-----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, S7C4KqjKeWCsFNnazJ9WyIv1NUVJvSmdeeOxsSv9L+2Vag3YsnaV/e7hC4KfUBhh zAQR44ZVgsuQiumtCgTzoQ== 0000714562-97-000004.txt : 19970514 0000714562-97-000004.hdr.sgml : 19970514 ACCESSION NUMBER: 0000714562-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-16759 FILM NUMBER: 97602028 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 03/31/97 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, 1997 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, 1997 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, 1997 were outstanding 6,681,876 shares without par value, of the registrant. 1 FIRST FINANCIAL CORPORATION FORM 10-Q INDEX Page No. PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets........................................3 Consolidated Statements of Income..................................4 Consolidated Statements of Cash Flows..............................5 Notes to Consolidated Financial Statements.........................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................8 PART II. Other Information: Signatures..............................................................11 2 FIRST FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1997 1996 (Amounts in thousands) Cash and due from banks $69,011 $66,658 Interest-bearing deposits with financial institutions 1,099 1,095 Federal funds sold and securities purchased under agreement to resell 0 2,000 Investments: Available-For-Sale 593,698 582,744 Loans: Commercial, financial and agricultural 205,281 197,449 Real estate - construction 23,561 22,629 Real estate - mortgage 507,412 508,010 Installment 185,839 188,670 Lease financing 3,392 3,284 925,485 920,042 Less: Unearned income 1,251 1,275 Allowance for loan losses 11,709 10,756 912,525 908,011 Accrued interest receivable 15,119 14,985 Premises and equipment 25,746 26,137 Other assets 18,222 18,012 TOTAL ASSETS $1,635,420 $1,619,642 LIABILITIES AND SHAREHOLDERS' EQUITY Deposit: Noninterest-bearing $136,754 $141,492 Interest-bearing: Certificates of deposit of $100,000 or more 192,941 187,199 Other interest-bearing deposits 853,066 846,537 1,182,761 1,175,228 Short-term borrowings: Federal funds purchased and securities sold under agreements to repurchase 52,392 62,416 Treasury tax and loan open-end note 6,340 5,131 Advances from Federal Home Loan Bank 155,787 140,244 214,519 207,791 Other liabilities 13,008 15,685 Long-term debt 6,633 6,637 Long-term advances from Federal Home Loan Bank 67,638 63,924 TOTAL LIABILITIES 1,484,559 1,469,265 Shareholders' equity: Common stock, $.125 stated value per share; authorized 10,000,000 shares; issued and outstanding 835 835 6,681,876 for 1996 and 1997 Additional capital 43,761 43,761 Retained earnings 105,524 101,093 Unrealized gains on securities, net of tax 741 4,688 TOTAL SHAREHOLDERS' EQUITY 150,861 150,377 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,635,420 $1,619,642 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, 1997 1996 (Amounts in thousands, except per share data) INTEREST INCOME: Loans $19,940 $19,310 Investment securities: Taxable 8,107 7,030 Tax-exempt 1,783 1,681 9,890 8,711 Other interest income 20 227 TOTAL INTEREST INCOME 29,850 28,248 INTEREST EXPENSE Deposits 11,304 11,351 Other 3,881 2,519 TOTAL INTEREST EXPENSE 15,185 13,870 NET INTEREST INCOME 14,665 14,378 Provision for loan losses 1,401 735 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 13,264 13,643 OTHER INCOME Trust department income 490 415 Service charges on deposit accounts 332 396 Other service charges and fees 892 851 Investment securities gains (losses) 231 6 Other 414 321 2,359 1,989 OTHER EXPENSES Salaries and employee benefits 5,275 5,192 Occupancy expense 694 865 Equipment expense 762 556 Data processing expense 63 532 Other 2,817 2,627 9,611 9,772 INCOME BEFORE INCOME TAXES 6,012 5,860 Income Tax Expense 1,581 1,801 NET INCOME $4,431 $4,059 EARNINGS PER SHARE $0.66 $0.61 6,682 6,672 The accompanying notes are an integral part of the consolidated financial statements. All information is restated for the 5% stock dividend and Crawford merger
4 FIRST FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1997 1996 (Amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $4,431 $4,059 Adjustment to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,401 735 Provision for depreciation and amortization 640 668 Net increase in accrued interest receivable -134 -387 Other, net 1,652 319 NET CASH PROVIDED BY OPERATING ACTIVITIES 7,990 5,394 CASH FLOWS FROM INVESTING ACTIVITIES: Increase from purchase and maturities of interest-bearing deposits with financial institutions -4 -5 Sales and maturities of available-for sale securities 37,213 69,532 Purchase of available-for-sale securities -54,195 -77,918 Loans made to customers, net of repayments -5,967 19,633 Net decrease (increase) in federal funds sold 2,000 -4,238 Additions to premises and equipment - 317 -1,410 NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES -21,270 5,594 CASH FLOWS FROM FINANCING ACTIVITIES: Net increase from sales and redemptions of certificates of deposit 13,173 32,252 Net decrease in other deposits - 5,640 -15,225 Net increase (decrease) in short-term borrowings 6,728 -46,011 Cash dividends -2,338 -1,770 Proceeds from reissuance of Treasury Stock 0 600 Purchase of treasury stock 0 -131 Net increase from long-term debt 3,714 953 Repayments of long-term debt -4 -4 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 15,633 -29,336 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,353 -18,348 CASH AND CASH EQUIVALENTS, BEGINNING OF QUARTER 66,658 65,276 CASH AND CASH EQUIVALENTS, END OF QUARTER $69,011 $46,928 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the quarter for interest $14,855 $13,484 Income taxes paid $326 $524 The accompanying notes are an integral part of the consolidated financial statements. All information is restated for the 5% stock dividend and Crawford merger.
