UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-22444
WVS Financial Corp.
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(Exact name of registrant as specified in its charter)
Pennsylvania 25-1710500
-------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9001 Perry Highway
Pittsburgh, Pennsylvania 15237
------------------------ ----------
(Address of principal (Zip Code)
executive offices)
(412) 364-1911
-------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. YES [ X ] NO [ ]
Shares outstanding as of February 6, 1998 : 1,808,050 shares Common
Stock, $.01 par value.
WVS FINANCIAL CORP. AND SUBSIDIARY
INDEX
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial
Condition as of December 31, 1997
and June 30, 1997 (Unaudited)
Consolidated Statements of Income
for the Three and Six Months Ended
December 31, 1997 and 1996 (Unaudited)
Consolidated Statements of Cash Flows
for the Six Months Ended December 31,
1997 and 1996 (Unaudited)
Consolidated Statements of Changes in
Stockholders' Equity for the Six Months
Ended December 31, 1997 (Unaudited)
Notes to Unaudited Consolidated
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations for the Three and Six Months
Ended December 31, 1997
Item 3. Quantitative and Qualitative Disclosures
about Market Risk
PART II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(in thousands)
December 31, June 30,
1997 1997
--------- ---------
Assets
Cash and due from banks ................................. $ 625 $ 667
Interest-earning demand deposits ........................ 908 1,904
Investment securities available-for-sale
(amortized cost of $10,360 and $3,689) ............... 10,434 3,553
Investment securities held-to-maturity
(market value of $75,444 and $83,889) ................ 75,021 83,995
Mortgage-backed securities available-for-sale
(amortized cost of $16,585 and $18,417) .............. 16,726 18,280
Mortgage-backed securities held-to-maturity
(market value of $19,273 and $19,381) ................ 18,819 19,210
Federal Home Loan Bank stock, at cost ................... 3,872 3,927
Net loans receivable .................................... 161,002 158,134
Accrued interest receivable ............................. 2,449 2,809
Real estate owned ....................................... -- --
Premises and equipment .................................. 1,237 1,298
Deferred taxes and other assets ......................... 929 916
--------- ---------
TOTAL ASSETS .................................. $ 292,022 $ 294,693
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Savings Deposits:
Non-interest-bearing accounts ........................ $ 7,859 $ 7,283
NOW accounts ......................................... 15,400 15,177
Savings accounts ..................................... 36,751 36,591
Money market accounts ................................ 11,642 12,103
Certificates of deposit .............................. 95,479 99,725
--------- ---------
Total savings deposits ............................... 167,131 170,879
Federal Home Loan Bank advances ......................... 77,432 77,857
Other borrowings ........................................ 7,171 6,784
Advance payments by borrowers for taxes and insurance ... 2,234 3,531
Accrued interest payable ................................ 1,924 1,768
Other liabilities ....................................... 5,002 985
--------- ---------
TOTAL LIABILITIES .................................... 260,894 261,804
--------- ---------
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(in thousands)
December 31, June 30,
1997 1997
--------- ---------
Stockholders' equity:
Preferred stock:
5,000,000 shares, no par value per share, authorized;
none outstanding...................................... -- --
Common stock:
10,000,000 shares, $.01 par value per share,
authorized; 1,753,280 and 1,747,280 shares issued and
outstanding .......................................... 18 17
Additional paid-in capital .............................. 17,672 17,236
Retained earnings, substantially restricted ............. 14,152 16,900
Unallocated shares - Recognition and Retention Plans .... (483) (631)
Unallocated shares - Employee Stock Ownership Plan ...... (373) (453)
--------- ---------
30,986 33,069
Unrealized gain (loss) on available-for-sale securities . 142 (180)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY ........................... 31,128 32,889
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .... $ 292,022 $ 294,693
========= =========
See accompanying notes to consolidated financial statements.
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
INTEREST AND DIVIDEND INCOME:
Loans ................................. $ 3,300 $ 3,080 $ 6,565 $ 6,163
Investment securities ................. 1,482 1,464 3,050 2,674
Mortgage-backed securities ............ 623 679 1,265 1,390
Interest-earning deposits with
other institutions ................. 21 26 35 54
Federal Home Loan Bank stock .......... 58 49 119 82
----------- ----------- ----------- -----------
Total interest and dividend income 5,484 5,298 11,034 10,363
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits .............................. 1,751 1,767 3,535 3,539
Borrowings ............................ 1,179 1,006 2,357 1,753
Advance payments by borrowers for
taxes and insurance................. 9 7 16 16
----------- ----------- ----------- -----------
Total interest expense ........... 2,939 2,780 5,908 5,308
----------- ----------- ----------- -----------
NET INTEREST INCOME ........................ 2,545 2,518 5,126 5,055
PROVISION FOR LOAN LOSSES .................. (120) 30 (120) 60
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES......................... 2,665 2,488 5,246 4,995
----------- ----------- ----------- -----------
NON-INTEREST INCOME:
Service charges on deposits ........... 58 56 110 103
Investment securities gains ........... -- -- -- 26
Other ................................. 48 41 86 77
----------- ----------- ----------- -----------
Total non-interest income ........ 106 97 196 206
----------- ----------- ----------- -----------
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
NON-INTEREST EXPENSE:
Salaries and employee benefits ........ 913 694 1,670 1,330
Occupancy and equipment ............... 104 109 207 208
Deposit insurance premium ............. 28 -- 55 1,239
Data processing ....................... 42 43 84 85
Correspondent bank service charges .... 29 30 60 58
Other ................................. 200 203 366 361
----------- ----------- ----------- -----------
Total non-interest expense ....... 1,316 1,079 2,442 3,281
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES ................. 1,455 1,506 3,000 1,920
INCOME TAXES ............................... 459 594 1,069 758
----------- ----------- ----------- -----------
NET INCOME ................................. $ 996 $ 912 $ 1,931 $ 1,162
=========== =========== =========== ===========
EARNINGS PER SHARE:
Basic ................................. $ 0.58 $ 0.54 $ 1.13 $ 0.69
Diluted ............................... $ 0.56 $ 0.52 $ 1.09 $ 0.67
AVERAGE SHARES OUTSTANDING:
Basic ................................. 1,709,170 1,681,304 1,706,495 1,680,229
Diluted ............................... 1,773,620 1,742,072 1,769,678 1,738,823
See accompanying notes to consolidated financial statements.
