<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 December 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ to _______________
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 February 12, 1998, there were 1,231,610 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 Cash Flows............................. 3-4
Notes to Consolidated Condensed Financial Statements........................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 6-8
PART II. OTHER INFORMATION.......................................... 9
SIGNATURES................................................. 10
EXHIBIT INDEX.............................................. 11
</TABLE>
<PAGE> 3
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
December 31, 1997 and June 30, 1997
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
-------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from financial institutions $ 1,864,492 $ 1,502,724
Interest-bearing deposits 906,266 1,577,888
-------------- ---------------
Total cash and cash equivalents 2,770,758 3,080,612
Securities held to maturity (fair value of $9,763 at
December 31, 1997 and $11,455 at June 30, 1997) 9,763 11,455
Loans held for sale 255,010 150,000
Loans receivable, net of allowance for loan losses of
$331,634 at December 31, 1997 and $302,903 at June 30, 1997 71,572,018 68,739,556
Federal Home Loan Bank stock 1,063,100 1,043,700
Accrued interest receivable 434,205 420,921
Premises and equipment, net 625,326 577,058
Mortgage servicing rights 85,199 27,595
Other assets 628,184 646,887
-------------- ---------------
Total Assets $ 77,443,563 $ 74,697,784
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits $ 42,358,441 $ 41,706,732
Federal Home Loan Bank Advance 21,162,967 19,373,600
Advance payments by borrowers for taxes and insurance 159,791 465,445
Accrued interest payable 91,721 79,114
Accrued expenses and other liabilities 610,692 382,697
-------------- ---------------
Total Liabilities 64,383,612 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 1,236,510 shares
outstanding at December 31, 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 7,165,345 7,096,776
Retained earnings, substantially restricted 8,809,248 8,372,493
Unallocated Employee Stock Ownership Plan shares (350,606) (383,006)
Unearned Recognition and Retention Plan shares (177,406) (208,084)
Less cost of Common Stock in Treasury- 249,392 shares at
December 31, 1997 and 234,392 shares at June 30, 1997 (2,401,460) (2,202,813)
-------------- ---------------
Total Shareholders' Equity 13,059,951 12,690,196
-------------- ---------------
Total Liabilities & Shareholders' Equity $ 77,443,563 $ 74,697,784
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
1
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Six months and three months ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
---------- ------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and dividend income
Loans, including fees $ 3,120,736 $ 2,526,789 $ 1,581,029 $ 1,321,525
Securities available for sale 28,179 9,158
Securities held to maturity 365 5,229 175 253
Other interest and dividends 102,977 58,892 55,389 27,645
------------- ------------- ------------- --------------
3,224,078 2,619,089 1,636,593 1,358,581
Interest Expense
Deposits 791,560 772,748 399,951 388,504
Federal Home Loan Bank Advance 659,993 261,179 338,472 154,749
Other interest expense 4,764 2,755 2,563 1,236
------------- ------------- ------------- --------------
1,456,317 1,036,682 740,986 544,489
------------- ------------- ------------- --------------
NET INTEREST INCOME 1,767,761 1,582,407 895,607 814,092
Provision for loan losses 40,000 18,000 15,000 9,000
------------- ------------- ------------- --------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,727,761 1,564,407 880,607 805,092
Noninterest income
Loan servicing fees 38,771 43,555 17,665 21,404
Gain on sales of loans 111,300 15,735 68,711 8,922
Service fees on deposit accounts 75,976 58,333 41,372 29,861
Profit on sale of real estate owned 10,666
Loss on sale of securities available
for sale (35,747) (3,507)
Other 68,716 56,668 35,997 27,782
------------- ------------- ------------- --------------
305,429 138,544 163,745 84,462
Noninterest expense
Salaries and employee benefits 499,310 411,950 254,087 208,341
Buildings, occupancy and equipment 99,202 99,206 49,167 50,301
Data processing 91,360 77,831 47,746 38,536
Federal deposit insurance premiums 25,954 53,006 13,012 23,470
Director fees 62,044 61,494 31,572 31,422
Correspondent bank charges 28,703 28,177 14,304 14,512
Michigan Single Business tax 35,000 25,550 17,000 16,550
Provision (recovery) to adjust loans held
for sale to lower of cost or market (13,645) (9,699)
SAIF special assessment 268,752
Professional fees 54,465 52,219 30,066 32,244
Other 213,212 197,721 112,978 102,330
------------- ------------- ------------- --------------
1,109,250 1,262,261 569,932 508,007
------------- ------------- ------------- --------------
