-----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, HFnfUM7UD5xwnVXo1PziXY559sIRjaej5zjQ5yZ5/n5CfrnbY5ZIbkzr3ykEfcG7 i/dLQCalBvIfc8PArW9etw== 0000908834-04-000375.txt : 20040517 0000908834-04-000375.hdr.sgml : 20040517 20040517143359 ACCESSION NUMBER: 0000908834-04-000375 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040517 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: 04811579 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_10qmay.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 March 31, 2004 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 ___ State the number of Shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of May 3, 2004, there were 1,301,229 shares of the Registrant's common stock issued and outstanding. Transitional Small Business Disclosure Format (check one): Yes ___ No _X_ FFW CORPORATION INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1 Financial Statements Consolidated Balance Sheets for March 31, 2004 3 and June 30, 2003 Consolidated Statements of Income and 4 Comprehensive Income for the three and nine months ended March 31, 2004 and 2003 Consolidated Statements of Cash Flows for the 5 nine months ended March 31, 2004 and 2003 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 15 PART II. OTHER INFORMATION Items 1-6 16 Signature Page 17 Exhibit Index 18 2 PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED BALANCE SHEETS
(Unaudited) ASSETS : March 31 June 30 2004 2003 ------------ ------------ Cash and due from financial institutions...................................... $ 6,134,583 $ 8,235,956 Interest-earning deposits in other financial institutions - short term........ 3,453,089 1,588,877 ------------ ------------ Cash and cash equivalents 9,587,672 9,824,833 Securities available for sale 83,347,299 89,636,775 Loans receivable, net of allowance for loan losses of $2,446,226 at March 31, 2004 and $2,592,092 at June 30, 2003 ................................ 128,842,747 126,018,943 Loans held for sale........................................................... 208,700 2,707,850 Federal Home Loan Bank stock, at cost ........................................ 3,576,800 3,445,900 Accrued interest receivable 1,193,486 1,388,322 Premises and equipment, net................................................... 3,568,525 2,677,102 Mortgage servicing rights..................................................... 626,114 614,638 Cash surrender value of life insurance........................................ 4,906,472 4,718,031 Other assets 3,264,663 1,738,687 ------------ ------------ Total Assets................................................ $239,122,478 $242,771,081 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities: Noninterest-bearing demand deposits........................................... $ 11,784,739 $ 11,238,092 Savings, NOW and MMDA deposits................................................ 70,383,611 70,450,282 Other time deposits............................................................ 78,178,911 81,758,120 ------------ ------------ Total Deposits....................................................... 160,347,261 163,446,494 Federal Home Loan Bank advances............................................... 52,407,919 52,038,331 Accrued interest payable...................................................... 614,167 120,640 Accrued expenses and other liabilities........................................ 1,501,962 3,525,548 ------------ ------------ Total Liabilities.................................................... 214,871,309 219,131,013 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: 1,301,229 - March 31, 2004; 1,311,800 - June 30, 2003 18,298 18,298 Additional paid-in capital.................................................... 9,399,507 9,345,123 Retained earnings............................................................. 20,524,080 19,266,267 Accumulated other comprehensive income........................................ 382,064 720,765 Unearned management retention plan shares..................................... (118,530) (48,172) Treasury stock at cost, shares: 528,599 - March 31, 2004 and 518,028 - June 30, 2003 .................................................. (5,954,250) (5,662,213) ------------ ------------ Total Shareholders' Equity 24,251,169 23,640,068 ------------ ------------ Total Liabilities and Shareholders' Equity ................. $239,122,478 $242,771,081 ============ ============
See accompanying notes. 3
