-----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, IRm9I8Jz8cdCfU6HFsQMoBrMomfFMZHfUJdV2a62hG5uDNSNk1K9iNX9LdLGNmos JuKKDHnfwWUpaAf7Zl222A== 0000903893-97-001068.txt : 19970814 0000903893-97-001068.hdr.sgml : 19970814 ACCESSION NUMBER: 0000903893-97-001068 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97658275 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 JUNE 30, 1997 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 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 filing requirements for the past 90 days. X Yes No - -------- ------- At July 31, 1997, 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
PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements ......................................................... 1 Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 .................... 1 Consolidated Statements of Income - Three months and six months ended June 30, 1997 and 1996 ............................................................................. 2 Consolidated Statements of Stockholders' Equity - Six months ended June 30, 1997 and year ended December 31, 1996 ................................... 3 Consolidated Statements of Cash Flows - Six months ended June 30, 1997 and 1996 ....... 4 Notes to Consolidated Financial Statements - June 30, 1997 ............................ 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................................. 6 PART II - OTHER INFORMATION Item 1 - Legal Proceedings ............................................................ 13 Item 2 - Changes in Securities ........................................................ 13 Item 3 - Defaults Upon Senior Securities .............................................. 13 Item 4 - Submission of Matters to a Vote of Security Holders .......................... 13 Item 5 - Other Information ............................................................ 14 Item 6 - Exhibits and Reports on Form 8-K ............................................. 14 SIGNATURES ............................................................................ 15 EXHIBITS Computation of per share earnings - Exhibit 11 ........................................ 16 Financial Data Schedule - Exhibit 27 .................................................. 17
PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 1997 1996 ---- ---- (UNAUDITED) ASSETS CASH AND DUE FROM BANKS ............................................ $ 3,575,697 $ 1,988,713 SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL .................... 1,478,000 2,376,000 LOANS HELD FOR SALE ................................................ -- 160,000 SECURITIES: Held-to-maturity (market value: $11,642,824 and $13,747,464) ... 11,664,939 13,780,519 Available-for sale (amortized cost: $25,847,636 and $28,354,439) 25,940,510 28,411,326 ------------ ------------ Total investment securities ............................ 37,605,449 42,191,845 FEDERAL HOME LOAN BANK STOCK ....................................... 447,700 348,100 LOANS: Commercial ..................................................... 6,007,343 5,074,679 Commercial real estate ......................................... 43,716,764 40,225,717 Residential real estate ........................................ 22,187,439 22,978,397 Home equity lines of credit .................................... 2,979,470 3,088,134 Consumer ....................................................... 1,002,461 1,236,216 ------------ ------------ 75,893,477 72,603,143 Less - Unearned discount ....................................... 64,127 66,716 Allowance for possible loan losses ............................. 1,914,019 1,942,457 ------------ ------------ Net loans .............................................. 73,915,331 70,593,970 OTHER REAL ESTATE OWNED ............................................ 537,190 675,607 PREMISES AND EQUIPMENT, net ........................................ 2,191,110 1,645,280 OTHER ASSETS ....................................................... 1,696,184 1,433,485 ------------ ------------ TOTAL ASSETS ....................................................... $121,446,661 $121,413,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Demand .......................................................... $ 11,371,160 $ 11,270,046 Savings and money market accounts ............................... 23,051,726 22,749,700 Time deposits ................................................... 59,040,517 59,856,363 ------------ ------------ Total deposits .......................................... 93,463,403 93,876,109 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE ..................... 10,778,000 10,778,000 ACCRUED EXPENSES AND OTHER LIABILITIES ............................. 1,151,592 1,294,594 SENIOR DEBENTURE ................................................... 2,921,635 2,894,396 ------------ ------------ STOCKHOLDERS' EQUITY: Common Stock, $1 par value Authorized - 5,000,000 shares Issued - 1,328,041 shares .................................. 1,328,041 1,328,041 Surplus ......................................................... 4,431,380 4,431,380 Retained earnings ............................................... 7,463,846 6,923,308 Unrealized gain on securities available-for-sale, net of taxes .. 