<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number 0-11889
FIRST FINANCIAL CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1471963
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1305 Main Street, Stevens Point, Wisconsin 54481
------------------------------------------------
(Address of principal executive office)
(715) 341-0400
--------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
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. 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, par value $1.00 per share 29,909,506 Shares
--------------------------------------- ----------------------
Class Outstanding at July 31, 1996
<PAGE>
FIRST FINANCIAL CORPORATION
Form 10-Q Index
- --------------------------------------------------------------------------------
Part I - Financial Information
----------------------
Consolidated Balance Sheets as of June 30, 1996
(Unaudited) and December 31, 1995
Unaudited Consolidated Statements of Income for
the Three Months and Six Months Ended June 30,
1996 and 1995
Unaudited Consolidated Statement of Changes In
Stockholders' Equity for the Six Months Ended
June 30, 1996
Unaudited Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996 and
1995
Notes to Unaudited Consolidated Financial Statements
Management's Discussion and Analysis:
Comparison of the Consolidated Balance Sheets
at June 30, 1996 (Unaudited) and December 31,
1995
Comparison of the Unaudited Consolidated Statements
of Income for the Three Months and Six Months Ended
June 30, 1996 and 1995
Part II - Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K
Signatures
- ----------
Exhibits
- --------
-1-
<PAGE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
----------- ----
(In thousands)
<S> <C> <C>
Cash $ 125,883 $ 123,379
Federal funds sold 4,381 34,929
Interest-earning deposits 29,244 13,801
---------- ----------
Cash and cash equivalents 159,508 172,109
Securities available for sale (at fair value):
Investment securities 148,841 80,999
Mortgage-related securities 780,881 571,293
Securities held to maturity (at amortized cost):
Investment securities (fair
value of $ 93,512,000--1996
and 119,063,000--1995) 94,702 119,426
Mortgage-related securities
(fair value of $653,442,000
--1996 and $691,060,000--1995) 659,947 699,468
Loans receivable:
Held for sale 15,617 26,651
Held for investment 3,486,927 3,590,149
Foreclosed properties and repossessed assets 2,285 3,379
Real estate held for investment or sale 8,720 8,289
Office properties and equipment, at cost 51,131 51,124
Intangible assets, less accumulated amortization 18,952 21,481
Other assets 151,783 126,740
---------- ----------
$5,579,294 $5,471,108
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking $ 460,559 $ 473,203
Money market accounts 366,969 310,545
Passbook 696,065 687,960
Certificates of deposit 2,922,459 2,952,817
---------- ----------
Total deposits 4,446,052 4,424,525
Borrowings 640,911 570,508
Advance payments by borrowers
for taxes and insurance 44,984 13,206
Other liabilities 39,442 77,952
---------- ----------
Total liabilities 5,171,389 5,086,191
---------- ----------
Stockholders' equity:
Serial preferred stock, $1 par
value, 3,000,000 shares
authorized; none outstanding
Common stock, $1 par value,
75,000,000 shares authorized;
shares issued and outstanding:
29,905,406-June 30, 1996;
29,676,365-December 31, 1995 29,905 29,676
Additional paid-in capital 50,860 49,756
Net unrealized loss on
securities available for sale (9,627) (6,021)
Common stock purchased by
employee benefit plan (271) (271)
Retained earnings 337,038 311,777
---------- ----------
Total stockholders' equity 407,905 384,917
---------- ----------
$5,579,294 $5,471,108
========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------
1996 1995 1996 1995
--------- --------- --------- ------
(In thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Interest income:
Mortgage loans $ 43,406 $ 45,927 $ 89,285 $ 91,450
Other loans 31,374 29,448 63,033 57,807
Mortgage-related securities 20,658 25,636 42,487 51,116
Investments 6,501 3,723 10,756 7,163
-------- -------- -------- --------
Total interest income 101,939 104,734 205,561 207,536
Interest expense:
Deposits 49,678 49,949 100,045 95,116
Borrowings 6,534 9,278 13,820 20,715
-------- -------- -------- --------
Total interest expense 56,212 59,227 113,865 115,831
-------- -------- -------- --------
Net interest income 45,727 45,507 91,696 91,705
