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, 2001
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to _______________
Commission File Number: 0-25906
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ASB FINANCIAL CORP.
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(Exact name of small business issuer as specified in its charter)
Ohio 31-1429488
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
503 Chillicothe Street Portsmouth, Ohio 45662
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(Address of principal executive offices)
(740) 354-3177
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(Issuer's telephone number)
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(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 11, 2001 - 1,532,658 shares of
common stock
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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 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
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, June 30,
ASSETS 2001 2000
Cash and due from banks $ 3,315 $ 917
Interest-bearing deposits in other financial institutions 1,273 4,152
------- -------
Cash and cash equivalents 4,588 5,069
Investment securities available for sale - at market 21,379 19,112
Mortgage-backed securities available for sale - at market 8,172 8,616
Loans receivable - net 100,081 95,084
Office premises and equipment - at depreciated cost 1,400 1,366
Federal Home Loan Bank stock - at cost 774 733
Accrued interest receivable on loans 136 63
Accrued interest receivable on mortgage-backed securities 58 59
Accrued interest receivable on investments and
interest-bearing deposits 289 355
Prepaid expenses and other assets 562 542
Prepaid federal income taxes 222 228
Deferred federal income tax assets 137 671
------- -------
Total assets $137,798 $131,898
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $117,178 $110,007
Advances from the Federal Home Loan Bank 4,266 7,790
Advances by borrowers for taxes and insurance 100 173
Accrued interest payable 873 89
Other liabilities 1,119 1,258
------- -------
Total liabilities 123,536 119,317
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 8,535 8,454
Retained earnings, restricted 8,357 7,870
Shares acquired by stock benefit plans (834) (1,059)
Accumulated comprehensive income (loss), unrealized gains (losses)
on securities designated as available for sale, net of related tax effects 445 (592)
Less 194,066 and 177,366 shares of treasury stock, respectively - at cost (2,241) (2,092)
------- -------
Total shareholders' equity 14,262 12,581
------- -------
Total liabilities and shareholders' equity $137,798 $131,898
======= =======
3
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Nine months ended Three months ended
March 31, March 31,
2001 2000 2001 2000
Interest income
Loans $6,069 $5,256 $2,056 $1,819
Mortgage-backed securities 441 457 146 150
Investment securities 1,198 1,135 387 378
Interest-bearing deposits and other 3 12 1 3
----- ----- ----- -----
Total interest income 7,711 6,860 2,590 2,350
Interest expense
Deposits 4,531 3,725 1,530 1,280
Borrowings 336 281 115 119
----- ----- ----- -----
Total interest expense 4,867 4,006 1,645 1,399
----- ----- ----- -----
Net interest income 2,844 2,854 945 951
Provision for losses on loans 1 1 1 -
----- ----- ----- -----
Net interest income after provision for
losses on loans 2,843 2,853 944 951
Other income
Gain (loss) on investment securities transactions 85 (15) 33 (15)
Other operating 280 239 96 84
----- ----- ----- -----
Total other income 365 224 129 69
General, administrative and other expense
Employee compensation and benefits 1,172 1,147 394 399
Occupancy and equipment 128 98 40 46
Federal deposit insurance premiums 19 35 5 6
Franchise taxes 121 139 45 51
Data processing 257 224 89 79
Other operating 376 356 109 104
----- ----- ----- -----
Total general, administrative and other expense 2,073 1,999 682 685
----- ----- ----- -----
Earnings before income taxes 1,135 1,078 391 335
Federal income taxes
Current 312 345 107 133
Deferred - (44) - (43)
----- ----- ----- -----
Total federal income taxes 312 301 107 90
----- ----- ----- -----
NET EARNINGS $ 823 $ 777 $ 284 $ 245
===== ===== ===== =====
EARNINGS PER SHARE
Basic $.54 $.50 $.19 $.16
=== === === ===
Diluted $.53 $.50 $.18 $.16
=== === === ===
4
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
(In thousands)
For the nine months For the three months
ended March 31, ended March 31,
2001 2000 2001 2000
Net earnings $ 823 $ 777 $284 $ 245
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities during
the period net of taxes (benefits) of $563, $(369),
$15 and $(102) in each period, respectively 1,093 (717) 30 (197)
Reclassification adjustment for realized (gains) losses
included in earnings net of (taxes) benefits of $(29), $5
$(11) and $5 in each period, respectively (56) 10 (22) 10
----- ---- --- ----
Comprehensive income $1,860 $ 70 $292 $ 58
===== ==== === ====
Accumulated comprehensive income (loss) $ 445 $(442) $445 $(442)
===== ==== === ====
5
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended March 31,
(In thousands)
2001 2000
Cash flows from operating activities:
Net earnings for the period $ 823 $ 777
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 (45) 27
Amortization of deferred loan origination fees (40) (35)
Depreciation and amortization 90 79
Amortization of expense related to stock benefit plans 306 326
