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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 September 30, 2002
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9001 Perry Highway
Pittsburgh, Pennsylvania 15237
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(412) 364-1911
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(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 November 12, 2002: 2,624,342 shares Common Stock,
$.01 par value.
WVS FINANCIAL CORP. AND SUBSIDIARY
----------------------------------
INDEX
-----
PART I. Financial Information Page
- ------- --------------------- ----
Item 1. Financial Statements
Consolidated Statement of Financial
Condition as of September 30, 2002
and June 30, 2002 (Unaudited) 3
Consolidated Statement of Income
for the Three Months Ended
September 30, 2002 and 2001 (Unaudited) 4
Consolidated Statement of Cash Flows
for the Three Months Ended September 30,
2002 and 2001 (Unaudited) 5
Consolidated Statement of Changes in
Stockholders' Equity for the Three Months
Ended September 30, 2002 (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 Months
Ended September 30, 2002 10
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 16
Item 4. Controls and Procedures 21
PART II. Other Information Page
- -------- ----------------- ----
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 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
Certification of Chief Executive Officer 24
Certification of Chief Accounting Officer 25
2
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
(In thousands)
September 30, 2002 June 30, 2002
------------------ -------------
Assets
------
Cash and due from banks $ 989 $ 879
Interest-earning demand deposits 2,198 2,298
Investment securities available-for-sale (amortized cost of
$2,712 and $8,375) 2,834 8,426
Investment securities held-to-maturity (market value of
$160,297 and $146,146) 156,682 142,958
Mortgage-backed securities available-for-sale (amortized cost of
$5,795 and $6,196) 6,085 6,450
Mortgage-backed securities held-to-maturity (market value of
$63,191 and $76,819) 62,298 76,093
Federal Home Loan Bank stock, at cost 8,394 8,281
Net loans receivable (allowance for loan losses of $2,776 and $2,758) 143,616 152,905
Accrued interest receivable 3,520 3,903
Premises and equipment 985 996
Deferred taxes and other assets 1,469 1,722
--------- ---------
TOTAL ASSETS $ 389,070 $ 404,911
========= =========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Savings Deposits:
Non-interest-bearing accounts $ 16,212 $ 12,615
NOW accounts 19,544 20,872
Savings accounts 41,130 41,620
Money market accounts 14,229 14,843
Certificates of deposit 84,039 84,709
--------- ---------
Total savings deposits 175,154 174,659
Federal Home Loan Bank advances 159,937 159,937
Other borrowings 19,139 33,731
Advance payments by borrowers for taxes and insurance 940 3,013
Accrued interest payable 1,745 1,698
Other liabilities 1,668 1,620
--------- ---------
TOTAL LIABILITIES 358,583 374,658
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;
3,730,258 and 3,729,858 shares issued 37 37
Additional paid-in capital 20,039 20,037
Treasury stock: 1,078,472 and 1,051,872 shares at cost, respectively (15,556) (15,133)
Retained earnings, substantially restricted 25,757 25,183
Accumulated other comprehensive income 272 201
Unallocated shares - Recognition and Retention Plans (62) (72)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 30,487 30,253
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 389,070 $ 404,911
========= =========
See accompanying notes to consolidated financial statements.
3
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands, except per share data)
Three Months Ended
September 30,
-------------------
2002 2001
---- ----
INTEREST AND DIVIDEND INCOME:
Loans $ 2,809 $ 3,551
Investment securities 1,742 1,882
Mortgage-backed securities 808 975
Interest-earning deposits with other institutions 4 4
Federal Home Loan Bank stock 69 139
---------- ----------
Total interest and dividend income 5,432 6,551
---------- ----------
INTEREST EXPENSE:
Deposits 959 1,608
Borrowings 2,223 2,245
Advance payments by borrowers for taxes and insurance 6 6
---------- ----------
Total interest expense 3,188 3,859
---------- ----------
NET INTEREST INCOME 2,244 2,692
PROVISION FOR LOAN LOSSES 18 37
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,226 2,655
---------- ----------
NON-INTEREST INCOME:
Service charges on deposits 100 104
Gain on sale of investments 64 ---
Other 79 69
---------- ----------
Total non-interest income 243 173
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 601 627
Occupancy and equipment 89 89
Deposit insurance premium 7 8
Data processing 49 45
Correspondent bank service charges 40 44
Other 334 163
---------- ----------
Total non-interest expense 1,120 976
---------- ----------
INCOME BEFORE INCOME TAXES 1,349 1,852
INCOME TAXES 349 611
---------- ----------
NET INCOME $ 1,000 $ 1,241
========== ==========
EARNINGS PER SHARE:
Basic $ 0.38 $ 0.45
Diluted $ 0.37 $ 0.45
AVERAGE SHARES OUTSTANDING:
Basic 2,661,933 2,753,358
Diluted 2,667,220 2,763,744
See accompanying notes to consolidated financial statements.
