-----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, OcwGTomxznIDuA2+W/O4CAIF9eiIL8fT4TdLtz5huAFmM6/jgcbgo3mFxM7+2AXQ amxlwadLUiOEZRZTwnOkAA== 0000914317-98-000115.txt : 19980218 0000914317-98-000115.hdr.sgml : 19980218 ACCESSION NUMBER: 0000914317-98-000115 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NASD 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: SEC FILE NUMBER: 000-21170 FILM NUMBER: 98537955 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 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 December 31, 1997 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 incorporation or organization) Identification or Number) 1205 North Cass Street, Wabash, IN 46992 (Address of principal executive offices) (219) 563-3185 (Issuer's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [ X ] 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 February 13, 1998 there were 1,449,532 shares of the Registrant's common stock issued and outstanding. FFW CORPORATION INDEX PART I. FINANCIAL INFORMATION (unaudited) Item 1. Consolidated Condensed Financial Statements Consolidated Condensed Balance Sheets December 31, 1997 and June 30, 1997 Consolidated Condensed Statements of Income for the three months ended December 31, 1997 and 1996 and the six months ended December 31, 1997 and 1996 Consolidated Statements of Shareholders' Equity for the three months ended December 31, 1997 and 1996 and the six months ended December 31, 1997 and 1996. Consolidated Statements of Cash Flows for the three months ended December 31, 1997 and 1996 and the six months ended December 31, 1997 and 1996. Notes to Consolidated Condensed Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Signature Page
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS: December 31 June 30 1997 1997 ------------- ------------- Cash and due from financial institutions ....................................... $ 635,898 $ 1,620,716 Interest-earning deposits in financial institutions - short term ............... 5,833,399 15,499,898 ------------- ------------- Cash and cash equivalents ............................................. $ 6,469,297 $ 17,120,614 Interest-earning deposits in financial institutions (cost approximates market value) ...................................... -- -- Securities available for sale .................................................. 47,347,334 40,449,698 Loans held for sale, net of unrealized gains and losses ........................ -- -- Loans receivable, net of allowance for loan losses of $723,142 in December and $571,751 in June .................................................. 128,222,423 114,158,745 Stock in Federal Home Loan Bank, at cost ....................................... 2,707,200 2,397,600 Accrued interest receivable .................................................... 1,510,230 1,123,623 Premises and Equipment-net ..................................................... 2,007,660 1,926,910 Investment in limited partnership ......................................... 749,952 749,952 Other assets 2,283,474 2,128,339 ------------- ------------- Total Assets ................................................. $ 191,297,570 $ 180,055,481 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities: Non-interest-bearing demand deposits ........................................... $ 8,033,588 $ 5,751,478 Savings, Now and MMDA deposits ................................................. 47,756,017 50,529,826 Other time deposits ............................................................ 60,316,083 59,837,170 ------------- ------------- Total Deposits ........................................................ $ 116,105,688 $ 116,118,474 Federal Home Loan Bank advances ................................................ 52,675,956 44,800,000 Obligation relative to limited partnership ................................ 525,000 712,500 Accrued Interest Payable ....................................................... 170,183 157,521 Accrued expenses and other liabilities ......................................... 3,636,119 1,125,700 ------------- ------------- Total Liabilities ..................................................... $ 173,112,946 $ 162,914,195
FFW CORPORATION CONSOLIDATED BALANCE SHEETS (continued) (Unaudited) December 31 June 30 1997 1997 ------------- ------------- Shareholders' Equity: Preferred stock, $.01 par value, 500,000 shares authorized none issued ......... -- -- Common stock, $.01 par value, 2,000,000 shares authorized; 1,760,146 shares issued and 1,443,082 outstanding at December 31, 1997; 1,739,532 shares issued and 1,422,468 shares outstanding at June 30, 1997 .............. 8,801 8,698 Additional paid-in capital ..................................................... 8,591,532 8,439,565 Retained earnings - substantially restricted ................................... 11,809,433 11,119,378 Net unrealized depreciation on securities available for sale, net of tax liability of $210,706 on December 31, 1997 and a tax benefit of $ 69,436 on June 30, 1997........................................ 703,396 502,183 Unearned Employee stock Ownership Plan shares .................................. (244,553) (244,553) Treasury Stock at Cost, 317,064 common shares at cost, at December 31, 1997 and June 30, 1997, respectively .................. (2,683,985) (2,683,985) ------------- ------------- Total Shareholders' equity ............................................ 18,184,624 17,141,286 Total Liabilities and Shareholders' Equity ................... $ 191,297,570 $ 180,055,481 ============= =============
FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended December 31 December 31 ------------------------- ------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Interest Income: Loans Receivable Mortgage loans .......................... $1,600,395 $1,475,668 $3,181,829 $2,923,907 Consumer and other loans ................ 1,094,804 791,937 2,091,341 1,530,941 Securities Taxable ................................. 767,562 624,681 1,529,521 1,218,335 Nontaxable .............................. 105,097 119,132 208,506 236,918 Other Interest-earning assets .................... 10,950 13,816 73,149 41,452 ---------- ---------- ---------- ---------- Total Interest Income ................... $3,578,808 $3,025,234 $7,084,346 $5,951,553 Interest Expense: Deposits ......................................... 1,365,681 1,201,293 2,752,142 2,370,681 Other ............................................ 743,723 600,895 1,418,989 1,190,097 ---------- ---------- ---------- ---------- Total Interest Expense .................. $2,109,404 $1,802,188 $4,171,131 $3,560,778 Net Interest Income ....................................... 1,469,404 1,223,046 2,913,215 2,390,775 Provision for Loan Losses ........................ 65,000 15,000 265,000 35,000 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses ....... 1,404,404 1,208,046 2,648,215 2,355,775 Non-interest income: Net gain on sale of interest-earning assets ...... 26,309 19,498 42,549 30,226 Net unrealized gain or loss on loans held for sale -- -- -- -- Other ............................................ 225,895 140,588 443,445 288,309 ---------- ---------- ---------- ---------- Total Non-Interest Income ............... $ 252,204 $ 160,086 $ 485,994 $ 318,535
FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (continued) Three Months Ended Six Months Ended December 31 December 31 ------------------------- ------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Non-Interest Expense: Compensation and Benefits ........................ 459,880 345,233 902,417 684,280 Occupancy and equipment .......................... 81,072 72,497 161,685 136,982 SAIF deposit insurance premiums .................. 29,993 60,289 57,157 683,539 Other ............................................ 358,570 263,161 718,368 494,140 ---------- ---------- ---------- ---------- Total Non-Interest Expense .............. $ 929,515 $ 741,180 $1,839,627 $1,998,941 ---------- ---------- ---------- ---------- Income before income taxes ................................ 727,093 626,952 1,294,582 675,369 Income Tax Expense ............................... 248,468 200,335 345,978 169,347 ---------- ---------- ---------- ---------- Net Income ................................................ $ 478,625 $ 426,617 $ 948,604 $ 506,022 ========== ========== ========== ========== Earnings per common and common equivalent shares: Basic ............................................ $ .34 $ .32 $ .68 $ .38 Diluted .......................................... $ .34 $ .31 $ .66 $ .36
FFW CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Three Months Ended Six Months Ended December 31 December 31 ------------------------------ ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Beginning Balance ......................................... $ 17,610,488 $ 15,473,993 $ 17,141,286 $ 15,458,143 Common Stock at .01 Par Value 2,000,000 shares authorized issued and outstanding December 31, 1997 -- 1,443,082; December 31, 1996 -- 1,390,120 ................... 67 -- 103 -- Additional Paid-in Capital ................................ 102,873 24,000 151,967 48,000 Treasury Stock at Cost - no shares for the three-month periods and -0- and 9,000 shares for the six-month periods ended 1997 and 1996 .............................. -- -- -- (176,625) Cash Dividends of: $0.09 and $0.075 share for the three-month periods and $0.18 and $0.15 per share for the six-month periods ended 1997 and 1996 ............ (129,877) (105,309) (258,549) (210,618) Amortization of ESOP Contribution ......................... -- 42,574 -- 42,574 Amortization of MRP Contribution .......................... -- 6,540 -- 13,079 Net change in unrealized depreciation on equity securities available for sale .................... 122,447 248,194 201,213 436,034 Net Income for Period(s) .................................. 478,626 426,617 948,604 506,022 ------------ ------------ ------------ ------------ Ending Balance ............................................ $ 18,184,624 $ 16,116,609 $ 18,184,624 $ 16,116,609 ============ ============ ============ ============
FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended Six Months Ended December 31 December 31 ------------------------------ ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Cash flows from operating activities: Net Income .............................................. $ 478,626 $ 426,617 $ 948,604 $ 506,022 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization, net of accretion ..... (22,552) 14,360 (38,719) 58,809 Provision for loan losses ........................... 65,000 15,000 265,000 35,000 Net (gains) losses on sale of : Securities available for sale .................. -- 514 -- 514 Loans held for sale ............................ (35,463) (20,461) (57,372) (34,140) Foreclosed estate owned and repossessed assets . 5,586 10,661 4,187 2,388 Origination of loans held for sale .................. (1,770,558) (1,238,451) (3,710,838) (2,140,689) Proceeds from sale of loans held for sale ........... 1,806,021 1,536,412 3,768,210 2,445,768 ESOP expenses ....................................... 36,000 66,573 49,000 90,573 Amortization of MRP contribution .................... -- 6,540 -- 13,079 Net change in accrued interest receivable ........... (196,288) 22,895 (386,607) (29,421) Amortization of goodwill and core deposit intangibles 41,119 -- 82,237 -- Net change in other assets .......................... (179,330) (451,802) (392,699) (676,983) Net change in accrued interest payable, accrued expenses and other liabilities ................. 1,607,480 2,419,052 (714,741) 178,613 ------------ ------------ ------------ ------------ Total adjustments ..................... $ 1,357,015 $ (752,500) $ 2,001,451 $ (56,489) ------------ ------------ ------------ ------------ Net cash from operating activities ............. $ 1,835,641 $ (325,883) $ 2,950,055 $ 449,533
FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) Three Months Ended Six Months Ended December 31 December 31 ------------------------------ ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Cash flows from investing activities: Net change in interest-bearing deposits in other financial institutions ......................... -- 24,729 -- 362,664 Proceeds from : sales/calls of securities available for sale ... 3,000,000 75,000 8,000,000 75,000 sales/calls of securities held-to-maturity ..... -- -- -- -- maturities of securities available for sale .... 255,000 50,000 300,000 380,000 maturities of securities held-to-maturity ...... -- -- -- -- Purchase of : securities available for sale .................. (50,347) (50,104) (15,106,469) (596,589) Federal Home Loan Bank Stock ................... (309,600) -- (309,600) -- Principal collected on mortgage- backed securities .. 173,547 168,094 327,627 327,136 Net change in loans receivable ...................... (8,523,480) (4,249,764) (14,328,678) (6,766,074) Net purchases premises and equipment ................ (151,187) (10,310) (159,583) (61,165) Investment in limited partnership ................... -- (187,500) -- Proceeds from sales of other real estate and repossessed assets ............................. 36,190 78,606 155,140 196,340 ------------ ------------ ------------ ------------ Net cash from investing activities ... $ (5,569,877) $ (3,913,749) $(21,309,063) $ (6,082,688)
FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Three Months Ended Six Months Ended December 31 December 31 ------------------------------ ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Cash flows from financing activities : Net (decrease) increase in deposits ............ 1,165,629 (1,779,066) (12,786) 5,395,816 Proceeds from short-term borrowings ............ 32,975,956 9,500,000 43,475,956 9,500,000 Payment on short-term borrowings ............... (27,100,000) (4,000,000) (35,600,000) (8,000,000) Purchase of Treasury Stock ..................... -- -- -- (176,625) Proceeds from exercising of stock options ...... 66,940 -- 103,070 -- Cash dividends paid ............................ (129,877) (105,309) (258,549) (210,618) ------------ ------------ ------------ ------------ Net cash from financing activities ....... $ 6,978,648 $ 3,615,625 $ 7,707,691 $ 6,508,573 Net increase (decrease) in cash and cash equivalents ....... $ 3,244,412 $ (624,007) $(10,651,317) $ 875,418 Cash and cash equivalents at beginning of period ........... $ 3,224,885 $ 4,287,632 $ 17,120,614 $ 2,788,207 Cash and cash equivalents at end of period ................. $ 6,469,297 $ 3,663,625 $ 6,469,297 $ 3,663,625 ============ ============ ============ ============ Supplemental disclosure of cash flow information : Cash paid during quarter for: Interest ................................. $ 2,579,747 $ 2,194,134 $ 4,165,071 $ 3,542,163 Income Taxes ............................. $ 340,000 $ 315,000 $ 390,000 $ 376,000 Non-cash investing activities transfers from:
