<PAGE> 1
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 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 or (I.R.S. Employer
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 May 12, 2000,
there were issued and outstanding 1,474,321 shares of the Registrant's Common
Stock, par value $.01 per share.
Page 1 of 15
<PAGE> 2
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
(As of March 31, 2000 (unaudited) and September 30, 1999) 3
Consolidated Statements of Income for the three and six months
ended March 31, 2000 (unaudited) and March 31, 1999 (unaudited) 4
Consolidated Statements of Cash Flow for the six months ended
March 31, 2000 (unaudited) and March 31, 1999 (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 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
Page 2 of 15
<PAGE> 3
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, SEPT. 30,
2000 1999
--------- ---------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 785 $ 723
Investment Securities - Held to Maturity - at Amortized Cost 5,500 5,500
Available for Sale - at Market 765 741
Loans Receivable, Net 87,941 88,709
Real Estate Owned 364 248
Office Properties and Equipment - at Depreciated Cost 557 602
Federal Home Loan Bank Stock (FHLB) - at Cost 966 934
Cash Surrender Value of Life Insurance 1,237 1,211
Accrued Interest Receivable 863 825
Prepaid and Other Assets 61 80
Deferred Federal Income Tax Asset 96 86
Prepaid Federal Income Tax Asset -- 190
------- -------
TOTAL ASSETS $99,135 $99,849
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $64,845 $70,870
Borrowed Funds 18,832 13,739
Advances from Borrowers for Taxes and Insurance 168 341
Deferred Compensation 621 597
Accrued Interest Payable 111 76
Accrued Federal Income Tax 59 --
Other Liabilities 295 564
------- -------
TOTAL LIABILITIES 84,931 86,187
------- -------
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 7,683 7,659
Shares Acquired by Employee Stock Ownership Plan (ESOP) (335) (387)
MRP Trust (397) (428)
Retained Earnings, Substantially Restricted 8,617 8,182
Treasury Stock (99,454 Shares at Cost) (1,380) (1,380)
------- -------
TOTAL STOCKHOLDERS' EQUITY 14,204 13,662
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,135 $99,849
======= =======
</TABLE>
Page 3 of 15
<PAGE> 4
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
---------------------- ----------------------
2000 1999 2000 1999
------ ------ ------ ------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest on Loans $1,873 $1,969 $3,746 $3,997
Interest on Investment Securities 89 50 173 103
Other Interest and Dividends 32 85 51 168
------ ------ ------ ------
Total Interest Income 1,994 2,104 3,970 4,268
------ ------ ------ ------
INTEREST EXPENSE
Deposits 808 982 1,657 2,010
Long-Term Borrowed Funds 252 156 456 322
------ ------ ------ ------
Total Interest Expense 1,060 1,138 2,113 2,332
------ ------ ------ ------
Net Interest Income 934 966 1,857 1,936
Provision for Loan Losses 29 12 41 24
------ ------ ------ ------
Net Interest Income After Provision for Loan
Losses 905 954 1,816 1,912
------ ------ ------ ------
OTHER INCOME
Fees and Charges 19 19 44 46
Other 33 35 69 68
------ ------ ------ ------
Total Other Income 52 54 113 114
------ ------ ------ ------
GENERAL AND ADMINISTRATIVE
Salaries and Employee Benefits 270 319 584 630
Franchise and Other Taxes 37 47 73 83
Federal Insurance Premium 30 6 36 17
Expenses of Premises and Fixed Assets 48 46 97 95
Data Processing and Related Contract Services 54 47 99 81
Legal, Audit, and Supervisory Exam 109 97 154 126
Other Operating Expense 103 103 212 196
------ ------ ------ ------
Total Other Expenses 651 665 1,255 1,228
------ ------ ------ ------
Income Before Income Tax 306 343 674 798
Federal Income Tax Expense 103 131 239 291
------ ------ ------ ------
NET INCOME $ 203 $ 212 $ 435 $ 507
====== ====== ====== ======
Comprehensive Income $ 203 $ 212 $ 435 $ 507
====== ====== ====== ======
EARNINGS PER SHARE
Basic EPS $ 0.14 $ 0.15 $ 0.30 $ 0.36
====== ====== ====== ======
Fully Diluted EPS $ 0.13 $ 0.14 $ 0.29 $ 0.34
====== ====== ====== ======
</TABLE>
Page 4 of 15
<PAGE> 5
FORT THOMAS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 435 $ 507
Reconciliation of Net Income with Cash Flows from
Operations:
Provision for Loan Losses 41 24
Depreciation 46 36
Deferred Income Taxes (12) (8)
Amortization (102) (125)
FHLB Stock Dividends (32) (30)
ESOP and Stock Compensation 54 80
