FFY Financial (FFYF) 10-Q 2000 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000

OR

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____.

Commission file number 0-21638

FFY Financial Corp.
(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation) 34-1735753
(IRS Employer Identification No.)

724 Boardman-Poland Road, Youngstown, Ohio
(Address of principal executive office)

44512
(Zip Code)

(330) 726-3396
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  [X]      No  [   ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

CLASS
common stock, $.01 par value SHARES OUTSTANDING AT APRIL 30, 2000
6,778,498

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition	3
	Consolidated Statements of Income	4
	Consolidated Statements of Changes in Stockholders' Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition   and Results of Operations	9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 2.	Changes in Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 5.	Other Information	14
Item 6.	Exhibits and Reports on Form 8-K	14
	SIGNATURES	15

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
	March 31,	June 30,
	2000	1999
Assets
Cash	$    3,785,592	$    5,362,745
Interest-bearing deposits	5,127,918	5,245,061
Short-term investments	-	865,000
TOTAL CASH AND CASH EQUIVALENTS	8,913,510	11,472,806
Securities available for sale	160,205,708	190,325,599
Loans receivable	478,269,069	453,839,111
Loans available for sale	173,175	441,500
Interest and dividends receivable on securities	1,911,577	1,953,940
Interest receivable on loans	2,797,146	2,707,846
Federal Home Loan Bank stock, at cost	5,104,000	4,841,200
Office properties and equipment, net	7,231,756	7,218,640
Other assets	3,078,517	2,890,372
TOTAL ASSETS	$667,684,458	$675,691,014
Liabilities and Stockholders' Equity
Liabilities:
Deposits	$443,019,515	$457,342,802
Securities sold under agreements to repurchase:
Short-term	7,693,664	6,617,747
Long-term	51,300,000	51,300,000
Borrowed funds:
Short-term	9,740,000	22,800,000
Long-term	79,280,000	60,000,000
Advance payments by borrowers for taxes and insurance	3,593,327	2,221,976
Other payables and accrued expenses	7,995,736	5,291,964
TOTAL LIABILITIES	602,622,242	605,574,489
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized 5,000,000 shares; none outstanding	-	-
Common stock, $.01 par value:
Authorized 15,000,000 shares; issued 7,589,366 shares,               outstanding 6,791,336 shares at March 31, 2000               and 7,121,379 shares at June 30, 1999	75,894	75,894
Additional paid-in capital	38,341,807	38,092,628
Retained earnings, substantially restricted	49,725,430	46,243,673
Treasury stock, at cost, 798,030 shares at
March 31, 2000 and 467,987 shares at June 30, 1999	(14,099,711)	(8,551,484)
Accumulated other comprehensive loss	(6,332,477)	(2,816,864)
Common stock purchased by:
Employee Stock Ownership and 401(k) Plan	(2,366,937)	(2,645,532)
Recognition and Retention Plans	(281,790)	(281,790)
TOTAL STOCKHOLDERS' EQUITY	65,062,216	70,116,525
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$667,684,458	$675,691,014
See accompanying notes to consolidated financial statements

