-----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, Smh7eVGK9Y6GFOHP5Y0L2r6OKAJh5G0joO4EL9wkKis/iKYj9zKlz+KEN5xscRO9 CD9wQwf+bEDZwXFNXDnt8Q== 0000908834-03-000487.txt : 20031114 0000908834-03-000487.hdr.sgml : 20031114 20031114160727 ACCESSION NUMBER: 0000908834-03-000487 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 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: 031004742 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_10qnov.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, 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) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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 13, 2003, there were 1,292,229 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 September 30, 2003 3 and June 30, 2003 Consolidated Statements of Income and 4 Comprehensive Income for the three months ended September 30, 2003 and 2002. Consolidated Statements of Cash Flows for the 5 three months ended September 30, 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 13 PART II. OTHER INFORMATION Items 1-6 14 Signature Page 15 Exhibit Index 16
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS : September 30 June 30 2003 2003 ------------- ------------- Cash and due from financial institutions ........................................ $ 5,051,943 $ 8,235,956 Interest-earning deposits in other financial institutions - short term .......... 1,179,714 1,588,877 ------------- ------------- Cash and cash equivalents .................................................... 6,231,657 9,824,833 Securities available for sale ................................................... 89,272,470 89,636,775 Loans receivable, net of allowance for loan losses of $2,446,030 at September 30, 2003 and $2,592,092 at June 30, 2003 ......................................... 128,563,120 128,726,793 Federal Home Loan Bank stock, at cost ........................................... 3,488,700 3,445,900 Accrued interest receivable ..................................................... 1,189,970 1,388,322 Premises and equipment, net ..................................................... 2,680,873 2,677,102 Mortgage servicing rights asset ................................................. 617,782 614,638 Cash surrender value of life insurance .......................................... 4,785,021 4,718,031 Other assets .................................................................... 2,540,630 1,738,687 ------------- ------------- Total Assets .............................................................. $ 239,370,223 $ 242,771,081 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities: Noninterest-bearing demand deposits ............................................. $ 10,276,650 $ 11,238,092 Savings, NOW and MMDA deposits .................................................. 70,793,874 70,450,282 Other time deposits ............................................................. 78,114,573 81,758,120 ------------- ------------- Total Deposits ............................................................... 159,185,097 163,446,494 Federal Home Loan Bank advances ................................................. 55,288,331 52,038,331 Accrued interest payable ........................................................ 641,752 120,640 Accrued expenses and other liabilities .......................................... 1,524,481 3,525,548 ------------- ------------- Total Liabilities ......................................................... 216,639,661 219,131,013 Shareholders' Equity: Preferred stock, $.01 par; 500,000 shares authorized, none issued ............... -- -- Common stock, $.01 par; 2,000,000 shares authorized; issued: 1,829,828; outstanding: 1,292,229 - September 30, 2003; 1,311,800 - June 30, 2003 ....... 18,298 18,298 Additional paid-in capital ...................................................... 9,345,123 9,345,123 Retained earnings ............................................................... 19,657,976 19,266,267 Accumulated other comprehensive income .......................................... (194,678) 720,765 Unearned management retention plan shares ....................................... (40,567) (48,172) Treasury stock at cost, shares: 537,599 - September 30, 2003 and 518,028 - June 30, 2003 ...................................................... (6,055,590) (5,662,213) ------------- ------------- Total Shareholders' Equity ................................................ 22,730,562 23,640,068 ------------- ------------- Total Liabilities and Shareholders' Equity .................... $ 239,370,223 $ 242,771,081 ============= ============= See accompanying notes.
