<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM to
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Commission File Number 0-24898
MSB FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3203510
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization Number)
PARK AND KALAMAZOO AVENUE, N.E., MARSHALL, MICHIGAN 49068
----------------------------------------------------- --------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (616) 781-5103
--------------
Check 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
requirements for the past 90 days.
Yes [X] No [ ]
As of November 10, 1997, there were 1,233,622 shares of the Registrant's
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
<PAGE> 2
MSB FINANCIAL, INC.
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION......................................... 1
Item 1. Financial Statements (Unaudited).............................. 1
Consolidated Condensed Statements of Financial Condition.................. 1
Consolidated Condensed Statements of Income............................... 2
Consolidated Condensed Statements of Shareholders' Equity................. 3
Consolidated Condensed Statements of Cash Flows........................... 4-5
Notes to Consolidated Condensed Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 7-9
PART II. OTHER INFORMATION............................................. 10
SIGNATURES.................................................... 11
EXHIBIT INDEX................................................. 12
</TABLE>
<PAGE> 3
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
September 30, 1997 and June 30, 1997
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and due from financial institutions $ 1,534,687 $ 1,502,724
Interest-bearing deposits in other financial institutions 2,177,747 1,577,888
----------- ------------
Total cash and cash equivalents 3,712,434 3,080,612
Securities held to maturity (fair value of $10,609 at
September 30, 1997 and $11,455 at June 30, 1997) 10,609 11,455
Loans held for sale 580,000 150,000
Loans receivable, net of allowance for loan losses of
$316,142 at September 30, 1997 and $302,903 at June 30, 1997 69,963,614 68,739,556
Federal Home Loan Bank stock 1,063,100 1,043,700
Accrued interest receivable 445,618 420,921
Premises and equipment, net 566,953 577,058
Mortgage servicing rights 53,374 27,595
Other assets 618,377 646,887
----------- -----------
Total Assets $77,014,079 $74,697,784
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits $41,925,450 $41,706,732
Federal Home Loan Bank advances 21,260,709 19,373,600
Advance payments by borrowers for taxes and insurance 341,647 465,445
Accrued interest payable 89,953 79,114
Accrued expenses and other liabilities 656,577 382,697
----------- -----------
Total Liabilities 64,274,336 62,007,588
Shareholders' equity
Preferred stock, $.01 par value: 2,000,000 shares
authorized; none outstanding
Common stock, par value $.01: 4,000,000 shares
authorized; 1,483,014 shares issued and 1,233,622 shares
outstanding at September 30, 1997 and 1,483,014 shares
issued and 1,248,622 shares outstanding at June 30, 1997 14,830 14,830
Additional paid-in capital 7,130,255 7,096,776
Retained earnings, substantially restricted 8,582,022 8,372,493
Unallocated Employee Stock Ownership Plan shares (366,806) (383,006)
Unearned Recognition and Retention Plan shares (192,745) (208,084)
Treasury stock, at cost (249,392 shares at September 30, 1997
and 234,392 shares at June 30, 1997) (2,427,813) (2,202,813)
----------- -----------
Total Shareholders' Equity 12,739,743 12,690,196
----------- -----------
Total Liabilities & Shareholders' Equity $77,014,079 $74,697,784
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
1
<PAGE> 4
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
Three Months
------------
1997 1996
---- ----
<S> <C> <C>
Interest and dividend income
Loans receivable, including fees $ 1,539,707 $ 1,205,265
Securities available for sale 19,020
Securities held to maturity 190 4,976
Other interest and dividend income 47,588 31,247
----------- -----------
1,587,485 1,260,508
Interest expense
Deposits 391,609 384,244
Federal Home Loan Bank advances 321,521 106,431
Other interest expense 2,201 1,519
----------- -----------
715,331 492,194
----------- -----------
NET INTEREST INCOME 872,154 768,314
Provision for loan losses 25,000 9,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 847,154 759,314
Noninterest income
Loan servicing fees, net 21,106 22,152
Net gain on sales of loans held for sale 42,588 6,812
Service charges on deposit accounts 34,604 28,472
Profit on sale of real estate owned 10,666
Net realized losses on sale of securities available
for sale (32,240)
