UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
_________________________
FORM 10-Q
_________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31,September 30, 2021
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___________ to ___________
Commission File Number: 0-22444
WVS Financial Corp. _________________________
(Exact name of registrant as specified in its charter)
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) | |||||
_________________________ | |||||
(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 ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | |||||
Smaller reporting company | ☒ | |||||
Emerging growth company | ☐ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12 b-212b-2 of the Exchange Act). YES ☐ NO ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $.01 | WVFC | NASDAQ Global Market SM |
Shares outstanding as of May 07,November 12, 2021: 1,902,6901,884,114 shares of Common Stock, $.01 par value.
WVS FINANCIAL CORP. AND SUBSIDIARY
INDEX
2
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(In thousands, except share and per share data)thousands)
| March 31, 2021 | June 30, 2020 | September 30, 2021 | June 30, 2021 | |||||||||||||
Assets | ||||||||||||||||
Cash and due from banks | $ | 1,892 | $ | 2,488 | $ | 2,391 | $ | 2,514 | ||||||||
Interest-earning demand deposits | 2,088 | 12 | 37 | 37 | ||||||||||||
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Total cash and cash equivalents | 3,980 | 2,500 | 2,428 | 2,551 | ||||||||||||
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Certificates of deposit | 350 | 1,840 | 350 | 350 | ||||||||||||
Investment securities available-for-sale (amortized cost of $150,003 and $148,271) | 150,636 | 147,639 | ||||||||||||||
Investment securities held-to-maturity (fair value of $2,859 and $3,622) | 2,745 | 3,495 | ||||||||||||||
Mortgage-backed securities held-to-maturity (fair value of $58,316 and $96,649) | 58,453 | 97,106 | ||||||||||||||
Net loans receivable (allowance for loan losses of $603 and $618) | 86,300 | 91,032 | ||||||||||||||
Investment securities available-for-sale (amortized cost of $142,971 and $150,886) | 143,526 | 151,577 | ||||||||||||||
Investment securities held-to-maturity (fair value of $10,582 and $15,592) | 10,492 | 15,489 | ||||||||||||||
Mortgage-backed securities held-to-maturity (fair value of $100,143 and $82,659) | 99,958 | 82,459 | ||||||||||||||
Net loans receivable (allowance for loan losses of $551 and $565) | 81,300 | 80,684 | ||||||||||||||
Accrued interest receivable | 762 | 744 | 980 | 749 | ||||||||||||
Federal Home Loan Bank (FHLB) stock, at cost | 4,849 | 6,564 | 6,144 | 6,044 | ||||||||||||
Premises and equipment, net | 653 | 574 | 643 | 657 | ||||||||||||
Bank owned life insurance | 4,992 | 4,907 | 5,049 | 5,021 | ||||||||||||
Deferred tax assets, net | 254 | 548 | ||||||||||||||
Deferred tax assets (net) | 284 | 245 | ||||||||||||||
Other assets | 259 | 152 | 310 | 252 | ||||||||||||
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TOTAL ASSETS | $ | 314,233 | $ | 357,101 | $ | 351,464 | $ | 346,078 | ||||||||
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Liabilities and Stockholders’ Equity | ||||||||||||||||
Liabilities: | ||||||||||||||||
Deposits | ||||||||||||||||
Non-interest-bearing accounts | $ | 25,228 | $ | 22,657 | $ | 23,948 | $ | 25,452 | ||||||||
Interest-earning checking accounts | 27,499 | 25,075 | ||||||||||||||
Interest-earning checking | 26,010 | 26,881 | ||||||||||||||
Savings accounts | 47,781 | 44,541 | 48,967 | 50,058 | ||||||||||||
Money market accounts | 21,243 | 21,743 | 23,214 | 22,995 | ||||||||||||
Certificates of deposit | 31,783 | 35,063 | 32,314 | 29,731 | ||||||||||||
Advance payments by borrowers for taxes and insurance | 1,680 | 2,256 | 835 | 2,050 | ||||||||||||
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Total deposits | 155,214 | 151,335 | 155,288 | 157,167 | ||||||||||||
Federal Home Loan Bank advances: short-term | 82,093 | 59,159 | ||||||||||||||
Federal Home Loan Bank advances: long-term – fixed rate | 10,000 | 15,000 | 10,000 | 10,000 | ||||||||||||
Federal Home Loan Bank advances: long-term – variable rate | 25,000 | 85,000 | 25,000 | 25,000 | ||||||||||||
Other short-term borrowings | 1,200 | 7,000 | ||||||||||||||
Federal Home Loan Bank advances: short-term | 115,594 | 113,093 | ||||||||||||||
Accrued interest payable | 161 | 487 | 140 | 155 | ||||||||||||
Other liabilities | 2,059 | 2,207 | 7,021 | 2,274 | ||||||||||||
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TOTAL LIABILITIES | 275,727 | 320,188 | 313,043 | 307,689 | ||||||||||||
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Stockholders’ equity: | ||||||||||||||||
Preferred stock: | — | — | ||||||||||||||
Common stock: | 38 | 38 | ||||||||||||||
Preferred stock: | ||||||||||||||||
5,000,000 shares, 00no par value per share, authorized; 00none issued | 0- | 0- | ||||||||||||||
Common stock: | ||||||||||||||||
10,000,000 shares, $.01 par value per share, authorized; 3,805,636 shares issued; | 38 | 38 | ||||||||||||||
Additional paid-in capital | 21,588 | 21,577 | 21,604 | 21,596 | ||||||||||||
Treasury stock: 1,902,946 and 1,898,932 shares at cost, respectively | (28,827 | ) | (28,775 | ) | ||||||||||||
Treasury stock: 1,921,522 and 1,921,522 shares at cost, respectively | (29,119 | ) | (29,119) | ) | ||||||||||||
Retained earnings, substantially restricted | 47,106 | 46,590 | 47,283 | 47,186 | ||||||||||||
Accumulated other comprehensive (loss) income | 454 | (556 | ) | |||||||||||||
Accumulated other comprehensive income | 395 | 502 |
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Unallocated Employee Stock Ownership Plan (“ESOP”) shares | (1,853 | ) | (1,961 | ) | (1,780 | ) | (1,814) |
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TOTAL STOCKHOLDERS’ EQUITY | 38,506 | 36,913 | 38,421 | 38,389 | ||||||||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 314,233 | $ | 357,101 | $ | 351,464 | $ | 346,078 | ||||||||
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See accompanying notes to unaudited consolidated financial statements.
