Filed
Pursuant to Rule 424 (b) (3)
Registration
No. 333-163037
PROSPECTUS
17,142,857 Shares of
Common Stock
Including up to
14,706,247 Shares of Common Stock
Issuable upon the exercise of
Subscription Rights at $1.75 per share
We are distributing, at no charge to our shareholders,
non-transferable subscription rights to purchase up to
14,706,247 shares of our common stock, par value $0.01 per
share. In the rights offering, you will receive one subscription
right for each share of common stock you owned as of
5:00 p.m. Eastern Time, on January 27, 2010, the
record date of the rights offering. As of the close of business
on January 27, 2010, there were 7,979,120 shares of
common stock issued and outstanding. We must sell a minimum of
8,571,429 shares to complete the rights offering.
Each subscription right will entitle you to purchase
1.8431 shares of our common stock at the subscription price
of $1.75 per share, which we refer to as the basic subscription
privilege. If you fully exercise your basic subscription
privilege and other shareholders do not fully exercise their
basic subscription privileges, you will be entitled to exercise
an over-subscription privilege, subject to certain limitations
and subject to allotment, to purchase a portion of the
unsubscribed shares of our common stock at the same subscription
price of $1.75 per share. To the extent you properly exercise
your over-subscription privilege for an amount of shares that
exceeds the number of the unsubscribed shares available to you,
any excess subscription payments received by the information
agent will be returned to you promptly, without interest,
following the expiration of the rights offering. Funds we
receive from subscribers in the rights offering will be held in
escrow by the escrow agent until the rights offering is
completed or canceled.
The subscription rights will expire if they are not exercised by
5:00 p.m., Eastern Time, on March 22, 2010. We reserve
the right to extend the expiration date one or more times, but
in no event will we extend the rights offering beyond
March 26, 2010.
At the minimum of the offering, we expect to exceed all of our
regulatory capital ratios, including the higher capital
requirements imposed on us by Office of Thrift Supervision Cease
and Desist Orders, to be considered well capitalized.
We have separately entered into a standby purchase agreement
with Short Vincent Partners II, L.P., a private investment
partnership of which an affiliate of CapitalWorks, LLC, a
Cleveland based investment management firm, is the general
partner. Pursuant to the standby purchase agreement, Short
Vincent Partners has agreed to acquire from us, at the
subscription price of $1.75 per share, the lesser of
2,436,610 shares of common stock or 9.61% of PVF
outstanding common stock on a fully diluted basis assuming
completion of the rights offering, including shares issued to
Short Vincent Partners. Short Vincent Partners has conditioned
its minimum purchase of shares of common stock upon the receipt
by PVF of $26.0 million in gross proceeds from the rights
offering, the offering to Short Vincent Partners and the public
reoffer, if any. As a result, the minimum purchase by Short
Vincent Partners (2,215,925 shares of common stock) is
conditioned on the sale by PVF of 12,641,218 shares in the
rights offering and the public reoffer, if any. Although the up
to 2,436,610 shares offered to the standby purchaser are
included in PVFs registered offering and are offered to
the standby purchaser under this prospectus, the shares offered
to the standby purchaser are separate from the up to
14,706,247 shares offered in the rights offering. The
maximum number of shares that may be sold in the rights offering
and to Short Vincent Partners is 17,142,857. In no event will
Short Vincent Partners be required to purchase a number of
shares that would require it or any of its affiliates to obtain
prior regulatory clearance or approval from any state or federal
bank regulatory authority.
We reserve the right to cancel the rights offering at any time.
In the event the rights offering is cancelled, all subscription
payments received by the information agent will be returned
promptly, without interest or penalty.
We may offer any shares of common stock that remain unsubscribed
(after taking into account all over-subscription rights
exercised) at the expiration of the rights offering to the
public at $1.75 per share. Any offering of shares of common
stock that remain unsubscribed shall be on a best efforts basis.
The public offering of unsubscribed shares of common stock shall
terminate on April 9, 2010.
You should carefully consider whether to exercise your
subscription rights prior to the expiration of the rights
offering. All exercises of subscription rights are irrevocable.
Our board of directors is making no recommendation regarding
your exercise of the subscription rights. The subscription
rights may not be sold, transferred or assigned and will not be
listed for trading on the Nasdaq Capital Market or any other
stock exchange or market.
Our common stock is traded on the Nasdaq Capital Market under
the trading symbol PVFC. The last reported sales
price of our shares of common stock on February 12, 2010
was $2.79 per share.
OFFERING
SUMMARY
Price: $1.75 per share
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Minimum
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Maximum
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Number of shares
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8,571,429
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17,142,857
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Gross offering proceeds
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$
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15,000,000
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$
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30,000,000
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Estimated offering expenses excluding selling agent commissions
and expenses
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$
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565,000
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$
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715,000
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Selling agent commissions and expenses (1)
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$
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1,000,000
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$
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1,525,000
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Selling agent commissions and expenses per share
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$
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0.12
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$
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0.09
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Net proceeds (1)
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$
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13,435,000
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$
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27,760,000
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Net proceeds per share
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$
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1.57
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$
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1.62
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(1)
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We have engaged Stifel,
Nicolaus & Company, Incorporated as our financial and
marketing advisor and information agent in connection with the
rights offering, the offering to the standby purchaser and the
public offering. This is not an underwritten offering. Stifel
Nicolaus is not obligated to purchase any of the shares of
common stock that are being offered for sale. See
Plan
of Distribution Financial Advisor
for a
discussion of Stifel Nicolaus compensation for the rights
offering, the offering to the standby purchaser and the public
offering. Selling agent commission amount at the minimum of the
offering assumes that all common stock is sold pursuant to the
exercise of subscription rights. Selling agent commission amount
at the maximum of the offering assumes $21.3 million of
common stock is sold pursuant to the exercise of subscription
rights, $4.3 million of common stock is sold to the standby
purchaser and $4.5 million is sold in the public reoffer.
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This
investment involves risks, including the possible loss of
principal.
Please read Risk Factors beginning on
page 21.
These securities are not deposits, savings accounts or
other obligations of any bank and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Neither the Securities and Exchange
Commission, the Office of Thrift Supervision, nor any state
securities regulator has approved or disapproved of these
securities or determined if this prospectus is accurate or
complete. Any representation to the contrary is a criminal
offense.
Stifel Nicolaus
The date of this prospectus is February 17, 2010.
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Corporate Center Office
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Chardon Office
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North Royalton Office
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30000 Aurora Road
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408 Water Street
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13901 Ridge Road
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Solon, OH 44139
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Chardon, OH 44024
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North Royalton, OH 44133
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Aurora Office
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Lakewood Cleveland Office
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Shaker Heights Office
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215 W. Garfield Road
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11010 Clifton Blvd.
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Shaker Towne Centre
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Aurora, OH 44202
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Cleveland, OH 44102
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16909 Chagrin Blvd.
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Shaker Heights, OH 44120
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Avon Office
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Macedonia Office
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Solon Office
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36311 Detroit Road
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497 East Aurora Road
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Solar Shopping Center
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Avon, OH 44011
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Macedonia, OH 44056
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34400 Aurora Road
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Solon, OH 44139
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Bainbridge Office
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Mayfield Heights Office
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Streetsboro Office
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8500 Washington Street
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1244 SOM Center Road,
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9305 Market Squars Drive
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Chagrin Falls, OH 44023
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Mayfield Heights OH 44124
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Streetsboro, OH 44241
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Beachwood Office
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Medina Office
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Strongsville Office
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La Place
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Reserve Square
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17780 Pearl Road
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2111 Richmond Road
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3613 Medina Road
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Strongsville, OH 44136,
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Beachwood, OH 44l22
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Medina, 011 44256
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Bedford Office
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Mentor Office
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413 Northfield Road
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Heisley Corners
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Bedford, OH 44146
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6900 Heisley Road
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Mentor, OH 44060
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Table of Contents
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Page
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1
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8
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21
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31
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33
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34
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34
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35
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36
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36
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45
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49
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51
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54
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54
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You should rely only on the information contained in this prospectus. We have not, and our
agent, Stifel Nicolaus, has not, authorized anyone to provide you with different information. The
information contained in this prospectus is accurate only as of the date of this prospectus
regardless of the time of delivery of this prospectus or any exercise of the subscription rights.
Our business, financial condition, results of operations and prospects may have changed since those
dates. We are not making an offer of these securities in any state or jurisdiction where the offer
is not permitted.
No action is being taken in any jurisdiction outside the United States to permit a public
offering of the common stock or possession or distribution of this prospectus in that jurisdiction.
Persons who come into possession of this prospectus in jurisdictions outside the United States are
required to inform themselves about and to observe any restrictions as to this offering and the
distribution of this prospectus applicable to those jurisdictions.
Unless the context indicates otherwise, all references in this prospectus to PVF, we,
our and us refer to PVF Capital Corp. and our subsidiaries, including Park View Federal Savings
Bank (Park View Federal); except that in the discussion of our subscription rights and capital
stock and related matters these terms refer solely to PVF Capital Corp. and not to any of our
subsidiaries. In this prospectus, we will refer to the rights offering, the offering to the
standby purchaser and the public offering collectively as the stock offering.
Questions and Answers Relating to the Rights Offering
What is the rights offering?
We are distributing, at no charge, to holders of our shares of common stock, non-transferable
subscription rights to purchase shares of our common stock. You will receive one subscription
right for each share of common stock you owned as of 5:00 p.m., Eastern Time, on January 27, 2010,
the record date. Each subscription right entitles the holder to a basic subscription privilege and
an over-subscription privilege, which are described below. The shares to be issued in the rights
offering, like our existing shares of common stock, will be traded on the Nasdaq Capital Market
under the symbol PVFC.
What is the offering to the standby purchaser?
We have separately entered into a standby purchase agreement with Short Vincent Partners, a
private investment partnership of which an affiliate of CapitalWorks, a Cleveland based investment
management firm, is the general partner. Pursuant to the standby purchase agreement, Short Vincent
Partners has agreed to acquire from us, at the subscription price of $1.75 per share, the lesser of
2,436,610 shares of common stock or 9.61% of PVF outstanding common stock on a fully diluted basis
assuming completion of the rights offering, including shares issued to Short Vincent Partners.
Short Vincent Partners has conditioned its minimum purchase of shares of common stock upon the
receipt by PVF of $26.0 million in gross proceeds from the rights offering, the offering to Short
Vincent Partners and the public reoffer, if any. As a result, the minimum purchase by Short
Vincent Partners (2,215,925 shares of common stock) is conditioned on the sale by PVF of 12,641,218
shares in the rights offering and the public reoffer, if any. In no event will Short Vincent
Partners be required to purchase a number of shares that would require it or any of its affiliates
to obtain prior regulatory clearance or approval from any state or federal bank regulatory
authority.
Subject to receipt of regulatory approval, we have agreed to provide Short Vincent Partners
the right to designate one candidate for appointment to the board of directors of PVF. We
currently expect this director designee to be Richard R. Hollington, III, President of CapitalWorks
and a principal of the general partner of Short Vincent Partners. We have also agreed to pay Short
Vincent Partners a commitment fee, to be paid at the closing of the stock offering, of $150,000 to
compensate Short Vincent Partners for its diligence and negotiation efforts in connection with the
stock offering.
What is the basic subscription privilege?
The basic subscription privilege of each subscription right gives our shareholders the
opportunity to purchase 1.8431 shares of our common stock at a subscription price of $1.75 per
share. We have granted to you, as a shareholder of record as of 5:00 p.m., Eastern Time, on the
record date, one subscription right for each share of our common stock you owned at that time.
Fractional shares of our common stock resulting from the exercise of the basic subscription
privilege will be eliminated by rounding down to the nearest whole share. For example, if you
owned 100 shares of our common stock as of 5:00 p.m., Eastern Time, on the record date, you would
have received 100 subscription rights and would have the right to purchase 184 shares of common
stock for $1.75 per share. You may exercise all or a portion of your basic subscription privilege
or you may choose not to exercise any subscription rights at all. However, if you exercise less
than your full basic subscription privilege, you will not be entitled to purchase any additional
shares by using your over-subscription privilege.
If you hold a PVF stock certificate, the number of rights you may exercise pursuant to your
basic subscription privilege is indicated on the enclosed rights certificate. If you hold your
shares in the name of a custodian bank, broker, dealer or other nominee, you will not receive a
rights certificate. Instead, the Depository Trust Company (DTC) will issue one subscription right
to the nominee record holder for each share of our common stock that you own at the record date.
If you are not contacted by your custodian bank, broker, dealer or other nominee, you should
contact your nominee as soon as possible.
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What is the over-subscription privilege?
In the event that you purchase all of the shares of our common stock available to you pursuant
to your basic subscription privilege, you may also choose to purchase a portion of any shares of
our common stock that are not purchased by our other shareholders through the exercise of their
basic subscription privileges. You should indicate on your rights certificate how many additional
shares you would like to purchase pursuant to your over-subscription privilege.
If sufficient shares of common stock are available, we will seek to honor your
over-subscription request in full. If, however, over-subscription requests exceed the number of
shares of common stock available to be purchased pursuant to the over-subscription privilege, we
will allocate the available shares of common stock among shareholders who over-subscribed by
multiplying the number of shares requested by each shareholder through the exercise of their
over-subscription privileges by a fraction that equals (x) the number of shares available to be
issued through over-subscription privileges divided by (y) the total number of shares requested by
all subscribers through the exercise of their over-subscription privileges. As described above for
the basic subscription privilege, we will not issue fractional shares through the exercise of
over-subscription privileges.
In order to properly exercise your over-subscription privilege, you must deliver the
subscription payment related to your over-subscription privilege at the time you deliver payment
related to your basic subscription privilege. Because we will not know the actual number of
unsubscribed shares prior to the expiration of the rights offering, if you wish to maximize the
number of shares you purchase pursuant to your over-subscription privilege, you will need to
deliver payment in an amount equal to the aggregate subscription price for the maximum number of
shares of our common stock that may be available to you. For that calculation, you must assume
that no other shareholder, other than you, will subscribe for any shares of our common stock
pursuant to their basic subscription privilege. See
The Rights OfferingThe Subscription
RightsOver-Subscription Privilege.
Why are we conducting the stock offering?
We are engaging in the stock offering to raise equity capital to improve Park View Federals
capital position, and to retain additional capital at PVF. See
Use of Proceeds.
Our board of
directors has chosen to raise capital through a rights offering to give our shareholders the
opportunity to limit ownership dilution by buying additional shares of common stock. Our board of
directors also considered several alternative capital raising methods prior to concluding that the
rights offering was the appropriate option under the current circumstances. We believe that the
rights offering will strengthen our financial condition by generating additional cash and
increasing our capital position; however, our board of directors is making no recommendation
regarding your exercise of the subscription rights. We cannot assure you that we will not need to
seek additional financing or engage in additional capital offerings in the future.
How was the $1.75 per share subscription price determined?
In determining the subscription price, our board of directors considered a number of factors,
including: the price at which our shareholders might be willing to participate in the rights
offering, historical and current trading prices for our common stock, the need for liquidity and
capital, negotiations with the standby purchaser, and the desire to provide an opportunity to our
shareholders to participate in the rights offering on a pro rata basis. In conjunction with its
review of these factors, our board of directors also reviewed our history and prospects, including
our past and present earnings, our prospects for future earnings, our current financial condition
and regulatory status and a range of discounts to market value represented by the subscription
prices in various prior rights offerings. We may elect to receive a fairness opinion from our
financial advisor with respect to the consideration to be paid to PVF prior to the closing of the
stock offering, but we have not received a fairness opinion as of the date of this prospectus. The
subscription price is not necessarily related to our book value or any other established criteria
of value and may or may not be considered the fair value of our common stock to be offered in the
rights offering. You should not assume or expect that, after the stock offering, our shares of
common stock will trade at or above the $1.75 purchase price.
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Am I required to exercise all of the subscription rights I receive in the rights offering?
No. You may exercise any number of your subscription rights, or you may choose not to
exercise any subscription rights. If you do not exercise any subscription rights, the number of
shares of our common stock you own will not change. However, if you choose not to exercise your
basic subscription rights in full, your ownership interest in PVF will be diluted as a result of
the stock offering, and even if you fully exercise your basic subscription rights, but do not
exercise a certain level of over-subscription rights, you may experience dilution as a result of
the sale of shares to the standby purchaser. In addition, if you do not exercise your basic
subscription privilege in full, you will not be entitled to participate in the over-subscription
privilege.
How soon must I act to exercise my subscription rights?
If you received a rights certificate and elect to exercise any or all of your subscription
rights, the information agent must receive your completed and signed rights certificate and payment
prior to the expiration of the rights offering, which is March 22, 2010, at 5:00 p.m., Eastern
Time. If you hold your shares in the name of a custodian bank, broker, dealer or other nominee,
your nominee may establish a deadline prior to 5:00 p.m., Eastern Time, on March 22, 2010 by which
you must provide it with your instructions to exercise your subscription rights and payment for
your shares. Our board of directors may, in its discretion, extend the rights offering one or more
times, but in no event will the expiration date be later than March 26, 2010. Our board of
directors may cancel or amend the rights offering at any time. In the event that the rights
offering is cancelled, all subscription payments received will be returned promptly, without
interest.
Although we will make reasonable attempts to provide this prospectus to holders of
subscription rights, the rights offering and all subscription rights will expire at 5:00 p.m.,
Eastern Time on March 22, 2010 (unless extended), whether or not we have been able to locate each
person entitled to subscription rights.
May I transfer my subscription rights?
No. You may not sell, transfer or assign your subscription rights to anyone. Subscription
rights will not be listed for trading on the Nasdaq Capital Market or any other stock exchange or
market. Rights certificates may only be completed by the shareholder who receives the certificate.
Are we requiring a minimum subscription to complete the rights offering?
There is no individual minimum purchase requirement in the rights offering. However, we
cannot complete the stock offering unless we receive aggregate subscriptions of at least $15.0
million (8,571,429 shares) of common stock in the rights offering.
Has our board of directors made a recommendation to our shareholders regarding the rights offering?
No. Our board of directors is making no recommendation regarding your exercise of the
subscription rights. Shareholders who exercise subscription rights risk investment loss on new
money invested. We cannot predict the price at which our shares of common stock will trade;
therefore, we cannot assure you that the market price for our common stock will be above the
subscription price or that anyone purchasing shares at the subscription price will be able to sell
those shares in the future at the same price or a higher price. You are urged to make your
decision based on your own assessment of our business and the rights offering. Please see
Risk
Factors
for a discussion of some of the risks involved in investing in our common stock.
Are there any limits on the number of shares I may purchase in the rights offering or own as a
result of the rights offering?
Persons, together with certain related affiliates, may purchase up to a number of shares such
that upon completion of the stock offering the person owns up to 4.9% of PVFs common stock
outstanding. If a person, together with certain affiliates, intends to purchase a number of shares
such that upon completion of the stock offering the person owns in excess of 4.9% of PVFs common
stock outstanding (including persons who currently
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own in excess of 4.9% of PVFs common stock outstanding and intend to maintain stock ownership in
excess of 4.9%), the board of directors retains the discretion to limit such purchases in order to
maintain compliance with the ownership change provisions of Section 382 of the Internal Revenue
Code. See
Risk FactorsRisks Related to Our BusinessPVF could, as a result of the stock offering
or future investments in our common stock by 5% holders, experience an ownership change for tax
purposes that could cause PVF to permanently lose a significant portion of its U.S. federal
deferred tax assets.
In addition, we will not issue shares of our common stock pursuant to the exercise of basic
subscription rights or over-subscription rights, or to any person or entity who, in our sole
opinion, could be required to obtain prior clearance or approval from or submit a notice to any
state or federal bank regulatory authority to acquire, own or control such shares if, as of March
22, 2010, such clearance or approval has not been obtained and/or any applicable waiting period has
not expired. If we elect not to issue shares in such a case, the unissued shares will become
available to satisfy over-subscriptions by other shareholders pursuant to their subscription rights
and will thereafter be available in the public reoffer of shares.
How do I exercise my subscription rights if I own shares in certificate form?
If you hold a PVF stock certificate and you wish to participate in the rights offering, you
must take the following steps:
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deliver a properly completed and signed rights certificate, and related subscription
documents, to the information agent before 5:00 p.m., Eastern Time, on March 22, 2010;
and
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deliver payment to the information agent (as described below) before 5:00 p.m., Eastern Time, on March
22, 2010.
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In certain cases, you may be required to provide additional documentation or signature
guarantees.
Please follow the delivery instructions on the rights certificate. Do not deliver documents
to PVF. You are solely responsible for completing delivery to the information agent of your
subscription documents, rights certificate and payment. We urge you to allow sufficient time for
delivery of your subscription materials to the information agent so that they are received by the
information agent by 5:00 p.m., Eastern Time, on March 22, 2010.
If you send a payment that is insufficient to purchase the number of shares you requested, or
if the number of shares you requested is not specified in the forms, the payment received will be
applied to exercise your subscription rights to the fullest extent possible based on the amount of
the payment received, subject to the availability of shares under the over-subscription privilege
and the elimination of fractional shares. Any excess subscription payments received by the
information agent will be returned promptly, without interest, following the expiration of the
rights offering.
What form of payment is required to purchase the shares of our common stock?
As described in the instructions accompanying the rights certificate, payments submitted to
the information agent must be made in full United States currency by:
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check payable to Northern Trust Bank, FSB, the escrow agent;
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bank check or bank draft payable to Northern Trust Bank, FSB, the escrow agent,
drawn upon a United States bank; or
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money order payable to Northern Trust Bank, FSB, the escrow agent.
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Payment will be deemed to have been received by the information agent only upon the
information agents receipt of any certified check, bank check or bank draft drawn upon a United
States bank or money order or, in the case of an uncertified personal check, receipt and clearance
of such check.
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Please note that funds paid by uncertified personal check may take at least seven business
days to clear. Accordingly, if you wish to pay by means of an uncertified personal check, we urge
you to make payment sufficiently in advance of the expiration date to ensure that the information
agent receives cleared funds before that time. We also urge you to consider payment by means of a
certified check, bank check, bank draft or money order.
What should I do if I want to participate in the rights offering, but my shares are held in the
name of a custodian bank, broker, dealer or other nominee?
If you hold your shares of common stock through a custodian bank, broker, dealer or other
nominee, then your nominee is the record holder of the shares you own. If you are not contacted by
your nominee, you should contact your nominee as soon as possible. Your nominee must exercise the
subscription rights on your behalf for the shares of common stock you wish to purchase. You will
not receive a rights certificate. Please follow the instructions of your nominee. Your nominee
may establish a deadline that may be before the 5:00 p.m., Eastern Time, March 22, 2010 expiration
date that we have established for the rights offering.
What should I do if I want to participate in the rights offering, but my shares are held in my
account under the PVF 401(k) plan?
