-----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, LvQRVJWj00yQBlKPU17pQZySW30ghS2O8oxEAJXOAgaDAKqTugBvCJ9QqkqVJEC5 C8VpWxn8e13WEnSqLXMZgA== 0000927016-01-502309.txt : 20010813 0000927016-01-502309.hdr.sgml : 20010813 ACCESSION NUMBER: 0000927016-01-502309 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL CORP /RI/ CENTRAL INDEX KEY: 0000354948 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 050391383 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27878 FILM NUMBER: 1703639 BUSINESS ADDRESS: STREET 1: 180 WASHINGTON ST CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4014213600 10-Q 1 d10q.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, 2001 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 6, 2001, 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, 2001 and December 31, 2000.............................................. 1 Consolidated Statements of Income - Three months and six months ended June 30, 2001 and 2000................................................................................................... 2 Consolidated Statements of Stockholders' Equity and Comprehensive Income - Six months ended June 30, 2001........................................................................................ 3 Consolidated Statements of Cash Flows - Six months ended June 30, 2001 and 2000................................ 4 Notes to Consolidated Financial Statements - June 30, 2001..................................................... 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 7 Item 3 - Quantitative and Qualitative Disclosures about Market Risk................................................. 13 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
PART I - FINANCIAL INFORMATION Item 1 - Financial Statements FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2001 2000 ------------- ------------- ASSETS (Unaudited) (Note 1) CASH AND DUE FROM BANKS....................................................................... $ 2,436,306 $ 3,055,863 SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL............................................... 7,043,899 1,748,068 LOANS HELD FOR SALE........................................................................... 681,614 505,000 INVESTMENT SECURITIES: Held-to-maturity (market value: $16,029,818 and $22,451,901).............................. 15,944,216 22,488,801 ------------- ------------- Available-for sale........................................................................ 39,608,693 31,923,655 ------------- ------------- Total investment securities....................................................... 55,552,909 54,412,456 ------------- ------------- FEDERAL HOME LOAN BANK STOCK.................................................................. 1,091,500 716,000 LOANS: Commercial................................................................................ 15,290,276 13,099,260 Commercial real estate.................................................................... 74,454,786 73,522,872 Residential real estate................................................................... 12,407,269 13,377,532 Home equity lines of credit............................................................... 2,890,717 2,948,764 Consumer.................................................................................. 979,518 939,063 ------------- ------------- 106,022,566 103,887,491 Less - Unearned discount.................................................................. 4,033 7,674 Allowance for loan losses................................................................. 1,782,456 1,751,621 ------------- ------------- Net loans......................................................................... 104,236,077 102,128,196 ------------- ------------- PREMISES AND EQUIPMENT, net................................................................... 1,913,161 2,003,583 OTHER ASSETS.................................................................................. 3,379,009 3,802,341 ------------- ------------- TOTAL ASSETS.................................................................................. $ 176,334,475 $ 168,371,507 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY DEPOSITS: Demand..................................................................................... $ 19,109,497 $ 19,187,122 Savings and money market accounts.......................................................... 26,375,988 25,084,287 Time deposits.............................................................................. 80,172,696 84,774,840 ------------- ------------- Total deposits..................................................................... 125,658,181 129,046,249 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE................................................ 8,551,326 9,574,571 FEDERAL HOME LOAN BANK ADVANCES............................................................... 21,741,322 10,869,241 ACCRUED EXPENSES AND OTHER LIABILITIES........................................................ 2,504,198 2,390,731 ------------- ------------- TOTAL LIABILITIES............................................................................. 158,455,027 151,880,792 ------------- ------------- 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.......................................................................... 12,571,867 11,892,318 Accumulated other comprehensive income (loss).............................................. 303,245 (405,939) ------------- ------------- 18,634,533 17,245,800 Less - Treasury stock, at cost, 114,300 shares.............................................. 755,085 755,085 ------------- ------------- TOTAL STOCKHOLDERS' EQUITY.................................................................... 