<PAGE>
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, 1999 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 July 30, 1999, there were 1,328,041 shares of the Company's $1.00 par value
stock issued, with 1,231,241 shares outstanding.
<PAGE>
FIRST FINANCIAL CORP.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.............................................................................. 1
Consolidated Balance Sheets - June 30, 1999 and December 31, 1998..................................... 1
Consolidated Statements of Income - Three months and six months ended June 30, 1999
and 1998............................................................................................. 2
Consolidated Statements of Stockholders' Equity and Comprehensive Income - Six months
ended June 30, 1999 and year ended December 31, 1998................................................. 3
Consolidated Statements of Cash Flows - Six months ended June 30, 1999 and 1998....................... 4
Notes to Consolidated Financial Statements - June 30, 1999............................................ 5
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................................. 7
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings................................................................................. 14
Item 2 - Changes in Securities............................................................................. 15
Item 3 - Defaults Upon Senior Securities................................................................... 15
Item 4 - Submission of Matters to a Vote of Security Holders............................................... 15
Item 5 - Other Information................................................................................. 15
Item 6 - Exhibits and Reports on Form 8-K.................................................................. 16
SIGNATURES................................................................................................. 17
EXHIBITS
Computation of per share earnings - Exhibit 11............................................................. 18
Financial Data Schedule - Exhibit 27....................................................................... 19
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
CASH AND DUE FROM BANKS...................................................... $ 3,048,444 $ 2,342,782
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL 4,141,255 2,723,488
LOANS HELD FOR SALE.......................................................... 2,184,000 357,493
INVESTMENT SECURITIES:
Held-to-maturity (market value: $13,636,108 and $13,673,673).............. 13,798,950 13,733,393
Available-for sale (amortized cost: $31,271,555 and $32,969,558).......... 31,168,218 33,087,290
------------ ------------
Total investment securities.......................................... 44,967,168 46,820,683
------------ ------------
FEDERAL HOME LOAN BANK STOCK................................................. 487,500 447,700
LOANS:
Commercial................................................................ 12,518,716 14,762,537
Commercial real estate.................................................... 60,230,240 50,646,390
Residential real estate................................................... 14,271,629 16,417,012
Home equity lines of credit............................................... 2,937,594 3,489,029
Consumer.................................................................. 849,536 1,047,141
------------ ------------
90,807,715 86,362,109
Less - Unearned discount.................................................. 41,885 66,264
Allowance for loan losses................................................. 1,393,652 1,287,058
------------ ------------
Net loans............................................................ 89,372,178 85,008,787
------------ ------------
OTHER REAL ESTATE OWNED...................................................... 47,290 513,127
PREMISES AND EQUIPMENT, net.................................................. 2,213,693 2,416,790
OTHER ASSETS................................................................. 1,428,790 1,288,080
------------ ------------
TOTAL ASSETS................................................................. $147,890,318 $141,918,930
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Demand..................................................................... $ 20,631,466 $ 15,743,185
Savings and money market accounts.......................................... 23,310,724 21,940,330
Time deposits.............................................................. 65,607,779 66,688,413
------------ ------------
Total deposits........................................................ 109,549,969 104,371,928
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE............................... 11,857,890 12,255,880
FEDERAL HOME LOAN BANK ADVANCES.............................................. 9,748,426 6,204,077
ACCRUED EXPENSES AND OTHER LIABILITIES....................................... 1,764,708 1,302,316
SENIOR DEBENTURE............................................................. -- 2,971,487
------------ ------------
TOTAL LIABILITIES............................................................ 132,920,993 127,105,688
------------ ------------
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.......................................................... 9,803,241 9,130,143
Accumulated other comprehensive income..................................... (62,002) 70,638
------------ ------------
15,500,660 14,960,202
Less - Treasury stock, at cost, 96,800 shares in 1999; 66,800 shares
In 1998................................................................. 531,335 146,960
------------ ------------
TOTAL STOCKHOLDERS' EQUITY................................................... 14,969,325 14,813,242
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................... $147,890,318 $141,918,930
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans......................................... $4,201,084 $3,811,188 $2,122,507 $1,923,015
Interest and dividends on investment securities-
U.S. Government and agency obligations.................... 852,965 909,114 434,950 508,931
Collateralized mortgage obligations....................... 74,070 15,676 35,032 7,949
Mortgage-backed securities................................ 207,773 273,423 96,598 137,703
Marketable equity securities and other.................... 31,698 37,283 12,111 15,290
Interest on cash equivalents....................................... 74,509 132,478 37,920 72,316
---------- ---------- ---------- ----------
Total interest income..................................... 5,442,099 5,179,162 2,739,118 2,665,204
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits............................................... 1,857,640 2,070,580 925,849 1,049,446
Interest on repurchase agreements................................. 300,511 353,348 149,703 196,496
Interest on advances............................................... 215,465 39,267 115,799 32,380
Interest on debenture.............................................. 84,503 129,147 33,803 64,466
---------- ---------- ---------- ----------
Total interest expense..................................... 2,458,119 2,592,342 1,225,154 1,342,788
---------- ---------- ---------- ----------
Net interest income........................................ 2,983,980 2,586,820 1,513,964 1,322,416
PROVISION FOR LOAN LOSSES.............................................. 125,000 125,000 50,000 75,000
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses...................................................... 2,858,980 2,461,820 1,463,964 1,247,416
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Service charges on deposits........................................ 132,094 138,954 65,023 72,846
Gain on sale of securities......................................... ---------- ---------- ---------- ----------
Gain on loan sales................................................. 154,154 71,837 53,952 36,132
Other.............................................................. 99,420 97,218 48,856 45,148
---------- ---------- ---------- ----------
Total noninterest income................................... 385,668 308,009 167,831 154,126
---------- ---------- ---------- ----------
NONINTEREST EXPENSE:
Salaries and employee benefits.................................... 1,022,075 893,652 515,732 445,350
