-----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, H2dTci9XZ4h10/Mz2tCg3oBcP+qUh5N+T5I+H6sw265O5P2gWddWCB6pcWQXr8I0 t07XePPN2D1BhpvJhJKukQ== 0000927016-00-001665.txt : 20000509 0000927016-00-001665.hdr.sgml : 20000509 ACCESSION NUMBER: 0000927016-00-001665 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000508 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: SEC FILE NUMBER: 000-27878 FILM NUMBER: 621616 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, 2000 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 such filing requirements for the past 90 days. X Yes _____ No ------ At May 3, 2000, there were 1,328,041 shares of the Company's $1.00 par value stock issued, with 1,213,741 shares outstanding. FIRST FINANCIAL CORP. INDEX PART I - FINANCIAL INFORMATION
PAGE Item 1 - Financial Statements.................................................................................. 1 Consolidated Balance Sheets - March 31, 2000 and December 31, 1999........................................ 1 Consolidated Statements of Income - Three months ended March 31, 2000 and 1999............................ 2 Consolidated Statements of Stockholders' Equity and Comprehensive Income- Three months ended March 31, 2000 and year ended December 31, 1999......................................... 3 Consolidated Statements of Cash Flows - Three months ended March 31, 2000 and 1999........................ 4 Notes to Consolidated Financial Statements - March 31, 2000............................................... 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................................... 7 PART II - OTHER INFORMATION Item 1 - Legal Proceedings..................................................................................... 14 Item 2 - Changes in Securities................................................................................. 14 Item 3 - Defaults Upon Senior Securities....................................................................... 14 Item 4 - Submission of Matters to a Vote of Security Holders................................................... 14 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
March 31, December 31, 2000 1999 ------------ ----------- ASSETS (Unaudited) CASH AND DUE FROM BANKS.............................................. $ 3,591,422 $ 5,441,190 SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL...................... 3,798,604 3,802,865 LOANS HELD FOR SALE.................................................. 2,263,005 942,338 INVESTMENT SECURITIES: Held-to-maturity (market value: $21,804,632 and $15,450,453)Y....... 22,073,145 15,691,004 Available-for-sale (amortized cost: $37,516,665 and $21,167,567).... 36,959,247 20,857,124 ------------ ------------ Total investment securities........................................ 59,032,392 36,548,128 ------------ ------------ FEDERAL HOME LOAN BANK STOCK......................................... 681,500 681,500 LOANS: Commercial.......................................................... 13,510,096 12,248,552 Commercial real estate.............................................. 67,616,652 65,812,129 Residential real estate............................................. 12,874,142 13,084,006 Home equity lines of credit......................................... 2,936,971 3,051,265 Consumer............................................................ 765,903 766,383 ------------ ------------ 97,703,764 94,962,335 Less - Unearned discount............................................ 18,109 23,221 Allowance for loan losses........................................... 1,615,727 1,556,405 ------------ ------------ Net loans.......................................................... 96,069,928 93,382,709 ------------ ------------ OTHER REAL ESTATE OWNED.............................................. 100,000 ---- PREMISES AND EQUIPMENT, net.......................................... 2,124,642 2,167,103 OTHER ASSETS......................................................... 2,508,283 1,815,822 ------------ ------------ TOTAL ASSETS......................................................... $170,169,776 $144,781,655 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Demand.............................................................. $ 21,005,483 $ 17,522,309 Savings and money market accounts................................... 21,967,915 23,838,702 Time deposits....................................................... 86,495,854 63,227,494 ------------ ------------ Total deposits................................................... 129,469,252 104,588,505 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE....................... 9,457,410 9,411,111 FEDERAL HOME LOAN BANK ADVANCES...................................... 13,546,542 13,610,400 ACCRUED EXPENSES AND OTHER LIABILITIES............................... 2,219,402 1,689,999 SENIOR DEBENTURE..................................................... ------ ------ ------------ ------------ TOTAL LIABILITIES.................................................... 154,692,606 129,300,015 ------------ ------------ 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................................................... 10,807,285 10,504,194 Accumulated other comprehensive (loss) income....................... (334,451) (186,265) ------------ ------------ 16,232,255 16,077,350 Less - Treasury stock, at cost, 114,300 shares in 2000; 101,800 shares in 1999.................................................... 755,085 595,710 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY........................................... 15,477,170 15,481,640 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $170,169,776 $144,781,655 ============ ============