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) Three Months Ended September 30 2003 2002 ----------- ----------- Interest and dividend income : Loans, including fees.............................. $ 2,271,094 $ 2,735,061 Taxable securities................................. 629,209 748,365 Nontaxable securities.............................. 252,716 229,186 Other interest-earning assets ..................... 6,231 23,869 ----------- ----------- Total interest income .......................... 3,159,250 3,736,481 Interest expense : Deposits .......................................... 935,749 1,314,668 Other ............................................. 635,599 707,632 ----------- ----------- Total interest expense ......................... 1,571,348 2,022,300 ----------- ----------- Net interest income .................................. 1,587,902 1,714,181 Provision for loan losses ......................... 210,000 225,000 ----------- ----------- Net interest income after provision for loan losses .. 1,377,902 1,489,181 Non-interest income : Net gain on sale of securities .................... 3,712 1,222 Net gain on sale of loans ......................... 270,663 180,183 Commission income ................................. 35,761 39,306 Service charges and fees .......................... 157,490 234,012 Earnings on life insurance ........................ 73,101 16,258 Other ............................................. 16,373 13,270 ----------- ----------- Total non-interest income ...................... 557,100 484,251 Non-interest expense : Compensation and benefits ......................... 579,353 579,905 Occupancy and equipment ........................... 103,951 100,272 Deposit insurance premium ......................... 18,926 18,028 Regulatory assessment ............................. 15,431 23,538 Correspondent bank charges ........................ 60,967 55,567 Data processing expense ........................... 128,511 119,361 Printing, postage and supplies .................... 38,879 38,353 Amortization of core deposit premium .............. -- 18,286 Other ............................................. 293,328 244,199 ----------- ----------- Total non-interest expense ..................... 1,239,346 1,197,509 ----------- ----------- Income before income taxes ........................... 695,656 775,923 Income tax expense ................................ 94,059 200,183 ----------- ----------- Net income ........................................... $ 601,597 $ 575,740 =========== =========== Change in unrealized appreciation (depreciation) on securities available for sale, net of tax ......... (915,443) 716,854 ----------- ----------- Comprehensive income ................................. $ (313,846) $ 1,292,594 =========== =========== Earnings per common share : Basic ............................................. $ .46 $ .42 Diluted ........................................... $ .45 $ .42 See accompanying notes.
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30 2003 2002 ------------ ------------ Cash flows from operating activities : Net income ............................................. $ 601,597 $ 575,740 Adjustments to reconcile net income to net cash from operating activities : Depreciation and amortization ....................... 303,195 113,795 Provision for loan losses ........................... 210,000 225,000 Net (gains) losses on sale of : Securities ....................................... (3,712) (1,222) Loans held for sale .............................. (270,663) (180,183) REOs and repossessed assets ...................... 626 1,981 Originations of loans held for sale ................. (13,972,750) (8,741,414) Proceeds from sale of loans held for sale ........... 14,120,453 8,834,183 Increase in cash surrender value of life insurance .. (66,990) (15,282) Amortization of MRP contribution .................... 7,605 9,387 Net change in accrued interest receivable and other assets ........................................... 373,723 205,634 Amortization of core deposit intangibles ............ -- 18,286 Net change in accrued interest payable and other liabilities ............................ (1,479,955) 460,907 ------------ ------------ Net cash from operating activities ............... (176,871) 1,506,812 Cash flows from investing activities : Proceeds from : Sales and calls of securities available for sale .... 3,540,191 3,252,317 Maturities of securities available for sale ......... 240,000 150,000 Sales of REOs and repossessed assets ................ 105,624 185,185 Purchase of: Securities available for sale ....................... (7,688,649) (7,069,083) FHLB stock .......................................... (42,800) -- Life insurance ...................................... -- (4,500,000) Principal collected on mortgage-backed securities ...... 2,891,203 3,097,579 Net change in loans receivable ......................... (795,827) 5,050,797 Purchases of premises and equipment, net ............... (51,385) (33,957) ------------ ------------ Net cash from investing activities .................. (1,801,643) 132,838 Cash flows from financing activities : Net change in deposits ................................. (4,261,397) 2,591,502 Proceeds from borrowings ............................... 9,000,000 -- Repayment on borrowings ................................ (5,750,000) (5,500,000) Purchase of treasury stock ............................. (393,377) (167,280) Cash dividends paid .................................... (209,888) (204,492) ------------ ------------ Net cash from financing activities .................. (1,614,662) (3,280,270) Net change in cash and cash equivalents ................... (3,593,176) (1,640,620) Beginning cash and cash equivalents ....................... 9,824,833 9,318,513 ------------ ------------ Ending cash and cash equivalents .......................... $ 6,231,657 $ 7,677,893 ============ ============ Supplemental disclosure of cash flow information Transfer of loans to REO and repossessed assets ........... $ 749,500 $ 285,875 See accompanying notes.
