212121
21
FCFT, Inc.
P O Box 5909
Princeton, West Virginia 24740
August 14, 1997
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of
1934, we are transmitting herewith the attached Form 10-Q.
Sincerely,
FCFT, Inc.
Vivian Perry
Financial Accountant
1
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET
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: June 30,
1997 OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:__________________ to
__________________
Commission File Number:
0-19297
FCFT, INC.
(Exact name of registrant as specified in its charter)
Delaware 55-0694814
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization) Identification
No.)
1001 Mercer Street, Princeton, West Virginia 24740
(Address of principal executive offices) (Zip Code)
(304) 487-
9000
(Registrant's telephone number, including
area code)
Indicate by check mark whether the Registrant (1) has filed all
reports
required to be filed by Section 13 of 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__
Indicate the number of shares outstanding of each of the issuer's
classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31,
1997
Common Stock, $5 Par Value
5,650,205
2
<PAGE>
FCFT, INC.
FORM
10-Q
For the quarter ended
June 30, 1997
<TABLE>
<CAPTION>
INDEX
<S> <C>
PART I. FINANCIAL INFORMATION REFERENCE
Item 1. Financial Statements
Consolidated Balance Sheets June 30, 1997 and
December 31, 1996 4
Consolidated Statements of Income for the
Three and Six Month Periods Ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 6
Consolidated Statements of Changes in Stockholders'
Equity for the Six Months Ended June 30,
1997 and 1996 7
Notes to Consolidated Financial Statements 8-9
Independent Accountants' Report 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of 18
Security Holders
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18-20
SIGNATURES 19
</TABLE>
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FCFT, INC.
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
(Unaudited) June 30 December 31
(Amounts in Thousands except share data) 1997
1996
Assets:
Cash and due from banks $ 33,360 $ 27,369
Federal funds sold 13,901 --
Securities available for sale (amortized cost
of $138,100 June 30, 1997; $135,404
December 31, 1996) 138,817 136,113
Investment securities:
U.S. Treasury securities 5,598 8,247
U.S. Government agencies and corporations 39,127
43,494
States and political subdivisions 53,076 47,532
Other securities 1,056 1,055
Total Investment Securities (market
value, $100,676 June 30, 1997; $101,200
December 31, 1996) 98,857 100,328
Total loans, net of unearned income 615,683 547,703
Less: reserve for possible loan losses 10,197 8,987
Net loans 605,486 538,716
Premises and equipment, net 15,464 12,334
Other real estate owned 2,483 2,225
Interest receivable 6,942 6,341
Other assets 9,503 10,122
Intangible assets 18,350 4,116
Total Assets $943,163 $837,664
Liabilities:
Deposits, non-interest bearing $106,028 $ 89,902
Deposits, interest-bearing 646,724 553,595
Total Deposits 752,752 643,497
Interest, taxes and other liabilities 10,807 11,217
Federal funds purchased -- 25,468
Securities sold under agreement to repurchase 59,142
53,031
Other indebtedness 26,550 15,126
Total Liabilities 849,251 748,339
Stockholders' Equity:
Common stock, $5 par value; 10,000,000 shares
authorized; 5,755,741 issued in 1997 and 1996;
5,650,205 shares outstanding in 1997 and 1996 28,779
23,022
Additional paid-in capital 14,564 20,343
Retained earnings 51,317 46,815
Treasury stock, at cost (1,288) (1,288)
Unrealized gain on securities available for sale 540
433
Total Stockholders' Equity 93,912 89,325
Total Liabilities and Stockholders' Equity $943,163
$837,664
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
FCFT, INC.
