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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended December 31, 2010

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 Number: 0-22444





WVS Financial Corp.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Pennsylvania                                                   |  | 25-1710500                             
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|9001 Perry Highway Pittsburgh, Pennsylvania                    |  | 15237                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

(412)
364-1911

(Registrants telephone number, including area code)





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 reports), and (2) has been subject to such filing requirement for the past 90
days.    YES  x    NO   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    YES   ̈    NO   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

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

Shares outstanding as of February 9, 2011: 2,057,930 shares Common Stock, $.01 par value.









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##### Table of Contents

WVS FINANCIAL CORP. AND SUBSIDIARY

INDEX



|         |  |                                                                                                                                            |  |  |      | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ---- | 
|PART I.  |  | Financial Information                                                                                                                      |  |  | Page | 
|         |  |                                                                                                                                           
|Item 1.  |  | Financial Statements                                                                                                                       |  |  |      | 
|         |  |                                                                                                                                           
|         |  | Consolidated Balance Sheet as of December 31, 2010 and June 30, 2010 (Unaudited)                                                           |  |  | 3    | 
|         |  |                                                                                                                                           
|         |  | Consolidated Statement of Income for the Three and Six Months Ended December 31, 2010 and 2009 (Unaudited)                                 |  |  | 4    | 
|         |  |                                                                                                                                           
|         |  | Consolidated Statement of Changes in Stockholders Equity for the Six Months Ended December 31, 2010 (Unaudited)                           |  |  | 5    | 
|         |  |                                                                                                                                           
|         |  | Consolidated Statement of Cash Flows for the Six Months Ended December 31, 2010 and 2009
(Unaudited)                                       |  |  | 6    | 
|         |  |                                                                                                                                           
|         |  | Notes to Unaudited Consolidated Financial Statements                                                                                       |  |  | 8    | 
|         |  |                                                                                                                                           
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations for the Three and
Six Months Ended December 31, 2010 |  |  | 29   | 
|         |  |                                                                                                                                           
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                 |  |  | 36   | 
|         |  |                                                                                                                                           
|Item 4.  |  | Controls and Procedures                                                                                                                    |  |  | 44   | 
|         |  |                                                                                                                                           
|PART II. |  | Other Information                                                                                                                          |  |  | Page | 
|         |  |                                                                                                                                           
|Item 1.  |  | Legal Proceedings                                                                                                                          |  |  | 45   | 
|Item 1A. |  | Risk Factors                                                                                                                               |  |  | 45   | 
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                |  |  | 45   | 
|Item 3.  |  | Defaults Upon Senior Securities                                                                                                            |  |  | 46   | 
|Item 4.  |  | (Removed and Reserved)                                                                                                                     |  |  | 46   | 
|Item 5.  |  | Other Information                                                                                                                          |  |  | 46   | 
|Item 6.  |  | Exhibits                                                                                                                                   |  |  | 46   | 
|         |  | Signatures                                                                                                                                 |  |  | 47   | 



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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(In thousands)



|                                                                                               |  |                   |         |   |               |   |         |  
|---------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------- | - | ------- | -
|                                                                                               |  | December 31, 2010 |         |   | June 30, 2010 |  
|Assets                                                                                         |  |                   |         |   |               |   |         |  
|Cash and due from banks                                                                        |  | $                 | 661     |   |               | $ | 438     |  
|Interest-earning demand deposits                                                               |  |                   | 1,425   |   |               |   | 1,760   |  
|                                                                                               |  |                   |         |   |               |   |         |  
|Total cash and cash equivalents                                                                |  |                   | 2,086   |   |               |   | 2,198   |  
|Certificates of deposit                                                                        |  |                   | 7,005   |   |               |   | 8,605   |  
|Investment securities available-for-sale (amortized cost of $100 and $0)                       |  |                   | 99      |   |               |   |        |  
|Investment securities held-to-maturity (fair value of $120,509 and $157,379)                   |  |                   | 117,208 |   |               |   | 153,193 |  
|Mortgage-backed securities available-for-sale (amortized cost of $1,997 and $2,019)            |  |                   | 2,128   |   |               |   | 2,146   |  
|Mortgage-backed securities held-to-maturity (fair value of $74,443 and $110,443)               |  |                   | 74,048  |   |               |   | 114,986 |  
|Net loans receivable (allowance for loan losses of $661 and $645)                              |  |                   | 54,794  |   |               |   | 56,315  |  
|Accrued interest receivable                                                                    |  |                   | 1,994   |   |               |   | 2,430   |  
|Federal Home Loan Bank stock, at cost                                                          |  |                   | 10,332  |   |               |   | 10,875  |  
|Premises and equipment                                                                         |  |                   | 631     |   |               |   | 679     |  
|Prepaid FDIC insurance premium                                                                 |  |                   | 658     |   |               |   | 855     |  
|Deferred tax assets (net)                                                                      |  |                   | 1,408   |   |               |   | 1,533   |  
|Other assets                                                                                   |  |                   | 546     |   |               |   | 853     |  
|                                                                                               |  |                   |         |   |               |   |         |  
|TOTAL ASSETS                                                                                   |  | $                 | 272,937 |   |               | $ | 354,668 |  
|                                                                                               |  |                   |         |   |               |   |         |  
|                                                                                               |  |                  
|Liabilities and Stockholders Equity                                                           |  |                   |         |   |               |   |         |  
|Liabilities:                                                                                   |  |                   |         |   |               |   |         |  
|Deposits:                                                                                      |  |                   |         |   |               |   |         |  
|Non-interest-bearing accounts                                                                  |  | $                 | 13,594  |   |               | $ | 14,828  |  
|NOW accounts                                                                                   |  |                   | 19,361  |   |               |   | 18,792  |  
|Savings accounts                                                                               |  |                   | 35,559  |   |               |   | 35,137  |  
|Money market accounts                                                                          |  |                   | 23,096  |   |               |   | 22,797  |  
|Certificates of deposit                                                                        |  |                   | 87,468  |   |               |   | 109,624 |  
|Advance payments by borrowers for taxes and insurance                                          |  |                   | 477     |   |               |   | 744     |  
|                                                                                               |  |                   |         |   |               |   |         |  
|Total savings deposits                                                                         |  |                   | 179,555 |   |               |   | 201,922 |  
|Federal Home Loan Bank advances: long-term                                                     |  |                   | 49,500  |   |               |   | 109,500 |  
|Other short-term borrowings                                                                    |  |                   | 13,950  |   |               |   | 12,510  |  
|Accrued interest payable                                                                       |  |                   | 567     |   |               |   | 837     |  
|Other liabilities                                                                              |  |                   | 1,466   |   |               |   | 2,104   |  
|                                                                                               |  |                   |         |   |               |   |         |  
|TOTAL LIABILITIES                                                                              |  |                   | 245,038 |   |               |   | 326,873 |  
|                                                                                               |  |                   |         |   |               |   |         |  
|                                                                                               |  |                  
|Stockholders equity:                                                                          |  |                   |         |   |               |   |         |  
|Preferred stock:                                                                               |  |                   |         |   |               |   |         |  
|5,000,000 shares, no par value per share, authorized; none Issued                              |  |                   |        |   |               |   |        |  
|Common stock:                                                                                  |  |                   |         |   |               |   |         |  
|10,000,000 shares, $.01 par value per share, authorized; 3,805,636 and 3,805,636 shares issued |  |                   | 38      |   |               |   | 38      |  
|Additional paid-in capital                                                                     |  |                   | 21,426  |   |               |   | 21,415  |  
|Treasury stock: 1,747,706 and 1,747,706 shares at cost, respectively                           |  |                   | (26,690 | ) |               |   | (26,690 | )
|Retained earnings, substantially restricted                                                    |  |                   | 35,132  |   |               |   | 35,270  |  
|Accumulated other comprehensive loss                                                           |  |                   | (2,007  | ) |               |   | (2,238  | )
|                                                                                               |  |                   |         |   |               |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                     |  |                   | 27,899  |   |               |   | 27,795  |  
|                                                                                               |  |                   |         |   |               |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                     |  | $                 | 272,937 |   |               | $ | 354,668 |  
|                                                                                               |  |                   |         |   |               |   |         |  

See accompanying notes to unaudited consolidated financial statements.



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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

(In thousands, except per share data)



|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|----------------------------------------------------------------------- |  | ------------------------------ | --------- |  | ---------------------------- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | -
|                                                                        |  | Three Months EndedDecember 31, |           |  | Six Months EndedDecember 31, |  
|                                                                        |  | 2010                           |           |  | 2009                         |   |           | 2010 |  |   | 2009      | 
|INTEREST AND DIVIDEND INCOME:                                           |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Loans                                                                   |  | $                              | 837       |  |                              | $ | 926       |      |  | $ | 1,718     |  |  | $ | 2,028     |  
|Investment securities                                                   |  |                                | 1,096     |  |                              |   | 1,496     |      |  |   | 2,372     |  |  |   | 2,823     |  
|Mortgage-backed securities                                              |  |                                | 324       |  |                              |   | 529       |      |  |   | 749       |  |  |   | 1,111     |  
|Certificates of deposit                                                 |  |                                | 34        |  |                              |   | 127       |      |  |   | 72        |  |  |   | 312       |  
|Interest-earning demand deposits                                        |  |                                | 1         |  |                              |   |          |      |  |   | 2         |  |  |   | 2         |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Total interest and dividend income                                      |  |                                | 2,292     |  |                              |   | 3,078     |      |  |   | 4,913     |  |  |   | 6,276     |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|                                                                        |  |                                |           | 
|INTEREST EXPENSE:                                                       |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Deposits                                                                |  |                                | 252       |  |                              |   | 316       |      |  |   | 538       |  |  |   | 692       |  
|Federal Home Loan Bank advances                                         |  |                                | 816       |  |                              |   | 1,797     |      |  |   | 2,267     |  |  |   | 3,592     |  
|Federal Reserve Bank short-term borrowings                              |  |                                |          |  |                              |   | 45        |      |  |   |          |  |  |   | 85        |  
|Other short-term borrowings                                             |  |                                | 8         |  |                              |   | 2         |      |  |   | 14        |  |  |   | 4         |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Total interest expense                                                  |  |                                | 1,076     |  |                              |   | 2,160     |      |  |   | 2,819     |  |  |   | 4,373     |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|                                                                        |  |                                |           | 
|NET INTEREST INCOME                                                     |  |                                | 1,216     |  |                              |   | 918       |      |  |   | 2,094     |  |  |   | 1,903     |  
|PROVISION (RECOVERY) FOR LOAN LOSSES                                    |  |                                | 7         |  |                              |   | (9        | )    |  |   | 16        |  |  |   | (6        | )
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR LOAN LOSSES          |  |                                | 1,209     |  |                              |   | 927       |      |  |   | 2,078     |  |  |   | 1,909     |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|                                                                        |  |                                |           | 
|NON-INTEREST INCOME:                                                    |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Service charges on deposits                                             |  |                                | 65        |  |                              |   | 69        |      |  |   | 122       |  |  |   | 147       |  
|Gains on trading assets                                                 |  |                                |          |  |                              |   |          |      |  |   |          |  |  |   | 1         |  
|Investment securities gains                                             |  |                                |          |  |                              |   | 1         |      |  |   |          |  |  |   | 1         |  
|Other than temporary impairment losses                                  |  |                                |          |  |                              |   |          |      |  |   |          |  |  |   |          |  
|Portion of loss recognized in other comprehensive income (before taxes) |  |                                |          |  |                              |   |          |      |  |   |          |  |  |   |          |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Net impairment loss recognized in earnings                              |  |                                |          |  |                              |   |          |      |  |   |          |  |  |   |          |  
|Other                                                                   |  |                                | 89        |  |                              |   | 63        |      |  |   | 157       |  |  |   | 137       |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Total non-interest income                                               |  |                                | 154       |  |                              |   | 133       |      |  |   | 279       |  |  |   | 286       |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|                                                                        |  |                                |           | 
|NON-INTEREST EXPENSE:                                                   |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Salaries and employee benefits                                          |  |                                | 474       |  |                              |   | 486       |      |  |   | 944       |  |  |   | 974       |  
|Occupancy and equipment                                                 |  |                                | 79        |  |                              |   | 75        |      |  |   | 162       |  |  |   | 153       |  
|Data processing                                                         |  |                                | 63        |  |                              |   | 60        |      |  |   | 125       |  |  |   | 120       |  
|Correspondent bank service charges                                      |  |                                | 22        |  |                              |   | 23        |      |  |   | 43        |  |  |   | 46        |  
|Deposit insurance premium                                               |  |                                | 116       |  |                              |   | 73        |      |  |   | 207       |  |  |   | 152       |  
|Other                                                                   |  |                                | 286       |  |                              |   | 209       |      |  |   | 464       |  |  |   | 390       |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Total non-interest expense                                              |  |                                | 1,040     |  |                              |   | 926       |      |  |   | 1,945     |  |  |   | 1,835     |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|                                                                        |  |                                |           | 
|INCOME BEFORE INCOME TAXES                                              |  |                                | 323       |  |                              |   | 134       |      |  |   | 412       |  |  |   | 360       |  
|INCOME TAX EXPENSE                                                      |  |                                | 108       |  |                              |   | 1         |      |  |   | 139       |  |  |   | 56        |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|NET INCOME                                                              |  | $                              | 215       |  |                              | $ | 133       |      |  | $ | 273       |  |  | $ | 304       |  
|                                                                        |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|                                                                        |  |                                |           | 
|EARNINGS PER SHARE:                                                     |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Basic                                                                   |  | $                              | 0.10      |  |                              | $ | 0.06      |      |  | $ | 0.13      |  |  | $ | 0.15      |  
|Diluted                                                                 |  | $                              | 0.10      |  |                              | $ | 0.06      |      |  | $ | 0.13      |  |  | $ | 0.15      |  
|                                                                        |  |                                |           | 
|AVERAGE SHARES OUTSTANDING:                                             |  |                                |           |  |                              |   |           |      |  |   |           |  |  |   |           |  
|Basic                                                                   |  |                                | 2,057,930 |  |                              |   | 2,068,932 |      |  |   | 2,057,930 |  |  |   | 2,069,508 |  
|Diluted                                                                 |  |                                | 2,057,930 |  |                              |   | 2,068,932 |      |  |   | 2,057,930 |  |  |   | 2,069,508 |  

See accompanying notes
to unaudited consolidated financial statements.



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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

(UNAUDITED)

(In thousands)



|                                                                                               |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|---------------------------------------------------------------------------------------------- |  | ----------- | -- |  | ------------------------ | - | ------ | ------------- |  | - | --------------------------------------- | - |  | ------------------------------------------ | ------ | - | ----- | - | ------ | - |  | - | ------ | -
|                                                                                               |  | CommonStock |    |  | AdditionalPaid-InCapital |   |        | TreasuryStock |  |   | RetainedEarningsSubstantiallyRestricted |   |  | AccumulatedOtherComprehensiveIncome (loss) |        |   | Total |  
|Balance at June 30, 2010                                                                       |  | $           | 38 |  |                          | $ | 21,415 |               |  | $ | (26,690                                 | ) |  | $                                          | 35,270 |   |       | $ | (2,238 | ) |  | $ | 27,795 |  
|                                                                                               |  |             |    |  |                          |  
|Comprehensive income:                                                                          |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|                                                                                               |  |             |    |  |                          |  
|Net Income                                                                                     |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            | 273    |   |       |   |        |   |  |   | 273    |  
|Other comprehensive income:                                                                    |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|Non-credit unrealized holding gains on securities with OTTI, net of income tax effect of $ 118 |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   | 228    |   |  |   | 228    |  
|Change in unrealized holding gains on securities, net of income tax effect of $ 1              |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   | 3      |   |  |   | 3      |  
|                                                                                               |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|                                                                                               |  |             |    |  |                          |  
|Comprehensive income                                                                           |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   | 504    |  
|                                                                                               |  |             |    |  |                          |  
|Expense of stock options awarded                                                               |  |             |   |  |                          |   | 11     |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   | 11     |  
|                                                                                               |  |             |    |  |                          |  
|Cash dividends declared ($0.20 per share)                                                      |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            | (411   | ) |       |   |        |   |  |   | (411   | )
|                                                                                               |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   |        |  
|                                                                                               |  |             |    |  |                          |  
|Balance at December 31, 2010                                                                   |  | $           | 38 |  |                          | $ | 21,426 |               |  | $ | (26,690                                 | ) |  | $                                          | 35,132 |   |       | $ | (2,007 | ) |  | $ | 27,899 |  
|                                                                                               |  |             |    |  |                          |   |        |               |  |   |                                         |   |  |                                            |        |   |       |   |        |   |  |   |        |  

See accompanying notes to unaudited consolidated financial statements.



