SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________________________________
FORM 10-QSB
| [X] |
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended December 31, 2002 |
|
OR |
| [ ] |
TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from ______________ to _______________ |
Commission File Number 0-24898
MSB FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization) |
|
38-3203510
(I.R.S. Employer Identification
Number) |
|
|
|
Park and Kalamazoo Avenue, N.E., Marshall, Michigan
(Address of principal executive offices) |
|
49068
(ZIP Code) |
Registrant's telephone number, including area code: (269) 781-5103
As of February 12, 2003, there were 1,300,791 shares of the Registrant's common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
Next Page
MSB FINANCIAL, INC.
INDEX
| PART I. |
FINANCIAL INFORMATION.
|
1 |
|
|
|
| Item 1. |
Financial Statements (Unaudited)
|
1 |
|
|
|
Condensed Consolidated Balance Sheets
|
1 |
Condensed Consolidated Statements of Income
|
2 |
Condensed Consolidated Statements of Changes in Shareholders' Equity
|
3 |
Condensed Consolidated Statements of Cash Flows
|
5 |
Notes to Condensed Consolidated Financial Statements
|
7 |
|
|
|
| Item 2. |
Management's Discussion and Analysis
|
10 |
|
|
|
| Item 3. |
Controls and Procedures
|
15 |
|
|
|
| PART II. |
OTHER INFORMATION
|
16 |
|
|
|
|
SIGNATURES
|
17 |
|
|
|
|
CERTIFICATIONS PURSUANT TO SECTION 302 |
|
|
OF THE SARBANES-OXLEY ACT OF 2002
|
18 |
|
|
|
|
EXHIBIT INDEX |
20 |
Next Page
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2002 and June 30, 2002
|
December 31,
2002
(Unaudited) |
June 30,
2002
|
| ASSETS |
|
|
|
Cash and due from financial institutions |
$ 3,352,044 |
$ 2,870,614 |
|
Interest-bearing deposits in other financial institutions |
1,166,805
|
1,802,597
|
|
|
|
Total cash and cash equivalents |
4,518,849 |
4,673,211 |
|
|
|
|
|
|
|
Securities available for sale |
8,805,655 |
11,146,525 |
|
Securities held to maturity (fair value of $0 at |
|
|
|
|
December 31, 2002 and $88 at June 30, 2002) |
- |
88 |
|
Loans held for sale |
593,000 |
90,000 |
|
Loans receivable, net of allowance for loan losses of |
|
|
|
|
$513,136 at December 31, 2002 and $554,136 at June 30, 2002 |
78,155,500 |
83,338,175 |
|
Federal Home Loan Bank stock |
1,426,600 |
1,426,600 |
|
Accrued interest receivable |
454,552 |
495,281 |
|
Premises and equipment, net |
1,297,044 |
1,377,394 |
|
Mortgage servicing rights, net |
706,575 |
586,029 |
|
Goodwill |
1,451,210 |
1,451,210 |
|
Intangible assets, net |
370,989 |
411,875 |
|
Other assets |
2,939,365
|
3,158,198
|
|
|
|
Total Assets |
$100,719,339
|
$108,154,586
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
| Liabilities |
|
|
|
Deposits |
$ 71,496,684 |
$ 74,339,980 |
|
Federal Home Loan Bank advances |
12,648,549 |
15,438,356 |
|
Advance payments by borrowers for taxes and insurance |
286,792 |
884,879 |
|
Accrued interest payable |
108,787 |
131,638 |
|
Accrued expenses and other liabilities |
1,607,843
|
1,301,799
|
|
|
|
Total Liabilities |
86,148,655 |
92,096,652 |
|
|
|
|
|
|
| Shareholders' equity |
|
|
|
Preferred stock, $.01 par value: 2,000,000 shares |
|
|
|
|
authorized; none outstanding |
|
|
|
Common stock, par value $.01: 4,000,000 shares |
|
|
|
|
authorized; 1,630,981 shares issued; 1,300,791 shares |
|
|
|
|
outstanding at December 31, 2002 and |
|
|
|
|
1,241,742 shares outstanding at June 30, 2002 |
16,310 |
16,310 |
|
Additional paid-in capital |
9,776,371 |
9,819,238 |
|
Retained earnings, substantially restricted |
8,415,495 |
10,330,263 |
|
Unearned Employee Stock Ownership Plan shares |
(67,768) |
(92,338) |
|
Unearned Recognition and Retention Plan shares |
(14,923) |
(19,003) |
|
Treasury stock, at cost - 330,190 shares at |
|
|
|
|
December 31, 2002 and 389,239 shares at June 30, 2002 |
(3,567,280) |
(4,011,189) |
|
Accumulated other comprehensive income, net of tax |
|
|
|
|
of $6,428 at December 31, 2002 and $7,550 at June 30, 2002 |
12,479
|
14,653
|
|
|
|
Total Shareholders' Equity |
14,570,684
|
16,057,934
|
|
|
|
|
|
|
|
|
Total Liabilities & Shareholders' Equity |
$100,719,339
|
$108,154,586
|
See accompanying notes to condensed consolidated financial statements.