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, ------------------------ 2000 1999 ---------- ---------- (Unaudited) INTEREST INCOME: Interest and fees on loans...................................... $2,325,210 $2,078,577 Interest and dividends on investment securities- U.S. Government and agency obligations..................... 455,024 418,015 Collateralized mortgage obligations........................ 21,856 39,038 Mortgage-backed securities.................................... 82,590 111,175 Other debt securities......................................... 90,418 ----- Marketable equity securities and other........................ 25,768 19,587 Interest on cash equivalents.................................... 107,516 36,589 ---------- ---------- Total interest income....................................... 3,108,382 2,702,981 ---------- ---------- INTEREST EXPENSE: Interest on deposits............................................ 1,170,151 931,791 Interest on repurchase agreements............................... 119,828 150,808 Interest on advances............................................ 201,467 99,666 Interest on debenture........................................... ----- 50,700 ---------- ---------- Total interest expense....................................... 1,491,446 1,232,965 ---------- ---------- Net interest income.......................................... 1,616,936 1,470,016 PROVISION FOR LOAN LOSSES........................................ 50,000 75,000 ---------- ---------- Net interest income after provision for loan losses................................................. 1,566,936 1,395,016 NONINTEREST INCOME: Service charges on deposits..................................... 67,429 67,071 Gain on loan sales.............................................. 56,306 100,202 Other........................................................... 75,545 50,564 ---------- ---------- Total noninterest income..................................... 199,280 217,837 ---------- ---------- NONINTEREST EXPENSE: Salaries and employee benefits................................. 587,365 506,343 Occupancy expense.............................................. 119,399 105,690 Equipment expense.............................................. 66,170 72,382 Other real estate owned net losses and expenses................ 166 14,571 Computer services.............................................. 63,383 59,208 Deposit insurance assessments.................................. 5,584 3,000 Other operating expenses....................................... 229,260 201,660 ---------- ---------- Total noninterest expense.................................... 1,071,327 962,854 ---------- ---------- Income before provision for income taxes..................... 694,889 649,999 PROVISION FOR INCOME TAXES....................................... 246,149 242,540 ---------- ---------- NET INCOME....................................................... $ 448,740 $ 407,459 ========== ========== Earnings per share: Basic........................................................ $ 0.37 $ 0.33 ========== ========== Diluted...................................................... $ 0.37 $ 0.33 ========== ========== Weighted average common shares outstanding....................... 1,215,297 1,239,074 Weighted average equivalent shares............................... --------- --------- ---------- ---------- Weighted average common and common stock equivalent shares outstanding............................................. 1,215,297 1,239,074 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Accumulated Other Total Common Retained Comprehensive Treasury Stockholders' Comprehensive Stock Surplus Earnings (Loss) Income Stock Equity Income ---------- --------- ---------- ------------- ---------- ------------- ------------- Balance, December 31, 1998.............. $1,328,041 $4,431,380 $ 9,130,143 $ 70,638 $(146,960) $14,813,242 Net income.............................. ---------- ---------- 1,818,648 --------- --------- 1,818,648 $1,818,648 Other comprehensive income, net of tax: Unrealized holding losses, net of reclassification adjustment....... ---------- ---------- ---------- (256,903) --------- (256,903) (256,903) ---------- Comprehensive income.................... $1,561,745 ========== Dividends declared ($.36 per share) .............................. (444,597) (444,597) Repurchase of 35,000 shares of common stock......................... (448,750) (448,750) ---------- ---------- ---------- --------- --------- ----------- Balance, December 31, 1999.............. 