FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FIRST FINANCIAL CORPORATION
June 30, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
Commission File Number 0-16759
FIRST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1546989
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
One First Financial Plaza, Terre Haute, IN 47807
(Address of principal executive office) (Zip Code)
(812)-238-6000
(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 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 .
As of June 30, 1995 were outstanding 5,771,347 shares without par value, of the
registrant.
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FIRST FINANCIAL CORPORATION
FORM 10-Q
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Statements of Condition............................3
Consolidated Statements of Income...............................4
Consolidated Statements of Cash Flows...........................5
Notes to Consolidated Financial Statements......................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............7
PART II. Other Information:
Item 4. Submission of Matters to a Vote of
Security Holders..........................................9
Signatures...........................................................10
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FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
June 30, December 31,
1995 1994
(Dollar amounts in thousands)
Cash and due from banks $48,628 $51,947
Federal funds sold and securities purchased under
agreements to resell 5,855 23,725
Investments:
Held to Maturity (market value of $177,716 and
$168,879, respectively) 176,586 174,646
Available-For-Sale 206,608 178,272
Loans:
Commercial, financial and agricultural 162,004 163,268
Real estate - construction 22,218 20,446
Real estate - mortgage 441,761 424,427
Installment 196,530 185,533
Lease financing 4,767 5,259
827,280 798,933
Less:
Unearned income 1,437 1,882
Allowance for possible loan losses 10,401 9,649
815,442 787,402
Accrued interest receivable 9,991 9,704
Premises and equipment 20,744 20,011
Other assets 12,635 14,132
TOTAL ASSETS 1,296,489 1,259,839
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposit:
Noninterest-bearing $119,107 $125,106
Interest-bearing:
Certificates of deposit of $100,000 or more 97,514 109,306
Other interest-bearing deposits 820,973 758,954
1,037,594 993,366
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 54,073 66,685
Treasury tax and loan open-end note 9,600 5,406
Advances from Federal Home Loan Bank 41,197 46,272
104,870 118,363
Other liabilities 11,206 9,919
Long-term debt 6,659 7,470
Long-term advances from Federal Home Loan Bank 16,172 18,168
TOTAL LIABILITIES 1,176,501 1,147,286
Shareholders' equity:
Common stock, $.125 stated value per share;
authorized 10,000,000 shares; issued
5,815,857 shares for 1995 and 1994, including treasury 727 693
shares of 44,510 for 1995 and 19,600 for 1994.
Additional capital 33,150 25,498
Retained earnings 85,794 89,399
Unrealized gains(losses) on AFS securities, net of tax 1,712 (2,429)
Less treasury shares, at cost (1,395) (608)
TOTAL SHAREHOLDERS' EQUITY 119,988 112,553
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,296,489 $1,259,839
The accompanying notes are an integral part of the consolidated financial statements.
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FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months ended
June 30, June 30,
1995 1994 1995 1994
(Amounts in thousands, except per share amounts)
INTEREST INCOME:
Loans $17,949 $15,196 $34,959 $29,950
Investment securities:
Taxable 4,401 3,741 8,867 7,579
Tax-exempt 1,789 1,612 3,549 3,203
6,190 5,353 12,416 10,782
Other interest income 173 83 364 167
TOTAL INTEREST INCOME 24,312 20,632 47,739 40,899
INTEREST EXPENSE:
Deposits 10,624 7,828 20,556 15,551
Other 1,691 1,163 3,591 2,355
TOTAL INTEREST EXPENSE 12,315 8,991 24,147 17,906
NET INTEREST INCOME 11,997 11,641 23,592 22,993
Provision for possible
loan losses 540 430 1,080 1,393
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES 11,457 11,211 22,512 21,600
OTHER INCOME
Trust department income 361 322 676 593
Service charges on deposit
accounts 301 300 590 600
Other service charges and fees 784 662 1,562 1,298
Investment securities gains
(losses) (30) (53) (24) 18
Other 335 731 626 1,049
1,751 1,962 3,430 3,558
OTHER EXPENSES
Salaries and employee benefits 4,532 4,378 8,860 8,697
Occupancy expense 646 652 1,279 1,121
Equipment expense 507 516 1,003 1,012
Data processing expense 489 467 1,024 953
FDIC insurance expense 544 548 1,087 1,094
Other 2,386 2,324 4,839 4,591
9,104 8,885 18,092 17,468
INCOME BEFORE INCOME TAXES 4,104 4,288 7,850 7,690
Income Tax Expense 1,117 1,167 2,143 2,059
NET INCOME $2,987 $3,121 $5,707 $5,631
EARNINGS PER SHARE: $0.52 $0.54 $0.99 $0.97
Weighted average number of
shares outstanding 5,771 5,818 5,771 5,818
The accompanying notes are an integral part of the consolidated financial statements.