4
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended
September 30,
--------------------
2002 2001
---- ----
OPERATING ACTIVITIES
Net income $ 1,000 $ 1,241
Adjustments to reconcile net income to cash provided by operating
activities:
Provision for loan and real estate owned losses 33 37
Gain on sale of investments (64) ---
Depreciation and amortization, net 29 29
Amortization of discounts, premiums and deferred loan fees 841 (120)
Amortization of ESOP, RRP and deferred and unearned
compensation 10 22
Decrease in accrued interest receivable 383 875
Increase (decrease) in accrued interest payable 47 (152)
Increase in accrued and deferred taxes 66 635
Other, net (5) (117)
-------- --------
Net cash provided by operating activities 2,340 2,450
-------- --------
INVESTING ACTIVITIES
Available-for-sale:
Purchases of investments and mortgage-backed securities (1,381) (2,073)
Proceeds from repayments of investments and mortgage-backed securities 6,901 486
Proceeds from sale of investments and mortgage-backed securities 610 ---
Held-to-maturity:
Purchases of investments and mortgage-backed securities (24,030) (44,383)
Proceeds from repayments of investments and mortgage-backed securities 23,319 72,742
Decrease in net loans receivable 9,209 6,587
Sale of real estate owned 190 5
Increase in FHLB stock (113) (37)
Purchases of premises and equipment (18) (87)
-------- --------
Net cash provided by investing activities 14,687 33,240
-------- --------
5
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended
September 30,
--------------------
2002 2001
---- ----
FINANCING ACTIVITIES
Net increase in transaction and passbook accounts 1,165 186
Net decrease in certificates of deposit (670) (7,055)
Net decrease in FHLB advances --- (5,837)
Net decrease in other borrowings (14,592) (19,660)
Net decrease in advance payments by borrowers for taxes and insurance (2,073) (2,176)
Net proceeds from issuance of common stock 2 38
Funds used for purchase of treasury stock (423) (140)
Cash dividends paid (426) (441)
------- -------
Net cash used for financing activities (17,017) (35,085)
------- -------
Increase in cash and cash equivalents 10 605
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 3,177 2,993
------- -------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 3,187 $ 3,598
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits, escrows and borrowings $ 3,141 $ 4,011
Income taxes $ 320 $ 20
See accompanying notes to consolidated financial statements.
6
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
Accumulated Retained
Additional Unallocated Unallocated Other 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, 2002 $ 37 $ 20,037 $(15,133) $ --- $ (72) $ 201 $ 25,183 $ 30,253
Comprehensive income:
Net Income 1,000 1,000
Other comprehensive
income:
Change in unrealized
holding gains on
securities, net of
income tax effect of
$36 71 71
---------
Comprehensive income 1,071
Purchase of shares for
treasury stock (423) (423)
Accrued compensation
expense for Recognition
and Retention Plans (RRP) 10 10
Exercise of stock options 2 2
Cash dividends declared
($0.16 per share) (426) (426)
-------- -------- -------- ----- -------- -------- -------- --------
Balance at Sept. 30, 2002 $ 37 $ 20,039 $(15,556) $ --- $ (62) $ 272 $ 25,757 $ 30,487
======== ======== ======== ===== ======== ======== ======== ========
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 months ended September 30, 2002, are
not necessarily indicative of the results which may be expected for the
entire fiscal year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
On October 1, 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) No. 147, Acquisitions of
Certain Financial Institutions, effective for all business combinations
initiated after October 1, 2002. This Statement addresses the financial
accounting and reporting for the acquisition of all or part of a financial
institution, except for a transaction between two or more mutual
enterprises. This Statement removes acquisitions of financial institutions,
other than transactions between two or more mutual enterprises, from the
scope of FAS No. 72, Accounting for Certain Acquisitions of Banking or
Thrift Institutions, and FASB Interpretation No. 9, Applying APB Opinions
No. 16 and 17 When a Savings and Loan Association or a Similar Institution
Is Acquired in a Business Combination Accounted for by the Purchase Method.
The acquisition of all or part of a financial institution that meets the
definition of a business combination shall be accounted for by the purchase
method in accordance with FAS No. 141, Business Combinations, and FAS No.
142, Goodwill and Other Intangible Assets. This Statement also provides
guidance on the accounting for the impairment or disposal of acquired
long-term customer-relationship intangible assets (such as depositor- and
borrower-relationship intangible assets and credit cardholder intangible
assets), including those acquired in transactions between two or more
mutual enterprises. The adoption of FAS No. 147 is not expected to have a
material effect on the Company's financial position or results of
operations.
8
3. EARNINGS PER SHARE
------------------
The following table sets forth the computation of basic and diluted
earnings per share.
