Exhibit 13



LOGO

FINANCIAL

CORP.

- THE HOLDING COMPANY OF WEST VIEW SAVINGS BANK-

Over 100 Years of Quality Banking

2012

ANNUAL REPORT



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TABLE OF CONTENTS



|                                                          |  |            |    | 
|--------------------------------------------------------- |  | ---------- | -- | 
|                                                          |  | PageNumber |   
|                                                          | 
|Stockholders Letter                                      |  |            | 1  | 
|                                                          | 
|Selected Financial and Other Data                         |  |            | 2  | 
|                                                          | 
|Managements Discussion and Analysis                      |  |            | 4  | 
|                                                          | 
|Report of Independent Registered Public Accounting Firm   |  |            | 24 | 
|                                                          | 
|Consolidated Balance Sheet                                |  |            | 25 | 
|                                                          | 
|Consolidated Statement of Income                          |  |            | 26 | 
|                                                          | 
|Consolidated Statement of Changes in Stockholders Equity |  |            | 27 | 
|                                                          | 
|Consolidated Statement of Cash Flows                      |  |            | 28 | 
|                                                          | 
|Notes to the Consolidated Financial Statements            |  |            | 29 | 
|                                                          | 
|Common Stock Market Price and Dividend Information        |  |            | 77 | 
|                                                          | 
|Corporate Information                                     |  |            |    | 



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|     |  |              
|---- |  | -------------
|LOGO |  | (412)364-1911

- THE HOLDING COMPANY OF WEST VIEW SAVINGS BANK-

To Our Shareholders:

Despite the best efforts of central bankers and governments around the
world, the global economic crisis that began in December 2007 continued into fiscal 2012. Current financial forecasts expect continued slow economic growth, and low market interest rates, at least until the end of December 2014.

This economic misery affects young and old alike. Young adults face high rates of unemployment and rising tuition costs. Working people continue to
struggle to make ends meet. Senior citizens, who faithfully saved for years, face low (or negative) returns on their retirement nest eggs.

Despite the economic challenges, over the past year the Bank continued to improve its net income, grew its total capital, and began to increase its asset
base. During the fiscal year ended June 30, 2012:



| |  |  | Net income improved to $1.4 million as compared to $1.2 million in fiscal 2011 and $372 thousand in fiscal 2010.
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Shareholders equity grew to $30.4 million as compared to $28.9 million in fiscal 2011 and $27.8 million in fiscal 2010.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Total assets increased to $273.3 million. This was an improvement from fiscal 2011s asset size of $228.9 million, but lower than fiscal
2010s asset base of $354.7 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During fiscal 2012, we continued to keep a close watch on operating expenses
while continuing our mission as a community owned financial institution. Finding the right balance between cost savings and reinvesting in the business is never easy. Our Board of Directors, management, and employees take the stewardship of your
investment (and ours) very seriously.

We are also pleased to report that West View Savings Bank received an award from the Pennsylvania
Association of Community Bankers for its excellent community service during Consumer Banking Week 2012. The Bank was recognized as the Kid Friendly Winner in the category of community banks with assets of $176 - $400 million.

During fiscal 2013, the Bank intends on launching a cell phone banking service that will allow customers with an internet capable cell phone
to conduct a variety of banking transactions. The Bank will also be upgrading its customer service software to provide more efficient front and back office processing capabilities.

Thanks to our shareholders and customers for their continued support.



|                        |  |  |  |                                   
|----------------------- |  |  |  | ----------------------------------
|LOGO                    |  |  |  | LOGO                              
|David J. Bursic         |  |  |  | David L. Aeberli                  
|President and           |  |  |  | Chairman of the Board of Directors
|Chief Executive Officer |  |  |  |                                   

Town of McCandless 9001 Perry Highway, Pittsburgh, Pennsylvania 15237



1



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FIVE YEAR SUMMARY OF SELECTED CONSOLIDATED

FINANCIAL AND OTHER DATA



|                                                                                   |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|---------------------------------------------------------------------------------- |  | --------------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|                                                                                   |  | As of or For the Year Ended June 30,          |          
|                                                                                   |  | 2012                                          |           |   | 2011 |   |           | 2010 |  |   | 2009      |   |  | 2008 |          
|                                                                                   |  | (Dollars in Thousands, except per share data) |          
|Selected Financial Data:                                                           |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Total assets                                                                       |  | $                                             | 273,341   |   |      | $ | 228,888   |      |  | $ | 354,668   |   |  | $    | 419,434   |   |  | $ | 423,109   |  
|Net loans receivable                                                               |  |                                               | 39,433    |   |      |   | 49,952    |      |  |   | 56,315    |   |  |      | 58,148    |   |  |   | 56,477    |  
|Mortgage-backed securities                                                         |  |                                               | 79,086    |   |      |   | 70,568    |      |  |   | 117,132   |   |  |      | 176,204   |   |  |   | 215,905   |  
|Investment securities                                                              |  |                                               | 140,020   |   |      |   | 89,438    |      |  |   | 153,193   |   |  |      | 123,621   |   |  |   | 128,537   |  
|Deposit accounts  Retail                                                          |  |                                               | 142,173   |   |      |   | 143,518   |      |  |   | 146,584   |   |  |      | 146,315   |   |  |   | 150,142   |  
|Deposit accounts  Wholesale                                                       |  |                                               |          |   |      |   | 248       |      |  |   | 55,338    |   |  |      |          |   |  |   |          |  
|FHLB advances  long-term                                                          |  |                                               | 17,500    |   |      |   | 22,500    |      |  |   | 109,500   |   |  |      | 130,079   |   |  |   | 135,579   |  
|FHLB advances  short-term                                                         |  |                                               | 79,270    |   |      |   | 32,059    |      |  |   |          |   |  |      |          |   |  |   |          |  
|FRB short-term borrowings                                                          |  |                                               |          |   |      |   |          |      |  |   |          |   |  |      | 108,800   |   |  |   | 80,600    |  
|Other short-term borrowings                                                        |  |                                               |          |   |      |   |          |      |  |   | 12,510    |   |  |      |          |   |  |   | 20,000    |  
|Stockholders equity                                                               |  |                                               | 30,413    |   |      |   | 28,878    |      |  |   | 27,795    |   |  |      | 31,123    |   |  |   | 32,148    |  
|Non-performing assets, troubled debt restructurings and potential problem loans(1) |  |                                               | 1,739     |   |      |   | 2,401     |      |  |   | 1,666     |   |  |      | 1,268     |   |  |   | 1,924     |  
|                                                                                   |  |                                               |           |   |     
|Selected Operating Data:                                                           |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Interest income                                                                    |  | $                                             | 7,053     |   |      | $ | 9,225     |      |  | $ | 12,083    |   |  | $    | 17,438    |   |  | $ | 23,681    |  
|Interest expense                                                                   |  |                                               | 1,544     |   |      |   | 4,220     |      |  |   | 8,481     |   |  |      | 10,311    |   |  |   | 15,143    |  
|                                                                                   |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net interest income                                                                |  |                                               | 5,509     |   |      |   | 5,005     |      |  |   | 3,602     |   |  |      | 7,127     |   |  |   | 8,538     |  
|Provision for (Recovery of) loan losses                                            |  |                                               | (104      | ) |      |   | (15       | )    |  |   | (11       | ) |  |      | (294      | ) |  |   | (123      | )
|                                                                                   |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net interest income after provision for (recovery of) loan losses                  |  |                                               | 5,613     |   |      |   | 5,020     |      |  |   | 3,613     |   |  |      | 7,421     |   |  |   | 8,661     |  
|Non-interest income                                                                |  |                                               | 349       |   |      |   | 514       |      |  |   | 370       |   |  |      | 604       |   |  |   | 597       |  
|Non-interest expense                                                               |  |                                               | 3,658     |   |      |   | 3,846     |      |  |   | 3,624     |   |  |      | 3,795     |   |  |   | 3,636     |  
|                                                                                   |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Income before income tax expense                                                   |  |                                               | 2,304     |   |      |   | 1,688     |      |  |   | 359       |   |  |      | 4,230     |   |  |   | 5,622     |  
|Income tax expense (benefit)                                                       |  |                                               | 902       |   |      |   | 462       |      |  |   | (13       | ) |  |      | 1,352     |   |  |   | 1,850     |  
|                                                                                   |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Net income                                                                         |  | $                                             | 1,402     |   |      | $ | 1,226     |      |  | $ | 372       |   |  | $    | 2,878     |   |  | $ | 3,772     |  
|                                                                                   |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|                                                                                   |  |                                               |           |   |     
|Per Share Information:                                                             |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Basic earnings                                                                     |  | $                                             | 0.68      |   |      | $ | 0.60      |      |  | $ | 0.18      |   |  | $    | 1.35      |   |  | $ | 1.67      |  
|Diluted earnings                                                                   |  | $                                             | 0.68      |   |      | $ | 0.60      |      |  | $ | 0.18      |   |  | $    | 1.35      |   |  | $ | 1.67      |  
|Dividends per share                                                                |  | $                                             | 0.16      |   |      | $ | 0.28      |      |  | $ | 0.64      |   |  | $    | 0.64      |   |  | $ | 0.64      |  
|Dividend payout ratio                                                              |  |                                               | 23.53     | % |      |   | 46.67     | %    |  |   | 355.56    | % |  |      | 47.41     | % |  |   | 38.32     | %
|Book value per share at period end:                                                |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Common Equity                                                                      |  | $                                             | 14.78     |   |      | $ | 14.03     |      |  | $ | 13.51     |   |  | $    | 15.03     |   |  | $ | 14.44     |  
|Tier I Equity                                                                      |  | $                                             | 15.45     |   |      | $ | 14.92     |      |  | $ | 14.59     |   |  | $    | 15.03     |   |  | $ | 14.40     |  
|Average shares outstanding:                                                        |  |                                               |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Basic                                                                              |  |                                               | 2,057,930 |   |      |   | 2,057,930 |      |  |   | 2,066,335 |   |  |      | 2,133,234 |   |  |   | 2,252,604 |  
|Diluted                                                                            |  |                                               | 2,057,930 |   |      |   | 2,057,930 |      |  |   | 2,066,335 |   |  |      | 2,133,308 |   |  |   | 2,252,906 |  



2



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|                                                                                                                |  |                                      |        |   |      |  |        |      |  |  |        |   |  |      |        |   |  |  |        |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ---- |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - |  |  | ------ | -
|                                                                                                                |  | As of or For the Year Ended June 30, |       
|                                                                                                                |  | 2012                                 |        |   | 2011 |  |        | 2010 |  |  | 2009   |   |  | 2008 |       
|                                                                                                                | 
|Selected Operating Ratios(2):                                                                                   |  |                                      |        |  
|Average yield earned on interest-earning assets(3)                                                              |  |                                      | 2.85   | % |      |  | 3.30   | %    |  |  | 3.27   | % |  |      | 4.16   | % |  |  | 5.72   | %
|Average rate paid on interest-bearing liabilities                                                               |  |                                      | 0.75   |   |      |  | 1.76   |      |  |  | 2.56   |   |  |      | 2.72   |   |  |  | 4.06   |  
|Average interest rate spread(4)                                                                                 |  |                                      | 2.11   |   |      |  | 1.58   |      |  |  | 0.71   |   |  |      | 1.44   |   |  |  | 1.66   |  
|Net interest margin(4)                                                                                          |  |                                      | 2.24   |   |      |  | 1.83   |      |  |  | 1.00   |   |  |      | 1.73   |   |  |  | 2.10   |  
|Ratio of interest-earning assets to interest-bearing liabilities                                                |  |                                      | 120.72 |   |      |  | 116.43 |      |  |  | 113.27 |   |  |      | 111.82 |   |  |  | 112.02 |  
|Non-interest expense as a percent of average assets                                                             |  |                                      | 1.44   |   |      |  | 1.35   |      |  |  | 0.96   |   |  |      | 0.89   |   |  |  | 0.86   |  
|Return on average assets                                                                                        |  |                                      | 0.55   |   |      |  | 0.43   |      |  |  | 0.10   |   |  |      | 0.67   |   |  |  | 0.89   |  
|Return on average equity                                                                                        |  |                                      | 4.75   |   |      |  | 4.38   |      |  |  | 1.22   |   |  |      | 9.15   |   |  |  | 12.03  |  
|Ratio of average equity to average assets                                                                       |  |                                      | 11.64  |   |      |  | 9.85   |      |  |  | 8.04   |   |  |      | 7.37   |   |  |  | 7.43   |  
|Full-service offices at end of period                                                                           |  |                                      | 5      |   |      |  | 5      |      |  |  | 5      |   |  |      | 5      |   |  |  | 5      |  
|                                                                                                                |  |                                      |        |   |     
|Asset Quality Ratios(2):                                                                                        |  |                                      |        |   |      |  |        |      |  |  |        |   |  |      |        |   |  |  |        |  
|Non-performing and potential problem loans and troubled debt restructurings as a percent of net total loans(1)  |  |                                      | 3.81   | % |      |  | 4.34   | %    |  |  | 2.96   | % |  |      | 2.18   | % |  |  | 3.41   | %
|Non-performing assets as a percent of total assets(1)                                                           |  |                                      | 0.58   |   |      |  | 1.05   |      |  |  | 0.47   |   |  |      | 0.23   |   |  |  | 0.37   |  
|Non-performing assets, troubled debt restructurings and potential problem loans as a percent of total assets(1) |  |                                      | 0.64   |   |      |  | 1.05   |      |  |  | 0.47   |   |  |      | 0.30   |   |  |  | 0.45   |  
|Allowance for loan losses as a percent of total loans receivable                                                |  |                                      | 0.97   |   |      |  | 1.24   |      |  |  | 1.13   |   |  |      | 1.12   |   |  |  | 1.66   |  
|Allowance for loan losses as a percent of non-performing loans                                                  |  |                                      | 25.60  |   |      |  | 29.09  |      |  |  | 38.72  |   |  |      | 69.46  |   |  |  | 60.43  |  
|Charge-offs to average loans receivable outstanding during the period                                           |  |                                      | 0.30   |   |      |  | 0.00   |      |  |  | 0.01   |   |  |      | 0.00   |   |  |  | 0.00   |  
|                                                                                                                |  |                                      |        |   |     
|Capital Ratios(2):                                                                                              |  |                                      |        |   |      |  |        |      |  |  |        |   |  |      |        |   |  |  |        |  
|Tier 1 risk-based capital ratio                                                                                 |  |                                      | 20.69  | % |      |  | 21.57  | %    |  |  | 14.10  | % |  |      | 14.18  | % |  |  | 21.71  | %
|Total risk-based capital ratio                                                                                  |  |                                      | 20.43  |   |      |  | 22.03  |      |  |  | 14.41  |   |  |      | 14.50  |   |  |  | 22.37  |  
|Tier 1 leverage capital ratio                                                                                   |  |                                      | 11.14  |   |      |  | 13.12  |      |  |  | 8.21   |   |  |      | 7.35   |   |  |  | 7.75   |  



|(1) | Non-performing assets consist of non-performing loans and real estate owned (REO). Non-performing loans consist of non-accrual loans and accruing loans
greater than 90 days delinquent, while REO consists of real estate acquired through foreclosure and real estate acquired by acceptance of a deed in lieu of foreclosure. Potential problem loans include loans where management has some doubt as to the
ability of the borrower to comply with present loan repayment terms.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Consolidated asset quality ratios and capital ratios are end of period ratios, except for charge-offs to average net loans. With the exception of end of period ratios,
all ratios are based on average monthly balances during the indicated periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Interest and yields on tax-exempt loans and securities (tax-exempt for federal income tax purposes) are shown on a fully taxable equivalent basis.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing
liabilities, and net interest margin represents net interest income as a percent of average interest-earning assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3



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WVS FINANCIAL CORP. AND SUBSIDIARY

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

In the normal course of business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time to time issue or make certain statements, either in writing or
orally, that are or contain forward-looking statements, as that term is defined in the U.S. federal securities laws. Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions made by or
to be made by us, projections involving anticipated revenues, earnings, profitability or other aspects of operating results or other future developments in our affairs or the industry in which we conduct business. Forward-looking statements may be
identified by reference to a future period or periods or by the use of forward-looking terminology such as anticipated, believe, expect, intend, plan, estimate or similar
expressions.

Although we believe that the anticipated results or other expectations reflected in our forward-looking
statements are based on reasonable assumptions, we can give no assurance that those results or expectations will be attained. Forward-looking statements involve risks, uncertainties and assumptions (some of which are beyond our control), and as a
result actual results may differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include, but are not limited to, the following, as well as those
discussed elsewhere herein:



| |  |  | our investments in our businesses and in related technology could require additional incremental spending, and might not produce expected deposit and
loan growth and anticipated contributions to our earnings;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the
allowance for loan losses or a reduced demand for credit or fee-based products and services;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the interest rate environment could reduce net interest income and could increase credit losses;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the conditions of the securities markets could change, which could adversely affect, among other things, the value or credit quality of our assets, the
availability and terms of funding necessary to meet our liquidity needs and our ability to originate loans and leases;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the extensive laws, regulations and policies governing financial holding companies and their subsidiaries could alter our business
environment or affect our operations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the potential need to adapt to industry changes in information technology systems, on which we are highly dependent, could present operational issues
or require significant capital spending;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competitive pressures could intensify and affect our profitability, including as a result of continued industry consolidation, the increased
availability of financial services from non-banks, technological developments such as the internet or bank regulatory reform; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acts or threats of terrorism and actions taken by the United States or other governments as a result of such acts or threats, including possible
military action, could further adversely affect
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4



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| | business and economic conditions in the United States generally and in our principal markets, which could have an adverse effect on our financial performance and that of our borrowers and on the
financial markets and the price of our common stock.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

You should not put undue reliance on any
forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new or future events except to the extent required by federal securities laws.

GENERAL

WVS Financial Corp. (the Company) is the parent holding company of West View Savings Bank (West View or the
Savings Bank). The Company was organized in July 1993 as a Pennsylvania-chartered unitary bank holding company and acquired 100% of the common stock of the Savings Bank in November 1993.

West View Savings Bank is a Pennsylvania-chartered, FDIC-insured stock savings bank conducting business from six offices in the North
Hills suburbs of Pittsburgh. The Savings Bank converted from the mutual to the stock form of ownership in November 1993. The Savings Bank had no subsidiaries at June 30, 2012.

The operating results of the Company depend primarily upon its net interest income, which is determined by the difference between income
on interest-earning assets, principally loans, mortgage-backed securities and investment securities, and interest expense on interest-bearing liabilities, which consist primarily of deposits and borrowings. The Companys net income is also
affected by its provision for loan losses, as well as the level of its non-interest income, including loan fees and service charges, and its non-interest expenses, such as compensation and employee benefits, income taxes, deposit insurance and
occupancy costs.



5



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CHANGES IN FINANCIAL CONDITION

Condensed Balance Sheet



|                        |  |                        |         |  |        |   |         |         |  |   |            |   |  |  |       |  
|----------------------- |  | ---------------------- | ------- |  | ------ | - | ------- | ------- |  | - | ---------- | - |  |  | ----- | -
|                        |  | June 30,               |         |  | Change |  
|                        |  | 2012                   |         |  | 2011   |   |         | Dollars |  |   | Percentage |  
|                        |  | (Dollars in Thousands) |         |  |        |  
|                        |  |                        |         | 
|Cash equivalents        |  | $                      | 2,506   |  |        | $ | 1,960   |         |  | $ | 546        |   |  |  | 27.9  | %
|                        |  |                        |         | 
|Certificates of deposit |  |                        | 846     |  |        |   | 3,668   |         |  |   | (2,822     | ) |  |  | -76.9 |  
|                        |  |                        |         | 
|Investments (1)         |  |                        | 226,701 |  |        |   | 169,330 |         |  |   | 57,371     |   |  |  | 33.9  |  
|                        |  |                        |         | 
|Net loans receivable    |  |                        | 39,433  |  |        |   | 49,952  |         |  |   | (10,519    | ) |  |  | -21.1 |  
|                        |  |                        |         | 
|Total assets            |  |                        | 273,341 |  |        |   | 228,888 |         |  |   | 44,453     |   |  |  | 19.4  |  
|                        |  |                        |         | 
|Deposits                |  |                        | 142,173 |  |        |   | 143,766 |         |  |   | (1,593     | ) |  |  | -1.1  |  
|                        |  |                        |         | 
|Borrowed funds          |  |                        | 96,770  |  |        |   | 54,559  |         |  |   | 42,211     |   |  |  | 77.4  |  
|                        |  |                        |         | 
|Total liabilities       |  |                        | 242,928 |  |        |   | 200,010 |         |  |   | 42,918     |   |  |  | 21.5  |  
|                        |  |                        |         | 
|Stockholders equity    |  |                        | 30,413  |  |        |   | 28,878  |         |  |   | 1,535      |   |  |  | 5.3   |  



|(1) | Includes Federal Home Loan Bank stock.
|--- | --------------------------------------

Cash Equivalents. Cash on hand and due from banks, and interest-earning demand deposits represent cash equivalents. Cash equivalents increased $546 thousand to $2.5 million at June 30, 2012
from $2.0 million at June 30, 2011. Changes in cash equivalents are influenced by the timing of customer transaction account deposits, the redeployment of funds into other earning assets such as investments or loans, and the repayment of
Company borrowings.

Certificates of Deposit.Certificates of deposit decreased $2.8 million or 76.9% to $846 thousand
at June 30, 2012. As part of our asset liability and liquidity management strategies, the Company continued to redeem maturing FDIC insured certificates of deposit with other financial institutions. Contract terms typically range from five to
twenty-seven months. At various times, risk-adjusted rates earned on certificates of deposit are higher than other investment alternatives at the time of investment and contribute to net interest income. Proceeds from certificates of deposit were
primarily used to fund investment purchases.

Investments.The Companys investment portfolio is primarily
comprised of U.S. Government Agency bonds, corporate bonds, FHLB stock and mortgaged-backed securities issued by U.S. Government Agencies and private-issuers. See Notes 4 and 5 to the Consolidated Financial Statements for additional information. The
Companys investment portfolio increased $57.3 million or 33.9% to $226.7 million at June 30, 2012 from $169.3 million at June 30, 2011. Investment securities increased $50.6 million or 56.6% to $140.0 million at June 30, 2012.
This increase was due primarily to purchases of U.S. Government Agency securities totaling $100.6 million, investment grade corporate bonds totaling $57.3 million, $4.5 million of investment grade corporate utility first mortgage bonds, U.S. dollar
denominated investment grade foreign bonds totaling $1.7 million, and investment grade short-term commercial paper totaling $999 thousand, which were partially offset by early issuer redemptions and maturities totaling $83.2 million of U.S.
Government Agency securities, $14.7 million of investment grade corporate bonds, $11.5 million of investment grade corporate utility first mortgage bonds, $3.6 million of municipal obligations, $1.5 million of U.S. dollar denominated investment
grade foreign bonds, and $1.0 million of



6



---

investment grade short-term commercial paper. Mortgage-backed securities increased $8.5 million or 12.1% to $79.1 million at June 30, 2012. This increase was due primarily to $57.4 million
in purchases of U.S. Government Agency floating-rate mortgage-backed securities, which was partially offset by cash repayments on U.S. Government Agency floating rate mortgage-backed securities totaling $36.1 million and $13.4 million in cash
repayments on the Companys private-label floating-rate mortgage-backed securities portfolio. Our investment in Federal Home Loan Bank stock decreased $1.7 million or 18.5% to $7.6 million at June 30, 2012 due to partial redemptions of
excess stock by the FHLB. Investment purchases were primarily funded with borrowed funds and cash flows from the loan and certificate of deposit portfolios. See Quantitative and Qualitative Disclosures about Market Risk beginning on page
16.

Net Loans Receivable.Net loans receivable decreased $10.5 million or 21.1% to $39.4 million at June 30, 2012,
compared to June 30, 2011. The decrease in net loans is primarily attributable to: lower net balances of construction and land development loans ($7.5 million) due to soft demand for new speculative construction loans by local builders,
refinancing and other repayments of previously originated 1-4 family loans ($1.5 million) due to low market interest rates and repayments on the Companys multi-family, consumer and commercial loan portfolios ($2.3 million). Due to the stagnant
economy, a number of the Companys small builders have experienced slow sales of their housing inventories. This slow down in sales also caused a substantially reduced number of new home starts which adversely impacted originations of new
speculative construction loans. Record low interest rates for fixed rate permanent mortgage loans caused further levels of refinance activity on the Companys 1-4 family loan portfolio. The Company does not believe that it can effectively hedge
the interest rate risk inherent in new fixed rate originations, especially on thirty year fixed rate mortgages. Consumer acceptance of fifteen and twenty-year fixed rate mortgages has been limited due to the small rate differential between these
products and fixed rate thirty year mortgage loans. Historically, adjustable rate mortgage loans have not been popular in the Companys local market area because of the low rate of housing turnover. Consequently the Company has partnered with a
national correspondent lender to make purchase money and refinancing mortgages available to the public. These correspondent loans are originated through the national correspondent lender, who then sells the loans into the secondary market. This
correspondent relationship allows the Company to earn loan origination fee income and avoid the interest rate risk of retaining long-term fixed rate mortgages with low interest rates on the Companys balance sheet. Residential loan originations
remained soft in fiscal 2012 due to the continued weak economic environment, an increase in the inventory of existing houses for sale and fewer construction loan starts. We expect these trends to continue into fiscal 2013.

Deposits.Total deposits decreased approximately $1.6 million or 1.1%. The Companys customers primarily reduced CD holdings
by transferring funds to more liquid holdings (such as demand deposit, savings and money market accounts). Certificates of deposit decreased $6.7 million or 13.9%. Money market and savings accounts grew by $1.9 million or 3.0%, while demand deposits
increased $3.3 million or 10.1%. See Note 12 to the Consolidated Financial Statements and Quantitative and Qualitative Disclosures on Market Risk.

Borrowed Funds.Borrowed funds increased $42.2 million or 77.4% to $96.8 million during fiscal 2012. The Companys borrowed funds are comprised of two components: legacy FHLB long-term
advances and short-term borrowings. Short-term borrowings include FHLB short-term advances, other short-term borrowings, and FRB short-term borrowings.

During fiscal 2012, the Company repaid $5.0 million of legacy FHLB long-term advances with a rate of 5.03%. At June 30, 2012, our remaining legacy FHLB long-term advances totaled $17.5 million with
weighted-average interests rate of 4.72%.

The Company also uses a variety of short-term borrowing sources as part of its
asset/liability management program. The actual short-term funding source used, at any given point in time, depends upon factors such as cost, terms, maturity terms and general market conditions. During fiscal 2012, we increased our FHLB short-term
borrowings by $47.2 million or 147.3%. We had no other short-term borrowings or FRB short-term borrowings at June 30, 2012.



7



---

Stockholders Equity.Total stockholders equity increased $1.5 million or
5.3% to $30.4 million at June 30, 2012, compared to June 30, 2011. The increase in stockholders equity was primarily attributable to Company net income of $1.4 million and other comprehensive income, net of tax, totaling $442
thousand, which was partially offset by $330 thousand of cash dividends paid on the Companys common stock. See Note 3 to the Consolidated Financial Statements for a discussion of the components of other comprehensive income. Book value per
share (Tier 1 Equity basis) grew from $14.92 at June 30, 2011 to $15.45 at June 30, 2012. On a Common Equity basis, book value per share increased from $14.03 at June 30, 2011 to $14.78 at June 30, 2012. The Company also
maintained strong capital ratios during fiscal 2012 to further bolster its balance sheet. Our tier 1 leverage ratio was 11.14% at June 30, 2012. Our total risk-based capital ratio was 20.43% at June 30, 2012.



8



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RESULTS OF OPERATIONS

Condensed Statements of Income



|                             |  |                        |       |   |        |    |       |                        |  |   |        |   |  |                        |         |   |  |   |        |  
|---------------------------- |  | ---------------------- | ----- | - | ------ | -- | ----- | ---------------------- |  | - | ------ | - |  | ---------------------- | ------- | - |  | - | ------ | -
|                             |  | Year EndedJune 30,2012 |       |   | Change |    |       | Year EndedJune 30,2011 |  |   | Change |   |  | Year EndedJune 30,2010 |        
|                             |  | (Dollars in Thousands) |      
|                             |  |                        |       |   |       
|Interest income              |  | $                      | 7,053 |   |        | ($ | 2,172 | )                      |  | $ | 9,225  |   |  | ($                     | 2,858   | ) |  | $ | 12,083 |  
|                             |  |                        |       |   |        |    | -23.5 | %                      |  |   |        |   |  |                        | -23.7   | % |  |   |        |  
|                             |  |                        |       |   |       
|Interest expense             |  | $                      | 1,544 |   |        | ($ | 2,676 | )                      |  | $ | 4,220  |   |  | ($                     | 4,261   | ) |  | $ | 8,481  |  
|                             |  |                        |       |   |        |    | -63.4 | %                      |  |   |        |   |  |                        | -50.2   | % |  |   |        |  
|                             |  |                        |       |   |       
|Net interest income          |  | $                      | 5,509 |   |        | $  | 504   |                        |  | $ | 5,005  |   |  | $                      | 1,403   |   |  | $ | 3,602  |  
|                             |  |                        |       |   |        |    | 10.1  | %                      |  |   |        |   |  |                        | 39.0    | % |  |   |        |  
|                             |  |                        |       |   |       
|Recovery of loan losses      |  | $                      | (104  | ) |        | $  | 89    |                        |  | $ | (15    | ) |  | $                      | 4       |   |  | $ | (11    | )
|                             |  |                        |       |   |        |    | 593.3 | %                      |  |   |        |   |  |                        | 36.4    | % |  |   |        |  
|                             |  |                        |       |   |       
|Non-interest income          |  | $                      | 349   |   |        | ($ | 165   | )                      |  | $ | 514    |   |  | $                      | 144     |   |  | $ | 370    |  
|                             |  |                        |       |   |        |    | -32.1 | %                      |  |   |        |   |  |                        | 38.9    | % |  |   |        |  
|                             |  |                        |       |   |       
|Non-interest expense         |  | $                      | 3,658 |   |        | ($ | 188   | )                      |  | $ | 3,846  |   |  | $                      | 222     |   |  | $ | 3,624  |  
|                             |  |                        |       |   |        |    | -4.9  | %                      |  |   |        |   |  |                        | 6.1     | % |  |   |        |  
|                             |  |                        |       |   |       
|Income tax expense (benefit) |  | $                      | 902   |   |        | $  | 440   |                        |  | $ | 462    |   |  | $                      | 475     |   |  | $ | (13    | )
|                             |  |                        |       |   |        |    | 95.2  | %                      |  |   |        |   |  |                        | 3,653.8 | % |  |   |        |  
|                             |  |                        |       |   |       
|Net income                   |  | $                      | 1,402 |   |        | $  | 176   |                        |  | $ | 1,226  |   |  | $                      | 854     |   |  | $ | 372    |  
|                             |  |                        |       |   |        |    | 14.4  | %                      |  |   |        |   |  |                        | 229.6   | % |  |   |        |  

General. The Company reported net income of $1.4 million, $1.2 million and $372 thousand for the
fiscal years ended June 30, 2012, 2011 and 2010, respectively. The $176 thousand increase in net income during fiscal 2012 was primarily the result of a $504 thousand increase in net interest income, a $188 thousand decrease in non-interest
expense, and a $89 thousand increase in recoveries of loan losses, which were partially offset by a $440 thousand increase in income tax expense and a $165 thousand decrease in non-interest income. Earnings per share totaled $0.68 (basic and
diluted) for fiscal 2012 as compared to $0.60 (basic and diluted) for fiscal 2011. The $854 thousand increase in net income during fiscal 2011 was primarily the result of a $1.4 million increase in net interest income, a $144 thousand increase in
non-interest income and a $4 thousand increase in recoveries of loan losses, which were partially offset by a $475 thousand increase in income tax expense and a $222 thousand increase in non-interest expense. Earnings per share totaled $0.60 (basic
and diluted) for fiscal 2011 as compared to $0.18 (basic and diluted) for fiscal 2010.



