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 December 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 (I.R.S. Employer
of incorporation or organization) of incorporation 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 February 13, 2001, there were 1,424,627 shares of the Registrant's common
stock issued and outstanding.
FFW CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Condensed Financial Statements
Consolidated Balance Sheets December 31, 2000 3
and June 30, 2000
Consolidated Statements of Income for the three and 4
six months ended December 31, 2000 and 1999.
Consolidated Statements of Cash Flows for the six 5
months ended December 31, 2000 and 1999.
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Items 1-6 13
Signature Page 14
2
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS: (Unaudited)
- ------- December 31 June 30
2000 2000
------------- -------------
Cash and due from financial institutions......................................... $ 5,436,084 $ 4,152,652
Interest-earning deposits in financial institutions - short term................. 3,231,795 1,101,766
------------- -------------
Cash and cash equivalents ............................................. 8,667,879 5,254,418
Securities available for sale ................................................... 51,082,951 52,026,138
Loans receivable, net of allowance for loan losses of $1,878,143 at December 31
and $1,961,318 at June 30 ............................................. 151,317,820 150,810,106
Federal Home Loan Bank stock, at cost ........................................... 3,400,900 3,400,900
Accrued interest receivable ..................................................... 1,537,225 1,666,265
Premises and Equipment-net....................................................... 2,084,732 2,028,386
Investment in limited partnership............................................. 536,254 561,254
Other assets .................................................................... 2,721,366 3,289,565
------------- -------------
Total Assets................................................. $ 221,349,127 $ 219,037,032
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Liabilities:
Non-interest-bearing demand deposits............................................. $ 8,956,432 $ 8,875,968
Savings, NOW and MMDA deposits................................................... 46,379,740 48,198,026
Other time deposits.............................................................. 83,855,474 76,030,606
------------- -------------
Total Deposits......................................................... 139,191,646 133,104,600
Federal Home Loan Bank advances ................................................. 59,667,542 64,167,542
Obligation relative to limited partnership....................................... 0 75,000
Accrued Interest Payable......................................................... 220,448 285,680
Accrued expenses and other liabilities........................................... 1,341,020 1,789,290
------------- -------------
Total Liabilities ..................................................... 200,420,656 199,422,112
Shareholders' Equity:
Preferred stock, $.01 par value, 500,000 shares authorized none issued .......... -- --
Common stock, $.01 par value, 2,000,000 shares authorized, 1,808,013 shares
issued and 1,424,627 shares outstanding at December 31, 2000; 1,807,013
shares issued and 1,423,627 shares outstanding at June 30, 2000 ............ 18,080 18,070
Additional paid-in capital....................................................... 9,233,118 9,228,128
Retained earnings - substantially restricted..................................... 15,666,007 15,547,131
Accumulated other comprehensive income........................................ (302,254) (1,479,969)
Unearned Management Retention Plan shares........................................ (60,394) (72,354)
Treasury Stock at cost, 383,386 shares on December 31, 2000 and
June 30, 2000.......................................................... (3,626,086) (3,626,086)
------------- -------------
Total Shareholders' equity....................................... 20,928,471 19,614,920
Total Liabilities and Shareholders' Equity .................. $ 221,349,127 $ 219,037,032
============= =============
3
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
2000 1999 2000 1999
---- ---- ---- ----
Interest Income :
Loans Receivable
Mortgage loans .................. $ 1,526,295 $ 1,449,903 $ 3,033,707 $ 2,898,079
Consumer and other loans ........ 1,859,357 1,746,465 3,728,802 3,510,402
Securities
Taxable ......................... 830,053 790,671 1,679,364 1,561,763
Nontaxable ...................... 119,485 115,139 232,262 227,773
Other Interest-earning assets ............. 54,375 24,443 83,690 57,250
----------- ------------ ----------- ------------
Total Interest Income ........... 4,389,565 4,126,621 8,757,825 8,255,267
Interest Expense :
Deposits .................................. 1,759,364 1,477,191 3,411,227 2,933,353
Other ..................................... 962,459 906,181 1,946,994 1,816,490
----------- ------------ ----------- ------------
Total Interest Expense .......... 2,721,823 2,383,372 5,358,221 4,749,843
----------- ------------ ----------- ------------
Net Interest Income .................................. 1,667,742 1,743,249 3,399,604 3,505,424
Provision for Loan Losses ................. 210,000 215,000 1,245,000 350,000
----------- ------------ ----------- ------------
Net interest income after provision for loan losses .. 1,457,742 1,528,249 2,154,604 3,155,424
Non-interest income :
Net gain (loss) on sale of securities ..... (15,951) 0 (15,951) (34,224)
