1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITIONAL REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2001
[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-24948
PVF CAPITAL CORP.
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(Exact Name of Registrant as Specified in Its Charter)
OHIO 34-1659805
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
25350 ROCKSIDE ROAD, BEDFORD HTS., OHIO 44146
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (216) 991-9600
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK (PAR VALUE $.01 PER SHARE)
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Title of Class
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The registrant's voting stock is listed on the NASDAQ SmallCap Market under the
symbol "PVFC." The aggregate market value of the voting stock held by
nonaffiliates of the registrant, based on the closing sales price of the
registrant's common stock as quoted on the Nasdaq SmallCap Market on September
7, 2001, was $48,588,828. For purposes of this calculation, it is assumed that
directors, executive officers and 5% stockholders of the registrant are
affiliates. As of September 7, 2001, the registrant had 5,213,172 shares of
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Stockholders for the Fiscal Year Ended June
30, 2001. (Parts II and IV)
2. Portions of Proxy Statement for the 2001 Annual Meeting of Stockholders.
(Part III)
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PART I
ITEM 1. BUSINESS
GENERAL
PVF Capital Corp. ("PVF" or the "Company") is the holding company for
Park View Federal Savings Bank ("Park View Federal" or the "Bank"). PVF owns and
operates Park View Federal Savings Bank, PVF Service Corporation ("PVFSC"), a
real estate subsidiary, and Mid Pines Land Company ("MPLC"), a real estate
subsidiary. In addition, PVF owns PVF Holdings, Inc., a financial services
subsidiary, currently inactive, and two other subsidiaries chartered for future
operation, but which are also currently inactive. Park View Federal is a federal
stock savings bank operating through twelve offices located in Cleveland and
surrounding communities. Park View Federal has operated continuously for 80
years, having been founded as an Ohio chartered savings and loan association in
1920. PVF Capital Corp's main office is located at 30000 Aurora Road, Solon,
Ohio 44139, and its telephone number is (440) 248-7171.
The Bank's principal business consists of attracting deposits from the
general public and investing these funds primarily in loans secured by first
mortgages on real estate located in the Bank's market area, which consists of
Portage, Lake, Geauga, Cuyahoga, Summit, Stark, Medina and Lorain Counties in
Ohio. Park View Federal emphasizes the origination of loans for the purchase or
construction of residential real estate, commercial real estate and multi-family
residential property and land loans. To a lesser extent, the Bank originates
loans secured by second mortgages, including home equity lines of credit and
loans secured by savings deposits.
The Bank derives its income principally from interest earned on loans
and, to a lesser extent, loan servicing and other fees, gains on the sale of
loans and mortgage-backed securities and interest earned on investments. The
Bank's principal expenses are interest expense on deposits and borrowings and
noninterest expense such as compensation and employee benefits, office occupancy
expenses and other miscellaneous expenses. Funds for these activities are
provided principally by deposits, Federal Home Loan Bank advances, repayments of
outstanding loans, sales of loans and mortgage-backed securities and operating
revenues. The business of PVF consists primarily of the business of the Bank.
Park View Federal is subject to examination and comprehensive
regulation by the Office of Thrift Supervision (the "OTS"), and the Bank's
savings deposits are insured up to applicable limits by the Savings Association
Insurance Fund (the "SAIF"), which is administered by the Federal Deposit
Insurance Corporation (the "FDIC"). The Bank is a member of and owns capital
stock in the Federal Home Loan Bank (the "FHLB") of Cincinnati, which is one of
12 regional banks in the FHLB System. The Bank is further subject to regulations
of the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") governing reserves to be maintained and certain other matters.
See "-- Regulation of the Bank."
MARKET AREA
The Bank conducts its business through twelve offices located in
Cuyahoga, Summit, Medina, Lake and Geauga Counties in Ohio, and its market area
consists of Portage, Lake, Geauga, Cuyahoga, Summit, Stark, Medina and Lorain
Counties in Ohio. At June 30, 2001, over 98% of the Bank's net loan portfolio
and over 98% of the Bank's deposits were in the Bank's market area. Park View
Federal has targeted business development efforts in suburban sectors of its
market area, such as Lake, Geauga, Medina and Summit Counties, where demographic
growth has been stronger.
The economy in the Cleveland area historically has been based on the
manufacture of durable goods. Though manufacturing continues to remain an
important sector of the economy, diversification has occurred in recent years
with the growth of service, financial and wholesale and retail trade industries.
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LENDING ACTIVITIES
Loan Portfolio Composition
The Company's net loan portfolio, including mortgage-backed securities,
totaled $597.9 million at June 30, 2001, representing 81.2% of total assets at
such date. It is the Company's policy to concentrate its lending in its market
area.
Set forth below is certain data relating to the composition of the
Company's loan portfolio by type of loan on the dates indicated. As of June 30,
2001, the Company had no concentrations of loans exceeding 10% of total loans
other than as disclosed below.
AT JUNE 30,
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2001 2000 1999
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AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- ------- --------- ------- --------- -------
(DOLLARS IN THOUSANDS)
Real estate loans:
Single-family residential (1) .............. $ 213,525 35.71% $ 208,183 39.61% $ 141,308 35.41%
Multi-family residential ................... 43,772 7.32 42,503 8.09 34,075 8.54
Commercial ................................. 125,769 21.03 115,226 21.92 105,427 26.42
Home equity lines of credit ................ 37,597 6.29 30,978 5.89 22,956 5.75
Construction ............................... 135,544 22.67 128,310 24.41 101,032 25.32
Land ....................................... 58,833 9.84 41,583 7.91 42,003 10.53
Mortgage-backed securities held to maturity ... 17,900 2.99 1,214 0.23 1,733 0.43
Consumer loans:
Property improvement ....................... 0 0.00 1 0.00 6 0.00
Passbook loans ............................. 540 0.09 582 0.11 552 0.14
Mobile home ................................ 87 0.01 105 0.02 146 0.04
Other ...................................... 20,378 3.41 15,783 3.00 7,095 1.78
--------- ------ --------- ------ --------- ------
653,945 109.37 584,468 111.20 456,333 114.36
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Less:
Accrued interest receivable ................ 3,627 0.61 3,027 0.58 2,202 0.55
Deferred loan fees ......................... (2,345) (0.39) (2,130) (0.41) (1,951) (0.49)
Unearned discount .......................... (4) 0.00 (16) 0.00 (23) (0.01)
Undisbursed discount FHLMC MBS ............. 11 0.00 (6) 0.00 (11) 0.00
Unrealized loss FHLMC MBS .................. 0 0.00 0 0.00 0 0.00
Undisbursed portion of loan proceeds ....... (53,795) (9.00) (56,288) (10.71) (54,864) (13.75)
Market valuation reserve ................... 0 0.00 (45) (0.01) 0 0.00
Allowance for loan losses .................. (3,520) (0.59) (3,387) (0.64) (2,630) (0.66)
--------- ------ --------- ---------
Total other items .......................... (56,026) (9.37) (58,845) (11.20) (57,277) (14.36)
--------- ------ --------- ------ --------- ------
Total loans and mortgage-backed securities $ 597,919 100.00% $ 525,623 100.00% $ 399,056 100.00%
========= ====== ========= ====== ========= ======
AT JUNE 30,
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1998 1997
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AMOUNT PERCENT AMOUNT PERCENT
--------- ------- --------- ---------
(DOLLARS IN THOUSANDS)
Real estate loans:
Single-family residential (1) .............. $ 142,233 38.07% $ 128,908 37.62%
Multi-family residential ................... 31,493 8.43 31,090 9.07
Commercial ................................. 94,588 25.32 84,940 24.79
Home equity lines of credit ................ 18,762 5.02 16,941 4.94
Construction ............................... 96,063 25.71 82,611 24.11
Land ....................................... 30,462 8.15 32,045 9.35
Mortgage-backed securities held to maturity ... 2,949 0.79 505 0.15
Consumer loans:
Property improvement ....................... 20 0.01 34 0.01
Passbook loans ............................. 614 0.16 615 0.18
Mobile home ................................ 213 0.06 191 0.06
Other ...................................... 3,040 .81 2,756 .80
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420,427 112.53 380,636 111.08
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Less:
Accrued interest receivable ................ 2,217 0.59 2,097 0.61
Deferred loan fees ......................... (1,689) (0.45) (1,733) (0.51)
Unearned discount .......................... (36) (0.01) (48) (0.01)
Undisbursed discount FHLMC MBS ............. (16) 0.00 0 0.00
Unrealized loss FHLMC MBS .................. 0 0.00 0 0.00
Undisbursed portion of loan proceeds ....... (44,622) (11.94) (35,653) (10.41)
Market valuation reserve ................... 0 0.00 0 0.00
Allowance for loan losses .................. (2,687) (0.72) (2,675) (0.76)
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Total other items .......................... (46,833) (12.53) (38,012) (11.08)
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Total loans and mortgage-backed securities $ 373,594 100.00% $ 342,624 100.00%
========= ====== ========= =========
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(1) Includes loans held for sale in the amounts of $6.2 million, $10.8 million,
$1.7 million, $1.6 million and $0.7 million at June 30, 2001, 2000, 1999,
1998 and 1997 respectively.
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The following table presents at June 30, 2001 the amounts of loan
principal repayments scheduled to be received by the Company during the periods
shown based upon the time remaining before contractual maturity. Loans with
adjustable rates are reported as due in the year in which they reprice. Demand
loans, loans having no schedule of repayments and no stated maturity and
overdrafts are reported as due in one year or less. The table below does not
include any estimate of prepayments which significantly shorten the average life
of all mortgage loans and may cause the Bank's actual repayment experience to
differ from that shown below.
DUE DURING DUE ONE
THE YEAR THROUGH FIVE DUE FIVE YEARS
ENDING YEARS AFTER OR MORE AFTER
JUNE 30, JUNE 30, JUNE 30,
2002 2001 2001
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(IN THOUSANDS)
Real estate mortgage loans................... $ 211,965 $ 224,032 $ 56,277
Real estate construction loans............... 81,748 0 0
Consumer loans............................... 3,732 608 1,433
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Total.................................... $ 297,445 $ 224,640 $ 57,710
========== =========== ==========
The following table apportions the dollar amount of the loans
outstanding at June 30, 2001 that are due or repricing after June 30, 2002
between those with predetermined interest rates and those with adjustable
interest rates.
FLOATING OR
PREDETERMINED RATES ADJUSTABLE RATES TOTAL
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(IN THOUSANDS)
Real estate mortgage loans (1)............... $ 53,134 $ 227,175 $ 280,309
Consumer loans............................... 2,041 0 2,041
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Total.................................... $ 55,175 $ 227,175 $ 282,350
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(1) Includes real estate mortgage loans and construction loans
Scheduled contractual principal repayments of loans and mortgage-backed
securities do not reflect the actual life of such assets. The average life of
loans and mortgage-backed securities may be substantially less than their
contractual terms because of prepayments. In addition, due-on-sale clauses on
loans generally give the Bank the right to declare a conventional loan
immediately due and payable in the event, among other things, that the borrower
sells the real property subject to the mortgage and the loan is not repaid. The
average life of mortgage loans tends to increase, however, when current mortgage
loan rates are substantially higher than rates on existing mortgage loans and,
conversely, decreases when rates on existing mortgages are substantially higher
than current mortgage loan rates.
Origination, Purchase and Sale of Loans
The Bank generally has authority to originate and purchase loans
secured by real estate located throughout the United States. Consistent with its
emphasis on being a community-oriented financial institution, the Bank
concentrates its lending activities in its market area.
The Bank originates all fixed-rate, single-family mortgage loans in
conformity with the Federal Home Loan Mortgage Corporation (the "FHLMC") and
Federal National Mortgage Association (the "FNMA") guidelines so as to permit
their being swapped with the FHLMC or the FNMA in exchange for mortgage-backed
securities secured by such loans or their sale in the secondary market. All such
loans are sold or swapped, as the case may be, with servicing retained, and are
sold in furtherance of the Bank's goal of better matching the maturities and
interest rate-sensitivity of its assets and liabilities. The Bank generally
retains responsibility for collecting and remitting loan payments, inspecting
the properties, making certain insurance and tax payments on behalf of borrowers
and otherwise servicing
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the loans it sells or converts into mortgage-backed securities, and receives a
fee for performing these services. Sales of loans also provide funds for
additional lending and other purposes.
The following table shows total loan origination and sale activity
during the periods indicated.
