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, 1999
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 No. 0-26242
FORT THOMAS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 61-1278396
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
25 North Fort Thomas Avenue
Fort Thomas, Kentucky 41075
(Address of principal executive officer) (Zip Code)
(606)441-3302
(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 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 the last practicable date. As of April 12,
1999, there were issued and outstanding 1,474,321 shares of the
Registrant's Common Stock, par value $.01 per share.
<PAGE> 1 of 14
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
Part I. Financial Information Page
- ------------------------------- ----
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
(As of March 31, 1999 (unaudited) and
September 30, 1998) 3
Consolidated Statements of Income for the three
and six months ended March 31, 1999 (unaudited)
and 1998 (unaudited) 4
Consolidated Statements of Cash Flow for the six
months ended March 31, 1999 (unaudited) and 1998
(unaudited) 5
Notes to the Unaudited Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 12
Part II. Other Information
- ---------------------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 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
<PAGE> 2 of 14
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
--------- -------------
(In Thousands Except Share Amounts)
<S> <C> <C>
Assets
Cash and Due from Banks $ 5,585 $ 3,135
Investment Securities - Held to Maturity
- at Amortized Cost 3,000 3,001
- Available for Sale - at Market 741 753
Loans Receivable, Net 90,183 92,795
Office Properties and Equipment - at
Depreciated Cost 581 493
Federal Home Loan Bank Stock (FHLB) - at Cost 901 871
Cash Surrender Value of Life Insurance 1,185 1,159
Real Estate Owned 13 -
Accrued Interest Receivable 838 856
Prepaid and Other Assets 174 112
Deferred Federal Income Tax Asset 445 436
-----------------------
Total Assets $103,646 $103,611
=======================
Liabilities and Stockholders' Equity
Deposits $ 76,763 $ 76,851
Borrowed Funds 12,412 12,526
Advances from Borrowers for Taxes and
Insurance 111 270
Deferred Compensation 574 552
Accrued Interest Payable 79 72
Accrued Federal Income Tax - 6
Other Liabilities 539 621
-----------------------
Total Liabilities 90,478 90,898
-----------------------
Stockholders' Equity
Common Stock, $.01 Par value; 4,000,000
Shares Authorized; 1,573,775 Shares Issued
and 1,474,321 Shares Outstanding 16 16
Additional Paid-In Capital 7,615 7,594
Shares Acquired by Employee Stock Ownership
Plan (ESOP) (447) (498)
MRP Trust (489) (550)
Retained Earnings, Substantially Restricted 7,853 7,531
Treasury Stock (99,454 Shares at Cost) (1,380) (1,380)
-----------------------
Total Stockholders' Equity 13,168 12,713
-----------------------
Total Liabilities and Stockholders'
Equity $103,646 $103,611
=======================
</TABLE>
<PAGE> 3 or 14
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands Except for Share Amounts)
<S> <C> <C> <C> <C>
Interest Income
Interest on Loans $1,969 $2,007 $3,997 $3,984
Interest on Investment Securities 50 47 103 95
Other Interest and Dividends 85 64 168 113
---------------------------------------
Total Interest Income 2,104 2,118 4,268 4,192
---------------------------------------
Interest Expense
Deposits 982 974 2,010 1,945
Long-Term Borrowed Funds 156 157 322 295
---------------------------------------
Total Interest Expense 1,138 1,131 2,332 2,240
---------------------------------------
Net Interest Income 966 987 1,936 1,952
Provision for Loan Losses 12 12 24 24
---------------------------------------
Net Interest Income After Provision
for Loan Losses 954 975 1,912 1,928
---------------------------------------
Other Income
Fees and Charges 19 18 46 39
Other 35 44 68 98
---------------------------------------
Total Other Income 54 62 114 137
---------------------------------------
General and Administrative
Salaries and Employee Benefits 319 305 630 585
Franchise and Other Taxes 47 36 83 72
Federal Insurance Premium 6 11 17 22
Expenses of Premises and Fixed Assets 46 41 95 84
Data Processing and Related Contract
Services 47 46 81 79
Legal, Audit, and Supervisory Exam 97 103 126 155
Other Operating Expense 103 103 196 201
---------------------------------------
Total General and Administrative 665 645 1,228 1,198
---------------------------------------
Income Before Income Tax 343 392 798 867
Federal Income Tax Expense 131 144 291 313
---------------------------------------
