FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission File No. 0-25906 ASB FINANCIAL CORP. ______________________________________________________ (Exact name of registrant as specified in its charter) Ohio 31-1429488 _______________________________ ______________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 503 Chillicothe Street Portsmouth, Ohio 45662 ______________________ __________ (Address of principal (Zip Code) executive office) Registrant's telephone number, including area code: (614) 354-3177 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 May 9, 1997, the latest practicable date, 1,721,412 shares of the registrant's common stock, without par value, were issued and outstanding. Page 1 of 16 pages INDEX Page PART I - FINANCIAL INFORMATION Consolidated Statements of Financial Condition 3 Consolidated Statements of Earnings 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION 15 SIGNATURES 16 -2- ASB Financial Corp. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except share data) March 31, June 30, ASSETS 1997 1996 --------- -------- Cash and due from banks $ 334 $ 411 Interest-bearing deposits in other financial institutions 2,599 3,425 --------- --------- Cash and cash equivalents 2,933 3,836 Certificates of deposit in other financial institutions 4,457 6,702 Investment securities available for sale - at market 17,547 19,284 Mortgage-backed securities available for sale - at market 9,187 10,728 Loans receivable - net 71,367 68,455 Office premises and equipment - at depreciated cost 891 940 Real estate acquired through foreclosure - net 663 663 Federal Home Loan Bank stock - at cost 703 667 Accrued interest receivable on loans 86 120 Accrued interest receivable on mortgage-backed securities 83 110 Accrued interest receivable on investments and interest- bearing deposits 392 479 Prepaid expenses and other assets 569 586 Prepaid federal income taxes 77 -- Deferred federal income taxes 459 352 --------- --------- Total assets $ 109,414 $ 112,922 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $ 87,324 $ 83,395 Advances from the Federal Home Loan Bank 2,391 2,413 Other borrowed money 500 -- Advances by borrowers for taxes and insurance 81 162 Accrued interest payable 637 115 Other liabilities 1,264 1,219 Accrued federal income taxes -- 5 --------- --------- Total liabilities 92,197 87,309 Shareholders' equity Preferred stock, 1,000,000 shares authorized, no par value; no shares issued -- -- Common stock, 4,000,000 shares authorized, no par value: 1,721,412 and 1,713,960 shares issued and outstanding at March 31, 1997 and June 30, 1996 -- -- Additional paid-in capital 8,023 16,496 Retained earnings - restricted 11,028 11,173 Shares acquired by employee benefit plans (1,921) (2,180) Unrealized gains on securities designated as available for sale, net of related tax effects 87 124 --------- --------- Total shareholders' equity 17,217 25,613 --------- --------- Total liabilities and shareholders' equity $ 109,414 $ 112,922 ========= ========= -3- ASB Financial Corp. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except share data) Nine months ended Three months ended March 31, March 31, 1997 1996 1997 1996 Interest income Loans $ 4,383 $4,074 $ 1,500 $1,386 Mortgage-backed securities 518 549 162 191 Investment securities 1,138 1,162 349 368 Interest-bearing deposits and other 253 293 68 91 ------- ------ ------- ------ Total interest income 6,292 6,078 2,079 2,036 Interest expense Deposits 3,374 3,196 1,140 1,077 Borrowings 113 20 48 9 ------- ------ ------- ------ Total interest expense 3,487 3,216 1,188 1,086 ------- ------ ------- ------ Net interest income 2,805 2,862 891 950 Provision for losses on loans 22 -- -- -- ------- ------ ------- ------ Net interest income after provision for losses on loans 2,783 2,862 891 950 Other income Gain (loss) on sale of investment securities 103 -- (2) -- Other operating 178 123 69 50 ------- ------ ------- ------ Total other income 281 123 67 50 General, administrative and other expense Employee compensation and benefits 1,056 921 358 355 Occupancy and equipment 89 90 30 31 Federal deposit insurance premiums 650 141 3 47 Franchise taxes 175 133 54 66 Data processing 132 127 46 43 Other operating 400 352 115 112 ------- ------ ------- ------ Total general, administrative and other expense 2,502 1,764 606 654 ------- ------ ------- ------ Earnings before income taxes 562 1,221 352 346 Federal income taxes Current 278 400 184 112 Deferred (88) 16 (67) 4 ------- ------ ------- ------ Total federal income taxes 190 416 117 116 ------- ------ ------- ------ NET EARNINGS $ 372 $ 805 $ 235 $ 230 ======= ====== ======= ====== EARNINGS PER SHARE $ .23 $ .50 $ .14 $ .14 ======= ====== ======= ====== -4- ASB Financial Corp. CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended March 31, (In thousands) 1997 1996 Cash flows from operating activities: Net earnings for the period $ 372 $ 805 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 59 134 Amortization of deferred loan origination fees (38) (28) Depreciation and amortization 60 60 Amortization of expense related to employee benefit plans 290 211 Provision for losses on loans 22 -- Gain on sale of investment securities (103) -- Federal Home Loan Bank stock dividends (36) (33) Increase (decrease) in cash due to changes in: Accrued interest receivable 148 (67) Prepaid expenses and other assets 17 (137) Accrued interest payable 522 482 Other liabilities 45 11 Federal income taxes Current (82) (69) Deferred (88) 16 -------- -------- Net cash provided by operating activities 1,188 1,385 Cash flows provided by (used in) investing activities: Proceeds from maturity of investment securities 6,449 8,138 Proceeds from sales of investment securities designated as available for sale 103 865 Purchase of investment securities (4,804) (10,543) Purchase of mortgage-backed securities -- (3,488) Principal repayments on mortgage-backed securities 1,518 1,670 Loan principal repayments 13,555 11,254 Loan disbursements (16,451) (16,077) Purchase of office premises and equipment (11) (18) Decrease in certificates of deposit in other financial institutions - net 2,245 1,509 -------- -------- Net cash provided by (used in) investing activities 2,604 (6,690) Cash flows provided by (used in) financing activities: Net increase in deposit accounts 3,929 3,835 Proceeds from Federal Home Loan Bank advances 2,000 1,000 Repayment of Federal Home Loan Bank advances (2,022) (22) Proceeds from other borrowed money 3,500 -- Repayment of other borrowed money (3,000) -- Advances by borrowers for taxes and insurance (81) (175) Purchase of shares for employee benefit plans -- (909) Proceeds from exercise of stock options 103 -- Distributions paid on common stock (9,124) (385) -------- -------- Net cash provided by (used in) financing activities (4,695) 3,344 -------- -------- Net decrease in cash and cash equivalents (903) (1,961) Cash and cash equivalents at beginning of period 3,836 5,926 -------- -------- Cash and cash equivalents at end of period $ 2,933 $ 3,965 ======== ======== -5- ASB Financial Corp. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the nine months ended March 31, (In thousands) 1997 1996 Supplemental disclosure of cash flow information: Cash paid during the period for: Federal income taxes $ 367 $ 383 ======== ======= Interest on deposits and borrowings $ 2,965 $ 2,735 ======== ======= Supplemental disclosure of noncash investing activities: Transfers from loans to real estate acquired through foreclosure $ -- $ 138 ======== ======= Transfer of investments and mortgage-backed securities to an available for sale classification $ -- $22,486 ======== ======= Unrealized gains (losses) on securities designated as available for sale, net of related tax effects $ (37) $ 4 ======== ======= -6- ASB Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended March 31, 1997 and 1996 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, 1996. 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, 1997 and 1996, are not necessarily indicative of the results which may be expected for an entire fiscal year. 2. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Corporation and American Savings Bank, fsb (the "Savings Bank"). All significant intercompany items have been eliminated. 3. Earnings Per Share Earnings per share is computed based upon the weighted-average shares outstanding during the period plus those stock options that are dilutive, less shares in the Employee Stock Ownership Plan ("ESOP") that are unallocated and not committed to be released. Weighted-average common shares deemed outstanding, which gives effect to 95,482 unallocated ESOP shares, totaled 1,621,710 and 1,620,812 for the nine and three month periods ended March 31, 1997, respectively. Weighted-average common shares deemed outstanding, which gives effect to 111,352 unallocated ESOP shares, totaled 1,602,608 for each of the nine and three month periods ended March 31, 1996. There is no dilutive effect associated with the Corporation's stock option plan. 4. Effects of Recent Accounting Pronouncements In October 1995, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", establishing financial accounting and reporting standards for stock-based compensation plans. SFAS No. 123 encourages all entities to adopt a new method of accounting to measure compensation cost of all stock compensation plans based on the estimated fair value of the award at the date it is granted. Companies are, however, allowed to continue to measure compensation cost for those plans using the intrinsic value based method of accounting, which generally does not result in compensation expense recognition -7- ASB Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the three and nine months ended March 31, 1997 and 1996 4. Effects of Recent Accounting Pronouncements (continued) for most plans. Companies that elect to remain with the existing accounting are required to disclose in a footnote to the financial statements pro forma net earnings and, if presented, earnings per share, as if SFAS No. 123 had been adopted. The accounting requirements of SFAS No. 123 are effective for transactions entered into during fiscal years that begin after December 15, 1995; however, companies are required to disclose information for awards granted in their first fiscal year beginning after December 15, 1994. Management has determined that the Corporation will continue to account for stock-based compensation pursuant to Accounting Principles Board Opinion No. 25, and therefore the disclosure provisions of SFAS No. 123 will have no effect on its consolidated financial condition or results of operations. In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers of Financial Assets, Servicing Rights, and Extinguishment of Liabilities", that