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Six Months Ended
December 31,
----------------------
1997 1996
------- -------
OPERATING ACTIVITIES
Net income ........................................................ $ 1,931 $ 1,162
Adjustments to reconcile net income to cash provided by operating
activities:
Provision for loan losses ...................................... (120) 60
Gain on sale of Real Estate Owned .............................. -- (8)
Gain on sale of investments and mortgage-backed securities ..... -- (26)
Depreciation and amortization, net ............................. 67 70
Amortization of discounts, premiums and deferred loan fees ..... (29) 38
Amortization of ESOP, RRP and deferred and unearned compensation 429 190
Decrease (increase) in accrued interest receivable ............. 360 (201)
Increase in accrued interest payable ........................... 154 279
Decrease (increase) in accrued and deferred taxes .............. (119) 43
Other, net ..................................................... 290 (175)
------- -------
Net cash provided by operating activities ................... 2,963 1,432
------- -------
INVESTING ACTIVITIES
Available-for-sale:
Purchases of investments and mortgage-backed securities ........ (11,680) (839)
Proceeds from repayments of investments and mortgage-backed
securities ..................................................... 4,707 921
Proceeds from sale of investments and mortgage-backed securities 2,192 1,665
Held-to-maturity:
Purchases of investments and mortgage-backed securities ........ (47,620) (44,513)
Proceeds from repayments of investments and mortgage-backed
securities ..................................................... 57,052 30,981
Net Increase in loans receivable .................................. (2,842) (1,366)
Sale of real estate owned ......................................... -- 72
Decrease (increase) in FHLB stock ................................. 55 (1,268)
Purchases of premises and equipment ............................... (7) (45)
------- -------
Net cash provided by (used for) investing activities ........ 1,857 (14,392)
------- -------
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Six Months Ended
December 31,
----------------------
1997 1996
-------- --------
FINANCING ACTIVITIES
Net increase (decrease) in transaction and passbook accounts......... 499 (1,320)
Net decrease in certificates of deposit ............................. (4,246) (1,515)
Net (decrease) increase in FHLB borrowings .......................... (425) 24,857
Net increase (decrease) in other borrowings ......................... 388 (5,416)
Net decrease in advance payments by borrowers for taxes and insurance (1,297) (1,547)
Net proceeds from issuance of common stock .......................... 63 2
Cash dividends paid ................................................. (839) (488)
-------- --------
Net cash (used for) provided by financing activities .......... (5,857) 14,573
-------- --------
(Decrease) increase in cash and cash equivalents .............. (1,037) 1,613
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD ................ 2,570 2,727
-------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD ...................... $ 1,533 $ 4,340
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits, escrows and borrowings .................. $ 5,752 $ 5,029
Income taxes .................................................. 1,181 889
Noncash item:
Foreclosed mortgage loans transferred to real estate owned .... -- 64
Dividends declared, not yet paid (net of reimbursement
for unallocated ESOP shares) ................................ 3,775 --
See accompanying notes to consolidated financial statements.
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands)
Net
Unrealized Retained
Additional Unallocated Unallocated Gain Earnings-
Common Paid-in Shares Held Shares Held (Loss) on Substantially
Stock Capital by ESOP by RRP Securities Restricted Total
-------- -------- -------- -------- -------- -------- --------
Balance at June 30, 1997 ... $ 17 $ 17,236 $ (453) $ (631) $ (180) $ 16,900 $ 32,889
Release of earned Employee
Stock Ownership Plan (ESOP)
shares ..................... 201 80 281
Accrued compensation expense
for Recognition and
Retention Plans (RRP) ...... 148 148
Tax benefit from stock
grants issued under RRP .... 173 173
Exercise of Stock Options .. 1 62 63
Change in unrealized loss,
net of income taxes of $166 322 322
Cash dividends declared
($2.70 per share) .......... (4,679) (4,679)
Net income ................. 1,931 1,931
-------- -------- -------- -------- -------- -------- --------
Balance at December 31, 1997 $ 18 $ 17,672 $ (373) $ (483) $ 142 $ 14,152 $ 31,128
======== ======== ======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
WVS FINANCIAL CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and
therefore do not include information or footnotes necessary for a
complete presentation of financial condition, results of operations,
and cash flows in conformity with generally accepted accounting
principles. However, all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of management, are
necessary for a fair presentation have been included. The results of
operations for the three and six months ended December 31, 1997 are not
necessarily indicative of the results which may be expected for the
entire fiscal year.
2. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128 "Earnings
Per Share". Statement No. 128 replaced the previously reported primary
and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share differs from fully diluted
earnings per share in that average period market prices are utilized in
calculating weighted average common stock equivalents instead of period
ending market prices.
All earnings per share amounts have been presented, and where
necessary, restated to conform to the Statement No. 128 requirements.
