FCFT, Inc.
P O Box 5909
Princeton, West Virginia 24740
May 15, 1997
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of
1934, we
are transmitting herewith the attached Form 10-Q.
Sincerely,
FCFT, Inc.
Vivian Perry
Financial Accountant
1
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31,
1997 OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:__________________ to
__________________
Commission File Number: 0-
19297
FCFT, INC.
(Exact name of registrant as specified in its charter)
Delaware 55-0694814
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization) Identification
No.)
1001 Mercer Street, Princeton, West Virginia 24740
(Address of principal executive offices) (Zip Code)
(304) 487-
9000
(Registrant's telephone number, including area
code)
Indicate by check mark whether the Registrant (1) has filed all
reports
required to be filed by Section 13 of 15(d) of the Securities
Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the
Registrant was required to file such reports), and (2) has been
subject to
such filing requirements for the past 90 days.
Yes X No__
Indicate the number of shares outstanding of each of the issuer's
classes of
common stock, as of the latest practicable date.
Class Outstanding at
April 30, 1997
Common Stock, $5 Par Value
5,649,995
2
FCFT, INC.
FORM 10-Q
For the quarter ended March
31, 1997
INDEX
PART I. FINANCIAL INFORMATION REFERENCE
Item 1. Financial Statements
Consolidated Balance Sheets March 31, 1997 and
December 31, 1996 4
Consolidated Statements of Income for the
Three Months Ended March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 6
Consolidated Statements of Changes in Stockholders'
Equity for the Three Months Ended March 31,
1997 and 1996 7
Notes to Consolidated Financial Statements 8-9
Independent Accountants' Report 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of 16-17
Security Holders
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K17,18,20
SIGNATURES 19
3
ITEM 1. FINANCIAL STATEMENTS
FCFT, INC.
CONSOLIDATED
BALANCE SHEETS
(Unaudited) March 31 December 31
(Amounts in Thousands) 1997 1996
Assets
Cash and due from banks $ 29,780 $ 27,369
Federal funds sold 9,830 -
Securities available for sale (amortized cost
of $129,489 March 31, 1997; $135,404
December 31, 1996) 128,930 136,113
Investment securities:
U.S. Treasury securities 7,247 8,247
U.S. Government agencies and corporations 37,854
43,494
States and political subdivisions 47,434 47,532
Other securities 1,056 1,055
Total Investment Securities (market
value, $94,014 March 31, 1997; $101,200
December 31, 1996) 93,591 100,328
Total loans, net of unearned income 544,897 547,703
Less: reserve for possible loan losses 8,976 8,987
Net loans 535,921 538,716
Premises and equipment, net 12,125 12,334
Other real estate owned 2,450 2,225
Interest receivable 6,268 6,341
Other assets 10,163 10,122
Intangible assets 4,000 4,116
Total Assets $833,058 $837,664
Liabilities
Deposits, non-interest bearing $ 97,455 $ 89,902
Deposits, interest-bearing 560,003 553,595
Total Deposits 657,458 643,497
Interest, taxes and other liabilities 11,996 11,217
Federal funds purchased - 25,468
Securities sold under agreement to repurchase 57,838
53,031
Other indebtedness 15,122 15,126
Total Liabilities 742,414 748,339
Stockholders' Equity
Common stock, $5 par value; 10,000,000 shares
authorized; 5,755,531 issued in 1997 and 1996;
5,649,995 shares outstanding in 1997 and 1996 28,778
23,022
Additional paid-in capital 14,565 20,343
Retained earnings 48,930 46,815
Treasury stock, at cost (1,288) (1,288)
Unrealized (loss) gain on securities available for sale
(341) 433
Total Stockholders' Equity 90,644 89,325
Total Liabilities and Stockholders' Equity $833,058
$837,664
See Notes to Consolidated Financial Statements.
4
FCFT, INC.
