##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 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 May 12, 2006, there were 2,645,000 shares of the registrants common stock outstanding.



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##### Table of Contents

BV FINANCIAL, INC.

Table of Contents



|                              |  |         |  |                                                                                                             |  |         
|----------------------------- |  | ------- |  | ----------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |         |  |                                                                                                             |  | Page No.
|                              | 
|Part I. Financial Information |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements (Unaudited)                                                                            |  |         
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Financial Condition at March 31, 2006 and June 30, 2005                          |  | 1       
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2006 and 2005               |  | 2       
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 2006 and 2005 |  | 3       
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2006 and 2005                     |  | 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                                                                                     |  | 18      
|                              | 
|Part II. Other Information    |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Legal Proceedings                                                                                           |  | 19      
|                              |  |         | 
|                              |  | Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                 |  | 19      
|                              |  |         | 
|                              |  | Item 3. |  | Defaults upon Senior Securities                                                                             |  | 19      
|                              |  |         | 
|                              |  | Item 4. |  | Submission of Matters to a Vote of Security Holders                                                         |  | 19      
|                              |  |         | 
|                              |  | Item 5. |  | Other Information                                                                                           |  | 19      
|                              |  |         | 
|                              |  | Item 6. |  | Exhibits                                                                                                    |  | 19      
|                              | 
|Signatures                    |  |        



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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)



|                                                                                               |  |                |         |   |              |   |         |  
|---------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------ | - | ------- | -
|                                                                                               |  | March 31,2006  |         |   | June 30,2005 |  
|                                                                                               |  | (In thousands) |        
|ASSETS                                                                                         |  |                |         |   |              |   |         |  
|Cash                                                                                           |  | $              | 1,538   |   |              | $ | 1,847   |  
|Interest bearing deposits in other banks                                                       |  |                | 3,004   |   |              |   | 5,471   |  
|Federal funds sold                                                                             |  |                | 1,293   |   |              |   | 1,018   |  
|                                                                                               |  |                |         |   |              |   |         |  
|Cash and Cash Equivalents                                                                      |  |                | 5,835   |   |              |   | 8,336   |  
|                                                                                               |  |               
|Securities available for sale                                                                  |  |                | 4,241   |   |              |   | 4,342   |  
|Securities held to maturity                                                                    |  |                | 3,255   |   |              |   | 3,350   |  
|Loans receivable, net of allowance for loan losses March 31, 2006 - $426; June 30, 2005 - $349 |  |                | 109,973 |   |              |   | 96,051  |  
|Premises and equipment, net                                                                    |  |                | 2,513   |   |              |   | 2,569   |  
|Federal Home Loan Bank of Atlanta stock, at cost                                               |  |                | 939     |   |              |   | 497     |  
|Investment in life insurance                                                                   |  |                | 1,870   |   |              |   | 1,813   |  
|Accrued interest receivable                                                                    |  |                | 448     |   |              |   | 417     |  
|Other assets                                                                                   |  |                | 457     |   |              |   | 423     |  
|                                                                                               |  |                |         |   |              |   |         |  
|Total Assets                                                                                   |  | $              | 129,531 |   |              | $ | 117,798 |  
|                                                                                               |  |                |         |   |              |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                           |  |                |         |   |              |   |         |  
|LIABILITIES                                                                                    |  |                |         |   |              |   |         |  
|Non-interest bearing deposits                                                                  |  | $              | 3,526   |   |              | $ | 3,304   |  
|Interest bearing deposits                                                                      |  |                | 90,896  |   |              |   | 88,097  |  
|                                                                                               |  |                |         |   |              |   |         |  
|Total Deposits                                                                                 |  |                | 94,422  |   |              |   | 91,401  |  
|Federal Home Loan Bank advances                                                                |  |                | 14,500  |   |              |   | 5,000   |  
|Official checks                                                                                |  |                | 532     |   |              |   | 983     |  
|Advance payments by borrowers for taxes and insurance                                          |  |                | 858     |   |              |   | 1,080   |  
|Other liabilities                                                                              |  |                | 718     |   |              |   | 886     |  
|                                                                                               |  |                |         |   |              |   |         |  
|Total Liabilities                                                                              |  | $              | 111,030 |   |              | $ | 99,350  |  
|                                                                                               |  |                |         |   |              |   |         |  
|COMMITMENTS AND CONTINGENCIES                                                                  |  |                |         |   |              |   |         |  
|                                                                                               |  |               
|STOCKHOLDERS EQUITY                                                                           |  |                |         |   |              |   |         |  
|Preferred stock $0.01 par value; 1,000,000 shares authorized; none issued or outstanding       |  |                |        |   |              |   |        |  
|Common stock $0.01 par value; 9,000,000 shares authorized; 2,645,000 issued and outstanding    |  |                | 26      |   |              |   | 26      |  
|Paid-in capital                                                                                |  |                | 10,962  |   |              |   | 10,923  |  
|Unearned employee stock ownership plan shares                                                  |  |                | (911    | ) |              |   | (963    | )
|Unvested shares of restricted stock                                                            |  |                | (437    | ) |              |   |        |  
|Retained earnings                                                                              |  |                | 8,918   |   |              |   | 8,499   |  
|Accumulated other comprehensive loss                                                           |  |                | (57     | ) |              |   | (37     | )
|                                                                                               |  |                |         |   |              |   |         |  
|Total Stockholders Equity                                                                     |  |                | 18,501  |   |              |   | 18,448  |  
|                                                                                               |  |                |         |   |              |   |         |  
|Total Liabilities and Stockholders Equity                                                     |  | $              | 129,531 |   |              | $ | 117,798 |  
|                                                                                               |  |                |         |   |              |   |         |  

See notes to Unaudited Consolidated Financial Statements.



