UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended: June 30, 2006
                                       OR

          [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
             For the transition period from __________ to __________

                          Commission File No.: 0-22444

                               WVS Financial Corp.
                    -----------------------------------------
             (Exact name of registrant as specified in its charter)

           Pennsylvania                                      25-1710500
---------------------------------                      ------------------------
   (State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                      Identification Number)

        9001 Perry Highway
     Pittsburgh, Pennsylvania                                  15237
---------------------------------                      ------------------------
      (Address of Principal                                  (Zip Code)
        Executive Offices)

       Registrant's telephone number, including area code: (412) 364-1911

           Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $.01 per share            NASDAQ Global Market
--------------------------------------            --------------------
          (Title of Class)                (Name of exchange on which registered)

           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                                      ----

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes[_] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes[_] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  report(s),  and (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):
Large accelerated filer [_]    Accelerated filer[_]    Non-accelerated filer [X]

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

As of December 31, 2005, the aggregate  value of the 1,929,265  shares of Common
Stock of the  registrant  issued and  outstanding  on such date,  which excludes
422,803  shares held by all directors and officers of the registrant as a group,
was  approximately  $31.3 million.  This figure is based on the last known trade
price of $16.21 per share of the registrant's Common Stock on December 31, 2005.

Number of shares of Common Stock outstanding as of September 25, 2006: 2,320,347

                       DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents incorporated by reference and the Part of
the Form 10-K into which the document is incorporated:

(1) Portions of the Annual Report to Stockholders for the fiscal year ended June
30, 2006 are  incorporated  into Part II.
(2) Portions of the  definitive  proxy  statement for the 2006 Annual Meeting of
Stockholders are incorporated into Part III.

<PAGE>

                           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:

         o  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;

         o  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 and lease losses or a reduced  demand for
            credit or fee-based products and services;

         o  changes in the interest rate  environment  could reduce net interest
            income and could increase credit losses;

         o  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;

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

         o  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;

         o  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;

         o  acquisitions  may result in  one-time  changes  to  income,  may not
            produce  revenue  enhancements  or cost  savings at levels or within
            time  frames  originally  anticipated  and may result in  unforeseen
            integration difficulties; and

         o  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 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.

                                       2
<PAGE>

PART I.

Item 1.  Business.
-------  ---------

         WVS Financial  Corp.  ("WVS" or 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,  SAIF-insured stock
savings bank conducting  business from six offices in the North Hills suburbs of
Pittsburgh.  The  Savings  Bank  converted  to the stock  form of  ownership  in
November 1993. The Savings Bank had no subsidiaries at June 30, 2006.


Lending Activities

         General.  At June  30,  2006,  the  Company's  net  portfolio  of loans
receivable totaled $55.7 million, as compared to $60.2 million at June 30, 2005.
Net loans receivable  comprised 13.2% of the Company's total assets and 36.7% of
total  deposits at June 30, 2006, as compared to 14.3% and 36.6%,  respectively,
at June 30, 2005. The principal  categories of loans in the Company's  portfolio
are  single-family  and multi-family  residential real estate loans,  commercial
real estate loans,  construction  loans,  consumer loans,  land  acquisition and
development  loans and  commercial  loans.  Substantially  all of the  Company's
mortgage loan portfolio consists of conventional mortgage loans, which are loans
that are  neither  insured by the  Federal  Housing  Administration  ("FHA") nor
partially guaranteed by the Department of Veterans Affairs ("VA"). Historically,
the  Company's  lending  activities  have  been  concentrated  in  single-family
residential and land  development and  construction  loans secured by properties
located in its primary market area of northern Allegheny County, southern Butler
County and eastern Beaver County, Pennsylvania.

         On  occasion,  the  Company  has also  purchased  whole  loans and loan
participations  secured by properties located outside of its primary market area
but predominantly in Pennsylvania.  The Company believes that  substantially all
of its  mortgage  loans are  secured  by  properties  located  in  Pennsylvania.
Moreover,  substantially  all  of  the  Company's  non-mortgage  loan  portfolio
consists of loans made to  residents  and  businesses  located in the  Company's
primary market area.

         Federal regulations impose limitations on the aggregate amount of loans
that a  savings  institution  can make to any one  borrower,  including  related
entities.  The permissible amount of loans-to-one  borrower follows the national
bank standard for all loans made by savings  institutions,  which generally does
not  permit  loans-to-one  borrower  to exceed  15% of  unimpaired  capital  and
surplus. Loans in an amount equal to an additional 10% of unimpaired capital and
surplus also may be made to a borrower if the loans are fully secured by readily
marketable   securities.   At  June  30,  2006,  the  Savings  Bank's  limit  on
loans-to-one  borrower was  approximately  $4.2 million.  The Company's  general
policy has been to limit loans-to-one  borrower,  including related entities, to
$2.0 million although this general limit may be exceeded based on the merit of a
particular  credit. At June 30, 2006, the Company's five largest loans or groups
of loans-to-one borrower,  including related entities,  ranged from an aggregate
of $1.6  million to $2.8  million,  and are  secured  primarily  by real  estate
located in the Company's primary market area.

                                       3
<PAGE>

         Loan  Portfolio  Composition.   The  following  table  sets  forth  the
composition of the Company's net loans  receivable  portfolio by type of loan at
the dates indicated.


<PAGE>
<TABLE>
<CAPTION>

                                                                 At June 30,
                     -----------------------------------------------------------------------------------------------------
                           2006                 2005                 2004                 2003                 2002
                    ------------------   ------------------   ------------------   ------------------   ------------------
                     Amount        %      Amount        %      Amount        %      Amount        %      Amount        %
                     ------        -      ------        -      ------        -      ------        -      ------        -
<S>                  <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>
                                                           (Dollars in Thousands)
Real estate loans:
Single-family       $17,702      26.72%  $20,680      27.86%  $25,825      32.52%  $43,255      40.91%  $89,889      53.69%
Multi-family          4,339       6.55     4,960       6.68     4,761       5.99     5,196       4.92     6,173       3.69
Commercial            7,574      11.43     8,561      11.53     9,950      12.53    17,949      16.98    25,439      15.19
Construction         20,964      31.64    22,065      29.72    18,070      22.76    16,942      16.03    19,965      11.92
Land acquisition
 and development      3,221       4.86     5,884       7.93     7,947      10.01     7,437       7.03     6,691       4.00
                    -------    -------   -------    -------   -------    -------   -------    -------   -------    -------
Total real estate
  Loans              53,800      81.20    62,150      83.72    66,553      83.81    90,779      85.87   148,157      88.49
                    -------    -------   -------    -------   -------    -------   -------    -------   -------    -------
Consumer loans:
Home equity           9,444      14.26    10,082      13.58    11,018      13.88    12,374      11.70    16,319       9.75
Education                --       0.00        --       0.00        --       0.00        --       0.00         1       0.00
Other                   962       1.45     1,089       1.47       870       1.09     1,069       1.01     1,514       0.90
                    -------    -------   -------    -------   -------    -------   -------    -------   -------    -------
Total consumer
  Loans              10,406      15.71    11,171      15.05    11,888      14.97    13,443      12.71    17,834      10.65
                    -------    -------   -------    -------   -------    -------   -------    -------   -------    -------
Commercial loans      2,050       3.09       915       1.23       968       1.22     1,499       1.42     1,447       0.86
                    -------    -------   -------    -------   -------    -------   -------    -------   -------    -------
Commercial lease
  Financings             --       0.00        --       0.00        --       0.00        --       0.00        --       0.00
                    -------    -------   -------    -------   -------    -------   -------    -------   -------    -------
                     66,256     100.00%   74,236     100.00%   79,409     100.00%  105,721     100.00%  167,438     100.00%
                    -------    =======   -------    =======   -------    =======   -------    =======   -------    =======
Less:
Undisbursed loan
  Proceeds           (9,512)             (12,882)              (9,956)             (11,348)             (11,311)
Net deferred loan
  Origination fees      (85)                 (82)                (115)                (174)                (464)
Allowance for loan
  Losses               (957)              (1,121)              (1,370)              (2,530)              (2,758)
                    -------              -------              -------              -------              -------
Net loans
  Receivable        $55,702              $60,151              $67,968              $91,669              $152,905
                    =======              =======              =======              =======              ========
</TABLE>

         Contractual  Maturities.  The following  table sets forth the scheduled
contractual maturities of the Company's loans and mortgage-backed  securities at
June 30, 2006.  The amounts  shown for each period do not take into account loan
prepayments and normal amortization of the Company's loan portfolio.

<TABLE>
<CAPTION>

                                                 Real Estate Loans
                           -------------------------------------------------------------
                                                                                Land       Consumer
                                                                             acquisition   loans and     Mortgage
                            Single-     Multi-                                   and      commercial     -backed
                            family     family       Commercial  Construction  development    loans      securities      Total
                            ------     ------       ----------  ------------  -----------    -----      ----------      -----
<S>                          <C>           <C>          <C>            <C>           <C>       <C>        <C>          <C>
                                                            (Dollars in Thousands)
Amounts due in:
  One year or less         $     32     $     --     $    235     $ 20,507     $  2,652     $  1,485     $     --     $ 24,911
  After one year through
     five years               1,273           45        1,111          347          491        5,654           --        8,921
  After five years           16,397        4,294        6,228          110           78        5,317      155,753      188,177
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total(1)              $ 17,702     $  4,339     $  7,574     $ 20,964     $  3,221     $ 12,456     $155,753     $222,009
                           ========     ========     ========     ========     ========     ========     ========     ========

Interest rate terms on amounts due after one year:
  Fixed                    $ 15,450     $     28     $  2,688     $    457     $    378     $  6,861     $  2,292     $ 28,154
  Adjustable                  2,220        4,311        4,651           --          191        4,110      153,461      168,944
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total                 $ 17,670     $  4,339     $  7,339     $    457     $    569     $ 10,971     $155,753     $197,098
                           ========     ========     ========     ========     ========     ========     ========     ========
</TABLE>

--------------
(1)      Does  not  include  adjustments  relating  to  loans  in  process,  the
         allowance for loan losses,  accrued  interest,  deferred fee income and
         unearned discounts.

                                       4
<PAGE>

         Scheduled  contractual  principal  repayments do not reflect the actual
maturities of loans. The average  maturity of loans is  substantially  less than
their average contractual terms because of prepayments and due-on-sale  clauses.
The average life of mortgage loans tends to increase when current  mortgage loan
rates are  substantially  higher  than  rates on  existing  mortgage  loans and,
conversely,  decrease when rates on existing mortgages are substantially  higher
than current  mortgage loan rates (due to  refinancings of  adjustable-rate  and
fixed-rate loans at lower rates).

         The Company has from time to time renewed  commercial real estate loans
and speculative  construction  (single-family) loans due to slower than expected
sales of the underlying  collateral.  Commercial real estate loans are generally
renewed at a contract rate that is the greater of the market rate at the time of
the  renewal  or the  original  contract  rate.  Loans  secured  by  speculative
single-family  construction  or  developed  lots are  generally  renewed  for an
additional  six  month  term  with  monthly  payments  of  interest.  Subsequent
renewals, if necessary,  are generally granted for an additional six month term;
principal  amortization  may also be required.  Land acquisition and development
loans are  generally  renewed for an  additional  twelve month term with monthly
payments of interest.

         At June 30, 2006, the Company had approximately $4.1 million of renewed
commercial  real estate and  construction  loans.  The $4.1 million in aggregate
disbursed  principal  that has  been  renewed  is  comprised  of:  single-family
speculative  construction  loans totaling $3.3 million and land  acquisition and
development  loans  totaling  $807  thousand.   Management   believes  that  the
previously discussed whole loans will self-liquidate during the normal course of
business,  though some additional  rollovers may be necessary.  All of the loans
that have been rolled over are in compliance with all loan terms,  including the
receipt of all required payments, and are considered performing loans.

         Origination,  Purchase and Sale of Loans.  Applications for residential
real  estate  loans and  consumer  loans are  accepted  at all of the  Company's
offices.  Applications  for  commercial  real estate loans are taken only at the
Company's Franklin Park office. Loan applications are primarily  attributable to
existing  customers,  builders,  walk-in  customers and referrals from both real
estate loan brokers and existing customers.

         All processing and underwriting of real estate and commercial  business
loans is performed  solely at the  Company's  loan division at the Franklin Park
office.  The Company believes this  centralized  approach to approving such loan
applications  allows it to process and approve such applications faster and with
greater  efficiency.  The Company also believes that this approach increases its
ability to service the loans.  The  Savings  Bank's  Director of Retail  Lending
authority  ranges from $5 thousand  (unsecured  loans) to $300  thousand  (loans
secured by first  mortgage  liens).  With the  approval  of the  Savings  Bank's
President,   the  individual   lending   authorities  range  from  $25  thousand
(unsecured),  $500 thousand (loans secured by non-real estate collateral),  $750
thousand (first and second mortgages) and $2 million on secured builder lines of
credit.  All loan applications are required to be ratified by the Company's Loan
Committee,  comprised of both outside  directors and management,  which meets at
least monthly.

