-----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, KKozlV3+MSMcylWhSzRFX+/y/L9GN9g7NV7apVyDZugTDJ0LShghngMHsajEGvls JRG/7v6Jpw32hFqaleHNPA== 0000908834-03-000192.txt : 20030513 0000908834-03-000192.hdr.sgml : 20030513 20030513162017 ACCESSION NUMBER: 0000908834-03-000192 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 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: 03695835 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 ffw_10q05.txt 10-QSB 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 March 31, 2003 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 incorporation (I.R.S. Employer identification 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 May 5, 2003, there were 1,321,800 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 for March 31, 2003 3 and June 30, 2002 Consolidated Statements of Income and 4 Comprehensive Income for the three and nine months ended March 31, 2003 and 2002. Consolidated Statements of Cash Flows for the 5 nine months ended March 31, 2003 and 2002. 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 14 PART II. OTHER INFORMATION Items 1-6 15 Signature Page 16 Certifications 17
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) March 31 June 30 2003 2002 ------------ ------------ ASSETS : Cash and due from financial institutions $ 7,855,331 $ 6,321,697 Interest-earning deposits in other financial institutions - short term 1,638,337 2,996,816 ------------ ------------ Cash and cash equivalents 9,493,668 9,318,513 Securities available for sale 87,924,883 76,344,629 Loans receivable, net of allowance for loan losses of $2,606,292 at March 31, 2003 and $2,361,241 at June 30, 2002 124,525,925 141,857,794 Federal Home Loan Bank stock, at cost 3,400,900 3,400,900 Accrued interest receivable 1,262,711 1,448,182 Premises and equipment, net 2,685,576 2,693,163 Investment in limited partnership 365,974 409,974 Cash surrender value of life insurance 4,651,041 --- Other assets 2,337,614 2,355,286 ------------ ------------ Total Assets $236,648,292 $237,828,441 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities: Noninterest-bearing demand deposits $ 12,300,829 $ 9,981,667 Savings, NOW and MMDA deposits 69,622,528 67,611,581 Other time deposits 83,649,175 81,067,474 ------------ ------------ Total Deposits 165,572,532 158,660,722 Federal Home Loan Bank advances 44,740,957 54,362,554 Accrued interest payable 704,043 153,571 Accrued expenses and other liabilities 2,283,646 2,242,805 ------------ ------------ Total Liabilities 213,301,178 215,419,652 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 1,321,800 shares outstanding at March 31, 2003; 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 18,882,584 17,711,055 Accumulated other comprehensive income 623,992 138,695 Unearned management retention plan shares (55,770) (80,961) Treasury stock at cost, 508,028 shares on March 31, 2003 and 462,453 shares on June 30, 2002 (5,467,113) (4,723,421) ------------ ------------ Total Shareholders' Equity 23,347,114 22,408,789 ------------ ------------ Total Liabilities and Shareholders' Equity $236,648,292 $237,828,441 ============ ============
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) Three Months Ended Nine Months Ended March 31 March 31 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Interest income: Loans receivable Mortgage loans $1,062,830 $1,316,337 $3,407,716 $4,283,245 Consumer and other loans 1,428,214 1,600,585 4,462,926 4,936,082 Securities Taxable 636,436 792,255 2,067,574 2,452,994 Nontaxable 256,663 174,810 730,532 453,363 Other interest-earning assets 21,225 13,230 60,967 57,883 ---------- ---------- ---------- ---------- Total interest income 3,405,368 3,897,217 10,729,715 12,183,567 Interest expense: Deposits 1,139,278 1,531,914 3,672,873 4,826,319 Other 613,968 768,369 1,997,730 2,403,932 ---------- ---------- ---------- ---------- Total interest expense 1,753,246 2,300,283 5,670,603 7,230,251 ---------- ---------- ---------- ---------- Net interest income 1,652,122 1,596,934 5,059,112 4,953,316 Provision for loan losses 460,000 305,000 1,090,000 980,000 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 1,192,122 1,291,934 3,969,112 3,973,316 Non-interest income: Net gain (loss) on sale of securities 25,452 92,229 26,033 97,229 Net gain on sale of loans 172,184 193,747 513,990 344,442 Other 489,512 339,439 1,278,053 1,021,297 ---------- ---------- ---------- ---------- Total non-interest income 687,148 625,415 1,818,076 1,462,968 Non-interest expense: Compensation and benefits 572,831 549,410 1,733,240 1,603,547 Occupancy and equipment 