PINX:FFDF FFD Financial Corporation Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark One)

x
QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended     March 31, 2012  
 
OR

o
TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ____________ to _______________
 
Commission File Number:     0-27916     
 
FFD FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)
 
Ohio  
38-1821148
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)

321 North Wooster Avenue, Dover, Ohio  44622

(Address of principal executive offices) (Zip Code)

(330)  364-7777

(Registrant’s telephone number, including area code)
 
 

(Former name, former address and former fiscal year, if changed since last report)

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  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x                      No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o Accelerated filer o
   
Non-accelerated filer o (Do not check if a smaller reporting company)    Smaller reporting companyx
                                                                                                                                                                               
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o                      No  x
 
APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:May 14, 2012 – 1,016,096 common shares, no par value 
 


 
 

 
 
 
      Page
       
PART I Item 1-  FINANCIAL INFORMATION  
       
    Consolidated Statements of Financial Condition  3
       
    Consolidated Statements of Earnings      4
       
    Consolidated Statements of Comprehensive Income 5
       
    Condensed Consolidated Statements of Cash Flows 6
       
    Notes to Consolidated Financial Statements       7
       
  Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations   26
       
  Item 3 Qualitative and Quantitative Disclosures about Market Risk 36
       
  Item 4 Controls and Procedures 36
       
PART II
-
OTHER INFORMATION    37
       
SIGNATURES  38
 
 
2

 
FFD Financial Corporation

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share data)

   
March 31,
   
June 30,
 
ASSETS
 
2012
   
2011
 
    (Unaudited)        
             
Cash and due from financial institutions
  $ 1,141     $ 1,352  
Interest-bearing deposits in other financial institutions, including overnight deposits
    22,190       14,944  
Cash and cash equivalents
    23,331       16,296  
                 
Investment securities available for sale
    2       6,021  
Mortgage-backed securities available for sale
    10,469       6,257  
Mortgage-backed securities held to maturity, fair value of $41 at March 31, 2012 and $51 at June 30, 2011
    41       51  
Loans receivable – net of allowance of $2,214 and $2,174
    193,537       182,226  
Loans held for sale
    764       -  
Premises and equipment, net
    3,947       3,910  
Federal Home Loan Bank of Cincinnati stock, at cost
    2,422       2,422  
Loan servicing rights
    667       732  
Accrued interest receivable
    559       515  
Prepaid expenses and other assets
    1,504       1,106  
                 
Total assets
  $ 237,243     $ 219,536  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
                 
Deposits
               
Non-interest bearing
  $ 17,857     $ 15,746  
Interest bearing
    184,264       169,297  
Total deposits
    202,121       185,043  
Federal Home Loan Bank advances
    12,428       13,137  
Other borrowed funds
    566       630  
Accrued interest payable
    102       118  
Accrued and deferred federal income tax
    402       62  
Other liabilities
    1,821       1,575  
Total liabilities
    217,440       200,565  
                 
Shareholders’ equity
               
Preferred stock - authorized 1,000,000 shares without par value; no shares issued
    -       -  
Common stock - authorized 5,000,000 shares without par or stated value; 1,454,750 shares issued
    -       -  
Additional paid-in capital
    8,340       8,334  
Retained earnings
    17,409       16,686  
Accumulated comprehensive income, net
    99       35  
Treasury stock, at cost (438,654 and 443,154 treasury shares at March 31, 2012 and June 30, 2011, respectively)
    (6,045 )     (6,084 )
Total shareholders’ equity
    19,803       18,971  
                 
Total liabilities and shareholders’ equity
  $ 237,243     $ 219,536  
 
The accompanying notes are an integral part of these statements.
 
 
3

 
FFD Financial Corporation

CONSOLIDATED STATEMENTS OF EARNINGS
 (In thousands, except per share data)
(Unaudited)

   
    For the three months
   
    For the nine months
 
   
    ended March 31,
   
    ended March 31,
 
   
2012
   
2011
   
2012
   
2011
 
Interest income
                       
Loans, including fees
  $ 2,569     $ 2,509     $ 7,716     $ 7,736  
Mortgage-backed securities
    44       1       125       7  
Investment securities
    2       35       38       132  
Interest-bearing deposits and other
    35       30       93       87  
      2,650       2,575       7,972       7,962  
Interest expense
                               