55,724 34,132 ------------ ------------ 13,278,991 12,716,861 Less - Treasury stock, at cost, 66,800 shares ................... 146,960 146,960 ------------ ------------ Total stockholders' equity ............................... 13,132,031 12,569,901 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $121,446,661 $121,413,000 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 1 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ----------------------- (UNAUDITED) 1997 1996 1997 1996 ---- ---- ---- ---- INTEREST INCOME: Interest and fees on loans ............................. $3,612,979 $3,306,431 $1,843,020 $1,684,681 Interest on investment securities - U.S. Government and agency obligations ........ 779,315 686,675 382,426 354,312 Collateralized mortgage obligations ........... 57,372 58,933 26,328 32,008 Mortgage backed securities .................... 397,199 -- 194,645 -- Marketable equity securities and other ................. 16,129 7,480 9,984 5,842 Interest on cash equivalents ........................... 69,618 97,898 38,810 57,327 ---------- ---------- ---------- ---------- Total interest income ......................... 4,932,612 4,157,417 2,495,213 2,134,170 ---------- ---------- ---------- ---------- INTEREST EXPENSE: Interest on deposits ................................... 1,887,693 1,834,027 949,143 925,896 Interest on repurchase agreements ...................... 325,262 -- 165,500 -- Interest on debenture .................................. 131,789 126,347 66,743 64,253 ---------- ---------- ---------- ---------- Total interest expense ......................... 2,344,744 1,960,374 1,181,386 990,149 ---------- ---------- ---------- ---------- Net interest income ............................ 2,587,868 2,197,043 1,313,827 1,144,021 PROVISION FOR POSSIBLE LOAN LOSSES ......................... 150,000 175,000 75,000 105,000 ---------- ---------- ---------- ---------- Net interest income after provision for possible loan losses .................................. 2,437,868 2,022,043 1,238,827 1,039,021 ---------- ---------- ---------- ---------- NONINTEREST INCOME: Service charges on deposits ............................ 160,384 149,983 77,329 74,818 Gain on sale of securities ............................. -- -- -- -- Gain on loan sales ..................................... 15,823 15,973 15,823 15,973 Other .................................................. 60,671 63,059 20,328 26,403 ---------- ---------- ---------- ---------- Total noninterest income ................... 236,878 229,015 113,480 117,194 ---------- ---------- ---------- ---------- NONINTEREST EXPENSE: Salaries and employee benefits ........................ 878,362 823,159 450,242 403,226 Occupancy expense ..................................... 185,107 187,482 96,633 88,066 Equipment expense ..................................... 99,419 103,066 49,226 51,540 Other real estate owned net losses, and expenses ...... 24,044 39,925 6,924 11,836 Computer services ..................................... 84,170 82,364 42,956 40,474 Deposit insurance assessments ......................... 4,870 500 2,435 500 Other operating expenses .............................. 354,208 347,542 177,138 180,528 ---------- ---------- ---------- ---------- Total noninterest expense ................... 1,630,180 1,584,038 825,554 776,170 ---------- ---------- ---------- ---------- Income before provision for income taxes .... 1,044,566 667,020 526,753 380,045 PROVISION FOR INCOME TAXES ................................. 377,903 220,426 190,457 133,539 ---------- ---------- ---------- ---------- NET INCOME ................................................. $ 666,663 $ 446,594 $ 336,296 $ 246,506 ========== ========== ========== ========== Earnings per share ......................................... $ 0.53 $ 0.52 $ 0.27 $ 0.25 ========== ========== ========== ========== Dividends declared per share ............................... $ 0.10 $ 0.06 $ 0.05 $ 0.03 ========== ========== ========== ========== Weighted average common and common stock equivalent Shares outstanding .................................... 1,261,241 856,474 1,261,241 1,001,465 ========== ========== ========== ==========
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 ON SECURITIES TOTAL COMMON RETAINED AVAILABLE FOR SALE, TREASURY STOCKHOLDERS' STOCK SURPLUS EARNINGS NET OF TAXES STOCK EQUITY ----- ------- -------- ------------ ----- ------ Balance, December 31, 1995 ......... $ 750,000 $ 500,000 $6,013,638 $ 74,911 $ (146,960) $ 7,191,589 Net income ......................... -- -- 1,043,677 -- -- 1,043,677 Dividends ($.12 per share) ......... -- -- (134,007) -- -- (134,007) Exercise of stock options and related tax effect ............. 28,041 (41,744) -- -- -- (13,703) Issuance of 550,000 shares of common stock, net of offering costs .......................... 550,000 3,973,124 -- -- -- 4,523,124 Change in net unrealized gain on securities available-for-sale .. -- -- -- (40,779) -- (40,779) ---------- ---------- ---------- ---------- ----------- ----------- Balance, December 31, 1996 ......... 