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, 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 (I.R.S. Employer Identification incorporation or organization) 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 November 10, 2004, there were 1,285,292 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 September 30, 2004 and June 30, 2004 3 Consolidated Statements of Income and Comprehensive Income for the three months ended September 30, 2004 and 2003. 4 Consolidated Statements of Cash Flows for the three months ended September 30, 2004 and 2003. 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis or Plan of Operation 8 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) September 30 June 30 2004 2004 ASSETS : ----- ---- ------- Cash and due from financial institutions $ 4,979,083 $ 5,239,955 Interest-earning deposits in other financial institutions - short term 4,119,532 1,299,774 ------------ ------------ Cash and cash equivalents 9,098,615 6,539,729 Securities available for sale 77,418,753 79,070,586 Loans receivable, net of allowance for loan losses of $2,687,614 at September 30, 2004 and $2,569,960 at June 30, 2004 141,730,521 136,086,451 Loans held for sale 256,400 96,600 Federal Home Loan Bank stock, at cost 3,656,900 3,616,600 Accrued interest receivable 1,189,118 1,356,853 Premises and equipment, net 4,158,734 3,965,553 Mortgage servicing rights 533,959 618,793 Cash surrender value of life insurance 4,987,284 4,935,876 Goodwill 975,468 975,468 Other assets 1,909,453 2,647,008 ------------ ------------ Total Assets $245,915,205 $239,909,517 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY: ------------------------------------- Liabilities: Noninterest-bearing deposits $ 13,466,654 $ 10,912,541 Interest-bearing deposits 149,961,367 148,339,452 ------------ ------------ Total Deposits 163,428,021 159,251,993 Federal Home Loan Bank advances 56,733,017 55,733,017 Accrued expenses and other liabilities 1,989,329 2,300,427 ------------ ------------ Total Liabilities 222,150,367 217,285,437 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: 1,285,292 - September 30, 2004; 1,285,248 - June 30, 2004 18,298 18,298 Additional paid-in capital 9,409,689 9,403,738 Retained earnings 21,260,462 20,872,005 Accumulated other comprehensive income (412,935) (1,209,167) Unearned management retention plan shares (92,597) (107,816) Treasury stock at cost, shares: 544,536 - September 30, 2004 and 544,580 - June 30, 2004 (6,418,079) (6,352,978) ------------ ------------ Total Shareholders' Equity 23,764,838 22,624,080 ------------ ------------ Total Liabilities and Shareholders' Equity $ 245,915,205 $ 239,909,517 ============= ============= See accompanying notes.
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PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) Three Months Ended September 30 2004 2003 ---- ---- Interest and dividend income : Loans, including fees $ 2,256,142 $ 2,270,901 Taxable securities 644,855 638,549 Nontaxable securities 206,998 243,376 Other interest-earning assets 8,390 6,231 ----------- ---------- Total interest income 3,116,385 3,159,057 Interest expense : Deposits 818,149 935,749 Other 624,734 635,600 ----------- ---------- Total interest expenses 1,442,883 1,571,349 ----------- ---------- Net interest income 1,673,502 1,587,708 Provision for loan losses 120,000 210,000 ----------- ---------- Net interest income after provision for loan losses 1,553,502 1,377,708 Non-interest income : Net gain on sale of securities - 3,712 Net gain on sale of loans 32,622 270,663 Commission income 49,194 35,761 Service charges and fees 227,514 157,490 Earnings on life insurance 58,289 73,101 Other 169,819 16,373 ----------- ---------- Total non-interest income 537,438 557,100 Non-interest expense : Compensation and benefits 655,075 579,353 Occupancy and equipment 167,715 103,951 Deposit insurance premium 5,913 18,926 Regulatory assessment 16,799 15,431 Correspondent bank charges 65,435 60,967 Data processing expense 113,267 128,511 Printing, postage and supplies 39,268 38,879 Other 326,953 293,134 ----------- ---------- Total non-interest expense 1,390,425 1,239,152 ----------- ---------- Income before income taxes 700,515 695,656 Income tax expense 91,482 94,059 ----------- ---------- Net income $ 609,033 $ 601,597 =========== ========== Change in unrealized appreciation (depreciation) on securities available for sale, net of tax 796,232 (915,443) ----------- ---------- Comprehensive income (loss) $ 1,405,265 $ (313,846) =========== ========== Earnings per common share : Basic $ .48 $ .46 Diluted $ .47 $ .45 See accompanying notes.