Occupancy expense............................................... 336,947 198,785 231,257
98,860
Equipment expense................................................. 147,257 132,148 74,875 68,074
Other real estate owned net (gains) losses and expenses (212,110) 34,613 (226,681) 32,005
Computer services................................................ 124,636 101,928 65,428 48,690
Deposit insurance assessments..................................... 5,977 6,000 2,977 3,004
Other operating expenses.......................................... 406,755 337,455 205,095 168,311
---------- ---------- ---------- ----------
Total noninterest expense.................................. 1,831,537 1,704,581 868,683 864,294
---------- ---------- ---------- ----------
Income before provision for income taxes................... 1,413,111 1,065,248 763,112 537,248
PROVISION FOR INCOME TAXES............................................. 517,039 374,553 274,499 183,371
---------- ---------- ---------- ----------
NET INCOME............................................................. $ 896,072 $ 690,695 $ 488,613 $ 353,877
========== ========== ========== ==========
Earnings per share:
Basic...................................................... $0.73 $0.55 $0.40 $0.28
========== ========== ========== ==========
Diluted.................................................... $0.73 $0.55 $0.40 $0.28
========== ========== ========== ==========
Weighted average common shares outstanding............................. 1,235,136 1,261,241 1,231,241 1,261,241
Diluted effect of common stock equivalents............................. -- -- -- --
---------- ---------- ---------- ----------
Weighted average common and common stock equivalent
shares outstanding................................................ 1,235,136 1,261,241 1,231,241 1,261,241
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Retained Comprehensive Treasury Stockholders' Comprehensive
Stock Surplus Earnings Income Stock Equity Income
---------- ---------- ---------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997...... $1,328,041 $4,431,380 $7,982,792 $ 117,380 $ (146,960) $13,712,633
Net income...................... -- -- 1,450,048 -- -- 1,450,048 $ 1,450,048
Other comprehensive income, net
of tax:
Unrealized holding losses.... -- -- -- (46,742) -- (46,742) (46,742)
-----------
Comprehensive income............ -- -- -- -- -- -- $ 1,403,306
===========
Dividends declared ($.24 per
share)....................... -- -- (302,697)) -- -- (302,697)
---------- ---------- ---------- ------------ ------------ ----------
Balance, December 31, 1998...... 1,328,041 4,431,380 9,130,143 70,638 (146,960) 14,813,242
Net income...................... -- -- -- 896,072 -- 896,072 $ 896,072
Other comprehensive income, net
of tax:
Unrealized holding losses.... -- -- -- -- (132,640) (132,640) (132,640)
-----------
Comprehensive income............ -- -- -- -- -- -- $ 763,432
===========
Dividends declared ($.18 per
share)....................... -- -- -- (222,974) -- (222,974)
Repurchase of 30,000 shares
common stock................ -- -- -- -- (384,375) (384,375)
---------- ---------- ---------- ------------ ------------ -----------
Balance, June 30, 1999.......... $1,328,041 $4,431,380 $9,803,241 $ (62,002) $ (531,335) $14,969,325
========== ========== ========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
FIRST FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................................... $ 896,072 $ 690,695
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses.................................................................... 125,000 125,000
Depreciation and amortization................................................................ 153,792 141,739
Write-off of impaired long-lived asset....................................................... 129,362 --
Amortization of discount on debenture........................................................ 15,860 102,674
Net accretion on investment securities held-to-maturity...................................... (3,155) (3,500)
Net accretion on investment securities available-for-sale.................................... (186,185) (100,317)
(Gains) losses on sale of OREO............................................................... (219,118) 18,952
Gains on sales of loans....................................................................... (154,154) (71,837)
Proceeds from sales of loans................................................................. 2,268,857 1,020,210
Loans originated for sale.................................................................... (3,958,631) (728,373)
Net (decrease) increase in unearned discount................................................ (24,379) 37,570
Net (increase) in other assets............................................................... (140,710) (121,781)
Net increase (decrease) in deferred loan fees................................................ 12,315 (3,529)
Net increase (decrease) in accrued expenses and other liabilities............................ 289,730 (159,947)
------------- ------------
Net cash (used in) provided by operating activities........................................... (795,344) 947,556
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Federal Home Loan Bank stock.......................................................... (39,800) --
Proceeds from maturities of investment securities
held-to-maturity.............................................................................. 2,425,992 8,895,095
Proceeds from maturities of investment securities
available-for-sale............................................................................. 167,546,146 43,539,739
Purchase of investment securities held-to-maturity................................................ (2,488,394) (8,942,494)
Purchase of investment securities available-for-sale.............................................. (165,662,016) (53,173,983)
Net increase in loans............................................................................. (4,476,327) (3,056,787)
Purchase of premises and equipment................................................................ (80,057) (77,090)
Sales of OREO..................................................................................... 684,955 344,217
------------- ------------
Net cash used in investing activities.......................................................... (2,089,501) (12,471,303)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand accounts........................................................ 4,888,281 (251,911)
Net increase (decrease) in savings and money market accounts...................................... 1,370,394 (2,053,735)
Net (decrease) increase in time deposits.......................................................... (1,080,634) 3,073,887
Net (decrease) increase in repurchase agreements.................................................. (397,990) 4,983,691
Net increase in Federal Home Loan Bank advances................................................... 3,544,349 2,335,933
Repayment of senior debenture..................................................................... (2,708,777) --
Purchase of common stock for treasury............................................................. (384,375) --
Dividends paid.................................................................................... (222,974) (138,737)
------------- ------------
Net cash provided by financing activities...................................................... 5,008,274 7,949,128
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................................................................... 2,123,429 (3,574,619)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD........................................................................................... 5,066,270 6,715,014
------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................................................ $ 7,189,699 $ 3,140,395
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid..................................................................................... $ 2,462,048 $ 2,592,349
============= ============
Income taxes paid................................................................................. $ 843,000 $ 599,500
============= ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Transfer of loans to OREO.........................................................................