1,328,041 4,431,380 6,923,308 34,132 (146,960) 12,569,901 Net income ......................... -- -- 666,663 -- -- 666,663 Dividends declared ($.10 per share) ......................... -- -- (126,125) -- -- (126,125) Change in net unrealized gain on securities available-for-sale -- -- -- 21,592 -- 21,592 ---------- ---------- ---------- ---------- ----------- ----------- Balance, June 30, 1997 ............. $1,328,041 $4,431,380 $7,463,846 $ 55,724 $ (146,960) $13,132,031 ========== ========== ========== ========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements 3 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, ------------------------- 1997 1996 ---- ---- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................ $ 666,663 $ 446,594 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan losses ........................ 150,000 175,000 Depreciation and amortization ............................. 106,594 92,882 Accretion of discount on debenture ........................ 100,736 126,347 Net (accretion) on investment securities held-to-maturity . (6,265) (2,794) Net (accretion) on investment securities available-for-sale (42,559) (45,214) Gains on sale of OREO ..................................... (2,017) (11,689) Gain on sales of loans .................................... (15,823) (15,973) Proceeds from sales of loans .............................. 399,908 338,139 Loans originated for sale ................................. (224,085) (765,147) Net (decrease) in unearned discount ....................... (2,589) (12,590) Net (increase) in other assets ........................... (262,699) (153,077) Net increase (decrease) in deferred loan fees ............. 31,199 (5,064) Net (decrease) in accrued expenses and other liabilities .. (256,120) (76,633) ------------ ------------ Net cash provided by operating activities ............. 642,943 90,781 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Federal Home Loan Bank stock ................... (99,600) -- Proceeds from maturities of investment securities held-to-maturity ....................................... 4,121,845 6,974,314 Proceeds from maturities of investment securities available-for-sale ..................................... 14,931,609 13,400,000 Purchase of investment securities held-to-maturity ......... (2,000,000) (6,793,569) Purchase of investment securities available-for-sale ....... (12,382,247) (16,567,868) Net increase in loans ...................................... (3,660,971) (3,200,269) Purchase of premises and equipment ......................... (652,424) (11,002) Sales of OREO .............................................. 301,434 370,189 ------------ ------------ Net cash provided by (used in) investing activities ... 559,646 (5,828,205) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in demand accounts ................. 101,114 (1,124,637) Net increase (decrease) in savings and money market accounts 302,026 (198,713) Net (decrease) increase in time deposits ................... (815,846) 4,130,105 Net proceeds on issuance of common stock ................... -- 4,646,235 Exercise of stock options .................................. -- (13,703) Dividends paid ............................................. (100,899) (20,496) ------------ ------------ Net cash (used in) provided by financing activities ........... (513,605) 7,418,791 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS ..................... 688,984 1,681,367 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .................................................... 4,364,713 2,901,249 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD ................................................ $ 5,053,697 $ 4,582,616 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid .............................................. $ 2,286,495 $ 1,802,001 ============ ============ Income taxes paid .......................................... $ 515,687 $ 164,250 ============ ============ SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: Transfer of loans to OREO .................................. $ 161,000 $ 70,000 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDING JUNE 30, 1997 (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 six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997 or any other interim period. For further information refer to the consolidated financial statements, notes and other information included in the Company's annual report and Form 10-K for the period ended December 31, 1996, filed with the Securities and Exchange Commission. (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 $520,376 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 19, 1997 the Company declared dividends of $63,062 or $.05 per share to all common stockholders of record on June 16, 1997, payable on July 2, 1997. (4) RECENT DEVELOPMENTS In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". SFAS No. 128 standardized the calculation of earnings per share with International Accounting Standard No. 33. SFAS No. 128 is effective for both interim and annual periods ending after December 15, 1997. Early application is prohibited, although footnote disclosure of pro forma earnings per share amounts computed under SFAS No. 128 is permitted. 5 The following table presents the earnings per share computations as reported and pro forma for the three months and six months ended June 30,1997 and 1996.
