<PAGE>
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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: 0-26360
FRANKFORT FIRST BANCORP, INC.
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-1271129
- ----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
216 West Main Street, Frankfort, Kentucky 40602
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(502) 223-1638
- ----------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 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
_____ _____
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of May 9, 2000: 1,320,108
Page 1 of 14 pages
1
<PAGE>
<PAGE>
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
--------------------------------------------------------
Item 1 Consolidated Statements of Financial
Condition at March 31, 2000 and June
30, 1999 3
Consolidated Statements of Earnings for
the three months and nine months ended
March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for
the nine months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
-----------------
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults upon Senior Securities 13
Item 4 Submission of Matters to a
Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
<PAGE>
FRANKFORT FIRST BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
<S> <C> <C>
ASSETS
Cash and due from banks $ 493 $ 991
Interest-bearing deposits in other financial
institutions 454 1,600
------- --------
Cash and cash equivalents 947 2,591
Certificates of deposit in other financial
institutions 200 200
Investment securities held to maturity-
at amortized cost, approximate fair market
value of $1,960 and $1,999 as of March 31,
2000 and June 30, 1999 1,975 2,004
Loans receivable - net 134,540 131,639
Office premises and equipment - at
depreciated cost 1,472 1,477
Federal Home Loan Bank stock - at cost 2,011 1,621
Accrued interest receivable on loans 380 367
Accrued interest receivable on investments
and interest-bearing deposits 13 39
Prepaid expenses and other assets 56 127
Prepaid federal income taxes 249 170
Deferred federal income taxes 36 87
-------- --------
Total assets $141,879 $140,322
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 83,136 $ 86,254
Advances from the Federal Home Loan Bank 38,425 30,878
Other borrowed money 50 284
Advances by borrowers for taxes and insurance 186 308
Accrued interest payable 62 79
Other liabilities 1,271 1,253
-------- --------
Total liabilities 123,130 119,056
Shareholders' equity
Preferred stock, 500,000 shares
authorized, $.01 par value;
no shares issued -- --
Common stock, 3,750,000 shares authorized,
$.01 par value; 1,672,443 shares issued 17 17
Additional paid-in capital 5,876 5,876
Retained earnings - restricted 18,337 18,166
Less 352,335 and 173,940 shares of
treasury stock-at cost (5,481) (2,793)
-------- --------
Total shareholders' equity 18,749 21,266
-------- --------
Total liabilities and shareholders'
equity $141,879 $140,322
======== ========
Book value per share $ 14.20 $ 14.19
======== ========
</TABLE>
3
<PAGE>
<PAGE>
FRANKFORT FIRST BANCORP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
--------------------- --------------------
2000 1999 2000 1999
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Loans $7,255 $7,039 $2,460 $2,343
Investment securities 79 156 33 36
Interest-bearing deposits
and other 134 83 44 22
------ ------ ------ ------
Total interest income 7,468 7,278 2,537 2,401
Interest expense
Deposits 2,872 2,953 953 969
Borrowings 1,536 1,253 550 411
------ ------ ------ ------
Total interest expense 4,408 4,206 1,503 1,380
------ ------ ------ ------
Net interest income 3,060 3,072 1,034 1,021
Provision for losses on loans 1 -- 1 --
------ ------ ------ ------
Net interest income
after provision for
losses on loans 3,059 3,072 1,033 1,021
Other operating income 32 31 9 11
General, administrative and other
expense
Employee compensation and benefits 709 634 249 221
Occupancy and equipment 125 113 45 37
Federal deposit insurance premiums 30 37 4 13
Franchise and other taxes 81 89 31 26
Data processing 103 119 37 37
Other operating 241 231 80 77
------ ------ ------ ------
Total general, administrative
and other expense 1,289 1,223 446 411
------ ------ ------ ------
Earnings before income taxes 1,802 1,880 596 621
Federal income taxes
Current 562 669 187 225
Deferred 51 (30) 15 (7)
------ ------ ------ ------
Total federal income taxes 613 639 202 218
------ ------ ------ ------
NET EARNINGS $1,189 $1,241 $ 394 $ 403
====== ====== ====== ======
Basic Earnings Per Share $ 0.83 $ 0.79 $ 0.29 $ 0.26
====== ====== ====== ======
Diluted Earnings Per Share $ 0.82 $ 0.78 $ 0.29 $ 0.26
====== ====== ====== ======
</TABLE>
4
<PAGE>
<PAGE>
FRANKFORT FIRST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 1,189 $ 1,241
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of discounts and premiums on loans,
investments, and mortgage backed securities, net 1 (3)
Amortization of deferred loan origination (fees)
costs 8 (39)