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##### Table of Contents

BV FINANCIAL, INC. AND SUBSIDIARY

Consolidated Statements of Income

(Unaudited)



|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|--------------------------------------------------- |  | ---------------------------- | ----- | --------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                                    |  | Three Months Ended March 31, |       | Nine Months Ended March 31,
|                                                    |  | 2006                         |       | 2005                        |   | 2006  |  | 2005
|                                                    |  | (In thousands)              
|INTEREST INCOME                                     |  |                              |       |                             |   |       |  |      |       |  |   |      
|Loans, including fees                               |  | $                            | 1,671 |                             | $ | 1,318 |  | $    | 4,963 |  | $ | 3,879
|Investment securities                               |  |                              | 87    |                             |   | 71    |  |      | 258   |  |   | 240  
|Other                                               |  |                              | 47    |                             |   | 109   |  |      | 124   |  |   | 164  
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Total Interest Income                               |  |                              | 1,805 |                             |   | 1,498 |  |      | 5,345 |  |   | 4,283
|                                                    |  |                              |       |                            
|INTEREST EXPENSE                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Deposits                                            |  |                              | 731   |                             |   | 605   |  |      | 2,026 |  |   | 1,660
|Borrowed funds                                      |  |                              | 162   |                             |   |      |  |      | 448   |  |   |     
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Total Interest Expense                              |  |                              | 893   |                             |   | 605   |  |      | 2,474 |  |   | 1,660
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Net Interest Income                                 |  |                              | 912   |                             |   | 893   |  |      | 2,871 |  |   | 2,623
|PROVISION FOR LOAN LOSSES                           |  |                              | 20    |                             |   |      |  |      | 90    |  |   |     
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Net Interest Income after Provision for Loan Losses |  |                              | 892   |                             |   | 893   |  |      | 2,781 |  |   | 2,623
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|NON-INTEREST INCOME                                 |  |                              |       |                             |   |       |  |      |       |  |   |      
|Service fees on deposits                            |  |                              | 29    |                             |   | 24    |  |      | 86    |  |   | 83   
|Service fees on loans                               |  |                              | 25    |                             |   | 4     |  |      | 39    |  |   | 12   
|Income from investment in life insurance            |  |                              | 19    |                             |   | 20    |  |      | 57    |  |   | 60   
|Other income                                        |  |                              | 10    |                             |   | 9     |  |      | 55    |  |   | 25   
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Total Non-Interest Income                           |  |                              | 83    |                             |   | 57    |  |      | 237   |  |   | 180  
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|NON-INTEREST EXPENSES                               |  |                              |       |                             |   |       |  |      |       |  |   |      
|Compensation and related expenses                   |  |                              | 488   |                             |   | 372   |  |      | 1,320 |  |   | 1,162
|Occupancy                                           |  |                              | 43    |                             |   | 39    |  |      | 122   |  |   | 111  
|Data processing                                     |  |                              | 79    |                             |   | 77    |  |      | 217   |  |   | 220  
|Telephone and postage                               |  |                              | 15    |                             |   | 17    |  |      | 48    |  |   | 52   
|Advertising                                         |  |                              | 39    |                             |   | 18    |  |      | 89    |  |   | 56   
|Professional fees                                   |  |                              | 44    |                             |   | 58    |  |      | 132   |  |   | 115  
|Equipment                                           |  |                              | 32    |                             |   | 29    |  |      | 96    |  |   | 86   
|Other                                               |  |                              | 99    |                             |   | 109   |  |      | 311   |  |   | 275  
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Total Non-Interest Expenses                         |  |                              | 839   |                             |   | 719   |  |      | 2,335 |  |   | 2,077
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Income before Income Taxes                          |  |                              | 136   |                             |   | 231   |  |      | 683   |  |   | 726  
|PROVISION FOR INCOME TAXES                          |  |                              | 54    |                             |   | 79    |  |      | 264   |  |   | 254  
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|Net Income                                          |  | $                            | 82    |                             | $ | 152   |  | $    | 419   |  | $ | 472  
|                                                    |  |                              |       |                             |   |       |  |      |       |  |   |      
|BASIC AND DILUTED EARNINGS PER
SHARE                |  | $                            | 0.03  |                             |   | N/A   |  | $    | 0.17  |  |   | N/A  

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 Months Ended March 31, |    |   | For Nine Months Ended March 31, |  
|                                                                                                                     |  | 2006                             |    |   | 2005                            |   |     | 2006 |  |   | 2005 |  
|                                                                                                                     |  | (In thousands)                   |   
|Net Income                                                                                                           |  | $                                | 82 |   |                                 | $ | 152 |      |  | $ | 419  |   |  | $ | 472 |  
|Unrealized net holding gains (losses) on available-for-sale securities, net of taxes of ($1), ($17), ($13) and ($10) |  |                                  | (2 | ) |                                 |   | (27 | )    |  |   | (20  | ) |  |   | (16 | )
|                                                                                                                     |  |                                  |    |   |                                 |   |     |      |  |   |      |   |  |   |     |  
|Comprehensive income                                                                                                 |  | $                                | 80 |   |                                 | $ | 125 |      |  | $ | 399  |   |  | $ | 456 |  
|                                                                                                                     |  |                                  |    |   |                                 |   |     |      |  |   |      |   |  |   |     |  

See Notes to Unaudited Consolidated Financial Statements.



