WVS FINANCIAL CORP - Quarter Report: 2013 December (Form 10-Q)

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 December 31, 2013

[ ]

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.


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

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

Shares outstanding as of February 13, 2014: 2,057,930 shares Common Stock, $.01 par value.

WVS FINANCIAL CORP. AND SUBSIDIARY

INDEX


PART I.	Financial Information	Page

Item 1.	Financial Statements

	Consolidated Balance Sheet as of December 31, 2013 and June 30, 2013 (Unaudited)	3

	Consolidated Statement of Income for the Three and Six Months Ended December 31, 2013 and 2012 (Unaudited)	4

	Consolidated Statement of Comprehensive Income for the Three and Six Months Ended December 31, 2013 and 2012 (Unaudited)	5

	Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended December 31, 2013 (Unaudited)	6

	Consolidated Statement of Cash Flows for the Six Months Ended December 31, 2013 and 2012 (Unaudited)	7

	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended December 31, 2013	36

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43

Item 4.	Controls and Procedures	50

PART II.	Other Information	Page

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	51
	Signatures	52

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(In thousands)


	December 31, 2013		June 30, 2013
Assets
Cash and due from banks		$ 1,574		$ 1,603
Interest-earning demand deposits		247		324

Total cash and cash equivalents		1,821		1,927
Certificates of deposit		598		598
Investment securities available-for-sale (amortized cost of $55,450 and $77,067)		55,581		77,186
Investment securities held-to-maturity (fair value of $18,137 and $26,956)		18,163		26,420
Mortgage-backed securities held-to-maturity (fair value of $195,606 and $139,998)		193,956		139,268
Net loans receivable (allowance for loan losses of $220 and $307)		31,470		31,531
Accrued interest receivable		955		1,371
Federal Home Loan Bank stock, at cost		6,068		5,682
Premises and equipment, net		587		614
Bank owned life insurance		4,062		2,000
Deferred tax assets (net)		559		748
Other assets		213		231

TOTAL ASSETS		$ 314,033		$ 287,576


Liabilities and Stockholders’ Equity
Liabilities:
Deposits
Non-interest-bearing accounts		$ 16,629		$ 14,911
NOW accounts		21,539		20,654
Savings accounts		42,539		41,808
Money market accounts		23,142		23,772
Certificates of deposit		37,013		38,829
Advance payments by borrowers for taxes and insurance		424		550

Total deposits		141,286		140,524
Federal Home Loan Bank advances: long-term		17,500		17,500
Federal Home Loan Bank advances: short-term		122,054		96,712
Accrued interest payable		223		210
Other liabilities		680		802

TOTAL LIABILITIES		281,743		255,748


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		21,485		21,478
Treasury stock: 1,747,706 and 1,747,706 shares at cost, respectively		(26,690)		(26,690)
Retained earnings, substantially restricted		38,022		37,744
Accumulated other comprehensive loss		(565)		(742)

TOTAL STOCKHOLDERS’ EQUITY		32,290		31,828

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$ 314,033		$ 287,576

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 December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
INTEREST AND DIVIDEND INCOME:
Loans, including fees		$ 415		$ 549		$ 829		$ 1,135
Investment securities - taxable		397		748		895		1,527
Mortgage-backed securities		588		247		1,062		494
Certificates of deposit		3		2		5		4
Interest-earning demand deposits		-		-		1		1
FHLB Stock		21		8		35		10

Total interest and dividend income		1,424		1,554		2,827		3,171


INTEREST EXPENSE:
Deposits		89		100		168		208
Federal Home Loan Bank advances – long-term		211		211		422		422
Federal Home Loan Bank advances – short-term		55		54		109		107

Total interest expense		355		365		699		737


NET INTEREST INCOME		1,069		1,189		2,128		2,434
PROVISION FOR LOAN LOSSES		(99)		(25)		(87)		(49)

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		1,168		1,214		2,215		2,483


NON-INTEREST INCOME:
Service charges on deposits		50		47		102		99
Earnings on Bank Owned Life Insurance		36		-		62		-
Investment securities gains		-		-		-		8


Other		60		178		119		249

Total non-interest income		146		225		283		356


NON-INTEREST EXPENSE:
Salaries and employee benefits		532		491		1,043		984
Occupancy and equipment		95		80		168		155
Data processing		60		61		120		122
Correspondent bank service charges		11		13		22		27
Deposit insurance premium		48		43		95		79
Other		212		225		370		479

Total non-interest expense		958		913		1,818		1,846


INCOME BEFORE INCOME TAXES		356		526		680		993
INCOME TAX EXPENSE		123		201		237		282

NET INCOME		$ 233		$ 325		$ 443		$ 711


EARNINGS PER SHARE:
Basic		$ 0.11		$ 0.16		$ 0.22		$ 0.35
Diluted		$ 0.11		$ 0.16		$ 0.22		$ 0.35

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 COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands, except per share data)


	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012

NET INCOME		$ 233		$ 325		$ 443		$ 711

OTHER COMPREHENSIVE INCOME

Investment securities available for sale not other-than-temporarily impaired:
Gains (losses) arising during the year		(7)		42		12		414
Income tax effect		(2)		14		4		141

		(5)		28		8		273

Gains recognized in earnings		-		-		-		(8)
Income tax effect		-		-		-		(3)

		-		-		-		(5)
Unrealized holdings gains (losses) on securities available for sale not other-than-temporarily impaired, net of tax		(5)		28		8		268


Accretion of other comprehensive loss on other-than-temporarily impaired securities held to maturity		111		264		256		485
Income tax effect		37		90		87		165

		74		174		169		320
Unrealized holding gains on other-than-temporarily impaired securities held to maturity, net of tax		74		174		169		320


Unrealized holdings gains on securities, net		69		202		177		588


Other comprehensive income		69		202		177		588


NET COMPREHENSIVE INCOME		$ 302		$ 527		$ 620		$ 1,299

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 Compre- hensive Income(Loss)		Total
Balance at June 30, 2013		$ 38		$21,478		$(26,690)		$ 37,744		$ (742)		$ 31,828

Net Income								443				443

Other comprehensive income										177		177

Expense of stock options awarded				7								7

Cash dividends declared ($0.08 per share)								(165)				(165)


Balance at December 31, 2013		$ 38		$ 21,485		$(26,690)		$38,022		$ (565)		$ 32,290

See accompanying notes to unaudited consolidated financial statements.

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Six Months Ended December 31,
	2013		2012
OPERATING ACTIVITIES

Net income		$ 443		$ 711
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan losses		(87)		(49)
Depreciation		59		47
Gain on sale of investments		-		(8)
Amortization of discounts, premiums and deferred loan fees		1,057		1,420
Deferred income taxes		189		314
Increase in prepaid accrued income taxes		(91)		(1)
Earnings on bank owned life insurance		(62)		-
Decrease (increase) in accrued interest receivable		416		(27)
Increase (decrease) in accrued interest payable		13		(26)
Decrease in deferred director compensation payable		(11)		(15)
Decrease in prepaid federal deposit insurance premium		-		71
Other, net		(88)		(499)

Net cash provided by operating activities		1,838		1,938


INVESTING ACTIVITIES

Available-for-sale:
Purchase of investment securities		-		(32,960)
Proceeds from repayments of investments		20,573		5,803
Proceeds from sales of investments		-		1,891
Held-to-maturity:
Purchases of investment securities		(1,955)		-
Purchases of mortgage-backed securities		(66,986)		(46,980)
Proceeds from repayments of investments		10,182		33,927
Proceeds from repayments of mortgage-backed securities		12,575		45,050
Maturities/redemptions of certificates of deposit		-		248
Purchase of bank owned life insurance		(2,000)		-
Net decrease in net loans receivable		145		6,002
Purchase of FHLB stock		(4,019)		-
Redemption of FHLB stock		3,633		1,626
Capital improvements to other real estate owned		-		(4)
Acquisition of premises and equipment		(31)		(119)

Net cash (used for) provided by investing activities		(27,883)		14,484

WVS FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Six Months Ended December 31,
	2013		2012
FINANCING ACTIVITIES

Net increase in transaction and savings accounts		$ 2,704		$ 243
Net decrease in certificates of deposit		(1,816)		(2,163)
Net decrease in advance payments by borrowers for taxes and insurance		(126)		(187)
Net increase (decrease) in FHLB short-term advances		25,342		(14,554)
Cash dividends paid		(165)		(165)

Net cash provided by (used for) financing activities		25,939		(16,826)


Decrease in cash and cash equivalents		(106)		(404)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD		1,927		2,506


CASH AND CASH EQUIVALENTS AT END OF THE PERIOD		$ 1,821		$2,102


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the period for:
Interest on deposits, escrows and borrowings		$ 686		$ 763
Income taxes		$ 230		$ 346

Non-cash items:
Educational Improvement Tax Credit		$ 47		$ 107

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 (GAAP). However, all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation have been included. The results of operations for the three and six months ended December 31, 2013, are not necessarily indicative of the results which may be expected for the entire fiscal year.

