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 December 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: February 12, 2002 - 1,531,858 shares
of common stock, no par value
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
1
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)
December 31, June 30,
ASSETS 2001 2001
Cash and due from banks $ 260 $ 640
Interest-bearing deposits in other financial institutions 7,158 4,009
------- -------
Cash and cash equivalents 7,418 4,649
Investment securities available for sale - at market 17,601 20,658
Mortgage-backed securities available for sale - at market 6,401 8,716
Loans receivable - net 103,801 103,308
Office premises and equipment - at depreciated cost 1,334 1,394
Federal Home Loan Bank stock - at cost 813 788
Accrued interest receivable on loans 224 188
Accrued interest receivable on mortgage-backed securities 29 50
Accrued interest receivable on investments and interest-bearing deposits 263 295
Prepaid expenses and other assets 566 902
Prepaid federal income taxes 178 39
------- -------
Total assets $138,628 $140,987
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $117,581 $120,725
Advances from the Federal Home Loan Bank 4,240 4,257
Advances by borrowers for taxes and insurance 166 171
Accrued interest payable 145 129
Other liabilities 1,484 1,201
Deferred federal income taxes 27 1
------- -------
Total liabilities 123,643 126,484
Commitments - -
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;
1,746,924 shares issued - -
Additional paid-in capital 8,503 8,482
Retained earnings, restricted 8,695 8,393
Shares acquired by stock benefit plans (537) (781)
Accumulated comprehensive income, unrealized gains on securities
designated as available for sale, net of related tax effects 764 779
Less 215,066 and 208,145 shares of treasury stock at December 31, 2001
and June 30 2001, respectively - at cost (2,440) (2,370)
------- -------
Total shareholders' equity 14,985 14,503
------- -------
Total liabilities and shareholders' equity $138,628 $140,987
======= =======
3
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
For the six months For the three months
ended December 31, ended December 31,
2001 2000 2001 2000
Interest income
Loans $4,034 $4,013 $1,968 $2,024
Mortgage-backed securities 245 295 114 142
Investment securities 649 811 276 410
Interest-bearing deposits and other 3 2 2 1
----- ----- ----- -----
Total interest income 4,931 5,121 2,360 2,577
Interest expense
Deposits 2,808 3,001 1,297 1,548
Borrowings 83 221 37 105
----- ----- ----- -----
Total interest expense 2,891 3,222 1,334 1,653
----- ----- ----- -----
Net interest income 2,040 1,899 1,026 924
Provision for losses on loans 22 - 22 -
----- ----- ----- -----
Net interest income after provision for
losses on loans 2,018 1,899 1,004 924
Other income
Gain on sale of investment securities 31 52 - 27
Other operating 239 184 147 98
----- ----- ----- -----
Total other income 270 236 147 125
General, administrative and other expense
Employee compensation and benefits 708 778 318 386
Occupancy and equipment 91 88 45 44
Federal deposit insurance premiums 11 14 5 7
Franchise taxes 91 76 46 25
Data processing 187 168 95 83
Other operating 359 267 193 145
----- ----- ----- -----
Total general, administrative and other expense 1,447 1,391 702 690
----- ----- ----- -----
Earnings before income taxes 841 744 449 359
Federal income taxes
Current 211 205 135 98
Deferred 34 - 1 -
----- ----- ----- -----
Total federal income taxes 245 205 136 98
----- ----- ----- -----
NET EARNINGS $ 596 $ 539 $ 313 $ 261
===== ===== ===== =====
EARNINGS PER SHARE
Basic $.40 $.36 $.21 $.18
=== === === ===
Diluted $.38 $.35 $.20 $.17
=== === === ===
4
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
For the six months For the three months
ended December 31, ended December 31,
2001 2000 2001 2000
Net earnings $596 $ 539 $313 $261
Other comprehensive income (loss), net of taxes:
Unrealized holding gains (losses) on securities during
the period, net of taxes (benefits) of $3, $548, $(9)
and $347 during the respective periods 5 1,063 (17) 673
Reclassification adjustment for realized gains included
in earnings, net of taxes of $11 during the six-month
period ended December 31, 2001, and $18 and $9 during
the six- and three-month periods ended December 31, 2000,
respectively (20) (34) - (18)
--- ----- --- ---
Comprehensive income $581 $1,568 $296 $916
=== ===== === ===
Accumulated comprehensive income $764 $ 437 $764 $437
=== ===== === ===
5
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended December 31,
(In thousands)
2001 2000
Cash flows from operating activities:
Net earnings for the period $ 596 $ 539
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 12 (37)
Amortization of deferred loan origination fees (49) (29)