         Historically, the Company has originated substantially all of the loans
retained in its  portfolio.  Substantially  all of the  residential  real estate
loans  originated  by  the  Company  have  been  under  terms,   conditions  and
documentation  which permit their sale to the Fannie Mae and other  investors in
the secondary market. Although West View has not been a frequent seller of loans
in the secondary market,  the Savings Bank is on the Fannie Mae approved list of
sellers/servicers.  The Company has held most of the loans it  originates in its
own portfolio until maturity, due, in part, to competitive pricing conditions in
the marketplace for origination by nationwide lenders and portfolio lenders.

         The Company has not been an aggressive purchaser of loans. However, the
Company may purchase whole loans or loan participations in those instances where
demand for new loan originations in the Company's market area is insufficient or
to increase the yield  earned on the loan  portfolio.  Such loans are  generally
presented  to  the  Company   from   contacts   primarily  at  other   financial
institutions,  particularly  those which have  previously done business with the
Company.  At June 30, 2006,  $763  thousand or 1.4% of the  Company's  net loans
receivable  consisted  of  single-family  mortgage  whole loans  purchased  from
another financial institution.

                                       5
<PAGE>

         The  Company  requires  that all  purchased  loans be  underwritten  in
accordance with its underwriting  guidelines and standards.  The Company reviews
loans, particularly scrutinizing the borrower's ability to repay the obligation,
the  appraisal  and  the  loan-to-value  ratio.   Servicing  of  loans  or  loan
participations  purchased  by the Company  generally is performed by the seller,
with a portion of the interest being paid by the borrower retained by the seller
to  cover  servicing  costs.  At June 30,  2006,  $763  thousand  or 1.4% of the
Company's net loans receivable were being serviced for the Company by others.

         The following  table shows  origination,  purchase and sale activity of
the Company  with  respect to loans on a  consolidated  basis during the periods
indicated.

                                               At or For the Year Ended June 30,
                                               ---------------------------------
                                                 2006        2005         2004
                                                 ----        ----         ----
                                                     (Dollars in Thousands)

Net loans receivable beginning balance         $ 60,151    $ 67,968    $ 91,669
Real estate loan originations
   Single-family(1)                               1,349         890       2,202
   Multi-family(2)                                   --         495       1,319
   Commercial                                       325       2,002       1,433
   Construction                                   8,932      12,307      10,730
   Land acquisition and development                 299         353         982
                                               --------    --------    --------
      Total real estate loan originations        10,905      16,047      16,666
                                               --------    --------    --------

Home equity                                       2,088       1,680       3,186
Education                                            --          --          --
Commercial                                          480         100          --
Other                                               179         303         258
                                               --------    --------    --------
      Total loan originations                    13,652      18,130      20,110
                                               --------    --------    --------
Disbursements against available credit lines:
   Home equity                                    2,554       2,848       3,215
   Other                                              9           6           7
   Commercial                                     1,638         725         459
Purchase of whole loans and participations           --          --         388
                                               --------    --------    --------
     Total originations and purchases            17,853      21,709      24,179
                                               --------    --------    --------
Less:
   Loan principal repayments                     25,527      28,378      47,376
   Sales of whole loans (3)                          --           4          17
   Sales of participation interests (4)              --          --         979
   Transferred to real estate owned                  10          70         550
   Change in loans in process                    (3,074)      1,355         179
   Other, net(5)                                   (161)       (281)     (1,221)
                                               --------    --------    --------
     Net decrease                              $ (4,449)   $ (7,817)   $(23,701)
                                               --------    --------    --------

Net loans receivable ending balance            $ 55,702    $ 60,151    $ 67,968
                                               ========    ========    ========
--------------
(1) Consists of loans secured by one-to-four family properties.
(2) Consists of loans secured by five or more family properties.
(3) Loans sold included servicing rights.
(4) As of June 30, 2006,  loans serviced for others totaled  approximately  $767
thousand.
(5) Includes reductions for net deferred loan origination fees and the allowance
for loan losses.

                                       6
<PAGE>

         Real Estate Lending Standards.  All financial institutions are required
to adopt and maintain  comprehensive  written real estate lending  policies that
are consistent  with safe and sound banking  practices.  These lending  policies
must reflect consideration of the Interagency Guidelines for Real Estate Lending
Policies  ("Guidelines")  adopted by the  federal  banking  agencies in December
1992.  The Guidelines set forth uniform  regulations  prescribing  standards for
real estate  lending.  Real estate  lending is defined as an extension of credit
secured  by  liens on  interests  in real  estate  or made  for the  purpose  of
financing the  construction of a building or other  improvements to real estate,
regardless of whether a lien has been taken on the property.

         The policies must address certain lending  considerations  set forth in
the Guidelines,  including  loan-to-value  ("LTV") limits,  loan  administration
procedures,  underwriting standards,  portfolio  diversification  standards, and
documentation,  approval and reporting requirements. These policies must also be
appropriate  to the size of the  institution  and the  nature  and  scope of its
operations, and must be reviewed and approved by the Board of Directors at least
annually.  The LTV ratio  framework,  with a LTV ratio being the total amount of
credit to be extended divided by the appraised value of the property at the time
the credit is originated,  must be established  for each category of real estate
loans.  If not a first  lien,  the lender  must  combine  all senior  liens when
calculating  this ratio.  The  Guidelines,  among other  things,  establish  the
following  supervisory  LTV limits:  raw land  (65%);  land  development  (75%);
construction  (commercial,  multi-family and  non-residential)  (80%);  improved
property (85%); and one-to-four family residential  (owner-occupied) (no maximum
ratio;  however  any LTV  ratio in  excess  of 80%  should  require  appropriate
mortgage  insurance  or  readily  marketable  collateral).  Consistent  with its
conservative  lending  philosophy,  the Company's LTV limits are generally  more
restrictive  than those in the  Guidelines:  raw land  (60%);  land  development
(70%);   construction   (commercial  -  70%;  multi-family  -  75%;  speculative
residential - 80%); and residential properties (80%).

         Single-Family  Residential  Real Estate  Loans.  Historically,  savings
institutions such as the Company have concentrated  their lending  activities on
the  origination of loans secured  primarily by first mortgage liens on existing
single-family  residences.  At June  30,  2006,  $17.7  million  or 26.7% of the
Company's  total loan  portfolio  consisted of  single-family  residential  real
estate loans,  substantially all of which are conventional loans.  Single-family
loan  originations  totaled $1.3 million and  increased  $459  thousand or 51.6%
during the fiscal year ended June 30, 2006,  when compared to the same period in
2005.  Due to low levels of market  interest  rates,  the Company  continued  to
reduce its  portfolio  originations  of long-term  fixed rate  mortgages,  while
continuing to offer consumer, home equity,  construction loans, land acquisition
and development loans and commercial loans.

         The Company historically has originated  fixed-rate loans with terms of
up to 30 years.  Although such loans are originated  with the  expectation  that
they will be maintained in the portfolio,  these loans are originated  generally
under  terms,  conditions  and  documentation  that  permit  their  sale  in the
secondary  market.  The Company also makes available  single-family  residential
adjustable-rate  mortgages ("ARMs"),  which provide for periodic  adjustments to
the  interest  rate,  but such loans have never been as widely  accepted  in the
Company's  market  area as the  fixed-rate  mortgage  loan  products.  The  ARMs
currently  offered by the Company have up to 30-year terms and an interest rate,
which adjusts in accordance with one of several indices.

         At  June  30,  2006,  approximately  $15.5  million  or  87.6%  of  the
single-family  residential  loans in the Company's loan  portfolio  consisted of
loans which provide for fixed rates of interest.  Although these loans generally
provide for repayments of principal over a fixed period of 15 to 30 years, it is
the Company's  experience that because of prepayments  and due-on-sale  clauses,
such loans generally  remain  outstanding for a substantially  shorter period of
time.

         The Company is permitted to lend up to 100% of the  appraised  value of
real  property  securing  a  residential  loan;  however,  if  the  amount  of a
residential  loan originated or refinanced  exceeds 95% of the appraised  value,
the Company is required by state banking  regulations to obtain private mortgage
insurance  on the  portion  of the  principal  amount  that  exceeds  75% of the
appraised value of the security  property.  Pursuant to underwriting  guidelines
adopted by the Board of  Directors,  private  mortgage  insurance is obtained on
residential  loans for which  loan-to-value  ratios  exceed 80% according to the
following schedule:  loans exceeding 80% but less than 90% - 25% coverage; loans
exceeding 90% but less than 95% - 30% coverage;  and loans exceeding 95% through
100% - 35% coverage. No loans are made in excess of 100% of appraised value.

                                       7
<PAGE>

         Property  appraisals on the real estate and  improvements  securing the
Company's  single-family  residential  loans are made by independent  appraisers
approved by the Board of Directors.  Appraisals are performed in accordance with
federal  regulations and policies.  The Company obtains title insurance policies
on most of the first mortgage real estate loans  originated.  If title insurance
is not obtained or is unavailable,  the Company obtains an abstract of title and
a title opinion.  Borrowers also must obtain hazard  insurance  prior to closing
and,  when  required  by the  United  States  Department  of  Housing  and Urban
Development,  flood insurance.  Borrowers may be required to advance funds, with
each monthly  payment of principal and interest,  to a loan escrow  account from
which the Company  makes  disbursements  for items such as real estate taxes and
mortgage insurance premiums as they become due.

         Multi-Family  Residential and Commercial Real Estate Loans. The Company
originates  mortgage  loans for the  acquisition  and  refinancing  of  existing
multi-family  residential  and commercial  real estate  properties.  At June 30,
2006,  $4.3 million or 6.5% of the Company's  total loan portfolio  consisted of
loans secured by existing multi-family residential real estate properties, which
represented  a decrease of $621  thousand or 12.5% from fiscal 2005. Of the $4.3
million,  approximately  $4.3 million or 99.4% provide for an adjustable rate of
interest, while approximately $28 thousand or 0.6% are fixed rate loans.

         At June 30, 2006, $7.6 million or 11.4% of the Company's loan portfolio
consisted of loans secured by existing commercial real estate properties,  which
represented  a decrease of $987  thousand or 11.5% from fiscal 2005. Of the $7.6
million,  approximately  $4.7 million or 61.8% provide for an adjustable rate of
interest, while approximately $2.9 million or 38.2% are fixed rate loans.

         The  majority  of the  Company's  multi-family  residential  loans  are
secured  primarily by 5 to 20 unit apartment  buildings,  while  commercial real
estate   loans  are  secured  by  office   buildings,   hotels,   small   retail
establishments and churches.  These types of properties  constitute the majority
of  the  Company's   commercial  real  estate  loan  portfolio.   The  Company's
multi-family  residential  and commercial  real estate loan  portfolio  consists
primarily of loans secured by properties located in its primary market area.

         Although  terms vary,  multi-family  residential  and  commercial  real
estate loans  generally are amortized over a period of up to 15 years  (although
some loans  amortize  over a 20 year  period)  and mature in 5 to 15 years.  The
Company  will  originate  these loans either with fixed or  adjustable  interest
rates which  generally is negotiated at the time of  origination.  Loan-to-value
ratios on the Company's  commercial  real estate loans are currently  limited to
75% or lower. As part of the criteria for underwriting  multi-family residential
and commercial real estate loans, the Company  generally imposes a debt coverage
ratio (the ratio of net cash from operations  before payment of the debt service
to debt service) of at least 100%. It is also the Savings  Bank's general policy
to obtain  personal  guarantees on its  multi-family  residential and commercial
real estate loans from the  principals  of the borrower and, when this cannot be
obtained,  to  impose  more  stringent  loan-to-value,  debt  service  and other
underwriting requirements.

         At June 30, 2006, the Company's multi-family residential and commercial
real estate loan portfolio  consisted of  approximately 43 loans with an average
principal  balance of $277  thousand.  At June 30,  2006,  the  Company  had one
commercial  real estate loan,  totaling $984  thousand that was  classified as a
potential  problem  loan.  During the year ended June 30, 2006,  $77 thousand of
interest was collected and recognized.

         Construction  Loans.  For many  years,  the  Company has been active in
originating loans to construct  primarily  single-family  residences,  and, to a
much lesser extent, loans to acquire and develop real estate for construction of
residential  properties.  These construction  lending  activities  generally are
limited to the Company's  primary  market area.  At June 30, 2006,  construction
loans amounted to  approximately  $21.0 million or 31.6% of the Company's  total
loan portfolio, which represented a decrease of $1.1 million or 5.0% from fiscal
2005.  The  decrease  was  principally  due to  decreased  levels  of  new  home
construction. As of June 30, 2006, the Company's portfolio of construction loans
consisted   primarily  of  $20.7  million  of  loans  for  the  construction  of
single-family  residential real estate.  Construction loan originations  totaled
$8.9 million and decreased by $3.4 million or 27.6% during the fiscal year ended
June 30, 2006, when compared to the same period in 2005.

