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 March 31, 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: May 12, 2000 - 1,573,558 shares of
common stock
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Page 1 of 16 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 15
SIGNATURES 16
2
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, June 30,
ASSETS 2000 1999
<S> <C> <C>
Cash and due from banks $ 3,411 $ 4,078
Interest-bearing deposits in other financial institutions 1,122 3,488
------- -------
Cash and cash equivalents 4,533 7,566
Certificates of deposit in other financial institutions 99 293
Investment securities available for sale - at market 19,652 19,372
Mortgage-backed securities available for sale - at market 8,870 10,232
Loans receivable - net 91,670 82,430
Office premises and equipment - at depreciated cost 1,251 1,047
Federal Home Loan Bank stock - at cost 720 778
Accrued interest receivable on loans 77 78
Accrued interest receivable on mortgage-backed securities 58 66
Accrued interest receivable on investments and
interest-bearing deposits 338 290
Prepaid expenses and other assets 557 714
Prepaid federal income taxes 258 200
Deferred federal income tax assets 590 182
------- -------
Total assets $128,673 $123,248
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $107,278 $100,954
Advances from the Federal Home Loan Bank 6,799 5,823
Advances by borrowers for taxes and insurance 89 168
Accrued interest payable 761 93
Other liabilities 1,113 1,170
------- -------
Total liabilities 116,040 108,208
Shareholders' equity
Preferred stock, 1,000,000 shares authorized, no par value;
no shares issued - -
Common stock, 4,000,000 no par value shares authorized;
1,740,854 shares issued - -
Additional paid-in capital 8,455 8,427
Retained earnings, restricted 7,736 8,909
Shares acquired by stock benefit plans (1,059) (1,418)
Accumulated comprehensive income (loss), unrealized gains (losses)
on securities designated as available for sale,
net of related tax effects (442) 265
Less 167,296 and 86,066 shares of treasury stock - at cost (2,057) (1,143)
------- -------
Total shareholders' equity 12,633 15,040
------- -------
Total liabilities and shareholders' equity $128,673 $123,248
======= =======
</TABLE>
3
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Nine months ended Three months ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Interest income
Loans $5,256 $4,781 $1,819 $1,581
Mortgage-backed securities 457 537 150 179
Investment securities 1,135 1,026 378 361
Interest-bearing deposits and other 12 61 3 15
----- ----- ----- -----
Total interest income 6,860 6,405 2,350 2,136
Interest expense
Deposits 3,725 3,638 1,280 1,198
Borrowings 281 240 119 71
----- ----- ----- -----
Total interest expense 4,006 3,878 1,399 1,269
------ ----- ----- -----
Net interest income 2,854 2,527 951 867
Provision for (recoveries of) losses on loans 1 (1) - -
----- ----- ----- -----
Net interest income after provision for
(recoveries of) losses on loans 2,853 2,528 951 867
Other income
Gain (loss) on investment securities transactions (15) 60 (15) 31
Other operating 239 196 84 66
----- ----- ----- -----
Total other income 224 256 69 97
General, administrative and other expense
Employee compensation and benefits 1,147 921 399 326
Occupancy and equipment 98 87 46 28
Federal deposit insurance premiums 35 41 6 14
Franchise taxes 139 152 51 50
Data processing 224 180 79 70
Other operating 356 320 104 98
----- ----- ----- -----
Total general, administrative and other expense 1,999 1,701 685 586
----- ----- ----- -----
Earnings before income taxes 1,078 1,083 335 378
Federal income taxes
Current 345 294 133 232
Deferred (44) 13 (43) (129)
----- ----- ----- -----
Total federal income taxes 301 307 90 103
----- ----- ----- -----
NET EARNINGS $ 777 $ 776 $ 245 $ 275
===== ===== ===== =====
EARNINGS PER SHARE
Basic $.50 $.49 $.16 $.17
=== === === ===
Diluted $.50 $.48 $.16 $.17
=== === === ===
</TABLE>
4
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
(In thousands)
For the nine months For the three months