1,328,041 4,431,380 10,504,194 (186,265) (595,710) 15,481,640 Net income.............................. ---------- ---------- 448,740 --------- --------- 448,740 $ 448,740 Other comprehensive income, net of tax: Unrealized holding losses, net of reclassification adjustment...... ---------- --------- ---------- (148,186) --------- (148,186) (148,186) ---------- Comprehensive income.................... $ 300,554 ========== Dividends declared ($.12 per share).............................. ---------- --------- (145,649) --------- --------- (145,649) (159,375) ----------- Repurchase of 12,500 shares of common stock........................ (159,375) $15,477,170 ---------- --------- ----------- --------- --------- =========== Balance, March 31, 2000................. $1,328,041 $4,431,380 $10,807,285 $(334,451) $(755,085) ========== ========== =========== ========= =========
The accompanying notes are an integral part of these consolidated statements FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, ------------------------------- 2000 1999 ------------ ------------ (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................................... $ 448,740 $ 407,459 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Provision for loan losses................................................... 50,000 75,000 Depreciation and amortization............................................... 69,682 73,464 Losses on sale of OREO...................................................... --- 3,334 Gains on sales of loans..................................................... (56,306) (100,202) Proceeds from sales of loans................................................ 1,328,234 1,205,770 Loans originated for sale................................................... (2,592,595) (777,425) Net accretion on investment securities held-to-maturity..................... (2,597) (1,836) Net accretion on investment securities available-for-sale................... (80,585) (83,251) Net decrease in unearned discount........................................... (5,112) (13,073) Net increase in other assets................................................ (692,461) (158,972) Amortization of discount on debenture....................................... --- 9,517 Net (decrease) increase in deferred loan fees............................... (5,290) 7,159 Net increase in accrued expenses and other liabilities...................... 628,192 325,342 ------------ ------------ Net cash (used in) provided by operating activities....................... (910,098) 972,286 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of investment securities held-to-maturity............ 370,222 1,818,492 Proceeds from maturities of investment securities available-for-sale.......... 66,045,772 80,620,467 Purchase of investment securities held-to-maturity............................ (6,749,766) (1,488,394) Purchase of investment securities available-for-sale.......................... (82,314,285) (78,832,729) Net increase in loans......................................................... (2,826,817) (3,277,105) Purchase of premises and equipment............................................ (27,221) (47,972) Sales of OREO................................................................. --- 96,666 ------------ ------------ Net cash used in investing activities..................................... (25,502,095) (1,110,575) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in demand accounts.................................... 3,483,174 (378,830) Net (decrease) increase in savings and money market accounts.................. (1,870,787) 1,324,746 Net increase (decrease) in time deposits...................................... 23,268,360 (1,952,477) Net increase (decrease) in repurchase agreements.............................. 46,299 (216,155) Net (decrease) increase in Federal Home Loan Bank advances.................... (63,858) 1,900,204 Purchase of common stock for treasury......................................... (159,375) (384,375) Dividends paid................................................................ (145,649) (112,162) ------------ ------------ Net cash provided by financing activities................................. 24,558,164 180,951 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........................... (1,854,029) 42,662 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................. 