FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FIRST FINANCIAL CORPORATION
September 30, 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999
Commission File Number 0-16759
FIRST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1546989
(State or other jurisdiction (I.R.S. Employer
Incorporation or organization) Identification No.)
One First Financial Plaza, Terre Haute, IN 47807
(Address of principal executive office) (Zip Code)
(812) -238-6000
(Registrant s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __x___ No _____.
As of September 30, 1999 were outstanding 6,919,719 shares without par value, of
the registrant.
1 <PAGE>
FIRST FINANCIAL CORPORATION
FORM 10-Q
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements:
Consolidated Statements of Condition.....................3
Consolidated Statements of Income........................4
Consolidated Statements of Shareholders Equity and
Comprehensive Income...................................5
Consolidated Statements of Cash Flows....................7
Notes to Consolidated Financial Statements...............8
Item 2. Management s Discussion and Analysis of
Financial Condition and Results of Operations.........9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk..........................................11
PART II. Other Information:
Signatures..................................................................14
2 <PAGE>
ITEM 1. Financial Statements
<TABLE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Amounts in thousands, except share and per share amounts)
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $58,748 $54,877
Federal funds sold and securities
purchased under agreement to resell 4,200 450
Investments available-for-sale, at market 560,414 633,365
Loans:
Commercial, financial and agricultural 251,306 233,080
Real estate - construction 41,989 32,880
Real estate - mortgage 680,746 636,615
Installment 216,502 205,251
Lease financing 5,455 5,825
1,195,998 1,113,651
Less:
Unearned income 1,920 1,886
Allowance for loan losses 17,886 16,429
1,176,192 1,095,336
Accrued interest receivable 14,065 14,704
Premises and equipment, net 24,825 24,426
Other assets 33,730 26,594
TOTAL ASSETS $1,872,174 $1,849,752
LIABILITIES AND SHAREHOLDERS EQUITY
Deposits:
Noninterest-bearing $153,241 $148,747
Interest-bearing:
Certificates of deposit of $100,000 or more 205,207 196,773
Other interest-bearing deposits 874,731 914,845
1,233,179 1,260,365
Federal funds purchased and securities
sold under agreements to repurchase 74,980 100,571
Treasury tax and loan open-end note 7,632 3,061
Advances from Federal Home Loan Bank 360,872 275,449
Other long-term debt 6,610 6,619
Other liabilities 16,638 21,504
TOTAL LIABILITIES 1,699,911 1,667,569
Shareholders equity:
Common stock, $.125 stated value per share;
authorized 10,000,000 shares; issued and
outstanding 903 903
7,225,483 shares for 1998 and 1999 including
treasury shares of 91,093 in 1998 and 305,764
in 1999
Additional capital 66,680 66,680
Retained earnings 123,395 110,566
Accumulated other comprehensive income (loss):
Unrealized gains (losses) on investments,
net of tax -4,819 8,123
Less: Treasury shares at cost -13,896 -4,089
TOTAL SHAREHOLDERS EQUITY 172,263 182,183
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $1,872,174 $1,849,752
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
3 <PAGE>
<TABLE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Unaudited Unaudited Unaudited Unaudited
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $24,772 $23,822 $71,887 $69,577
Investment securities:
Taxable 7,104 6,807 21,329 20,079
Tax-exempt 2,001 1,932 6,030 5,968
9,105 8,739 27,359 26,047
Other interest income 23 28 505 550
TOTAL INTEREST INCOME 33,900 32,589 99,751 96,174
INTEREST EXPENSE:
Deposits 11,197 12,779 33,853 37,855
Other 5,495 3,989 15,450 11,572
TOTAL INTEREST EXPENSE 16,692 16,768 49,303 49,427
NET INTEREST INCOME 17,208 15,821 50,448 46,747
Provision for loan losses 1,084 1,345 3,644 4,301
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 16,124 14,476 46,804 42,446
NON-INTEREST INCOME
Trust income 646 509 1,972 1,594
Service Charges on deposit
accounts 309 347 929 992
Other service charges and fees 1,249 1,204 3,906 3,468
Investment securities gains 37 382 194 773
Other 409 487 1,420 1,043
2,650 2,929 8,421 7,870
NON-INTEREST EXPENSE
Salaries and employee benefits 6,252 5,712 18,511 17,689
Occupancy expense 726 717 2,192 2,105
Equipment expense 941 836 2,689 2,484
Other 3,035 3,156 9,441 9,346
10,954 10,421 32,833 31,624
INCOME BEFORE INCOME TAXES 7,820 6,984 22,392 18,692
