SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 Number 0-21170
FFW CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 35-1875502
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification or Number)
1205 North Cass Street, Wabash, IN 46992
(Address of principal executive offices)
(219) 563-3185
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
State the number of Shares outstanding of each of the issuer's classes of common
equity, as of the latest date:
As of February 10, 1997 there were 695,060 shares of the Registrant's common
stock issued and outstanding.
<PAGE>
FFW CORPORATION
INDEX
PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets December 31, 1996 and
June 30, 1996
Consolidated Condensed Statements of Income for the three
months ended December 31, 1996 and 1995 and the six months
ended December 31, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the three
months ended December 31, 1996 and 1995 and the six months
ended December 31, 1996 and 1995.
Consolidated Statements of Cash Flows for the three months
ended December 31, 1996 and 1995 and the six months ended
December 31, 1996 and 1995.
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Signature Page
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<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1996 1996
------------- -------------
<S> <C> <C>
ASSETS:
Cash and due from financial institutions .............................. $ 1,082,437 $ 861,553
Interest-earning deposits in financial institutions - short term ...... 2,581,188 1,926,654
------------- -------------
Cash and cash equivalents .................................... $ 3,663,625 $ 2,788,207
Interest-earning deposits in financial institutions
(cost approximates market value) ............................. -- 362,664
Securities available for sale ......................................... 41,102,765 40,566,384
Loans held for sale, net of unrealized losses ......................... 153,700 423,361
Loans receivable, net of allowance for loan losses of $531,744
in December and $553,440 in June ............................. 107,259,208 100,529,412
Stock in Federal Home Loan Bank, at cost .............................. 2,397,600 2,397,600
Accrued interest receivable ........................................... 1,132,032 1,102,611
Premises and equipment - net .......................................... 1,687,621 1,691,433
Other assets .......................................................... 803,248 605,233
------------- -------------
Total Assets ........................................ $ 158,199,799 $ 150,466,905
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY :
Liabilities:
Noninterest-bearing demand deposits ................................... $ 2,797,220 $ 3,263,982
Savings, Now and MMDA deposits ........................................ 44,540,908 45,868,695
Other time deposits ................................................... 50,547,799 43,357,434
------------- -------------
Total Deposits ............................................... $ 97,885,927 $ 92,490,111
Borrowed funds ........................................................ 43,300,000 41,800,000
Accrued Interest Payable .............................................. 170,794 150,492
Accrued expenses and other liabilities ................................ 726,470 568,159
------------- -------------
Total Liabilities ............................................ $ 142,083,190 $ 135,008,762
<PAGE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED BALANCE SHEETS
(continued)
(Unaudited)
December 31, June 30,
1996 1996
------------- -------------
<S> <C> <C>
Shareholders' Equity:
Preferred stock, $.01 par value, 500,000 shares authorized
none issued ................................................. -- --
Common stock, $.01 par value, 2,000,000 shares authorized;
853,592 shares issued and 702,060 shares outstanding
at December 31, 1996; 853,592 shares issued and 711,060
shares outstanding at June 30, 1996 .......................... 8,536 8,536
Additional paid-in capital ............................................ 8,180,484 8,132,484
Retained earnings - substantially restricted .......................... 10,514,314 10,218,910
Net unrealized depreciation on securities available for sale, net of
tax liability of $210,706 on December 31, 1996 and a tax
benefit of $69,436 on June 30, 1996 .......................... 232,751 (203,283)
Unearned Employee stock Ownership Plan Shares ......................... (288,615) (331,189)
Unearned Management Retention Plan Shares ............................. -- (13,079)
Treasury Stock, 151,532 and 142,532 common shares at cost, at
December 31, 1996 and June 30, 1996, respectively ............ (2,530,861) (2,354,236)
------------- -------------