Provisions for losses on loans 1 1
(Gain) loss on investment securities transactions (85) 15
Federal Home Loan Bank stock dividends (41) (42)
Increase (decrease) in cash due to changes in:
Accrued interest receivable (6) (39)
Prepaid expenses and other assets (20) 157
Accrued interest payable 784 668
Other liabilities (139) (57)
Federal income taxes
Current 6 (58)
Deferred - (44)
------ ------
Net cash provided by operating activities 1,634 1,775
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 4,749 970
Proceeds from sales of investment securities 86 -
Purchase of investment securities (5,778) (2,103)
Principal repayments on mortgage-backed securities 821 1,102
Loan principal repayments 13,952 12,359
Loan disbursements (18,910) (21,565)
Purchase of office premises and equipment (124) (283)
Decrease in certificates of deposit in other financial institutions - net - 194
Redemption of Federal Home Loan Bank stock - 100
------ ------
Net cash used in investing activities (5,204) (9,226)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 7,171 6,324
Proceeds from Federal Home Loan Bank advances 2,000 8,500
Repayment of Federal Home Loan Bank advances (5,524) (7,524)
Advances by borrowers for taxes and insurance (73) (79)
Purchase of treasury stock (149) (914)
Proceeds from the exercise of stock options - 61
Distributions paid on common stock (336) (1,950)
------ ------
Net cash provided by financing activities 3,089 4,418
------ ------
Net decrease in cash and cash equivalents (481) (3,033)
Cash and cash equivalents at beginning of period 5,069 7,566
------ ------
Cash and cash equivalents at end of period $ 4,588 $ 4,533
====== ======
6
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended March 31,
(In thousands)
2001 2000
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 355 $ 442
===== =====
Interest on deposits and borrowings $4,123 $3,338
===== =====
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available for sale,
net of related tax effects $1,037 $ (707)
===== =====
7
ASB Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine and three months ended March 31, 2001 and 2000
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
accounting principles generally accepted in the United States of America.
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 and nine-month periods
ended March 31, 2001, 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 37,209 unallocated ESOP shares, totaled 1,518,211 and
1,519,705 for the nine and three month periods ended March 31, 2001.
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.
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
1,545,367 and 1,544,571 for the nine and three month periods ended March
31, 2001, respectively, and 1,561,562 and 1,544,662 for the nine and three
month periods ended March 31, 2000, respectively.
Incremental shares related to the assumed exercise of stock options
included in the calculation of diluted earnings per share totaled 27,156
and 24,866 for the nine and three month periods ended March 31, 2001,
respectively, and 6,432 for the nine month period ended March 31, 2000.
Options to purchase 164,557 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
ASB Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the nine and three months ended March 31, 2001 and 2000
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 position or results of operations.
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. SFAS No. 140 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, and is not expected to have a material effect on the
Corporation's financial position or results of operations.
9
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 March 31, 2001
At March 31, 2001, the Corporation's assets totaled $137.8 million, an increase
of $5.9 million, or 4.5%, over total assets at June 30, 2000. The increase in
assets was funded primarily by growth in deposits of $7.2 million and a $1.7
million increase in shareholders' equity, which were partially offset by a $3.5
million decrease in advances from the Federal Home Loan Bank ("FHLB").
Liquid assets (i.e. cash and interest-bearing deposits) decreased by $481,000,
or 9.5%, from June 30, 2000 levels, to a total of $4.6 million at March 31,
2001. Investment securities totaled $21.4 million at March 31, 2001, an increase
of $2.3 million, or 11.9%, over June 30, 2000 levels. The increase resulted from
purchases of securities totaling $5.8 million, which were partially offset by
maturities of $4.7 million. During the nine month period ended March 31, 2001,
unrealized gains on available for sale securities increased by $1.2 million.
Mortgage-backed securities totaled $8.2 million at March 31, 2001, a decrease of
$444,000, or 5.2%, from the total at June 30, 2000. The decrease was due
primarily to principal repayments of $821,000, which were partially offset by a
decline in net unrealized losses totaling $387,000 for the period.
Loans receivable increased by $5.0 million, or 5.3%, during the nine month
period ended March 31, 2001, to a total of $100.1 million. Loan disbursements
amounted to $18.9 million and were partially offset by principal repayments of
$14.0 million. During the nine months ended March 31, 2001, loans originated
were comprised of $9.3 million of one- to four-family residential real estate,
$8.1 million of commercial and nonresidential real estate and $1.5 million of
consumer loans.
