<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
-------------------------------------------
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 No. 0-27916
-------------
FFD FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1921148
- -------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
321 North Wooster Avenue
Dover, Ohio 44622
- -------------------------------- ------------------------
(Address of principal (Zip Code)
executive office)
Issuers' telephone number, including area code: (330) 364-7777
----------------
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
As of February 7, 1997, the latest practicable date, 1,454,750 shares of the
registrant's common stock, without par value, were issued and outstanding.
Page 1 of 14 pages
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<TABLE>
<CAPTION>
INDEX
Page
------
PART I - FINANCIAL INFORMATION
<S> <C>
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION 13
SIGNATURES 14
</TABLE>
2
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<TABLE>
<CAPTION>
FFD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
DECEMBER 31, JUNE 30,
ASSETS 1996 1996
<S> <C> <C>
Cash and due from banks $ 445 $ 905
Interest-bearing deposits in other financial institutions 3,621 1,793
-------- --------
Cash and cash equivalents 4,066 2,698
Investment securities available for sale - at market 9,659 9,256
Investment securities - at amortized cost, approximate
market value of $1,460 and $2,427 as of
December 31, 1996 and June 30, 1996 1,465 2,460
Mortgage-backed securities - at amortized cost, approximate
market value of $5,397 and $6,073 as of
December 31, 1996 and June 30, 1996 5,235 5,932
Mortgage-backed securities designated as available for sale - at market 12,717 9,007
Loans receivable - net 51,335 48,539
Office premises and equipment - at depreciated cost 681 545
Federal Home Loan Bank stock - at cost 619 598
Accrued interest receivable 333 283
Prepaid expenses and other assets 49 140
-------- --------
Total assets $ 86,159 $ 79,458
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $54,450 $ 52,208
Advances from the Federal Home Loan Bank 9,083 5,184
Accrued interest payable 98 37
Other liabilities 541 204
Accrued federal income taxes 16 40
Deferred federal income taxes 568 374
-------- --------
Total liabilities 64,756 58,047
Shareholders' equity
Preferred stock - authorized 1,000,000 shares without par
value; no shares issued -- --
Common stock - authorized 5,000,000 shares without par
value, 1,454,750 shares issued and outstanding -- --
Additional paid-in capital 14,132 14,132
Retained earnings - restricted 7,920 7,857
Unrealized gains on securities designated as available for sale,
net of related tax effects 934 586
Shares acquired by Employee Stock Ownership Plan (1,164) (1,164)
Shares acquired by Recognition and Retention Plan (419) --
-------- --------
Total shareholders' equity 21,403 21,411
-------- --------
Total liabilities and shareholders' equity $ 86,159 $ 79,458
======== ========
</TABLE>
3
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<TABLE>
<CAPTION>
FFD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
FOR THE SIX MONTHS FOR THE THREE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income
Loans $ 1,842 $ 1,654 $ 899 $ 841
Mortgage-backed securities 622 283 329 135
Investment securities and interest-bearing
deposits and other 438 227 254 111
------- ------- ------- -------
Total interest income 2,902 2,164 1,482 1,087
Interest expense
Deposits 1,295 1,218 657 616
Borrowings 241 1 134 --
------- ------- ------- -------
Total interest expense 1,536 1,219 791 616
------- ------- ------- -------
Net interest income 1,366 945 691 471
Provision for losses on loans -- 50 -- --
------- ------- ------- -------
Net interest income after provision for
losses on loans 1,366 895 691 471
Other operating income 26 18 16 10
General, administrative and other expense
Employee compensation and benefits 405 248 199 123
Occupancy and equipment 56 41 34 21
Federal deposit insurance premiums 374 57 12 29
Franchise taxes 56 51 25 25
Other operating 192 144 94 85
------- ------- ------- -------
Total general, administrative and other expense 1,083 541 364 283
------- ------- ------- -------
Earnings before income taxes 309 372 343 198
Federal income taxes
Current 86 157 96 50
Deferred 15 (31) 17 17
------- ------- ------- -------
Total federal income taxes 101 126 113 67
------- ------- ------- -------
NET EARNINGS $ 208 $ 246 $ 230 $ 131
======= ======= ======= =======
EARNINGS PER SHARE $ .16 N/A $ .17 N/A
======= ======= ======= =======
</TABLE>
4
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<TABLE>
<CAPTION>
FFD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended December 31,
(In thousands)
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 208 $ 246
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of discounts and premiums on loans,
investments and mortgage-backed securities - net 1 (6)
