U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1995 Commission file number 0-5559
FIRST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Texas 74-1502313
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
800 Washington Avenue, Waco, Texas 76701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817)757-2424
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 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.
Yes X No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Common Stock, No Par Value 173,528
(Class) (Outstanding at August 15, 1995)
<PAGE>
FORM 10-QSB
FIRST FINANCIAL CORPORATION
June 30, 1995
INDEX
Part I Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheet as of 1
June 30, 1995
Consolidated Statements of Income 2
for the Three-Months and Six Months
ended June 30, 1995 and 1994
Consolidated Statements of Cash
Flow for the Six-Months
ended June 30, 1995 and 1994 3
Notes to Consolidated Financial
Statements 4-5
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial 5-7
Condition
Part II Other Information
Item 1. Legal Proceedings 7
Item 4. Submission of Matters to a Vote
of Security Holders 7-8
Item 6. Exhibits and Reports on Form
8-K 8
<PAGE>
<TABLE>
First Financial Corporation
Consolidated Balance Sheet
June 30, 1995
(Unaudited)
<CAPTION>
Assets
------
<S> <C>
Cash and cash equivalents $431,316
Restricted cash 326,774
Marketable investment securities 300,310
Real estate held for investment,at cost 474,074
Mortgage loans 3,945,524
Investment in and advances to
affiliated companies 384,426
Property and equipment 950,293
Other assets 2,105,725
------------
Total Assets $8,918,442
============
Liabilities and Stockholders' Equity
--------------------------------------
Notes payable $585,000
Estimated reserve for losses under servicing
agreements 2,327,931
Other liabilities 1,404,165
------------
Total Liabilities 4,317,096
------------
Minority interest 1,800,743
------------
Stockholders' equity:
Common stock - no par value; authorized
500,000 shares;issued 183,750 shares,
of which 10,222 shares are held in
treasury shares 1,000
Additonal paid-in capital 518,702
Retained earnings 2,334,520
------------
2,854,222
Less:Treasury stock - at cost (35,309)
Net unrealized loss on marketable
investment securities (18,310)
------------
Total Stockholders' Equity 2,800,603
------------
Total Liabilities and Stockholders' Equity $8,918,442
============
See accompanying notes to consolidated financial statements.
</TABLE>
1
<PAGE>
<TABLE>
First Financial Corporation
Consolidated Statements of Income
Three months and Six months ended June 30,1995 and 1994
(Unaudited)
<CAPTION>
Three months ende Six months ended
June 30, June 30,
-------------------- -------------------------
1994 1995 1994 1995
<S> <C> <C> <C> <C>
Revenues:
Loan administration $294,027 $867,314 $521,921 $1,407,198
Interest income 216,654 333,036 442,527 528,976
Other income 213,628 129,754 280,395 279,279
-------- -------- -------- -----------
Total Revenues 724,309 1,330,104 1,244,843 2,215,453
-------- -------- -------- -----------
Expenses:
Salaries and related expenses 489,739 696,026 886,781 1,285,842
Interest expense 38,779 256,598 79,992 339,164
Provision for losses under servicing
agreements (181,000) (144,000) (342,000) (345,000)
Other operating expenses 337,107 485,601 627,496 922,217
-------- -------- -------- -----------
Total Expenses 684,625 1,294,225 1,252,269 2,202,223
-------- -------- -------- -----------
Income before income taxes,
minority interest, equity in earnings
(loss) of affiliates and extraordinary items 39,684 35,879 (7,426) 13,230
Federal income taxes (20,136) 0 (58,976) 0
-------- -------- -------- -----------
Income before minority interest 59,820 35,879 51,550 13,230
Minority interest in net loss (income) 13,298 11,869 19,200 59,829
-------- -------- -------- -----------
Income before equity in earnings (loss) of
affiliates and extraordinary item 73,118 47,748 70,750 73,059
Equity in earnings (loss) of affiliates (3,461) 42,067 194 48,729
-------- -------- -------- -----------
Income before extraorinary item 69,657 89,815 70,944 121,788
Utilization of tax loss carryforward 0 0 0 0
-------- -------- -------- -----------
Net income $69,657 $89,815 $70,944 $121,788
======== ======== ======== ===========
Income Per Common Share $0.37 $0.48 $0.38 $0.66
======== ======== ======== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
First Financial Corporation
Consolidated Statement of Cash Flows
<CAPTION>
(Unaudited)
Six Months Ended Jun
--------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $121,788 $70,944
Adjustments to reconcile net income(loss) to
net cash used by operating activities:
Depreciation 102,655 90,010
Provision for losses under servicing agreements (345,000) (1,227,000)
Equity in (income) loss of affiliates (48,729) (194)
Realized losses on marketable investment securities 0 942
Net (increase) decrease in other assets (471,776) (215,055)
Net increase (decrease) in other liabilities 499,157 (34,550)
Increase in minority interest (59,830) (19,200)
(Increase) decrease in restricted cash used
in operating activities - net (355) (321)
Increase in mortgage loans - net 0 0
Mortgage loans funded (66,165,656)(17,529,721)
Mortgage loans sold 50,573,203 16,763,363
Increase in mortgage loans participations sold 15,191,445 1,025,537
Other (3,866) 848,717
-------- --------
Net cash provided (used) for operating activities (606,964) (226,528)
-------- --------
Cash flows from investing activities:
Proceeds from sale of marketable investment securities 0 413,988
Purchases of marketable investment securities (50,000) 0
Purchase of property and equipment (30,014) (193,831)