The allowance for loan losses totaled $716,000 and $723,000 at March 31, 2001
and June 30, 2000, respectively. Nonperforming and nonaccrual loans totaled
$689,000 and $281,000 at March 31, 2001 and June 30, 2000, respectively. The
allowance for loan losses represented 103.9% and 257.3% of nonperforming loans
as of March 31, 2001 and June 30, 2000, respectively. At March 31, 2001,
nonperforming loans were comprised of $580,000 of one- to four-family
residential real estate and $109,000 in consumer and other loans. Management
believes such loans are adequately collateralized and does not expect to incur
any losses on such loans. Although management believes that its allowance for
loan losses at March 31, 2001, 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 $117.2 million at March 31, 2001, an increase of $7.2 million,
or 6.5%, 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 and pricing strategies. Proceeds from deposit growth
were generally used to fund new loan originations and repay advances from the
FHLB.
Advances from the FHLB totaled $4.3 million at March 31, 2001, a decrease of
$3.5 million, or 45.2%, compared to June 30, 2000.
10
ASB Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from June 30, 2000 to March 31, 2001
(continued)
Shareholders' equity totaled $14.3 million at March 31, 2001, an increase of
$1.7 million, or 13.4%, over June 30, 2000 levels. The increase resulted
primarily from a $1.0 million increase in unrealized gains on securities
designated as available for sale and net earnings of $823,000, which were
partially offset by dividends on common shares totaling $336,000 for the
nine-month period.
American is required to meet minimum capital standards promulgated by the Office
of Thrift Supervision ("OTS"). At March 31, 2001, American's regulatory capital
was well in excess of the minimum capital requirements.
Comparison of Operating Results for the Nine-Month Periods Ended March 31, 2001
and 2000
General
Net earnings amounted to $823,000 for the nine months ended March 31, 2001, an
increase of $46,000, or 5.9%, compared to the $777,000 of net earnings reported
for the same period in 2000. The increase in earnings resulted primarily from a
$141,000 increase in other income, which was partially offset by a $10,000
decrease in net interest income and a $74,000 increase in general,
administrative and other expense.
Net Interest Income
Net interest income decreased by $10,000, or .4%, for the nine months ended
March 31, 2001, compared to the 2000 period. Interest income on loans increased
by $813,000, or 15.5%, during the nine-month period ended March 31, 2001,
compared to the 2000 period, due primarily to an approximate $8.5 million
increase in the average portfolio balance outstanding and a 42 basis point
increase in the weighted-average yield year to year. Interest income on
investment and mortgage-backed securities and interest-bearing deposits and
other increased by $38,000, or 2.4%, due primarily to a 22 basis point increase
in the weighted-average yield year to year, which was partially offset by a $2.3
million decrease in the average balance of the related assets.
Interest expense on deposits increased by $806,000, or 21.6%, due primarily to
an increase of approximately $10.2 million in the average balance of deposits
outstanding, coupled with a 52 basis point increase in the weighted-average cost
of deposits year to year. Interest expense on borrowings increased by $55,000,
or 19.6%, due primarily to a 106 basis point increase in the average cost of
borrowings, which was offset by a $740,000 decrease in the average balance of
borrowings outstanding.
As a result of the foregoing changes in interest income and interest expense,
net interest income decreased by $10,000, or .4%, to a total of $2.8 million for
the nine months ended March 31, 2001. The interest rate spread amounted to
approximately 2.48% for the nine months ended March 31, 2001, compared to 2.46%
for the 2000 period, while the net interest margin decreased to approximately
2.93% in fiscal 2001, compared to 3.07% in fiscal 2000.
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, 2001
and 2000 (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 elected to
record a provision for losses on loans totaling $1,000 for the nine-month period
ended March 31, 2001. 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 $141,000, or 62.9%, for the nine months ended March
31, 2001, compared to the same period in 2000, due primarily to an $85,000 gain
on the sale of investment securities, compared to a $15,000 loss on securities
transactions in the 2000 period, coupled with a $41,000, or 17.2%, increase in
other operating income. The increase in other operating income was due primarily
to increased service fees on ATM and other account transactions, as well as
increased revenues related to sales of non-deposit investment products through
an agency arrangement with a third-party vendor.
General, Administrative and Other Expense
General, administrative and other expense increased by $74,000, or 3.7%, during
the nine months ended March 31, 2001, compared to the same period in 2000. This
increase resulted primarily from a $25,000, or 2.2%, increase in employee
compensation and benefits, a $30,000, or 30.6%, increase in occupancy and
equipment expense, a $33,000, or 14.7%, increase in data processing expense and
a $20,000, or 5.6%, increase in other operating expense, which were partially
offset by a $16,000, or 45.7%, decrease in federal deposit insurance premiums
and an $18,000, or 12.9%, decrease in franchise taxes. The increase in employee
compensation and benefits was due primarily to an increase in staffing levels,
including the hiring of a chief financial officer, which was partially offset by
a decrease in expense related to stock benefit plans. 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 decrease in federal deposit
insurance premiums and franchise tax expense was due to a reduction in premium
rates and a decrease in shareholders' equity in prior periods, respectively. The
increase in other operating expense relates primarily to the amortization
expense related to the Savings Bank's investment in a low-income housing
partnership.
