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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, 2003
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 executive offices) (Zip Code)
(412) 364-1911
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.
YES X NO
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12 b-2 of the Exchange Act).
YES NO X
--- ---
Shares outstanding as of November 13, 2003: 2,571,777 shares Common Stock,
$.01 par value.
WVS FINANCIAL CORP. AND SUBSIDIARY
----------------------------------
INDEX
-----
PART I. Financial Information Page
- ------- --------------------- ----
Item 1. Financial Statements
Consolidated Balance Sheet as of
September 30, 2003 and June 30, 2003
(Unaudited) 3
Consolidated Statement of Income
for the Three Months Ended
September 30, 2003 and 2002 (Unaudited) 4
Consolidated Statement of Cash Flows
for the Three Months Ended September 30,
2003 and 2002 (Unaudited) 5
Consolidated Statement of Changes in
Stockholders' Equity for the Three Months
Ended September 30, 2003 (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, 2003 11
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 17
Item 4. Controls and Procedures 23
PART II. Other Information Page
- -------- ----------------- ----
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 24
Item 3. Defaults upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
2
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(In thousands)
September 30, 2003 June 30, 2003
------------------ -------------
Assets
------
Cash and due from banks $ 912 $ 921
Interest-earning demand deposits 1,421 1,894
Investment securities available-for-sale (amortized cost of
$9,782 and $25,310) 10,112 25,641
Investment securities held-to-maturity (market value of
$204,899 and $126,036) 201,695 121,841
Mortgage-backed securities available-for-sale (amortized cost of
$3,940 and $4,219) 4,092 4,387
Mortgage-backed securities held-to-maturity (market value of
$79,168 and $107,914) 78,924 107,492
Federal Home Loan Bank stock, at cost 8,493 7,797
Net loans receivable (allowance for loan losses of $2,397 and
$2,530) 77,677 91,669
Accrued interest receivable 2,351 2,800
Premises and equipment 1,185 1,231
Other assets 2,010 1,515
--------- ---------
TOTAL ASSETS $ 388,872 $ 367,188
========= =========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Savings Deposits:
Non-interest-bearing accounts $ 23,920 $ 11,302
NOW accounts 17,994 19,215
Savings accounts 43,514 44,152
Money market accounts 13,473 14,691
Certificates of deposit 77,664 79,956
Advance payments by borrowers for taxes and insurance 372 1,610
--------- ---------
Total savings deposits 176,937 170,926
Federal Home Loan Bank advances 150,115 153,390
Other borrowings 28,576 9,453
Accrued interest payable 1,470 1,449
Other liabilities 1,415 1,352
--------- ---------
TOTAL LIABILITIES 358,513 336,570
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;
3,736,810 and 3,736,750 shares issued 37 37
Additional paid-in capital 20,219 20,212
Treasury stock: 1,165,373 and 1,153,591 shares at cost,
Respectively (16,967) (16,767)
Retained earnings, substantially restricted 26,799 26,857
Accumulated other comprehensive income 318 329
Unallocated shares - Recognition and Retention Plans (47) (50)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 30,359 30,618
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 388,872 $ 367,188
========= =========
See accompanying notes to unaudited 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,
----------------------------------
2003 2002
----------- ----------
INTEREST AND DIVIDEND INCOME:
Loans $ 1,528 $ 2,809
Investment securities 1,581 1,742
Mortgage-backed securities 656 808
Interest-earning deposits with other institutions 5 4
Federal Home Loan Bank stock 41 69
----------- ----------
Total interest and dividend income 3,811 5,432
----------- ----------
INTEREST EXPENSE:
Deposits 663 959
Borrowings 2,102 2,223
Advance payments by borrowers for taxes and insurance 4 6
----------- ----------
Total interest expense 2,769 3,188
----------- ----------
NET INTEREST INCOME 1,042 2,244
PROVISION FOR LOAN LOSSES (133) 18
----------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,175 2,226
----------- ----------
NON-INTEREST INCOME:
Service charges on deposits 106 100
Gain on sale of investments -- 64
Other 88 81
----------- ----------
Total non-interest income 194 245
----------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 511 601
Occupancy and equipment 105 89
Deposit insurance premium 7 7
Data processing 56 49
Correspondent bank service charges 38 40
Other 175 336
----------- ----------
Total non-interest expense 892 1,122
----------- ----------
INCOME BEFORE INCOME TAXES 477 1,349
INCOME TAXES 125 349
----------- ----------
NET INCOME $ 352 $ 1,000
=========== ==========
EARNINGS PER SHARE:
Basic $ 0.14 $ 0.38
Diluted $ 0.14 $ 0.37
AVERAGE SHARES OUTSTANDING:
Basic 2,575,242 2,661,933
Diluted 2,585,081 2,667,220
See accompanying notes to unaudited consolidated financial statements.