FFW CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (1) Basis of Presentation The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the Consolidated Condensed Financial Statements contain all adjustments (consisting only of normal recurring adjustments) necessary to represent fairly the financial condition of FFW Corporation as of December 31, 1997 and June 30, 1997, and the results of its operations, changes in shareholders' equity for the three and six months ended December 31, 1997 and 1996. Financial Statement reclassifications have been made for the prior period to conform to classifications used as of and for the period ended December 31, 1997. Operating results for the three and six months ended December 31, 1997 are not necessarily indicative Of the results that may be expected for the fiscal year ended June 30, 1998. (2) Earnings Per Share of Common Stock Basic and diluted earnings per share are computed under a new accounting standard effective in the quarter ended December 31, 1997. All prior amounts have been restated to be comparable. Basic earnings per share is based on net income (less preferred dividends) divided by the weighted average number of shares outstanding during the period. Diluted earnings per share shows the dilutive effect of additional common shares issuable under stock options (and convertible securities). On October 26, 1993, the shareholders of the Company ratified the adoption of the Company's 1992 Stock Option and Incentive Plan and the Management Recognition Plan and Trusts ("MRP"). Pursuant to the Stock Option Plan, 169,000 shares of the Company's Common Stock are reserved for issuance, of which the Company has granted options on 152,884 shares. As of December 31, 1997, 66,738 exercisable options of the Company's Common Stock remain un-exercised. All share and per share data have been adjusted to reflect a 100% common stock dividend declared December 15, 1997 and paid December 31, 1997.
Three Months Ended Six Months Ended December 31, December 31, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Earnings Per Share Net Income ............................................ $ 478,625 $ 426,617 $ 948,604 $ 506,022 Weighted average common shares outstanding ............ 1,394,785 1,344,058 1,388,329 1,346,620 Basic Earnings Per Share ......................... $ .34 $ .32 $ .68 $ .38 Earnings Per Share Assuming Dilution Net Income ............................................ $ 478,625 $ 426,617 $ 948,604 $ 506,022 Weighted average common shares outstanding ............ 1,394,785 1,344,058 1,388,329 1,346,620 Add: dilutive effects of assumed exercises Incentive stock options .......................... 26,447 31,501 49,877 60,879 ---------- ---------- ---------- ---------- Weighted average and dilutive common shares outstanding 1,421,232 1,375,559 1,438,206 1,407,499 Diluted Earnings Per Share ...................... $ .34 $ .31 $ .66 $ .36
(3) Regulatory Capital Requirements Pursuant to the Financial Institution Reform, Recovery, and Enforcement Act of l989 ("FIRREA"), savings institutions must meet three separate minimum capital-to-asset requirements. The following table summarizes, as of December 31, 1997, the capital requirements for the Bank under FIRREA and its actual capital ratios. As of December 31, 1997, the Bank substantially exceeded all current regulatory capital standards.
Regulatory Actual Capital Requirement Capital(Bank Only) Amount Percent Amount Percent ------ ------- ------ ------- (Dollars in Thousands) Risk-Based ................ $ 8,818 8.00% $13,281 12.05% Core Capital .............. $ 5,594 3.00% $12,580 6.75% Tangible Capital .......... $ 2,797 1.50% $12,580 6.75%
(4) Common Stock Cash Dividends On November 28, 1997, the Board of Directors of FFW Corporation, declared a quarterly cash dividend of $.15 per share. The dividend was paid December 31, 1997 to shareholders of record on December 15, 1997. The payment of the cash dividend reduced shareholders' equity by $129,877. PART II FFW CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations General The accompanying Consolidated Financial Statement includes the account of FFW Corporation (the "Company") and its wholly owned subsidiaries, First Federal Savings Bank of Wabash (the "Bank") and FirstFed Financial of Wabash, Inc. 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 level of its non-interest expenses, such as employee compensation and benefits, occupancy expenses, and other expenses also affects the Bank's net income. Forward-Looking Statements When used in this Form 10-QSB and in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in the Company's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, including but not limited to changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area and competition, all or some of which could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made and are subject to the above-stated qualifications in any event. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. 