17,879,448 16,490,715 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................................... $ 176,334,475 $ 168,371,507 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 1 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six Months Ended Three Months Ended June 30, June 30, ------------------ ------------------ 2001 2000 2001 2000 ---- ---- ---- ---- INTEREST INCOME: Interest and fees on loans.......................................... $ 4,934,698 $ 4,733,773 $ 2,489,440 $ 2,408,563 Interest and dividends on investment securities- U.S. Government and agency obligations..................... 953,847 1,030,406 403,219 575,382 Collateralized mortgage obligations........................ 17,335 39,303 7,500 17,447 Mortgage-backed securities................................. 124,050 159,820 61,203 77,230 Preferred stock............................................ 517,735 294,790 263,558 204,372 Marketable equity securities and other..................... 77,685 49,089 32,073 23,321 Interest on cash equivalents........................................ 210,837 158,439 120,068 50,923 ----------- ----------- ----------- ----------- Total interest income...................................... 6,836,187 6,465,620 3,377,061 3,357,238 ----------- ----------- ----------- ----------- INTEREST EXPENSE: Interest on deposits................................................ 2,621,098 2,525,821 1,207,257 1,355,670 Interest on repurchase agreements................................... 192,184 231,649 89,608 111,821 Interest on advances................................................ 536,618 401,347 288,397 199,880 ----------- ----------- ----------- ----------- Total interest expense..................................... 3,349,900 3,158,817 1,585,262 1,667,371 ----------- ----------- ----------- ----------- Net interest income........................................ 3,486,287 3,306,803 1,791,799 1,689,867 PROVISION FOR LOAN LOSSES............................................... 50,000 125,000 25,000 75,000 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses........ 3,436,287 3,181,803 1,766,799 1,614,867 ----------- ----------- ----------- ----------- NONINTEREST INCOME: Service charges on deposits......................................... 160,432 136,880 80,259 69,451 Gain on loan sales.................................................. 17,002 152,261 4,232 95,955 Other............................................................... 214,707 140,839 79,955 65,294 ----------- ----------- ----------- ----------- Total noninterest income................................... 392,141 429,980 164,446 230,700 ----------- ----------- ----------- ----------- NONINTEREST EXPENSE: Salaries and employee benefits..................................... 1,252,946 1,203,463 621,501 616,098 Occupancy expense.................................................. 237,213 228,912 111,527 109,513 Equipment expense.................................................. 139,962 130,856 71,449 64,686 Other real estate owned net (gains) losses and expenses............ 2,400 (4,261) 1,200 (4,427) Computer services.................................................. 132,794 123,558 64,561 60,175 Deposit insurance assessments...................................... 17,848 10,843 5,827 5,259 Other operating expenses........................................... 439,386 480,766 210,297 251,506 ----------- ----------- ----------- ----------- Total noninterest expense................................... 2,222,549 2,174,137 1,086,362 1,102,810 ----------- ----------- ----------- ----------- Income before provision for income taxes.................... 1,605,879 1,437,646 844,883 742,757 PROVISION FOR INCOME TAXES.............................................. 562,207 510,052 309,303 263,903 ----------- ----------- ----------- ----------- NET INCOME.............................................................. $ 1,043,672 $ 927,594 $ 535,580 $ 478,854 =========== =========== =========== =========== Earnings per share: Basic....................................................... $ 0.86 $ 0.76 $ 0.44 $ 0.39 =========== =========== =========== =========== Diluted..................................................... $ 0.86 $ 0.76 $ 0.44 $ 0.39 =========== =========== =========== =========== Weighted average common shares outstanding.............................. 1,213,741 1,214,514 1,213,741 1,213,741 Weighted average equivalent shares...................................... -- -- -- -- ----------- ----------- ----------- ----------- Weighted average common and common stock equivalent shares outstanding................................................. 1,213,741 1,214,514 1,213,741 1,213,741 =========== =========== =========== ===========
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 (Unaudited)
Accumulated Other Total Common Retained Comprehensive Treasury Stockholders' Comprehensive Stock Surplus Earnings Income (Loss) Stock Equity Income --------- ------- --------- ------------- ------ ------------ -------------- Balance, December 31, 2000 ............. $1,328,041 $4,431,380 $11,892,318 $(405,939) $(755,085) $16,490,715 Net income ............................. -- -- 1,043,672 -- -- 1,043,672 $ 1,043,672 Other comprehensive income, net of tax: Unrealized holding losses, net ...... -- -- -- 709,184 -- 709,184 709,184 ----------- of reclassification adjustment Comprehensive income.................... $ 1,752,856 =========== Dividends declared ($.30 per share) ............................. -- -- (364,123) -- -- (364,123) Balance, June 30, 2001 ................. $1,328,041 $4,431,380 $12,571,867 $ 303,245 $(755,085) $17,879,448 ========== ========== =========== ========= ========= ===========