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##### Table of Contents

BV FINANCIAL, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Nine Months Ended March 31, |        
|                                                                                  |  | 2006                        |         |   | 2005 |  
|                                                                                  |  | (In thousands)              |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                             |         |   |      |   |         |  
|Net income                                                                        |  | $                           | 419     |   |      | $ | 472     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Net amortization of discounts and premiums                                        |  |                             | 7       |   |      |   | 9       |  
|Provision for loan losses                                                         |  |                             | 90      |   |      |   |        |  
|Amortization of deferred loan fees/costs                                          |  |                             | 96      |   |      |   | (134    | )
|Provision for depreciation                                                        |  |                             | 95      |   |      |   | 97      |  
|Increase in cash surrender value of life insurance                                |  |                             | (57     | ) |      |   | (60     | )
|Stock-based compensation expense                                                  |  |                             | 91      |   |      |   |        |  
|Change in other assets and other liabilities                                      |  |                             | (195    | ) |      |   | 141     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net Cash Provided by Operating Activities                                         |  |                             | 546     |   |      |   | 525     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                             |         |   |      |   |         |  
|Purchases of securities available for sale                                        |  |                             | (76     | ) |      |   | (17     | )
|Proceeds from maturity of securities available for sale                           |  |                             |        |   |      |   | 1,000   |  
|Proceeds from maturity of securities held to maturity                             |  |                             |        |   |      |   | 1,000   |  
|Principal collected on mortgage backed securities                                 |  |                             | 232     |   |      |   | 223     |  
|Net increase in loans                                                             |  |                             | (12,914 | ) |      |   | (9,742  | )
|Purchase of loans                                                                 |  |                             | (1,219  | ) |      |   | (3,225  | )
|Purchase of premises and equipment                                                |  |                             | (39     | ) |      |   | (45     | )
|(Purchase) sale of Federal Home Loan Bank stock                                   |  |                             | (442    | ) |      |   | 200     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net Cash Used in Investing Activities                                             |  |                             | (14,458 | ) |      |   | (10,606 | )
|                                                                                  |  |                             |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                             |         |   |      |   |         |  
|Decrease in official checks                                                       |  |                             | (451    | ) |      |   | (547    | )
|Net increase in deposits                                                          |  |                             | 3,021   |   |      |   | 7,968   |  
|Decrease in advance payments by borrowers for taxes and insurance                 |  |                             | (222    | ) |      |   | (183    | )
|Advances from Federal Home Loan Bank                                              |  |                             | 14,000  |   |      |   |        |  
|Repayment of advances from Federal Home Loan Bank                                 |  |                             | (4,500  | ) |      |   |         |  
|Purchase of MRP shares                                                            |  |                             | (437    | ) |      |   |        |  
|Capitalization of Bay Vanguard, M.H.C.                                            |  |                             |        |   |      |   | (50     | )
|Proceeds from sale of common stock                                                |  |                             |        |   |      |   | 9,968   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net Cash Provided by Financing Activities                                         |  |                             | 11,411  |   |      |   | 17,157  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net (Decrease) Increase in Cash and Cash Equivalents                              |  |                             | (2,501  | ) |      |   | 7,076   |  
|CASH AND CASH EQUIVALENTS  BEGINNING                                             |  |                             | 8,336   |   |      |   | 9,872   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS  ENDING                                                |  |                             | 5,835   |   |      |   | 16,948  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|SUPPLEMENTARY CASH FLOWS INFORMATION                                              |  |                             |         |   |      |   |         |  
|Interest paid                                                                     |  | $                           | 2,474   |   |      | $ | 1,660   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Income taxes paid                                                                 |  | $                           | 421     |   |      | $ | 242     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Loans transferred to repossessed assets                                           |  | $                           | 25      |   |      | $ | 24      |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Issuance of shares for employee stock ownership plan                              |  | $                           |        |   |      | $ | (1,037  | )
|                                                                                  |  |                             |         |   |      |   |         |  

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

March 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 three and nine month periods ended
March 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)
Annual Report on Form 10-KSB for the year ended June 30, 2005.

Principles of Consolidation

The consolidated financial statements at March 31, 2006 and June 30, 2005 and for the three and nine months ended March 31, 2006 and
March 31, 2005 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) Mutual Holding Company Reorganization and Minority Stock Issuance

On January 12, 2005, pursuant to a Plan of Reorganization and Stock Issuance, as amended, the Bank: (i) converted to a stock savings bank (the
Stock Bank) as the successor to the mutual Bank; (ii) organized the Company as a federally chartered corporation that owns 100% of the common stock of the Stock Bank; and (iii) organized Bay-Vanguard, M.H.C. as a federally
chartered mutual holding company that owns 55% of the common stock of the Company (the Mutual Holding Company). The Stock Bank succeeded to the business and operations of the Bank in its mutual form and the Company sold 45% of its common
stock in a public stock offering at $10.00 per share, raising net proceeds of $11.0 million.

Following the completion of the
reorganization, all members who had membership or liquidation rights with respect to the Bank as of the effective date of the reorganization continued to have such rights solely with respect to the Mutual Holding Company so long as they continued to
hold deposit accounts or, for borrower members, continued their borrowing relationship with the Bank. In addition, all persons who become depositors of the Bank subsequent to the reorganization will have such membership and liquidation rights with
respect to the Mutual Holding Company.

Costs of approximately $947,000 incurred in connection with the offering were recorded as a
reduction of the proceeds from the offering.



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##### Table of Contents

(3) Earnings Per Share

Basic earnings per share is based upon the weighted average number of common shares outstanding, while diluted earnings per share is based upon the weighted average number of common shares outstanding and common share
equivalents that would arise from the exercise of dilutive securities. All stock options were antidilutive at March 31, 2006.

The
difference between the common shares issued and the common shares outstanding, for the purposes of calculating basic earnings per share, is a result of the unallocated ESOP shares.