CONSOLIDATED
STATEMENTS OF INCOME
<S> <C> <C> <C> <C>
(Unaudited)
(Amounts in Thousands, Except Six
Months Ended Three Months Ended
Share and Per Share Data) June 30 June
30
1997 1996 1997 1996
Interest Income:
Interest and fees on loans $27,815 $24,256 $14,859 $12,472
Interest on securities available for sale4,510 3,638 2,329
1,838
Interest on investment securities:
U.S. Treasury securities 205 451 100 211
U.S. Government agencies and corporations 1,246 1,755
637 858
States and political subdivisions1,343 1,311 710
665
Other securities 42 42 21 21
Interest on federal funds sold 296 114 270 34
Interest on deposits in banks 23 23
8 16
Total Interest Income 35,480 31,590 18,934
16,115
Interest Expense:
Interest on deposits 12,923 11,344 6,947 5,703
Interest on borrowings 1,965 1,719 999
957
Total Interest Expense 14,888 13,063 7,946
6,660
Net Interest Income 20,592 18,527 10,988 9,455
Provision for possible loan losses 1,717 1,036
1,087 581
Net Interest Income After Provision for
Possible Loan Losses 18,875 17,491 9,901
8,874
Non-Interest Income:
Fiduciary income 793 782 454 397
Service charges on deposit accounts 1,472 1,445 806
751
Other charges, commissions and fees 1,412 1,132 715
568
Investment securities losses -- (165) -- --
Other operating income 310 492 188
394
Total Non-Interest Income 3,987 3,686 2,163
2,110
Non-Interest Expense:
Salaries and employee benefits5,686 4,905 3,049 2,481
Occupancy expense of bank premises 779 871 395
435
Furniture and equipment expense691 716 404 354
Other operating expense 4,260 4,268 2,127
2,105
Total Non-Interest Expense 11,416 10,760 5,975
5,375
Income before income taxes 11,446 10,417 6,089 5,609
Income tax expense 3,610 3,116 1,950
1,718
Net Income $ 7,836 $ 7,301 $ 4,139 $
3,891
Net income per common share $ 1.39 $ 1.30 $
.73 $ .69
Weighted average shares outstanding5,650,2055,597,7385,650,205
5,604,746
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
FCFT, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
<S> <C> <C>
(Unaudited)
(Amounts in Thousands) Six Months Ended
June 30 June 30
1997 1996
Cash Flows From Operating Activities:
Net income $ 7,836 $ 7,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses1,717 1,036
Depreciation of premises and equipment 504
461
Amortization of intangibles 228 348
Investment amortization and accretion, net (77)
18
(Gain) Loss on the sale of assets, net (69)
157
Other liabilities, net (3,062) 285
Interest receivable 226 (227)
Other assets, net 1,105 (37)
Other, net 36 (55)
Net cash provided by operating activities 8,444
9,287
Cash Flows From Investment Activities:
Increase (decrease) in cash realized from:
Sales of securities available for sale --
11,016
Maturities and calls of investment securities 14,134
12,701
Maturities and calls of securities available for sale11,214
8,997
Purchase of investment securities(408) (2,915)
Purchase of securities available for sale (3,521)
(17,060)
Loans to customers, net (3,910) (46,241)
Purchase of equipment (481) (41)
Sale of equipment -- 21
Net cash used in acquisitions (9,803) --
Net cash provided by (used in) investment activities
7,225 (33,522)
Cash Flows From Financing Activities:
Increase (decrease) in cash realized from:
Demand and savings deposits, net4,024 (4,485)
Time deposits, net 11,719 4,442
Short-term borrowings, net (19,357) 27,242
Increase in long-term debt 11,500 --
Payment of long-term debt (307) (5)
Acquisition of treasury stock -- (170)
Reissuance of treasury stock -- 1,419
Cash paid in lieu of fractional shares (22)
- --
Cash dividends paid (3,334) (2,580)
Net cash provided by financing activities 4,223
25,863
Net increase in cash and cash equivalents 19,892
1,628
Cash and cash equivalents at beginning of year 27,369
26,174
Cash and cash equivalents at end of quarter $47,261
$27,802
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
FCFT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
(Unaudited) Unrealized
(Amounts in Thousands, Except Gain
(Loss)
Share and Per Share Data) Additional on
Securities
Common Paid-In Retained Treasury Available
Stock Capital Earnings Stock for Sale
Balance beginning of
the period,
January 1, 1996 $23,022 $20,372 $39,320 $(2,646) $392
Net Income -- -- 7,301 -- --
Common dividends
declared ($.46
per common share) -- -- (2,580) -- --
Purchase of 6,375
shares at $26.74
per share -- -- -- (170) --
Reissuance of 59,164 shares
at $24.57 per share -- (33) -- 1,453 --
Unrealized net loss
on securities available
for sale -- -- -- -
- - (1,571)
Balance, June 30, 1996 $23,022 $20,339 $44,041 $(1,363)
$(1,179)
Balance beginning of
the period,
January 1, 1997 $23,022 $20,343 $46,815 $(1,288) $433
Net income -- -- 7,836 -- --
Common dividends
declared ($.59
per common share) -- -- (3,334) -- --
Five-for-four stock split 5,757 (5,779) -- -- --
Unrealized net gain on
securities available
for sale -- -- -- -
- - 107
Balance, June 30, 1997 $28,779 $14,564 $51,317 $(1,288)
$540
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Unaudited Financial Statements
The unaudited consolidated balance sheet as of June 30, 1997 and the
unaudited consolidated statements of income, cash flows and
changes in
stockholders' equity for the periods ended June 30, 1997 and 1996
have been
prepared by the management of FCFT, Inc. In the opinion of
management, all
adjustments (including normal recurring accruals) necessary to
present fairly
the financial position of FCFT, Inc. and subsidiaries at June 30,
1997 and
its results of operations, cash flows, and changes in
stockholders' equity
for the periods ended June 30, 1997 and 1996, have been made.
These
results are not necessarily indicative of the results of
consolidated
operations for the full calendar year.
The consolidated balance sheet as of December 31, 1996 has been
extracted
from audited financial statements included in the Company's 1996
Annual
Report to Shareholders. Certain information and footnote
disclosure normally
included in financial statements prepared in accordance with
generally
accepted accounting principles have been omitted. It is
suggested that these
financial statements should be read in conjunction with the
financial
statements and notes thereto included in the 1996 Annual Report
of FCFT, Inc.
