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, 1999
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 11, 2000 there were 1,423,263 shares of the Registrant's common
stock issued and outstanding.
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<CAPTION>
FFW CORPORATION
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION (unaudited)
Item 1. Consolidated Condensed Financial Statements 3
Consolidated Condensed Balance Sheets December 31, 1999
and June 30, 1999
Consolidated Condensed Statements of Income for the three 4
months and six months ended December 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the six months 5
ended December 31, 1999 and 1998.
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Signature Page 13
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PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FFW CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS : (Unaudited)
- ------- December 31 June 30
1999 1999
------------- -------------
<S> <C> <C>
Cash and due from financial institutions 7,221,546 $ 4,650,866
Interest-earning deposits in financial institutions - short term 3,005,725 188,369
------------- -------------
Cash and cash equivalents $ 10,227,271 $ 4,839,235
Securities available for sale 49,122,370 51,028,563
Loans receivable, net of allowance for loan losses of $1,571,965 in December
and $1,623,293 in June 151,909,160 151,491,090
Stock in Federal Home Loan Bank, at cost 3,400,900 3,400,900
Accrued interest receivable 1,604,136 1,616,479
Premises and Equipment-net 2,071,077 2,124,656
Investment in limited partnership 626,087 626,087
Other assets 1,758,158 2,361,884
------------- -------------
Total Assets $ 220,719,159 $ 217,488,894
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Non-interest-bearing demand deposits $ 9,429,478 $ 8,171,372
Savings, Now and MMDA deposits 51,917,724 52,860,423
Other time deposits 74,378,714 69,369,558
------------- -------------
Total Deposits $ 135,725,916 $ 130,401,353
Federal Home Loan Bank advances 65,877,262 66,300,388
Obligation relative to limited partnership 75,000 75,000
Accrued Interest Payable 336,177 196,256
Accrued expenses and other liabilities 146,962 1,159,057
------------- -------------
Total Liabilities $ 202,161,317 $ 198,132,054
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<TABLE>
<CAPTION>
<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, 1,798,513 shares
issued and 1,423,263 outstanding at December 31 1999; 1,785,288 shares
issued and1,441,224 shares outstanding at June 30, 1999 17,985 17,853
Additional paid-in capital 9,099,557 8,965,882
Retained earnings - substantially restricted 14,722,132 13,970,694
Accumulated other comprehensive income (1,749,936) (455,386)
Unearned Employee stock Ownership Plan shares 0 (52,331)
Treasury Stock at cost, 375,250 December 31, 1999 and 344,064 at
June 30, 1999 (3,531,896) (3,089,872)
------------- -------------
Total Shareholders' equity 18,557,842 19,356,840
Total Liabilities and Shareholders' Equity $ 220,719,159 $ 217,488,894
============= =============
</TABLE>
3
<PAGE>
PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FFW CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Loans Receivable
Mortgage loans $ 1,449,903 $ 1,552,622 $ 2,898,079 $ 3,138,758
Consumer and other loans 1,746,465 1,613,131 3,510,402 3,082,999
Securities
Taxable 790,671 771,613 1,561,763 1,490,776
Nontaxable 115,139 122,117 227,773 246,714
Other Interest-earning assets 24,443 18,639 57,250 85,952
----------- ----------- ----------- -----------
Total Interest Income $ 4,126,621 $ 4,078,122 $ 8,255,267 $ 8,045,199
Interest Expense :
Deposits 1,477,191 1,476,148 2,933,353 2,966,800
Other 906,181 924,798 1,816,490 1,840,122
----------- ----------- ----------- -----------
Total Interest Expense $ 2,383,372 $ 2,400,946 $ 4,749,843 $ 4,806,922
Net Interest Income 1,743,249 1,677,176 3,505,424 3,238,277
Provision for Loan Losses 215,000 120,000 350,000 240,000
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 1,528,249 1,557,176 3,155,424 2,998,277
Non-interest income :
Net gain or (loss) on sale of interest-earning assets 6,340 71,896 (27,210) 102,061
Net unrealized gain or loss on loans held for sale -- -- -- --