Principal collections on mortgage loans 420,480 623,477
Amortization of discount on mortgage loans purchased (37,953) (85,514)
(Advances to) repayments from affiliates 0 0
-------- --------
Net cash provided (used) for investing activities 302,513 758,120
-------- --------
Cash flows from financing activities:
Payment on notes payable 12,366 (737,085)
-------- --------
Net cash used for financing activities 12,366 (737,085)
-------- --------
Net increase (decrease) in cash and cash equivalents (292,085) (205,493)
Cash and cash equivalents at beginning of year 723,401 561,121
-------- --------
Cash and cash equivalents at end of period $431,316 $355,628
======== ========
Supplemental Disclosure of Cash Flow Information
Interest Paid $217,197 $46,552
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FIRST FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 - Basis of Presentation
The financial information included herein for First
Financial Corporation, and all of its wholly owned and
majority owned subsidiaries (the "Company") is unaudited;
however, such unaudited information reflects all adjustments
which are, in management's opinion, necessary for a fair
presentation of the financial position, results of
operations and statement of cash flows for the interim
periods. Minority interest represents ownership of other
entities in the net assets and net earnings of Key Group,
Ltd. ("Key Group").
The results of operations and changes in cash flow for the
six-month period ended June 30, 1995 are not necessarily
indicative of the results to be expected for the full year.
Certain reclassification were made to prior periods to
ensure comparability with the current period.
2 - Earnings Per Share
Earnings per common share were computed by dividing net
income by the weighted average number of shares outstanding.
3 - Income Taxes
Income taxes are provided for the tax effects of
transactions reported in the financial statements and
consist of taxes currently due plus deferred taxes related
primarily to differences between the basis of the loan loss
reserve for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized
for operating losses that are available to offset future
taxable income and tax credits that are available to offset
future federal income taxes. The Company has approximately
$5,400,000 in available net operating loss carryforward
benefits for financial statement purposes to offset future
income, if any.
4 - Contingencies
As more fully discussed in the Annual Report Form 10-KSB for
the year ending December 31, 1994, the Company was
extinguished as an issurer and servicer of GNMA-MBS
Securities on September 15, 1987. GNMA may seek to recover
from the Company funds advanced by GNMA to cover collection
shortfalls on the GNMA Loan Portfolio and expenses related
thereto. Demand has been made on the Company and its
subsidiaries by GNMA for $21,129,480, with notice that
additional losses were anticipated.
The Company's management and legal counsel is not aware of
any facts which would lead them to believe that is probable
GNMA will or intends to assert or reassert any claims
against the Company. The Company's position is it has no
liability to GNMA. Legal counsel has advised the Company
that if GNMA does assert or reassert any claims, the Company
should in addition to its defense that it has no liability,
raise other defenses such as the expiration of the statute
of limitations and laches. It is not possible to determine,
at this time , the ultimate outcome of these matters and the
effects, if any, on the accompanying consolidated financial
statements since the final resolution depends on
circumstances which cannot currently be evaluated with
certainty.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
The Company had a net income of $121,788 for the six months
ended June 30, 1995 compared to net income of $70,944 for
the same period in 1994. Loan administration revenues were
$1,407,198 for the first six months of 1995 compared to
$521,921 for the same period of 1994. The increase in loan
administration revenues is primarily due to increased loan
origination and service fees from the Company's residential
mortgage loan operations.
Interest income for the six months ended June 30, 1995
amounted to $528,976 compared to $442,527 for the six months
ended June 30, 1994. The increase in interest income is
primarily due to the increased volume of new residential
mortgage loans originated by and held for sale by the
Company. During the six months ended June 30, 1995,
originations of new residential mortgage loans ammounted to
approximately $66.2 million compared to approximately $17.5
million during the same period in 1994.
Other income for the six months ended June 30, 1995
amounted to $279,279 as compared to $280,395 for the same
period in 1994.
Salaries and related expenses increased to $1,285,842 for
the six months ended June 30, 1995, compared to $886,781 for
the six months ended June 30, 1994. This increase is due to
the addition of personnel in connection with the operations
of the residential mortgage origination and servicing
activities of First Preference Mortgage Corp., a second tier
subsidiary of Key Group.
For the six months ended June 30, 1995, interest expense
amounted to $339,164 compared to $79,992 for the same period
in 1994.
During the six months ended June 30, 1995, the Company's
interest expense on its warehouse credit lines increased to
$312,746 from $34,363 for the same period in 1994. This
increase is the result of the increased utilization of the
Company's warehouse credit lines in connection with the
origination of residential mortgage loans, which as
previously discussed increased significantly during the
period.
