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 September 30, 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 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 [ ] No [ X ]
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 November 12, 1997, there were 717,988 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 September 30, 1997
and June 30, 1997.
Consolidated Condensed Statements of Income for the 4 three
months ended September 30, 1997 and 1996.
Consolidated Statements of Shareholders' Equity for the
three months ended September 30, 1997 and 1996.
Consolidated Statements of Cash Flows for the three
months ended September 30, 1997 and 1996.
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)
ASSETS: September 30 June 30
1997 1997
------------- -------------
<S> <C> <C>
Cash and due from financial institutions .................................. $ 1,495,824 $ 1,620,716
Interest-earning deposits in financial institutions - short term .......... 1,729,061 15,499,898
------------- -------------
Cash and cash equivalents ........................................ $ 3,224,885 $ 17,120,614
Interest-earning deposits in financial institutions
(cost approximates market value) ................................. -- --
Securities available for sale ............................................. 50,452,597 40,449,698
Loans held for sale, net of unrealized gains and losses ................... -- --
Loans receivable, net of allowance for loan losses of $725,537 in September
and $571,751 in June ............................................. 119,763,943 114,158,745
Stock in Federal Home Loan Bank, at cost .................................. 2,397,600 2,397,600
Accrued interest receivable ............................................... 1,313,942 1,123,623
Premises and Equipment-net ................................................ 1,894,284 1,926,910
Investment in limited partnership .................................... 749,952 749,952
Other assets .............................................................. 2,187,038 2,128,339
------------- -------------
Total Assets ............................................ $ 181,984,241 $ 180,055,481
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Non-interest-bearing demand deposits ...................................... $ 6,158,575 $ 5,751,478
Savings, Now and MMDA deposits ............................................ 50,661,998 50,529,826
Other time deposits ....................................................... 58,119,486 59,837,170
------------- -------------
Total Deposits ................................................... $ 114,940,059 $ 116,118,474
Federal Home Loan Bank advances ........................................... 46,800,000 44,800,000
Obligations relative to limited partnership .......................... 525,000 712,500
Accrued Interest Payable .................................................. 634,265 157,521
Accrued expenses and other liabilities .................................... 1,474,429 1,125,700
------------- -------------
Total Liabilities ................................................ $ 164,373,753 $ 162,914,195
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FFW CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30 June 30
1997 1997
------------- -------------
<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, 873,379 shares
issued and 714,847 outstanding at March 31, 1997; 853,592 shares
issued and 710,840 shares outstanding at June 30, 1997 ........... 8,734 8,698
Additional paid-in capital ................................................ 8,488,659 8,439,565
Retained earnings - substantially restricted .............................. 11,460,684 11,119,378
Net unrealized appreciation on securities available for sale, net
of tax of $210,706 on September 30, 1997 and $405,385 on June
30, 1997 ........................................................... 580,949 502,183
Unearned Employee stock Ownership Plan shares ............................. (244,553) (244,553)
Treasury Stock 158,532 common shares, at cost ............................. (2,683,985) (2,683,985)
------------- -------------
Total Shareholders' equity ....................................... 17,610,488 17,141,286
Total Liabilities and Shareholders' Equity .............. $ 181,984,241 $ 180,055,481
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
September 30
1997 1996
----------- -----------
<S> <C> <C>
Interest Income:
Loans Receivable
Mortgage loans .......................... $ 1,581,434 $ 1,448,240
Consumer and other loans ................ 996,536 739,004
Securities
Taxable ................................. 761,959 593,654
Nontaxable .............................. 103,409 117,786
Other Interest-earning assets .................... 62,200 27,636
----------- -----------
Total Interest Income ................... $ 3,505,538 $ 2,926,320
Interest Expense:
Deposits ......................................... 1,386,462 1,169,388
Other ............................................ 675,266 589,203
----------- -----------
Total Interest Expense .................. $ 2,061,728 $ 1,758,591
Net Interest Income ....................................... 1,443,810 1,167,729
Provision for Loan Losses ........................ 200,000 20,000
----------- -----------
Net interest income after provision for loan losses ....... 1,243,810 1,147,729
Non-interest income:
Net gain on sale of interest-earning assets ...... 16,240 10,728
Net unrealized gain or loss on loans held for sale -- --
Other ............................................ 217,550 147,721
----------- -----------
Total Non-Interest Income ............... $ 233,790 $ 158,449
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(continued)
Three Months Ended
September 30
1997 1996
----------- -----------
<S> <C> <C>
Non-Interest Expense:
Compensation and Benefits ........................ 442,537 339,047
Occupancy and equipment .......................... 80,614 64,486