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PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30 2004 2003 ---- ---- Cash flows from operating activities : Net income $ 609,033 $ 601,597 Adjustments to reconcile net income to net cash from operating activities : Depreciation and amortization 258,474 303,195 Provision for loan losses 120,000 210,000 Net (gains) losses on sale of : Securities --- (3,712) Loans held for sale (32,622) (270,663) REOs and repossessed assets (44,631) 626 Fixed assets (105,124) --- Originations of loans held for sale (1,818,460) (13,972,750) Proceeds from sale of loans held for sale 1,677,481 14,120,453 Increase in cash surrender value of life insurance (51,408) (66,990) Dividends paid as FHLB stock (40,300) (42,800) Amortization of MRP contribution 15,219 7,605 Net change in accrued interest receivable and other assets 317,243 373,723 Net change in accrued interest payable and other liabilities (311,098) (1,479,955) ---------- ----------- Net cash from operating activities 593,807 (219,671) Cash flows from investing activities : Proceeds from : Sales and calls of securities available for sale 2,200,000 3,540,191 Maturities of securities available for sale 1,000,000 240,000 Sales of REOs and repossessed assets 339,179 105,624 Sales of branch building 115,733 --- Purchase of securities available for sale (1,530,678) (7,688,649) Principal collected on mortgage- backed securities 1,045,016 2,891,203 Net change in loans receivable (5,801,570) (795,827) Purchases of premises and equipment, net (298,904) (51,385) ---------- ----------- Net cash from investing activities (2,931,224) (1,758,843) Cash flows from financing activities : Net change in deposits 4,176,028 (4,261,397) Proceeds from borrowings 14,000,000 9,000,000 Repayment on borrowings (13,000,000) (5,750,000) Purchase of treasury stock (135,900) (393,377) Proceeds from stock options 76,751 --- Cash dividends paid (220,576) (209,888) ---------- ----------- Net cash from financing activities 4,896,303 (1,614,662) ---------- ----------- Net change in cash and cash equivalents 2,558,886 (3,593,176) Beginning cash and cash equivalents 6,539,729 9,824,833 ---------- ----------- Ending cash and cash equivalents $9,098,615 $ 6,231,657 ========== =========== Supplemental disclosure of cash flow information Transfer of loans to REO and repossessed assets $ 37,500 $ 749,500 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 September 30, 2004 and June 30, 2004 and the results of its operations, for the three months ended September 30, 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 September 30, 2004. Operating results for the three months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2005. (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 month periods ending September 30, 2004 and 2003, the weighted average shares outstanding in calculating basic earnings per share were 1,279,338 and 1,304,567 while the weighted average number of shares for diluted earnings per share were 1,302,164 and 1,326,791. 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 September 30, 2004 2003 ---- ---- Net income as reported $ 609,033 $ 601,597 Less: Stock-based compensation expense determined under fair value based method 730 5,314 -------------- -------------- Pro forma net income $ 608,303 $ 596,283 ============== ============== Basic earnings per share as reported $ .48 $ .46 Pro forma basic earnings per share .48 .46 Diluted earnings per share as reported .47 .45 Pro forma diluted earnings per share .47 .45 There were no stock options granted during the three months ended September 30, 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 affect these judgments include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses, ("ALL"), the fair value of securities available for sale and the valuation of mortgage servicing rights. 8 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. Fair Value of Securities Available For Sale ("AFS"): Securities AFS are carried at fair value, with unrealized holding gains and losses reported separately in accumulated other comprehensive income/(loss), net of tax. The Company obtains market values from a third party on a monthly basis in order to adjust the securities to fair value. As a result of changes in the fair market value of the Company's AFS securities portfolio, accumulated other comprehensive income/(loss) net of tax totaled $(412,935) at September 30, 2004 and $(1,209,167) at June 30, 2004. Additionally, securities AFS are required to be written down to fair value when a decline in fair value is not temporary; therefore, future changes in the fair value of securities could have a significant impact on the Company's operating results. In determining whether a market value decline is other than temporary, management considers the reason for the decline, the extent of the decline and the duration of the decline. As of September 30, 2004 and June 30, 2004, unrealized losses on equity securities (primarily floating rate government sponsored entity preferred stocks) totaled approximately $1.4 and $1.6 million, respectively. These losses have not been recognized into income because the securities are of high credit quality (rated AA or higher), management has the intent and ability to hold the investments for the foreseeable future, and the decline in fair value is largely due to the historically low market interest rates at the time the Company's floating rate preferred stocks repriced. The fair value is expected to recover as the securities approach their repricing dates and market rates rise. Should our consideration of these factors change, the Company may be required to record unrealized losses on some or all of these investments in the income statement. Further, future changes in generally accepted accounting principles could require us to record unrealized losses on some or all of these investments in the income statement. 