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United States

Securities and Exchange Commission

Washington, D.C. 20549



---

FORM 10-KSB/A No. 2



---



|x | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------

For the fiscal year ended June 30, 2006



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 0-51014



---

BV FINANCIAL, INC.

(Name of small business issuer in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Federal                                                        |  | 14-1920944                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                           |  |           
|------------------------------------------ |  | ----------
|7114 North Point Road, Baltimore, Maryland |  | 21219     
|(Address of principal executive offices)   |  | (Zip Code)

Issuers telephone number: (410) 477-5000

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common
Stock, par value $0.01 per share

(Title of class)



---

Check whether the issuer is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Check if there is no disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form
10-KSB or any amendment to this Form 10-KSB.  x

Indicate by check mark if the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

The issuers revenues for its most
recent fiscal year were $7,471,000.

The aggregate market value of the voting and non-voting common equity held by non-affiliates at
September 22, 2006 was $9.8 million, based upon the closing price of $9.00 as quoted on the OTC Electronic Bulletin Board for September 22, 2006. Solely for purposes of this calculation, the shares held by Bay-Vanguard, M.H.C.
and the directors and executive officers of the issuer are deemed to be held by affiliates.

As of September 22, 2006, the
issuer had 2,645,000 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the 2006 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-KSB.

Transitional Small Business Disclosure Format (check one):    Yes ̈No  x



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##### Table of Contents

EXPLANATORY NOTE

This Form 10-K/A is being filed to include the earnings per share for the year ended June 30, 2005 in the consolidated statement of income and earnings per share footnote, which was omitted in the original filing.

INDEX



|           |  |                      |  |     
|---------- |  | -------------------- |  | ----
|           |  |                      |  | Page
|           | 
|PART II    |  |                     
|           |  |                     
|Item 7.    |  | Financial Statements |  | 1   
|           | 
|PART III   |  |                     
|           |  |                     
|Item 13.   |  | Exhibits             |  | 1   
|           | 
|SIGNATURES |  |                     



i



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##### Table of Contents

ITEM 7. FINANCIAL STATEMENTS

Information required by this item is included herein beginning on page F-1.

ITEM 13. EXHIBITS



|      |  |                                                                                               
|----- |  | ----------------------------------------------------------------------------------------------
|3.1   |  | Charter of BV Financial, Inc.(1)                                                              
|      | 
|3.2   |  | Bylaws of BV Financial, Inc.(1)                                                               
|      | 
|4.0   |  | Specimen Stock Certificate of BV Financial, Inc.(1)                                           
|      | 
|10.1  |  | Employment Agreement between Bay-Vanguard Federal Savings Bank and Edmund T. Leonard(2)       
|      | 
|10.2  |  | Employment Agreement between BV Financial, Inc. and Edmund T. Leonard(2)                      
|      | 
|10.3  |  | Employment Agreement between Bay-Vanguard Federal Savings Bank and Carolyn M. Mroz(2)         
|      | 
|10.4  |  | Employment Agreement between BV Financial, Inc. and Carolyn M. Mroz(2)                        
|      | 
|10.5  |  | Employment Agreement between Bay-Vanguard Federal Savings Bank and Daniel J. Gallagher, Jr.(2)
|      | 
|10.6  |  | Form of Bay-Vanguard Federal Savings Bank Employee Stock Ownership Plan and Trust(1)          
|      | 
|10.7  |  | Form of ESOP Loan Commitment Letter and ESOP Loan Documents(1)                                
|      | 
|10.8  |  | Form of Bay-Vanguard Federal Savings Bank Change in Control Severance Compensation Plan(1)    
|      | 
|10.9  |  | Bay-Vanguard Federal Savings Bank Employees Savings and Profit-Sharing Plan(1)               
|      | 
|10.10 |  | Form of Bay-Vanguard Federal Savings Bank Executive Supplemental Retirement Plan(1)           
|      | 
|10.11 |  | Form of Bay-Vanguard Federal Savings Bank Supplemental Executive Retirement Plan(1)           
|      | 
|10.12 |  | Form of Bay-Vanguard Federal Savings Bank Directors Supplemental Retirement Plan(1)          
|      | 
|10.13 |  | BV Financial, Inc. 2005 Equity Incentive Plan(3)                                              
|      | 
|21.0  |  | Subsidiaries of the Registrant(4)                                                             
|      | 
|23.0  |  | Consent of Beard Miller Company LLP                                                           
|      | 
|31.1  |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                             
|      | 
|31.2  |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                             
|      | 
|32.0  |  | Section 1350 Certification                                                                    

---

|(1) | Incorporated herein by reference from the Exhibits to Form SB-2, Registration Statement and amendments thereto, initially filed on September 17, 2004, Registration
No. 333-119083.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated herein by reference from the Exhibits to the Quarterly Report on Form 10-QSB, filed on May 13, 2005.
|--- | -----------------------------------------------------------------------------------------------------------------

|(3) | Incorporated herein by reference from Appendix C of the Proxy Statement for the 2005 Annual Meeting of Stockholders, filed on October 4, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated herein by reference from the Exhibits to the Annual Report on Form 10-KSB, filed on September 28, 2006.
|--- | --------------------------------------------------------------------------------------------------------------------



1



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##### Table of Contents

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                     |  |                    |  |                                      
|-------------------- |  | ------------------ |  | -------------------------------------
|                     |  | BV Financial, Inc.
|                     |  |                   
|Date: March 30, 2007 |  | By:                |  | /s/ Carolyn M. Mroz                  
|                     |  |                    |  | Carolyn M. Mroz                      
|                     |  |                    |  | President and Chief Executive Officer



2



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LOGO

Report of Independent Registered Public Accounting Firm

To the Board of Directors

BV Financial, Inc.

Baltimore, Maryland

We have audited the accompanying
consolidated statements of financial condition of BV Financial, Inc. and subsidiaries as of June 30, 2006 and 2005, and the related consolidated statements of income, stockholders equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BV Financial,
Inc. and subsidiaries as of June 30, 2006 and 2005 and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1, Earnings Per Share (Restated) to the financial statements, earnings per share information for the year ended June
30, 2005 was omitted from the consolidated statements of income and footnote disclosure. Accordingly, the consolidated statements of income and earnings per share footnote disclosure was restated to include this information.



|    
|----
|LOGO

Beard Miller Company LLP

Baltimore, Maryland

September 6, 2006, except for Note 1, Earnings per share (Restated),

as to which the date is March 14, 2007



F-1



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION



|                                                                                                    |  |                                                 |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                    |  | June 30,                                        |        
|                                                                                                    |  | 2006                                            |         |   | 2005 |  
|                                                                                                    |  | (Dollars In Thousands Except Per Share Amounts) |        
|ASSETS                                                                                              |  |                                                 |         |   |      |   |         |  
|Cash                                                                                                |  | $                                               | 1,359   |   |      | $ | 1,847   |  
|Interest bearing deposits in other banks                                                            |  |                                                 | 6,363   |   |      |   | 5,471   |  
|Federal funds sold                                                                                  |  |                                                 | 1,357   |   |      |   | 1,018   |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|Cash and Cash Equivalents                                                                           |  |                                                 | 9,079   |   |      |   | 8,336   |  
|                                                                                                    |  |                                                
|Securities available for sale                                                                       |  |                                                 | 4,228   |   |      |   | 4,342   |  
|Securities held to maturity                                                                         |  |                                                 | 3,233   |   |      |   | 3,350   |  
|Loans receivable, net of allowance for loan losses 2006 $410; 2005 $349                             |  |                                                 | 113,026 |   |      |   | 96,051  |  
|Premises and equipment, net                                                                         |  |                                                 | 2,485   |   |      |   | 2,569   |  
|Federal Home Loan Bank of Atlanta stock, at cost                                                    |  |                                                 | 939     |   |      |   | 497     |  
|Investment in life insurance                                                                        |  |                                                 | 1,889   |   |      |   | 1,813   |  
|Accrued interest receivable                                                                         |  |                                                 | 494     |   |      |   | 417     |  
|Other assets                                                                                        |  |                                                 | 610     |   |      |   | 423     |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|Total Assets                                                                                        |  | $                                               | 135,983 |   |      | $ | 117,798 |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                |  |                                                 |         |   |      |   |         |  
|LIABILITIES                                                                                         |  |                                                 |         |   |      |   |         |  
|Non-interest bearing deposits                                                                       |  | $                                               | 3,887   |   |      | $ | 3,304   |  
|Interest bearing deposits                                                                           |  |                                                 | 93,208  |   |      |   | 88,097  |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|                                                                                                    |  |                                                 | 97,095  |   |      |   | 91,401  |  
|                                                                                                    |  |                                                
|Federal Home Loan Bank advances                                                                     |  |                                                 | 14,500  |   |      |   | 5,000   |  
|Official checks                                                                                     |  |                                                 | 3,922   |   |      |   | 983     |  
|Advance payments by borrowers for taxes and insurance                                               |  |                                                 | 1,145   |   |      |   | 1,080   |  
|Other liabilities                                                                                   |  |                                                 | 741     |   |      |   | 886     |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|Total Liabilities                                                                                   |  |                                                 | 117,403 |   |      |   | 99,350  |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|COMMITMENTS AND CONTINGENCIES                                                                       |  |                                                 |         |   |      |   |         |  
|                                                                                                    |  |                                                
|STOCKHOLDERS EQUITY                                                                                |  |                                                 |         |   |      |   |         |  
|Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding           |  |                                                 |        |   |      |   |        |  
|Common stock, $0.01 par value; 9,000,000 shares authorized; 2,645,000 shares issued and outstanding |  |                                                 | 26      |   |      |   | 26      |  
|Paid-in capital                                                                                     |  |                                                 | 10,994  |   |      |   | 10,923  |  
|Unearned employee stock ownership plan shares                                                       |  |                                                 | (894    | ) |      |   | (963    | )
|Unearned shares of restricted stock under Equity Incentive Plan                                     |  |                                                 | (418    | ) |      |   |        |  
|Retained earnings                                                                                   |  |                                                 | 8,938   |   |      |   | 8,499   |  
|Accumulated other comprehensive loss                                                                |  |                                                 | (66     | ) |      |   | (37     | )
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|Total Stockholders Equity                                                                          |  |                                                 | 18,580  |   |      |   | 18,448  |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  
|Total Liabilities and Stockholders Equity                                                          |  | $                                               | 135,983 |   |      | $ | 117,798 |  
|                                                                                                    |  |                                                 |         |   |      |   |         |  

See notes to consolidated financial statements.



