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 March 31, 2000
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)
MARYLAND 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
--------------
As of May 5, 2000, there were 1,265,825 shares of the Registrant's common stock
issued and outstanding.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
<PAGE>
MSB FINANCIAL, INC.
INDEX
PART I. FINANCIAL INFORMATION............................................ 1
Item 1. Financial Statements (Unaudited)................................. 1
Condensed Consolidated Balance Sheets..................................... 1
Condensed Consolidated Statements of Income and Comprehensive Income...... 2
Condensed Consolidated Statements of Cash Flows........................... 3
Notes to Condensed Consolidated Financial Statements...................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 6
PART II. OTHER INFORMATION................................................ 10
SIGNATURES....................................................... 11
EXHIBIT INDEX.................................................... 12
<PAGE>
<TABLE>
<CAPTION>
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2000 and June 30, 1999
- --------------------------------------------------------------------------------
March 31, June 30,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from financial institutions $ 1,518,408 $ 1,896,722
Interest-bearing deposits 1,111,457 715,536
--------------- ----------------
Total cash and cash equivalents 2,629,865 2,612,258
Securities held to maturity (fair value of $3,177 at
March 31, 2000 and $4,866 at June 30, 1999) 3,177 4,866
Loans held for sale, net of unrealized losses of
$0 at March 31, 2000 and $97,942 at June 30, 1999 155,850 3,158,577
Loans receivable, net of allowance for loan losses of
$507,513 at March 31, 2000 and $452,308 at June 30, 1999 83,859,404 74,716,028
Federal Home Loan Bank stock 1,425,500 1,270,500
Accrued interest receivable 485,533 455,481
Premises and equipment, net 614,447 684,068
Mortgage servicing rights 306,882 306,910
Other assets 1,738,252 1,247,474
--------------- ----------------
Total Assets $ 91,218,910 $ 84,456,162
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits $ 48,187,904 $ 45,836,977
Federal Home Loan Bank Advances 27,845,972 23,864,235
Advance payments by borrowers for taxes and insurance 251,300 608,515
Accrued interest payable 129,540 104,361
Accrued expenses and other liabilities 996,131 860,598
--------------- ----------------
Total Liabilities 77,410,847 71,274,686
Shareholders' equity
Preferred stock, $.01 par value: 2,000,000 shares
authorized; none outstanding
Common stock, par value $.01: 4,000,000 shares
authorized; 1,630,981 shares issued and 1,265,825 shares
outstanding at March 31, 2000 and 1,631,315 shares
issued and 1,261,586 shares outstanding at June 30, 1999 16,310 16,313
Additional paid-in capital 9,707,904 9,655,006
Retained earnings, substantially restricted 8,117,414 7,623,538
Unearned Employee Stock Ownership Plan shares (213,015) (256,668)
Unearned Recognition and Retention Plan shares (74,712) (85,372)
Less cost of Common Stock in Treasury- 365,156 shares at
March 31, 2000 and 369,729 shares at June 30, 1999 (3,745,838) (3,771,341)
---------------- -----------------
Total Shareholders' Equity 13,808,063 13,181,476
--------------- ----------------
Total Liabilities & Shareholders' Equity $ 91,218,910 $ 84,456,162
=============== ================
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME Nine months and three
months ended March 31, 2000 and 1999
(Unaudited)
- --------------------------------------------------------------------------------
Nine Months Three Months
----------- ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and dividend income
Loans receivable, including fees $ 5,003,704 $ 4,854,550 $ 1,705,331 $ 1,584,162
Securities held to maturity, taxable 277 339 136 98
Other interest and dividends 130,871 162,741 49,393 58,931
-------------- -------------- -------------- ---------------
5,134,852 5,017,630 1,754,860 1,643,191
Interest Expense
Deposits 1,245,282 1,226,239 424,412 410,430
Federal Home Loan Bank Advances 1,242,404 1,129,391 430,922 377,960
Other interest expense 13,788 10,589 5,568 3,401
-------------- -------------- -------------- ---------------