The calculated basic and diluted earnings per share (EPS) are as follows:



|                         |  |                              |           |                             |   |         |  |      |           |  |   |        
|------------------------ |  | ---------------------------- | --------- | --------------------------- | - | ------- |  | ---- | --------- |  | - | -------
|                         |  | Three Months Ended March 31, |           | Nine Months Ended March 31,
|                         |  | 2006                         |           | 2005                        |   | 2006    |  | 2005
|Numerator                |  | $                            | 82,000    |                             | $ | 152,000 |  | $    | 419,000   |  | $ | 472,000
|Denominator:             |  |                              |           |                             |   |         |  |      |           |  |   |        
|Basic shares outstanding |  |                              | 2,534,959 |                             |   | N/A     |  |      | 2,505,441 |  |   | N/A    
|Earnings per share:      |  |                              |           |                             |   |         |  |      |           |  |   |        
|Basic and diluted        |  | $                            | 0.03      |                             |   | N/A     |  | $    | 0.17      |  |   | N/A    

(4) Employee Stock Ownership Plan

The Company accounts for the Bay-Vanguard Federal Savings Bank Employee Stock Ownership Plan (the ESOP) in accordance with American Institute
of Certified Public Accountants Statement of Position 93-6. The cost of shares issued to the ESOP but not yet allocated to participants is presented in the consolidated statements of financial condition as a reduction of stockholders equity.
Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation to participant accounts. The difference between the market price and the cost of shares committed to be released is recorded
as an adjustment to additional paid-in capital. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are reflected as a reduction of debt.

(5) Stock-Based Compensation

The Company maintains a
stock-based compensation plan. The compensation cost that has been charged against income for the plan was $55,000 and $77,000 for the three and nine months ended March 31, 2006, respectively. The total income tax benefit recognized in the
income statement for stock-based compensation arrangements was $14,000 and $19,000 for the three and nine months ended March 31, 2006, respectively. As of March 31, 2006 there was $615,000 of total unrecognized compensation cost related to
unvested share-based compensation arrangements granted under the Plan. The remaining cost is expected to be recognized over a weightedaverage period of 4.6 years. No stock-based compensation plans were in effect for the three and nine months
ended March 31, 2005.

On November 8, 2005, stockholders approved the BV Financial, Inc. 2005 Equity Compensation Plan that
enabled the Company to grant stock options and restricted stock awards to



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##### Table of Contents

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 111,407 shares of common stock to certain employees and
directors of the Company. The options were granted at the then fair market value, 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. The Company recognized $35,000 and $44,000 of expenses relating to the granting of stock options during the three and nine months ended March 31, 2006, respectively.

As of March 31, 2006, the Company granted 44,566 shares of restricted stock to certain employees and directors of the Company. The Company purchased
shares in the open market during the current year to fund this plan. The awards vest over a five-year period and, therefore, the cost of such awards will be accrued ratably over a five-year period as compensation expense. The Company recognized
$20,000 and $33,000 of expenses relating to the grant of shares of restricted stock during the three and nine months ended March 31, 2006, respectively.

(6) Recent Accounting Pronouncements

In February 2006, the 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 2007. Management does not believe the adoption of SFAS
No. 155 will have a material 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 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 2007. The Company does not believe that the adoption of SFAS 156 will have a significant effect on its financial statements.

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, Inc. (the Company or 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.



7



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##### Table of Contents

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.

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.



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##### Table of Contents

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 impacted loans; the value of collateral; and the
determination of loss 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 March 31, 2006 and June 30, 2005

Total assets increased $11.7 million, or 10.0%, to $129.5 million at March 31, 2006 from $117.8 million at June 30, 2005, primarily due to an increase in loans, offset slightly by a decrease in cash and cash
equivalents.

Loans receivable increased $13.9 million, or 14.5%, to $110.0 million at March 31, 2006, primarily due to $20.0
million in originations of residential real estate loans, $6.3 million of residential construction loans and $1.9 million of other loans.The increased originations were due to a strong local real estate market and competitive pricing.

Securities decreased $196,000, or 2.5%, from $7.7 million at June 30, 2005 to $7.5 million at March 31, 2006, due to
principal collected on mortgage-backed securities, the proceeds of which were used to fund loan growth.

Cash and cash
equivalents decreased $2.5 million, or 30.0%, from $8.3 million at June 30, 2005 to $5.8 million at March 31, 2006, as those funds were used to fund loan growth.



9



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##### Table of Contents

The following table provides information with respect to the Companys non-performing assets at the
dates indicated. The Company did not have any accruing loans past due 90 days or more, foreclosed real estate or troubled debt restructurings at the dates presented.



|                                            |  |                        |      |   |                  |   |      |          |  |       |   
|------------------------------------------- |  | ---------------------- | ---- | - | ---------------- | - | ---- | -------- |  | ----- | --
|                                            |  | At March 31, 2006      |      |   | At June 30, 2005 |   |      | % change | 
|                                            |  | (Dollars in thousands) |      |   |                  |  
|Non-accruing loans:                         |  |                        |      |   |                  |   |      |          |  |       |   
|One- to four-family                         |  | $                      | 257  |   |                  | $ | 464  |          |  | (44.6 | )%
|Mobile home                                 |  |                        | 69   |   |                  |   | 11   |          |  | 527.3 |   
|                                            |  |                        |      |   |                  |   |      |          |  |       |   
|Total                                       |  |                        | 326  |   |                  |   | 475  |          |  | (31.4 | ) 
|                                            |  |                        |      |   |                  |   |      |          |  |       |   
|Accruing loans past due 90 days or more     |  |                        |     |   |                  |   |     |          |  |       |   
|Foreclosed real estate                      |  |                        |     |   |                  |   |     |          |  |       |   
|Other repossessed assets                    |  |                        | 51   |   |                  |   | 76   |          |  | (32.9 | ) 
|                                            |  |                        |      |   |                  |   |      |          |  |       |   
|Total non-performing assets                 |  | $                      | 377  |   |                  | $ | 551  |          |  | (31.6 | ) 
|                                            |  |                        |      |   |                  |   |      |          |  |       |   
|Total non-performing loans to total loans   |  |                        | 0.30 | % |                  |   | 0.49 | %        |  |       |   
|Total non-performing loans to total assets  |  |                        | 0.25 |   |                  |   | 0.40 |          |  |       |   
|Total non-performing assets to total assets |  |                        | 0.29 |   |                  |   | 0.47 |          |  |       |   

Nonperforming assets decreased $174,000, or 31.6%, primarily due to the full repayment of a
$225,000 mortgage loan during this period.