Deposits
    497       542       1,538       1,846  
Borrowings
    124       148       383       454  
      621       690       1,921       2,300  
                                 
Net interest income
    2,029       1,885       6,051       5,662  
                                 
Provision for losses on loans
    150       120       556       652  
                                 
                                 
Net interest income after provision for losses on loans
    1,879       1,765       5,495       5,010  
                                 
Noninterest income
                               
Net gain on sale of loans
    225       56       646       591  
Mortgage servicing revenue (loss)
    (49 )     47       (109 )     (18 )
Service charges on deposit accounts
    125       84       335       264  
Other
    54       27       111       85  
      355       214       983       922  
Noninterest expense
                               
Employee and director compensation and benefits
    706       669       2,055       1,938  
Occupancy and equipment
    169       124       477       412  
Franchise taxes
    63       61       184       185  
FDIC Insurance Premiums
    22       76       65       200  
Data processing
    105       109       303       289  
ATM processing
    50       36       130       108  
Professional and consulting fees
    97       72       273       207  
Postage and stationery supplies
    37       32       117       117  
Advertising
    64       40       187       130  
Checking account maintenance expense
    47       50       150       159  
Other
    237       182       649       546  
      1,597       1,451       4,590       4,291  
                                 
Income before income taxes
    637       528       1,888       1,641  
                                 
Income tax expense
    218       180       647       562  
                                 
Net Income
  $ 419     $ 348     $ 1,241     $ 1,079  
                                 
Earnings per share
                               
Basic
  $ .41     $ .34     $ 1.22     $ 1.07  
                                 
Diluted
  $ .41     $ .34     $ 1.22     $ 1.06  
                                 
Dividends declared per share
  $ .17     $ .17     $ .51     $ .51  
 
The accompanying notes are an integral part of these statements.
 
 
4

 
FFD Financial Corporation

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (In thousands)
(Unaudited)
 
   
    For the three months
   
    For the nine months
 
   
    ended March 31,
   
    ended March 31,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income
  $ 419     $ 348     $ 1,241     $ 1,079  
                                 
Other comprehensive income (loss), net of related tax effects:
                               
Unrealized holding gains (losses) on securities during the period, net of taxes (benefits) of $13, $(8), $34 and $(76), during the respective periods
    25       (16     64       (147
                                 
Comprehensive income
  $ 444     $ 332     $ 1,305     $ 932  
 
The accompanying notes are an integral part of these statements.
 
 
5

 
FFD Financial Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended March 31, 2012 and 2011
(In thousands)
(Unaudited)

   
2012
   
2011
 
             
Cash flows from operating activities:
           
Net cash provided from (used by) operating activities
  $ (1,396 )   $ 6,680  
                 
Cash flows from investing activities:
               
Purchase of investment securities available for sale
    (4,991 )     (8,000 )
Proceeds from maturities/calls of investment securities available for sale
    6,000       6,000  
Principal repayments on mortgage-backed securities
    1,047       18  
Loan originations and payments, net
    (10,536 )     (2,376 )
Proceeds from participation loan sales to other financial institutions
    1,333       -  
Additions to premises and equipment
    (254 )     (107 )
Proceeds from the sale of real estate owned
    -       18  
Net cash provided from investing activities
    (7,401 )     (4,447 )
                 
Cash flows financing activities:
               
Net change in deposits
    17,078       5,094  
Repayments of Federal Home Loan Bank advances
    (709 )     (399 )
Net change in other borrowed funds
    (64 )     -  
Proceeds from exercise of stock options
    45       6  
Cash dividends paid
    (518 )     (516 )
Net cash provided from financing activities
    15,832       4,185  
                 
Net change in cash and cash equivalents
    7,035       6,418  
                 
Beginning cash and cash equivalents
    16,296       9,034  
                 
Ending cash and cash equivalents
  $ 23,331     $ 15,452  
                 
                 
                 
Supplemental disclosure of cash flow information:
               
Cash paid during the period for:
               
Federal income taxes
  $ 340     $ 650  
                 
Supplemental noncash disclosures:
               
Transfer from loans to repossessed assets
  $ -     $ 404  
                 
Interest paid
  $ 1,937     $ 2,326  
 
The accompanying notes are an integral part of these statements.
 