YEAR ENDED JUNE 30,
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2001 2000 1999
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(IN THOUSANDS)
Loans originated:
Real estate:
Residential and commercial (1).................... $ 156,913 $ 123,663 $ 130,515
Construction (1).................................. 130,227 134,681 104,911
Land.............................................. 38,448 22,587 28,814
Savings Deposit....................................... 735 585 209
Other................................................. 1,458 1,371 1,202
--------- ---------- ----------
Total loans originated......................... $ 327,781 $ 282,887 $ 265,651
========= ========== ==========
Loans refinanced...................................... $ 22,952 $ 6,457 $ 13,699
Loans and mortgage-backed securities sold............. $ 106,048 $ 37,826 $ 107,978
========= ========== ==========
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(1) Includes single-family and multi-family residential and commercial loans.
Loan Underwriting Policies
The Bank's lending activities are subject to the Bank's written,
nondiscriminatory underwriting standards and to loan origination procedures
prescribed by the Bank's Board of Directors and its management. Detailed loan
applications are obtained to determine the borrower's ability to repay, and the
more significant items on these applications are verified through the use of
credit reports, financial statements and confirmations. Property valuations are
generally performed by an internal staff appraiser and by independent outside
appraisers approved by the Bank's Board of Directors. The Bank's Loan
Underwriter has authority to approve all fixed-rate single-family residential
mortgage loans which meet FHLMC and FNMA underwriting guidelines and those
adjustable-rate single-family residential mortgage loans which meet the Bank's
underwriting standards and are in amounts of less than $400,000. The Board of
Directors has established a Loan Committee comprised of the Chairman of the
Board, President, Senior Vice President, other management and an outside
director of the Bank. This committee reviews all loans approved by the
underwriter and has the authority to approve adjustable-rate single-family
residential loans up to $750,000 and construction and commercial real estate
loans up to $500,000. All loans in excess of the above amounts must be approved
by the Board of Directors. All loans secured by savings deposits can be approved
by lending officers based in the Bank's branch offices.
It is the Bank's policy to have a mortgage creating a valid lien on
real estate and to generally obtain a title insurance policy which insures that
the property is free of prior encumbrances. When a title insurance policy is not
obtained, an attorney's certificate is received. Borrowers must also obtain
hazard insurance policies prior to closing and, when the property is in a flood
plain as designated by the Department of Housing and Urban Development, paid
flood insurance policies. Most borrowers are also required to advance funds on a
monthly basis together with each payment of principal and interest to a mortgage
escrow account from which the Bank makes disbursements for items such as real
estate taxes and homeowners insurance.
The Bank is permitted to lend up to 100% of the appraised value of the
real property securing a mortgage loan. However, if the amount of a residential
loan originated or refinanced exceeds 90% of the appraised value, the Bank is
required by federal regulations to obtain private mortgage insurance on that
portion of the principal amount of the loan that exceeds 80% of the appraised
value of the property. The Bank will make a single-family residential mortgage
loan with up to a 97% loan-to-value ratio if the required private mortgage
insurance is obtained. The Bank generally limits the loan-to-value ratio on
multi-family and commercial real estate mortgages to 75%.
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Interest rates charged by the Bank on loans are affected principally by
competitive factors, the demand for such loans and the supply of funds available
for lending purposes and, in the case of fixed-rate single-family residential
loans, rates established by the FHLMC and the FNMA. These factors are, in turn,
affected by general economic conditions, monetary policies of the federal
government, including the Federal Reserve Board, legislative tax policies and
government budgetary matters.
Residential Real Estate Lending. The Bank historically has been and
continues to be an originator of single-family residential real estate loans in
its market area. The Bank currently originates fixed-rate, residential mortgage
loans in accordance with underwriting guidelines promulgated by the FHLMC and
the FNMA and adjustable-rate mortgage loans for terms of up to 30 years. In
addition, in accordance with FHLMC and FNMA guidelines, the Bank offers 30-year
loans with interest rates that adjust after five or seven years to a rate which
is 0.5% above the FHLMC 60 day delivery rate, at which point the rate is fixed
over the remaining 25 or 23 years of the loan, respectively. At June 30, 2001,
$213.5 million, or 35.7%, of the Bank's net loan and mortgage-backed securities
portfolio consisted of single-family, conventional mortgage loans, of which
approximately $178.7 million, or 83.7%, carried adjustable interest rates.
Included in this amount are $10.9 million in second mortgage loans. Such loans
are for terms of up to fifteen years and adjust annually to a rate which is
3.75% above the treasury rate. Any such loans having fixed rates are loans
originated by the Bank to be swapped with the FHLMC and the FNMA in exchange for
mortgage-backed securities or sold for cash in the secondary market.
The Bank offers adjustable-rate residential mortgage loans with
interest rates which adjust annually based upon changes in an index based on the
weekly average yield on United States Treasury securities adjusted to a constant
comparable maturity of one year, as made available by the Federal Reserve Board
(the "Treasury Rate"), plus a margin of 2.75%. The amount of any increase or
decrease in the interest rate is presently limited to 2% per year, with a limit
of 6% over the life of the loan. The adjustable-rate mortgage loans offered by
the Bank, as well as many other savings institutions, provide for initial rates
of interest below the rates which would prevail when the index used for
repricing is applied. However, the Bank underwrites the loan on the basis of the
borrower's ability to pay at the rate which would be in effect without the
discount.
Commercial and Multi-Family Residential Real Estate Lending. The
commercial real estate loans originated by the Bank are primarily secured by
office buildings, shopping centers, warehouses and other income producing
commercial property. The Bank's multi-family residential loans are primarily
secured by apartment buildings. These loans are generally for a term of from 10
to 25 years with interest rates that adjust either annually or every three years
based upon changes in the Treasury Rate, plus a negotiated margin of between
3.0% and 3.5%. Commercial and multi-family residential real estate loans
amounted to $169.5 million, or 28.4%, of the total loan and mortgage-backed
securities portfolio at June 30, 2001.
Commercial real estate lending entails significant additional risks as
compared with residential property lending. Commercial real estate loans
typically involve large loan balances to single borrowers or groups of related
borrowers. The payment experience on such loans typically is dependent on the
successful operation of the real estate project. These risks can be
significantly impacted by supply and demand conditions in the market for office
and retail space, and, as such, may be subject to a greater extent to adverse
conditions in the economy. To minimize these risks, Park View Federal generally
limits itself to its market area and to borrowers with which it has substantial
experience or who are otherwise well known to the Bank. The Bank obtains
financial statements and personal guarantees from all principals obtaining
commercial real estate loans.
Construction Loans. The Bank also offers residential and commercial
construction loans, with a substantial portion of such loans originated to date
being for the construction of owner-occupied, single-family dwellings in the
Bank's market area. Residential construction loans are offered to selected local
developers to build single-family dwellings and to individuals building their
primary or secondary residence. Generally, loans for the construction of
owner-occupied, single-family residential properties are originated in
connection with the permanent loan on the property and have a construction term
of six to 18 months. Such loans are offered only on an adjustable rate basis.
Interest rates on residential construction loans made to the eventual occupant
are set at the prime rate plus 2%, and are fixed for the construction term.
Interest rates on residential construction loans to builders are set at the
prime rate plus 2%, and adjust quarterly. Interest rates on commercial
construction loans float with a specified index, with construction terms
generally not exceeding 18 months. Advances are generally paid directly to
subcontractor's and
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suppliers and are made on a percentage of completion basis. At June 30, 2001,
$135.5 million, or 22.7%, of the Bank's total loan and mortgage-backed
securities portfolio consisted of construction loans, virtually all of which
were secured by single-family residences.
Prior to making a commitment to fund a loan, the Bank requires both an
appraisal of the property by appraisers approved by the Board of Directors and a
study of the feasibility of the proposed project. The Bank also reviews and
inspects each project at the commencement of construction and prior to every
disbursement of funds during the term of the construction loan.
Construction financing is generally considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction costs proves to be
inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate, the Bank may be confronted, at or prior to the
maturity of the loan, with a project having a value which is insufficient to
assure full repayment.
Land Loans. The Bank originates loans to builders and developers for
the acquisition and/or development of vacant land. The proceeds of the loan are
used to acquire the land and/or to make site improvements necessary to develop
the land into saleable lots. The Bank will not originate land loans to
individuals wishing to speculate in the value of land, and limits such loans to
borrowers who have agreed to begin development of the property within two years
of the date of the loan. The term of the loans are generally limited to two
years. Repayments are made on the loans as the developed lots are sold.
Land development and acquisition loans involve significant additional
risks when compared with loans on existing residential properties. These loans
typically involve large loan balances to single borrowers, and the payment
experience is dependent on the successful development of the land and the sale
of the lots. These risks can be significantly impacted by supply and demand
conditions. To minimize these risks, Park View Federal generally limits the
loans to builders and developers with whom it has substantial experience or who
are otherwise well-known to the Bank, and it obtains the financial statements
and personal guarantees of such builders and developers. The Bank also requires
feasibility studies and market analyses to be performed with respect to the
project. The amount of the loan is limited to the lesser of 80% of the estimated
gross sell out value or 100% of the discounted value. If land is being acquired,
the amount of the loan to be used for such purposes is limited to 75% of the
cost of the land. All of these loans originated are within the Bank's market
area. The Bank had $58.8 million, or 9.8% of its net loan and mortgage-backed
securities portfolio, in land loans at June 30, 2001.
Home Equity Line of Credit Loans. The Bank originates loans secured by
mortgages on residential real estate. Such loans are for terms of 5 years with
one 5 year review and renewal option followed by a balloon payment. The rate
adjusts monthly to a rate ranging from the prime lending rate to prime plus
0.5%. At June 30, 2001, the Bank had $37.6 million in home equity lines of
credit, which amounted to 6.3% of its net loan portfolio.
Mortgage Banking Activity
In addition to interest earned on loans, Park View Federal receives
fees for servicing loans which it had sold or swapped for mortgage-backed
securities. During the year ended June 30, 2001, the Bank reported net loan
servicing fee income of $456,143, and at June 30, 2001 was servicing $351.7
million of loans for others. The Bank has been able to keep delinquencies on
loans serviced for others to a relatively low level of below 1% of the aggregate
outstanding balance of loans serviced as a result of its policy to limit
servicing to loans it originated and subsequently sold to the FHLMC and the
FNMA. Because of the success the Bank has experienced in this area and because
it has data processing equipment that will allow it to expand its portfolio of
serviced loans without incurring significant incremental expenses, the Bank
intends in the future to augment its portfolio of loans serviced by continuing
to originate and either swap such fixed-rate, single-family residential mortgage
loans with the FHLMC and the FNMA in exchange for mortgage-backed securities or
sell such loans for cash, while retaining servicing.
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On August 18, 1995, the Bank sold $146.0 million in FHLMC servicing to
PVF and recognized no gain due to the transaction being an intercompany sale.
PVF then entered into an agreement with the Bank to service the underlying loans
for $8.00 per loan monthly. PVF borrowed $1.2 million to finance the purchase of
this servicing. The servicing income from these loans will provide sufficient
funds to pay the servicing fee to the Bank. At June 30, 2001 the Bank was
servicing $47.2 million in FHLMC loans for PVF.
In addition to loan servicing fees, the Bank receives fees in
connection with loan commitments and originations, loan modifications, late
payments and changes of property ownership and for miscellaneous services
related to its loans. Loan origination fees are calculated as a percentage of
the amount loaned. The Bank typically receives fees of up to three points (one
point being equivalent to 1% of the principal amount of the loan) in connection
with the origination of fixed-rate and adjustable-rate residential mortgage
loans. All loan origination fees are deferred and accreted into income over the
contractual life of the loan according to the interest method of recognizing
income. If a loan is prepaid, refinanced or sold, all remaining deferred fees
with respect to such loan are taken into income at such time.
Income from these activities varies from period to period with the
volume and type of loans originated, sold and purchased, which in turn is
dependent on prevailing mortgage interest rates and their effect on the demand
for loans in the Bank's market area.
At June 30, 2001 and June 30, 2000, the Bank had $6,152,000 and
$10,738,000 of fixed-rate single-family mortgage loans available for sale. In
connection with these activities the Bank establishes a mortgage banking reserve
for market valuation losses at June 30, 2000. See Note 5 of Notes to
Consolidated Financial Statements.