During the six months ended June 30, 1995, the provision for
losses under servicing agreements was ($345,000) resulting
in a balance in the reserve for losses under servicing
agreements of $2,327,931 at June 30, 1995. For the six
months ended June 30, 1994, the Company had a negative
provision for losses under servicing agreements of
($342,000) which resulted in a balance in the reserve for
losses under servicing agreements of $3,087,028 at June 30,
1994. The negative provisions are due to the Company's
belief that its exposure to losses attributable to the
servicing agreements continues to decline.
Other operating expenses for the six months ended June 30,
1995 were $922,217 compared to $627,496 for the same period
1994. This increase is primarily due to the significant
increase in new residential mortgage loan originations of
First Preference Mortgage Corp.
The minority interest in the net loss of Key Group amounted
to $59,829 for the six months ended June 30, 1995. For the
six months ended June 30, 1994, the minority interest in the
net loss of Key Group amounted to $19,200. The minority
interest represents the ownership of other entities in the
Key Group net income or net loss.
Financial Condition
At June 30, 1995, the Company's total assets were
$8,918,442. Included in the Company's total assets are the
assets of Key Group, LTD. which amounted to $5,198,509 at
June 30, 1995. The Key Group assets at June 30, 1995
consisted primarily of cash and cash equivalents of $98,002
mortgage loans of $3,520,026, property and equipment of
$338,085 and prepaid expenses and other assets of $666,082.
The minority interest in the net assets of Key Group at June
30, 1995 amounted to $1,800,743.
On consolidated basis, cash and cash equivalents (including
restricted cash) were $758,090 at June 30, 1995. Included
therein was cash and cash equivalents for Key Group of
$98,002 and Apex Lloyds Insurance Company of $585,752. The
cash flow of Key Group is only available to the Company to
the extent that cash is received in the form of partnership
distributions. Key Group has paid no distributions and has
no plans to pay distributions in the foreseeable future.
The cash flow of Apex Lloyds Insurance Company is only
available to the Company as allowed by state insurance
regulations.
As more fully discussed in the Annual Report Form 10-KSB for
the year ended December 31, 1994, First Preference Mortgage
Corp. has a master loan participation with four financial
institutions totaling $35,000,000--$5,000,000 expires in
September 1995; $5,000,000 expires in October 1995;
$15,000,000 expires in November 1995; and $10,000,000
expires in April 1996.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously mentioned, the Company was extinguished as an
issurer and servicer of GNMA-MBS Securities on September 15,
1987. GNMA may seek to recover from the Company funds
advanced by GNMA to cover collection shortfalls on the GNMA
Loan Portfolio and expenses related there to. Demand has
been made on the Company and its subsidiaries by GNMA for
$21,129,480, with notice that additional losses were
anticipated.
The Company's management and legal counsel are not aware of
any facts which would lead them to believe that is probable
GNMA will or intends to assert or reassert any claims
against the Company. The Company's position is it has no
liability to GNMA. Legal counsel has advised the Company
that if GNMA does assert or reassert any claims, the
Company should in addition to its defense that is has no
liability, raise other defenses such as the expiration of
the statute of limitations and laches. It is not possible
to determine, at this time, the ultimate outcome of these
matters and the effects, if any, on the accompanying
consolidated financial statements since the final resolution
depends on circumstances which cannot currently be evaluated
with certainty.
The Company is involved in other routine litigation
incidental to its business, both as a plaintiff and a
defendant. Management of the Company, after consulting with
legal counsel, feels that liability resulting from the
litigation, if any, will no have a material effect on this
financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on May 30, 1995,
pursuant to an information statement dated April 27, 1995,
furnished by the Board of Directors to the Shareholders of
Record.
At the meeting, the following were elected to the board of
Directors: Henry Dietz, John Carl Hauser, David W. Mann,
Robert A. Mann, Walter J. Rusek, Barrett Smith, and Jackson
K. Walker.
In other matters, the shareholders approved the selection of
Pattillo, Brown, & Hll, Certified Public Accountants, as
auditors for the fiscal year ended December 31, 1995 and
ratified and approved all actions take by the Company's
directors and management during the preceding year. No
other matters were voted upon.
Item 6. Exhibits and Reports on Form 8-K
No Form 8-K was filed during the quarter ended June 30,
1995.
SIGNATURES
Pursuant to the requirements of the Securities and 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
____________________________________________________________
Date August 14, 1995 David W. Mann
David W. Mann
President
Duly Authorized Officer and
Principal Financial Officer
Date August 14,1995 Robert L. Harris
Robert L. Harris
Vice President and Principal
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 758,090
<SECURITIES> 300,310
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,817,780
<DEPRECIATION> 867,487
<TOTAL-ASSETS> 8,918,442
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,000
0
0
<OTHER-SE> 2,799,603
<TOTAL-LIABILITY-AND-EQUITY> 8,918,442
<SALES> 0
<TOTAL-REVENUES> 2,215,453
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,202,223
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,230
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,788
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