Depreciation and amortization 65 60
Amortization of expense related to stock benefit plans 340 306
Provision for losses on loans 22 -
Federal Home Loan Bank stock dividends (25) (28)
Gain on sale of investment securities (31) (52)
Increase (decrease) in cash due to changes in:
Accrued interest receivable 17 (51)
Prepaid expenses and other assets 336 65
Other liabilities 299 (74)
Federal income taxes
Current (139) (91)
Deferred 34 -
------ ------
Net cash provided by operating activities 1,477 608
Cash flows provided by (used in) investing activities:
Purchase of investment securities (14,826) -
Proceeds from maturity of investment securities 17,855 255
Proceeds from sale of investment securities 32 53
Principal repayments on mortgage-backed securities 2,307 581
Loan principal repayments 18,882 9,620
Loan disbursements (19,348) (11,957)
Purchase of office equipment (5) (90)
------ ------
Net cash provided by (used in) investing activities 4,897 (1,538)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposit accounts (3,144) 4,081
Repayment of Federal Home Loan Bank advances (17) (3,016)
Advances by borrowers for taxes and insurance (5) (9)
Purchase of treasury stock (70) (64)
Dividends paid on common stock (369) (164)
------ ------
Net cash provided by (used in) financing activities (3,605) 828
------ ------
Net increase (decrease) in cash and cash equivalents 2,769 (102)
Cash and cash equivalents at beginning of period 4,649 5,069
------ ------
Cash and cash equivalents at end of period $ 7,418 $ 4,967
====== ======
6
ASB Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended December 31,
(In thousands)
2001 2000
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 230 $ 225
===== =====
Interest on deposits and borrowings $2,875 $3,183
===== =====
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ (15) $1,029
===== =====
7
ASB Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six- and three-months ended December 31, 2001 and 2000
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared
in accordance with the 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, 2001. 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 six-month periods
ended December 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 23,193 unallocated ESOP shares, totaled 1,501,710 and
1,499,560 for the six- and three-month periods ended December 31, 2001.
Weighted-average common shares outstanding, which give effect to 37,209
unallocated ESOP shares, totaled 1,517,630 and 1,515,335 for the six and
three-month periods ended December 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
1,548,259 and 1,546,108 for the six- and three-month periods ended December
31, 2001, and 1,545,384 and 1,540,201 for the six- and three-month periods
ended December 31, 2000, respectively. Incremental shares related to the
assumed exercise of stock options totaled 46,549 and 46,548 shares for the
six- and three-month periods ended December 31, 2001, and 27,754 and 24,866
shares for the six- and three-month periods ended December 31, 2000.
4. Effects of Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141 "Business
Combinations," which requires that all business combinations initiated after
June 30, 2001 be accounted for using the purchase method. The
pooling-of-interests method of accounting is prohibited except for
combinations initiated before
8
ASB Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six- and three-months ended December 31, 2001 and 2000
4. Effects of Recent Accounting Pronouncements (continued)
June 30, 2001. The remaining provisions of SFAS No. 141 relating to business
combinations accounted for by the purchase method, including identification
of intangible assets, accounting for negative goodwill and financial
statement presentation and disclosure, are effective for combinations
completed after June 30, 2001. Management adopted SFAS No. 141 effective
July 1, 2001, as required, without material effect on the Corporation's
financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142 "Goodwill and Intangible Assets,"
which prescribes accounting for all purchased goodwill and intangible
assets. Pursuant to SFAS No. 142, acquired goodwill is not amortized, but is
tested for impairment at the reporting unit level annually and whenever an
impairment indicator arises. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. SFAS No. 142 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, 2001 to December 31,
2001
At December 31, 2001, the Corporation's assets totaled $138.6 million, a
decrease of $2.4 million, or 1.7%, from total assets at June 30, 2001. The
decrease in assets was due primarily to a $3.1 million decrease in deposits,
which was partially offset by a $482,000 increase in shareholders' equity.