Note 2. Acquisitions
At the close of business on April 9, 1997, FCFT, Inc. (FCFT)
acquired 100%
of the common stock of Blue Ridge Bank (Blue Ridge),
headquartered in Sparta,
North Carolina. Blue Ridge is a $105 million state-chartered
bank with
offices located in Sparta, Elkin, Hays and Taylorsville, North
Carolina.
Pursuant to the Agreement and Plan of merger, FCFT exchanged cash
of
$19.50 for each of Blue Ridge's 1,212,148 common shares. In
conjunction
with the acquisition, Blue Ridge cancelled outstanding stock
options through
the payment of $727,948 representing the difference between
$19.50 and the
respective option prices. Total consideration including the
payment for
cancellation of the options was $24.7 million and resulted in an
intangible
asset of approximately $14.7 million which is being amortized
over a 15 year
period. The acquisition was partially funded with loan proceeds
of $11.5
million the Company borrowed from an outside source. The loan
agreement
has certain covenants that may restrict the payment of dividends
to
stockholders in the event of default. The acquisition was
accounted for under
the purchase method of accounting. Accordingly, results of
operations of Blue
Ridge are included in consolidated results of FCFT from the date
of
acquisition. Subsequent to the merger, Blue Ridge will operate
as a
wholly-owned subsidiary of FCFT, Inc.
The following proforma financial information shows the effect of
the Blue
Ridge Bank acquisition as of the first day in each period
presented:
<TABLE>
<CAPTION>
FCFT, Inc.
Proforma Financial Information
(Amounts in thousands except per share data)
<S> <C> <C> <C> <C>
Six Months Ended Three months ended
June 30 June 30
1997 1996 1997 1996
Net Interest Income $21,878 $20,792 $10,988 $10,625
Net Income $ 7,292 $ 7,611 $ 4,139 $ 4,069
Net Income per common share$ 1.29$ 1.36$ .73$ .73
</TABLE>
On July 2, 1997, First Community Bank , Inc., a subsidiary of
FCFT, Inc.,
entered into a definitive agreement with the Huntington National
Bank
("Huntington"), wherein FCFT, Inc. will acquire a branch of
Huntington
located in Man, West Virginia. This branch acquisition is
anticipated to
close on or before September 25, 1997. Deposits of the branch
total
approximately $50.8 million. Pursuant to this agreement, the
company will
purchase all loans, premises and equipment at book value and in
addition to
assumption of deposit liabilities, will pay a deposit premium
estimated at
$4.4 million, which will be amortized over a 15 year period.
This
acquisition will be accounted for under the purchase method of
accounting;
therefore, consolidated results in future periods after September
25, 1997
will include the operations of the Man branch only from the date
of
acquisition.
8
<PAGE>
At the close of business on July 24, 1997, First Community Bank
of Southwest
Virginia, Inc., formerly Citizens Bank of Tazewell, Inc., the
Virginia
subsidiary of FCFT, Inc., acquired the Clintwood, Virginia branch
of First
Virginia Bank-Mountain Empire; the Pound, Virginia branch of
Premier
Bank-Central, N.A.; and the Fort Chiswell, Virginia branch of
Premier
Bank-South, N.A. The acquisition of these branches added
approximately
$44 million in deposits. The deposit premium paid in this
transaction
totaled approximately $4.5 million and will be amortized over a
15 year
period. This acquisition was accounted for under the purchase
method of
accounting. Accordingly, the consolidated results in future
periods after
July 24, 1997 will include the operations of the Clintwood, Pound
and Fort
Chiswell branches only from the date of acquisition.
On August 1, 1997, First Community Bank of Southwest Virginia,
Inc.,
commenced banking operations at its de-novo branch in Wytheville,
Virginia.
Note 3. Cash Flows
For the six months ended June 30, 1997 and 1996, for purposes of
reporting
cash flows, cash and cash equivalents include cash and due from
banks and
interest-bearing balances available for immediate withdrawal of
$33.4 million
at June 30, 1997 and $26.3 million at June 30, 1996, and federal
funds sold
of $13.9 million at June 30, 1997 and $1.5 million at June 30,
1996.
Note 4. Commitments and Contingencies
The Company is currently a defendant in various actions most of
which involve
lending and collection activities in the normal course of
business, some of
which have remained dormant for a number of years. Certain of
these actions
are described in greater detail in the Company's 1996 Report on
Form 10-K.
While the Company and legal counsel are unable to assess the
outcome of each
of these matters, they are of the belief that the resolution of
these actions
should not have a material adverse affect on the financial
position or
results of operations of the Company.