4
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended
September 30,
------------------------------
2003 2002
--------- --------
OPERATING ACTIVITIES
Net income $ 352 $ 1,000
Adjustments to reconcile net income to cash provided by operating
activities:
Provision for loan losses (133) 18
Gain on sale of investments -- (64)
Depreciation and amortization, net 46 29
Amortization of discounts, premiums and deferred loan fees 488 841
Amortization of ESOP, RRP and deferred and unearned
compensation 3 10
Decrease in accrued interest receivable 449 383
Increase in accrued interest payable 21 47
Increase in accrued and deferred taxes 12 66
Other, net 63 10
--------- --------
Net cash provided by operating activities 1,301 2,340
--------- --------
INVESTING ACTIVITIES
Available-for-sale:
Purchases of investments and mortgage-backed securities (20,290) (1,381)
Proceeds from repayments of investments and mortgage-backed securities 36,113 6,901
Proceeds from sale of investments securities -- 610
Held-to-maturity:
Purchases of investments and mortgage-backed securities (159,770) (24,030)
Proceeds from repayments of investments and mortgage-backed securities 108,068 23,319
Decrease in net loans receivable 13,537 9,209
Purchase of Federal Home Loan Bank stock (696) (113)
Purchases of premises and equipment -- (18)
Other, net -- 190
--------- --------
Net cash (used for) provided by investing activities (23,038) 14,687
--------- --------
5
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended
September 30,
-----------------------------
2003 2002
-------- --------
FINANCING ACTIVITIES
Net increase in transaction and passbook accounts 9,540 1,165
Net decrease in certificates of deposit (2,292) (670)
Net decrease in FHLB short-term advances (3,275) --
Net increase (decrease) in other borrowings 19,123 (14,592)
Net decrease in advance payments by borrowers for taxes and insurance (1,238) (2,073)
Net proceeds from issuance of common stock 7 2
Funds used for purchase of treasury stock (200) (423)
Cash dividends paid (410) (426)
-------- --------
Net cash provided by (used for) financing activities 21,255 (17,017)
-------- --------
(Decrease) increase in cash and cash equivalents (482) 10
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 2,815 3,177
-------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 2,333 $ 3,187
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits, escrows and borrowings $ 2,748 $ 3,141
Income taxes $ 107 $ 320
Non-cash item:
Pennsylvania Education Tax Credit $ -- $ 100
Mortgage Loan Transferred to Other Assets $ 500 $ --
See accompanying notes to unaudited consolidated financial statements.
6
WVS FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
Accumulated
Retained Other
Additional Earnings Compre- Unallocated Unallocated
Common Paid-In Treasury Substantially hensive Shares Held Shares Held
Stock Capital Stock Restricted Income by ESOP by RRP Total
----- ------- ----- ---------- ----------- ------- ------ -----
Balance at June 30, 2003 $ 37 $20,212 $(16,767) $26,857 $ 329 $ -- $ (50) $30,618
Comprehensive income:
Net Income 352 352
Other comprehensive
income:
Change in unrealized
holding gains on
securities, net of
income tax effect of
$6 11 11
-------
Comprehensive income 341
Purchase of shares for
treasury stock (200) (200)
Accrued compensation
expense for Recognition
and Retention Plans (RRP) 3 3
Exercise of stock options 7 7
Cash dividends declared (410) (410)
($0.48 per share)
------ ------- -------- ------- ------- ------- ------- -------
Balance at Sept 30, 2003 $ 37 $20,219 $(16,967) $26,799 $ 318 $ -- $ (47) $30,359
====== ======= ======== ======= ======= ======= ======= =======
See accompanying notes to unaudited 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, 2003, are not necessarily indicative of
the results which may be expected for the entire fiscal year.
2. RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In January, 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, in an effort to expand upon and strengthen existing
accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity.
The objective of this interpretation is not to restrict the use of variable
interest entities but to improve financial reporting by companies involved with
variable interest entities. Until now, one company generally has included
another entity in its consolidated financial statements only if it controlled
the entity through voting interests. This interpretation changes that by
requiring a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's residual
returns or both. The consolidation requirements of this interpretation apply
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements apply to older entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain of the disclosure
requirements apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. The adoption of
this interpretation has not and is not expected to have a material effect on the
Company's financial position or results of operations. In October, 2003, the
FASB decided to defer to the fourth quarter from the third quarter the
implementation date for Interpretation No. 46. This deferral only applies to
variable interest entities that existed prior to February 1, 2003.
8
3. EARNINGS PER SHARE
------------------
The following table sets forth the computation of basic and diluted
earnings per share.
Three Months Ended
September 30,
-----------------------------------
2003 2002
----------- -----------
Weighted average common shares outstanding 3,736,645 3,729,910
Average treasury stock shares (1,161,403) (1,067,977)
Average unearned ESOP shares -- --
----------- -----------
Weighted average common shares and common stock equivalents
used to calculate basic earnings per share 2,575,242 2,661,933
Additional common stock equivalents (stock options) used to
calculate diluted earnings per share 9,839 5,287
----------- -----------
Weighted average common shares and common stock equivalents
used to calculate diluted earnings per share 2,585,081 2,667,220
=========== ===========
Net income $ 351,865 $ 999,845
=========== ===========
Earnings per share:
Basic $ 0.14 $ 0.38
Diluted $ 0.14 $ 0.37
All options at September 30, 2003 and September 30, 2002 were included in
the computation of diluted earnings per share.
4. STOCK BASED COMPENSATION DISCLOSURE
-----------------------------------
Pro forma information regarding net income and earnings per share as
required by FAS No. 123, has been determined as if the Company had accounted for
its stock options using that method. The fair value for these options was
estimated at the date of the grants using the Black-Scholes option pricing
model.
In management's opinion, existing stock option valuation models do not
provide a reliable single measure of the fair value of employee stock options
that have vesting provisions and are not transferable. In addition, option
valuation models require input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock options
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, the existing models may not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For the purpose of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. The following
table represents the effect on net income and earnings per share had the
stock-based employee compensation expense been recognized:
9
Three Months Ended
September 30,
------------------------------
2003 2002
--------- ---------
Net income, as reported: $ 352 $ 1,000
Less proforma expense related
to stock options -- --
--------- ---------
Proforma net income $ 352 $ 1,000
========= =========
Basic net income per common share:
As reported $ 0.14 $ 0.38
Pro forma 0.14 0.38
Diluted net income per common share:
As reported $ 0.14 $ 0.37
Pro forma 0.14 0.37
5. 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,
-------------------------------------------
2003 2002
------------------ ---------------------
Net income $ 352 $ 1,000
Other comprehensive
(loss) income:
Unrealized (losses)
gains on available for
sale securities $ (17) $ 171
Less:
Reclassification
adjustment for
gain included in
net income -- 64
-------- ------ ------- --------
Other comprehensive
(loss) income before
tax (17) 107
Income tax (benefit)
expense related to
other comprehensive
(loss) income (6) 36
------ --------
Other comprehensive
(loss) income, net of
tax (11) 71
------ --------
Comprehensive income $ 341 $ 1,071
====== ========
10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q, 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, 2003.
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.
FINANCIAL CONDITION
The Company's assets totaled $388.9 million at September 30, 2003, as
compared to $367.2 million at June 30, 2003. The $21.7 million or 5.9% increase
in total assets was primarily comprised of a $65.0 million or 41.9% increase in
investment securities and FHLB stock, and a $495 thousand or 32.7% increase in
deferred taxes and other assets, which were partially offset by a $28.9 million
or 25.8% decrease in mortgage-backed securities and a $14.0 million or 15.3%
decrease in net loans receivable.