Net Income $ 212 $ 248 $ 507 $ 554
=======================================
Comprehensive Income $ 212 $ 248 $ 507 $ 554
=======================================
Earnings Per Share
Basic EPS $ 0.15 $ 0.18 $ 0.36 $ 0.39
=======================================
Fully Diluted EPS $ 0.14 $ 0.17 $ 0.34 $ 0.37
=======================================
</TABLE>
<PAGE> 4 of 14
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-----------------
1999 1998
---- ----
(In Thousands Except Share Amounts)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 507 $ 554
Reconciliation of Net Income with Cash
Flows from Operations:
Provision for Loan Losses 24 24
Depreciation 36 33
Deferred Income Taxes (8) (100)
Amortization (125) (125)
FHLB Stock Dividends (30) (29)
ESOP and Stock Compensation 80 77
Changes In:
Accrued Interest Receivable 18 (47)
Prepaid and Other Assets 8 (24)
Cash Surrender Value of Life Insurance (25) (23)
Deferred Compensation 22 28
Accrued Interest Payable 7 11
Accrued /Prepaid Income Tax (77) 22
Other Liabilities (83) (143)
--------------------
Net Cash Provided by Operating Activities 354 258
--------------------
Cash Flows from Investing Activities
Purchase of Investment Securities (2,000) (1,000)
Maturity of Investment Securities 2,000 2,290
Loan Originations and Repayments, Net 2,559 (2,999)
Principal Received on Debt Security 12 -
Expenses paid for REO - (19)
Proceeds from Sale of REO 143 203
Purchase of Office Properties and Equipment (125) (7)
--------------------
Net Cash Used in Investing Activities 2,589 (1,532)
--------------------
Cash Flows from Financing Activities
Net (Decrease) Increase in Deposits (88) 2,936
Dividends Paid (184) (184)
ESOP Shares Released 52 51
Common Stock Shares Purchased for Treasury - (277)
Advance from Borrowers for Taxes and Insurance (158) (124)
Repayments of Borrowings (4,115) (9,908)
Proceeds of Borrowings 4,000 10,700
--------------------
Net Cash Provided by Financing Activities (493) 3,194
--------------------
Changes in Cash and Cash Equivalents 2,450 1,920
Cash and Cash Equivalents, Beginning of Period 3,135 2,186
--------------------
Cash and Cash Equivalents, End of Period $ 5,585 $ 4,106
====================
</TABLE>
<PAGE> 5 of 14
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Note 1 - Basis of Presentation
Fort Thomas Financial Corporation (the "Corporation") was incorporated
under Ohio law in March 1995 by Fort Thomas Federal Savings and Loan
Association (the "Association") in connection with the conversion of the
Association from a federally chartered mutual savings and loan association
to a federally chartered stock savings bank, known as Fort Thomas Savings
Bank, F.S.B. (the "Bank"), the issuance of the Bank's stock by the
Corporation and the offer and sale of the Corporation's common stock by the
corporation (the "Conversion"). Upon consummation of the Conversion on
June 27, 1995, the Corporation became the unitary holding company for the
Bank.
The accompanying unaudited consolidated financial statements of the
Corporation have been prepared in accordance with instructions to Form 10-
Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
The results of operations for the three and six months ended March 31, 1999
are not necessarily indicative of the results to be expected for the year
ending September 30, 1999. The unaudited consolidated financial statements
and notes thereto should be read in conjunction with the audited financial
statements and notes thereto for the year ended September 30, 1998
contained in the Corporation's 1998 Annual Report.
Note 2 - Earnings Per Share
The average number of common shares used to calculate earnings per share
were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
---------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic Weighted -
Average Shares 1,427,105 1,402,661 1,425,818 1,404,445
Diluted Weighted -
Average Shares 1,493,240 1,482,116 1,499,340 1,482,903
</TABLE>
Note 3 - Impact of Recent Accounting Standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. SFAS No.
130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements and requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of the statement of financial position. Under existing accounting
standards, other comprehensive income shall be classified separately into
foreign currency items, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and equity
securities. The provisions of SFAS No. 130 became effective for fiscal
years beginning after December 15, 1997. The adoption of SFAS No. 130 has
not had a material impact on the disclosure requirements of the
Corporation.
