Document
FIRST FINANCIAL CORPORATION
One First Financial Plaza, Terre Haute, Indiana 47807 (812) 238-6000
First Financial Corporation Reports 2020 Results
Terre Haute, Indiana, February 2, 2021 – First Financial Corporation (NASDAQ:THFF) today announced results for the three months ending December 31, 2020:
For the quarter:
•Net income was $15.7 million compared to $14.4 million for the same period of 2019;
•Diluted net income per common share of $1.15 compared to $1.05 for the same period of 2019; and
•Return on average assets was 1.39% compared to 1.42% for the three months ended December 31, 2019.
The Corporation further reported results for the twelve months ending December 31, 2020:
•Net income was $53.8 million compared to $48.9 million for the same period of 2019;
•Diluted net income per common share of $3.93 compared to $3.80 for the same period of 2019; and
•Return on average assets was 1.25% compared to 1.42% for the twelve months ended December 31, 2019.
“Despite the headwinds of the global pandemic and the varied restrictions of the four states in which we do business, we were able to deliver our third consecutive year of record earnings” said Norman L. Lowery, Chairman and Chief Executive Officer. “We are proud that during the fourth quarter we were able to assist many of our clients who participated in the Paycheck Protection Program apply for and receive forgiveness of the loans which have enabled them to keep their employees working and doors open.”
Average Total Loans
Average total loans for the fourth quarter of 2020 were $2.68 billion versus $2.66 billion for the comparable period in 2019, an increase of $18.0 million or 0.68%.
Total Loans Outstanding
Total loans outstanding decreased $46.0 million, from $2.66 billion as of December 31, 2019 to $2.61 billion as of December 31, 2020.
"On December 27, 2020 a second stimulus bill was signed into law providing an additional $285 billion in the form of PPP loans. We look forward to continuing to assist our clients whose businesses have suffered the brunt of the economic slowdown caused by the pandemic to help them realize the benefits of this program.”
Average Total Deposits
Average total deposits for the quarter ended December 31, 2020, were $3.74 billion versus $3.28 billion as of December 31, 2019, an increase of $461 million or 14.06%.
Total Deposits
Total deposits were $3.76 billion as of December 31, 2020, compared to $3.28 billion as of December 31, 2019, an increase of $481 million or 14.67%. On a linked quarter basis, total deposits increased $151.6 million from $3.60 billion for the quarter ending September 30, 2020.
Book Value Per Share
Book Value per share was $44.03 at December 31, 2020, compared to $40.58 at December 31, 2019 a 9.28% increase.
Shareholder Equity
Shareholder equity at December 31, 2020, was $597.0 million compared to $557.6 million on December 31, 2019. During the quarter the Corporation repurchased 195,042 shares of its common stock.
Tangible Common Equity to Tangible Asset Ratio
The Corporation’s tangible common equity to tangible asset ratio was 11.40% at December 31, 2020, compared to 11.91% at December 31, 2019.
Net Interest Income
Net interest income for the fourth quarter of 2020 was $37.6 million, compared to $38.5 million reported for the same period of 2019. The decrease was primarily driven by the 150 basis point interest rate reduction by the Federal Reserve in response to the pandemic.
Net Interest Margin
The net interest margin for the quarter ended December 31, 2020, was 4.11% compared to the 4.37% reported at December 31, 2019.
Nonperforming Loans
Nonperforming loans as of December 31, 2020, were $21.9 million versus $15.3 million as of December 31, 2019. The ratio of nonperforming loans to total loans and leases was 0.84% as of December 31, 2020, versus 0.58% as of December 31, 2019.
Loan Loss Provision
In 2019 provision was calculated using the incurred loss basis. In the fourth quarter 2020, provision was calculated using the expected loss basis. The provision for loan losses for the three months ended December 31 2020, was $448 thousand compared to the $1.50 million provision for the fourth quarter of 2019.
Net Charge-Offs
Net charge-offs were $416 thousand for the fourth quarter of 2020 compared to $1.4 million in the same period of 2019.
Allowance for Credit Losses
In March 2020 due to the uncertainty surrounding the global pandemic and as provided by the Coronavirus Aid Relief and Economic Security Act the Corporation elected to delay the implementation of the Current Expected Credit Loss accounting standard. On December 31, 2020 the
Corporation adopted ASU 2016-13 (topic 326), “Measurement of Credit Losses on Financial Instruments” commonly referenced as the Current Expected Credit Loss (“CECL”) model. CECL was retrospectively adopted on January 1, 2020. Upon adoption, the Corporation recognized a $20.0 million increase in its allowance for credit losses, which includes $6.1 million in the remaining loan fair value marks on prior acquisitions and $1.0 million in its reserve for unfunded commitments. These one-time increases, net of tax, were $10.4 million and recorded as an adjustment to beginning retained earnings.
