WVS FINANCIAL CORP - Quarter Report: 2012 March (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-Q

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 March 31, 2012

¨	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 x 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.

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 May 11, 2012: 2,057,930 shares Common Stock, $.01 par value.

WVS FINANCIAL CORP. AND SUBSIDIARY

INDEX


		Page
PART I.	Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheet as of March 31, 2012 and June 30, 2011 (Unaudited)		3

	Consolidated Statement of Income for the Three and Nine Months Ended March 31, 2012 and 2011 (Unaudited)		4

	Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended March 31, 2012 (Unaudited)		5

	Consolidated Statement of Cash Flows for the Nine Months Ended March 31, 2012 and 2011 (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 Nine Months Ended March 31, 2012		34

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		41

Item 4.	Controls and Procedures		49

		Page
PART II.	Other Information

Item 1.	Legal Proceedings		50
Item 1A.	Risk Factors		50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		50
Item 3.	Defaults Upon Senior Securities		50
Item 4.	Mine Safety Disclosures		50
Item 5.	Other Information		50
Item 6.	Exhibits		50
	Signatures		51

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(In thousands)


	March 31, 2012			June 30, 2011
Assets
Cash and due from banks	$	3,526		$	662
Interest-earning demand deposits		192			1,298

Total cash and cash equivalents		3,718			1,960
Certificates of deposit		2,336			3,668
Investment securities available-for-sale (amortized cost of $43,340 and $1,067)		43,423			1,064
Investment securities held-to-maturity (fair value of $130,901 and $90,974)		129,389			88,374
Mortgage-backed securities held-to-maturity (fair value of $72,537 and $71,169)		71,807			70,568
Net loans receivable (allowance for loan losses of $440 and $630)		43,875			49,952
Accrued interest receivable		1,634			1,189
Federal Home Loan Bank stock, at cost		7,994			9,324
Real estate owned		235			235
Premises and equipment, net		557			588
Prepaid FDIC insurance premium		255			456
Deferred tax assets (net)		1,120			1,298
Other assets		356			212

TOTAL ASSETS	$	306,699		$	228,888


Liabilities and Stockholders’ Equity
Liabilities:
Deposits
Non-interest-bearing accounts	$	15,386		$	13,324
NOW accounts		20,548			19,818
Savings accounts		39,442			37,922
Money market accounts		23,115			23,824
Certificates of deposit		42,142			48,226
Advance payments by borrowers for taxes and insurance		584			652

Total deposits		141,217			143,766
Federal Home Loan Bank advances: long-term		17,500			22,500
Federal Home Loan Bank advances: short-term		106,795			32,059
Accrued interest payable		259			322
Other liabilities		10,934			1,363

TOTAL LIABILITIES		276,705			200,010


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		21,453			21,437
Treasury stock: 1,747,706 and 1,747,706 shares at cost, Respectively		(26,690	)		(26,690	)
Retained earnings, substantially restricted		36,669			35,920
Accumulated other comprehensive loss		(1,476	)		(1,827	)

TOTAL STOCKHOLDERS’ EQUITY		29,994			28,878

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	306,699		$	228,888

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

(In thousands, except per share data)


	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2012			2011		2012			2011
INTEREST AND DIVIDEND INCOME:
Loans	$	695		$	808	$	2,268		$	2,526
Investment securities – taxable		818			1,031		2,189			3,299
Investment securities – non-taxable		7			51		87			155
Mortgage-backed securities		219			246		686			995
Certificates of deposit		7			29		26			101
FHLB stock		2			—		2			—
Interest-earning demand deposits		—			1		1			3

Total interest and dividend income		1,748			2,166		5,259			7,079


INTEREST EXPENSE:
Deposits		132			218		423			755
Federal Home Loan Bank advances – long-term		209			587		663			2,853
Federal Home Loan Bank advances – short-term		44			—		74			1
Other short-term borrowings		—			5		1			20

Total interest expense		385			810		1,161			3,629


NET INTEREST INCOME		1,363			1,356		4,098			3,450
PROVISION FOR (RECOVERY OF) LOAN LOSSES		(11	)		2		(50	)		17

NET INTEREST INCOME AFTER PROVISION FOR (RECOVERY OF) LOAN LOSSES		1,374			1,354		4,148			3,433


NON-INTEREST INCOME:
Service charges on deposits		40			54		153			175

Other than temporary impairment (“OTTI”) losses		—			—		(303	)		—
Portion of loss recognized in other comprehensive income (before taxes)		—			—		172			—

Net impairment loss recognized in earnings		—			—		(131	)		—


Other		61			62		197			219

Total non-interest income		101			116		219			394


NON-INTEREST EXPENSE:
Salaries and employee benefits		493			486		1,457			1,430
Occupancy and equipment		74			82		227			243
Data processing		61			61		182			186
Correspondent bank service charges		9			22		47			65
Deposit insurance premium		90			118		210			325
Other		151			158		614			623

Total non-interest expense		878			927		2,737			2,872


INCOME BEFORE INCOME TAXES		597			543		1,630			955
INCOME TAX EXPENSE		215			190		634			329

NET INCOME	$	382		$	353	$	996		$	626


EARNINGS PER SHARE:
Basic	$	0.19		$	0.17	$	0.48		$	0.30
Diluted	$	0.19		$	0.17	$	0.48		$	0.30

AVERAGE SHARES OUTSTANDING:
Basic		2,057,930			2,057,930		2,057,930			2,057,930
Diluted		2,057,930			2,057,930		2,057,930			2,057,930

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)


	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings Substantially Restricted			Accumulated Other Comprehensive Income(Loss)			Total
Balance at June 30, 2011	$	38	$	21,437	$	(26,690	)	$	35,920		$	(1,827	)	$	28,878

Comprehensive income:

Net Income									996						996
Other comprehensive income:
Accretion of other-than-temporary impairment on securities held to maturity, net of income tax effect of $ 174												338			338
Other-than-temporary impairment on securities held to maturity, net of income tax effect of $(58)												(114	)		(114	)
Reclassification adjustment of other-than-temporary impairment losses on securities held to maturity, net of income tax effect of $ 36												70			70
Change in unrealized holding gains on securities available for sale, net of income tax effect of $ 29												57			57


Comprehensive income															1,347

Expense of stock options awarded				16											16

Cash dividends declared ($0.12 per share)									(247	)					(247	)


Balance at March 31, 2012	$	38	$	21,453	$	(26,690	)	$	36,669		$	(1,476	)	$	29,994

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended March 31,
	2012			2011
OPERATING ACTIVITIES

Net income	$	996		$	626
Adjustments to reconcile net income to cash provided by operating activities:
Provision for (recovery of) loan losses		(50	)		17
Net impairment loss recognized in earnings		131			—
Depreciation		62			79
Accretion of discounts, premiums and deferred loan fees		758			1,158
Decrease in deferred income taxes		178			204
Increase in prepaid/accrued income taxes		100			327
(Increase) decrease in accrued interest receivable		(445	)		1,012
Decrease in accrued interest payable		(63	)		(361	)
Decrease in deferred director compensation payable		(22	)		(61	)
Decrease of prepaid federal deposit insurance premium		201			311
Decrease in transaction account clearing balance payable to Federal Reserve		(733	)		(602	)
Other, net		(181	)		(6	)

Net cash provided by operating activities		932			2,704


INVESTING ACTIVITIES

Available-for-sale:
Purchase of investment securities		(44,960	)		(9,347	)
Proceeds from repayments of investments		2,000			9,240
Proceeds from repayments of mortgage-backed securities		—			34
Held-to-maturity:
Purchases of investment securities		(101,666	)		(51,203	)
Purchases of mortgage-backed securities		(25,997	)		—
Proceeds from repayments of investments		60,576			93,141
Proceeds from repayments of mortgage-backed securities		35,072			58,287
Purchases of certificates of deposit		(947	)		(2,981	)
Maturities/redemptions of certificates of deposit		2,276			5,420
Decrease in net loans receivable		6,233			4,108
Redemption of FHLB stock		1,330			1,060
Acquisition of premises and equipment		(31	)		(9	)

Net cash (used for) provided by investing activities		(66,114	)		107,750

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended March 31,
	2012			2011
FINANCING ACTIVITIES

Net increase in transaction and savings accounts	$	3,603		$	1,184
Net decrease in certificates of deposit		(5,836	)		(8,991	)
Net decrease in advance payments by borrowers for taxes and insurance		(68	)		(243	)
Net decrease in brokered CDs		(248	)		(5,324	)
Net decrease in CDARS one-way buy CDs		—			(10,988	)
Repayments of FHLB long-term advances		(5,000	)		(70,000	)
Net increase in FHLB short-term advances		74,736			—
Net decrease in other short-term borrowings		—			(12,510	)
Cash dividends paid		(247	)		(494	)

Net cash provided by (used for) financial activities		66,940			(107,366	)


Increase in cash and cash equivalents		1,758			3,088

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD		1,960			2,198


CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	$	3,718		$	5,286


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the period for :
Interest on deposits, escrows and borrowings	$	1,224		$	3,990
Income taxes	$	537		$	15

Non-cash items:
Due to Federal Reserve Bank	$	—		$	528
Educational Improvement Tax Credit	$	95		$	—
Mortgage Loans Transferred to Real Estate Owned	$	182		$	—
Loans to facilitate the sale of Real Estate Owned	$	298		$	—
Commitment to purchase U.S. Government Agency CMOs-held to maturity	$	9,985		$	—

See accompanying notes to unaudited consolidated financial statements.