Three Months Ended
September 30,
----------------------
2002 2001
---- ----
Weighted average common shares outstanding 3,729,910 3,710,677
Average treasury stock shares (1,067,977) (957,319)
Average unearned ESOP shares --- ---
----------- -----------
Weighted average common shares and common stock equivalents
used to calculate basic earnings per share 2,661,933 2,753,358
Additional common stock equivalents (stock options) used to
calculate diluted earnings per share 5,287 10,386
----------- -----------
Weighted average common shares and common stock equivalents
used to calculate diluted earnings per share 2,667,220 2,763,744
=========== ===========
Net income $ 999,845 $ 1,240,538
=========== ===========
Earnings per share:
Basic $ 0.38 $ 0.45
Diluted $ 0.37 $ 0.45
4. COMPREHENSIVE INCOME
--------------------
Other comprehensive income primarily reflects changes in net unrealized
gains/losses on available for sale securities. Total comprehensive income is
summarized as follows (dollars in thousands):
Three Months Ended
September 30,
-----------------------
2002 2001
---- ----
Net Income $1,000 $1,241
Other comprehensive income: 71 85
------ ------
Total comprehensive income $1,071 $1,326
====== ======
9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
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.
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 September 30, 2002.
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.
The Company's strategy focuses on community-based lending, growth of core
deposits, capital management, maintaining strong non-interest expense ratios and
steadily increasing book value per share.
10
FINANCIAL CONDITION
The Company's assets totaled $389.1 million at September 30, 2002, as
compared to $404.9 million at June 30, 2002. The $15.8 million or 3.9% decrease
in total assets was primarily comprised of a $9.3 million or 6.1% decrease in
net loans receivable, a $5.9 million or 2.4% decrease in investment and
mortgage-backed securities, including FHLB Stock, a $383 thousand or 9.8%
decrease in accrued interest receivable, and a $205 thousand or 87.2% decrease
in real estate owned.
The Company's total liabilities decreased $16.1 million or 4.3% to $358.6
million as of September 30, 2002, from $374.7 million as of June 30, 2002. The
$16.1 million decrease in total liabilities was primarily comprised of a $14.6
million or 43.3% decrease in other borrowings, and a $2.1 million or 68.8%
decrease in advance payments by borrowers for taxes and insurance due to the
seasonal payment of local real estate taxes, which were partially offset by a
$495 thousand or 0.3% increase in total savings deposits.
Total stockholders' equity increased $234 thousand or 0.8% to $30.5 million
as of September 30, 2002, from $30.3 million as of June 30, 2002. Capital
expenditures for the Company's stock repurchase program and cash dividends
totaled $423 thousand and $426 thousand, respectively, which were entirely
funded by net income of $1.0 million for the three months ended September 30,
2002.
RESULTS OF OPERATIONS
General. WVS reported net income of $1.0 million, or $0.37 diluted earnings
per share for the three months ended September 30, 2002. Net income decreased by
$241 thousand or 19.4% and diluted earnings per share decreased $0.08 or 17.8%
for the three months ended September 30, 2002, when compared to the same period
in 2001. The decrease in net income was primarily attributable to a $448
thousand decrease in net interest income, and a $144 thousand increase in
non-interest expense, which were partially offset by a $262 thousand decrease in
income tax expense, a $70 thousand increase in non-interest income, and a $19
thousand decrease in provisions for loan losses.
Net Interest Income. The Company's net interest income decreased by $448
thousand or 16.6% for the three months ended September 30, 2002, when compared
to the same period in 2001. The decrease in net interest income was primarily
attributable to lower rates earned on Company assets due to lower market
interest rates which was partially offset by lower rates paid on deposits and
borrowings. The Company experienced higher levels of repayments on its loan,
investment and mortgage-backed securities portfolios due to refinancing
activities.
Interest Income. Interest on net loans receivable decreased by $742
thousand or 20.9% for the three months ended September 30, 2002, when compared
to the same period in 2001. The decrease was attributable to a decrease of $34.3
million in the average balance of net loans receivable outstanding and a
decrease of 24 basis points in the weighted average yield earned on net loans
receivable for the three months ended September 30, 2002, when compared to the
same period in 2001. The decreases in the average loan balance outstanding for
the three months ended September 30, 2002, was primarily attributable to an
increased level of mortgage prepayments and refinancings due to lower market
rates on mortgages. As part of its asset/liability management strategy, the
Company has limited its origination of longer-term fixed rate loans to mitigate
its exposure to a rise in market interest rates.
Interest and dividend income on interest-bearing deposits with other
institutions, investment securities and FHLB stock ("other investment
securities") decreased by $210 thousand or 10.4% for the three months ended
September 30, 2002, when compared to the same period in 2001. The decrease was
primarily attributable to a 202 basis point decrease in the weighted average
yield earned on investment securities which was partially offset by a $38.7
million increase in the average balance of investment securities outstanding for
the three months ended September 30, 2002, when compared to the same period in
2001. The decrease in the weighted average yield earned was consistent with
market conditions for the three months ended September 30, 2002. The increase in
the average balance of investment securities
11
during the three month period ended September 30, 2002 was principally
attributable to the reinvestment of a portion of its loan payment proceeds into
shorter-term corporate bonds.
