-----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, RExZDYYp58gMp4JsQDrdp1MRRy4EQC4fPiw8kgSfND9zCmKGWDawz/iBOvM0r1LW DoE0/6bzRFv8wKiSeTNxCw== 0000914317-97-000210.txt : 19970508 0000914317-97-000210.hdr.sgml : 19970508 ACCESSION NUMBER: 0000914317-97-000210 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970507 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: 1934 Act SEC FILE NUMBER: 000-21170 FILM NUMBER: 97597218 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 CORPORATION 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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 [ X ] No [ ] Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ] State the number of Shares outstanding of each of the issuer's classes of common equity, as of the latest date: As of May 7, 1997, there were 697,010 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 March 31, 1997 and June 30, 1996 Consolidated Condensed Statements of Income for the three months ended March 31, 1997 and 1996 and the nine months ended March 31, 1997 and 1996. Consolidated Statements of Shareholders' Equity for the three months ended March 31, 1997 and 1996 and the nine months ended March 31, 1997 and 1996. Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 and the nine months ended March 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 : March 31, June 30, 1997 1996 ------------- ------------- Cash and due from financial institutions ................................ $ 1,038,469 $ 861,553 Interest-earning deposits in financial institutions - short term ........ 1,865,617 1,926,654 ------------- ------------- Cash and cash equivalents ...................................... $ 2,904,086 $ 2,788,207 Interest-earning deposits in financial institutions (cost approximates market value) ............................... -- 362,664 Securities available for sale ........................................... 39,685,487 40,566,384 Loans held for sale, net of unrealized gains and losses ................. -- 423,361 Loans receivable, net of allowance for loan losses of $534,314 in March and $553,440 in June ........................................... 109,850,484 100,529,412 Stock in Federal Home Loan Bank, at cost ................................ 2,397,600 2,397,600 Accrued interest receivable ............................................. 1,138,291 1,102,611 Premises and Equipment-net .............................................. 1,718,177 1,691,433 Other assets ............................................................ 746,847 605,233 ------------- ------------- Total Assets .......................................... $ 158,440,972 $ 150,466,905 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities: Non-interest-bearing demand deposits .................................... $ 3,233,880 $ 3,263,982 Savings, Now and MMDA deposits .......................................... 45,497,464 45,868,695 Other time deposits ..................................................... 49,480,051 43,357,434 ------------- ------------- Total Deposits ................................................. $ 98,211,395 $ 92,490,111 Borrowed funds .......................................................... 43,225,468 41,800,000 Accrued Interest Payable ................................................ 562,649 150,492 Accrued expenses and other liabilities .................................. 587,185 568,159 ------------- ------------- Total Liabilities .............................................. $ 142,586,697 $ 135,008,762 PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) Shareholders' Equity: March 31, June 30, 1997 1996 ------------- ------------- Preferred stock, $.01 par value, 500,000 shares authorized none issued .. -- -- Common stock, $.01 par value, 2,000,000 shares authorized, 855,542 shares issued and 697,010 outstanding at March 31, 1997; 853,592 shares issued and 711,060 shares outstanding at June 30, 1996 ......... 8,555 8,536 Additional paid-in capital .............................................. 8,225,965 8,132,484 Retained earnings - substantially restricted ............................ 10,856,742 10,218,910 Net unrealized depreciation on securities available for sale, net of tax liability of $ 210,706 on March 31, 1997 and a tax benefit of $69,436 on June 30, 1996 .......................... . (264,386) (203,283) Unearned Employee stock Ownership Plan shares ........................... (288,615) (331,189) Unearned Management Retention Plan share ................................ -- (13,079) Treasury Stock at Cost, 158,532 and 142,532 common shares at cost, at March 31, 1997 and June 30, 1996, respectively .............. (2,683,986) (2,354,236) ------------- ------------- Total Shareholders' equity ..................................... 15,854,275 15,458,143 Total Liabilities and Shareholders' Equity ............ $ 158,440,972 $ 150,466,905 ============= =============