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. Financial Condition The Company's total assets increased $9.3 million, or 5.1%, from $182.0 million at September 30, 1997 to $191.3 million at December 31, 1997. This increase was due primarily to an increase in net loan receivable of $8.5 million. The growth in loan receivables was funded with an increase of borrowings from FHLB of $5.9 million, an increase in deposits of $1.2 million and a decrease in securities available for sale of $3.1 million. Loan demand and liquidity needs may result in additional borrowing if deposits and loan growth remain at current levels. Total securities available-for-sale decreased $3.1 million from $50.5 million at September 30, 1997 to $47.3 million at December 31, 1997. The decrease was primarily the result of calls on 2 government agency bonds totaling $3.0 million. The available-for-sale portfolio consists primarily of municipal securities, government agencies and mortgage backed securities. Net loan receivables increased $8.5 million, or 7.1%, from $119.8 million at September 30, 1997 to $128.2 million at December 31, 1997. The increase in the loan portfolio resulted primarily from an increase in mortgage loans of $3.0 million and non-mortgage loans of $5.0 million. Management, consistent with its asset/liability objectives, will continue to sell newly originated fixed-rate mortgage loans with terms to maturity of greater than 15 years. Total deposits increased $1.2 million or 1.0% from $114.9 million at September 30, 1997 to $116.1 million at December 31, 1997. This increase was primarily the result of interest posted to accounts at the end of the quarter. For the quarter ended December 31, 1997, passbook accounts decreased $1.3 million, or 3.0%, and certificates of deposit increased $2.2 million or 3.8%. Management believes that deposit growth may be difficult to maintain at prior years levels as deposit customers look for alternative investment opportunities with higher yields. Total borrowed funds increased $5.9 million from $46.8 million at September 30, 1997 to $52.7 million at December 31, 1997. The increase consisted of new borrowings from the Federal Home Loan Bank of Indianapolis. Total shareholders' equity increased $469,200 from $17.1 million at September 30, 1997 to $17.6 million at December 31, 1997. The increase was due to the quarterly net income of $478,600 and the unrealized appreciation of securities held for sale, net of tax, of $122,400, which was partially offset by the quarterly payment of dividends of $129,900. Results of Operations - Comparison of the Three and Six Months Ended December 31, 1997 and December 31, 1996 General Net income increased by $52,000 and $442,600 for the three and six months ended December 31, 1997 respectively, as compared to the three and six months ended December 31, 1996. The increase for the three months ended December 31, 1997 was primarily the result of increases in net interest income. The increase for six months ended December 31, 1997 was primarily the result of decreased SAIF premiums of $626,400. All of these items are discussed in greater detail below. Net Interest Income Net interest income increased $52,000, or 12.2% to $478,600 from $426,600 for the quarter ended December 31, 1997 and 1996 respectively. This was primarily the result of an increase in average interest-earning assets, which exceeded the increase in average interest-bearing liabilities. Interest Income Interest income increased $554,000 and $1.1 million to $3.6 million and $7.1 million for the three and six months ended December 31, 1997 respectively, as compared to the three and six months ended December 31, 1996. The increases in interest income for the three and six months ended December 31, 1997 were due to continued growth in interest-earning assets including mortgage loans, commercial and consumer loans and investments, as compared to the same periods ended December 31, 1996. These increased interest-earning assets are the result of competitive pricing, marketing, and the repricing of adjustable-rate loans and mortgage-backed securities. Interest Expense Interest expense increased $307,000 and $610,000 to $2.1 million and $4.2 million for the three and six months ended December 31, 1997 respectively, as compared to the three and six months ended December 31, 1996. The increase in interest expense was due to an increase in borrowed funds and deposits outstanding as compared to the same periods in 1996. If interest rates remain at or near current levels, management anticipates the rate of shift to certificates from passbook accounts will decrease as the difference between rates paid on new certificates and passbooks contracts. Provision for Loan Losses The provision for loan losses increased $50,000 and $230,000 for the three and six months ended December 31, 1997 respectively, as compared to the three and six months ended December 31, 1996. The loan loss provisions are based on management's quarterly analysis of the allowance for loan losses. The provisions for the three and six month periods reflect the growth in the balances of non-mortgage loans and to a lesser extent the increase in mortgage loans. The company will continue to monitor its allowance for loan losses and make future additions to the allowance through the provision for loan losses as economic and regulatory conditions dictate. Although the Company maintains its allowance for loan losses at a level which is deemed consistent with the level of risk in the portfolio, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required in future periods. Non-interest Income Non-interest income increased by $92,000 and $167,000 to $252,000 and $486,000 for the three and six months