Other income 32,720 28,887
----------- -----------
141,684 54,083
Noninterest expense
Salaries and employee benefits 245,223 203,609
Occupancy and equipment expense 50,035 48,905
Data processing expense 43,614 39,295
Federal deposit insurance premium 12,942 29,536
Director fees 30,472 30,072
Correspondent bank charges 14,399 13,664
Michigan Single Business tax 18,000 9,000
Provision (recovery) to adjust loans held
for sale to lower of cost or market (3,945)
SAIF special assessment 268,752
Advertising expense 19,686 13,912
Professional fees 24,399 19,975
Supplies expense 13,319 14,362
Other 67,229 67,117
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539,318 754,254
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INCOME BEFORE FEDERAL INCOME TAX EXPENSE 449,520 59,143
Federal income tax expense 159,000 18,500
----------- -----------
NET INCOME $ 290,520 $ 40,643
=========== ===========
Earnings per common and common equivalent shares $ 0.24 $ 0.03
=========== ===========
Average common and common equivalent shares 1,213,623 1,219,850
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
2
<PAGE> 5
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
Three months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Loss on
Securities Unallocated Unearned
Additional Available Employee Stock Recognition Common
Common Paid-In Retained for Sale, Ownership and Retention Stock in
Stock Capital Earnings Net of Tax Plan Shares Plan Shares Treasury
----- ------- ------- ---------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1996 $ 7,408 $7,017,760 $7,870,150 $(37,622) $(451,399) $(254,200) $(1,557,753)
Net income 40,643
Shares committed to be released (1,704 shares)
under the Employee Stock Ownership Plan (ESOP) 13,632 17,040
Shares earned under the Recognition and
Retention Plan (RRP) 14,667
Cash dividends declared on common stock, net
of dividends on unallocated ESOP Shares (76,061)
Repurchase of 3,930 shares of common stock (32,693)
Change in unrealized loss on securities
available for sale 24,090
-------- ---------- ---------- -------- --------- --------- -----------
BALANCES, SEPTEMBER 30, 1996 $ 7,408 $7,031,392 $7,834,732 $(13,532) $(434,359) $(239,533) $(1,590,446)
======== ========== ========== ======== ========= ========= ===========
BALANCES, JULY 1, 1997 $14,830 $7,096,776 $8,372,493 $(383,006) $(208,084) $(2,202,813)
Net income 290,520
Shares committed to be released (3,240 shares)
under the Employee Stock Ownership Plan (ESOP) 33,479 16,200
Shares earned under the RRP 15,339
Cash dividends declared on common stock, net
of dividends on unallocated ESOP shares (80,991)
Repurchase of 15,000 shares of common stock (225,000)
-------- ---------- ---------- --------- --------- -----------
BALANCES, SEPTEMBER 30, 1997 $14,830 $7,130,255 $8,582,022 $(366,806) $(192,745) $(2,427,813)
======== ========== ========== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Total
Shareholders'
Equity
-------------
<S> <C>
BALANCE, JULY 1, 1996 $12,594,344
Net income 40,643
Shares committed to be released (1,704 shares)
under the Employee Stock Ownership Plan (ESOP) 30,672
Shares earned under the Recognition and
Retention Plan (RRP) 14,667
Cash dividends declared on common stock, net
of dividends on unallocated ESOP Shares (76,061)
Repurchase of 3,930 shares of common stock (32,693)
Change in unrealized loss on securities
available for sale 24,090
-----------
BALANCES, SEPTEMBER 30, 1996 $12,595,662
===========
BALANCES, JULY 1, 1997 $12,690,196
Net income 290,520
Shares committed to be released (3,240 shares)
under the Employee Stock Ownership Plan (ESOP) 49,679
Shares earned under the RRP 15,339
Cash dividends declared on common stock, net
of dividends on unallocated ESOP shares (80,991)
Repurchase of 15,000 shares of common stock (225,000)
-----------
BALANCES, SEPTEMBER 30, 1997 $12,739,743
===========
</TABLE>
See accompanying notes to consolidated condensed financial statements
3
<PAGE> 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 290,520 $ 40,643
Adjustments to reconcile net income
to net cash provided by operating activities
Provision for loan losses 25,000 9,000
Recovery to adjust loans held for sale
to lower of cost or market (3,945)
Depreciation 21,633 26,430
Amortization of mortgage servicing rights 436
Net amortization of premium 396
Employee Stock Ownership Plan expense 49,679 30,672
Recognition and Retention Plan expense 15,339 14,667
Originations of loans held for sale (2,781,527) (337,556)
Proceeds from sales of loans held for sale 2,367,900 436,373
Net gains on sales of loans originated for sale (42,588) (6,812)
Net realized losses on sales of securities available for sale 32,240
Change in assets and liabilities