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, ------------------------- ------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Interest Income: Loans Receivable Mortgage loans .......................... $1,500,690 $1,421,329 $4,424,597 $4,229,953 Consumer and other loans ................ 824,477 685,632 2,355,419 1,927,921 Securities Taxable ................................. 622,025 553,712 1,840,360 1,499,728 Nontaxable .............................. 110,822 126,594 347,740 409,982 Other Interest-earning assets .................... 17,277 38,822 58,729 203,413 ---------- ---------- ---------- ---------- Total Interest Income ................... $3,075,291 $2,826,089 $9,026,845 $8,270,997 Interest Expense: Deposits ......................................... 1,193,419 1,096,910 3,564,101 3,247,546 Other ............................................ 605,590 614,474 1,795,687 1,819,581 ---------- ---------- ---------- ---------- Total Interest Expense .................. $1,799,009 $1,711,384 $5,359,788 $5,067,127 Net Interest Income ....................................... 1,276,282 1,114,705 3,667,057 3,203,870 Provision for Loan Losses ........................ 35,000 36,153 70,000 48,153 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses ....... 1,241,282 1,078,552 3,597,057 3,155,717 Non-interest income: Net gain on sale of interest-earning assets ...... 7,225 28,169 37,451 127,257 Net unrealized gain or loss on loans held for sale -- -- -- -- Other ............................................ 149,705 113,837 438,015 349,008 ---------- ---------- ---------- ---------- Total Non-Interest Income ............... $ 156,930 $ 142,006 $ 475,466 $ 476,265 PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (continued) Three Months Ended Nine Months Ended March 31, March 31, ------------------------- ------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Non-Interest Expense: Compensation and Benefits ........................ 356,472 294,893 1,040,752 884,763 Occupancy and equipment .......................... 63,519 56,420 200,502 199,161 SAIF deposit insurance premiums .................. 15,925 60,019 699,464 177,165 Other ............................................ 293,985 225,554 788,125 649,442 ---------- ---------- ---------- ---------- Total Non-Interest Expense .............. $ 729,901 $ 636,886 $2,728,843 $1,910,531 ---------- ---------- ---------- ---------- Income before income taxes ................................ 668,311 583,672 1,343,680 1,721,451 Income Tax Expense ............................... 221,331 190,203 390,678 565,201 ---------- ---------- ---------- ---------- Net Income ................................................ $ 446,980 $ 393,469 $ 953,002 $1,156,250 ========== ========== ========== ========== Earnings per common and common equivalent shares : Primary .......................................... $ .64 $ .53 $ 1.36 $ 1.53 Fully Diluted .................................... $ .64 $ .53 $ 1.35 $ 1.53
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, ------------------------------ ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Beginning Balance .................................... $ 16,116,609 $ 16,479,481 $ 15,458,143 $ 15,491,568 Common Stock at .01 Par Value 2,000,000 shares authorized issued and outstanding March 31, 1997 -- 855,542; March 31, 1996 -- 850,508 ................... 20 -- 20 21 Additional Paid-in Capital ........................... 45,480 12,000 93,480 57,099 Treasury Stock at Cost - 7,000 and 19,682 shares for the three-month periods and 16,000 and 38,682 shares for the nine-month periods ended 1997 and 1996 ......................... (153,125) (378,129) (329,750) (737,151) Cash Dividends of: $.15 and $.12 per share for the three-month periods and $ .45 and $ .36 per share for the nine-month periods ended 1997 and 1996 ...... (104,552) (88,701) (315,170) (273,767) Amortization of ESOP Contribution .................... -- -- 42,574 39,743 Amortization of MRP Contribution ..................... -- 6,539 13,079 37,061 Net change in unrealized depreciation on equity securities available for sale ............... (497,137) (341,650) (61,103) 312,185 Net Income for Period(s) ............................. 446,980 393,469 953,002 1,156,250 ------------ ------------ ------------ ------------ Ending Balance ....................................... $ 15,854,275 $ 16,083,009 $ 15,854,275 $ 16,083,009 ============ ============ ============ ============
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, ------------------------------- ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Cash flows from operating activities: Net Income ........................................... $ 446,980 $ 393,469 $ 953,002 $ 1,156,250 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization, net of accretion .. 14,169 38,885 72,978 97,089 Provision for loan losses ........................ 35,000 36,153 70,000 48,153 Net realized gains on sale/call of interest- earning assets .............................. (9,990) (35,620) (43,616) (141,718) Net losses on sale of repossessed assets, real estate owned and fixed assets ............... (2,146) 347 242 49,432 Origination of loans held for sale ............... (556,725) (2,801,435) (2,697,414) (5,666,450) Proceeds from sale of loans held for sale ........ 721,265 2,344,635 3,167,033 5,214,369 ESOP expenses .................................... 