3. LITIGATION
On March 27, 1995, the United States District Court for the Western
District of Pennsylvania entered an Opinion and Orders dismissing in
its entirety a lawsuit brought by Plaintiff William S. Karn, who is a
depositor of the Savings Bank and a shareholder of the Company, which
alleged, among other things, antitrust and securities laws violations
in connection with the Savings Bank's mutual - to - stock conversion.
The court also dismissed this same Plaintiff's federal claims in a
second and substantially similar lawsuit while remanding to the Court
of Common Pleas of Allegheny County any cognizable state law claims.
This Plaintiff has filed Motion to Amend Judgment with the Court on the
Opinion and Orders and a Memorandum Response in Opposition has been
filed. On August 28, 1995, the Court denied the Plaintiff's motion to
Amend Judgment.
The Company is involved with various other 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.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In July 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income". Statement No. 130 is effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for
reporting and presentation of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general purpose
financial statements. It requires that all items are required to be
recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is presented with the
same prominence as other financial statements. Statement No. 130
requires that companies (i) classify items of other comprehensive
income by their nature in a financial statement and (ii) display the
accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section
of the statement of financial condition. Reclassification of financial
statements for earlier periods provided for comprehensive purposes is
required.
WVS FINANCIAL CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997
When used in this Form 10-Q, or, in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties
including changes in economic conditions in the Company's market area, changes
in policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the Company's market area and competition that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The Company does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions which may be made to
forward-looking statements to reflect events or circumstances after the date of
statements or to reflect the occurrence of anticipated or unanticipated events.
GENERAL
WVS Financial Corp. ("WVS" or the "Company") is the parent holding
company of West View Savings Bank ("West View" or the "Savings Bank"). The
Company was organized in July 1993 as a Pennsylvania-chartered unitary bank
holding company and acquired 100% of the common stock of the Savings Bank in
November 1993.
West View Savings Bank is a Pennsylvania-chartered, SAIF-insured stock
savings bank conducting business from six offices in the North Hills suburbs of
Pittsburgh. Originally organized under Pennsylvania law in 1908 as West View
Building Loan Association, West View changed its name to West View Savings and
Loan Association in 1954. In June 1992, West View converted from a
Pennsylvania-chartered mutual savings and loan association to a
Pennsylvania-chartered mutual savings bank. The Savings Bank converted to the
stock form of ownership in November 1993. The Savings Bank had no subsidiaries
at December 31, 1997.
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 consists 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.
The Company's strategy focuses on traditional thrift lending,
maintaining asset quality and increasing core earnings.
FINANCIAL CONDITION
The Company's assets totaled $292.0 million at December 31, 1997 as
compared to $294.7 million at June 30, 1997. The $2.7 million or 0.9% decline in
total assets was primarily comprised of a $4.1 million or 3.2% decrease in
investment and mortgage-backed securities, including Federal Home Loan Bank
("FHLB") stock, which was partially offset by a $2.9 million or 1.8% increase in
net loans receivable. The Company's total liabilities decreased $900 thousand or
3.4% to $260.9 million as of December 31, 1997 from $261.8 million as of June
30, 1997. The $900 thousand decrease in total liabilities was primarily
comprised of a $3.8 million or 2.2% decrease in deposits and a $1.3 million
decrease in advance payments by borrowers for taxes and insurance which was
partially offset by a $4.0 million increase in other liabilities. The $4.0
million increase in other liabilities was primarily attributable to a $3.8
million increase in dividends payable on the Company's common stock. Total
stockholders' equity decreased $1.8 million or 5.5% to $31.1 million as of
December 31, 1997 from $32.9 million as of June 30, 1997, primarily due to $1.9
million of Company net income for the six months ended December 31, 1997, which
was offset by $4.6 million in cash dividends declared on the Company's common
stock.
ASSET AND LIABILITY MANAGEMENT. The Company continued a strategy
designed to reduce the interest rate sensitivity of its financial assets to its
financial liabilities. The primary elements of this strategy include: (i)
expanding the Company's investment growth program in order to enhance net
interest income; (ii) maintaining the Company's level of short-term liquid
investments by funding loan commitments and purchasing longer-term investment
securities; (iii) emphasizing the retention of lower-cost savings accounts and
other core deposits; (iv) pricing the Company's certificates of deposit and loan
products nearer to the market average rate as opposed to the upper range of
market offered rates.
The Company has continued its investment growth program, originally
initiated in the third quarter of fiscal 1994, in order to realize additional
net interest income. Under this strategy, a longer-term callable or noncallable
investment security, or mortgage-backed security, is purchased and funded
through the use of short-term non-deposit liabilities, such as FHLB advances and
short-term borrowings. With this strategy, the Company increases its net
interest income, but also faces the risk, during periods of rising market
interest rates, that it may experience a decline in net interest income if the
rate paid on its various borrowings rises above the rate earned on the
investment security purchased. In order to mitigate this exposure, the Board has
placed certain restrictions on the investment growth program, including: (i) the
average outstanding daily balance of total borrowings, computed quarterly, may
not exceed approximately $85.0 million; (ii) suitable investments shall be
confined to those meeting the credit quality criteria outlined in the Company's
investment policy; and (iii) each security purchased shall initially yield a
minimum of seventy-five basis points above the incremental rate paid on
short-term borrowings, at the time of purchase. In most cases, the initial yield
spread earned on investment security purchases exceeded approximately two
hundred basis points.