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
	Three months ended		Nine months ended
	March 31,		March 31,
	2000	1999	2000	1999
Interest Income
Loans	$  9,848,858	$  9,613,281	$29,014,280	$29,470,051
Securities available for sale	2,538,986	2,501,376	7,858,257	6,941,368
Federal Home Loan Bank stock	88,832	82,143	267,337	248,583
Other interest-earning assets	10,973	44,062	32,091	126,360
TOTAL INTEREST INCOME	12,487,649	12,240,862	37,171,965	36,786,362
Interest Expense
Deposits	4,766,462	4,981,248	14,386,810	15,292,422
Securities sold under agreements to repurchase:
Short-term	92,149	99,681	270,865	363,157
Long-term	791,331	733,328	2,294,173	2,232,575
Borrowed funds:
Short-term	220,508	287,193	986,231	1,162,063
Long-term	1,219,907	420,805	2,800,330	925,088
TOTAL INTEREST EXPENSE	7,090,357	6,522,255	20,738,409	19,975,305
NET INTEREST INCOME	5,397,292	5,718,607	16,433,556	16,811,057
Provision for loan losses	134,941	130,565	340,854	380,528
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES	5,262,351	5,588,042	16,092,702	16,430,529
Non-Interest Income
Service charges	263,725	216,755	807,300	633,257
Gain on sale of securities available for sale	16,670	54,708	45,574	112,421
Gain on sale of loans	45,354	201,791	163,822	590,623
Other	148,931	112,990	472,518	550,173
TOTAL NON-INTEREST INCOME	474,680	586,244	1,489,214	1,886,474
Non-Interest Expense
Salaries and employee benefits	1,597,441	1,643,802	4,902,478	4,828,058
Net occupancy and equipment	494,013	504,843	1,502,491	1,503,577
Insurance and bonding	74,347	118,235	308,022	362,309
State and local taxes	196,589	230,082	697,951	739,080
Other	543,300	551,227	1,929,118	1,879,871
TOTAL NON-INTEREST EXPENSE	2,905,690	3,048,189	9,340,060	9,312,895
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST	2,831,341	3,126,097	8,241,856	9,004,108
Income taxes	830,000	1,085,510	2,447,000	3,045,742
Minority interest in loss of consolidated subsidiaries	(4,675)	(105,524)	(8,267)	(105,524)
NET INCOME	$  2,006,016	$  2,146,111	$  5,803,123	$  6,063,890
BASIC EARNINGS PER SHARE	$           0.32	$           0.31	$           0.90	$           0.84
DILUTED EARNINGS PER SHARE	$           0.31	$           0.30	$           0.88	$           0.81
CASH DIVIDENDS DECLARED PER SHARE	$         0.125	$        0.1125	$         0.375	$       0.3375
See accompanying notes to consolidated financial statements

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
	Nine months ended
	March 31,
	2000	1999
Balance at July 1	$70,116,525	$84,215,701
Comprehensive income:
Net income	5,803,123	6,063,890
Change in unrealized holding gain (loss) on securities available       for sale, net of reclassification adjustment and tax effect	(3,515,613)	(524,862)
Comprehensive income	2,287,510	5,539,028
Dividends paid, $.3625 and $.325 per share, respectively	(2,321,366)	(2,356,807)
Treasury stock purchased	(6,183,249)	(13,738,551)
Stock options exercised	172,429	525,106
Amortization of KSOP expense	278,595	291,780
Tax benefit related to exercise of stock options	137,857	306,903
Difference between average fair value per share and cost   per share on KSOP shares committed to be released	573,915	663,844
Balance at March 31	$65,062,216	$75,447,004
See accompanying notes to consolidated financial statements

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FFY FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
	Nine months ended
	March 31,
	2000	1999
NET CASH PROVIDED BY OPERATING ACTIVITIES	$ 11,601,568	$ 9,576,999
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of securities available for sale	3,020,000	10,697,077
Proceeds from sales of securities available for sale	15,451,261	27,274,701
Purchase of securities available for sale	(742,661)	(107,864,491)
Principal receipts on securities available for sale	6,891,642	22,448,087
Net (increase) decrease in loans	(24,121,359)	24,268,796
Purchase of office properties and equipment	(801,145)	(488,758)
Other, net	30,752	(121,295)
NET CASH USED IN INVESTING ACTIVITIES	(271,510)	(23,785,883)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits	(14,274,585)	12,605,034
Net increase (decrease) in short-term securities sold under        agreements to repurchase	1,075,917	(5,739,323)
Net decrease in short-term borrowed funds	(13,060,000)	(11,885,000)
Proceeds from long-term borrowed funds	29,280,000	35,000,000
Principal repayments on long-term borrowed funds	(10,000,000)	-
Net increase (decrease) in advance payments by borrowers       for taxes and insurance	1,371,351	(1,217,198)
Treasury stock purchases	(6,183,249)	(13,738,551)
Dividends paid	(2,321,366)	(2,356,807)
Proceeds from stock options exercised	172,429	525,106
Other, net	50,149	(551,523)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(13,889,354)	12,641,738
NET DECREASE IN CASH AND CASH EQUIVALENTS	(2,559,296)	(1,567,146)
CASH AND CASH EQUIVALENTS
Beginning of period	11,472,806	10,075,182
End of period	$   8,913,510	$   8,508,036
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments of interest expense	$ 18,773,343	$ 17,816,678
Cash payments of income taxes	-	2,900,000
Loans originated for sale	10,296,240	23,509,400
Proceeds from sales of loans originated for sale	10,728,387	23,541,237
See accompanying notes to consolidated financial statements

PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

FFY FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)    Principles of Consolidation:

The interim consolidated financial statements of the Company include the accounts of FFY Financial Corp. and its wholly-owned subsidiaries FFY Bank (formerly known as First Federal Savings Bank of Youngstown) and FFY Holdings, Inc. The consolidated financial statements also include the accounts of FFY Insurance (formerly known as Daniel W. Landers Insurance, Ltd.), an affiliate of FFY Holdings, Inc., through its two-thirds controlling interest in FFY Insurance. FFY Holdings, Inc.'s other affiliate, Coldwell Banker FFY Real Estate, is accounted for using the equity method of accounting and is not consolidated since FFY Holdings, Inc. has a non-controlling one-third interest in the real estate company. All significant intercompany balances and transactions have been eliminated in consolidation.

(b)    Basis of Presentation:

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in FFY Financial Corp.'s 1999 Annual Report to Shareholders incorporated by reference into FFY Financial Corp.'s 1999 Annual Report on Form 10-K. The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) which, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year.

(c)    Earnings Per Share:

The computation of basic and diluted earnings per share is shown in the following table.

				Three months ended		Nine months ended
				March 31,		March 31,
				2000	1999	2000	1999
Basic earnings per share computation:
	Numerator	-	Net income	$2,006,016	$2,146,111	$5,803,123	$6,063,890
	Denominator	-	Weighted average common
			shares outstanding	6,358,850	7,019,679	6,417,405	7,212,817
Basic earnings per share				$         0.32	$         0.31	$         0.90	$         0.84
Diluted earnings per share computation:
	Numerator	-	Net income	$2,006,016	$2,146,111	$5,803,123	$6,063,890
	Denominator	-	Weighted average common
			shares outstanding	6,358,850	7,019,679	6,417,405	7,212,817
			Dilutive effect of stock options	146,352	227,403	194,156	236,712
			Weighted average common shares
			and common stock equivalents	6,505,202	7,247,082	6,611,561	7,449,529
Diluted earnings per share				$         0.31	$         0.30	$         0.88	$         0.81

(d)    Reclassifications:

Certain amounts in the prior period consolidated financial statements have been reclassified to conform with the current period's presentation.

(2)    EFFECT OF RECENT FINANCIAL ACCOUNTING STANDARDS

In June 1999, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 - - an Amendment of FASB Statement 133. This statement standardizes the accounting for derivative contracts, by requiring that an entity recognize those items as assets or liabilities in the statement of financial condition and measure them at fair value. SFAS No. 137 is effective for fiscal years beginning after June 15, 2000. Management is currently evaluating the effects SFAS No. 137 will have on the Company's financial condition and results of operations.

In March 2000, the FASB issued FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25. This interpretation clarifies the application of Opinion 25 for only certain issues. Interpretation No. 44 is effective July 1, 2000, but certain conclusions in this interpretation cover specific events that occur after either December 15, 1998 or January 12, 2000. Currently, this interpretation does not affect the Company; however, management is evaluating the effects Interpretation No. 44 will have on the Company's financial condition or results of operations.