F-2



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME



|                                                    |  |                                         |       |      |   |       |  
|--------------------------------------------------- |  | --------------------------------------- | ----- | ---- | - | ----- | -
|                                                    |  | Years Ended June 30,                    |      
|                                                    |  | 2006                                    |       | 2005 |  
|                                                    |  | (In Thousands Except Per Share Amounts) |      
|INTEREST INCOME                                     |  |                                         |       |      |   |       |  
|Loans, including fees                               |  | $                                       | 6,658 |      | $ | 5,120 |  
|Investment securities - taxable                     |  |                                         | 347   |      |   | 320   |  
|Other                                               |  |                                         | 179   |      |   | 223   |  
|                                                    |  |                                         |       |      |   |       |  
|Total Interest Income                               |  |                                         | 7,184 |      |   | 5,663 |  
|                                                    |  |                                         |       |      |   |       |  
|INTEREST EXPENSE                                    |  |                                         |       |      |   |       |  
|Deposits                                            |  |                                         | 2,848 |      |   | 2,241 |  
|Federal Home Loan Bank Advances                     |  |                                         | 610   |      |   |      |  
|                                                    |  |                                         |       |      |   |       |  
|Total Interest Expense                              |  |                                         | 3,458 |      |   | 2,241 |  
|                                                    |  |                                         |       |      |   |       |  
|Net Interest Income                                 |  |                                         | 3,726 |      |   | 3,422 |  
|PROVISION FOR LOAN LOSSES                           |  |                                         | 90    |      |   |      |  
|                                                    |  |                                         |       |      |   |       |  
|Net Interest Income after Provision for Loan Losses |  |                                         | 3,636 |      |   | 3,422 |  
|                                                    |  |                                         |       |      |   |       |  
|NON-INTEREST INCOME                                 |  |                                         |       |      |   |       |  
|Service fees on deposits                            |  |                                         | 116   |      |   | 112   |  
|Service fees on loans                               |  |                                         | 30    |      |   | 16    |  
|Income from investment in life insurance            |  |                                         | 76    |      |   | 81    |  
|Other income                                        |  |                                         | 65    |      |   | 34    |  
|                                                    |  |                                         |       |      |   |       |  
|Total Non-Interest Income                           |  |                                         | 287   |      |   | 243   |  
|                                                    |  |                                         |       |      |   |       |  
|NON-INTEREST EXPENSES                               |  |                                         |       |      |   |       |  
|Compensation and related expenses                   |  |                                         | 1,875 |      |   | 1,537 |  
|Occupancy                                           |  |                                         | 159   |      |   | 149   |  
|Data processing                                     |  |                                         | 288   |      |   | 291   |  
|Advertising                                         |  |                                         | 124   |      |   | 77    |  
|Professional fees                                   |  |                                         | 185   |      |   | 183   |  
|Equipment                                           |  |                                         | 129   |      |   | 111   |  
|Other                                               |  |                                         | 459   |      |   | 451   |  
|                                                    |  |                                         |       |      |   |       |  
|Total Non-Interest Expenses                         |  |                                         | 3,219 |      |   | 2,799 |  
|                                                    |  |                                         |       |      |   |       |  
|Income before Income Taxes                          |  |                                         | 704   |      |   | 866   |  
|PROVISION FOR INCOME TAXES                          |  |                                         | 265   |      |   | 304   |  
|                                                    |  |                                         |       |      |   |       |  
|Net Income                                          |  | $                                       | 439   |      | $ | 562   |  
|                                                    |  |                                         |       |      |   |       |  
|Basic Earnings Per Share                            |  | $                                       | 0.17  |      | $ | 0.29  | *
|                                                    |  |                                         |       |      |   |       |  
|Diluted Earnings Per Share                          |  | $                                       | 0.17  |      | $ | 0.29  | *
|                                                    |  |                                         |       |      |   |       |  

See notes to consolidated financial statements.



|* | Restated. Refer to Note 1, Earnings Per Share (Restated)
|- | --------------------------------------------------------



F-3



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY

Years Ended June 30, 2006 and 2005



|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|--------------------------------------------------------------- |  | ---------------------- | -- | --------------- | - | ------ | --------------------------------------------- |  | - | ----------------------------------- | - |  | ----------------- | ---- | -------------------------------------- |  | - | ----- |  | - | --- | - |  | - | ------ | -
|                                                                |  | Common Stock           |    | Paid-In Capital |   |        | Unearned Employee Stock Ownership Plan Shares |  |   | Unearned Shares of Restricted
Stock |   |  | Retained Earnings |      | Accumulated Other Comprehensive (Loss) |  |   | Total | 
|                                                                |  | (Dollars in Thousands) |   
|BALANCE  JULY 1, 2004                                          |  | $                      |   |                 | $ |       |                                               |  | $ |                                    |   |  | $                 |     |                                        |  | $ | 7,937 |  | $ | (23 | ) |  | $ | 7,914  |  
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Comprehensive income:                                           |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Net income                                                      |  |                        |   |                 |   |       |                                               |  |   |                                    |   |  |                   |     |                                        |  |   | 562   |  |   |    |   |  |   | 562    |  
|Unrealized holding losses (net of tax of $9)                    |  |                        |   |                 |   |       |                                               |  |   |                                    |   |  |                   |     |                                        |  |   |      |  |   | (14 | ) |  |   | (14    | )
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Total Comprehensive Income                                      |  |                        |   |                 |   |       |                                               |  |   |                                    |   |  |                   |     |                                        |  |   |      |  |   |    |   |  |   | 548    |  
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Shares issued in public offering                                |  |                        | 26 |                 |   | 10,929 |                                               |  |   |                                    |   |  |                   |     |                                        |  |   |      |  |   |    |   |  |   | 10,955 |  
|Shares purchased by Employee Stock Ownership Plan               |  |                        |   |                 |   |       |                                               |  |   | (1,036                              | ) |  |                   |     |                                        |  |   |      |  |   |    |   |  |   | (1,036 | )
|Compensation expense under Employee Stock Ownership Plan        |  |                        |   |                 |   | (6     | )                                             |  |   | 73                                  |   |  |                   |     |                                        |  |   |      |  |   |    |   |  |   | 67     |  
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|BALANCE - JUNE 30, 2005                                         |  |                        | 26 |                 |   | 10,923 |                                               |  |   | (963                                | ) |  |                   |     |                                        |  |   | 8,499 |  |   | (37 | ) |  |   | 18,448 |  
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Comprehensive income:                                           |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Net income                                                      |  |                        |   |                 |   |       |                                               |  |   |                                    |   |  |                   |     |                                        |  |   | 439   |  |   |    |   |  |   | 439    |  
|Unrealized holding losses (net of tax of $18)                   |  |                        |   |                 |   |       |                                               |  |   |                                    |   |  |                   |     |                                        |  |   |      |  |   | (29 | ) |  |   | (29    | )
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Total Comprehensive Income                                      |  |                        |   |                 |   |       |                                               |  |   |                                    |   |  |                   |     |                                        |  |   |      |  |   |    |   |  |   | 410    |  
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|Shares purchased for 2005 Equity Incentive Plan  51,842 shares |  |                        |   |                 |   |       |                                               |  |   |                                    |   |  |                   | (471 | )                                      |  |   |      |  |   |    |   |  |   | (471   | )
|Compensation expense under Employee Stock Ownership Plan        |  |                        |   |                 |   | (8     | )                                             |  |   | 69                                  |   |  |                   |     |                                        |  |   |      |  |   |    |   |  |   | 61     |  
|Compensation expense under stock-based compensation plan        |  |                        |   |                 |   | 79     |                                               |  |   |                                    |   |  |                   | 53   |                                        |  |   |      |  |   |    |   |  |   | 132    |  
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  
|BALANCE - JUNE 30, 2006                                         |  | $                      | 26 |                 | $ | 10,994 |                                               |  | $ | (894                                | ) |  | $                 | (418 | )                                      |  | $ | 8,938 |  | $ | (66 | ) |  | $ | 18,580 |  
|                                                                |  |                        |    |                 |   |        |                                               |  |   |                                     |   |  |                   |      |                                        |  |   |       |  |   |     |   |  |   |        |  

See notes to consolidated financial statements.



