ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008

FORWARD LOOKING STATEMENTS

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

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

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

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

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

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

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

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

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

o acts or threats of terrorism and actions taken by the United States or other governments as a result of such acts or threats, including possible military action, could further adversely affect business and economic conditions in the United States generally and in our principal

markets, which could have an adverse effect on our financial performance and that of our borrowers and on the financial markets and the price of our common stock.

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

GENERAL

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

West View Savings Bank is a Pennsylvania-chartered, FDIC-insured stock savings bank conducting business from six offices in the North Hills suburbs of Pittsburgh. The Savings Bank converted to the stock form of ownership in November 1993. The Savings Bank had no subsidiaries at September 30, 2008.

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 $411.1 million at September 30, 2008, as compared to $423.1 million at June 30, 2008. The $12.0 million or 2.8% decrease in total assets was primarily comprised of a $8.1 million or 6.7% decrease in investment securities - held to maturity, a $7.5 million or 93.4% decrease in investment securities - available for sale, and a $3.1 million or 1.5% decrease in mortgage-backed securities - held to maturity, which were partially offset by a $3.7 million or 53.4% increase in Federal Home Loan Bank ("FHLB") stock, a $1.5 million or 15.8% increase in FDIC insured certificates of deposit, a $1.0 million increase in net loans receivable, a $458 thousand increase in cash and cash equivalents, and a $115 thousand or 10.0% increase in deferred taxes and other assets. The decrease in investment securities - held to maturity was primarily attributable to $36.0 million of issuer redemptions prior to maturity (i.e. calls) of fixed rate U.S. Government agency bonds, which was partially offset by purchases of $15.8 million of fixed-rate U.S. Government agency bonds and $12.6 million of short-term investment grade commercial paper. The decrease in investment securities - available for sale was due to $7.5 million in maturities of short-term investment grade commercial paper. The increase in FHLB stock was attributable to higher levels of FHLB borrowings and associated FHLB stock purchase requirements. The increase in FDIC insured certificates of deposit was attributable to an increase of $3.1 million in bank certificates of deposit, which was partially offset by $1.6 million in maturities and early redemptions of bank certificates of deposit. See "Asset and Liability Management".

The Company's total liabilities decreased $11.5 million or 2.9% to $379.5 million as of September 30, 2008 from $391.0 million as of June 30, 2008. The $11.5 million decrease in total liabilities was primarily comprised of a $80.6 million or 100.0% decrease in short-term Federal Reserve Bank borrowings, a $15.6 million or 77.8% decrease in other short-term borrowings and a $1.2 million or 0.8% decrease in total savings deposits, which were partially offset by a $85.1 million or 100.0% increase in FHLB short-term borrowings and a $971 thousand or 31.3% increase in other liabilities. The respective changes in short-term borrowings were primarily due to more competitive FHLB pricing in contrast to the short-term repurchase agreement and Federal Reserve Bank ("FRB") markets. Certificates of deposit decreased $1.5 million, savings accounts

decreased $592 thousand, advance payments by borrowers for taxes and insurance decreased $539 thousand, and demand deposits decreased $143 thousand, while money market accounts increased $1.6 million. The change in money market accounts and certificates of deposit may be in response to lower market yields on certificates of deposit and increased liquidity preferences by depositors in response to unsettled financial markets. Management believes that the changes in savings accounts and advance payments by borrowers for taxes and insurance were primarily attributable to seasonal payments of county, local and school real estate taxes, and transactional needs. The change in other liabilities is primarily attributable to increases in clearing balances due to the Federal Reserve and accrued income taxes payable.

Total stockholders' equity decreased $564 thousand or 1.8% to $31.6 million as of September 30, 2008, from approximately $32.1 million as of June 30, 2008. Capital expenditures for the Company's stock repurchase program and cash dividends totaled $945 thousand and $350 thousand, respectively, and accumulated other comprehensive income decreased $26 thousand, which were partially offset by net income of $757 thousand for the three months ended September 30, 2008.

RESULTS OF OPERATIONS

General. WVS reported net income of $757 thousand or $0.35 diluted earnings per share for the three months ended September 30, 2008. Net income decreased by $266 thousand or 26.0% and diluted earnings per share decreased $0.10 or 22.2% for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease in net income was primarily attributable to a $454 thousand decrease in net interest income, a $31 thousand increase in non-interest expense and an $11 thousand decrease in recovery for loan losses, which were partially offset by a $220 thousand decrease in income tax expense and a $10 thousand increase in non-interest income.