2.	RECENT ACCOUNTING PRONOUNCEMENTS

In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date. The ASU requires the measurement of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement with its co-obligors as well as any additional amount that the entity expects to pay on behalf of its co-obligors. The new standard is effective retrospectively for fiscal years and interim periods within those years, beginning after December 15, 2013, and early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In April 2013, the Financial Accounting Standards Board FASB issued ASU 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The amendments in this Update are being issued to clarify when an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. Entities that use the liquidation basis of accounting as of the effective date in accordance with other Topics (for example, terminating employee benefit plans) are not required to apply the amendments. Instead, those entities should continue to apply the guidance in those other Topics until they have completed liquidation. This ASU is not expected to have a significant impact on the Company’s financial statements.

In June 2013, the FASB issued ASU 2013-08, Financial Services – Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The amendments in this Update affect the scope, measurement, and disclosure requirements for investment companies under U.S. GAAP. The amendments do all of the following: 1. Change the approach to the investment company assessment in Topic 946, clarify the characteristics of an investment company, and provide comprehensive guidance for assessing whether an entity is an investment Company. 2. Require an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting. 3. Require the following additional disclosures:

(a) the fact that the entity is an investment company and is applying the guidance in Topic 946, (b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support provided or contractually required to be provided by an investment company to any of its investees. The amendments in this Update are effective for an entity’s interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited. This ASU is not expected to have a significant impact on the Company’s financial statements.

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This Update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application 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 January 2014, FASB issued ASU 2014-01, Investments – Equity Method and Join Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. The amendments in this Update permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments in this Update should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. The amendments in this Update are effective for public business entities for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after

December 15, 2014. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method. 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 December 31,				Six Months Ended December 31,

	2013		2012		2013		2012
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 December 31, 2013, there were 114,519 options outstanding with an exercise price of $16.20 which were anti-dilutive for the three and six month periods. At December 31, 2012 there were 114,519 options outstanding with an exercise price of $16.20 which were anti-dilutive for the three and six month periods.

4.	STOCK BASED COMPENSATION DISCLOSURE

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

During the six month periods ended December 31, 2013 and 2012, the Company recorded $7 thousand and $11 thousand, respectively, in compensation expense related to our share-based compensation awards. As of December 31, 2013, there was approximately $3 hundred 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 month.

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 9,729 non-vested stock options outstanding at December 31, 2013, and 31,552 unvested stock options outstanding at December 31, 2012. There were no stock options exercised or issued during the six months ended December 31, 2013 and 2012.

5.	INVESTMENT SECURITIES

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


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
December 31, 2013		(Dollars in Thousands)

AVAILABLE FOR SALE
Corporate debt securities	$		53,351	$		169	$		(49)	$		53,471
Foreign debt securities ¹			2,099			11			-			2,110


Total	$		55,450	$		180	$		(49)	$		55,581


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
December 31, 2013		(Dollars in Thousands)

HELD TO MATURITY
U.S. government agency securities	$		11,959	$		-	$		(602)	$		11,357
Corporate debt securities			6,204			576			-			6,780


Total	$		18,163	$		576	$		(602)	$		18,137

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


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
June 30, 2013		(Dollars in Thousands)

AVAILABLE FOR SALE
Corporate debt securities	$		73,349	$		223	$		(107)	$		73,465
Foreign debt securities ¹			3,718			8			(5)			3,721


Total	$		77,067	$		231	$		(112)	$		77,186


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
June 30, 2013		(Dollars in Thousands)

HELD TO MATURITY
U.S. government agency securities	$		9,995	$		-	$		(328)	$		9,667
Corporate debt securities			14,425			853			-			15,278
Foreign debt securities ¹			2,000			11			-			2,011


Total	$		26,420	$		864	$		(328)	$		26,956

During the six months ended December 31, 2013, and 2012, the Company recorded gross realized investment security gains of $0 thousand, and $8, respectively. Proceeds from sales of investment securities during the six months ended December 31, 2013 and 2012, were $0 and $1.9 million, respectively.

The amortized cost and fair values of debt securities at December 31, 2013, 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	$		34,305	$		17,070	$		2,080	$		1,004	$		991	$		-	$		55,450
Fair value			34,382			17,147			2,082			984			986			-			55,581

HELD TO MATURITY
Amortized cost	$		1,001	$		999	$		522	$		3,682	$		-	$		11,959	$		18,163
Fair value			1,018			1,065			587			4,110			-			11,357			18,137

At both December 31, 2013 and June 30, 2013, no investment securities were pledged to secure public deposits, repurchase agreements, or borrowings with the Federal Home Loan Bank. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.

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

6.	MORTGAGE-BACKED SECURITIES

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

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

At December 31, 2013, the Company’s Agency CMO’s totaled $191.2 million as compared to $135.6 million at June 30, 2013. The Company’s private-label CMO’s totaled $2.8 million at December 31, 2013 as compared to $3.6 million at June 30, 2013. The $54.8 million increase in the CMO segment of our MBS portfolio was primarily due to purchases of U.S. Government Agency CMO’s totaling $67.0 million which more than offset repayments on our Agency CMO’s totaling $11.4 million and $1.1 million in repayments on our private-label CMO’s. During the six months ended December 31, 2013, the Company received principal payments totaling $1.1 million on its private-label CMO’s. At December 31, 2013, approximately $194.0 million or 100.0% (book value) of the Company’s MBS portfolio, including CMO’s, were comprised of adjustable or floating rate investments, as compared to $139.3 million or 100.0% at June 30, 2013. Substantially all of the Company’s floating rate MBS adjust monthly based upon changes in the one month LIBOR. The Company has no investment in multi-family or commercial real estate based MBS.

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

The Company retains an independent third party to assist it in the determination of a fair value for its three 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 previously recorded other-than-temporary impairments at December 31, 2013. During the six months ending December 31, 2013, the Company reversed $256 thousand of non-credit unrealized holding losses on its three private-label CMO’s with OTTI due to principal repayments. During the six months ended December 31, 2013, the Company recorded no additional credit impairment charges on its private-label CMO portfolio.

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 following table sets forth information with respect to the Company’s private-label CMO portfolio as of December 31, 2013. At the time of purchase, all of our private-label CMO’s were rated in the highest investment category by at least two ratings agencies.


		At December 31, 2013
		Rating			Book Value		Fair Value²		Life to Date Impairment Recorded in Earnings
Cusip #	Security Description	S&P	Moody’s	Fitch	(in thousands)
126694CP1	CWHL SER 21 A11	N/A	Caa2	C	$	1,554	$	1,882	$	201
126694KF4	CWHL SER 24 A15	D	N/A	D		298		333		33
126694KF4	CWHL SER 24 A15	D	N/A	D		595		666		66
126694MP0	CWHL SER 26 1A5	CC	N/A	C		326		351		36

					$	2,773	$	3,232	$	336

The amortized cost and fair values of the Company’s mortgage-backed securities are as follows:


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value

		(Dollars in Thousands)
December 31, 2013
HELD TO MATURITY

Collateralized mortgage obligations:
Agency	$		191,183	$		2,126	$		(935)	$		192,374
Private-label			2,773			459			-			3,232


Total	$		193,956	$		2,585	$		(935)	$		195,606


		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value

June 30, 2013		(Dollars in Thousands)
HELD TO MATURITY

Collateralized mortgage obligations:
Agency	$		135,621	$		368	$		(256)	$		135,733
Private-label			3,647			621			(3)			4,265


Total	$		139,268	$		989	$		(259)	$		139,998

² Fair value estimate provided by the Company’s independent third party valuation consultant.

The amortized cost and fair value of the Company’s mortgage-backed securities at December 31, 2013, 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	$		-	$		-	$		641	$		193,315	$		193,956
Fair value	$		-	$		-	$		658	$		194,948	$		195,606

At December 31, 2013, mortgage-backed securities with amortized costs of $136.3 million and fair values of $136.5 million were pledged to secure public deposits and borrowings with the Federal Home Loan Bank. Of the securities pledged, $9.9 million of fair value was excess collateral. At June 30, 2013 mortgage-backed securities with an amortized cost of $123.7 million and fair values of $123.8 million, were pledged to secured borrowings with the Federal Home Loan Bank. Of the securities pledged, $20.9 million of fair value was excess collateral. Excess collateral is maintained to support future borrowings and may be withdrawn by the Company at any time.

7.	ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables present the changes in accumulated other comprehensive income by component, for the three and six months ended December 31, 2013.