5 FIRST FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying March 31, 1997 and 1996 consolidated financial statements are unaudited. The December 31, 1996, consolidated balance sheet amounts are as reported in the Corporation's 1996 annual report. The significant accounting policies followed by First Financial 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. 2. The provision for loan and lease losses charged to expense is based upon each affiliate's past loan and lease loss experience and an evaluation of potential losses in the current loan and lease portfolio, including the evaluation of impaired loans under SFAS 114. 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. Impairment losses are included in the calculation of the provision for loan and lease losses. SFAS 114 does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment, except for those loans restructured under a troubled debt restructuring. Loans collectively evaluated for impairment include certain smaller balance commercial loans, consumer loans, residential real estate loans, and credit card loans, and are not included in the data that follows. The following table summarizes impaired loan information.
(000'S) March 31, 1997 1996 Impaired loans.........................................................$ 1,999 $3,762 Impaired loans with related reserve for loan losses calculated under SFAS 114............................................................. 1,998 3,642 Impaired loans with no realized reserve for loan losses calculated under SFAS 114........................................................ 1 120 March 31, 1997 1996 Average impaired loans.................................................$ 1,993 $4,028 Interest income recognized on impaired loans........................... 42 47 Cash basis interest income recognized on impaired loans................ 0 0
Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is fully assured, in which case interest is recognized on the cash basis for certain troubled debt restructurings which are included in the impaired loan data above. 6 Commercial loans and residential real estate loans are placed on nonaccrual 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 the process of collection, or other extenuating 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 at 150 days delinquent. In all cases, loans must be placed on nonaccrual 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. Loans may be returned to accrual status when all the principal and interest amounts contractually due are paid and the loan is returned to current. 7 FIRST FINANCIAL CORPORATION ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The purpose of the review is to point out key factors in First Financial's recent performance, compared with earlier periods. The review should be read in conjunction with the financial statements beginning on Page 3 of this report. All figures are for the consolidated entities. It is presumed the reader of these financial statements and the following narrative have previously read the Corporation's annual report for 1996. Summary of Operating Results Net income for current quarter of $4,431,000 was 9.2% greater than the first quarter of 1996. Earnings per share increased to $.66 from $.61 for the same period of 1996 which represents a record first quarter earnings. Net Interest Income First Financial 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. In the first three months of 1997 net interest income increased to $14,665,000 from $14,378,000 in the same period of 1996. The net interest margin for the quarter decreased from 4.33% in 1996 to 4.16% in 1997. This decrease was the result of a lower yield on earnings asset while the cost of funds was higher than the prior year. Other Income Other income for the three month period ending March 31, 1997, as compared to the same period of 1996 increased $370,000 or 18.6%. The main contributing factor to the increase were realized gains from the sale of securities of $231,000 which were recognized as a result of repositioning the investment portfolio. In addition, trust department income increased to $490,000 or 18.1% above the prior year, and other miscellaneous income increased to $414,000, 15.6% more than the same period of 1996. Other Expenses Other expenses for the first three months of 1997, as compared to the same period of 1996, decreased to $9,611,000 from $9,772,000. The Corporation changed data processing service from a facilities management firm to an in-house operation which impacted data processing expenses favorably, decreasing to $63,000 in 1997 from $532,000 for the same period of 1996. These decreases were offset by increased equipment expenses which grew by $206,000 or 37%. Depreciation expense for capital expenditures incurred for the system conversion is the primary reason for the increase. Occupancy expenses decreased by $171,000 or 20% compared to the same period of 1996 due to real and personal property tax reduction. Allowance for Loan Losses The Corporation's provision for loan losses totaled $1,401,000 for the first three months of 1997 compared to $735,000 in the same period a year earlier. This represents a $666,000 increase and was deemed necessary to properly reserve for the increase in underperforming loans during the quarter. 