$ -- $ 110,000
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1999
(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, 1999, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999, 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, 1998, filed with the Securities
and Exchange Commission.
(2) DIVIDEND DECLARATION
On July 12, 1999, the Company declared dividends of $110,811.69 or $.09 per
share to all common stockholders of record on August 2, 1999, payable on
August 16, 1999.
(3) RECENT DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value. This statement requires that changes in the derivative's
fair value be recognized currently in income unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the
hedged item in the statement of income and requires that a company must
formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133, as amended by SFAS No. 137,
"Deferral of the Effective Date of FASB Statement No. 133", is effective
for fiscal years beginning after June 15, 2000. A company may also
implement the statement as of the beginning of any fiscal quarter after
issuance (that is, financial quarters beginning June 16, 1998 and
thereafter). SFAS No. 133 cannot be applied retroactively. SFAS No. 133
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired or
substantively modified after December 31, 1998 (and, at the Company's
election, before January 1, 1999). The Company has not yet quantified the
impact of adopting SFAS No. 133 on its consolidated financial statements
and has not determined the timing or method of its adoption of the
statement. However, the Company does not expect that the adoption of this
statement will have a material impact on its financial position or results
of operations.
In May 1992, the Company issued a $3 million Senior Debenture to the
Depositors Economic Protection Corporation (DEPCO) in connection with its
acquisition of certain assets and the assumption of certain liabilities of
Chariho-Exeter Credit Union. Under the terms of the Senior Debenture, the
Company was allowed to charge net acquired loan losses in excess of the
acquired loan loss reserve against the outstanding Senior Debenture. On
May 31, 1999, the Senior Debenture matured. The Company repaid the
Debenture in the amount of $2,708,777, which represented the original face
value of $3,000,000, less $291,223 in net acquired loan losses in excess of
the acquired loan loss reserve.
5
<PAGE>
(4) BUSINESS SEGMENTS
The Company's community banking business segment consists of commercial and
retail banking. The community banking business segment is managed as a
single strategic unit which derives its revenues from a wide range of
banking services, including investing and lending activities and acceptance
of demand, savings and time deposits. There is no single 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
nonreportable segments include the Parent Company.
The accounting policies used in the disclosure of business segments for
these interim financial statements are the same as those used in the
December 31, 1998 Annual Report on 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:
<TABLE>
<CAPTION>
Community Other Adjustments
Banking Other and Eliminations Consolidated
---------- -------- ------------------ ------------
<S> <C> <C> <C> <C>
Three Months Ended June 30, 1999
Net Interest Income $1,529,169 $498,113 $(513,318) $1,513,964
Provision for Loan Losses 50,000 ------ ------- 50,000
Total Noninterest Income 167,831 ------ ------- 167,831
Total Noninterest Expense 846,683 22,000 ------- 868,683
Net Income 513,318 488,613 (513,318) 488,613
Three Months Ended June 30, 1998
Net Interest Income $1,338,619 $360,248 $(376,451) $1,322,416
Provision for Loan Losses 75,000 ----- ------ 75,000
Total Noninterest Income 154,126 ----- ------ 154,126
Total Noninterest Expense 846,294 18,000 ------ 864,294
Net Income 376,451 353,877 (376,451) 353,877
Six Months Ended June 30, 1999
Net Interest Income $3,011,320 $918,112 $(945,452) $2,983,980
Provision for Loan Losses 125,000 ----- ------ 125,000
Total Noninterest Income 385,668 ----- ------ 385,668
Total Noninterest Expense 1,785,537 46,000 ------ 1,831,537
Net Income 945,452 896,072 (945,452) 896,072
Six Months Ended June 30, 1998
Net Interest Income $2,619,789 $703,248 $(736,217) $2,586,820
Provision for Loan Losses 125,000 ----- ------- 125,000
Total noninterest Income 308,009 ----- ------- 308,009
Total Noninterest Expense 1,668,581 36,000 ------- 1,704,581
Net Income 736,217 690,695 (736,217) 690,695
</TABLE>
6
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
- --------
First Financial Corp. ("Company") is a bank holding company that was organized
under Rhode Island law in 1980 for the purposes of owning all of the outstanding
capital stock of First Bank and Trust Company ("Bank") and providing greater
flexibility in helping the Bank achieve its business objectives. The Bank is a
Rhode Island chartered commercial bank that was originally chartered and opened
for business on February 14, 1972. The Bank provides a broad range of lending
and deposit products primarily to individuals and small businesses ($10 million
or less in total revenues). Although the Bank has full commercial banking and
trust powers, it has not exercised its trust powers and does not, at the current
time, provide asset management or trust administration services. The Bank's
deposits are insured by the FDIC up to applicable limits.