	Three Months Ended December 31, 2013
	(Dollars in Thousands – net of tax)

	Unrealized Gains and Losses on Available-for-Sale Securities		Unrealized Gains and Losses on Held-to-Maturity Securities		Total

Beginning Balance – September 30, 2013	$	91	$	(725)	$	(634)

Other comprehensive income (loss)		(5)		74		69


Ending Balance – December 31, 2013	$	86	$	(651)	$	(565)


	Six Months Ended December 31, 2013
	(Dollars in Thousands – net of tax)

	Unrealized Gains and Losses on Available-for-Sale Securities		Unrealized Gains and Losses on Held-to-Maturity Securities		Total

Beginning Balance – June 30, 2013	$	78	$	(820)	$	(742)

Other comprehensive income		8		169		177


Ending Balance – December 31, 2013	$	86	$	(651)	$	(565)

8.	UNREALIZED LOSSES ON SECURITIES

The following table shows the Company’s gross unrealized losses and fair value, aggregated by category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2013 and June 30, 2013.


		December 31, 2013

		Less Than Six Months						Six through Twelve Months						Twelve Months or Greater						Total

		Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses

		(Dollars in Thousands)

U.S. government agencies securities	$		1,938	$		(21)	$		9,419	$		(581)	$		-	$		-	$		11,357	$		(602)
Corporate debt securities			1,185			(2)			4,800			(47)			-			-			5,985			(49)
Collateralized mortgage obligations:
Agency			36,546			(325)			35,134			(561)			2,879			(49)			74,559			(935)


Total	$		39,669	$		(348)	$		49,353	$		(1,189)	$		2,879	$		(49)	$		91,901	$		(1,586)


		June 30, 2013

		Less Than Six Months						Six through Twelve Months						Twelve Months or Greater						Total

		Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses

		(Dollars in Thousands)

U.S. government agencies securities	$		9,667	$		(328)	$		-	$		-	$		-	$		-	$		9,667	$		(328)
Corporate debt securities			15,042			(78)			2,322			(29)			-			-			17,364			(107)
Foreign debt securities¹			-			-			518			(5)			-			-			518			(5)
Collateralized mortgage obligations:
Agency			49,176			(235)			782			(13)			4,900			(8)			54,858			(256)
Private-label			-			-			-			-			109			(3)			109			(3)


Total	$		73,885	$		(641)	$		3,622	$		(47)	$		5,009	$		(11)	$		82,516	$		(699)

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

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

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


	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
	(In thousands)

Beginning balance		$309		$324		$316		$324
Initial credit impairment		-		-		-		-
Subsequent credit impairment		-		-		-		-
Reductions for amounts recognized in earnings due to intent or requirement to sell		-		-		-		-
Reductions for securities sold		-		-		-		-
Reduction for actual realized losses		(5)		-		(12)		-
Reduction for increase in cash flows expected to be collected		-		-		-		-

Ending Balance		$304		$324		$304		$324

During the quarter and six months ended December 31, 2013, the Company recorded no credit impairment charge and no non-credit unrealized holding loss to accumulated other comprehensive income. During the quarter and six months ended December 31, 2013, the Company accreted back into other comprehensive income $74 thousand and $169 thousand, respectively, (net of income tax effect of $37 thousand and $87 thousand, respectively), based on principal repayments on private-label CMO’s previously identified with OTTI.

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

losses of principal and interest on the underlying mortgage loans. The development of the modeling assumptions requires significant judgment.

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

The Company reviewed the independent third party’s assumptions used in the December 31, 2013 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 no additional private-label CMO’s in the portfolio had an other-than-temporary impairment at December 31, 2013, keeping the total at three private-label CMO’s with OTTI at December 31, 2013.

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

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

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

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

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 had investments in 28 positions that were impaired at December 31, 2013. Based on its analysis, management has concluded that three private-label CMO’s are other-than-temporarily impaired, while the remaining securities portfolio has experienced unrealized losses and a decrease in

fair value due to interest rate volatility, illiquidity in the marketplace, or credit deterioration in the U.S. mortgage markets.

LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

The following table summarizes the primary segments of the loan portfolio as of December 31, 2013 and June 30, 2013.


		December 31, 2013								June 30, 2013
		Total Loans			Individually evaluated for impairment			Collectively evaluated for impairment			Total Loans			Individually evaluated for impairment			Collectively evaluated for impairment

		(Dollars in Thousands)
First mortgage loans:
1 – 4 family dwellings	$		15,321	$		-	$		15,321	$		13,611	$		-	$		13,611
Construction			2,899			-			2,899			2,546			701			1,845
Land acquisition & development			864			-			864			1,407			280			1,127
Multi-family dwellings			2,654			-			2,654			2,780			-			2,780
Commercial			5,035			-			5,035			5,787			-			5,787

Consumer Loans
Home equity			837			-			837			1,085			-			1,085
Home equity lines of credit			2,071			150			1,921			2,056			150			1,906
Other			219			-			219			180			-			180

Commercial Loans			1,811			-			1,811			1,890			-			1,890

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

	$		31,711	$		150	$		31,561	$		31,842	$		1,131	$		30,711

Less: Deferred loan fees			(21)									(4)
Allowance for loan losses			(220)									(307)

Total	$		31,470							$		31,531

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 December 31, 2013 and June 30, 2013, and the related interest income recognized for the three and six months ended December 31, 2013 and December 31, 2012:


		December 31, 2013			June 30, 2013
		(Dollars in Thousands)
Impaired loans with an allocated allowance:
Construction loans	$		-	$		701
Home equity lines of credit			150			150
Impaired loans without an allocated allowance:
Land acquisition & development loans			-			280

Total impaired loans	$		150	$		1,131

Allocated allowance on impaired loans:
Construction loans	$		-	$		107
Home equity lines of credit	$		15	$		15


		Three Months Ended						Six Months Ended
		December 31, 2013			December 31, 2012			December 31, 2013			December 31, 2012
		(Dollars in Thousands)
Average impaired loans
Construction loans	$		236	$		701	$		470	$		701
Land acquisition & development loans			-			-			29			-
Home equity lines of credit			150			150			150			150

Total	$		386	$		851	$		649	$		851


Income recognized on impaired loans
Construction loans	$		-	$		-	$		-	$		-
Land acquisition & development loans			-			-			-			-
Home equity lines of credit			2			2			3			3

Total	$		2	$		2	$		3	$		3

Total nonaccrual loans as of December 31, 2013 and June 30, 2013 and the related interest income recognized for the three and six months ended December 31, 2013 and December 31, 2012 are as follows:


		December 31, 2013			June 30, 2013
		(Dollars in Thousands)
Principal outstanding
1 – 4 family dwellings	$		476	$		477
Construction			-			701
Land acquisition & development			-			280
Home equity lines of credit			150			150

Total	$		626	$		1,608


		Three Months Ended						Six Months Ended
		December 31, 2013			December 31, 2012			December 31, 2013			December 31, 2012
		(Dollars in Thousands)
Average nonaccrual loans
1 – 4 family dwellings	$		476	$		73	$		476	$		178
Construction			236			1,056			470			1,054
Land acquisition & development			-			290			29			290
Home equity lines of credit			150			150			150			150

Total	$		862	$		1,569	$		1,125	$		1,672


Income that would have been recognized	$		13	$		25	$		35	$		52

Interest income recognized	$		4	$		6	$		7	$		47

Interest income foregone	$		10	$		22	$		29	$		31

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

The following tables include the recorded investment and number of modifications for modified loans, as of December 31, 2013 and 2012. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured.


	For the Six Months Ended December 31, 2013
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

	(Dollars in Thousands)
Troubled debt restructurings:
Home equity lines of credit	-	$	-	$	-

Troubled debt restructurings that subsequently defaulted:
Home equity lines of credit	-	$	-	$	-

For the Three Months Ended

December 31, 2013

Number

of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

(Dollars in Thousands)

Troubled debt restructurings:

Home equity lines of credit

Troubled debt restructurings that subsequently defaulted:

Home equity lines of credit


	For the Six Months Ended
	December 31, 2012


	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

	(Dollars in Thousands)
Troubled debt restructurings:
Home equity lines of credit	-	$	-	$	-

Troubled debt restructurings that subsequently defaulted:
Home equity lines of credit	1	$	150	$	150

For the Three Months Ended

December 31, 2012

Number

of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment

(Dollars in Thousands)

Troubled debt restructurings:

Home equity lines of credit

Troubled debt restructurings that subsequently defaulted:

Home equity lines of credit

There is one previously modified TDR’s in default as of December 31, 2013.