9,244,055 5,066,270 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD....................................... $ 7,390,026 $ 5,108,932 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid................................................................. $ 1,357,218 $ 1,224,271 ============ ============ Income taxes paid............................................................. $ 145,000 $ 313,000 ============ ============ SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: Transfer of loans to OREO..................................................... $ 100,000 $ --- ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2000 (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, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000, 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, 1999, filed with the Securities and Exchange Commission. (2) DIVIDEND DECLARATION On April 10, 2000, the Company declared dividends of $145,649 or $.12 per share to all common stockholders of record on May 1, 2000, payable on May 15, 2000. (3) RECENT DEVELOPMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. This statement requires that changes in the derivative's fair value be recognized currently in income unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statement of income and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133", is effective for fiscal years beginning after June 15, 2000. A company may also implement the statement as of the beginning of any fiscal quarter after issuance (that is, financial quarters beginning June 16, 1998 and thereafter). SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after December 31, 1997 (and, at the Company's election, before January 1, 1998). The Company has not yet quantified the impact of adopting SFAS No. 133 on its consolidated financial statements and has not determined the timing or method of its adoption of the statement. However, the Company does not expect that the adoption of this statement will have a material impact on its financial position or results of operations. (4) BUSINESS SEGMENTS The Company's community banking business segment consists of commercial and retail banking. The community banking business segment is managed as a single strategic unit which derives its revenue from a wide range of banking services, including investing and lending activities and acceptance of demand, savings and time deposits. There is no major customer and the Company operates within a single geographic area (southeastern New England). 5 Nonreportable operating segments of the Company's operations which do not have similar characteristics to the community banking operations and do not meet the quantitative thresholds requiring disclosure, are included in the Other category in the disclosure of business segments below. These nonreportable segments include the Parent Company. The accounting policies used in the disclosure of business segments for these interim financial statements are the same as those used in the December 31, 1999 Annual Report and Form 10-K. The consolidation adjustments reflect certain eliminations of intersegment revenue. Reportable specific information and reconciliation to consolidated financial information is as follows:
Community Other Adjustments Banking Other and Eliminations Consolidated Three Months Ended March 31, 2000 Net Interest Income $1,610,878 $ 465,029 $ (458,971) $1,616,936 Provision for Loan Losses 50,000 --- --- 50,000 Total Noninterest Income 199,280 --- --- 199,280 Total Noninterest Expense 1,047,327 24,000 --- 1,071,327 Net Income 458,971 448,740 (458,971) 448,740 Three Months Ended March 31, 1999 Net Interest Income $1,482,151 $ 419,999 $ (432,134) $1,470,016 Provision for Loan Losses 75,000 --- --- 75,000 Total Noninterest Income 217,837 --- --- 217,837 Total Noninterest Expense 938,854 24,000 --- 962,854 Net Income 432,134 407,459 (432,134) 407,459
6 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 commercial and consumer financial products and services designed to satisfy the deposit and loan needs of its customers. The Bank's deposit 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. The Bank's products and services are delivered through it's four branch network system. The Bank's main office and branch are located in Providence, Rhode Island with branches in Cranston, Richmond and North Kingstown, Rhode Island. 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 Federal Home Loan Bank advances. 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 loan losses, occupancy costs and, when necessary, expenses related to other real estate owned acquired through foreclosure (OREO) and to the administration of nonperforming and other classified assets. Summary - ------- For the three months ended March 31, 2000, the Company reported net income of $448,740 compared to net income of $407,459 for the three months ended March 31, 1999, or an increase of 10.1%. Basic and diluted net income per share were $.37 for the quarter ended March 31, 2000, based on 1,215,297 weighted average common and common stock equivalent shares outstanding, compared to $.33 per share in the first quarter of 1999, based on 1,239,074 weighted average common and common stock equivalent shares outstanding. The first quarter ended March 31, 2000 was the strongest first quarter in the Company's history. Overall, this achievement was accomplished as a result of (i) relatively stable net interest spreads and margins in a rising interest rate environment, (ii) balance sheet growth and, (iii) continued strength in asset quality. Total assets increased $25.4 million or 17.5% to $170.2 at March 31, 2000, from $144.8 million at December 31, 1999. The loan portfolio, net of unearned discount, increased $2.8 million or 3.0% to $97.7 million at March 31, 2000, from $94.9 million at December 31, 1999. Total investment securities increased $22.5 million or 61.6% to $59.0 million at March 31, 2000, from $36.5 million at December 31, 1999. Funding for the loan portfolio and investment portfolio growth came from retail deposits and, in particular, time deposits. Total deposits increased $24.9 million to $129.5 million at March 31, 2000 from $104.6 million at December 31, 1999, while time deposits increased $23.3 million to $86.5 million at March 31, 2000 from $63.2 million at December 31, 1999. During the three months ended March 31, 2000, the Company successfully marketed a 14 month certificate of deposit promotion through its branch network at a 7 slightly above market rate of 6.77% (7.00% annual percentage yield). This promotion raised over $23 million in new deposits and opened over 1,000 new deposit accounts, all of which was from the local community. The purpose of this retail deposit growth activity was to increase the Company's customer base; strengthen the Company's presence in the community; leverage the Company's strong capital position and; solidify the Company's ability to fund future loan portfolio growth. The Company invested the proceeds in government agency and corporate debt obligations. Financial Condition Asset Quality - ------------- The following table sets forth information regarding nonperforming 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 for the three months ended March 31, 1999 are exclusive of the acquired loans and acquired allowance for 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, --------------------- ------------------ 2000 1999 1999 -------- -------- ------------------ (Dollars in Thousands) Nonperforming loans................................. $ 193 $ 78 $ 181 Other real estate owned............................. $ 100 $ 413 $ -0- Total nonperforming assets.......................... $ 293 $ 491 $ 181 Loans 30-89 days delinquent......................... $ 676 $ 231 $ 154 Nonperforming assets to total assets................ 0.17% 0.34% 0.12% Nonperforming loans to total loans.................. 0.30% 0.09% 0.19% Net loan (recoveries) charge-offs to average loans (0.01)% 0.05% 0.01% Allowance for loan losses to total loans............ 1.65% 1.50% 1.64% Allowance for loan losses to nonperforming loans (multiple).................. 8.36X 16.94X 8.62X
The following represents the activity in the allowance for loan losses for the three months ended March 31, 2000 and 1999: Three Months Ended March 31, ----------------------- 2000 1999 ---------- ---------- Company Allowance: Balance at beginning of period................ $1,556,405 $1,287,058 Provision................................... 50,000 75,000 Loan charge-offs............................ (1,440) (46,852) Recoveries.................................. 10,762 3,168 ---------- ---------- Balance at end of period...................... 1,615,727 1,318,374 ---------- ---------- Acquired Allowance: Balance at beginning of period................ --- --- Loan charge-offs............................ --- --- Recoveries.................................. --- 1,483 Reclassification to senior debenture........ --- (1,483) ---------- ---------- Balance at end of period...................... --- --- ---------- ---------- Total Allowance................................. $1,615,727 $1,318,374 ========== ========== 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 loan losses, future adjustments may be necessary if economic 8 conditions differ substantially from the assumptions used in making the evaluation. Deposits and Other Borrowings - ----------------------------- Total deposits increased $24.9 million or 23.8% to $129.5 million at March 31, 2000 from $104.6 million at December 31, 1999. During the three months ended March 31, 2000, demand deposits increased $3.5 million, savings and money market accounts decreased $1.9 million, and time deposits increased $23.3 million. The previously mentioned promotional activity and market acceptance of new deposit product offerings accounted for the positive deposit growth. Also contributing to the deposit activity were customers seeking banking relationships as an alternative to the merger and acquisition activity of area financial institutions. Securities sold under agreements to repurchase and Federal Home Loan Bank advances remained virtually flat at $23.0 million at March 31, 2000 and December 31, 1999. 9 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 $1,616,936 for the three months ended March 31, 2000, compared to $1,470,016 for the first quarter of 1999. This increase was the result of an increase in interest-earning assets, offset somewhat by a slight decline in net interest spreads and margins. The following table sets forth certain information relating to the Company=s average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities. Average balances are derived from daily balances. Loans are net of unearned discount. Non-accrual loans are included in the average balances used in calculating this table.
