UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
----------------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to _______________
Commission File Number: 0-25906
--------------
ASB FINANCIAL CORP.
------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Ohio 31-1429488
------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
503 Chillicothe Street Portsmouth, Ohio 45662
------------------------------------------------------------------------------
(Address of principal executive offices)
(740) 354-3177
------------------------------------------------------------------------------
(Issuer's telephone number)
------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: November 6, 2000 - 1,569,558 shares
of common stock
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Page 1 of 14 pages
<PAGE>
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 13
SIGNATURES 14
2
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
September 30, June 30,
ASSETS 2000 2000
<S> <C> <C>
Cash and due from banks $ 3,557 $ 917
Interest-bearing deposits in other financial institutions 1,797 4,152
------- -------
Cash and cash equivalents 5,354 5,069
Investment securities available for sale - at market 19,423 19,112
Mortgage-backed securities available for sale - at market 8,279 8,616
Loans receivable - net 97,414 95,084
Office premises and equipment - at depreciated cost 1,386 1,366
Federal Home Loan Bank stock - at cost 747 733
Accrued interest receivable on loans 60 63
Accrued interest receivable on mortgage-backed securities 62 59
Accrued interest receivable on investments and
interest-bearing deposits 307 355
Prepaid expenses and other assets 512 542
Prepaid federal income taxes 128 228
Deferred federal income tax assets 478 671
------- -------
Total assets $134,150 $131,898
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $112,526 $110,007
Advances from the Federal Home Loan Bank 6,282 7,790
Advances by borrowers for taxes and insurance 89 173
Accrued interest payable 839 89
Other liabilities 1,353 1,258
------- -------
Total liabilities 121,089 119,317
Shareholders' equity
Preferred stock, 1,000,000 shares authorized, no par value;
no shares issued - -
Common stock, authorized 4,000,000 shares without par or stated value;
1,746,924 shares issued - -
Additional paid-in capital 8,454 8,454
Retained earnings, restricted 7,976 7,870
Shares acquired by stock benefit plans (1,059) (1,059)
Accumulated comprehensive loss, unrealized losses
on securities designated as available for sale, net of related tax effects (218) (592)
Less 177,366 shares of treasury stock - at cost (2,092) (2,092)
------- -------
Total shareholders' equity 13,061 12,581
------- -------
Total liabilities and shareholders' equity $134,150 $131,898
======= =======
</TABLE>
3
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended September 30,
(In thousands, except per share data)
2000 1999
<S> <C> <C>
Interest income
Loans $1,989 $1,668
Mortgage-backed securities 153 156
Investment securities 401 386
Interest-bearing deposits and other 5 11
----- -----
Total interest income 2,548 2,221
Interest expense
Deposits 1,453 1,215
Borrowings 116 74
----- -----
Total interest expense 1,569 1,289
----- -----
Net interest income 979 932
Provision for losses on loans - 1
----- -----
Net interest income after provision
for losses on loans 979 931
Other income
Gain on sale of investment securities 25 -
Other operating 82 72
----- -----
Total other income 107 72
General, administrative and other expense
Employee compensation and benefits 392 372
Occupancy and equipment 44 24
Federal deposit insurance premiums 7 15
Franchise taxes 51 51
Data processing 85 69
Other operating 122 94
----- -----
Total general, administrative and other expense 701 625
----- -----
Earnings before income taxes 385 378
Federal income taxes
Current 107 119
Deferred - (14)
----- -----
Total federal income taxes 107 105
----- -----
NET EARNINGS $ 278 $ 273
===== =====
EARNINGS PER SHARE
Basic $.18 $.17
=== ===
Diluted $.18 $.17
=== ===
</TABLE>
4
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended September 30,
(In thousands)
2000 1999
<S> <C> <C>
Net earnings $ 278 $273
Other comprehensive income, net of tax:
Unrealized holding gains (losses) on securities during the period,
net of tax of $201 and $(115) in 2000 and 1999, respectively 391 (224)
Reclassification adjustment for realized gains included in earnings,
net of tax of $8 in 2000 (17) -
---- ---
Comprehensive income $ 652 $ 49
==== ===
Accumulated comprehensive income (loss) $(218) $ 41
==== ===
</TABLE>
5
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended September 30,
(In thousands)
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 278 $ 273
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net (47) 6
Amortization of deferred loan origination fees (15) (29)
Depreciation and amortization 30 24
Federal Home Loan Bank stock dividends (14) (14)