Non-Performing Loans and Other Problem Assets
It is management's policy to continually monitor its loan portfolio to
anticipate and address potential and actual delinquencies. When a borrower fails
to make a payment on a loan, the Bank takes immediate steps to have the
delinquency cured and the loan restored to current status. Loans which are
delinquent 15 days incur a late fee of 5% of the scheduled principal and
interest payment. As a matter of policy, the Bank will contact the borrower
after the loan has been delinquent 20 days. The Bank orders a property
inspection after a loan payment becomes 45 days past due. If a delinquency
exceeds 90 days in the case of a residential mortgage loan, 30 days in the case
of a construction loan or 30-60 days for a loan on commercial real estate, the
Bank will institute additional measures to enforce its remedies resulting from
the loan's default, including, commencing foreclosure action. Loans which are
delinquent 90 days or more generally are placed on nonaccrual status, and formal
legal proceedings are commenced to collect amounts owed.
8
9
The following table sets forth information with respect to the Bank's
nonperforming loans and other problem assets at the dates indicated.
AT JUNE 30,
-----------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Nonaccruing loans (1):
Real estate ...................................... $5,385 $4,842 $3,639 $3,262 $4,097
Consumer loans ................................... 0 0 0 15 40
------ ------ ------ ------ ------
Total ........................................ $5,385 $4,842 $3,639 $3,277 $4,137
====== ====== ====== ====== ======
Accruing loans which are contractually past due
90 days or more:
Real estate .................................. $ 20 $ 935 $ 248 $ 163 $ 476
------ ------ ------ ------ ------
Total ...................................... $ 20 $ 935 $ 248 $ 163 $ 476
====== ====== ====== ====== ======
Total nonaccrual and 90 days
past due loans ............................. $5,405 $5,777 $3,887 $3,440 $4,613
====== ====== ====== ====== ======
Ratio of non-performing loans to total loans
and mortgage-backed securities ................. 0.90% 1.10% .97% 0.92% 1.35%
====== ====== ====== ====== ======
Other non-performing assets (2) .................. $ 547 $ 488 $ 168 $ 699 $ 0
====== ====== ====== ====== ======
Total non-performing assets ...................... $5,952 $6,265 $4,055 $4,139 $4,613
====== ====== ====== ====== ======
Total non-performing assets to
total assets ................................... 0.81% 1.02% 0.90% 0.96% 1.24%
====== ====== ====== ====== ======
-------------
(1) Non-accrual status denotes loans on which, in the opinion of
management, the collection of additional interest is unlikely, or loans
that meet the non-accrual criteria established by regulatory
authorities. Non-accrual include all loans classified as substandard,
doubtful, or loss and all loans greater than 90-days past due with a
loan-to-value ratio greater than 65%. Payments received on a
non-accrual loan are either applied to the outstanding principal
balance or recorded as interest income, depending on an assessment of
the collectibility of the principal balance of the loan.
(2) Other non-performing assets represent property acquired by the Bank
through foreclosure or repossession.
It is the Bank's policy to not record into income partial interest
payments. During the year ended June 30, 2001, gross interest income of $770,000
would have been recorded on loans accounted for on a non-accrual basis if such
loans had been current throughout the period. No interest was included in income
on non-accruing loans.
At June 30, 2001, non-accruing loans consisted of 31 loans totaling
$5.4 million, and included 12 conventional mortgage loans aggregating $1.5
million, 11 land loans in the amount of $2.3 million, 4 construction loans in
the amount of $0.5 million, 3 commercial loan in the amount of $1.0 million and
1 multi-family loans in the amount of $0.1 million. Management has reviewed its
non-accruing loans and believes that the allowance for loan losses is adequate
to absorb probable losses on these loans.
Real estate acquired by the Bank as a result of foreclosure is
classified as real estate owned until such time as it is sold. At June 30, 2001,
the Bank had three real estate owned properties totaling $547,000. The
properties consist of two residential construction properties and one commercial
property.
Asset Classification and Allowance for Loan Losses. Federal regulations
require savings institutions to review their assets on a regular basis and to
classify them as "substandard," "doubtful" or "loss," if warranted. Assets
classified as substandard or doubtful require the institution to establish
general allowances for loan losses. If an asset or portion thereof is classified
loss, the insured institution must either establish specific allowances for loan
losses in the amount of 100% of the portion of the asset classified loss, or
charge off such amount. An asset which does not currently warrant classification
but which possesses weaknesses or deficiencies deserving close attention is
required to be designated as "special mention." The Bank has established an
Asset Classification Committee, which is comprised of the Chairman of the Board,
the President and Chief Financial Officer and senior employees of the Bank. The
Asset Classification Committee meets quarterly to review the Bank's loan
portfolio and determine which loans should be
9
10
placed on a "watch-list" of potential problem loans which are considered to have
more than normal credit risk. Currently, general loss allowances (up to 1.25% of
risk-based assets) established to cover losses related to assets classified
substandard or doubtful may be included in determining an institution's
regulatory capital, while specific valuation allowances for loan losses do not
qualify as regulatory capital. See "Regulation of the Bank -- Regulatory Capital
Requirements." OTS examiners may disagree with the insured institution's
classifications and amounts reserved. If an institution does not agree with an
examiner's classification of an asset, it may appeal this determination to the
OTS. At June 30, 2001, total non-accrual and 90 days past due loans and other
non-performing assets were $6.0 million, of which amount approximately $5.2
million were classified as substandard. For additional information, see "--
Non-Performing Loans and Other Problem Assets" and Note 4 of Notes to
Consolidated Financial Statements.
In originating loans, the Bank recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan, general economic conditions and, in the case of a secured loan, the
quality of the security for the loan. It is management's policy to maintain an
adequate allowance for loan losses based on, among other things, the Bank's and
the industry's historical loan loss experience, evaluation of economic
conditions and regular reviews of delinquencies and loan portfolio quality. The
Bank increases its allowance for loan losses by charging provisions for loan
losses against the Bank's income.
General allowances are made pursuant to management's assessment of risk
in the Bank's loan portfolio as a whole. Specific allowances are provided for
individual loans when ultimate collection is considered questionable by
management after reviewing the current status of loans which are contractually
past due and considering the net realizable value of the security for the loan.
Management continues to actively monitor the Bank's asset quality and to charge
off loans against the allowance for loan losses when appropriate or to provide
specific loss reserves when necessary. Although management believes it uses the
best information available to make determinations with respect to the allowance
for loan losses, future adjustments may be necessary if economic conditions
differ substantially from the economic conditions in the assumptions used in
making the initial determinations.
The following table summarizes the activity in the allowance for loan
losses for the periods indicated.
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Balance at beginning of year ................... $3,388 $2,630 $2,687 $2,675 $2,565
------ ------ ------ ------ ------
Charge-offs:
Mortgage loans ............................... 106 93 42 238 174
Consumer loans (1) ........................... 7 0 20 0 24
------ ------ ------ ------ ------
Total charge-offs .......................... 113 93 62 238 198
------ ------ ------ ------ ------
Recoveries:
Mortgage loans ............................... 20 1 5 4 117
Consumer loans (1) ........................... 0 0 0 0 4
------ ------ ------ ------ ------
Total recoveries ........................... 20 1 5 4 121
------ ------ ------ ------ ------
Net charge-offs ................................ 93 92 57 234 77
------ ------ ------ ------ ------
Provision charged to income .................... 225 850 0 246 187
------ ------ ------ ------ ------
Balance at end of year ......................... $3,520 $3,388 $2,630 $2,687 $2,675
====== ====== ====== ====== ======
Ratio of net charge-offs during
the year to average loans
outstanding during the year .................. 0.0% 0.0% 0.0% 0.0% 0.0%
====== ====== ====== ====== ======
---------------------
(1) Consists primarily of mobile home loans.
10
11
The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. The allocation of the allowance
to each category is not necessarily indicative of future losses and does not
restrict the use of the allowance to absorb losses in any category.
AT JUNE 30,
-------------------------------------------------------------------------------
2001 2000 1999
------------------------ ------------------------ ------------------------
% OF LOANS IN % OF LOANS IN % OF LOANS IN
CATEGORY TO CATEGORY TO CATEGORY TO
TOTAL NET LOANS TOTAL NET LOANS TOTAL NET LOANS
AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING
------ --------------- ------ --------------- ------ ---------------
(DOLLARS IN THOUSANDS)
Mortgage Loans:
Single-family ................. $ 841 57.44% $ 885 59.29% $ 727 52.84%
Multi-family .................. 233 7.51 234 8.05 201 8.53
Commercial .................... 1,934 21.35 1,596 21.65 1,438 26.17
Land .......................... 307 10.09 261 7.87 218 10.52
Unallocated ................... 130 0.00 349 0.00 0 0.00
------ ------ ------ ------ ------ ------
Total mortgage loans ........ 3,445 96.39 3,325 96.87 2,584 98.05
Consumer loans (1) .............. 75 3.61 63 3.13 46 1.95
------ ------ ------ ------ ------ ------
Total allowance for
loan losses ................. $3,520 100.00% $3,388 100.00% $2,630 100.00%
====== ====== ====== ====== ====== ======
AT JUNE 30,
-----------------------------------------------------
1998 1997
------------------------ -------------------------
% OF LOANS IN % OF LOANS IN
CATEGORY TO CATEGORY TO
TOTAL NET LOANS TOTAL NET LOANS
AMOUNT OUTSTANDING AMOUNT OUTSTANDING
------ --------------- ------ ---------------
(DOLLARS IN THOUSANDS)
Mortgage Loans:
Single-family ................. $ 925 57.19% $ 899 56.19%
Multi-family .................. 203 8.44 291 9.00
Commercial .................... 1,227 25.19 990 24.54
Land .......................... 230 8.16 361 9.26
Unallocated ................... 0 0.00 0 0.00
------ ------ ------ ------
Total mortgage loans ........ 2,585 98.98 2,541 98.99
Consumer loans (1) .............. 102 1.02 134 1.01
------ ------ ------ ------
Total allowance for
loan losses ................. $2,687 100.00% $2,675 100.00%
====== ====== ====== ======
------
(1) Consists of property improvement loans and mobile home loans.
11
12
INVESTMENT ACTIVITIES
Park View Federal's investment policy currently allows for investment
in various types of liquid assets, including United States Government and Agency
securities, time deposits at the FHLB of Cincinnati, certificates of deposit or
bankers' acceptances at other federally insured depository institutions and
mortgage-backed securities. The general objective of Park View Federal's
investment policy is to maximize returns without compromising liquidity or
creating undue credit or interest rate risk. In accordance with the investment
policy, at June 30, 2001 Park View Federal had investments in agency notes,
federal funds sold, FHLB of Cincinnati stock and interest-bearing deposits in
other financial institutions.
The Bank reports its investments, other than marketable equity
securities and securities available for sale, at cost as adjusted for discounts
and unamortized premiums. The Bank has the intent and ability and generally
holds all securities until maturity. Any FHLMC mortgage-backed securities
created from loans originated by the Bank for sale will be designated available
for sale. For additional information see Notes 1 and 2 of Notes to Consolidated
Financial Statements.
At present, management is not aware of any conditions or circumstances
which could impair its ability to hold its remaining securities to maturity.
The following table sets forth the carrying value of the Bank's
securities portfolio, short-term investments and FHLB of Cincinnati stock at the
dates indicated. At June 30, 2001, the fair market values of the Bank's
securities portfolio was $50.2 million. All securities are held to maturity, but
are callable prior to maturity.
AT JUNE 30,
----------------------------------------
2001 2000 1999
---- ---- ----
(IN THOUSANDS)
Investment securities:
Municipal Security.................................. $ 212 $ 297 $ 376
U.S. Government and agency securities............... 50,000 64,962 24,958
-------- --------- ---------
Total securities................................ 50,212 65,259 25,334
Interest-bearing deposits............................. 1,200 815 574
Federal funds sold.................................... 56,050 1,050 5,375
FHLB of Cincinnati stock.............................. 9,442 5,841 3,759
-------- --------- ---------
Total investments................................. $116,904 $ 72,965 $ 35,042
======== ========= =========
12
13
The following table sets forth the scheduled maturities, carrying values, market
values and average yields for the Bank's securities at June 30, 2001.