Cash and cash equivalents increased by $2.8 million, or 59.6%, over June 30,
2001 levels, to a total of $7.4 million at December 31, 2001. Investment
securities totaled $17.6 million at December 31, 2001, a decrease of $3.1
million, or 14.8%, from June 30, 2001 levels. The decrease was due primarily to
maturities of $17.9 million, which were partially offset by purchases of $14.8
million. Purchases of investment securities consisted primarily of fixed-rate
medium-term U.S. Government agency obligations. Mortgage-backed securities
totaled $6.4 million at December 31, 2001, a decrease of $2.3 million, or 26.6%,
from the total at June 30, 2001, due primarily to principal repayments during
the period. The combined $5.6 million net proceeds from the maturities and
repayment proceeds were used to fund deposit withdrawals of $3.1 million and the
balance were invested in interest-bearing deposits in other financial
institutions, which accounted for most of the increase in cash and cash
equivalents.
Loans receivable increased by $493,000, or .5%, during the six-month period
ended December 31, 2001, to a total of $103.8 million. Loan disbursements
amounted to $19.3 million and were substantially offset by principal repayments
of $18.9 million. During the six-months ended December 31, 2001, loans
originated consisted of $11.3 million of loans secured by one- to four-family
residential real estate, $7.0 million of loans secured by nonresidential and
commercial real estate and $1.0 million of consumer loans.
The allowance for loan losses totaled $656,000 and $713,000 at December 31, 2001
and June 30, 2001, respectively. During the period ended December 31, 2001,
management recorded a charge-off of loans totaling $79,000, consisting of
$31,000 of residential mortgage loans and $48,000 of commercial and other
nonresidential loans. Nonperforming and nonaccrual loans totaled $1.0 million
and $618,000 at December 31, 2001 and June 30, 2001, respectively. The allowance
for loan losses represented 62.6% and 115.4% of nonperforming loans as of
December 31, 2001 and June 30, 2001, respectively. At December 31, 2001,
nonperforming loans consisted of $781,000 in one- to four-family residential
real estate loans and $267,000 in nonresidential real estate, 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 December 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 $117.6 million at December 31, 2001, a decline of $3.1 million,
or 2.6%, from June 30, 2001 levels. The decrease in deposits was primarily
attributable to the current declining interest rate environment. While
management has generally pursued a strategy of moderate growth in the deposit
portfolio, it has historically not engaged in sporadic increases and decreases
in interest rates, nor has it offered the highest interest rates available in
its market area.
Advances from the FHLB totaled $4.2 million at December 31, 2001, a decrease of
$17,000, or .4%, compared to June 30, 2001, due to repayments made during the
period.
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, 2001 to December 31,
2001 (continued)
Shareholders' equity totaled $15.0 million at December 31, 2001, an increase of
$482,000, or 3.3%, over June 30, 2001 levels. The increase resulted primarily
from net earnings of $596,000 and the amortization effects of stock benefit
plans of $244,000, which were partially offset by dividends on common shares
totaling $369,000, a $70,000 repurchase of treasury shares and a $15,000 decline
in unrealized gains on securities designated as available for sale for the
six-month period.
American is required to meet minimum capital standards promulgated by the Office
of Thrift Supervision ("OTS"). At December 31, 2001, American's regulatory
capital was well in excess of the minimum capital requirements.
Comparison of Operating Results for the Six-Month Periods Ended December 31,
2001 and 2000
General
Net earnings amounted to $596,000 for the six months ended December 31, 2001, an
increase of $57,000, or 10.6%, compared to the $539,000 of net earnings reported
for the same period in 2000. The increase in earnings resulted primarily from a
$141,000 increase in net interest income and a $34,000 increase in other income,
which were partially offset by a $22,000 increase in the provision for losses on
loans, a $56,000 increase in general, administrative and other expense and a
$40,000 increase in the provision for federal income taxes.