2,501,474 2,366,219 860,902 791,791
-------------- -------------- -------------- ---------------
NET INTEREST INCOME 2,633,378 2,651,411 893,958 851,400
Provision for loan losses 54,000 54,000 18,000 18,000
-------------- -------------- -------------- ---------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,579,378 2,597,411 875,958 833,400
Noninterest income
Loan servicing fees, net 51,841 30,685 18,221 8,875
Net gains on sales of loans held for sale 64,280 238,030 14,703 53,920
Service charges on deposit accounts 128,315 122,070 37,452 35,631
Profit on sale of real estate owned 2,761 26,967
Other income 149,807 133,485 46,817 43,290
-------------- -------------- -------------- ---------------
397,004 551,237 117,193 141,716
Noninterest expense
Salaries and employee benefits 742,666 778,609 225,262 251,465
Occupancy and equipment expense 195,207 206,288 61,972 67,099
Data processing expense 111,803 153,530 41,251 53,117
Y2K expense 13,451 21,799 175 6,432
Federal deposit insurance premiums 36,103 39,679 9,450 13,327
Director fees 94,891 90,731 31,672 29,662
Correspondent bank charges 27,021 42,189 8,303 15,072
Provision to adjust loans held for sale
to lower of cost or market 54,139 25,765 16,292 25,766
Michigan Single Business tax 46,000 51,000 16,000 15,000
Professional fees 78,611 124,648 18,106 25,903
Other expense 347,176 376,635 104,009 114,817
-------------- -------------- -------------- ---------------
1,747,068 1,910,873 532,492 617,660
-------------- -------------- -------------- ---------------
INCOME BEFORE FEDERAL INCOME
TAX EXPENSE 1,229,314 1,237,775 460,659 357,456
Federal income tax expense 430,000 438,000 159,000 123,000
-------------- -------------- -------------- ---------------
NET INCOME 799,314 799,775 301,659 234,456
Other comprehensive income 0 0 0 0
-------------- -------------- -------------- ---------------
TOTAL COMPREHENSIVE INCOME $ 799,314 $ 799,775 $ 301,659 $ 234,456
============== ============== ============== ===============
Basic earnings per common share $ 0.67 $ 0.65 $ 0.25 $ 0.19
============== ============== ============== ==============
Weighted average common shares outstanding 1,192,795 1,237,191 1,201,073 1,228,227
============== ============== ============== ===============
Diluted earnings per common share $ 0.66 $ 0.62 $ 0.25 $ 0.19
============== ============== ============== ===============
Weighted average common and diluted
potential common shares outstanding 1,219,629 1,291,343 1,215,758 1,245,562
============== ============== ============== ===============
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended March 31, 2000 and 1999
(Unaudited)
- --------------------------------------------------------------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 799,314 $ 799,775
Adjustments to reconcile net income
to net cash from operating activities
Provision for loan losses 54,000 54,000
Provision to adjust loans held for sale
to lower of cost or market 54,139 25,765
Depreciation 113,198 103,619
Amortization of mortgage servicing rights 38,068 44,844
Employee Stock Ownership Plan expense 98,872 154,343
Recognition and Retention Plan expense 49,160 46,017
Originations of loans held for sale (3,650,640) (19,028,511)
Proceeds from sales of loans held for sale 3,830,290 15,179,669
Net gains on sales of loans held for sale (64,280) (238,030)
Change in assets and liabilities
Accrued interest receivable (30,052) (63,863)
Other assets (490,778) (338,270)
Accrued interest payable 25,179 19,048
Other expense and other liabilities 135,533 (155,002)
-------------- ----------------
Net cash from operating activities 962,003 (3,396,596)
CASH FLOWS FROM INVESTING ACTIVITIES
Principal paydowns on mortgage-backed securities 1,689 2,580
Purchase of Federal Home Loan Bank stock (155,000) (112,300)
Net increase in loans (6,402,198) 113,553
Net purchases of premises and equipment (43,577) (142,651)
--------------- ----------------
Net cash used in investing activities (6,599,086) (138,818)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 2,350,927 2,178,916
Proceeds from Federal Home Bank advances 19,600,000 8,000,000
Repayments on Federal Home Bank advances (15,618,263) (6,012,918)
Decrease in advance payments
by borrowers for taxes and insurance (357,215) (144,389)