If shares of our common stock are held in your account under our 401(k) plan as of 5:00 p.m.,
Eastern Time, on January 27, 2010, you are eligible to participate in the offering. If you wish to
exercise some or all of your subscription rights, you will need to notify the plan administrator of
the 401(k) plan trustee of your decision and the plan administrator will submit your instructions to the
401(k) plan who will act on your behalf. The plan administrator must receive your properly
completed form entitled
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01(k)
Plan Participant Election Form
no later than March 12, 2010. If
you elect to exercise some or all of your subscription rights, you must ensure that the total
amount of the funds required for such exercise is maintained in Merrill Lynch Retirement
Preservation Trust Fund (an existing investment fund under the 401(k) plan) at or prior to 5:00
p.m., Eastern Time, on March 12, 2010. The trustee, in order to exercise subscription rights on
your behalf, will transfer funds from your Merrill Lynch Retirement Preservation Trust Fund
account one business day before the expiration date. If these funds are insufficient to exercise
all of your rights in accordance with your election, or if you transfer amounts out of the Merrill
Lynch Retirement Preservation Trust Fund, including after March 12, 2010 (due to, for example, a
fund transfer, loan, withdrawal or distribution), the subscription
rights will be exercised in accordance with the instructions you provide to the
trustee, to the
maximum extent possible with the amount you have invested in your Merrill Lynch Retirement
Preservation Trust Fund account. Your
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01(k)
Plan Participant Election Form
accompanies this
prospectus.
Once you elect to exercise your rights you cannot revoke your election.
When will I receive my new shares?
If you purchase stock in the rights offering by submitting a rights certificate and payment,
we will mail you a stock certificate as soon as practicable after the expiration date of the rights
offering. If your shares as of January 27, 2010 were held by a custodian bank, broker, dealer or
other nominee, and you participate in the rights offering, you will not receive stock certificates
for your new shares. Your nominee will be credited with the shares of common stock you purchase in
the rights offering as soon as practicable after the expiration of the rights offering.
After I send in my payment and rights certificate, may I cancel my exercise of subscription rights?
No. All exercises of subscription rights are irrevocable unless the rights offering is
terminated, even if you later learn information that you consider to be unfavorable to the exercise
of your subscription rights. You should not exercise your subscription rights unless you are
certain that you wish to purchase shares of our common stock in the rights offering.
Are there any conditions to completing the rights offering?
Yes. In order to complete the rights offering, we must sell the minimum offering amount of at
least $15.0 million (8,571,429 shares) of common stock in the rights offering.
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Will our directors and officers participate in the rights offering?
Yes. We expect our directors and officers will subscribe for, in the aggregate, approximately
2,857,000 shares of common stock, or $5.0 million, in the rights offering. The purchase price paid
by them will be $1.75 per share, the same paid by all other persons who purchase shares of our
common stock in the stock offering. Following the stock offering and assuming completion of the
exchange of the PVF Capital Trust II trust preferred securities, our current directors and
executive officers, together with their affiliates, are expected to own approximately 5,413,939
shares of common stock, or 32.2% and 21.3% of our total outstanding shares of common stock,
assuming the sale at the minimum and maximum of the offering range, respectively.
What agreements do we have with the standby purchaser and will the standby purchaser receive any
compensation for its commitment?
Short Vincent Partners executed a non-disclosure agreement and accordingly gained access to
limited nonpublic information about the stock offering. Subsequently, Short Vincent Partners
negotiated and executed a standby purchase agreement. Pursuant to
this agreement, the standby
purchaser has agreed to acquire from us, at the subscription price of $1.75 per share, the lesser
of 2,436,610 shares of common stock or 9.61% of PVF outstanding common stock on a fully diluted
basis assuming completion of the rights offering, including shares issued to Short Vincent
Partners. Short Vincent Partners has conditioned its minimum purchase of shares of common stock
upon the receipt by PVF of $26.0 million in gross proceeds from the rights offering, the offering
to Short Vincent Partners and the public reoffer, if any. As a result, the minimum purchase by
Short Vincent Partners (2,215,925 shares of common stock) is conditioned on the sale by PVF of
12,641,218 shares in the rights offering and the public reoffer, if any. In no event will Short
Vincent Partners be required to purchase a number of shares that would require it or any of its
affiliates to obtain prior regulatory clearance or approval from any state or federal bank
regulatory authority.
Subject to receipt of regulatory approval, we have agreed to provide Short Vincent Partners
the right to designate one candidate for appointment to the board of directors of PVF. We
currently expect this director designee to be Richard R. Hollington, III, President of CapitalWorks
and a principal of the general partner of Short Vincent Partners. We have also agreed to pay Short
Vincent Partners a commitment fee, to be paid at the closing of the stock offering, of $150,000 to
compensate Short Vincent Partners for its diligence and negotiation efforts in connection with the
stock offering.
How many shares will the standby purchaser own after the stock offering?
After the stock offering, the standby purchaser, Short Vincent Partners, has represented to us
that it and its affiliates will own between 2,284,361 shares of our common stock (9.9% of our
outstanding shares) and 2,510,647 shares of our common stock (9.9% of our outstanding shares),
depending on how many shares of common stock we sell in the stock offering.
What effects will the stock offering have on our outstanding common stock?
As of January 27, 2010, we had 7,979,120 shares of our common stock issued and outstanding.
Assuming no options are exercised prior to the expiration of the rights offering and assuming all
shares are sold in the rights offering and to the standby purchaser, we expect approximately
25,365,880 shares of our common stock will be outstanding immediately after completion of the stock
offering.
The issuance of shares of our common stock in the stock offering will dilute, and thereby
reduce, your proportionate ownership in our shares of common stock unless you fully exercise your
basic subscription privilege and a certain level of your over-subscription privilege. In addition,
the issuance of shares of our common stock at the subscription price, which is less than the market
price as of February 12, 2010, will likely reduce the price per share of shares held by you prior
to the stock offering.
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How much will we receive in net proceeds from the stock offering?
We expect that the aggregate stock offering proceeds, net of expenses, to be between $13.4
million and $27.8 million. Subject to Office of Thrift Supervision approval of or non-objection to
the capital plan and business plan we have adopted, we intend to invest all of the net proceeds, up
to a maximum of $15.0 million, in Park View Federal to improve its regulatory capital position, and
retain the remainder of the net proceeds. The net proceeds we retain may be used for general
corporate purposes. Please see
Use of Proceeds.
Are there risks in exercising my subscription rights?
Yes. The exercise of your subscription rights involves risks. Exercising your subscription
rights involves the purchase of additional shares of our common stock and should be considered as
carefully as you would consider any other equity investment. Among other things, you should
carefully consider the risks described under the
heading
Risk Factors
in this prospectus.
If the rights offering is not completed, will my subscription payment be refunded to me?
Yes. The information agent will hold all funds it receives in a segregated bank account until
completion of the rights offering. If the rights offering is not completed, all subscription
payments received by the information agent will be returned promptly, without interest. If your
shares are held in the name of a custodian bank, broker, dealer or other nominee, it may take
longer for you to receive the refund of your subscription payment because the information agent
will return payments through the record holder of your shares.
What is the public reoffer of shares?
If shares of common stock remain available for sale after the closing of the rights offering,
we may offer and sell those remaining shares to the public on a best efforts basis at the $1.75 per
share subscription price.
What fees or charges apply if I purchase shares of the common stock in the rights offering?
We are not charging any fee or sales commission to issue subscription rights to you or to
issue shares to you if you exercise your subscription rights (other than the subscription price).
If you exercise your subscription rights through a custodian bank, broker, dealer or other nominee,
you are responsible for paying any fees your nominee may charge you.
What is the role of Stifel Nicolaus in the stock offering?
We have entered into an agreement with Stifel Nicolaus, pursuant to which Stifel Nicolaus is
acting as our financial advisor and marketing and information agent in connection with the stock
offering and will use its best efforts to assist us in soliciting the exercise of subscription
rights for the purchase of shares of our common stock, in soliciting the standby purchaser and in
soliciting purchasers in the public reoffer of shares. Stifel Nicolaus is not acting as an
underwriter and is not obligated to purchase any shares of our common stock in the stock offering.
We have agreed to pay certain fees to, and expenses of, Stifel Nicolaus.
Who should I contact if I have other questions?
If you have other questions regarding PVF, Park View Federal or the stock offering, or if you
have any questions regarding completing a rights certificate or submitting payment in the rights
offering, please contact our information agent, Stifel Nicolaus, at (866) 585-5970 (toll free),
Monday through Friday (except bank holidays), between 9:00 a.m. and 4:00 p.m., Eastern Time.
7
Summary
The following summary contains basic information about us and the rights offering.
Because it is a summary, it may not contain all of the information that is important to you. For
additional information before making a decision to invest in our shares of common stock, you should
read this prospectus carefully, including the sections entitled The Rights Offering and Risk
Factors and the information incorporated by reference in this prospectus, including our audited
consolidated financial statements and the accompanying notes included in our Annual Report on Form
10-K for the fiscal year ended June 30, 2009, and our unaudited consolidated financial statements
in our Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2009.
PVF Capital Corp.
PVF is the holding company for Park View Federal. PVF owns and operates Park View
Federal, PVF Service Corporation, a real estate subsidiary, and Mid Pines Land Company, 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. The business of PVF consists primarily of the business of Park View Federal.
Park View Federal is a federal stock savings bank operating through 17 offices located in Cleveland
and surrounding communities. Park View Federal has operated continuously for 89 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.
Park View Federals 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
Park View Federals market area, which consists of Portage, Lake, Geauga, Cuyahoga, Summit, 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, Park View Federal originates commercial
business loans, loans secured by second mortgages, including home equity lines of credit, and loans
secured by savings deposits.
Park View Federal 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 interest earned on
investments. Park View Federals 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 and other borrowings, repayments of outstanding loans,
sales of loans and operating revenues.
At December 31, 2009, we had total consolidated assets of $869.3 million, total deposits of
$682.9 million and total shareholders equity of $53.6 million.
Recent Operational Challenges
Deterioration in Asset Quality.
Like many financial institutions across the United
States, our operations have been significantly negatively impacted by the current economic crisis.
During our fiscal years ended June 30, 2008 and 2009 and continuing into our current fiscal year,
the economic crisis that was initially confined to residential real estate and subprime lending has
evolved into a global economic crisis that has negatively impacted not only liquidity and credit
quality but also the general economic environment, including the labor market, the capital markets
and real estate values. As a result of this significant downturn, we have been adversely affected
by declines in the residential and commercial real estate market in our market area. Declining
home prices, slowing economic conditions and increasing levels of delinquencies and foreclosures
have negatively affected the credit performance of our residential real estate, commercial real
estate and construction and land loans, resulting in a significant increase in our level of
nonperforming assets and charge-offs of problem loans. At the same time, competition among
depository institutions in our markets for deposits and quality loans has increased significantly.
These market conditions, the tightening of credit and widespread reduction in general business
activity have led to increased deficiencies in our loan portfolio, a decreased interest margin and
increased market volatility.
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As a result of the deterioration in our asset quality, we recorded provisions for loan losses
of $4.0 million during the six months ended December 31, 2009 and $31.3 million and $6.1 million
during the years ended June 30, 2009 and 2008, respectively, which significantly negatively
impacted our earnings. Due in part to the deterioration in our asset quality, and resulting
provisions for loans losses, our regulatory capital ratios also were negatively impacted.
Our restructured management team has taken several significant steps to improve our asset
quality, including establishing a Special Asset Management Department, obtaining an independent
loan review and applying more conservative underwriting practices. See
Business Strategy of Our
Restructured Management TeamImprove Our Asset Quality.
As a result of these initiatives, our
management believes that the deterioration in our asset quality has slowed and that improvement
will be seen over the next year.
PVF Debt.
At June 30, 2009, PVF had $20.0 million aggregate amount of outstanding
subordinated debentures, consisting of two issuances of subordinated debentures in the aggregate
amount of $10.0 million each. The subordinated debentures were issued to two trust subsidiaries,
PVF Capital Trust I and PVF Capital Trust II, each of which, in turn, issued and sold trust
preferred securities with an aggregate liquidation amount of $10.0 million. The trust preferred
securities carried interest rates of 3.70% and 7.462% at June 30, 2009. In December 2008, PVF
determined to defer interest payment on these trust preferred securities. PVF accrued interest
expense of $1.3 million on the trust preferred securities during the year ended June 30, 2009.
Since June 30, 2009, our restructured management team has made significant strides in
strengthening our balance sheet and capital structure by entering into exchange agreements that
have eliminated or will eliminate, subject to shareholder approval, all of our trust preferred
obligations. See
Business Strategy of Our Restructured Management TeamComplete the Early
Extinguishment of PVF Debt.
As a result of the elimination of these trust preferred obligations,
we expect, in the aggregate, to record an after-tax gain in consolidated shareholders equity of
approximately $11.6 million and to reduce our annual debt servicing requirements by approximately
$922,000.
Regulatory Restrictions.
On October 19, 2009, PVF and Park View Federal each entered into a
Stipulation and Consent to the Issuance of Order to Cease and Desist with the Office of Thrift
Supervision whereby PVF and Park View Federal each consented to the issuance of an Order to Cease
and Desist without admitting or denying that grounds exist for the Office of Thrift Supervision to
initiate an administrative proceeding against PVF or Park View Federal.
Park View Federal Cease and Desist Order.
The Park View Federal Cease and Desist Order
requires Park View Federal to take several actions, including, but not limited to:
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by December 31, 2009, meet and maintain (i) a tier one (core) capital ratio of at
least 8.0% and (ii) a total risk-based capital ratio of at least 12.0% after the
funding of an adequate allowance for loan and lease losses and submit for Office of
Thrift Supervision approval a detailed plan to accomplish this; as a result of this
requirement Park View Federal may not be deemed to be well-capitalized under
applicable regulations;
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if Park View Federal fails to meet these capital requirements at any time after
December 31, 2009, within 15 days thereafter prepare a written contingency plan
detailing actions to be taken, with specific time frames, providing for (i) a merger
with another federally insured depository institution or holding company thereof, or
(ii) voluntary liquidation (see
Compliance with Cease and Desist Orders
for further
information regarding non-compliance with the December 31, 2009 deadline);
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adopt revisions to Park View Federals liquidity policy to, among other things,
increase Park View Federals minimum liquidity ratio:
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reduce the level of adversely classified assets to no more than 50% of core capital
plus allowance for loan and lease losses by December 31, 2010 and to reduce the level
of adversely classified
assets and assets designated as special mention to no more than 65% of core capital
plus allowance for loan and lease losses by December 31, 2010;
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submit for Office of Thrift Supervision approval a new business plan that will
include the requirements contained in the Cease and Desist Order and that also will
include well supported and realistic strategies to achieve consistent profitability by
September 30, 2010;
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restrict quarterly asset growth to an amount not to exceed net interest credited on
deposit liabilities until the Office of Thrift Supervision approves of the new business
plan (see
Impact of Asset Growth and Brokered Deposit Restrictions
for recent and
anticipated impact of this restriction);
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cease to accept, renew or roll over any brokered deposit or act as a deposit broker,
without the prior written waiver of the Federal Deposit Insurance Corporation (see
Impact of Asset Growth and Brokered Deposit Restrictions
for recent and anticipated
impact of this restriction); and
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not declare or pay dividends or make any other capital distributions from Park View
Federal without receiving prior Office of Thrift Supervision approval.
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PVF Cease and Desist Order.
The PVF Cease and Desist Order requires PVF to take several
actions, including, but not limited to:
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submit a capital plan that includes, among other things, (i) the establishment of a
minimum tangible capital ratio of tangible equity capital to total tangible assets
commensurate with PVFs consolidated risk profile, and (ii) specific plans to reduce
the risks to PVF from its current debt levels and debt servicing requirements;
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not declare, make or pay any cash dividends or other capital distributions or
purchase, repurchase or redeem or commit to purchase, repurchase or redeem PVF equity
stock without the prior non-objection of the Office of Thrift Supervision, except that
this provision does not apply to immaterial capital stock redemptions that arise in the
normal course of PVFs business in connection with its stock-based compensation plans;
and
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not incur, issue, renew, roll over or increase any debt or commit to do so without
the prior non-objection of the Office of Thrift Supervision (debt includes loans,
bonds, cumulative preferred stock, hybrid capital instruments such as subordinated debt
or trust preferred securities, and guarantees of debt).
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The Cease and Desist Orders also impose certain on-going reporting obligations and additional
restrictions on severance and indemnification payments, changes in directors and management,
employment agreements and compensation arrangements that we may enter into, third party service
contracts and transactions with affiliates.
Compliance with Cease and Desist Orders.
With exception to the higher capital ratio
requirement discussed below, we have complied with all requirements of the Cease and Desist Orders
that are required of us to date and we will continue to work to comply with all such requirements
in the future. We have submitted a capital plan and a business plan which plans contemplate this
stock offering and a first calendar quarter 2010 closing date and which is being reviewed by the
Office of Thrift Supervision. Although we did not comply with the higher capital ratio
requirements by the December 31, 2009 required date, based on informal discussions with the Office
of Thrift Supervision and due to the pendency of the stock offering, management does not expect
that any additional material restrictions or penalties will be imposed by the Office of Thrift
Supervision as a result of not complying with the December 31, 2009 deadline, assuming we are able
to raise sufficient capital in this stock offering. We have also submitted to the Office of Thrift
Supervision our reduction targets for our adversely classified assets. Both Cease and Desist
Orders will remain in effect until terminated, modified, or suspended in writing by the Office of
Thrift Supervision.
The failure to comply with the Cease and Desist Orders could result in the initiation of
further enforcement action by the Office of Thrift Supervision, including the imposition of further
operating restrictions. The Office of
Thrift Supervision could also direct us to seek a merger partner. We have incurred, and expect to
continue to incur, significant additional regulatory compliance expense in connection with the
Cease and Desist Orders. For further
10
information, see
Risk FactorsRisks Related to Our Business
We are subject to restrictions and conditions of Cease and Desist Orders issued by the Office of
Thrift Supervision. We have incurred and expect to continue to incur significant additional
regulatory compliance expense in connection with the Cease and Desist Orders. Failure to comply
with the Cease and Desist Orders could result in additional enforcement action against us.
Impact of Asset Growth and Brokered Deposit Restrictions.
The regulatory restrictions on
asset growth and brokered deposits have not materially impacted and are not expected to have in the
near future a material impact on our operations or asset size. Our operations have been and are
expected to continue to be focused on reducing nonperforming assets, which, as a result, will
reduce our asset size. As our asset size decreases, brokered deposits are not expected to be
needed to fund the lower level of assets. Consistent with managements strategy to increase
capital ratios and reduce problem assets, total assets and deposits declined slightly during the
three months ended December 31, 2009.
Restructured Management and Directorship
In the past two years, we have undergone significant changes to management and the board
of directors. Our restructured management team and directorship has extensive experience in the
banking industry, in particular with large commercial banks, and has deep connections to the Ohio
market, in particular Cleveland.
New Chairman of the Board.
In January 2009, Mark D. Grossi was appointed Chairman of PVF and
Park View Federal. Mr. Grossi has over 30 years experience in the banking, thrift and brokerage
industries. From 1992 to Royal Bank of Scotlands acquisition of Charter One Bank, N.A. in 2004,
Mr. Grossi served as Executive Vice President, Chief Retail Banking Officer and member of the board
of directors of Charter One Bank. Prior to joining Charter One Bank, Mr. Grossi was President and
Chief Executive Officer and member of the board of directors of First American Savings Bank from
1987 to 1992, when First American Savings Bank was acquired by Charter One Bank. Since 2004, Mr.
Grossi has been providing consulting services to financial services companies.
New President and Chief Executive Officer.
In September 2009, Robert J. King, Jr. was
appointed as the President, Chief Executive Officer and a director of PVF and Park View Federal.
Previously, Mr. King most recently served as senior managing director of FSI Group, LLC, a private
equity operation focused on investing in the financial sector from 2006 through 2009. Prior to
that, Mr. King held numerous positions with Fifth Third Bank, which he joined in 1975. During his
tenure with the Cincinnati-based company, he served as vice president of Institutional Asset
Administration, director of marketing, commercial lending officer, customer service manager and
marketing research specialist. In 1989, he joined Fifth Third Bank (Northwestern Ohio) as an
executive vice president and was promoted to president and chief executive officer the following
year. In 1997, Fifth Third Banks board of directors appointed Mr. King chairman of the board and
chief executive officer of Fifth Third Bank (Northwestern Ohio), a position he held until his
retirement from Fifth Third Bank in 2004. Mr. King was also an executive vice president of Fifth
Third Bancorp and regional president of its affiliates in Toledo, Dayton, Columbus and southern
Ohio.
New Chief Financial Officer.
In November 2009, James H. Nicholson was appointed Chief
Financial Officer of PVF and Park View Federal. From 2006 to 2009, Mr. Nicholson served Huntington
Bank in several capacities, including regional chief operating officer (Akron/Canton Region) and
regional president and chief operating officer (Eastern Ohio Region). Mr. Nicholson previously
served as Executive Vice President and Chief Operating Officer of Unizan Financial Corp. and
President and Chief Executive Officer and director of Unizan Bank, National Association from 2002
until Huntington Bancshares, Inc.s acquisition of Unizan Financial in 2006. Previously, Mr.
Nicholsons served BancFirst Ohio Corp. and The First National Bank of Zanesville as Controller of
the bank from 1990 to 1994, Chief Financial Officer until 1996, Executive Vice President and Chief
Operating Officer until 1997, and President and Chief Executive Officer and a director of the bank
until the merger with Unizan Financial (formerly UNB Corp.) in 2002. Mr. Nicholson became a
director of BancFirst Ohio Corp. in 2000, and was also serving as its Executive Vice President and
Corporate Secretary at the time of the 2002 merger.
New Chief Lending Officer.
In November 2009, Lonnie L. Shiffert was appointed as Chief
Lending Officer. Previously, Mr. Shiffert served in several senior level commercial real estate
positions with institutions in
the Cleveland area, including with Citizens Bank as Senior Vice President and Manager, Commercial
Real Estate Department (2007 to 2009), Sky Bank as Senior Vice President and Manager, Commercial
Real Estate Department
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(2006 to 2007), Fifth Third Bank as Senior Vice President and Manager,
Commercial Real Estate Department (2004 to 2006), Provident Bank as Senior Vice President and
Manager, Commercial Real Estate Department (1998 to 2004).
New Head of Retail Banking.
In October 2009, Jane S. Grebenc was appointed as Executive Vice
President, Retail Banking. Previously, Ms. Grebenc served as Executive Vice President, Wealth
Segment and Senior Executive, Private Bank at KeyBank National Association from 2008 to 2009. Ms.
Grebenc previously served National City Corporation from 1982 to 2007 in several capacities,
including Executive Vice President, Private Client Group (2006 to 2007), Executive Vice President,
Loan Operations (2003 to 2006), Executive Vice President, Branch Network (1999 to 2003) and
Executive Vice President, Retail Banking Group (1995 to 1998).
Additional New Directors.
Marty E. Adams, appointed to the Park View Federal board in
September 2009 and elected to the PVF board for election at the annual meeting of shareholders held
in January 2010, has over 30 years of banking experience. Mr. Adams most recently served as the
Interim Chief Executive Officer of PVF and Park View Federal from March 2009 until September 2009.
Previously, Mr. Adams served as president and chief operating officer of Huntington Bancshares,
Inc. from July 2007 until December 2007 following Huntington Bancshares acquisition of Sky
Financial Group, Inc. Mr. Adams previously served as the chairman and chief executive officer of
Sky Financial Group, Inc. for 30 years.
Steven A. Calebrese, appointed to the boards of PVF and Park View Federal in 2008, is the
managing partner of Calabrese, Racek and Markos, Inc., which operates a number of commercial real
estate companies in Cleveland, Ohio and Tampa, Florida. The firms specialize in evaluation, market
research and reporting, management, construction and development services for commercial and
industrial real estate.