AT JUNE 30, 2001
---------------------------------------------------------------------------------------
ONE YEAR ONE TO FIVE FIVE TO 10 MORE THAN
OR LESS YEARS YEARS 10 YEARS
------------------- ------------------ -------------------- ------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
-------- ----- ----- ----- ------- ----- ----- -----
(DOLLARS IN THOUSANDS)
Municipal security .......... $ 91 6.25% $ 121 6.25% $ 0 0.00% $ 0 0.00%
U.S. Government and
agency securities ......... 0 0.00 50,000 5.79 0 0.00 0 0.00
Deposits(1) ................. 57,250 3.75 0 0.00 0 0.00 0 0.00
FHLB of Cincinnati stock .... 0 0.00 0 0.00 0 0.00 9,442 7.25
-------- -------- -------- --------
Total ..................... $ 57,341 3.75 $ 50,121 5.79 $ 0 0.00 $ 9,442 7.25
======== ======== ======== ========
AT JUNE 30, 2001
-----------------------------
TOTAL SECURITIES
-----------------------------
CARRYING MARKET AVERAGE
VALUE VALUE YIELD
----- ----- ------
(DOLLARS IN THOUSANDS)
Municipal security .......... $ 212 $ 212 6.25%
U.S. Government and
agency securities ......... 50,000 50,000 5.79
Deposits(1) ................. 57,250 57,250 3.75
FHLB of Cincinnati stock .... 9,442 9,442 7.25
-------- --------
Total ..................... $116,904 $116,904 4.91
======== ========
---------------
(1) Includes interest-bearing deposits at other financial institutions and
federal funds sold.
13
14
DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS
GENERAL. Deposits are the primary source of the Bank's funds for
lending, investment activities and general operational purposes. In addition to
deposits, Park View Federal derives funds from loan principal and interest
repayments, maturities of securities and interest payments thereon. Although
loan repayments are a relatively stable source of funds, deposit inflows and
outflows are significantly influenced by general interest rates and money market
conditions. Borrowings may be used on a short-term basis to compensate for
reductions in the availability of funds, or on a longer term basis for general
operational purposes.
DEPOSITS. The Bank attracts deposits principally from within its
primary market area by offering a variety of deposit instruments, including
checking accounts, money market accounts, regular savings accounts and
certificates of deposit which range in maturity from seven days to four years.
Deposit terms vary according to the minimum balance required, the length of time
the funds must remain on deposit and the interest rate. Maturities, terms,
service fees and withdrawal penalties for its deposit accounts are established
by the Bank on a periodic basis. Park View Federal generally reviews its deposit
mix and pricing on a weekly basis. In determining the characteristics of its
deposit accounts, Park View Federal considers the rates offered by competing
institutions, funds acquisition and liquidity requirements, growth goals and
federal regulations. The Bank does not accept brokered deposits due to the
volatility and rate sensitivity of such deposits.
Park View Federal competes for deposits with other institutions in its
market area by offering deposit instruments that are competitively priced and
providing customer service through convenient and attractive offices,
knowledgeable and efficient staff and hours of service that meet customers'
needs. To provide additional convenience, Park View Federal participates in MAC
(money access card) Automated Teller Machine networks at locations throughout
Ohio and other participating states, through which customers can gain access to
their accounts at any time.
The Bank's deposits increased by $39.5 million for the fiscal year
ended June 30, 2001 as compared to the fiscal year ended June 30, 2000, as a
result of the opening of one new branch office and the relocation of an existing
branch office. Deposit balances totaled $480.5 million, $441.0 million and
$331.2 million at the fiscal years ended June 30, 2001, 2000, and 1999,
respectively.
Deposits in the Bank as of June 30, 2001 were represented by the
various programs described below.
WEIGHTED
AVERAGE PERCENTAGE
INTEREST MINIMUM BALANCE IN OF TOTAL
RATE CATEGORY BALANCE THOUSANDS DEPOSITS
---- -------- ------- --------- --------
2.40 % NOW accounts $ 50 $ 27,518 5.73 %
2.50 Passbook statement accounts 5 31,245 6.50
3.36 Money market accounts 1,000 12,998 2.70
0.00 Non-interest-earning demand accounts 50 12,583 2.62
--------- -----
84,344 17.55
CERTIFICATES OF DEPOSIT
-----------------------
6.00 3 months or less 500 110,510 23.00
6.15 3 - 6 months 500 84,515 17.59
5.73 6 - 12 months 500 96,096 20.00
6.58 1 - 3 years 500 95,055 19.78
6.26 More than three years 500 10,012 2.08
--------- ------
6.23 Total certificates of deposit 396,188 82.45
--------- ------
5.53 Total deposits $ 480,532 100.00%
========= ======
14
15
The following table sets forth the change in dollar amount of deposits
in the various types of accounts offered by the Bank between the dates
indicated.
AT JUNE 30, 2001 AT JUNE 30, 2000 AT JUNE 30, 1999
------------------------------- ------------------------------- -----------------
INCREASE INCREASE
(DECREASE) (DECREASE)
% OF FROM PRIOR % OF FROM PRIOR % OF
BALANCE DEPOSITS YEAR BALANCE DEPOSITS YEAR BALANCE DEPOSITS
--------- -------- --------- --------- -------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
NOW checking (1) .................. $ 40,101 8.35 % $ 2,654 $ 37,447 8.49% $ 8,517 $ 28,930 8.73%
Super NOW checking and money market 12,998 2.70 1,152 11,846 2.69 3,447 8,399 2.54
Passbook and regular savings ...... 31,245 6.50 (893) 32,138 7.29 (1,116) 33,254 10.04
Jumbo certificates ................ 110,561 23.01 18,735 91,826 20.82 33,399 58,427 17.64
Other certificates ................ 242,848 50.54 13,571 229,277 51.99 63,761 165,516 49.97
Keogh accounts .................... 292 0.06 46 246 0.06 17 229 0.07
IRA accounts ...................... 42,487 8.84 4,285 38,202 8.66 1,715 36,487 11.02
--------- ------ --------- --------- ------ --------- --------- ------
Total ......................... $ 480,532 100.00% $ 39,550 $ 440,982 100.00% $ 109,740 $ 331,242 100.00%
========= ====== ========= ========= ====== ========= ========= ======
------
(1) Includes non-interest-bearing demand accounts.
The following table sets forth the average balances and average
interest rates based on month-end balances for interest-bearing demand deposits
and time deposits during the periods indicated.
FOR THE YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------
2001 2000
-------------------------------------- ---------------------------------------
INTEREST- INTEREST-
BEARING BEARING
DEMAND SAVINGS TIME DEMAND SAVINGS TIME
DEPOSITS DEPOSITS DEPOSITS DEPOSITS DEPOSITS DEPOSITS
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
Average balance . $ 40,034 $ 30,893 $ 399,039 $ 33,043 $ 32,544 $ 315,914
Average rate paid 3.23% 2.50% 6.27% 2.96% 2.50% 5.58%
FOR THE YEAR ENDED JUNE 30,
----------------------------------------
1999
----------------------------------------
INTEREST-
BEARING
DEMAND SAVINGS TIME
DEPOSITS DEPOSITS DEPOSITS
-------- -------- --------
(DOLLARS IN THOUSANDS)
Average balance . $ 27,646 $ 32,209 $ 268,501
Average rate paid 2.64% 2.58% 5.74%
15
16
The rates currently paid on certificates maturing within one year or
less are lower than the rates currently being paid on similar certificates of
deposit maturing thereafter. The Bank will seek to retain these deposits to the
extent consistent with its long-term objective of maintaining positive interest
rate spreads. Depending upon interest rates existing at the time such
certificates mature, the Bank's cost of funds may be significantly affected by
the rollover of these funds. A decrease in such cost of funds, if any, may have
a material impact on the Bank's operations. To the extent such deposits do not
rollover, the Bank may, if necessary, use other sources of funds, including
borrowings from the FHLB of Cincinnati, to replace such deposits. See "--
Borrowings."
The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of June 30,
2001.
CERTIFICATES
MATURITY PERIOD OF DEPOSIT
--------------- ----------
(IN THOUSANDS)
Three months or less.................................... $ 33,021
Three through six months................................ 27,386
Six through 12 months................................... 28,022
Over 12 months.......................................... 30,881
---------
Total.......................................... $ 119,310
=========
BORROWINGS. Savings deposits historically have been the primary source
of funds for the Bank's lending, investments and general operating activities.
The Bank is authorized, however, to use advances from the FHLB of Cincinnati to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The FHLB of Cincinnati functions as a central reserve bank
providing credit for savings institutions and certain other member financial
institutions. As a member of the FHLB System, Park View Federal is required to
own stock in the FHLB of Cincinnati and is authorized to apply for advances.
Advances are pursuant to several different programs, each of which has its own
interest rate and range of maturities. Park View Federal has a Blanket Agreement
for advances with the FHLB under which the Bank may borrow up to 50% of assets
subject to normal collateral and underwriting requirements. The Bank currently
has two commitments with the Federal Home Loan Bank of Cincinnati for flexible
lines of credit, referred to as a cash management advance and a REPO advance, in
the amounts of $30 million and $100 million respectively. The REPO advance was
drawn down by $65 million, while the CMA was not drawn down at June 30, 2001.
Advances from the FHLB of Cincinnati are secured by the Bank's stock in the FHLB
of Cincinnati and other eligible assets. For additional information please refer
to Note 8 of Notes to Consolidated Financial Statements.
The following table sets forth certain information regarding the Bank's
advances from the FHLB of Cincinnati for the periods indicated:
AT JUNE 30,
------------------------------------------
2001 2000 1999
---- ---- ----
(IN THOUSANDS)
Amounts outstanding at end of period ............... $185,867 $114,974 $ 66,041
Weighted average rate .............................. 4.68% 6.38% 5.65%
Maximum amount outstanding at any
month end ........................................ $185,872 $114,974 $ 66,041
Approximate average outstanding balance ............ 117,624 79,862 52,102
Weighted average rate .............................. 5.68% 5.71% 5.55%
At June 30, 2001 PVFCC had one note payable for $5.0 million, and drawn
down $4.7 million, collateralized by the stock of PVFSB. At June 30, 2000, PVFSC
had one note payable for $1.0 million, collateralized by real estate and
guaranteed by PVF. See Note 9 of Notes to Consolidated Financial Statement.
16
17
SUBSIDIARY ACTIVITIES
The Bank is required to give the FDIC and the Director of OTS 30 days
prior notice before establishing or acquiring a new subsidiary or commencing a
new activity through an existing subsidiary. Both the FDIC and the Director of
OTS have the authority to prohibit the initiation or to order the termination of
subsidiary activities determined to pose a risk to the safety or soundness of
the institution.
As a federally chartered savings bank, Park View Federal is permitted
to invest an amount equal to 2% of its assets in subsidiaries, with an
additional investment of 1% of assets where such investment serves primarily
community, inner-city and community development purposes. Under such
limitations, as of June 30, 2001, ParkView Federal was authorized to invest up
to approximately $22.1 million in the stock of or loans to subsidiaries,
including the additional 1% investment for community inner-city and community
development purposes. Institutions meeting their applicable minimum regulatory
capital requirements may invest up to 50% of their regulatory capital in
conforming first mortgage loans to subsidiaries in which they own 10% or more of
the capital stock. Park View Federal currently exceeds its regulatory capital
requirements.
PVF has three active subsidiaries, Park View Federal, PVFSC and MPLC.
PVFSC is engaged in the activities of land acquisition and real estate
investment. At June 30, 2001, PVFSC has an investment of $0.7 million in real
estate. The real estate includes a $0.3 million investment in the constructon of
a new branch office in Avon, Ohio, and $0.4 million in the development of land
in Newbury, Ohio. In addition, PVF has three non-active subsidiaries, PVF
Community Development Corp., PVF Mortgage Corp., and PVF Holdings, which have
been chartered for future activity.
PVF Service Corporation. In March of 1998, PVFSC entered into an option
agreement with Cameratta Properties Limited for the sale of Mid Pines, its 257
acre parcel of land in Solon, Ohio. PVFSC had acquired 150 acres of this land in
1983 from the Bank, which property the Bank acquired in foreclosure. The
additional 107 acre parcel of land was acquired by PVFSC in 1985 for $150,000.
PVFSC acquired and held the property as an investment. In March of 1999,
according to the terms of the option agreement and upon voter approval of the
planned development project, the Mid Pines sale to Cameratta Properties Limited
was completed for $4.8 million. The property was carried at a book value of $1.0
million by PVFSC, and the sale resulted in a pre-tax gain on the sale of real
estate of $3.8 million.
The proceeds from this sale were used by PVFSC to purchase a strip
center in Berea, Ohio at a cost of $3.8 million.
In April of 2000, PVFSC sold the Berea Strip Center for $4.3 million to
Berea Square Company, LLC. The proceeds from this sale were used by PVFSC to
purchase the Company's new Corporate Center in Solon, Ohio at a cost of $4.3
million. This transaction was handled as a like kind exchange for Federal Income
Tax purposes.
