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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(Mark One)

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

For the quarterly period ended December 31, 2006

OR



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

For the transition period from  to

Commission file number: 0-51014



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BV FINANCIAL, INC.

(Exact name of small business issuer as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)

(410) 477-5000

(Issuers telephone number)

Not Applicable

(Former name, former address and former fiscal year, if
changed since last report)



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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 ̈

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

As of February 12, 2007, there were 2,625,387 shares of the registrants common stock
outstanding.



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##### Table of Contents

BV FINANCIAL, INC.

Form 10-QSB

Table of C
ontents



|                              |  |          |  |                                                                                                                           |  |   
|----------------------------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | --
|                              |  | Page No.
|PART I. FINANCIAL INFORMATION |  |         
|                              |  |          | 
|                              |  | Item 1.  |  | Financial Statements                                                                                                      |  |   
|                              |  |          | 
|                              |  |          |  | Consolidated Statements of Financial Condition at December 31, 2006 and June 30, 2006 (unaudited)                         |  | 1 
|                              |  |          | 
|                              |  |          |  | Consolidated Statements of Income for the three and six months ended December 31, 2006 and 2005 (unaudited)               |  | 2 
|                              |  |          | 
|                              |  |          |  | Consolidated Statements of Comprehensive Income for the three and six months ended December 31, 2006 and 2005 (unaudited) |  | 3 
|                              |  |          | 
|                              |  |          |  | Consolidated Statements of Cash Flows for the six months ended December 31, 2006 and 2005 (unaudited)                     |  | 4 
|                              |  |          | 
|                              |  |          |  | Notes to Unaudited Consolidated Financial Statements                                                                      |  | 5 
|                              |  |          | 
|                              |  | Item 2.  |  | Managements Discussion and Analysis or Plan of Operation                                                                 |  | 7 
|                              |  |          | 
|                              |  | Item 3.  |  | Controls and Procedures                                                                                                   |  | 17
|                              | 
|PART II. OTHER INFORMATION    |  |         
|                              |  |          | 
|                              |  | Item 1.  |  | Legal Proceedings                                                                                                         |  | 18
|                              |  |          | 
|                              |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                               |  | 18
|                              |  |          | 
|                              |  | Item 3.  |  | Defaults upon Senior Securities                                                                                           |  | 18
|                              |  |          | 
|                              |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 19
|                              |  |          | 
|                              |  | Item 5.  |  | Other Information                                                                                                         |  | 19
|                              |  |          | 
|                              |  | Item 6.  |  | Exhibits                                                                                                                  |  | 19
|                              | 
|SIGNATURES                    |  |         



i



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

BV FINANCIAL, INC. AND SUBSIDIARY

Consolidated Statements of Financial Condition

(unaudited)



|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                                                        |  | December 31, 2006                             |         |   | June 30, 2006 |  
|                                                                                                                                                                                        | 
|                                                                                                                                                                                        |  | (Dollars in thousands, except per share data) |        
|ASSETS                                                                                                                                                                                  |  |                                               |         |  
|Cash                                                                                                                                                                                    |  | $                                             | 1,072   |   |               | $ | 1,359   |  
|Interest bearing deposits in other banks                                                                                                                                                |  |                                               | 4,359   |   |               |   | 6,363   |  
|Federal funds sold                                                                                                                                                                      |  |                                               | 981     |   |               |   | 1,357   |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|Cash and Cash Equivalents                                                                                                                                                               |  |                                               | 6,412   |   |               |   | 9,079   |  
|Securities available for sale                                                                                                                                                           |  |                                               | 4,285   |   |               |   | 4,228   |  
|Securities held to maturity                                                                                                                                                             |  |                                               | 3,198   |   |               |   | 3,233   |  
|Loans receivable, net of allowance for loan losses December 31, 2006$402; June 30, 2006$410                                                                                           |  |                                               | 112,974 |   |               |   | 113,026 |  
|Premises and equipment, net                                                                                                                                                             |  |                                               | 2,466   |   |               |   | 2,485   |  
|Federal Home Loan Bank of Atlanta stock, at cost                                                                                                                                        |  |                                               | 984     |   |               |   | 939     |  
|Investment in life insurance                                                                                                                                                            |  |                                               | 1,938   |   |               |   | 1,889   |  
|Accrued interest receivable                                                                                                                                                             |  |                                               | 514     |   |               |   | 494     |  
|Other assets                                                                                                                                                                            |  |                                               | 720     |   |               |   | 610     |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|Total Assets                                                                                                                                                                            |  | $                                             | 133,491 |   |               | $ | 135,983 |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS
EQUITY                                                                                                                                                    |  |                                               |         |   |               |   |         |  
|Liabilities                                                                                                                                                                             |  |                                               |         |   |               |   |         |  
|Non-interest bearing deposits                                                                                                                                                           |  | $                                             | 2,805   |   |               | $ | 3,887   |  
|Interest bearing deposits                                                                                                                                                               |  |                                               | 95,900  |   |               |   | 93,208  |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|Total deposits                                                                                                                                                                          |  |                                               | 98,705  |   |               |   | 97,095  |  
|Federal Home Loan Bank advances                                                                                                                                                         |  |                                               | 14,000  |   |               |   | 14,500  |  
|Official checks                                                                                                                                                                         |  |                                               | 1,015   |   |               |   | 3,922   |  
|Advance payments by borrowers for taxes and insurance                                                                                                                                   |  |                                               | 450     |   |               |   | 1,145   |  
|Other liabilities                                                                                                                                                                       |  |                                               | 813     |   |               |   | 741     |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|Total Liabilities                                                                                                                                                                       |  | $                                             | 114,983 |   |               | $ | 117,403 |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|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; 2,625,387 and 2,645,000 shares outstanding as of
December 31, 2006 and June 30, 2006, respectively |  |                                               | 26      |   |               |   | 26      |  
|Paid-in capital                                                                                                                                                                         |  |                                               | 11,049  |   |               |   | 10,994  |  
|Unearned employee stock ownership plan shares                                                                                                                                           |  |                                               | (859    | ) |               |   | (894    | )
|Unvested shares of restricted stock under Equity Incentive Plan                                                                                                                         |  |                                               | (376    | ) |               |   | (418    | )
|Treasury stock, at cost; 19,613 shares                                                                                                                                                  |  |                                               | (183    | ) |               |   |        |  
|Retained earnings                                                                                                                                                                       |  |                                               | 8,894   |   |               |   | 8,938   |  
|Accumulated other comprehensive loss                                                                                                                                                    |  |                                               | (43     | ) |               |   | (66     | )
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|Total Stockholders Equity                                                                                                                                                              |  |                                               | 18,508  |   |               |   | 18,580  |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  
|Total Liabilities and Stockholders Equity                                                                                                                                              |  | $                                             | 133,491 |   |               | $ | 135,983 |  
|                                                                                                                                                                                        |  |                                               |         |   |               |   |         |  

See notes to Unaudited Consolidated Financial Statements.