Deposits increased $3.0 million, or 3.3%, to $94.4 million at March 31, 2006,
primarily due to an increase in certificates of deposit of $11.7 million, offset by an $8.5 million decrease in money market accounts. The increase in certificates of deposit was due to a promotional special the Bank ran on five-year certificates of
deposit. Federal Home Loan Bank advances increased $9.5 million, or 190.0%, to $14.5 million at March 31, 2006. The additional borrowings were used to fund loan growth.

Total equity increased $53,000, or 0.3%, to $18.5 million at March 31, 2006, primarily as a result of net income of $419,000 in the period and a
$52,000 decrease in unearned employee stock ownership plan shares due to the allocation of the shares during the period, offset by an increase of $437,000 in unvested restricted stock due to the purchase of shares during the period to fund the
restricted stock granted under the equity incentive plan.

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

General. Net income decreased $70,000, or 46.1%, to $82,000 for the three months ended March 31, 2006 compared to the same period in
the prior year due primarily to an $120,000 increase in non-interest expenses and a $20,000 increase in the provision for loan losses, offset by a $25,000 decrease in the provision for income taxes, a $19,000 increase in net interest income and a
$26,000 increase in non-interest income.



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##### Table of Contents

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



|                                |  |                              |       |          |   |       |  |       |  
|------------------------------- |  | ---------------------------- | ----- | -------- | - | ----- |  | ----- | -
|                                |  | Three Months Ended March 31, |       | % change |  
|                                |  | 2006                         |       | 2005     |  
|                                |  | (Dollars in thousands)       |       |          |  
|Interest Income:                |  |                              |       |          |   |       |  |       |  
|Loans, including fees           |  | $                            | 1,671 |          | $ | 1,318 |  | 26.8  | %
|Investment securities           |  |                              | 87    |          |   | 71    |  | 22.5  |  
|Other                           |  |                              | 47    |          |   | 109   |  | (56.9 | )
|                                |  |                              |       |          |   |       |  |       |  
|Total interest income           |  | $                            | 1,805 |          | $ | 1,498 |  | 20.5  |  
|                                |  |                              |       |          |   |       |  |       |  
|Interest Expense:               |  |                              |       |          |   |       |  |       |  
|Deposits                        |  | $                            | 731   |          | $ | 605   |  | 20.9  |  
|Federal Home Loan Bank advances |  |                              | 162   |          |   |      |  | N/A   |  
|                                |  |                              |       |          |   |       |  |       |  
|Total interest expense          |  |                              | 893   |          |   | 605   |  | 47.6  |  
|                                |  |                              |       |          |   |       |  |       |  
|Net interest income             |  | $                            | 912   |          | $ | 893   |  | 2.1   |  
|                                |  |                              |       |          |   |       |  |       |  

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



|                                |  |                              |         |             |      |   |                 |   |             |  |      |  
|------------------------------- |  | ---------------------------- | ------- | ----------- | ---- | - | --------------- | - | ----------- |  | ---- | -
|                                |  | Three Months Ended March 31, |        
|                                |  | 2006                         |         |             | 2005 |  
|                                |  | Average Balance              |         | Yield/ Cost |      |   | Average Balance |   | Yield/ Cost | 
|                                |  | (Dollars in thousands)       |        
|Loans                           |  | $                            | 110,597 |             | 6.04 | % |                 | $ | 84,032      |  | 6.35 | %
|Investment securities           |  |                              | 7,534   |             | 4.62 |   |                 |   | 7,824       |  | 3.63 |  
|Interest-earning deposits       |  |                              | 3,869   |             | 3.31 |   |                 |   | 18,134      |  | 2.14 |  
|Federal funds sold              |  |                              | 1,229   |             | 4.56 |   |                 |   | 879         |  | 1.37 |  
|Interest-bearing deposits       |  |                              | 91,936  |             | 3.18 |   |                 |   | 95,853      |  | 2.53 |  
|Federal Home Loan Bank advances |  |                              | 14,672  |             | 4.42 |   |                 |   |            |  |     |  

Net interest income for the three months ended March 31, 2006 increased $19,000, or 2.1%,
compared to the same period last year, as a result of a larger average balance of interest-earning assets, offset by a decrease in the interest rate spread to 2.51% from 2.90%. Total interest income increased as a result of the growth in average
interest-earning assets to $123.2 million from $110.9 million, offset by a decrease in the average yield on loans to 6.04% from 6.35%, due primarily to loans being originated at a lower rate than those that had been paid in full or refinanced during
the period, offset by higher rates being earned in investment securities. Total interest expense increased as a result of an increase in the average balance of long-term Federal Home Loan Bank borrowings of $14.7 million, compared to no borrowings
in 2005. Interest expense on deposits increased due to an increase in the average interest rate paid on deposits, which increased from 2.53% to 3.18%, due to an increase in the short-term interest rate environment, offset by a decrease in the
average balance of deposits.