INCOME BEFORE FEDERAL INCOME
TAX EXPENSE 923,940 440,690 474,420 381,547
Federal income tax expense 325,000 149,500 166,000 131,000
------------- ------------- ------------- --------------
NET INCOME $ 598,940 $ 291,190 $ 308,420 $ 250,547
============= ============= ============= ==============
Basic earnings per share $ 0.48 $ 0.22 $ 0.25 $ 0.19
============= ============= ============= ==============
Weighted average common
share outstanding 1,238,768 1,304,962 1,234,783 1,301,832
============= ============= ============= ==============
Diluted earnings per share $ 0.47 $ 0.22 $ 0.25 $ 0.19
============= ============= ============= ==============
Weighted average common and diluted
potential common shares outstanding 1,262,637 1,310,921 1,248,092 1,305,404
============= ============= ============= ==============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 5
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six months ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 598,940 $ 291,190
Adjustments to reconcile net income
to net cash from operating activities
Provision for loan losses 40,000 18,000
Provision (recovery) to adjust loans held
for sale to lower of cost or market (13,645)
Depreciation 45,266 52,860
Amortization of mortgage servicing rights 5,370
Net amortization of premium 396
Employee Stock Ownership Plan expense 104,760 61,344
Recognition and Retention Plan expense 30,678 29,558
Originations of loans held for sale (6,402,472) (1,274,269)
Proceeds from sales of loans held for sale 6,345,916 988,416
Net gains on sales of loans held for sale (111,428) (15,734)
Net losses on sales of securities available for sale (35,747)
Change in assets and liabilities
Accrued interest receivable (13,284) 1,120
Other assets 18,703 8,435
Accrued interest payable 12,607 10,862
Other expense and other liabilities 227,995 (249,520)
------------- --------------
Net cash from operating activities 903,051 (126,734)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 1,591,835
Proceeds from maturities of securities held to maturity 1,000,000
Principal paydowns on mortgage-backed securities 1,692 1,884
Purchase of Federal Home Loan Bank stock (19,400) (283,300)
Net increase in loans (2,872,462) (8,807,410)
Net purchases of premises and equipment (93,534) (123,711)
------------- --------------
Net cash used in investing activities (2,983,704) (6,620,702)
</TABLE>
(Continued)
3
<PAGE> 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six months ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $ 651,709 $ 867,176
Proceeds from Federal Home Bank advances 11,000,000 6,000,000
Repayments on Federal Home Bank advances (9,210,633)
Decrease in advance payments
by borrowers for taxes and insurance (305,654) (325,087)
Payment of dividends on common stock (162,185) (151,556)
Repurchase of common stock (225,000) (153,257)
Exercise of stock options 22,562
------------- --------------
Net cash from financing activities 1,770,799 6,237,276
------------- --------------
Net change in cash and cash equivalents (309,854) (510,160)
Cash and cash equivalents at beginning of period 3,080,612 2,180,060
------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,770,758 $ 1,669,900
============= ==============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 1,438,946 $ 1,023,066
Income taxes 402,956 178,299
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.
4
<PAGE> 7
MSB FINANCIAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Six months ended December 31,1997
(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
December 31, 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.
Basic and diluted earnings per share for the periods presented in 1997
and 1996 are computed under a new accounting standard effective in the quarter
ended December 31, 1997. All prior amounts have been restated to be
comparable. Basic earnings per share is based on net income divided by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share shows the dilutive effect of additional common
shares issuable under stock option plans. Net income was $598,940 and $308,420
for the six month and three month periods ended December 31, 1997. The
weighted average number of common shares outstanding for the six and three
month periods ended December 31, 1997, were 1,238,768 and 1,234,783,
respectively. The weighted average of number of common and diluted potential
common shares outstanding for the six and three months ended December 31, 1997,
were 1,262,637 and 1,248,092, respectively. For the six month and three month
periods ended December 31, 1996, respectively, net income was $291,190 and
$250,547. The weighted average number of common shares outstanding for the six
and three month periods ended December 31, 1996, were 1,304,962 and 1,301,832,
respectively. The weighted average number of common and diluted potential
common shares outstanding for the six and three months ended December 31, 1996,
were 1,310,921 and 1,305,404, respectively.