Income Tax Expense 2,300 2,124 6,494 5,162
NET INCOME $5,520 $4,860 $15,898 $13,530
EARNINGS PER SHARE $0.80 $0.67 $2.28 $1.87
Weighted average number of
shares outstanding 6,942 7,209 6,988 7,217
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
4 <PAGE>
<TABLE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Nine Months Ended
September 30, 1999 and 1998
<CAPTION>
Accumulated
Other
(Dollar amounts in thousands, Common Additional Retained Comprehensive Treasury
except per share data) Stock Capital Earnings Income Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $903 $66,680 $110,566 $8,123 $-4,089 $182,183
Comprehensive income:
Net income 15,898 15,898
Other comprehensive income,
net of tax:
Net change in unrealized gains/losses on investments -12,942 -12,942
Total comprehensive income 2,956
Cash Dividends, $.44 per share -3,069 -3,069
Treasury stock purchase -9,807 -9,807
_____________________________________________________________________________
Balance, September 30, 1999 $903 $66,680 $123,395 $-4,819 $-13,896 $172,263
Balance, January 1, 1998 $877 $59,787 $ 98,046 $6,770 - $165,480
Comprehensive income:
Net income 13,530
Other comprehensive income,
net of tax:
Net change in unrealized gains/losses on investments 1,810 1,810
Total comprehensive income 15,340
Issue shares for
Morris Plan acquisition 26 6,893 6,919
Cash Dividends, $.40 per share -2,884 -2,884
Treasury stock purchase -1,224 -1,224
_____________________________________________________________________________
Balance, September 30, 1998 $903 $66,680 $108,692 $8,580 $-1,224 $183,631
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
5 <PAGE>
<TABLE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Three Months Ended
September 30, 1999 and 1998
<CAPTION>
Accumulated
Other
(Dollar amounts in thousands, Common Additional Retained Comprehensive Treasury
except per share data) Stock Capital Earnings Income Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1999 $903 $66,680 $117,875 $-1,541 $-11,849 $172,068
Comprehensive income:
Net income 5,520 5,520
Other comprehensive income,
net of tax:
Net change in unrealized gains/losses on investments -3,278 -3,278
Total comprehensive income 2,243
Treasury stock per share -2,047 -2,047
__________________________________________________________________________
Balance, September 30, 1999 $903 $66,680 $123,395 $-4,819 $-13,896 $172,263
Balance, July 1, 1998 $903 $66,680 $103,832 $ 7,028 $ -780 $177,663
Comprehensive income:
Net income 4,860 4,860
Other comprehensive income,
net of tax:
Net change in unralized gains/losses on investments 1,552 1,552
Total comprehensive income 6,412
Treasury stock per share -444 -444
__________________________________________________________________________
Balance, September 30, 1998 $903 $66,680 $108,692 $ 8,580 $ -1,224 $183,631
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
6 <PAGE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1999 1998
(Unaudited)
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $15,898 $13,530
Adjustment to reconcile net income to net cash
provided by operating activities:
Net amortization (Accretion) of discounts
on investments 161 -722
Provision for loan losses 3,644 4,301
Investment gains -194 -773
Provision for depreciation and amortization 2,072 1,839
Provision for deferred income taxes -1,180 -604
Net decrease in accrued interest receivable 639 88
Other, net 1,676 680
NET CASH PROVIDED BY OPERATING ACTIVITIES 22,716 18,339
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales and maturities of investments available-for-sale 217,400 179,224
Purchases of investments available-for-sale -166,321 -211,551
Loans made to customers, net of repayments -85,022 -54,753
Net increase in federal funds sold -3,750 -1,950
Additions to premises and equipment -2,729 -1,660
NET CASH USED BY INVESTING ACTIVITIES -40,422 -90,690
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits -27,186 28,782
Net increase in short-term borrowings 52,640 2,795
Minority interest investment in subsidiary 400 0
Cash dividends -6,224 -5,624
Purchase of treasury stock -9,807 -1,224
Net increase in long-term debt and advances 11,754 40,564
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,577 65,293
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,871 -7,058
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 54,877 54,285
CASH AND CASH EQUIVALENTS, END OF PERIOD $58,748 $47,227
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $49,508 $48,869
Income taxes paid $7,715 $5,345
The accompanying notes are an integral part of the consolidated financial
statements.