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##### Table of Contents

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



|                                 |  |                              |     |      |   |     |  
|-------------------------------- |  | ---------------------------- | --- | ---- | - | --- | -
|                                 |  | Three Months Ended March 31, |    
|                                 |  | 2006                         |     | 2005 |  
|                                 |  | (In thousands)               |    
|Allowance at beginning of period |  | $                            | 406 |      | $ | 313 |  
|Provision for loan losses        |  |                              | 20  |      |   |    |  
|Charge-offs                      |  |                              |    |      |   | (8  | )
|Recoveries                       |  |                              |    |      |   | 26  |  
|                                 |  |                              |     |      |   |     |  
|Net recoveries                   |  |                              |    |      |   | 18  |  
|                                 |  |                              |     |      |   |     |  
|Allowance at end of period       |  | $                            | 426 |      | $ | 331 |  
|                                 |  |                              |     |      |   |     |  

The provision for loan losses increased $20,000 to $20,000 for the three months ended
March 31, 2006. The increase in the provision for loan losses was necessitated by a higher allowance percentage being assigned to the commercial real estate loans in the Companys portfolio, thereby increasing the allowance for loan
losses. The allowance percentage was increased after an evaluation of the historical loss experience, delinquency trends and collectibility of the commercial real estate portfolio. The absence of a loan loss provision for the three months ended
March 31, 2005 was due to recoveries of $26,000 exceeding charge-offs of $8,000 in the three months ended March 31, 2005, as well as the continued low level of non-performing assets.

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



|                                         |  |                              |    |          |   |    |  |       |  
|---------------------------------------- |  | ---------------------------- | -- | -------- | - | -- |  | ----- | -
|                                         |  | Three Months Ended March 31, |    | % change |  
|                                         |  | 2006                         |    | 2005     |  
|                                         |  | (Dollars in thousands)       |    |          |  
|Service fees on deposits                 |  | $                            | 29 |          | $ | 24 |  | 20.8  | %
|Service fees on loans                    |  |                              | 25 |          |   | 4  |  | 525.0 |  
|Income from investment in life insurance |  |                              | 19 |          |   | 20 |  | (5.0  | )
|Other income                             |  |                              | 10 |          |   | 9  |  | 11.1  |  
|                                         |  |                              |    |          |   |    |  |       |  
|                                         |  | $                            | 83 |          | $ | 57 |  | 45.6  |  
|                                         |  |                              |    |          |   |    |  |       |  

The increase in service fees on loans of $21,000, or 525.0%, was due primarily to an increase in
the sale of loan participations, upon which the Bank retains the servicing. No mortgage servicing rights asset has been recorded as the servicing fees approximate the servicing cost.



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##### Table of Contents

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



|                                  |  |                              |       |   |          |   |       |   |  |       |  
|--------------------------------- |  | ---------------------------- | ----- | - | -------- | - | ----- | - |  | ----- | -
|                                  |  | Three Months Ended March 31, |       |   | % change |  
|                                  |  | 2006                         |       |   | 2005     |   |      
|                                  |  | (Dollars in thousands)       |      
|Compensation and related expenses |  | $                            | 488   |   |          | $ | 372   |   |  | 31.2  | %
|Occupancy                         |  |                              | 43    |   |          |   | 39    |   |  | 10.3  |  
|Data processing                   |  |                              | 79    |   |          |   | 77    |   |  | 2.6   |  
|Telephone and postage             |  |                              | 15    |   |          |   | 17    |   |  | (11.8 | )
|Advertising                       |  |                              | 39    |   |          |   | 18    |   |  | 116.7 |  
|Professional fees                 |  |                              | 44    |   |          |   | 58    |   |  | (24.1 | )
|Equipment expense                 |  |                              | 32    |   |          |   | 29    |   |  | 10.3  |  
|Other                             |  |                              | 99    |   |          |   | 109   |   |  | (9.2  | )
|                                  |  |                              |       |   |          |   |       |   |  |       |  
|Total Noninterest Expenses        |  | $                            | 839   |   |          | $ | 719   |   |  | 16.7  |  
|                                  |  |                              |       |   |          |   |       |   |  |       |  
|Efficiency ratio (1)              |  |                              | 84.32 | % |          |   | 75.68 | % |  | 11.4  |  
|                                  |  |                              |       |   |          |   |       |   |  |       |  

---

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

Total non-interest expenses increased $120,000, or 16.7%, primarily as a result of increases in compensation and related expenses and advertising, offset
by a decrease in professional fees and other miscellaneous expenses. Compensation and related expenses increased primarily due to the hiring of a new controller in August 2005 and a new executive loan officer in January 2006, and the implementation
of the BV Financial, Inc. 2005 Equity Incentive Plan in November 2005. Advertising expense increased due to the promotion of a special rate five-year certificate of deposit. Professional fees decreased due to a reduction in legal fees subsequent to
the reorganization. Other miscellaneous expenses decreased primarily due to a decrease in costs related to loan processing software and due to a change in the vendor servicing our ATMs.

Income Taxes. Provision for income taxes decreased $25,000, or 31.6%, from $79,000 for the three months ended March 31, 2005 to
$54,000 for the three months ended March 31, 2006. The effective tax rate was 34.2% for the three months ended March 31, 2005 compared to 39.7% for the three months ended March 31, 2006. The increase in the effective tax rate was due
to increased non-deductible stock-based compensation expenses.

Results of Operations for the Nine Months Ended March 31, 2006 and 2005

General. Net income decreased $53,000, or 11.2%, to $419,000 for the nine months ended March 31, 2006 compared to
the same period in the prior year, due primarily to a $258,000 increase in non-interest expenses, a $90,000 increase in the provision for loan losses and a $10,000 increase in provision for income taxes, offset by a $248,000 increase in net interest
income and a $57,000 increase in non-interest income.