Umberto P. Fedeli, appointed to the boards of PVF and Park View Federal in 2008, has served
since 1988 as President and Chief Executive Officer of The Fedeli Group, a privately held insurance
brokerage firm in Independence, Ohio. He is a member of the board of directors of the Cleveland
Clinic Foundation and is currently serving as their Chairman of Government Relations and as a
member of their Executive Committee. He is on the Board of Trustees of John Carroll University, is
a trustee of the Cleveland Catholic Diocese Foundation, and Chairman of the Northern Ohio Italian
American Foundation, a charitable organization that he helped establish in 1995.
Business Strategy of Our Restructured Management Team
In light of the operational challenges we recently have faced, our restructured
management team has taken, and will continue to aggressively pursue, the following actions that we
believe will not only improve our operations in the short-term, but will also position us for
long-term future opportunities:
Improve Our Asset Quality.
We have taken several significant steps to stabilize and then
improve our asset quality, which we expect will improve our net interest margin and lower our
provision for loan losses. In particular, we have:
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Established a Special Asset Management Department.
In the quarter ended March 31,
2009, we engaged a consultant to assist with asset review and business planning with an
emphasis on problem loan identification, loss recognition and disposition of
nonperforming assets. As a result of the consultants review, we established a Special
Asset Management Department, headed by three newly hired and experienced workout
professionals, and now consisting of nine total employees. The focus of the Special
Asset Management Department is to manage nonperforming loans, including returning
nonperforming loans to performing status, negotiating loan modifications to extend
payment terms or modify rates, when we believe the project involved will be
successfully completed, and negotiating loan payoffs. From April 1, 2009 to December
31, 2009, 22 nonperforming loans, aggregating $4.2 million, were returned to performing
status, 12 nonperforming loans, aggregating $6.2 million, were modified to extend
payment terms or modify rates and remain nonperforming and ten nonperforming loans,
aggregating $2.3 million, were paid
off by the borrower. During this time, an additional 36 loans, aggregating $12.6
million, were foreclosed and reclassified as real estate owned. The Special Asset
Management Department also
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works with management to prudently dispose of
nonperforming loans and real estate owned. From April 1, 2009 to December 31, 2009,
33 nonperforming loans, aggregating $3.1 million, were resolved through short sales.
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Obtained an Independent Loan Review.
During the year ended June 30, 2009, we
engaged an outside loan review firm to perform a thorough review of our loan portfolio.
This review involved analyzing all large borrowing relationships, delinquency trends,
and loan collateral valuation in order to identify impaired loans. The review covered
$384.7 million of loans, primarily commercial relationships, representing approximately
77.0% of our commercial loan portfolio. This analysis was performed so that management
and the Special Asset Management Department could identify all troubled loans and loan
relationships as well as deteriorating loans and loan relationships. As a result of
this review, detailed action plans were developed with management and the Special Asset
Management Department to either return the loans to performing status or dispose of the
loan and end the borrowing relationship. As discussed above, from April 1, 2009 to
December 31, 2009, 22 nonperforming loans, aggregating $4.2 million, were returned to
performing status, ten nonperforming loans, aggregating $2.3 million, were paid off by
the borrower and 33 nonperforming loans, aggregating $3.1 million, were resolved
through short sales. These reviews also resulted in Park View Federal establishing
specific valuation allowances of $15.0 million for identified collateral shortfalls
during the year ended June 30, 2009. We intend to continue to engage an outside loan
review firm to conduct at a minimum an annual review of our loan portfolio.
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Applied Conservative Underwriting Practices.
We have significantly curtailed our
higher risk lending and have applied more conservative underwriting practices,
including, among other things, requiring more detailed credit information in certain
circumstances, increasing the amount of required collateral or equity requirements or
reducing loan-to-value ratios and reducing the amount that we will lend to one
borrower.
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In connection with our loan review and additional efforts to determine the scope of our
deteriorating loans, management has identified certain positive factors relating to our
nonperforming assets. Our nonperforming assets are primarily located within our local market area.
This generally allows management and our Special Asset Management Department better access to the
collateral and borrowers and, therefore, more useful information in making loan modification and
foreclosure decisions. In addition, we have not historically purchased loans or loan
participations and are not dependent on outside parties to service our loans or make loan
modification decisions. As a result, we believe we are well-positioned to determine whether a
nonperforming loan will return to performing status or whether it is in the best interest of PVF to
end the borrowing relationship. Finally, we believe that the funds we raise in the stock offering
will strengthen our capital position to provide us with flexibility to address and reduce our
nonperforming asset levels.
Complete the Early Extinguishment of PVF Debt.
Since June 30, 2009, we have made significant
strides in strengthening our balance sheet and capital structure by reducing our debt and
debt-servicing requirements and eliminating our trust preferred obligations.
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PVF Capital Trust I.
The first transaction (the Completed Trust Preferred
Exchange) was the exchange of outstanding trust preferred securities with an aggregate
liquidation amount of $10.0 million issued by PVF Capital Trust I in exchange for
$500,000 in cash, 205,297 shares of common stock, warrants to acquire 769,608 shares of
common stock and warrants to acquire additional shares of common stock equal to 9.9% of
the shares to be issued in any transaction for the exchange of trust preferred
securities issued by PVF Capital Trust II (exclusive of shares issuable upon the
exercise of warrants). As part of the Completed Trust Preferred Exchange, PVF
submitted for cancellation the trust preferred securities and the common securities
issued by PVF Capital Trust I and the related subordinated debentures issued by PVF.
The Completed Trust Preferred Exchange was completed on September 3, 2009, and PVF
realized after tax income of approximately $5.7 million and increased total
shareholders equity by approximately $6.2 million
during the quarter ending September 30, 2009 as a result of the cancellation of the
trust preferred securities, the common securities and the subordinated debentures.
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PVF Capital Trust II.
Next, we entered into an agreement with investors holding
trust preferred securities with an aggregate liquidation amount of $10.0 million issued
by PVF Capital Trust II (the Second Trust Preferred Exchange). Pursuant to the
agreement, the investors will tender $10.0 million aggregate liquidation amount of
trust preferred securities to PVF in exchange for an aggregate of $400,000 in cash, a
number of shares of common stock (the Initial Shares) equal to $600,000 divided by
the conversion price and warrants to acquire 769,608 shares of common stock plus 9.9%
of the Initial Shares. Further, PVF will issue additional warrants that become
exercisable in the event PVF completes one or more public offerings or private
placements of its common stock (including the stock offering conducted hereby) within a
year. The second group of warrants will give the holders thereof the right to acquire
additional shares of common stock so that the total number of shares they could acquire
under all warrants would entitle them to purchase an aggregate of 4.9% of the common
stock to be outstanding following the public offering or offerings completed during
that one-year period. The consummation of the Second Trust Preferred Exchange was
approved by PVFs shareholders at the annual meeting of shareholders held in January
2010. Upon consummation of the Second Trust Preferred Exchange, PVF intends to submit
for cancellation the trust preferred securities, the common securities issued by PVF
Capital Trust II and the related subordinated debentures. If completed, the Second
Trust Preferred Exchange is expected to eliminate $10.0 million of subordinated
debentures and, although the exact amounts are subject to variation based on the
valuation of the warrants at closing, generate after tax income of approximately $6.1
million and increase total shareholders equity by approximately $6.7 million from the
cancellation of the trust preferred securities, the common securities and the
subordinated debentures. The income will be recorded during the quarter in which the
trust preferred securities are cancelled, which is expected to be the first quarter of
calendar year 2010.
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In the aggregate, we expect to record an increase in consolidated shareholders
equity of approximately $12.9 million in connection with elimination of these trust
preferred obligations. In addition, the elimination of this debt is expected to
reduce our annual debt servicing requirements by approximately $922,000.
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Raise Capital.
We believe that our efforts to raise additional capital in the stock offering
will help us to achieve our goals of obtaining Office of Thrift Supervision termination of the
Cease and Desist Orders, to mitigate the impact on Park View Federal of a worsening economy and
manage our capital levels to maintain a capital cushion in excess of our regulatory capital
requirement.
At the minimum of the offering range, we expect to exceed all of our regulatory capital
requirements, including the higher capital requirements imposed by the Office of Thrift Supervision
and as set forth in the Cease and Desist Orders. On a pro forma basis at the minimum of the
offering and assuming all of the net proceeds of the stock offering will be invested in Park View
Federal, our tier one (core) capital ratio and total risk-based capital ratio at December 31, 2009
would have been 8.60% and 12.80%, respectively, exceeding the 8.0% and 12.0% requirements imposed
by the Office of Thrift Supervision. On a pro forma basis at the maximum of the offering and
assuming $15.0 million of the net proceeds of the stock offering will be invested in Park View
Federal, our tier one (core) capital ratio and total risk-based capital ratio at December 31, 2009
would have been 8.73% and 12.97%, respectively. See
Capitalization.
However, to the extent we
experience increases in our allowance for loan losses and operating losses, such events will
reduce, and possibly eliminate, our capital cushion.
Control Expenses.
Our new management team expects to actively work to reduce unneeded or
excess operating expenses. Our management team has made it a priority to identify cost savings
opportunities throughout all phases of our operations. In particular, once we are able to
successfully manage our asset quality and terminate our Cease and Desist Orders, we expect to
reduce significantly fees for consultants and other advisors and expenses related to the management
of our nonperforming assets. Our efficiency ratio (representing expenses divided by the sum of net
interest income and other income) was 95.0% and 80.5% for the six months ended December 31, 2009
and the year ended June 30, 2009, respectively.
Leverage the Existing Retail Branch Presence.
Park View Federal has 17 branches in the
greater Cleveland market area, many of which are located in upscale suburban markets with a
favorable demographic
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profile. According to census tract data obtained from SNL Financial, Park
View Federals 17 sub-markets (by zip code) have a median household income level of $80,000 and a
median household net worth of $348,000, significantly higher than statewide and national averages.
Despite this attractive market area, we historically have under-performed in terms of our retail
banking penetration. Only nine of our 17 branches have ATMs, and 15 of the 17 branches have
drive-up facilities. As a result, transaction, money market and savings accounts comprised only
28.7% of the Companys total deposits as of December 31, 2009. In the future, our new management
team intends to change the deposit mix, increase product offerings, and achieve higher levels of
profitability by more effectively serving customers in our attractive markets.
Increase Market Share and Achieve Profitable Growth.
As we improve our asset quality and
increase our operating efficiency and after we obtain termination of the Cease and Desist Orders,
we expect that operating earnings will increase significantly. Our new management team will focus
on instituting an effective sales culture and transitioning the loan portfolio as well as the
deposit base to become more bank-like (
i.e.,
less dependent on real estate loans and certificates
of deposit). According to the most recent Federal Deposit Insurance Corporation data, the
Cleveland and Akron metropolitan statistical areas had insured deposits on June 30, 2009 of $66.0
billion and $11.3 billion, respectively. PVFs management team believes that a void exists among
community banks in those markets, and that a recapitalized Park View Federal can attain significant
market share growth on a profitable basis over the next several years.
Obtain Termination of the Cease and Desist Orders.
With exception to the higher capital ratio
requirement discussed below, we have complied with all requirements of the Cease and Desist Orders
that are required of us to date and we will continue to work to comply with all such requirements
in the future. We have submitted a capital plan and a business plan which plans contemplate this
stock offering and a first calendar quarter 2010 closing date and which is being reviewed by the
Office of Thrift Supervision. Although we did not comply with the higher capital ratio
requirements by the December 31, 2009 required date, based on informal discussions with the Office
of Thrift Supervision and due to the pendency of the stock offering, management does not expect
that any additional material restrictions or penalties will be imposed by the Office of Thrift
Supervision as a result of not complying with the December 31, 2009 deadline, assuming we are able
to raise sufficient capital in this stock offering. We will seek to demonstrate as soon as
possible to the Office of Thrift Supervision that we have fully complied with the requirements of
the Cease and Desist Orders and that the Office of Thrift Supervision should terminate the Cease
and Desist Orders. At such time, we will be able to return to a more typical level of regulatory
oversight and redirect management resources from maintaining compliance with the Cease and Desist
Orders to the operation of our institution.
Increase in Capital Ratios Resulting from Recent Federal Income Tax Laws
As part of the Worker, Home Ownership, and Business Assistance Act of 2009, taxpayers
with net operating losses, such as PVF, were permitted to elect to offset these losses against
income earned in up to five prior years. Typically, a net operating loss can be carried back for
only two years. As a result of this change in the income tax laws, PVF and its subsidiaries were
able to offset all their net operating losses against historical income. Under Office of Thrift
Supervision regulations, a portion of Park View Federals deferred tax asset, amounting to $4.25
million at September 30, 2009, was required to be excluded from Park View Federals tier one (core)
and risk-based capital. The effect of this change in tax laws was to increase Park View Federals
capital ratios since this portion of its deferred tax asset is no longer required to be excluded.
Park View Federals tier one (core), tier one risk-based and total risk-based capital ratios were
7.15%, 9.48% and 10.74%, respectively, at December 31, 2009. The change in the tax laws had no
effect on PVF Capital Corp.s net income or shareholders equity.
Market Area Overview
PVF operates in the large and diverse Northeast Ohio market. The Cleveland and Akron
metropolitan statistical areas (MSAs) in which PVF operates have a total population of
approximately 2.8 million and are home to thousands of businesses. Though Cleveland, like many
Midwestern cities, has struggled to move beyond its manufacturing-oriented history, PVF believes
that growth in other industries will have a beneficial impact on the regional economy going
forward. For instance, there has been significant growth in recent years by the Cleveland
Clinic and University Hospitals Health Systems, the areas two largest private employers (which
employ 45,000 people combined). As a result, Cleveland has emerged as a leader in the health care
industry. In addition to health
15
care, a broad variety of industries are represented among
Clevelands largest companies. Fortune 500 constituents Aleris International (metals), Eaton and
Parker Hannifin (industrial machinery), KeyCorp (financial services), Lubrizol and Sherwin-Williams
(chemicals), Progressive (insurance), and TravelCenters of America (specialty retail) are all
headquartered in the Cleveland area. The top private employers in Northeast Ohio as of December
31, 2008 included:
Top Ten Northeast Ohio Private Employers
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Cleveland Clinic
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28,200
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University Hospitals
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16,800
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Progressive Corp
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9,400
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KeyCorp
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6,400
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PNC Financial Services Group
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6,300
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General Motors
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6,300
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MetroHealth
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5,500
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Ford Motor Company
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5,500
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Case Western Reserve University
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5,100
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Summa Health System
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4,700
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Source: clevelandplusbusiness.com
Since the real estate market began to experience considerable difficulty in 2006, significant
economic challenges have resulted in most markets. The relative stability of the Northeast Ohio
real estate market has protected the region from the worst of the collapse. The Northeast Ohio
market did not experience the dramatic housing price increases that occurred in certain parts of
the United States, and consequently has not experienced as much of a market decline. From June 30,
2006 to October 31, 2009, the Case-Shiller index for the Cleveland market was down 14.6%. For that
same period, the U.S. Composite Index was down 29.8%.
PVF believes that Northeast Ohio, including Cleveland and Akron, is a large market with
substantial opportunity. The combined Cleveland and Akron MSA total for Federal Deposit Insurance
Corporation insured deposits was $77.3 billion as of June 30, 2009. A number of PVFs large
super-regional competitors are experiencing change. For instance, National City Corporation, the
market leader with 30.5% of the Cleveland MSAs deposits as of June 30, 2009 (according to Federal
Deposit Insurance Corporation data), recently sold to PNC Financial Services Group. PVFs
management believes that a recapitalized PVF will be in a better position to achieve profitable
growth in its current markets.
The Rights Offering
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Securities Offered
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We are distributing to you, at no charge, one non-transferable
subscription right for each share of our common stock that you owned as
of 5:00 p.m., Eastern Time, on January 27, 2010, either as a holder of
record or, in the case of shares held of record by custodian banks,
brokers, dealers or other nominees on your behalf, as a beneficial
owner of such shares.
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Subscription Price
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$1.75 per share.
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Record Date
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5:00 p.m., Eastern Time, on January 27, 2010.
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Expiration of the Rights
Offering
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5:00 p.m., Eastern Time, on March 22, 2010. We may extend the rights
offering without notice to you until March 26, 2010.
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Use of Proceeds
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We expect the aggregate net proceeds from the stock offering to be
between $13.4 million and $27.8 million. We intend to use the proceeds
of the stock offering to invest in Park View Federal to improve its
regulatory capital position and for general corporate purposes.
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Basic Subscription Privilege
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The basic subscription privilege of each subscription right entitles
you to purchase 1.8431 shares of our common stock at a subscription
price of $1.75 per share; however, fractional shares of our common
stock resulting from the exercise of the basic subscription privilege
will be eliminated by rounding down to the nearest whole share. The
number of rights you may exercise appears on your rights certificate.
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Over-Subscription Privilege
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In the event that you purchase all of the shares of our common stock
available to you pursuant to your basic subscription privilege, you may
also choose to subscribe for a portion of any shares of our common
stock that are not purchased by our shareholders through the exercise
of their basic subscription privileges. You may subscribe for shares
of common stock pursuant to your over-subscription privilege, subject
to the purchase and ownership limitations described below under the
heading
Limitations on the Purchase of Shares.
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Limitations on the Purchase
of Shares
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Persons, together with certain related affiliates, may purchase up to a
number of shares such that upon completion of the stock offering the
person owns up to 4.9% of PVFs common stock outstanding. If a person,
together with certain affiliates, intends to purchase a number of
shares such that upon completion of the stock offering the person owns
in excess of 4.9% of PVFs common stock outstanding (including persons
who currently own in excess of 4.9% of PVFs common stock outstanding
and intend to maintain stock ownership in excess of 4.9%), the board of
directors retains the discretion to limit such purchases in order to
maintain compliance with the ownership change provisions of Section
382 of the Internal Revenue Code. See
Risk FactorsRisks Related to
Our BusinessPVF could, as a result of the stock offering or future
investments in our common stock by 5% holders, experience an ownership
change for tax purposes that could cause PVF to permanently lose a
significant portion of its U.S. federal deferred tax assets.
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In addition, we will not issue shares of our common stock pursuant to
the exercise of basic subscription rights or over-subscription rights,
or to any person or entity who, in our sole opinion, could be required
to obtain prior clearance or approval from or submit a notice to any
state or federal bank regulatory authority to acquire, own or control
such shares if, as of March 22, 2010, such clearance or approval has
not been obtained and/or any applicable waiting period has not expired.
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Non-Transferability of Rights
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The subscription rights may not be sold, transferred or assigned and
will not be listed for trading on the Nasdaq Capital Market or on any
other stock exchange or market.
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No Board Recommendation
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Our board of directors is making no recommendation regarding your
exercise of your subscription rights. You are urged to make your
decision based on your own assessment of our business and the rights
offering.
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Please see
Risk Factors
for a discussion of some of the risks
involved in investing in our common stock.
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Standby Purchaser and
Standby Purchase Agreement
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We have separately entered into a standby purchase agreement with Short
Vincent Partners, a private investment partnership of which an
affiliate of CapitalWorks, a Cleveland-based investment management
firm, is the general partner. Pursuant to the standby purchase
agreement, Short Vincent Partners has agreed to acquire from us, at the
subscription price of $1.75 per
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share, the lesser of 2,436,610 shares
of common stock or 9.61% of PVF outstanding common stock on a fully
diluted basis assuming completion of the rights offering, including
shares issued to Short Vincent Partners. Short Vincent Partners has
conditioned its minimum purchase of shares of common stock upon the
receipt by PVF of $26.0 million in gross proceeds from the rights
offering, the offering to Short Vincent Partners and the public
reoffer, if any. As a result, the minimum purchase by Short Vincent
Partners (2,215,925 shares of common stock) is conditioned on the sale
by PVF of 12,641,218 shares in the rights offering and the public
reoffer, if any. In no event will Short Vincent Partners be required
to purchase a number of shares that would require it or any of its
affiliates to obtain prior regulatory clearance or approval from any
state or federal bank regulatory authority.
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Subject to receipt of regulatory approval, we have agreed to
provide Short Vincent Partners the right to designate one candidate for
appointment to the board of directors of PVF. We currently expect this
director designee to be Richard R. Hollington, III, President of
CapitalWorks and a principal of the general partner of Short Vincent
Partners. We have also agreed to pay Short Vincent Partners a
commitment fee, to be paid at the closing of the stock offering, of
$150,000 to compensate Short Vincent Partners for its diligence and
negotiation efforts in connection with the stock offering.
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Revocation
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All exercises of subscription rights are irrevocable, even if you later
learn of information that you consider to be unfavorable to the
exercise of your subscription rights. You should not exercise your
subscription rights unless you are certain that you wish to purchase
additional shares of our common stock at a subscription price of $1.75
per share.
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Minimum Offering
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The rights offering is conditioned upon the receipt of aggregate
subscriptions of at least $15.0 million (8,571,429 shares) of common
stock in the rights offering.
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Purchase Intentions of Our
Directors and Officers
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Our directors and executive officers as a group, together with their
affiliates, have indicated their intention to exercise rights to
purchase, in the aggregate, approximately $5.0 million of our common
stock in the rights offering.
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Material U.S. Federal Income
Tax Considerations
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For U.S. federal income tax purposes, you should not recognize income
or loss upon receipt or exercise of a subscription right. You should
consult your own tax advisor as to the tax consequences to you of the
receipt, exercise or lapse of the rights in light of your particular
circumstances.
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Extension and Cancellation
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Although we do not presently intend to do so, we have the option to
extend the rights offering expiration date, but in no event will we
extend the rights offering beyond March 26, 2010. Our board of
directors may cancel the rights offering at any time. In the event
that the rights offering is cancelled, all subscription payments
received by the information agent will be returned promptly, without
interest.
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Conditions to Completing
Rights Offering
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We must meet the following condition to complete the rights offering:
We must sell the minimum rights offering amount of at least $15.0
million (8,571,429 shares) of common stock in the rights offering.
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Public Reoffer
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If shares of common stock remain available for sale after the closing
of the rights offering, we may offer and sell those remaining shares to
the public on a best efforts basis at the $1.75 per share subscription
price.
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Procedures for Exercising
Rights
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To exercise your subscription rights, you must take the following steps:
If you hold a PVF stock certificate, you must deliver payment and a
properly completed and signed rights certificate to the information
agent to be received before 5:00 p.m., Eastern Time, on March 22, 2010.
You may deliver the documents and payment by U.S. mail or courier
service. If U.S. mail is used for this purpose, we recommend using
registered mail, properly insured, with return receipt requested.
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If you are a beneficial owner of shares that are registered in the
name of a custodian bank, broker, dealer or other nominee, you will not
receive a rights certificate. You should instruct your nominee to
exercise your subscription rights on your behalf. Please follow the
instructions of your nominee, who may require that you meet a deadline
earlier than 5:00 p.m., Eastern Time, on March 22, 2010.
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If shares of our common stock are held in your account under our
401(k) plan, the plan administrator must receive your properly
completed form entitled
401(k) Plan Participant Election Form
no
later than March 12, 2010. If you elect to exercise some or all of
your subscription rights, you must ensure that the total amount of the
funds required for such exercise is maintained in Merrill Lynch
Retirement Preservation Trust Fund (an existing investment fund under
the 401(k) plan) at or prior to 5:00 p.m., Eastern Time, on March 12,
2010.
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Subscription Agent
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Computershare Trust Company, N.A.
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Financial Advisor and
Information Agent
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Stifel, Nicolaus & Company, Incorporated is acting as our financial
advisor and marketing and information agent in connection with the
stock offering. We have agreed to pay certain fees to, and expenses
of, Stifel, Nicolaus & Company, Incorporated.