Payment of dividends on common stock (305,437) (288,509)
Repurchase of common stock (60,428) (681,396)
Exercise of stock options 45,106 14,605
-------------- ---------------
Net cash from financing activities 5,654,690 3,066,309
-------------- ---------------
Net change in cash and cash equivalents 17,607 (469,105)
Cash and cash equivalents at beginning of period 2,612,258 3,280,713
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,629,865 $ 2,811,608
============== ===============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 2,476,295 $ 2,347,172
Income taxes 440,000 445,000
Supplemental disclosure of noncash investing activities
Transfer from loans held for sale to loans held to maturity 2,947,258 110,000
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
MSB FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended March 31, 2000
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements include the
accounts of MSB Financial, Inc. and its wholly-owned subsidiary, Marshall
Savings Bank, F.S.B. after the elimination of significant intercompany
transactions and accounts. The initial capitalization of MSB Financial and its
acquisition of Marshall Savings 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 our financial position at March 31, 2000 and the
results of operations and its cash flows for the periods presented. All such
adjustments are normal and recurring in nature. The accompanying condensed
consolidated 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 included in the annual
report of MSB Financial, Inc. for the year ended June 30, 1999. 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.
NOTE 2 - EARNINGS PER COMMON SHARE
A reconciliation of the numerators and denominators used in the computation of
the basic earnings per common share and diluted earnings per common share is
presented below for the nine and three month periods ended March 31, 2000 and
1999:
<TABLE>
<CAPTION>
Nine Months Three Months
----------- ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic Earnings Per Common Share
Numerator
Net Income $ 799,314 $ 799,775 $ 301,659 $ 234,456
============== ============== ============== ===============
Denominator
Weighted average common shares
outstanding 1,262,619 1,321,240 1,265,895 1,306,751
Less: Average unallocated ESOP Shares (51,684) (58,331) (48,486) (54,951)
Less: Average nonvested RRP Shares (18,140) (25,718) (16,336) (23,573)
--------------- --------------- --------------- ----------------
Weighted average common shares
outstanding for basic earnings per
common shares 1,192,795 1,237,191 1,201,073 1,228,227
============== ============== ============== ===============
Basic earnings per common share $ 0.67 $ 0.65 $ 0.25 $ 0.19
============== ============== ============== ===============
</TABLE>
- --------------------------------------------------------------------------------
4
(Continued)
<PAGE>
MSB FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended March 31, 2000
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 2 - EARNINGS PER COMMON SHARE (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Diluted Earnings Per Common Share
Numerator
Net Income $ 799,314 $ 799,775 $ 301,659 $ 234,456
============== ============== ============== ===============
Denominator
Weighted average common shares
outstanding for basic earnings per
common share 1,192,795 1,237,191 1,201,073 1,228,227
Add: Dilutive effects of average
nonvested RRP shares, net of
tax benefits 4,930 9,047 1,604 2,781
Add: Dilutive effective of assumed
exercises of stock options 21,904 45,105 13,081 14,554
-------------- -------------- -------------- ---------------
Weighted average common shares
and dilutive potential common
shares outstanding 1,219,629 1,291,343 1,215,758 1,245,562
============== ============== ============== ===============
Diluted earnings per common share $ 0.66 $ 0.62 $ 0.25 $ 0.19
============== ============== ============== ===============
</TABLE>
Stock options for 83,508 and 85,891 of common stock for the three and nine month
periods ending March 31, 2000, respectively, and stock options for 67,848 shares
of common stock for both the three and nine month periods ending March 31, 1999,
were not considered in computing diluted earnings per common shares because they
were antidilutive.
