-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AX9odveIgmGYCQDDtNjmsRuDQqKU8mjmVQMrl89kqYZIyAKnevFGUMDPWd1A6i9L RbJCAjRSPwlYQiwS4XuSNg== 0000908834-02-000319.txt : 20021114 0000908834-02-000319.hdr.sgml : 20021114 20021114163928 ACCESSION NUMBER: 0000908834-02-000319 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FFW CORP CENTRAL INDEX KEY: 0000895401 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 351875502 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21170 FILM NUMBER: 02825445 BUSINESS ADDRESS: STREET 1: 1205 N CASS STREET STREET 2: PO BOX 419 CITY: WABASH STATE: IN ZIP: 46992-1027 BUSINESS PHONE: 2195633185 MAIL ADDRESS: STREET 1: 1205 N CASS ST STREET 2: PO BOX 419 CITY: WABASH STATE: IN ZIP: 46992 10QSB 1 ffw10q_0902.txt 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, 2002 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) (260) 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 November 8, 2002, there were 1,356,775 shares of the Registrant's common stock issued and outstanding. FFW CORPORATION INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Consolidated Financial Statements Consolidated Balance Sheets September 30, 2002 3 and June 30, 2002 Consolidated Statements of Income and 4 Comprehensive Income for the three months ended September 30, 2002 and 2001. Consolidated Statements of Cash Flows for the three 5 months ended September 30, 2002 and 2001. Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 8 Condition and Results of Operations Item 3. Controls and Procedures 13 PART II. OTHER INFORMATION Items 1-6 14 Signature Page 15 Certifications 16
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS: (Unaudited) September 30 June 30 2002 2002 ------------- ------------ Cash and due from financial institutions..................................... $ 5,981,783 $ 6,321,697 Interest-earning deposits in financial institutions - short term............. 1,696,110 2,996,816 ------------- ------------ Cash and cash equivalents 7,677,893 9,318,513 Securities available for sale 77,978,771 76,344,629 Loans receivable, net of allowance for loan losses of $2,266,597 at September 30, 2002 and $2,361,241 at June 30, 2002 .................. 136,296,122 141,857,794 Federal Home Loan Bank stock, at cost ....................................... 3,400,900 3,400,900 Accrued interest receivable 1,357,408 1,448,182 Premises and equipment-net................................................... 2,680,832 2,693,163 Investment in limited partnership....................................... 393,474 409,974 Cash surrender value of life insurance.................................. 4,515,282 0 Other assets 2,012,358 2,355,286 ------------- ------------ Total Assets...........................................................$ 236,313,040 $237,828,441 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities: Non-interest-bearing demand deposits.........................................$ 9,952,812 $ 9,981,667 Savings, NOW and MMDA deposits............................................... 68,245,141 67,611,581 Other time deposits.......................................................... 83,054,271 81,067,474 ------------- ------------ Total Deposits......................................................... 161,252,224 158,660,722 Federal Home Loan Bank advances.............................................. 48,862,554 54,362,554 Accrued interest payable..................................................... 696,698 153,571 Accrued expenses and other liabilities....................................... 2,162,566 2,242,805 ------------- ------------ Total Liabilities...................................................... 212,974,042 215,419,652 Shareholders' Equity: Preferred stock, $.01 par value, 500,000 shares authorized none issued ...... -- -- Common stock, $.01 par value, 2,000,000 shares authorized, 1,829,828 shares issued and 1,356,775 shares outstanding at September 30, 2002; 1,829,828 shares issued and 1,367,375 shares outstanding at June 30, 2002 .......... 18,298 18,298 Additional paid-in capital................................................... 9,345,123 9,345,123 Retained earnings - substantially restricted................................. 18,082,303 17,711,055 Accumulated other comprehensive income....................................... 855,549 138,695 Unearned management retention plan shares.................................... (71,574) (80,961) Treasury stock at cost, 473,053 shares on September 30, 2002 and 462,453 shares on June 30, 2002 .......................................... (4,890,701) (4,723,421) ------------- ------------ Total Shareholders' Equity............................................. 23,338,998 22,408,789 Total Liabilities and Shareholders' Equity ............................ $236,313,040 $237,828,441 ============= ============
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