1



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##### Table of Contents

BV FINANCIAL, INC. AND SUBSIDIARY

Consolidated Statements of Income

(Unaudited)



|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|--------------------------------------------------- |  | --------------------------------------------- | ----- | - | ---------------------------- | - | ----- | ---- |  | ---- | ----- |  | - | ----- | -
|                                                    |  | Three Months EndedDecember 31,                |       |   | Six Months EndedDecember 31, |  
|                                                    |  | 2006                                          |       |   | 2005                         |   |       | 2006 |  | 2005 |      
|                                                    |  | (Dollars in thousands, except per share data) |      
|INTEREST INCOME                                     |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Loans, including fees                               |  | $                                             | 1,766 |   |                              | $ | 1,717 |      |  | $    | 3,521 |  | $ | 3,292 |  
|Investment securities                               |  |                                               | 94    |   |                              |   | 93    |      |  |      | 186   |  |   | 171   |  
|Other                                               |  |                                               | 62    |   |                              |   | 53    |      |  |      | 99    |  |   | 77    |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Total Interest Income                               |  |                                               | 1,922 |   |                              |   | 1,863 |      |  |      | 3,806 |  |   | 3,540 |  
|INTEREST EXPENSE                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Deposits                                            |  |                                               | 925   |   |                              |   | 683   |      |  |      | 1,813 |  |   | 1,295 |  
|Borrowed funds                                      |  |                                               | 178   |   |                              |   | 188   |      |  |      | 341   |  |   | 286   |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Total Interest Expense                              |  |                                               | 1,103 |   |                              |   | 871   |      |  |      | 2,154 |  |   | 1,581 |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Net Interest Income                                 |  |                                               | 819   |   |                              |   | 992   |      |  |      | 1,652 |  |   | 1,959 |  
|PROVISION FOR LOAN LOSSES                           |  |                                               |      |   |                              |   | 30    |      |  |      | 5     |  |   | 70    |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Net Interest Income after Provision for Loan Losses |  |                                               | 819   |   |                              |   | 962   |      |  |      | 1,647 |  |   | 1,889 |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|NON-INTEREST INCOME                                 |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Service fees on deposits                            |  |                                               | 27    |   |                              |   | 29    |      |  |      | 57    |  |   | 57    |  
|Service fees on loans                               |  |                                               | 7     |   |                              |   | 6     |      |  |      | 14    |  |   | 14    |  
|Income from investment in life insurance            |  |                                               | 19    |   |                              |   | 19    |      |  |      | 49    |  |   | 38    |  
|Other income                                        |  |                                               | 11    |   |                              |   | 28    |      |  |      | 23    |  |   | 45    |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Total Non-Interest Income                           |  |                                               | 64    |   |                              |   | 82    |      |  |      | 143   |  |   | 154   |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|NON-INTEREST EXPENSES                               |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Compensation and related expenses                   |  |                                               | 511   |   |                              |   | 445   |      |  |      | 1,028 |  |   | 832   |  
|Occupancy                                           |  |                                               | 42    |   |                              |   | 39    |      |  |      | 87    |  |   | 79    |  
|Data processing                                     |  |                                               | 82    |   |                              |   | 70    |      |  |      | 148   |  |   | 138   |  
|Repossessed assets activity                         |  |                                               | 12    |   |                              |   | (1    | )    |  |      | 16    |  |   | (1    | )
|Telephone and postage                               |  |                                               | 15    |   |                              |   | 18    |      |  |      | 32    |  |   | 33    |  
|Advertising                                         |  |                                               | 26    |   |                              |   | 23    |      |  |      | 50    |  |   | 50    |  
|Professional fees                                   |  |                                               | 65    |   |                              |   | 49    |      |  |      | 132   |  |   | 88    |  
|Equipment                                           |  |                                               | 36    |   |                              |   | 33    |      |  |      | 69    |  |   | 64    |  
|Other                                               |  |                                               | 120   |   |                              |   | 101   |      |  |      | 203   |  |   | 213   |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Total Non-Interest Expenses                         |  |                                               | 909   |   |                              |   | 777   |      |  |      | 1,765 |  |   | 1,496 |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|(Loss) Income before Income Taxes                   |  |                                               | (26   | ) |                              |   | 267   |      |  |      | 25    |  |   | 547   |  
|PROVISION FOR INCOME TAXES (BENEFIT)                |  |                                               | (11   | ) |                              |   | 108   |      |  |      | 10    |  |   | 210   |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|Net (Loss) Income                                   |  | $                                             | (15   | ) |                              | $ | 159   |      |  | $    | 15    |  | $ | 337   |  
|                                                    |  |                                               |       |   |                              |   |       |      |  |      |       |  |   |       |  
|BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE         |  | $                                             | (0.01 | ) |                              | $ | 0.06  |      |  | $    | 0.01  |  | $ | 0.13  |  

See Notes to Unaudited Consolidated Financial Statements.



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##### Table of Contents

BV FINANCIAL, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(Unaudited)



|                                                                                                                          |  |                                   |     |   |                                 |   |     |      |  |      |    |  |   |     |  
|------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | --- | - | ------------------------------- | - | --- | ---- |  | ---- | -- |  | - | --- | -
|                                                                                                                          |  | For Three MonthsEndedDecember 31, |     |   | For Six MonthsEndedDecember 31, |  
|                                                                                                                          |  | 2006                              |     |   | 2005                            |   |     | 2006 |  | 2005 |   
|                                                                                                                          |  | (In thousands)                    |    
|Net (loss) income                                                                                                         |  | $                                 | (15 | ) |                                 | $ | 159 |      |  | $    | 15 |  | $ | 337 |  
|Unrealized net holding gains/(losses) on available-for-sale securities, net of taxes (benefit) of $1, $(8), $14 and $(13) |  |                                   | 7   |   |                                 |   | (11 | )    |  |      | 23 |  |   | (18 | )
|                                                                                                                          |  |                                   |     |   |                                 |   |     |      |  |      |    |  |   |     |  
|Comprehensive (loss) income                                                                                               |  | $                                 | (8  | ) |                                 | $ | 148 |      |  | $    | 38 |  | $ | 319 |  
|                                                                                                                          |  |                                   |     |   |                                 |   |     |      |  |      |    |  |   |     |  

See Notes to Unaudited Consolidated Financial Statements.