1
Next Page
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six months and three months ended December 31, 2002 and 2001
(Unaudited)
|
Six Months
|
Three Months
|
|
2002
|
2001
|
2002
|
2001
|
| Interest and dividend income |
|
|
|
|
| |
Loans receivable, including fees |
$3,074,072 |
$3,473,967 |
$1,506,444 |
$1,725,427 |
|
Securities held to maturity - taxable |
- |
23 |
- |
9 |
|
Securities available for sale - taxable |
146,355 |
- |
62,820 |
- |
|
Other interest and dividend income |
67,547
|
96,571
|
33,388
|
48,946
|
|
|
3,287,974 |
3,570,561 |
1,602,652 |
1,774,382 |
|
|
|
|
|
| Interest Expense |
|
|
|
|
|
Deposits |
765,530 |
977,729 |
349,637 |
464,211 |
|
Federal Home Loan Bank advances |
402,677 |
612,227 |
190,034 |
286,296 |
|
Other interest expense |
18,889
|
15,651
|
9,686
|
8,042
|
|
|
1,187,096
|
1,605,607
|
549,357
|
758,549
|
|
|
|
|
|
|
| Net interest income |
2,100,878 |
1,964,954 |
1,053,295 |
1,015,833 |
|
|
|
|
|
|
| Provision for loan losses |
65,000
|
49,000
|
50,000
|
37,000
|
|
|
|
|
|
|
| Net interest income after provision |
|
|
|
|
|
for loan losses |
2,035,878 |
1,915,954 |
1,003,295 |
978,833 |
|
|
|
|
|
|
| Noninterest income |
|
|
|
|
|
Loan servicing fees, net |
(132,585) |
(20,400) |
(96,004) |
(24,756) |
|
Net gains on sales of loans held for sale |
766,175 |
470,960 |
462,083 |
337,280 |
|
Service charges on deposit accounts |
262,420 |
132,920 |
140,613 |
69,766 |
|
Debit card/ATM Fees |
85,129 |
36,295 |
43,152 |
18,788 |
|
Net gains on securities available for sale |
16,070 |
- |
4,022 |
- |
|
Other income |
209,981
|
153,308
|
95,956
|
97,171
|
|
|
1,207,190 |
773,083 |
649,822 |
498,249 |
|
|
|
|
|
|
| Noninterest expense |
|
|
|
|
|
Salaries and employee benefits |
770,197 |
593,212 |
375,998 |
306,690 |
|
Occupancy and equipment expense |
197,612 |
140,070 |
98,842 |
70,809 |
|
Data processing expense |
128,275 |
95,359 |
65,448 |
48,389 |
|
Federal deposit insurance premiums |
23,840 |
19,919 |
13,040 |
10,014 |
|
Director fees |
53,370 |
54,720 |
26,550 |
28,110 |
|
Amortization of intangible assets |
40,886 |
- |
20,443 |
- |
|
Michigan Single Business tax |
50,000 |
44,000 |
27,000 |
24,000 |
|
Professional fees |
89,640 |
87,885 |
53,135 |
53,809 |
|
Other expense |
466,880
|
333,304
|
263,315
|
187,541
|
|
|
1,820,700
|
1,368,469
|
943,771
|
729,362
|
|
|
|
|
|
|
| Income before federal income |
|
|
|
|
|
tax expense |
1,422,368 |
1,320,568 |
709,346 |
747,720 |
|
|
|
|
|
|
| Federal income tax expense |
499,000
|
437,000
|
255,000
|
240,000
|
|
|
|
|
|
|
| Net income |
$ 923,368
|
$ 883,568
|
$ 454,346
|
$ 507,720
|
|
|
|
|
|
|
| Comprehensive income |
$ 921,294
|
$ 883,568
|
$ 452,729
|
$ 507,720
|
|
|
|
|
|
|
| Basic earnings per common share |
$ 0.75
|
$ 0.73
|
$ 0.35
|
$ 0.42
|
|
|
|
|
|
|
| Weighted average common shares outstanding |
1,233,484
|
1,211,533
|
1,281,988
|
1,214,395
|
|
|
|
|
|
|
| Diluted earnings per common share |
$ 0.74
|
$ 0.71
|
$ 0.35
|
$ 0.41
|
|
|
|
|
|
|
| Weighted average common shares and dilutive |
|
|
|
|
|
potential common shares outstanding |
1,246,540
|
1,236,773
|
1,286,014
|
1,235,935
|
See accompanying notes to condensed consolidated financial statements.
2
Next Page
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended December 31, 2001
(Unaudited )
|
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Unearned
Employee
Stock
Ownership
Plan Shares
|
Unearned
Recognition
and Retention
Plan Shares
|
Treasury
Shares
|
Accumulated
Other
Comprehensive
Income, Net
|
Total
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
| Balance, July 1, 2001 |
$16,310 |
$9,755,668 |
$ 9,370,758 |
$(143,724) |
$ (28,275) |
$(3,934,904) |
$ - |
$15,035,833 |
|
|
|
|
|
|
|
|
|
|
| Net income |
- |
- |
883,568 |
- |
- |
- |
- |
883,568 |
|
|
|
|
|
|
|
|
|
|
| Cash dividends declared on common
stock, |
|
|
|
|
|
|
|
|
|
net of dividends on unearned
ESOP Shares |
|
|
|
|
|
|
|
|
|
($.195 per share) |
- |
- |
(236,563) |
- |
- |
- |
- |
(236,563) |
|
|
|
|
|
|
|
|
|
|
| 5,646 shares committed to be released |
|
|
|
|
|
|
|
|
|
under the ESOP |
- |
34,158 |
- |
25,689 |
- |
- |
- |
59,847 |
|
|
|
|
|
|
|
|
|
|
| Issuance of 5,765 common shares
from |
|
|
|
|
|
|
|
|
|
from treasury stock due to exercise |
|
|
|
|
|
|
|
|
|
of stock options |
- |
(6,918) |
- |
- |
- |
47,850 |
- |
40,932 |
|
|
|
|
|
|
|
|
|
|
| Amortization of RRP Shares |
-
|
-
|
-
|
-
|
5,194
|
-
|
-
|
5,194
|
|
|
|
|
|
|
|
|
|
|
| Balances, December 31, 2001 |
$16,310
|
$9,782,908
|
$10,017,763
|
$(118,035)
|
$ (23,081)
|
$(3,887,054)
|
$ -
|
$15,788,811
|
See accompanying notes to condensed consolidated financial statements.