Total Shareholders' equity ................................... 16,116,609 15,458,143
Total Liabilities and Shareholders' Equity ......... $ 158,199,799 $ 150,466,905
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income :
Loans Receivable
Mortgage loans .................. $1,475,668 $1,410,028 $2,923,907 $2,808,624
Consumer and other loans ........ 791,937 650,676 1,530,941 1,242,289
Securities
Taxable ......................... 624,681 469,760 1,218,335 946,016
Nontaxable ...................... 119,132 139,368 236,918 283,388
Other Interest-earning assets ............ 13,816 86,186 41,452 164,591
---------- ---------- ---------- ----------
Total Interest Income ........... $3,025,234 $2,756,018 $5,951,553 $5,444,908
Interest Expense :
Deposits ................................. 1,201,293 1,090,133 2,370,681 2,150,637
Federal Home Loan Bank Advances .......... 600,895 606,975 1,190,097 1,205,107
---------- ---------- ---------- ----------
Total Interest Expense .......... $1,802,188 $1,697,108 $3,560,778 $3,355,743
---------- ---------- ---------- ----------
Net Interest Income ............................... 1,223,046 1,058,910 2,390,775 2,089,165
Provision for Loan Losses ................ 15,000 6,000 35,000 12,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 1,208,046 1,052,910 2,355,775 2,077,165
Non-interest income :
Net realized gain on sales/calls of
interest-earning assets ......... 19,498 81,151 30,226 99,089
Net unrealized gain on loans held for sale -- -- -- --
Other .................................... 140,588 113,758 288,309 235,170
---------- ---------- ---------- ----------
Total Non-Interest Income ....... $ 160,086 $ 194,909 $ 318,535 $ 334,259
---------- ---------- ---------- ----------
<PAGE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Non-Interest Expense :
Compensation and Benefits ................ 345,233 293,750 684,280 589,870
Occupancy and equipment expense .......... 72,497 46,763 136,982 142,741
SAIF deposit insurance premiums .......... 60,289 58,690 683,539 117,145
Other expense ............................ 263,161 215,129 494,140 423,889
---------- ---------- ---------- ----------
Total Non-Interest Expense ...... $ 741,180 $ 614,332 $1,998,941 $1,273,645
---------- ---------- ---------- ----------
Income before income taxes ........................ 626,952 633,487 675,369 1,137,779
Income Tax Expense ....................... 200,335 209,128 169,347 374,998
---------- ---------- ---------- ----------
Net Income ........................................ $ 426,617 $ 424,359 $ 506,022 $ 762,781
========== ========== ========== ==========
Earnings per common and common equivalent shares :
Primary .................................. $ .61 $ .56 $ .72 $ 1.00
Fully Diluted ............................ $ .61 $ .56 $ .72 $ 1.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------------ ------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Beginning Balance ..................................... $ 15,473,993 $ 15,826,344 $ 15,458,143 $ 15,491,568
Common Stock at .01 Par Value 2,000,000 shares
authorized issued and outstanding
December 31, 1996-- 853,592;
December 30, 1995 -- 850,508 ................. -- -- -- 21
Additional Paid-in Capital ............................ 24,000 12,000 48,000 45,099
Treasury Stock purchase at Cost 0 and 19,000 shares for
the three-month periods, and 9,000 and 19,000
shares for the six-months periods ended
1996 and 1995 respectively ................... -- (359,022) (176,625) (359,022)
Cash Dividends of:
$.15 and $.12 per share for the three-month
periods and $ .30 and $ .24 per share for the
six-month periods ended 1996 and 1995 ........ (105,309) (91,723) (210,618) (185,066)
Amortization of ESOP Contribution ..................... 42,574 39,743 42,574 39,743
Amortization of MRP Contribution ...................... 6,540 15,260 13,079 30,522
Net change in unrealized depreciation on securities
available for sale ........................... 248,194 612,520 436,034 653,835
Net Income for Period(s) .............................. 426,617 424,359 506,022 762,781
------------ ------------ ------------ ------------
Ending Balance ........................................ $ 16,116,609 $ 16,479,481 $ 16,116,609 $ 16,479,481
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net Income ........................................................ $ 426,617 $ 424,359 $ 506,022 $ 762,781
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization, net of accretion .............. 14,360 32,931 58,809 58,204
Provision for loan losses .................................... 15,000 6,000 35,000 12,000
Net realized gains on sale/call of interest-earning assets ... (19,947) (84,499) (33,626) (106,098)
Net losses on sale of repossessed assets, real estate owned
and fixed assets ........................................ 10,661 3,198 2,388 49,085
