SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[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 0-21170
FFW CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 35-1875502
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification or Number)
1205 North Cass Street, Wabash, IN 46992
(Address of principal executive offices)
(219) 563-3185
(Issuer's telephone number)
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 [ ]
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest date:
As of May 12, 2000 there were 1,423,527 shares of the Registrant's common stock
issued and outstanding.
FFW CORPORATION
INDEX
PART I. FINANCIAL INFORMATION (unaudited) PAGE NO.
Item 1. Consolidated Financial Statements (Condensed)
Consolidated Balance Sheets March 31, 2000 3
and June 30, 1999
Consolidated Statements of Income for the 4
three months and nine months ended March 31, 2000 and 1999.
Consolidated Statements of Cash Flows for the nine 5
months ended March 31, 2000 and 1999.
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Change In Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submissions of Matter to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature page 14
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31 June 30
ASSETS : 2000 1999
- ------- ------------- -------------
Cash and due from financial institutions .................................. $ 4,247,360 $ 4,650,866
Interest-earning deposits in financial institutions - short term .......... 3,750,969 188,369
------------- -------------
Cash and cash equivalents ........................................ 7,998,329 4,839,235
Securities available for sale ............................................. 52,245,573 51,028,563
Loans receivable, net of allowance for loan losses of $1,566,205 in March
and $1,623,293 in June ........................................... 149,192,571 151,491,090
Stock in Federal Home Loan Bank, at cost .................................. 3,400,900 3,400,900
Accrued interest receivable ............................................... 1,420,311 1,616,479
Premises and equipment-net ................................................ 2,096,809 2,124,656
Investment in limited partnership .................................... 604,062 626,087
Other assets .............................................................. 2,718,347 2,361,884
------------- -------------
Total assets ............................................ $ 219,676,902 $ 217,488,894
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Non interest-bearing demand deposits ...................................... $ 9,323,479 $ 8,171,372
Savings, Now and MMDA deposits ............................................ 48,025,857 52,860,423
Other time deposits ....................................................... 76,729,973 69,369,558
------------- -------------
Total deposits ................................................... 134,079,309 130,401,353
Federal Home Loan Bank advances ........................................... 63,877,262 66,300,388
Obligation relative to limited partnership ........................... 75,000 75,000
Accrued interest payable .................................................. 1,045,589 196,256
Accrued expenses and other liabilities ................................... 1,366,393 1,159,057
------------- -------------
Total liabilities ................................................ 200,443,553 198,132,054
Shareholders' equity:
Preferred stock, $.01 par value, 500,000 shares authorized none issued .... -- --
Common stock, $.01 par value, 2,000,000 shares authorized, 1,798,513 shares
issued and 1,418,763 outstanding at March 31 2000; 1,785,288 shares
issued and 1,441,224 shares outstanding at June 30, 1999 ............. 17,985 17,853
Additional paid-in capital ............................................... 9,095,285 8,965,882
Retained earnings ......................................................... 15,121,807 13,970,694
Accumulated other comprehensive income .................................... (1,418,138) (455,386)
Unearned Employee Stock Ownership Plan shares ............................. 0 (52,331)
Treasury Stock at cost, 379,750 at March 31, 2000 and 344,064 at
June 30, 1999 .................................................... (3,583,590) (3,089,872)
------------- -------------
Total shareholders' equity ............................... 19,233,349 19,356,840
Total liabilities and shareholders' equity .............. $ 219,676,902 $ 217,488,894
============= =============
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PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
------------ ------------ ------------ ------------
Interest income:
Loans receivable, including fees
Mortgage loans ................................. $ 1,449,123 $ 1,494,289 $ 4,347,202 $ 4,633,047
Consumer and other loans ....................... 1,771,114 1,570,559 5,281,516 4,653,558
Securities
Taxable ........................................ 797,607 735,728 2,359,370 2,226,504
Nontaxable ..................................... 115,178 108,784 342,951 355,498
Other interest-earning assets ........................... 47,952 52,706 105,202 138,658