         Construction   loans  are  made  for  the  purpose  of  constructing  a
single-family  residence.  The Company will underwrite such loans to individuals
on a  construction/permanent  mortgage loan basis or to a builder/developer on a
speculative (not pre-sold)  construction  mortgage loan basis. At June 30, 2006,

                                       8
<PAGE>

approximately  98.8% of total outstanding  construction loans were made to local
real  estate  builders  and  developers  with whom the  Company has worked for a
number  of  years  for  the  purpose  of  constructing  primarily  single-family
residences.  Upon  application,  credit  review and  analysis  of  personal  and
corporate  financial  statements,  the Company may grant local builders lines of
credit up to designated amounts.  These credit lines may be used for the purpose
of construction of speculative residential properties. In some instances,  lines
of credit will also be granted for  purposes of acquiring  finished  residential
lots and  developing  speculative  residential  properties  thereon.  Such lines
generally  have not  exceeded  $1.0  million,  with the  largest  line  totaling
approximately  $1.2 million.  Once approved for a construction line, a developer
must  still  submit  plans  and   specifications   and  receive  the   Company's
authorization,  including  an appraisal of the  collateral  satisfactory  to the
Company,  in order to begin utilizing the line for a particular  project.  As of
June 30,  2006,  the  Company  also had $3.2  million  or 4.9% of the total loan
portfolio  invested in land development loans, which consisted of 18 loans to 14
developers.

         Speculative  construction loans generally have maturities of 18 months,
including  one 6  month  extension,  with  payments  being  made  monthly  on an
interest-only  basis.  Thereafter,  the permanent  financing  arrangements  will
generally  provide for either an adjustable or fixed interest  rate,  consistent
with the Company's  policies with respect to  residential  and  commercial  real
estate financing.

         The Company intends to maintain its involvement in construction lending
within its primary market area. Such loans afford the Company the opportunity to
increase the interest rate  sensitivity of its loan  portfolio.  Commercial real
estate and  construction  lending is  generally  considered  to involve a higher
level of risk as  compared  to  single-family  residential  lending,  due to the
concentration  of principal in a limited  number of loans and  borrowers and the
effects of general economic  conditions on real estate  developers and managers.
Moreover,  a  construction  loan can  involve  additional  risks  because of the
inherent  difficulty in estimating both a property's  value at completion of the
project and the estimated cost (including  interest) of the project.  The nature
of these loans is such that they are  generally  more  difficult to evaluate and
monitor.  In  addition,  speculative  construction  loans to a  builder  are not
necessarily  pre-sold and thus pose a greater potential risk to the Company than
construction loans to individuals on their personal residences.

         The Company has  attempted  to minimize the  foregoing  risks by, among
other  things,  limiting  the  extent  of its  commercial  real  estate  lending
generally  and by limiting its  construction  lending to  primarily  residential
properties.  In addition,  the Savings Bank has adopted underwriting  guidelines
which impose stringent  loan-to-value,  debt service and other  requirements for
loans which are believed to involve higher elements of credit risk, by generally
limiting the  geographic  area in which the Savings Bank will do business to its
primary  market area and by working with builders  with whom it has  established
relationships.

         Consumer  Loans.  The Company  offers  consumer  loans,  although  such
lending activity has not historically been a large part of its business. At June
30, 2006, $10.4 million or 15.7% of the Company's total loan portfolio consisted
of consumer  loans,  which  represented a decrease of $765 thousand or 6.8% from
fiscal 2005.  The consumer loan  portfolio,  like the mortgage  loan  portfolio,
decreased due to the low levels of market interest rates and an increase in loan
refinances. The consumer loans offered by the Company include home equity loans,
home equity lines of credit, automobile loans, loans secured by deposit accounts
and personal  loans.  Approximately  90.8% of the Company's  consumer  loans are
secured by real estate and are primarily  obtained  through existing and walk-in
customers.

         The Company will originate either a fixed-rate,  fixed term home equity
loan,  or a home equity line of credit with a variable  rate.  At June 30, 2006,
approximately  68.6% of the Company's home equity loans were at a fixed rate for
a  fixed  term.   Although  there  have  been  a  few  exceptions  with  greater
loan-to-value  ratios,  substantially  all of such loans are  originated  with a
loan-to-value  ratio which,  when coupled with the  outstanding  first  mortgage
loan, does not exceed 80%.

         Commercial  Loans.  At  June  30,  2006,  $2.1  million  or 3.1% of the
Company's  total loan  portfolio  consisted of commercial  loans,  which include
loans secured by accounts  receivable,  business  inventory and  equipment,  and
similar  collateral.  The $1.1 million or 124.0%  increase  from fiscal 2005 was
principally  due to the Company's  emphasis in making these types of loans.  The
Company is  continuing  to develop  this line of  business  in order to increase
interest income and to attract compensating deposit account balances.

         Loan Fee Income.  In addition to interest earned on loans,  the Company
may  receive  income  from  fees in  connection  with  loan  originations,  loan
modifications, late payments, prepayments and for

                                       9
<PAGE>

miscellaneous services related to its loans. Income from these activities varies
from  period to period  with the volume  and type of loans made and  competitive
conditions.

         The  Company's  loan  origination  fees are  generally  calculated as a
percentage of the amount borrowed.  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.
Discounts and premiums on loans purchased are accreted and amortized in the same
manner.  In accordance with Statement of Financial  Accounting  Standards (SFAS)
No. 91, the Company has recognized $19 thousand,  $61 thousand and $172 thousand
of deferred  loan fees  during  fiscal  2006,  2005 and 2004,  respectively,  in
connection  with  loan  refinancings,   payoffs  and  ongoing   amortization  of
outstanding  loans. The decreases in loan origination fee income for fiscal year
2006 was principally  attributable to a higher volume of loan  refinancings with
lower or no loan origination fees. Loans previously  originated with lower or no
loan  origination  fees will reduce the  recognition of associated  deferred fee
balances.

         Non-Performing  Loans, Real Estate Owned,  Troubled Debt Restructurings
and Potential Problem Loans. When a borrower fails to make a required payment on
a loan,  the Company  attempts to cure the deficiency by contacting the borrower
and seeking  payment.  Contacts are generally  made on the fifteenth day after a
payment is due. In most cases, deficiencies are cured promptly. If a delinquency
extends beyond 15 days, the loan and payment history is reviewed and efforts are
made to  collect  the loan.  While the  Company  generally  prefers to work with
borrowers to resolve such problems, when the account becomes 90 days delinquent,
the Company does institute  foreclosure or other proceedings,  as necessary,  to
minimize any potential loss.

         Loans  are  placed on  non-accrual  status  when,  in the  judgment  of
management,   the  probability  of  collection  of  interest  is  deemed  to  be
insufficient  to warrant further  accrual.  When a loan is placed on non-accrual
status, previously accrued but unpaid interest is deducted from interest income.
The Company normally does not accrue interest on loans past due 90 days or more.
The Company may continue to accrue interest if, in the opinion of management, it
believes it will collect on the loan.

         Real estate  acquired by the Company as a result of  foreclosure  or by
deed-in-lieu of foreclosure is classified as real estate owned until it is sold.
When property is acquired,  it is recorded at the lower of cost or fair value at
the date of acquisition.  Any subsequent write-down, if necessary, is charged to
the allowance for losses on real estate owned. All costs incurred in maintaining
the Company's interest in the property are capitalized between the date the loan
becomes  delinquent and the date of acquisition.  After the date of acquisition,
all costs incurred in  maintaining  the property are expensed and costs incurred
for the improvement or development of such property are capitalized.

         Potential problem loans are loans where management has some doubt as to
the ability of the borrower to comply with present loan repayment terms.

                                       10
<PAGE>

         The  following  table  sets forth the  amounts  and  categories  of the
Company's non-performing assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                       At June 30,
                                              ------------------------------------------------------------
                                                 2006         2005         2004         2003        2002
                                                 ----         ----         ----         ----        ----
<S>                                           <C>          <C>          <C>          <C>         <C>
                                                                  (Dollars in Thousands)
Non-accruing loans:
Real estate:
   Single-family(1)                           $     291    $      58    $     281    $      59   $     582
   Commercial                                        --           --            4        3,342       3,267
   Construction                                      --          456           --           --         520
   Land Acquisition and Development                  --          387          427           58         477
Consumer (2)                                         17           86           71           --          --
Commercial loans and leases                          --           --           45           22         198
                                              ---------    ---------    ---------    ---------   ---------
Total non-accrual loans                             308          987          828        3,481       5,044
                                              ---------    ---------    ---------    ---------   ---------
Accruing loans greater than 90 days
   Delinquent                                        --           --           --           --          --
                                              ---------    ---------    ---------    ---------   ---------
     Total non-performing loans               $     308    $     987    $     828    $   3,481   $   5,044
                                              ---------    ---------    ---------    ---------   ---------
Real estate owned (3)                                10           70           --           --         235
                                              ---------    ---------    ---------    ---------   ---------
     Total non-performing assets              $     318    $   1,057    $     828    $   3,481   $   5,279
                                              =========    =========    =========    =========   =========
Troubled debt restructurings                  $      --    $   1,114    $   1,343    $   2,497   $      --
                                              =========    =========    =========    =========   =========
Potential problem loans (4)                   $   1,377    $      --    $      --    $      --   $      --
                                              =========    =========    =========    =========   =========
Total non-performing loans and potential
problem loans and troubled debt restructurings
     as a percentage of net loans receivable       3.03%        3.49%        3.19%      4.36 %      3.30 %
                                              =========    =========    =========    =========   =========
Total non-performing assets to total assets        0.08%        0.25%        0.19%      0.95 %      1.30 %
                                              =========    =========    =========    =========   =========
Total non-performing assets, troubled debt
restructurings and potential problem loans
    as a percentage of total assets                0.40%        0.52%        0.50%      1.09 %      1.30 %
                                              =========    =========    =========    =========   =========
</TABLE>

----------------
(1) At June 30, 2006,  non-accrual  single-family  residential real estate loans
consisted of five loans.
(2) At June 30, 2006, non-accrual consumer loans consisted of one loan.
(3) At  June  30,  2006,  real  estate  owned  consisted  of  one  single-family
residential dwelling.
(4) At June 30, 2006, potential problem loans consisted of three loans.

         The $739 thousand decrease in  non-performing  assets during the twelve
months ended June 30, 2006 was primarily  attributable to: the payoff in full of
one  non-performing  speculative  construction loan totaling  approximately $456
thousand;  the  reclassification of two claims related to a bankruptcy discussed
below  totaling  approximately  $446 thousand from  non-performing  to potential
problem  loans;  the  sale of a  single-family  home  with a  carrying  value of
approximately $70 thousand;  the reclassification of an $11 thousand home equity
line of credit loan from  non-performing to performing status; and a $7 thousand
partial  charge off and transfer to other  assets of a home equity  loan,  which
were  partially  offset by the  addition  to  non-accrual  status of one line of
credit loan secured by real property totaling  approximately  $17 thousand,  and
four single-family real estate loans totaling approximately $234 thousand.

         The Company has one restructured and potential problem  commercial real
estate loan to a  retirement  village  located in the North  Hills.  The Savings
Bank's  outstanding  principal  balance  totaled  $2.0 million at June 30, 2003.
During the quarter  ended  September  30, 2003,  the Savings Bank  redeemed $388
thousand of participating interests. During the quarter ended December 31, 2003,
the Bank  sold a forty  percent  participating  interest  to  another  financial
institution  at par resulting in proceeds  totaling $979  thousand.  The Savings
Bank's outstanding principal balance totaled $984 thousand at June 30, 2006. The
Company had recorded  interest  received on this credit on a cost recovery basis
until September 30, 2003 and is now recording interest income.

         At June 30,  2006,  the Company had one  restructured  loan  secured by
undeveloped  land  totaling $347 thousand and one  restructured  unsecured  loan
totaling $46 thousand to two borrowers.  These potential problem loans represent
two adjudicated Bankruptcy Court Claims in connection with a previously reported
loan to a personal  care home.  During  fiscal 2004,  the personal care home was
sold for net proceeds of approximately  $50 thousand.  During the fourth quarter
of fiscal 2004,  the  Bankruptcy  Court  approved a secured claim  totaling $440
thousand,  and an unsecured  claim totaling $76 thousand,  be paid in

                                       11
<PAGE>

accordance  with a Bankruptcy  Plan of  Reorganization.  All Court  ordered Plan
payments have been received in a timely  manner.  In accordance  with  generally
accepted  accounting  principles,  the Company had  recorded  interest  payments
received  on a cost  recovery  basis  until June 30,  2006 and is now  recording
interest income.

         The Company had one non-accrual single-family real estate loan totaling
approximately  $58  thousand at June 30,  2006.  This loan is being  serviced by
another financial institution, who is proceeding with collection activities.

         During fiscal 2006,  2005 and 2004,  approximately  $23 thousand,  $150
thousand and $123 thousand,  respectively,  of interest would have been recorded
on loans accounted for on a non-accrual  basis and troubled debt  restructurings
if such loans had been current according to the original loan agreements for the
entire period.  These amounts were not included in the Company's interest income
for the respective periods. The amount of interest income on loans accounted for
on a  non-accrual  basis and troubled debt  restructurings  that was included in
income  during the same periods  amounted to  approximately  $10  thousand,  $99
thousand and $94 thousand, respectively.