3



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##### Table of Contents

BV FINANCIA
L, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                              |        |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                  |  | Six Months EndedDecember 31, |       
|                                                                                  |  | 2006                         |        |   | 2005 |  
|                                                                                  |  | (In thousands)               |       
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                              |        |   |      |   |         |  
|Net income                                                                        |  | $                            | 15     |   |      | $ | 337     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |        |   |      |   |         |  
|Net amortization of discounts and premiums                                        |  |                              | 5      |   |      |   | 5       |  
|Provision for loan losses                                                         |  |                              | 5      |   |      |   | 70      |  
|Amortization of deferred loan fees/costs                                          |  |                              | 42     |   |      |   | 82      |  
|Provision for depreciation                                                        |  |                              | 37     |   |      |   | 36      |  
|Increase in cash surrender value of life insurance                                |  |                              | (49    | ) |      |   | (38     | )
|Stock-based compensation expense                                                  |  |                              | 132    |   |      |   | 40      |  
|Increase in other assets                                                          |  |                              | (151   | ) |      |   | (100    | )
|Increase (decrease) in other liabilities                                          |  |                              | 72     |   |      |   | (247    | )
|                                                                                  |  |                              |        |   |      |   |         |  
|Net Cash Provided by Operating Activities                                         |  |                              | 108    |   |      |   | 185     |  
|                                                                                  |  |                              |        |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                              |        |   |      |   |         |  
|Purchases of securities available for sale                                        |  |                              | (68    | ) |      |   | (49     | )
|Principal collected on mortgage backed securities                                 |  |                              | 78     |   |      |   | 166     |  
|Net decrease (increase) in loans                                                  |  |                              | 193    |   |      |   | (14,296 | )
|Purchase of loans                                                                 |  |                              | (181   | ) |      |   | (1,039  | )
|Purchase of premises and equipment                                                |  |                              | (18    | ) |      |   | (9      | )
|Purchase of Federal Home Loan Bank stock                                          |  |                              | (45    | ) |      |   | (450    | )
|                                                                                  |  |                              |        |   |      |   |         |  
|Net Cash Used in Investing Activities                                             |  |                              | (41    | ) |      |   | (15,677 | )
|                                                                                  |  |                              |        |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                              |        |   |      |   |         |  
|Decrease in official checks                                                       |  |                              | (2,907 | ) |      |   | (254    | )
|Net increase in deposits                                                          |  |                              | 1,610  |   |      |   | 5,105   |  
|Decrease in advance payments by borrowers for taxes and insurance                 |  |                              | (695   | ) |      |   | (584    | )
|Federal Home Loan Bank advances                                                   |  |                              | 2,000  |   |      |   | 10,000  |  
|Repayment of advances from Federal Home Loan Bank                                 |  |                              | (2,500 | ) |      |   |        |  
|Purchase of shares of restricted stock                                            |  |                              |       |   |      |   | (174    | )
|Cash dividends paid                                                               |  |                              | (59    | ) |      |   |        |  
|Treasury stock purchased                                                          |  |                              | (183   | ) |      |   |        |  
|                                                                                  |  |                              |        |   |      |   |         |  
|Net Cash (Used In) Provided by Financing Activities                               |  |                              | (2,734 | ) |      |   | 14,093  |  
|                                                                                  |  |                              |        |   |      |   |         |  
|Net Decrease in Cash and Cash Equivalents                                         |  |                              | (2,667 | ) |      |   | (1,399  | )
|CASH AND CASH EQUIVALENTS  BEGINNING                                             |  |                              | 9,079  |   |      |   | 8,336   |  
|                                                                                  |  |                              |        |   |      |   |         |  
|CASH AND CASH EQUIVALENTS  ENDING                                                |  | $                            | 6,412  |   |      | $ | 6,937   |  
|                                                                                  |  |                              |        |   |      |   |         |  
|SUPPLEMENTARY CASH FLOWS INFORMATION                                              |  |                              |        |   |      |   |         |  
|Interest paid                                                                     |  | $                            | 2,146  |   |      | $ | 1,580   |  
|                                                                                  |  |                              |        |   |      |   |         |  
|Income taxes paid                                                                 |  | $                            | 130    |   |      | $ | 147     |  
|                                                                                  |  |                              |        |   |      |   |         |  
|Net loans transferred to foreclosed real estate/repossessed assets                |  | $                            | 7      |   |      | $ | 25      |  
|                                                                                  |  |                              |        |   |      |   |         |  

See Notes to Unaudited Consolidated Financial Statements.



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##### Table of Contents

BV FINANCIAL, INC. AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

December 31, 2006

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions for Form 10-QSB and,
therefore, do not include all disclosures necessary for a complete presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. However, all adjustments that are, in the
opinion of management, necessary for the fair presentation of the interim financial statements have been included. Such adjustments were of a normal recurring nature. The results of operations for the period ended December 31, 2006 are not
necessarily indicative of the results that may be expected for the entire year. These unaudited consolidated financial statements should be read in conjunction with BV Financial Inc.s (the Company or BV Financial)
Annual Report on Form 10-KSB for the year ended June 30, 2006.

Principles of Consolidation

The consolidated financial statements at December 31, 2006 and June 30, 2006 and for the six months ended December 31, 2006 include the
accounts of the Company, Bay-Vanguard Federal Savings Bank (the Bank) and its wholly-owned subsidiary, Housing Recovery Corporation. All intercompany balances and transactions have been eliminated in consolidation.

(2) Earnings Per Share

Basic earnings per share is
computed by dividing net income by the weighted average number of common shares outstanding for the appropriate period. 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. Information related to the calculation of earnings per share is summarized for the three and six months ended December 31, 2006 and 2005 as follows:



|                                           |  |                                 |       |                              |         |   |       |       |      |         |       |       |   |         |  |       |       |         |   |       |  |   |       |  |   |      
|------------------------------------------ |  | ------------------------------- | ----- | ---------------------------- | ------- | - | ----- | ----- | ---- | ------- | ----- | ----- | - | ------- |  | ----- | ----- | ------- | - | ----- |  | - | ----- |  | - | -----
|                                           |  | Three Months Ended December 31, |       | Six Months Ended December 31
|                                           |  | 2006                            |       |                              | 2005    |   | 2006  |       | 2005
|                                           |  | Basic                           |       |                              | Diluted |   |       | Basic |      | Diluted |       | Basic |   | Diluted |  | Basic |       | Diluted
|                                           |  | In Thousands                    |       | In Thousands                
|Net income (loss)                          |  | $                               | (15   | )                            |         | $ | (15   | )     |      | $       | 159   |       | $ | 159     |  | $     | 15    |         | $ | 15    |  | $ | 337   |  | $ | 337  
|                                           |  |                                 |       |                              |         |   |       |       |      |         |       |       |   |         |  |       |       |         |   |       |  |   |       |  |   |      
|Weighted average common shares outstanding |  |                                 | 2,507 |                              |         |   | 2,507 |       |      |         | 2,549 |       |   | 2,549   |  |       | 2,510 |         |   | 2,510 |  |   | 2,549 |  |   | 2,549
|Diluted securities:                        |  |                                 |       |                              |         |   |       |       |      |         |       |       |   |         |  |       |       |         |   |       |  |   |       |  |   |      
|Restricted stock                           |  |                                 |      |                              |         |   | 1     |       |      |         |      |       |   |        |  |       |      |         |   | 1     |  |   |      |  |   |     
|Stock options                              |  |                                 |      |                              |         |   | 2     |       |      |         |      |       |   |        |  |       |      |         |   | 2     |  |   |      |  |   |     
|                                           |  |                                 |       |                              |         |   |       |       |      |         |       |       |   |         |  |       |       |         |   |       |  |   |       |  |   |      
|Adjusted weighted average shares           |  |                                 | 2,507 |                              |         |   | 2,510 |       |      |         | 2,549 |       |   | 2,549   |  |       | 2,510 |         |   | 2,513 |  |   | 2,549 |  |   | 2,549
|                                           |  |                                 |       |                              |         |   |       |       |      |         |       |       |   |         |  |       |       |         |   |       |  |   |       |  |   |      



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(3) Equity Incentive Plan

The Compensation cost charged against income for the BV Financial, Inc. 2005 Equity Compensation Plan (the Plan) was $46,000 and $101,000 for the three and six months ended December 31, 2006,
respectively, and $22,000 for the three and six months ended December 31, 2005, respectively. The total income tax benefit recognized was $12,000 and $23,000 for the three and six months ended December 31, 2006, respectively, and
$5,000 for the three and six months ended December 31, 2005, respectively.