Provision for losses on loans 2,180 2,073 4,080 4,192
-------- -------- -------- --------
43,547 43,434 87,616 87,513
Non-interest income:
Deposit account service fees 3,334 2,974 6,476 5,594
Loan fees and service charges 3,020 2,801 5,749 5,258
Insurance and brokerage commissions 1,779 1,734 3,611 3,786
Service fees on loans sold 1,564 1,787 3,097 3,756
Gain on disposition of loans and
mortgage-related securities, net 447 245 708 282
Gain on sale of investment
securities available for sale 391 -- 404 11
Other 843 828 1,590 1,935
-------- -------- -------- --------
Total non-interest income 11,378 10,369 21,635 20,622
-------- -------- -------- --------
Operating income 54,925 53,803 109,251 108,135
Non-interest expense:
Compensation, payroll taxes
and benefits 11,183 10,960 23,266 24,137
Federal deposit insurance premiums 2,542 2,529 5,103 5,058
Occupancy 2,374 2,180 4,832 4,530
Data processing 1,885 1,888 3,750 3,613
Loan expenses 1,883 1,547 3,604 3,002
Telephone and postage 1,587 1,607 3,285 3,300
Marketing 1,613 2,062 3,270 4,177
Furniture and equipment 1,254 1,485 2,614 2,897
Amortization of intangible assets 1,265 1,311 2,529 2,622
Net cost from operations of fore-
closed properties (183) (25) (123) (7)
Acquisition-related costs -- -- -- 6,458
Other 2,890 2,959 5,558 5,714
-------- -------- -------- --------
Total non-interest expense 28,293 28,503 57,688 65,501
-------- -------- -------- --------
Income before income taxes and extra-
ordinary item 26,632 25,300 51,563 42,634
Income taxes 9,051 8,995 16,648 15,502
-------- -------- -------- --------
Income before extraordinary item 17,581 16,305 34,915 27,132
Extraordinary item -- -- (686) --
-------- -------- -------- --------
Net income $ 17,581 $ 16,305 $ 34,229 $ 27,132
======== ======== ======== ========
Earnings per share:
Primary:
Income before extraordinary item $ 0.58 $ 0.54 $ 1.14 $ 0.90
Extraordinary item -- -- (0.02) --
-------- -------- -------- --------
Net income $ 0.58 $ 0.54 $ 1.12 $ 0.90
======== ======== ======== ========
Fully diluted:
Income before extraordinary item $ 0.58 $ 0.54 $ 1.14 $ 0.90
Extraordinary item -- -- (0.02) --
-------- -------- -------- --------
Net income $ 0.58 $ 0.54 $ 1.12 $ 0.90
======== ======== ======== ========
Cash dividends per share $ 0.15 $ 0.12 $ 0.30 $ 0.24
======== ======== ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Net
Unrealized
Common Holding Common
Stock and Loss on Stock
Additional Securities Purchased
Paid-In Available by ESOP Retained Stockholders'
Capital For Sale Plan Earnings Equity
------- -------- ---- -------- ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1995 $ 79,432 $ (6,021) $ (271) $311,777 $384,917
Net income for the
six months ended
June 30, 1996 34,229 34,229
Cash dividends paid
($0.30 per share) (8,968) (8,968)
Exercise of stock
options 1,333 1,333
Change in net un-
realized holding
loss on securities
available for
sale, net of tax (3,606) (3,606)
-------- -------- ------- -------- --------
Balances at
June 30, 1996 $ 80,765 $ (9,627) $ (271) $337,038 $407,905
======== ======== ======= ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------------
1996 1995
---------- -------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 34,229 $ 27,132
Adjustments to reconcile net income to net cash provided
by operating activities:
Decrease (increase) in accrued interest on loans 898 (2,941)
Increase in accrued interest on deposits 2,706 5,876
Loans originated for sale (138,695) (79,680)
Proceeds from sales of loans held for sale 172,115 64,883
Provision for depreciation 2,938 2,937
Provision for losses on loans 4,080 4,192
Provision for losses on real estate and other assets (332) 644
Unrealized loss on impairment of mortgage-related securities 4,900 --
Amortization of cost in excess of net assets of
acquired businesses 396 416
Amortization of core deposit intangibles 2,133 2,206
Amortization of mortgage servicing rights 907 423
Net gain on sales of loans and assets (6,012) (325)
Other-net (27,303) 2,110
--------- ---------
Net cash provided by operating activities 52,960 27,873
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 2,513 33,771
Proceeds from sales of mortgage-related securities available
for sale 334,923 --
Proceeds from maturities of investment securities held
to maturity 54,309 2,382
Proceeds from maturities of investment securities available for
sale 5,247 --