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 nine months ended March 31, 2012, are not necessarily indicative of the results which may be expected for the entire fiscal year.

2.	RECENT ACCOUNTING PRONOUNCEMENTS

In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments in this Update provide additional guidance or clarification to help creditors in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The amendments in this Update are effective for the first interim or annual reporting period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011.

In April 2011, the FASB issued ASU 2011-03, Transfers and Services (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. The main objective in developing this Update is to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The amendments in this Update apply to all entities, both public and nonpublic. The amendments affect all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The guidance in this Update is effective for the first interim or annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company has provided the necessary disclosures in Note 10.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive

income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this Update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

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

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

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

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

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

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 Ended March 31,						Nine Months Ended March 31,
	2012			2011			2012			2011
Weighted average common shares outstanding		3,805,636			3,805,636			3,805,636			3,805,636

Average treasury stock shares		(1,747,706	)		(1,747,706	)		(1,747,706	)		(1,747,706	)

Weighted average common shares and common stock equivalents used to calculate basic earnings per share		2,057,930			2,057,930			2,057,930			2,057,930

Additional common stock equivalents (stock options) used to calculate diluted earnings per share		—			—			—			—


Weighted average common shares and common stock equivalents used to calculate diluted earnings per share		2,057,930			2,057,930			2,057,930			2,057,930

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 March 31, 2012, there were 124,519 options outstanding with an exercise price of $16.20 which were anti-dilutive for the three and nine month periods. At March 31, 2011 there were 124,824 options outstanding with an exercise price ranging from $15.77 to $16.20 which were anti-dilutive for the three and nine 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 over five years of continuous service and have ten-year contractual terms.

During the nine month periods ended March 31, 2012 and 2011, the Company recorded $16 thousand and $17 thousand, respectively, in compensation expense related to our share-based compensation awards. As of March 31, 2012, there was approximately $34 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 two years.

In accordance with generally accepted accounting principles (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.

For purposes of computing results, the Company estimated the fair values of stock options using the Black-Scholes option-pricing model. The model requires the use of subjective assumptions that can materially affect fair value estimates. The fair value of each option is amortized into compensation expense on a straight

line basis between the grant date for the option and each vesting date. The fair value of each stock option granted was estimated using the following weighted-average assumptions:


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

The Company had 53,052 non-vested stock options outstanding at March 31, 2012, and 72,551 unvested stock options outstanding at March 31, 2011. There were no stock options exercised or issued during the nine months ended March 31, 2012 and 2011.

5.	COMPREHENSIVE INCOME

Other comprehensive income primarily reflects changes in net unrealized gains/losses on available-for-sale securities and the net non-credit component of Other Than Temporary Impairments (“OTTI”) on the Company’s held-to-maturity private-label CMO portfolio. Total comprehensive income is summarized as follows (dollars in thousands):


	Three Months Ended March 31,					Nine Months Ended March 31,
	2012		2011			2012			2011

Net Income	$	382	$	353		$	996		$	626

Other comprehensive income:
Unrealized (losses) gains on available-for-sale securities without OTTI		274		(1	)		86			3
Accretion of OTTI on securities held to maturity		167		289			512			635
Unrealized losses on held-to-maturity securities with OTTI		—		—			(303	)		—
Reclassification adjustment for loss included in net income		—		—			237			—

Other comprehensive income before tax		441		288			532			638
Income tax effect related to other comprehensive income		150		(98	)		181			217

Other comprehensive income, net of tax		291		190			351			421


Comprehensive income	$	673	$	543		$	1,347		$	1,047

6.	INVESTMENT SECURITIES

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)

March 31, 2012
AVAILABLE FOR SALE
Corporate debt securities	$	42,758	$	124	$	(40	)	$	42,842
Foreign debt securities ⁽¹⁾		582		—		(1	)		581


Total	$	43,340	$	124	$	(41	)	$	43,423


HELD TO MATURITY
U.S. government agency securities	$	98,494	$	40	$	(334	)	$	98,200
Corporate debt securities		28,893		1,696		—			30,589
Foreign debt securities ⁽¹⁾		2,002		110		—			2,112


Total	$	129,389	$	1,846	$	(334	)	$	130,901

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2011
AVAILABLE FOR SALE
Corporate debt securities	$	1,067	$	—	$	(3	)	$	1,064


HELD TO MATURITY
U.S. government agency securities	$	40,068	$	53	$	(7	)	$	40,114
Corporate debt securities		41,227		2,330		—			43,557
Foreign debt securities ⁽¹⁾		3,514		163		—			3,677
Obligations of states and political Subdivisions		3,565		61		—			3,626


Total	$	88,374	$	2,607	$	(7	)	$	90,974

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

There were no recorded realized investment securities gains or losses during the nine months ended March 31, 2012 and March 31, 2011.

The amortized cost and fair values of debt securities at March 31, 2012, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because issuers may have the right to call securities prior to their final maturities.


	Due in one year or less		Due after one through two years		Due after two through three years		Due after three through five years		Due after five through ten years		Due after ten years		Total
	(Dollars in Thousands)

AVAILABLE FOR SALE
Amortized cost	$	14,170	$	28,106	$	1,064	$	—	$	—	$	—	$	43,340
Fair value		14,206		28,157		1,060		—		—		—		43,423

HELD TO MATURITY
Amortized cost	$	9,666	$	14,341	$	2,003	$	521	$	6,403	$	96,455	$	129,389
Fair value		9,791		15,117		2,209		619		7,006		96,159		130,901

Investment securities with amortized costs of $57.1 million and $3.9 million and fair values of $57.1 million and $3.9 million at March 31, 2012 and June 30, 2011, respectively, were pledged to secure borrowings with the Federal Home Loan Bank, 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 March 31, 2012, the Company’s Agency CMO’s totaled $58.5 million as compared to $47.8 million at June 30, 2011. The Company’s private-label CMO’s totaled $13.3 million at March 31, 2012 as compared to $22.8 million at June 30, 2011. The $1.2 million increase in the CMO segment of our MBS portfolio was primarily due to $36.0 million in purchases of floating-rate Agency CMO’s, which was partially offset by repayments on our Agency and private-label CMO portfolios totaling $25.2 million and $9.8 million, respectively. During the nine months ended March 31, 2012, the Company received principal payments totaling $9.8 million on its private-label CMO’s. At March 31, 2012, $71.8 million or 100.0% (book value) of the Company’s MBS portfolio, including CMO’s, were comprised of adjustable or floating rate investments, as compared to $70.6 million or 100.0% at June 30, 2011. All of the Company’s floating rate MBS adjust monthly based upon changes in the one month LIBOR. The Company has no investment in multi-family or commercial real estate based MBS.

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

The following table sets forth information with respect to the Company’s private-label CMO portfolio as of March 31, 2012. 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 March 31, 2012

Rating

Book
Value

Fair
Value

Life to Date
Impairment
Recorded
in Earnings

Cusip #

Security Description

S&P

Moody’s

Fitch

(in thousands)

05949AN63

BOAMS 2005-1 1A7

N/A

Ba1

AAA

142

141

—

36242DE25

GSR 2005-3F 1A11

N/A

Ba2

BBB

208

207

—

05949A2H2

BOAMS 2005-3 1A6

N/A

Ba2

297

285

—

05949A2H2

BOAMS 2005-3 1A6

N/A

Ba2

379

364

—

225458JZ2

CSFB 05-3 3A4

BBB

N/A

1,186

1,161

—

225458KE7

CSFB 2005-3 3A9

BBB

N/A

134

129

—

225458KE7

CSFB 2005-3 3A9

BBB

N/A

404

389

—

12669G3A7

CWHL 2005 16 A8

N/A

333

325

—

12669G3A7

CWHL 2005 16 A8

N/A

606

591

—

12669G3A7

CWHL 2005 16 A8

N/A

830

809

—

12669G3A7

CWHL 2005 16 A8

N/A

909

886

—

126694CP1

CWHL SER 21 A11

N/A

Caa1

4,090

4,588

201

126694KF4

CWHL SER 24 A15

N/A

662

776

126694KF4

CWHL SER 24 A15

N/A

1,323

1,552

16162WLW7

CHASE SER S2 A10

N/A

BBB

467

458

—

16162WLW7

CHASE SER S2 A10

N/A

BBB

653

641

—

126694MP0

CWHL SER 26 1A5

N/A

658

666

13,281

13,968

324

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 three private-label CMO’s with OTTI, which totaled $2.6 million including unrecognized losses of $2.3 million at March 31, 2012. During the three and nine months ending March 31, 2012, the Company reversed $167 thousand and $512 thousand, respectively, of non-credit unrealized holding losses on three of its private-label CMO’s with OTTI due to principal repayments. No additional other than temporary impairments were identified during the quarter ended March 31, 2012.