3
Next Page
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended December 31, 2002
(Unaudited )
|
|
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Unearned
Employee Stock
Ownership
Plan Shares
|
Unearned
Recognition
and Retention
Plan Shares
|
Treasury
Shares
|
Accumulated
Other
Comprehensive
Income, Net
|
Total
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, July 1, 2002 |
$16,310 |
$9,819,238 |
$10,330,263 |
$ (92,338) |
$ (19,003) |
$(4,011,189) |
$14,653 |
$16,057,934 |
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income |
|
|
|
|
|
|
|
|
|
Net income |
- |
- |
923,368 |
- |
- |
- |
- |
923,368 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
Net change in net
unrealized gains(losses)
on |
|
|
|
|
|
|
|
|
|
|
securities available for
sale, net of
reclassification |
|
|
|
|
|
|
|
|
|
|
adjustments and tax
effects |
- |
- |
- |
- |
- |
- |
(2,174) |
(2,174)
|
|
|
|
Total comprehensive
income |
- |
- |
- |
- |
- |
- |
- |
921,194 |
|
|
|
|
|
|
|
|
|
|
|
| Cash dividends declared on
common stock, |
|
|
|
|
|
|
|
|
|
net of dividends on
unearned ESOP shares |
|
|
|
|
|
|
|
|
|
($2.22 per share) |
- |
- |
(2,838,136) |
- |
- |
- |
- |
(2,838,136) |
|
|
|
|
|
|
|
|
|
|
|
| 5,400 shares committed to be
released |
|
|
|
|
|
|
|
|
|
under the ESOP |
- |
43,574 |
- |
24,570 |
- |
- |
- |
68,144 |
|
|
|
|
|
|
|
|
|
|
|
| Issuance of 71,549 common
shares from |
|
|
|
|
|
|
|
|
|
treasury stock due to
exercise of stock options |
- |
(86,441) |
- |
- |
- |
606,409 |
- |
519,968 |
|
|
|
|
|
|
|
|
|
|
|
| Amortization of RRP shares |
- |
- |
- |
- |
4,080 |
- |
- |
4,080 |
|
|
|
|
|
|
|
|
|
|
|
| Repurchase of 12,500 shares
of common stock |
-
|
-
|
-
|
-
|
(162,500)
|
-
|
-
|
(162,500)
|
|
|
|
|
|
|
|
|
|
|
|
| Balances, December 31,
2002 |
$16,310
|
$9,776,371
|
$ 8,415,495
|
$ (67,768)
|
$ (14,923)
|
$(3,567,280)
|
$12,479
|
$14,570,684
|
See accompanying notes to condensed consolidated financial statements.
4
Next Page
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended December 31, 2002 and 2001
(Unaudited)
|
2002
|
2001
|
|
|
|
| Cash flows from operating activities |
|
|
|
Net income |
$ 923,368 |
$ 883,568 |
|
Adjustments to reconcile net income |
|
|
|
|
to net cash from operating activities |
|
|
|
|
|
Provision for loan losses |
65,000 |
49,000 |
|
|
|
Provision to adjust loans held for sale |
|
|
|
|
|
|
to lower of cost or market |
- |
1,725 |
|
|
|
Write down of originated mortgage servicing rights |
38,000 |
- |
|
|
|
Depreciation |
90,693 |
70,896 |
|
|
|
Amortization of mortgage servicing rights |
197,235 |
99,924 |
|
|
|
Amortization of intangible assets |
40,886 |
- |
|
|
|
Net gains on sales of securities available for sale |
(16,070) |
- |
|
|
|
Employee Stock Ownership Plan expense |
68,144 |
59,847 |
|
|
|
Recognition and Retention Plan expense |
4,080 |
5,194 |
|
|
|
Originations of loans held for sale |
(36,436,832) |
(24,649,331) |
|
|
|
Proceeds from sales of loans held for sale |
36,344,226 |
24,928,261 |
|
|
|
Net gains on sales of loans held for sale |
(766,175) |
(470,960) |
|
|
|
Change in assets and liabilities |
|
|
|
|
|
|
Accrued interest receivable |
40,729 |
35,358 |
|
|
|
|
Other assets |
669,234 |
(47,285) |
|
|
|
|
Accrued interest payable |
(22,851) |
(17,851) |
|
|
|
|
Accrued expenses and other liabilities |
306,044
|
17,064
|
| |
|
|
|
|
Net cash from operating activities |
1,545,711 |
965,410 |
|
|
|
|
|
|
|
| Cash flows from investing activities |
|
|
|
Proceeds from sales of securities available for sale |
7,000,000 |
- |
|
Purchases of securities available for sale |
(4,646,355) |
- |
|
Principal paydowns on mortgage-backed securities |
88 |
587 |
|
Net change in loans |
4,668,395 |
3,021,281 |
|
Net purchases of premises and equipment |
(10,343)
|
(7,864)
|
|
|
Net cash from investing activities |
7,011,785
|
3,014,004
|
See accompanying notes to condensed consolidated financial statements.
5
Next Page
MSB FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended December 31, 2002 and 2001
(Unaudited)
| Cash flows from financing activities |
|
|
|
Net change in deposits |
(2,843,296) |
2,282,453 |
|
Repayments on Federal Home Bank advances |
(2,789,807) |
(5,146,640) |
|
Net change in advance payments |
|
|
|
|
by borrowers for taxes and insurance |
(598,087) |
(501,639) |
|
Cash dividends paid |
(2,838,136) |
(236,563) |
|
Repurchase of common stock |
(162,500) |
- |
|
Exercise of stock options |
519,968
|
40,932
|
|
|
Net cash from financing activities |
(8,711,858)
|
(3,561,457)
|
| Net change in cash and cash equivalents |
(154,362) |
417,957 |
|
|
|
|
|
| Cash and cash equivalents at beginning of period |
4,673,211
|
4,062,451
|
|
|
|
|
|
| Cash and cash equivalents at end of period |
$ 4,518,849
|
$ 4,480,408
|
|
|
|
|
|
| Supplemental disclosures of cash flow information |
|
|
|
Cash paid during the period for: |
|
|
|
|
Interest |
$ 1,209,947 |
$ 1,623,458 |
|
|
Income taxes |
260,000 |
556,000 |
|
|
|
|
|
| Supplemental disclosures of noncash investing activities |
|
|
|
Transfers from loans receivable to real-estate held in redemption |
449,280 |
- |
See accompanying notes to condensed consolidated financial statements.
6
Next Page
MSB FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended December 31, 2002
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements include the accounts of MSB Financial, Inc. and its wholly-owned
subsidiary, Marshall Savings Bank, F.S.B. after the elimination of significant intercompany transactions and accounts. The initial
capitalization of MSB Financial and its acquisition of Marshall Savings Bank took place on February 6, 1995.
These interim financial statements are prepared in accordance with the Securities and Exchange Commission's rules for quarterly
financial information without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly
our financial position at December 31, 2002 and the results of operations and its cash flows for the periods presented. All such
adjustments are normal and recurring in nature. The accompanying condensed consolidated financial statements do not purport to
contain all the necessary disclosures required by generally accepted accounting principles that might otherwise be necessary in the
circumstances and should be read in conjunction with the consolidated financial statements and notes included in the annual report of
MSB Financial, Inc. for the year ended June 30, 2002. The results of the periods presented are not necessarily representative of the
results of operations and cash flows which may be expected for the entire year.
The provision for income taxes is based upon the effective tax rate expected to be applicable for the entire year.