F-4



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS



|                                                                                  |  |                      |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | -------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Years Ended June 30, |        
|                                                                                  |  | 2006                 |         |   | 2005 |  
|                                                                                  |  | (In Thousands)       |        
|CASH FLOWS FROM OPERATING
ACTIVITIES                                              |  |                      |         |   |      |   |         |  
|Net income                                                                        |  | $                    | 439     |   |      | $ | 562     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                      |         |   |      |   |         |  
|Net amortization of discounts and premiums                                        |  |                      | 10      |   |      |   | 10      |  
|Provision for loan losses                                                         |  |                      | 90      |   |      |   |        |  
|Amortization of deferred loan fees/costs                                          |  |                      | 118     |   |      |   | 34      |  
|Provision for depreciation                                                        |  |                      | 144     |   |      |   | 130     |  
|Increase in cash surrender value of life insurance                                |  |                      | (76     | ) |      |   | (81     | )
|Stock-based compensation expense                                                  |  |                      | 193     |   |      |   | 67      |  
|Change in other assets and other liabilities                                      |  |                      | (366    | ) |      |   | 236     |  
|                                                                                  |  |                      |         |   |      |   |         |  
|Net Cash Provided by Operating Activities                                         |  |                      | 552     |   |      |   | 958     |  
|                                                                                  |  |                      |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING
ACTIVITIES                                              |  |                      |         |   |      |   |         |  
|Purchases of securities available for sale                                        |  |                      | (107    | ) |      |   | (72     | )
|Proceeds from maturity of securities available for sale                           |  |                      |        |   |      |   | 1,000   |  
|Proceeds from maturity of securities held to maturity                             |  |                      |        |   |      |   | 1,000   |  
|Principal collected on mortgage backed securities                                 |  |                      | 281     |   |      |   | 355     |  
|Net increase in loans                                                             |  |                      | (13,467 | ) |      |   | (19,239 | )
|Purchase of loans                                                                 |  |                      | (3,741  | ) |      |   | (4,624  | )
|Purchase of premises and equipment                                                |  |                      | (60     | ) |      |   | (55     | )
|Purchase of Federal Home Loan Bank stock                                          |  |                      | (442    | ) |      |   | (320    | )
|Proceeds from the sale of Federal Home Loan Bank stock                            |  |                      |        |   |      |   | 295     |  
|                                                                                  |  |                      |         |   |      |   |         |  
|Net Cash Used in Investing Activities                                             |  |                      | (17,536 | ) |      |   | (21,660 | )
|                                                                                  |  |                      |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING
ACTIVITIES                                              |  |                      |         |   |      |   |         |  
|Increase (decrease) in official checks                                            |  |                      | 2,939   |   |      |   | (274    | )
|Net increase in deposits                                                          |  |                      | 5,694   |   |      |   | 4,390   |  
|Increase in advance payments by borrowers for taxes and insurance                 |  |                      | 65      |   |      |   | 131     |  
|Advances from Federal Home Loan Bank                                              |  |                      | 14,000  |   |      |   | 5,000   |  
|Repayment of advances from Federal Home Loan Bank                                 |  |                      | (4,500  | ) |      |   |        |  
|Purchase of shares of restricted stock                                            |  |                      | (471    | ) |      |   |        |  
|Capitalization of Bay-Vanguard M.H.C.                                             |  |                      |        |   |      |   | (50     | )
|Proceeds from sale of common stock                                                |  |                      |        |   |      |   | 9,969   |  
|                                                                                  |  |                      |         |   |      |   |         |  
|Net Cash Provided by Financing Activities                                         |  |                      | 17,727  |   |      |   | 19,166  |  
|                                                                                  |  |                      |         |   |      |   |         |  
|                                                                                  |  |                     
|Net Increase (Decrease) in Cash and Cash Equivalents                              |  |                      | 743     |   |      |   | (1,536  | )
|CASH AND CASH EQUIVALENTS -
BEGINNING                                             |  |                      | 8,336   |   |      |   | 9,872   |  
|                                                                                  |  |                      |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS -
ENDING                                                |  | $                    | 9,079   |   |      | $ | 8,336   |  
|                                                                                  |  |                      |         |   |      |   |         |  
|SUPPLEMENTARY CASH FLOWS INFORMATION                                              |  |                      |         |   |      |   |         |  
|Interest paid                                                                     |  | $                    | 3,461   |   |      | $ | 2,237   |  
|                                                                                  |  |                      |         |   |      |   |         |  
|Income taxes paid                                                                 |  | $                    | 616     |   |      | $ | 264     |  
|                                                                                  |  |                      |         |   |      |   |         |  
|Net loans transferred to foreclosed real estate/repossessed assets                |  | $                    | 25      |   |      | $ | 27      |  
|                                                                                  |  |                      |         |   |      |   |         |  
|Issuance of shares for employee stock ownership plan                              |  | $                    |        |   |      | $ | (1,036  | )
|                                                                                  |  |                      |         |   |      |   |         |  

See notes to consolidated financial statements.



F-5



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

Business

BV Financial, Inc. (the
Company) was organized as a federally chartered corporation at the direction of Bay-Vanguard Federal Savings Bank (the Bank or Bay-Vanguard Federal) in January 2005 to become the mid-tier stock holding company for
Bay-Vanguard Federal upon the completion of its reorganization into the mutual holding company form of organization. Pursuant to the Plan of Reorganization, the Bank converted to stock form with all of its stock owned by the Company and organized
Bay-Vanguard, M.H.C. as a federally chartered mutual holding company that owns 55% of the common stock of the Company. As part of the reorganization, the Company sold 1,190,250 shares of its common stock at a price of $10.00 per share to members of
the Bank in a subscription offering raising approximately $11.0 million in net proceeds.

Bay-Vanguard Federal is headquartered in
Baltimore, Maryland and is a community-oriented financial institution offering traditional financial services to its local communities. The Bank is engaged primarily in the business of attracting deposits from the general public using such funds to
originate one-to four-family real estate, mobile home, construction, multi-family and commercial real estate and consumer loans.

The
Banks savings accounts are insured up to the applicable legal limits by the Federal Deposit Insurance Corporations Deposit Insurance Fund. Bay-Vanguard Federal is a member of the Federal Home Loan Bank System.

Principles of Consolidation

The consolidated
financial statements include the accounts of the Company, the Bank and its wholly-owned subsidiary, Housing Recovery Corporation (HRC). HRCs primary business is holding real estate and other assets acquired by the Bank through
foreclosure or repossession. All intercompany balances and transactions have been eliminated in consolidation.

Basis of Financial Statement
Presentation and Significant Estimates

The consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of
the consolidated statement of financial condition and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near-term
relate to the determination of the allowance for loan losses.

Significant Group Concentrations of Credit Risk

Most of the Companys activities are with customers located within the Baltimore Metropolitan Area. The Company does not have any significant
concentrations to any one industry or customer.



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)

Securities

The Company follows Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires investments in securities to be classified in one
of three categories: held to maturity, trading or available for sale. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and are reported at amortized cost (including
amortization of premium or accretion of discount). As the Company does not engage in security trading, the balance of its debt securities and any equity securities are classified as available for sale. Net unrealized gains and losses for such
securities are required to be recognized as increases or decreases in other comprehensive income, net of taxes, and excluded from the determination of net income. Realized gains and losses on sales of securities are determined using the specific
identification method and are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Federal law requires a member institution of the Federal Home Loan Bank System to hold stock of its district Federal Home Loan Bank according to a predetermined formula. This restricted stock is carried at cost.

Premises and Equipment

Premises and
equipment are stated at cost less accumulated depreciation. Depreciation is computed based on the straight-line method over the useful lives of the respective assets. Expenditures for improvements are capitalized while costs for maintenance and
repairs are expensed as incurred.

Advertising Costs

Advertising costs are expensed as incurred.

Foreclosed Real Estate

Foreclosed real estate is composed of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and is included in
other assets. Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure, establishing a new cost basis. If the fair value is less than the related loan balance at the time of acquisition, a
charge against the allowance for loan losses is recorded. After foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell. Revenues and expenses from
operations and changes in the valuation allowance are included in foreclosed real estate expense.

Deferred Income Taxes

Deferred income taxes are recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities based
on enacted tax rates expected to be in effect when such amounts are realized or settled. Deferred tax assets are recognized only to the extent that it is more likely than not that such amounts will be realized based on consideration of available
evidence.



F-7



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)

Loans Receivable

Loans receivable are stated at unpaid principal balances, less undisbursed portion of loans in process, deferred loan origination fees and costs and the allowance for loan losses. Interest income is accrued on the unpaid principal balance.
Loan origination fees and costs are deferred and recognized as an adjustment to the yield (interest income) of the related loans. The Company is amortizing these amounts over the contractual life of the loan using the interest method.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has
serious doubts about further collectibility of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is
placed on nonaccrual status, unpaid interest credited to income is reversed. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to managements judgment as to the
collectibility of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt. Cash payments on impaired loans are recorded in the same manner as payments on non-accrual loans.

Purchased Mortgage Loans

The Company records its investment in purchased loans at cost. The related premium or discount is
recognized over the contractual life of the purchased loan and is included as part of interest income. Principal is reduced as payments are received. The Company evaluates the realization of such loans when determining the allowance for loan losses.

Allowance for Loan Losses

The
allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is maintained at a level to provide for losses that are probable and can be reasonably estimated.
Managements periodic evaluation of the adequacy of the allowance is based on the Banks past loan loss experience, known and inherent losses in the portfolio, adverse situations that may affect the borrowers ability to repay, the
estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to
significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.

The allowance consists
of specific and general components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted
cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative
factors.



F-8



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)

Allowance for Loan Losses (Continued)

A loan is considered past due or delinquent when a contractual payment is not paid in the month that it is due. A loan is considered impaired when, based on current information and events, it is probable that the Bank
will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the
probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record
and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for multi-family, commercial real estate and construction loans by either the present value of expected future cash flows
discounted at the loans effective interest rate, the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer, mobile home, and residential real estate loans for
impairment disclosures.