Mid Pines Land Company. In September of 2000, MPLC purchased a
commercial office building in Solon, Ohio and approximately 5 acres of adjoining
land from ARAC, Inc. for $4.4 million dollars. The purchase was made for the
purpose of facilitating the acquisition in April 2001 by PVFSC of the Company's
new Corporate Center. In November of 2000, the commercial office building was
sold to Rockside Corporate Woods Limited, LLC for $3.6 million. At June 30, 2001
MPLC had an investment of $0.6 million in land adjacent to the Company's new
Corporate Center in Solon, Ohio
COMPETITION
The Bank faces strong competition both in originating real estate and
other loans and in attracting deposits. The Bank competes for real estate and
other loans principally on the basis of interest rates and the loan fees it
charges, the type of loans it originates and the quality of services it provides
to borrowers. Its competition in originating real estate loans comes primarily
from other savings institutions, commercial banks and mortgage bankers making
loans secured by real estate located in the Bank's market area.
The Bank attracts all its deposits through its branch offices primarily
from the communities in which those branch offices are located. Consequently,
competition for deposits is principally from other savings institutions,
commercial banks, credit unions and brokers in these communities. Park View
Federal competes for deposits and
17
18
loans by offering a variety of deposit accounts at competitive rates, a wide
array of loan products, convenient business hours and branch locations, a
commitment to outstanding customer service and a well-trained staff. In
addition, the Bank believes it has developed strong relationships with local
businesses, realtors, builders, and the public in general, giving it an
excellent image in the community.
EMPLOYEES
As of June 30, 2001, PVF and its subsidiaries had 139 full-time
employees and 24 part-time employees, none of whom was represented by a
collective bargaining agreement. The Company believes it enjoys a good
relationship with its personnel.
REGULATION OF THE BANK
GENERAL. As a savings institution, Park View Federal is subject to
extensive regulation by the OTS, and its deposits are insured by the SAIF, which
is administered by the FDIC. The lending activities and other investments of the
Bank must comply with various federal regulatory requirements. The OTS
periodically examines the Bank for compliance with various regulatory
requirements. The FDIC also has the authority to conduct special examinations of
SAIF-insured savings institutions. The Bank must file reports with OTS
describing its activities and financial condition. The Bank is also subject to
certain reserve requirements promulgated by the Federal Reserve Board. This
supervision and regulation is intended primarily for the protection of
depositors. Certain of these regulatory requirements are referred to below or
elsewhere herein.
FINANCIAL MODERNIZATION LEGISLATION. On November 12, 1999, President
Clinton signed legislation which could have a far-reaching impact on the
financial services industry. The Gramm-Leach-Bliley ("G-L-B") Act authorizes
affiliations between banking, securities and insurance firms and authorizes bank
holding companies and national banks to engage in a variety of new financial
activities. Among the new activities that will be permitted to bank holding
companies are securities and insurance brokerage, securities underwriting,
insurance underwriting and merchant banking. The Federal Reserve Board, in
consultation with the Secretary of the Treasury, may approve additional
financial activities. The G-L-B Act, however, prohibits future acquisitions of
existing unitary savings and loan holding companies, like the Company, by firms
which are engaged in commercial activities and limits the permissible activities
of unitary holding companies formed after May 4, 1999.
The G-L-B Act imposes new requirements on financial institutions with
respect to customer privacy. The G-L-B Act generally prohibits disclosure of
customer information to non-affiliated third parties unless the customer has
been given the opportunity to object and has not objected to such disclosure.
Financial institutions are further required to disclose their privacy policies
to customers annually. Financial institutions, however, will be required to
comply with state law if it is more protective of customer privacy than the
G-L-B Act. The G-L-B Act directs the federal banking agencies, the National
Credit Union Administration, the Secretary of the Treasury, the Securities and
Exchange Commission and the Federal Trade Commission, after consultation with
the National Association of Insurance Commissioners, to promulgate implementing
regulations within six months of enactment. The privacy provisions became
effective in July 2001.
The G-L-B Act contains significant revisions to the FHLB System. The
G-L-B Act imposes new capital requirements on the FHLBs and authorizes them to
issue two classes of stock with differing dividend rates and redemption
requirements. The G-L-B Act deletes the current requirement that the FHLBs
annually contribute $300 million to pay interest on certain government
obligations in favor of a 20% of net earnings formula. The G-L-B Act expands the
permissible uses of FHLB advances by community financial institutions (under
$500 million in assets) to include funding loans to small businesses, small
farms and small agri-businesses. The G-L-B Act makes membership in the FHLB
voluntary for federal savings associations.
The G-L-B Act contains a variety of other provisions including a
prohibition against ATM surcharges unless the customer has first been provided
notice of the imposition and amount of the fee. The G-L-B Act reduces the
frequency of Community Reinvestment Act examinations for smaller institutions
and imposes certain reporting requirements on depository institutions that make
payments to non-governmental entities in connection with the Community
Reinvestment Act. The G-L-B Act eliminates the SAIF special reserve and
authorizes a federal savings association that converts to a national or state
bank charter to continue to use the term "federal" in its name and to retain any
interstate branches.
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The Company is unable to predict the impact of the G-L-B Act on its
operations at this time. Although the G-L-B Act reduces the range of companies
with which may acquire control of the Company, it may facilitate affiliations
with companies in the financial services industry.
REGULATORY CAPITAL REQUIREMENTS. Under OTS regulations, savings
institutions must maintain "tangible" capital equal to 1.5% of adjusted total
assets, "core" (also referred to as "Tier 1") capital equal to 4.0% (or 3.0% if
the institution is rated composite 1 under the OTS examination rating system) of
adjusted total assets and "total capital," a combination of core and
"supplementary" capital, equal to 8.0% of "risk-weighted" assets. In addition,
the OTS has adopted regulations which impose certain restrictions on savings
associations that have a total risk-based capital ratio that is less than 8.0%,
a ratio of Tier 1 capital to risk-weighted assets of less than 4.0% or a ratio
of Tier 1 capital to adjusted total assets of less than 4.0% (or 3.0% if the
institution is rated composite 1 under the OTS examination rating system). For
purposes of these regulations, Tier 1 capital has the same definitions as core
capital. See "-- Prompt Corrective Regulatory Action." The Bank is in compliance
with all applicable regulatory capital requirements.
In determining compliance with the risk-based capital requirement, a
savings institution calculates its total capital, which may include both core
capital and supplementary capital, provided the amount of supplementary capital
used does not exceed the savings institution's core capital. Supplementary
capital is defined to include certain preferred stock issues, nonwithdrawable
accounts and pledged deposits that do not qualify as core capital, certain
approved subordinated debt, certain other capital instruments and a portion of
the savings institution's general loss allowances, and up to 45% of unrealized
net gains of equity securities.
The risk-based capital requirement is measured against risk-weighted
assets, which equal the sum of each asset and the credit-equivalent amount of
each off-balance sheet item after being multiplied by an assigned risk weight.
Under the OTS risk-weighting system, single-family first mortgages not more than
90 days past due with loan-to-value ratios under 80%, and multi-family mortgages
(maximum 36 dwelling units) with loan-to-value ratios under 80% and average
annual occupancy rates over 80%, are assigned a risk weight of 50%. Consumer
loans, residential construction loans and commercial real estate loans are
assigned a risk weight of 100%. Mortgage-backed securities issued, or fully
guaranteed as to principal and interest, by the FNMA or FHLMC are assigned a 20%
risk weight. Cash and United States Government securities backed by the full
faith and credit of the United States Government are given a 0% risk weight.
Under the risk-based capital requirement, a savings institution is required to
maintain total capital, consisting of core capital plus certain other
components, including general valuation allowances, equal to 8.0% of
risk-weighted assets. At June 30, 2001 the Bank's risk-weighted assets were
$496.7 million, and its total regulatory capital was $51.0 million, or 10.26% of
risk-weighted assets.
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The table below presents the Bank's capital position at June 30, 2001,
relative to its various minimum regulatory capital requirements.
AT JUNE 30, 2001
----------------
PERCENT OF
AMOUNT ASSETS (1)
------ ----------
(DOLLARS IN THOUSANDS)
Tangible Capital........................... $ 47,489 6.46%
Tangible Capital Requirement............... 11,033 1.50
-------- -----
Excess .................................. $ 36,456 4.96%
======== =====
Tier 1/Core Capital........................ $ 47,489 6.46%
Tier 1/Core Capital Requirement............ 29,420 4.00
-------- -----
Excess .................................. $ 18,069 2.46%
======== =====
Tier 1 Risk-Based Capital.................. $ 47,489 9.56%
Tier 1 Risk-Based Capital Requirement...... 19,868 4.00
-------- ----
Excess .................................. $ 27,621 5.56%
======== =====
Risk-Based Capital......................... $ 50,984 10.26%
Risk-Based Capital Requirement............. 39,737 8.00
-------- ------
Excess................................... $ 11,247 2.26%
======== =====
-------------
(1) Based upon adjusted total assets for purposes of the
tangible, core and Tier 1 capital requirements, and
risk-weighted assets for purposes of the Tier 1 risk-based
and risk-based capital requirements.
OTS risk-based capital regulations require savings institutions with
more than a "normal" level of interest rate risk to maintain additional total
capital. A savings institution's interest rate risk will be measured in terms of
the sensitivity of its "net portfolio value" to changes in interest rates. Net
portfolio value is defined, generally, as the present value of expected cash
inflows from existing assets and off-balance sheet contracts less the present
value of expected cash outflows from existing liabilities. A savings institution
will be considered to have a "normal" level of interest rate risk exposure if
the decline in its net portfolio value after an immediate 200 basis point
increase or decrease in market interest rates (whichever results in the greater
decline) is less than two percent of the current estimated economic value of its
assets. A savings institution with a greater than normal interest rate risk will
be required to deduct from total capital, for purposes of calculating its
risk-based capital requirement, an amount (the "interest rate risk component")
equal to one-half the difference between the institution's measured interest
rate risk and the normal level of interest rate risk, multiplied by the economic
value of its total assets. At June 30, 2001 the Bank had no interest rate risk
component deduction from total capital.
In addition to requiring generally applicable capital standards for
savings institutions, the Director of OTS may establish the minimum level of
capital for a savings institution at such amount or at such ratio of
capital-to-assets as the Director determines to be necessary or appropriate for
such institution in light of the particular circumstances of the institution.
The Director of OTS may treat the failure of any savings institution to maintain
capital at or above such level as an unsafe or unsound practice and may issue a
directive requiring any savings institution which fails to maintain capital at
or above the minimum level required by the Director to submit and adhere to a
plan for increasing capital. Such an order may be enforced in the same manner as
an order issued by the FDIC.
PROMPT CORRECTIVE REGULATORY ACTION. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), the federal banking
regulators are required to take prompt corrective action if an insured
depository institution fails to satisfy certain minimum capital requirements.
All institutions, regardless of their capital levels, are restricted from making
any capital distribution or paying any management fees if the institution would
thereafter fail to satisfy the minimum levels for any of its capital
requirements. An institution that fails to meet the minimum level for any
relevant capital measure (an "undercapitalized institution") may be: (i) subject
to
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increased monitoring by the appropriate federal banking regulator; (ii) required
to submit an acceptable capital restoration plan within 45 days; (iii) subject
to asset growth limits; and (iv) required to obtain prior regulatory approval
for acquisitions, branching and new lines of businesses. The capital restoration
plan must include a guarantee by the institution's holding company that the
institution will comply with the plan until it has been adequately capitalized
on average for four consecutive quarters, under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the institution into capital compliance as of the date it
failed to comply with its capital restoration plan. A "significantly
undercapitalized" institution, as well as any undercapitalized institution that
did not submit an acceptable capital restoration plan, may be subject to
regulatory demands for recapitalization, broader application of restrictions on
transactions with affiliates, limitations on interest rates paid on deposits,
asset growth and other activities, possible replacement of directors and
officers, and restrictions on capital distributions by any bank holding company
controlling the institution. Any company controlling the institution could also
be required to divest the institution or the institution could be required to
divest subsidiaries. The senior executive officers of a significantly
undercapitalized institution may not receive bonuses or increases in
compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions. If an institution's ratio of tangible capital to total assets
falls below a "critical capital level," the institution will be subject to
conservatorship or receivership within specified time periods.