9



---

Average Balances, Net Interest Income and Yields Earned and Rates Paid. The
following average balance sheet table sets forth at and for the periods indicated information on the Company regarding: (1) the total dollar amounts of interest income on interest-earning assets and the resulting average yields; (2) the
total dollar amounts of interest expense on interest-bearing liabilities and the resulting average costs; (3) net interest income; (4) interest rate spread; (5) net interest-earning assets (interest-bearing liabilities); (6) the
net yield earned on interest-earning assets; and (7) the ratio of total interest-earning assets to total interest-bearing liabilities.



|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|-------------------------------------------------------------------- |  | ---------------------------- | ------- |  | -------- | - | ----- | ----------------- |  |  | -------------- | - |  | -------- | ------- |  | ----------------- | - | ----- | -------------- |  |  | -------- | - |  | ----------------- | ------- |  |  | - | ------ |  |  |  | ------ | -
|                                                                     |  | For the Years Ended June 30, |        
|                                                                     |  | 2012                         |         |  | 2011     |   |       | 2010              | 
|                                                                     |  | AverageBalance               |         |  | Interest |   |       | AverageYield/Rate |  |  | AverageBalance |   |  | Interest |         |  | AverageYield/Rate |   |       | AverageBalance |  |  | Interest |   |  | AverageYield/Rate |        
|                                                                     |  | (Dollars in Thousands)       |        
|Interest-earning assets:                                             |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   | 
|Net loans receivable(1)                                              |  | $                            | 46,264  |  |          | $ | 2,892 |                   |  |  | 6.25           | % |  | $        | 54,932  |  |                   | $ | 3,297 |                |  |  | 6.00     | % |  | $                 | 58,895  |  |  | $ | 3,956  |  |  |  | 6.72   | %
|Mortgage-backed securities                                           |  |                              | 69,834  |  |          |   | 929   |                   |  |  | 1.33           |   |  |          | 82,284  |  |                   |   | 1,196 |                |  |  | 1.45     |   |  |                   | 150,043 |  |  |   | 2,094  |  |  |  | 1.40   |  
|Investments - taxable                                                |  |                              | 118,233 |  |          |   | 3,109 |                   |  |  | 2.63           |   |  |          | 117,849 |  |                   |   | 4,395 |                |  |  | 3.73     |   |  |                   | 131,604 |  |  |   | 5,273  |  |  |  | 4.01   |  
|Investments - tax-free(2)                                            |  |                              | 1,819   |  |          |   | 88    |                   |  |  | 7.25           |   |  |          | 4,213   |  |                   |   | 211   |                |  |  | 7.41     |   |  |                   | 6,380   |  |  |   | 351    |  |  |  | 8.07   |  
|FHLB stock                                                           |  |                              | 8,379   |  |          |   | 4     |                   |  |  | 0.05           |   |  |          | 10,245  |  |                   |   |      |                |  |  | 0.00     |   |  |                   | 10,875  |  |  |   |       |  |  |  | 0.00   |  
|Interest-bearing deposits                                            |  |                              | 661     |  |          |   | 1     |                   |  |  | 0.15           |   |  |          | 2,707   |  |                   |   | 3     |                |  |  | 0.11     |   |  |                   | 2,488   |  |  |   | 3      |  |  |  | 0.12   |  
|Certificates of deposits                                             |  |                              | 2,685   |  |          |   | 30    |                   |  |  | 1.12           |   |  |          | 6,945   |  |                   |   | 123   |                |  |  | 1.77     |   |  |                   | 14,538  |  |  |   | 406    |  |  |  | 2.79   |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total interest-earning assets                                        |  |                              | 247,875 |  |          |   | 7,053 |                   |  |  | 2.85           | % |  |          | 279,175 |  |                   |   | 9,225 |                |  |  | 3.30     | % |  |                   | 374,823 |  |  |   | 12,083 |  |  |  | 3.27   | %
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Non-interest-earning assets                                          |  |                              | 5,848   |  |          |   |       |                   |  |  |                |   |  |          | 4,753   |  |                   |   |       |                |  |  |          |   |  |                   | 3,534   |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total assets                                                         |  | $                            | 253,723 |  |          |   |       |                   |  |  |                |   |  | $        | 283,928 |  |                   |   |       |                |  |  |          |   |  | $                 | 378,357 |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   | 
|Interest-bearing liabilities:                                        |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   | 
|Interest-bearing deposits and escrows                                |  | $                            | 125,588 |  |          | $ | 543   |                   |  |  | 0.43           | % |  | $        | 164,991 |  |                   | $ | 918   |                |  |  | 0.56     | % |  | $                 | 144,057 |  |  | $ | 1,251  |  |  |  | 0.87   | %
|FHLB long-term advances                                              |  |                              | 18,142  |  |          |   | 871   |                   |  |  | 4.80           |   |  |          | 62,626  |  |                   |   | 3,265 |                |  |  | 5.21     |   |  |                   | 129,163 |  |  |   | 7,071  |  |  |  | 5.47   |  
|FHLB short-term advances                                             |  |                              | 61,515  |  |          |   | 129   |                   |  |  | 0.21           |   |  |          | 1,603   |  |                   |   | 4     |                |  |  | 0.25     |   |  |                   | 2,037   |  |  |   | 6      |  |  |  | 0.29   |  
|FRB short-term borrowings                                            |  |                              | 4       |  |          |   |      |                   |  |  | 0.00           |   |  |          |        |  |                   |   |      |                |  |  | 0.00     |   |  |                   | 52,401  |  |  |   | 142    |  |  |  | 0.27   |  
|Other short-term borrowings                                          |  |                              | 90      |  |          |   | 1     |                   |  |  | 1.11           |   |  |          | 10,553  |  |                   |   | 33    |                |  |  | 0.31     |   |  |                   | 3,259   |  |  |   | 11     |  |  |  | 0.34   |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total interest-bearing liabilities                                   |  |                              | 205,339 |  |          |   | 1,544 |                   |  |  | 0.75           | % |  |          | 239,773 |  |                   |   | 4,220 |                |  |  | 1.76     | % |  |                   | 330,917 |  |  |   | 8,481  |  |  |  | 2.56   | %
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Non-interest-bearing accounts                                        |  |                              | 17,065  |  |          |   |       |                   |  |  |                |   |  |          | 14,734  |  |                   |   |       |                |  |  |          |   |  |                   | 15,144  |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total interest-bearing liabilities and non-interest-bearing accounts |  |                              | 222,404 |  |          |   |       |                   |  |  |                |   |  |          | 254,507 |  |                   |   |       |                |  |  |          |   |  |                   | 346,061 |  |  |   |        |  |  |  |        |  
|Non-interest-bearing liabilities                                     |  |                              | 1,788   |  |          |   |       |                   |  |  |                |   |  |          | 1,459   |  |                   |   |       |                |  |  |          |   |  |                   | 1,877   |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total liabilities                                                    |  |                              | 224,192 |  |          |   |       |                   |  |  |                |   |  |          | 255,966 |  |                   |   |       |                |  |  |          |   |  |                   | 347,938 |  |  |   |        |  |  |  |        |  
|Equity                                                               |  |                              | 29,531  |  |          |   |       |                   |  |  |                |   |  |          | 27,962  |  |                   |   |       |                |  |  |          |   |  |                   | 30,419  |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Total liabilities and equity                                         |  | $                            | 253,723 |  |          |   |       |                   |  |  |                |   |  | $        | 283,928 |  |                   |   |       |                |  |  |          |   |  | $                 | 378,357 |  |  |   |        |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Net interest income                                                  |  |                              |         |  |          | $ | 5,509 |                   |  |  |                |   |  |          |         |  |                   | $ | 5,005 |                |  |  |          |   |  |                   |         |  |  | $ | 3,602  |  |  |  |        |  
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Interest rate spread                                                 |  |                              |         |  |          |   |       |                   |  |  | 2.10           | % |  |          |         |  |                   |   |       |                |  |  | 1.54     | % |  |                   |         |  |  |   |        |  |  |  | 0.71   | %
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Net yield on interest-earning assets(3)                              |  |                              |         |  |          |   |       |                   |  |  | 2.24           | % |  |          |         |  |                   |   |       |                |  |  | 1.83     | % |  |                   |         |  |  |   |        |  |  |  | 1.00   | %
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  
|Ratio of interest-earning assets to interest-bearing liabilities     |  |                              |         |  |          |   |       |                   |  |  | 120.72         | % |  |          |         |  |                   |   |       |                |  |  | 116.43   | % |  |                   |         |  |  |   |        |  |  |  | 113.27 | %
|                                                                     |  |                              |         |  |          |   |       |                   |  |  |                |   |  |          |         |  |                   |   |       |                |  |  |          |   |  |                   |         |  |  |   |        |  |  |  |        |  



|(1) | Includes non-accrual loans.
|--- | ---------------------------

|(2) | Yields on tax-exempt loans and tax-exempt securities (tax-exempt for federal income tax purposes) are shown on a fully taxable equivalent basis utilizing a calculation
that reflects the tax-exempt coupon, a 20% interest expense disallowance and a federal tax rate of 34%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net interest income divided by average interest-earning assets.
|--- | ---------------------------------------------------------------



10



---

Rate/Volume Analysis. The following table describes the extent to which
changes in interest rates and changes in volume of interest-related assets and liabilities have affected the Companys interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to: (1) changes in volume (change in volume multiplied by prior year rate), (2) changes in rate (change in rate multiplied by prior year volume), and (3) total change in
rate and volume. The combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.



|                                      |  |                           |        |   |                         |   |        |                           |        |   |                         |      |  |   |        |   |  |   |      |   |  |   |        |  
|------------------------------------- |  | ------------------------- | ------ | - | ----------------------- | - | ------ | ------------------------- | ------ | - | ----------------------- | ---- |  | - | ------ | - |  | - | ---- | - |  | - | ------ | -
|                                      |  | Year Ended June 30,       |       
|                                      |  | 2012 vs. 2011             |        |   | 2011 vs. 2010           |  
|                                      |  | Increase (Decrease)Due to |        |   | TotalIncrease(Decrease) |   |        | Increase (Decrease)Due to |        |   | TotalIncrease(Decrease) |     
|                                      |  | Volume                    |        |   | Rate                    |   |        |                           | Volume |   |                         | Rate |  |  
|                                      |  | (Dollars in Thousands)    |       
|Interest-earning assets:              |  |                           |        |   |                         |   |        |                           |        |   |                         |      |  |   |        |   |  |   |      |   |  |   |        |  
|Net loans receivable                  |  | $                         | (548   | ) |                         | $ | 143    |                           |        | $ | (405                    | )    |  | $ | (253   | ) |  | $ | (406 | ) |  | $ | (659   | )
|Mortgage-backed securities            |  |                           | (190   | ) |                         |   | (77    | )                         |        |   | (267                    | )    |  |   | (998   | ) |  |   | 100  |   |  |   | (898   | )
|Investments - taxable                 |  |                           | (198   | ) |                         |   | (1,088 | )                         |        |   | (1,286                  | )    |  |   | (680   | ) |  |   | (198 | ) |  |   | (878   | )
|Investments - tax-free                |  |                           | (116   | ) |                         |   | (7     | )                         |        |   | (123                    | )    |  |   | (102   | ) |  |   | (38  | ) |  |   | (140   | )
|FHLB stock                            |  |                           |       |   |                         |   | 4      |                           |        |   | 4                       |      |  |   |       |   |  |   |     |   |  |   |       |  
|Interest-bearing deposits             |  |                           | (3     | ) |                         |   | 1      |                           |        |   | (2                      | )    |  |   |       |   |  |   |     |   |  |   |       |  
|Certificates of deposit               |  |                           | (58    | ) |                         |   | (35    | )                         |        |   | (93                     | )    |  |   | (167   | ) |  |   | (116 | ) |  |   | (283   | )
|                                      |  |                           |        |   |                         |   |        |                           |        |   |                         |      |  |   |        |   |  |   |      |   |  |   |        |  
|Total interest-earning assets         |  |                           | (1,113 | ) |                         |   | (1,059 | )                         |        |   | (2,172                  | )    |  |   | (2,200 | ) |  |   | (658 | ) |  |   | (2,858 | )
|Interest-bearing liabilities:         |  |                           |        |   |                         |   |        |                           |        |   |                         |      |  |   |        |   |  |   |      |   |  |   |        |  
|Interest-bearing deposits and Escrows |  |                           | (403   | ) |                         |   | 28     |                           |        |   | (375                    | )    |  |   | 245    |   |  |   | (578 | ) |  |   | (333   | )
|FHLB long-term borrowings             |  |                           | (2,155 | ) |                         |   | (239   | )                         |        |   | (2,394                  | )    |  |   | (3,485 | ) |  |   | (321 | ) |  |   | (3,806 | )
|FHLB short-term borrowings            |  |                           | 126    |   |                         |   | (1     | )                         |        |   | 125                     |      |  |   | (1     | ) |  |   | (1   | ) |  |   | (2     | )
|FRB short-term borrowings             |  |                           |       |   |                         |   |       |                           |        |   |                        |      |  |   | (71    | ) |  |   | (71  | ) |  |   | (142   | )
|Other short-term borrowings           |  |                           | (55    | ) |                         |   | 23     |                           |        |   | (32                     | )    |  |   | 23     |   |  |   | (1   | ) |  |   | 22     |  
|                                      |  |                           |        |   |                         |   |        |                           |        |   |                         |      |  |   |        |   |  |   |      |   |  |   |        |  
|Total interest-bearing liabilities    |  |                           | (2,487 | ) |                         |   | (189   | )                         |        |   | (2,676                  | )    |  |   | (3,289 | ) |  |   | (972 | ) |  |   | (4,261 | )
|                                      |  |                           |        |   |                         |   |        |                           |        |   |                         |      |  |   |        |   |  |   |      |   |  |   |        |  
|Change in net interest income         |  | $                         | 1,374  |   |                         | $ | (870   | )                         |        | $ | 504                     |      |  | $ | 1,089  |   |  | $ | 314  |   |  | $ | 1,403  |  
|                                      |  |                           |        |   |                         |   |        |                           |        |   |                         |      |  |   |        |   |  |   |      |   |  |   |        |  

Net Interest Income. Net interest income is determined by the Companys interest rate spread
(i.e. the difference between the yields earned on its interest-earning assets and the rates paid on its interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities. Net interest income increased
by $504 thousand or 10.1% in fiscal 2012 and increased $1.4 million or 39.0% in fiscal 2011. The increase in fiscal 2012 was the result of a $2.7 million or 63.4% decrease in interest expense, which was partially offset by a $2.2 million or 23.5%
decrease in interest and dividend income. The increase in fiscal 2011 was the result of a $4.3 million or 50.2% decrease in interest expense, which was partially offset by a decrease in interest and dividend income of $2.9 million or 23.7%. Fiscal
2012 and 2011 were favorably impacted by the reduction of fixed interest costs associated with the repayments on our legacy FHLB long-term advances. We expect fiscal 2013 fixed rate interest costs associated with legacy FHLB long-term advances to
fall slightly, when compared to fiscal 2011, due to slightly lower average outstanding balances.

Interest Income. Total
interest income decreased by $2.2 million or 23.5% during fiscal 2012 and $2.9 million or 23.7% during fiscal 2011. The decrease in fiscal 2012 was primarily the result of lower average balances of interest earning financial assets and a 45 basis
point decrease in the overall yield on financial assets. The decrease in fiscal 2011 was primarily the result of lower average balances of financial assets, which was partially offset by a three basis point increase in the overall yield on financial
assets. During fiscal 2009, the global economy went into a deep recession and this weakness continued through fiscal 2010, fiscal 2011 and fiscal 2012. In response to the weak global economy, the worlds central banks implemented a variety of
programs including lowering short-term interest rates and various liquidity programs to help restore investor confidence. The overall impact of the global recession, central bank intervention efforts and market disruptions was markedly lower
interest rates, especially in the short and intermediate term bond markets. During fiscal 2012, the Company was able to capitalize on historically low borrowing rates and purchase investments with positive net yield spreads which helped to increase
net interest income. During fiscal 2011,



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the Company used repayments from its investment portfolio to substantially reduce borrowings due to relatively unattractive net interest margins associated with its wholesale leverage strategy.
Management continuously evaluates market opportunities, and associated borrowing costs, to contribute to net interest income. The Company believes that it has sufficient capital to grow its balance sheet as opportunities become available.

Interest income on investment securities decreased $1.4 million or 30.6% during fiscal 2012 and $1.0 million or 18.1% during
fiscal 2011. The decrease in fiscal 2012 was primarily attributable to a 111 basis point decrease in the weighted average yield on the Companys investment portfolio and a $2.0 million decrease in the average balance of the Companys
investment portfolio. The decrease in fiscal 2011 was primarily attributable to a $15.9 million decrease in the average balance of the Companys investment portfolio and a 31 basis point decrease in the weighted average yield on the
Companys investment portfolio. Investment purchases were primarily funded with borrowed funds and cash flows from the mortgage-backed securities, loan and certificate of deposit portfolios.

Interest income on mortgage-backed securities decreased $267 thousand or 22.3% during fiscal 2012 and decreased $898 thousand or 42.9%
during fiscal 2011. The decrease in fiscal 2012 was primarily attributable to a $12.4 million decrease in the average balance of the Companys mortgage-backed securities portfolio and a 12 basis point decrease in the weighted average yield on
the Companys mortgage-backed securities portfolio. The decrease in fiscal 2011 was primarily attributable to a $67.8 million decrease in the average balance of the Companys mortgage-backed securities portfolio, which was partially offset
by a 5 basis point increase in the weighted average yield on the Companys mortgage-backed securities portfolio. The average balances associated with the Companys private label mortgage-backed securities declined $15.5 million and $18.8
million, during fiscal 2012 and fiscal 2011, respectively. For the fiscal years 2012 and 2011, the Company reduced its exposure to private-label mortgage-backed securities due to the substandard investment performance associated with this segment.
Proceeds from repayments on the mortgage-backed securities were primarily used to fund investment purchases during fiscal 2012.

Interest income on net loans receivable decreased $405 thousand or 12.3% during fiscal 2012 and decreased $659 thousand or 16.7% during
fiscal 2011. The decrease in fiscal year 2012 was primarily attributable to an $8.7 million decrease in the average balance of net loans outstanding, which was partially offset by a 25 basis point increase in the weighted average yield earned on the
Companys loan portfolio. The increase in the weighted average yield earned was primarily due to payoff of, and collection of past due interest on, one single family non-accrual loan and two home equity lines of credit during fiscal 2012. The
decrease in fiscal 2011 was primarily attributable to a 72 basis point decrease in the weighted average yield earned on the Companys loan portfolio and a $4.0 million decrease in the average balance of net loans outstanding. As part of its
asset/liability management strategy, historically low long-term mortgage rates, weakness in the economy, rising inventories of existing homes available for sale, and lower construction starts throughout our lending area, the Company limited its
portfolio origination of longer-term fixed rate loans to mitigate its exposure to a rise in market interest rates and credit risk. The Company continued to offer longer-term fixed rate loans on a correspondent basis during fiscal 2012 and 2011, as
well as offering multi-family and commercial real estate loans, construction loans, land acquisition and development loans, consumer loans, small business and commercial loans. Overall loan demand, and borrower financial capacity, were constrained
during both fiscal 2012 and 2011 due to weakness in the national economy. Management anticipates weakness in the real estate market to continue into fiscal 2013.

Interest income on certificates of deposit decreased $93 thousand or 75.6% during fiscal 2012 and decreased $283 thousand or 69.7% during fiscal 2011. The decrease in fiscal year 2012 was primarily
attributable to a $4.3 million decrease in the average balance of the Companys holdings of FDIC insured certificates of deposit and a 65 basis point decrease in the weighted average yield earned on the Companys certificate of deposit
holdings. The decrease in fiscal 2011 was primarily attributable to a $7.6 million decrease in the average balance of the Companys holding of FDIC insured certificates of deposit and a 102 basis point decrease in the weighted average yield
earned on the Companys certificate of deposit holdings. Proceeds from maturing CDs were primarily used to fund investment purchases during fiscal 2012.



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Dividend income on FHLB stock increased $4 thousand or 100.0% during fiscal 2012. The
increase was due to the FHLB reinstating dividends on FHLB stock held during fiscal 2012. No dividend income on FHLB stock was received during fiscal 2011. The lack of a dividend in fiscal 2011 was due to the December 2008 announcement by the FHLB
of Pittsburgh suspending the payment of dividends and redemptions of excess capital stock from members. The FHLBs stated purpose of the 2008 decision was to rebuild retained earnings to ensure adequate regulatory capital. Beginning in the
quarter ended December 31, 2010, the FHLB began redeeming excess capital stock from members. Beginning in the quarter ended March 31, 2012, the FHLB once again began paying dividends on the stock. During fiscal 2012, approximately $1.7
million of the Companys FHLB stock was redeemed by the FHLB.

Interest Expense. Total interest expense decreased
$2.7 million or 63.4% during fiscal 2012 and decreased $4.3 million or 50.1% during fiscal 2011. The decrease in fiscal 2012 was primarily attributable to a $34.4 million decrease in the average balances of interest-bearing liabilities and a 101
basis point decrease in the weighted average rate paid on interest-bearing liabilities. The decrease in fiscal 2011 was primarily attributable to a $3.3 million decrease associated with lower weighted average balances of interest bearing
liabilities, and a $972 thousand decrease as a result of lower rates paid on interest-bearing liabilities. The repayment of $5.0 million and $87.0 million of legacy FHLB advances during fiscal 2012 and 2011, respectively, materially reduced the
average balance of, and rates paid on, the Companys interest-bearing liabilities. The repayment of $55.1 million of wholesale deposits during fiscal 2011 also reduced the Companys average balance of, and to a lesser extent rates paid on,
the Companys interest-bearing liabilities.

Interest expense on legacy FHLB long-term borrowings decreased by $2.4
million or 73.3% during fiscal 2012, and decreased $3.8 million or 53.8% during fiscal 2011. During fiscal 2012, approximately $2.2 million of the decrease in interest expense was due to the $44.5 million decrease in average balances of legacy FHLB
long-term advances, and approximately $239 thousand of the decrease in interest expense was due to a 41 basis point reduction in weighted average rates paid. Approximately $3.5 million of the decrease in interest expense in fiscal 2011 was
attributable to the $66.5 million reduction in average balances of legacy FHLB long-term advances and $321 thousand was attributable to a 26 basis point reduction in weighted average rates paid.

Interest expense on interest-bearing deposits and escrows decreased $375 thousand or 40.8% in fiscal 2012 and decreased $333 thousand or
26.6% in fiscal 2011. The decrease in fiscal 2012 was primarily attributable to decreased average balances of time deposits which were partially offset by an increase on rates paid on time deposits. Average balances of time deposits decreased $42.5
million while average balances of passbooks increased $2.8 million. Average rates on time deposits increased 8 basis points, while average rates on passbooks and money market accounts decreased by 5 and 7 basis points respectively. The decrease in
average balances of time deposits and increase in rates paid on time deposits during fiscal 2012 was primarily attributable to the repayment of wholesale CDs in the second and fourth quarter of fiscal 2011. The decrease in fiscal 2011 was
primarily attributable to lower rates paid on time deposits, passbook and money market accounts, which were partially offset by decreased average balances of time deposits and passbook accounts. Average rates on time deposits, passbook and money
market accounts decreased by 64, 14 and 10 basis points, respectively. Average balances of time deposits and passbook accounts increased $18.4 million and $1.9 million, respectively. The increase with average balance of time deposits during fiscal
2011 was primarily attributable to wholesale CDs issued in the fourth quarter of fiscal 2010 and repaid throughout fiscal 2011.

No interest expense on FRB short-term borrowings was recorded in fiscal years 2012 or 2011. Interest expense on FRB short-term borrowings decreased $142 thousand or 100.0% during fiscal 2011. The decrease
in fiscal 2011 was primarily attributable to the payoff of all FRB short-term borrowings during fiscal 2010, resulting in a $52.4 million decrease in the average balance of FRB short-term borrowings and a 27 basis point decrease in the weighted
average rate paid on FRB short-term borrowings.

Interest expense on other short-term borrowings decreased $32 thousand or
97.0% during fiscal 2012, and increased $22 thousand or 200.0% during fiscal 2011. The decrease in fiscal 2012 was primarily attributable to a $10.5 million decrease in the average balance of other short-term borrowings outstanding, which was



13



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partially offset by an 80 basis point increase in the weighted average rate paid on other short-term borrowings. The increase in fiscal 2011 was primarily attributable to a $7.3 million increase
in the average balance of other short-term borrowing outstanding, which was partially offset by a 3 basis point decrease in the weighted average rate paid on other short-term borrowings. The decrease in the average balance of other short-term
borrowings reflects a funding shift from other borrowings to FHLB short-term borrowings due to lower short-term borrowing rates available through the FHLB.

Interest expense on FHLB short-term borrowings increased $125 thousand or 3,125.0% during fiscal 2012, and decreased $2 thousand or 33.3% during fiscal 2011. The increase in fiscal 2012 was primarily
attributable to a $59.9 million increase in the average balance of FHLB short-term borrowings outstanding, which was partially offset by a 4 basis point decrease in the weighted average rate paid on FHLB short-term borrowings. The increase in the
average balance of FHLB short-term borrowings during 2012 reflects lower rates charged by the FHLB when compared to other short-term rates charged by brokers and the FRB. The decrease in fiscal 2011 was primarily attributable to a $434 thousand
decrease in the average balance of FHLB short-term borrowings outstanding, and a 4 basis point decrease in the weighted average rate paid on FHLB short-term borrowings.

Recovery of Loan Losses. A provision for loan losses is charged to earnings to bring the total allowance to a level considered adequate by management to absorb potential losses in the portfolio.
Managements determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio considering past experience, current economic conditions, volume, growth, composition of the loan portfolio and other relevant
factors. The Company recorded recoveries of loan losses totaling $104 thousand and $15 thousand in fiscal 2012 and 2011, respectively. The recovery for fiscal 2012 was primarily attributable to lower levels of non-performing loans. The recovery for
fiscal 2011 was primarily attributable to reduced loans receivable balances.

Non-interest Income. Total non-interest
income decreased by $165 thousand or 32.1% in fiscal 2012 and increased by $144 thousand or 38.9% in fiscal 2011. The decrease in fiscal 2012 was primarily attributable to $131 thousand of other-than-temporary impairment credit losses on two
private-label mortgage-backed securities, and a decrease in service charges on deposits. The increase in fiscal 2011 was primarily attributable to the absence of a $194 thousand other-than-temporary impairment credit loss recognized in earnings
during fiscal 2010, which was partially offset by a decrease in service charges on deposits and a decrease in market gains on trading assets.

Non-interest Expense. Total non-interest expense decreased $188 thousand or 4.9% in fiscal 2012, and increased $222 thousand or 6.1% during fiscal 2011. The decrease in fiscal 2012 was primarily
attributable to decreases in federal deposit insurance expense, correspondent bank service charges, ATM related expenses, and legal expenses, which were partially offset by increases in charitable contributions eligible for PA tax credits and
employee related expenses. The increase in fiscal 2011 was primarily attributable to an increase in federal deposit insurance expense, ATM related expenses, real estate owned expenses, legal expenses and employee related expenses, which were
partially offset by decreases in independent audit expense due to the absence of Sarbanes-Oxley Act attestation fees in fiscal 2011.

Income Taxes. Income taxes increased $440 thousand during fiscal 2012 and increased $475 thousand during fiscal 2011. The increases in fiscal 2012 and fiscal 2011 were primarily attributable to
higher levels of taxable income. The Companys combined effective tax rate was 39.1% for the year ended June 30, 2012 and 27.4% for the year ended June 30, 2011.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is often analyzed by reviewing the cash flow statement. Cash and cash equivalents increased by $546 thousand during fiscal 2012 primarily due to $40.3 million of net cash provided by financing
activities and $1.9 million of net cash provided by operating activities, which were partially offset by $41.7 million used for investing activities.



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Funds provided by operating activities totaled $1.9 million during fiscal 2012 as compared
to $3.3 million during fiscal 2011. Net cash provided by operating activities was primarily comprised of $1.4 million of net income, $1.1 million of amortization and accretion of discounts, premiums and deferred loan fees, a $293 thousand decrease
in prepaid FDIC insurance, and a $251 thousand decrease in deferred income taxes, which were partially offset by a $733 thousand decrease in a payable to the Federal Reserve Bank and a $432 thousand decrease in accrued interest receivable.

Funds used for investing activities totaled $41.7 million during fiscal 2012 as compared to $122.6 million provided by
investing activities during fiscal 2011. Primary uses of funds during fiscal 2012 included purchases of investments, mortgage-backed securities, and certificates of deposit totaling $165.1 million, $57.4 million and $947 thousand, respectively,
which were partially offset by repayments of investments, mortgage-backed securities and certificates of deposit totaling $114.0 million, $49.5 million and $3.8 million, respectively, a decrease in net loans receivable of $10.7 million, proceeds
from the sale of investments totaling $2.1 million and redemptions of FHLB stock totaling $1.7 million. Investment purchases were comprised primarily of U.S. Government Agency Step-up notes and mortgage-backed securities, and investment grade
corporate debt obligations. Certificates of deposits purchased ranged in term from three to thirty months.

Funds provided by
financing activities totaled $40.3 million for fiscal 2012 as compared to $126.2 million used for financing activities in fiscal 2011. Primary sources of funds for fiscal 2012 were a $47.2 million increase in FHLB short-term advances, which were
partially offset by a $5.0 million decrease in FHLB long-term advances, a $1.6 million decrease in total deposits and $330 thousand in cash dividends paid on the Companys common stock. During fiscal 2012, the Company repaid $5.0 million of
fixed-rate legacy long-term FHLB advances which had a rate of 5.03%. Management has determined that it currently is maintaining adequate liquidity and continues to match funding sources with lending and investment opportunities.

The Companys primary sources of funds are deposits, repayments on existing loans, investment portfolio cash flow, funds from
operations and funds obtained through various borrowings. At June 30, 2012, the total approved loan commitments outstanding amounted to $450 thousand. At the same date, commitments under unused letters and lines of credit amounted to $6.7
million and the unadvanced portion of construction loans approximated $4.3 million. Certificates of deposit scheduled to mature in one year or less at June 30, 2012, totaled $29.9 million. Management believes that a significant portion of our
local maturing deposits will remain with the Company.

The Companys contractual obligations at June 30, 2012 were as
follows:



|                            |  |                                                |        |  |                 |   |    |           |  |   |           |  |  |                  |       |  |  |   |        | 
|--------------------------- |  | ---------------------------------------------- | ------ |  | --------------- | - | -- | --------- |  | - | --------- |  |  | ---------------- | ----- |  |  | - | ------ | 
|                            |  | Contractual Obligations
(Dollars in Thousands) |       
|                            |  | Total                                          |        |  | Less than1 year |   |    | 1-3 years |  |   | 3-5 years |  |  | More than5 years |      
|Long-term debt              |  | $                                              | 17,500 |  |                 | $ |   |           |  | $ | 5,000     |  |  | $                | 2,500 |  |  | $ | 10,000 | 
|Operating lease obligations |  |                                                | 205    |  |                 |   | 52 |           |  |   | 96        |  |  |                  | 57    |  |  |   |       | 
|                            |  |                                                |        |  |                 |   |    |           |  |   |           |  |  |                  |       |  |  |   |        | 
|                            |  | $                                              | 17,705 |  |                 | $ | 52 |           |  | $ | 5,096     |  |  | $                | 2,557 |  |  | $ | 10,000 | 

See also Note 15 of the Companys Consolidated Financial Statements.

Historically, the Company used its sources of funds primarily to meet its ongoing commitments to pay maturing certificates of deposit and
savings withdrawals, fund loan commitments and maintain a substantial portfolio of investment securities. The Company has been able to generate sufficient cash through FHLB advances, other borrowings and through the retail and broker deposit market
to provide the cash utilized in investing and financing activities. Management believes that the Company currently has adequate liquidity available to respond to liquidity demands.

On July 30, 2012, the Companys Board of Directors declared a cash dividend of $0.04 per share payable on August 23, 2012
to shareholders of record at the close of business on August 13, 2012. Dividends are subject to determination and declaration by the Board of Directors, which take into account the Companys



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financial condition, statutory and regulatory restrictions, general economic conditions and other factors. There can be no assurance that dividends will in fact be paid on the common stock in the
future or that, if paid, such dividends will not be reduced or eliminated in future periods.

The Companys ratio of total
capital to risk weighted assets and Tier 1 capital to risk weighted assets were 20.69% and 20.43%, respectively, at June 30, 2012. The Companys ratio of Tier 1 capital to average total assets was 11.14% at June 30, 2012.

Non-performing assets consist of non-accrual loans and real estate owned. A loan is placed on non-accrual status when, in the judgment of
management, the probability of collection of interest is deemed insufficient to warrant further accrual. When a loan is placed on non-accrual status, previously accrued but uncollected interest is deducted from interest income. The Company normally
does not accrue interest on loans past due 90 days or more, however, interest may be accrued if management believes that it will collect on the loan.

The Companys non-performing assets at June 30, 2012 totaled approximately $1.7 million or 0.6% of total assets compared to $2.4 million or 1.0% of total assets at June 30, 2011. The $662
thousand decrease in non-performing assets during the twelve months ended June 30, 2012 was primarily attributable to the payoff in full of one single-family residential real estate loan totaling $420 thousand, two home equity lines of credit
totaling $359 thousand and the transfer to real estate owned and subsequent sale of one single-family residential construction loan totaling $323 thousand, which were partially offset by the classification to non-performing of one land loan totaling
$290 thousand and one home equity line of credit totaling $150 thousand. Non-performing assets at June 30, 2012 consisted of one single-family construction loans totaling $701 thousand, two single-family real estate loans totaling $363
thousand, one land loan totaling $290 thousand, one home equity line of credit totaling $150 thousand and one single family real estate owned property totaling $235 thousand.

Impact of Inflation and Changing Prices.The consolidated financial statements of the Company and related notes presented herein have been prepared in accordance with U.S. generally accepted
accounting principles which require the measurement of financial condition and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature. As a
result, interest rates have a more significant impact on a financial institutions performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices
of goods and services since such prices are affected by inflation to a larger degree than interest rates. In the current interest rate environment, liquidity and the maturity structure of the Companys assets and liabilities are critical to the
maintenance of acceptable performance levels.