         Allowances   for  Loan  Losses.   The  allowance  for  loan  losses  is
established  through  provisions for loan losses charged against  income.  Loans
deemed to be uncollectible are charged against the allowance 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 21, 1993, the FDIC, in conjunction  with the Office
of the  Comptroller of the Currency,  the Office of Thrift  Supervision  and the
Federal Reserve Board,  adopted an Interagency Policy Statement on the Allowance
for Loan and Lease Losses  ("Policy  Statement").  The Policy  Statement,  which
effectively supersedes previous FDIC proposed guidance, includes guidance (1) on
the  responsibilities  of management for the assessment and  establishment of an
adequate allowance and (2) for the agencies'  examiners to use in evaluating the
adequacy  of  such  allowance  and  the  policies  utilized  to  determine  such
allowance.  The Policy Statement also sets forth  quantitative  measures for the
allowance with respect to assets classified substandard and doubtful,  described
below,  and with  respect  to the  remaining  portion of an  institution's  loan
portfolio.   Specifically,   the  Policy  Statement  sets  forth  the  following
quantitative measures which examiners may use to determine the reasonableness of
an allowance:  (1) 50% of the portfolio that is classified doubtful;  (2) 15% of
the portfolio  that is classified  substandard;  and (3) for the portions of the
portfolio that have not been  classified  (including  loans  designated  special
mention), estimated credit losses over the upcoming twelve months based on facts
and  circumstances  available on the evaluation date. While the Policy Statement
sets forth this quantitative measure, such guidance is not intended as a "floor"
or "ceiling".

         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.

                                       12
<PAGE>

         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  ranges:  (1) 0% to 5% of assets subject to
special mention; (2) 5% 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, 2006, is adequate.

         The allowance for loan losses at June 30, 2006  decreased $164 thousand
to $957  thousand.  The decrease in the  allowance for loan losses was primarily
the result of the Company  reallocating  $35 thousand of its  allowance for loan
loss  attributable to off balance sheet  liabilities  (builder letters of credit
and  undisbursed  lines of credit) to a separate  reserve  account for financial
reporting  purposes  during the first quarter of fiscal 2006 and a $103 thousand
reduction due to continued  paydowns of classified  loans.  The Company believes
that the loan loss reserve  levels are prudent and warranted at this time due to
the weakness of the  national  economy.  The changes in prior years  reflected a
number  of  factors,  the most  significant  of which  were the  changes  in the
Company's level of non-performing  assets and the industry trend towards greater
emphasis on the allowance method of providing for loan losses.

                                       13
<PAGE>

         The following table summarizes  changes in the Company's  allowance for
loan losses and other selected statistics for the periods indicated.

<TABLE>
<CAPTION>
                                                                       At June 30,
                                               -----------------------------------------------------------
                                                 2006         2005         2004         2003        2002
                                                 ----         ----         ----         ----        ----
<S>                                            <C>          <C>          <C>          <C>         <C>
                                                                (Dollars in Thousands)

Average net loans                              $ 55,881     $ 62,410     $ 74,656     $125,221    $173,023
                                               ========     ========     ========     ========    ========
Allowance balance (at beginning of period)     $  1,121     $  1,370     $  2,530     $  2,758    $  2,763
Provision for loan losses                          (161)         (46)        (794)        (228)         57
Charge-offs:
   Real estate:
     Single-family                                    7           15           --           --          --
     Multi-family                                    --           --           --           --          --
     Commercial                                      --          186          524           --          --
     Construction                                    --           --           --           --          --
   Land acquisition and development                  --           --           --           --          --
   Consumer:
     Home equity                                     --           25           --           --          25
     Education                                       --           --           --           --          --
     Other                                           --           --           --           --          43
   Commercial loans and leases                       --           11           --           --          --
                                               --------     --------     --------     --------    --------
     Total charge-offs                                7          237          524           --          68
                                               --------     --------     --------     --------    --------

Recoveries:
   Real estate:
     Single-family                                   --           --           --           --          --
     Multi-family                                    --           --           --           --          --
     Commercial                                       4            4          158           --          --
     Construction                                    --           30           --           --          --
   Land acquisition and development                  --           --           --           --          --
   Consumer:
     Home equity                                     --           --           --           --          --
     Education                                       --           --           --           --          --
     Other                                           --           --           --           --           6
   Commercial loans and leases                       --           --           --           --          --
                                               --------     --------     --------     --------    --------
     Total recoveries                                 4           34          158           --           6
                                               --------     --------     --------     --------    --------
Net loans charged-off                                 3          203          366           --          62
Transfer to real estate owned loss reserve           --           --           --           --          --
                                               --------     --------     --------     --------    --------
Allowance balance (at end of period)           $    957     $  1,121     $  1,370     $  2,530    $  2,758
                                               ========     ========     ========     ========    ========
Allowance for loan losses as a percentage of
  total loans receivable                           1.69%        1.83%        1.97%        2.68%       1.77%
                                               ========     ========     ========     ========    ========
Net loans charged-off as a percentage of
  average net loans                                0.01%        0.33%        0.49%        0.00%       0.04%
                                               ========     ========     ========     ========    ========
Allowance for loan losses to non-performing
  Loans                                          310.71%      113.58%      165.46%       72.68%      54.68%
                                               ========     ========     ========     ========    ========
Net loans charged-off to allowance for loan
  Losses                                           0.31%       18.11%       26.72%        0.00%       2.25%
                                               ========     ========     ========     ========    ========
Recoveries to charge-offs                         57.14%       14.35%       30.15%        0.00%       8.82%
                                               ========     ========     ========     ========    ========
</TABLE>

                                       14
<PAGE>

         The following  table presents the allocation of the allowances for loan
losses by loan category at the dates indicated.

<TABLE>
<CAPTION>
                                                                       At June 30,
                        -----------------------------------------------------------------------------------------------------------
                               2006                   2005                 2004                  2003                   2002
                               ----                   ----                 ----                  ----                   ----
                        % of Total Loans by   % of Total Loans by   % of Total Loans by   % of Total Loans by   % of Total Loans by
                         Amount   Category     Amount   Category     Amount   Category     Amount   Category     Amount    Category
                         ------   --------     ------   --------     ------   --------     ------   --------     ------    --------
<S>                         <C>      <C>          <C>      <C>          <C>      <C>        <C>        <C>        <C>        <C>
                                                                  (Dollars in Thousands)
Real estate loans:
  Single-family         $    54      26.72%   $    52      27.86%   $    82      32.52%   $    75      40.91%   $   191      53.69%
  Multi-family               22       6.55         26       6.68         18       5.99         26       4.92         31       3.69
  Commercial                420      11.43        465      11.53        597      12.53      1,944      16.98      1,745      15.19
  Construction               32      31.64         54      29.72         30      22.76         33      16.03        300      11.92
  Land acquisition
   and development          218       4.86        262       7.93        302      10.01         73       7.03         66       4.00
  Unallocated                --       0.00         --       0.00         --       0.00         --       0.00         10       0.00
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------
    Total real estate
     Loans                  746      81.20        859      83.72      1,029      83.81      2,151      85.87      2,343      88.49
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------

Consumer loans:
  Home equity               103      14.26        128      13.58        117      13.88        124      11.70        165       9.75
  Education                  --       0.00         --       0.00         --       0.00         --       0.00         --       0.00
  Other                      50       1.45         61       1.47         78       1.09         22       1.01         28       0.90
  Unallocated                --       0.00         --       0.00         --       0.00         --       0.00         --       0.00
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------
    Total consumer
      loans                 153      15.71        189      15.05        195      14.97        146      12.71        193      10.65
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------
Commercial loans:
  Commercial loans           58       3.09         35       1.23        116       1.22        200       1.42        187       0.86
  Unallocated                --       0.00         --       0.00         --       0.00         --       0.00         --       0.00
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------
    Total commercial
      loans                  58       3.09         35       1.23        116       1.22        200       1.42        187       0.86
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------
Commercial lease
  financings                 --       0.00         --       0.00         --       0.00         --       0.00         --       0.00
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------

Off balance-sheet
   Items (1)                 --       0.00         38       0.00         30       0.00         33       0.00         35       0.00
                        -------    -------    -------    -------    -------    -------    -------    -------    -------    -------
                        $   957     100.00%   $ 1,121     100.00%   $ 1,370     100.00%   $ 2,530     100.00%   $ 2,758     100.00%
                        =======    =======    =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>

-----

(1) In accordance with generally  accepted  accounting  principles,  the Company
established a separate  reserve for off-balance  sheet items beginning in fiscal
2006. At June 30, 2006 this accounting reserve totaled $48 thousand.

         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 SFAS 114. 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 SFAS 114. 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  recoveries;  and (3)  presents  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, 2006.
In prior fiscal years, an unallocated loss allowance  balance was maintained for
real estate,  consumer and small commercial  loans.

                                       15
<PAGE>

With respect to real estate loans,  the Company  believed that it was prudent to
maintain a certain level of unallocated loss allowances as the Savings Bank grew
its commercial real estate and construction  segments. At the time the Company's
historical  loss  experience  with  these two  segments  was  somewhat  limited.
Management  believed  that risks were  inherent  within  those  segments but was
uncertain as to the degree of loss. A reasonable  estimate,  using industry loss
factors, was utilized.  The same rationale applied to the unallocated  allowance
for consumer loans. The Company had no unallocated  consumer loan allowances for
the past five fiscal years.

         The following table summarizes the  calculations of required  allowance
for loan losses by loan category as of June 30, 2006.

                                                                      Allowance
                                                                         for
                                                  Group Rate          Loan Loss
                                               -----------------      ---------
Homogenous loans:
      Single-family                                 0.0015            $      26
      Multi-family                                  0.0050                   22
      Commercial real estate                        0.0100                   64
      Construction/land acquisition
        and development                        0.0015 - 0.0100(1)            59
      Secured consumer                              0.0100                  102
      Unsecured consumer                            0.0500                    4
      Commercial loans                              0.0500                   58
      Unallocated                                                             -

Individually evaluated loans:
      Single-family                                                          28
      Multi-family                                                            -
      Commercial real estate                                                356
      Construction/land acquisition
        and development                                                     191
      Secured consumer                                                        1
      Unsecured consumer                                                     46
      Commercial loans                                                        -

Total allowance for loan losses:
      Single-family                                                          54
      Multi-family                                                           22
      Commercial real estate                                                420
      Construction/land acquisition
        and development                                                     250
      Secured consumer                                                      103
      Unsecured consumer                                                     50
      Commercial loans                                                       58
      Unallocated                                                             -
                                                                      ---------

Total allowance for loan losses                                       $     957
                                                                      =========

-----------------------
(1) The rate applied ranges from 0.0015 to 0.0100  depending upon the underlying
collateral, loan type (permanent vs. construction),  historical loss experience,
industry loss  experience on similar loan  segments,  delinquency  trends,  loan
volumes  and  concentrations,  and other  relevant  economic  and  environmental
factors.

         Management  believes that the reserves it has  established are adequate
to cover  potential  losses in the Company's  loan  portfolio.  However,  future
adjustments  to these  reserves may be necessary,  and the Company's  results of
operations  could be adversely  affected if circumstances  differ  substantially
from the  assumptions  used by management in making its  determinations  in this
regard.

                                       16
<PAGE>

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 the Federal Home Loan Mortgage  Corporation
("FHLMC"),  the  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.  All of the Company's CMOs
are rated in the highest category by at least two national rating services.

         At June 30, 2006, the Company's MBS portfolio totaled $155.8 million as
compared to $162.2  million at June 30, 2005.  The $6.4 million or 3.9% decrease
in MBS balances  outstanding  during fiscal 2006 was primarily  attributable  to
principal  repayments  on  floating  rate CMOs  which were  partially  offset by
purchases of floating rate CMOs. At June 30, 2006,  approximately $153.5 million
or 98.5% (book value) of the Company's  portfolio of MBS,  including  CMOs, were
comprised of  adjustable  or floating  rate  instruments,  as compared to $158.4
million or 97.7% at June 30, 2005.  Substantially all of the Company's  floating
rate MBS adjust monthly based upon changes in certain  short-term market indices
(e.g. LIBOR, Prime, etc.).

         The following  tables set forth the amortized cost and estimated market
values of the Company's  MBSs  available for sale and held to maturity as of the
periods indicated.

                                               2006       2005       2004
                                               ----       ----       ----
MBS Available for Sale at June 30,                (Dollars in Thousands)
----------------------------------

FHLMC PCs                                    $     --   $     44   $     45
GNMA PCs                                        2,171      2,333      2,411
FNMA PCs                                           --        449        686
CMOs - agency collateral                           58         67         92
                                             --------   --------   --------
Total amortized cost                         $  2,229   $  2,893   $  3,234
                                             ========   ========   ========
Total estimated market value                 $  2,292   $  3,120   $  3,357
                                             ========   ========   ========

MBS Held to Maturity at June 30,
--------------------------------

FHLMC PCs                                    $     --   $      9   $     17
GNMA PCs                                           --        370        591
FNMA PCs                                           --         16         19
CMOs - agency collateral                       85,436    127,915     57,131
CMOs - single-family whole loan collateral     68,025     30,721     14,475
                                             --------   --------   --------
Total amortized cost                         $153,461   $159,031   $ 72,233
                                             ========   ========   ========
Total estimated market value                 $152,706   $159,566   $ 72,099
                                             ========   ========   ========

         The Company believes that its present MBS available for sale allocation
of $2.3 million or 1.5% of the carrying value of the MBS portfolio,  is adequate
to meet anticipated future liquidity  requirements and to reposition its balance
sheet and asset/liability mix should it wish to do so in the future.

                                       17
<PAGE>

         The  following  table  sets  forth  the  amortized  cost,   contractual
maturities and weighted average yields of the Company's MBSs, including CMOs, at
June 30, 2006.