Investment in Life Insurance

The Company did not have any loans against the cash surrender value of the life insurance policies at June 30, 2006 or 2005. The face value of the life insurance policies at June 30, 2006 and 2005 was
$3,581,000 and $3,719,000, respectively. The cash proceeds from the death benefits are restricted by split dollar agreements with certain officers in the amount of $1,101,000 at June 30, 2006 and $771,000 at June 30, 2005.

Statement of Cash Flows

Cash and cash equivalents in
the statement of cash flows include cash, interest-bearing deposits in other banks with an original maturity of 90 days or less and federal funds sold.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has
been surrendered. Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of
that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Off-Balance Sheet Financial Instruments

In the
ordinary course of business, the Company has entered into commitments to extend credit. Such financial instruments are recorded when they are funded.



F-9



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##### Table of Contents

BV FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Comprehensive Income

Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, are reported as a separate component of the
stockholders equity section of the statement of financial condition, such items, along with net income, are components of comprehensive income.

Earnings Per Share (Restated)

The information regarding earnings per share that follows as well as Earnings Per Share for the June 30, 2005
Consolidated Statements of Income have been restated to include previously omitted earnings per share information for the year ended June 30, 2005.

The
following table is presented to show the impact of the restatement on the year ended June 30, 2005:



|                                                             |  |   |      |          
|------------------------------------------------------------ |  | - | ---- | ---------
|Earnings per share, basic and diluted as originally reported |  | $ |     | (omitted)
|Earnings per share, basic and diluted as restated            |  | $ | 0.29 |          

Basic earnings per share is computed by dividing net income by the weighted average number of common shares
outstanding for the appropriate period. For 2005, the 1,190,250 shares issued to the public as part of the reorganization are included in the weighted-average calculation beginning on January 12, 2005, the date such shares were issued. The 1,454,750
shares issued to Bay-Vanguard, M.H.C. as part of the reorganization are included in the weighted-average calculation as if outstanding for the entire fiscal year. Unearned shares under the Bay-Vanguard Federal Savings Bank Employee Stock Ownership
Plan (ESOP) are not included in outstanding shares. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding as adjusted for the dilutive effect of stock options and unvested stock awards
based on the treasury stock method. For the year ended June 30, 2006, the Company had 44,577 shares of restricted stock and 111,456 shares of unexercised stock options. For the year ended June 30, 2005, the Company did not have any
restricted stock or shares of unexercised stock options. Information related to the calculation of earnings per share for the years ended June 30, 2006 and 2005, is as follows:



|                                           |  |                                     |       |                                      |   |       |  |         |       |  |   |      
|------------------------------------------ |  | ----------------------------------- | ----- | ------------------------------------ | - | ----- |  | ------- | ----- |  | - | -----
|                                           |  | Year Ended June 30, 2006            |       | Year Ended June 30, 2005 As
Restated
|                                           |  | Basic                               |       | Diluted                              |   | Basic |  | Diluted
|                                           |  | In Thousands, Except Per Share Data
|Net income                                 |  | $                                   | 439   |                                      | $ | 439   |  | $       | 562   |  | $ | 562  
|                                           |  |                                     |       |                                      |   |       |  |         |       |  |   |      
|Weighted average common shares outstanding |  |                                     | 2,527 |                                      |   | 2,527 |  |         | 1,965 |  |   | 1,965
|                                           |  |                                     |       |                                     
|Diluted securities:                        |  |                                     |       |                                      |   |       |  |         |       |  |   |      
|Stock options                              |  |                                     |      |                                      |   |      |  |         |      |  |   |     
|                                           |  |                                     |       |                                      |   |       |  |         |       |  |   |      
|Adjusted weighted average shares           |  |                                     | 2,527 |                                      |   | 2,527 |  |         | 1,965 |  |   | 1,965
|                                           |  |                                     |       |                                      |   |       |  |         |       |  |   |      
|Per share amount                           |  | $                                   | 0.17  |                                      | $ | 0.17  |  | $       | 0.29  |  | $ | 0.29 
|                                           |  |                                     |       |                                      |   |       |  |         |       |  |   |      

Employee Stock Ownership Plan

The Company accounts for the ESOP in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6. The cost of shares issued to the ESOP but not yet allocated to
participants is presented in the consolidated statement of financial condition as a reduction of stockholders equity. Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation
to participant accounts. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to paid-in capital. Dividends on allocated ESOP shares are reflected as a reduction of debt.



F-10



---

##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)

Reclassifications

Certain prior year amounts have been reclassified to conform with the current years presentation. Such reclassifications had no effect on net income.

NOTE 2 - SECURITIES

Securities at June 30, 2006 and 2005 consisted of the
following:



|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|----------------------------------------------- |  | -------------- | ----- | ---------------------- | - | ----------------------- |  | ---------- | --- |  | - | -----
|                                                |  | June 30, 2006 
|                                                |  | Amortized Cost |       | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value
|                                                |  | (In Thousands)
|Available for Sale                              |  |                |       |                        |   |                         |  |            |     |  |   |      
|Marketable equity securities                    |  | $              | 2,805 |                        | $ |                        |  | $          | 80  |  | $ | 2,725
|U.S. Government and federal agencies securities |  |                | 1,005 |                        |   |                        |  |            | 22  |  |   | 983  
|Mortgage-backed securities                      |  |                | 525   |                        |   |                        |  |            | 5   |  |   | 520  
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|                                                |  | $              | 4,335 |                        | $ |                        |  | $          | 107 |  | $ | 4,228
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|                                                | 
|                                                |  | June 30, 2005 
|                                                |  | Amortized Cost |       | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value
|                                                |  | (In Thousands)
|Available for Sale                              |  |                |       |                        |   |                         |  |            |     |  |   |      
|Marketable equity securities                    |  | $              | 2,698 |                        | $ |                        |  | $          | 51  |  | $ | 2,647
|U.S. Government and federal agencies securities |  |                | 1,013 |                        |   |                        |  |            | 32  |  | $ | 981  
|Mortgage-backed securities                      |  |                | 691   |                        |   | 23                      |  |            |    |  |   | 714  
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|                                                |  | $              | 4,402 |                        | $ | 23                      |  | $          | 83  |  | $ | 4,342
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      



F-11



---

##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 2 - SECURITIES (CONTINUED)

No securities were sold during the years ended June 30, 2006 or 2005.



|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|----------------------------------------------- |  | -------------- | ----- | ---------------------- | - | ----------------------- |  | ---------- | --- |  | - | -----
|                                                |  | June 30, 2006 
|                                                |  | Amortized Cost |       | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value
|                                                |  | (In Thousands)
|Held to Maturity                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|U.S. Government and federal agencies securities |  | $              | 3,002 |                        | $ |                        |  | $          | 122 |  | $ | 2,880
|Mortgage-backed securities                      |  |                | 231   |                        |   | 3                       |  |            |    |  |   | 234  
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|                                                |  | $              | 3,233 |                        | $ | 3                       |  | $          | 122 |  | $ | 3,114
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|                                                | 
|                                                |  | June 30, 2005 
|                                                |  | Amortized Cost |       | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Fair Value
|                                                |  | (In Thousands)
|Held to Maturity                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|U.S. Government and federal agencies securities |  | $              | 3,003 |                        | $ |                        |  | $          | 50  |  | $ | 2,953
|Mortgage-backed securities                      |  |                | 347   |                        |   | 15                      |  |            |    |  |   | 362  
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      
|                                                |  | $              | 3,350 |                        | $ | 15                      |  | $          | 50  |  | $ | 3,315
|                                                |  |                |       |                        |   |                         |  |            |     |  |   |      



F-12



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 2 - SECURITIES (CONTINUED)

The amortized cost and fair value of securities as of June 30, 2006, by contractual maturity, are shown below. Expected maturities may differ from contractual
maturities because the securities may be called or prepaid with or without prepayment penalties.



|                                       |  |                    |       |                  |   |                |  |           |       |  |   |      
|-------------------------------------- |  | ------------------ | ----- | ---------------- | - | -------------- |  | --------- | ----- |  | - | -----
|                                       |  | Available for Sale |       | Held to Maturity
|                                       |  | Amortized Cost     |       | Fair Value       |   | Amortized Cost |  | FairValue
|                                       |  | (In Thousands)    
|Due in one year or less                |  | $                  | 1,005 |                  | $ | 983            |  | $         | 502   |  | $ | 487  
|Due after one year through five years  |  |                    |      |                  |   |               |  |           | 2,500 |  |   | 2,393
|Due after five years through ten years |  |                    |      |                  |   |               |  |           |      |  |   |     
|Mortgage-backed securities             |  |                    | 525   |                  |   | 520            |  |           | 231   |  |   | 234  
|Marketable equity securities           |  |                    | 2,805 |                  |   | 2,725          |  |           |      |  |   |     
|                                       |  |                    |       |                  |   |                |  |           |       |  |   |      
|                                       |  | $                  | 4,335 |                  | $ | 4,228          |  | $         | 3,233 |  | $ | 3,114
|                                       |  |                    |       |                  |   |                |  |           |       |  |   |      

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

Below is a schedule of securities with unrealized losses as of June 30, 2006 and 2005. Unrealized losses are the result of interest rate
levels differing from those existing at the time of purchase of the securities and, as to mortgage-backed securities, actual and estimated prepayment speeds. These unrealized losses are considered temporary as they reflect fair values on
June 30, 2006 and 2005 and are subject to change daily as interest rates fluctuate.