Net Interest Income
Interest income on loans increased by $21,000, or .5%, during the six-month
period ended December 31, 2001, compared to the 2000 period, due primarily to a
$10.0 million, or 10.4%, increase in the average portfolio balance outstanding,
which was partially offset by a 74 basis point decrease in the weighted-average
yield year to year, to 7.56% at December 31, 2001. Interest income on investment
and mortgage-backed securities and interest-bearing deposits decreased by
$211,000, or 19.0%, due primarily to an 85 basis point decrease in the
weighted-average yield and a $2.4 million decrease in the average balance of the
related assets year to year.
Interest expense on deposits decreased by $193,000, or 6.4%, due primarily to a
58 basis point decrease in the weighted-average cost of deposits, to 4.77% at
December 31, 2001, which was partially offset by an increase of $5.3 million, or
4.7%, in the average balance of deposits outstanding year to year. Interest
expense on borrowings decreased by $138,000, or 62.4%, due primarily to a $2.7
million decrease in the average balance of borrowings outstanding and a 243
basis point decrease in the average cost of borrowings. The decrease in the
yields on interest-earning assets and costs of interest-bearing liabilities was
due primarily to the overall decrease in interest rates in the economy during
2001.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $141,000, or 7.4%, to a total of $2.0 million
for the six months ended December 31, 2001. The interest rate spread decreased
to 2.46% for the six months ended December 31, 2001, from 2.52% for the 2000
period, while the net interest margin increased to approximately 2.98% in the
2001 period, compared to 2.94% in the 2000 period.
11
ASB Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Six-Month Periods Ended December 31,
2001 and 2000 (continued)
Provision for Losses on Loans
A provision for losses on loans is charged to earnings to bring the allowance
for loan losses to a level considered appropriate by management based upon
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 for the six-month period ended December 31, 2001. The
provision was predicated upon the growth in loans and the increase in
nonperforming loans year to year. 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 totaled $270,000 for the six months ended December 31, 2001, an
increase of $34,000, or 14.4%, compared to the same period in 2000, due
primarily to increased service fees on ATM and other account transactions during
the period, and increased revenues related to sales of non-deposit investment
products through an agency arrangement with a third-party vendor. These
increases were partially offset by a $21,000 decrease in gain on sale of
investment securities year to year.
General, Administrative and Other Expense
General, administrative and other expense totaled $1.4 million for the six
months ended December 31, 2001, an increase of $56,000, or 4.0%, compared to the
same period in 2000. This increase was comprised primarily of a $19,000, or
11.3%, increase in data processing expense and a $92,000, or 34.5%, increase in
other operating expense, which were partially offset by a $70,000, or 9.0%,
decrease in employee compensation and benefits. The increase in data processing
expense primarily reflects an increase in transaction costs, and the effects of
the Corporation's overall growth year to year. The increase in other operating
expense was due primarily to a $20,000 increase in expense related to the
Corporation's investment in a low income housing partnership and an increase in
professional fees year to year. The decrease in employee compensation and
benefits was due primarily to a $58,000 reduction in expense associated with the
Corporation's stock-based management recognition plan. The initial awards under
this plan became fully vested in November 2000. Additional awards under this
plan were made in November 2000 and will vest through fiscal 2005 at an
estimated annual expense of approximately $86,000.
Federal Income Taxes
The provision for federal income taxes totaled $245,000 for the six months ended
December 31, 2001, an increase of $40,000, or 19.5%, compared to the same period
in 2000. This increase resulted primarily from the increase in net earnings
before taxes of $97,000, or 13.0%, which was partially offset by tax credits
from the Savings Bank's investment in a low income housing partnership. The
effective tax rates were 29.1% and 27.6% for the six-month periods ended
December 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 December 31,
2001 and 2000
General
Net earnings amounted to $313,000 for the three months ended December 31, 2001,
an increase of $52,000, or 19.9%, compared to the $261,000 of net earnings
reported for the same period in 2000. The increase in earnings resulted
primarily from a $102,000 increase in net interest income and a $22,000 increase
in other income, which were partially offset by a $22,000 increase in the
provision for losses on loans, a $12,000 increase in general, administrative and
other expense and a $38,000 increase in the provision for federal income taxes.