103,053 102,071 304,826 292,934 Data processing expense 138,278 117,771 379,503 348,512 Other 388,907 469,762 1,150,295 1,180,251 ---------- ---------- ---------- ---------- Total non-interest expense 1,203,069 1,239,014 3,567,864 3,425,244 ---------- ---------- ---------- ---------- Income before income taxes 676,201 678,335 2,219,324 2,011,040 Income tax expense 91,738 160,581 442,471 527,298 ---------- ---------- ---------- ---------- Net income $ 584,463 $ 517,754 $1,776,853 $1,483,742 ========== ========== ========== ========== Change in unrealized appreciation (depreciation) on securities available for sale, net of tax (107,681) (509,391) 485,297 (482,138) ---------- ---------- ---------- ---------- Comprehensive income $476,782 $8,363 $2,262,150 $1,001,604 ========== ========== ========== ========== Earnings per common share: Basic $.44 $.38 $1.32 $1.07 Diluted $.43 $.37 $1.30 $1.06
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31 2003 2002 ------------ ------------ Cash flows from operating activities : Net income $ 1,776,853 $ 1,483,742 Adjustments to reconcile net income to net cash from operating activities : Depreciation and amortization, net of accretion 358,631 134,380 Provision for loan losses 1,090,000 980,000 Increase in cash surrender value of life insurance (151,041) --- Net (gains) losses on sale of : Securities available for sale (26,033) (97,229) Loans held for sale (513,990) (344,442) Foreclosed estate owned and repossessed assets (46,225) 4,085 Origination of loans held for sale (40,265,201) (24,692,019) Proceeds from sale of loans held for sale 40,660,326 24,911,461 Net change in accrued interest receivable and other assets 271,309 110,049 Amortization of goodwill --- 70,420 Net change in accrued interest payable, accrued expenses and other liabilities 616,504 254,988 ------------ ------------ Total adjustments 1,994,280 1,331,693 ------------ ------------ Net cash from operating activities 3,771,133 2,815,435 Cash flows from investing activities : Proceeds from : Sales/calls of securities available for sale 10,141,285 16,448,829 Maturities of securities available for sale 150,000 --- Purchase of securities available for sale (38,341,117) (35,272,222) Purchase of life insurance (4,500,000) --- Principal collected on mortgage- backed securities 16,977,070 3,118,979 Net change in loans receivable 15,846,194 8,160,929 Net purchases premises and equipment (132,232) (762,892) Proceeds from sales of other real estate and repossessed assets 321,625 362,951 ------------ ------------ Net cash from investing activities 462,825 (7,943,426) Cash flows from financing activities : Net increase in deposits 6,911,810 8,776,282 Proceeds from borrowings 3,000,000 37,990,750 Payment on borrowings (12,621,597) (41,290,750) Purchase of treasury stock (743,692) (627,380) Proceeds from stock option exercising --- 78,287 Cash dividends paid (605,324) (569,937) ------------ ------------ Net cash from financing activities (4,058,803) 4,357,252 Net increase (decrease) in cash and cash equivalents 175,155 (770,739) Cash and cash equivalents at beginning of period 9,318,513 8,530,159 ------------ ------------ Cash and cash equivalents at end of period $ 9,493,668 $ 7,759,420 ============ ============
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 March 31, 2003 and June 30, 2002 and the results of its operations, for the three and nine-months ended March 31, 2003 and 2002. Financial Statement reclassifications have been made for the prior period to conform to classifications used as of and for the period ended March 31, 2003. Operating results for the three and nine-months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 2003. (2) Earnings Per Share: Basic earnings per share are calculated solely on weighted-average common shares outstanding. Diluted earnings per share will reflect the potential dilution of stock options and other common stock equivalents. For the three and nine-month periods ending March 31, 2003, the weighted average shares outstanding in calculating basic earnings per share were 1,335,825 and 1,350,774 while the weighted average number of shares for diluted earnings per share were 1,351,750 and 1,366,625. For the three and nine-month periods ending March 31, 2002, the weighted average shares outstanding in calculating basic earnings per share were 1,375,715 and 1,388,727 while the weighted average number of shares for diluted earnings per share were 1,382,619 and 1,396,805. (3) Stock Based Compensation: Compensation expense under stock options is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation.