SAIF deposit insurance premiums .................. 27,164 623,249
Other ............................................ 359,797 230,979
----------- -----------
Total Non-Interest Expense .............. $ 910,112 $ 1,257,761
----------- -----------
Income before income taxes ................................ 567,488
48,417
Income Tax Expense ............................... 97,510 (30,988)
----------- -----------
Net Income ................................................ $ 469,978 $ 79,405
=========== ===========
Earnings per common and common equivalent shares:
Primary .......................................... $ .66 $ .11
Fully Diluted .................................... $ .65 $ .11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Three Months Ended
September 30
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Beginning Balance ...................................... $ 17,141,286 $ 15,458,143
Common Stock at .01 Par Value 2,000,000 shares
authorized issued and
outstanding September 30, 1997 -- 873,379;
September 30, 1996 -- 853,592 ................. 36 --
Additional Paid-in Capital ............................. 49,094 24,000
Treasury Stock at Cost - 0 shares for the three-month
period September 30, 1997
and 9,000 shares for
the three-month period September 30, 1996 ..... -- (176,625)
Cash Dividends of:
$.18 and $.15 per share for the three-month
periods ended September 30,1997 and 1996 ...... (128,672) (105,309)
Amortization of ESOP Contribution ...................... -- --
Amortization of MRP Contribution ....................... -- 6,539
Net unrealized appreciation (depreciation) on securities
available for sale, net of tax ................ 78,766 187,840
Net Income for Period(s) ............................... 469,978 79,405
------------ ------------
Ending Balance ......................................... $ 17,610,488 $ 15,473,993
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net Income ................................................... $ 469,978 $ 79,405
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization, net of accretion .......... (16,167) 44,449
Provision for loan losses ................................ 200,000 20,000
Net (gains) losses on sales of:
Securities available for sale ....................... -- --
Loans held for sale ............................... (21,909) (13,679)
Foreclosed real estate owned and repossessed assets (1,398) (8,273)
Origination of loans held for sale ....................... (1,940,280) (1,400,221)
Proceeds from sale of loans held for sale ................ 1,962,189 1,407,339
ESOP expenses ............................................ 13,000 24,000
Amortization of MRP contribution ......................... -- 6,539
Net change in accrued interest receivable ................ (190,319) (52,316)
Amortization of goodwill and core deposit intangibles .... 41,118 --
Net change in other assets ............................... (213,369) (225,181)
Net change in accrued interest payable, accrued
expenses and other liabilities ...................... 811,572 893,354
------------ ------------
Total adjustments .......................... $ 644,435 $ 696,011
------------ ------------
Net cash from operating activities .................. $ 1,114,413 $ 775,416
Cash flows from investing activities:
Net change in interest-bearing deposits in other
financial institutions .............................. -- 337,935
Proceeds from:
sales/calls of securities available for sale ........ 5,000,000 --
sales/calls of securities held-to-maturity .......... -- --
maturities of securities available for sale ......... 45,000 330,000
maturities of securities held-to-maturity ........... -- --
Purchase of:
securities available for sale ....................... (15,056,122) (546,485)
Federal Home Loan Bank Stock ........................ -- --
Principal collected on mortgage- backed securities ....... 154,081 159,042
Net change in loans receivable ........................... (5,805,198) (2,516,310)
Net purchases premises and equipment ..................... (8,396) (50,855)
Investment in limited partnership ........................ (187,500) --
Proceeds from sales of other real estate and
repossessed assets .................................. 118,950 117,734
------------ ------------
Net cash from investing activities ......... $(15,739,185) $ (2,168,939)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Three Months Ended
September 30
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Net (decrease) increase in deposits ................... (1,178,415) 7,174,882
Proceeds from Federal Home Loan Bank advances ......... 10,500,000 --
Repayment of Federal Home Loan Bank advances .......... (8,500,000) (4,000,000)
Purchase of Treasury Stock ............................ -- (176,625)
Proceeds from exercising of stock options ............. 36,130 --
Cash dividends paid ................................... (128,672) (105,309)
------------ ------------
Net cash from financing activities .............. $ 6,521,332 $ 2,892,948
Net (decrease) increase in cash and cash equivalents .............. $(13,895,729) $ 1,499,425
Cash and cash equivalents at beginning of period .................. $ 17,120,614 $ 2,788,207
Cash and cash equivalents at end of period ........................ $ 3,224,885 $ 4,287,632
============ ============
Supplemental disclosure of cash flow information:
Cash paid during quarter for:
Interest ........................................ $ 1,585,324 $ 1,348,029
Income Taxes .................................... $ 50,000 $ 61,000
Non-cash investing activities transfers from:
</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 September 30, 1997 and June 30, 1997, and the results of its
operations, changes in shareholders' equity for the three months ended September
30, 1997 and 1996. Financial Statement reclassifications have been made for the
prior period to conform to classifications used as of and for the period ended
September 30, 1997.