At December 31, 2006, there was $376,000 of total
unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Plan. The cost is expected to be recognized over a weighted average period of 3.8 years.

On November 8, 2005, stockholders approved the 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.

During the three and six months ended
December 31, 2006, there were no grants of stock options or restricted stock under the Plan. No stock options were exercised during the three and six months ended December 31, 2006. At December 31, 2006, there were 22,286
stock options and 8,914 restricted stock shares that had vested under the Companys Plan. At December 31, 2006, the aggregate intrinsic value of outstanding unexercisable options was $262,000 and the aggregate intrinsic value of
exercisable options was $66,000.

(4) Recent Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments(SFAS No. 155). SFAS No. 155
amends FASB Statement No. 133 and FASB Statement No. 140, and improves the financial reporting of certain hybrid financial instruments by requiring more consistent accounting that eliminates exemptions and provides a means to simplify the
accounting for these instruments. Specifically, SFAS No. 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to
account for the whole instrument on a fair value basis. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The Company
is required to adopt the provisions of SFAS No. 155, as applicable, beginning in fiscal year 2008. The Company has evaluated SFAS No. 155 and determined that it will have no impact on the Companys financial position or results of
operations.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial AssetsAn Amendment of FASB
Statement No. 140 (SFAS 156). SFAS 156 requires that all separately



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recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. The statement permits, but does not require, the
subsequent measurement of servicing assets and servicing liabilities at fair value. SFAS 156 is effective as of the beginning of an entitys first fiscal year that begins after September 15, 2006, which for the Company will be as of the
beginning of fiscal year 2008. The Company does not believe that the adoption of SFAS 156 will have a significant effect on its financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for
uncertainty in tax positions. This Interpretation requires that companies recognize in their financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of
the position. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company has
analyzed FIN 48 and determined that upon adoption, it will have no impact on our financial statements.

In September 2006, the FASB issued
FASB Statement No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. FASB Statement No. 157 applies to other
accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. The
company has evaluated FASB Statement No. 157 and determined that it will have no impact on our consolidated financial position, results of operations and cash flows.

On September 13, 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 provides interpretive guidance on how the effects of the carryover or
reversal of prior year misstatements should be considered in quantifying a potential current year misstatement. Prior to SAB 108, Companies might evaluate the materiality of financial-statement misstatements using either the income statement or
balance sheet approach, with the income statement approach focusing on new misstatements added in the current year, and the balance sheet approach focusing on the cumulative amount of misstatement present in a companys balance sheet.
Misstatements that would be material under one approach could be viewed as immaterial under another approach, and not be corrected. SAB 108 now requires that companies view financial statement misstatements as material if they are material according
to either the income statement or balance sheet approach. The Company has analyzed SAB 108 and determined that upon adoption it will have no impact on the reported results of operations or financial condition.



|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

Managements discussion and analysis of the financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of BV Financial. The information
contained in this section should be read in conjunction with the Unaudited Consolidated Financial Statements and footnotes appearing in Part I, Item 1 of this document.

Forward-Looking Statements

This quarterly report contains forward-looking statements that are based
on assumptions and may describe future plans, strategies and expectations of Bay-Vanguard, M.H.C., BV Financial and Bay-Vanguard Federal. These forward-looking statements are generally identified by use of the words believe,
expect, intend, anticipate, estimate, project or similar expressions.



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Bay-Vanguard, M.H.C., BV Financial and Bay-Vanguard Federals ability to predict results or the
actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of BV Financial and its subsidiary include, but are not limited to, changes in interest rates, national and
regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for financial services in BV Financial and Bay-Vanguards market area, changes in real estate market values in BV Financial and Bay-Vanguards market area, and
changes in relevant accounting principles and guidelines.

These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, BV Financial does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions
that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

General

BV Financial 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 BV Financial and organized Bay-Vanguard, M.H.C. as a federally chartered
mutual holding company that owns 55% of the common stock of BV Financial. 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. Bay-Vanguard Federal is a member of the Federal Home Loan Bank System.

Critical
Accounting Policies

The Company considers accounting policies involving significant judgments and assumptions by management that have,
or could have, a material impact on the carrying value of certain assets and liabilities or income and expense to be critical accounting policies. The Company considers the allowance for loan losses to be a critical accounting policy.

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the
loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among
the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impaired loans; the value of collateral; and the determination of loss



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factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. However, historically, the
Companys estimates and assumptions have provided results that did not differ materially from actual results.

Management reviews the
level of the allowance on a quarterly basis, at a minimum, and establishes the provision for loan losses based on an evaluation of the portfolio, past loss experience, economic conditions and business conditions affecting its primary market area,
credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, the duration of the current business cycle, bank regulatory examination results and other factors related to the collectibility of the loan
portfolio. Although the Company believes that it uses the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary if certain future events occur that cause actual results to differ
from the assumptions used in making the evaluation. For example, a downturn in the local economy could cause increases in nonperforming loans. Additionally, a decline in real estate values could cause some of the Companys loans to become
inadequately collateralized. In either case, this may require the Company to increase its provisions for loan losses, which would negatively impact earnings. Further, the Office of Thrift Supervision, as an integral part of its examination process,
periodically reviews the Companys allowance for loan losses. Such agency may require the Company to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. An increase to
the allowance required to be made by the Office of Thrift Supervision would negatively impact the Companys earnings. Additionally, a large loss could deplete the allowance and require increased provisions to replenish the allowance, which
would negatively affect earnings.

Comparison of Financial Condition at December 31, 2006 and June 30, 2006

Total assets decreased $2.5 million, or 1.8%, to $133.5 million at December 31, 2006 from $136.0 million at June 30, 2006 primarily due
to a decrease in interest-bearing deposits, which were used to pay back Federal Home Loan Bank borrowings. Federal Home Loan Bank stock increased $45,000, or 4.8%, to $984,000 at December 31, 2006 as the Company purchased stock to collateralize
$2.0 million in additional borrowings, which was paid back during the period. Loans receivable remained at $113.0 million.

Deposits increased $1.6 million, or 1.7%, to $98.7 million at December 31, 2006, primarily due to an increase in certificates of deposit of $6.9 million, offset by a decrease of $1.7 million in checking accounts and a decrease
of $2.5 million in savings accounts. The increase in deposits was primarily due to aggressive marketing of higher rate certificates of deposit. Federal Home Loan Bank advances decreased $500,000, or 3.5%, to $14.0 million at December 31, 2006.
The repayment of Federal Home Loan Bank advances was also funded by deposit growth.

Total equity decreased $72,000, or 0.4%, to
$18.5 million at December 31, 2006 primarily due to a decrease in retained earnings due to the loss for the period, the payment of a dividend to stockholders and the purchase of treasury shares, offset by an increase to paid in capital and a
reduction of the offsets to capital for the allocation of ESOP shares and the vesting of shares of restricted stock.