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, 2003 and June 30, 2003 and the results of its operations, for the three months ended September 30, 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 September 30, 2003. Operating results for the three months ended September 30, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2004. (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 month periods ending September 30, 2003 and 2002, the weighted average shares outstanding in calculating basic earnings per share were 1,304,567 and 1,364,507 while the weighted average number of shares for diluted earnings per share were 1,326,791 and 1,380,315. (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 September 30, 2003 2002 ---- ---- Net income as reported $601,597 $575,740 Less: Stock-based compensation expense determined under fair value based method 5,314 7,370 -------- -------- Pro forma net income $596,283 $568,370 ======== ======== Basic earnings per share as reported $ .46 $ .42 Pro forma basic earnings per share .46 .42 Diluted earnings per share as reported .45 .42 Pro forma diluted earnings per share .45 .41 There were no stock options granted during the three months ended September 30, 2003 or 2002. 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. (4) Recently Adopted Accounting Standards: On July 1, 2003, the Company adopted Interpretation 45, Guarantor's Accounting and Disclosure Requirements for Guarantees. On July 1, 2003, the Company adopted Statement 149, amendment of Statement 133 on Derivative Instruments and Hedging Activities, and Statement 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities. On October 1, 2003, the Company adopted Interpretation 46, Consolidation of Variable Interest Entities. Adoption of the new standards did not materially affect the Company's operating results or financial condition. 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 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 prepayment characteristics. Any impairment of a grouping is reported as a valuation allowance. As of September 30, 2003, mortgage servicing rights had a carrying value of $618,000. COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002 Net income for the three-month period ended September 30, 2003 was $602,000 compared to net income of $576,000 for the equivalent period in 2002. The increase of $26,000 for the three month period was primarily the result of increased non-interest income combined with a lower effective tax rate due to increased nontaxable income and reduced provision for loan losses that was partially offset by lower net interest income and increased non-interest expense for the period ended September 30, 2003 compared to September 30, 2002. Diluted earnings per common share were $0.45 for the three-month period ended September 30, 2003 compared to $0.42 for the equivalent period in 2002. Return on average shareholders' equity was 10.26% for the three months ended September 30, 2003, compared to 10.01% in 2002. The return on total average assets was 1.00% for the three-month period ended September 30, 2003, compared to 0.96% in 2002. NET INTEREST INCOME The net interest income for the three-month period ended September 30, 2003, was $1,588,000 compared to $1,714,000, a decrease of 7.4% over the same period in 2002, resulting in a net interest margin of 2.82% compared to 3.01% in 2002. Total average earning assets decreased $2,159,000 for the three-month period ended September 30, 2003, over the comparative period in 2002. This decrease was primarily due to the average cash surrender value of life insurance being $3.8 million higher in fiscal 2004. Total average investment securities increased $12.9 million while total average loans decreased $11.9 million comparing the three-months ended September 30, 2003 and 2002. The yields on total average earning assets were 5.62% and 6.56% for the three-month periods ended September 30, 2003, and 2002 as loans refinanced to lower rates, balances declined and were replaced with securities. The yields on total average interest-bearing liabilities were 3.09% and 3.97% for the three-month periods ended September 30, 2003, and 2002 as the cost of deposits and borrowings reduced by 0.97% and 0.66%. The following tables set forth consolidated information regarding average balances and rates.