Three Months Ending Nine Months Ended March 31, March 31, 2003 2002 2003 2002 -------- -------- ---------- ---------- Net income as reported $584,463 $517,754 $1,776,853 $1,483,742 Less: Stock-based compensation expense determined under fair value based method 7,664 9,488 22,992 27,004 -------- -------- ---------- ---------- Pro forma net income $576,799 $508,266 $1,753,861 $1,456,738 ======== ======== ========== ========== Basic earnings per share as reported $ .44 $ .38 $ 1.32 $ 1.07 Pro forma basic earnings per share .43 .37 1.30 1.05 Diluted earnings per share as reported .43 .37 1.30 1.06 Pro forma diluted earnings per share .43 .37 1.28 1.04
There were no stock options granted during the nine months ended March 31, 2003. The weighted average fair value of stock options granted during the nine months ended March 31, 2002 was $2.92. The fair value of options granted during the nine months ended March 31, 2002 were estimated using an option pricing model with the following weighted average information as of the grant dates: 2002 -------- Risk free rate of interest 5.31% Expected option life 8 years Expected dividend yield 4.34% Expected volatility 23.65% In future years, as additional options are granted, the proforma effect on net income and earnings per share may increase. Stock options are used to reward directors and certain executive officers and provide them with an additional equity interest. Options are issued for ten year periods and have varying vesting schedules. 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 income and 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"), and the valuation of mortgage servicing rights. Allowance for Loan Losses: 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 and consumer 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 March 31, 2003, mortgage servicing rights had a carrying value of $584,000. COMPARISON OF THREE AND NINE-MONTH PERIODS ENDED MARCH 31, 2003 AND 2002 Net income for the three-month and nine-month periods ended March 31, 2003 was $584,000 and $1,777,000 compared to net income of $518,000 and $1,484,000 for the equivalent periods in 2002. The increases of $66,000 and $293,000 for the three and nine-month periods were primarily the result of increased non-interest income combined with a lower effective tax rate due to increased nontaxable income for the periods ended March 31, 2003 compared to March 31, 2002. Diluted earnings per common share were $0.43 for the three-month period ended March 31, 2003 compared to diluted earnings per common share of $0.37 for the equivalent period in 2002. For the comparable nine-month periods, diluted earnings per common share were $1.30 in 2003 and $1.06 in 2002. Return on average shareholders' equity was 10.04% for the three months and 10.20% for the nine-months ended March 31, 2003, compared to 9.47% and 8.89% in 2002. The return on total average assets was 1.00% and 1.00% for the three and nine-month periods ended March 31, 2003, compared to 0.91% and 0.86% in 2002. NET INTEREST INCOME The net interest income for the three-month period ended March 31, 2003, was $1,652,000 compared to $1,597,000, an increase of 3.4% over the same period in 2002, resulting in a net interest margin of 3.06% compared to 2.91% in 2002. The net interest income for the nine-month period ended March 31, 2003, was $5,059,000 compared to $4,953,000, an increase of 2.1% over the same period in 2002, resulting in a net interest margin of 3.03% compared to 3.00% in 2002. Total average earning assets decreased $1,810,000 for the three-month period and increased $2,504,000 for the nine-month period ended March 31, 2003, over the comparative periods in 2002. Total average investment securities increased $11,578,000 and $13,558,000 for the three-month and nine-month periods over one-year ago. Total average loans decreased $18,041,000 and $14,121,000 for the three-month and nine-month periods over one-year ago. The yields on total average earning assets were 6.30% and 7.13% for the three-month periods ended March 31, 2003, and 2002 and 6.43% and 7.38% for the nine-month periods.