Other 351,169 305,016 656,940 584,991
----------- ----------- ----------- -----------
Total Non-Interest Income $ 357,509 $ 376,912 $ 629,730 $ 687,052
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<CAPTION>
<S> <C> <C> <C> <C>
Non-Interest Expense :
Compensation and Benefits 470,602 529,574 1,014,012 1,042,107
Occupancy and equipment 95,691 91,677 190,478 185,627
Data Processing 113,204 122,995 220,765 202,189
Other 326,505 358,173 647,518 674,491
----------- ----------- ----------- -----------
Total Non-Interest Expense $ 1,006,002 $ 1,102,419 $ 2,072,773 $ 2,104,414
----------- ----------- ----------- -----------
Income before income taxes 879,756 831,669 1,712,381 1,580,915
Income Tax Expense 316,891 292,141 615,475 560,703
----------- ----------- ----------- -----------
Net Income $ 562,865 $ 539,528 $ 1,096,906 $ 1,020,212
=========== =========== =========== ===========
Earnings per common and common equivalent shares :
Basic $ .40 $ .38 $ .77 $ .71
Diluted $ .39 $ .37 $ .76 $ .69
Dividends $ .12 $ .105 $ .24 $ .21
Diluted weighted average common shares outstanding 1,449,669 1,469,847 1,450,424 1,470,241
</TABLE>
4
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PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities :
Net Income $ 1,096,906 $ 1,020,212
Adjustments to reconcile net income to net cash
from operating activities :
Depreciation and amortization, net of accretion . (11,618) (37,059)
Provision for loan losses 350,000 240,000
Net (gains) losses on sale of :
Securities available for sale 34,224 4,831
Loans held for sale (7,015) (106,892)
Foreclosed real estate and repossessed assets (37,883) (18,619)
Origination of loans held for sale (890,400) (6,307,139)
Proceeds from sale of loans held for sale 897,415 6,390,157
ESOP expenses 121,181 156,852
Net change in accrued interest receivable and other
assets (143,994) (540,213)
Amortization of goodwill and core deposit intangibles .. 78,174 78,174
Net change in accrued interest payable, accrued
expenses and other liabilities 290,618 (75,429)
----------- -----------
Total adjustments $ 680,702 $ (215,337)
----------- -----------
Net cash from operating activities $ 1,777,608 $ 804,875
Cash flows from investing activities :
Proceeds from :
sales/calls of securities available for sale 2,980,941 3,001,136
Maturities of securities available for sale 780,000 4,405,000
Purchase of :
Securities available for sale (4,096,398) (6,000,000)
Federal Home Loan Bank Stock 0 (675,000)
Principal collected on mortgage- backed securities 173,427 305,652
Net change in loans receivable (956,089) (8,837,115)
Net purchases premises and equipment (44,078) (110,502)
Investment in limited partnership 0 (168,750)
Proceeds from sales of other real estate and
Repossessed assets 603,795 428,360
----------- -----------
Net cash from investing activities $ (558,402) $(7,651,219)
</TABLE>
5
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PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FFW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from financing activities :
Net increase in deposits 5,324,563 5,563,664
Proceeds from short-term borrowings 38,747,898 26,500,000
Payment on short-term borrowings (39,171,024) (21,500,000)
Purchase of Treasury Stock (442,024) (288,634)
Proceeds from exercising of stock options 54,885 15,000
Cash dividends paid (345,468) (304,798)
------------ ------------
Net cash from financing activities $ 4,168,830 $ 9,985,232
Net increase (decrease) in cash and cash equivalents $ 5,388,036 $ 3,138,888
Cash and cash equivalents at beginning of period $ 4,839,235 $ 4,410,352
Cash and cash equivalents at end of period $ 10,227,271 $ 7,549,240
============ ============
</TABLE>
6
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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, 1999 and June 30, 1999 and the results of its
operations, for the three and the six months ended December 31, 1999 and 1998
Financial Statement reclassifications have been made for the prior period to
conform to classifications used as of and for the period ended December 31, 1999
Operating results for the three and six months ended December 31, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ended June 30, 2000.
