PRE 14A 1 asb-sprx.txt PRELIMINARY PROXY MATERIAL SCHEDULE 14A INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 ASB FINANCIAL CORP. --------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) --------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------ (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------ (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------ (5) Total fee paid: ------------------------------------------------------------ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount previously paid: ------------------------------------------------------------ (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------ (3) Filing party: ------------------------------------------------------------ (4) Date Filed: ------------------------------------------------------------ ASB FINANCIAL CORP. 503 Chillicothe Street Portsmouth, Ohio 45662 (740) 354-3177 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS A Special Meeting of Shareholders (the "Special Meeting") of ASB Financial Corp., an Ohio corporation ("ASB"), will be held on [April ___, 2005], at _________ __.m., local time, at Shawnee State Park Resort and Conference Center, 4404B State Route 125, West Portsmouth, Ohio 45663 for the following purposes, which are more completely set forth in the accompanying Proxy Statement: 1. To consider and vote upon a proposal to amend ASB's Articles of Incorporation to effect a 1-for-300 reverse stock split and the repurchase of all resulting fractional shares, followed immediately by an amendment to ASB's Articles of Incorporation to effect a 300-for-1 forward stock split of ASB's common shares (collectively, the "Stock Splits"). As a result of the Stock Splits, (a) each shareholder owning fewer than 300 common shares of ASB immediately before the Stock Splits will receive $23.00 in cash, without interest, for each ASB common share owned by such shareholder immediately prior to the Stock Splits and will no longer be a shareholder of ASB; and (b) each shareholder owning 300 or more common shares immediately before the Stock Splits (i) will receive 300 Common Shares after the Stock Splits in exchange for each lot of 300 Common Shares held before the Stock Splits and (ii) any additional Common Shares held other than in a 300 share lot will be cancelled and exchanged for $23.00 in cash per share. The proposed amendments to ASB's Articles of Incorporation are attached as Exhibits B and C to the accompanying Proxy Statement; and 2. To transact such other business as may properly come before the Special Meeting or any adjournment thereof. Only ASB shareholders of record as of the close of business on [March ___, 2005], will be entitled to notice of, and to vote at, the Special Meeting and any adjournment thereof. To assure that a quorum is present at the Special Meeting, please date, sign and promptly return the enclosed Proxy whether or not you expect to attend the Special Meeting. A postage-prepaid envelope is enclosed for your convenience. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE STOCK SPLITS, PASSED UPON THE MERITS OR FAIRNESS OF THE STOCK SPLITS, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ASB's Board of Directors carefully considered the terms of the proposed Stock Splits, has determined that the Stock Splits are fair to, and in the best interests of, ASB and its shareholders, and unanimously recommends that you vote FOR the approval of the Stock Splits. By Order of the Board of Directors, Robert M. Smith President Portsmouth, Ohio [March ___, 2005] ASB FINANCIAL CORP. 503 Chillicothe Street Portsmouth, Ohio 45662 (740) 354-3177 PROXY STATEMENT GENERAL INFORMATION This Proxy Statement provides detailed information about a proposal to amend the Articles of Incorporation, as amended (the "Articles"), of ASB Financial Corp. ("ASB") to effect a 1-for-300 reverse stock split and the repurchase of all resulting fractional shares, followed immediately by a 300-for-1 forward stock split (together these are referred to as the "Stock Splits") of ASB's common shares, no par value per share (the "Common Shares"). If the Stock Splits are completed: * Each shareholder owning fewer than 300 Common Shares immediately before the Stock Splits will receive $23.00 in cash, without interest, in exchange for each Common Share owned by such shareholder immediately prior to the Stock Splits and will no longer be a shareholder of ASB; and * Each shareholder owning 300 or more Common Shares will receive 300 Common shares for each lot of 300 Common Shares held prior to the Stock Splits and will receive $23.00 in cash, without interest, in exchange for any Common Shares not in a 300 share lot. The proposed amendments to ASB's Articles to accomplish the Stock Splits are attached as Exhibits B and C to this Proxy Statement. We cannot complete the Stock Splits unless the holders of at least [857,932] Common Shares, which is a majority of the outstanding Common Shares, approve the Stock Splits. The Board of Directors has scheduled a Special Meeting of Shareholders of ASB (the "Special Meeting") to vote upon the Stock Splits proposal. The date, time and place of the Special Meeting are as follows: [April ____, 2005] ___:___, __.m. Local Time Shawnee State Park Resort and Conference Center 4404B State Route 125, West Portsmouth, Ohio 45663 We urge you to read this Proxy Statement carefully and in its entirety, including the attached Exhibits. This Proxy Statement is first being mailed to ASB's shareholders on or about [March ___, 2005]. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE STOCK SPLITS, PASSED UPON THE MERITS OR FAIRNESS OF THE STOCK SPLITS, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ASB. 2 SUMMARY TERM SHEET The following is a summary of the material terms of the Stock Splits upon which ASB's shareholders will vote at the Special Meeting. While this summary describes what we believe are the most material terms and conditions of the Stock Splits, this Proxy Statement contains a more detailed description of such terms and conditions. We urge you to carefully review, in their entirety, this Proxy Statement, the attached Exhibits and the documents incorporated by reference before voting. ASB Background * ASB is an Ohio corporation and a registered savings and loan holding company which owns all of the issued and outstanding shares of its wholly-owned subsidiary, American Savings Bank, fsb ("American"). ASB's principal offices are located at 503 Chillicothe Street, Portsmouth, Ohio 45662 and ASB's phone number at that address is (740) 354-3177. Please see the section of this Proxy Statement entitled "Information About ASB - Business of ASB and American" for a more detailed discussion. Stock Splits Proposal The Stock Splits will consist of the following steps: * On the date (the "Effective Date") that the Ohio Secretary of State accepts for filing certificates of amendment to our Articles, a 1-for-300 reverse stock split of the Common Shares will occur, as a result of which: * Each holder of less than 300 Common Shares immediately before the reverse stock split will receive from ASB cash in the amount of $23.00, without interest, for each Common Share held immediately before the reverse stock split and will no longer be a shareholder of ASB; and * Each holder of 300 or more Common Shares immediately prior to the reverse stock split will receive one whole Common Share for each lot of 300 Common Shares held by the shareholder immediately before the reverse stock split and will receive cash from ASB in the amount of $23.00 for each Common Share held immediately before the reverse stock split and not converted into one whole share. * After completion of the reverse stock split and the repurchase of all resulting fractional shares, ASB will effect a 300-for-1 forward stock split of the Common Shares remaining outstanding after the reverse stock split. Each holder of 300 or more Common Shares immediately before the reverse stock split will participate in the forward stock split, which will result in such holder holding a number of Common Shares equal to the number of whole shares remaining outstanding after the reverse stock split multiplied by 300. Please see the sections of this Proxy Statement entitled "Special Factors - Effects of the Stock Splits" and "Stock Splits Proposal - Summary and Structure" for a more detailed discussion of the Stock Splits. 3 Purposes of and Reasons for the Stock Splits * The Stock Splits are intended to reduce the number of record holders of the Common Shares below 300 and enable ASB to terminate the registration of, or deregister, the Common Shares under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Deregistration would eliminate ASB's duty to file periodic reports and proxy statements with the Securities and Exchange Commission (the "SEC"), and as a result, ASB would no longer be a public reporting company. However, ASB will continue to be subject to the general anti-fraud provisions of federal and applicable state securities laws and federal banking laws applicable to ASB and American. * The following are the principal reasons for the Stock Splits: * anticipated annual cost savings of approximately $165,000 as a result of the deregistration of the Common Shares and the related elimination of periodic reporting requirements, including the cost savings resulting from no longer being subject to the public company provisions of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act") and the elimination of costs associated with being listed on the Nasdaq National Market ("Nasdaq"); * additional savings of management's and employees' time that will no longer be spent preparing the periodic reports required under the Exchange Act and complying with other provisions of the Exchange Act; * reduced premiums for ASB's directors' and officers' insurance policies as a result of ASB no longer being a public reporting company; * decreased expenses resulting from no longer being required to service holders with small positions in the Common Shares; * the Stock Splits constitute the most expeditious, efficient, cost effective and fair method to convert ASB from a public reporting company to a privately-held, non- reporting company compared to other alternatives considered by the Board; and * the fact that ASB has not realized many of the benefits normally associated with being a public reporting company (such as access to capital markets, active trading market and use of company stock as currency for acquisitions) due to the relatively limited liquidity of the Common Shares. Please see the sections of this Proxy Statement entitled "Special Factors - Purpose of the Stock Splits," "Special Factors - Effects of the Stock Splits" and "Special Factors - Reasons for the Stock Splits" for a more detailed discussion of the principal reasons for the Stock Splits. Fairness of the Stock Splits * The Board has set $23.00 per pre-split Common Share (the "Repurchase Price") as the cash consideration to be paid by ASB in lieu of issuing fractional Common Shares (i.e., less than one whole Common Share) in connection with the Stock Splits. The Board made this determination in good faith and received a fairness opinion (the "Fairness Opinion") prepared by Keller & Company, Inc. ("Keller & Company"), an independent financial advisor. The 4 Board also considered other factors the Board deemed relevant, as described in greater detail in this Proxy Statement. * The Fairness Opinion was delivered to the Board to assist the Board in establishing the terms and conditions of the Stock Splits. The Fairness Opinion states, that based upon and subject to the factors and assumptions set forth therein as of February 28, 2005, the Repurchase Price is fair, from a financial point of view, to ASB's shareholders. * The full text of the Fairness Opinion, dated February 28, 2005, is attached to this Proxy Statement as Exhibit A. We urge to read the Fairness Opinion in its entirety. Keller & Company provided the Fairness Opinion for the information and assistance of the Board in connection with its consideration of the Stock Splits. The Fairness Opinion is not a recommendation as to how you should vote with respect to the Stock Splits. * The Board believes that the Stock Splits are in ASB's best interests and are substantively and procedurally fair to both the affiliated and unaffiliated holders of the Common Shares, including both those holders whose Common Shares will be completely cashed out pursuant to the Stock Splits ("Cashed Out Holders") and those who will continue to hold Common Shares after the Stock Splits ("Continuing Holders"). * The Board has reviewed and considered the analyses and conclusions of Keller & Company contained in the Fairness Opinion and has unanimously approved the Stock Splits. Please see the sections of this Proxy Statement entitled "Special Factors - Fairness of the Stock Splits," "Opinion of Keller & Company," "Stock Splits Proposal - Background of the Stock Splits" and "Stock Splits Proposal - Recommendation of the Board" for a more detailed discussion of the foregoing. Voting Information * Approval of the Stock Splits requires the approval of a majority of the outstanding Common Shares entitled to vote at the Special Meeting. As of the close of business on [March ___, 2005] (the "Record Date"), there were [1,715,862] Common Shares outstanding and entitled to vote at the Special Meeting, of which [857,932] are required to approve the Stock Splits. Please see the section of the Proxy Statement entitled "Meeting and Voting Information" for a more detailed discussion of the foregoing. Certain Federal Income Tax Consequences * ASB will not recognize any gain, loss or deduction for federal income tax purposes as a result of the Stock Splits. * ASB's shareholders will generally recognize a gain or loss for federal income tax purposes equal to the difference between the amount of cash received and the shareholder's tax basis in the Common Shares that are exchanged for the Repurchase Price in lieu of issuing fractional shares. Please see the section of this Proxy Statement entitled "Stock Splits Proposal - Material Federal Income Tax Consequences" for a more detailed discussion of the foregoing. 5 Unavailability of Appraisal or Dissenters' Rights * A holder of Common Shares does not have the right under Ohio law or ASB's Articles or Code of Regulations (the "Regulations") to demand the appraised value of such Common Shares or any other dissenters' rights if the holder votes against the Stock Splits. Please see the section of this Proxy Statement entitled "Stock Splits Proposal - Unavailability of Appraisal or Dissenters' Rights" for a more detailed discussion of the foregoing. Escheat Laws * All unclaimed cash amounts payable to shareholders in lieu of issuing fractional shares will be subject to applicable state laws regarding abandoned property. Please see the section of this Proxy Statement entitled "Stock Splits Proposal - Escheat Laws" for a more detailed discussion of the foregoing. CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS When used in this Proxy Statement the words or phrases "will likely result," "are expected to," "will continue," "anticipate," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from results presently anticipated or projected. ASB cautions you not to place undue reliance on any such forward-looking statements, which speak only as of the date made. ASB advises readers that ASB's actual results may differ materially from any opinions or statements expressed with respect to future periods in any current statements in this Proxy Statement or in our other filings with the SEC. ASB does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Please see the section of this Proxy Statement entitled "Available Information" 6 TABLE OF CONTENTS ----------------- SUMMARY TERM SHEET 3 Stock Splits Proposal 3 Purposes of and Reasons for the Stock Splits 4 Fairness of the Stock Splits 4 Voting Information 5 Certain Federal Income Tax Consequences 5 Unavailability of Appraisal or Dissenters' Rights 6 Escheat Laws 6 CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS 6 SPECIAL FACTORS 9 Purpose of the Stock Splits 9 Reasons for the Stock Splits 9 Effects of the Stock Splits 11 Alternatives to the Stock Splits 15 Fairness of the Stock Splits 16 Advantages of the Stock Splits 17 Disadvantages of the Stock Splits 18 Other Factors 19 Conclusion 20 OPINION OF KELLER & COMPANY 20 Public Comparables Analysis 22 Review of ASB Market Performance 23 Conclusion 23 Engagement of Keller & Company 24 MEETING AND VOTING INFORMATION 24 Time and Place 24 Revoking Your Proxy 24 Record Date 24 Quorum and Required Vote 24 Solicitation and Costs 25 STOCK SPLITS PROPOSAL 25 Summary and Structure 25 Background of the Stock Splits 27 Recommendation of the Board 31 Potential Disadvantages of the Stock Splits to Shareholders 31 Share Certificates 31 Material Federal Income Tax Consequences 31 Unavailability of Appraisal or Dissenters' Rights 34 Reservation of Rights 34 Escheat Laws 34 Regulatory Approvals 35 INFORMATION ABOUT ASB 35 Business Overview 35 Management of ASB 35 Interest of Certain Persons in Matters to be Acted Upon 37 7 Market Price and Dividend Information 39 Common Share Repurchase Information 40 FINANCIAL INFORMATION 41 Summary Historical Financial Information 41 Certain Financial Effects of the Stock Splits 42 Pro Forma Financial Information 42 AVAILABLE INFORMATION 48 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 48 PROPOSALS OF SHAREHOLDERS AND OTHER MATTERS 49 EXHIBIT A - FAIRNESS OPINION EXHIBIT B - FORM OF REVERSE STOCK SPLIT AMENDMENT EXHIBIT C - FORM OF FORWARD STOCK SPLIT AMENDMENT 8 SPECIAL FACTORS Purpose of the Stock Splits The primary purpose of the Stock Splits is to terminate ASB's status as a public reporting company with the SEC. As a result of the Stock Splits and the repurchase of the resulting fractional shares from holders of fewer than 300 shares, ASB expects to have approximately 240 holders of record of the Common Shares, which would enable ASB to terminate the registration of the Common Shares under the Exchange Act. If the Stock Splits are completed, ASB intends to file with the SEC to terminate the registration of the Common Shares. Upon deregistration, the Common Shares would no longer be quoted on the Nasdaq and trades in the Common Shares would only be possible through privately negotiated transactions or in the Pink Sheets(R) (a centralized quotation service that collects and publishes market maker quotes for securities). Reasons for the Stock Splits Reduced Costs and Expenses. We incur both direct and indirect costs to comply with the filing and reporting requirements imposed on us as a public reporting company. As described below, these costs include, among other things, management's time spent preparing and reviewing our public filings and legal and accounting fees associated with the preparation and review of such filings. Our compliance costs have increased significantly with the adoption and implementation of the Sarbanes-Oxley Act and related SEC and Nasdaq rules, and we expect these costs to increase further in the future. For smaller publicly traded companies, such as ASB, those costs represent a larger portion of our revenues than for larger public companies. Not all of our reporting costs will be eliminated, however. We will continue to comply with all federal reporting requirements applicable to ASB as a savings and loan holding company and to American as a federal savings bank. Further, we anticipate that we will continue to provide our shareholders with annual audited financial statements and proxy statements, although we are not required to do so. If provided, these documents may not be as detailed, or contain the same level of disclosure, as those required of a public reporting company. The Board believes that by deregistering the Common Shares and suspending ASB's periodic reporting obligations under the Exchange Act, we will realize recurring annual cost savings of approximately $165,000 in fees and expenses that we have historically incurred, including fees and expenses for compliance with the Sarbanes-Oxley Act and associated regulations and compliance with requirements imposed on us by the Nasdaq. These estimated fees and expenses are described in greater detail below. Estimated