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) Three Months Ended Nine Months Ended March 31 March 31 2004 2003 2004 2003 ----------- ---------- ---------- ---------- Interest and dividend income : Loans, including fees................................. $ 2,177,350 $2,491,044 $6,627,477 $7,870,310 Taxable securities..................................... 707,236 666,157 2,006,014 2,097,297 Nontaxable securities.................................. 221,510 226,942 717,975 700,808 Other interest-earning assets.......................... 8,212 21,225 26,533 61,095 ----------- ---------- ---------- ---------- Total interest income......................... 3,114,308 3,405,368 9,377,999 10,729,510 Interest expense: Deposits............................................... 856,291 1,139,278 2,697,965 3,672,872 Other.................................................. 626,076 613,968 1,901,570 1,997,731 ----------- ---------- ---------- ---------- Total interest expense 1,482,367 1,753,246 4,599,535 5,670,603 ----------- ---------- ---------- ---------- Net interest income...................................... 1,631,941 1,652,122 4,778,464 5,058,907 Provision for loan losses.............................. 180,000 460,000 600,000 1,090,000 ----------- ---------- ---------- ---------- Net interest income after provision for loan losses...... 1,451,941 1,192,122 4,178,464 3,968,907 Non-interest income : Net gain on sale of securities......................... 55,301 25,452 59,013 26,033 Net gain on sale of loans ............................. 54,488 246,575 410,355 784,450 Commission income .................................... 63,979 45,108 155,766 132,593 Service charges and fees............................... 310,060 235,671 798,946 626,920 Earnings on life insurance ............................ 60,808 73,101 207,010 162,520 Other 13,180 61,241 97,461 85,433 ----------- ---------- ---------- ---------- Total non-interest income 557,816 687,148 1,728,551 1,817,949 Non-interest expense : Compensation and benefits.............................. 610,384 572,831 1,772,282 1,733,240 Occupancy and equipment................................ 125,067 103,053 334,851 304,825 Deposit insurance premium.............................. 6,117 18,719 43,448 55,221 Regulatory assessment.................................. 15,897 23,101 47,459 70,927 Correspondent bank charges............................. 61,816 58,003 188,943 178,460 Data processing expense................................ 132,771 138,278 390,585 379,502 Printing, postage and supplies......................... 34,175 53,811 111,072 133,936 Amortization of core deposit premium................... --- 18,286 --- 54,858 Other 316,276 216,987 933,002 656,563 ----------- ---------- ---------- ---------- Total non-interest expense ................... 1,302,503 1,203,069 3,821,642 3,567,532 ----------- ---------- ---------- ---------- Income before income taxes .............................. 707,254 676,201 2,085,373 2,219,324 Income tax expense..................................... 62,293 91,738 204,730 442,471 ----------- ---------- ---------- ---------- Net income $ 644,961 $ 584,463 $1,880,643 $1,776,853 =========== ========== ============ =========== Change in unrealized appreciation (depreciation) on securities available for sale, net of tax 559,981 (107,681) (338,701) 485,297 ----------- ---------- ---------- ---------- Comprehensive income .................................... $ 1,204,942 $ 476,782 $1,541,942 $2,262,150 =========== ========== ============ =========== Earnings per common share : Basic ................................................. $ .50 $ .44 $ 1.45 $ 1.32 Diluted................................................ $ .49 $ .44 $ 1.42 $ 1.31
See accompanying notes. 4
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31 2004 2003 ---------- ----------- Cash flows from operating activities : Net income................................................... $ 1,880,643 $ 1,776,853 Adjustments to reconcile net income to net cash from operating activities : Depreciation and amortization............................ 608,338 629,091 Provision for loan losses ............................... 600,000 1,090,000 Net (gains) losses on sale of : Securities...................... ................... (59,013) (26,033) Loans held for sale ................................ (410,355) (784,450) REOs and repossessed assets......................... (52,794) (46,225) Originations of loans held for sale ..................... (20,344,584) (40,265,201) Proceeds from sale of loans held for sale ............... 23,075,057 40,660,326 Increase in cash surrender value of life insurance....... (188,441) (151,041) Dividends paid as FHLB stock............................. (130,900) --- Amortization of MRP contribution......................... 