Provision for losses on loans - 1
Gain on sale of investment securities (25) -
Increase (decrease) in cash due to changes in:
Accrued interest receivable 48 (21)
Prepaid expenses and other assets 30 209
Accrued interest payable 750 595
Other liabilities 95 88
Federal income taxes
Current 100 118
Deferred - (14)
----- -----
Net cash provided by operating activities 1,230 1,236
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 255 -
Proceeds from sale of investment securities 26 -
Purchase of investment securities - (765)
Principal repayments on mortgage-backed securities 384 652
Purchase of loans (972) -
Loan principal repayments 4,242 4,206
Loan disbursements (5,585) (8,037)
Purchase of office premises and equipment (50) (202)
Decrease in certificates of deposit in other financial institutions - net - 1
----- -----
Net cash used in investing activities (1,700) (4,145)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 2,519 1,232
Proceeds from Federal Home Loan Bank advances - 1,500
Repayment of Federal Home Loan Bank advances (1,508) (1,508)
Advances by borrowers for taxes and insurance (84) (85)
Dividends paid on common shares (172) (1,822)
Proceeds from exercise of stock options - 61
Purchase of treasury stock - (587)
----- -----
Net cash provided by (used in) financing activities 755 (1,209)
----- -----
Net increase (decrease) in cash and cash equivalents 285 (4,118)
Cash and cash equivalents at beginning of period 5,069 7,566
----- -----
Cash and cash equivalents at end of period $5,354 $3,448
===== =====
</TABLE>
6
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the three months ended September 30,
(In thousands)
2000 1999
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings $819 $ 694
=== ====
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $374 $(224)
=== ====
</TABLE>
7
<PAGE>
ASB Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended September 30, 2000 and 1999
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-QSB and, therefore, do not
include information or footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Accordingly, these financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto of ASB Financial Corp. (the "Corporation")
included in the Annual Report on Form 10-KSB for the year ended June 30,
2000. However, in the opinion of management, all adjustments (consisting of
only normal recurring accruals) which are necessary for a fair presentation
of the financial statements have been included. The results of operations
for the three month period ended September 30, 2000, are not necessarily
indicative of the results which may be expected for the entire fiscal year.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Corporation and its wholly owned subsidiary, American Savings Bank, fsb
("American" or the "Savings Bank"). All significant intercompany items have
been eliminated.
3. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average shares
outstanding during the period, less shares in the ASB Financial Corp.
Employee Stock Ownership Plan (the "ESOP") that are unallocated and not
committed to be released. Weighted-average common shares outstanding, which
give effect to 49,633 unallocated ESOP shares, totaled 1,519,925 for the
three month period ended September 30, 2000. Weighted-average common shares
deemed outstanding, which give effect to 62,795 unallocated ESOP shares,
totaled 1,577,463 for the three month period ended September 30, 1999.
Diluted earnings per share is computed taking into consideration common
shares outstanding and dilutive potential common shares to be issued under
the Corporation's stock option plan. Weighted-average common shares deemed
outstanding for purposes of computing diluted earnings per share totaled
1,519,925 for the three month period ended September 30, 2000, and 1,600,851
for the three month period ended September 30, 1999, respectively.
Incremental shares related to the assumed exercise of stock options included
in the calculation of diluted earnings per share totaled 23,388 for the
three month period ended September 30, 1999. Options to purchase 164,557
shares of common stock with a weighted-average exercise price of $10.08 were
outstanding at September 30, 2000, but were excluded from the computation of
common share equivalents for the three months ended September 30, 2000,
because their exercise prices were greater than the average market price of
the common shares.
8
<PAGE>
ASB Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended September 30, 2000 and 1999
4. Effects of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which requires entities
to recognize all derivatives in their financial statements as either assets
or liabilities measured at fair value. SFAS No. 133 also specifies new
methods of accounting for hedging transactions, prescribes the items and
transactions that may be hedged, and specifies detailed criteria to be met
to qualify for hedge accounting.