Accrued interest receivable (24,697) (3,913)
Other assets 28,510 (12,250)
Accrued interest payable 10,839 5,066
Accrued expense and other liabilities 273,880 142,831
----------- -----------
Net cash from operating activities 234,924 373,842
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 1,001,520
Proceeds from maturities of securities held to maturity 1,000,000
Principal paydowns on mortgage-backed securities 846 976
Purchase of Federal Home Loan Bank stock (19,400) (83,300)
Net increase in loans (1,249,058) (4,890,940)
Net purchases of premises and equipment (11,528) (118,365)
----------- -----------
Net cash from investing activities (1,279,140) (3,090,109)
</TABLE>
(Continued)
4
<PAGE> 7
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Three months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $ 218,718 $ 663,029
Proceeds from Federal Home Bank advances 8,000,000 6,000,000
Repayments on Federal Home Bank advances (6,112,891) (4,000,000)
Decrease in advance payments
by borrowers for taxes and insurance (123,798) (110,947)
Payment of dividends on common stock (80,991) (76,061)
Repurchase of common stock (225,000) (32,693)
-------------- --------------
Net cash from financing activities 1,676,038 2,443,328
-------------- --------------
Net change in cash and cash equivalents 631,822 (272,939)
Cash and cash equivalents at beginning of period 3,080,612 2,180,060
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,712,434 $ 1,907,121
============== ==============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 702,292 $ 485,609
Income taxes 25,956 28,299
Supplemental disclosure of noncash investing activities
Transfer from loans held for sale to loans held to maturity $ 47,486
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE> 8
MSB FINANCIAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Three months ended September 30, 1997
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated condensed financial statements include the
accounts of MSB Financial, Inc. (the "Company") and its wholly-owned
subsidiary, Marshall Savings Bank, F.S.B. ("Bank") after the elimination of
significant intercompany transactions and accounts. The initial capitalization
of the Company and its acquisition of the Bank took place on February 6, 1995.
These interim financial statements are prepared in accordance with the
Securities and Exchange Commission's rules for quarterly financial information
without audit and reflect all adjustments which, in the opinion of management,
are necessary to present fairly the financial position of the Company at
September 30, 1997 and the results of its operations and its cash flows for the
periods presented. All such adjustments are normal and recurring in nature.
The accompanying consolidated condensed financial statements do not purport to
contain all the necessary disclosures required by generally accepted accounting
principles that might otherwise be necessary in the circumstances and should be
read in conjunction with the consolidated financial statements and notes
thereto included in the annual report of MSB Financial, Inc. for the year ended
June 30, 1997. The results of the periods presented are not necessarily
representative of the results of operations and cash flows which may be
expected for the entire year.
The provision for income taxes is based upon the effective tax rate expected to
be applicable for the entire year.
Earnings per common share for the periods presented in 1997 and 1996 were
computed by dividing net income by the weighted average number of common shares
outstanding and common share equivalents which would arise from considering
dilutive stock options, less Employee Stock Ownership Plan (ESOP) shares not
committed to be released. Net income was $290,520 for the three month period
ended September 30, 1997. The weighted average number of shares outstanding
for the 1997 period was 1,213,623. For the three month period ended September
30, 1996, net income was $40,643. The weighted average number of shares
outstanding for the 1996 period was 1,219,850.
NOTE 2 - REPURCHASES OF COMMON STOCK
On November 17, 1995 the Company received a "no objection" letter from the
Office of Thrift Supervision to repurchase up to 9% (129,962 shares) of its
common stock in the open market over a twelve month period. As of March 31,
1996 the Company had completed the repurchase program with a total of 129,962
shares at an average price of $9.35 per share. On April 22, 1996, the Company
received OTS approval to repurchase up to 5% (67,780 shares) of its common
stock. As of January 31, 1997, the Company had completed this repurchase
program with a total of 67,780 shares at an average price of $8.85 per share.