26,000 12,000 116,573 75,742 Amortization of MRP contribution ................. -- 6,539 13,079 37,061 Net change in accrued interest receivable ........ (6,260) (51,897) (35,681) (112,011) Net change in other assets ....................... 360,691 (55,184) (316,292) 135,822 Net change in accrued interest payable, accrued expenses and other liabilities .............. 252,570 518,174 431,183 570,751 ------------ ------------ ------------ ------------ Total adjustments .................. $ 834,574 $ 12,597 $ 778,085 $ 308,240 ------------ ------------ ------------ ------------ Net cash from operating activities .......... $ 1,281,554 $ 406,066 $ 1,731,087 $ 1,464,490 Cash flows from investing activities: Net change in interest-bearing deposits in other financial institutions ...................... -- 185,565 362,664 (174,380) Proceeds from : sales/calls of securities available for sale 300,000 409,000 375,000 1,199,723 sales/calls of securities held-to-maturity .. -- -- -- 500,000 maturities of securities available for sale . 195,000 250,000 575,000 250,000 maturities of securities held-to-maturity ... -- -- -- 300,000 Purchase of : securities available for sale ............... (45,908) (1,569,848) (642,497) (6,689,391) Federal Home Loan Bank Stock ................ -- -- -- (57,200) Principal collected on mortgage- backed securities .................................. 128,844 205,588 455,980 594,665 Net change in loans receivable ................... (2,626,276) (2,116,086) (9,392,350) (6,938,953) ............ Net purchases premises and equipment ............. (62,183) (21,698) (123,348) (445,458) Proceeds from sales of other real estate and repossessed assets .......................... 56,671 15,653 253,011 77,815 ------------ ------------ ------------ ------------ Net cash from investing activities . $ (2,053,852) $ (2,641,826) $ (8,136,540) $(11,383,179)
PART I: FINANCIAL INFORMATION FFW CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Three Months Ended Nine Months Ended March 31, March 31, ------------------------------- ------------------------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Cash flows from financing activities: Net increase in deposits ...................... 325,468 3,428,744 5,721,284 6,200,988 Proceeds from short-term borrowings ........... 6,925,468 5,500,000 16,425,468 19,000,000 Payment on short-term borrowings .............. (7,000,000) (6,000,000) (15,000,000) (25,000,000) Purchase of Treasury Stock .................... (153,125) (378,128) (329,750) (737,150) Proceeds from exercising of stock options ..... 19,500 -- 19,500 21,120 Cash dividends paid ........................... (104,552) (88,701) (315,170) (273,767) ------------ ------------ ------------ ------------ Net cash from financing activities ...... $ 12,759 $ 2,461,915 $ 6,521,332 $ (788,809) Net increase (decrease) in cash and cash equivalents ...... $ (759,539) $ 226,155 $ 115,879 $(10,707,498) Cash and cash equivalents at beginning of period .......... $ 3,663,625 $ 2,961,062 $ 2,788,207 $ 13,894,715 Cash and cash equivalents at end of period ................ $ 2,904,086 $ 3,187,217 $ 2,904,086 $ 3,187,217 ============ ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid during quarter for: Interest ................................ $ 1,416,813 $ 1,333,257 $ 4,958,976 $ 4,678,221 Income Taxes ............................ $ 50,000 $ 168,100 $ 426,000 $ 383,100 Non-cash investing activities transfers from: Securities held-to-maturity to securities available-for-sale ............. -- -- -- $ 29,301,698
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 March 31, 1997 and June 30, 1996, and the results of its operations, changes in shareholders' equity for the three and nine months ended March 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 March 31, 1997. Operating results for the three and nine months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 1997. (2) Earnings Per Share of Common Stock Earnings per share of Common Stock is computed by dividing net income for the period by the weighted average number of common stock and common stock equivalents outstanding during the three and nine month periods ended March 31, 1997 and 1996. Weighted average number of shares used in the earnings per share computations were 666,177 for the three-month period ended March 31, 1997 and 671,156 for the nine-month period ended March 31, 1997. 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, 84,500 shares of the Company's Common Stock are reserved for issuance, of which the Company has granted options on 72,442 shares. As of March 31, 1997, options on 61,900 shares of the Company's Common Stock remain unexercised. (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 March 31, 1997, the capital requirements for the Bank under FIRREA and its actual capital ratios. As of March 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 ........................ $ 7,161 8.00% $13,277 14.83% Core Capital ...................... 4,672 3.00% 12,743 8.18% Tangible Capital .................. 2,336 1.50% 12,743 8.18%
