-----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, DCs0w2JhdcYVuq7ruqzXQ6IqVHmP+ZN0wGNE+QPK0F3k+OJE8Xslz8oPhyUKcsNf CX2+yes+IOX/EvQc5nqiyA== 0000714562-99-000002.txt : 19990517 0000714562-99-000002.hdr.sgml : 19990517 ACCESSION NUMBER: 0000714562-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL CORP /IN/ CENTRAL INDEX KEY: 0000714562 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 351546989 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16759 FILM NUMBER: 99623809 BUSINESS ADDRESS: STREET 1: ONE FIRST FINANCIAL PLZ CITY: TERRE HAUTE STATE: IN ZIP: 47807 BUSINESS PHONE: 8122386000 MAIL ADDRESS: STREET 1: ONE FIRST FINANCIAL PLAZA CITY: TERRE HAUTE STATE: IN ZIP: 47807 FORMER COMPANY: FORMER CONFORMED NAME: TERRE HAUTE FIRST CORP DATE OF NAME CHANGE: 19850808 10-Q 1 03/31/99 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 FIRST FINANCIAL CORPORATION March 31 , 1999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1999 Commission File Number 0-16759 FIRST FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) INDIANA 35-1546989 (State or other jurisdiction (I.R.S. Employer Incorporation or organization) Identification No.) One First Financial Plaza, Terre Haute, IN 47807 (Address of principal executive office) (Zip Code) (812) -238-6000 (Registrant s telephone number, including area code) 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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __x___ No _____. As of March 31, 1999 were outstanding 6,975,219 shares without par value, of the registrant. 1 FIRST FINANCIAL CORPORATION FORM 10-Q INDEX PART I. Financial Information Page No. Item 1. Financial Statements: Consolidated Statements of Condition.... ...............3 Consolidated Statements of Income.......................4 Consolidated Statements of Shareholders Equity and Comprehensive Income.......................5 Consolidated Statements of Cash Flows...................6 Notes to Consolidated Financial Statements..............7 Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations............................9 PART II. Other Information: Signatures.................................................................14 2 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CONDITION
March, 31 December, 31 1999 1998 (Unaudited) (Amounts in thousands) ASSETS Cash and due from banks $46,209 $54,877 Federal funds sold and securities purchased under agreement to resell 27,410 450 Investments, available-for-sale 594,833 633,365 Loans: Commercial, financial and agricultural 232,420 233,080 Real estate - construction 34,908 32,880 Real estate - mortgage 641,868 636,615 Installment 205,329 205,251 Lease financing 5,656 5,825 1,120,181 1,113,651 Less: Unearned income 1,818 1,886 Allowance for loan losses 17,390 16,429 1,100,973 1,095,336 Accrued interest receivable 12,718 14,704 Premises and equipment, net 24,561 24,426 Other assets 27,330 26,594 TOTAL ASSETS $1,834,034 $1,849,752 LIABILITIES AND SHAREHOLDERS EQUITY Deposits: Noninterest-bearing $145,123 $148,747 Interest-bearing: Certificates of deposit of $100,000 or more 199,690 196,773 Other interest-bearing deposits 895,467 914,845 1,240,280 1,260,365 Short-term borrowings: Federal funds purchased and securities sold under agreements to repurchase 80,736 100,571 Treasury tax and loan open-end note 2,429 3,061 Advances from Federal Home Loan Bank 202,118 185,930 285,283 289,562 Other liabilities 19,225 21,504 Long-term debt 6,613 6,619 Long-term advances from Federal Home Loan Bank 105,353 89,519 TOTAL LIABILITIES 1,656,754 1,667,569 Shareholders equity: Common stock, $.125 stated value per share; authorized 10,000,000 shares; issued and outstanding 903 903 7,225,483 shares for 1998 and 1999 including treasury shares of 91,093 in 1998 and 250,264 in 1999 Additional capital 66,680 66,680 Retained earnings 115,558 110,566 Accumulated other comprehensive income: Unrealized gains on investments, net of tax 5,988 8,123 Less: Treasury shares at cost -11,849 -4,089 TOTAL SHAREHOLDERS EQUITY 177,280 182,183 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $1,834,034 $1,849,752 The accompanying notes are an integral part of the consolidated financial statements.