In the matter of Four Winds Development, Inc., W. Stephen
Melcher, and
E.T. Boggess, plaintiffs vs. First Community Bank and Dave
Shields Company,
Inc., defendants, the settlement and compromise which is
discussed in the
Company's 1996 Annual Report on Form 10-K has been completed and
agreed to by
all parties to the litigation as well as parties to the related
civil matter
and mechanics' lien action. The settlement and release has been
executed by
all parties and has been approved by written order by the
appropriate
Bankruptcy Courts. The litigation was concluded during the
second quarter of
1997 at a net cost of approximately $460,000 to the Company. A
court order
dismissing the civil proceeding in Mercer County, West Virginia
Circuit Court
was issued June 6, 1997. In 1995 reserves in excess of $1
million were
established in response to the verdict in this case and the
Company was able
to reverse $700,000 in litigation reserves during the second
quarter of 1997
as a result of this settlement. This adjustment was reflected as
a reduction
of other operating expenses.
Note 5. Common Stock
In the first quarter of 1997, the Company declared a five-for-
four stock
split. Accordingly, $5.8 million was transferred from additional
paid-in
capital to common stock, representing the par value of the new
shares issued.
All share and per share amounts reported herein have been
adjusted for the
stock split.
9
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
of FCFT, Inc.
We have reviewed the accompanying consolidated balance sheet of
FCFT, Inc.
and subsidiaries as of June 30, 1997, and the related
consolidated statements
of income, changes in stockholders' equity and cash flows for the
three-month
and six-month periods ended June 30, 1997 and 1996. These
financial
statements are the responsibility of the Corporation's
management.
We conducted our review in accordance with standards established
by the
American Institute of Certified Public Accountants. A review of
interim
financial information consists principally of applying analytical
procedures
to financial data and of making inquiries of persons responsible
for
financial and accounting matters. It is substantially less in
scope than an
audit conducted in accordance with generally accepted auditing
standards,
the objective of which is the expression of an opinion regarding
the
financial statements taken as a whole. Accordingly, we do not
express such
an opinion.
Based on our review, we are not aware of any material
modifications that
should be made to such consolidated financial statements for them
to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing
standards, the consolidated balance sheet of FCFT, Inc. and
subsidiaries as
of December 31, 1996, and the related consolidated statements of
income,
changes in stockholders' equity, and cash flows for the year then
ended
(not presented herein); and in our report dated January 30, 1997,
we
expressed an unqualified opinion on those consolidated financial
statements.
In our opinion, the information set forth in the accompanying
consolidated
balance sheet as of December 31, 1996, is fairly stated, in all
material
respects, in relation to the consolidated balance sheet from
which it has
been derived.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
July 25, 1997
10
<PAGE>
FCFT, INC.
PART 1. ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis is provided to address information
about the Company's financial condition and results of operations which is
not otherwise apparent from the consolidated financial statements
incorporated by reference or included in this report. This discussion and
analysis should be read in conjunction with the 1996 Annual Report to
Shareholders and the other financial information included in this report.
RESULTS OF OPERATIONS
The Company reported net income of $7.8 million for the six month
period
ended June 30, 1997, a 7.3% increase over net income of $7.3
million for the
same period in 1996. Earnings per common share between the same
periods
increased 6.9%, from $1.30 to $1.39.
The improvement in earnings for the first half of 1997 can be
primarily
attributed to a $2 million increase in net interest income
compared with the
same period in 1996 including $1.5 million contributed through the
Blue
Ridge acquisition. During the second quarter of 1997, $700,000 in
litigation
reserves, which had been established in 1995, were reversed,
resulting in an
after-tax contribution of $420,000 to net income for the first
half of 1997.
Non-interest income for the six month period ended June 30, 1997
increased
$301,000 over the comparable period in 1996, $143,000 of which was
due to the
Blue Ridge acquisition. Non-interest expense for the six month
period ended
June 30, 1997 increased $656,000 over the comparable period in
1996 with
Blue Ridge contributing $1.2 million for the period since April 9,
1997, the
date of acquisition. Offsetting the impact of Blue Ridge on non-
interest
expense for the first half of 1997 was the $700,000 reversal of
litigation
reserves which is reflected as a reduction in non-interest
expense. The net
contribution by Blue Ridge in its first three months of affiliated
operations
was $371,000. Provision for possible loan losses for the six
month period
ended June 30, 1997 increased $681,000 over the comparable period
in 1996.
Also, the Company's tax position resulted in an increase in the
effective
tax rate from 29.9% through the second quarter of 1996 to the 1997
level of
31.5%. These increases in provision for possible loan losses and
income tax
expense offset a portion of the improvement in earnings during
this period.
The amounts presented for 1996 have been restated to reflect the
effect of
the change in the number of outstanding shares as a result of the
March 31,
1997, 5-for-4 stock split as well as the affiliation with First
Community
Bank of Southwest Virginia, Inc., which was accounted for as a
pooling- of -interests.
Net Interest Income
Net interest income, the largest contributor to earnings, was
$20.6 million
for the first six months of 1997 as compared with $18.5 million
for the
corresponding period in 1996. For the second quarter of 1997, net
interest
income reached $11 million, an increase of 16.2% over the $9.5
million
reported for the second quarter of 1996. Tax equivalent net
interest income
was $21.8 million for the first half of 1997, a $2 million
increase over the
$19.8 million reported for the same period in 1996. The increase
in net
interest income to record levels was the result of increases in
the yield and
average balances of earning assets as well as the contribution of
earning
assets by Blue Ridge. The Company's tax equivalent net interest
margin,
the ratio of tax equivalent net interest income to average earning
assets,
of 5.37% at June 30, 1997 decreased slightly from 5.40% at June
30, 1996.