<TABLE>
<CAPTION>
                           One Year      After One to     After Five to    Over Ten
                            or Less       Five Years       Ten Years         Years           Total
                            -------       ----------       ---------         -----           -----
<S>                              <C>             <C>             <C>             <C>             <C>
                                                     (Dollars in Thousands)

MBS Available for Sale   $         --    $         --    $         --    $      2,229    $      2,229
                                 0.00%           0.00%           0.00%           7.73%           7.73%

MBS Held to Maturity     $         --    $         --    $         --    $    153,461    $    153,461
                                 0.00%           0.00%           0.00%           6.16%           6.16%
                         ------------    ------------    ------------    ------------    ------------

Total                    $         --    $         --    $         --    $    155,690    $    155,690
                         ============    ============    ============    ============    ============
Weighted average yield           0.00%           0.00%           0.00%           6.18%           6.18%
                         ============    ============    ============    ============    ============
</TABLE>

         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  following  table sets forth  information  with  respect to the MBS
owned by the Company at June 30, 2006,  which had a carrying  value greater than
10% of the Company's  stockholders'  equity at such date,  other than securities
issued by the United States Government or United States Government  agencies and
corporations.  All MBS  owned  by the  Company  have  been  assigned  a triple A
investment grade rating.

<TABLE>
<CAPTION>
                                                         Number of                        Estimated
Name of Issuer                                           Securities    Carrying Value   Market Value
--------------                                           ----------    --------------   ------------
<S>                                                          <C>              <C>             <C>
                                                                   (Dollars in Thousands)

Countrywide Home Loans                                       8        $       35,867    $     35,846
Chase Mortgage Finance Corp.                                 2                11,151          11,156
Credit Suisse First Boston Mortgage Securities Corp.         3                10,440          10,445
Bank of America Mortgage Securities                          3                 6,758           6,811
GSR Mortgage Loan Trust                                      1                 3,809           3,808
                                                                      --------------    ------------

                                                                      $       68,025    $     68,066
                                                                      ==============    ============
</TABLE>

Investment Securities

         The  Company  may  invest in  various  types of  securities,  including
corporate debt and equity securities, U.S. Government and U.S. Government agency
obligations,  securities of various federal, state and municipal agencies,  FHLB
stock,    commercial   paper,   bankers'   acceptances,    federal   funds   and
interest-bearing deposits with other financial institutions.

         The  Company's  investment  activities  are  directly  monitored by the
Company's  Finance  Committee  under policy  guidelines  adopted by the Board of
Directors.  In recent years, the general  objective of the Company's  investment
policy  has been to manage  the  Company's  interest  rate  sensitivity  gap and
generally to increase  interest-earning assets. As reflected in the table below,
the Company increased its position of U.S.  Government Agency  obligations while
decreasing  its  portfolio  of  floating  rate  CMO's.  The  Company   purchased
approximately $111.3 million of U.S. Government Agency obligations during fiscal
2006.  Outstanding  balances  totaled  $175.8  million  or  86.0%  of the  total
investment portfolio at June 30, 2006, as compared to $149.4 million or 78.3% of
the total investment portfolio at June 30, 2005. At June 30, 2006, approximately
$174.6 million or 99.3% of the Company's U.S.  Government  Agency  portfolio was
comprised of U.S. Government Agency securities with longer-terms to maturity and
optional principal redemption features ("callable bonds").

                                       18
<PAGE>

         The following  tables set forth the amortized cost and estimated market
values of the Company's investment securities portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                        2006      2005       2004
                                                        ----      ----       ----
<S>                                                       <C>        <C>      <C>
Investment Securities Available for Sale at June 30,       (Dollars in Thousands)
----------------------------------------------------

Corporate debt obligations                           $      4   $  8,655   $  2,032
Commercial paper                                        7,993         --         --
Obligations of states and political subdivisions           --         --         --
                                                     --------   --------   --------
Total amortized cost                                    7,997      8,655      2,032
Equity securities                                         500        500      2,081
                                                     --------   --------   --------
Total amortized cost                                 $  8,497   $  9,155   $  4,113
                                                     ========   ========   ========
Total estimated market value                         $  8,469   $  9,155   $  4,416
                                                     ========   ========   ========

Investment Securities Held to Maturity at June 30,
--------------------------------------------------

Corporate debt obligations                           $     --   $     --   $ 13,772
U.S. Government agency securities                     175,755    149,360    223,808
Obligations of states and political subdivisions       12,197     24,551     31,593
                                                     --------   --------   --------
                                                      187,952    173,911    269,173
FHLB stock                                              7,861      7,769      7,532
                                                     --------   --------   --------
Total amortized cost                                 $195,813   $181,680   $276,705
                                                     ========   ========   ========
Total estimated market value                         $193,541   $182,092   $278,635
                                                     ========   ========   ========
</TABLE>

         Information  regarding the amortized cost,  contractual  maturities and
weighted average yields of the Company's  investment  portfolio at June 30, 2006
is presented below.

<TABLE>
<CAPTION>

Investment Securities                   One Year   After One to  After Five to   Over Ten
Available for Sale                      or Less     Five Years     Ten Years       Years         Total
------------------                      -------     ----------     ---------       -----         -----
<S>                                         <C>           <C>           <C>           <C>           <C>
                                                            (Dollars in Thousands)

Corporate debt obligations            $        4    $       --    $       --    $       --    $        4
                                            5.77%         0.00%         0.00%         0.00%         5.77%

Commercial paper                      $    7,993    $       --    $       --    $       --    $    7,993
                                            5.51%         0.00%         0.00%         0.00%         5.51%
                                      ----------    ----------    ----------    ----------    ----------

Total                                 $    7,997    $       --    $       --    $       --    $    7,997
                                      ==========    ==========    ==========    ==========    ==========
Weighted average yield                      5.51%         0.00%         0.00%         0.00%         5.51%
                                      ==========    ==========    ==========    ==========    ==========
<CAPTION>

Investment Securities                   One Year   After One to  After Five to   Over Ten
Held to Maturity                        or Less     Five Years     Ten Years       Years         Total
----------------                        -------     ----------     ---------       -----         -----
<S>                                         <C>           <C>           <C>           <C>           <C>
U.S. Government Agency
      securities                      $       --    $       --    $   48,360    $  127,395    $  175,755
                                            0.00%         0.00%         5.99%         5.20%         5.42%

Obligations of states and political
      subdivisions (1)                $       --    $      854    $      734    $   10,609    $   12,197
                                            0.00%         6.55%         8.44%         8.15%         8.06%
                                      ----------    ----------    ----------    ----------    ----------

Total                                 $       --    $      854    $   49,094    $  138,004    $  187,952
                                      ==========    ==========    ==========    ==========    ==========
Weighted average yield                      0.00%         6.55%         6.03%         5.43%         5.59%
                                      ==========    ==========    ==========    ==========    ==========
</TABLE>

-----------------
(1) Tax exempt  obligations of states and political  subdivisions are calculated
on a  taxable  equivalent  basis  utilizing  a  calculation  that  reflects  the
tax-exempt coupon, a 20% interest expense disallowance and a federal tax rate of
34%.

                                       19
<PAGE>

         Information  regarding  the  amortized  cost,  earliest  call dates and
weighted average yield of the Company's  investment  portfolio at June 30, 2006,
is presented below. All Company  investments in callable U.S.  Government Agency
bonds were classified as held to maturity at June 30, 2006.

<TABLE>
<CAPTION>
                                        One Year     After One to   After Five to    Over Ten
                                         or Less      Five Years      Ten Years        Years          Total
                                         -------      ----------      ---------        -----          -----
<S>                                   <C>            <C>            <C>            <C>            <C>
Corporate debt obligations            $         4    $        --    $        --    $        --    $         4
                                             5.77%          0.00%          0.00%          0.00%          5.77%

Commercial paper                      $     7,993    $        --    $        --    $        --    $     7,993
                                             5.51%          0.00%          0.00%          0.00%          5.51%

U.S. Government Agency
      securities                      $   138,859    $    35,645    $        --    $     1,251    $   175,755
                                             5.27%          6.02%          0.00%          5.38%          5.42%

Obligations of states and political
      subdivisions (1)                $     2,295    $     7,081    $     2,821    $        --    $    12,197
                                             8.74%          7.89%          7.91%          0.00%          8.05%
                                      -----------    -----------    -----------    -----------    -----------

Total                                 $   149,151    $    42,726    $     2,821    $     1,251    $   195,949
                                      ===========    ===========    ===========    ===========    ===========
Weighted average yield                       5.34%          6.33%          7.91%          5.38%          5.59%
                                      ===========    ===========    ===========    ===========    ===========
</TABLE>

--------------
(1) Tax exempt  obligations of states and political  subdivisions are calculated
on a  taxable  equivalent  basis  utilizing  a  calculation  that  reflects  the
tax-exempt coupon, a 20% interest expense disallowance and a federal tax rate of
34%.

         At June 30, 2006,  the Company had no securities  classified as trading
investment securities.

         The  following  table  sets  forth  information  with  respect  to  the
investment securities owned by the Company at June 30, 2006 which had a carrying
value greater than 10% of the Company's stockholders' equity at such date, other
than  securities  issued by the  United  States  Government  and  United  States
Government  agencies and  corporations.  All Pennsylvania  school district bonds
securities owned by the Company, including those shown below, have been assigned
an investment grade rating by at least two national rating services.

                                                                 Estimated
  Name of Issuer                          Carrying Value        Market Value
  --------------                          --------------        ------------
                                                  (Dollars in Thousands)
  Puget Sound Energy                          $ 3,997            $ 3,997
  Viacom Inc.                                   3,996              3,996
  New Castle PA School District                 2,979              3,130
                                              -------            -------

                                              $10,972            $11,123
                                              =======            =======

Sources of Funds

         The  Company's  principal  source of funds for use in  lending  and for
other general business  purposes has  traditionally  come from deposits obtained
through the Company's home and branch offices. Funding is also derived from FHLB
advances,  short-term  borrowings,  amortization  and prepayments of outstanding
loans and MBS and from maturing investment securities.

         Deposits.  The Company's  deposits  totaled  $151.7 million at June 30,
2006,  as  compared to $164.7  million at June 30,  2005.  Transaction  accounts
decreased approximately $7.9 million or 21.2%. Certificates of deposit increased
approximately  $429 thousand or 0.6%. Savings accounts decreased $7.5 million or
16.9% and money market  accounts  increased  $2.9 million or 21.6%.  In order to
attract new and lower cost core deposits,  the Company continued to promote a no
minimum balance,  "free", checking

                                       20
<PAGE>

account product and Internet  Banking.  Current deposit products include regular
savings  accounts,  demand  accounts,  negotiable  order of  withdrawal  ("NOW")
accounts,  money market deposit  accounts and certificates of deposit ranging in
terms  from 30 days to 10 years.  Included  among  these  deposit  products  are
certificates of deposit with negotiable  interest rates and balances of $100,000
or more, which amounted to $11.0 million or 7.3% of the Company's total deposits
at June 30, 2006,  as compared to $13.5  million or 8.2% at June 30,  2005.  The
Company's   deposit  products  also  include   Individual   Retirement   Account
certificates ("IRA certificates").

         The  Company's  deposits  are  obtained  primarily  from  residents  of
northern Allegheny,  southern Butler and eastern Beaver counties,  Pennsylvania.
The Company  utilizes  various  marketing  methods to attract new  customers and
savings  deposits,  including print media  advertising and direct mailings.  The
Company  does not  advertise  for  deposits  outside of its local market area or
utilize  the  services  of deposit  brokers,  and  management  believes  that an
insignificant   number  of  deposit  accounts  were  held  by  non-residents  of
Pennsylvania at June 30, 2006. The Company has drive-up  banking  facilities and
automated teller machines  ("ATMs") at its McCandless,  Franklin Park,  Bellevue
and Cranberry Township offices.  The Company also has an ATM machine at its West
View Office. The Company participates in the STAR(R) and CIRRUS(R) ATM networks.
The  Company  also  participates  in an  ATM  program  called  the  Freedom  ATM
AllianceSM.  The Freedom ATM AllianceSM  allows West View Savings Bank customers
to use other  Pittsburgh  area Freedom ATM AllianceSM  affiliates'  ATMs without
being  surcharged  and vice versa.  The Freedom ATM  AllianceSM was organized to
help smaller local banks compete with larger  national banks that have large ATM
networks.

         The  Company  has been  competitive  in the  types of  accounts  and in
interest rates it has offered on its deposit products and continued to price its
savings products nearer to the market average rate as opposed to the upper range
of market offering  rates.  The Company has continued to emphasize the retention
and  growth  of  core  deposits,   particularly   demand   deposits.   Financial
institutions generally, including the Company, have experienced a certain degree
of depositor  disintermediation  to other  investment  alternatives.  Management
believes that the degree of disintermediation experienced by the Company has not
had a material impact on overall liquidity.

         The  following  table sets forth the average  balance of the  Company's
deposits and the average  rates paid  thereon for the past three years.  Average
balances were derived from daily average balances.