13



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##### Table of Contents

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



|                                |  |                             |       |          |   |       |  |       |  
|------------------------------- |  | --------------------------- | ----- | -------- | - | ----- |  | ----- | -
|                                |  | Nine Months Ended March 31, |       | % change |  
|                                |  | 2006                        |       | 2005     |  
|                                |  | (Dollars in thousands)      |       |          |  
|Interest Income:                |  |                             |       |          |   |       |  |       |  
|Loans, including fees           |  | $                           | 4,963 |          | $ | 3,879 |  | 28.0  | %
|Investment securities           |  |                             | 258   |          |   | 240   |  | 7.5   |  
|Other                           |  |                             | 124   |          |   | 164   |  | (24.4 | )
|                                |  |                             |       |          |   |       |  |       |  
|Total interest income           |  | $                           | 5,345 |          | $ | 4,283 |  | 24.8  |  
|                                |  |                             |       |          |   |       |  |       |  
|Interest Expense:               |  |                             |       |          |   |       |  |       |  
|Deposits                        |  | $                           | 2,026 |          | $ | 1,660 |  | 22.1  |  
|Federal Home Loan Bank advances |  |                             | 448   |          |   |      |  | N/A   |  
|Total interest expense          |  |                             | 2,474 |          |   | 1,660 |  | 49.0  |  
|                                |  |                             |       |          |   |       |  |       |  
|Net interest income             |  | $                           | 2,871 |          | $ | 2,623 |  | 9.5   |  
|                                |  |                             |       |          |   |       |  |       |  

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



|                                |  |                             |         |             |      |   |                |   |             |  |      |  
|------------------------------- |  | --------------------------- | ------- | ----------- | ---- | - | -------------- | - | ----------- |  | ---- | -
|                                |  | Nine Months Ended March 31, |        
|                                |  | 2006                        |         |             | 2005 |  
|                                |  | AverageBalance              |         | Yield/ Cost |      |   | AverageBalance |   | Yield/ Cost | 
|                                |  | (Dollars in thousands)      |        
|Loans                           |  | $                           | 107,420 |             | 6.16 | % |                | $ | 80,727      |  | 6.41 | %
|Investment securities           |  |                             | 7,585   |             | 4.58 |   |                |   | 8,753       |  | 3.66 |  
|Interest-earning deposits       |  |                             | 3,880   |             | 2.96 |   |                |   | 10,187      |  | 1.97 |  
|Federal funds                   |  |                             | 1,140   |             | 4.09 |   |                |   | 1,052       |  | 1.70 |  
|Interest-bearing deposits       |  |                             | 89,539  |             | 3.02 |   |                |   | 99,227      |  | 2.23 |  
|Federal Home Loan Bank advances |  |                             | 13,498  |             | 4.43 |   |                |   |            |  |     |  

Net interest income for the nine months ended March 31, 2006 increased $248,000, or 9.5%,
compared to the same period last year, as a result of a larger average balance of interest-earning assets, offset by a decrease in the interest rate spread to 2.74% from 3.10%. Total interest income increased as a result of the growth in average
interest-earning assets to $120.0 million from $100.7 million, and by an increase in the average yield to 5.94% from 5.31% 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 of $13.5 million, compared to no borrowings in 2005. Interest expense on deposits increased due to an increase in the average interest rate paid on deposits, which increased to 3.02% from 2.23%, due to
the higher market interest rate environment, offset by the lower average balance of deposits.



14



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##### Table of Contents

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



|                                 |  |                             |     |   |      |   |     |  
|-------------------------------- |  | --------------------------- | --- | - | ---- | - | --- | -
|                                 |  | Nine Months Ended March 31, |    
|                                 |  | 2006                        |     |   | 2005 |  
|                                 |  | (In thousands)              |    
|Allowance at beginning of period |  | $                           | 349 |   |      | $ | 292 |  
|Provision for loan losses        |  |                             | 90  |   |      |   |    |  
|Charge-offs                      |  |                             | (25 | ) |      |   | (9  | )
|Recoveries                       |  |                             | 12  |   |      |   | 48  |  
|                                 |  |                             |     |   |      |   |     |  
|Net (charge-offs) recoveries     |  |                             | (13 | ) |      |   | 39  |  
|                                 |  |                             |     |   |      |   |     |  
|Allowance at end of period       |  | $                           | 426 |   |      | $ | 331 |  
|                                 |  |                             |     |   |      |   |     |  

The provision for loan losses increased $90,000 to $90,000 for the nine months ended
March 31, 2006. The increase in the provision for loan losses was necessitated by a higher allowance percentage being assigned to the commercial real estate loans in the Companys portfolio, thereby increasing the allowance for loan
losses. The allowance percentage was increased after an evaluation of the historical loss experience, delinquency trends and collectibility of the commercial real estate portfolio. The absence of a loan loss provision for the nine months ended
March 31, 2005 was due to recoveries of $48,000 and charge-offs of only $9,000 in the nine months ended March 31, 2005, as well as the continued low level of non-performing assets.

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



|                                                |  |                             |     |          |   |     |  |       |  
|----------------------------------------------- |  | --------------------------- | --- | -------- | - | --- |  | ----- | -
|                                                |  | Nine Months Ended March 31, |     | % change |  
|                                                |  | 2006                        |     | 2005     |  
|                                                |  | (Dollars in thousands)      |     |          |  
|Service fees on deposits                        |  | $                           | 86  |          | $ | 83  |  | 3.6   | %
|Service fees on loans                           |  |                             | 39  |          |   | 12  |  | 225.0 |  
|Income from investment in life insurance policy |  |                             | 57  |          |   | 60  |  | (5.0  | )
|Other income                                    |  |                             | 55  |          |   | 25  |  | 120.0 |  
|                                                |  |                             |     |          |   |     |  |       |  
|                                                |  | $                           | 237 |          | $ | 180 |  | 31.7  |  
|                                                |  |                             |     |          |   |     |  |       |  

The increase in service fees on loans of $27,000, or 225.0%, was due primarily to an
increase in the sale of loan participations, upon which the Bank retains the servicing. The increase in other income of $30,000, or 120.0%, was due primarily to an increase in wire, money order and other miscellaneous fees.



