- Quarterly Report (10-Q)

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

December 31, 2011

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		34-1821148
(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 company x

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: F ebruary 10, 2012 – 1,016,096 common shares, no par value

INDEX

			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	24

	Item 3	Qualitative and Quantitative Disclosures about Market Risk	33

	Item 4	Controls and Procedures	34

PART II	-	OTHER INFORMATION	35

SIGNATURES			36

Index

FFD Financial Corporation

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share data)

	December 31,			June 30,
ASSETS	2011			2011
	(Unaudited)

Cash and due from financial institutions	$	1,195		$	1,352
Interest-bearing deposits in other financial institutions, including overnight deposits		21,372			14,944
Cash and cash equivalents		22,567			16,296

Investment securities available for sale		1,004			6,021
Mortgage-backed securities available for sale		11,031			6,257
Mortgage-backed securities held to maturity,fair value of $49 at December 31, 2011 and $51 at June 30, 2011		49			51
Loans receivable – net of allowance of $2,130 and $2,174		190,529			182,226
Loans held for sale		943			-
Premises and equipment, net		3,919			3,910
Federal Home Loan Bank of Cincinnati: stock, at cost		2,422			2,422
Loan servicing rights		709			732
Accrued interest receivable		529			515
Prepaid expenses and other assets		984			1,106

Total assets	$	234,686		$	219,536

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits
Non-interest bearing	$	20,045		$	15,746
Interest bearing		179,185			169,297
Total deposits		199,230			185,043
Federal Home Loan Bank advances		12,949			13,137
Other borrowed funds		566			630
Accrued interest payable		113			118
Accrued and deferred federal income tax		411			62
Other liabilities		1,885			1,575
Total liabilities		215,154			200,565

Commitments and contingent liabilities		-			-

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		17,163			16,686
Accumulated comprehensive income, net		74			35
Treasury stock, at cost (438,654 and 443,154 treasury shares at December 31, 2011 and June 30, 2011, respectively)		(6,045	)		(6,084	)
Total shareholders’ equity		19,532			18,971

Total liabilities and shareholders’ equity	$	234,686		$	219,536

The accompanying notes are an integral part of these statements.

Index

FFD Financial Corporation

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

	For the three months						For the six months
	ended December 31,						ended December 31,
	2011			2010			2011			2010

Interest income
Loans, including fees	$	2,589		$	2,616		$	5,147		$	5,227
Mortgage-backed securities		49			4			81			6
Investment securities		8			40			36			97
Interest-bearing deposits and other		30			28			58			57
		2,676			2,688			5,322			5,387
Interest expense
Deposits		509			594			1,041			1,304
Borrowings		129			152			259			306
		638			746			1,300			1,610

Net interest income		2,038			1,942			4,022			3,777

Provision for losses on loans		163			346			406			532

Net interest income after provision for losses on loans		1,875			1,596			3,616			3,245

Noninterest income
Net gain on sale of loans		258			275			421			535
Mortgage servicing loss		(59	)		(65	)		(60	)		(65	)
Service charges on deposit accounts		101			86			210			180
Other		31			31			57			58
		331			327			628			708
Noninterest expense
Employee and director compensation and benefits		661			626			1,349			1,269
Occupancy and equipment		163			141			308			288
Franchise taxes		61			67			121			124
FDIC Insurance Premiums		18			61			43			124
Data processing		96			87			198			180
ATM processing		40			33			80			72
Professional and consulting fees		86			81			176			135
Postage and stationery supplies		51			51			80			85
Advertising		71			51			123			90
Checking account maintenance expense		52			55			103			109
Other		216			186			412			364
		1,515			1,439			2,993			2,840

Income before income taxes		691			484			1,251			1,113

Income tax expense		237			167			429			382

Net Income	$	454		$	317		$	822		$	731

Earnings per share
Basic	$	.45		$	.31		$	.81		$	.72

Diluted	$	.45		$	.31		$	.81		$	.72

Dividends declared per share	$	.17		$	. 17		$	.34		$	. 34

The accompanying notes are an integral part of these statements.

Index

FFD Financial Corporation

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	For the three months					For the six months
	ended December 31,					ended December 31,
	2011		2010			2011		2010

Net income	$	454	$	317		$	822	$	731

Other comprehensive income (loss), net of related tax effects:
Unrealized holding gains (losses) on securities during the period, net of taxes (benefits) of $4, $(64),$21 and $(67), during the respective periods		7		(126	)		39		(131	)

Comprehensive income	$	461	$	191		$	861	$	600

The accompanying notes are an integral part of these statements.

Index

FFD Financial Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended December 31, 2011 and 2010

(In thousands)

(Unaudited)

	2011			2010

Cash flows from operating activities:
Net cash from operating activities	$	1,002		$	5,949

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		5,000			6,000
Principal repayments on mortgage-backed securities		475			11
Loan originations and payments, net		(8,705	)		(2,343	)
Additions to premises and equipment		(145	)		(35	)
Proceeds from the sale of real estate owned		-			18
Net cash from investing activities		(8,366	)		(4,349	)

Cash flows financing activities:
Net change in deposits		14,187			3,184
Repayments of Federal Home Loan Bank advances		(188	)		(282	)
Net change in other borrowed funds		(64	)		-
Proceeds from exercise of stock options		45			6
Cash dividends paid		(345	)		(344	)
Net cash from financing activities		13,635			(2,564	)

Net change in cash and cash equivalents		6,271			4,164

Beginning cash and cash equivalents		16,296			9,034

Ending cash and cash equivalents	$	22,567		$	13,198

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes	$	100		$	375

Supplemental noncash disclosures:
Transfer from loans to repossessed assets	$	-		$	18

Interest paid	$	1,305		$	1,631

The accompanying notes are an integral part of these statements.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the six-and three-month periods ended December 31, 2011 and 2010

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 six-month periods ended December 31, 2011, 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 six months ended December 31, 2011 and 2010 because they were antidilutive. The computations are as follows:

	For the three months ended				For the six months ended
	December 31,				December 31,
	2011		2010		2011		2010

Weighted-average common shares outstanding (basic)		1,016,096		1,011,596		1,015,607		1,011,519
Dilutive effect of assumed exercise of stock options		1,832		2,574		2,046		2,585
Weighted-average common shares outstanding (diluted)		1,017,928		1,014,170		1,017,653		1,014,104

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.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

4. Stock Option Plan (continued)

A summary of the activity in the Plan for the six months ended December 31, 2011 follows:

						Weighted
				Weighted		average
				average		remaining		Aggregate
				exercise		contractual		intrinsic
	Shares			price		term		value

Outstanding at beginning of period		18,820		$	11.68
Granted		-					-
Exercised		(4,500	)		10.10
Forfeited or expired		-			-
Outstanding at end of period		14,320		$	12.18	1.2 yrs		$	29,055

Exercisable at end of period		14,320		$	12.18	1.2 yrs		$	29,055

Options available for grant		-

Information related to the Plan during the six months ended December 31, 2011 and 2010 follows:

	2011		2010

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

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans

Loans at period end and year end were as follows:

	December 31,			June 30,
	2011			2011
	(in thousands)
Residential real estate
One- to four-family	$	73,441		$	69,689
Multi-family		8,071			6,961
Nonresidential real estate and land		85,678			81,955
Commercial loans – secured		21,604			22,637
Commercial loans – unsecured		196			132
Consumer and other loans		5,890			6,086
		194,880			187,460

Net deferred loan origination costs		297			293
Undisbursed portion of loans in process		(2,518	)		(3,353	)
Allowance for loan losses		(2,130	)		(2,174	)

Loans, net	$	190,529		$	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 six months ended December 31, 2011.