NOTE 3 - REPURCHASES OF COMMON STOCK
There were no repurchases of our common stock during the quarter ended March 31,
2000. During the quarter ended March 31, 1999, we repurchased 21,805 shares of
our stock at a total cost of $301,651 or $13.83 per share. On March 22, 2000 the
Board of Directors approved a plan to repurchase up to 5%, or 63,291 shares, of
our common stock. No shares have been repurchased under the current repurchase
program, which expires March 22, 2001. As of March 31, 2000, a total of 380,556
shares of common stock had been repurchased at a total cost of $3,873,642, or
$10.18 per share.
- --------------------------------------------------------------------------------
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MSB Financial, Inc. was formed as a Delaware corporation in September
1994 to act as the holding company for Marshall Savings Bank, F.S.B. upon the
completion of Marshall Savings' conversion from the mutual to the stock form.
MSB Financial received approval from the Office of Thrift Supervision to acquire
all of the common stock of Marshall Savings to be outstanding upon completion of
the conversion. The conversion was completed on February 6, 1995. On December 8,
1998, shareholders approved a proposal to reincorporate MSB Financial from the
State of Delaware to the State of Maryland. The following discussion compares
the consolidated financial condition of MSB Financial and Marshall Savings at
March 31, 2000 to June 30, 1999 and the results of operations for the three and
nine month periods ended March 31, 2000 with the same periods ended March 31,
1999. This discussion should be read in conjunction with the condensed
consolidated financial statements and footnotes included herein. References in
this Form 10-QSB to "we", "us" and "our" refer to MSB Financial and/or Marshall
Savings as the context requires.
FORWARD-LOOKING STATEMENTS DISCLOSURE
We may from time to time make written or oral "forward-looking
statements". These forward-looking statements may be contained in our Quarterly
Reports on Form 10-QSB and the exhibits, filings with the Securities and
Exchange Commission and in other communications by us, which are made in good
faith pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The words "may", "could", "should, "would",
"believe", "anticipate", "estimate", "expect", "intend", "plan", and similar
expressions are intended to identify forward-looking statements.
Forward-looking statements include statements about our beliefs, plans,
objectives, goals, expectations, anticipations, estimates and intentions, that
are subject to significant risks and uncertainties. The following factors, many
of which are subject to change based on various other factors beyond our
control, could cause our financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements:
o the strength of the United States economy in general and the
strength of the local economies in which we conduct our operations;
o the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Federal Reserve
Board;
o inflation, interest rate, market and monetary fluctuations;
o the timely development of and acceptance of our new products and
services and the perceived overall value of these products and
services by users, including the features, pricing and quality
compared to competitors' products and services;
o the willingness of users to substitute competitors' products and
services for our products and services;
o our success in gaining regulatory approval of our products and
services, when required;
o the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and
insurance);
o the impact of technological changes;
o acquisitions;
o changes in consumer spending and savings habits; and
o our success at managing the risks involved in our business.
The list of important factors stated above is not exclusive. We do not
undertake to update any forward-looking statement, whether written or oral, that
may be made from time to time by or on behalf of MSB Financial or Marshall
Savings.
FINANCIAL CONDITION
Total assets increased $6.8 million to $91.2 million from June 30, 1999
to March 31, 2000. Net loans, including loans held for sale, increased by $6.1
6
<PAGE>
million or 7.9% for the period, due primarily to the strong demand for mortgage
loans, especially residential 1-4 family construction loans, in our market
areas. This increase was primarily funded by an increase of $4.0 million in
Federal Home Loan Bank advances.
