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 March 31, 1996
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 April 30, 1996)
FORM 10-QSB
FIRST FINANCIAL CORPORATION
MARCH 31, 1996
INDEX
Part I Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheet as of 1
March 31, 1996
Consolidated Statements of Income 2
for the Three-Months ended
March 31, 1996 and 1995
Consolidated Statements of Cash
Flow for the Three-Months
ended March 31, 1996 and 1995 3
Notes to Consolidated Financial
Statements 4-5
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial 5-6
Condition
Part II Other Information
Item 1. Legal Proceedings 6
Item 6. Exhibits and Reports on Form
8-K 7
4
First Financial Corporation
Consolidated Balance Sheet
March 31, 1996
(Unaudited)
Assets
------
Cash and cash equivalents $699,960
Restricted cash 327,329
Accounts receivable 1,121,258
Marketable investment securities 311,712
Real estate held for investment,at cost 474,074
Mortgage loans 3,293,621
Investment in and advances to
affiliated companies 366,927
Property and equipment 892,628
Deferred tax benefit 297,909
Other assets 712,163
Total Assets $8,497,581
============
Liabilities and Stockholders' Equity
--------------------------------------
Notes payable $310,000
Estimated reserve for losses under servicing
agreements 1,763,283
Other liabilities 1,668,585
Total Liabilities 3,741,868
Minority interest 1,772,010
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 2,499,310
3,019,012
Less:Treasury stock - at cost (35,309)
Net unrealized loss on marketable
investment securities 0
Total Stockholders' Equity 2,983,703
Total Liabilities and Stockholders' Equity $8,497,581
============
See accompanying notes to consolidated financial statements.
-1-
<TABLE>
First Financial Corporation
Consolidated Statements of Income
Three months ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Loan administration $784,785 $539,884
Interest income 271,535 195,940
Other income 214,764 149,525
Total revenues 1,271,084 885,349
Expenses:
Salaries and related expenses 666,021 589,816
Interest expense 158,737 82,566
Provision for losses under servicing
agreements (123,000) (201,000)
Other operating expenses 554,261 436,616
Total expenses 1,256,019 907,998
Income before income taxes,
minority interest, and equity in earnings
(loss) of affiliates 15,065 (22,649)
Federal income taxes 0 0
Income before minority interest 15,065 (22,649)
Minority interest in net loss (income) 34,217 47,960
Income before equity in earnings
(loss) of affiliates 49,282 25,311
Equity in earnings (loss) of affiliates 2,848 6,662
Net income $52,130 $31,973
========= =========
Income per common share $ .30 $ .18
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
-2-
<TABLE>
First Financial Corporation
Consolidated Statement of Cash Flows
<CAPTION>
(Unaudited)
Three Months Ended March 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $52,129 $31,973
Adjustments to reconcile net income(loss) to
net cash used by operating activities:
Depreciation 49,797 48,931
Provision for losses under servicing agreements (123,000) (201,000)
Equity in (income) loss of affiliates (2,848) (6,662)
Realized losses on marketable investment securities 0 0
Net (increase) decrease in accounts receivable (7,553)
Net (increase) decrease in other assets 104,646 (163,926)
Net increase (decrease) in other liabilities (366,367) (3,360)
Increase in minority interest (34,219) (47,961)
(Increase) decrease in restricted cash used
in operating activities - net (199) (176)
Increase in mortgage loans - net 0 0
Mortgage loans funded (36,300,205) (18,432,014)
Mortgage loans sold 38,580,768 17,090,126
Increase in mortgage loans participations sold (2,204,408) 1,227,762
Other 13,076 (2,187)
Net cash provided (used) for operating activitie (238,383) (458,494)
Cash flows from investing activities:
Proceeds from sale of marketable investment securitie 0 0
Purchases of marketable investment securities 0 0
Purchase of property and equipment (7,697) (13,583)
Principal collections on mortgage loans 251,822 199,733
Amortization of discount on mortgage loans purchased (12,973) (19,279)
(Advances to) repayments from affiliates 12,500 0
Net cash provided (used) for investing activitie 243,652 166,871
Cash flows from financing activities:
Payment on notes payable (61,000) 12,366
Net cash used for financing activities (61,000) 12,366
Net increase (decrease) in cash and cash equivalents (55,731) (279,257)
Cash and cash equivalents at beginning of year 755,691 723,401
Cash and cash equivalents at end of period $699,960 $444,144
========= =========
Supplemental Disclosure of Cash Flow Information
Interest Paid $210,271 $66,809
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
-3-
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 adjustment 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 three-month
period ended March 31, 1996 are not necessarily indicative of the
results to be expected for the full year.
Certain reclassifications 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 $5,900,000 in available net operating loss carryforward
benefits for financial statement purposes to offset future income, if
any.