The Bank offers a variety of commercial and consumer financial products and
services designed to satisfy the deposit and loan needs of its customers. The
Bank's retail products include interest-bearing and noninterest-bearing checking
accounts, money market accounts, passbook and statement savings accounts, club
accounts, and short-term and long-term certificates of deposit. The Bank also
offers customary check collection services, wire transfers, safe deposit box
rentals, and automated teller machine (ATM) cards and services. Loan products
include commercial, commercial mortgage, residential mortgage, construction,
home equity and a variety of consumer loans.
The Bank's products and services are delivered through its 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, Federal Home Loan Bank advances, and the Senior
Debenture. 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
nonperforming and other classified assets.
SUMMARY
- --------
During the three months ended June 30, 1999, the Company recorded two one-time
transactions. The first nonrecurring transaction was the sale of OREO at a gain
of $222,452. The second nonrecurring transaction was a $129,362 write-off of a
long-lived asset in recognition of its impaired value. The after-tax impact of
these two transactions was to increase net income by $61,439.
For the three months ended June 30, 1999, the Company reported net income of
$488,613 compared to net income of $353,877 for the three months ended June 30,
1998, or an increase of 38.1%. Basic and diluted net income per share were $0.40
for the quarter ended June 30, 1999, compared to $0.28 per share for the same
three month period of the prior year. Excluding the nonrecurring transactions
mentioned above, net income for the three months ended June 30, 1999, would have
been $427,174, or an increase of 20.7% over net income for the second quarter of
1998. Net income per share would have been $0.35 for the second quarter of 1999
compared to $0.28 per share for last year's second quarter. Net income for the
six months ended June 30, 1999 amounted to $896,072 compared to net income of
$690,695 for the six months ended June 30, 1998. Basic and diluted net income
per share for the six months ended June 30, 1999, were $0.73 compared to $0.55
per share for the six months ended June 30, 1998. Excluding the previously
discussed nonrecurring transactions, net income for the six months ended June
30, 1999 would have been $834,633, or an increase of 20.8% over net income for
the first six months of 1998. Net income per share would have been $0.68 for the
six months ended June 30, 1999, compared to $0.55 per share for the six months
ended June 30, 1998.
7
<PAGE>
The second quarter ended June 30, 1999, was another record quarter for the
Company--was the fifth (5) consecutive record quarter and; represented the
twelfth (12th) record quarter of the past fourteen (14) quarters. Overall, this
achievement was accomplished as a result of (i) an increase in net interest
spreads and margins, (ii) balance sheet growth, predominately within the loan
portfolio, (iii) an increase in the recognition of gains on SBA loan sales, and
(iv) continued strength in asset quality.
Total assets increased $5,971,388 or 4.2% to $147,890,318 at June 30, 1999, from
$141,918,930 at December 31, 1998. The loan portfolio, net of unearned discount,
increased $4,469,985 or 5.2% to $90,765,830 at June 30, 1999, from $86,295,845
at December 31, 1998. Investment securities decreased $1,853,515 to $44,967,168
at June 30, 1999, from $46,820,683 at December 31, 1998, while cash, cash
equivalents, and loans held for sale increased $3,949,936 to $9,373,699 at June
30, 1999, from $5,423,763 at December 31, 1998. The increase in the Company's
total assets was funded primarily from, (i) a $5,178,041 or 5.0% increase in
total deposits to $109,549,969 at June 30, 1999, from $104,371,928 at December
31, 1998; (ii) a $3,544,349 increase in Federal Home Loan Bank advances; less
(iii) the repayment of the senior debenture of $2,971,487.
Financial Condition
Asset Quality
- --------------
The following table sets forth information regarding nonperforming assets and
delinquent loans 30-89 days past due as to interest or principal, and held by
the Company at the dates indicated. The amounts and ratios shown are exclusive
of the acquired loans and acquired allowance for loan losses associated with the
1992 acquisition of certain assets and the assumption of certain liabilities of
the former Chariho-Exeter Credit Union:
<TABLE>
<CAPTION>
As of and for the As of and for the
six months ended year ended
June 30, December 31,
-------------------- ------------------
1999 1998 1998
--------- ------- ------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Nonperforming loans................................... $ 126 $ 248 $-----
Other real estate owned............................... $ 47 $ 529 $ 513
Total nonperforming assets............................ $ 173 $ 777 $ 513
Loans 30-89 days delinquent........................... $ 583 $ 603 $ 161
Nonperforming assets to total assets.................. 0.12% 0.57% 0.36%
Nonperforming loans to total loans.................... 0.14% 0.32% ----
Net loan charge-offs to average loans................. 0.02% 0.06% 0.22%
Allowance for loan losses to total loans.............. 1.53% 1.67% 1.53%
Allowance for loan losses to nonperforming
loans (multiple).................................. 11.10X 5.20X NM
</TABLE>
8
<PAGE>
The following represents the activity in the allowance for loan losses for
the three and six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Bank Reserve:
Balance at beginning of period......................... $1,287,058 $1,208,322 $1,318,374 $1,259,180
Provision........................................... 125,000 125,000 50,000 75,000
Loan charge-offs.................................... (46,852) (51,223) ---- (49,934)
Recoveries.......................................... 28,446 8,998 25,278 6,851
---------- ---------- ---------- ----------
Balance at end of period............................... 1,393,652 1,291,097 1,393,652 1,291,097
---------- ---------- ---------- ----------
Acquired Reserve:
Balance at beginning of period......................... ----- 388,291 ---- 168,966
Loan charge-offs.................................... (266,482) (272,188) (266,482) (55,688)
Recoveries (Administrative Costs)................... 1,638 (6,205) 155 (3,380)
Reclassification to Senior Debenture................ 264,844 ---- 266,327 ----
---------- ---------- ---------- ----------
Balance at end of period............................... ----- 109,898 ---- 109,898
---------- ---------- ---------- ----------
Total Reserve.......................................... $1,393,652 $1,400,995 $1,393,652 $1,400,995
========== ========== ========== ==========
</TABLE>
The Company continually reviews its delinquency position, underwriting and
appraisal procedures, charge-off experience and current real estate market
conditions with respect to its entire loan portfolio. While management believes
it uses the best information available in establishing the allowance for loan
losses, future adjustments may be necessary if economic conditions differ
substantially from the assumptions used in making the evaluation.