Goodwill and Other Intangible Assets: Goodwill resulted from our acquisition of a branch on March 15, 2002 and represents the
excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill
is assessed at least annually for impairment and any such impairment will be recognized in the period identified. As a result of
adopting SFAS No. 147 on October 1, 2002, the year to date financial statements reflect the reversal of unidentified intangible
amortization totaling $68,000 recorded during the three month period ended September 30, 2002.
7
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MSB FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended December 31, 2002
(Unaudited)
NOTE 2 - EARNINGS PER COMMON SHARE
A reconciliation of the numerators and denominators used in the computation of the basic earnings per common share and diluted
earnings per common share is presented below for the six and three month periods ended December 31, 2002 and 2001:
|
Six Months
|
Three Months
|
|
|
|
|
2002
|
2001
|
2002
|
2001
|
| Basic Earnings Per Common Share |
|
|
|
|
|
Numerator |
|
|
|
|
|
|
Net Income |
$ 923,368
|
$ 883,568
|
$ 454,346
|
$ 507,720
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
Weighted average common shares |
|
|
|
|
|
|
|
outstanding |
1,253,677 |
1,245,262 |
1,300,791 |
1,245,580 |
|
|
Less: Average unallocated ESOP shares |
(17,727) |
(28,834) |
(16,477) |
(27,423) |
|
|
Less: Average nonvested RRP shares |
(2,466)
|
(4,895)
|
(2,326)
|
(3,762)
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares |
|
|
|
|
|
|
|
outstanding for basic earnings per |
|
|
|
|
|
|
|
common shares |
1,233,484
|
1,211,533
|
1,281,988
|
1,214,395
|
|
|
|
|
|
|
|
|
| Basic earnings per common share |
$ 0.75
|
$ 0.73
|
$ 0.35
|
$ 0.42
|
|
Six Months
|
Three Months
|
|
|
|
|
2002
|
2001
|
2002
|
2001
|
| Diluted Earnings Per Common Share |
|
|
|
|
|
Numerator |
|
|
|
|
|
|
Net Income |
$ 923,368
|
$ 883,568
|
$ 454,346
|
$ 507,720
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
Weighted average common shares |
|
|
|
|
|
|
|
outstanding for basic earnings per |
|
|
|
|
|
|
|
common share |
1,233,484 |
1,211,533 |
1,281,988 |
1,214,395 |
|
|
Add: Dilutive effects of average |
|
|
|
|
|
|
|
nonvested RRP shares, net of |
|
|
|
|
|
|
|
tax benefits |
268 |
835 |
182 |
82 |
|
|
Add: Dilutive effects of assumed |
|
|
|
|
|
|
|
exercises of stock options |
12,788
|
24,405
|
3,844
|
21,458
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares |
|
|
|
|
|
|
|
and dilutive potential common |
|
|
|
|
|
|
|
shares outstanding |
1,246,540
|
1,236,773
|
1,286,014
|
1,235,935
|
|
|
|
|
|
|
|
|
| Diluted earnings per common share |
$ 0.74
|
$ 0.71
|
$ 0.35
|
$ 0.41
|
Stock options for 67,848 shares of common stock for the three and six month periods ended December 31, 2002 and December 31,
2001, respectively, were not considered in computing diluted earnings per common share because they were not dilutive.
8
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MSB FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended December 31, 2002
(Unaudited)
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows for the six and three month periods ended December 31, 2002 and
2001:
|
Six Months
|
Three Months
|
|
2002
|
2001
|
2002
|
2001
|
|
|
|
|
|
| Balance at beginning of period |
$554,136 |
$570,632 |
$512,746 |
$593,922 |
|
Provision charged to operating expense |
65,000 |
49,000 |
50,000 |
37,000 |
|
Recoveries credited to allowance |
4,175 |
11,546 |
3,823 |
256 |
|
Less: Loans charged off |
(110,175)
|
(1,858)
|
(53,433)
|
(1,858)
|
|
|
|
|
|
| Balance at end of period |
$513,136
|
$629,320
|
$513,136
|
$629,320
|
NOTE 4 - SECONDARY MORTGAGE MARKET ACTIVITIES
The following summarizes our secondary mortgage market activities for the six and three month periods ended December 31, 2002
and 2001:
|
Six Months
|
Three Months
|
|
2002
|
2001
|
2002
|
2001
|
|
|
|
|
|
| Loans originated for resale, net of |
|
|
|
|
|
principal paydowns |
$36,436,832 |
$24,649,331 |
$20,609,456 |
$17,172,224 |
| Proceeds from sales of loans originated |
|
|
|
|
|
for resale |
36,344,226 |
24,928,261 |
21,811,598 |
17,661,052 |
| Gain on sales of loans originated |
|
|
|
|
|
for resale |
766,175 |
470,960 |
462,083 |
337,280 |
| Portion of gain resulting from costs |
|
|
|
|
|
allocated to mortgage servicing rights |
355,781 |
244,582 |
213,496 |
173,247 |
| Loan servicing fees, net |
(132,585) |
(20,400) |
(96,004) |
(24,756) |
|
|
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Loans held for sale balance at December 31, 2002 and June 30, 2002: |
|
|
December
31, 2002
|
June 30,
2002
|
|
Loans held for sale |
|
|
$ 593,000 |
$ 90,000 |
|
Less: Allowance to adjust loans held for |
|
|
|
|
|
|
sale to lower of aggregate cost or market |
|
|
|
-
|
|
|
|
|
|
|
|
|
Loans held for sale, net |
|
|
$ 593,000
|
$ 90,000
|
Mortgage loans serviced for others are not included in the accompanying condensed consolidated balance sheets. The unpaid
principal balances on these loans at December 31, 2002 and June 30, 2002 are summarized as follows:
|
December
31,
2002
|
June 30,
2002
|
| Mortgage loan portfolios serviced for Freddie Mac |
|
|
|
$86,452,000 |
$73,255,000 |
Custodial escrow balances maintained in connection with the foregoing serviced loans at December 31, 2002 and June 30, 2002 were
$160,000 and $447,000, respectively.
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Item 2. Management's Discussion and Analysis
The following discussion compares the consolidated financial condition of MSB Financial and Marshall Savings at December
31, 2002 to June 30, 2002 and the results of operations for the three and six month periods ended December 31, 2002 with the same
periods ended December 31, 2001. This discussion should be read in conjunction with the condensed consolidated financial
statements and footnotes included herein. References in this Form 10-QSB to "we", "us" and "our" refer to MSB Financial and/or
Marshall Savings as the context requires.