PART I: FINANCIAL INFORMATION
FFY FINANCIAL CORP.
MARCH 31, 2000

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following analysis discusses changes in the Company's financial condition and results of operations at and for the three and nine months ended March 31, 2000.

Forward-Looking Statements

When used in this Form 10-Q, or, in future filings by FFY Financial Corp. with the Securities and Exchange Commission, in FFY Financial Corp.'s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "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 including, but not limited to, changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above and other factors could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company 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.

Year 2000

On January 1, 2000, FFY Financial Corp. reported that its wholly owned subsidiary, FFY Bank, had successfully completed its processing for 1999 and had tested all mission critical systems for proper operation due to the change to the Year 2000. Various audit teams from FFY Bank confirmed that environmental services, such as utilities and telecommunications, were operating properly. Other technical staff processed a comprehensive list of customer transactions, thereby confirming that all accounting systems were operating correctly. Based on operations since January 1, 2000, the Company does not expect any significant impact to its ongoing business as a result of the Year 2000. However, it is possible that the full impact of the date change, which was of concern due to computer programs that use two digits instead of four digits to define years, has not been fully recognized. The Company believes that any such problems are likely to be minor and correctable. In addition, the Company could still be negatively affected if its customers or suppliers are adversely affected by the Year 2000 or similar issues. The Company currently is not aware of any significant Year 2000 or similar problems that have arisen for its customers and suppliers.

The Company spent nearly $1 million in its Year 2000 readiness efforts, including $429,000 for a new comprehensive software system in 1998. In addition to the new software system, monies were spent to replace outdated, noncompliant hardware and software as well as identifying and remediating Year 2000 problems.

Financial Condition

General. Total assets at March 31, 2000 were $666.7 million, a decrease of $8.0 million, or 1.2% compared to $675.7 million at June 30, 1999. The decrease in assets was primarily attributable to cash provided by the securities portfolio partially offset by an increase in loans receivable, which is discussed below. Total liabilities at March 31, 2000 were $602.6 million, a decrease of $3.0 million, or 0.5% compared to $605.6 million at June 30, 1999.

Securities. The Company's securities portfolio decreased $30.1 million, or 15.8% during the nine months ended March 31, 2000, and totaled $160.2 million at March 31, 2000 compared to $190.3 million at June 30, 1999. The decrease over the nine month period consisted of $15.4 million, $3.0 million and $6.9 million in security sales, maturities and principal receipts, respectively. Additionally, there was an increase in the gross unrealized loss on securities available for sale totaling $5.3 million, resulting from an increase in interest rates. Security purchases totaling $743,000 for the nine months ended March 31, 2000 partially offset the aforementioned decreases.

Loans. Net loans receivable, including loans available for sale, increased $24.1 million, or 5.3% during the nine months ended March 31, 2000, and totaled $478.4 million at March 31, 2000 compared to $454.3 million at June 30, 1999. The increase in loans receivable during the nine month period was largely the result of retaining loans in FFY Bank's portfolio as opposed to selling them in the secondary market (see next paragraph) during the increasing interest rate environment that existed during the current fiscal year. First mortgage loans secured by one- to four -family residences represented 56.8% of dollar volume growth in FFY Bank's loan portfolio during the nine months ended March 31, 2000. FFY Bank's commercial real estate loans represented 31.0% of dollar volume growth and consumer loans, primarily home equity loans, represented 10.3% of dollar volume growth during the nine months ended March 31, 2000.

FFY Bank's secondary market mortgage lending operation is designed to originate and sell qualifying loans to Fannie Mae. FFY Bank sold 131 loans during the nine months ended March 31, 2000, resulting in a pre-tax gain of $164,000, compared to sales of 299 loans for a pre-tax gain of $591,000 for the nine months ended March 31, 1999. FFY Bank's secondary market mortgage lending slowed during fiscal year 2000 due to an increase in market interest rates, which is evident by the reduced number of loans sold and an increase in loans receivable (see previous paragraph). However, management expects that the secondary market mortgage lending program will continue as long as market conditions allow it to be profitable.