Deposits and Other Borrowings
- -----------------------------
Total deposits increased $5,178,041 during the six months ended June 30, 1999,
from $104,371,928 at December 31, 1998, to $109,549,969 at June 30, 1999. During
the six months ended June 30, 1999, demand, savings and money market deposits
increased $6,258,675 while time deposits decreased $1,080,634. Included in the
decrease of time deposits was a $700,000 withdrawal by a single municipal
depositor from a short-term certificate of deposit. The increase in demand and
savings deposits was primarily the result of the development, delivery and
marketing of a new small business demand deposit account, cross-selling of
products, and customer concern over the recently announced merger of two major
competitors.
Securities sold under agreements to repurchase decreased $397,990 during the six
months ended June 30, 1999, to $11,857,890 from $12,255,880 at December 31,
1998. Federal Home Loan Bank advances increased $3,544,349 to $9,748,426 at June
30, 1999, from $6,204,077 at December 31, 1998. This increase was the result of
the Company's continued strategy of match funding selected loan originations.
On May 31, 1999, the Company repaid the Senior Debenture in the amount of
$2,708,777, which represented the original face value of $3,000,000, less
$291,223 in net acquired loan losses in excess of the acquired loan loss
reserve.
Results of Operations
Net Interest Income
- --------------------
Net interest income (the difference between interest earned on loans and
investments and interest paid on deposits and other borrowings) was $2,983,980
for the six months ended June 30, 1999, compared to $2,586,820 for the six
months ended June 30, 1998. This increase was the result of an increase in net
interest spread and margin as well as an increase in interest-earning assets.
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
9
<PAGE>
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. Nonaccrual loans are included in the average balances used in
calculating this table.
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------------------------
1999 1998
----------------------------------- -----------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest - earning assets:
Loans...................................... $ 89,835,475 $4,201,084 9.35% $ 78,977,414 $3,811,188 9.65%
Investment securities taxable - AFS........ 30,037,301 786,661 5.24% 30,849,364 885,877 5.74%
Investment securities taxable - HTM........ 13,269,027 363,998 5.49% 11,300,100 330,894 5.86%
Securities purchased under agreements
to resell............................... 3,790,269 74,509 3.93% 5,364,397 132,478 4.94%
Federal Home Loan Bank Stock and other..... 472,255 15,847 6.71% 685,946 18,725 5.46%
------------ ---------- ----- ------------ ---------- -----
Total interest-earning assets............... 137,404,327 5,442,099 7.92% 127,177,221 5,179,162 8.14%
---------- ----- ---------- -----
Noninterest-earning assets:
Cash and due from banks.................... 2,401,343 2,224,283
Premises and equipment..................... 2,386,403 2,446,098
Other real estate owned.................... 421,736 677,422
Allowance for loan losses.................. (1,259,705) (1,497,002)
Other assets............................... 1,322,010 1,398,100
------------ ------------
Total noninterest-earning assets............ 5, 271,787 5,248,901
------------ ------------
Total assets................................ $142,676,114 $132,426,122
============ ============
Interest - bearing liabilities:
Deposits:
Interest-bearing demand and NOW
deposits............................... $ 3,457,562 $ 25,204 1.46% $ 3,742,089 $ 36,198 1.93%
Savings deposits......................... 17,843,570 188,545 2.11% 16,780,458 218,691 2.61%
Money market deposits.................... 1,510,307 15,173 2.01% 1,224,047 14,655 2.39%
Time deposits............................ 65,537,310 1,628,718 4.97% 65,242,966 1,801,037 5.52%
Securities sold under agreements to
repurchase............................. 12,043,802 300,511 4.99% 12,772,634 353,348 5.53%
Federal Home Loan Bank advances............. 7,639,702 215,465 5.64% 1,249,937 39,267 6.28%
Senior debenture............................ 2,428,590 84,503 6.96% 2,983,450 129,146 8.66%
------------ ---------- ----- ------------ ---------- -----
Total interest-bearing liabilities.......... 110,460,843 2,458,119 4.45% 103,995,581 2,592,342 4.99%
---------- ----- ---------- -----
Noninterest-bearing liabilities:
Noninterest-bearing deposits............... 16,275,856 13,177,883
Other liabilities.......................... 1,278,526 1,308,601
------------ ------------
Total noninterest-bearing liabilities....... 17,554,382 14,486,484
Stockholders' equity........................ 14,660,889 13,944,057
------------ ------------
Total liabilities and stockholders' equity.. $142,676,114 $132,426,122
============ ============
Net interest income......................... $2,983,980 $2,586,820
========== ==========
Net interest spread......................... 3.47% 3.16%
===== =====
Net interest margin......................... 4.34% 4.07%
===== =====
</TABLE>
10
<PAGE>
Total interest income for the three months ended June 30, 1999, was $2,739,118,
compared to $2,665,204 for the same three month period of the prior year. This
increase of $73,914 or 2.77% was primarily the result of a $5.9 million increase
in quarterly average interest-earning assets during the second quarter of 1999
over the second quarter of 1998. Average loans outstanding increased $10.4
million funded by a $3.1 million increase in average retail deposits; a $3.3
million increase in wholesale sources; and nearly $4.0 million from the lower
yielding investment portfolio. The increase in quarterly average earning assets
more than offset the reduction in earning asset yields which declined 12 basis
points to 7.95% for the three months ended June 30, 1999, from 8.07% for the
three months ended June 30, 1998. Total interest income for the six months
ended June 30, 1999, was $5,442,099, compared to $5,179,162 for the six months
ended June 30, 1998. This increase of $262,937 or 5.08% was largely the result
of a $10.2 million increase in average interest- earning assets, all of which
took place in the loan portfolio which grew an average of $10.8 million, or
13.7%. The yield on interest-earning assets declined 22 basis points to 7.92%
for the six months ended June 30, 1999, from 8.14% for the same six month period
of 1998. This decline is primarily a reflection of a lower interest rate
environment. In terms of rate/volume, the decline in rates reduced interest
income by approximately $240,000; while the increase in volume contributed
approximately $503,000 in interest income.
