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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(Mark One)

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



For the quarterly period ended December 31, 2005



OR



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



For the transition period from  to



Commission file number: 0-51014



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BV FINANCIAL, INC.

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



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



7114 North Point
Road, Baltimore, Maryland 21219

(Address of principal executive offices)



(410) 477-5000

(Issuers telephone number)



Not Applicable

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



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



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



As of February 13, 2006, there were 2,645,000 shares of the
registrants common stock outstanding.



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##### Table of Contents

BV FINANCIAL, INC.



Form 10-QSB



Table of Contents



|                              |  |         |  |                                                                                                                           |  |         
|----------------------------- |  | ------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |         |  |                                                                                                                           |  | Page No.
|                              | 
|PART I. FINANCIAL INFORMATION |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements                                                                                                      |  |         
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Financial Condition at December 31, 2005 and June 30, 2005 (unaudited)                         |  | 1       
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Income for the three and six months ended December 31, 2005 and 2004 (unaudited)               |  | 2       
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Comprehensive Income for the three and six months ended December 31, 2005 and 2004 (unaudited) |  | 3       
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Cash Flows for the six months ended December 31, 2005 and 2004 (unaudited)                     |  | 4       
|                              |  |         | 
|                              |  |         |  | Notes to Unaudited Consolidated Financial Statements                                                                      |  | 5       
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis or Plan of Operation                                                                 |  | 7       
|                              |  |         | 
|                              |  | Item 3. |  | Controls and Procedures                                                                                                   |  | 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                                                                                                                  |  | 20      
|                              | 
|SIGNATURES                    |  |        



i



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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



BV FINANCIAL, INC. AND SUBSIDIARY

Consolidated Statements of Financial Condition

(unaudited)