3
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands, except share and per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| March 31, | March 31, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
INTEREST AND DIVIDEND INCOME: | ||||||||||||||||||||||||
Loans, including fees | $ | 753 | $ | 875 | $ | 2,422 | $ | 2,629 | $ | 697 | $ | 864 | ||||||||||||
Investment securities | 370 | 941 | 1,205 | 3,018 | 358 | 437 | ||||||||||||||||||
Mortgage-backed securities | 149 | 685 | 623 | 2,327 | 201 | 269 | ||||||||||||||||||
Certificates of deposit | 3 | 7 | 13 | 38 | 2 | 6 | ||||||||||||||||||
Interest-earning demand deposits | — | 1 | — | 3 | ||||||||||||||||||||
FHLB Stock | 38 | 131 | 174 | 383 | 61 | 89 | ||||||||||||||||||
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Total interest and dividend income | 1,313 | 2,640 | 4,437 | 8,398 | 1,319 | 1,665 | ||||||||||||||||||
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INTEREST EXPENSE: | ||||||||||||||||||||||||
Deposits | 61 | 224 | 257 | 705 | 37 | 104 | ||||||||||||||||||
Federal Home Loan Bank advances – long-term – fixed rate | 76 | 116 | 269 | 342 | 57 | 115 | ||||||||||||||||||
Federal Home Loan Bank advances – long-term – variable rate | 19 | 402 | 111 | 1,376 | 35 | 71 | ||||||||||||||||||
Federal Home Loan Bank advances – short-term | 25 | 247 | 85 | 860 | 46 | 34 | ||||||||||||||||||
Other short-term borrowings | — | 1 | 1 | 1 | 0- | 1 | ||||||||||||||||||
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Total interest expense | 181 | 990 | 723 | 3,284 | 175 | 325 | ||||||||||||||||||
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NET INTEREST INCOME | 1,132 | 1,650 | 3,714 | 5,114 | 1,144 | 1,340 | ||||||||||||||||||
(CREDIT) PROVISION FOR LOAN LOSSES | (8 | ) | (7 | ) | (15 | ) | (25 | ) | ||||||||||||||||
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 1,140 | 1,657 | 3,729 | 5,139 | ||||||||||||||||||||
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PROVISION (CREDIT) FOR LOAN LOSSES | (14) | 2 | ||||||||||||||||||||||
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES | 1,158 | 1,338 | ||||||||||||||||||||||
NON-INTEREST INCOME: | ||||||||||||||||||||||||
Service charges on deposits | 22 | 25 | 63 | 85 | 23 | 22 | ||||||||||||||||||
Earnings on Bank Owned Life Insurance | 28 | 29 | 85 | 89 | 28 | 28 | ||||||||||||||||||
Investment securities gains | 56 | — | 93 | 32 | 35 | 25 | ||||||||||||||||||
Other than temporary impairment losses | — | (32 | ) | (13 | ) | (50 | ) | |||||||||||||||||
Portion of loss recognized in other comprehensive income | — | — | — | — | ||||||||||||||||||||
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Other than temporary impairment (“OTTI”) losses | 0- |
| (13 | ) | ||||||||||||||||||||
Portion of loss (gain) recognized in other comprehensive income (before taxes) | 0- | 0- | ||||||||||||||||||||||
Net impairment loss recognized in earnings | — | (32 | ) | (13 | ) | (50 | ) | 0- |
| (13 | ) | |||||||||||||
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ATM fee income | 35 | 38 | 109 | 116 | 39 | 38 | ||||||||||||||||||
Other | 11 | 10 | 30 | 30 | 13 | 11 | ||||||||||||||||||
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Total non-interest income | 152 | 70 | 367 | 302 | 138 | 111 | ||||||||||||||||||
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NON-INTEREST EXPENSE: | ||||||||||||||||||||||||
Salaries and employee benefits | 632 | 559 | 1,726 | 1,638 | 588 | 552 | ||||||||||||||||||
Occupancy and equipment | 71 | 63 | 208 | 183 | 68 | 68 | ||||||||||||||||||
Data processing | 60 | 55 | 181 | 164 | 62 | 59 | ||||||||||||||||||
Correspondent bank service charges | 10 | 7 | 29 | 25 | 10 | 9 | ||||||||||||||||||
Federal deposit insurance premium | 8 | 9 | 62 | (14 | ) | 23 | 27 | |||||||||||||||||
ATM network expense | 21 | 24 | 64 | 64 | ||||||||||||||||||||
ATM Network expense | 21 | 21 | ||||||||||||||||||||||
Other | 134 | 167 | 422 | 541 | 160 | 144 | ||||||||||||||||||
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Total non-interest expense | 936 | 884 | 2,692 | 2,601 | 932 | 880 | ||||||||||||||||||
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INCOME BEFORE INCOME TAXES | 356 | 843 | 1,404 | 2,840 | 364 | 569 | ||||||||||||||||||
INCOME TAX EXPENSE | 91 | 218 | 363 | 695 | 93 | 149 | ||||||||||||||||||
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NET INCOME | $ | 265 | $ | 625 | $ | 1,041 | $ | 2,145 | $ | 271 | $ | 420 | ||||||||||||
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EARNINGS PER SHARE: | ||||||||||||||||||||||||
Basic | $ | 0.15 | $ | 0.35 | $ | 0.59 | $ | 1.21 | $ | 0.16 | $ | 0.24 | ||||||||||||
Diluted | $ | 0.15 | $ | 0.35 | $ | 0.59 | $ | 1.21 | $ | 0.16 | $ | 0.24 | ||||||||||||
AVERAGE SHARES OUTSTANDING: | ||||||||||||||||||||||||
Basic | 1,751,849 | 1,771,722 | 1,749,739 | 1,772,918 | 1,738,227 | 1,748,040 | ||||||||||||||||||
Diluted | 1,751,849 | 1,771,722 | 1,749,739 | 1,772,918 | 1,738,227 | 1,748,040 | ||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
4
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands)
| Three Months Ended | Nine Months Ended | Three Months Ended September 30, | ||||||||||||||||||||||
| March 31, | March 31, | 2021 | 2020 | |||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
NET INCOME | $ | 265 | $ | 625 | $ | 1,041 | $ | 2,145 | $ | 271 | $ | 420 | ||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||||||||||||||
Investment securities available for sale not other-than-temporarily impaired: | ||||||||||||||||||||||||
Gains (losses) arising during the year | (19 | ) | (6,961 | ) | 1,358 | (6,518 | ) | |||||||||||||||||