------------ ------------ ------------ ------------
Total interest income .......................... 4,180,974 3,962,066 12,436,241 12,007,265
Interest expense :
Deposits ................................................ 1,468,884 1,422,219 4,402,237 4,389,019
FHLB advances ........................................... 921,002 857,708 2,737,492 2,697,829
------------ ------------ ------------ ------------
Total interest expense
Net interest income .............................................. 1,791,088 1,682,139 5,296,512 4,920,417
Provision for loan losses ............................... 135,000 620,000 485,000 860,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses .............. 1,656,088 1,062,139 4,811,512 4,060,417
Non-interest income :
Net gains(losses) on sales of securities ................ -- 739,667 (34,224) 734,835
Net gains on sales of loans ............................. 979 31,395 7,993 138,287
Other income ............................................ 258,490 274,506 915,430 859,497
------------ ------------ ------------ ------------
Total non-interest income ...................... 259,469 1,045,568 889,199 1,732,619
Non-interest expense :
Compensation and benefits ............................... 536,068 518,289 1,550,080 1,560,396
Occupancy and equipment ................................. 94,205 92,379 284,683 278,005
Data processing ......................................... 122,611 126,546 343,376 347,311
Other expense ........................................... 325,732 510,658 973,250 1,166,574
------------ ------------ ------------ ------------
Total non-interest expense ..................... 1,078,616 1,247,872 3,151,389 3,352,286
------------ ------------ ------------ ------------
Income before income taxes ....................................... 836,941 859,835 2,549,322 2,440,750
Provision for income taxes .............................. 275,827 306,596 891,302 867,299
------------ ------------ ------------ ------------
Net income ....................................................... $ 561,114 $ 553,239 $ 1,658,020 $ 1,573,451
============ ============ ============ ============
Comprehensive income ............................................. $ 892,912 $ (98,149) $ 695,268 $ 1,040,989
============ ============ ============ ============
Earnings per common and common equivalent shares :
Basic ................................................... $ .39 $ .39 $ 1.16 $ 1.10
Diluted ................................................. $ .39 $ .38 $ 1.14 $ 1.08
Dividends ........................................ $ .12 $ .105 $ .36 $ .315
Diluted weighted average common shares outstanding 1,448,500 1,463,052 1,449,757 1,453,333
-4-
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31
2000 1999
------------ ------------
Cash flows from operating activities :
Net income ................................................. $ 1,658,020 $ 1,573,451
Adjustments to reconcile net income to net cash
from operating activities :
Depreciation and amortization, net of accretion ........ (21,962) (63,957)
Provision for loan losses .............................. 485,000 860,000
Net (gains) losses on sale of :
Securities available for sale ..................... 34,224 (734,835)
Loans held for sale ........................... (7,994) (138,287)
Foreclosed real estate and repossessed assets ..... (49,994) (32,859)
Origination of loans held for sale ..................... (984,300) (13,240,945)
Proceeds from sale of loans held for sale .............. 992,294 13,415,703
ESOP expenses .......................................... 126,981 235,706
Net change in accrued interest receivable and other
assets ....................................... 7,548 (685,573)
Amortization of goodwill and core deposit intangibles .. 117,261 117,261
Net change in accrued interest payable, accrued
expenses and other liabilities .................... 1,066,922 928,596
------------ ------------
Total adjustments ........................ 1,765,890 660,810
------------ ------------
Net cash from operating activities ................ 3,423,910 2,234,261
Cash flows from investing activities :
Proceeds from :
Sales/calls of securities available for sale ...... 2,980,941 11,569,123
Maturities of securities available for sale ....... 780,000 9,545,000
Purchase of :
Securities available for sale ............... (6,731,521) (23,879,883)
Federal Home Loan Bank Stock ...................... -- (675,000)
Principal collected on mortgage- backed securities ..... 252,211 433,442
Net change in loans receivable ......................... 1,379,790 (8,797,974)
Net purchases premises and equipment ................... (119,100) (110,754)
Investment in limited partnership ...................... -- (168,750)
Proceeds from sales of other real estate and
Repossessed assets ................................ 894,026 879,270
------------ ------------
Net cash from investing activities ................ (563,653) (11,205,526)
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PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Nine Months Ended
March 31
2000 1999
------------ ------------
Cash flows from financing activities :