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
(Amounts in Thousands, Except Three Months Ended
Share and Per Share Data) March 31
1997 1996
Interest Income:
Interest and fees on loans $12,956 $11,784
Interest on securities available for sale 2,181
1,800
Interest on investment securities:
U.S. Treasury securities 105 240
U.S. Government agencies and corporations 609
897
States and political subdivisions633 646
Other securities 21 21
Interest on federal funds sold 26 80
Interest on deposits in banks 15 7
Total Interest Income 16,546 15,475
Interest Expense:
Interest on deposits 5,976 5,641
Interest on borrowings 966 762
Total Interest Expense 6,942 6,403
Net Interest Income 9,604 9,072
Provision for possible loan losses 630 455
Net Interest Income After Provision for
Possible Loan Losses 8,974 8,617
Non-Interest Income:
Fiduciary income 339 385
Service charges on deposit accounts 666 694
Other charges, commissions and fees 697 564
Investment securities losses - (165)
Other operating income 122 98
Total Non-Interest Income 1,824 1,576
Non-Interest Expense:
Salaries and employee benefits 2,637 2,424
Occupancy expense of bank premises 384 436
Furniture and equipment expense 287 362
Other operating expense 2,133 2,163
Total Non-Interest Expense 5,441 5,385
Income before income taxes 5,357 4,808
Income tax expense 1,660 1,398
Net Income $3,697 $3,410
Net income per common share $.65 $.61
Weighted average shares outstanding5,649,995 5,590,806
See Notes to Consolidated Financial Statements.
5
FCFT, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands) Three Months Ended
March 31 March 31
1997 1996
Cash Flows From Operating Activities:
Net income $ 3,697 $ 3,410
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses630 455
Depreciation of premises and equipment 204
232
Amortization of intangibles 146 195
Investment amortization and accretion, net (27)
16
(Gain) Loss on the sale of assets, net (26)
159
Other liabilities, net 779 592
Interest receivable 73 527
Other assets, net 466 (11)
Other, net 23 (67)
Net cash provided by operating activities 5,965
5,508
Cash Flows From Investment Activities:
Increase (decrease) in cash realized from:
Sales of securities available for sale --
11,016
Maturities and calls of investment securities 6,740
10,184
Maturities and calls of securities available for sale9,191
3,905
Purchase of investment securities -- (2,713)
Purchase of securities available for sale (3,265)
(12,902)
Repayments from (loans to) customers, net 1,958
(17,110)
Purchase of equipment (40) (20)
Net cash provided by (used in) investment activities 14,584
(7,640)
Cash Flows From Financing Activities:
Increase (decrease) in cash realized from:
Demand and savings deposits, net7,421 (5,603)
Time deposits, net 6,540 2,028
Short-term borrowings, net (20,661) 7,234
Payments of long-term debt (4) (3)
Reissuance of treasury stock -- 87
Cash paid in lieu of fractional shares (22)
- --
Cash dividends paid (1,582) (1,265)
Net cash (used in) provided by financing activities (8,308)
2,478
Net increase in cash and cash equivalents 12,241
346
Cash and cash equivalents at beginning of year 27,369
26,274
Cash and cash equivalents at end of quarter $39,610
$26,620
See Notes to Consolidated Financial Statements.