Amortization of deferred loan origination fees (28) (33)
Depreciation and amortization 23 20
Provision for losses on loans -- 50
Federal Home Loan Bank stock dividends (21) (20)
Increase (decrease) in cash due to changes in:
Accrued interest receivable (50) 9
Prepaid expenses and other assets 91 (22)
Accrued interest payable 61 21
Other liabilities 337 8
Federal income taxes
Current (24) 80
Deferred 15 (31)
------- -------
Net cash provided by operating activities 613 322
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 1,000 500
Purchase of mortgage-backed securities (4,737) --
Principal repayments on mortgage-backed securities 1,842 1,259
Loan principal repayments 4,627 4,386
Loan disbursements (7,395) (7,377)
Purchase of office premises and equipment (159) (15)
------- -------
Net cash used in investing activities (4,822) (1,247)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 2,242 1,384
Proceeds from Federal Home Loan Bank advances 4,600 --
Repayment of Federal Home Loan Bank advances (701) (1)
Purchase of shares for Recognition and Retention Plan (419) --
Dividends on common stock (145) --
------- -------
Net cash provided by financing activities 5,577 1,383
------- -------
Net increase in cash and cash equivalents 1,368 458
Cash and cash equivalents at beginning of period 2,698 3,880
------- -------
Cash and cash equivalents at end of period $ 4,066 $ 4,338
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 128 $ 78
======= =======
Interest on deposits and borrowings $ 1,475 $ 1,198
======= =======
Supplemental disclosure of noncash investing activities:
Unrealized gains on securities designated as available for
sale, net of related tax effects $ 348 $ 3
======= =======
</TABLE>
5
<PAGE> 6
FFD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended December 31, 1996 and 1995
On November 14, 1995, the Board of Directors of First Federal Savings Bank
of Dover (the Savings Bank) adopted a plan of conversion (the Plan) whereby
the Savings Bank would convert to the stock form of ownership, and issue all
of the Savings Bank's outstanding stock to a newly formed holding company,
FFD Financial Corporation (the Corporation). Pursuant to the Plan, the
Corporation offered for sale up to 1,454,750 common shares to certain
depositors of the Savings Bank and members of the community. The conversion
was completed on April 2, 1996, and resulted in the issuance of 1,454,750
common shares of the Corporation which, after consideration of offering
expenses totaling approximately $400,000, resulted in net proceeds of $14.2
million.
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-QSB and, therefore, do not
include information or footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Accordingly, these financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto of the Corporation included in the Annual
Report on Form 10-KSB for the year ended June 30, 1996. However, in the
opinion of management, all adjustments (consisting of only normal recurring
accruals) which are necessary for a fair presentation of the financial
statements have been included. The results of operations for the three and
six month periods ended December 31, 1996 and 1995 are not necessarily
indicative of the results which may be expected for an entire fiscal year.
2. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of
the Corporation and the Savings Bank. All significant intercompany items
have been eliminated.
3. Effects of Recent Accounting Pronouncements
-------------------------------------------
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", establishing financial accounting and reporting
standards for stock-based employee compensation plans. SFAS No. 123
encourages all entities to adopt a new method of accounting to measure the
compensation cost of all employee stock compensation plans based on the
estimated fair value of the award at the date it is granted. Companies are,
however, allowed to continue to measure compensation cost for those plans
using the intrinsic value based method of accounting, which generally does
not result in compensation expense recognition for most plans. Companies
that elect to remain with the existing accounting are required to disclose
in a footnote to the financial statements pro forma net earnings and, if
presented, earnings per share, as if SFAS No. 123 had been adopted. The
accounting requirements of SFAS No. 123 are effective for transactions
entered into during fiscal years that begin after December 15, 1995;
however, companies are required to disclose information for awards granted
in their first fiscal year beginning after December 15, 1994. Management has
determined that the Corporation will continue to account for stock-based
compensation pursuant to Accounting Principles Board Opinion No. 25, and
therefore SFAS No. 123 will have no effect on its consolidated financial
condition or results of operations.
