SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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
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(Exact name of small business issuer as specified in its charter)
Delaware 35-1875502
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification or Number)
1205 North Cass Street, Wabash, IN 46992
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(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 8, 2001, there were 1,417,878 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 March 31, 2001 3
and June 30, 2000
Consolidated Statements of Income for the three and
4 nine months ended March 31, 2001 and 2000.
Consolidated Statements of Cash Flows for the nine 5
months ended March 31, 2001 and 2000.
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)
- ------- March 31 June 30
2001 2000
---- ----
Cash and due from financial institutions .................................... $ 5,290,097 $ 4,152,652
Interest-earning deposits in financial institutions - short term ............ 2,773,693 1,101,766
------------- -------------
Cash and cash equivalents ..................................... 8,063,790 5,254,418
Securities available for sale ............................................... 61,262,425 52,026,138
Loans receivable, net of allowance for loan losses of $1,602,340 at March 31
and $1,961,318 at June 30 ..................................... 152,587,097 150,810,106
Federal Home Loan Bank stock, at cost ....................................... 3,400,900 3,400,900
Accrued interest receivable ................................................. 1,421,946 1,666,265
Premises and equipment-net .................................................. 2,043,071 2,028,386
Investment in limited partnership ............................................ 523,754 561,254
Other assets ................................................................ 2,201,962 3,289,565
------------- -------------
Total Assets ................................... $ 231,504,945 $ 219,037,032
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Non-interest-bearing demand deposits ........................................ $ 9,246,874 $ 8,875,968
Savings, NOW and MMDA deposits .............................................. 46,632,351 48,198,026
Other time deposits ......................................................... 88,377,362 76,030,606
------------- -------------
Total Deposits ................................................ 144,256,587 133,104,600
Federal Home Loan Bank advances ............................................. 62,667,542 64,167,542
Obligation relative to limited partnership ................................... 0 75,000
Accrued interest payable .................................................... 1,204,892 285,680
Accrued expenses and other liabilities ...................................... 1,547,211 1,789,290
-------------
Total Liabilities ............................................. 209,676,232 199,422,112
Shareholders' Equity:
Preferred stock, $.01 par value, 500,000 shares authorized none issued ...... -- --
Common stock, $.01 par value, 2,000,000 shares authorized, 1,829,828 shares
issued and 1,427,878 shares outstanding at March 31, 2001; 1,807,013
shares issued and 1,423,627 shares outstanding at June 30, 2000 ........ 18,298 18,070
Additional paid-in capital .................................................. 9,341,335 9,228,128
Retained earnings - substantially restricted ................................ 16,043,465 15,547,131
Accumulated other comprehensive income (loss) ................................ 343,599 (1,479,969)
Unearned Management Retention Plan shares ................................... (55,807) (72,354)
Treasury Stock at cost, 401,950 shares on March 31, 2001 and
383,386 shares on June 30, 2000 ............................... (3,862,177) (3,626,086)
------------- -------------
Total Shareholders' equity .................................. 21,828,713 19,614,920
Total Liabilities and Shareholders' Equity ..... $ 231,504,945 $ 219,037,032
============= =============
3
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
2001 2000 2001 2000
---- ---- ---- ----
Interest Income :
Loans receivable
Mortgage loans ........... $ 1,535,676 $ 1,449,123 $ 4,569,383 $ 4,347,202
Consumer and other loans . 1,824,714 1,771,114 5,553,516 5,281,516
Securities
Taxable .................. 873,883 797,607 2,553,247 2,359,370
Nontaxable ............... 112,984 115,178 345,246 342,951
Other interest-earning assets .......... 42,523 47,952 126,213 105,202
------------ ------------ ------------ ------------
Total Interest Income .... 4,389,780 4,180,974 13,147,605 12,436,241
Interest Expense :
Deposits ............................... 1,796,649 1,468,884 5,207,876 4,402,237
Other .................................. 915,625 921,002 2,862,619 2,737,492
------------ ------------ ------------ ------------
Total Interest Expense ... 2,712,274 2,389,886 8,070,495 7,139,729
------------ ------------ ------------ ------------
Net Interest Income ................................... 1,677,506 1,791,088 5,077,110 5,296,512
