-----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, Wjg9LWlrpUPoHnQ5f+9E3r3Gv6lJQMOcOlB/vnjW+tGpDR1AOExjEgZWqWRUuTt2 3eAW7zvXrT7jFIA7ExUIBg== /in/edgar/work/20000809/0000927016-00-002797/0000927016-00-002797.txt : 20000921 0000927016-00-002797.hdr.sgml : 20000921 ACCESSION NUMBER: 0000927016-00-002797 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL CORP /RI/ CENTRAL INDEX KEY: 0000354948 STANDARD INDUSTRIAL CLASSIFICATION: [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: 689188 BUSINESS ADDRESS: STREET 1: 180 WASHINGTON ST CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4014213600 10-Q 1 0001.txt 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, 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 August 4, 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
PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements........................................................................ 1 Consolidated Balance Sheets - June 30, 2000 and December 31, 1999............................... 1 Consolidated Statements of Income - Three months and six months ended June 30, 2000 and 1999..................................................................................... 2 Consolidated Statements of Stockholders' Equity and Comprehensive Income - Six months ended June 30, 2000 and year ended December 31, 1999......................................... 3 Consolidated Statements of Cash Flows - Six months ended June 30, 2000 and 1999................. 4 Notes to Consolidated Financial Statements - June 30, 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............................................................ 15 SIGNATURES........................................................................................... 16 EXHIBITS Computation of per share earnings - Exhibit 11....................................................... 17 Financial Data Schedule - Exhibit 27................................................................. 18
PART I - FINANCIAL INFORMATION Item 1 - Financial Statements FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2000 1999 ------------ ------------ ASSETS (Unaudited) CASH AND DUE FROM BANKS........................................................ $ 2,613,735 $ 5,441,190 SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL................................ 5,320,932 3,802,865 LOANS HELD FOR SALE............................................................ 836,501 942,338 INVESTMENT SECURITIES: Held-to-maturity (market value: $22,464,164 and $15,450,453)................. 22,738,391 15,691,004 Available-for sale (amortized cost: $31,417,624 and $21,167,567)............. 30,305,517 20,857,124 ------------ ------------ Total investment securities............................................ 53,043,908 36,548,128 ------------ ------------ FEDERAL HOME LOAN BANK STOCK................................................... 716,000 681,500 LOANS: Commercial................................................................... 12,850,215 12,248,552 Commercial real estate....................................................... 68,691,037 65,812,129 Residential real estate...................................................... 14,368,931 13,084,006 Home equity lines of credit.................................................. 2,735,660 3,051,265 Consumer..................................................................... 750,774 766,383 ------------ ------------ 99,396,617 94,962,335 Less - Unearned discount..................................................... 14,024 23,221 Allowance for loan losses.................................................... 1,697,072 1,556,405 ------------ ------------ Net loans.............................................................. 97,685,521 93,382,709 ------------ ------------ OTHER REAL ESTATE OWNED........................................................ 268,000 --- PREMISES AND EQUIPMENT, net.................................................... 2,055,826 2,167,103 OTHER ASSETS................................................................... 3,136,283 1,815,822 ------------ ------------ TOTAL ASSETS................................................................... $165,676,706 $144,781,655 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: DEPOSITS Demand....................................................................... $ 19,380,911 $ 17,522,309 Savings and money market accounts............................................ 21,062,473 23,838,702 Time deposits................................................................ 85,064,920 63,227,494 ------------ ------------ Total deposits.......................................................... 125,508,304 104,588,505 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE................................. 9,496,125 9,411,111 FEDERAL HOME LOAN BANK ADVANCES................................................ 