Total liabilities increased $6.1 million to $77.4 million from June 30,
1999 to March 31, 2000. This increase primarily resulted from the increase in
Federal Home Loan Bank advances discussed above. We also experienced increases
in deposits of $2.4 million, accrued interest payable of $25,000 and accrued
expenses and other liabilities of 136,000. Offsetting the above increases in
liabilities for the period was a decrease in advance payments by borrowers for
taxes and insurance of $357,000. The decrease in advance payments by borrowers
for taxes and insurance was primarily due to property tax bills due during the
month of December.
Net income offset by the payment of dividends on common stock resulted
in a net increase in shareholders' equity of $627,000.
RESULTS OF OPERATIONS
GENERAL. Our results of operations depend primarily upon the level of net
interest income, which is the difference 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. Our results of operations are also dependent upon the level of our
non-interest income, including fee income and service charges, and the level of
our non-interest expense, including general and administrative expenses. We,
like other financial institutions, are subject to interest rate risk to the
degree that our interest-bearing liabilities mature or reprice at different
times, or on a different basis, than our interest-earning assets.
NET INCOME. Net income for the three months ended March 31, 2000 was $302,000,
28.7% higher than net income of $234,000 for same period ended March 31, 1999.
Net income for the nine month period ended March 31, 2000 was $799,000,
relatively unchanged from net income of $800,000 for the same period in 1999.
Reasons for the changes in net income are discussed in detail below.
NET INTEREST INCOME. Net interest income increased $43,000, or 5.0%, to $894,000
for the three month period ended March 31, 2000, as compared to the same three
month period in 1999. For the nine month period ended March 31, 2000, net
interest income decreased $18,000, or 0.7%, to $2.6 million. The above increase
in net interest income during the three month period ended March 31, 2000 was
primarily the result of adjustable rate mortgages renewing at higher rates.
Offsetting the changes in interest income mentioned above were increases in
interest expense for the three and nine month periods ended March 31, 2000 of
$69,000 and $135,000, respectively, when compared to the same periods ended
March 31, 1999. The increases in interest expense were primarily a result of
increases in interest paid on Federal Home Bank advances, due to increased
advance balances. For the three and nine month periods ended March 31, 2000
Federal Home Loan Bank advance interest increased $53,000 and $113,000,
respectively, when compared to the same periods ended March 31, 1999.
Contributing to the changes in net interest income mentioned above was
a decrease in the weighted average yield on the loan portfolio for the three
month period ended March 31, 2000 of 3 basis points to 8.21% from 8.24% for the
same period ended March 31, 1999. For the nine month period ended March 31, 2000
the weighted average yield on the loan portfolio was 8.19%, compared to 8.52%
for the same period ended March 31, 1999, a decrease of 33 basis points. The
decreases in weighted average yields for both the three and nine month periods
were primarily the result of a decrease of $9,000 and $101,000, respectively, in
loan fee income due to a decrease in loan sales and loan originations during the
periods ended March 31, 2000.
PROVISION FOR LOAN LOSSES. The provision for loan losses is a result of our
periodic analysis of the adequacy of the allowance for loan losses. The
provision for loan losses remained at $18,000 for the three month period ended
March 31, 2000 as compared to the three month period ended March 31, 1999, due
to our continuing reassessment of losses inherent in the loan portfolio. At
March 31, 2000, the allowance for loan losses totaled $508,000 or 0.60% of net
loans receivable and 182% of total non-performing loans. At June 30, 1999, our
allowance for loan losses totaled $452,000, or 0.58% of net loans receivable and
116% of total non-performing loans.
We established 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
7
<PAGE>
collateral, loan commitments outstanding, delinquencies, and other factors.
Accordingly, the calculation of the adequacy of the allowance for loan losses
was not based directly on our level of non-performing assets.
As of March 31, 2000, the Company's non-performing assets, consisting
of nonaccrual loans and accruing loans 90 days or more delinquent, totaled
$279,000, or 0.33% of total loans, compared to $390,000, or 0.50% of total loans
as of June 30, 1999, a decrease of $111,000. 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 real estate owned on March 31, 2000 of $57,000.