Depreciation and amortization 61 54
Provision for losses on loans 1 --
Loans originated for sale -- (80)
Federal Home Loan Bank stock dividends (96) (54)
Increase (decrease) in cash due to changes in:
Accrued interest receivable 13 (5)
Prepaid expenses and other assets 71 51
Accrued interest payable (17) --
Other liabilities 18 3
Federal income taxes
Current (79) (57)
Deferred 51 (30)
-------- --------
Net cash provided by operating activities 1,221 1,081
Cash flows provided by (used in) investing activities:
Purchase of investment securities designated as held
to maturity (1,970) (3,006)
Proceeds from maturity of investment securities 2,000 4,000
Purchase of Federal Home Loan Bank stock (294) --
Loan principal repayments 18,872 27,928
Loan disbursements (21,784) (32,882)
Purchase of office premises and equipment (56) (43)
-------- --------
Net cash used in investing activities (3,232) (4,003)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposit accounts (3,118) 2,192
Proceeds from Federal Home Loan Bank advances 33,200 15,250
Repayment of Federal Home Loan Bank advances (25,653) (12,638)
Proceeds from other borrowed money 1,877 --
Repayment of other borrowed money (2,111) --
Advances by borrowers for taxes and insurance (122) (127)
Capital distributions paid on common stock (1,018) (1,000)
Acquisition of treasury stock (2,688) (1,109)
-------- --------
Net cash provided by financing activities 367 2,568
-------- --------
Net decrease in cash and cash equivalents (1,644) (354)
Cash and cash equivalents at beginning of period 2,591 1,321
-------- --------
Cash and cash equivalents at end of period $ 947 $ 967
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 640 $ 200
======== ========
Interest on deposits and borrowings $ 4,425 $ 4,221
======== ========
</TABLE>
5
<PAGE>
<PAGE>
FRANKFORT FIRST BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(1) BASIS OF PRESENTATIONS
The accompanying unaudited consolidated financial
statements were prepared in accordance with instructions for
Form 10-Q and therefore do not include all disclosures necessary
for a complete presentation of the statements of financial
condition, statements of earnings, and statements of cash flows
in conformity with generally accepted accounting principles.
However, all adjustments which are, in the opinion of
management, necessary for the fair presentation of the interim
financial statements have been included and all such adjustments
are of a normal recurring nature. The results of operations for
the nine and three month periods ended March 31, 2000 and 1999
are not necessarily indicative of the results which may be
expected for the entire year. These financial statements should
be read in conjunction with the audited financial statements and
the notes thereto included in the Company's Annual Report on
Form 10-K for the year ended June 30, 1999.
(2) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include
the accounts of Frankfort First Bancorp, Inc. (the Company) and
First Federal Savings Bank of Frankfort (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 which totaled
1,434,424 and 1,354,096 for the nine and three month periods
ended March 31, 2000, respectively, and 1,577,096 and 1,553,081
for the nine and three month periods ended March 31, 1999,
respectively.
Diluted earnings per share is computed taking into
consideration common shares outstanding and dilutive potential
common shares, i.e. the Company's stock option plan. Weighted-
average common shares deemed outstanding for purposes of
computing diluted earnings per share totaled 1,446,555 and
1,354,096 for the nine and three month periods ended March 31,
2000, respectively, and 1,593,812 and 1,567,887 for the nine and
three month periods ended March 31, 1999, respectively.
Incremental shares related to the assumed exercise of stock
options included in the calculation of diluted earnings per
share totaled 12,131 for the nine month period ended March 31,
2000, and 16,716 and 14,806 for the nine and three month periods
ended March 31, 1999, respectively. For the three month period
ended March 31, 2000, there were no incremental shares related
to the assumed exercise of stock options due to the nondilutive
nature of the options during that period. The Company has
239,492 stock options outstanding of which 234,745 have an
exercise price of $13.80 per share and 4,747 have an exercise
price of $14.91 per share.
(4) EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS
Accounting for Derivative Instruments and Hedging
Activities. In June, 1998, the Financial Accounting Standards
Board (the "FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires entities to
recognize all derivatives in their financial statements as
either assets or liabilities measured at fair value. SFAS No.
133 also specifies new methods of accounting for hedging
transactions, prescribes the items and transactions that may be
hedged, and specifies detailed criteria to be met to qualify for
hedge accounting.