3 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31 1999 1998 (Unaudited) (Amounts in thousands, except per share data) INTEREST INCOME: Loans $23,434 $22,604 Investment securities: Taxable 6,999 6,613 Tax-exempt 1,999 1,964 8,998 8,577 Other interest income 334 298 TOTAL INTEREST INCOME 32,766 31,479 INTEREST EXPENSE: Deposits 11,431 12,191 Other 4,852 3,883 TOTAL INTEREST EXPENSE 16,283 16,074 NET INTEREST INCOME 16,483 15,405 Provision for loan losses 1,482 1,407 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 15,001 13,998 OTHER INCOME Trust department income 737 582 Service charges on deposit accounts 301 320 Other service charges and fees 1,116 1,080 Investment securities gains 24 352 Other 669 282 2,847 2,616 OTHER EXPENSES Salaries and employee benefits 6,064 5,994 Occupancy expense 735 704 Equipment expense 883 818 Other 3,203 2,990 10,885 10,506 INCOME BEFORE INCOME TAX EXPENSE 6,963 6,108 Income Tax Expense 1,971 1,608 NET INCOME $ 4,992 $ 4,500 BASIC EARNINGS PER SHARE $0.71 $ 0.62 Weighted average number of shares outstanding 7,046 7,225 The accompanying notes are an integral part of the consolidated financial statements.
4 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME Three Months Ended March 31, 1999 and 1998
Accumulated Other (Dollar amounts in thousands, Common Additional Retained Comprehensive Treasury except per share data) Stock Capital Earnings Income Stock Total Balance, January 1, 1999 $903 $66,680 $110,566 $8,123 $- 4,089 $182,183 Comprehensive income: Net income 4,992 4,992 Other comprehensive income, net of tax: Change in unrealized gains on securities, net of tax of $-1,141 -2,119 -2,119 Less: reclassification adjustment for gains included in net income, net of tax of $-9 - 16 - 16 Total comprehensive income 2,857 Treasury stock purchase - 7,760 -7,760 ____________________________________________________________________________________ Balance, March 31, 1999 $903 $66,680 $115,558 $5,988 $-11,849 $177,280 Balance, January 1, 1998 $877 $59,787 $ 98,046 $6,770 - $165,480 Comprehensive income: Net income 4,500 4,500 Other comprehensive income, net of tax: Change in unrealized gains on securities, net of tax of $-281 -522 -522 Less: reclassification adjustment for gains included in net income, net of tax of $-123 -229 -229 Total comprehensive income 3,749 Issurance of shares for Morris Plan acquisition 26 6,893 6,919 ___________________________________________________________________________________ Balance, March 31, 1998 $903 $66,680 $102,546 $6,019 $ - $176,148
5 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999 1998 (Unaudited) (Amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $4,992 $4,500 Adjustment to reconcile net income to net cash provided by operating activities: Net amortization of discounts on investments -375 -421 Provision for loan losses 1,482 1,407 Investment gains -24 -352 Provision for depreciation and amortization 703 637 Provision for deferred income taxes -397 273 Net decrease in accrued interest receivable 1,986 815 Other, net 1,445 156 NET CASH PROVIDED BY OPERATING ACTIVITIES 9,812 7,015 CASH FLOWS FROM INVESTING ACTIVITIES: Sales and maturities of available-for-sale securities 100,905 87,284 Purchases of available-for-sale securities -65,032 -105,125 Loans made to customers, net of repayments -7,034 -6,328 Net increase in federal funds sold -26,960 -9,520 Additions to premises and equipment -909 -598 NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 970 -34,287 CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) increase from sales and redemptions of certificates of deposit -8,172 61,528 Net decrease in other deposits -11,913 -40,057 Net (decrease) increase in short-term borrowings -4,279 13,673 Cash dividends -3,154 -2,740 Purchase of treasury stock -7,760 0 Net increase (decrease) in long-term debt and advances 15,828 -689 NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES -19,450 31,715 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS -8,668 4,443 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 54,877 54,285 CASH AND CASH EQUIVALENTS, END OF PERIOD $46,209 $58,728 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $16,327 $15,537 Income taxes paid $ 721 $531 The accompanying notes are an integral part of the consolidated financial statements.