Interest on mortgage-backed securities ("MBS") decreased by $167 thousand
or 17.1% for the three months ended September 30, 2002, when compared to the
same period in 2001. The decrease was attributable to a 213 basis point decrease
in the weighted average yield earned on mortgage-backed securities, which was
partially offset by a $15.9 million increase in the average balance of
mortgage-backed securities for the three months ended September 30, 2002, when
compared to the same period in 2001. The decrease in the weighted average yield
earned on mortgage-backed securities was consistent with market conditions for
the three months ended September 30, 2002 and reflects the higher proportion of
floating rate MBS in the portfolio. The increase in the average balance of
mortgage-backed securities during the three month period ended September 30,
2002 was principally attributable to the reinvestment of a portion of its loan
payment proceeds into floating rate MBS.
Interest Expense. Interest expense on deposits and escrows decreased by
$649 thousand or 40.4% for the three months ended September 30, 2002, when
compared to the same period in 2001. The decrease in interest expense on
deposits and escrows was principally attributable to a 152 basis point decrease
in the average yield paid on deposits and escrows, and a $3.2 million decrease
in the average balance of interest-bearing deposits and escrows for the three
months ended September 30, 2002, when compared to the same period in 2001. The
average yield paid on interest-bearing deposits was consistent with market
conditions for the three months ended September 30, 2002.
Interest expense on FHLB advances and other borrowings decreased by $22
thousand or 1.0% for the three months ended September 30, 2002, when compared to
the same period in 2001. The decrease was primarily attributable to a 70 basis
point decrease in the weighted average rate paid on such borrowings for the
three months ended September 30, 2002 which was partially offset by a $22.1
million increase in the average balance of such borrowings outstanding during
the three months ended September 30, 2002. The increase in borrowings
outstanding was primarily to fund purchases of investments and mortgage-backed
securities. The weighted average rate paid declined less than deposits due to
the longer average maturity of the Company's FHLB advances outstanding.
Provision for Loan Losses. A provision for loan losses is charged to
earnings to maintain the total allowance at a level considered adequate by
management to absorb potential losses in the portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio considering past experience, current economic conditions, volume,
growth and composition of the loan portfolio, and other relevant factors.
The Company recorded a $18 thousand provision for possible losses on loans
for the three months ended September 30, 2002, compared to $37 thousand for the
same period in 2001. At September 30, 2002, the Company's total allowance for
loan losses amounted to $2.8 million or 1.9% of the Company's total loan
portfolio, as compared to $2.8 million or 1.5% at September 30, 2001. The
Company believes that the additional loan loss reserves are prudent and
warranted at this time due to the weakening of the national economy.
Non-Interest Income. Total non-interest income increased by $70 thousand or
40.5% for the three months ended September 30, 2002, when compared to the same
period in 2001. The increase in non-interest income for the three months ended
September 30, 2002, was primarily attributable to sales of investments from the
Company's investment portfolio.
Non-Interest Expense. Total non-interest expense increased $144 thousand or
14.8% for the three months ended September 30, 2002 when compared to the same
period in 2001. The increase was primarily attributable to a $111 thousand
increase in charitable contributions for local educational programs, a $23
thousand increase in legal expenses, and a $15 thousand increase in the
provision for losses on real estate owned, which were partially offset by a
decrease of $26 thousand in employee salaries and benefits, when compared to the
same period in 2001.
Income Taxes. Income tax expense decreased $262 thousand or 42.9% for the
three months ended September 30, 2002 when compared to the same period in 2001.
The decrease was attributable to a $100 thousand Pennsylvania tax credit
associated with the previously mentioned charitable contributions and lower
levels of taxable income.
12
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $2.3 million during the
three months ended September 30, 2002. Net cash provided by operating activities
was primarily comprised of $1.0 million of net income, $841 thousand in
amortization of discounts, premiums and deferred loan fees, and a $383 thousand
decrease in accrued interest receivable.
Funds provided by investing activities totaled $14.7 million during the
three months ended September 30, 2002. Primary sources of funds during the three
months ended September 30, 2002, included $30.2 million of proceeds from
repayments of investment and mortgage-backed securities, a $9.2 million decrease
in net loans receivable, and $610 thousand of proceeds from the sale of
investment securities, which were partially offset by $25.4 million for
purchases of investments and mortgage-backed securities, including Federal Home
Loan Bank stock.