6
<PAGE>
<PAGE>
The definition of a derivative financial instrument is
complex, but in general, it is an instrument with one or more
underlyings, such as an interest rate or foreign exchange rate,
that is applied to a notional amount, such as an amount of
currency, to determine the settlement amount(s). It generally
requires no significant initial investment and can be settled
net or by delivery of an asset that is readily convertible to
cash. SFAS No. 133 applies to derivatives embedded in other
contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.
SFAS No. 133, as amended by SFAS No. 137, is effective for
fiscal years beginning after June 15, 2000. On adoption,
entities are permitted to transfer held-to-maturity debt
securities to the available-for-sale or trading category without
calling into question their intent to hold other debt securities
to maturity in the future. SFAS No. 133 is not expected to have
a material impact on the Company's financial statements.
7
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information contained herein,
the following discussion contains forward-looking statements
that involve risks and uncertainties. Economic circumstances,
the Company's operations, and the Company's actual results could
differ significantly from those discussed in the forward-looking
statements. Some of the factors that could cause or contribute
to such differences are discussed herein but also include
changes in the economy and interest rates in the nation and the
Company's market area generally.
GENERAL
The principal business of the Bank consists of accepting
deposits from the general public and investing these funds in
loans secured by one- to four-family owner-occupied residential
properties in the Bank's primary market area. The Bank also
invests in loans secured by non-owner occupied one- to four-
family residential properties and some churches located in the
Bank's primary market area. The Bank also maintains an
investment portfolio which includes FHLB stock, U.S. Government
Agency-issued bonds, and other investments.
OTHER MATTERS -- YEAR 2000
In previous filings, the Company has reported on efforts
to ensure a smooth transition of its computer systems to the
Year 2000. As of the date of this report, no malfunctions have
been detected and the Bank has not experienced any problems or
delays in its ability to serve its customers. Likewise, there
has been no detectable interruption in service from the Bank's
primary vendors or utilities. As reported, the Bank has spent
approximately $80,000 on the project but has obtained computer
equipment that will be useful for some years to come.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2000 AND JUNE 30,
1999
ASSETS: The Company's total assets increased from $140.3
million at June 30, 1999 to $141.9 million at March 31, 2000, an
increase of $1.6 million or 1.1%. The increase in total assets
is primarily attributable to an increase in the Company's net
loans receivable which increased from $131.6 million at June 30,
1999 to $134.5 million at March 31, 2000, an increase of $2.9
million or 2.2%.
LIABILITIES: The Company's total liabilities increased by
$4.1 million or 3.4% to $123.1 million at March 31, 2000. The
increase in total liabilities is primarily attributable to an
increase in Advances from the Federal Home Loan Bank
("Advances"). Advances increased from $30.9 million at June 30,
1999 to $38.4 million at March 31, 2000, an increase of $7.5
million or 24.4%. The increase has been utilized to fund new
loans, replace lost deposits and to make dividends to the
Company. The Company, in turn, has repurchased some of its
common stock (see "Stock Repurchase"). Partially offsetting the
increase in Advances was a decrease in deposits, which decreased
by $3.1 million or 3.6% to $83.1 million at March 31, 2000. The
balance of deposits at June 30, 1999 had been inflated somewhat
by a $2.2 million deposit of very short duration.
SHAREHOLDERS' EQUITY: Shareholders' equity decreased by
$2.5 million or 11.8% to $18.7 million at March 31, 2000. This
decrease is a result of the Company's net earnings of $1.2
million less the Company's dividends accrued or paid during the
period of $1.0 million less the acquisition of the Company's own
stock at a cost of $2.7 million (see "Dividends" and "Stock
Repurchase"). The Company's book value per share was $14.20 at
March 31, 2000 compared to $14.19 at June 30, 1999.
8
<PAGE>
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999
NET EARNINGS: The Company's net earnings decreased
$52,000 or 4.2% to $1.2 million for the nine months ended March
31, 2000 compared to the nine months ended March 31, 1999. This
decrease is primarily attributable to an increase in general,
administrative and other expense of $66,000 and a decrease in
net interest income of $12,000. The Company's basic earnings
per share rose 5.1% from $0.79 per share for the nine month
period ended March 31, 1999 to $0.83 per share for the nine
month period ended March 31, 2000. The Company's diluted
earnings per share also rose 5.1% from $0.78 per share for the
nine month period ended March 31, 1999 to $0.82 per share for
the nine month period ended March 31, 2000.