6
FCFT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited) Unrealized
(Amounts in Thousands, Except (Loss) Gain
Share and Per Share Data) Additional on
Securities
Common Paid-In Retained Treasury Available
Stock Capital Earnings Stock for Sale
Balance beginning of
the period,
January 1, 1996 $23,022 $20,372 $39,320 $(2,646) $392
Net Income -- -- 3,410 -- --
Common dividends
declared ($.23
per common share) -- -- (1,265) -- --
Purchase of 6,375
shares at $26.74
per share -- -- -- (170) --
Reissuance of 10,289 shares
at $25.00 per share -- -- -- 257 --
Unrealized net loss
on securities available
for sale -- -- -- -
- - (392)
Balance, March 31, 1996 $23,022 $20,372 $41,465 $(2,559)
- --
Balance beginning of
the period,
January 1, 1997 $23,022 $20,343 $46,815 $(1,288) $433
Net income -- -- 3,697 -- --
Common dividends
declared ($.28
per common share) -- -- (1,582) -- --
Five-for-four stock split 5,756 (5,778) -- -- --
Unrealized net loss on
securities available
for sale -- -- -- -
- - (774)
Balance, March 31, 1997 $28,778 $14,565 $48,930 $(1,288)
$(341)
See Notes to Consolidated Financial Statements.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Unaudited Financial Statements
The unaudited consolidated balance sheet as of March 31, 1997 and the
unaudited consolidated statements of income, cash flows and
changes in
stockholders' equity for the periods ended March 31, 1997 and
1996 have
been prepared by the management of FCFT, Inc. without audit. In
the opinion
of management, all adjustments (including normal recurring
accruals) necessary
to present fairly the financial position of FCFT, Inc. and
subsidiaries at
March 31, 1997 and its results of operations, cash flows, and
changes in
stockholders' equity for the periods ended March 31, 1997 and
1996, have been
made. These results are not necessarily indicative of the
results of
consolidated operations for the full calendar year.
The consolidated balance sheet as of December 31, 1996 has been
extracted
from audited financial statements included in the Company's 1996
Annual
Report to Shareholders. Certain information and footnote
disclosure normally
included in financial statements prepared in accordance with
generally
accepted accounting principles have been omitted. It is
suggested that
these financial statements should be read in conjunction with the
financial
statements and notes thereto included in the 1996 Annual Report
of FCFT, Inc.
Note 2. Acquisitions
At the close of business on April 9, 1997, FCFT, Inc. (FCFT)
acquired 100% of
the common stock of Blue Ridge Bank (Blue Ridge), headquartered
in Sparta,
North Carolina. Blue Ridge is a $105 million state-chartered
bank with
offices located in Sparta, Elkin, Hays and Taylorsville, North
Carolina.
Pursuant to the Agreement and Plan of merger, FCFT exchanged cash
of $19.50
for each of Blue Ridge's 1,212,148 common shares. In conjunction
with the
acquisition, Blue Ridge cancelled outstanding stock options
through the
payment of $727,948 representing the difference between $19.50
and the
respective option prices. The acquisition was partially funded
with loan
proceeds of $12 million the Company borrowed from an outside
source. The loan
agreement has certain covenants that may restrict the payment of
dividends to
stockholders in the event of default. Total consideration
including the
purchase of the options was $24.7 million and resulted in an
intangible asset
of approximately $13.4 million which will be amortized over a 15
year period.
The acquisition was accounted for under the purchase method of
accounting.
Accordingly, results of operations of Blue Ridge will be included
in
consolidated results of FCFT from the date of acquisition.
Subsequent to the
merger, Blue Ridge will operate as a wholly-owned subsidiary of
FCFT, Inc.
Citizens Bank of Tazewell, Inc., the Virginia subsidiary of FCFT,
Inc., has
applied to the Virginia Bureau of Financial Institutions to
establish a de
novo branch in Wytheville, Virginia. Banking operations at this
new location
are expected to commence on or about July 1, 1997.
Note 3. Cash Flows
For the three months ended March 31, 1997 and 1996, for purposes
of reporting
cash flows, cash and cash equivalents include cash and due from
banks and
interest-bearing balances available for immediate withdrawal of
$29.8 million
at March 31, 1997 and $24.6 million at March 31, 1996, and
federal funds sold
of $9.8 million at March 31, 1997 and $2 million at March 31,
1996.
Note 4. Commitments and Contingencies
The Company is currently a defendant in various actions most of
which involve
lending and collection activities in the normal course of
business, some of
which have remained dormant for a number of years. Certain of
these actions
are described in greater detail in the Company's 1996 Report on
Form 10-K.
While the Company and legal counsel are unable to assess the
outcome of each
of these matters, they are of the belief that the resolution of
these actions
should not have a material adverse affect on the financial
position or results
of operations of the Company.