Other ..................................... 311,223 357,509 606,316 663,954
----------- ------------ ----------- ------------
Total Non-Interest Income ....... 295,272 357,509 590,365 629,730
Non-Interest Expense:
Compensation and Benefits ................. 489,370 470,602 1,010,271 1,014,012
Occupancy and equipment ................... 105,099 95,691 201,626 190,478
Data Processing Expense ................... 116,247 113,204 231,475 220,765
Other ..................................... 344,473 326,505 685,339 647,518
----------- ------------ ----------- ------------
Total Non-Interest Expense ...... 1,055,189 1,006,002 2,128,711 2,072,773
----------- ------------ ----------- ------------
Income before income taxes ........................... 697,825 879,756 616,258 1,712,381
Income Tax Expense ........................ 171,018 316,891 124,045 615,475
Net Income ........................................... $ 526,807 $ 562,865 $ 492,213 $ 1,096,906
=========== ============ =========== ============
Comprehensive Income (Loss) .......................... $ 1,344,024 $ (137,366) $ 1,669,928 $ (197,644)
=========== ============ =========== ============
Earnings per common share :
Basic ..................................... $ .37 $ .40 $ .35 $ .77
Diluted ................................... $ .36 $ .39 $ .34 $ .76
4
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31
2000 1999
---------- -----------
Cash flows from operating activities:
Net Income ................................................... $ 492,213 $ 1,096,906
Adjustments to reconcile net income to net cash
From operating activities:
Depreciation and amortization, net of accretion .......... (26,766) (11,618)
Provision for loan losses ................................ 1,245,000 350,000
Net (gains) losses on sale of:
Securities available for sale ...................... 15,951 34,224
Loans held for sale ............................. (21,189) (7,015)
Foreclosed real estate owned & repossessed assets 0 (37,883)
Origination of loans held for sale ....................... (1,998,750) (890,400)
Proceeds from sale of loans held for sale ................ 2,019,939 897,415
ESOP expenses ............................................ 0 121,181
Net change in accrued interest receivable and other
assets .......................................... (103,244) (143,994)
Amortization of goodwill and core deposit intangibles .... 79,065 78,174
Net change in accrued interest payable, accrued
expenses and other liabilities ..................... (501,542) 290,618
---------- -----------
Total adjustments ........................ 708,464 680,702
---------- -----------
Net cash from operating activities ................. 1,200,677 1,777,608
Cash flows from investing activities :
Proceeds from:
Sales/calls of securities available for sale ....... 4,283,594 2,980,941
Maturities of securities available for sale ........ 405,000 780,000
Purchase of:
Securities available for sale ...................... (1,888,428) (4,096,398)
Federal Home Loan Bank stock ....................... 0 0
Principal collected on mortgage- backed securities ....... 204,212 173,427
Net change in loans receivable ........................... (1,980,809) (956,089)
Net purchases premises and equipment ..................... (156,863) (44,078)
Investment in limited partnership ........................ (75,000) 0
Proceeds from sales of other real estate and
Repossessed assets ................................. 202,369 603,795
---------- -----------
Net cash from investing activities ................. 994,075 (558,402)
5
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Six Months Ended
December 31
2000 1999
---- ----
Cash flows from financing activities :
Net increase in deposits........................... $ 6,087,046 $ 5,324,563
Proceeds from borrowings .......................... 35,560,400 38,747,898
Payment on borrowings.............................. (40,060,400) (39,171,024)
Purchase of treasury stock ....................... 0 (442,024)
Proceeds from exercising of stock options ........ 5,000 54,885
Cash dividends paid .............................. (373,337) (345,468)
------------ ------------
Net cash from financing activities .......... 1,218,709 4,168,830
Net increase (decrease) in cash and cash equivalents .......... 3,413,461 5,388,036
Cash and cash equivalents at beginning of period .............. 5,254,418 4,839,235
------------ ------------
Cash and cash equivalents at end of period .................... $ 8,667,879 $ 10,227,271
============ ============
6
FFW CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited Consolidated Condensed 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 Condensed Financial
Statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to represent fairly the financial condition of FFW
Corporation as of December 31, 2000 and June 30, 2000 and the results of its
operations, for the three and six months ended December 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 December 31,
2000.
Operating results for the three and six months ended December 31, 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ended June 30, 2001.
7
PART II
FFW CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The accompanying Consolidated Condensed Financial Statements include
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 SIX-MONTH PERIODS
ENDED DECEMBER 31, 2000 AND 1999
Net income for the three-month and six-month periods ended December 31,
2000 was $527,000 and $492,000 compared to net income of $563,000 and $1,097,000
for the equivalent periods in 1999. The substantial decrease for the six-month
period was primarily the result of a $900,000 increase in the provision for loan
loss incurred in the period ended September 30, 2000.
