-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T6w6X4r5eUhgrASfWm+IGdrgl9pCW7p3Q4xzLjSHksyEMwzbvU5KxOQ3fHow3935 BYs1I6DMWpxq/vr+vNPNMA== 0001046386-01-500015.txt : 20010515 0001046386-01-500015.hdr.sgml : 20010515 ACCESSION NUMBER: 0001046386-01-500015 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASB FINANCIAL CORP /OH CENTRAL INDEX KEY: 0000944304 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 311429488 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25906 FILM NUMBER: 1633049 BUSINESS ADDRESS: STREET 1: 503 CHILLICOTHE ST CITY: PORTSMOUTH STATE: OH ZIP: 45662 BUSINESS PHONE: 6143543177 MAIL ADDRESS: STREET 1: 503 CHILLICTHE ST CITY: PORTSMOUTH STATE: OH ZIP: 45662 10QSB 1 asb10qsb_33101.txt ASB 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 ----------------------------------------------- OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ____________ to _______________ Commission File Number: 0-25906 -------------- ASB FINANCIAL CORP. - ------------------------------------------------------------------------------ (Exact name of small business issuer as specified in its charter) Ohio 31-1429488 - ------------------------------- -------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 503 Chillicothe Street Portsmouth, Ohio 45662 - ------------------------------------------------------------------------------ (Address of principal executive offices) (740) 354-3177 - ------------------------------------------------------------------------------ (Issuer's telephone number) - ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the issuer filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: May 11, 2001 - 1,532,658 shares of common stock Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] Page 1 of 16 pages INDEX Page PART I - FINANCIAL INFORMATION Consolidated Statements of Financial Condition 3 Consolidated Statements of Earnings 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION 15 SIGNATURES 16 2 ASB Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except share data) March 31, June 30, ASSETS 2001 2000 Cash and due from banks $ 3,315 $ 917 Interest-bearing deposits in other financial institutions 1,273 4,152 ------- ------- Cash and cash equivalents 4,588 5,069 Investment securities available for sale - at market 21,379 19,112 Mortgage-backed securities available for sale - at market 8,172 8,616 Loans receivable - net 100,081 95,084 Office premises and equipment - at depreciated cost 1,400 1,366 Federal Home Loan Bank stock - at cost 774 733 Accrued interest receivable on loans 136 63 Accrued interest receivable on mortgage-backed securities 58 59 Accrued interest receivable on investments and interest-bearing deposits 289 355 Prepaid expenses and other assets 562 542 Prepaid federal income taxes 222 228 Deferred federal income tax assets 137 671 ------- ------- Total assets $137,798 $131,898 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $117,178 $110,007 Advances from the Federal Home Loan Bank 4,266 7,790 Advances by borrowers for taxes and insurance 100 173 Accrued interest payable 873 89 Other liabilities 1,119 1,258 ------- ------- Total liabilities 123,536 119,317 Shareholders' equity Preferred stock, 1,000,000 shares authorized, no par value; no shares issued - - Common stock, authorized 4,000,000 shares without par or stated value; 1,746,924 shares issued - - Additional paid-in capital 8,535 8,454 Retained earnings, restricted 8,357 7,870 Shares acquired by stock benefit plans (834) (1,059) Accumulated comprehensive income (loss), unrealized gains (losses) on securities designated as available for sale, net of related tax effects 445 (592) Less 194,066 and 177,366 shares of treasury stock, respectively - at cost (2,241) (2,092) ------- ------- Total shareholders' equity 14,262 12,581 ------- ------- Total liabilities and shareholders' equity $137,798 $131,898 ======= =======