Federal Income Taxes
The provision for federal income taxes totaled $312,000 for the nine months
ended March 31, 2001, an increase of $11,000, or 3.7%, compared to the same
period in 2000. This increase resulted primarily from a corresponding increase
in pre-tax income totaling $57,000, or 5.3%, which was partially offset by tax
credits from the Savings Bank's investment in a low-income housing partnership.
The effective tax rate was 27.5% and 27.9% for the nine months ended March 31,
2001 and 2000, respectively.
12
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, 2001
and 2000
General
Net earnings amounted to $284,000 for the three months ended March 31, 2001, an
increase of $39,000, or 15.9%, compared to the $245,000 of net earnings reported
for the same period in 2000. The increase in earnings resulted primarily from a
$60,000 increase in other income and a $43,000 decrease in general,
administrative and other expense, which were partially offset by a $6,000
decrease in net interest income and a $17,000 increase in the provision for
federal income taxes.
Net Interest Income
Net interest income decreased by $6,000, or .6%, for the three months ended
March 31, 2001, compared to the 2000 period. Interest income on loans increased
by $237,000, or 13.0%, during the three-month period ended March 31, 2001,
compared to the 2000 period, due primarily to an approximate $7.7 million
increase in the average portfolio balance outstanding and a 36 basis point
increase in the weighted-average yield year to year. Interest income on
investment and mortgage-backed securities and interest-bearing deposits and
other increased by $3,000, or .6%, due primarily to a 25 basis point increase in
the weighted-average yield year to year, which was partially offset by a $2.7
million decrease in the average balance of the related assets.
Interest expense on deposits increased by $250,000, or 19.5%, due primarily to
an increase of approximately $10.8 million in the average balance of deposits
outstanding, coupled with a 66 basis point increase in the weighted-average cost
of deposits year to year. Interest expense on borrowings decreased by $4,000, or
3.4%, due primarily to a $1.1 million decrease in the average balance of
borrowings outstanding, which was offset by a 114 basis point increase in the
average cost of borrowings.
As a result of the foregoing changes in interest income and interest expense,
net interest income decreased by $6,000, or .6%, to a total of $945,000 for the
three months ended March 31, 2001. The interest rate spread decreased to
approximately 2.37% for the three months ended March 31, 2001, from 2.39% for
the 2000 period, while the net interest margin decreased to approximately 2.88%
in fiscal 2001, compared to 3.03% in 2000.
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 elected to
record a provision for losses on loans totaling $1,000 for the three-month
period ended March 31, 2001 and recorded no provision 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.
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, 2001
and 2000 (continued)
Other Income
Other income increased by $60,000, or 87.0%, for the three months ended March
31, 2001, compared to the same period in 2000, due primarily to a $33,000 gain
on the sale of investment securities during the 2001 quarter, compared to a loss
of $15,000 on investment securities transactions recorded in the 2000 quarter,
coupled with a $12,000, or 14.3%, increase in other operating income. The
increase in other operating income was due primarily to increased service fees
on ATM and other account transactions during the period, as well as increased
revenues related to sales of non-deposit investment products through an agency
arrangement with a third-party vendor.
General, Administrative and Other Expense
General, administrative and other expense decreased by $3,000, or .4%, during
the three months ended March 31, 2001, compared to the same period in 2000. This
decrease was comprised primarily of a $5,000, or 1.3%, decrease in employee
compensation and benefits, a $6,000, or 13.0%, decrease in occupancy and
equipment and a $6,000, or 11.8%, decrease in franchise taxes, which were
partially offset by a $10,000, or 12.7%, increase in data processing expense and
a $5,000, or 4.8%, increase in other operating expenses. 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 decrease
in employee compensation and benefits was due to a decline in costs of stock
benefit plans year to year, partially offset by an increase in staffing levels.
Federal Income Taxes
The provision for federal income taxes totaled $107,000 for the three months
ended March 31, 2001, an increase of $17,000, or 18.9%, compared to the same
period in 2000. This increase resulted primarily from the increase in net
earnings before taxes of $56,000, or 16.7%, which were partially offset by tax
credits from the Savings Bank's investment in a low income housing partnership.
The effective tax rates were 27.4% and 26.9% for the three-month periods ended
March 31, 2001 and 2000, respectively.
14
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
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits: None.
Reports on Form 8-K: None.
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: May 14, 2001 By: /s/Robert M. Smith
----------------------- -----------------------------------
Robert M. Smith
President and Chief Executive Officer
Date: May 14, 2001 By: /s/Michael L. Gampp
----------------------- -----------------------------------
Michael L. Gampp
Chief Financial Officer
16