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, 2000
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 identification
incorporation or organization) 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 [ X ] No [ ]
State the number of Shares outstanding of each of the issuer's classes of common
equity, as of the latest date:
As of November 14, 2000, there were 1,424,627 shares of the Registrant's common
stock issued and outstanding.
<PAGE>
FFW CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Condensed Financial Statements
Consolidated Balance Sheets September 30, 2000 3
and June 30, 2000
Consolidated Statements of Income for the 4
three months ended September 30, 2000 and 1999.
Consolidated Statements of Cash Flows for the three 5
months ended September 30, 2000 and 1999.
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Items 1-6 12
Signature Page 13
2
<PAGE>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS :
-------
<TABLE>
<CAPTION>
(Unaudited)
September 30 June 30
2000 2000
----- ----
<S> <C> <C>
Cash and due from financial institutions ........................................... $ 6,180,228 $ 4,152,652
Interest-earning deposits in financial institutions - short term ................... 2,845,653 1,101,766
Cash and cash equivalents ............................................ 9,025,881 5,254,418
Securities available for sale ...................................................... 51,007,596 52,026,138
Loans receivable, net of allowance for loan losses of $2,897,271 at September 30
and $1,961,318 at June 30 ............................................ 152,153,900 150,810,106
Federal Home Loan Bank stock, at cost .............................................. 3,400,900 3,400,900
Accrued interest receivable ........................................................ 1,537,224 1,666,265
Premises and Equipment-net ......................................................... 1,985,413 2,028,386
Investment in limited partnership ................................................... 548,754 561,254
Other assets ....................................................................... 2,934,010 3,289,565
Total Assets .......................................... $ 222,593,678 $ 219,037,032
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Non-interest-bearing demand deposits ............................................... $ 9,446,542 $ 8,875,968
Savings, Now and MMDA deposits ..................................................... 47,442,567 48,198,026
Other time deposits ................................................................ 79,838,652 76,030,606
------------- -------------
Total Deposits ....................................................... 136,727,761 133,104,600
Federal Home Loan Bank advances .................................................... 62,167,542 64,167,542
Obligation relative to limited partnership ......................................... 0 75,000
Accrued Interest Payable ........................................................... 984,474 285,680
Accrued expenses and other liabilities ............................................. 2,949,337 1,789,290
------------- -------------
Total Liabilities .................................................... 202,829,114 199,422,112
Shareholders' Equity:
Preferred stock, $.01 par value, 500,000 shares authorized none issued ............. -- --
Common stock, $.01 par value, 2,000,000 shares authorized, 1,808,013 shares
Issued and 1,424,627 outstanding at September, 30 2000; 1,807,013 shares
issued and 1,423,627 shares outstanding at June 30, 2000 ...................... 18,080 18,070
Additional paid-in capital ......................................................... 9,233,118 9,228,128
Retained earnings - substantially restricted ....................................... 15,325,297 15,547,131
Accumulated other comprehensive income ............................................. (1,119,471) (1,479,969)
Unearned Management Retention Plan shares .......................................... (66,374) (72,354)
Treasury Stock at cost, 383,386 on September 30, 2000 and 383,386 at
June 30, 2000 ........................................................ (3,626,086) (3,626,086)
------------- -------------
Total Shareholders' equity ......................................... 19,764,564 19,614,920
Total Liabilities and Shareholders' Equity ............ $ 222,593,678 $ 217,488,894
============= =============
</TABLE>
3
<PAGE>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30
2000 1999
---- ----
<S> <C> <C>
Interest Income:
Loans Receivable
Mortgage loans ..................... $ 1,507,412 $ 1,448,176
Consumer and other loans ........... 1,869,445 1,763,937
Securities
Taxable ............................ 849,311 771,092
Nontaxable ......................... 112,777 112,634
Other Interest-earning assets .................... 29,315 32,807
Total Interest Income .............. 4,368,260 4,128,646
Interest Expense :
Deposits ......................................... 1,651,863 1,456,162
Other ............................................ 984,535 910,309
----------- -----------
Total Interest Expense ............. 2,636,398 2,366,471
----------- -----------
Net Interest Income ................................... 1,731,862 1,762,175
Provision for Loan Losses .............. 1,035,000 135,000
----------- -----------
Net interest income after provision for loan losses ... 696,862 1,627,175
Non-interest income :
Net (loss) on sale of interest-earning assets .... (33,427) (33,550)
Net unrealized gain or loss on loans held for sale -- --
Other ............................................ 328,520 305,771
----------- -----------
Total Non-Interest Income .......... 295,093 272,221
Non-Interest Expense :
Compensation and Benefits ........................ 520,901 543,410