On February 11, 1997, the Company received OTS approval to repurchase up to 5%
(64,264 shares) of its common stock. As of September 30, 1997, 51,650 shares
had been repurchased at an average price of $11.87 and therefore the Company
has remaining approval to repurchase up to 12,614 shares. Approval to
repurchase these shares expires on February 11, 1998.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MSB Financial, Inc. (the "Company") was incorporated under the laws of the
State of Delaware for the purpose of becoming the savings and loan holding
company of Marshall Savings Bank, F.S.B. (the "Bank") in connection with the
Bank's conversion from a federally chartered mutual savings bank to a federally
chartered stock savings bank (the "Conversion"). On February 6, 1995 the
Conversion was completed and the Bank became a wholly-owned subsidiary of the
Company. The following discussion compares the consolidated financial
condition of the Company and the Bank at September 30, 1997 to June 30, 1997
and the results of operations for the three month period ended September 30,
1997 with the same period ended September 30, 1996. This discussion should be
read in conjunction with the consolidated condensed financial statements and
footnotes included herein.
Forward-Looking Statements
When used in this Quarterly Report on Form 10-QSB or 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", "believe" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. 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, and to advise readers that various
factors including regional and national economic conditions, changes in levels
of market interest rates, credit risks of lending activities, and competitive
and regulatory factors could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ
materially from those anticipated or projected.
The Company does not undertake and specifically disclaims any obligation
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
Financial Condition
Total assets increased $2.3 million to $77.0 million from June 30, 1997 to
September 30, 1997. Net loans, including loans held for sale, increased $1.7
million, or 2.4% for the period, due primarily to the strong demand for
mortgage loans, especially residential 1-4 family construction loans, in the
Company's market area. This increase was primarily funded by an increase of
$1.9 million in Federal Home Loan Bank advances.
Total liabilities increased $2.3 million to $64.3 million from June 30,
1997 to September 30, 1997. In addition to the increase in the Federal Home
Loan Bank advances discussed above, were increases in deposits of $219,000,
accrued expenses and other liabilities of $273,000 and accrued interest payable
of $11,000. Offsetting the above increases in liabilities for the period was a
decrease of $124,000 in advance payments by borrowers for taxes and insurance.
The repurchase of the Company's common stock, payment of dividends
declared on common stock, and net income resulted in a net increase in
shareholders' equity of $50,000.
Results of Operations
GENERAL. The Company's results of operations depend primarily upon the level
of net interest income, which is the difference ("spread") between average
yield earned on loans and securities, interest-bearing deposits, and other
interest-earning assets, and the average rate paid on deposits and borrowed
funds, as well as competitive factors that influence interest rates, loan
demand, and deposit flows. Results of operations are also dependent upon the
level of the Company's noninterest income, including fee income and service
charges, and the level of its noninterest expense, including general and
administrative expenses. The Company, like other financial institutions, is
subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice at different times, or on a different basis, than
its interest-earning assets.
NET INCOME. Net income for the three months ended September 30, 1997 was
$291,000, as compared to $41,000 for the same period ended September 30, 1996.
Net income for the period ended September 30, 1996 was reduced by $170,000, net
of taxes, due to a non-recurring special assessment to recapitalize the Savings
Association Insurance Fund (SAIF). Net income, without the SAIF assessment,
for the three months ended
7
<PAGE> 10
September 30, 1996 was $211,000, as compared to $291,000 for the same three
month period in 1997, resulting in an increase of $80,000, or 37.9%.
NET INTEREST INCOME. Net interest income increased $104,000, or 13.7%, to
$872,000 for the three month period ended September 30, 1997. The increase in
net interest income for the three month period ended September 30, 1997
compared to the same period in 1996 was primarily a result of an increase in
interest income. Interest income increased primarily due to the increase in
the average outstanding balance of net loans, as discussed above. The weighted
average yield on the loan portfolio for the three month period ended September
30, 1997 increased 11 basis points to 8.71% from 8.60% for the same period
ended September 30, 1996. Interest expense increased $223,000 for the three
month period ended September 30, 1997 as compared to the same period in 1996.