Provision for loan losses .............. 225,000 135,000 1,470,000 485,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses ... 1,452,506 1,656,088 3,607,110 4,811,512
Non-interest income :
Net gain (loss) on sale of securities .. (6,246) -- (22,197) (34,224)
Net gain (loss) on sale of loans ....... 26,161 979 47,349 7,993
Other .................................. 293,142 258,490 878,270 915,430
------------ ------------ ------------ ------------
Total Non-Interest Income 313,057 259,469 903,422 889,199
Non-Interest Expense :
Compensation and benefits .............. 496,190 536,068 1,506,461 1,550,080
Occupancy and equipment ................ 99,902 94,205 301,528 284,683
Data processing expense ............... 121,067 122,611 352,542 343,376
Other .................................. 321,817 325,732 1,007,156 973,250
------------ ------------ ------------ ------------
Total Non-Interest Expense 1,038,976 1,078,616 3,167,687 3,151,389
------------ ------------ ------------ ------------
Income before income taxes ............................ 726,587 836,941 1,342,845 2,549,322
Income Tax Expense ..................... 160,905 275,827 284,950 891,302
------------ ------------ ------------ ------------
Net Income ............................................ $ 565,682 $ 561,114 $ 1,057,895 $ 1,658,020
============ ============ ============ ============
Comprehensive Income .................................. $ 1,211,535 $ 892,912 $ 2,881,463 $ 695,268
============ ============ ============ ============
Earnings per common share :
Basic .................................. $ .39 $ .39 $ .74 $ 1.16
Diluted ................................ $ .39 $ .39 $ .73 $ 1.14
4
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31
2001 2000
---- ----
Cash flows from operating activities :
Net Income ...................................................... $ 1,057,895 $ 1,658,020
Adjustments to reconcile net income to net cash
From operating activities :
Depreciation and amortization, net of accretion ............ (24,964) (21,962)
Provision for loan losses .................................. 1,470,000 485,000
Net (gains) losses on sale of :
Securities available for sale ..................... 22,197 34,224
Loans held for sale ............................... (47,349) (7,994)
Foreclosed real estate owned & repossessed assets . 2,135 (49,994)
Origination of loans held for sale ......................... (4,528,265) (984,300)
Proceeds from sale of loans held for sale .................. 4,575,614 992,294
ESOP expenses .............................................. 0 126,981
Net change in accrued interest receivable and other
assets ............................................ 320,471 7,458
Amortization of goodwill and core deposit intangibles ...... 120,825 117,261
Amortization of MRPs ....................................... 17,891 15,127
Net change in accrued interest payable, accrued
expenses and other liabilities .................... 677,133 1,051,795
------------ ------------
Total adjustments .................. 2,605,688 1,765,890
------------ ------------
Net cash from operating activities ................ 3,663,583 3,423,910
Cash flows from investing activities :
Proceeds from :
Sales/calls of securities available for sale ...... 13,789,842 2,980,941
Maturities of securities available for sale ....... 745,000 780,000
Purchase of :
Securities available for sale .................... (20,959,138) (6,731,521)
Principal collected on mortgage- backed securities ......... 358,546 252,211
Net change in loans receivable ............................. (3,839,484) 1,379,790
Net purchases premises and equipment ....................... (163,302) (119,100)
Investment in limited partnership .......................... (75,000) 0
Proceeds from sales of other real estate and
repossessed assets ................................ 322,899 894,026
------------ ------------
Net cash from investing activities ................ (9,820,637) (563,653)
5
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Nine Months Ended
March 31
2001 2000
---- ----
Cash flows from financing activities :
Net increase in deposits .................. $ 11,151,987 $ 3,677,956
Proceeds from borrowings .................. 49,500,000 70,626,267
Payment on borrowings ..................... (51,000,000) (73,049,393)
Purchase of treasury stock ................ (245,000) (493,718)
Proceeds from exercising of stock options . 121,000 54,885
Cash dividends paid ....................... (561,561) (517,160)
------------ ------------
Net cash from financing activities 8,966,426 298,837
Net change in cash and cash equivalents ....................... 2,809,372 3,159,094
Cash and cash equivalents at beginning of period .............. 5,254,418 4,839,235
------------ ------------
Cash and cash equivalents at end of period .................... $ 8,063,790 $ 7,998,329
============ ============
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 March 31, 2001 and June 30, 2000 and the results of its
operations, for the three and nine months ended March 31, 2001 and 2000.