8 At March 31, 1997, the allowance for loan losses was 1.27% of net loans. This compares with an allowance of 1.17% at December 31, 1997. Net chargeoffs for the first three months of 1997 were $443,000 compared to $848,000 for the same period of 1996. The ratio of net chargeoffs to average loans outstanding for the last five years ended December 31, 1996, was .37%. With this experience and based on management's review of the portfolio, management believes the allowance of $11,709,000 at March 31, 1997 is adequate. Underperforming Assets The following is a listing of all categories of non-performing assets which includes potential problem loans at March 31, 1997 and December 31, 1996. (000') (000') March 31, 97 December 31,96 Nonaccrual Loans $ 3,735 $ 2,504 Restructured Loans 44 34 $ 3,779 $ 2,538 Past due > 90 days $ 5,516 $ 5,296 Land sold on contract and others 1,989 1,871 Total non-performing asset $11,284 $ 9,705 The ratio of the allowance for loan losses as a percentage of non- performing loans was 126% at March 31, 1997 representing a decrease of 8% from December 31, 1996. This decrease is the result of an increase in the amount of loans placed in nonaccrual status amounting to $1,231,000 or 49%. No one particular category affected the increase, but on a consolidated basis each category of loans increased a small amount. The following loan categories comprise significant components of the non-performing loans at March 31, 1997 Non-Accrual Loans: (000') (000) March 31, 97 December 31,96 1-4 family residential $ 426 11% $ 287 12% Commercial loans 2,035 55% 1,420 57% Installment loans 406 11% 469 18% Other, various 868 23% 328 13% $3,735 100% $2,504 100% ====== ==== ====== ==== Past due 90 days or more: 1-4 family residential $1,991 36% $2,256 43% Commercial loans 937 17% 1,125 21% Installment loans 921 17% 943 18% Non farm nonresidential properties 1,031 19% 848 16% Other, various 636 11% 124 2% $5,516 100% $5,296 100% ====== ==== ====== ==== 9 There are no material concentrations by industry within the non- performing loans. In addition to the above under-performing 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, 1997, the Corporation had $1.2 million of doubtful loans which are still in accrual status. INTEREST RATE SENSITIVITY AND LIQUIDITY First Financial Corporation charges the eight subsidiary banks with monitoring and managing their individual sensitivity to fluctuations in interest rates and assuring that they have adequate liquidity to meet loan and deposit demand. 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. Interest Rate Risk The committee reviews a series of monthly reports to insure that performance objectives are being met. The committee monitors and controls interest rate risk through earnings simulation. Simulation modeling measures the effects of interest rate changes on net interest income. The primary measure of interest rate risk is Earnings At Risk. This measure projects the effect of various rate movements over the next three years. The Corporation's Earnings At Risk as of March 31, 1997 are summarized below. Given a 100 basis point increase in rates, net income would increase 2.02% over the next 12 months. A 100 basis point decrease would result in a .36% increase in net income. Earnings At Risk YEAR 1 YEAR 2 YEAR 3 DOWN 300 -3.01% -8.09% -17.22% DOWN 200 0.41% -2.66% -8.07% DOWN 100 0.36% -1.18% -3.77% UP 100 2.02% 3.54% 5.89% UP 200 3.95% 7.35% 11.93% UP 300 5.69% 11.46% 17.97% Liquidity Risk Liquidity is measured by the Corporation's ability to raise funds to meet the obligation from its customers, including deposit withdrawals and credit needs. The Corporation has $13.1 million of investments that mature throughout the coming year. The Corporation also anticipates $17.5 million of principal from mortgage backed securities. Given the current rate environment the Corporation does not anticipate any Federal Agency calls within the next year. Capital Adequacy As of March 31, 1997 the Corporation's leverage ratio was 9.25% which compared to 9.35% at December 31, 1996. At March 31, 1997, the Corporation's total capital, which includes Tier II capital, was 16.54% compared to 16.00% at December 31, 1996. These amounts exceed minimum regulatory capital requirements. 10 FIRST FINANCIAL CORPORATION PART II OTHER INFORMATION 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 13, 1997 By (Signature) Donald E. Smith, President Date: May 13, 1997 By (Signature) John W. Perry, Secretary Date: May 13, 1997 By (Signature) Michael A. Carty, Treasurer 11 EX-27 2 3/31/97 FDS SCHEDULE
9 1000 3-MOS DEC-31-1997 MAR-31-1997 69,011 1,099 0 0 593,698 593,698 593,698 924,234 11,709 1,635,420 1,182,761 214,519 13,008 74,271 0 0 835 150,026 1,635,420 19,940 9,890 20 29,850 11,304 15,185 14,665 1,401 231 9,611 6,012 6,012 0 0 4,431 .66 .66 4.16 3,735 5,516 44 1,200 10,756 743 300 11,709 11,709 0 0
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