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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)



|                                                                                         |  |                              |         |   |      |   |         |  
|---------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                         |  | Six Months EndedDecember 31, |        
|                                                                                         |  | 2010                         |         |   | 2009 |  
|OPERATING ACTIVITIES                                                                     |  |                              |         |   |      |   |         |  
|                                                                                         |  |                             
|Net income                                                                               |  | $                            | 273     |   |      | $ | 304     |  
|Adjustments to reconcile net income to cash provided by (used for) operating activities: |  |                              |         |   |      |   |         |  
|Provision (recovery) for loan losses                                                     |  |                              | 16      |   |      |   | (6      | )
|Depreciation                                                                             |  |                              | 55      |   |      |   | 50      |  
|Investment securities gains                                                              |  |                              |        |   |      |   | (1      | )
|Accretion of discounts, premiums and deferred loan fees                                  |  |                              | 940     |   |      |   | 618     |  
|Trading gains                                                                            |  |                              |        |   |      |   | (1      | )
|Purchase of trading securities                                                           |  |                              |        |   |      |   | (995    | )
|Proceeds from sale of trading securities                                                 |  |                              |        |   |      |   | 996     |  
|(Increase) decrease in deferred income taxes                                             |  |                              | (111    | ) |      |   | 60      |  
|Decrease in prepaid/accrued income taxes                                                 |  |                              | 147     |   |      |   | 53      |  
|Decrease (increase) in accrued interest receivable                                       |  |                              | 436     |   |      |   | (210    | )
|Decrease in accrued interest payable                                                     |  |                              | (270    | ) |      |   | (88     | )
|Increase in deferred director compensation payable                                       |  |                              | 1       |   |      |   | 2       |  
|Decrease (payment) of prepaid federal deposit insurance premium                          |  |                              | 197     |   |      |   | (1,182  | )
|(Decrease) increase in Transaction Account Clearing Balance payable to Federal Reserve   |  |                              | (665    | ) |      |   | 3       |  
|Other, net                                                                               |  |                              | 314     |   |      |   | (72     | )
|                                                                                         |  |                              |         |   |      |   |         |  
|Net cash provided by (used for) operating activities                                     |  |                              | 1,333   |   |      |   | (469    | )
|                                                                                         |  |                              |         |   |      |   |         |  
|                                                                                         |  |                             
|INVESTING ACTIVITIES                                                                     |  |                              |         |   |      |   |         |  
|                                                                                         |  |                             
|Available-for-sale:                                                                      |  |                              |         |   |      |   |         |  
|Purchase of investment securities                                                        |  |                              | (9,347  | ) |      |   |        |  
|Proceeds from repayments of investments and mortgage-backed securities                   |  |                              | 9,262   |   |      |   | 21      |  
|Proceeds from sales of investments                                                       |  |                              |        |   |      |   | 501     |  
|Held-to-maturity:                                                                        |  |                              |         |   |      |   |         |  
|Purchases of investment securities                                                       |  |                              | (23,856 | ) |      |   | (58,521 | )
|Purchases of mortgage-backed securities                                                  |  |                              |        |   |      |   | (8,242  | )
|Proceeds from repayments of investments                                                  |  |                              | 58,916  |   |      |   | 36,094  |  
|Proceeds from repayments of mortgage-backed securities                                   |  |                              | 41,296  |   |      |   | 32,223  |  
|Purchases of certificates of deposit                                                     |  |                              | (2,732  | ) |      |   | (9,656  | )
|Maturities/redemptions of certificates of deposit                                        |  |                              | 4,327   |   |      |   | 20,214  |  
|Decrease (increase) in net loans receivable                                              |  |                              | 1,491   |   |      |   | (2,005  | )
|Redemption of FHLB stock                                                                 |  |                              | 543     |   |      |   |        |  
|Acquisition of premises and equipment                                                    |  |                              | (7      | ) |      |   | (32     | )
|                                                                                         |  |                              |         |   |      |   |         |  
|Net cash provided by investing activities                                                |  |                              | 79,893  |   |      |   | 10,597  |  
|                                                                                         |  |                              |         |   |      |   |         |  



6



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WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)



|                                                                      |  |                              |         |   |      |   |         |  
|--------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                      |  | Six Months EndedDecember 31, |        
|                                                                      |  | 2010                         |         |   | 2009 |  
|FINANCING ACTIVITIES                                                  |  |                              |         |   |      |   |         |  
|                                                                      |  |                             
|Net increase in transaction and savings accounts                      |  | $                            | 56      |   |      | $ | 2,511   |  
|Net decrease in certificates of deposit                               |  |                              | (7,825  | ) |      |   | (4,008  | )
|Net decrease in advance payments by borrowers for taxes and insurance |  |                              | (267    | ) |      |   | (261    | )
|Net decrease in brokered CDs                                          |  |                              | (3,588  | ) |      |   |        |  
|Net decrease in CDARS one-way buy CDs                                 |  |                              | (10,743 | ) |      |   |        |  
|Repayments of Federal Home Loan Bank long-term advances               |  |                              | (60,000 | ) |      |   |        |  
|Net increase in FHLB short-term advances                              |  |                              |        |   |      |   | 5,000   |  
|Net decrease in Federal Reserve Bank short-term borrowings            |  |                              |        |   |      |   | (31,400 | )
|Net increase in other short-term borrowings                           |  |                              | 1,440   |   |      |   |        |  
|Cash dividends paid                                                   |  |                              | (411    | ) |      |   | (662    | )
|Funds used for purchase of treasury stock                             |  |                              |        |   |      |   | (63     | )
|                                                                      |  |                              |         |   |      |   |         |  
|Net cash used for financing activities                                |  |                              | (81,338 | ) |      |   | (28,883 | )
|                                                                      |  |                              |         |   |      |   |         |  
|                                                                      |  |                             
|Decrease in cash and cash equivalents                                 |  |                              | (112    | ) |      |   | (18,755 | )
|                                                                      |  |                             
|CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                  |  |                              | 2,198   |   |      |   | 21,828  |  
|                                                                      |  |                              |         |   |      |   |         |  
|                                                                      |  |                             
|CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                        |  | $                            | 2,086   |   |      | $ | 3,073   |  
|                                                                      |  |                              |         |   |      |   |         |  
|                                                                      |  |                             
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                     |  |                              |         |   |      |   |         |  
|                                                                      |  |                             
|Cash paid during the period for:                                      |  |                              |         |   |      |   |         |  
|Interest on deposits, escrows and borrowings                          |  | $                            | 3,089   |   |      | $ | 4,461   |  
|Income taxes                                                          |  | $                            |        |   |      | $ | 4       |  
|                                                                      |  |                             
|Non-cash items:                                                       |  |                              |         |   |      |   |         |  
|Unfunded Security Commitments                                         |  | $                            |        |   |      | $ | 964     |  
|Due to Federal Reserve Bank                                           |  | $                            | 465     |   |      | $ | 821     |  
|Educational Improvement Tax Credit                                    |  | $                            |        |   |      | $ | 32      |  

See accompanying notes
to unaudited consolidated financial statements.



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WVS FINANCIAL CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|1. | BASIS OF PRESENTATION
|-- | ---------------------

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include information or footnotes necessary for a
complete presentation of financial condition, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles. However, all adjustments (consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary for a fair presentation have been included. The results of operations for the three and six months ended December 31, 2010, are not necessarily indicative of the results which may be expected for the entire fiscal
year.



|2. | RECENT ACCOUNTING PRONOUNCEMENTS
|-- | --------------------------------

In January 2010, the FASB issued ASU 2010-05, Compensation  Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of Compensation. ASU 2010-05 updates existing
guidance to address the SEC staffs views on overcoming the presumption that for certain shareholders escrowed share arrangements represent compensation. ASU 2010-05 is effective January 15, 2010. The adoption of this guidance did not have
a material impact on the Companys financial position.

In January 2010, the FASB issued ASU No. 2010-06, Fair
Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on
employers disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the
roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of this guidance is not expected to
have a significant impact on the Companys financial statements.

In March 2010, the FASB issued ASU 2010-11,
Derivatives and Hedging. ASU 2010-11 provides clarification and related additional examples to improve financial reporting by resolving potential ambiguity about the breadth of the embedded credit derivative scope exception in ASC
815-15-15-8. ASU 2010-11 is effective at the beginning of the first fiscal quarter beginning after June 15, 2010. The adoption of this guidance did not have a significant impact on the Companys financial statements.

In April 2010, the FASB issued ASU 2010-13, Compensation  Stock Compensation (Topic 718): Effect of Denominating the
Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a
liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2010 and is not expected to have a significant impact on the Companys financial statements.

In April 2010, the FASB issued ASU 2010-18, Receivables (Topic 310): Effect of a Loan Modification When the Loan is a Part of a Pool That is Accounted for as a Single Asset  a consensus of the
FASB Emerging Issues Task Force. ASU 2010-18 clarifies the treatment for a modified loan that was acquired as part of a pool of assets. Refinancing or restructuring the loan does not make it eligible for removal from the pool, the FASB said. The
amendment will be effective for loans that are part of an asset pool and are modified during financial reporting periods that end July 15, 2010 or later and did not have a significant impact on the Companys financial statements.

In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses.ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entitys credit risk exposures



8



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and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after
December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do
not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company has
presented the necessary disclosures in Note 9 herein.

In August 2010, the FASB issued ASU 2010-21, Accounting for
Technical Amendments to Various SEC Rules and Schedules. This ASU amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules, and Codification of Financial Reporting
Policies and is not expected to have a significant impact on the Companys financial statements.

In August 2010, the
FASB issued ASU 2010-22, Technical Corrections to SEC Paragraphs  An announcement made by the staff of the U.S. Securities and Exchange Commission. This ASU amends various SEC paragraphs based on external comments received and the
issuance of SAB 112, which amends or rescinds portions of certain SAB topics and is not expected to have a significant impact on the Companys financial statements.

In September 2010, the FASB issued ASU 2010-25, Plan Accounting  Defined Contribution Pension Plans. The amendments in this ASU require that participant loans be classified as notes receivable from
participants, which are segregated from plan investments and measured at their unpaid principal balance plus any accrued but unpaid interest. The amendments in this update are effective for fiscal years ending after December 15, 2010 and are
not expected to have a significant impact on the Companys financial statements.

In October 2010, the FASB issued ASU
2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts. This ASU addresses the diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance
contracts qualify for deferral. The amendments are effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2011 and are not expected to have a significant impact on the Companys financial
statements.

In December 2010, the FASB issued ASU 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts. This ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of
the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative
factors indicating an impairment may exist. The qualitative factors are consistent with the existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change
that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For public entities, the amendments in this Update are effective for fiscal year, and interim periods within those years, beginning after
December 15, 2010. Early adoption is not permitted. This ASU is not expected to have a significant impact on the Companys financial statements.

In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents
comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual
reporting period only. The amendments also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and earnings. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2010. Early adoption is permitted. This ASU is not expected to have a significant impact on the Companys financial statements.



9



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|3. | EARNINGS PER SHARE
|-- | ------------------

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



|                                                                                                         |  |                                |            |   |                              |  |            |      |  |  |            |   |  |  |            |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---------------------------- |  | ---------- | ---- |  |  | ---------- | - |  |  | ---------- | -
|                                                                                                         |  | Three Months EndedDecember 31, |            |   | Six Months EndedDecember 31, | 
|                                                                                                         |  | 2010                           |            |   | 2009                         |  |            | 2010 |  |  | 2009       |  
|Weighted average common shares outstanding                                                               |  |                                | 3,805,636  |   |                              |  | 3,805,636  |      |  |  | 3,805,636  |   |  |  | 3,805,636  |  
|                                                                                                         |  |                                |            |  
|Average treasury stock shares                                                                            |  |                                | (1,747,706 | ) |                              |  | (1,736,704 | )    |  |  | (1,747,706 | ) |  |  | (1,736,128 | )
|                                                                                                         |  |                                |            |   |                              |  |            |      |  |  |            |   |  |  |            |  
|Weighted average common shares and common stock equivalents used to calculate basic earnings per share   |  |                                | 2,057,930  |   |                              |  | 2,068,932  |      |  |  | 2,057,930  |   |  |  | 2,069,508  |  
|                                                                                                         |  |                                |            |  
|Additional common stock equivalents (stock options) used to calculate diluted earnings per share         |  |                                |           |   |                              |  |           |      |  |  |           |   |  |  |           |  
|                                                                                                         |  |                                |            |   |                              |  |            |      |  |  |            |   |  |  |            |  
|                                                                                                         |  |                                |            |  
|Weighted average common shares and common stock equivalents used to calculate diluted earnings per share |  |                                | 2,057,930  |   |                              |  | 2,068,932  |      |  |  | 2,057,930  |   |  |  | 2,069,508  |  
|                                                                                                         |  |                                |            |   |                              |  |            |      |  |  |            |   |  |  |            |  

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

At December 31,
2010, there were 124,824 options outstanding with an average exercise price of $16.20 which were anti-dilutive for the three and six month periods. At December 31, 2009 there were 125,127 options outstanding with an average exercise price of
$16.20 which were anti-dilutive for the three and six month periods.



|4. | STOCK BASED COMPENSATION DISCLOSURE
|-- | -----------------------------------

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

During the six month periods ended
December 31, 2010 and 2009, the Company recorded $11 thousand and $11 thousand, respectively, in compensation expense related to our share-based compensation awards. As of December 31, 2010, there was approximately $61 thousand of
unrecognized compensation cost related to unvested share-based compensation awards granted in fiscal 2009. That cost is expected to be recognized over the next three years.

In accordance with GAAP, the cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (excess tax benefits) are classified as
financing cash flows.



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##### Table of Contents

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



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

The Company had
79,035 non-vested stock options outstanding at December 31, 2010, and 105,019 unvested stock options outstanding at December 31, 2009. There were no stock options issued during the six months ended December 31, 2010 and 2009.



|5. | COMPREHENSIVE INCOME
|-- | --------------------

Other comprehensive income primarily reflects changes in net unrealized gains/losses on available-for-sale securities. Total comprehensive income is summarized as follows (dollars in thousands):



|                                                                          |  |                                |     |   |                              |   |     |      |  |   |      |   |  |   |     |   |  |   |     |  |  |   |     |  |  |   |     |   |  |   |     |  
|------------------------------------------------------------------------- |  | ------------------------------ | --- | - | ---------------------------- | - | --- | ---- |  | - | ---- | - |  | - | --- | - |  | - | --- |  |  | - | --- |  |  | - | --- | - |  | - | --- | -
|                                                                          |  | Three Months EndedDecember 31, |     |   | Six Months EndedDecember 31, |  
|                                                                          |  | 2010                           |     |   | 2009                         |   |     | 2010 |  |   | 2009 |  
|                                                                          |  |                                |     |   |                              |   |     |     
|Net income                                                                |  |                                |     |   |                              | $ | 215 |      |  |   |      |   |  | $ | 133 |   |  |   |     |  |  | $ | 273 |  |  |   |     |   |  | $ | 304 |  
|Other comprehensive income (loss):                                        |  |                                |     |   |                              |   |     |      |  |   |      |   |  |   |     |   |  |   |     |  |  |   |     |  |  |   |     |   |  |   |     |  
|Unrealized (losses) gains on available for sale securities without OTTI   |  | $                              | (2  | ) |                              |   |     |      |  | $ | (5   | ) |  |   |     |   |  | $ | 4   |  |  |   |     |  |  | $ | (10 | ) |  |   |     |  
|Unrealized gains on securities with OTTI  Held to maturity               |  |                                | 346 |   |                              |   |     |      |  |   |     |   |  |   |     |   |  |   | 346 |  |  |   |     |  |  |   |    |   |  |   |     |  
|Less:                                                                     |  |                                |     |   |                              |   |     |      |  |   |      |   |  |   |     |   |  |   |     |  |  |   |     |  |  |   |     |   |  |   |     |  
|Reclassification adjustment for gain included in net income               |  |                                |    |   |                              |   |     |      |  |   | 1    |   |  |   |     |   |  |   |    |  |  |   |     |  |  |   | 1   |   |  |   |     |  
|                                                                          |  |                                |     |   |                              |   |     |      |  |   |      |   |  |   |     |   |  |   |     |  |  |   |     |  |  |   |     |   |  |   |     |  
|Other comprehensive income (loss) before tax                              |  |                                | 344 |   |                              |   |     |      |  |   | (4   | ) |  |   |     |   |  |   | 350 |  |  |   |     |  |  |   | (9  | ) |  |   |     |  
|Income tax (expense) benefit related to other comprehensive income (loss) |  |                                | 118 |   |                              |   |     |      |  |   | (1   | ) |  |   |     |   |  |   | 119 |  |  |   |     |  |  |   | (3  | ) |  |   |     |  
|                                                                          |  |                                |     |   |                              |   |     |      |  |   |      |   |  |   |     |   |  |   |     |  |  |   |     |  |  |   |     |   |  |   |     |  
|Other comprehensive income (loss) net of tax                              |  |                                |     |   |                              |   | 226 |      |  |   |      |   |  |   | (3  | ) |  |   |     |  |  |   | 231 |  |  |   |     |   |  |   | (6  | )
|                                                                          |  |                                |     |   |                              |   |     |      |  |   |      |   |  |   |     |   |  |   |     |  |  |   |     |  |  |   |     |   |  |   |     |  
|Comprehensive income                                                      |  |                                |     |   |                              | $ | 441 |      |  |   |      |   |  | $ | 130 |   |  |   |     |  |  | $ | 504 |  |  |   |     |   |  | $ | 298 |  
|                                                                          |  |                                |     |   |                              |   |     |      |  |   |      |   |  |   |     |   |  |   |     |  |  |   |     |  |  |   |     |   |  |   |     |  