(4) Common Stock Cash Dividends On February 25, 1997, the Board of Directors of FFW Corporation, declared a quarterly cash dividend of $.15 per share. The dividend was paid March 31, 1997 to shareholders of record on March 15, 1997. The payment of the cash dividend reduced shareholders' equity by $104,552. 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 Bank's net income is also affected by the level of its non-interest expenses, such as employee compensation and benefits, occupancy expenses, and other expenses. Forward - Looking Statements When used in this Form 10 - Q and in future filings by the Company with Securities and Exchange Commission, in the Company's press release or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrase "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 1997. Such statements are subject to certain risks and uncertainties, that 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. The Company wishes to advise readers that the factors listed below 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 On January 1, 1997 the company hired a commercial loan officer with 8 years of commercial loan experience. This development of a new loan and deposit market should further position the bank as the predominate local bank in each of the markets which we serve. On February 24, 1997 the Company announced the intended acquisition of deposits and certain assets associated with the branch of NBD Bank N.A. in South Whitley, Indiana. The acquisition of this branch should result in an increase in deposits of approximately $18 million. While, there are no loans in this purchase, it will expand our market presence in a contiguous county, which is closer to the expanding Ft. Wayne market. This expansion will also allow the company to better utilize our excess capital for growth and provide a higher return for our shareholders once the transaction is closed. We anticipate the transaction to be completed sometime in June 1997. The Company's total assets increased $8.0 million, or 5.3%, from $150.5 million at June 30, 1996 to $148.9 million at March 31, 1997. This increase was due primarily to funds generated by an increase in deposits of $5.7 million and borrowings from FHLB of $1.4 million. Net loans receivables increased $9.3 million and securities available-for-sale decreased $881,000. All of which contributed to an increase in cash and cash equivalents of $116,000. Loan demand and liquidity needs may result in additional borrowings if deposits and loan growth remain at current levels. Total securities available-for-sale decreased $881,000 from $40.6 million at June 30, 1996 to $39.7 million at March 31, 1997. This decrease was primarily the result of repayments due to maturities/calls and decrease in portfolio value due to increasing interest rates. The available-for-sale portfolio consists primarily of municipal securities, government agencies, mortgage-backed securities and to a lesser extent mutual funds and FNMA preferred stock. Net loans receivable increased $9.3 million, or 9.3% and $2.6 million or 2.4%, from $100.5 million at June 30, 1996 and $107.3 million at December 31, 1996 respectively to $109.9 million at March 31, 1997. The increase in the loan portfolio for the quarter resulted, primarily, from an increase in non-mortgage loans of $2.4 million due to an increase in origination's. Management, consistent with its asset/liability objectives, will continue to sell all of its newly originated fixed-rate mortgage loans with terms to maturity greater than 15 years. Total deposits increased $5.7 million or 6.2% and $325,000 or .3% from $92.5 million at June 30, 1996 and $97.9 million at December 31, 1996 to $98.2 million at March 31, 1997. For the quarter ended March 31, 1997, Savings, Now and MMDA accounts increased $1.0 million or 2.1% while certificates of deposit decreased $1.1 million or 2.1%. Management believes that deposit growth may become more costly with the increase in interest rates and the competitive nature of the markets we serve. However, this cost increase should be reduced with our acquisition of the NBD Bank N. A. branch in South Whitley, Indiana. This acquisition will almost double our DDA/NOW account balances and increase our lower cost passbook balances. This should help us reduce the need for higher cost certificates and FHLB advances. Total borrowed funds increased $1.4 million from $41.8 million at June 30, 1996 to $43.2 million at March 31, 1997. The increase consisted of new short term advances from the Federal Home Loan Bank of Indianapolis. Total shareholders' equity increased $400,000 from $15.5 million at June 30, 1996 to $15.9 million at March 31, 1997. The increase resulted from net income of $953,000 for the nine months ended March 31, 1997, which was reduced for the same period by $315,000 for the payment of dividends and the repurchase of 16,000 shares of FFW stock at a cost of $329,750. Results of Operations - Comparison of the Three and Nine Months Ended March 31, 1997 and March 31, 1996 General. Net income increased by $54,000 and decreased $203,000 for the three and nine months ended March 31, 1997 respectively, as compared to the three