Cost Savings: ----------------------- Legal fees $ 50,000 Printing, mailing and filing costs $ 25,000 Audit fees $ 75,000 Internal personnel fees $ 15,000 -------- Total $165,000 ======== These estimated historical cost savings reflect, among other things: (i) a reduction in audit and related fees; (ii) a reduction in legal fees related to securities law compliance and compliance with Nasdaq requirements; (iii) the elimination of filing costs and expenses associated with electronically filing 9 periodic reports and other documents (such as proxy statements) with the SEC on its Edgar database; (iv) the lower printing and mailing costs attributable to the reduction in the number of shareholders and the less complicated and extensive disclosure required by our private status; (v) a reduction in management time spent on compliance and disclosure matters attributable to our Exchange Act filings; (vi) the lower risk of liability that is associated with non-reporting company status and the expected decrease in premiums for directors' and officers' liability insurance; (vii) the cost savings due to ASB not being subject to the public company provisions of the Sarbanes-Oxley Act; (viii) the savings in fees charged by Illinois Stock Transfer Company, ASB's transfer agent (the "Transfer Agent"), that are expected because of the reduction in the number of shareholder accounts to be handled by the Transfer Agent; and (ix) a reduction in direct miscellaneous clerical and other expenses. Further, due to increases in the market value of the Common Shares over the past couple of years, ASB is no longer a "small business" filer under the Exchange Act. Under SEC rules, small business filers are subject to less stringent disclosure requirements. Due to our transition to a regular filer, our costs to prepare our Exchange Act filings in the future would likely be greater than our historical costs because of these increased disclosure requirements. In addition to the foregoing annual estimated cost savings, the consummation of the Stock Splits and the subsequent deregistration of the Common Shares would also result in a significant one-time cost savings of approximately $144,900 in fees and expenses because we would not be subject to the new internal control audit requirements imposed by Section 404 of the Sarbanes-Oxley Act. Preparing to comply with Section 404 of the Sarbanes-Oxley Act would require significant expenditures, including fees to third parties for compliance planning, assessment, documentation and testing. It would also require a significant investment of time by the management and employees of ASB and American. These estimated costs for compliance with Section 404 are described in more detail below. Non-Recurring Sarbanes-Oxley Act Compliance Costs: -------------------------------------------------- Third party planning, testing and documentation $100,000 Audit fees $ 29,900 Internal personnel expenses $ 15,000 -------- Total $144,900 ======== The historical and non-recurring cost savings figures set forth above are only estimates. The actual savings we realize from going private may be higher or lower than these estimates. The estimates are based upon the (i) actual costs to us of the services and disbursements in each of the categories listed above that were reflected in our recent financial statements and (ii) allocation to each category of management's estimates of the portion of the expenses and disbursements believed to be solely or primarily attributable to our public reporting company status. In some instances, these cost savings expectations were based on verifiable assumptions. For example, our auditing fees will be reduced if we cease to be a public reporting company due to the elimination of fees for interim services. In addition, the costs associated with retaining legal counsel to assist us with complying with the Exchange Act reporting requirements will be eliminated if we no longer file reports with the SEC. Operational Flexibility. Another reason for the Stock Splits is the operational flexibility that completion of the Stock Splits and subsequent deregistration would provide. The Board believes that ceasing to be a public 10 reporting company would enable management to focus more on ASB's long-term growth without the distraction of SEC reporting requirements and other aspects of being a public company, and that ASB will benefit if business decisions can be made with this added focus on long-term growth. Benefits Normally Associated with Public Reporting Company Status Have Not Been Realized. A further reason for the Stock Splits is that ASB does not realize many of the benefits normally associated with being a public reporting company. A typical advantage of being a public company comes from the ability to use company stock, as opposed to cash or other consideration, to effect acquisitions. ASB has found that the opportunities for companies our size to acquire other businesses using stock are limited. We have not previously completed an acquisition using stock and, given the limited opportunities for such acquisitions, it is not likely that would be able to do so in the future. In addition, public companies can obtain financing by issuing securities in public offerings. ASB has historically had adequate capital or other means of obtaining necessary capital and has not needed to obtain financing through public offerings. We have not issued Common Shares or any other securities in a public offering since our initial public offering in 1995, and we do not presently foresee any need to do so. Conclusion. In light of the foregoing, the Board believes the benefits ASB receives from maintaining its status as a public reporting company and maintaining its small shareholder accounts are substantially outweighed by the associated costs. The Board believes that it is in ASB's best interests to eliminate the administrative burden and costs associated with maintaining its status as a public reporting company and its small shareholder accounts. Reasons for the Forward Stock Split. The forward stock split will occur immediately after the reverse stock split and the repurchase of fractional shares resulting from the reverse split. The forward stock split is intended to prevent the Common Shares from having an unusually high per share value that would otherwise result from the reverse stock split, which would tend to further decrease the liquidity of the Common Shares. Effects of the Stock Splits The Stock Splits are expected to significantly reduce the number of holders of record of the Common Shares from approximately 418 to approximately 240. Upon the completion of the Stock Splits, we intend to apply with the SEC to deregister the Common Shares under the Exchange Act as soon as practicable. After deregistration, the Common Shares will no longer be quoted on the Nasdaq. The completion of the Stock Splits and the termination of our reporting obligations under the Exchange Act will cause the existing limited trading market for the Common Shares to be further reduced or eliminated. Effects on the Common Shares. There will be no differences with respect to dividend, voting, liquidation or other rights associated with the Common Shares before and after the Stock Splits. The Common Shares acquired by ASB for cash in lieu of issuing fractional shares will be retired. Effects on All ASB Shareholders. All ASB shareholders: * Will not have the opportunity to liquidate, at a time and for a price of their choosing, the Common Shares that are exchanged for cash in lieu of issuing fractional shares; * Will not receive a fractional Common Share as a result of the Stock Splits, but will instead receive cash, in a taxable transaction, equal to $23.00 for each Common Share held immediately before the Stock Splits that is exchanged for cash in accordance with the procedures described in this Proxy Statement; 11 * Will not have to pay any brokerage commissions or other transaction fees in connection with the exchange of Common Shares for cash in lieu of issuing fractional shares; and * Will not receive any interest on cash payments owed as a result of the Stock Splits. If you hold Common Shares other than in multiples of 300, some of your Common Shares will be exchanged for cash in lieu of issuing fractional shares in connection with the Stock Splits. You will receive a letter of transmittal as soon as practicable after the Stock Splits are completed. The letter of transmittal will contain instructions on how to surrender your existing share certificate(s) to the Transfer Agent to receive your cash payment and, if applicable, a new share certificate evidencing the number of Common Shares you hold after the Stock Splits. You will not receive your cash payment or your new share certificate until you surrender your outstanding share certificate(s) to the Transfer Agent, along with a completed and executed copy of the letter of transmittal. Do not send your share certificate(s) in with your Proxy. Please wait until you receive your letter of transmittal to surrender your share certificate(s) to the Transfer Agent. For a discussion of the federal income tax consequences of the Stock Splits, please see the section of this Proxy Statement entitled "Stock Splits Proposal - Material Federal Income Tax Consequences." Effects on Cashed Out Holders. Cashed Out Holders (i.e., holders of less than 300 Common Shares immediately before the consummation of the Stock Splits) will have no further ownership interest in ASB and will not be able to participate in future earnings or growth of ASB. If you hold less than 300 Common Shares, but you would rather continue to hold Common Shares after the Stock Splits and not be completely cashed out, you may do so by taking either of the following actions far enough in advance so that it is complete by the Effective Date: * Purchase a sufficient number of additional Common Shares, to the extent available, on the open market and have them registered in your name and consolidated with your current record account, if you are a record holder, or have them entered in your account with a nominee (such as your broker or bank) in which you hold your current shares so that you hold at least 300 Common Shares in your record account immediately before the Effective Date. Due to the limited market in the Common Shares, there is no assurance that you will be able to purchase enough Common Shares to remain a shareholder of ASB; or * If applicable, consolidate your accounts so that you hold at least 300 Common Shares in one record account immediately before the Effective Date. Effects on Continuing Holders. If the Stock Splits are consummated, Continuing Holders (i.e., holders of 300 or more Common Shares immediately before the Stock Splits): * Will likely hold fewer Common Shares after the Stock Splits than they held before the Stock Splits; * Will likely experience a change in their ownership percentage of ASB after completion of the Stock Splits; * Will likely experience a further reduction in liquidity of the Common Shares; and * Will have less publicly available information about ASB. 12 Upon the termination of the registration of the Common Shares under the Exchange Act, the Common Shares will no longer be eligible for trading or quotation on any securities market or quotation system, except the Pink Sheets(R). In order for the Common Shares to be quoted on the Pink Sheets(R), one or more broker-dealers would need to act as market maker and sponsor the Common Shares on the Pink Sheets(R). There can be no assurance that any broker-dealer will be willing to act as a market maker in Common Shares after the Stock Splits. There is also no assurance that you will be able to sell your Common Shares or purchase additional Common Shares after the Stock Splits. If you hold 300 or more Common Shares, but you would rather be completely cashed out in connection with the Stock Splits and not remain a shareholder of ASB, you may do so by selling a sufficient number of Common Shares in the open market so that you hold less than 300 Common Shares as of the Effective Date. Any such sales should be made far enough in advance so they are complete by the Effective Date. Due to the limited market in the Common Shares, there is no assurance that you will be able to sell enough Common Shares to reduce your holdings to less than 300 Common Shares. Effect on Common Shares Held in Street Name. If you hold Common Shares in "street name," your nominee (such as your broker or bank) may have required procedures you must follow and you should contact your nominee to determine how the Stock Splits will affect you. Effect on ESOP. Upon completion of the Stock Splits and the subsequent deregistration of the Common Shares, the Common Shares will no longer be traded or quoted on the Nasdaq or any other established securities market. As a result of the lack of an established market for the Common Shares, ASB's Employee Stock Ownership Plan (the "ESOP") will be required to obtain annual appraisals to value the Common Shares owned by the ESOP. In addition, under the terms of the ESOP, the participants in the ESOP will have a "put right." This put right permits a participant to require ASB to repurchase the participant's Common Shares held in the ESOP when they are distributed to the participant. Effects on Option Holders. Upon completion of the Stock Split, outstanding options to purchase Common Shares under ASB's 1995 Stock Option and Incentive Plan (the "Option Plan") will have their number and prices adjusted to reflect the effect of the Stock Splits. Effects on ASB. If our number of shareholders falls below 300, we intend to apply to the SEC to deregister the Common Shares as soon as practicable after completion of the Stock Splits. Upon deregistration of the Common Shares, our duty to file periodic reports with the SEC will be suspended and we will no longer be classified as a public reporting company. In addition, we will be relieved of the obligation to comply with the requirements of the proxy rules under Section 14 of the Exchange Act. We will continue to be subject to the general anti-fraud provisions of federal and applicable state securities laws and we will also continue to be subject to regulation by the Office of Thrift Supervision of the Department of the Treasury (the "OTS") and the Federal Deposit Insurance Corporation (the "FDIC") as applicable to savings and loan holding companies and federal savings banks. Although we will no longer be required to file periodic reports with the SEC, we currently intend to continue to provide annual audited financial statements and proxy statements to our shareholders. Although we intend to continue to provide these documents to our shareholders, there is no SEC requirement that we do so, and there is no requirement that the level of our disclosure in such financial statements or in the proxy statement remain at the level required by our current status as a public reporting company. These documents may not be as detailed or extensive as the information we currently file with the SEC and deliver to shareholders and our financial statements may not be accompanied by 13 management's discussion and analysis in the same detail. It will be more difficult for our shareholders to obtain information about us. We estimate that we will save approximately $165,000 in annual costs associated with being a public company as well as additional cost savings in time spent by management and employees associated with our SEC reporting activities. We anticipate a one time cost savings of $144,900 in expenses associated with compliance with the internal controls audit requirements of Section 404 of the Sarbanes-Oxley Act. These anticipated savings are discussed under the heading entitled "Reasons for the Stock Splits - Reduced Costs and Expenses" above. The termination of our reporting obligations under the Exchange Act will render the Common Shares ineligible for listing or quotation on any stock exchange or other automated quotation system, except the Pink Sheets(R). As a result, the Common Shares will no longer be listed on the Nasdaq and the existing limited trading market for the Common Shares will likely be further reduced or eliminated. This reduction or elimination may result in ASB having less flexibility in attracting and retaining executives and other employees since equity-based incentives (such as stock options) tend to be viewed as having less value in a non-publicly traded company. We have no current plans to issue Common Shares after the Stock Splits other than pursuant to the Option Plan, but we reserve the right to do so at any time and from time to time at such prices and on such terms as the Board determines to be in ASB's best interests. If in the future the Board determines that the adoption of a new option plan would be beneficial to ASB, it may, in its discretion, adopt such a plan. The exercise of options granted under any newly adopted plan would reduce the ownership percentage of ASB's shareholders at the time. Nasdaq rules require that any new stock option or equity compensation be approved by ASB's shareholders. However, once the Common Shares are no longer listed on Nasdaq, ASB will not be required to seek shareholder approval of new option plans or other equity compensation plans. Holders of Common Shares do not currently have, and will not have, any preemptive or other preferential rights to purchase any of our equity securities that we may issue in the future, unless such rights are specifically granted to such holders. After the Stock Splits have been consummated, ASB may, from time-to- time, repurchase Common Shares pursuant privately negotiated sales or other transactions. Whether or not we purchase shares in the future will depend on a number of factors, including ASB's financial condition, operating results and available capital at the time. We expect our business and operations, and the business and operations of American, to continue as they are presently conducted. The executive officers and directors of ASB and American will not change due to the Stock Splits. American's deposits will continue to be insured by the FDIC and we will continue to be regulated by the same bank regulatory agencies as before the Stock Splits. ASB expects to realize time and cost savings as a result of terminating its public company status, and intends to invest those savings in other areas of its and American's business operations. Other than as described in this Proxy Statement, neither ASB, American nor their management has any current plans or proposals to effect any extraordinary corporate transaction (such as a merger, reorganization or liquidation); to sell or transfer any material amount of ASB or American's assets; to change the composition of the Board or management of ASB or American; to change materially ASB's indebtedness or capitalization; to change ASB's dividend policy; or otherwise to effect any material change in ASB's corporate structure or business. Effects on ASB's Executive Officers, Directors and Affiliates. Our affiliates, comprised of our executive officers, directors and any shareholders who own more than ten percent (10%) of the Common Shares, will be relieved from complying with the stock ownership reporting requirements and "short 14 swing profit" trading restrictions under Section 16 of the Exchange Act, as well as many of the provisions of the Sarbanes-Oxley Act. Our affiliates will lose the ability to dispose of their Common Shares pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). As is more thoroughly set forth under the heading entitled "Information About ASB - Interests of Certain Persons in Matters to be Acted Upon," we expect that upon the completion of the Stock Splits, the Common Shares beneficially owned by our executive officers and directors will comprise approximately 26.88% of the then outstanding Common Shares, as compared to approximately 25.79% of the Common Shares outstanding immediately prior to the Stock Splits. Alternatives to the Stock Splits In making the determination to proceed with the Stock Splits, the Board considered the potential feasibility of the alternative transactions described below: Issuer Tender Offer. The Board considered the feasibility of an issuer tender offer to repurchase Common Shares. The primary disadvantage of this type of transaction is that, due to its voluntary nature, ASB would have no assurance that a sufficient number of Common Shares would be tendered to sufficiently reduce the number of ASB's shareholders. In addition, the rules governing tender offers require equal treatment of all shareholders, including pro rata acceptance of offers from shareholders. These requirements make it difficult to ensure that ASB would be able to reduce the number of the holders of record of the Common Shares enough to permit ASB to deregister the Common Shares, and ASB could repurchase numerous Common Shares at a great expense and still be unable to deregister. A tender offer would likely take longer to complete than the Stock Splits. As a result of these disadvantages, the Board determined not to pursue this alternative. Odd-Lot Tender Offer. Another option considered by the Board was an odd-lot tender offer. In an odd-lot tender offer, ASB would offer to repurchase, at a designated price per share, Common Shares held by any holder of less than 100 Common Shares. Unlike general tender offers which require ASB to permit all shareholders to participate equally, as discussed above, there is an exception for tender offers to holders of less than 100 Common Shares. However, even if all holders of less than 100 Common Shares participated in the tender, we still could not sufficiently reduce our number of shareholders to enable us to deregister. As a result, the Board rejected this alternative. Traditional Stock Repurchase Program. The Board also considered a plan whereby ASB would periodically repurchase Common Shares on the open market at then-current market prices. The Board rejected this type of transaction since repurchasing enough shares in this manner to enable ASB to deregister the Common Shares would likely take an extended period of time, have no assurance of success and be of undeterminable cost. Cash Out Merger. The alternative available to the Board which was most similar to the Stock Splits was coordinating a merger with a shell corporation and reissuing stock to the shareholders of the newly merged entity. The share exchange would be such that shareholders owning less than 300 Common Shares prior to the merger would be cashed out, and shareholders owning more than 300 Common Shares would become shareholders in the newly merged entity. The Board of Directors concluded that the Stock Splits were a better alternative since they do not require the formation of a new entity and allow ASB to avoid the regulatory issues and approvals associated with the merger of ASB into another corporation. 