Under regulations jointly adopted by the federal banking regulators, a
savings institution's capital adequacy for purposes of the FDICIA prompt
corrective action rules is determined on the basis of the institution's total
risk-based capital ratio (the ratio of its total capital to risk-weighted
assets), Tier 1 risk-based capital ratio (the ratio of its core capital to
risk-weighted assets) and leverage ratio (the ratio of its Tier 1 or core
capital to adjusted total assets). The following table shows the capital ratio
requirements for each prompt corrective action category:
ADEQUATELY SIGNIFICANTLY
WELL CAPITALIZED CAPITALIZED UNDERCAPITALIZED UNDERCAPITALIZED
---------------- ----------- ---------------- ----------------
Total risk-based
capital ratio 10.0% or more 8.0% or more Less than 8.0% Less than 6.0%
Tier 1 risk-based
capital ratio 6.0% or more 4.0% or more Less than 4.0% Less than 3.0%
Leverage ratio 5.0% or more 4.0% or more * Less than 4.0% * Less than 3.0%
-----------
* 3.0% if the institution has a composite 1 CAMELS rating.
A "critically undercapitalized" savings institution is defined as a savings
institution that has a ratio of "tangible equity" to total assets of less than
2.0%. Tangible equity is defined as core capital plus cumulative perpetual
preferred stock (and related surplus) less all intangibles other than qualifying
supervisory goodwill and certain purchased mortgage servicing rights. The OTS
may reclassify a well capitalized savings association as adequately capitalized
and may require an adequately capitalized or undercapitalized institution to
comply with the supervisory actions applicable to institutions in the next lower
capital category (but may not reclassify a significantly undercapitalized
institution as critically undercapitalized) if the OTS determines, after notice
and an opportunity for a hearing, that the savings institution is in an unsafe
or unsound condition or that the institution has received and not corrected a
less-than-satisfactory rating for any CAMELS rating category. For information
regarding the position of the Bank with respect to the FDICIA prompt corrective
action rules, see Note __ of Notes to Consolidated Financial Statements.
SAFETY AND SOUNDNESS STANDARDS. Interagency Guidelines Establishing
Standards for Safety and Soundness require savings institutions to maintain
internal controls and information systems and internal audit systems that are
appropriate for the size, nature and scope of the institution's business. The
guidelines also establish certain basic standards for loan documentation, credit
underwriting, interest rate risk exposure, and asset growth. The guidelines
further provide that savings institutions should maintain safeguards to prevent
the payment of compensation, fees and benefits that are excessive or that could
lead to material financial loss, and should take into account factors such as
comparable compensation practices at comparable institutions. If the OTS
determines that a savings institution is not in compliance with the safety and
soundness guidelines, it may require the institution to submit an acceptable
plan to
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achieve compliance with the guidelines. A savings institution must submit an
acceptable compliance plan to the OTS within 30 days of receipt of a request for
such a plan. Failure to submit or implement a compliance plan may subject the
institution to regulatory sanctions. Additionally, a savings institution should
maintain systems, commensurate with its size and the nature and scope of its
operations, to identify problem assets and prevent deterioration in those assets
as well as to evaluate and monitor earnings and ensure that earnings are
sufficient to maintain adequate capital and reserves. Management believes that
the Bank meets substantially all the standards adopted in the interagency
guidelines.
FEDERAL HOME LOAN BANK SYSTEM. Park View Federal is a member of the
FHLB System, which consists of 12 regional FHLBs subject to supervision and
regulation by the Federal Housing Finance Board ("FHFB"). The FHLBs provide a
central credit facility primarily for member institutions. As a member of the
FHLB System, the Bank is required to acquire and hold shares of capital stock in
the FHLB of Cincinnati in an amount at least equal to 1% of the aggregate unpaid
principal of its home mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the FHLB of Cincinnati, whichever is greater. The Bank was in compliance
with this requirement with an investment in FHLB of Cincinnati stock at June 30,
2001 of $9.4 million.
The FHLB of Cincinnati serves as a reserve or central bank for its
member institutions within its assigned region. It is funded primarily from
proceeds derived from the sale of consolidated obligations of the FHLB System.
It makes advances to members in accordance with policies and procedures
established by the FHFB and the Board of Directors of the FHLB of Cincinnati.
Long-term advances may be made only for the purpose of providing funds for
residential housing finance, small business loans, small farm loans and small
agri-business loans. At June 30, 2001, the Bank had $185.9 million in advances
outstanding from the FHLB of Cincinnati. See " -- Deposit Activity and Other
Sources of Funds -- Borrowings."
QUALIFIED THRIFT LENDER TEST. A savings association that does not meet
the Qualified Thrift Lender test ("QTL Test") must either convert to a bank
charter or comply with the following restrictions on its operations: (i) the
institution may not engage in any new activity or make any new investment,
directly or indirectly, unless such activity or investment is permissible for a
national bank; (ii) the branching powers of the institution shall be restricted
to those of a national bank; and (iii) payment of dividends by the institution
shall be subject to the rules regarding payment of dividends by a national bank.
Upon the expiration of three years from the date the institution ceases to be a
Qualified Thrift Lender, it must cease any activity, and not retain any
investment not permissible for a national bank and savings association.
To meet the QTL test, the institution must qualify as a domestic
building and loan association under the Internal Revenue Code or the
institution's "Qualified Thrift Investments" must total at least 65% of
"portfolio assets." Under OTS regulations, portfolio assets are defined as total
assets less intangibles, property used by a savings institution in its business
and liquidity investments in an amount not exceeding 20% of assets. Qualified
Thrift Investments consist of (i) loans, equity positions or securities related
to domestic, residential real estate or manufactured housing, and educational,
small business and credit card loans, (ii) 50% of the dollar amount of
residential mortgage loans subject to sale under certain conditions, and (iii)
stock in an FHLB or the FHLMC or FNMA. In addition, subject to a 20% of
portfolio assets limit, savings institutions are able to treat as Qualified
Thrift Investments 200% of their investments in loans to finance "starter homes"
and loans for construction, development or improvement of housing and community
service facilities or for financing small businesses in "credit-needy" areas. In
order to maintain QTL status, the savings institution must maintain a weekly
average percentage of Qualified Thrift Investments to portfolio assets equal to
65% on a monthly average basis in nine out of 12 months. A savings institution
that fails to maintain QTL status will be permitted to requalify once, and if it
fails the QTL test a second time, it will become immediately subject to all
penalties as if all time limits on such penalties had expired. Failure to
qualify as a QTL results in a number of sanctions, including the imposition of
certain operating restrictions imposed on national banks. At June 30, 2001, the
Bank qualified as a QTL.
UNIFORM LENDING STANDARDS. Under OTS regulations, savings institutions
must adopt and maintain written policies that establish appropriate limits and
standards for extensions of credit that are secured by liens or interests in
real estate or are made for the purpose of financing permanent improvements to
real estate. These policies must establish loan portfolio diversification
standards, prudent underwriting standards, including loan-to-value limits, that
are clear and measurable, loan administration procedures and documentation,
approval and reporting requirements.
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The real estate lending policies must reflect consideration of the Interagency
Guidelines for Real Estate Lending Policies (the "Interagency Guidelines") that
have been adopted by the federal bank regulators.
The Interagency Guidelines, among other things, call upon depository
institutions to establish internal loan-to-value limits for real estate loans
that are not in excess of the following supervisory limits; (i) for loans
secured by raw land, the supervisory loan-to-value limit is 65% of the value of
the collateral; (ii) for land development loans (i.e., loans for the purpose of
improving unimproved property prior to the erection of structures), the
supervisory limit is 75%; (iii) for loans for the construction of commercial,
multifamily or other nonresidential property, the supervisory limit is 80%; (iv)
for loans for the construction of one-to-four family properties, the supervisory
limit is 85%; and (v) for loans secured by other improved property (e.g.,
farmland, completed commercial property and other income-producing property
including non-owner-occupied, one-to-four family property), the limit is 85%.
Although no supervisory loan-to-value limit has been established for
owner-occupied, one-to-four family and home equity loans, the Interagency
Guidelines state that for any such loan with a loan-to-value ratio that equals
or exceeds 90% at origination, an institution should require appropriate credit
enhancement in the form of either mortgage insurance or readily marketable
collateral.
The Interagency Guidelines state that it may be appropriate in
individual cases to originate or purchase loans with loan-to-value ratios in
excess of the supervisory loan-to-value limits, based on the support provided by
other credit factors. The aggregate amount of loans in excess of the supervisory
loan-to-value limits, however, should not exceed 100% of total capital and the
total of such loans secured by commercial, agricultural, multi-family and other
non-one-to-four family residential properties should not exceed 30% of total
capital. The supervisory loan-to-value limits do not apply to certain categories
of loans including loans insured or guaranteed by the U.S. government and its
agencies or by financially capable state, local or municipal governments or
agencies, loans backed by the full faith and credit of a state government, loans
that are to be sold promptly after origination without recourse to a financially
responsible party, loans that are renewed, refinanced or restructured without
the advancement of new funds, loans that are renewed, refinanced or restructured
in connection with a workout, loans to facilitate sales of real estate acquired
by the institution in the ordinary course of collecting a debt previously
contracted and loans where the real estate is not the primary collateral.
The Bank believes that its current lending policies conform to the
Interagency Guidelines.
DEPOSIT INSURANCE. The Bank is required to pay assessments, based on a
percentage of its insured deposits, to the FDIC for insurance of its deposits by
the FDIC through the SAIF of the FDIC. The FDIC is required to set semi-annual
assessments for SAIF-insured institutions at a level necessary to maintain the
designated reserve ratio of the SAIF at 1.25% of estimated insured deposits, or
at a higher percentage of estimated insured deposits that the FDIC determines to
be justified for that year by circumstances indicating a significant risk of
substantial future losses to the SAIF.
Under the FDIC's risk-based deposit insurance assessment system, the
assessment rate for an insured depository institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the institution's capital level and supervisory evaluations. Based on the
data reported to regulators for the date closest to the last day of the seventh
month preceding the semi-annual assessment period, institutions are assigned to
one of three capital groups -- well capitalized, adequately capitalized or
undercapitalized -- using the same percentage criteria as under the prompt
corrective action regulations. See "-- Prompt Corrective Regulatory Action."
Within each capital group, institutions are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority, and such other information as the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance fund. Subgroup A consists of financially sound institutions with only
a few minor weaknesses. Subgroup B consists of institutions that demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the institution and increased risk of loss to the deposit insurance fund.
Subgroup C consists of institutions that pose a substantial probability of loss
to the deposit insurance fund unless effective corrective action is taken.
The FDIC's current regular semi-annual SAIF assessment rates set a base
assessment rate schedule ranging from 0 to 27 basis points. Until December 31,
1999, SAIF-insured institutions were required to pay assessments to the FDIC at
the rate of 6.44 basis points to help fund interest payments on certain bonds
issued by the Financing Corporation ("FICO"), an agency of the federal
government established to finance takeovers of insolvent thrifts.
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During this period, Bank Insurance Fund ("BIF") members were assessed for these
obligations at the rate of 1.3 basis points. After December 31, 1999, both BIF
and SAIF members are assessed at the same rate for FICO payments.
DIVIDEND LIMITATIONS. Under OTS regulations, the Bank may not pay
dividends on its capital stock if its regulatory capital would thereby be
reduced below the amount then required for the liquidation account established
for the benefit of certain depositors of the Bank at the time of the Bank's
conversion from the mutual to stock form. In addition, savings institution
subsidiaries of savings and loan holding companies are required to give the OTS
30 days' prior notice of any proposed declaration of dividends to the holding
company.
OTS regulations require that savings institutions submit notice to the
OTS prior to making a capital distrubution (which includes dividends, stock
repurchases and amounts paid to stockholders of another institution in a cash
merger) if (a) they would not be well-capitalized after the distribution, (b)
the distribution would result in the retirement of any of the institution's
common or preferred stock or debt counted as its regulatory capital, or (c) the
institution is a subsidiary of a holding company. A savings institution must
make application to the OTS to pay a capital distribution if (x) the institution
would not be adequately capitalized following the distribution, (y) the
institution's total distributions for the calendar year exceeds the
institution's net income for the calendar year to date plus its net income (less
distributions) for the preceding two years, or (z) the distribution would
otherwise violate applicable law or regulation or an agreement with or
conditions imposed by the OTS. If neither the savings institution nor the
proposed capital distribution meet any of the foregoing criteria, then no notice
or application is required to be filed with the OTS before making a capital
distribution. The OTS may disapprove or deny a capital distribution if in the
view of the OTS, the capital distribution would constitute an unsafe or unsound
practice.
The Bank is prohibited from making any capital distributions if after
making the distribution, it would be undercapitalized as defined in the OTS'
prompt corrective action regulations. After consultation with the FDIC, the OTS
may permit a savings association to repurchase, redeem, retire or otherwise
acquire shares or ownership interests if the repurchase, redemption, retirement
or other acquisition: (i) is made in connection with the issuance of additional
shares or other obligations of the institution in at least an equivalent amount;
and (ii) will reduce the institution's financial obligations or otherwise
improve the institution's financial condition.