ended March 31, ended March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net earnings $ 777 $776 $ 245 $275
Other comprehensive income, net of tax:
Unrealized holding losses on securities
during the period net of tax of $(369), $(11),
$(102) and $(133) in each period, respectively (717) (21) (197) (258)
Reclassification adjustment for realized (gains)
losses included in earnings net of tax of $5, $(21),
$5 and $(10) in each period, respectively 10 (40) 10 (20)
---- --- ---- ---
Comprehensive income (loss) $ 70 $715 $ 58 $ (3)
==== === ==== ===
Accumulated comprehensive income (loss) $(442) $653 $(442) $653
==== === ==== ===
</TABLE>
5
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended March 31,
(In thousands)
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 777 $ 776
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 27 38
Amortization of deferred loan origination fees (35) (55)
Depreciation and amortization 79 51
Amortization of expense related to stock benefit plans 326 310
Provisions for (recoveries of) losses on loans 1 (1)
(Gain) loss on investment securities transactions 15 (60)
Federal Home Loan Bank stock dividends (42) (39)
Increase (decrease) in cash due to changes in:
Accrued interest receivable (39) 9
Prepaid expenses and other assets 157 28
Accrued interest payable 668 567
Other liabilities (57) (112)
Federal income taxes
Current (58) 3
Deferred (44) 13
------ ------
Net cash provided by operating activities 1,775 1,528
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 970 9,782
Purchase of investment securities (2,103) (16,808)
Purchase of mortgage-backed securities - (4,735)
Principal repayments on mortgage-backed securities 1,102 2,429
Loan principal repayments 12,359 21,699
Loan disbursements (21,565) (24,375)
Purchase of office premises and equipment (283) (182)
Decrease in certificates of deposit in other financial institutions - net 194 1,354
Redemption of Federal Home Loan Bank stock 100 -
Proceeds from sale of real estate acquired through foreclosure - 157
------ ------
Net cash used in investing activities (9,226) (10,679)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 6,324 4,800
Proceeds from Federal Home Loan Bank advances 8,500 2,000
Repayment of Federal Home Loan Bank advances (7,524) (524)
Repayment of other borrowed money - (2,500)
Advances by borrowers for taxes and insurance (79) (78)
Purchase of treasury stock (914) -
Proceeds from the exercise of stock options 61 -
Distributions paid on common stock (1,950) (295)
------ ------
Net cash provided by financing activities 4,418 3,403
------ ------
Net decrease in cash and cash equivalents (3,033) (5,748)
Cash and cash equivalents at beginning of period 7,566 13,890
------ ------
Cash and cash equivalents at end of period $ 4,533 $ 8,142
====== ======
</TABLE>
6
<PAGE>
ASB Financial Corp.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended March 31,
(In thousands)
2000 1999
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 442 $ 302
===== =====
Interest on deposits and borrowings $3,338 $3,311
===== =====
Supplemental disclosure of noncash investing activities:
Unrealized losses on securities designated as available for sale,
net of related tax effects $ (707) $ (61)
===== =====
</TABLE>
7
<PAGE>
ASB Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine and three months ended March 31, 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,
1999. 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 and nine month periods ended March 31, 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 51,432 unallocated ESOP shares, totaled 1,555,130 and
1,544,662 for the nine and three month periods ended March 31, 2000.
Weighted-average common shares deemed outstanding, which give effect to
62,795 unallocated ESOP shares, totaled 1,581,909 and 1,591,993 for the nine
and three month periods ended March 31, 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
1,561,562 and 1,544,662 for the nine and three month periods ended March 31,
2000, respectively, and 1,600,414 and 1,609,479 for the nine and three month
periods ended March 31, 1999, respectively.