Purchases of investment securities held to maturity (29,849) (35,333)
Purchases of investment securities available for sale (77,994) --
Purchases of mortgage-related securities available for sale (458,337) --
Principal payments received on mortgage-related securities 111,251 112,570
Principal received on loans receivable 334,750 259,151
Loans originated for portfolio (421,684) (324,126)
Additions to office properties and equipment (2,634) (2,253)
Proceeds from sales of foreclosed properties and
repossessed assets 4,269 3,705
--------- ---------
Net cash provided by (used in) investing activities (143,236) 49,867
FINANCING ACTIVITIES
Net increase in deposits 18,821 123,113
Net increase in advance payments by borrowers for
taxes and insurance 31,778 35,720
Funding of official checks for borrower tax escrows (35,692) (34,953)
Net increase (decrease) in short-term borrowings (11,297) 86,050
Proceeds from borrowings 887,500 578,223
Repayments of borrowings (805,800) (852,113)
Proceeds from exercise of stock options 1,333 2,267
Proceeds from vesting of employee benefit plans -- 1,139
Payments of cash dividends to stockholders (8,968) (7,048)
--------- ---------
Net cash provided by (used in) financing activities 77,675 (67,602)
--------- ---------
Increase (decrease) in cash and cash equivalents (12,601) 10,138
Cash and cash equivalents at beginning of period 172,109 118,978
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 159,508 $ 129,116
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
-5-
<PAGE>
FIRST FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements include the accounts and
results of operations of First Financial Corporation ("FFC") and its
wholly-owned subsidiary, First Financial Bank ("FF Bank"). Significant
intercompany accounts and transactions have been eliminated in consolidation.
FFC uses the calendar year as its fiscal year.
The financial statements reflect adjustments, all of which are of a
normal recurring nature, and in the opinion of management, necessary for a fair
statement of the results for the interim periods, and are presented on an
unaudited basis. The operating results for the first six months of 1996 are not
necessarily indicative of the results which may be expected for the entire 1996
fiscal year. The December 31, 1995 balance sheet included herein is derived from
the consolidated financial statements included in FFC's 1995 Annual Report to
Shareholders. The accompanying unaudited consolidated financial statements and
related notes should be read in conjunction with the consolidated financial
statements and related notes included in FFC's 1995 Annual Report to
Shareholders. See Note B for information relative to business combinations.
NOTE B - FIRST FINANCIAL CORPORATION
At June 30, 1996, FFC conducted business as a nondiversified unitary
thrift holding company and its principal asset was all of the capital stock of
FF Bank. The primary business of FFC is the business of FF Bank. FFC's
activities are currently comprised of providing limited administrative services
to FF Bank.
On February 28, 1995, FFC acquired FirstRock Bancorp, Inc. ("FirstRock")
of Rockford, Illinois. Upon closing, FirstRock's subsidiary, First Federal
Savings Bank, FSB ("First Federal") was merged into FF Bank with First Federal's
six offices now operating as branch banking offices of FF Bank. The transaction
was accounted for as a pooling-of-interests and, accordingly, financial
statements for all periods presented have been restated to include the results
of FirstRock.
On February 28, 1995 FirstRock had assets (unaudited) of $376,473,000
and shareholders' equity (unaudited) of $48,430,000. The total income and net
income (loss) for the two-month period ended February 28, 1995 (unaudited),
which reflects the pre-merger
-6-
<PAGE>
results of FFC and FirstRock that are included in the first six months of 1995
results of operations, are as follows:
Net
Total Income
Income (Loss)
------ ------
FFC $69,579 $ 9,348
FirstRock 5,383 (3,091)
------- -------
$74,962 $ 6,257
======= =======
As a result of the FirstRock acquisition, FFC and FirstRock incurred
expenses i) in conjunction with the acquisition itself and ii) relative to the
reorganization of FirstRock's operations following the acquisition. The
acquisition/transaction costs and charges aggregated $6.5 million on a pre-tax
basis and $4.0 million on an after-tax basis, or $0.14 per share during the
first quarter of 1995.