3 ASB Financial Corp.
CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) Nine months ended Three months ended March 31, March 31, 2001 2000 2001 2000 Interest income Loans $6,069 $5,256 $2,056 $1,819 Mortgage-backed securities 441 457 146 150 Investment securities 1,198 1,135 387 378 Interest-bearing deposits and other 3 12 1 3 ----- ----- ----- ----- Total interest income 7,711 6,860 2,590 2,350 Interest expense Deposits 4,531 3,725 1,530 1,280 Borrowings 336 281 115 119 ----- ----- ----- ----- Total interest expense 4,867 4,006 1,645 1,399 ----- ----- ----- ----- Net interest income 2,844 2,854 945 951 Provision for losses on loans 1 1 1 - ----- ----- ----- ----- Net interest income after provision for losses on loans 2,843 2,853 944 951 Other income Gain (loss) on investment securities transactions 85 (15) 33 (15) Other operating 280 239 96 84 ----- ----- ----- ----- Total other income 365 224 129 69 General, administrative and other expense Employee compensation and benefits 1,172 1,147 394 399 Occupancy and equipment 128 98 40 46 Federal deposit insurance premiums 19 35 5 6 Franchise taxes 121 139 45 51 Data processing 257 224 89 79 Other operating 376 356 109 104 ----- ----- ----- ----- Total general, administrative and other expense 2,073 1,999 682 685 ----- ----- ----- ----- Earnings before income taxes 1,135 1,078 391 335 Federal income taxes Current 312 345 107 133 Deferred - (44) - (43) ----- ----- ----- ----- Total federal income taxes 312 301 107 90 ----- ----- ----- ----- NET EARNINGS $ 823 $ 777 $ 284 $ 245 ===== ===== ===== ===== EARNINGS PER SHARE Basic $.54 $.50 $.19 $.16 === === === === Diluted $.53 $.50 $.18 $.16 === === === ===
4 ASB Financial Corp.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (In thousands) For the nine months For the three months ended March 31, ended March 31, 2001 2000 2001 2000 Net earnings $ 823 $ 777 $284 $ 245 Other comprehensive income (loss), net of tax: Unrealized holding gains (losses) on securities during the period net of taxes (benefits) of $563, $(369), $15 and $(102) in each period, respectively 1,093 (717) 30 (197) Reclassification adjustment for realized (gains) losses included in earnings net of (taxes) benefits of $(29), $5 $(11) and $5 in each period, respectively (56) 10 (22) 10 ----- ---- --- ---- Comprehensive income $1,860 $ 70 $292 $ 58 ===== ==== === ==== Accumulated comprehensive income (loss) $ 445 $(442) $445 $(442) ===== ==== === ====
5 ASB Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended March 31, (In thousands) 2001 2000 Cash flows from operating activities: Net earnings for the period $ 823 $ 777 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Amortization of discounts and premiums on loans, investments and mortgage-backed securities - net (45) 27 Amortization of deferred loan origination fees (40) (35) Depreciation and amortization 90 79 Amortization of expense related to stock benefit plans 306 326 Provisions for losses on loans 1 1 (Gain) loss on investment securities transactions (85) 15 Federal Home Loan Bank stock dividends (41) (42) Increase (decrease) in cash due to changes in: Accrued interest receivable (6) (39) Prepaid expenses and other assets (20) 157 Accrued interest payable 784 668 Other liabilities (139) (57) Federal income taxes Current 6 (58) Deferred - (44) ------ ------ Net cash provided by operating activities 1,634 1,775 Cash flows provided by (used in) investing activities: Proceeds from maturity of investment securities 4,749 970 Proceeds from sales of investment securities 86 - Purchase of investment securities (5,778) (2,103) Principal repayments on mortgage-backed securities 821 1,102 Loan principal repayments 13,952 12,359 Loan disbursements (18,910) (21,565) Purchase of office premises and equipment (124) (283) Decrease in certificates of deposit in other financial institutions - net - 194 Redemption of Federal Home Loan Bank stock - 100 ------ ------ Net cash used in investing activities (5,204) (9,226) Cash flows provided by (used in) financing activities: Net increase in deposit accounts 7,171 6,324 Proceeds from Federal Home Loan Bank advances 2,000 8,500 Repayment of Federal Home Loan Bank advances (5,524) (7,524) Advances by borrowers for taxes and insurance (73) (79) Purchase of treasury stock (149) (914) Proceeds from the exercise of stock options - 61 Distributions paid on common stock (336) (1,950) ------ ------ Net cash provided by financing activities 3,089 4,418 ------ ------ Net decrease in cash and cash equivalents (481) (3,033) Cash and cash equivalents at beginning of period 5,069 7,566 ------ ------ Cash and cash equivalents at end of period $ 4,588 $ 4,533 ====== ======
6 ASB Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the nine months ended March 31, (In thousands) 2001 2000 Supplemental disclosure of cash flow information: Cash paid during the period for: Federal income taxes $ 355 $ 442 ===== ===== Interest on deposits and borrowings $4,123 $3,338 ===== ===== Supplemental disclosure of noncash investing activities: Unrealized gains (losses) on securities designated as available for sale, net of related tax effects $1,037 $ (707) ===== =====