This increase was attributable to an increase in the interest paid on Federal
Home Loan Bank advances for the three month period ended September 30, 1997 of
$215,000, when compared to three month period ended September 30, 1996.
PROVISION FOR LOAN LOSSES. The provision for loan losses is a result of
management's periodic analysis of the adequacy of the allowance for loan
losses. The provision for loan losses increased by $16,000 to $25,000 for the
three month period ended September 30, 1997 as compared to the three month
period ended September 30, 1996, due to the increase in size of the loan
portfolio and management's continuing reassessment of losses inherent in the
loan portfolio. At September 30, 1997 the Company's allowance for loan losses
totaled $316,000 or 0.45% of net loans receivable and 40.20% of total
non-performing loans. At June 30, 1997, the Company's allowance for loan
losses totaled $303,000, or 0.44% of net loans receivable and 65.16% of total
non-performing loans.
Management establishes an allowance for loan losses based on an analysis
of risk factors in the loan portfolio. This analysis includes the evaluation
of concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio, estimated fair value of
underlying collateral, loan commitments outstanding, delinquencies, and other
factors. Because the Company has had extremely low loan losses during its
history, management also considers loss experience of similar portfolios in
comparable lending markets. Accordingly, the calculation of the adequacy of
the allowance for loan losses was not based directly on the level of
non-performing assets.
As of September 30, 1997, the Company's non-performing assets, consisting
of nonaccrual loans and accruing loans 90 days or more delinquent, totaled
$786,000, or 1.12% of total loans, compared to $465,000, or 0.62% of total
loans as of June 30, 1997, an increase of $321,000. The increase is primarily
attributed to the addition of five loans, all one- to four-family loans, that
were accruing loans 90 days or more delinquent as of September 30, 1997 but
were less than 90 days delinquent as of June 30, 1997. Loans greater than 90
days past due, and other designated loans of concern, are placed on non-accrual
status, unless it is determined that the loans are well collateralized and in
the process of collection. There was no real estate owned as of September 30,
1997.
Management will continue to monitor the allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Company maintains its allowance for
loan losses at a level which it considers to be adequate to provide for losses,
there can be no assurance that future losses will not exceed estimated amounts
or that additional provisions for loan losses will not be required in future
periods. In addition, management's determination as to the amount of the
allowance for loan losses is subject to review by the Office of Thrift
Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC), as part
of their examination process, which may result in the establishment of an
additional allowance based upon their judgment of the information available to
them at the time of their examination.
NONINTEREST INCOME. Noninterest income consists primarily of gains on the sale
of loans, gains or losses on sale of securities available for sale, loan
servicing fees, service fees on deposit accounts and other fees. Noninterest
income increased $88,000 during the three month period ended September 30, 1997
compared to the three month period ended September 30, 1996. The increase for
the three month period ended September 30, 1997 was due to increases in gains
on sales of loans of $36,000, due to increased sales of mortgage loans, and the
profit on the sale of real estate owned of $11,000. Also, net realized losses
of $32,000 on the sale of securities available for sale during the three month
period ending September 30, 1996 resulted in lower noninterest income for the
1996 period. There were no other significant changes in the components of
noninterest income.
NONINTEREST EXPENSE. Noninterest expense was $539,000 for the three month
period ended September 30, 1997 compared to $754,000 reported for the same
prior year period. Noninterest expense for the three month period
ended September 30, 1996 without the special SAIF assessment discussed above
was $486,000, and when compared to $539,000 for the same period ending
September 30, 1997, shows an increase of $53,000, or 11.1%
8
<PAGE> 11
in total noninterest expense for the 1997 period. Salaries and employee
benefits, the largest component of noninterest expense, increased $42,000 for
the three month period ended September 30, 1997, compared to the same period
during 1996. Significant factors causing the increase in salaries and employee
benefits was the addition of another full-time employee during the 1997 period
and increases in expenses associated with the Company's stock-based benefit
plans, as a result of the Company's stock price. Also contributing to the
increase in noninterest expense, is an increase of $9,000 in the Michigan Single
Business Tax for the three month period ending September 30, 1997 compared to
the same period in 1996.
INCOME TAX EXPENSE. Income tax expense increased $141,000 for the three month
period ended September 30, 1997 compared to the same period in 1996 due to the
increase in net income. The Company's effective tax rate remains at
approximately 34%.