NOTE C - EARNINGS PER SHARE
Primary and fully diluted earnings per share for the periods ended June
30, 1996 and 1995 have been determined based on the weighted average number of
common shares outstanding during each period and common equivalent shares, using
the treasury share method, outstanding at the end of each period. FFC's common
stock equivalents consist entirely of stock options. Weighted average common
shares have been adjusted for all periods presented to reflect the restatement
for FirstRock shares. See Exhibit 11 to this Report for a detailed computation
of earnings per share.
NOTE D - CONTINGENT LIABILITIES
FF Bank has previously entered into agreements whereby, for an annual
fee, letters of credit are issued by FF Bank in connection with the issuance of
industrial development revenue bonds. At June 30, 1996, bond issues totaling
$7.1 million are supported by such letters of credit. At June 30, 1996, each of
the outstanding bonds for which FF Bank has issued letters of credit is current
with regard to debt service payments.
NOTE E - DIVIDENDS PAID OR DECLARED TO STOCKHOLDERS
The Board of Directors of FFC on May 16, 1996, declared a $0.15 per
share quarterly cash dividend payable on June 28, 1996 to shareholders of record
of FFC common stock on June 14, 1996.
NOTE F - REGULATORY CAPITAL REQUIREMENTS
Current Office of Thrift Supervision ("OTS") regulatory capital
requirements for federally-insured thrift institutions include a tangible
capital to tangible assets ratio, a core leverage capital to adjusted tangible
assets ratio and a risk-based capital measurement based upon assets weighted for
their inherent risk.
-7-
<PAGE>
As of June 30, 1996, FF Bank exceeded all OTS capital requirements as displayed
below.
Required Actual
OTS FF Bank
Ratio Ratio
----- -----
Tangible capital 1.50% 6.77%
Core leverage capital 3.00 7.03
Risk-based capital 8.00 15.21
The OTS has adopted a final rule, effective March 4, 1994, disallowing any new
core deposit intangibles, acquired after the rule's effective date, from
counting as regulatory capital. Core deposit intangibles acquired prior to the
effective date have been grandfathered for purposes of this rule. At June 30,
1996, FFC had core deposit intangibles of $15.2 million, all of which have been
grandfathered from this OTS rule. The OTS has added an interest-rate risk
calculation such that an institution with a measured interest-rate risk exposure
greater than specified levels must deduct an interest-rate risk component when
calculating the OTS risk-based capital requirement. Final implementation of this
rule was pending at June 30, 1996. The OTS also has proposed to increase the
minimum required core capital ratio from the current 3.00% to a range of 4.00%
to 5.00% for all but the most healthy financial institutions. Management of FFC
and FF Bank do not believe these rules will significantly impact the capital
requirements of FF Bank or cause FF Bank to fail to meet its regulatory capital
requirements.
NOTE G - EXTRAORDINARY ITEM
In January 1996, FFC redeemed all of its outstanding 8% Subordinated
Notes due November 1999 (which aggregated $54,925,000 at the date of
redemption). The net after-tax cost associated with this redemption, $686,000 or
$0.02 per share, has been reported as an extraordinary charge in the first
quarter of 1996. This transaction was funded principally through a dividend from
FF Bank.
-8-
<PAGE>
NOTE H - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For The
Six Months Ended
June 30,
1996 1995
------- -----
(In thousands)
Supplemental disclosure of cash flow information:
Cash paid or credited to accounts during
period for:
Interest on deposits and borrowings $111,090 $110,255
Income taxes 16,877 17,516
Non-cash investing activities:
Mortgage loans transferred to held for sale
portfolio 21,775 846
Loans receivable transferred to foreclosed
properties 3,214 3,704
Increase in net unrealized holding loss
on securities available for sale (3,606) (4,726)
Mortgage loans securitized and transferred to
mortgage-related securities available for sale 161,087 --
NOTE I - ACCOUNTING CHANGE
During the third quarter of 1995, the Corporation adopted Statement of
Financial Accounting Standards ("SFAS" or "the Statement") No. 122, "Accounting
for Mortgage Servicing Rights". SFAS No. 122 requires that a mortgage banking
enterprise recognize as a separate asset the rights to service mortgage loans
for others, whether those rights are purchased or originated.