Net Interest Income
Interest income on loans decreased by $56,000, or 2.8%, during the three-month
period ended December 31, 2001, compared to the 2000 period. This decrease was
due primarily to a 72 basis point decrease in the weighted-average yield, to
7.60% for the quarter ended December 31, 2001, which was partially offset by a
$6.2 million, or 6.4%, increase in the average portfolio balance outstanding
year to year. Interest income on investment and mortgage-backed securities and
interest-bearing deposits decreased by $161,000, or 29.1%, due primarily to a
189 basis point decrease in the weighted-average yield and a $403,000 decrease
in the average balance of the related assets year to year.
Interest expense on deposits decreased by $251,000, or 16.2%, for the three
months ended December 31, 2001, compared to the same quarter in 2000. This
decrease was due primarily to a 118 basis point decrease in the weighted-average
cost of deposits, to 4.35% for the quarter ended December 31, 2001, which was
partially offset by a $7.1 million, or 6.3%, increase in the average balance of
deposits outstanding year to year. Interest expense on borrowings decreased by
$68,000, or 64.8%, due primarily to a $2.0 million decrease in the average
balance of borrowings outstanding and a 320 basis point decrease in the average
cost of borrowings. The decrease in the yields on interest-earning assets and
the costs of interest-bearing liabilities was due primarily to the overall
decrease in interest rates in the economy during 2001.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $102,000, or 11.0%, to a total of $1.0 million
for the three months ended December 31, 2001. The interest rate spread increased
to 2.61% for the three months ended December 31, 2001, from 2.31% for the 2000
period, while the net interest margin increased to 3.01% in the 2001 period,
compared to 2.83% in the 2000 period.
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 $22,000 provision for losses on loans for the three-month period ended
December 31, 2001. The current period provision was attributable to the growth
in loans and the increase in nonperforming loans year to year. 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 December 31,
2001 and 2000 (continued)
Other Income
Other income amounted to $147,000 for the three months ended December 31, 2001,
an increase of $22,000, or 17.6%, compared to the same period in 2000, due
primarily to an increase in 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.
These increases were partially offset by the effects of the gain on sale of
investment securities in the 2000 period.
General, Administrative and Other Expense
General, administrative and other expense totaled $702,000 for the three months
ended December 31, 2001, an increase of $12,000, or 1.7%, compared to the same
period in 2000. This increase was comprised primarily of a $12,000, or 14.5%,
increase in data processing expense, a $21,000, or 84.0%, increase in franchise
tax expense and a $48,000, or 33.1%, increase in other operating expense, which
were partially offset by a $68,000, or 17.6%, decrease in employee compensation
and benefits. The increase in data processing expense primarily reflects an
increase in transaction costs, and the effects of the Corporation's overall
growth year to year. The increase in other operating expense was due primarily
to costs related to the Corporation's investment in a low income housing
partnership and increased professional fees during the quarter. The decrease in
employee compensation and benefits expense was due primarily to a reduction in
expense associated with the Corporation's stock-based management recognition
plan. The initial awards under this plan became fully vested in November 2000.
Additional awards were made in November 2000 and will vest through 2005. Annual
expense for this plan is estimated to total approximately $86,000 in future
periods.
Federal Income Taxes
The provision for federal income taxes totaled $136,000 for the three months
ended December 31, 2001, an increase of $38,000, or 38.8%, compared to the same
period in 2000. This increase resulted primarily from the increase in net
earnings before taxes of $90,000, or 25.1%, which was partially offset by tax
credits from the Savings Bank's investment in a low income housing partnership.
The effective tax rates were 30.3% and 27.3% for the three-month periods ended
December 31, 2001 and 2000, 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 Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits: None.
Reports on Form 8-K: None.
15
ASB Financial Corp.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ASB FINANCIAL CORP.
Date: February 13, 2002 By: /s/Robert M. Smith
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Robert M. Smith
President and Chief Executive Officer
Date: February 13, 2002 By: /s/Michael L. Gampp
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Michael L. Gampp
Chief Financial Officer
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