Occupancy and equipment .......................... 96,527 94,786
Data Processing Expense .......................... 115,228 107,561
Other ............................................ 340,866 321,014
----------- -----------
Total Non-Interest Expense ......... 1,073,522 1,066,771
----------- -----------
Income (Loss) before income taxes ..................... (81,567) 832,625
Income Tax Expense (Benefit) ........... (46,973) 298,584
----------- -----------
Net Income (Loss) ..................................... $ (34,594) $ 534,041
=========== ===========
Comprehensive Income (Loss) ........................... $ 325,904 $ (60,278)
=========== ===========
Earnings (Losses) per common and common equivalent shares :
Basic .................................. $ (.02) $ .37
Diluted ................................ $ (.02) $ .37
</TABLE>
4
<PAGE>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities :
Net Income (Loss) ..................................................... $ (34,594) $ 534,041
Adjustments to reconcile net income to net cash
from operating activities :
Depreciation and amortization, net of accretion .................. (12,524) (3,970)
Provision for loan losses ........................................ 1,035,000 135,000
Net (gains) losses on sale of :
Securities available for sale ........................... 0 34,207
Loans held for sale ..................................... (8,010) (657)
Foreclosed estate owned and repossessed assets .......... 0 (10,506)
Origination of loans held for sale ............................... (784,000) (132,000)
Proceeds from sale of loans held for sale ........................ 792,010 132,657
ESOP expenses .................................................... 0 79,710
Net change in accrued interest receivable and other
assets .................................................. 228,006 (275,216)
Amortization of goodwill and core deposit intangibles ............ 39,087 39,087
Net change in accrued interest payable, accrued
expenses and other liabilities .......................... 1,864,821 1,085,143
----------- -----------
Total adjustments ........................ 3,154,390 1,083,455
----------- -----------
Net cash from operating activities ...................... 3,119,796 1,617,496
Cash flows from investing activities :
Proceeds from :
sales/calls of securities available for sale ............ 1,750,000 2,980,940
Maturities of securities available for sale ............. 95,000 415,000
Purchase of :
Securities available for sale .......................... (212,499) (3,997,786)
Federal Home Loan Bank Stock ............................ 0 0
Principal collected on mortgage- backed securities ............... 45,922 84,832
Net change in loans receivable ................................... (2,482,509) (1,109,119)
Net purchases premises and equipment ............................. (7,533) (17,891)
Investment in limited partnership ................................ (75,000) 0
Proceeds from sales of other real estate and
Repossessed assets ...................................... 97,365 229,759
----------- -----------
Net cash from investing activities ...................... (789,254) (1,414,265)
</TABLE>
5
<PAGE>
PART I: FINANCIAL INFORMATION
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
September 30
2000 1999
---- ----
<S> <C> <C>
Cash flows from financing activities :
Net increase in deposits ...................... $ 3,623,161 $ 5,113,475
Proceeds from short-term borrowings ........... 20,889,047 7,662,781
Payment on short-term borrowings .............. (22,889,047) (8,085,907)
Purchase of Treasury Stock .................... 0 (415,895)
Proceeds from exercising of stock options ..... 5,000 49,885
Cash dividends paid ........................... (187,240) (172,614)
------------ ------------
Net cash from financing activities ... 1,440,921 4,151,725
Net increase (decrease) in cash and cash equivalents 3,771,463 4,354,956
Cash and cash equivalents at beginning of period ... 5,254,418 4,839,235
------------ ------------
Cash and cash equivalents at end of period ......... $ 9,025,881 $ 9,194,191
============ ============
</TABLE>
6
<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-QSB and Regulation S-B. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the Consolidated Condensed
Financial Statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to represent fairly the financial condition of
FFW Corporation as of September 30, 2000 and June 30, 2000 and the results of
its operations, for the three months ended September 30, 2000 and 1999.
Financial Statement reclassifications have been made for the prior period to
conform to classifications used as of and for the period ended September 30,
2000.
Operating results for the three months ended September 30, 2000
are not necessarily indicative of the results that may be expected for the
fiscal year ended June 30, 2001.
(2) Securities
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS No. 138,
requires derivative instruments be carried at fair value on the balance sheet.
The statement continues to allow derivative instruments to be used to hedge
various risks and sets fourth specific criteria to be used to determine when
hedge accounting can be used. The statement also provides for offsetting changes
in fair value or cash flows of both the derivative and the hedged asset or
liability to be recognized in earnings in the same period; however, any changes
in fair value of cash flow that represent the ineffective portion of a hedge are
required to be recognized in earnings and cannot be deferred. For derivative
instruments not accounted for as hedges, changes in fair value are required to
be recognized in earnings. The adoption of this statement on July 1, 2000, did
not have a material effect on the consolidated financial statements.