4 - Contingencies
Substantially all of the conventional pools of manufactured home loans
serviced by the Company, approximately $6,100,000 at March 31, 1996,
were sold to investors with recourse. The recourse provisions
typically require the Company to repurchase delinquent loans at the
unpaid balances plus accrued interest, or replace delinquent loans with
another loan which is current. Further, several of the agreements
require the Company to establish and maintain cash reserve accounts.
Deposits are periodically made to the accounts equal to a specified
percent of the outstanding loans. The accounts may be used to cover
deficiencies from foreclosure and liquidation of delinquent pooled
mortgage loans. Such cash reserve accounts totaled $27,330 and are
included in restricted cash at March 31, 1996.
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
The Company had a net income of $52,130 for the quarter ended March 31,
1996 compared to net income of $31,973 for the same period in 1995.
Loan administration revenues were $784,785 for the first quarter for
1996 compared to $539,884 for the first quarter of 1995. 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 quarter ended March 31, 1996 amounted to
$271,535 compared to $195,940 for the same period in 1995. The
increase in interest income is primarily due to the increased volume of
new residential mortgage loans originated during the quarter ended
March 31, 1996 as compared to the same period in 1995 as discussed
above. First Preference Mortgage Corp. earns interest from the date
the mortgage loan is closed until the date the mortgage loan is sold to
investors.
Other income for the quarter ended March 31, 1996 amounted to $214,764
as compared to $149,525 for the same period in 1995. This increase is
primarily due to increased consulting fees earned by the Company for
providing accounting services. During the first quarter of 1996, the
Company increased the fees it charges for providing accounting services
to compensate for the Company's increasing costs
Salaries and related expenses increased to $666,021 for the three
months ended March 31, 1996, compared to $589,816 for the three months
ended March 31, 1995. 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 quarter ended March 31, 1996, interest expense amounted to
$158,737 compared to $82,566 for the same period in 1995. 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. During the quarter ended March 31, 1996,
First Preference Mortgage Corp. originated approximately $36.3 million
in residential mortgage loans compared to $18.4 million during the same
period in 1995.
During the quarter ended March 31, 1996, the provision for losses under
servicing agreements was ($123,000) resulting in a balance in the
reserve for losses under servicing agreements of $1,763,283 at March
31, 1996. For the quarter ended March 31, 1995, the Company had a
negative provision for losses under servicing agreements of ($201,000)
which resulted in a balance in the reserve for losses under servicing
agreements of $2,472,445 at March 31, 1995. 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 three months ended March 31, 1996 were
$554,261 compared to $436,616 for the same period 1995. This increase
is primarily due to the significant increase in new residential
mortgage loan origination of First Preference Mortgage Corp.
The minority interest in the net loss of Key Group amounted to $34,217
for the quarter ended March 31, 1996. For the quarter ended March 31,
1995, the minority interest in the net loss of Key Group amounted to
$47,960. The minority interest represents the ownership of other
entities in the Key Group net income or net loss.
Financial Condition
At March 31, 1996, the Company's total assets were $8,497,581.
Included in the Company's total assets are the assets of Key Group,
LTD. which amounted to $4,837,839 at March 31, 1996. The Key Group
assets at March 31, 1996 consisted primarily of cash and cash
equivalents of $316,053, mortgage loans of $2,963,753, property and
equipment of $308,755 and accounts receivable, prepaid expenses and
other assets of $1,249,278. The minority interest in the net assets of
Key Group at March 31, 1996 amounted to $1,772,010.
On consolidated basis, cash and cash equivalents (including restricted
cash) were $1,027,289 at March 31, 1996. Included therein was cash and
cash equivalents for Key Group of $316,053 and Apex Lloyds Insurance
Company of $621,253. 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, 1995, First Preference Mortgage Corp. has a master
loan participation with three financial institutions totaling
$50,000,000, one of which in the amount of $10,000,000 expires on April
30, 1996.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in 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 March 31, 1996.
(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 May 13, 1996 /s/ David Mann
David W. Mann
President
Duly Authorized Officer and
Principal Financial Officer
Date May 13, 1996 /s/ Robert L. Harris
Robert L. Harris
Vice President and
Principal Accounting Officer
(Remainder of page purposely left blank.)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,027,289
<SECURITIES> 311,712
<RECEIVABLES> 1,121,258
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,897,998
<DEPRECIATION> 1,005,370
<TOTAL-ASSETS> 8,497,581
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 2,982,703
<TOTAL-LIABILITY-AND-EQUITY> 8,497,581
<SALES> 0
<TOTAL-REVENUES> 1,271,084
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,256,019
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,065
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,130
<EPS-PRIMARY> .3
<EPS-DILUTED> .3
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