Net increase in deposits ................................ 3,677,956 6,531,414
Proceeds from short-term borrowings ..................... 70,626,267 19,000,000
Payment on short-term borrowings ........................ (73,049,393) (12,000,000)
Purchase of Treasury Stock .............................. (493,718) (365,387)
Proceeds from exercising of stock options ............... 54,885 21,125
Cash dividends paid ..................................... (517,160) (455,411)
------------ ------------
Net cash from financing activities 298,837 12,731,741
------------ ------------
Net increase (decrease) in cash and cash equivalents................ 3,159,094 3,760,476
Cash and cash equivalents at beginning of period ................... 4,839,235 4,410,352
------------ ------------
Cash and cash equivalents at end of period ......................... $ 7,998,329 $ 8,170,828
============ ============
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FFW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation
S-B. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the Consolidated Financial Statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to represent fairly the financial condition of FFW Corporation as of
March 31, 2000 and June 30, 1999 and the results of its operations, for the
three and the nine months ended March 31, 2000 and 1999. Financial Statement
reclassifications have been made for the prior period to conform to
classifications used as of and for the period ended March 31, 2000.
Operating results for the three and nine months ended March 31, 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ended June 30, 2000.
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PART II
FFW CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The accompanying Consolidated Financial Statements includes the
accounts of FFW Corporation (the "Company") and its wholly owned subsidiaries,
First Federal Savings Bank of Wabash (the "Bank") and FirstFed Financial of
Wabash, Inc. All significant inter-company transactions and balances are
eliminated in consolidation. The Company's results of operations are primarily
dependent on the Bank's net interest margin, which is the difference between
interest income on interest-earning assets and interest expense on
interest-bearing liabilities. The Bank's net income is also affected by the
level of its non-interest expenses, such as employee compensation and benefits,
occupancy expenses, and other expenses.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the matters
discussed in this document, and other information contained in the Company's SEC
filings, may express "forward-looking statements." Those "forward-looking
statements" may involve risk and uncertainties, including statements concerning
future events, performance and assumptions and other statements that are other
than statements of historical facts. The Company wishes to caution readers not
to place undue reliance on any forward-looking statements, which speak only as
of the date made. Readers are advised that various factors--including, but not
limited to, changes in laws, regulations or generally accepted accounting
principles; the Company's competitive position within the markets served;
increasing consolidation within the banking industry; unforeseen changes in
interest rates; any unforeseen downturns in the local, regional or national
economies--could cause the Company's actual results or circumstances for future
periods to differ materially from those anticipated or projected.
The Company does not undertake - and specifically declines 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.
COMPARISON OF THREE-MONTH AND NINE-MONTH PERIODS
ENDED MARCH 31, 2000 AND 1999
Net income for the three-month and nine-month periods ended March 31,
2000 was $561,000 and $1,658,000 respectively, compared to $553,000 and
$1,573,000 for the equivalent periods in 1999. These moderate increases were
primarily the result of increases in net interest income and decreases in
provision for loan losses and non-interest expense, offset by a decrease in
non-interest income.
Diluted net income per common share increased by $0.01 to $0.39 for the
three month period ending March 31, 2000 when compared to the equivalent period
in 1999; whereas, diluted net income per common share increased to 1.14 for the
nine-month period ended March 31, 2000 from $1.08 for the nine months ended
March 31, 1999. Return on average shareholders' equity was 11.6% for the nine
months ended March 31, 2000, compared to 10.6% in 1999. The return on total
average assets was 1.01% for the nine months ended March 31, 2000, compared to
0.99% in 1999.
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NET INTEREST INCOME
The net interest income for the three-month period ended March 31,
2000, was $1,791,000, an increase of 6.5% over the same period in 1999,
resulting in a net yield of 3.46% compared to 3.29% in 1999. The net interest
income for the nine-month period ended March 31, 2000, was $5,296,000, an
increase of 7.6% over the same period in 1999, resulting in a net yield of 3.38%
compared to 3.24% in 1999.