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|6. | INVESTMENT SECURITIES
|-- | ---------------------

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



|                                                 |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 
|------------------------------------------------ |  | ---------------------- | ------- |  | -------------------- | - | ----- | --------------------- |  | - | ---------- | - |  | - | ------- | 
|                                                 |  | AmortizedCost          |         |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | Fair Value |  
|                                                 |  | (Dollars in Thousands) |        
|December 31, 2010                                |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 
|AVAILABLE FOR SALE                               |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 
|Obligations of states and political subdivisions |  | $                      | 100     |  |                      | $ |      |                       |  | $ | (1         | ) |  | $ | 99      | 
|                                                 |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 
|                                                 |  |                        |         | 
|Total                                            |  | $                      | 100     |  |                      | $ |      |                       |  | $ | (1         | ) |  | $ | 99      | 
|                                                 |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 
|                                                 |  |                        |         | 
|HELD TO MATURITY                                 |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 
|U.S. government agency securities                |  | $                      | 26,931  |  |                      | $ | 133   |                       |  | $ | (140       | ) |  | $ | 26,924  | 
|Corporate debt securities                        |  |                        | 77,686  |  |                      |   | 2,694 |                       |  |   | (2         | ) |  |   | 80,378  | 
|Foreign debt securities(1)                       |  |                        | 8,694   |  |                      |   | 466   |                       |  |   |           |   |  |   | 9,160   | 
|Obligations of states and political subdivisions |  |                        | 3,897   |  |                      |   | 150   |                       |  |   |           |   |  |   | 4,047   | 
|                                                 |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 
|                                                 |  |                        |         | 
|Total                                            |  | $                      | 117,208 |  |                      | $ | 3,443 |                       |  | $ | (142       | ) |  | $ | 120,509 | 
|                                                 |  |                        |         |  |                      |   |       |                       |  |   |            |   |  |   |         | 



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



|                                                 |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|------------------------------------------------ |  | ---------------------- | ------- |  | -------------------- | - | ----- | --------------------- |  | - | --------- | - |  | - | ------- | 
|                                                 |  | AmortizedCost          |         |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | FairValue |  
|                                                 |  | (Dollars in Thousands) |        
|June 30, 2010                                    |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|AVAILABLE FOR SALE                               |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|NONE                                             |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                 |  |                        |         | 
|HELD TO MATURITY                                 |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|U.S. government agency securities                |  | $                      | 55,002  |  |                      | $ | 403   |                       |  | $ | (5        | ) |  | $ | 55,400  | 
|Corporate debt securities                        |  |                        | 83,710  |  |                      |   | 3,090 |                       |  |   | (6        | ) |  |   | 86,794  | 
|Foreign debt securities(1)                       |  |                        | 9,711   |  |                      |   | 482   |                       |  |   |          |   |  |   | 10,193  | 
|Obligations of states and political subdivisions |  |                        | 4,770   |  |                      |   | 222   |                       |  |   |          |   |  |   | 4,992   | 
|                                                 |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                 |  |                        |         | 
|Total                                            |  | $                      | 153,193 |  |                      | $ | 4,197 |                       |  | $ | (11       | ) |  | $ | 157,379 | 
|                                                 |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 



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

During the six months ended December 31, 2010, and December 31, 2009, realized investment securities gains totaled $0 thousand
and $1 thousand, respectively.



12



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##### Table of Contents

The amortized cost and fair values of debt securities at December 31, 2010, by
contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because issuers may have the right to call securities prior to their final maturities.



|                   |  |                        |        |  |                                |   |        |                                |  |   |                    |  |  |       |        |  |  |   |         | 
|------------------ |  | ---------------------- | ------ |  | ------------------------------ | - | ------ | ------------------------------ |  | - | ------------------ |  |  | ----- | ------ |  |  | - | ------- | 
|                   |  | Due inone yearor less  |        |  | Due afterone throughfive years |   |        | Due afterfive throughten years |  |   | Due afterten years |  |  | Total |       
|                   |  | (Dollars in Thousands) |       
|AVAILABLE FOR SALE |  |                        |        |  |                                |   |        |                                |  |   |                    |  |  |       |        |  |  |   |         | 
|Amortized cost     |  | $                      | 100    |  |                                | $ |       |                                |  | $ |                   |  |  | $     |       |  |  | $ | 100     | 
|Fair value         |  |                        | 99     |  |                                |   |       |                                |  |   |                   |  |  |       |       |  |  |   | 99      | 
|                   |  |                        |        |  |                               
|HELD TO MATURITY   |  |                        |        |  |                                |   |        |                                |  |   |                    |  |  |       |        |  |  |   |         | 
|Amortized cost     |  | $                      | 39,004 |  |                                | $ | 49,931 |                                |  | $ | 11,241             |  |  | $     | 17,032 |  |  | $ | 117,208 | 
|Fair value         |  |                        | 39,126 |  |                                |   | 52,366 |                                |  |   | 11,912             |  |  |       | 17,105 |  |  |   | 120,509 | 

Investment securities
with amortized costs of $14.7 million and $28.7 million and fair values of $14.7 million and $29.0 million at December 31, 2010 and June 30, 2010, respectively, were pledged to secure public deposits, repurchase agreements, and for other
purposes as required by law.



|7. | MORTGAGE-BACKED SECURITIES
|-- | --------------------------

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

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

At December 31, 2010, the Companys
Agency CMOs totaled $42.9 million as compared to $70.9 million at June 30, 2010. The Companys private-label CMOs totaled $31.2 million at December 31, 2010 as compared to $44.1 million at June 30, 2010. The $40.9
million decrease in the CMO segment of our MBS portfolio was primarily due to repayments on our Agency CMOs totaling $28.0 million and $13.3 million in repayments on our private-label CMOs which were partially offset by $228 thousand of
non-credit unrealized holding gains on private-label CMOs with OTTI. During the six months ended December 31, 2010, the Company received principal payments totaling $13.3 million on its private-label CMOs. At December 31, 2010,
approximately $74.0 million or 97.2% (book value) of the Companys MBS portfolio, including CMOs, were comprised of adjustable or floating rate investments, as compared to $115.0 million or 98.2% at June 30, 2010. Substantially all
of the Companys floating rate MBS adjust monthly based upon changes in the one month LIBOR. The Company has no investment in multi-family or commercial real estate based MBS.

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



13



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##### Table of Contents

The following table sets forth information with respect to the Companys private-label
CMO portfolio as of December 31, 2010. At the time of purchase, all of our private-label CMOs were rated in the highest investment category by at least two ratings agencies.



|          |  |                      |  |                      |     |  |            |  |      |            |  |  |                |  |  |                |        |  |  |   |        | 
|--------- |  | -------------------- |  | -------------------- | --- |  | ---------- |  | ---- | ---------- |  |  | -------------- |  |  | -------------- | ------ |  |  | - | ------ | 
|          |  |                      |  | At December 31, 2010 |    
|          |  |                      |  | Rating               |     |  | Book Value |  |      | Fair Value | 
|Cusip #   |  | Security Description |  | S&P                  |     |  | Moodys    |  |      | Fitch      |  |  | (in thousands) |  |  | (in thousands) |       
|05949AN63 |  | BOAMS 2005-1 1A7     |  |                      | N/A |  |            |  | Ba1  |            |  |  | AAA            |  |  | $              | 1,707  |  |  | $ | 1,648  | 
|36242DE25 |  | GSR 2005-3F 1A11     |  |                      | N/A |  |            |  | Baa3 |            |  |  | AA             |  |  |                | 1,717  |  |  |   | 1,690  | 
|05949A2H2 |  | BOAMS 2005-3 1A6     |  |                      | N/A |  |            |  | Ba2  |            |  |  | AA             |  |  |                | 584    |  |  |   | 566    | 
|05949A2H2 |  | BOAMS 2005-3 1A6     |  |                      | N/A |  |            |  | Ba2  |            |  |  | AA             |  |  |                | 744    |  |  |   | 722    | 
|225458JZ2 |  | CSFB 05-3 3A4        |  |                      | AAA |  |            |  | N/A  |            |  |  | A              |  |  |                | 4,188  |  |  |   | 4,090  | 
|225458KE7 |  | CSFB 2005-3 3A9      |  |                      | AAA |  |            |  | N/A  |            |  |  | A              |  |  |                | 293    |  |  |   | 285    | 
|225458KE7 |  | CSFB 2005-3 3A9      |  |                      | AAA |  |            |  | N/A  |            |  |  | A              |  |  |                | 886    |  |  |   | 861    | 
|12669G3A7 |  | CWHL 2005 16 A8      |  |                      | N/A |  |            |  | B2   |            |  |  | B              |  |  |                | 829    |  |  |   | 785    | 
|12669G3A7 |  | CWHL 2005 16 A8      |  |                      | N/A |  |            |  | B2   |            |  |  | B              |  |  |                | 1,508  |  |  |   | 1,428  | 
|12669G3A7 |  | CWHL 2005 16 A8      |  |                      | N/A |  |            |  | B2   |            |  |  | B              |  |  |                | 2,065  |  |  |   | 1,955  | 
|12669G3A7 |  | CWHL 2005 16 A8      |  |                      | N/A |  |            |  | B2   |            |  |  | B              |  |  |                | 2,261  |  |  |   | 2,141  | 
|126694CP1 |  | CWHL SER 21 A11      |  |                      | N/A |  |            |  | Caa1 |            |  |  | CCC            |  |  |                | 5,104  |  |  |   | 5,842  | 
|126694KF4 |  | CWHL SER 24 A15      |  |                      | CCC |  |            |  | N/A  |            |  |  | CCC            |  |  |                | 1,250  |  |  |   | 1,406  | 
|126694KF4 |  | CWHL SER 24 A15      |  |                      | CCC |  |            |  | N/A  |            |  |  | CCC            |  |  |                | 2,499  |  |  |   | 2,811  | 
|16162WLW7 |  | CHASE SER S2 A10     |  |                      | N/A |  |            |  | B1   |            |  |  | BBB            |  |  |                | 1,834  |  |  |   | 1,727  | 
|16162WLW7 |  | CHASE SER S2 A10     |  |                      | N/A |  |            |  | B1   |            |  |  | BBB            |  |  |                | 2,568  |  |  |   | 2,418  | 
|126694MP0 |  | CWHL SER 26 1A5      |  |                      | CCC |  |            |  | N/A  |            |  |  | B              |  |  |                | 1,140  |  |  |   | 937    | 
|          |  |                      |  |                      |     |  |            |  |      |            |  |  |                |  |  |                |        |  |  |   |        | 
|          |  |                      |  |                      |     |  |            |  |      |            |  |  |                |  |  | $              | 31,177 |  |  | $ | 31,312 | 
|          |  |                      |  |                      |     |  |            |  |      |            |  |  |                |  |  |                |        |  |  |   |        | 

The Company retains an independent third party to assist it in the determination of a fair value for each of
its private-label CMOs. This valuation is meant to be a Level Three valuation as defined by ASC Topic 820, Fair Value Measurements and Disclosures. The valuation does not represent the actual terms or prices at which any party
could purchase the securities. There is currently no active secondary market for private-label CMOs and there can be no assurance that any secondary market for private-label CMOs will develop. The private-label CMO portfolio had two
previously recorded Other Than Temporary Impairments at December 31, 2010. During the three and six months ending December 31, 2010, the Company recorded $346 thousand of non-credit unrealized holding gains on two of its private-label
CMOs with OTTI due to principal repayments. No additional other than temporary impairments were identified during the quarter ended December 31, 2010.

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



14



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##### Table of Contents

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



|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|----------------------------------------------------- |  | ---------------------- | ------- |  | -------------------- | - | ----- | --------------------- |  | - | --------- | - |  | - | ------- | 
|                                                      |  | AmortizedCost          |         |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | FairValue |  
|                                                      |  | (Dollars in Thousands) |        
|December 31, 2010                                     |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|AVAILABLE FOR SALE                                    |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Government National Mortgage Association certificates |  | $                      | 1,997   |  |                      | $ | 131   |                       |  | $ |          |   |  | $ | 2,128   | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Total                                                 |  | $                      | 1,997   |  |                      | $ | 131   |                       |  | $ |          |   |  | $ | 2,128   | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|HELD TO MATURITY                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Collateralized mortgage obligations:                  |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|Agency                                                |  | $                      | 42,871  |  |                      | $ | 271   |                       |  | $ | (11       | ) |  | $ | 43,131  | 
|Private-label                                         |  |                        | 31,177  |  |                      |   | 1,207 |                       |  |   | (1,072    | ) |  |   | 31,312  | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Total                                                 |  | $                      | 74,048  |  |                      | $ | 1,478 |                       |  | $ | (1,083    | ) |  | $ | 74,443  | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|                                                      |  | AmortizedCost          |         |  | GrossUnrealizedGains |   |       | GrossUnrealizedLosses |  |   | FairValue |  
|                                                      |  | (Dollars in Thousands) |        
|June 30, 2010                                         |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|AVAILABLE FOR SALE                                    |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Government National Mortgage Association certificates |  | $                      | 2,019   |  |                      | $ | 127   |                       |  | $ |          |   |  | $ | 2,146   | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Total                                                 |  | $                      | 2,019   |  |                      | $ | 127   |                       |  | $ |          |   |  | $ | 2,146   | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|HELD TO MATURITY                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Collateralized mortgage obligations:                  |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|Agency                                                |  | $                      | 70,899  |  |                      | $ | 71    |                       |  | $ | (376      | ) |  | $ | 70,594  | 
|Private-label                                         |  |                        | 44,087  |  |                      |   |      |                       |  |   | (4,238    | ) |  |   | 39,849  | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 
|                                                      |  |                        |         | 
|Total                                                 |  | $                      | 114,986 |  |                      | $ | 71    |                       |  | $ | (4,614    | ) |  | $ | 110,443 | 
|                                                      |  |                        |         |  |                      |   |       |                       |  |   |           |   |  |   |         | 



15



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##### Table of Contents

The amortized cost and fair value of mortgage-backed securities at December 31, 2010,
by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



|                   |  |                        |   |  |                                |   |   |                                |  |   |                    |  |  |       |        |  |  |   |        | 
|------------------ |  | ---------------------- | - |  | ------------------------------ | - | - | ------------------------------ |  | - | ------------------ |  |  | ----- | ------ |  |  | - | ------ | 
|                   |  | Due inone yearor less  |   |  | Due afterone throughfive years |   |   | Due afterfive throughten years |  |   | Due afterten years |  |  | Total |       
|                   |  | (Dollars in Thousands) |  
|                   |  |                        |   |  |                               
|AVAILABLE FOR SALE |  |                        |   |  |                                |   |   |                                |  |   |                    |  |  |       |        |  |  |   |        | 
|Amortized cost     |  | $                      |  |  |                                | $ |  |                                |  | $ |                   |  |  | $     | 1,997  |  |  | $ | 1,997  | 
|Fair value         |  |                        |  |  |                                |   |  |                                |  |   |                   |  |  |       | 2,128  |  |  |   | 2,128  | 
|                   |  |                        |   |  |                               
|HELD TO MATURITY   |  |                        |   |  |                                |   |   |                                |  |   |                    |  |  |       |        |  |  |   |        | 
|Amortized cost     |  | $                      |  |  |                                | $ |  |                                |  | $ |                   |  |  | $     | 74,048 |  |  | $ | 74,048 | 
|Fair value         |  |                        |  |  |                                |   |  |                                |  |   |                   |  |  |       | 74,443 |  |  |   | 74,443 | 

At December 31,
2010 and June 30, 2010, mortgage-backed securities with an amortized cost of $25.6 million and $81.4 million and fair values of $26.0 million and $80.8 million, were pledged to secure borrowings with the Federal Home Loan Bank.