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

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
March 31, 2012
HELD TO MATURITY

Collateralized mortgage obligations:
Agency	$	58,526	$	87	$	(44	)	$	58,569
Private-label		13,281		849		(162	)		13,968


Total	$	71,807	$	936	$	(206	)	$	72,537


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in Thousands)
June 30, 2011
HELD TO MATURITY

Collateralized mortgage obligations:
Agency	$	47,777	$	283	$	(12	)	$	48,048
Private-label		22,791		1,146		(816	)		23,121


Total	$	70,568	$	1,429	$	(828	)	$	71,169

The amortized cost and fair value of mortgage-backed securities at March 31, 2012, by contractual maturity, are shown below. Expected maturities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
	(Dollars in Thousands)

HELD TO MATURITY
Amortized cost	$	—	$	—	$	—	$	71,807	$	71,807
Fair value	$	—	$	—	$	—	$	72,537	$	72,537

At March 31, 2012 and June 30, 2011, mortgage-backed securities with an amortized cost of $48.5 million and $26.4 million and fair values of $48.6 million and $26.7 million, were pledged to secure borrowings with the Federal Home Loan Bank and public deposits.

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 March 31, 2012 and June 30, 2011.


	March 31, 2012
	Less Than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(Dollars in Thousands)

U.S. government agencies securities	$	54,845	$	(332	)	$	364	$	(2	)	$	55,209	$	(334	)
Corporate debt securities		7,501		(40	)		—		—			7,501		(40	)
Foreign debt securities ⁽¹⁾		581		(1	)		—		—			581		(1	)
Collateralized mortgage obligations:
Agency		15,269		(24	)		6,350		(20	)		21,619		(44	)
Private-label		—		—			6,385		(162	)		6,385		(162	)


Total	$	78,196	$	(397	)	$	13,099	$	(184	)	$	91,295	$	(581	)

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


	June 30, 2011
	Less Than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)

U.S. government agencies securities	$	4,990	$	(5	)	$	382	$	(2	)	$	5,372	$	(7	)
Corporate debt securities		1,064		(3	)		—		—			1,064		(3	)
Collateralized mortgage obligations:
Agency		—		—			10,234		(12	)		10,234		(12	)
Private-label		—		—			14,321		(816	)		14,321		(816	)


Total	$	6,054	$	(8	)	$	24,937	$	(830	)	$	30,991	$	(838	)

Impairment is considered to be other than temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its amortized cost basis, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell the security). In addition, 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.

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 nine month periods ended March 31, 2012 and 2011:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2012		2011		2012		2011
	(In thousands)

Beginning balance	$	324	$	194	$	194	$	194
Initial credit impairment		—		—		24		—
Subsequent credit impairment		—		—		106		—
Reductions for amounts recognized in earnings due to intent or requirement to sell		—		—		—		—
Reductions for securities sold		—		—		—		—
Reduction for increase in cash flows expected to be collected		—		—		—		—

Ending Balance	$	324	$	194	$	324	$	194

During the quarter ended March 31, 2012, 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 included 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 March 31, 2012 OTTI process. Based on the results of this review, the Company deemed the independent third party’s assumptions to be reasonable and adopted them. However, different assumptions could produce materially different results, which could impact the Company’s conclusions as to whether an impairment is considered other-than-temporary and the magnitude of the credit loss. Management believes that three private-label CMO’s in the portfolio had OTTI at March 31, 2012, which totaled $2.6 million, including unrecognized losses of $2.3 million. During the three and nine months ending March 31, 2012, the Company reversed $167 thousand and $512 thousand of non-credit unrealized holding losses on three 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.

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 32 positions that are impaired at March 31, 2012, including 7 positions in private-label collateralized mortgage obligations. Based on its analysis, management has concluded that three private-label CMO’s remain 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.

9.	LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

The following table summarizes the primary segments of the loan portfolio as of March 31, 2012 and June 30, 2011 (in thousands).


	March 31, 2012							June 30, 2011
	Total Loans			Individually evaluated for impairment		Collectively evaluated for impairment		Total Loans			Individually evaluated for impairment		Collectively evaluated for impairment

First mortgage loans:
1 – 4 family dwellings	$	15,007		$	—	$	15,007	$	14,984		$	—	$	14,984
Construction		6,651			701		5,950		11,569			1,024		10,545
Land acquisition & development		3,190			—		3,190		2,947			—		2,947
Multi-family dwellings		5,156			—		5,156		5,365			—		5,365
Commercial		6,798			—		6,798		7,732			—		7,732

Consumer Loans
Home equity		1,583			—		1,583		1,893			—		1,893
Home equity lines of credit		2,237			—		2,237		2,601			—		2,601
Other		296			—		296		322			—		322

Commercial Loans		2,924			—		2,924		3,210			—		3,210

Obligations (other than securities and leases) of states and political subdivisons		500			—		500		—			—		—

	$	44,342		$	701	$	43,641	$	50,623		$	1,024	$	49,599

Less: Deferred loan fees		(27	)						(41	)
Allowance for loan losses		(440	)						(630	)

Total	$	43,875						$	49,952

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

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

Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances surrounding the loan and the borrower, including the

length of the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed.

The following tables are a summary of the loans considered to be impaired as of March 31, 2012 and June 30, 2011 (in thousands), and the related interest income recognized for the three and nine months ended March 31, 2012 and March 31, 2011 (in thousands):


	March 31, 2012		June 30, 2011

Impaired loans with an allocated allowance
Construction loans	$	—	$	323
Impaired loans without an allocated allowance
Construction loans		701		701

Total impaired loans	$	701	$	1,024


Allocated allowance on impaired loans
Construction loans	$	—	$	67
Average impaired loans
Construction loans	$	1,020	$	1,024


	Three Months Ended				Nine Months Ended
	March 31, 2012		March 31, 2011		March 31, 2012		March 31, 2011
Average impaired loans
Construction loans	$	701	$	1,024	$	1,020	$	1,024


Income recognized on impaired loans
Construction loans	$	—	$	—	$	—	$	9

Total nonaccrual loans as of March 31, 2012 and June 30, 2011 (in thousands), and the related interest income recognized for the three and nine months ended March 31, 2012 and March 31, 2011 are as follows (in thousands):


	March 31, 2012		June 30, 2011

Principal outstanding
1 – 4 family dwellings	$	363	$	784
Construction		701		1,024
Land acquisition & development		290		359

Total	$	1,354	$	2,166


Average nonaccrual loans
1 – 4 family dwellings	$	364	$	1,019
Construction		1,020		1,024
Land acquisition & development		449		—
Home equity lines of credit		346		359

Total	$	2,179	$	2,402


	Three Months Ended				Nine Months Ended
	March 31, 2012		March 31, 2011		March 31, 2012		March 31, 2011

Average Principal outstanding
1 – 4 family dwellings	$	364	$	1,020	$	364	$	1,019
Construction		701		1,023		1,020		1,024
Land acquisition & development		320		—		449		—
Home equity lines of credit		—		359		346		359

Total	$	1,385	$	2,402	$	2,179	$	2,402

Interest income that would have been recognized	$	26	$	41	$	87	$	122
Interest income recognized		3		2		107		15


Interest income foregone	$	24	$	39	$	77	$	107

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 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 March 31, 2012, is adequate.

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2012 and June 30, 2011 (in thousands):


	At March 31, 2012
	Current		30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days + Past Due Accruing		90 Days + Past Due Non-accrual		Total Past Due		Total Loans
First mortgage loans:
1 – 4 family dwellings	$	14,644	$	—	$	—	$	—	$	363	$	363	$	15,007
Construction		5,950		—		—		—		701		701		6,651
Land acquisition & development		2,900		—		—		—		290		290		3,190
Multi-family dwellings		5,156		—		—		—		—		—		5,156
Commercial		6,798		—		—		—		—		—		6,798

Consumer Loans
Home equity		1,583		—		—		—		—		—		1,583
Home equity line of credit		2,087		—		—		150		—		150		2,237
Other		296		—		—		—		—		—		296

Commercial Loans		2,921		3		—		—		—		3		2,924

Obligations (other than securities and leases) of states and political subdivisions		500		—		—		—		—		—		500

	$	42,835	$	3	$	—	$	150	$	1,354	$	1,507		44,342

Less: Deferred loan fees														(27	)
Allowance for loan loss														(440	)

Total													$	43,875


	At June 30, 2011
	Current		30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days + Past Due Accruing		90 Days + Past Due Non-accrual		Total Past Due		Total Loans
First mortgage loans:
1 – 4 family dwellings	$	14,200	$	—	$	—	$	—	$	784	$	784	$	14,984
Construction		10,545		—		—		—		1,024		1,024		11,569
Land acquisition & development		2,947		—		—		—		—		—		2,947
Multi-family dwellings		5,365		—		—		—		—		—		5,365
Commercial		7,732		—		—		—		—		—		7,732

Consumer Loans
Home equity		4,136		—		—		—		358		358		4,494
Other		321		1		—		—		—		1		322

Commercial Loans		3,206		4		—		—		—		4		3,210

	$	48,452	$	5	$	—	$	—	$	2,166	$	2,171		50,623

Less: Deferred loan fees														(41	)
Allowance for loan loss														(630	)

Total													$	49,952

Credit quality information

The following tables represent credit exposure by internally assigned grades for the period ended March 31, 2012. The grading system analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or not at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

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

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

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

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

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

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

The following table presents the Company’s internally classified construction, land acquisition and development, multi-family residential, commercial real estate and commercial (not secured by real estate) loans at March 31, 2012 and June 30, 2011 (in thousands).