The definition of a derivative financial instrument is complex, but in
general, it is an instrument with one or more underlyings, such as an
interest rate or foreign exchange rate, that is applied to a notional
amount, such as an amount of currency, to determine the settlement
amount(s). It generally requires no significant initial investment and can
be settled net or by delivery of an asset that is readily convertible to
cash. SFAS No. 133 applies to derivatives embedded in other contracts,
unless the underlying of the embedded derivative is clearly and closely
related to the host contract. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000. On adoption,
entities are permitted to transfer held-to-maturity debt securities to the
available-for-sale or trading category without calling into question their
intent to hold other debt securities to maturity in the future. Management
adopted SFAS No. 133 effective July 1, 2000, as required, without material
impact on the Corporation's financial statements.
In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities", which
revises the standards for accounting for securitizations and other transfers
of financial assets and collateral and requires certain disclosures, but
carries over most of the provisions of SFAS No. 125 without reconsideration.
SFAS No. 140 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after March 31, 2001. The
Statement is effective for recognition and reclassification of collateral
and for disclosures relating to securitization transactions and collateral
for fiscal years ending after December 15, 2000. SFAS No. 140 is not
expected to have a material effect on the Corporation's financial position
or results of operations.
9
<PAGE>
ASB Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from June 30, 2000 to September 30,
2000
At September 30, 2000, the Corporation's assets totaled $134.2 million, an
increase of $2.3 million, or 1.7%, over the balance of total assets at June 30,
2000. The increase in assets was funded primarily by growth in deposits of $2.5
million, which was partially offset by a decrease in Federal Home Loan Bank
("FHLB") advances totaling $1.5 million.
Liquid assets (i.e. cash, interest-bearing deposits and certificates of deposit)
increased by $285,000 from June 30, 2000 levels, to a total of $5.4 million at
September 30, 2000. Investment securities totaled $19.4 million at September 30,
2000, an increase of $311,000, or 1.6%, over June 30, 2000 levels. During the
three months ended September 30, 2000, net unrealized losses decreased by
$512,000.
Mortgage-backed securities totaled $8.3 million at September 30, 2000, a
decrease of $337,000, or 3.9%, from the total at June 30, 2000. The decrease was
due primarily to principal repayments of $384,000, which were offset by a
decline in net unrealized losses totaling $55,000 for the quarter.
Loans receivable increased by $2.3 million, or 2.5%, during the three month
period ended September 30, 2000, to a total of $97.4 million. Loan disbursements
and purchases amounted to $6.6 million and were partially offset by principal
repayments of $4.2 million. The allowance for loan losses totaled $723,000 at
both September 30, 2000 and June 30, 2000. Nonperforming and nonaccrual loans
totaled $507,000 and $281,000 at September 30, 2000 and June 30, 2000,
respectively. The allowance for loan losses represented 142.6% and 257.3% of
nonperforming loans as of September 30, 2000 and June 30, 2000, respectively.
Although management believes that its allowance for loan losses at September 30,
2000, was adequate based upon the available facts and circumstances, there can
be no assurance that additions to such allowance will not be necessary in future
periods, which could adversely affect the Corporation's results of operations.
Deposits totaled $112.5 million at September 30, 2000, an increase of $2.5
million, or 2.3%, over June 30, 2000 levels. The growth in deposits was
primarily attributable to management's efforts to maintain a moderate rate of
deposit growth through marketing strategies. Proceeds from deposit growth were
generally used to fund new loan originations.
Advances from the FHLB totaled $6.3 million at September 30, 2000, a decrease of
$1.5 million, or 19.4%, compared to June 30, 2000.
Shareholders' equity totaled $13.1 million at September 30, 2000, an increase of
$480,000, or 3.8%, over June 30, 2000 levels. The increase resulted primarily
from a decrease in unrealized losses on securities designated as available for
sale of $374,000, and net earnings of $278,000, which were partially offset by
dividends on common shares totaling $172,000 for the quarter.
American is required to meet minimum capital standards promulgated by the Office
of Thrift Supervision ("OTS"). At September 30, 2000, American's regulatory
capital was well in excess of the minimum capital requirements.
10
<PAGE>
ASB Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended September 30,
2000 and 1999
General
Net earnings amounted to $278,000 for the three months ended September 30, 2000,
an increase of $5,000, or 1.8%, compared to the $273,000 of net earnings
reported for the same period in 1999. The increase in earnings resulted
primarily from a $47,000 increase in net interest income and a $35,000 increase
in other income, which were partially offset by a $76,000 increase in general,
administrative and other expense.