(2) Earnings Per Share of Common Stock
Basic and diluted earning per share are computed under a new accounting
standard effective in the quarter ended December 31, 1997. All prior amounts
have been restated to be comparable. Basic earnings per share is based on net
income (less preferred dividends) divided by the weighted average number of
shares outstanding during the period. Diluted earnings per share shows the
dilutive effect of additional common shares issuable under stock options (and
convertible securities). Diluted net income per common share for the second
quarter of 1999 amounted to 39 cents, up 5.4 percent from the 37 cents for the
second quarter of 1998. Diluted net income per share for the first two quarters
of 1999 was 76 cents, up 10.1 percent from the 69 cents for the same period a
year ago.
(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, 1999, the capital requirements for the Bank under FIRREA and its actual
capital ratios. As of December 31, 1999, the Bank substantially exceeded all
current regulatory capital standards.
<PAGE>
Regulatory Actual
Capital Requirement Capital (Bank Only)
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Risk-Based ................. $11,158 8.00% $17,792 12.76%
Core Capital ............... 8,789 4.00% 16,238 7.39%
Tangible Capital ........... 3,296 1.50% 16,238 7.39%
(4) Common Stock Cash Dividends
On November 23, 1999 the Board of Directors of FFW Corporation,
declared a quarterly cash dividend of $.12 per share. The dividend was paid
December 31, 1999 to shareholders of record on December 15, 1999. The payment of
the cash dividend reduced shareholders' equity by $173,454.
7
<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 $3.2 million, or 1.5%, from $217.5
million at June 30, 1999 to $220.7 million at December 31, 1999. This increase
was due primarily to funds generated by an increase in cash and cash equivalents
of $5.4 million. Net loans receivables increased $418,000 and securities
available-for-sale decreased $1.9 million. Loan demand and liquidity needs may
result in additional borrowings if deposits and loan growth remain at current
levels.
Total securities available-for-sale decreased $1.9 million from $51.0
million at June 30, 1999 to $49.1 million at December 31, 1999. This decrease
was primarily the result of the change in unrealized depreciation. 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.
<PAGE>
Net loans receivable increased $418,000 or 0.3% from $151.5 million at
June 30, 1999 to $151.9 million at December 31, 1999. The increase in the loan
portfolio for the six months resulted, primarily, from an increase in
non-mortgage loans. 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 increased $ 5.3 million or 4.1% from $130.4 million at
June 30, 1999 to $135.7 million at December 31, 1999. For the six months ended
December 31, 1999, Non-interest bearing demand deposits increased $ 1.2 million
or 15.4% and other time deposits increased $ 5.0 million or 7.2%. 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.
8
<PAGE>
Total borrowed funds decreased $423,000 from $66.3 million at June 30,
1999 to $65.9 million at December 31, 1999. The decrease consisted of payments
on short term advances from the Federal Home Loan Bank of Indianapolis.
Total shareholders' equity decreased $799,000 from $19.4 million at
June 30, 1999 to $18.6 million at December 31, 1999. The decrease resulted in a
decrease in the market value of investments, net of tax, of 1.3 million,
dividends of $345,000 and treasury stock purchases of $ 442,000, offset by net
income of $ 1.1 million.
Results of Operations - Comparison of the three and six months ended December
31, 1999 and December 31, 1998
General. Net income increased by $23,000 and $77,000 for the three and
six months ended December 31, 1999 respectively, as compared to the three and
six months ended December 31, 1998. The increase for the three and six months
ended December 31, 1999 was primarily the result of increases in net interest
income, and non-interest income offset by an increase in non-interest expense.
All of these items are discussed in greater detail below.
Net Interest Income. Net interest income increased $66,000 or 3.9% for
the three months ended December 31, 1999 and $267,000 or 8.2% for the six months
ended December 31, 1999 compared over the same period in 1998. 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 $48,000 and $210,000
to $4.13 million and $8.26 million for the three and six months ended December
31, 1999 respectively, as compared to the three and six months ended December
31, 1998. The increases in interest income for the three and six months ended
December 31, 1999 were due to continued growth in interest-earning assets
specifically commercial loans, as compared to the same periods ended December
31, 1998. These increased interest-earning assets are the result of competitive
pricing, marketing, and the re-pricing of adjustable-rate loans and
mortgage-backed securities.