Results of Operations for the
Three Months Ended December 31, 2006 and 2005

General. Net income decreased $174,000, or 109.4 %, to a loss of
$15,000 for the three months ended December 31, 2006 compared to the same period in the prior year due primarily to a $173,000 decrease in net interest income and a $132,000 increase in non-interest expenses, offset by a $30,000 decrease in the
provision for loan losses and a $119,000 decrease in the provision for income taxes.



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Net Interest Income.The following table summarizes interest income and expense for the
three months ended December 31, 2006 and 2005.



|                                |  |                                 |       |      |   |          |  |       |  
|------------------------------- |  | ------------------------------- | ----- | ---- | - | -------- |  | ----- | -
|                                |  | Three Months Ended December 31, |      
|                                |  | 2006                            |       | 2005 |   | % change | 
|                                |  | (Dollars in thousands)          |       |      |  
|Interest Income:                |  |                                 |       |      |   |          |  |       |  
|Loans, including fees           |  | $                               | 1,766 |      | $ | 1,717    |  | 2.9   | %
|Investment securities           |  |                                 | 94    |      |   | 93       |  | 1.1   |  
|Other                           |  |                                 | 62    |      |   | 53       |  | 17.0  |  
|                                |  |                                 |       |      |   |          |  |       |  
|Total interest income           |  |                                 | 1,922 |      |   | 1,863    |  | 3.2   |  
|                                |  |                                 |      
|Interest Expense:               |  |                                 |       |      |   |          |  |       |  
|Deposits                        |  |                                 | 925   |      |   | 683      |  | 35.4  |  
|Federal Home Loan Bank advances |  |                                 | 178   |      |   | 188      |  | (5.3  | )
|                                |  |                                 |       |      |   |          |  |       |  
|Total interest expense          |  |                                 | 1,103 |      |   | 871      |  | 26.6  |  
|                                |  |                                 |       |      |   |          |  |       |  
|Net interest income             |  | $                               | 819   |      | $ | 992      |  | (17.4 | )
|                                |  |                                 |       |      |   |          |  |       |  

The following table summarizes average balances and average yield and costs for the three months
ended December 31, 2006 and 2005.



|                                |  |                                 |         |            |      |   |                |   |            |  |      |  
|------------------------------- |  | ------------------------------- | ------- | ---------- | ---- | - | -------------- | - | ---------- |  | ---- | -
|                                |  | Three Months Ended December 31, |        
|                                |  | 2006                            |         |            | 2005 |  
|                                |  | AverageBalance                  |         | Yield/Cost |      |   | AverageBalance |   | Yield/Cost | 
|                                |  | (Dollars in thousands)          |        
|Loans                           |  | $                               | 113,534 |            | 6.22 | % |                | $ | 110,695    |  | 6.20 | %
|Investment securities           |  |                                 | 7,492   |            | 5.02 |   |                |   | 7,569      |  | 4.91 |  
|Interest-bearing deposits       |  |                                 | 4,680   |            | 4.19 |   |                |   | 4,875      |  | 3.04 |  
|Federal funds sold              |  |                                 | 1,152   |            | 4.51 |   |                |   | 1,146      |  | 4.19 |  
|Deposits                        |  |                                 | 98,313  |            | 3.76 |   |                |   | 90,340     |  | 3.02 |  
|Federal Home Loan Bank advances |  |                                 | 15,435  |            | 4.61 |   |                |   | 16,913     |  | 4.45 |  

Net interest income for the three months ended December 31, 2006 decreased $173,000, or
17.4%, compared to the same period last year, as a result of a decrease in the interest rate spread to 2.18% from 2.74% offset by an increase in average interest-earning balances.Total interest income increased as a result of the growth in
average interest-earning assets to $126.9 million from $124.3 million, and by an increase in the average yield to 6.06% from 6.00% due to the higher market interest rate environment. Total interest expense increased as a result of a higher average
balance of deposits and an increase in the average interest rate paid on deposits, which increased to 3.76% from 3.02%, due to the higher market interest rate environment and increase in higher costing certificates of deposit, offset by a decrease
in the average balance of Federal Home Loan Bank borrowings to $15.4 million, compared to average borrowings of $16.9 million in 2005.



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Provision for Loan Losses. The following table summarizes the activity in the allowance for
loan losses for the three months ended December 31, 2006 and 2005.



|                                 |  |                                 |     |      |   |    
|-------------------------------- |  | ------------------------------- | --- | ---- | - | ---
|                                 |  | Three Months Ended December 31,
|                                 |  | 2006                            |     | 2005
|                                 |  | (In thousands)                 
|Allowance at beginning of period |  | $                               | 402 |      | $ | 364
|Provision for loan losses        |  |                                 |    |      |   | 30 
|Charge-offs                      |  |                                 |    |      |   |   
|Recoveries                       |  |                                 |    |      |   | 12 
|Net recoveries                   |  |                                 |    |      |   | 12 
|                                 |  |                                 |     |      |   |    
|Allowance at end of period       |  | $                               | 402 |      | $ | 406
|                                 |  |                                 |     |      |   |    

The provision for loan losses decreased $30,000 to no provision for the three months ended
December 31, 2006. The decrease in the provision for loan losses reflects the absence of charge-offs in 2006 and continued low non-performing assets.

The following table provides information with respect to our nonperforming assets at the dates indicated. The Company did not have any accruing loans past due 90 days or more or foreclosed real estate at the dates
presented.



|                                            |  |                        |      |   |                 |   |      |          |  |      |   
|------------------------------------------- |  | ---------------------- | ---- | - | --------------- | - | ---- | -------- |  | ---- | --
|                                            |  | At December 31,2006    |      |   | At June 30,2006 |   |      | % change | 
|                                            |  | (Dollars in thousands) |      |   |                 |  
|Nonaccruing loans:                          |  |                        |      |   |                 |   |      |          |  |      |   
|One- to four-family                         |  | $                      | 154  |   |                 | $ | 165  |          |  | (6.7 | )%
|Mobile home                                 |  |                        | 8    |   |                 |   |     |          |  | N/A  |   
|                                            |  |                        |      |   |                 |   |      |          |  |      |   
|Total                                       |  |                        | 162  |   |                 |   | 165  |          |  | (1.8 | ) 
|Accruing loans past due 90 days or more     |  |                        |     |   |                 |   |     |          |  |      |   
|Foreclosed real estate                      |  |                        |     |   |                 |   |     |          |  |      |   
|Other repossessed assets                    |  |                        | 55   |   |                 |   | 51   |          |  | 7.8  |   
|                                            |  |                        |      |   |                 |   |      |          |  |      |   
|Total non-performing assets                 |  | $                      | 217  |   |                 | $ | 216  |          |  | 0.5  |   
|                                            |  |                        |      |   |                 |   |      |          |  |      |   
|                                            |  |                        |     
|Total non-performing loans to total loans   |  |                        | 0.14 | % |                 |   | 0.15 | %        |  |      |   
|Total non-performing loans to total assets  |  |                        | 0.12 |   |                 |   | 0.12 |          |  |      |   
|Total non-performing assets to total assets |  |                        | 0.16 |   |                 |   | 0.16 |          |  |      |   