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, he 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 December 31, 1997, 51,650 shares had
been repurchased at an average price of $11.87 per share. Approval to
repurchase these shares expired on February 11, 1998, with a total of 56,550
shares repurchased at an avearge price of $12.31 per share.
5
<PAGE> 8
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 December 31, 1997 to June 30, 1997 and the
results of operations for the three and six month periods ended December 31,
1997 with the same periods ended December 31, 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 of 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",
"estimated", "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 $2.7 million to $77.4 million from June 30, 1997
to December 31, 1997. Net loans, including loans held for sale, increased by
$2.9 million, or 4.3% 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
$1.8 million in Federal Home Loan Bank advances and a $652,000 increase in
deposits.
Total liabilities increased $2.4 million to $64.4 million from June 30,
1997 to December 31, 1997. In addition to the increase in the Federal Home Loan
Bank advances and deposits discussed above, were increases in accrued expenses
and other liabilities of $228,000 and accrued interest payable of $13,000.
Offsetting the above increases in liabilities for the period was a decrease of
$306,000 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 $370,000.
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 the
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.
6
<PAGE> 9
NET INCOME. Net income for the three months ended December 31, 1997 was
$308,000, 23.1% higher than net income of $251,000 for same period ended
December 31, 1996. Net income for the six month period ended December 31, 1997
was $599,000, compared to net income of $291,000 for the same period in 1996.
Net income for the six month period ended December 31, 1996 was reduced by
$170,000, net of taxes, due to a non-recurring special assessment to
recapitalize the Savings Assocation Insurance Fund (SAIF). Net income, without
the SAIF assessment, for the six months ended December 31, 1996 was $461,000 as
compared to $599,000 for the same six month period in 1997, resulting in an
increase of $138,000, or 29.9%.
NET INTEREST INCOME. Net interest income increased $82,000, or 10.0%,
to $896,000 for the three month period ended December 31, 1997. For the six
month period ended December 31, 1997 net interest income increased $185,000, or
11.7%, to $1.8 million. The increases in net interest income for the three
month and six month periods ended December 31, 1997 compared to the same periods
in 1996 were 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 December 31, 1997 increased 18
basis points to 8.83% from 8.65% for the same period ended December 31, 1996.
For the six month period ended December 31, 1997 the weighted average yield on
the loan portfolio was 8.77%, compared to 8.63% for the same period ended
December 31, 1996, an increase of 14 basis points. Interest expense increased
$196,000 for three month period ended December 31, 1997 and increased $420,000
for the six month period ended December 31, 1997, as compared to the same
periods in 1996. These increases are attributable to an increase in interest
paid on Federal Home Loan Bank advances for the three month and six month
periods ended December 31, 1997 of $184,000 and $399,000, respectively, when
compared to the same periods ended December 31, 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 $6,000 to $15,000 for the
three month period ended December 31, 1997 as compared to the three month period
ended December 31, 1996, due to management's continuing reassessment of losses
inherent in the loan portfolio. At December 31, 1997 the Company's allowance
for loan losses totaled $332,000 or 0.46% of net loans receivable and 51.31% 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 December 31, 1997, the Company's non-performing assets, consisting
of nonaccrual loans and accruing loans 90 days or more delinquent, totaled
$647,000, or 0.90% of total loans, compared to $465,000, or 0.67% of total loans
as of June 30, 1997, an increase of $182,000. 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 at December 31, 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 $79,000 during the three month period ended
December 31, 1997 compared to the three month period ended December 31, 1996.
For the six month period ended December 31, 1997 noninterest income increased
$167,000 compared the six month period ended December 31, 1996. The increase
for the six month
7
<PAGE> 10
period ended December 31, 1997, was due to increases in gains on sales of loans
of $96,000, due to increased sales of loans, an increase of $18,000 in service
charges on deposit accounts and a $11,000 profit on the sale of real estate
owned. Also, net realized losses of $36,000 on the sale of securities
available for sale during the six month period ended December 31, 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 $570,000 for the three
month period ended December 31, 1997 compared to $508,000 reported for the same
prior year period, an increase of $62,000 or 12.2%. For the six month period
ended December 31, 1996 noninterest expense was $1.3 million including the
non-recurring SAIF assessment of $269,000. Noninterest expense without the SAIF
assessment was $994,000 for the six month period ended December 31, 1996,
compared to $1.1 million for the same six month period in 1997, an increase of
$116,000 or 11.6%. Salaries and employee benefits, the largest component of
noninterest expense, increased $46,000 and $87,000 for the three month and six
month periods ended December 31, 1997, respectively, compared to the same
periods during 1996. Significant factors causing the increase in salaries and
employee benefits was the addition of a 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 was a recovery of $14,000 during the six
month period ended December 31, 1996, to adjust loans held for sale to the
lower of cost value or market value.