Operating results for the three months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ended June 30, 1998.
(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 month periods ended September 30, 1997
and 1996. Weighted average number of shares used in the earnings per share
computations were 690,936 for the three-month period ended September 30, 1997.
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 76,442 shares. As of September 30,
1997, options on 38,066 shares of the Company's Common Stock remain unexercised.
(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 September
30, 1997, the capital requirements for the Bank under FIRREA and its actual
capital ratios. As of September 30, 1997, 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 $8,041 8.00% $12,781 12.71%
Core Capital 5,310 3.00% 12,060 6.62%
Tangible Capital 2,655 1.50% 12,060 6.62%
</TABLE>
(4) Common Stock Cash Dividends
On August 26, 1997, the Board of Directors of FFW Corporation, declared
a quarterly cash dividend of $.18 per share. The dividend was paid September 30,
1997 to shareholders of record on September 15, 1997. The payment of the cash
dividend reduced shareholders' equity by $128,672.
<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.
Forward - Looking Statements
When used in this Form 10 - Q and in future filings by the Company with
Securities and Exchange Commission, in the Company's press release or other
public or shareholder communications, and in oral statements made with the
approval of an authorized executive officer, the words or phrase "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify "forward - looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1997. Such statements are subject to certain risks and uncertainties, that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. The Company wishes to caution readers
not to place undue reliance on any such forward - looking statements, which
speak only as of the date made. The Company wishes to advise readers that the
factors listed below could affect the Company's financial performance and could
cause the Company's actual results for future periods to differ materially from
any opinions or statements expressed with respect to future periods in any
current statements.
The Company does not undertake - and specifically declines any
obligation - to publicly release the result of any revisions which may be made
to any forward - looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
Financial Condition
The Company's total assets increased $1.9 million, or 1.1%, from $180.1
million at June 30, 1997 to $182.0 million at September 30, 1997. This increase
was due primarily to funds generated by an increase in advances from FHLB of
$2.0 million. Net loans receivables increased $5.6 million and securities
available-for-sale increased $10.0 million. All of which contributed to a
decrease in cash and cash equivalents of $13.9 million. Loan demand and
liquidity needs may result in additional borrowings if deposits and loan growth
remain at current levels.
<PAGE>
Total securities available-for-sale increased $10.0 million from $40.4
million at June 30, 1997 to $50.4 million at September 30, 1997. This increase
was primarily the result of purchases of callable bonds with the proceeds of the
branch acquisition which closed on June 13. 1997. The available-for-sale
portfolio consists primarily of municipal securities, government agencies,
mortgage-backed securities and to a lesser extent mutual funds and FNMA
preferred stock.
Net loans receivable increased $5.6 million, or 4.9% from $114.2
million at June 30, 1997 to $119.8 million at September 30, 1997. The increase
in the loan portfolio for the quarter resulted, primarily, from an increase in
non-mortgage loans of $3.5 million 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 greater than 15 years.
