-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QGeIudmpVk2co8LzFGnnkzOZd+3lq727JnmGxsFpuEVGIGquGmrAJ5r7iPkhqJ5C MLZvEhWaIZg4z8VrTYxYLA== 0000903893-96-000425.txt : 19960701 0000903893-96-000425.hdr.sgml : 19960701 ACCESSION NUMBER: 0000903893-96-000425 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960628 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL CORP /RI/ CENTRAL INDEX KEY: 0000354948 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 050391383 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27878 FILM NUMBER: 96587726 BUSINESS ADDRESS: STREET 1: 180 WASHINGTON ST CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4014213600 10-Q 1 FORM 10-Q 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 For the quarterly period ended March 31, 1996 Commission file number 0-27878 FIRST FINANCIAL CORP. (Exact name of registrant as specified in its charter) RHODE ISLAND 05-0391383 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 180 WASHINGTON STREET, PROVIDENCE, RHODE ISLAND 02903 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 421-3600 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or l5(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 filing requirements for the past 90 days. Yes X No --- --- At June 24, 1996, there were 1,328,041 shares of the Company's $1.00 par value stock issued, with 1,261,241 shares outstanding. FIRST FINANCIAL CORP. INDEX PART I - FINANCIAL INFORMATION Item 1 - Financial Statements.....................................................................................1 Consolidated Balance Sheets - March 31, 1996 and December 31, 1995................................................1 Consolidated Statements of Income - Three months ended March 31, 1996 and 1995....................................2 Consolidated Statements of Stockholders' Equity - Three months ended March 31, 1996 and year ended December 31, 1995..................................................................3 Consolidated Statements of Cash Flows - Three months ended March 31, 1996 and 1995................................4 Notes to Consolidated Financial Statements - March 31, 1996.......................................................5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................................................6 PART II - OTHER INFORMATION Item 1 - Legal Proceedings.......................................................................................ll Item 2 - Changes in Securities...................................................................................ll Item 3 - Defaults Upon Senior Securities.........................................................................11 Item 4 - Submission of Matters to a Vote of Security Holders.....................................................11 Item 5 - Other Information.......................................................................................11 Item 6 - Exhibits and Reports on Form 8-K........................................................................12 SIGNATURES.......................................................................................................13 EXHIBITS Computation of per share earnings - Exhibit 11.............................................................14 Financial Data Schedule - Exhibit 27.......................................................................15
PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 1996 1995 ---- ---- ASSETS (Unaudited) CASH AND DUE FROM BANKS $1,733,183 $1,866,249 ----------- ------------ SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL 3,609,000 1,035,000 ----------- ------------ SECURITIES: Held-to-maturity (market value: $11,321,190 and $14,566,501) 11,400,521 14,644,165 Available-for sale (amortized cost: $13,007,273 and $15,006,743) 13,081,620 15,131,595 ----------- ------------ Total investment securities 24,482,141 29,775,760 ----------- ------------ FEDERAL HOME LOAN BANK STOCK 348,100 348,100 ----------- ------------ LOANS: Commercial 3,764,709 3,549,458 Commercial real estate 34,940,114 32,412,836 Residential real estate 23,364,111 23,657,622 Home equity lines of credit 3,461,822 3,671,892 Consumer 1,556,063 1,496,933 ----------- ------------ 67,086,819 64,788,741 Less - Unearned discount 76,794 88,141 Allowance for possible loan losses 1,757,797 1,828,040 ----------- ------------ Net loans 65,252,228 62,872,560 ----------- ------------ OTHER REAL ESTATE OWNED 1,265,310 1,470,310 ----------- ------------ PREMISES AND EQUIPMENT, net 1,781,502 1,816,893 ----------- ------------ OTHER ASSETS 1,288,594 1,118,950 ----------- ------------ TOTAL ASSETS $99,760,058 $100,303,822 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Demand $9,663,318 $12,483,433 Savings and money market accounts 23,914,312 24,191,981 Time deposits 55,262,373 52,915,128 ----------- ------------ Total deposits 88,840,003 89,590,542 ----------- ------------ ACCRUED EXPENSES AND OTHER LIABILITIES 672,452 677,059 ----------- ------------ SENIOR DEBENTURE, net of Unamortized discount of $93,274 and $155,368 2,906,726 2,844,632 ----------- ------------ STOCKHOLDERS' EQUITY Common Stock, $1 par value Authorized- 5,000,000 shares Issued- 750,000 shares 750,000 750,000 Surplus 500,000 500,000 Retained earnings 6,193,230 6,013,638 Unrealized gain on securities available-for-sale, net of taxes 44,607 74,911 ----------- ------------ 7,487,837 7,338,549 Less - Treasury stock, at cost, 66,800 shares 146,960 146,960 ----------- ------------ Total stockholders' equity 7,340,877 7,191,589 ----------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,760,058 $100,303,822 =========== ============