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

The 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 December 31, 2013, 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 December 31, 2013 and June 30, 2013:


		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

		(Dollars in Thousands)
December 31, 2013
First mortgage loans:
1 – 4 family dwellings	$		14,845	$		-	$		-	$		-	$		476	$		476	$		15,321
Construction			2,899			-			-			-			-			-			2,899
Land acquisition & development			864			-			-			-			-			-			864
Multi-family dwellings			2,654			-			-			-			-			-			2,654
Commercial			5,035			-			-			-			-			-			5,035

Consumer Loans:
Home equity			837			-			-			-			-			-			837
Home equity lines of credit			1,921			-			-			-			150			150			2,071
Other			219			-			-			-			-			-			219

Commercial Loans			1,811			-			-			-			-			-			1,811

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

	$		31,085	$		-	$		-	$		-	$		626	$		626			31,711

Less: Deferred loan fees																					(21)
Allowance for loan loss																					(220)

Net Loans Receivable																			$		31,470


		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

	(Dollars in Thousands)
June 30, 2013
First mortgage loans:
1 – 4 family dwellings	$		13,089	$		45	$		-	$		-	$		477	$		522	$		13,611
Construction			1,845			-			-			-			701			701			2,546
Land acquisition & development			1,127			-			-			-			280			280			1,407
Multi-family dwellings			2,780			-			-			-			-			-			2,780
Commercial			5,787			-			-			-			-			-			5,787

Consumer Loans:
Home equity			1,085			-			-			-			-			-			1,085
Home equity lines of credit			1,906			-			-			-			150			150			2,056
Other			180			-			-			-			-			-			180

Commercial Loans			1,884			6			-			-			-			6			1,890

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

	$		30,183	$		51	$		-	$		-	$		1,608	$		1,659			31,842

Less: Deferred loan fees																					(4)
Allowance for loan loss																					(307)

Net Loans Receivable																			$		31,531

Credit quality information

The following tables represent credit exposure by internally assigned grades for the period ended December 31, 2013. 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 tables presents the Company’s internally classified construction, land acquisition and development, multi-family residential, commercial real estate and commercial (not secured by real estate) loans at December 31, 2013 and June 30, 2013.


		December 31, 2013
		Construction			Land Acquisition & Development Loans			Multi-family Residential			Commercial Real Estate			Commercial			Obligations (other than securities and leases) of States and Political Subdivisions

		(Dollars in Thousands)

Pass	$		2,899	$		291	$		2,654	$		5,035	$		1,810	$		-
Special Mention			-			-			-			-			-			-
Substandard			-			573			-			-			1			-
Doubtful			-			-			-			-			-			-


Ending Balance	$		2,899	$		864	$		2,654	$		5,035	$		1,811	$		-


		June 30, 2013
		Construction			Land Acquisition & Development Loans			Multi-family Residential			Commercial Real Estate			Commercial			Obligations (other than securities and leases) of States and Political Subdivisions

		(Dollars in Thousands)

Pass	$		1,845	$		1,127	$		2,780	$		5,787	$		1,889	$		500
Special Mention			-			-			-			-			-			-
Substandard			701			280			-			-			1			-
Doubtful			-			-			-			-			-			-


Ending Balance	$		2,546	$		1,407	$		2,780	$		5,787	$		1,890	$		500

The following table presents performing and non-performing 1 – 4 family residential and consumer loans based on payment activity for the periods ended December 31, 2013 and June 30, 2013.


		December 31, 2013

		1 – 4 Family			Consumer

		(Dollars in Thousands)

Performing	$		14,845	$		2,977
Non-performing			476			150


Total	$		15,321	$		3,127


	June 30, 2013

		1 – 4 Family			Consumer

		(Dollars in Thousands)

Performing	$		13,134	$		3,171
Non-performing			477			150


Total	$		13,611	$		3,321

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 December 31, 2013.

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 present the activity in the allowance for loan losses for the three and six month periods ended December 31, 2013 and 2012.


		As of December 31, 2013
		First Mortgage Loans
		1 – 4 Family			Construction			Land Acquisition & Development			Multi- family			Commercial			Consumer Loans			Commercial Loans			Total

		(Dollars in Thousands)
Beginning ALLL Balance at September 30, 2013	$		50	$		130	$		8	$		14	$		55	$		52	$		10	$		319
Charge-offs			-			-			-			-			-			-			-			-
Recoveries			-			-			-			-			-			-			-			-
Provisions			14			(110)			2			-			(4)			-			(1)			(99)

Ending ALLL Balance at December 31, 2013	$		64	$		20	$		10	$		14	$		51	$		52	$		9	$		220


		As of December 31, 2013
		First Mortgage Loans
		1 – 4 Family			Construction			Land Acquisition & Development			Multi- family			Commercial			Consumer Loans			Commercial Loans			Total

		(Dollars in Thousands)
Beginning ALLL Balance at June 30, 2013	$		47	$		117	$		8	$		14	$		57	$		53	$		11	$		307
Charge-offs			-			-			-			-			-			-			-			-
Recoveries			-			-			-			-			-			-			-			-
Provisions			17			(97)			2			-			(6)			(1)			(2)			(87)

Ending ALLL Balance at December 31, 2013	$		64	$		20	$		10	$		14	$		51	$		52	$		9	$		220


		As of December 31, 2012
		First Mortgage Loans
		1 – 4 Family			Construction			Land Acquisition & Development			Multi- family			Commercial			Consumer Loans			Commercial Loans			Total

		(Dollars in Thousands)
Beginning ALLL Balance at September 30, 2012	$		27	$		142	$		16	$		25	$		80	$		57	$		14	$		361
Charge-offs			-			-			-			-			-			-			-			-
Recoveries			-			-			-			-			-			-			-			-
Provisions			(1)			(19)			-			-			(3)			(1)			(1)			(25)

Ending ALLL Balance at December 31, 2012	$		26	$		123	$		16	$		25	$		77	$		56	$		13	$		336


		As of December 31, 2012
		First Mortgage Loans
		1 – 4 Family			Construction			Land Acquisition & Development			Multi- family			Commercial			Consumer Loans			Commercial Loans			Total

		(Dollars in Thousands)
Beginning ALLL Balance at June 30, 2012	$		73	$		122	$		21	$		26	$		76	$		53	$		14	$		385
Charge-offs			-			-			-			-			-			-			-			-
Recoveries			-			-			-			-			-			-			-			-
Provisions			(47)			1			(5)			(1)			1			3			(1)			(49)

Ending ALLL Balance at December 31, 2012	$		26	$		123	$		16	$		25	$		77	$		56	$		13	$		336

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 December 31, 2013 and June 30, 2013.


		As of December 31, 2013
		First Mortgage Loans
		1 – 4 Family			Construction			Land Acquisition & Development			Multi- family			Commercial			Consumer Loans			Commercial Loans			Total

		(Dollars in Thousands)
Individually evaluated for impairment	$		-	$		-	$		-	$		-	$		-	$		15	$		-	$		-
Collectively evaluated for impairment			64			20			10			14			51			37			9			220

	$		64	$		20	$		10	$		14	$		51	$		52	$		9	$		220


		As of June 30, 2013
		First Mortgage Loans
		1 – 4 Family			Construction			Land Acquisition & Development			Multi- family			Commercial			Consumer Loans			Commercial Loans			Total

		(Dollars in Thousands)
Individually evaluated for impairment	$		-	$		107	$		-	$		-	$		-	$		15	$		-	$		107
Collectively evaluated for impairment			47			10			8			14			57			38			11			200

	$		47	$		117	$		8	$		14	$		57	$		53	$		11	$		307

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 the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

Level III:		Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Assets Measured at Fair Value on a Recurring Basis

Investment Securities Available-for-Sale

Fair values for securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. The Company has no Level I or Level III investment securities. Level II 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 December 31, 2013 and June 30, 2013, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


		December 31, 2013
		Level I			Level II			Level III			Total
		(Dollars in Thousands)
Assets measured on a recurring basis:
Investment securities – available for sale:
Corporate securities	$		-	$		53,471	$		-	$		53,471
Foreign debt securities ⁽¹⁾			-			2,110			-			2,110

	$		-	$		55,581	$		-	$		55,581


		June 30, 2013
		Level I			Level II			Level III			Total
		(Dollars in Thousands)
Assets measured on a recurring basis:
Investment securities – available for sale:
Corporate securities	$		-	$		73,465	$		-	$		73,465
Foreign debt securities ⁽¹⁾			-			3,721			-			3,721

	$		-	$		77,186	$		-	$		77,186

(1)

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

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 I or Level II impaired loans. Level III impaired loans were primarily comprised of one single-family residential construction loan, one land loan, and one home equity line of credit.