Diluted net income per common share was $0.36 for the three-month
period ending December 31, 2000 as compared to diluted net income per common
share of $0.39 for the equivalent period in 1999. For the comparable six-month
periods, diluted net income per common share was $0.34 in 2000 and $0.76 in
1999. Return on average shareholders' equity was 10.56% for the three months and
4.91% for the six months ended December 31, 2000, compared to 11.89% and 11.36%
in 1999. The return on total average assets was 0.94% for the three months and
0.44% for the six months ended December 31, 2000, compared to 1.00% and 0.99% in
1999.
8
NET INTEREST INCOME
The net interest income for the three-month period ended December 31,
2000, was $1,668,000 compared to $1,743,000, a decrease of 4.3% over the same
period in 1999, resulting in a net yield of 3.10% compared to 3.30% in 1999. The
net interest income for the six-month period ended December 31, 2000, was
$3,400,000 compared to $3,505,000, a decrease of 3.0% over the same period in
1999, resulting in a net yield of 3.18% compared to 3.31% in 1999.
Total average earning assets increased $3,114,000 and $1,604,000,
respectively, for the three-month and six-month periods ended December 31, 2000,
over the comparative periods in 1999. Total average investment securities
increased $900,000 and $1,094,000, respectively, for the three-month and
six-month periods over one-year ago. Total average loans increased $464,000 and
$127,000, respectively, for the three-month and six-month periods over one-year
ago. The yields on total average earning assets were 8.15% and 7.80% for the
three-month periods ended December 31, 2000, and 1999 and 8.20% and 7.80% for
the six-month periods.
The following tables set forth consolidated information regarding
average balances and rates.
FFW Corp
Three Months Ending
(In Thousands)
December 31, 2000 December 31, 1999
--------------------------------- ---------------------------------
Average Average Average Average
Interest-earning assets: Balance Interest Rate Balance Interest Rate
- ------------------------ ------- -------- ---- ------- -------- ----
Loans $154,703 $3,385 8.68% $154,239 $3,197 8.25%
Securities 54,623 950 6.90% 53,723 906 6.71%
Other interest-earning assets 4,214 54 5.08% 2,464 24 3.87%
-------- ------ -------- ------
Total interest-earning assets 213,540 4,389 8.15% 210,426 4,127 7.80%
Non interest-earning assets
Cash and due from 3,874 6,537
Allowance for loan losses (2,529) (1,547)
Other non interest-earning assets 7,640 6,859
-------- --------
Total assets $222,525 $222,275
======== ========
Interest-bearing liabilities:
Interest-bearing deposits $128,398 1,759 5.44% $126,326 1,477 4.65%
FHLB advances 61,681 962 6.19% 64,829 907 5.57%
-------- ------ -------- ------
Total interest-bearing liabilities 190,079 2,721 5.68% 191,155 2,384 4.96%
-------- ------ -------- ------
Non interest-bearing deposit accounts 8,675 8,782
Other non interest-bearing liabilities 3,971 3,556
-------- --------
Total liabilities 202,725 203,493
Shareholders' equity 19,800 18,782
-------- --------
Total liabilities and shareholders equity $222,525 $222,275
-------- --------
Net interest income $1,668 $1,743
====== ======
Net interest margin 3.10% 3.30%
===== =====
9
FFW Corp
Six Months Ending
(In Thousands)
December 31, 2000 December 31, 1999
---------------------------------- ---------------------------------
Average Average Average Average
Interest-earning assets: Balance Interest Rate Balance Interest Rate
- ------------------------ ------- -------- ---- ------- -------- ----
Loans $154,381 $6,762 8.69% $154,254 $6,408 8.26%
Securities 54,982 1,912 6.90% 53,888 1,790 6.61%
Other interest-earning assets 2,623 84 6.35% 2,240 57 5.06%
-------- ------ -------- ------
Total interest-earning assets 211,986 8,758 8.20% 210,382 8,255 7.80%
Non interest-earning assets
Cash and due from 4,443 5,850
Allowance for loan losses (2,287) (1,590)
Other non interest-earning assets 6,746 6,759
-------- --------
Total assets $221,401 $220,888
======== ========
Interest-bearing liabilities:
Interest-bearing deposits $126,718 3,411 5.34% $125,532 2,933 4.65%
FHLB advances 62,849 1,947 6.15% 65,389 1,817 5.53%
-------- ------ -------- ------
Total interest-bearing liabilities 189,567 5,358 5.61% 190,921 4,750 4.95%
-------- ------ -------- ------
Non interest-bearing deposit accounts 8,935 8,810
Other non interest-bearing liabilities 2,515 2,571
-------- --------
Total liabilities 201,017 202,302
Shareholders' equity 19,871 19,099
-------- --------
Total liabilities and shareholders equity $220,888 $221,401
======== ========
Net interest income $3,400 $3,505
====== ======
Net interest margin 3.18% 3.31%
===== =====
PROVISION FOR LOAN LOSSES
The provision for loan losses was $210,000 and $1,245,000,
respectively, for the three-month and six-month periods ended December 31, 2000
and $215,000 and $350,000 for the same periods in 1999. The substantial
difference between the six-month amounts is due to an additional $900,000
provision taken in the period ending September 30, 2000 on loans to a single
borrower. Changes in the provision for loan losses are attributed to
management's analysis of the adequacy of the allowance for loan losses to
address recognizable and currently anticipated losses. Net charge-offs of
$1,229,000 have been recorded for the three-month period ended December 31,
2000, compared to $295,000 of net charge-offs for the same period in 1999. Net
charge-offs of $1,328,000 have been recorded for the six-month period ended
December 31, 2000, compared to $401,000 of net charge-offs for the same period
in 1999. The allowance for loan losses was $1,878,000 or 1.24% of net loans as
of December 31, 2000, compared to $1,962,000 or 1.30% of net loans at June 30,
2000.