Financial Statement reclassifications have been made for the prior period to
conform to classifications used as of and for the period ended March 31, 2001.
Operating results for the three and nine months ended March 31,
2001 are not necessarily indicative of the results that may be expected for the
fiscal year ending 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 NINE-MONTH PERIODS
ENDED MARCH 31, 2001 AND 2000
Net income for the three-month and nine-month periods ended March
31, 2001 was $566,000 and $1,058,000 compared to net income of $561,000 and
$1,658,000 for the equivalent periods in 2000. The substantial decrease for the
nine-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 earnings per common share were $0.39 for the three-month
period ending March 31, 2001 as compared to diluted earnings per common share of
$0.39 for the equivalent period in 2000. For the comparable nine-month periods,
diluted earnings per common share were $0.73 in 2001 and $1.14 in 2000. Return
on average shareholders' equity was 10.91% for the three months and 6.96% for
the nine months ended March 31, 2001, compared to 11.96% and 11.56% in 2000. The
return on total average assets was 1.01% for the three months and 0.63% for the
nine months ended March 31, 2001, compared to 1.02% and 1.01% in 2000.
8
NET INTEREST INCOME
The net interest income for the three-month period ended March
31, 2001, was $1,677,000 compared to $1,791,000, a decrease of 6.4% over the
same period in 2000, resulting in a net yield of 3.13% compared to 3.46% in
2000. The net interest income for the nine-month period ended March 31, 2001,
was $5,077,000 compared to $5,296,000, a decrease of 4.1% over the same period
in 2000, resulting in a net yield of 3.16% compared to 3.36% in 2000.
Total average earning assets increased $9,389,000 and $4,199,000,
respectively, for the three-month and nine-month periods ended March 31, 2001,
over the comparative periods in 2000. Total average investment securities
increased $7,466,000 and $3,218,000, respectively, for the three-month and
nine-month periods over one-year ago. Total average loans increased $2,248,000
and $834,000, respectively, for the three-month and nine-month periods over
one-year ago. The yields on total average earning assets were 8.19% and 8.08%
for the three-month periods ended March 31, 2001, and 2000 and 8.19% and 7.90%
for the nine-month periods.
The following tables set forth consolidated information regarding
average balances and rates.
FFW Corp
Three Months Ending
(In Thousands)
March 31, 2001 March 31, 2000
Average Average Average Average
Interest-earning assets: Balance Interest Rate Balance Interest Rate
- ------------------------ ------- -------- -------- ------- -------- --------
Loans $153,931 $3,361 8.86% $151,683 $3,221 8.54%
Securities 60,274 986 6.63% 52,808 912 6.95%
Other interest-earning assets 3,187 42 5.34% 3,512 48 5.50%
------ ----- ----------- -----
Total interest-earning assets 217,392 4,389 8.19% 208,003 4,181 8.08%
Non interest-earning assets
Cash and due from 4,485 4,713
Allowance for loan losses (1,810) (1,521)
Other non interest-earning assets 6,476 6,981
-------- --------
Total assets $226,543 $218,176
======== ========
Interest-bearing liabilities:
Interest-bearing deposits $133,099 1,797 5.48% $123,723 1,469 4.78%
FHLB advances 62,210 915 5.97% 64,402 921 5.75%
------- ---- --------- -----
Total interest-bearing liabilities 195,309 2,712 5.63% 188,125 2,390 5.11%
-------- ------ --------- -----
Non interest-bearing deposit accounts 8,635 8,945
Other non interest-bearing liabilities 1,579 2,535
------ ---------
Total liabilities 205,523 199,605
Shareholders' equity 21,020 18,571
------- ---------
Total liabilities and shareholders equity $226,543 $218,176
========= ========
Net interest income $ 1,677 $1,791
======== ======
Net interest margin 3.13% 3.46%
===== =====
9
FFW Corp
Nine Months Ending
(In Thousands)
March 31, 2001 March 31, 2000
Average Average Average Average
Interest-earning assets: Balance Interest Rate Balance Interest Rate
- ------------------------ ------- -------- ------- ------- -------- ----
Loans $154,231 $10,123 8.74% $153,397 $9,629 8.35%