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, ------------------------ ------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Average shares outstanding ................... 1,261,241 835,650 1,261,241 988,101 Average dilutive option shares ............... -- 20,824 -- 13,364 ---------- -------- ---------- ---------- Total average shares .................... 1,261,241 856,474 1,261,241 1,001,465 ========== ======== ========== ========== Net income ................................... $ 666,663 $446,594 $ 336,296 $ 246,506 ========== ======== ========== ========== As Reported: Earnings per share ...................... $0.53 $0.52 $0.27 $0.25 ========== ======== ========== ========== Pro Forma: Basic earnings per share ................. $0.53 $0.53 $0.27 $0.25 ========== ======== ========== ========== Diluted earnings per share ............... $0.53 $0.52 $0.27 $0.25 ========== ======== ========== ==========
In January 1997, the Bank entered into a definitive agreement with Wal-Mart Stores, Inc. of Bentonville, Arkansas, pursuant to which the Bank agreed to open de novo branch offices in two Wal-Mart Stores located in Rhode Island. On June 23, 1997, the Bank opened the first Wal-Mart in-store branch located at 1031 Ten Rod Road, North Kingstown, Rhode Island. The branch is a full-service retail branch offering all of the retail products offered at the Bank's three other branch offices, including checking and savings accounts, consumer loans, and mortgages. The branch is open seven days a week and includes a full service automated teller machine (ATM). The Company is currently discussing with Wal-Mart the opening of the second branch in the Wal-Mart store in Warwick, Rhode Island. 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 accounts, 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. 6 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 loans and investment securities, while its interest-bearing liabilities consist primarily of deposits, securities sold under agreements to repurchase and the Senior Debenture. The Company's net income is also affected by its level of noninterest income, including fees and service charges, as well as by its noninterest 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 remained virtually flat at $121,446,661 at June 30, 1997 compared to $121,413,000 at December 31, 1996. The loan portfolio increased $3,290,334 or 4.5% from $72,603,143 at December 31, 1996 to $75,893,477 at June 30, 1997. The loan growth was primarily funded from Securities and Cash and Cash Equivalents which decreased $3,897,412 from $46,556,558 at December 31,1996 to $42,191,845 at June 30, 1997. Total deposits decreased $412,706 from $93,876,109 at December 31, 1996 to $93,463,403 at June 30, 1997. For the three months ended June 30, 1997, the Company reported net income of $336,296 compared to net income of $246,506 for the three months ended June 30, 1996. Fully diluted net income per share for the quarter ended June 30, 1997, was $.27 as compared to $.25 per share for the same three month period of the prior year. Net income for the six months ended June 30, 1997, amounted to $666,663 compared to net income of $446,594 for the six months ended June 30, 1996. Fully diluted net income per share for the six months ended June 30, 1997, was $.53 compared to $.52 per share for the six months ended June 30, 1996. The Company's improved earnings performance for the three months and six months ended June 30, 1997, as compared to the three months and six months ended June 30, 1996, resulted from (i) an increase in earning assets funded by the net proceeds of the Company's public offering; the use of repurchase agreements and; an increase in deposits (ii) increased loan originations and (iii) improvement in asset quality and attendant reduction in the provision for possible loan losses. 7 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 SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ---------------------------- ----------------- 1997 1996 1996 ---- ---- ---- (DOLLARS IN THOUSANDS) Nonperforming loans ................................... $ 339 $ 311 $ 428 Other real estate owned ............................... $ 537 $ 1,182 $ 676 Total nonperforming assets ............................ $ 876 $ 1,493 $ 1,104 Loans 30-89 days delinquent ........................... $ 405 $ 833 $ 196 Nonperforming assets to total assets .................. 0.75% 1.45% 0.95% Nonperforming loans to total loans .................... 0.48% 0.50% 0.64% Net loan charge-offs to average loans ................. 0.01% 0.07% 0.19% Allowance for possible loan losses to total loans ..... 1.89% 1.59% 1.78% Allowance for possible loan losses to nonperforming loans ............................. 397.04% 318.05% 280.35%
In 1992, the Bank acquired certain assets and assumed certain deposit liabilities of the former Chariho-Exeter Credit Union ("Chariho"). The Bank and the State of Rhode Island Depositors Economic Protection Corporation ("DEPCO") established a reserve for possible loan losses of $3,850,000 for loans acquired. This reserve is available only for loans of Chariho existing as of the acquisition date. The following analysis summarizes activity for both the acquired reserve and the Bank's reserve for possible loan losses.