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##### Table of Contents

Noninterest Income. The following table summarizes noninterest income for the three months
ended December 31, 2006 and 2005.



|                                                |  |                                |    |      |   |          |  |       |   
|----------------------------------------------- |  | ------------------------------ | -- | ---- | - | -------- |  | ----- | --
|                                                |  | Three MonthsEnded December 31, |    |      |  
|                                                |  | 2006                           |    | 2005 |   | % change | 
|                                                |  | (Dollars in thousands)         |    |      |  
|Service fees on deposits                        |  | $                              | 27 |      | $ | 29       |  | (6.9  | )%
|Service fees on loans                           |  |                                | 7  |      |   | 6        |  | 16.7  |   
|Income from investment in life insurance policy |  |                                | 19 |      |   | 19       |  |      |   
|Other income                                    |  |                                | 11 |      |   | 28       |  | (60.7 | ) 
|                                                |  |                                |    |      |   |          |  |       |   
|Total                                           |  | $                              | 64 |      | $ | 82       |  | (22.0 | ) 
|                                                |  |                                |    |      |   |          |  |       |   

The decrease in non-interest income was due to a decrease in other income. The decrease in other
income of $17,000, or 60.7%, was due primarily to a decrease in miscellaneous fees.

Noninterest Expenses. The following
table summarizes noninterest expenses for the three months ended December 31, 2006 and 2005.



|                                  |  |                                |       |   |      |   |      |          |  |        |  
|--------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ---- | -------- |  | ------ | -
|                                  |  | Three MonthsEnded December 31, |       |   |      |  
|                                  |  | 2006                           |       |   | 2005 |   |      | % change | 
|                                  |  | (Dollars in thousands)         |       |   |      |  
|Compensation and related expenses |  | $                              | 511   |   |      | $ | 445  |          |  | 14.8   | %
|Occupancy                         |  |                                | 42    |   |      |   | 39   |          |  | 7.7    |  
|Data processing                   |  |                                | 82    |   |      |   | 70   |          |  | 17.1   |  
|Foreclosed real estate activity   |  |                                | 12    |   |      |   | (1   | )        |  | 1300.0 |  
|Telephone and postage             |  |                                | 15    |   |      |   | 18   |          |  | (16.7  | )
|Advertising                       |  |                                | 26    |   |      |   | 23   |          |  | 13.0   |  
|Professional fees                 |  |                                | 65    |   |      |   | 49   |          |  | 32.7   |  
|Equipment expense                 |  |                                | 36    |   |      |   | 33   |          |  | 9.1    |  
|Other                             |  |                                | 120   |   |      |   | 101  |          |  | 18.8   |  
|                                  |  |                                |       |   |      |   |      |          |  |        |  
|Total                             |  | $                              | 909   |   |      | $ | 777  |          |  | 17.0   |  
|                                  |  |                                |       |   |      |   |      |          |  |        |  
|Efficiency ratio (1)              |  |                                | 102.9 | % |      |   | 72.3 | %        |  |        |  

---

|(1) | Computed as noninterest expenses divided by the sum of net interest income and other income.
|--- | --------------------------------------------------------------------------------------------

Total non-interest expenses increased $132,000, or 17.0%, primarily as a result of increases in compensation, professional fees and other. Compensation
expense increased due to the addition of two additional executive officers and increased stock-based compensation expense. Professional fees increased due to higher legal and accounting costs incurred during the year. Other expenses increased
$19,000, or 18.8%, as a result of start-up expenses for the introduction of new debit cards, increased information technology maintenance expenses and increased insurance bonds.



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##### Table of Contents

Income Taxes. Provision for income taxes decreased $119,000, or 110.2%, from $108,000 for
the three months ended December 31, 2005 to a benefit of $11,000 for the three months ended December 31, 2006. The effective tax rate was 40.4% for the three months ended December 31, 2005 compared to 42.3% for the three months ended
December 31, 2006. The increase in the effective tax rate was due to an increase in non-deductible stock based compensation expense.

Results of
Operations for the Six Months Ended December 31, 2006 and 2005

General. Net income decreased $322,000, or 95.6%, to
$15,000 for the six months ended December 31, 2006 compared to the same period in the prior year due primarily to increases in interest expense and non-interest expenses.

Net Interest Income.The following table summarizes changes in interest income and expense for the six months ended December 31, 2006
and 2005.



|                                |  |                               |       |      |   |          |  |       |  
|------------------------------- |  | ----------------------------- | ----- | ---- | - | -------- |  | ----- | -
|                                |  | Six Months Ended December 31, |       |      |  
|                                |  | 2006                          |       | 2005 |   | % change | 
|                                |  | (Dollars in thousands)        |       |      |  
|Interest Income:                |  |                               |       |      |   |          |  |       |  
|Loans, including fees           |  | $                             | 3,521 |      | $ | 3,292    |  | 7.0   | %
|Investment securities           |  |                               | 186   |      |   | 171      |  | 8.8   |  
|Other                           |  |                               | 99    |      |   | 77       |  | 28.6  |  
|                                |  |                               |       |      |   |          |  |       |  
|Total interest income           |  |                               | 3,806 |      |   | 3,540    |  | 7.5   |  
|                                |  |                               |      
|Interest Expense:               |  |                               |       |      |   |          |  |       |  
|Deposits                        |  |                               | 1,813 |      |   | 1,295    |  | 40.0  |  
|Federal Home Loan Bank advances |  |                               | 341   |      |   | 286      |  | 19.2  |  
|                                |  |                               |       |      |   |          |  |       |  
|Total interest expense          |  |                               | 2,154 |      |   | 1,581    |  | 36.2  |  
|                                |  |                               |       |      |   |          |  |       |  
|Net interest income             |  | $                             | 1,652 |      | $ | 1,959    |  | (15.7 | )
|                                |  |                               |       |      |   |          |  |       |  

The following table summarizes average balances and average yield and costs for the six months
ended December 31, 2006 and 2005.



|                                |  |                               |         |            |      |   |                |   |             |  |      |  
|------------------------------- |  | ----------------------------- | ------- | ---------- | ---- | - | -------------- | - | ----------- |  | ---- | -
|                                |  | Six Months Ended December 31, |        
|                                |  | 2006                          |         |            | 2005 |  
|                                |  | AverageBalance                |         | Yield/Cost |      |   | AverageBalance |   | Yield/ Cost | 
|                                |  | (Dollars in thousands)        |        
|Loans                           |  | $                             | 113,435 |            | 6.21 | % |                | $ | 105,863     |  | 6.22 | %
|Investment securities           |  |                               | 7,482   |            | 4.97 |   |                |   | 7,611       |  | 4.55 |  
|Interest-earning deposits       |  |                               | 3,627   |            | 3.97 |   |                |   | 3,896       |  | 2.78 |  
|Federal funds                   |  |                               | 1,152   |            | 4.65 |   |                |   | 1,096       |  | 3.83 |  
|Deposits                        |  |                               | 97,638  |            | 3.71 |   |                |   | 88,827      |  | 2.92 |  
|Federal Home Loan Bank advances |  |                               | 14,946  |            | 4.56 |   |                |   | 12,924      |  | 4.43 |  

Net interest income for the six months ended December 31, 2006 decreased $307,000, or 15.7%,
compared to the same period last year, as a result of a decrease in the interest rate spread to 2.23% from 2.87%, offset by a larger average balance of interest-earning assets. Total interest income increased as a



13



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result of the growth in average interest-earning assets to $125.7 million from $118.5 million and an increase in the average yield to 6.06% from 5.98% due to
the higher market interest rate environment.Total interest expense increased as a result of an increase in the average balance of Federal Home Loan Bank borrowings to $14.9 million, compared to average borrowings of $12.9 million in 2005.
Interest expense on deposits increased due to an increase in the average balance of $8.8 million, or 10.0%, and the average interest rate paid on deposits, which increased to 3.71% from 2.92%, due to the higher market interest rate environment.