	March 31, 2012
	Construction		Land Acquisition & Development Loans		Multi-family Residential		Commercial Real Estate		Commercial

Pass	$	5,950	$	2,900	$	5,156	$	6,798	$	2,924
Special Mention		—		—		—		—		—
Substandard		701		290		—		—		—
Doubtful		—		—		—		—		—


Ending Balance	$	6,651	$	3,190	$	5,156	$	6,798	$	2,924


	June 30, 2011
	Construction		Land Acquisition & Development Loans		Multi-family Residential		Commercial Real Estate		Commercial

Pass	$	10,545	$	2,947	$	5,365	$	7,732	$	3,210
Special Mention		—		—		—		—		—
Substandard		1,024		—		—		—		—
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—


Ending Balance	$	11,569	$	2,947	$	5,365	$	7,732	$	3,210

The following table presents performing and non-performing 1 – 4 family residential and consumer loans based on payment activity for the periods ended March 31, 2012 and June 30, 2011 (in thousands).


	March 31, 2012
	1 – 4 Family		Consumer

Performing	$	14,644	$	3,966
Non-performing		363		150


Total	$	15,007	$	4,116


	June 30, 2011
	1 – 4 Family		Consumer

Performing	$	13,690	$	4,239
Non-performing		1,294		577


Total	$	14,984	$	4,816

The Company determines its allowance for loan losses in accordance with generally accepted accounting principles. The Company uses a systematic methodology as required by Financial Reporting Release No. 28 and the various Federal Financial Institutions Examination Council guidelines. The Company also

endeavors to adhere to SEC Staff Accounting Bulletin No. 102 in connection with loan loss allowance methodology and documentation issues.

Our methodology used to determine the allocated portion of the allowance is as follows. For groups of homogenous loans, we apply a loss rate to the groups’ aggregate balance. Our group loss rate reflects our historical loss experience. We may adjust these group rates to compensate for changes in environmental factors; but our adjustments have not been frequent due to a relatively stable charge-off experience. The Company also monitors industry loss experience on similar loan portfolio segments. We then identify loans for individual evaluation under ASC Topic 310. If the individually identified loans are performing, we apply a segment specific loss rate adjusted for relevant environmental factors, if necessary, for those loans reviewed individually and considered individually impaired, we use one of the three methods for measuring impairment mandated by ASC Topic 310. Generally the fair value of collateral is used since our impaired loans are generally real estate based. In connection with the fair value of collateral measurement, the Company generally uses an independent appraisal and determines costs to sell. The Company’s appraisals for commercial income based loans, such as multi-family and commercial real estate loans, assess value based upon the operating cash flows of the business as opposed to merely “as built” values. The Company then validates the reasonableness of our calculated allowances by: (1) reviewing trends in loan volume, delinquencies, restructurings and concentrations; (2) reviewing prior period (historical) charge-offs and recoveries; and (3) presenting the results of this process, quarterly, to the Asset Classification Committee and the Savings Bank’s Board of Directors. We then tabulate, format and summarize the current loan loss allowance balance for financial and regulatory reporting purposes.

The Company had no unallocated loss allowance balance at March 31, 2012.

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

The following tables summarize 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 March 31, 2012 and June 30, 2011. Activity in the allowance is presented for the nine months ended March 31, 2012 and March 31, 2011 (in thousands).


	Nine Months Ended March 31, 2012
	First Mortgage Loans
	1 – 4 Family			Construction			Land Acquisition & Development			Multi- family			Commercial			Consumer Loans			Commercial Loans			Total
ALLL balance at June 30, 2011	$	87		$	243		$	55		$	27		$	79		$	85		$	54		$	630
Charge-offs		—			(140	)		—			—			—			—			—			(140	)
Recoveries		—			—			—			—			—			—			—			—
Provisions		(13	)		50			(49	)		(1	)		(2	)		(31	)		(4	)		(50	)

ALLL balance at March 31, 2012	$	74		$	153		$	6		$	26		$	77		$	54		$	50		$	440

Individually evaluated for impairment		—			—			—			—			—			—			—			—
Collectively evaluated for impairment		74			153			6			26			77			54			50			440

	$	74		$	153		$	6		$	26		$	77		$	54		$	50		$	440


	Nine Months Ended March 31, 2011
	First Mortgage Loans
	1 – 4 Family		Construction		Land Acquisition & Development			Multi- family			Commercial		Consumer Loans		Commercial Loans			Total
ALLL balance at June 30, 2010	$	147	$	47	$	213		$	28		$	66	$	77	$	67		$	645
Charge-offs		—		—		—			—			—		—		—			—
Recoveries		—		—		—			—			—		—		—			—
Provisions		9		158		(158	)		(1	)		14		6		(10	)		18

ALLL balance at March 31, 2011	$	156	$	205	$	55		$	27		$	80	$	83	$	57		$	663

Individually evaluated for impairment		—		67		—			—			—		—		—			67
Collectively evaluated for impairment		156		138		55			27			80		83		57			596

	$	156	$	205	$	55		$	27		$	80	$	83	$	57		$	663

During the nine months ended March 31, 2012, the Company reduced its ALLL by $190 thousand. A $140 thousand charge-off was recorded on one single-family construction loan which was taken into real estate owned (“REO”). The charge-off amount was calculated using an independent internal and external appraisal of the property, adjusted for costs to complete and costs to sell the property.

During the nine months ended March 31, 2012, the Company also reduced the ALLL on the remaining loan portfolio by $50 thousand. The decrease was primarily attributable to a $31 thousand decrease in the ALLL related to consumer loans due to the payoff in full of two non-accrual home equity lines of credit, a $49 thousand decrease in the ALLL related to land acquisition and development loans due to reduced balances associated with payoffs in this segment of the loan portfolio, a $13 thousand decrease in the ALLL related to single-family residential mortgage loans due to the paydown on one previously classified non-accrual loan and a $4 thousand decrease in the ALLL related to commercial loans, which were partially offset by a $50 thousand increase in the ALLL related to construction loans due to the larger than anticipated charge-off on the single-family construction taken into REO.

At March 31, 2012, the Company had one collateral dependent non-accrual construction loan totaling $701 thousand that was considered to be impaired.

The property underlying the impaired construction loan is almost entirely complete and currently being marketed for sale. The loan was originated as a speculative construction loan to build a single-family home with a well known and respected builder within our market. At March 31, 2012, the loan was fifteen months past due for interest. The borrower communicates regularly with management of the Company. Management has interviewed several real estate agencies as part of this process and they all have indicated that sales of similar properties in this market support the asking price and that the property is in an affluent market that tends to take somewhat longer to sell. The property’s appraised value is $950 thousand, the current listing price is $899 thousand, and our book value of the loan is $701 thousand. The loan is considered impaired primarily due to its delinquency status. Management weighed several factors in considering whether a discount to the appraised valuation was appropriate. In its analysis, management considered several qualitative factors including the length of time that the property has been on the market, the recent change in real estate agents and the associated $26 thousand reduction in the listing price, and the limited number of buyers for homes in this price range. Based upon the significant difference between the loan’s $701 thousand book value and the home’s current listing price of $899 thousand, management has concluded that no specific allocation of the ALLL is needed as of March 31, 2012. The Company will continue to monitor marketing efforts with the builder and his real estate agent.

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.

Assets Measured at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale

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

The following tables present the assets reported on a recurring basis on the consolidated balance sheet at their fair value as of March 31, 2012 and June 30, 2011, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


	March 31, 2012
	Level I		Level II		Level III		Total
	(in thousands)
Assets Measured on a Recurring Basis:
Investment securities – available for sale:
Corporate securities	$	—	$	42,842	$	—	$	42,842
Foreign debt securities ⁽¹⁾		—		581		—		581

	$	—	$	43,423	$	—	$	43,423

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


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

Assets Measured at Fair Value on a Nonrecurring Basis

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

Impaired Loans

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

Real Estate Owned

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

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

The following tables present the assets reported on a non-recurring basis on the consolidated balance sheet at their fair value as of March 31, 2012 and June 30, 2011, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


	March 31, 2012
	Level I		Level II		Level III		Total
	(in thousands)
Assets Measured on a Non-recurring Basis:
Impaired loans	$	—	$	—	$	701	$	701
Real estate owned		—		—		235		235


Total	$	—	$	—	$	936	$	936


	June 30, 2011
	Level I		Level II		Level III		Total
	(in thousands)

Assets Measured on a Non-recurring Basis:
Impaired loans	$	—	$	—	$	957	$	957
Real estate owned		—		—		235		235


Total	$	—	$	—	$	1,192	$	1,192

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

The Company classifies financial instruments in Level III of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation model for Level III financial instruments typically also rely on a number of inputs that are readily observable, either directly or indirectly. The following table represents the changes in the measured Level III fair-value category for the nine month period ended March 31, 2012.