7 <PAGE>
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying September 30, 1999 and 1998 consolidated financial
statements are unaudited. The December 31, 1998 consolidated financial
statements are as reported in the First Financial Corporation (the Corporation)
1998 annual report. The following notes should be read together with notes to
the consolidated financial statements included in the 1998 annual report.
1. The significant accounting policies followed by the Corporation and its
subsidiaries for interim financial reporting are consistent with the accounting
policies followed for annual financial reporting. All adjustments which are, in
the opinion of management, necessary for a fair statement of the results for the
periods reported have been included in the accompanying consolidated financial
statements and are of a normal recurring nature.
2. A loan is considered to be impaired when, based upon current information and
events, it is probable that the Corporation will be unable to collect all
amounts due according to the contractual terms of the loan. Impairment is
primarily measured based on the fair value of the loans collateral.
The following table summarizes impaired loan information.
(000's)
September 30,
1999 1998
Impaired loans with related allowance for loan losses
calculated under SFAS No. 114........................ $2,176 $1,874
3. Investments
The cost and fair value of the Corporation's investments at September 30,
1999 are shown below. All investments are classified as available-for-sale.
(000's)
September 30, 1999
Amortized Cost Fair Value
Available-For-Sale:
United States Government $194,041 $189,143
United States Government Agencies 176,939 172,464
State and Municipal 154,719 153,667
Other 45,816 45,141
$571,515 $560,415
4. Changes in Shareholders' Equity
Under the Corporation's common stock repurchase program announced in September
1998, the Corporation has repurchased 305,764 shares as of September 30, 1999
compared to 91,093 shares as of December 31, 1998.
8 <PAGE>
FIRST FINANCIAL CORPORATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The purpose of this discussion is to point out key factors in the
Corporation's recent performance compared with earlier periods. The discussion
should be read in conjunction with the financial statements beginning on page
three of this report. All amounts are for the consolidated entity. It is
presumed the readers of these financial statements and the following narrative
have previously read the Corporation's annual report for 1998.
Forward-looking statements contained in the following discussion are based
on estimates and assumptions that are subject to significant business, economic
and competitive uncertainties, many of which are beyond the Corporation's
control and are subject to change. These uncertainties can affect actual results
and could cause actual results to differ materially from those expressed in any
forward-looking statements in this discussion.
Summary of Operating Results
The Corporation reported record earnings for the nine and three month
periods ended September 30, 1999. Net income for the nine months ended September
30, 1999 was $15.9 million, a 17.5% increase above the same period of 1998.
Earnings per share of $2.28 for the nine month period was 21.9% more than the
$1.87 reported in 1998.
For the three month period ended September 30,1999 net income of $5.5
million was 13.6% higher than the $4.9 million reported in 1998, while the $.80
earnings per share for the second quarter was 19.4% better than the $.67 per
share reported for 1998.
The increased earnings are the result of an increase in average earning
assets and a decrease in the efficiency ratio to 52.6% from 54.4% a year
earlier. Also, as a result of a 9.9% decrease in net charge-offs and the
improvement in the performance of substandard loans, management was able to
reduce the provision for loan losses 15.3% and 19.4% for the nine-month and
three-month periods respectively. Earnings per share growth was positively
effected by a stock repurchase plan that began in the third quarter of 1998.
Net Interest Income
The Corporation's primary source of earnings is net interest income, which
is the difference between the interest earned on loans and other investments and
the interest incurred for deposits and other sources of funds. Net interest
income increased to $50.4 million in the first nine months of 1999 from $46.7
million in the same period of 1998, while the net interest margin remained the
same at 4.14% for both years. The 1999 third quarter net interest income
increased to $17.2 million from $15.8 million for the same quarter of 1998, as
the net interest margin increased to 4.22% for the third quarter of 1999 from
4.10% in the same quarter of 1998.