Total deposits decreased $1.2 million or 1.0% from $116.1 million at
June 30, 1997 to $114.9 million at September 30, 1997. For the quarter ended
September 30, 1997, Savings, Now and MMDA accounts increased $395,000 or .7%
while certificates of deposit decreased $1.7 million or 2.9%. Management
believes that deposit growth may become more costly with the increased use of
specials with higher interest rates and the competitive nature of the markets we
serve.
Total borrowed funds increased $2.0 million from $44.8 million at June
30, 1997 to $46.8 million at September 30, 1997. The increase consisted of new
short term advances from the Federal Home Loan Bank of Indianapolis.
Total shareholders' equity increased $469,000 from $17.1 million at
June 30, 1997 to $17.6 million at September 30, 1997. The increase resulted from
net income of $470,000, the exercise of options for $36,000, and an increase in
the market value of investments, net of tax of $79,000, which was partially
reduced by $128,700 for the payment of dividends.
Results of Operations - Comparison of the Quarters Ended September 30, 1997 and
September 30, 1996
General. Net income increased by $391,000 for the three months ended
September 31, 1997 respectively, as compared to the three months ended September
30, 1996. The increase for the three months ended September 30, 1997 was
primarily the result of increases in net interest income, and the result of the
one time SAIF assessment of $337,800 net of taxes paid in 1996. All of these
items are discussed in greater detail below.
Net Interest Income. Net interest income increased $276,000 or 23.6%
for the three months ended September 30, 1997 and 1996 respectively. This was
primarily the result of an increase in average interest-earning assets which
exceeded the increase in average interest-bearing liabilities, and a
corresponding increase in the spread earned.
Interest Income. Interest income increased $579,000 to $3.5 from $2.9 million
for the quarter ended September 30, 1997 and 1996 respectively. The increases in
interest income for the three months ended September 30, 1997 were due to
continued growth in interest-earning assets including mortgage loans, commercial
and consumer loans and investment, as compared to the same periods ended
September 30, 1996. These increased interest-earning assets are the result of
competitive pricing, marketing, and the re-pricing of adjustable-rate loans and
mortgage-backed securities.
<PAGE>
Interest Expense. Interest expense increased $303,000 to $2.1 million
from $1.8 million for the quarter ended September 30, 1997 and 1996
respectively. For the three months ended September 30, 1997, the increase in
interest expense was due to an increase in borrowed funds and deposits
outstanding as compared to the same periods in 1996. Interest rates, while
remaining steady have increased the use of higher rate specials by everyone
trying to attract deposits. If interest rates remain at or near current levels,
management anticipates the rate of shift to certificates from passbook accounts
will continue. thereby raising our interest expense cost, as the difference
between rates paid on existing certificates and passbooks expands.
Provision for Loan Losses. The provision for loan losses increased
$180,000 to $200,000 from $20,000 for the quarter ended September 30, 1997 and
1996 respectively. The loan loss provisions are based on management's quarterly
analysis of the allowance for loan losses. The provisions for the three month
period reflect an increase in non-mortgage lending and the inherent riskiness
and the number of these loans as compared to 1-4 family mortgage loans. With the
expansion into commercial lending the company will continue to increase its
allowance for loan losses and make future additions to the allowance through the
provision for loan losses as loan growth, 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.
Non-interest Income. Non-interest income increased by $75,000 to
$234,000 from $158,000 for the quarter ended September 30, 1997 and 1996
respectively. The increase was the primarily the result of increased fee income
on deposit accounts and commission income of $54,000 and increase in gain on
sales of loans to the Federal Home Loan Mortgage Corporation of $5,500.
Management believes that with the lower interest rates we will see a increase in
the gain on sales of loans to Freddie Mac for the remainder of the year as
compared to last year.
Non-Interest Expense. Non-interest expense decreased $348,000 to
$910,000 from $1.3 million for the quarter ended September 30, 1997 and 1996
respectively. For the three months ended September 30, 1997, SAIF deposit
premiums decreased $596,000 due to the one time assessment paid in 1996. This
decrease in the SAIF premium was offset by an increase in, compensation and
benefits expenses of $103,000 for increased staff related to our new branch in
South Whitley and our commercial loan department compared to 1996; and other
expenses increased by $156,000 for data processing and cost related to the
branch acquisition in South Whitley compared to 1996.