Loans, the Company's highest yielding asset category, increased,
on average,
$77.2 million ($33.4 million due to the Blue Ridge acquisition) or
15.4%,
comparing the first half of 1997 to the corresponding period in
1996. This
increase in the loan portfolio was funded through increases in
average
deposits of $78.4 million, ($47.3 due to Blue Ridge) and calls and
maturities
of investments. The yield on the loan portfolio was 9.78% for the
first
half of 1997, substantially unchanged from the 9.83% for the same
period in
1996. The yield on securities available for sale improved from
6.60% in 1996
to 6.97% in the first half of 1997. The overall yield on average
earning
assets increased 7 basis points from 8.97% for the six months
ended June 30,
1996 to 9.04% for the corresponding period in 1997.
Market conditions left rates on short-term borrowings, time
deposits, and
short-term deposits, such as interest-bearing demand deposits, and
savings
accounts substantially unchanged, with the cost of these funding
sources
remaining flat during the period.
11
<PAGE>
<TABLE>
<CAPTION>
NET INTEREST INCOME ANALYSIS
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended Six Months Ended
(Unaudited) June 30, 1997 June
30, 1996
(Amounts in Average Interest Yield/Rate Average
Interest Yield/Rate
Thousands) Balance (1) (2) (2) Balance (1) (2) (2)
Earning Assets:
Loans (3)
Taxable $563,900 $27,269 9.75% $487,001 $23,680 9.78%
Tax-Exempt 15,873 83910.66% 15,562 88711.46%
Total 579,773 28,108 9.78% 502,563 24,567 9.83%
Reserve for Possible (9,597) (8,561)
Loan Losses
Net Total 570,176 494,002
Investments Available
for Sale:
Taxable 122,453 4,104 6.76% 102,336 3,204 6.30%
Tax-Exempt 14,329 6258.79% 15,557 6688.63%
Total 136,782 4,729 6.97% 117,893 3,872 6.60%
Investment Securities
Held to Maturity:
Taxable 50,156 1,598 6.42% 71,695 2,280 6.40%
Tax-Exempt 49,408 1,9067.78% 47,134 1,9678.39%
Total 99,564 3,5047.10% 118,829 4,2477.19%
Interest-Bearing Deposits 375 23 12.37% 853 23 5.42%
Federal Funds Sold 10,967 296 5.44% 4,325 114
5.30%
Total Earning Assets817,864 36,6609.04%735,902 32,8238.97%
Other Assets 67,021 52,116
Total $884,885 $788,018
Interest-Bearing Liabilities:
Interest-bearing Demand
Deposits$100,933 1,372 2.74% $ 92,394 1,240 2.70%
Savings Deposits136,6562,082 3.07% 135,298 2,082 3.09%
Time Deposits364,279 9,475 5.25% 308,059 8,021 5.24%
Short-Term Borrowings 63,403 1,360 4.33% 59,273 1,283 4.35%
Other Indebtedness 19,192 5996.29% 15,133 436
5.79%
Total Interest-Bearing 684,463 14,8884.39% 610,157 13,062
4.31%
Liabilities
Demand Deposits 94,365 82,038
Other Liabilities14,564 13,066
Stockholders' Equity 91,493 82,757
Total $884,885 $788,018
Net Interest Earnings $ 21,772 $19,761
Net Interest Spread 4.65% 4.66%
Net Interest Margin 5.37% 5.40%
</TABLE>
(1) Interest amounts represent taxable equivalent results for
the first six months of 1997 and 1996.
(2) Fully Taxable Equivalent-using the statutory rate of 35%.
(3) Non-accrual loans are included in average balances
outstanding with no related interest income.
12
<PAGE>
Provision and Reserve for Possible Loan Losses
In order to maintain a balance in the reserve for possible loan
losses which
is sufficient to absorb potential loan losses, charges are made
to the
provision for possible loan losses (provision). The provision
for possible
loan losses was $1.7 million for the first half of 1997 compared
with $1.0
million for the corresponding period in 1996.
Net charge-offs for the first half of 1997 were $1.7 million as
compared
to $605,000 for the corresponding period in 1996. Expressed as a
percentage
of loans, net charge-offs were .27% for the six month period
ended June 30,
1997 and .11% for the corresponding period in 1996. The increase
in net
charge offs between the two periods include the impact of
elevated losses
in the company's credit card division, indirect auto lending and
a larger
charge off of $276,000 on a commercial account bankruptcy.
The reserve for possible loan losses totaled $10.2 million at
June 30, 1997
and $9 million at December 31, 1996 resulting in reserve to loan
ratios of
1.66% and 1.64% for the respective periods.