|8. | UNREALIZED LOSSES ON SECURITIES
|-- | -------------------------------

The following table shows the Companys gross unrealized losses and fair value, aggregated by category and length of time that the individual securities have been in a continuous unrealized loss
position, at December 31, 2010 and June 30, 2010.



|                                                 |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        |  |  |   |        |  
|------------------------------------------------ |  | ----------------------- | ------ |  | ------------------------ | - | ---- | --------- |  | - | --------------------- |  |  | --------- | ------ | - | --------------------- | - | ------ |  |  | - | ------ | -
|                                                 |  | December 31, 2010       |       
|                                                 |  | Less Than Twelve Months |        |  | Twelve Months or Greater |   |      | Total     | 
|                                                 |  | FairValue               |        |  | GrossUnrealizedLosses    |   |      | FairValue |  |   | GrossUnrealizedLosses |  |  | FairValue |        |   | GrossUnrealizedLosses |  
|                                                 |  | (Dollars in Thousands)  |       
|                                                 |  |                         |        |  |                          |  
|U.S. government agencies securities              |  | $                       | 14,062 |  |                          | $ | (137 | )         |  | $ | 393                   |  |  | $         | (3     | ) |                       | $ | 14,455 |  |  |   | (140   | )
|Corporate debt securities                        |  |                         | 6,415  |  |                          |   | (1   | )         |  |   | 683                   |  |  |           | (1     | ) |                       |   | 7,098  |  |  |   | (2     | )
|Obligations of states and political subdivisions |  |                         | 99     |  |                          |   | (1   | )         |  |   |                      |  |  |           |       |   |                       |   | 99     |  |  |   | (1     | )
|Collateralized mortgage obligations:             |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        | 
|Agency                                           |  |                         | 1,664  |  |                          |   | (1   | )         |  |   | 14,325                |  |  |           | (10    | ) |                       |   | 15,989 |  |  |   | (11    | )
|Private-label                                    |  |                         |       |  |                          |   |     |           |  |   | 21,252                |  |  |           | (1,072 | ) |                       |   | 21,252 |  |  |   | (1,072 | )
|                                                 |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        |  |  |   |        |  
|                                                 |  |                         |        |  |                          |  
|Total                                            |  | $                       | 22,240 |  |                          | $ | (140 | )         |  | $ | 36,653                |  |  | $         | (1,086 | ) |                       | $ | 58,893 |  |  | $ | (1,226 | )
|                                                 |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        |  |  |   |        |  



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##### Table of Contents

|                                     |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        |  |  |   |        |  
|------------------------------------ |  | ----------------------- | ------ |  | ------------------------ | - | ---- | --------- |  | - | --------------------- |  |  | --------- | ------ | - | --------------------- | - | ------ |  |  | - | ------ | -
|                                     |  | June 30, 2010           |       
|                                     |  | Less Than Twelve Months |        |  | Twelve Months or Greater |   |      | Total     | 
|                                     |  | FairValue               |        |  | GrossUnrealizedLosses    |   |      | FairValue |  |   | GrossUnrealizedLosses |  |  | FairValue |        |   | GrossUnrealizedLosses |  
|                                     |  | (Dollars in Thousands)  |       
|                                     |  |                         |        |  |                          |  
|U.S. government agencies securities  |  | $                       |       |  |                          | $ |     |           |  | $ | 404                   |  |  | $         | (5     | ) |                       | $ | 404    |  |  | $ | (5     | )
|Corporate debt securities            |  |                         | 3,893  |  |                          |   | (6   | )         |  |   |                      |  |  |           |       |   |                       |   | 3,893  |  |  |   | (6     | )
|Collateralized mortgage obligations: |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        |  |  |   |        |  
|Agency                               |  |                         | 15,607 |  |                          |   | (116 | )         |  |   | 33,065                |  |  |           | (260   | ) |                       |   | 48,672 |  |  |   | (376   | )
|Private-label                        |  |                         |       |  |                          |   |     |           |  |   | 39,849                |  |  |           | (4,238 | ) |                       |   | 39,849 |  |  |   | (4,238 | )
|                                     |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        |  |  |   |        |  
|                                     |  |                         |        |  |                          |  
|Total                                |  | $                       | 19,500 |  |                          | $ | (122 | )         |  | $ | 73,318                |  |  | $         | (4,503 | ) |                       | $ | 92,818 |  |  | $ | (4,625 | )
|                                     |  |                         |        |  |                          |   |      |           |  |   |                       |  |  |           |        |   |                       |   |        |  |  |   |        |  

In accordance with ASC Topic 820, revisions were made to the recognition and reporting requirements for
Other-Than-Temporary-Impairments (OTTI) of debt securities classified as available-for-sale and held-to-maturity.

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

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



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##### Table of Contents

The following table presents a roll-forward of the credit loss component of the amortized
cost of mortgage-backed securities that we have written down for OTTI and the credit component of the loss that is recognized in earnings. The beginning balance represents the credit loss component for mortgage-backed securities for which OTTI
occurred prior to adoption of the guidance of ASC Topic 320-10-69. OTTI recognized in earnings for credit impaired mortgage-back securities is presented as additions in two components based upon whether the current period is the first time the
mortgage-backed security was credit-impaired (initial credit impairment) or is not the first time the mortgage-backed security was credit impaired (subsequent credit impairments). The credit loss component is reduced if the Company sells, intends to
sell or believes that the Company will be required to sell previously credit-impaired mortgage-backed securities. Additionally, the credit loss component is reduced if the Company receives cash flows in excess of what the Company expected to receive
over the remaining life of the credit impaired mortgage-backed securities, the security matures or is fully written down. Changes in the credit loss component of credit impaired mortgage-backed securities were as follows for the three and six month
periods ended December 31, 2010:



|                                                                                   |  |                                    |     |  |                                  |   |     | 
|---------------------------------------------------------------------------------- |  | ---------------------------------- | --- |  | -------------------------------- | - | --- | 
|                                                                                   |  | Three MonthsEndedDecember 31, 2010 |     |  | Six
MonthsEndedDecember 31, 2010 |  
|                                                                                   |  | (In thousands)                     |     |  |                                  |  
|                                                                                   |  |                                   
|Beginning balance                                                                  |  | $                                  | 194 |  |                                  | $ | 194 | 
|Initial credit impairment                                                          |  |                                    |    |  |                                  |   |    | 
|Subsequent credit impairment                                                       |  |                                    |    |  |                                  |   |    | 
|Reductions for amounts recognized in earnings due to intent or requirement to sell |  |                                    |    |  |                                  |   |    | 
|Reductions for securities sold                                                     |  |                                    |    |  |                                  |   |    | 
|Reduction for increase in cash flows expected to be collected                      |  |                                    |    |  |                                  |   |    | 
|                                                                                   |  |                                    |     |  |                                  |   |     | 
|Ending Balance                                                                     |  | $                                  | 194 |  |                                  | $ | 194 | 
|                                                                                   |  |                                    |     |  |                                  |   |     | 

During the quarter ended December 31, 2010, the Company recorded no credit impairment charge and no
non-credit unrealized holding loss to accumulated other comprehensive income.

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

In conjunction with the adoption of ASC Topic 820 effective June 30, 2009, the Company retained an independent third
party to assist it with the private label CMO portfolio OTTI assessment. The independent third party utilized certain assumptions for producing the cash flow analyses used in the OTTI assessment. Key assumptions would include interest rates,
expected market participant spreads and discount rates, housing prices, projected future delinquency levels and assumed loss rates on any liquidated collateral.

The Company reviewed the independent third partys assumptions used in the December 31, 2010 OTTI process. Based on the results of this review, the Company deemed the independent third
partys assumptions to be reasonable and adopted them. However, different assumptions could produce materially different results, which could impact the Companys conclusions as to whether an impairment is considered other-than-temporary
and the magnitude of the credit loss. Management believes that two private-label CMOs in the portfolio had an Other Than Temporary Impairment at December 31, 2010. During the three and six months ending December 31, 2010, the Company
recorded $228 thousand of non-credit unrealized holding gains on the two private-label CMOs with OTTI due to principal repayments.

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



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

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

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

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

The
Company has investments in 30 positions that are impaired at December 31, 2010, including 10 positions in private-label collateralized mortgage obligations. Based on its analysis, management has concluded that two private-label CMOs are
other-than-temporarily impaired, while the remaining securities portfolio has experienced unrealized losses and a decrease in fair value due to interest rate volatility, illiquidity in the marketplace, or credit deterioration in the
U.S. mortgage markets.



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|9. | LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES
|-- | -------------------------------------------

The following table summarizes the primary segments of the loan portfolio as of December 31, 2010 and June 30, 2010 (in thousands).



|                               |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 
|------------------------------ |  | ----------------- | ------ |  | ----------------------------------- | - | - | ----------------------------------- |  | - | ---------- |  |  | ----------------------------------- | ------ |  | ----------------------------------- | - | - |  |  | - | ------ | 
|                               |  | December 31, 2010 |        |  | June 30, 2010                       |  
|                               |  | TotalLoans        |        |  | Individuallyevaluated forimpairment |   |   | Collectivelyevaluated forimpairment |  |   | TotalLoans |  |  | Individuallyevaluated forimpairment |        |  | Collectivelyevaluated forimpairment |  
|December 31, 2010              |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 
|First mortgage loans:          |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 
|1  4 family dwellings         |  | $                 | 16,492 |  |                                     | $ |  |                                     |  | $ | 16,492     |  |  | $                                   | 17,247 |  |                                     | $ |  |  |  | $ | 17,247 | 
|Construction                   |  |                   | 14,450 |  |                                     |   |  |                                     |  |   | 14,450     |  |  |                                     | 15,059 |  |                                     |   |  |  |  |   | 15,059 | 
|Land acquisition & development |  |                   | 2,514  |  |                                     |   |  |                                     |  |   | 2,514      |  |  |                                     | 2,718  |  |                                     |   |  |  |  |   | 2,718  | 
|Multi-family dwellings         |  |                   | 5,499  |  |                                     |   |  |                                     |  |   | 5,499      |  |  |                                     | 5,636  |  |                                     |   |  |  |  |   | 5,636  | 
|Commercial                     |  |                   | 8,293  |  |                                     |   |  |                                     |  |   | 8,293      |  |  |                                     | 7,635  |  |                                     |   |  |  |  |   | 7,635  | 
|Consumer Loans                 |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 
|Home equity                    |  |                   | 2,006  |  |                                     |   |  |                                     |  |   | 2,006      |  |  |                                     | 2,190  |  |                                     |   |  |  |  |   | 2,190  | 
|Home equity lines of credit    |  |                   | 2,619  |  |                                     |   |  |                                     |  |   | 2,619      |  |  |                                     | 2,676  |  |                                     |   |  |  |  |   | 2,676  | 
|Other                          |  |                   | 260    |  |                                     |   |  |                                     |  |   | 260        |  |  |                                     | 280    |  |                                     |   |  |  |  |   | 280    | 
|Commercial Loans               |  |                   | 3,375  |  |                                     |   |  |                                     |  |   | 3,375      |  |  |                                     | 3,585  |  |                                     |   |  |  |  |   | 3,585  | 
|                               |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 
|                               |  | $                 | 55,508 |  |                                     | $ |  |                                     |  | $ | 55,508     |  |  | $                                   | 57,026 |  |                                     | $ |  |  |  | $ | 57,026 | 
|                               |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 
|Less: Deferred loan fees       |  |                   | 53     |  |                                     |   |   |                                     |  |   |            |  |  |                                     | 66     |  |                                     |   |   |  |  |   |        | 
|                               |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 
|Total                          |  | $                 | 55,455 |  |                                     |   |   |                                     |  |   |            |  |  | $                                   | 56,960 |  |                                     |   |   |  |  |   |        | 
|                               |  |                   |        |  |                                     |   |   |                                     |  |   |            |  |  |                                     |        |  |                                     |   |   |  |  |   |        | 

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

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



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The following table is a summary of the loans considered to be impaired as of
December 31, 2010 and June 30, 2010 (in thousands):



|                                              |  |                    |   |  |                  |   |   |                  |  |   |                  |  |  |   |     | 
|--------------------------------------------- |  | ------------------ | - |  | ---------------- | - | - | ---------------- |  | - | ---------------- |  |  | - | --- | 
|                                              |  | Three Months Ended |   |  | Six Months Ended |  
|                                              |  | December 31,2010   |   |  | December 31,2009 |   |   | December 31,2010 |  |   | December 31,2009 | 
|                                              |  |                    |   | 
|Impaired loans with an allocated allowance    |  | $                  |  |  |                  | $ |  |                  |  | $ |                 |  |  | $ |    | 
|Impaired loans without an allocated allowance |  |                    |  |  |                  |   |  |                  |  |   |                 |  |  |   |    | 
|                                              |  |                    |   |  |                  |   |   |                  |  |   |                  |  |  |   |     | 
|Total impaired loans                          |  | $                  |  |  |                  | $ |  |                  |  | $ |                 |  |  | $ |    | 
|                                              |  |                    |   |  |                  |   |   |                  |  |   |                  |  |  |   |     | 
|                                              |  |                    |   | 
|Allocated allowance on impaired loans         |  | $                  |  |  |                  | $ |  |                  |  | $ |                 |  |  | $ |    | 
|Average impaired loans                        |  |                    |  |  |                  |   |  |                  |  |   |                 |  |  |   | 106 | 
|Income recognized on impaired loans           |  |                    |  |  |                  |   |  |                  |  |   |                 |  |  |   | 28  | 

Total nonaccrual
loans and the related interest income recognized for the three and six months ended December 31, 2010 and December 31, 2009 are as follows (in thousands):



|                                                |  |                    |       |  |                  |   |       |                  |  |   |                  |  |  |   |       | 
|----------------------------------------------- |  | ------------------ | ----- |  | ---------------- | - | ----- | ---------------- |  | - | ---------------- |  |  | - | ----- | 
|                                                |  | Three Months Ended |       |  | Six Months Ended |  
|                                                |  | December 31,2010   |       |  | December 31,2009 |   |       | December 31,2010 |  |   | December 31,2009 | 
|                                                |  |                    |       | 
|Principal outstanding                           |  | $                  | 2,402 |  |                  | $ | 1,620 |                  |  | $ | 2,402            |  |  | $ | 1,620 | 
|                                                |  |                    |       |  |                  |   |       |                  |  |   |                  |  |  |   |       | 
|Interest income that would have been recognized |  |                    | 57    |  |                  |   | 42    |                  |  |   | 81               |  |  |   | 53    | 
|Interest income recognized                      |  |                    | 17    |  |                  |   | 5     |                  |  |   | 18               |  |  |   | 11    | 
|                                                |  |                    |       |  |                  |   |       |                  |  |   |                  |  |  |   |       | 
|                                                |  |                    |       | 
|Interest income foregone                        |  | $                  | 40    |  |                  | $ | 37    |                  |  | $ | 63               |  |  | $ | 42    | 
|                                                |  |                    |       |  |                  |   |       |                  |  |   |                  |  |  |   |       | 

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

Effective December 13, 2006, the FDIC, in conjunction with the other federal banking agencies adopted a Revised Interagency Policy
Statement on the Allowance for Loan and Lease Losses (ALLL). The revised policy statement revised and replaced the banking agencies 1993 policy statement on the ALLL. The revised policy statement provides that an institution must
maintain an ALLL at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. The banking
agencies also revised the policy to ensure consistency with generally accepted accounting principles (GAAP). The revised policy statement updates the previous guidance that describes the responsibilities of the board of directors,
management, and bank examiners regarding the ALLL, factors to be considered in the estimation of the ALLL, and the objectives and elements of an effective loan review system.

Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have
authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: substandard, doubtful and loss. Substandard assets have one or more defined weaknesses
and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of those classified as substandard with the added characteristic that
the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and



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values questionable, and there is a high possibility of loss. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset of the institution is
not warranted. Another category designated asset watch is also utilized by the Bank for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful or
loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured institution must either establish specific allowances for
loan losses in the amount of 100% of the portion of the asset classified loss, or charge-off such amount. General loss allowances established to cover possible losses related to assets classified substandard or doubtful may be included in
determining an institutions regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital.

The Companys general policy is to internally classify its assets on a regular basis and establish prudent general valuation allowances that are adequate to absorb losses that have not been
identified but that are inherent in the loan portfolio. The Company maintains general valuation allowances that it believes are adequate to absorb losses in its loan portfolio that are not clearly attributable to specific loans. The Companys
general valuation allowances are within the following general ranges: (1) 0% to 5% of assets subject to special mention; (2) 5.00% to 100% of assets classified substandard; and (3) 50% to 100% of assets classified doubtful. Any loan
classified as loss is charged-off. To further monitor and assess the risk characteristics of the loan portfolio, loan delinquencies are reviewed to consider any developing problem loans. Based upon the procedures in place, considering the
Companys past charge-offs and recoveries and assessing the current risk elements in the portfolio, management believes the allowance for loan losses at December 31, 2010, is adequate.



