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WVS Financial Corp. Reports Operating Results (10-Q)

February 12, 2010 | About:
10qk

10qk

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WVS Financial Corp. (WVFC) filed Quarterly Report for the period ended 2009-12-31.

Wvs Financial Corp. has a market cap of $29 million; its shares were traded at around $14 with a P/E ratio of 20.9 and P/S ratio of 1.6. The dividend yield of Wvs Financial Corp. stocks is 4.6%. Wvs Financial Corp. had an annual average earning growth of 6.8% over the past 10 years.

Highlight of Business Operations:

The Companys assets totaled $391.6 million at December 31, 2009, as compared to $419.4 million at June 30, 2009. The $27.8 million or 6.6% decrease in total assets was primarily comprised of a $23.9 million or 13.8% decrease in mortgage-backed securities (MBS) held to maturity, a $18.8 million or 85.9% decrease in cash and cash equivalents, a $10.6 million or 42.8% decrease in FDIC insured certificates of deposit, and a $493 thousand or 100.0% decrease in investment securities available for sale, which were partially offset by a $21.8 million or 17.7% increase in investment securities held-to-maturity, a $1.9 million or 3.4% increase in net loans receivable, a $965 thousand or 96.5% increase in deferred taxes and other assets, and a $960 thousand or 100.0% increase in trading assets. The decrease in mortgage-backed securities held to maturity was due to paydowns on the Companys mortgage-backed securities portfolio which were partially offset by $8.1 million in purchase of floating rate U.S. Government agency Collateralized Mortgage Obligations (CMOs). During the quarter ended December 31, 2009, overall replacement yields on floating rate MBS began to improve. As a result, the Company chose to reinvest a portion of its cash flows into purchases of U.S. Government agency floating-rate MBSs. The decrease in FDIC insured certificates of deposit was primarily due to $20.2 million in redemptions of bank certificates of deposit which were partially offset by $9.6 million of purchases of bank certificates of deposit. The Company chose to reduce its overall investment in certificates of deposits due to a narrowing of spreads when compared to other investment sectors. The decrease in investment securities available for sale was the result of the sale of an investment with an amortized cost of $500 thousand, during the six months ended December 31, 2009. The increase in investment securities held to maturity was primarily due to purchases of $33.7 million of fixed rate investment grade corporate bonds, $15.0 million of U.S. Government agency step-up bonds, $4.7 million of floating rate investment grade foreign bonds, $2.0 million of fixed to floating rate U.S. Government agency bonds, $1.0 million of short-term taxable municipal bonds, $1.0 million of floating rate investment grade corporate bonds, $760 thousand of callable fixed rate U.S. Government agency bonds and $418 thousand of floating rate investment grade foreign bonds, which were partially offset by $21.8 million of issuer redemptions prior to maturity (i.e. calls) of U.S. Government agency bonds, $9.7 million of maturities and calls of investment grade corporate bonds, $3.0 million of maturities of investment grade foreign bonds, $1.0 million of maturities of tax-free municipal bonds and $406 thousand of repayments on investment grade corporate utility first mortgage bonds . See Asset and Liability Management.

The Companys total liabilities decreased $27.5 million or 7.1% to $360.8 million as of December 31, 2009 from $388.3 million as of June 30, 2009. The $27.5 million decrease in total liabilities was primarily comprised of a $31.4 million or 28.9% decrease in short-term Federal Reserve Bank borrowings and a $1.8 million or 1.2% decrease in total savings deposits which were partially offset by $5.0 million or 100.0% increase in other FHLB short-term advances and a $775 thousand increase in other liabilities. The decrease in FRB short-term borrowings was funded primarily by a planned reduction of cash equivalents and investment cash flows received during the six months ended December 31, 2009. Certificates of deposit decreased $4.0 million, money market accounts decreased $1.1 million and advance payments by borrowers for taxes and insurance decreased $261 thousand while demand deposits increased $2.3 million and savings accounts increased $1.3 million. The increase in demand deposits may be attributable to social security payments for January 2010 being paid by the Social Security Administration, and credited by the Company, on December 31, 2009. The changes in passbook savings, money market accounts and certificates of deposit may reflect lower market rates on certificates and a shift in consumer preferences to more liquid savings options. Management believes that the changes in advance payments by borrowers for taxes and insurance were primarily attributable to seasonal payments of local and school real estate taxes. The change in other liabilities was primarily attributable to the Companys commitment to purchase an investment security in early January 2010.