The Corporation’s allowance for credit losses as of December 31, 2020, was $47.1 million compared to $19.9 million as of December 31, 2019. The variance is directly related to the adoption of CECL. The allowance for credit losses as a percent of total loans was 1.80% as of December 31, 2020, compared to 0.75% as of December 31, 2019. For the quarter ended December 31, 2019 and the first three quarters of 2020, provision for loan loss was calculated using the incurred loss model.
Non-Interest Income
Non-interest income for the three months ended December 31, 2020 and 2019 was $12.9 and $11.3 million, respectively. During the quarter, the Corporation sold its merchant card processing portfolio and recorded a $1.0 million gain on the sale. The company has entered into an agent relationship to continue to provide these services to our customers.
Non-Interest Expense
Non-interest expense for the three months ended December 31, 2020, was $31.2 million compared to $29.8 million in 2019.
Efficiency Ratio
The Corporation’s efficiency ratio was 60.60% for the quarter ending December 31, 2020, versus 58.43% for the same period in 2019.
Income Taxes
Income tax expense for the three months ended December 31, 2020, was $3.1 million versus $4.2 million for the same period in 2019. The effective tax rate for 2020 was 17.84% compared to 19.95% for 2019.
“Despite the challenges presented by the pandemic, First Financial has continued to meet the financial needs of our customers,” Lowery stated. “I am very proud of our associates' and of their unwavering commitment to serve our customers in these challenging times.”
About First Financial Corporation
First Financial Corporation (NASDAQ:THFF) is the holding company for First Financial Bank N.A. and The Morris Plan Company of Terre Haute, Inc. First Financial Bank N.A. is the fifth oldest national bank in the United States, operating 81 banking centers in Illinois, Indiana, Kentucky and Tennessee. The Morris Plan Company of Terre Haute, Inc. is a state industrial chartered financial institution operating one office in Terre Haute, Indiana. Additional information is available at www.first-online.bank.
Investor Contact:
Rodger A. McHargue
Chief Financial Officer
P: 812-238-6334
E: rmchargue@first-online.com
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Year Ended |
| | December 31, | September 30, | December 31, | December 31, | December 31, |
| | 2020 | 2020 | 2019 | 2020 | 2019 |
| END OF PERIOD BALANCES | | | | | | |
| Assets | | $ | 4,557,544 | | $ | 4,389,996 | | $ | 4,023,250 | | $ | 4,557,544 | | $ | 4,023,250 | |
| Deposits | | $ | 3,755,945 | | $ | 3,604,353 | | $ | 3,275,357 | | $ | 3,755,945 | | $ | 3,275,357 | |
| Loans, including net deferred loan costs | | $ | 2,610,294 | | $ | 2,753,493 | | $ | 2,656,390 | | $ | 2,610,294 | | $ | 2,656,390 | |
| Allowance for Credit Losses | | $ | 47,052 | | $ | 26,960 | | $ | 19,943 | | $ | 47,052 | | $ | 19,943 | |
| Total Equity | | $ | 596,992 | | $ | 607,095 | | $ | 557,608 | | $ | 596,992 | | $ | 557,608 | |
Tangible Common Equity (a) | | $ | 509,428 | | $ | 519,098 | | $ | 468,373 | | $ | 509,428 | | $ | 468,373 | |
| | | | | | |
| AVERAGE BALANCES | | | | | | |
| Total Assets | | $ | 4,532,078 | | $ | 4,379,798 | | $ | 4,041,287 | | $ | 4,312,919 | | $ | 3,439,793 | |
| Earning Assets | | $ | 3,736,217 | | $ | 3,776,803 | | $ | 3,662,390 | | $ | 3,714,794 | | $ | 3,197,855 | |
| Investments | | $ | 1,058,925 | | $ | 1,008,303 | | $ | 1,000,488 | | $ | 1,011,324 | | $ | 924,513 | |
| Loans | | $ | 2,676,041 | | $ | 2,768,003 | | $ | 2,658,582 | | $ | 2,702,225 | | $ | 2,270,313 | |
| Total Deposits | | $ | 3,741,155 | | $ | 3,592,633 | | $ | 3,279,859 | | $ | 3,532,736 | | $ | 2,797,330 | |