7
<PAGE>
PART II
FFW CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The accompanying Consolidated Condensed Financial Statements
include the accounts of FFW Corporation (the "Company") and its wholly owned
subsidiaries, First Federal Savings Bank of Wabash (the "Bank") and FirstFed
Financial of Wabash, Inc. All significant inter-company transactions and
balances are eliminated in consolidation. The Company's results of operations
are primarily dependent on the Bank's net interest margin, which is the
difference between interest income on interest-earning assets and interest
expense on interest-bearing liabilities. The Bank's net income is also affected
by the level of its non-interest expenses, such as employee compensation and
benefits, occupancy expenses, and other expenses.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the matters
discussed in this document, and other information contained in the Company's SEC
filings, may express "forward-looking statements." Those "forward-looking
statements" may involve risk and uncertainties, including statements concerning
future events, performance and assumptions and other statements that are other
than statements of historical facts. The Company wishes to caution readers not
to place undue reliance on any forward-looking statements, which speak only as
of the date made. Readers are advised that various factors--including, but not
limited to, changes in laws, regulations or generally accepted accounting
principles; the Company's competitive position within the markets served;
increasing consolidation within the banking industry; unforeseen changes in
interest rates; any unforeseen downturns in the local, regional or national
economies--could cause the Company's actual results or circumstances for future
periods to differ materially from those anticipated or projected.
The Company does not undertake - and specifically declines any
obligation - to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
COMPARISON OF THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Net loss for the three-month period ended September 30, 2000 was
$(35,000) compared to net income of $534,000 for the equivalent period in 1999.
This substantial decrease and loss was primarily the result of a $900,000
increase in the provision for loan loss for the period in 2000.
Diluted net loss per common share was $(0.02) for the three-month
period ending September 30, 2000 compared to diluted net income per common share
of $0.37 for the equivalent period in 1999. Return on average shareholders'
equity was (0.69)% for the three months ended September 30, 2000, compared to
10.94% in 1999. The return on total average assets was (0.06)% for the three
months ended September 30, 2000, compared to 0.96% in 1999.
8
<PAGE>
NET INTEREST INCOME
The net interest income for the three-month period ended
September 30, 2000, was $1,732,000 compared to $1,762,000, a decrease of 1.7%
over the same period in 1999, resulting in a net yield of 3.29% compared to
3.35% in 1999.
Total average earning assets increased slightly, by $94,000, for
the three-month period ended September 30, 2000, over the comparative period in
1999. Total average investment securities increased $1,288,000 for the
three-month period over one-year ago. Total average loans decreased $210,000 for
the three-month period over one-year ago. The yields on total average earning
assets were 8.30% and 7.85% for the three-month periods ended September 30,
2000, and 1999.
The following tables set forth consolidated information regarding
average balances and rates.
FFW Corp
Three Months Ending
(In Thousands)
<TABLE>
<CAPTION>
9/30/2000 9/30/1999
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
------------------------
Loans ............................................ $ 154,059 $ 3,377 8.77% $ 154,269 $ 3,211 8.33%
Securities ....................................... 55,341 962 6.95% 54,053 884 6.54%
Other interest-earning assets .................... 1,032 30 10.99% 2,016 33 6.55%
--------- --------- --------- ---------
Total interest-earning assets ............... 210,432 4,369 8.30% 210,338 4,128 7.85%
Non interest-earning assets
Cash and due from ................................ 5,012 5,163
Allowance for loan losses ........................ (2,045) (1,633)
Other non interest-earning assets ................ 5,852 6,659
--------- ---------
Total assets ................................ $ 219,251 $ 220,527
========= =========
Interest-bearing liabilities:
-----------------------------
Interest-bearing deposits ........................ $ 125,038 1,652 5.28% $ 124,738 1,456 4.67%
FHLB advances .................................... 64,017 985 6.15% 65,949 910 5.52%
--------- --------- --------- ---------
Total interest-bearing liabilities .......... 189,055 2,637 5.58% 190,687 2,366 4.96%
--------- --------- --------- ---------
Non interest-bearing deposit accounts ............ 9,195 8,838
Other non interest-bearing liabilities ........... 1,059 1,586
--------- ---------
Total liabilities ........................... 199,309 201,111
Shareholders' equity ............................. 19,942 19,416
--------- ---------
Total liabilities and shareholders equity ... $ 219,251 $ 220,527
========= =========
Net interest income .............................. $ 1,732 $ 1,762
========= =========
Net interest margin .............................. 3.29% 3.35%
</TABLE>
9
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses was $1,035,000 for the three-month
period ended September 30, 2000 and $135,000 for the same period in 1999.
Changes in the provision for loan losses are attributed to management's analysis
of the adequacy of the allowance for loan losses to address recognizable and
currently anticipated losses. Net charge-offs of $99,000 have been recorded for
the three-month period ended September 30, 2000, compared to $106,000 of net
charge-offs for the same period in 1999. The allowance for loan losses was
$2,897,000 or 1.90% of net loans as of September 30, 2000, compared to
$1,962,000 or 1.30% of net loans at June 30, 2000.