<TABLE>
<CAPTION>
                                                             At June 30,
                                   ----------------------------------------------------------------
                                         2006                    2005                  2004
                                         ----                    ----                  ----
                                   Amount      Rate       Amount      Rate       Amount      Rate
                                   ------      ----       ------      ----       -----       ----
<S>                                 <C>          <C>       <C>          <C>       <C>          <C>
                                                        (Dollars in Thousands)
Regular savings and club
   accounts                       $ 39,877       0.70%   $ 44,479       0.70%   $ 44,091       0.76%
NOW accounts                        20,023       0.06      22,516       0.06      19,948       0.16
Money market deposit
   accounts                         15,024       2.75      13,538       1.23      13,839       0.79
Certificate of deposit accounts     66,599       3.62      65,036       2.67      72,800       2.52
Escrows                                804       1.37         797       1.63         899       1.67
                                  --------   --------    --------   --------    --------   --------
     Total interest-bearing
        deposits and escrows       142,327       2.19     146,366       1.53     151,577       1.53
Non-interest-bearing checking
   accounts                         12,513       0.00      12,774       0.00      12,542       0.00
                                  --------   --------    --------   --------    --------   --------
     Total deposits and escrows   $154,840       2.01%   $159,140       1.41%   $164,119       1.42%
                                  ========   ========    ========   ========    ========   ========
</TABLE>

         The  following  table sets forth the net  deposit  flows of the Company
during the periods indicated.

                                             Year Ended June 30,
                                      -------------------------------
                                        2006        2005        2004
                                        ----        ----        ----
                                           (Dollars in Thousands)
Increase (decrease) before interest
   credited                           $(15,947)   $  1,976   $(12,952)
Interest credited                        2,954       2,167      2,589
                                      --------    --------   --------
Net deposit increase (decrease)       $(12,993)   $  4,143   $(10,363)
                                      ========    ========   ========

                                       21
<PAGE>

         The following table sets forth maturities of the Company's certificates
of deposit of $100,000 or more at June 30, 2006, by time remaining to maturity.

                                                          Amounts
                                                          -------
                                                   (Dollars in Thousands)
         Three months or less                             $ 2,972
         Over three months through six months               3,551
         Over six months through twelve months              1,572
         Over twelve months                                 2,904
                                                          -------
                                                          $10,999
                                                          =======

         Borrowings.  Borrowings  are  comprised of FHLB  advances  with various
terms and repurchase agreements with securities brokers with original maturities
of ninety-two days or less. At June 30, 2006,  borrowings totaled $237.8 million
as  compared  to $224.7  million  at June 30,  2005.  The $13.1  million or 5.8%
increase  was  primarily  due to purchases of  investments  and  mortgage-backed
securities and decreases in deposits,  which were partially offset by repayments
on the Company's investment, mortgage-backed and loan portfolios. For a detailed
discussion of the Company's asset and liability  management  activities,  please
see the "Quantitative and Qualitative  Disclosures about Market Risk" section of
the Company's  fiscal year 2006 Annual Report included as Exhibit 13.  Wholesale
funding also  provides the Company with a larger  degree of control with respect
to the term structure of its liabilities  than traditional  retail deposits.  By
utilizing borrowings,  as opposed to retail certificates of deposit, the Company
also avoids the additional operating costs associated with increasing its branch
network and associated federal deposit insurance premiums.


Competition

         The Company faces significant  competition in attracting deposits.  Its
most direct competition for deposits has historically come from commercial banks
and other  savings  institutions  located in its market  area.  The Company also
faces  additional  significant  competition  for  investors'  funds  from  other
financial  intermediaries.  The Company  competes  for deposits  principally  by
offering depositors a variety of deposit programs,  competitive  interest rates,
convenient branch locations, hours and other services. The Company does not rely
upon any individual group or entity for a material portion of its deposits.

         The Company's  competition for real estate loans comes principally from
mortgage banking  companies,  other savings  institutions,  commercial banks and
credit unions. The Company competes for loan originations  primarily through the
interest rates and loan fees it charges,  the efficiency and quality of services
it provides borrowers,  referrals from real estate brokers and builders, and the
variety of its products.  Factors which affect  competition  include the general
and local economic  conditions,  current  interest rate levels and volatility in
the mortgage markets.

Employees

         The Company had 36 full-time employees and 14 part-time employees as of
June 30, 2006. None of these employees is represented by a collective bargaining
agent.  The  Company  believes  that it  enjoys  excellent  relations  with  its
personnel.

                                       22
<PAGE>

                           REGULATION AND SUPERVISION

The Company

         General.  The  Company,  as a  bank  holding  company,  is  subject  to
regulation and supervision by the Federal Reserve Board and by the  Pennsylvania
Department  of Banking  (the  "Department").  The  Company is  required  to file
annually a report of its operations  with, and is subject to examination by, the
Board of Governors of the Federal Reserve System  ("Federal  Reserve Board") and
the Department.

         Sarbanes-Oxley  Act of 2002. On July 3, 2002,  President George W. Bush
signed into law the  Sarbanes-Oxley  Act of 2002, which generally  establishes a
comprehensive  framework to modernize and reform the oversight of public company
auditing,  improve the quality and transparency of financial  reporting by those
companies and strengthen the independence of auditors.

         BHCA Activities and Other Limitations.  The Bank Holding Company Act of
1956, as amended ("BHCA") prohibits a bank holding company from acquiring direct
or  indirect  ownership  or control of more than 5% of the voting  shares of any
bank,  or  increasing  such  ownership  or  control of any bank,  without  prior
approval of the Federal Reserve Board. The BHCA also generally  prohibits a bank
holding  company from  acquiring any bank located  outside of the state in which
the existing bank  subsidiaries  of the bank holding  company are located unless
specifically authorized by applicable state law.

         The  BHCA  also  prohibits  a  bank  holding   company,   with  certain
exceptions, from acquiring more than 5% of the voting shares of any company that
is not a bank and from  engaging in any business  other than banking or managing
or controlling banks. Under the BHCA, the Federal Reserve Board is authorized to
approve the  ownership of shares by a bank holding  company in any company,  the
activities of which the Federal  Reserve  Board has  determined to be so closely
related  to  banking  or to  managing  or  controlling  banks  as to be a proper
incident thereto.  In making such  determinations,  the Federal Reserve Board is
required  to  weigh  the  expected  benefit  to  the  public,  such  as  greater
convenience,  increased competition or gains in efficiency, against the possible
adverse effects,  such as undue concentration of resources,  decreased or unfair
competition, conflicts of interest or unsound banking practices.

         The Federal  Reserve  Board has by regulation  determined  that certain
activities are closely related to banking within the meaning of the BHCA.  These
activities  include operating a mortgage company,  finance company,  credit card
company,  factoring company,  trust company or savings  association;  performing
certain data  processing  operations;  providing  limited  securities  brokerage
services;  acting as an investment or financial advisor;  acting as an insurance
agent for certain types of credit-related  insurance;  leasing personal property
on a full-payout,  non-operating  basis;  providing tax planning and preparation
services; operating a collection agency; and providing certain courier services.
The Federal  Reserve Board also has  determined  that certain other  activities,
including real estate  brokerage and  syndication,  land  development,  property
management   and   underwriting   of  life   insurance  not  related  to  credit
transactions, are not closely related to banking and a proper incident thereto.

         Capital  Requirements.  The Federal  Reserve Board has adopted  capital
adequacy  guidelines  pursuant to which it assesses  the  adequacy of capital in
examining and supervising a bank holding  company and in analyzing  applications
to it under the BHCA.  The Federal  Reserve  Board capital  adequacy  guidelines
generally  require bank holding  companies to maintain total capital equal to 8%
of total risk-adjusted  assets, with at least one-half of that amount consisting
of Tier I or core capital and up to one-half of that amount  consisting  of Tier
II or supplementary capital. Tier I capital for bank holding companies generally
consists of the sum of common stockholders' equity and perpetual preferred stock
(subject in the case of the latter to limitations on the kind and amount of such
stocks which may be included as Tier I capital),  less goodwill. Tier II capital
generally  consists of hybrid capital  instruments;  perpetual  preferred  stock
which is not eligible to be included as Tier I capital;  term  subordinated debt
and  intermediate-term  preferred stock;  and,  subject to limitations,  general
allowances for loan losses.  Assets are adjusted under the risk-based guidelines
to take into account different risk characteristics, with the categories ranging
from 0% (requiring  no  additional  capital) for assets such as cash to 100% for
the bulk of assets which are typically held by a bank holding company, including
multi-family  residential and commercial real estate loans,  commercial business
loans and consumer loans.  Single-family  residential first mortgage loans which
are not (90 days or more) past-due or non-performing and which have been made in
accordance with prudent  underwriting  standards are assigned a 50% level in the
risk-weighting system, while certain  privately-issued MBS representing indirect
ownership of such loans are assigned a 20% level in the  risk-weighting  system.
Off-balance  sheet items also are  adjusted to take into  account  certain  risk
characteristics.

                                       23
<PAGE>

         In addition to the risk-based capital requirements, the Federal Reserve
Board  requires bank holding  companies to maintain a minimum  leverage  capital
ratio of Tier I capital to total  assets of 3%.  Total  assets for this  purpose
does not include goodwill and any other  intangible  assets and investments that
the Federal Reserve Board determines should be deducted from Tier I capital. The
Federal  Reserve Board has announced  that the 3% Tier I leverage  capital ratio
requirement is the minimum for the top-rated bank holding  companies without any
supervisory,  financial or operational weaknesses or deficiencies or those which
are not  experiencing or  anticipating  significant  growth.  Other bank holding
companies  will be  expected to maintain  Tier I leverage  capital  ratios of at
least 4% to 5% or more, depending on their overall condition.

         The Company is in compliance with the  above-described  Federal Reserve
Board regulatory capital requirements.

         Commitments  to Affiliated  Institutions.  Under Federal  Reserve Board
policy,  the Company is expected to act as a source of financial strength to the
Savings   Bank  and  to  commit   resources  to  support  the  Savings  Bank  in
circumstances  when it might not do so absent  such  policy.  The  legality  and
precise scope of this policy is unclear.


The Savings Bank

         General.  The  Savings  Bank is subject  to  extensive  regulation  and
examination by the Department and by the FDIC, which insures its deposits to the
maximum  extent  permitted  by  law,  and is  subject  to  certain  requirements
established  by the  Federal  Reserve  Board.  The  federal  and state  laws and
regulations  which are  applicable to banks  regulate,  among other things,  the
scope of their business, their investments, their reserves against deposits, the
timing of the  availability  of deposited funds and the nature and amount of and
collateral for certain  loans.  The laws and  regulations  governing the Savings
Bank  generally  have been  promulgated  to protect  depositors  and not for the
purpose of protecting stockholders.

         FDIC  Insurance  Premiums.  The Savings  Bank  currently  pays  deposit
insurance premiums to the FDIC on a risk-based  assessment system established by
the FDIC.  Under  applicable  regulations,  institutions  are assigned to one of
three  capital  groups  which is based  solely on the level of an  institution's
capital - "well capitalized",  "adequately  capitalized" and "undercapitalized"-
which is defined in the same manner as the regulations  establishing  the prompt
corrective  action system under Section 38 of the Federal Deposit  Insurance Act
("FDIA"),  as  discussed  below.  These three groups are then divided into three
subgroups which reflect varying levels of supervisory concern,  from those which
are  considered to be healthy to those which are considered to be of substantial
supervisory  concern.  The matrix so created  results  in nine  assessment  risk
classifications,  with rates  ranging from 0.00% for well  capitalized,  healthy
institutions  to  0.27%  for  undercapitalized   institutions  with  substantial
supervisory concerns. The Savings Bank is a "well capitalized" institution as of
June 30, 2006.

         Capital Requirements.  The FDIC has promulgated regulations and adopted
a statement of policy  regarding the capital adequacy of  state-chartered  banks
which,  like the Savings Bank,  are not members of the Federal  Reserve  System.
These  requirements  are  substantially  similar to those adopted by the Federal
Reserve Board regarding bank holding companies, as described above.

         The FDIC's capital  regulations  establish a minimum 3% Tier I leverage
capital requirement for the most highly-rated state-chartered, non-member banks,
with an  additional  cushion  of at least 100 to 200 basis  points for all other
state-chartered,  non-member banks,  which effectively will increase the minimum
Tier I leverage ratio for such other banks to 4% to 5% or more. Under the FDIC's
regulation,  highest-rated  banks are  those  that the FDIC  determines  are not
anticipating or experiencing  significant growth and have well diversified risk,
including no undue interest rate risk exposure,  excellent  asset quality,  high
liquidity,  good earnings and, in general, which are considered a strong banking
organization  and rated  composite  1 under the Uniform  Financial  Institutions
Rating System.

         A bank which has less than the  minimum  leverage  capital  requirement
shall,  within  60 days of the date as of which it  fails to  comply  with  such
requirement,  submit to its FDIC regional  director for review and  approval,  a
reasonable  plan describing the means and timing by which the bank shall achieve
its minimum leverage capital  requirement.  A bank which fails to file such plan
with the FDIC is deemed to be  operating  in an unsafe and unsound  manner,  and
could  subject the bank to a  cease-and-desist  order from the FDIC.  The FDIC's
regulation also provides that any insured depository institution with a ratio of
Tier I capital to total

                                       24
<PAGE>

assets  that is less than 2% is deemed to be  operating  in an unsafe or unsound
condition  pursuant  to Section  8(a) of the FDIA and is  subject  to  potential
termination  of deposit  insurance.  However,  such an  institution  will not be
subject to an enforcement proceeding thereunder solely on account of its capital
ratios if it has entered into and is in compliance with a written agreement with
the FDIC to increase its Tier I leverage capital ratio to such level as the FDIC
deems  appropriate  and to take such other  action as may be  necessary  for the
institution  to be  operated  in a safe  and  sound  manner.  The  FDIC  capital
regulation  also provides,  among other things,  for the issuance by the FDIC or
its designee(s) of a capital directive,  which is a final order issued to a bank
that fails to maintain  minimum  capital to be restored to the minimum  leverage
capital   requirement  within  a  specified  time  period.   Such  directive  is
enforceable in the same manner as a final cease-and-desist order.