8
Note 5. Common Stock
In the first quarter of 1997, the Company declared a five-for-
four stock
split. Accordingly, $5.8 million was transferred from additional
paid-in
capital to common stock, representing the par value of the new
shares issued.
Per share amounts have been adjusted for the stock split.
9
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
of FCFT, Inc.
We have reviewed the accompanying consolidated balance sheet of
FCFT, Inc.
and subsidiaries as of March 31, 1997, and the related
consolidated statements
of income, changes in stockholders' equity and cash flows for the
three month
periods ended March 31, 1997 and 1996. These financial
statements are the
responsibility of the Corporation's management.
We conducted our review in accordance with standards established
by the
American Institute of Certified Public Accountants. A review of
interim
financial information consists principally of applying analytical
procedures
to financial data and of making inquiries of persons responsible
for financial
and accounting matters. It is substantially less in scope than
an audit
conducted in accordance with generally accepted auditing
standards, the
objective of which is the expression of an opinion regarding the
financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material
modifications that
should be made to such consolidated financial statements for them
to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing
standards. the consolidated balance sheet of FCFT, Inc. and
subsidiaries as
of December 31, 1996, and the related consolidated statements of
income,
changes in stockholders' equity, and cash flows for the year then
ended
(not presented herein); and in our report dated January 30, 1997,
we
expressed an unqualified opinion on those consolidated financial
statements.
In our opinion, the information set forth in the accompanying
consolidated
balance sheet as of December 31, 1996, is fairly stated, in all
material
respects, in relation to the consolidated balance sheet from
which it has
been derived.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
April 25, 1997
10
FCFT, INC.
PART 1. ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis is provided to address information
about the Company's financial condition and results of operations which is
not otherwise apparent from the consolidated financial statements
incorporated by reference or included in this report. This discussion and
analysis should be read in conjunction with the 1996
Annual Report to Shareholders and the other financial information included
in this report.
RESULTS OF OPERATIONS
The Company reported net income of $3.7 million for the period
ended March
31, 1997, an 8.4% increase over net income of $3.4 million for the
same
period in 1996. Earnings per common share between the same
periods increased
6.6%, from $.61 to $.65.
The improvement in earnings for the first quarter of 1997 can be
attributed
to a $532,000 increase in net interest income compared with the
same period
in 1996. Non-interest income for the three month period ended
March 31,
1997 increased $248,000 over the comparable period in 1996. This
improvement
was the result of an increase in income from credit card discount
fees and
credit life / A&H insurance sales. In addition, net income for
the quarter
ended March 31, 1996 included a $165,000 loss on securities
transactions.
This securities loss in 1996 decreased earnings per share by $.03
for the
quarter.
The amounts presented for 1996 have been restated to reflect the
effect of
the change in the number of outstanding shares as a result of the
March 31,
1997, 5-for-4 stock split as well as the affiliation with Citizens
Bank of
Tazewell, Inc., which was accounted for as a pooling-of -
interests.
Net Interest Income
Net interest income, the largest contributor to earnings was $9.6
million for
the first quarter of 1997 as compared with $9.1 million for the
corresponding
period in 1996. Tax equivalent net interest income totaled $10.2
million for
1997, an increase of $511,000 over the $9.7 million reported in
the first
quarter of 1996. This increase in net interest income was the
result of a 12
basis points improvement in the yield on earning assets coupled
with increases
in average earning assets of $43.5 million over the corresponding
period in
1996.
The Company's tax equivalent net interest margin of 5.37% at
quarter-end was
substantially unchanged from the first quarter of 1996. The
Company's strong
and improving earning assets yield served to offset the increase
in
interest-bearing deposits of 14 basis points from 4.28% in the
first three
months of 1996 to 4.42% in the corresponding period in 1997.