13,491,764 13,610,400 ACCRUED EXPENSES AND OTHER LIABILITIES......................................... 1,702,951 1,689,999 SENIOR DEBENTURE............................................................... --- --- ------------ ------------ TOTAL LIABILITIES.............................................................. 150,199,144 129,300,015 ------------ ------------ 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............................................................ 11,140,490 10,504,194 Accumulated other comprehensive (loss) income................................ (667,264) (186,265) ------------ ------------ 16,232,647 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..................................................... 15,477,562 15,481,640 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $165,676,706 $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
Six Months Ended Three Months Ended June 30, June 30, ----------------------- ------------------------ 2000 1999 2000 1999 ---------- ---------- ---------- ----------- (Unaudited) INTEREST INCOME: Interest and fees on loans......................................... $4,733,773 $4,201,084 $2,408,563 $2,122,507 Interest and dividends on investment securities- U.S. Government and agency obligations.................... 1,030,406 852,965 575,382 434,950 Collateralized mortgage obligations....................... 39,303 74,070 17,447 35,032 Mortgage-backed securities................................ 159,820 207,773 77,230 96,598 Other debt securities..................................... 294,790 --- 204,372 --- Marketable equity securities and other.................... 49,089 31,698 23,321 12,111 Interest on cash equivalents....................................... 158,439 74,509 50,923 37,920 ---------- ---------- ---------- ---------- Total interest income..................................... 6,465,620 5,442,099 3,357,238 2,739,118 ---------- ---------- ---------- ---------- INTEREST EXPENSE: Interest on deposits............................................... 2,525,821 1,857,640 1,355,670 925,849 Interest on repurchase agreements.................................. 231,649 300,511 111,821 149,703 Interest on advances............................................... 401,347 215,465 199,880 115,799 Interest on debenture.............................................. --- 84,503 --- 33,803 ---------- ---------- ---------- ---------- Total interest expense..................................... 3,158,817 2,458,119 1,667,371 1,225,154 ---------- ---------- ---------- ---------- Net interest income........................................ 3,306,803 2,983,980 1,689,867 1,513,964 PROVISION FOR LOAN LOSSES.............................................. 125,000 125,000 75,000 50,000 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses............................................... 3,181,803 2,858,980 1,614,867 1,463,964 ---------- ---------- ---------- ---------- NONINTEREST INCOME: Service charges on deposits........................................ 136,880 132,094 69,451 65,023 Gain on loan sales................................................. 152,261 154,154 95,955 53,952 Other.............................................................. 140,839 99,420 65,294 48,856 Total noninterest income................................... ---------- ---------- ---------- ---------- 429,980 385,668 230,700 167,831 ---------- ---------- ---------- ---------- NONINTEREST EXPENSE: Salaries and employee benefits.................................... 1,203,463 1,022,075 616,098 515,732 Occupancy expense................................................. 228,912 336,947 109,513 231,257 Equipment expense................................................. 130,856 147,257 64,686 74,875 Other real estate owned net (gains) losses and expenses........... (4,261) (212,110) (4,427) (226,681) Computer services................................................. 123,558 124,636 60,175 65,428 Deposit insurance assessments..................................... 10,843 5,977 5,259 2,977 Other operating expenses.......................................... 480,766 406,755 251,506 205,095 ---------- ---------- ---------- ---------- Total noninterest expense.................................. 2,174,137 1,831,537 1,102,810 868,683 ---------- ---------- ---------- ---------- Income before provision for income taxes................... 1,437,646 1,413,111 742,757 763,112 PROVISION FOR INCOME TAXES............................................. 510,052 517,039 263,903 274,499 ---------- ---------- ---------- ---------- NET INCOME............................................................. $ 927,594 $ 896,072 $ 478,854 $ 488,613 ========== ========== ========== ========== Earnings per share: Basic...................................................... $ 0.76 $ 0.73 $ 0.39 $ 0.40 ========== ========== ========== ========== Diluted.................................................... $ 0.76 $ 0.73 $ 0.39 $ 0.40 ========== ========== ========== ========== Weighted average common shares outstanding............................. 1,214,514 1,235,136 1,213,741 1,231,241 Diluted effect of common stock equivalents............................. --- --- --- --- ---------- ---------- ---------- ---------- Weighted average common and common stock equivalent shares outstanding................................................ 1,214,514 1,235,136 1,213,741 1,231,741 ========== ========== ========== ==========