Incremental shares related to the assumed exercise of stock options included
in the calculation of diluted earnings per share totaled 6,432 for the nine
period ended March 31, 2000, and 18,505 and 17,486 for the nine and three
month periods ended March 31, 1999. Options to purchase 13,802 shares of
common stock with a weighted-average exercise price of $10.08 were
outstanding at March 31, 2000, but were excluded from the computation of
common share equivalents for the three months ended March 31, 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 nine and three months ended March 31, 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. SFAS No. 133 is not expected to
have a material impact on the Corporation's financial statements.
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, 1999 to March 31, 2000
At March 31, 2000, the Corporation's assets totaled $128.7 million, an increase
of $5.4 million, or 4.4%, over the balance of total assets at June 30, 1999. The
increase in assets was funded primarily by growth in deposits of $6.3 million
and an increase in Federal Home Loan Bank advances totaling $976,000, which were
partially offset by dividends paid on common stock of $2.0 million.
Liquid assets (i.e. cash, interest-bearing deposits and certificates of deposit)
decreased by $3.2 million from June 30, 1999 levels, to a total of $4.6 million
at March 31, 2000. Investment securities totaled $19.7 million at March 31,
2000, an increase of $280,000, or 1.4%, over June 30, 1999 levels. During the
nine months ended March 31, 2000, purchases of investment securities totaling
$2.1 million were partially offset by a decline from unrealized losses.
Mortgage-backed securities totaled $8.9 million at March 31, 2000, a decrease of
$1.4 million, or 13.3%, from the total at June 30, 1999. The decrease was due
primarily to principal repayments of $1.1 million.
Loans receivable increased by $9.2 million, or 11.2%, during the nine month
period ended March 31, 2000, to a total of $91.7 million. Loan disbursements
amounted to $21.6 million and were partially offset by principal repayments of
$12.4 million. The allowance for loan losses totaled $723,000 and $733,000 at
March 31, 2000 and June 30, 1999, respectively. Nonperforming and nonaccrual
loans totaled $669,000 and $379,000 at March 31, 2000 and June 30, 1999,
respectively. The allowance for loan losses represented 108.1% and 193.4% of
nonperforming loans as of March 31, 2000 and June 30, 1999, respectively.
Although management believes that its allowance for loan losses at March 31,
2000, is 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 $107.3 million at March 31, 2000, an increase of $6.3 million,
or 6.3%, over June 30, 1999 levels. The growth in deposits was primarily
attributable to management's efforts to maintain a moderate rate of deposit
growth through marketing strategies.
Advances from the Federal Home Loan Bank totaled $6.8 million at March 31, 2000,
an increase of $976,000, or 16.8%, over June 30, 1999. Proceeds from borrowings
and deposit growth were generally used to fund new loan originations.
Shareholders' equity totaled $12.6 million at March 31, 2000, a decrease of $2.4
million, or 16.0%, from June 30, 1999 levels. The decrease resulted primarily
from distributions on common shares totaling $2.0 million, treasury stock
purchases of $914,000 and a decrease in unrealized gains on securities
designated as available for sale of $707,000, which were partially offset by net
earnings of $777,000 and proceeds from the exercise of stock options totaling
$61,000.
American is required to meet minimum capital standards promulgated by the Office
of Thrift Supervision ("OTS"). At March 31, 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 Nine Month Periods Ended March 31, 2000
and 1999
General
Net earnings amounted to $777,000 for the nine months ended March 31, 2000, an
increase of $1,000 compared to the $776,000 of net earnings reported for the
same period in 1999. Current period earnings reflect a $327,000 increase in net
interest income, which was partially offset by a $298,000 increase in general,
administrative and other expense and a $32,000 decrease in other income.
Net Interest Income
Net interest income increased by $327,000, or 12.9%, for the nine months ended
March 31, 2000, compared to the 1999 period. Interest income on loans increased
by $475,000, or 9.9%, for the nine month period ended March 31, 2000, compared
to the 1999 period, due primarily to a $9.7 million, or 12.4%, increase in the
average portfolio outstanding period to period, while interest income on
investment and mortgage-backed securities and interest-bearing deposits and
other decreased by $20,000, or 1.2%, due primarily to a decrease in the average
balance of the related assets.
