UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
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.
------------------------------------------------------
(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 May 7, 1999: 3,219,209 shares Common Stock, $.01
par value.
WVS FINANCIAL CORP. AND SUBSIDIARY
INDEX
PART I. Financial Information Page
- ------- --------------------- ----
Item 1. Financial Statements
Consolidated Statements of Financial
Condition as of March 31, 1999
and June 30, 1998 (Unaudited) 3
Consolidated Statements of Income
for the Three and Nine Months Ended
March 31, 1999 and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows
for the Nine Months Ended March 31,
1999 and 1998 (Unaudited) 5
Consolidated Statements of Changes in
Stockholders' Equity for the Nine Months
Ended March 31, 1999 (Unaudited) 7
Notes to Unaudited Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations for the Three and Nine Months
Ended March 31, 1999 10
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 18
PART II. Other Information Page
- -------- ----------------- ----
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of
Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
2
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(in thousands)
March 31, 1999 June 30, 1998
----------- -----------
Assets
Cash and due from banks $ 808 $ 699
Interest-earning demand deposits 713 1,807
Investment securities available-for-sale
(amortized cost of $1,381 and $17,481) 1,399 17,519
Investment securities held-to-maturity
(market value of $74,540 and $63,996) 75,278 63,749
Mortgage-backed securities available-for-sale
(amortized cost of $10,263 and $18,842) 10,396 19,041
Mortgage-backed securities held-to-maturity
(market value of $64,889 and $27,777) 64,662 27,273
Federal Home Loan Bank stock, at cost 6,195 4,675
Net loans receivable 159,703 157,737
Accrued interest receivable 2,081 2,414
Real estate owned -- --
Premises and equipment 1,171 1,179
Deferred taxes and other assets 959 961
----------- -----------
TOTAL ASSETS $ 323,365 $ 297,054
=========== ===========
(continued)
March 31, 1999 June 30, 1998
----------- -----------
Liabilities and Stockholders' Equity
Liabilities:
Savings Deposits:
Non-interest-bearing accounts $ 8,284 $ 7,528
NOW accounts 16,259 15,347
Savings accounts 38,056 37,966
Money market accounts 11,775 13,259
Certificates of deposit 94,484 93,570
----------- -----------
Total savings deposits 168,858 167,670
Federal Home Loan Bank advances 108,500 88,857
Other borrowings 10,779 889
Advance payments by borrowers for taxes and insurance 2,382 3,312
Accrued interest payable 2,090 1,874
Other liabilities 1,882 1,474
----------- -----------
TOTAL LIABILITIES 294,491 264,076
----------- -----------
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;
3,664,780 and 3,617,120 shares issued, respectively, and
3,265,516 and 3,617,120 shares outstanding, respectively 37 36
Additional paid-in capital 19,004 18,386
Treasury stock: 399,264 shares at cost (6,104) --
Retained earnings, substantially restricted 16,441 15,143
Unallocated shares - Recognition and Retention Plans (352) (432)
Unallocated shares - Employee Stock Ownership Plan (252) (312)
----------- -----------
28,774 32,821
Unrealized gain on available-for-sale securities 100 157
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 28,874 32,978
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 323,365 $ 297,054
=========== ===========
See accompanying notes to consolidated financial statements.