15 Maintaining the Status Quo. The Board considered maintaining the status quo. In that case, ASB would continue to incur the expenses of being a public reporting company without enjoying the benefits traditionally associated with public company status. The Board believes that maintaining the status quo is not in the best interests of ASB and its shareholders and rejected this alternative. Fairness of the Stock Splits The Stock Splits are not structured so that approval of at least a majority of unaffiliated shareholders is required. The Board based its decision not to seek such approval due to the equal treatment of affiliated and unaffiliated shareholders in the Stock Splits. In determining not to seek such approval, the Board was aware that the executive officers and directors of ASB, who together own approximately 25.79% of the voting power of the Common Shares outstanding and entitled to vote at the Special Meeting, have indicated that they will vote in favor of the Stock Splits. No independent committee of the Board has reviewed the fairness of the Stock Splits. The Board is comprised primarily of independent directors and accordingly there was no need to form a special committee. Although all of the directors own Common Shares, the 1-for-300 reverse split ratio and the 300-for-1 forward split ratio were determined without regard to their share ownership. As this was the sole potential conflict of interest and the directors will be treated identically to all other shareholders in the Stock Splits, the Board did not feel that the additional protections that may be afforded by an independent committee would be significant. No unaffiliated representative acting solely on behalf of the shareholders for the purpose of negotiating the terms of the transaction proposal or preparing a report covering the fairness of the Stock Splits was retained by ASB or by a majority of directors who are not employees of ASB. The Board views (i) the Fairness Opinion, (ii) the need to obtain the affirmative vote of the holders of at least a majority of the Common Shares, and (iii) the other matters discussed in this Proxy Statement as affording adequate procedural safeguards to unaffiliated shareholders without the extraordinary expense of multiple financial or legal advisors. ASB has not made any provision in connection with the Stock Splits to grant unaffiliated shareholders access to ASB's corporate files or to obtain counsel or appraisal services at ASB's expense. With respect to unaffiliated shareholders' access to ASB's corporate files, the Board determined that this proxy statement, together with ASB's other filings with the SEC, provide adequate information for unaffiliated shareholders to make an informed decision with respect to the Stock Splits. The Board also considered the fact that under Ohio law, subject to certain conditions, shareholders have the right to review ASB's relevant books and records. The Board did not consider the steps discussed above necessary to ensure the fairness of the Stock Splits. The Board determined that such steps would be costly and would not provide any meaningful additional benefits. The Board noted the fact that the financial advisor engaged by ASB considered and rendered its opinion as to the fairness of the consideration payable in the Stock Splits, from a financial point of view, to ASB's shareholders. The Board believes that the transaction is substantively and procedurally fair to affiliated and unaffiliated shareholders, notwithstanding the absence of an unaffiliated shareholder approval requirement, independent committee or unaffiliated representative. After consideration of all aspects of the proposed transaction as described above, all of the directors, including the directors who are not employees of ASB, approved the Stock Splits. Except for the unanimous vote of the Board to approve the Stock Splits and its recommendation that ASB's shareholders approve the Stock Splits, ASB is not 16 aware that any of its executive officers, directors or affiliates has made a recommendation either in support of or opposed to the Stock Splits. The Board considered the factors in support of and in opposition to the Stock Splits discussed below in reaching its conclusion as to the substantive fairness of the Stock Splits. The Board did not assign specific weight to the following factors in a formulaic fashion, but did place special emphasis on the opportunity for unaffiliated holders of Common Shares who will have fractional shares exchanged for cash to sell such Common Shares at a premium and without brokerage fees or commissions, as well as the significant cost and time savings ASB is expected to realize from deregistration of the Common Shares. Advantages of the Stock Splits Opportunity for Shareholders to Sell Repurchased Common Shares at a Premium and Without Broker Fees or Commissions. The Repurchase Price of $23.00 per Common Share represents (i) a premium of 12.86% over the average closing price of the Common Shares over the 30 trading days prior to and including February 28, 2005 (the date the Board approved the Stock Splits), which was $20.38 per share, and (ii) a premium of 9.42% over the closing price for the Common Shares on February 28, 2005 (the date the Board approved the Stock Splits), which was $21.02 per share. The Board reviewed the proposal made by ASB's management that $23.00 per share be established as the Repurchase Price for the Common Shares. The Board, in the exercise of its business judgment, adopted such recommendation since the Repurchase Price for the Common Shares represented fair consideration at a premium to the current and historical market prices of the Common Shares while also being consistent with the valuation analysis of Keller & Company. The Board believes that the Repurchase Price is fair to ASB's shareholders. The Board determined that the Stock Splits are fair in part because they provide Cashed Out Holders with an opportunity to liquidate all of their Common Shares, and for Continuing Holders to liquidate some Common Shares, without paying brokerage commissions or other transaction fees. While performing its analysis for the Fairness Opinion, Keller & Company selected the valuation analyses it deemed most relevant based on its knowledge of ASB and ASB's expressed intent to continue as an operating entity and not liquidate. Please see the section entitled "Opinion of Keller & Company" for a discussion of these analyses. The Board did not deem ASB's liquidation value material or relevant in the context of the Stock Splits. The Board did not calculate ASB's liquidation value, on a per share basis or otherwise. Although not calculated by the Board, the liquidation value of ASB would likely reflect an arbitrarily low valuation, and thus using liquidation value to help set the Repurchase Price would have supported a price lower than the price the Board believed would be appropriate in light of its desire to ensure that shareholders who receive cash in lieu of fractional shares receive a fair price for their Common Shares that are exchanged for cash in connection with the Stock Splits. The Board believes that ASB's net book value per share does not properly reflect ASB's earnings stream and cash flow, two factors it considers critical for a meaningful valuation of the Common Shares. Net book value is based upon the historical cost of a company's assets and ignores the value of a company as a going concern. The value of items such as a positive business reputation, a trained workforce and established customer accounts are ignored in computing net book value. The Board believes that the proper valuation of ASB should be based on ASB's historical and prospective operating performance and Keller & Company's analysis was based upon this premise. As set forth in greater detail in the section of this Proxy Statement entitled "Stock Splits Proposal-- Financial Information--Summary Financial Information," ASB's book value per Common Share as of December 31, 2004 was $10.96. The Board believes that the valuation of the Common Shares, as determined by Keller & Company, as well as the 17 market price of the Common Shares on December 31, 2004 ($22.00 per share), are significantly greater than the book value per Common Share. Significant Cost and Time Savings for ASB. By deregistering the Common Shares and suspending our periodic reporting obligations under the Exchange Act, we expect to realize recurring annual cost savings of approximately $165,000. In addition, we expect to realize non-recurring savings of approximately $149,900 in fees and expenses that we would otherwise expect to incur due to compliance with the internal controls audit requirements of Section 404 of the Sarbanes-Oxley Act. The termination of our reporting obligations under the Exchange Act will also eliminate the significant amount of time and effort previously required of our management to prepare and review the reports required to be filed under the Exchange Act. Please see the section entitled "Special Factors - Reasons for the Stock Splits" for a more detailed discussion of these cost savings. Equal Treatment of Affiliated and Unaffiliated Holders of Common Shares. The Stock Splits will not impact affiliated holders of Common Shares differently than unaffiliated holders of Common Shares on the basis of affiliate status. The sole determining factor as to whether a holder of Common Shares will remain a shareholder of ASB and how many Common Shares will be repurchased by ASB in lieu of issuing fractional shares as a result of the Stock Splits is the number of Common Shares held by such holder immediately prior to the Stock Splits. Please see the section entitled "Stock Splits Proposal - Summary and Structure" for a more detailed discussion. Minimum Effect on Voting Power. The Stock Splits will have minimum effect on the voting power of ASB's shareholders. The Common Shares are ASB's only voting shares and will continue to be ASB's only voting shares after the Stock Splits. The voting and other rights currently held by the Common Shares will not be affected by the Stock Splits. The only effect of the Stock Splits on ASB's voting power will be a change in the overall percentage of ownership of the Continuing Holders. No Material Change in Percentage Ownership of Executive Officers and Directors. Since only an estimated 86,333 out of 1,715,862 outstanding Common Shares will be eliminated as a result of the Stock Splits, the percentage ownership of the Continuing Holders will be approximately the same as it was prior to the Stock Splits. For example, the executive officers and directors of ASB and American currently beneficially own approximately 25.79% of the outstanding Common Shares, and will beneficially own approximately 26.88% of the outstanding Common Shares following completion of the Stock Splits. All of the directors and executive officers currently have over 300 shares and will remain shareholders of ASB after completion of the Stock Splits. Please see the section entitled "Information About ASB - Interest of Certain Persons in Matters to be Acted Upon." Potential Ability to Control Decision to Remain a Holder of or Liquidate Common Shares. Another factor considered by the Board in determining the fairness of the Stock Splits to the holders of the Common Shares is that current holders of fewer than 300 Common Shares can seek to remain shareholders of ASB following the Stock Splits by acquiring additional shares so that they own at least 300 Common Shares immediately before the Stock Splits. Conversely, stockholders that own 300 or more Common Shares who desire to liquidate their shares in connection with the Stock Splits at the premium price offered can seek to reduce their holdings to less than 300 Common Shares by selling shares prior to the Stock Splits. The Board did not place undue emphasis on this factor due to the limited trading market for the Common Shares. Please see the section entitled "Special Factors - Effects of the Stock Splits." 18 Disadvantages of the Stock Splits Substantial or Complete Reduction of the Market for Common Shares. After the completion of the Stock Splits and deregistration of the Common Shares, we anticipate that the public market for the Common Shares will be substantially reduced or altogether eliminated. The Board, however, considered that potential trades in the Common Shares could be facilitated by a market maker in the Pink Sheets(R) following deregistration. Please see the section entitled "Special Factors - Effects of the Stock Splits." Termination of Publicly Available Information About ASB. Upon termination of the registration of the Common Shares under the Exchange Act, our duty to file periodic reports with the SEC will be suspended. Information regarding our operations and financial results that is currently available to the general public and our investors will not be readily available after deregistration, and investors seeking information about us will have to contact us directly to receive such information. We may or may not provide investors with requested information that we are not required by law to provide. The Stock Splits will not affect the right of Continuing Holders to obtain certain information from ASB under Ohio law. Under Ohio law, a shareholder has the right to make a written request to inspect a company's books and records (including, without limitation, annual financial statements) and receive copies thereof for any purpose reasonably related to such person's interest as a shareholder. While the Board realizes and acknowledges that the termination of publicly available information may be disadvantageous to our shareholders, the Board believes that the overall benefits to ASB of no longer being a public reporting company substantially outweigh the disadvantages associated with a lack of publicly available information about ASB. We currently intend to continue to provide annual audited financial statements and proxy statements to our shareholders; however, these documents may not be as detailed or extensive as the information we currently file with the SEC. Although we currently intend to continue to provide these documents, there is no SEC requirement that we do so or that we maintain the present level of disclosure contained in such documents. Please see the section entitled "Special Factors - Effects of the Stock Splits." Possible Decline in Price of the Common Shares. After the completion of the Stock Splits, the liquidity of the Common Shares will be significantly reduced or eliminated. In addition, the lack of publicly available financial and other information about ASB and the diminished opportunity for ASB's shareholders to monitor the management of ASB due to the lack of such public information may cause the Continuing Holders to experience a decrease in the price at which they may sell their Common Shares. Please see "Special Factors - Disadvantages of the Stock Splits - Substantial or Complete Reduction of Public Sale Opportunities" and "Special Factors - Disadvantages of the Stock Splits - Termination of Publicly Available Information about ASB" above. Inability to Participate in Future Increases in Value of the Common Shares or Payments of Dividends. Following the Stock Splits, Cashed Out Holders will have no further financial interest in ASB and will not have the opportunity to participate in the potential appreciation in the value of, or the payment of dividends on, the Common Shares. Other Factors The Board concluded the factors set forth below to be either inapplicable or not material to its assessment of the fairness of the Stock Splits. * Firm Offers. We are not aware of any firm offers to purchase ASB that have been made during the past two calendar years or during the current calendar year. * Prior Public Offerings. We have not made any underwritten public offering of the Common Shares or any other securities since our initial public offering in 1995. 