Miscellaneous

         The  Savings  Bank is subject to certain  restrictions  on loans to the
Company,  on  investments in the stock or securities  thereof,  on the taking of
such stock or  securities as  collateral  for loans to any borrower,  and on the
issuance  of a  guarantee  or letter of  credit  on behalf of the  Company.  The
Savings  Bank  is  also  subject  to  certain  restrictions  on  most  types  of
transactions with the Company,  requiring that the terms of such transactions be
substantially  equivalent to terms of similar  transactions with  non-affiliated
firms.  In  addition,  there are  various  limitations  on the  distribution  of
dividends to the Company by the Savings Bank.

         The foregoing  references to laws and regulations  which are applicable
to the Company and the Savings  Bank are brief  summaries  thereof  which do not
purport to be complete and which are qualified in their entirety by reference to
such laws and regulations.

                                       25
<PAGE>

                           FEDERAL AND STATE TAXATION

         General.  The Company and the Savings Bank are subject to the generally
applicable  corporate tax  provisions of the Internal  Revenue Code of 1986 (the
"Code"),  as well as certain  provisions  of the Code which  apply to thrift and
other types of financial  institutions.  The following discussion of tax matters
is  intended  only as a  summary  and does  not  purport  to be a  comprehensive
description of the tax rules applicable to the Company and the Savings Bank.

         Fiscal Year. The Company currently files a consolidated  federal income
tax return on the basis of the calendar year ending on December 31.

         Method of Accounting.  The Company  maintains its books and records for
federal income tax purposes using the accrual method of accounting.  The accrual
method of accounting  generally requires that items of income be recognized when
all events have occurred that  establish the right to receive the income and the
amount of income can be determined  with  reasonable  accuracy and that items of
expense be deducted  at the later of (1) the time when all events have  occurred
that establish the liability to pay the expense and the amount of such liability
can be  determined  with  reasonable  accuracy  or (2) the  time  when  economic
performance with respect to the item of expense has occurred.

         Bad Debt Reserves.  Historically  under Section 593 of the Code, thrift
institutions  such as the Savings  Bank,  which met certain  definitional  tests
primarily  relating  to their  assets  and the  nature of their  business,  were
permitted to establish a tax reserve for bad debts and to make annual  additions
within specified  limitations  which may have been deducted in arriving at their
taxable income. The Savings Bank's deduction with respect to "qualifying loans",
which are generally  loans secured by certain  interests in real  property,  may
currently be computed  using an amount based on the Savings  Bank's  actual loss
experience (the "experience method").

         The Small Business Job Protection Act of 1996,  adopted in August 1996,
generally  (1) repealed the  provision of the Code which  authorized  use of the
percentage  of taxable  income  method by  qualifying  savings  institutions  to
determine deductions for bad debts,  effective for taxable years beginning after
1995,  and (2) required  that a savings  institution  recapture for tax purposes
(i.e. take into income) over a six-year period its applicable  excess  reserves.
For a savings  institution such as West View which is a "small bank", as defined
in the  Code,  generally  this is the  excess  of the  balance  of its bad  debt
reserves as of the close of its last taxable year  beginning  before  January 1,
1996, over the balance of such reserves as of the close of its last taxable year
beginning  before January 1, 1988. Any recapture  would be suspended for any tax
year that began after  December  31,  1995,  and before  January 1, 1998 (thus a
maximum of two years),  in which a savings  institution  originated an amount of
residential loans which was not less than the average of the principal amount of
such loans made by a savings  institution  during  its six most  recent  taxable
years  beginning  before  January 1, 1996.  The amount of tax bad debt  reserves
subject to  recapture  was  approximately  $1.2  million,  which was  recaptured
ratably over a six-year period ending December 31, 2003. In accordance with FASB
No. 109,  deferred  income taxes have  previously  been provided on this amount,
therefore no financial  statement  expense has been recorded as a result of this
recapture.  The Company's  supplemental bad debt reserve of  approximately  $3.8
million is not subject to recapture.

         The  above-referenced  legislation also repealed certain  provisions of
the Code that only apply to thrift  institutions  to which  Section 593 applies:
(1) the denial of a portion of certain tax credits to a thrift institution;  (2)
the special rules with respect to the foreclosure of property  securing loans of
a thrift institution; (3) the reduction in the dividends received deduction of a
thrift  institution;  and (4) the ability of a thrift  institution  to use a net
operating  loss to offset its income  from a residual  interest in a real estate
mortgage  investment  conduit.  The  repeal of these  provisions  did not have a
material adverse effect on the Company's financial condition or operations.

         Audit by IRS. The Company's consolidated federal income tax returns for
taxable  years  through  December 31, 2002,  have been closed for the purpose of
examination by the Internal Revenue Service.

         State Taxation.  The Company is subject to the  Pennsylvania  Corporate
Net Income Tax and Capital Stock and Franchise Tax. The  Pennsylvania  Corporate
Net  Income Tax rate is 9.99% and is  imposed  on the  Company's  unconsolidated
taxable income for federal purposes with certain  adjustments.  In general,  the
Capital  Stock  Tax is a  property  tax  imposed  at the  rate  of  0.489%  of a
corporation's  capital stock

                                       26
<PAGE>

value, which is determined in accordance with a fixed formula based upon average
net income and consolidated net worth.

         The  Savings  Bank  is  taxed  under  the  Pennsylvania  Mutual  Thrift
Institutions  Tax Act (enacted on December  13, 1988,  and amended in July 1989)
(the "MTIT"),  as amended to include thrift  institutions  having capital stock.
Pursuant to the MTIT,  the Savings  Bank's  current tax rate is 11.5%.  The MTIT
exempts the Savings  Bank from all other taxes  imposed by the  Commonwealth  of
Pennsylvania  for state income tax purposes and from all local taxation  imposed
by  political  subdivisions,  except  taxes  on  real  estate  and  real  estate
transfers.  The MTIT is a tax upon net earnings,  determined in accordance  with
generally accepted accounting principles ("GAAP") with certain adjustments.  The
MTIT, in computing GAAP income,  allows for the deduction of interest  earned on
state and federal  securities,  while  disallowing  a  percentage  of a thrift's
interest expense  deduction in the proportion of those securities to the overall
investment  portfolio.  Net operating losses, if any,  thereafter can be carried
forward three years for MTIT purposes.

Item 1A. Risk Factors.
-------- -------------

         In  analyzing  whether  to make or to  continue  an  investment  in our
securities,  investors should consider,  among other factors, the following risk
factors.

         Our  results of  operations  are  significantly  dependent  on economic
conditions and related uncertainties.

         Commercial  banking is affected,  directly and indirectly,  by domestic
and international economic and political conditions and by governmental monetary
and  fiscal  policy.  Conditions  such as  inflation,  recession,  unemployment,
volatile  interest  rates,  real  estate  values,  government  monetary  policy,
international  conflicts, the actions of terrorists and other factors beyond our
control  may  adversely  affect our results of  operations.  Changes in interest
rates, in particular,  could adversely affect our net interest income and have a
number  of  other  adverse  effects  on  our  operations,  as  discussed  in the
immediately  succeeding  risk factor.  Adverse  economic  conditions  also could
result in an increase in loan  delinquencies,  foreclosures  and  non-performing
assets and a decrease  in the value of the  property or other  collateral  which
secures  our  loans,  all  of  which  could  adversely  affect  our  results  of
operations.  We are particularly sensitive to changes in economic conditions and
related  uncertainties in Western  Pennsylvania  because we derive substantially
all of our loans,  deposits and other business from this area.  Accordingly,  we
remain subject to the risks  associated  with prolonged  declines in national or
local economies.

         Changes in interest  rates could have a material  adverse effect on our
operations.

         The operations of financial  institutions such as us are dependent to a
large  extent  on net  interest  income,  which is the  difference  between  the
interest income earned on  interest-earning  assets such as loans and investment
securities and the interest expense paid on interest-bearing liabilities such as
deposits  and  borrowings.  Changes in the general  level of interest  rates can
affect our net interest income by affecting the difference  between the weighted
average  yield earned on our  interest-earning  assets and the weighted  average
rate paid on our interest-bearing  liabilities, or interest rate spread, and the
average life of our interest-earning  assets and  interest-bearing  liabilities.
Changes in interest  rates also can affect our ability to originate  loans;  the
value of our  interest-earning  assets and our ability to realize gains from the
sale of such assets;  our ability to obtain and retain  deposits in  competition
with other available  investment  alternatives;  the ability of our borrowers to
repay  adjustable or variable rate loans;  and the fair value of the derivatives
carried on our balance sheet,  derivative  hedge  effectiveness  testing and the
amount of ineffectiveness recognized in our earnings.  Interest rates are highly
sensitive to many factors,  including  governmental monetary policies,  domestic
and international economic and political conditions and other factors beyond our
control.   Although   we  believe   that  the   estimated   maturities   of  our
interest-earning assets currently are well balanced in relation to the estimated
maturities of our interest-bearing liabilities (which involves various estimates
as to how changes in the  general  level of  interest  rates will  impact  these
assets and liabilities),  there can be no assurance that our profitability would
not be adversely affected during any period of changes in interest rates.

         There are  increased  risks  involved  with  multi-family  residential,
commercial real estate, commercial business and consumer lending activities.

         Our  lending   activities   include   loans   secured  by   speculative
construction,  land  acquisition and development and commercial real estate.  In
addition, from time to time we originate loans for the purchase

                                       27
<PAGE>

or refinancing of multi-family residential real estate.  Speculative residential
construction,  land  acquisition and development,  multi-family  residential and
commercial  real estate  lending  generally  is  considered  to involve a higher
degree of risk  than  single-family  residential  lending  due to a  variety  of
factors,  including generally larger loan balances, the dependency on successful
completion  or  operation  of the project for  repayment,  the  difficulties  in
estimating  construction  costs and loan terms which  often do not require  full
amortization  of the loan  over its term  and,  instead,  provide  for a balloon
payment at stated  maturity.  Our lending  activities  also  include  commercial
business  loans to small to medium  businesses,  which  generally are secured by
various  equipment,  machinery  and other  corporate  assets,  and a variety  of
consumer loans,  including home improvement  loans,  home equity loans and loans
secured by automobiles and other personal property. Although commercial business
loans and leases and consumer  loans  generally  have  shorter  terms and higher
interest  rates than  mortgage  loans,  they  generally  involve  more risk than
mortgage loans because of the nature of, or in certain cases the absence of, the
collateral which secures such loans.

         Our  allowance  for losses on loans and leases may not be  adequate  to
cover probable losses.

         We have  established  an allowance  for loan losses which we believe is
adequate to offset probable  losses on our existing loans and leases.  There can
be no  assurance  that any future  declines  in real estate  market  conditions,
general economic  conditions or changes in regulatory  policies will not require
us to increase our allowance for loan and lease  losses,  which would  adversely
affect our results of operations.

         We are subject to extensive regulation which could adversely affect our
business and operations.

         We and our  subsidiaries  are  subject to  extensive  federal and state
governmental  supervision and regulation,  which are intended  primarily for the
protection of depositors.  In addition,  we and our  subsidiaries are subject to
changes  in  federal  and  state  laws,  as  well  as  changes  in  regulations,
governmental  policies  and  accounting  principles.  The  effects  of any  such
potential  changes cannot be predicted but could  adversely  affect the business
and operations of us and our subsidiaries in the future.

         We  face   strong   competition   which  may   adversely   affect   our
profitability.

         We are subject to vigorous  competition in all aspects and areas of our
business from banks and other financial institutions, including savings and loan
associations,   savings  banks,  finance  companies,  credit  unions  and  other
providers of financial  services,  such as money market mutual funds,  brokerage
firms, consumer finance companies and insurance companies.  We also compete with
non-financial  institutions,  including  retail stores that  maintain  their own
credit  programs  and  governmental  agencies  that make  available  low cost or
guaranteed  loans to certain  borrowers.  Certain of our  competitors are larger
financial  institutions with substantially  greater  resources,  lending limits,
larger  branch  systems  and a  wider  array  of  commercial  banking  services.
Competition from both bank and non-bank organizations will continue.

         We and  our  banking  subsidiary  are  subject  to  capital  and  other
requirements which restrict our ability to pay dividends.

         Our ability to pay  dividends  to our  shareholders  depends to a large
extent upon the dividends we receive from West View Savings Bank. Dividends paid
by the Savings Bank are subject to restrictions  under  Pennsylvania and federal
laws and regulations.  In addition, West View Savings Bank must maintain certain
capital  levels,  which may restrict the ability of the Bank to pay dividends to
us and our ability to pay dividends to our shareholders.

