SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Three Months Ended: Commission File Number:
March 31, 2000 33-27139
FEDERAL TRUST CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-2935028
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1211 Orange Avenue
Winter Park, Florida 32789
-----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number: (407) 645-1201
-----------------------------------------------------
FEDTRUST CORPORATION
(Former name of registrant)
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 quarterly reports), and (2) has been subject to such
filing requirements for the past 90 days:
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date:
Common Stock, par value $.01 per share 4,947,911
- -------------------------------------- ---------------------------
(class) Outstanding at May 10, 2000
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Page
Consolidated Condensed Balance Sheet (unaudited)
March 31, 2000 ......................................... 3
Consolidated Condensed Statements of Operations for the
Three months ended March 31, 2000 and 1999 (unaudited)... 4
Consolidated Condensed Statements of Cash Flows for the
Three months ended March 31, 2000 and 1999 (unaudited)... 5
Notes to Consolidated Condensed Financial Statements (unaudited) 6 - 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................ 12 - 13
PART II. OTHER INFORMATION
Signatures........................................................ 14
2
<PAGE>
<TABLE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
March 31, 2000
Assets (unaudited)
<S> <C>
Cash $ 2,800,904
Interest bearing deposits 2,566,852
Investment securities available for sale 1,917,685
Investment securities held to maturity 6,595,684
Loans receivable, net (net of allowance for loan losses of
$1,501,954) 205,394,274
Accrued interest receivable - Loans 1,383,745
Accrued interest receivable - Securities 103,229
Notes Receivable 25,000
Federal Home Loan Bank of Atlanta stock, at cost 2,500,000
Real Estate owned, net 222,104
Property and equipment, net 1,265,671
Prepaid expenses and other assets 1,517,599
Executive supplemental income plan-cash surrender
value life insurance policies 2,632,366
Deferred income taxes 154,706
-----------
Total $ 229,079,819
===========
Liabilities and Stockholders' Equity
Deposit accounts $ 160,683,738
Official Checks 2,383,212
Federal Home Loan Bank advances 45,300,000
Other Borrowings 1,000,000
Advance payments for taxes and insurance 1,258,657
Accrued expenses and other liabilities 3,764,127
-----------
Total Liabilities $ 214,389,734
-----------
Stockholders' equity:
Common stock, $.01 par value, 5,000,000 shares authorized;
4,947,911 shares issued and outstanding at March 31, 2000 49,479
Additional paid-in capital 15,955,177
Accumulated deficit (1,063,147)
Accumulated other comprehensive loss (251,424)
-----------
Total Stockholders' Equity $ 14,690,085
-----------
Total Liabilities and Stockholders' Equity $ 229,079,819
===========
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
For Three Months Ended March 31, 2000 and 1999
(Unaudited)
Three Months
Ended March 31,
2000 1999
---- ----
Interest income:
<S> <C> <C>
Loans $ 3,958,033 2,967,828
Securities 76,583 65,147
Interest-bearing deposits and other 93,090 75,638
--------- ---------
Total interest income 4,127,706 3,108,613
--------- ---------
Interest expense:
Deposit accounts 1,991,177 1,635,863
Federal Home Loan Bank advances & other
borrowings 656,805 352,947
--------- ---------
Total interest expense 2,647,982 1,988,810
--------- ---------
Net interest income 1,479,724 1,119,803
Provision for loan losses 60,000 60,000
--------- ---------
Net interest income after provision 1,419,724 1,059,803
--------- ---------
Other income:
Fees and service charges 153,219 35,335
Gain on sale of assets 12,917 140,445
Other 226,262 105,067
--------- ---------
Total other income 392,398 280,847
--------- ---------
Other expenses:
Employee compensation & benefits 766,322 588,482
Occupancy and equipment 254,019 208,703
Data processing expense 40,548 37,760
Professional fees 51,295 47,345
FDIC Insurance 20,165 27,540
Other 212,573 167,400
--------- ---------
Total other expense 1,344,922 1,077,230
--------- ---------
Income before income tax 467,200 263,420
Income tax expense 159,572 85,171
--------- ---------
Net income $ 307,628 178,249
========= =========
Per share amounts:
Earnings per share .06 .04
Cash dividends per share 0.00 0.00
Weighted average number of shares outstanding 4,947,911 4,941,547