provides accounting guidance on transfers of financial assets, servicing of financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an approach to accounting for transfers of financial assets that provides a means of dealing with more complex transactions in which the seller disposes of only a partial interest in the assets, retains rights or obligations, makes use of special purpose entities in the transaction, or otherwise has continuing involvement with the transferred assets. The new accounting method, the financial components approach, provides that the carrying amount of the financial assets transferred be allocated to components of the transaction based on their relative fair values. SFAS No. 125 provides criteria for determining whether control of assets has been relinquished and whether a sale has occurred. If the transfer does not qualify as a sale, it is accounted for as a secured borrowing. Transactions subject to the provisions of SFAS No. 125 include, among others, transfers involving repurchase agreements, securitizations of financial assets, loan participations, factoring arrangements, and transfers of receivables with recourse. An entity that undertakes an obligation to service financial assets recognizes either a servicing asset or liability for the servicing contract (unless related to a securitization of assets, and all the securitized assets are retained and classified as held-to-maturity). A servicing asset or liability that is purchased or assumed is initially recognized at its fair value. Servicing assets and liabilities are amortized in proportion to and over the period of estimated net servicing income or net servicing loss and are subject to subsequent assessments for impairment based on fair value. SFAS No. 125 provides that a liability is removed from the balance sheet only if the debtor either pays the creditor and is relieved of its obligation for the liability or is legally released from being the primary obligor. SFAS No. 125 is effective for transfers and servicing of financial assets and extinguishment of liabilities occurring after December 31, 1997, and is to be applied prospectively. Earlier or retroactive application is not permitted. Management does not believe that adoption of SFAS No. 125 will have a material adverse effect on the Corporation's consolidated financial position or results of operations. -8- ASB Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the three and nine months ended March 31, 1997 and 1996 4. Effects of Recent Accounting Pronouncements (continued) In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which requires companies to present basic earnings per share and, if applicable, diluted earnings per share, instead of primary and fully diluted earnings per share, respectively. Basic earnings per share is computed without including potential common shares, i.e., no dilutive effect. Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares, including options, warrants, convertible securities and contingent stock agreements. SFAS No. 128 is effective for periods ending after December 15, 1997. Early application is not permitted. Based upon the provisions of SFAS No. 128, the Corporation's basic and diluted earnings per share for the nine months ended March 31, 1997, would have been $.23 and $.21, respectively. Basic and diluted earnings per share for the three months ended March 31, 1997, would have been $.14 and $.13, respectively. -9- ASB Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Discussion of Financial Condition Changes from June 30, 1996 to March 31, 1997 At March 31, 1997, the Corporation's assets totaled $109.4 million, a decrease of $3.5 million, or 3.1%, from the $112.9 million of total assets at June 30, 1996. The decrease in assets resulted primarily from the $8.6 million return of capital distribution paid in December 1996, which was partially offset by growth in savings deposits of $3.9 million. Liquid assets (i.e., cash, interest-bearing deposits and certificates of deposit) decreased by $3.1 million from June 30, 1996 levels, to a total of $7.4 million at March 31, 1997. Investment securities totaled $17.5 million at March 31, 1997, a decrease of $1.7 million, or 9.0%, from June 30, 1996 levels. During the nine months ended March 31, 1997, $1.5 million of investment securities were sold to the Savings Bank and the proceeds utilized to fund a return of capital to shareholders. In addition, maturities of investment securities totaled $6.4 million, which were partially offset by purchases of $4.8 million. Regulatory liquidity amounted to $11.6 million, or 15.1%, at March 31, 1997. Loans receivable increased by $2.9 million, or 4.3%, during the nine month period, to a total of $71.4 million at March 31, 1997. Loan disbursements amounted to $16.5 million and were partially offset by principal repayments of $13.6 million. Deposits totaled $87.3 million at March 31, 1997, an increase of $3.9 million, or 4.7%, over June 30, 1996 levels. Management continued its efforts to obtain moderate growth in the deposit portfolio through marketing and pricing strategies. American is required to meet each of three minimum capital standards promulgated by the Office of Thrift Supervision (OTS), hereinafter described as the tangible capital requirement, the core capital requirement and the risk-based capital requirement. The tangible capital requirement