19 * Merger, Consolidation or Other Extraordinary Transaction. We have not engaged in a merger or consolidation with another company or in any other extraordinary transaction, such as the sale or other transfer of all, or a substantial part, of our assets, during the past two calendar years or during the current calendar year. * Securities Purchases. There have not been any purchases of our Common Shares that would enable the holder to exercise control of ASB. * Liquidation Value. ASB's liquidation value was not deemed relevant because we plan to continue to operate as a going concern following the Stock Splits. Conclusion The Board believes that all of the factors mentioned above, both favorable and unfavorable, when viewed together support a conclusion that the Stock Splits are substantively fair to ASB's shareholders, including the Cashed Out Holders and Continuing Holders. OPINION OF KELLER & COMPANY The Board retained Keller & Company to provide the Fairness Opinion. On February 28, 2005, Keller & Company delivered the Fairness Opinion to the Board. The Fairness Opinion states that, based upon and subject to the factors and assumptions set forth therein, the Repurchase Price to be paid to Cashed Out Holders pursuant to the Stock Splits is fair from a financial point of view as of February 28, 2005. Keller & Company also presented to the Board a summary of the analyses described below. The Fairness Opinion was prepared for use by the Board and was directed only to the fairness from a financial point of view, as of the date thereof, of the Repurchase Price. Keller & Company was not involved in structuring the Stock Splits and its opinion does not compare the relative merits of the Stock Splits with those of any other transaction or business strategy which were or might have been available to or considered by ASB or the Board as alternatives to the Stock Splits and does not address the underlying business decision by the Board to proceed with or effect the Stock Splits. The Fairness Opinion is solely for the information of, and directed to, the Board in its evaluation of the Stock Splits and is not to be relied upon by any shareholder of ASB or any other person or entity. The Fairness Opinion does not constitute a recommendation to the Board as to how it should vote on the Stock Splits or to any shareholder as to how such shareholder should vote at the Special Meeting. In furnishing the Fairness Opinion, Keller & Company did not admit that it is an expert within the meaning of the term "expert" as used in the Securities Act of nor did it admit that its opinion serves as a report or valuation within the meaning of the Securities Act. The full text of the Fairness Opinion is attached as Exhibit A to this Proxy Statement and is incorporated herein by reference. The summary of the Fairness Opinion set forth in this Proxy Statement is qualified in its entirety by reference to the full text of the Fairness Opinion. Shareholders are urged to read the Fairness Opinion carefully and in its entirety for a discussion of the procedures followed, assumptions made, other matters considered and limits of the review by Keller & Company in connection with the Fairness Opinion. The Board selected Keller & Company as its financial advisor because it is a recognized financial institutions consulting firm that has substantial experience in the financial institutions industry and is knowledgeable and familiar with the operations of ASB and its business. As part of its business, Keller & Company is regularly engaged in the valuation of businesses and securities in connection with mergers, 20 acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuation for corporate and other purposes, particularly those of financial institutions and financial institution holding companies. In rendering the Fairness Opinion, Keller & Company reviewed the terms of the Stock Splits and also reviewed financial and other information that was publicly available, or furnished to Keller & Company by ASB's management. Keller & Company also reviewed certain publicly available operational, financial and stock market data relating to selected public companies and conducted other financial studies, analyses and investigations as Keller & Company deemed necessary or appropriate for purposes of rendering the Fairness Opinion, as more fully set forth therein. No limitations were imposed by the Board of ASB upon Keller & Company with respect to the investigations made or procedures followed by it in rendering its opinion. Keller & Company assumed and relied upon, without independent verification, the accuracy and completeness of all financial and other information that was publicly available, supplied or otherwise communicated to it by or on behalf of ASB. Keller & Company further relied upon the assurances of ASB's management that they are unaware of any facts that would make the information provided to it incomplete or misleading. Keller & Company was not requested to make, and did not make, an independent evaluation or appraisal of the assets, properties, facilities or liabilities (contingent or otherwise) of ASB, and was not furnished with any such appraisals or evaluations. Keller & Company's opinion is necessarily based upon financial, economic, market and other conditions and circumstances existing and disclosed to Keller & Company on the date of the Fairness Opinion. Subsequent developments may affect the conclusions reached in the Fairness Opinion and Keller & Company has no obligation to update, revise or reaffirm the Fairness Opinion. In preparing the Fairness Opinion, Keller & Company conducted the following two principal analyses: (i) a comparison of ASB with certain publicly traded companies deemed comparable to ASB, and (ii) a review of the historical market performance of the Common Shares on the Nasdaq. No company used in any analysis as a comparison is identical to ASB, and they all differ in various ways. As a result, Keller & Company applied its experience and professional judgment in making such analyses. Accordingly, an analysis of the results is not mathematical; rather it involves complex considerations and judgments concerning differences in financial characteristics, performance characteristics and trading value of the comparable companies to which ASB is being compared. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analyses or summary description. In arriving at the Fairness Opinion, Keller & Company considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered by it. Keller & Company believes that the summary provided and the analyses described above must be considered as a whole and that selecting portions of these analyses, without considering all of them, would create an incomplete view of the process underlying its analyses and opinion. In addition, Keller & Company may have given various analyses and factors more or less weight than other analyses and factors and may have deemed various assumptions more or less probable than other assumptions, therefore the range of valuations resulting from any particular analysis described above should not be taken to be Keller & Company's view of the actual value of ASB. 21 The following is a summary of the material financial analyses performed by Keller & Company in connection with the preparation of the Fairness Opinion. These summaries of financial analyses alone do not constitute a complete description of the financial analyses Keller & Company employed in reaching its conclusions. The order of analyses described does not represent relative importance or weight given to those analyses by Keller & Company. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Keller & Company's financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before February 18, 2005 and is not necessarily indicative of current market conditions. Public Comparables Analysis In rendering its opinion, Keller & Company analyzed the pricing ratios of certain comparable thrift institutions and thrift holding companies. The analysis included a comparison of such key financial ratios as return on average assets, return on average equity and equity to assets and such key pricing ratios as price relative to book value, latest twelve months earnings and assets. Keller & Company reviewed and compared selected financial and stock market information, ratios and multiples of ASB to corresponding financial and stock market information, ratios and multiples for a group of nine selected publicly-traded Midwest thrift institutions or thrift holding companies set forth below: AMB Financial Corp. City Savings Financial Corp. CKF Bancorp, Inc. FFW Corporation Indian Village Bancorp, Inc. Peoples Ohio Financial Corp. Peoples-Sidney Financial Corp. Perpetual Federal Savings Bank River Valley Bancorp The key pricing ratios for the comparable group, all Ohio publicly- traded thrifts and all publicly-traded Midwest thrifts, are shown in the following table:
Pricing Ratios(1) Trading Group Price to Book Price to Earnings Price to Assets ------------- ------------- ----------------- --------------- Comparable Group 124.37% 16.0X 12.78% Publicly-Traded Ohio Thrifts 140.87% 21.9X 15.35% Publicly-Traded Midwest Thrifts 132.15% 20.4X 13.85% ------------------- The pricing ratios include any pending merger/acquisition transactions for the listed institution.
The Repurchase Price of $23.00 per share represents a premium of 15.0% above ASB's current trading price and represents a price to book ratio of 209.85%, a price to earnings multiple of 19.33 and a price to asset ratio of 22.08%, with all of these ratios well in excess of the pricing ratios of the comparable group and the price to book ratio and price to asset ratio in excess of all publicly-traded Ohio thrifts and 22 all publicly-traded Midwest thrifts, while ASB's price to earnings multiple is moderately below that of publicly-traded Ohio thrifts and publicly- traded Midwest thrifts. Keller considered the comparable group comparison and analysis as the most appropriate basis for evaluating the fairness from a financial point of view of the Repurchase Price. Keller reviewed each of the pricing ratios for the comparable group relative to ASB's corresponding ratios based on the recent price prior to the Stock Splits and then subsequent to the Stock Splits, based on the Repurchase Price. Based on the previous pricing ratio comparison analyses and given that the Repurchase Price to be paid to Cashed Out Holders pursuant to the Stock Splits indicates a 15.0% premium above the current trading price of ASB, Keller & Company concluded that the Repurchase Price was fair from a financial point of view. Review of ASB Market Performance Keller reviewed the trading prices of ASB's Common Shares for the period of January 1, 2004, through February 18, 2005, as quoted by Nasdaq. The following table sets forth the high and low closing prices for ASB Common Shares for each quarter of the calendar year ended December 31, 2004. Quarter Ended High Close Low Close ------------- ---------- --------- March 31, 2004 $27.75 $23.11 June 30, 2004 $29.24 $22.00 September 30, 2004 $25.30 $21.30 December 31, 2004 $23.05 $21.05 Period Of High Close Low Close --------- ---------- --------- January 1, 2005 to February 18, 2005 $22.49 $20.00 Latest Price Closing Price ------------ ------------- February 18, 2005 $20.00 The pricing for ASB's Common Shares has indicated a decreasing trend over the four quarters of 2004 and this trend has continued through February 18, 2005, with ASB indicating a new low of $20.00 per share at February 18, 2005. The pricing trend for ASB combined with recent pricing level of ASB at February 18, 2005, further indicates the fairness of the Repurchase Price of $23.00, which reflects a premium of 15% over the closing price of the Common Shares on February 18, 2005. Conclusion Based upon the foregoing analyses and the assumptions and limitations set forth in full in the text of the Fairness Opinion, Keller & Company is of the opinion that, as of the date of the Fairness Opinion, the Repurchase Price of $23.00 per Common Share to be paid by ASB in lieu of issuing fractional shares in connection with the Stock Splits is fair to the Cashed Out Holders and Continuing Holders from a financial point of view. 23 Engagement of Keller & Company ASB has agreed to pay Keller & Company a fee of $3,000 and to reimburse Keller & Company for its reasonable out-of-pocket expenses related to its engagement, whether or not the Stock Splits are consummated. No compensation received or to be received by Keller & Company is based on or is contingent on the results of Keller & Company's engagement. There are no other current arrangements to compensate Keller & Company, its affiliates or unaffiliated representatives for any services rendered to ASB, its executive officers, directors or affiliates. Keller & Company has previously provided financial institution consulting services to ASB and American. None of Keller & Company's employees who worked on the engagement has any known financial interest in the assets or equity of ASB or the outcome of the engagement. MEETING AND VOTING INFORMATION Each properly executed Proxy received prior to the Special Meeting and not revoked will be voted as directed by the shareholder or, in the absence of specific instructions to the contrary, will be voted FOR the approval of the Stock Splits. Time and Place The Special Meeting will be held on [___________, 2005], at ___:___ __.m., local time, at the Shawnee State Park Resort and Conference Center, 4404B State Route 125, West Portsmouth, Ohio 45663. Revoking Your Proxy Without affecting any vote previously taken, you may revoke your Proxy by either (i) submitting a later dated proxy or a written revocation which is received by ASB before the Proxy is exercised or (ii) by attending the Special Meeting and voting in person or giving notice of revocation in open meeting before the Proxy is exercised. Attending the Special Meeting will not, by itself, revoke a Proxy. Record Date Only ASB shareholders of record at the close of business on [March ____, 2005] (the "Record Date"), are entitled to vote at the Special Meeting. Each shareholder will be entitled to cast one vote for each share then owned. According to ASB's records, as of the Record Date, there were [1,715,862] votes entitled to be cast at the Special Meeting. Quorum and Required Vote The presence at the Special Meeting in person or by proxy of the holders of at least a majority of the issued and outstanding Common Shares as of the Record Date is necessary to establish a quorum to conduct business at the Special Meeting. Each ASB shareholder is entitled to cast one vote for each share owned on the Record Date. Under Ohio law and ASB's Articles and Regulations, the affirmative vote of at least a majority of the issued and outstanding Common Shares as of the Record Date is necessary to approve the Stock Splits. Shareholders holding Common Shares in "street name" should review the information provided to them by their nominee (such as a broker or bank). This information will describe the procedures to follow to instruct the nominee how to vote the street name shares and how to revoke previously given 24 instructions. The proposal to approve the Stock Splits is a "non- discretionary" item, meaning that nominees cannot vote Common Shares in their discretion on behalf of a client if the client has not given them voting instructions. Shares held in street name that are not voted by brokerage firms or other nominees are referred to as "broker non-votes." Broker non votes and abstentions are counted toward the establishment of a quorum for the Special Meeting. However, because the affirmative vote of a majority of the outstanding Common Shares is necessary to approve the Stock Splits, broker non-votes and abstentions will have the same effect as a vote "AGAINST" the proposal to approve the Stock Splits. The Board urges you to complete, date and sign the enclosed Proxy and to return it promptly in the enclosed postage prepaid envelope so that a quorum can be assured for the Special Meeting and your Common Shares can be voted as you wish. Solicitation and Costs The enclosed Proxy is solicited on behalf of the Board. Proxies may be solicited by the directors, officers and other employees of ASB and American, in person or by telephone, telegraph or mail only for use at the Special Meeting. ASB will bear the costs of preparing, assembling, printing and mailing this Proxy Statement and the enclosed Proxy and all other costs of the Board's solicitation of Proxies for the Special Meeting. Brokerage houses and other nominees, fiduciaries, and custodians nominally holding Common Shares as of the Record Date will be requested to forward proxy soliciting material to the beneficial owners of such Common Shares, and will be reimbursed by us for their reasonable expenses. The repurchase of fractional Common Shares in connection with the Stock Splits is estimated to cost approximately $1,986,000. We intend to finance the Stock Splits and repurchase of fractional shares by using cash on hand. The following is an estimate of the total costs expected to be incurred by ASB in connection with the Stock Splits and the solicitation of Proxies for the Special Meeting. Final costs may be higher or lower than the estimates shown below. Item Approximate Cost ---- ---------------- Repurchase of Fractional Common Shares $1,986,000 Legal fees $ 30,000 Keller & Company fees $ 3,000 Accounting fees $ 5,000 Filing fees $ 2,500 Printing, mailing and other costs $ 34,500 ---------- Total $2,061,000 ========== STOCK SPLITS PROPOSAL Summary and Structure The Board has authorized and recommends that you approve the Stock Splits. The Stock Splits consist of two steps. First, ASB will conduct a 1-for-300 reverse stock split of the Common Shares. In the reverse split, (i) each lot of 300 Common Shares held by a shareholder of ASB prior to the reverse split will be converted into one whole Common Share after the reverse split; and (ii) any Common Shares held by a shareholder other than in a 300 share lot will not be converted into a whole share and will be cancelled and exchanged for $23.00 in cash per share. After the reverse split is completed, it will be followed immediately by a 300-for-1 forward stock split of the Common Shares, which will convert each 25 whole Common Share issued in connection with the reverse split into 300 Common Shares. The Stock Splits are intended to take effect on the Effective Date (the date the Ohio Secretary of State accepts for filing Certificates of Amendment to the Articles). The proposed amendments to the Articles are attached to this Proxy Statement as Exhibits B and C and are incorporated herein by reference. Generally, the effects of the Stock Splits can be illustrated by the following examples: Hypothetical Scenario Result --------------------- ------ Shareholder A holds 200 Shareholder A's 200 Common Shares will be Common Shares in a single converted into the right to receive record account and holds no $4,600 in cash (200 x $23.00). If other Common Shares. Shareholder A wanted to continue to be a shareholder after the Stock Splits, he could purchase an additional 100 Common Shares far enough in advance of the Stock Splits so that the purchase is complete by the Effective Date. Shareholder B holds 200 ASB intends for the Stock Splits to treat shares in a brokerage shareholders holding Common Shares account and holds no other through a nominee the same as those Common Shares. holding shares in a record account. Nominees will be instructed to effect the Stock Splits for their beneficial owners. If this occurs, Shareholder B will entitled to receive $4,600 in cash (200 x $23.00). However, nominees may have different procedures and shareholders holding shares in street name should contact their nominee to determine how the Stock Splits will affect them. Shareholder C holds 450 After the reverse stock split, Common Shares in a single Shareholder C would have 1.5 Common record account and holds no Shares (450/300 = 1.5). He will receive other shares. one whole Common Share and instead of receiving a fractional share he will be entitled to receive $3,450 (150 x $23.00). In the forward stock split his whole Common Share will be converted into 300 Common Shares (1 x 300). After completion of the Stock Splits, Shareholder C will hold 300 Common Shares and will be entitled to receive $3,450. Shareholder D holds 500 After the reverse stock split, shares in each of two Shareholder D will hold three whole separate record accounts for Common Shares (1,000/300 = 3.33) and will a total of 1,000 Common be entitled to receive $2,300 in cash in Shares. Shareholder D holds lieu of being issued a fractional share no other Common Shares. (100 x $23.00). In the forward split his shares will be converted into 900 Common Shares (3 x 300). After the completion of the Stock Splits, Shareholder D will hold 900 Common Shares and will be entitled to receive $2,300. Shareholder E holds 800 ASB intends for shareholders holding Common Shares in a shares through nominees to be treated the brokerage account. He holds same as record holders and expects that no other Common Shares. Shareholder E would hold two whole Common Shares after the reverse split (800/300 = 2.66) and would be entitled to receive $4,600 in cash (200 x $23.00). Shareholder E's two whole Common Shares would be converted into 600 Common Shares in the forward split. After the completion of the Stock Splits, Shareholder E would hold 600 Common Shares and would be entitled to receive $4,600. 