The Company's total liabilities increased $21.9 million or 6.5% to $358.5
million as of September 30, 2003, from $336.6 million as of June 30, 2003. The
$21.9 million increase in total liabilities was primarily
11
comprised of a $19.1 million or 202.3% increase in other short-term borrowings,
and a $7.2 million or 4.3% increase in total savings deposits, which were
partially offset by a $3.3 million or 2.1% decrease in FHLB advances, and a $1.2
million or 76.9% decrease in advance payments by borrowers for taxes and
insurance due to the seasonal payment of local and school real estate taxes.
During the three months ended September 30, 2003, non-interest bearing accounts
increased by $12.6 million due to seasonal deposits by local tax collectors.
Interest-bearing transaction and passbook accounts decreased $3.1 million.
Management believes that the decrease in transaction and savings balances were
also primarily attributable to seasonal real estate tax withdrawals.
Certificates of deposit decreased $2.3 million.
Total stockholders' equity decreased $259 thousand or 0.8% to $30.4 million
as of September 30, 2003, from approximately $30.6 million as of June 30, 2003.
Capital expenditures for the Company's stock repurchase program and cash
dividends totaled $200 thousand and $410 thousand, respectively, which were
partially funded by net income of $352 thousand for the three months ended
September 30, 2003.
RESULTS OF OPERATIONS
General. WVS reported net income of $352 thousand or $0.14 diluted earnings
per share for the three months ended September 30, 2003. Net income decreased by
$648 thousand or 64.8% and diluted earnings per share decreased $0.23 or 62.2%
for the three months ended September 30, 2003, when compared to the same period
in 2002. The decrease in net income was primarily attributable to a $1.2 million
decrease in net interest income and a $51 thousand decrease in non-interest
income, which were partially offset by a $230 thousand decrease in non-interest
expense, a $224 thousand decrease in income tax expense, and a $151 thousand
decrease in provision for loan losses.
Net Interest Income. The Company's net interest income decreased by $1.2
million or 53.6% for the three months ended September 30, 2003, when compared to
the same period in 2002. The decrease in net interest income for the three month
period was principally attributable to lower rates earned on Company assets due
to historically low market interest rates and lower average balances of net
loans receivable, which were partially offset by lower rates paid on deposits,
lower average balances of borrowings outstanding, and increased average balances
of the Company's mortgage-backed and investment securities portfolios. The
Company experienced higher levels of repayments on its loan portfolio due to
refinancing activities for the three months ended September 30, 2003.
Interest Income. Interest on net loans receivable decreased $1.3 million or
45.6% for the three months ended September 30, 2003, when compared to the same
period in 2002. The decrease for the three months ended September 30, 2003 was
attributable to a decrease of $64.5 million in the average balance of net loans
receivable outstanding and a decrease of 36 basis points in the weighted average
yield earned on net loans receivable for the three months ended September 30,
2003, when compared to the same period in 2002. The decreases in the average
loan balance outstanding for the three months ended September 30, 2003, were
primarily attributable to increased levels 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. The Company will continue to originate longer-term fixed rate
loans for sale on a correspondent basis to increase non-interest income and to
contribute to net income.
Interest on mortgage-backed securities ("MBS") decreased $152 thousand or
18.8% for the three months ended September 30, 2003, when compared to the same
period in 2002. The decrease for the three months ended September 30, 2003 was
primarily attributable to a 156 basis point decrease in the weighted average
yield earned on mortgage-backed securities for the period, which was partially
offset by a $23.9 million increase in the average balance of mortgage-backed
securities outstanding for the three months ended September 30, 2003, when
compared to the same period in 2002. The decrease in the weighted average yield
earned on mortgage-backed securities was consistent with market conditions for
the three months ended September 30, 2003, and reflects the higher proportion of
floating rate MBS in the portfolio. The increase in the average balances of
mortgage-backed securities during the three months ended
12
September 30, 2003 was primarily attributable to the reinvestment of a portion
of the Company's loan payment proceeds into floating rate MBS.
