<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 March 31, 1997
-----------------------
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
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(Exact name of registrant as specified in its charter)
Ohio 34-1921148
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
321 North Wooster Avenue
Dover, Ohio 44622
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(Address of principal (Zip Code)
executive office)
Registrant's 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 May 9, 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 15 pages
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INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 14
SIGNATURES 15
</TABLE>
2
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FFD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
ASSETS 1997 1996
<S> <C> <C>
Cash and due from banks $ 559 $ 905
Interest-bearing deposits in other financial institutions 2,089 1,793
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Cash and cash equivalents 2,648 2,698
Investment securities available for sale - at market 8,216 9,256
Investment securities - at amortized cost, approximate
market value of $1,445 and $2,427 as of March 31,
1997 and June 30, 1996 1,467 2,460
Mortgage-backed securities available for sale - at market 13,138 9,007
Mortgage-backed securities - at amortized cost, approximate market value of
$5,119 and $6,073 as of March 31,
1997 and June 30, 1996 4,789 5,932
Loans receivable - net 53,017 48,539
Office premises and equipment - at depreciated cost 847 545
Federal Home Loan Bank stock - at cost 630 598
Accrued interest receivable 416 283
Prepaid expenses and other assets 118 140
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Total assets $85,286 $79,458
======= =======
LIABILITIES AND SHAREHOLDER' EQUITY
Deposits $54,669 $52,208
Advances from the Federal Home Loan Bank 8,582 5,184
Accrued interest payable 121 37
Other liabilities 353 204
Accrued federal income taxes 70 40
Deferred federal income taxes 389 374
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Total liabilities 64,184 58,047
Shareholders' equity
Preferred stock - authorized 1,000,000 shares without par
value; no shares issued - -
Common shares - authorized 5,000,000 shares without par or
stated value, 1,454,750 shares issued and outstanding - -
Additional paid-in capital 14,132 14,132
Retained earnings - restricted 8,039 7,857
Unrealized gains on securities designated as available for sale,
net of related tax effects 589 586
Shares acquired by employee stock ownership plan (1,164) (1,164)
Shares acquired by recognition and retention plan (494) -
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Total shareholders' equity 21,102 21,411
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Total liabilities and shareholders' equity $85,286 $79,458
======= =======
</TABLE>
3
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FFD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Loans $2,794 $2,513 $ 952 $ 859
Mortgage-backed securities 932 420 310 137
Investment securities and interest-bearing
deposits and other 650 357 212 130
------ ------ ------ ------
Total interest income 4,376 3,290 1,474 1,126
Interest expense
Deposits 1,937 1,856 642 638
Borrowings 366 1 125 -
------ ------ ------ ------
Total interest expense 2,303 1,857 767 638
------ ------ ------ ------
Net interest income 2,073 1,433 707 488
Provision for losses on loans - 50 - -
------ ------ ------ ------
Net interest income after provision for losses on loans 2,073 1,383 707 488
Other income (loss)
Gain on sale of office premises - 50 - 50
Loss on sale of investment securities (6) - (6) -
Loss on sale of mortgage-backed securities (37) - (37) -
Other income 41 28 15 10
------ ------ ------ ------
Total other income (loss) (2) 78 (28) 60
General, administrative and other expense
Employee compensation and benefits 594 392 189 144
Occupancy and equipment 87 73 31 32
Federal deposit insurance premiums 383 86 9 29
Franchise taxes 98 79 42 28
Other operating 314 234 122 90
------ ------ ------ ------
Total general, administrative and other expense 1,476 864 393 323
------ ------ ------ ------
Earnings before income taxes 595 597 286 225
Federal income taxes
Current 181 203 95 46
Deferred 14 (2) (1) 29
------ ------ ------ ------
Total federal income taxes 195 201 94 75
------ ------ ------ ------
NET EARNINGS $ 400 $ 396 $ 192 $ 150
====== ====== ====== ======
EARNINGS PER SHARE $.30 N/A $.14 N/A
==== === ==== ===
</TABLE>
4
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FFD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended March 31,
(In thousands)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 400 $ 396
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 5 (2)
Amortization of deferred loan origination fees (40) (51)
Depreciation and amortization 37 32
Provision for losses on loans - 50
Federal Home Loan Bank stock dividends (32) (30)
Gain on sale of office premises - (50)
Loss on sale of investment securities 6 -
Loss on sale of mortgage-backed securities 37 -
Increase (decrease) in cash due to changes in:
Accrued interest receivable (133) (51)
Prepaid expenses and other assets 22 (1,353)
Accrued interest payable 84 21
Other liabilities 149 57
Federal income taxes
Current 30 81
Deferred 14 (2)
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Net cash provided by (used in) operating activities 579 (902)
Cash flows provided by (used in) investing activities:
Proceeds from maturity of investment securities 1,000 500
Proceeds from sale of investment securities 994 -
Purchase of investment securities - (500)
Proceeds from sale of mortgage-backed securities 3,970 -
Purchase of mortgage-backed securities (9,711) -
Principal repayments on mortgage-backed securities 2,748 1,632
Loan principal repayments 6,905 7,357