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Escrow Agent
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Northern Trust Bank, FSB, the escrow agent, will hold funds received in
payment for shares of our common stock in a segregated account pending
completion of the rights offering. The escrow agent will hold this
money in escrow until the rights offering is completed or is withdrawn
and canceled. If the rights offering is canceled for any reason, all
subscription payments received by the escrow agent will be returned
promptly, without interest or penalty.
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Shares Outstanding Before
the Stock Offering
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7,979,120 shares of our common stock were outstanding as of January 27,
2010.
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Shares Outstanding After
Completion of the Stock
Offering
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Assuming no options or warrants are exercised prior to the expiration
of the rights offering and assuming all shares are sold in the rights
offering and to the standby purchaser at the maximum of the offering
range, we expect approximately 25,365,880 shares of our common stock
will be outstanding immediately after completion of the rights offering
and the closing of the transactions contemplated by the standby
purchase agreement.
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Nasdaq Capital Market Symbol
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Shares of our common stock are currently listed for trading on the
Nasdaq Capital Market under the symbol PVFC.
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Risk Factors
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Before you exercise your subscription rights to purchase shares of our
common stock, you should be aware that there are risks associated with
your investment, including the risks described in the section entitled
Risk Factors
of this prospectus, and the risks that we have
highlighted in other sections of this prospectus. You should carefully
read and consider these risk factors together with all of the other
information included in this prospectus before you decide to exercise
your subscription rights to purchase shares of our common stock.
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Risk Factors
You should consider carefully the following risk factors before purchasing shares of PVF
common stock.
Risks Related to Our Business
We are subject to restrictions and conditions of Cease and Desist Orders issued by the Office
of Thrift Supervision. We have incurred and expect to continue to incur significant additional
regulatory compliance expense in connection with the Cease and Desist Orders. Failure to comply
with the Cease and Desist Orders could result in additional enforcement action against us.
The Office of Thrift Supervision has issued Cease and Desist Orders against PVF and Park View
Federal. The Cease and Desist Orders contain a number of significant directives, including higher
capital requirements, requirements to reduce the level of our classified and criticized assets,
growth and operating restrictions, restrictions on brokered deposits, and restrictions on dividend
payments. These restrictions may impede our ability to operate our own business and to effectively
compete in our markets. If we fail to comply with the terms and conditions of the Cease and Desist
Orders, the Office of Thrift Supervision could take additional enforcement action against us,
including the imposition of further operating restrictions, directing us to seek a merger partner
or to liquidate Park View Federal. With exception to the higher capital ratio requirement, we have
complied with all requirements of the Cease and Desist Orders that are required of us to date and
we will continue to work to comply with all such requirements in the future. As of the date of
this prospectus, we have submitted a capital plan and a business plan which plans contemplate this
stock offering and a first calendar quarter 2010 closing date and which is being reviewed by the
Office of Thrift Supervision. We have also submitted to the Office of Thrift Supervision our
reduction targets for our adversely classified assets.
We have incurred and expect to continue to incur significant additional regulatory compliance
expense in connection with the Cease and Desist Orders, and we will incur ongoing expenses
attributable to compliance with the terms of the orders. It is possible regulatory compliance
expenses related to the Cease and Desist Orders could have a material adverse impact on us in the
future.
In addition, the Office of Thrift Supervision must approve any deviation from our business
plan, which could limit our ability to make any changes to our business, which could negatively
impact the scope and flexibility of our business activities. Further, the imposition of the Cease
and Desist Orders, including certain restrictions on severance and indemnification payments and
employment and compensation arrangements, may make it more difficult to attract and retain
qualified employees. While we plan to take appropriate actions and intend to seek to have the
Cease and Desist Orders terminated in the future, such actions may not result in the Office of
Thrift Supervision terminating the Cease and Desist Orders.
Our capital levels were not sufficient to achieve compliance with the higher capital requirements
by December 31, 2009 and any capital cushion in the future may not be sufficient to absorb
additional loan or other losses and maintain compliance with these higher capital requirements.
The Office of Thrift Supervision has directed Park View Federal to raise its tier one (core)
capital and total risk-based capital ratios to 8% and 12%, respectively, by December 31, 2009. We
have submitted a capital plan and a business plan which plans contemplate this stock offering and a
first calendar quarter 2010 closing date and which is being reviewed by the Office of Thrift
Supervision. Although we did not comply with the higher capital ratio requirements by the December
31, 2009 required date, based on informal discussions with the Office of Thrift Supervision and due
to the pendency of the stock offering, management does not expect that any additional material
restrictions or penalties will be imposed by the Office of Thrift Supervision as a result of not
complying with the December 31, 2009 deadline, assuming we are able to raise sufficient capital in
this stock offering.
Even assuming completion of the stock offering, our capital cushion, if any, may not be
significant. At the minimum of the offering, our pro forma tier one (core) capital and total
risk-based capital ratios at December 31, 2009 are expected to be 8.60% and 12.80%, respectively,
with a capital cushion of approximately $5.2 million in excess of the required capital levels.
However, after the offering, increases to our allowance for loan losses and
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operating losses will negatively impact our capital cushion. If our capital cushion is impacted
such that our capital ratios do not comply with the requirements of the Cease and Desist Order, the
Office of Thrift Supervision could take additional enforcement action against us, including the
imposition further operating restrictions. The Office of Thrift Supervision could also direct us
to seek a merger partner or liquidate Park View Federal.
Our classified asset levels currently are not sufficient to achieve compliance with the classified
asset levels we must meet by December 31, 2010.
The Office of Thrift Supervision has directed Park View Federal to reduce the level of
adversely classified assets to no more than 50% of core capital plus allowance for loan and lease
losses by December 31, 2010 and to reduce the level of adversely classified assets and assets
designated as special mention to no more than 65% of core capital plus allowance for loan and lease
losses by December 31, 2010. At December 31, 2009, we did not meet these requirements and our
levels of adversely classified assets and adversely classified assets and assets designated as
special mention to core capital plus allowance for loan and lease losses were 119.9% and 130.5%,
respectively. We do not expect to achieve compliance with these classified asset ratios prior to
December 31, 2010. If we fail to meet the required classified asset ratios by December 31, 2010,
the Office of Thrift Supervision could take additional enforcement action against us, including the
imposition of further operating restrictions. The Office of Thrift Supervision could also direct
us to seek a merger partner or liquidate Park View Federal.
Higher loan losses could require us to increase our allowance for loan losses through a charge to
earnings.
When we loan money we incur the risk that our borrowers do not repay their loans. We reserve
for loan losses by establishing an allowance through a charge to earnings. The amount of this
allowance is based on our assessment of loan losses inherent in our loan portfolio. The process for
determining the amount of the allowance is critical to our financial results and condition. It
requires subjective and complex judgments about the future, including forecasts of economic or
market conditions that might impair the ability of our borrowers to repay their loans. We might
underestimate the loan losses inherent in our loan portfolio and have loan losses in excess of the
amount reserved. We might increase the allowance because of changing economic conditions. For
example, in a rising interest rate environment, borrowers with adjustable-rate loans could see
their payments increase. There may be a significant increase in the number of borrowers who are
unable or unwilling to repay their loans, resulting in our charging off more loans and increasing
our allowance. In addition, when real estate values decline, the potential severity of loss on a
real estate-secured loan can increase significantly, especially in the case of loans with high
combined loan-to-value ratios. The recent decline in the national economy and the local economies
of the areas in which the loans are concentrated could result in an increase in loan delinquencies,
foreclosures or repossessions resulting in increased charge-off amounts and the need for additional
loan loss allowances in future periods. In addition, our determination as to the amount of our
allowance for loan losses is subject to review by our primary regulator, the Office of Thrift
Supervision, as part of its examination process, which may result in the establishment of an
additional allowance based upon the judgment of the Office of Thrift Supervision after a review of
the information available at the time of its examination. Our allowance for loan losses amounted
to $29.9 million, or 4.6% of total loans outstanding and 40.8% of nonperforming loans, at December
31, 2009. Our allowance for loan losses at December 31, 2009 may not be sufficient to cover future
loan losses. A large loss could deplete the allowance and require increased provisions to replenish
the allowance, which would decrease our earnings. In addition, at December 31, 2009, we had 29
loan relationships that were performing according to their original terms with outstanding balances
that exceeded $3.0 million. However, the deterioration of one or more of these loans could result
in a significant increase in our nonperforming loans and our provision for loan losses, which would
negatively impact our results of operations.
A continuation of recent turmoil in the financial markets could have an adverse effect on our
financial position or results of operations.
Since 2008, United States and global financial markets have experienced severe disruption and
volatility, and general economic conditions have declined significantly. Adverse developments in
credit quality, asset values and revenue opportunities throughout the financial services industry,
as well as general uncertainty regarding the economic, industry and regulatory environment, have
had a marked negative impact on the industry. Dramatic declines in the U.S. housing market over
the past two years, with falling home prices, increasing foreclosures and
22
increasing unemployment, have negatively affected the credit performance of mortgage loans and
resulted in significant write-downs of asset values by many financial institutions. The United
States and the governments of other countries have taken steps to try to stabilize the financial
system, including investing in financial institutions, and have also been working to design and
implement programs to improve general economic conditions. Notwithstanding the actions of the
United States and other governments, these efforts may not succeed in restoring industry, economic
or market conditions and may result in adverse unintended consequences. Factors that could
continue to pressure financial services companies, including PVF, are numerous and include (i)
worsening credit quality, leading among other things to increases in loan losses and reserves, (ii)
continued or worsening disruption and volatility in financial markets, leading to, among other
things, continuing reductions in asset values, (iii) capital and liquidity concerns regarding
financial institutions generally, (iv) limitations resulting from or imposed in connection with
governmental actions intended to stabilize or provide additional regulation of the financial
system, or (v) recessionary conditions that are deeper or last longer than currently anticipated.
The current economic recession could result in increases in our level of non-performing loans
and/or reduce demand for our products and services, which would lead to lower revenue, higher loan
losses and lower earnings.
Our business activities and earnings are affected by general business conditions in the United
States and in our local market area. These conditions include short-term and long-term interest
rates, inflation, unemployment levels, monetary supply, consumer confidence and spending,
fluctuations in both debt and equity capital markets and the strength of the economy in the United
States generally and in our market area in particular. In the current recession, the national
economy has experienced a general economic downturn, with rising unemployment levels, declines in
real estate values and an erosion in consumer confidence. Our primary market area has also been
negatively impacted by the current economic recession. From November 2008 to November 2009,
unemployment rates in the Cleveland-Elyria-Mentor metropolitan statistical area increased from 6.6%
to 9.0%. In addition, our primary market area has also experienced a softening of the local real
estate market, a reduction in local property values and a decline in the local manufacturing
industry, which employs many of our borrowers. A prolonged or more severe economic downturn,
continued elevated levels of unemployment, further declines in the values of real estate, or other
events that affect household and/or corporate incomes could impair the ability of our borrowers to
repay their loans in accordance with their terms. Nearly all of our loans are secured by real
estate or made to businesses in our primary market area, the greater Cleveland metropolitan area
and the surrounding areas. As a result of this concentration, a prolonged or more severe downturn
in the local economy could result in significant increases in nonperforming loans, which would
negatively impact our interest income and result in higher provisions for loan losses, which would
decrease our earnings and further increase the capital required to comply with the Cease and Desist
Orders. The economic downturn could also result in reduced demand for credit or fee-based products
and services, which also would decrease our revenues.
Our emphasis on construction and commercial real estate lending and land loans may expose us to
increased lending risks.
At December 31, 2009, we had $205.0 million in loans secured by commercial real estate, $33.6
million in real estate construction loans, which included $20.8 million in residential construction
loans, $3.8 million in loans for the construction of multi-family properties and $9.0 million for
the construction of commercial properties and $58.1 million in loans secured by land. Commercial
real estate loans, construction loans and land loans represented 31.2%, 5.1% and 8.9%,
respectively, of our loan portfolio. At December 31, 2009, we had $15.1 million of reserves
specifically allocated to these loan types. While commercial real estate, construction and land
loans are generally more interest rate sensitive and carry higher yields than do residential
mortgage loans, these types of loans generally expose a lender to greater risk of non-payment and
loss than single-family residential mortgage loans because repayment of the loans often depends on
the successful operation of the property, the income stream of the borrowers and, for construction
loans, the accuracy of the estimate of the propertys value at completion of construction and the
estimated cost of construction. Such loans typically involve larger loan balances to single
borrowers or groups of related borrowers compared to single-family residential mortgage loans.
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Our adjustable-rate mortgage loans may expose us to increased lending risks.
At December 31, 2009, we had $574.7 million in adjustable-rate mortgage loans, or 86.2% of our
total loan portfolio. In addition, $327.5 million, or 57.0%, of our adjustable-rate mortgage loans
will have interest rate adjustments on or prior to December 31, 2010. While adjustable-rate loans
better offset the adverse effects of an increase in interest rates as compared to fixed-rate
mortgages, the increased mortgage payments required of adjustable-rate loan borrowers upon an
interest rate adjustment in a rising interest rate environment could cause an increase in
delinquencies and defaults. The marketability of the underlying property also may be adversely
affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans
help make our asset base more responsive to changes in interest rates, the extent of this interest
sensitivity is limited by the annual and lifetime interest rate adjustment limits.
PVFs financial condition and results of operations are dependent on the economy in Park View
Federals market area.
Park View Federals market area consists of Portage, Lake, Geauga, Cuyahoga, Summit, Medina
and Lorain Counties in Ohio. As of December 31, 2009, management estimates that more than 90% of
deposits and 90% of loans came from its market area. Because of Park View Federals concentration
of business activities in its market area, PVFs financial condition and results of operations
depend upon economic conditions in its market area. Adverse economic conditions in our market area
could reduce our growth rate, affect the ability of our customers to repay their loans and
generally affect our financial condition and results of operations. Conditions such as inflation,
recession, unemployment, high interest rates, short money supply, scarce natural resources,
international disorders, terrorism and other factors beyond our control may adversely affect our
profitability. We are less able than a larger institution to spread the risks of unfavorable local
economic conditions across a large number of diversified economies. Any sustained period of
increased payment delinquencies, foreclosures or losses caused by adverse market or economic
conditions in the State of Ohio could adversely affect the value of our assets, revenues, results
of operations and financial condition. Moreover, we cannot give any assurance we will benefit from
any market growth or favorable economic conditions in our primary market areas if they do occur.
Increased and/or special Federal Deposit Insurance Corporation assessments will hurt our earnings
Beginning in late 2008, the economic environment caused higher levels of bank
failures, which dramatically increased Federal Deposit Insurance Corporation resolution costs and
led to a significant reduction in the Deposit Insurance Fund. As a result, the Federal Deposit
Insurance Corporation has significantly increased the initial base assessment rates paid by
financial institutions for deposit insurance. These increases in the base assessment rate have
increased our deposit insurance costs and negatively impacted our earnings. In addition, in May
2009, the Federal Deposit Insurance Corporation imposed a special assessment on all insured
institutions due to recent bank and savings association failures. The emergency assessment
amounted to 5 basis points on each institutions assets minus tier one (core) capital as of June
30, 2009, subject to a maximum equal to 10 basis points times the institutions assessment base.
Any further increased and/or special Federal Deposit Insurance Corporation assessment will further
negatively impact our earnings.
PVF could, as a result of the stock offering or future investments in our common stock by 5%
holders, experience an ownership change for tax purposes that could cause PVF to permanently lose
a portion of its U.S. federal deferred tax assets.
The completion of the stock offering could cause PVF to experience an ownership
change as defined for U.S. federal income tax purposes. Even if these transactions do not cause
PVF to experience an ownership change, these transactions materially increase the risk that PVF
could experience an ownership change in the future. As a result, issuances or sales of common
stock or other securities in the future (including common stock issued in the stock offering), or
certain other direct or indirect changes in ownership, could result in an ownership change under
Section 382 of the Internal Revenue Code of 1986, as amended. In the event an ownership change
were to occur, PVF could realize a permanent loss on a portion of its U.S. federal deferred tax
assets as a result of certain limitations on certain built-in losses that have not been recognized
for tax purposes, including, for example, losses on existing nonperforming assets. The amount of
the permanent loss would depend on the size of the annual
24
limitation (which is in part a function of PVFs market capitalization at the time of an ownership
change) and the applicable carryforward period for losses that have been limited (U.S. federal net
operating losses generally may be carried forward for a period of 20 years). Any permanent loss
could have a material adverse effect on PVFs results of operations and financial condition.
PVF has not established a valuation allowance against its U.S. federal deferred tax assets of
December 31, 2009, as PVF believed, based on its analysis as of that date, that it was more likely
than not that all of these assets would be realized. Section 382 of the Internal Revenue Code
imposes restrictions on the use of a corporations net operating losses, certain recognized
built-in losses and other carryovers after an ownership change occurs. An ownership change is
generally a greater than 50 percentage point increase by certain 5% shareholders during the
testing period, which is generally the three year-period ending on the transaction date. Upon an
ownership change, a corporation generally is subject to an annual limitation on its pre-change
losses and certain recognized built-in losses equal to the value of the corporations market
capitalization immediately before the ownership change multiplied by the long-term tax-exempt
rate (subject to certain adjustments). The annual limitation is increased each year to the extent
that there is an unused limitation in a prior year. Since U.S. federal net operating losses
generally may be carried forward for up to 20 years, the annual limitation also effectively
provides a cap on the cumulative amount of pre-change losses and certain recognized built-in losses
that may be utilized. Pre-change losses and certain recognized built-in losses in excess of the
cap are effectively lost. Thus, if an ownership change were to occur, it is possible that the
limitations imposed could cause a net increase in our U.S. Federal income tax liability and cause
U.S. Federal income taxes to be paid earlier than if such limitations were not in effect.
The relevant calculations under Section 382 of the Internal Revenue Code are technical and
highly complex. The stock offering, combined with other ownership changes in recent years, could
cause PVF to experience an ownership change. If an ownership change were to occur, PVF
believes it could permanently lose the ability to realize a portion of its deferred tax asset,
resulting in reduction to PVFs total shareholders equity. This could also decrease Park View
Federals regulatory capital. PVF does not believe, however, that any such decrease in regulatory
capital would be material.
Park View Federal has been notified by the counterparty to a repurchase agreement that the
counterparty is entitled to declare that an event of default has occurred under the repurchase
agreement. If the counterparty were to declare a default and pursue its remedies, Park View
Federal could incur an expense of approximately $3.0 million related to the early termination of
the repurchase transaction.
Park View Federal is a party to a repurchase agreement, pursuant to which it has sold $50.0
million in securities to a counterparty with an obligation to repurchase such securities at a later
date. Park View Federals obligation to repurchase securities is fully collateralized by the
securities sold to the counterparty under obligation to repurchase. This transaction provides
additional liquidity to Park View Federal at an imputed interest rate to Park View Federal of
4.99%. Park View Federal has been notified by the counterparty that as a result of Park View
Federals failure to remain well capitalized, as described in the repurchase agreement, the
counterparty is entitled to declare that an event of default has occurred under the agreement.
While the counterparty has not at this time declared that an event of default has occurred, if it
were to elect to do so and pursue its remedies under the repurchase agreement, it would be entitled
to seize and sell the collateral it holds and use the proceeds from such sale to satisfy amounts
owed it under the repurchase agreement. In such event, because market interest rates are below the
imputed interest rate in the repurchase transaction, Park View Federal estimates based on current
market rates that it could incur an expense of approximately $3.0 million related to the early
termination of the repurchase transaction.
Changing interest rates may decrease our earnings and asset values.
Our net interest income is the interest we earn on loans and investments less the interest we
pay on our deposits and borrowings. Our net interest margin is the difference between the yield we
earn on our assets and the interest rate we pay for deposits and our other sources of funding.
Changes in interest ratesup or downcould adversely affect our net interest margin and, as a
result, our net interest income. Although the yield we earn on our assets and our funding costs
tend to move in the same direction in response to changes in interest rates, one can rise or fall
faster than the other, causing our net interest margin to expand or contract. Our liabilities tend
to be shorter in
25
duration than our assets, so they may adjust faster in response to changes in interest rates. As a
result, when interest rates rise, our funding costs may rise faster than the yield we earn on our
assets, causing our net interest margin to contract until the yield catches up. Changes in the
slope of the yield curveor the spread between short-term and long-term interest ratescould
also reduce our net interest margin. Normally, the yield curve is upward sloping, meaning
short-term rates are lower than long-term rates. Because our liabilities tend to be shorter in
duration than our assets, when the yield curve flattens or even inverts, we could experience
pressure on our net interest margin as our cost of funds increases relative to the yield we can
earn on our assets.
Changes in interest rates also affect the value of Park View Federals interest-earning
assets, and in particular Park View Federals securities portfolio. Generally, the value of
fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and
losses on securities available for sale are reported as a separate component of equity, net of tax.
Decreases in the fair value of securities available for sale resulting from increases in interest
rates could have an adverse effect on shareholders equity.
PVF and Park View Federal operate in a highly regulated environment and may be adversely affected
by changes in laws and regulations.
Park View Federal is subject to extensive regulation, supervision and examination by the
Office of Thrift Supervision, our primary federal regulator, and by the Federal Deposit Insurance
Corporation, as insurer of its deposits. PVF also is subject to regulation and supervision by the
Office of Thrift Supervision. Such regulation and supervision govern the activities in which an
institution and its holding company may engage, and are intended primarily for the protection of
the insurance fund and for the depositors and borrowers of Park View Federal. The regulation and
supervision by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation are
not intended to protect the interests of investors in PVF common stock. Regulatory authorities
have extensive discretion in their supervisory and enforcement activities, including the imposition
of restrictions on our operations, the classification of our assets and determination of the level
of our allowance for loan losses. Any change in such regulation and oversight, whether in the form
of regulatory policy, regulations, legislation or supervisory action, may have a material impact on
our operations.
Proposed regulatory reform may have a material impact on our operations.
The Obama Administration has published a comprehensive regulatory reform plan that is intended
to modernize and protect the integrity of the United States financial system and has offered, and
the House of Representatives and Senate are currently considering, proposed legislation to
accomplish these reforms. The Presidents plan contains several elements that would have a direct
effect on PVF and Park View Federal. Under the proposed legislation, the federal thrift charter
and the Office of Thrift Supervision would be eliminated and all companies that control an insured
depository institution must register as a bank holding company. Existing federal thrifts, such as
Park View Federal, would become a national bank or could choose to adopt a state charter.
Registration as a bank holding company would represent a significant change, as there currently
exist significant differences between savings and loan holding company and bank holding company
supervision and regulation. For example, the Federal Reserve imposes leverage and risk-based
capital requirements on bank holding companies whereas the Office of Thrift Supervision does not
impose any capital requirements on savings and loan holding companies. The Administration has also
proposed the creation of a new federal agency, the Consumer Financial Protection Agency, that would
be dedicated to protecting consumers in the financial products and services market. The creation
of this agency could result in new regulatory requirements and raise the cost of regulatory
compliance. In addition, legislation stemming from the reform plan could require changes in
regulatory capital requirements, loan loss provisioning practices, and compensation practices. If
implemented, the foregoing regulatory reforms may have a material impact on our operations.
However, because the final legislation may differ significantly from the reform plan proposed by
the President, we cannot determine the specific impact of any regulatory reform at this time.
Strong competition within Park View Federals market area could hurt profits and slow growth.
Park View Federal faces intense competition both in making loans and attracting deposits.