|                                                                                                  |  |                                               |         |   |               |   |         |  
|------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                  |  | December 31, 2005                             |         |   | June 30, 2005 |  
|                                                                                                  |  | (Dollars in thousands, except per share data) |        
|ASSETS                                                                                            |  |                                               |         |   |               |   |         |  
|Cash                                                                                              |  | $                                             | 1,563   |   |               | $ | 1,847   |  
|Interest bearing deposits in other banks                                                          |  |                                               | 4,172   |   |               |   | 5,471   |  
|Federal funds sold                                                                                |  |                                               | 1,202   |   |               |   | 1,018   |  
|                                                                                                  |  |                                               |         |   |               |   |         |  
|Cash and Cash Equivalents                                                                         |  |                                               | 6,937   |   |               |   | 8,336   |  
|                                                                                                  |  |                                              
|Securities available for sale                                                                     |  |                                               | 4,253   |   |               |   | 4,342   |  
|Securities held to maturity                                                                       |  |                                               | 3,288   |   |               |   | 3,350   |  
|Loans receivable, net of allowance for loan losses December 31, 2005 - $406; June 30, 2005 - $349 |  |                                               | 111,234 |   |               |   | 96,051  |  
|Premises and equipment, net                                                                       |  |                                               | 2,542   |   |               |   | 2,569   |  
|Federal Home Loan Bank of Atlanta stock, at cost                                                  |  |                                               | 947     |   |               |   | 497     |  
|Investment in life insurance                                                                      |  |                                               | 1,851   |   |               |   | 1,813   |  
|Accrued interest receivable                                                                       |  |                                               | 469     |   |               |   | 417     |  
|Other assets                                                                                      |  |                                               | 482     |   |               |   | 423     |  
|                                                                                                  |  |                                               |         |   |               |   |         |  
|Total Assets                                                                                      |  | $                                             | 132,003 |   |               | $ | 117,798 |  
|                                                                                                  |  |                                               |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                              |  |                                               |         |   |               |   |         |  
|LIABILITIES                                                                                       |  |                                               |         |   |               |   |         |  
|Non-interest bearing deposits                                                                     |  | $                                             | 3,690   |   |               | $ | 3,304   |  
|Interest bearing deposits                                                                         |  |                                               | 92,816  |   |               |   | 88,097  |  
|                                                                                                  |  |                                               |         |   |               |   |         |  
|Total deposits                                                                                    |  |                                               | 96,506  |   |               |   | 91,401  |  
|Federal Home Loan Bank advances                                                                   |  |                                               | 15,000  |   |               |   | 5,000   |  
|Official checks                                                                                   |  |                                               | 729     |   |               |   | 983     |  
|Advance payments by borrowers for taxes and insurance                                             |  |                                               | 496     |   |               |   | 1,080   |  
|Other liabilities                                                                                 |  |                                               | 639     |   |               |   | 886     |  
|                                                                                                  |  |                                               |         |   |               |   |         |  
|Total Liabilities                                                                                 |  | $                                             | 113,370 |   |               | $ | 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                                                                                   |  |                                               | 10,928  |   |               |   | 10,923  |  
|Unearned employee stock ownership plan shares                                                     |  |                                               | (928    | ) |               |   | (963    | )
|Unvested shares of restricted stock                                                               |  |                                               | (174    | ) |               |   |        |  
|Retained earnings                                                                                 |  |                                               | 8,836   |   |               |   | 8,499   |  
|Accumulated other comprehensive loss                                                              |  |                                               | (55     | ) |               |   | (37     | )
|                                                                                                  |  |                                               |         |   |               |   |         |  
|Total Stockholders Equity                                                                        |  |                                               | 18,633  |   |               |   | 18,448  |  
|                                                                                                  |  |                                               |         |   |               |   |         |  
|Total Liabilities and Stockholders Equity                                                        |  | $                                             | 132,003 |   |               | $ | 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 EndedDecember 31,                |       | Six Months EndedDecember 31,
|                                                   |  | 2005                                          |       |                              | 2004 |   | 2005  |  |   | 2004 
|                                                   |  | (Dollars in thousands, except per share data)
|INTEREST INCOME                                    |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Loans, including fees                              |  | $                                             | 1,717 |                              |      | $ | 1,312 |  | $ | 3,292 |   |  | $ | 2,561
|Investment securities                              |  |                                               | 93    |                              |      |   | 82    |  |   | 171   |   |  |   | 169  
|Other                                              |  |                                               | 53    |                              |      |   | 40    |  |   | 77    |   |  |   | 55   
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Total Interest Income                              |  |                                               | 1,863 |                              |      |   | 1,434 |  |   | 3,540 |   |  |   | 2,785
|                                                   |  |                                               |       |                             
|INTEREST EXPENSE                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Deposits                                           |  |                                               | 683   |                              |      |   | 544   |  |   | 1,295 |   |  |   | 1,055
|Borrowed funds                                     |  |                                               | 188   |                              |      |   |      |  |   | 286   |   |  |   |     
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Total Interest Expense                             |  |                                               | 871   |                              |      |   | 544   |  |   | 1,581 |   |  |   | 1,055
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Net Interest Income                                |  |                                               | 992   |                              |      |   | 890   |  |   | 1,959 |   |  |   | 1,730
|PROVISION FOR LOAN LOSSES                          |  |                                               | 30    |                              |      |   |      |  |   | 70    |   |  |   |     
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Net Interest Incomeafter Provision for Loan Losses |  |                                               | 962   |                              |      |   | 890   |  |   | 1,889 |   |  |   | 1,730
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|NON-INTEREST INCOME                                |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Service fees on deposits                           |  |                                               | 29    |                              |      |   | 28    |  |   | 57    |   |  |   | 59   
|Service fees on loans                              |  |                                               | 6     |                              |      |   | 4     |  |   | 14    |   |  |   | 8    
|Income from investment in life insurance           |  |                                               | 19    |                              |      |   | 19    |  |   | 38    |   |  |   | 40   
|Other income                                       |  |                                               | 28    |                              |      |   | 14    |  |   | 45    |   |  |   | 16   
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Total Non-Interest Income                          |  |                                               | 82    |                              |      |   | 65    |  |   | 154   |   |  |   | 123  
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|NON-INTEREST EXPENSES                              |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Compensation and related expenses                  |  |                                               | 445   |                              |      |   | 402   |  |   | 832   |   |  |   | 790  
|Occupancy                                          |  |                                               | 39    |                              |      |   | 34    |  |   | 79    |   |  |   | 72   
|Data processing                                    |  |                                               | 70    |                              |      |   | 70    |  |   | 138   |   |  |   | 143  
|Foreclosed real estate/repossessed assets          |  |                                               | (1    | )                            |      |   | 3     |  |   | (1    | ) |  |   | 3    
|Telephone and postage                              |  |                                               | 18    |                              |      |   | 17    |  |   | 33    |   |  |   | 35   
|Advertising                                        |  |                                               | 23    |                              |      |   | 17    |  |   | 50    |   |  |   | 38   
|Professional fees                                  |  |                                               | 49    |                              |      |   | 33    |  |   | 88    |   |  |   | 57   
|Equipment                                          |  |                                               | 33    |                              |      |   | 22    |  |   | 64    |   |  |   | 57   
|Other                                              |  |                                               | 101   |                              |      |   | 90    |  |   | 213   |   |  |   | 163  
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Total Non-Interest Expenses                        |  |                                               | 777   |                              |      |   | 688   |  |   | 1,496 |   |  |   | 1,358
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Income before Income Taxes                         |  |                                               | 267   |                              |      |   | 267   |  |   | 547   |   |  |   | 495  
|PROVISION FOR INCOME TAXES                         |  |                                               | 108   |                              |      |   | 97    |  |   | 210   |   |  |   | 175  
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|Net Income                                         |  | $                                             | 159   |                              |      | $ | 170   |  | $ | 337   |   |  | $ | 320  
|                                                   |  |                                               |       |                              |      |   |       |  |   |       |   |  |   |      
|BASIC AND DILUTED EARNINGS PER SHARE               |  | $                                             | 0.06  |                              |      |   | N/A   |  | $ | 0.13  |   |  |   | 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 MonthsEndedDecember 31, |     |   | For Six MonthsEndedDecember 31,
|                                                                                                                           |  | 2005                              |     |   | 2004                            |   |     | 2005 |  |   | 2004
|                                                                                                                           |  | (In thousands)                   
|Net Income                                                                                                                 |  | $                                 | 159 |   |                                 | $ | 170 |      |  | $ | 337  |   |  | $ | 320
|Unrealized net holding gains/(losses) on available-for-sale securities, net of taxes (benefit) of $(8), $(7), $(13) and $7 |  |                                   | (11 | ) |                                 |   | (12 | )    |  |   | (18  | ) |  |   | 11 
|                                                                                                                           |  |                                   |     |   |                                 |   |     |      |  |   |      |   |  |   |    
|Comprehensive income                                                                                                       |  | $                                 | 148 |   |                                 | $ | 158 |      |  | $ | 319  |   |  | $ | 331
|                                                                                                                           |  |                                   |     |   |                                 |   |     |      |  |   |      |   |  |   |    