3
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- -----------
INTEREST AND DIVIDEND INCOME:
Loans $ 3,158 $ 3,301 $ 9,536 $ 9,867
Investment securities 1,193 1,484 4,013 4,534
Mortgage-backed securities 1,236 650 3,093 1,914
Interest-earning deposits with
other institutions 32 15 64 50
Federal Home Loan Bank stock 99 65 277 184
---------- ---------- ---------- -----------
Total interest and dividend income 5,718 5,515 16,983 16,549
---------- ---------- ---------- -----------
INTEREST EXPENSE:
Deposits 1,576 1,686 4,928 5,222
Borrowings 1,550 1,194 4,436 3,551
Advance payments by borrowers for
taxes and insurance 11 12 25 27
---------- ---------- ---------- -----------
Total interest expense 3,137 2,892 9,389 8,800
---------- ---------- ---------- -----------
NET INTEREST INCOME 2,581 2,623 7,594 7,749
PROVISION FOR LOAN LOSSES -- -- -- (120)
---------- ---------- ---------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,581 2,623 7,594 7,869
---------- ---------- ---------- -----------
NON-INTEREST INCOME:
Service charges on deposits 64 57 200 166
Investment securities gains -- -- 36 --
Other 45 41 137 127
---------- ---------- ---------- -----------
Total non-interest income 109 98 373 293
---------- ---------- ---------- -----------
(continued)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- -----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 683 894 2,091 2,564
Occupancy and equipment 89 97 272 303
Deposit insurance premium 26 26 76 81
Data processing 43 43 131 128
Correspondent bank service charges 33 30 94 89
Other 165 186 548 552
---------- ---------- ---------- -----------
Total non-interest expense 1,039 1,276 3,212 3,717
---------- ---------- ---------- -----------
INCOME BEFORE INCOME TAXES 1,651 1,445 4,755 4,445
INCOME TAXES 644 571 1,814 1,640
---------- ---------- ---------- -----------
NET INCOME $ 1,007 $ 874 $ 2,941 $ 2,805
========== ========== ========== ===========
EARNINGS PER SHARE:
Basic $ 0.30 $ 0.25 $ 0.84 $ 0.81
Diluted $ 0.30 $ 0.24 $ 0.84 $ 0.79
AVERAGE SHARES OUTSTANDING:
Basic 3,364,721 3,513,627 3,488,234 3,443,582
Diluted 3,394,679 3,593,152 3,519,054 3,554,334
See accompanying notes to consolidated financial statements.
4
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended
March 31,
-----------------------
1999 1998
-------- --------
OPERATING ACTIVITIES
Net income $ 2,941 $ 2,805
Adjustments to reconcile net income to cash provided by operating
activities:
Provision for loan losses --- (120)
Gain on sale of investments and mortgage-backed securities (36) ---
Depreciation and amortization, net 88 97
Amortization of discounts, premiums and deferred loan fees 33 (47)
Amortization of ESOP, RRP and deferred and unearned
compensation 263 776
Decrease (increase) in accrued interest receivable 333 (133)
Increase in accrued interest payable 216 392
Decrease in accrued and deferred taxes 408 411
Other, net (264) 53
-------- --------
Net cash provided by operating activities 3,982 4,234
-------- --------
INVESTING ACTIVITIES
Available-for-sale:
Purchases of investment and mortgage-backed securities (26,908) (18,434)
Proceeds from repayments of investment and mortgage-backed
securities 50,272 15,457
Proceeds from sale of investment and mortgage-backed securities 905 2,192
Held-to-maturity:
Purchases of investment and mortgage-backed securities (147,763) (83,413)
Proceeds from repayments of investment and mortgage-backed
securities 99,507 83,961
Increase in net loans receivable (2,216) (3,890)
Increase in FHLB stock (1,520) (489)
Net purchases of premises and equipment (79) (6)
-------- --------
Net cash used for investing activities (27,802) (4,622)
-------- --------
5
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended
March 31,
-----------------------
1999 1998
FINANCING ACTIVITIES
Net increase (decrease) in transaction and passbook accounts 274 (814)
Net increase (decrease) in certificates of deposit 914 (5,006)
Net increase in FHLB borrowings 19,643 9,088
Net increase in other borrowings 9,889 236
Net decrease in advance payments by borrowers for taxes and
insurance (929) (1,009)
Net proceeds from issuance of common stock 238 631
Purchases of treasury stock (6,104) --
Cash dividends paid (1,090) (4,816)
-------- --------
Net cash provided by (used for) financing activities 22,835 (1,690)
-------- --------
Decrease in cash and cash equivalents (985) (2,078)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 2,506 2,571
-------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 1,521 $ 493
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits, escrows and borrowings $ 9,173 $ 8,408
Income taxes 1,153 1,236
See accompanying notes to consolidated financial statements.
6
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands)
Accum.