Interest and dividend income on interest-bearing deposits with other
institutions, investment securities and FHLB stock ("other investment
securities") decreased by $188 thousand or 10.4% for the three months ended
September 30, 2003, when compared to the same period in 2002. The decrease was
principally attributable to a 92 basis point decrease in the weighted average
yield earned on other investment securities for the three months ended September
30, 2003, when compared to the same period in 2002, which was partially offset
by a $19.8 million increase in the average balance of other investment
securities outstanding when compared to the same period in 2002. The decrease in
the weighted average yield earned was consistent with market conditions for the
three months ended September 30, 2003. The increase in the average balance of
other investment securities outstanding during the three months ended September
30, 2003, was principally attributable to the reinvestment of a portion of the
Company's loan payment proceeds into callable floating rate U.S. government
sponsored agency bonds.
Interest Expense. Interest expense on deposits and escrows decreased $298
thousand or 30.9% for the three months ended September 30, 2003, when compared
to the same period in 2002. The decrease in interest expense on deposits and
escrows for the three months ended September 30, 2003, was attributable to a
$6.8 million decrease in the average balance of interest-bearing deposits and
escrows for the period, and a 66 basis point decrease in the weighted average
yield paid on interest-bearing deposits and escrows for the three months ended
September 30, 2003, when compared to the same period in 2002. The average yield
paid on interest-bearing deposits was consistent with market conditions for the
three months ended September 30, 2003. The decrease in the average balance of
interest-bearing deposits and escrows for the three months ended September 30,
2003 was primarily due to seasonal withdrawals of escrows for payment of local
and school taxes.
Interest on FHLB advances and other borrowings decreased $121 thousand or
5.4% for the three months ended September 30, 2003, when compared to the same
period in 2002. The decrease for the three months ended September 30, 2003, was
attributable to a $14.0 million decrease in the average balance of FHLB advances
and other borrowings for the period which was partially offset by a 11 basis
point increase in the weighted average rate paid on such borrowings when
compared to the same period in 2002. The weighted average rate paid on FHLB
advances and other borrowings declined less than the decline in market interest
rates due to longer average maturity of the Company's fixed-rate FHLB advances
outstanding and a higher proportion of long-term borrowings to total borrowings.
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 reduced its provision for loan losses by $133 thousand for the
three months ended September 30, 2003, compared to an $18 thousand provision for
the same period in 2002. At September 30, 2003, the Company's total allowance
for loan losses amounted to $2.4 million or 3.0% of the Company's total loan
portfolio, as compared to $2.8 million or 1.9% at September 30, 2002. The
decrease in the provision for loan losses is primarily the result of reduced
levels of net loans receivable and collections on past due loans.
Non-Interest Income. Non-interest income decreased by $51 thousand or 20.8%
for the three months ended September 30, 2003, when compared to the same period
in 2002. The decrease was primarily attributable to the absence of $64 thousand
in pre-tax gains recognized in the 2002 quarter on the sale of investments from
the Company's investment portfolio, which was partially offset by a $7 thousand
increase in correspondent mortgage application fee income and a $6 thousand
increase in service charge income earned on deposits.
Non-Interest Expense. Non-interest expense decreased $230 thousand or 20.5%
for the three months ended September 30, 2003, when compared to the same period
in 2002. The decrease was
13
principally attributable to a $111 thousand decrease in charitable contributions
eligible for Pennsylvania Education Tax Credits, a $90 thousand decrease in
payroll related costs and $41 thousand decrease in legal expenses and costs
associated with the work-out of non-performing assets, which were partially
offset by a $16 thousand increase in equipment expense incurred to upgrade the
Savings Bank's technology platform, when compared to the same period on 2002.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $1.3 million during the
three months ended September 30, 2003. Net cash provided by operating activities
was primarily comprised of $488 thousand in amortization of discounts, premiums
and deferred loan fees, a $449 thousand decrease in accrued interest
receivables, and $352 thousand of net income, which were partially offset by a
$133 thousand decrease in provision for loan losses.
Funds used for investing activities totaled $23.0 million during the three
months ended September 30, 2003. Primary uses of funds during the three months
ended September 30, 2003, included $180.8 million for purchases of investment
and mortgage-backed securities and including Federal Home Loan Bank stock, which
were partially offset by $144.2 million from repayments of investment and
mortgage-backed securities, and a $13.5 million decrease in net loans
receivable.