Total average earning assets increased $2,563,000 and $6,444,000,
respectively, for the three-month and nine-month periods ended March 31, 2000,
over the comparative periods in 1999. Total average investment securities
increased $250,000 and $240,000, respectively for the three-month and nine-month
periods over one year ago. Total average loans increased $3,795,000 and
$7,099,000, respectively for the three-month and nine-month periods over one
year ago. The yields on total average earning assets were 8.07% and 7.74% for
the three month periods ended March 31, 2000, and 1999, and 7.93% and 7.90% for
the nine-month periods ended March 31, 2000, and 1999, respectively.
The following tables set forth consolidated information regarding
average balances and rates.
FFW Corp
Three Months Ending
3/31/2000 3/31/1999
Average Average Average Average
Interest-earning assets: Balance Interest Rate Balance Interest Rate
- ------------------------ ------- -------- ----- ------- -------- ----
Loans $152,062 $3,220 8.47% $148,267 $3,065 8.27%
Securities 53,063 913 6.88% 52,813 844 6.39%
Other interest-earning assets 2,201 48 8.72% 3,683 53 5.76%
------- ----- ---- ------- ----- ----
Total interest-earning assets 207,326 4,181 8.07% 204,763 3,962 7.74%
Non interest-earning assets
Cash and due from 5,442 4,519
Allowance for loan losses (1,555) (1,186)
Other non interest-earning assets 6,076 6,662
------- --------
Total assets $217,289 $214,758
======= ========
Interest-bearing liabilities:
- -----------------------------
Interest-bearing deposits $123,724 1,469 4.75% $121,658 1,422 4.68%
FHLB advances 64,381 921 5.72% 61,843 858 5.55%
------- ----- ---- ------- ----- ----
Total interest-bearing liabilities 188,105 2,390 5.08% 183,501 2,280 4.97%
Non interest-bearing deposit accounts 9,207 8,446
Other non interest-bearing liabilities 1,118 2,857
------- -------
Total liabilities 198,430 194,804
Shareholders' equity 18,859 19,954
------- -------
Total liabilities and shareholders equity $217,289 $214,758
======== ========
Net interest income $1,791 $1,682
====== ======
Net interest margin 3.46% 3.29%
==== ====
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FFW Corp
Nine Months Ending
3/31/2000 3/31/1999
Average Average Average Average
Interest-earning assets: Balance Interest Rate Balance Interest Rate
- ------------------------ ------- -------- ----- ------- -------- ----
Loans ........................................ $153,570 $9,629 8.36% $146,471 $9,286 8.45%
Securities ................................... 53,554 2,702 6.73% 53,314 2,582 6.46%
Other interest-earning assets ................ 1,912 105 7.32% 2,807 139 6.60%
------- ----- ---- ------- ----- ----
Total interest-earning assets ........... 209,036 12,436 7.93% 202,592 12,007 7.90%
Non interest-earning assets
Cash and due from ............................ 5,778 4,441
Allowance for loan losses .................... (1,595) (1,096)
Other non interest-earning assets ............ 6,381 6,804
------- -------
Total assets ............................ $219,600 $212,741
======== ========
Interest-bearing liabilities:
- -----------------------------
Interest-bearing deposits .................... $124,824 4,402 4.70% $120,081 4,389 4.87%
FHLB advances ................................ 65,184 2,738 5.60% 61,726 2,698 5.83%
------- ----- ---- ------- ----- ----
Total interest-bearing liabilities ...... 190,008 7,140 5.01% 181,807 7,087 5.20%
Non interest-bearing deposit accounts ........ 8,991 7,940
Other non interest-bearing liabilities ....... 1,504 3,230
-------- --------
Total liabilities ....................... 200,503 192,977
Shareholders' equity ......................... 19,097 19,764
-------- --------
Total liabilities and shareholders equity $219,600 $212,741
======== ========
$ 5,296 $4,920
Net interest income .......................... ======== ======
Net interest margin .......................... 3.38% 3.24%
==== ====
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PROVISION FOR LOAN LOSSES
The provision for loan losses for the three-month period ended March
31, 2000 and 1999, was $135,000 and $485,000, respectively, and was $620,000 and
$860,000 for the nine-month periods ended March 31, 2000 and 1999. Net
charge-offs of $141,000 have been recorded for the three-month period ended
March 31, 2000, compared to $124,000 of net charge-offs for the same period in
1999. Year-to-date net charge-offs of $542,000 have been recorded in the
nine-month period ended March 31, 2000, compared to net charge-offs of $234,000
for the comparative period ended March 31, 1999. The allowance for loan losses
was $1,566,000 or 1.04% of net loans as of March 31, 2000, compared to
$1,623,060 or 1.07% of net loans at June 30, 1999.