Loan disbursements (11,343) (12,020)
Purchase of office premises and equipment (339) (490)
Proceeds from sale of office premises - 275
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Net cash used in investing activities (5,776) (3,246)
-------- --------
Net cash used in operating and investing
activities (subtotal carried forward) (5,197) (4,148)
-------- --------
</TABLE>
5
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FFD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended March 31,
(In thousands)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net cash used in operating and investing
activities (subtotal brought forward) $(5,197) $(4,148)
Cash flows provided by (used in) financing activities:
Net increase in deposit accounts 2,461 16,503
Proceeds from Federal Home Loan Bank advances 4,600 -
Repayment of Federal Home Loan Bank advances (1,202) (1)
Purchase of shares for recognition and retention plan (494) -
Dividends on common shares (218) -
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Net cash provided by financing activities 5,147 16,502
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Net increase (decrease) in cash and cash equivalents (50) 12,354
Cash and cash equivalents at beginning of period 2,698 3,880
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Cash and cash equivalents at end of period $ 2,648 $16,234
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 168 $ 123
======= =======
Interest on deposits and borrowings $ 2,219 $ 1,836
======= =======
Supplemental disclosure of noncash investing activities:
Unrealized gains on securities designated as available for
sale, net of related tax effects $ 3 $ 119
======= =======
</TABLE>
6
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FFD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended March 31, 1997 and 1996
On November 14, 1995, the Board of Directors of First Federal Savings Bank
of Dover (the "Savings Bank") adopted a plan of conversion and
reorganization (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 ("FFD"
or the "Corporation"). Pursuant to the Plan, FFD 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 FFD which, after
consideration of offering expenses totaling approximately $400,000,
resulted in net proceeds of $14.2 million. The consolidated financial
statements for periods prior to April 2, 1996 contained herein are those of
the Savings Bank prior to the completion of its conversion to stock form.
1. Basis of Presentation
The accompanying unaudited 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 FFD included in FFD's 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 nine month periods
ended March 31, 1997 and 1996, 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
FFD 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 (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," establishing financial
accounting and reporting standards for stock-based compensation plans. SFAS
No. 123 encourages all entities to adopt a new method of accounting to
measure compensation cost of all 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,
7
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FFD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and nine months ended March 31, 1997 and 996
3. Effects of Recent Accounting Pronouncements (continued)
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.
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.
8
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FFD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and nine months ended March 31, 1997 and 996
3. Effects of Recent Accounting Pronouncements (continued)
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
requires companies to present basic earnings per share and, if applicable,
diluted earnings per share, instead of primary and fully diluted earnings
per share, respectively. Basic earnings per share is computed without
including potential common shares, i.e., no dilutive effect. Diluted
earnings per share is computed taking into consideration common shares
outstanding and dilutive potential common shares, including options,
warrants, convertible securities and contingent stock agreements. SFAS No.
128 is effective for periods ending after December 15, 1997. Early
application is not permitted. Based upon the provisions of SFAS No. 128,
the Corporation's basic and diluted earnings per share for the nine months
ended March 31, 1997 would have been $.30 and $.28, respectively. Basic and
diluted earnings per share for the three months ended March 31, 1997 would
have been $.14 and $.13, respectively.
4. Pending Legislative Changes
Congress is considering legislation to eliminate the federal savings and
loan charter and separate federal regulation of savings and loan
associations. Pursuant to such legislation, Congress may develop a common
charter for all financial institutions, eliminate the OTS and regulate the
Savings Bank as a bank or require it to change its charter. Such changes
would likely change the types of activities in which such institutions
could engage and would probably subject them to greater regulation by the
FDIC. In addition, the Corporation might become subject to different
holding company regulations.
5. 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 nine month periods ended March 31, 1997. 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 nine month periods ended March
31, 1996, as the Conversion from mutual to stock form was completed in
April 1996.
9
<PAGE> 10
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 March 31, 1997
The Corporation's total assets at March 31, 1997, amounted to $85.3 million, a
$5.8 million, or 7.3%, increase over the total at June 30, 1996. This increase
was funded primarily through an increase in advances from the Federal Home Loan
Bank of $3.4 million and growth in the deposit portfolio of $2.5 million.