Other Retained
Additional Unallocated Unallocated Compre- Earnings-
Common Paid-In Treasury Shares Held Shares Held hensive Substantially
Stock Capital Stock by ESOP by RRP Income Restricted Total
-------- -------- --------- -------- --------- -------- -------- --------
Balance at June 30, 1998 $ 36 $ 18,386 $ --- $ (312) $ (432) $ 157 $ 15,143 $ 32,978
Comprehensive income:
Net Income 2,941 2,941
Other comprehensive
income:
Change in unrealized
holding gains on
securities, net of
income tax of $29 (57) (57)
--------
Comprehensive income 2,884
Purchase of shares for
treasury stock (6,104) (6,104)
Release of earned
Employee Stock
Ownership Plan (ESOP)
shares 124 60 184
Accrued compensation
expense for Recognition
and Retention Plans
(RRP) 80 80
Exercise of stock options 1 237 238
Tax benefit from exercise
of stock options 257 257
Cash dividends declared
($0.47 per share)
(1,643) (1,643)
-------- -------- --------- -------- -------- -------- -------- --------
Balance at March 31,
1999 $ 37 $ 19,004 $ (6,104) $ (252) $ (352) $ 100 $ 16,441 $ 28,874
======== ======== ========= ======== ======== ======== ======== ========
Components of
comprehensive income:
Change in net unrealized
gain on investment
securities held for sale (33)
Realized gains included
in net income, net of tax (24)
--------
Total (57)
========
See accompanying notes to consolidated financial statements.
7
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 nine months ended March 31, 1999, are not
necessarily indicative of the results which may be expected for the
entire fiscal year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The statement provides accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring the
recognition of those items as assets or liabilities in the statement of
financial position, recorded at fair value. Statement No. 133 precludes
a held-to-maturity security from being designated as a hedged item,
however, at the date of initial application of this statement, an
entity is permitted to transfer any held-to-maturity security into the
available-for-sale or trading categories. The unrealized holding gain
or loss on such transferred securities shall be reported consistent
with the requirements of Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Such transfers do not raise
an issue regarding an entity's intent to hold other debt securities to
maturity in the future. This statement applies prospectively for all
fiscal quarters of all years beginning after June 15, 1999. Earlier
adoption is permitted for any fiscal quarter that begins after the
issue date of this statement.
8
3. EARNINGS PER SHARE
------------------
The following table sets forth the computation of basic and diluted
earnings per share.
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------------- -----------------------------------
1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
Weighted average common
shares outstanding 3,664,343 3,585,354 3,661,535 3,525,358
Average treasury
stock shares (246,649) --- (116,259) ---
Average unearned ESOP
shares (52,973) (71,727) (57,042) (81,776)
---------------- ---------------- ---------------- ----------------
Weighted average common
shares and common stock
equivalents used to calculate
basic earnings per share 3,364,721 3,513,627 3,488,234 3,443,582
Additional common
stock equivalents (stock options)
used to calculate diluted earnings
per share 29,958 79,525 30,820 110,752
---------------- ---------------- ---------------- ----------------
Weighted average common
shares and common stock
equivalents used to calculate
diluted earnings per share 3,394,679 3,593,152 3,519,054 3,554,334
================ ================ ================ ================
Net income $ 1,007,343 $ 874,001 $ 2,940,786 $ 2,804,766
================ ================ ================ ================
Earnings per share:
Basic $0.30 $0.25 $0.84 $0.81
Diluted $0.30 $0.24 $0.84 $0.79
================ ================ ================ ================
9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1999
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. The Savings Bank converted to the stock form of ownership in
November 1993. The Savings Bank had no subsidiaries at March 31, 1999.
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 $323.4 million at March 31, 1999, as
compared to $297.1 million at June 30, 1998. The $26.3 million or 8.9% increase
in total assets was primarily comprised of a $25.7 million or 19.4% increase in
investment and mortgage-backed securities, including Federal Home Loan Bank
("FHLB") stock, and a $2.0 million or 1.2% increase in net loans receivable,
which were partially offset by a $1.1 million or 62.2% decrease in
interest-earning demand deposits. The Company's investment securities decreased
by 3.6% from $85.9 million to $82.9 million while mortgage-backed securities
increased by 62.2% from $46.3 million to $75.1 million from June 30, 1998, to
March 31, 1999. These changes were primarily due to higher yields on
mortgage-backed securities over other investment securities. The Company's loans
receivable increased by 1.3% from $157.7 million to $159.7 million from June 30,
1998, to March 31, 1999. The increase was principally attributable to increased
levels of loan originations, partially offset by refinancings as a result of
lower market interest rates on loans.
The Company's total liabilities increased $30.4 million or 11.5% to
$294.5 million as of March 31, 1999, from $264.1 million as of June 30, 1998.