The accompanying notes are an integral part of these consolidated financial statements 3 FIRST FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, --------------------------------- 2001 2000 -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................................................... $ 1,043,672 $ 927,594 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses ............................................................ 50,000 125,000 Depreciation and amortization ........................................................ 143,906 138,550 Net accretion on investment securities held-to-maturity .............................. (15,102) (4,897) Net accretion on investment securities available-for-sale ............................ (145,422) (169,823) Gains on sale of OREO ................................................................ -- (5,014) Gains on sales of loans .............................................................. (17,002) (152,261) Net (originations) proceeds on loans held for sale ................................... (159,612) 258,098 Net decrease in unearned discount .................................................... (3,641) (9,197) Net increase in other assets ......................................................... (49,457) (999,795) Net increase (decrease) in deferred loan fees ........................................ 22,976 (20,588) Net increase in accrued expenses and other liabilities ............................... 113,467 12,952 ------------- ------------- Net cash provided by operating activities ........................................... 983,785 100,619 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Federal Home Loan Bank stock .................................................. (375,500) (34,500) Proceeds from maturities of investment securities held-to-maturity ........................ 19,559,687 707,276 Proceeds from maturities of investment securities available-for-sale ...................... 134,536,852 131,856,949 Purchase of investment securities held-to-maturity ........................................ (13,000,000) (7,749,766) Purchase of investment securities available-for-sale ...................................... (140,894,495) (141,937,184) Net increase in loans ..................................................................... (2,177,216) (4,828,108) Purchase of premises and equipment ........................................................ (53,484) (27,273) Sales of OREO ............................................................................. -- 167,095 ------------- ------------- Net cash used in investing activities ............................................... (2,404,156) (21,845,511) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase in demand accounts ................................................ (77,625) 1,858,602 Net increase (decrease) in savings and money market accounts .............................. 1,291,701 (2,776,229) Net (decrease) increase in time deposits .................................................. (4,602,144) 21,837,426 Net (decrease) increase in repurchase agreements .......................................... (1,023,245) 85,014 Net increase (decrease) in Federal Home Loan Bank advances ................................ 10,872,081 (118,636) Purchase of common stock for treasury ..................................................... -- (159,375) Dividends paid ............................................................................ (364,123) (291,298) ------------- ------------- Net cash provided by financing activities ........................................... 6,096,645 20,435,504 ------------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................................... 4,676,274 (1,309,388) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............................................... 4,803,931 9,244,055 ------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD ..................................................... $ 9,480,205 $ 7,934,667 ============= ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid ............................................................................. $ 3,423,007 $ 3,074,250 ------------- ------------- Income taxes paid ......................................................................... $ 755,456 $ 805,000 ------------- ------------- 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, 2001 (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, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001, 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, 2000, filed with the Securities and Exchange Commission. (2) DIVIDEND DECLARATION On July 16, 2001 the Company declared dividends of $182,061 or $.15 per share to all common stockholders of record on August 1, 2001, payable on August 13, 2001. (3) 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. 5 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, 2000 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, 2001 Net Interest Income $1,785,829 $ 566,819 $ (560,849) $1,791,799 Provision for Loan Losses 25,000 -- -- 25,000 Total Noninterest Income 164,446 -- -- 164,446 Total Noninterest Expense 1,040,426 45,936 -- 1,086,362 Net Income 560,849 535,580 (560,849) 535,580 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 Six Months Ended June 30, 2001 Net Interest Income $3,474,252 $1,092,815 $(1,080,780) $3,486,287 Provision for Loan Losses 50,000 -- -- 50,000 Total Noninterest Income 392,141 -- -- 392,141 Total Noninterest Expense 2,152,613 69,936 -- 2,222,549 Net Income 1,080,780 1,043,672 (1,080,780) 1,043,672 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