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)



|                                                                                  |  |                              |         |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                  |  | Six Months EndedDecember 31, |        
|                                                                                  |  | 2005                         |         |   | 2004 |  
|                                                                                  |  | (In thousands)               |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                              |         |   |      |   |        |  
|Net income                                                                        |  | $                            | 337     |   |      | $ | 320    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |         |   |      |   |        |  
|Net amortization of discounts and premiums                                        |  |                              | 5       |   |      |   | 6      |  
|Provision for loan losses                                                         |  |                              | 70      |   |      |   |       |  
|Amortization of deferred loan fees/costs                                          |  |                              | 82      |   |      |   | (96    | )
|Provision for depreciation                                                        |  |                              | 36      |   |      |   | 64     |  
|Increase in cash surrender value of life insurance                                |  |                              | (38     | ) |      |   | (40    | )
|Compensation expense under ESOP                                                   |  |                              | 40      |   |      |   |       |  
|Change in other assets and other liabilities                                      |  |                              | (347    | ) |      |   | (456   | )
|                                                                                  |  |                              |         |   |      |   |        |  
|Net Cash Provided by (Used in) Operating Activities                               |  |                              | 185     |   |      |   | (202   | )
|                                                                                  |  |                              |         |   |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                              |         |   |      |   |        |  
|Purchases of securities available for sale                                        |  |                              | (49     | ) |      |   |       |  
|Principal collected on mortgage backed securities                                 |  |                              | 166     |   |      |   | 162    |  
|Proceeds from maturity of securities available for sale                           |  |                              |        |   |      |   | 1,000  |  
|Proceeds from maturity of securities held to maturity                             |  |                              |        |   |      |   | 1,000  |  
|Net increase in loans                                                             |  |                              | (14,296 | ) |      |   | (7,564 | )
|Purchase of loans                                                                 |  |                              | (1,039  | ) |      |   | (2,088 | )
|Purchase of premises and equipment                                                |  |                              | (9      | ) |      |   | (28    | )
|Purchase (sale) of Federal Home Loan Bank stock                                   |  |                              | (450    | ) |      |   | 295    |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Net Cash Used in Investing Activities                                             |  |                              | (15,677 | ) |      |   | (7,223 | )
|                                                                                  |  |                              |         |   |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                              |         |   |      |   |        |  
|Decrease in official checks                                                       |  |                              | (254    | ) |      |   | (364   | )
|Net increase in deposits                                                          |  |                              | 5,105   |   |      |   | 38,497 |  
|Decrease in advance payments by borrowers for taxes and insurance                 |  |                              | (584    | ) |      |   | (447   | )
|Advances from Federal Home Loan Bank                                              |  |                              | 10,000  |   |      |   |       |  
|Purchase of shares of restricted stock                                            |  |                              | (174    | ) |      |   |       |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Net Cash Provided by Financing Activities                                         |  |                              | 14,093  |   |      |   | 37,686 |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Net Increase (Decrease) in Cash and Cash Equivalents                              |  |                              | (1,399  | ) |      |   | 30,261 |  
|CASH AND CASH EQUIVALENTS  BEGINNING                                             |  |                              | 8,336   |   |      |   | 9,872  |  
|                                                                                  |  |                              |         |   |      |   |        |  
|CASH AND CASH EQUIVALENTS  ENDING                                                |  | $                            | 6,937   |   |      | $ | 40,133 |  
|                                                                                  |  |                              |         |   |      |   |        |  
|SUPPLEMENTARY CASH FLOWS INFORMATION                                              |  |                              |         |   |      |   |        |  
|Interest paid                                                                     |  | $                            | 1,580   |   |      | $ | 1,050  |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Income taxes paid                                                                 |  | $                            | 147     |   |      | $ |       |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Net loans transferred to foreclosed real estate/repossessed assets                |  | $                            | 25      |   |      | $ | 24     |  
|                                                                                  |  |                              |         |   |      |   |        |  



See Notes to Unaudited Consolidated
Financial Statements.



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##### Table of Contents

BV FINANCIAL, INC. AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

December 31, 2005



(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 six months ended December 31, 2005 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 December 31, 2005 and
June 30, 2005 and for the three and six months ended December 31, 2005 include the accounts of the Company, Bay-Vanguard Federal Savings Bank (the Bank) and its wholly-owned subsidiary, Housing Recovery Corporation. The
consolidated financial statements for the three and six months ended December 31, 2004 include the accounts of the Bank and Housing Recovery Corporation. All intercompany balances and transactions have been eliminated in consolidation. See Note
2.



(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 continue 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 December 31, 2005. Earnings per share do not apply to the three
or six months ended December 31, 2004 since the Company was not in existence at that time.



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 EndedDecember 31, |           | Six Months EndedDecember 31,
|                         |  | 2005                           |           | 2004                         |   | 2005    |  | 2004
|Numerator                |  | $                              | 159,000   |                              | $ | 170,000 |  | $    | 337,000   |  | $ | 320,000
|Denominator:             |  |                                |           |                              |   |         |  |      |           |  |   |        
|Basic shares outstanding |  |                                | 2,549,534 |                              |   | N/A     |  |      | 2,549,398 |  |   | N/A    
|Earnings per share:      |  |                                |           |                              |   |         |  |      |           |  |   |        
|Basic and diluted        |  | $                              | 0.06      |                              |   | N/A     |  | $    | 0.13      |  |   | 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 in 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 $22,000 for the three and six months ended December 31, 2005. The total income tax benefit recognized in the income statement for
stock-based compensation arrangements was $5,000 for the three and six months ended December 31, 2005. As of December 31, 2005 there was $670,000 of total unrecognized compensation cost related to unvested share-based compensation
arrangements granted under the Plan. That cost is expected to be recognized over a weightedaverage period of 4.8 years. No stock-based compensation plans were in effect for the three and six months ended December 31, 2004.