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.... --- --- --- (256,903) --- (256,903) (256,903) ------------ of reclassification adjustment 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........................... --- --- 927,594 --- --- 927,594 $ 927,594 Other comprehensive income, net of tax: Unrealized holding losses, net.... --- --- --- (480,999) --- (480,999) (480,999) ------------ of reclassification adjustment Comprehensive income................. $ 446,595 ============ Dividends declared ($.24 per share)............................ --- --- (291,298) --- --- (291,298) Repurchase of 12,500 shares of common stock...................... (159,375) (159,375) ----------- ---------- ----------- --------- --------- ------------ Balance, June 30, 2000............... $ 1,328,041 $4,431,380 $11,140,490 $(667,264) $(755,085) $ 15,477,562 =========== ========== =========== ========= ========= ============
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, ------------------------------- 2000 1999 ------------- ------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................................. $ 927,594 $ 896,072 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses.................................................... 125,000 125,000 Depreciation and amortization................................................ 138,550 153,792 Writeoff of impaired long-lived asset........................................ --- 129,362 Amortization of discount on debenture........................................ --- 15,860 Net accretion on investment securities held-to-maturity............ (4,897) (3,155) Net accretion on investment securities available-for-sale.................... (169,823) (186,185) Gains on sale of OREO........................................................ (5,014) (219,118) Gains on sales of loans...................................................... (152,261) (154,154) Proceeds from sales of loans................................................. 3,427,708 2,268,857 Loans originated for sale.................................................... (3,169,610) (3,958,631) Net decrease in unearned discount............................................ (9,197) (24,379) Net increase in other assets................................................. (999,795) (140,710) Net (decrease) increase in deferred loan fees (20,588) 12,315 Net increase in accrued expenses and other liabilities 12,952 289,730 ------------- ----------- Net cash provided by (used in) operating activities...................... 100,619 (795,344) ------------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Federal Home Loan Bank stock..................................... (34,500) (39,800) Proceeds from maturities of investment securities held-to-maturity........................................................... 707,276 2,425,992 Proceeds from maturities of investment securities available-for-sale........................................................... 131,856,949 167,546,146 Purchase of investment securities held-to-maturity........................... (7,749,766) (2,488,394) Purchase of investment securities available-for-sale......................... (141,937,184) (165,662,016) Net increase in loans....................................................... (4,828,108) (4,476,327) Purchase of premises and equipment........................................... (27,273) (80,057) Sales of OREO................................................................ 167,095 684,955 ------------- ----------- Net cash used in investing activities.................................. (21,845,511) (2,089,501) ------------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in demand accounts.............................................. 1,858,602 4,888,281 Net (decrease) increase in savings and money market accounts...... (2,776,229) 1,370,394 Net increase (decrease) in time deposits..................................... 21,837,426 (1,080,634) Net increase (decrease) in repurchase agreements............................ 85,014 (397,990) Net (decrease) increase in Federal Home Loan Bank advances........ (118,636) 3,544,349 Repayment of senior debenture................................................ --- (2,708,777) Purchase of common stock for treasury........................................ (159,375) (384,375) Dividends paid............................................................... (291,298) (222,974) Net cash provided by financing activities......................... 