Interest expense on deposits increased by $87,000, or 2.4%, due primarily to an
increase of $7.0 million in the average balance of deposits outstanding, which
was offset by a 24 basis point decrease in the weighted-average interest rate
outstanding. Interest expense on borrowings increased by $41,000, or 17.1%, due
primarily to a $1.2 million increase in the average balance of advances
outstanding, which was partially offset by a 30 basis point decrease in the
average cost of borrowings from period to period.
Provision for Losses on Loans
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on 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. As a result of such analysis, management recorded
a $1,000 provision for the nine month period ended March 31, 2000. There can be
no assurance that the loan loss allowance will be adequate to absorb losses on
known nonperforming assets or that the allowance will be adequate to cover
losses on nonperforming assets in the future.
Other Income
Other income decreased by $32,000, or 12.5%, for the nine months ended March 31,
2000, compared to the same period in 1999, due primarily to the effects of a
$60,000 gain recorded on security transactions during the 1999 nine month period
and a $15,000 loss on security transactions recorded during the 2000 nine month
period. This decline was partially offset by an increase in other operating
income of $43,000, or 21.9%, due primarily to an increase in both fees on
deposit accounts and revenues under an agreement with a third-party vendor of
alternative investment products.
11
<PAGE>
ASB Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Nine Month Periods Ended March 31, 2000
and 1999 (continued)
General, Administrative and Other Expense
General, administrative and other expense increased by $298,000, or 17.5%,
during the nine months ended March 31, 2000, compared to the same period in
1999. This increase resulted primarily from a $226,000, or 24.5%, increase in
employee compensation and benefits and a $44,000, or 24.4%, increase in data
processing expense. The increase in employee compensation and benefits was due
primarily to an increase in expense related to the Corporation's stock benefit
plans coupled with normal merit increases. The increase in data processing
expense primarily reflects an increase in transaction costs and new product
applications added during the period.
Federal Income Taxes
The provision for federal income taxes totaled $301,000 for the nine months
ended March 31, 2000, a decrease of $6,000, or 2.0%, compared to the same period
in 1999. This decrease resulted primarily from the decrease in net earnings
before taxes of $5,000, or 0.5%, coupled with the effects of tax credits from
the Savings Bank's investment in a low income housing partnership. The effective
tax rates were 27.9% and 28.3% for the nine months ended March 31, 2000 and
1999, respectively.
Comparison of Operating Results for the Three Month Periods Ended March 31, 2000
and 1999
General
Net earnings amounted to $245,000 for the three months ended March 31, 2000, a
decrease of $30,000, or 10.9%, compared to the $275,000 of net earnings reported
for the same period in 1999. The decrease in earnings resulted primarily from a
$99,000 increase in general, administrative and other expense and a $28,000
decrease in other income, which were partially offset by an $84,000 increase in
net interest income.
Net Interest Income
Net interest income increased by $84,000, or 9.7%, for the three months ended
March 31, 2000, compared to the 1999 period. Interest income on loans increased
by $238,000, or 15.1%, during the three month period ended March 31, 2000,
compared to the 1999 period, due primarily to an increase in the average
portfolio balance outstanding, while interest income on investment and
mortgage-backed securities and interest-bearing deposits and other decreased by
$24,000, or 4.3%, due primarily to a decrease in the average balance of the
related assets.
Interest expense on deposits increased by $82,000, or 6.8%, due primarily to an
increase of approximately $7.0 million in the average balance of deposits
outstanding. Interest expense on borrowings increased by $48,000, or 67.6%, due
primarily to a 145 basis point increase in the average cost of borrowings from
period to period, and a $1.5 million increase in the average balance of
borrowings outstanding.
12
<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 March 31, 2000
and 1999 (continued)
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 March 31, 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 decreased by $28,000, or 28.9%, for the three months ended March
31, 2000, compared to the same period in 1999, due primarily to the effects of a
$31,000 gain on investment and mortgage-backed securities transactions recorded
in the 1999 period, and a $15,000 loss recorded on investment securities
transactions in the 2000 period. This decline was partially offset by an
$18,000, or 27.3%, increase in other operating income during the period.