6
<PAGE> 7
FFD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and six months ended December 31, 1996 and 1995
3. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers of
Financial Assets, Servicing Rights, and Extinguishment of Liabilities", that
provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities. SFAS No. 125 introduces an
approach to accounting for transfers of financial assets that provides a means
of dealing with more complex transactions in which the seller disposes of only a
partial interest in the assets, retains rights or obligations, makes use of
special purpose entities in the transaction, or otherwise has continuing
involvement with the transferred assets. The new accounting method, known as the
financial components approach, provides that the carrying amount of the
financial assets transferred be allocated to components of the transaction based
on their relative fair values. SFAS No. 125 provides criteria for determining
whether control of assets has been relinquished and whether a sale has occurred.
If the transfer does not qualify as a sale, it is accounted for as a secured
borrowing. Transactions subject to the provisions of SFAS No. 125 include, among
others, transfers involving repurchase agreements, securitizations of financial
assets, loan participations, factoring arrangements, and transfers of
receivables with recourse.
An entity that undertakes an obligation to service financial assets recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets, and all the securitized assets are retained and
classified as held-to-maturity). A servicing asset or liability that is
purchased or assumed is initially recognized at its fair value. Servicing assets
and liabilities are amortized in proportion to, and over the period of,
estimated net servicing income or net servicing loss and are subject to
subsequent assessments for impairment based on fair value.
SFAS No. 125 provides that a liability is removed from the balance sheet only if
the debtor either pays the creditor and is relieved of its obligation for the
liability or is legally released from being the primary obligor.
SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1997, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management does not believe that adoption of SFAS No. 125 will have a material
adverse effect on the Corporation's consolidated financial position or results
of operations.
4. Earnings Per Share
------------------
Earnings per share is computed based upon the weighted-average shares
outstanding during the period plus those stock options that are dilutive, less
shares in the FFD Financial Corporation Employee Stock Ownership Plan (the ESOP)
that are unallocated and not committed to be released. Weighted-average common
shares deemed outstanding, which gives effect to 116,380 unallocated ESOP
shares, totaled 1,338,370 for each of the three and six month periods ended
December 31, 1996. There is no dilutive effect associated with the Corporation's
stock option plan.
The provisions of Accounting Principles Board Opinion No. 15 "Earnings Per
Share" are not applicable to the three and six month periods ended December 31,
1995, as the Corporation completed its conversion from mutual to stock form in
April 1996.
7
<PAGE> 8
FFD FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from June 30, 1996 to December 31,
- -------------------------------------------------------------------------------
1996
- ----
The Corporation's total assets at December 31, 1996, amounted to $86.2 million,
a $6.7 million, or 8.4%, increase over the total at June 30, 1996. This increase
was funded primarily through an increase in advances from the Federal Home Loan
Bank (FHLB) of $3.9 million and growth in deposits of $2.2 million.
Cash and interest-bearing deposits totaled $4.1 million, an increase of $1.4
million over the total as of June 30, 1996. This increase resulted primarily
from the aforementioned FHLB advances and deposit growth.
Mortgage-backed securities totaled $18.0 million at December 31, 1996, a $3.0
million, or 20.2%, increase over the total at June 30, 1996. This increase
resulted from purchases totaling $4.7 million, which was partially offset by
principal repayments of $1.8 million.
Loans receivable totaled $51.3 million at December 31, 1996, an increase of $2.8
million, or 5.8%, over the June 30, 1996 total. Loan disbursements during the
period totaled $7.4 million, which were partially offset by principal repayments
of $4.6 million.
Deposits totaled $54.5 million at December 31, 1996, a $2.2 million, or 4.3%,
increase over June 30, 1996. This increase resulted primarily from management's
efforts to obtain moderate growth through advertising and pricing strategies.
FHLB advances increased by $3.9 million as management elected to fund purchases
of adjustable-rate mortgage-backed securities yielding 7.11% at the time of
purchase with short-term advances with a weighted-average rate of 5.48%.