Three Months Ended March 31, -------------------------------------------------------------------------------- 2000 1999 ----------------------------------------- ------------------------------------ Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------------ ------------ ------ ------------ ------------ ------ (Dollars in Thousands) Interest - earning assets: Loans..................................... $ 97,251,579 $ 2,325,210 9.56% $ 89,378,320 $ 2,078,577 9.30% Investment securities - AFS............... 27,026,500 415,534 6.15 30,165,980 404,434 5.36 Investment securities - HTM............... 17,539,809 248,066 5.66 13,148,653 175,629 5.34 Securities purchased under agreements to resell................................. 9,142,565 107,515 4.70 3,749,121 36,589 3.90 Federal Home Loan Bank Stock and other 761,772 12,057 4.22 559,287 7,752 5.54 ------------ ------------ ------ ------------ ------------ ------ Total interest-earning assets............... 151,722,225 3,108,382 8.19 137,001,361 2,702,981 7.89 ------------ ------ ------------ ------ Noninterest-earning assets: Cash and due from banks.................... 3,456,438 2,293,341 Premises and equipment................... 2,153,863 2,407,191 Other real estate owned.................. 26,374 448,682 Allowance for loan losses................ (1,589,816) (1,287,900) Other assets............................. 1,971,359 1,297,641 ------------ ------------ Total noninterest-earning assets............ 6,018,218 5,158,955 ------------ ------------ Total assets................................ $157,740,443 $142,160,316 ============ ============ Interest - bearing liabilities: Deposits: Interest bearing demand and NOW deposits............................. $ 3,285,048 $ 11,992 1.46 $ 3,411,554 $ 12,340 1.45 Savings deposits...................... 17,484,865 92,527 2.12 17,481,734 91,145 2.09 Money market deposits................. 1,398,056 6,758 1.93 1,455,090 7,132 1.96 Time deposits......................... 77,557,703 1,058,874 5.46 65,959,543 821,174 4.98 Securities sold under agreements to repurchase............................. 9,430,886 119,828 5.08 12,126,200 150,808 4.97 Federal Home Loan Bank advances......... 13,571,818 201,467 5.94 7,177,688 99,666 5.55 Senior debenture........................ --- --- --- 3,016,080 50,700 6.72 ------------ ------------ ------ ------------ ------------ ------ Total interest-bearing liabilities.......... 122,728,376 1,491,446 4.86 110,627,889 1,232,965 4.46 ------------ ------ ------------ ------ Noninterest-bearing liabilities: Noninterest-bearing deposits............. 18,140,751 15,697,353 Other liabilities........................ 1,526,569 1,248,518 ------------ ------------ Total noninterest-bearing liabilities....... 19,667,320 16,945,871 Stockholders' equity........................ 15,344,747 14,586,556 ------------ ------------ Total liabilities and stockholders' equity.. $157,740,443 $142,160,316 ============ ============ Net interest income......................... $ 1,616,936 $ 1,470,016 ============ ============ Interest spread............................. 3.33% 3.43% ====== ====== Net interest margin......................... 4.26% 4.29% ====== ======
10 Interest income increased $405,401 or 15.0% to $3,108,382 for the three months ended March 31, 2000 from $2,702,981 for the three months ended March 31, 1999. This increase was attributable to a $14.7 million increase in average interest- earning assets along with a 30 basis point increase in earning asset yield to 8.19% from 7.89%. Within earning assets, average loans increased $7.9 million or 8.8%, while average investments increased $6.8 million. During the first quarter of 2000, average loans represented 64.1% of total average interest-earning assets compared to 65.2% during the first quarter of 1999. In terms of rate/volume, a rising rate environment accounted for the increase in earning asset yield and contributed nearly $136,000 to the increase in interest income. Balance sheet growth, especially within interest-earning assets, added approximately $269,000 to the increase in interest income. Total interest expense amounted to $1,491,446 in the first quarter of 2000 compared to $1,232,965 in the first quarter of 1999, or an increase of $258,481 or 21.0%. Average interest-bearing deposits grew $11.4 million, with the preponderance of growth occurring within higher cost time deposits. A rising interest rate environment along with above-market rates offered during the deposit gathering promotion, drove up the Company's cost of funds 40 basis points to 4.86% from 4.46%, and accounted for nearly $90,000 of the increase