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 307,628 178,249
Adjustments to reconcile net income to net cash flows from operations:
Depreciation & amortization of property & equipment 110,531 96,269
Amort. (net) of premiums, fees & disc. on loans & securities 4,747 91,986
Provision for loan losses 60,000 60,000
Gain on sale of assets (12,917) (140,445)
Accretion of stock option expense 10,937 10,937
Deferred Income Taxes 305,669 165,105
Executive supplemental income plan (29,893) (24,269)
Cash provided by (used for) changes in:
Accrued interest receivable (91,036) 104,566
Prepaid expenses & other assets (293,456) 727,746
Official checks (595,797) (776,697)
Accrued expenses & other liabilities (647,831) (276,376)
----------- ---------
Net cash (used) provided by operating activities (871,418) 217,071
----------- ---------
Cash flows from investing activities:
Acquisition of office properties and equipment (281,909) (22,978)
Purchase of Federal Home Loan Bank stock (540,000) --
Proceeds collected from loan sales 1,073,792 7,903,003
Reimbursement of real estate owned costs -- 57,392
Addition to real estate owned -- 91,580
Proceeds from sale of real estate owned 73,215 184,869
Proceeds from securities available for sale 5,343 --
Principal collected on loans 13,741,899 10,280,721
Loans originated or purchased (33,611,768) (27,013,772)
------------ -----------
Net cash (used in) investing activities (19,539,428) (8,519,185)
------------ -----------
Cash flows from financing activities:
Increase in deposits, net 7,160,129 10,970,429
Increase (decrease) in Federal Home Loan Bank advances 10,100,000 (5,000,000)
Increase in other borrowings 1,000,000 --
Net increase in advance payments by borrowers for taxes & insurance 450,864 256,271
------------ ----------
Net cash provided by financing activities 18,710,993 6,226,700
------------ ----------
(Decrease) in cash and cash equivalents (1,699,853) (2,075,414)
Cash and cash equivalents at beginning of period 7,067,609 7,165,433
------------ ----------
Cash and cash equivalents at end of period $ 5,367,756 5,090,019
============ ==========
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
5
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements (unaudited)
1. General
Federal Trust Corporation ("Federal Trust" or "Holding Company") is a unitary
savings and loan holding company for Federal Trust Bank ("Bank") a
federally-chartered stock savings bank. Federal Trust and the Bank are
collectively referred to as the "Company". The Company is headquartered in
Winter Park, Florida. Federal Trust is currently conducting business as a
unitary savings and loan holding company, and its principal asset is all of the
capital stock of the Bank. As a unitary holding company, Federal Trust has
greater flexibility than the Bank to diversify and expand its business
activities, either through newly formed subsidiaries or through acquisitions.
The Holding Company's primary investment is the ownership of the Bank. The Bank
is primarily engaged in the business of attracting deposits from the general
public and using these funds with advances from the Federal Home Loan Bank of
Atlanta ("FHLB") to originate one-to-four family residential mortgage loans,
residential consumer loans, multi-family loans, and to a lesser extent,
commercial real estate related SBA loans and consumer loans and also fund bulk
purchases of one-to-four family residential mortgage loans.
The consolidated condensed balance sheet as of March 31, 2000, and the
consolidated condensed statements of operations for the three month periods
ended March 31, 2000 and 1999, and the cash flows for the three month periods
ended March 31, 2000 and 1999, include the accounts and operations of Federal
Trust and all subsidiaries. All material intercompany accounts and transactions
have been eliminated.
In the opinion of management of the Company, the accompanying consolidated
condensed financial statements contain all adjustments (principally consisting
of normal recurring accruals) necessary to present fairly the financial position
as of March 31, 2000, the results of operations for the three month periods
ended March 31, 2000 and 1999, and cash flows for the three month periods ended
March 31, 2000 and 1999. The results of operations for the three month period
ended March 31, 2000 are not necessarily indicative of the results to be
expected for the full year. These statements should be read in conjunction with
the consolidated financial statements included in the Company's Annual Report on
Form 10 - KSB for the year ended December 31, 1999.