Gain on REO (7) --
Changes In:
Accrued Interest Receivable (38) 18
Prepaid and Other Assets 18 8
Cash Surrender Value of Life Insurance (26) (25)
Deferred Compensation 24 22
Accrued Interest Payable 36 7
Accrued Income Tax 249 (77)
Other Liabilities (269) (83)
------- -------
Net Cash Provided by Operating Activities 417 354
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Investment Securities (39) (2,000)
Maturity of Investment Securities -- 2,000
Loan Originations and Repayments, Net 225 2,559
Principal Received on Debt Security 15 12
REO Expenses 4 --
Proceeds from Sale of REO 492 143
Purchase of Office Properties and Equipment -- (125)
------- -------
Net Cash Provided by Investing Activities 697 2,589
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (Decrease) Increase in Deposits (6,025) (88)
Dividends Paid -- (184)
ESOP Shares Released 52 52
Advance from Borrowers for Taxes and Insurance (172) (158)
Repayments of Borrowings (1,000) (4,115)
Proceeds of Borrowings 6,093 4,000
------- -------
Net Cash (Used) Provided by Financing Activities (1,052) (493)
------- -------
CHANGES IN CASH AND CASH EQUIVALENTS 62 2,450
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 723 3,135
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 785 $ 5,585
======= =======
</TABLE>
Page 5 of 15
<PAGE> 6
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 months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the year ending
September 30, 2000. 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, 1999 contained in the
Corporation's 1999 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,
---------------------------- --------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic Weighted -
Average Shares 1,438,255 1,427,105 1,436,968 1,425,818
Diluted Weighted -
Average Shares 1,525,449 1,493,240 1,524,943 1,499,340
</TABLE>
Page 6 of 15
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At March 31, 2000, the Corporation's total assets amounted to $99.1 million as
compared to $99.8 million at September 30, 1999. Stockholders' equity amounted
to $14.2 million or 14.3% of total assets at March 31, 2000 compared to $13.7
million or 13.7% at September 30, 1999. The increase in stockholders' equity was
primarily due to continued profitable operations.
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,
2000 1999
---- ----
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
REAL ESTATE LOANS (Dollars in Thousands)
One-to-Four Family Residential $75,025 81.48% $76,468 81.90%
Multi-Family and Non-Residential 9,039 9.82 9,569 10.25
Land and Construction:
Residential 7,168 7.78 6,215 6.66
Commercial -- -- -- --
------- ------ ------- ------
Total Real Estate Loans 91,232 99.08 92,252 98.81
------- ------ ------- ------
CONSUMER LOANS
Savings Accounts 575 0.62 721 0.77
Other Consumer Loans 274 0.30 392 0.42
------- ------ ------- ------
Total Consumer Loans 849 0.92 1,113 1.19
------- ------ ------- ------
Total Loans 92,081 100.00% 93,365 100.00%
------- ====== ------- ======
LESS
Loans in Process 3,087 3,489
Deferred Loan Fees 515 553
Allowance for Loan Losses 538 614
------- -------
Loan Receivables, Net $87,941 $88,709
======= =======
</TABLE>
Page 7 of 15
<PAGE> 8
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 March
31, 2000. 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 $2,471 $1,975 $4,446 3.29% 2.63% 5.92%
Multi-family and
nonresidential 129 343 472 1.43 3.79 5.22
Construction and land 235 415 650 3.28 5.79 9.07
Consumer -- -- -- -- -- --
------ ------ ------
Total delinquent loans $2,835 $2,733 $5,568
====== ====== ======
</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,
--------- -------------
2000 1999 1999
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accruing loans:
One-to-four family residential (1) $1,975 $2,337 $1,420
Multi-family and non-residential
real estate 343 577 482
Construction and land 415 314 361
Consumer -- -- --
Accruing consumer loans greater
than 90 days delinquent: -- -- --
------ ------ ------
Total non-performing loans 2,733 3,228 2,263
Real estate acquired through
foreclosure 364 13 248
------ ------ ------
Total non-performing assets $3,097 $3,241 $2,511
====== ====== ======
Total non-performing assets as a
percentage of total loans 3.36% 3.41% 2.69%
====== ====== ======
Total non-performing assets as a
percentage of total assets 3.12% 3.13% 2.51%
====== ====== ======
</TABLE>
(1) Includes second mortgage loans.