6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations General - ------- First Financial Corp. ("Company") is a financial 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 debit 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, 2001, the Company reported net income of $535,580, compared to net income of $478,854 for the three months ended June 30, 2000, or an increase of 11.8%. Net income for the second quarter of 2001 represented record earnings for the Company. Basic and diluted net income per share were $0.44 for the quarter ended June 30, 2001 compared to $0.39 per share for the same three month period of the prior year. Net income for the six months ended June 30, 2001 amounted to $1,043,672 or $0.86 per diluted share, compared to $927,594 or $0.76 per diluted share for the same six month period of 2000. The Company's operating performance for the second quarter ended June 30, 2001 was primarily attributable to (i) balance sheet growth with a flat interest margin in a declining interest rate environment, thereby enhancing net interest income by nearly $102,000, (ii) superior asset quality resulting in a $50,000 decrease in the provision for loan losses and, (iii) control of overhead spending which is down nearly $17,000 from last year's second quarter level of spending. These favorable items were offset somewhat by a decrease of $66,000 in noninterest income, $92,000 of which was isolated to a decrease in gains on SBA loan sales. Total assets increased $7.9 million or 4.7% to $176.3 million at June 30, 2001, from $168.4 million at December 31, 2000. The loan portfolio, net of unearned discount, increased $2.1 million or 2.0% to $106.0 million at June 30, 7 2001 from $103.9 million at December 31, 2000. Investment securities increased $1.2 million to $55.6 million at June 30, 2001, from $54.4 million at December 31, 2000. Cash and equivalents increased $4.7 million to $9.5 million at June 30, 2001, from $4.8 million at December 31, 2000. Funding for the increase in total assets was provided from wholesale sources, primarily from advances from the Federal Home Loan Bank of Boston. Although retail deposits declined $3.3 million to $125.7 million at June 30, 2001, from $129.0 million at December 31, 2000, wholesale borrowings increased $9.9 million to $30.3 million at June 30, 2001 from $20.4 million at December 31, 2000. During the first quarter of 2001, the Company increased liquidity by $6.0 million through wholesale funding sources in anticipation of the maturity during the second quarter of 2001 of nearly $38.5 million in retail time deposits. Retail time deposits decreased $4.6 million to $80.2 million at June 30, 2001, from $84.8 million at December 31, 2000. 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. As of and for the As of and for the six months ended year ended June 30, December 31, ------------------------------ ----------------- 2001 2000 2000 ----------- ------------ ----------------- (Dollars in Thousands) Nonperforming loans........................................ $ 70 $ 120 $ -0- Other real estate owned.................................... $ -0- $ 268 $ -0- Total nonperforming assets................................. $ 70 $ 388 $ -0- Loans 30-89 days delinquent................................ $ 942 $ 347 $ 460 Nonperforming assets to total assets....................... 0.04% 0.23 % NM Nonperforming loans to total loans......................... 0.07% 0.12 % NM Net loan charge-offs (recoveries) to average loans......... 0.02% (0.02)% (0.02%) Allowance for loan losses to total loans................... 1.68% 1.71 % 1.69% Allowance for loan losses to nonperforming loans (multiple).................. 25.50X 14.10X NM
NM- Not Meaningful The following represents the activity in the allowance for loan losses for the three and six months ended June 30, 2001 and 2000:
Six Months Ended Three Months Ended June 30, June 30, ------------------------------- --------------------------- 2001 2000 2001 2000 ---------- ---------- ---------- ---------- Balance at beginning of period.................. $1,751,621 $1,556,405 $1,772,895 $1,615,727 Provision................................. 50,000 125,000 25,000 75,000 Loan charge-offs.......................... (22,214) (41,920) (18,118) (40,480) Recoveries................................ 3,049 57,587 2,679 46,825 ---------- ---------- ---------- ---------- Balance at end of period........................ $1,782,456 $1,697,072 $1,782,456 $1,697,072 ========== ========== ========== ==========
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 - ----------------------------- As previously mentioned total retail deposits decreased $3.3 million to $125.7 million at June 30, 2001, from $129.0 million at December 31, 2000. During this same six month period, wholesale borrowings increased $9.9 million to $30.3 8 million from $20.4 million. During the six months ended June 30, 2001, the Company took down $11 million in FHLB advances. One of the advances for $5 million at 4.58% with a 10 year/2 year call structure, was used to purchase government agency preferred stock at an adjustable rate which resets every two years. The other advance for $6 million at 4.50% with a 10 year/1 year call structure was used for liquidity purposes. During the second quarter of 2001, the Company had $38.5 million of time deposits scheduled to mature. Of that amount, nearly $28 million was comprised of 14 month certificates of deposit which paid an annual percentage yield of 7.00%. Of the $28 million, the Company successfully repriced $22 million at an annual percentage yield of 5.25%. The remaining $6 million was funded with the 4.50% advance. Effectively, the Company reduced its cost of funds on the 14 month certificate of deposit product from 7.00% to a blended rate of 5.09%. Results of Operations Net Interest Income - ------------------- Net interest income (the difference between interest and dividends earned on loans and investments and interest paid on deposits and other borrowings) was $3,486,287 for the six months ended June 30, 2001, compared to $3,306,803 for the six months ended June 30, 2000. This increase was the result of an increase in interest-earning assets, offset somewhat by a slight decline in net interest margins. 9 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.