The accompanying notes are an integral part of these consolidated financial statements. 1 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, --------- 1996 1995 ---- ---- (UNAUDITED) INTEREST INCOME: Interest and fees on loans $1,621,750 $1,452,286 Interest on investment securities - U.S. Government and agency obligations 332,363 319,015 Collateralized mortgage obligations 26,925 38,075 Marketable equity securities and other 1,638 300 Interest on cash equivalents 40,571 34,558 ---------- ---------- Total interest income 2,023,247 1,844,234 ---------- ---------- INTEREST EXPENSE: Interest on deposits 908,131 766,868 Interest on debenture 62,094 45,741 ---------- ---------- Total interest expense 970,225 812,609 ---------- ---------- Net interest income 1,053,022 1,031,625 PROVISION FOR POSSIBLE LOAN LOSSES 70,000 105,000 ---------- ---------- Net interest income after provision for possible loan losses 983,022 926,625 ---------- ---------- NONINTEREST INCOME: Service charges on deposits 75,165 67,184 Gain on loan sales -------- --------- Other 36,656 42,343 ---------- ---------- Total noninterest income 111,821 109,527 ---------- ---------- NONINTEREST EXPENSE: Salaries and employee benefits 419,933 389,925 Occupancy expense 99,416 83,036 Equipment expense 51,526 54,134 Other real estate owned (gains) losses, and expenses 28,089 (9,369) Computer services 41,890 35,310 Deposit insurance assessments -------- 46,011 Other operating expenses 167,014 148,034 ---------- ---------- Total noninterest expense 807,868 747,081 ---------- ---------- Income before provision for income taxes 286,975 289,071 PROVISION FOR INCOME TAXES 86,887 100,448 ---------- ---------- Net income $200,088 $188,623 ========== ========== Earnings per share $ 0.28 $ 0.26 ========== ========== Dividends paid per share $ 0.03 $ ------- ========== ========== Weighted average common and common stock equivalent shares outstanding 711,483 728,215 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE TOTAL COMMON RETAINED FOR SALE, NET TREASURY STOCKHOLDERS' STOCK SURPLUS EARNINGS OF TAXES STOCK EQUITY ----- ------- -------- -------- ----- ------ Balance, December 31, 1994 $750,000 $500,000 $5,571,013 $(114,893) $(146,960) $6,559,160 Net income ----------- ----------- 517,777 ------------- ------------- 517,777 Dividends ($.11 per share) ----------- ----------- (75,152) ------------- ------------- (75,152) Change in net unrealized gain (loss) on securities available-for-sale ----------- ----------- -------------- 189,804 ------------- 189,804 ----------- ----------- -------------- ------------- ------------- ---------- Balance, December 31, 1995 750,000 500,000 6,013,638 74,911 (146,960) 7,191,589 Net income ----------- ----------- 200,088 ------------- ------------- 200,088 Dividends ($.03 per share) ----------- ----------- (20,496) ------------- ------------- (20,496) Change in net unrealized gain (loss) on securities available-for-sale ----------- ----------- -------------- (30,304) ------------- (30,304) ----------- ----------- -------------- ------------- ------------- ---------- Balance, March 31, 1996 $750,000 $500,000 $6,193,230 $44,607 $(146,960) $7,340,877 =========== =========== ============== ============= ============= ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, ---------------------------- 1996 1995 ---- ---- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $200,088 $188,623 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan losses 70,000 105,000 Depreciation and amortization 46,363 40,646 Losses (gains) on sale of OREO (8,384) (22,561) Gain on sales of loans --------- --------- Proceeds from sales of loans 219,683 905,305 Loans originated for sale (203,710) (826,250) Net (accretion) amortization on investment securities held-to-maturity (1,057) 2,059 Net (accretion) on investment securities available-for-sale (16,161) (13,291) Net (decrease) increase in unearned discount (11,347) 1,088 Net (increase) decrease in other assets (169,644) 45,823 Accretion of discount on debenture 62,094 45,741 Net (decrease) increase in deferred loan fees (5,630) (2,783) Net increase (decrease) in accrued expenses and other liabilities 15,595 163,582 ---------- ---------- Net cash provided by operating activities 197,890 632,982 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Federal Home Loan Bank stock ---------- --------- Proceeds from maturities of investment securities held-to-maturity 6,247,088 169,436 Proceeds from maturities of investment securities available-for-sale 5,900,000 6,600,000 Purchase of investment securities held-to-maturity (1,998,202) (1,644,895) Purchase of investment securities available-for-sale (4,888,555) (5,486,446) Net increase in loans (2,451,664) (1,134,866) Purchase of premises and equipment (10,972) (27,488) Sales of OREO 216,384 132,561 ---------- ---------- Net cash provided by (used in) investing activities 3,014,079 (1,391,698) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in demand accounts (2,820,115) (792,216) Net (decrease) increase in savings and money market accounts (277,669) (2,527,923) Net increase in time deposits 2,347,245 4,058,502 Dividends paid (20,496) ----------- ---------- ---------- Net cash (used in) provided by financing activities (771,035) 738,363 ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,440,934 (20,353) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,901,249 4,807,584 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $5,342,183 $4,787,231 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $879,371 $723,267 ========== ========== Income taxes paid $82,750 $21,250 ========== ========== SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: Transfer of loans to OREO $3,000 $231,169 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1996 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996 or any other interim period. These statements should be read in conjunction with the consolidated financial statements, notes and other information included in the Company's Registration Statement on Form S-1 (File No. 333-1654), as amended, declared effective by the Securities and Exchange Commission on May 13, 1996 (see Note 2 below). (2) PUBLIC OFFERING On May 13, 1996, the Securities and Exchange Commission simultaneously declared effective the Company's Registration Statement on Form S-1 filed under the Securities Act of 1933, as amended and its Registration Statement on Form 8-A filed under the Securities Exchange Act of 1934, as amended. The Registration Statement related to the public offering of 550,000 shares of Common Stock. On May 13, 1996 the Company entered into an Underwriting Agreement with Sandler O'Neill & Partners, L.P. (Underwriter) to purchase from the Company the shares of the Common Stock at the public offering price of $9.75 per share, less an underwriting discount of $.58 per share. On May 17, 1996, the Company received from the Underwriter the net proceeds of the public offering in the amount of $5,043,500 exclusive of approximately $450,000 in expenses incurred in connection with the offering, while the number of common shares outstanding increased to 1,261,241 shares; including 28,041 shares issued in connection with the exercise of certain stock options. (3) DIVIDEND DECLARATION On May 20, 1996 the Company declared dividends of $37,837 or $.03 per share to all common stockholders of record on June 17, 1996. The dividend is to be paid on July 2, 1996. 5 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL First Financial Corp. ("Company") is a bank holding company that was organized under Rhode Island law in 1980 for the purposes of owning all of the outstanding capital stock of First Bank and Trust Company ("Bank") and providing greater flexibility in helping the Bank achieve its business objectives. The Bank is a Rhode Island chartered commercial bank that was originally chartered and opened for business on February 14, 1972. The Bank provides a broad range of lending and deposit products primarily to individuals and small businesses ($10 million or less in total revenues). Although the Bank has full commercial banking and trust powers, it has not exercised its trust powers and does not, at the current time, provide asset management or trust administration services. The Bank's deposits are insured by the FDIC up to applicable limits. The Bank offers a variety of consumer financial products and services designed to satisfy the deposit and loan needs of its retail customers. The Bank's retail products include interest-bearing and noninterest-bearing checking accounts, money market accounts, passbook and statement savings, club accounts, and short-term and long-term certificates of deposit. The Bank also offers customary check collection services, wire transfers, safe deposit box rentals, and automated teller machine (ATM) cards and services. Loan products include commercial, commercial mortgage, residential mortgage, construction, home equity and a variety of consumer loans. The Company's results of operations depend primarily on its net interest income, which is the difference between interest