8
<PAGE> 9
FFD FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from June 30, 1996 to December 31,
- ----------------------------------------------------------------------------
1996 (continued)
- -----
The Savings Bank is required to meet each of three minimum capital standards
promulgated by the Office of Thrift Supervision (OTS), hereinafter described as
the tangible capital requirement, the core capital requirement and the
risk-based capital requirement. The tangible capital requirement mandates
maintenance of shareholders' equity less all intangible assets equal to 1.5% of
adjusted total assets. The core capital requirement provides for the maintenance
of tangible capital plus certain forms of supervisory goodwill equal to 3% of
adjusted total assets, while the risk-based capital requirement mandates
maintenance of core capital plus general loan loss allowances equal to 8% of
risk-weighted assets as defined by OTS regulations.
At December 31, 1996, the Savings Bank's tangible and core capital totaled $12.3
million, or 15.7% of adjusted total assets, which exceeded the minimum
requirements of $1.2 million and $2.3 million by $11.1 million and $9.9 million,
respectively. The Savings Bank's risk-based capital of $12.4 million, or 33.8%
of risk-weighted assets, exceeded the current 8.0% requirement by $9.5 million.
Comparison of Operating Results for the Six Month Periods Ended December 31,
- -------------------------------------------------------------------------------
1996 and 1995
- -------------
General
- -------
The Corporation's net earnings totaled $208,000 for the six months ended
December 31, 1996, a decline of $38,000, or 15.4%, from the net earnings of
$246,000 recorded in the comparable period in 1995. The decline in net earnings
resulted primarily from a $332,000 charge recorded at September 30, 1996, as a
result of the legislative mandate to recapitalize the Savings Association
Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation (FDIC).
Additionally, general, administrative and other expense increased by $210,000.
These increased expense items were partially offset by a $421,000 increase in
net interest income, a $50,000 decrease in the provision for losses on loans and
a $25,000 decrease in the provision for federal income taxes.
Net Interest Income
- -------------------
Total interest income increased by $738,000, or 34.1%, to a total of $2.9
million for the six months ended December 31, 1996. Interest income on loans
increased by $188,000, or 11.4%, due primarily to a $6.5 million increase in the
average loan portfolio balance outstanding. Interest income on mortgage-backed
securities increased by $339,000, or 119.8%, due primarily to a $9.7 million
increase in the average balance outstanding. Interest income on investment
securities and interest-bearing deposits increased by $211,000, or 93.0%, due
primarily to a $6.5 million increase in the related investment balance. The
increases in interest-earning assets primarily reflect management's deployment
of proceeds from the common stock offering which was completed in April 1996
and FHLB advances.
Interest expense on deposits increased by $77,000, or 6.3%, for the six months
ended December 31, 1996, compared to 1995, due primarily to a $2.2 million
increase in the average deposit portfolio balance outstanding.
9
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FFD FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Six Month Periods Ended December 31,
- ----------------------------------------------------------------------------
1996 and 1995 (continued)
- -------------
Net Interest Income (continued)
- -------------------
Interest expense on borrowings increased by $240,000 due primarily to a $7.9
million increase in average advances outstanding, as management elected to fund
the purchase of mortgage-backed securities with such advances, as previously
discussed.
As a result of the foregoing, net interest income increased by $421,000, or
44.6%, for the six months ended December 31, 1996, compared to 1995. The
interest rate spread amounted to 2.09% for the six months ended December 31,
1996, compared to 2.60% for the comparable 1995 period, while the net interest
margin increased to 3.34% in 1996, compared to 3.21% in 1995.