In accordance with the Statement, an enterprise that acquires mortgage
servicing rights through either the origination or purchase of mortgage loans
and sells or securitizes those loans with servicing rights retained should
allocate the total cost of the mortgage loans to the mortgage servicing rights
and to the loans (without the mortgage servicing rights) based on their relative
fair values.
The results for the second quarter and the first six months of 1996
include gains of $969,000 ($640,000 after tax) and $1.8 million ($1.2 million
after tax), respectively, resulting from the capitalization of such originated
mortgage servicing rights.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF THE CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1996 (UNAUDITED) WITH DECEMBER 31, 1995
General:
Total assets increased to $5.579 billion at June 30, 1996 from $5.471
billion at December 31, 1995. Deposits increased to $4.446 billion at June 30,
1996 from $4.425 billion at year-end 1995 while borrowings increased to $640.9
million from $570.5 million during the same time frame. Advance payments by
borrowers for taxes and insurance increased by $31.8 million between December
31, 1995 and June 30, 1996 and other liabilities decreased $38.5 million from
December 31, 1995 to June 30, 1996. Stockholders' equity at June 30, 1996 was
$407.9 million, up from $384.9 million at year-end 1995.
Liquidity and Capital Resources:
At June 30, 1996, total consolidated liquidity, consisting of cash,
cash equivalents, and investment securities represented 7.22% of FFC's total
assets compared with 6.81% at December 31, 1995. FF Bank is in compliance with
requirements relating to minimum levels of liquid assets as defined by OTS
regulations. The ongoing management of liquid assets is an integral part of
FFC's overall asset/liability management program as described below under
"Asset/Liability Management." The cash and securities portfolios are among the
most flexible assets available for shorter term liability matching. Total
consolidated liquidity at June 30, 1996 increased by $30.5 million as compared
to December 31, 1995 liquidity as a result of the net effect of significant
changes in various categories of assets and liabilities during the six-month
interim period. Some of the more significant changes in these categories,
including liquid assets, are summarized as follows:
<TABLE>
<CAPTION>
Consolidated Balance Balance
Balance Sheet December 31, Increases June 30,
Classification 1995 (Decreases) 1996
- ------------------- ------------ ----------- --------
(In thousands)
<S> <C> <C> <C>
Cash and cash equivalents $ 172,109 $ (12,601) $ 159,508
Securities available for
sale:
Investment securities 80,999 67,842 148,841
Mortgage-related
securities 571,293 209,588 780,881
Securities held to
maturity:
Investment securities 119,426 (24,724) 94,702
Mortgage-related
securities 699,468 (39,521) 659,947
Loans receivable, in-
cluding loans held
for sale 3,616,800 (114,256) 3,502,544
Office properties 51,124 7 51,131
Intangible assets 21,481 (2,529) 18,952
Deposits 4,424,525 21,527 4,446,052
Borrowings 570,508 70,403 640,911
Advance payments by
borrowers for taxes
and insurance 13,206 31,778 44,984
Other liabilities 77,952 (38,510) 39,442
Stockholders' equity 384,917 22,988 407,905
</TABLE>
-10-
<PAGE>
Changes noted in the "Increases (Decreases)" column of the preceding
table are discussed below in the related sections of "Management's Discussion
and Analysis."
Management believes liquidity levels are proper and that adequate
capital and borrowings are available through the capital markets, the Federal
Home Loan Bank ("FHLB") and other sources. For a discussion of regulatory
capital requirements, see Note F to the unaudited consolidated financial
statements.
On an unconsolidated basis, FFC had cash of $10.3 million. During the
first quarter of 1996, FFC redeemed its subordinated debt of $54.9 million (See
Note G to the unaudited consolidated financial statements). The principal
ongoing sources of funds for FFC are dividends from FF Bank. Applicable rules
and regulations of the OTS impose limitations on capital distributions by
savings institutions such as FF Bank. Savings institutions such as FF Bank which
have capital in excess of all capital requirements before and after a proposed
capital distribution are permitted, after giving prior notice to the OTS, to
make capital distributions during a calendar year up to the greater of (i) 100%
of net income to date during the calendar year, plus the amount that would
reduce by 1/2 its "surplus capital ratio" (the excess capital over its capital
requirements) at the beginning of the calendar year, or (ii) 75% of its net
income over the most recent four-quarter period.