Provision for Loan Losses. The following table summarizes the activity in the allowance for loan losses for the six months
ended December 31, 2006 and 2005.



|                                 |  |                               |     |   |      |   |     |  
|-------------------------------- |  | ----------------------------- | --- | - | ---- | - | --- | -
|                                 |  | Six Months Ended December 31, |    
|                                 |  | 2006                          |     |   | 2005 |  
|                                 |  | (In thousands)                |    
|Allowance at beginning of period |  | $                             | 410 |   |      | $ | 349 |  
|Provision for loan losses        |  |                               | 5   |   |      |   | 70  |  
|Charge-offs                      |  |                               | (13 | ) |      |   | (25 | )
|Recoveries                       |  |                               |    |   |      |   | 12  |  
|                                 |  |                               |     |   |      |   |     |  
|Net (charge-offs) recoveries     |  |                               | (13 | ) |      |   | (13 | )
|                                 |  |                               |     |   |      |   |     |  
|Allowance at end of period       |  | $                             | 402 |   |      | $ | 406 |  
|                                 |  |                               |     |   |      |   |     |  

The provision for loan losses decreased $65,000 to $5,000 for the six months ended
December 31, 2006. The decrease in the provision for loan losses reflects the continued low level of charge-offs in 2006 and continued low non-performing assets.

Noninterest Income. The following table summarizes noninterest income for the six months ended December 31, 2006 and 2005.



|                                         |  |                              |     |      |   |          |  |       |  
|---------------------------------------- |  | ---------------------------- | --- | ---- | - | -------- |  | ----- | -
|                                         |  | Six Months EndedDecember 31, |     |      |  
|                                         |  | 2006                         |     | 2005 |   | % change | 
|                                         |  | (Dollars in thousands)       |     |      |  
|Service fees on deposits                 |  | $                            | 57  |      | $ | 57       |  |      | %
|Service fees on loans                    |  |                              | 14  |      |   | 14       |  |      |  
|Income from investment in life insurance |  |                              | 49  |      |   | 38       |  | 29.0  |  
|Other income                             |  |                              | 23  |      |   | 45       |  | (48.9 | )
|                                         |  |                              |     |      |   |          |  |       |  
|                                         |  | $                            | 143 |      | $ | 154      |  | (7.1  | )
|                                         |  |                              |     |      |   |          |  |       |  

The decrease in noninterest income was due to a decrease in other income. The decrease in other
income of $22,000 or 48.9%, was due primarily to a decrease in miscellaneous fees.



14



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##### Table of Contents

Noninterest Expenses. The following table summarizes noninterest expenses for the six
months ended December 31, 2006 and 2005.



|                                  |  |                               |       |   |      |   |       |          |  |        |  
|--------------------------------- |  | ----------------------------- | ----- | - | ---- | - | ----- | -------- |  | ------ | -
|                                  |  | Six Months Ended December 31, |       |   |      |  
|                                  |  | 2006                          |       |   | 2005 |   |       | % change | 
|                                  |  | (Dollars in thousands)        |       |   |      |  
|Compensation and related expenses |  | $                             | 1,028 |   |      | $ | 832   |          |  | 23.6   | %
|Occupancy                         |  |                               | 87    |   |      |   | 79    |          |  | 10.1   |  
|Data processing                   |  |                               | 148   |   |      |   | 138   |          |  | 7.3    |  
|Repossessed asset activity        |  |                               | 16    |   |      |   | (1    | )        |  | 1700.0 |  
|Telephone and postage             |  |                               | 32    |   |      |   | 33    |          |  | (3.0   | )
|Advertising                       |  |                               | 50    |   |      |   | 50    |          |  | 0.0    |  
|Professional fees                 |  |                               | 132   |   |      |   | 88    |          |  | 50.0   |  
|Equipment expense                 |  |                               | 69    |   |      |   | 64    |          |  | 7.8    |  
|Other                             |  |                               | 203   |   |      |   | 213   |          |  | (4.7   | )
|                                  |  |                               |       |   |      |   |       |          |  |        |  
|Total                             |  | $                             | 1,765 |   |      | $ | 1,496 |          |  | 18.0   |  
|                                  |  |                               |       |   |      |   |       |          |  |        |  
|                                  |  |                               |      
|Efficiency ratio (1)              |  |                               | 98.3  | % |      |   | 70.8  | %        |  |        |  

---

|(1) | Computed as noninterest expenses divided by the sum of net interest income and other income.
|--- | --------------------------------------------------------------------------------------------

Total non-interest expenses increased $269,000, or 18.0%, primarily as a result of increases in compensation and related expenses, occupancy, repossessed
asset activity, and professional fees.Compensation expense increased due to the addition of two additional executive officers and additional stock based compensation expense. Repossessed asset activity expenses increased due to repairs made
to repossessed assets to prepare them for sale. Professional fees increased due to higher legal and accounting costs incurred during the year.

Income Taxes. Provision for income taxes decreased $200,000, or 95.2%, from $210,000 for the six months ended December 31, 2005 to $10,000 for the six months ended December 31, 2006. The effective tax rate was 40.0%
for the six months ended December 31, 2006 compared to 38.4% for the six months ended December 31, 2005. The increase in the effective tax rate was due to an increase in non-deductible stock based compensation expense.

Liquidity and Capital Resources

Liquidity is the
ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of investment securities. While maturities and scheduled amortization
of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows,
(3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management program. Generally, excess liquid assets are invested in interest-earning deposits and short- and intermediate-term
U.S. Treasury and federal agency securities.



15



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Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of
these assets depend on our operating, financing, lending and investing activities during any given period. At December 31, 2006, cash and cash equivalents totaled $6.4 million, including interest-bearing deposits of $4.4 million. Securities
classified as available-for-sale, which provide additional sources of liquidity, totaled $4.3 million at December 31, 2006. In addition, at December 31, 2006, we had the ability to borrow a total of approximately $40.0 million from the
Federal Home Loan Bank of Atlanta. On that date, we had advances outstanding of $14.0 million.