The following tables present the assets reported on a non-recurring basis on the consolidated balance sheet at their fair values as of December 31, 2013 and June 30, 2013, by level within the fair value hierarchy. As required by GAAP, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


		December 31, 2013
		Level I			Level II			Level III			Total
		(Dollars in Thousands)
Assets measured on a non-recurring basis:
Impaired loans	$		-	$		-	$		135	$		135


Total	$		-	$		-	$		135	$		135


		June 30, 2013
		Level I			Level II			Level III			Total
		(Dollars in Thousands)
Assets measured on a non-recurring basis:
Impaired loans	$		-	$		-	$		1,024	$		1,024


Total	$		-	$		-	$		1,024	$		1,024

For Level III assets measured at fair value on a recurring and non-recurring basis as of December 31, 2013 and June 30, 2013, the significant observable inputs used in the fair value measurements were as follows:

Fair Value at

December 31,

2013

June 30,

2013

Valuation

Technique

Significant
Unobservable
Inputs

Significant Unobservable

Input Range (Weighted
Average)

(Dollars in Thousands)

Impaired loans

135

1,024

Appraisal of
collateral⁽¹⁾

Discounted
appraisal⁽²⁾

0%/0%

When evaluating the value of the collateral on impaired loans, the Company will consider the age of the most current appraisal, and may discount the appraised value from 1.0% to 15.0%.

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.

⁽¹⁾

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level III inputs which are not identifiable.

⁽²⁾

Appraisals may be adjusted by management for qualitative factors such as economic conditions. The range and weighted average of appraisal adjustments are presented as a percentage of the appraisals.

11.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values are as follows:


		December 31, 2013
		Carrying Amount			Fair Value			Level I			Level II			Level III
		(Dollars in Thousands)

FINANCIAL ASSETS
Cash and cash equivalents	$		1,821	$		1,821	$		1,821	$		-	$		-
Certificates of deposit			598			598			598			-			-
Investment securities – available for sale			55,581			55,581			-			55,581			-
Investment securities – held to maturity			18,163			18,137			-			18,137			-
Mortgage-backed securities – held to maturity:
Agency			191,183			192,374			-			192,374			-
Private-label			2,773			3,232			-			-			3,232
Net loans receivable			31,470			32,443			-			-			32,443
Accrued interest receivable			955			955			955			-			-
FHLB stock			6,068			6,068			6,068			-			-
Bank owned life insurance			4,062			4,062			4,062			-			-

FINANCIAL LIABILITIES
Deposits:
Non-interest bearing deposits	$		16,629	$		16,629	$		16,629	$		-	$		-
NOW accounts			21,539			21,539			21,539			-			-
Savings accounts			42,539			42,539			42,539			-			-
Money market accounts			23,142			23,142			23,142			-			-
Certificates of deposit			37,013			37,002			-			-			37,002
Advance payments by borrowers for taxes and insurance			424			424			424			-			-
FHLB long-term advances			17,500			18,438			-			-			18,438
FHLB short-term advances			122,054			122,054			122,054			-			-
Accrued interest payable			223			223			223			-			-


		June 30, 2013
		Carrying Amount			Fair Value			Level I			Level II			Level III
		(Dollars in Thousands)

FINANCIAL ASSETS
Cash and cash equivalents	$		1,927	$		1,927	$		1,927	$		-	$		-
Certificates of deposit			598			598			598			-			-
Investment securities – available for sale			77,186			77,186			-			77,186			-
Investment securities – held to maturity			26,420			26,956			-			26,956			-
Mortgage-backed securities – held to maturity:
Agency			135,621			135,733			-			135,733			-
Private-label			3,647			4,265			-			109			4,156
Net loans receivable			31,531			33,194			-			-			33,194
Accrued interest receivable			1,371			1,371			1,371			-			-
FHLB stock			5,682			5,682			5,682			-			-
Bank owned life insurance			4,026			4,026			4,026			-			-

FINANCIAL LIABILITIES
Deposits:
Non-interest bearing deposits	$		14,911	$		14,911	$		14,911	$		-	$		-
NOW accounts			20,654			20,654			20,654			-			-
Savings accounts			41,808			41,808			41,808			-			-
Money market accounts			23,772			23,772			23,772			-			-
Certificates of deposit			38,829			38,885			-			-			38,885
Advance payments by borrowers for taxes and insurance			550			550			550			-			-
FHLB long-term advances			17,500			18,525			-			-			18,525
FHLB short-term advances			96,712			96,712			96,712			-			-
Accrued interest payable			210			210			210			-			-

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.

Bank Owned Life Insurance (“BOLI”)

The fair value of BOLI at December 31, 2013 and June 30, 2013 approximated the cash surrender value of the policies at these dates.

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 SIX MONTHS ENDED DECEMBER 31, 2013

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:

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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

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

West View Savings Bank is a Pennsylvania-chartered, FDIC-insured stock savings bank conducting business from six offices in the North Hills suburbs of Pittsburgh. The Savings Bank converted from the mutual to the stock form of ownership in November 1993. The Savings Bank had no subsidiaries at December 31, 2013.

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 $314.0 million at December 31, 2013, as compared to $287.6 million at June 30, 2013. The $26.4 million or 9.2% increase in total assets was primarily comprised of a $54.7 million increase in mortgage-backed securities – held to maturity, a $2.1 million increase in bank owned life insurance, and a $386 thousand increase in Federal Home Loan Bank (“FHLB”)Stock which were partially offset by a $21.6 million decrease in investment securities available for sale, a $8.3 million decrease in investment securities held to maturity, a $416 thousand decrease in accrued interest receivable, a $189 thousand decrease in deferred tax assets, and a $106 thousand decrease in cash and cash equivalents. The increase in mortgage-backed securities held to maturity was primarily due to purchases of floating-rate U.S. Government agency CMO’s totaling $67.0 million, which were partially offset by repayments on floating-rate U.S. Government agency CMO’s and floating-rate private-label CMO’s totaling $11.4 million and $1.1 million, respectively. The mortgage-backed securities purchased were primarily used to offset maturities and early calls of securities in the investment portfolio and to bolster interest revenue. The increase in FHLB stock was due to an increase in FHLB short-term advances. The decrease in investment securities available for sale was primarily due to maturities and early redemptions of investment-grade corporate bonds and U.S. dollar denominated investment-grade foreign bonds totaling $17.6 million and $1.5 million, respectively. The decrease in investment securities held to maturity was primarily due to maturities and early redemptions of investment-grade corporate bonds and U.S. dollar denominated investment-grade foreign bonds totaling $9.4 million and $2.0 million, respectively. See “Asset and Liability Management”.

The Company’s total liabilities increased $26.0 million or 10.2% to $281.7 million as of December 31, 2013 from $255.7 million as of June 30, 2013. The $26.0 million increase in total liabilities was primarily comprised of a $25.3 million or 26.2% increase in short-term FHLB advances and a $762 thousand or 0.5% increase in total savings deposits, which were partially offset by a $122 thousand or 15.2% decrease in other liabilities. The increase in FHLB short-term advances was primarily a result of funding needs for the purchase of mortgage-backed securities. The increase in total deposits was primarily attributable to increases in non-interest bearing accounts, NOW accounts and savings accounts of $1.7 million, $885 thousand, and $731 thousand, respectively, which were partially offset by decreases in time deposits, money market accounts and advance payments by borrowers real estate taxes of $1.8 million, $630 thousand, and $126 thousand, respectively. See also “Asset and Liability Management”.

Total stockholders’ equity increased $462 thousand or 1.5% to $32.3 million as of December 31, 2013, from $31.8 million as of June 30, 2013. The increase was primarily attributable to Company net income of $443 thousand and other comprehensive income totaling $177 thousand for the six months ended December 31, 2013, which were partially offset by cash dividends totaling $165 thousand. The other comprehensive income was primarily attributable to a $169 thousand (net of tax effect) reversal of unrealized holding losses on three private-label CMO’s with previously identified OTTI, and an $8 thousand (net of tax effect) of unrealized holding gains on the Company’s available for sale investment portfolio.

RESULTS OF OPERATIONS

General. WVS reported net income of $233 thousand or $0.11 earnings per share (basic and diluted), and $443 thousand or $0.22 earnings per share (basic and diluted) for the three and six months ended December 31, 2013, respectively. Net income decreased by $92 thousand or 28.3% and earnings per share (basic and diluted) decreased $0.05 or 31.2% for the three months ended December 31, 2013, when compared to the same period in 2012. The decrease in net income for the three months ended December 31, 2013 was primarily attributable to a $120 thousand decrease in net interest income, a $79 thousand decrease in non-interest income, and a $45 thousand increase in non-interest expense, which were partially offset by a $74 thousand increase in credit provisions for loan losses, and a $78 thousand decrease in income tax expense. For the six months ended December 31, 2013, net income decreased $268 thousand, or 37.7% and earnings per share (basic and diluted) decreased $0.13 or 37.1%, when compared to the same period in 2012. The decrease in net income for the six months ended December 31, 2013, was primarily attributable to a $306 thousand decrease in net interest income, and a $73 thousand decrease in non-interest income, which were partially offset by a $45 thousand decrease in income tax expense, a $38 thousand increase in credit provisions for loan losses, and a $28 thousand decrease in non-interest expense.