Net Interest Income. The Company's net interest income decreased by $454 thousand or 19.7% for the three months ended September 30, 2008, when compared to the same period in 2007. For the three months ended September 30, 2008, approximately $750 thousand of the decrease in net interest income can be primarily attributed to decreases in average balances of the Company's U.S. Government agency fixed-rate bonds portfolio which was partially offset by higher holdings of floating rate agency mortgage-backed securities. This $750 thousand decrease was offset by a $296 thousand increase in net interest income primarily due to higher realized yields on the Company's corporate and government agency fixed-rate bond portfolio.

During the three months ended September 30, 2008, the Federal Open Market Committee (FOMC) held its targeted federal funds level at 2.00%. During the three months ending September 30, 2008, the Company also observed a marked upward deviation in the three-month LIBOR as compared to the U.S. federal funds rate. Market participants attributed this upward deviation to liquidity imbalances in LIBOR markets. During this anomalous period the Company benefited by earning a higher than anticipated yield on its LIBOR floating rate CMO portfolio, while enjoying lower costs of short-term funding which were more closely aligned with the targeted federal funds rate. See also Asset and Liability Management.

Interest Income. Interest on investment securities decreased by $1.7 million or 49.6% for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease for the three months ended September 30, 2008, was primarily attributable to a $1.6 million decrease in interest income on U.S. Government Agency bonds (principally due to issuer redemptions of securities prior to scheduled maturities). The changes in interest income on the various segments of the investment portfolio are primarily attributable to changes in the average balances of the respective segments.

Interest on net loans receivable decreased $97 thousand or 8.6% for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease for the three months ended September 30, 2008 was primarily attributable to a decrease of 36 basis points in the weighted average yield earned on net loans receivable for the three months ended September 30, 2008, when compared to the same period in 2007, and a $2.4 million decrease in the average balance of net loans receivable outstanding, when compared to the same period in 2007. The decrease in the weighted average yield earned on net

loans receivable for the three months ended September 30, 2008, was primarily attributable to rate reductions on the adjustable rate portion of the loan portfolio due to lower market rates on which the adjustments are based. The decrease in the average loan balance outstanding for the three months ended September 30, 2008 was attributable in part to reduced levels of new loan originations among construction and commercial loan products. The Company has limited its portfolio origination of longer-term fixed rate loans to mitigate its exposure to a rise in market interest rates. The Company will continue to originate longer-term fixed rate loans for sale on a correspondent basis to increase non-interest income and to contribute to net income.

Dividends on FHLB stock decreased $5 thousand or 5.2% for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease for the three months ended September 30, 2008 was attributable to a $432 thousand decrease in the average balance of FHLB stock when compared to the same period in 2007. The decrease in average balances of FHLB stock held resulted from decreased levels of FHLB borrowings and associated redemptions of the FHLB stock.

Interest on FDIC insured bank certificates of deposit increased $85 thousand or 100.0% for the three months ended September 30, 2008, when compared to the same period in 2007. The Company began investing in FDIC insured certificates of deposit during the quarter ended March 31, 2008. The certificates ranged in maturity terms from five to twenty-four months.

Interest on mortgage-backed securities increased $43 thousand or 2.2% for the three months ended September 30, 2008, when compared to the same period in 2007. The increase for the three months ended September 30, 2008 was primarily attributable to a $93.3 million increase in the average balance of U.S. government agency floating-rate mortgage-backed securities outstanding for the period, which was partially offset by a 267 basis point decrease in the weighted average yield earned on U.S. government agency floating-rate mortgage-backed securities, a 276 basis point decrease in the weighted-average yield earned on private label mortgage-backed securities, and a $374 thousand decrease on the average balance outstanding of private label mortgage-backed securities for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease in the weighted average yield earned on mortgage-backed securities was consistent with lower short-term market interest rates for the three months ended September 30, 2008. The increase in the average balances of U.S. government agency mortgage-backed securities during the three months ended September 30, 2008 was primarily attributable to purchases of floating rate U.S. government agency mortgage-backed securities during the period, while the decrease in average balances of private label mortgage-backed securities for the three months ended September 30, 2008 reflects principal paydowns during the period. All mortgage-backed securities purchased during the period were guaranteed by agencies of the U.S. government.