This competition has made it more difficult for Park View Federal to make new loans and at times
has forced Park View Federal to offer higher deposit rates. Price competition for loans and
deposits might result in Park View Federal
26
earning less on loans and paying more on deposits, which would reduce net interest income.
Competition also makes it more difficult to increase loans and deposits. As of June 30, 2009,
which is the most recent date for which information is available, we held 1.0% of the deposits in
Cleveland-Elyria-Mentor, Ohio metropolitan statistical area, which was the 14th largest share of
deposits out of 40 financial institutions with offices in the area, and 0.8% of the deposits in
Akron, Ohio metropolitan statistical area, which was the 16th largest share of deposits out of 28
financial institutions with offices in this area. Competition also makes it more difficult to hire
and retain experienced employees. Some of the institutions with which Park View Federal competes
have substantially greater resources and lending limits than Park View Federal has and may offer
services that Park View Federal does not provide. Management expects competition to increase in
the future as a result of legislative, regulatory and technological changes and the continuing
trend of consolidation in the financial services industry. Park View Federals profitability
depends upon its continued ability to compete successfully in its market area.
Provisions in PVFs First Amended and Restated Articles of Incorporation and Bylaws and statutory
provisions could discourage a hostile acquisition of control.
PVFs First Amended and Restated Articles of Incorporation and Bylaws contain certain
provisions that could discourage nonnegotiated takeover attempts that certain shareholders might
deem to be in their interests or through which shareholders might otherwise receive a premium for
their shares over the then current market price and that may tend to perpetuate existing
management. These provisions include: the classification of the terms of the members of the board
of directors; supermajority provisions for the approval of certain business combinations;
elimination of cumulative voting by shareholders in the election of directors; certain provisions
relating to meetings of shareholders; and provisions allowing the board of directors to consider
nonmonetary factors in evaluating a business combination or a tender or exchange offer. The
provisions in PVFs First Amended and Restated Articles of Incorporation requiring a supermajority
vote for the approval of certain business combinations and containing restrictions on acquisitions
of PVFs equity securities provide that the supermajority voting requirements or acquisition
restrictions do not apply to business combinations or acquisitions meeting specified board of
directors approval requirements. The First Amended and Restated Articles of Incorporation also
authorizes the issuance of 1,000,000 shares of preferred stock as well as additional shares of
common stock up to a total of 65,000,000 outstanding shares. These shares could be issued without
further shareholder approval on terms or in circumstances that could deter a future takeover
attempt.
We are subject to the Ohio statutes relating to control share acquisitions, which restrict the
ability of an acquirer to acquire a significant amount of our outstanding common stock without
shareholder approval, as well as Ohios merger moratorium statute, which restricts the ability of
certain interested shareholders to effect transactions involving us or our assets. In addition,
federal banking laws contain various restrictions on acquisitions of control of savings
associations and their holding companies.
The First Amended and Restated Articles of Incorporation, Bylaws and statutory provisions, as
well as certain other provisions of state and federal law and certain provisions in PVFs and Park
View Federals employee benefit plans, employment agreements and change in control severance
agreements, may have the effect of discouraging or preventing a future takeover attempt in which
shareholders of PVF otherwise might receive a substantial premium for their shares over then
current market prices.
We may need to raise additional capital in the future, but that capital may not be available when
we need it. Any additional securities issued in a capital raising transaction would dilute your
ownership if you did not, or were not permitted to, invest in the additional issuances.
The Office of Thrift Supervision is requiring us to raise our tier one (core) capital and
total risk-based capital ratios to 8.0% and 12.0%. Even if the stock offering is successful, we
may at some point need to raise additional capital, through offerings of our common stock,
preferred stock, securities convertible into common stock, or rights to acquire such securities or
our common stock, to maintain these required capital ratios and to support our operations and any
future growth, as well as to protect against the impact of any further deterioration in our loan
portfolio. Our ability to raise additional capital, if needed, will depend on conditions in the
capital markets at that time and on our financial performance. Recently, the volatility and
disruption in the capital and credit markets have reached unprecedented levels. In some cases, the
markets have produced downward pressure on stock prices and credit availability for certain issuers
without regard to those issuers underlying financial strength. If current
27
levels of market disruption and volatility continue or worsen, our ability to raise additional
capital may be disrupted. If we cannot raise additional capital when needed, our results of
operations and financial condition may be adversely affected, and our banking regulators may
subject Park View Federal to further regulatory enforcement action.
Under our First Amended and Restated Articles of Incorporation, we have additional authorized
shares of common stock and preferred stock that we can issue from time to time at the discretion of
our board of directors, without further action by the shareholders, except where shareholder
approval is required by law or Nasdaq Capital Market requirements. The issuance of any additional
shares of common stock, preferred stock or convertible securities could be substantially dilutive
to shareholders of our common stock. Holders of our shares of common stock have no preemptive
rights that entitle them to purchase their pro-rata share of any offering of shares of any class or
series and, therefore, our shareholders may not be permitted to invest in future issuances of our
common stock and as a result will be diluted.
Shareholders will experience dilution of their ownership interest in PVF upon the exercise of
warrants issued in connection with the Completed Trust Preferred Exchange and the warrants to be
issued in the Second Trust Preferred Exchange.
In the Completed Trust Preferred Exchange, we issued warrants to acquire a number of shares of
common stock equal to 769,608 shares plus 9.9% of the shares to be issued in the Second Trust
Preferred Exchange (exclusive of shares issuable upon the exercise of warrants). Pursuant to the
Second Trust Preferred Exchange, the investors will tender $10.0 million aggregate liquidation
amount of trust preferred securities to PVF in exchange for an aggregate of $400,000 in cash, the
Initial Shares and warrants to acquire 769,608 shares of common stock plus 9.9% of the Initial
Shares. Further, we will issue additional warrants that become exercisable in the event we
complete one or more public offerings or private placements of our common stock (including the
stock offering conducted by this prospectus) within a year. The second group of warrants will give
the holders the right to acquire additional shares of common stock so that the total number of
shares they could acquire under all warrants would be an aggregate of 4.9% of the common stock to
be outstanding following the public offering or offerings completed during that one-year period.
Assuming that we sell the maximum number of shares of common stock in this offering, and assuming
the exercise price for the warrants is $1.75 per share, which is the offering price per share in
this offering, then we would have outstanding warrants to acquire 2,036,682 shares of common stock.
If all such warrants were to be exercised, your ownership interest would be diluted by 7.4%.
Risks Related to the Rights Offering
The future price of the shares of common stock may be less than the $1.75 purchase price per
share in the rights offering.
If you exercise your subscription rights to purchase shares of common stock in the rights
offering, you may not able to sell them later at or above the $1.75 purchase price in the rights
offering. The actual market price of our common stock could be subject to wide fluctuations in
response to numerous factors, some of which are beyond our control. These factors include, among
other things, actual or anticipated variations in our costs of doing business, operating results
and cash flow, the nature and content of our earnings releases and our competitors earnings
releases, changes in financial estimates by securities analysts, business conditions in our markets
and the general state of the securities markets and the market for other financial stocks, changes
in capital markets that affect the perceived availability of capital to companies in our industry,
governmental legislation or regulation, currency and exchange rate fluctuations, as well as general
economic and market conditions, such as downturns in our economy and recessions.
Once you exercise your subscription rights, you may not revoke them. If you exercise your
subscription rights and, afterwards, the public trading market price of our shares of common stock
decreases below the subscription price, you will have committed to buying shares of our common
stock at a price above the prevailing market price and could have an immediate unrealized loss.
Our common stock is traded on the Nasdaq Capital Market under the ticker symbol PVFC, and the
last reported sales price of our common stock on the Nasdaq Capital Market on February 12, 2010 was
$2.79 per share. We cannot assure you that the market price of our shares of common stock will not
decline after you exercise your subscription rights. Moreover, we cannot assure you that
28
following the exercise of your subscription rights you will be able to sell your common stock at a
price equal to or greater than the subscription price.
The subscription price determined for the rights offering is not an indication of the fair value of
our common stock.
Our board of directors may elect to receive a fairness opinion from our financial advisor with
respect to the consideration to be paid to PVF prior to the closing of the stock offering, but has
not done so as of the date of this prospectus. In determining the subscription price, the board of
directors considered a number of factors, including: the price at which our shareholders might be
willing to participate in the rights offering, historical and current trading prices for our common
stock, the need for liquidity and capital, negotiations with the standby purchaser and the desire
to provide an opportunity to our shareholders to participate in the rights offering on a pro rata
basis. In conjunction with its review of these factors, the board of directors also reviewed our
history and prospects, including our past and present earnings, our prospects for future earnings,
our current financial condition and regulatory status. The per share subscription price is not
necessarily related to our book value or any other established criteria of fair value and may or
may not be considered the fair value of our common stock to be offered in the rights offering.
After the date of this prospectus, our shares of common stock may trade at prices below the
subscription price.
The stock offering may reduce your percentage ownership in PVF.
If you choose not to exercise your basic subscription rights in full, your ownership interest
in PVF will be diluted as a result of the stock offering, and even if you fully exercise your basic
subscription rights, but do not exercise a certain level of over-subscription rights, you may
experience dilution as a result of the sale of shares to the standby purchaser, Short Vincent
Partners, who has agreed to acquire from us the lesser of 2,436,610 shares of common stock or 9.61%
of PVF outstanding common stock on a fully diluted basis assuming completion of the rights
offering, including shares issued to Short Vincent Partners. Assuming that we sell the maximum
number of shares in this offering, the purchase by Short Vincent Partners will dilute your
ownership interest by up to 10.7%.
After the consummation of the rights offering and the sale of additional shares of common stock to
the standby purchaser, a significant amount of our common stock will be concentrated in the hands
of one shareholder. Your interests may not be the same as the interests of this shareholder.
Upon the completion of the rights offering and the sale of additional shares of common stock
to the standby purchaser, the standby purchaser, Short Vincent Partners, will own approximately
9.9% of our common stock. In addition, subject to receipt of regulatory approval, we have agreed
to provide Short Vincent Partners the right to designate one candidate for appointment to the board
of directors of PVF. As a result, Short Vincent Partners will have the ability to significantly
influence, along with our directors and executive officers, matters generally requiring shareholder
approval. These matters include the election of directors and the approval of significant
corporate transactions, including potential mergers, consolidations or sales of all or
substantially all of our assets. Your interests as a holder of the common stock may differ from
the interests of the standby purchaser and its affiliates.
Our directors and executive officers own, and expect to continue to own after completion of the
stock offering, a significant portion of our common stock and can exert significant control over
our business and corporate affairs.
Our directors and executive officers, as a group, beneficially owned approximately 29.5% of
our outstanding common stock, as of January 27, 2010. Following the stock offering and assuming
completion of the exchange of the PVF Capital Trust II trust preferred securities, our current
directors and executive officers, together with their affiliates are expected to own approximately
32.2% and 21.3% of our total outstanding shares of common stock, assuming the sale at the minimum
and maximum of the offering range, respectively. As a result of their ownership, the directors and
executive officers will have the ability, by voting their shares in concert, to significantly
influence, along with the standby purchaser, the outcome of all matters submitted to our
shareholders for approval, including the election of directors and the approval of significant
corporate transactions, including potential mergers, consolidations or sales of all or
substantially all of our assets
29
You may not revoke your exercise of rights; we may terminate the rights offering.
Once you have exercised your subscription rights, you may not revoke your exercise even if you
learn information about us that you consider to be unfavorable. We may terminate the rights
offering at our discretion, including without limitation if we fail to sell at least 8,571,429
shares and raise at least $15.0 million in the stock offering. If we terminate the rights
offering, none of PVF, the information agent or the subscription agent will have any obligation to
you with respect to the rights except to return any payment received by the information agent,
without interest or penalty.
You will not be able to sell the shares you buy in the rights offering until you receive your stock
certificates or your account is credited with the shares of common stock.
If you purchase shares of our common stock in the rights offering by submitting a rights
certificate and payment, we will mail you a stock certificate as soon as practicable after March
22, 2010, or such later date as to which the rights offering may be extended. If your shares are
held by a custodian bank, broker, dealer or other nominee and you purchase shares of our common
stock, your account with your nominee will be credited with the shares of common stock you
purchased in the rights offering as soon as practicable after the expiration of the rights
offering, or such later date as to which the rights offering may be extended. Until your stock
certificates have been delivered or your account is credited, you may not be able to sell your
shares even though the common stock issued in the rights offering will be listed for trading on the
Nasdaq Capital Market. The stock price may decline between the time you decide to sell your shares
and the time you are actually able to sell your shares.
Although publicly traded, our common stock has substantially less liquidity than the average
liquidity of stocks listed on the Nasdaq Capital Market.
Although our common stock is listed for trading on the Nasdaq Capital Market, our common stock
has substantially less liquidity than the average liquidity for companies listed on the Nasdaq
Capital Market. A public trading market having the desired characteristics of depth, liquidity and
orderliness depends on the presence in the marketplace of willing buyers and sellers of our common
stock at any given time. This marketplace depends on the individual decisions of investors and
general economic and market conditions over which we have no control. This limited market may
affect your ability to sell your shares on short notice, and the sale of a large number of shares
at one time could temporarily depress the market price of our common stock. For these reasons, our
common stock should not be viewed as a short-term investment.
The market price of our common stock may fluctuate in the future, and this volatility may be
unrelated to our performance. General market price declines or overall market swings in the future
could adversely affect the price of our common stock, and the current market price may not be
indicative of future market prices.
We have broad discretion in the use of proceeds of the stock offering.
Other than an investment in Park View Federal, we have not designated the anticipated net
proceeds of the stock offering for specific uses. Accordingly, our management will have
considerable discretion in the application of the net proceeds of the stock offering and you will
not have the opportunity, as part of your investment decision, to assess whether the proceeds are
being used appropriately. See
Use of Proceeds.
30
Selected Consolidated Financial and Other Data
Our selected consolidated financial data is presented below as of and for the six
months ended December 31, 2009 and 2008 and as of and for the years ended June 30, 2005 through
2009. Our selected consolidated financial data presented below as of June 30, 2009 and 2008 and
for each of the years in the three-year period ended June 30, 2009, are derived from our audited
financial statements and related notes incorporated by reference in this prospectus. Selected
consolidated financial data as of June 30, 2007, 2006 and 2005 and for each of the years in the
two-year period ended June 30, 2006 has been derived from our audited consolidated financial
statements. Our selected consolidated financial data as of December 31, 2009 and for the six
months ended December 31, 2009 and 2008 are derived from our unaudited interim consolidated
financial statements incorporated by reference in this prospectus. In the opinion of our
management, such amounts contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly our financial position and results of operations for such periods in
accordance with generally accepted accounting principles. Our results for the six months ended
December 31, 2009 are not necessarily indicative of our results of operations that may be expected
for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
|
|
December 31,
|
|
At June 30,
|
(In thousands)
|
|
2009
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Total assets
|
|
$
|
869,297
|
|
|
$
|
912,209
|
|
|
$
|
867,402
|
|
|
$
|
900,816
|
|
|
$
|
906,081
|
|
|
$
|
823,899
|
|
Loans receivable, net
|
|
|
626,438
|
|
|
|
668,460
|
|
|
|
714,492
|
|
|
|
713,329
|
|
|
|
736,065
|
|
|
|
660,494
|
|
Loans receivable held for sale, net
|
|
|
7,181
|
|
|
|
27,078
|
|
|
|
7,831
|
|
|
|
14,993
|
|
|
|
10,698
|
|
|
|
9,060
|
|
Mortgage-backed securities held to
maturity
|
|
|
|
|
|
|
|
|
|
|
55,151
|
|
|
|
25,880
|
|
|
|
27,578
|
|
|
|
31,720
|
|
Mortgage-backed securities available for
sale
|
|
|
57,433
|
|
|
|
64,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
42,661
|
|
|
|
21,213
|
|
|
|
17,804
|
|
|
|
28,458
|
|
|
|
19,738
|
|
|
|
11,090
|
|
Securities held to maturity
|
|
|
55,000
|
|
|
|
50,000
|
|
|
|
7,580
|
|
|
|
58,000
|
|
|
|
58,000
|
|
|
|
57,500
|
|
Securities available for sale
|
|
|
87
|
|
|
|
103
|
|
|
|
1,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
682,891
|
|
|
|
724,932
|
|
|
|
659,386
|
|
|
|
658,053
|
|
|
|
656,864
|
|
|
|
591,226
|
|
Borrowings
|
|
|
96,313
|
|
|
|
106,366
|
|
|
|
114,950
|
|
|
|
146,260
|
|
|
|
156,773
|
|
|
|
146,413
|
|
Shareholders equity
|
|
|
53,578
|
|
|
|
49,505
|
|
|
|
69,075
|
|
|
|
71,490
|
|
|
|
68,973
|
|
|
|
66,453
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
December 31,
|
|
Year Ended June 30,
|
(In thousands except per share data)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Interest income
|
|
$
|
20,010
|
|
|
$
|
24,454
|
|
|
$
|
46,662
|
|
|
$
|
56,485
|
|
|
$
|
62,020
|
|
|
$
|
55,651
|
|
|
$
|
43,963
|
|
Interest expense
|
|
|
10,391
|
|
|
|
14,697
|
|
|
|
27,347
|
|
|
|
34,275
|
|
|
|
36,705
|
|
|
|
28,408
|
|
|
|
19,801
|
|
|
|
|
Net interest income before provision for
loan losses
|
|
|
9,619
|
|
|
|
9,757
|
|
|
|
19,315
|
|
|
|
22,210
|
|
|
|
25,315
|
|
|
|
27,243
|
|
|
|
24,162
|
|
Provision for loan losses
|
|
|
4,010
|
|
|
|
4,332
|
|
|
|
31,273
|
|
|
|
6,058
|
|
|
|
1,103
|
|
|
|
826
|
|
|
|
111
|
|
|
|
|
Net interest income after provision for
loan
losses
|
|
|
5,609
|
|
|
|
5,425
|
|
|
|
(11,958
|
)
|
|
|
16,152
|
|
|
|
24,212
|
|
|
|
26,417
|
|
|
|
24,051
|
|
Noninterest income
|
|
|
11,193
|
(2)
|
|
|
138
|
|
|
|
4,799
|
(3)
|
|
|
2,458
|
|
|
|
3,376
|
|
|
|
2,028
|
|
|
|
3,006
|
|
Noninterest expense
|
|
|
12,263
|
|
|
|
10,951
|
|
|
|
23,001
|
|
|
|
20,806
|
|
|
|
21,634
|
|
|
|
21,549
|
|
|
|
18,942
|
|
|
|
|
Income (loss) before federal income taxes
|
|
|
4,539
|
|
|
|
(5,388
|
)
|
|
|
(30,160
|
)
|
|
|
(2,196
|
)
|
|
|
5,954
|
|
|
|
6,896
|
|
|
|
8,115
|
|
Federal income tax expense (benefit)
|
|
|
1,620
|
|
|
|
(1,765
|
)
|
|
|
(10,044
|
)
|
|
|
(1,095
|
)
|
|
|
1,720
|
|
|
|
2,053
|
|
|
|
2,531
|
|
|
|
|
Net income (loss)
|
|
$
|
2,919
|
|
|
$
|
(3,623
|
)
|
|
$
|
(20,116
|
)
|
|
$
|
(1,101
|
)
|
|
$
|
4,234
|
|
|
$
|
4,843
|
|
|
$
|
5,584
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
0.37
|
|
|
$
|
(0.47
|
)
|
|
$
|
(2.59
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
0.55
|
|
|
$
|
0.63
|
|
|
$
|
0.72
|
(1)
|
Diluted earnings (loss) per share
|
|
$
|
0.37
|
|
|
$
|
(0.47
|
)
|
|
$
|
(2.59
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
0.54
|
|
|
$
|
0.62
|
|
|
$
|
0.71
|
(1)
|
|
|
|
(1)
|
|
Adjusted for stock dividends.
|
|
(2)
|
|
Includes $8.6 million gain related to exchange of PVF Capital Trust I trust preferred
securities.
|
|
(3)
|
|
Includes $1.8 million other-than-temporary impairment of securities.
|
31
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the Six
|
|
|
|
|
Month Ended
|
|
|
|
|
December 31,
|
|
At or For the Year Ended June 30,
|
Performance Ratios:
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
Return on average assets (1)
|
|
|
0.66
|
%
|
|
|
(0.81
|
)%
|
|
|
(2.25
|
)%
|
|
|
(0.13
|
)%
|
|
|
0.47
|
%
|
|
|
0.56
|
%
|
|
|
0.70
|
%
|
Return on average equity (1)
|
|
|
11.09
|
|
|
|
(10.70
|
)
|
|
|
(32.39
|
)
|
|
|
(1.55
|
)
|
|
|
6.00
|
|
|
|
7.15
|
|
|
|
8.62
|
|
Interest rate spread
|
|
|
2.22
|
|
|
|
2.16
|
|
|
|
2.10
|
|
|
|
2.43
|
|
|
|
2.73
|
|
|
|
3.11
|
|
|
|
3.08
|
|
Net interest margin (1)
|
|
|
2.31
|
|
|
|
2.34
|
|
|
|
2.28
|
|
|
|
2.68
|
|
|
|
2.96
|
|
|
|
3.32
|
|
|
|
3.22
|
|
Efficiency ratio (2)
|
|
|
94.98
|
|
|
|
98.15
|
|
|
|
80.52
|
|
|
|
81.19
|
|
|
|
76.09
|
|
|
|
73.53
|
|
|
|
70.15
|
|
Average interest-earning assets to
average interest-bearing liabilities
|
|
|
103.54
|
|
|
|
105.21
|
|
|
|
103.40
|
|
|
|
105.33
|
|
|
|
104.84
|
|
|
|
105.38
|
|
|
|
104.81
|
|
Shareholders equity to total assets
(all tangible)
|
|
|
6.16
|
|
|
|
7.30
|
|
|
|
5.43
|
|
|
|
7.96
|
|
|
|
7.94
|
|
|
|
7.61
|
|
|
|
8.07
|
|
Ratio of average equity to average assets
|
|
|
5.92
|
|
|
|
7.59
|
|
|
|
6.94
|
|
|
|
8.09
|
|
|
|
7.76
|
|
|
|
7.78
|
|
|
|
8.16
|
|
Dividend payout ratio (cash dividends
declared
divided by net income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54.04
|
|
|
|
47.13
|
|
|
|
37.20
|
|
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to total assets
|
|
|
9.83
|
%
|
|
|
5.02
|
%
|
|
|
9.00
|
%
|
|
|
3.40
|
%
|
|
|
1.90
|
%
|
|
|
1.80
|
%
|
|
|
1.66
|
%
|
Nonperforming loans to total loans
|
|
|
11.17
|
|
|
|
4.89
|
|
|
|
10.04
|
|
|
|
3.50
|
|
|
|
2.02
|
|
|
|
2.08
|
|
|
|
1.85
|
|
Net charge-offs to average loans(1)
|
|
|
1.68
|
|
|
|
0.82
|
|
|
|
1.29
|
|
|
|
0.14
|
|
|
|
0.16
|
|
|
|
0.07
|
|
|
|
0.03
|
|
Allowance for loan losses to total loans
|
|
|
4.56
|
|
|
|
1.50
|
|
|
|
4.48
|
|
|
|
1.33
|
|
|
|
0.64
|
|
|
|
0.63
|
|
|
|
0.64
|
|
|
Park View Federal Regulatory Capital
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of tangible capital to adjusted
total assets
|
|
|
7.15
|
%
|
|
|
8.98
|
%
|
|
|
6.54
|
%
|
|
|
9.69
|
%
|
|
|
9.72
|
%
|
|
|
8.33
|
%
|
|
|
8.77
|
%
|
Ratio of tier one (core) capital to
adjusted total assets
|
|
|
7.15
|
|
|
|
8.98
|
|
|
|
6.54
|
|
|
|
9.69
|
|
|
|
9.72
|
|
|
|
8.33
|
|
|
|
8.77
|
|
Ratio of tier one risk-based capital to
risk-weighted assets
|
|
|
9.48
|
|
|
|
11.51
|
|
|
|
8.77
|
|
|
|
12.09
|
|
|
|
12.56
|
|
|
|
9.72
|
|
|
|
10.41
|
|
Ratio of total risk-based capital to
risk-weighted assets
|
|
|
10.74
|
|
|
|
12.61
|
|
|
|
10.03
|
|
|
|
12.99
|
|
|
|
13.08
|
|
|
|
10.28
|
|
|
|
10.97
|
|
|
|
|
(1)
|
|
Ratios for the six months ended December 31, 2009 and 2008 are annualized.
|
|
(2)
|
|
Represents other expenses divided by the sum of net interest income and other income.