The coverage ratio represents the percentage of non-performing
loans covered
through available reserves. As of June 30, 1997, this ratio was
103.6% as
compared to 124.1% at June 30, 1996 and 143.7% at December 31,
1996.
Management continually evaluates the adequacy of the reserve for
possible
loan losses and makes specific adjustments to it based on the
results of risk
analysis in the credit review process, the recommendation of
regulatory
agencies, and other factors, such as loan loss experience and
prevailing
economic conditions. Management considers the level of reserves
adequate
based on the current risk profile in the loan portfolio.
However, there can
be no assurance that the Company will not sustain losses in
future periods,
which could be substantial in relation to the size of the
allowance at June
30, 1997.
Non-Interest Income
Non-interest income consists of all revenues which are not
included in
interest and fee income related to earning assets. Total non-
interest income
increased $301,000, or 8.2% from $3.7 million for the six months
ended June
30, 1996 to $4 million for the corresponding period in 1997. A
loss of
$165,000 on the sale of investment securities is included in the
1996
operating results as the Company repositioned a portion of its
available for
sale investment portfolio for improved performance. In addition,
1997
results for the first six months reflected an increase of
$290,000 in credit
card fees due to continued growth in the credit card portfolio.
Non-interest income for the second quarter of 1997 remained
substantially
unchanged, increasing only $53,000 from the comparable period one
year
earlier. Included in second quarter results for 1996 was
$295,000 in other
income received from life insurance proceeds. 1997 second
quarter results
reflect the impact of Blue Ridge, which contributed $143,000
while credit
card fees increased $140,000 over second quarter 1996.
Non-Interest Expense
Non-interest expense totaled $11.4 million in the first half of
1997
increasing $656,000 over the corresponding period in 1996. This
increase was
the net effect of an increase in salaries and employee benefits
of $781,000 or
15.9% and decreases in occupancy expense of $92,000 or 10.6% and
furniture
and equipment expense of $25,000 or 3.5%. Increases in salaries
and
employee benefits include the impact of two branch acquisitions
in September
1996 and a bank acquisition in April 1997 which added
approximately $598,000
in new salary and benefit costs in addition to the impact of
company-wide
salary progression.
In comparing second quarter of 1997 with second quarter of 1996,
non-interest
expense increased $600,000 or 11.2%. 1997 results include Blue
Ridge which
added $1.2 million to the Company's total non-interest expense.
Also, during
the second quarter of 1997, pending litigation was concluded,
enabling the
Company to reverse $700,000 in litigation reserves. This
adjustment was
reflected as a reduction of other operating expenses and
partially offset the
impact of Blue Ridge. Excluding Blue Ridge, second quarter 1997
reflects
an increase of $64,000 in salaries and benefits related primarily
to two
branch acquisitions in September 1996 which added $43,000 in new
salary
and benefit costs.
13
<PAGE>
Income Tax Expense
Income tax expense increased $494,000 from $3.1 million in the
first half of
1996 to $3.6 million for the corresponding period in 1997. This
increase in
taxes is principally the result of the increase in pre-tax income
of $1
million or 9.9% when comparing the first half of 1997 with the
corresponding
period in 1996. The effective tax rates for the first half were
31.5% in
1997 and 29.9% in 1996. For the second quarter of 1997, the
Company
reported $1.9 million in income tax expense, an increase of
$200,000 over
the $1.7 million reported for the same period one year earlier.
The
effective tax rate for second quarter 1997 was 32%, compared to
30.6% for
second quarter 1996.
FINANCIAL POSITION
Securities
Securities totaled $237.7 million at June 30,1997 which
represented an
increase of $1.2 million from December 31, 1996. The acquisition
of Blue
Ridge Bank in the second quarter of 1997 contributed
approximately $22.6
million to the securities portfolio. An offsetting decrease in
the portfolio
as a result of routine maturities was used to reduce the
wholesale funding
from the Federal Home Loan Bank.
Securities available for sale were $138.8 million at June 30,
1997 as
compared to $136.1 million at December 31, 1996. Securities
available for
sale are recorded at their fair market value at June 30, 1997 and
December
31, 1996. The unrealized gain or loss, which is the difference
between book
value and market value, net of related deferred taxes, is
recognized in the
Stockholder's Equity section of the balance sheet. The
unrealized gain
after taxes of $433,000 at December 31, 1996, increased $107,000
to $540,000
at June 30, 1997.
Investment securities, which are purchased with the intent to
hold until
maturity, totaled $98.9 million at June 30, 1997 as compared to
$100.3
million at December 31, 1996. The market value of investment
securities at
June 30, 1997 was 101.8% of book value as compared with 100.9% at
December
31, 1996, reflecting a substantially flat bond market.
Loans
The Company's lending strategy stresses quality growth,
diversified by
product, geography, and industry. A common credit underwriting
structure and
review process is in place throughout the Company.