6



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##### Table of Contents

On November 8, 2005, stockholders approved the BV Financial, Inc. 2005 Equity Compensation Plan that
enabled the Company to grant stock options and restricted stock awards to employees and directors. The Company has elected to early implement the requirements of SFAS No. 123, as amended by SFAS No. 148,Accounting for Stock-Based
CompensationTransition and DisclosureAn Amendment of FASB Statement No. 123.



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 expired volatility was 15.977%. The estimated fair value of each option granted was computed to be
$2.64. The Company recognized $9,000 of expense relating to the stock options during the three and six months ended December 31, 2005.



As of December 31, 2005, the Company granted 44,566 shares of restricted stock to certain employees and directors of the Company. 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 $13,000 of expense relating to the shares of restricted stock during the three and six
months ended December 31, 2005.



(6) Recent Accounting Pronouncements



In March 2004, the EITF reached a consensus on Issue
No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance on other-than-temporary impairment models for marketable debt and equity securities accounted for under
SFAS 115 and non-marketable equity securities accounted for under the cost method. The EITF developed a basic three-step model to evaluate whether an investment is other-than-temporarily impaired. In November 2005, the FASB approved the issuance of
FASB Staff Position FAS No 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The FSP addresses when an investment is considered impaired, whether the impairment is
other-than-temporary and the measurement of an impairment loss. The FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have
not been recognized as other-than-temporary. The FSP is effective for reporting periods beginning after December 15, 2005 with earlier application permitted. For the Company, the effective date will be January 1, 2006. The adoption of this
accounting principle is not expected to have a material impact on the Companys financial position or results of operations.



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.



The Company was not organized until January 12, 2005. Accordingly, the
information set forth in this report for the three and six months ended December 31, 2004, including the consolidated financial statements and related data, relates to the Bank.



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 Federal Deposit Insurance Corporation, through the Savings Association Insurance Fund, insures the Banks savings accounts up to the applicable legal limits. Bay-Vanguard Federal is a member of the Federal Home Loan Bank System.



8



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##### Table of Contents

Critical Accounting Policies



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



Allowance for Loan Losses. The allowance for loan losses is the
amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the
allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on 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 December 31, 2005 and June 30, 2005



Total assets increased $14.2 million, or 12.1%, to $132.0 million at December 31, 2005 from $117.8 million at June 30, 2005 primarily due to an increase in loans.



Loans receivable increased $15.2 million, or 15.8%, to $111.2 million at
December 31, 2005, primarily due to $19.4 million in originations of residential real estate loans, $6.3 million of residential construction loans and $1.6 million of other loans.The increased originations were due to a strong local
real estate market and competitive pricing.



Securities
decreased $151,000, or 2.0%, from $7.7 million at June 30, 2005 to $7.5 million at December 31, 2005 due to principal collected on mortgage-backed securities, the proceeds of which were used to fund loan growth.



9



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##### Table of Contents

Cash and cash equivalents decreased $1.4 million, or 16.8%, from $8.3 million at June 30, 2005 to
$6.9 million at December 31, 2005, as those funds were used to fund loan growth.



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 December 31, 2005   |      |   | At June 30,2005 |   |      | % change | 
|                                            |  | (Dollars in thousands) |     
|Non-accruing loans:                         |  |                        |      |   |                 |   |      |          |  |       |   
|One- to four-family                         |  | $                      | 167  |   |                 | $ | 464  |          |  | (64.0 | )%
|Multi-family and commercial                 |  |                        |     |   |                 |   |     |          |  |      |   
|Construction                                |  |                        |     |   |                 |   |     |          |  |      |   
|Mobile home                                 |  |                        |     |   |                 |   |     |          |  |      |   
|Other consumer                              |  |                        | 49   |   |                 |   | 11   |          |  | 345.5 |   
|                                            |  |                        |      |   |                 |   |      |          |  |       |   
|Total                                       |  |                        | 216  |   |                 |   | 475  |          |  | (54.5 | ) 
|Accruing loans past due 90 days or more     |  |                        |     |   |                 |   |     |          |  |      |   
|Foreclosed real estate                      |  |                        |     |   |                 |   |     |          |  |      |   
|Other repossessed assets                    |  |                        | 51   |   |                 |   | 76   |          |  | (32.9 | ) 
|                                            |  |                        |      |   |                 |   |      |          |  |       |   
|Total non-performing assets                 |  | $                      | 267  |   |                 | $ | 551  |          |  | (51.5 | ) 
|                                            |  |                        |      |   |                 |   |      |          |  |       |   
|Total non-performing loans to total loans   |  |                        | 0.19 | % |                 |   | 0.49 | %        |  | (61.2 | ) 
|Total non-performing loans to total assets  |  |                        | 0.16 |   |                 |   | 0.40 |          |  | (60.0 | ) 
|Total non-performing assets to total assets |  |                        | 0.20 |   |                 |   | 0.47 |          |  | (58.3 | ) 



Nonperforming assets
decreased $284,000, or 51.5%, primarily due to the full repayment of a $275,000 mortgage loan during this period.



Deposits increased $5.1 million, or 5.6%, to $96.5 million at December 31, 2005, primarily due to an increase in certificates of deposit of $10.4
million, offset by a $5.3 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 $10.0 million,
or 200.0%, to $15.0 million at December 31, 2005. The additional borrowings were used to fund loan growth.



Total equity increased $185,000, or 1.0%, to $18.6 million at December 31, 2005 primarily as a result of net income of $337,000 in the period, offset
by an increase of $174,000 in unvested restricted stock due to the purchase of shares to fund the restricted stock granted under the equity incentive plan during the period.