(Losses) gains arising during the year | (102) | 1,030 | ||||||||||||||||||||||
Less: Income tax effect | 4 | 1,462 | (285 | ) | 1,370 | 21 |
| (216 | ) | |||||||||||||||
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| (81 | ) | 814 | ||||||||||||||||||
| (15 | ) | (5,499 | ) | 1,073 | (5,148 | ) | ||||||||||||||||||
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Gains recognized in earnings | (56 | ) | — | (93 | ) | (32 | ) | |||||||||||||||||
(Gains) recognized in earnings | (35 | ) | (25 | ) | ||||||||||||||||||||
Less: Income tax effect | 12 | — | 20 | 7 | (7 | ) | (5 | ) | ||||||||||||||||
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| (28 | ) | (20 | ) | |||||||||||||||||
| (44 | ) | — | (73 | ) | (25 | ) | ||||||||||||||||||
Unrealized holdings gains (losses) on securities available for sale not other-than-temporarily impaired, net of tax | (59 | ) | (5,499 | ) | 1,000 | (5,173 | ) | |||||||||||||||||
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Unrealized holding (losses) gains on investment securities available for sale not other-than-temporarily impaired, net of tax | (109) | 794 | ||||||||||||||||||||||
Investment securities held to maturity other-than-temporarily impaired: | ||||||||||||||||||||||||
Total losses | — | 32 | 13 | 50 | 0- | 13 | ||||||||||||||||||
Losses recognized in earnings | — | 32 | 13 | 50 | 0- | 13 | ||||||||||||||||||
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Gains (losses) recognized in comprehensive income | — | — | — | — | 0- | 0- | ||||||||||||||||||
Income tax effect | — | — | — | — | 0- | 0- | ||||||||||||||||||
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| 0- | 0- | |||||||||||||||||||
| — | — | — | — | |||||||||||||||||||||
Accretion of other comprehensive loss on other-than-temporarily impaired securities held to maturity | 4 | 4 | 12 | 12 | ||||||||||||||||||||
Accretion of other comprehensive gain on other-than-temporarily impaired securities held to maturity | 3 | 4 | ||||||||||||||||||||||
Less: Income tax effect | (1 | ) | (1 | ) | (2 | ) | (3 | ) | (1 | ) | (1 | ) | ||||||||||||
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Unrealized holding gains on other-than-temporarily impaired securities held to maturity, net of tax | 3 | 3 | 10 | 9 | 2 | 3 | ||||||||||||||||||
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Other comprehensive income (loss) | (56 | ) | (5,496 | ) | 1,010 | (5,164 | ) | |||||||||||||||||
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COMPREHENSIVE INCOME (LOSS) | $ | 209 | $ | (4,871 | ) | $ | 2,051 | $ | (3,019 | ) | ||||||||||||||
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Other comprehensive (loss) income | (107) | 797 | ||||||||||||||||||||||
COMPREHENSIVE INCOME | $ | 164 | $ | 1,217 | ||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
5
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands)thousands, except per share data)
Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings – Substantially Restricted | Accumulated Other Comprehensive (Loss) Income | Unallocated ESOP Shares | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings – Substantially Restricted | Accumulated Other Comprehensive Income (Loss) | Unallocated ESOP Shares | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2020 | $ | 38 | $ | 21,581 | $ | (28,827 | ) | $ | 47,016 | $ | 510 | $ | (1,891 | ) | $ | 38,427 | ||||||||||||||||||||||||||||||||||||||||
Balance June 30, 2021 | $ | 38 | $ | 21,596 | $ | (29,119) |
| $ | 47,186 | $ | 502 |
| $ | (1,814) |
| $ | 38,389 | |||||||||||||||||||||||||||||||||||||||
Net income | 265 | 265 | 271 | 271 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | (56 | ) | (56 | ) | (107) | (107) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unallocated ESOP shares | 7 | 38 | 45 | 8 | 34 | 42 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.10 per share) | (175 | ) | (175 | ) | (174 | ) | (174 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
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Balance March 31, 2021 | $ | 38 | $ | 21,588 | $ | (28,827 | ) | $ | 47,106 | $ | 454 | $ | (1,853 | ) | $ | 38,506 | ||||||||||||||||||||||||||||||||||||||||
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Balance September 30, 2021 | $ | 38 | $ | 21,604 | $ | (29,119 | ) | $ | 47,283 | $ | 395 | $ | (1,780 | ) | $ | 38,421 | ||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings – Substantially Restricted | Accumulated Other Comprehensive Income (Loss) | Unallocated ESOP Shares | Total | Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings – Substantially Restricted | Accumulated Other Comprehensive (Loss) Income | Unallocated ESOP Shares | Total | |||||||||||||||||||||||||||||||||||||||||||
Balance June 30, 2020 | $ | 38 | $ | 21,577 | $ | (28,775 | ) | $ | 46,590 | $ | (556 | ) | $ | (1,961 | ) | $ | 36,913 | $ | 38 | $ | 21,577 | $ | (28,775 | ) | $ | 46,590 | $ | (556 | ) | $ | (1,961 | ) | $ | 36,913 | ||||||||||||||||||||||
Net income | 1,041 | 1,041 | 420 | 420 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | 1,010 | 1,010 | 797 | 797 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock (4,014 shares) | (52 | ) | (52 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock (4,014 shares) | (52 | ) | (52 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unallocated ESOP shares | 11 | 108 | 119 | 1 | 35 | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.30 per share) | (525 | ) | (525 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balance March 31, 2021 | $ | 38 | $ | 21,588 | $ | (28,827 | ) | $ | 47,106 | $ | 454 | $ | (1,853 | ) | $ | 38,506 | ||||||||||||||||||||||||||||||||||||||||