26 Husband and Wife each hold Shares held in joint accounts will not be 200 Common Shares in added to shares held individually in separate record accounts and determining whether a shareholder will hold 200 shares jointly in receive whole shares after the reverse another record account. split. In this situation, Husband and They own no other Common Wife will each be entitled to receive Shares. $4,600 each for the shares held in their individual record accounts (200 x $23.00). Further, they will be entitled to receive $4,600 for the Common Shares held in their joint account. Husband and Wife will hold no Common Shares after the Stock Splits. If Husband and Wife wished to continue to be shareholders after the Stock Splits, they could transfer a sufficient number of shares from one account into another so that at least 300 Common Shares (or a multiple thereof) are held in one account. The Board has set the Repurchase Price at $23.00 per pre-split Common Share. The Board made this determination in good faith, based upon the Fairness Opinion and other factors the Board deemed relevant. Please see the sections entitled "Special Factors - Reasons for the Stock Splits," "Opinion of Keller & Company" and "Stock Splits Proposal - Background of the Stock Splits." ASB currently estimates that shareholders will receive payment for their Common Shares that are exchanged for cash in lieu of issuing fractional shares within approximately four weeks after the Effective Date. At least a majority of the Common Shares outstanding and entitled to vote at the Special Meeting must approve the Stock Splits before they can be completed. The executive officers and directors of ASB and American, who together own approximately 25.79% of the Common Shares outstanding and entitled to vote at the Special Meeting, have indicated that they will vote in favor of the Stock Splits proposal. The Stock Splits are considered a "going-private" transaction as defined in Rule 13e-3 promulgated under the Exchange Act because they are intended to terminate the registration of the Common Shares and suspend ASB's filing and reporting obligations under the Exchange Act. In connection with the Stock Splits, we have filed, as required by the Exchange Act, a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") with the SEC. Please see the section entitled "Available Information." The Board has retained for itself the absolute authority to not implement the Stock Splits, even after they are approved, if it subsequently determines that the Stock Splits for any reason are not then in the best interests of ASB. Please see the section entitled "Stock Splits Proposal - Reservation of Rights." Background of the Stock Splits In 1995, American converted from a mutual institution to the stock form of ownership. In connection with this conversion, all of the issued and outstanding stock of American was acquired by ASB, which was organized at that time to become a public holding company for American. ASB held an initial public offering of the Common Shares and registered them under the Exchange Act. During the past several months, the Board has debated the advantages and disadvantages of remaining a SEC reporting company or converting to a privately held institution. The Board has considered many factors which are discussed throughout this Proxy Statement. Ultimately, the Board concluded that the advantages of remaining a SEC reporting company no longer outweigh the costs ASB incurs as a publicly traded corporation, particularly in light of the requirements that the Sarbanes-Oxley Act imposed upon public companies. As a result, the Board approved the Stock Splits and recommends that the shareholders approve the Stock Splits at the Special Meeting. 27 Costs Associated with SEC Regulations. Because we are a SEC reporting company, we are obligated to prepare and file periodic reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements and related materials. In addition, we assist our officers and directors in complying with reports required under the Exchange Act's transaction and short swing profit reporting requirements for affiliates of ASB. The costs associated with these reports and other filing obligations are a significant corporate overhead expense. We realize that the costs associated with SEC reporting have been increasing in recent years and we believe that the costs will continue to increase significantly. The principal reason behind these increases in compliance costs is the enactment of the Sarbanes-Oxley Act and related rules and regulations adopted by the SEC. In addition to compliance costs and expenses, compliance with existing and new SEC reporting requirements, internal control audit requirements and other SEC regulatory requirements diverts the time and resources of ASB and American's management from other business. We estimate that we currently pay approximately $165,000 per year as a result of being a public company which we would not incur as a private company. These costs do not include the time and resources that management of ASB and American spend in preparation of periodic reports and compliance with reporting obligations. Further, we anticipate that in order to complete the documentation and testing of internal controls required by Section 404 of the Sarbanes-Oxley Act, we would incur an additional estimated $149,900 for fiscal year 2005 alone. In addition, legal expenses associated with SEC compliance and disclosure rules and regulations have increased and we believe will continue to increase. The time demanded of ASB and American's management with respect to these SEC compliance requirements takes away time which could be focused on business matters that bear a more direct relationship to our operations and profitability. Please see the section entitled "Special Factors - Reasons for the Stock Split" above. Advantages of a Public Corporation. Considering the significant increase in SEC compliance costs that ASB has incurred and will incur in the future, the Board analyzed the advantages of ASB remaining a SEC reporting company to determine if the advantages outweighed the costs. One advantage to being a public company is that it may facilitate a more active trading market. However, trading reports on our Common Shares reflect that our Common Shares have a limited trading volume. As a result, our limited trading market has not allowed our shareholders to recognize the primary benefit which should be available to shareholders of a publicly traded company, which is the ability to buy and sell stock in a liquid market. Another potential advantage of being a publicly traded institution is the ability to access public markets to raise additional capital. Since becoming a public company in 1995, we have not needed to access public markets to raise capital and, accordingly, we have not made any additional public offerings of Common Shares or any other securities. In addition, we have not used our Common Shares to acquire other companies because we have found that our opportunities for acquisitions using stock are limited. We do not anticipate the need for a large amount of capital for acquisitions or expansions in the future and we estimate that any anticipated expansion can be accomplished through controlled growth or by using otherwise available capital. As a result, we do not foresee the need to access public markets. Shareholders of public corporations also have greater access to information about the entity. As discussed above, the SEC requires that reporting companies comply with increasing stringent reporting and auditing requirements. There are several benefits to this type of SEC oversight and mandated disclosure; however, it is accompanied by substantial expense. Not only does SEC compliance divert the time and resources of our management and financial staff from other business, it also results in increased legal, auditing and accounting costs which we anticipate will continue to rise in the future. 28 Smaller publicly traded institutions, such as ASB, have more difficulty absorbing these costs and resource allocations than larger publicly traded institutions since they represent a larger portion of our revenues. Because of our status as a savings and loan holding company, after deregistration we will continue to be extensively regulated under other federal laws and American will continue to be subject to periodic reporting requirements of, and inspections by, bank regulatory agencies such as the OTS and the FDIC. Background of the Board's Recommendation. The idea of reducing ASB's number of shareholders and deregistering as an Exchange Act reporting company was initially discussed in October, 2004. At that time, the Board and management held informal discussions with ASB's independent auditor regarding the expected costs and procedures involved in compliance with the internal auditing requirements of Section 404 of the Sarbanes-Oxley Act. Our outside auditor then estimated that ASB would incur approximately $145,000 in additional accounting and auditing expenses in order to comply with Section 404 of the Sarbanes-Oxley Act. Our auditor informed us that in order to comply with Section 404, procedures and controls would need to be implemented at the beginning of the 2005 fiscal year, and our additional expenses would begin to accrue at that time. After these meetings, the Board and management began discussions with our legal counsel regarding the possibility of ASB deregistering as an Exchange Act reporting company and some of the advantages and disadvantages of engaging in a "going private" transaction. The Board and management discussed whether ASB was truly reaping the benefits typically available to a publicly traded company and discussed whether reducing the number of shareholders and deregistering as an Exchange Act reporting company might be a good use of its excess capital. At the Board's request, management began to analyze potential compliance costs and out of pocket expenses associated with remaining a SEC reporting company. After these meetings, management continued to investigate potential alternatives to avoid these increased costs, including deregistering as an Exchange Act reporting company, and kept the Board apprised of their findings. On November 22, 2004, at its regular monthly Board meeting, the Board of Directors discussed the anticipated costs associated with ASB's continued compliance with the Exchange Act's rules and regulations, as supplemented by the Sarbanes-Oxley Act, during the current and future fiscal years. The Board also analyzed the current composition of its shareholders and number of shares issued and outstanding. The Board discussed the option of going private and the advantages and disadvantages associated with deregistering the Common Shares. The Board further discussed options available to reduce the number of ASB's shareholders below 300 so that we may qualify to deregister as a SEC reporting company. At this meeting, the Board began to analyze the possible costs associated with a going private transaction involving a reverse stock split and considered the funds available to ASB to engage in such a transaction. The Board next held a special meeting on December 20, 2004, with ASB's legal counsel to further discuss and consider going private alternatives. At that meeting, the Board once again carefully considered the advantages and disadvantages of going private, as well as the alternatives available to accomplish the deregistration of our Common Shares. At that meeting, the Board considered, among other issues, the potential impact of the reverse stock split and the deregistration of the Common Shares on ASB's shareholders. On December 27, 2004, the Board of Directors met again. At that meeting, after further consideration and deliberation by the Board, the Board unanimously decided to further investigate mechanics and expenses of proceeding with a going private transaction and, specifically, a reverse stock 29 split. The Board also discussed with management the price to be paid to the shareholders in lieu of issuing fractional shares in connection with the reverse stock split and the desirability of a forward split immediately following a reverse split to avoid an unusually high per share value for the Common Shares after the reverse split. The Board determined that a subsequent forward split was desirable. Also at this meeting the Board authorized management to contact Keller & Company regarding the possibility of obtaining a fairness opinion regarding the price to be paid to the shareholders who would receive cash in lieu of fractional shares. On January 24, 2005, the Board met to address the question as to whether the Stock Splits are a fair transaction to affiliated and unaffiliated shareholders. A separate discussion was conducted with respect to those shareholders who would receive whole Common Shares in the reverse split and participate in the subsequent forward split and those shareholders who would receive only cash and no longer continue to be shareholders of ASB. After weighing the advantages and disadvantages of the Stock Splits to unaffiliated shareholders, the Board also considered whether other procedures should be implemented to assure fairness to unaffiliated shareholders. The Board determined that the fairness to unaffiliated shareholders depended in part on the per share price to be paid in lieu of issuing fractional shares. At this point, Keller & Company discussed its valuation analysis with respect to the Common Shares. It presented the Board with information regarding (i) trading history, including volume and prices, of the Common Shares, and (ii) a review of the market performance and trading history of companies comparable to ASB. At the end of its presentation, Keller & Company presented that a per share purchase price of $23.00 per Common Share in lieu of issuing fractional shares would be fair to ASB's shareholders. The information presented to the Board by Keller & Company regarding its financial analysis is described more fully under the heading "Opinion of Keller & Company." Finally, the Board reviewed analyses prepared by management regarding the anticipated financial impact of the Stock Splits and actively engaged in further discussions and asked questions to Keller & Company and management. Specifically, the Board considered the total number of Common Shares which would be exchanged for cash in the Stock Splits and considered its resulting impact on the financial condition of ASB. The Board reviewed the fairness opinion and considered whether a premium should be paid for shares that will be exchanged for cash in lieu of issuing fractional shares. After considering other factors described in this Proxy Statement, the Board concluded that ASB's shareholders should receive $23.00 for each Common Share held immediately prior to the Stock Splits that is not converted into a whole Common Share in the reverse split. In determining the price to be paid in lieu of issuing fractional shares, the Board particularly focused on the fact that the Stock Splits is not a voluntary transaction for shareholders, and a higher premium was justified when considering that factor along with the other analyses. The Board concluded that this price is a fair price to all unaffiliated shareholders. The matters considered at the January 24, 2005 Board meeting are more fully discussed in this Proxy Statement at "Special Factors - Fairness of this Stock Splits" and "Opinion of Keller & Company." On February 28, 2005, the Board held a regular meeting attended by all of the directors. At this meeting, the Board reviewed the per share price of $23.00 to be paid to the shareholders in lieu of issuing fractional shares and once again considered the advantages and disadvantages of the Stock Splits. At this meeting, the Board unanimously voted to approve the Stock Splits and the price per share to be paid in lieu of issuing fractional shares and to recommend the approval of the Stock Splits by ASB's shareholders. 30 Recommendation of the Board The Board has unanimously determined that the Stock Splits are in the best interest of ASB and are fair to ASB's shareholders. The Board unanimously recommends that the shareholders vote "FOR" the approval of the Stock Splits. Potential Disadvantages of the Stock Splits to Shareholders As is more thoroughly described in the section entitled "Special Factors - Disadvantages of the Stock Splits" above, potential disadvantages to ASB and Continuing Holders include decreased availability of information about ASB and decreased liquidity of the Common Shares. If the Stock Splits are completed, we intend to terminate the registration of the Common Shares under the Exchange Act. As a result, we will no longer be subject to the filing and reporting requirements of the Exchange Act. In addition, the liquidity of the Common Shares will be adversely affected by the lack of publicly available information about ASB following deregistration of the Common Shares. Decreased liquidity may have an adverse effect on the market value of the Common Shares. Share Certificates We have appointed the Transfer Agent to act as exchange agent to carry out the exchange of existing share certificates for cash payments in lieu of issuing fractional shares and, if applicable, new share certificates. On the Effective Date, all share certificates evidencing ownership of Common Shares held by shareholders who will have fractional shares repurchased will be deemed cancelled without further action by the shareholders or ASB. Thereafter, such certificates will represent only the right to receive cash in the amount of $23.00 per pre-split Common Share for repurchased fractional shares and, if applicable, the right to receive a new certificate for Common Shares issued in the forward stock split. The Common Shares acquired by ASB in connection with of the Stock Splits will be retired. The Transfer Agent will furnish ASB's shareholders with the necessary materials and instructions to surrender their Common Share certificate(s) promptly following the Effective Date. The letter of transmittal will explain how the certificates are to be surrendered. Shareholders must complete and sign the letter of transmittal and return it with their certificate(s) to the Transfer Agent as instructed before they can receive any cash payments and/or new share certificates to which they are entitled. Do not send your certificates to us, and do not send them to the Transfer Agent until you have received a transmittal letter and followed the instructions therein. No service charges will be payable by ASB's shareholders in connection with the exchange of certificates or the payment of cash in lieu of issuing fractional shares. ASB will pay all expenses of the Stock Splits. Material Federal Income Tax Consequences We have summarized below the material federal income tax consequences to ASB and to holders of Common Shares resulting from the Stock Splits. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Department Regulations (the "Treasury Regulations") issued pursuant thereto, and published rulings and court decisions in effect as of the date hereof, all of which are subject to change. This summary does not take into account possible changes in such laws or interpretations, including amendments to the Code, applicable statutes, Treasury Regulations and proposed Treasury Regulations or changes in judicial or administrative rulings. Some of those changes may have retroactive effect. No assurance can be given that any such changes will not adversely affect this summary. This summary is not binding on the Internal Revenue Service. 