Results of Operations for the Three Months Ended December 31, 2005 and 2004



General. Net income decreased $11,000, or 6.5%, to $159,000
for the three months ended December 31, 2005 compared to the same period in the prior year due primarily to a $30,000 increase in the provision for loan losses, an $89,000 increase in non-interest expenses and an $11,000 increase in the
provision for income taxes, offset by a $102,000 increase in net interest income and a $17,000 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 December 31, 2005 and 2004.



|                                |  |                                |       |          |   |       |  |      |  
|------------------------------- |  | ------------------------------ | ----- | -------- | - | ----- |  | ---- | -
|                                |  | Three MonthsEnded December 31, |       | % change |  
|                                |  | 2005                           |       | 2004     |  
|                                |  | (Dollars in thousands)         |      
|Interest Income:                |  |                                |       |          |   |       |  |      |  
|Loans, including fees           |  | $                              | 1,717 |          | $ | 1,312 |  | 30.9 | %
|Investment securities           |  |                                | 93    |          |   | 82    |  | 13.4 |  
|Other                           |  |                                | 53    |          |   | 40    |  | 32.5 |  
|                                |  |                                |       |          |   |       |  |      |  
|Total interest income           |  |                                | 1,863 |          |   | 1,434 |  | 29.9 |  
|                                |  |                                |      
|Interest Expense:               |  |                                |       |          |   |       |  |      |  
|Deposits                        |  |                                | 683   |          |   | 544   |  | 25.6 |  
|Federal Home Loan Bank advances |  |                                | 188   |          |   |      |  | N/A  |  
|                                |  |                                |       |          |   |       |  |      |  
|Total interest expense          |  |                                | 871   |          |   | 544   |  | 60.1 |  
|                                |  |                                |       |          |   |       |  |      |  
|Net interest income             |  | $                              | 992   |          | $ | 890   |  | 11.5 |  
|                                |  |                                |       |          |   |       |  |      |  



The following table
summarizes average balances and average yield and costs for the three months ended December 31, 2005 and 2004.



|                                |  |                                 |         |            |      |   |                 |   |            |  |      |  
|------------------------------- |  | ------------------------------- | ------- | ---------- | ---- | - | --------------- | - | ---------- |  | ---- | -
|                                |  | Three Months Ended December 31, |        
|                                |  | 2005                            |         |            | 2004 |  
|                                |  | Average Balance                 |         | Yield/Cost |      |   | Average Balance |   | Yield/Cost | 
|                                |  | (Dollars in thousands)          |        
|Loans                           |  | $                               | 110,695 |            | 6.20 | % |                 | $ | 81,248     |  | 6.45 | %
|Investment securities           |  |                                 | 7,569   |            | 4.91 |   |                 |   | 8,810      |  | 3.72 |  
|Interest-earning deposits       |  |                                 | 4,875   |            | 3.04 |   |                 |   | 10,027     |  | 1.52 |  
|Federal funds                   |  |                                 | 1,146   |            | 4.19 |   |                 |   | 288        |  | 4.17 |  
|Interest-bearing deposits       |  |                                 | 90,340  |            | 3.02 |   |                 |   | 94,550     |  | 2.30 |  
|Federal Home Loan Bank advances |  |                                 | 16,913  |            | 4.45 |   |                 |   |           |  |     |  



Net interest income
for the three months ended December 31, 2005 increased $102,000, or 11.5%, 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
3.41%. Total interest income increased as a result of the growth in average interest-earning assets to $124.3 million from $100.4 million, offset by a decrease in the average yield to 6.20% from 6.45% due to loans being originated at a lower rate
than those that had been paid in full or refinanced during the period. Total interest expense increased as a result of an increase in the average balance of Federal Home Loan Bank borrowings of $16.9 million, compared to no borrowings in 2004.
Interest expense on deposits increased due to an increase in the average interest rate paid on deposits, which increased from 2.30% to 3.02%, due to an increase in the short-term interest rate environment, offset by a decrease in the average balance
of deposits.



11



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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 December 31, 2005 and 2004.



|                                 |  |                                |     |      |   |    
|-------------------------------- |  | ------------------------------ | --- | ---- | - | ---
|                                 |  | Three MonthsEnded December 31,
|                                 |  | 2005                           |     | 2004
|                                 |  | (In thousands)                
|Allowance at beginning of period |  | $                              | 364 |      | $ | 313
|Provision for loan losses        |  |                                | 30  |      |   |   
|Charge-offs                      |  |                                |    |      |   |   
|Recoveries                       |  |                                | 12  |      |   |   
|                                 |  |                                |     |      |   |    
|Net recoveries                   |  |                                | 12  |      |   |   
|                                 |  |                                |     |      |   |    
|Allowance at end of period       |  | $                              | 406 |      | $ | 313
|                                 |  |                                |     |      |   |    



The provision for loan
losses increased $30,000 to $30,000 for the three months ended December 31, 2005. 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 December 31, 2004 was due to no charge-offs in the three months ended December 31, 2004, as well as the continued low level of non-performing assets.