20,435,504 5,008,274 ------------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........................................................... (1,309,388) 2,123,429 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................................................................... 9,244,055 5,066,270 ------------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD........... $ 7,934,667 $ 7,189,699 ============= =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid............................................................. $ 3,074,250 $ 2,462,048 ============= =========== Income taxes paid................................................... $ 805,000 $ 843,000 ============= =========== SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: Transfer of loans to OREO.................................................... $ 430,081 $ --- ============= ===========
The accompanying notes are an integral part of these consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 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 and six months ended June 30, 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 July 10, 2000 the Company declared dividends of $145,649 or $.12 per share to all common stockholders of record on August 1, 2000, payable on August 14, 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, as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded on 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 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. 5 (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). 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 non reportable 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 segment specific information and reconciliation to consolidated financial information is as follows:
Community Other Adjustments Banking Other and Eliminations Consolidated ----------- ---------- ------------------- ------------ Three Months Ended June 30, 2000 Net Interest Income $ 1,683,804 $ 499,617 $(493,554) $ 1,689,867 Provision for Loan Losses 75,000 --- --- 75,000 Total Noninterest Income 230,700 --- --- 230,700 Total Noninterest Expense 1,078,810 24,000 --- 1,102,810 Net Income 493,554 478,854 (493,554) 478,854 Three Months Ended June 30, 1999 Net Interest Income 1,529,169 498,113 (513,318) 1,513,964 Provision for Loan Losses 50,000 --- --- 50,000 Total Noninterest Income 167,831 --- --- 167,831 Total Noninterest Expense 846,683 22,000 --- 868,683 Net Income 513,318 488,613 (513,318) 488,613 Six Months Ended June 30, 2000 Net Interest Income 3,294,682 964,646 (952,525) 3,306,803 Provision for Loan Losses 125,000 --- --- 125,000 Total Noninterest Income 429,980 --- --- 429,980 Total Noninterest Expense 2,126,137 48,000 --- 2,174,137 Net Income 952,525 927,594 (952,525) 927,594 Six Months Ended June 30, 1999 Net Interest Income 3,011,320 918,112 (945,452) 2,983,980 Provision for Loan Losses 125,000 --- --- 125,000 Total Noninterest Income 385,668 --- --- 385,668 Total Noninterest Expense 1,785,537 46,000 --- 1,831,537 Net Income 945,452 896,072 (945,452) 896,072
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 non-performing and other classified assets. Summary - ------- For the three months ended June 30, 2000, the Company reported net income of $478,854, compared to net income of $488,613 for the three months ended June 30, 1999, or a decrease of 2.0%. Basic and diluted net income per share were $.39 for the quarter ended June 30, 2000, compared to $.40 per share for the same three month period of the prior year. Net income for the six months ended June 30, 2000 amounted to $927,594, compared to net income of $896,072 for the six months ended June 30, 1999. Basic and diluted net income per share for the six months ended June 30, 2000 and June 30, 1999 were $.76 and $.73, respectively. During the three months ended June 30, 1999, the Company recorded two one-time transactions. The first nonrecurring transaction was the sale of OREO at a gain of $222,452. The second nonrecurring transaction was a $129,362 write-off of a long-lived asset in recognition of its impaired value. The after-tax impact of these two transactions was to increase net income by $61,439, or $.05 per share. Exclusive of last year's nonrecurring transactions, net income increased 12.1% for the three months ended June 30, 2000 over the core earnings for the three months ended June 30, 1999. For the six months ended June 30, 2000, net income increased 11.1% over the core earnings for the same six month period of the prior year. Exclusive of last year's nonrecurring transactions, the second quarter ended June 30, 2000 was the second strongest in 7 the Company's history. Overall, this achievement was accomplished as a result of (i) balance sheet growth, which more than offset a slight decline in net interest margin, and (ii) continued