The Company has continued to purchase bonds with optional principal
redemption features ("callable bonds") in order to capture additional net
interest income. Callable bonds generally provide investors with higher rates of
return than noncallable bonds because the issuer has the option to redeem the
bonds before maturity. While this strategy affords WVS the current opportunity
to improve its net interest income, during a period of declining interest rates,
such as was experienced during the quarter ended December 31, 1997, the Company
would be exposed to the risk that the investment will be redeemed prior to its
final stated maturity. In order to mitigate this risk, the Company has funded a
significant portion of its purchases of callable bonds with short-term
borrowings. Approximately $19.3 million of callable agency bonds with an
estimated weighted average rate of 7.7% were called during the quarter ended
December 31, 1997. During the quarter ended December 31, 1997, the Company
purchased approximately $18.5 million of callable bonds with an approximate
weighted average yield to call and maturity of 7.5% and 7.4%, respectively. The
callable agency bond purchases, totaling $18.5 million, are summarized by
initial term to call as follows: $6.5 million within three months, $4.0 million
with greater than three months and within six months, and $8.0 million with
greater than six months and within twelve months.
During the quarter ended December 31, 1997, the Company increased its
commercial paper holdings by $15.0 million. At December 31, 1997 the Company
held $15.0 million of commercial paper with an approximate yield of 7.2%. The
commercial paper purchases were made in order to capitalize on seasonally high
calendar year end commercial paper rates and for liquidity management.
The Company also makes available for origination residential mortgage
loans with interest rates which adjust pursuant to a designated index, although
customer acceptance has been somewhat limited in the Savings Bank's market area.
The Company will continue to offer land acquisition and development and
shorter-term construction loans, primarily on residential properties, to
partially increase its loan asset sensitivity.
During the six months ended December 31, 1997, the Company borrowed
approximately $23.1 million from the FHLB in the way of various short-term
borrowings with a weighted average rate of 5.71% and $28.6 million in other
borrowings with a weighted average rate of 5.62%. During the six months ended
December 31, 1997, the Company repaid $23.5 million of FHLB advances and $27.2
million of other borrowings. Due to a decline in market interest rates during
the six months ended December 31, 1997, the Company shortened the maturity
structure of its incremental borrowings to reduce its cost of funds and to
better match the maturities of its borrowings with the possible early repayment
of a portion of its investment portfolio.
As of December 31, 1997, the implementation of these asset and
liability management initiatives resulted in the following: (i) an aggregate of
$51.6 million or 32.0% of the Company's net loan portfolio had adjustable
interest rates or maturities of less than 12 months; (ii) $18.4 million or 51.8%
of the Company's portfolio of mortgage-backed securities (including CMOs) were
secured by floating rate securities; (iii) $15.5 million or 18.1% of the
Company's investment securities portfolio had scheduled maturities of one year
or less; and (iv) $68.4 million or 80.0% of the Company's investment securities
portfolio was comprised of callable bonds.
The effect of interest rate changes on a financial institution's assets
and liabilities may be analyzed by examining the extent to which such assets and
liabilities are "interest rate sensitive" 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 when the amount of rate
sensitive assets exceeds the amount of rate sensitive liabilities. A gap is
considered negative when the amount of interest sensitive liabilities exceeds
the amount of interest sensitive assets. During a period of falling interest
rates, a positive gap would tend to adversely affect net interest income, while
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, while a negative gap would tend to adversely
affect net interest income.
The Company's one year cumulative interest rate sensitivity gap
amounted to a negative 22.4% of total assets at December 31, 1997 as compared to
a negative 13.3% at June 30, 1997, in each instance, based on certain
assumptions by management with respect to the repricing of certain assets and
liabilities. At December 31, 1997, the Company's interest-earning assets
maturing or repricing within one year totaled $100.7 million while the Company's
interest-bearing liabilities maturing or repricing within one year totaled
$166.2 million, providing a deficiency of interest-earning assets over
interest-bearing liabilities of $65.5 million. At December 31, 1997, the
percentage of the Company's assets to liabilities maturing or repricing within
one year was 60.6%.
RESULTS OF OPERATIONS
General. WVS reported net income of $996 thousand and $1.9 million
for the three and six months ended December 31, 1997. Net income increased by
$84 thousand or 9.2% for the three months ended December 31, 1997 when compared
to the same period in 1996. The increase was primarily the result of a $150
thousand decrease in the provision for loan losses, a $135 thousand decrease in
income tax expense, a $27 thousand increase in net interest income, and a $9
thousand increase in non-interest income, which was partially offset by a $219
thousand increase in employee salaries and benefits expense. Net income
increased by $769 thousand or 66.2% for the six months ended December 31, 1997
when compared to the same period in 1996. The $769 thousand or 66.2% increase in
net income was principally the result of a $839 thousand decrease in
non-interest expense, a $180 thousand decrease in the provision for loan losses
and a $71 thousand increase in net interest income, which was partially offset
by a $311 thousand increase in income tax expense. The decrease in non-interest
expense for the six months ended December 31, 1997 was primarily attributable to
one-time items, including a $1.2 million net decrease in federal deposit
premiums to recapitalize the Savings Association Insurance Fund ("SAIF"), which
was partially offset by a $340 thousand increase in employee compensation
expense. The $71 thousand increase in net interest income for the six months
ended December 31, 1997 was chiefly attributable to increases in interest earned
on investment and mortgage-backed securities and net loans receivable of $269
thousand and $402 thousand, respectively, which was partially offset by a $604
thousand increase in interest expense on Federal Home Loan Bank Advances and
other borrowings.
Net Interest Income. The Company's net interest income increased by
$27 thousand or 1.1% for the three months ended December 31, 1997 when compared
to the same period in 1996. The increase resulted from a $186 thousand or 3.5%
increase in interest income which was partially offset by a $159 thousand or
5.7% increase in interest expense. For the six months ended December 31, 1997,
net interest income increased by $71 thousand or 1.4%, when compared to the same
period in 1996. The increase resulted from a $671 million or 6.5% increase in
interest income which was partially offset by a $600 thousand or 11.3% increase
in interest expense.