Income Tax Expense. Income tax expense increased $128,500 to $98,000
from a credit of $31,000 for the quarter ended September 30, 1997 compared to
quarter ended 1996. The increase was due to the tax effect of the one time SAIF
assessment for the quarter ended September 30, 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
<PAGE>
ability to repay the loan and the Company's past statistical history concerning
charge-offs. The Company's allowance for loan losses as of September 30, 1997,
was $726,000 or 0.6% of total loans. The June 30, 1997 allowance for loan losses
was $572,000, or 0.5% of total loans. Total loans classified as substandard,
doubtful or loss as of September 30, 1997 were $1.3 million or 0.7% of total
assets. Management has considered non-performing assets and total classified
assets in establishing the allowance for loan losses.
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>
9/30/97 6/30/97
------- -------
(Dollars in Thousands)
<S> <C> <C>
Non-Accruing Loans ................................. $290 $248
Accruing Loans Delinquent 90 days or more .......... -- --
Troubled Debt Restructurings ....................... -- --
Foreclosed Assets .................................. 44 33
Total Non-Performing Assets ........................ $334 $281
==== ====
Total Non-Performing Assets as a
Percentage of Total Assets ......................... .18% .16%
</TABLE>
Total non-performing assets increased $53,000 to $355,000, or .22% of
total assets at September 30, 1997, from $180,000 or .11% of total assets at
December 31, 1996. The increase in non-performing assets was primarily due to
the addition of two 1-4 family loans for $123,000. Foreclosed assets increased
$11,000 due to the repossession of several vehicles.
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 September
30, 1997, the Bank's liquidity ratio of 5.95%, exceeds the minimum regulatory
requirements.
<PAGE>
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 September 30, 1997, the
Company has commitments to originate loans totaling $2.2 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 September 30, 1997,
the Bank exceeded all fully phased-in regulatory capital standards.
At September 30, 1997, the Bank's tangible capital was $12.1 million,
or 6.8% of adjusted total assets, which is in excess of the 1.5% requirement by
$9.4 million. In addition, at September 30, 1997, the Bank had core capital of
$12.1 million, or 6.8% of adjusted total assets, which exceeds the 3.0%
requirement by $6.8 million. The Bank had risk-based capital of $12.8 million at
September 30, 1997 or 12.7% of risk-adjusted assets which exceeds the 8.0%
risk-based capital requirements by $4.7 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, 1994. 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 September 30, 1997, management is not aware of any current
recommendations by regulatory authorities which, if they were to be implemented,
would have or are reasonably likely to have a material adverse effect on the
Company's liquidity, capital resources or operations.
Item 1 - Legal Proceedings
Not Applicable.
Item 2 - Changes in Securities
Not Applicable.
Item 3 - Defaults upon Senior Securities
Not Applicable.
Item 4 - Submission of Matters to a vote of Security Holders
The Annual Meeting of Shareholders (the "Meeting") of FFW Corporation
was held on October 28, 1997. The matters approved by shareholders at the
Meeting and the number of votes cast for, against or withheld ( as well as the
number of abstentions and broker non-votes) as to each matter are set below:
PROPOSAL NUMBER OF VOTES
-------- ---------------
FOR WITHHELD
--- --------
Election of the following Directors for
a three-year term
Wayne W. Rees ...................... 590,632 900
Ronald D. Reynolds ................. 590,632 900
FOR AGAINST ABSTAIN
--- ------- -------
Ratification of Crowe Chizek as auditors
for the fiscal year ending June 30, 1998..... 589,867 500 1,165
Item 5 - Other Information
Not Applicable
Item 6 - 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 September 30, 1997.
(i) A Form 8-K was filed on July 31, 1997 announcing the year end
income results for fiscal year end June 30, 1997
<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
November 12, 1997 /S/ Nicholas M. George
------------------------
Nicholas M. George
President and Chief
Executive Officer
November 12, 1997 /S/ Charles E. Redman
Charles E. Redman
Treasurer and Chief Financial
Accounting Officer
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