Securities gains, other-than-temporary impairment charges, gains on the cancellation of debt
and gains or losses on the disposition or write-down of other real estate owned are excluded
from noninterest income.
|
32
Cautionary Note Regarding Forward-Looking Statements
Some of our statements contained in, or incorporated by reference into, this prospectus
are forward-looking statements within the meaning of the Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. We intend such forward-looking
statements to be covered by the safe harbor provisions for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes
of invoking these safe harbor provisions. Forward-looking statements are not guarantees of
performance or results. When we use words like may, plan, contemplate, anticipate,
believe, intend, continue, expect, project, predict, estimate, target, could, is
likely, should, would, will, and similar expressions, you should consider them as
identifying forward-looking statements, although we may use other phrasing. These forward-looking
statements involve risks and uncertainties and are based on our beliefs and assumptions, and on the
information available to us at the time that these disclosures were prepared. These
forward-looking statements involve risks and uncertainties and may not be realized due to a variety
of factors, including, but not limited to, the following:
|
|
|
the unfavorable effects of future economic conditions, including inflation,
recession or a continuing decrease in real estate values;
|
|
|
|
|
the failure of assumptions underlying the establishment of our allowance for loan
losses, that may prove to be materially incorrect or may not be borne out by subsequent
events;
|
|
|
|
|
adverse changes in the securities markets;
|
|
|
|
|
changes in governmental monetary and fiscal policies, as well as legislative and
regulatory changes;
|
|
|
|
|
the risks of changes in interest rates on the level and composition of deposits,
loan demand and the values of loan collateral, securities and interest sensitive assets
and liabilities;
|
|
|
|
|
the imposition of additional formal enforcement actions by bank regulatory
authorities upon Park View Federal or PVF;
|
|
|
|
|
the effects of terrorism and efforts to combat it;
|
|
|
|
|
our ability to effectively manage market risk, credit risk and operational risk;
|
|
|
|
|
the effects of competition from other commercial banks, thrifts, mortgage banking
firms, consumer finance companies, credit unions, securities brokerage firms, insurance
companies, money market and other mutual funds and other financial institutions
operating in our market area and elsewhere, including institutions operating
regionally, nationally and internationally, together with competitors offering banking
products and services by mail, telephone and the Internet;
|
|
|
|
|
the effect of any mergers, acquisitions or other transactions to which we or our
subsidiaries may from time to time be a party, including our ability to successfully
integrate any businesses that we acquire; and
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the risks described in this prospectus and our most recent Annual Report on Form
10-K and Quarterly Report on Form 10-Q.
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All written or oral forward-looking statements attributable to us are expressly qualified in
their entirety by this cautionary note. Our actual results may differ significantly from those we
discuss in these forward-looking statements. For other factors, risks and uncertainties that could
cause our actual results to differ materially from estimates and projections contained in these
forward-looking statements, please read the
Risk Factors
section of this prospectus. Any
forward-looking statement speaks only as of the date which such statement was made, and, except as
required by law, we expressly disclaim any obligation or undertaking to disseminate any updates or
33
revisions to any forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated events.
Use of Proceeds
Although we cannot determine what the actual net proceeds from the sale of the shares of
common stock in the stock offering will be until the stock offering is completed, we estimate that
the aggregate net proceeds from the stock offering, after deducting estimated offering expenses,
will be between $13.4 million and $27.8 million. Subject to Office of Thrift Supervision approval
of or non-objection to the capital plan and business plan we have adopted, we intend to invest all
of the net proceeds, up to a maximum of $15 million, in Park View Federal to improve its regulatory
capital position and to retain the remainder of the net proceeds. The net proceeds we retain may
be used for general corporate purposes. Other than an investment in Park View Federal, we
currently have no arrangements or understandings regarding any specific use of proceeds.
The net proceeds may vary because total expenses relating to the offering may be more or less
than our estimates. For example, our expenses will increase if shares of common stock not
purchased in the rights offering are sold in the public reoffer of shares.
Market for the Common Stock and Dividend Information
PVFs common stock trades under the symbol PVFC on the Nasdaq Capital Market. PVF had
7,979,120 shares of common stock outstanding and approximately 149 holders of record of the common
stock at January 27, 2010. On February 12, 2010, the most recent practicable date before the date
of this prospectus, the closing price of our common stock as reported on the Nasdaq Capital Market
was $2.79 per share.
Office of Thrift Supervision regulations applicable to all federal savings banks such as Park
View Federal limit the dividends that may be paid by Park View Federal to PVF. Any dividends paid
may not reduce Park View Federals capital below minimum regulatory requirements. Pursuant to the
Cease and Desist Order, Park View Federal may not declare or pay a dividend without receiving prior
Office of Thrift Supervision approval.
Quarterly cash dividends of $.074 per share were declared on PVFs outstanding common stock in
fiscal 2008, and cash dividends of $.0025 per share were declared on PVFs outstanding common stock
during the first quarter of fiscal 2009. In December 2008, PVF discontinued the payment of cash
dividends on the common stock. Pursuant to the Cease and Desist Order, PVF may not declare or pay a
dividend, including the repurchase or redemption of capital stock, without the prior non-objection
of the Office of Thrift Supervision.
The following table sets forth, for the periods indicated, the high and low sales prices per
share of PVFs common stock as reported on the Nasdaq Capital Market.
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Fiscal Year Ending June 30, 2010
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High
|
|
Low
|
Third quarter (through February 12, 2010)
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$
|
4.39
|
|
|
$
|
1.75
|
|
Second quarter
|
|
|
2.60
|
|
|
|
1.58
|
|
First quarter
|
|
|
3.06
|
|
|
|
1.49
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30, 2009
|
|
High
|
|
Low
|
Fourth quarter
|
|
$
|
3.20
|
|
|
$
|
1.46
|
|
Third quarter
|
|
|
3.20
|
|
|
|
1.20
|
|
Second quarter
|
|
|
5.00
|
|
|
|
1.43
|
|
First quarter
|
|
|
8.09
|
|
|
|
3.72
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30, 2008
|
|
High
|
|
Low
|
Fourth quarter
|
|
$
|
10.76
|
|
|
$
|
7.00
|
|
Third quarter
|
|
|
12.80
|
|
|
|
8.00
|
|
Second quarter
|
|
|
15.77
|
|
|
|
10.34
|
|
First quarter
|
|
|
16.14
|
|
|
|
12.50
|
|
34
Capitalization
The following table presents our historical consolidated capitalization at December 31,
2009, our pro forma consolidated capitalization after giving effect to the Second Trust Preferred
Exchange and our pro forma consolidated capitalization after giving effect to the Second Trust
Preferred Exchange and the sale and receipt of net proceeds at the minimum and maximum of the
offering range of the stock offering. The table also sets forth the historical regulatory capital
ratios of Park View Federal at December 31, 2009 and the pro forma regulatory capital ratios of
Park View Federal assuming the receipt by Park View Federal of $13.4 million and $15.0 million of
net proceeds at the minimum and maximum of the offering range of the stock offering, respectively
(further assuming that 100.0% of the proceeds received by Park View Federal were invested in assets
with a risk weighting of 20%. The Second Trust Preferred Exchange will have no impact on the
regulatory capital of Park View Federal.
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|
|
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|
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|
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|
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|
|
|
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Pro Forma Capitalization
|
|
|
|
|
|
|
|
|
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Based Upon the Sale of
|
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|
|
|
|
|
|
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Minimum of
|
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Maximum of
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|
|
|
|
|
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Pro Forma
|
|
Stock Offering
|
|
Stock Offering
|
|
|
|
|
|
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Capitalization
|
|
Range:
|
|
Range:
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|
|
Capitalization as
|
|
Based Upon the
|
|
8,571,429
|
|
17,142,857
|
|
|
December 31,
|
|
Trust Preferred
|
|
Shares at $1.75
|
|
Shares at $1.75
|
(Dollars in thousands, except per share data)
|
|
2009
|
|
Exchange (3)
|
|
Per Share (4)
|
|
Per Share (4)
|
|
Deposits
|
|
$
|
682,891
|
|
|
$
|
682,891
|
|
|
$
|
682,891
|
|
|
$
|
682,891
|
|
Federal Home Loan Bank advances
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
35,000
|
|
|
|
35,000
|
|
Subordinated debentures
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other borrowings
|
|
|
51,313
|
|
|
|
51,313
|
|
|
|
51,313
|
|
|
|
51,313
|
|
|
|
|
Total deposits and borrowed funds
|
|
$
|
779,204
|
|
|
$
|
769,204
|
|
|
$
|
769,204
|
|
|
$
|
769,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Serial preferred stock, $.01 par value, 1,000,000
shares authorized, none issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock $0.01 par value, 65,000,000 shares
authorized (post- shareholder approval); shares to
be issued as reflected (1)(2)
|
|
|
85
|
|
|
|
87
|
|
|
|
173
|
|
|
|
259
|
|
Additional paid-in capital
|
|
|
69,968
|
|
|
|
70,566
|
|
|
|
85,745
|
|
|
|
100,505
|
|
Retained earnings (accumulated deficit)
|
|
|
(13,620
|
)
|
|
|
(7,657
|
)
|
|
|
(7,657
|
)
|
|
|
(8,001
|
)
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Accumulated other comprehensive income
|
|
|
982
|
|
|
|
982
|
|
|
|
982
|
|
|
|
982
|
|
Treasury stock, at cost
|
|
|
(3,837
|
)
|
|
|
(3,837
|
)
|
|
|
(3,837
|
)
|
|
|
(3,837
|
)
|
|
|
|
Total shareholders equity
|
|
$
|
53,578
|
|
|
$
|
60,141
|
|
|
$
|
75,406
|
|
|
$
|
89,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding
|
|
|
7,979,120
|
|
|
|
8,223,022
|
|
|
|
16,794,451
|
|
|
|
25,365,880
|
|
Total shareholders equity as a percentage of total
assets (all tangible)
|
|
|
6.16
|
%
|
|
|
6.92
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%
|
|
|
8.55
|
%
|
|
|
10.03
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%
|
Tangible book value per share
|
|
$
|
6.71
|
|
|
$
|
7.31
|
|
|
$
|
4.49
|
|
|
$
|
3.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory capital ratios of Park View Federal:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier one (core) capital ratio
|
|
|
7.15
|
%
|
|
|
7.15
|
%
|
|
|
8.60
|
%
|
|
|
8.73
|
%
|
Tier one risk-based capital ratio
|
|
|
9.48
|
%
|
|
|
9.48
|
%
|
|
|
11.53
|
%
|
|
|
11.71
|
%
|
Total risk-based capital ratio
|
|
|
10.74
|
%
|
|
|
10.74
|
%
|
|
|
12.80
|
%
|
|
|
12.97
|
%
|
|
|
|
|
(1)
|
|
At December 31, 2009, we had 15,000,000 authorized shares of common stock, par value $0.01
per share. At our annual meeting of shareholders, held in January, 2010, shareholders
approved an amendment to our First Amended and Restated Articles of Incorporation to increase
the number of authorized shares of common stock to 65,000,000.
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|
(2)
|
|
The number of shares of common stock to be outstanding after the stock offering is based on
the number of shares outstanding as of January 27, 2010 and excludes 567,692 shares of our
common stock issuable upon exercise of outstanding options on such date, at a weighted average
exercise price of $7.20, and the warrants issued in connection with the exchange of trust
preferred securities of PVF Capital Trust I and PVF Capital Trust II.
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|
(3)
|
|
Assumes 243,902 shares of common stock are issued in connection with the Second Trust
Preferred Exchange based on an assumed conversion price of $2.46 and the number of A
warrants issued is 793,754. Assumes the number of B warrants issued in connection with the
Second Trust Preferred Exchange is 29,174 based on the minimum offering range of the rights
offering. The Second Trust Preferred Exchange will have no impact on the regulatory capital
of Park View Federal. See
SummaryBusiness Strategy of our Restructured Management
TeamEarly Extinguishment of PVF Debt.
|
35
|
|
|
(4)
|
|
Assumes warrants issued in connection with the First and Second Trust Preferred Exchanges are
reclassified from liabilities to equity and an aggregate number of B warrants issued of
449,174 under the maximum range of the offering.
|
Subscriptions by Directors and Executive Officers
We expect all of our directors and executive officers to participate in the rights
offering. Our directors and executive officers, together with their affiliates, intend to purchase
approximately $5.0 million in available common stock in the rights offering. The purchase price
paid by our directors and executive officers, together with their affiliates, will be $1.75 per
share, the same paid by all other persons who purchase shares of our common stock in the rights
offering. Following the stock offering and assuming completion of the exchange of the PVF Capital
Trust II trust preferred securities, our directors and executive officers, together with their
affiliates are expected to own approximately 5,413,939 shares of common stock, or between 32.2% and
21.3% of our total outstanding shares of common stock, assuming the sale at the minimum and maximum
of the offering range, respectively.
The Rights Offering
The Subscription Rights
We are distributing to the holders of our shares of common stock as of January 27, 2010
non-transferable subscription rights to purchase shares of our common stock at $1.75 per share. The
subscription rights entitle the holders of our common stock to purchase an aggregate of
approximately 14,706,247 shares of our common stock for an aggregate purchase price of $25.7
million.
Each holder of record of our common stock will receive one subscription right for each share
of our common stock owned by such holder as of 5:00 p.m., Eastern Time, on January 27, 2010. Each
subscription right entitles the holder to a basic subscription privilege and an over-subscription
privilege.
Basic Subscription Privilege.
With your basic subscription privilege, you may purchase 1.8431
shares of our common stock per subscription right, subject to delivery of the required documents
and payment of the subscription price of $1.75 per share, prior to the expiration of the rights
offering. Fractional shares of our common stock resulting from the exercise of the basic
subscription privilege will be eliminated by rounding down to the nearest whole share. You may
exercise all or a portion of your basic subscription privilege. However, if you exercise less than
your full basic subscription privilege, you will not be entitled to purchase shares under your
over-subscription privilege.
Over-Subscription Privilege.
In the event that you purchase all of the shares of common stock
available to you pursuant to your basic subscription privilege, you may also choose to purchase a
portion of any shares of our common stock that are not purchased by other shareholders through the
exercise of their basic subscription privileges. If sufficient shares of common stock are
available, we will seek to honor the over-subscription requests in full. If over-subscription
requests exceed the number of shares of common stock available to be purchased pursuant to the
over-subscription privilege, we will allocate the available shares of common stock among
shareholders who over-subscribed by multiplying the number of shares requested by each shareholder
through the exercise of their over-subscription privileges by a fraction which equals (x) the
number of shares available to be issued through over-subscription privileges divided by (y) the
total number of shares requested by all subscribers through the exercise of their over-subscription
privileges. As described above for the basic subscription privilege, we will not issue fractional
shares through the exercise of over-subscription privileges.
In order to properly exercise your over-subscription privilege, you must deliver the
subscription payment related to your over-subscription privilege at the time you deliver payment
related to your basic subscription privilege. Because we will not know the actual number of
unsubscribed shares prior to the expiration of the rights offering, if you wish to maximize the
number of shares you purchase pursuant to your over-subscription privilege, you will need to
deliver payment in an amount equal to the aggregate subscription price for the maximum number of
shares of our common stock that may be available to you. For that calculation, you must assume
that no shareholder other than you will subscribe for any shares of our common stock pursuant to
their basic subscription privilege.
36
We can provide no assurances that you will be able to purchase the number of shares issuable
upon the exercise of your over-subscription privilege in full. We will not be able to satisfy any
orders for shares pursuant to the over-subscription privilege if all of our shareholders exercise
their basic subscription privileges in full. We can only honor an over-subscription privilege to
the extent sufficient shares of our common stock are available following the exercise of
subscription rights under the basic subscription privileges.
To the extent the aggregate subscription price of the actual number of unsubscribed shares
available to you pursuant to the over-subscription privilege is less than the amount you paid in
connection with the exercise of the over-subscription privilege, you will be allocated only the
number of unsubscribed shares actually available to you, and any excess subscription payments will
be returned to you promptly, without interest.
To the extent the amount you paid in connection with the exercise of the over-subscription
privilege is less than the aggregate subscription price of the actual number of unsubscribed shares
available to you pursuant to the over-subscription privilege, you will be allocated the number of
unsubscribed shares for which you actually paid in connection with the over-subscription privilege.
Reasons for the Stock Offering
We are engaging in the stock offering to raise equity capital to improve Park View
Federals capital position in order to comply with the Cease and Desist Orders and to retain
additional capital at PVF. See
Use of Proceeds
. Our board of directors has chosen to raise
capital through a rights offering to give our shareholders the opportunity to limit ownership
dilution by buying additional shares of common stock. Our board of directors also considered
several alternative capital raising methods prior to concluding that the rights offering was the
appropriate option under the current circumstances. We believe that the rights offering will
strengthen our financial condition by generating additional cash and increasing our capital
position; however, our board of directors is making no recommendation regarding your exercise of
the subscription rights. We cannot assure you that we will not need to seek additional financing
or engage in additional capital offerings in the future.
Standby Commitment
We have separately entered into a standby purchase agreement with Short Vincent Partners,
a private investment partnership of which an affiliate of CapitalWorks, a Cleveland
based investment management firm, is the general partner. Pursuant to the standby purchase
agreement, Short Vincent Partners has agreed to acquire from us, at the subscription price of $1.75
per share, the lesser of 2,436,610 shares of common stock or 9.61% of PVF outstanding common stock
on a fully diluted basis assuming completion of the rights offering, including shares issued to
Short Vincent Partners. Short Vincent Partners has conditioned its minimum purchase of shares of
common stock upon the receipt by PVF of $26.0 million in gross proceeds from the rights offering,
the offering to Short Vincent Partners and the public reoffer, if any. As a result, the minimum
purchase by Short Vincent Partners (2,215,925 shares of common stock) is conditioned on the sale by
PVF of 12,641,218 shares in the rights offering and the public reoffer, if any. In no event will
Short Vincent Partners be required to purchase a number of shares that would require it or any of
its affiliates to obtain prior regulatory clearance or approval from any state or federal bank
regulatory authority.
Prior to making its commitment to participate in the stock offering, the standby purchaser,
Short Vincent Partners, executed a non-disclosure agreement and pursuant to this agreement gained
access to limited nonpublic information about the stock offering. Subsequently, we negotiated and
entered into a standby purchase agreement with the standby purchaser in connection with the stock
offering. The following description of the standby purchase agreement summarizes certain terms of
the standby purchase agreement. A form of the standby purchase agreement has been filed as an
exhibit to the registration statement of which this prospectus is a part. We urge you to carefully
read the entire document.
Conditions to Closing.
The standby purchase agreement provides that the obligations of the
standby purchaser to complete the purchase of PVF common stock are subject to satisfaction or
waiver of the following conditions specified in the standby purchase agreement:
37
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|
|
The representations and warranties of PVF must be true and correct in all material
respects as of the date of the standby purchase agreement and as of the closing date of
the stock offering;
|
|
|
|
|
Subsequent to the execution and delivery of the standby purchase agreement and prior
to the closing date, there must not have been any material adverse effect on PVF (as
defined in the standby purchase agreement);
|
|
|
|
|
As of the closing date, there must not have been a market adverse effect (as defined
in the standby purchase agreement);
|
|
|
|
|
PVF must have obtained any required federal, state and regulatory approvals for the
stock offering on conditions reasonably satisfactory to PVF; and
|
|
|
|
|
No circumstances may have occurred that would result in the standby purchaser being
required to register as a depository institution holding company under federal or state
laws or regulations, or to submit an application, or notice, to a federal regulatory
authority.
|
The obligations of PVF to complete the common stock sale to the standby purchaser are subject
to satisfaction or waiver of the following conditions specified in the standby purchase agreement:
|
|
|
The representations and warranties of the standby purchaser must be true and correct
in all material respects as of the date of the standby purchase agreement and as of the
closing date of the stock offering; and
|
|
|
|
|
The standby purchaser must have executed and delivered a lock-up agreement
substantially in the form of the exhibit to the standby purchase agreement. See
Plan
of DistributionLock-Up Agreements.
|
The respective obligations of PVF and the standby purchaser to complete the offering to
standby purchaser are subject to satisfaction or waiver of the following conditions specified in
the standby purchase agreement:
|
|
|
No judgment, injunction, decree, regulatory proceeding or other legal restraint must
prohibit, or have the effect of rendering unachievable, the consummation of the rights
offering or the sale of stock to the standby purchaser;
|
|
|
|
|
No stop order suspending the effectiveness of the registration statement may have
been issued and no proceeding for that purpose may have been initiated or threatened by
the Commission;
|
|
|
|
|
The shares of common stock to be issued by PVF must have been authorized for listing
on the Nasdaq Capital Market;
|
|
|
|
|
Any applicable waiting period must have expired or been terminated with respect to
the common stock purchase; and
|
|
|
|
|
PVF must sell the minimum number of shares of common stock to complete the rights
offering.
|
Terminating the Standby Purchase Agreement.
The standby purchase agreement may be terminated
at any time prior to the closing date by the standby purchaser by written notice to PVF if there is
a material adverse effect or a market adverse effect that is not cured within a cure period of
21 days,
provided
that the right to terminate the agreement after the occurrence of each material
adverse effect or a market adverse effect, which has not been cured within the cure period, will
expire seven days after the expiration of the cure period.
The standby purchase agreement may be terminated by PVF or by the standby purchaser by written
notice to the other party:
38
|
|
|
At any time prior to the closing date, if there is a material breach of the
agreement by the other party that is not cured within 15 days after the non-breaching
party has delivered written notice to the breaching party of the breach;
|
|
|
|
|
At any time after May 31, 2010, unless the closing has occurred prior to such date;
|
|
|
|
|
Consummation of the offering to the standby purchaser is prohibited by law, rule or
regulation.
|
The standby purchase agreement may be terminated by PVF in the event:
|
|
|
PVF determines that it is not in the best interests of PVF and its shareholders to
go forward with the stock offering.
|
Additional Agreements with Short Vincent Partners.
Subject to receipt of regulatory approval,
we have agreed to provide Short Vincent Partners the right to designate one candidate for
appointment to the board of directors of PVF. We currently expect this director designee to be
Richard R. Hollington, III, President of CapitalWorks and a principal of the general partner of
Short Vincent Partners. We have also agreed to pay Short Vincent Partners a commitment fee, to be
paid at the closing of the stock offering, of $150,000 to compensate Short Vincent Partners for its
diligence and negotiation efforts in connection with the stock offering.