Deposits. Deposits decreased $14.3 million, or 3.1% during the nine months ended March 31, 2000, and totaled $443.0 million at March 31, 2000 compared to $457.3 million at June 30, 1999. The decrease in deposits was from declines in certificate and NOW accounts of $17.7 million and $4.6 million, respectively, partially offset by increases in money market and passbook accounts of $6.8 million and $1.2 million, respectively. The level of deposit flows during any given period is heavily influenced by factors such as the general level of interest rates as well as alternative yields that investors may obtain on competing instruments, such as money market mutual funds and other investments. Net deposit outflows during the nine months ended March 31, 2000 were funded by proceeds from the decline in securities available for sale and the increase in borrowed funds.

Borrowed Funds. Short-term borrowed funds decreased $13.1 million, or 57.3% during the nine months ended March 31, 2000, whereas long-term borrowed funds increased $19.3 million, or 32.1% during the same period. In the current rising interest rate environment, using long-term borrowings to fund the balance sheet reduces the Company's interest rate risk in that short-term borrowings will reprice more quickly and possibly at higher rates. Short- and long-term borrowed funds totaled $9.7 million and $79.3 million, respectively, at March 31, 2000 compared to $22.8 million and $60.0 million, respectively, at June 30, 1999. Cash provided by the net increase in borrowed funds was used to fund the decline in deposit accounts.

Other Liabilities. Other liabilities increased $4.1 million during the nine months ended March 31, 2000 and totaled $11.6 million at March 31, 2000 compared to $7.5 million at June 30, 1999. This increase was primarily attributable to increases in (i) accrued interest payable on deposit accounts since interest on most certificates are paid semi-annually; (ii) customer deposits for real estate taxes that were due in April 2000; and (iii) deferred taxes as a result of the increased unrealized holding loss on the available for sale securities portfolio.

Stockholders' Equity. Total stockholders' equity declined $5.0 million, or 7.2% during the nine months ended March 31, 2000 and totaled $65.1 million at March 31, 2000 compared to $70.1 million at June 30, 1999. This decline resulted principally from treasury stock repurchases, an increase in net unrealized holding losses on available-for-sale securities and dividends paid to shareholders. These declines were partially offset by net income for the nine months ended March 31, 2000.

Results of Operations

Comparison of the Three and Nine Months Ended March 31, 2000 and 1999

General. The Company recorded net income for the three and nine months ended March 31, 2000 of $2.0 million and $5.8 million, respectively, compared to $2.1 million and $6.1 million, respectively, for the three and nine months ended March 31, 1999. Diluted earnings per share for the three and nine months ended March 31, 2000 were $0.31 and $0.88, respectively, compared to diluted earnings per share of $0.30 and $0.81, respectively, for the three and nine months ended March 31, 1999.

Interest Income. Total interest income for the three months ended March 31, 2000 was $12.5 million, an increase of $247,000, or 2.0% compared to $12.2 million for the three months ended March 31, 1999. Interest income from loans totaled $9.8 million for the three months ended March 31, 2000, an increase of $236,000, or 2.5% compared to $9.6 million for the three months ended March 31, 1999. The increase in interest from loans was primarily the result of an increase in the average balance of loans outstanding. Interest income from securities remained constant at $2.5 million for the three months ended March 31, 2000 and 1999. During the current three month period, a decrease in volume in the securities portfolio was offset by a decline in premium amortization on the Bank's mortgage-backed securities portfolio and a 10 basis point increase in average yield earned when compared to the same prior year period.

Total interest income for the nine months ended March 31, 2000 was $37.2 million, an increase of $386,000, or 1.0% compared to $36.8 million for the nine months ended March 31, 1999. Interest income from securities totaled $7.9 million for the nine months ended March 31, 2000, an increase of $917,000, or 13.2% compared to $6.9 million for the nine months ended March 31, 1999. The increase in interest from securities was attributable to an increase in the average balance of securities, and to a lesser extent, a 12 basis point increase in yield earned on securities. Interest income from loans totaled $29.0 million for the nine months ended March 31, 2000, a decrease of $456,000, or 1.5% compared to $29.5 million for the nine months ended March 31, 1999. The decrease in interest from loans was the result of a decline in the average balance of loans outstanding and a 7 basis point decline in the average yield earned on loans.