Six Months Ended June 30, ---------------------------------------------------------------------------------- 2001 2000 ----------------------------------------- ------------------------------------- Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------- ------- ---- ------- ------- ---- Interest - earning assets: Loans........................................ $ 104,460,472 $ 4,934,698 9.45% $ 98,713,438 $ 4,733,773 9.59% Investment securities - AFS.................. 35,202,515 1,153,651 6.55% 29,675,091 957,232 6.45% Investment securities - HTM.................. 17,069,554 502,455 5.89% 20,146,670 590,993 5.87% Securities purchased under agreement resell................................. 11,177,718 210,837 3.77% 6,576,017 158,438 4.82% Federal Home Loan Bank Stock and other....... 1,187,457 34,546 5.82% 786,875 25,183 6.40% ------------- ------------- ----- ------------ ----------- ----- Total interest-earning assets................... 169,097,716 6,836,187 8.08% 155,898,091 6,465,620 8.30% ------------- ----- ----------- ----- Noninterest-earning assets: Cash and due from banks..................... 2,484,659 3,092,234 Premises and equipment...................... 1,976,033 2,123,663 Other real estate owned..................... 0 129,975 Allowance for loan losses................... (1,772,889) (1,625,582) Other assets................................ 3,145,670 2,040,338 ------------- ------------ Total noninterest-earning assets................ 5,833,473 5,760,628 ------------- ------------ Total assets.................................... $ 174,931,189 $161,658,719 ============= ============ Interest - bearing liabilities: Deposits: Interest bearing demand and NOW deposits........................ $ 2,887,510 20,911 1.45% $ 3,240,913 23,642 1.46% Savings deposits................... 18,472,011 214,460 2.32% 17,441,758 185,057 2.12% Money market deposits.............. 3,384,957 33,372 1.97% 1,315,496 13,649 2.08% Time deposits...................... 82,953,046 2,352,355 5.67% 81,382,491 2,303,473 5.66% Securities sold under agreements to repurchase.......................... 8,825,375 192,184 4.36% 9,453,410 231,649 4.90% Federal Home Loan Bank Advances............ 20,133,506 536,618 5.33% 13,552,230 401,347 5.92% ------------- ------------- ----- ------------ ----------- ----- Total interest-bearing liabilities.............. 136,656,405 3,349,900 4.90% 126,386,298 3,158,817 5.00% ------------- ----- ----------- ----- Noninterest-bearing liabilities: Noninterest-bearing deposits................ 18,957,201 18,460,724 Other liabilities........................... 2,267,031 1,396,903 ------------- ------------ Total noninterest-bearing liabilities........... 21,224,232 19,857,627 Stockholders' equity............................ 17,050,552 15,414,794 ------------- ------------ Total liabilities and stockholders' equity...... $ 174,931,189 $161,658,719 ============= ============ Net interest income............................. $ 3,486,287 $ 3,306,803 ============= =========== Net interest spread............................. 3.18% 3.30% ===== ===== Net interest margin............................. 4.12% 4.24% ===== =====
10 Total interest income for the three months ended June 30, 2001 was $3,377,061, compared to $3,357,238 for the same three month period of the prior year. This increase of $19,823 or .6% was primarily the result of a $10.0 million increase in quarterly average interest-earning assets to $170.0 million for the second quarter of 2001 from $160.0 million for the second quarter of 2000. This earning asset growth contributed approximately $200,000 to the increase in total interest income. During the second quarter of 2001, the Federal Reserve reduced targeted rates on three occasions totaling 125 basis points. These rate reductions came on the heels of three rate reductions totaling 150 basis points during the first quarter of 2001. This declining rate environment pushed down earning asset yields for the second quarter of 2001 to 7.94% from 8.39% during last year's second quarter. The drop in yields reduced total interest income by approximately $180,000. Total interest expense decreased $82,109 to $1,585,262 for the three months ended June 30, 2001 compared to $1,667,371 for the same three month period of 2000. Quarterly average interest-bearing liabilities increased $6.3 million to $136.3 million from $130.0 million. This increase contributed nearly $74,000 to interest expense. However, the rapid decline in market rates and the repricing of $38.5 million in high cost time deposits reduced the Company's quarterly cost of funds to 4.65% from 5.13%. This decline accounted for a $156,000 reduction in total interest