In addition to the foregoing, earnings of the Bank appropriated to bad
debt reserves and deducted for federal income tax purposes are not available for
payment of cash dividends without payment of taxes at the then current tax rate
by the Bank on the amount of earnings removed from the reserves for such
distributions. See "Taxation." The Bank intends to make full use of this
favorable tax treatment afforded to the Bank and does not contemplate use of any
earnings of the Bank in a manner which would limit the Bank's bad debt deduction
or create federal tax liabilities.
FEDERAL RESERVE SYSTEM. Pursuant to regulations of the Federal Reserve
Board, a savings institution must maintain average daily reserves equal to 3% on
transaction accounts of between $0 and $42.8 million, plus 10% on the remainder.
These percentages are subject to adjustment by the Federal Reserve Board.
Because required reserves must be maintained in the form of vault cash or in a
noninterest-bearing account at a Federal Reserve Bank, the effect of the reserve
requirement is to reduce the amount of the institution's interest-earning
assets. At June 30, 2001, Park View Federal met its reserve requirements.
INTERSTATE AND INTERINDUSTRY ACQUISITIONS. OTS regulations permit
federal savings institutions to branch in any state or states of the United
States and its territories. Except in supervisory cases or when interstate
branching is otherwise permitted by state law or other statutory provision, an
institution may not establish an out-of-state branch unless (i) the institution
qualifies as a "domestic building and loan association" under sec.7701(a)(19) of
the Internal Revenue Code and the total assets attributable to all branches of
the association in the state would qualify such branches taken as a whole for
treatment as a domestic building and loan association or as a QTL, and (ii) such
branch would not result in (a) formation of a prohibited multi-state multiple
savings and loan holding company, or (b) a violation of certain statutory
restrictions on branching by savings association subsidiaries of banking holding
companies. Federal savings institutions generally may not establish new branches
unless the institution meets or exceeds minimum regulatory capital requirements.
The OTS will also consider the institution's record of compliance with the
Community Reinvestment Act in connection with any branch application.
The Federal Reserve Board may permit the acquisition of a savings
institution by a bank holding company. In approving an application by a bank
holding company to acquire a savings institution, the Federal Reserve Board is
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prohibited from imposing restrictions on tandem operations of the subsidiary
savings institution and its holding company affiliates except as required under
Sections 23A and 23B of the Federal Reserve Act, as amended.
A bank holding company that controls a savings institution may merge or
consolidate the assets and liabilities of the savings institution with, or
transfer assets and liabilities to, any subsidiary bank which is a BIF member
with the approval of the appropriate federal banking agency and the Federal
Reserve Board. The resulting bank will be required to continue to pay
assessments to the SAIF at the rates prescribed for SAIF members on the deposits
attributable to the merged savings institution plus an annual growth increment.
In addition, the transaction must comply with the restrictions on interstate
acquisitions of commercial banks under the Bank Holding Company Act.
LOANS-TO-ONE-BORROWER LIMITATIONS. Under federal law, loans and
extensions of credit outstanding at one time to a person shall not exceed 15% of
the unimpaired capital and surplus of the savings institution. Loans and
extensions of credit fully secured by certain readily marketable collateral may
represent an additional 10% of unimpaired capital and surplus. Applicable law
authorizes savings associations to make loans to one borrower, for any purpose,
in an amount not to exceed $500,000 or, by order of the Director of OTS, in an
amount not to exceed the lesser of $30,000,000 or 30% of unimpaired capital and
surplus to develop residential housing, provided: (i) the purchase price of each
single-family dwelling in the development does not exceed $500,000; (ii) the
savings institution is in compliance with federal capital requirements; (iii)
the loans comply with applicable loan-to-value requirements; and (iv) the
aggregate amount of loans made under this authority does not exceed 150% of
unimpaired capital and surplus. A savings institution is authorized to make
loans to one borrower to finance the sale of real property acquired in
satisfaction of debts in an amount up to 50% of unimpaired capital and surplus.
TRANSACTIONS WITH AFFILIATES. Transactions between savings institutions
and any affiliate are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings institution is any company or entity which
controls, is controlled by or is under common control with the savings
institution. In a holding company context, the parent holding company of a
savings institution (such as the Company) and any companies which are controlled
by such parent holding company are affiliates of the savings institution.
Generally, Sections 23A and 23B (i) limit the extent to which the savings
institution or its subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of such institution's capital stock and
surplus, and contain an aggregate limit on all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable, to the institution or subsidiary as those provided to a
nonaffiliated. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar other types of
transactions. In addition to the restrictions imposed by Sections 23A and 23B,
no savings institution may (i) loan or otherwise extend credit to an affiliate,
except for any affiliate which engages only in activities which are permissible
for bank holding companies, or (ii) purchase or invest in any stocks, bonds,
debentures, notes or similar obligations of any affiliate, except for affiliates
which are subsidiaries of the savings institution. Section 106 of the Bank
Holding Company Act of 1956, as amended ("BHCA") which also applies to the Bank,
prohibits the Bank from extending credit to or offering any other services, or
fixing or varying the consideration for such extension of credit or service, on
condition that the customer obtain some additional services from the institution
or certain of its affiliates or not obtain services of a competitor of the
institution, subject to certain exceptions.
Savings institutions are also subject to the restrictions contained in
Section 22(h) and Section 22(g) of the Federal Reserve Act on loans to executive
officers, directors and principal stockholders. Under Section 22(h), loans to a
director, executive officer or to a greater than 10% stockholder of a savings
institution, and certain affiliated entities of the foregoing, may not exceed,
together with all other outstanding loans to such person and affiliated entities
the institution's loan to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus and an additional 10% of such
capital and surplus for loans fully secured by certain readily marketable
collateral). Section 22(h) also prohibits loans, above amounts prescribed by the
appropriate federal banking agency, to directors, executive officers and greater
than 10% stockholders of a savings institution, and their respective affiliates,
unless such loan is approved in advance by a majority of the board of directors
of the institution with any "interested" director not participating in the
voting. The Federal Reserve Board has prescribed the loan amount (which includes
all other outstanding loans to such person), as to which such prior board of
director approval is required, as being the greater of $25,000 or 5% of capital
and surplus (up to $500,000). Further, the Federal Reserve Board pursuant to
Section 22(h) requires that loans to directors, executive officers and principal
stockholders be made on terms substantially the same as offered in comparable
transactions to other persons. Section 22(h) also generally prohibits a
depository institution from paying the overdrafts of any of its executive
officers or directors.
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Section 22(g) of the Federal Reserve Act requires that loans to
executive officers of depository institutions not be made on terms more
favorable than those afforded to other borrowers, requires approval for such
extensions of credit by the board of directors of the institution, and imposes
reporting requirements for and additional restrictions on the type, amount and
terms of credits to such officers. In addition, Section 106 of the BHCA
extensions of credit to executive officers, directors, and greater than 10%
stockholders of a depository institution by any other institution which has a
correspondent banking relationship with the institution, unless such extension
of credit is on substantially the same terms as those prevailing at the time for
comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features.
REGULATION OF THE COMPANY
GENERAL
The company is a savings and loan holding company as defined by the
Home Owners' Loan Act. As such, the Company is registered with the OTS and is
subject to OTS regulation, examination, supervision and reporting requirements.
As a subsidiary of a savings and loan holding company, the Bank is subject to
certain restrictions in its dealings with the Company and affiliates thereof.
ACTIVITIES RESTRICTIONS. The Board of Directors of the Company
presently intends to operate the Company as a unitary savings and loan holding
company. Since the Company became a unitary savings and loan holding company
before May 4, 1999, there are generally no restrictions on the activities of the
Company. However, if the Director of the OTS determines that there is reasonable
cause to believe that the continuation by a savings and loan holding company of
an activity constitutes a serious risk to the financial safety, soundness or
stability of its subsidiary savings institution, the Director of the OTS may
impose such restrictions as deemed necessary to address such risk including
limiting: (i) payment of dividends by the savings institution; (ii) transactions
between the savings institution and its affiliates; and (iii) any activities of
the savings institution that might create a serious risk that the liabilities of
the holding company and its affiliates may be imposed on the savings
institution. Notwithstanding the above rules as to permissible business
activities of unitary savings and loan holding companies, if the savings
institution subsidiary of such a holding company fails to meet the QTL test,
then such unitary holding company shall also presently become subject to the
activities restrictions applicable to multiple holding companies and, unless the
savings institution requalifies as a QTL within one year thereafter, register
as, and become subject to the restrictions applicable to a bank holding company.
See "-- Regulation of the Bank -- Qualified Thrift Lender Test."
If the Company were to acquire control of another savings institution,
other than through merger or other business combination with the Bank, the
Company would thereupon become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve emergency
thrift acquisitions and where each subsidiary savings institution meets the QTL
test, the activities of the Company and any of its subsidiaries (other than the
Bank or other subsidiary savings institutions) would thereafter be subject to
further restrictions. Among other things, no multiple savings and loan holding
company or subsidiary thereof which is not a savings institution shall commence
or continue for a limited period of time after becoming a multiple savings and
loan holding company or subsidiary thereof, any business activity, upon prior
notice to, and no objection by, the OTS, other than: (i) furnishing or
performing management services for a subsidiary savings institution; (ii)
conducting an insurance agency or escrow business; (iii) holding, managing, or
liquidating assets owned by or acquired from a subsidiary savings institution;
(iv) holding or managing properties used or occupied by a subsidiary savings
institution; (v) acting as trustee under deeds of trust; (vi) those activities
authorized by regulation as of March 5, 1987 to be engaged in by multiple
holding companies; or (vii) unless the Director of the OTS by regulation
prohibits or limits such activities for savings and loan holding companies,
those activities authorized by the Federal Reserve Board as permissible for bank
holding companies. Those activities described in (vii) above must also be
approved by the Director of the OTS prior to being engaged in by a multiple
holding company.
RESTRICTIONS ON ACQUISITIONS. Savings and loan holding companies are
prohibited from acquiring, without prior approval of the Director of OTS, (i)
control of any other savings institution or savings and loan holding company or
substantially all the assets thereof, or (ii) more than 5% of the voting shares
of a savings institution or holding company thereof which is not a subsidiary.
Under certain circumstances, a registered savings and loan holding company is
permitted to acquire, with the approval of the Director of the OTS, up to 15% of
the voting shares of an undercapitalized savings institution pursuant to a
"qualified stock issuance" without that savings institution being deemed
controlled by the holding company. In order for the shares acquired to
constitute a "qualified stock issuance,"
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the shares must consist of previously unissued stock or treasury shares, the
shares must be acquired for cash, the savings and loan holding company' other
subsidiaries must have tangible capital of at least 6 1/2% of total assets,
there must not be more than one common director or officer between the savings
and loan holding company and the issuing savings institution, and transactions
between the savings institution and the savings and loan holding company and any
of its affiliates must conform to Sections 23A and 23B of the Federal Reserve
Act. Except with the prior approval of the Director of the OTS, no director or
officer of a savings and loan holding company or person owning or controlling by
proxy or otherwise more than 25% of such company's stock, may also acquire
control of any savings institution, other than a subsidiary savings institution,
or of any other savings and loan holding company.
The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
institutions in more than one state if: (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office in the state of the institution to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act; or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by state chartered institutions or savings and loan holding companies
located in the state where the acquiring entity is located (or by a holding
company that controls such state-chartered savings institutions).
TAXATION
GENERAL
The Company and its subsidiaries currently file a consolidated federal
income tax return based on a fiscal year ending June 30. Consolidated returns
have the effect of eliminating intercompany distributions, including dividends,
from the computation of consolidated taxable income for the taxable year in
which the distributions occur.
FEDERAL INCOME TAXATION
Savings institutions are subject to the provisions of the Internal
Revenue Code of 1986, as amended (the "Code") in the same general manner as
other corporations. Prior to legislation in 1996, institutions such as the Bank
which met certain definitional tests and other conditions prescribed by the Code
benefited from certain favorable provisions regarding their deductions from
taxable income for annual additions to their bad debt reserve. Legislation that
is effective for tax years beginning after December 31, 1995 repealed the
reserve method available to thrifts and required institutions to recapture into
taxable income over a six taxable year period the portion of the tax loan loss
reserve that exceeds the pre-1988 tax loan loss reserve. The Bank had no such
excess reserve. The Bank will no longer be allowed to use the percentage of
taxable income method for tax loan loss provisions, but was allowed to use the
experience method of accounting for bad debts as long as it was not considered a
large thrift. Beginning with June 30, 1997 taxable year, the Bank was treated
the same as a small commercial bank. Institutions with less than $500 million in
assets were still permitted to make deductible bad debt additions to reserves,
using the experience method. Beginning with the June 30, 2000 taxable year, the
Bank will be taxed as a large thrift and will only be able to take a tax
deduction when a loan is actually charged off.