Noninterest Income. The following table summarizes noninterest
income for the three months ended December 31, 2005 and 2004.



|                                         |  |                                |    |          |   |    |  |       |  
|---------------------------------------- |  | ------------------------------ | -- | -------- | - | -- |  | ----- | -
|                                         |  | Three MonthsEnded December 31, |    | % change |  
|                                         |  | 2005                           |    | 2004     |  
|                                         |  | (Dollars in thousands)         |   
|Service fees on deposits                 |  | $                              | 29 |          | $ | 28 |  | 3.6   | %
|Service fees on loans                    |  |                                | 6  |          |   | 4  |  | 50.0  |  
|Income from investment in life insurance |  |                                | 19 |          |   | 19 |  |      |  
|Other income                             |  |                                | 28 |          |   | 14 |  | 100.0 |  
|                                         |  |                                |    |          |   |    |  |       |  
|                                         |  | $                              | 82 |          | $ | 65 |  | 26.2  |  
|                                         |  |                                |    |          |   |    |  |       |  



The increase in other
income of $14,000, or 100.0%, was due primarily to an increase in miscellaneous fees.



12



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##### Table of Contents

Noninterest Expenses. The following table summarizes noninterest expenses for the three
months ended December 31, 2005 and 2004.



|                                  |  |                                |      |   |          |   |      |   |  |        |  
|--------------------------------- |  | ------------------------------ | ---- | - | -------- | - | ---- | - |  | ------ | -
|                                  |  | Three MonthsEnded December 31, |      |   | % change |  
|                                  |  | 2005                           |      |   | 2004     |   |     
|                                  |  | (Dollars in thousands)         |     
|Compensation and related expenses |  | $                              | 445  |   |          | $ | 402  |   |  | 10.7   | %
|Occupancy                         |  |                                | 39   |   |          |   | 34   |   |  | 14.7   |  
|Data processing                   |  |                                | 70   |   |          |   | 70   |   |  |       |  
|Foreclosed real estate activity   |  |                                | (1   | ) |          |   | 3    |   |  | (133.3 | )
|Telephone and postage             |  |                                | 18   |   |          |   | 17   |   |  | 5.9    |  
|Advertising                       |  |                                | 23   |   |          |   | 17   |   |  | 35.3   |  
|Professional fees                 |  |                                | 49   |   |          |   | 33   |   |  | 48.5   |  
|Equipment expense                 |  |                                | 33   |   |          |   | 22   |   |  | 50.0   |  
|Other                             |  |                                | 101  |   |          |   | 90   |   |  | 12.2   |  
|                                  |  |                                |      |   |          |   |      |   |  |        |  
|Total Noninterest Expenses        |  | $                              | 777  |   |          | $ | 688  |   |  | 12.9   |  
|                                  |  |                                |      |   |          |   |      |   |  |        |  
|Efficiency ratio (1)              |  |                                | 72.3 | % |          |   | 70.2 | % |  |        |  

---

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



Total non-interest expenses increased $89,000, or 12.9%, primarily as a result of increases in compensation and related
expenses, advertising, professional fees, equipment expense and other miscellaneous expenses. Compensation and related expenses increased due to, among other factors, $16,000 related to the hiring of a new controller in August 2005 and $22,000
related to 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 an increase in depreciation expense. Other miscellaneous expenses increased primarily due to expenses related to the annual meeting
and expenses relating to operating as a public company.



Income Taxes. Provision for income taxes increased $11,000, or 11.3%, from $97,000 for the three months ended December 31, 2004 to $108,000 for the three months ended December 31, 2005. The effective tax rate was
36.3% for the three months ended December 31, 2004 compared to 40.4% for the three months ended December 31, 2005. The increase in the effective tax rate was due to increased non-deductible compensation expenses.



Results of Operations for the Six Months Ended December 31, 2005 and 2004



General. Net income increased $17,000, or
5.3%, to $337,000 for the six months ended December 31, 2005 compared to the same period in the prior year due primarily to a $229,000 increase in net interest income and a $31,000 increase in non-interest income, offset by a $70,000 increase
in the provision for loan losses, a $138,000 increase in non-interest expenses and a $35,000 increase in provision for income taxes.



13



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##### Table of Contents

Net Interest Income.The following table summarizes changes in interest income and expense
for the six months ended December 31, 2005 and 2004.



|                                |  |                               |       |          |   |       |  |      |  
|------------------------------- |  | ----------------------------- | ----- | -------- | - | ----- |  | ---- | -
|                                |  | Six Months Ended December 31, |       | % change |  
|                                |  | 2005                          |       | 2004     |  
|                                |  | (Dollars in thousands)        |      
|Interest Income:                |  |                               |       |          |   |       |  |      |  
|Loans, including fees           |  | $                             | 3,292 |          | $ | 2,561 |  | 28.5 | %
|Investment securities           |  |                               | 171   |          |   | 169   |  | 1.2  |  
|Other                           |  |                               | 77    |          |   | 55    |  | 40.0 |  
|                                |  |                               |       |          |   |       |  |      |  
|Total interest income           |  |                               | 3,540 |          |   | 2,785 |  | 27.1 |  
|                                |  |                               |      
|Interest Expense:               |  |                               |       |          |   |       |  |      |  
|Deposits                        |  |                               | 1,295 |          |   | 1,055 |  | 22.8 |  
|Federal Home Loan Bank advances |  |                               | 286   |          |   |      |  |     |  
|                                |  |                               |       |          |   |       |  |      |  
|Total interest expense          |  |                               | 1,581 |          |   | 1,055 |  | 49.9 |  
|                                |  |                               |       |          |   |       |  |      |  
|Net interest income             |  | $                             | 1,959 |          | $ | 1,730 |  | 13.2 |  
|                                |  |                               |       |          |   |       |  |      |  



The following table
summarizes average balances and average yield and costs for the six months ended December 31, 2005 and 2004.