Interest Income. Interest on net loans receivable increased by $220
thousand or 7.1% for the three months ended December 31, 1997 when compared to
the same period in 1996. The increase was attributable to an increase of $11.0
million in the average balance of net loans receivable outstanding, which was
partially offset by a decrease in the weighted average yield earned on net loans
receivable of 1 basis point for the three months ended December 31, 1997 when
compared to the same period in 1996. Interest on net loans receivable increased
by $402 thousand or 6.5% for the six months ended December 31, 1997 when
compared to the same period in 1996. The increase was attributable to a $10.8
million increase in the average balance of outstanding loans which was partially
offset by a 5 basis point decrease in the weighted average yield earned on
outstanding loans for the six months ended December 31, 1997. The increases in
the average loan balance outstanding for the three and six months ended December
31, 1997 were primarily attributable to higher levels of real estate and
consumer loan originations.
Interest on mortgage-backed securities decreased by $56 thousand or
8.2% for the three months ended December 31, 1997 when compared to the same
period in 1996. The decrease was attributable to a $3.5 million decrease in the
average balance of mortgage-backed securities outstanding, partially offset by a
4 basis point increase in the weighted average yield earned on mortgage-backed
securities for the three months ended December 31, 1997 when compared to the
same period in 1996. Interest on mortgage-backed securities decreased $125
thousand or 8.9% for the six months ended December 31, 1997. The decrease was
primarily attributable to a $3.9 million decrease in the average balance of
mortgage-backed securities outstanding partially offset by a 5 basis point
increase in the weighted average yield earned on mortgage-backed securities for
the six months ended December 31, 1997 when compared to the same period in 1996.
The decrease in the average balance of mortgage-backed securities outstanding
was due to principal repayment during the period. The increase in the weighted
average yield earned, during both periods, was principally attributable to lower
levels of premium amortization due to slower rates of principal repayment, when
compared to the same period in 1996.
Interest and dividend income on interest-bearing deposits with other
institutions, investment securities and FHLB Stock ("other investment
securities") increased by $2.2 thousand or 1.4% for the three months ended
December 31, 1997 when compared to the same period in 1996. The increase was
attributable to a $515 thousand increase in the average balance of other
investment securities outstanding and a 6 basis point increase in the weighted
average yield earned on other investment securities for the three months ended
December 31, 1997 when compared to the same period in 1996. Interest on other
investment securities increased $394 thousand or 14% for the six months ended
December 31, 1997 when compared to the same period in 1996. The increase in
interest income on other investment securities was attributable to an $8.2
million increase in the average balance of other investment securities
outstanding and a 23 basis point increase in the weighted average yield earned
on other investment securities for the six months ended December 31, 1997 when
compared to the same period in 1996. The increases in the average balance of
other investment securities during both three and six month periods ended
December 31, 1997 was principally attributable to purchases of commercial paper,
which were made in order to capitalize on seasonally high calendar year end
commercial paper rates and for liquidity management.
Interest Expense. Interest expense on deposits and escrows decreased
by $14 thousand or 0.8% and decreased by $4 thousand or 0.1% for the three and
six months ended December 31, 1997, respectively, when compared to the same
periods in 1996. The decrease in interest expense on deposits and escrows was
principally attributable to a $2.6 million decrease in the average balance of
interest-bearing deposits and escrows for the three months ended December 31,
1997 when compared to the same period in 1996. For the six months ended December
31, 1997, the decrease in interest expense on deposits and escrows was primarily
attributable to a 12 basis point decrease in the average yield paid on deposits
and escrows due to lower market interest rates, when compared to the same period
in 1996.
Interest expense on other borrowings increased by $173 thousand and
increased by $604 thousand for the three and six months ended December 31, 1997,
respectively, when compared to the same periods in 1996. The increase associated
with both periods is primarily attributable to funding the Company's investment
growth program.
Provision for Loan Losses. A provision for loan losses is charged to
earnings to bring the total allowance to a level considered adequate by
management to absorb potential losses in the portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
growth and composition of the loan portfolio, and other relevant factors.
The Company's provision for loan losses decreased by $150 thousand
and $180 thousand for the three and six months ended December 31, 1997,
respectively, when compared to the same periods in 1996. The decrease in
provision for loan losses was primarily due to a recovery of previously
established loan loss reserves attributable to the payoff of a commercial loan
participation. At December 31, 1997, the Company's total allowance for loan
losses amounted to $1.9 million or 1.1% of the Company's total loan portfolio as
compared to $2.0 million, or 1.3% at June 30, 1997.
Non-Interest Income. Total non-interest income increased by $9
thousand and decreased by $10 thousand for the three and six months ended
December 31, 1997, respectively, when compared to the same periods in 1996. The
increase in non-interest income for the three months ended December 31, 1997 was
primarily attributable to increased automated teller machine ("ATM") service
charges. The decrease in non-interest income for the six months ended December
31, 1997 was principally attributable to the absence of a $26 thousand gain from
the sale of securities in 1996, partially offset by increased service charges on
ATMs and transaction account service charges.
Non-Interest Expense. Total non-interest expense increased $237
thousand or 22% and decreased $839 thousand or 25.6% for the three and six
months ended December 31, 1997, respectively, when compared to the same periods
in 1996.
Federal deposit insurance premiums increased $28 thousand and
decreased $1.2 million or 95.6% for the three and six months ended December 31,
1997, respectively, when compared to the same periods in 1996. The increase for
the quarter ended December 31, 1997 was primarily attributable to normal and
recurring levels of SAIF premiums based upon deposit size. The decrease for the
six months ended December 31, 1997 was principally attributable to the absence
of a $1.1 million one-time charge to recapitalize the SAIF as required by
federal law.