The Company has the ability and intent to hold the securities
until the earlier of recovery or maturity. At June 30, 2006 the Companys equity securities have unrealized depreciation of 2.85% from the Companys cost basis. No credit risk issues have been identified that cause management to
believe the declines in fair value are other than temporary. In analyzing the issuers financial condition, management considers industry analysts reports, financial performance, and projected target prices of investment analysts.



|                                                |  |                                                      |       |                                                      |   |            |  |                   |     |  |   |  
|----------------------------------------------- |  | ---------------------------------------------------- | ----- | ---------------------------------------------------- | - | ---------- |  | ----------------- | --- |  | - | -
|                                                |  | At June 30, 2006                                    
|                                                |  | Continuous Unrealized Losses for More Than 12 Months |       | Continuous Unrealized Losses for Less Than 12 Months
|                                                |  | Fair Value                                           |       | Unrealized Losses                                    |   | Fair Value |  | Unrealized Losses
|                                                |  | (In Thousands)                                      
|U.S. Government and federal agencies securities |  |                                                      |       |                                                      |   |            |  |                   |     |  |   |  
|HTM  four securities                           |  | $                                                    | 2,880 |                                                      | $ | 122        |  | $                 |    |  | $ | 
|AFS - one security                              |  |                                                      | 983   |                                                      |   | 22         |  |                   |    |  |   | 
|Marketable equity securities - one security     |  |                                                      | 2,725 |                                                      |   | 80         |  |                   |    |  |   | 
|Mortgage-backed securities-two securities       |  |                                                      |      |                                                      |   |           |  |                   | 419 |  |   | 5
|                                                |  |                                                      |       |                                                      |   |            |  |                   |     |  |   |  
|                                                |  | $                                                    | 6,588 |                                                      | $ | 224        |  | $                 | 419 |  | $ | 5
|                                                |  |                                                      |       |                                                      |   |            |  |                   |     |  |   |  



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 2 - SECURITIES (CONTINUED)



|                                                |  |                                                      |       |                                                      |   |            |  |                  |   |  |   |  
|----------------------------------------------- |  | ---------------------------------------------------- | ----- | ---------------------------------------------------- | - | ---------- |  | ---------------- | - |  | - | -
|                                                |  | At June 30, 2005                                    
|                                                |  | Continuous Unrealized Losses for More Than 12 Months |       | Continuous Unrealized Losses for Less Than 12 Months
|                                                |  | Fair Value                                           |       | UnrealizedLosses                                     |   | Fair Value |  | UnrealizedLosses
|                                                |  | (In Thousands)                                      
|U.S. Government and federal agencies securities |  |                                                      |       |                                                      |   |            |  |                  |   |  |   |  
|HTM  four securities                           |  | $                                                    | 2,953 |                                                      | $ | 50         |  | $                |  |  | $ | 
|AFS - three securities                          |  |                                                      | 981   |                                                      |   | 32         |  |                  |  |  |   | 
|Marketable equity securities - one security     |  |                                                      | 2,647 |                                                      |   | 51         |  |                  |  |  |   | 
|                                                |  |                                                      |       |                                                      |   |            |  |                  |   |  |   |  
|                                                |  | $                                                    | 6,581 |                                                      | $ | 133        |  | $                |  |  | $ | 
|                                                |  |                                                      |       |                                                      |   |            |  |                  |   |  |   |  

NOTE 3 - LOANS RECEIVABLE

Loans receivable at June 30, 2006 and 2005 consisted of the following:



|                                         |  |                |         |   |      |   |         |  
|---------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                         |  | 2006           |         |   | 2005 |  
|                                         |  | (In Thousands) |        
|Real estate loans:                       |  |                |         |   |      |   |         |  
|Secured by one-to-four family residences |  | $              | 85,211  |   |      | $ | 68,555  |  
|Secured by other properties              |  |                | 10,322  |   |      |   | 9,132   |  
|Construction loans                       |  |                | 10,605  |   |      |   | 11,310  |  
|Mobile home loans                        |  |                | 10,535  |   |      |   | 10,249  |  
|Consumer loans                           |  |                | 296     |   |      |   | 413     |  
|Share loans                              |  |                | 319     |   |      |   | 349     |  
|                                         |  |                |         |   |      |   |         |  
|                                         |  |                | 117,288 |   |      |   | 100,008 |  
|Loans in process                         |  |                | (3,873  | ) |      |   | (3,519  | )
|Deferred loan origination fees, net      |  |                | 21      |   |      |   | (89     | )
|Allowance for loan losses                |  |                | (410    | ) |      |   | (349    | )
|                                         |  |                |         |   |      |   |         |  
|Total loans receivable - net             |  | $              | 113,026 |   |      | $ | 96,051  |  
|                                         |  |                |         |   |      |   |         |  

Residential lending is generally considered to involve less risk than other forms of lending, although payment
experience on these loans is dependent to some extent on economic and market conditions in the Banks lending area. Multi-family, commercial real estate and construction loan repayments are generally dependent on the operations of the related
properties or the financial condition of its borrower or guarantor. Accordingly, repayment of such loans can be more susceptible to adverse conditions in the real estate market and the regional economy.

Substantially all of the Banks loans receivable are mortgage loans secured by residential, multi-family and commercial real estate properties located in the State
of Maryland. Loans are extended only after evaluation by



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 3 - LOANS RECEIVABLE (CONTINUED)

management of customers creditworthiness and other relevant factors on a case-by-case basis. The Bank generally does not lend more than 90% of the appraised value
of a property and usually requires private mortgage insurance on residential mortgages with loan-to-value ratios in excess of 80%. In some instances, the Bank will lend up to 90% of the appraised value of a property through a combination of first
and second mortgages without requiring private mortgage insurance. The Bank originates and purchases mobile home loans to owner occupied borrowers up to a maximum of 90% of the value of the mobile home. In addition, the Bank generally obtains
personal guarantees of repayment from borrowers and/or others for construction, commercial and multifamily residential loans and disburses the proceeds of construction and similar loans only as work progresses on the related projects.

The following is a summary of the allowance for loan losses for the years ended June 30, 2006 and 2005:



|                                 |  |                |     |   |      |   |     |  
|-------------------------------- |  | -------------- | --- | - | ---- | - | --- | -
|                                 |  | 2006           |     |   | 2005 |  
|                                 |  | (In Thousands) |    
|Balance at beginning of the year |  | $              | 349 |   |      | $ | 292 |  
|Provision for loan losses        |  |                | 90  |   |      |   |    |  
|Loans charged-off                |  |                | (41 | ) |      |   | (21 | )
|Recovery of loans charged-off    |  |                | 12  |   |      |   | 78  |  
|                                 |  |                |     |   |      |   |     |  
|Balance at end of year           |  | $              | 410 |   |      | $ | 349 |  
|                                 |  |                |     |   |      |   |     |  

The Bank had no impaired loans as defined by SFAS No. 114, Accounting by Creditors for Impairment of a
Loan, at June 30, 2006 and 2005.

Non-accrual loans that are not subject to SFAS No. 114 totaled approximately $165,000 and $475,000 at
June 30, 2006 and 2005, respectively. The Bank did not have any loan balances past due 90 days or more and still accruing interest at June 30, 2006 or 2005.

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments are limited to commitments to
originate loans and unused lines of credit and involve to varying degrees elements of credit risk in excess of the amount recognized in the statement of financial position. The contract amounts of these instruments express the extent of involvement
the Bank has in each class of financial instruments.

The Banks exposure to credit loss from non-performance by the other party to the above
mentioned financial instruments is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 3 - LOANS RECEIVABLE (CONTINUED)

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



|                                                                   |      |                            |       |  |   |      
|------------------------------------------------------------------ | ---- | -------------------------- | ----- |  | - | -----
|Financial Instruments Whose Contract Amounts Represent Credit
Risk |      | Contract Amount atJune 30,
|                                                                   | 2006 |                            | 2005 
|                                                                   |      | (In Thousands)            
|Loan commitments                                                   |      | $                          | 4,928 |  | $ | 2,171
|Unused lines of credit                                             |      |                            | 851   |  |   | 641  

Mortgage loan commitments of $4.3 million not reflected in the accompanying consolidated financial statements at
June 30, 2006 are for fixed rate mortgages from 5.25% to 7.13%. There were consumer loan commitments of $641,000 at June 30, 2006 at rates from 8.45% to 11.85%. Mortgage loan commitments of $1,436,000 not reflected in the accompanying
consolidated financial statements at June 30, 2005 are for fixed rate mortgages from 4.50% to 7.00%. There were consumer loan commitments of $735,000 at June 30, 2005 at rates from 9.80% to 11.65%. Loan commitments expire 60 days from the
date of the commitment.



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 4 - PREMISES AND EQUIPMENT

Premises and equipment at June 30, 2006 and 2005 are summarized by major classification as follows:



|                                   |  |                |       |   |      |   |       |                     |  |        
|---------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ------------------- |  | -------
|                                   |  | 2006           |       |   | 2005 |   |       | Useful Lifein Years
|                                   |  | (In Thousands) |       |   |     
|Land                               |  | $              | 1,083 |   |      | $ | 1,083 |                     |  |       
|Building                           |  |                | 1,290 |   |      |   | 1,292 |                     |  | 15  40
|Leasehold improvements             |  |                | 283   |   |      |   | 285   |                     |  | 5  25 
|Furniture, fixtures, and equipment |  |                | 717   |   |      |   | 689   |                     |  | 3  10 
|                                   |  |                |       |   |      |   |       |                     |  |        
|                                   |  |                | 3,373 |   |      |   | 3,349 |                     |  |        
|Accumulated depreciation           |  |                | (888  | ) |      |   | (780  | )                   |  |        
|                                   |  |                |       |   |      |   |       |                     |  |        
|                                   |  | $              | 2,485 |   |      | $ | 2,569 |                     |  |        
|                                   |  |                |       |   |      |   |       |                     |  |        

Depreciation expense for the years ended June 30, 2006 and 2005 was $144,000
and $130,000, respectively.