in total interest expense. The increase in total average interest-bearing liabilities contributed approximately $168,000 to the increase in total interest expense. Net interest income rose $146,920 or 10.0% during the first quarter of 2000 compared to the comparable quarter of the prior year to $1,616,936 from $1,470,016. The primary reasons for this increase were the $14.7 million increase in average interest-earning assets, offset by a 10 basis point decline in net interest spreads. However, due to a $2.4 million increase in average noninterest-bearing deposits and a $.8 million increase in average stockholders' equity, net interest margins only declined 3 basis points to 4.26% from 4.29%, despite the rising interest rate environment. Provision for Loan Losses - ------------------------- The provision for loan losses totaled $50,000 for the three months ended March 31, 2000, compared to $75,000 during the same three month period of the prior year. During the quarter, the Company experienced net recoveries of $9,322, compared to last year's comparable first quarter in which it incurred net charge-offs of $43,684. At March 31, 2000 and 1999, the allowance for loan losses as a percent of total loans amounted to 1.65% and 1.50%, respectively. Noninterest Income - ------------------ Total noninterest income equaled $199,280 for the three months ended March 31, 2000, compared to $217,837 during the same period of the prior year. Gains on the sale of the guaranteed portion of Small Business Administration (ASBA@) loans of $56,306 during the first quarter of 2000 compared to $100,202 during the first quarter of 1999 account for the decrease in total noninterest income. Noninterest Expense - ------------------- Noninterest expense increased $108,473 or 11.3% to $1,071,327 from $962,854. Salaries and benefits increased $81,022 or 16.0% primarily as a result of three additional full time equivalent (FTE) positions to 48 FTE in 2000 vs. 45 FTE in 1999 and across the board pay increases and higher benefit costs. Other operating costs are up approximately $27,600, or 13.7% mainly due to increases in discretionary spending categories. Income Taxes - ------------ Income taxes for the three months ended March 31,2000 and 1999, were 35.4% and 37.3%, respectively, of pretax income. The Company's combined federal and state (net of federal benefit) statutory income tax rate is 39.9%. The Company's effective combined federal and state tax rate was lower than the statutory rate primarily due to the exclusion, from state taxable income of interest income on U.S. Treasury obligations and certain government agency debt securities. 11 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 Company and the Bank. 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, 2000: Regulatory Minimum (1) Actual ----------- ------- The Company Risk-based: Tier 1........... 4.00% 14.37% Totals........... 8.00 15.62 Leverage.......... 3.00 10.00 The Bank Risk-based: Tier 1........... 4.00% 13.80% Totals........... 8.00 15.05 Leverage.......... 3.00 9.61 (1) 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. 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, 2000, the Company's one year static gap position was a negative $15,409,000 or 9.1% of total assets. By using simulation modeling techniques, the Company is able to measure its interest rate risk exposure as determined by the impact of sudden movements in interest rates on net interest income and equity. This exposure is termed `earnings-at-risk' and `equity-at-risk'. At March 31, 2000, the Company's earnings-at-risk under a +/-200 basis point interest rate shock test measured a negative 3.8% in a worst case scenario. Under a similar test, the Company's equity-at-risk measured a negative 14.0% of market value of equity at March 31, 2000. At March 31, 2000, the Company's earnings-at-risk and equity-at-risk fell well within tolerance levels established by internal policy. Liquidity - --------- Liquidity is defined as the ability to meet current and future financial obligations of a short-term nature. The Company further defines liquidity as the ability to respond to the needs of depositors and borrowers and to earning enhancement opportunities in a changing marketplace. Primary sources of liquidity consist of deposit inflows, loan repayments, securities sold under agreements to repurchase, FHLB advances, maturity of investment securities and sales of securities 12 from the available-for-sale portfolio. These sources fund the Bank's lending and investment activities. At March 31, 2000, cash and due from banks, securities purchased under agreements