Recent Accounting and Regulatory Pronouncements. The Companys
discussion of recent accounting and regulatory pronouncements can be found in Note 1 to the Companys Consolidated Financial Statements.

QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The
Companys primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk. All of the Companys transactions are denominated in US dollars with no specific foreign exchange exposure. The Savings Bank has no
agricultural loan assets and therefore would not have a specific exposure to changes in commodity prices. Any impacts that changes in foreign exchange rates and commodity prices would have on interest rates are assumed to be exogenous and will be
analyzed on an ex post basis.

Interest rate risk (IRR) is the exposure of a banking
organizations financial condition to adverse movements in interest rates. Accepting this risk can be an important source of profitability and



16



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shareholder value, however excessive levels of IRR can pose a significant threat to the Companys earnings and capital base. Accordingly, effective risk management that maintains IRR at
prudent levels is essential to the Companys safety and soundness.

Evaluating a financial institutions exposure to
changes in interest rates includes assessing both the adequacy of the management process used to control IRR and the organizations quantitative level of exposure. When assessing the IRR management process, the Company seeks to ensure that
appropriate policies, procedures, management information systems and internal controls are in place to maintain IRR at prudent levels with consistency and continuity. Evaluating the quantitative level of IRR exposure requires the Company to assess
the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity, and, where appropriate, asset quality.

Since December 2007 and throughout fiscal 2012, the global economy remained in the worst recession since the end of World War II. Many
factors contributed to the recession, including: the failure, or near failure, of major financial institutions, marked declines in housing sales and prices, significant defaults in mortgage payments (particularly in the subprime sector), disruptions
in global financial market liquidity, declining stock markets and increased volatility in the bond, commodity and equity markets.

As the various markets began to unravel, historical relationships between bonds, commodities and equities continued to diverge. This divergence created additional market volatility as market participants
attempted to rebalance their portfolios. The worlds central banks continued to intervene in order to stabilize markets, at varying times and with varying degrees of success. The degree of co-ordination and timing between central banks varied
due to differing perceptions of the problem and disparate impacts within a particular countrys economy. For example, the U.S. economy began to recover at a very slow and uneven rate. Domestic unemployment remained high which continued to
impact the housing markets. Several governments within the Eurozone have experienced difficulty in managing their fiscal budgets.

On September 21, 2011, the Federal Reserve Open Market Committee (FOMC) announced a maturity extension program and reinvestment policy. Under the maturity extension program, the Federal Reserve
intends to sell $400 billion of shorter-term Treasury securities by the end of June 2012 and use the proceeds to buy longer-term Treasury securities. This will extend the average maturity of the securities in the Federal Reserves portfolio. By
reducing the supply of longer-term Treasury securities in the market, the FOMC believes that this action should put downward pressure on longer-term interest rates and provide additional stimulus to support the economic recovery.

Federal Reserve sales of short-term securities could put some upward pressure on their yields, but the FOMC believes that the effect is
likely to be small. At the time, the FOMC stated that it anticipated that economic conditions will warrant the current level of the federal funds rate at least until mid  2013. This expectation should help anchor short-term rates near current
levels.

In addition, the FOMC will reinvest principal payments from its holdings of agency debt and agency mortgage-backed
securities in agency mortgage-backed securities. The FOMC will also maintain its existing policy of rolling over maturing Treasury securities at auction.

Minutes from the FOMC meeting of December 13, 2011 indicates that participants further considered ways in which the FOMC might enhance the clarity and transparency of its public communications. The
Committee considered an approach for incorporating information about participants projections of appropriate future monetary policy into the Summary of Economic Projections (SEP), which the FOMC releases four times each year. In the SEP,
participants projections for economic growth, unemployment and inflation are conditioned on their individual assessments of the path of monetary policy that is most likely to be consistent with the Federal Reserves statutory mandate to
promote maximum employment and price stability, but information on those assessments has not been included in the SEP.



17



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At the December 13, 2011 FOMC meeting, participants decided to incorporate information
about their projections of monetary policy into the SEP beginning in January 2012. Specifically, the SEP will include information about participants projections of the appropriate level of the targeted federal funds rate in the fourth quarter
of the current year and the next few calendar years, and over the longer run. The SEP will also report participants current projections of the likely timing of the first increase in the target rate given their projections of future economic
conditions. An accompanying narrative will describe the key factors underlying those assessments as well as qualitative information regarding participants expectations for the Federal Reserves balance sheet.

On January 25, 2012, the FOMC issued a press release indicating that it decided to keep the target range for the
federal funds rate at 0 to 1/4percent and currently anticipates that economic conditions  including low rates of resource utilization and a subdued outlook for inflation over the medium run  are likely to warrant
exceptionally low levels for the federal funds rate at least through late 2014.

The FOMC also released economic
projections of Federal Reserve Board Members and Federal Reserve Bank Presidents and FOMC participants assessments of appropriate monetary policy (including the appropriate timing and pace of policy firming).

The FOMC also decided to continue its program to extend the average maturity of its holdings of securities as announced in September 2011.
The FOMC is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The FOMC stated that it will
regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Throughout fiscal year 2012, the Company continued to adjust its asset/liability management tactics in two ways. First, the Company
increased total assets by about $44.5 million while continuing to manage its Tier 1 capital. The primary segments of asset growth for fiscal year 2012 were: investment securities  available for sale - $55.6 million, and mortgage-backed
securities  held to maturity, which were partially offset by reductions in net loans receivable - $10.5 million, investment securities held to maturity - $6.0 million, FDIC insured bank certificates of deposit - $2.8 million, and FHLB stock -
$1.7 million. We increased Tier 1 capital primarily through earnings retention. Second, we substantially increased the available for sale classification of the Companys investment portfolio from $1.1 million at June 30, 2011 to $57.6
million at June 30, 2012. This allowed us to substantially bolster balance sheet liquidity while earning additional net interest income. We anticipate maintaining our asset base in the range of $285 - $310 million for the remainder of calendar
year 2012, subject to economic and market conditions. Legacy FHLB long-term borrowings were reduced by $5.0 million.

Financial
institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time.
Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest-rate changes. For example, assume that an institutions assets carry intermediate- or long-term fixed
rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institutions interest expense on its liabilities may not be
sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institutions profits could decrease on existing assets because the institution will either have lower net interest income or, possibly, net interest
expense. Similar risks exist when assets are subject to contractual interest-rate ceilings, or rate sensitive assets are funded by longer-term, fixed-rate liabilities in a decreasing-rate environment.

During the fiscal year 2012, intermediate and long-term market interest rates fluctuated considerably. Many central banks, including the
Federal Reserve, continued above normal levels of monetary accommodation including quantitative easing and targeted asset purchase programs. The desired outcomes of these programs are to stimulate aggregate demand, reduce high levels of unemployment
and to further lower market interest rates.



18



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The table below shows the targeted federal funds rate and the benchmark two and ten year
treasury yields at June 30, 2007, September 30, 2007, December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, December 31, 2008, March 31,
2009, June 30, 2009, September 30, 2009, December 31, 2009, March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, June 30,
2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012. The difference in yields on the two year and ten year Treasurys is often used to determine the steepness of the yield curve and
to assess the term premium of market interest rates.



|                   |  |                        |  |                      |      |   |                       |  |      |                      |  |                    
|------------------ |  | ---------------------- |  | -------------------- | ---- | - | --------------------- |  | ---- | -------------------- |  | -------------------
|                   |  |                        |  | Yield on:            |      |   |                      
|                   |  | Targeted Federal Funds |  | Two (2) YearTreasury |      |   | Ten (10) YearTreasury |  |      | Shape of Yield Curve
|                   |  |                        |  |                      |     
|                   |  |                        |  |                     
|June 30, 2007      |  | 5.25%                  |  |                      | 4.87 | % |                       |  | 5.03 | %                    |  | Slightly positive  
|September 30, 2007 |  | 4.75%                  |  |                      | 3.97 | % |                       |  | 4.59 | %                    |  | Moderately positive
|December 31, 2007  |  | 4.25%                  |  |                      | 3.05 | % |                       |  | 4.04 | %                    |  | Positive           
|March 31, 2008     |  | 2.25%                  |  |                      | 1.62 | % |                       |  | 3.45 | %                    |  | Positive           
|June 30, 2008      |  | 2.00%                  |  |                      | 2.63 | % |                       |  | 3.99 | %                    |  | Positive           
|September 30, 2008 |  | 2.00%                  |  |                      | 2.00 | % |                       |  | 3.85 | %                    |  | Positive           
|December 31, 2008  |  | 0.00% to 0.25%         |  |                      | 0.76 | % |                       |  | 2.25 | %                    |  | Positive           
|March 31, 2009     |  | 0.00% to 0.25%         |  |                      | 0.81 | % |                       |  | 2.71 | %                    |  | Positive           
|June 30, 2009      |  | 0.00% to 0.25%         |  |                      | 1.11 | % |                       |  | 3.53 | %                    |  | Positive           
|September 30, 2009 |  | 0.00% to 0.25%         |  |                      | 0.95 | % |                       |  | 3.31 | %                    |  | Positive           
|December 31, 2009  |  | 0.00% to 0.25%         |  |                      | 1.14 | % |                       |  | 3.85 | %                    |  | Positive           
|March 31, 2010     |  | 0.00% to 0.25%         |  |                      | 1.02 | % |                       |  | 3.84 | %                    |  | Positive           
|June 30, 2010      |  | 0.00% to 0.25%         |  |                      | 0.61 | % |                       |  | 2.97 | %                    |  | Positive           
|September 30, 2010 |  | 0.00% to 0.25%         |  |                      | 0.42 | % |                       |  | 2.53 | %                    |  | Positive           
|December 31, 2010  |  | 0.00% to 0.25%         |  |                      | 0.61 | % |                       |  | 3.30 | %                    |  | Positive           
|March 31, 2011     |  | 0.00% to 0.25%         |  |                      | 0.80 | % |                       |  | 3.47 | %                    |  | Positive           
|June 30, 2011      |  | 0.00% to 0.25%         |  |                      | 0.45 | % |                       |  | 3.18 | %                    |  | Positive           
|September 30, 2011 |  | 0.00% to 0.25%         |  |                      | 0.25 | % |                       |  | 1.92 | %                    |  | Positive           
|December 31, 2011  |  | 0.00% to 0.25%         |  |                      | 0.25 | % |                       |  | 1.89 | %                    |  | Positive           
|March 31, 2012     |  | 0.00% to 0.25%         |  |                      | 0.33 | % |                       |  | 2.23 | %                    |  | Positive           
|June 30, 2012      |  | 0.00% to 0.25%         |  |                      | 0.33 | % |                       |  | 1.67 | %                    |  | Positive           

These changes in intermediate and long-term market interest rates, the changing slope of the Treasury
yield curve, and higher levels of interest rate volatility have impacted prepayments on the Companys loan, investment and mortgage-backed securities portfolios. Principal repayments on the Companys loan, investment, mortgage-backed
securities and CD portfolios for the twelve months ended June 30, 2012, totaled $18.1 million, $116.1 million, $49.5 million and $3.8 million, respectively. Despite stagnant global interest rates and Treasury yields the Company began to grow
its balance sheet and used proceeds from calls of U.S. Government agency bonds, repayments on its mortgage-backed securities and maturities of bank certificates of deposit, and borrowings to purchase U.S. Government agency bonds, investment grade
corporate bonds and U.S. Government agency CMOs. In particular, the Company increased its available for sale portfolio allocation from $1.1 million at June 30, 2011 to $57.6 million at June 30, 2012. This strategy has allowed the
Company to substantially improve its liquidity posture while managing overall interest rate risk and strengthen our regulatory capital ratios.

Due to the term structure of market interest rates, historically low long-term mortgage interest rates, weakness in the economy, an excess supply of existing homes available for sale, and lower levels of
housing starts, the Company continued to reduce its portfolio originations of long-term fixed rate mortgages while continuing to offer such loans on a correspondent basis. The Company also makes available for origination residential mortgage loans
with interest rates which adjust pursuant to a designated index, although customer acceptance has been somewhat limited in the Savings Banks market area. We expect that the housing market will continue to be weak throughout fiscal 2013. The



19



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Company will continue to selectively offer commercial real estate, land acquisition and development, and shorter-term construction loans (primarily on residential properties), and commercial
loans on business assets to partially increase interest income while limiting credit and interest rate risk. The Company has also offered higher yielding commercial and small business loans to existing customers and seasoned prospective customers.

During fiscal 2012, principal investment purchases were comprised of: callable U.S. Government agency multiple step-up bonds
with initial lock out periods of 1  12 months - $100.6 million with a weighted average yield to call of 1.44%; fixed rate investment grade corporate bonds - $52.9 million with a weighted average yield of 1.45%; floating rate U.S. Government
agency CMOs - $67.4 million with a weighted average yield of 1.27%; floating rate investment grade corporate bonds - $4.4 million with a weighted average yield of 1.29%; fixed rate investment grade corporate utility first mortgage bonds - $4.5
million with a weighted average yield of 1.34%; fixed rate investment grade foreign bonds - $1.7 million with a weighted average yield of 1.38%; and investment-grade short-term commercial paper - $1.0 million with a yield of 0.51%. The Company also
invested in FDIC bank insured certificates of deposit totaling $946 thousand with a weighted average yield of 0.89%. Single step-up bonds have one step or increase in coupon. Multiple step-up bonds have more than one step or increase in
coupon. Substantially all of the corporate bond purchases were classified as available for sale for accounting purposes. The Company believes that this classification bolsters asset based liquidity while earning a return above the Companys
cost of funds.

Major investment proceeds received during fiscal 2012 were: callable U.S. Government agency bonds - $83.1
million with a weighted average yield of approximately 1.71%; investment grade corporate bonds - $14.7 million with a weighted average yield of approximately 2.68%; tax free municipal bonds - $3.6 million with a weighted average yield of 4.80%;
investment grade foreign bonds - $1.5 million with a weighted average yield of 2.24%; investment grade corporate utility first mortgage bonds - $11.5 million with a weighted average yield of 3.85%; and investment-grade short-term commercial paper -
$1.0 million with a yield of 0.51%. The Company also had $3.5 million in FDIC insured bank certificates of deposit redeemed with a weighted average yield of approximately 1.26%.

As of June 30, 2012, the implementation of these asset and liability management initiatives resulted in the following:



| | 1) | $86.9 million or 31.8% of the Companys assets were comprised of floating rate investment and mortgage-backed securities. Of this $86.9 million, approximately
$79.1 million float on a monthly basis based upon changes in the one-month London Interbank Offered Rate (LIBOR) and about $7.8 million reprice on a quarterly basis based upon the three-month LIBOR.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | $79.1 million or 36.1% of the Companys investment portfolio was comprised of floating rate mortgage-backed securities (including collateralized mortgage
obligations  CMOs) that reprice on a monthly basis;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | $71.3 million or 32.5% of the Companys investment portfolio consisted of investment grade fixed-rate corporate bonds with remaining maturities as follows: 3
months or less - $501 thousand or 0.7%; 3  12 months - $19.5 million or 27.3%; 1  2 years - $38.9 million or 54.6%; 2  3 years - $6.9 million or 9.6%; 3  5 years - $1.2 million or 1.7%; and over 5 years - $4.4 million or
6.1%;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4) | $57.2 million or 26.1% of the Companys investment portfolio was comprised of callable U.S. Government Agency multiple step-up bonds which are callable as follows:
1  3 months - $29.9 million or 52.2%; and 7  12 months - $27.3 million or 47.8%. These bonds may or may not actually be redeemed prior to maturity (i.e. called) depending upon the level of market interest rates at their respective call
dates;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5) | $57.6 million or 21.1% of the Companys assets were comprised of investment securities classified as available for sale;
| | -- | ------------------------------------------------------------------------------------------------------------------------



| | 6) | An aggregate of $19.9 million or 50.5% of the Companys net loan portfolio had adjustable interest rates or maturities of less than 12 months; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | 7) | The maturity distribution of the Companys borrowings is as follows: 3 months or less - $79.3 million or 81.9%; 1  3 years - $5.0 million or 5.2%; 3  5
years - $2.5 million or 2.6%; and over 5 years - $10.0 million or 10.3%.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20



---

The effect of interest rate changes on a financial institutions assets and liabilities
may be analyzed by examining the interest rate sensitivity of the assets and liabilities and by monitoring an institutions interest rate sensitivity gap. An asset or liability is said to be interest rate sensitive
within a specific time period if it will mature or reprice within a given time period. A gap is considered positive (negative) when the amount of rate sensitive assets (liabilities) exceeds the amount of rate sensitive liabilities (assets). During a
period of falling interest rates, a negative gap would tend to result in an increase in net interest income. During a period of rising interest rates, a positive gap would tend to result in an increase in net interest income.

As part of its asset/liability management strategy, the Company maintained an asset sensitive financial position due to unusually low
market interest rates. An asset sensitive financial position may benefit earnings during a period of rising interest rates and reduce earnings during a period of declining interest rates.

The following table sets forth certain information at the dates indicated relating to the Companys interest-earning assets and
interest-bearing liabilities which are estimated to mature or are scheduled to reprice within one year.



|                                                                     |  |                        |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                     |  | June 30,               |        
|                                                                     |  | 2012                   |         |   | 2011 |   |         | 2010 | 
|                                                                     |  | (Dollars in Thousands) |        
|Interest-earning assets maturing or repricing within one year        |  | $                      | 180,617 |   |      | $ | 178,738 |      |  | $ | 243,519 |  
|Interest-bearing liabilities maturing or repricing within one year   |  |                        | 165,879 |   |      |   | 128,811 |      |  |   | 248,813 |  
|                                                                     |  |                        |         |   |      |   |         |      |  |   |         |  
|                                                                     |  |                        |        
|Interest sensitivity gap                                             |  | $                      | 14,738  |   |      | $ | 49,927  |      |  | $ | (5,294  | )
|                                                                     |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest sensitivity gap as a percentage of total assets             |  |                        | 5.39    | % |      |   | 21.8    | %    |  |   | -1.5    | %
|Ratio of assets to liabilities maturing or repricing within one year |  |                        | 108.88  | % |      |   | 138.76  | %    |  |   | 97.87   | %

During fiscal 2012, the Company reduced its one-year interest sensitivity gap by: (1) purchasing
$29.3 million of corporate bonds with maturities beyond one year but within two years; (2) purchasing $4.8 million of corporate bonds with maturities beyond two years but within three years; and (3) increasing by approximately $37.1
million the Companys borrowings that mature with one year. All of the referenced corporate bond purchases were designated as available for sale for accounting purposes. These purchases further bolstered balance sheet liquidity. At
June 30, 2012, investments available for sale totaled $57.6 million or 21% of total assets.



21



---

The following table illustrates the Companys estimated stressed cumulative repricing
gap  the difference between the amount of interest-earning assets and interest-bearing liabilities expected to reprice at a given point in time  at June 30, 2012. The table estimates the impact of an upward or downward change in
market interest rates of 100 and 200 basis points.

Cumulative Stressed Repricing Gap



|                      |  |                        |         |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|--------------------- |  | ---------------------- | ------- | - | ------- | - | ------ | -------- |  | - | -------- | - |  | -------- | ------ | - | -------- | - | ------ | --------- |  | - | ------ | - |  | - | ------ | -
|                      |  | Month 3                |         |   | Month 6 |   |        | Month 12 |  |   | Month 24 |   |  | Month 36 |        |   | Month 60 |   |        | Long Term | 
|                      |  | (Dollars in Thousands) |        
|Base Case Up 200 bp   |  |                        |         |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cumulative Gap ($s)  |  | $                      | (10,581 | ) |         | $ | (9,856 | )        |  | $ | 10,888   |   |  | $        | 53,033 |   |          | $ | 55,080 |           |  | $ | 46,120 |   |  | $ | 27,781 |  
|% of Total Assets     |  |                        | -3.9    | % |         |   | -3.6   | %        |  |   | 4.0      | % |  |          | 19.4   | % |          |   | 20.2   | %         |  |   | 16.9   | % |  |   | 10.2   | %
|Base Case Up 100 bp   |  |                        |         |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cumulative Gap ($s)  |  | $                      | (10,169 | ) |         | $ | (9,096 | )        |  | $ | 12,157   |   |  | $        | 54,969 |   |          | $ | 57,333 |           |  | $ | 48,397 |   |  | $ | 27,781 |  
|% of Total Assets     |  |                        | -3.7    | % |         |   | -3.3   | %        |  |   | 4.4      | % |  |          | 20.1   | % |          |   | 21.0   | %         |  |   | 17.7   | % |  |   | 10.2   | %
|Base Case No Change   |  |                        |         |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cumulative Gap ($s)  |  | $                      | (9,291  | ) |         | $ | (7,499 | )        |  | $ | 14,738   |   |  | $        | 58,460 |   |          | $ | 60,884 |           |  | $ | 50,043 |   |  | $ | 27,781 |  
|% of Total Assets     |  |                        | -3.4    | % |         |   | -2.7   | %        |  |   | 5.4      | % |  |          | 21.4   | % |          |   | 22.3   | %         |  |   | 18.3   | % |  |   | 10.2   | %
|Base Case Down 100 bp |  |                        |         |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cumulative Gap ($s)  |  | $                      | (8,928  | ) |         | $ | (6,858 | )        |  | $ | 15,653   |   |  | $        | 59,486 |   |          | $ | 61,743 |           |  | $ | 50,043 |   |  | $ | 27,781 |  
|% of Total Assets     |  |                        | -3.3    | % |         |   | -2.5   | %        |  |   | 5.7      | % |  |          | 21.8   | % |          |   | 22.6   | %         |  |   | 18.3   | % |  |   | 10.2   | %
|Base Case Down 200 bp |  |                        |         |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cumulative Gap ($s)  |  | $                      | (8,912  | ) |         | $ | (6,830 | )        |  | $ | 15,694   |   |  | $        | 59,530 |   |          | $ | 61,776 |           |  | $ | 50,043 |   |  | $ | 27,781 |  
|% of Total Assets     |  |                        | -3.3    | % |         |   | -2.5   | %        |  |   | 5.7      | % |  |          | 21.8   | % |          |   | 22.6   | %         |  |   | 18.3   | % |  |   | 10.2   | %

The Company utilizes an income simulation model to measure interest rate risk and to manage interest rate
sensitivity. The Company believes that income simulation modeling may enable the Company to better estimate the possible effects on net interest income due to changing market interest rates. Other key model parameters include: estimated prepayment
rates on the Companys loan, mortgage-backed securities and investment portfolios; savings decay rate assumptions; and the repayment terms and embedded options of the Companys borrowings.



22



---

The following table presents the simulated impact of a 100 and 200 basis point upward or
downward (parallel) shift in market interest rates on net interest income, return on average equity, return on average assets and the market value of portfolio equity at June 30, 2012. This analysis was done assuming that the interest-earning
assets will average approximately $296 million and $321 million over a projected twelve and twenty-four month period, respectively, for the estimated impact on change in net interest income, return on average equity and return on average assets. The
estimated changes in market value of equity were calculated using balance sheet levels at June 30, 2012. Actual future results could differ materially from our estimates primarily due to unknown future interest rate changes and the level of
prepayments on our investment and loan portfolios and future FDIC regular and special assessments.

Analysis of Sensitivity
to Changes in Market Interest Rates



|                                      |  |                                                              |       |   |               |  |       |   |  |  |      |   |  |  |      |   |  |  |      |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------- |  | ------------------------------------------------------------ | ----- | - | ------------- |  | ----- | - |  |  | ---- | - |  |  | ---- | - |  |  | ---- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                      |  | Twelve Month Forward Modeled Change in Market Interest Rates |      
|                                      |  | June 30, 2013                                                |       |   | June 30, 2012 | 
|                                      |  |                                                              |       |   |               |  |       |   |  | 
|Estimated impact on:                  |  |                                                              | -200  |   |               |  | -100  |   |  |  | 0    |   |  |  | +100 |   |  |  | +200 |   |  |   | -200   |   |  |   | -100   |   |  |   | 0      |   |  |   | +100   |   |  |   | +200   |  
|                                      |  |                                                              |       |   |               |  |       |   |  |  |      |   |  |  |      |   |  |  |      |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  
|                                      |  |                                                              |       |   |               |  |       |   |  | 
|Change in net interest income         |  |                                                              | -26.9 | % |               |  | -25.0 | % |  |  |     |   |  |  | 3.7  | % |  |  | 26.5 | % |  |   | -12.7  | % |  |   | -12.0  | % |  |   |       |   |  |   | -2.2   | % |  |   | 4.0    | %
|                                      |  |                                                              |       |   |               |  |       |   |  | 
|Return on average equity              |  |                                                              | 1.37  | % |               |  | 1.58  | % |  |  | 4.31 | % |  |  | 4.72 | % |  |  | 7.12 | % |  |   | 2.61   | % |  |   | 2.69   | % |  |   | 4.00   | % |  |   | 3.76   | % |  |   | 4.43   | %
|                                      |  |                                                              |       |   |               |  |       |   |  | 
|Return on average assets              |  |                                                              | 0.16  | % |               |  | 0.19  | % |  |  | 0.42 | % |  |  | 0.54 | % |  |  | 0.74 | % |  |   | 0.31   | % |  |   | 0.32   | % |  |   | 0.41   | % |  |   | 0.43   | % |  |   | 0.49   | %
|                                      |  |                                                              |       |   |               |  |       |   |  | 
|Market value of equity (in thousands) |  |                                                              |       |   |               |  |       |   |  |  |      |   |  |  |      |   |  |  |      |   |  | $ | 31,878 |   |  | $ | 32,166 |   |  | $ | 32,805 |   |  | $ | 33,283 |   |  | $ | 29,181 |  

The table below provides information about the Companys anticipated transactions comprised of firm
loan commitments and other commitments, including undisbursed letters and lines of credit. The Company used no derivative financial instruments to hedge such anticipated transactions as of June 30, 2012.



|                                               |  |                        |        |  
|---------------------------------------------- |  | ---------------------- | ------ | -
|Anticipated Transactions                       | 
|                                               |  | (Dollars in Thousands) |       
|Undisbursed construction and development loans |  |                        |        |  
|Fixed rate                                     |  | $                      | 2,001  |  
|                                               |  |                        | 6.53   | %
|                                               | 
|Adjustable rate                                |  | $                      | 2,294  |  
|                                               |  |                        | 5.03   | %
|                                               | 
|Undisbursed lines of credit                    |  |                        |        |  
|Adjustable rate                                |  | $                      | 6,251  |  
|                                               |  |                        | 3.74   | %
|                                               | 
|Loan origination commitments                   |  |                        |        |  
|Fixed rate                                     |  | $                      | 450    |  
|                                               |  |                        | 4.50   | %
|                                               | 
|Letters of credit                              |  |                        |        |  
|Adjustable rate                                |  | $                      | 479    |  
|                                               |  |                        | 4.25   | %
|                                               |  |                        |        |  
|                                               |  | $                      | 11,475 |  
|                                               |  |                        |        |  



23



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LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

WVS Financial Corp.

We have audited the accompanying consolidated balance sheet
of WVS Financial Corp. and subsidiary (the Company) as of June 30, 2012 and 2011, and the related consolidated statements of income, stockholders equity, and cash flows for each of the years in the three-year period ended
June 30, 2012. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of WVS Financial Corp. and subsidiary as of June 30, 2012 and 2011, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2012, in conformity with U.S. generally
accepted accounting principles.

/s/ S.R. Snodgrass, A.C.

Wexford, PA

September 18, 2012

S.R. Snodgrass, A.C. * 2100 Corporate Drive, Suite 400 * Wexford, Pennsylvania 15090-8399 * Phone: (724) 934-0344 * Facsimile: (724) 934-0345



24



---

WVS FINANCIAL CORP.

CONSOLIDATED BALANCE SHEET

(In thousands, except per share data)



|                                                                                     |  |          |         |   |      |   |         |  
|------------------------------------------------------------------------------------ |  | -------- | ------- | - | ---- | - | ------- | -
|                                                                                     |  | June 30, |        
|                                                                                     |  | 2012     |         |   | 2011 |  
|ASSETS                                                                               |  |          |         |   |      |   |         |  
|Cash and due from banks                                                              |  | $        | 2,314   |   |      |   | 662     |  
|Interest-earning demand deposits                                                     |  |          | 192     |   |      |   | 1,298   |  
|                                                                                     |  |          |         |   |      |   |         |  
|Total cash and cash equivalents                                                      |  |          | 2,506   |   |      |   | 1,960   |  
|Certificates of deposit                                                              |  |          | 846     |   |      |   | 3,668   |  
|Investment securities available for sale (amortized cost of $57,636 and $1,067)      |  |          | 57,620  |   |      |   | 1,064   |  
|Investment securities held to maturity (fair value of $84,059 and $90,974)           |  |          | 82,400  |   |      |   | 88,374  |  
|Mortgage-backed securities held to maturity (fair value of $79,813 and $71,169)      |  |          | 79,086  |   |      |   | 70,568  |  
|Net loans receivable (allowance for loan losses of $385 and $630)                    |  |          | 39,433  |   |      |   | 49,952  |  
|Accrued interest receivable                                                          |  |          | 1,621   |   |      |   | 1,189   |  
|Federal Home Loan Bank stock, at cost                                                |  |          | 7,595   |   |      |   | 9,324   |  
|Real estate owned                                                                    |  |          | 235     |   |      |   | 235     |  
|Premises and equipment                                                               |  |          | 583     |   |      |   | 588     |  
|Prepaid FDIC insurance premium                                                       |  |          | 163     |   |      |   | 456     |  
|Deferred tax assets (net)                                                            |  |          | 1,047   |   |      |   | 1,298   |  
|Other assets                                                                         |  |          | 206     |   |      |   | 212     |  
|                                                                                     |  |          |         |   |      |   |         |  
|                                                                                     |  |         
|TOTAL ASSETS                                                                         |  | $        | 273,341 |   |      | $ | 228,888 |  
|                                                                                     |  |          |         |   |      |   |         |  
|                                                                                     |  |         
|LIABILITIES                                                                          |  |          |         |   |      |   |         |  
|Deposits                                                                             |  | $        | 142,173 |   |      | $ | 143,766 |  
|Federal Home Loan Bank advances: long-term                                           |  |          | 17,500  |   |      |   | 22,500  |  
|Federal Home Loan Bank advances: short-term                                          |  |          | 79,270  |   |      |   | 32,059  |  
|Accrued interest payable                                                             |  |          | 257     |   |      |   | 322     |  
|Other liabilities                                                                    |  |          | 3,728   |   |      |   | 1,363   |  
|                                                                                     |  |          |         |   |      |   |         |  
|TOTAL LIABILITIES                                                                    |  |          | 242,928 |   |      |   | 200,010 |  
|                                                                                     |  |          |         |   |      |   |         |  
|                                                                                     |  |         
|STOCKHOLDERS EQUITY                                                                 |  |          |         |   |      |   |         |  
|Preferred stock, no par value; 5,000,000 shares authorized; none outstanding         |  |          |        |   |      |   |        |  
|Common stock, par value $0.01; 10,000,000 shares authorized; 3,805,636 shares issued |  |          | 38      |   |      |   | 38      |  
|Additional paid-in capital                                                           |  |          | 21,458  |   |      |   | 21,437  |  
|Treasury stock (1,747,706 shares at cost)                                            |  |          | (26,690 | ) |      |   | (26,690 | )
|Retained earnings - substantially restricted                                         |  |          | 36,992  |   |      |   | 35,920  |  
|Accumulated other comprehensive loss                                                 |  |          | (1,385  | ) |      |   | (1,827  | )
|                                                                                     |  |          |         |   |      |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                           |  |          | 30,413  |   |      |   | 28,878  |  
|                                                                                     |  |          |         |   |      |   |         |  
|                                                                                     |  |         
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                           |  | $        | 273,341 |   |      | $ | 228,888 |  
|                                                                                     |  |          |         |   |      |   |         |  

See accompanying notes to the consolidated financial statements.



25



---

WVS FINANCIAL CORP.