 
6

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three-and nine-month periods ended March 31, 2012 and 2011
 
1. 
Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with United States generally accepted accounting principles.  Accordingly, these financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto of FFD Financial Corporation (the “Corporation”) included in the Corporation’s Annual Report on Form 10-K for the year ended June 30, 2011.  However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the financial statements have been included.  The results of operations for the three- and nine-month periods ended March 31, 2012, are not necessarily indicative of the results which may be expected for the entire fiscal year.

2. 
Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Corporation and First Federal Community Bank (the “Bank).  All significant intercompany items have been eliminated.

3. 
Earnings Per Share

Basic earnings per share is computed based upon the weighted-average common shares outstanding during the period.  Diluted earnings per common share includes the dilutive effect of additional common shares issuable under the Corporation’s stock option plans.  Stock options for 3,500 shares were not considered in computing diluted earnings per share for each of the three and nine months ended March 31, 2012 and 2011 because they were antidilutive.  The computations are as follows:

   
    For the three months ended
   
    For the nine months ended
   
    March 31,
   
    March 31,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Weighted-average common shares outstanding (basic)
    1,016,096       1,011,596       1,015,769       1,011,544  
Dilutive effect of assumed exercise of stock options
    2,066       2,978       2,070       2,718  
Weighted-average common shares outstanding (diluted)
    1,018,162       1,014,574       1,017,839       1,014,262  

4. 
Stock Option Plan

The FFD Financial Corporation 1996 Stock Option and Incentive Plan (the “Plan”) expired as to new awards in October of 2006.  Options granted prior to expiration remain exercisable for ten years from the grant date, unless terminated in accordance with the Plan or the applicable award agreement.  In addition, the Corporation has an option plan in which only one director participates.  The director-only plan was adopted in 2002 to permit an option issuance to a new director because the terms of the Plan at the time limited the aggregate number of options available for awards to directors.

 
7

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

4. 
Stock Option Plan (continued)

A summary of the activity in the Plan for the nine months ended March 31, 2012 follows:

   
Shares
   
Weighted
average
exercise
price
 
Weighted
average
remaining
contractual
term
 
Aggregate
intrinsic
value
 
                     
Outstanding at beginning of period
    18,820     $ 11.68          
Granted
    -       -          
Exercised
    (4,500 )     10.1          
Forfeited or expired
    -       -          
Outstanding at end of period
    14,320     $ 12.18  
1.0 yrs
  $ 57,539  
                           
Exercisable at end of period
    14,320     $ 12.18  
1.0 yrs
  $ 57,539  
                           
Options available for grant
    -                    
 
Information related to the Plan during the nine months ended March 31, 2012 and 2011 follows:

   
2012
   
2011
 
             
Intrinsic value of options exercised
  $ 23,850     $ 4,406  
Cash received from options exercised
    45,450       6,281  
Tax benefit from options exercised
    -       -  
 
 
8


FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011
 
5. 
Loans
 
Loans at period end and year end were as follows:
 
   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(in thousands)
 
Residential real estate
           
One- to four-family
  $ 74,644     $ 69,689  
Multi-family
    7,598       6,961  
Nonresidential real estate and land
    87,162       81,955  
Commercial loans – secured
    25,153       22,637  
Commercial loans – unsecured
    215       132  
Consumer and other loans
    5,144       6,086  
      199,916       187,460  
                 
Net deferred loan origination costs
    291       293  
Undisbursed portion of loans in process
    (4,456 )     (3,353 )
Allowance for loan losses
    (2,214 )     (2,174 )
                 
Loans, net
  $ 193,537     $ 182,226  

Activity in the allowance for loan losses was as follows:

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended
March 31, 2012.
 
   
Residential
real
estate
   
Nonresidential
real estate
and land
   
Commercial
secured and
unsecured
   
Consumer
and other
   
Total
 
   
(in thousands)
 
Allowance for loan losses:
                             
Beginning balance
  $ 935     $ 861     $ 268     $ 110       2,174  
Provision for loan losses
    265       214       70       7       556  
Loans charged-off
    (298 )     (195 )     (21 )     (3 )     (517 )
Recoveries
    -       -       -       1       1  
                                         
Ending balance
  $ 902     $ 880     $ 317     $ 115       2,214  


The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012.