Reoffer of Remaining Shares
In the event all or any portion of the subscription rights are not exercised by the
holders of common stock prior to the expiration of the rights offering, we may offer those
remaining shares of common stock to the public at $1.75 per share.
Method of Exercising Subscription Rights
One non-transferable subscription right is being distributed for each share of our common
stock that you owned as of 5:00 p.m., Eastern Time, on January 27, 2010. The exercise of
subscription rights is irrevocable and may not be cancelled or modified. You may exercise your
subscription rights as follows:
Subscription by Registered Holders.
If you hold a PVF stock certificate, the number of rights
you may exercise pursuant to your basic subscription privilege is indicated on the enclosed rights
certificate. You may exercise your subscription rights by properly completing and executing the
rights certificate and forwarding it, together with your full payment, to the information agent at
the address set forth below under
Information Agent,
to be received prior to 5:00 p.m., Eastern
Time, on March 22, 2010.
Subscription by Beneficial Owners.
If you are a beneficial owner of shares of our common
stock that are registered in the name of a broker, custodian bank or other nominee, you will not
receive a rights certificate. Instead, one subscription right will be issued to the nominee record
holder for each share of our common stock that you own at the record date. If you are not
contacted by your nominee, you should promptly contact your nominee in order to subscribe for
shares of our common stock in the rights offering.
If you hold your shares of common stock in the name of a custodian bank, broker, dealer or
other nominee, your nominee will exercise the subscription rights on your behalf in accordance with
your instructions. Your nominee may establish a deadline that may be before the 5:00 p.m., Eastern
Time, March 22, 2010 expiration date that we have established for the rights offering.
Payment Method
As described in the instructions accompanying the rights certificate, payments submitted
to the information agent must be made in full United States currency by:
|
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check payable to Northern Trust Bank, FSB, the escrow agent;
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bank check or bank draft payable to Northern Trust Bank, FSB, the escrow agent,
drawn upon a United States bank; or
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money order payable to Northern Trust Bank, FSB, the escrow agent.
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Payment will be deemed to have been received by the information agent only upon the
information agents receipt of any certified check, bank check or bank draft drawn upon a United
States bank or money order or, in the case of an uncertified personal check, receipt and clearance
of such check.
Please note that funds paid by uncertified personal check may take at least seven business
days to clear. Accordingly, if you wish to pay by means of an uncertified personal check, we urge
you to make payment sufficiently in advance of the expiration date to ensure that the information
agent receives cleared funds before that time. We also urge you to consider payment by means of a
certified check, bank check, bank draft or money order.
You should read and follow the instructions accompanying the rights certificate carefully. As
described in the instructions accompanying the rights certificate, in certain cases additional
documentation or signature guarantees may be required.
The method of delivery of payments of the subscription amount to the information agent will be
at the risk of the holders of subscription rights. If sent by mail, we recommend that you send
those documents and payments by registered mail, properly insured, with return receipt requested,
and that a sufficient number of days be allowed to ensure delivery to the information agent. Do
not send or deliver these materials to us.
There is no sales fee or commission payable by you. We will pay all fees charged by the
subscription agent and the information agent. You are responsible for paying any other
commissions, fees, taxes or other expenses incurred in connection with the exercise of the
subscription rights.
Medallion Guarantee May Be Required
Your signature on your rights certificate must be guaranteed by an eligible institution,
such as a member firm of a registered national securities exchange or a member of the Financial
Industry Regulatory Authority, or a commercial bank or trust company having an office or
correspondent in the United States, subject to standards and procedures adopted by the subscription
agent, unless:
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you provide on the rights certificate that shares are to be delivered in your name
and to your address of record, as imprinted on the face of the rights certificate; or
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you are an eligible institution.
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Limit on How Many Shares of Common Stock You May Purchase in the Rights Offering
Persons, together with certain related affiliates, may purchase up to a number of shares
such that upon completion of the stock offering the person owns up to 4.9% of PVFs common stock
outstanding. If a person, together with certain affiliates, intends to purchase a number of shares
such that upon completion of the stock offering the person owns in excess of 4.9% of PVFs common
stock outstanding (including persons who currently own in excess of 4.9% of PVFs common stock
outstanding and intend to maintain stock ownership in excess of 4.9%), the board of directors
retains the discretion to limit such purchases in order to maintain compliance with the ownership
change provisions of Section 382 of the Internal Revenue Code. See
Risk FactorsRisks Related to
Our BusinessPVF could, as a result of the stock offering or future investments in our common stock
by 5% holders, experience an ownership change for tax purposes that could cause PVF to
permanently lose a significant portion of its U.S. federal deferred tax assets.
In addition, we will not issue shares of common stock pursuant to the exercise of basic
subscription rights or over-subscription rights or, to any person or entity, who, in our sole
opinion, could be required to obtain prior
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clearance or approval from or submit a notice to any state or federal bank regulatory authority to
acquire, own or control such shares if, as of March 22, 2010, such clearance or approval has not
been obtained and/or any required waiting period has not expired. If we elect not to issue shares
in such case, such shares will become available to satisfy over-subscription by other shareholders
pursuant to subscription rights and will thereafter be available in the public reoffer of shares.
Missing or Incomplete Subscription Information
If you send a payment that is insufficient to purchase the number of shares you
requested, or if the number of shares you requested is not specified in the forms, the payment
received will be applied to exercise your subscription rights to the fullest extent possible based
on the amount of the payment received, subject to the availability of shares under the
over-subscription privilege and the elimination of fractional shares. Any excess subscription
payments received by the information agent will be returned promptly, without interest, following
the expiration of the rights offering.
Expiration Date
The subscription period, during which you may exercise your subscription rights, expires
at 5:00 p.m., Eastern Time, on March 22, 2010, which is the expiration of the rights offering. If
you do not exercise your subscription rights prior to that time, your subscription rights will
expire and will no longer be exercisable. We will not be required to issue shares of our common
stock to you if the information agent receives your rights certificate or your subscription payment
after that time. We have the option to extend the rights offering without notice to you. In no
event will the expiration date be later than March 26, 2010. We may extend the expiration of the
rights offering by giving oral or written notice to the information agent prior to the expiration
of the rights offering. If we elect to extend the expiration of the rights offering, we will issue
a press release announcing such extension no later than the next business day after the board of
directors determines to extend the rights offering.
If you hold your shares of common stock in the name of a custodian bank, broker, dealer or
other nominee, your nominee will exercise the subscription rights on your behalf in accordance with
your instructions. Your nominee may establish a deadline that may be before the 5:00 p.m., Eastern
Time, March 22, 2010, expiration date that we have established for the rights offering.
Determination of Subscription Price
In determining the subscription price, our board of directors considered a number of
factors, including: the price at which our shareholders might be willing to participate in the
rights offering, historical and current trading prices for our common stock, the need for liquidity
and capital, negotiations with the standby purchaser, and the desire to provide an opportunity to
our shareholders to participate in the rights offering on a pro rata basis. In conjunction with
its review of these factors, the board of directors also reviewed our history and prospects,
including our past and present earnings, our prospects for future earnings, our current financial
condition and regulatory status. We may elect to receive a fairness opinion from our financial
advisor with respect to the consideration to be paid to PVF prior to the closing of the stock
offering, but we have not done so as of the date of this prospectus. The subscription price is not
necessarily related to our book value, net worth or any other established criteria of value and may
or may not be considered the fair value of our common stock to be offered in the rights offering.
We cannot assure you that the market price of our shares of common stock will not decline
during or after the rights offering. We also cannot assure you that you will be able to sell
shares of our common stock purchased during the rights offering at a price equal to or greater than
the subscription price. We urge you to obtain a current quote for our common stock before
exercising your subscription rights.
Conditions, Withdrawal and Termination
We reserve the right to withdraw the rights offering at any time for any reason. We may
terminate the rights offering if at any time before completion of the rights offering there is any
judgment, order, decree, injunction, statute, law or regulation entered, enacted, amended or held
to be applicable to the rights offering that in
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the sole judgment of our board of directors would or might make the rights offering or its
completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion of
the rights offering. We may waive any of these conditions and choose to proceed with the rights
offering even if one or more of these events occur. If we terminate the rights offering, all
affected subscription rights will expire without value, and all subscription payments received by
the information agent will be returned promptly, without interest or penalty.
In addition, we must meet the following condition to complete the stock offering:
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We must sell the minimum offering amount of at least $15.0 million (8,571,429
shares) of common stock in the rights offering.
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Subscription Agent
The subscription agent for the stock offering is Computershare Trust Company, N.A. The
subscription agent will maintain the list of subscriptions, calculate any necessary allocations of
over-subscription privileges and mail all common stock certificates upon completion of the stock
offering.
Information Agent
We have appointed Stifel Nicolaus as information agent for the offering. The address to
which rights certificates and payments should be mailed or delivered is provided below. If sent by
mail, we recommend that you send documents and payments by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the
subscription agent. Do not send or deliver these materials to PVF.
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By Mail:
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By Express Mail or Overnight Courier:
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Stifel, Nicolaus & Company, Incorporated
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Stifel, Nicolaus & Company, Incorporated
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7th Floor Attn: Susie Kivlehen
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7th Floor Attn: Susie Kivlehen
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501 North Broadway
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501 North Broadway
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St. Louis, MO 63102
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St. Louis, MO 63102
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Any questions or requests regarding PVF, Park View Federal or the stock offering or any
questions regarding completing a rights certificate or submitting payment in the rights offering
may be directed to Stifel Nicolaus at (866) 585-5970 (toll free) Monday through Friday (except bank
holidays), between 9:00 a.m. and 4:00 p.m., Eastern Time. We will pay the fees and expenses of the
information agent and have also agreed to indemnify the information agent from certain liabilities
that it may incur in connection with the rights offering.
No Fractional Shares
All shares will be sold at a purchase price of $1.75 per share. We will not issue
fractional shares. Fractional shares of our common stock resulting from the exercise of the basic
subscription privileges and the over-subscription privileges will be eliminated by rounding down to
the nearest whole share. Any excess subscription payments received by the information agent will
be returned promptly, without interest.
Notice to Nominees
If you are a broker, custodian bank or other nominee holder that holds shares of our
common stock for the account of others on the record date, you should notify the beneficial owners
of the shares for whom you are the nominee of the rights offering as soon as possible to learn
their intentions with respect to exercising their subscription rights. You should obtain
instructions from the beneficial owners, as set forth in the instructions we have provided to you
for your distribution to beneficial owners. If a registered holder of our common stock so
instructs, you should complete the rights certificate and submit it to the subscription agent with
the proper subscription payment to be received by the expiration date. You may exercise the number
of subscription rights to which all beneficial owners in the aggregate otherwise would have been
entitled had they been direct holders of our
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common stock on the record date, provided that you, as a nominee record holder, make a proper
showing to the subscription agent by submitting the form entitled
Nominee Holder Certification
,
which is provided with your rights offering materials. If you did not receive this form, you
should contact the subscription agent to request a copy.
Beneficial Owners
If you are a beneficial owner of shares of our common stock and will receive your
subscription rights through a broker, custodian bank or other nominee, we will ask your nominee to
notify you of the rights offering. If you wish to exercise your subscription rights, you will need
to have your broker, custodian bank or other nominee act for you, as described above. To indicate
your decision with respect to your subscription rights, you should follow the instructions of your
nominee. If you wish instead to obtain a separate rights certificate, you should contact your
nominee as soon as possible and request that a rights certificate be issued to you. You should
contact your nominee if you do not receive notice of the rights offering, but you believe you are
entitled to participate in the rights offering. We are not responsible if you do not receive the
notice by mail or otherwise from your nominee or if you receive notice without sufficient time to
respond to your nominee by the deadline established by your nominee, which may be before the 5:00
p.m., Eastern Time, March 22, 2010, expiration date.
Persons Holding Shares Through Our 401(k) Plan
If shares of our common stock are held in your account under our 401(k) plan as of 5:00
p.m., Eastern Time, on January 27, 2010, you are eligible to participate in the offering. If you
wish to exercise some or all of your subscription rights, you will need to notify the plan
administrator of the 401(k) plan trustee of your decision and the plan administrator will submit your
instructions to the 401(k) plan who will act on your behalf. The plan administrator must receive
your properly completed form entitled
4
01(k)
Plan Participant Election Form
no later than March
12, 2010. If you elect to exercise some or all of your subscription rights, you must ensure that
the total amount of the funds required for such exercise is maintained in the Merrill Lynch
Retirement Preservation Trust Fund (an existing investment fund under the 401(k) plan) at or prior
to 5:00 p.m., Eastern Time, on March 12, 2010. The trustee, in order to exercise subscription
rights on your behalf, will transfer funds from your the Merrill Lynch Retirement Preservation
Trust Fund account one business day before the expiration date. If these funds are insufficient to
exercise all of your rights in accordance with your election, or if you transfer amounts out of the
Merrill Lynch Retirement Preservation Trust Fund, including after March 12, 2010 (due to, for
example, a fund transfer, loan, withdrawal or distribution), the subscription rights will be
exercised in accordance with the instructions you provide to the
trustee, to the maximum extent possible with the amount you have invested in your the Merrill
Lynch Retirement Preservation Trust Fund account. Your
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01(k)
Plan Participant Election Form
accompanies this prospectus.
Once you elect to exercise your rights you cannot revoke your
election.
Non-Transferability of Subscription Rights
The subscription rights granted to you are non-transferable and, therefore, you may not
sell, transfer or assign your subscription rights to anyone. The subscription rights will not be
listed for trading on the Nasdaq Capital Market or any other stock exchange or market. The shares
of our common stock issuable upon exercise of the subscription rights will be listed on the Nasdaq
Capital Market under the ticker symbol PVFC.
Validity of Subscriptions
We will resolve all questions regarding the validity and form of the exercise of your
subscription rights, including time of receipt and eligibility to participate in the rights
offering. Our determination will be final and binding. Once made, subscriptions and directions
are irrevocable, and we will not accept any alternative, conditional or contingent subscriptions or
directions. We reserve the absolute right to reject any subscriptions or directions not properly
submitted or the acceptance of which would be unlawful. You must resolve any irregularities in
connection with your subscriptions before the subscription period expires, unless waived by us in
our sole discretion. None of PVF, the information agent or the subscription agent shall be under
any duty to notify you or your representative of defects in your subscriptions. A subscription
will be considered accepted, subject to our right to withdraw or terminate the rights offering,
only when a properly completed and duly executed rights
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certificate and any other required documents and the full subscription payment have been received
by the subscription agent. Our interpretations of the terms and conditions of the rights offering
will be final and binding.
Escrow Arrangements; Return of Funds
Northern Trust Bank, FSB, the escrow agent, will hold funds received in payment for
shares of our common stock in a segregated account pending completion of the rights offering. The
escrow agent will hold this money in escrow until the rights offering is completed or is withdrawn
and canceled. If the rights offering is canceled for any reason, all subscription payments
received by the escrow agent will be returned promptly, without interest or penalty.
Shareholder Rights
You will have no rights as a holder of the shares of our common stock you purchase in the
rights offering until certificates representing the shares of our common stock are issued to you,
or your account at your nominee is credited with the shares of our common stock purchased in the
rights offering.
Foreign Shareholders
We will not mail this prospectus or rights certificates to shareholders with addresses
that are outside the United States or that have an army post office or foreign post office address.
The subscription agent will hold these rights certificates for their account. To exercise
subscription rights, our foreign shareholders must notify the information agent prior to 5:00 p.m.,
Eastern Time, at least three business days prior to the expiration of the rights offering (or, if
the rights offering is extended, on or before three business days prior to the extended expiration
date) and demonstrate to the satisfaction of the information agent and the subscription agent that
the exercise of such subscription rights does not violate the laws of the jurisdiction of such
shareholder.
No Revocation or Change
Once you submit the rights certificate or have instructed your nominee of your
subscription request, you are not allowed to revoke or change the exercise or request a refund of
monies paid. All exercises of subscription rights are irrevocable, even if you learn information
about us that you consider to be unfavorable. You should not exercise your subscription rights
unless you are certain that you wish to purchase additional shares of our common stock at the
subscription price.
Regulatory Limitation
We will not issue shares of common stock pursuant to the exercise of basic subscription
rights or over-subscription rights, or to any person or entity, who, in our sole opinion, could be
required to obtain prior clearance or approval from or submit a notice to any state or federal bank
regulatory authority to acquire, own or control such shares if, as of March 22, 2010, such
clearance or approval has not been obtained and/or any required waiting period has not expired. If
we elect not to issue shares in such case, such shares will become available to satisfy
over-subscriptions by other shareholders pursuant to subscription rights and will be available
thereafter in the public reoffer of shares.
Material U.S. Federal Income Tax Treatment of Rights Distribution
For U.S. federal income tax purposes, you should not recognize income or loss upon
receipt or exercise of these subscription rights to purchase shares of our common stock for the
reasons described below in
Material U.S. Federal Income Tax Consequences
.
No Recommendation to Rights Holders
Our board of directors is making no recommendation regarding your exercise of the
subscription rights. Shareholders who exercise subscription rights risk investment loss on new
money invested. We cannot assure you
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that the market price for our common stock will be above the subscription price or that anyone
purchasing shares at the subscription price will be able to sell those shares in the future at the
same price or a higher price. You are urged to make your decision based on your own assessment of
our business and the rights offering. Please see
Risk Factors
for a discussion of some of the
risks involved in investing in our common stock.
Shares of Our Common Stock Outstanding After the Rights Offering
Assuming no options are exercised prior to the expiration of the rights offering and
assuming completion of the exchange of the PVF Capital Trust II trust preferred securities, we
expect approximately 25,365,880 shares of our common stock will be outstanding immediately after
completion of the rights offering and the closing of the transactions contemplated by the standby
purchase agreement, assuming all shares are sold at the maximum of the rights offering and to the
standby purchaser.
The Reoffering of Remaining Shares
Acceptance of Nonbinding Subscriptions During Pendency of Rights Offering
We will permit persons and entities who are not shareholders eligible to participate in
the rights offering to submit nonbinding subscriptions to purchase shares of our common stock, if
any, that remain available for purchase following the expiration date of the rights offering.
Prospective purchasers should complete, date and sign the preliminary subscription agreement which
accompanies this prospectus and return it to Stifel, Nicolaus & Company, Incorporated, One South
Street, Baltimore, Maryland 21202, Attn: Syndicate Department.
Preliminary subscriptions are NOT binding on subscribers. DO NOT send payment for shares of
common stock with your preliminary subscription. Upon completion of the rights offering, we will
furnish to all persons who previously submitted preliminary subscriptions a prospectus supplement
that sets forth the results of the rights offering and the amount of unsubscribed shares of common
stock, accompanied by an acknowledgement of subscription. A copy of the acknowledgement of
subscription will accompany this prospectus. Upon receipt of the prospectus supplement, each
subscriber will be asked to do the following:
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Complete, sign and date the acknowledgement of subscription;
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Make a check payable to Northern Trust Bank, FSB in an amount equal to the
subscription price of $1.75 per share multiplied by the number of shares of common
stock subscribed for; and
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Return the completed acknowledgement of subscription and check to Stifel, Nicolaus &
Company, Incorporated, 7th Floor Attn: Susie Kivlehen, 501 North Broadway, St. Louis,
MO 63102.
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Upon receipt by PVF of the acknowledgement of subscription, the preliminary subscription
agreement will become binding on and irrevocable by the subscriber until the expiration date of the
reoffer period.
Discretion to Accept Subscriptions
We have the right, in our sole discretion, to accept or reject any subscription in whole
or in part on or before the reoffer expiration date. We generally will accept subscriptions in the
order in which they are received. As a result, you may not receive any or all of the shares for
which you subscribe. We will notify subscribers as soon as practicable following the reoffer
expiration date as to whether and to what extent their subscriptions have been accepted. If we do
not accept all or a portion of a subscription, we will return to the subscriber the unaccepted
portion of the subscription funds, without interest.
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Expiration Date and Cancellation Rights
The reoffer period will expire at the earlier of 5:00 p.m. Eastern Time, on April 9, 2010
or the date on which we have accepted subscriptions for all shares remaining for purchase as
reflected in the prospectus supplement.
We may cancel the reoffer of remaining shares at any time for any reason, including following
the expiration date. If we cancel the public offering of any remaining shares of common stock, we
will return all subscription payments promptly, without interest.
Escrow Arrangements; Return of Funds
Northern Trust Bank, FSB, the escrow agent, will hold funds received with an
acknowledgement of subscription in a segregated account. The escrow agent will hold these funds in
escrow until such time as we accept the subscription or until the reoffering is cancelled. If the
reoffering of remaining shares is cancelled, the escrow agent will return the subscription payments
promptly, without interest.
No Revocation or Change
Once you submit the acknowledgement of subscription and your payment, you will not be
allowed to revoke your subscription or request a refund of monies paid. All acknowledgements of
subscriptions are irrevocable, even if you learn information about us that you consider to be
unfavorable. You should not submit an acknowledgement of subscription unless you are certain that
you wish to purchase shares of our common stock at the subscription price.
Material U.S. Federal Income Tax Consequences
The following discussion is a summary of the material United States federal income tax
consequences of the ownership and exercise of the subscription rights acquired through the rights
offering and the shares of common stock received upon exercise of the subscription rights or, if
applicable, upon exercise of the over-subscription privilege. This discussion is a summary and
does not consider all aspects of U.S. federal income taxation that may be relevant to particular
U.S. holders in light of their particular circumstances. This discussion applies to you only if
you are a U.S. holder (defined below), acquire your subscription rights in the rights offering and
you hold your subscription rights or shares of common stock issued to you upon exercise of the
subscription rights or, if applicable, the over-subscription privilege as capital assets for tax
purposes. This section does not apply to you if you are not a U.S. holder or if you are a member
of a special class of holders subject to special rules, including, but not limited to:
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A financial institution,
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A regulated investment company,
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A real estate investment trust,
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A dealer in securities,
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A trader in securities that elects to use a mark-to-market method of accounting for
securities holdings,
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A tax-exempt organization,
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An insurance company,
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A person liable for alternative minimum tax,
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A person who acquired common stock pursuant to the exercise of compensatory stock
options or otherwise as compensation,
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A person that holds common stock as part of a straddle or a hedging or conversion
transaction, or
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A person whose functional currency is not the U.S. dollar.
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This section is based on the Internal Revenue Code of 1986, as amended, its legislative
history, existing and proposed regulations, published rulings and court decisions, all as currently
in effect. These laws are subject to change or differing interpretations at any time, possibly on
a retroactive basis.
You are a U.S. holder if you are a beneficial owner of subscription rights or common stock and
you are:
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An individual citizen or resident of the United States,
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A domestic corporation,
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An estate whose income is subject to United States federal income tax regardless of
its source, or
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A trust if (i) a United States court can exercise primary supervision over the
trusts administration and one or more United States persons are authorized to control
all substantial decisions of the trust, or (ii) the trust has a valid election in
effect under applicable regulations to be treated as a United States person.
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If a partnership (including any entity treated as a partnership for U.S. federal income tax
purposes) receives the subscription rights or holds shares of common stock received upon exercise
of the subscription rights or the over-subscription privilege, the tax treatment of a partner in a
partnership generally will depend upon the status of the partner and the activities of the
partnership. Such a partner or partnership should consult its tax advisor as to the U.S. federal
income tax consequences of receiving, exercising and disposing of the subscription rights and
acquiring, holding or disposing of shares of the common stock.
