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 September 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 November 15,
1995)
FORM 10-QSB
FIRST FINANCIAL CORPORATION
September 30, 1995
INDEX
Part I Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheet as of 1
September 30, 1995
Consolidated Statements of Income 2
for the Three-Months and Nine Months
ended September 30, 1995 and 1994
Consolidated Statements of Cash
Flow for the Nine-Months
ended September 30, 1995 and 1994 3
Notes to Consolidated Financial 4-5
Statements
Item 2. Management's Discussion and Analysis 5-7
of Results of Operations and Financial
Condition
Part II Other Information
Item 1. Legal Proceedings 7
Item 6. Exhibits and Reports on Form
8-K 8
<TABLE>
First Financial Corporation
Consolidated Balance Sheet
September 30, 1995
(Unaudited)
<CAPTION>
Assets
------
<S> <C>
Cash and cash equivalents $1,034,744
Restricted cash 326,954
Marketable investment securities 309,125
Real estate held for investment,at cost 474,074
Mortgage loans 3,475,843
Investment in and advances to
affiliated companies 396,398
Property and equipment 917,271
Other assets 2,305,333
------------
Total Assets $9,239,742
============
Liabilities and Stockholders' Equity
--------------------------------------
Notes payable $585,000
Estimated reserve for losses under servicing
agreements 2,174,931
Other liabilities 1,815,024
------------
Total Liabilities 4,574,955
------------
Minority interest 1,800,860
------------
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
Additional paid-in capital 518,702
Retained earnings 2,389,101
------------
2,908,803
Less:Treasury stock - at cost (35,309)
Net unrealized loss on marketable
investment securities (9,567)
------------
Total Stockholders' Equity 2,863,927
------------
Total Liabilities and Stockholders' Equity $9,239,742
============
See accompanying notes to consolidated financial statements.
</TABLE>
-1-
<TABLE>
First Financial Corporation
Consolidated Statements of Income
Three months and Nine months ended September 30,1995 and 1994
(Unaudited)
<CAPTION>
Three mont Nine months ended
Septe September 30,
--------------------------------------
1994 1995 1994 1995
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues:
Loan administration $503,091 $989,204 $1,025,012 $2,396,402
Interest income 207,432 482,132 649,959 1,011,108
Other income 187,324 175,968 467,719 455,247
-------- -------- -------- -----------
Total Revenues 897,847 1,647,304 2,142,690 3,862,757
-------- -------- -------- -----------
Expenses:
Salaries and related expenses 542,936 778,693 1,429,717 2,064,535
Interest expense 91,191 433,441 171,183 772,605
Provision for losses under servicing
agreements (148,000) (153,000) (490,000) (498,000)
Other operating expenses 427,311 545,444 1,054,807 1,467,661
-------- -------- -------- -----------
Total Expenses 913,438 1,604,578 2,165,707 3,806,801
-------- -------- -------- -----------
Income before income taxes,
minority interest, equity in earnings
(loss) of affiliates and extraordin (15,591) 42,726 (23,017) 55,956
Federal income taxes (33,934) 0 (92,910) 0
-------- -------- -------- -----------
Income before minority interest 18,343 42,726 69,893 55,956
Minority interest in net loss (income) 12,404 -117 31,604 59,712
-------- -------- -------- -----------
Income before equity in earnings (loss) of
affiliates and extraordinary item 30,747 42,609 101,497 115,668
Equity in earnings (loss) of affiliates (11,624) 11,972 (11,430) 60,701
-------- -------- -------- -----------
Income before extraordinary item 19,123 54,581 90,067 176,369
Utilization of tax loss carryforward 0 0 0 0
-------- -------- -------- -----------
Net income $19,123 $54,581 $90,067 $176,369
======== ======== ======== ===========
Income Per Common Share $0.09 $0.29 $0.49 $0.96
======== ======== ======== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-2-
<TABLE>
First Financial Corporation
Consolidated Statement of Cash Flows
<CAPTION>
(Unaudited)
Nine Months Ended Se
--------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $176,369 $90,067
Adjustments to reconcile net income(loss) to
net cash used by operating activities:
Depreciation 147,258 124,819
Provision for losses under servicing agreements (498,000) (490,000)
Equity in (income) loss of affiliates (60,701) 11,430
Realized losses on marketable investment securities 0 3,709
Net (increase) decrease in other assets (668,384) (314,857)
Net increase (decrease) in other liabilities 910,016 67,903
Increase in minority interest (59,713) (31,604)
(Increase) decrease in restricted cash used
in operating activities - net (535) (486)
Increase in mortgage loans - net 0 0
Mortgage loans funded (129,554,746) (34,920,379)
Mortgage loans sold 119,654,783 33,275,992
Increase in mortgage loans participations sold 9,756,926 2,030,093
Other (6,937) (29,312)
-------- --------
Net cash provided (used) for operating activities (203,664) (182,625)
-------- --------
Cash flows from investing activities:
Proceeds from sale of marketable investment securities 0 637,375
Purchases of marketable investment securities (50,000) 0
Purchase of property and equipment (41,595) (256,181)
Principal collections on mortgage loans 650,568 868,480
Amortization of discount on mortgage loans purchased (56,332) (116,538)
(Advances to) repayments from affiliates 0 0
-------- --------
Net cash provided (used) for investing activities 502,641 1,133,136
-------- --------
Cash flows from financing activities:
Payment on notes payable 12,366 (916,007)
-------- --------
Net cash used for financing activities 12,366 (916,007)
-------- --------
Net increase (decrease) in cash and cash equivalents 311,343 34,504
Cash and cash equivalents at beginning of year 723,401 561,121
-------- --------
Cash and cash equivalents at end of period $1,034,744 $595,625
======== =======
Supplemental Disclosure
of Cash Flow Information
Interest Paid $700,849 $172,545
======== ========
</TABLE>
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 nine-
month period ended September 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 $176,369 for the nine months
ended September 30, 1995 compared to net income of $90,067 for
the same period in 1994. Loan administration revenues were
$2,396,402 for the first nine months of 1995 compared to
$1,025,012 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. During the nine months ended September
30, 1995, originations of new residential mortgage loans amounted
to approximately $129.5 million compared to approximately $34.9
million during the same period in 1994.