Net Interest Income
Net interest income increased by $47,000, or 5.0%, for the three months ended
September 30, 2000, compared to the 1999 period. Interest income on loans
increased by $321,000, or 19.2%, during the three month period ended September
30, 2000, compared to the 1999 period, due primarily to an $11.9 million
increase in the average portfolio balance outstanding and a 36 basis point
increase in the weighted average interest rate year to year. Interest income on
investment and mortgage-backed securities and interest-bearing deposits and
other increased by $6,000, or 1.1%, due primarily to a 52 basis point increase
in the weighted average interest rate year to year, which was partially offset
by a $2.4 million decrease in the average balance of the related assets.
Interest expense on deposits increased by $238,000, or 19.6%, due primarily to
an increase of approximately $9.7 million in the average balance of deposits
outstanding, coupled with a 44 basis point increase in the weighted average
interest rate year to year. Interest expense on borrowings increased by $42,000,
or 56.8%, due primarily to a 150 basis point increase in the average cost of
borrowings, and a $1.2 million increase in the average balance of borrowings
outstanding.
Provision for Losses on Loans
As a result of an analysis of historical experience, the volume and type of
lending conducted by the Savings Bank, the status of past due principal and
interest payments, general economic conditions, particularly as such conditions
relate to the Savings Bank's market area, and other factors related to the
collectibility of the Savings Bank's loan portfolio, management determined that
the allowance for loan losses was adequate and did not record a provision for
losses on loans for the three month period ended September 30, 2000. There can
be no assurance that the loan loss allowance will be adequate to cover losses on
nonperforming assets in the future.
Other Income
Other income increased by $35,000, or 48.6%, for the three months ended
September 30, 2000, compared to the same period in 1999, due primarily to a
$25,000 gain on the sale of investment securities, coupled with a $10,000, or
13.9%, increase in other operating income, due primarily to increased service
fees on ATM and other account transactions during the period.
11
<PAGE>
ASB Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended September 30,
2000 and 1999 (continued)
General, Administrative and Other Expense
General, administrative and other expense increased by $76,000, or 12.2%, during
the three months ended September 30, 2000, compared to the same period in 1999.
This increase resulted primarily from a $20,000, or 5.4%, increase in employee
compensation and benefits, a $20,000, or 83.3%, increase in occupancy and
equipment expense, a $16,000, or 23.2%, increase in data processing expense, and
a $28,000, or 29.8%, increase in other operating expense. The increase in
employee compensation and benefits was due primarily to an increase in staffing
levels including the addition of a chief financial officer. The increase in
occupancy and equipment expense reflects increased depreciation and maintenance
costs associated with a new drive-through location and the new computer hardware
purchased during fiscal 2000. The increase in data processing expense primarily
reflects an increase in transaction costs, coupled with the effects of the
Corporation's overall growth year to year. The increase in other operating
expense relates primarily to amortization associated with the Corporation's
participation in a low income housing partnership.
Federal Income Taxes
The provision for federal income taxes totaled $107,000 for the three months
ended September 30, 2000, an increase of $2,000, or 1.9%, compared to the same
period in 1999. This increase resulted primarily from the growth in net earnings
before taxes of $7,000, or 1.9%, offset by the effects of tax credits from the
Savings Bank's investment in a low income housing partnership. The effective tax
rate was 27.8% for the three months ended September 30, 2000 and 1999.
12
<PAGE>
ASB Financial Corp.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
On October 25, 2000, the Corporation held its Annual Meeting of
Shareholders. In connection therewith, two matters were submitted to
the shareholders for a vote. The shareholders elected five directors
to terms expiring in 2001 by the following votes:
For Against
William J. Burke 1,291,149 12,613
Lee O. Fitch 1,288,685 15,077
Gerald R. Jenkins 1,291,149 12,613
Louis M. Schoettle 1,291,149 12,613
Robert M. Smith 1,291,149 12,613
The shareholders also ratified the selection of Grant Thornton LLP as
the Corporation's auditors for the 2001 fiscal year by the following
vote:
For: 1,298,499 Against: 1,780 Abstain: 3,483
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
Form 8-K: None.
Exhibits:
27 Financial data schedule for the three months
ended September 30, 2000.
13
<PAGE>
ASB Financial Corp.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 2000 By:/s/Robert M. Smith
-------------------------- ---------------------------------
Robert M. Smith
President, Chief Executive Officer
and principal financial officer
14