strength in asset quality. Total assets increased $20.9 million or 14.4% to $165.7 million at June 30, 2000, from $144.8 million at December 31, 1999. The loan portfolio, net of unearned discount, increased $4.5 million or 4.7% to $99.4 million at June 30, 2000, from $94.9 million at December 31, 1999. Investment securities increased $16.5 million to $53.0 million at June 30, 2000, from $36.5 million at December 31, 1999. The increase in the Company's total assets was funded from retail deposits and, in particular, time deposits. Total deposits increased $20.9 million to $125.5 million at June 30, 2000, from $104.6 million at December 31, 1999, while time deposits increased $21.8 million to $85.0 million at June 30, 2000, from $63.2 million at December 31, 1999. During February 2000, the Company successfully marketed a 14 month certificate of deposit promotion through its branch network at a 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 were 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 as of and for the six months and twelve months ended June 30, 1999 and December 31, 1999, respectively, 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 six months ended year ended June 30, December 31, ----------------- ----------------- 2000 1999 1999 ------ ------ --------- (Dollars in Thousands) Nonperforming loans................................. $ 120 $ 126 $ 181 Other real estate owned............................. $ 268 $ 47 $ -0- Total nonperforming assets.......................... $ 388 $ 173 $ 181 Loans 30-89 days delinquent......................... $ 347 $ 583 $ 154 Nonperforming assets to total assets................ 0.23% 0.12% 0.12% Nonperforming loans to total loans.................. 0.12% 0.14% 0.19% Net loan (recoveries) charge-offs to average loans.. (0.02)% 0.02% 0.01% Allowance for loan losses to total loans............ 1.71% 1.53% 1.64% Allowance for loan losses to nonperforming loans (multiple).................. 14.10X 11.10X 8.62X
In May 1992, the Company issued a $3 million Senior Debenture to the Depositors Economic Protection Corporation (DEPCO) in connection with its acquisition of certain assets and the assumption of certain liabilities of Chariho-Exeter Credit Union. Under the terms of the Senior Debenture, the Company was allowed to charge net acquired loan losses in excess of the acquired loan loss reserve against the outstanding Senior Debenture. On May 31, 1999, the Senior Debenture matured. The Company repaid the Debenture in the amount of $2,708,777, which represented the original face value of $3,000,000, less $291,223 in net acquired loan losses in excess of the acquired loan loss reserve. 8 The following represents the activity in the allowance for loan losses for the three and six months ended June 30, 2000 and 1999:
Six Months Ended Three Months Ended June 30, June 30, ------------------------- --------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ------------ Bank Reserve Balance at beginning of period......................... $ 1,556,405 $ 1,287,058 $ 1,615,727 $ 1,318,374 Provision............................................ 125,000 125,000 75,000 50,000 Loan charge-offs..................................... (41,920) (46,852) (40,480) --- Recoveries........................................... 57,587 28,446 46,825 25,278 ----------- ----------- ----------- ------------ Balance at end of period.............................. 1,697,072 1,393,652 1,697,072 1,393,652 ----------- ----------- ----------- ------------ Acquired Reserve: Balance at beginning of period.................... --- --- --- --- Loan charge-offs.................................... --- (266,482) --- (266,482) Recoveries (Administrative Costs).................. --- 1,638 --- 155 Reclassification to senior debenture............... --- 264,844 --- 266,327 Balance at end of period............................ --- --- --- --- ----------- ----------- ----------- ------------ Total Reserve.......................................... $ 1,697,072 $ 1,393,652 $ 1,697,072 $ 1,393,652 =========== =========== =========== ============
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 conditions differ substantially from the assumptions used in making the evaluation. Deposits and Other Borrowings - ----------------------------- Total deposits increased $20.9 million or 20.0% to $125.5 million at June 30, 2000 from $104.6 million at December 31, 1999. During the six months ended June 30, 2000, demand deposits increased $1.9 million, savings and money market accounts decreased $2.8 million, and time deposits increased $21.8 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 June 30, 2000 and December 31, 1999. 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) was $3,306,803 for the six months ended June 30, 2000, compared to $2,983,980 for the six months ended June 30, 1999. This increase was the result of an increase in interest-earning assets, offset somewhat by a slight decline in net interest 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. 9