Total loans increased $68 million from $548 million at December
31, 1996 to
$616 million at June 30, 1997, due primarily to the acquisition
of Blue Ridge
Bank in the second quarter of 1997, which contributed
approximately $66
million to the loan portfolio. The loan to deposit ratio
decreased slightly
from 85% at December 31, 1996 to 82% at June 30, 1997.
Average total loans have increased $77 million over the last
twelve months.
Approximately 43% of the increase was attributable to Blue Ridge
which added
$33 million to the 1997 average balance. The company continues
to
effectively compete with larger regional banks for small business
customers
both in and around the company's primary markets, further
contributing to
loan growth. The loan portfolio continues to be diversified
among loan types
and industry segments. Commercial and commercial real estate
loans represent
the largest portion of the portfolio, comprising $238.7 million
or 39% of
total loans at June 30, 1997 and $246.1 million or 45% of total
loans at
December 31, 1996. Residential real estate loans increased to
$224.1 million
or 36% of the total portfolio at June 30, 1997 as compared to
$171.5 million
or 31% at December 31, 1996. This increase in residential real
estate loans
was due largely to the Blue Ridge affiliation which contributed
$32 million.
While loans to individuals increased in volume from $119.3
million at
December 31, 1996 to $137.5 million at June 30, 1997, the
percentage of the
total portfolio remained level at 22% for both periods.
14
<PAGE>
Non-Performing Assets
Non-performing assets are comprised of loans on non-accrual
status, loans
contractually past due 90 days or more and still accruing
interest and other
real estate owned (OREO). Non-performing assets were $12.3
million at June
30, 1997, or 2% of total loans and OREO, compared with $8.5
million or 1.5%
at December 31, 1996. The following schedule details non-
performing assets
by category at the close of each of the last five quarters:
<TABLE>
<S> <C> <C> <C> <C> <C>
(In Thousands) June 30 March 31 December 31 September 30
June 30
1997 1997 1996 1996 1996
Non-Accrual $7,173 $7,096 $5,476 $6,620 $4,420
Ninety Days Past Due 2,674 5,189 780 4,960 2,635
Other Real Estate Owned 2,483 2,450 2,225 1,969 2,309
$12,330 $14,735 $8,481 $13,549 $9,364
Restructured loans
performing in accordance
with modified terms$ 547$ 394$ 401$ 405 $ 409
</TABLE>
Non-accrual loans and loans ninety days past due increased $1.7
million and
$1.9 million, respectively, when comparing June 30, 1997 and
December 31,
1996. The increase in non-accrual loans is due primarily to
three
relationships. One is a plastic film manufacturer, in the amount
of
$565,000, on which the Company has begun foreclosure proceedings
and is in
the process of liquidation. The Company anticipates that
proceeds from the
sale of repossessed equipment will be sufficient to cover the
debt and
expects no material loss. A second relationship contributing to
the increase
in non-accrual loans is a community hospital, in the amount of
$652,000.
The hospital has filed for relief under Chapter 11 of the U.S.
Bankruptcy
code. This loan is 80% guaranteed by the FHA and is continuing
to make
reduced principal payments. The third relationship which
increased
non-accrual loans is comprised of two restaurant loans amounting
to $425,000,
one of which will soon be liquidated, relieving approximately
$69,000 of the
debt. The other portion, or $356,000 of the debt, is expected to
become
current by the end of the third quarter.
As of June 30, the increase in ninety-days past due relates
primarily to
one relationship, a local car dealership, totaling $1.2 million.
The Company
is currently seeking to secure its position by obtaining
collateral interests
in real property. Subsequent to June 30 and prior to the release
of this
report, this relationship was converted to non-accrual status.
Based upon
new information and the most recent evaluation of collateral and
absent
any favorable developments on this credit, it is likely that it
will be
reduced to a carrying value of $303,000, resulting in a $819,000
charge to
the reserve.
Management believes that the extent of problem loans at June 30,
1997 is
disclosed as non-performing assets in the preceding chart.
However, there
can be no assurance that future circumstances, such as further
erosions in
economic conditions and the related potential effect that such
erosions may
have on certain borrowers' ability to continue to meet payment
obligations,
will not lead to an increase in problem loan totals. Management
further
believes that non-performing asset carrying values will be
substantially
recoverable after taking into consideration the adequacy of
applicable
collateral and, in certain cases, partial writedowns which have
been taken
and allowances that have been established.
15
<PAGE>
Stockholders' Equity
Total stockholders' equity reached $93.9 million at June 30, 1997
increasing
$4.6 million over the $89.3 million reported for December 31,
1996. The
increase in stockholders' equity was the result of earnings net
of dividends
of $4.5 million. Also contributing to the improvement in equity
was an
increase of $107,000 in the unrealized gain on securities
available for sale,
rising from $433,000 at December 31, 1996 $540,000 at June 30,
1997.