Total interest expense for the three months ended June 30, 1999, was $1,225,154,
compared to $1,342,788 for the same three month period of the prior year. This
decrease of $117,634, or 8.76% was primarily the result of a lower interest
rate environment which reduced the Company's cost of funds 53 basis point to
4.44% for the three months ended June 30, 1999, from 4.97% for the same three
month period of the prior year. For the six months ended June 30,1999, total
interest expense was $2,458,119, as compared to $2,592,342 for the same six
month period of 1998. Although average interest-bearing liabilities increased
$6.5 million, the decline in interest expense was attributable to deposit
pricing in a declining interest rate environment which reduced the Company's
cost of funds by 54 basis points to 4.45% for the six months ended June 30,
1999, from 4.99% for the same six month period of 1998. In terms of
rate/volume, the decline in rates reduced interest expense nearly $296,000,
while the increase in total interest-bearing liabilities caused an increase of
approximately $162,000 in interest expense.
For the three months ended June 30,1999, net interest income amounted to
$1,513,964, an increase of $191,548, or 14.48% over net interest income of
$1,322,416 for the same three month period of 1998. For the six months ended
June 30,1999, net interest income amounted to $2,983,980, compared to
$2,586,820, or an increase of $397,160, or 15.35% over the same six month period
of 1998. Changes in rates accounted for nearly $57,000 of this increase, while
balance sheet growth or volume contributed approximately $340,000. Overall, the
Company's net interest margin improved to 4.34% for the six months ended June
30, 1999, from 4.07% for the first six months of 1998.
Provision for Loan Losses
- -------------------------
The provision for loan losses totaled $50,000 for the three months ended June
30, 1999, and $75,000 for the three months ended June 30, 1998. For the six
months ended June 30, 1999 and 1998, the provision for loan losses amounted to
$125,000. The decrease in the provision for the three months ended June 30,
1999, as compared to the same period of the prior year is the result of
improvement in asset quality reflected by decreases in nonperforming loans and
nonperforming assets, as well as a decrease in net loan charge-offs to average
loans outstanding.
Noninterest Income
- ------------------
Total noninterest income increased $13,705 to $167,831 for the three months
ended June 30, 1999, from $154,126 for the three months ended June 30, 1998.
For the six months ended June 30, 1999 and 1998, noninterest income increased
$77,659 to $385,668 from $308,009. For both the three month and six month
reporting period, the increases were attributable to an increase in gains on the
sale of the guaranteed portion of Small Business Administration ("SBA") loans.
Noninterest Expense
- -------------------
Total noninterest expense amounted to $868,683 and $864,294 for the three months
ended June 30, 1999 and 1998, respectively. Excluding the nonrecurring
transactions relating to the gain on OREO sale and the write-off of a long-lived
asset, noninterest expense would have amounted to $961,773 for the three months
ended June 30, 1999, or an increase of
11
<PAGE>
$97,479, or 11.28%. For the six months ended June 30, 1999 and 1998, noninterest
expense was $1,831,537 and $1,704,581, respectively. Excluding the nonrecurring
transactions, noninterest expense would have totaled $1,924,627 for the six
months ended June 30, 1999, or an increase of $220,046, or 12.91%. For both the
three month and six month periods ended June 30, 1999, the increases in overhead
costs are primarily the result of (i) higher salaries and wages associated with
filling additional staff positions, and across-the-board pay increases, (ii)
higher benefit costs, (iii) technology enhancements resulting in increased
computer servicing costs, (iv) increases in legal and professional fees, and (v)
higher marketing, advertising and business development costs.
Income Taxes
- ------------
Income taxes for the three months ended June 30, 1999, were $274,499 or 36.0%
of pretax income, compared to $183,371 or 34.1% of pretax income for the three
months ended June 30, 1998. For the six months ended June 30, 1999 and 1998,
income taxes were $517,039 and $374,553, respectively, or 36.6% and 35.2% of
pretax income, respectively. The Company's combined federal and state (net of
federal benefit) statutory income tax rate is 39.9%. The Company's effective
combined federal and state tax rate was lower than the statutory rate primarily
due to the exclusion, from state taxable income, of interest income on U.S.
Treasury obligations and certain government agency debt securities. The higher
effective tax rates in 1999 were primarily due to proportionately less income
favorably taxed for state income tax purposes.
Capital Adequacy
- ----------------
The FDIC and the Federal Reserve Board have established guidelines with respect
to the maintenance of appropriate levels of capital by both the Bank and the
Company.