Six Months Ended June 30, - --------------------------------------------------------------------------------------- 2000 1999 ------------------------------------------ -------------------------------------- Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------------- ------------ ----------- ------------ ---------- ------------ Interest - earning assets: Loans......................................... $ 98,713,438 $ 4,733,773 9.59% $ 89,835,475 $ 4,201,084 9.35% Investment securities - AFS................... 29,675,090 957,232 6.45% 30,037,301 786,661 5.24% Investment securities - HTM.................. 20,146,672 590,993 5.87% 13,269,027 363,998 5.49% Securities purchased under agreements to resell.................................... 6,594,388 158,438 4.81% 3,790,269 74,509 3.93% Federal Home Loan Bank Stock and other 786,875 25,184 6.40% 472,255 15,847 6.71% ------------ ----------- ------- ------------ ------------ ------- Total interest-earning assets.................. 155,916,463 6,465,620 8.29% 137,404,327 5,442,099 7.92% ----------- ------- ------------ ------- Noninterest-earning assets: Cash and due from banks...................... 3,073,862 2,401,343 Premises and equipment....................... 2,123,663 2,386,403 Other real estate owned...................... 129,975 421,736 Allowance for loan losses.................... (1,625,582) (1,259,705) Other assets................................. 2,040,338 1,322,010 ------------ ------------ Total noninterest-earning assets............... 5,742,256 5,271,787 ------------ ------------ Total assets................................... $161,658,719 $142,676,114 ============ ============ Interest - bearing liabilities: Deposits: Interest bearing demand and NOW deposits............................... $ 3,240,912 $ 23,643 1.46% $ 3,457,562 $ 25,204 1.46% Savings deposits........................ 17,441,758 185,057 2.12% 17,843,570 188,545 2.11% Money market deposits................... 1,315,497 13,648 2.08% 1,510,307 15,173 2.01% Time deposits........................... 81,382,491 2,303,473 5.66% 65,537,310 1,628,718 4.97% Securities sold under agreements to repurchase............................... 9,453,410 231,649 4.90% 12,043,802 300,511 4.99% Federal Home Loan Bank Advances...... 13,552,230 401,347 5.92% 7,639,702 215,465 5.64% Senior debenture............................ 0.00 0.00 0.00% 2,428,590 84,503 6.96% ------------ ---------- --------- ------------ ------------ ------ Total interest-bearing liabilities............. 126,386,298 3,158,817 5.00% 110,460,843 2,458,119 4.45% ---------- --------- ------------ ------ Noninterest-bearing liabilities: Noninterest-bearing deposits................. 18,460,724 16,275,856 Other liabilities............................ 1,396,903 1,278,526 ------------ ------------ Total noninterest-bearing liabilities.......... 19,857,627 17,554,382 Stockholders' equity........................... 15,414,794 14,660,889 ------------ ------------ Total liabilities and stockholders' equity. $161,658,719 $142,676,114 ============ ============ Net interest income............................ $3,306,803 $ 2,983,980 ========== ============ Net interest spread............................ 3.30% 3.47% ========== ====== Net interest margin............................ 4.24% 4.34% ========== ======
10 Total interest income for the three months ended June 30, 2000 was $3,357,238, compared to $2,739,118 for the same three month period of the prior year. This increase of $618,120 or 22.6% was primarily the result of a $22.1 million increase in quarterly average interest-earning assets to $160.0 million for the second quarter of 2000 from $137.9 million for the second quarter of 1999. Quarterly average loans increased $9.7 million from a year ago, while the remainder of the growth went into the lower yielding investment portfolio. The yield on quarterly average interest-earning assets increased to 8.39% for the three months ended June 30, 2000, compared to 7.95% for the three months ended June 30, 1999. The increase in quarterly interest-earning asset yield was primarily attributed to a rising interest rate environment. Total interest expense increased $442,217 to $1,667,371 for the three months ended June 30, 2000 compared to $1,225,154 for the same three month period of 1999. This increase reflected the growth of quarterly average interest-bearing liabilities of $19.7 million to $130.0 million in the second quarter of 2000 from $110.3 million in the second quarter of 1999. All of this growth took place within the higher cost time deposits which, coupled with a rising rate environment, drove up the Company's cost of funds to 5.13% in the second quarter of 2000 from 4.44% in last year's second quarter. Overall, the Company's net interest spread decreased to 3.26% from 3.51% and