6 FIRST FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying March 31, 1999 and 1998 consolidated financial statements are unaudited. The December 31, 1998 consolidated financial statements are as reported in the First Financial Corporation (the Corporation) 1998 annual report. The following notes should be read together with notes to the consolidated financial statements included in the 1998 annual report. 1. The significant accounting policies followed by the Corporation and its subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods reported have been included in the accompanying consolidated financial statements and are of a normal recurring nature. Effective January 1, 1998, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes a new framework for segment reporting. The Corporation adopted SFAS No. 131 in 1998 and determined that it has only one segment of reporting as presented in the consolidated balance sheets and statements of income. The Corporation does not have significant revenues from external customers domiciled outside of the United States or places significant reliance on major customers. As many of the assets of the Corporation are used for the various products and services provided to customers, an allocation of revenues and expenses for each major product or service is considered impracticable to determine for each period ended. SFAS No. 132, Employers Disclosures about Pensions and Other Postretirement Benefits, was adopted by the Corporation in 1998. This statement does not change the measurement or recognition of the benefit plans, but it standardizes the disclosure requirements for pensions and other postretirement benefits. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. SFAS No. 133, which will be adopted by the Corporation in 2000, is not anticipated to have a material impact on the Corporation's financial position or results of operations. 2. A loan is considered to be impaired when, based upon current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan. Impairment is primarily measured based on the fair value of the loan's collateral. The following table summarizes impaired loan information.
(000's) March 31, 1999 1998 Impaired loans with related allowance for loan losses calculated under SFAS No. 114............................................................... $3,033 $1,440
Interest payments on impaired loans are typically applied to principal unless collection of the principal amount is deemed to be fully assured, in which case interest is recognized on a cash basis. 7 Interest income on commercial loans and residential real estate loans is no longer accrued at the time the loan is 90 days delinquent unless the credit is well secured and in the process of collection. Commercial loans are charged off at the time the loan becomes 180 days delinquent unless the loan is well secured and in process of collection, or other circumstances support collection. Credit card loans and other unsecured personal credit lines are typically charged off no later than 180 days delinquent. Other consumer loans are typically charged off when they become 150 days delinquent. In all cases, loans must be placed on nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. The interest on these loans is accounted for on the cash basis or cost recovery method, until qualifying for return to accrual status. Loans may be returned to accrual status when all the principal and interest amounts contractually due are paid. 3. Investments The cost and fair value of the Corporation s investments at March 31, 1999 are shown below. All investments are classified as available-for-sale.