   
Residential
real
estate
   
Nonresidential
real estate
and land
   
Commercial
secured and
unsecured
   
Consumer
and other
   
Total
 
   
(in thousands)
 
Allowance for loan losses:
                             
Beginning balance
  $ 856     $ 866     $ 294     $ 114       2,130  
Provision for loan losses
    46       60       44       -       150  
Loans charged-off
    -       (46 )     (21 )     -       (67 )
Recoveries
    -       -       -       1       1  
                                         
Ending balance
  $ 902     $ 880     $ 317     $ 115       2,214  
 
 
9

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

5. 
Loans (continued)

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ending March 31, 2011.
 
   
Consumer
and other
   
Commercial
secured and
unsecured
   
Nonresidential
real estate
and land
   
Residential
real
estate
   
Unallocated
   
Total
 
   
(in thousands)
 
Allowance for loan losses:
                                   
Beginning balance
  $ 289     $ 359       1,293     $ 490     $ -       2,431  
Provision for loan losses
    15       17       65       23       -       120  
Loans charged-off
    (2 )     -       (51 )     (26 )     -       (79 )
Recoveries
    1       -       -       -       -       1  
                                                 
Ending balance
  $ 303     $ 376       1,307     $ 487     $ -       2,473  

   
Nine months ended
 
   
March 31,
 
   
2012
   
2011
 
   
(in thousands)
 
Beginning balance
  $ 2,174     $ 1,993  
Provision for loan losses
    556       652  
Loans charged-off
    (517 )     (174 )
Recoveries
    1       2  
Ending balance
  $ 2,214     $ 2,473  
 
The following tables present, based on the impairment method, the balance in the allowance for loan losses and loan balances by portfolio segment as of March 31, 2012 and June 30, 2011:

   
Residential
real
estate
   
Nonresidential
real estate
and land
   
Commercial
secured and
unsecured
   
Consumer
and other
   
Total
 
March 31, 2012
 
(in thousands)
 
Allowance for loan losses
                             
Ending allowance balance attributable to loans:
                             
Individually evaluated for impairment
  $ 186     $ 65     $ 45     $ -     $ 296  
Collectively evaluated for impairment
    716       815       272       115       1,918  
                                         
Total ending allowance balance
  $ 902     $ 880     $ 317     $ 115     $ 2,214  
                                         
Loans
                                       
Loans individually evaluated for impairment
  $ 1,518     $ 946     $ 89     $ -     $ 2,553  
Loans collectively evaluated for impairment
    79,971       86,080       21,966       5,181       193,198  
                                         
Total ending loan balance
  $ 81,489     $ 87,026     $ 22,055       5,181     $ 195,751  
 
 
10

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

5. 
Loans (continued)
 
   
Residential
real
estate
   
Nonresidential
real estate
and land
   
Commercial
secured and
unsecured
   
Consumer
and other
   
Total
 
June 30, 2011
 
(in thousands)
 
Allowance for loan losses
                             
Ending allowance balance attributable to loans:
                             
Individually evaluated for impairment
  $ 323     $ 222     $ 23     $ -     $ 568  
Collectively evaluated for impairment
    612       639       245       110       1,606  
                                         
Total ending allowance balance
  $ 935     $ 861     $ 268     $ 110       2,174  
                                         
Loans
                                       
Loans individually evaluated for impairment
  $ 1,802     $ 587     $ 71     $ -     $ 2,460  
Loans collectively evaluated for impairment
    74,707       79,211       21,897       6,125       181,940  
                                         
Total ending loan balance
  $ 76,509     $ 79,798       21,968     $ 6,125     $ 184,400  

The recorded investment does not include accrued interest receivable due to immateriality.  Accrued interest receivable for the total loan portfolio is $532,000 at March 31, 2012 and $468,000 at June 30, 2011.
 
The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2012:
 
   
Unpaid
Principal
balance
   
Recorded
investment
   
Allowance for
loan losses
allocated
 
   
(in thousands)
 
With no related allowance recorded:
                 
Residential
                 
One- to four-family
  $ 901     $ 893     $ -  
Nonresidential real estate and land
    856       800       -  
Commercial loans - secured
    20       18       -  
Total with no related allowance recorded
    1,777       1,711     $ -  
                         
With an allowance recorded:
                       
Residential
                       
One- to four-family
  $ 638     $ 446     $ 117  
Multi-family
    196       179       69  
Nonresidential real estate and land
    304       146       65  
Commercial loans - secured
    90       67       41  
Commercial loans – unsecured
    4       4       4  
Total with an allowance recorded
  $ 1,232     $ 842     $ 296  
                         