| Interest-Bearing Deposits | | $ | 3,005,337 | | $ | 2,887,575 | | $ | 3,072,566 | | $ | 2,872,725 | | $ | 2,504,885 | |
| Interest-Bearing Liabilities | | $ | 98,922 | | $ | 108,236 | | $ | 118,605 | | $ | 108,948 | | $ | 85,704 | |
| Total Equity | | $ | 610,879 | | $ | 603,067 | | $ | 575,908 | | $ | 593,791 | | $ | 497,329 | |
| | | | | | |
| INCOME STATEMENT DATA | | | | | | |
| Net Interest Income | | $ | 37,570 | | $ | 36,531 | | $ | 38,475 | | $ | 146,346 | | $ | 131,652 | |
Net Interest Income Fully Tax Equivalent (b) | | $ | 38,606 | | $ | 37,612 | | $ | 39,594 | | $ | 150,590 | | $ | 135,770 | |
| Provision for Loan Losses | | $ | 448 | | $ | 4,425 | | $ | 1,500 | | $ | 10,528 | | $ | 4,700 | |
| Non-interest Income | | $ | 12,866 | | $ | 11,739 | | $ | 11,327 | | $ | 42,476 | | $ | 38,452 | |
| Non-interest Expense | | $ | 31,191 | | $ | 27,130 | | $ | 29,754 | | $ | 112,758 | | $ | 104,348 | |
| Net Income | | $ | 15,739 | | $ | 14,000 | | $ | 14,364 | | $ | 53,844 | | $ | 48,872 | |
| | | | | | |
| PER SHARE DATA | | | | | | |
| Basic and Diluted Net Income Per Common Share | | $ | 1.15 | | $ | 1.02 | | $ | 1.05 | | $ | 3.93 | | $ | 3.80 | |
| Cash Dividends Declared Per Common Share | | $ | 0.53 | | $ | — | | $ | 0.52 | | $ | 1.05 | | $ | 1.04 | |
| Book Value Per Common Share | | $ | 44.03 | | $ | 44.27 | | $ | 40.58 | | $ | 44.03 | | $ | 40.58 | |
Tangible Book Value Per Common Share (c) | | $ | 37.64 | | $ | 37.56 | | $ | 35.46 | | $ | 37.57 | | $ | 34.08 | |
| Basic Weighted Average Common Shares Outstanding | | 13,695 | | 13,715 | | 13,726 | | 13,716 | | 12,865 | |
(a) Tangible common equity is a non-GAAP financial measure derived from GAAP-based amounts. We calculate tangible common equity by excluding goodwill and other intangible assets from shareholder's equity.
(b) Net interest income fully tax equivalent is a non-GAAP financial measure derived from GAAP-based amounts. We calculate net interest income fully tax equivalent by adding back the tax equivalent factor of tax exempt income to net interest income. We calculate the tax equivalent factor of tax exempt income by dividing tax exempt income by the net of tax rate of 75%.
(c) Tangible book value per common share is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the factor by dividing average tangible common equity by average shares outstanding. We calculate average tangible common equity by excluding average intangible assets from average shareholder's equity.
| | | | | | | | | | | | | | | | | | | | |
| Key Ratios | | Three Months Ended | Year Ended |
| | | December 31, | September 30, | December 31, | December 31, | December 31, |
| | | 2020 | 2020 | 2019 | 2020 | 2019 |
| Return on average assets | | 1.39 | % | 1.28 | % | 1.42 | % | 1.25 | % | 1.42 | % |
| Return on average common shareholder's equity | | 10.31 | % | 9.29 | % | 9.98 | % | 9.07 | % | 9.83 | % |
| Efficiency ratio | | 60.60 | % | 54.97 | % | 58.43 | % | 58.40 | % | 59.89 | % |
| Average equity to average assets | | 13.48 | % | 13.77 | % | 14.25 | % | 13.77 | % | 14.46 | % |
Net interest margin (a) | | 4.11 | % | 3.99 | % | 4.37 | % | 4.05 | % | 4.25 | % |
| Net charge-offs to average loans and leases | | 0.05 | % | 0.11 | % | 0.20 | % | 0.13 | % | 0.23 | % |
| Loan and lease loss reserve to loans and leases | | 1.80 | % | 0.98 | % | 0.75 | % | 1.80 | % | 0.75 | % |
| Loan and lease loss reserve to nonperforming loans | | 214.88 | % | 113.89 | % | 130.01 | % | 214.88 | % | 130.01 | % |
| Nonperforming loans to loans and leases | | 0.84 | % | 0.86 | % | 0.58 | % | 0.84 | % | 0.58 | % |
| Tier 1 leverage | | 11.24 | % | 11.81 | % | 12.04 | % | 11.24 | % | 12.04 | % |
| Risk-based capital - Tier 1 | | 16.11 | % | 15.70 | % | 15.51 | % | 16.11 | % | 15.51 | % |
(a) Net interest margin is calculated on a tax equivalent basis.