	Residential			Nonresidential			Commercial
	real			real estate			secured and		Consumer
	estate			and land			unsecured		and other			Unallocated		Total
	(in thousands)
Allowance for loan losses:
Beginning balance	$	935		$	861		$	268	$	110		$	-	$	2,174
Provision for loan losses		219			154			26		7			-		406
Loans charged-off		(298	)		(149	)		-		(3	)		-		(450	)
Recoveries		-			-			-		-			-		-

Ending balance	$	856		$	866		$	294	$	114		$	-	$	2,130

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended December 31, 2011.

	Residential		Nonresidential		Commercial
	real		real estate		secured and		Consumer
	estate		and land		unsecured		and other		Unallocated		Total
	(in thousands)
Allowance for loan losses:
Beginning balance	$	786	$	789	$	278	$	114	$	-	$	1,967
Provision for loan losses		70		77		16		-		-		163
Loans charged-off		-		-		-		-		-		-
Recoveries		-		-		-		-		-		-

Ending balance	$	856	$	866	$	294	$	114	$	-	$	2,130

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans (continued)

	Three months ended					Six months ended
	December 31,					December 31,
	2011		2010			2011			2010
	(in thousands)					(in thousands)

Beginning balance	$	1,967	$	2,102		$	2,174		$	1,993
Provision for loan losses		163		346			406			532
Loans charged-off		-		(17	)		(450	)		(95	)
Recoveries		-		-			-			1
Ending balance	$	2,130	$	2,431		$	2,130		$	2,431

The following tables present the balance in the allowance for loan losses and loan balances by portfolio segment and based on the impairment method as of December 31, 2011 and June 30, 2011:

	Residential		Nonresidential		Commercial
	real		real estate		secured and		Consumer
	estate		and land		unsecured		and other		Total
December 31, 2011	(in thousands)
Allowance for loan losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	140	$	131	$	21	$	-	$	292
Collectively evaluated for impairment		716		735		273		114		1,838

Total ending allowance balance	$	856	$	866	$	294	$	114	$	2,130

Loans
Loans individually evaluated for impairment	$	1,695	$	1,037	$	93	$	-	$	2,825
Loans collectively evaluated for impairment		79,381		83,486		21,042		5,925		189,834

Total ending loan balance	$	81,076	$	84,523	$	21,135	$	5,925	$	192,659

	Residential		Nonresidential		Commercial
	real		real estate		secured and		Consumer
	estate		and land		unsecured		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 in the aforementioned disclosure and the next several disclosures do not include accrued interest receivable and loan origination fees, net. The recorded investment in loans excludes accrued interest receivable or loan origination fees, net due to immateriality. Accrued interest receivable for the total loan portfolio is $499,000.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans (continued)

Individually impaired loans at period end and year end were as follows:

	December 31,		June 30,
	2011		2011
	(in thousands)
Period-end impaired loans with no allocated allowance for loan losses	$	1,523	$	886
Period-end impaired loans with allocated allowance for loan losses		1,302		1,574

Total	$	2,825	$	2,460

Amount of the allowance for loan losses allocated	$	292	$	568

Period-end impaired loans on nonaccural	$	1,581	$	286
Period-end impaired loans accruing		1,244		2,174
	$	2,825	$	2,460

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011:

	Unpaid				Allowance for
	Principal		Recorded		loan losses
	balance		investment		allocated
	(in thousands)
With no related allowance recorded:
Residential
One- to four-family	$	982	$	979	$	-
Multi-family		-		-		-
Nonresidential real estate and land		509		503		-
Commercial loans - secured		42		41		-
Commercial loans – unsecured		-		-		-
Consumer and other loans		-		-		-
Total with no related allowance recorded	$	1,533	$	1,523	$	-

With an allowance recorded:
Residential
One- to four-family	$	909	$	716	$	140
Multi-family		-		-		-
Nonresidential real estate and land		707		534		131
Commercial loans - secured		54		52		21
Commercial loans – unsecured		-		-		-
Consumer and other loans		-		-		-
Total with an allowance recorded	$	1,670	$	1,302	$	292

Total	$	3,203	$	2,825	$	292

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans (continued)

The following table presents loans individually evaluated for impairment by class of loans for the six-and three-month periods ended December 31, 2011:

	For the three months ended						For the six months ended
	December 31, 2011						December 31, 2011

	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	recorded		income		interest		recorded		income		interest
	investment		recognized		recognized		investment		recognized		recognized
	(in thousands)						(in thousands)
With no related allowance recorded:
Residential
One- to four-family	$	983	$	17	$	17	$	1,010	$	28	$	28
Multi-family		-		-		-		-		-		-
Nonresidential real estate and land		506		3		3		509		6		6
Commercial loans - secured		43		-		-		44		-		-
Commercial loans – unsecured		-		-		-		-		-		-
Consumer and other loans		-		-		-		-		-		-
Total with no related allowance recorded	$	1,532	$	20	$	20	$	1,563	$	34	$	34

With an allowance recorded:
Residential
One- to four-family	$	747	$	-	$	-	$	840	$	3	$	3
Multi-family		-		-		-		-		-		-
Nonresidential real estate and land		544		-		-		630		-		-
Commercial loans - secured		52		-		-		55		-		-
Commercial loans – unsecured		-		-		-		-		-		-
Consumer and other loans		-		-		-		-		-		-
Total with an allowance recorded	$	1,343	$	-	$	-	$	1,525	$	3	$	3

Total	$	2,875	$	-	$	-	$	3,088	$	37	$	37

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans (continued)

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

	Unpaid				Allowance for
	principal		Recorded		loan losses
	balance		investment		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		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 December 31, 2011 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 six-and three-month periods ended December 31, 2010:

	For the three months ended		For the six months ended
	December 31, 2010		December 31, 2010
	(in thousands)		(inthousands0

Average of individually impaired loans during the period	$	2,648	$	3,074
Interest income recognized during the impairment		19		49
Cash-basis interest income recognized		19		49

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans (continued)

Nonaccrual loans were as follows:

	December 31,		June 30,
	2011		2011
	(in thousands)
Residential real estate
One- to four-family	$	875	$	1,073
Multi-family		574		-
Nonresidential real estate and land		931		646
Commercial loans – secured		86		58
Commercial loans – unsecured		-		-
Consumer and other loans		12		20
	$	2,478	$	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 December 31, 2011:

		30-59		60-89	90 or more
	days		days		days		Total		Loans not
	past due		past due		past due		past due		past due		Total
	(in thousands)
Residential real estate
One- to four-family	$	365	$	187	$	338	$	890	$	72,107	$	72,997
Multifamily		-		-		-		-		8,079		8,079
Nonresidential real estate and land		127		57		389		573		83,950		84,523
Commercial loans – secured		435		-		86		521		20,418		20,939
Commercial loans – unsecured		-		-		9		9		187		196
Consumer and other loans		80		9		-		89		5,836		5,925

Total	$	1,007	$	253	$	822	$	2,082	$	190,577	$	192,659

The following table presents the aging of the recorded investment in past due loans as of June 30, 2011:

		30-59		60-89	90 or more
	days		days		days		Total		Loans not
	past due		past due		past due		past due		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

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans (continued)

Troubled Debt Restructurings:

The Corporation has allocated $142,000 and $125,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2011 and June 30, 2011. The Corporation had not committed to lend additional amounts as of December 31, 2011 and June 30, 2011 to customers whose loans were classified as troubled debt restructurings.

During the six-month period ending December 31, 2011, there were three modifications of loans totaling $218,000 that would be considered troubled debt restructurings. At December 31, 2011 the balance of the loans were $216,000. 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 six-month period ending December 31, 2011.

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 December 31, 2011, one- to four-family troubled debt restructurings totaled $1,117,000 and nonresidential real estate and land troubled debt restructurings totaled $507,000. There were no commercial or consumer troubled debt restructurings.

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.

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.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

5. Loans (continued)

As of December 31, 2011, and based on the most recent analysis performed, the risk category of loans by class is as follows:

					Special
	Not rated		Pass		mention		Substandard		Doubtful		Total
	(in thousands)
Residential real estate
One- to four-family	$	70,812	$	-	$	333	$	1,678	$	174	$	72,997
Multi-family		-		7,406		628		45		-		8,079
Nonresidential real estate and land		-		83,226		165		964		168		84,523
Commercial loans – secured		-		20,802		3		134		-		20,939
Commercial loans – unsecured		-		192		-		4		-		196
Consumer and other loans		5,897		-		21		7		-		5,925

Total	$	76,709	$	111,626	$	1,150	$	2,832	$	342	$	192,659

As of June 30, 2011, and based on the most recent analysis performed, the risk category of loans by class is as follows:

					Special
	Not rated		Pass		mention		Substandard		Doubtful		Total
	(in thousands)
Residential real estate
One- to four-family	$	67,094	$	-	$	641	$	1,765	$	40	$	69,540
Multi-family		-		6,923		46		-		-		6,969
Nonresidential real estate and land		-		78,625		397		595		181		79,798
Commercial loans – secured		-		21,715		113		8		-		21,836
Commercial loans – unsecured		-		79		-		-		53		132
Consumer and other loans		6,068		-		51		-		6		6,125

Total	$	73,162	$	107,342	$	1,248	$	2,368	$	280	$	184,400

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

6. Securities

The amortized cost and fair value of available for sale securities and the related gross unrealized gains recognized in accumulated other comprehensive income were as follows:

	December 31, 2011

			Gross		Gross
	Amortized		unrealized		unrealized		Fair
	cost		gains		losses		value
	(In thousands)
U.S. Government agency obligations	$	1,000	$	2	$	-	$	1,002
Equity securities		2		-		-		2

Total		1,002		2		-		1,004

Mortgage Backed Securities:
Federal National Mortgage Association participation certificates		150		1		-		151
Government National Mortgage Association participation certificates		10,771		109		-		10,880
Total mortgage-backed securities available for sale		10,921		110		-		11,031

Total	$	11,923	$	112	$	-	$	12,035

	June 30, 2011

			Gross		Gross
	Amortized		unrealized		unrealized		Fair
	cost		gains		losses		value
	(In thousands)
U.S. Government agency obligations	$	5,999	$	20	$	-	$	6,019
Equity securities		2		-		-		2

Total		6,001		20		-		6,021

Mortgage Backed Securities:
Federal National Mortgage Association participation certificates		156		1		-		157
Government National Mortgage Association participation certificates		6,069		31		-		6,100
Total mortgage-backed securities available for sale		6,225		32		-		6,257

Total	$	12,226	$	52	$	-	$	12,278

All mortgage backed securities held by the Corporation at December 31, 2011 and June 30, 2011 had underlying collateral of residential real estate.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

6. Securities (continued)

The carrying amount, unrecognized gains and losses, and fair value of securities held to maturity were as follows:

	December 31, 2011

			Gross		Gross
	Carrying		unrecognized		unrecognized		Fair
	amount		gains		losses		value
	(In thousands)
Federal Home Loan Mortgage
Corporation participation certificates	$	49	$	-	$	-	$	49
Total mortgage-backed securities held to maturity	$	49	$	-	$	-	$	49

	June 30, 2011

			Gross		Gross
	Carrying		unrecognized		unrecognized		Fair
	amount		gains		losses		value
	(In thousands)
Federal Home Loan Mortgage
Corporation participation certificates	$	51	$	-	$	-	$	51
Total mortgage-backed securities held to maturity	$	51	$	-	$	-	$	51

No securities were sold during the three or six months ended December 31, 2011 or 2010.

The fair value and carrying amount of debt securities at December 31, 2011 by contractual maturity were as follows. Securities not due at a single maturity date, which consist primarily of mortgage-backed securities, are shown separately. Equity securities were excluded.

	Held to maturity				Available for sale
	Carrying		Fair		Amortized		Fair
	amount		value		cost		value
	(in thousands)

Due in one year or less	$	-	$	-	$	-	$	-
Due from one to five years		-		-		-		-
Due from five to ten years		-		-		-		-
Due after ten years		-		-		1,000		1,002
Mortgage-backed		49		49		10,921		11,031
Total	$	49	$	49	$	11,921	$	12,033

Securities pledged to secure public deposits at December 31, 2011, and June 30, 2011, had carrying amounts of $5.1 million and $5.2 million, respectively.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

6. Securities (continued)

At December 31, 2011, and June 30, 2011, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity. One security had an unrealized loss of $2,000 at December 31, 2011. The decline in fair value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell these U. S. Government agency securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, the Corporation does not consider these securities to be other-than-temporarily impaired at December 21, 2011. There were no securities with unrealized losses at and June 30, 2011.

7. Recent Accounting Developments

In April 2011, the Financial Accounting Standards Board (“FASB”) amended existing guidance for assisting a creditor in determining whether a restructuring is a troubled debt restructuring. The amendments clarify the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. This Accounting Standards Update (“ASU”) clarifies that creditors are precluded from using the effective interest method to determine whether a concession has been granted. In the absence of using the effective interest method, a creditor must now focus on other considerations such as the value of the underlying collateral, evaluation of other collateral or guarantees, the debtor’s ability to access other funds at market rates, interest rate increases and whether the restructuring results in a delay in payment that is insignificant. This guidance is effective for interim and annual reporting periods beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. For purposes of measuring impairment on newly identified troubled debt restructurings, the amendments should be applied prospectively for the first interim or annual period beginning on or after June 15, 2011. The adoption of this guidance did not have a material impact on the Corporation’s consolidated financial statements.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

8. Fair Value Measurement

Fair value is the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the entity’s own assumptions about how market participants would price an asset or liability.