Three Months Ended September 30 2002 2001 ---- ---- Interest income: Loans receivable Mortgage loans..............................$ 1,172,123 $ 1,485,635 Consumer and other loans ................... 1,562,938 1,702,056 Securities Taxable..................................... 748,365 850,237 Nontaxable.................................. 229,186 130,480 Other interest-earning assets........................ 23,806 29,633 ----------- ----------- Total interest income ...................... 3,736,418 4,198,041 Interest expense: Deposits............................................. 1,314,668 1,723,078 Other................................................ 707,632 842,051 ----------- ----------- Total interest expense...................... 2,022,300 2,565,129 ----------- ----------- Net interest income........................................... 1,714,118 1,632,912 Provision for loan losses............................ 225,000 225,000 ----------- ----------- Net interest income after provision for loan losses........... 1,489,118 1,407,912 Non-interest income: Net gain on sale of securities....................... 1,222 5,000 Net gain on sale of loans............................ 133,886 49,024 Other 349,206 342,652 ----------- ----------- Total noninterest income.................... 484,314 396,676 Noninterest expense : Compensation and benefits ........................... 579,905 526,290 Occupancy and equipment ............................ 100,272 92,803 Data processing expense....................... 119,361 116,867 Other 397,971 346,155 ----------- ----------- Total noninterest expense .................. 1,197,509 1,082,115 ----------- ----------- Income before income taxes ................................... 775,923 722,473 Income tax expense................................... 200,183 196,363 ----------- ----------- Net income....................................................$ 575,740 $ 526,110 =========== =========== Comprehensive income..........................................$ 1,292,594 $ 732,499 =========== =========== Earnings per common share : Basic $ .42 $ .37 Diluted $ .42 $ .37
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30 2002 2001 ---- ---- Cash flows from operating activities : Net income .................................................... $ 575,740 $ 526,110 Adjustments to reconcile net income to net cash from operating activities : Depreciation and amortization, net of accretion ............ 67,498 24,327 Provision for loan losses .................................. 225,000 225,000 Increase in cash surrender value of life insurance ......... (15,282) 0 Net (gains) losses on sale of : Securities available for sale ........................... (1,222) (5,000) Loans held for sale .................................. (133,886) (49,024) Foreclosed estate owned and repossessed assets .......... 9,387 7,980 Origination of loans held for sale ......................... (8,741,414) (5,110,050) Proceeds from sale of loans held for sale .................. 8,834,183 5,159,074 Net change in accrued interest receivable and other assets ............................................... 205,634 (285,878) Amortization of goodwill and core deposit intangibles ...... 18,286 41,760 Net change in accrued interest payable, accrued expenses and other liabilities ........................ 462,888 1,230,708 ------------ ------------ Total adjustments ................................. 931,072 1,238,897 ------------ ------------ Net cash from operating activities .................... 1,506,812 1,765,007 Cash flows from investing activities : Proceeds from : Sales/calls of securities available for sale ............... 3,252,317 9,386,600 Maturities of securities available for sale ................ 150,000 0 Purchase of securities available for sale ..................... (7,069,083) (11,970,180) Purchase of life insurance .................................... (4,500,000) 0 Principal collected on mortgage- backed securities ............ 3,097,579 1,402,844 Net change in loans receivable ................................ 5,050,797 159,929 Net purchases premises and equipment .......................... (33,957) (581,575) Proceeds from sales of other real estate and repossessed assets ......................................... 185,185 104,769 ------------ ------------ Net cash from investing activities ......................... 132,838 (1,497,613) Cash flows from financing activities : Net increase in deposits ...................................... 2,591,502 666,425 Proceeds from borrowings ...................................... 0 25,490,750 Payment on borrowings ......................................... (5,500,000) (21,500,000) Purchase of treasury stock .................................... (167,280) (280,218) Cash dividends paid ........................................... (204,492) (185,464) ------------ ------------ Net cash from financing activities ......................... (3,280,270) 4,191,493 Net increase (decrease) in cash and cash equivalents ............. (1,640,620) 4,458,887 Cash and cash equivalents at beginning of period ................. 9,318,513 8,530,159 ------------ ------------ Cash and cash equivalents at end of period ....................... $ 7,677,893 $ 12,989,046 ============ ============
PART I: FINANCIAL INFORMATION FFW CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) Basis of Presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the Consolidated 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, 2002 and June 30, 2002 and the results of its operations, for the three months ended September 30, 2002 and 2001. Financial Statement reclassifications have been made for the prior period to conform to classifications used as of and for the period ended September 30, 2002. Operating results for the three months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 2003. (2) New Accounting Pronouncements: In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which addresses the accounting for such assets arising from prior and future business combinations. Upon the adoption of this statement, goodwill arising from business combinations will no longer be amortized, but rather will be assessed regularly for impairment, with any such impairment recognized as a reduction to earnings in the period identified. Other identified intangible assets, such as core deposit intangible assets, will continue to be amortized over their estimated useful lives. On October 1, 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions." SFAS No. 147 is effective October 1, 2002, and may be early applied. SFAS No. 147 supersedes SFAS No. 