(000's) March 31, 1999 Amortized Cost Fair Value Available-For-Sale: United States Government $182,990 $184,058 United States Government Agencies 204,658 205,414 State and Municipal 151,514 157,274 Other 48,094 48,087 $587,256 $594,833
4. Changes in Shareholders Equity Under the Corporation s common stock repurchase program announced in September 1998, the Corporation has repurchased 250,264 shares as of March 31, 1999 compared to 91,903 shares as of December 31, 1998. In March 1998, the Corporation completed it s acquisition of The Morris Plan Company of Terre Haute, which was accounted for using the purchase method and resulted in goodwill of $2.4 million. 8 FIRST FINANCIAL CORPORATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The purpose of this discussion is to point out key factors in the Corporation's recent performance compared with earlier periods. The discussion should be read in conjunction with the financial statements beginning on page three of this report. All figures are for the consolidated entities. It is presumed the readers of these financial statements and of the following narrative have previously read the Corporation's annual report for 1998. Forward-looking statements contained in the following discussion are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the Corporation's control and are subject to change. These uncertainties can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements in this discussion. Summary of Operating Results Net income of $5.0 million was up 10.9% from the $4.5 million reported in 1998. Basic earnings per share was up 14.5% from the $.62 reported in the first quarter of 1998 to $.71 per share for the same period in 1999. The increased earnings are the result of a 7.0% increase in net interest income and an 8.8% increase in non-interest income over the same period for 1998. Net Interest Income The Corporation's primary source of earnings is net interest income, which is the difference between the interest earned on loans and other investments and the interest incurred for deposits and other sources of funds. Net interest income increased to $16.5 million in the first three months of 1999 from $15.4 million in the same period of 1998 due to an increase in earning asset volume while the net interest margin decreased to 4.08% in 1999 from 4.18% in the same period of 1998. This decrease resulted from a shift in the deposit mix to higher cost deposit products. Other Income Other income for the three month period ending March 31, 1999, as compared to the same period of 1998 increased $.2 million or 8.8%. Trust department income and other income increased to $.7 million and $.7 million or 26.6% and 137.2% respectively compared to the same period of 1998. The main reason for the increase of other income is the result of realized gains from the sale of other real estate owned and the sale of mortgage loans in the secondary market for $.2 million and $.1 million, respectively. These increases were partially offset by the reduction in realized gains from investments sales of $.3 million. Other Expenses Other expenses for the first three months of 1999, as compared to the same period of 1998, increased to $10.9 million from $10.5 million. Most categories of other expenses increased due to overall growth. 9 Allowance for Loan Losses The Corporation s provision for loan losses increased to $1.5 million for the first three months of 1999 compared to $1.4 million in the same period of 1998. At March 31, 1999, the allowance for loan losses was 1.55% of net loans. This compares with an allowance of 1.48% at December 31, 1998. Net chargeoffs for the first three months of 1999 were $.5 million compared to $.7 million for the same period of 1998. The ratio of net chargeoffs to average loans outstanding for the last five years ended December 31, 1998, was .33%. With this experience and based on management's review of the portfolio, management believes the allowance of $17.4 million at March 31, 1999 is adequate. Underperforming Assets Underperforming assets consist primarily of (1) nonaccrual loans and leases on which the ultimate collectability of the full amount of interest is uncertain, (2) loans and leases which have been renegotiated to provide for a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower, (3) loans and leases past due ninety days or more as to principal or interest and (4) land sold on contract. A summary of underperforming assets at March 31, 1999 and December 31, 1998 follows:
(000') (000') March 31, 1999 December 31, 1998 Nonaccrual loans and leases $ 4,153 $ 4,103 Renegotiated loans and leases 1,058 70 Land sold on contract and others 1,957 1,914 Total non-performing assets $ 7,168 $ 6,087 Ninety days past due loans and leases 6,399 8,184 Total underperforming assets $13,567 $ 14,271 Ratio of the allowance for loan losses as a percentage of non-performing assets 243% 270% Ratio of the allowance for loan losses as a percentage of underperforming assets 128% 115% 10 The following loan categories comprise significant components of the under- performing loans at March 31, 1999 and December 31, 1998. Non-Accrual Loans:
(000's) (000's) March 31, 1999 December 31, 1998 1-4 family residential $ 2,004 48% $ 1,927 47% Commercial loans 1,275 31 587 14 Installment loans 849 20 879 22 Other, various 25 1 710 17 $4,153 100% $4,103 100% Past due 90 days or more: 1-4 family residential $3,487 55% $3,456 42% Commercial loans 589 9 2,963 36 Installment loans 1,985 31 590 7 Other, various 338 5 1,175 15 $6,399 100% $8,184 100%
There are no material industry concentrations within the underperforming loans. In addition to the above Underperforming loans, certain loans are felt by management to be impaired for reasons other than the current repayment status. Such reasons may include but not be limited to previous payment history, bankruptcy proceedings, industry concerns, or information related to a specific borrower that may result in a negative future event to that borrower. At March 31, 1999 the Corporation had $1.9 million of these loans which are still in accrual status. Interest Rate Sensitivity and Liquidity The Corporation charges the nine subsidiary banks with monitoring and managing their individual sensitivity to fluctuations in interest rates and assuring that they have adequate liquidity to meet loan demand or any potential unexpected deposit withdrawals. This function is facilitated by the Asset/Liability Committee. The primary goal of the committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors. This goal is accomplished through management of the subsidiary bank's balance sheet liquidity and interest rate risk exposures due to the changes in economic conditions and interest rate levels. Interest Rate Risk Management considers interest rate risk to be the Corporation s most significant market risk. Interest rate risk is the exposure to changes in net interest income as a result of changes in interest rates. Consistency in the Corporation's net income is largely dependent on the effective management of this risk. The Committee reviews a series of monthly reports to ensure that performance objectives are being met. The Committee monitors and controls interest rate risk through earnings simulation. Simulation modeling measures the effects of changes in interest rates, changes in the shape of the yield curve, and changes in prepayment speeds on net interest income. The primary measure of Interest Rate Risk is "Earnings at Risk." This measure projects the earnings effect of various rate movements over the next three years on net interest income. It is important to note that measures of interest rate risk have limitations and are dependent upon certain assumptions. These assumptions are inherently uncertain and, as a result, the model cannot precisely predict the impact of interest rate fluctuations on net interest income. Actual results will differ from simulated results due to timing, frequency and amount of interest rate changes as well as overall market conditions. The Committee has performed a thorough analysis and believes the assumptions to be valid and theoretically sound. The relationships are continuously monitored for behavioral changes. 11 In its interest rate risk management, the Corporation currently does not utilize any derivative products and is not engaged in securities trading activity. The Corporation instead invests in assets whose value is derived from an underlying asset. These assets include government agency issued mortgage- backed securities. The performance of these assets in changing rate environments is included in the following table. The table below shows the Corporation's estimated earnings sensitivity profile as of March 31, 1999. Given a 100 basis point increase in rates, net interest income would decrease 3.83% over the next 12 months and decrease 4.27% over the next 24 months. A 100 basis point decrease would result in a 1.20% increase in net interest income over the next 12 months and a .88% increase over the next 24 month periods. These estimates assume all rates changed overnight and management took no action as a result of this change. Basis Point Percentage Change in Net Interest Income Interest Rate Change 12 months 24 months 36 months Down 300 -.84% -1.63% -9.26% Down 200 1.44 .86 -4.24 Down 100 1.20 .88 -1.72 Up 100 -3.83 - 4.27 -1.95 Up 200 -7.66 -8.24 -3.37 Up 300 -11.69 -12.32 -4.60 The Corporation uses products which contain options, most notably callable agency securities and putable Federal Home Loan Bank advances. The securities pay a premium rate and the advances charge a discounted rate in exchange for the option. Therefore, there is a benefit to current income by using these products. Typical rate shock analysis does not reflect management s ability to react and thereby reduce the effects of rate changes, and represents a worst case scenario. The model assumes no actions are taken and prices change to the full extent of the rate shock. Liquidity Risk Liquidity is measured by each bank's ability to raise funds to meet the obligations from its customers, including deposit withdrawals and credit needs. This is accomplished primarily by maintaining sufficient liquid assets in the form of investment securities and core deposits. The Corporation has $16.1 million of investments that mature throughout the coming 12 months. The Corporation also anticipates $88.6 million of principal payments from mortgage- backed securities. Given the current interest rate environment, the Corporation anticipates $27.0 million of securities to be called within the next 12 months. With these sources of funds, the Corporation currently anticipates adequate liquidity to meet the expected obligations of its customers. Capital Adequacy As of March 31, 1999 the Corporation's leverage ratio was 9.24% compared to 9.51% at December 31, 1998. At March 31, 1999 the Corporation's total capital, which includes Tier II capital, was 16.61% compared to 16.29% at December 31, 1998. These amounts exceed minimum regulatory capital requirements. 