and nine months ended March 31, 1997. The increase for the three months ended March 31, 1997 was primarily the result of increases in net interest income. The decrease for the nine months ended was primarily the result of the one time SAIF assessment of $337,800 net of taxes. All of these items are discussed in greater detail below. Net Interest Income. Net interest income increased $162,000 or 14.5% and $441,000 or 14.0% for the three and nine months ended March 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, and a corresponding increase in the spread earned. Interest Income. Interest income increased $249,000 and $756,000 to $3.1 million and $9.0 million for the three and nine months ended March 31, 1997 respectively, as compared to the three and nine months ended 11 March 31, 1996. The increases in interest income for the three and nine months ended March 31, 1997 were due to continued growth in interest-earning assets including mortgage loans, commercial and consumer loans and investment, as compared to the same periods ended March 31, 1996. These increased interest-earning assets are the result of competitive pricing, marketing, and the re-pricing of adjustable-rate loans and mortgage-backed securities. Interest Expense. Interest expense increased $88,000 and $293,000 to $1.8 million and $5.4 million for the three and nine months ended March 31, 1997 respectively, as compared to the three and nine months ended March 31, 1996. For the three months ended March 31, 1997, the increase in interest expense was due to an increase in borrowed funds and deposits outstanding as compared to the same periods in 1997. Interest rates, while declining during the first six months, have seen a increase that will probably continue through the remainder of this fiscal year. If interest rates remain at or near current levels, management anticipates the rate of shift to certificates from passbook accounts will continue. thereby raising our interest expense cost, as the difference between rates paid on existing certificates and passbooks expands. Provision for Loan Losses. The provision for loan losses increased $1,000 and 22,000 for the three and nine months ended March 31, 1997, respectively as compared to the three and nine months ended March 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 nine month periods reflect an increase in non-mortgage lending and the inherent riskiness and the number of these loans as compared to 1-4 family mortgage loans. With the expansion into commercial lending the company will continue to increase its allowance for loan losses and make future additions to the allowance through the provision for loan losses as loan growth, 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, economic conditions, etc. 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 $15,000 and $0 to $157,000 and $476,000 for the three and nine months ended March 31, 1997 respectively, as compared to the three and nine months ended March 31, 1996. The increase was the result of increased other income which was offset by reduced gain on sales of loans to the Federal Home Loan Mortgage Corporation of $21,000 and $90,000 for the three and nine months ended March 31, 1997 respectively. Management believes that with the rise of interest rates we will see a decrease in the gain on sales of loans to Freddie Mac for the remainder of the year as compared to earlier in the year. Non-Interest Expense. Non-interest expense increased $93,000 and $818,000 to $730,000 and $2.7 million for the three and nine months ended March 31, 1997 respectively, as compared to the three and nine months ended March 31, 1996. For the three months ended March 31, 1997, compensation and benefits expenses increased by $62,000; other expenses increased by $68,000; SAIF insurance premiums decreased $44,000 as compared to the three months ended March 31, 1997. For the nine months ended March 31, 1997, compensation and benefit expense increased $156,000 due to increased clerical and officer staff due to increased growth. Other expenses increased by $139,000 due to cost related to the planned acquisition of NBD branch, being named business of the year in Wabash, increased data processing cost and a contribution in the way of a neighborhood tax credit purchase for the Wabash downtown revitalization. SAIF deposit premiums increased $522,000 due to the one time assessment paid as compared to the nine months ended March 31, 1996. Income Tax Expense. Income tax expense increased $31,000 and decreased $174,000 to $221,000 and $391,000 for the three and nine months ended March 31, 1997 respectively, as compared to the three and nine months ended March 31, 1996. The decrease was due to the tax effect of the one time SAIF assessment for the nine months ended March 31, 1997. 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 March 31, 1997, was $534,000 or 0.5% of total loans. The December 31, 1996 allowance for loan losses was $532,000, or 0.5% of total loans. Total loans classified as substandard, doubtful or loss as of March 31, 1997 were $1.0 million or 0.9% 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.