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FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,707 $5,631
Adjustment to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 1,080 1,393
Provision for depreciation and amortization 1,169 1,180
Net (increase) decrease in accrued interest receivable (287) 57
Other, net (1,175) 483
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,494 8,744
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase (decrease) from purchases and maturities of
interest-bearing deposits with financial institutions 0 685
Sales and maturities of investment securities 0 151,829
Maturities of held-to-maturity securities 31,787 0
Sales and maturities of available-for-sale securities 20,466 0
Purchases of investment securities 0 (150,531)
Purchases of investment securities:
Held-to-maturity security (12,961) 0
Available-for-sale security (61,837) 0
Loans made to customers, net of repayments (29,109) (25,110)
Net decrease in federal funds sold 17,870 21,125
Additions to premises and equipment (1,623) (807)
NET CASH USED BY INVESTING ACTIVITIES (35,407) (2,809)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase from sales and
redemptions of certificates of deposit 83,065 7,049
Net decrease in other deposits (38,837) (10,363)
Net increase (decrease) in short-term borrowings (13,494) 9,117
Cash dividends (1,546) (1,469)
Proceeds from reissuance of Treasury Stock 525 0
Purchase of treasury stock (1,312) 0
Net decrease from long-term debt (2,801) (5,983)
Repayments of long-term debt (6) (86)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 25,594 (1,735)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,319) 4,200
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 51,947 43,460
CASH AND CASH EQUIVALENTS, END OF PERIOD $48,628 $47,660
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $22,498 $17,758
Income taxes paid $2,527 $1,580
The accompanying notes are an integral part of the consolidated financial statements.
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FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Accounting Policies
The accompanying June 30, 1995 and 1994 consolidated financial
statements are unaudited. The December 31, 1994, consolidated statement of
condition amounts are as reported in the Corporation's 1994 annual report.
The significant accounting policies followed by First Financial
Corporation and its subsidiaries for interim financial reporting are
consistent with the accounting policies followed for annual financial
reporting. All adjustments which are in the opinion of management necessary
for a fair statement of the results for the periods reported have been
included in the accompanying consolidated financial statements and are of a
normal recurring nature.
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FIRST FINANCIAL CORPORATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The purpose of the review is to point out key factors in First
Financial's recent performance, compared with earlier periods. The review
should be read in conjunction with the financial statements beginning on Page
3 of this report. All figures are for the consolidated entities. It is
presumed the readers of these financial statements and the following narrative
have previously read the Corporation's annual report for 1994.
At the May 16, 1995 meeting, the Board of Directors approved a 5% stock
dividend to shareholders of record June 20, 1995. This stock dividend is
reflected in the accompanying financial statements.
Earnings Analysis
Summary of Operating Results
For the first half of 1995 the Corporation reported that earnings had
increased to $5.7 million or $.99 per share from $5.6 million or $.97 per
share in the prior year. The net income for the second quarter was $267,000
or 9.8% above the first quarter of 1995.
For the second quarter of 1995 net income as compared to the second quarter
of 1994 was down slightly because of a one-time insurance recovery of
$425,000 in 1994.
Net Interest Income
First Financial Corporation's primary source of earnings is net interest
income, which is the difference between the interest earned on loans and other
investments and the interest incurred for deposits and other sources of funds.
The spread in net interest margin decreased in the first six months of 1995 as
compared to same period of 1994, thereby causing a decrease from 4.32% for the
same quarter of 1994 to 4.22% in 1995.
Although net interest income increased $356,000 or 3.0% as compared to
the same period of 1994, the spread in interest rates for the second quarter
decreased from 4.38% in 1994 to 4.27% in 1995. This decrease was caused by a
higher cost paid for interest bearing liabilities as the result of more
competition for funds.