Loans, the Company's highest yielding asset category, experienced
an increase
in average balances of $58.3 million or 11.9%, comparing the first
quarter of
1997 to the corresponding period in 1996. This increase in the
loan portfolio
was funded through increases in deposits of $27 million, wholesale
funding
from Federal Home Loan Bank advances, and calls and maturities of
investments. The yield on the loan portfolio was 9.73% for the
first quarter
of 1997 as compared with 9.84% for the same period in 1996. The
yield on
securities available for sale improved from 6.43% in 1996 to 6.93%
in the
corresponding first quarter of 1997. Investment securities held
to maturity
experienced a 2 basis points decline in yield from 7.18% in the
first quarter
of 1996 to 7.16% for the corresponding period in 1997. The yield
on average
earning assets increased 12 basis points in response to the loan
growth from
8.90% for the three months ended March 31, 1996 to 9.02% for the
corresponding period in 1997.
Short-term borrowings increased 36 basis points over the past twelve months
from 4.20% in 1996 to 4.56% for the corresponding first quarter of 1997.
Time
deposits experienced an 11 basis points increase from 5.23% in the first
quarter of 1996 to 5.34% for the corresponding period in 1997. This market
pressure on rates did not effect short-term deposits, such as interest-
bearing
demand deposits and savings accounts, with the cost of these funding
sources
remaining flat during the period.
11
NET INTEREST INCOME ANALYSIS
Three Months Ended Three Months Ended
(Unaudited) March 31, 1997 March
31, 1996
(Amounts in Average Interest Yield/Rate Average
Interest Yield/Rate
Thousands) Balance (1) (2) (2) Balance (1) (2) (2)
Earning Assets:
Loans (3)
Taxable $530,537 $12,686 9.70% $472,401 $11,501 9.79%
Tax-Exempt 15,796 41510.66% 15,636 43711.24%
Total 546,333 13,101 9.73% 488,037 11,938 9.84%
Reserve for Possible Loan Losses (9,078) (8,468)
Net Total 537,255 479,569
Investments Available for Sale:
Taxable 119,547 1,965 6.67% 104,198 1,582 6.11%
Tax-Exempt 14,962 3329.01% 15,695 3368.61%
Total 134,509 2,297 6.93% 119,893 1,918 6.43%
Investment Securities Held to Maturity:
Taxable 49,845 753 6.13% 73,310 1,163 6.38%
Tax-Exempt 46,570 9498.26% 47,026 9848.42%
Total 96,415 1,702 7.16% 120,336 2,147 7.18%
Interest-Bearing Deposits 338 14 16.80% 1,204 7 2.34%
Federal Funds Sold 2,027 26 5.20% 6,037 80
5.33%
Total Earning Assets770,54417,140 9.02% 727,039 16,090 8.90%
Other Assets 57,129 50,678
Total $827,673 $777,717
Interest-Bearing Liabilities:
Interest-bearing Demand Deposits$ 91,806 617 2.73%$ 93,227 626
2.70%
Savings Deposits132,3491,007 3.09% 135,109 1,039 3.09%
Time Deposits330,780 4,354 5.34% 306,171 3,979 5.23%
Short-Term Borrowings 66,737 750 4.56% 51,666 540 4.20%
Other Indebtedness 15,124 213 5.71% 15,134 218
5.79%
Total Interest-Bearing Liabilities 636,796 6,9414.42% 601,307
6,402 4.28%
Demand Deposits 87,539 80,981
Other Liabilities12,858 13,383
Stockholders' Equity 90,480 82,046
Total $827,673 $777,717
Net Interest Earnings $ 10,199 $ 9,688
Net Interest Spread 4.60% 4.62%
Net Interest Margin 5.37% 5.36%
(1) Interest amounts represent taxable equivalent results for
the first three months of 1997 and 1996.
(2) Fully Taxable Equivalent-using the statutory rate of 35%.
(3) Non-accrual loans are included in average balances
outstanding with no related interest income.
12
Provision and Reserve for Possible Loan Losses
In order to maintain a balance in the reserve for possible loan
losses which
is sufficient to absorb potential loan losses, charges are made
to the
provision for possible loan losses (provision). The provision
for possible
loan losses was $630,000 for the first quarter of 1997 compared
with $455,000
for the corresponding period in 1996.