Total
  $ 3,009     $ 2,553     $ 296  

 
11


FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

5. 
Loans (continued)

The following table presents loans individually evaluated for impairment by class for the three-and nine-month periods ended March 31, 2012:
 
   
For the three months ended
   
For the nine months ended
 
   
31-Mar-12
   
31-Mar-12
 
             
   
Average
recorded
investment
   
Interest
income
recognized
   
Cash Basis
interest
recognized
   
Average
recorded
investment
   
Interest
income
recognized
   
Cash Basis
interest
recognized
 
   
(in thousands)
    (in thousands)  
With no related allowance recorded:
                                   
Residential
                                   
One- to four-family
    1,055     $ 10     $ 10       1,093     $ 38     $ 38  
Multi-family
    -       -       -       -       -       -  
Nonresidential real estate and land
    359       1       1       371       7       7  
Commercial loans - secured
    28       -       -       36       -       -  
Commercial loans – unsecured
    -       -       -       -       -       -  
Consumer and other loans
    -       -       -       -       -       -  
Total with no related allowance recorded
    1,442     $ 11     $ 11     $ 1,500     $ 45     $ 45  
                                                 
With an allowance recorded:
                                               
Residential
                                               
One- to four-family
  $ 485     $ 3     $ 3     $ 567     $ 6     $ 6  
Multi-family
    89       -       -       60       -       -  
Nonresidential real estate and land
    484       -       -       539       -       -  
Commercial loans - secured
    43       -       -       45       -       -  
Commercial loans – unsecured
    4       -       -       4       -       -  
Consumer and other loans
    -       -       -       -       -       -  
Total with an allowance recorded
  $ 1,105     $ 3     $ 3     $ 1,215     $ 6     $ 6  
                                                 
Total
  $ 2,547     $ 14     $ 14     $ 2,715     $ 51     $ 51  
 
 
12

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

5. 
Loans (continued)

The following table presents loans individually evaluated for impairment by class as of June 30, 2011:

   
Unpaid
principal
balance
   
Allowance for
Recorded
investment
   
loan losses
allocated
 
   
(in thousands)
 
With no related allowance recorded:
                 
Residential
                 
One- to four-family
  $ 878     $ 878     $ -  
Multi-family
    -       -       -  
Nonresidential real estate and land
    -       -       -  
Commercial loans - secured
    8       -       -  
Commercial loans – unsecured
    -       -       -  
Consumer and other loans
    -       -       -  
Total with no related allowance recorded
  $ 886     $ 886     $ -  
                         
With an allowance recorded:
                       
Residential
                       
One- to four-family
  $ 933     $ 924     $ 323  
Multi-family
    -       -       -  
Nonresidential real estate and land
    590       587       222  
Commercial loans - secured
    64       63       23  
Commercial loans – unsecured
    -       -       -  
Consumer and other loans
    -       -       -  
Total with an allowance recorded
  $ 1,587     $ 1,574     $ 568  
                         
Total
  $ 2,473     $ 2,460     $ 568  
 
 At March 31, 2012 and June 30, 2011, there were no loans past due 90 days and still on accrual.

The following table presents information for loans individually evaluated for impairment for the three-and nine-month periods ended March 31, 2011:

   
For the three months ended
   
For the nine months ended
 
   
31-Mar-11
   
31-Mar-11
 
   
(in thousands)
   
(in thousands)
 
             
Average of individually impaired loans during the period
  $ 2,451     $ 2,914  
Interest income recognized during the impairment
    23       72  
Cash-basis interest income recognized
    23       72  
 
 
13

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

5. 
Loans (continued)

Nonaccrual loans were as follows:
   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(in thousands)
 
Residential real estate
           
One- to four-family
    905       1,073  
Multi-family
    691       -  
Nonresidential real estate and land
    868       646  
Commercial loans – secured
    85       58  
Consumer and other loans
    5       20  
    $ 2,554     $ 1,797  

Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of March 31, 2012:

   
30-59
days
past due
   
60-89
days
past due
   
90 or more
days
past due
   
Total
past due
   
Loans not
past due
   
Total
 
   
(in thousands)
 