mandates maintenance of shareholders' equity less all intangible assets equal to 1.5% of adjusted total assets. The core capital requirement provides for the maintenance of tangible capital plus certain forms of supervisory goodwill equal to 3% of adjusted total assets, while the risk-based capital requirement mandates maintenance of core capital plus general loan loss allowances equal to 8% of risk-weighted assets as defined by OTS regulations. At March 31, 1997, American's tangible and core capital totaled $13.0 million, or 12.2% of adjusted total assets, which exceeded the minimum requirements of $1.6 million and $3.2 million by $11.4 million and $9.8 million, respectively. American's risk-based capital of $13.7 million, or 27.0% of risk-weighted assets, exceeded the current 8% requirement by $9.6 million. -10- 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, 1997 and 1996 General Net earnings amounted to $372,000 for the nine months ended March 31, 1997, a decrease of $433,000, or 53.8%, from the $805,000 of net earnings reported for the same period in 1996. The decrease in earnings resulted primarily from a $551,000 charge recorded as a result of the one-time Savings Association Insurance Fund ("SAIF") recapitalization assessment, coupled with a $187,000 increase in general, administrative and other expense, a $22,000 increase in the provision for losses on loans and a $57,000 decrease in net interest income, which were partially offset by a $158,000 increase in other income and a $226,000 decrease in the provision for federal income taxes. Net Interest Income Net interest income decreased by $57,000, or 2.0%, for the nine months ended March 31, 1997, as compared to the 1996 period. Interest income on loans increased by $309,000, or 7.6%, due primarily to a $5.5 million increase in the weighted-average balance of loans outstanding year-to-year. Interest income on mortgage-backed securities decreased by $31,000, or 5.6%, due to a decrease in the average balance outstanding. Interest income on investment securities and interest-bearing deposits decreased by $64,000, or 4.4%, due primarily to a $2.0 million decrease in the weighted-average portfolio balance outstanding. The decline in interest-earning assets was due primarily to the return of capital distribution which was paid in December 1996. Interest expense on deposits increased by $178,000, or 5.6%, due primarily to an increase in the cost of deposits year to year, and a $4.7 million increase in the weighted-average portfolio balance outstanding. Interest expense on borrowings increased by $93,000, or 465.0%, due primarily to a $1.7 million increase in the average balance of borrowings outstanding. Provision for Losses on Loans The allowance for loan losses totaled $884,000 at March 31, 1997 and June 30, 1996. Nonperforming loans totaled $1.1 million at March 31, 1997, as compared to $1.2 million at June 30, 1996. The allowance for loan losses represented 82.5% and 76.3% of nonperforming loans as of March 31, 1997 and June 30, 1996, respectively. 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 $22,000 provision for losses on loans during the nine month period ended March 31, 1997. The provision in the 1997 period resulted primarily to growth in the loan portfolio, as the level of nonperforming loans remained relatively constant over the nine month period. There can be no assurance that the allowance for loan losses of the Savings Bank will be adequate to cover losses on nonperforming assets in the future. -11- 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, 1997 and 1996 (continued) Provision for Losses on Loans (continued) The foregoing statement is a "forward-looking" statement within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Factors that could affect the adequacy of the loan loss allowance include, but are not limited to, the following: (1) changes in the national and local economy which may negatively impact the ability of borrowers to repay their loans and which may cause the value of real estate and other properties that secure outstanding loans to decline; (2) unforeseen adverse changes in circumstances with respect to certain large loan borrowers; (3) decrease in the value of collateral securing consumer loans to amounts equal to less than the outstanding balances of the consumer loans; and (4) determinations by various regulatory agencies that the Savings Bank must recognize additions to its loan loss allowance based on such regulators' judgment of information available to them at the time of their examinations. Other Income Other income increased by $158,000, or 128.5%, for the nine months ended March 31, 1997, as compared to the same period in 1996, due primarily to a $103,000 gain on sale of investment securities, coupled with a $30,000 increase in rental income on real estate acquired through foreclosure. General, Administrative and Other Expense General, administrative and other expense increased by $738,000, or 41.8%, during the nine months ended March 31, 1997, compared to the same period in 1996. This increase resulted primarily from the $551,000 charge recorded in 1996 in connection with the SAIF recapitalization, coupled with a $135,000, or 14.7%, increase in employee compensation and benefits, a $42,000, or 31.6%, increase in franchise taxes and a $48,000, or 13.6%, increase in other operating expenses. The increase in