Net charge-offs for the first quarter of 1997 were $640,836 as
compared to
$345,397 for the corresponding period in 1996. Expressed as a
percentage of
loans, net charge-offs were .11% for the three month period ended
March 31,
1997 and .08% for the corresponding period in 1996.
The reserve for possible loan losses totaled $9 million at March
31, 1997 and
December 31, 1996 resulting in reserve to loan ratios of 1.65%
and 1.64% for
each respective period ending.
The coverage ratio represents the percentage of non-performing
loans covered
through available reserves. As of March 31, 1997, this ratio was
73.1% as
compared to 137.4% at March 31, 1996 and 143.7% at December 31,
1996.
Management continually evaluates the adequacy of the reserve for
possible
loan losses and makes specific adjustments to it based on the
results of risk
analysis in the credit review process, the recommendation of
regulatory
agencies, and other factors, such as loan loss experience and
prevailing
economic conditions. Management considers the level of reserves
adequate
based on the current risk profile in the loan portfolio.
Non-Interest Income
Non-interest income consists of all revenues which are not
included in
interest and fee income related to earning assets. Total non-
interest income
increased $248,000, or 15.7% from $1.6 million for the three
months ended
March 31, 1996 to $1.8 million for the corresponding period in
1997. A loss
of $165,000 on the sale of investment securities is included in
the first
quarter of 1996 as the Company repositioned a portion of its
available for
sale investment portfolio for improved performance. In addition,
1997
results reflected an increase of $140,000 in credit card fees due
to continued
growth in the credit card market.
Non-Interest Expense
Non-interest expense totaled $5.4 million in the first quarter of
1997
increasing $56,000 over the corresponding period in 1996. This
increase
was the net effect of an increase in salaries and employee
benefits of
$213,000 or 8.8% and decreases in: occupancy expense of $52,000
or 11.9%,
furniture and equipment expense of $75,000 or 20.7%, and other
operating
expenses of $30,000 or 1.4%. Increases in salaries and employee
benefits
include the impact of two branch acquisitions in September 1996
which
added approximately $48,000 in new salary and benefit costs in
addition to
the impact of company-wide salary progression.
13
Income Tax Expense
Income tax expense increased $262,000 from $1.4 million in the
first quarter
of 1996 to $1.7 million for the corresponding period in 1997.
This increase
in taxes is principally the result of the increase in pre-tax
income of
$549,000 or 11.4% when comparing the first quarter of 1997 with
the
corresponding period in 1996. The effective tax rates for the
first quarter
were 31% in 1997 and 29.1% in 1996.
FINANCIAL POSITION
Securities
Securities totaled $222.5 million at March 31,1997 which
represented a
decrease of $13.9 million from December 31, 1996. This 5.9%
decrease was
used to reduce the wholesale funding from Federal Home Loan Bank.
Securities available for sale were $128.9 million at March 31,
1997 as
compared to $136.1 million at December 31, 1996. Securities
available for
sale are recorded at their fair market value at March 31, 1997
and December
31, 1996. The unrealized gain or loss, which is the difference
between book
value and market value, net of related deferred taxes, is
recognized in the
Stockholder's Equity section of the balance sheet. The
unrealized gain after
taxes of $433,000 at December 31, 1996, decreased $774,000 to an
unrealized
loss of $341,000 at March 31, 1997.
Investment securities, which are purchased with the intent to
hold until
maturity, totaled $93.6 million at March 31, 1997 as compared to
$100.3
million at December 31, 1996. The market value of investment
securities
at March 31, 1997 was 100% of book value as compared with 101% at
December
31, 1996, reflecting a slight decline in the bond market.
Loans
The Company's lending strategy stresses quality growth,
diversified by
product, geography, and industry. A common credit underwriting
structure and
review process is in place throughout the Company.
Total loans decreased $2.8 million from $547.7 million at
December 31, 1996 to
$544.9 million at March 31, 1997. The loan to deposit ratio
decreased
slightly from 85% at December 31, 1996 to 83% at March 31, 1997.