| | | | | | | | | | | | | | | | | | | | |
| Asset Quality | | Three Months Ended | Year Ended |
| | | December 31, | September 30, | December 31, | December 31, | December 31, |
| | | 2020 | 2020 | 2019 | 2020 | 2019 |
| Accruing loans and leases past due 30-89 days | | $ | 17,309 | | $ | 13,490 | | $ | 24,040 | | $ | 17,309 | | $ | 24,040 | |
| Accruing loans and leases past due 90 days or more | | $ | 2,324 | | $ | 2,948 | | $ | 1,610 | | $ | 2,324 | | $ | 1,610 | |
| Nonaccrual loans and leases | | $ | 15,367 | | $ | 16,628 | | $ | 9,535 | | $ | 15,367 | | $ | 9,535 | |
| Total troubled debt restructuring | | $ | 4,206 | | $ | 4,097 | | $ | 4,194 | | $ | 4,206 | | $ | 4,194 | |
| Other real estate owned | | $ | 1,012 | | $ | 3,577 | | $ | 3,625 | | $ | 1,012 | | $ | 3,625 | |
| Nonperforming loans and other real estate owned | | $ | 22,909 | | $ | 27,138 | | $ | 18,964 | | $ | 22,909 | | $ | 18,964 | |
| Total nonperforming assets | | $ | 26,045 | | $ | 30,174 | | $ | 22,583 | | $ | 26,045 | | $ | 22,583 | |
| Gross charge-offs | | $ | 1,954 | | $ | 1,998 | | $ | 3,456 | | $ | 8,396 | | $ | 10,673 | |
| Recoveries | | $ | 1,538 | | $ | 1,248 | | $ | 2,100 | | $ | 4,917 | | $ | 5,480 | |
| Net charge-offs/(recoveries) | | $ | 416 | | $ | 750 | | $ | 1,356 | | $ | 3,479 | | $ | 5,193 | |
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | |
| December 31,
2020 | | December 31,
2019 |
| | (unaudited) |
| ASSETS | | | |
| Cash and due from banks | $ | 657,470 | | | $ | 127,426 | |
| Federal funds sold | 301 | | | 7,500 | |
| Securities available-for-sale | 1,020,744 | | | 926,717 | |
| Loans: | | | |
| Commercial | 1,521,711 | | | 1,584,447 | |
| Residential | 604,652 | | | 682,077 | |
| Consumer | 479,750 | | | 386,006 | |
| | 2,606,113 | | | 2,652,530 | |
| (Less) plus: | | | |
| Net deferred loan costs | 4,181 | | | 3,860 | |
| Allowance for credit losses | (47,052) | | | (19,943) | |
| | 2,563,242 | | | 2,636,447 | |
| Restricted stock | 14,812 | | | 15,394 | |
| Accrued interest receivable | 16,957 | | | 18,523 | |
| Premises and equipment, net | 62,063 | | | 62,576 | |
| Bank-owned life insurance | 95,849 | | | 94,251 | |
| Goodwill | 78,592 | | | 78,592 | |
| Other intangible assets | 8,972 | | | 10,643 | |
| Other real estate owned | 1,012 | | | 3,625 | |
| Other assets | 37,530 | | | 41,556 | |
| TOTAL ASSETS | $ | 4,557,544 | | | $ | 4,023,250 | |
| | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
| Deposits: | | | |
| Non-interest-bearing | $ | 732,694 | | | $ | 547,189 | |
| Interest-bearing: | | | |
| Certificates of deposit exceeding the FDIC insurance limits | 107,764 | | | 126,738 | |
| Other interest-bearing deposits | 2,915,487 | | | 2,601,430 | |
| | 3,755,945 | | | 3,275,357 | |
| Short-term borrowings | 116,061 | | | 80,119 | |
| | | |
| Other liabilities | 82,687 | | | 79,193 | |
| TOTAL LIABILITIES | 3,960,552 | | | 3,465,642 | |
| | | |
| Shareholders’ equity | | | |
| Common stock, $.125 stated value per share; | | | |
| Authorized shares-40,000,000 | | | |
| Issued shares-16,075,154 in 2020 and 16,055,466 in 2019 | | | |
| Outstanding shares-13,558,511 in 2020 and 13,741,825 in 2019 | 2,007 | | | 2,005 | |