<PAGE> 6 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
At March 31, 1999 and September 30, 1998, the Corporation's total assets
amounted to $103.6 million. Stockholders' equity amounted to $13.2 million
or 12.7% of total assets at March 31, 1999 compared to $12.7 million or
12.3% at September 30, 1998. The increase in stockholders' equity was
primarily due to continued profitable operations partially offset by cash
dividends.
Asset Quality
Loans are placed on nonaccrual status when, in the judgment of management,
the probability of collection of interest is deemed to be insufficient to
warrant further accrual. When a loan is placed on nonaccrual status,
previously accrued but unpaid interest is deducted from interest income.
The Bank does not accrue interest on real estate loans past due 90 days or
more. Loans may be reinstated to accrual status when payments are brought
current and, in the opinion of management, collection of the remaining
balance can be reasonably expected.
The following is a breakdown of loan receivables as of the periods
indicated:
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
------------------- -------------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Real Estate Loans
One-to-Four Family Residential $73,771 77.63% $78,969 81.68%
Multi-Family and Non-Residential 10,111 10.64 11,070 11.45
Land and Construction:
Residential 10,076 10.60 5,531 5.72
Commercial - - - -
-------------------------------------------
Total Real Estate Loans 93,958 98.87 95,570 98.85
-------------------------------------------
Consumer Loans
Savings Accounts 638 0.67 665 0.69
Other Consumer Loans 435 0.46 449 0.46
-------------------------------------------
Total Consumer Loans 1,073 1.13 1,114 1.15
-------------------------------------------
Total Loans 95,031 100.00% 96,684 100.00%
------- ====== ------- ======
Less
Loans in Process 3,638 2,572
Deferred Loan Fees 560 613
Allowance for Loan Losses 650 704
------- -------
Loan Receivables, Net $90,183 $92,795
======= =======
</TABLE>
<PAGE> 7 of 14
Delinquent Loans
The following table sets forth information concerning delinquent loans in
dollar amounts and as a percentage of each category of the Bank's loan
portfolio at March 31, 1999. The amounts presented represent the total
outstanding principal balances of the related loans, rather than the actual
payment amounts that are past due.
<TABLE>
<CAPTION>
Percent of Corresponding
Loans Delinquent For Loan Categories
---------------------------- -------------------------
30-89 90 Days 30-89 90 Days
Days And Over Total Days And Over Total
----- -------- ----- ----- -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One-to-four family residential $3,029 $2,337 $5,366 4.11% 3.17% 7.28%
Multi-family and nonresidential 53 577 630 0.52 5.71 6.23
Construction and land 100 314 414 0.99 3.12 4.11
Consumer 28 - 28 2.61 - 2.61
----------------------------
Total delinquent loans $3,210 $3,228 $6,438
============================
</TABLE>
The following table sets forth the amounts and categories of the Bank's
non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
March 31, September 30,
------------------ -------------
1999 1998 1998
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accruing loans:
One-to-four family residential (1) $2,337 $1,273 $2,905
Multi-family and non-residential real estate 577 776 343
Construction and land 314 100 335
Consumer - - -
Accruing consumer loans greater
than 90 days delinquent: - 102 -
------------------------------
Total non-performing loans 3,228 2,251 3,583
Real estate acquired through foreclosure 13 - -
-------------------------------
Total non-performing assets $3,241 $2,251 $3,583
==============================
Total non-performing assets as a
percentage of total loans 3.41% 2.59% 3.71%
==============================
Total non-performing assets as a
percentage of total assets 3.13% 2.25% 3.46%
==============================
<FN>
<F1> Includes second mortgage loans.
</FN>
</TABLE>
The $3.2 million of nonaccruing loans at March 31, 1999 consisted of 57
loans with an average balance of approximately $56,000. Interest that
would have been earned on these loans, if they had been accounted for on an
accruing basis during the quarter ended March 31, 1999 would have been
approximately $69,000. Substantially, all of the loans are extended to
separate borrowers.
The increase between March 31, 1998 and March 31, 1999, is primarily due to
the nonaccrual status of 17 loans which have been extended to separate
borrowers. Such loans, aggregating $1.0 million at December 31, 1998, are
secured by residential real estate. Presently, the Bank does not believe
that it will incur any material losses on such loans.