Interest Expense. Interest expense decreased $18,000 and $57,000 to
$2.4 million and $4.7 million for the three and six months ended December 31,
1999 respectively, as compared to the three and six months ended December 31,
1998. For the three and six months ended December 31, 1999, the decrease in
interest expense was due to lowered re-pricing of our borrowed funds and
deposits outstanding as compared to the same periods in 1998.
Provision for Loan Losses. The provision for loan losses increased
$95,000 to $215,000 for the three months ended December 31, 1999, the provision
increased $110,000 for the six months ended to $350,000 compared to the same
period in 1998. 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 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.
<PAGE>
Non-interest Income. Non-interest income for the three month periods
ended December 31, 1999, and 1998 was $358,000 and $377,000, respectively, and
for the six month periods was $630,000 in 1999 and $687,000 in 1998. For the six
months ended gain on sale of loans decreased $ 100,000 and loss on sale of
investments increased $ 29,000 over the same period in 1998. The decreases were
offset by increases in commission income of $ 20,000 and loan fee income of $
36,000 compared to the same period last year.
Non-Interest Expense. Non-interest expense for the three month period
ended December 31, 1999, was $1.0 million a decrease of 8.7% over the same
period in 1998 and was $2.1 million for the six month period ended December 31,
1999, a decrease of 1.5% over 1998. For the six months ended compensation and
benefits decreased 2.7% and other expenses decreased 3.9% over the same period
last year. The decrease came from a change in ESOP expense of $ 36,000 based on
the decrease in market value of the shares earned. Other expenses had decreases
in REO expense and office supplies totaling $ 43,000 compared to the same period
in 1998.
Income Tax Expense. The provision for income taxes for the three month
and six month periods ended December 31, 1999, was $317,000 and $615,000
respectively, compared to $292,000 and $561,000 for the comparable periods in
1998. The provision for income taxes for the six months ended December 31, 1999,
is at a rate which management believes approximates the effective rate for the
year. The increase is due to increased taxable income in 1999 compared to 1998.
9
<PAGE>
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, 1999,
was $1.6 million or 1.02% of total loans. The June 30, 1999 allowance for loan
losses was $ 1.6 million, or 1.06% of total loans. Total loans classified as
substandard, doubtful or loss as of December 31, 1999 were $2.1 million or 0.95%
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.
12/31/99 6/30/99
(Dollars in thousands)
Non-Accruing Loans .............................. $1,274 $ 410
Accruing Loans Delinquent 90 days or more ....... --- ---
Troubled Debt Restructurings .................... --- ---
Foreclosed Assets ............................... 38 432
------- -----
Total Non-Performing Assets ..................... $ 1,312 $ 842
======= =====
Total Non-Performing Assets as a
Percentage of Total Assets ...................... .59% .39%
Total non-performing assets increased $470,000 to $1.3 million, or .59%
of total assets at December 31, 1999, from $842,000 or .39% of total assets at
June 30, 1999. The increase in non-performing assets was primarily due to the
addition of several mortgage loans. Foreclosed assets decreased $394,000 due to
the sale of two REO properties.
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.
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, 1999, the
Company has commitments to originate loans totaling $1.2 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.
<PAGE>
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, 1999,
the Bank exceeded all fully phased-in regulatory capital standards.
At December 31, 1999, the Bank's tangible capital was $16.2 million, or
7.39% of adjusted total assets, which is in excess of the 1.5% requirement by
$12.9 million. In addition, at December 31, 1999, the Bank had core capital of
$16.2 million, or 7.39% of adjusted total assets, which exceeds the 4.0%
requirement by $7.4 million. The Bank had risk-based capital of $17.8 million at
December 31, 1999 or 12.76% of risk-adjusted assets which exceeds the 8.0%
risk-based capital requirements by $6.6 million.
10
<PAGE>
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.
11
<PAGE>
Part II - Other Information
As of December 31, 1999, 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
Not Applicable
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: February 14, 2000 /S/Nicholas M. George
----------------- --------------------
Nicholas M. George
President and Chief Executive Officer
Date:February 14, 2000 /S/Roger K. Cromer
----------------- --------------------
Roger K. Cromer
Treasurer and Chief Financial
Accounting Officer
13
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