and dividend income on interest-earning assets and interest expense on its interest-bearing liabilities. Its interest-earning assets consist primarily of deposits and the Senior Debenture. The Company's net-income is also affected by its level of non-interest income, including fees and service charges, as well as by its non-interest expenses, such as salary and employee benefits, provisions to the allowance for possible loan losses, occupancy costs and, when necessary, expenses related to OREO and to the administration of non-performing and other classified assets. SUMMARY Total assets decreased $543,764 or 0.5% from $100,303,822 at December 31, 1995 to $99,760,058 at March 31, 1996. The loan portfolio increased $2,298,078 or 3.6% from $64,788,741 at December 31, 1995 to $67,086,819 at March 31, 1996. The loan growth was primarily funded from Securities and Cash and Cash Equivalents which decreased $2,852,685 from $32,677,009 at December 31, 1995 to $29,824,324 at March 31, 1996. Total deposits decreased $750,539 from $89,590,542 at December 31, 1995 to $88,840,003 at March 31, 1996. For the three months ended March 31, 1996, the Company reported net income of $200,088 compared to net income of $188,623 for the three months ended March 31, 1995, or an increase of 6.1%. Fully diluted net income per share for the quarter ended March 31, 1996 was $.28, an increase of 7.7% from $.26 per share in the first quarter of 1995. The Company's improved earnings performance resulted from (i) increased loan originations and (ii) improvement in asset quality reflected by decreases in nonperforming loans, nonperforming assets, delinquent loans, net loan charge-offs, and increases in the percentage of the allowance for possible loan losses to total loans and to nonperforming loans. 6 FINANCIAL CONDITION ASSET QUALITY The following table sets forth information regarding non-performing assets and delinquent loans 30-89 days past due as to interest or principal, and held by the Company at the dates indicated. The amounts and ratios shown are exclusive of the acquired loans and acquired allowance for possible loan losses associated with the 1992 acquisition of certain assets and the assumption of certain liabilities of the former Chariho-Exeter Credit Union:
AS OF AND FOR THE AS OF AND FOR THE THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, --------- ------------ 1996 1995 1995 ---- ---- ---- (DOLLARS IN THOUSANDS) Nonperforming loans $ 515 $ 787 $ 536 Other real estate owned $1,265 $1,066 $1,470 Total nonperforming assets $1,780 $1,853 $2,006 Loans 30-89 days delinquent $ 250 $1,050 $ 266 Nonperforming assets to total assets 1.78% 1.97% 2.11% Nonperforming loans to total loans 0.77% 1.33% 0.91% Net loan charge-offs to average loans 0.08% 0.32% 1.01% Allowance for possible loan losses to total loans 1.45% 1.35% 1.47% Allowance for possible loan losses to nonperforming loans 172.06% 89.15% 160.63%
The following represents the activity in the allowance for possible loan losses for the three months ended March 31, 1996:
BANK ACQUIRED TOTAL ---- -------- ----- Balance at December 31, 1995 $861,693 $966,347 $1,828,040 Provision for Possible loan losses 70,000 -------- 70,000 Charge-offs (47,130) (98,481) (145,611) Recoveries 978 4,390 5,368 -------- -------- ---------- Balance at March 31, 1996 $885,541 $872,256 $1,757,797 ======== ======== ==========
The Company continually reviews its delinquency position, underwriting and appraisal procedures, charge-off experience and current real estate market conditions with respect to its entire loan portfolio. While management believes it uses the best information available in establishing the allowance for possible loan losses, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. DEPOSITS Total deposits decreased $750,539 during the three months ended March 31, 1996 from $89,590,542 at December 31, 1995, to $88,840,003 at March 31, 1996, primarily due to approximately $1,900,000 of volatile state and municipal demand deposits being withdrawn from the Company. At March 31, 1996 the Company held state and municipal demand deposits of $387,212. Savings and money market accounts remained relatively flat during the three months ended March 31, 1996, while time deposits increased $2,347,255 during the same period. 7 RESULTS OF OPERATIONS NET INTEREST INCOME Net interest income (the difference between interest earned on loans and investments and interest paid on deposits and other borrowings) increased to $1,053,022 at March 31, 1996, compared to $1,031,625 for the first quarter of 1995. This increase was the result of an increase in interest earning assets which was partially offset by a decrease in net interest margin. The table below shows the average balance sheet, the interest earned and paid on interest earning assets and interest-bearing liabilities, and the resulting net interest spread and margin for the periods presented.