The $30.4 million increase in total liabilities was primarily comprised of a
$29.5 million or 32.9% increase in FHLB advances and other borrowings, and a
$1.2 million or 0.7% increase in total deposits. The $29.5 million increase in
FHLB advances and other borrowings was primarily the result of the Company's
investment growth program. The $1.2 million increase in deposits was principally
the result of expanded marketing efforts with new and existing customers.
10
Total stockholders' equity decreased $4.1 million or 12.4% to $28.9
million as of March 31, 1999, from $33.0 million as of June 30, 1998, primarily
due to $6.1 million in purchases of treasury stock and $1.6 million in cash
dividends declared on the Company's common stock, which were partially funded by
the $2.9 million of Company net income and $0.7 million of proceeds from stock
option exercises and ESOP and RRP plan share releases.
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:
1) expanding the Company's investment growth program in order to enhance
net interest income;
2) maintaining the Company's level of short-term liquid investments by
funding loan commitments and purchasing longer-term investment
securities;
3) emphasizing the retention of lower-cost savings accounts and other
core deposits; and
4) 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:
1) the average outstanding daily balance of total borrowings, computed
quarterly, may not exceed $125.0 million;
2) suitable investments shall be restricted to those meeting the credit
quality criteria outlined in the Company's investment policy;
3) 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; and
4) the Company's total borrowed funds position may not exceed $150.0
million.
In most cases, the initial yield spread earned on investment security
purchases exceeded approximately one hundred to one hundred and forty basis
points.
During the three months ended March 31, 1999, the Company decreased
its mortgage-backed securities portfolio by $5.5 million or 6.89%. The decrease
for the quarter ended March 31, 1999, was attributable to principal
amortization. During the nine months ended March 31, 1999, the Company increased
its mortgage-backed securities holdings by $28.7 million or 62.2%.
Mortgage-backed securities purchases for the nine months totaled approximately
$45.2 million with an estimated weighted average purchase yield of 6.51%. At
March 31, 1999, the Company held $75.1 million of mortgage-backed securities
with an approximate yield of 6.69%. The mortgage-backed securities purchases
were made in order to mitigate the principal calls on the Company's callable
bond portfolio and to earn a higher yield with an expected average life profile
comparable to longer-term callable agency bonds.
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 nine months ended March 31, 1999, the Company
would be exposed to the risk that the investment will be redeemed prior to its
final stated
11
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 $8.1 million of callable agency bonds with an estimated weighted
average rate of 6.1% were called during the quarter ended March 31, 1999. During
the quarter ended March 31, 1999, the Company purchased approximately $25.3
million of callable bonds with an approximate weighted average yield to call and
maturity of 7.3% and 6.8%, respectively. The callable agency bond purchases,
totaling $25.3 million, are summarized by initial term to call as follows: $1.4
million within three months, $20.9 million with greater than three months and
within six months, $1.0 million with greater than twelve months and within
twenty-four months, and $2.0 million with greater than twenty-four months and
within thirty-six months.
During the nine months ended March 31, 1999, the Company borrowed
approximately $103.3 million in various borrowings from the FHLB with a weighted
average rate of 5.07% and incurred $77.7 million in other borrowings with a
weighted average rate of 5.11%. During the nine months ended March 31, 1999, the
Company repaid $83.7 million of FHLB advances and $67.8 million of other
borrowings. Due to a decline in market interest rates during the nine months
ended March 31, 1999, the Company lengthened the maturity structure of its
incremental borrowings to lock in lower cost, longer-term liability funding.
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 selectively offer commercial real estate, land
acquisition and development, and shorter-term construction loans, primarily on
residential properties, to partially increase its loan asset sensitivity. Due to
relatively low fifteen and thirty year mortgage loan yields, the Company intends
to emphasize higher yielding commercial real estate, home equity and small
business loans to existing customers and seasoned prospective customers.
As of March 31, 1999, the implementation of these asset and liability
management initiatives resulted in the following:
1) an aggregate of $48.7 million or 30.1% of the Company's net loan
portfolio had adjustable interest rates or maturities of less than 12
months;
2) $16.7 million or 22.2% of the Company's portfolio of mortgage-backed
securities (including collateralized mortgage obligations - "CMOs")
were secured by floating rate securities; and
3) $74.1 million or 96.9% 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 "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 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 is
estimated at a positive 0.7% of total assets at March 31, 1999, as compared to a
negative 13.3% at June 30, 1998, in each instance, based on certain assumptions
by management with respect to the repricing of certain assets and liabilities.