At December 31, 2006, we had
$980,000 in loan commitments outstanding, which included $121,000 in commitments to purchase mobile home loans. In addition to commitments to originate loans, we had $1.6 million in unused lines of credit and $2.8 million of construction loans in
process. Certificates of deposit due within one year of December 31, 2006 totaled $20.6 million, or 20.9% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other
certificates of deposit and lines of credit. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2007. We
believe, however, based on past experience, that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our primary investing activities are the origination of loans and the purchase of securities. Our primary financing activities consist of activity in
deposit accounts. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive and to
increase core deposits. Occasionally, we offer promotional rates on certain deposit products to attract deposits.



|                                 |  |                              |       |      |   |       
|-------------------------------- |  | ---------------------------- | ----- | ---- | - | ------
|                                 |  | Six Months EndedDecember 31,
|                                 |  | 2006                         |       | 2005
|                                 |  | (In thousands)              
|Investing activities:            |  |                              |       |      |   |       
|Loan originations                |  | $                            | 2,563 |      | $ | 21,899
|Loan and participation purchases |  |                              | 181   |      |   | 1,039 
|Securities purchases             |  |                              | 68    |      |   | 49    
|                                 |  |                             
|Financing activities:            |  |                              |       |      |   |       
|Increase in deposits             |  |                              | 1,610 |      |   | 5,105 
|Federal Home Loan Bank advances  |  |                              | 2,000 |      |   | 10,000

We are subject to various regulatory capital requirements administered by the Office of Thrift
Supervision, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad
risk categories. At December 31, 2006, we exceeded all of our regulatory capital requirements. We are considered well capitalized under regulatory guidelines.

The capital from the offering significantly increased our liquidity and capital resources. Over time, this initial level of liquidity will be reduced as
net proceeds from the stock offering continue to be used for general corporate purposes, including the funding of lending activities. Our financial condition and results of operations have been enhanced by the capital from the offering, resulting in
increased net interest-earning. However, the large increase in equity resulting from the capital raised



16



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##### Table of Contents

in the offering had an adverse impact on our return on equity. We may use capital management tools such as cash dividends and share repurchases.

Off-Balance Sheet Arrangements

In the normal
course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of
credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers requests for funding and take the form of loan commitments and lines of credit.

For the six months ended December 31, 2006 and the year ended June 30, 2006, we did not engage in any off-balance sheet transactions reasonably
likely to have a material effect on our financial condition, results of operations or cash flows.



|Item 3. | Controls and Procedures
|------- | -----------------------

The Companys
management, including the Companys principal executive officer and principal financial officer, have evaluated the effectiveness of the Companys disclosure controls and procedures, as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by
this report, the Companys disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities
and Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and (2) is accumulated and communicated to the Companys
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. However, the initial draft of the financial statements are currently prepared by the chief
financial officer. The absence of a second level of review of the financial statements disclosures may result in revisions to the draft financial statement disclosures (which are reflected in, and do not affect the final interim financial statement
disclosures) as a result of the review by the auditors.



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##### Table of Contents

Part II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

BV Financial is not involved in
any pending legal proceedings. Bay-Vanguard Federal is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by
management to be immaterial to its financial condition and results of operations.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

The following table sets forth information regarding the Companys repurchases of its common stock during the quarter ended December 31, 2006.



|                                      |  |                                       |   |  |                               |      |                                                                              |        |                                                                            |        
|------------------------------------- |  | ------------------------------------- | - |  | ----------------------------- | ---- | ---------------------------------------------------------------------------- | ------ | -------------------------------------------------------------------------- | -------
|Period                                |  | (a) TotalNumber ofSharesPurchased (1) |   |  | (b) AveragePricePaid perShare |      | (c) TotalNumber ofSharesPurchasedas Part ofPubliclyAnnouncedPlans orPrograms |        | (d) MaximumNumberof Sharesthat MayYet BePurchasedUnder thePlans orPrograms
|October 1, 2006 to October 31, 2006   |  |                                      |   |  |                               |     |                                                                              |       |                                                                            | 132,250
|                                      |  |                                       |   | 
|November 1, 2006 to November 30, 2006 |  | 9,613                                 | 2 |  | $                             | 9.25 |                                                                              | 9,000  |                                                                            | 123,250
|                                      |  |                                       |   | 
|December 1, 2006 to December 31, 2006 |  | 10,000                                |   |  |                               | 9.30 |                                                                              | 10,000 |                                                                            | 113,250
|                                      |  |                                       |   |  |                               |      |                                                                              |        |                                                                            |        
|Total                                 |  | 19,613                                |   |  | $                             | 9.27 |                                                                              | 19,000 |                                                                            |        

---

|(1) | On April 12, 2006, BV Financial announced the adoption of a stock repurchase program to acquire up to 132,250 shares, or 5.0%, of BV Financials outstanding shares of
common stock. The program will continue until it is completed or terminated by the Board of Directors.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 613 shares withheld at $9.20 for taxes on vested shares to two executive officers.
|--- | -------------------------------------------------------------------------------------------

Item 3. Defaults upon Senior Securities

Not Applicable.



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##### Table of Contents

|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

The Annual Meeting of Stockholders of the Company was held on November 8, 2006. The results of the vote on the matters presented at the meeting is as follows:



| | 1. | The following individuals were elected as directors, each for a three-year term:
| | -- | --------------------------------------------------------------------------------



|                          |  |           |  |               
|------------------------- |  | --------- |  | --------------
|                          |  | Votes for |  | Votes Withheld
|Michael J. Birmingham III |  | 2,227,418 |  | 52,271        
|Daniel J. Gallagher, Jr.  |  | 2,227,443 |  | 52,246        
|Edmund J. Kowalewski      |  | 2,224,945 |  | 54,744        
|Catherine M. Staszak      |  | 2,225,175 |  | 54,494        



| | 2. | The appointment of Beard Miller Company LLP as auditors for the Company for the fiscal year ending June 30, 2007 was ratified by stockholders by the following vote:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|               |  |                 |  |               
|-------------- |  | --------------- |  | --------------
|For: 2,260,294 |  | Against: 10,121 |  | Abstain: 9,274



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                  
|---- |  | -----------------------------------------------------------------
|3.1  |  | Charter of BV Financial, Inc. (1)                                
|3.2  |  | Bylaws of BV Financial, Inc. (1)                                 
|4.0  |  | Stock Certificate of BV Financial, Inc. (1)                      
|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 by reference into this document from the Exhibits filed with the Securities and Exchange Commission on the Registration Statement on Form SB-2, and any amendments
thereto, Registration No. 333-119083.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.



|                         |  |                    |  |                                                                    
|------------------------ |  | ------------------ |  | -------------------------------------------------------------------
|                         |  | BV FINANCIAL, INC.
|                         |  |                   
|Dated: February 12, 2007 |  | By:                |  | /s/ Carolyn M. Mroz                                                
|                         |  |                    |  | Carolyn M. Mroz                                                    
|                         |  |                    |  | President and Chief Executive Officer (principal
executive officer)



|                         |  |     |  |                                                                                               
|------------------------ |  | --- |  | ----------------------------------------------------------------------------------------------
|Dated: February 12, 2007 |  | By: |  | /s/ Edmund T. Leonard                                                                         
|                         |  |     |  | Edmund T. Leonard                                                                             
|                         |  |     |  | Chairman of the Board and Chief Financial Officer (principal financial and accounting officer)