Funds used for financing activities totaled $17.0 million for the three
months ended September 30, 2002. The primary financial use included a $14.6
million decrease in other short-term borrowings, a $1.6 million decrease in
deposits and escrows, $426 thousand in cash dividends paid on the Company's
common stock, and $423 thousand in purchased treasury stock. Management believes
that it currently is maintaining adequate liquidity and continues to better
match funding sources with lending and investment opportunities.
During the quarter ended September 30, 2002, the Company incurred $74.7
million in other borrowings with a weighted average rate of 1.81%. During the
three months ended September 30, 2002, the Company repaid $89.3 million of other
borrowings.
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 September 30, 2002, the total approved loan
commitments outstanding amounted to $575 thousand. At the same date, commitments
under unused lines of credit amounted to $6.9 million and the unadvanced portion
of construction loans approximated $9.2 million. Certificates of deposit
scheduled to mature in one year or less at September 30, 2002, totaled $56.1
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 access to the Federal Reserve Bank discount window.
Management believes that the Company currently has adequate liquidity available
to respond to liquidity demands.
On October 29, 2002, the Company's Board of Directors declared a cash
dividend of $0.16 per share payable November 14, 2002, to shareholders of record
at the close of business on November 4, 2002. 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 or that, if paid, such
dividends will not be reduced or eliminated in future periods.
As of September 30, 2002, WVS Financial Corp. exceeded all regulatory
capital requirements and maintained Tier I and total risk-based capital equal to
$30.2 million or 13.3% and $33.0 million or 14.6%, respectively, of total
risk-weighted assets, and Tier I leverage capital of $30.2 million or 7.59% of
average quarterly assets.
13
Nonperforming assets consist of nonaccrual loans and real estate owned. A
loan is placed on nonaccrual status when, in the judgment of management, the
probability of collection of interest is deemed insufficient to warrant further
accrual. When a loan is placed on nonaccrual status, previously accrued but
uncollected interest is deducted from interest income. The Company normally does
not accrue interest on loans past due 90 days or more, however, interest may be
accrued if management believes that it will collect on the loan.
The Company's nonperforming assets at September 30, 2002, totaled
approximately $4.7 million or 1.2% of total assets as compared to $5.3 million
or 1.3% at June 30, 2002. Nonperforming assets at September 30, 2002, consisted
of: five commercial real estate loans totaling $3.6 million, two construction
and land development loans totaling $578 thousand, two single-family loans
totaling $411 thousand, one commercial loan totaling $26 thousand, and two
residential lots carried as real estate owned totaling $30 thousand.
The $394 thousand decrease in non-accrual loans during the quarter ended
September 30, 2002 was comprised of a $419 thousand decrease in construction and
land development loans, a $172 thousand decrease in commercial loans, and a $171
thousand decrease in single-family loans, which were partially offset by a $368
thousand increase in commercial real estate loans.
The land acquisition and development loan classified as non-accrual at June
30, 2002 was released by the Bankruptcy Court and sold in July 2002. The Savings
Bank recovered the full principal balance plus approximately $36 thousand in
previously unaccrued interest.
As of June 30, 2002 the Company had one non-accruing commercial loan with a
principal balance of $198 thousand. The loan is secured by various commercial
business assets including photographic equipment and a truck along with the
personal guarantees of both owners. In July 2002, the Company entered into a
loan work-out that provided for reduced monthly loan payments in exchange for
the pledging of additional unrelated business assets. The revised payment plan
went into effect in August 2002 and the borrowers are performing under the
modified terms, therefore the loan is no longer classified as non-accrual.
As of September 30, 2002, the Company had five commercial real estate loans
classified as non-accrual loans. One of the commercial real estate loans is
secured by a restaurant and real estate located in Wexford, PA. The outstanding
principal balance of this loan totals $189 thousand and is part of a court
supervised bankruptcy plan. In brief, the original bankruptcy plan called for
payments in excess of the original loan terms to cure the deficiency within the
next three years. During the quarter ended June 30, 2002, the original court
appointed disbursing agent stopped making payments and is being investigated by
the U.S. Attorney's Office for bankruptcy fraud and money laundering. On July
31, 2002 the United States Bankruptcy Court for the Western District of
Pennsylvania appointed a successor disbursing agent for the limited purpose of
disbursing funds currently held in escrow (rent payments) as well as regularly
scheduled payments due under the plan. The Savings Bank has not modified the
original terms of this loan and we are presently providing a loan accounting to
the successor disbursing agent.
The Company has one non-accrual commercial real estate loan, and one
non-accrual construction loan, to a retirement village located within the North
Hills area. Both loans became delinquent in fiscal 2000. The outstanding
principal balances total $3.8 million of which $2.6 million is owned by the
Company and the remaining $1.2 million is serviced by the Company for four
participating lenders. Prior to January 2002, the borrower had been paying $15
thousand per month towards curing the arrearages. See Part II - Other
Information - Item #1, "Legal Proceedings". As of the date of this Quarterly
Report on Form 10-Q, the Savings Bank and the debtor are working towards a final
work-out of these credits prior to a Court review of the Petition for
Enforcement of Assignment of Rents and for Supplementary Aid of Execution during
November 2002.