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions." SFAS No. 147 provides guidance on the accounting for the acquisition of a financial institution, and applies to all such acquisitions except those between two or more mutual enterprises. Under SFAS No. 147, the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a financial institution business combination represents goodwill that should be accounted for under SFAS No. 142, "Goodwill and Other Intangible Assets." If certain criteria are met, the amount of the unidentifiable intangible asset resulting from prior financial institution acquisitions is to be reclassified to goodwill upon adoption of this Statement. The adoption by the Company of SFAS No. 142 and SFAS No. 147 effective July 1, 2002 resulted in $975,000 of unamortized goodwill that will cease to be amortized into expense. The following table reflects net income and earnings per share as previously reported and adjusted income and earnings per share for the same period as if the new standard had been adopted in 2001. Three months ended September 30 (Dollars in thousands except for per share data) 2002 2001 ---- ---- Net income as reported $ 576 $ 526 Add discontinued goodwill expense, net of tax - 14 ------ ------ Adjusted net income $ 576 $ 540 ====== ====== Basic earnings per share as reported $ 0.42 $ 0.37 Diluted earnings per share as reported $ 0.42 $ 0.37 Adjusted basic earnings per share $ 0.42 $ 0.38 Adjusted diluted earnings per share $ 0.42 $ 0.38 Intangible assets at September 30, 2002 subject to amortization are as follows: Gross Accumulated Amount Amortization ------ ------------ Core deposit premium resulting from branch acquisition $ 447 $ 392 Amortization expense for the first three months of fiscal 2003 was $18. The remaining amortization expense is $55 and will be expensed in the remaining nine months of fiscal 2003. Intangible assets not subject to amortization, because they have indefinite lives are as follows: Gross Accumulated Amount Amortization ------- ------------ 1997 Purchase of South Whitley branch $ 1,248 $ 416 2001 Purchase of investment company 160 17 ------- ------ $ 1,408 $ 433 ======= ====== Impairment testing revealed that no impairment provision was required at September 30, 2002. PART I: ITEM 2 FFW CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The accompanying Consolidated 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, Inc ("FirstFed Financial"). 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 accounting principles generally accepted in the United States of America; 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. CRITICAL ACCOUNTING POLICIES Certain of the Company's accounting policies are important to the portrayal of the Company's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances that could effect these judgments include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses, ("ALL"), the valuation of mortgage servicing rights, classification and valuation of securities, and stock compensation. Allowance for Loan Losses (ALL): The ALL is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the ALL balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the ALL may be made for specific loans, but the entire ALL is available for any loan that, in management's judgment, should be charged-off. Loan losses are charged against the ALL when management believes the uncollectibility of a loan balance is confirmed. A loan is impaired when full payment under the loan terms is not expected. Impairment is evaluated in total for small-balance loans of similar nature such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans. If a loan is impaired, a portion of the ALL is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Mortgage Servicing Rights: Servicing rights represent both purchased rights and the allocated value of servicing rights retained on loans sold. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to interest rates and then, secondarily, as to geographic and prepayment characteristics. Any impairment of a grouping is reported as a valuation allowance. As of September 30, 2002, mortgage servicing rights had a carrying value of $506,000. Securities: Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported separately in shareholders' equity, net of tax. Securities are classified as trading when held for short-term periods in anticipation of market gains, and are carried at fair value. Securities are written down to fair value when a decline in fair value is not temporary. Gains and losses on sales are determined using the amortized cost of the specific security sold. Interest income includes amortization of purchase premiums and discounts. Stock Compensation: Expense for employee compensation under stock option plans is based on Accounting Principles Board (APB) Opinion 25, with expense reported only if options are granted below market price at grant date. If applicable, disclosures of net income and earnings per common share are provided as if the fair value method of Statement of Financial Accounting Standards SFAS No. 123 were used for stock-based compensation. COMPARISON OF THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001 Net income for the three-month period ended September 30, 2002 was $576,000 compared to $526,000 for the equivalent period in 2001. This 9.4% increase of $50,000 was the result of an $81,000 increase in net interest income and an $88,000 increase in non-interest income being partially offset by a $115,000 increase in non-interest expense for the period ended September 30, 2002 compared to September 30, 2001. Diluted net income per common share was $0.42 