24,491 25,191 Net change in accrued interest receivable and other assets.......................................... 210,592 191,259 Amortization of core deposit intangibles................. --- 54,859 Net change in accrued interest payable and other liabilities .............................. (1,530,059) 616,504 ---------- ----------- Net cash from operating activities ................. 3,682,975 3,771,133 Cash flows from investing activities : Proceeds from : Sales and calls of securities available for sale........ 12,421,046 10,141,285 Maturities of securities available for sale............. 1,030,000 150,000 Sales of REOs and repossessed assets.................... 667,494 321,625 Purchase of: Securities available for sale........................... (14,630,957) (38,341,117) Life insurance.......................................... --- (4,500,000) Principal collected on mortgage- backed securities .......... 6,799,354 16,977,070 Net change in loans receivable .............................. (5,464,304) 15,846,194 Purchases of premises and equipment, net..................... (1,057,792) (132,232) ---------- ----------- Net cash from investing activities...................... (235,159) 462,825 Cash flows from financing activities : Net change in deposits....................................... (3,099,233) 6,911,810 Proceeds from borrowings .................................... 29,000,000 3,000,000 Repayment on borrowings ..................................... (28,630,412) (12,621,597) Purchase of treasury stock................................... (393,377) (743,692) Proceeds from stock options.................................. 60,875 --- Cash dividends paid (622,830) (605,324) ---------- ----------- Net cash from financing activities .................... (3,684,977) (4,058,803) ---------- ----------- Net change in cash and cash equivalents........................ (237,161) 175,155 Beginning cash and cash equivalents............................ 9,824,833 9,318,513 ---------- ----------- Ending cash and cash equivalents............................... $9,587,672 $ 9,493,668 ========== =========== Supplemental disclosure of cash flow information Transfer of loans to REO and repossessed assets $2,040,500 $ 395,675
See accompanying notes. 5 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 present fairly the financial condition of FFW Corporation as of March 31, 2004 and June 30, 2003 and the results of its operations, for the three and nine months ended March 31, 2004 and 2003. Financial Statement reclassifications have been made for the prior period to conform to classifications used as of and for the period ended March 31, 2004. Operating results for the three and nine months ended March 31, 2004 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 reflect the potential dilution of stock options and other common stock equivalents. For the three and nine month periods ending March 31, 2004, the weighted average shares outstanding in calculating basic earnings per share were 1,294,067 and 1,294,747 while the weighted average number of shares for diluted earnings per share were 1,322,880 and 1,320,674. For the three and nine month periods ending March 31, 2003, the weighted average shares outstanding in calculating basic earnings per share were 1,324,993 and 1,344,580 while the weighted average number of shares for diluted earnings per share were 1,340,916 and 1,360,431. 6 (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 Ending March 31, March 31, 2004 2003 2004 2003 ---------- --------- ----------- ----------- Net income as reported $ 644,961 $ 584,463 $ 1,880,643 $ 1,776,853 Less: Stock-based compensation expense determined under fair value based method 5,314 7,370 15,942 22,111 ---------- --------- ----------- ----------- Pro forma net income $ 639,647 $ 577,093 $ 1,864,701 $ 1,754,742 ========== ========= =========== =========== Basic earnings per share as reported $ .50 $ .44 $ 1.45 $ 1.32 Pro forma basic earnings per share .49 .44 1.44 1.31 Diluted earnings per share as reported .49 .44 1.42 1.31 Pro forma diluted earnings per share .48 .43 1.41 1.29