Non-Interest Income
Non-interest income for the nine months of 1999, as compared to the same
period of 1998, increased $.6 million or 7.0%. Trust income, other service
charges and fees, and other income were $2.0 million, $3.9 million and $1.4
million, which represent increases of 23.7% , 12.6%, and 36.1% respectively,
compared to the same period of 1998. The primary factors for the increase of
9 <PAGE>
Trust income are increased volume and transaction fees. Other service charges
and fees increased mainly from the commissions received from a newly formed
insurance company subsidiary for $.3 million. The reasons for the increase of
other income are the result of realized gains from the sale of other real estate
owned and sale of mortgage loans in the secondary market of $.2 million each.
These increases were partially offset by the reduction in realized gains from
investment sales of $.5 million.
Third quarter non-interest income decreased to $2.7 million from $2.9
million compared to the same quarter of 1998. This decrease is mainly from the
decrease of gains realized from sales of investment by $.3 million from the same
quarter of 1998.
Non-Interest Expenses
Non-interest expenses for the first nine months of 1999, as compared to the
same period of 1998, increased to $32.8 million from $31.6 million or 3.8%.
Most of the components of other expenses increased slightly and no one
significant factor contributed to this increase.
Third quarter other expenses also increased to $11.0 million from $10.4
million or 5.1% for the same quarter of 1998. Most of the components of other
expenses increased slightly while salaries and related benefits, the largest
component of this group, increased from $5.7 million to $6.3 million or 9.5%.
The primary reason for this increase were higher average salaries and higher
pension cost.
Allowance for Loan Losses
The Corporation's provision for loan losses decreased to $3.6 million from
$4.3 million for the first nine months of 1999 compared to the same period a
year earlier.
At September 30, 1999, the allowance for loan losses was 1.50% of net loans.
This compares with an allowance of 1.48% at December 31, 1998. Net chargeoffs
for the first nine months of 1999 were $2.2 million compared to $2.4 million for
the same period of 1998. The ratio of net chargeoffs to average loans
outstanding for the last five years ended December 31, 1998, was .33%. With this
experience and based on management's review of the portfolio, management
believes the allowance of $17.9 million at September 30, 1999 is adequate.
10 <PAGE>
Under-performing Assets
Under-performing assets consist primarily of (1) nonaccrual loans and
leases on which the ultimate collectability of the full amount of interest is
uncertain, (2) loans and leases which have been renegotiated to provide for a
reduction or deferral of interest or principal because of a deterioration in
the financial position of the borrower, (3) loans and leases past due ninety
days or more as to principal or interest and (4) land sold on contract and
others. A summary of under-performing assets at September 30, 1999 and
December 31, 1998 follows:
(000's) (000's)
September 30, 1999 December 31, 1998
Nonaccrual loans and leases $ 3,405 $ 4,103
Renegotiated loans and leases 945 70
Land sold on contract and others 2,858 1,914
Total non-performing assets $ 7,208 $ 6,087
Ninety days past due loans and leases 5,587 8,184
Total under-performing assets $12,795 $ 14,271
Ratio of the allowance for loan losses as a
percentage of non-performing assets 248% 270%
Ratio of the allowance for loan losses as a
percentage of under-performing assets 140% 115%
The following loan categories comprise significant components of the under-
erforming loans at September 30, 1999 and December 31, 1998.
Non-Accrual Loans:
(000's) (000's)
September 30, 1999 December 31, 1998
1-4 family residential $ 1,683 49% $ 1,927 47%
Commercial loans 860 25 587 14
Installment loans 668 20 879 22
Other, various 194 6 710 17
$3,405 100% $4,103 100%
Past due 90 days or more:
1-4 family residential $2,083 37% $3,456 42%
Commercial loans 2,431 44 2,963 36
Installment loans 801 14 590 7
Other, various 272 5 1,175 15
$5,587 100% $8,184 100%
There are no material industry concentrations within the under-performing
loans.
In addition to the above under-performing loans, certain loans are felt by
management to be impaired for reasons other than the current repayment status.
Such reasons may include but not be limited to previous payment history,
bankruptcy proceedings, industry concerns, or information related to a specific
borrower that may result in a negative future event to that borrower. At
September 30, 1999 the Corporation had $1.8 million of these loans which are
still in accrual status.
11 <PAGE>
Interest Rate Sensitivity and Liquidity
The Corporation charges the nine subsidiary banks with monitoring and
managing their individual sensitivity to fluctuations in interest rates and
assuring that they have adequate liquidity to meet loan demand or any potential
unexpected deposit withdrawals. This function is facilitated by the
Asset/Liability Committee. The primary goal of the committee is to maximize net
interest income within the interest rate risk limits approved by the Board of
Directors. This goal is accomplished through management of the subsidiary bank's
balance sheet liquidity and interest rate risk exposures due to the changes in
economic conditions and interest rate levels.