We 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 we maintain allowance for loan losses at a
level which we consider 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, our determination as to the amount of the allowance for loan losses is
subject to review by the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation, 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, loan servicing fees, service charges on deposit accounts and other
fees. Noninterest income decreased $25,000 during the three month period ended
March 31, 2000 compared to the three month period ended March 31, 1999. For the
nine month period ended March 31, 2000, noninterest income decreased $154,000
compared the nine month period ended March 31, 1999. The decrease during the
three and nine month periods ended March 31, 2000 were primarily due to
decreases in gains on the sale of loans during the three and nine month periods
ended March 31, 2000 of $39,000 and $174,000, respectively, due to decreased
sales of mortgage loans during these periods. There was also a decrease during
the nine month period ending March 31, 2000 in profit on the sale of real estate
owned of $24,000 as compared to the same period in 1999. Offsetting the above
mentioned decreases for the nine month period were increases in loan servicing
fees of $21,000 and service charges on deposit accounts of $6,000.
NONINTEREST EXPENSE. Noninterest expense was $532,000 for the three month period
ended March 31, 2000 compared to $618,000 reported for the same prior year
period, a decrease of $85,000 or 13.8%. Noninterest expense for the nine month
period ended March 31, 2000 was $1.7 million compared to $1.9 million for the
same period in 1999, a decrease of $164,000 or 8.6%. The largest component of
noninterest expense, salaries and employee benefits, decreased $26,000 and
$36,000 for the three month and nine month periods ended March 31, 2000,
respectively, compared to the same periods during 1999. The primary factor
causing the above mentioned decreases in salary and employee benefits was a
decrease in expenses associated with our stock-based benefit plans, as a result
of our stock price. We also recorded decreases in noninterest expense for the
nine month period ended March 31, 2000 in data processing expense of $42,000,
due to a prior period rebate from our data processor and in professional fees of
$46,000, a result of our reincorporation from a Delaware into a Maryland
corporation during the 1999 period. The above mentioned decreases in noninterest
expense were offset by an increase of $28,000 in the provision to adjust loans
held for sale to the lower of cost or market during the nine month period ended
March 31, 2000.
FEDERAL INCOME TAX EXPENSE. Federal income tax expense increased $36,000 for the
three month period and decreased $8,000 for the nine month period ended March
31, 2000 compared to the same periods in 1999. MSB Financial's effective tax
rate remains at approximately 34%.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of funds are deposits, principal and interest
repayments on loans, sales of loans and maturities of interest-bearing deposits
and securities held to maturity. 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 require Marshall Savings to maintain minimum levels
of liquid assets. The required percentage has varied from time to time based
upon economic conditions and savings flows. The percentage 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
8
<PAGE>
maturities of less than five years. Marshall Savings has maintained its
liquidity ratio at levels in excess of those required. At March 31, 2000, the
Bank's liquidity ratio was 4.21%.
We use our liquidity resources principally to meet ongoing commitments,
to fund maturing certificates of deposit and deposit withdrawals and to meet
operating expenses. We anticipate that there will be sufficient funds available
to meet current loan commitments. At March 31, 2000, we had outstanding
commitments to extend credit, which amounted to $6.1 million (including $3.9
million in available home equity lines of credit). At March 31, 2000, there was
$27.8 million in advances from the Federal Home Loan Bank of Indianapolis
outstanding. Based on our FHLB borrowing limit of $30.0 million, we had
additional FHLB borrowings of $2.2 million available on March 31, 2000. We
believe that loan repayments and other sources of funds, will be adequate to
meet our foreseeable liquidity needs.