for the three-month period ended September 30, 2002 compared $0.37 for the equivalent period in 2001. Return on average shareholders' equity was 10.04% for the three months ended September 30, 2002, compared to 9.45% in 2001. The return on total average assets was 0.96% for the three months ended September 30, 2002, compared to 0.91% in 2001. NET INTEREST INCOME The net interest income for the three-month period ended September 30, 2002, was $1,714,000 compared to $1,633,000, an increase of 5.0% over the same period in 2001, resulting in a net yield of 3.00% compared to 2.95% in 2001. Total average earning assets increased by $6.5 million for the three-month period ended September 30, 2002, over the comparative period in 2001. Total average investment securities increased $13.2 million for the three-month period over one-year ago. Total average loans decreased $9.5 million for the three-month period over one-year ago. The yields on average total interest-earning assets were 6.55% and 7.57% for the three-month periods ended September 30, 2002, and 2001 while the rates on average total interest-bearing liabilities were 3.97% and 5.20%, respectively. The following tables set forth consolidated information regarding average balances and rates.
FFW Corp Three Months Ending (In Thousands) 9/30/2002 9/30/2001 Average Average Average Average Interest-earning assets: Balance Interest Rate Balance Interest Rate - ------------------------ -------- -------- ----- -------- -------- ------ Loans $142,120 $2,735 7.63% $151,646 $3,187 8.34% Securities 78,863 978 4.96% 65,676 981 5.99% Other interest-earning assets 6,099 24 1.56% 3,265 30 3.65% -------- ------ -------- ------ Total interest-earning assets 227,082 3,737 6.55% 220,587 4,198 7.57% Non interest-earning assets Cash and due from 4,796 4,818 Allowance for loan losses (2,390) (1,750) Other non interest-earning assets 7,357 5,896 -------- -------- Total assets $236,845 $229,551 ======== ======== Interest-bearing liabilities: - ----------------------------- Interest-bearing deposits $151,474 1,315 3.44% $135,737 1,723 5.04% FHLB advances 50,728 708 5.54% 60,072 842 5.56% -------- ------ -------- ------ Total interest-bearing liabilities 202,202 2,023 3.97% 195,809 2,565 5.20% -------- ------ -------- ------ Non interest-bearing deposit accounts 9,640 9,535 Other non interest-bearing liabilities 2,248 2,116 -------- -------- Total liabilities 214,090 207,460 Shareholders' equity 22,755 22,091 -------- --------- Total liabilities and shareholders equity $236,845 $229,551 ======== ======== Net interest income $ 1,714 $ 1,633 ======= ======= Net interest margin 3.00% 2.95% ===== =====
PROVISION FOR LOAN LOSSES The provision for loan losses was $225,000 for the three-month period ended September 30, 2002 and also $225,000 for the same period in 2001. Changes in the provision for loan losses are attributed to management's analysis of the adequacy of the allowance for loan losses (ALL) to address recognizable and currently estimated losses. Net charge-offs of $320,000 have been recorded for the three-month period ended September 30, 2002, compared to $421,000 of net charge-offs for the same period in 2001. For the period ended September 30, 2002, gross charge-offs were $416,000. The ALL was $2,267,000 or 1.66% of net loans as of September 30, 2002, compared to $2,361,000 or 1.66% of net loans at June 30, 2002. Non-performing loans, which includes non-accruing loans and accruing loans delinquent more than 90 days, were $1,981,000 at September 30, 2002 compared to $1,943,000 at June 30, 2002. The Company establishes an ALL 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 ALL, 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 OTS which may order the establishment of additional general or specific reserve allowances. It is management's opinion that the ALL is adequate to absorb existing losses in the loan portfolio as of September 30, 2002. NONINTEREST INCOME Noninterest income for the three-month periods ended September 30, 2002 and 2001 was $484,000 and $397,000, respectively. This $87,000 increase from the prior period is composed primarily of increased gain on sale of loans, $85,000 higher, compared to the period ending September 30, 2001. Included in the gain on sale of loans is $41,000 of income recorded for mortgage servicing right assets. In other noninterest income, commission income fell by $53,000 due to lower annuity and life insurance sales while other income, fees and charges grew $60,000 over the comparable quarter. NONINTEREST EXPENSE Noninterest expense for the three-month period ended September 30, 2002 increased $116,000, or 10.7%, compared to the total of $1,082,000 for the same period in 2001. For the three-month period ended September 30, 2002, compensation and employee benefits increased 10.2%, occupancy and equipment expense increased 8.1%, data processing expense increased 2.1% and other noninterest expense increased 15.0% over the same period in 2001. After adjusting for a nonrecurring $20,000 expense on real estate owned, other noninterest expense increased 9.2% over the same period in 2001. INCOME TAXES The provision for income taxes for the three-month period ended September 30, 2002, was $200,000 compared to $196,000 for the comparable period in 2001. The provision for income taxes for the three months ended September 30, 2002, is at a rate which management believes approximates the effective rate for the year ending June 30, 2003. REGULATORY CAPITAL REQUIREMENTS The Bank is required to maintain specific amounts of regulatory capital pursuant to regulations of the OTS. At September 30, 2002, the Bank exceeded all regulatory capital standards as is shown in the following table.