	Private-label Mortgage-backed securities Held-to-maturity			Impaired Loans			Real Estate Owned			Total
	(in thousands)

Beginning balance – July 1, 2011	$	—		$	957		$	235		$	1,192
Total net realized/unrealized gains (losses)
Included in earnings
Net realized losses on securities held-to-maturity		(131	)		—			—			(131	)
Included in other comprehensive income
Net unrealized gains on securities held-to-maturity		(66	)		—			—			(66	)
Transfers into Level III		997			—			182			1,179
Transfers out of Level III		(728	)		(256	)		(182	)		(1,166	)
Other – principal paydowns received		(72	)		—			—			(72	)

Ending balance – March 31, 2012	$	—		$	701		$	235		$	936

11.	FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values are as follows:


	March 31, 2012
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(in thousands)

FINANCIAL ASSETS
Cash and cash equivalents	$	3,718	$	3,718	$	3,718	$	—	$	—
Certificates of deposit		2,336		2,336		2,336		—		—
Investment securities – available for sale		43,423		43,423		—		43,423		—
Investment securities – held to maturity		129,389		130,901		—		130,901		—
Mortgage-backed securities – held to maturity
Agency		58,526		58,569		—		58,569		—
Private-label		13,281		13,968		—		13,968		—
Net loans receivable		43,875		48,002		—		—		48,002
Accrued interest receivable		1,634		1,634		1,634		—		—
FHLB stock		7,994		7,994		7,994		—		—

FINANCIAL LIABILITIES
Deposits
Non-interest bearing deposits	$	15,386	$	15,386	$	15,386	$	—	$	—
NOW accounts		20,548		20,548		20,548		—		—
Savings Accounts		39,442		39,442		39,442		—		—
Money market accounts		23,115		23,115		23,115		—		—
Certificates of deposit		42,142		42,383		—		—		42,383
Advance payments by borrowers for taxes and insurance		584		584		584		—		—
FHLB long-term advances		17,500		19,087		—		—		19,087
FHLB short-term advances		106,795		106,795		106,795		—		—
Accrued interest payable		259		259		259		—		—


	June 30, 2011
	Carrying Amount		Fair Value
	(in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	1,960	$	1,960
Certificates of deposit		3,668		3,668
Investment securities - available for sale		1,064		1,064
Investment securities – held to maturity		88,374		90,974
Mortgage-backed securities – held to maturity
Agency		47,777		48,048
Private-label		22,791		23,121
Net loans receivable		49,952		53,441
Accrued interest receivable		1,189		1,189
FHLB stock		9,324		9,324

FINANCIAL LIABILITIES
Deposits	$	143,766	$	143,928
FHLB long-term advances		22,500		23,762
FHLB short-term advances		32,059		32,059
Accrued interest payable		322		322

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

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

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

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

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

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

The fair value approximates the current carrying value.

Investment Securities, Mortgage-Backed Securities, and FHLB Stock

The fair value of investment and mortgage-backed securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities. For discussion of valuation of private-label CMOs, see Note 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 Long-term Advances

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

Commitments to Extend Credit

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

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2012

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;

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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;

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

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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;

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

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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;

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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.

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 March 31, 2012.

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

FINANCIAL CONDITION

The Company’s assets totaled $306.7 million at March 31, 2012, as compared to $228.9 million at June 30, 2011. The $77.8 million or 34.0% increase in total assets was primarily comprised of a $42.4 million increase in investment securities – available for sale, a $41.0 million increase in investment securities – held to maturity, a $1.8 million increase in cash and cash equivalents, and a $1.2 million increase in mortgage-backed securities-held to maturity, which were partially offset by a $6.1 million decrease in net loans receivable, a $1.3 million decrease in Federal Home Loan Bank Stock, and a $1.3 million decrease in FDIC insured bank certificates of deposit. The increase in investment securities – available for sale was primarily due to purchases of fixed-rate investment grade corporate bonds totaling $41.0 million and floating-rate investment grade corporate bonds totaling $4.4 million to bolster overall liquidity. The increase in investment securities – held to maturity was primarily due to purchases of U.S. Government Agency multiple step-up bonds totaling $100.6 million, which was partially offset by $42.2 million in early redemptions (i.e. calls) of U.S. Government Agency step-up notes. The increase in mortgage-backed securities held to maturity was primarily due to purchases of U.S. Government Agency CMO’s totaling $36.0 million, which was partially offset by repayments on our Agency and private-label CMO portfolios totaling $25.2 million and $9.8 million, respectively. The decrease in Federal Home Loan Bank stock was due to the continued redemption of excess stock by the FHLB Pittsburgh. The decrease in certificates of deposit was primarily due to $2.0 million in maturities of certificates of deposit which were partially offset by purchases totaling $946 thousand of FDIC insured bank certificates of deposit. See “Asset and Liability Management”.

The Company’s total liabilities increased $76.7 million or 38.4% to $276.7 million as of March 31, 2012 from $200.0 million as of June 30, 2011. The $76.7 million increase in total liabilities was primarily comprised of a $74.7 million or 233.1% increase in short-term FHLB advances, and a $9.6 million increase in other liabilities, which were partially offset by a $5.0 million or 22.2% decrease in legacy high-cost long-term FHLB advances, and a $2.5 million or 1.8% decrease in total savings deposits. The increase in other liabilities was primarily due to a $10.0 million commitment to purchase two U.S. Government Agency floating-rate CMO’s. The increase in FHLB short-term advances was primarily a result of funding needs for the purchase of investments securities. The decrease in total of deposits was due primarily to the maturity of a $4.0 million cash management CD related to a local government unit, which was partially offset by a $2.8 million increase in demand deposits. See also “Asset and Liability Management”.

Total stockholders’ equity increased $1.1 million or 3.9% to $30.0 million as of March 31, 2012, from approximately $28.9 million as of June 30, 2011. The increase was primarily attributable to Company net income of $996 thousand and other comprehensive income totaling $351 thousand, which were partially offset by cash dividends totaling $247 thousand. The other comprehensive income was primarily attributable to a $338 thousand reversal of unrealized holding losses on three private-label CMO’s with previously identified OTTI, and a $70 thousand OTTI reclassified and recognized in earnings, which were partially offset by $114 thousand OTTI other impairment on one private-label CMO.

RESULTS OF OPERATIONS

General. WVS reported net income of $382 thousand or $0.19 earnings per share (basic and diluted) and $996 thousand or $0.48 earnings per share (basic and diluted) for the three and nine months ended March 31, 2012, respectively. Net income increased by $29 thousand or 8.2% and earnings per share (basic and diluted) increased $0.02 or 11.8% for the three months ended March 31, 2012, when compared to the same period in 2011. The increase in net income was primarily attributable to a $49 thousand decrease in non-interest expense, a $13 thousand change in the provision for loan losses, and a $7 thousand increase in net interest income, which were partially offset by a $25 thousand increase in income tax expense and a $15 thousand decrease in non-interest income. For the nine months ended March 31, 2012 net income increased $370 thousand or 59.1% and earnings per share (basic and diluted) increased $0.18 or 60.0% when compared to the same period in 2011. The increase in net income was primarily attributable to a $648 thousand increase in net interest income, a $135 thousand decrease in non-interest expense, and a $67 thousand change in the provision for loan losses, which were partially offset by a $305 thousand increase in income tax expense, and a $175 thousand decrease in non-interest income.

Net Interest Income. The Company’s net interest income increased by $7 thousand or 0.5% for the three months ended March 31, 2012, when compared to the same period in 2011. The increase in net interest income is attributable to a $425 thousand decrease in interest expense, which more than offset a $418 thousand decrease in interest income. The decrease in interest expense was primarily attributable to the payoff of legacy high-cost FHLB long-term advances and lower average balances of wholesale deposits during the quarter ended March 31, 2012, when compared to the same period in 2011. The decrease in interest income was primarily due to lower average balances of, and lower realized yields on the Company’s investment and mortgage-backed securities portfolios for the quarter ended March 31, 2012 when compared to the same period in 2011. For the nine months ended March 31, 2012, net interest income increased $648 thousand or 18.8% when compared to the same period in 2011. The increase in net interest income is attributable to a $2.5 million decrease in interest expense, which was partially offset by a $1.8 million decrease in interest income. The decrease in interest expense was primarily due to the payoff of fixed rate legacy FHLB long-term advances, and wholesale time deposits during the nine months ended March 31, 2012, when compared to the same period in 2011. The decrease in interest income was primarily attributable to lower average balances of, and lower yields earned on the Company’s investment portfolio during the nine months ended March 31, 2012, when compared to the same period in 2011.

Interest Income. Interest on investment securities decreased $257 thousand or 23.8% and $1.2 million or 34.1% for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The decrease for the three months ended March 31, 2012 was primarily attributable to a 141 basis point decrease in the weighted average yield on investment securities which was partially offset by a $27.9 million increase in the average balance of investment securities outstanding, when compared to the same period in 2011. The decrease for the nine months ended March 31, 2012 was primarily attributable to a $21.5 million decrease in the average balance of investment securities and a 74 basis point decrease in the weighted average yield on investment securities outstanding, when compared to the same period in 2011.