Compensation and employee benefits expense increased $219 thousand or
31.6% and increased $340 thousand or 25.6% for the three and six months ended
December 31, 1997, respectively, when compared to the same periods in 1996.
Income Tax Expense. Income tax expense decreased by $135 thousand or
22.7% and increased by $311 thousand or 41.0% for the three and six months ended
December 31, 1997, respectively, when compared to the same periods in 1996. The
change in income tax expense, for both periods, was attributable to varying
levels of taxable income during the three and six months ended December 31,
1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $3.0 million during
the six months ended December 31, 1997. Net cash provided by operating
activities was primarily comprised of $1.9 million of net income and a $360
thousand decrease in accrued interest receivable.
Funds provided by investing activities totaled $2.4 million during the
six months ended December 31, 1997. Primary sources of funds during the six
months ended December 31, 1997 include $64.0 million of proceeds from repayments
of investment and mortgage-backed securities which was partially offset by $58.7
million used for purchases of investment securities and a $2.8 million increase
in net loans receivable.
Funds used by financing activities totaled $5.9 million for the six
months ended December 31, 1997. Primary financial uses include a $425 thousand
decrease in Federal Home Loan Bank advances, a $3.7 million decrease in
deposits, a $1.3 million decrease in advance payments by borrowers for taxes and
insurance, and $839 thousand of cash dividends disbursed, which was partially
offset by a $388 thousand increase in other borrowings. Financial institutions
generally, including the Company, have experienced a certain degree of depositor
disintermediation to other investment alternatives. Management believes that the
degree of disintermediation experienced by the Company has not had a material
impact on overall liquidity. As of December 31, 1997, $71.7 million or 42.9% of
the Company's total deposits consisted of core deposits. Management has
determined that it currently is maintaining adequate liquidity and is seeking to
better match funding sources with lending and investment opportunities.
The Company's primary sources of funds are deposits, amortization,
prepayments and maturities of existing loans, mortgage-backed securities and
investment securities, funds from operations, and funds obtained through
short-term borrowings. At December 31, 1997, the total approved loan commitments
outstanding amounted to $3.3 million. At the same date commitments under unused
lines of credit amounted to $6.2 million and the unadvanced portion of
construction loans approximated $12.5 million. Certificates of deposit scheduled
to mature in one year or less at December 31, 1997 totaled $58.2 million.
Management believes that a significant portion of maturing deposits will remain
with the Company.
Historically, the Company used its sources of funds primarily to meet
its ongoing commitments to pay maturing savings certificates and savings
withdrawals, fund loan commitments and maintain a substantial portfolio of
investment securities. The Company has been able to generate sufficient cash
through the retail deposit market, its traditional funding source, and through
FHLB advances and other borrowings, to provide the cash utilized in investing
activities. The Company has established a $15.0 million line of credit with the
FHLB, which is scheduled to mature on March 25, 1998 and is subject to various
conditions, including the pledging and delivery of acceptable collateral. The
primary purpose of the line of credit is to serve as a back-up liquidity
facility for the Company, however, the Company may from time to time utilize the
line of credit to purchase investment securities and fund other commitments. In
addition, the Company has access to the Federal Reserve Bank discount window.
Management believes that the Company currently has adequate liquidity available
to respond to liquidity demands.
On December 30, 1997 the Company's Board of Directors declared a cash
dividend of $0.30 per share, and a special cash dividend of $1.90 per share,
both payable February 19, 1998 to shareholders of record at the close of
business on February 9, 1998. Dividends will be 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 or that, if paid, such dividends will not be
reduced or eliminated in future periods.
As of December 31, 1997, WVS Financial Corp. exceeded all regulatory
capital requirements and maintained Tier I and total risk-based capital equal to
$31.0 million or 20.8% and $32.8 million or 22.0%, respectively, of total
risk-weighted assets, and Tier I leverage capital of $31.0 million or 10.8% of
average quarterly assets.
Nonperforming assets consist of nonaccrual loans and real estate owned.
A loan is placed on nonaccrual status when, in the judgment of management, the
probability of collection of interest is deemed insufficient to warrant further
accrual. When a loan is placed on nonaccrual status, previously accrued but
uncollected interest is deducted from interest income. The Company normally does
not accrue interest on loans past due 90 days or more, however, interest may be
accrued if management believes that it will collect on the loan.
The Company's nonperforming assets at December 31, 1997 totaled
approximately $598 thousand or 0.2% of total assets as compared to $274 thousand
or 0.1% of total assets as of June 30, 1997. Nonperforming assets at December
31, 1997 consisted of $480 thousand in commercial real estate loans, $52
thousand in single-family loans, and $66 thousand in consumer loans.
Approximately $1 thousand of additional interest income would have been recorded
during the six months ended December 31, 1997, if the Company's nonaccrual and
restructured loans had been current in accordance with their original loan terms
and outstanding throughout the quarter year ended December 31, 1997.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 U.S. dollars with no specific foreign exchange exposure. The
Savings Bank has no agricultural loan assets and therefore would not have a
specific exposure to changes in commodity prices. Any impacts that changes in
foreign exchange rates and commodity prices would have on interest rates are
assumed to be exogenous and will be analyzed on an ex post basis.
Interest-rate risk ("IRR") is the exposure of a banking organization's
financial condition to adverse movements in interest rates. Accepting this risk
can be an important source of profitability and shareholder value, however
excessive levels of IRR can pose a significant threat to the Company's earnings
and capital base. Accordingly, effective risk management that maintains IRR at
prudent levels is essential to the Company's safety and soundness.