Federal insured savings institutions are required to maintain a minimum
level of regulatory capital. The Office of Thrift Supervision has established
capital standards, including a tangible capital requirement, a leverage ratio
(or core capital) requirement and a risk-based capital requirement applicable to
such savings associations. As of March 31, 2000, Marshall Savings had tangible
capital and Tier 1 (core) capital of $10.6 million, or 11.6% of adjusted total
assets, which was approximately $9.2 million and $7.9 million above the minimum
requirements of 1.5% and 3.0%, respectively, of the adjusted total assets in
effect on that date. As of March 31, 2000, we had Tier 1 (core) capital of $10.6
million, or 18.9% of risk-weighted assets, which was approximately $8.4 million
above the minimum requirement of 4.0% of risk-weighted total assets in effect on
that date. On March 31, 2000, we had total risk-based capital of $11.1 million
(including $10.6 million in core capital), or 19.8% of risk-weighted assets of
$56.0 million. This amount was $6.6 million above the 8.0% requirement in effect
on that date.
9
<PAGE>
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
See Exhibit Index.
(b) Reports on Form 8-K
None.
10
<PAGE>
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: May 12, 2000 \s\Charles B. Cook
----------------------------------------
Charles B. Cook, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: May 12, 2000 \s\Elaine R. Carbary
----------------------------------------
Elaine R. Carbary, Chief Financial
Officer (Principal Financial Officer)
<PAGE>
MSB FINANCIAL, INC.
EXHIBIT INDEX
Exhibit No. Description
3 Registrant's Articles of Incorporation and Bylaws, filed on
February 4, 1999 as exhibits to the Registrant's Registration
Statement on Form S-8 (File No. 333-71837), are incorporated
here in by reference.
4 Registrant's Specimen Stock Certificate, filed on February 4,
1999 as Exhibit 4 to the Registrant's Registration Statement
on Form S-8 (File No. 333-71837), is incorporated herein by
reference.
10.1 Employment Agreement between the Bank and Charles B. Cook,
filed on September 23, 1995 as Exhibit 10.2 to Registrant's
Registration Statement on Form S-1 (File No. 33-81312), is
incorporated herein by reference.
10.2 Registrant's 1995 Stock Option and Incentive Plan, filed as
Exhibit 10(b) to Registrant's Report on Form 10-KSB for the
fiscal year ended June 30, 1995 (File No. 0-24898), is
incorporated herein by reference.
10.3 Registrant's Recognition and Retention Plan, filed as Exhibit
10(c) to Registrant's Report on Form 10-KSB for the fiscal
year ended June 30, 1995 (File No. 0-24898), is incorporated
herein by reference.
10.4 Registrant's 1997 Stock Option and Incentive Plan, filed as
Appendix A to Registrants Schedule 14A filed on September 26,
1997 (File No. 0-24898), is incorporated herein by reference.
11 Statement re: computation of earnings per share (see Note 1 of
the Notes to Consolidated Financial Statements)
27 Financial Data Schedule (electronic filing only)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE FOLLOWING SCHEDULE CONTAINS SUMMARY FINANCIAL EXTRACTED FROM THE FINANCIAL
STATEMENTS CONTAINED IN THE REGISTRANT'S QUARTERLY REPORT ON FORM 10-QSB FOR THE
PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN IT'S ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,518,408
<INT-BEARING-DEPOSITS> 1,111,457
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 3,177
<INVESTMENTS-MARKET> 3,177
<LOANS> 84,522,767
<ALLOWANCE> 507,513
<TOTAL-ASSETS> 91,218,910
<DEPOSITS> 48,187,904
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,376,971
<LONG-TERM> 27,845,972
<COMMON> 16,310
0
0
<OTHER-SE> 13,791,753
<TOTAL-LIABILITIES-AND-EQUITY> 91,218,910
<INTEREST-LOAN> 5,003,704
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<INTEREST-OTHER> 130,871
<INTEREST-TOTAL> 5,134,852
<INTEREST-DEPOSIT> 1,245,282
<INTEREST-EXPENSE> 2,501,474
<INTEREST-INCOME-NET> 2,633,378
<LOAN-LOSSES> 54,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,747,068
<INCOME-PRETAX> 1,229,314
<INCOME-PRE-EXTRAORDINARY> 799,314
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 799,314
<EPS-BASIC> 0.67
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