NOTE 5 - INVESTMENT IN FEDERAL HOME
LOAN BANK OF ATLANTA STOCK

The Bank is required to maintain an investment in
the stock of the Federal Home Loan Bank of Atlanta (the FHLB) in an amount equal to at least 0.20% of the Banks total assets plus 4.50% of its outstanding advances from the FHLB, whichever is greater. Purchases and sales of stock
are made directly with the FHLB at par value.



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 6 - DEPOSITS

Deposits are composed of the following:



|                              |  |                |        |      |   |       
|----------------------------- |  | -------------- | ------ | ---- | - | ------
|                              |  | June 30,      
|                              |  | 2006           |        | 2005
|                              |  | (In Thousands)
|Non-interest bearing accounts |  | $              | 3,887  |      | $ | 3,304 
|NOW and money market accounts |  |                | 33,706 |      |   | 42,810
|Savings accounts              |  |                | 22,572 |      |   | 23,565
|Certificates of deposit       |  |                | 36,930 |      |   | 21,722
|                              |  |                |        |      |   |       
|                              |  | $              | 97,095 |      | $ | 91,401
|                              |  |                |        |      |   |       

Interest expense on deposits for the years ended June 30, 2006 and 2005 is as follows:



|                              |  |                |       |      |   |      
|----------------------------- |  | -------------- | ----- | ---- | - | -----
|                              |  | 2006           |       | 2005
|                              |  | (In Thousands)
|NOW and money market accounts |  | $              | 1,063 |      | $ | 995  
|Savings accounts              |  |                | 520   |      |   | 490  
|Certificates of deposit       |  |                | 1,265 |      |   | 756  
|                              |  |                |       |      |   |      
|                              |  | $              | 2,848 |      | $ | 2,241
|                              |  |                |       |      |   |      

At June 30, 2006, the Bank had outstanding $10.9 million in certificates of deposit in excess of $100,000.
Deposits in excess of $100,000 may not be insured by the FDIC.

At June 30, 2006, scheduled maturities of
certificates of deposit are as follows (in thousands):



|                     |  |   |       
|-------------------- |  | - | ------
|Year ending June 30: |  |  
|2007                 |  | $ | 15,144
|2008                 |  |   | 4,476 
|2009                 |  |   | 2,864 
|2010                 |  |   | 2,501 
|2011                 |  |   | 11,945
|                     |  |   |       
|                     |  | $ | 36,930
|                     |  |   |       



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 7  FEDERAL HOME LOAN BANK
ADVANCES

At June 30, 2006 and 2005, the Bank has an agreement under a blanket floating lien with the FHLB providing the Bank a line
of credit of $41.0 million. At June 30, 2006, the Bank had outstanding advances of $14.5 million at a weighted rate of 4.47%. At June 30, 2005, the Bank had outstanding advances of $5.0 million at a rate of 4.04% which mature in June 2007.
The Bank is required to maintain as collateral for its FHLB advances qualified mortgage loans in an amount equal to 125% of the outstanding advances.

At June 30, 2006, scheduled maturities of outstanding advances are as follows (in thousands):



|                     |  |   |       
|-------------------- |  | - | ------
|Year ending June 30: |  |  
|                     |  |  
|2007                 |  | $ | 6,000 
|2008                 |  |   | 1,000 
|2009                 |  |   | 1,000 
|2010                 |  |   | 1,000 
|2011                 |  |   | 5,500 
|                     |  |   |       
|Total                |  | $ | 14,500
|                     |  |   |       

NOTE 8  PROFIT SHARING AND
DEFERRED COMPENSATION AGREEMENTS

The Bank has a profit-sharing plan and a 401(k) plan for all eligible
employees. Contributions to the plans are discretionary by the Board of Directors. Expenses for the years ended June 30, 2006 and June 30, 2005 were $30,000 and $30,000 for the profit-sharing plan and $19,000 and $23,000 for the 401(k)
plan, respectively.

The Company has a deferred compensation agreement with two of its executive officers. Under each executive officers agreement,
the deferred compensation will be paid from the proceeds in excess of cash value of life insurance policies. The cost of the insurance is charged to operations as incurred. The amount of an executive officers benefit is determined pursuant to
the accrual of two accounts: (i) a pre-retirement account and (ii) an index retirement benefit account. The pre-retirement account is a liability reserve account of the Bank and, prior to the executive officers termination of service
or retirement is increased or decreased each calendar year by the aggregate annual after-tax income from specified life insurance policies purchased or deemed purchased by the Bank reduced by an opportunity cost, which is calculated by
taking into account the Banks after-tax cost of funds. The index retirement benefit account for any calendar year is equal to the excess of the annual earnings (if any) of the insurance policies for that year over the opportunity
cost for that year.

The directors entered into a supplemental retirement plan. The directors are 100% vested in a pre-retirement account at the
effective date of the plan. The balance at the effective date of the plan was $10,000. The index retirement benefit for each director each year is equal to the excess of the index over the cost of funds divided by a factor equal to 1.20 minus the
marginal tax rate. The index is the aggregate annual after-tax income from life insurance contracts. At retirement, the directors are entitled to the balance of the pre-retirement account in 120 monthly installments.

The accrued liabilities for the aforementioned plans were $443,000 and $331,000 for the executive plans and $145,000 and $138,000 for the directors plans at
June 30, 2006 and 2005, respectively. The Company recognized compensation expense related to these plans in the amount of $119,000 and $121,000 during the years ended June 30, 2006 and 2005, respectively.



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 8  PROFIT SHARING AND DEFERRED
COMPENSATION AGREEMENTS (CONTINUED)

The Company recognized the increase in the cash surrender value of the
insurance policies as income from investment in life insurance in the amount of $76,000 and $81,000 during the years ended June 30, 2006 and 2005, respectively.

NOTE 9 - COMMON STOCK AND EMPLOYEE STOCK OWNERSHIP PLAN

In 2005, the Bank reorganized from a federally chartered mutual savings bank to a federally chartered stock savings bank. Simultaneously, the Bank formed a new holding
company, BV Financial, Inc. Also simultaneously, a mutual holding company was formed, Bay-Vanguard, M.H.C. In connection with the reorganization, the Company issued 2,645,000 shares of its common stock. A majority of that stock (1,454,750 shares)
was issued to Bay Vanguard, M.H.C. The remainder was sold and issued to depositors of the Bank and the ESOP for a total price of $11,902,000. Costs associated with the conversion, totaling $947,000 were deducted from the sale proceeds.

At the same time as the reorganization and conversion, the Bank established the ESOP for its employees. On January 12, 2005, the ESOP acquired 103,684 shares of
the Companys common stock in the conversion with funds provided by a loan from the Company. Accordingly, $1,036,000 of common stock acquired by the ESOP is shown as a reduction of stockholders equity. The ESOP loan will be repaid
principally from the Banks contributions to the ESOP. The loan is being repaid in 15 equal annual installments through 2020 and bears interest at the rate of five and one quarter percent (5.25%). Shares are released to participants
proportionately as the loan is repaid. The Bank will recognize compensation expense as shares are committed for release from collateral at their current market price. Dividends on allocated shares are recorded as a reduction of retained earnings and
dividends on unallocated shares are recorded as a reduction of debt. The Company recognized $61,000 and $67,000 of compensation expense for the years ended June 30, 2006 and June 30, 2005, respectively. The ESOP holds the common stock in a
trust for allocation among participating employees. The unearned ESOP shares totaled 89,860 at June 30, 2006. The fair value of the unearned shares at June 30, 2006 was $809,000.

All employees of the Bank who attain the age of 21 and complete one year of service with the Bank will be eligible to participate in the ESOP. Each participants
vested interest under the ESOP is determined according to the following schedule: 1 year  20%, 2 years  40%, 3 years 60%, 4 years  80%, 5 years  100%. For vesting purposes, a year of service means any plan year in which an
employee completes at least 1,000 hours of service (whether before or after the ESOPs January 12, 2005 effective date). Vesting accelerates to 100% upon; (1) termination of the Plan or upon the permanent and complete discontinuance
of contributions by the Bank, (2) termination of service on or after the participants normal or postponed retirement date, (3) a change in control, or (4) termination of service by reason of death or disability.

NOTE 10  EQUITY INCENTIVE PLAN

The Company maintains an equity incentive plan. The compensation cost that has been charged against income for the plan was $132,000 for the year ended June 30, 2006. The total income tax benefit recognized in
the income statement for equity incentive plan arrangements was $31,000 for the year ended June 30, 2006. As of June 30, 2006, there was $418,000 of total unrecognized compensation cost related to unvested share-based compensation
arrangements granted under the Plan. The remaining cost is expected to be recognized over a weighted-average period of 4.3 years. No equity incentive plans were in effect for the twelve months ended June 30, 2005.



