FORWARD LOOKING STATEMENTS
In the normal course of business, we, in an effort to help keep our shareholders
and the public informed about our operations, may from time to time issue or
make certain statements, either in writing or orally, that are or contain
forward-looking statements, as that term is defined in the U.S. federal
securities laws. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits from acquisitions made by or to be
made by us, projections involving anticipated revenues, earnings, profitability
or other aspects of operating results or other future developments in our
affairs or the industry in which we conduct business. Forward-looking statements
may be identified by reference to a future period or periods or by the use of
forward-looking terminology such as "anticipated," "believe," "expect,"
"intend," "plan," "estimate" or similar expressions.
Although we believe that the anticipated results or other expectations reflected
in our forward-looking statements are based on reasonable assumptions, we can
give no assurance that those results or expectations will be attained.
Forward-looking statements involve risks, uncertainties and assumptions (some of
which are beyond our control), and as a result actual results may differ
materially from those expressed in forward-looking statements. Factors that
could cause actual results to differ from forward-looking statements include,
but are not limited to, the following, as well as those discussed elsewhere
herein:
•
our investments in our businesses and in related technology could require
additional incremental spending, and might not produce expected deposit and loan
growth and anticipated contributions to our earnings;
•
general economic or industry conditions could be less favorable than expected,
resulting in a deterioration in credit quality, a change in the allowance for
loan losses or a reduced demand for credit or fee-based products and services;
•
the effects and extent of the coronavirus (COVID-19) pandemic on the global
economy, and its impact on the Company's operations and financial condition,
including the granting of various loan payment deferral and fee waivers, the
possibility of credit losses in our loan portfolios and increases in our
allowance for credit losses as well as possible impairments on the securities we
hold;
•
changes in the interest rate environment could reduce net interest income and
could increase credit losses;
•
the conditions of the securities markets could change, which could adversely
affect, among other things, the value or credit quality of our assets, the
availability and terms of funding necessary to meet our liquidity needs and our
ability to originate loans and leases;
•
changes in the extensive laws, regulations and policies governing financial
holding companies and their subsidiaries could alter our business environment or
affect our operations;
•
the potential need to adapt to industry changes in information technology
systems, on which we are highly dependent, could present operational issues or
require significant capital spending;
•
competitive pressures could intensify and affect our profitability, including as
a result of continued industry consolidation, the increased availability of
financial services from non-banks, technological developments such as the
internet or bank regulatory reform; and
•
acts or threats of terrorism and actions taken by the United States or other
governments as a result of such acts or threats, including possible military
action, could further adversely affect business and economic conditions in the
United States generally and in our principal markets, which could have an
adverse effect on our financial performance and that of our borrowers and on the
financial markets and the price of our common stock.
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You should not put undue reliance on any forward-looking statements.
Forward-looking statements speak only as of the date they are made, and we
undertake no obligation to update them in light of new or future events except
to the extent required by federal securities laws.
GENERAL
WVS Financial Corp. (the "Company") is the parent holding company of West View
Savings Bank ("West View" or the "Savings Bank"). The Company was organized in
July 1993 as a Pennsylvania-chartered unitary bank holding company and acquired
100% of the common stock of the Savings Bank in November 1993.
West View Savings Bank is a Pennsylvania-chartered, FDIC-insured stock savings
bank conducting business from six offices in the North Hills suburbs of
Pittsburgh. The Savings Bank converted from the mutual to the stock form of
ownership in November 1993. The Savings Bank had no subsidiaries at September
30, 2021.
The operating results of the Company depend primarily upon its net interest
income, which is determined by the difference between income on interest-earning
assets, principally loans, mortgage-backed securities and investment securities,
and interest expense on interest-bearing liabilities, which consist primarily of
deposits and borrowings. The Company's net income is also affected by its
provision for loan losses, as well as the level of its non-interest income,
including loan fees and service charges, and its non-interest expenses, such as
compensation and employee benefits, income taxes, deposit insurance and
occupancy costs.