Securities 56,746 2,898 6.80% 53,528 2,702 6.72%
Other interest-earning assets 2,811 126 5.97% 2,664 105 5.25%
-------- -------- -------- -------
Total interest-earning assets 213,788 13,147 8.19% 209,589 12,436 7.90%
Non interest-earning assets
Cash and due from 4,457 5,471
Allowance for loan losses (2,128) (1,567)
Other non interest-earning assets 6,656 6,833
------ --------
Total assets $222,773 $220,326
========= ========
Interest-bearing liabilities:
Interest-bearing deposits $128,645 5,208 5.39% $125,019 4,402 4.69%
FHLB advances 62,636 2,862 6.09% 65,060 2,738 5.60%
------- ------ ------- ------
Total interest-bearing liabilities 191,281 8,070 5.62% 190,079 7,140 5.00%
-------- ------ -------- ------
Non interest-bearing deposit accounts 8,835 8,855
Other non interest-bearing liabilities 2,403 2,469
------ -----
Total liabilities 202,519 201,403
Shareholders' equity 20,254 18,923
------- ------
Total liabilities and shareholders equity $222,773 $220,326
========= ========
Net interest income $ 5,077 $5,296
======== ======
Net interest margin 3.16% 3.36%
===== =====
PROVISION FOR LOAN LOSSES
The provision for loan losses was $225,000 and $1,470,000,
respectively, for the three-month and nine-month periods ended March 31, 2001
and $135,000 and $485,000 for the same periods in 2000. The substantial
difference between the nine-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
$501,000 have been recorded for the three-month period ended March 31, 2001,
compared to $141,000 of net charge-offs for the same period in 2000. Net
charge-offs of $1,829,000 have been recorded for the nine-month period ended
March 31, 2001, compared to $542,000 of net charge-offs for the same period in
2000. The allowance for loan losses was $1,602,000 or 1.05% of net loans as of
March 31, 2001, 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 March 31, 2001, management
believes that the additional provision was adequate for these loans. Any
subsequent losses on the remaining individual lease receivables the Bank
continues to hold have been identified and are allocated for in the Company's
allowance for loan losses.
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 March 31, 2001.
NON-INTEREST INCOME
Non-interest income for the three-month periods ended March 31,
2001 and 2000 was $313,000 and $259,000, respectively, and for the nine-month
periods was $903,000 and $889,000. The increases from the prior periods are
primarily the result of an increase on gain on sale of loans.
NON-INTEREST EXPENSE
Non-interest expense for the three-month period ended March 31,
2001, was $1,039,000, a decrease of $40,000, 3.7%, compared to the same period
in 2000 and was $3,168,000 for the nine-month period ended March 31, 2001, an
increase of 0.5% from 2000. For the nine-month period ended March 31, 2001,
compensation and employee benefits decreased 2.8%, occupancy and equipment
expense increased 5.9%, data processing expense increased 2.7% and other
non-interest expense increased 3.5% over the same period in 2000.
INCOME TAXES
The provisions for income taxes for the three-month and
nine-month periods ended March 31, 2001, were $161,000 and $285,000,
respectively, compared to $276,000 and $891,000. 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 and the reapportionment
of interest affecting state taxes. 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 and FHLMC preferred stock.
The impact of these items is magnified in 2001 compared to the periods in 2000
due to 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 March 31, 2001, the Bank
maintains risk-based, core capital and tangible capital ratios of 13.64%, 7.88%
and 7.88% compared to capital requirements of 8.00%, 4.00% and 1.50%,
respectively.
12
Part II - Other Information
---------------------------
As of March 31, 2001, 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 10, 2001 /s/ Roger K. Cromer
--------------------- ---------------------
Roger K. Cromer
President and Chief Executive Officer
Date: May 10, 2001 /s/ Timothy A. Sheppard
--------------------- ------------------------
Timothy A. Sheppard
Treasurer and Chief Financial Accounting Officer