The Corporation determines fair values of securities available for sale by either (i) obtaining quoted prices on nationally recognized securities exchanges, which are Level 1 inputs, or (ii) using matrix pricing, which is a Level 2 input. Matrix pricing is a mathematical technique widely used in the industry to value debt securities that relies on the securities’ relationship to other benchmark quoted securities, rather than relying exclusively on quoted prices for the specific securities.

The fair value of loan servicing rights carried at fair value due to impairment is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income. The Corporation is able to compare the valuation model inputs and results to widely published industry data for reasonableness, resulting in a Level 2 classification.

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches, including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and available income data and result in a Level 3 classification.

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

8. Fair Value Measurement (continued)

Assets Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair value measurements
	at December 31, 2011 Using
			Quoted prices in		Significant
			active markets		other		Significant
			for identical		observable		unobservable
	Carrying		assets		inputs		inputs
	amount		(Level 1 )		(Level 2 )		(Level 3 )
	(in thousands)
Assets:
Available for sale securities
U. S. government agency obligations	$	1,002	$	-	$	1,002	$	-
Equity securities		2		2		-		-
Federal National Mortgage Association participation certificates-residential		151		-		151		-
Government National Mortgage
Association participation certificates-residential		10,880		-		10,880		-

Total securities available for sale	$	12,035	$	2	$	12,033	$	-

	Fair value measurements
	at June 30, 2011 Using
			Quoted prices in		Significant
			active markets		other		Significant
			for identical		observable		unobservable
	Carrying		assets		inputs		inputs
	amount		(Level 1 )		(Level 2 )		(Level 3 )
	(in thousands)
Assets:
Available for sale securities
U. S. government agency obligations	$	6,019	$	-	$	6,019	$	-
Equity securities		2		2		-		-
Federal National Mortgage Association participation certificates-residential		157		-		157		-
Government National Mortgage Association participation certificates-residential		6,100		-		6,100		-

Total securities available for sale	$	12,278	$	2	$	12,276	$	-

All mortgage backed securities held by the Corporation at December 31, 2011 and June 30, 2011, had underlying collateral of residential real estate

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

8. Fair Value Measurement (continued)

Assets Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:

	Fair value measurements
	at December 31, 2011 Using
	Quoted prices in		Significant
	active markets		other		Significant
	for identical		observable		unobservable
	assets		inputs		inputs
	(Level 1 )		(Level 2 )		(Level 3 )
	(in thousands)

Assets:
Loan servicing rights	$	-	$	419	$	-
Impaired loans, net of allowance
Residential one-to-four-family		-		-		576
Nonresidential real estate and land		-		-		403
Commercial loans – secured		-		-		31
Total	$	-	$	419	$	1,010

The following impairment charges were recognized during the three and six months ended December 31, 2011:

Impaired loan servicing rights, which are carried at lower of cost or fair value based on stratifying rights into groupings, were written down to a fair value of $419,000, resulting in a valuation allowance of $52,000. Net charges of $18,000 and $10,000 were included in earnings for the three and six months ended December 31, 2011, respectively. A net benefit of servicing rights totaling $290,000 was carried at amortized cost.

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $2.83 million, with a valuation allowance of $292,000, resulting in an additional provision for loan losses of $28,000 and a reduction in the provision for loan losses of $276,000 for the respective three-and six-month periods ended December 31, 2011.

	Fair value measurements
	at June 30, 2011 Using
	Quoted prices in		Significant
	active markets		other		Significant
	for identical		observable		unobservable
	assets		inputs		inputs
	(Level 1 )		(Level 2 )		(Level 3 )
	(in thousands)

Assets:
Loan servicing rights	$	-	$	97	$	-
Impaired loans, net of allowance
Residential one-to-four-family		-		-		601
Nonresidential real estate and land		-		-		365
Commercial loans – secured		-		-		40
Total	$	-	$	97	$	1,006

Index

FFD Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six-and three-month periods ended December 31, 2011 and 2010

8. Fair Value Measurement (continued)

The following impairment charges were recognized during the year ended June 30, 2011:

Impaired loan servicing rights, which are carried at the lower of cost or fair value based on stratifying rights into groupings, were written down to a fair value of $97,000, resulting in a valuation allowance of $41,000. A net benefit of $67,000 from the recovery of servicing rights fair value was included in earnings for the year ending June 30, 2011. Servicing rights totaling $635,000 were carried at amortized cost.

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $1.57 million, with a valuation allowance of $568,000, resulting in an additional provision for loan losses of $456,000 for the year ended June 30, 2011.

Carrying amount and estimated fair values of financial instruments at period end were as follows:

	December 31, 2011						June 30, 2011
	Carrying			Fair			Carrying			Fair
	amount			value			amount			value
	(in thousands)

Financial assets
Cash and cash equivalents	$	22,567		$	22,567		$	16,296		$	16,296
Investment Securities		1,004			1,004			6,021			6,021
Mortgage-backed securities		11,080			11,080			6,308			6,308
Loans, net, including loans held for sale		191,472			191,831			182,226			182,004
Federal Home Loan Bank stock		2,422			n/a			2,422			n/a
Accrued interest receivable		529			529			515			515

Financial liabilities
Deposits	$	(199,230	)	$	(200,830	)	$	(185,043	)	$	(187,265	)
Federal Home Loan Bank advances		(12,949	)		(13,518	)		(13,137	)		(13,667	)
Other borrowed funds		(566	)		(566	)		(630	)		(630	)
Accrued interest payable		(113	)		(113	)		(118	)		(118	)

The methods and assumptions used to estimate fair value are described as follows:

Carrying amount is the value of cash and is the estimated fair value for cash equivalents, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair value of debt is based on current rates for similar financing. It was not practicable to determine the fair value of Federal Home Loan Bank (“FHLB”) stock due to restrictions placed on its transferability. The fair value of off-balance-sheet items is not considered material.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

FFD Financial Corporation

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements contained in this Form 10-Q that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties, and may address our financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements may generally be identified by the words “may,” “expected,” “anticipated,” “estimated,” “intends,” “believes,” “plans,” “will,” “would,” “should,” “could,” “might,” “can,” or similar words. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to:

general economic conditions and weakening in the economy, specifically the real estate market, either nationally or in our market area;

deteriorating credit and asset quality;

political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions;

changes in the interest rate environment and reductions in interest margins;

prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions;

our ability to maintain required capital levels and adequate sources of funding and liquidity;

competitive pressures among depository institutions;

effects of critical accounting policies and judgments;

required changes in accounting policies or procedures;

legislative or regulatory changes or actions, including the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”);

our ability to attract and retain key personnel;

our ability to dividend money from the Bank to the Corporation; and

our reputation in our primary market.