Forward-Looking Statements Disclosure
This document, including information incorporated by reference, and future filings by MSB Financial, Inc. on Form 10-KSB,
Form 10-QSB, and Form 8-K and future oral and written statements by MSB Financial and its management, may contain forward-looking statements about MSB Financial and its subsidiary which we believe are within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated
future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or
anticipated to be realized by management. Words such as may, could, should, would, believe, anticipate, estimate, expect, intend,
plan and similar expressions are intended to identify these forward-looking statements. The important factors we discuss below and
elsewhere in this document, as well as other factors discussed under the caption "Management's Discussion and Analysis or Plan of
Operation" in this document and identified in our filings with the SEC, and those presented elsewhere by our management from time
to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document:
- the strength of the United States economy in general and the strength of the local economies in which we conduct our operations;
- the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve
Board;
- financial market, monetary and interest rate fluctuations, particularly the relative relationship of short-term interest rates to long-term interest rates;
- the timely development of and acceptance of our new products and services and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to competitors' products and services;
- the willingness of users to substitute competitors' products and services for our products and services;
- the impact of changes in financial services' laws and regulations (including laws concerning taxes, accounting standards, banking,
securities and insurance);
- the impact of technological changes;
- acquisitions;
- changes in consumer spending and savings habits; and
- our success at managing the risks involved in our business.
Forward-looking statements by MSB Financial and its management are based on beliefs, plans, objectives, goals,
expectations, anticipations, estimates and intentions of management and are not guarantees of future performance. MSB Financial
disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of
new information, or otherwise.
Financial Condition
Total assets decreased $7.4 million to $100.7 million from June 30, 2002 to December 31, 2002. The decrease in assets was
primarily the result of a decrease in net loans, including loans held for sale, of $4.7 million or 5.6% for the period. The decrease in
net loans was due to strong loan refinancing activity in favor of fixed-rate one- to four-family mortgage loans during the six month
period, a result of low mortgage interest rates. We generally sell fixed-rate mortgage products to Freddie Mac, retaining the right to
service these loans. This resulted in the decrease of net loans. However, mortgage loans serviced for others increased from $73.3
million at June 30, 2002 to $86.5 million at December 31, 2002, an increase of $13.2 million or 18.0%. Mortgage servicing rights
increased $121,000 or 20.6%, at December 31, 2002 as compared to June 30, 2002, due to retained mortgage service rights on
increased loan sales during the period.
We also experienced a decrease in securities available for sale of $2.3 million or 21.0% for the period. The decrease in
securities available for sale was the result of withdrawals made from an adjustable rate mortgage fund used primarily to fund
scheduled payments on FHLB advances totaling $2.8 million.
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Other assets at December 31, 2002 totaled $2.9 million compared to $3.2 million at June 30, 2002. The decrease was
primarily the result of a change in real estate held in redemption and real estate owned. See "Provision for loan losses" for further
information.
Total liabilities decreased $5.9 million to $86.1 million from June 30, 2002 to December 31, 2002. In addition to the decrease
in FHLB advances discussed above, we experienced a decrease in deposits of $2.8 million from June 30, 2002 to December 31, 2002.
This decrease was partially attributed to withdrawals made from deposit accounts in favor of alternative investments offered by our
new investments program affiliated with LPL Financial Services. We also experienced decreases in accrued interest payable of
$23,000 and advance payments by borrowers for taxes and insurance of $598,000. The decrease in advance payments by borrowers
for taxes and insurance was primarily due to the payment of property tax bills during the month of December. Offsetting the above
decreases in liabilities for the period was an increase in accrued expenses and other liabilities of $306,000, the result of an increase in
funds due Freddie Mac at December 31, 2002 as compared to June 30, 2002.
Shareholders' equity decreased $1.5 million, or 9.3%, from June 30, 2002 to December 31, 2002. This decrease was primarily
the result of dividends paid to shareholders during the period ended December 31, 2002 totaling $2.8 million, which included a
special cash dividend of $2 per share. Management believes the special cash dividend was an appropriate use of excess capital and
will improve future return on equity. Dividend payments to shareholders were partially offset by net income of $923,000 and the
exercise of stock options totaling $520,000.
Results of Operations
General. Our results of operations depend primarily upon the level of net interest income, which is the difference between the
average yield earned on loans, securities, interest-bearing deposits, and other interest-earning assets, and the average rate paid on
deposits and borrowed funds, as well as competitive factors that influence interest rates, loan demand, and deposit flows. Our results
of operations are also dependent upon the level of our noninterest income, including fee income and service charges, and the level of
our noninterest expense, including general and administrative expenses. We, like other financial institutions, are subject to interest
rate risk to the degree that our interest-bearing liabilities mature or reprice at different times, or on a different basis, than our interest-earning assets.
Net Income. Net income for the three months ended December 31, 2002 was $454,000, a decrease of 10.5% compared to net income
of $508,000 for the same period ended December 31, 2001. Net income for the six month period ended December 31, 2002 was
$923,000, 4.5% higher than net income of $884,000 for the same period in 2001. Reasons for the changes in net income are
discussed in detail below.
Net Interest Income. Net interest income increased $37,000, or 3.6%, to $1.1 million for the three month period ended December 31,
2002, as compared to the same three month period in 2001. For the six month period ended December 31, 2002, net interest income
increased $136,000, or 6.9%, to $2.1 million.
The increase in net interest income during the three and six month periods ended December 31, 2002 was primarily the result
of decreases in total interest expense. For the three and six months periods ended December 31, 2002 interest expense decreased
$209,000 and $419,000, respectively, when compared to the same periods ended December 31, 2001. The decreases in interest
expense were primarily a result of a decrease in interest paid on certificate of deposit accounts, which repriced at lower interest rates.
For the three and six month periods ended December 31, 2002, deposit interest expense decreased $115,000 and $212,000,
respectively, when compared to the same periods ended December 31, 2001. The other major component of interest expense, interest
paid on FHLB advances, also decreased during the 2002 periods primarily due to decreases in the average principal balance. For the
three and six month periods ended December 31, 2002, interest on FHLB advances decreased $96,000 and $210,000, respectively,
when compared the same 2001 periods. The weighted average rate paid on interest-bearing liabilities for the three month period
ended December 31, 2002 decreased 143 basis points to 2.71% from 4.14% for the same period ended December 31, 2001. For the
six month period ended December 31, 2002 the weighted average rate paid on interest-bearing liabilities was 2.87%, compared to
4.34% for the same period ended December 31, 2001, a decrease of 147 basis points.