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##### Table of Contents

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



|                                  |  |                             |       |   |          |   |       |   |  |      |  
|--------------------------------- |  | --------------------------- | ----- | - | -------- | - | ----- | - |  | ---- | -
|                                  |  | Nine Months Ended March 31, |       |   | % change |  
|                                  |  | 2006                        |       |   | 2005     |   |      
|                                  |  | (Dollars in thousands)      |       |   |          |  
|Compensation and related expenses |  | $                           | 1,320 |   |          | $ | 1,162 |   |  | 13.6 | %
|Occupancy                         |  |                             | 122   |   |          |   | 111   |   |  | 9.9  |  
|Data processing                   |  |                             | 217   |   |          |   | 220   |   |  | (1.4 | )
|Telephone and postage             |  |                             | 48    |   |          |   | 52    |   |  | (7.7 | )
|Advertising                       |  |                             | 89    |   |          |   | 56    |   |  | 58.9 |  
|Professional fees                 |  |                             | 132   |   |          |   | 115   |   |  | 14.8 |  
|Equipment expense                 |  |                             | 96    |   |          |   | 86    |   |  | 11.6 |  
|Other                             |  |                             | 311   |   |          |   | 275   |   |  | 13.1 |  
|                                  |  |                             |       |   |          |   |       |   |  |      |  
|Total                             |  | $                           | 2,335 |   |          | $ | 2,077 |   |  | 12.4 |  
|                                  |  |                             |       |   |          |   |       |   |  |      |  
|Efficiency ratio (1)              |  |                             | 75.13 | % |          |   | 74.10 | % |  | 1.4  |  

---

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

Total non-interest expenses increased $258,000, or 12.4%, primarily as a result of increases in compensation and related expenses, advertising,
professional fees, occupancy fees,equipment expense and other miscellaneous expenses. Compensation and related expenses increased primarily due to the hiring of a new controller in August 2005 and an executive loan officer in January 2006,
and the implementation of the BV Financial, Inc. 2005 Equity Incentive Plan in November 2005. Advertising expense increased due to the promotion of a special rate five-year certificate of deposit. Professional fees increased due to the additional
legal and accounting costs incurred in operating as a public company. Equipment expense increased due to increased depreciation costs on equipment purchases. Occupancy costs increased due to an increase in repairs and maintenance expenses. Other
miscellaneous expenses increased due to increased costs relating to operating as a public company, including expenses relating to its annual meeting.

Income Taxes. Provision for income taxes increased $10,000, or 3.9%, from $254,000 for the nine months ended March 31, 2005 to $264,000 for the nine months ended March 31, 2006. The effective
tax rate was 38.7% for the nine months ended March 31, 2006, compared to 35.0% for the nine months ended March 31, 2005. The increase in the effective tax rate was due to higher pre-tax income and 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



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##### Table of Contents

and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in
interest-earning deposits and short- and intermediate-term U.S. Treasury and federal agency securities.

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 March 31, 2006, cash and cash equivalents totaled $5.8 million,
including interest-bearing deposits of $3.0 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $4.2 million at March 31, 2006. In addition, at March 31, 2006, we had the ability to
borrow a total of approximately $33.0 million from the Federal Home Loan Bank of Atlanta. On that date, we had advances outstanding of $14.5 million.

At March 31, 2006, we had $1.0 million in loan commitments outstanding, which included $486,000 in commitments to purchase mobile home loans. In addition to commitments to originate loans, we had $1.1 million in
unused lines of credit and $3.9 million of construction loans in process. Certificates of deposit due within one year of March 31, 2006 totaled $13.6 million, or 14.4% 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 March 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 and borrowings from the Federal Home Loan Bank. 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.



|                                            |  |                            |        |      |   |       
|------------------------------------------- |  | -------------------------- | ------ | ---- | - | ------
|                                            |  | Nine Months EndedMarch 31,
|                                            |  | 2006                       |        | 2005
|                                            |  | (In thousands)            
|Investing activities:                       |  |                            |        |      |   |       
|Loan originations                           |  | $                          | 30,469 |      | $ | 25,676
|Loan and participation purchases            |  |                            | 1,219  |      |   | 3,225 
|Securities purchases                        |  |                            | 76     |      |   | 17    
|                                            |  |                           
|Financing activities:                       |  |                            |        |      |   |       
|Increase in deposits                        |  |                            | 3,021  |      |   | 7,968 
|Increase in Federal Home Loan Bank advances |  |                            | 9,500  |      |   |      

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 March 31, 2006, we exceeded all of our regulatory capital requirements. We are considered well capitalized under regulatory guidelines.



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##### Table of Contents

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 for the three
and nine months ended March 31, 2006 were enhanced by the capital from the offering, resulting in increased net interest-earning assets. However, the large increase in equity resulting from the capital raised 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. However, under Office of Thrift Supervision regulations, we are not allowed to repurchase any shares during the first year following
the offering, except to fund the restricted stock awards under the stock-based benefit plans, unless extraordinary circumstances exist and we receive regulatory approval.

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 nine months ended March 31, 2006 and the year ended June 30, 2005, 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 statement 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. We have hired a new controller, which we believe will strengthen our internal controls and procedures. Further, we are currently seeking to hire an additional individual to our accounting department.



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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 Company did not repurchase any
of its securities in the quarter ended March 31, 2006 and at March 31, 2006, the Company had no publicly announced repurchase plans or programs.

Item 3. Defaults upon Senior Securities

Not Applicable.

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

Not Applicable.

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: May 12, 2006 |  | By:                |  | /s/ Carolyn M. Mroz                         
|                    |  |                    |  | Carolyn M. Mroz                             
|                    |  |                    |  | President and Chief Executive Officer       
|                    |  |                    |  | (principal executive officer)               
|                    |  |                   
|Dated: May 12, 2006 |  | By:                |  | /s/ Edmund T. Leonard                       
|                    |  |                    |  | Edmund T. Leonard                           
|                    |  |                    |  | Chairman of the Board                       
|                    |  |                    |  | and Chief Financial Officer                 
|                    |  |                    |  | (principal financial and accounting officer)