Interest income for the nine months ended September 30, 1995
amounted to $1,011,108 compared to $649,959 for the nine months
ended September 30, 1994. The increase in interest income is
primarily due to the increased volume of new residential mortgage
loans originated and held for sale by the Company.
Other income for the nine months ended September 30, 1995
amounted to $455,247 as compared to $467,719 for the same period
in 1994.
Salaries and related expenses for the three months and nine
months ended September 30, 1995 were $778,693 and $2,064,535,
respectively compared to $542,936 and $1,429,717 for the same
periods in 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 nine months ended September 30, 1995, interest expense
amounted to $772,605 compared to $171,183 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. For the
period ended September 30, 1995, the Company's interest expense
on credit lines increased to $732,450 from $110,789 for the same
period in 1994.
During the nine months ended September 30, 1995, the provision
for losses under servicing agreements was ($498,000) resulting in
a balance in the reserve for losses under servicing agreements of
$2,174,931 at September 30, 1995. For the nine months ended
September 30, 1994, the Company had a negative provision for
losses under servicing agreements of ($490,000) which resulted in
a balance in the reserve for losses under servicing agreements of
$2,945,942 at September 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.
For the three months and nine months ended September 30, 1995,
other operating expenses were $545,444 and $1,467,661 compared
to $427,311 and $1,054,807 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
$59,712 for the nine months ended September 30, 1995. For the
nine months ended September 30, 1994, the minority interest in
the net loss of Key Group amounted to $31,604. The minority
interest represents the ownership of other entities in the Key
Group net income or net loss.
The consolidated statements of income reflect equity in net
income of affiliates of $60,701 for the nine months ended
September 30, 1995, compared to a equity in net loss of $11,430
for the nine months ended September 30, 1994. The net income of
affiliates for the period ended September 30, 1995, is primarily
due to gains on real estate sales realized by Vidor, LTD., a
limited partnership in which the Company has a 24.99% interest.
Financial Condition
At September 30, 1995, the Company's total assets were
$9,239,742. Included in the Company's total assets are the
assets of Key Group, LTD. which amounted to $5,633,003 at
September 30, 1995. The Key Group assets at September 30, 1995
consisted primarily of cash and cash equivalents of $799,359,
accounts receivable of $821,685, mortgage loans of $3,062,057,
property and equipment of $317,167 and prepaid expenses and other
assets of $632,661. The minority interest in the net assets of
Key Group at September 30, 1995 amounted to $1,800,860.
On consolidated basis, cash and cash equivalents (including
restricted cash) were $1,361,698 at September 30, 1995. Included
therein was cash and cash equivalents for Key Group of $799,359
and Apex Lloyds Insurance Company of $532,139. 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 two financial institutions
totaling $25,000,000--$15,000,000 expires in December 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 6. Exhibits and Reports on Form 8-K
No Form 8-K was filed during the quarter ended September 30,
1995.
(Remainder of page purposely left blank.)
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 November 14, 1995
David W. Mann
President
Duly Authorized Officer and
Principal Financial Officer
Date November 14, 1995
Robert L. Harris
Vice President and Principal
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,361,698
<SECURITIES> 309,125
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,829,361
<DEPRECIATION> 912,090
<TOTAL-ASSETS> 9,239,742
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,000
0
0
<OTHER-SE> 2,862,927
<TOTAL-LIABILITY-AND-EQUITY> 9,239,742
<SALES> 0
<TOTAL-REVENUES> 3,862,757
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,806,801
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 55,956
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176,369
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
</TABLE>