Net Interest Income. The Company’s net interest income decreased by $120 thousand or 10.1% for the three months ended December 31, 2013, when compared to the same period in 2012. The decrease in net interest income is attributable to a $130 thousand decrease in interest income, which was partially offset by a $10 thousand decrease in interest expense. The decrease in interest income was primarily due to lower average balances of investment securities and loans outstanding, and lower yields earned on the Company’s loan and investment portfolio for the quarter ended December 31, 2013, which were partially offset by higher average balances of mortgage-backed securities, when compared to the same period in 2012. The decrease in interest expense was primarily attributable to lower rates paid on the Company’s deposits, which were partially offset by higher average balances of time deposits during the quarter ended December 31, 2013, when compared to the same period in 2012. For the six months ended December 31, 2013, net interest income decreased $306 thousand or 12.6% when compared to the same period in 2012. The decrease in net-interest income was primarily attributable to a $344 thousand decrease in interest income, which was partially offset by a $38 thousand decrease in interest expense. The decrease in interest income was primarily due to lower average balances of investment securities and loans outstanding, and lower yields earned on the Company’s loan and investment portfolios for the six months ended December 31, 2013, which were partially offset by higher average balances of mortgage-backed securities, when compared to the same period in 2012. The decrease in interest expense was primarily attributable to lower rates paid on the Company’s deposits, which were partially offset by higher average balances of time deposits during the six months ended December 31, 2013, when compared to the same period in 2012.

Interest Income. Interest income on net loans receivable decreased $134 thousand or 24.4%, and $306 thousand or 27.0% for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The decrease for the three months ended December 31, 2013 was primarily attributable to a $3.5 million decrease in the average balance of net loans receivable outstanding, and a decrease of 98 basis points in the weighted average yield earned on net loans receivable for the three months ended December 31, 2013, when compared to the same period in 2012. The decrease in the average balance of loans outstanding was primarily attributable to lower construction loans outstanding, payoffs on non-accrual loans, and repayments on performing loans in excess of originations. The decrease in the yield on loans was primarily attributable to payoffs of higher yielding construction loans. The decrease for the six months ended December 31, 2013, was primarily attributable to a $4.4 million decrease in the average balance of net loans receivable outstanding, and a 104 basis point decrease in the weighted average yield earned on net loans receivable for the six months ended December 31, 2013, when compared

to the same period in 2012. The six months ended December 31, 2012 also included collection of past due interest and late charges on one non-accrual loan of approximately $36 thousand, as compared to $0 for the same period in 2013.

Interest income on investment securities decreased $351 thousand or 46.9% and $632 thousand or 41.4% for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The decrease for the three months ended December 31, 2013 was primarily attributable to a $73.7 million decrease in the average balance of investment securities outstanding, which was partially offset by a 4 basis point increase in the weighted average yield on investment securities, when compared to the same period in 2012. The decrease for the six months ended December 31, 2013 was primarily attributable to a $67.6 million decrease in the average balance of investment securities outstanding, which was partially offset by an 8 basis point increase in the weighted average yield on investment securities, when compared to the same period in 2012.

Interest income on FDIC insured bank certificates of deposit increased $1 thousand or 50.0% and $1 thousand or 25.0% for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The increase for the three months ended December 31, 2013 was primarily attributable to an 87 basis point increase in the weighted average yield earned, which was partially offset by a $105 thousand decrease in the average portfolio balance of certificates of deposit, when compared to the same period in 2012. The increase for the six months ended December 31, 2013 was primarily attributable to a 64 basis point increase in the weighted average yield earned, which was partially offset by a $176 thousand decrease in the average portfolio balance of certificates of deposit, when compared to the same period in 2012. The certificates have remaining maturities ranging from eight to one hundred twelve months. Due to decreases in market 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 income on mortgage-backed securities increased $341 thousand or 138.1% and $568 thousand or 115.0% for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The increase for the three months ended December 31, 2013 was primarily attributable to a $100.3 million increase in the average balance of U.S. Government agency mortgage-backed securities outstanding, a 16 basis point increase in the weighted average yield earned on U.S. Government agency mortgage-backed securities, and a 9 basis point increase in the weighted average yield earned on private-label mortgage-backed securities, which were partially offset by a $3.8 million decrease in the average balance of private-label mortgage-backed securities outstanding, for the three months ended December 31, 2013, when compared to the same period in 2012. The increase for the six months ended December 31, 2013 was primarily attributable to a $90.7 million increase in the average balance of U.S. Government agency mortgage-backed securities outstanding, a 3 basis point increase in the weighted average yield earned on U.S. Government agency mortgage-backed securities, and a 16 basis point increase in the weighted average yield earned on private-label mortgage-backed securities, which were partially offset by a $4.9 million decrease in the average balance of private-label mortgage-backed securities outstanding for the six months ended December 31, 2013, when compared to the same period in 2012. The decrease in the average balances of private-label mortgage-backed securities during the three and six months ended December 31, 2013 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 and six months ended December 31, 2013, was primarily attributable to purchases of U.S. Government agency mortgage-backed securities totaling $37.8 million and $67.0 million, respectively, during the three and six months, which was partially offset by repayments of $4.1 million and $11.4 million, respectively, on the U.S. Government agency mortgage-backed securities portfolio, during the three and six months ended December 31, 2013. The mortgage-backed securities purchased during both periods were primarily used to offset maturities and early calls of securities within the investment portfolio and to bolster interest revenue.

Interest income on FHLB stock increased $13 thousand or 162.5%, and $25 thousand or 250.0% for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The increase in dividends on FHLB stock for the three months ended December 31, 2013 was attributable to a 121 basis point increase in the yield earned on FHLB stock, which was partially offset by a

$1.4 million decrease in the average balance of FHLB stock held during the three months ended December 31, 2013, when compared to the same period in 2012. The increase in dividends on FHLB stock for the six months ended December 31, 2013 was attributable to a 103 basis point increase in the yield earned on FHLB stock, which was partially offset by a $1.4 million decrease in the average balance of FHLB stock held during the six months ended December 31, 2013, when compared to the same period in 2012.

Interest Expense. Interest expense on deposits and escrows decreased $11 thousand or 11.0% and $40 thousand or 19.2% for the three and six months ended December 31, 2013, when compared to the same periods in 2012. The decrease in interest expense on deposits for the three months ended December 31, 2013 was primarily attributable to a 31 basis point decrease in the weighted average rate paid on time deposits, a 3 basis point decrease in the weighted average rate paid on savings accounts, and a 3 basis point decrease in the weighted average rate paid on money market accounts, which was partially offset by a $21.8 million increase in the average balance of time deposits for the three months ended December 31, 2013, when compared to the same period in 2012. The decrease in interest expense on deposits for the six months ended December 31, 2013 was primarily attributable to a 28 basis point decrease in the weighted average rate paid on time deposits, a 4 basis point decrease in the weighted average rate paid on money market accounts, and a 2 basis point decrease in the weighted average rate paid on savings accounts, which was partially offset by a $10.3 million increase in the average balance of time deposits for the six months ended December 31, 2013, when compared to the same period in 2012.

Interest paid on FHLB advances increased $1 thousand or 0.4% and $2 thousand or 0.4% for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The increase for the three months ended December 31, 2013 was primarily attributable to a 2 basis point decrease in the weighted average rate paid on FHLB short-term advances, which were partially offset by a $6.7 million decrease in the average balance of FHLB short-term advances for the three months ended December 31, 2013, when compared to the same period in 2012. The increase for the six months ended December 31, 2013, was primarily attributable to a $560 thousand increase in the average balance of short-term FHLB advances, for the six months ended December 31, 2013.

Provision for Loan Losses. A provision for loan losses is charged to earnings (while credit provision for loan losses are accretive 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.

Credit provisions for loan losses increased $74 thousand and $38 thousand for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The increase in the credit provisions for loan losses for both the three and six months ended December 31, 2013, were primarily attributable to higher payoffs on non-performing loan balances during the three and six months ended December 31, 2013, when compared to the same periods in 2012. At December 31, 2013, the Company’s total allowance for loan losses amounted to $220 thousand or 0.7% of the Company’s total loan portfolio, as compared to $307 thousand or 1.0% at June 30, 2013. At December 31, 2013, the Company’s non-performing loans totaled $625 thousand as compared to $1.6 million at June 30, 2013.

Non-Interest Income. Non-interest income decreased by $79 thousand or 35.1% and $73 thousand or 20.5% for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The decrease for the three months ended December 31, 2013 was primarily attributable to the absence of a $117 thousand recognized gain on the sale of other real-estate owned, which was partially offset by a $40 thousand increase in earnings on bank-owned life insurance, and an $8 thousand increase in mortgage loan correspondent fee income for the three months ended December 31, 2013, when compared to the same period in 2012. The decrease for the six months ended December 31, 2013 was primarily attributable to the absence of a $117 thousand recognized gain on the sales of other real-estate owned, which was partially offset by a $67 thousand increase in earnings on bank-owned life insurance during the six months ended December 31, 2013, when compared to the same period in 2012.