|                                |  |                               |         |            |      |   |                |   |             |  |      |  
|------------------------------- |  | ----------------------------- | ------- | ---------- | ---- | - | -------------- | - | ----------- |  | ---- | -
|                                |  | Six Months Ended December 31, |        
|                                |  | 2005                          |         |            | 2004 |  
|                                |  | Average Balance               |         | Yield/Cost |      |   | AverageBalance |   | Yield/ Cost | 
|                                |  | (Dollars in thousands)        |        
|Loans                           |  | $                             | 105,863 |            | 6.22 | % |                | $ | 80,126      |  | 6.39 | %
|Investment securities           |  |                               | 7,611   |            | 4.55 |   |                |   | 9,020       |  | 3.75 |  
|Interest-earning deposits       |  |                               | 3,896   |            | 2.78 |   |                |   | 8,803       |  | 1.07 |  
|Federal funds                   |  |                               | 1,096   |            | 3.83 |   |                |   | 691         |  | 2.32 |  
|Interest-bearing deposits       |  |                               | 88,827  |            | 2.92 |   |                |   | 95,645      |  | 2.21 |  
|Federal Home Loan Bank advances |  |                               | 12,924  |            | 4.43 |   |                |   |            |  |     |  



Net interest income
for the six months ended December 31, 2005 increased $229,000, or 13.2%, 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 2.87% from
3.21%. Total interest income increased as a result of the growth in average interest-earning assets to $118.5 million from $98.6 million, and by an increase in the average yield to 5.98% from 5.42% 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 $12.9 million, compared to no borrowings in 2004. Interest expense on deposits increased due to an increase in the average
interest rate paid on deposits, which increased to 2.92% from 2.21%, due to the higher market interest rate environment, partially 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 six months ended December 31, 2005 and 2004.



|                                 |  |                              |     |   |      |   |     |  
|-------------------------------- |  | ---------------------------- | --- | - | ---- | - | --- | -
|                                 |  | Six MonthsEnded December 31, |    
|                                 |  | 2005                         |     |   | 2004 |  
|                                 |  | (In thousands)               |    
|Allowance at beginning of period |  | $                            | 349 |   |      | $ | 292 |  
|Provision for loan losses        |  |                              | 70  |   |      |   |    |  
|Charge-offs                      |  |                              | (25 | ) |      |   | (1  | )
|Recoveries                       |  |                              | 12  |   |      |   | 22  |  
|                                 |  |                              |     |   |      |   |     |  
|Net (charge-offs) recoveries     |  |                              | (13 | ) |      |   | 21  |  
|                                 |  |                              |     |   |      |   |     |  
|Allowance at end of period       |  | $                            | 406 |   |      | $ | 313 |  
|                                 |  |                              |     |   |      |   |     |  



The provision for loan
losses increased $70,000 to $70,000 for the six months ended December 31, 2005. 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 six months ended December 31, 2004 was due to recoveries of $22,000 and charge-offs of only $1,000 in the six months ended December 31, 2004, as well as the continued low level of non-performing
assets.



Noninterest Income. The following table
summarizes noninterest income for the six months ended December 31, 2005 and 2004.



|                                         |  |                              |     |          |   |     |  |       |   
|---------------------------------------- |  | ---------------------------- | --- | -------- | - | --- |  | ----- | --
|                                         |  | Six MonthsEnded December 31, |     | % change |  
|                                         |  | 2005                         |     | 2004     |  
|                                         |  | (Dollars in thousands)       |    
|Service fees on deposits                 |  | $                            | 57  |          | $ | 59  |  | (3.4  | )%
|Service fees on loans                    |  |                              | 14  |          |   | 8   |  | 75.0  |   
|Income from investment in life insurance |  |                              | 38  |          |   | 40  |  | (5.0  | ) 
|Other income                             |  |                              | 45  |          |   | 16  |  | 181.3 |   
|                                         |  |                              |     |          |   |     |  |       |   
|                                         |  | $                            | 154 |          | $ | 123 |  | 25.2  |   
|                                         |  |                              |     |          |   |     |  |       |   



The increased in other
income of $29,000 or 181.3%, was due primarily to an increase in miscellaneous fees.



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##### Table of Contents

Noninterest Expenses. The following table summarizes noninterest expenses for the six
months ended December 31, 2005 and 2004.



|                                  |  |                               |       |   |          |   |       |   |  |        |  
|--------------------------------- |  | ----------------------------- | ----- | - | -------- | - | ----- | - |  | ------ | -
|                                  |  | Six Months Ended December 31, |       |   | % change |  
|                                  |  | 2005                          |       |   | 2004     |   |      
|                                  |  | (Dollars in thousands)        |      
|Compensation and related expenses |  | $                             | 832   |   |          | $ | 790   |   |  | 5.3    | %
|Occupancy                         |  |                               | 79    |   |          |   | 72    |   |  | 9.7    |  
|Data processing                   |  |                               | 138   |   |          |   | 143   |   |  | (3.5   | )
|Foreclosed real estate activity   |  |                               | (1    | ) |          |   | 3     |   |  | (133.3 | )
|Telephone and postage             |  |                               | 33    |   |          |   | 35    |   |  | (5.7   | )
|Advertising                       |  |                               | 50    |   |          |   | 38    |   |  | 31.6   |  
|Professional fees                 |  |                               | 88    |   |          |   | 57    |   |  | 54.4   |  
|Equipment expense                 |  |                               | 64    |   |          |   | 57    |   |  | 12.3   |  
|Other                             |  |                               | 213   |   |          |   | 163   |   |  | 30.7   |  
|                                  |  |                               |       |   |          |   |       |   |  |        |  
|Total                             |  | $                             | 1,496 |   |          | $ | 1,358 |   |  | 10.2   |  
|                                  |  |                               |       |   |          |   |       |   |  |        |  
|Efficiency ratio (1)              |  |                               | 70.8  | % |          |   | 73.3  | % |  |        |  