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 term. Any impairment is reported as a valuation allowance. Changes in interest rates and the level of refinance activity can have volatile effects on the carrying value of servicing rights. The Company periodically obtains an outside appraisal in order to evaluate the Company's mortgage servicing rights asset for impairment. During the quarter ending September 30, 2004, an $84,000 impairment charge was taken following the receipt of an outside appraisal. The $84,000 impairment charge is presented as a reduction in non-interest income in the financial statements and has been established as a valuation allowance. 9 FINANCIAL CONDITION Total assets were $245.9 million at September 30, 2004, up $6.0 million from $239.9 million at June 30, 2004. Growth in net loans receivable of $5.6 million, or 4.1%, was accompanied by a $4.2 million increase in deposits. Net loans receivable increased from $136.1 million at June 30, 2004 to $141.7 million at September 30, 2004. The increases in the loan portfolio were comprised primarily of $3.4 million in nonresidential and commercial loans, $3.1 million in residential mortgages and $893,000 in home equity and improvement loans. Other consumer and automobile loans decreased $710,000. 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 increased from $97,000 at June 30, 2004 to $256,000 at September 30, 2004. Total deposits increased to $163.4 million at September 30, 2004. Management will continue to attempt to control the overall increases in interest rates on 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 by $1.0 million, or 1.8%, to $56.7 million at September 30, 2004. Total shareholders' equity increased $1.1 million to $23.8 million at September 30, 2004. The increase primarily resulted from net income and a $796,000 decrease in unrealized depreciation on securities available for sale, net of tax, offsetting cash dividends of $221,000 and treasury stock purchases of $136,000. COMPARISON OF THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003 Net income for the three-month period ended September 30, 2004 was $609,000 compared to net income of $602,000 for the equivalent period in 2003. The increase of $7,000, 1.2%, for the three-month period ended September 30, 2004 was a combination of improved net interest income and reduced provision for loan losses combined with a slightly lower effective tax rate that was partially offset by lower non-interest income and increased non-interest expense. Diluted earnings per common share were $0.47 for the three-month period ended September 30, 2004 compared to $0.45 for the equivalent period in 2003. Return on average shareholders' equity was 10.47% for the three months ended September 30, 2004, compared to 10.26% in 2003. The return on total average assets was 0.99% for the three-month period ended September 30, 2004, compared to 1.00% in 2003. 10 NET INTEREST INCOME The net interest income for the three-month period ended September 30, 2004, was $1,673,000 compared to $1,588,000, an increase of 5.4% from the same period in 2003. Accordingly, the Company's net interest margin was 2.92% compared to 2.82% in 2003. Total average earning assets increased $2.1 million for the three-month period ended September 30, 2004, over the comparative period in 2003. Total average investment securities decreased $9.0 million for the three-month period over one-year ago. Total average loans increased $11.5 million for the three-month period from one-year ago. The yield on total average earning assets was 5.44% and 5.62% for the three-month periods ended September 30, 2004, and 2003. The increase in net interest margin was due to interest bearing liabilities repricing downward more quickly and to a greater extent than adjustable rate loans repricing to lower rates, as well as other interest earning assets, loans and securities. The cost of funds on total average interest-bearing liabilities was 2.77% and 3.09% for the three-month periods ended September 30, 2004, and 2003. 11
The following tables set forth consolidated information regarding average balances and rates. FFW Corp Three Months Ending (Dollars in thousands) 9/30/2004 9/30/2003 Average Average Average Average Interest-earning assets: Balance Interest Rate Balance Interest Rate ------------------------ ------- -------- ----- ------- -------- ---- Loans $141,699 $2,256 6.32% $130,234 $2,271 6.94% Securities 82,755 852 4.05% 91,798 882 3.85% Other interest-earning assets 2,123 8 1.50% 2,410 6 0.99% -------- ------ -------- ------ Total interest-earning assets 226,577 3,116 5.44% 224,442 3,159 5.62% Non interest-earning assets: Cash and due from 5,938 6,267 Allowance for loan losses (2,613) (2,464) Other non interest-earning assets 14,111 11,481 -------- -------- Total assets $244,013 $239,726 ======== ======== Interest-bearing liabilities: Interest-bearing deposits $149,014 818 2.18% $150,763 936 2.47% FHLB advances 57,385 625 4.32% 51,807 635 4.88% -------- ------ -------- ------ Total interest-bearing liabilities 206,399 1,443 2.77% 202,570 1,571 3.09% -------- ------ -------- ------ Non interest-bearing deposit accounts 12,370 11,011 Other non interest-bearing liabilities 2,174 2,815 -------- -------- Total liabilities 220,943 216,396 Shareholders' equity 23,070 23,330 -------- -------- Total liabilities and shareholders' equity $244,013 $239,726 ======== ======== Net interest income $ 1,673 $ 1,588 ======= ======= Net interest margin 2.92% 2.82% ==== ====