Earnings appropriated to the Bank's bad debt reserve and claimed as a
tax deduction are not available for the payment of cash dividends or for
distribution to stockholders (including distributions made on dissolution or
liquidation), unless the Bank includes the amount in taxable income, along with
the amount deemed necessary to pay the resulting federal income tax.
In addition to the regular income tax, corporations generally are
subject to a minimum tax. An alternative minimum tax is imposed at a minimum tax
rate of 20% on alternative minimum taxable income, which is the sum of a
corporation's regular taxable income (with certain adjustments) and tax
preference items, less any available exemption. Net operating losses can offset
no more than 90% of alternative minimum taxable income. The alternative minimum
tax is imposed to the extent it exceeds the corporation's regular income tax.
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The Bank's federal income tax returns through June 30, 1992 were
audited by the IRS, and the Company has federal income tax returns which are
open and subject to audit for the tax years 1997 through 1999. With respect to
years examined by the IRS, all deficiencies have been satisfied.
For further information regarding federal income taxes, see Note 10 of
Notes to Consolidated Financial Statements.
STATE INCOME TAXATION
The Bank is subject to an Ohio franchise tax based on its equity
capital plus certain reserve amounts. Total equity capital for this purpose is
reduced by certain exempted assets. The resulting net taxable value of capital
was taxed at a rate of 1.3%, 1.3% and 1.4% for fiscal years 2001, 2000, and
1999, respectively. The Company generally elects to be taxed as a qualifying
holding company and pay Ohio tax based on its net income only. The other
subsidiaries of the Company are taxed on the greater of a tax based on net
income or net worth.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth information with respect to the executive
officers of the Company.
AGE AS OF
NAME SEPTEMBER 11, 2001 TITLE
---- ------------------ -----
John R. Male 53 Chairman of the Board and Chief Executive Officer
of the Company and the Bank
C. Keith Swaney 58 President and Chief Operating Officer of the
Company and the Bank, Treasurer of the Company
and Chief Financial Officer of the Bank
Jeffrey N. Male 52 Vice President and Secretary of the Company and
Executive Vice President of the Bank
JOHN R. MALE. Mr. Male has been with the Bank since 1971, where he has
held various positions including branch manager, mortgage loan officer, manager
of construction lending, savings department administrator and chief lending
officer. Mr. Male was named President and Chief Executive Officer of the Bank in
1986 and was named President of the Company upon its organization in 1994. Mr.
Male was named Chairman of the Board of Directors and Chief Executive Officer of
the Company and the Bank in October 2000. Mr. Male serves in various public
service and charitable organizations. He currently serves on the Board of
Trustees for Heather Hill, a long-term care hospital in Chardon, Ohio. He has an
undergraduate degree from Tufts University and an MBA from Case Western Reserve
University.
C. KEITH SWANEY. Mr. Swaney joined the Bank in 1962 and was named
Executive Vice President and Chief Financial Officer in 1986. He was named Vice
President and Treasurer of the Company upon its organization in 1994. Mr. Swaney
was named President and Chief Operating Officer of the Company and the Bank in
October 2000. He continues to serve as Treasurer of the Company and as Chief
Financial Officer of the Bank. He is responsible for all internal operations of
the Company and the Bank. Over the years, he has participated in various
charitable organizations. Mr. Swaney attended Youngstown State University and
California University in Pennsylvania.
JEFFREY N. MALE. Mr. Male has been with the Bank since 1973. He has
served in various capacities including supervisor of the construction loan
department, personnel director and manager of the collection, foreclosure and
REO departments. Mr. Male was named Executive Vice President of the Bank in
2000. In 1986 Mr. Male was named Senior Vice President in charge of residential
lending operations. He was named Vice President and Secretary of the Company
upon its organization in 1994 and continues to serve in that position. Mr. Male
has served in various capacities with public service and charitable
organizations, including the Chagrin Valley Jaycees, the Chagrin Falls Chamber
of Commerce and the Neighborhood Housing Services Corporate Loan Committee. Mr.
Male is a graduate of Denison University.
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ITEM 2. PROPERTIES
-------------------
The following table sets forth the location and certain additional
information regarding the Company's offices at June 30, 2001.
YEAR NET BOOK OWNED OR APPROXIMATE
OPENED/ TOTAL VALUE AT LEASED/ SQUARE
LOCATION ACQUIRED DEPOSITS JUNE 30, 2001 EXPIRATION FOOTAGE
-------- -------- -------- ------------- ---------- -------
(DOLLARS IN THOUSANDS)
MAIN OFFICE:
30000 Aurora Road 2000 $ 0 $ 4,346 Owned 51,635
Solon, Ohio
BRANCH OFFICES:
2111 Richmond Road 1967 65,842 74 Lease 2,750
Beachwood, Ohio 3/1/09
25350 Rockside Road 1969 69,539 11 Lease 14,400
Bedford Heights, Ohio 3/1/03
11010 Clifton Blvd 1974 25,490 4 Lease 1,550
Cleveland, Ohio 8/1/05
13901 Ridge Road 1999 48,605 65 Lease 3,278
North Royalton, Ohio 8/31/04
6990 Heisley Road 1994 40,562 0 Lease 2,400
Mentor, Ohio 10/25/03
1456 SOM Center Road 1995 36,094 134 Lease 2,200
Mayfield Heights, Ohio 9/30/04
497 East Aurora Road 1994 34,397 0 Lease 2,400
Macedonia, Ohio 9/30/04
8500 Washington Street 1995 33,081 40 Lease 2,700
Chagrin Falls, Ohio 11/30/04
408 Water Street 1997 21,551 647 Owned 2,800
Chardon, Ohio
3613 Medina Road 2000 26,880 63 Lease 2,440
Medina, Ohio 8/31/04
34400 Aurora Road 2000 29,023 90 Lease 3,000
Solon, Ohio 4/30/10
16909 Chagrin Blvd 2000 49,468 158 Lease 2,904
Shaker Hts., Ohio 6/30/10
At June 30, 2001 the net book value of the Company's premises,
furniture, fixtures and equipment was $7.8 million. See Note 6 of Notes to
Consolidated Financial Statements for further information.
The Company also owns real estate in the Solon, Ohio and Newbury, Ohio.
See "-- Subsidiary Activities" for further information.
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ITEM 3. LEGAL PROCEEDINGS.
-------------------------
From time to time, the Company and/or the Bank is a party to various
legal proceedings incident to its business. There are no other material legal
proceedings to which the Bank or PVF is a party or to which any of their
property is subject.
In its Annual Report on Form 10-K (the "2000 form 10-K") for the year
ended June 30, 2000, the Company disclosed that it and various of its
subsidiaries had been parties to lawsuits related to the Company's efforts,
which have since been suspended, to develop a business offering financial
planning advice and the sale of mutual funds and insurance products on any
agency basis. The entities named in the lawsuits were the Company, the Bank and
two other entities, PVF Financial Planning Inc. ("PVFFP") and Emissary Financial
Group, Inc. ("Emissary"), which are majority-owned subsidiaries of the Company's
wholly owned subsidiary, PVF Holdings, Inc. The Company's proposed business plan
called for PVFFP to establish offices in certain of the Bank's locations, from
which offices PVFFP would provide financial planning advice to customers and
sell insurance and mutual fund products to those customers on an agency basis.
Emissary was proposed to act as a broker dealer that would execute any trades
directed by PVFFP and by entities unrelated to PVFFP or the Company. Through PVF
Holdings, Inc., the Company invested a total of $300,000 in PVFFP and Emissary,
virtually all of which was invested in Emissary. The other investor in PVFFP and
Emissary was to be an individual named Gregory Shefchuk. Mr. Shefchuk owned a
financial planning service that traded through Money Concepts Capital Corp.
("Money Concepts"), a broker dealer based in Chicago, Illinois. Mr. Shefchuk
intended to utilize Emissary as the broker dealer for his proposed activities
with PVFFP.
All lawsuits disclosed in Item 3 of the 2000 form 10-K have been
dismissed with no liability and immaterial expense to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 2001.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
--------------------------------------------------------------------------
MATTERS
-------
The information contained under the section captioned "Market
Information" in the Company's Annual Report to Stockholders for the Fiscal Year
Ended June 30, 2001 (the "Annual Report") is incorporated herein by reference.
For information regarding restrictions on the payment of dividends see "Item 1.
Business -- Regulation of the Bank -- Dividend Limitations."
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
The information contained in the table captioned "Selected Consolidated
Financial and Other Data" in the Annual Report is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Asset/Liability Management" in the Annual Report incorporated herein by
reference.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
The consolidated financial statements contained in the Annual Report
which are listed under Item 14 herein are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The information contained under the section captioned "Proposal I --
Election of Directors" in the Company's definitive proxy statement for the
Company's 2001 Annual Meeting of Stockholders (the "Proxy Statement") is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The information contained under the section captioned "Proposal I --
Election of Directors -- Executive Compensation" and "-- Directors'
Compensation" in the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
(a) and (b) The information required by this item is
incorporated herein by reference to the sections captioned
"Proposal I -- Election of Directors" and "Voting Securities
and Principal Holders Thereof" of the Proxy Statement.
(c) Management knows of no arrangements, including any pledge by
any person of securities of the Bank, the operation of which
may at a subsequent date result in a change in control of the
registrant. [CONFIRM]
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors" of the
Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a) 1. Independent Auditors' Report (incorporated by reference to the
Annual Report)
Consolidated Financial Statements (incorporated by reference
to the Annual Report)
(a) Consolidated Statements of Financial Condition, at
June 30, 2001 and 2000
(b) Consolidated Statements of Operations for the Years
Ended June 30, 2001, 2000 and 1999
(c) Consolidated Statements of Stockholders' Equity for
the Years Ended June 30, 2001, 2000 and 1999
(d) Consolidated Statements of Cash Flows for the Years
Ended June 30, 2001, 2000 and 1999
(e) Notes to Consolidated Financial Statements.
2. All schedules have been omitted as the required information is
either inapplicable or included in the Notes to Consolidated
Financial Statements.
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3. Exhibits and Index to Exhibits
The following exhibits are either attached to or incorporated
by reference in this Annual Report on Form 10-K.
No. Description
--- -----------
3.1 Certificate of Incorporation *
3.2 Code of Regulations *
3.3 Bylaws *
4 Specimen Stock Certificate *
10.1 Park View Federal Savings Bank Conversion Stock Option Plan *
10.2 PVF Capital Corp. 1996 Incentive Stock Option Plan *
10.3 Severance Agreement between PVF Capital Corporation and **
each of John R. Male, C. Keith Swaney and Jeffrey N. Male
10.4 Park View Federal Savings Bank Supplemental Executive **
Retirement Plan
10.5 PVF Capital Corp. 2000 Incentive Stock Option Plan and Form of Stock Option ***
Agreement
13 PVF Capital Corp. Annual Report to Stockholders for the year ended June 30, 2001
21 Subsidiaries of the Registrant
23 Consent of KPMG LLP
-------------
* Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended June 30, 1996 (Commission File No. 0-24948).
** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended June 30, 1998 (Commission File No. 0-24948).
*** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended June 30, 2000 (Commission File No. 0-24948).
(b) No current reports on Form 8-K have been filed during the last quarter
of the fiscal year covered by this report.
(c) All required exhibits are filed as attached.
(d) No financial statement schedules are required.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PVF CAPITAL CORP.
September 25, 2001 By: /s/ John R. Male
-------------------------------------
John R. Male
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ John R. Male September 25, 2001
--------------------------------------------
John R. Male
Chairman of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
/s/ C. Keith Swaney September 25, 2001
--------------------------------------------
C. Keith Swaney
President, Chief Financial Officer and
Chief Operating Officer
(Principal Financial and Accounting Officer)
/s/ Robert K. Healey September 25, 2001
--------------------------------------------
Robert K. Healey
Director
/s/ Stanley T. Jaros September 25, 2001
--------------------------------------------
Stanley T. Jaros
Director
/s/ Creighton E. Miller September 25, 2001
--------------------------------------------
Creighton E. Miller
Director
/s/ Stuart D. Neidus September 25, 2001
--------------------------------------------
Stuart D. Neidus
Director
/s/ Robert F. Urban September 25, 2001
--------------------------------------------
Robert F. Urban
Director