Residential real estate
                                       
One- to four-family
  $ 155     $ 154     $ 228     $ 537     $ 73,346     $ 73,883  
Multi-family
    114       -       135       249       7,357       7,606  
Nonresidential real estate and land
    403       -       131       534       86,491       87,025  
Commercial loans – secured
    14       21       64       99       21,742       21,841  
Commercial loans – unsecured
    -       -       -       -       215       215  
Consumer and other loans
    44       1       -       45       5,136       5,181  
Total
  $ 730     $ 176     $ 558       1,464     $ 194,287       195,751  

The following table presents the aging of the recorded investment in past due loans as of June 30, 2011:
 
   
30-59
days
past due
   
60-89
days
past due
   
90 or more
days
past due
   
Total
past due
   
Loans not
past due
   
Total
 
   
(in thousands)
 
Residential real estate
                                       
One- to four-family
  $ 386     $ 534     $ 300     $ 1,220     $ 68,320     $ 69,540  
Multi-family
    103       -       -       103       6,866       6,969  
Nonresidential real estate and land
    337       146       181       664       79,134       79,798  
Commercial loans – secured
    2       48       53       103       21,733       21,836  
Commercial loans – unsecured
    -       -       -       -       132       132  
Consumer and other loans
    63       28       12       103       6,022       6,125  
Total
  $ 891     $ 756     $ 546     $ 2,193     $ 182,207     $ 184,400  
 
 
14

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

5. 
Loans (continued)

Troubled Debt Restructurings:

The Corporation has allocated $141,000 and $125,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2012 and June 30, 2011, respectively.  The Corporation had not committed to lend additional amounts as of March 31, 2012 and June 30, 2011 to customers whose loans were classified as troubled debt restructurings.

During the three-month period ending March 31, 2012, there was one modification of a loan totaling $25,000 that would be considered a troubled debt restructuring.   The loan modification extended the maturity date of the loan.

During the nine-month period ending March 31, 2012, there were three modifications of loans totaling $218,000 that would be considered troubled debt restructurings.  At March 31, 2012 the balance of these loans was $215,000.  The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

All troubled debt restructured loans which were modified prior to June 30, 2011 performed in accordance with their modified terms for the twelve-month period ending March 31, 2012.

A troubled debt restructured commercial or consumer loan is considered to be in payment default once it is 11 days contractually past due under the modified terms.  A troubled debt restructured residential real estate loan is considered to be in payment default once it is 16 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Corporation’s internal underwriting policy.

At March 31, 2012, troubled debt restructured loans totaled $1.66 million and included $1.14 million in one- to four-family, $496,000 in nonresidential real estate and land and $25,000 in commercial.  There were no consumer troubled debt restructurings at March 31, 2012.  At June 30, 2011 troubled debt restructured loans totaled $1.46 million.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  The Corporation analyzes loans individually by classifying the loans as to credit risk.  The Corporation uses the following definitions for risk ratings:

Not rated: Homogeneous one- to four-family real estate loans that have maintained their contractual payments and are not analyzed.

Pass:  Loans that are analyzed but that do not meet the criteria to be considered special mention, substandard or doubtful as defined below.

Special mention:  Loans that have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date.
 
 
15

 
FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-and nine-month periods ended March 31, 2012 and 2011

5. 
Loans (continued)

Substandard:  Loans that are inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any.  These loans have a well-defined weakness or weaknesses that jeopardize the collection or liquidation of the debt.  They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

Doubtful:  Loans that have all the weaknesses inherent of those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

As of March 31, 2012, and based on the most recent analysis performed, the risk category of loans by class was as follows:
 
   
Not rated
   
Pass
   
Special
mention
   
Substandard
   
Doubtful
   
Total
 
   
(in thousands)
 
Residential real estate
                                   
One- to four-family
  $ 71,308     $ -     $ 813     $ 1,589     $ 173     $ 73,883  
Multi-family
    -       6,819       608       179       -       7,606  
Nonresidential real estate and land
    -       85,887       192       815       131       87,025  
Commercial loans – secured
    -       21,713       2       126       -       21,841  
Commercial loans – unsecured
    -       204       7       4       -       215  
Consumer and other loans
    5,167       -       14       -       -       5,181  
                                                 
Total
  $ 76,475     $ 114,623     $ 1,636     $ 2,713     $ 304     $ 195,751  

As of June 30, 2011,  the risk category of loans by class was as follows:
   
Not rated
   
Pass
   
Special
mention
   
Substandard
   
Doubtful
   
Total
 
   
(in thousands)
 
Residential real estate
                                   
One- to four-family