Provision for Losses on Loans
- -----------------------------
The allowance for loan losses totaled $146,000 at both December 31, 1996 and
June 30, 1996, which represented .3% and .2% of total loans and 304.2% and
124.8% of nonperforming loans at those respective dates. A provision for losses
on loans is charged to earnings to bring the total allowance for losses on loans
to a level considered appropriate by management based on historical loss
experience, the volume and type of lending conducted by the Savings Bank, the
status of past due principal and interest payments, general economic conditions,
particularly as such conditions relate to the Savings Bank's market area, and
other factors related to the collectibility of the Savings Bank's loan
portfolio. As a result of such analysis, management concluded that the allowance
for loan losses was adequate and therefore did not record a provision for losses
on loans during the six month period ended December 31, 1996. There can be no
assurance that the loan loss allowance of the Savings Bank will be adequate to
cover losses on nonperforming assets in the future. The foregoing statement is a
"forward-looking" statement within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Factors that could affect the adequacy of the loan loss allowance
include, but are not limited to, the following: (1) changes in the national and
local economy which may negatively impact the ability of borrowers to repay
their loans and which may cause the value of real estate and other properties
that secure outstanding loans to decline; (2) unforeseen adverse changes in
circumstances with respect to certain large loan borrowers; (3) decreases in the
value of collateral securing consumer loans to amounts equal to less than the
outstanding balances of the consumer loans; and (4) determinations by various
regulatory agencies that the Savings Bank must recognize additions to its loan
loss allowance based on such regulators' judgment of information available to
them at the time of their examinations.
Other Operating Income
- ----------------------
Other operating income totaled $26,000 for the six months ended December 31,
1996, an increase of $8,000, or 44.4%, over the 1995 total. Other income
consists primarily of fees generated from late charges on loans, safety deposit
box rentals and negotiable order of withdrawal (NOW) account fees.
General, Administrative and Other Expense
- ---------------------------------------
General, administrative and other expense increased by $542,000, or 100.2%, for
the six months ended December 31, 1996, compared to the same period in 1995. The
increase resulted primarily from the aforementioned $332,000 charge to
recapitalize the SAIF, coupled with an increase of $157,000, or 63.3%, in
employee compensation and benefits, resulting primarily from the costs
associated with stock benefit plans implemented since the Conversion, and an
increase of $48,000, or 33.3%, in other operating expenses, which resulted
primarily from costs associated with the operation of the Corporation and the
annual reporting requirements of a public stock company.
10
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FFD FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Six Month Periods Ended December 31,
- --------------------------------------------------------------------------------
1996 and 1995 (continued)
- --------------
General, Administrative and Other Expense (continued)
- ------------------------------------------
Legislation to recapitalize the SAIF provided for a special assessment of $.657
per $100 of SAIF deposits held at March 31, 1995, in order to increase SAIF
reserves to the level required by law. The Savings Bank had approximately $49.2
million in deposits at March 31, 1995. The special assessment resulted in an
additional assessment of $332,000, or an after-tax charge of $219,000, which was
recorded in the quarter ended September 30, 1996 and paid in November 1996. The
legislation also provides for reduced premium rates for healthy savings
associations beginning in 1997, estimated to be a rate of $.064 per $100 of SAIF
insured deposits.
A component of the recapitalization plan provides for the merger of the SAIF and
the BIF on January 1, 1999, and for the elimination of the federal thrift
charter and of the separate federal regulation of thrifts. Pursuant to the
merger, the Savings Bank would then be required to convert to a new charter and
become subject to federal regulation as a bank. At this time, management is
unsure as to what, if any, impact the more restrictive activity limits and
capital requirements of federal banking law would have on the Savings Bank or
the Corporation.
Federal Income Taxes
- --------------------
The Corporation recorded a provision for federal income taxes totaling $101,000
for the six months ended December 31, 1996, a decrease of $25,000, or 19.8%,
from the same period in 1995. The decrease resulted primarily from a $63,000, or
16.9%, decline in earnings before taxes. The effective tax rates were 32.7% and
33.9% for the six months ended December 31, 1996 and 1995, respectively.
Comparison of Operating Results for the Three Month Periods Ended December 31,
- ------------------------------------------------------------------------------
1996 and 1995
- -------------
General
- -------
The Corporation's net earnings totaled $230,000 for the three months ended
December 31, 1996, an increase of $99,000, or 75.6%, over the comparable period
in 1995. The increase in net earnings resulted primarily from a $220,000
increase in net interest income and a $6,000 increase in other income, which
were partially offset by an $81,000 increase in general, administrative and
other expense and a $46,000 increase in the provision for federal income taxes.