7 ASB Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the nine and three months ended March 31, 2001 and 2000 1. Basis of Presentation The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-QSB and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of ASB Financial Corp. (the "Corporation") included in the Annual Report on Form 10-KSB for the year ended June 30, 2000. However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the three and nine-month periods ended March 31, 2001, are not necessarily indicative of the results which may be expected for the entire fiscal year. 2. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiary, American Savings Bank, fsb ("American" or the "Savings Bank"). All significant intercompany items have been eliminated. 3. Earnings Per Share Basic earnings per share is computed based upon the weighted-average shares outstanding during the period, less shares in the ASB Financial Corp. Employee Stock Ownership Plan (the "ESOP") that are unallocated and not committed to be released. Weighted-average common shares outstanding, which give effect to 37,209 unallocated ESOP shares, totaled 1,518,211 and 1,519,705 for the nine and three month periods ended March 31, 2001. Weighted-average common shares outstanding, which give effect to 51,432 unallocated ESOP shares, totaled 1,555,130 and 1,544,662 for the nine and three month periods ended March 31, 2000. Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be issued under the Corporation's stock option plan. Weighted-average common shares deemed outstanding for purposes of computing diluted earnings per share totaled 1,545,367 and 1,544,571 for the nine and three month periods ended March 31, 2001, respectively, and 1,561,562 and 1,544,662 for the nine and three month periods ended March 31, 2000, respectively. Incremental shares related to the assumed exercise of stock options included in the calculation of diluted earnings per share totaled 27,156 and 24,866 for the nine and three month periods ended March 31, 2001, respectively, and 6,432 for the nine month period ended March 31, 2000. Options to purchase 164,557 shares of common stock with a weighted-average exercise price of $10.08 were outstanding at March 31, 2000, but were excluded from the computation of common share equivalents for the three months ended March 31, 2000, because their exercise prices were greater than the average market price of the common shares. 8 ASB Financial Corp. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the nine and three months ended March 31, 2001 and 2000 4. Effects of Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires entities to recognize all derivatives in their financial statements as either assets or liabilities measured at fair value. SFAS No. 133 also specifies new methods of accounting for hedging transactions, prescribes the items and transactions that may be hedged, and specifies detailed criteria to be met to qualify for hedge accounting. The definition of a derivative financial instrument is complex, but in general, it is an instrument with one or more underlyings, such as an interest rate or foreign exchange rate, that is applied to a notional amount, such as an amount of currency, to determine the settlement amount(s). It generally requires no significant initial investment and can be settled net or by delivery of an asset that is readily convertible to cash. SFAS No. 133 applies to derivatives embedded in other contracts, unless the underlying of the embedded derivative is clearly and closely related to the host contract. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. On adoption, entities are permitted to transfer held-to-maturity debt securities to the available-for-sale or trading category without calling into question their intent to hold other debt securities to maturity in the future. Management adopted SFAS No. 133 effective July 1, 2000, as required, without material impact on the Corporation's financial position or results of operations. In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. SFAS No. 140 is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000, and is not expected to have a material effect on the Corporation's financial position or results of operations. 