CONSOLIDATED STATEMENT OF INCOME

(In thousands, except per share data)



|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|----------------------------------------------------------------------- |  | ------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                        |  | Year Ended June 30, |          
|                                                                        |  | 2012                |           |   | 2011 |   |           | 2010 | 
|INTEREST AND DIVIDEND INCOME                                            |  |                     |           |   |      |   |           |      |  |   |           |  
|Loans                                                                   |  | $                   | 2,892     |   |      | $ | 3,297     |      |  | $ | 3,956     |  
|Investment securities  taxable                                         |  |                     | 3,109     |   |      |   | 4,395     |      |  |   | 5,273     |  
|Investment securities  non-taxable                                     |  |                     | 88        |   |      |   | 211       |      |  |   | 351       |  
|Mortgage-backed securities                                              |  |                     | 929       |   |      |   | 1,196     |      |  |   | 2,094     |  
|Certificates of deposit                                                 |  |                     | 30        |   |      |   | 123       |      |  |   | 406       |  
|Interest-earning demand deposits                                        |  |                     | 1         |   |      |   | 3         |      |  |   | 3         |  
|Federal Home Loan Bank stock                                            |  |                     | 4         |   |      |   |          |      |  |   |          |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|Total interest and dividend income                                      |  |                     | 7,053     |   |      |   | 9,225     |      |  |   | 12,083    |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|                                                                        |  |                     |          
|INTEREST EXPENSE                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|Deposits                                                                |  |                     | 543       |   |      |   | 918       |      |  |   | 1,251     |  
|Federal Home Loan Bank advances  long-term                             |  |                     | 871       |   |      |   | 3,265     |      |  |   | 7,071     |  
|Federal Home Loan Bank advances  short-term                            |  |                     | 129       |   |      |   | 4         |      |  |   | 6         |  
|FRB short-term borrowings                                               |  |                     |          |   |      |   |          |      |  |   | 142       |  
|Other short-term borrowings                                             |  |                     | 1         |   |      |   | 33        |      |  |   | 11        |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|Total interest expense                                                  |  |                     | 1,544     |   |      |   | 4,220     |      |  |   | 8,481     |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|                                                                        |  |                     |          
|NET INTEREST INCOME                                                     |  |                     | 5,509     |   |      |   | 5,005     |      |  |   | 3,602     |  
|Recovery of loan losses                                                 |  |                     | (104      | ) |      |   | (15       | )    |  |   | (11       | )
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|NET INTEREST INCOME AFTER RECOVERY OF LOAN LOSSES                       |  |                     | 5,613     |   |      |   | 5,020     |      |  |   | 3,613     |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|                                                                        |  |                     |          
|NONINTEREST INCOME                                                      |  |                     |           |   |      |   |           |      |  |   |           |  
|Service charges on deposits                                             |  |                     | 202       |   |      |   | 232       |      |  |   | 278       |  
|Gains on trading securities                                             |  |                     |          |   |      |   |          |      |  |   | 16        |  
|Investment securities gains                                             |  |                     | 4         |   |      |   |          |      |  |   | 1         |  
|                                                                        |  |                     |          
|Other than temporary impairment losses                                  |  |                     | (303      | ) |      |   |          |      |  |   | (3,712    | )
|Portion of loss recognized in other comprehensive income (before taxes) |  |                     | 172       |   |      |   |          |      |  |   | 3,518     |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|Net impairment loss recognized in earnings                              |  |                     | (131      | ) |      |   |          |      |  |   | (194      | )
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|Other                                                                   |  |                     | 274       |   |      |   | 282       |      |  |   | 269       |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|Total noninterest income                                                |  |                     | 349       |   |      |   | 514       |      |  |   | 370       |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|                                                                        |  |                     |          
|NONINTEREST EXPENSE                                                     |  |                     |           |   |      |   |           |      |  |   |           |  
|Salaries and employee benefits                                          |  |                     | 1,981     |   |      |   | 1,964     |      |  |   | 1,945     |  
|Occupancy and equipment                                                 |  |                     | 301       |   |      |   | 316       |      |  |   | 322       |  
|Data processing                                                         |  |                     | 243       |   |      |   | 246       |      |  |   | 243       |  
|Correspondent bank charges                                              |  |                     | 61        |   |      |   | 89        |      |  |   | 93        |  
|Federal deposit insurance premium                                       |  |                     | 306       |   |      |   | 419       |      |  |   | 343       |  
|Other                                                                   |  |                     | 766       |   |      |   | 812       |      |  |   | 678       |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|Total noninterest expense                                               |  |                     | 3,658     |   |      |   | 3,846     |      |  |   | 3,624     |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|                                                                        |  |                     |          
|INCOME BEFORE INCOME TAXES                                              |  |                     | 2,304     |   |      |   | 1,688     |      |  |   | 359       |  
|                                                                        |  |                     |          
|INCOME TAX EXPENSE (BENEFIT)                                            |  |                     | 902       |   |      |   | 462       |      |  |   | (13       | )
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|                                                                        |  |                     |          
|NET INCOME                                                              |  | $                   | 1,402     |   |      | $ | 1,226     |      |  | $ | 372       |  
|                                                                        |  |                     |           |   |      |   |           |      |  |   |           |  
|                                                                        |  |                     |          
|EARNINGS PER SHARE:                                                     |  |                     |           |   |      |   |           |      |  |   |           |  
|Basic                                                                   |  | $                   | 0.68      |   |      | $ | 0.60      |      |  | $ | 0.18      |  
|Diluted                                                                 |  |                     | 0.68      |   |      |   | 0.60      |      |  |   | 0.18      |  
|                                                                        |  |                     |          
|AVERAGE SHARES OUTSTANDING:                                             |  |                     |           |   |      |   |           |      |  |   |           |  
|Basic                                                                   |  |                     | 2,057,930 |   |      |   | 2,057,930 |      |  |   | 2,066,335 |  
|Diluted                                                                 |  |                     | 2,057,930 |   |      |   | 2,057,930 |      |  |   | 2,066,335 |  

See accompanying notes to the consolidated financial statements.



26



---

WVS FINANCIAL CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(In thousands, except per
share data)



|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -- |  | ------------------------ | - | ------ | ------------- |  | - | ---------------------------------------- | - |  | ------------------------------------------ | ------ | - | ----- | - | ------ | - |  | - | ------ | -
|                                                                                                                                      |  | CommonStock |    |  | AdditionalPaid-InCapital |   |        | TreasuryStock |  |   | RetainedEarnings-SubstantiallyRestricted |   |  | AccumulatedOtherComprehensiveIncome (Loss) |        |   | Total |  
|                                                                                                                                      |  |             |    |  |                          |  
|Balance June 30, 2009                                                                                                                 |  | $           | 38 |  |                          | $ | 21,392 |               |  | $ | (26,531                                  | ) |  | $                                          | 36,220 |   |       | $ | 4      |   |  | $ | 31,123 |  
|                                                                                                                                      |  |             |    |  |                          |  
|Net income                                                                                                                            |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            | 372    |   |       |   |        |   |  |   | 372    |  
|Other comprehensive loss:                                                                                                             |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|Non-credit unrealized holding losses on securities with other-than-temporary impairment, net of income tax effect of
($1,197)         |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | (2,321 | ) |  |   | (2,321 | )
|Unrealized holding gain (loss) on securities, net of income tax effect of $40                                                         |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | 79     |   |  |   | 79     |  
|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|Comprehensive loss                                                                                                                    |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   | (1,870 | )
|                                                                                                                                      |  |             |    |  |                          |  
|Expense of stock options awarded                                                                                                      |  |             |    |  |                          |   | 23     |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   | 23     |  
|Purchase of treasury stock (12,155)                                                                                                   |  |             |    |  |                          |   |        |               |  |   | (159                                     | ) |  |                                            |        |   |       |   |        |   |  |   | (159   | )
|Cash dividends declared ($0.64 per share)                                                                                             |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            | (1,322 | ) |       |   |        |   |  |   | (1,322 | )
|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|                                                                                                                                      |  |             |    |  |                          |  
|Balance June 30, 2010                                                                                                                 |  |             | 38 |  |                          |   | 21,415 |               |  |   | (26,690                                  | ) |  |                                            | 35,270 |   |       |   | (2,238 | ) |  |   | 27,795 |  
|                                                                                                                                      |  |             |    |  |                          |  
|Net income                                                                                                                            |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            | 1,226  |   |       |   |        |   |  |   | 1,226  |  
|Other comprehensive income:                                                                                                           |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|Accretion of other-than-temporary impairment on securities held to maturity, net of income tax effect of ($256)                       |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | 496    |   |  |   | 496    |  
|Unrealized holding gain (loss) on securities, net of income tax effect of $(44)                                                       |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | (85    | ) |  |   | (85    | )
|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|Comprehensive income                                                                                                                  |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   | 1,637  |  
|                                                                                                                                      |  |             |    |  |                          |  
|Expense of stock options awarded                                                                                                      |  |             |    |  |                          |   | 22     |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   | 22     |  
|Cash dividends declared ($0.28 per share)                                                                                             |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            | (576   | ) |       |   |        |   |  |   | (576   | )
|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|                                                                                                                                      |  |             |    |  |                          |  
|Balance June 30, 2011                                                                                                                 |  |             | 38 |  |                          |   | 21,437 |               |  |   | (26,690                                  | ) |  |                                            | 35,920 |   |       |   | (1,827 | ) |  |   | 28,878 |  
|                                                                                                                                      |  |             |    |  |                          |  
|Net income                                                                                                                            |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            | 1,402  |   |       |   |        |   |  |   | 1,402  |  
|Other comprehensive income:                                                                                                           |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|Accretion of other-than-temporary impairment on securities held to maturity, net of income tax effect of $255                         |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | 495    |   |  |   | 495    |  
|Other-than-temporary impairment on securities held to maturity, net of income tax effect of $(58)                                     |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | (114   | ) |  |   | (114   | )
|Reclassification adjustment of other-than-temporary impairment losses on securities held to maturity, net of income tax effect of
$36 |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | 70     |   |  |   | 70     |  
|Unrealized holding gains (loss) on securities available for sale, net of income tax effect of $(5)                                    |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   | (9     | ) |  |   | (9     | )
|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|Comprehensive income                                                                                                                  |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   | 1,844  |  
|                                                                                                                                      |  |             |    |  |                          |  
|Expense of stock options awarded                                                                                                      |  |             |    |  |                          |   | 21     |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   | 21     |  
|Cash dividends declared ($0.16 per share)                                                                                             |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            | (330   | ) |       |   |        |   |  |   | (330   | )
|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|                                                                                                                                      |  |             |    |  |                          |  
|Balance June 30, 2012                                                                                                                 |  | $           | 38 |  |                          | $ | 21,458 |               |  | $ | (26,690                                  | ) |  | $                                          | 36,992 |   |       | $ | (1,385 | ) |  | $ | 30,413 |  
|                                                                                                                                      |  |             |    |  |                          |   |        |               |  |   |                                          |   |  |                                            |        |   |       |   |        |   |  |   |        |  

See accompanying notes to the consolidated financial statements.



27



---

WVS FINANCIAL CORP.

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)



|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                  |  | Year Ended June 30, |         
|                                                                                  |  | 2012                |          |   | 2011 |   |          | 2010 | 
|OPERATING ACTIVITIES                                                              |  |                     |          |   |      |   |          |      |  |   |          |  
|Net income                                                                        |  | $                   | 1,402    |   |      | $ | 1,226    |      |  | $ | 372      |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                     |          |   |      |   |          |      |  |   |          |  
|Recovery of loan losses                                                           |  |                     | (104     | ) |      |   | (15      | )    |  |   | (11      | )
|Net impairment loss recognized in earnings                                        |  |                     | 131      |   |      |   |         |      |  |   | 194      |  
|Depreciation                                                                      |  |                     | 84       |   |      |   | 100      |      |  |   | 103      |  
|Investment securities gains                                                       |  |                     | (4       | ) |      |   |         |      |  |   | (1       | )
|Amortization of discounts, premiums, and deferred loan fees, net                  |  |                     | 1,106    |   |      |   | 932      |      |  |   | 1,563    |  
|Trading security gains                                                            |  |                     |         |   |      |   |         |      |  |   | (16      | )
|Purchase of trading securities                                                    |  |                     |         |   |      |   |         |      |  |   | (1,975   | )
|Proceeds from sale of trading securities                                          |  |                     |         |   |      |   |         |      |  |   | 1,991    |  
|Deferred income taxes                                                             |  |                     | 251      |   |      |   | 269      |      |  |   | (101     | )
|Decrease (increase) in accrued interest receivable                                |  |                     | (432     | ) |      |   | 1,241    |      |  |   | (83      | )
|Decrease in accrued interest payable                                              |  |                     | (65      | ) |      |   | (515     | )    |  |   | (314     | )
|(Decrease) increase in deferred director compensation payable                     |  |                     | (30      | ) |      |   | (368     | )    |  |   | 10       |  
|Decrease (increase) in prepaid federal deposit insurance                          |  |                     | 293      |   |      |   | 399      |      |  |   | (855     | )
|Other, net                                                                        |  |                     | (684     | ) |      |   | 45       |      |  |   | 23       |  
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                         |  |                     | 1,948    |   |      |   | 3,314    |      |  |   | 900      |  
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|                                                                                  |  |                     |         
|INVESTING ACTIVITIES                                                              |  |                     |          |   |      |   |          |      |  |   |          |  
|Available for sale:                                                               |  |                     |          |   |      |   |          |      |  |   |          |  
|Purchase of investment securities                                                 |  |                     | (63,416  | ) |      |   | (10,416  | )    |  |   |         |  
|Proceeds from repayments of investment securities                                 |  |                     | 6,389    |   |      |   | 9,340    |      |  |   |         |  
|Proceeds from repayments of mortgage-backed securities                            |  |                     |         |   |      |   | 2,018    |      |  |   | 42       |  
|Proceeds from sales of investment securities                                      |  |                     | 2,102    |   |      |   |         |      |  |   | 501      |  
|Held to maturity:                                                                 |  |                     |          |   |      |   |          |      |  |   |          |  
|Purchase of investment securities                                                 |  |                     | (101,666 | ) |      |   | (61,189  | )    |  |   | (112,021 | )
|Purchase of mortgage-backed securities                                            |  |                     | (57,386  | ) |      |   | (17,757  | )    |  |   | (15,451  | )
|Proceeds from repayments of investment securities                                 |  |                     | 107,633  |   |      |   | 125,108  |      |  |   | 80,430   |  
|Proceeds from repayments of mortgage-backed securities                            |  |                     | 49,456   |   |      |   | 62,941   |      |  |   | 70,935   |  
|Purchase of certificates of deposit                                               |  |                     | (947     | ) |      |   | (3,817   | )    |  |   | (9,755   | )
|Maturities/redemptions of certificates of deposit                                 |  |                     | 3,766    |   |      |   | 8,747    |      |  |   | 25,855   |  
|Net decrease (increase) in net loans receivable                                   |  |                     | 10,729   |   |      |   | 6,114    |      |  |   | 1,767    |  
|Purchase of Federal Home Loan Bank stock                                          |  |                     |         |   |      |   |         |      |  |   |         |  
|Redemption of Federal Home Loan Bank stock                                        |  |                     | 1,729    |   |      |   | 1,551    |      |  |   |         |  
|Acquisition of premises and equipment                                             |  |                     | (79      | ) |      |   | (9       | )    |  |   | (90      | )
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|Net cash (used for) provided by investing activities                              |  |                     | (41,690  | ) |      |   | 122,631  |      |  |   | 42,213   |  
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|                                                                                  |  |                     |         
|FINANCING ACTIVITIES                                                              |  |                     |          |   |      |   |          |      |  |   |          |  
|Net increase (decrease) in deposits                                               |  |                     | (1,593   | ) |      |   | (58,156  | )    |  |   | 55,607   |  
|Net (decrease) increase in Federal Reserve Bank short-term borrowings             |  |                     |         |   |      |   |         |      |  |   | (108,800 | )
|Net increase (decrease) in other short-term borrowings                            |  |                     |         |   |      |   | (12,510  | )    |  |   | 12,510   |  
|Repayments of Federal Home Loan Bank long-term advances                           |  |                     | (5,000   | ) |      |   | (87,000  | )    |  |   | (20,579  | )
|Net increase in Federal Home Loan Bank short-term advances                        |  |                     | 47,211   |   |      |   | 32,059   |      |  |   |         |  
|Cash dividends paid                                                               |  |                     | (330     | ) |      |   | (576     | )    |  |   | (1,322   | )
|Purchase of treasury stock                                                        |  |                     |         |   |      |   |         |      |  |   | (159     | )
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used for) financing activities                              |  |                     | 40,288   |   |      |   | (126,183 | )    |  |   | (62,743  | )
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|                                                                                  |  |                     |         
|Increase (decrease) in cash and cash equivalents                                  |  |                     | 546      |   |      |   | (238     | )    |  |   | (19,630  | )
|                                                                                  |  |                     |         
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |  |                     | 1,960    |   |      |   | 2,198    |      |  |   | 21,828   |  
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|                                                                                  |  |                     |         
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |  | $                   | 2,506    |   |      | $ | 1,960    |      |  | $ | 2,198    |  
|                                                                                  |  |                     |          |   |      |   |          |      |  |   |          |  
|                                                                                  |  |                     |         
|SUPPLEMENTAL CASH FLOW INFORMATION                                                |  |                     |          |   |      |   |          |      |  |   |          |  
|Cash paid during the year for:                                                    |  |                     |          |   |      |   |          |      |  |   |          |  
|Interest                                                                          |  | $                   | 1,609    |   |      | $ | 4,735    |      |  | $ | 8,795    |  
|Taxes                                                                             |  |                     | 782      |   |      |   | 212      |      |  |   | 69       |  
|Non-cash items                                                                    |  |                     |          |   |      |   |          |      |  |   |          |  
|Due to Federal Reserve Bank                                                       |  |                     |         |   |      |   | 733      |      |  |   | 1,130    |  
|Mortgage loans transferred to other real estate owned                             |  |                     | 182      |   |      |   | 235      |      |  |   |         |  
|Educational Improvement Tax Credits                                               |  |                     | 98       |   |      |   |         |      |  |   | 32       |  
|Neighborhood Assistance Act Tax Credit                                            |  |                     | 1        |   |      |   |         |      |  |   |         |  
|Loan to facilitate sale of Real Estate Owned                                      |  |                     | 364      |   |      |   |         |      |  |   |         |  
|Commitment to purchase investment securities available for sale                   |  |                     | 2,782    |   |      |   |         |      |  |   |         |  

See accompanying notes to the consolidated financial statements.



28



---

WVS FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Organization

WVS Financial Corp. (WVS or the
Company) is a Pennsylvania-chartered unitary bank holding company which owns 100 percent of the common stock of West View Savings Bank (West View or the Savings Bank). The operating results of the Company depend
primarily upon the operating results of the Savings Bank and, to a lesser extent, income from interest-earning assets such as investment securities.

West View is a Pennsylvania-chartered, FDIC-insured stock savings bank conducting business from six offices in the North Hills suburbs of Pittsburgh. The Savings Banks principal sources of revenue
originate from its portfolio of residential real estate and commercial mortgage loans as well as income from investment and mortgage-backed securities.

The Company is supervised by the Board of Governors of the Federal Reserve System, while the Savings Bank is subject to regulation and supervision by the Federal Deposit Insurance Corporation
(FDIC) and the Pennsylvania Department of Banking.

Basis of Presentation

The consolidated financial statements include the accounts of WVS and its wholly owned subsidiary, West View. All intercompany
transactions have been eliminated in consolidation. The accounting and reporting policies of WVS and West View conform to U.S. generally accepted accounting principles. The Companys fiscal year-end for financial reporting is June 30. For
regulatory and income tax reporting purposes, WVS reports on a December 31 calendar year basis.

In preparing the
consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the Consolidated Balance Sheet date and revenues and expenses for that period. Actual
results could differ significantly from those estimates.

Investment and Mortgage-Backed Securities

Investment and mortgage-backed securities are classified at the time of purchase as securities held to maturity or securities available
for sale based on managements ability and intent. Investment and mortgage-backed securities acquired with the ability and intent to hold to maturity are stated at cost adjusted for amortization of premium and accretion of discount, which are
computed using the level-yield method and recognized as adjustments of interest income. Amortization rates for mortgage-backed securities are periodically adjusted to reflect changes in the prepayment speeds of the underlying mortgages. Certain
other investment, equity, and mortgage-backed securities have been classified as available for sale to serve principally as a source of liquidity. Unrealized holding gains and losses for available-for-sale securities are reported as a separate
component of stockholders equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment and mortgage-backed securities are recognized as
income when earned.

Common stock of the Federal Home Loan Bank (the FHLB) represents ownership in an institution
which is wholly owned by other financial institutions. This equity security is accounted for at cost and reported separately on the accompanying Consolidated Balance Sheet.



29



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Investment and Mortgage-Backed Securities (Continued)



Management systematically evaluates investment securities for other-than-temporary
declines in fair value on at least a quarterly basis. This analysis requires management to consider various factors, which include: (1) duration and magnitude of the decline in value; (2) the credit rating of the issuer or issuers;
(3) structure of the security; and (4) the Companys intent to sell the security or whether its more likely than not that the Company would be required to sell the security before its anticipated recovery in market value.

The Company retained an independent third party to assist it in the determination of a fair value for six of its eight private-label
collateralized mortgage obligations (CMOs). This valuation is meant to be a Level Three valuation as defined by ASC Topic 820, Fair Value Measurements and Disclosures. The valuation does not represent the actual terms
or prices at which any party could purchase the securities. There is currently no active secondary market for private-label CMOs and there can be no assurance that any secondary market for private-label CMOs will develop. Of the two
private-label CMOs not evaluated by the independent third party, one has a balance of less than $500 thousand, while the other has a shorter estimated remaining life when compared to other private-label CMOs within our portfolio, and the
Company decided that the possibility of an other-than-temporary impairment is remote. The Company believes that the private-label CMO portfolio had three other than temporary impairments at June 30, 2012.

The Company believes that the data and assumptions used to determine the fair values are reasonable. The fair value calculations reflect
relevant facts and market conditions. Events and conditions occurring after the valuation date could have a material effect on the private-label CMO segments fair value.

Trading Securities

Trading securities are held for resale in
anticipation of short-term (generally 90 days or less) fluctuations in market prices. Trading securities are stated at fair value. Realized and unrealized gains and losses are included in noninterest income.

Net Loans Receivable

Net loans receivable are reported at their principal amount, net of the allowance for loan losses and deferred loan fees. Interest on mortgage, consumer, and commercial loans is recognized on the accrual
method. The Companys general policy is to stop accruing interest on loans when, based upon relevant factors, the collection of principal or interest is doubtful, regardless of the contractual status. Interest received on nonaccrual loans is
recorded as income or applied against principal according to managements judgment as to the collectability of such principal.

Loan origination and commitment fees, and all incremental direct loan origination costs, are deferred and recognized over the contractual remaining lives of the related loans on a level-yield basis.

Allowance for Loan Losses

The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan
losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses charged to operations. The provision for loan losses is based
on managements periodic evaluation of individual loans, economic factors, past loan loss experience, changes in the composition and volume of the portfolio, and other relevant factors. The estimates used in determining the adequacy of the
allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to changes in the near term.



30



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------

|
|



Allowance for Loan Losses (Continued)



Impaired loans are commercial and commercial real estate loans for which it is probable
the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does not aggregate loans by major risk classifications. The definition
of impaired loans is not the same as the definition of nonaccrual loans, although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability,
while not classifying the loan as impaired if the loan is not a commercial or commercial real estate loan. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these
types of impaired loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized
loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral.

Mortgage loans on one-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are
measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case
basis taking into consideration all circumstances surrounding the loan and the borrower, including the length of the delay, the borrowers prior payment record, and the amount of shortfall in relation to the principal and interest owed.

Real Estate Owned

Real estate owned acquired through foreclosure is carried at the lower of cost or fair value minus estimated costs to sell. Costs relating to development and improvement of the property are capitalized,
whereas costs of holding such real estate are expensed as incurred. Valuation allowances for estimated losses are provided when the carrying value of the real estate acquired exceeds the fair value.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is principally computed on the straight-line method over the estimated useful lives of the related assets, which
range from 3 to 10 years for furniture and equipment and 25 to 50 years for building premises. Leasehold improvements are amortized over the shorter of their estimated useful lives or their respective lease terms, which range from 7 to 15 years.
Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.

Income Taxes

Deferred tax assets and liabilities are computed based
on the difference between the financial statement and the income tax basis of assets and liabilities using the enacted marginal tax rates. Deferred income taxes or benefits are based on the changes in the deferred tax asset or liability from period
to period.



31



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------

|
|



Income Taxes (Continued)



The Company files a consolidated federal income tax return. Deferred tax assets and
liabilities are reflected at currently enacted income tax rates applicable to the period in which such items are expected to be realized or settled. As changes in tax rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.

Earnings Per Share

The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share are calculated by dividing net
income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share are calculated by dividing net income available to common stockholders, adjusted for the effects of any
dilutive securities, by the weighted-average number of common shares outstanding, adjusted for the effects of any dilutive securities.

Stock Options

The Company accounts for stock compensation based on
the grant-date fair value of all share-based payment awards that are expected to vest, including employee share options to be recognized as employee compensation expense over the requisite service period.

The Companys 2008 Stock Incentive Plan (the Plan) permits the grant of stock options or restricted shares to its
directors and employees for up to 152,000 shares (up to 38,000 restricted shares may be issued). Option awards are generally granted with an exercise price equal to the market price of the Companys stock at the date of grant; those option
awards generally vest based on five years of continuous service and have ten-year contractual terms.

During the periods ended
June 30, 2012, 2011, and 2010, the Company recorded $21, $22, and $23, respectively, in compensation expense related to our share-based compensation awards. As of June 30, 2012, there was approximately $29 of unrecognized compensation cost
related to unvested share-based compensation awards granted in fiscal 2009. That cost is expected to be recognized over the next two years.

For purposes of computing results, the Company estimated the fair values of stock options using the Black-Scholes option-pricing model. The model requires the use of subjective assumptions that can
materially affect fair value estimates. The fair value of each option is amortized into compensation expense on a straight line basis between the grant date for the option and each vesting date. The fair value of each stock option granted was
estimated using the following weighted-average assumptions:



|                                 |  |                
|-------------------------------- |  | ---------------
|Assumptions                      |  |                
|Volatility                       |  | 7.49% to 11.63%
|Interest Rates                   |  | 2.59% to 3.89% 
|Dividend Yields                  |  | 3.94% to 4.02% 
|Weighted Average Life (in years) |  | 10             

The Company had 51,502, 70,550 and 96,535 non-vested stock options outstanding at June 30, 2012,
2011 and 2010, respectively. During the fiscal year ended June 2009, the Company issued 124,519 options. The weighted average fair value of each stock option issued in fiscal 2009 was $0.89.



32



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------

|
|



Comprehensive Income (Loss)

The Company is required to present comprehensive income (loss) and its components in a full set of general-purpose financial statements
for all periods presented. Other comprehensive income (loss) is composed exclusively of net unrealized holding gains (losses) on its available-for-sale securities portfolio, and the net non-credit component of other-than-temporary impairment on its
held-to-maturity private-label CMO portfolio. The Company has elected to report the effects of its other comprehensive income as part of Note 3.

Cash Flow Information

Cash and cash equivalents include cash and
due from banks and interest-earning deposits with original maturities of 90 days or less. Cash flow from loans, deposits, and short-term borrowings are reported net.

Reclassification of Comparative Figures

Certain comparative amounts
for prior years have been reclassified to conform to current-year presentations. Such reclassifications did not affect net income or stockholders equity.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU
2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure
requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this
Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning
after December 15, 2011. Early application by public entities is not permitted. The Company has provided the necessary disclosure in Note 21.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity,
consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP
and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders equity was eliminated. The amendments require that all non-owner changes in stockholders equity be presented
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second
statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by
the changes in this Update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years
ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. This ASU is not expected to have a significant impact on the
Companys financial statements.



33



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Recent Accounting Pronouncements (Continued)



In September 2011, the FASB issued ASU 2011-08, Intangibles  Goodwill and Other
Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic
350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is
more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that have goodwill reported in their financial statements and are effective for interim and
annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an
entitys financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU is not expected to have a significant impact on the
Companys financial statements.

In September 2011, the FASB issued ASU 2011-09, Compensation-Retirement
Benefits-Multiemployer Plans (Subtopic 715-80): Disclosures about an Employers Participation in a Multiemployer Plan. The amendments in this Update will require additional disclosures about an employers participation in a
multiemployer pension plan to enable users of financial statements to assess the potential cash flow implications relating to an employers participation in multiemployer pension plans. The disclosures also will indicate the financial health of
all of the significant plans in which the employer participates and assist a financial statement user to access additional information that is available outside the financial statements. For public entities, the amendments in this Update are
effective for annual periods for fiscal years ending after December 15, 2011, with early adoption permitted. For nonpublic entities, the amendments are effective for annual periods of fiscal years ending after December 15, 2012, with early
adoption permitted. The amendments should be applied retrospectively for all prior periods presented. This ASU is not expected to have a significant impact on the Companys financial statements.

In December 2011, the FASB issued ASU 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a
Scope Clarification. The amendments in this Update affect entities that cease to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiarys nonrecourse debt. Under the
amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiarys nonrecourse debt, the reporting entity
should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal
transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would
continue to include the real estate, debt, and the results of the subsidiarys operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update
should be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods should not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate
entities. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the amendments are effective for fiscal years
ending after December 15, 2013, and interim and annual periods thereafter. Early adoption is permitted. This ASU is not expected to have a significant impact on the Companys financial statements.



34



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|-- | ------------------------------------------------------



Recent Accounting Pronouncements (Continued)



In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures
about Offsetting Assets and Liabilities. The amendments in this Update affect all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or
Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information will enable users of an
entitys financial statements to evaluate the effect or potential effect of netting arrangements on an entitys financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments
and derivative instruments in the scope of this Update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide
the disclosures required by those amendments retrospectively for all comparative periods presented. This ASU is not expected to have a significant impact on the Companys financial statements.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification
adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in
effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive
financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years
ending after December 15, 2012, and interim and annual periods thereafter. This ASU is not expected to have a significant impact on the Companys financial statements.



35



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|2. | EARNINGS PER SHARE
|-- | ------------------

The
following table sets forth the computation of the weighted-average common shares used to calculate basic and diluted earnings per share.



|                                                                                                         |  |      |            |   |      |  |            |      |  |  |            |  
|-------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- |  | ---------- | ---- |  |  | ---------- | -
|                                                                                                         |  | 2012 |            |   | 2011 |  |            | 2010 | 
|                                                                                                         |  |      |           
|Weighted-average common shares issued                                                                    |  |      | 3,805,636  |   |      |  | 3,805,636  |      |  |  | 3,805,636  |  
|                                                                                                         |  |      |           
|Average treasury stock shares                                                                            |  |      | (1,747,706 | ) |      |  | (1,747,706 | )    |  |  | (1,739,301 | )
|                                                                                                         |  |      |            |   |      |  |            |      |  |  |            |  
|                                                                                                         |  |      |           
|Weighted-average common shares and common stock equivalents used to calculate basic earnings per share   |  |      | 2,057,930  |   |      |  | 2,057,930  |      |  |  | 2,066,335  |  
|                                                                                                         |  |      |           
|Additional common stock equivalents (stock options) used to calculate diluted earnings per share         |  |      |           |   |      |  |           |      |  |  |           |  
|                                                                                                         |  |      |            |   |      |  |            |      |  |  |            |  
|                                                                                                         |  |      |           
|Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share |  |      | 2,057,930  |   |      |  | 2,057,930  |      |  |  | 2,066,335  |  
|                                                                                                         |  |      |            |   |      |  |            |      |  |  |            |  

There are no convertible securities that would affect the numerator in calculating basic and diluted
earnings per share; therefore, net income as presented on the Consolidated Statement of Income is used.

At June 30, 2012,
there were 124,519 options with an exercise price of $16.20 which were anti-dilutive. At June 30, 2011, there were 124,824 options with an exercise price ranging from $15.77 to $16.20 which were anti-dilutive. At June 30, 2010, there were
125,127 options with an exercise price ranging from $15.77 to $16.20 which were anti-dilutive.