NET INTEREST INCOME: Net interest income decreased
$12,000 or 0.4% to $3.1 million for the nine month period ended
March 31, 2000. The decrease was primarily due to an increase
in total interest expense.
INTEREST INCOME: Interest income increased $190,000 or
2.6% to $7.5 million for the nine month period ended March 31,
2000. This increase was primarily due to an increase in
interest income from loans and interest-bearing deposits and
other. Offsetting these increases was a decrease in interest
income from investment securities. Interest income from loans
increased from $7.0 million for the nine month period ended
March 31, 1999 to $7.3 million for the nine month period ended
March 31, 2000, an increase of $216,000 or 3.1%. The increase in
interest income from loans is attributable to the increase in
volume of the Company's loan portfolio. Interest income from
interest-bearing deposits and other increased from $83,000 for
the nine month period ended March 31, 1999 to $134,000 for the
nine month period ended March 31, 2000, an increase of $51,000
or 61.4%. Interest income from investment securities decreased
from $156,000 for the nine month period ended March 31, 1999 to
$79,000 for the nine month period ended March 31, 2000, a
decrease of $77,000 or 49.4%. Management believes that
generally rates paid on short-term investments and deposits are
less than the rates that can be earned on mortgage loans, and
prefers to use excess funds to either make new loans or reduce
advances.
INTEREST EXPENSE: Interest expense increased from $4.2
million for the nine month period ended March 31, 1999, to $4.4
million for the nine month period ended March 31, 2000, an
increase of $202,000 or 4.8%. This increase was primarily due
to an increase in interest expense on borrowings which increased
$283,000 or 22.6% from $1.3 million for the nine month period
ended March 31, 1999 to $1.5 million for the nine month period
ended March 31, 2000. The increase is chiefly a result of an
increase in the average amount of advances outstanding.
Partially offsetting this increase was a decrease in interest
expense on deposits from $3.0 million for the nine month period
ended March 31, 1999 to $2.9 million for the nine month period
ended March 31, 2000, a decrease of $81,000 or 2.7%. This
decrease is a result of a decrease in the level of deposits and
a 16 basis point reduction in the rate paid on deposits when the
two nine-month periods are compared.
PROVISION FOR LOSSES ON LOANS: The provision for losses
on loans increased slightly with a $1,000 provision for the nine
month period ended March 31, 2000 compared with no provision for
the nine month period ended March 31, 1999. Management
believed, on the basis of its analysis of the risk profile of
the Company's assets, that it was appropriate to increase the
allowance for loan losses to $101,000. In determining the
appropriate provision, management considers a number of factors,
including specific loans in the Company's portfolio, real estate
market trends in the Company's market area, economic conditions,
interest rates, and other conditions that may affect a
borrower's ability to comply with repayment terms. There can be
no assurance that the allowance will be adequate to cover losses
on nonperforming assets in the future.
<PAGE>
OTHER OPERATING INCOME: Other operating income increased
from $31,000 for the nine month period ended March 31, 1999 to
$32,000 for the nine month period ended March 31, 2000. Other
operating income is not a significant component of the Company's
statement of operations.
9
<PAGE>
<PAGE>
GENERAL, ADMINISTRATIVE, AND OTHER EXPENSES: General,
administrative, and other expense increased from $1.2 million
for the nine month period ended March 31, 1999 to $1.3 million
for the nine month period ended March 31, 2000, an increase of
$66,000, or 5.4%. The increase was due to an increase in
employee compensation and benefits and an increase in occupancy
and equipment. Offsetting these increases were decreases in
data processing expenses, franchise and other taxes and Federal
deposit insurance premiums. The increase in employee
compensation and benefits is primarily related to normal
increases in salaries and wages, a reduction in the level of
deferred loan costs and increased costs of health insurance
provided for employees. The decrease in data processing expense
is attributed primarily to year 2000 costs which were charged to
expense in earlier periods and which are nonrecurring.
INCOME TAX: The Company's provision for federal income
taxes decreased from $639,000 for the nine month period ended
March 31, 1999 to $613,000 for the nine month period ended March
31, 2000. The decrease was a result of the decrease in the
Company's pretax earnings. The Company's effective tax rate was
34.0% for each of the nine month periods ended March 31, 2000
and 1999.