Average total loans have increased $58.3 million over the last
twelve months,
due to the company's success in effectively competing with larger
regional
banks for small business customers both in and around the
company's primary
markets. The loan portfolio continues to be diversified among
loan types and
industry segments. Commercial and commercial real estate loans
represent
the largest portion of the portfolio, comprising $222.5 million
or 41% of
total loans at March 31, 1997 and $246.1 million or 45% of total
loans at
December 31, 1996. Residential real estate loans increased
slightly to
$180.3 million or 33% of the total portfolio at March 31, 1997 as
compared to
$171.5 million or 31% at December 31, 1996. Loans to individuals
also
increased slightly from $119.3 million or 22% of total loans at
December 31,
1996 to $122.1 million or 22% of total loans at March 31, 1997.
14
Non-Performing Assets
Non-performing assets are comprised of loans on non-accrual
status, loans
contractually past due 90 days or more and still accruing
interest and other
real estate owned (OREO). Non-performing assets were $14.7
million at March
31, 1997, or 2.7% of total loans and OREO, compared with $8.5
million or 1.5%
at December 31, 1996. The following schedule details non-
performing assets by
category at the close of each of the last five quarters:
(In Thousands) March 31 December 31 September 30 June 30 March
31
1997 1996 1996 1996 1996
Non-Accrual $7,096 $5,476 $6,620 $4,420 $4,650
Ninety Days Past Due 5,189 780 4,960 2,635 1,524
Other Real Estate Owned 2,450 2,225 1,969 2,309 1,590
$14,735 $8,481 $13,549 $9,364 $7,764
Restructured loans
performing in accordance
with modified terms$ 394$ 401$ 405$ 409 $ 436
Non-accrual loans and loans ninety days past due increased $1.6
million and
$4.4 million, respectively, when comparing March 31, 1997 and
December 31,
1996. The increase in non-accrual loans is due primarily to two
relationships. One is a restaurant chain, amounting to $430,000,
on which the
Company has begun foreclosure proceedings. The borrower is
seeking financing
elsewhere. The other relationship contributing to the increase
in non-accrual
loans is a trucking company, amounting to $674,000. The Company
is in the
process of liquidating the assets seized at foreclosure. The
increase in
ninety-days past due relates primarily to one relationship
totaling $4
million. This relationship, a local furniture manufacturer has
had a history
of delinquency. The Company recently loaned this firm an
additional $650,000
to provide working capital based on a forward takeout commitment
from another
lender.
Management believes that the extent of problem loans at March 31,
1997 is
disclosed as non-performing assets in the preceding chart.
However, there can
be no assurance that future circumstances, such as further
erosions in
economic conditions and the related potential effect that such
erosions may
have on certain borrowers' ability to continue to meet payment
obligations,
will not lead to an increase in problem loan totals. Management
further
believes that non-performing asset carrying values will be
substantially
recoverable after taking into consideration the adequacy of
applicable
collateral and, in certain cases, partial writedowns which have
been taken
and allowances that have been established.
Stockholders' Equity
Total stockholders' equity reached $90.6 million at March 31,
1997 increasing
$1.3 million over the $89.3 million reported for December 31,
1996. The
increase in stockholders' equity was the result of earnings net
of dividends
of $2.1 million. Partially offsetting this increase was a
decrease in the
unrealized gain (loss) on securities available for sale,
decreasing from an
unrealized gain of $433,000 at December 31, 1996 to an unrealized
loss of
$341,000 at March 31, 1997. The Federal Reserve's risk based
capital
guidelines and leverage ratio measure capital adequacy of banking
institutions. Risk-based capital guidelines weight balance sheet
assets
and off-balance commitments based on inherent risks associated
with the
respective asset types. At March 31, 1997, the company's risk
adjusted
capital-to-asset ratio was 17.48%. The company's leverage ratio
at March 31,
1997 was 10.27% compared with 10.33% at December 31, 1996. Both
the risk
adjusted capital-to-asset ratio and the leverage ratio exceed the
current
minimum levels prescribed for bank holding companies of 8% and
3%,
respectively.