Interest Expense. Interest paid on other short-term borrowings decreased $442 thousand or 59.9% for the three months ended September 30, 2008 when compared to the same period in 2007. The decrease for the three months ended September 30, 2008 was primarily attributable to a 317 basis point decrease in rates paid on other short-term borrowings and a $1.4 million decrease in average balances of other short-term borrowings during the period. The decrease in rates paid reflect lower short-term market interest rates while the decrease in average balances of other short-term borrowings is attributable to more favorable short-term borrowing rates offered by the FHLB and Federal Reserve Bank.

Interest expense on deposits and escrows decreased $433 thousand or 38.1% for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease in interest expense on deposits for the three months ended September 30, 2008 was primarily attributable to a 137 basis point decrease in the weighted average rate paid on time deposits, a 208 basis point decrease in the weighted average rate paid on money markets, and a $10.6 million decrease in the average balance of time deposits, which were partially offset by a $4.2 million increase in the average balance of money markets, when compared to the same period in 2007. The decrease in average yields of time deposits and money markets reflects lower market rates for the three months ended September 30, 2008 while the change in average balances for time deposits and money markets may be in response to increased liquidity preferences by depositors in response to unsettled financial markets.

Interest paid on FHLB advances decreased $409 thousand or 17.4% for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease for the three months ended September 30, 2008 was attributable to a $23.1 million decrease in the average balance of FHLB short-term advances and a 320 basis point decrease in rates paid on FHLB short-term advances, which was partially offset by a $2.6 million increase in the average balance of FHLB long-term advances when compared to the same period in 2007. The decreases in the average balances of FHLB short-term advances was primarily attributable to more favorable short-term borrowing rates offered by the Federal Reserve Bank, while the decrease in rates paid reflect lower short-term market interest rates.

Interest paid on FRB short-term borrowings increased $85 thousand or 100% for the three months ended September 30, 2008, when compared to the same period in 2007. The increase for the three months ended September 30, 2008 was attributable to a $15.0 million increase in the average balances of FRB short-term borrowings. The increase in average balances of FRB short-term borrowings is attributable to more favorable short-term borrowing rates offered by the Federal Reserve Bank.

Provision (Recovery) for Loan Losses. A provision (recovery) for loan losses is charged (credited) 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.

The Company recorded a recovery for loan losses of $6 thousand for the three months ended September 30, 2008 compared to a recovery for loan losses of $17 thousand for the same period in 2007. At September 30, 2008, the Company's total allowance for loan losses amounted to $950 thousand or 1.6% of the Company's total loan portfolio, as compared to $956 thousand or 1.7% at June 30, 2008.

Non-Interest Income. Non-interest income increased by $10 thousand or 6.4% for the three months ended September 30, 2008, when compared to the same period in 2007. The increase was primarily attributable to increased levels of service charges on deposit accounts and increased levels of ATM and debit card fee income.

Non-Interest Expense. Non-interest expense increased $31 thousand or 3.3% for the three months ended September 30, 2008, when compared to the same period in 2007. The increase for the three months ended September 30, 2008 was principally attributable to a $60 thousand increase in charitable contributions eligible for PA tax credits, which were partially offset by a $18 thousand decrease in legal expense and a $13 thousand decrease in advertising costs when compared to the same period in 2007.

Income Tax Expense. Income tax expense decreased $220 thousand or 43.0% for the three months ended September 30, 2008, when compared to the same period in 2007. The decrease for the three months ended September 30, 2008 was primarily due to PA educational improvement tax credits recognized on charitable contributions and lower levels of taxable income.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities totaled $282 thousand during the three months ended September 30, 2008. Net cash provided by operating activities was primarily comprised of $757 thousand of net income, which was partially offset by a $132 thousand decrease in accrued interest payable, a $145 thousand in accretion of discounts, premiums and deferred loan fees, $82 thousand decrease in accrued and deferred income taxes, and a $46 thousand increase in accrued interest receivable.