36



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|3. | COMPREHENSIVE INCOME (LOSS)
|-- | ---------------------------

Other comprehensive income (loss) primarily reflects changes in net unrealized gains (losses) on available-for-sale securities and the net non-credit component of other-than-temporary impairment
(OTTI) on the Companys held-to-maturity private-label CMO portfolio. Total comprehensive income (loss) for the years ended June 30 is summarized as follows:



|                                                                        |  |      |       |   |      |   |       |      |  |   |        |  
|----------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                        |  | 2012 |       |   | 2011 |   |       | 2010 | 
|                                                                        |  |      |      
|Net Income                                                              |  | $    | 1,402 |   |      | $ | 1,226 |      |  | $ | 372    |  
|Other comprehensive income (loss):                                      |  |      |       |   |      |   |       |      |  |   |        |  
|Unrealized (losses) gains on available-for-sale securities without OTTI |  |      | (14   | ) |      |   | (129  | )    |  |   | 119    |  
|Accretion of OTTI on securities held to maturity                        |  |      | 750   |   |      |   | 752   |      |  |   |       |  
|Unrealized losses on held-to-maturity securities with OTTI              |  |      | (303  | ) |      |   |      |      |  |   | (3,518 | )
|Reclassification adjustment for gains included in net income            |  |      | 237   |   |      |   |      |      |  |   | 1      |  
|                                                                        |  |      |       |   |      |   |       |      |  |   |        |  
|Other comprehensive income (loss) before tax                            |  |      | 670   |   |      |   | 623   |      |  |   | (3,398 | )
|Income tax effect related to other comprehensive income (loss)          |  |      | 228   |   |      |   | 212   |      |  |   | (1,156 | )
|                                                                        |  |      |       |   |      |   |       |      |  |   |        |  
|Other comprehensive income (loss), net of tax                           |  |      | 442   |   |      |   | 411   |      |  |   | (2,242 | )
|                                                                        |  |      |       |   |      |   |       |      |  |   |        |  
|Comprehensive income (loss)                                             |  | $    | 1,844 |   |      | $ | 1,637 |      |  | $ | (1,870 | )
|                                                                        |  |      |       |   |      |   |       |      |  |   |        |  



|4. | INVESTMENT SECURITIES
|-- | ---------------------

The amortized cost and fair values of investments are as follows:



|                          |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|------------------------- |  | ------------- | ------ |  | -------------------- | - | --- | --------------------- |  | - | --------- | - |  | - | ------ | 
|                          |  | AmortizedCost |        |  | GrossUnrealizedGains |   |     | GrossUnrealizedLosses |  |   | FairValue |  
|2012                      |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|AVAILABLE FOR SALE        |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|Corporate debt securities |  | $             | 55,965 |  |                      | $ | 116 |                       |  | $ | (129      | ) |  | $ | 55,952 | 
|Foreign debt securities1  |  |               | 1,671  |  |                      |   |    |                       |  |   | (3        | ) |  |   | 1,668  | 
|                          |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|                          |  |               |        | 
|Total                     |  | $             | 57,636 |  |                      | $ | 116 |                       |  | $ | (132      | ) |  | $ | 57,620 | 
|                          |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 



|1 | U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers.
|- | --------------------------------------------------------------------------------------------



37



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|4. | INVESTMENT SECURITIES (Continued)
|-- | ---------------------------------



|                                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|------------------------------------------------ |  | ------------- | ------ |  | -------------------- | - | ----- | --------------------- |  | - | --------- | - |  | - | ------ | 
|                                                 |  | AmortizedCost |        |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | FairValue |  
|2012                                             |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|HELD TO MATURITY                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|U.S. government agency securities                |  | $             | 57,588 |  |                      | $ | 131   |                       |  | $ | (4        | ) |  | $ | 57,715 | 
|Corporate debt securities                        |  |               | 22,810 |  |                      |   | 1,442 |                       |  |   |          |   |  |   | 24,252 | 
|Foreign debt securities1                         |  |               | 2,002  |  |                      |   | 90    |                       |  |   |          |   |  |   | 2,092  | 
|Obligations of states and political subdivisions |  |               |       |  |                      |   |      |                       |  |   |          |   |  |   |       | 
|                                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|                                                 |  |               |        | 
|Total                                            |  | $             | 82,400 |  |                      | $ | 1,663 |                       |  | $ | (4        | ) |  | $ | 84,059 | 
|                                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 



|                          |  |               |       |  |                      |   |   |                       |  |   |           |   |  |   |       | 
|------------------------- |  | ------------- | ----- |  | -------------------- | - | - | --------------------- |  | - | --------- | - |  | - | ----- | 
|                          |  | AmortizedCost |       |  | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |  |   | FairValue |  
|2011                      |  |               |       |  |                      |   |   |                       |  |   |           |   |  |   |       | 
|AVAILABLE FOR SALE        |  |               |       |  |                      |   |   |                       |  |   |           |   |  |   |       | 
|Corporate debt securities |  | $             | 1,067 |  |                      | $ |  |                       |  | $ | (3        | ) |  | $ | 1,064 | 
|                          |  |               |       |  |                      |   |   |                       |  |   |           |   |  |   |       | 
|                          |  |               |       | 
|Total                     |  | $             | 1,067 |  |                      | $ |  |                       |  | $ | (3        | ) |  | $ | 1,064 | 
|                          |  |               |       |  |                      |   |   |                       |  |   |           |   |  |   |       | 



|                                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|------------------------------------------------ |  | ------------- | ------ |  | -------------------- | - | ----- | --------------------- |  | - | --------- | - |  | - | ------ | 
|                                                 |  | AmortizedCost |        |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | FairValue |  
|2011                                             |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|HELD TO MATURITY                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|U.S. government agency securities                |  | $             | 40,068 |  |                      | $ | 53    |                       |  | $ | (7        | ) |  | $ | 40,114 | 
|Corporate debt securities                        |  |               | 41,227 |  |                      |   | 2,330 |                       |  |   |          |   |  |   | 43,557 | 
|Foreign debt securities1                         |  |               | 3,514  |  |                      |   | 163   |                       |  |   |          |   |  |   | 3,677  | 
|Obligations of states and political subdivisions |  |               | 3,565  |  |                      |   | 61    |                       |  |   |          |   |  |   | 3,626  | 
|                                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|                                                 |  |               |        | 
|Total                                            |  | $             | 88,374 |  |                      | $ | 2,607 |                       |  | $ | (7        | ) |  | $ | 90,974 | 
|                                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 

In fiscal 2012, 2011, and 2010, the Company recorded gross realized investment security gains of $4, $0,
and $1. Proceeds from sales of investment securities during fiscal 2012, 2011, and 2010 were $2,102, $0, and $501.



|1 | U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers.
|- | --------------------------------------------------------------------------------------------



38



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|4. | INVESTMENT SECURITIES (Continued)
|-- | ---------------------------------



The amortized cost and fair values of investment securities at June 30, 2012, by
contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because issuers may have the right to call securities prior to their final maturities.



|                   |  |                       |        |  |                               |   |        |                                 |  |   |                                  |  |  |                                |     |  |                    |   |       |       |  |   |        |  |  |   |        | 
|------------------ |  | --------------------- | ------ |  | ----------------------------- | - | ------ | ------------------------------- |  | - | -------------------------------- |  |  | ------------------------------ | --- |  | ------------------ | - | ----- | ----- |  | - | ------ |  |  | - | ------ | 
|                   |  | Due inone yearor less |        |  | Due afterone throughtwo years |   |        | Due aftertwo throughthree years |  |   | Due afterthree throughfive years |  |  | Due afterfive throughten years |     |  | Due afterten years |   |       | Total | 
|                   |  |                       |        |  |                               |   |       
|AVAILABLE FOR SALE |  |                       |        |  |                               |   |        |                                 |  |   |                                  |  |  |                                |     |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Amortized cost     |  | $                     | 16,292 |  |                               | $ | 34,797 |                                 |  | $ | 5,886                            |  |  | $                              | 661 |  |                    | $ |      |       |  | $ |       |  |  | $ | 57,636 | 
|Fair value         |  |                       | 16,261 |  |                               |   | 34,843 |                                 |  |   | 5,855                            |  |  |                                | 661 |  |                    |   |      |       |  |   |       |  |  |   | 57,620 | 
|                   |  |                       |        |  |                               |   |       
|HELD TO MATURITY   |  |                       |        |  |                               |   |        |                                 |  |   |                                  |  |  |                                |     |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Amortized cost     |  | $                     | 6,656  |  |                               | $ | 12,276 |                                 |  | $ | 999                              |  |  | $                              | 522 |  |                    | $ | 6,402 |       |  | $ | 55,545 |  |  | $ | 82,400 | 
|Fair value         |  |                       | 6,731  |  |                               |   | 12,921 |                                 |  |   | 1,125                            |  |  |                                | 616 |  |                    |   | 6,994 |       |  |   | 55,672 |  |  |   | 84,059 | 

At June 30, 2012, investment securities with amortized costs of $27,845 and fair values of $27,891
were pledged to secure public deposits, repurchase agreements and borrowings with the Federal Home Loan Bank. Of the securities pledged, $18,993 of fair value was excess collateral. At June 30, 2011, investment securities with amortized costs
of $23,537 and fair values of $23,544 were pledged to secure public deposits, repurchase agreements and borrowings with the Federal Home Loan Bank. Of the securities pledged, $19,622 of fair value was excess collateral. Excess collateral is
maintained to support future borrowings and may be withdrawn by the Company at any time.



|5. | MORTGAGE-BACKED SECURITIES
|-- | --------------------------

Mortgage-backed securities (MBS) include mortgage pass-through certificates (PCs) and collateralized mortgage
obligations (CMOs). With a pass-through security, investors own an undivided interest in the pool of mortgages that collateralize the PCs. Principal and interest is passed through to the investor as it is generated by the mortgages
underlying the pool. PCs and CMOs may be insured or guaranteed by Freddie Mac (FHLMC), Fannie Mae (FNMA) and the Government National Mortgage Association (GNMA). CMOs may also be privately issued with varying
degrees of credit enhancements. A CMO reallocates mortgage pool cash flow to a series of bonds (called traunches) with varying stated maturities, estimated average lives, coupon rates and prepayment characteristics.

The Companys CMO portfolio is comprised of two segments: CMOs backed by U.S. Government Agencies (Agency
CMOs) and CMOs backed by single-family whole loans not guaranteed by a U.S. Government Agency (Private-Label CMOs).

At June 30, 2012, the Companys Agency CMOs totaled $69.1 million as compared to $47.8 million at June 30, 2011. The Companys private-label CMOs totaled $9.9 million at
June 30, 2012 as compared to $22.8 million at June 30, 2011. The $8.4 million increase in the CMO segment of our MBS portfolio was primarily due to repayments on our Agency CMOs totaling $36.1 million and $13.4 million in repayments
on our private-label CMOs which were more than offset by purchases of U.S. Government Agency CMOs totaling $57.4 million, and $750 in amortization of non-credit unrealized holding losses on private-label CMOs with
other-than-temporary impairment. During the fiscal year ended June 30, 2012, the Company received principal payments totaling $13.4 million on its private-label CMOs. At June 30, 2012, approximately $79.0 million or 100.0% (book
value) of the Companys MBS portfolio, including CMOs, were comprised of adjustable or floating rate investments, as compared to $70.6 million or 100.0% at



39



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|5. | MORTGAGE-BACKED SECURITIES (Continued)
|-- | --------------------------------------



June 30, 2011. Substantially all of the Companys floating rate MBS adjust
monthly based upon changes in the one month LIBOR. The Company has no investment in multi-family or commercial real estate based MBS.

Due to prepayments of the underlying loans, and the prepayment characteristics of the CMO traunches, the actual maturities of the Companys MBS are expected to be substantially less than the
scheduled maturities.

The Company retains an independent third party to assist it in the determination of a fair value for six
of its private-label CMOs. This valuation is meant to be a Level Three valuation as defined by ASC Topic 820, Fair Value Measurements and Disclosures. The valuation does not represent the actual terms or prices at which any party
could purchase the securities. There is currently no active secondary market for private-label CMOs and there can be no assurance that any secondary market for private-label CMOs will develop. Of the two private-label CMOs not
evaluated by the independent third party, one had a balance of less than $500 thousand, and both have shorter estimated remaining lives. The Company decided that the possibility of an other-than-temporary impairment is remote. The private-label CMO
portfolio had three previously recorded other-than-temporary impairments at June 30, 2012. During the fiscal year ending June 30, 2012, the Company reversed $750 thousand of non-credit unrealized holding losses on three of its
private-label CMOs with OTTI due to principal repayments. During the twelve months ended June 30, 2012, the Company recorded a $131 thousand credit impairment charge on private-label CMOs, and a $114 thousand non-credit unrealized
holding loss (net of income tax effect of $58 thousand) to accumulated other Comprehensive Income.

The Company believes that
the data and assumptions used to determine the fair values are reasonable. The fair value calculations reflect relevant facts and market conditions. Events and conditions occurring after the valuation date could have a material effect on the
private-label CMO segments fair value.

For two other private-label CMOs, the Company used the fair value estimates
provided by its independent third party investment accounting service. There was no OTTI associated with these two securities as of June 30, 2012 or in the past.

The amortized cost and fair values of mortgage-backed securities are as follows:



|                                     |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|------------------------------------ |  | ------------- | ------ |  | -------------------- | - | --- | --------------------- |  | - | --------- | - |  | - | ------ | 
|                                     |  | AmortizedCost |        |  | GrossUnrealizedGains |   |     | GrossUnrealizedLosses |  |   | FairValue |  
|2012                                 |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|HELD TO MATURITY                     |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|                                     |  |               |        | 
|Collateralized mortgage obligations: |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|Agency                               |  | $             | 69,146 |  |                      | $ | 99  |                       |  | $ | (24       | ) |  | $ | 69,221 | 
|Private-label                        |  |               | 9,940  |  |                      |   | 740 |                       |  |   | (88       | ) |  |   | 10,592 | 
|                                     |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 
|                                     |  |               |        | 
|Total                                |  | $             | 79,086 |  |                      | $ | 839 |                       |  | $ | (112      | ) |  | $ | 79,813 | 
|                                     |  |               |        |  |                      |   |     |                       |  |   |           |   |  |   |        | 



40



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|5. | MORTGAGE-BACKED SECURITIES (Continued)
|-- | --------------------------------------



|                                     |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|------------------------------------ |  | ------------- | ------ |  | -------------------- | - | ----- | --------------------- |  | - | --------- | - |  | - | ------ | 
|                                     |  | AmortizedCost |        |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | FairValue |  
|2011                                 |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|HELD TO MATURITY                     |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|                                     |  |               |        | 
|Collateralized mortgage obligations: |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|Agency                               |  | $             | 47,777 |  |                      | $ | 283   |                       |  | $ | (12       | ) |  | $ | 48,048 | 
|Private-label                        |  |               | 22,791 |  |                      |   | 1,146 |                       |  |   | (816      | ) |  |   | 23,121 | 
|                                     |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 
|                                     |  |               |        | 
|Total                                |  | $             | 70,568 |  |                      | $ | 1,429 |                       |  | $ | (828      | ) |  | $ | 71,169 | 
|                                     |  |               |        |  |                      |   |       |                       |  |   |           |   |  |   |        | 

The amortized cost and fair value of mortgage-backed securities at June 30, 2012, by contractual
maturity, are shown below. Expected maturities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



|                 |  |                       |   |  |                                |   |   |                                |  |   |                    |  |  |       |        |  |  |   |        | 
|---------------- |  | --------------------- | - |  | ------------------------------ | - | - | ------------------------------ |  | - | ------------------ |  |  | ----- | ------ |  |  | - | ------ | 
|                 |  | Due inone yearor less |   |  | Due afterone throughfive years |   |   | Due afterfive throughten years |  |   | Due afterten years |  |  | Total |       
|                 |  |                       |   |  |                               
|HELD TO MATURITY |  |                       |   |  |                                |   |   |                                |  |   |                    |  |  |       |        |  |  |   |        | 
|Amortized cost   |  | $                     |  |  |                                | $ |  |                                |  | $ |                   |  |  | $     | 79,086 |  |  | $ | 79,086 | 
|Fair value       |  |                       |  |  |                                |   |  |                                |  |   |                   |  |  |       | 79,813 |  |  |   | 79,813 | 

At June 30, 2012 and 2011, mortgage-backed securities with an amortized cost of $66,972 and $26,388
and fair values of $67,043 and $26,657, were pledged to secure borrowings with the Federal Home Loan Bank and public deposits.



41



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|6. | UNREALIZED LOSSES ON SECURITIES
|-- | -------------------------------

The following table shows the Companys gross unrealized losses and fair value, aggregated by category and length of time that the individual securities have been in a continuous unrealized loss
position, at June 30, 2012 and 2011.



|                                     |  |                      |        |  |                           |   |     |                          |  |   |                       |  |  |           |     |   |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  
|------------------------------------ |  | -------------------- | ------ |  | ------------------------- | - | --- | ------------------------ |  | - | --------------------- |  |  | --------- | --- | - | --------------------- | - | ------ | --------- |  | - | --------------------- | - |  | - | ------ |  |  | - | ---- | -
|                                     |  | 2012                 |       
|                                     |  | Less Than Six Months |        |  | Six through Twelve Months |   |     | Twelve Months or Greater |  |   | Total                 | 
|                                     |  | FairValue            |        |  | GrossUnrealizedLosses     |   |     | FairValue                |  |   | GrossUnrealizedLosses |  |  | FairValue |     |   | GrossUnrealizedLosses |   |        | FairValue |  |   | GrossUnrealizedLosses |  
|                                     |  |                      |        |  |                           |   |     |                         
|U.S. government agencies securities  |  | $                    | 7,725  |  |                           | $ | (2  | )                        |  | $ |                      |  |  | $         |    |   |                       | $ | 357    |           |  | $ | (2                    | ) |  | $ | 8,082  |  |  | $ | (4   | )
|Corporate debt Securities            |  |                      | 17,670 |  |                           |   | (61 | )                        |  |   | 2,001                 |  |  |           | (68 | ) |                       |   |       |           |  |   |                      |   |  |   | 19,671 |  |  |   | (129 | )
|Foreign Debt Securities1             |  |                      | 1,093  |  |                           |   | (2  | )                        |  |   | 575                   |  |  |           | (1  | ) |                       |   |       |           |  |   |                      |   |  |   | 1,668  |  |  |   | (3   | )
|Collateralized mortgage obligations: |  |                      |        |  |                           |   |     |                          |  |   |                       |  |  |           |     |   |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  
|Agency                               |  |                      | 11,279 |  |                           |   | (12 | )                        |  |   | 272                   |  |  |           | (1  | ) |                       |   | 11,260 |           |  |   | (11                   | ) |  |   | 22,811 |  |  |   | (24  | )
|Private-label                        |  |                      | 624    |  |                           |   | (4  | )                        |  |   |                      |  |  |           |    |   |                       |   | 3,838  |           |  |   | (84                   | ) |  |   | 4,462  |  |  |   | (88  | )
|                                     |  |                      |        |  |                           |   |     |                          |  |   |                       |  |  |           |     |   |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  
|                                     |  |                      |        |  |                           |   |     |                         
|Total                                |  | $                    | 38,391 |  |                           | $ | (81 | )                        |  | $ | 2,848                 |  |  | $         | (70 | ) |                       | $ | 15,455 |           |  | $ | (97                   | ) |  | $ | 56,694 |  |  | $ | (248 | )
|                                     |  |                      |        |  |                           |   |     |                          |  |   |                       |  |  |           |     |   |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  



|                                     |  |                      |       |  |                           |   |    |                          |  |   |                       |  |  |           |   |  |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  
|------------------------------------ |  | -------------------- | ----- |  | ------------------------- | - | -- | ------------------------ |  | - | --------------------- |  |  | --------- | - |  | --------------------- | - | ------ | --------- |  | - | --------------------- | - |  | - | ------ |  |  | - | ---- | -
|                                     |  | 2011                 |      
|                                     |  | Less Than Six Months |       |  | Six through Twelve Months |   |    | Twelve Months or Greater |  |   | Total                 | 
|                                     |  | FairValue            |       |  | GrossUnrealizedLosses     |   |    | FairValue                |  |   | GrossUnrealizedLosses |  |  | FairValue |   |  | GrossUnrealizedLosses |   |        | FairValue |  |   | GrossUnrealizedLosses |  
|                                     |  |                      |       |  |                           |   |    |                         
|U.S. government agencies securities  |  | $                    | 4,990 |  |                           | $ | (5 | )                        |  | $ |                      |  |  | $         |  |  |                       | $ | 382    |           |  | $ | (2                    | ) |  | $ | 5,372  |  |  | $ | (7   | )
|Corporate debt Securities            |  |                      | 1,064 |  |                           |   | (3 | )                        |  |   |                      |  |  |           |  |  |                       |   |       |           |  |   |                      |   |  |   | 1,064  |  |  |   | (3   | )
|Collateralized mortgage obligations: |  |                      |       |  |                           |   |    |                          |  |   |                       |  |  |           |   |  |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  
|Agency                               |  |                      |      |  |                           |   |   |                          |  |   |                      |  |  |           |  |  |                       |   | 10,234 |           |  |   | (12                   | ) |  |   | 10,234 |  |  |   | (12  | )
|Private-label                        |  |                      |      |  |                           |   |   |                          |  |   |                      |  |  |           |  |  |                       |   | 14,321 |           |  |   | (816                  | ) |  |   | 14,321 |  |  |   | (816 | )
|                                     |  |                      |       |  |                           |   |    |                          |  |   |                       |  |  |           |   |  |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  
|                                     |  |                      |       |  |                           |   |    |                         
|Total                                |  | $                    | 6,054 |  |                           | $ | (8 | )                        |  | $ |                      |  |  | $         |  |  |                       | $ | 24,937 |           |  | $ | (830                  | ) |  | $ | 30,991 |  |  | $ | (838 | )
|                                     |  |                      |       |  |                           |   |    |                          |  |   |                       |  |  |           |   |  |                       |   |        |           |  |   |                       |   |  |   |        |  |  |   |      |  

For debt securities, impairment is considered to be other than temporary if an entity (1) intends to
sell the security, (2) more likely than not will be required to sell the security before recovering its amortized cost basis, or (3) does not expect to recover the securitys entire amortized cost basis (even if the entity does not
intend to sell the security). In addition, impairment is considered to be other than temporary if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security (any such
shortfall is referred to as a credit loss).

The Company evaluates outstanding available-for-sale and held-to-maturity
securities in an unrealized loss position (i.e., impaired securities) for OTTI on a quarterly basis. In doing so, the Company considers many factors including, but not limited to: the credit ratings assigned to the securities by the Nationally
Recognized Statistical Rating Organizations (NRSROs); other indicators of the credit quality of the issuer; the strength of the provider of any guarantees; the length of time and extent that fair value has been less than amortized cost; and whether
the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. In the case of its private label residential MBS, the Company also considers prepayment speeds, the
historical and projected performance of the underlying loans and the credit support provided by the subordinate securities. These evaluations are inherently subjective and consider a number of quantitative and qualitative factors.



|1 | U.S. dollar-denominated investment-grade corporate bonds of large foreign corporate issuers.
|- | --------------------------------------------------------------------------------------------



42



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|6. | UNREALIZED LOSSES ON SECURITIES (Continued)
|-- | -------------------------------------------



The following table presents a roll-forward of the credit loss component of the
amortized cost of mortgage-backed securities that we have written down for OTTI and the credit component of the loss that is recognized in earnings. OTTI recognized in earnings for credit impaired mortgage-backed securities is presented as additions
in two components based upon whether the current period is the first time the mortgage-backed security was credit-impaired (initial credit impairment) or is not the first time the mortgage-backed security was credit impaired (subsequent credit
impairments). The credit loss component is reduced if we sell, intend to sell or believe that we will be required to sell previously credit-impaired mortgage-backed securities. Additionally, the credit loss component is reduced if we receive cash
flows in excess of what we expected to receive over the remaining life of the credit impaired mortgage-backed securities, the security matures or is fully written down.

Changes in the credit loss component of credit impaired mortgage-backed securities were as follows for the twelve month period ended June 30, 2012:



|                                                                                   |  |                     |     |  |      |   |     | 
|---------------------------------------------------------------------------------- |  | ------------------- | --- |  | ---- | - | --- | 
|                                                                                   |  | Twelve Months Ended |    
|                                                                                   |  | June 30,            |    
|                                                                                   |  | 2012                |     |  | 2011 |  
|                                                                                   |  |                    
|Beginning balance                                                                  |  | $                   | 194 |  |      | $ | 194 | 
|Initial credit impairment                                                          |  |                     | 24  |  |      |   |    | 
|Subsequent credit impairment                                                       |  |                     | 106 |  |      |   |    | 
|Reductions for amounts recognized in earnings due to intent or requirement to sell |  |                     |    |  |      |   |    | 
|Reductions for securities sold                                                     |  |                     |    |  |      |   |    | 
|Reduction for increase in cash flows expected to be collected                      |  |                     |    |  |      |   |    | 
|                                                                                   |  |                     |     |  |      |   |     | 
|Ending Balance                                                                     |  | $                   | 324 |  |      | $ | 194 | 
|                                                                                   |  |                     |     |  |      |   |     | 

During the twelve months ended June 30, 2012, the Company identified one additional private-label
CMO, classified as held to maturity, with OTTI totaling $196 thousand, of which $172 thousand was recognized in other comprehensive income and $24 thousand was recognized in earnings. The Company also identified additional OTTI on one previously
identified private-label CMO, classified as held to maturity, totaling $106 thousand, of which $106 thousand was recognized in earnings. The Company was able to accrete back into other comprehensive income $495 thousand (net of income tax effect of
$255 thousand), based on principal repayments on private-label CMOs previously identified with OTTI.

In the case of its
private label residential CMOs that exhibit adverse risk characteristics, the Company employs models to determine the cash flows that it is likely to collect from the securities. These models consider borrower characteristics and the
particular attributes of the loans underlying the securities, in conjunction with assumptions about future changes in home prices and interest rates, to predict the likelihood a loan will default and the impact on default frequency, loss severity
and remaining credit enhancement. A significant input to these models is the forecast of future housing price changes for the relevant states and metropolitan statistical areas, which are based upon an assessment of the various housing markets. In
general, since the ultimate receipt of contractual payments on these securities will depend upon the credit and prepayment performance of the underlying loans and, if needed, the credit enhancements for the senior securities owned by the Company,
the Company uses these models to



43



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|6. | UNREALIZED LOSSES ON SECURITIES (Continued)
|-- | -------------------------------------------



assess whether the credit enhancement associated with each security is sufficient to protect against likely losses of principal and interest on the underlying mortgage loans. The development of
the modeling assumptions requires significant judgment.

In conjunction with our adoption of ASC Topic 820 effective
June 30, 2009, the Company retained an independent third party to assist it with assessing six investments within the private label CMO portfolio. For the other two private-label CMOs, the Company used the fair value estimates provided by
its independent third party investment accounting service. There was no OTTI associated with these two securities at June 30, 2012 or in the past. The independent third parties utilized certain assumptions for producing the cash flow analyses
used in the OTTI assessment. Key assumptions would include interest rates, expected market participant spreads and discount rates, housing prices, projected future delinquency levels and assumed loss rates on any liquidated collateral.

The Company reviewed the independent third partys assumptions used in the June 30, 2012 OTTI process. Based on the results of
this review, the Company deemed the independent third partys assumptions to be reasonable and adopted them. However, different assumptions could produce materially different results, which could impact the Companys conclusions as to
whether an impairment is considered other-than-temporary and the magnitude of the credit loss. Management believes that one additional private-label CMO in the portfolio had an other-than-temporary impairment at June 30, 2012, bringing the
total to three private-label CMOs with OTTI at June 30, 2012.

If the Company intends to sell an impaired debt
security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, the impairment is other-than-temporary and is recognized currently in earnings in an amount equal to the entire difference between
fair value and amortized cost. The Company does not anticipate selling its private-label CMO portfolio, nor does Management believe that the Company will be required to sell these securities before recovery of this amortized cost basis.

In instances in which the Company determines that a credit loss exists but the Company does not intend to sell the security and it is not
more likely than not that the Company will be required to sell the security before the anticipated recovery of its remaining amortized cost basis, the OTTI is separated into (1) the amount of the total impairment related to the credit loss and
(2) the amount of the total impairment related to all other factors (i.e., the noncredit portion). The amount of the total OTTI related to the credit loss is recognized in earnings and the amount of the total OTTI related to all other factors
is recognized in accumulated other comprehensive loss. The total OTTI is presented in the Consolidated Statement of Income with an offset for the amount of the total OTTI that is recognized in accumulated other comprehensive loss. Absent the intent
or requirement to sell a security, if a credit loss does not exist, any impairment is considered to be temporary.

Regardless
of whether an OTTI is recognized in its entirety in earnings or if the credit portion is recognized in earnings and the noncredit portion is recognized in other comprehensive income (loss), the estimation of fair values has a significant impact on
the amount(s) of any impairment that is recorded.

The noncredit portion of any OTTI losses on securities classified as
available-for-sale is adjusted to fair value with an offsetting adjustment to the carrying value of the security. The fair value adjustment could increase or decrease the carrying value of the security. All of the Companys private-label CMOs
were originally, and continue to be classified, as held to maturity.



44



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|6. | UNREALIZED LOSSES ON SECURITIES (Continued)
|-- | -------------------------------------------



In periods subsequent to the recognition of an OTTI loss, the other-than-temporarily
impaired debt security is accounted for as if it had been purchased on the measurement date of the OTTI at an amount equal to the previous amortized cost basis less the credit-related OTTI recognized in earnings. For debt securities for which
credit-related OTTI is recognized in earnings, the difference between the new cost basis and the cash flows expected to be collected is accreted into interest income over the remaining life of the security in a prospective manner based on the amount
and timing of future estimated cash flows.

The Company has investments in 31 positions that are impaired at June 30,
2012, including 6 positions in private-label collateralized mortgage obligations. Based on its analysis, management has concluded that three private-label CMOs are other-than-temporarily impaired, while the remaining securities portfolio has
experienced unrealized losses and a decrease in fair value due to interest rate volatility, illiquidity in the marketplace, or credit deterioration in the U.S. mortgage markets.



|7. | NET LOANS RECEIVABLE
|-- | --------------------

The
Companys primary business activity is with customers located within its local trade area of Northern Allegheny and Southern Butler counties within the state of Pennsylvania. The Company has concentrated its lending efforts by granting
residential and construction mortgage loans to customers throughout its immediate trade area. The Company also selectively funds and participates in commercial and residential mortgage loans outside of its immediate trade area, provided such loans
meet the Companys credit policy guidelines. At June 30, 2012 and 2011, the Company had approximately $7 million and $15 million, respectively, of outstanding loans for land development and construction in the local trade area. Although
the Company had a diversified loan portfolio at June 30, 2012 and 2011, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate trade area.

Certain officers, directors, and their associates were customers of, and had transactions with, the Company in the ordinary course of
business. There were no loans for those directors, executive officers, and their associates with aggregate loan balances outstanding of at least $60 thousand during the fiscal years ended June 30, 2012 and 2011.



45



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------



The following table summarizes the primary segments of the loan portfolio as of
June 30, 2012 and June 30, 2011.



|                                                                                    |  |               |        |   |                                    |   |     |                                    |  |   |            |  |  |                                    |        |   |                                    |   |       |  |  |   |        | 
|----------------------------------------------------------------------------------- |  | ------------- | ------ | - | ---------------------------------- | - | --- | ---------------------------------- |  | - | ---------- |  |  | ---------------------------------- | ------ | - | ---------------------------------- | - | ----- |  |  | - | ------ | 
|                                                                                    |  | June 30, 2012 |        |   | June 30, 2011                      |  
|                                                                                    |  | TotalLoans    |        |   | Individuallyevaluatedforimpairment |   |     | Collectivelyevaluatedforimpairment |  |   | TotalLoans |  |  | Individuallyevaluatedforimpairment |        |   | Collectivelyevaluatedforimpairment |  
|                                                                                    |  |               |        |   |                                    |  
|First mortgage loans:                                                               |  |               |        |   |                                    |   |     |                                    |  |   |            |  |  |                                    |        |   |                                    |   |       |  |  |   |        | 
|1  4 family dwellings                                                              |  | $             | 13,514 |   |                                    | $ |    |                                    |  | $ | 13,514     |  |  | $                                  | 14,984 |   |                                    | $ |      |  |  | $ | 14,984 | 
|Construction                                                                        |  |               | 4,997  |   |                                    |   | 701 |                                    |  |   | 4,296      |  |  |                                    | 11,569 |   |                                    |   | 1,024 |  |  |   | 10,545 | 
|Land acquisition & development                                                      |  |               | 2,029  |   |                                    |   |    |                                    |  |   | 2,029      |  |  |                                    | 2,947  |   |                                    |   |      |  |  |   | 2,947  | 
|Multi-family dwellings                                                              |  |               | 5,083  |   |                                    |   |    |                                    |  |   | 5,083      |  |  |                                    | 5,365  |   |                                    |   |      |  |  |   | 5,365  | 
|Commercial                                                                          |  |               | 7,623  |   |                                    |   |    |                                    |  |   | 7,623      |  |  |                                    | 7,732  |   |                                    |   |      |  |  |   | 7,732  | 
|                                                                                    |  |               |        |   |                                    |  
|Consumer Loans                                                                      |  |               |        |   |                                    |   |     |                                    |  |   |            |  |  |                                    |        |   |                                    |   |       |  |  |   |        | 
|Home equity                                                                         |  |               | 1,402  |   |                                    |   |    |                                    |  |   | 1,402      |  |  |                                    | 1,893  |   |                                    |   |      |  |  |   | 1,893  | 
|Home equity lines of credit                                                         |  |               | 2,188  |   |                                    |   | 150 |                                    |  |   | 2,038      |  |  |                                    | 2,601  |   |                                    |   |      |  |  |   | 2,601  | 
|Other                                                                               |  |               | 286    |   |                                    |   |    |                                    |  |   | 286        |  |  |                                    | 322    |   |                                    |   |      |  |  |   | 322    | 
|                                                                                    |  |               |        |   |                                    |  
|Commercial Loans                                                                    |  |               | 2,222  |   |                                    |   |    |                                    |  |   | 2,222      |  |  |                                    | 3,210  |   |                                    |   |      |  |  |   | 3,210  | 
|                                                                                    |  |               |        |   |                                    |  
|Obligations (other than securities and leases) of states and political subdivisions |  |               | 500    |   |                                    |   |    |                                    |  |   | 500        |  |  |                                    |       |   |                                    |   |      |  |  |   |       | 
|                                                                                    |  |               |        |   |                                    |   |     |                                    |  |   |            |  |  |                                    |        |   |                                    |   |       |  |  |   |        | 
|                                                                                    |  | $             | 39,844 |   |                                    | $ | 851 |                                    |  | $ | 38,993     |  |  | $                                  | 50,623 |   |                                    | $ | 1,024 |  |  | $ | 49,599 | 
|                                                                                    |  |               |        |   |                                    |   |     |                                    |  |   |            |  |  |                                    |        |   |                                    |   |       |  |  |   |        | 
|Less: Deferred loan fees                                                            |  |               | (26    | ) |                                    |   |     |                                    |  |   |            |  |  |                                    | (41    | ) |                                    |   |       |  |  |   |        | 
|Allowance for loan losses                                                           |  |               | (385   | ) |                                    |   |     |                                    |  |   |            |  |  |                                    | (630   | ) |                                    |   |       |  |  |   |        | 
|                                                                                    |  |               |        |   |                                    |   |     |                                    |  |   |            |  |  |                                    |        |   |                                    |   |       |  |  |   |        | 
|Total                                                                               |  | $             | 39,433 |   |                                    |   |     |                                    |  |   |            |  |  | $                                  | 49,952 |   |                                    |   |       |  |  |   |        | 
|                                                                                    |  |               |        |   |                                    |   |     |                                    |  |   |            |  |  |                                    |        |   |                                    |   |       |  |  |   |        | 

Impaired loans are loans for which it is probable the Company will not be able to collect all amounts due
according to the contractual terms of the loan agreement. The following loan categories are collectively evaluated for impairment. First mortgage loans: 1  4 family dwellings and all consumer loan categories (home equity, home equity lines of
credit and other). The following loan categories are individually evaluated for impairment. First mortgage loans: construction, land acquisition and development, multi-family dwellings and commercial. The Company evaluates commercial loans not
secured by real property individually for impairment.