Liquidity and Capital Resources
The Company's principal sources of funds are deposits, principal and
interest repayments on loans, sales of loans, interest-bearing deposits and
securities available for sale. While scheduled loan repayments and maturing
investments are relatively predictable, deposit flows and early loan
prepayments are more influenced by interest rates, general economic conditions
and competition.
Federal regulations have required the Bank to maintain minimum levels of
liquid assets. The required percentage has varied from time to time based upon
economic conditions and savings flows and is currently 5% of net withdrawable
savings deposits and borrowings payable on demand or in one year or less during
the preceding calendar month. Liquid assets for purposes of this ratio include
cash, certain time deposits, U.S. Government, government agency and other
securities and obligations generally having remaining maturities of less than
five years. The Bank has maintained its liquidity ratio at levels in excess of
those required. At September 30, 1997, the Bank's liquidity ratio was 5.20%.
The Company uses its liquidity resources principally to meet ongoing
commitments, to fund maturing certificates of deposit and deposit withdrawals
and to meet operating expenses. The Company anticipates that it will have
sufficient funds available to meet current loan commitments. At September 30,
1997, the Company had outstanding commitments to extend credit which amounted
to $5.1 million (including $3.2 million in available home equity lines of
credit). At September 30, 1997, the Company had $21.3 million in advances from
the FHLB of Indianapolis outstanding. Management believes that loan repayments
and other sources of funds, including Federal Home Loan Bank advances, will be
adequate to meet the Company's foreseeable liquidity needs.
At September 30, 1997 the Bank had tangible capital of $9.9 million, or
12.9% of adjusted total assets which was $8.8 million above the minimum capital
requirement of $1.1 million, or 1.5% of adjusted total assets.
The Bank had at September 30, 1997, core capital of $9.9 million, or 12.9%
of adjusted total assets which was $7.6 million above the minimum capital
requirement of $2.3 million, or 3.0% of adjusted total assets.
At September 30, 1997, the Bank had total risk based capital of $10.2
million and risk weighted assets of $47.3 million or total risk based capital
of 21.6% of risk weighted assets. This amount was $6.4 million above the
minimum regulatory requirement of $3.8 million, or 8.0% of risk weighted
assets.
9
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
10
<PAGE> 13
Pursuant to the requirement 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.
SIGNATURES
MSB FINANCIAL, INC.
Registrant
Date: November 12, 1997 \s\ Charles B. Cook
-------------------------------------
Charles B. Cook, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: November 12, 1997 \s\ Elaine R. Carbary
-------------------------------------
Elaine R. Carbary, Chief Financial
Officer (Principal Financial Officer)
11
<PAGE> 14
MSB FINANCIAL, INC.
EXHIBIT INDEX
Exhibit No. Description
- ----------- ------------
27 Financial Data Schedule
12
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE FOLLOWING SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE REGISTRANT'S QUARTERLY REPORT ON FORM
10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,534,687
<INT-BEARING-DEPOSITS> 2,177,747
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 10,609
<INVESTMENTS-MARKET> 10,609
<LOANS> 70,859,756
<ALLOWANCE> 316,142
<TOTAL-ASSETS> 77,014,079
<DEPOSITS> 41,925,450
<SHORT-TERM> 4,000,000
<LIABILITIES-OTHER> 1,088,177
<LONG-TERM> 17,260,709
0
0
<COMMON> 14,830
<OTHER-SE> 12,724,913
<TOTAL-LIABILITIES-AND-EQUITY> 77,014,079
<INTEREST-LOAN> 1,539,707
<INTEREST-INVEST> 190
<INTEREST-OTHER> 47,588
<INTEREST-TOTAL> 1,587,485
<INTEREST-DEPOSIT> 391,609
<INTEREST-EXPENSE> 715,331
<INTEREST-INCOME-NET> 872,154
<LOAN-LOSSES> 25,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 539,318
<INCOME-PRETAX> 449,520
<INCOME-PRE-EXTRAORDINARY> 290,520
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290,520
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 0
<LOANS-NON> 16,589
<LOANS-PAST> 769,006
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 302,903
<CHARGE-OFFS> 12,241
<RECOVERIES> 480
<ALLOWANCE-CLOSE> 316,142
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