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Balance at beginning of period....... $1,199,617 $ 861,693 $1,267,506 $ 885,540 Provision..................... 150,000 175,000 75,000 105,000 Loan charge-offs............... (26,829) (63,064) (9,699) (15,934) Recoveries..................... 22,689 14,716 12,670 13 ,739 ---------- ---------- ---------- ---------- Balance at end of period.............. 1,345,477 988,345 1,345,477 988,345 ---------- ---------- ---------- ---------- Acquired Reserve: Balance at beginning of period......... 742,840 966,347 712,202 872,257 Loan charge-offs....................... (169,695) (205,289) (141,041) (106,808) Recoveries............................. (4,603) 6,900 (2,619) 2,509 ---------- ---------- ---------- ---------- 568,542 767,958 568,542 767,958 ---------- ---------- ---------- ---------- Total Reserve............................. $1,914,019 $1,756,303 $1,914,019 $1,756,303 ========== ========== ========== ==========
As set forth in the Chariho Acquisition Agreement, the remaining balance, if any, in the acquired reserve at May 1, 1999, less an amount equal to 1% of the remaining acquired loans, must be refunded to DEPCO. Conversely, in the event the reserve is inadequate, additional loan charge-offs will reduce the amount owed on the debenture issued to DEPCO in connection with the acquisition. At June 30, 1997, the remaining balance of acquired loans was $4,813,282. 8 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 AND OTHER BORROWINGS Total deposits decreased $412,706 during the six months ended June 30, 1997, from $93,876,109 at December 31, 1996, to $93,463,403 at June 30, 1997. Demand, savings and money market accounts increased $403,140 during the six months ended June 30, 1997, while time deposits decreased $815,846 during the same period. Securities sold under agreements to repurchase remained unchanged at June 30, 1997, compared to December 31, 1996, at $10,778,000. 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 $2,587,868 for the six months ended June 30, 1997, compared to $2,197,043 for the six months ended June 30, 1996. This increase was the result of an increase in interest earning assets offset somewhat by a decrease in net interest spreads. 9 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.
SIX MONTHS ENDED JUNE 30, ------------------------------------------------------------------------- 1997 1996 ------------------------------------ ------------------------------ INTEREST AVERAGE INTEREST AVERAGE AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ------- ------- ---- ------- ------- ---- (DOLLARS IN THOUSANDS) INTEREST - EARNING ASSETS: Loans ..................................... $74,249 $3,613 9.73% $66,622 $ 3,306 9.92% Investment securities taxable - AFS........ 26,810 865 6.45 13,102 409 6.24 Investment securities taxable - HTM........ 12,597 371 5.89 12,818 337 5.26 Securities purchased under agreements to resell........................... 2,828 70 4.95 3,939 98 4.98 Federal Home Loan Bank Stock and other .... 540 14 5.19 348 7 4.02 -------- ------ ---- -------- ------- ---- TOTAL INTEREST-EARNING ASSETS ................ 117,024 4,933 8.43 96,829 4,157 8.59 ------ ---- ------- ---- NONINTEREST-EARNING ASSETS: Cash and due from banks................... 2,047 1,896 Premises and equipment.................... 1,868 1,784 Other real estate owned................... 731 1,301 Allowance for possible loan losses........ (1,982) (1,837) Other assets.............................. 1,038 1,079 -------- -------- TOTAL NONINTEREST-EARNING ASSETS.............. 3,702 4,223 -------- -------- TOTAL ASSETS.................................. $120,726 $101,052 ======== ======== INTEREST - BEARING LIABILITIES: Deposits: Interest bearing demand and NOW deposits....................... $ 3,144 30 1.91% $ 2,467 24 1.95% Savings deposits................. 18,093 237 2.62 19,660 261 2.66 Money market deposits............ 1,447 17 2.35 1,666 20 2.40 Time deposits................................. 58,905 1,604 5.45 54,635 1,529 5.60 Securities sold under agreements to repurchase........................ 10,778 325 6.03 -- -- -- Senior debenture......................... 2,932 132 9.00 2,878 126 8.76 -------- ------ ---- -------- ------- ---- TOTAL INTEREST-BEARING LIABILITIES............ 95,299 2,345 4.92 81,306 1,960 4.82 ------ ---- ------- ---- NONINTEREST-BEARING LIABILITIES: Noninterest-bearing deposits............. 11,807 10,695 Other liabilities........................ 825 584 -------- -------- Total noninterest-bearing liabilities........ 12,632 11,279 Stockholders' equity......................... 12,795 8,467 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $120,726 $101,052 ======== ======== NET INTEREST INCOME.......................... $ 2,588 $ 2,197 ======== ======== NET INTEREST SPREAD.......................... 3.51% 3.77% ==== ==== NET INTEREST MARGIN.......................... 4.42% 4.54% ==== ====