Any forward-looking statements contained in this report, in a report incorporated by reference to this report, or made by our management in other reports and filings, in press releases and in oral statements, involve risks and uncertainties and are subject to change based upon the factors listed above and like items. Actual results could differ materially from those expressed or implied, and therefore the forward-looking statements should be considered in light of these factors.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Business Overview

The Corporation is a unitary savings and loan holding company incorporated in Ohio in 1996. Our primary business is the operation of the Bank, our principal subsidiary. The Bank is a federally chartered savings association established in 1898. In April 2011, First Federal filed an application with the Office of the Comptroller of the Currency (“OCC”) to convert its charter from a federal savings bank to a national bank, which was approved on October 4, 2011. Once the conversion is completed, First Federal will become a national bank, subject to the rules and regulations governing national banks, and will be subject to regulation, supervision and examination by the OCC and FDIC. In connection with First Federal’s conversion to a national bank, FFD applied to the Federal Reserve to become a bank holding company, which was approved on December 2, 2011. FFD will convert from a savings and loan holding company to a bank holding company and will be regulated, supervised and examined by the Fed. These conversions are expected to occur in the third quarter of fiscal 2012.

The Bank is a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve. Its business model emphasizes personalized service, clients’ access to decision makers, solution-driven lending and quick execution, efficient use of technology and the convenience of remote deposit, telephone banking, and online internet banking. It attracts deposits from the general public and uses the deposits, together with borrowings and other funds, primarily to originate commercial and commercial real estate loans, single-family and multi-family residential mortgage loans, vehicle loans, boat loans and home equity lines of credit. The majority of its customers are consumers and small businesses.

Critical Accounting Policies

The financial condition and results of operations for the Corporation presented in the Consolidated Financial Statements, accompanying notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations are, to a large degree, dependent upon the Corporation's accounting policies. The selection and application of these accounting policies involve judgments, estimates and uncertainties that are susceptible to change.

Critical accounting policies are those policies that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Corporation has identified the appropriateness of the allowance for loan losses as a critical accounting policy and an understanding of this policy is necessary to understand the financial statements. Footnote 5 (Loans), and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for the year ended June 30, 2011 provide detail regarding the Corporation's accounting for the allowance for loan losses. There have been no significant changes in the application of accounting policies since June 30, 2011.

Liquidity

The objective of liquidity management is to ensure adequate cash flows to accommodate the demands of customers and provide adequate flexibility for the Corporation to take advantage of market opportunities under both normal operating conditions and under unpredictable circumstances of industry or market stress. Cash is used to fund loan purchases, the maturity of liabilities and, at times, deposit outflows and operating activities. The Corporation's principal sources of funds are deposits, amortization and prepayments of loans, maturities, sales and principal receipt from securities, borrowings, and operations. Management considers the Corporation's asset position to be sufficiently liquid to meet normal operating needs and conditions. The Corporation's earning assets are mainly comprised of loans and investment securities. Management continually strives to obtain the best mix of loans and investments to both maximize yield and insure the soundness of the portfolio, as well as to provide funding for loan demand.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Capital Resources

The Bank is subject to various regulatory capital requirements. Capital adequacy guidelines and prompt corrective-action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Failure to meet various capital requirements can result in regulatory action that could have a direct material effect on the Corporation's financial statements. The Bank exceeded the regulatory requirements to be “well capitalized” at December 31, 2011. Management is not aware of any matters occurring subsequent to December 31, 2011 that would cause the Bank's capital category to change.

The Bank’s actual and required capital amounts (in thousands) and ratios are presented below for December 31, 2011 and at fiscal year end.

											To Be Well
						Required					Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	As of December 31, 2011
Total capital to risk weighted assets	$	21,382		12.26	%	$	13,947		8.00	%	$	17,434		10.00	%

Tier 1 (core) capital to risk weighted assets		19,544		11.21	%		6,974		4.00	%		10,460		6.00	%

Tier 1 (core) capital to adjusted assets		19,544		8.33	%		9,382		4.00	%		11,727		5.00	%

Tangible capital (to adjusted total assets)		19,544		8.33	%		3,518		1.50	%		N/A		N/A

											To Be Well
						Required					Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	As of June 30, 2011
Total capital to risk weighted assets	$	20,794		12.43	%	$	13,388		8.0	%	$	16,735		10.0	%

Tier 1 (core) capital to risk weighted assets		19,137		11.44	%		6,694		4.0	%		10,041		6.0	%

Tier 1 (core) capital to adjusted assets		19,137		8.72	%		8,779		4.0	%		10,973		5.0	%

Tangible capital (to adjusted total assets)		19,137		8.72	%		3,292		1.50	%		N/A		N/A

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

General

The Corporation’s net income is dependent primarily on net interest income, which is the difference between the interest income earned on loans and securities and the interest paid on deposits and borrowed funds. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. Net income is also affected by, among other things, loan fee income, provisions for loan losses, service charges, gains on loan sales, operating expenses, and franchise and income taxes. Operating expenses principally consist of employee compensation and benefits, occupancy, and other general and administrative expenses. In general, results of operations are significantly affected by overall economic and competitive conditions, particularly changes in market interest rates, government policies, and actions of regulatory authorities. Future changes in applicable laws, regulations or government policies may also materially impact our performance.

Tuscarawas County and Holmes County in the Bank's primary market area had 7.3% and 5.2% unemployment at December 31, 2011, respectively. This compares favorably to the State of Ohio’s unemployment rate of 7.6% for December 2011. In this market area, however, residential real estate sales and construction remain relatively soft. Commercial loan demand is showing signs of improvement and overall loan demand was stronger than in prior quarters. Tuscarawas County, and to a lesser extent Holmes County, is experiencing an elevated level of oil and natural gas related economic activity related to the Marcellus Shale and Utica Shale gas and oil reserves.

On July 21, 2010, President Obama signed Dodd-Frank into law. Dodd-Frank imposes new restrictions and an expanded framework of regulatory oversight on financial institutions, including depository institutions. Because Dodd-Frank requires various federal agencies to adopt a broad range of regulations with significant discretion, many of the details of the new law and the effects it will have on the Corporation and the Bank will not be known for months or even years. Many provisions of Dodd-Frank will not be implemented immediately and will require interpretation and extensive rule making by federal regulators. The Corporation is closely monitoring all relevant sections of Dodd-Frank to ensure continued compliance with laws and regulations.

Management’s Discussion and Analysis represents a review of the Corporation’s consolidated financial condition and results of operations. This review should be read in conjunction with the Corporation’s Consolidated Financial Statements and related notes.

Discussion of Financial Condition Changes from June 30, 2011 to December 31, 2011

The Corporation’s total assets at December 31, 2011, were $234.7 million, a $15.2 million, or 6.9%, increase from the total at June 30, 2011.