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The following tables present the classes of the loan portfolio summarized by the aging
categories of performing loans and nonaccrual loans as of December 31, 2010 and June 30, 2010 (in thousands):



|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|------------------------------ |  | ------- | ------ |  | ------------------- | - | --- | ------------------- |  | - | ----------------- |  |  | ------------- | - |  | ----------- | - | --- | ---------- |  | - | ----- |  |  | - | ------ | 
|                               |  | Current |        |  | 30  59Days PastDue |   |     | 60  89Days PastDue |  |   | 90 Days +Past Due |  |  | TotalPast Due |   |  | Non-Accrual |   |     | TotalLoans | 
|December 31, 2010              |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|First mortgage loans:          |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|1  4 family dwellings         |  | $       | 15,472 |  |                     | $ |    |                     |  | $ |                  |  |  | $             |  |  |             | $ |    |            |  | $ | 1,020 |  |  | $ | 16,492 | 
|Construction                   |  |         | 13,426 |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   | 1,024 |  |  |   | 14,450 | 
|Land acquisition & development |  |         | 2,514  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 2,514  | 
|Multi-family dwellings         |  |         | 5,499  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 5,499  | 
|Commercial                     |  |         | 8,293  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 8,293  | 
|                               |  |         |        |  |                     |   |    
|Consumer Loans                 |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|Home equity                    |  |         | 2,006  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 2,006  | 
|Home equity lines of credit    |  |         | 2,261  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   | 358   |  |  |   | 2,619  | 
|Other                          |  |         | 260    |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 260    | 
|                               |  |         |        |  |                     |   |    
|Commercial Loans               |  |         | 3,375  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 3,375  | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|                               |  | $       | 53,106 |  |                     | $ |    |                     |  | $ |                  |  |  | $             |  |  |             | $ |    |            |  | $ | 2,402 |  |  |   | 55,508 | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|Less: Deferred loan fees       |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   | 53     | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|Total                          |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  | $ | 55,455 | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|                               |  |         |        |  |                     |   |    
|                               |  | Current |        |  | 30  59Days PastDue |   |     | 60  89Days PastDue |  |   | 90 Days +Past Due |  |  | TotalPast Due |   |  | Non-Accrual |   |     | TotalLoans | 
|June 30, 2010                  |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|First mortgage loans:          |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|1  4 family dwellings         |  | $       | 15,884 |  |                     | $ | 56  |                     |  | $ |                   |  |  | $             |   |  |             | $ | 56  |            |  | $ | 1,307 |  |  | $ | 17,247 | 
|Construction                   |  |         | 15,059 |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 15,059 | 
|Land acquisition & development |  |         | 2,718  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 2,718  | 
|Multi-family dwellings         |  |         | 5,636  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 5,636  | 
|Commercial                     |  |         | 7,635  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 7,635  | 
|                               |  |         |        |  |                     |   |    
|Consumer Loans                 |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|Home equity                    |  |         | 2,156  |  |                     |   | 34  |                     |  |   |                   |  |  |               |  |  |             |   | 34  |            |  |   |      |  |  |   | 2,190  | 
|Home equity lines of credit    |  |         | 2,167  |  |                     |   | 150 |                     |  |   |                  |  |  |               |  |  |             |   | 150 |            |  |   | 359   |  |  |   | 2,676  | 
|Other                          |  |         | 280    |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 280    | 
|                               |  |         |        |  |                     |   |    
|Commercial Loans               |  |         | 3,585  |  |                     |   |    |                     |  |   |                  |  |  |               |  |  |             |   |    |            |  |   |      |  |  |   | 3,585  | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|                               |  | $       | 55,120 |  |                     | $ | 240 |                     |  | $ |                  |  |  | $             |  |  |             | $ | 240 |            |  | $ | 1,666 |  |  |   | 57,026 | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|Less: Deferred loan fees       |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   | 66     | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 
|Total                          |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  | $ | 56,960 | 
|                               |  |         |        |  |                     |   |     |                     |  |   |                   |  |  |               |   |  |             |   |     |            |  |   |       |  |  |   |        | 

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



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The following table summarizes the primary segments of the ALLL, segregated into the amount
required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, 2010 and June 30, 2010. Activity in the allowance is presented for the six months ended
December 31, 2010 (in thousands).



|                                      |  |                      |     |  |              |   |     |                              |  |   |              |   |  |            |    |  |               |   |    |                 |  |   |       |  |  |   |    |   |  |   |     | 
|------------------------------------- |  | -------------------- | --- |  | ------------ | - | --- | ---------------------------- |  | - | ------------ | - |  | ---------- | -- |  | ------------- | - | -- | --------------- |  | - | ----- |  |  | - | -- | - |  | - | --- | 
|                                      |  | First Mortgage Loans |     |  |              |   |     |                              |  |   |              |  
|                                      |  | 1  4Family          |     |  | Construction |   |     | LandAcquisition &Development |  |   | Multi-family |   |  | Commercial |    |  | ConsumerLoans |   |    | CommercialLoans |  |   | Total | 
|ALLL balance at June 30, 2010         |  | $                    | 147 |  |              | $ | 47  |                              |  | $ | 213          |   |  | $          | 28 |  |               | $ | 66 |                 |  | $ | 77    |  |  | $ | 67 |   |  | $ | 645 | 
|Charge-offs                           |  |                      |    |  |              |   |    |                              |  |   |             |   |  |            |   |  |               |   |   |                 |  |   |      |  |  |   |   |   |  |   |    | 
|Recoveries                            |  |                      |    |  |              |   |    |                              |  |   |             |   |  |            |   |  |               |   |   |                 |  |   |      |  |  |   |   |   |  |   |    | 
|Provisions                            |  |                      | 11  |  |              |   | 143 |                              |  |   | (158         | ) |  |            |   |  |               |   | 16 |                 |  |   | 5     |  |  |   | (1 | ) |  |   | 16  | 
|                                      |  |                      |     |  |              |   |     |                              |  |   |              |   |  |            |    |  |               |   |    |                 |  |   |       |  |  |   |    |   |  |   |     | 
|ALLL balance at December 31, 2010     |  | $                    | 158 |  |              | $ | 190 |                              |  | $ | 55           |   |  | $          | 28 |  |               | $ | 82 |                 |  | $ | 82    |  |  |   | 66 |   |  | $ | 661 | 
|                                      |  |                      |     |  |              |   |     |                              |  |   |              |   |  |            |    |  |               |   |    |                 |  |   |       |  |  |   |    |   |  |   |     | 
|Individually evaluated for impairment |  |                      |    |  |              |   |    |                              |  |   |             |   |  |            |   |  |               |   |   |                 |  |   |      |  |  |   |   |   |  |   |    | 
|Collectively evaluated for impairment |  |                      | 158 |  |              |   | 190 |                              |  |   | 55           |   |  |            | 28 |  |               |   | 82 |                 |  |   | 82    |  |  |   | 66 |   |  |   | 661 | 
|                                      |  |                      |     |  |              |   |     |                             
|ALLL balance at June 30, 2010         |  | $                    | 147 |  |              | $ | 47  |                              |  | $ | 213          |   |  | $          | 28 |  |               | $ | 66 |                 |  | $ | 77    |  |  | $ | 67 |   |  | $ | 645 | 
|                                      |  |                      |     |  |              |   |     |                              |  |   |              |   |  |            |    |  |               |   |    |                 |  |   |       |  |  |   |    |   |  |   |     | 
|Individually evaluated for impairment |  |                      |    |  |              |   |    |                              |  |   |             |   |  |            |   |  |               |   |   |                 |  |   |      |  |  |   |   |   |  |   |    | 
|Collectively evaluated for impairment |  |                      | 147 |  |              |   | 47  |                              |  |   | 213          |   |  |            | 28 |  |               |   | 66 |                 |  |   | 77    |  |  |   | 67 |   |  |   | 645 | 

The allowance for
loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the granularity of the homogenous pools and the related historical loss ratios and other qualitative factors, as well as the consistency
in the application of assumptions, result in an ALLL that is representative of the risk found in the components of the portfolio at any given time.



|10. | FAIR VALUE MEASUREMENTS
|--- | -----------------------

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



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



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The following tables present the assets reported on a recurring basis on the consolidated
balance sheet at their fair value as of December 31, 2010 and June 30, 2010, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement.



|                                                             |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|------------------------------------------------------------ |  | ----------------- | - |  | -------- | - | ----- | --------- |  | - | ----- |  |  | - | ----- | 
|                                                             |  | December 31, 2010 |  
|                                                             |  | Level I           |   |  | Level II |   |       | Level III |  |   | Total | 
|Assets Measured on a Recurring Basis:                        |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|Investment securities                                        |  | $                 |  |  |          | $ | 99    |           |  | $ |      |  |  | $ | 99    | 
|Mortgage-backed securities available for sale:               |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|Government National Mortgage Association (GNMA) certificates |  | $                 |  |  |          | $ | 2,128 |           |  | $ |      |  |  | $ | 2,128 | 
|                                                             |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|                                                             |  |                   |   | 
|Total                                                        |  | $                 |  |  |          | $ | 2,227 |           |  | $ |      |  |  | $ | 2,227 | 
|                                                             |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|                                                             | 
|                                                             |  | June 30, 2010     |  
|                                                             |  | Level I           |   |  | Level II |   |       | Level III |  |   | Total | 
|Assets Measured on a Recurring Basis:                        |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|Mortgage-backed securities available for sale:               |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|GNMA certificates                                            |  | $                 |  |  |          | $ | 2,146 |           |  | $ |      |  |  | $ | 2,146 | 
|                                                             |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 
|                                                             |  |                   |   | 
|Total                                                        |  | $                 |  |  |          | $ | 2,146 |           |  | $ |      |  |  | $ | 2,146 | 
|                                                             |  |                   |   |  |          |   |       |           |  |   |       |  |  |   |       | 

The following tables present the assets reported on a non-recurring basis on the consolidated balance sheet
at their fair value as of December 31, 2010 and June 30, 2010, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.



|                                                    |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|--------------------------------------------------- |  | ----------------- | - |  | -------- | - | - | --------- |  | - | ----- |  |  | - | ----- | 
|                                                    |  | December 31, 2010 |  
|                                                    |  | Level I           |   |  | Level II |   |   | Level III |  |   | Total | 
|Assets Measured on a Non-recurring Basis:           |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|Mortgage-backed securities held to maturity:        |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|Collateralized mortgage obligations  private-label |  | $                 |  |  |          | $ |  |           |  | $ | 8,853 |  |  | $ | 8,853 | 
|                                                    |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|                                                    |  |                   |   | 
|Total                                               |  | $                 |  |  |          | $ |  |           |  | $ | 8,853 |  |  | $ | 8,853 | 
|                                                    |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|                                                    | 
|                                                    |  | June 30, 2010     |  
|                                                    |  | Level I           |   |  | Level II |   |   | Level III |  |   | Total | 
|Assets Measured on a Non-recurring Basis:           |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|Mortgage-backed securities held to maturity:        |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|Collateralized mortgage obligations  private-label |  | $                 |  |  |          | $ |  |           |  | $ | 9,935 |  |  | $ | 9,935 | 
|                                                    |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 
|                                                    |  |                   |   | 
|Total                                               |  | $                 |  |  |          | $ |  |           |  | $ | 9,935 |  |  | $ | 9,935 | 
|                                                    |  |                   |   |  |          |   |   |           |  |   |       |  |  |   |       | 

Fair values for securities available for sale are determined by obtaining quoted prices on nationally
recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the
securities relationship to other benchmark quoted securities.



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The following table represents the changes in the Level III fair-value category for the six
month period ended December 31, 2010. The Company classifies financial instruments in Level III of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these
unobservable inputs, the valuation model for Level III financial instruments typically also rely on a number of inputs that are readily observable, either directly or indirectly.

Changes in fair value measurements using significant unobservable inputs (Level III) during the six months ended December 31, 2010
are detailed in the following table.



|                                                    |  |                                                                          |        |  
|--------------------------------------------------- |  | ------------------------------------------------------------------------ | ------ | -
|                                                    |  | Private-labelMortgage-backed securitiesHeld-to-maturityDecember 31,
2010 |       
|Beginning balance  July 1, 2010                    |  | $                                                                        | 9,935  |  
|Total net realized/unrealized gains (losses)        |  |                                                                          |        |  
|Included in earnings                                |  |                                                                          |        |  
|Net realized losses on securities held-to-maturity  |  |                                                                          |       |  
|Included in other comprehensive income              |  |                                                                          |        |  
|Net unrealized gains on securities held-to-maturity |  |                                                                          | 346    |  
|Transfers into Level III                            |  |                                                                          |       |  
|Other  paydowns received                           |  |                                                                          | (1,428 | )
|                                                    |  |                                                                          |        |  
|Ending balance  December 31, 2010                  |  | $                                                                        | 8,853  |  
|                                                    |  |                                                                          |        |  



|11. | FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- | -----------------------------------

The carrying amounts and estimated fair values are as follows:



|                            |  |                        |         |  |               |   |         |                |  |   |           |  |  |   |         | 
|--------------------------- |  | ---------------------- | ------- |  | ------------- | - | ------- | -------------- |  | - | --------- |  |  | - | ------- | 
|                            |  | December 31, 2010      |         |  | June 30, 2010 |  
|                            |  | CarryingAmount         |         |  | FairValue     |   |         | CarryingAmount |  |   | FairValue | 
|                            |  | (Dollars in Thousands) |        
|FINANCIAL ASSETS            |  |                        |         |  |               |   |         |                |  |   |           |  |  |   |         | 
|Cash and cash equivalents   |  | $                      | 2,086   |  |               | $ | 2,086   |                |  | $ | 2,198     |  |  | $ | 2,198   | 
|Certificates of deposit     |  |                        | 7,005   |  |               |   | 7,005   |                |  |   | 8,605     |  |  |   | 8,605   | 
|Investment securities       |  |                        | 117,307 |  |               |   | 120,608 |                |  |   | 153,193   |  |  |   | 157,379 | 
|Mortgage-backed securities  |  |                        | 76,176  |  |               |   | 76,571  |                |  |   | 117,132   |  |  |   | 112,589 | 
|Net loans receivable        |  |                        | 54,794  |  |               |   | 58,368  |                |  |   | 56,315    |  |  |   | 60,403  | 
|Accrued interest receivable |  |                        | 1,994   |  |               |   | 1,994   |                |  |   | 2,430     |  |  |   | 2,430   | 
|FHLB stock                  |  |                        | 10,332  |  |               |   | 10,332  |                |  |   | 10,875    |  |  |   | 10,875  | 
|                            |  |                        |         | 
|FINANCIAL LIABILITIES       |  |                        |         |  |               |   |         |                |  |   |           |  |  |   |         | 
|Deposits                    |  | $                      | 179,555 |  |               | $ | 179,777 |                |  | $ | 201,922   |  |  | $ | 202,275 | 
|FHLB advances  long term   |  |                        | 49,500  |  |               |   | 51,005  |                |  |   | 109,500   |  |  |   | 113,721 | 
|Other short-term borrowings |  |                        | 13,950  |  |               |   | 13,950  |                |  |   | 12,510    |  |  |   | 12,510  | 
|Accrued interest payable    |  |                        | 567     |  |               |   | 567     |                |  |   | 837       |  |  |   | 837     | 

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

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



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##### Table of Contents

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

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

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

Cash and Cash Equivalents, Certificates of Deposit, Accrued Interest Receivable and Payable, and
Other Short-term Borrowings

The fair value approximates the current book value.

Investment Securities, Mortgage-Backed Securities, and FHLB Stock

The fair value of investment and mortgage-backed securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for
similar securities. For discussion of valuation of private-label CMOs, see Note 8 Unrealized Losses on Securities. Since the FHLB stock is not actively traded on a secondary market and held exclusively by member financial institutions,
the estimated fair market value approximates the carrying amount.

Net Loans Receivable and Deposits

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

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

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

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

FHLB Advances

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



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##### Table of Contents

Commitments to Extend Credit

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



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##### Table of Contents

|ITEM 2. | 
|------- | 

MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2010

FORWARD LOOKING
STATEMENTS

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

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



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



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



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



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



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



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



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



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



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##### Table of Contents

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

GENERAL

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

West View Savings Bank is a Pennsylvania-chartered,
FDIC-insured stock savings bank conducting business from six offices in the North Hills suburbs of Pittsburgh. The Savings Bank converted to the stock form of ownership in November 1993. The Savings Bank had no subsidiaries at December 31,
2010.