The definition of impaired loans is not the same as the
definition of nonaccrual loans, although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability, while not classifying the loan as impaired if the
loan is not a commercial or commercial real estate loan. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of impaired loans is determined by the
difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of
the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral.

Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a
case-by-case basis taking into consideration all circumstances surrounding the loan and the borrower, including the length of the delay, the borrowers prior payment record, and the amount of shortfall in relation to the principal and interest
owed.



46



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------



The following table is a summary of the loans considered to be impaired as of
June 30, 2012 and June 30, 2011, and the related interest income recognized for the twelve months ended June 30, 2012 and June 30, 2011:



|                                              |  |          |       |  |          |   |       | 
|--------------------------------------------- |  | -------- | ----- |  | -------- | - | ----- | 
|                                              |  | June 30, |       |  | June 30, |  
|                                              |  | 2012     |       |  | 2011     |  
|                                              |  |         
|Impaired loans with an allocated allowance    |  |          |       |  |          |   |       | 
|Construction loans                            |  | $        | 701   |  |          | $ | 323   | 
|Impaired loans without an allocated allowance |  |          |       |  |          |   |       | 
|Construction loans                            |  |          |      |  |          |   | 701   | 
|Home equity lines of credit                   |  |          | 150   |  |          |   |      | 
|                                              |  |          |       |  |          |   |       | 
|Total impaired loans                          |  | $        | 851   |  |          | $ | 1,024 | 
|                                              |  |          |       |  |          |   |       | 
|                                              |  |         
|Allocated allowance on impaired loans         |  |          |       |  |          |   |       | 
|Construction loans                            |  | $        | 105   |  |          | $ | 67    | 
|Average impaired loans                        |  |          |       |  |          |   |       | 
|Construction loans                            |  | $        | 1,020 |  |          | $ | 1,024 | 
|Home equity lines of credit                   |  |          | 501   |  |          |   |      | 
|                                              |  |          |       |  |          |   |       | 
|Total                                         |  | $        | 1,521 |  |          | $ | 1,024 | 
|                                              |  |          |       |  |          |   |       | 
|                                              |  |         
|Income recognized on impaired loans           |  |          |       |  |          |   |       | 
|Construction loans                            |  | $        |      |  |          | $ | 9     | 
|Home equity lines of credit                   |  |          | 6     |  |          |   |      | 
|                                              |  |          |       |  |          |   |       | 
|Total                                         |  | $        | 6     |  |          | $ | 9     | 
|                                              |  |          |       |  |          |   |       | 

Total nonaccrual loans as of June 30, 2012 and June 30, 2011 and the related interest income
recognized for the twelve months ended June 30, 2012 and June 30, 2011 are as follows:



|                                       |  |          |       |  |          |   |       | 
|-------------------------------------- |  | -------- | ----- |  | -------- | - | ----- | 
|                                       |  | June 30, |       |  | June 30, |  
|                                       |  | 2012     |       |  | 2011     |  
|                                       |  |         
|Principal outstanding                  |  |          |       |  |          |   |       | 
|1  4 family dwellings                 |  | $        | 363   |  |          | $ | 784   | 
|Construction                           |  |          | 701   |  |          |   | 1,024 | 
|Land acquisition & development         |  |          | 290   |  |          |   |      | 
|Home equity lines of credit            |  |          | 150   |  |          |   | 359   | 
|                                       |  |          |       |  |          |   |       | 
|Total                                  |  | $        | 1,504 |  |          | $ | 2,166 | 
|                                       |  |          |       |  |          |   |       | 
|                                       |  |         
|Average nonaccrual loans               |  |          |       |  |          |   |       | 
|1  4 family dwellings                 |  | $        | 364   |  |          | $ | 1,019 | 
|Construction                           |  |          | 1,020 |  |          |   | 1,024 | 
|Land acquisition & development         |  |          | 449   |  |          |   |      | 
|Home equity lines of credit            |  |          | 346   |  |          |   | 359   | 
|                                       |  |          |       |  |          |   |       | 
|Total                                  |  | $        | 2,179 |  |          | $ | 2,402 | 
|                                       |  |          |       |  |          |   |       | 
|                                       |  |         
|Income that would have been recognized |  | $        | 116   |  |          | $ | 171   | 
|Interest income recognized             |  |          | 115   |  |          |   | 17    | 
|                                       |  |          |       |  |          |   |       | 
|                                       |  |         
|Interest income foregone               |  | $        | 101   |  |          | $ | 154   | 
|                                       |  |          |       |  |          |   |       | 



47



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------

|
|



The Companys loan portfolio also includes troubled debt restructurings
(TDRs), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Companys loss mitigation activities and could
include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after
considering the borrowers sustained repayment performance for a reasonable period, generally six months.

When the
Company modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of
repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the
modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance
estimate or a charge-off to the allowance. Segment and class status is determined by the loans classification at origination.

The following table includes the recorded investment and number of modifications for modified loans, as of June 30, 2012. The Company reports the recorded investment in the loans prior to a
modification and also the recorded investment in the loans after the loans were restructured.



|                                                         |  |                   |   |  |                                               |   |     |                                                |  |   |     | 
|-------------------------------------------------------- |  | ----------------- | - |  | --------------------------------------------- | - | --- | ---------------------------------------------- |  | - | --- | 
|                                                         |  | June 30, 2012     |  
|                                                         |  | NumberofContracts |   |  | Pre-ModificationOutstandingRecordedInvestment |   |     | Post-ModificationOutstandingRecordedInvestment | 
|                                                         |  |                   |  
|Troubled Debt Restructurings                             |  |                   |   |  |                                               |   |     |                                                |  |   |     | 
|Home Equity Lines of Credit                              |  |                   | 1 |  |                                               | $ | 150 |                                                |  | $ | 150 | 
|                                                         |  |                   |  
|Troubled Debt Restructurings That Subsequently Defaulted |  |                   |   |  |                                               |   |     |                                                |  |   |     | 
|Home Equity Lines of Credit                              |  |                   |  |  |                                               | $ |    |                                                |  | $ |    | 

The allowance for loan losses is established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance account. Subsequent recoveries, if any, are credited to the allowance. The allowance is maintained at a level believed adequate by management to absorb estimated potential loan
losses. Managements determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio considering past experience, current economic conditions, composition of the loan portfolio and other relevant factors.
This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change.

Effective December 13, 2006, the FDIC, in conjunction with the other federal banking agencies adopted a Revised Interagency Policy
Statement on the Allowance for Loan and Lease Losses (ALLL). The



48



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------



revised policy statement revised and replaced the banking agencies 1993 policy statement on the ALLL. The revised policy statement provides that an institution must maintain an ALLL at a
level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. The banking agencies also revised the
policy to ensure consistency with generally accepted accounting principles (GAAP). The revised policy statement updates the previous guidance that describes the responsibilities of the board of directors, management, and bank examiners
regarding the ALLL, factors to be considered in the estimation of the ALLL, and the objectives and elements of an effective loan review system.

Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have
authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: substandard, doubtful and loss. Substandard assets have one or more defined weaknesses
and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of those classified as substandard with the added characteristic that
the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as loss is considered uncollectible and of such little
value that continuance as an asset of the institution is not warranted. Another category designated asset watch is also utilized by the Bank for assets which do not currently expose an insured institution to a sufficient degree of risk
to warrant classification as substandard, doubtful or loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured
institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge-off such amount. General loss allowances established to cover possible losses related to assets
classified substandard or doubtful may be included in determining an institutions regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital.

The Companys general policy is to internally classify its assets on a regular basis and establish prudent general valuation
allowances that are adequate to absorb losses that have not been identified but that are inherent in the loan portfolio. The Company maintains general valuation allowances that it believes are adequate to absorb losses in its loan portfolio that are
not clearly attributable to specific loans. The Companys general valuation allowances are within the following general ranges: (1) 0% to 5% of assets subject to special mention; (2) 5.00% to 100% of assets classified substandard; and
(3) 50% to 100% of assets classified doubtful. Any loan classified as loss is charged-off. To further monitor and assess the risk characteristics of the loan portfolio, loan delinquencies are reviewed to consider any developing problem loans.
Based upon the procedures in place, considering the Companys past charge-offs and recoveries and assessing the current risk elements in the portfolio, management believes the allowance for loan losses at June 30, 2012, is adequate.



49



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------



The following tables present the classes of the loan portfolio summarized by the aging
categories of performing loans and nonaccrual loans as of June 30, 2012 and June 30, 2011:



|                                                                                    |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  
|----------------------------------------------------------------------------------- |  | ------- | ------ |  | ------------------- | - | - | ------------------- |  | - | ------------------------- |  |  | ---------------------------- | - |  | ------------ | - | ----- | ---------- |  | - | ----- |  |  | - | ------ | -
|                                                                                    |  | Current |        |  | 30  59Days PastDue |   |   | 60  89Days PastDue |  |   | 90 Days +Past
DueAccruing |  |  | 90 Days +Past DueNon-accrual |   |  | TotalPastDue |   |       | TotalLoans | 
|June 30, 2012                                                                       |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  
|First mortgage loans:                                                               |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  
|1  4 family dwellings                                                              |  | $       | 13,151 |  |                     | $ |  |                     |  | $ |                          |  |  | $                            |  |  |              | $ | 363   |            |  | $ | 363   |  |  | $ | 13,514 |  
|Construction                                                                        |  |         | 4,296  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   | 701   |            |  |   | 701   |  |  |   | 4,997  |  
|Land acquisition & development                                                      |  |         | 1,739  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   | 290   |            |  |   | 290   |  |  |   | 2,029  |  
|Multi-family dwellings                                                              |  |         | 5,083  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 5,083  |  
|Commercial                                                                          |  |         | 7,623  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 7,623  |  
|                                                                                    |  |         |        |  |                     |   |  
|Consumer Loans                                                                      |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  
|Home equity                                                                         |  |         | 1,402  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 1,402  |  
|Home equity lines of credit                                                         |  |         | 2,038  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   | 150   |            |  |   | 150   |  |  |   | 2,188  |  
|Other                                                                               |  |         | 286    |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 286    |  
|                                                                                    |  |         |        |  |                     |   |  
|Commercial Loans                                                                    |  |         | 2,219  |  |                     |   |  |                     |  |   | 3                         |  |  |                              |  |  |              |   |      |            |  |   | 3     |  |  |   | 2,222  |  
|                                                                                    |  |         |        |  |                     |   |  
|Obligations (other than securities and leases) of states and political subdivisions |  |         | 500    |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 500    |  
|                                                                                    |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  
|                                                                                    |  | $       | 38,337 |  |                     | $ |  |                     |  | $ | 3                         |  |  | $                            |  |  |              | $ | 1,504 |            |  | $ | 1,507 |  |  |   | 39,844 |  
|                                                                                    |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  
|Less:  Deferred loan fees                                                           |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   | (26    | )
|Allowance for loan loss                                                             |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   | (385   | )
|                                                                                    |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  
|Net Loans Receivable                                                                |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  | $ | 39,433 |  
|                                                                                    |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        |  



|                               |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 
|------------------------------ |  | ------- | ------ |  | ------------------- | - | - | ------------------- |  | - | ------------------------- |  |  | ---------------------------- | - |  | ------------ | - | ----- | ---------- |  | - | ----- |  |  | - | ------ | 
|                               |  | Current |        |  | 30  59Days PastDue |   |   | 60  89Days PastDue |  |   | 90 Days +Past
DueAccruing |  |  | 90 Days +Past DueNon-accrual |   |  | TotalPastDue |   |       | TotalLoans | 
|June 30, 2011                  |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 
|First mortgage loans:          |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 
|1  4 family dwellings         |  | $       | 14,200 |  |                     | $ |  |                     |  | $ |                          |  |  | $                            |  |  |              | $ | 784   |            |  | $ | 784   |  |  | $ | 14,984 | 
|Construction                   |  |         | 10,545 |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   | 1,024 |            |  |   | 1024  |  |  |   | 11,569 | 
|Land acquisition & development |  |         | 2,947  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 2,947  | 
|Multi-family dwellings         |  |         | 5,365  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 5,365  | 
|Commercial                     |  |         | 7,732  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 7,732  | 
|                               |  |         |        |  |                     |   |  
|Consumer Loans                 |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 
|Home equity                    |  |         | 1,893  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   |      |  |  |   | 1,893  | 
|Home equity lines of credit    |  |         | 2,243  |  |                     |   |  |                     |  |   |                          |  |  |                              |  |  |              |   | 358   |            |  |   | 358   |  |  |   | 2,601  | 
|Other                          |  |         | 321    |  |                     |   | 1 |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   | 1     |  |  |   | 322    | 
|                               |  |         |        |  |                     |   |  
|Commercial Loans               |  |         | 3,206  |  |                     |   | 4 |                     |  |   |                          |  |  |                              |  |  |              |   |      |            |  |   | 4     |  |  |   | 3,210  | 
|                               |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 
|                               |  | $       | 48,452 |  |                     | $ | 5 |                     |  | $ |                          |  |  | $                            |  |  |              | $ | 2,166 |            |  | $ | 2,171 |  |  |   | 50,623 | 
|                               |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 
|Less:  Deferred loan fees      |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   | 41     | 
|Allowance for loan loss        |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   | 630    | 
|                               |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 
|Net Loans Receivable           |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  | $ | 49,952 | 
|                               |  |         |        |  |                     |   |   |                     |  |   |                           |  |  |                              |   |  |              |   |       |            |  |   |       |  |  |   |        | 



50



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------



Credit quality information

The following tables represent credit exposure by internally assigned grades for the fiscal year ended June 30, 2012. The grading
system analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or not at all. The Companys internal credit risk grading system is based on experiences with similarly graded
loans.

The Companys internally assigned grades are as follows:

Pass  loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying
collateral.

Special mention  loans where a potential weakness or risk exists, which could cause a more serious problem
if not corrected.

Substandard  loans that have a well-defined weakness based on objective evidence and can be
characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful  loans classified as doubtful have all the weaknesses inherent in a substandard loan. In addition, these weaknesses make
collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss  loans
classified as loss are considered uncollectible, or of such value that continuance as a loan is not warranted.

The primary
credit quality indicator used by Management in the 1  4 family and consumer loan portfolios is the performance status of the loans. Payment activity is reviewed by Management on a monthly basis to determine how loans are performing. Loans are
considered to be non-performing when they become 90 days delinquent, have a history of delinquency, or have other inherent characteristics which Management deems to be weaknesses.



51



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------



The following tables presents the Companys internally classified construction,
land acquisition and development, multi-family residential, commercial real estate and commercial (not secured by real estate) loans at June 30, 2012 and June 30, 2011.



|                |  |               |       |  |                                  |   |       |                         |  |   |                      |  |  |            |       |  |                                                                               |   |       |  |  |   |     | 
|--------------- |  | ------------- | ----- |  | -------------------------------- | - | ----- | ----------------------- |  | - | -------------------- |  |  | ---------- | ----- |  | ----------------------------------------------------------------------------- | - | ----- |  |  | - | --- | 
|                |  | June 30, 2012 |      
|                |  | Construction  |       |  | LandAcquisition&DevelopmentLoans |   |       | Multi-familyResidential |  |   | CommercialRealEstate |  |  | Commercial |       |  | Obligations(other thansecuritiesand leases)of statesand politicalsubdivisions |  
|                |  |               |       |  |                                  |  
|Pass            |  | $             | 4,296 |  |                                  | $ | 1,739 |                         |  | $ | 5,083                |  |  | $          | 7,623 |  |                                                                               | $ | 2,219 |  |  | $ | 500 | 
|Special Mention |  |               |      |  |                                  |   |      |                         |  |   |                     |  |  |            |      |  |                                                                               |   |      |  |  |   |    | 
|Substandard     |  |               | 701   |  |                                  |   | 290   |                         |  |   |                     |  |  |            |      |  |                                                                               |   |      |  |  |   |    | 
|Doubtful        |  |               |      |  |                                  |   |      |                         |  |   |                     |  |  |            |      |  |                                                                               |   | 3     |  |  |   |    | 
|                |  |               |       |  |                                  |   |       |                         |  |   |                      |  |  |            |       |  |                                                                               |   |       |  |  |   |     | 
|Ending Balance  |  | $             | 4,997 |  |                                  | $ | 2,029 |                         |  | $ | 5,083                |  |  | $          | 7,623 |  |                                                                               | $ | 2,222 |  |  | $ | 500 | 
|                |  |               |       |  |                                  |   |       |                         |  |   |                      |  |  |            |       |  |                                                                               |   |       |  |  |   |     | 



|                |  |               |        |  |                                  |   |       |                         |  |   |                      |  |  |            |       |  |                                                                               |   |       |  |  |   |   | 
|--------------- |  | ------------- | ------ |  | -------------------------------- | - | ----- | ----------------------- |  | - | -------------------- |  |  | ---------- | ----- |  | ----------------------------------------------------------------------------- | - | ----- |  |  | - | - | 
|                |  | June 30, 2011 |       
|                |  | Construction  |        |  | LandAcquisition&DevelopmentLoans |   |       | Multi-familyResidential |  |   | CommercialRealEstate |  |  | Commercial |       |  | Obligations(other thansecuritiesand leases)of statesand politicalsubdivisions |  
|                |  |               |        |  |                                  |  
|Pass            |  | $             | 10,545 |  |                                  | $ | 2,947 |                         |  | $ | 5,365                |  |  | $          | 7,732 |  |                                                                               | $ | 3,210 |  |  | $ |  | 
|Special Mention |  |               |       |  |                                  |   |      |                         |  |   |                     |  |  |            |      |  |                                                                               |   |      |  |  |   |  | 
|Substandard     |  |               | 1,024  |  |                                  |   |      |                         |  |   |                     |  |  |            |      |  |                                                                               |   |      |  |  |   |  | 
|Doubtful        |  |               |       |  |                                  |   |      |                         |  |   |                     |  |  |            |      |  |                                                                               |   |      |  |  |   |  | 
|                |  |               |        |  |                                  |   |       |                         |  |   |                      |  |  |            |       |  |                                                                               |   |       |  |  |   |   | 
|Ending Balance  |  | $             | 11,569 |  |                                  | $ | 2,947 |                         |  | $ | 5,365                |  |  | $          | 7,732 |  |                                                                               | $ | 3,210 |  |  | $ |  | 
|                |  |               |        |  |                                  |   |       |                         |  |   |                      |  |  |            |       |  |                                                                               |   |       |  |  |   |   | 



52



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|7. | NET LOANS RECEIVABLE (Continued)
|-- | --------------------------------



The following table presents performing and non-performing 1  4 family residential
and consumer loans based on payment activity for the periods ended June 30, 2012 and June 30, 2011.



|               |  |               |        |  |          |   |       | 
|-------------- |  | ------------- | ------ |  | -------- | - | ----- | 
|               |  | June 30, 2012 |       
|               |  | 1  4 Family  |        |  | Consumer |  
|               |  |              
|Performing     |  | $             | 13,151 |  |          | $ | 3,726 | 
|Non-performing |  |               | 363    |  |          |   | 150   | 
|               |  |               |        |  |          |   |       | 
|Total          |  | $             | 13,514 |  |          | $ | 3,876 | 
|               |  |               |        |  |          |   |       | 



|               |  |               |        |  |          |   |       | 
|-------------- |  | ------------- | ------ |  | -------- | - | ----- | 
|               |  | June 30, 2011 |       
|               |  | 1  4 Family  |        |  | Consumer |  
|               |  |              
|Performing     |  | $             | 14,200 |  |          | $ | 4,458 | 
|Non-performing |  |               | 784    |  |          |   | 358   | 
|               |  |               |        |  |          |   |       | 
|Total          |  | $             | 14,984 |  |          | $ | 4,816 | 
|               |  |               |        |  |          |   |       | 



|8. | ALLOWANCE FOR LOAN LOSSES
|-- | -------------------------

The Company determines its allowance for loan losses in accordance with generally accepted accounting principles. The Company uses a
systematic methodology as required by Financial Reporting Release No. 28 and the various Federal Financial Institutions Examination Council guidelines. The Company also endeavors to adhere to SEC Staff Accounting Bulletin No. 102 in
connection with loan loss allowance methodology and documentation issues.

Our methodology used to determine the allocated
portion of the allowance is as follows. For groups of homogenous loans, we apply a loss rate to the groups aggregate balance. Our group loss rate reflects our historical loss experience. We may adjust these group rates to compensate for
changes in environmental factors; but our adjustments have not been frequent due to a relatively stable charge-off experience. The Company also monitors industry loss experience on similar loan portfolio segments. We then identify loans for
individual evaluation under ASC Topic 310. If the individually identified loans are performing, we apply a segment specific loss rate adjusted for relevant environmental factors, if necessary, for those loans reviewed individually and considered
individually impaired, we use one of the three methods for measuring impairment mandated by ASC Topic 310. Generally the fair value of collateral is used since our impaired loans are generally real estate based. In connection with the fair value of
collateral measurement, the Company generally uses an independent appraisal and determines costs to sell. The Companys appraisals for commercial income based loans, such as multi-family and commercial real estate loans, assess value based upon
the operating cash flows of the business as opposed to merely as built values. The Company then validates the reasonableness of our calculated allowances by: (1) reviewing trends in loan volume, delinquencies, restructurings and
concentrations; (2) reviewing prior period (historical) charge-offs and



53



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|8. | ALLOWANCE FOR LOAN LOSSES (Continued)
|-- | -------------------------------------



recoveries; and (3) presenting the results of this process, quarterly, to the Asset
Classification Committee and the Savings Banks Board of Directors. We then tabulate, format and summarize the current loan loss allowance balance for financial and regulatory reporting purposes.

The Company had no unallocated loss allowance balance at June 30, 2012 and 2011.

The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its
loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan
losses charged to operations. The provision for loan losses is based on managements periodic evaluation of individual loans, economic factors, past loan loss experience, changes in the composition and volume of the portfolio, and other
relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to changes in the near term.

The following is a summary of the changes in the allowance for loan losses:



|                        |  |      |      |   |      |   |     |      |  |   |     |  
|----------------------- |  | ---- | ---- | - | ---- | - | --- | ---- |  | - | --- | -
|                        |  | 2012 |      |   | 2011 |   |     | 2010 | 
|                        |  |      |     
|Balance, July 1         |  | $    | 630  |   |      | $ | 645 |      |  | $ | 662 |  
|Add:                    |  |      |      |   |      |   |     |      |  |   |     |  
|Recovery of loan losses |  |      | (104 | ) |      |   | (15 | )    |  |   | (11 | )
|Less:                   |  |      |      |   |      |   |     |      |  |   |     |  
|Loans charged off       |  |      | 141  |   |      |   |    |      |  |   | 6   |  
|                        |  |      |      |   |      |   |     |      |  |   |     |  
|                        |  |      |     
|Balance, June 30        |  | $    | 385  |   |      | $ | 630 |      |  | $ | 645 |  
|                        |  |      |      |   |      |   |     |      |  |   |     |  



54



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|8. | ALLOWANCE FOR LOAN LOSSES (Continued)
|-- | -------------------------------------



The following table summarizes the primary segments of the ALLL, segregated into the
amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2012 and June 30, 2011. Activity in the allowance is presented for the fiscal years
ended June 30, 2012 and 2011.



|                                        |  |                      |     |   |              |   |      |                              |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |   |  |   |     |   |  |   |      |  
|--------------------------------------- |  | -------------------- | --- | - | ------------ | - | ---- | ---------------------------- |  | - | ------------ | - |  | ---------- | -- | - | ------------- | - | -- | --------------- |  | - | ----- | - |  | - | --- | - |  | - | ---- | -
|                                        |  | As of June 30, 2012  |    
|                                        |  | First Mortgage Loans |     |   |              |   |      |                              |  |   |              |  
|                                        |  | 1  4Family          |     |   | Construction |   |      | LandAcquisition &Development |  |   | Multi-family |   |  | Commercial |    |   | ConsumerLoans |   |    | CommercialLoans |  |   | Total |  
|Beginning ALLL Balance at June 30, 2011 |  | $                    | 87  |   |              | $ | 243  |                              |  | $ | 55           |   |  | $          | 27 |   |               | $ | 79 |                 |  | $ | 85    |   |  | $ | 54  |   |  | $ | 630  |  
|Charge-offs                             |  |                      |    |   |              |   | (141 | )                            |  |   |             |   |  |            |   |   |               |   |   |                 |  |   |      |   |  |   |    |   |  |   | (141 | )
|Recoveries                              |  |                      |    |   |              |   |     |                              |  |   |             |   |  |            |   |   |               |   |   |                 |  |   |      |   |  |   |    |   |  |   |     |  
|Provisions                              |  |                      | (14 | ) |              |   | 20   |                              |  |   | (34          | ) |  |            | (1 | ) |               |   | (3 | )               |  |   | (32   | ) |  |   | (40 | ) |  |   | (104 | )
|                                        |  |                      |     |   |              |   |      |                              |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |   |  |   |     |   |  |   |      |  
|Ending ALLL Balance at June 30, 2012    |  | $                    | 73  |   |              | $ | 122  |                              |  | $ | 21           |   |  | $          | 26 |   |               | $ | 76 |                 |  | $ | 53    |   |  | $ | 14  |   |  | $ | 385  |  
|                                        |  |                      |     |   |              |   |      |                              |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |   |  |   |     |   |  |   |      |  
|                                        |  |                      |     |   |              |   |      |                             
|Individually evaluated for impairment   |  |                      |    |   |              |   | 105  |                              |  |   |             |   |  |            |   |   |               |   |   |                 |  |   |      |   |  |   |    |   |  |   | 105  |  
|Collectively evaluated for impairment   |  |                      | 73  |   |              |   | 17   |                              |  |   | 21           |   |  |            | 26 |   |               |   | 76 |                 |  |   | 53    |   |  |   | 14  |   |  |   | 280  |  
|                                        |  |                      |     |   |              |   |      |                              |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |   |  |   |     |   |  |   |      |  
|                                        |  | $                    | 73  |   |              | $ | 122  |                              |  | $ | 21           |   |  | $          | 26 |   |               | $ | 76 |                 |  | $ | 53    |   |  | $ | 14  |   |  | $ | 385  |  
|                                        |  |                      |     |   |              |   |      |                              |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |   |  |   |     |   |  |   |      |  



|                                        |  |                      |     |   |              |   |     |                             |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |  |  |   |     |   |  |   |     |  
|--------------------------------------- |  | -------------------- | --- | - | ------------ | - | --- | --------------------------- |  | - | ------------ | - |  | ---------- | -- | - | ------------- | - | -- | --------------- |  | - | ----- |  |  | - | --- | - |  | - | --- | -
|                                        |  | As of June 30, 2011  |    
|                                        |  | First Mortgage Loans |     |   |              |   |     |                             |  |   |              |  
|                                        |  | 1  4Family          |     |   | Construction |   |     | LandAcquisition&Development |  |   | Multi-family |   |  | Commercial |    |   | ConsumerLoans |   |    | CommercialLoans |  |   | Total | 
|Beginning ALLL Balance at June 30, 2010 |  | $                    | 147 |   |              | $ | 47  |                             |  | $ | 213          |   |  | $          | 28 |   |               | $ | 66 |                 |  | $ | 77    |  |  | $ | 67  |   |  | $ | 645 |  
|Charge-offs                             |  |                      |    |   |              |   |    |                             |  |   |             |   |  |            |   |   |               |   |   |                 |  |   |      |  |  |   |    |   |  |   |    |  
|Recoveries                              |  |                      |    |   |              |   |    |                             |  |   |             |   |  |            |   |   |               |   |   |                 |  |   |      |  |  |   |    |   |  |   |    |  
|Provisions                              |  |                      | (60 | ) |              |   | 196 |                             |  |   | (158         | ) |  |            | (1 | ) |               |   | 13 |                 |  |   | 8     |  |  |   | (13 | ) |  |   | (15 | )
|                                        |  |                      |     |   |              |   |     |                             |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |  |  |   |     |   |  |   |     |  
|Ending ALLL Balance atJune 30, 2011     |  | $                    | 87  |   |              | $ | 243 |                             |  | $ | 55           |   |  | $          | 27 |   |               | $ | 79 |                 |  | $ | 85    |  |  | $ | 54  |   |  | $ | 630 |  
|                                        |  |                      |     |   |              |   |     |                             |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |  |  |   |     |   |  |   |     |  
|                                        |  |                      |     |   |              |   |     |                            
|Individually evaluated for impairment   |  |                      |    |   |              |   | 67  |                             |  |   |             |   |  |            |   |   |               |   |   |                 |  |   |      |  |  |   |    |   |  |   | 67  |  
|Collectively evaluated for impairment   |  |                      | 87  |   |              |   | 176 |                             |  |   | 55           |   |  |            | 27 |   |               |   | 79 |                 |  |   | 85    |  |  |   | 54  |   |  |   | 563 |  
|                                        |  |                      |     |   |              |   |     |                             |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |  |  |   |     |   |  |   |     |  
|                                        |  | $                    | 87  |   |              | $ | 243 |                             |  | $ | 55           |   |  | $          | 27 |   |               | $ | 79 |                 |  | $ | 85    |  |  | $ | 54  |   |  | $ | 630 |  
|                                        |  |                      |     |   |              |   |     |                             |  |   |              |   |  |            |    |   |               |   |    |                 |  |   |       |  |  |   |     |   |  |   |     |  



55



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|9. | ACCRUED INTEREST RECEIVABLE
|-- | ---------------------------

Accrued interest receivable consists of the following:



|                                          |  |      |       |  |      |   |       | 
|----------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                                          |  | 2012 |       |  | 2011 |  
|                                          |  |     
|Investment and mortgage-backed securities |  | $    | 1,440 |  |      | $ | 942   | 
|Loans receivable                          |  |      | 181   |  |      |   | 247   | 
|                                          |  |      |       |  |      |   |       | 
|                                          |  |     
|Total                                     |  | $    | 1,621 |  |      | $ | 1,189 | 
|                                          |  |      |       |  |      |   |       | 



|10. | FEDERAL HOME LOAN BANK STOCK
|--- | ----------------------------

The Companys subsidiary bank is a member of the FHLB System. As a member, the Savings Bank maintains an investment in the capital stock of the FHLB of Pittsburgh, at cost, in an amount not less than
1.0% of the unpaid principal balances of residential mortgage loans, 0.3% of total assets or approximately 5.0% of outstanding advances, if any due to the FHLB, whichever is greater, as calculated periodically by the FHLB. Purchases and redemptions
of FHLB stock are made directly with the FHLB at par. In 2008, the FHLB suspended both the payment of dividends and the repurchase of excess capital stock. Beginning in the fourth quarter of calendar year 2010, the FHLB partially lifted the
suspension with limited repurchases of excess stock. Beginning in the first quarter of calendar year 2012, the FHLB began paying dividends at an annualized rate of 0.10% on the average balance of stock held in the prior quarter. During fiscal 2012,
the Bank received $4 thousand in dividends on its holdings of FHLB stock. This repurchase restriction could result in the Savings Banks investment in FHLB stock being greater than 5.0% of its outstanding notes payable to the FHLB.



|11. | PREMISES AND EQUIPMENT
|--- | ----------------------

Major classifications of premises and equipment are summarized as follows:



|                                   |  |      |       |  |      |   |       | 
|---------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                                   |  | 2012 |       |  | 2011 |  
|                                   |  |     
|Land and improvements              |  | $    | 246   |  |      | $ | 246   | 
|Buildings and improvements         |  |      | 2,064 |  |      |   | 2,046 | 
|Furniture, fixtures, and equipment |  |      | 955   |  |      |   | 894   | 
|                                   |  |      |       |  |      |   |       | 
|                                   |  |      | 3,265 |  |      |   | 3,186 | 
|Less accumulated depreciation      |  |      | 2,682 |  |      |   | 2,598 | 
|                                   |  |      |       |  |      |   |       | 
|Total                              |  | $    | 583   |  |      | $ | 588   | 
|                                   |  |      |       |  |      |   |       | 

Depreciation charged to operations was $84 thousand, $100 thousand, and $103 thousand, for the years
ended June 30, 2012, 2011, and 2010, respectively.