ended December 31, 1997 respectively, as compared to the three and six months ended December 31, 1996. The increases were, primarily, attributed to increased fee and other income of $85,000 and $154,000 for the three and six months ended December 31, 1997, as compared to 1996. Gain on sale of loans increased by $7,000 and $13,000 for the three and six months ended December 31, 1997, as compared to 1996. Management believes that with the decline of interest rates, we will continue to see an increase in sales of loans to Freddie Mac for the remainder of the year as compared to last year. This should result in increased gain on sales of loans. Non-Interest Expense Non-interest expense increased $189,000 to $930,000 for the three months ended December 31, 1997, as compared to the three months ended December 31, 1996. The increase for the three months ended December 31, 1997, was due to increased staffing, and the amortization of goodwill for our new branch in South Whitley, which was purchased from NBD Bank. Non-interest expense decreased $159,000 to $1.8 million for the six months ended December 31, 1997, as compared to the six months ended December 31, 1996. This decrease was primarily due to the reduction in the SAIF premiums of $627,000 in 1997 compared to 1996. This decrease was partially offset with higher staffing cost and goodwill amortization of our new branch in South Whitley. Income Tax Expense Income tax expense increased $48,000 and $177,000 to $248,000 and $346,000 for the three and six months ended December 31, 1997 respectively, as compared to the three and six months ended December 31, 1996. The increase was due to an increase in taxable income for the three and six months ended December 31, 1997, and the tax effect of the one time SAIF assessment, which lowered taxes, for the three and six months ended December 31, 1996. Non-Performing Assets and Allowance for Loan Losses The allowance for loan losses is calculated based upon an evaluation of pertinent factors underlying the types and qualities of the Company's loans. Management considers such factors as the repayment status of a loan, the estimated net realizable value of the underlying collateral, the borrower's ability to repay the loan, current and anticipated economic conditions which might affect the borrower's ability to repay the loan and the Company's past statistical history concerning charge-offs. The Company's allowance for loan losses as of December 31, 1997, was $723,000 or 0.6% of total loans. The September 30, 1997 allowance for loan losses was $726,000, or 0.6% of total loans. Total loans classified as substandard, doubtful or loss as of December 31, 1997 were $1.4 million or 0.7% of total assets. Management has considered non-performing assets and total classified assets in establishing the allowance for loan losses. The ratio of non-performing assets to total assets is one indicator of the exposure to credit risk. Non-performing assets of the Company consist of non-accruing loans, accruing loans delinquent 90 days or more, and foreclosed assets, which have been acquired as a result of foreclosure or deed-in-lieu of foreclosure.
12/31/97 09/30/97 -------- -------- (Dollars in Thousands) Non-Accruing Loans ................................. $428 $290 Accruing Loans Delinquent 90 days or more .......... -- -- Troubled Debt Restructurings ....................... -- -- Foreclosed Assets .................................. 173 44 ---- ---- Total Non-Performing Assets ........................ $601 $334 ==== ==== Total Non-Performing Assets as a Percentage of Total Assets ................ .31% .18%
Total non-performing assets increased to $601,000, or .31% of total assets at December 31, 1997, compared to $334,000 or .18% of total assets at September 30, 1997. The increase of $267,000 in non-performing assets was primarily due to a greater number of auto loans being repossessed and put on non-accrual status. Management believes these increased numbers are a result of the overall increase in auto and consumer lending over the last year, and as such, we have increased our loan loss allowance accordingly. Liquidity and Capital Resources The Company's primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, FHLB Indianapolis advances and funds provided by operations. While scheduled loan and mortgage-backed security repayments and maturity of short-term investments are a relatively predictable source of funds, deposit flows are greatly influenced by general interest rates, economic conditions, competition and, most recently, the restructuring occurring in the banking and thrift industries. Current Office of Thrift Supervision regulations require the Bank to maintain cash and eligible investments in an amount equal to at least 4.0% of customer accounts and short-term borrowings to assure its ability to meet demands for withdrawals and repayment of short-term borrowings. As of December 31, 1997, the Bank's liquidity ratio of 8.32% exceeds the minimum regulatory requirements. The Company uses its capital resources principally to meet its ongoing commitments to fund maturing certificates of deposits, loan