Effects of COVID-19 Pandemic
The Company's business is dependent upon the willingness and ability of our
employees and clients to conduct banking and other financial transactions. The
persistance of the novel coronavirus (COVID-19) pandemic has negatively impacted
the global economy, disrupted global supply chains and increased unemployment
levels. While the full effects of the pandemic remain unknown, the Company is
committed to supporting its customers, employees and communities during this
difficult time. The Company has given hardship relief assistance to customers,
including the consideration of various loan payment deferral and fee waiver
options, and encourages customers to reach out for assistance to support their
individual circumstances. The pandemic could result in the recognition of credit
losses in our loan portfolios and increases in our allowance for credit losses,
particularly if businesses were to close once again, the impact on the global
economy worsens, or more customers draw on their lines of credit or seek
additional loans to help finance their businesses. Similarly, because of
changing economic and market conditions affecting issuers, we may be required to
recognize impairments on the securities we hold. The extent to which the
COVID-19 pandemic impacts our business, results of operations, and financial
condition, as well as our regulatory capital and liquidity ratios, will depend
on future developments, which are highly uncertain and cannot be predicted,
including the scope and duration of the pandemic and actions taken by
governmental authorities and other third parties in response to the pandemic.
The Company has responded to the circumstances surrounding the pandemic to
support the safety and well-being of the employees, customers and shareholders
by enacting the following measures:
•
Modified branch business hours Monday through Thursday to close at 4:00 pm (no
change), Friday close at 4:00 pm (as opposed to 6:00 pm and Saturday close at
12:00 pm (no change).
•
Monitor federal, state and local COVID-19 websites and adopt guidance as
appropriate and feasible.
•
Encourage customers to use our various on-line portals (e.g. internet banking,
online bill pay service), automated teller machines and night depositories to
redirect routine transactions away from our branch staff as much as possible.
•
Non-branch banking services (e.g. lending, accounting, check and electronic
processing) continue to be offered consistent with COVID-19 guidelines.
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FINANCIAL CONDITION
The Company's assets totaled $351.5 million at September 30, 2021, as compared
to $346.1 million at June 30, 2021. The $5.4 million, or 1.6%, increase in total
assets was primarily due to a $17.5 million increase in mortgage-backed
securities and a $616 thousand increase in net loans receivable, which were
partially offset by a $8.1 million decrease in available-for-sale investment
securities and $5.0 million decrease in held-to-maturity investment securities.
The decrease in investment securities available-for-sale was primarily the
result of maturities and early issuer redemptions of $12.8 million and $6.1
million, respectively, partially offset by purchases of investment securities
totaling $11.3 million. The increase in mortgage-backed securities was due
primarily from purchases of $20.8 million, partially offset by repayments of
$8.2 million.
The Company's total liabilities increased $5.4 million, or 1.7%, to $313.0
million as of September 30, 2021 from $307.7 million as of June 30, 2021. The
increase in total liabilities was primarily comprised of a $2.5 million, or
2.2%, increase in FHLB short-term advances and a $4.9 million increase in other
liabilities, partially offset by a $1.9 million decrease in total deposits.
Additionally, other liabilities increased $4.7 million to $7.0 million at
September 30, 2021 from $2.3 million at June 30, 2021, primarily due to a $4.9
million increase in unfunded security commitments. The decrease in total
deposits was primarily attributable to decreases in non-interest bearing
accounts, NOW accounts, savings accounts and advance payments by borrowers for
taxes and insurance of $1.5 million, $871 thousand, $1.1 million and $1.2
million, respectively, partially offset by an increase in money market accounts
of $219 thousand and certificates of deposit of $2.6 million. Management
believes that the increase in certificates of deposit was primarily the result
of a $3.3 million increase in brokered deposits which more than offset a $682
thousand decrease in retail time deposits. A significant portion of retail time
deposits were transferred into savings accounts. The increase FHLB short-term
borrowings and brokered deposits primarily funded purchases of mortgage-backed
securities and available-for-sale investment securities. See also Quantitative
and Qualitative Disclosures About Market Risk "Asset and Liability Management".