employee compensation and benefits generally reflects normal merit increases and increased costs attendant to the Corporation's stock benefit plans. The increase in franchise taxes resulted from the overall increase in the Corporation's shareholders' equity. The increase in other operating expense resulted primarily from non-recurring consulting costs in the 1997 period. Legislation to recapitalize the SAIF provided for a special assessment of $.657 per $100 of SAIF deposits held at March 31, 1995, in order to increase SAIF reserves to the level required by law. The Savings Bank had $83.9 million in SAIF deposits at March 31, 1995, resulting in an assessment of approximately $551,000, or $364,000 after tax, which was recorded as a charge to operations in the quarter ended September 30, 1996, and was paid in November 1996. The legislation also provides for reduced premium rates for healthy savings associations beginning in 1997, at a rate of $.064 per $100 of SAIF insured deposits. -12- 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, 1997 and 1996 (continued) General, Administrative and Other Expense (continued) Congress is considering legislation to eliminate the federal savings and loan charter and separate federal regulation of savings and loan associations. Pursuant to such legislation, Congress may develop a common charter for all financial institutions, eliminate the OTS and regulate the Savings Bank under federal law as a bank or require the Savings Bank to change its charter. Such changes would likely change the types of activities in which the Savings Bank may engage and would probably subject the Savings Bank to more regulation by the FDIC. In addition, the Corporation might become subject to different holding company regulations. Federal Income Taxes The provision for federal income taxes decreased by $226,000, or 54.3%, for the nine months ended March 31, 1997, as compared to the same period in 1996. This decrease resulted primarily from a decrease in net earnings before tax of $659,000, or 54.0%. The effective tax rates were 33.8% and 34.1% for the nine months ended March 31, 1997 and 1996, respectively. Comparison of Operating Results for the Three Month Periods Ended March 31, 1997 and 1996 General Net earnings amounted to $235,000 for the three months ended March 31, 1997, an increase of $5,000, or 2.2%, over the $230,000 of net earnings reported for the same period in 1996. The increase in earnings resulted primarily from a $48,000 decrease in general, administrative and other expense and a $17,000 increase in other income, which were partially offset by a $59,000 decrease in net interest income. Net Interest Income Net interest income decreased by $59,000, or 6.2%, for the three months ended March 31, 1997, as compared to the 1996 quarter. Interest income on loans and mortgage-backed securities increased by $85,000, or 5.4%, due primarily to a $4.3 million increase in the weighted-average balance outstanding. Interest income on investment securities and interest-bearing deposits decreased by $42,000, or 9.2%, due primarily to a $2.9 million decrease in the weighted-average portfolio balance outstanding. The decline in interest-earning assets was due primarily to such assets being redeployed to fund the return of capital distribution which was paid in December 1996. Interest expense on deposits and borrowings increased by $102,000, or 9.4%, due primarily to an $8.2 million increase in the weighted-average portfolio outstanding. -13- 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, 1997 and 1996 (continued) Other Income Other income totaled $67,000 for the quarter ended March 31, 1997, an increase of $17,000, or 34.0%, over the comparable quarter in 1996. The increase was due primarily to rental income received on a parcel of real estate acquired through foreclosure. General, Administrative and Other Expense General, administrative and other expense decreased by $48,000, or 7.3%, during the three months ended March 31, 1997, as compared to the same period in 1996. This decrease resulted primarily from a $44,000, or 93.6%, decrease in federal deposit insurance premiums and a $12,000, or 18.2%, decrease in franchise taxes. The decrease in federal deposit insurance premiums resulted from the lower premium rates following the one-time SAIF recapitalization assessment paid in the second fiscal quarter. The decrease in franchise taxes resulted primarily from the decrease in shareholders' equity following the Corporation's return of capital distribution. Federal Income Taxes The provision for federal income taxes increased by $1,000, or .9%, for the three months ended March 31, 1997, as compared to the same period in 1996. This increase resulted primarily from the increase in net earnings before taxes of $6,000, or 1.7%. The effective tax rates were 33.2% and 33.5% for the three months ended March 31, 1997 and 1996, respectively. -14- 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 Materially Important Events None ITEM 6. Exhibits and Reports on Form 8-K Exhibit 27: Financial Data Schedule for the nine month period ended March 31, 1997 -15- 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: 5/13/97 By: /s/ Gerald R. Jenkins ____________________________________ Gerald R. Jenkins President Date: 5/13/97 By: /s/ Robert M. Smith ____________________________________ Robert M. Smith Executive Vice President