56



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|12. | DEPOSITS
|--- | --------

Retail deposit
accounts are summarized as follows:



|                                                      |  |        |         |  |                     |  |       |        |  |   |                     |  |  |  |       |  
|----------------------------------------------------- |  | ------ | ------- |  | ------------------- |  | ----- | ------ |  | - | ------------------- |  |  |  | ----- | -
|                                                      |  | 2012   |         |  | 2011                | 
|                                                      |  | Amount |         |  | Percent ofPortfolio |  |       | Amount |  |   | Percent ofPortfolio | 
|                                                      |  |        |         | 
|Non-interest-earning checking                         |  | $      | 15,642  |  |                     |  | 11.0  | %      |  | $ | 13,324              |  |  |  | 9.3   | %
|Interest-earning checking                             |  |        | 20,834  |  |                     |  | 14.6  |        |  |   | 19,818              |  |  |  | 13.8  |  
|Savings accounts                                      |  |        | 39,770  |  |                     |  | 28.0  |        |  |   | 37,922              |  |  |  | 26.4  |  
|Money market accounts                                 |  |        | 23,837  |  |                     |  | 16.8  |        |  |   | 23,824              |  |  |  | 16.6  |  
|Savings certificates                                  |  |        | 41,508  |  |                     |  | 29.2  |        |  |   | 48,226              |  |  |  | 33.5  |  
|Advance payments by borrowers for taxes and insurance |  |        | 582     |  |                     |  | 0.4   |        |  |   | 652                 |  |  |  | 0.4   |  
|                                                      |  |        |         |  |                     |  |       |        |  |   |                     |  |  |  |       |  
|Total                                                 |  | $      | 142,173 |  |                     |  | 100.0 | %      |  | $ | 143,766             |  |  |  | 100.0 | %
|                                                      |  |        |         |  |                     |  |       |        |  |   |                     |  |  |  |       |  

The maturities of savings certificates at June 30, 2012, are summarized as follows:



|                                         |  |   |        | 
|---------------------------------------- |  | - | ------ | 
|Within one year                          |  | $ | 29,883 | 
|Beyond one year but within two years     |  |   | 5,641  | 
|Beyond two years but within three years  |  |   | 2,913  | 
|Beyond three years but within four years |  |   | 1,151  | 
|Beyond four years but within five years  |  |   | 1,492  | 
|Beyond five years                        |  |   | 428    | 
|                                         |  |   |        | 
|                                         | 
|Total                                    |  | $ | 41,508 | 
|                                         |  |   |        | 

Savings certificates with balances of $100,000 or more amounted to $5,400 and $9,371 on June 30,
2012 and 2011, respectively.

At June 30, 2012 the Savings Bank had no brokered CDs, as compared to $248 of brokered
CDs at June 30, 2011.

Interest expense by deposit category for the years ended June 30 is as follows:



|                                                      |  |      |     |  |      |   |     |      |  |   |       | 
|----------------------------------------------------- |  | ---- | --- |  | ---- | - | --- | ---- |  | - | ----- | 
|                                                      |  | 2012 |     |  | 2011 |   |     | 2010 | 
|                                                      |  |      |    
|Interest-earning checking                             |  | $    | 8   |  |      | $ | 8   |      |  | $ | 8     | 
|Savings accounts                                      |  |      | 61  |  |      |   | 76  |      |  |   | 117   | 
|Money market accounts                                 |  |      | 42  |  |      |   | 58  |      |  |   | 83    | 
|Savings certificates                                  |  |      | 425 |  |      |   | 768 |      |  |   | 1,034 | 
|Advance payments by borrowers for taxes and insurance |  |      | 7   |  |      |   | 8   |      |  |   | 9     | 
|                                                      |  |      |     |  |      |   |     |      |  |   |       | 
|                                                      |  |      |    
|Total                                                 |  | $    | 543 |  |      | $ | 918 |      |  | $ | 1,251 | 
|                                                      |  |      |     |  |      |   |     |      |  |   |       | 



57



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|13. | FEDERAL HOME LOAN BANK ADVANCES
|--- | -------------------------------

The following table presents contractual maturities of FHLB long-term advances as of June 30:



|            |  |                |          |  |                                 |  |          |                            |      |  |      |    |  |  |      |   |  |      |        |   |  |   |        |  |  |   |        | 
|----------- |  | -------------- | -------- |  | ------------------------------- |  | -------- | -------------------------- | ---- |  | ---- | -- |  |  | ---- | - |  | ---- | ------ | - |  | - | ------ |  |  | - | ------ | 
|            |  | Maturity range |          |  | Weighted-averageinterest rate 1 |  |          | Stated interest rate range |      |  |      |    |  |  |     
|Description |  | from           |          |  | to                              |  |          |                            | from |  |      | to |  |  | 2012 |   |  | 2011 |       
|            |  |                |          |  |                                 |  |         
|Convertible |  |                | 04/23/14 |  |                                 |  | 07/27/17 |                            |      |  | 4.72 | %  |  |  | 4.26 | % |  |      | 5.41   | % |  | $ | 17,500 |  |  | $ | 22,500 | 
|            |  |                |          |  |                                 |  |          |                            |      |  |      |    |  |  |      |   |  |      |        |   |  |   |        |  |  |   |        | 
|            |  |                |          |  |                                 | 
|Total       |  |                |          |  |                                 |  |          |                            |      |  |      |    |  |  |      |   |  | $    | 17,500 |   |  | $ | 22,500 | 
|            |  |                |          |  |                                 |  |          |                            |      |  |      |    |  |  |      |   |  |      |        |   |  |   |        |  |  |   |        | 

Maturities of FHLB long-term advances at June 30, 2012, are summarized as follows:



|                                           |  |        |        |  |                              |  |      |  
|------------------------------------------ |  | ------ | ------ |  | ---------------------------- |  | ---- | -
|Maturing During
Fiscal Year Ended June 30: |  | Amount |        |  | Weighted-AverageInterestRate | 
|                                           |  |       
|2013                                       |  | $      |       |  |                              |  |     | %
|2014                                       |  |        | 5,000  |  |                              |  | 5.41 |  
|2015                                       |  |        |       |  |                              |  |     |  
|2016                                       |  |        | 2,500  |  |                              |  | 5.16 |  
|2017 and thereafter                        |  |        | 10,000 |  |                              |  | 4.26 |  
|                                           |  |        |        |  |                              |  |      |  
|                                           |  |       
|Total                                      |  | $      | 17,500 |  |                              |  | 4.72 | %
|                                           |  |        |        |  |                              |  |      |  

The terms of the convertible advances reset to the three-month London Interbank Offered Rate
(LIBOR) and have various spreads and call dates of three months. The FHLB has the right to convert from a fixed rate to a predetermined floating rate on its conversion date or quarterly thereafter. Should the advance be converted, the
Company has the right to pay off the advance without penalty. The FHLB advances are secured by the Companys FHLB stock, investment securities and loans, and are subject to substantial prepayment penalties.

The Company also utilized revolving and short-term FHLB advances. Short-term FHLB advances generally mature within 90 days, while
revolving FHLB advances may be repaid by the Company without penalty. The following table presents information regarding such advances as of June 30:



|                                          |  |      |         |   |      |   |        |  
|----------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | -
|                                          |  | 2012 |         |   | 2011 |  
|                                          |  |     
|FHLB revolving and short-term advances:   |  |      |         |   |      |   |        |  
|Ending balance                            |  | $    | 79,270  |   |      | $ | 32,059 |  
|Average balance during the year           |  |      | 61,515  |   |      |   | 1,603  |  
|Maximum month-end balance during the year |  |      | 106,795 |   |      |   | 32,059 |  
|Average interest rate during the year     |  |      | 0.21    | % |      |   | 0.25   | %
|Weighted-average rate at year-end         |  |      | 0.22    | % |      |   | 0.17   | %



|1 | For fiscal year
ended 2012.
|- | ---------------------------



58



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|13. | FEDERAL HOME LOAN BANK ADVANCES (Continued)
|--- | -------------------------------------------



At June 30, 2012, the Company had remaining borrowing capacity with the FHLB of
approximately $50.0 million.

The FHLB advances are secured by the Companys FHLB stock, loans, and investment and
mortgage-backed securities held in safekeeping at the FHLB. FHLB advances are subject to substantial prepayment penalties.



|14. | OTHER BORROWINGS
|--- | ----------------

Other
borrowings include securities sold under agreements to repurchase with securities brokers and Federal Reserve Bank short-term borrowings. These borrowings generally mature within 1 to 90 days from the transaction date and require a collateral
pledge. The following tables present information regarding other borrowings as of June 30:

OTHER SHORT-TERM BORROWINGS



|                                          |  |      |      |   |      |   |        |  
|----------------------------------------- |  | ---- | ---- | - | ---- | - | ------ | -
|                                          |  | 2012 |      |   | 2011 |  
|                                          |  |     
|Ending balance                            |  | $    |     |   |      | $ |       |  
|Average balance during the year           |  |      | 90   |   |      |   | 10,553 |  
|Maximum month-end balance during the year |  |      |     |   |      |   | 32,650 |  
|Average interest rate during the year     |  |      | 0.35 | % |      |   | 0.31   | %
|Weighted-average rate at year-end         |  |      |     |   |      |   |       |  

FEDERAL RESERVE BANK SHORT-TERM BORROWINGS



|                                          |  |      |      |   |      |   |   |  
|----------------------------------------- |  | ---- | ---- | - | ---- | - | - | -
|                                          |  | 2012 |      |   | 2011 |  
|                                          |  |     
|Ending balance                            |  | $    |     |   |      | $ |  |  
|Average balance during the year           |  |      | 4    |   |      |   |  |  
|Maximum month-end balance during the year |  |      |     |   |      |   |  |  
|Average interest rate during the year     |  |      | 0.75 | % |      |   |  | %
|Weighted-average rate at year-end         |  |      |     | % |      |   |  | %



|15. | COMMITMENTS AND CONTINGENT LIABILITIES
|--- | --------------------------------------

Loan Commitments

In the normal course of business, there are
various commitments that are not reflected in the Companys financial statements. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheet. The
Companys exposure to credit loss in the event of nonperformance by the other parties to the financial instruments is represented by the contractual amounts as disclosed. Losses, if any, are charged to the allowance losses on off balance sheet
items. Management minimizes its exposure to credit loss under these commitments by subjecting them to credit approval, review procedures, and collateral requirements, as deemed necessary. Various loan commitments totaling $11,475 and $9,996 at
June 30, 2012 and 2011, respectively, represent financial instruments with off-balance sheet risk. The commitments outstanding at June 30, 2012, contractually mature in less than one year.

Loan commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the
Consolidated Balance Sheet. The same credit policies are used in making commitments and conditional obligations as for on-balance sheet instruments. Generally, collateral, usually in the form of real estate, is required to support financial
instruments with credit risk.



59



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|15. | COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
|--- | --------------------------------------------------



Loan Commitments (continued)



Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the loan agreement. These commitments are composed primarily of the undisbursed portion of construction and land development loans (Note 7), residential, commercial real estate, and consumer loan
originations.

The exposure to loss under these commitments is limited by subjecting them to credit approval and monitoring
procedures. Substantially all commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of the loan funding. Management assesses the credit risk associated with certain commitments to extend credit
in determining the level of the allowance for loan losses.

Litigation

The Company is involved with various legal actions arising in the ordinary course of business. Management believes the outcome of these
matters will have no material effect on the consolidated operations or financial condition of WVS.



|16. | REGULATORY CAPITAL
|--- | ------------------

Federal regulations require the Company and Savings Bank to maintain minimum amounts of capital. Specifically, each is required to
maintain certain minimum dollar amounts and ratios of Total and Tier I Capital to Risk-Weighted Assets and of Tier I Capital to Average Total Assets.

In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (FDICIA) established five capital categories ranging from well capitalized to critically
undercapitalized. Should any institution fail to meet the requirements to be considered adequately capitalized, it would become subject to a series of increasingly restrictive regulatory actions.

As of June 30, 2012 and 2011, the FDIC categorized the Savings Bank as well capitalized under the regulatory framework for prompt
corrective action. To be classified as a well capitalized financial institution, Total Risk-Based, Tier 1 Risk-Based, and Tier 1 Leverage Capital Ratios must be at least 10 percent, 6 percent, and 5 percent, respectively.



60



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|16. | REGULATORY CAPITAL (Continued)
|--- | ------------------------------



The Companys and Savings Banks actual capital ratios are presented in the
following tables, which show that both met all regulatory capital requirements.



|                                         |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|---------------------------------------- |  | ------------- | ------ |  | --------- |  | ----- | ------ |  | - | ------ |  |  |  | ----- | -
|                                         |  | June 30, 2012 |       
|                                         |  | WVS           |        |  | West View | 
|                                         |  | Amount        |        |  | Ratio     |  |       | Amount |  |   | Ratio  | 
|                                         |  |               |        | 
|Total Capital (to Risk-Weighted Assets)  |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|                                         |  |               |        | 
|Actual                                   |  | $             | 32,211 |  |           |  | 20.69 | %      |  | $ | 30,803 |  |  |  | 19.80 | %
|To Be Well Capitalized                   |  |               | 15,566 |  |           |  | 10.00 |        |  |   | 15,559 |  |  |  | 10.00 |  
|For Capital Adequacy Purposes            |  |               | 12,405 |  |           |  | 8.00  |        |  |   | 12,447 |  |  |  | 8.00  |  
|                                         |  |               |        | 
|Tier I Capital (to Risk-Weighted Assets) |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|                                         |  |               |        | 
|Actual                                   |  | $             | 31,798 |  |           |  | 20.43 | %      |  | $ | 30,390 |  |  |  | 19.53 | %
|To Be Well Capitalized                   |  |               | 9,339  |  |           |  | 6.00  |        |  |   | 9,335  |  |  |  | 6.00  |  
|For Capital Adequacy Purposes            |  |               | 6,202  |  |           |  | 4.00  |        |  |   | 6,224  |  |  |  | 4.00  |  
|                                         |  |               |        | 
|Tier I Capital (to Average Total Assets) |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|                                         |  |               |        | 
|Actual                                   |  | $             | 31,798 |  |           |  | 11.14 | %      |  | $ | 30,390 |  |  |  | 10.67 | %
|To Be Well Capitalized                   |  |               | 14,272 |  |           |  | 5.00  |        |  |   | 14,244 |  |  |  | 5.00  |  
|For Capital Adequacy Purposes            |  |               | 11,418 |  |           |  | 4.00  |        |  |   | 11,395 |  |  |  | 4.00  |  



|                                         |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|---------------------------------------- |  | ------------- | ------ |  | --------- |  | ----- | ------ |  | - | ------ |  |  |  | ----- | -
|                                         |  | June 30, 2011 |       
|                                         |  | WVS           |        |  | West View | 
|                                         |  | Amount        |        |  | Ratio     |  |       | Amount |  |   | Ratio  | 
|                                         |  |               |        | 
|Total Capital (to Risk-Weighted Assets)  |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|                                         |  |               |        | 
|Actual                                   |  | $             | 31,360 |  |           |  | 22.03 | %      |  | $ | 30,233 |  |  |  | 21.25 | %
|To Be Well Capitalized                   |  |               | 14,235 |  |           |  | 10.00 |        |  |   | 14,230 |  |  |  | 10.00 |  
|For Capital Adequacy Purposes            |  |               | 11,388 |  |           |  | 8.00  |        |  |   | 11,384 |  |  |  | 8.00  |  
|                                         |  |               |        | 
|Tier I Capital (to Risk-Weighted Assets) |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|                                         |  |               |        | 
|Actual                                   |  | $             | 30,705 |  |           |  | 21.57 | %      |  | $ | 29,578 |  |  |  | 20.79 | %
|To Be Well Capitalized                   |  |               | 8,541  |  |           |  | 6.00  |        |  |   | 8,538  |  |  |  | 6.00  |  
|For Capital Adequacy Purposes            |  |               | 5,694  |  |           |  | 4.00  |        |  |   | 5,692  |  |  |  | 4.00  |  
|                                         |  |               |        | 
|Tier I Capital (to Average Total Assets) |  |               |        |  |           |  |       |        |  |   |        |  |  |  |       |  
|                                         |  |               |        | 
|Actual                                   |  | $             | 30,705 |  |           |  | 13.12 | %      |  | $ | 29,578 |  |  |  | 12.64 | %
|To Be Well Capitalized                   |  |               | 11,700 |  |           |  | 5.00  |        |  |   | 11,697 |  |  |  | 5.00  |  
|For Capital Adequacy Purposes            |  |               | 9,360  |  |           |  | 4.00  |        |  |   | 9,358  |  |  |  | 4.00  |  



61



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|17. | STOCK BENEFIT PLANS
|--- | -------------------

Stock Option Plan

The Company maintains the 2008 Stock Incentive Plan for the directors, officers, and employees. The stock options granted typically have an expiration term of ten years, subject to certain extensions and
early terminations. The per share exercise price of an incentive stock option shall at a minimum equal the fair market value of a share of common stock on the date the option is granted. The per share exercise price of a compensatory stock option
granted shall at least equal the greater of par value or 100 percent of the fair market value of a share of common stock on the date the option is granted. Proceeds from the exercise of the stock options are credited to common stock for the
aggregate par value and the excess is credited to paid-in capital.

The following table presents information related to the
outstanding options:



|                           |  |                                     |        |  |                        |  |        |                               |  |   |       | 
|-------------------------- |  | ----------------------------------- | ------ |  | ---------------------- |  | ------ | ----------------------------- |  | - | ----- | 
|                           |  | Officers andEmployeesStockOptions |        |  | DirectorsStockOptions |  |        | Weighted-AverageExercisePrice | 
|                           |  |                                     |       
|Outstanding, June 30, 2009 |  |                                     | 87,019 |  |                        |  | 38,108 |                               |  | $ | 16.20 | 
|                           |  |                                     |       
|Granted                    |  |                                     |       |  |                        |  |       |                               |  |   |       | 
|Exercised                  |  |                                     |       |  |                        |  |       |                               |  |   |       | 
|Forfeited                  |  |                                     |       |  |                        |  |       |                               |  |   |       | 
|                           |  |                                     |        |  |                        |  |        |                               |  |   |       | 
|                           |  |                                     |       
|Outstanding, June 30, 2010 |  |                                     | 87,019 |  |                        |  | 38,108 |                               |  | $ | 16.20 | 
|                           |  |                                     |       
|Granted                    |  |                                     |       |  |                        |  |       |                               |  |   |       | 
|Exercised                  |  |                                     |       |  |                        |  |       |                               |  |   |       | 
|Forfeited                  |  |                                     |       |  |                        |  | 303    |                               |  |   |       | 
|                           |  |                                     |        |  |                        |  |        |                               |  |   |       | 
|                           |  |                                     |       
|Outstanding, June 30, 2011 |  |                                     | 87,019 |  |                        |  | 37,805 |                               |  | $ | 16.20 | 
|                           |  |                                     |       
|Granted                    |  |                                     |       |  |                        |  |       |                               |  |   |       | 
|Exercised                  |  |                                     |       |  |                        |  |       |                               |  |   |       | 
|Forfeited                  |  |                                     |       |  |                        |  | 305    |                               |  |   |       | 
|                           |  |                                     |        |  |                        |  |        |                               |  |   |       | 
|                           |  |                                     |       
|Outstanding, June 30, 2012 |  |                                     | 87,019 |  |                        |  | 37,500 |                               |  | $ | 16.20 | 
|                           |  |                                     |        |  |                        |  |        |                               |  |   |       | 
|                           |  |                                     |       
|Exercisable at year-end    |  |                                     | 50,967 |  |                        |  | 22,500 |                               |  | $ | 16.20 | 
|                           |  |                                     |        |  |                        |  |        |                               |  |   |       | 
|                           |  |                                     |       
|Available for future grant |  |                                     | 26,981 |  |                        |  | 500    |                               |  |   |       | 
|                           |  |                                     |        |  |                        |  |        |                               |  |   |       | 



62



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|17. | STOCK BENEFIT PLANS (Continued)
|--- | -------------------------------



Stock Option Plan (continued)



At June 30, 2012, for officers and employees there were 87,019 options outstanding
and 50,967 options exercisable, with a weighted-average exercise price of $16.20, and a weighted-average remaining contractual life of 6.49 years. At June 30, 2011 there were 87,019 options outstanding and 38,969 options exercisable with a
weighted-average price of $16.20, and a weighted-average remaining contractual life of 7.49 years.

There were also 37,500
options outstanding and 22,500 options exercisable for directors with a weighted-average exercise price of $16.20, and a weighted-average remaining contractual life of 6.25 years. At June 30, 2011 there were 37,805 options outstanding and
15,305 options exercisable, with a weighted-average price of $16.20, and a weighted-average remaining contractual life of 7.19 years.

Employee Stock Ownership Plan (ESOP)

WVS maintains an
ESOP for the benefit of officers and Savings Bank employees who have met certain eligibility requirements related to age and length of service. Compensation expense for the ESOP was $152, $150, and $60 for the years ended June 30, 2012, 2011
and 2010, respectively. Total ESOP shares as of June 30, 2012 and 2011, were 258,706 and 258,146, respectively.



|18. | DIRECTOR, OFFICER, AND EMPLOYEE BENEFITS
|--- | ----------------------------------------

Profit Sharing Plan

The Company maintains a non-contributory profit
sharing 401(k) plan (the Plan) for its officers and employees who have met the age and length of service requirements. The Plan is a defined contribution plan with the contributions based on a percentage of salaries of the Plan
participants. The Company made no contributions to the Plan for the three years ended June 30, 2012, 2011, and 2010.

Directors Deferred Compensation Plan

The Company maintains a deferred compensation plan (the Plan) for directors who elect to defer all or a portion of their directors fees. Deferred fees are paid to the participants in
installments commencing in the year following the year the individual is no longer a member of the Board of Directors.

The
Plan allows for the deferred amounts to be paid in shares of common stock at the prevailing market price on the date of distribution. For fiscal years ended June 30, 2012, 2011, and 2010, 1,731, 1,731, and 17,842 shares, respectively, were held
by the Plan.



|19. | INCOME TAXES
|--- | ------------

The
provision for income taxes consists of:



|                   |  |      |     |  |      |   |     |      |  |   |      |  
|------------------ |  | ---- | --- |  | ---- | - | --- | ---- |  | - | ---- | -
|                   |  | 2012 |     |  | 2011 |   |     | 2010 | 
|Currently payable: |  |      |     |  |      |   |     |      |  |   |      |  
|Federal            |  | $    | 575 |  |      | $ | 59  |      |  | $ | 81   |  
|State              |  |      | 76  |  |      |   | 134 |      |  |   | 7    |  
|                   |  |      |     |  |      |   |     |      |  |   |      |  
|                   |  |      | 651 |  |      |   | 193 |      |  |   | 88   |  
|Deferred           |  |      | 251 |  |      |   | 269 |      |  |   | (101 | )
|                   |  |      |     |  |      |   |     |      |  |   |      |  
|                   |  |      |    
|Total              |  | $    | 902 |  |      | $ | 462 |      |  | $ | (13  | )
|                   |  |      |     |  |      |   |     |      |  |   |      |  



63



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|19. | INCOME TAXES (Continued)
|--- | ------------------------



In addition to income taxes applicable to income before taxes in the consolidated income
statement, the following income tax amounts were recorded to stockholders equity during the years ended June 30:



|                                                     |  |      |      |   |      |   |      |      |  |   |       |  
|---------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ----- | -
|                                                     |  | 2012 |      |   | 2011 |   |      | 2010 | 
|Net unrealized gain on securities available for sale |  | $    | 4    |   |      | $ | 44   |      |  | $ | (41   | )
|Net non-credit losses on securities with OTTI        |  |      | (232 | ) |      |   | (256 | )    |  |   | 1,197 |  
|                                                     |  |      |      |   |      |   |      |      |  |   |       |  
|                                                     |  |      |     
|                                                     |  | $    | (228 | ) |      | $ | (212 | )    |  | $ | 1,156 |  
|                                                     |  |      |      |   |      |   |      |      |  |   |       |  

The following temporary differences gave rise to the net deferred tax assets at June 30:



|                                                     |  |      |       |  |      |   |       | 
|---------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                                                     |  | 2012 |       |  | 2011 |  
|Deferred tax assets:                                 |  |      |       |  |      |   |       | 
|Allowance for loan losses                            |  | $    | 131   |  |      | $ | 191   | 
|Deferred compensation                                |  |      | 91    |  |      |   | 95    | 
|Reserve for uncollected interest                     |  |      | 62    |  |      |   | 71    | 
|Reserve for off-balance sheet commitments            |  |      | 10    |  |      |   | 8     | 
|OTTI other impairment                                |  |      | 708   |  |      |   | 940   | 
|OTTI credit impairment                               |  |      | 111   |  |      |   | 66    | 
|Net unrealized loss on securities available for sale |  |      | 6     |  |      |   | 1     | 
|Other                                                |  |      | 50    |  |      |   | 64    | 
|                                                     |  |      |       |  |      |   |       | 
|Total gross deferred tax assets                      |  |      | 1,169 |  |      |   | 1,436 | 
|                                                     |  |      |       |  |      |   |       | 
|                                                     |  |     
|Deferred tax liabilities:                            |  |      |       |  |      |   |       | 
|Net unrealized gain on securities available for sale |  |      |      |  |      |   |      | 
|Deferred origination fees, net                       |  |      | 94    |  |      |   | 115   | 
|Depreciation reserve                                 |  |      | 27    |  |      |   | 22    | 
|Other                                                |  |      | 1     |  |      |   | 1     | 
|                                                     |  |      |       |  |      |   |       | 
|Total gross deferred tax liabilities                 |  |      | 122   |  |      |   | 138   | 
|                                                     |  |      |       |  |      |   |       | 
|                                                     |  |     
|Net deferred tax assets                              |  | $    | 1,047 |  |      | $ | 1,298 | 
|                                                     |  |      |       |  |      |   |       | 

No valuation allowance was established at June 30, 2012 and 2011, in view of the Companys
ability to carryback to taxes paid in previous years, future anticipated taxable income, which is evidenced by the Companys earnings potential, and deferred tax liabilities at June 30.

The Company and its subsidiary file a consolidated federal income tax return. Prior to 1996, the Savings Bank was permitted under the
Internal Revenue Code to establish a tax reserve for bad debts, and to make annual additions within specified limitations which may have been deducted in arriving at its taxable income. Subsequent to 1995, the Savings Banks bad debt deduction
may be computed using an amount based on its actual loss experience (the experience method).

U.S. generally
accepted accounting principles prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should
be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position
that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than



64



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|19. | INCOME TAXES (Continued)
|--- | ------------------------



50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first
subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in
which that threshold is no longer met.

There is currently no liability for uncertain tax positions and no known unrecognized
tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statement of Income. With few exceptions, the Company is no longer subject
to U.S. federal income tax examinations by tax authorities for years before 2008.

The following is a reconciliation between
the actual provision for income taxes and the amount of income taxes which would have been provided at federal statutory rates for the years ended June 30:



|                                             |  |        |     |   |                  |  |      |        |  |   |                  |   |  |        |      |   |                  |   |      |   |  |  |       |   
|-------------------------------------------- |  | ------ | --- | - | ---------------- |  | ---- | ------ |  | - | ---------------- | - |  | ------ | ---- | - | ---------------- | - | ---- | - |  |  | ----- | --
|                                             |  | 2012   |     |   | 2011             |  |      | 2010   | 
|                                             |  | Amount |     |   | % ofPretaxIncome |  |      | Amount |  |   | % ofPretaxIncome |   |  | Amount |      |   | % ofPretaxIncome |  
|                                             |  |        |     |   |                  | 
|Provision at statutory rate                  |  | $      | 783 |   |                  |  | 34.0 | %      |  | $ | 574              |   |  |        | 34.0 | % |                  | $ | 122  |   |  |  | 34.0  | % 
|State income tax, net of federal tax benefit |  |        | 50  |   |                  |  | 2.2  |        |  |   | 88               |   |  |        | 5.2  |   |                  |   | 5    |   |  |  | 1.4   |   
|Tax exempt income                            |  |        | (31 | ) |                  |  | (1.3 | )      |  |   | (72              | ) |  |        | (4.3 | ) |                  |   | (119 | ) |  |  | (33.1 | ) 
|Other, net                                   |  |        | 100 |   |                  |  | 4.3  |        |  |   | (128             | ) |  |        | (7.5 | ) |                  |   | (21  | ) |  |  | (5.8  | ) 
|                                             |  |        |     |   |                  |  |      |        |  |   |                  |   |  |        |      |   |                  |   |      |   |  |  |       |   
|                                             |  |        |     |   |                  | 
|Actual tax expense and effective rate        |  | $      | 902 |   |                  |  | 39.1 | %      |  | $ | 462              |   |  |        | 27.4 | % |                  | $ | (13  | ) |  |  | (3.6  | )%
|                                             |  |        |     |   |                  |  |      |        |  |   |                  |   |  |        |      |   |                  |   |      |   |  |  |       |   

The Savings Bank is subject to the Pennsylvania Mutual Thrift Institutions Tax, which is calculated at
11.5 percent of earnings.

Prior to the enactment of the Small Business Job Protection Act, the Company accumulated
approximately $3.9 million of retained earnings, which represent allocations of income to bad debt deductions for tax purposes only. Since there is no amount that represents the accumulated bad debt reserves subsequent to 1987, no provision for
federal income tax has been made for such amount. If any portion of this amount is used other than to absorb loan losses (which is not anticipated), the amount will be subject to federal income tax at the current corporate rate.



|20. | REGULATORY MATTERS
|--- | ------------------

Cash and Due From Banks

The Federal Reserve requires the Savings Bank to maintain certain reserve balances. The required reserves are computed by applying prescribed ratios to the Savings Banks average deposit transaction
account balances. As of June 30, 2012 and 2011, the Savings Bank had required reserves of $237 and $189, respectively. The required reserves are held in the form of vault cash and an interest-bearing depository balance maintained directly with
the Federal Reserve.



65



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|20. | REGULATORY MATTERS (Continued)
|--- | ------------------------------



Loans

Federal law prohibits the Company from borrowing from the Savings Bank unless the loans are secured by specific obligations. Further, such
secured loans are limited in amount to 10 percent of the Savings Banks capital surplus.

Dividend Restrictions

The Savings Bank is subject to the Pennsylvania Banking Code, which restricts the availability of surplus for dividend
purposes. At June 30, 2012, surplus funds of $3,363 were not available for dividends.



|21. | FAIR VALUE MEASUREMENTS
|--- | -----------------------

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most
advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. GAAP established a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the
following three levels:



|           |  |                                                                                                                                                                                                                                                                                                                                                                                              
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level I:   |  | Quoted prices are available in active markets for identical assets or liabilities as of the reported date.                                                                                                                                                                                                                                                                                   
|           | 
|Level II:  |  | Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and
liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.
|           | 
|Level III: |  | Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using managements best
estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.                                                                           

Assets Measured at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale

Fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in
the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities relationship to other benchmark quoted securities. The Company has no Level 1 or Level 3
investment securities. Level 2 investment securities were primarily comprised of investment-grade corporate bonds and U.S. dollar-denominated investment-grade corporate bonds of large foreign issuers.

The following tables present the assets reported on a recurring basis on the consolidated balance sheet at their fair value as of
June 30, 2012 and June 30, 2011, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement.



66



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|21. | FAIR VALUE MEASUREMENTS
|--- | -----------------------



Assets Measured at Fair Value on a Recurring Basis (Continued)



|                                            |  |                |   |  |          |   |        |           |  |   |       |  |  |   |        | 
|------------------------------------------- |  | -------------- | - |  | -------- | - | ------ | --------- |  | - | ----- |  |  | - | ------ | 
|                                            |  | June 30, 2012  |  
|                                            |  | Level I        |   |  | Level II |   |        | Level III |  |   | Total | 
|                                            |  | (in thousands) |  
|Assets Measured on a Recurring Basis:       |  |                |   |  |          |   |        |           |  |   |       |  |  |   |        | 
|Investment securities  available for sale: |  |                |   |  |          |   |        |           |  |   |       |  |  |   |        | 
|Corporate securities                        |  | $              |  |  |          | $ | 55,952 |           |  | $ |      |  |  | $ | 55,952 | 
|Foreign debt securities(1)                  |  |                |  |  |          |   | 1,668  |           |  |   |      |  |  |   | 1,668  | 
|                                            |  |                |   |  |          |   |        |           |  |   |       |  |  |   |        | 
|                                            |  | $              |  |  |          | $ | 57,620 |           |  | $ |      |  |  | $ | 57,620 | 
|                                            |  |                |   |  |          |   |        |           |  |   |       |  |  |   |        | 



|(1) | U.S. dollar-denominated investment-grade corporate bonds of large foreign issuers.
|--- | ----------------------------------------------------------------------------------



|                                            |  |                |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|------------------------------------------- |  | -------------- | - |  | -------- | - | ----- | --------- |  | - | ----- |  |  | - | ----- | 
|                                            |  | June 30, 2011  |  
|                                            |  | Level I        |   |  | Level II |   |       | Level III |  |   | Total | 
|                                            |  | (in thousands) |  
|Assets Measured on a Recurring Basis:       |  |                |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|Investment securities  available for sale: |  |                |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|Corporate securities                        |  | $              |  |  |          | $ | 1,064 |           |  | $ |      |  |  | $ | 1,064 | 
|                                            |  |                |   |  |          |   |       |           |  |   |       |  |  |   |       | 

Assets Measured at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a
nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period.