The Federal Reserve's risk based capital guidelines and leverage
ratio
measure capital adequacy of banking institutions. Risk-based
capital
guidelines weight balance sheet assets and off-balance
commitments based on
inherent risks associated with the respective asset types. At
June 30,
1997, the company's risk adjusted capital-to-asset ratio was
13.58% as
compared to 17.02% at December 31, 1996. The company's leverage
ratio at
June 30, 1997 was 8.13% compared with 10.33% at December 31,
1996. Both the
risk adjusted capital-to-asset ratio and the leverage ratio
exceed the
current minimum levels prescribed for bank holding companies of
8% and 3%,
respectively.
Liquidity
The Company maintains a significant level of liquidity in the
form of cash
and due from bank balances ($33.4 million), investment securities
available
for sale ($138.8 million), federal funds sold ($13.9 million),
and Federal
Home Loan Bank of Pittsburgh credit availability of $159.9
million. Cash
advances from the Federal Home Loan Bank of Pittsburgh are
immediately
available for satisfaction of deposit withdrawals, customer
credit needs
and operations of the Company. Investment securities available
for sale
represent a secondary level of liquidity available for conversion
to liquid
funds in the event of extraordinary needs.
16
<PAGE>
FCFT, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) In the matter of Four Winds Development, Inc., W. Stephen
Melcher,
and E. T. Boggess, plaintiffs vs. First Community Bank and Dave
Shields
Company, Inc., defendants, the settlement and compromise which is
discussed
in the Company's 1996 Annual Report on Form 10-K has been
completed and
agreed to by all parties to the litigation as well as parties to
the related
civil matter and mechanics' lien action. The settlement and
release has been
executed by all parties and has been approved by written order by
the
appropriate Bankruptcy Courts. A court order dismissing the
civil proceeding
in Mercer County, West Virginia Circuit Court was issued June 6,
1997. The
net cost of the settlement and compromise to the Company was
approximately
$460,000 after contribution by other defendants and parties and
the Company's
insurance carrier.
Item 2. Changes in Securities
(a) N/A
(b) N/A
Item 3. Defaults Upon Senior Securities
(a) N/A
(b) N/A
Item 4. Submission of Matters to a Vote of Security Holders
(a) N/A
Item 5. Other Information
(a) N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 15 - Letter regarding unaudited interim financial
information
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K regarding the Blue Ridge merger was filed
during the
second quarter of 1997.
17
<PAGE>
August 14, 1997
To the Board of Directors and Stockholders
of FCFT, Inc.
Dear Sirs:
We have made a review, in accordance with standards established
by the
American Institute of Certified Public Accountants, of the
unaudited interim
financial information of FCFT, Inc. and subsidiaries for the
periods ended
June 30, 1997 and 1996, as indicated in our report dated July 25,
1997;
because we did not perform an audit, we expressed no opinion on
that
information.
We are aware that our report referred to above, which is included
in your
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, is
incorporated by reference in Registration Statement No. 33-72616
on Form
S-8 and Registration Statement No. 333-2996 on Form S-4.
We also are aware that the aforementioned report, pursuant to
Rule 436(c)
under the Securities Act of 1933, is not considered a part of the
Registration Statement prepared or certified by an accountant or
a report
prepared or certified by an accountant within the meaning of
Sections 7 and
11 of that Act.
Yours truly,
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
18
<PAGE>
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.
FCFT, INC.
DATE: August 13, 1997
______________________________
James L. Harrison, Sr.
President & Chief Executive Officer
(Duly Authorized Officer)
DATE: August 13, 1997
______________________________
John M. Mendez
Vice President & Chief Financial Officer
(Principal Accounting Officer)
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> $33,153
<INT-BEARING-DEPOSITS> 207
<FED-FUNDS-SOLD> 13,901
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 138,817
<INVESTMENTS-CARRYING> 98,857
<INVESTMENTS-MARKET> 100,676
<LOANS> 615,683
<ALLOWANCE> 10,197
<TOTAL-ASSETS> 943,163
<DEPOSITS> 752,752
<SHORT-TERM> 59,142
<LIABILITIES-OTHER> 10,807
<LONG-TERM> 26,550
0
0
<COMMON> 28,779
<OTHER-SE> 65,133
<TOTAL-LIABILITIES-AND-EQUITY> 943,163
<INTEREST-LOAN> 27,815
<INTEREST-INVEST> 7,346
<INTEREST-OTHER> 319
<INTEREST-TOTAL> 35,480
<INTEREST-DEPOSIT> 12,923
<INTEREST-EXPENSE> 14,888
<INTEREST-INCOME-NET> 20,592
<LOAN-LOSSES> 1,717
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 11,416
<INCOME-PRETAX> 11,446
<INCOME-PRE-EXTRAORDINARY> 11,446
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,836
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.39
<YIELD-ACTUAL> 5.37
<LOANS-NON> 7,173
<LOANS-PAST> 2,674
<LOANS-TROUBLED> 547
<LOANS-PROBLEM> 9,847
<ALLOWANCE-OPEN> 8,987
<CHARGE-OFFS> 2,026
<RECOVERIES> 373
<ALLOWANCE-CLOSE> 10,197
<ALLOWANCE-DOMESTIC> 1,928
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 8,269
</TABLE>