Interest on mortgage-backed securities decreased $27 thousand or 11.0% and $309 thousand or 31.1% for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The decrease for the three months ended March 31, 2012 was primarily attributable to a 30 basis point decrease in the weighted average yield earned on U.S. Government agency mortgage-backed securities, and to

a $11.6 million decrease in the average balance of private label mortgage-backed securities outstanding, which were partially offset by an $11.9 million increase in the average balance of U.S. Government agency mortgage-backed securities outstanding, and a 4 basis point increase in the weighted average yield earned on private label mortgage-backed securities for the three months ended March 31, 2012, when compared to the same period in 2011. The decrease for the nine months ended March 31, 2012, was primarily attributable to a $16.8 million decrease in the average balance of private label mortgage-backed securities outstanding, a $3.1 million decrease in the average balance of U.S. Government agency mortgage-backed securities outstanding, a 26 basis point decrease in the weighted average yield earned on U.S. Government agency mortgage-backed securities and a 3 basis point decrease in the weighted average yield earned on private label mortgage-backed securities outstanding for the nine months ended March 31, 2012, when compared to the same period in 2011. The decrease in the average balances of private-label mortgage-backed securities during the three and nine months ended March 31, 2012 was attributable to principal paydowns of private-label mortgage-backed securities during the periods. The increase in the average balance of U.S. Government agency mortgage-backed securities for the three months ended March 31, 2012, was primarily attributable to $14.4 million in purchases of U.S. Government agency mortgage-backed securities during the quarter, which was partially offset by $86 million in repayments on the U.S. Government agency mortgage-backed securities portfolio. The decrease in the average balance of U.S. Government agency mortgage-backed securities for the nine months ended March 31, 2012, was primarily due to $25.2 million in repayments on the U.S. Government agency mortgage-backed securities portfolio. The decrease in yield is attributable to slightly lower LIBOR interest rates in the nine months ended March 31, 2012 when compared to the same period in 2011.

Interest on net loans receivable decreased $113 thousand or 14.0% and $258 thousand or 10.2% for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The decrease for the three months ended March 31, 2012 was primarily attributable to a $8.9 million decrease in the average balance of net loans receivable outstanding, which was partially offset by an increase of 14 basis points in the weighted average yield earned on net loans receivable for the three months ended March 31, 2012, when compared to the same period in 2011. The decrease for the nine months ended March 31, 2012, was primarily attributable to an $8.4 million decrease in the average balance of net loans receivable outstanding, when compared to the same period in 2011, which was partially offset by an increase of 34 basis points in the weighted average yield earned on net loans receivable for the nine months ended March 31, 2012, when compared to the same period in 2011. The increase in yield for the three and nine months ended March 31, 2012 was favorably impacted by $3 thousand and $104 thousand, respectively, of interest income collected on nonaccrual loans. The decrease in the average loan balance of net loans receivable outstanding for the three and nine months ended March 31, 2012 was attributable in part to increased levels of loan payoffs on single-family first mortgage loan and construction 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.

Interest on FDIC insured bank certificates of deposit decreased $22 thousand or 75.9% and $75 thousand or 74.3% for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The decrease for the three months ended March 31, 2012 was primarily attributable to a $4.0 million decrease in the average portfolio balance of certificates of deposit and a 69 basis point decrease in the weighted average yield earned when compared to the same period in 2011. The decrease for the nine months ended March 31, 2012 was primarily attributable to a $4.3 million decrease in the weighted average portfolio balance of certificates of deposit and a 69 basis point decrease in the weighted average yield earned when compared to the same periods in 2011. The certificates have remaining maturities ranging from one to thirty months. Due to decreases in yields in this investment sector, the Company has decided to limit reinvestments in certificates of deposit and to redeploy maturities and early issuer redemptions to other investment portfolio segments.

Interest on FHLB stock totaled $2 thousand for both the three and nine months ended March 31, 2012. This is the first dividend payment received on the FHLB stock since November 2008. This was attributable to the Federal Home Loan Bank of Pittsburgh’s payment of a dividend on its common stock during the quarter ended March 31, 2012. 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

was to build retained earnings to ensure adequate regulatory capital. Beginning in the December 2010 quarter, the FHLB began redeeming excess capital stock from members. Redemptions of $421 thousand and $1.3 million were recorded for the three and nine months ended March 31, 2012.

Interest Expense. Interest paid on FHLB advances decreased $334 thousand or 56.9% and $2.1 million or 74.2% for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The decrease for the three months ended March 31, 2012 was primarily attributable to a $29.4 million decrease in the average balance of fixed rate legacy FHLB long-term advances and a 21 basis point decrease in the weighted average yield paid on fixed rate legacy FHLB long-term advances, which were partially offset by a $86.2 million increase in the average balance of short-term FHLB advances, when compared to the same period in 2011. The decrease for the nine months ended March 31, 2012 was primarily attributable to a $54.2 million decrease in the average balance of fixed rate legacy FHLB long-term advances and a 43 basis point decrease in the weighted average yield paid on fixed rate legacy FHLB long-term advances, which was partially offset by a $50.4 million increase in the average balance of short-term FHLB advances when compared to the same period in 2011. The decreases in the average balances of fixed-rate legacy long-term FHLB advances during the three and nine months ended March 31, 2012 were due to repayments at maturity, when compared to the same period in 2011. Sources of funds for the repayments were primarily cash flows from the Company’s investment portfolio.

Interest expense on deposits and escrows decreased $86 thousand or 39.5% and $332 thousand or 44.0% for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The decrease in interest expense on deposits for the three months ended March 31, 2012 was primarily attributable to a $40.7 million decrease in the average balance of whole-sale time deposits, which was partially offset by a 12 basis point increase on the weighted average rate paid on time deposits, when compared to the same period in 2011. The decrease for the nine months ended March 31, 2012 was primarily attributable to a $48.9 million decrease in the average balance of whole-sale time deposits, which was partially offset by a 13 basis point increase in the weighted average rate paid on time deposits, when compared to the same period in 2011. The change in average balances of whole-sale time deposits is a result of the Savings Bank’s exit from wholesale brokered CD programs, including the CDARS One Way Buy transactions and to a lesser extent, brokered deposits, when compared to the same periods in 2011.

Interest paid on other short-term borrowings decreased $5 thousand or 100.0% and $19 thousand or 95.0% for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The decrease for both the three and nine months ended March 31, 2012, was attributable to the Company’s migration to FHLB short-term borrowings, and away from other short-term borrowings, during the three and nine months ended March 31, 2012. The migration is attributable to more favorable short-term borrowing rates offered by the FHLB when compared to brokers’ repurchase agreements.

Provision for (Recovery of) 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 decreased $13 thousand and $67 thousand for the three and nine months ended March 31, 2012, when compared to the same periods in 2011. The change in the provision for loan losses was primarily attributable to lower levels of non-performing loans. At March 31, 2012, the Company’s total allowance for loan losses amounted to $440 thousand or 1.0% of the Company’s total loan portfolio, as compared to $630 thousand or 1.2% at June 30, 2011. At March 31, 2012, the Company’s nonperforming loans totaled $1.4 million as compared to $2.2 million at June 30, 2011.

Non-Interest Income. Non-interest income decreased by $15 thousand or 12.9% for the three months ended March 31, 2012, and decreased $175 thousand or 44.4% for the nine months ended March 31, 2012, when compared to the same periods in 2011. The decrease for the three months ended March 31, 2012 was primarily attributable to a $14 thousand decrease in service charges on deposits, when compared to the same period in 2011. The decrease for the nine months ended March 31, 2012 was primarily due to a $131 thousand

other-than-temporary impairment loss recognized in earnings on two private-label mortgage-backed securities and decreases in correspondent loan origination, ATM, credit card and deposit fee income, when compared to the same period in 2011.

Non-Interest Expense. Non-interest expense decreased $49 thousand or 5.3% and $135 thousand or 4.7% for the three and nine months ended March 31, 2012, when compared to the same periods in 2011. The decrease for the three months ended March 31, 2012 was principally attributable to a $28 thousand decrease in Federal Deposit Insurance Corporation (FDIC) deposit insurance expense, a decrease of $13 thousand in correspondent bank service charges, and an $8 thousand decrease in occupancy and equipment expenses. The decrease for the nine months ended March 31, 2012 was primarily attributable to an $115 thousand decrease in FDIC insurance expense, an $18 thousand decrease in correspondent bank service charges and a $16 thousand decrease in occupancy and equipment expenses.

Income Tax Expense. Income tax expense increased $25 thousand and $305 thousand for the three and nine months ended March 31, 2012, respectively, when compared to the same periods in 2011. The increase for the three and nine months ended March 31, 2012 was primarily due to higher levels of taxable income, when compared to the same periods in 2011.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities totaled $932 thousand during the nine months ended March 31, 2012. Net cash provided by operating activities was primarily comprised of Company net income of $996 thousand, $758 thousand of amortization of investment premiums, a $201 thousand decrease in prepaid federal deposit insurance premiums, a $131 thousand net impairment loss recognized in earnings, a $178 thousand decrease in deferred income taxes, and $62 thousand in depreciation of the Company’s fixed assets, which were partially offset by a $733 thousand decrease in transaction account clearing balance payable to the Federal Reserve, a $445 thousand decrease in accrued interest receivable, a $63 thousand decrease in accrued interest payable, and a $50 thousand recovery of loan losses.