This discussion addresses only certain material United States federal income tax consequences.
You should consult your own tax advisor regarding the United States federal, state, local,
non-U.S. and other tax consequences of receiving, owning, exercising and disposing of subscription
rights and shares of common stock in your particular circumstances.
Taxation of Subscription Rights
Receipt of Subscription Rights.
Your receipt of subscription rights pursuant
to the rights offering should be treated as a nontaxable distribution with respect to your existing
shares of common stock for U.S. federal income tax purposes. The discussion below assumes that the
receipt of subscription rights will be treated as a nontaxable distribution.
If the fair market value of the subscription rights you receive is less than 15% of the fair
market value of your existing shares of common stock on the date you receive the subscription
rights, the subscription rights will be allocated a zero basis for U.S. federal income tax
purposes, unless you elect to allocate basis between your existing shares of common stock and the
subscription rights in proportion to the relative fair market values of the existing shares of
common stock and the subscription rights determined on the date of receipt of the subscription
rights. If you choose to allocate basis between your existing shares of common stock and the
subscription rights, you must make this election on a statement included with your tax return for
the taxable year in which you receive the subscription rights. Such an election is irrevocable.
On the other hand, if the fair market value of the subscription rights you receive is 15% or
more of the fair market value of your existing shares of common stock on the date you receive the
subscription rights, then you must allocate your basis in your existing shares of common stock
between the existing shares of common stock and the
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subscription rights you receive in proportion to their fair market values determined on the date
you receive the subscription rights.
The fair market value of the subscription rights on the date the subscription rights are
distributed is uncertain, and we have not obtained, and do not intend to obtain, an appraisal of
the fair market value of the subscription rights on that date. In determining the fair market
value of the subscription rights, you should consider all relevant facts and circumstances,
including any difference between the subscription price of the subscription rights and the trading
price of our common stock on the date that the subscription rights are distributed, the length of
the period during which the subscription rights may be exercised and the fact that the subscription
rights are non-transferable.
Your holding period in a subscription right will include your holding period in the shares of
common stock with respect to which the subscription right was distributed.
Exercise of Subscription Rights or Over-Subscription Privilege.
Generally, you will not
recognize gain or loss on the exercise of a subscription right or over-subscription privilege.
Your tax basis in a new share of common stock acquired when you exercise a subscription right will
be equal to the sum of (i) your adjusted tax basis, if any, in the subscription right, (ii) any
servicing fee charged to you by your broker, bank or trust company and (iii) the subscription price
you paid for such shares. The holding period of a share of common stock acquired when you exercise
your subscription right will begin on the date of exercise.
Acquisition of Common Stock through Exercise of Over-Subscription Privilege.
If you acquire
shares of common stock through exercise of the over-subscription privilege, your basis in such
shares will generally be equal to the subscription price you paid for such shares plus any
servicing fee charged to you by your broker, bank or trust company. The holding period with
respect to such shares of common stock will commence on the day after the acquisition of the common
stock.
Not Exercising Subscription Rights.
If you do not exercise your subscription rights, you
should not recognize a capital loss for United States federal income tax purposes and any portion
of the tax basis in your existing shares of common stock previously allocated to the subscription
right not exercised will be re-allocated to the existing common stock.
Taxation of Common Stock
Distributions.
Distributions with respect to shares of common stock acquired upon
exercise of subscription rights or the over-subscription privilege will be taxable as dividend
income when actually or constructively received to the extent of our current or accumulated
earnings and profits as determined for U.S. federal income tax purposes. To the extent that the
amount of a distribution exceeds our current and accumulated earnings and profits, such
distribution will be treated first as a tax-free return of capital to the extent of your adjusted
tax basis in such common stock and thereafter as capital gain.
Subject to certain exceptions for short-term and hedged positions, distributions constituting
dividend income received by certain non-corporate U.S. holders, including individuals, in respect
of the common stock in taxable years beginning before January 1, 2011 are generally taxed at a
maximum rate of 15%. Similarly, subject to similar exceptions for short-term and hedged positions,
distributions on the common stock constituting dividend income paid to holders that are domestic
corporations generally will qualify for the dividends-received deduction. You should consult your
own tax advisor regarding the availability of the reduced dividend tax rate and the
dividends-received deduction in light of your particular circumstances.
Dispositions.
If you sell or otherwise dispose of the common stock, you will generally
recognize capital gain or loss equal to the difference between the amount you realize and your
adjusted tax basis in the common stock. Such capital gain or loss will be long-term capital gain
or loss if your holding period for the common stock is more than one year. Long-term capital gain
of a non-corporate U.S. holder, including individuals, that is recognized in taxable years
beginning before January 1, 2011 is generally taxed at a maximum rate of 15%. The deductibility of
net capital losses is subject to limitations.
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Information Reporting and Backup Withholding
For non-corporate U.S. holders, information reporting requirements, on Internal Revenue
Service Form 1099, generally will apply to the payment of dividends on the common stock and the
payment of the proceeds from the sale, redemption or other disposition of common stock.
Additionally, backup withholding will apply to such payments if a non-corporate U.S. holder
fails to provide an accurate taxpayer identification number, is notified by the Internal Revenue
Service that it has failed to report all dividends required to be shown on its federal income tax
returns, or in certain circumstances, fails to comply with applicable certification requirements.
Any amount withheld from a payment under the backup withholding rules is allowable as a credit
against (and may entitle you to a refund with respect to) your federal income tax liability,
provided that the required information is furnished to the Internal Revenue Service.
Plan of Distribution
Directors, Executive Officers and Employees
Our directors and executive officers may participate in the solicitation of the exercise
of subscription rights for the purchase of common stock. These persons will not receive any
commissions or compensation in connection with these activities, other than their normal
compensation, but they will be reimbursed for their reasonable out-of-pocket expenses incurred in
connection with any solicitation. Other trained employees of Park View Federal may assist in the
rights offering in ministerial capacities, providing clerical work in effecting an exercise of
subscription rights or answering questions of a ministerial nature. Other questions of prospective
purchasers will be directed to our executive officers or registered representatives of Stifel
Nicolaus, our financial and marketing advisor and information agent. Our other employees have been
instructed not to solicit the exercise of subscription rights for the purchase of shares of common
stock or to provide advice regarding the exercise of subscription rights. We will rely on Rule
3a4-1 under the Securities Exchange Act of 1934, as amended, and the solicitation of subscription
rights and the sales of the common stock underlying such subscription rights will be conducted
within the requirements of Rule 3a4-1, so as to permit officers, directors and employees to
participate in the sale of our common stock. None of our officers, directors or employees will be
compensated in connection with their participation in the offering by the payment of commissions or
other remuneration based either directly or indirectly on the transactions in the shares of common
stock.
Financial Advisor
We have engaged Stifel Nicolaus, a broker-dealer registered with the Financial Industry
Regulatory Authority, as our financial and marketing advisor in connection with the stock offering
pursuant to an agency agreement between Stifel Nicolaus, and us. Stifel Nicolaus is a nationally
recognized investment banking firm with significant experience in advising financial institutions.
In the ordinary course of its investment banking business, Stifel Nicolaus is regularly engaged in
the valuation of financial institutions and their securities in connection with mergers and
acquisitions and other corporate transactions.
In its capacity as our financial and marketing advisor, Stifel Nicolaus provided advice to us
regarding the structure of the stock offering as well as with respect to marketing the shares of
our common stock to be issued in the stock offering. Stifel Nicolaus assisted us in negotiating
the standby purchase agreement with Short Vincent Partners.
Stifel Nicolaus has not prepared any report or opinion constituting a recommendation or advice
to us or our shareholders; however, Stifel Nicolaus may be requested to prepare an opinion
addressed to our board of directors prior to the closing of the stock offering as to the fairness,
from a financial point of view and, as of the date of such opinion and subject to the assumptions
and qualifications contained in such opinion, of the consideration to be paid to PVF in connection
with the stock offering. Stifel Nicolaus expresses no opinion and makes no recommendation to
holders of the subscription rights as to the purchase by any person of shares of our common stock.
Stifel Nicolaus
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also expresses no opinion as to the prices at which shares to be distributed in connection with the
rights offering may trade if and when they are issued or at any future time. See
The Rights
OfferingDetermination of Subscription Price.
As compensation for its services, we have agreed to pay Stifel Nicolaus the following amounts:
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An advisory fee, in consideration for Stifel Nicolaus work in advising us with
respect to the increase in our authorized shares, our 2010 annual meeting of
shareholders, shareholder voting, press releases and debt restructuring, equal to: (i)
$25,000 paid as an advance upon the execution of the engagement letter and $25,000
payable on the 30th day of each month (with respect to such services actually performed
by Stifel Nicolaus during such month) during the term of the engagement letter,
commencing on November 30, 2009, and (ii) the difference of $825,000 and the sum of all
advisory fees paid to date which will be due and payable to the Stifel Nicolaus on the
date of the initial closing;
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a placement fee of up to 6.00% (600 basis points) of the aggregate dollar amount of
the common stock sold to the standby purchaser and sold in the public reoffer; and
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if an opinion is requested by our board of directors, a fairness opinion fee of
$100,000 in connection with an opinion given by Stifel Nicolaus as to the fairness to
PVF, from a financial point of view, of the consideration to be paid in connection with
the stock offering.
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We have agreed to reimburse Stifel Nicolaus for its reasonable out-of-pocket expenses
pertaining to its engagement, including legal fees, up to $175,000, regardless of whether the
rights offering is consummated. Although Stifel Nicolaus has no obligation to act, and will not
act, in any capacity as an underwriter in the rights offering, if it were nonetheless deemed to be
an underwriter under the Securities Act, the fees and commission to be paid to it might be deemed
to be underwriting fees and commissions. We have agreed to indemnify Stifel Nicolaus against
certain liabilities and expenses in connection with its engagement, including certain potential
liabilities under the federal securities laws. Stifel Nicolaus expresses no opinion and makes no
recommendation to our shareholders as to the purchase by any person of any shares of common stock.
Stifel Nicolaus expresses no opinion as to the prices that the shares of our common stock may trade
for if and when they are issued or at any future time. Stifel Nicolaus has advised us that they
will pay selected dealers a management fee in the aggregate not exceeding $300,000.
Stifel Nicolaus may in the future provide other investment banking services to us and
will receive compensation for such services. In the ordinary course of its business as a
broker-dealer, Stifel Nicolaus may also purchase securities from and sell securities to us and may
actively trade our equity or debt securities for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such securities.
Lock-Up Agreements
Subject to certain exceptions, we and each of our directors and executive officers and
the standby purchaser have agreed with Stifel Nicolaus that, without the prior written consent of
Stifel Nicolaus, none of us or the standby purchaser will, during the period ending 180 days after
the closing date of this offering:
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offer, sell, contract to sell (including any short sale), pledge, hypothecate,
establish an open put equivalent position within the meaning of Rule 15a-1(h) of the
Securities Exchange Act of 1934, as amended, grant any option, right or warrant for the
sale of, purchase any option or contract to sell, sell any option or contract to
purchase, or otherwise encumber, dispose of or transfer, or grant any rights with
respect to, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or enter into any
transaction that would have the same effect; or
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enter into any swap, hedge or other arrangement that transfers, in whole or in part,
any of the economic consequences of ownership of the common stock, whether any
transaction described above is to be settled by delivery of common stock or such other
securities, in cash or otherwise, or publicly disclose the intention to make any such
offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge
or other arrangement, without, in each case, the prior written consent of Stifel
Nicolaus.
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This 180-day period may be extended under certain circumstances if we announce or
pre-announce earnings or material news or a material event within approximately 17 days
prior to, or approximately 16 days after, the termination of the 180-day period.
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Subscription for and Delivery of Shares
As soon as practicable after the record date for the rights offering, we will distribute
the subscription rights and rights certificates to individuals who owned shares of our common stock
at 5:00 p.m., Eastern Time, on January 27, 2010. If you wish to exercise your subscription rights
and purchase shares of our common stock, you should complete the rights certificate and return it
with payment for the shares to Stifel Nicolaus, at the following address:
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By Mail:
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By Express Mail or Overnight Courier:
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Stifel, Nicolaus & Company, Incorporated
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Stifel, Nicolaus & Company, Incorporated
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7th Floor Attn: Susie Kivlehen
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7th Floor Attn: Susie Kivlehen
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501 North Broadway
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501 North Broadway
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St. Louis, MO 63102
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St. Louis, MO 63102
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See
The Rights OfferingMethod of Exercising Subscription Rights.
If you have any questions
regarding PVF, Park View Federal, or the stock offering, or you have any questions regarding
completing a rights certificate or submitting payment in the rights offering, please call our
information agent, Stifel Nicolaus at (866) 585-5970 (toll free), Monday through Friday (except
bank holidays), between 9:00 a.m. and 4:00 p.m., Eastern Time.
Description of Common Stock
The following description does not purport to be complete and is subject to, and
qualified in its entirety by reference to, our First Amended and Restated Articles of
Incorporation, Code of Regulations, and our Bylaws, as amended to date.
Common Stock
At December 31, 2009, we were authorized to issue 15,000,000 shares of common stock, $.01
par value. There were 7,979,120 shares of common stock outstanding as of January 27, 2010. At our
annual meeting of stockholders held in January 2010, stockholders approved an amendment to our
First Amended and Restated Articles of Incorporation to increase the authorized shares of common
stock to 65,000,000.
Dividend Rights
Holders of our common stock are entitled to receive such dividends as may be declared by
our board of directors out of legally available funds, and to receive pro rata any assets
distributable to holders of our common stock upon our liquidation.
In December 2008, PVF deferred the payment of dividends on its subordinated debentures. Under
the terms of the debentures, if PVF defers the payment of interest on the debentures, PVF generally
may not pay dividends or distributions, or redeem, purchase, or make a liquidation payment with
respect to any of its capital stock. Accordingly, at such time, PVF discontinued the payment of
cash dividends on the common stock. Pursuant to the Cease and Desist Order, PVF may not declare or
pay a dividend, including the repurchase or redemption of capital stock, without the prior
non-objection of the Office of Thrift Supervision.
51
Voting Rights
Holders of our common stock are entitled to vote for the election of directors and upon
all other matters, which may be submitted to a vote of shareholders generally, with each share
being entitled to one vote. Our common shareholders do not possess cumulative voting rights. This
means that holders of more than 50% of our common stock (on a fully diluted basis) voting for the
election of directors can elect all of the directors, and holders of the remaining shares will not
be able to elect any directors.
Directors are elected by a plurality of the votes cast at the meeting, i.e., the nominees
receiving the highest number of votes will be elected regardless of whether such votes constitute a
majority of the shares represented at the meeting. Any other corporate action shall be authorized
by a majority of the votes cast at the meeting unless otherwise provided by Chapter 1701 of the
Ohio Revised Code, our First Amended and Restated Articles of Incorporation, Amended and Restated
Code of Regulations, or our Amended and Restated Bylaws.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of our holding company, the
holders of our common stock would be entitled to receive, after payment or provision for payment of
all our debts and liabilities, all of our assets available for distribution. Holders of our serial
preferred stock, if any such shares are then outstanding, may have a priority over the holders of
common stock in the event of any liquidation or dissolution. We have no serial preferred stock
currently outstanding.
Other Rights
Common shareholders have no preemptive rights to purchase additional securities that may
be issued by us in the future. There are no redemption or conversion provisions applicable to our
common stock, and common shareholders are not liable for any further capital call or assessment.
Anti-Takeover Effects
First Amended and Restated Articles of Incorporation.
Our First Amended and Restated
Articles of Incorporation provide for a classified board to which approximately one-third of our
board of directors is elected each year at our annual meeting of shareholders. Accordingly, our
directors serve three-year terms rather than one-year terms. The classification of our board of
directors has the effect of making it more difficult for shareholders to change the composition of
our board of directors. At least two annual meetings of shareholders, instead of one, will
generally be required to effect a change in a majority of our board of directors. The
classification of our board of directors could also have the effect of discouraging a third party
from initiating a proxy contest, making a tender offer or otherwise attempting to obtain control of
us, even though such an attempt might be beneficial to us and our shareholders. The classification
of our board of directors could thus increase the likelihood that incumbent directors will retain
their positions.
Our First Amended and Restated Articles of Incorporation require the affirmative vote of the
holders of not less than eighty percent (80%) of the outstanding common stock of PVF entitled to
vote with respect to each such transaction: (a) any merger, share exchange or consolidation of PVF
with or into a related person (as defined therein); (b) any sale, lease, exchange, transfer or
other disposition, including without limitation, a mortgage, or any other security device, of all
or any substantial part (as defined therein) of the assets of PVF (including, without limitation,
any voting securities of a subsidiary) or of a subsidiary to a related person; (c) any merger or
consolidation of a related person with or into PVF or a subsidiary; (d) any sale, lease, exchange,
transfer or other disposition, including without limitation, a mortgage, or any other capital
device, of all or any substantial part of the assets of related person to PVF or a subsidiary; (e)
the issuance of any securities of PVF or a subsidiary of a related person; (f) the acquisition by
PVF or a subsidiary of any securities of a related person; (g) any reclassification of the common
stock of PVF, or any recapitalization involving the common stock of PVF; and (h) any agreement,
contract or other arrangement providing for any of the transactions described in (a) through (g)
above (the Special Voting
52
Requirement). The Special Voting Requirement shall not apply to any such merger, consolidation,
sale or exchange, issuance or delivery of stock or other securities, or dissolution which was
approved by the affirmative vote of at least two-thirds of the continuing directors (as defend
therein), provided such appraisal was obtained at a meeting in which a continuing director quorum
(as defined therein) was present, nor shall it apply to any such transactions solely between PVF
and another entity ninety percent (90%) or more of the voting stock or voting equity interests of
which is owned by PVF provided that Chapter 1704 of the Ohio Revised Code does not prevent such
transaction from being effected.
Our First Amended and Restated Articles of Incorporation also contain additional provisions
that may make takeover attempts and other acquisitions of interests in us more difficult where the
takeover attempt or other acquisition has not been approved by our board of directors. These
provisions include:
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a requirement that a shareholder wishing to nominate directors for election comply
with certain procedures, including advance notice requirements; and
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the affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding common stock of PVF shall be required to:
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remove any directory or the entire board of directors of PVF unless for
cause; and
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amend or repeal certain articles in our First Amended and Restated Articles
of Incorporation, some of which include: the article regarding actions by
shareholders (Article Ninth); the article regarding the classification of our
board of directors (Article Tenth); the article regarding the removal of
directors (Article Eleventh); the article regarding the Special Voting
Requirement (Article Fourteenth); and the article regarding the repeal or
amendment of PVFs Code of Regulations (Article Fifteenth), except that such
repeal, alteration, amendment or rescission of the above referenced articles
may be made by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of PVF entitled to vote at a meeting of
stockholders if the same is first approved by a majority of the directors.
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Control Share Acquisitions.
Section 1701.831 of the Ohio Revised Code provides that certain
notice and informational filings and special shareholder meeting and voting procedures must be
followed prior to consummation of a proposed control share acquisition. The Ohio Revised Code
defines a control share acquisition as any acquisition of an issuers shares which would entitle
the acquirer, immediately after that acquisition, directly or indirectly, to exercise or direct the
exercise of voting power of the issuer in the election of directors within any one of the following
ranges of that voting power:
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one-fifth or more but less than one-third of that voting power;
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one-third or more but less than a majority of that voting power; or
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a majority or more of that voting power.
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Assuming compliance with the notice and information filings prescribed by the statute, the
proposed control share acquisition may be made only if, at a special meeting of shareholders, the
acquisition is approved by at least a majority of the voting power of the issuer represented at the
meeting and at least a majority of the voting power remaining after excluding the combined voting
power of the interested shares. Interested shares are the shares held by the intended acquirer
and the employee-directors and officers of the issuer, as well as certain shares that were acquired
after the date of the first public disclosure of the acquisition but before the record date for the
meeting of shareholders and shares that were transferred, together with the voting power thereof,
after the record date for the meeting of shareholders.
Nasdaq.
In addition, under existing Nasdaq Stock Market regulations, approval of a majority
of the holders of common stock would be required in connection with any transaction or series of
related transactions that
53
would result in the original issuance of additional shares of common stock for a price less than
the greater of book or market value, other than in a public offering for cash, (i) if the common
stock (including securities convertible into or exercisable for common stock) has, or will have
upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the
issuance of such common stock; or (ii) if the number of shares of common stock to be issued is or
will be equal to or in excess of 20% of the number of shares outstanding before the issuance of the
common stock.
Experts
The consolidated financial statements of PVF as of June 30, 2009 and 2008, and for each
of the years in the three-year period ended June 30, 2009, appearing in PVFs Annual Report on Form
10-K for the year ended June 30, 2009 have been incorporated by reference herein in reliance upon
the report of Crowe Horwath LLP, independent registered public accounting firm, incorporated by
reference herein and upon the authority of that firm as experts in accounting and auditing.
Legal Matters
Certain legal matters in connection with this offering will be passed upon for PVF by
Kilpatrick Stockton LLP, Washington, DC. Certain legal matters will be passed upon for Stifel
Nicolaus by Jones Day.
Incorporation by Reference
The Securities and Exchange Commission allows us to incorporate by reference the
information we file with it, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is an important part
of this prospectus. We incorporate by reference the following documents:
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our Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 2009;
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our Quarterly Reports on Form 10-Q for the fiscal quarter ended September 30, 2009
and December 31, 2009;
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our Current Reports on Form 8-K filed July 1, 2009, July 31, 2009, August 26, 2009,
September 4, 2009, September 10, 2009, September 21, 2009, October 5, 2009, October 16,
2009, October 23, 2009, November 16, 2009, December 1, 2009, December 17, 2009, January
7, 2010 and February 3, 2010; and
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our Definitive Proxy Statement on Schedule 14A, filed December 30, 2009.
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Any statement contained in a document that is incorporated by reference will be modified or
superseded for all purposes to the extent that a statement contained in this prospectus modifies or
is contrary to that previous statement. Any statement so modified or superseded will not be deemed
a part of this prospectus except as so modified or superseded.
You may request a copy of any of these filings at no cost, by writing or telephoning us at the
following address or telephone number:
PVF Capital Corp.
30000 Aurora Road
Solon, Ohio 44139
(440) 248-7171
We have filed with the SEC a registration statement under the Securities Act of 1933, as
amended, with respect to the shares of common stock offered hereby. As permitted by the rules and
regulations of the SEC, this
54
prospectus does not contain all the information set forth in the registration statement. Such
information can be examined without charge at the public reference facilities of the SEC located at
100 F Street, NE, Washington, D.C. 20549, and copies of such material can be obtained from the
Securities and Exchange Commission at prescribed rates. The Securities and Exchange Commission
telephone number is 1-800-SEC-0330. In addition, the SEC maintains a web site (
www.sec.gov
) that
contains periodic reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC, including PVF. The statements contained in this
prospectus as to the contents of any contract or other document filed as an exhibit to the
registration statement are, of necessity, brief descriptions of the material terms of, and should
be read in conjunction with, such contract or document.
In addition, we make available, without charge, through our website,
www.parkviewfederal.com
,
electronic copies of our filings with the SEC, including copies of annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these filings, if
any. Information on our website should not be considered a part of this prospectus, and we do not
intend to incorporate into this prospectus any information contained in the website.
55
17,142,857 Shares
(Maximum)
COMMON STOCK
PROSPECTUS
Stifel Nicolaus
February 17, 2010
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