2. Summary of Significant Accounting Policies
Comprehensive Income:
The Company's accumulated comprehensive loss is the unrealized loss on
investment securities available for sale. Total comprehensive income for the
three month period ended March 31, 2000 was $324,010, as compared to the three
month period ended March 31, 1999 of $194,122.
3. New Accounting Pronouncements
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FASB 133). This standard, which is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999, requires all
derivatives be measured at fair value and be recognized as assets and
liabilities in the statement of financial position. FASB 133 sets forth the
accounting for changes in fair value of a derivative depending on the intended
use and designation of the derivative. Implementation of FASB 133 is not
expected to have a significant impact on the financial position or results of
operations of the Company. In June 1999, the Financial Accounting Standards
Board issued FASB 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of The Effective Date of FASB 133", which is a one year
deferral of the application of FASB 133. FASB 133 shall be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000.
(continued)
6
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements (unaudited)
4. Loans
The Company's policy is to classify all loans 90 days or more past due as
non-performing and not accrue interest on these loans and reverse all accrued
and unpaid interest, however, a non-performing loan is not considered impaired
if all amounts due including interest are expected to be collected under the
loan's contractual terms. When the ultimate collectibility of an impaired loan's
principal is in doubt, wholly or partially, all cash receipts are applied to
principal. When this doubt does not exist, cash receipts are applied under the
contractual terms of the loan agreement first to interest income and then to
principal. Once the recorded principal balance has been reduced to zero, future
cash receipts are applied to interest income, to the extent that any interest
has been forgone. Further cash receipts are recorded as recoveries of any
amounts previously charged off.
At March 31, 2000, impaired loans amounted to $3.7 million as compared to $2.0
million at March 31, 1999. Included in the allowance for loan losses is $498
thousand related to the impaired loans as compared to $248 thousand at March 31,
1999. The Company measures impairment on collateralized loans using the fair
value of the collateral, and on unsecured loans using the present value of
expected future cash flows discounted at the loan's effective interest rate.
In the first three months of 2000, the average recorded investment in impaired
loans was $2.5 million and $34,225 of interest income was recognized on loans
while they were impaired. All of this income was recognized using a cash basis
method of accounting.
A summary of loans receivable at March 31, 2000 is as follows:
March 31, 2000
Mortgage Loans:
Permanent conventional:
Commercial 16,621,009
Residential 163,473,828
Residential Construction 34,648,698
-----------
Total Mortgage Loans 214,743,535
Commerical loans 288,090
Consumer loans 1,409,772
Lines of credit 1,383,824
-----------
Total loans receivable 217,825,221
Net premium on mortgage loans purchased 1,990,662
Deduct:
Unearned loan origination fees, net of direct loan
origination costs 150,347
Undisbursed portion of loans in process 12,769,308
Allowance for loan losses 1,501,954
-----------
Loans receivable, net 205,394,274
===========
(continued)
7
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements (unaudited)
5. Allowance for Losses
The following is an analysis of the activity in the allowance for loan losses
for the periods presented:
Three Months
Ended March 31,
-----------------------
2000 1999
Balance at beginning of period $ 1,437,913 1,136,056
Provision for loan losses 60,000 60,000
Less Charge-offs -- 9,239
Plus recoveries 4,041 4,258
--------- ---------
Balance at end of period $ 1,501,954 1,191,075
========= =========
Loans Outstanding $205,394,274 160,703,242
Ratio of charge-offs to Loans Outstanding -- .006%
Ratio of allowance to Loans Outstanding .73% .74%
A provision for loan losses is generally charged to operations based upon
management's evaluation of the potential losses in its loan portfolio. During
the quarter ended March 31, 2000, management made a provision of $60,000 based
on its evaluation of the loan portfolio, as compared to the provision of $60,000
made in the quarter ended March 31, 1999. Although the dollar amount of the
allowance was unchanged from the same quarter a year ago, the level of the
allowance for losses decreased as a percentage of loans outstanding due to the
growth in the loan portfolio. Management believes that the allowance is
adequate, primarily as a result of the overall quality of the loans in the
portfolio and the change in the composition of the portfolio to a higher
percentage of residential single family home loans.