10 Total interest income for the three months ended June 30, 1997 was $2,495,213, compared to $2,134,170 for the same three month period of the prior year. This increase of $361,043 is primarily the result of a $17,550,000 increase in quarterly average interest-earning assets offset by a decrease of .06% in the quarterly yield on interest earning assets. During the three months ended June 30, 1996 the Company satisfactorily resolved a non-accruing loan and recorded nearly $47,000 in cash basis interest income. This transaction accounted for approximately .20% to the quarterly yield on interest-earning assets. Total interest income for the six months ended June 30, 1997, was $4,932,612, compared to $4,157,417 for the six months ended June 30, 1996. This increase of $775,195 or 18.6% is primarily attributed to a $20.2 million or 20.9% increase in average interest-earning assets to $117.0 million from $96.8 million offset by a .16% decrease in yield on interest-earning assets. The decrease in yield is primarily the result of a $13.5 million increase in investment securities at yields lower than the blended yield on average interest-earning assets. Total interest expense for the three months ended June 30, 1997 was $1,181,386, compared to $990,149 for the same period of the prior year. This increase of $191,237 or 19.3% is solely related to a $12.0 million increase in quarterly average interest-bearing liabilities. During the three months ended June 30, 1997, the quarterly average cost of funds approximated 4.97% as compared to 4.76% for the same quarter of the prior year. The primary reason for this .21% increase in quarterly cost of funds rates relates to the $10.8 million increase in securities sold under agreements to repurchase at rates higher than the blended rate on average interest-bearing liabilities. For the six months ended June 30, 1997, total interest expense was $2,344,744 as compared to $1,960,374 for the same six month period of 1996. This increase of $384,370 or 19.6% is attributable to $14.0 million increase in average interest-bearing liabilities to $95.3 million for the six months ended June 30, 1997, compared to $81.3 million for the same six month period of the prior year. PROVISION FOR POSSIBLE LOAN LOSSES The provision for possible loan losses totaled $75,000 for the three months ended June 30, 1997, compared to $105,000 during the same three month period of the prior year. For the six months ended June 30, 1997 and 1996, the provision for possible loan losses amounted to $150,000 and $175,000, respectively. The decrease in the provision for both the three months and six months ended June 30, 1997, as compared to the same periods of the prior year is the result of improvement in asset quality reflected by decreases in nonperforming assets, net loan charge-offs, and increases in the percentage of the allowance for possible loan losses to total loans and to nonperforming loans. NONINTEREST INCOME Total noninterest income decreased $3,714 or 3.2% to $113,480 from $117,194 during the three months ended June 30, 1997, and June 30, 1996, respectively. Total noninterest income increased $7,863 to $236,878 from $229,015 for the six months ended June 30, 1997, compared to the six months ended June 30, 1996, respectively. NONINTEREST EXPENSE Total noninterest expense amounted to $825,554 and $776,170 for the three months ended June 30, 1997 and 1996, respectively. This increase of $49,384 or 6.4% primarily relates to a $47,016 increase in salaries and employee benefits attributable to an increase in staff levels (46 full-time equivalent employees at June 30, 1997 compared to 42 at June 30, 1996) and the adoption of a qualified savings incentive plan under Internal Revenue Code Section 401(K), effective January 1, 1997. 