11
<PAGE> 12
FFD FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods Ended December 31,
- ------------------------------------------------------------------------------
1996 and 1995 (continued)
- -------------
Net Interest Income
- -------------------
Total interest income increased by $395,000, or 36.3%, to a total of $1.5
million for the three months ended December 31, 1996. Interest income on loans
increased by $58,000, or 6.9%, due primarily to an increase in the average loan
portfolio balance outstanding. Interest income on mortgage-backed securities
increased by $194,000, or 143.7%, due primarily to an increase in the average
balance outstanding. Interest income on investment securities and
interest-bearing deposits increased by $143,000, or 128.8%, due primarily to an
increase in the related investment balances. The increases in interest-earning
assets primarily reflects the deployment of proceeds from the Corporation's
common stock offering which was completed in April 1996.
Interest expense on deposits increased by $41,000, or 6.7%, for the three months
ended December 31, 1996, compared to 1995, due primarily to an increase in the
average deposit portfolio balance outstanding.
Interest expense on borrowings increased by $134,000 due primarily to an
increase in average advances outstanding, as management elected to fund the
purchase of mortgage-backed securities with such advances, as previously
discussed.
As a result of the foregoing, net interest income increased by $220,000, or
46.7%, for the three months ended December 31, 1996, compared to 1995.
Other Operating Income
- ----------------------
Other operating income totaled $16,000 for the three months ended December 31,
1996, an increase of $6,000, or 60.0%, over the 1995 total. Other income
consists primarily of fees generated from late charges on loans, safety deposit
box rentals and NOW account fees.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense increased by $81,000, or 28.6%, for
the three months ended December 31, 1996, compared to the same period in 1995.
The increase resulted primarily from an increase of $76,000, or 61.8%, in
employee compensation and benefits, resulting primarily from the costs
associated with stock benefit plans, an increase of $13,000, or 61.9%, in
occupancy and equipment, due primarily to depreciation and other costs attendant
to the new office location, and an increase of $9,000, or 10.6%, in other
operating expenses, which resulted primarily from the annual reporting
requirements of public stock companies. These increases were partially offset by
a decline of $17,000, or 58.6%, in federal deposit insurance premiums,
reflecting a reduction in premium rates following the recapitalization
assessment.
Federal Income Taxes
- --------------------
The Corporation recorded a provision for federal income taxes totaling $113,000
for the three months ended December 31, 1996, an increase of $46,000, or 68.7%,
over the same period in 1995. The increase resulted primarily from a $145,000,
or 73.2%, increase in earnings before taxes. The effective tax rates were 32.9%
and 33.8% for the three months ended December 31, 1996 and 1995, respectively.
12
<PAGE> 13
FFD FINANCIAL CORPORATION
PART II
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
---------------------------------------------------
On October 8, 1996, the Annual Meeting of the Corporation's
Shareholders was held. Each of the three directors nominated
were elected to terms expiring in 1998 by the following votes:
Stephen G. Clinton For: 1,267,887 Withheld: 1,725
Robert R. Gerber For: 1,268,362 Withheld: 1,250
Richard J. Herzig For: 1,263,837 Withheld: 5,775
Three other matters were submitted to the shareholders, for which the
following votes were cast:
1) Ratification of the adoption of the FFD Financial Corporation
1996 Stock Option and Incentive Plan.
For: 764,775 Against: 128,744 Abstain: 17,000
Broker Non Votes: 359,093
2) Ratification of the adoption of the First Federal
Savings Bank of Dover Recognition and Retention Plan and
Trust Agreement.
For: 739,140 Against: 155,429 Abstain: 15,950
Broker Non Votes: 359,093
3) Ratification of the appointment of Grant Thornton LLP as
independent auditors of the Corporation for the fiscal
year ended June 30, 1997.
For: 1,230,089 Against: 28,948 Abstain: 10,575
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
Reports on Form 8-K:
None.
Exhibits:
Financial data schedule for the six months ended December 31,
1996.
13
<PAGE> 14
FFD FINANCIAL CORPORATION
SIGNATURES
----------
Pursuant to 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.
Date: February 10, 1997 By: /s/ ROBERT R. GERBER
---------------------------- ----------------------------
Robert R. Gerber
President and
Principal Financial Officer
14
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