31 This summary does not address all aspects of the possible federal income tax consequences of the Stock Splits and is not intended as tax advice to any person or entity. In particular, this summary does not consider the individual investment circumstances of holders of Common Shares, nor does it consider the particular rules applicable to special categories of holders (such as tax exempt entities, life insurance companies, regulated investment companies and foreign taxpayers) or holders who hold, have held, or will hold, Common Shares as part of a straddle, hedging or conversion transaction. In addition, this summary does not address any consequences of the Stock Splits under any state, local or foreign tax laws. This summary assumes that you are one of the following: (i) a citizen or resident of the United States, (ii) a domestic corporation, (iii) an estate, the income of which is subject to United States federal income tax regardless of its source, or (iv) a trust, if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust. This summary also assumes that you have held and will continue to hold your Common Shares as capital assets for federal income tax purposes. We believe that the Stock Splits will be treated as a tax-free "recapitalization" for federal income tax purposes. This treatment will result in no material federal income tax consequences to ASB. However, you may not qualify for tax free "recapitalization" treatment for federal income tax purposes, depending on whether you are receiving cash, stock or both cash and stock pursuant to the Stock Splits. You should consult your tax advisor as to the particular federal, state, local, foreign, and other tax consequences applicable to your specific circumstances. Federal Income Tax Consequences to Continuing Holders Not Receiving Cash. If you (i) continue to hold Common Shares directly immediately after the Stock Splits and (ii) you receive no cash as a result of the Stock Splits, you will not recognize any gain or loss in the Stock Splits, and you will have the same adjusted tax basis and holding period in your Common Shares as you had in such Common Shares immediately prior to the Stock Splits. Federal Income Tax Consequences to Holders Receiving Cash. If you receive cash in exchange for Common Shares as a result of the Stock Splits, your tax consequence will depend on whether, in addition to receiving cash, you retain a portion of your Common Shares or a person or entity related to you (as determined by the Code) continues to hold Common Shares immediately after the Stock Splits. If you receive cash, do not continue to hold directly any Common Shares and are not related to any person or entity who or which continues to hold Common Shares, you will recognize capital gain or loss. The amount of this capital gain or loss will equal the difference between the cash you receive for your Common Shares and your aggregate adjusted tax basis in such Common Shares. If you receive cash and either (a) retain a portion of your Common Shares or (b) do not continue to hold directly any Common Shares but are related to a person or entity who or which continues to hold Common Shares (in which case you may be treated as owning constructively the Common Shares owned by such related person or entity), your receipt of cash may be treated (i) first, as ordinary taxable dividend income to the extent of your ratable share of ASB's undistributed earnings and profits, (ii) second, as a tax-free return of capital to the extent of your aggregate adjusted tax basis in your Common Shares, and (iii) then, the remainder as capital gain. 32 If you fall into the category described in the immediately preceding paragraph, your tax treatment will depend upon whether your receipt of cash either (i) is "not essentially equivalent to a dividend" or (ii) constitutes a "substantially disproportionate redemption of stock," as described below. If your receipt of cash meets either of these two tests, your receipt of cash will result solely in capital gain or loss. If your receipt of cash cannot meet either of these two tests, your tax consequences will be those described in the immediately preceding paragraph. "Not Essentially Equivalent to a Dividend." You will satisfy the "not essentially equivalent to a dividend" test if the reduction in your proportionate interest in ASB resulting from the Stock Splits (taking into account for this purpose the Common Shares owned by persons or entities related to you) is considered a "meaningful reduction" given your particular facts and circumstances. The Internal Revenue Service has ruled that a small reduction by a minority stockholder whose relative stock interest is minimal and who exercises no control over the affairs of the corporation will satisfy this test. "Substantially Disproportionate Redemption of Stock." Your receipt of cash in the Stock Splits will be a "substantially disproportionate redemption of stock" for you if the percentage of Common Shares owned by you (and by persons or entities related to you) immediately after the Stock Splits is (i) less than 50% of all Common Shares and (b) less than 80% of the percentage of Common Shares owned by you (and by persons or entities related to you) immediately before the Stock Splits. If you or a person or entity related to you will continue to hold Common Shares after the Stock Splits, you should consult with your own tax advisor to determine your particular tax consequences. Capital Gain and Loss. For individuals, net capital gain (defined generally as your total capital gains in excess of capital losses for the year) recognized upon the sale of capital assets that have been held for more than 12 months generally will be subject to tax at a rate not to exceed 15%. Net capital gain recognized from the sale of capital assets that have been held for 12 months or less will continue to be subject to tax at ordinary income tax rates. Capital gain recognized by a corporate taxpayer will continue to be subject to tax at the ordinary income tax rates applicable to corporations. There are limitations on the deductibility of capital losses. Special Rate for Certain Dividends. In general, dividends are taxed at ordinary income rates. However, you may qualify for a 15% rate of tax on any cash received in the Stock Splits that is treated as a dividend as described above, if (i) you are an individual or other non-corporate stockholder; (ii) you have held the Common Shares of ASB with respect to which the dividend was received for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date, as determined under the Code; and (iii) you were not obligated during such period (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. You should consult with your tax advisor regarding your eligibility for such lower tax rates on dividend income. Backup Withholding. Holders of Common Shares will be required to provide their social security or other taxpayer identification numbers (or, in some instances, additional information) to the Transfer Agent in connection with the Stock Splits to avoid backup withholding requirements that might otherwise apply. The letter of transmittal will require each holder of Common Shares to deliver such information when the Common Share certificates are surrendered following the Effective Date of the Stock Splits. Failure to provide such information may result in backup withholding. 33 As explained above, the amounts paid to you as a result of the Stock Splits may result in dividend income, capital gain income, or some combination of dividend and capital gain income to you depending on your individual circumstances. Unavailability of Appraisal or Dissenters' Rights No appraisal or dissenters' rights are available under Ohio law or under ASB's Articles or Regulations to holders of Common Shares who vote against the Stock Splits. Other rights or actions may exist under Ohio law or federal and state securities laws for shareholders who can demonstrate that they have been damaged by the Stock Splits. Reservation of Rights Although we are requesting your approval of the Stock Splits, the Board reserves the right, in its discretion, to withdraw the Stock Splits from the agenda of the Special Meeting prior to any vote thereon or to abandon the Stock Splits before the Effective Date even if the shareholders have approved the proposal. Although the Board presently believes that the Stock Splits are in ASB's best interests and has recommended a vote for the Stock Splits, the Board nonetheless believes that it is prudent to recognize that factual circumstances could possibly change prior to the Effective Date such that it might not be appropriate or desirable to effect the Stock Splits at that time. Such reasons include any change in the nature of the shareholdings of ASB prior to the Effective Date which would result in ASB being unable to reduce the number of holders of record of Common Shares to below 300 as a result of the Stock Splits. If the Board decides to withdraw the Stock Splits from the agenda of the Special Meeting, the Board will promptly notify ASB's shareholders of the decision by mail and by announcement at the Special Meeting. If the Board decides to abandon the Stock Splits after the Special Meeting and before the Effective Date, the Board will promptly notify ASB's shareholders of the decision by mail or by press release and any other appropriate public disclosure. Escheat Laws The unclaimed property and escheat laws of each state provide that under circumstances defined in that state's statutes, holders of unclaimed or abandoned property must surrender that property to the state. Shareholders who are entitled to receive cash in lieu of fractional shares in connection with the Stock Splits whose addresses are unknown to ASB or who do not surrender their share certificates and request payment of the Repurchase Price generally will have a period of years from the Effective Date in which to claim the cash payment to which they are entitled. For example, with respect to shareholders whose last known addresses, as shown by the records of ASB, are in Ohio the period is five years. Following the expiration of that five-year period, the relevant provisions of the Ohio Revised Code would likely cause the cash payments to escheat to the State of Ohio. For shareholders who reside in other states or whose last known addresses, as shown by the records of ASB, are in states other than Ohio, such states may have abandoned property laws which call for such state to obtain either (i) custodial possession of property that has been unclaimed until the owner reclaims it or (ii) escheat of such property to the state. Under the laws of such other jurisdictions, the "holding period" or the time period which must elapse before the property is deemed to be abandoned may be shorter or longer than five years. If ASB does not have an address for a shareholder, then the unclaimed cash payment would be turned over to ASB's state of incorporation, the State of Ohio, in accordance with its escheat laws. 34 Regulatory Approvals ASB is not aware of any material governmental or regulatory approval required for completion of the Stock Splits, other than compliance with the relevant federal and state securities laws and Ohio corporate laws. INFORMATION ABOUT ASB Business Overview ASB is a savings and loan holding company which owns all of the common stock issued by American upon its conversion from a mutual savings association to a stock savings association in May of1995. ASB's activities have been limited primarily to holding the common stock of American since the conversion. American engages principally in the business of originating real estate loans secured by first mortgages on one- to four-family residential real estate located in American's primary market area, which consists of the Cities of Portsmouth and Waverly, Ohio and contiguous areas of Scioto County and Pike County, Ohio. American also makes loans secured by multifamily real estate (over four units) and nonresidential real estate and secured and unsecured consumer loans. In addition, American purchases interests in multifamily real estate and nonresidential real estate loans originated and serviced by other lenders. American also invests in mortgage-backed securities, U.S. Government agency obligations, obligations of state and political subdivisions, and other investments permitted by applicable law. Funds for lending and other investment activities are obtained primarily from savings deposits, which are insured up to applicable limits by the FDIC, and loan principal and mortgage-backed security repayments. American conducts business from its main office in Portsmouth, Ohio and a branch office in Waverly, Ohio. American's primary market area for lending consists of Scioto County and Pike County, Ohio, and for deposits consists of Scioto County and Pike County and adjacent communities in North Central Kentucky. ASB is subject to regulation, supervision and examination by the OTS and the SEC. American is subject to regulation, supervision and examination by the OTS and the FDIC. ASB's principal offices are located at 503 Chillicothe Street, Portsmouth, Ohio 45662, and ASB's phone number at that address is (740) 354-3177. Management of ASB Board of Directors. There are six members of ASB's Board of Directors. Information regarding ASB's current directors is set forth below. * William J. Burke, age 63, has been a director of ASB since 1995. Mr. Burke is a director, the Chief Executive Officer and the marketing manager of OSCO Industries, Inc., a manufacturing company which has its principal place of business in Portsmouth, Ohio. He has been employed by OSCO Industries, Inc., since 1967. 35 * Gerald R. Jenkins, age 69, has been a director of ASB since 1995. Mr. Jenkins retired in 1998 as the President and Chief Executive Officer of ASB and American. Prior to becoming President of American in 1983, he held various positions at American including Secretary and Vice President. * Christopher H. Lute, age 55, has been a director of ASB since 2003. Mr. Lute is the President and Chief Executive Officer of Lute Plumbing Supply, Inc., a wholesale distributor of plumbing, heating, cooling, kitchen and bath products with facilities in Ohio, Kentucky, Indiana and West Virginia. He has held this position since 1979. Mr. Lute is also immediate past Chairman of the Southern Ohio Growth Partnership and is President of WIT & Co., a national buying group. Mr. Lute also serves on the board of the Southern Ohio Museum and Cultural Center. * Larry F. Meredith, age 63, has been a director of ASB since 2003. Mr. Meredith is a consultant to the Pike County Board of Mental Retardation and Developmental Disabilities and is a part-time instructor at Shawnee State University. Mr. Meredith served as a director of The Waverly Building and Loan Company from 1997 until its acquisition by American in 2002. He has previously served as Superintendent of Pike County Schools, Supervisor of Scioto County Schools and a member of the Eastern Board of Education. * Louis M. Schoettle, age 78, has been a director of ASB since 1995. Dr. Schoettle is a physician. He retired from active practice in 1994 after over 35 years of practicing medicine in Portsmouth. Dr. Schoettle also owns and operates a 1,100 acre farm. * Robert M. Smith, age 58, has been a director of ASB since 1995. Mr. Smith has been employed by American since 1966 and has served as the President and Chief Executive Officer of American and ASB since 1998. Prior positions held by Mr. Smith with American include Secretary, Treasurer and Executive Vice President. Mr. Smith is also a director of Intrieve, Incorporated and serves on the board of the Ohio Bankers League. The Board has determined that, except for Mr. Smith, each director is an "independent director" under applicable Nasdaq rules. Executive Officers. In addition to Mr. Smith, who is the President of ASB and American, the following persons are executive officers of ASB and American: * Carlisa R. Baker, age 42, has served as the Treasurer of ASB since 1995. She has served as Treasurer of American since 1993 and has been employed by American since 1979. * Mary Kathryn Fish, age 53, is the Secretary of ASB and American, and has been employed by American since 1984. She has served as Secretary of American since 1993 and of ASB since 1995. * Michael L. Gampp, age 35, has served as the Vice President and Chief Financial Officer of ASB and American since 2000. From 1997 until joining ASB and American, Mr. Gampp was a principal with Reynolds & Co., Certified Public Accountants, and from 1995 to 1997 he served as Chief Financial Officer of Buckeye Rural Electric. * Jack A. Stephenson, age 52, has served as American's Vice President responsible for lending activities and has served as Vice President of ASB since 1995. 36 Each director and executive officer may be contacted at ASB's address at 503 Chillicothe Street, Portsmouth, Ohio 45662, and the phone number at that address is (740) 354-3177. To ASB's knowledge, none of ASB's executive officers or directors has been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors) or has been a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Each of ASB's executive officers and directors is a citizen of the United States of America. Interest of Certain Persons in Matters to be Acted Upon Information regarding the Common Shares beneficially owned by the executive officers and directors of ASB and American is set forth in the table below. The Stock Splits will not impact affiliated holders of Common Shares differently from unaffiliated holders of Common Shares on the basis of affiliate status. The executive officers and directors of ASB and American will receive no extra or special benefit not shared on a pro rata basis by all other holders of the Common Shares. If the Stock Splits are implemented, the executive officers and directors of ASB and American will not benefit by any material increase in their percentage ownership of Common Shares. Please see the sections entitled "Special Factors - Fairness of the Stock Splits" and "Special Factors - Advantages of the Stock Splits." Share Ownership of Directors and Executive Officers. The following table provides certain information regarding the number of Common Shares beneficially owned by ASB's directors and executive officers as of March 1, 2005 and the anticipated ownership percentage of such persons after the Stock Splits:
Percent of Percent of Outstanding Number of Outstanding Common Number of Common Common Shares Shares Before Common Shares Shares After Name (1) Before Stock Splits (2) Stock Splits (3) After Stock Splits Stock Splits (4) -------- ----------------------- ------------------ ------------------ ---------------- William J. Burke 40,699 (5) 2.37 40,500 2.49 Gerald R. Jenkins 129,400 (6) 7.54 128,700 7.90 Christopher H. Lute 4,209 (7) 0.25 3,900 0.24 Larry F. Meredith 1,847 (8) 0.11 1,800 0.11 Louis M. Schoettle 60,000 (9) 3.50 59,400 3.65 Robert M. Smith 118,200 (10) 6.88 117,000 7.18 All directors and executive officers of ASB as a group (10 persons) 444,620 (11) 25.79 440,100 26.88 ------------------- Each of the persons listed in this table may be contacted at ASB's address. All shares are owned directly with sole voting or investment power unless otherwise indicated by footnote. Assumes a total of [1,715,862] Common Shares outstanding before the Stock Splits, plus the number of vested stock options held by such person or group. (Footnotes continued on next page) 37 Assumes a total of [1,629,529] Common Shares outstanding after the Stock Splits, plus the number of vested stock options held by such person or group. Includes 27,099 phantom shares held in American's Deferred Compensation Plan (the "Deferred Compensation Plan") which represent Common Shares that may be acquired under the plan in the next 60 days. Includes 78,442 shares as to which Mr. Jenkins has shared voting and investment power and 18,227 phantom shares held in the Deferred Compensation Plan which represent Common Shares that may be acquired under the plan in the next 60 days. Includes 1,200 shares which may be acquired upon the exercise of options and 997 phantom shares held in the Deferred Compensation Plan which represent Common Shares that may be acquired under the plan in the next 60 days. Includes 1,200 shares which may be acquired upon the exercise of options and 647 phantom shares held in the Deferred Compensation Plan which represent Common Shares that may be acquired under the plan in the next 60 days. Includes 21,883 shares as to which Dr. Schoettle has shared voting and investment power, and 12,745 phantom shares held in the Deferred Compensation Plan which represent Common Shares that may be acquired under the plan in the next 60 days. Includes 26,494 shares held in the ESOP as to which Mr. Smith has shared investment power, 3,999 shares held by the ASB Management Recognition Plan (the "MRP") as to which Mr. Smith has shared voting power as Trustee of the MRP, 65,000 shares as to which Mr. Smith has shared voting and investment power, and 12,295 phantom shares held in the Deferred Compensation Plan which represent Common Shares that may be acquired under the plan in the next 60 days. Includes 8,074 shares which may be acquired upon the exercise of options, 71,009 shares held in the ESOP, 72,010 phantom shares held in the Deferred Compensation Plan which represent Common Shares that may be acquired under the plan in the next 60 days and 193,427 shares over which a person has shared voting or investment power.