<PAGE> 8 of 14
Classified Assets
Federal regulations require that each insured savings association classify
its assets on a regular basis. In addition, in connection with
examinations of insured institutions, federal examiners have authority to
identify problem assets and, if appropriate, classify them. There are
three classifications for problem assets: "substandard", "doubtful" and
"loss". Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets
have the weaknesses of substandard assets with the additional
characteristic that the weaknesses make collection or liquidation in full
on the basis of currently existing facts, conditions and values
questionable, and there is a high possibility of loss. An asset classified
loss is considered uncollectable and of such little value that continuance
as an asset of the institution is not warranted. At March 31, 1999, the
Bank had $4.0 million of loans that were classified as substandard, no
loans classified as doubtful and no loans classified as loss. The
difference between the $4.0 million of assets classified for regulatory
purposes and the delinquent loans of $3.2 million represents loans that
were required to be classified for regulatory purposes due to certain
quantitative factors regarding collateral, delinquency periods, and loan
terms.
Allowance for Loan Losses
It is management's policy to maintain an allowance for estimated losses
based on the perceived risk of loss in the loan portfolio. In assessing
risk, management considers historical loss experience, the volume and type
of lending conducted by the Bank, industry standards, past due loans,
general economic conditions and other factors related to the collectability
of the loan portfolio. Provisions for loan losses that are charged against
income increase the allowance.
Although management uses the best information available to make
determinations with respect to the provisions of loan losses, additional
provisions for loan losses may be required to be established in the future
should economic or other conditions change substantially. In addition, the
OTS and the FDIC, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies
may require the Bank to recognize additions to such allowance based on
their judgments about information available to them at the time of their
examination.
The following table summarizes the activity in the allowance for loan
losses and other selected statistics for the periods presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, September 30,
-------------------- -------------
1999 1998 1998
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Average Loans Receivable, Net $92,166 $90,633 $91,487
Allowance for Loan Losses
Balance at Beginning of Period $ 704 $ 476 $ 476
Net (Charge-Offs) (78) (41) (57)
Provision for Loan Losses 24 12 285
---------------------------------
Balance at End of Period $ 650 $ 447 $ 704
=================================
Net Loans (Charged-Off) Recovered to
Average Loans -0.09% -0.05% -0.06%
=================================
Allowance for Loan Losses to Total Loans 0.68% 0.51% 0.73%
=================================
Allowance for Loan Losses to Total
Non-Performing Loans 20.14% 19.86% 19.65%
=================================
Net Loans (Charged-Off) Recovered to
Allowance for Loan Losses -12.00% -9.17% -8.10%
=================================
</TABLE>
<PAGE> 9 of 14
The following table presents the allocation of the allowance for loan
losses to the total amount of loans in each category listed at the dates
indicated.
<TABLE>
<CAPTION>
March 31, 1999
---------------------------
Percent of Loans
In Each Category
Amount To Total Loans
------ ----------------
(Dollars in Thousands)
<S> <C> <C>
One-to-Four Family Residential $397 77.63%
Multi-Family Residential 125 10.64
Land and Construction 100 10.60
Consumer Loans 28 1.13
--------------------
Total $650 100.00%
====================
</TABLE>
Results of Operations for the Three Months Ended March 31, 1999 and 1998
General. The Corporation reported net income of $212,000 during the
three months ended March 31, 1999 compared to $248,000 during the three
months ended March 31, 1998. The decrease in net income during the three
months ended March 31, 1999 compared to the same period in 1998 was due
primarily to a decrease in net interest income of $21,000, a decrease in
revenues from fees, charges and other income of $8,000, and increases in
non-interest expense of $20,000 which were partially offset by a decrease
in federal income tax expense.
Interest Income. Interest income decreased $14,000 or 0.7% to $2.1
million for the three months ended March 31, 1999 compared to the same
period in 1998. The decrease during the 1999 period was primarily due to a
decrease in the average yield on the Corporation's loan portfolio of 18
basis points.
Interest Expense. Interest expense increased $7,000 or 0.6% to $1.1
million for the three months ended March 31, 1999, compared to the same
period in 1998. Such increase was primarily due to an increase in the
average outstanding balance of the Corporation's time deposits and borrowed
funds.