6. Supplemental Disclosure of Cash Flow and Non-Cash Investing and Financing
Activities
<TABLE>
Three Months Ended March 31,
2000 1999
---- ----
Cash paid during the period for:
<S> <C> <C>
Interest expense $ 1,107,361 769,832
Income taxes $ - -
Supplemental disclosure of non-cash transactions:
Real estate acquired in settlement of loans $ - 91,580
Market Value adjustment - investment securities available for sale:
Market value adjustment - investments $ 1,200 -
Deferred income tax asset $ 452 -
------------ -------
Unrealized loss on investment securities
available for sale, net $ 748 -
</TABLE>
(continued)
8
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements (unaudited)
7. Real Estate Owned, Net
The following is an analysis of the activity in real estate acquired through
foreclosure for the periods ended:
Three Months
Ended March 31,
------------------
2000 1999
---- ----
Balance at beginning of period $ 295,319 $1,107,295
Acquired through foreclosure -- 91,580
Add: Capitalized costs (net of
insurance recoveries) -- (57,392)
Less: Sale of real estate 73,215 184,869
Less: Chargeoffs -- 9,239
------- ---------
Balance at end of period $ 222,104 $ 947,375
======= =========
8. Investment Securities
At March 31, 2000
Book Value Market Value
Held to maturity:
FHLB Floating Rate Note, 4.55%, due 7/30/03 $ 6,595,684 6,496,875
========= =========
Available for sale:
FNMA ARM Pool 516140, 6.893%, due 08/01/28 1,272,907 1,272,907
FNMA ARM Pool 516141, 7.531%, due 03/01/28 644,778 644,778
--------- ---------
1,917,685 1,917,685
========= =========
The Company's investment in obligations of U.S. government agencies consists of
one dual indexed bond issued by the Federal Home Loan Bank. At March 31, 2000,
the bond had a market value of $6,496,875 and gross unrealized pretax losses of
$503,125. The bond has a par value of $7,000,000 and pays interest based on the
difference between two indices. The one bond held at March 31, 2000, pays
interest at the 10-year constant maturity treasury ("CMT") rate less six month
LIBOR rate plus a contractual amount of 4.0%. During the quarter ended March 31,
2000, the Bank did not purchase or sell any bonds.
9. Advances from Federal Home Loan Bank and Other Borrowings
The following is an analysis of the advances from the Federal Home Loan Bank:
Amounts Outstanding at March 31, 2000:
Maturity Date Rate Amount Type
------------- ---- ------ ----
12/01/00 5.09% 5,000,000 Fixed rate
12/04/00 6.59% 5,300,000 Variable rate
12/04/00 6.29% 5,000,000 Fixed rate
06/05/00 6.12% 5,000,000 Fixed rate
07/05/00 6.26% 5,000,000 Fixed rate
12/18/00 6.59% 5,000,000 Fixed rate
01/04/01 6.48% 5,000,000 Fixed rate
03/05/01 5.96% 5,000,000 Fixed rate
03/17/01 6.70% 5,000,000 Fixed rate
----- ---------
Total 6.23% $45,300,000
===== ==========
(continued)
9
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements (unaudited)
Variable rate advances reprice daily and may be repaid at any time without
penalty. Fixed rate advances incur a prepayment penalty if repaid prior to
maturity, and the interest rate is fixed for the term of the advance.
Amounts Outstanding at:
Month-end Rate Amount
1/31/00 5.98% $ 35,200,000
2/29/00 5.98% 47,200,000
3/31/00 6.23% 45,300,000
The maximum amount of advances outstanding at any month end during the three
month period ended March 31, 2000, was $47,200,000. During the three month
period ended March 31, 2000, average advances outstanding totaled $42.3 million
at an average rate of 6.10%.
Advances from the FHLB are collateralized by a blanket pledge of eligible assets
in an amount required to be maintained so that the estimated value of such
eligible assets exceeds at all times, approximately 133% of the outstanding
advances, and a pledge of all FHLB stock owned by the Bank.