Cash and cash equivalents totaled $22.6 million at December 31, 2011, an increase of $6.3 million, or 38.5%, from the total at June 30, 2011. The increase was primarily a result of deposit growth and proceeds from calls of investment securities available for sale. The Corporation also holds funds in interest-bearing deposits that may in the future be primarily invested in securities or loans.

Investment securities totaled $1.0 million at December 31, 2011, a $5.0 million, or 83.3%, decrease from the total at June 30, 2011, resulting from four investment securities that were called. As a result of purchases and mark to market adjustments, mortgage-backed securities totaled $11.1 million at December 31, 2011, a $4.8 million, or 75.7%, increase from the total June 30, 2010 of $6.3 million. Investments were made in liquid mortgage-backed securities to improve our asset yield and provide liquidity until those funds can be used to originate loans.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Discussion of Financial Condition Changes from June 30, 2011 to December 31, 2011 (continued)

Loans receivable, including loans held for sale, totaled $191.5 million at December 31, 2011, an increase of $9.2 million, or 5.1%, from the June 30, 2011 total. The portfolio of loans secured by one- to four-family residential real estate increased by $3.8 million, or 5.4%, to $73.4 million at December 31, 2011. Loans secured by nonresidential real estate and land totaled $85.7 million at December 31, 2011, an increase of $3.7 million, or 4.5%, from June 30, 2011. Multi-family loans increased by $1.1 million, or 15.6%, to $8.1 million at December 31, 2011. Commercial loans decreased $969,000, or 4.3%, from June 30, 2011 to a total of $21.8 million at December 31, 2011.

Loan originations during the period totaling $55.4 million were substantially offset by principal repayments of $46.7 million, adjustments to the allowance for loan losses and net unamortized fees and costs. During the six-month period ended December 31, 2011, loan originations were comprised of $33.9 million of one- to four-family residential real estate loans, $14.0 million of nonresidential real estate loans, $4.4 million of commercial loans, $1.9 million of consumer loans and $1.2 million of multifamily real estate loans. The increase in one- to four-family residential real estate originations resulted primarily from refinancings, while demand from home buyers remained soft. The increase in nonresidential real estate and land and commercial loans resulted from increased refinancings along with increased demand for commercial loans.

Nonresidential real estate and commercial lending generally involve a higher degree of risk than one- to four-family residential real estate lending due to the relatively larger loan amounts and the effects of general economic conditions on the successful operation of income-producing properties and businesses. The Corporation endeavors to reduce this risk by evaluating the credit history and past performance of the borrower, the location of the real estate, the quality of the management operating the property or business, the debt service ratio, the quality and characteristics of the income stream generated by the property or business and appraisals supporting the real estate or collateral valuation.

The allowance for loan losses totaled $2.1 million at December 31, 2011, a decrease of $44,000, or 2.0%, from June 30, 2011, and represented 1.11% and 1.18% of total loans at those respective dates. The decrease resulted from charge-offs of $450,000, of which $304,000 were impaired loans with specific reserves allocated to them in prior periods. The charge-offs were partially offset by provisions of $406,000. An increase of $135,000 in general reserves was recorded on non-impaired loans during the quarter ended December 31, 2011 as compared to the prior quarter, largely in response to loan portfolio growth.

Nonaccrual loans were $2.5 million at December 31, 2011 and $1.8 million at June 30, 2011, which represented 1.29% and .97% of total loans at those respective dates. Non-accruing multifamily residential increased by $574,000, non-residential real estate and land mortgage loans increased by $285,000, commercial loans-secured increased by $28,000, one- to four-family properties secured by first liens decreased by $198,000 and consumer and other loans decreased by $8,000. The decrease in one- to four-family properties was partially due to the resolution of a number of non-performing one- to four-family loans during the period. The increase in non-accruing loans was primarily the result of a change in loan classifications. Delinquent loans to total loans were 1.08% at December 31, 2011 and 1.19% at June 30, 2011. At December 31, 2011, there were no loans past due over 90 days and still on accrual. Management has reviewed these loans for loss exposure and believes they are adequately collateralized in the event of foreclosure. There can be no assurance that increases in nonaccrual and delinquent loans will not occur in future periods.

The composition of the loan portfolio remained relatively the same from June 30, 2011 to December 31, 2011. One- to four-family and multifamily residential real estate and nonresidential real estate and land loans make up most of the portfolio. Impaired loan balances were $2.8 million (with an allowance of $292,000) and $2.5 million (with an allowance of $568,000) at December 31, 2011 and June 30, 2011, respectively. Although management believes that the allowance for loan losses at December 31, 2011, is adequate based upon the available facts and circumstances, there can be no assurance that additions to the allowance will not be necessary in future periods, which could adversely affect the Corporation’s results of operations.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Discussion of Financial Condition Changes from June 30, 2011 to December 31, 2011 (continued)

Prepaid expenses and other assets totaled $984,000 at December 31, 2011, a $122,000, or 11.0%, decrease from the June 30, 2011 balance of $1.1 million. The amortization of prepaid franchise tax, Federal Deposit Insurance Corporation (“FDIC”) insurance premiums and promotional expense accounted for substantially all of the decrease and were partially offset by increases in insurance, service contracts and other operating accounts.

Deposits totaled $199.2 million at December 31, 2011, a $14.2 million, or 7.7%, increase from total deposits at June 30, 2011. This increase was attributable to deposit growth at the Bank’s branches resulting from what management believes is our strong banking franchise and reputation in the Bank’s market. Our customers also moved funds into insured deposit accounts from uninsured investment vehicles, such as stocks and mutual funds, further increasing liquidity. We also experienced the continued growth of the Kasasa© program that is designed to attract lower cost transactional deposit relationships, allowing us to reduce reliance on time deposits. The Kasasa© program has an added benefit of enhancing non-interest income through increased point of sale transaction activity. We also believe that some deposit growth may be attributable to elevated mineral rights leasing payments to land owners related to the Marcellus Shale and Utica Shale natural gas and oil reserves.

FHLB advances decreased $188,000 due to principal repayments from June 30, 2011 to December 31, 2011. Other borrowed money, consisting of a line of credit with another financial institution, decreased $64,000 from June 30, 2011 to December 31, 2011.

Other liabilities totaled $1.9 million at December 31, 2011, a $310,000 increase from the June 30, 2011 balance of $1.6 million. The increase was primarily due to an increase of $259,000 in custodial payments processing accounts.

Shareholders’ equity totaled $19.5 million at December 31, 2011, an increase of $561,000, or 3.0%, from June 30, 2011. The increase was primarily due to net earnings of $822,000, and an increase in the unrealized gain on securities designated as available for sale of, net of tax, totaling $39,000, which were partially offset by dividends of $345,000.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Comparison of Operating Results for the six-Month Periods Ended December 31, 2011 and 2010

General

The Corporation’s net earnings totaled $822,000 for the six months ended December 31, 2011, an increase of $91,000, or 12.5%, from the net earnings of $731,000 recorded in the comparable period in 2010. The increase in net earnings resulted from an increase of $245,000, or 6.5%, in net interest income and a decrease of $126,000, or 23.7%, in the provision for losses on loans, which were partially offset by a decrease of $80,000, or 11.3%, in noninterest income and increases of $153,000, or 5.4%, in noninterest expenses and $47,000, or 12.3%, in the provision for federal income taxes.