Funds provided by financing activities totaled $21.3 million for the three
months ended September 30, 2003. The primary sources included a $19.1 million
increase in other short-term borrowings and a $6.0 million increase in deposits
and escrows, which were offset by a $3.3 million decrease in short-term FHLB
advances, $410 thousand in cash dividends paid on the Company's common stock and
$200 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, 2003, the Company incurred
approximately $12.2 million in various short-term borrowings from the FHLB with
a weighted average rate of 1.10%, and incurred $108.2 million in other
short-term borrowings with a weighted average rate of 1.10%. During the three
months ended September 30, 2003, the Company repaid $15.5 million of various
short-term FHLB borrowings and $89.1 million of other short-term borrowings with
weighted average rates of 1.13% and 1.12%, respectively.
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. At September 30, 2003, the total approved loan
commitments outstanding amounted to $5.6 million. At the same date, commitments
under unused lines of credit amounted to $5.0 million, the unadvanced portion of
construction loans approximated $9.2 million and commitments to fund security
purchases totaled $2.0 million. Certificates of deposit scheduled to mature in
one year or less at September 30, 2003, totaled $55.3 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 also has access to the Federal Reserve Bank Primary
Credit Program. Management believes that the Company currently has adequate
liquidity available to respond to liquidity demands.
On October 28, 2003, the Company's Board of Directors declared a cash
dividend of $0.16 per share payable November 20, 2003, to shareholders of record
at the close of business on November 10, 2003. 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
14
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, 2003, WVS Financial Corp. exceeded all regulatory
capital requirements and maintained Tier I and total risk-based capital equal to
$30.0 million or 16.2% and $32.5 million or 17.6%, respectively, of total
risk-weighted assets, and Tier I leverage capital of $30.0 million or 7.96% of
average quarterly assets.
Nonperforming assets consist of nonaccrual loans and real estate owned. A
loan is placed on nonaccrual status when, in the judgment of management, the
probability of collection of interest is deemed insufficient to warrant further
accrual. When a loan is placed on nonaccrual status, previously accrued but
uncollected interest is deducted from interest income. The Company normally does
not accrue interest on loans past due 90 days or more, however, interest may be
accrued if management believes that it will collect on the loan.
The Company's nonperforming assets at September 30, 2003, totaled
approximately $3.9 million or 1.00% of total assets as compared to $3.5 million
or 0.95% of total assets at June 30, 2003. Nonperforming assets at September 30,
2003, consisted of: four commercial real estate loans totaling $3.2 million, one
construction and land development loan totaling $58 thousand, one commercial
loan totaling $22 thousand, two single-family real estate loans totaling $144
thousand, two home equity lines of credit totaling $15 thousand, and one parcel
of commercial real estate owned totaling $500 thousand.
The $368 thousand increase in nonperforming assets during the three months
ended September 30, 2003 was primarily attributable to the Savings Bank's
purchase of certain nonperforming participating interests discussed below.
As of September 30, 2003, the Company had four commercial real estate loans
classified as non-accrual loans.
The Company has one non-accrual commercial real estate loan to a retirement
village located in the North Hills area. The outstanding principal balance
totaled $2.3 million at September 30, 2003. During the quarter ended September
30, 2003 the Savings Bank purchased approximately $388 thousand of remaining
participating bank interests. Payments continue to be received on a timely
basis. The Company recorded interest received on this credit on a cost recovery
basis.
The Company has one non-accruing commercial real estate loan relationship,
with a carrying value of approximately $1 million, to a personal care home that
was originally part of the retirement village loan discussed above. Due to the
low occupancy of the personal care home, and the related cash drain on the
retirement 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 $363
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 December 31, 2002, the obligor filed for bankruptcy protection under
Chapter 11 of the Federal Bankruptcy Code. The Savings Bank obtained title to
the personal care home and related real property during the quarter ended
September 30, 2003 and anticipates a sale of such property during the second
quarter of fiscal 2004, with estimated proceeds of approximately $500 thousand.
The Company and its legal counsel are also investigating other claims and
remedies against other properties pledged as collateral for these loans.
As of September 30, 2003, the Company has one non-accruing commercial real
estate loan, secured by a small store front and three apartment units, with a
principal balance of $103 thousand. The obligors have filed for bankruptcy under
Chapter 7 of the Federal Bankruptcy Code. In January 2003 the Bankruptcy Court
entered an Order authorizing the listing for sale of the real property securing
the loan, ordered interest only payments to begin in February 2003 and granted.