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Cash dividends declared ($0.10 per share) | (175 | ) | (175 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance September 30, 2020 | $ | 38 | $ | 21,578 | $ | (28,827 | ) | $ | 46,835 | $ | 241 | $ | (1,926 | ) | $ | 37,939 | ||||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
6
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYCASH FLOWS
(UNAUDITED)
(In thousands)
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings – Substantially Restricted | Accumulated Other Comprehensive Loss | Unallocated ESOP Shares | Total | ||||||||||||||||||||||
Balance December 31, 2019 | $ | 38 | $ | 21,568 | $ | (28,382 | ) | $ | 45,973 | $ | 347 | $ | (2,031 | ) | $ | 37,513 | ||||||||||||
Net income | 625 | 625 | ||||||||||||||||||||||||||
Other comprehensive loss | (5,496 | ) | (5,496 | ) | ||||||||||||||||||||||||
Purchase of treasury stock (16,801 shares) | (234 | ) | (234 | ) | ||||||||||||||||||||||||
Amortization of unallocated ESOP Shares | 7 | 35 | 42 | |||||||||||||||||||||||||
Cash dividends declared ($0.10 per share) | (178 | ) | (178 | ) | ||||||||||||||||||||||||
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Balance March 31, 2020 | $ | 38 | $ | 21,575 | $ | (28,616 | ) | $ | 46,420 | $ | (5,149 | ) | $ | (1,996 | ) | $ | 32,272 | |||||||||||
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Three Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 271 | $ | 420 | ||||
Adjustments to reconcile net income to cash (used for) provided by operating activities: | ||||||||
Provision (credit) for loan losses | (14) | 2 | ||||||
Depreciation | 18 | 18 | ||||||
Investment securities gains | (35 | ) | (25 | ) | ||||
Net impairment loss recognized in earnings | 0 | 13 | ||||||
Amortization of discounts, premiums and deferred loan fees, net | 304 | 8 | ||||||
Amortization of unallocated ESOP shares | 42 | 36 | ||||||
Deferred income taxes | (10 | ) | 22 | |||||
(Decrease) increase in accrued income taxes | 89 |
| (355 | ) | ||||
Earnings on bank owned life insurance | (28 | ) | (28 | ) | ||||
Increase in accrued employee benefits | 50 | 46 | ||||||
(Increase) decrease in accrued interest receivable | (231 | ) | 35 | |||||
Decrease in accrued interest payable | (15 | ) | (173 | ) | ||||
Increase in deferred director compensation payable | 13 | 14 | ||||||
Other, net | (394 | ) | (171 | ) | ||||
Net cash (used for) provided by operating activities | 60 |
| (138 | ) | ||||
INVESTING ACTIVITIES | ||||||||
Available-for-sale: | ||||||||
Purchases of investment securities | (11,308 | ) | (12,945 | ) | ||||
Proceeds from sale of investments | 6,145 | 1,015 | ||||||
Proceeds from repayments of investment securities | 12,814 | 19,507 | ||||||
Held-to-maturity: | ||||||||
Purchase of mortgage-backed securities | (20,767 | ) | 0- | |||||
Proceeds from repayments of investment securities | 5,000 | 0- | ||||||
Proceeds from repayments of mortgage-backed securities | 8,204 | 19,171 | ||||||
Purchases of certificates of deposit | (100 | ) | (100 | ) | ||||
Maturities/redemptions of certificates of deposit | 100 | 597 | ||||||
Purchase of loans | (394 | ) | (5,248 | ) | ||||
Net (increase) decrease in net loans receivable | (221 | ) | 4,558 | |||||
Purchase of FHLB stock | (2,818 | ) | (3,044 | ) | ||||
Redemption of FHLB stock | 2,718 | 3,685 | ||||||
Acquisition of premises and equipment | (4 | ) | (119 | ) | ||||
Net cash (used for) provided by investing activities | (631) | 27,077 | ||||||
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings – Substantially Restricted | Accumulated Other Comprehensive Loss | Unallocated ESOP Shares | Total | ||||||||||||||||||||||
Balance June 30, 2019 | $ | 38 | $ | 21,550 | $ | (28,269 | ) | $ | 44,807 | $ | 15 | $ | (2,092 | ) | $ | 36,049 | ||||||||||||
Net income | 2,145 | 2,145 | ||||||||||||||||||||||||||
Other comprehensive loss | (5,164 | ) | (5,164 | ) | ||||||||||||||||||||||||
Purchase of treasury stock (24,276 shares) | (347 | ) | (347 | ) | ||||||||||||||||||||||||
Amortization of unallocated ESOP shares | 25 | 96 | 121 | |||||||||||||||||||||||||
Cash dividends declared ($0.30 per share) | (532 | ) | (532 | ) | ||||||||||||||||||||||||
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Balance March 31, 2020 | $ | 38 | $ | 21,575 | $ | (28,616 | ) | $ | 46,420 | $ | (5,149 | ) | $ | (1.996 | ) | $ | 32,272 | |||||||||||
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7
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
FINANCING ACTIVITIES | ||||||||
Net decrease in transaction and savings accounts | $ | (3,247 | ) | $ | (1,853 | ) | ||
Net increase (decrease) in certificates of deposit | 2,583 |
| (5,198 | ) | ||||
Net decrease in advance payments by borrowers for taxes and insurance | (1,215 | ) | (1,347 | ) | ||||
Net increase (decrease) in FHLB short-term advances | 2,501 |
| (15,878 | ) | ||||
Repayments of other short-term borrowings | 0- |
| (1,125 | ) | ||||
Purchase of treasury stock | 0- |
| (52 | ) | ||||
Cash dividends paid | (174 | ) | (175 | ) | ||||
Net cash (used for) provided by financing activities | 448 |
| (25,628 | ) | ||||
(Decrease) increase in cash and cash equivalents | (123) | 1,311 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | 2,551 | 2,500 | ||||||
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ | 2,428 | $ | 3,811 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the period for: | ||||||||
Interest on deposits and borrowings | $ | 190 | $ | 498 | ||||
Income taxes | 15 | 518 | ||||||
Unfunded security commitments | 4,931 | 0- | ||||||
See accompanying notes to unaudited consolidated financial statements.