Net Interest Income

The Bank experienced an increase in net interest income in the current period as a result of its efforts to grow income generating assets and the favorable re-pricing of time deposits.

Total interest income decreased $65,000, or 1.2%, to $5.3 million for the six months ended December 31, 2011, compared to the same period in 2010. The decrease was due primarily to an average 56 basis point decrease in yield, which was partially offset by a $19.8 million increase in the average balances outstanding. Interest income on loans decreased by $80,000, or 1.5%, due to a 27 basis point decrease in yield, which was partially offset by an increase of $6.1 million, or 3.4%, in the average loan portfolio balance outstanding. Interest income on investment securities decreased by $61,000, or 63.0%, due to a 52 basis point decrease in yield and a $3.7 million, or 55.3%, decrease in the average balance outstanding. Interest income on interest bearing deposits increased $1,000, or 1.8%, to a total of $58,000 for the six-months ended December 31, 2011, due to a $9.5 million, or 121.6%, increase in the average balance outstanding, which was partially offset by a 79 basis point decrease in yield. Interest income on mortgage-backed securities increased by $75,000, due to an increase of $7.9 million in the average balance outstanding. Mortgage-backed securities totaling $5.0 million were purchased in the first quarter of fiscal 2012. This purchase was a strategy to improve asset yield and diversify our investment portfolio from step-up callable agency securities to increase the cash flow of the investment portfolio.

Total interest expense decreased by $310,000, or 19.3%, to $1.3 million for the six months ended December 31, 2011, compared to the 2010 period. Interest expense on deposits decreased by $263,000, or 20.2%, due to a 42 basis point decrease in the average cost of deposits, to 1.08% for the 2011 period, which was partially offset by a $19.3 million, or 11.1%, increase in the average balance outstanding. Interest expense on borrowings decreased by $47,000, or 15.4%, due to a $537,000, or 3.8%, decrease in the average balance outstanding, and a 53 basis point decrease in the average cost.

As a result of the foregoing, net interest income increased by $245,000, or 6.5%, for the six months ended December 31, 2011, compared to the same fiscal period in 2010. The interest rate spreads were 3.62% and 3.71%, and the net interest margins were 3.69% and 3.81%, for the six-month periods ended December 31, 2011 and 2010, respectively. The decrease in the interest rate spread and net interest margin have been the result of interest earning assets re-pricing to lower rates faster than interest costing liabilities and liquid assets having lower yields.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Comparison of Operating Results for the Six-Month Periods Ended December 31, 2011 and 2010 (continued)

Provision for Losses on Loans

The Corporation recorded a $406,000 provision for losses on loans during the six months ended December 31, 2011, and a $532,000 provision for the comparable quarter in 2010. The decrease in the provision for losses on loans was due to management’s assessment of the loan portfolio, delinquency rates, net charge-offs, and current economic conditions. Net charge-offs were $450,000 for the six months ended December 31, 2011 and $95,000 for the comparable six months in 2010. The increase in net charge-offs was primarily attributable to the charge-off of impaired loans which had $304,000 of specific reserves allocated to them in prior periods. The decision to charge-off these loans was due to continued evaluation of the borrower’s ability to pay and economic circumstances. An increase of $232,000 in general reserves was recorded on non-impaired loans during the six months ended December 31, 2011 compared to the prior period largely in response to loan portfolio growth. Although management believes that the provision was adequate at December 31, 2011, there can be no assurance that the loan loss allowance will be adequate to cover losses on nonperforming assets in the future, which could result in additions to the allowance and could adversely affect the Corporation’s results of operations.

Noninterest Income

Noninterest income totaled $628,000 for the six months ended December 31, 2011, a decrease of $80,000, or 11.3%, from the 2010 total. Net gain on sale of loans decreased by $114,000, or 21.3%, to $421,000 for the six months ended December 31, 2011, compared to $535,000 for the six months ended December 31, 2010. The decrease in gain on sale of loans resulted from a 35.7% decrease in loans sold into the secondary mortgage market due to a significant decline in the number of newly originated and refinanced loans in the current economic climate. Service charges on deposit accounts increased by $30,000, or 16.7%, to $210,000 for the six months ended December 31, 2011, compared to $180,000 for the same period in 2010. Mortgage servicing revenue increased $5,000 in 2011 compared to the same period in 2010.

Noninterest Expense

Noninterest expense totaled $3.0 million for the six months ended December 31, 2011, an increase of $153,000, or 5.4%, compared to the same period in 2010. The increase in noninterest expense includes increases of $80,000, or 6.3%, in employee and director compensation and benefits, $41,000, or 30.4%, in professional and consulting fees, $48,000, or 13.2%, in other operating expense, $33,000, or 36.7%, in advertising and $20,000, or 6.9%, in occupancy and equipment expense, which were partially offset by a decrease of $81,000, or 65.3%, in FDIC insurance expense. The increase in employee compensation was due to additional staffing for operations and normal merit increases. The increase in professional and consulting fees resulted from consulting fees for analysis and contract negotiations for data processing services and one-time costs related to our pending conversion from a thrift charter to a national bank charter and bank holding company. The increase in advertising was partially the result of marketing the Kasasa© checking and savings program. Effective April 1, 2011, the FDIC changed to an asset based assessment from a deposit based assessment for the calculation of FDIC insurance premiums. The Corporation benefitted from the change in the assessment base, which reduced its deposit premiums.

Federal Income Taxes

The Corporation recorded a provision for federal income taxes totaling $429,000 for the six months ended December 31, 2011, an increase of $47,000, or 12.3%, over the same period in 2010. The increase resulted from a $138,000, or 12.4%, increase in earnings before taxes. The Corporation’s effective tax rate was 34.3% for both six-month periods ended December 31, 2011 and 2010, respectively.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Comparison of Operating Results for the Three-Month Periods Ended December 31, 2011 and 2010

General

The Corporation’s net earnings totaled $454,000 for the three months ended December 31, 2011, an increase of $137,000, or 43.2%, from the net earnings of $317,000 recorded in the comparable period in 2010. The increase in net earnings resulted from increases of $96,000, or 4.9%, in net interest income and a decrease of $183,000, or 52.9%, in the provision for losses on loans, which were partially offset by increases of $76,000, or 5.3%, in noninterest expenses and $70,000, or 41.9%, in the provision for federal income taxes.