At March 31, 1999, the Company's interest-earning assets maturing or repricing
within one year totaled $120.9 million while the Company's interest-bearing
liabilities maturing or repricing within one year totaled $118.5 million,
providing an excess of interest-earning assets over interest-bearing liabilities
of $2.4 million. At March 31, 1999, the percentage of the Company's assets to
liabilities maturing or repricing within one year was 102.0%.
12
RESULTS OF OPERATIONS
General. WVS reported net income of $1.0 million and $2.9 million for
the three and nine months ended March 31, 1999. Net income increased by $133
thousand or 15.3% for the three months ended March 31, 1999, when compared to
the same period in 1998. The increase was primarily the result of a $237
thousand decrease in non-interest expense and an $11 thousand increase in
non-interest income, which were partially offset by a $73 thousand increase in
income tax expense and a $42 thousand decrease in net interest income. Net
income increased by $136 thousand or 4.9% for the nine months ended March 31,
1999, when compared to the same period in 1998. The $136 thousand increase in
net income was principally the result of a $505 thousand decrease in
non-interest expense and an $80 thousand increase in non-interest income, which
were partially offset by a $174 thousand increase in income taxes, a $155
thousand decrease in net interest income and the absence of a $120 thousand
recovery in the provision for loan losses due to the payoff of a commercial loan
participation in fiscal 1998. The decrease in non-interest expense for the nine
months ended March 31, 1999, was principally attributable to a $473 thousand
reduction in discretionary ESOP contributions and lower RRP expenses, and a $31
thousand decrease in occupancy and equipment expense. The $80 thousand increase
in non-interest income was chiefly attributable to increases in service charges
on deposits and investment securities gains. Total interest income increased
$434 thousand primarily due to higher volumes of mortgage-backed securities.
Total interest expense increased by $589 thousand primarily due to higher levels
of FHLB advances and other borrowings.
Net Interest Income. The Company's net interest income decreased by
$42 thousand or 1.6% for the three months ended March 31, 1999, when compared to
the same period in 1998. The decrease resulted from a $245 thousand or 8.5%
increase in interest expense which was partially offset by a $203 thousand or
3.7% increase in interest income. For the nine months ended March 31, 1999, net
interest income decreased by $155 thousand or 2.0%, when compared to the same
period in 1998. The decrease resulted from a $589 thousand or 6.7% increase in
interest expense which was partially offset by a $434 thousand or 2.6% increase
in interest income.
Interest Income. Interest on mortgage-backed securities increased by
$586 thousand or 90.2% for the three months ended March 31, 1999, when compared
to the same period in 1998. The increase was attributable to a $41 million
increase in the average balance of mortgage-backed securities outstanding, which
was partially offset by a 51 basis point decrease in the weighted average yield
earned on mortgage-backed securities for the three months ended March 31, 1999,
when compared to the same period in 1998. Interest on mortgage-backed securities
increased $1.2 million or 61.6% for the nine months ended March 31, 1999. The
increase was primarily attributable to a $27.2 million increase in the average
balance of mortgage-backed securities outstanding, which was partially offset by
a 45 basis point decrease in the weighted average yield earned on
mortgage-backed securities for the nine months ended March 31, 1999, when
compared to the same period in 1998. The Company increased its mortgage-backed
securities portfolio to capitalize on attractive sector yield levels in
comparison to other investment securities. The decrease in the weighted average
yield earned, during both periods, was principally attributable to reduced
market interest rates and higher levels of premium amortization due to faster
rates of principal repayment.
Interest and dividend income on interest-bearing deposits with other
institutions, investment securities and FHLB stock ("other investment
securities") decreased by $240 thousand or 15.3% for the three months ended
March 31, 1999, when compared to the same period in 1998. The decrease was
attributable to a $5.0 million decrease in the average balance of other
investment securities outstanding and an 83 basis point decrease in the weighted
average yield earned on other investment securities, which were partially offset
by a $371 thousand increase in the average balance of interest-bearing deposits
and a 271 basis point increase in the weighted average yield earned on
interest-bearing deposits for the three months ended March 31, 1999, when
compared to the same period in 1998. Interest on other investment securities
decreased $414 thousand or 8.7% for the nine months ended March 31, 1999, when
compared to the same period in 1998. The decrease in interest income on other
investment securities was attributable to an 87 basis point decrease in the
weighted average yield earned on other investment securities, which was
partially offset by a $2.5 million increase in the average balance of other
investment securities outstanding for the nine months ended
13
March 31, 1999, when compared to the same period in 1998. The increase in the
average balance of other investment securities was principally attributable to
purchases as a part of the investment growth program.