Origination of loans held for sale ........................... (1,238,451) (1,511,800) (2,140,689) (2,865,015)
Proceeds from sale of loans held for sale .................... 1,536,412 1,462,395 2,445,768 2,869,734
ESOP expense ................................................. 66,573 51,742 90,573 63,742
Amortization of MRP contribution ............................. 6,540 15,260 13,079 30,522
Net change in accrued interest receivable .................... 22,895 (36,351) (29,421) (60,114)
Net change in other assets ................................... (451,802) 113,783 (676,983) 191,006
Net change in accrued interest payable, accrued expenses
and other liabilities .................................... (714,741) (259,087) 178,613 49,520
----------- ----------- ----------- -----------
Total adjustments .............................. $ (752,500) $ (206,428) $ (56,489) $ 292,586
----------- ----------- ----------- -----------
Net cash from operating activities ....................... $ (325,883) $ 217,931 $ 449,533 $ 1,055,367
Cash flows from investing activities
Net change in interest-bearing deposits in other financial
institutions ............................................. 24,729 (359,945) 362,664 (359,945)
Proceeds from :
sales/calls of securities available for sale ............. 75,000 765,723 75,000 790,723
sale/calls of securities held-to-maturity ................ -- 500,000 -- 500,000
maturities of securities available for sale .............. 50,000 -- 380,000 --
maturities of securities held-to-maturity ................ -- 100,000 -- 300,000
Purchase of :
securities available for sale ............................ (50,104) (5,061,183) (596,589) (5,119,543)
Federal Home Loan Bank Stock ............................. -- (57,200) -- (57,200)
Principal collected on mortgage- backed securities ................ 168,094 171,616 327,136 389,077
Net change in loans receivable .................................... (4,249,764) (2,534,761) (6,766,074) (4,822,867)
Net purchases premises and equipment .............................. (10,310) (66,141) (61,165) (423,760)
Proceeds from sales of other real estate and repossessed
assets ................................................... 78,606 26,062 196,340 62,162
----------- ----------- ----------- -----------
Net cash from investing activities ........ ($3,913,749) ($6,515,829) ($6,082,698) ($8,741,353)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Three Months Ended Six Months Ended
December 31 December 31
----------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from financing activities :
Net change in deposits ....................... (1,779,066) 1,622,099 5,395,816 2,772,244
Proceeds from short-term borrowings .......... 9,500,000 13,500,000 9,500,000 13,500,000
Payment on short-term borrowings ............. (4,000,000) (8,500,000) (8,000,000) (19,000,000)
Purchase of Treasury Stock ................... -- (359,022) (176,625) (359,022)
Proceeds from exercising of stock options .... -- -- -- 21,120
Cash dividends paid .......................... (105,309) (91,723) (210,618) (185,066)
------------ ------------ ------------ ------------
Net cash from financing activities ...... 3,615,625 6,102,003 6,408,573 (3,247,667)
Net increase (decrease) in cash and cash equivalents .. (624,007) (195,895) 875,418 (10,933,653)
Cash and cash equivalents at beginning of period ...... 4,287,632 3,156,957 2,788,207 13,894,715
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period ............ $ 3,663,625 $ 2,961,062 $ 3,663,626 $ 2,961,062
============ ============ ============ ============
Supplemental disclosure of cash flow information :
Cash paid during quarter for :
Interest ................................ 2,194,134 2,020,110 3,542,163 3,353,426
Income Taxes ............................ 315,000 215,000 376,000 215,000
Non-cash investing activities transfers from :
Securities held-to-maturity to securities
available-for-sale ...................... -- 29,301,698 -- 29,301,698
</TABLE>
<PAGE>
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-Q and
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the Consolidated Condensed Financial
Statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to represent fairly the financial condition of FFW
Corporation as of December 31, 1996 and June 30, 1996, and the results of its
operations, changes in shareholders' equity for the three and six months ended
December 31, 1996 and 1995. Financial Statement reclassifications have been made
for the prior period to conform to classifications used as of and for the period
ended December 31, 1996.
Operating results for the three and six months ended December 31, 1996
are not necessarily indicative of the results that may be expected for the
fiscal year ended June 30, 1997.