The $2.7 million of nonaccruing loans at March 31, 2000 consisted of 35 loans
with an average balance of approximately $77,000. 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, 2000, would have been approximately $56,000.
Substantially, all of the loans are extended to separate borrowers.
The decrease between March 31, 2000 and March 31, 1999 was primarily due to
reduction of number of loans in nonaccrual status. Presently, the Bank does not
believe that it will incur any material losses on such loans.
Page 8 of 15
<PAGE> 9
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, 2000, the Bank had $3.5
million of loans that were classified as substandard, no loans classified as
doubtful and no loans classified as loss. The difference between the $3.5
million of assets classified for regulatory purposes and the delinquent loans of
$2.7 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,
--------- -------------
2000 1999 1999
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average Loans Receivable, Net $88,355 $92,166 $88,954
======= ======= =======
Allowance for Loan Losses
Balance at Beginning of Period $ 614 $ 704 $ 704
Net (Charge-Offs) (117) (78) (158)
Provision for Loan Losses 41 24 68
------- ------- -------
Balance at End of Period $ 538 $ 650 $ 614
======= ======= =======
Net Loans (Charged-Off) Recovered to Average Loans -0.13% -0.09% -0.18%
======= ======= =======
Allowance for Loan Losses to Total Loans 0.58% 0.68% 0.66%
======= ======= =======
Allowance for Loan Losses to Total Non-Performing
Loans 19.69% 20.14% 27.13%
======= ======= =======
Net Loans (Charged-Off) Recovered to Allowance for
Loan Losses -21.75% -12.00% -25.73%
======= ======= =======
</TABLE>
Page 9 of 15
<PAGE> 10
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, 2000
--------------
PERCENT OF LOANS
IN EACH CATEGORY
AMOUNT TO TOTAL LOANS
------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
One-to-Four Family Residential $285 81.48%
Multi-Family Residential 125 9.82
Land and Construction 100 7.78
Consumer Loans 28 0.92
---- ------
Total $538 100.00%
==== ======
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
GENERAL. The Corporation reported net income of $203,000 during the
three months ended March 31, 2000 compared to $212,000 during the three months
ended March 31, 1999. The decrease in net income during the three months ended
March 31, 2000 compared to the same period in 1999 was due primarily to a
decrease in net interest income of $32,000 and an increase in provision for loan
losses of $17,000, partially offset by decreases in non-interest expenses of
$14,000 and federal income tax expense of $28,000.
INTEREST INCOME. Interest income decreased $110,000 or 5.2% to $2.0
million for the three months ended March 31, 2000 compared to the same period in
1999. The decrease during the 2000 period was primarily due to a decrease in the
average loans receivable, net of $3.2 million.
INTEREST EXPENSE. Interest expense decreased $78,000 or 6.9% to $1.1
million for the three months ended March 31, 2000, compared to the same period
in 1999. Such decrease was primarily due to a decrease in the average balance of
the Corporation's time deposits of $11.0 million primarily as a result of the
maturity of certain higher rate of certificates of deposit. This was partially
offset by $5.5 million increase in the average balance of borrowed funds.
NET INTEREST INCOME. Net interest income amounted to $934,000 for the
three months ended March 31, 2000, a decrease of $32,000 or 3.3% over the
comparable period in 1999. The interest rate spread amounted to 3.18% for the
three months ended March 31, 2000 compared to 3.17% for the same period in 1999.