Set forth below is a summary of FDIC and Federal Reserve Board capital
requirements, and the Company's and the Bank's capital ratios as of June 30,
1999:
<TABLE>
<CAPTION>
Regulatory
Minimum (2) Actual
----------- ------
<S> <C> <C>
The Company (1)
Risk-based:
Tier 1................... 4.00% 16.49%
Totals................... 8.00 17.75
Leverage..................... 3.00 10.50
The Bank
Risk-based:
Tier 1................... 4.00% 15.80%
Totals................... 8.00 17.06
Leverage..................... 3.00 10.14
</TABLE>
(1) The regulatory capital guidelines with respect to bank holding companies
are not applicable unless the bank holding company has either consolidated
assets in excess of $150 million or either: (i) engages in any bank
activity involving significant leverage; or (ii) has a significant amount
of outstanding debt that is held by the general public. Otherwise, the
Federal Reserve Board applies its capital adequacy requirements on a "bank
only" basis.
(2) The 3% regulatory minimum leverage ratio applies only to certain highly-
rated banks. Other institutions are subject to higher requirements.
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.
12
<PAGE>
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 March 31, 1999, the most recent date for which this information is available,
the Company's one year static gap position was a negative $11,880,000 or 8.3% 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 March 31, 1999, the Company's
earnings-at-risk under a +/-200 basis point interest rate shock test measured a
negative 4.2% in a worst case scenario. Under a similar test, the Company's
equity-at-risk measured a negative 10.3% of market value of equity at March 31,
1999. At March 31, 1999, 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, 1999, cash and due from banks, securities purchased under agreements
to resell, and short-term investments (unpledged and maturing within one year)
amounted to $20.2 million, or 13.6% of total assets. Management is responsible
for establishing and monitoring liquidity targets as well as strategies and
tactics to meet these targets. Through membership in the Federal Home Loan Bank
of Boston (FHLB), the Company has access to both short and long-term borrowings
of nearly $40.0 million, which could assist the Company in meeting its liquidity
needs and funding its asset mix. At June 30, 1999, the Company held state and
municipal demand deposits of $1.3 million which it considered highly volatile.
Nonetheless, the Company believes that there are no adverse trends in the
Company's liquidity or capital reserves, and the Company believes that it
maintains adequate liquidity to meet its commitments.
The Company is cognizant of the special liquidity demands posed by the Year 2000
issue. Liquidity plans have been developed to ensure adequate liquidity on hand
and available should abnormal demands result from the Year 2000 issue. Refer to
the discussion below regarding Year 2000 compliance.
Year 2000 Compliance
- --------------------
The efficient operation of the Company's business is highly dependent on its
computer software programs and operating systems. Virtually all of these
programs and systems are furnished, supported and maintained by correspondent
institutions, computer service and system providers, and software vendors. As
the year 2000 approaches, a critical business issue has emerged regarding how
existing application software programs and operating systems can accommodate
this date value. As a result, the year 1999 could be the maximum date value
these systems will be able to accurately process. The Company has adopted a Year
2000 Plan which calls for completion of a risk assessment, identification,
reprogramming and testing of all programs and systems. As of June 30, 1999, the
Company completed the risk assessment, identification, reprogramming and testing
phase of the Year 2000 Plan. With the exception of an item processing software
application which is scheduled for testing in August 1999, all programs and
systems have been successfully tested for year 2000.
The Company' s Board of Directors plays a very active role in the Year 2000
compliance effort. The Board has approved the Year 2000 Plan and receives
monthly status reports from members of the project team. The FDIC has also
played a very active role and has visited the Company on two occasions to
examine the Company's progress.
13
<PAGE>
In confronting the Year 2000 problem, the Company faces potential risks to its
and the Bank's operations. As stated above, the Company purchases substantially
all of its software from third parties who face the same Year 2000 challenge as
the Company. In addition, the Company relies almost exclusively on other
companies for the functioning of its automated system. Thus, the Company's
operations could be adversely affected if the operations of these third parties
are adversely affected by the Year 2000 problem. Included among these risks
faced by the Company is the risk that the Year 2000 date change may result in
the inability to process and underwrite loan applications, to credit deposits
and withdrawals from customer accounts, to credit loan payments or track
delinquencies, to properly reconcile and record daily activity or to engage in
similar normal banking activities. Additionally, if those commercial loan
customers of the Bank whose operations depend heavily on computers and computer
software experience Year 2000 compliance problems and suffer adverse effects
with respect to their own operations, their ability to meet their obligations to
the Bank could be adversely affected. This could force the Bank to increase its
provision for loan losses or take more aggressive collection actions,
potentially impacting the Company's earnings. Furthermore, the Bank faces the
risk that in light of potential uncertainty as to the availability of their
funds after the date change and a decrease in interest rates, the Bank's deposit
customers could withdraw their funds, causing the Bank to experience deposit
run-off prior to the Year 2000 date change. This potential deposit contraction
could make it necessary for the Company to change its sources of funding which
could materially affect the Company's earnings. Moreover, to the extent that
the risks posed by the Year 2000 problem are pervasive in data processing and
transmission and communications services worldwide, the Company cannot predict
with any certainty that its operations will remain materially unaffected after
January 1, 2000, or on dates preceding this date at which time post-January 1,
2000 dates become significant within the Bank's systems. Finally, to the extent
that certain utility and communication services utilized by the Company face
Year 2000 problems, the Company's operations could be disrupted.
The Company is in constant communication with its outside vendors, with whom it
is reliant, to ensure that their timetable and progress is consistent with that
of the Company. The Company has also communicated with significant borrowers
and mission critical vendors to determine the status of their Year 2000
compliance efforts. The Company has also kept the Bank's depositors informed of
its efforts. The Company has incorporated a Business Continuity or Contingency
Plan into the Year 2000 Plan. The Contingency Plan, which is a supplement to
the Company's Disaster Recovery Plan, calls for a conversion to another core
system provider in the event of a system failure during the remediation effort.