8
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
| Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 1,041 | $ | 2,145 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
(Credit) provision for loan losses | (15 | ) | (25 | ) | ||||
Depreciation | 53 | 26 | ||||||
Gains on sale of investment securities | (93 | ) | (32 | ) | ||||
Net impairment loss recognized in earnings | 13 | 50 | ||||||
Amortization of discounts, premiums and deferred loan costs, net | 208 | 85 | ||||||
Amortization of unallocated ESOP shares | 119 | 121 | ||||||
Deferred income taxes | 26 | 104 | ||||||
(Decrease) increase in prepaid/accrued income taxes | (280 | ) | 226 | |||||
Earnings on bank owned life insurance | (85 | ) | (89 | ) | ||||
(Increase) decrease in accrued interest receivable | (18 | ) | 174 | |||||
Decrease in accrued interest payable | (326 | ) | (162 | ) | ||||
Increase in deferred director compensation payable | 40 | 40 | ||||||
Other, net | (12 | ) | (32 | ) | ||||
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Net cash provided by operating activities | 671 | 2,631 | ||||||
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INVESTING ACTIVITIES | ||||||||
Available-for-sale: | ||||||||
Purchases of investment securities | (70,843 | ) | (45,268 | ) | ||||
Proceeds from repayments of investments | 60,797 | 3,980 | ||||||
Proceeds from sale of investment securities | 8,082 | 9,055 | ||||||
Held-to-maturity: | ||||||||
Proceeds from repayments of investments | 750 | 500 | ||||||
Purchases of mortgage-backed securities | (13,163 | ) | — | |||||
Proceeds from repayments of mortgage-backed securities | 51,835 | 5,996 | ||||||
Purchase of certificates of deposit | (100 | ) | (2,334 | ) | ||||
Maturities/redemptions of certificates of deposit | 1,590 | 2,585 | ||||||
Purchase of loans | (7,950 | ) | (8,056 | ) | ||||
Net decrease in net loans receivable | 12,792 | 8,083 | ||||||
Purchase of FHLB stock | (12,058 | ) | (5,420 | ) | ||||
Redemption of FHLB stock | 13,773 | 5,541 | ||||||
Acquisition of premises and equipment | (132 | ) | (215 | ) | ||||
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Net cash provided by (used for) investing activities | 45,373 | (25,553 | ) | |||||
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See accompanying notes to unaudited consolidated financial statements.
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
| Nine Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
FINANCING ACTIVITIES | ||||||||
Net increase (decrease) in transaction and savings accounts | $ | 7,735 | $ | (2,183 | ) | |||
Net (decrease) increase in certificates of deposit | (3,280 | ) | 9,488 | |||||
Net decrease in advance payments by borrowers for taxes and insurance | (576 | ) | (285 | ) | ||||
Repayments of FHLB long-term advances – fixed rate | (5,000 | ) | — | |||||
Repayments of FHLB long-term advances – variable rate | (60,000 | ) | — | |||||
Net decrease in other short-term borrowings | (5,800 | ) | 24,800 | |||||
Net increase (decrease) in FHLB short-term advances | 22,934 | (10,026 | ) | |||||
Purchase of treasury stock | (52 | ) | (347 | ) | ||||
Cash dividends paid | (525 | ) | (532 | ) | ||||
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| |||||
Net cash (used for) provided by financing activities | (44,564 | ) | 20,915 | |||||
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| |||||
Increase (decrease) in cash and cash equivalents | 1,480 | (2,007 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | 2,500 | 4,379 | ||||||
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| |||||
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ | 3,980 | $ | 2,372 | ||||
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the period for: | ||||||||
Interest on deposits and borrowings | $ | 1,049 | $ | 3,446 | ||||
Income taxes | $ | 653 | $ | 461 | ||||
Non-cash items: | ||||||||
Educational Improvement Tax Credit | $ | — | $ | 45 | ||||
See accompanying notes to unaudited consolidated financial statements.
WVS FINANCIAL CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.BASIS OF PRESENTATION
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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 nine months ended March 31,September 30, 2021, are not necessarily indicative of the results which may be expected for the entire fiscal year.