The Company has one non-accruing commercial real estate loan, with a
principal balance of $980 thousand, to a personal care home that was originally
part of the two retirement village loans discussed above. Due to the low
occupancy of the personal care home, and the related cash drain on the
retirement
14
village, the Savings Bank "carved out" approximately $1 million of loan debt
from the retirement village, assigned that $1 million in debt to the personal
care home, and allowed one of the obligors - a geriatric physician - to
separately own and operate the personal care home as a separate facility. The
borrower was in compliance with a written loan work-out agreement until February
2002. Sporadic payments have been received since March 2002. The borrower
alleges insufficient operating cash, along with the loss of other income, to
service the debt. The Savings Bank also holds three other loans, totaling $366
thousand, secured by pledges of various real estate and chattel, to this same
borrower which were non-accrual as of September 30, 2002. During the quarter
ended September 30, 2002, the Company began legal proceedings against the
debtors. Legal proceedings at this point are preliminary and the Company is
exploring work-out options with legal counsel.
As of September 30, 2002, the Company had one non-accruing commercial loan
with a principal balance of $26 thousand. This loan is unsecured and is in the
process of collection.
The Company had two non-accrual single-family loans at September 30, 2002
which totaled $411 thousand. These loans are in the process of collection.
Real estate owned, at September 30, 2002, totaled $30 thousand and was
comprised of two undeveloped residential lots. In August 2002 the Company
entered into a sales agreement to sell the two lots and recorded a $15 thousand
loss provision. In October 2002, the two undeveloped residential lots were sold
with the Company realizing proceeds of approximately $30 thousand.
During the three months ended September 30, 2002, the Company collected and
recognized approximately $11 thousand in past due interest on its nonperforming
loans. Approximately $89 thousand of additional interest income would have been
recorded during the three months ended September 30, 2002, if the Company's
nonaccrual and restructured loans had been current in accordance with their
original loan terms and outstanding throughout the three months ended September
30, 2002. The Company continues to work with the borrowers in an attempt to cure
the defaults and is also pursuing various legal avenues in order to collect on
these loans.
15
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ASSET AND LIABILITY MANAGEMENT
The Company's primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk. All of the Company's transactions are denominated
in US 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.
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 interest 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.
During the quarter ended September 30, 2002, the level of market interest
rates remained at relatively low levels due to the Federal Reserve's
accommodative monetary policy and the weakness in the national economy. The
marked decline in equity market prices and reduced corporate earnings have
caused a considerable disintermediation from the equity to the fixed income
markets, further compounding the decline in market interest rates across the
yield curve.
Due to the rapid decline in market interest rates, the Company's loan,
investment and mortgage-backed securities portfolios experienced much higher
then anticipated levels of prepayments. Principal repayments on the Company's
loan, investment and mortgage-backed securities portfolios for the quarter ended
September 30, 2002, totaled $15.8 million, $16.5 million and $14.2 million
respectively.
In response to higher levels of liquidity the Company began to rebalance
its loan, investment and mortgage-backed securities portfolios. Due to the low
level of market interest rates, the Company began to reduce its originations of
long-term fixed rate mortgages while continuing to offer consumer home equity
and construction loans. The Company's commercial loan exposure was also reduced
in recognition of the weaknesses in the national and local economies. The
Company began to purchase investment grade commercial paper and corporate bonds
in order to earn a higher return with a shorter maturity profile and to reduce
the prepayment risk within the portfolio. Each of the aforementioned strategies
also helped to improve the interest-rate and liquidity risks associated with the
Savings Bank's customers' liquidity preference for shorter term deposit
products.
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
16
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. The Company intends to emphasize higher yielding home equity and
small business loans to existing customers and seasoned prospective customers.
During the quarter ended September 30, 2002, principal investment purchases
were comprised of: investment grade corporate bonds - $20.9 million with a
weighted average yield of approximately 3.47%; investment grade commercial paper
- - $3.6 million with a weighted average yield of approximately 2.10%; and
corporate equity securities - $867 thousand. Major investment proceeds received
during the quarter ended September 30, 2002 were: investment grade commercial
paper - $6.5 million with a weighted average yield of approximately 2.64%;
callable government agency bonds - $3.5 million with a weighted average rate of
approximately 5.94%; and investment grade corporate bonds - $4.0 million with a
weighted average yield of approximately 3.33%. In most cases, the initial spread
earned on investment security purchases averaged approximately 165.6 basis
points.