Funds used for investing activities totaled $66.1 million during the nine months ended March 31, 2012. Primary uses of funds during the nine months ended March 31, 2012 were purchases of: investment securities held to maturity of $101.7 million, investment securities available for sale totaling $45.0 million and mortgage-backed securities held to maturity of $26.0 million. Primary sources of funds during the nine months ended March 31, 2012 consisted of proceeds from investments and mortgage-backed securities within the held to maturity portfolio totaling $60.6 million and $35.1 million, respectively, $5.9 million of net loan repayments, $2.3 million of certificate of deposit net redemptions and $1.3 million of FHLB stock redemptions. During the nine months ended March 31, 2012, the Company has substantially increased the available for sale allocation to bolster balance sheet liquidity due to turmoil in the global financial markets while seeking to earn additional net interest income.

Funds provided by financing activities totaled $66.9 million for the nine months ended March 31, 2012. The primary sources included a $74.7 million increase in FHLB short-term borrowings, and a $3.6 million increase in transaction and savings deposits, which were partially offset by a $5.8 million decrease in retail certificates of deposit, a $5.0 million decrease in legacy FHLB long-term advances, a $248 thousand decrease in whole-sale certificates of deposit, a $68 thousand decrease in escrow accounts, and $247 thousand in cash dividends paid on the Company’s common stock. The $5.0 million 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 $5.8 million decrease in retail time deposits was primarily attributable to a matured $4 million cash management CD for a local government unit and seasonal withdrawals for the payment of local, county and school taxes by depositors. 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

March 31, 2012 totaled $30.6 million. At March 31, 2012, the Company had no brokered CD’s or wholesale time deposits.

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 March 31, 2012, total approved loan commitments outstanding were $855 thousand. At the same date, commitments under unused lines of credit amounted to $5.7 million and the unadvanced portion of construction loans approximated $4.1 million. The Company has been able to generate sufficient cash through the retail deposit market, its traditional funding source, and through FHLB advances, and other borrowings, to provide the cash utilized in investing activities. The Company’s available for sale segment of the investment portfolio totaled $43.4 million at March 31, 2012. Management believes that the Company currently has adequate liquidity available to respond to liquidity demands.

On April 24, 2012, the Company’s Board of Directors declared a cash dividend of $0.04 per share payable May 24, 2012, to shareholders of record at the close of business on May 7, 2012. 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.

As of March 31, 2012, WVS Financial Corp. exceeded all regulatory capital requirements and maintained Tier I and total risk-based capital equal to $31.5 million or 19.8% and $31.9 million or 20.1%, respectively, of total risk-weighted assets, and Tier I leverage capital of $31.5 million or 11.40% 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 March 31, 2012 totaled approximately $1.6 million or 0.5% of total assets as compared to $2.4 million or 1.0% of total assets at June 30, 2011. Nonperforming assets at March 31, 2012 consisted of: two single-family real estate loans totaling $363 thousand, one single-family construction loan totaling $701 thousand, one single-family real estate owned properties totaling $235 thousand, and one land loan totaling $290 thousand. The loans are in various stages of collection activity and the real estate owned property is being marketed.

The $812 thousand decrease in nonperforming assets during the nine months ended March 31, 2012 was attributable to the classification to performing status of one single-family real estate loan totaling $420 thousand, the payoff of two home equity lines of credit totaling $359 thousand, and a $140 thousand charge-off relating to one partially completed single-family construction loan which was transferred to real estate owned, and the subsequent sale of the partially completed real estate owned property with a carrying value of $182 thousand, which were partially offset by the classification to non-performing status of one land loan totaling $290 thousand.

During the nine months ended March 31, 2012, the Company collected $107 thousand of interest income on non-accrual loans that were paid off or brought current and approximately $77 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 nine months ended March 31, 2012. 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.

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

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

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

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

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

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

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

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

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

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

Throughout the nine months ended March 31, 2012, the Company continued to adjust its asset/liability management tactics in two ways. First, the Company increased total assets in two stages by about $77.8 million while continuing to increase Tier 1 capital. During the quarter ended December 31, 2011, as previously reported, the Company increased total assets by approximately $24.6 million as compared to June 30, 2011. The primary segments of asset growth for the quarter ended December 31, 2011 were: investment securities – available for sale - $33.9 million, which was partially offset by reductions in net loans receivable - $4.0 million, investment securities held to maturity - $3.2 million, FDIC insured bank certificates of deposit - $1.1 million, and FHLB stock - $909 thousand.

During the quarter ended March 31, 2012, the Company continued to selectively grow total assets by about $53.2 million when compared to the quarter ended December 31, 2011. The primary segments of asset growth during the quarter ended March 31, 2012 were: investment securities held to maturity - $44.2 million, investment securities available for sale - $8.5 million, mortgage-backed securities held to maturity - $2.1 million, and cash and cash equivalents - $1.5 million; which were partially offset by reductions in: net loans receivable - $2.1 million, FHLB stock - $421 thousand, and FDIC insured bank certificates of deposit - $249 thousand. We increased Tier 1 capital primarily through earnings retention. Second, we substantially increased the available for sale classification of the Company’s investment portfolio from $1.1 million at June 30, 2011 to $43.4 million at March 31, 2012. This allowed us to substantially bolster balance sheet liquidity

while earning additional net interest income. We anticipate maintaining our asset base in the range of $285 - $310 million for the remainder of calendar year 2012, subject to economic and market conditions. Legacy FHLB long-term borrowings were reduced by $5.0 million.

Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest-rate changes. For example, assume that an institution’s assets carry intermediate or long-term fixed rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn 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 nine months ended March 31, 2012, 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.

The table below shows the quarterly targeted federal funds rate and the benchmark two and ten year treasury yields from June 30, 2007 through March 31, 2012. The difference in yields on the two year and ten year Treasury’s is often used to determine the steepness of the yield curve and to assess the term premium of market interest rates.


		Yield on:
	Targeted Federal Funds	Two (2) Year Treasury			Ten (10) Year Treasury			Shape of Yield Curve

June 30, 2007	5.25%		4.87	%		5.03	%	Slightly Positive
September 30, 2007	4.75%		3.97	%		4.59	%	Moderately Positive
December 31, 2007	4.25%		3.05	%		4.04	%	Positive
March 31, 2008	2.25%		1.62	%		3.45	%	Positive
June 30, 2008	2.00%		2.63	%		3.99	%	Positive
September 30, 2008	2.00%		2.00	%		3.85	%	Positive
December 31, 2008	0.00% to 0.25%		0.76	%		2.25	%	Positive
March 31, 2009	0.00% to 0.25%		0.81	%		2.71	%	Positive
June 30, 2009	0.00% to 0.25%		1.11	%		3.53	%	Positive
September 30, 2009	0.00% to 0.25%		0.95	%		3.31	%	Positive
December 31, 2009	0.00% to 0.25%		1.14	%		3.85	%	Positive
March 31, 2010	0.00% to 0.25%		1.02	%		3.84	%	Positive
June 30, 2010	0.00% to 0.25%		0.61	%		2.97	%	Positive
September 30, 2010	0.00% to 0.25%		0.42	%		2.53	%	Positive
December 31, 2010	0.00% to 0.25%		0.61	%		3.30	%	Positive
March 31, 2011	0.00% to 0.25%		0.80	%		3.46	%	Positive
June 30, 2011	0.00% to 0.25%		0.45	%		3.18	%	Positive
September 30, 2011	0.00% to 0.25%		0.25	%		1.92	%	Positive
December 31, 2011	0.00% to 0.25%		0.25	%		1.89	%	Positive
March 31, 2012	0.00% to 0.25%		0.33	%		2.23	%	Positive

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 nine months ended March 31, 2012, totaled $11.0 million, $62.6

million and $35.1 million, respectively. Despite stagnant global interest rates and Treasury yields the Company began to grow its balance sheet and used proceeds from calls of U.S. Government agency bonds, repayments on its mortgage-backed securities and maturities of bank certificates of deposit to purchase U.S. Government agency bonds, investment grade corporate bonds and U.S. Government agency CMO’s. In particular, the Company increased its available for sale portfolio allocation from $1.1 million at June 30, 2011 to $43.4 million at March 31, 2012. This strategy has allowed the Company to substantially improve its liquidity posture while managing overall interest rate risk and strengthen our regulatory capital ratios.