Total Loans Receivable and Held for Sale:
Total loans, including loans held for sale, decreased $114.3 million
from $3.617 billion at December 31, 1995 to $3.503 billion at June 30, 1996.
Total loans are summarized below as of the dates indicated.
<TABLE>
<CAPTION>
June 30, December 31, Increase
1996 1995 (Decrease)
------------- ------------ ----------
(In thousands)
<S> <C> <C> <C>
Real estate loans:
One- to four-family $1,868,988 $2,038,103 $(169,115)
Multi-family 240,879 220,772 20,107
Commercial and non-residential 176,715 153,173 23,542
---------- ---------- ---------
Total real estate loans 2,286,582 2,412,048 (125,466)
Other loans:
Consumer 399,569 362,659 36,910
Home equity 285,234 284,700 534
Education 255,978 240,650 15,328
Credit cards 210,922 214,107 (3,185)
Manufactured housing 121,080 139,385 (18,305)
Business 13,462 17,198 (3,736)
Less net items to loans receivable (70,283) (53,947) (16,336)
---------- ---------- ---------
Total loans (including loans held
for sale) $3,502,544 $3,616,800 $(114,256)
========== ========== =========
</TABLE>
The decrease in total loans during the first six months of 1996 was
due to a $125.5 million decrease in real estate loans. This decrease was
primarily the result of the net effect of i) originations of $406.8 million
offset by ii) repayments of $214.5 million, iii) loan sales of $172.1 million,
and iv) the securitization of $161.1 million of seasoned fixed-term fixed-rate
mortgage loans transferred to the mortgage-related securities portfolio. For a
further discussion of loan origination activity, see "Loan Originations".
Consumer loans increased $36.9 million and education loans increased
$15.3 million in 1996 as customer usage of these products continues to grow.
Manufactured housing loan
-11-
<PAGE>
balances decreased $18.3 million as FFC had previously ceased originating
manufactured housing loans and the portfolio continues to make scheduled
repayments.
Mortgage loans held for sale were $15.6 million at June 30, 1996 as
compared to $26.7 million at the end of 1995. Off-balance sheet commitments to
extend credit and to sell mortgage loans totaled $44.7 million and $20.8
million, respectively, at June 30, 1996 as compared to $40.2 million and $43.3
million, respectively, at December 31, 1995. During the six months ended June
30, 1996, market interest rates moved slightly lower than year-end 1995 rates
early in 1996 but then trended upward from year-end levels for the remainder of
the first six months. The fair value of on-balance sheet mortgage loans held for
sale and off- balance sheet commitments to originate and sell mortgage loans can
vary substantially depending upon the movement of interest rates. Management
utilizes various methods to insulate FFC from the effects of such interest-rate
movements, principally by securing forward commitments to sell loans in the
secondary mortgage market. However, there can be no assurance that these means
will be totally effective. Future operations may be affected by the
above-discussed risk factors.
Mortgage-Related Securities:
The mortgage-related securities ("MBS") portfolio increased $170.1
million during the six months ended June 30, 1996 primarily as a result of the
net effect of i) the purchase of $458.3 million of adjustable rate
U.S.Government agency-backed MBSs and ii) the aforementioned securitization of
$161.1 million of mortgage loans transferred to the mortgage-related securities
portfolio offset by iii) sales of MBSs having an aggregate par value of $331.7
million and iv) principal repayments of $111.3 million. At the end of the second
quarter, FF Bank had commitments to purchase adjustable rate U.S. Government
agency-backed MBSs having an aggregate par value of $92.4 million. Also, see
"Non-Performing MBSs" for discussion of non-performing MBSs.
-12-
<PAGE>
The following tables set forth, at the dates indicated, the
composition of the MBS portfolio including issuer, security type and financial
statement carrying value as well as classification according to
available-for-sale or held-to-maturity status:
Carrying Value At
June 30, December 31,
1996 1995
----------- --------
(In thousands)
Issuer/Security Type
U.S. Government agencies:
Mortgage-backed certificates $ 783,139 $ 349,216
Collateralized mortgage
obligations ("CMOs") 287,499 342,190
---------- ----------
Total agencies 1,070,638 691,406
---------- ----------
Private issuers:
Mortgage-backed certificates
Senior position 332,114 480,839
Mezzanine position 37,564 97,904
CMOs 512 612
---------- ----------
Total private issuers 370,190 579,355
---------- ----------
Totals $1,440,828 $1,270,761
========== ==========
Financial Statement Classification
Available-for-sale portfolio $ 780,881 $ 571,293
Held-to-maturity portfolio 659,947 699,468
---------- ----------
Total carrying value $1,440,828 $1,270,761
========== ==========
During the first six months of 1996, FFC reduced its holdings of private
issue MBSs by $209.2 million from $579.4 million at the end of 1995 to $370.2
million at June 30, 1996. This decrease included a $60.3 million reduction in
mezzanine position MBSs due to i) the sale of seven securities, at a nominal
loss, having an aggregate carrying value of $55.9 million and ii) a $5.0 million
writedown of three private-issue MBSs (See "Non-Performing MBSs").