Non-Interest Expense. Non-interest expense increased $45 thousand or 4.9% and decreased $28 thousand or 1.5% for the three and six months ended December 31, 2013, respectively, when compared

to the same periods in 2012. The increase for the three months ended December 31, 2013 was principally attributable to a $41 thousand increase in employee related expense, and a $5 thousand increase in Federal Deposit Insurance Corporation (FDIC) deposit insurance expense, when compared to the same period in 2012. The decrease for the six months ended December 31, 2013 was primarily attributable to a $65 thousand decrease in charitable contributions eligible for Pennsylvania tax credits, a $23 thousand decrease in provisions for losses on off-balance sheet (loan origination commitments), and a $7 thousand decrease in other real estate owned expenses, which were partially offset by a $59 thousand increase in employee related expenses, a $16 thousand increase in FDIC deposit insurance expenses, and a $13 thousand increase in equipment depreciation expense during the six months ended December 31, 2013, when compared to the same period in 2012.

Income Tax Expense. Income tax expense decreased $78 thousand and $45 thousand for the three and six months ended December 31, 2013, respectively, when compared to the same periods in 2012. The decrease for the three and six months ended December 31, 2013 was primarily due to lower levels of taxable income, and Pennsylvania educational improvement tax credits utilized during the three and six months ended December 31, 2013, when compared to the same periods in 2012.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities totaled $1.8 million during the six months ended December 31, 2013. Net cash provided by operating activities was primarily comprised of Company net income of $443 thousand, $1.1 million of amortization of investment premiums, a $189 thousand decrease in deferred income taxes, a $416 thousand decrease in accrued interest receivable, and $59 thousand of depreciation expense, which were partially offset by a $91 thousand increase in prepaid/accrued income taxes, an $87 thousand credit provision for loan losses, and $62 thousand in earnings on bank-owned life insurance.

Funds used for investing activities totaled $27.9 million during the six months ended December 31, 2013. Primary uses of funds during the six months ended December 31, 2013 included purchases of mortgage-backed securities held to maturity totaling $67.0 million, purchases of investment securities held to maturity totaling $2.0 million, the purchase of bank-owned life insurance totaling $2.0 million, net purchases of FHLB stock totaling $386 thousand and purchases of fixed assets totaling $31 thousand. Primary sources of funds during the six months ended December 31, 2013 included proceeds from investment securities in the available for sale portfolio totaling $20.6 million, proceeds from mortgage-backed and investment securities in the held-to-maturity portfolio totaling $12.6 million and $10.2 million, respectively, and $145 thousand of net loan repayments. The mortgage-backed securities purchased were primarily used to offset maturities and early calls of securities in the investment portfolio and to bolster interest revenue.

Funds provided by financing activities totaled $25.9 million for the six months ended December 31, 2013. The primary sources included a $25.3 million increase in FHLB short-term borrowings, and a $2.7 million increase in transaction and savings accounts, which were partially offset by a $1.8 million decrease in retail certificates of deposit, $165 thousand in cash dividends paid on the Company’s common stock, and a $126 thousand decrease in escrow accounts. The $25.3 million increase in FHLB short-term borrowings was primarily a result of funding needs for the purchase of mortgage-backed securities. Management believes that a significant portion of our local maturing deposits will remain with the Company.

The Company’s primary sources of funds are deposits, amortization, repayments and maturities of existing loans, mortgage-backed securities and investment securities, funds from operations, and funds obtained through FHLB advances and other borrowings. Certificates of deposit scheduled to mature in one year or less at December 31, 2013 totaled $28.6 million.

Historically, the Company used its sources of funds primarily to meet its ongoing commitments to pay maturing savings certificates and savings withdrawals, fund loan commitments and maintain a substantial portfolio of investment securities. At December 31, 2013, there were no approved loan commitments outstanding. At the same date, commitments under unused lines of credit amounted to $5.4 million and the unadvanced portion of construction loans approximated $3.2 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 $55.6 million at December 31, 2013. Management believes that the Company currently has adequate liquidity available to respond to liquidity demands.

On January 27, 2014, the Company’s Board of Directors declared a cash dividend of $0.04 per share payable February 20, 2014, to shareholders of record at the close of business on February 10, 2014. 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 December 31, 2013, WVS Financial Corp. exceeded all regulatory capital requirements and maintained Tier I and total risk-based capital equal to $32.9 million or 24.7% and $33.1 million or 24.9%, respectively, of total risk-weighted assets, and Tier I leverage capital of $32.9 million or 10.7% of average quarterly assets.

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

The Company’s nonperforming assets at December 31, 2013 totaled $625 thousand or 0.2% of total assets as compared to $1.6 million or 0.6% of total assets at June 30, 2013. Nonperforming assets at December 31, 2013 consisted of: three single-family real estate loans totaling $476 thousand, and one home equity line of credit totaling $150 thousand. The loans are in various stages of collection activity.

The $983 thousand decrease in nonperforming assets during the six months ended December 31, 2013 was primarily attributable to the payoff of one non-accrual single-family construction loan totaling $701 thousand, and the sale of a non-accrual land loan totaling $280 thousand.

During the three and six months ended December 31, 2013, the Company collected $4 thousand and $7 thousand, respectively, of interest income on non-accrual loans. Approximately $13 thousand and $35 thousand of interest income would have been recorded during the three and six months ended December 31, 2013, on non-accrual loans if such loans had been current according to the original loan agreements for the entire periods. These amounts were not included in the Company’s interest income for the three and six months ended December 31, 2013. 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.

The Federal Open Market Committee (“Committee” or “FOMC”) issued press releases in December 2013 and January 2014 which announced the Committee’s current assessments of the U.S. economy and the FOMC’s decision to reduce (or “taper”) its anticipated volumes of securities purchases.

On December 18, 2013 the FOMC’s press release noted improvement in several macroeconomic measures including economic growth, labor market conditions, an improvement in the unemployment rate, household spending, and business investment. The FOMC also noted that inflation was running at a rate below the Committee’s longer-run objective, but that longer-term inflation expectations remained stable.

The Committee announced that beginning in January 2014, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

On January 29, 2014, the FOMC’s press release indicated that information received since the Federal Open Market Committee met in December 2013 indicates that growth in economic activity picked up in recent quarters. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.

The Committee continues to see the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. In light

of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to make a further measured reduction in the pace of its asset purchases.

Beginning in February 2014, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate.

The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

During the six months ended December 31, 2013, the Company continued to adjust its asset/liability management tactics in two ways. First, the Company increased total assets by about $26.4 million while continuing to manage its Tier 1 capital. The primary segments of asset growth for the six months ended December 31, 2013 were: mortgage-backed securities – held to maturity, $54.7 million, which was partially offset by decreases in investment securities available for sale - $21.6 million, and investment securities – held to maturity - $8.3 million. Second, we increased Tier 1 capital primarily through earnings retention. We anticipate growing our asset base to the range of $325 - $350 million for calendar year 2014, subject to economic and market conditions.

Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is

exposed to lower profit margins (or losses) if it cannot adapt to interest-rate changes. For example, assume that an institution’s assets carry intermediate- or long-term fixed rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could decrease on existing assets because the institution will either have lower net interest income or, possibly, net interest expense. Similar risks exist when assets are subject to contractual interest-rate ceilings, or rate sensitive assets are funded by longer-term, fixed-rate liabilities in a decreasing-rate environment.

During the fiscal year 2013 and into fiscal year 2014, intermediate and long-term market interest rates fluctuated considerably. Many central banks, including the Federal Reserve, continued above normal levels of monetary accommodation including quantitative easing and targeted asset purchase programs. The desired outcomes of these programs are to stimulate aggregate demand, reduce high levels of unemployment and to further lower market interest rates.

The table below shows the targeted federal funds rate and the benchmark two and ten year treasury yields at quarter ends beginning in June 30, 2007, and extending through December 31, 2013. 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
June 30, 2012	0.00% to 0.25%	0.33%	1.67%	Positive
September 30, 2012	0.00% to 0.25%	0.23%	1.65%	Positive
December 31, 2012	0.00% to 0.25%	0.24%	1.85%	Positive
March 31, 2013	0.00% to 0.25%	0.25%	1.87%	Positive
June 30, 2013	0.00% to 0.25%	0.36%	2.52%	Positive
September 30, 2013	0.00% to 0.25%	0.33%	2.64%	Positive
December 31, 2013	0.00% to 0.25%	0.30%	2.84%	Positive

These changes in intermediate and long-term market interest rates, the changing slope of the Treasury yield curve, and higher levels of interest rate volatility have impacted prepayments on the Company’s loan, investment and mortgage-backed securities portfolios. Principal repayments on the Company’s loan, investment and mortgage-backed securities portfolios for the six months ended December 31, 2013, totaled $7.3 million, $30.8 million, and $12.6 million, respectively. Despite stagnant global interest rates and Treasury yields the Company continued to grow its balance sheet and used proceeds from maturities and Corporate calls of bonds, repayments on its

mortgage-backed securities, and borrowings to purchase U.S. Government agency bonds, and U.S. Government agency CMO’s.