Total stockholders' equity increased $32 thousand, or 0.1%, to $38.4 million as
of September 30, 2021, from $38.4 million as of June 30, 2021. The increase in
stockholders' equity was primarily attributable to net income of $271 thousand
and $34 thousand attributable to amortization of unallocated ESOP shares, which
were partially offset by a decrease in accumulated other comprehensive income of
$107 thousand and cash dividends paid totaling $174 thousand. The decrease in
accumulated other comprehensive income was primarily the result of an increase
in the unrealized loss on the Company's available-for-sale investment portfolio.
RESULTS OF OPERATIONS
General. WVS reported net income of $271 thousand or $0.16 earnings per share
(basic and diluted) for the three months ended September 30, 2021 as compared to
$420 thousand or $0.24 per share (basic and diluted) for the same period in
2020. The $149 thousand decrease in net income for the for the three months
ended September 30, 2021 was primarily attributable to a $196 thousand decrease
in net interest income and a $52 thousand increase in non-interest expense,
which were partially offset by a $56 thousand decrease in income tax expense, a
$27 thousand increase in non-interest income and a $16 thousand decrease in the
provision for loan losses.
Net Interest Income. The Company's net interest income decreased by $196
thousand or 14.6% for the three months ended September 30, 2021, when compared
to the same period in 2020. The decrease in net interest income is attributable
to a $346 thousand decrease in interest and dividend income, which was partially
offset by a $150 thousand decrease in interest expense. The decrease in interest
and dividend income during the three months ended September 30, 2021 was
primarily attributable to lower yields earned on the Company's investment and
mortgage-backed securities, FHLB stock and net loans, when compared to the same
period in 2020. The decrease in interest expense during the three months ended
September 30, 2021 was primarily attributable to lower market interest rates
paid on FHLB advances and time deposits as well as a slightly higher level of
average time deposits and FHLB short term borrowings, when compared to the same
period in 2020.
Interest Income. Interest income on net loans receivable decreased $167 thousand
or 19.3% for the three months ended September 30, 2021, when compared to the
same period in 2020. The decrease for the quarter ended September 30, 2021 was
primarily attributable to a 24 basis point decrease in the average portfolio
yield and a $12.8 million decrease in the average balance of net loans
receivable, when compared to the same period in 2020. The decrease in the
average balance of loans outstanding was primarily attributable to decreased
loan originations and purchases.
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Interest income on investment securities decreased $79 thousand or 18.1% for the
three months ended September 30, 2021, when compared to the same period in 2020.
The decrease for the three months ended September 30, 2021 was primarily
attributable to a 29 basis point decrease in the weighted-average yield on the
available-for-sale portfolio, partially offset by a $12.8 million increase in
the average balance of these investment securities when compared to the same
period in 2020.
Interest income on mortgage-backed securities decreased $68 thousand or 25.3%
for the three months ended September 30, 2021, when compared to the same period
in 2020. The decrease for the three months ended September 30, 2021 was
primarily attributable to a 28 basis point decrease in the weighted-average
yield earned on U.S. Government agency mortgage-backed securities and a $1.5
million decrease in the average balance of these U.S. Government agency
mortgage-backed securities, when compared to the same period in 2020. The
decrease in the average balances of U.S. Government agency and Private-Label
mortgage-backed securities during the three months ended September 30, 2021 was
attributable to principal pay-downs of $8.2 million on U.S. Government agency
and Private-Label mortgage-backed securities, when compared to the same period
in 2020. The $8.2 million in principal paydowns was used in part to reduce the
level of FHLB short-term advances.
Interest income on bank certificates of deposit decreased $4 thousand for the
three months ended September 30, 2021 when compared to the same period in 2020.
The decrease for the three months ended September 30, 2021 was attributable to a
decrease of $1.2 million in the average balance of certificates of deposit,
partially offset by an increase of 77 basis points in the average yield earned.