commitments, maintain liquidity and meet operating expenses. At December 31, 1997, the Company has commitments to originate loans totaling $2.0 million. The Company considers its liquidity and capital resources to be adequate to meet its foreseeable short- and long-term needs. The Company expects to be able to fund or refinance, on a timely basis, its material commitments and long-term liabilities. Regulatory standards impose the following capital requirements: a risk-based capital standard expressed as a percent of risk-adjusted assets, a leverage ratio of core capital to total adjusted assets, and a tangible capital ratio expressed as a percent of total adjusted assets. As of December 31, 1997, the Bank exceeded all fully phased-in regulatory capital standards. At December 31, 1997, the Bank's tangible capital was $12.6 million, or 6.8% of adjusted total assets, which is in excess of the 1.5% requirement by $9.8 million. In addition, at December 31, 1997, the Bank had core capital of $12.6 million, or 6.8% of adjusted total assets, which exceeds the 3.0% requirement by $7.0 million. The Bank had risk-based capital of $12.2 million at December 31, 1997, or 12.1% of risk-adjusted assets which exceeds the 8.0% risk-based capital requirements by $4.5 million. As required by federal law, the OTS has proposed a rule revising its minimum core capital requirement to be no less stringent than that imposed on national banks. The OTS has proposed that only those savings associations rated a composite one (the highest rating) under the MACRO rating system for savings associations will be permitted to operate at or near the regulatory minimum leverage ratio of 3.0%. All other savings associations will be required to maintain a minimum leverage ratio of 3.0% at least an additional 100 to 200 basis points. The OTS will assess each individual savings association through the supervisory process on a case-by-case basis to determine the applicable requirement. No assurance can be given as to the final form of any such regulation, the date of its effectiveness or the requirement applicable to the Bank. As a result of the prompt corrective action provisions of federal law discussed below, however, a savings association must maintain a core capital ratio of at least 4.0% to be considered adequately capitalized unless its supervisory condition is such to allow it to maintain a 3.0% ratio. Under the requirements of federal law all the federal banking agencies, including the OTS, must revise their risk-based capital requirements to ensure that such requirements account for interest rate risk, concentration of credit risk and the risks of non-traditional activities, and that they reflect the actual performance of and expected loss on multi-family loans. The OTS had adopted a final rule that requires every savings association with more than normal interest rate risk to deduct from its total capital, for purposes of determining compliance with such requirement, an amount equal to 50% of its interest-rate risk exposure multiplied by the market value of its assets. This exposure is a measure of the potential decline in the market value of portfolio equity of a savings association, greater than 2%, based upon a hypothetical 200 basis point increase or decrease in interest rates (whichever results in a greater decline) affecting on-and off-balance sheet assets and liabilities. The effective date of the new requirement was July 1, 1996. Any savings association with less than $300 million in assets and a total capital ratio in excess of 12% is exempt from this requirement unless the OTS determines otherwise. It is anticipated that since the Bank has less than $300 million in assets, and a risk-based capital ratio in excess of 12%, it will be exempt from this rule. Part II - Other Information As of December 31, 1997, 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 - Other Information Not Applicable Item 5 - Exhibits and Reports on Form 8-K (a) Exhibits Not Applicable (b) The following is a description of the Form 8-K's filed during the quarter ended December 31, 1997. (i) A Form 8-K was filed on November 30, 1997 announcing the quarterly earnings for the quarter ended September 30, 1997. (ii) A Form 8-K was filed on November 30, 1997 announcing that a quarterly dividend was declared on September 4, 1997, payable September 30, 1997. (iii)A Form 8-K was filed on November 28, 1997 announcing that a quarterly cash dividend and a 100% stock dividend was declared on November 26, 1997, payable December 31, 1997. 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: February 13, 1998 By: /S/Nicholas M. George ---------------------- Nicholas M. George President and Chief Executive Officer Date: February 13, 1998 By: /S/Charles E. Redman -------------------- Charles E. Redman Treasurer and Chief Financial Accounting Officer EX-27 2
9 1,000 3-MOS JUN-30-1998 DEC-31-1997 635 5,833 0 0 47,347 0 0 128,946 723 191,298 116,106 52,676 4,331 0 0 0 9 18,176 191,298 2,695 873 11 3,579 1,366 2,109 1,469 65 26 930 727 727 0 0 479 .34 .34 2.66 428 0 0 972 728 72 4 723 720 0 3
-----END PRIVACY-ENHANCED MESSAGE-----