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 10  EQUITY INCENTIVE PLAN
(CONTINUED)

On November 8, 2005, stockholders approved the BV Financial, Inc. 2005 Equity Compensation Plan that enabled the
Company to grant stock options and restricted stock awards to employees and directors. The Company has elected to implement early the requirements of SFAS No. 123R, Share-Based Payment.On November 14, 2005, the Company granted
stock options covering 111,456 shares of common stock to certain employees and directors of the Company. The options were granted at the then fair market value of the stock of $8.94, vest over five years and expire ten years from the date of grant.
The Company estimated the grant date fair value of each option awarded in fiscal 2006 using the Black-Scholes Option-Pricing model with the following assumptions: dividend yield 0%, risk-free interest rate of 4.30%, and expected lives of 6.5 years.
The assumption for the expected volatility was 15.977%. The estimated fair value of each option granted was computed to be $2.64. Stock options had no intrinsic value at June 30, 2006. The Company recognized $79,000 of expenses relating to the
granting of stock options during the year ended June 30, 2006.

As of June 30, 2006, the Company granted 44,577 shares of restricted stock to
certain employees and directors of the Company. The Bank purchased shares in the open market during the current year to fund this plan. The awards vest over a five-year period and, therefore, the cost of such awards will be accrued ratably over a
five-year period as compensation expense. The Company recognized $53,000 of expenses relating to the grant of shares of restricted stock during the year ended June 30, 2006.

Note 11  REGULATORY MATTERS

The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary actions by the regulators that, if undertaken, could have a direct material
effect on the Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks assets,
liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Banks capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings,
and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the regulations) and risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2006, that the
Bank met all capital adequacy requirements to which it was subject.



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 11  REGULATORY MATTERS (CONTINUED)

As of June 30, 2006, the most recent notification from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that
management believes have changed the Banks category. The Banks actual capital amounts and ratios are also presented in the table.

The following table presents the Banks capital position based on the financial statements:



|                                         |  |                        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|---------------------------------------- |  | ---------------------- | ------ | ----- | ---------------------------- | - | ------ | -------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                         |  | Actual                 |        |       | For Capital AdequacyPurposes |   |        | To be Well Capitalizedunder Prompt CorrectiveAction Provisions |       
|                                         |  | Amount                 |        | Ratio |                              |   | Amount |                                                                | Ratio  |  |      | Amount |  | Ratio |       
|                                         |  | (Dollars in Thousands) |       
|As of June 30, 2006:                     |  |                        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Tangible (to adjusted total assets)      |  | $                      | 13,171 |       | 9.68                         | % |        | $                                                              | 32,041 |  | 1.5  | %      |  | $     | N/A    |  | N/A   |  
|Tier 1 capital (to risk-weighted assets) |  |                        | 13,171 |       | 16.83                        |   |        |                                                                | N/A    |  | N/A  |        |  |       | 4,695  |  | 36.0  | %
|Core (to adjusted total assets)          |  |                        | 13,171 |       | 9.68                         |   |        |                                                                | 35,442 |  | 34.0 |        |  |       | 6,802  |  | 35.0  |  
|Total (to risk-weighted assets)          |  |                        | 13,581 |       | 17.35                        |   |        |                                                                | 36,260 |  | 38.0 |        |  |       | 7,825  |  | 310.0 |  
|                                         |  |                        |        |       |                              |  
|As of June 30, 2005:                     |  |                        |        |       |                              |   |        |                                                                |        |  |      |        |  |       |        |  |       |  
|Tangible (to adjusted total assets)      |  | $                      | 12,992 |       | 11.03                        | % |        | $                                                              | 31,768 |  | 31.5 | %      |  |       | N/A    |  | N/A   |  
|Tier 1 capital (to risk-weighted assets) |  |                        | 12,992 |       | 19.68                        |   |        |                                                                | N/A    |  | N/A  |        |  | $     | 33,979 |  | 36.0  | %
|Core (to adjusted total assets)          |  |                        | 12,992 |       | 11.03                        |   |        |                                                                | 34,714 |  | 34.0 |        |  |       | 35,892 |  | 35.0  |  
|Total (to risk-weighted assets)          |  |                        | 13,341 |       | 20.20                        |   |        |                                                                | 35,306 |  | 38.0 |        |  |       | 36,632 |  | 30.0  |  

The following table provides a reconciliation of total stockholders equity per the consolidated financial
statements to capital amounts reflected in the above table:



|                                     |  |                |        |   |      |   |        |  
|------------------------------------ |  | -------------- | ------ | - | ---- | - | ------ | -
|                                     |  | 2006           |        |   | 2005 |  
|                                     |  | (In Thousands) |       
|Total equity                         |  | $              | 18,580 |   |      | $ | 18,448 |  
|Adjustment to regulatory capital:    |  |                |        |   |      |   |        |  
|Accumulated other comprehensive loss |  |                | 66     |   |      |   | 37     |  
|Intangible assets (software)         |  |                | (28    | ) |      |   | (19    | )
|Equity of BV Financial, Inc.         |  |                | (5,447 | ) |      |   | (5,474 | )
|                                     |  |                |        |   |      |   |        |  
|Tangible, Tier 1 and Core Capital    |  |                | 13,171 |   |      |   | 12,992 |  
|                                     |  |               
|Allowance for loan losses            |  |                | 410    |   |      |   | 349    |  
|                                     |  |                |        |   |      |   |        |  
|Total Capital                        |  | $              | 13,581 |   |      | $ | 13,341 |  
|                                     |  |                |        |   |      |   |        |  



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 11  REGULATORY MATTERS (CONTINUED)

The Bank was allowed a special bad debt deduction at various percentages of otherwise taxable income for various years through December 1, 1987. If the amounts
which qualified as deductions for federal income tax purposes prior to December 31, 1987 are later used for purposes other than to absorb loan losses, including distributions in liquidations, they will be subject to federal and state income tax
at the then current corporate rate. Retained earnings at June 30, 2006 and 2005 include $1,201,000, for which no provision for income tax has been provided. The unrecorded deferred income tax liability on the above amount was approximately
$464,000.

NOTE 12 - INCOME TAXES

The income tax provision consists of the following for the years ended June 30, 2006 and 2005:



|                  |  |                |      |   |      |   |     |  
|----------------- |  | -------------- | ---- | - | ---- | - | --- | -
|                  |  | 2006           |      |   | 2005 |  
|                  |  | (In Thousands) |     
|Current expense:  |  |                |      |   |      |   |     |  
|Federal           |  | $              | 355  |   |      | $ | 278 |  
|State             |  |                | 73   |   |      |   | 78  |  
|                  |  |                |      |   |      |   |     |  
|                  |  |                | 428  |   |      |   | 356 |  
|                  |  |                |      |   |      |   |     |  
|Deferred benefit: |  |                |      |   |      |   |     |  
|Federal           |  |                | (134 | ) |      |   | (46 | )
|State             |  |                | (29  | ) |      |   | (6  | )
|                  |  |                |      |   |      |   |     |  
|                  |  |                | (163 | ) |      |   | (52 | )
|                  |  |                |      |   |      |   |     |  
|                  |  | $              | 265  |   |      | $ | 304 |  
|                  |  |                |      |   |      |   |     |  



F-23



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 12 - INCOME TAXES (CONTINUED)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 2006 and 2005 are
presented below:



|                                                   |  |                |     |      |   |    
|-------------------------------------------------- |  | -------------- | --- | ---- | - | ---
|                                                   |  | 2006           |     | 2005
|                                                   |  | (In Thousands)
|Deferred tax assets:                               |  |                |     |      |   |    
|Deferred compensation                              |  | $              | 227 |      | $ | 181
|Allowance for loan losses                          |  |                | 148 |      |   | 113
|Unrealized losses on available for sale securities |  |                | 41  |      |   | 23 
|Stock-based compensation                           |  |                | 31  |      |   |   
|Other                                              |  |                | 54  |      |   | 45 
|                                                   |  |                |     |      |   |    
|Total Deferred Tax Assets                          |  |                | 501 |      |   | 362
|                                                   |  |                |     |      |   |    
|Deferred tax liabilities:                          |  |                |     |      |   |    
|Federal Home Loan Bank of Atlanta stock dividends  |  |                | 18  |      |   | 44 
|Accrual basis books to cash basis tax return       |  |                | 74  |      |   | 79 
|Depreciation                                       |  |                | 61  |      |   | 72 
|                                                   |  |                |     |      |   |    
|Total Deferred Tax Liabilities                     |  |                | 153 |      |   | 195
|                                                   |  |                |     |      |   |    
|Net Deferred Tax Assets                            |  | $              | 348 |      | $ | 167
|                                                   |  |                |     |      |   |    

The amount computed by applying the statutory federal income tax rate to income before income taxes is different
than the taxes provided for the following reasons:



|                                            |  |                        |     |   |                          |      |   |        |   |     |                         |  |      |  
|------------------------------------------- |  | ---------------------- | --- | - | ------------------------ | ---- | - | ------ | - | --- | ----------------------- |  | ---- | -
|                                            |  | Years Ended June 30,   |    
|                                            |  | 2006                   |     |   | 2005                     |     
|                                            |  | Amount                 |     |   | Percent of Pretax Income |      |   | Amount |   |     | Percentof Pretax Income | 
|                                            |  | (Dollars In Thousands) |    
|Statutory federal income tax rate           |  | $                      | 239 |   |                          | 34.0 | % |        | $ | 294 |                         |  | 34.0 | %
|State tax net of federal income tax benefit |  |                        | 29  |   |                          | 4.1  |   |        |   | 48  |                         |  | 5.5  |  
|Non-deductible stock-based compensation     |  |                        | 20  |   |                          | 2.8  |   |        |   |    |                         |  |     |  
|Income from investment in life insurance    |  |                        | (29 | ) |                          | (4.1 | ) |        |   | (31 | )                       |  | (3.6 | )
|Other                                       |  |                        | 6   |   |                          | 0.8  |   |        |   | (7  | )                       |  | (0.8 | )
|                                            |  |                        |     |   |                          |      |   |        |   |     |                         |  |      |  
|                                            |  | $                      | 265 |   |                          | 37.6 | % |        | $ | 304 |                         |  | 35.1 | %
|                                            |  |                        |     |   |                          |      |   |        |   |     |                         |  |      |  