Minimum To Be Well Minimum Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions --------------------- ------------------- ----------------- Amount Ratio Amount Ratio Amount Ratio ------- ------ ------- ----- ------- ------ As of September 30, 2002 Total Risk-based Capital $20,660 14.32% $11,544 8.00% $14,429 10.00% Tier I (Core) Capital 18,851 13.06% 5,772 4.00% 8,658 6.00% (to risk weighted assets) Tier I (Core) Capital 18,851 8.14% 9,260 4.00% 11,574 5.00% (to adjusted total assets)
NEW ACCOUNTING PRONOUNCEMENTS Effective July 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," and SFAS No. 147, "Acquisitions of Certain Financial Institutions." The adoption by the Company of SFAS No. 142 and SFAS No. 147 effective July 1, 2002 resulted in $975,000 of unamortized goodwill that will cease to be amortized into expense. For details on the effects of these adoptions, please see Footnote (2) above in Part I: Financial Information, Notes to Consolidated Financial Statements. PART I: ITEM 3 FFW CORPORATION CONTROLS AND PROCEDURES Within the 90-day period prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of FFW Corporation's management, including our Chief Executive Officer and Chief Financial Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief Financial Accounting Officer have concluded that the Company's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed by FFW Corporation in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, our Chief Executive Officer and Chief Financial Accounting Officer have concluded that there were no significant changes in FFW Corporation's internal controls or in other factors that could significantly affect its internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. Part II - Other Information As of September 30, 2002, 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 22, 2002. 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 Thomas L. Frank........................................... 1,086,121 128,610 J. Stanley Myers.......................................... 1,086,121 128,610 John N. Philippsen........................................ 1,086,121 128,610 FOR AGAINST ABSTAIN --------- ------- ------- Ratification of Crowe, Chizek and Company LLP as auditors for the fiscal year ending June 30, 2003........... 1,197,766 14,165 2,800
Item 5 - Other Information Not Applicable Item 6 - Exhibits and Reports on Form 8-K Not Applicable 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 13, 2002 /S/ Roger K. Cromer ----------------------------- -------------------------------------- Roger K. Cromer President and Chief Executive Officer Date: November 13, 2002 /S/ Timothy A. Sheppard ----------------------------- -------------------------------------- Timothy A. Sheppard Treasurer and Chief Accounting Officer CERTIFICATION By signing below, each of the undersigned hereby certifies pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, (i) this Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2002 ("Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and (ii) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of FFW Corporation. Signed this 13th day of November, 2002. FFW CORPORATION Registrant By: {s} Roger K. Cromer ----------------------------------------- Roger K. Cromer President and Chief Executive Officer By: {s} Timothy A. Sheppard ----------------------------------------- Timothy A. Sheppard Treasurer and Chief Accounting Officer CERTIFICATION I, Roger K. Cromer, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of FFW Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 13, 2002 {S} Roger K. Cromer -------------------------------------- President/Chief Executive Officer CERTIFICATION I, Timothy A. Sheppard, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of FFW Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: November 13, 2002 {S} Timothy A. Sheppard -------------------------------------- Treasurer/Chief Financial Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----