Net Interest Income. Net interest income amounted to $966,000 for
the three months ended March 31, 1999, a decrease of $21,000 or 2.1% over
the comparable period in 1998. The interest rate spread amounted to 3.17%
for the three months ended March 31, 1999 compared to 3.14% for the same
period in 1998. The ratio of average interest-earning assets to average
interest-bearing liabilities was 113.5% and 118.3% for the same respective
periods.
Provision for Losses on Loans. The provision for losses on loans
amounted to $12,000 for both the three months ended March 31, 1999 and
1998.
Other Income. Other income decreased $8,000 or 12.9% during the
three months March 31, 1999, compared to the same period in 1998 due
primarily to a decrease in fees and charges relating to loans.
Non-Interest Expenses. Non-interest expenses for the three months
ended March 31, 1999 increased $20,000 or 3.1% over the same period in 1998
to $665,000. This increase was primarily due to an increase in salaries
and employee benefits of $14,000 and an increase in franchise and other
taxes of $11,000. The increase in salaries and employee benefits was due
to normal merit increases.
Results of Operations for the Six Months Ended March 31, 1999 and 1998
General. The Corporation reported net income of $507,000 during the
six months ended March 31, 1999, compared to $554,000 during the six months
ended March 31, 1998. The decrease in net income during the six months
ended March 31, 1999, compared to the same period in 1998 was due primarily
to decreases in net interest income of $16,000 and revenues from fees,
charges and other income of $23,000, and increases in non-interest expense
of $30,000 which were partially offset by a decrease in federal income tax
expense.
Interest Income. Interest income increased $76,000 or 1.8% to $4.3
million for the six months ended March 31, 1999, compared to the same
period in 1998. The increase during the 1999 period was primarily due to
increase in the average outstanding balance of the Corporation's loan
portfolio. Such increase was primarily due to increased loan demand and an
increase in other interest earning assets.
<PAGE> 10 of 14
Interest Expense. Interest expense increased $92,000 or 4.1% to $2.3
million for the six months ended March 31, 1999, compared to the same
period in 1998. Such increase was primarily due to an increase in the
average outstanding balance of the Corporation's time deposits and
borrowings.
Net Interest Income. Net interest income amounted to $1.9 million
for the six months ended March 31, 1999, a decrease of $16,000 over the
comparable period in 1998. The interest rate spread amounted to 3.18% for
the six months ended March 31, 1999, compared to 3.14% for the same period
in 1998. The ratio of average interest-earning assets to average interest-
bearing liabilities was 113.19% and 118.47% for the same respective
periods.
Provision for Losses on Loans. The provision for losses on loans
amounted to $24,000 for both the six months ended March 31, 1999 and March
31, 1998.
Other Income. Other income decreased $23,000 or 16.8% during the six
months ended March 31, 1999, compared to the same period in 1998 primarily
due to a decrease in fees and charges relating to loans.
Non-Interest Expense. Non-interest expenses for the six months ended
March 31, 1999 increased $30,000 or 2.5% over the same period in 1998 to
$1.2 million. This increase was primarily due to an increase in salaries
and employee benefits of $45,000 that was partially offset by a decrease in
legal, audit, and supervisory exam expenses. The increase in salaries and
employee benefits was due to normal merit increases.
Liquidity and Capital Resources
The Bank's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing and financing activities. The Bank's
primary sources of funds are deposits, borrowings, amortization,
prepayments and maturities of outstanding loans, sales of loans, maturities
of investment securities and other short-term investments and funds
provided from operations. While scheduled loan amortization and maturing
investment securities and short-term investments are relatively predictable
sources of funds, deposit flows and loan prepayments are greatly influenced
by general interest rates, economic conditions and competition. The Bank
manages the pricing of its deposits to maintain a steady deposit balance.
In addition, the Bank invests excess funds in overnight deposits and other
short-term interest-earning assets that provide liquidity to meet lending
requirements. The Bank has generally been able to generate enough cash
through the retail deposit market, its traditional funding source, to
offset the cash utilized in investing activities. As an additional source
of funds, the Bank may borrow from the FHLB of Cincinnati and has access
to the Federal Reserve discount window. At March 31, 1999, the Bank had
$12.4 million of outstanding advances from the FHLB of Cincinnati. The
interest rates on these advances range from 4.82% to 5.55%. Maturities on
these advances range from March 26, 2008 to October 2, 2008.