9 ASB Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Discussion of Financial Condition Changes from June 30, 2000 to March 31, 2001 At March 31, 2001, the Corporation's assets totaled $137.8 million, an increase of $5.9 million, or 4.5%, over total assets at June 30, 2000. The increase in assets was funded primarily by growth in deposits of $7.2 million and a $1.7 million increase in shareholders' equity, which were partially offset by a $3.5 million decrease in advances from the Federal Home Loan Bank ("FHLB"). Liquid assets (i.e. cash and interest-bearing deposits) decreased by $481,000, or 9.5%, from June 30, 2000 levels, to a total of $4.6 million at March 31, 2001. Investment securities totaled $21.4 million at March 31, 2001, an increase of $2.3 million, or 11.9%, over June 30, 2000 levels. The increase resulted from purchases of securities totaling $5.8 million, which were partially offset by maturities of $4.7 million. During the nine month period ended March 31, 2001, unrealized gains on available for sale securities increased by $1.2 million. Mortgage-backed securities totaled $8.2 million at March 31, 2001, a decrease of $444,000, or 5.2%, from the total at June 30, 2000. The decrease was due primarily to principal repayments of $821,000, which were partially offset by a decline in net unrealized losses totaling $387,000 for the period. Loans receivable increased by $5.0 million, or 5.3%, during the nine month period ended March 31, 2001, to a total of $100.1 million. Loan disbursements amounted to $18.9 million and were partially offset by principal repayments of $14.0 million. During the nine months ended March 31, 2001, loans originated were comprised of $9.3 million of one- to four-family residential real estate, $8.1 million of commercial and nonresidential real estate and $1.5 million of consumer loans. The allowance for loan losses totaled $716,000 and $723,000 at March 31, 2001 and June 30, 2000, respectively. Nonperforming and nonaccrual loans totaled $689,000 and $281,000 at March 31, 2001 and June 30, 2000, respectively. The allowance for loan losses represented 103.9% and 257.3% of nonperforming loans as of March 31, 2001 and June 30, 2000, respectively. At March 31, 2001, nonperforming loans were comprised of $580,000 of one- to four-family residential real estate and $109,000 in consumer and other loans. Management believes such loans are adequately collateralized and does not expect to incur any losses on such loans. Although management believes that its allowance for loan losses at March 31, 2001, was adequate based upon the available facts and circumstances, there can be no assurance that additions to such allowance will not be necessary in future periods, which could adversely affect the Corporation's results of operations. Deposits totaled $117.2 million at March 31, 2001, an increase of $7.2 million, or 6.5%, over June 30, 2000 levels. The growth in deposits was primarily attributable to management's efforts to maintain a moderate rate of deposit growth through marketing and pricing strategies. Proceeds from deposit growth were generally used to fund new loan originations and repay advances from the FHLB. Advances from the FHLB totaled $4.3 million at March 31, 2001, a decrease of $3.5 million, or 45.2%, compared to June 30, 2000. 10 ASB Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Discussion of Financial Condition Changes from June 30, 2000 to March 31, 2001 (continued) Shareholders' equity totaled $14.3 million at March 31, 2001, an increase of $1.7 million, or 13.4%, over June 30, 2000 levels. The increase resulted primarily from a $1.0 million increase in unrealized gains on securities designated as available for sale and net earnings of $823,000, which were partially offset by dividends on common shares totaling $336,000 for the nine-month period. American is required to meet minimum capital standards promulgated by the Office of Thrift Supervision ("OTS"). At March 31, 2001, American's regulatory capital was well in excess of the minimum capital requirements. Comparison of Operating Results for the Nine-Month Periods Ended March 31, 2001 and 2000 General Net earnings amounted to $823,000 for the nine months ended March 31, 2001, an increase of $46,000, or 5.9%, compared to the $777,000 of net earnings reported for the same period in 2000. The increase in earnings resulted primarily from a $141,000 increase in other income, which was partially offset by a $10,000 decrease in net interest income and a $74,000 increase in general, administrative and other expense. Net Interest Income Net interest income decreased by $10,000, or .4%, for the nine months ended March 31, 2001, compared to the 2000 period. Interest income on loans increased by $813,000, or 15.5%, during the nine-month period ended March 31, 2001, compared to the 2000 period, due primarily to an approximate $8.5 million increase in the average portfolio balance outstanding and a 42 basis point increase in the weighted-average yield year to year. Interest income on investment and mortgage-backed securities and interest-bearing deposits and other increased by $38,000, or 2.4%, due primarily to a 22 basis point increase in the weighted-average yield year to year, which was partially offset by a $2.3 million decrease in the average balance of the related assets. Interest expense on deposits increased by $806,000, or 21.6%, due primarily to an increase of approximately $10.2 million in the average balance of deposits outstanding, coupled with a 52 basis point increase in the weighted-average cost of deposits year to year. Interest expense on borrowings increased by $55,000, or 19.6%, due primarily to a 106 basis point increase in the average cost of borrowings, which was offset by a $740,000 decrease in the average balance of borrowings outstanding. As a result of the foregoing changes in interest income and interest expense, net interest income decreased by $10,000, or .4%, to a total of $2.8 million for the nine months ended March 31, 2001. The interest rate spread amounted to approximately 2.48% for the nine months ended March 31, 2001, compared to 2.46% for the 2000 period, while the net interest margin decreased to approximately 2.93% in fiscal 2001, compared to 3.07% in fiscal 2000. 