F-24



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 13 - RELATED PARTY TRANSACTIONS

The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course of business with directors, officers, their immediate families
and affiliated companies (commonly referred to as related parties), on the same terms including interest rates and collateral, as those prevailing at the time for comparable transactions with others. The following table presents a summary of the
activity of loans receivable from related parties:



|                   |  |                         |       |  
|------------------ |  | ----------------------- | ----- | -
|                   |  | Year EndedJune 30, 2006 |      
|                   |  | (In Thousands)          |      
|Balance, beginning |  | $                       | 1,128 |  
|Advances           |  |                         | 25    |  
|Repayments         |  |                         | (175  | )
|                   |  |                         |       |  
|Balance, ending    |  | $                       | 978   |  
|                   |  |                         |       |  

The Bank leases one of its office buildings from a relative of an officer of the Bank. The Bank executed a new
lease on August 4, 2004 with an initial term of five years, with two five year renewal options. Rent expense for the years ended June 30, 2006 and 2005 was $22,000 and $22,000, respectively. The annual rent is payable in equal monthly
installments.

At June 30, 2006, minimum rental commitments under this lease are as follows:



|                     |  |                |   
|-------------------- |  | -------------- | --
|Year Ending June 30, |  | Amount        
|                     |  | (In Thousands)
|2007                 |  | $              | 22
|2008                 |  |                | 22
|2009                 |  |                | 22
|2010                 |  |                | 4 
|                     |  |                |   
|                     |  | $              | 70
|                     |  |                |   

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Various legal claims arise from time to time in the normal course of business, which, in the opinion of management, will have no material effect on the
Companys consolidated financial position or results of operations.

NOTE 15 - DISCLOSURE ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the
Banks financial instruments are summarized below. The fair values are estimates derived primarily from present value techniques and may not be indicative of the net realizable or liquidation values. Also, the calculation of estimated fair
values is based on market conditions at a specific point in time and may not reflect current or future fair values.



F-25



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 15 - DISCLOSURE ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS (CONTINUED)

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

Cash and Cash Equivalents

The carrying amounts of cash and equivalents approximate fair value.

Investment Securities

Fair values for securities, excluding Federal Home Loan Bank stock, are based on quoted market
prices. The carrying amount of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank.

Loans Receivable

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values
are based on carrying amounts. Fair values for fixed-rate loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for
non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposits

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts)
are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates
currently being offered on such certificates to a schedule of aggregated expected monthly maturities on these deposits.

Advances from Federal Home Loan
Bank

The fair value of borrowings is estimated using discounted cash flow analyses, based on rates currently available to the Bank for
borrowings with similiar terms and remaining maturities.

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest receivable and payable approximate fair value.

Off-Balance Sheet Credit Related Instruments

Fair values for off-balance sheet, credit-related
financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing.



F-26



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##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 15 - DISCLOSURE ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS (CONTINUED)

The following table
summarizes the carrying amounts and fair values of financial instruments at June 30, 2006 and 2005:



|                                             |  |                |         |            |   |                |  |           |        |  |   |       
|-------------------------------------------- |  | -------------- | ------- | ---------- | - | -------------- |  | --------- | ------ |  | - | ------
|                                             |  | 2006           |         | 2005      
|                                             |  | CarryingAmount |         | Fair Value |   | CarryingAmount |  | FairValue
|                                             |  | (In Thousands)
|Financial assets:                            |  |                |         |            |   |                |  |           |        |  |   |       
|Cash and cash equivalents                    |  | $              | 9,079   |            | $ | 9,079          |  | $         | 8,336  |  | $ | 8,336 
|Securities available for sale                |  |                | 4,228   |            |   | 4,228          |  |           | 4,342  |  |   | 4,342 
|Securities held to maturity                  |  |                | 3,233   |            |   | 3,114          |  |           | 3,350  |  |   | 3,315 
|Loans receivable, net                        |  |                | 113,026 |            |   | 108,639        |  |           | 96,051 |  |   | 97,170
|Federal Home Loan Bank of Atlanta stock      |  |                | 939     |            |   | 939            |  |           | 497    |  |   | 497   
|Accrued interest receivable                  |  |                | 494     |            |   | 494            |  |           | 417    |  |   | 417   
|                                             |  |                |         |           
|Financial liabilities                        |  |                |         |            |   |                |  |           |        |  |   |       
|Deposits, including accrued interest payable |  |                | 97,095  |            |   | 97,051         |  |           | 91,401 |  |   | 91,485
|Advances from Federal Home Loan Bank         |  |                | 14,500  |            |   | 14,382         |  |           | 5,000  |  |   | 5,000 
|                                             |  |                |         |           
|Off-balance sheet commitments                |  |                |        |            |   |               |  |           |       |  |   |      

NOTE 16  CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)

Information as to the financial position of BV Financial, Inc. and its results of
operations and cash flows as of June 30, 2006 and 2005 are summarized below.



|                                     |  |                |        |              |   |       
|------------------------------------ |  | -------------- | ------ | ------------ | - | ------
|Statements of Financial Condition    |  | June 30,2006   |        | June 30,2005
|                                     |  | (In Thousands)
|Assets                               |  |                |        |              |   |       
|                                     |  |               
|Cash                                 |  | $              | 4,524  |              | $ | 4,508 
|Employee stock ownership plan loan   |  |                | 915    |              |   | 963   
|Investment in subsidiary             |  |                | 13,130 |              |   | 12,974
|Other assets                         |  |                | 11     |              |   | 3     
|                                     |  |                |        |              |   |       
|Total assets                         |  | $              | 18,580 |              | $ | 18,448
|                                     |  |                |        |              |   |       
|Liabilities and Stockholders Equity |  |                |        |              |   |       
|                                     |  |               
|Total stockholders equity           |  | $              | 18,580 |              | $ | 18,448
|                                     |  |                |        |              |   |       



F-27



---

##### Table of Contents

BV FINANCIAL, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 16  CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY) (CONTINUED)



|                                                                                 |  |                         |       |   |                                                  |   |        |  
|-------------------------------------------------------------------------------- |  | ----------------------- | ----- | - | ------------------------------------------------ | - | ------ | -
|Statements of Operations                                                         |  | Year EndedJune 30, 2006 |       |   | For the Period January 12, 2005 to June 30, 2005 |  
|                                                                                 |  | (In Thousands)          |      
|Interest income                                                                  |  | $                       | 51    |   |                                                  | $ | 25     |  
|Non-interest expense                                                             |  |                         | (86   | ) |                                                  |   | (31    | )
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Loss before income tax provision (benefit)                                       |  |                         | (35   | ) |                                                  |   | (6     | )
|Income tax benefit                                                               |  |                         | 11    |   |                                                  |   | 2      |  
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Loss before equity in net income of subsidiary                                   |  |                         | (24   | ) |                                                  |   | (4     | )
|Equity in net income of subsidiary                                               |  |                         | 463   |   |                                                  |   | 246    |  
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Net income                                                                       |  | $                       | 439   |   |                                                  | $ | 242    |  
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|                                                                                 |  |                        
|Statements of Cash Flows                                                         |  | Year EndedJune 30, 2006 |       |   | For the Period January 12, 2005 to June 30,
2005 |  
|                                                                                 |  | (In Thousands)          |      
|Net income                                                                       |  | $                       | 439   |   |                                                  | $ | 242    |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                         |       |   |                                                  |   |        |  
|Equity in net income of subsidiary                                               |  |                         | (463  | ) |                                                  |   | (246   | )
|Increase in other assets                                                         |  |                         | (8    | ) |                                                  |   | (3     | )
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Net cash provided by operating activities                                        |  |                         | (32   | ) |                                                  |   | (7     | )
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Cash Flows from Investing Activities                                             |  |                         |       |   |                                                  |   |        |  
|Issuance of ESOP loan                                                            |  |                         |      |   |                                                  |   | (1,036 | )
|Principal collected on ESOP loan                                                 |  |                         | 48    |   |                                                  |   | 73     |  
|Investment in subsidiaries                                                       |  |                         |      |   |                                                  |   | (4,441 | )
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Net cash used by investing activities                                            |  |                         | 48    |   |                                                  |   | (5,404 | )
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Cash Flows from Financing Activities                                             |  |                         |       |   |                                                  |   |        |  
|Proceeds from sale of common stock                                               |  |                         |      |   |                                                  |   | 9,969  |  
|Capitalization of Bay-Vanguard M.H.C.                                            |  |                         |      |   |                                                  |   | (50    | )
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Net cash provided by financing activities                                        |  |                         |      |   |                                                  |   | 9,919  |  
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Increase in cash and cash equivalents                                            |  |                         | 16    |   |                                                  |   | 4,508  |  
|Cash and cash equivalents at beginning of period                                 |  |                         | 4,508 |   |                                                  |   |       |  
|                                                                                 |  |                         |       |   |                                                  |   |        |  
|Cash and cash equivalents at end of period                                       |  | $                       | 4,524 |   |                                                  | $ | 4,508  |  
|                                                                                 |  |                         |       |   |                                                  |   |        |  



F-28