Funds provided by investing activities totaled $12.7 million during the three months ended September 30, 2008. Primary sources of funds during the three months ended September 30, 2008, included maturities and repayments of investment securities, FHLB stock, mortgage-backed securities and certificates of deposit totaling $44.1 million, $7.5 million, $3.2 million and $1.6 million, respectively, and a $1.0 million increase in net loans receivable, which were partially offset by purchases of investments, FHLB stock and certificates of deposit totaling $28.4 million, $11.2 million and $3.1 million, respectively. Short-term

investment grade commercial paper purchases, included in investment securities purchases, totaled $12.6 million; and maturities of short-term commercial paper totaled $7.5 million.

Funds used for financing activities totaled $12.5 million for the three months ended September 30, 2008. The primary uses included an $80.6 million decrease in short-term FRB borrowings, a $15.6 million decrease in other short-term borrowings, a $1.2 million decrease in deposits, $945 thousand in treasury stock purchases and $350 thousand in cash dividends paid on the Company's common stock, which were partially offset by a $85.1 million increase in FHLB short-term advances. The decrease in other short-term borrowings reflects lower short-term rates available through the Federal Home Loan Bank. The $1.2 million decrease in total deposits consisted of a $1.4 million decrease in time deposits, a $592 thousand decrease in passbook accounts, a $539 decrease in mortgage escrow accounts and a $143 thousand decrease in demand deposits, which were partially offset by a $1.6 million increase in money market deposits. The increase in money market balances may be attributable to lower market yields on certificates of deposits and increased liquidity preferences by depositors in response to unsettled financial markets. The decreases in passbook and escrow accounts were due primarily to the payments of local property taxes by and for customers. Management believes that it currently is maintaining adequate liquidity and continues to match funding sources with lending and investment opportunities.

The Company's primary sources of funds are deposits, amortization, repayments and maturities of existing loans, mortgage-backed securities and investment securities, funds from operations, and funds obtained through FHLB and FRB advances and other borrowings. At September 30, 2008, total approved loan commitments outstanding amounted to approximately $695 thousand. At the same date, commitments under unused lines of credit amounted to $5.9 million and the unadvanced portion of construction loans approximated $10.2 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2008 totaled $46.7 million. Management believes that a significant portion of maturing deposits will remain with the Company.

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. The Company has been able to generate sufficient cash through the retail deposit market, its traditional funding source, and through FHLB advances, and FRB and other borrowings, to provide the cash utilized in investing activities. Management believes that the Company currently has adequate liquidity available to respond to liquidity demands.

On October 28, 2008, the Company's Board of Directors declared a cash dividend of $0.16 per share payable November 20, 2008, to shareholders of record at the close of business on November 10, 2008. 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 September 30, 2008, WVS Financial Corp. exceeded all regulatory capital requirements and maintained Tier I and total risk-based capital equal to $31.5 million or 21.1% and $32.5 million or 21.8%, respectively, of total risk-weighted assets, and Tier I leverage capital of $31.5 million or 7.69% 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 September 30, 2008 totaled approximately $1.2 million or 0.3% of total assets as compared to $1.6 million or 0.4% of total assets at June 30, 2008. Nonperforming assets at September 30, 2008 consisted of: one commercial real estate loan totaling $972 thousand, four

single-family real estate loans totaling $231 thousand, two home equity lines of credit totaling $5 thousand and one secured line of credit totaling $17 thousand. These loans are in various stages of collection activity.

The $356 thousand decrease in nonperforming assets during the three months ended September 30, 2008 was attributable to the payoff in full of a $356 thousand non-performing speculative construction loan.

At September 30, 2008, the Company had one previously restructured and non-performing commercial real estate loan to a retirement village located in the North Hills totaling $972 thousand. The Savings Bank's outstanding principal balance totaled $2.0 million at June 30, 2003. During the quarter ended September 30, 2003, the Savings Bank redeemed $388 thousand of participating interests. During the quarter ended December 31, 2003, the Bank sold a forty percent participating interest to another financial institution at par resulting in proceeds totaling $979 thousand. The Savings Bank's outstanding principal balance totaled $972 thousand at June 30, 2008. The Company had recorded interest received on this credit on a cost recovery basis until September 30, 2003 when it began to recognize interest income. During the three months ended September 30, 2008 the Company received and recognized $10 thousand of interest . . .