Although the average balance of loans declined comparing the nine months ended March 31, 2000 and 1999, the trend of a declining loan portfolio reversed during the current fiscal year mainly due to retaining loans in FFY Bank's loan portfolio as opposed to selling them in the secondary market. In addition, the trend of a growing securities portfolio reversed during the current fiscal year due to proceeds from securities transactions being used to fund deposit outflows and loan growth.

Interest Expense. Total interest expense for the three months ended March 31, 2000 was $7.1 million, an increase of $568,000, or 8.7% compared to $6.5 million for the three months ended March 31, 1999. Interest expense from long-term borrowed funds totaled $1.2 million for the three months ended March 31, 2000, an increase of $799,000 compared to $421,000 for the three months ended March 31, 1999. The increase in interest expense from long-term borrowed funds was due to an increase in the average balance of such borrowings, and to a lesser extent, a 144 basis point increase in rate. Interest expense on deposits totaled $4.8 million for the three months ended March 31, 2000, a decrease of $215,000, or 4.3% compared to $5.0 million for the three months ended March 31, 1999. The decrease in interest expense from deposits was mainly due to a decline in the average balance of deposit accounts.

Total interest expense for the nine months ended March 31, 2000 was $20.7 million, an increase of $763,000, or 3.8% compared to $20.0 million for the nine months ended March 31, 1999. Interest expense from long-term borrowed funds totaled $2.8 million for the nine months ended March 31, 2000, an increase of $1.9 million compared to $925,000 for the nine months ended March 31, 1999. The increase in interest expense from long-term borrowed funds was predominantly due to an increase in the average balance of such borrowings, and to a lesser extent, a 63 basis point increase in rate. Interest expense on deposits totaled $14.4 million for the nine months ended March 31, 2000, a decrease of $906,000, or 5.9% compared to $15.3 million for the nine months ended March 31, 1999. The decrease in interest expense from deposits was due to a 17 basis point decline in rates paid on deposit accounts as well as a decline in the average balance of deposit accounts. The $176,000 decline in interest expense from short-term borrowed funds comparing the nine months ended March 31, 2000 and 1999 was the result of a decline in average balance, partially offset by an increase in rate.

Provision for Loan Losses. The provision for loan losses totaled $135,000 and $341,000 for the three and nine months ended March 31, 2000, respectively, compared to $131,000 and $381,000 for same periods last year. The provision for loan losses reflects management's evaluation of the underlying credit risk of FFY Bank's loan portfolio to adequately provide for probable loan losses inherent in the loan portfolio as of the balance sheet date. The ratio of allowance for loan losses to non-performing loans was 85.2% at March 31, 2000, down from 112.3% at June 30, 1999, primarily due to an increase in non-performing loans, most particularly non-accrual loans. Non-accrual loans increased $964,000 from $2.2 million at June 30, 1999 to $3.1 million at March 31, 2000, predominantly in FFY Bank's one- to four -family portfolio. Future additions to the allowance for loan losses will be dependent on a number of factors including the performance of FFY Bank's loan portfolio, the economy, changes in interest rates and the effect of such changes on real estate values and inflation. Management believes that the allowance for loan losses was adequate at March 31, 2000.