(2) Earnings Per Share of Common Stock
Earnings per share of Common Stock is computed by dividing net income
for the period by the weighted average number of common stock and common stock
equivalents outstanding during the three and six month periods ended December
31, 1996 and 1995. Weighted average number of shares used in the earnings per
share computations were 672,207 for the three-month period ended December 31,
1996 and 673,591 for the six-month period ended December 31, 1996.
On October 26, 1993, the shareholders of the Company ratified the
adoption of the Company's 1992 Stock Option and Incentive Plan and the
Management Recognition Plan and Trusts ("MRP"). Pursuant to the Stock Option
Plan, 84,500 shares of the Company's Common Stock are reserved for issuance, of
which the Company has granted options on 68,442 shares. As of December 31, 1996,
options on 59,850 shares of the Company's Common Stock remain un-exercised.
(3) Regulatory Capital Requirements
Pursuant to the Financial Institution Reform, Recovery, and Enforcement
Act of l989 ("FIRREA"), savings institutions must meet three separate minimum
capital-to-asset requirements. The following table summarizes, as of December
31, 1996, the capital requirements for the Bank under FIRREA and its actual
capital ratios. As of December 31, 1996, the Bank substantially exceeded all
current regulatory capital standards.
<PAGE>
<TABLE>
<CAPTION>
Regulatory Actual
Capital Requirement Capital (Bank Only)
------------------- -------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Risk-Based ........................ $ 6,946 8.00% $12,827 14.77%
Core Capital ...................... 4,638 3.00 12,295 7.94
Tangible Capital .................. 2,319 1.50 12,295 7.94
</TABLE>
(4) Common Stock Cash Dividends
On November 28, 1996, the Board of Directors of FFW Corporation,
declared a quarterly cash dividend of $.15 per share. The dividend was paid
December 31, 1996 to shareholders of record on December 15, 1996. The payment of
the cash dividend reduced shareholders' equity by $105,309.
<PAGE>
PART II
FFW CORPORATION
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The accompanying Consolidated Financial Statement includes the account
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.
Financial Condition
The Company's total assets increased $3.6 million, or 2.4%, from $154.6
million at September 30, 1996 to $158.2 million at December 31, 1996. This
increase was due primarily to an increase in net loans receivable of $4.3
million. This growth was funded with an increase of borrowings from FHLB of $5.5
million, which offset a decrease in deposits of $1.8 million. All of which
contributed to a decrease in cash and cash equivalents of $ 624,000. Loan demand
and liquidity needs may result in additional borrowing if deposits and loan
growth remain at current levels.
Total securities available-for-sale increased $186,500 from $40.9
million at September 30, 1996 to $41.1 million at December 31, 1996. This
increase was primarily the result of an increase in the net market value of the
portfolio. The available-for-sale portfolio consists primarily of municipal
securities, government agencies and mortgage backed securities.
Net loans receivable increased $4.3 million, or 4.1%, from $103.0
million at September 30, 1996 $107.3 million at December 31, 1996. The increase
in the loan portfolio resulted primarily from an increase in mortgage loans of
$3.4 million and non-mortgage loans of $713,000, due to an increase in
origination's. Management, consistent with its asset/liability objectives, will
continue to sell all of its newly originated fixed-rate mortgage loans with
terms to maturity of greater than 15 years.
Total deposits decreased $1.8 million or 1.8% from $99.7 million at
September 30, 1996 to $97.9 million at December 31, 1996. This decrease was
primarily the result of one $ 2.0 million public funds certificate of deposit
that matured and was not renewed. For the quarter ended December 31, 1996,
passbook accounts decreased $419,000, or 1.0%, and certificates of deposit
decreased $918,000 or 1.8%. Management believes that deposit growth may be will
be difficult to maintain at prior years levels as deposit customers look for
alternative investment opportunities with higher yields.
Total borrowed funds increased $5.5 million from $37.8 million at
September 30, 1996 to $43.3 million at December 31, 1996. The increase consisted
of new borrowings from the Federal Home Loan Bank of Indianapolis.
<PAGE>
Total shareholders' equity increased $642,600 from $15.5 million at
September 30, 1996 to $16.1 million at December 31, 1996. The increase resulted
from net income of $426,600 for the quarter and the net of tax effect of the
unrealized gains on securities available-for-sale of $248,200. Which were
reduced for the same period by $105,300 for the payment of dividends.