Other Income
Other income for the six months of 1995, as compared to the same period
of 1994, decreased $128,000 or 3.6%. The major contributing factor was the
recovery of $425,000 in 1994 from previous losses. This also affected second
quarter other income which went down to $.52 per share from $.54 per share.
There were no other significant changes.
Other Expenses
For the first six months of 1995, other expenses increased 3.6% or
$624,000. Occupancy expense increased from $1,121,000 to $1,279,000 due to
increased facilities cost resulting from the acquisition of a new operations
building.
Other expenses for the three months ended June 30, 1995, were up
$219,000 or 2.5%. These increases are primarily the result of the
Corporation's overall growth.
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Analysis of Financial Condition
Allowance for Possible Loan Losses
The Corporation's provision for possible loan losses totaled $1,080,000
for the first half of 1995 compared to $1,393,000 for the same period a year
earlier. The decreased provision is the result of fewer non-performing loans
and an overall improvement in loan quality.
At June 30, 1995, the allowance for possible loan losses was 1.26% of
total loans, net of unearned income. This compares with an allowance of 1.21%
at December 31, 1994. Net charge-offs for the first six months of 1995 were
$324,000 compared to $1,219,000 for the same period of 1994. The ratio of net
charge-offs to average loans outstanding for the last five years ended
December 31, 1994, was .43%. With this experience and based on management's
review of the portfolio, management believes the allowance of $10,401,000 at
June 30, 1995 is adequate.
Liquidity and Interest Rate Sensitivity
The Corporation's objective in liquidity management is to manage the
assets and liabilities to meet the needs of borrowers while allowing for the
possibility of deposit withdrawals.
Part of the strategy in maintaining a satisfactory level of liquidity is
to structure a maturity schedule for the investment and loan portfolios that
will allow for fluctuations in the availability of funds. Within the next
twelve months $107,416,000 of investments will mature which represents 27.9%
of the investment portfolio. Investments with maturities of one to five years
comprise an additional 48.2% of the investment portfolio.
The investment maturities along with the normal run-off of loans coupled
with a large supply of unpledged securities for repurchase agreements, federal
funds purchased, additional negotiable certificates of deposits, and other
available borrowings affords the Corporation flexibility in funding loan
growth and meeting other market opportunities as they present themselves.
During the next twelve months the Corporation will either reprice or
mature a total of $470,538,000 of assets. In this same period a total of
$513,996,000 of liabilities will either be repriced or mature. Thus, the
ratio of rate sensitive assets to rate sensitive liabilities as measured on a
static basis, is 92% as June 30, 1995. The Corporation will continue to
monitor this relationship to determine if it is appropriate to maintain a
satisfactory level of net interest margin, while considering interest rate
sensitivity.
Capital Adequacy
As of June 30, 1995, the Corporation's leverage ratio was 9.14% which
compared 9.30% at December 31, 1994.
At June 30, 1995, the Corporation's tier II capital ratio was 15.27%
compared to 15.30% at December 31, 1994.
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FIRST FINANCIAL CORPORATION
PART II OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Annual meeting of the shareholders of the Corporation
was held on April 19, 1995.
(b) The following were elected Directors of the Corporation:
Walter A. Bledsoe, B. Guille Cox, Jr., Thomas T. Dinkel,
Welby M. Frantz, Anton Hulman George, Mari Hulman George,
Gregory L. Gibson, Max Gibson, Norman L. Lowery, William
Niemeyer, Patrick O'Leary, John W. Ragle, Chapman J. Root II,
Donald E. Smith, and Virginia Smith.
(c) The shareholders unanimously approved the anual report of
the Corporation and unanimously approved the actions of the
Directors and Officers of the Corporation for the fiscal
year ended December 31, 1994.
No other information is required to be filed under Part II of this form.
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FIRST FINANCIAL CORPORATION
FORM 10-Q
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.
FIRST FINANCIAL CORPORATION
(Registrant)
Date: August 11, 1995 By (Signature)
Donald E. Smith, President
Date: August 11, 1995 By (Signature)
John W. Perry, Secretary
Date: August 11, 1995 By (Signature)
Michael A. Carty, Treasurer
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