FFW Corp Three Months Ending (Dollars in thousands) 9/30/2003 9/30/2002 Average Average Average Average Interest-earning assets: Balance Interest Rate Balance Interest Rate - ------------------------ ------- -------- ---- ------- -------- ---- Loans $130,234 $2,271 6.94% $142,120 $2,735 7.63% Securities 91,798 882 3.85% 78,863 978 4.96% Other interest-earning assets 2,410 6 0.99% 5,618 24 1.69% -------- ------ -------- ------ Total interest-earning assets 224,442 3,159 5.62% 226,601 3,737 6.56% Non interest-earning assets: Cash and due from 6,267 5,277 Allowance for loan losses (2,551) (2,390) Other non interest-earning assets 11,568 7,357 -------- -------- Total assets $239,726 $236,845 ======== ======== Interest-bearing liabilities: Interest-bearing deposits $150,763 936 2.47% $151,474 1,315 3.44% FHLB advances 51,807 635 4.88% 50,728 708 5.54% -------- ------ -------- ------ Total interest-bearing liabilities 202,570 1,571 3.09% 202,202 2,023 3.97% -------- ------ -------- ------ Non interest-bearing deposit accounts 11,011 9,640 Other non interest-bearing liabilities 2,815 2,248 -------- -------- Total liabilities 216,396 214,090 Shareholders' equity 23,330 22,755 -------- -------- Total liabilities and shareholders' equity $239,726 $236,845 ======== ======== Net interest income $ 1,588 $ 1,714 ======= ======= Net interest margin 2.82% 3.01% ==== ====
PROVISION FOR LOAN LOSSES The provision for loan losses was $210,000 for the three month period ended September 30, 2003 and $225,000 for the same period in 2002. Changes in the provision for loan losses are attributable to management's analysis of the adequacy of the allowance for loan losses (ALL) to address probable and incurred losses. Net charge-offs of $356,000 have been recorded for the three month period ended September 30, 2003, compared to $320,000 of net charge-offs for the same period in 2002. For the three month periods ended September 30, 2003, gross charge-offs were $388,000. The ALL was $2,466,000 or 1.90% of net loans as of September 30, 2003 compared to $2,592,000 or 2.01% of net loans at June 30, 2003. Non-performing loans, which include non-accruing loans and accruing loans delinquent more than 90 days, were $1,742,000 at September 30, 2003 compared to $2,616,000 at June 30, 2003. This reduction in nonperforming loans includes the transfer of $750,000 to REO and repossessed assets that occurred in the quarter ended September 30, 2003. Management believes that the Bank will realize the carrying value of these other assets upon their sale. 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 September 30, 2003. NON-INTEREST INCOME Non-interest income for the three-month period ended September 30, 2003 was $557,000 compared to $484,000 for the same period in 2002. The three-month increase of $73,000 from the prior period benefited from a $57,000 increase in earnings on the cash surrender value of bank owned life insurance that was purchased in September 2002. Net gain on sale of loans increased $90,000 but was offset by a $77,000 decrease in service fees and charges. Service fees and charges were lower due to $120,000 amortization of the mortgage servicing rights asset for the three-month period ended September 30, 2003 compared to $46,000 amortization for the period ended September 30, 2002. Net gain on sale of securities, commission income and other non-interest income were relatively unchanged from fiscal 2003. NON-INTEREST EXPENSE Non-interest expense for the three-month period ended September 30, 2003, was $1,239,000, an increase of $42,000, or 3.5%, compared to the same period in 2002. Other non-interest expense increased $49,000 from the prior year due primarily to higher professional, loan and real estate owned expense including $20,000 in higher expenses on bank owned life insurance. The Company completed, as of June 2003, the amortization of the core deposit premium associated with the 1997 purchase of the South Whitley branch and will realize the accompanying $18,000 per quarter expense reduction compared to fiscal 2003. For the three-month period ended September 30, 2003, compensation and employee benefits decreased 0.1%, occupancy and equipment expense increased 3.7%, data processing expense increased 7.7% and