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

FINANCIAL CONDITION

The Companys assets totaled $272.9 million at December 31, 2010, as compared to $354.7 million at June 30, 2010. The $81.8
million or 23.1% decrease in total assets was primarily comprised of a $40.9 million or 35.6% decrease in mortgage-backed securities (MBS) - held to maturity, a $36.0 million or 23.5% decrease in investment securities held to maturity, a $1.6
million or 18.6% decrease in FDIC insured certificates of deposit, and a $1.5 million or 2.7% decrease in net loans receivable. The decrease in mortgage-backed securities  held to maturity was primarily due to paydowns on the Companys
mortgage-backed securities portfolio. The decrease in investment securities- held to maturity was primarily due to $49.0 million of issuer redemptions prior to maturity (i.e., calls) of U.S. Government agency bonds, $6.4 million of maturities/calls
of investment grade corporate bonds, $5.5 million of maturities of investment grade short-term commercial paper, $4.6 million of maturities/calls of investment grade foreign bonds, $1.6 million of maturities of investment grade corporate utility
first mortgage bonds and $900 thousand of maturities/redemptions of tax free municipal bonds, which were partially offset by purchases of $20.9 million of callable U.S. Government agency step-up bonds, $5.5 million of investment grade short-term
commercial paper, $3.7 million of investment grade foreign bonds, $3.0 million of investment grade corporate bonds, and $100 thousand of PA housing agency bonds. The decrease in FDIC insured certificates of deposit was due to $4.3 million in
redemptions of bank certificates of deposit which was partially offset by $2.7 million in investments in bank certificates of deposit. The Company has reduced its overall investment portfolio due to a marked decline in market interest rates and a
narrowing of investment spreads. See Asset and Liability Management.

The Companys total liabilities
decreased $81.9 million or 25.0% to $245.0 million as of December 31, 2010 from $326.9 million as of June 30, 2010. The $81.9 million decrease in total liabilities was primarily comprised of a $60.0 million or 54.8% decrease in maturing
legacy high-cost long-term FHLB advances and, a $22.4 million or 11.1% decrease in total savings deposits, which were partially offset by a $1.4 million or 11.5% increase in other short-term borrowings. The decrease in longterm FHLB advances
was funded primarily by investment cash flows received during the six months ended December 31, 2010. Certificates of deposit decreased $22.2 million, demand and NOW deposits decreased $665 thousand, and advance payments by borrowers for taxes
and insurance decreased $267 thousand, while savings accounts increased $422 thousand and money market accounts increased $299 thousand. The decrease in certificates of deposits is primarily the result of a $10.75 million early partial repayment of
a CDARS One Way Buy CD, a $4 million matured cash management CD related to a local government unit and $2 million of maturing brokered deposits during the six



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months ended December 31, 2010. Management believes that the changes in demand deposits, and advance payments by borrowers for taxes and insurance were primarily attributable to seasonal
payments of local, county and school real estate taxes. See also Asset and Liability Management.

Total
stockholders equity increased $104 thousand or 0.4% to $27.9 million as of December 31, 2010, from approximately $27.8 million as of June 30, 2010. The increase was primarily attributable to Company net income of $273 thousand and
other comprehensive income totaling $231 thousand, which were partially offset by cash dividends totaling $411 thousand. Other comprehensive income was principally attributable to unrealized holding gains on two private label mortgage backed
securities totaling $228 thousand.

RESULTS OF OPERATIONS

General. WVS reported net income of $215 thousand or $0.10 earnings per share (basic and diluted) and $273 thousand or $0.13 earnings per share (basic and diluted) for the three and six months
ended December 31, 2010, respectively. Net income increased by $82 thousand or 61.7% and earnings per share (basic and diluted) increased $0.04 or 66.7% for the three months ended December 31, 2010, when compared to the same period in
2009. The increase in net income was primarily attributable to a $298 thousand increase in net interest income, and a $21 thousand increase in non-interest income, which were partially offset by a $114 thousand increase in non-interest expense, a
$107 thousand increase in income tax expense, and a $16 thousand increase in provisions for loan losses. For the six months ended December 31, 2010, net income decreased $31 thousand or 10.2% and earnings per share (basic and diluted) decreased
$0.02 or 13.3% when compared to the same period in 2009. The decrease in net income was primarily attributable to a $110 thousand increase in non-interest expense, an $83 thousand increase in income tax expense, a $22 thousand increase in provisions
for loan losses, and a $7 thousand decrease in non-interest income, which were partially offset by a $191 thousand increase in net interest income.

Net Interest Income. The Companys net interest income increased by $298 thousand or 32.5% for the three months ended December 31, 2010, when compared to the same period in 2009. The
increase in net interest income is attributable to a $1.1 million decrease in interest expense, which more than offset a $786 thousand decrease in interest income. The decrease in interest income was primarily due to lower average balances of, and
lower rates of interest earned on, financial assets during the quarter ended December 31, 2010 when compared to the same period in 2009. The decrease in interest expense was primarily attributable to the payoff of FHLB long-term, and other
short-term, borrowings and lower rates paid on interest-bearing liabilities during the quarter ended December 31, 2010, when compared to the same period in 2009. For the six months ended December 31, 2010, net interest income increased
$191 thousand or 10.0% when compared to the same period in 2009. The increase in net interest income is attributable to a $1.6 million decrease in interest expense, which was partially offset by a $1.4 million decrease in interest income. The
decrease in interest expense was primarily due to the payoff of FHLB long-term, and other short-term, borrowings, and lower rates paid on interest-bearing liabilities during the six months ended December 31, 2010, when compared to the same
period in 2009. The decrease in interest income was primarily attributable to lower rates earned on, and lower average balances of, financial assets during the six months ended December 31, 2010, when compared to the same period in 2009.

Interest Income. Interest on investment securities decreased $400 thousand or 26.7% and $451 thousand or 16.0%
for the three and six months ended December 31, 2010, respectively, when compared to the same period in 2009. The decrease for the three months ended December 31, 2010 was primarily attributable to a $17.1 million decrease in the average
balance of investment securities and a 71 basis point decrease in the weighted average yield on investment securities outstanding, when compared to the same period in 2009. The decrease for the six months ended December 31, 2010 was primarily
attributable to an 87 basis point decrease in the weighted average yield on investment securities outstanding, which was partially offset by a $6.3 million increase in the average balance of investment securities when compared to the same period in
2009.

Interest on mortgage-backed securities decreased $205 thousand or 38.8% and $362 thousand or 32.6% for the three and
six months ended December 31, 2010, respectively, when compared to the same periods in 2009. The decrease for the three months ended December 31, 2010 was primarily attributable to a $47.2 million decrease in the average balance of U.S.
Government agency mortgage-backed securities outstanding and a $15.9 million decrease in the average balance of private label mortgage-backed securities outstanding, which



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were partially offset by an 8 basis point increase in the weighted average yield earned on U.S. Government agency mortgage-backed securities and a 5 basis point increase in the weighted average
yield earned on private label mortgage-backed securities for the three months ended December 31, 2010, when compared to the same period in 2009. The decrease for the six months ended December 31, 2010, was primarily attributable to a $44.0
million decrease in the average balance of U.S. Government agency mortgage-backed securities outstanding and a $14.1 million decrease in the average balance of private-label mortgage-backed securities outstanding, which were partially offset by a 9
basis point increase in the weighted average yield earned on U.S. Government agency mortgage-backed securities and an 11 basis point increase in the weighted average yield earned on private-label mortgage-backed securities outstanding for the six
months ended December 31, 2010, when compared to the same period in 2009. The decrease in the average balances of mortgage-backed securities during the three and six months ended December 31, 2010 was attributable to principal paydowns of
mortgage-backed securities during the periods. The increase in yield is attributable to slightly higher LIBOR interest rates in the three and six months ended December 31, 2010 when compared to the same periods in 2009.

Interest on FDIC insured bank certificates of deposit decreased $93 thousand or 73.2% and $240 thousand or 76.9% for the three and six
months ended December 31, 2010, respectively, when compared to the same period in 2009. The decrease for the three months ended December 31, 2010 was primarily attributable to a $9.4 million decrease in the average portfolio balance of
certificates of deposit and a 118 basis point decrease in the weighted average yield earned when compared to the same period in 2009. The decrease for the six months ended December 31, 2010 was primarily attributable to an $11.6 million
decrease in the weighted average portfolio balance certificates of deposit and a 138 basis point decrease in the weighted average yield earned when compared to the same period in 2009. The certificates have remaining maturities ranging from one to
fifteen months. Due to decreases in yields in this investment sector, the Company has decided to limit reinvestments in certificates of deposit and to let the portfolio decrease through maturities and early issuer redemptions.

Interest on net loans receivable decreased $89 thousand or 9.6% and $310 thousand or 15.3% for the three and six months ended
December 31, 2010, respectively, when compared to the same periods in 2009. The decrease for the three months ended December 31, 2010 was primarily attributable to a decrease of 29 basis points in the weighted average yield earned on net
loans receivable for the three months ended December 31, 2010, when compared to the same period in 2009, and a $3.1 million decrease in the average balance of net loans receivable outstanding, when compared to the same period in 2009. The
decrease for the six months ended December 31, 2010, was primarily attributable to a decrease of 84 basis points in the weighted average yield earned on net loans receivable for the six months ended December 31, 2010, when compared to the
same period in 2009, and a $2.1 million decrease in the average balance of net loans receivable outstanding, when compared to the same period in 2009. The decrease in the average loan balance of net loans receivable outstanding for the three and six
months ended December 31, 2010 was attributable in part to increased levels of loan payoffs on single-family first mortgage and junior lien loan products. The Company has limited its origination of longer-term fixed rate loans for its portfolio
to mitigate its exposure to a rise in market interest rates. The Company will continue to originate longer-term fixed rate loans for sale on a correspondent basis to increase non-interest income and to contribute to net income.

Dividends on FHLB stock were $0 for the three and six months ended December 31, 2010 and December 31, 2009. This was
attributable to the Federal Home Loan Bank of Pittsburghs suspension of dividends on its common stock. In December 2008, the FHLB of Pittsburgh announced that it was suspending payments of dividends and redemptions of excess capital stock from
members. The FHLBs stated purpose of these actions is to build retained earnings to ensure adequate regulatory capital.

Interest Expense.Interest paid on FHLB advances decreased $981 thousand or 54.6% and $1.3 million or 36.9% for the three and six
months ended December 31, 2010, respectively, when compared to the same periods in 2009. The decrease for the three months ended December 31, 2010 was primarily attributable to a $67.1 million decrease in the average balance of FHLB
long-term advances, when compared to the same period in 2009, and a 35 basis point decrease in the weighted average yield paid on FHLB long-term advances when compared to the same period in 2009. The decrease for the six months ended
December 31, 2010 was primarily attributable to a $45.0 million decrease in the average balance of FHLB long-term advances and a 19 basis point decrease in the weighted average yield paid on FHLB long-term advances when compared to the



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same period in 2009. The decreases in the average balances of FHLB long-term borrowings were due to the maturity of seven FHLB long-term borrowings totaling $60.0 million during the six months
ended December 31, 2010.

Interest expense on deposits and escrows decreased $64 thousand or 20.3% and $154 thousand or
22.3% for the three and six months ended December 31, 2010, respectively, when compared to the same period in 2009. The decrease in interest expense on deposits for the three months ended December 31, 2010 was primarily attributable to a
107 basis point decrease in the weighted average rate paid on time deposits, which was partially offset by a $45.0 million increase in the average balance of time deposits when compared to the same period in 2009. The decrease for the six months
ended December 31, 2010 was primarily attributable to a 118 basis point decrease in the weighted average rate paid on time deposits, which was partially offset by a $47.5 million increase in the average balance of time deposits, when compared
to the same period in 2009. The decrease in average yields of time deposits reflects lower market rates for the three and six months ended December 31, 2010 while the change in average balances for time deposits is a result of the Banks
participation in brokered CD programs.

Interest paid on Federal Reserve Bank (FRB) short-term borrowings decreased $45
thousand or 100.0% and $85 thousand or 100.0% for the three and six months ended December 31, 2010, respectively, when compared to the same periods in 2009. The decrease for the three months ended December 31, 2010 was attributable to the
payoff of all FRB Term Auction Facility borrowings. The FRB terminated the Term Auction Facility in April 2010.

Interest paid
on other short-term borrowings increased $6 thousand or 300.0% and $10 thousand or 250.0% for the three and six months ended December 31, 2010, respectively, when compared to the same periods in 2009. The increase for the three months ended
December 31, 2010 was primarily attributable to a $6.7 million increase in average balances of other short-term borrowings during the period. The increase for the six months ended December 31, 2010 was primarily attributable to a $5.7
million increase in the average balances of other short-term borrowings outstanding when compared to the same period in 2009. The increase in average balances of other short-term borrowings is attributable to more favorable short-term borrowing
rates offered by brokers or comparable FHLB short-term borrowings.

Provision for Loan Losses. A provision for loan
losses is charged to earnings to maintain the total allowance at a level considered adequate by management to absorb potential losses in the portfolio. Managements determination of the adequacy of the allowance is based on an evaluation of the
portfolio considering past experience, current economic conditions, volume, growth and composition of the loan portfolio, and other relevant factors.

Provisions for loan losses increased $16 thousand or 177.8% and $22 thousand or 366.7% for the three and six months ended December 31, 2010, when compared to the same periods in 2009. At
December 31, 2010, the Companys total allowance for loan losses amounted to $661 thousand or 1.2% of the Companys total loan portfolio, as compared to $645 thousand or 1.1% at June 30, 2010.

Non-Interest Income. Non-interest income increased by $21 thousand or 15.8% for the three months ended December 31, 2010, and
decreased $7 thousand or 2.4% for the six months ended December 31, 2010, when compared to the same periods in 2009. The increase for the three months ended December 31, 2010 was primarily attributable to an increase in loan correspondent
fees. The decrease for the six months ended December 31, 2010 was primarily attributable to a decrease in service charges on deposit accounts, which was offset by an increase in correspondent loan fees.

Non-Interest Expense. Non-interest expense increased $114 thousand or 12.3% and $110 thousand or 6.0% for the three and six months
ended December 31, 2010, when compared to the same periods in 2009. The increase for the three months ended December 31, 2010 was principally attributable to an $83 thousand increase in ATM related expenses, and a $43 thousand increase in
Federal Deposit Insurance Corporation (FDIC) insurance expense, which was partially offset by a $12 thousand decrease in employee related expenses. The increase for the six months ended December 31, 2010 was primarily attributable to an $83
thousand increase in ATM related expenses and a $55 thousand increase in FDIC insurance expense, which were partially



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offset by a $30 thousand decrease in employee related expenses. The increase in ATM related expenses, for both the three and six months ended December 31, 2010 were primarily attributable to
the settlement of ATM litigation. See Part II, Item 1, Legal Proceedings, in this Form 10-Q.

Income Tax
Expense.Income tax expense increased $107 thousand and $83 thousand for the three and six months ended December 31, 2010, respectively, when compared to the same periods in 2009. The increase for the three and six months ended
December 31, 2010 was primarily due to higher levels of taxable income and the absence of PA tax credits when compared to the same periods in 2009.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities
totaled $1.3 million during the six months ended December 31, 2010. Net cash provided by operating activities was primarily comprised of $940 thousand in amortizations of premiums and $273 thousand of Company net income.

Funds provided by investing activities totaled $79.9 million during the six months ended December 31, 2010. Primary sources of funds
during the six months ended December 31, 2010, included maturities and repayments of investment securities, mortgage-backed securities and certificates of deposit totaling $68.2 million, $41.3 million and $4.3 million, respectively, which were
partially offset by purchases of investment securities and certificates of deposit totaling $33.2 million and $2.7 million, respectively.

Funds used for financing activities totaled $81.3 million for the six months ended December 31, 2010. The primary uses included a $60.0 million decrease in FHLB long-term advances, a $14.3 million
decrease in wholesale total deposits, and a $7.8 million decrease in retail certificates of deposit. The decrease in FHLB long-term advances reflects paydowns on matured high cost FHLB legacy advances using cash flow from the Companys
investment portfolio. The Company chose to repay $14.3 million of wholesale time deposits using cash flow from repayments on mortgage-backed securities. The $7.8 million decrease in retail time deposits was primarily attributable to a matured $4
million cash management CD for a local government unit. Management believes that a significant portion of our local maturing deposits will remain with the Company.

The Companys primary sources of funds are deposits, amortization, repayments and maturities of existing loans, mortgage-backed securities and investment securities, funds from operations, and funds
obtained through FHLB advances and other borrowings. Certificates of deposit scheduled to mature in one year or less at December 31, 2010 totaled $75.6 million. At December 31, 2010, the Company had outstanding $38.8 million of
certificates of deposits (CDs) issued through the CDARS One-Way Buy Program. CDARS CDs totaling $32.3 million reprice on a monthly basis at LIBOR plus 14 basis points and mature on April 7, 2011. CDARS CDs totaling $6.5
million mature on April 14, 2011 and carry a fixed rate of interest at 0.60%. The Company intends to repay the maturing wholesale CDs with investment and MBS cash flows during fiscal 2011.