its margin also declined to 4.22% from 4.39%. However, this spread and margin compression was anticipated when the Company ran a certificate of deposit promotion to partially leverage the Company's capital position and presumably increase market share. Effectively, net interest income increased $175,903 or 11.6% during the second quarter of 2000 compared to the second quarter of 1999. Total interest income for the six months ended June 30, 2000 was $6,465,620, compared to $5,442,099 for the six months ended June 30, 1999. This increase of $1,023,521 or 18.8% was largely the result of an $18.5 million increase in average interest-earning assets, of which $8.9 million took place in the loan portfolio and the remaining $9.6 million of growth occurred within the investment portfolio. Of the increase in total interest income, approximately $693,000 was related to balance sheet growth (volume). A rising rate environment boosted the yield on interest-earning assets to 8.29% for the first six months of 2000, compared to 7.92% for the first six months of 1999. This yield improvement added nearly $331,000 to the increase in interest income. The total interest expense increased $700,698 or 28.5% to $3,158,817 for the six months ended June 30, 2000 from $2,458,119 for the six months ended June 30, 1999. Total average interest-bearing liabilities increased $15.9 million to $126.4 million from $110.5 million. All of this increase took place within higher cost time deposits which funded interest-earning asset growth. This volume related increase accounted for nearly $468,000 of the increase in interest expense. The Company's cost of funds increased to 5.00% for the six months ended June 30, 2000 from 4.45% for the same six month period of 1999. This increase in cost of funds was due in part to a rising interest rate environment, along with a change in the composition mix of interest-bearing liabilities. This increase in funding costs added approximately $233,000 to the increase in interest expense. Overall, net interest income increased $322,823 to $3,306,803 from $2,983,980. Changes in volume (balance sheet growth) contributed nearly $225,000 to this increase, while changes in rates added approximately $98,000. Net interest spread declined 17 basis points to 3.30% from 3.47%, while net interest margin decreased 10 basis points to 4.24% for the first six months of 2000 from 4.34% for last year's first six months. Provision for Loan Losses - ------------------------- The provision for loan losses totaled $75,000 for the three months ended June 30, 2000 and $50,000 for the three months ended June 30, 1999. For the six months ended June 30, 2000 and 1999, the provision for loan losses amounted to $125,000. Noninterest Income - ------------------ Total noninterest income increased $62,869 to $230,700 for the three months ended June 30, 2000, from $167,831 for the three months ended June 30, 1999. For the six months ended June 30, 2000 and 1999, noninterest income increased $44,312 to $429,980 from $385,668. For both the three month and six month reporting period, the increases were attributable to an increase in gains on the sale of the guaranteed portion of Small Business Administration ("SBA") loans plus SBA loan servicing fees. 11 Noninterest Expense - ------------------- Total noninterest expense amounted to $1,102,810 and $868,683 for the three months ended June 30, 2000 and 1999, respectively. Excluding the nonrecurring transactions relating to the gain on OREO sale and the write-off of a long-lived asset, noninterest expense would have amounted to $961,773 for the three months ended June 30, 1999, or an increase of $141,037, or 14.7% for the three months ended June 30, 2000 compared to the three months ended June 30, 1999. For the six months ended June 30, 2000 and 1999, noninterest expense was $2,174,137 and $1,831,537, respectively. Excluding the nonrecurring transactions, noninterest expense would have totaled $1,924,627 for the six months ended June 30, 1999, or an increase of $249,510, or 13.0%. For both the three month and six month periods ended June 30, 2000, the increases in overhead costs are primarily the result of (i) higher salaries and wages associated with filling additional staff positions, and across-the-board pay increases, (ii) higher benefit costs, (iii) increases in legal and professional fees, and (iv) higher marketing, advertising and business development costs. Income Taxes - ------------ Income taxes for the three months ended June 30, 2000, were $263,903 or 35.5% of pretax income, compared to $274,499 or 36.0% of pretax income for the three months ended June 30, 1999. For the six months ended June 30, 2000 and 1999, income taxes were $510,052 and $517,039, respectively, or 35.5% and 36.6% of pretax income, respectively. 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. The lower effective tax rates in 2000 were primarily due to proportionately more income excluded for state income tax purposes. 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, 2000:
Regulatory Minimum (1) Actual ----------- -------- The Company Risk-based: Tier 1........................ 4.00% 14.57% Totals........................ 8.00 15.83 Leverage........................ 3.00 9.71 The Bank Risk-based: Tier 1......................... 4.00% 14.03% Totals....................... 8.00 15.29 Leverage......................... 3.00 9.37
(1) The 3% regulatory minimum leverage ratio applies only to certain highly- rated banks. Other institutions are subject to higher requirements. 12 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 June 30, 2000, the Company's one year static gap position was a negative $41.9 million or 25.3% 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 June 30, 2000, the Company's earnings-at-risk under a +200 basis point interest rate shock test measured a negative 6.25% in a worst case scenario. Under a similar test, the Company's equity-at-risk measured a negative 18.86% of market value of equity at June 30, 2000. At June 30, 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 from the available-for-sale portfolio. These sources fund the Bank's lending and investment activities. At June 30, 2000, cash and due from banks, securities purchased under agreements to resell, and short-term investments (unpledged and maturing within one year) amounted to $16.6 million, or 10.0% 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 June 30, 2000, the Company held state and municipal demand deposits of $.8 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 - -------------------- 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 The Company held its 2000 Annual Meeting of Stockholders on May 10, 2000. The meeting was held for the purpose of: (i) electing Artin H. Coloian, Esq., John Nazarian, Ph.D. and William P. Shields, Directors of the Company for a three year term expiring at the Annual Meeting in the year 2003 and (ii) ratifying the selection of Arthur Andersen LLP as the independent public accountants for the Company for the fiscal year ending December 31, 2000. At the time of the 2000 Annual Meeting there were 1,213,741 shares entitled to vote. Shares voted either in person or by proxy totaled 1,076,063 shares. The results of the votes cast were as follows:
For Against Abstention ---------- ----------- ------------ (i) To elect Directors of the Company for three years: Artin H. Coloian, Esq. 1,057,701 18,362 John Nazarian, Ph.D. 1,057,801 18,262 William P. Shields 1,057,801 18,262 (ii) To select Arthur Andersen LLP as independent public accountants for the Company for the 1,069,411 6,050 602 fiscal year ending December 31, 2000
In addition, upon completion of the Annual Meeting the Director's Terms continue as follows:
Name Term to Expire in: ---- -------------------- Patrick J. Shanahan, Jr. 2001 Gary R. Alger 2001 Joseph V. Mega 2001 Raymond F. Bernardo 2002 Joseph A. Keough, Esq. 2002 Peter L. Mathieu, Jr., M.D. 2002 Fred J. Simon, Jr. 2002
Item 5 - Other Information Not Applicable 14 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 15 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 4, 2000 /s/ Patrick J. Shanahan, Jr. - ---------------------- -------------------------------- Date Patrick J. Shanahan, Jr. Chairman, President and Chief Executive Officer August 4, 2000 /s/ John A. Macomber - ---------------------- -------------------------------- Date John A. Macomber Vice President, Treasurer and Chief Financial Officer 16 EX-11 2 0002.txt COMPUTATION OF PER SHARE DATA Exhibit 11 - Computation of per share earnings
Six Months Ended Three Months Ended June 30, June 30, ----------------------- ---------------------- 2000 1999 2000 1999 ----------- ---------- ---------- ---------- Weighted average common shares outstanding 1,214,5141 1,235,136 1,213,741 1,231,241 Weighted average equivalent shares --- --- --- --- ---------- ---------- ---------- ---------- Weighted average common and common stock equivalent shares outstanding 1,214,514 1,235,136 1,213,741 1,231,241 ========== ========== ========== ========== Net income $ 927,594 $ 896,072 $ 478,854 $ 488,613 ========== ========== ========== ========== Earnings per share: Basic $ 0.76 $ 0.73 $ 0.39 $ 0.40 ========== ========== ========== ========== Diluted $ 0.76 $ 0.73 $ 0.39 $ 0.40 ========== ========== =========== ==========
EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-2000 APR-01-2000 JUN-30-2000 2,613,735 0 5,320,932 0 30,305,517 22,738,391 22,464,164 99,382,593 1,697,072 165,676,706 125,508,304 9,496,125 1,702,951 13,491,764 0 0 1,328,041 14,149,521 165,676,706 2,408,563 948,675 0 3,357,238 1,355,670 1,667,371 1,689,867 75,000 0 1,102,810 742,757 742,757 0 0 478,854 0.39 0.39 4.22 120,000 0 0 2,004,937 1,615,727 40,480 46,825 1,697,072 1,697,072 0 0
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