Dividend income on FHLB stock decreased $28 thousand or 31.5% for the three
months ended September 30, 2021 when compared to the same period in 2020. The
decrease for the three months ended September 30, 2021 was primarily
attributable to a 77 basis point decrease in the weighted-average yield earned
as well as a $1.3 million decrease in the average balance of FHLB stock held.
Interest Expense. Interest paid on FHLB short-term advances increased $12
thousand or 35.3% for the three months ended September 30, 2021, when compared
to the same period in 2020. The increase for the three months ended September
30, 2021 was primarily attributable to a $35.7 million increase in the average
balance of FHLB short-term advances outstanding, partially offset by a 12 basis
point decrease in the weighted-average rate paid on FHLB short-term balances
outstanding. The decrease in rates paid on FHLB short-term borrowings were
consistent with decreases in short-term market interest rates.
Interest paid on FHLB long-term variable rate advances decreased $36 thousand
for the three months ended September 30, 2021, when compared to the same period
in 2020. The decrease for the three months ended September 30, 2021 was
primarily attributable to a $60.0 million decrease in the average balance of
FHLB long-term variable rate advances and an 18 basis point decrease in the
weighted-average rate paid in FHLB long-term variable rate advances.
Interest expense on deposits decreased $67 thousand or 64.4% for the three
months ended September 30, 2021, when compared to the same period in 2020. The
decrease in interest expense on deposits for the three months ended September
30, 2021 was primarily attributable to a 61 basis point decrease in the
weighted-average rate paid on time deposits and was partially offset by an
increase of $17.9 million in the average balance of time deposits when compared
the same period in the prior year.
Provision for Loan Losses. A provision for loan losses is charged to earnings
(while credit provision for loan losses are accretive to earnings) to maintain
the total allowance at a level considered adequate by management to absorb
potential losses in the portfolio. Management's determination of the adequacy of
the allowance is based on an evaluation of the portfolio considering past
experience, current economic conditions, volume, growth and composition of the
loan portfolio, and other relevant factors.
Provision for loan losses decreased $14 thousand for the three months ended
September 30, 2021, when compared to the same period in 2020. The decrease in
the provision for loan losses for the three months ended September 30, 2021 was
primarily due to decreased reserve factors related to the economic uncertainty
as a result of the COVID-19 pandemic totaling $22 thousand which were partially
offset by increases related to increased net loans outstanding, when compared to
the same period in 2020. At September 30, 2021, the Company's total allowance
for loan losses amounted to $551 thousand or 0.68% of the Company's total loan
portfolio, as compared to $565 thousand and 0.70% at June 30, 2021. At September
30, 2021 and June 30, 2021, the Company had no non-performing loans.
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Non-Interest Income. For the three months ended September 30, 2021, non-interest
income increased $27 thousand compared to the same period in 2020. For the
quarter ended September 30, 2021, the increase was attributable to a $10
thousand increase in gains on investments, a $13 thousand decrease in other than
temporary security impairment losses, a $2 thousand increase in miscellaneous
operating income, a $1 thousand increase in service charges on deposits, and a
$1 thousand increase in automated teller machine and debit card fee income.
Non-Interest Expense. Non-interest expense increased $52 thousand or 5.9% for
the three months ended September 30, 2021, when compared to the same period in
2020. This increase was primarily due to a $36 thousand increase in employee
compensation and benefits expenses, a $24 thousand increase in the provision for
off-balance sheet commitments (primarily unfunded loan commitments), and $3
thousand in data processing expenses, which were partially offset by a $5
thousand decrease in stationary, printing and office supplies, $4 thousand
decrease in the federal deposit insurance premium and a $2 thousand decrease in
postage expense, when compared to the same period of 2020.