---

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



Total non-interest expenses increased $138,000, or 10.2%, primarily as a result of increases in compensation and related
expenses, advertising, professional fees, equipment expense and other miscellaneous expenses. Compensation and related expenses increased due to, among other factors, $27,000 related to the hiring of a new controller in August 2005 and $22,000
related to 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. 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 $35,000, or 20.0%, from $175,000 for the six months ended December 31, 2004 to $210,000 for the six months ended December 31, 2005. The
effective tax rate was 38.4% for the six months ended December 31, 2005 compared to 35.4% for the six months ended December 31, 2004. The increase in the effective tax rate was due to higher pre-tax income and an increase in non-deductible
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 December 31, 2005, cash and cash equivalents totaled $6.9 million, including interest-bearing deposits of $4.2 million. Securities classified as available-for-sale, which provide
additional sources of liquidity, totaled $4.3 million at December 31, 2005. In addition, at December 31, 2005, we had the ability to borrow a total of approximately $39.6 million from the Federal Home Loan Bank of Atlanta. On that date, we
had advances outstanding of $15.0 million.



At
December 31, 2005, we had $178,000 in loan commitments outstanding, which included $129,000 in commitments to purchase mobile home loans. In addition to commitments to originate loans, we had $800,000 in unused lines of credit and $5.4 million
of construction loans in process. Certificates of deposit due within one year of December 31, 2005 totaled $12.2 million, or 12.6% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds,
including other certificates of deposit and lines of credit. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before
December 31, 2006. 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 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. The
larger increase in deposits for the six months ended December 31, 2005 was due to the receipt of funds for purchase orders in the Companys initial public offering.



|                                            |      |                              |        |  |   |       
|------------------------------------------- | ---- | ---------------------------- | ------ |  | - | ------
|                                            |      | Six Months EndedDecember 31,
|                                            | 2005 |                              | 2004  
|                                            |      | (In thousands)              
|Investing activities:                       |      |                              |        |  |   |       
|Loan originations                           |      | $                            | 21,899 |  | $ | 19,857
|Loan and participation purchases            |      |                              | 1,039  |  |   | 2,088 
|Securities purchases                        |      |                              | 49     |  |   |      
|                                            |      |                             
|Financing activities:                       |      |                              |        |  |   |       
|Increase in deposits                        |      |                              | 5,105  |  |   | 38,497
|Increase in Federal Home Loan Bank advances |      |                              | 10,000 |  |   |      



We are subject to
various regulatory capital requirements administered by the Office of Thrift Supervision, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted
assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At December 31, 2005, we exceeded all of our regulatory capital requirements. We are considered well capitalized under regulatory
guidelines.



17



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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 six months ended December 31, 2005 were enhanced by the capital from the offering, resulting in increased net interest-earning assets and net income. 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 six months
ended December 31, 2005 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 statements disclosures may result in revisions to the draft financial statement disclosures (which are reflected in, and do not affect the final interim financial
statement disclosures) as a result of the review by the auditors. 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.



18



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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 December 31, 2005 and at December 31, 2005, 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



The Annual Meeting of Stockholders of the Company was held on November 8, 2005. The results of the vote on the matters presented at the meeting is as follows:



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



|                      |  |           |  |               
|--------------------- |  | --------- |  | --------------
|                      |  | Votes for |  | Votes Withheld
|Brian K. McHale       |  | 2,516,942 |  | 73,846        
|Anthony J. Narutowicz |  | 2,517,242 |  | 73,546        
|Jerry S. Sopher       |  | 2,521,501 |  | 69,287        



| | 2. | The approval of the BV Financial, Inc. 2005 Equity Incentive Plan by the following vote:
| | -- | ----------------------------------------------------------------------------------------



|                          |  |                  |  |               
|------------------------- |  | ---------------- |  | --------------
|For: 1,888,486            |  | Against: 288,735 |  | Abstain: 5,721
|                          | 
|Broker non-votes: 407,846 |  |                 



| | 3. | The appointment of Beard Miller Company LLP as auditors for the Company for the fiscal year ending June 30, 2006 was ratified by stockholders by the following vote:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|               |  |                 |  |               
|-------------- |  | --------------- |  | --------------
|For: 2,567,446 |  | Against: 19,429 |  | Abstain: 3,913



Item 5. Other Information



None.



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##### Table of Contents

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)                      
|     | 
|10.0 |  | BV Financial, Inc. 2005 Equity Incentive Plan (2)                
|     | 
|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 in the Registration Statement on Form SB-2, and any amendments
thereto, Registration No. 333-119083.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference into this document from Appendix C filed with the Securities and Exchange Commission in the Proxy Statement filed on October 4, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

SIGNATURES



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



|                         |  |                    |  |                                             
|------------------------ |  | ------------------ |  | --------------------------------------------
|                         |  | BV FINANCIAL, INC.
|                         |  |                   
|Dated: February 13, 2006 |  | By:                |  | /s/ Carolyn M. Mroz                         
|                         |  |                    |  | Carolyn M. Mroz                             
|                         |  |                    |  | President and Chief Executive Officer       
|                         |  |                    |  | (principal executive officer)               
|                         |  |                   
|Dated: February 13, 2006 |  | By:                |  | /s/ Edmund T. Leonard                       
|                         |  |                    |  | Edmund T. Leonard                           
|                         |  |                    |  | Chairman of the Board                       
|                         |  |                    |  | and Chief Financial Officer                 
|                         |  |                    |  | (principal financial and accounting officer)