03/31/97 12/31/96 -------- -------- (Dollars in Thousands) Non-Accruing Loans ................................. $315 $101 Accruing Loans Delinquent 90 days or more .......... -- -- Troubled Debt Restructurings Foreclosed Assets .................................. 40 50 Total Non-Performing Assets ........................ $355 $180 ==== ==== Total Non-Performing Assets as a Percentage of Total Assets ......................... 22% .11%
Total non-performing assets increased $175,000 to $355,000, or .22% of total assets at March 31, 1997, from $180,000 or .11% of total assets at December 31, 1996. The increase in non-performing assets was primarily due to the addition of one loan for $196,000 that has since been paid current. Foreclosed assets decreased $10,000 due to the disposal of several repossessed vehicles. 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 thrift industry. Current Office of Thrift Supervision regulations require the Bank to maintain cash and eligible investments in an amount equal to at least 5.0% of customer accounts and short-term borrowings to assure its ability to meet demands for withdrawals and repayment of short-term borrowings. As of March 31, 1997, the Bank's liquidity ratio of 9.15%, exceeds the minimum regulatory requirements. The Company uses its capital resources principally to meet its ongoing commitments to fund maturing certificates of deposits and loan commitments, maintain is liquidity and meet operating expenses. At March 31, 1997, the Company has commitments to originate loans totaling $2.2 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 March 31, 1997, the Bank exceeded all fully phased-in regulatory capital standards. At March 31, 1997, the Bank's tangible capital was $12.7 million, or 8.2% of adjusted total assets, which is in excess of the 1.5% requirement by $10.4 million. In addition, at March 31, 1997, the Bank had core capital of $12.7 million, or 8.2% of adjusted total assets, which exceeds the 3.0% requirement by $8.0 million. The Bank had risk-based capital of $13.3 million at March 31, 1997 or 14.8% of risk-adjusted assets which exceeds the 8.0% risk-based capital requirements by $6.1 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 is July 1, 1994. 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 March 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 March 31, 1997. (i) A Form 8-K was filed on January 30, 1997 announcing the annual earnings for the quarter ended December 31, 1996. (ii) A Form 8-K was filed on February 27, 1997 announcing that a quarterly dividend was declared on February 25, 1997, payable March 31, 1997 to record holders on March 15, 1997. (iii) A Form 8-K was filed on February 27, 1997 announcing that a definitive agreement had been signed for the acquisition of a NBD Bank N.A. branch in South Whitley, Indiana. 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 7, 1997 /s/Nicholas M. George --------------------- Nicholas M. George President and Chief Executive Officer Date: May 7, 1997 /s/Charles E. Redman -------------------- Charles E. Redman Treasurer and Chief Financial Accounting Officer EX-27 2
9 1,000 9-MOS JUN-30-1997 MAR-31-1997 1,038 1,866 0 0 39,685 0 0 110,385 534 158,441 98,211 43,225 1,150 0 0 0 9 15,845 158,441 6,780 2,188 59 9,027 3,564 5,360 3,667 70 37 2,729 1,344 953 0 0 953 1.36 1.35 2.67 315 0 0 685 532 41 9 534 520 0 14
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