There were no stock options granted during the nine months ended March 31, 2004 or 2003. 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. 7 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. 8 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 March 31, 2004, mortgage servicing rights had a carrying value of $626,000. FINANCIAL CONDITION Total assets were $239.1 million at March 31, 2004, down $3.6 million from $242.8 million at June 30, 2003. Growth in net loans receivable was offset by a $6.3 million, or 7.0%, reduction in securities available for sale while deposits decreased $3.1 million. Net loans receivable increased $2.8 million, or 2.2%, from $126.0 million at June 30, 2003 to $128.8 million at March 31, 2004. The increases in the loan portfolio were comprised primarily of $3.7 million in residential mortgages and $1.7 million in home equity and improvement loans. Nonresidential and commercial loans decreased $4.6 million and while automobile and other consumer loans decreased $0.6 million. The increase in residential mortgages reflects renewed interest in adjustable rate loans, primarily five year hybrids, which the Company retains on its balance sheet. The Company primarily sells its fixed rate mortgages in the secondary market with terms of 15 years or longer. Loans held for sale reduced from $2.7 million at June 30, 2003 to $209,000 at March 31, 2004. Premises and equipment, net increased $891,000, or 33.3%, from $2.7 million at June 30, 2003. The increase is the result of an expansion of our Syracuse office, the addition of a new office in the Columbia City, Indiana market and the upgrade of computer equipment for retail and back office personnel. Total deposits decreased $3.1 million, or 1.9%, to $160.3 million at March 31, 2004. Management will continue to control the overall increases in interest rates in deposits by targeting certain terms and offering "specials" rather than making across the board increases in interest rates on all deposit products. FHLB advances increased slightly by $370,000, or 0.7%, to $52.4 million at March 31, 2004. Total shareholders' equity increased $611,000 to $24.3 million at March 31, 2004. The increase primarily resulted from net income offsetting a $339,000 decrease in unrealized appreciation on securities available for sale, net of tax, cash dividends of $623,000 and treasury stock purchases of $393,000. COMPARISON OF THE THREE AND NINE-MONTH PERIODS ENDED MARCH 31, 2004 AND 2003 Net income for the three and nine-month periods ended March 31, 2004 was $645,000 and $1,881,000 compared to net income of $584,000 and $1,777,000 for the equivalent periods in 2003. The increases of $61,000, 10.4%, and $104,000, 5.8%, for the three and nine-month periods ended March 31, 2004 were a combination of reduced provision for loan losses combined with lower effective tax rates that were partially offset by lower net interest and non-interest income and increased non-interest expense. Diluted earnings per common share were $0.49 for the three-month period ended March 31, 2004 compared to $0.44 for the equivalent period in 2003. For the comparable nine-month periods, diluted earnings per common share were $1.42 in 9 2004 and $1.31 in 2003. Return on average shareholders' equity was 10.97% for the three months and 10.73% for the nine-months ended March 31, 2004, compared to 10.04% and 10.20% in 2003. The return on total average assets was 1.08% and 1.04% for the three and nine-month periods ended March 31, 2004, compared to 1.00% and 1.00% in 2003. NET INTEREST INCOME The net interest income for the three-month period ended March 31, 2004, was $1,632,000 compared to $1,652,000, a decrease of 1.2% from the same period in 2003. Accordingly, the Company's net interest margin was 2.93% compared to 3.07% in 2003. The net interest income for the nine-month period ended March 31, 2004, was $4,778,000 compared to $5,059,000, a decrease of 5.5% from the same period in 2003. Accordingly, the Company's net interest margin was 2.83% compared to 3.04% in 2003. Total average earning assets increased $4.9 and $2.9 million, respectively, for the three and nine-month periods ended March 31, 2004, over the comparative periods in 2003. Total average investment securities increased $4.5 and $8.8 million for the three and nine-month periods over one-year ago. Total average loans increased $3.8 million for the three-month period and decreased $3.3 million for the nine-month period from one-year ago. The yields on total average earning assets were 5.60% and 6.32% for the three-month periods ended March 31, 2004, and 2003 and 5.55% and 6.45% for the nine-month periods. The decline in net interest margin was due to adjustable rate loans repricing to lower rates, as well as other interest earning assets, loans and securities, repricing downward more quickly and to a greater extent than interest bearing liabilities. The cost of funds on total average interest-bearing liabilities were 2.93% and 3.59% for the three-month periods ended March 31, 2004, and 2003 and 3.00% and 3.78% for the nine-month periods. 10 The following tables set forth consolidated information regarding average balances and rates.