PROVISION FOR LOAN LOSSES The provision for loan losses was $120,000 for the three-month period ended September 30, 2004 and $210,000 for the same period 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 $2,000 have been recorded for the three-month period ended September 30, 2004, compared to $356,000 of net charge-offs for the same period in 2003. For the three-month period ended September 30, 2004, gross charge-offs were $41,000. The ALL was $2,688,000 or 1.89% of portfolio loans at September 30, 2004 compared to $2,570,000 or 1.89% at June 30, 2004. Non-performing loans, which include non-accruing loans and accruing loans delinquent more than 90 days, were $1.1 million at September 30, 2004 compared to $1.0 million at June 30, 2004. 12 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, 2004. NON-INTEREST INCOME Non-interest income for the three-month period ended September 30, 2004 was $537,000 compared to $557,000 for the same period in 2003. The three-month decrease of $20,000 from the prior period was a result of decreases of $238,000 in gain on sale of loans, $15,000 in earnings on life insurance and $4,000 in gain on sale of securities that was partially offset by increases of $153,000 in other non-interest income, $70,000 in service charges and fees and $13,000 in commission income. The increase in other non-interest income includes $105,000 from the sale of the Bank's previous North Manchester, IN branch and $45,000 from the sale of repossessed assets. Additionally, non-interest income was negatively impacted by the previously discussed $84,000 mortgage servicing rights impairment charge recorded during the quarter ending September 30, 2004. NON-INTEREST EXPENSE Non-interest expense for the three-month period ended September 30, 2004, was $1,390,000, an increase of $151,000, or 12.2%, compared to the same period in 2003. Comparing the three-month periods, all areas of non-interest expense were higher except for deposit insurance premiums and data processing expense. The largest increases, $76,000 or 13.0% in compensation and benefits and $64,000 or 61.3% in occupancy and equipment, stem from the addition of our fifth full service branch, located in Columbia City, IN, in late June 2004 and increased depreciation of computer hardware and software purchased over the last nine months. FFW Corporation is investigating the possibility of de-listing its stock and de-registering with the Securities and Exchange Commission ("SEC"). This strategy would reduce future expenses associated with SEC reporting requirements, as well as NASDAQ filing fees, but would also result in the Company's common stock no longer being quoted on the NASDAQ Small Cap Market. In order to de-register, the Company must first have fewer than 300 shareholders of record. The Company currently has 315 shareholders of record. The Company's shares trade infrequently and residents of Indiana hold many shares. Therefore, it is management's belief that any negative impact on the liquidity of the shares as a result of a de-registering and de-listing would be minimal. INCOME TAXES The provisions for income taxes for the three-month period ended September 30, 2004, were $91,000 compared to $94,000 for the same period in 2003. The Company's effective tax rate remained relatively stable when comparing the quarters ending September 30, 2004 and 2003. 13 REGULATORY CAPITAL REQUIREMENTS The Bank is required to maintain specific amounts of regulatory capital pursuant to regulations of the OTS. At September 30, 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 September 30, 2004 Total Risk-Based Capital $ 21,488 13.83% $12,432 8.00% $15,540 10.00% Tier I (Core) Capital 19,536 12.57% 6,216 4.00% 9,324 6.00% (to risk weighted assets) Tier I (Core) Capital 19,536 8.07% 9,683 4.00% 12,104 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 September 30, 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 - Unregistered Sales of Equity Securities and Use of Proceeds 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 September 30, 2004, the Company had repurchased 53,552 shares pursuant to this repurchase program, leaving 12,538 shares subject to the plan. 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 26, 2004. 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: NUMBER OF VOTES --------------- PROPOSAL FOR WITHHELD -------- -------- -------- Election of the following Directors for a three-year term Roger K. Cromer 1,154,105 19,606 Joseph W. McSpadden 1,153,933 19,778 FOR AGAINST ABSTAIN ------- ------- ------- Ratification of Crowe Chizek and Company LLC as auditors for the fiscal year ending June 30, 2005 1,160,148 7,767 5,796 Item 5 - Other Information Not Applicable. Item 6 - Exhibits (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 16 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FFW CORPORATION Registrant Date: November 12, 2004 By: /s/ Roger K. Cromer -------------------------- -------------------------------------- Roger K. Cromer President and Chief Executive Officer Date: November 12, 2004 By: /s/ Timothy A. Sheppard -------------------------- -------------------------------------- Timothy A. Sheppard Treasurer and Chief Accounting Officer 17 EXHIBIT INDEX Exhibit No. Description of Exhibit ----------- ---------------------- 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 18