THREE MONTHS ENDED MARCH 31, ---------------------------- 1996 1995 ---- ---- INTEREST AVERAGE INCREASE AVERAGE AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ------- ------- ---- ------- ------- ---- (DOLLARS IN THOUSANDS) INTEREST EARNING ASSETS: Loans $65,773 $1,621 9.86% $59,660 $1,452 9.74% Investment securities taxable - AFS 12,169 191 6.28 12,536 164 5.23 Investment securities taxable - HTM 12,667 169 5.34 14,247 194 5.45 Securities purchased under agreement to resell 3,260 41 5.03 2,661 34 5.11 Federal Home Loan Bank Stock 348 1 1.15 ------- ------- ----- ------- ------ ---- ------- ------ ---- TOTAL INTEREST-EARNING ASSETS 94,217 2,023 8.59 89,104 1,844 8.28 ------ ---- ------ ---- NONINTEREST-EARNING ASSETS: Cash and due from banks 1,827 2,238 Premises and equipment 1,805 1,828 Other real estate owned 1,391 963 Allowance for possible loan losses (1,858) (2,282) Other assets 1,021 789 ------- ------- TOTAL NONINTEREST-EARNING ASSETS 4,186 3,536 ------- ------- TOTAL ASSETS $98,403 $92,640 ======= ======= INTEREST BEARING LIABILITIES: Deposits: Interest bearing demand and NOW deposits $2,414 12 1.99 $2,963 16 2.16 Savings deposits 19,626 129 2.63 25,266 164 2.60 Money market deposits 1,754 10 2.28 2,521 17 2.70 Time deposits 52,890 757 5.73 40,913 570 5.57 Senior debenture 2,876 62 8.62 2,759 46 6.66 ------- ------ ---- ------- ------ ---- TOTAL INTEREST-BEARING LIABILITIES 79,560 970 4.88 74,422 813 4.37 ------ ---- ------ ---- NONINTEREST-BEARING LIABILITIES: Noninterest-bearing deposits 10,943 11,073 Other liabilities 632 448 ------- ------- TOTAL NONINTEREST-BEARING LIABILITIES 11,575 11,521 STOCKHOLDERS' EQUITY 7,268 6,697 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $98,403 $92,640 ======= ======= NET INTEREST INCOME $1,053 $1,031 ====== ====== NET INTEREST SPREAD 3.71% 3.91% ==== ==== NET INTEREST MARGIN 4.47% 4.63% ==== ====
8 Total interest income for the three months ended March 31, 1996 was $2,023,247, compared to $1,844,234 for the same period of the prior year. This increase of $179,013, or 9.7%, was attributable primarily to a $5,113,000, or 5.7% increase in average interest-earning assets, which included a $6,113,000, or 10.2% increase in average loan balances. This increase in higher yielding average loan balances, combined with an increase in investment securities' yields, resulted in an overall increase of .31% in the yield on interest-earning assets. Yields on investment securities increased primarily as a result of the relatively short duration of the portfolio and the ability to reinvest or reprice in a rising rate environment. Total interest expense for the three months ended March 31, 1996 was $970,225, compared to $812,609 for the same period of the prior year. This increase of $157,616, or 19.4%, was due primarily to an increase of .51% in average cost of funds, and a $5,138,000 increase in interest-bearing liabilities. The increase in the average cost of funds is primarily attributable to: (i) the shifting of existing core savings deposits into higher yielding time deposits; and (ii) the gathering of new deposits into higher yielding time deposits. PROVISION FOR POSSIBLE LOAN LOSSES The provision for possible loan losses totaled $70,000 for the three months ended March 31, 1996, as compared to $105,000 during the same period of the prior year. The decrease in the provision reflects the improvement in the Company's asset quality. NONINTEREST INCOME Total noninterest income totaled $111,821 for the three months ended March 31, 1996 as compared to $109,527 during the same period of the prior year. Service charges on deposits increased $7,981 primarily due to increased volumes in transaction accounts. NONINTEREST EXPENSE Total noninterest expense increased $60,787 or 8.1% to $807,868 from $747,081 during the three month period ended March 31, 1996 and March 31, 1995, respectively. Salaries and employee benefits increased $30,008 from $389,925 to $419,933. This increase is primarily attributed to the adoption of a Supplemental Executive Retirement Plan at the end of 1995 and the addition of a commercial loan officer at the end of the first quarter of 1995. Occupancy expense increased $16,380 mainly due to abnormally high snow removal costs during the three months ended March 31, 1996. Carrying and disposition costs associated with a larger OREO portfolio accounts for the $37,458 increase in OREO expenses. Deposit insurance premiums paid to the FDIC decreased $46,011 as a result of the reduction in deposit assessments. Other operating expenses increased $18,980 due to increased focus on marketing, advertising and public relations. INCOME TAXES Income taxes for the three months ended March 31, 1996 were 30.3% of pretax income, compared to 34.7% for the comparable period of 1995. The lower effective tax rate was the result of the reversal of excess federal tax reserves. 9 CAPITAL ADEQUACY The FDIC and the Federal Reserve Board have established guidelines with respect to the maintenance of appropriate levels of capital by both the Bank and the Company. Set forth below is a summary of FDIC and Federal Reserve Board capital requirements, and the Company's and the Bank's capital ratios as of March 31, 1996:
REGULATORY MINIMUM (2) ACTUAL ----------- ------ The Company (1) Risk-based: Tier 1 4.00% 10.17% Totals 8.00 11.42 Leverage 3.00 7.08 The Bank Risk-based: Tier 1 4.00% 14.97% Totals 8.00 16.22 Leverage 3.00 10.46
- ------------------- (1) The regulatory capital guidelines with respect to bank holding companies are not applicable unless the bank holding company has either consolidated assets in excess of $150 million or either: (i) engages in any bank activity involving significant leverage; or (ii) has a significant amount of outstanding debt that is held by the general public. Otherwise, the Federal Reserve Board applies its capital adequacy requirements on a "bank only" basis. (2) The 3% regulatory minimum leverage ratio applies only to certain highly-rated banks. Other institutions are subject to higher requirements. 10 ASSET/LIABILITY MANAGEMENT The Company's objective with respect to asset/liability management is to position the Company so that sudden changes in interest rates do not have a material impact on net interest income and stockholders' equity. The primary objective is to manage the assets and liabilities to provide for profitability and capital at prudent levels of liquidity and interest rate, credit, and market risk. The Company uses a static gap measurement as well as a modeling approach to review its level of interest rate risk. The internal targets established by the Company are to maintain: (i) a static gap of no more than a positive 10% or negative 15% of total assets at the one year time frame; (ii) a change in economic market value from base present value of no more than positive or negative 30%; and (iii) a change in net interest income from base of no more than positive or negative 17%. At March 31, 1996, the Company's one year static gap position was a negative $9,226,000 or 9.2% of total assets. LIQUIDITY Deposits and borrowings are the principal sources of funds for use in investing, lending and for general business purposes. Loan and investment amortization and prepayments provide additional significant cash flows. At March 31, 1996, the Company had $18,423,803, or 18.4% of assets in cash and cash equivalents and investments classified available-for-sale. The Bank is a member of the Federal Home Loan Bank of Boston, and as such has access to an unused borrowing capacity of $4,525,300 at March 31, 1996. PART II - OTHER INFORMATION ITEM 1- LEGAL PROCEEDINGS The Company and the Bank are involved in routine legal proceedings occurring in the ordinary course of business. In the opinion of management, final disposition of these lawsuits will not have a material adverse effect on the financial condition or results of operations of the Company or the Bank in the aggregate. 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 Not applicable. ITEM 5 - OTHER INFORMATION Not applicable. 11 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NUMBER DESCRIPTION -------------- ----------- 11 Computation of Per Share Earnings 27 Financial Data Schedule (b) Reports on Form 8-K None 12 SIGNATURES Under 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 Corp. June 24, 1996 \s\ Patrick J. Shanahan, Jr. - ------------- ---------------------------------------------- Date Patrick J. Shanahan, Jr. President and Chief Executive Officer June 24, 1996 \s\ John A. Macomber - ------------- ---------------------------------------------- Date John A. Macomber Vice President, Treasurer and Chief Financial Officer 13 EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBITS Computation of per share earnings - Exhibit 11 THREE MONTHS ENDED MARCH 31, --------- 1996 1995 ---- ---- Average shares outstanding 683,200 683,200 Average dilutive option shares 28,283 45,015 -------- -------- Total average shares 711,483 728,215 ======== ======== Net income $200,088 $188,623 ======== ======== Earnings per share $ 0.28 $ 0.26 ======== ======== 14 EX-27 3 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-1996 MAR-31-1996 1,733,183 0 3,609,000 0 13,081,620 11,400,521 11,321,190 67,010,025 1,757,797 99,760,058 88,840,003 0 672,452 2,906,726 0 0 750,000 6,590,877 99,760,058 1,621,750 401,497 0 2,023,247 908,131 970,225 1,053,022 70,000 0 807,868 286,975 286,975 0 0 200,088 0.28 0.28 4.47 498,084 16,584 0 1,459,694 1,828,040 145,611 5,368 1,757,797 1,757,797 0 0
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