General. WVS reported net income of $133 thousand or $0.06 earnings per share (basic and diluted) and $304 thousand or $0.15 earnings per share (basic and diluted) for the three and six months ended December 31, 2009, respectively. Net income decreased by $879 thousand or 86.9% and earnings per share (basic and diluted) decreased $0.41 or 87.2% for the three months ended December 31, 2009, when compared for the same period in 2008. The decrease in net income was primarily attributable to a $1.4 million decrease in net interest income and a $23 thousand decrease in non-interest income, which were partially offset by a $500 thousand decrease in income tax expense, a $36 thousand decrease in non-interest expense and a $36 thousand decrease in provisions for loan losses. For the six months ended December 31, 2009, net income decreased $1.5 million or 82.8% and earnings per share (basic and diluted) decreased $0.66 or 81.5% when compared to the same period in 2008. The decrease in net income was primarily attributable to a $2.3 million decrease in net interest income and a $37 thousand decrease in non-interest income, which were partially offset by a $737 thousand decrease in income tax expense, a $101 thousand decrease in non-interest expense and a $27 thousand decrease in provision for loan losses.

Non-Interest Expense. Non-interest expense decreased $36 thousand or 3.7% and $101 thousand or 5.2% for the three and six months ended December 31, 2009, respectively, when compared to the same periods in 2008. The decrease for the three months ended December 31, 2009 was principally attributable to a $75 thousand decrease in employee related expenses, a $20 thousand decrease in legal expenses, a $9 thousand decrease in ATM network expense, a $9 thousand decrease in charitable contributions eligible for PA tax credits and a $8 thousand decrease in advertising, which were partially offset by a $67 thousand increase in Federal Deposit Insurance expense and a $25 thousand increase in provisions for losses on off-balance sheet commitments when compared to the same period in 2008. The decrease for the six months ended December 31, 2009 was primarily attributable to $109 thousand decrease in charitable contributions eligible for PA tax credits, a $95 thousand decrease in employee related expenses, and a $24 thousand decrease in ATM network expenses, which were partially offset by a $139 thousand increase in Federal Deposit Insurance expense.

Funds used for financing activities totaled $28.9 million for the six months ended December 31, 2009. The primary uses included a $31.4 million decrease in short-term FRB borrowings, a $1.8 million decrease in deposits, $662 thousand in cash dividends paid on the Companys common stock, and $63 thousand in treasury stock purchases, which were partially offset by a $5.0 million increase in FHLB short-term advances. The decrease in FRB short-term borrowings reflects paydowns on the borrowings through cash flows and cash available at June 30, 2009. The $1.8 million decrease in total deposits consisted of a $4.0 million decrease in time deposits, a $1.1 million decrease in money market accounts, and a $261 thousand decrease in mortgage escrow accounts, which were partially offset by a $2.3 million increase in demand deposits, and a $1.3 million increase in passbook accounts. The increase in demand deposits may be attributable to social security payments for January 2010 being paid by the Social Security Administration on December 31, 2009. The changes in passbook savings, money market accounts and certificates of deposit may reflect lower market rates on certificates and a shift in consumer preferences to more liquid savings options. The decreases in escrow accounts were due primarily to the payments of local property taxes by and for customers. Management believes that it currently is maintaining adequate liquidity and continues to match funding sources with lending and investment opportunities.

The $667 thousand increase in nonperforming assets during the six months ended December 31, 2009 was attributable to the classification to non-performing of: three single family real estate loans totaling $861 thousand, one home equity line of credit totaling $300 thousand and one home equity loan totaling $54 thousand, which were partially offset by the reclassification of; one multi-family real estate loan totaling $465 thousand, one single family real estate loan totaling $55 thousand and one home equity loan totaling $21 thousand, (all of which paid current in the period) to performing, the charge-off of one commercial loan totaling $6 thousand, and paydowns on non-performing loans of $1 thousand.

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