Impaired Loans

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the
loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310. The fair value of impaired loans is estimated using one of several methods, including
collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.
Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of impaired real estate related loans, the Company obtains a current external
appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information. The Company has no Level 1 or Level 2 impaired loans. Level 3 impaired loans were primarily
comprised of one single-family residential construction loan.

Real Estate Owned

Real estate acquired through foreclosure or deed in lieu of foreclosure is carried at fair value less estimated costs to sell. Any
reduction from the carrying value of the related loan to fair value at the time of acquisition is accounted for as a loan loss. Any subsequent reduction in fair market value is reflected as a valuation allowance through a charge to income. Costs of
significant property improvements are capitalized, whereas costs relating to holding and maintaining the property, are charged to expense.



67



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|21. | FAIR VALUE MEASUREMENTS
|--- | -----------------------



Assets Measured at Fair Value on a Nonrecurring Basis (Continued)



The Company has no Level 1 or Level 2 real estate owned. Level 3 real estate owned was
primarily comprised of one single-family residential property.

The following tables present the assets reported on a
non-recurring basis on the consolidated balance sheet at their fair value as of June 30, 2012 and June 30, 2011, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their
entirety based on the lowest level of input that is significant to the fair value measurement.



|                                          |  |                |   |  |          |   |   |           |  |   |       |  |  |   |     | 
|----------------------------------------- |  | -------------- | - |  | -------- | - | - | --------- |  | - | ----- |  |  | - | --- | 
|                                          |  | June 30, 2012  |  
|                                          |  | Level I        |   |  | Level II |   |   | Level III |  |   | Total | 
|                                          |  | (in thousands) |  
|Assets Measured on a Non-recurring Basis: |  |                |   |  |          |   |   |           |  |   |       |  |  |   |     | 
|Impaired loans                            |  | $              |  |  |          | $ |  |           |  | $ | 746   |  |  | $ | 746 | 
|Real estate owned                         |  |                |  |  |          |   |  |           |  |   | 235   |  |  |   | 235 | 
|                                          |  |                |   |  |          |   |   |           |  |   |       |  |  |   |     | 
|                                          |  |                |   | 
|Total                                     |  | $              |  |  |          | $ |  |           |  | $ | 981   |  |  | $ | 981 | 
|                                          |  |                |   |  |          |   |   |           |  |   |       |  |  |   |     | 



|                                          |  |                |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|----------------------------------------- |  | -------------- | - |  | -------- | - | - | --------- |  | - | ----- |  |  | - | ----- | 
|                                          |  | June 30, 2011  |  
|                                          |  | Level I        |   |  | Level II |   |   | Level III |  |   | Total | 
|                                          |  | (in thousands) |  
|                                          |  |                |   | 
|Assets Measured on a Non-recurring Basis: |  |                |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|Impaired loans                            |  | $              |  |  |          | $ |  |           |  | $ | 957   |  |  | $ | 957   | 
|Real estate owned                         |  |                |  |  |          |   |  |           |  |   | 235   |  |  |   | 235   | 
|                                          |  |                |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|                                          |  |                |   | 
|Total                                     |  | $              |  |  |          | $ |  |           |  | $ | 1,192 |  |  | $ | 1,192 | 
|                                          |  |                |   |  |          |   |   |           |  |   |       |  |  |   |       | 

Assets measured on a non-recurring basis include impaired loans and real estate owned. The Company used
appraised collateral values for the valuation technique less estimated selling costs ranging from 5% to 20%, which represents the unobservable inputs.



68



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|21. | FAIR VALUE MEASUREMENTS
|--- | -----------------------



Assets Measured at Fair Value on a Nonrecurring Basis (Continued)



The Company classifies financial instruments in Level III of the fair-value hierarchy
when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation model for Level III financial instruments typically also rely on a number of inputs that are
readily observable, either directly or indirectly. The following table represents the changes in the measured Level III fair-value category for the twelve month period ended June 30, 2012.



|                                                    |  |                                                         |      |   |               |   |      |                  |  |   |       |   |  |   |        |  
|--------------------------------------------------- |  | ------------------------------------------------------- | ---- | - | ------------- | - | ---- | ---------------- |  | - | ----- | - |  | - | ------ | -
|                                                    |  | Private-labelMortgage-backed securitiesHeld-to-maturity |      |   | ImpairedLoans |   |      | Real EstateOwned |  |   | Total |  
|                                                    |  | (in thousands)                                          |     
|                                                    |  |                                                         |      |  
|Beginning balance  July 1, 2011                    |  | $                                                       |     |   |               | $ | 957  |                  |  | $ | 235   |   |  | $ | 1,192  |  
|Total net realized/unrealized gains (losses)        |  |                                                         |      |   |               |   |      |                  |  |   |       |   |  |   |        |  
|Included in earnings                                |  |                                                         |      |   |               |   |      |                  |  |   |       |   |  |   |        |  
|Net realized losses on securities held-to-maturity  |  |                                                         | (131 | ) |               |   |     |                  |  |   |      |   |  |   | (131   | )
|Included in other comprehensive income              |  |                                                         |      |   |               |   |      |                  |  |   |       |   |  |   |        |  
|Net unrealized gains on securities held-to-maturity |  |                                                         | (66  | ) |               |   |     |                  |  |   |      |   |  |   | (66    | )
|Transfers into Level III                            |  |                                                         | 997  |   |               |   | 150  |                  |  |   | 182   |   |  |   | 1,329  |  
|Transfers out of Level III                          |  |                                                         | (728 | ) |               |   | (361 | )                |  |   | (182  | ) |  |   | (1,271 | )
|Other  principal paydowns received                 |  |                                                         | (72  | ) |               |   |     |                  |  |   |      |   |  |   | (72    | )
|                                                    |  |                                                         |      |   |               |   |      |                  |  |   |       |   |  |   |        |  
|Ending balance  June 30, 2012                      |  | $                                                       |     |   |               | $ | 746  |                  |  | $ | 235   |   |  | $ | 981    |  
|                                                    |  |                                                         |      |   |               |   |      |                  |  |   |       |   |  |   |        |  



69



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|22. | FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- | -----------------------------------

The carrying amounts and estimated fair values at June 30 are as follows:



|                                                      |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|----------------------------------------------------- |  | -------------- | ------ |  | --------- | - | ------ | ------- |  | - | ------- |  |  | ------- | ------ |  |  | - | ------ | 
|                                                      |  | June 30, 2012  |        |  |           |   |        |         |  |   |         | 
|                                                      |  | CarryingAmount |        |  | FairValue |   |        | Level 1 |  |   | Level 2 |  |  | Level 3 |       
|                                                      |  | (in thousands) |       
|                                                      |  |                |        |  |          
|FINANCIAL ASSETS                                      |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|Cash and cash equivalents                             |  | $              | 2,506  |  |           | $ | 2,506  |         |  | $ | 2,506   |  |  | $       |       |  |  | $ |       | 
|Certificates of deposit                               |  |                | 846    |  |           |   | 846    |         |  |   | 846     |  |  |         |       |  |  |   |       | 
|Investment securities  available for sale            |  |                | 57,620 |  |           |   | 57,620 |         |  |   |        |  |  |         | 57,620 |  |  |   |       | 
|Investment securities  held to maturity              |  |                | 82,400 |  |           |   | 84,059 |         |  |   |        |  |  |         | 84,059 |  |  |   |       | 
|Mortgage-backed securities  held to maturity         |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |       | 
|Agency                                                |  |                | 69,146 |  |           |   | 69,221 |         |  |   |        |  |  |         | 69,221 |  |  |   |       | 
|Private-label                                         |  |                | 9,940  |  |           |   | 10,592 |         |  |   |        |  |  |         | 1,148  |  |  |   | 9,444  | 
|Net loans receivable                                  |  |                | 39,443 |  |           |   | 43,942 |         |  |   |        |  |  |         |       |  |  |   | 43,942 | 
|Accrued interest receivable                           |  |                | 1,621  |  |           |   | 1,621  |         |  |   | 1,621   |  |  |         |       |  |  |   |       | 
|FHLB stock                                            |  |                | 7,595  |  |           |   | 7,595  |         |  |   | 7,595   |  |  |         |       |  |  |   |       | 
|                                                      |  |                |        |  |          
|FINANCIAL LIABILITIES                                 |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|Deposits                                              |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|Non-interest bearing deposits                         |  | $              | 15,642 |  |           | $ | 15,642 |         |  | $ | 15,642  |  |  | $       |       |  |  | $ |       | 
|NOW accounts                                          |  |                | 20,834 |  |           |   | 20,834 |         |  |   | 20,834  |  |  |         |       |  |  |   |       | 
|Savings Accounts                                      |  |                | 39,770 |  |           |   | 39,770 |         |  |   | 39,770  |  |  |         |       |  |  |   |       | 
|Money market accounts                                 |  |                | 23,837 |  |           |   | 23,837 |         |  |   | 23,837  |  |  |         |       |  |  |   |       | 
|Certificates of deposit                               |  |                | 41,508 |  |           |   | 41,805 |         |  |   |        |  |  |         |       |  |  |   | 41,805 | 
|Advance payments by borrowers for taxes and insurance |  |                | 582    |  |           |   | 582    |         |  |   | 582     |  |  |         |       |  |  |   |       | 
|FHLB long-term advances                               |  |                | 17,500 |  |           |   | 19,187 |         |  |   |        |  |  |         |       |  |  |   | 19,187 | 
|FHLB short-term advances                              |  |                | 79,270 |  |           |   | 79,270 |         |  |   | 79,270  |  |  |         |       |  |  |   |       | 
|Accrued interest payable                              |  |                | 257    |  |           |   | 257    |         |  |   | 257     |  |  |         |       |  |  |   |       | 



70



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|22. | FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- | -----------------------------------



|                                                      |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|----------------------------------------------------- |  | -------------- | ------ |  | --------- | - | ------ | ------- |  | - | ------- |  |  | ------- | ------ |  |  | - | ------ | 
|                                                      |  | June 30, 2011  |        |  |           |   |        |         |  |   |         | 
|                                                      |  | CarryingAmount |        |  | FairValue |   |        | Level 1 |  |   | Level 2 |  |  | Level 3 |       
|                                                      |  | (in thousands) |       
|                                                      |  |                |        |  |          
|FINANCIAL ASSETS                                      |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|Cash and cash equivalents                             |  | $              | 1,960  |  |           | $ | 1,960  |         |  | $ | 1,960   |  |  | $       |       |  |  | $ |       | 
|Certificates of deposit                               |  |                | 3,668  |  |           |   | 3,668  |         |  |   | 3,668   |  |  |         |       |  |  |   |       | 
|Investment securities  available for sale            |  |                | 1,064  |  |           |   | 1,064  |         |  |   |        |  |  |         | 1,064  |  |  |   |       | 
|Investment securities  held to maturity              |  |                | 88,374 |  |           |   | 90,974 |         |  |   |        |  |  |         | 90,974 |  |  |   |       | 
|Mortgage-backed securities  held to maturity         |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |       | 
|Agency                                                |  |                | 47,777 |  |           |   | 48,048 |         |  |   |        |  |  |         | 48,048 |  |  |   |       | 
|Private-label                                         |  |                | 22,791 |  |           |   | 23,121 |         |  |   |        |  |  |         |       |  |  |   | 23,121 | 
|Net loans receivable                                  |  |                | 49,952 |  |           |   | 53,441 |         |  |   |        |  |  |         |       |  |  |   | 53,441 | 
|Accrued interest receivable                           |  |                | 1,189  |  |           |   | 1,189  |         |  |   | 1,189   |  |  |         |       |  |  |   |       | 
|FHLB stock                                            |  |                | 9,324  |  |           |   | 9,324  |         |  |   | 9,324   |  |  |         |       |  |  |   |       | 
|                                                      |  |                |        |  |          
|FINANCIAL LIABILITIES                                 |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|Deposits                                              |  |                |        |  |           |   |        |         |  |   |         |  |  |         |        |  |  |   |        | 
|Non-interest bearing deposits                         |  | $              | 13,324 |  |           | $ | 13,324 |         |  | $ | 13,324  |  |  | $       |       |  |  | $ |       | 
|NOW accounts                                          |  |                | 19,818 |  |           |   | 19,818 |         |  |   | 19,818  |  |  |         |       |  |  |   |       | 
|Savings Accounts                                      |  |                | 37,922 |  |           |   | 37,922 |         |  |   | 37,922  |  |  |         |       |  |  |   |       | 
|Money market accounts                                 |  |                | 23,824 |  |           |   | 23,824 |         |  |   | 23,824  |  |  |         |       |  |  |   |       | 
|Certificates of deposit                               |  |                | 48,226 |  |           |   | 48,388 |         |  |   |        |  |  |         |       |  |  |   | 48,388 | 
|Advance payments by borrowers for taxes and insurance |  |                | 652    |  |           |   | 652    |         |  |   | 652     |  |  |         |       |  |  |   |       | 
|FHLB long-term advances                               |  |                | 22,500 |  |           |   | 23,762 |         |  |   |        |  |  |         |       |  |  |   | 23,762 | 
|FHLB short-term advances                              |  |                | 32,059 |  |           |   | 32,059 |         |  |   | 32,059  |  |  |         |       |  |  |   |       | 
|Accrued interest payable                              |  |                | 322    |  |           |   | 322    |         |  |   | 322     |  |  |         |       |  |  |   |       | 

Financial instruments are defined as cash, evidence of an ownership interest in an entity, or a contract
which creates an obligation or right to receive or deliver cash or another financial instrument from or to a second entity on potentially favorable or unfavorable terms.

Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. If a quoted market
price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.

If no readily available market exists, the fair value estimates for financial instruments should be based upon managements judgment regarding current economic conditions, interest rate risk,
expected cash flows, future estimated losses, and other factors, as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates, which are
inherently uncertain, the resulting estimated values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated values are based may have a
significant impact on the resulting estimated values.

As certain assets and liabilities, such as deferred tax assets, premises
and equipment, and many other operational elements of the Company, are not considered financial instruments, but have value, this estimated fair value of financial instruments would not represent the full market value of the Company.



71



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|22. | VALUE OF FINANCIAL INSTRUMENTS (Continued)
|--- | ------------------------------------------



Estimated fair values have been determined by the Company using the best available data,
as generally provided in internal Savings Bank regulatory, or third party valuation reports, using an estimation methodology suitable for each category of financial instruments. The estimation methodologies used are as follows:

Cash and Cash Equivalents, Certificates of Deposit, Accrued Interest Receivable and Payable, and FHLB Short-term Advances

The fair value approximates the current carrying value.

Investment Securities, Mortgage-Backed Securities, and FHLB Stock

The fair value of investment and mortgage-backed securities is equal to the available quoted market price. If no quoted market price is
available, fair value is estimated using the quoted market price for similar securities. For discussion of valuation of private-label CMOs, see Note 6 Unrealized Losses on Securities. Since the FHLB stock is not actively traded on a
secondary market and held exclusively by member financial institutions, the estimated fair market value approximates the carrying amount.

Net Loans Receivable and Deposits

Fair value for consumer mortgage
loans is estimated using market quotes or discounting contractual cash flows for prepayment estimates. Discount rates were obtained from secondary market sources, adjusted to reflect differences in servicing, credit, and other characteristics.

The estimated fair values for consumer, fixed-rate commercial, and multi-family real estate loans are estimated by discounting
contractual cash flows for prepayment estimates. Discount rates are based upon rates generally charged for such loans with similar credit characteristics.

The estimated fair value for nonperforming loans is the appraised value of the underlying collateral adjusted for estimated credit risk.

Demand, savings, and money market deposit accounts are reported at book value. The fair value of certificates of deposit is based upon the
discounted value of the contractual cash flows. The discount rate is estimated using average market rates for deposits with similar average terms.

FHLB Long-term Advances

The fair values of fixed-rate advances are
estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount on variable rate advances approximates their fair value.

Commitments to Extend Credit

These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized
commitment, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, is not considered material for
disclosure.



72



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|23. | PARENT COMPANY
|--- | --------------

Condensed
financial information of WVS Financial Corp. is as follows:

CONDENSED BALANCE SHEET

|                                               |  |          |        |  |      |   |        | 
|---------------------------------------------- |  | -------- | ------ |  | ---- | - | ------ | 
|                                               |  | June 30, |       
|                                               |  | 2012     |        |  | 2011 |  
|ASSETS                                         |  |          |        |  |      |   |        | 
|Interest-earning deposits with subsidiary bank |  | $        | 1,341  |  |      | $ | 1,085  | 
|Investment in subsidiary bank                  |  |          | 29,005 |  |      |   | 27,751 | 
|Other assets                                   |  |          | 73     |  |      |   | 48     | 
|                                               |  |          |        |  |      |   |        | 
|                                               |  |         
|TOTAL ASSETS                                   |  | $        | 30,419 |  |      | $ | 28,884 | 
|                                               |  |          |        |  |      |   |        | 
|                                               |  |         
|LIABILITIES AND STOCKHOLDERS EQUITY           |  |          |        |  |      |   |        | 
|Other liabilities                              |  | $        | 6      |  |      | $ | 6      | 
|Stockholders equity                           |  |          | 30,413 |  |      |   | 28,878 | 
|                                               |  |          |        |  |      |   |        | 
|                                               |  |         
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $        | 30,419 |  |      | $ | 28,884 | 
|                                               |  |          |        |  |      |   |        | 

CONDENSED STATEMENT OF INCOME



|                                                                    |  |                     |       |   |      |   |       |      |  |   |        |  
|------------------------------------------------------------------- |  | ------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                    |  | Year Ended June 30, |      
|                                                                    |  | 2012                |       |   | 2011 |   |       | 2010 | 
|INCOME                                                              |  |                     |       |   |      |   |       |      |  |   |        |  
|Investment and mortgage-backed securities                           |  | $                   | 1     |   |      | $ |      |      |  | $ |       |  
|Certificates of deposit                                             |  |                     |      |   |      |   |      |      |  |   |       |  
|Dividend from subsidiary                                            |  |                     | 637   |   |      |   |      |      |  |   | 1,940  |  
|Interest-earning deposits with subsidiary bank                      |  |                     | 2     |   |      |   | 4     |      |  |   | 5      |  
|                                                                    |  |                     |       |   |      |   |       |      |  |   |        |  
|                                                                    |  |                     |      
|Total income                                                        |  |                     | 640   |   |      |   | 4     |      |  |   | 1,945  |  
|                                                                    |  |                     |       |   |      |   |       |      |  |   |        |  
|                                                                    |  |                     |      
|OTHER OPERATING EXPENSE                                             |  |                     | 102   |   |      |   | 100   |      |  |   | 99     |  
|                                                                    |  |                     |       |   |      |   |       |      |  |   |        |  
|                                                                    |  |                     |      
|Income (loss) before equity in undistributed earnings of subsidiary |  |                     | 538   |   |      |   | (96   | )    |  |   | 1,846  |  
|Equity in undistributed earnings of subsidiary                      |  |                     | 812   |   |      |   | 1,327 |      |  |   | (1,498 | )
|                                                                    |  |                     |       |   |      |   |       |      |  |   |        |  
|                                                                    |  |                     |      
|Income before income taxes                                          |  |                     | 1,351 |   |      |   | 1,231 |      |  |   | 348    |  
|Income tax expense (benefit)                                        |  |                     | (51   | ) |      |   | 5     |      |  |   | (24    | )
|                                                                    |  |                     |       |   |      |   |       |      |  |   |        |  
|                                                                    |  |                     |      
|NET INCOME                                                          |  | $                   | 1,402 |   |      | $ | 1,226 |      |  | $ | 372    |  
|                                                                    |  |                     |       |   |      |   |       |      |  |   |        |  



73



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|23. | PARENT COMPANY (Continued)
|--- | --------------------------



|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|-------------------------------------------------------------------------------------------- |  | ------------------- | ----- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                             |  | Year Ended June 30, |      
|                                                                                             |  | 2012                |       |   | 2011 |   |        | 2010 | 
|OPERATING ACTIVITIES                                                                         |  |                     |       |   |      |   |        |      |  |   |        |  
|Net income                                                                                   |  | $                   | 1,402 |   |      | $ | 1,226  |      |  | $ | 372    |  
|Adjustments to reconcile net income to net cash provided by (used for) operating activities: |  |                     |       |   |      |   |        |      |  |   |        |  
|Equity in undistributed earnings of subsidiary                                               |  |                     | (812  | ) |      |   | (1,327 | )    |  |   | 1,498  |  
|Other, net                                                                                   |  |                     | (5    | ) |      |   | 32     |      |  |   | 5      |  
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|Net cash provided by (used for) operating activities                                         |  |                     | 585   |   |      |   | (69    | )    |  |   | 1,875  |  
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|                                                                                             |  |                     |      
|INVESTING ACTIVITIES                                                                         |  |                     |       |   |      |   |        |      |  |   |        |  
|Available for sale:                                                                          |  |                     |       |   |      |   |        |      |  |   |        |  
|Purchases of investment and mortgage-backed securities                                       |  |                     | (999  | ) |      |   |       |      |  |   |       |  
|Proceeds from repayments of investment and mortgage-backed securities                        |  |                     | 1,000 |   |      |   |       |      |  |   |       |  
|Held to maturity:                                                                            |  |                     |       |   |      |   |        |      |  |   |        |  
|Purchases of investment and mortgage-backed securities                                       |  |                     |      |   |      |   |       |      |  |   |       |  
|Proceeds from repayments of investment and mortgage-backed securities                        |  |                     |      |   |      |   |       |      |  |   |       |  
|Purchases of certificates of deposit                                                         |  |                     | (349  | ) |      |   |       |      |  |   |       |  
|Maturities of certificates of deposit                                                        |  |                     | 349   |   |      |   |       |      |  |   |       |  
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|Net cash provided by investing activities                                                    |  |                     | 1     |   |      |   |       |      |  |   |       |  
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|                                                                                             |  |                     |      
|FINANCING ACTIVITIES                                                                         |  |                     |       |   |      |   |        |      |  |   |        |  
|Cash dividends paid                                                                          |  |                     | (330  | ) |      |   | (576   | )    |  |   | (1,322 | )
|Purchases of treasury stock                                                                  |  |                     |      |   |      |   |       |      |  |   | (159   | )
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|Net cash used for financing activities                                                       |  |                     | (330  | ) |      |   | (576   | )    |  |   | (1,481 | )
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|                                                                                             |  |                     |      
|Increase (decrease) in cash and cash equivalents                                             |  |                     | 256   |   |      |   | (645   | )    |  |   | 394    |  
|                                                                                             |  |                     |      
|CASH AND CASH EQUIVALENTS BEGINNING OF YEAR                                                  |  |                     | 1,085 |   |      |   | 1,730  |      |  |   | 1,336  |  
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  
|                                                                                             |  |                     |      
|CASH AND CASH EQUIVALENTS END OF YEAR                                                        |  | $                   | 1,341 |   |      | $ | 1,085  |      |  | $ | 1,730  |  
|                                                                                             |  |                     |       |   |      |   |        |      |  |   |        |  



74



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|24. | SELECTED QUARTERLY FINANCIAL DATA (unaudited)
|--- | ---------------------------------------------



|                                                                  |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|----------------------------------------------------------------- |  | ------------------ | --------- | - | ------------ | - | --------- | --------- |  | - | --------- | - |  | - | --------- | -
|                                                                  |  | Three Months Ended |          
|                                                                  |  | September2011      |           |   | December2011 |   |           | March2012 |  |   | June2012  |  
|                                                                  |  |                    |           |  
|Total interest and dividend income                                |  | $                  | 1,867     |   |              | $ | 1,643     |           |  | $ | 1,748     |   |  | $ | 1,795     |  
|Total interest expense                                            |  |                    | 407       |   |              |   | 369       |           |  |   | 385       |   |  |   | 383       |  
|                                                                  |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|                                                                  |  |                    |           |  
|Net interest income                                               |  |                    | 1,460     |   |              |   | 1,274     |           |  |   | 1,363     |   |  |   | 1,412     |  
|Provision for (recovery of) loan losses                           |  |                    | (19       | ) |              |   | (20       | )         |  |   | (11       | ) |  |   | (54       | )
|                                                                  |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|                                                                  |  |                    |           |  
|Net interest income after provision for (recovery of) loan losses |  |                    | 1,479     |   |              |   | 1,294     |           |  |   | 1,374     |   |  |   | 1,466     |  
|                                                                  |  |                    |           |  
|Total noninterest income                                          |  |                    | 101       |   |              |   | 18        |           |  |   | 101       |   |  |   | 129       |  
|Total noninterest expense                                         |  |                    | 977       |   |              |   | 882       |           |  |   | 878       |   |  |   | 921       |  
|                                                                  |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|                                                                  |  |                    |           |  
|Income before income taxes                                        |  |                    | 603       |   |              |   | 430       |           |  |   | 597       |   |  |   | 674       |  
|Income taxes                                                      |  |                    | 193       |   |              |   | 226       |           |  |   | 215       |   |  |   | 268       |  
|                                                                  |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|                                                                  |  |                    |           |  
|Net income                                                        |  | $                  | 410       |   |              | $ | 204       |           |  | $ | 382       |   |  | $ | 406       |  
|                                                                  |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|                                                                  |  |                    |           |  
|Per share data:                                                   |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|Net income                                                        |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|Basic                                                             |  | $                  | 0.20      |   |              | $ | 0.10      |           |  | $ | 0.19      |   |  | $ | 0.19      |  
|Diluted                                                           |  |                    | 0.20      |   |              |   | 0.10      |           |  |   | 0.19      |   |  |   | 0.19      |  
|Average shares outstanding                                        |  |                    |           |   |              |   |           |           |  |   |           |   |  |   |           |  
|Basic                                                             |  |                    | 2,057,930 |   |              |   | 2,057,930 |           |  |   | 2,057,930 |   |  |   | 2,057,930 |  
|Diluted                                                           |  |                    | 2,057,930 |   |              |   | 2,057,930 |           |  |   | 2,057,930 |   |  |   | 2,057,930 |  



75



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except per share data)



|24. | SELECTED QUARTERLY FINANCIAL DATA (unaudited) (Continued)
|--- | ---------------------------------------------------------



|                                                                  |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|----------------------------------------------------------------- |  | ------------------ | --------- |  | ------------ | - | --------- | --------- |  | - | --------- |  |  | - | --------- | -
|                                                                  |  | Three Months Ended |          
|                                                                  |  | September2010      |           |  | December2010 |   |           | March2011 |  |   | June2011  | 
|                                                                  |  |                    |           | 
|Total interest and dividend income                                |  | $                  | 2,621     |  |              | $ | 2,292     |           |  | $ | 2,166     |  |  | $ | 2,146     |  
|Total interest expense                                            |  |                    | 1,743     |  |              |   | 1,076     |           |  |   | 810       |  |  |   | 591       |  
|                                                                  |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|                                                                  |  |                    |           | 
|Net interest income                                               |  |                    | 878       |  |              |   | 1,216     |           |  |   | 1,356     |  |  |   | 1,555     |  
|Provision for (recovery of) loan losses                           |  |                    | 9         |  |              |   | 7         |           |  |   | 2         |  |  |   | (33       | )
|                                                                  |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|                                                                  |  |                    |           | 
|Net interest income after provision for (recovery of) loan losses |  |                    | 869       |  |              |   | 1,209     |           |  |   | 1,354     |  |  |   | 1,588     |  
|                                                                  |  |                    |           | 
|Total noninterest income                                          |  |                    | 125       |  |              |   | 154       |           |  |   | 116       |  |  |   | 119       |  
|Total noninterest expense                                         |  |                    | 905       |  |              |   | 1,040     |           |  |   | 927       |  |  |   | 974       |  
|                                                                  |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|                                                                  |  |                    |           | 
|Income before income taxes                                        |  |                    | 89        |  |              |   | 323       |           |  |   | 543       |  |  |   | 733       |  
|Income taxes                                                      |  |                    | 30        |  |              |   | 108       |           |  |   | 190       |  |  |   | 134       |  
|                                                                  |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|                                                                  |  |                    |           | 
|Net income                                                        |  | $                  | 59        |  |              | $ | 215       |           |  | $ | 353       |  |  | $ | 599       |  
|                                                                  |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|                                                                  |  |                    |           | 
|Per share data:                                                   |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|Net income                                                        |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|Basic                                                             |  | $                  | 0.03      |  |              | $ | 0.10      |           |  | $ | 0.17      |  |  | $ | 0.30      |  
|Diluted                                                           |  |                    | 0.03      |  |              |   | 0.10      |           |  |   | 0.17      |  |  |   | 0.30      |  
|Average shares outstanding                                        |  |                    |           |  |              |   |           |           |  |   |           |  |  |   |           |  
|Basic                                                             |  |                    | 2,057,930 |  |              |   | 2,057,930 |           |  |   | 2,057,930 |  |  |   | 2,057,930 |  
|Diluted                                                           |  |                    | 2,057,930 |  |              |   | 2,057,930 |           |  |   | 2,057,930 |  |  |   | 2,057,930 |  



76



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COMMON STOCK MARKET PRICE AND DIVIDEND INFORMATION

WVS Financial Corp.s common stock is traded on the Nasdaq Global MarketSMunder the symbol WVFC.

The following table sets forth the high and low market prices of a share of common stock, and cash dividends declared per share, for the
periods indicated.



|               |  |              |       |  |                         |   |      |  |  |   |      | 
|-------------- |  | ------------ | ----- |  | ----------------------- | - | ---- |  |  | - | ---- | 
|               |  | Market Price |       |  | Cash 
DividendsDeclared |  
|Quarter Ended  |  | High         |       |  | Low                     |   |     
|June 2012      |  | $            | 8.42  |  |                         | $ | 6.63 |  |  | $ | 0.04 | 
|March 2012     |  |              | 9.00  |  |                         |   | 8.10 |  |  |   | 0.04 | 
|December 2011  |  |              | 10.51 |  |                         |   | 8.03 |  |  |   | 0.04 | 
|September 2011 |  |              | 9.95  |  |                         |   | 8.37 |  |  |   | 0.04 | 
|               |  |              |      
|June 2011      |  | $            | 9.44  |  |                         | $ | 8.65 |  |  | $ | 0.04 | 
|March 2011     |  |              | 9.31  |  |                         |   | 8.55 |  |  |   | 0.04 | 
|December 2010  |  |              | 11.00 |  |                         |   | 8.66 |  |  |   | 0.04 | 
|September 2010 |  |              | 13.17 |  |                         |   | 8.31 |  |  |   | 0.16 | 

There were six Nasdaq Market Makers in the Companys common stock as of June 30, 2012: Knight
Execution & Clearing Services, LLC; UBS Securities LLC; Stifel Nicolaus & Co.; Credit Suisse Securities USA; Automated Trading Desk; Citadel Deriviatives Group LLC.

According to the records of the Companys transfer agent, there were approximately 546 shareholders of record at August 31,
2012. This does not include any persons or entities who hold their stock in nominee or street name through various brokerage firms.

Dividends are subject to determination and declaration by the Board of Directors, which takes into account the Companys financial condition, statutory and regulatory restrictions, general economic
condition and other factors.



77



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WVS FINANCIAL CORP.

CORPORATE INFORMATION



CORPORATE OFFICES

WVS FINANCIAL CORP.WEST VIEW SAVINGS BANK

9001 Perry Highway Pittsburgh, PA 15237

412-364-1911



COMMON STOCK The common stock of WVS Financial Corp. is traded on The
Nasdaq Global MarketSMunder the symbol WVFC. TRANSFER AGENT & REGISTRAR Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 1-800-368-5948 CORPORATE SECRETARY AND INVESTOR RELATIONS Jonathan D. Hoover 412-364-1911 SPECIAL COUNSEL Elias, Matz, Tiernan & Herrick L.L.P. Washington, DC WEST VIEW SAVINGS BANK 9001 Perry Highway Pittsburgh, PA 15237 412-364-1911 WEST VIEW OFFICE 456 Perry Highway 412-931-2171 CRANBERRY OFFICE 20531 Perry Highway 412-931-6080/724-776-3480 FRANKLIN PARK OFFICE 2566 Brandt School Road 724-935-7100 BELLEVUE OFFICE 572 Lincoln Avenue 412-761-5595 SHERWOOD OAKS OFFICE Serving Sherwood Oaks Cranberry Twp. LENDING DIVISION 2566 Brandt School Road 724-935-7400


BOARD OF DIRECTORS David L. Aeberli Funeral Director McDonald-Aeberli Funeral Home, Inc. David J. Bursic President and Chief Executive Officer WVS Financial Corp. and West View Savings Bank John W. Grace President G & R Investment Consultants, Inc. Jonathan D. Hoover Senior Vice President WVS Financial Corp. and West View Savings Bank Lawrence M. Lehman Sole Proprietor Newton-Lehman Insurance Agency Margaret VonDerau Former Senior Vice President and Corporate Secretary WVS Financial Corp. and West View Savings Bank Donald E. Hook Director Emeritus EXECUTIVE OFFICERS David L. Aeberli Chairman David J. Bursic President and Chief Executive Officer Jonathan D. Hoover Senior Vice President Bernard P. Lefke Vice President of Savings Keith A. Simpson Vice President, Treasurer and Chief Accounting Officer






The members of the
Board of Directors serve in that capacity for both the Company and the Savings Bank.