FFW Corp Three Months Ending (Dollars in thousands) 3/31/2004 3/31/2003 Average Average Average Average Interest-earning assets: Balance Interest Rate Balance Interest Rate - ------------------------ -------- -------- ------- -------- -------- ------- Loans $133,068 $2,177 6.58% $129,260 $2,492 7.82% Securities 88,218 929 4.28% 83,711 893 4.40% Other interest-earning assets 3,483 9 1.04% 6,925 21 1.23% -------- -------- -------- -------- Total interest-earning assets 3,483 3,115 5.60% 219,896 3,406 6.32% 224,769 Non interest-earning assets: Cash and due from 5,729 5,988 Allowance for loan losses (2,472) (2,546) Other non interest-earning assets 12,528 10,997 -------- -------- Total assets $240,554 $234,335 ======== ======== Interest-bearing liabilities: Interest-bearing deposits $147,974 856 2.33% $152,935 1,139 3.02% FHLB advances 55,724 627 4.53% 44,906 614 5.55% -------- -------- -------- -------- Total interest-bearing liabilities 203,698 1,483 2.93% 197,841 1,753 3.59% -------- -------- -------- -------- Non interest-bearing deposit accounts 10,956 10,442 Other non interest-bearing liabilities 1,983 2,419 -------- -------- Total liabilities 216,637 210,702 Shareholders' equity 23,917 23,633 -------- -------- Total liabilities and shareholders' equity $240,554 $234,335 Net interest income $1,632 $1,653 ====== ======== Net interest margin 2.93% 3.07% ====== ======
11
FFW Corp Nine Months Ending (Dollars in thousands) 3/31/2004 3/31/2003 Average Average Average Average Interest-earning assets: Balance Interest Rate Balance Interest Rate - ------------------------ -------- -------- ------- -------- -------- ------- Loans $132,246 $6,627 6.67% $135,594 $7,871 7.73% Securities 90,300 2,724 4.04% 81,477 2,798 4.63% Other interest-earning assets 2,965 27 1.21% 5,585 61 1.45% -------- -------- -------- -------- Total interest-earning assets 225,511 9,378 5.55% 222,656 10,730 6.45% Non interest-earning assets: Cash and due from 6,071 5,910 Allowance for loan losses (2,484) (2,444) Other non interest-earning assets 11,972 9,707 -------- -------- Total assets $241,070 $235,829 ======== ======== Interest-bearing liabilities: Interest-bearing deposits $148,986 2,698 2.41% $151,941 3,673 3.22% FHLB advances 55,176 1,902 4.59% 47,934 1,998 5.55% -------- -------- -------- -------- Total interest-bearing liabilities 204,162 4,600 3.00% 199,875 5,671 3.78% -------- -------- -------- -------- Non interest-bearing deposit accounts 11,002 10,140 Other non interest-bearing liabilities 2,493 2,601 -------- -------- Total liabilities 217,657 212,616 Shareholders' equity 23,413 23,213 -------- -------- Total liabilities and shareholders' equity $241,070 $235,829 ======== ======== Net interest income $4,778 $5,059 ====== ======== Net interest margin 2.83% 3.04% ====== ======
PROVISION FOR LOAN LOSSES The provision for loan losses was $180,000 and $600,000 for the three and nine-month periods ended March 31, 2004 and $460,000 and $1,090,000 for the same periods in 2003. 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 $380,000 and $746,000 have been recorded for the three and nine- month periods ended March 31, 2004, compared to $462,000 and $845,000 of net charge-offs for the same period in 2003. For the three and nine-month periods ended March 31, 2004, gross charge-offs were $465,000 and $1,014,000. The ALL was $2,446,000 or 1.86% of portfolio loans at March 31, 2004 compared to $2,647,000 or 1.96% at December 31, 2003 and $2,592,000 or 2.02% at June 30, 2003. Non-performing loans, which include non-accruing loans and accruing loans delinquent more than 90 days, were $461,000 at March 31, 2004 compared to $2,472,000 at December 31, 2003. The decrease in nonperforming loans for the quarter ended March 31, 2004 is primarily the result of the Bank's repossession of the collateral of two commercial loan relationships and setting up this collateral under real estate owned and other repossessed assets in the amount of $901,000. 