Net Interest Income

Total interest income decreased $12,000, or 0.5%, to $2.7 million for the three months ended December 31, 2011, compared to the same period in 2010. The decrease was due primarily to an average 57 basis point decrease in yield, which was partially offset by a $22.4 million increase in the average balances outstanding. Interest income on loans decreased by $27,000, or 1.0%, due to a 30 basis point decrease in yield, which was partially offset by an increase of $8.1 million, or 4.4%, in the average loan portfolio balance outstanding. Interest income on investment securities decreased by $32,000, or 80.0%, due to a $5.0 million, or 80.0%, decrease in the average balance outstanding and a 30 basis point decrease in yield. Interest income on interest bearing deposits increased $2,000, or 7.1%, to a total of $30,000 for the three-months ended December 31, 2011, due to a $10.0 million, or 111.4%, increase in the average balance outstanding which was partially offset by a 62 basis point decrease in yield. Interest income on mortgage-backed securities increased by $45,000, due to an increase of $9.4 million in the average balance outstanding.

Total interest expense decreased by $108,000, or 14.5%, to $662,000 for the three months ended December 31, 2011, compared to the three months ended December 31, 2010. Interest expense on deposits decreased by $85,000, or 14.3%, due to a 33 basis point decrease in the average cost of deposits, to 1.04% for the 2011 period, which was partially offset by a $22.4 million, or 12.9%, increase in the average balance outstanding. Interest expense on borrowings decreased by $23,000, or 15.1%, due to a $521,000, or 3.7%, decrease in the average balance outstanding, and a 53 basis point decrease in the average cost.

As a result of the foregoing, net interest income increased by $96,000, or 4.9%, for the three months ended December 31, 2011, compared to the same period in 2010. The interest rate spreads were 3.60% and 3.80%, and the net interest margins were 3.67% and 3.89%, for the three-month periods ended December 31, 2011 and 2010, respectively.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

Comparison of Operating Results for the Three-Month Periods Ended December 31, 2011 and 2010 (continued)

Provision for Losses on Loans

The Corporation recorded a $163,000 provision for losses on loans during the three months ended December 31, 2011, and a $406,000 provision for the comparable quarter in 2010. The decrease in the provision for losses on loans was due to management’s assessment of the loan portfolio, delinquency rates, net charge-offs, and current economic conditions. There were no net charge-offs for the quarter ended December 31, 2011 and $329,000 for the comparable quarter in 2010. An increase of $135,000 in general reserves was recorded on non-impaired loans during the quarter ended December 31, 2011 as compared to the prior quarter largely in response to loan portfolio growth. Although management believes that the provision was adequate at December 31, 2011, there can be no assurance that the loan loss allowance will be adequate to cover losses on nonperforming assets in the future, which could result in additions to the allowance and could adversely affect the Corporation’s results of operations.

Noninterest Income

Noninterest income totaled $331,000 for the three months ended December 31, 2011, an increase of $4,000, or 1.2%, from the 2010 total. Net gain on sale of loans decreased by $17,000, or 6.2%, to $258,000 for the three months ended December 31, 2011, compared to $275,000 for the three months ended December 31, 2010. The decrease in gain on sale of loans resulted from a 22.4% decrease in loans sold into the secondary mortgage market due to a significant decline in the number of newly originated and refinanced loans in the current economic climate. Service charges on deposit accounts increased by $15,000, or 17.4%, to $101,000 for the three months ended December 31, 2011, compared to $86,000 for the same period in 2010. Mortgage servicing revenue decreased $6,000 in 2011 compared to the same period in 2010.

Noninterest Expense

Noninterest expense totaled $1.5 million for the three months ended December 31, 2011, an increase of $76,000, or 5.3%, compared to the same period in 2010. The increase in noninterest expense includes increases of $35,000, or 5.6%, in employee and director compensation and benefits, $30,000, or 16.1%, in other operating expense, $22,000, or 15.6%, in occupancy and equipment expense and $20,000, or 39.2%, in advertising, which were partially offset by decreases of $43,000, or 70.5%, in FDIC insurance expense. The increase in employee compensation was due to additional staffing for operations and normal merit increases. The increase in occupancy and equipment expense was due to increases in maintenance and software contracts expense. The increase in advertising was partially the result of marketing the Kasasa© checking and savings program. Effective April 1, 2011, the FDIC changed to an asset based assessment from a deposit based assessment for the calculation of FDIC insurance premiums. The Corporation benefitted from the change in the assessment base, which reduce its deposit premiums.

Federal Income Taxes

The Corporation recorded a provision for federal income taxes totaling $237,000 for the three months ended December 31, 2011, an increase of $70,000, or 41.9%, over the same period in 2010. The increase resulted from a $207,000, or 42.8%, increase in earnings before taxes. The Corporation’s effective tax rates were 34.3% and 34.2%, for the three-month periods ended December 31, 2011 and 2010, respectively.

ITEM 3:

Quantitative and Qualitative Disclosures About Market Risk

Not required.

Index

FFD Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (CONTINUED)

ITEM 4:

Controls and Procedures

The Corporation’s Chief Executive Officer and Chief Financial Officer have evaluated the Corporation’s disclosure controls and procedures (as defined under Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report . Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Corporation’s disclosure controls and procedures are effective. There were no changes in the Corporation’s internal controls which materially affected, or are reasonably likely to materially effect, the Corporation’s internal controls over financial reporting.

Index

FFD Financial Corporation

PART II

ITEM 1.

Legal Proceedings

None

ITEM 1A:

Risk Factors

Not required

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None

(b)

None

(c)

None

ITEM 3.

Defaults Upon Senior Securities

Not applicable

ITEM 4.

(Removed and Reserved)

ITEM 5.

Other Information

None.

ITEM 6.

Exhibits

31.1

Section 302 Chief Executive Officer certification

31.2

Section 302 Chief Financial Officer certification

32.1

Section 906 Chief Executive Officer certification

32.2

Section 906 Chief Financial Officer certification

101

Interactive Data File

Index

FFD Financial Corporation

SIGNATURES

Pursuant to the requirements 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.

		FFD FINANCIAL CORPORATION

Date:	February 14, 2012	By:	/s/Trent B. Troyer
			Trent B. Troyer
			President and Chief Executive Officer

Date:	February 14, 2012	By:	/s/Robert R. Gerber
			Robert R. Gerber
			Senior Vice President, Treasurer and
			Chief Financial Officer

Ffd Financial (NASDAQ:FFDF)
Historical Stock Chart
Von Okt 2024 bis Nov 2024

Click Here for more Ffd Financial Charts.

Ffd Financial (NASDAQ:FFDF)
Historical Stock Chart
Von Nov 2023 bis Nov 2024

Marktdaten

News

Werkzeuge

Märkte

Entdecken

Hot Features

Follow Feed

Optionen-Flow

Watchlist

FFDF F F D Financial (MM)

News

Kürzlich von Ihnen besucht

Unternehmen

Geschäft

Popular

App herunterladen

Trends

Toplisten

Marktdaten

News

Werkzeuge

Märkte

Entdecken

Hot Features

Follow Feed

Optionen-Flow

Watchlist

FFDF F F D Financial (MM)

News

Kürzlich von Ihnen besucht

Unternehmen

Geschäft

Popular

App herunterladen

BLACK FRIDAY

Sparen Sie bis zu 60%* für Euronext Level 2

1 Jahr 40%, 2 Jahre 50% und *3 Jahre 60%