Results of Operations - Comparison of the Three and Six Months Ended December
31, 1996 and December 31, 1995
General. Net income increased by $2,200 for the three months and
decreased $256,800 for the six months ended December 31, 1996 respectively, as
compared to the three and six months ended December 31, 1995. The increase for
the three months ended December 31, 1996 was primarily the result of increases
in net interest income. The decrease for six months ended December 31, 1996 was
primarily the result of the one time SAIF assessment of $337,800 net of taxes.
All of these items are discussed in greater detail below.
Net Interest Income. Net interest income increased $164,100, or 15.5%
to $1.2 million from $1.0 million for the quarter ended December 31, 1996 and
1995 respectively. This was primarily the result of an increase in average
interest-earning assets which exceeded the increase in average interest-bearing
liabilities.
Interest Income. Interest income increased $269,200 and $506,600 to
$3.0 million and $6.0 million for the three and six months ended December 31,
1996 respectively, as compared to the three and six months ended December 31,
1995. The increases in interest income for the three and six months ended
December 31, 1996 were due to continued growth in interest-earning assets
including mortgage loans, commercial and consumer loans and investments, as
compared to the same periods ended December 31, 1995. These increased
interest-earning assets are the result of competitive pricing, marketing, and
the repricing of adjustable-rate loans and mortgage-backed securities.
Interest Expense. Interest expense increased $105,000 and $301,600 to
$1.8 million and $3.6 million for the three and six months ended December 31,
1996 respectively, as compared to the three and six months ended December 31,
1995. The increase in interest expense was due to an increase in borrowed funds
and deposits outstanding as compared to the same periods in 1995. If interest
rates remain at or near current levels, management anticipates the rate of shift
to certificates from passbook accounts will decrease as the difference between
rates paid on new certificates and passbooks contracts.
Provision for Loan Losses. The provision for loan losses increased
$9,000 and $23,000 for the three and six months ended December 31, 1996
respectively, as compared to the three and six months ended December 31, 1995.
The loan loss provisions are based on management's quarterly analysis of the
allowance for loan losses. The provisions for the three and six month periods
reflect the growth in the balances of non-mortgage loans and to a lesser extent
the increase in mortgage loans. The company will continue to monitor its
allowance for loan losses and make future additions to the allowance through the
provision for loan losses as economic and regulatory conditions dictate.
Although the Company maintains its allowance for loan losses at a level which is
deemed consistent with the level of risk in the portfolio, economic conditions,
etc. there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods.
<PAGE>
Non-interest Income. Non-interest income decreased by $35,000 and
$16,000 to $160,000 and $318,000 for the three and six months ended December 31,
1996 respectively, as compared to the three and six months ended December 31,
1995. The decreases were the result of a $59,000 gain on sale of securities
available for sale recorded in the quarter ended December 31, 1995. Management
believes that with the decline of interest rates, we will continue to see sales
of loans to Freddie Mac for the remainder of the year as compared to last year.
This should result in increased gain on sales of loans.
Non-Interest Expense. Non-interest expense increased $127,000 and
$725,000 to $741,000 and $2.0 million for the three and six months ended
December 31, 1996 respectively, as compared to the three and six months ended
December 31, 1995. For the three months ended December 31, 1996, other expenses
increased $48,000 due to cost related to being named business of the year in
Wabash and increased data processing cost. Compensation and benefits increased
$51,000 due to increased staffing and salaries. Occupancy expense increased
$26,000 due to increased cost related to new office in Syracuse as compared to
the three months ended December 31, 1995. For the six months ended December 31,
1996, compensation and benefit expense increased $94,000 due to increased
staffing and salaries. Other expense increased by $70,000 due to cost related to
being named business of the year in Wabash and increased data processing cost.
SAIF insurance increased $566,000 due to the one time assessment paid as
compared to the six months ended December 31, 1995.
Income Tax Expense. Income tax expense decreased $9,000 and $206,000 to
$200,000 and $169,000 for the three and six months ended December 31, 1996
respectively, as compared to the three and six months ended December 31, 1995.
The decrease was due to the tax effect of the one time SAIF assessment for the
three and six months ended December 31, 1996.