General, Administrative and Other Expense
General, administrative and other expense increased by $99,000, or 16.9%, during
the three months ended March 31, 2000, compared to the same period in 1999. This
increase resulted primarily from a $73,000, or 22.4%, increase in employee
compensation and benefits, an $18,000, or 64.3%, increase in occupancy and
equipment expense and a $9,000, or 12.9%, increase in data processing expense.
The increase in employee compensation and benefits was due primarily to an
increase in expense related to the Corporation's stock benefit plans coupled
with normal merit increases. The increase in occupancy and equipment expense
reflects increased depreciation and maintenance costs associated with a new
drive-through location. 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.
Federal Income Taxes
The provision for federal income taxes totaled $90,000 for the three months
ended March 31, 2000, a decrease of $13,000, or 12.6%, compared to the same
period in 1999. This decrease resulted primarily from the decline in net
earnings before taxes of $43,000, or 11.4%, and the effects of tax credits from
the Savings Bank's investment in a low income housing partnership. The effective
tax rates were 26.9% and 27.2% for the three months ended March 31, 2000 and
1999, respectively.
13
<PAGE>
ASB Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Year 2000 Compliance Matters
During the periods leading up to January 1, 2000, the Savings Bank addressed the
potential problems associated with the possibility that the computers that
control or operate the Savings Bank's information technology system and
infrastructure may not have been programmed to read four-digit date codes and,
upon arrival of the year 2000, may have recognized the two-digit code "00" as
the year 1900, causing systems to fail to function or to generate erroneous
data.
The Savings Bank expended less than $10,000 through the periods ended December
31, 1999, in connection with its Year 2000 compliance program, and no additional
expense is anticipated. The Savings Bank experienced no significant problems
related to its information technology systems upon arrival of the Year 2000, nor
was there any interruption in service to its customers of any kind.
The Savings Bank could incur losses if year 2000 issues adversely affect its
depositors or borrowers. Such problems could include delayed loan payments due
to year 2000 problems affecting any significant borrowers or impairing the
payroll systems of large employers in the Savings Bank's primary market area.
Because the Savings Bank's loan portfolio is highly diversified with regard to
individual borrowers and types of businesses, the Savings Bank does not expect,
and to date has not realized, any significant or prolonged difficulties that
will affect net earning or cash flow.
14
<PAGE>
ASB Financial Corp.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
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
Form 8-K: None.
Exhibits:
27 Financial data schedule for the nine months ended
March 31, 2000.
15
<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: May 12, 2000 By: /s/Robert M. Smith
----------------------- -------------------------------
Robert M. Smith
President, Chief Executive Officer
and Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 3,411
<INT-BEARING-DEPOSITS> 1,122
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,621
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 91,670
<ALLOWANCE> 723
<TOTAL-ASSETS> 128,673
<DEPOSITS> 107,278
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,963
<LONG-TERM> 6,799
0
0
<COMMON> 0
<OTHER-SE> 12,633
<TOTAL-LIABILITIES-AND-EQUITY> 128,673
<INTEREST-LOAN> 5,256
<INTEREST-INVEST> 1,592
<INTEREST-OTHER> 12
<INTEREST-TOTAL> 6,860
<INTEREST-DEPOSIT> 3,725
<INTEREST-EXPENSE> 4,006
<INTEREST-INCOME-NET> 2,854
<LOAN-LOSSES> 1
<SECURITIES-GAINS> (15)
<EXPENSE-OTHER> 1,999
<INCOME-PRETAX> 1,078
<INCOME-PRE-EXTRAORDINARY> 777
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 777
<EPS-BASIC> .50
<EPS-DILUTED> .50
<YIELD-ACTUAL> 3.19
<LOANS-NON> 304
<LOANS-PAST> 365
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 733
<CHARGE-OFFS> 12
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 723
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 723
</TABLE>