15
Liquidity
The Company maintains a significant level of liquidity in the
form of cash and
due from bank balances ($29.8 million), investment securities
available for
sale ($128.9 million), federal funds sold ($9.8 million), and
Federal Home
Loan Bank of Pittsburgh credit availability of $173.2 million.
Cash advances
from the Federal Home Loan Bank of Pittsburgh are immediately
available for
satisfaction of deposit withdrawals, customer credit needs and
operations of
the Company. Investment securities available for sale represent
a secondary
level of liquidity available for conversions to liquid funds in
the event of
extraordinary needs.
FCFT, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) In the matter of Four Winds Development, Inc., W.
Stephen Melcher,
and E. T. Boggess, plaintiffs vs. First Community Bank and Dave
Shields
Company, Inc., defendants, the settlement and compromise which is
discussed in
the Company's 1996 Annual Report on Form 10-K has been completed
and agreed
to by all parties to the litigation as well as parties to the
related civil
matter and mechanics' lien action. The settlement and release
has been
executed by all parties and has been approved by written order by
the
ppropriate Bankruptcy Courts. The only remaining action to be
taken to
completely dispose of these matters is the dismissal of the civil
proceeding
in Mercer County, West Virginia Circuit Court. It is expected
that a court
order dismissing this matter will be issued by May 31, 1997.
Item 2. Changes in Securities
(a) N/A
(b) N/A
Item 3. Defaults Upon Senior Securities
(a) N/A
(b) N/A
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on April
8, 1997.
(b) The following directors were elected to serve a
three-year
term through the date of the 2000 Annual Meeting of Stockholders.
Votes For Votes Against Votes Withheld
James L. Harrison, Sr.3,331,797105,823 300
I. Norris Kantor 3,376,668 60,952 300
A.A. Modena3,414,346 23,274 300
William P. Stafford II3,330,940106,680 300
(c) The stockholders adopted the agreement of merger between
FCFT, Inc. and
a newly formed Nevada corporation formed solely to change the
corporate
domicile of FCFT, Inc. from Delaware to Nevada. This matter was
approved
with the affirmative vote of 3,175,436 shares. There were 62,889
negative
votes cast and 600 votes withheld.
16
(d) The accounting firm of Deloitte & Touche LLP was ratified
as
independent auditors for the 1997 fiscal year with the
affirmative vote of
3,393,902 shares. There were 43,918 negative votes cast and 100
votes
withheld.
Item 5. Other Information
(a) N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 15-Letter regarding unaudited interim financial
information
Exhibit 27- Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K regarding the Blue Ridge merger was filed
during the
second quarter of 1997.
17
EXHIBIT 15
May 14, 1997
To the Board of Directors and Stockholders
of FCFT, Inc.
Dear Sirs:
We have made a review, in accordance with standards established
by the
American Institute of Certified Public Accountants, of the
unaudited interim
financial information of FCFT, Inc. and subsidiaries for the
periods ended
March 31, 1997 and 1996, as indicated in our report dated April
25, 1997;
because we did not perform an audit, we expressed no opinion on
that
information.
We are aware that our report referred to above, which is included
in your
Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, is
incorporated by reference in Registration Statement No. 33-72616
on Form S-8.
We also are aware that the aforementioned report, pursuant to
Rule 436(c)
under the Securities Act of 1933, is not considered a part of the
Registration
Statement prepared or certified by an accountant or a report
prepared or
certified by an accountant within the meaning of Sections 7 and
11 of that
Act.
Yours truly,
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the
Registrant has duly caused this report to be signed on its behalf
by the
undersigned thereunto duly authorized.
FCFT, INC.
DATE: May 12, 1997
______________________________
James L. Harrison, Sr.
President & Chief Executive Officer
(Duly Authorized Officer)
DATE: May 12, 1997
______________________________
John M. Mendez
Vice President & Chief Financial Officer
(Principal Accounting Officer)
19