Income Tax Expense. Income tax expense decreased $56 thousand for the three
months ended September 30, 2021, when compared to the same period in 2020. The
decrease for the three months ended September 30, 2021 was primarily due to
lower levels of taxable income, when compared to the same period in 2020.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $59 thousand during the three
months ended September 30, 2021. Net cash provided by operating activities was
primarily attributable to $271 thousand of Company net income, $304 thousand of
amortization of discounts, premiums and deferred loan fees, which were partially
offset by $231 thousand decrease in accrued interest receivable and a $394
decrease in other, net.
Net cash used for investing activities totaled $630 thousand for the three
months ended September 30, 2021. Primary sources of funds from investing
activities during the three months ended September 30, 2021 included proceeds
from repayments of investment securities of $12.8 million, proceeds from early
issuer redemptions of investment securities of $6.1 million, $8.2 million of
repayments of mortgage-backed securities, $5.0 million of proceeds from
repayments of held-to-maturity investment securities and a decrease in loans
receivable of $614 thousand. Primary uses of funds for investing activities
during the three months ended September 30, 2021 included purchases of
investment securities available-for-sale totaling $11.3 million and purchases of
mortgage-backed securities totaling $20.8 million.
Funds provided by financing activities totaled $448 thousand for the three
months ended September 30, 2021. Primary uses of funds by financing activities
were decreases in transaction accounts of $3.2 million, decreases in advance
payments by borrowers for taxes and insurance of $1.2 million and $174 thousand
of cash dividends paid. Primary sources of funds from financing activities were
increases in certificates of deposits and FHLB short-term advances of $2.6
million and $2.5 million, respectively.
The decreases in transaction accounts and advance payments by borrowers for
taxes and insurance were primarily attributable to seasonal withdrawals for the
payment of local real estate taxes. The increase in certificates of deposit at
September 30, 2021 was due principally to a $3.3 million increase in brokered
deposits. Management has determined that it currently is maintaining adequate
liquidity and continues to match funding sources with lending and investment
opportunities.
The Company's primary sources of funds are deposits, amortization, repayments
and maturities of existing loans, mortgage-backed securities and investment
securities, funds from operations, and funds obtained through FHLB advances and
other borrowings. Certificates of deposit scheduled to mature in one year or
less at September 30, 2021 totaled $28.4 million.
Historically, the Company used its sources of funds primarily to meet its
ongoing commitments to pay maturing savings certificates and savings
withdrawals, fund loan commitments and maintain a substantial portfolio of
investment securities. At September 30, 2021, total approved loan commitments
outstanding were $722 thousand. At the same date, commitments under unused lines
of credit amounted to $5.3 million and the unadvanced portion of construction
loans approximated $2.6 million. The Company has been able to generate
sufficient cash through the retail deposit market, its traditional funding
source, and through FHLB advances, and other borrowings, to provide the cash
utilized in investing activities. The Company's available-for-sale segment of
the investment portfolio totaled $143.5 million at September 30, 2021. In
addition, the Company had $350 thousand of certificates of deposit at September
30, 2021. Management believes that the Company currently has adequate liquidity
available to respond to liquidity demands.
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On October 26, 2021, the Company's Board of Directors declared a quarterly cash
dividend of $0.10 per share, on the Common Stock payable on November 18, 2021,
to shareholders of record at the close of business on November 8, 2021.
Dividends are subject to determination and declaration by the Board of
Directors, which take into account the Company's financial condition, statutory
and regulatory restrictions, general economic conditions and other factors.
There can be no assurance that dividends will in fact be paid on the Common
Stock in future periods or that, if paid, such dividends will not be reduced or
eliminated.
As of September 30, 2021, WVS Financial Corp. exceeded all regulatory capital
requirements and maintained Common Equity Tier I Capital, Tier I, and total
risk-based capital equal to $38.0 million or 19.41%, $38.0 million or 19.41%,
and $38.6 million or 19.70%, respectively, of total risk-weighted assets, and
Tier I leverage capital of $38.0 million or 10.95% 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 had no non-performing assets at September 30, 2021 and on September
30, 2020.
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ITEM 3.
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WVS FINANCIAL CORP. 