The coronavirus (COVID-19) pandemic has negatively impacted the global economy, disrupted global supply chains and increased unemployment levels. The resulting temporary closure of many businesses and the implementation of social distancing and sheltering-in-place policies has and may continue to impact many of the Company’s customers. While the full effects of the pandemic remain unknown, the Company is committed to supporting its customers, employees and communities during this difficult time. The Company has given hardship relief assistance to customers, including the consideration of various loan payment deferral and fee waiver options, and encourages customers to reach out for assistance to support their individual circumstances. The pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize impairments on the securities we hold. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed by the President of the United States. Certain provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by COVID-19. Under these provisions, loan modifications deemed to be COVID-19 related would not be considered a troubled debt restructuring (TDR) if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020. The banking regulators issued similar guidance, which also clarified that a COVID-19-related modification should not be considered a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short-term. As of March 31,September 30, 2021, the number ofSavings Bank had no loans in deferral totaled 12 with an aggregate balance of $4.7 million and an aggregate appraised value of $10.1 million. Effective July 1, 2020 these loans were given a twelve month catch-up period to repay any previously due deferred amounts. As of March 31, 2021 all of these loans were current with the terms of their deferral agreements.deferral.
2.RECENT ACCOUNTING PRONOUNCEMENTS
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In June 2016, the FASB issued ASU 2016-13,Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the ASU is that financial assets
measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10,Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.
9
In November, 2018, the FASB issued ASU 2018-19,Codification Improvements to Topic 326, Financial Instruments – Instruments—Credit Losses, which amended the effective date of ASU 2016-13 for entities other than public business entities (PBEs), by requiring non-PBEs to adopt the standard for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Therefore, the revised effective dates of ASU 2016-13 for PBEs that are SEC filers will be fiscal years beginning after December 15, 2019, including interim periods within those years, PBEs other than SEC filers will be for fiscal years beginning after December 15, 2020, including interim periods within those years, and all other entities (non-PBEs) will be for fiscal years beginning after December 15, 2021, including interim periods within those years. The ASU also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Rather, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The effective date and transition requirements for ASU 2018-19 are the same as those in ASU 2016-13, as amended by ASU 2018-19. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. This Update is not expected to have a significant impact on the Company’s financial statements.
In April 2019, the FASB issued ASU 2019-04,Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments – Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November.Topic 815, Derivatives and Hedging amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update. Topic 825, Financial Instruments amendmentsare effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years. 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 May 2019, the FASB issued ASU 2019-05,Financial Instruments – Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously
measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. On October 16, 2019, the FASB voted to defer the effective date for ASC 326,Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The final ASU is expected to be issued in mid-November. 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 November 2019, the FASB issued ASU 2019-11,Codification Improvements to Topic 326, Financial Instruments – Credit Losses, to clarify its new credit impairment guidance in ASC 326, based on implementation issues raised by stakeholders. This Update clarified, among other things, that expected recoveries are to be included in the allowance for credit losses for these financial assets; an accounting policy election can be made to adjust the effective interest rate for existing troubled debt restructurings based on the prepayment assumptions instead of the prepayment assumptions applicable immediately prior to the restructuring event; and extends the practical expedient to exclude accrued interest receivable from all additional relevant disclosures involving amortized cost basis. The effective dates in this Update are the same as those applicable for ASU 2019-10. The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.
In December 2019, the FASB issued ASU 2019-12,Income Taxes (Topic 740), to simplify the accounting for income taxes, change the accounting for certain tax transactions, and make minor improvements to the codification. This Update provides a policy election to not allocate consolidated income taxes when a member
10
In March 2020, the FASB issued ASU 2020-03,Codification Improvements to Financial Instruments. This ASU was issued to improve and clarify various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven issues that describe the areas of improvement and the related amendments to GAAP; they are intended to make the standards easier to understand and apply and to eliminate inconsistencies, and they are narrow in scope and are not expected to significantly change practice for most entities. Among its provisions, the ASU clarifies that all entities, other than public business entities that elected the fair value option, are required to provide certain fair value disclosures under ASC 825, Financial Instruments, in both interim and annual financial statements. It also clarifies that the contractual term of a net investment in a lease under Topic 842 should be the contractual term used to measure expected credit losses under Topic 326. Amendments related to ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is not permitted before an entity’s adoption of ASU 2016-01. Amendments related to ASU 2016-13 for entities that have not yet adopted
that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Amendments related to ASU 2016-13 for entities that have adopted that guidance are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Other amendments are effective upon issuance of this ASU. This Update is not expected to have a significant impact on the Company’s financial statements.
In March 2020, the FASB issued ASU 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. 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 May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which requires an entity to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. An entity should measure the effect of a modification as the difference between the fair value of the modified warrant and the fair value of that warrant immediately before modification. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. This Update is not expected to have a significant impact on the Company’s financial statements.
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11
3.REVENUE RECOGNITION
The Company recognizes revenue in accordance with ASC 606, Revenue from contracts with Customers – Topic 606. Management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, and earnings on bank owned life insurances are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue. The main types of noninterest income within the scope of the standard are as follows: Service Charges on deposit accounts—accounts - the Company has contracts with its deposit customers where fees are charged if certain parameters are not met. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific transactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time upon the completion of the requested service/transaction.
4.EARNINGS PER SHARE
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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 | Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
| March 31, | March 31, | September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Weighted average common shares issued | 3,805,636 | 3,805,636 | 3,805,636 | 3,805,636 | 3,805,636 | 3,805,636 | ||||||||||||||||||
Average treasury stock shares | (1,902,946 | ) | (1,872,228 | ) | (1,902,562 | ) | (1,868,532 | ) | (1,921,522 | ) | (1,901,801 | ) | ||||||||||||
Average unallocated ESOP shares | (150,841 | ) | (161,686 | ) | (153,335 | ) | (164,186 | ) | (145,887 | ) | (155,795 | ) | ||||||||||||
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Weighted average common shares and common stock equivalents used to calculate basic earnings per share | 1,751,849 | 1,771,722 | 1,749,739 | 1,772,918 | 1,738,227 | 1,748,040 | ||||||||||||||||||
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share | 1,751,849 | 1,771,722 | 1,749,739 | 1,772,918 | 1,738,227 | 1,748,040 | ||||||||||||||||||
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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.