As of September 30, 2002, the implementation of these asset and liability
management initiatives resulted in the following:
1) the Company's liquidity profile has improved by reducing the investment
portfolio's stated final maturities as follows: less than 1 year: $66.4
million or 29.1%; 1-3 years: $12.4 million or 5.5%; 3-5 years: $0 million
or 0.0%; over 5 years: $149.1 million or 65.4%;
2) $49.8 million or 73.1% of the Company's portfolio of mortgage-backed
securities (including collateralized mortgage obligations - "CMOs") were
secured by floating rate securities;
3) the maturity distribution of the Company's borrowings is as follows: less
than 1 year: $30.1 million or 16.8%; 1-3 years: $279 thousand or 0.2%; 3-5
years: $4.2 million or 2.3%; over 5 years: $144.5 million or 80.7%; and
4) an aggregate of $40.2 million or 28.0% of the Company's net loan portfolio
had adjustable interest rates or maturities of less than 12 months.
The effect of interest rate changes on a financial institution's assets and
liabilities may be analyzed by examining the "interest rate sensitivity" of the
assets and liabilities and by monitoring an institution's interest rate
sensitivity "gap". An asset or liability is said to be interest rate sensitive
within a specific time period if it will mature or reprice within a given time
period. A gap is considered positive (negative) when the amount of rate
sensitive assets (liabilities) exceeds the amount of rate sensitive liabilities
(assets). During a period of falling interest rates, a negative gap would tend
to result in an increase in net interest income. During a period of rising
interest rates, a positive gap would tend to result in an increase in net
interest income.
17
The following table sets forth certain information at the dates indicated
relating to the Company's interest-earning assets and interest-bearing
liabilities which are estimated to mature or are scheduled to reprice within one
year.
September 30, June 30,
------------- --------
2002 2002 2001
---- ---- ----
(Dollars in Thousands)
Interest-earning assets maturing or
repricing within one year $ 237,309 $ 252,467 $ 155,928
Interest-bearing liabilities maturing or
repricing within one year 127,244 142,823 137,232
--------- --------- ----------
Interest sensitivity gap $ 110,065 $ 109,644 $ 18,696
========= ========= ==========
Interest sensitivity gap as a percentage of
total assets 28.3% 27.1% (4.7)%
Ratio of assets to liabilities
maturing or repricing within one year 186.5% 176.8% 113.6%
During the quarter ended September 30, 2002, the Company managed its one
year interest sensitivity gap by: (1) reducing the amount of short-term
borrowings and (2) generally limiting incremental corporate bond purchases to
those with repricing dates within 2 years.
18
The following table illustrates the Company's estimated stressed cumulative
repricing gap - the difference between the amount of interest-earning assets and
interest-bearing liabilities expected to reprice at a given point in time - at
September 30, 2002. The table estimates the impact of an upward or downward
change in market interest rates of 100 and 200 basis points.
Cumulative Stressed Repricing Gap
---------------------------------
Month 3 Month 6 Month 12 Month 24 Month 36 Month 60 Long Term
------- ------- -------- -------- -------- -------- ---------
(Dollars in Thousands)
Base Case Up 200 bp
- -------------------
Cummulative
Gap ($'s) 62,886 90,713 98,699 101,248 104,659 87,132 25,593
% of Total
Assets 16.1% 23.3% 25.3% 26.0% 26.9% 22.4% 6.6%
Base Case Up 100 bp
- -------------------
Cummulative
Gap ($'s) 63,983 92,724 102,017 106,587 115,538 102,489 25,593
% of Total
Assets 16.4% 23.8% 26.2% 27.4% 29.7% 26.3% 6.6%
Base Case No Change
- -------------------
Cummulative
Gap ($'s) 70,003 99,935 110,065 114,852 122,801 108,668 28,332
% of Total
Assets 18.0% 25.7% 28.3% 29.5% 31.5% 27.9% 7.3%
Base Case Down 100 bp
- -------------------
Cummulative
Gap ($'s) 68,908 99,040 109,244 113,516 121,433 107,069 25,593
% of Total
Assets 17.7% 25.4% 28.1% 29.2% 31.2% 27.5% 6.6%
Base Case Down 200 bp
- -------------------
Cummulative
Gap ($'s) 69,837 100,436 110,690 115,391 123,264 108,384 25,593
% of Total
Assets 17.9% 25.8% 28.4% 29.6% 31.7% 27.8% 6.6%
Beginning in the third quarter of fiscal 2001, the Company began to utilize
an income simulation model to measure interest rate risk and to manage interest
rate sensitivity. The Company believes that income simulation modeling may
enable the Company to more accurately estimate the possible effects on net
interest income due to changing market interest rates. Other key model
parameters include: estimated prepayment rates on the Company's loan,
mortgage-backed securities and investment portfolios; savings decay rate
assumptions; and the repayment terms and embedded options of the Company's
borrowings.
19
The following table presents the simulated impact of a 100 and 200 basis
point upward or downward shift in market interest rates on net interest income,
return on average equity, return on average assets and the market value of
portfolio equity at September 30, 2002.