| Additional paid-in capital | 140,820 | | | 139,694 | |
| Retained earnings | 521,103 | | | 492,055 | |
| Accumulated other comprehensive income/(loss) | 9,764 | | | (7,501) | |
| Less: Treasury shares at cost-2,516,643 in 2020 and 2,313,641 in 2019 | (76,702) | | | (68,645) | |
| TOTAL SHAREHOLDERS’ EQUITY | 596,992 | | | 557,608 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 4,557,544 | | | $ | 4,023,250 | |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2020 | | 2019 | | 2018 | | |
| | (unaudited) |
| INTEREST INCOME: | | | | | | | |
| Loans, including related fees | $ | 137,241 | | | $ | 124,788 | | | $ | 100,541 | | | |
| Securities: | | | | | | | |
| Taxable | 13,625 | | | 15,191 | | | 16,942 | | | |
| Tax-exempt | 7,952 | | | 7,674 | | | 7,455 | | | |
| Other | 1,667 | | | 1,468 | | | 1,286 | | | |
| TOTAL INTEREST INCOME | 160,485 | | | 149,121 | | | 126,224 | | | |
| INTEREST EXPENSE: | | | | | | | |
| Deposits | 12,801 | | | 15,711 | | | 9,032 | | | |
| Short-term borrowings | 568 | | | 1,105 | | | 501 | | | |
| Other borrowings | 770 | | | 653 | | | 112 | | | |
| TOTAL INTEREST EXPENSE | 14,139 | | | 17,469 | | | 9,645 | | | |
| NET INTEREST INCOME | 146,346 | | | 131,652 | | | 116,579 | | | |
| Provision for loan losses | 10,528 | | | 4,700 | | | 5,768 | | | |
| NET INTEREST INCOME AFTER PROVISION | | | | | | | |
| FOR LOAN LOSSES | 135,818 | | | 126,952 | | | 110,811 | | | |
| NON-INTEREST INCOME: | | | | | | | |
| Trust and financial services | 5,423 | | | 5,036 | | | 5,286 | | | |
| Service charges and fees on deposit accounts | 10,256 | | | 11,795 | | | 11,733 | | | |
| Other service charges and fees | 15,644 | | | 14,012 | | | 13,012 | | | |
| Securities gains (losses), net | 233 | | | 44 | | | 2 | | | |
| | | | | | | |
| | | | | | | |
| Gain on sales of mortgage loans | 6,626 | | | 2,573 | | | 1,829 | | | |
| Other | 4,294 | | | 4,992 | | | 6,344 | | | |
| TOTAL NON-INTEREST INCOME | 42,476 | | | 38,452 | | | 38,206 | | | |
| NON-INTEREST EXPENSE: | | | | | | | |
| Salaries and employee benefits | 61,931 | | | 54,827 | | | 50,658 | | | |
| Occupancy expense | 8,202 | | | 7,600 | | | 7,030 | | | |
| Equipment expense | 10,568 | | | 8,244 | | | 6,827 | | | |
| FDIC Expense | 316 | | | 693 | | | 929 | | | |
| Other | 31,741 | | | 32,984 | | | 25,845 | | | |
| TOTAL NON-INTEREST EXPENSE | 112,758 | | | 104,348 | | | 91,289 | | | |
| INCOME BEFORE INCOME TAXES | 65,536 | | | 61,056 | | | 57,728 | | | |
| Provision for income taxes | 11,692 | | | 12,184 | | | 11,145 | | | |
| NET INCOME | 53,844 | | | 48,872 | | | 46,583 | | | |
| OTHER COMPREHENSIVE INCOME | | | | | | | |
| Change in unrealized gains/(losses) on securities, net of reclassifications and taxes | 19,269 | | | 20,998 | | | (8,363) | | | |
| Change in funded status of post retirement benefits, net of taxes | (2,004) | | | (5,045) | | | (387) | | | |
| COMPREHENSIVE INCOME | $ | 71,109 | | | $ | 64,825 | | | $ | 37,833 | | | |
| PER SHARE DATA | | | | | | | |
| Basic and Diluted Earnings per Share | $ | 3.93 | | | $ | 3.80 | | | $ | 3.80 | | | |
| Weighted average number of shares outstanding (in thousands) | 13,716 | | | 12,865 | | | 12,256 | | | |