         Holders of our common stock have no preemptive right and are subject to
potential dilution.

         Our articles of  incorporation  do not provide any  shareholder  with a
preemptive  right to subscribe  for  additional  shares of common stock upon any
increase  thereof.  Thus, upon issuance of any additional shares of common stock
or other voting securities of the Company or securities  convertible into common
stock or other voting  securities,  shareholders may be unable to maintain their
pro rata voting or ownership interest in us.


Item 1B. Unresolved Staff Comments
-------- -------------------------

         Not applicable.

                                       28
<PAGE>

Item 2.  Properties.
-------  -----------

         The following table sets forth certain  information with respect to the
         offices and other properties of the Company at June 30, 2006.

         Description/Address                          Leased/Owned
         -------------------                          ------------

         McCandless Office                            Owned
           9001 Perry Highway
           Pittsburgh, PA  15237

         West View Boro Office                        Owned
           456 Perry Highway
           Pittsburgh, PA  15229

         Cranberry Township Office                    Owned
           20531 Perry Highway
           Cranberry Township, PA  16066

         Sherwood Oaks Office                         Leased(1)
           100 Norman Drive
           Cranberry Township, PA  16066

         Bellevue Boro Office                         Leased(2)
           572 Lincoln Avenue
           Pittsburgh, PA  15202

         Franklin Park Boro Office                    Owned
           2566 Brandt School Road
           Wexford, PA  15090

--------
(1)  The Company operates this office out of a retirement  community.  The lease
     expired in June 2006. Negotiations are in process to extend the lease.
(2)  The lease  was for a period  of 15 years  ending  in  September  2006.  The
     Company has renewed the lease for an additional ten years.

Item 3.  Legal Proceedings.
------   -----------------
         (a) 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 consolidated  financial  condition of WVS  Financial
             Corp.

         (b) Not applicable.

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

         Not applicable.


                                       29
<PAGE>

PART II.

Item 5.     Market for  Registrant's  Common Equity, Related Stockholder Matters
------      --------------------------------------------------------------------
            and Issuer Purchases of Equity Securities.
            ------------------------------------------

            (a)    The information  required herein is incorporated by reference
                   on  page  50  of  the   Company's   2006  Annual   Report  to
                   Stockholders included as Exhibit 13 ("2006 Annual Report").
            (b)    Not applicable.

            (c)    The following  table sets forth  information  with respect to
                   purchases of common stock of the Company made by or on behalf
                   of the Company during the three months ended June 30, 2006.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                 ISSUER PURCHASES OF EQUITY SECURITIES
------------------------------------------------------------------------------------------------------
                                                            Total Number of
                           Total                          Shares Purchased as      Maximum Number of
                         Number of                          part of Publicly    Shares that may yet be
                          Shares        Average Price      Announced Plans or   Repurchased Under the
       Period            Purchased    Paid per Share ($)      Programs (1)       Plans or Programs (2)
------------------------------------------------------------------------------------------------------
<C>                        <C>                  <C>                   <C>                    <C>
04/01/06 - 04/30/06          9,439                17.25                 9,439                  83,845
------------------------------------------------------------------------------------------------------
05/01/06 - 05/31/06              0                    -                     0                  83,845
------------------------------------------------------------------------------------------------------
06/01/06 - 06/30/06              0                    -                     0                  83,845
------------------------------------------------------------------------------------------------------
     Total                   9,439                17.25                 9,439                  83,845
------------------------------------------------------------------------------------------------------
</TABLE>

------------

            (1)  All  shares  indicated   were   purchased  under the  Company's
                 Eighth Stock Repurchase Program.

            (2)  Eighth Stock Repurchase Program
                 (a)  Announced September 27, 2005.
                 (b)  125,000 common shares approved for repurchase.
                 (c)  No fixed date of expiration.
                 (d)  This  Program  has  not  expired  and  has  83,845  shares
                      remaining to be purchased at June 30, 2006.
                 (e)  Not applicable.

Item 6.     Selected Financial Data.
------      -----------------------

            The  information  required  herein is incorporated by reference from
            pages 2 to 3 of the Company's 2006 Annual Report.

Item 7.     Management's  Discussion  and  Analysis  of  Financial Condition and
------      --------------------------------------------------------------------
            Results of Operations.
            ---------------------

            The information  required  herein is  incorporated by reference from
            pages 4 to 13 of the Company's 2006 Annual Report.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.
-------     ----------------------------------------------------------

            The  information  required  herein is incorporated by reference from
            pages 13 to 17 of the Company's 2006 Annual Report.

Item 8.     Financial Statements and Supplementary Data.
------      -------------------------------------------

            The  information  required  herein is incorporated by reference from
            pages 18 to 49 of the Company's 2006 Annual Report.

Item 9.     Changes  in  and  Disagreements  with  Accountants on Accounting and
------      --------------------------------------------------------------------
            Financial Disclosure.
            --------------------

            Not applicable.


                                       30
<PAGE>

Item 9A.    Controls and Procedures.
-------     -----------------------

            Our  management  evaluated,  with  the  participation  of our  Chief
            Executive Officer and Chief Financial Officer,  the effectiveness of
            our  disclosure   controls  and  procedures  (as  defined  in  Rules
            13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934)
            as of June 30, 2006. Based on such  evaluation,  our Chief Executive
            Officer  and  Chief  Financial   Officer  have  concluded  that  our
            disclosure  controls  and  procedures  are  designed  to ensure that
            information  required to be  disclosed  by us in the reports that we
            file  or  submit  under  the  Securities  Exchange  Act of  1934  is
            recorded, processed, summarized and reported within the time periods
            specified in the SEC's rules and regulations and are operating in an
            effective manner.

            No change in our  internal  control  over  financial  reporting  (as
            defined in Rules  13a-15(f)  and  15(d)-15(f)  under the  Securities
            Exchange Act of 1934)  occurred  during the fourth fiscal quarter of
            fiscal 2006 that has materially affected, or is reasonably likely to
            materially affect, our internal control over financial reporting.

Item 9B.    Other Information.
-------     -----------------

            Not applicable.

PART III

Item 10.    Directors and Executive Officers of the Registrant.
-------     --------------------------------------------------

            The  information  required  herein is incorporated by reference from
            pages 2 to 8 of the  Company's  Proxy  Statement for the 2006 Annual
            Meeting  of   Stockholders   dated   September   29,  2006   ("Proxy
            Statement").

            The  Company  has  adopted a Code of Ethics  for its  employees  and
            directors and executive officers. See Exhibits 14.1 and 14.2 to this
            Annual Report on Form 10-K. Upon receipt of a written  request,  the
            Company will furnish to any person,  without  charge,  a copy of its
            Code of  Ethics  for  its  employees  and  directors  and  executive
            officers.  Such written requests should be directed to WVS Financial
            Corp.,   9001  Perry  Highway,   Pittsburgh,   Pennsylvania   15237,
            attention: Corporate Secretary.

Item 11.    Executive Compensation.
-------     ----------------------

            The  information  required  herein is incorporated by reference from
            pages 10 to 15 of the Company's Proxy Statement.

Item 12.    Security  Ownership of  Certain Beneficial Owners and Management and
-------     --------------------------------------------------------------------
            Related Stockholder Matters.
            ---------------------------

            The security  ownership of certain  beneficial owners and management
            information  required herein is incorporated by reference from pages
            8 to 9 of the Company's  Proxy  Statement.  The following table sets
            forth  certain  information  for all equity  compensation  plans and
            individual  compensation  arrangements  (whether  with  employees or
            non-employees, such as directors) in effect as of June 30, 2006.

<TABLE>
<CAPTION>

                                        Equity Compensation Plan Information
===================================================================================================================

                                                                                   Number of securities remaining
                                 Number of securities to be    Weighted-average     available for future issuance
                                   issued upon exercise of     exercise price of   under equity compensation plans
                                    outstanding options,     outstanding options,  (excluding securities reflected
          Plan Category              warrants and rights      warrants and rights       in the first column)
-------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                      <C>                    <C>
Equity compensation plans
approved by security holders               36,406                   $15.51                       --
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders                 --                       --                         --
-------------------------------------------------------------------------------------------------------------------
Total                                      36,406                   $15.51                       --
===================================================================================================================
</TABLE>

                                       31
<PAGE>

Item 13.    Certain Relationships and Related Transactions.
-------     ----------------------------------------------

            The information required herein is incorporated by reference on page
            15 of the Company's Proxy Statement.

Item 14.    Principal Accountant Fees and Services.
-------     --------------------------------------

            The information required herein is incorporated by reference on page
            6 of the Company's Proxy Statement.

PART IV.

Item 15.    Exhibits and Financial Statement Schedules.
-------     ------------------------------------------

            (a) Documents filed as part of this report.

              (1)The  following  documents  are filed as part of this report and
                 are  incorporated  herein by reference  from the Company's 2006
                 Annual Report.

                 Report of Independent Registered Public Accounting Firm.

                 Consolidated Balance Sheet at June 30, 2006 and 2005.

                 Consolidated  Statement  of Income for the Years Ended June 30,
                 2006, 2005 and 2004.

                 Consolidated  Statement of Changes in Stockholders'  Equity for
                 the Years Ended June 30, 2006, 2005 and 2004.

                 Consolidated  Statement  of Cash Flows for the Years Ended June
                 30, 2006, 2005 and 2004.

                 Notes to the Consolidated Financial Statements.

               (2)All  schedules for which  provision is made in the  applicable
                  accounting   regulation   of  the   Securities   and  Exchange
                  Commission ("SEC") are omitted because they are not applicable
                  or the required  information  is included in the  Consolidated
                  Financial Statements or notes thereto.

                                       32
<PAGE>

               (3)The  following  exhibits  are filed as part of this Form 10-K,
                  and this list includes the Exhibit Index.
<TABLE>
<CAPTION>

                   No.             Description                                                                 Page
                   ---        -------------------------                                                        ----
<S>                           <C>                                                                                 <C>
                   3.1        Articles of Incorporation                                                           *
                   3.2        Amended and Restated By-Laws                                                       **
                    4         Stock Certificate of WVS Financial Corp.                                            *
                  10.1        WVS Financial Corp. Recognition Plans and Trusts for
                                   Executive Officers, Directors and Key Employees***                             *

                  10.2        WVS Financial Corp. 1993 Stock Incentive Plan***                                    *
                  10.3        WVS Financial Corp. 1993 Directors' Stock Option Plan***                            *
                  10.4        WVS Financial Corp. Employee Stock Ownership Plan and Trust***                      *
                  10.5        Amended West View Savings Bank Employee Profit Sharing Plan***                      *
                  10.6        Employment Agreements between WVS Financial Corp. and
                                   David Bursic ***                                                            ****

                  10.7        Directors Deferred Compensation Program***                                          *
                   13         2006 Annual Report to Stockholders                                     filed herewith
                  14.1        Ethics Policy                                                                   *****
                  14.2        Code of Ethics for Senior Financial Officers                                    *****
                   21         Subsidiaries of the Registrant - Reference is made to
                                   Item 1. "Business" for the required information                                2
                   23         Consent of Independent Registered Public Accounting Firm               filed herewith
                  31.1        Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive
                                 Officer                                                             filed herewith
                  31.2        Rule 13a-14(a) / 15d-14(a) Certification of the Chief Accounting
                                 Officer                                                             filed herewith
                  32.1        Section 1350 Certification of the Chief Executive Officer              filed herewith
                  32.2        Section 1350 Certification of the Chief Accounting Officer             filed herewith
</TABLE>


      *           Incorporated by reference from the  Registration  Statement on
                  Form S-1 (Registration No. 33-67506) filed by the Company with
                  the SEC on August 16, 1993, as amended.
      **          Incorporated  by reference from the Current Report on Form 8-K
                  filed by the Company with the SEC on August 24, 2005.
      ***         Management contract or compensatory plan or arrangement.
      ****        Incorporated  by reference  from the Form 10-Q for the quarter
                  ended  September 30, 1998 filed by the Company with the SEC on
                  November 13, 1998.
      *****       Incorporated  by reference from the Annual report on Form 10-K
                  filed by the Company with the SEC on September 24, 2004.

                                       33
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                            WVS FINANCIAL CORP.



September 25, 2006                     By: /s/ David J. Bursic
                                           -------------------------------------
                                           David J. Bursic
                                           President and Chief Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


/s/ David J. Bursic
-----------------------------------------
David J. Bursic, Director, President and                     September 25, 2006
Chief Executive Officer
(Principal Executive Officer)




/s/ Keith A. Simpson
-----------------------------------------
Keith A. Simpson,  Vice President,                           September 25, 2006
Treasurer and Chief Accounting Officer
(Principal Accounting Officer)


/s/ Donald E. Hook
-----------------------------------------
Donald E. Hook,                                              September 25, 2006
Chairman of the Board of Directors


/s/ David L. Aeberli
-----------------------------------------
David L. Aeberli, Director                                   September 25, 2006


/s/ Arthur H. Brandt
-----------------------------------------
Arthur H. Brandt, Director                                   September 25, 2006


/s/ Lawrence M. Lehman
-----------------------------------------
Lawrence M. Lehman, Director                                 September 25, 2006


/s/ Margaret VonDerau
-----------------------------------------
Margaret VonDerau, Director                                  September 25, 2006





                                       34