15
Relief from the Automatic Stay to Foreclosure effective June 2003. The Company
has collected nominal rent on a sporadic basis with a sheriff's sale scheduled
for the second quarter of fiscal 2004.
During the three months ended September 30, 2003, approximately $58
thousand of interest income would have been recorded on loans accounted for on a
non-accrual basis and troubled debt restructurings if such loans had been
current according to the original loan agreements for the entire period. These
amounts were not included in the Company's interest income for the quarter ended
September 30, 2003. 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.
16
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 three months ended September 30, 2003, 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.
Due to the rapid and sustained decline in market interest rates, the
Company's loan, investment and mortgage-backed securities portfolios experienced
much higher than anticipated levels of prepayments. Principal repayments on the
Company's loan, investment and mortgage-backed securities portfolios for the
three months ended September 30, 2003, totaled $20.3 million, $82.9 million and
$61.2 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 continued 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 purchased callable floating rate government agency bonds and floating
rate CMOs in order to provide current income and protection against an eventual
rise in market interest rates. Each of the aforementioned strategies also helped
to improve the interest-rate
17
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 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, 2003, principal investment purchases
were comprised of: investment grade corporate bonds - $2.1 million with a
weighted average yield of approximately 1.95%; callable floating rate government
agency bonds which will reprice quarterly within one year - $94.2 million with a
weighted average yield of approximately 2.83%; investment grade commercial paper
- - $51.0 million with a weighted average yield of approximately 1.32%; and
floating rate collateralized mortgage obligations - $32.4 million with an
original weighted average yield of approximately 2.55%. Major investment
proceeds received during the quarter ended September 30, 2003 were: investment
grade corporate bonds - $16.3 million with a weighted average yield of
approximately 3.31%; investment grade commercial paper - $65.6 million with a
weighted average yield of approximately 1.38%; and tax-free municipal commercial
paper - $1.0 million with a weighted average yield of approximately 1.24%.
As of September 30, 2003, the implementation of these asset and liability
management initiatives resulted in the following:
1) the Company's liquidity profile remains high with the investment
portfolio's stated final maturities as follows: less than 1 year:
$61.3 million or 20.8%; 1-3 years: $1.1 million or 0.4%; 3-5 years:
$24 thousand or 0.01%; over 5 years: $232.4 million or 78.8%;
2) $96.9 million or 45.8% of the Company's investment portfolio
(including FHLB stock) was comprised of floating rate bonds which will
reprice quarterly within one year;
3) $70.9 million or 85.4% of the Company's portfolio of mortgage-backed
securities (including collateralized mortgage obligations - "CMOs")
were comprised of floating rate instruments;
4) the maturity distribution of the Company's borrowings is as follows:
less than 1 year: $29.5 million or 16.5%; 1-3 years: $4.2 or 2.3%; 3-5
years: $3.0 million or 1.7%; over 5 years: $142.1 million or 79.5%;
and
5) an aggregate of $32.2 million or 41.5% 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.
18
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,
------------- -----------------------
2003 2003 2002
------------- -----------------------
(Dollars in Thousands)
Interest-earning assets maturing or
repricing within one year $ 300,824 $262,782 $ 252,467
Interest-bearing liabilities maturing or
repricing within one year 169,628 133,418 142,823
----------- ----------- ----------
Interest sensitivity gap $ 131,196 $129,364 $ 109,644
Interest sensitivity gap as a percentage of =========== =========== ==========
total assets 33.7% 35.2% 27.1%
Ratio of assets to liabilities
maturing or repricing within one year 177.3% 197.0% 176.8%
During the quarter ended September 30, 2003, the Company managed its one
year interest sensitivity gap by: (1) purchasing floating rate U.S. Government
Agency bonds which will reprice quarterly beginning within one year; and (2)
purchasing floating rate CMO's which reprice on a monthly basis; and (3)
generally limiting incremental corporate bond purchases to those with repricing
dates within 3 months.