10
Subsequent to September 30, 2000, the Company became aware of
circumstances that had occurred involving loans the Bank had originated to a
single borrower backed by collateral of automobiles and lease receivables. After
review, management concluded that these loans were impaired and necessitated an
increase of $900,000 in the Bank's provision for loan loss compared to the
three-month period ended September 30, 1999. As of December 31, 2000, management
believes that the additional provision was adequate for these loans and that any
subsequent losses associated with these loans will be covered within the
Company's ordinary loan loss provision.
The Company establishes an allowance for loan losses based on an
evaluation of risk factors in the loan portfolio and changes in the nature and
volume of its loan activity. This evaluation includes, among other factors, the
level of the Company's classified and non-performing assets and their estimated
value, the national outlook which may tend to inhibit economic activity and
depress real estate and other values in the Company's primary market area,
regulatory issues and historical loan loss experience. Accordingly, the
calculation of the adequacy of loan losses is not based directly on the level of
non-performing loans. Although management believes it uses the best information
available to determine the allowances, unforeseen market conditions or other
unforeseen events could result in adjustments and net earnings could be
significantly affected if circumstances differ substantially from the
assumptions used in making the determination. In addition, a determination by
the Company's main operating subsidiary, First Federal, as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the Office of Thrift Supervision, which may order the establishment of
additional general or specific reserve allowances. It is management's opinion
that the allowance for loan losses is adequate to absorb existing losses in the
loan portfolio as of December 31, 2000.
NON-INTEREST INCOME
Non-interest income for the three-month periods ended December 31, 2000
and 1999 was $295,000 and $358,000, respectively, and for the six-month periods
was $590,000 and $630,000. The decreases from the prior periods are primarily
the result of reduced commission income and the effect of recording losses from
the Company's investment in a low income housing limited partnership.
NON-INTEREST EXPENSE
Non-interest expense for the three-month period ended December 31,
2000, was $1,055,000, an increase of $49,000, 4.9%, compared to the same period
in 1999 and was $2,129,000 for the six-month period ended December 31, 2000, an
increase of 2.7% from 1999. For the six-month period ended December 31, 2000,
compensation and employee benefits decreased 0.4%, occupancy and equipment
expense increased 5.9%, data processing expense increased 4.9% and other
non-interest expense increased 5.8% over the same period in 1999.
INCOME TAXES
The provision for income taxes for the three-month and six-month
periods ended December 31, 2000, was $171,000 and $124,000, respectively,
compared to $317,000 and $615,000. Part of the reduction in the provision for
income taxes reflects benefits from tax credits on the Company's investment in a
low income housing limited partnership, the reapportionment of interest
affecting state taxes and the recognition of some deferred tax assets. The
reduction in the provision for income taxes is also greatly affected by the
impact of federal tax-free municipal interest and a dividend received deduction
on FNMA preferred stock. The impact of these items is magnified compared to the
periods in 1999 due to substantially lower income before taxes.
11
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 December 31, 2000, the Bank maintains
risk-based, core capital and tangible capital ratios of 13.61%, 7.98% and 7.98%
compared to capital requirements of 8.00%, 4.00% and 1.50%, respectively.
LIQUIDITY
The standard measure of liquidity for savings associations is the ratio of cash
and eligible investments to a certain percentage of net withdrawable 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
December 31, 2000, the Bank's liquidity ratio was 8.47%.
12
Part II - Other Information
As of December 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: February 13, 2001 /S/ Roger K. Cromer
-------------------------------- --------------------------
Roger K. Cromer
President and Chief
Executive Officer
Date: February 13, 2001 /S/ Timothy A. Sheppard
-------------------------------- --------------------------
Timothy A. Sheppard
Treasurer and Chief
Financial Accounting Officer
14