INCOME TAX EXPENSE. Income tax expense increased $35,000 and $176,000
for the three and six month periods ended December 31, 1997 compared to the same
periods 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 4% 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 December 31, 1997, the Bank's liquidity ratio was 6.90%.
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 December 31,
1997, the Company had outstanding commitments to extend credit which amounted to
$5.0 million (including $3.2 million in available home equity lines of credit).
At December 31, 1997, the Company had $21.1 million in advances from the Federal
Home Loan Bank of Indianapolis outstanding. Management believes that loan
repayments and other sources of funds, including Federal Home Loan Bank
borrowings, will be adequate to meet the Company's foreseeable liquidity needs.
At December 31, 1997, the Bank had tangible capital of $9.7 million, or
12.5% of adjusted total assets which was $8.5 million above the minimum capital
requirement of $1.2, or 1.5% of adjusted total assets.
The Bank had, at December 31, 1997, core capital of $9.7 million, or
12.5% of adjusted total assets which was $7.4 million above the minimum capital
requirement of $2.3 million, or 3.0% of adjusted total assets.
At December 31, 1997, the Bank had total risk based capital of $10.0
million and risk weighted assets of $47.5 million or total risk based capital of
21.2% of risk weighted assets. This amount was $6.2 million above the minimum
regulatory requirement of $3.8 million, or 8.0% of risk weighted assets.
8
<PAGE> 11
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
The Annual Shareholders' Meeting of MSB Financial, Inc.
was held on October 28, 1997 in Marshall, Michigan. At that
meeting the shareholders elected the following persons to three
year terms to the Board of Directors. Richard L. Dobbins by a
vote of 909,301 for and 84,582 against. Martin L. Mitchel by a
vote of 910,801 for and 83,082 against. Shareholders ratified
the 1997 Stock Option and Incentive Plan by a vote of 871,539
for, 113,292 against, 8,650 abstentions & 402 non-votes. Also
approved was the appointment of Crowe, Chizek and Company,
L.L.P., as independent auditors for the Company for the fiscal
year ending June 30, 1998, with a vote of 905,841 for, 84,592
against & 3,450 abstentions.
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
9
<PAGE> 12
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: February 12, 1998 \s\Charles B. Cook
---------------------------
Charles B. Cook, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: February 12, 1998 \s\Elaine R. Carbary
---------------------------
Elaine R. Carbary, Chief Financial
Officer (Principal Financial Officer)
10
<PAGE> 13
MSB FINANCIAL, INC.
EXHIBIT INDEX
Exhibit No. Description Page No.
27 Financial Data Schedule 12
11
<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 DECEMBER 31, 1997 AND IS QUALIFIED IN IT'S ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,864,492
<INT-BEARING-DEPOSITS> 906,266
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 9,763
<INVESTMENTS-MARKET> 9,763
<LOANS> 72,158,662
<ALLOWANCE> 331,634
<TOTAL-ASSETS> 77,443,563
<DEPOSITS> 42,358,441
<SHORT-TERM> 4,499,688
<LIABILITIES-OTHER> 862,204
<LONG-TERM> 16,663,279
0
0
<COMMON> 14,830
<OTHER-SE> 13,045,121
<TOTAL-LIABILITIES-AND-EQUITY> 77,443,563
<INTEREST-LOAN> 3,120,736
<INTEREST-INVEST> 365
<INTEREST-OTHER> 102,977
<INTEREST-TOTAL> 3,224,078
<INTEREST-DEPOSIT> 791,560
<INTEREST-EXPENSE> 1,456,317
<INTEREST-INCOME-NET> 1,767,761
<LOAN-LOSSES> 40,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,109,250
<INCOME-PRETAX> 923,940
<INCOME-PRE-EXTRAORDINARY> 598,940
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 598,940
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.47
<YIELD-ACTUAL> 0
<LOANS-NON> 16,321
<LOANS-PAST> 630,709
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 302,903
<CHARGE-OFFS> 12,241
<RECOVERIES> 972
<ALLOWANCE-CLOSE> 331,634
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