11 ASB Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Operating Results for the Nine-Month Periods Ended March 31, 2001 and 2000 (continued) Provision for Losses on Loans As a result of an analysis of historical experience, the volume and type of lending conducted by the Savings Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Savings Bank's market area, and other factors related to the collectibility of the Savings Bank's loan portfolio, management elected to record a provision for losses on loans totaling $1,000 for the nine-month period ended March 31, 2001. There can be no assurance that the loan loss allowance will be adequate to cover losses on nonperforming assets in the future. Other Income Other income increased by $141,000, or 62.9%, for the nine months ended March 31, 2001, compared to the same period in 2000, due primarily to an $85,000 gain on the sale of investment securities, compared to a $15,000 loss on securities transactions in the 2000 period, coupled with a $41,000, or 17.2%, increase in other operating income. The increase in other operating income was due primarily to increased service fees on ATM and other account transactions, as well as increased revenues related to sales of non-deposit investment products through an agency arrangement with a third-party vendor. General, Administrative and Other Expense General, administrative and other expense increased by $74,000, or 3.7%, during the nine months ended March 31, 2001, compared to the same period in 2000. This increase resulted primarily from a $25,000, or 2.2%, increase in employee compensation and benefits, a $30,000, or 30.6%, increase in occupancy and equipment expense, a $33,000, or 14.7%, increase in data processing expense and a $20,000, or 5.6%, increase in other operating expense, which were partially offset by a $16,000, or 45.7%, decrease in federal deposit insurance premiums and an $18,000, or 12.9%, decrease in franchise taxes. The increase in employee compensation and benefits was due primarily to an increase in staffing levels, including the hiring of a chief financial officer, which was partially offset by a decrease in expense related to stock benefit plans. The increase in occupancy and equipment expense reflects increased depreciation and maintenance costs associated with a new drive-through location and the new computer hardware purchased during fiscal 2000. The increase in data processing expense primarily reflects an increase in transaction costs, coupled with the effects of the Corporation's overall growth year to year. The decrease in federal deposit insurance premiums and franchise tax expense was due to a reduction in premium rates and a decrease in shareholders' equity in prior periods, respectively. The increase in other operating expense relates primarily to the amortization expense related to the Savings Bank's investment in a low-income housing partnership. Federal Income Taxes The provision for federal income taxes totaled $312,000 for the nine months ended March 31, 2001, an increase of $11,000, or 3.7%, compared to the same period in 2000. This increase resulted primarily from a corresponding increase in pre-tax income totaling $57,000, or 5.3%, which was partially offset by tax credits from the Savings Bank's investment in a low-income housing partnership. The effective tax rate was 27.5% and 27.9% for the nine months ended March 31, 2001 and 2000, respectively. 12 ASB Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Operating Results for the Three-Month Periods Ended March 31, 2001 and 2000 General Net earnings amounted to $284,000 for the three months ended March 31, 2001, an increase of $39,000, or 15.9%, compared to the $245,000 of net earnings reported for the same period in 2000. The increase in earnings resulted primarily from a $60,000 increase in other income and a $43,000 decrease in general, administrative and other expense, which were partially offset by a $6,000 decrease in net interest income and a $17,000 increase in the provision for federal income taxes. Net Interest Income Net interest income decreased by $6,000, or .6%, for the three months ended March 31, 2001, compared to the 2000 period. Interest income on loans increased by $237,000, or 13.0%, during the three-month period ended March 31, 2001, compared to the 