At December 31, 2010, the Company also had $2.2 million of other brokered CDs which carried fixed rates of interest ranging
from 0.50% to 0.60% with various maturities through July 19, 2011. During the quarter ended December 31, 2010, approximately $3.6 million of other brokers CDs matured and were repaid.

Historically, the Company used its sources of funds primarily to meet its ongoing commitments to pay maturing savings certificates and
savings withdrawals, fund loan commitments and maintain a substantial portfolio of investment securities. At December 31, 2010, total approved loan commitments outstanding amounted to approximately $130 thousand. At the same date, commitments
under unused lines of credit amounted to $4.8 million and the unadvanced portion of construction loans approximated $7.3 million. The Company has been able to generate sufficient cash through the retail deposit market, its traditional funding
source, and through FHLB advances, and FRB and other borrowings, to provide the cash utilized in investing activities. During the quarter ended March 31, 2010, the Company began to utilize whole-sale deposits in order to rebalance its
short-term liability structure. The use of whole-sale deposits also allows the Company to match its corporate bond maturities and cash-flows from its private-label CMO securities. Management believes that the Company currently has adequate liquidity
available to respond to liquidity demands.



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On January 25, 2011, the Companys Board of Directors declared a cash dividend of
$0.04 per share payable February 24, 2011, to shareholders of record at the close of business on February 14, 2011. Dividends are subject to determination and declaration by the Board of Directors, which take into account the
Companys financial condition, statutory and regulatory restrictions, general economic conditions and other factors. There can be no assurance that dividends will in fact be paid on the Common Stock in future periods or that, if paid, such
dividends will not be reduced or eliminated.

Recently, the Savings Bank learned the results of a targeted regulatory
visitation and review of the Savings Banks asset quality, earnings performance and capital protection. The review was primarily related to the Savings Banks private label mortgage-backed securities portfolio as a result of the previously
reported downgrades of certain private-label CMOs within the Savings Banks investment portfolio by one or more national rating agencies. In connection with the regulatory review, the Savings Bank agreed to take certain actions to monitor
and improve related asset quality in relation to regulatory capital. These actions include: additional documentation and monitoring procedures relating to its assessment of other than temporary impairment and market (fair) value estimates, the
submission of a capital plan to its regulators, and to seek prior non-objection from its banking regulators for any dividends payable by the Savings Bank to the Company. The Company has made similar commitments to the Federal Reserve. The Company
previously announced and reported a reduction of its quarterly cash dividend from $0.16 to $0.04 per share along with the suspension of common stock repurchases under its stock repurchase program. The Company believes that these actions demonstrate
its commitment to serve as a source of strength to the Savings Bank and are appropriate in light of todays economic environment. The Company believes that its liquidity is strong with liquid assets totaling approximately $1.3 million. This
level of liquidity could support operating expenses and the current dividend for about two years without any dividend income from the Savings Bank. Dividends are subject to declaration by the Board of Directors, which take into account the
Companys financial condition, earnings, statutory and regulatory restrictions, general economic conditions and other factors. There can be no assurance that dividends will in fact be paid on the common stock in future periods or that, if paid,
such dividends will not be reduced or eliminated.

As of December 31, 2010, WVS Financial Corp. exceeded all regulatory
capital requirements and maintained Tier I and total risk-based capital equal to $29.9 million or 16.3% and $30.6 million or 16.7%, respectively, of total risk-weighted assets, and Tier I leverage capital of $29.9 million or 10.23% of average
quarterly assets.

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

The Companys nonperforming assets at December 31, 2010 totaled approximately $2.4 million or 0.9% of total assets as compared
to $1.7 million or 0.5% of total assets at June 30, 2010. Nonperforming assets at December 31, 2010 consisted of: four single-family real estate loans totaling $1.0 million, two single-family construction loans totaling $1.0 million, and
two home equity lines of credit totaling $359 thousand. These loans are in various stages of collection activity.

The $737
thousand increase in nonperforming assets during the six months ended December 31, 2010 was attributable to the classification to non-performing status of two single-family construction loans totaling $1.0 million, which were partially offset
by the reclassification to performing status of one single family real estate loan totaling $286 thousand.

During the six
months ended December 31, 2010, approximately $63 thousand of interest income would have been recorded on loans accounted for on a non-accrual basis 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 six months ended December 31, 2010. The Company continues to work with the borrowers in an attempt to cure the defaults and is also pursuing various legal avenues in
order to collect on these loans.



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|ITEM 3. | 
|------- | 

QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

ASSET AND LIABILITY MANAGEMENT

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

Interest rate risk (IRR) is the exposure of a banking organizations financial condition to adverse movements in interest rates. Accepting this risk can be an important source of
profitability and shareholder value, however, excessive levels of IRR can pose a significant threat to the Companys earnings and capital base. Accordingly, effective risk management that maintains IRR at prudent levels is essential to the
Companys safety and soundness.

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

Since December 2007 and into fiscal 2011, the global economy remained in the worst recession since the end of World War II. Many factors contributed to the recession, including: the failure, or near
failure, of major financial institutions, marked declines in housing sales and prices, significant defaults in mortgage payments (particularly in the subprime sector), disruptions in global financial market liquidity, declining stock markets and
increased volatility in the bond, commodity and equity markets.

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

On November 3, 2010, the Federal Open Market Committee (FOMC) decided to
expand the Federal Reserves holdings of securities to promote a stronger pace of economic recovery and to help insure that inflation, over time, is at levels consistent with its mandate. In particular, the FOMC decided to purchase an
additional $600 billion of longer-term U.S. Treasury securities by the end of the second (calendar) quarter of 2011. The Federal Reserve will also continue to reinvest principal payments from agency debt and agency mortgage-backed securities into
longer-term U.S. Treasury securities. Based on its estimates at the time, the Federal Reserve expected to reinvest about $250 - $300 billion of principal repayments. Taken together, the Federal Reserve anticipates purchasing approximately $850 -
$900 billion of longer-term U.S. Treasury securities through the end of the second quarter of 2011.

Throughout the six months
ended December 31, 2010, the Company continued to adjust its asset/liability management tactics in two ways. First, we substantially increased our Tier 1 capital to average assets ratio from 8.21% at June 30, 2010 to 10.23% at
December 31, 2010. We accomplished this primarily by reducing both Company assets and borrowings. With market interest rates at historical lows, we believed



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that the risks of maintaining a leveraged balance sheet far exceed the additional potential income that could be earned. Second, we reduced overall borrowings and changed the composition of our
wholesale funding sources. We reduced our overall borrowings by $58.6 million. Legacy FHLB long-term borrowings were reduced by $60.0 million, while short-term borrowing increased $1.4 million. We also utilized two sources of wholesale funding: the
CDARS One-Way Buy Program and the limited use of other deposit brokers. We believe that the CDARS One-Way Buy Program makes financial sense because it allows us to issue CDs that price monthly using the same LIBOR index used by our floating-rate
MBS. The CDARS CDs, along with the other brokered CDs, also allow us to better match cash flow from our maturing corporate bond investments and monthly principal repayments from the MBS portfolio.

Looking ahead, we continue to believe that our net interest income will improve in fiscal year 2011 primarily through the reduction of
interest expense on long-term fixed rate legacy FHLB advances. Our legacy long-term fixed rate FHLB advances, taken out a number of years ago when interest rates were higher, will mature as shown below.



|              |  |            |      |  |                    |  |      |  
|------------- |  | ---------- | ---- |  | ------------------ |  | ---- | -
|Quarter Ended |  | Amount/$MM |      |  | Weighted Avg. Rate | 
|03/31/11      |  | $          | 10.0 |  |                    |  | 4.99 | %
|06/30/11      |  | $          | 17.0 |  |                    |  | 5.28 | %

We expect to repay a
substantial portion of these legacy long-term FHLB advances as they mature, and to reprice any amounts not repaid at much lower rates of interest.

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

During the six months ended December 31, 2010, intermediate and long-term market
interest rates fluctuated considerably. Many central banks, including the Federal Reserve began a second phase of quantitative easing to stimulate aggregate demand, reduce high levels of unemployment and to further lower market interest rates. In
response to these market conditions, the Company reduced the overall level of both assets and liabilities. Asset levels were reduced in light of considerably lower market yields and narrowing credit spreads. Borrowings were reduced by utilizing
investment cash flow and to lower related interest expense. These actions also allowed us to increase our Tier 1 leverage and risk-based capital ratios. In the December 2010 quarter, intermediate and long-term market interest rates began to rise,
when compared to the quarter ended September 30, 2010. This enabled the Company to begin to buy callable U.S. Government agency step-up notes.



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



|                   |  |                       |  |                     |      |   |                      |  |      |                     |  |                    
|------------------ |  | --------------------- |  | ------------------- | ---- | - | -------------------- |  | ---- | ------------------- |  | -------------------
|                   |  |                       |  | Yield on:           |      |   |                     
|                   |  | TargetedFederal Funds |  | Two (2)YearTreasury |      |   | Ten (10)YearTreasury |  |      | Shape of YieldCurve
|                   |  |                       |  |                    
|June 30, 2007      |  | 5.25%                 |  |                     | 4.87 | % |                      |  | 5.03 | %                   |  | Slightly Positive  
|September 30, 2007 |  | 4.75%                 |  |                     | 3.97 | % |                      |  | 4.59 | %                   |  | Moderately Positive
|December 31, 2007  |  | 4.25%                 |  |                     | 3.05 | % |                      |  | 4.04 | %                   |  | Positive           
|March 31, 2008     |  | 2.25%                 |  |                     | 1.62 | % |                      |  | 3.45 | %                   |  | Positive           
|June 30, 2008      |  | 2.00%                 |  |                     | 2.63 | % |                      |  | 3.99 | %                   |  | Positive           
|September 30, 2008 |  | 2.00%                 |  |                     | 2.00 | % |                      |  | 3.85 | %                   |  | Positive           
|December 31, 2008  |  | 0.00% to 0.25%        |  |                     | 0.76 | % |                      |  | 2.25 | %                   |  | Positive           
|March 31, 2009     |  | 0.00% to 0.25%        |  |                     | 0.81 | % |                      |  | 2.71 | %                   |  | Positive           
|June 30, 2009      |  | 0.00% to 0.25%        |  |                     | 1.11 | % |                      |  | 3.53 | %                   |  | Positive           
|September 30, 2009 |  | 0.00% to 0.25%        |  |                     | 0.95 | % |                      |  | 3.31 | %                   |  | Positive           
|December 31, 2009  |  | 0.00% to 0.25%        |  |                     | 1.14 | % |                      |  | 3.85 | %                   |  | Positive           
|March 31, 2010     |  | 0.00% to 0.25%        |  |                     | 1.02 | % |                      |  | 3.84 | %                   |  | Positive           
|June 30, 2010      |  | 0.00% to 0.25%        |  |                     | 0.61 | % |                      |  | 2.97 | %                   |  | Positive           
|September 30, 2010 |  | 0.00% to 0.25%        |  |                     | 0.42 | % |                      |  | 2.53 | %                   |  | Positive           
|December 31, 2010  |  | 0.00% to 0.25%        |  |                     | 0.61 | % |                      |  | 3.30 | %                   |  | Positive           

These changes in
intermediate and long-term market interest rates, the changing slope of the Treasury yield curve, and higher levels of interest rate volatility have impacted prepayments on the Companys loan, investment and mortgage-backed securities
portfolios. Principal repayments on the Companys loan, investment and mortgage-backed securities portfolios for the six months ended December 31, 2010, totaled $10.0 million, $68.2 million and $41.3 million, respectively. Due to stagnant
global interest rates and Treasury yields we continued to reduce our overall borrowed funds position. The Company continued to rebalance its investment portfolio by using proceeds from calls of U.S. Government agency bonds, repayments on its
mortgage-backed securities and maturities of bank certificates of deposit to pay down borrowings. This strategy has allowed the Company to improve its liquidity posture while managing overall interest rate risk and strengthening our regulatory
capital ratios.

Due to the term structure of market interest rates, historically low long-term mortgage interest rates,
weakness in the economy, an excess supply of existing homes available for sale, and lower levels of housing starts, the Company continued to reduce its portfolio originations of long-term fixed rate mortgages while continuing to offer such loans on
a correspondent basis. The Company also makes available for origination residential mortgage loans with interest rates which adjust pursuant to a designated index, although customer acceptance has been somewhat limited in the Savings Banks
market area. We expect that the housing market will continue to be weak throughout fiscal 2011. The Company will continue to selectively offer commercial real estate, land acquisition and development, and shorter-term construction loans (primarily
on residential properties), and commercial loans on business assets to partially increase interest income while limiting credit and interest rate risk. The Company has also offered higher yielding commercial and small business loans to existing
customers and seasoned prospective customers.

During the six months ended December 31, 2010, principal investment
purchases were comprised of: callable U.S. Government agency step-up bonds with initial lock-out periods ranging from 3 to 6 months - $20.9 million with a weighted average yield to call of 1.69%; short-term investment grade commercial paper - $5.5
million with a weighted average yield of 0.56%; fixed rate investment grade foreign bonds - $3.7 million with a weighted average yield of 1.13%; floating rate investment grade corporate bonds - $3.0 million with a weighted



38



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##### Table of Contents

average yield of 1.16%; and PA state housing agency bonds - $100 thousand with a yield of 0.45%. The Company also invested in FDIC bank insured certificates of deposit totaling $2.7 million with
a weighted average yield of 1.03%.

Major investment proceeds received during the six months ended December 31, 2010
were: callable U.S. Government agency bonds - $49.0 million with a weighted average yield of approximately 2.49%; investment grade corporate bonds - $6.4 million with a weighted average yield of approximately 3.98%; short-term investment grade
commercial paper - $5.5 million with a weighted average yield of 0.56%; investment grade foreign bonds - $4.6 million with a weighted average yield of 1.38%; investment grade corporate utility first mortgage bonds - $1.6 million with a weighted
average yield of 5.99%; and tax free municipal bonds - $900 thousand with a weighted average taxable equivalent yield to maturity of 2.21%. The Company also had $4.3 million in FDIC insured bank certificates of deposit redeemed with a weighted
average yield of approximately 1.78%.

As of December 31, 2010, the implementation of these asset and liability
management initiatives resulted in the following:



| | 1) | $74.0 million or 38.2% of the Companys investment portfolio was comprised of floating rate mortgage-backed securities (including collateralized mortgage
obligations  CMOs) that reprice on a monthly basis;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | $73.7 million or 38.1% of the Companys investment portfolio consisted of investment grade fixed-rate corporate bonds with remaining maturities as follows: 3
months or less - $25.7 million or 34.9%; 3  12 months - $9.6 million or 13.0%; 1  2 years - $18.0 million or 24.4%; 2  3 years - $11.9 million or 16.1%; 3  5 years - $3.3 million or 4.5%; and over 5 years - $5.2 million or
7.1%;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | $23.9 million or 12.4% of the Companys investment portfolio was comprised of callable U.S. Government Agency step-up bonds which are callable within 1  6
months. These bonds may or may not actually be redeemed prior to maturity (i.e. called) depending upon the level of market interest rates at their respective call dates;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4) | $7.0 million or 2.6% of the Companys total assets consisted of FDIC insured bank certificates of deposit with remaining maturities ranging from two to eighteen
months;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5) | $2.6 million or 1.3% of the Companys investment portfolio was comprised of fixed-rate callable U.S. Government Agency bonds which are callable as follows: one
year or less - $2.6 million. These bonds may or may not actually be redeemed prior to maturity (i.e. called) depending upon the level of market interest rates at their respective call dates;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6) | $4.0 million or 2.1% of the Companys investment portfolio consisted of investment grade floating-rate corporate bonds which will reprice within three months and
will mature within thirteen to twenty five months;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7) | An aggregate of $29.9 million or 54.6% of the Companys net loan portfolio had adjustable interest rates or maturities of less than 12 months; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | 8) | The maturity distribution of the Companys borrowings is as follows: 3 months or less - $23.9 million or 37.7%; 3  12 months - $22.0 million or 34.7%; 3
 5 years - $5.0 million or 7.9%; and over 5 years - $12.5 million or 19.7%.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



39



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##### Table of Contents

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



|                                                                     |  |                        |         |   |          |      |         |   |  |   |         |  
|-------------------------------------------------------------------- |  | ---------------------- | ------- | - | -------- | ---- | ------- | - |  | - | ------- | -
|                                                                     |  | December 31,2010       |         |   | June 30, |     
|                                                                     |  |                        | 2010    |   |          | 2009 |        
|                                                                     |  | (Dollars in Thousands) |        
|Interest-earning assets maturing or repricing within one year        |  | $                      | 200,336 |   |          | $    | 243,519 |   |  | $ | 326,316 |  
|Interest-bearing liabilities maturing or repricing within one year   |  |                        | 174,327 |   |          |      | 248,813 |   |  |   | 228,295 |  
|                                                                     |  |                        |         |   |          |      |         |   |  |   |         |  
|                                                                     |  |                        |        
|Interest sensitivity gap                                             |  | $                      | 26,009  |   |          | $    | (5,294  | ) |  | $ | 98,021  |  
|                                                                     |  |                        |         |   |          |      |         |   |  |   |         |  
|Interest sensitivity gap as a percentage of total assets             |  |                        | 9.53    | % |          |      | -1.49   | % |  |   | 23.37   | %
|Ratio of assets to liabilities maturing or repricing within one year |  |                        | 114.92  | % |          |      | 97.87   | % |  |   | 142.94  | %

During the six months
ended December 31, 2010, the Company managed its one year interest sensitivity gap by: (1) Repaying $60.0 million of maturing legacy FHLB long-term debt; and (2) Repaying $10.7 million of floating rate and $2.0 million of fixed rate
CDARS CDs; and (3) Repaying $3.8 million of fixed rate other brokered CDs.