11 For the six months ended June 30, 1997, total noninterest expense increased $46,142 or 2.9% to $1,630,180 from $1,584,038 for the six months ended June 30, 1996. Although other categories of noninterest expense increased or decreased by relatively small amounts, salaries and employee benefits increased $55,203 and are solely responsible for the overall increase in noninterest expense. During the first six months of 1997 the Bank hired an additional commercial loan officer. The Bank also hired retail personnel to staff the newly opened Wal-Mart in-store branch. Further, the January 1, 1997 adoption of a 401(K) Plan increased benefit costs by $17,576 for the first six months of 1997. INCOME TAXES Income taxes for the three months ended June 30, 1997, were $190,457 or 36.2% of pretax income, compared to $133,539 or 35.1% of pretax income for the three months ended June 30, 1996. For the six months ended June 30, 1997 and 1996, income taxes were $377,903 and $220,426, respectively, or 36.2% and 33.0% of pretax income, respectively. The higher effective tax rates in 1997 are primarily due to proportionately less Bank income sheltered from state income taxes. 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 June 30, 1997: REGULATORY MINIMUM (2) ACTUAL ----------- ------ The Company (1) Risk-based: Tier 1 ................. 4.00% 16.38% Totals ................. 8.00 17.63 Leverage ........................ 3.00 10.84 The Bank Risk-based: Tier 1................... 4.00% 15.27% Totals................... 8.00 16.52 Leverage......................... 3.00 10.42 (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 adequacyrequirements 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. 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. 12 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, 1997, the most recent date for which this information is available, the Company's one year static gap position was a negative $12,654,000 or 10.5% 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 June 30, 1997, the Company had $30,994,207, or 25.5% 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 $8,954,000 at June 30, 1997, of which $2,352,000 was in the form of an overnight Line of Credit. 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 The Company held its 1997 Annual Meeting of Stockholders on May 14, 1997. The meeting was held for the purpose of: (i) electing Artin Coloian, Esq., John Nazarian, Ph.D., and William P. Shields, Directors of the Company for three years, term expiring at the Annual Meeting in the year 2000 and (ii) ratifying the selection of Arthur Andersen LLP as independent public accountants for the Company for the year 1997. 13 At the time of the 1997 Annual Meeting there were 1,261,241 shares entitled to vote. Shares voted either in person or by proxy totaled 991,045 shares. The results of the votes cast were as follows: FOR AGAINST ABSTENTION --- ------- ---------- (i) To elect Directors of the Company for three years: Artin Coloian, Esq. 990,345 700 John Nazarian, Ph.D. 990,095 950 William P. Shields 990,345 700 (ii) To select Arthur Andersen LLP as independent public accountants for the Company for 1997 988,695 400 1,950 In addition, upon completion of the Annual Meeting the Directors' Terms continue as follows: NAME TERM TO EXPIRE IN: ---- ------------------ Joseph V. Mega 1998 Patrick J. Shanahan, Jr. 1998 Raymond F. Bernardo 1999 Joseph A. Keough, Esq. 1999 Peter L. Mathieu, Jr., M.D. 1999 ITEM 5 - OTHER INFORMATION Not applicable. 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 14 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. August 13, 1997 \s\ Patrick J. Shanahan, Jr. - --------------------------- ----------------------------------------------- Date Patrick J. Shanahan, Jr. Chairman, President and Chief Executive Officer August 13, 1997 \s\ John A. Macomber - --------------------------- ----------------------------------------------- Date John A. Macomber Vice President, Treasurer and Chief Financial Officer 15 EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, -------- -------- 1997 1996 1997 1996 ---- ---- ---- ---- Average shares outstanding 1,261,241 835,650 1,261,241 988,101 Average dilutive option shares --- 20,824 --- 13,364 --------- -------- --------- --------- Total average shares 1,261,241 856,474 1,261,241 1,001,465 ========= ======== ========= ========= Net income $ 666,663 $446,594 $ 336,296 $ 246,506 ========= ======== ========= ========= Earnings per share $ 0.53 $ 0.52 $ 0.27 $ 0.25 ========= ======== ========= =========
EX-27 3 FDS 9
9 6-MOS DEC-31-1997 JUN-30-1997 3,575,697 0 1,478,000 0 25,940,510 11,664,939 11,642,824 75,829,350 1,914,019 121,446,661 93,463,403 10,778,000 1,151,592 2,921,635 0 0 1,328,041 11,803,990 121,446,661 1,843,020 652,193 0 2,495,213 949,143 1,181,386 1,313,827 75,000 0 825,554 526,753 526,753 0 0 336,296 0.27 0.27 4.49 338,876 0 0 1,773,529 1,979,708 150,740 10,051 1,914,019 1,914,019 0 0
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