2000 period, due primarily to an approximate $7.7 million increase in the average portfolio balance outstanding and a 36 basis point increase in the weighted-average yield year to year. Interest income on investment and mortgage-backed securities and interest-bearing deposits and other increased by $3,000, or .6%, due primarily to a 25 basis point increase in the weighted-average yield year to year, which was partially offset by a $2.7 million decrease in the average balance of the related assets. Interest expense on deposits increased by $250,000, or 19.5%, due primarily to an increase of approximately $10.8 million in the average balance of deposits outstanding, coupled with a 66 basis point increase in the weighted-average cost of deposits year to year. Interest expense on borrowings decreased by $4,000, or 3.4%, due primarily to a $1.1 million decrease in the average balance of borrowings outstanding, which was offset by a 114 basis point increase in the average cost of borrowings. As a result of the foregoing changes in interest income and interest expense, net interest income decreased by $6,000, or .6%, to a total of $945,000 for the three months ended March 31, 2001. The interest rate spread decreased to approximately 2.37% for the three months ended March 31, 2001, from 2.39% for the 2000 period, while the net interest margin decreased to approximately 2.88% in fiscal 2001, compared to 3.03% in 2000. Provision for Losses on Loans As a result of an analysis of historical experience, the volume and type of lending conducted by the Savings Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Savings Bank's market area, and other factors related to the collectibility of the Savings Bank's loan portfolio, management elected to record a provision for losses on loans totaling $1,000 for the three-month period ended March 31, 2001 and recorded no provision for the three-month period ended March 31, 2000. There can be no assurance that the loan loss allowance will be adequate to cover losses on nonperforming assets in the future. 13 ASB Financial Corp. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Comparison of Operating Results for the Three-Month Periods Ended March 31, 2001 and 2000 (continued) Other Income Other income increased by $60,000, or 87.0%, for the three months ended March 31, 2001, compared to the same period in 2000, due primarily to a $33,000 gain on the sale of investment securities during the 2001 quarter, compared to a loss of $15,000 on investment securities transactions recorded in the 2000 quarter, coupled with a $12,000, or 14.3%, increase in other operating income. The increase in other operating income was due primarily to increased service fees on ATM and other account transactions during the period, as well as increased revenues related to sales of non-deposit investment products through an agency arrangement with a third-party vendor. General, Administrative and Other Expense General, administrative and other expense decreased by $3,000, or .4%, during the three months ended March 31, 2001, compared to the same period in 2000. This decrease was comprised primarily of a $5,000, or 1.3%, decrease in employee compensation and benefits, a $6,000, or 13.0%, decrease in occupancy and equipment and a $6,000, or 11.8%, decrease in franchise taxes, which were partially offset by a $10,000, or 12.7%, increase in data processing expense and a $5,000, or 4.8%, increase in other operating expenses. The increase in data processing expense primarily reflects an increase in transaction costs, coupled with the effects of the Corporation's overall growth year to year. The decrease in employee compensation and benefits was due to a decline in costs of stock benefit plans year to year, partially offset by an increase in staffing levels. Federal Income Taxes The provision for federal income taxes totaled $107,000 for the three months ended March 31, 2001, an increase of $17,000, or 18.9%, compared to the same period in 2000. This increase resulted primarily from the increase in net earnings before taxes of $56,000, or 16.7%, which were partially offset by tax credits from the Savings Bank's investment in a low income housing partnership. The effective tax rates were 27.4% and 26.9% for the three-month periods ended March 31, 2001 and 2000, respectively. 14 ASB Financial Corp. PART II ITEM 1. Legal Proceedings Not applicable ITEM 2. Changes in Securities and Use of Proceeds Not applicable ITEM 3. Defaults Upon Senior Securities Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K Exhibits: None. Reports on Form 8-K: None. 15 ASB Financial Corp. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 14, 2001 By: /s/Robert M. Smith ----------------------- ----------------------------------- Robert M. Smith President and Chief Executive Officer Date: May 14, 2001 By: /s/Michael L. Gampp ----------------------- ----------------------------------- Michael L. Gampp Chief Financial Officer 16 -----END PRIVACY-ENHANCED MESSAGE-----