Analysis of Sensitivity to Changes in Market Interest Rates
-----------------------------------------------------------
Modeled Change in Market Interest Rates
-----------------------------------------------------------------------------------------
Estimated impact on: -200 -100 0 +100 +200
- --------------------
Change in net interest income -20.6% -11.9% 0.0% 10.4% 16.6%
Return on average equity 7.58% 9.24% 11.46% 13.38% 14.52%
Return on average assets 0.59% 0.72% 0.90% 1.06% 1.15%
Market value of equity (in
thousands) $18,781 $19,952 $21,089 $20,911 $20,489
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 September 30,
2002.
Anticipated Transaction
- ------------------------------------------------------------------
(Dollars in Thousands)
Undisbursed construction and
land development loans
Fixed rate $ 3,920
6.98%
Adjustable rate $ 5,278
5.75%
Undisbursed lines of credit
Adjustable rate $ 6,944
5.37%
Loan origination commitments
Fixed rate $ 360
6.81%
Adjustable rate $ 215
5.55%
Letters of credit
Adjustable rate $ 82
7.75%
-------
$16,799
=======
20
ITEM 4.
CONTROLS AND PROCEDURES
Within 90 days prior to the date of this Quarterly Report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Accounting Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based upon that evaluation,
the Chief Executive Officer and Chief Accounting Officer concluded that the
Company's disclosure controls and procedures are effective. There were no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.
Disclosure controls and procedures are the controls and other procedures of
the Company that are designed to ensure that the information required to be
disclosed by the Company in its reports filed or submitted under the Securities
Exchange Act of 1934, as amended ("Exchange Act") is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in its reports filed under
the Exchange Act is accumulated and communicated to the Company's management,
including the principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
21
ITEM 1. Legal Proceedings
------------------
The Savings Bank filed a Complaint in Mortgage Foreclosure (the
"Foreclosure") in March 2000 against the Development Group of Rose Valley (the
"Obligor"), an obligor on two previously disclosed impaired and non-accrual
loans. The Foreclosure was filed in the Court of Common Pleas of Allegheny
County, Pennsylvania to request a judicial sale of the underlying real
properties securing the mortgage loans due to nonpayment as per the terms of the
mortgage notes. In November 2001, the Obligor filed an Answer, New Matter and
Counterclaim to the Foreclosure. The counterclaims include breach of contract,
promissory estoppel, breach of duty of good faith and fair dealing and tortuous
interference with prospective and existing business relations and seeks damages
of approximately $5.2 million. In January 2002, the Court dismissed the tortuous
interference claim. The Company believes the remaining counterclaims are without
merit. The Company anticipates a January 2003 trial date for the Foreclosure. In
April 2002, the Savings Bank filed a Petition for Enforcement of Assignment of
Rents and for Supplementary Aid of Execution. This Petition seeks to sequester
$25 thousand per month to adequately protect the Savings Bank's interest in the
loan during the pending litigation and any possible workout. The discovery phase
of the Petition is substantially complete. During the quarter ended September
30, 2002, the Savings Bank and the Obligor have made considerable progress in
resolving this credit. In light of this progress, the Savings Bank and the
Obligor have extended the Court reviewed date for the Petition to November 2002
to allow time for negotiations to continue.
ITEM 2. Changes in Securities and Use of Proceeds
-----------------------------------------
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 exhibits are filed as part of this Form 10-Q, and
this list includes the Exhibit Index.
Number Description Page
------ ----------- ----
99-1 Sarbanes-Oxley Act Certification of Chief Executive Officer E-1
99-2 Sarbanes-Oxley Act Certification of Chief Accounting Officer E-2
99-3 Independent Accountant's Report E-3
(b) The Company filed a current Report on Form 8-K, dated September 30,
2002, reporting under Item 5 that the Company filed its Annual
Report on Form 10-K for the year ended June 30, 2002. The Company
included as exhibits to the Form 8-K the Certifications of its
Chief Executive and Chief Accounting Officers pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
22
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.
November 14, 2002 BY: /s/ David J. Bursic
---------------------------------------------
Date David J. Bursic
President and Chief Executive Officer
(Principal Executive Officer)
November 14, 2002 BY: /s/ Keith A. Simpson
---------------------------------------------
Date Keith A. Simpson
Vice-President and Chief Accounting Officer
23
SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, David J. Bursic, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WVS Financial Corp.
(the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and Audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ David J. Bursic
-------------------------------------
David J. Bursic
President and Chief Executive Officer
24
SECTION 302 CERTIFICATION OF THE CHIEF ACCOUNTING OFFICER
I, Keith A. Simpson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WVS Financial Corp.
(the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and Audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Keith A. Simpson
-------------------------------------------
Keith A. Simpson
Vice-President and Chief Accounting Officer
25