19
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, 2003. 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
($'s) 19,518 36,266 124,676 141,680 126,497 130,204 27,983
% of Total
Assets 5.0% 9.3% 32.0% 36.4% 32.5% 33.4% 7.2%
Base Case Up 100 bp
- -------------------
Cummulative Gap
($'s) 19,911 36,951 125,703 158,938 156,200 166,897 27,983
% of Total
Assets 5.1% 9.5% 32.3% 40.8% 40.1% 42.9% 7.2%
Base Case No Change
- -------------------
Cummulative Gap
($'s) 21,720 40,104 131,196 170,691 169,831 174,923 27,983
% of Total
Assets 5.6% 10.3% 33.7% 43.8% 43.6% 44.9% 7.2%
Base Case Down 100 bp
- ---------------------
Cummulative Gap
($'s) 23,967 43,963 136,816 178,041 176,838 177,932 27,983
% of Total
Assets 6.2% 11.3% 35.1% 45.7% 45.4% 45.7% 7.2%
Base Case Down 200 bp
- ---------------------
Cummulative Gap
($'s) 25,768 46,887 145,573 187,096 184,197 183,080 27,983
% of Total
Assets 6.6% 12.0% 37.4% 48.0% 47.3% 47.0% 7.2%
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 better estimate the possible effects on net interest
income due to changing market interest rates. Other key model parameters
include: estimated prepayment rates on the Company's loan, mortgage-backed
securities and investment portfolios; savings decay rate assumptions; and the
repayment terms and embedded options of the Company's borrowings.
20
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, 2003.
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 -56.7% -50.0% 0.00% 45.4% 89.4%
Return on average equity -1.36% -0.50% 5.65% 10.95% 15.84%
Return on average assets -0.10% -0.04% 0.42% 0.83% 1.23%
Market value of equity (in
thousands) $15,209 $11,541 $18,621 $20,565 $21,159
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,
2003.
Anticipated Transactions
- --------------------------------------------------------------------------------
(Dollars in Thousands)
Undisbursed construction and
land development loans
Fixed rate $ 332
6.09%
Adjustable rate $ 8,905
5.09%
Undisbursed lines of credit
Adjustable rate $ 6,567
4.69%
Loan origination commitments
Fixed rate $ 1,718
5.56%
Adjustable rate $ 3,846
4.91%
Letters of credit
Adjustable rate $ 5
7.00%
Commitments to purchase mortgage-backed securities
Adjustable rate $ 2,000
2.62%
------------
$ 23,373
============
21
In the ordinary course of its construction lending business, the Savings
Bank enters into performance standby letters of credit. Typically, the standby
letters of credit are issued on behalf of a builder to a third party to ensure
the timely completion of a certain aspect of a construction project or land
development. At September 30, 2003, the Savings Bank had one performance standby
letter of credit outstanding totaling approximately $5 thousand. The performance
standby letter of credit is secured by deposits with the Savings Bank, and will
mature within twelve months. In the event that the obligor is unable to perform
its obligations as specified in the standby letter of credit agreement, the
Savings Bank would be obligated to disburse funds up to the amount specified in
the standby letter of credit agreement. The Savings Bank maintains adequate
collateral that could be liquidated to fund this contingent obligation.
22
ITEM 4.
CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) as of September 30, 2003. Based on such evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and regulations and are
operating in an effective manner.
No change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred
during the first fiscal quarter of fiscal 2004 that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
23
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 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
------ --------------------------------------------------------------- ----
31.1 Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive E-1
Officer
31.2 Rule 13a-14(a) / 15d-14(a) Certification of the Chief E-2
Accounting Officer
32.1 Section 1350 Certification of the Chief Executive Officer E-3
32.2 Section 1350 Certification of the Chief Accounting Officer E-4
99 Independent Accountant's Report E-5
(b) The Company filed a Current Report on Form 8-K dated August 15,
2003, reporting under Item 12 earnings for the three and twelve
months ending June 30, 2003. The Company included as an exhibit to
the Form 8-K the press release dated August 15, 2003.
24
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, 2003 BY: /s/ David J. Bursic
Date --------------------------------------
David J. Bursic
President and Chief Executive Officer
(Principal Executive Officer)
November 14, 2003 BY: /s/ Keith A. Simpson
Date --------------------------------------
Keith A. Simpson
Vice-President, Treasurer and Chief
Accounting Officer
(Principal Accounting Officer)
25