The maximum amount of other borrowings outstanding at any month end during the
three month period ended March 31, 2000, was $1,000,000. During the three month
period ended March 31, 2000, average other borrowings outstanding totaled $.6
million at an average rate of 9.36%.
10. Supervision
Federal Trust and the Bank are subject to extensive regulation, supervision and
examination by the OTS, their primary federal regulator, by the FDIC with regard
to the insurance of deposit accounts and, to a lesser extent, the Federal
Reserve. Such regulation and supervision establishes a comprehensive framework
of activities in which a savings and loan holding company and its financial
institution subsidiary may engage and is intended primarily for the protection
of the Savings Association Insurance Fund administered by the FDIC and
depositors.
On October 3, 1994, Federal Trust and the Bank voluntarily entered into
individual Cease and Desist Orders (collectively, the "Orders") with the OTS.
Federal Trust's Order focused on operating expenses and its financial
relationship with the Bank. The Bank's Order required it to institute and adhere
to programs and policies designed to strengthen its overall lending practices,
primarily in regard to underwriting procedures and credit risk. The Bank's Order
also directed the control of its operating expenses and restricted the payment
of dividends to Federal Trust.
Pursuant to the Orders, both Federal Trust and the Bank established Compliance
Committees that met monthly to review, in detail, the terms of the Orders to
ensure that the Holding Company and the Bank were in compliance with their
respective Orders. Following the Rights and Community Offering in December 1997,
Federal Trust formally requested that the OTS rescind the Bank's growth
restrictions and the Orders. On March 12, 1998, the OTS rescinded the growth
restrictions and on June 1, 1998 the OTS rescinded the Orders.
At the present neither Federal Trust nor the Bank are operating under any
extraordinary regulatory restrictions, agreements or orders.
(continued)
10
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements (unaudited)
11. Branching
On June 23, 1998, the Bank filed an application with the OTS for permission to
open a branch office in Sanford, Florida. Sanford is located in Seminole County
and the proposed branch office is approximately 15 miles northeast of the Bank's
main office in Winter Park, Florida. On August 7, 1998, the Bank received
approval from OTS to open the branch and on October 30, 1998 the branch opened
for business with four employees.
12. Subsidiaries
On May 19, 1999, Federal Trust Bank incorporated a new subsidiary, Vantage
Mortgage Service Center, Inc. (VMSC). On June 1, 1999, Federal Trust Corporation
acquired the fixed assets, consisting of furniture, fixtures and equipment, of
Vantage Mortgage Associates, Inc., a non-affiliated company, located in
Gainesville, Florida for 6,364 shares of Federal Trust Corporation common stock.
The fixed assets were contributed by Federal Trust Corporation to Federal Trust
Bank, who in turn contributed the fixed assets to VMSC. VMSC is engaged
primarily in the origination and sale of residential mortgage loans and all of
the officers and employees of Vantage Mortgage Associates, Inc. accepted
employment with VMSC.
(The remainder of this page left intentionally blank)
(continued)
11
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operation
Results of Operations
Comparison of the Three-Month Periods Ended March 31, 2000 and 1999
General. The Company had a net profit for the three-month period ended March 31,
2000, of $307,628 or $.06 per share, compared to a net profit of $178,249 or
$.04 per share for the same period in 1999. The increase in the net profit was
due primarily to an increase in net interest income, an increase in other
income, offset partially by an increase in other expense.
Interest Income and Expense. Interest income increased by $1,019,093 to
$4,127,706 for the three-month period ended March 31, 2000, from $3,108,613 for
the same period in 1999. Interest income on loans increased to $3,958,033 in
2000 from $2,967,828 in 1999, primarily as a result of an increase in the
average amount of loans outstanding and an increase in the average yield earned
on loans. The increase in the average yield earned on loans is the result of the
overall increase in loan rates. Interest income on the securities portfolio
increased by $11,436 for the three-month period ended March 31, 2000, over the
same period in 1999, as a result of an increase in the yield on securities
owned. Other interest and dividends increased $17,452 during the same three-
month period in 2000 from 1999, as a result of an increase in the average volume
of other interest-bearing assets. Management expects the rates earned on the
portfolio to fluctuate with general market conditions.