expense. Overall, net interest income increased nearly $102,000 or 6.0% to $1,791,799 for the three months ended June 30, 2001 from $1,689,867 for the same three month period of 2000. Of this increase in net interest income, approximately $126,000 was volume or balance sheet growth related, offset by $24,000 which was rate driven in a declining interest rate environment. During the second quarter of 2001, the Company's net interest spread improved slightly to 3.29% from 3.26% and the net interest margin remained virtually flat at 4.21% compared to 4.22% during last year's second quarter. For the six months ended June 30, 2001, total interest income increased $370,567 or 5.7% to $6,836,187 compared to $6,465,620 during the six months ended June 30, 2000. Average interest-earning assets increased $13.2 million to $169.1 million compared to $155.9 million. This increase in average interest-earning assets accounted for nearly $461,000 of the increase in total interest income. However, a declining interest rate environment and a slight shift in the composition of earning assets to the lower yielding securities portfolio reduced the yield on earning assets to 8.08% for the six months ended June 30, 2001 compared to 8.30% for the same six month period of 2000. This decline in earning asset yield reduced total interest income by nearly $90,000. Total interest expense increased $191,083 or 6.0% for the six months ended June 30, 2001 to $3,349,900 compared to $3,158,817 for the same six month period of the prior year. Average interest-bearing liabilities increased $10.3 million to $136.7 million compared to $126.4 million. This volume- related increase accounted for approximately $236,000 of the increase in interest expense. The declining interest rate environment helped ease the Company's cost of funds to 4.90% for the first six months of 2001 compared to 5.00% for the first six months of the prior year. Overall, net interest income increased $179,484 or 5.4% to $3,486,287 compared to $3,306,803. Of this increase, nearly $225,000 was volume or balance sheet growth related while a decline in rates reduced net interest income by nearly $45,000. For the first six months of 2001 and 2000, the Company's net interest spread was 3.18% and 3.30%, respectively, while net interest margin was 4.12% and 4.24%, respectively. Provision for Loan Losses - ------------------------- The provision for loan losses totaled $25,000 for the three months ended June 30, 2001 and $75,000 for the three months ended June 30, 2000. For the six months ended June 30, 2001 and 2000, the provision for loan losses amounted to $50,000 and $125,000, respectively. During the second quarter, the Company recorded net chargeoffs of only $15,439 or 0.015% of quarterly average outstanding loans. With modest loan portfolio growth and minimal net chargeoffs, the allowance as a percent of outstanding loans was 1.68% at June 30, 2001 compared to 1.71% at June 30, 2000 and 1.69% at year end 2000. At quarter's end, nonperforming loans to total loans was a mere 0.07%. Noninterest Income - ------------------ Total noninterest income decreased $66,254 to $164,446 for the three months ended June 30, 2001, from $230,700 for the three months ended June 30, 2000. For the six months ended June 30, 2001 and 2000, noninterest income decreased $37,839 to $392,141 from $429,980. For both the three month and six month reporting period, the decreases were attributable to a decrease in gains on the sale of the guaranteed portion of Small Business Administration ("SBA") loans. For the three months and six months ended June 30, 2001, service charges on deposits increased $10,808 and $23,552, respectively, and residential mortgage program fees increased $26,027 and $62,742, respectively, when compared to the same three month and six month period of the prior year. However, these increases were more than offset by decreases 11 in gains on SBA loan sales of $91,723 and $135,259 for the three months and six months ended June 30, 2001, respectively. During the first half of 2001, the Company experienced unanticipated delays in closing its SBA loan production which led to the decrease in gain recognition. Noninterest Expense - ------------------- Total noninterest expense amounted to $1,086,362 and $1,102,810 for the three months ended June 30, 2001 and 2000, respectively, or a decrease of $16,448 or 1.5%. For the six months ended June 30, 2001, total noninterest expense increased $48,412 or 2.2% to $2,222,549 compared to $2,174,137 during the first six months of 2000. For both the three months and six months ended June 30, 2001, no single expense item had a significant deviation from the level of spending for last year's comparable time period. Income Taxes - ------------ Income taxes for the three months ended June 30, 2001, were $309,303 or 36.6% of pretax income, compared to $263,903 or 35.5% of pretax income for the three months ended June 30, 2000. For the six months ended June 30, 2001 and 2000, income taxes were $562,207 and $510,052, respectively, or 35.0% and 35.5% 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. 