to resell, and short-term investments (unpledged and maturing within one year) amounted to $20.4 million, or 11.98% of total assets. Management is responsible for establishing and monitoring liquidity targets as well as strategies and tactics to meet these targets. Through membership in the Federal Home Loan Bank of Boston (FHLB), the Company has an unused borrowing capacity of nearly $29.0 million, which could assist the Company in meeting its liquidity needs and funding its asset mix. At March 31, 2000, the Company held state and municipal demand deposits of $3.0 million which it considered highly volatile. Nonetheless, the Company believes that there are no adverse trends in the Company's liquidity or capital reserves, and the Company believes that it maintains adequate liquidity to meet its commitments. Year 2000 Compliance - --------------------- The efficient operation of the Company's business is highly dependent on its computer software programs and operating systems. Virtually all of these programs and systems are furnished, supported and maintained by correspondent institutions, computer service and system providers, and software vendors. In confronting the Year 2000 problem, the Company's Board of Directors played a very active role in the Year 2000 compliance effort. The Board approved the Year 2000 plan and received monthly status reports from members of the project team. The FDIC also played a very active role and visited the Company on several occasions to examine the Company's progress. The Company faced potential risks to its and the Bank's operations. As stated above, the Company purchases substantially all of its software from third parties who faced the same Year 2000 challenge as the Company. In addition, the Company relies almost exclusively on other companies for the functioning of its automated system. Thus, the Company's operations could be adversely affected if the operations of these third parties were adversely affected by the Year 2000 problem. Most importantly, the Company faced risks that all banking institutions, whether large or small, also faced. Included among these risks is the risk that the Year 2000 date change would result in the inability to process and underwrite loan applications, to credit deposits and withdrawals from customer accounts, to credit loan payments or track delinquencies, to properly reconcile and record daily activity or to engage in similar normal banking activities. Additionally, if those commercial loan customers of the Bank whose operations depend heavily on computers and computer software experience Year 2000 compliance problems and suffer adverse effects with respect to their own operations, their ability to meet their obligations to the Bank could be adversely affected. This could force the Bank to increase its provision for loan losses or take more aggressive collection actions, potentially impacting the Company's earnings. At January 1, 2000, the Company did not encounter any Year 2000 date change difficulties. All systems and operations continued to function without interruption. The Company is not aware of any Year 2000 difficulties encountered by any of its borrowers. Nonetheless, the Company continues to closely monitor the Year 2000 issue as critical dates emerge throughout the year. 13 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 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. May 3, 2000 /s/ Patrick J. Shanahan, Jr. - ------------------------ ---------------------------- Date Patrick J. Shanahan, Jr. Chairman, President and Chief Executive Officer May 3, 2000 /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 Three Months Ended March 31, -------------------------- 2000 1999 ---- ---- Weighted average common shares outstanding 1,215,297 1,239,074 Dilutive effect of common stock equivalents -- -- ----------- ---------- Weighted average common and common stock equivalent shares outstanding 1,215,297 1,239,074 =========== ========== Net income $ 448,740 $ 407,459 =========== ========== Earnings per share: Basic $ 0.37 $ 0.33 =========== ========== Diluted $ 0.37 $ 0.33 =========== ========== 16 EX-27 3 FINANCIAL DATA SCHEDULE
9 3-MOS MAR-31-2000 JAN-01-2000 MAR-31-2000 3,591,422 0 3,798,604 0 36,959,247 22,073,145 21,804,632 97,685,655 1,615,727 170,169,776 129,469,252 9,457,410 2,219,402 13,546,542 0 0 1,328,041 14,149,129 170,169,776 2,325,210 783,172 0 3,108,382 1,170,151 1,491,446 1,616,963 50,000 0 1,071,327 694,889 448,740 0 0 448,740 0.37 0.37 4.26 193,000 0 0 2,912,872 1,556,405 1,440 10,762 1,615,727 1,615,727 0 0
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