NON-PERFORMING ASSETS: At March 31, 2000, the Bank had
approximately $712,000 in loans 90 days or more past due but
still accruing. These delinquent loans represent 0.5% of the
Bank's net loans. On May 10, 2000 one of the delinquent loans
totaling approximately $207,000 was paid off. The Bank had
$427,000 in loans internally classified as Substandard and no
loans classified as Doubtful, or Loss. The Bank has not
charged off any loans during the period. Of the loans
internally classified as Substandard approximately $227,000 were
paid off on May 10, 2000.
DIVIDENDS: On September 15, 1999 the Company announced a
dividend policy whereby it will pay a quarterly cash dividend of
$0.24 per share, per quarter, payable on the 15th day of the
month following the end of each quarter, to shareholders of
record as of the last business day of each quarter. This
represented an increase of $0.02 or 9.1% from the previous
quarterly dividend of $0.22 per share. Although the Board of
Directors has adopted this policy, the future payment of
dividends is dependent upon the Company's financial condition,
earnings, equity structure, capital needs, regulatory
requirements, and economic conditions. The Company last paid a
dividend on January 14, 2000. At March 31, 2000 the Company had
recorded dividends payable of $317,000 for the payment of a
dividend on April 14, 2000.
STOCK REPURCHASES: On October 6, 1999 the Company
announced a plan to purchase up to 73,295 shares of the
Company's common stock, which represented approximately 5% of
the outstanding common stock at that time. That specific
program was concluded on January 13, 2000 when the Company
announced that it had acquired that number of shares at an
average price of $15.15 per share. At the same time it was
announced that the Company's Board of Directors had authorized a
new program for the purchase of up to 5% of the remaining
outstanding shares of common stock. That specific program was
concluded on January 26, 2000 when the Company announced that it
had acquired 72,500 shares at an average price of $15.00 per
share. The Company's Board believes that the repurchase
programs enacted to date have been successful in its goals of
increasing the Company's earnings per share, increasing its
return on equity, and in improving the liquidity for the
Company's stock. The Board will continue to consider stock
repurchases and in the future may enact similar programs
depending on market conditions, interest rates, and the
availability of funds.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
NET EARNINGS: The Company's net earnings decreased $9,000
or 2.2% to $394,000 for the three months ended March 31, 2000
compared to the three months ended March 31, 1999. This decrease
is primarily attributable to an increase in general,
administrative and other expense of $35,000. The Company's
basic earnings per share rose 11.5% from $0.26 per share for the
three month period ended March 31, 1999 to $0.29 per share for
the three month period ended March 31, 2000. The Company's
diluted earnings per share also rose 11.5% from $0.26 per share
for the three month period ended March 31, 1999 to $0.29 per
share for the three month period ended March 31, 2000.
10
<PAGE>
<PAGE>
NET INTEREST INCOME: Net interest income totaled $1.0
million for the three month period ended March 31, 2000, an
increase of $13,000 or 1.3% compared to the 1999 quarter. The
increase was primarily due to an increase in total interest
income.
INTEREST INCOME: Interest income increased from $2.4
million for the three month period ended March 31, 1999 to $2.5
million for the three month period ended March 31, 2000, an
increase of $136,000 or 5.7%. This increase was primarily due
to an increase in interest income on loans and interest-bearing
deposits and other. Offsetting these increases was a decrease
in interest income from investment securities. Interest income
from loans increased from $2.3 million for the three month
period ended March 31, 1999 to $2.4 million for the three month
period ended March 31, 2000, an increase of $117,000 or 5.0%.
The increase is related both to increased volume and yield on
the loan portfolio. The yield on the loan portfolio increased
10 basis points to 7.29% for the three month period ended March
31, 2000 compared to the same period in 1999. Interest income
from interest-bearing deposits and other doubled from $22,000
for the three month period ended March 31, 1999 to $44,000 for
the three month period ended March 31, 2000. Interest income
from investment securities decreased from $36,000 for the three
month period ended March 31, 1999 to $33,000 for the three month
period ended March 31, 2000, a decrease of $3,000 or 8.3%.
Management believes that generally rates paid on short-term
investments and deposits are less than the rates that can be
earned on mortgage loans, and prefers to use excess funds to
either make new loans or reduce advances.