Interest on net loans receivable decreased by $143 thousand or 4.3%
for the three months ended March 31, 1999, when compared to the same period in
1998. The decrease was attributable to a decrease of $9.1 million in the average
balance of net loans receivable outstanding, which was partially offset by an
increase in the weighted average yield earned on net loans receivable of 11
basis points for the three months ended March 31, 1999, when compared to the
same period in 1998. Interest on net loans receivable decreased by $331 thousand
or 3.4% for the nine months ended March 31, 1999, when compared to the same
period in 1998. The decrease was attributable to a $7.0 million decrease in the
average balance of outstanding loans which was partially offset by an 8 basis
point increase in the weighted average yield earned on outstanding loans for the
nine months ended March 31, 1999. The decreases in the average loan balance
outstanding for both periods were primarily attributable to lower levels of
mortgage loan originations and higher levels of loan prepayments due to a marked
decline in long-term interest rates.
Interest Expense. Interest expense on deposits and escrows decreased
by $111 thousand or 6.5% and decreased by $296 thousand or 5.6% for the three
and nine months ended March 31, 1999, respectively, when compared to the same
periods in 1998. The decrease in interest expense on deposits and escrows was
principally attributable to a $1.1 million and $1.5 million decrease in the
average balance of interest-bearing deposits and escrows for the three and nine
months ended March 31, 1999, respectively, when compared to the same periods in
1998.
Interest expense on other borrowings increased by $356 thousand and
$885 thousand for the three and nine months ended March 31, 1999, respectively,
when compared to the same periods in 1998. 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 did not record a provision for possible losses on loans
for the three and nine months ended March 31, 1999. At March 31, 1999, the
Company's total allowance for loan losses amounted to $1.8 million or 1.1% of
the Company's total loan portfolio.
Non-Interest Income. Total non-interest income increased by $11
thousand and $80 thousand for the three and nine months ended March 31, 1999,
respectively, when compared to the same periods in 1998. The increase in
non-interest income for the nine months ended March 31, 1999, was primarily
attributable to increased service charges on automated teller machines and
transaction accounts, and $36 thousand in net gains on the sale of investment
securities.
Non-Interest Expense. Total non-interest expense decreased $237
thousand or 18.6% and decreased $505 thousand or 13.6% for the three and nine
months ended March 31, 1999, respectively, when compared to the same periods in
1998.
14
Compensation and employee benefits expense decreased $211 thousand or
23.6% and $473 thousand or 18.5% for the three and nine months ended March 31,
1999, respectively, when compared to the same periods in 1998. The decrease for
the quarter ended March 31, 1999, was primarily attributable to a $159 thousand
reduction in discretionary ESOP contributions and lower RRP expenses, and a $32
thousand decrease in employee compensation expense. The decrease for the nine
months ended March 31, 1999, was principally attributable to a $417 thousand
reduction in discretionary ESOP contributions and lower RRP expenses, and a $54
thousand decrease in employee compensation expense.
Income Tax Expense. Income tax expense increased by $73 thousand or
12.8% and $174 thousand or 10.6% for the three and nine months ended March 31,
1999, respectively, when compared to the same periods in 1998. The change in
income tax expense for both periods was attributable to increased levels of
taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $4.0 million during
the nine months ended March 31, 1999. Net cash provided by operating activities
was primarily comprised of $2.9 million of net income, a $408 thousand decrease
in accrued and deferred taxes, a $333 thousand decrease in accrued interest
receivable and a $263 thousand increase in ESOP, RRP and deferred and unearned
compensation amortization.
Funds used for investing activities totaled $27.8 million during the
nine months ended March 31, 1999. The primary uses of funds during the nine
months ended March 31, 1999, consisted of $174.7 million used for the purchase
of investment and mortgage-backed securities, a $2.2 million net increase in
loans receivable and a $1.5 million decrease in FHLB stock, which were partially
offset by the receipt of $150.7 million of proceeds from the repayment of
principal on investments and mortgage-backed securities.