The following tables set forth consolidated information regarding average balances and rates. FFW Corp Three Months Ending (Dollars in thousands) 3/31/2003 3/31/2002 Average Average Average Average Interest-earning assets: Balance Interest Rate Balance Interest Rate - ------------------------ -------- -------- ------- -------- -------- ------ Loans $129,260 $2,491 7.82% $147,301 $2,917 8.03% Securities 83,711 893 4.40% 72,133 967 5.48% Other interest-earning assets 7,521 21 1.13% 2,868 13 1.84% -------- ------ -------- ------ Total interest-earning assets 220,492 3,405 6.30% 222,302 3,897 7.13% Non interest-earning assets: Cash and due from 5,389 5,245 Allowance for loan losses (2,546) (1,992) Other non interest-earning assets 11,000 6,231 -------- -------- Total assets $234,335 $231,786 ======== ======== Interest-bearing liabilities: - ----------------------------- Interest-bearing deposits $152,935 1,139 3.02% $140,515 1,532 4.42% FHLB advances 44,906 614 5.55% 57,185 768 5.45% -------- ------ -------- ------ Total interest-bearing liabilities 197,841 1,753 3.59% 197,700 2,300 4.72% -------- ------ -------- ------ Non interest-bearing deposit accounts 10,442 9,859 Other non interest-bearing liabilities 2,419 2,058 -------- -------- Total liabilities 210,702 209,617 Shareholders' equity 23,633 22,169 -------- -------- Total liabilities and shareholders' equity $234,335 $231,786 ======== ======== Net interest income $1,652 $1,597 ====== ====== Net interest margin 3.06% 2.91% ==== ====
FFW Corp Nine Months Ending (Dollars in thousands) 3/31/2003 3/31/2002 Average Average Average Average Interest-earning assets: Balance Interest Rate Balance Interest Rate - ------------------------ -------- -------- ------- -------- -------- ------ Loans $135,594 $7,871 7.73% $149,715 $9,219 8.20% Securities 81,477 2,798 4.63% 67,919 2,906 5.77% Other interest-earning assets 6,207 61 1.31% 3,140 58 2.46% -------- ------ -------- ------ Total interest-earning assets 223,278 10,730 6.43% 220,774 12,183 7.38% Non interest-earning assets: Cash and due from 5,287 5,145 Allowance for loan losses (2,444) (1,794) Other non interest-earning assets 9,708 5,985 -------- -------- Total assets $235,829 $230,110 ======== ======== Interest-bearing liabilities: - ----------------------------- Interest-bearing deposits $151,941 3,673 3.22% $137,501 4,826 4.68% FHLB advances 47,934 1,998 5.55% 58,357 2,404 5.49% -------- ------ -------- ------ Total interest-bearing liabilities 199,875 5,671 3.78% 195,858 7,230 4.92% -------- ------ -------- ------ Non interest-bearing deposit accounts 10,140 9,681 Other non interest-bearing liabilities 2,601 2,340 -------- -------- Total liabilities 212,616 207,879 Shareholders' equity 23,213 22,231 -------- -------- Total liabilities and shareholders' equity $235,829 $230,110 ======== ======== Net interest income $5,059 $4,953 ====== ====== Net interest margin 3.03% 3.00% ==== ====
PROVISION FOR LOAN LOSSES The provision for loan losses was $460,000 and $1,090,000 for the three and nine-month periods ended March 31, 2003 and $305,000 and $980,000 for the same periods in 2002. 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 $462,000 and $845,000 have been recorded for the three and nine-month periods ended March 31, 2003, compared to $176,000 and $723,000 of net charge-offs for the same period in 2002. For the three and nine-month periods ended March 31, 2003, gross charge-offs were $506,000 and $1,120,000. The ALL was $2,606,000 or 2.09% of net loans as of March 31, 2003 compared to $2,609,000 or 1.99% of net loans at December 31, 2002 and $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 $2,714,000 at March 31, 2003 compared to $2,883,000 at December 31, 2002 and $1,943,000 at June 30, 2002. Two commercial loan relationships totaling $2,056,000 accounted for over 75% of non-performing loans for the quarter ended March 31, 2003. Based on an analysis of the collateral on these loans, management believes that the reserves currently allocated in the ALL on these loans are adequate to absorb the currently estimated potential losses on these loans. 