Interest expense increased $659,172 during the three-month period ended March
31, 2000, to $2,647,982 from the same period in 1999 due to an increase in the
amount of deposits and borrowings and an increase in interest rates. Interest on
deposits increased to $1,991,177 in 2000 from $1,635,863 in 1999, as a result of
an increase in the amount of, and the rates paid on, deposits, and interest on
FHLB advances and Other Borrowings increased to $656,805 in 2000 from $352,947
in 1999, as a result of an increase in the average amount of, and an increase in
the interest rates paid on, advances and other borrowings outstanding.
Management expects to continue to use FHLB advances and other borrowings as a
liability management tool.
Provisions for Loan Losses. A provision for loan losses is generally charged to
operations based upon management's evaluation of the losses in its loan
portfolio. During the quarter ended March 31, 2000, management made a provision
for loan losses of $60,000 based on its evaluation of the loan portfolio, which
was unchanged from the same period in 1999. There were recoveries of $4,041
during the three-month period ended March 31, 2000, as compared to net
recoveries of $4,258 during the three-month period ended March 31, 1999. Total
non-performing loans at March 31, 2000, were $2,858,623 compared to $1,685,647
at March 31, 1999. The allowance for loan losses at March 31, 2000 was
$1,501,954 or 53% of non-performing loans and .73% of net loans outstanding,
versus $1,191,075 at March 31, 1999, or 71% of non-performing loans and .74% of
net loans outstanding.
Total Other Income. Other income increased from $280,847 for the three-month
period ended March 31, 1999, to $392,398 for the same period in 2000. The
increase in other income was due to an increase of $117,884 in fees and service
charges, an increase of $121,195 in other miscellaneous income, offset partially
by a decrease of $127,528 in gains on the sale of assets. The increase in fees
and service charges was primarily the result of an increase in servicing fees on
loans and increased fees on deposit accounts. During the third quarter of 1999
the Company began servicing approximately 2,800 loans that are owned by other
companies. The increase in other miscellaneous income was attributable primarily
to increased other loan income, resulting from an increase in the amount of
loans originated. The decrease in gains on assets sold was the result of a
decrease in the amount of loans sold during the period.
(continued)
12
<PAGE>
FEDERAL TRUST CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operation
Total Other Expense. Other expense increased to $1,344,922 for the three-month
period ended March 31, 2000, from $1,077,230 for the same period in 1999.
Compensation and benefits increased to $766,322 in 2000, from $588,482 in 1999
due to an increase in staff in the loan department and also the addition of the
mortgage company owned by the Bank in Gainesville, Florida. Occupancy and
equipment expense increased by $45,316 in 2000, to $254,019 due to increases in
office building rent and maintenance expenses, the opening of a loan production
office in New Smyrna Beach in March 1999, and the opening of the mortgage
company in Gainesville in June 1999. Data Processing expense increased by $2,788
due to an increase in the number of loans serviced, and an increase in the
number of deposit accounts. Professional fees increased by $3,950, as a result
of increased professional and regulatory fees, resulting primarily from the
growth of the Company. FDIC Insurance expense decreased by $7,375, as a result
of a decrease in the insurance premium rate paid on deposits in the Bank. Other
miscellaneous expense increased by $45,173 due primarily to increases in loan
expenses related to the increased number of loans originated by the Company and
increases in general and administrative expenses resulting from the growth of
the Company during the year.
(The remainder of this page left intentionally blank)
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused the report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: May 11, 2000
----------------- FEDERAL TRUST CORPORATION
(Registrant)
By: /s/ Aubrey H. Wright, Jr.
--------------------------
Aubrey H. Wright, Jr.
Chief Financial Officer and duly
authorized Officer of the Registrant
14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial
information extracted from the consolidated
balance sheets and the consolidated statements
of operations found on pages and 3 of the
Company's Form 10-Q for the year to date.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 2,801
<INT-BEARING-DEPOSITS> 2,567
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0
0
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</TABLE>