Evaluating a financial institution's exposure to changes in interest
rates includes assessing both the adequacy of the management process used to
control IRR and the organization's quantitative level of exposure. When
assessing the IRR management process, the Company seeks to ensure that
appropriate policies, procedures management information systems and internal
controls are in place to maintain IRR at prudent levels with consistency and
continuity. Evaluating the quantitative level of IRR exposure requires the
Company to assess the existing and potential future effects of changes in
interest rates on its consolidated financial condition, including capital
adequacy, earnings, liquidity, and, where appropriate, asset quality.
The Federal Reserve Board, together with the Office of the Comptroller
of the Currency and the Federal Deposit Insurance Corporation, adopted a Joint
Agency Policy Statement on Interest-Rate Risk, effective June 26, 1996. The
policy statement provides guidance to examiners and bankers on sound practices
for managing interest rate risk, which will form the basis for ongoing
evaluation of the adequacy of interest-rate risk management at supervised
institutions. The policy statement also outlines fundamental elements of sound
management that have been identified in prior Federal Reserve guidance and
discusses the importance of these elements in the context of managing
interest-rate risk. Specifically, the guidance emphasizes the need for active
board of director and senior management oversight and a comprehensive
risk-management process that effectively identifies, measures, and controls
interest-rate risk. Financial institutions derive their income primarily from
the excess of interest collected over interest paid. The rates of interest an
institution earns on its assets and owes on its liabilities generally are
established contractually for a period of time. Since market interest rates
change over time, an institution is exposed to lower profit margins (or losses)
if it cannot adapt to interest-rate changes. For example, assume that an
institution's assets carry intermediate- or long-term fixed rates and that those
assets were funded with short-term liabilities. If market interest rates rise by
the time the short-term liabilities must be refinanced, the increase in the
institution's interest expense on its liabilities may not be sufficiently offset
if assets continue to earn at the long-term fixed rates. Accordingly, an
institution's profits could decrease on existing assets because the institution
will either have lower net interest income or, possibly, net interest expense.
Similar risks exist when assets are subject to contractual interest-rate
ceilings, or rate sensitive assets are funded by longer-term, fixed-rate
liabilities in a decreasing-rate environment.
Several techniques might be used by an institution to minimize
interest-rate risk. One approach used by the Company is to periodically analyze
its assets and liabilities and make future financing and investment decisions
based on payment streams, interest rates, contractual maturities, and estimated
sensitivity to actual or potential changes in market interest rates. Such
activities fall under the broad definition of asset/liability management. The
Company's primary asset/liability management technique is the measurement of the
Company's asset/liability gap-that is, the difference between the cash flow
amounts of interest-sensitive assets and liabilities that will be refinanced (or
repriced) during a given period. For example, if the asset amount to be repriced
exceeds the corresponding liability amount for a certain day, month, year, or
longer period, the institution is in an asset-sensitive gap position. In this
situation, net interest income would increase if market interest rates rose or
decrease if market interest rates fell. If, alternatively, more liabilities than
assets will reprice, the institution is in a liability-sensitive position.
Accordingly, net interest income would decline when rates rose and increase when
rates fell. Also, these examples assume that interest-rate changes for assets
and liabilities are of the same magnitude, whereas actual interest-rate changes
generally differ in magnitude for assets and liabilities.
An institution could also manage interest-rate risk by: selling
existing assets or repaying certain liabilities; matching repricing periods for
new assets and liabilities for example, by shortening terms of new loans or
investments; hedging existing assets, liabilities, or anticipated transactions.
An institution might also invest in more complex financial instruments intended
to hedge or otherwise change interest-rate risk. Interest-rate swaps, futures
contracts, options on futures, and other such derivative financial instruments
often are used for this purpose. Because these instruments are sensitive to
interest-rate changes, they require management expertise to be effective.
Financial institutions are also subject to prepayment risk in falling rate
environments. For example, mortgage loans and other financial assets may be
prepaid by a debtor so that the debtor may refund its obligations at new, lower
rates. The Company has not purchased derivative financial instruments in the
past and does not presently intend to purchase such instruments in the near
future. Prepayments of assets carrying higher rates reduce the Company's
interest income and overall asset yields. A large portion of an institution's
liabilities may be short term or due on demand, while most of its assets may be
invested in long-term loans or investments. Accordingly, the Company seeks to
have in place sources of cash to meet short-term demands. These funds can be
obtained by increasing deposits, borrowing, or selling assets. Also, FHLB
advances and wholesale borrowings have become increasingly important sources of
liquidity for the Company.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates as of December 31,
1997 based on the information and assumptions set forth in the notes. The
Company believes that the assumptions utilized, which are based on statistical
data provided by a federal regulatory agency in the Company's market area, are
reasonable. The Company had no derivative financial instruments, or trading
portfolio, as of December 31, 1997. The expected maturity date values for loans
receivable, mortgage-backed securities, and investment securities were
calculated by adjusting the instrument's contractual maturity date for
expectations of prepayments, as set forth in the notes. Similarly, expected
maturity date values for interest-bearing core deposits were calculated based
upon estimates of the period over which the deposits would be outstanding as set
forth in the notes. With respect to the Company's adjustable rate instruments,
expected maturity date values were measured by adjusting the instrument's
contractual maturity date for expectations of prepayments, as set forth in the
notes. From a risk management perspective, however, the Company believes that
repricing dates, as opposed to expected maturity dates, may be a more relevant
metric in analyzing the value of such instruments. Similarly, substantially all
of the Company's investment securities portfolio is comprised of callable
government agency securities. Company borrowings were tabulated by contractual
maturity dates and without regard to any conversion or repricing dates.