Non-Performing Assets and Allowance for Loan Losses. The allowance for
loan losses is calculated based upon an evaluation of pertinent factors
underlying the types and qualities of the Company's loans. Management considers
such factors as the repayment status of a loan, the estimated net realizable
value of the underlying collateral, the borrower's ability to repay the loan,
current and anticipated economic conditions which might affect the borrower's
ability to repay the loan and the Company's past statistical history concerning
charge-offs. The Company's allowance for loan losses as of December 31, 1996,
was $532,000 or 0.5% of total loans. The September 30, 1996 allowance for loan
losses was $494,000, or 0.5% of total loans. Total loans classified as
substandard, doubtful or loss as of December 31, 1996 were $1.0 million or 0.7%
of total assets. Management has considered non-performing assets and total
classified assets in establishing the allowance for loan losses.
<PAGE>
The ratio of non-performing assets to total assets is one indicator of the
exposure to credit risk. Non-performing assets of the Company consist of
non-accruing loans, accruing loans delinquent 90 days or more, and foreclosed
assets which have been acquired as a result of foreclosure or deed-in-lieu of
foreclosure.
<TABLE>
<CAPTION>
12/31/96 09/30/96
(Dollars in Thousands)
<S> <C> <C>
Non-Accruing Loans ............................... $101 $122
Accruing Loans Delinquent 90 days or more ........ -- 11
Troubled Debt Restructurings ..................... 29 55
Foreclosed Assets ................................ 50 52
Total Non-Performing Assets ...................... $180 $240
==== ====
Total Non-Performing Assets as a
Percentage of Total Assets .............. .11% .16%
</TABLE>
Total non-performing assets decreased $60,000 to $180,000, or .11% of total
assets at December 31, 1996, from $240,000 or .16% of total assets at September
30, 1996. The decrease in non-performing assets was primarily due to loan
payoffs and principal repayments on previously non-performing loans during the
quarter. Foreclosed assets decreased $2,000 due to the sale of several
repossessed autos.
Liquidity and Capital Resources. The Company's primary sources of funds
are deposits, principal and interest payments on loans and mortgage-backed
securities, FHLB Indianapolis advances and funds provided by operations. While
scheduled loan and mortgage-backed security repayments and maturity of
short-term investments are a relatively predictable source of funds, deposit
flows are greatly influenced by general interest rates, economic conditions,
competition and, most recently, the restructuring occurring in the thrift
industry. Current Office of Thrift Supervision regulations require the Bank to
maintain cash and eligible investments in an amount equal to at least 5.0% of
customer accounts and short-term borrowings to assure its ability to meet
demands for withdrawals and repayment of short-term borrowings. As of December
31, 1996, the Bank's liquidity ratio of 7.78% exceeds the minimum regulatory
requirements.
The Company uses its capital resources principally to meet its ongoing
commitments to fund maturing certificates of deposits and loan commitments,
maintain is liquidity and meet operating expenses. At December 31. 1996, the
Company has commitments to originate loans totaling $1.6 million. The Company
considers its liquidity and capital resources to be adequate to meet its
foreseeable short- and long-term needs. The Company expects to be able to fund
or refinance, on a timely basis, its material commitments and long-term
liabilities.
Regulatory standards impose the following capital requirements: a
risk-based capital standard expressed as a percent of risk-adjusted assets, a
leverage ratio of core capital to total adjusted assets, and a tangible capital
ratio expressed as a percent of total adjusted assets. As of December 31, 1996,
the Bank exceeded all fully phased-in regulatory capital standards.
<PAGE>
At December 31, 1996, the Bank's tangible capital was $12.3 million, or
7.9% of adjusted total assets, which is in excess of the 1.5% requirement by
$10.0 million. In addition, at December 31, 1996, the Bank had core capital of
$12.3 million, or 7.9% of adjusted total assets, which exceeds the 3.0%
requirement by $7.7 million. The Bank had risk-based capital of $12.8 million at
December 31, 1996, or $14.8% of risk-adjusted assets which exceeds the 8.0%
risk-based capital requirements by $5.9 million.