Funds provided by financing activities totaled $22.8 million for the
nine months ended March 31, 1999. Primary financial sources included a $29.5
million increase in FHLB advances and other borrowings and a $1.2 million
increase in deposits, which were partially offset by $6.1 million in purchases
of treasury stock, $1.1 million of cash dividends paid on the Company's common
stock and a $929 thousand decrease in advance payments by borrowers for taxes
and insurance. 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 March 31, 1999, $74.4 million or 44.0% 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 FHLB
advances and other borrowings. At March 31, 1999, the total approved loan
commitments outstanding amounted to $5.3 million. At the same date, commitments
under unused lines of credit amounted to $10.0 million and the unadvanced
portion of construction loans approximated $14.7 million. Certificates of
deposit scheduled to mature in one year or less at March 31, 1999, totaled $68.3
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 $25.0 million line of credit with the
FHLB, which is scheduled to mature on February 9, 2000, and is subject to
various
15
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.
During the nine months ended March 31, 1999, the Company purchased
399,264 shares of common stock for approximately $6.1 million under two stock
buyback programs.
On April 27, 1999, the Company's Board of Directors declared a cash
dividend of $0.16 per share, payable May 20, 1999, to shareholders of record at
the close of business on May 10, 1999. 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 March 31, 1999, WVS Financial Corp. exceeded all regulatory
capital requirements and maintained Tier I and total risk-based capital equal to
$28.8 million or 17.7% and $30.6 million or 18.8%, respectively, of total
risk-weighted assets, and Tier I leverage capital of $28.8 million or 9.0% of
average total 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, comprised exclusively of nonaccrual
loans, at March 31, 1999, totaled approximately $649 thousand or 0.2% of total
assets as compared to $603 thousand or 0.2% of total assets as of June 30, 1998.
Nonperforming assets at March 31, 1999, consisted of $481 thousand in commercial
real estate loans, $92 thousand in single-family loans, and $76 thousand in
consumer loans. Approximately $18 thousand of additional interest income would
have been recorded during the nine months ended March 31, 1999, if the Company's
nonaccrual and restructured loans had been current in accordance with their
original loan terms and outstanding throughout the nine months ended March 31,
1999.
YEAR 2000 COMPLIANCE
The Company outsources substantially all of its data processing
requirements and it is to a large extent dependent upon vendor cooperation for
systems used in its day-to-day business. The Company, in conjunction with its
vendors, is testing its computer systems and requiring representations from its
vendors that the products provided are or will be year 2000 compliant. The
Company has developed a plan of action to help ensure that its operational and
financial systems will not be adversely affected by year 2000 software/hardware
failures due to processing errors arising from calculations using the year 2000
date. Substantially all hardware and software products were compliant at
December 31, 1998. In the unlikely event that the systems tested do not, in
fact, operate properly when the year 2000 does arrive, all customer accounts,
deposits and loans, as well as accounting systems, will be maintained manually
to ensure business continuation while systems are being corrected. The Company
has not and does not expect to incur material expenditures to address the year
2000 issue. Based upon current estimates, the Company does not expect to incur
more than $75 thousand (pre-tax) in year 2000 remediation expenses. Any year
2000 compliance failures, which are currently unknown, could result in
additional expenses or business disruption to the Company.
16
FORWARD LOOKING STATEMENTS
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.
17
ITEM 3.
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
18
the measurement of the Company's asset/liability gap, which was discussed in
detail under "Asset and Liability Management" commencing on page 11.
An institution could also manage interest rate risk by selling existing
assets, repaying certain liabilities or matching repricing periods for new
assets and liabilities (for example, by shortening terms of new loans or
investments). 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. 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.
Prepayments of assets carrying higher rates reduce the Company's interest income
and overall asset yields.
An institution might also invest in more complex financial instruments
intended to hedge, or otherwise change the interest rate risk of existing
assets, liabilities, or anticipated transactions. 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. The
Company has not purchased derivative financial instruments in the past and does
not presently intend to purchase such instruments in the near future.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates as of March 31,
1999, based on the information and assumptions in the notes. The Company's
assumptions are based on statistical data provided by a federal regulatory
agency in the Company's market area, and are believed to be reasonable. The
Company had no derivative financial instruments or trading portfolio as of March
31, 1999. 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. 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. 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.