Interest on loans, including fees decreased $219,000, or 12.7%, during the three month period ended December 31, 2002
compared to the three month period ended December 31, 2001. For the six month period ended December 31, 2002 interest on loans,
including fees decreased $400,000, or 11.5%, as compared to the same period in 2001. The decrease was the result of a decrease in
net loans receivables, which was due to increased sales of fixed-rate loans in the secondary market, as well as a decrease in mortgage
loan interest rates. Loan interest rates were also impacted by adjustable loans repricing at lower rate. The weighted average yield on
the loan portfolio for the three month period ended December 31, 2002 decreased 147 basis points to 6.94% from 8.41% for the same
period ended December 31, 2001. For the six month period ended December 31, 2002 the weighted average yield on the loan
portfolio was 6.96%, compared to 8.32% for the same period ended December 31, 2001, a decrease of 136 basis points.
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Provision for Loan Losses. The provision for loan losses is a result of our periodic analysis of the adequacy of the allowance for
loan losses. For the three and six month periods ended December 31, 2002, the provision for loan losses increased $13,000 and
$16,000, respectively, as compared to the same periods ended December 31, 2001, due to our continuing reassessment of probable
incurred losses in the loan portfolio. At December 31, 2002, the allowance for loan losses totaled $513,000 or 0.65% of net loans
receivable and 91.28% of total non-performing loans. At June 30, 2002, our allowance for loan losses totaled $554,000, or 0.66% of
net loans receivable and 78.36% of total non-performing loans.
We established an allowance for loan losses based on an analysis of risk factors in the loan portfolio. This analysis includes
the evaluation of concentrations of credit, past loss experience, current economic conditions, amount and composition of the loan
portfolio, estimated fair value of underlying collateral, delinquencies, and other factors. Accordingly, the calculation of the adequacy
of the allowance for loan losses was not based directly on our level of non-performing assets.
Non-performing assets include non-accrual loans, loans 90 days or more delinquent and still accruing interest, restructured,
foreclosed real estate and other repossessed assets. Loans greater than 90 days past due, and other designated loans of concern, are
placed on non-accrual status, unless it is determined that the loans are well collateralized and in the process of collection. The
following table presents non-performing assets for the periods indicated.
|
|
December 31,
2002
|
June 30,
2002
|
|
|
|
|
| Non-accrual loans |
$ 16,000 |
$ 272,000 |
| Loans past due 90 days or more and still accruing interest |
546,000
|
435,000
|
|
|
|
|
|
Total non-performing loans |
$ 562,000 |
$ 707,000 |
|
|
|
|
| Foreclosed real estate and other repossessed assets |
568,000
|
824,000
|
|
|
|
|
|
Total non-performing assets |
$1,130,000
|
$1,531,000
|
|
|
|
|
| Total non-performing loans as a percentage of total loans |
0.71%
|
0.82%
|
|
|
|
|
| Total non-performing assets as a percentage of total assets |
1.12%
|
1.42%
|
Non-performing loans at December 31, 2002 decreased $145,000 to $562,000 as compared to June 30, 2002. This decrease
was primarily the result of one loan secured by a resident property totaling $236,000 that was transferred from non-accrual status to
foreclosed real estate during the six month period ended December 31, 2002. Currently this property is for sale by the owner.
Foreclosed real estate and other repossessed assets decreased $256,000 to $568,000 as compared to June 30, 2002. This
change was primarily the result of one borrower selling seven investment properties, totaling $481,000, of which $446,000 was held in redemption and
classified as foreclosed real estate and $35,000 was classified as non-accrual loans at June 30, 2002. As part of
the workout of the borrower's bankruptcy, these seven properties were sold to a single purchaser, who also received financing from
Marshall Savings Bank. These properties are now held as collateral for one loan totaling $555,000. Pending a review period of the
new borrower's payment history on the new loan, we will maintain a deferred interest income amount of $79,000. This amount
represents interest of $45,000 paid when the previous borrower's debts where restructured, and interest of $34,000 paid at the time of
the sale to the new borrower.
We will continue to monitor the allowance for loan losses and make future additions to the allowance through the provision
for loan losses as loan quality and economic conditions dictate. Although we maintain the allowance for loan losses at a level which
we consider to be adequate to provide for losses, there can be no assurance that future losses will not exceed estimated amounts or
that additional provisions for loan losses will not be required in future periods. In addition, our determination as to the amount of the
allowance for loan losses is subject to review by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, as
part of their examination process, which may result in the establishment of an additional allowance based upon their judgment of the
information available to them at the time of their examinations.
Noninterest Income. Noninterest income consists primarily of gains on the sale of loans, loan servicing fees, service charges on
deposit accounts and other fees. Noninterest income increased $152,000 during the three month period ended December 31, 2002
compared to the three month period ended December 31, 2001. For the six month period ended December 31, 2002, noninterest
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income increased $434,000 compared the six month period ended December 31, 2001. The increases during the three and six month
periods were primarily due to increases in net gains on the sale of loans during the three and six month periods ended December 31,
2002 of $125,000 and $295,000, respectively, due to increased sales of mortgage loans during these periods.
In addition to the increase in net gains on sales of loans held for sale, we also experienced increases in service charges on
deposit accounts for the three and six month periods ended December 31, 2002 of $71,000 and $129,000, respectively, as compared
to the same 2001 periods. Debit card/ATM fees also increased during the three and six months periods ended December 31, 2002 by
$24,000 and $49,000, respectively. The increases in service charges and debit card/ATM fees were primarily the result of additional
fees collected on increased deposits associated with a branch office purchase on March 15, 2002.
Offsetting the above mentioned increases in noninterest income were decreases in net loan servicing fees during the three and
six month periods ended December 31, 2002 of $71,000 and $112,000, respectively. These decreases in net loan servicing fees were
primarily the result of a mortgage servicing rights valuation adjustment as well as continuing and accelerated amortization of
originated mortgage loan servicing rights during the 2002 periods due to increased loan refinancing activity during the same periods.
We obtained a third party valuation of our originated mortgage servicing rights and recorded a valuation adjustment of $38,000, or
5.1% of our total mortgage service rights portfolio. This valuation adjustment, the first recorded by Marshall Savings Bank, was due
to the current low interest rate environment, which resulted in increased mortgage loan refinancing.