Cash and interest-bearing deposits totaled $2.6 million, a decrease of $50,000
from the total at June 30, 1996. Investment securities totaled $9.7 million at
March 31, 1997, a decline of $2.0 million, or 17.4%, from June 30, 1996 levels.
This decrease resulted primarily from maturities and sales of investment
securities totaling $1.0 million and $994,000, respectively. Proceeds from
sales and maturities of investment securities were redeployed to fund loan
originations.
Mortgage-backed securities totaled $17.9 million at March 31, 1997, an increase
of $3.0 million, or 19.9%, over June 30, 1996 levels. The increase was due to
purchases totaling $9.7 million and was partially offset by sales of $4.0
million and principal repayments of $2.7 million. The growth in the
mortgage-backed securities portfolio was funded primarily through advances from
the Federal Home Loan Bank.
Loans receivable totaled $53.0 million at March 31, 1997, an increase of $4.5
million, or 9.2%, over the June 30, 1996 total. This growth in the loan
portfolio was funded through proceeds from deposit growth and from investment
securities sales and maturities.
The allowance for loan losses totaled $145,000 at March 31, 1997, which
represented 0.3% of total loans and 3,833.3% of nonperforming loans at that
date. The allowance totaled $146,000 at June 30, 1996, which represented 0.3%
of total loans and 124.8% of nonperforming loans at that date.
Deposits totaled $54.7 million at March 31, 1997, a $2.5 million, or 4.7%,
increase over June 30, 1996. This increase resulted primarily from the
introduction of a higher yield passbook savings account. Federal Home Loan Bank
advances increased by $3.4 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%.
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 March 31, 1997, the Savings Bank's tangible and core capital totaled $12.3
million, or 15.8% of adjusted total assets, which exceeded the minimum
requirements of $1.2 million and $2.3 million by $11.1 million and $10.0
million, respectively. The Savings Bank's risk-based capital of $12.5 million,
or 34.1% of risk-weighted assets, exceeded the current 8.0% requirement by $9.5
million.
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 Nine Month Periods Ended March 31, 1997
and 1996
General
Net earnings totaled $400,000 for the nine months ended March 31, 1997, an
increase of $4,000, or 1.0%, over the total recorded for the comparable period
in 1996. The increase resulted primarily from an increase in net interest
income of $640,000, a decrease in the provision for losses on loans of $50,000
and a $6,000 decrease in the provision for federal income taxes, which were
partially offset by a decrease in other income of $80,000 and an increase in
general, administrative and other expense of $612,000.
Net Interest Income
Total interest income increased by $1.1 million, or 33.0%, to a total of $4.4
million for the nine months ended March 31, 1997. Interest income on loans
increased by $281,000, or 11.2%, due primarily to the growth in the loan
portfolio. Interest income on mortgage-backed securities increased by $512,000,
or 121.9%, due to an increase in the portfolio. Interest income on investment
securities and interest-bearing deposits increased by $293,000, or 82.1%, due
primarily to an increase in yield.
Interest expense on deposits increased by $81,000, or 4.4%, for the nine months
ended March 31, 1997, compared to 1996, due primarily to the increase in the
deposit portfolio as well as an increase in yield. Interest expense on
borrowings increased by $365,000 due primarily to a $8.0 million increase in
the average balance of advances outstanding, as management elected to fund the
purchase of mortgage-backed securities with such advances.
As a result of the foregoing, net interest income increased by $640,000, or
44.7%, for the nine months ended March 31, 1997, compared to 1996.
Provision for Losses on Loans
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 nine month period ended March
31, 1997. 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
11
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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 Nine Month Periods Ended March 31, 1997
and 1996 (continued)
Provision for Losses on Loans (continued)
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) decrease 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 Income (Loss)
Other loss totaled $2,000 for the nine months ended March 31, 1997, a decrease
of $80,000 from the $78,000 of other income for the 1996 period. The decrease
resulted primarily from a loss on sale of mortgage-backed and investment
securities of $43,000, coupled with a gain on sale of office premises of
$50,000 during the nine month period ending March 31, 1996.
General, Administrative and Other Expense
General, administrative and other expense increased by $612,000, or 70.8%, for
the nine months ended March 31, 1997, compared to 1996. The increase resulted
primarily from a $297,000, or 345.3%, increase in federal deposit insurance
premiums due primarily to a $332,000 charge recorded at September 30, 1996, as
a results of a legislative mandate to recapitalize the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
Additionally, employee compensation and benefits increased $202,000, or 51.5%,
primarily due to the costs associated with stock benefit plans implemented
since the Conversion. Occupancy and equipment expense increased $14,000, or
19.2%, primarily from increased costs attendant to FFD's office relocation. The
increase in other operating expense of $80,000 was due primarily to increased
professional fees and other costs related to the reporting requirements of a
public stock company and increases in insurance, stationery, office supplies
and advertising costs related to the office relocation as well as increased
data processing costs.