The unallocated shares controlled by the ESOP are not considered in the weighted-average shares outstanding until the shares are committed for allocation to an employee’s individual account.
12 5.INVESTMENT SECURITIES |
The amortized cost, gross unrealized gains and losses, and fair values of investments are as follows:
Gross | Gross | |||||||||||||||||||||||||||||||
| Gross | Gross | Amortized | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | Cost | Gains | Losses | Value | |||||||||||||||||||||||||
| Cost | Gains | Losses | Value | (Dollars in Thousands) | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||
March 31, 2021 | ||||||||||||||||||||||||||||||||
September 30, 2021 | ||||||||||||||||||||||||||||||||
AVAILABLE FOR SALE | ||||||||||||||||||||||||||||||||
U.S. government agency securities | $ | 3,209 | $ | 0- | $ | (2 | ) | $ | 3,207 | |||||||||||||||||||||||
Corporate debt securities | $ | 117,155 | $ | 505 | $ | (36 | ) | $ | 117,624 |
| 108,075 |
| 438 |
| (38 | ) |
| 108,475 | ||||||||||||||
Foreign debt securities 1 | 32,115 | 186 | (14 | ) | 32,287 | |||||||||||||||||||||||||||
Foreign debt securities1 | 30,960 | 168 | (4 | ) | 31,124 | |||||||||||||||||||||||||||
Obligations of states and political subdivisions | 733 | — | (8 | ) | 725 | 727 | 0- | (7 | ) | 720 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total | $ | 150,003 | $ | 691 | $ | (58 | ) | $ | 150,636 | $ | 142,971 | $ | 606 | $ | (51 | ) | $ | 143,526 | ||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(Dollars in Thousands) | ||||||||||||||||
September 30, 2021 | ||||||||||||||||
HELD TO MATURITY | ||||||||||||||||
U.S. government agency securities | $ | 7,747 | $ | 0- | $ | (14 | ) | $ | 7,733 | |||||||
Obligations of states and political subdivisions |
| 2,745 |
| 104 |
| 0- |
| 2,849 | ||||||||
Total | $ | 10,492 | $ | 104 | $ | (14 | ) | $ | 10,582 | |||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(Dollars in Thousands) | ||||||||||||||||
June 30, 2021 | ||||||||||||||||
AVAILABLE FOR SALE | ||||||||||||||||
U.S. government agency securities | $ | 3,215 | $ | 0- | $ | (1) |
| $ | 3,214 | |||||||
Corporate debt securities |
| 109,501 |
| 546 | $ | (7 | ) | $ | 110,040 | |||||||
Foreign debt securities1 | 37,440 | 179 | (21 | ) | 37,598 | |||||||||||
Obligations of states and political subdivisions | 730 | 0- | (5) | 725 | ||||||||||||
Total | $ | 150,886 | $ | 725 | $ | (34) |
| $ | 151,577 | |||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(Dollars in Thousands) | ||||||||||||||||
June 30, 2021 | ||||||||||||||||
HELD TO MATURITY | ||||||||||||||||
U.S. government agency securities | ||||||||||||||||
Obligations of states and political subdivisions |
| 2,745 |
| 98 |
| 0- |
| 2,843 | ||||||||
Total | $ | 15,489 | $ | 103 | $ | 0- | $ | 15,592 | ||||||||
__________________________ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
13
The amortized cost and fair values of debt securities at
At
, respectively. Of the 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 The Company’s CMO portfolio is comprised of two segments: CMOs backed by U.S. Government Agencies (“Agency CMOs”) and CMOs backed by single-family whole loans not guaranteed by a U.S. Government Agency (“ At Due to prepayments of the underlying loans, and the prepayment characteristics of the CMO The Company retains an independent third party to assist it in the determination of a fair value for its three private-label CMOs. 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 The Company believes that the data and assumptions used to determine the fair values of its securities 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 The following table sets forth information with respect to the Company’s 14
The amortized cost
The amortized cost and fair value of the Company’s mortgage-backed securities at
At
15 7.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following tables present the changes in accumulated other comprehensive
16
8.UNREALIZED LOSSES ON SECURITIES
The following tables show 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
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). The Company evaluates outstanding available-for-sale and held-to-maturity securities in an unrealized loss position (i.e., impaired securities) for 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.
During the three months ended In the case of its 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 The Company reviewed the independent third party’s assumptions used in the 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 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 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
The following table summarizes the primary segments of the loan portfolio as of
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 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.
19
The Company’s loan portfolio may also include troubled debt restructurings (“TDRs”), 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 TDRs 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. During the three 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 20 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) 1.00% 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 21 The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of
Credit quality information The following tables represent credit exposure by internally assigned grades for the 22 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 present the Company’s internally classified construction, land acquisition and development, multi-family
23
The following table presents performing and non-performing 1 – 4 family residential and consumer loans based on payment activity for the periods ended
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 24 The Company had no unallocated loss allowance The allowance for loan losses The following tables summarize the primary segments of the
25
During the three months ended During the
The following table presents contractual maturities of FHLB long-term advances as of
26 Maturities of FHLB long-term advances at
The Company also utilized revolving and short-term FHLB advances. Short-term FHLB advances generally mature within 90 days, while revolving FHLB advances may be repaid by the Company without penalty. The following table presents information regarding such advances as of
At The FHLB advances are secured by the Company’s FHLB stock, loans, and mortgage-backed and investment securities held in safekeeping at the FHLB. FHLB advances are subject to substantial prepayment penalties.