The directors and executive officers of ASB have engaged in the following transactions involving the Common Shares in the past 60 days: Mr. Jenkins exercised an option to purchase 13,942 Common Shares at an exercise price of $7.64 per share on January 4, 2005 and Mr. Burke gifted 2,400 Common Shares on January 6, 2005. 39 Owners of 5% or More of the Common Shares. The following table sets forth certain information regarding the only persons known to ASB to beneficially own more than five percent of the outstanding Common Shares as of March 1, 2005 and their anticipated ownership percentage after the Stock Splits:
Number of Number of Common Common Shares Percent of Common Shares Percent of Common Before Shares Outstanding After Shares Outstanding Name and Address Stock Splits Before Stock Splits Stock Splits After Stock Splits ---------------- ------------ ------------------- ------------ ------------------ First Bankers Trust Services, Inc. 211,658 (1) 12.34 211,500 12.98 1201 Broadway Quincy, Illinois 62301 ASB Financial Corp. 139,646 (1) 8.14 139,500 8.56 Employee Stock Ownership Plan 1201 Broadway Quincy, Illinois 62301 Gerald R. Jenkins 129,400 (2) 7.54 128,700 7.90 503 Chillicothe Street Portsmouth, Ohio 45662 Robert M. Smith 118,200(3) 6.88 117,000 7.18 503 Chillicothe Street Portsmouth, Ohio 45662 ------------------- Includes 139,646 shares held as Trustee for the ESOP as to which First Bankers Trust has limited investment power and 72,012 shares held as Trustee of the Deferred Compensation Plan as to which First Bankers Trust Company, N.A. has sole investment power. All shares held in the ESOP have been allocated to the accounts of participants. The ESOP Trustee has voting power over shares that have been allocated to the account of an ESOP participant but as to which no voting instructions are given by the participant. See footnote (5) in the preceding table. See footnote (9) in the preceding table.
Market Price and Dividend Information Our Common Shares are currently traded on the Nasdaq under the symbol "ASBP." The following table sets lists the high and low closing prices and dividend information for the periods indicated. The last sale of Common Shares reported on the Nasdaq on [___________, 2005]was [$_____.] Prices in the table do not reflect any retail mark-ups or mark-downs or commissions. 39 Cash Dividends Quarter Ended High Close Low Close Declared ------------- ---------- --------- -------------- Fiscal 2005 September 30, 2004 $25.30 $21.30 $0.15 December 31, 2004 $23.05 $21.05 $0.15 Fiscal 2004 September 30, 2003 $24.96 $17.27 $0.14 December 31, 2003 $27.50 $22.56 $0.14 March 31, 2004 $27.75 $23.11 $0.14 June 30, 2004 $29.24 $22.00 $0.15 Fiscal 2003 September 30, 2002 $11.59 $10.70 $0.13 December 31, 2002 $14.90 $10.70 $0.13 March 31, 2003 $17.50 $14.25 $0.13 June 30, 2003 $17.25 $14.05 $1.14 Dividends are paid only when declared by the Board, in its sole discretion, based on ASB's financial condition, results of operation, market conditions and such other factors as it may deem appropriate. If the Stock Splits are completed and we deregister the Common Shares, the Common Shares will no longer be quoted on the Nasdaq or be eligible to be traded on any exchange or automated quotation service operated by a national securities association, and trades in the Common Shares will only be possible through privately negotiated transactions or in the Pink Sheets(R). Common Share Repurchase Information The following table provides information regarding ASB's Common Share repurchases during the periods indicated. Price Range Number ------------- Weighted Average Quarter Ended Repurchased High Low Price Per Share ------------- ----------- ---- --- ---------------- Fiscal 2005 September 30, 2004 None N/A N/A N/A December 31, 2004 None N/A N/A N/A Through [________, 2005] None N/A N/A N/A Fiscal 2004 September 30, 2003 6,850 $19.47 $19.47 $19.47 December 31, 2003 None N/A N/A N/A March 31, 2004 None N/A N/A N/A June 30, 2004 None N/A N/A N/A Fiscal 2003 September 30, 2002 1,800 $10.90 $10.94 $10.94 December 31, 2002 2,600 $10.94 $10.94 $10.94 March 31, 2003 None N/A N/A N/A June 30, 2003 1,688 $16.25 $16.25 $16.26 40 FINANCIAL INFORMATION Summary Historical Financial Information The following summary consolidated financial information was derived from ASB's audited consolidated financial statements as of and for each of the years ended June 30, 2004 and 2003 and from unaudited consolidated interim financial statements as of and for the six months ended December 31, 2004 and 2003. The statement of operations data for the six months ended December 31, 2004 is not necessarily indicative of results for a full year. This financial information is only a summary and should be read in conjunction with our historical financial statements and the accompanying footnotes, which are incorporated herein by reference into this Proxy Statement. Please see the section entitled "Incorporation of Certain Documents by Reference."
Six Months Ended Year Ended December 31, June 30, 2004 2003 2004 2003 2002 (Dollars in thousands, except per share data) Results of Operations Interest income $ 4,620 $ 4,417 $ 8,954 $ 9,576 $ 9,543 Interest expense 1,649 1,464 3,051 3,888 5,050 -------- -------- -------- -------- -------- Net interest income 2,971 2,953 5,903 5,688 4,493 Provision for loan losses 46 50 111 249 70 -------- -------- -------- -------- -------- Net interest income after provision for loan losses 2,925 2,903 5,792 5,439 4,423 Noninterest income 340 381 705 745 486 Noninterest expenses 1,896 1,926 3,743 3,277 3,077 -------- -------- -------- -------- -------- Income before taxes & extraordinary item 1,369 1,358 2,754 2,907 1,832 Income tax expense 348 346 744 846 548 -------- -------- -------- -------- -------- Net income before extraordinary item 1,021 1,012 2,010 2,061 1,284 Extraordinary item 0 0 0 0 229 -------- -------- -------- -------- -------- Net income $ 1,021 $ 1,012 $ 2,010 $ 2,061 $ 1,513 ======== ======== ======== ======== ======== Financial Condition Total assets $172,961 $160,151 $166,371 $152,755 $148,272 Total deposits 138,035 132,482 136,761 130,780 132,818 Net loans 137,987 125,235 129,821 114,919 109,015 Shareholders' equity 18,661 17,008 17,424 16,359 15,454 Average assets 169,666 156,453 159,501 151,372 142,629 Average shareholders' equity 18,043 16,684 15,474 16,341 13,179 Key Financial Ratios Return on average assets 1.20% 1.29% 1.26% 1.36% 1.06% Return on average equity 11.32% 12.13% 12.99% 12.61% 11.48% Dividends paid as a percent of net income 50.54% 45.95% 46.07% 117.95% 49.83% Per Share Data Net income, basic 0.60 0.61 1.22 1.32 1.00 Net income, diluted 0.60 0.59 1.18 1.30 0.97 Cash dividends declared 0.15 0.14 0.57 1.53 0.49 Book value 10.96 10.22 10.49 9.84 10.11
41 ASB's book value per share, as set forth above, has been derived from financial statements prepared by ASB's management relating to the fiscal periods set forth above. As required by Exchange Act Rule 13a-14(a), ASB's Chief Executive Officer and Chief Financial Officer have certified that such financial statements, and the financial information included in the periodic reports in which such financial statements appear, fairly present in all material respects the financial condition, results of operation and cash flows of ASB as of, and for, the periods presented in such periodic reports. Certain Financial Effects of the Stock Splits We do not expect the Stock Splits or our use of approximately $2,061,000 to complete the Stock Splits (which includes payments to be made to shareholders who have fractional shares repurchased and professional fees and other expenses related to the transaction) to have any material adverse effect on our capitalization, liquidity, results of operations or cash flow. Please see the section entitled "Meeting and Voting Information - Solicitation and Costs." We expect to finance the Stock Splits with cash on hand. If the Stock Splits are completed, shareholders who receive cash in lieu of fractional shares will receive cash in the amount of $23.00 per Common Share held immediately prior to the Stock Splits. The repurchase of the fractional Common Shares resulting from the Stock Splits is estimated to cost approximately $1,986,000 and would reduce the number of record holders of Common Shares from approximately 418 to approximately 240. We expect that, as a result of the Reverse/Forward Stock Splits and the cashing out of fractional Common Shares held by shareholder after the reverse stock split: * Our aggregate shareholders' equity will change from approximately $18,661,000 (as of December 31, 2004) to approximately $16,675,000; and * Book value per Common Share would change from $10.96 (at December 31, 2004) to $10.31, assuming the cash out of fractional Common Shares had occurred on December 31, 2004. Pro Forma Financial Information The following pro forma consolidated information has been derived from ASB's financial statements. The financial statements for the year ended June 30, 2004, have been audited by independent certified public accountants. The financial statements for the quarterly periods ended December 31, 2004 and 2003 are unaudited. In the opinion of ASB's management, these quarterly financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the results of these quarters. The pro forma consolidated financial statements have been prepared based upon the assumption that the Stock Splits were completed effective the first day of the period presented for the income statement and as of the date of the balance sheet, and all fractional Common Shares under one whole share are repurchased. These pro forma consolidated financial statements are not necessarily indicative of the results that would have occurred had the Stock Splits actually taken place at the respective time periods specified nor do they purport to project the results of operations for any future date or period. Based on information from various external sources, ASB believes that approximately 86,333 pre-split Common Shares will be repurchased at $23.00 per Common Share for a total purchase price of approximately $1,986,000. 42 The pro forma results are not indicative of future results because ASB's public reporting costs for the periods presented include only the historic public costs and do not include anticipated future costs. Further, these results exclude $165,000 in estimated cost savings due to no longer being subject to periodic reporting obligations under the Exchange Act. The unaudited pro forma financial statements should be read in conjunction with our historical financial statements and the accompanying footnotes, which are incorporated herein by reference into this Proxy Statement. Please see the section entitled "Incorporation of Certain Documents by Reference." 43 PRO FORMA CONSOLIDATED BALANCE SHEET Six Months Ended December 31, 2004 (Unaudited) (Dollars in thousands)
Pro-Forma Pro-Forma Historical Adjustments Combined ---------- ----------- --------- ASSETS Cash and due from banks $ 1,145 $ 0 $ 1,145 Interest bearing deposits(1) 4,422 (2,061) 2,436 -------- -------- -------- 5,567 (2,061) 3,581 Certificates of deposits 71 71 Investment securities available for sale-at market 10,935 10,935 Mortgage backed securities available for sale at market 11,287 11,287 Loans receivable, net 137,987 137,987 Office premises and equipment at depreciated cost 1,887 1,887 Federal Home Loan Bank stock-at cost 1,128 1,128 Accrued interest receivable on loans 206 206 Accrued interest receivable on mortgage backed securities 45 45 Accrued interest receivable on investments and interest bearing deposits 107 107 Prepaid expenses and other assets 3,419 3,419 Prepaid federal income taxes 197 197 Deferred federal income taxes 125 0 125 -------- -------- -------- Total Assets $172,961 $ (2,061) $170,975 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $138,035 $ 0 $138,035 Advances from the Federal Home Loan Bank 14,952 14,952 Advances by borrowers for taxes and insurance 185 185 Accrued interest payable 44 44 Other liabilities 1,084 0 1,084 -------- -------- -------- Total liabilities 154,300 0 154,300 Shareholders' equity Preferred stock, 1,000,000 shares authorized, no par value; no shares issued 0 0 Common stock, 4,000,000 shares authorized, no par value; 1,952,037 shares issued 0 0 Additional paid-in capital(1) 10,540 (2,061) 8,554 Retained earnings, restricted 10,353 10,353 Shares acquired by stock benefit plans (63) (63) Accumulated comprehensive income, unrealized gains on securities designated as available for sale, net of tax effects 671 671 Less 250,117 shares of treasury stock at cost (2,840) 0 (2,840) -------- -------- -------- Total shareholders' equity 18,661 (2,061) 16,675 -------- -------- -------- Total liabilities and shareholders' equity $172,961 $ (2,061) $170,975 ======== ======== ======== ------------------- Retirement of repurchased shares.
44 PRO FORMA CONSOLIDATED BALANCE SHEET Year Ended June 30, 2004 (Dollars in thousands)
Pro-Forma Pro-Forma Historical Adjustments Combined ---------- ----------- --------- ASSETS Cash and due from banks $ 2,078 $ 0 $ 2,078 Interest bearing deposits(1) 5,307 (2,061) 3,246 -------- -------- -------- 7,385 (2,061) 5,324 ======== ======== ======== Certificates of deposits 178 178 Investment securities available for sale-at market 12,487 12,487 Mortgage backed securities available for sale at market 11,768 11,768 Loans receivable, net 129,821 129,821 Office premises and equipment at depreciated cost 1,814 1,814 Federal Home Loan Bank stock-at cost 1,104 1,104 Accrued interest receivable on loans 336 336 Accrued interest receivable on mortgage backed securities 50 50 Accrued interest receivable on investments and interest bearing deposits 130 130 Prepaid expenses and other assets 830 830 Prepaid federal income taxes 183 183 Deferred federal income taxes 285 0 285 -------- -------- -------- Total Assets $166,371 $ (2,061) $164,310 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $136,761 $ 0 $136,761 Advances from the Federal Home Loan Bank 10,899 10,899 Advances by borrowers for taxes and insurance 180 180 Accrued interest payable 52 52 Other liabilities 1,055 0 1,055 -------- -------- -------- Total liabilities 148,947 0 148,947 Shareholders' equity Preferred stock, 1,000,000 shares authorized, no par value; no shares issued 0 0 Common stock, 4,000,000 shares authorized, no par value; 1,952,037 shares issued 0 0 Additional paid-in capital(1) 10,165 (2,061) 8,104 Retained earnings, restricted 9,848 9,848 Shares acquired by stock benefit plans (126) (126) Accumulated comprehensive income, unrealized gains on securities designated as available for sale, net of tax effects 377 377 Less 250,117 shares of treasury stock at cost (2,840) 0 (2,840) -------- -------- -------- Total shareholders' equity 17,424 (2,061) 15,363 Total liabilities and shareholders' equity $166,371 $ (2,061) $164,310 ======== ======== ======== ------------------- Retirement of repurchased shares.