Noninterest Expense. Noninterest expense was $944,000 for the three month period ended December 31, 2002 compared to
$729,000 reported for the same prior year period, an increase of $252,000 or 29.3%. Noninterest expense for the six month period
ended December 31, 2002 was $1.8 million compared to $1.4 million for the same period in 2001. The largest component of
noninterest expense, salaries and employee benefits, increased $69,000 and $177,000 during the three month and six month periods
ended December 31, 2002 compared to the same 2001 periods. The most significant factor causing the increase in salaries and
employee benefits during the 2002 periods was an increase in salaries and associated payroll taxes of $62,000 and $145,000 during
the three and six month periods ended December 31, 2002, which resulted from additional staff acquired through the branch purchase.
Group insurance costs remain unchanged for the three month period and increased $19,000 during the six month period ended
December 31, 2002 as compared to the same 2001 period. As a way to offset the growing cost of employee health insurance, we
increased the percentage paid by our employees effective October 1, 2002.
Noninterest expense also increased due to the amortization of intangible assets acquired from the branch purchase. During
the three and six month periods ended December 31, 2002 we recorded $20,000 and $41,000, respectively, compared to no expense
during the same 2001 periods. During the quarter we adopted Statement of Financial Accounting Standards ("SFAS") No. 147,
"Acquisitions of Certain Financial Institutions" as of July 1, 2002. As a result the unidentifiable intangible asset recorded as part of
our branch purchase has been reclassified as goodwill. Accordingly, our year-to-date financial statements have been revised to reflect
the reversal of unidentifiable intangible amortization, totaling $68,000, recorded during the three month period ended September 30,
2002.
Occupancy and equipment expense increased $28,000 and $58,000 during the three and six month periods respectively. This
increase is primarily the result of our decision to continue to use the purchased branch office as a branch office of Marshall Savings
Bank. This facility provides us more options in our continuing evaluation of facility uses in determining the best way to meet the
needs of our customer base.
Other components of noninterest expense were impacted by the branch purchase, a result of increased deposits and
transaction activity. Data processing increased $17,000 and $33,000 during the three and six month periods ended December 31,
2002 as compared to the same 2001 periods. Debit card/ATM processing expense increased $19,000 and $29,000, for the three and
six month periods ended December 31, as compared to the three and six month periods ended December 31, 2001.
Federal Income Tax Expense. Federal income tax expense increased $15,000 for the three month period and $62,000 for the six
month period ended December 31, 2002 compared to the same periods in 2001.
Liquidity and Capital Resources
Our principal sources of funds are deposits, securities available for sale, principal and interest repayments on loans, sales of
loans, and Federal Home Loan Bank advances. While scheduled loan repayments are relatively predictable, deposit flows and early
loan prepayments are influenced more by interest rates, general economic conditions and competition.
Federal regulations require that we maintain minimum levels of liquid assets to ensure the safety and soundness of the
institution. Liquid assets for purposes of this ratio include cash, certain time deposits, U.S. Government, government agency and
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other securities and obligations generally having remaining maturities of less than five years. At December 31, 2002, our liquidity
ratio was 23.9%.
Liquidity management is both a daily and long term responsibility of management. Investments in liquid assets are adjusted
based upon our assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits in other
financial institutions and securities, and the objective of our asset/liability management program. Excess liquidity is invested
generally in interest-earning overnight deposits of the Federal Home Loan Bank of Indianapolis. We also use our borrowing
capability through the Federal Home Loan Bank of Indianapolis to meet liquidity needs.
If funds are required beyond the ability to generate them internally, borrowing agreements exist with the FHLB which provide
an additional source of funds. FHLB advances total $12.6 million at December 31, 2002. We also have $20.0 million of additional
borrowing capacity at the FHLB at December 31, 2002. We use these advances primarily to fund 15 year fixed-rate and adjustable-rate one- to four-family residential mortgage loans held in our portfolio. These advances are secured by a blanket lien on our first
mortgage loans. Refer to Note 9 to the consolidated financial statements included in our consolidated financial statements for the year
ended June 30, 2002 for further information regarding FHLB advances. We also use our liquidity resources to meet ongoing
commitments, to fund maturing certificates of deposit and deposit withdrawals, and to meet operating expenses. At December 31,
2002, we had outstanding commitments to extend credit which amounted to $9.3 million (including $5.6 million in available home
equity lines of credit). We believe that loan repayments and other sources of funds, including Federal Home Loan Bank advances,
will be adequate to meet our foreseeable liquidity needs.
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Federal insured savings institutions are required to maintain a minimum level of regulatory capital. If the requirement is not
met, regulatory authorities may take legal or administrative actions, including restrictions on growth or operations or, in extreme
cases, seizure. As of December 31, 2002 and June 30, 2002 Marshall Savings was categorized as well capitalized. Our actual and
required capital amounts and ratios at December 31, 2002 and June 30, 2002 are presented below:
|
Actual
|
For Capital
Adequacy Purposes
|
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|
(Dollars in Thousands) |
| As of December 31, 2002 |
|
|
|
|
|
|
Tier 1 (Core) Capital (to
adjusted total assets) |
$ 11,481 |
11.67% |
$ 3,932 |
4.0% |
$ 4,915 |
5.0% |
|
|
|
|
|
|
|
Tier 1 (Core) Capital (to
risk weighted assets) |
11,481 |
17.75 |
2,587 |
4.0 |
3,881 |
6.0 |
|
|
|
|
|
|
|
Total Capital (to risk
weighted assets) |
12,006 |
18.56 |
5,174 |
8.0 |
6,468 |
10.0 |
|
|
|
|
|
|
|
| As of June 30, 2002 |
|
|
|
|
|
|
Tier 1 (Core) Capital (to
adjusted total assets) |
$ 10,318 |
9.78% |
$ 4,219 |
4.0% |
$ 5,274 |
5.0% |
|
|
|
|
|
|
|
Tier 1 (Core) Capital (to
risk weighted assets) |
10,318 |
15.34 |
2,691 |
4.0 |
4,036 |
6.0 |
|
|
|
|
|
|
|
Total Capital (to risk
weighted assets) |
10,872 |
16.16 |
5,381 |
8.0 |
6,727 |
10.0 |
New Accounting Standards
On October 1, 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 147, "Acquisitions of Certain Financial Institutions." SFAS No. 147 was effective October 1, 2002. SFAS
No. 147 supersedes SFAS No. 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions." SFAS No. 147 provides
guidance on the accounting for the acquisitions of a financial institution, and applies to all such acquisitions except those between two
or more mutual enterprises. Under SFAS No. 147, the excess of the fair value of liabilities assumed over the fair value of tangible
and identifiable intangible assets acquired in a financial institution business combination represents goodwill that should be accounted
for under SFAS No. 142, "Goodwill and Other Intangible Assets." If curtain criteria are met, the amount of the unidentifiable
intangible assets resulting from prior financial institutions acquisitions is to be reclassified to goodwill upon adoption of this
Statement. Financial institutions meeting conditions outlined in SFAS No. 147 are required to restate previously issued financial
statements. The objective of the restatement is to present the balance sheet and income statement as if the amount accounted for
under SFAS No. 72 as an unidentifiable intangible asset had been reclassified to goodwill as of the date we adopted SFAS No. 142.