40



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##### Table of Contents

The following table illustrates the Companys estimated stressed cumulative repricing
gap  the difference between the amount of interest-earning assets and interest-bearing liabilities expected to reprice at a given point in time  at December 31, 2010. The table estimates the impact of an upward or downward change in
market interest rates of 100 and 200 basis points.

Cumulative Stressed Repricing Gap



|                      |  |                        |        |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|--------------------- |  | ---------------------- | ------ | - | ------- | - | ------ | -------- |  | - | -------- | - |  | -------- | ------ | - | -------- | - | ------ | --------- |  | - | ------ | - |  | - | ------ | -
|                      |  | Month 3                |        |   | Month 6 |   |        | Month 12 |  |   | Month 24 |   |  | Month 36 |        |   | Month 60 |   |        | Long Term | 
|                      |  | (Dollars in Thousands) |       
|Base Case Up 200 bp   |  |                        |        |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cummulative Gap ($s) |  | $                      | 67,272 |   |         | $ | 24,497 |          |  | $ | 20,733   |   |  | $        | 31,950 |   |          | $ | 43,575 |           |  | $ | 38,794 |   |  | $ | 27,668 |  
|% of Total Assets     |  |                        | 24.6   | % |         |   | 9.0    | %        |  |   | 7.6      | % |  |          | 11.7   | % |          |   | 16.0   | %         |  |   | 14.2   | % |  |   | 10.1   | %
|Base Case Up 100 bp   |  |                        |        |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cummulative Gap ($s) |  | $                      | 67,708 |   |         | $ | 25,366 |          |  | $ | 22,226   |   |  | $        | 34,288 |   |          | $ | 46,495 |           |  | $ | 42,151 |   |  | $ | 27,668 |  
|% of Total Assets     |  |                        | 24.8   | % |         |   | 9.3    | %        |  |   | 8.1      | % |  |          | 12.6   | % |          |   | 17.0   | %         |  |   | 15.4   | % |  |   | 10.1   | %
|Base Case No Change   |  |                        |        |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cummulative Gap ($s) |  | $                      | 68,989 |   |         | $ | 27,675 |          |  | $ | 26,009   |   |  | $        | 39,411 |   |          | $ | 52,158 |           |  | $ | 47,501 |   |  | $ | 27,668 |  
|% of Total Assets     |  |                        | 25.3   | % |         |   | 10.1   | %        |  |   | 9.5      | % |  |          | 14.4   | % |          |   | 19.1   | %         |  |   | 17.4   | % |  |   | 10.1   | %
|Base Case Down 100 bp |  |                        |        |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cummulative Gap ($s) |  | $                      | 69,794 |   |         | $ | 29,140 |          |  | $ | 28,302   |   |  | $        | 42,179 |   |          | $ | 54,972 |           |  | $ | 48,812 |   |  | $ | 27,668 |  
|% of Total Assets     |  |                        | 25.6   | % |         |   | 10.7   | %        |  |   | 10.4     | % |  |          | 15.5   | % |          |   | 20.1   | %         |  |   | 17.9   | % |  |   | 10.1   | %
|Base Case Down 200 bp |  |                        |        |   |         |   |        |          |  |   |          |   |  |          |        |   |          |   |        |           |  |   |        |   |  |   |        |  
|Cummulative Gap ($s) |  | $                      | 69,832 |   |         | $ | 29,222 |          |  | $ | 28,462   |   |  | $        | 42,399 |   |          | $ | 55,179 |           |  | $ | 48,907 |   |  | $ | 27,668 |  
|% of Total Assets     |  |                        | 25.6   | % |         |   | 10.7   | %        |  |   | 10.4     | % |  |          | 15.5   | % |          |   | 20.2   | %         |  |   | 17.9   | % |  |   | 10.1   | %

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



41



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##### Table of Contents

The following table presents the simulated impact of a 100 and 200 basis point upward or
downward (parallel) shift in market interest rates on net interest income, return on average equity, return on average assets and the market value of portfolio equity at December 31, 2010. This analysis was done assuming that the
interest-earning assets will average approximately $262 million and $290 million over a projected twelve and twenty-four month period, respectively, for the estimated impact on change in net interest income, return on average equity and return on
average assets. The estimated changes in market value of equity were calculated using balance sheet levels at December 31, 2010. Actual future results could differ materially from our estimates primarily due to unknown future interest rate
changes and the level of prepayments on our investment and loan portfolios and future FDIC regular and special assessments.

Analysis of Sensitivity to Changes in Market Interest Rates



|                                      |  |                                                              |      |   |                    |  |      |   |  |  |      |   |  |      |      |   |      |  |      |      |  |   |        |   |  |      |        |   |      |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------- |  | ------------------------------------------------------------ | ---- | - | ------------------ |  | ---- | - |  |  | ---- | - |  | ---- | ---- | - | ---- |  | ---- | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                      |  | Twelve Month Forward Modeled Change in Market Interest Rates |     
|                                      |  | September 30, 2011                                           |      |   | September 30, 2010 | 
|Estimated impact on:                  |  | -200                                                         |      |   | -100               |  |      | 0 |  |  | +100 |   |  | +200 |      |   | -200 |  |      | -100 |  |   | 0      |   |  | +100 |        |   | +200 |  
|Change in net interest income         |  |                                                              | -5.8 | % |                    |  | -4.1 | % |  |  |     |   |  |      | 7.6  | % |      |  | 15.2 | %    |  |   | -3.5   | % |  |      | -2.8   | % |      |   |       |   |  |   | 7.4    | % |  |   | 15.4   | %
|Return on average equity              |  |                                                              | 6.55 | % |                    |  | 6.79 | % |  |  | 7.39 | % |  |      | 8.45 | % |      |  | 9.46 | %    |  |   | 4.73   | % |  |      | 4.82   | % |      |   | 5.19   | % |  |   | 6.16   | % |  |   | 7.21   | %
|Return on average assets              |  |                                                              | 0.66 | % |                    |  | 0.69 | % |  |  | 0.75 | % |  |      | 0.87 | % |      |  | 0.99 | %    |  |   | 0.50   | % |  |      | 0.51   | % |      |   | 0.55   | % |  |   | 0.66   | % |  |   | 0.78   | %
|Market value of equity (in thousands) |  |                                                              |      |   |                    |  |      |   |  |  |      |   |  |      |      |   |      |  |      |      |  | $ | 29,192 |   |  | $    | 29,302 |   |      | $ | 29,519 |   |  | $ | 29,287 |   |  | $ | 27,543 |  

The Companys
second quarter and fiscal year to date earnings were positively impacted by lower interest expenses associated with repaying the Banks fixed rate legacy long-term FHLB advances. During the quarter and six months ended December 31, 2010,
we repaid $35 million and $60 million, respectively, of long-term FHLB advances, which had average rates of 5.44% and 5.58%, respectively.

Market interest rates continued to remain low by historical standards throughout the six months ended December 31, 2010. In response to this environment, we continued to reduce our balance sheet by
repaying fixed rate legacy long-term FHLB advances and wholesale deposits. These actions allowed us to further strengthen our Tier 1 leverage capital ratio from 8.21% at June 30, 2010 to 10.23% at December 31, 2010. As market conditions
improve, we may begin to grow our asset base.



42



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##### Table of Contents

The table below provides information about the Companys anticipated transactions
comprised of firm loan commitments and other commitments, including undisbursed letters and lines of credit. The Company used no derivative financial instruments to hedge such anticipated transactions as of December 31, 2010.



|                                                    |  |                        |        |  
|--------------------------------------------------- |  | ---------------------- | ------ | -
|Anticipated Transactions                            | 
|                                                    |  | (Dollars in Thousands) |       
|Undisbursed construction and land development loans |  |                        |        |  
|Fixed rate                                          |  | $                      | 2,701  |  
|                                                    |  |                        | 6.59   | %
|                                                    | 
|Adjustable rate                                     |  | $                      | 4,624  |  
|                                                    |  |                        | 4.45   | %
|                                                    | 
|Undisbursed lines of credit                         |  |                        |        |  
|Adjustable rate                                     |  | $                      | 4,779  |  
|                                                    |  |                        | 3.66   | %
|                                                    | 
|Loan origination commitments                        |  |                        |        |  
|Fixed rate                                          |  | $                      | 50     |  
|                                                    |  |                        | 5.50   | %
|                                                    | 
|Adjustable rate                                     |  | $                      | 80     |  
|                                                    |  |                        | 3.25   | %
|                                                    | 
|Letters of credit                                   |  |                        |        |  
|Adjustable rate                                     |  | $                      | 142    |  
|                                                    |  |                        | 4.25   | %
|                                                    |  |                        |        |  
|                                                    | 
|                                                    |  | $                      | 12,376 |  
|                                                    |  |                        |        |  



43



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##### Table of Contents

In the ordinary course of its construction lending business, the Savings Bank enters into
performance standby letters of credit. Typically, the standby letters of credit are issued on behalf of a builder to a third party to ensure the timely completion of a certain aspect of a construction project or land development. At
December 31, 2010, the Savings Bank had one performance standby letter of credit outstanding totaling approximately $142 thousand. The performance letter of credit is secured by developed property. The letter of credit will mature within two
months. In the event that the obligor is unable to perform its obligations as specified in the applicable letter of credit agreement, the Savings Bank would be obligated to disburse funds up to the amount specified in the letter of credit agreement.
The Savings Bank maintains adequate collateral that could be liquidated to fund these contingent obligations.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



| | (a) | Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a  15(f) and
15d  15(f) under the Securities Exchange Act of 1934).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management assessed the effectiveness of the
Companys internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control  Integrated Framework.

Based on this assessment, management believes that, as of December 31, 2010, the
Companys internal control over financial reporting was effective.



| | (b) | No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) occurred during the
three months ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



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##### Table of Contents

PART II - OTHER INFORMATION



|ITEM 1. | Legal Proceedings
|------- | -----------------

The Company previously reported, under Item 3(a) of its Annual Report on Form 10-K for the fiscal year ended June 30, 2009, a lawsuit filed by Plaintiff Matthew Dragotta against West View
Savings Bank. The Plaintiff alleged that West View Savings Bank failed to comply with the notification requirements of the Electronic Funds Transfer Act, 15 U.S.C.§ 1693 et. Seq. before a bank can impose a transaction fee for the use of
an automated teller machine. On August 24, 2009 U.S. District Judge, Terrance P. McVerry issued an order granting the Banks motion to Dismiss the lawsuit.

On September 3, 2009, the Plaintiff filed a motion for Reconsideration of Judge McVerrys order granting the Banks motion to Dismiss the lawsuit.

On October 16, 2009, Judge McVerry denied the Plaintiffs Motion for Reconsideration.

On November 4, 2009, the Plaintiff provided a Notice of Appeal to the United States Court of Appeals for the Third Circuit appealing
Judge McVerrys orders of September 3 and October 16, 2009.

On September 28, 2010 the United States Court
of Appeals for the Third Circuit vacated Judge McVerrys orders and remanded the case to the U.S. District Court for further proceedings.

During the quarter ended December 31, 2010, the Plaintiff and the Savings Bank agreed to settle this lawsuit. The settlement will be structured as a class action. In connection with the settlement,
the Savings Bank agreed to refund ATM fees collected and to pay a negotiated amount of the Plaintiffs attorneys fees and litigation costs. The Savings Bank decided to settle this lawsuit in order to avoid the costs of protracted
litigation. In connection with the settlement, the Savings Bank recorded a non-recurring charge of $81 thousand.

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.



|ITEM 1A. | Risk Factors
|-------- | ------------

There are no material changes to the risk factors included in Item 1A of the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2010.



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



| | (a) | Not applicable.
| | --- | ---------------



| | (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
December 31, 2010.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                      |  |                               |   |  |                                 |   |   |                                                                                 |  |  |                                                                                 |  |  |  |        | 
|------------------------------------- |  | ----------------------------- | - |  | ------------------------------- | - | - | ------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------- |  |  |  | ------ | 
|ISSUER PURCHASES OF EQUITY
SECURITIES | 
|Period                                |  | TotalNumber ofSharesPurchased |   |  | Average PricePaid per Share ($) |   |   | Total Number ofShares Purchasedas Part of PubliclyAnnounced Plans 
orPrograms 1 |  |  | Maximum Number ofShares that May YetBe RepurchasedUnder the Plans 
orPrograms 2 | 
|10/01/10  10/31/10                   |  |                               | 0 |  |                                 | $ |  |                                                                                 |  |  | 0                                                                               |  |  |  | 41,745 | 
|11/01/10  11/30/10                   |  |                               | 0 |  |                                 | $ |  |                                                                                 |  |  | 0                                                                               |  |  |  | 41,745 | 
|12/01/10  12/31/10                   |  |                               | 0 |  |                                 | $ |  |                                                                                 |  |  | 0                                                                               |  |  |  | 41,745 | 
|Total                                 |  |                               | 0 |  |                                 | $ |  |                                                                                 |  |  | 0                                                                               |  |  |  | 41,745 | 



|(1) | All shares indicated were purchased under the Companys Tenth Stock Repurchase Program.
|--- | ---------------------------------------------------------------------------------------



45



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##### Table of Contents

|(2) | Tenth Stock Repurchase Program
|--- | ------------------------------



| | (a) | Announced January 29, 2009.
| | --- | ---------------------------



| | (b) | 106,000 common shares approved for repurchase.
| | --- | ----------------------------------------------



| | (c) | No fixed date of expiration.
| | --- | ----------------------------



| | (d) | This program was suspended on October 26, 2010 with 41,745 shares remaining to be repurchased at December 31, 2010.
| | --- | -------------------------------------------------------------------------------------------------------------------



| | (e) | The Company does not intend to repurchase any shares under this program.
| | --- | ------------------------------------------------------------------------



|ITEM 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not applicable.



|ITEM 4. | (Removed and Reserved)
|------- | ----------------------



|ITEM 5. | Other Information
|------- | -----------------



| | (a) | Not applicable.
| | --- | ---------------



| | (b) | Not applicable.
| | --- | ---------------



|ITEM 6. | Exhibits
|------- | --------

The following exhibits are filed as part of this Form 10-Q, and this list includes the Exhibit Index.



|       |  |                                                                          |  |     
|------ |  | ------------------------------------------------------------------------ |  | ----
|Number |  | Description                                                              |  | Page
|       |  |                                                                         
|31.1   |  | Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer  |  | E-1 
|       |  |                                                                         
|31.2   |  | Rule 13a-14(a) / 15d-14(a) Certification of the Chief Accounting Officer |  | E-2 
|       |  |                                                                         
|32.1   |  | Section 1350 Certification of the Chief Executive Officer                |  | E-3 
|       |  |                                                                         
|32.2   |  | Section 1350 Certification of the Chief Accounting Officer               |  | E-4 
|       |  |                                                                         
|99     |  | Report of Independent Registered Public Accounting Firm                  |  | E-5 



46



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SIGNATURES

Pursuant to the requirements 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.                                                                                   
|                 |  |    
|February 9, 2011 |  | BY: |  | /s/ David J. Bursic                                                                                   
|Date             |  |     |  | David J. Bursic President and
Chief Executive Officer (Principal Executive Officer)                   
|                 |  |    
|February 9, 2011 |  | BY: |  | /s/ Keith A. Simpson                                                                                  
|Date             |  |     |  | Keith A. Simpson
Vice-President, Treasurer and Chief Accounting Officer (Principal Accounting Officer)



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