If the failure occurs on or after January 1, 2000, the Company will convert to a
manual system until the computerized system is remedied. The Company believes
that a major system failure is highly unlikely, but limited exceptions across
its core applications may occur. The Company does not anticipate that the
remedial or systems' failure costs incurred in connection with Year 2000
compliance will be material to its financial condition or results of operations.
The discussion above contains certain forward-looking statements. The
costs of the Year 2000 conversion, the date which the Company has set to
complete its Year 2000 project and statements about anticipated compliance are
based on the Company's current estimates and are subject to various
uncertainties that could cause actual results to differ materially from the
Company's expectations. Such uncertainties include, among others, the success
of the Company in identifying systems that are not Year 2000 compliant, the
nature and amount of programming required to upgrade or replace each of the
affected systems, the availability of qualified personnel, consultants and other
resources, and the success of the Year 2000 compliance efforts of others.
Readers are cautioned not to place undue reliance on these forward looking
statements.
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.
14
<PAGE>
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 1999 Annual Meeting of Stockholders on May 12, 1999. The
meeting was held for the purpose of: (i) electing Raymond F. Bernardo, Joseph
A. Keough, Esq., Peter L. Mathieu, Jr., M.D. and Fred J. Simon, Jr., Directors
of the Company for a three year term expiring at the Annual Meeting in the year
2002 and (ii) ratifying the selection of Arthur Andersen LLP as the independent
public accountants for the Company for the fiscal year ending December 31, 1999.
At the time of the 1999 Annual Meeting there were 1,231,241 shares entitled to
vote. Shares voted either in person or by proxy totaled 1,005,495 shares. The
results of the votes cast were as follows:
<TABLE>
<CAPTION>
For Against Abstention
----- ------- ----------
<S> <C> <C> <C>
(i) To elect Directors of the Company for three years:
Raymond F. Bernardo 962,457 43,038
Joseph A. Keough, Esq. 962,535 42,960
Peter L. Mathieu, Jr., M.D. 962,535 42,960
Fred J. Simon, Jr. 962,535 42,960
(ii) To select Arthur Andersen LLP as independent
public accountants for the Company for the 1,001,195 3,200 1,000
fiscal year ending December 31, 1999
</TABLE>
In addition, upon completion of the Annual Meeting the Director's terms continue
as follows:
Name Term to Expire in:
---- ------------------
Artin Coloian, Esq. 2000
John Nazarian, Ph.D. 2000
William P. Shields 2000
Patrick J. Shanahan, Jr. 2001
Gary R. Alger 2001
Joseph V. Mega 2001
Item 5 - Other Information
Not Applicable
15
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit Number Description
-------------- -----------
11 Computation of Per Share Earnings
27 Financial Data Schedule
(B) Reports on Form 8-K
None
16
<PAGE>
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.
July 30, 1999 /s/ Patrick J. Shanahan, Jr.
- ----------------------------- -----------------------------------
Date Patrick J. Shanahan, Jr.
Chairman, President and Chief
Executive Officer
July 30, 1999 /s/ John A. Macomber
- ----------------------------- -----------------------------------
Date John A. Macomber
Vice President, Treasurer
and Chief Financial Officer
17
<PAGE>
Exhibit 11 - Computation of per share earnings
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 1,235,136 1,261,241 1,231,241 1,261,241
Weighted average equivalent shares ---- ---- ---- ----
---------- ---------- ---------- ----------
Weighted average common and common stock
equivalent shares outstanding 1,235,136 1,261,241 1,231,241 1,261,241
========== ========== ========== ==========
Net income $ 896,072 $ 690,695 $ 488,613 $ 353,877
========== ========== ========== ==========
Earnings per share:
Basic $ 0.73 $ 0.55 $ 0.40 $ 0.28
========== ========== ========== ==========
Diluted $ 0.73 $ 0.55 $ 0.40 $ 0.28
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,048,444
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,141,255
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 31,168,218
<INVESTMENTS-CARRYING> 13,798,950
<INVESTMENTS-MARKET> 13,636,108
<LOANS> 90,765,830
<ALLOWANCE> 1,393,652
<TOTAL-ASSETS> 147,890,318
<DEPOSITS> 109,549,969
<SHORT-TERM> 11,857,890
<LIABILITIES-OTHER> 1,764,708
<LONG-TERM> 9,748,426
0
0
<COMMON> 1,328,041
<OTHER-SE> 13,641,284
<TOTAL-LIABILITIES-AND-EQUITY> 147,890,318
<INTEREST-LOAN> 2,122,507
<INTEREST-INVEST> 616,611
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,739,118
<INTEREST-DEPOSIT> 925,849
<INTEREST-EXPENSE> 1,225,154
<INTEREST-INCOME-NET> 1,513,964
<LOAN-LOSSES> 50,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 868,683
<INCOME-PRETAX> 763,112
<INCOME-PRE-EXTRAORDINARY> 763,112
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 488,613
<EPS-BASIC> 0.40
<EPS-DILUTED> 0.40
<YIELD-ACTUAL> 4.39
<LOANS-NON> 126,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,411,605
<ALLOWANCE-OPEN> 1,318,374
<CHARGE-OFFS> 0
<RECOVERIES> 25,278
<ALLOWANCE-CLOSE> 1,393,652
<ALLOWANCE-DOMESTIC> 1,393,652
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