Non-Interest Income. Non-interest income totaled $475,000 for the three months ended March 31, 2000, a decrease of $111,000, or 19.0% compared to $586,000 for the three months ended March 31, 1999. Non-interest income totaled $1.5 million for the nine months ended March 31, 2000, a decrease of $397,000, or 21.1% compared to $1.9 million for the nine months ended March 31, 1999. The three- and nine-month declines in non-interest income primarily reflects FFY Bank's slowing secondary market sales of loans (see Financial Condition - Loans on page 10 of this report). Gains from sales of loans decreased $156,000 comparing the three month periods and $427,000 comparing the nine month periods. An increase in service charges, mainly from NOW, passbook and commercial checking accounts as well as increased debit card income partially offset the decline in gains from loans sold for both the three- and nine-month periods. Contributing to the increase in other non-interest income comparing the three months ended March 31, 2000 and 1999 was an increase in service fee income on sold loans, reflecting growth in the sold loan portfolio. The decline in other non-interest income comparing the nine months ended March 31, 2000 and 1999 primarily reflects the activities of FFY Financial Corp.'s former real estate affiliate, First Real Estate, Ltd., being consolidated in the prior year period since FFY Financial Corp.'s interest was a controlling two-thirds; whereas FFY Financial Corp.'s current real estate affiliate, Coldwell Banker FFY Real Estate, is accounted for using the equity method of accounting since FFY Financial Corp.'s investment is a non-controlling one-third. Partially offsetting this decline was an increase in service fee income on sold loans.

Non-Interest Expense. Total non-interest expense remained relatively flat comparing both the three and nine months ended March 31, 2000 and 1999. For the three months ended March 31, 2000 and 1999, non-interest expenses totaled $2.9 million and $3.0 million, respectively. For both the nine months ended March 31, 2000 and 1999, non-interest expenses totaled $9.3 million.

Income Taxes. Income taxes totaled $830,000 for the three months ended March 31, 2000, a decrease of $256,000 compared to $1.1 million for the three months ended March 31, 1999. For the nine months ended March 31, 2000, income taxes totaled $2.4 million, a decrease of $599,000 compared to $3.0 million for the nine months ended March 31, 1999. The decline in income taxes for the three and nine month periods resulted from less income before tax and a reduction in the Company's effective tax rate due to increased income from tax-exempt securities.

Effect of New Accounting Standards

Refer to Note 2 of the Notes to Consolidated Financial Statements contained in this report.

Liquidity and Cash Flows

In general terms, liquidity is a measurement of the Company's ability to meet its cash needs. The Company's objective in liquidity management is to maintain the ability to meet loan commitments, purchase securities or to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings. The Company's principal sources of funds are deposits, amortization and prepayments of loans, maturities, sales and principal receipts of securities, borrowings, repurchase agreements and operations.

Federal regulations require FFY Bank to maintain minimum levels of liquid assets in each calendar quarter of not less than 4% of either (i) its liquidity base at the end of the preceding quarter, or (ii) the average daily balance of its liquidity base during the preceding quarter. FFY Bank's liquidity exceeded the applicable liquidity requirement at March 31, 2000 and 1999. Simply meeting the liquidity requirement does not automatically mean FFY Bank has sufficient liquidity for a safe and sound operation. Regulations also include a separate requirement that each thrift must maintain sufficient liquidity to ensure its safe and sound operation. Thus, adequate liquidity may vary depending on FFY Bank's overall asset/liability structure, market conditions, the activities of competitors, and the requirements of its own deposit and loan customers. Management believes FFY Bank's liquidity is sufficient.

Liquidity management is both a daily and long-term responsibility of management. FFY Bank adjusts its investments in liquid assets based upon management's assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and securities and (iv) the objective of its asset/liability management program. Along with its liquid assets, FFY Bank has additional sources of liquidity available including, but not limited to, the ability to obtain deposits by offering above-market interest rates and access to advances from the Federal Home Loan Bank.

The primary investing activities of the Company are originating loans and purchasing securities. For the nine months ended March 31, 2000, an increase in FFY Bank's loan portfolio used $24.1 million, whereas a decline in the securities portfolio provided $24.6 million. For the nine months ended March 31, 1999, a decline in FFY Bank's loan portfolio provided $24.3 million, whereas growth in the securities portfolio used $47.4 million. Generally, during periods of declining interest rates, FFY Bank would be expected to experience increased loan prepayments, which would likely be reinvested at lower interest rates. During periods of increasing interest rates, loan prepayments would be expected to decline, reducing funds available for investment at higher interest rates.