As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. The OTS has proposed that only those savings associations rated
a composite one (the highest rating) under the MACRO rating system for savings
associations will be permitted to operate at or near the regulatory minimum
leverage ratio of 3.0%. All other savings associations will be required to
maintain a minimum leverage ratio of 3.0% at least an additional 100 to 200
basis points. The OTS will assess each individual savings association through
the supervisory process on a case-by-case basis to determine the applicable
requirement. No assurance can be given as to the final form of any such
regulation, the date of its effectiveness or the requirement applicable to the
Bank. As a result of the prompt corrective action provisions of federal law
discussed below, however, a savings association must maintain a core capital
ratio of at least 4.0% to be considered adequately capitalized unless its
supervisory condition is such to allow it to maintain a 3.0% ratio.
Under the requirements of federal law all the federal banking agencies,
including the OTS, must revise their risk-based capital requirements to ensure
that such requirements account for interest rate risk, concentration of credit
risk and the risks of non-traditional activities, and that they reflect the
actual performance of and expected loss on multi-family loans.
The OTS had adopted a final rule that requires every savings
association with more than normal interest rate risk to deduct from its total
capital, for purposes of determining compliance with such requirement, an amount
equal to 50% of its interest-rate risk exposure multiplied by the market value
of its assets. This exposure is a measure of the potential decline in the market
value of portfolio equity of a savings association, greater than 2%, based upon
a hypothetical 200 basis point increase or decrease in interest rates (whichever
results in a greater decline) affecting on-and off-balance sheet assets and
liabilities. The effective date of the new requirement is July 1, 1995. Any
savings association with less than $300 million in assets and a total capital
ratio in excess of 12% is exempt from this requirement unless the OTS determines
otherwise. It is anticipated that since the Bank has less than $300 million in
assets, and a risk-based capital ratio in excess of 12%, it will be exempt from
this rule.
<PAGE>
Part II - Other Information
As of December 31, 1996, 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 - Other Information
Not Applicable
Item 5 - Exhibits and Reports on Form 8-K
(a) Exhibits
Not Applicable
(b) The following is a description of the Form 8-K's filed during the
quarter ended December 31, 1996.
(i) A Form 8-K was filed on October 31, 1996 announcing the
quarterly earnings for the quarter ended September 30, 1996.
(ii) A Form 8-K was filed on October 31, 1996 announcing that a
quarterly dividend was declared on September 3, 1996, payable
September 30, 1996.
(iii) A Form 8-K was filed on December 2, 1996 announcing that a
quarterly dividend was declared on November 29, 1996, payable
December 31,1996.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FFW CORPORATION
Registrant
Date: February 12, 1997 By: /S/Nicholas M. George
----------------------
Nicholas M. George
President and Chief
Executive Officer
Date: February 12, 1997 By: /S/Charles E. Redman
--------------------
Charles E. Redman
Treasurer and Chief
Financial Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,082
<INT-BEARING-DEPOSITS> 2,581
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41,103
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 107,945
<ALLOWANCE> 532
<TOTAL-ASSETS> 158,200
<DEPOSITS> 97,886
<SHORT-TERM> 0
<LIABILITIES-OTHER> 897
<LONG-TERM> 43,300
9
0
<COMMON> 0
<OTHER-SE> 16,107
<TOTAL-LIABILITIES-AND-EQUITY> 158,200
<INTEREST-LOAN> 2,268
<INTEREST-INVEST> 744
<INTEREST-OTHER> 14
<INTEREST-TOTAL> 3,026
<INTEREST-DEPOSIT> 1,202
<INTEREST-EXPENSE> 601
<INTEREST-INCOME-NET> 1,223
<LOAN-LOSSES> 15
<SECURITIES-GAINS> 19
<EXPENSE-OTHER> 741
<INCOME-PRETAX> 627
<INCOME-PRE-EXTRAORDINARY> 427
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<YIELD-ACTUAL> 2.67
<LOANS-NON> 101
<LOANS-PAST> 0
<LOANS-TROUBLED> 29
<LOANS-PROBLEM> 2,123
<ALLOWANCE-OPEN> 494
<CHARGE-OFFS> 21
<RECOVERIES> 44
<ALLOWANCE-CLOSE> 532
<ALLOWANCE-DOMESTIC> 524
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 8
</TABLE>