12 Year 2000 The Year 2000 problem concerns the inability of information systems to properly recognize and process date sensitive information beginning on December 31, 1999. The Corporation has developed a Year 2000 team responsible for ensuring that its information technology (IT) systems and software, and non-IT systems are Year 2000 compliant in time to minimize any significant detrimental effects on operations and service to its customers. The Corporation is currently in the validation stage of a five step Year 2000 program. The awareness, assessment and renovation steps have been completed for all mission critical applications. The validation stage includes the necessary software and hardware testing that is required as well as ongoing discussions with vendors and customers on the success of their validation efforts. The Corporation utilizes Fiserv-CBS software for processing all of its core applications. The testing of this software began on September 1, 1998, and was substantially completed by the end of 1998. Currently the Corporation is focusing on maintaining the internal core processing system s readiness and will be continuing the effort until the Year 2000. In addition, the Corporation will continue to manage third party system relationships, update disaster recovery and contingency plans, and will also continue to test secondary computer systems. The Corporation is confident that the remainder of the systems Year 2000 testing will be substantially completed by June 30, 1999. The Corporation is in the process of corresponding with its major commercial loan customers and major suppliers and vendors to assess the credit risk related to the Year 2000 problem as well as the risk of business interruption. The majority of the Corporation s non-IT related systems have been assessed as Year 2000 compliant or are in the final testing phase which will be completed by June 30, 1999. The total estimated cost related to the Year 2000 issue, including the cost of replacing equipment is $615,000. Total incremental cost incurred through March 31, 1999 is approximately $400,000. The Corporation does not expect that the cost relating to the Year 2000 project will have a material effect on the results of its operations or financial condition. The above expectations are subject to inherent uncertainties of the Year 2000 problem, including the readiness of third-party suppliers and regulatory agencies that the Corporation depends upon to meet customers needs. The failure to correct a material problem could result in an interruption or failure of normal business activities or operations. Such failures could materially affect the Corporation s ability to meet customers needs and ultimately affect its results of operations and financial condition. The Corporation believes that with the successful completion of its Year 2000 program, the possibility of significant interruptions will be reduced. Concurrently with the Year 2000 program described above, the Corporation is developing contingency plans intended to mitigate the possible disruption in business operations that may result from the year 2000 problem and is estimating the costs for such plans. Contingency plans may include increasing cash in vault, ordering extra forms/supplies, increasing allowance for loan loss allocation for year 2000 credit risk, establishing trigger dates for activating alternative solutions/vendors, identifying possible alternative vendors, preparing for some manual preparation of checks, forms, etc. , and other appropriate measures. Once developed, contingency plans and related cost estimates are being continually refined as information becomes available. 13 FIRST FINANCIAL CORPORATION PART II OTHER INFORMATION FORM 10-Q SIGNATURES Pursuant to 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 CORPORATION (Registrant) Date: May 14, 1999 By (Signature) Donald E. Smith, President Date: May 14, 1999 By (Signature) John W. Perry, Secretary Date: May 14, 1999 By (Signature) Michael A. Carty, Treasurer 14 EX-27 2 03/31/99 FDS SCHEDULE
9 1000 3-MOS DEC-31-1999 MAR-31-1999 46,209 0 27,410 0 594,833 587,256 594,833 1,118,363 17,390 1,834,034 1,240,280 285,283 19,225 111,966 0 0 903 176,377 1,834,034 23,434 8,998 334 32,766 11,431 4,852 16,483 1,482 24 10,885 6,963 6,963 0 0 4,992 .71 .71 4.08 4,153 6,399 1,058 3,033 16,429 801 280 17,390 17,390 0 0
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