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 12 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, 2004. NON-INTEREST INCOME Non-interest income for the three and nine-month periods ended March 31, 2004 was $558,000 and $1,729,000 compared to $687,000 and $1,818,000 for the same periods in 2003. The three-month decrease of $129,000 from the prior period was a result of a $192,000 decrease in gain on sale of loans and a $48,000 decrease in other non-interest income that was partially offset by increases of $74,000 in service charges and fees, $30,000 in gain on sale of securities and $19,000 in commission income. The decrease in gain on sale of loans will likely continue in fiscal 2004 if mortgage rates stay above the levels seen during the record setting refinancing cycle that peaked in June 2003. The increase in service charges and fees is the result of the introduction of new products whose long term effects on service charges and fees cannot be predicted. The nine-month results for fiscal 2004 showed increases in all areas of non-interest income except for a $374,000 drop in gain on sale of loans compared to 2003. NON-INTEREST EXPENSE Non-interest expense for the three-month period ended March 31, 2004, was $1,303,000, an increase of $100,000, or 8.3%, compared to the same period in 2003. For the nine-month period ended March 31, 2004, non-interest expense was $3,822,000, an increase of $254,000, or 7.1%. Comparing the nine-month periods, other non-interest expense increased $276,000 from the prior year due primarily to higher professional fees ($82,000), real estate owned ($69,000), bank owned life insurance ($37,000), loan expense ($31,000) and other expense ($57,000). 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 has realized $55,000 in expense reduction compared to fiscal 2003. For the nine-month period ended March 31, 2004, data processing expense increased 2.9% and occupancy and equipment expense increased 9.9% while compensation and employee benefits increased 2.3% over the same period in 2003. 13 INCOME TAXES The provisions for income taxes for the three and nine-month periods ended March 31, 2004, were $62,000 and $205,000 compared to $92,000 and $442,000 for the same periods in 2003. The provisions for income taxes dropped 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. 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 March 31, 2004, 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, 2004 Total Risk-Based Capital $ 20,530 14.15% $ 11,611 8.00% $14,513 10.00% Tier I (Core) Capital 18,708 12.89% 5,805 4.00% 8,708 6.00% (to risk weighted assets) Tier I (Core) Capital 18,708 7.98% 9,378 4.00% 11,723 5.00% (to adjusted total assets)
14 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. 15 Part II - Other Information As of March 31, 2004, 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 and Small Business Issuer Purchases of Equity Securities On March 25, 2003, the Board of Directors approved the repurchase of 5% of the Company's outstanding shares of common stock, or 66,090 such shares, on the open market. The program had no expiration date. As of March 31, 2004, the Company had repurchased 29,571 shares pursuant to this repurchase program, leaving 36,519 shares subject to the plan. 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 31(1) Certification required by 17 C.F.R. ss. 240.13a-14(a) 31(2) Certification required by 17 C.F.R. ss. 240.13a-14(a) 32 Certification pursuant to 18 U.S.C. ss. 1350 (b) Reports on Form 8-K Form 8-K for 2nd Fiscal Quarter Earnings Release filed on January 30, 2004. 16 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 3, 2004 By: /s/ Roger K. Cromer ------------------------------------- Roger K. Cromer President and Chief Executive Officer Date: May 3, 2004 By: /s/ Timothy A. Sheppard ------------------------------------- Timothy A. Sheppard Treasurer and Chief Accounting Officer 17 EXHIBIT INDEX Exhibit No. Description of Exhibit Page 31(1) Certification required by 17 C.F.R.ss.240.13a-14(a) 17 31(2) Certification required by 17 C.F.R.ss.240.13a-14(a) 18 32 Certification pursuant to 18 U.S.C.ss.1350 19 18 EX-31 2 ffw_10qmay311.txt CROMER CERTIFICATION 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: May 3, 2004 /s/ Roger K. Cromer ---------------------------------------- Roger K. Cromer President and Chief Executive Officer EX-31 3 ffw_10qmay312.txt SHEPPARD CERTIFICATION 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: May 3, 2004 /s/ Timothy A. Sheppard ---------------------------------------- Timothy A. Sheppard Treasurer EX-32 4 ffw_10qmay32.txt SOX CERTIFICATION 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 March 31, 2004 ("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 3rd day of May, 2004. FFW CORPORATION Registrant Date: May 3, 2004 By: /s/ Roger K. Cromer ------------------------------------- Roger K. Cromer President and Chief Executive Officer Date: May 3, 2004 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-----