The Company FRBC Discount Window Borrowings:
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:
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
28
13.FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of financial instruments are as follows:
29
30
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE FORWARD LOOKING STATEMENTS In the normal course of business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time to time issue or make certain statements, either in writing or orally, that are or contain forward-looking statements, as that term is defined in the U.S. federal securities laws. Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions made by or to be made by us, projections involving anticipated revenues, earnings, profitability or other aspects of operating results or other future developments in our affairs or the industry in which we conduct business. Forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology such as “anticipated,” “believe,” ”expect,” ”intend,” “plan,” “estimate” or similar expressions. Although we believe that the anticipated results or other expectations reflected in our forward-looking statements are based on reasonable assumptions, we can give no assurance that those results or expectations will be attained. Forward-looking statements involve risks, uncertainties and assumptions (some of which are beyond our control), and as a result actual results may differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include, but are not limited to, the following, as well as those discussed elsewhere herein: • our investments in our businesses and in related technology could require additional incremental spending, and might not produce expected deposit and loan growth and anticipated contributions to our earnings; • general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the allowance for loan losses or a reduced demand for credit or fee-based products and services; • the effects and extent of the coronavirus (COVID-19) pandemic on the global economy, and its impact on the Company’s operations and financial condition, including the granting of various loan payment deferral and fee waivers, the possibility of credit losses in our loan portfolios and increases in our allowance for credit losses as well as possible impairments on the securities we hold; • changes in the interest rate environment could reduce net interest income and could increase credit losses; • the conditions of the securities markets could change, which could adversely affect, among other things, the value or credit quality of our assets, the availability and terms of funding necessary to meet our liquidity needs and our ability to originate loans and leases; • changes in the extensive laws, regulations and policies governing financial holding companies and their subsidiaries could alter our business environment or affect our operations; • the potential need to adapt to industry changes in information technology systems, on which we are highly dependent, could present operational issues or require significant capital spending; • competitive pressures could intensify and affect our profitability, including as a result of continued industry consolidation, the increased availability of financial services from non-banks, technological developments such as the internet or bank regulatory reform; and • acts or threats of terrorism and actions taken by the United States or other governments as a result of such acts or threats, including possible military action, could further adversely affect business and economic conditions in the United States generally and in our principal markets, which could have an adverse effect on our financial performance and that of our borrowers and on the financial markets and the price of our common stock. 31 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 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. Effects of COVID-19 Pandemic The Company’s business is dependent upon the willingness and ability of our employees and clients to conduct banking and other financial transactions. The The Company has responded to the circumstances surrounding the pandemic to support the safety and well-being of the employees, customers and shareholders by enacting the following measures: • Modified branch business hours Monday through Thursday to close at 4:00 pm (no change), Friday close at 4:00 pm (as opposed to 6:00 • Monitor federal, state and local COVID-19 websites and adopt guidance as appropriate and feasible. • Encourage customers to use our various on-line portals (e.g. internet banking, online bill pay service), automated teller machines and night depositories to redirect routine transactions away from our branch staff as much as possible. • Non-branch banking services (e.g. lending, accounting, check and electronic processing) continue to be offered consistent with COVID-19 guidelines. 32 FINANCIAL CONDITION The Company’s assets totaled The Company’s total liabilities Total stockholders’ equity increased RESULTS OF OPERATIONS
Net Interest
Interest Income. Interest income on net loans receivable decreased $167 thousand or 19.3% for the three months ended
33 Interest income on investment securities Interest income on mortgage-backed securities decreased $68 thousand or 25.3% for the three months ended September 30, 2021, when compared to the same period in 2020. The
principal
Interest income on bank certificates of deposit decreased $4 thousand
Interest Expense.Interest paid on FHLB Interest paid on FHLB
Interest expense on deposits decreased $67 thousand or 64.4% for the three months ended September 30, 2021, when compared to the same period in 2020. The decrease in interest expense on deposits for the three months ended September 30, 2021 was primarily attributable to a 61 basis point decrease in the weighted-average rate paid on time deposits and was partially offset by an increase of Provision for Loan Losses. A provision for loan losses is charged
At 34 Non-Interest Non-Interest Expense. Non-interest expense increased $52 thousand or 5.9% for the three months ended
LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities totaled
Funds The decreases in transaction accounts and advance payments by borrowers for taxes and insurance were primarily attributable to seasonal withdrawals for the payment of local real estate taxes. The increase in 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 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 35 On 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 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 had no 36 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 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. 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 During the fiscal years 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. 37 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.
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 Cumulative Stressed Repricing Gap
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. 39 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 Analysis of Sensitivity to Changes in Market Interest Rates
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
40 In the ordinary course of its construction lending business, the Savings Bank
As of 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 41
(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.
There are no material changes to the risk factors included in Item 1A of
(a) Not applicable. (b) Not applicable. (c) The following table sets forth information with respect to purchases of common stock of the Company made by WVS Financial Corp. during the three months ended
(a) Announced March 24, 2020. (b) 100,000 common shares approved for repurchase. (c)
(d) This Program has not expired and has 68,729 common shares remaining to be purchased at September 30, 2021. (e) Not applicable. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(d) This Program has not expired and has 87,305 common shares remaining to be purchased at March 31, 2021.
(e) 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 | |
31.1 | ||
Rule 13a-14(a) / 15d-14(a) | ||
31.2 | Rule 13a-14(a) / 15d-14(a) Certification of the Chief Accounting Officer | |
32.1 | ||
32.2 | ||
99 | ||
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 | ||
43
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. | |||||||
Date: | November 15, 2021 | BY: | /s/ David J. Bursic | ||||
David J. Bursic President and Chief Executive Officer (Principal Executive Officer) | |||||||
Date: | November 15, 2021 | BY: | /s/ | ||||
| Mary C. Magestro-Johnston Vice-President, Treasurer and Chief Accounting Officer
| ||||||
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