The ratio of average interest-earning assets to average interest-bearing
liabilities was 115.4% and 113.5% for the same respective periods.
PROVISION FOR LOSSES ON LOANS. The provision for losses on loans
amounted to $29,000 for the three months ended March 31, 2000 an increase of
$17,000 over the comparable period in 1999. Such provisions are based on
management's estimate of net realizable value or fair value of the collateral,
and are adjusted accordingly.
OTHER INCOME. Other income amounted to $52,000 and $54,000 during the
three months March 31, 2000 and 1999.
NON-INTEREST EXPENSES. Non-interest expenses for the three months ended
March 31, 2000 decreased $14,000 or 2.1% over the same period in 1999 to
$651,000. This decrease was primarily due to a decrease in salaries and employee
benefits of $49,000, in franchise and other taxes of $10,000 and partially
offset by increases in federal insurance premium of $24,000 and legal, audit and
supervisory exam expenses of $12,000.
Page 10 of 15
<PAGE> 11
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND 1999
GENERAL. The Corporation reported net income of $435,000 during the six
months ended March 31, 2000 compared to $507,000 during the six months ended
March 31, 1999. The decrease in net income during the six months ended March 31,
2000 compared to the same period in 1999 was due primarily to a decrease in net
interest income of $79,000, an increase in provision for loan losses of $17,000
and increases in non-interest expense of $27,000 which were partially offset by
a decrease in federal income tax expense of $52,000.
INTEREST INCOME. Interest income decreased $298,000 or 7.0% to $4.0
million for the six months ended March 31, 2000 compared to the same period in
1999. The decrease during the 2000 period was primarily due to a decrease in the
average yield on the Corporation's loan portfolio of 22 basis points due to many
loans being refinanced and also a decrease in average loans receivable, net of
$3.5 million.
INTEREST EXPENSE. Interest expense decreased $219,000 or 9.4% to $2.1
million for the six months ended March 31, 2000, compared to the same period in
1999. Such decrease was primarily due to a decrease in the average cost of funds
on certificates of deposit of 23 basis points and a decrease in average balance
of the Corporation's time deposits of $9.9 million primarily as a result of the
maturity of certain higher rate of certificates of deposit. This was partially
offset by $4.3 million increase in the average balance of borrowed funds.
NET INTEREST INCOME. Net interest income amounted to $1.9 million for
the six months ended March 31, 2000, a decrease of $79,000 or 4.1% over the
comparable period in 1999. The interest rate spread amounted to 3.21% for the
six months ended March 31, 2000 compared to 3.18% for the same period in 1999.
The ratio of average interest-earning assets to average interest-bearing
liabilities was 114.5% and 113.2% for the same respective periods.
PROVISION FOR LOSSES ON LOANS. The provision for losses on loans
amounted to $41,000 for the six months ended March 31, 2000 an increase of
$17,000 over the comparable period in 1999. Such provisions are based on
management's estimate of net realizable value or fair value of the collateral,
and are adjusted accordingly.
OTHER INCOME. Other income amounted to $113,000 and $114,000 during the
six months March 31, 2000 and 1999, respectively.
NON-INTEREST EXPENSES. Non-interest expenses for the six months ended
March 31, 2000 increased $27,000 or 2.2% over the same period in 1999 to $1.3
million. This increase was primarily due to increases in federal insurance
premiums of $19,000, data processing expenses of $18,000, in legal, audit and
supervisory exam expenses of $28,000, in other operating expenses of $16,000 and
partially offset by a decrease in salaries and employee benefits of $46,000.
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, 2000, the Bank had $18.8 million
of outstanding advances from the FHLB of Cincinnati. The interest rates on these
advances range from 4.75% to 5.67%. Maturities on these advances ranges through
October 2, 2008.
As of March 31, 2000, the Bank's regulatory capital was well in excess of all
applicable regulatory requirements. At March 31, 2000, the Bank's tangible, core
and risk-based capital ratios amounted to 13.4%, 13.4% and 21.4%, respectively,
compared to regulatory requirements 1.5%, 3.0% and 8.0%, respectively.
Page 11 of 15
<PAGE> 12
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 12 of 15
<PAGE> 13
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
1999 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, 1999.