Substantially all of the Company's investment securities portfolio is comprised
of callable government agency securities. From a risk management perspective,
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.
Company borrowings were tabulated by contractual maturity dates and without
regard to any conversion or repricing dates.
19
EXPECTED MATURITY DATE-QUARTER ENDED MARCH 31,
There- Fair
2000 2001 2002 2003 2004 after Total Value
------- ------- ------- ------- ------ ------- -------- --------
ON-BALANCE SHEET FINANCIAL INSTRUMENTS
Interest-earning assets:
Loans receivable (1)(2)(3)(4)
Fixed rate $31,973 $19,999 $14,426 $11,874 $8,737 $32,886 $119,895 $123,312
Average interest rate 7.91% 7.71% 7.62% 7.58% 7.50% 7.37%
Adjustable rate 11,934 8,596 6,399 4,905 3,851 6,099 41,784 43,795
Average interest rate(5) 6.11% 6.06% 6.01% 5.97% 5.94% 5.93%
Mortgage-backed securities
Fixed rate --- --- 87 1,158 614 56,321 58,180 58,186
Average interest rate 0.00% 0.00% 8.00% 5.97% 6.11% 6.77%
Adjustable rate 107 --- --- --- --- 16,638 16,745 17,099
Average interest rate(6) 6.41% 0.00% 0.00% 0.00% 0.00% 6.15%
Investments(7) 17,957 --- --- --- --- 64,897 82,854 82,134
Average interest rate 6.39% 0.00% 0.00% 0.00% 0.00% 6.91%
Interest-bearing deposits 713 --- --- --- --- --- 713 713
Average interest rate 5.07% 0.00% 0.00% 0.00% 0.00% 0.00%
------- ------- ------- ------- ------ ------- -------- --------
Total $62,684 $28,595 $20,912 $17,937 $13,202 $176,841 $320,171 $325,239
Interest-bearing liabilities:
Interest-bearing deposits
and escrows(8)(9)(10) $92,719 $19,081 $19,081 $8,718 $8,718 $22,923 $171,240 $171,509
Average interest rate 4.21% 3.49% 3.49% 3.51% 3.51% 2.11%
Borrowings 25,779 35,000 16,500 --- --- 42,000 119,279 119,283
Average interest rate 5.28% 5.69% 5.89% 0.00% 0.00% 5.06%
------- ------- ------- ------- ------ ------- -------- --------
Total $118,498 $54,081 $35,581 $ 8,718 $ 8,718 $64,923 $290,519 $290,792
20
(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 40% for adjustable rate loans, and 15% to 44% 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.
Amounts adjusted to reflect called investment securities totaling
approximately $1.1 million through March 31, 1999, and $15.6 million
expected to be called by December 31, 1999.
(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 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 March 31,
1999.
Anticipated Transactions
------------------------
Undisbursed construction and
land development loans
Fixed rate $6,251
8.19%
Adjustable rate 8,480
8.76%
Undisbursed lines of credit
Adjustable rate 10,000
7.83%
Loan origination commitments
Fixed rate 4,127
6.90%
Adjustable rate 1,162
8.48%
Letters of credit
Adjustable rate 45
10.75%
-----
$30,065
The Company believes that there were no material changes to the
Company's anticipated transactions during the nine months ended March 31, 1999,
other than increases due to the timing of the construction market and the low
interest rate environment.
21
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings
-----------------
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.
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 Page
------ ----------- ----
27 Financial Data Schedule E-1
(b) The Company filed a Current Report on Form 8-K, dated February
24, 1999, reporting under Item 5 that the Company's Board of
Directors authorized the repurchase of up to 167,000 shares, or
approximately five percent, of the Company's outstanding common
stock. Repurchases are authorized to be made during the next
twelve months as market conditions warrant. All repurchased
shares will be held as treasury stock and may be reserved for
issuance pursuant to the Company's stock benefit plans.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WVS FINANCIAL CORP.
May 7, 1999 BY:/s/ David J. Bursic
- ----------- ----------------------
Date David J. Bursic
President and Chief Executive Officer
(Principal Executive and Financial Officer)