The primary financing activities of the Company are deposits, repurchase agreements and borrowings. For the nine months ended March 31, 2000, a decline in deposit accounts used $14.3 million, whereas increase in repurchase agreements and borrowed funds provided $1.1 million and $6.2 million, respectively. For the nine months ended March 31, 1999, increases in deposits and borrowed funds provided $12.6 million and $23.1 million, respectively, whereas a decline in repurchase agreements used $5.7 million.

Capital Resources

Office of Thrift Supervision (OTS) regulations require savings institutions to maintain certain minimum levels of regulatory capital. An institution that fails to comply with its regulatory capital requirements must obtain OTS approval of a capital plan and can be subject to a capital directive and certain restrictions on its operations. At March 31, 2000, the minimum capital regulations require institutions to have tangible capital to total tangible assets of 1.5%; a minimum leverage ratio of core (Tier 1) capital to total adjusted tangible assets of 3.0%; and a minimum ratio of total capital (core capital and supplementary capital) to risk weighted assets of 8.0%, of which 4.0% must be core capital.

Under the prompt corrective action regulations, the OTS is required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on an institution's financial statements. The regulations establish a framework for the classification of savings institutions into five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Generally, an institution is considered well capitalized if it has a core (Tier 1) capital ratio of at least 5.0% (based on average total assets); a core (Tier 1) risk-based capital ratio of at least 6.0%; and a total risk-based capital ratio of at least 10.0%.

The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OTS about capital components, risk weightings and other factors.

At March 31, 2000, FFY Bank met all capital adequacy requirements to which it was subject. Further, the most recent OTS notification categorized FFY Bank as a well-capitalized institution under the prompt corrective action regulations. There have been no conditions or events since that notification that management believes have changed FFY Bank's capital classification.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in information about market risk from that provided in the 1999 Annual Report to Shareholders, which was incorporated by reference into FFY Financial Corp.'s 1999 Annual Report on Form 10-K.

PART II: OTHER INFORMATION
FFY FINANCIAL CORP.
MARCH 31, 2000

Item 1. Legal Proceedings

FFY Financial Corp. or FFY Holdings, Inc. is not a party to any material legal proceeding before any court or regulatory authority, administrative agency or other tribunal. Further, FFY Financial Corp. or FFY Holdings, Inc. is not aware of the threat of any such proceeding.

As part of its ordinary course of business, FFY Bank is a party to several lawsuits involving a variety of claims, including the collection of of delinquent accounts. No litigation is pending or, to FFY Bank's knowledge, threatened in which FFY Bank faces potential loss or exposure which would have a material impact on its financial condition or results of operations. FFY Bank is not involved in any administrative or judicial proceeding under any Federal, State or Local provisions which have been enacted or adopted relating to the protection of the environment.

Item 2. Changes in Securities

None to be reported.

Item 3. Defaults on Senior Securities

None to be reported.

Item 4. Submission of Matters to a Vote of Security Holders

None to be reported.

Item 5. Other Information

None to be reported.

Item 6. Exhibits and Reports on Form 8-K

A.    Exhibits: Exhibit 27 - Financial Data Schedule.

B.    Reports on Form 8-K: On January 18, 2000, the Registrant announced earnings of $2.0 million, or $0.30 per diluted share for the quarter ended December 31, 1999 and its regular quarterly dividend of 12.5 cents per share. Also announced was a stock repurchase program that would buy back up to $3.0 million of the Registrant's common stock in open market transactions over a twelve month period beginning January 25, 2000.

Pursuant 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.

	FFY Financial Corp.
Date: May 12, 2000	By: /s/ Jeffrey L. Francis Jeffrey L. Francis President and Chief Executive Officer (Principal Executive Officer)
Date: May 12, 2000	By: /s/ Therese Ann Liutkus Therese Ann Liutkus Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)