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 economic outlook and the resulting impact on real estate and other values in the Company's primary market area, regulatory issues and historical loan loss experience. 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, the Bank, 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 March 31, 2003. NON-INTEREST INCOME Non-interest income for the three-month and nine-month periods ended March 31, 2003 was $687,000 and $1,818,000 compared to $625,000 and $1,463,000 for the same periods in 2002. The nine-month increase of $355,000 from the prior period is composed of $257,000 in other non-interest income and $170,000 from gain on sale of loans compared to the period ended March 31, 2002. In other non-interest income, commission income fell by $92,000 due to lower annuity and life insurance sales while other income, fees and charges grew $349,000 over the comparable nine-month period. Other income benefited from a $151,000 increase in the cash surrender value of bank owned life insurance that was not present in the nine-month period ended March 31, 2002. NON-INTEREST EXPENSE Non-interest expense for the three-month period ended March 31, 2003, was $1,203,000, a decrease of $36,000, or 2.9%, compared to the same period in 2002 and was $3,568,000 for the nine-month period ended March 31, 2003, an increase of $143,000, or 4.2%. For the nine-month period ended March 31, 2003, compensation and employee benefits increased 8.1%, occupancy and equipment expense increased 4.1%, data processing expense increased 8.9% and other non-interest expense decreased 2.5% over the same period in 2002. For the three-month period ended March 31, 2003, compensation and employee benefits increased 4.3%, occupancy and equipment expense increased 1.0%, data processing expense increased 17.4% and other non-interest expense decreased 17.2% over the same period in 2002. Other non-interest expense decreased from the prior year due primarily to a one-time adjustment related to serviced loans incurred in 2002. INCOME TAXES The provisions for income taxes for the three-month and nine-month periods ended March 31, 2003, were $92,000 and $442,000 compared to $161,000 and $527,000 for the same periods in 2002. The provision for income taxes dropped despite higher income before taxes for the nine months ended March 31, 2003 due to a lower effective tax rate stemming from increased nontaxable securities income and nontaxable income from the cash surrender value of bank owned life insurance purchased in September 2002. The provision for income taxes for the nine months ended March 31, 2003, 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 March 31, 2003, 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 March 31, 2003 Total Risk-Based Capital $21,155 14.90% $11,358 8.00% $14,197 10.00% Tier I (Core) Capital 19,370 13.64% 5,679 4.00% 8,518 6.00% (to risk weighted assets) Tier I (Core) Capital 19,370 8.33% 9,298 4.00% 11,623 5.00% (to adjusted total assets)
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 March 31, 2003, 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 -------------------------------- (a) Exhibits - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K 1) April 23, 2003 - Third Fiscal Quarter Earnings Release 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: May 9, 2003 /S/ Roger K. Cromer ---------------- ----------------------------------- Roger K. Cromer President and Chief Executive Officer Date: May 9, 2003 /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: May 9, 2003 /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: May 9, 2003 /s/ Timothy A. Sheppard -------------------------------------------- Treasurer/Chief Financial Accounting Officer EX-99 3 ffw_10q05ex.txt EXHIBIT 99.1 Exhibit 99.1 ------------ 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 March 31, 2003 ("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 9th day of May, 2003. 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 A signed original of this written statement required by Section 906 has been provided to FFW Corporation and will be retained by FFW Corporation and will be furnished to the Securities and Exchange Commission or its Staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----