Page 13 of 15
<PAGE> 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 AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 24, 2000, 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 1,168,053 1,375
Robert L. Grimm 1,167,553 1,875
Harold A. Luersen 1,165,621 3,807
Don J. Beckmeyer 1,168,053 1,375
J. Stephen McLane 1,167,553 1,875
</TABLE>
Proposal Two (Ratification of VonLehman & Company Inc. as Auditors):
<TABLE>
<CAPTION>
FOR AGAINST WITHHOLD
--- ------- --------
<S> <C> <C>
1,152,481 5,167 11,780
</TABLE>
ITEM 5. OTHER INFORMATION
On December 21, 1999, Fort Thomas Financial Corporation ("Fort
Thomas"), an Ohio corporation and a registered savings and loan holding company
and The Bank of Kentucky Financial Corporation ("BKFC"), a Kentucky corporation
and registered bank holding company entered into an Agreement and Plan of
Reorganization (the "Agreement") which sets forth the terms and conditions
under which Fort Thomas will merge with and into BKFC (the "Merger").
The Agreement provides that up on consummation of the Merger, and
subject to certain further terms, conditions, limitations and procedures set
forth in the Agreement, each issued and outstanding share of common stock, par
value $.01 of Fort Thomas ("Fort Thomas Common Stock") shall, by virtue of the
Merger, be converted into and represent the right to receive 0.5645 shares of
common stock, no par value, of BKFC. The Agreement contains customary
anti-dilution measures and provides for the merger of Fort Thomas' wholly-owned
subsidiary, Fort Thomas Savings Bank into The Bank of Kentucky, a wholly-owned
subsidiary of BKFC.
The Merger is intended to qualify as a reorganization within the
meaning of Section 368(a)(1)(A) and related provisions of the Internal Revenue
code of 1986, as amended (the "Code"). The Merger, which is expected to close
in the second quarter of 2000, is expected to be treated as a tax-free exchange
to holders of Fort Thomas Common Stock. Consummation of the Merger is subject
to the prior receipt of all necessary regulatory or governmental approvals and
consents, and the necessary approval of shareholders of Fort Thomas. A
shareholders' meeting has been scheduled from May 23, 2000.
The Agreement and the press release issued by Fort Thomas and BKFC on
December 21, 1999 regarding the Merger have been filed with the SEC as part of
the 8-K filed on December 21, 1999, and are incorporated herein by reference.
The foregoing summary of the Agreement does not purport to be complete and is
qualified in their entirety by reference to such Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
Page 14 of 15
<PAGE> 15
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: May 12, 2000 By: /s/ Larry N. Hatfield
---------------------------------------
Larry N. Hatfield
President and Chief Executive Officer
Date: May 12, 2000 By: /s/ J. Michael Lonnemann
---------------------------------------
J. Michael Lonnemann
Vice President, Secretary and Principal
Financial Officer
Page 15 of 15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-2000
<CASH> 294
<INT-BEARING-DEPOSITS> 491
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 5,500
<INVESTMENTS-MARKET> 765
<LOANS> 88,479
<ALLOWANCE> 538
<TOTAL-ASSETS> 99,135
<DEPOSITS> 64,845
<SHORT-TERM> 6,932
<LIABILITIES-OTHER> 1,294
<LONG-TERM> 11,900
0
0
<COMMON> 16
<OTHER-SE> 14,148
<TOTAL-LIABILITIES-AND-EQUITY> 99,135
<INTEREST-LOAN> 3,746
<INTEREST-INVEST> 173
<INTEREST-OTHER> 51
<INTEREST-TOTAL> 3,970
<INTEREST-DEPOSIT> 1,657
<INTEREST-EXPENSE> 456
<INTEREST-INCOME-NET> 1,857
<LOAN-LOSSES> 41
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,255
<INCOME-PRETAX> 674
<INCOME-PRE-EXTRAORDINARY> 674
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 435
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.29
<YIELD-ACTUAL> 3.84
<LOANS-NON> 2,733
<LOANS-PAST> 0
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<ALLOWANCE-OPEN> 614
<CHARGE-OFFS> 117
<RECOVERIES> 538
<ALLOWANCE-CLOSE> 538
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