INTEREST EXPENSE: Interest expense increased from $1.4
million for the three month period ended March 31, 1999, to $1.5
million for the three month period ended March 31, 2000, an
increase of $123,000 or 8.9%. This increase was primarily due
to an increase in interest expense on advances which increased
$139,000 or 33.8% from $411,000 for the three month period ended
March 31, 1999 to $550,000 for the three month period ended
March 31, 2000. The increase is chiefly a result of an increase
in the average amount of advances outstanding. Partially
offsetting this increase was a decrease in interest expense on
deposits from $969,000 for the three month period ended March
31, 1999 to $953,000 for the three month period ended March 31,
2000, a decrease of $16,000 or 1.7%.
PROVISION FOR LOSSES ON LOANS: The provision for losses
on loans increased slightly with a $1,000 provision for the
three month period ended March 31, 2000 compared with no
provision for the three month period ended March 31, 1999.
Management believed, on the basis of its analysis of the risk
profile of the Company's assets, that it was appropriate to
increase the allowance for loan losses to $101,000. In
determining the appropriate provision, management considers a
number of factors, including specific loans in the Company's
portfolio, real estate market trends in the Company's market
area, economic conditions, interest rates, and other conditions
that may affect a borrower's ability to comply with repayment
terms. There can be no assurance that the allowance will be
adequate to cover losses on nonperforming assets in the future.
OTHER OPERATING INCOME: Other operating income decreased
from $11,000 for the three month period ended March 31, 1999 to
$9,000 for the three month period ended March 31, 2000. Other
operating income is not a significant component of the Company's
statement of operations.
GENERAL, ADMINISTRATIVE, AND OTHER EXPENSES: General,
administrative, and other expense increased from $411,000 for
the three month period ended March 31, 1999 to $446,000 for the
three month period ended March 31, 2000, an increase of $35,000,
or 8.5%. The increase was primarily due to a $28,000, or 12.7%,
increase in employee compensation and benefits. Offsetting this
increase was a decrease in Federal deposit insurance premiums
expense of $9,000, or 69.2%. The increase in employee
compensation and benefits is primarily related to normal
increases in salaries and wages, a reduction in the level of
deferred loan costs and increased costs of health insurance
provided for employees. The decrease in Federal deposit
insurance premiums expense is attributed to a reduction in the
"FICO" (Financing Corporation) assessment that became effective
January 1, 2000, for Savings Association Insurance Fund ("SAIF")
deposits. The FICO debt service assessment became applicable to
all insured institutions as of January 1, 1997, in accordance
with the Deposit Insurance Act of 1996. Beginning January 1,
2000 the FICO rate is the same for both SAIF and Bank Insurance
Fund ("BIF') insured deposits.
11
<PAGE>
<PAGE>
INCOME TAX: The Company's provision for federal income
taxes decreased from $218,000 for the three month period ended
March 31, 1999 to $202,000 for the three month period ended
March 31, 2000. The decrease was a result of the decrease in
the Company's pretax earnings. The Company's effective tax rate
was 33.9% for the three month period ended March 31, 2000 and
35.1% for the three month period ended March 31, 1999.
12
<PAGE>
<PAGE>
PART II.
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: Financial Data Schedule as of March 31,
2000.
Reports on Form 8-K: None
13
<PAGE>
<PAGE>
SIGNATURE
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.
Frankfort First Bancorp, Inc.
Date: May 10, 2000 /s/ Don D. Jennings
-----------------------------
Don D. Jennings
Vice President
(Authorized Officer)
/s/ R. Clay Hulette
-----------------------------
R. Clay Hulette
Vice President
(Principal Financial and
Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 493
<INT-BEARING-DEPOSITS> 454
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 2,175
<INVESTMENTS-MARKET> 2,160
<LOANS> 134,641
<ALLOWANCE> 101
<TOTAL-ASSETS> 141,879
<DEPOSITS> 83,136
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,569
<LONG-TERM> 38,425
<COMMON> 17
0
0
<OTHER-SE> 18,732
<TOTAL-LIABILITIES-AND-EQUITY> 141,879
<INTEREST-LOAN> 7,255
<INTEREST-INVEST> 79
<INTEREST-OTHER> 134
<INTEREST-TOTAL> 7,468
<INTEREST-DEPOSIT> 2,872
<INTEREST-EXPENSE> 4,408
<INTEREST-INCOME-NET> 3,060
<LOAN-LOSSES> 1
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,289
<INCOME-PRETAX> 1,802
<INCOME-PRE-EXTRAORDINARY> 1,189
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,189
<EPS-BASIC> 0.83
<EPS-DILUTED> 0.82
<YIELD-ACTUAL> 2.95
<LOANS-NON> 0
<LOANS-PAST> 712
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 100
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 101
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 101
</TABLE>