EXPECTED MATURITY DATE-QUARTER ENDED DECEMBER 31,
--------------------------------------------------------------------
There- Fair
1998 1999 2000 2001 2002 after Total Value
------- ------- ------- ------- ------- -------- -------- --------
ON-BALANCE SHEET FINANCIAL INSTRUMENTS
Interest-earning assets:
Loans receivable (1)(2)(3)(4)
Fixed rate $25,795 $16,345 $12,534 $10,799 $ 8,208 $ 44,466 $118,147 $121,631
Average interest rate 8.36% 8.05% 7.94% 7.89% 7.79% 7.52%
Adjustable rate 8,764 7,423 6,276 5,295 4,456 12,725 44,939 46,852
Average interest rate(5) 8.06% 8.07% 8.08% 8.09% 8.10% 7.80%
Mortgage-backed securities
Fixed rate --- 1,745 359 1,623 223 13,091 17,041 17,199
Average interest rate 0.00% 6.45% 6.36% 7.65% 7.40% 7.03%
Adjustable rate --- --- --- --- --- 18,365 18,365 18,800
Average interest rate(6) 0.00% 0.00% 0.00 0.00% 0.00% 7.16%
Investments(7) 14,983 500 --- --- --- 73,770 89,253 89,750
Average interest rate 7.19% 6.40% 0.00% 0.00% 0.00% 7.58%
Interest-bearing deposits 908 --- --- --- --- --- 908 908
Average interest rate 5.77% 0.00% 0.00% 0.00% 0.00% 0.00%
------- ------- ------- ------- ------- -------- -------- --------
Total $50,450 $26,013 $19,169 $17,717 $12,887 $162,417 $288,653 $295,140
Interest-bearing liabilities:
Interest-bearing deposits
and escrows(8)(9)(10) $86,629 $23,050 $23,050 $7,425 $7,425 $21,786 $169,365 $169,587
Average interest rate 4.48% 4.41% 4.41% 3.57% 3.57%
2.30%
Borrowings 25,103 8,000 --- 30,000 21,500 --- 84,603 84,327
Average interest rate 5.84% 5.89% 0.00% 5.72% 5.80% 0.00%
------- ------- ------- ------- ------- -------- -------- --------
Total $111,732 $31,050 $23,050 $37,425 $28,925 $21,786 $253,968 $253,914
(1) Net of undisbursed loan proceeds and does not include net deferred loan
fees or the allowance for loan losses.
(2) For single-family residential loans, assumes annual amortization and
prepayment rate at 15% for adjustable rate loans, and 9% to 37% for fixed
rate loans. For multi-family residential loans and other loans, assumes
amortization and prepayment rate of 12%.
(3) For second mortgage loans, assumes annual amortization and prepayment rate
of 18%.
(4) Consumer loans assumes amortization and prepayment rate of 13%.
(5) Substantially all of the Company's adjustable rate loans reprice on an
annual basis based upon changes in the one-year constant maturity treasury
index with various market based annual and lifetime interest rate caps and
floors.
(6) Substantially all of the Company's adjustable rate mortgage-backed
securities reprice on a monthly basis based upon changes in the one month
LIBOR index with various lifetime caps and floors.
(7) Totals include the Company's investment in Federal Home Loan Bank stock.
(8) For regular savings accounts, assumes an annual decay rate of 17% for three
years or less, 16% for more than three through five years and 14% for more
than five years.
(9) For NOW accounts, assumes an annual decay rate of 37% for one year or less,
32% for more than one through three years and 17% for more than three
years.
(10) For money market deposit accounts, assumes an annual decay rate of 79% for
one year or less and 31% for more than one year.
The Company's loans receivable increased from $160.7 million at June
30, 1997 to $163.1 million at December 31, 1997. The $2.4 million increase was
primarily funded through a reduction of the Company's investment portfolio
during the quarter ended December 31, 1997. The Savings Bank's interest-bearing
deposits and escrows decreased from $174.4 million at June 30, 1997 to $169.4
million at December 31, 1997. The $5.0 million or 2.9% decrease was primarily
attributable to a $4.2 million decrease in time deposits and a $1.3 million
decrease in escrows which was partially offset by a $576 thousand increase in
non-interest bearing deposit accounts.
The table below provides information about the Company's anticipated
transactions comprised of firm loan commitments and other commitments, including
undisbursed letters and lines of credit. The Company used no derivative
financial instruments to hedge such anticipated transactions as of December 31,
1997.
Anticipated Transactions
------------------------
Undisbursed construction and
land development loans
Fixed rate ........... $ 5,130
8.79%
Adjustable rate ...... 7,324
9.43%
Undisbursed lines of credit
Adjustable rate ...... 6,172
8.56%
Loan origination commitments
Fixed rate ........... 1,895
9.13%
Adjustable rate ...... 1,433
7.92%
Letters of credit
Adjustable rate ...... 82
11.50%
-------
$22,036
The Company believes that there were no material changes to the
Company's anticipated transactions during the quarter ended December 31, 1997.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See discussion contained in Note 3 of Notes to Unaudited
Consolidated Financial Statements.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed as part of this form
10-Q, and this list includes the Exhibit Index.
Number Description
------ -----------
11 Statement re computation of per
share earnings
27 Financial data schedule
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WVS FINANCIAL CORP.
February 6, 1998 BY: /s/Robert C. Sinewe
-------------------
Date Robert C. Sinewe
President and Chief Executive
Officer
February 6, 1998 BY: /s/David J. Bursic
------------------
Date David J. Bursic
Senior Vice President, Treasurer
and Chief Financial Officer