Subsequent to September 30, 2000, the Company became aware of
circumstances that had occurred involving loans the Bank had originated to a
single borrower. Management is currently in the process of evaluating the
applicable collateral of automobiles and lease receivables. As a result of these
circumstances and based on the information currently available, management has
concluded that a loss is probable and, accordingly, has classified $900,000 of
the Bank's allowance for loan losses as a specific reserve on the borrower's
outstanding balance of approximately $1.9 million. In addition, these loans are
considered to be impaired at September 30, 2000. These circumstances have
necessitated an increase of $900,000 in the Bank's provision for loan loss
compared to the like period in 1999.
Information regarding impaired loans is as follows for the periods ended:
<TABLE>
<CAPTION>
Sept. 30, 2000 June 30, 2000
----- -----
<S> <C> <C>
Impaired loans with no allowance for loan losses allocated
Impaired loans with allowance for loan losses allocated 2,620,281 754,116
Amount of allowance allocated 1,232,711 234,667
</TABLE>
The Company establishes an allowance for loan losses based on an
evaluation of risk factors in the loan portfolio and changes in the nature and
volume of its loan activity. This evaluation includes, among other factors, the
level of the Company's classified and non-performing assets and their estimated
value, the national outlook which may tend to inhibit economic activity and
depress real estate and other values in the Company's primary market area,
regulatory issues and historical loan loss experience. Accordingly, the
calculation of the adequacy of loan losses is not based directly on the level of
non-performing loans. Although management believes it uses the best information
available to determine the allowances, unforeseen market conditions or other
unforeseen events could result in adjustments and net earnings could be
significantly affected if circumstances differ substantially from the
assumptions used in making the determination. In addition, a determination by
the Company's main operating subsidiary, First Federal, as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the Office of Thrift Supervision, which may order the establishment of
additional general or specific reserve allowances. It is management's opinion
that the allowance for loan losses is adequate to absorb existing losses in the
loan portfolio as of September 30, 2000.
NON-INTEREST INCOME
Non-interest income for the three-month periods ended September
30, 2000 and 1999 was $295,000 and $272,000, respectively. This $23,000 increase
from the prior period is primarily the result of increased fee income collected.
10
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense for the three-month period ended September
30, 2000, was $1,074,000, an increase of $7,000, 0.6%, compared to the same
period in 1999. For the three-month period ended September 30, 2000,
compensation and employee benefits decreased 4.1%, occupancy and equipment
expense increased 1.8%, data processing expense increased 7.1% and other
non-interest expense increased 6.2% over the same period in 1999.
INCOME TAXES
The provision for income taxes for the three-month period ended
September 30, 2000, was a benefit of $(47,000). This compares to an expense of
$299,000 for the comparable period in 1999. The provision for income taxes for
the three months ended September 30, 2000, is at a rate which management
believes approximates the effective rate for the year ending June 30, 2001.
REGULATORY CAPITAL REQUIREMENTS
Pursuant to the Financial Institution Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), savings institutions must meet three
separate minimum capital-to-asset requirements. As of September 30, 2000, the
Bank maintains risk-based, core capital and tangible capital ratios of 13.27%,
7.72% and 7.72% compared to capital requirements of 8.00%, 4.00% and 1.50%,
respectively.
LIQUIDITY
The standard measure of liquidity for savings associations is the ratio of cash
and eligible investments to a certain percentage of net withdrawable savings
accounts and borrowings due within one year. The minimum required ratio is
currently set by the Office of Thrift Supervision Regulation at 5.0%. At
September 30, 2000, the Bank's liquidity ratio was 10.23%.
11
<PAGE>
Part II - Other Information
As of September 30, 2000, 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 24, 2000. 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:
<TABLE>
<CAPTION>
PROPOSAL NUMBER OF VOTES
-------- ---------------
FOR WITHHELD
--- --------
<S> <C> <C>
Election of the following Directors for a three-year term
Wayne W. Rees ............................... 1,197,627 13,400
Ronald D. Reynolds............................. 1,208,927 2,100
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
Ratification of Crowe Chizek as auditors for the fiscal
year ending June 30, 2001..................................... 1,099,622 108,605 2,800
</TABLE>
Item 5 - Other Information
Not Applicable
Item 6 - Exhibits and Reports on Form 8-K
Not Applicable
12
<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: November 20, 2000 /S/ Roger K. Cromer
--------------------------- -------------------------------
Roger K. Cromer
President and Chief Executive Officer
Date: November 20, 2000 /S/ Timothy A. Sheppard
--------------------------- -------------------------------
Timothy A. Sheppard
Treasurer and Chief Accounting Officer
13