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, 2001: Regulatory Minimum (1) Actual ----------- ------ The Company Risk-based: Tier 1................... 4.00% 14.30% Totals................... 8.00 15.56 Leverage......................... 3.00 9.98 The Bank Risk-based: Tier 1.................... 4.00% 13.77% Totals.................... 8.00 15.03 Leverage.......................... 3.00 9.59 (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, 2001, the Company's one year static gap position was a negative $21.6 million or 12.3% 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, 2001, the Company's earnings-at-risk under a "200 basis point interest rate shock test measured a negative 1.30% in a worst case scenario. Under a similar test, the Company's equity-at-risk measured a negative 7.1% of market value of equity at June 30, 2001. At June 30, 2001, 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, 2001, cash and due from banks, securities purchased under agreements to resell, and short-term investments (unpledged and maturing within one year) amounted to $22.1 million, or 12.5% 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, the Company has an unused borrowing capacity of nearly $19.6 million, which could assist the Company in meeting its liquidity needs and funding its asset mix. 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. Item 3 - Quantitative and Qualitative Disclosures about Market Risk Refer to "Asset/Liability Management" within Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations. 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 2001 Annual Meeting of Stockholders on May 9, 2001. The meeting was held for the purpose of: (i) electing Patrick J. Shanahan, Jr., Gary R. Alger and Joseph V. Mega, Directors of the Company for a three year term expiring at the Annual Meeting in the year 2004 and (ii) ratifying the selection of Arthur Andersen LLP as the independent public accountants for the Company for the fiscal year ending December 31, 2001. At the time of the 2001 Annual Meeting there were 1,213,741 shares entitled to vote. Shares voted either in person or by proxy totaled 971,181 shares. The results of the votes cast were as follows:
For Against Abstention --- ------- ---------- (i) To elect Directors of the Company for three years: Patrick J. Shanahan, Jr. 950,570 20,611 Gary R. Alger 950,070 21,111 Joseph V. Mega 950,070 21,111 (ii) To select Arthur Andersen LLP as independent public accountants for the Company for the 950,675 900 19,606 fiscal year ending December 31, 2001
In addition, upon completion of the Annual Meeting the Director's Terms continue as follows: Name Term to Expire in: ---- ----------------- Joseph A. Keough, Esq. 2002 Peter L. Mathieu, Jr., M.D. 2002 Fred J. Simon, Jr. 2002 John Nazarian, Ph.D. 2003 William P. Shields 2003 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 (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 6, 2001 /s/ Patrick J. Shanahan, Jr. - --------------------------- ------------------------------------ Date Patrick J. Shanahan, Jr. Chairman, President and Chief Executive Officer August 6, 2001 /s/ John A. Macomber - --------------------------- -------------------------------------------- Date John A. Macomber Vice President, Treasurer and Chief Financial Officer 16 EX-11 3 dex11.txt COMPENSATION OF PER SHARE EARNINGS Exhibit 11 - Computation of per share earnings
Six Months Ended Three Months Ended June 30, June 30, ----------------------- ---------------------- 2001 2000 2001 2000 ---------- --------- --------- ---------- Weighted average common shares outstanding 1,213,741 1,214,514 1,213,741 1,213,741 Weighted average equivalent shares -- -- -- -- ---------- ---------- ---------- ---------- Weighted average common and common stock equivalent shares outstanding 1,213,741 1,214,514 1,213,741 1,213,741 ========== ========== ========== ========== Net income $1,043,672 $ 927,594 $ 535,580 $ 478,854 ========== ========== ========== ========== Earnings per share: Basic $ 0.86 $ 0.76 $ 0.44 $ 0.39 ========== ========== ========== ========== Diluted $ 0.86 $ 0.76 $ 0.44 $ 0.39 ========== ========== ========== ==========
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