Federal Income Taxes
The provision for federal income taxes totaled $195,000 for the nine months
ended March 31, 1997, a decrease of $6,000, or 3.0%, from the same period in
1996. The effective tax rates were 32.8% and 33.7% for the nine months ended
March 31, 1997 and 1996, respectively.
12
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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 Three Month Periods Ended March 31,
1997 and 1996
General
Net earnings totaled $192,000 for the three months ended March 31, 1996, an
increase of $42,000, or 28.0%, over the $150,000 in net earnings recorded for
the three months ended March 31, 1996. The increase in earnings resulted
primarily from a $219,000 increase in net interest income, which was partially
offset by a decline in other income of $88,000, an increase in general,
administrative and other expense of $70,000 and an increase of $19,000 in the
provision for federal income taxes.
Net Interest Income
Interest income increased by $348,000, or 30.9%, for the three months ended
March 31, 1997, compared to 1996. This increase resulted primarily from growth
in the loan portfolio over the period and the repricing of adjustable-rate
loans as well as increased interest income on mortgage-backed securities and
investment securities and interest bearing deposits. The increase in interest
income on mortgage-backed securities is primarily due to an increase in the
average balance, while the increase in interest income on investments and
interest-bearing deposits is due to increased yield. Interest expense increased
by $129,000, or 20.2%, resulting primarily from an increase in the cost of
deposits and an $8.8 million increase in the average balance of Federal Home
Loan Bank advances outstanding. Net interest income increased by $219,000, or
44.9%, for the three months ended March 31, 1997, compared to the comparable
quarter in 1996.
Other Income (Loss)
FFD reported other loss of $28,000 for the three month period ended March 31,
1997, a decline of $88,000 from the comparable quarter in 1996. The decline
resulted from a $43,000 loss on sales of investment and mortgage-backed
securities, coupled with the recognition of a $50,000 gain on sale of office
premises in the 1996 period.
General, Administrative and Other Expense
General, administrative and other expense increased by $70,000, or 21.7%, for
the quarter ended March 31, 1997, compared to 1996. The increase resulted
primarily from a $45,000, or 31.3%, increase in employee compensation and
benefits, a $14,000, or 50.0%, increase in franchise taxes, and a $32,000, or
35.6%, increase in other operating expense, which were partially offset by a
$20,000, or 69.0%, decrease in federal deposit insurance premiums. The increase
in employee compensation and benefits expense resulted primarily from costs
associated with stock benefit plans implemented since the Conversion. Franchise
tax expense increased due to the Corporation's increased equity following the
Conversion. The increase in other operating expense was due primarily to
professional fees and other costs associated with the reporting requirements of
a public stock company. Federal deposit insurance premium expense decreased due
to lower assessment rates for the three months ended March 31, 1997 compared to
the comparable 1996 period.
Federal Income Taxes
The provision for federal income taxes totaled $94,000 for the three months
ended March 31, 1997, an increase of $19,000, or 25.3%, over the same period in
1996. The effective tax rates were 32.9% and 33.3% for the three month periods
ended March 31, 1997 and 1996, respectively.
13
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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
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: None
Exhibit 27: Financial Data Schedule
for the nine month period
ended March 31, 1997
14
<PAGE> 15
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: By: /s/ ROBERT R. GERBER
------------------------ -----------------------------------
Robert R. Gerber
President
Date: By: /s/ CHARLES A. BRADLEY
------------------------ -----------------------------------
Charles A. Bradley
Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 559
<INT-BEARING-DEPOSITS> 2,089
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,354
<INVESTMENTS-CARRYING> 6,256
<INVESTMENTS-MARKET> 6,564
<LOANS> 53,017
<ALLOWANCE> 145
<TOTAL-ASSETS> 85,286
<DEPOSITS> 54,669
<SHORT-TERM> 8,582
<LIABILITIES-OTHER> 933
<LONG-TERM> 0
0
0
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<INTEREST-DEPOSIT> 1,937
<INTEREST-EXPENSE> 2,303
<INTEREST-INCOME-NET> 2,073
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (43)
<EXPENSE-OTHER> 1,476
<INCOME-PRETAX> 595
<INCOME-PRE-EXTRAORDINARY> 595
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<CHANGES> 0
<NET-INCOME> 400
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
<YIELD-ACTUAL> 3.34
<LOANS-NON> 3
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