Interest Rate Risk and Quantitative and Qualitative Disclosures
About Market Risk
Management considers interest rate risk to be the Corporation s most
significant market risk. Interest rate risk is the exposure to changes in net
interest income as a result of changes in interest rates. Consistency in the
Corporation's net income is largely dependent on the effective management of
this risk.
The Committee reviews a series of monthly reports to ensure that
performance objectives are being met. The Committee monitors and controls
interest rate risk through earnings simulation. Simulation modeling measures the
effects of changes in interest rates, changes in the shape of the yield curve,
and changes in prepayment speeds on net interest income. The primary measure of
Interest Rate Risk is "Earnings at Risk." This measure projects the earnings
effect of various rate movements over the next three years on net interest
income. It is important to note that measures of interest rate risk have
limitations and are dependent upon certain assumptions. These assumptions are
inherently uncertain and, as a result, the model cannot precisely predict the
impact of interest rate fluctuations on net interest income. Actual results will
differ from simulated results due to timing, frequency and amount of interest
rate changes as well as overall market conditions. The Committee has performed
a thorough analysis and believes the assumptions to be reasonable. The
relationships are continuously monitored for behavioral changes.
In its interest rate risk management, the Corporation currently does not
utilize derivative products, such as interest rate swaps, futures contracts, or
option contracts, and is not engaged in securities trading activity. The
Corporation instead invests in assets whose value is derived from an underlying
asset. These assets include government agency issued mortgage-backed securities.
The performance of these assets in changing rate environments is included in the
following table.
The table below shows the Corporation's estimated earnings sensitivity
profile as of September 30, 1999. Given a 100 basis point increase in rates, net
interest income would decrease 1.55% over the next 12 months and decrease 4.42%
over the next 24 months. A 100 basis point decrease would result in a .93%
decrease in net interest income over the next 12 months and a 1.88% increase
over the next 24 month periods. These estimates assume all rates changed
overnight and management took no action as a result of this change.
Basis Point Percentage Change in Net Interest Income
Interest Rate Change 12 months 24 months 36 months
Down 300 -4.39% 1.26% -5.52%
Down 200 -2.29 2.57 -2.02
Down 100 - .93 1.88 - .49
Up 100 -1.55 - 4.42 -1.99
Up 200 -3.11 -8.58 -3.55
Up 300 - 4.08 -11.30 -3.13
In the near term both the up and down scenarios show decreasing earnings. This
is due to the use of products containing options, most notably callable agency
securities and putable Federal Home Loan Bank advances. The securities pay a
premium rate and the advances charge a discounted rate in exchange for the
option. Therefore, there is a benefit to current income by using these products.
Typical rate shock analysis does not reflect management s ability to react and
thereby reduce the effects of rate changes, and represents a worst case
scenario. The model assumes no actions are taken and prices change to the full
extent of the rate shock.
12 <PAGE>
Liquidity Risk
Liquidity is measured by each bank's ability to raise funds to meet the
obligations from its customers, including deposit withdrawals and credit needs.
This is accomplished primarily by maintaining sufficient liquid assets in the
form of investment securities, cash, and deposits with banks. The Corporation
has $6.8 million of investments that mature throughout the coming 12 months. The
Corporation also anticipates $49.9 million of principal payments from mortgage-
backed securities. Given the current interest rate environment, the Corporation
anticipates $9.2 million of securities to be called within the next 12 months.
With these sources of funds, the Corporation currently anticipates adequate
liquidity to meet the expected obligations of its customers.
Capital Adequacy
As of September 30, 1999 the Corporation's leverage ratio was 9.45%
compared to 9.51% at December 31, 1998.
At September 30, 1999 the Corporation's total capital, which includes Tier
II capital, was 16.20% compared to 16.29% at December 31, 1998. These amounts
exceed minimum regulatory capital requirements.
Year 2000
The Year 2000 problem concerns the inability of information systems to
properly recognize and process date sensitive information beginning on December
31, 1999. The Corporation has developed a Year 2000 team responsible for
ensuring that its information technology (IT) systems and software, and non-IT
systems are Year 2000 compliant in time to minimize any significant detrimental
effects on operations and service to its customers.