45 PRO FORMA CONSOLIDATED INCOME STATEMENT December 31, 2004 (Unaudited) (Dollars in thousands, except per share data)
Pro-Forma Pro-Forma Historical Adjustments Combined ---------- ----------- --------- Six Months Ended December 31, 2004 Interest Income Loans $4,179 $ 0 $4,179 Mortgage-backed securities 208 208 Investment securities(1) 233 (25) 208 Interest-bearing deposits and other 0 0 0 ------ ------ ------ Total interest income 4,620 (25) 4,595 Interest Expense Deposits 1,456 1,456 Borrowings 193 193 ------ ------ Total interest expense 1,649 1,649 Net interest income 2,971 (25) 2,946 Provision for losses on loans 46 46 ------ ------ Net interest income after provision for losses on loans 2,925 (25) 2,900 Other income Gain on sale of office premises 0 0 Gain on sale of investment securities 0 0 Other operating 340 340 ------ ------ Total other income 340 340 General, Administrative and Other Expense Employee compensation and benefits 1,046 1,046 Occupancy and equipment 115 115 Franchise taxes 82 82 Data processing 224 224 Other operating(2) 429 75 504 ------ ------ ------ Total general administrative and other expenses 1,896 75 1,971 Earnings before income taxes 1,369 (100) 1,269 Federal Income Taxes Current 337 (34) 303 Deferred 11 0 11 ------ ------ ------ Total federal income taxes 348 (34) 314 ------ ------ ------ 0 Net Earnings $1,021 $ (66) $ 955 Earnings Per Share Basic $ 0.60 $ 0.60 Diluted $ 0.60 $(0.01) $ 0.59 ------------------- Interest forfeited from using $2,061,000 in short-term investments to fund the transaction. Transaction costs.
46 PRO FORMA CONSOLIDATED INCOME STATEMENT June 30, 2004 (Dollars in thousands, except per share data)
Pro-Forma Pro-Forma Historical Adjustments Combined ---------- ----------- --------- Year Ended June 30, 2004 Interest Income Loans $8,102 $ 0 $8,102 Mortgage-backed securities 200 200 Investment securities(1) 641 (50) 591 Interest-bearing deposits and other 11 0 11 ------ ------ ------ Total interest income 8,954 (50) 8,904 Interest Expense Deposits 2,862 2,862 Borrowings 189 189 ------ ------ Total interest expense 3,051 3,051 Net interest income 5,903 (50) 5,853 Provision for losses on loans 111 111 Net interest income after provision for losses on loans 5,792 (50) 5,742 Other income Gain on sale of office premises 58 58 Gain on sale of investment securities 40 40 Other operating 607 0 607 ------ ------ ------ Total other income 705 0 705 General, Administrative and Other Expense Employee compensation and benefits 2,017 2,017 Occupancy and equipment 235 235 Franchise taxes 169 169 Data processing 432 432 Other operating(2) 890 75 965 ------ ------ ------ Total general administrative and other expenses 3,743 75 3,818 Earnings before income taxes 2,754 (125) 2,629 Federal Income Taxes Current 694 (43) 651 Deferred 50 0 50 ------ ------ ------ Total federal income taxes 744 (43) 701 ------ ------ ------ 0 Net Earnings $2,010 $ (82) $1,928 Earnings Per Share Basic $ 1.22 $ 0.01 $ 1.23 Diluted $ 1.18 $ 0.02 $ 1.20 ------------------- Interest forfeited from using $2,061,000 in short-term investments to fund the transaction. Transaction costs.
47 AVAILABLE INFORMATION The Stock Splits will constitute a "going-private" transaction for purposes of Rule 13e-3 of the Exchange Act. As a result, ASB has filed the Schedule 13E-3 which contains additional information about ASB. Copies of the Schedule 13E-3 are available for inspection and copying at ASB's principal executive offices during regular business hours by any interested shareholder of ASB, or a representative who has been so designated in writing, and may be inspected and copied, or obtained by mail, by written request addressed to ASB Financial Corp., 503 Chillicothe Street, Portsmouth, Ohio 45662. ASB is currently subject to the information requirements of the Exchange Act and files periodic reports, proxy statements and other information with the SEC relating to its business, financial and other matters. Copies of such reports, proxy statements and other information, as well as the Schedule 13E-3, may be copied (at prescribed rates) at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. For further information concerning the SEC's public reference rooms, you may call the SEC at 1-800-SEC-0330. Some of this information may also be accessed on the World Wide Web through the SEC's internet address at "www.sec.gov." INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE In our filings with the SEC, information is sometimes incorporated by reference. This means that we are referring you to information that we have filed separately with the SEC. The information incorporated by reference should be considered part of this Proxy Statement, except for any information superseded by information contained directly in this Proxy Statement. This Proxy Statement incorporates by reference the following documents that we have previously filed with the SEC. They contain important information about ASB and its financial condition. * Our Annual Report on Form 10-KSB for the year ended June 30, 2004; and * Our Quarterly Report on Form 10-Q for the quarter ended December 31, 2004. We also incorporate by reference any additional documents that we may file with the Commission under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this Proxy Statement and the date of the Special Meeting. We will provide, without charge, upon the written or oral request of any person to whom this Proxy Statement is delivered, by first class mail or other equally prompt means within one business day of receipt of such request, a copy of any and all information that has been incorporated by reference, without exhibits unless such exhibits are also incorporated by reference in this Proxy Statement. You may obtain a copy of these documents and any amendments thereto by written request addressed to ASB Financial Corp., 503 Chillicothe Street, Portsmouth, Ohio 45662. 48 PROPOSALS OF SHAREHOLDERS AND OTHER MATTERS Shareholders of ASB desiring to submit proposals to be considered for inclusion in ASB's Proxy Statement and form of Proxy (the "Proxy Materials") for the 2005 Annual Meeting of Shareholders (the "2005 Annual Meeting") must provide their proposals by certain deadlines. To be included in the Proxy Materials, a shareholder proposal must be received by ASB no later than May 27, 2005. If a shareholder intends to present a proposal at the 2005 Annual Meeting and the proposal was not included in the Proxy Materials, ASB's management proxies for the 2005 Annual Meeting will be entitled to vote on such proposal in their discretion, despite the exclusion of any discussion of the matter in the Proxy Materials, if the proposal is not received by ASB before August 10, 2005. The Board is not aware of other matters that are likely to be brought before the Special Meeting. However, in the event that any other matters properly come before the Special Meeting, the persons named in the enclosed Proxy are expected to vote the Common Shares represented thereby on such matters in accordance with their best judgment. Dated: [March __, 2005] By Order of the Board of Directors, Robert M. Smith President 49 EXHIBIT A --------- KELLER & COMPANY, INC. FINANCIAL INSTITUTION CONSULTANTS INVESTMENT AND FINANCIAL ADVISORS 555 METRO PLACE NORTH SUITE 524 DUBLIN, OHIO 43017 (614) 766-1426 (614) 766-1459 FAX keller@ee.net February 28, 2005 Board of Directors ASB Financial Corp. 503 Chillicothe Portsmouth, Ohio 45662 Members of the Board: You have requested our opinion as to the fairness, from a financial point of view to the shareholders of ASB Financial Corp. ("ASB"), of the price per share for ASB stock to be paid to shareholders in connection with the Reverse Stock Split (defined below) set forth in the proxy material and to be sent to shareholders of record as established by the company in regard to the Reverse Stock Split. As more fully described in the proxy material to be sent to shareholders, ASB will conduct a Reverse Stock Split, resulting in an exchange of one share for each 300 shares of ASB. Any shareholder with less than 300 shares of ASB will receive cash based on a price per share of $23.00. Further, any partial shares resulting, based on the terms of the Reverse Stock Split, will be redeemed to shareholders in cash based on a price per share of $23.00. Keller & Company, Inc. ("Keller'), as part of its bank consulting and advisory business, is regularly engaged in the valuation of financial institutions and their securities in connection with the underwritings and distributions of listed and unlisted securities and with mergers and acquisitions and other corporate transactions. In connection with this opinion, we have reviewed, among other things: (i) proxy material; (ii) Annual Reports for the years ended June 30, 2002, 2003, and 2004; (iii) Form 10-Q for the quarters ended September 30, 2003 and 2004; (iv) certain publicly-available financial statements of ASB as of December 31, 2003 and 2004, and other historical financial information provided by ASB that we deemed relevant; (v) such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. We reviewed historical returns and the current and historical market prices and trading volumes of ASB's common stock and the historical and projected earnings and other operating data of ASB and the current and future capitalization of ASB. We considered the current market environment in general and the banking environment in particular. During the completion of our review, we have assumed and relied upon the accuracy and completeness of all the financial information, analyses and other information that was publicly-available or otherwise furnished to, reviewed by or discussed with us, and we do not assume any Board of Directors ASB Financial Corp. February 28, 2005 Page 2 responsibility or liability for independently verifying the accuracy or completeness thereof. We did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of ASB or any of its subsidiaries, or the collectability of any such assets, nor have we been furnished with any such evaluations or appraisals. We did not make an independent evaluation of the adequacy of the allowance for loan losses of ASB nor have we reviewed any individual credit files relating to ASB and, we have assumed that the respective allowances for loan losses for ASB is adequate to cover such losses. We have also assumed that there has been no material change in ASB's assets, financial condition, results of operations, business since the date of the most recent financial statements made available to us. Our opinion is necessarily based upon information available to us, and financial, stock, market and other conditions and circumstances existing, as of the date hereof. The opinion of Keller is directed to the Board of Directors of ASB in connection with its Reverse Stock Split and does not constitute a recommendation to any stockholder of ASB as to how a stockholder should vote at any meeting of stockholders called to consider and vote upon the Reverse Stock Split. The opinion of Keller is not to be quoted or referred to, in whole or in part, in any proxy material or in any other document, nor shall this opinion be used for any other purposes, without Keller's prior written consent provided; however, that we hereby consent to the inclusion of this opinion as an annex to ASB's proxy material and to the references to this opinion therein. Based upon and subject to the foregoing, it is our opinion, as of the date hereof, that the price per share for ASB stock used in the Reverse Stock Split of ASB is fair, from a financial point of view. Very truly yours, /s/ Keller & Company, Inc. KELLER & COMPANY, INC. EXHIBIT B --------- FORM OF REVERSE STOCK SPLIT AMENDMENT Article FOURTH of the Articles of Incorporation, as amended, of ASB Financial Corp. is hereby amended and replaced in its entirety as follows: FOURTH: (A) The authorized shares of the corporation shall be five million (5,000,000), four million (4,000,000) of which shall be common shares, each without par value, and one million (1,000,000) of which shall be preferred shares, each without par value. The directors of the corporation may adopt an amendment to the Articles of Incorporation in respect of any unissued or treasury shares of any class and thereby fix or change: the division of such shares into series and the designation and authorized number of each series; the dividend rate; the date of payment of dividends and the dates from which they are cumulative; the liquidation price; the redemption rights and price; the sinking fund requirements; the conversion rights and the restrictions on the issuance of shares of any class or series. (B) Effective at the date and time this amendment to the Articles of Incorporation to amend and replace this Article FOURTH is accepted by the Secretary of State of the State of Ohio (the "Effective Time"), each three hundred (300) of the corporation's common shares then issued and outstanding shall be automatically converted into one fully-paid and non- assessable common share (the "Reverse Stock Split"). In lieu of the issuance of any fractional common shares or scrip that would otherwise result from the Reverse Stock Split, any holder of common shares who would otherwise be entitled to receive fractional shares shall be entitled to receive the amount of Twenty-Three and 00/100 Dollars ($23.00) in cash for each common share held immediately prior to the Effective Time and not converted into a whole common share in the Reverse Stock Split. This subsection (B) of this Article FOURTH shall affect only issued and outstanding shares of the corporation and shall not affect the total authorized number of shares. (C) This Article FOURTH shall not change the stated capital or paid-in surplus referable to the common shares, if any. EXHIBIT C --------- FORM OF FORWARD STOCK SPLIT AMENDMENT Article FOURTH of the Articles of Incorporation, as amended, of ASB Financial Corp. is hereby amended and replaced in its entirety as follows: FOURTH: (A) The authorized shares of the corporation shall be five million (5,000,000), four million (4,000,000) of which shall be common shares, each without par value, and one million (1,000,000) of which shall be preferred shares, each without par value. The directors of the corporation may adopt an amendment to the Articles of Incorporation in respect of any unissued or treasury shares of any class and thereby fix or change: the division of such shares into series and the designation and authorized number of each series; the dividend rate; the date of payment of dividends and the dates from which they are cumulative; the liquidation price; the redemption rights and price; the sinking fund requirements; the conversion rights and the restrictions on the issuance of shares of any class or series. (B) Effective at the date and time this amendment to the Articles of Incorporation to amend and replace this Article FOURTH is accepted by the Secretary of State of the State of Ohio (the "Effective Time"), each share of the corporation's common shares then issued and outstanding shall be automatically converted into three hundred (300) fully paid and non-assessable common shares. This subsection (B) of this Article FOURTH shall affect only issued and outstanding shares of the corporation and shall not affect the total authorized number of shares. (C) This Article FOURTH shall not change the stated capital or paid-in surplus referable to the common shares, if any. REVOCABLE PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ASB FINANCIAL CORP. ASB FINANCIAL CORP. SPECIAL MEETING OF SHAREHOLDERS [April ___, 2005] IMPORTANT Please complete both sides of the Proxy Card. Sign, date and return the attached Proxy Card in the postage paid envelope as soon as possible. Your vote is important, regardless of the number of shares that you own. The undersigned shareholder of ASB Financial Corp. ("ASB") hereby constitutes and appoints the Proxy Committee of ASB as the Proxy or Proxies of the undersigned with full power of substitution and resubstitution, to vote at the Special Meeting of Shareholders of ASB to be held at Shawnee State Park Resort and Conference Center, 4404B State Route 125, West Portsmouth, Ohio 45663, on [April __, 2005], at ___:___ __.m., local time (the "Special Meeting"), all of the shares of ASB which the undersigned is entitled to vote at the Special Meeting, or at any adjournment thereof, on each of the following proposals, all of which are described in the accompanying Proxy Statement: 1. A proposal to amend ASB's Articles of Incorporation to effect a 1- for-300 reverse stock split and the repurchase of all resulting fractional shares, followed immediately by an amendment to ASB's Articles of Incorporation to effect a 300-for-1 forward stock split of ASB's common shares (collectively, the "Stock Splits"). As a result of the Stock Splits, (a) each shareholder owning fewer than 300 common shares of ASB immediately before the Stock Splits will receive $23.00 in cash, without interest, for each ASB common share owned by such shareholder immediately prior to the Stock Splits and will no longer be a shareholder of ASB; and (b) each shareholder owning 300 or more common shares immediately before the Stock Splits (i) will receive 300 Common Shares after the Stock Splits in exchange for each lot of 300 Common Shares held before the Stock Splits and (ii) any additional Common Shares held other than in a 300 share lot will be cancelled and exchanged for $23.00 in cash per share. [ ] FOR [ ] AGAINST [ ] ABSTAIN 2. In their discretion, upon such other business as may properly come before the Special Meeting or any adjournments thereof. IMPORTANT: Please sign and date this Proxy on the reverse side. Your Board of Directors recommends a vote "FOR" the approval of the amendments to ASB's Articles of Incorporation to effect the Stock Splits. This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. Unless otherwise specified, the shares will be voted FOR the approval of the amendments to ASB's Articles of Incorporation to effect the Stock Splits. All Proxies previously given by the undersigned are hereby revoked. Receipt of the Notice of the Special Meeting of Shareholders of ASB and of the accompanying Proxy Statement is hereby acknowledged. Please sign exactly as your name appears above. When signing as attorney, executor, administrator, trustee, guardian or agent, please give your full title. If share are held jointly, each holder should sign. ____________________________ ______________________________ Signature Signature Dated: _______________, 2005 Dated: _________________, 2005 PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.