all other non-interest expense increased 7.4% over the same period in 2002. INCOME TAXES The provisions for income taxes for the three-month period ended September 30, 2003, were $94,000 compared to $200,000 for the same period in 2002. The provision for income taxes dropped for the three months ended September 30, 2003 due to lower net income before taxes, 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. Additionally, the Bank's state tax expense is lower in fiscal 2004 due to the establishment, effective May 2003, of a domestic operating subsidiary that manages a portion of the Bank's investment portfolio. The subsidiary is located in a state with no corporate income tax. REGULATORY CAPITAL REQUIREMENTS The Bank is required to maintain specific amounts of regulatory capital pursuant to regulations of the OTS. At September 30, 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 September 30, 2003 Total Risk-Based Capital $ 20,841 14.27% $11,680 8.00% $14,601 10.00% Tier I (Core) Capital 19,009 13.02% 5,840 4.00% 8,760 6.00% (to risk weighted assets) Tier I (Core) Capital 19,009 8.07% 9,418 4.00% 11,772 5.00% (to adjusted total assets)
PART I: ITEM 3 FFW CORPORATION CONTROLS AND PROCEDURES As of the end of the fiscal quarter covered by 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-15(e) and 15d-15(e) 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, 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 The Annual Meeting of Shareholders (the "Meeting") of FFW Corporation was held on October 28, 2003. The matters approved by shareholders at the Meeting and the number of votes cast for, against or withheld (as well as the number of abstentions and broker non-votes) as to each matter are set below:
PROPOSAL NUMBER OF VOTES -------- --------------- FOR WITHHELD --- -------- Election of the following Directors for a three-year term Wayne W. Rees........................................... 1,152,228 4,420 Ronald D. Reynolds...................................... 1,152,893 3,755 FOR AGAINST ABSTAIN --- ------- ------- Ratification of Crowe Chizek and Company LLC as auditors for the fiscal year ending June 30, 2004................ 1,149,570 6,565 513
Item 5 - Other Information Not Applicable Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 31(1) Certification required by 17 C.F.R. Section 240.13a-14(a) 31(2) Certification required by 17 C.F.R. Section 240.13a-14(a) 32 Certification pursuant to 18 U.S.C. Section 1350 (b) Reports on Form 8-K Form 8-K for Fiscal Year End Earnings Release filed on July 28, 2003. 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, 2003 By: /s/ Roger K. Cromer -------------------------------------- Roger K. Cromer President and Chief Executive Officer Date: November 13, 2003 By: /s/ Timothy A. Sheppard -------------------------------------- Timothy A. Sheppard Treasurer and Chief Accounting Officer EXHIBIT INDEX Exhibit No. Description of Exhibit Page - ----------- ---------------------- ---- 31(1) Certification required by 17 C.F.R. Section 240.13a-14(a) 17 31(2) Certification required by 17 C.F.R. Section 240.13a-14(a) 18 32 Certification pursuant to 18 U.S.C. Section 1350 19 EX-31 3 ffw_10qnov311.txt EX. 31.1 Exhibit 31(1) ------------- 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 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/ Roger K. Cromer ----------------------------------------- Roger K. Cromer President and Chief Executive Officer EX-31 4 ffw_10qnov312.txt EX. 31.2 Exhibit 31(2) ------------- 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 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2003 /s/ Timothy A. Sheppard ------------------------------------------ Timothy A. Sheppard Treasurer EX-32 5 ffw_10qnov32.txt EX. 32 Exhibit 32 ---------- 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, 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 13th day of November, 2003. FFW CORPORATION Registrant Date: November 13, 2003 By: /s/ Roger K. Cromer ----------------------- ------------------------------------------- Roger K. Cromer President and Chief Executive Officer Date: November 13, 2003 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 forwarded to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----