The Corporation is currently in the implementation stage, the last stage of
a five step Year 2000 program. The awareness, assessment, renovation and
testing steps have been completed for all mission critical applications. The
Corporation utilizes Fiserv-CBS software for processing all of its core
applications. The testing of this software was substantially completed by the
end of 1998. The remainder of Year 2000 mission critical testing was completed
by June 30, 1999. Currently the Corporation is focusing on maintaining the
internal core processing system s readiness and will continue the effort until
the Year 2000. In addition, the Corporation will continue to manage third party
system relationships, update disaster recovery and contingency plans, and will
also continue to test secondary computer systems.
The Corporation continues to correspond with its major commercial loan
customers and major suppliers and vendors to assess the credit risk related to
the Year 2000 problem as well as the risk of business interruption. The
majority of the Corporation's non-IT related systems have been assessed as Year
2000 compliant and the final testing phase was completed by June 30, 1999.
The total estimated cost related to the Year 2000 issue, including the cost
of replacing equipment is $615,000. Total incremental cost incurred through
September 30, 1999 is approximately $456,000. The Corporation does not expect
that the cost related to the Year 2000 project will have a material effect on
the results of its operations or financial condition.
The above expectations are subject to inherent uncertainties of the Year
2000 problem, including the readiness of third-party suppliers and regulatory
agencies that the Corporation depends upon to meet customers' needs. The
failure to correct a material problem could result in an interruption or failure
of normal business activities or operations. Such failures could materially
affect the Corporation's ability to meet customers' needs and ultimately affect
its results of operations and financial condition. The Corporation believes that
with the successful completion of its Year 2000 program, the possibility of
significant interruptions will be reduced.
Concurrently with the Year 2000 program described above, the Corporation
has developed contingency plans intended to mitigate the possible disruption in
business operations that may result from the year 2000 problem and is estimating
the costs for such plans. Contingency plans include increasing cash in vault,
ordering extra forms/supplies, establishing trigger dates for activating
alternative solutions/vendors, identifying possible alternative vendors,
preparing for some manual preparation of checks, forms, etc., and other
appropriate measures. Contingency plans and related cost estimates are being
continually refined as information becomes available.
13 <PAGE>
FIRST FINANCIAL CORPORATION
PART II OTHER INFORMATION
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST FINANCIAL CORPORATION
(Registrant)
Date: November 12, 1999 By (Signature)
Donald E. Smith, President
Date: November 12, 1999 By (Signature)
John W. Perry, Secretary
Date: November 12, 1999 By (Signature)
Michael A. Carty, Treasurer
14 <PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 58,748
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 560,414
<INVESTMENTS-CARRYING> 560,414
<INVESTMENTS-MARKET> 560,414
<LOANS> 1,194,078
<ALLOWANCE> 17,886
<TOTAL-ASSETS> 1,872,174
<DEPOSITS> 1,233,179
<SHORT-TERM> 342,202
<LIABILITIES-OTHER> 16,638
<LONG-TERM> 107,892
0
0
<COMMON> 903
<OTHER-SE> 171,360
<TOTAL-LIABILITIES-AND-EQUITY> 1,872,174
<INTEREST-LOAN> 71,887
<INTEREST-INVEST> 27,359
<INTEREST-OTHER> 505
<INTEREST-TOTAL> 99,751
<INTEREST-DEPOSIT> 33,853
<INTEREST-EXPENSE> 49,303
<INTEREST-INCOME-NET> 50,448
<LOAN-LOSSES> 3,644
<SECURITIES-GAINS> 194
<EXPENSE-OTHER> 32,833
<INCOME-PRETAX> 22,392
<INCOME-PRE-EXTRAORDINARY> 22,392
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,898
<EPS-BASIC> 2.28
<EPS-DILUTED> 2.28
<YIELD-ACTUAL> 4.14
<LOANS-NON> 3,405
<LOANS-PAST> 5,587
<LOANS-TROUBLED> 945
<LOANS-PROBLEM> 2,176
<ALLOWANCE-OPEN> 16,429
<CHARGE-OFFS> 3,013
<RECOVERIES> 826
<ALLOWANCE-CLOSE> 17,886
<ALLOWANCE-DOMESTIC> 17,886
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