As a result of adopting SFAS No. 147, the year to date financial statements reflect the reversal of unidentified intangible amortization
totaling $68,000 recorded during the three month period ended September 30, 2002.
Item 3. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures: An evaluation of our disclosure controls and procedures (as defined in
Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the "Act")) was carried out under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer and several other members of our senior management within
the 90-day period preceding the filing date of this quarterly report. Our Chief Executive Officer and Chief financial Officer
concluded that our disclosure controls and procedures as currently in effect are effective in ensuring that the information required to
be disclosed in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the
Chief Executive Office and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms.
(b)
Changes in Internal Controls: Since the date of this evaluation, there have been no significant changes in, or corrective actions
regarding, our internal controls or other factors that could significantly affect these controls.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Shareholder's Meeting of MSB Financial, Inc. was held on October 22, 2002 in Marshall, Michigan. At
that meeting the shareholders elected the following persons for three year terms to the Board of Directors. Charles B. Cook by a vote
of 1,098,174 for and 16,825 withheld. Karl F. Loomis by a vote of 1,112,544 for and 2,455 withheld. J. Thomas Schaeffer by a vote
of 1,110,894 for and 4,105 withheld. Directors John W. Yakimow, Richard L. Dobbins and Martin L. Michell continued to serve as
directors of the Company. Also approved was the appointment of Crowe, Chizek and Company LLP as independent auditors for the
fiscal year ending June 30, 2003, with a vote of 1,100,903 for, 12,291 against and 1,805 abstentions.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
None.
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Pursuant to the requirement 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.
SIGNATURES
| |
|
|
MSB Financial, Inc.
Registrant |
|
|
|
|
| Date: |
February 14, 2003 |
|
\s\Charles B. Cook
Charles B. Cook, President and Chief
Executive Officer (Duly Authorized
Officer) |
| |
|
|
|
| Date: |
February 14, 2003 |
|
\s\Elaine R. Carbary
Elaine R. Carbary, Chief Financial
Officer (Principal Financial Officer) |
17
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CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-QSB
I, Charles B. Cook, certify that:
| 1) |
I have reviewed this quarterly report on Form 10-QSB of MSB Financial, Inc.; |
|
|
|
| 2) |
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this quarterly report; |
|
|
|
| 3) |
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report; |
|
|
|
| 4) |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
|
|
|
|
a) |
designed such disclosure controls and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the
period in which this quarterly report is being prepared; |
|
|
|
|
b) |
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the "Evaluation Date"); and |
|
|
|
|
c) |
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date; |
|
|
|
| 5) |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
|
|
|
|
a) |
all significant deficiencies in the design or operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and |
|
|
|
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal controls; and |
|
|
|
| 6) |
The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: February 14, 2003
\s\ Charles B. Cook
Charles B. Cook, President and Chief Executive Officer |
18
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CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-QSB
I, Elaine R. Carbary, certify that:
| 1) |
I have reviewed this quarterly report on Form 10-QSB of MSB Financial, Inc.; |
|
|
|
| 2) |
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this quarterly report; |
|
|
|
| 3) |
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report; |
|
|
|
| 4) |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
|
|
|
|
a) |
designed such disclosure controls and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the
period in which this quarterly report is being prepared; |
|
|
|
|
b) |
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the "Evaluation Date"); and |
|
|
|
|
c) |
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date; |
|
|
|
| 5) |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
|
|
|
|
a) |
all significant deficiencies in the design or operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and |
|
|
|
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal controls; and |
|
|
|
| 6) |
The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: February 14, 2003
\s\Elaine R. Carbary
Elaine R. Carbary, Chief Financial Officer |
19
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MSB FINANCIAL, INC.
EXHIBIT INDEX
Exhibit No.
|
Description
|
|
|
| 3 |
Registrant's Articles of Incorporation and Bylaws, filed on February 4, 1999 as exhibits to the Registrant's
Registration Statement on Form S-8 (File No. 333-71837), are incorporated here in by reference. |
|
|
| 4 |
Registrant's Specimen Stock Certificate, filed on February 4, 1999 as Exhibit 4 to the Registrant's Registration
Statement on Form S-8 (File No. 333-71837), is incorporated herein by reference. |
|
|
| 10.1 |
Employment Agreement between the Bank and Charles B. Cook, filed on September 23, 1995 as Exhibit 10.2 to
Registrant's Registration Statement on Form S-1 (File No. 33-81312), is incorporated herein by reference. |
|
|
| 10.2 |
Registrant's Employee Stock Ownership Plan, filed on September 23, 1995 as Exhibit 10-3 to Registrant's
Registration Statement on Form S-1 (file No. 33-81312), is incorporated herein by reference. |
|
|
| 10.3 |
Registrant's 1995 Stock Option and Incentive Plan, filed as Exhibit 10(b) to Registrant's Report on Form 10-KSB for the fiscal year ended June 30, 1995 (File No. 0-24898), is incorporated herein by reference. |
|
|
| 10.4 |
Registrant's Recognition and Retention Plan, filed as Exhibit 10(c) to Registrant's Report on Form 10-KSB for
the fiscal year ended June 30, 1995 (File No. 0-24898), is incorporated herein by reference. |
|
|
| 10.5 |
Registrant's 1997 Stock Option and Incentive Plan, filed as Appendix A to Registrants Schedule 14A filed on
September 26, 1997 (File No. 0-24898), is incorporated herein by reference. |
|
|
| 11 |
Statement re: computation of earnings per share (see Note 2 of the Notes of Condensed Consolidated Financial
Statements) |
|
|
| 99.1 |
Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
End.