Non-performing assets at March 31, 2000, were $364,000 compared to
$842,000 at June 30, 1999, a decrease of 56.7%. At March 31, 2000,
non-performing assets were .24% of net loans compared to .56% at June 30, 1999.
It is management's opinion that the allowance for loan losses is adequate to
absorb existing losses in the loan portfolio as of March 31, 2000.
NON-INTEREST INCOME
Non-interest income for the three-month periods ended March 31, 2000
and 1999 was $259,000 and $889,000, respectively, and for the nine-month periods
was $1,046,000 in 2000 and $1,733,000 in 1999. These decreases from the prior
period are primarily the result of an early call on a mortgage-backed security
during March 1999, resulting in a gain of $732,000 during the prior period.
NON-INTEREST EXPENSE
Non-interest expense for the three-month period ended March 31, 2000,
was $1,079,000, a decrease of 13.5% compared to the same period in 1999 and was
$3,151,000 for the nine-month period ended March 31, 2000, a decrease of 6.0%
from 1999. For the nine-month period ended March 31, 2000, compensation and
employee benefits decreased 0.7%, occupancy and equipment expense increased
2.4%, data processing expense decreased 1.1% and other non-interest expense
decreased 16.6% over the same period in 1999. Other non-interest expense
decreased due primarily to a $130,000 write down of repossessed assets during
the prior period.
INCOME TAXES
The provision for income taxes for the three-month and nine-month
periods ended March 31, 2000, was $276,000 and $891,000, respectively, compared
to $307,000 and $867,000 for the comparable periods in 1999. The provision for
income taxes for the nine months ended March 31, 2000, is at a rate which
management believes approximates the effective rate for the year ending June 30,
2000.
REGULATORY CAPITAL REQUIREMENTS
Pursuant to the Financial Institution Reform, Recovery, and Enforcement
Act of 1989 ("FIRREA"), savings institutions must meet three separate minimum
capital-to-asset requirements. As of March 31, 2000, the Bank maintains
risk-based, core capital and tangible capital ratios of 13.15%, 7.68% and 7.68%
compared to capital requirements of 8.00%, 4.00% and 1.50%, respectively.
-11-
LIQUIDITY AND CAPITAL RESOURCES
The standard measure of liquidity for savings associations is the ratio of cash
and eligible investments to a certain percentage of net withdrawalable savings
accounts and borrowings due within one year. The minimum required ratio is
currently set by the Office of Thrift Supervision Regulation at 5.0%. At March
31, 2000, the Bank's liquidity ratio was 8.78%.
-12-
Part II - Other Information
---------------------------
As of March 31, 2000, management is not aware of any current
recommendations by regulatory authorities which, if they were to be implemented,
would have or are reasonably likely to have a material adverse effect on the
Company's liquidity, capital resources or operations.
Item 1 - Legal Proceedings
-----------------
Not Applicable.
Item 2 - Changes in Securities
---------------------
Not Applicable.
Item 3 - Defaults upon Senior Securities
-------------------------------
Not Applicable.
Item 4 - Submission of Matters to a vote of Security Holders
---------------------------------------------------
Not Applicable
Item 5 - Other Information
-----------------
Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
Not Applicable
-13-
SIGNATURES
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.
FFW CORPORATION
Registrant
Date: May 15, 2000 /S/Roger K. Cromer
------------ ------------------
Roger K. Cromer
Acting President and CEO/Treasurer and
Chief Financial Accounting Officer
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