As of March 31, 1999, the Bank's regulatory capital was well in excess of
all applicable regulatory requirements. At March 31, 1999, the Bank's
tangible, core and risk-based capital ratios amounted to 11.8%, 11.8% and
19.4%, respectively, compared to regulatory requirements 1.5%, 3.0% and
8.0%, respectively.
Year 2000. The Corporation outsources its primary data processing
functions. A challenging problem exists as the millennium ("year 2000")
approaches as many computer systems worldwide do not have the capability of
recognizing the year 2000 or years thereafter. To date, the Company has
received confirmations from its primary vendors that plans have been
developed by them to address and correct the issues associated with the
year 2000 problem.
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements and information
relating to the Corporation that is based on the beliefs of management as
well as assumptions made by and information currently available to
management. In addition, in those and other portions of this document, the
words "anticipate", "believe", "estimate", "except", "intend", "should" and
similar expressions, or the negative thereof, as they relate to the
Corporation or the Corporation's management, are intended to identify
forward-looking statements. Such statements reflect the current views of
the Corporation with respect to future looking events and are subject to
certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. The Corporation
does not intend to update these forward-looking statements.
<PAGE> 11 0r 14
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
For a discussion of the Corporation's asset and liability management
policies as well as the potential impact of interest rate changes upon the
market value of the Bank's portfolio equity, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the
Corporation's 1998 Annual Report to the Stockholders. There has been no
material change in the Corporation's asset and liability position or the
market value of the Bank's portfolio equity since September 30, 1998.
<PAGE> 12 of 14
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
Part II
Item 1. Legal Proceedings
Neither the Corporation nor the Bank is involved in any pending
legal proceedings other than non-material legal proceedings
occurring in the ordinary course of business.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
On January 25, 1999, the Corporation held an annual meeting for
the election of directors and ratification of auditors. The
votes with respect to such proposals are set forth below.
Proposal One (Election of Directors):
<TABLE>
<CAPTION>
Name For Against Withhold
---- --- ------- --------
<S> <C> <C> <C>
Larry N. Hatfield 1,223,873 4,660
Robert L. Grimm 1,222,191 6,342
Harold A. Luersen 1,221,123 6,742
Don J. Beckmeyer 1,223,123 5,410
J. Steven McLane 1,223,623 4,910
</TABLE>
Proposal Two (Ratification of VonLehman & Company Inc. as
Auditors):
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<C> <C> <C>
1,221,488 2,897 4,148
</TABLE>
<PAGE> 13 of 14
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.
FORT THOMAS FINANCIAL CORPORATION
Date: __________ By: /s/ Larry N. Hatfield
Larry N. Hatfield
President and Chief Executive Officer
Date: __________ By: /s/ J. Michael Lonnemann
J. Michael Lonnemann
Vice President, Secretary and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 598
<INT-BEARING-DEPOSITS> 4,987
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 3,000
<INVESTMENTS-MARKET> 741
<LOANS> 90,882
<ALLOWANCE> 699
<TOTAL-ASSETS> 103,575
<DEPOSITS> 76,763
<SHORT-TERM> 4,000
<LIABILITIES-OTHER> 1,232
<LONG-TERM> 8,412
0
0
<COMMON> 16
<OTHER-SE> 13,152
<TOTAL-LIABILITIES-AND-EQUITY> 103,575
<INTEREST-LOAN> 3,997
<INTEREST-INVEST> 103
<INTEREST-OTHER> 168
<INTEREST-TOTAL> 4,268
<INTEREST-DEPOSIT> 2,010
<INTEREST-EXPENSE> 322
<INTEREST-INCOME-NET> 1,936
<LOAN-LOSSES> 24
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,228
<INCOME-PRETAX> 798
<INCOME-PRE-EXTRAORDINARY> 798
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 798
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.34
<YIELD-ACTUAL> 3.78
<LOANS-NON> 3,228
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 704
<CHARGE-OFFS> 78
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 650
<ALLOWANCE-DOMESTIC> 650
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