During the six months ended December 31, 2013, the Company increased its portfolio of: single-family mortgages by approximately $1.7 million, and construction loans by $353 thousand, which were partially offset by a $743 thousand decrease in land acquisition and development loans, a $752 thousand decrease in commercial real estate loans, and a $126 thousand decrease in multi-family real estate loans. 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 2014. The Company will continue to selectively offer commercial real estate, land acquisition and development, and shorter-term construction loans (primarily on residential properties), and commercial loans on business assets to partially increase interest income while limiting credit and interest rate risk. The Company has also offered higher yielding commercial and small business loans to existing customers and seasoned prospective customers.

During the six months ended December 31, 2013, principal investment purchases were comprised of: floating rate U.S. Government agency CMO’s - $67.0 million with a weighted average yield of 1.89%. The Company also purchased $2.0 million of callable U.S. Government agency multiple step-up bonds with initial lock out period of 6 months and with a weighted average yield to first call of 2.01% and a weighted average yield to maturity of 4.43%. Single step-up bonds have one “step” or increase in coupon. Multiple step-up bonds have more than one “step” or increase in coupon. All of the purchases were classified as held to maturity for accounting purposes. The Company believes that the purchases will earn a return above the Company’s cost of funds.

Major investment proceeds received during the six months ended December 31, 2013 were: investment grade corporate bonds - $20.8 million with a weighted average yield of approximately 1.87%; investment grade corporate utility first mortgage bonds - $6.2 million with a weighted average yield of 5.33%; and investment grade U.S. dollar denominated foreign corporate bonds - $3.5 million with a weighted average yield of 3.72%.

As of December 31, 2013, the implementation of these asset and liability management initiatives resulted in the following:

$201.7 million or 64.2% of the Company’s assets were comprised of floating rate investment and mortgage-backed securities. Of this $201.7 million, approximately $194.0 million float on a monthly basis based upon changes in the one-month London Interbank Offered Rate (LIBOR) and about $7.7 million reprice on a quarterly basis based upon the three-month LIBOR.

$194.0 million or 72.5% of the Company’s total investment portfolio was comprised of floating rate mortgage-backed securities (including collateralized mortgage obligations – “CMOs”) that reprice on a monthly basis;

$53.9 million or 20.1% of the Company’s investment portfolio consisted of investment grade fixed-rate corporate bonds with remaining maturities as follows: 3 months or less - $9.2 million or 17.2%; 3 – 12 months - $20.3 million or 37.7%; 1 – 2 years - $18.1 million or 33.5%; 2 – 3 years - $2.6 million or 4.8% and 3 – 5 years - $3.7 million or 6.8%;

$12.0 million or 4.5% of the Company’s investment portfolio was comprised of callable U.S. Government Agency multiple step-up bonds which are callable in less than 3 months. These bonds may or may not actually be redeemed prior to maturity (i.e. called) depending upon the level of market interest rates at their respective call dates;

$55.6 million or 17.7% of the Company’s assets were comprised of investment securities classified as available for sale;

An aggregate of $14.0 million or 41.0% 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 - $122.1 million or 87.5%; 3 – 12 months - $5.0 million or 3.6%; 2 – 3 years - $2.5 million or 1.8%; and over 3 years - $10.0 million or 7.1%.

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 due to unusually low market interest rates. An asset sensitive financial position may benefit earnings during a period of rising interest rates and reduce earnings during a period of declining interest rates.

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


	December 31, 2013	June 30,
	December 31, 2013	2013	2012
		(Dollars in Thousands)
Interest-earning assets maturing or repricing within one year	$256,290	$236,125	$180,617
Interest-bearing liabilities maturing or repricing within one year	213,904	188,841	165,879


Interest sensitivity gap	$42,386	$47,284	$14,738

Interest sensitivity gap as a percentage of total assets	13.50%	16.44%	5.39%
Ratio of assets to liabilities maturing or repricing within one year	119.82%	125.04%	108.88%

During the six months ended December 31, 2013, the Company managed its one-year interest sensitivity gap by: (1) purchasing $67.0 million of floating-rate U.S. Government agency CMO’s which reprice monthly; (2) increasing by approximately $25.3 million the Company’s borrowings that mature within one year. All of the referenced purchases were designated as held to maturity for accounting purposes. At December 31, 2013, investments available for sale totaled $55.6 million or 17.7% of total 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 December 31, 2013. 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)	$	58,372		$	47,092		$	40,198		$	44,680		$	50,543		$	37,753		$	26,974
% of Total Assets		18.6	%		15.0	%		12.8	%		14.2	%		16.1	%		12.0	%		8.6	%
Base Case Up 100 bp
Cumulative Gap ($’s)	$	58,568		$	47,463		$	40,823		$	45,666		$	51,528		$	38,884		$	26,974
% of Total Assets		18.7	%		15.1	%		13.0	%		14.5	%		16.4	%		12.4	%		8.6	%
Base Case No Change
Cumulative Gap ($’s)	$	58,841		$	48,257		$	42,386		$	48,250		$	54,383		$	41,225		$	26,974
% of Total Assets		18.7	%		15.4	%		13.5	%		15.4	%		17.3	%		13.1	%		8.6	%
Base Case Down 100 bp
Cumulative Gap ($’s)	$	59,502		$	49,220		$	43,825		$	50,180		$	56,469		$	42,891		$	26,974
% of Total Assets		18.9	%		15.7	%		14.0	%		16.0	%		18.0	%		13.7	%		8.6	%
Base Case Down 200 bp
Cumulative Gap ($’s)	$	59,749		$	49,669		$	44,559		$	51,156		$	57,380		$	43,461		$	26,974
% of Total Assets		19.0	%		15.8	%		14.2	%		16.3	%		18.3	%		13.8	%		8.6	%

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 December 31, 2013. This analysis was done assuming that the interest-earning assets will average approximately $321 million and $343 million over a projected twelve and twenty-four month period, respectively, for the estimated impact on change in net interest income, return on average equity and return on average assets. The estimated changes in market value of equity were calculated using balance sheet levels at December 31, 2013. 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
	December 31, 2014															December 31, 2015
Estimated impact on:	-200			-100			0			+100			+200			-200			-100			0			+100			+200
Change in net interest income		-2.5	%		-1.3	%		-			2.6	%		4.3	%		-6.7	%		-3.7	%		-			6.3	%		10.5	%
Return on average equity		3.55	%		3.67	%		3.79	%		4.03	%		4.20	%		4.01	%		4.31	%		4.68	%		5.31	%		5.73	%
Return on average assets		0.35	%		0.36	%		0.38	%		0.40	%		0.42	%		0.38	%		0.42	%		0.45	%		0.51	%		0.56	%
Market value of equity (in thousands)		$35,899			$36,779			$37,125			$36,540			$35,699

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 December 31, 2013. The Company used no derivative financial instruments to hedge such anticipated transactions as of December 31, 2013.


Anticipated Transactions

(Dollars in Thousands)
Undisbursed construction and land development loans
Fixed rate					$ 1,783
					5.16%

Adjustable rate					$ 1,437
					4.80%

Undisbursed lines of credit
Adjustable rate					$ 5,443
					3.82%

Letters of credit
Adjustable rate					$ 312
					4.25%


					$ 8,975

In the ordinary course of its construction lending business, the Savings Bank enters into performance standby letters of credit. Typically, the standby letters of credit are issued on behalf of a builder to a third party to ensure the timely completion of a certain aspect of a construction project or land development. At December 31, 2013, the Savings Bank had four performance standby letters of credit outstanding totaling approximately $312 thousand. All four performance letters of credit are secured by developed property. The letters of credit will mature within eighteen 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 December 31, 2013, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and 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). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Accounting Officer, concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2013.

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 Securities Exchange Act of 1934, as amended (“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 December 31, 2013, 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, 2013.

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	WVS FINANCIAL CORP.

February 13, 2014	BY:	/s/ David J. Bursic
Date		David J. Bursic President and Chief Executive Officer (Principal Executive Officer)

February 13, 2014	BY:	/s/ Keith A. Simpson
Date		Keith A. Simpson Vice-President, Treasurer and Chief Accounting Officer (Principal Accounting Officer)