Due to the term structure of market interest rates, historically low long-term mortgage interest rates, weakness in the economy, an excess supply of existing homes available for sale, and lower levels of housing starts, the Company continued to reduce its portfolio originations of long-term fixed rate mortgages while continuing to offer such loans on a correspondent basis. The Company also makes available for origination residential mortgage loans with interest rates which adjust pursuant to a designated index, although customer acceptance has been somewhat limited in the Savings Bank’s market area. We expect that the housing market will continue to be weak throughout fiscal 2012. 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 nine months ended March 31, 2012, principal investment purchases were comprised of: callable U.S. Government agency multiple step-up bonds with initial lock out periods of 1 – 12 months - $100.6 million with a weighted average yield to call of 1.44%; fixed rate investment grade corporate bonds - $38.9 million with a weighted average yield of 1.47%; floating rate U.S. Government agency CMO’s - $36.0 million with a weighted average yield of 1.26%; floating rate investment grade corporate bonds - $4.4 million with a weighted average yield of 1.29%; fixed rate investment grade corporate utility first mortgage bonds - $2.1 million with a weighted average yield of 1.20%; and fixed rate investment grade foreign bonds - $595 thousand with a weighted average yield of 1.22%. The Company also invested in FDIC bank insured certificates of deposit totaling $946 thousand with a weighted average yield of 0.89%. Single step-up bonds have one “step” or increase in coupon. Multiple step-up bonds have more than one step or increase in coupon. Substantially all of the corporate bond purchases were classified as available for sale for accounting purposes. The Company believes that this classification bolsters asset based liquidity while earning a return above the Company’s cost of funds.

Major investment proceeds received during the nine months ended March 31, 2012 were: callable U.S. Government agency bonds - $42.2 million with a weighted average yield of approximately 1.88%; investment grade corporate bonds - $12.7 million with a weighted average yield of approximately 2.88%; tax free municipal bonds - $3.6 million with a weighted average yield of 4.80%; investment grade foreign bonds - $1.5 million with a weighted average yield of 2.24%; and investment grade corporate utility first mortgage bonds - $2.4 million with a weighted average yield of 5.35%. The Company also had $2.0 million in FDIC insured bank certificates of deposit redeemed with a weighted average yield of approximately 1.40%.

As of March 31, 2012, the implementation of these asset and liability management initiatives resulted in the following:

$98.1 million or 40.1% of the Company’s investment portfolio was comprised of callable U.S. Government Agency multiple step-up bonds which are callable as follows: 1 - 3 months - $47.3 million or 48.2%; 4 - 6 months - $2.2 million or 2.2%; and 7 – 12 months - $48.6 million or 49.6%. 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;

$71.8 million or 29.4% 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;

$64.2 million or 26.3% of the Company’s investment portfolio consisted of investment grade fixed-rate corporate bonds with remaining maturities as follows: 3 months or less - $3.0 million or 4.7%; 3 – 12 months - $17.8 million or 22.7%; 1 – 2 years - $35.4 million or 55.1%; 2 – 3 years - $3.1 million or 4.8%; 3 – 5 years - $521 thousand or 0.8%; and over 5 years - $4.4 million or 6.9%;

$7.5 million or 3.0% of the Company’s investment portfolio consisted of investment grade floating-rate corporate bonds which will reprice within three months and will mature within four to twenty-four months;

$43.4 million or 14.2% of the Company’s assets were comprised of investment securities classified as available for sale;

$2.3 million or 0.8% of the Company’s total assets consisted of FDIC insured bank certificates of deposit with remaining maturities ranging from one to thirty months;

An aggregate of $23.7 million or 53.9% of the Company’s net loan portfolio had adjustable interest rates or maturities of less than 12 months; and

The maturity distribution of the Company’s borrowings is as follows: 3 months or less - $106.8 million or 85.9%; 1 – 3 years - $5.0 million or 4.0%; 3 – 5 years - $2.5 million or 2.0%; and over 5 years - $10.0 million or 8.1%.

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.

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.


	March 31, 2012			June 30,
	March 31, 2012			2011			2010
	(Dollars in Thousands)
Interest-earning assets maturing or repricing within one year	$	220,053		$	178,738		$	243,519
Interest-bearing liabilities maturing or repricing within one year		193,101			128,811			248,813


Interest sensitivity gap	$	26,952		$	49,927		$	(5,294	)

Interest sensitivity gap as a percentage of total assets		8.79	%		21.81	%		-1.49	%
Ratio of assets to liabilities maturing or repricing within one year		113.96	%		138.76	%		97.87	%

During the nine months ended March 31, 2012, the Company managed its one year interest sensitivity gap by: (1) Repaying $5.0 million of maturing legacy FHLB long-term debt; and (2) Repaying $248 thousand of fixed rate other brokered CD’s. In addition, the Company purchased $42.3 million (par value) of corporate bonds which have been classified as available for sale for accounting purposes. These purchases further bolstered balance sheet liquidity. At March 31, 2012, investments available for sale totaled $43.4 million or 14.2% of Company assets.

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 March 31, 2012. The table estimates the impact of an upward or downward change in market interest rates of 100 and 200 basis points.

Cumulative Stressed Repricing Gap


	Month 3			Month 6			Month 12			Month 24			Month 36			Month 60			Long Term
	(Dollars in Thousands)
Base Case Up 200 bp
Cumulative Gap ($’s)	$	(6,097	)	$	(18,219	)	$	23,273		$	67,442		$	60,956		$	52,434		$	35,784
% of Total Assets		-2.0	%		-5.9	%		7.6	%		22.0	%		19.9	%		17.1	%		11.7	%
Base Case Up 100 bp
Cumulative Gap ($’s)	$	(5,805	)	$	(17,723	)	$	24,123		$	68,703		$	64,420		$	53,929		$	35,784
% of Total Assets		-1.9	%		-5.8	%		7.9	%		22.4	%		20.4	%		17.6	%		11.7	%
Base Case No Change
Cumulative Gap ($’s)	$	(4,824	)	$	(16,031	)	$	26,952		$	72,583		$	66,720		$	57,688		$	35,784
% of Total Assets		-1.6	%		-5.2	%		8.8	%		23.7	%		21.8	%		18.8	%		11.7	%
Base Case Down 100 bp
Cumulative Gap ($’s)	$	(4,235	)	$	(14,990	)	$	28,563		$	74,450		$	68,432		$	57,855		$	35,784
% of Total Assets		-1.4	%		-4.9	%		9.3	%		24.3	%		22.3	%		18.9	%		11.7	%
Base Case Down 200 bp
Cumulative Gap ($’s)	$	(4,213	)	$	(14,945	)	$	28,636		$	74,532		$	68,495		$	57,855		$	35,784
% of Total Assets		-1.4	%		-4.9	%		9.3	%		24.3	%		22.3	%		18.9	%		11.7	%

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.

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 March 31, 2012. This analysis was done assuming that the interest-earning assets will average approximately $292 million and $317 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 March 31, 2012. Actual future results could differ materially from our estimates primarily due to unknown future interest rate changes and the level of prepayments on our investment and loan portfolios and future FDIC regular and special assessments.

Analysis of Sensitivity to Changes in Market Interest Rates


	Twelve Month Forward Modeled Change in Market Interest Rates
	March 31, 2013															March 31, 2012
Estimated impact on:	-200			-100			0			+100			+200			-200			-100			0			+100			+200
Change in net interest income		-19.2	%		-17.1	%		—			12.0	%		38.2	%		-2.4	%		-1.6	%		—			4.2	%		13.8	%
Return on average equity		2.27	%		2.50	%		4.43	%		5.74	%		8.49	%		3.89	%		3.98	%		4.16	%		4.62	%		5.66	%
Return on average assets		0.24	%		0.27	%		0.43	%		0.58	%		0.76	%		0.39	%		0.40	%		0.43	%		0.46	%		0.51	%
Market value of equity (in thousands)																$	32,824		$	33,306		$	33,385		$	34,207		$	28,488

The Company’s fiscal year to date earnings were positively impacted by lower interest expenses associated with lower average balances of fixed rate legacy long-term FHLB advances. During the nine months ended March 31, 2012, we repaid $5 million of long-term FHLB advances, with a rate of 5.03%.

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, at March 31, 2012. The Company used no derivative financial instruments to hedge such anticipated transactions as of March 31, 2012.


Anticipated Transactions
	(Dollars in Thousands)
Undisbursed construction and land development loans
Fixed rate	$	971
		6.60	%

Adjustable rate	$	2,693
		4.82	%

Undisbursed lines of credit
Adjustable rate	$	5,722
		3.39	%

Loan origination commitments
Fixed rate	$	854
		7.88	%

Letters of credit
Adjustable rate	$	302
		4.25	%


	$	10,542

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 March 31, 2012, the Savings Bank had three performance standby letters of credit outstanding totaling approximately $302 thousand. Two performance letters of credit are secured by developed property while one letter of credit is secured by loans in process and personal guarantees. The letters of credit will mature within six 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

As of March 31, 2012, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Accounting Officer, on the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Accounting Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2012.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that the information required to be disclosed by the Company in its reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports filed under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended March 31, 2012, no change in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has occurred that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

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

(b)Not applicable.

ITEM 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, 2011.

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

(a) Not applicable.

(b) Not applicable.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Mine Safety Disclosures

Not applicable.

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

101.INS	XBRL Instance Document*

101.SCH	XBRL Taxonomy Extension Schema Document*

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB	XBRL Taxonomy Extension Label Linkbase Document*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document*

*	These interactive files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

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.

May 11, 2012	BY:	/s/ David J. Bursic
Date		David J. Bursic President and Chief Executive Officer (Principal Executive Officer)

May 11, 2012	BY:	/s/ Keith A. Simpson
Date		Keith A. Simpson Vice-President, Treasurer and Chief Accounting Officer (Principal Accounting Officer)