FFC's investment in private-issuer MBSs has declined significantly in 1994,
1995 and 1996 due to prepayments and sales. The following table sets forth the
carrying value of FFC's private-issuer MBSs as of the indicated dates:
<TABLE>
<CAPTION>
At
June 30, At December 31,
-------------------------------------------------
1996 1995 1994 1993
---------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Private issuers:
Senior position $ 332,114 $ 480,839 $ 649,294 $ 912,461
Mezzanine position 37,564 97,904 107,721 220,576
CMOs 512 612 2,115 3,205
---------- ---------- ---------- ----------
Total $ 370,190 $ 579,355 $ 759,130 $1,136,242
========== ========== ========== ==========
Private issue
portfolio as
% of total MBSs 25.7% 45.6% 52.2% 85.8%
========== ========== ========== ==========
</TABLE>
FFC's portfolio of MBSs totaled approximately $1.44 billion at June 30,
1996 and, except for those securities discussed in "Non-Performing MBSs," were
either i) U.S. Government agency-backed or ii) rated at a minimum of investment
grade quality by at least one nationally recognized independent rating agency.
-13-
<PAGE>
Loan Delinquencies:
FFC monitors the delinquency status of its loan portfolio on a constant
basis and initiates a borrower contact and additional collection procedures as
necessary at an early date. Delinquencies and past due loans are, however, a
normal part of the lending function. When the delinquency reaches the status of
greater than 90 days, the loans are placed on a non-accrual basis until such
time as the delinquency is reduced again to 90 days or less. Non- accrual loans
are presented separately in the following section. Loan delinquencies of 90 days
or less, for the dates indicated, are summarized in the following chart:
June 30, December 31,
1996 1995
------------- ----------
(In thousands)
Loans Delinquent 30-59 Days
Residential real estate $ 8,998 $ 7,945
Manufactured housing 2,236 2,888
Credit card 2,264 2,555
Commercial real estate 85 303
Consumer, student and other 9,701 9,519
------- -------
$23,284 $23,210
======= =======
Loans Delinquent 60-90 Days
Residential real estate $ 1,331 $ 1,193
Manufactured housing 776 766
Credit card 1,294 1,315
Commercial real estate 498 606
Consumer, student and other 10,879 9,734
------- -------
$14,778 $13,614
======= =======
Total Loans Delinquent 30-90 Days
Residential real estate $10,329 $ 9,138
Manufactured housing 3,012 3,654
Credit card 3,558 3,870
Commercial real estate 583 909
Consumer, student and other 20,580 19,253
------- -------
$38,062 $36,824
======= =======
At June 30, 1996, the 30-90 day delinquencies increased $1.3 million to
$38.1 million from $36.8 million at year-end 1995. As a percent of total loans
receivable, these loan delinquencies increased from 1.02% at the end of 1995 to
1.09% at June 30, 1996. The increase in 30-90 day delinquencies relates to the
net effect of changes of such delinquencies for various loan categories,
including the following, i) an increase of $1.2 million for residential mortgage
loans, ii) an increase of $1.0 million for commercial business loans and iii) a
decrease of $600,000 for manufactured housing loans. Similar delinquencies for
other categories of loans changed by lesser amounts and tended to offset.
The residential mortgage delinquency increase is due to a combination of certain
collection system problems which have been corrected and a somewhat higher
delinquency experience recently exhibited by the mortgage borrowers in the
aggregate. A similar rise in mortgage delinquencies has been noted on a national
basis and FFC is closely monitoring its efforts to counter this recent trend.
All delinquent loans have been considered by management in its evaluation of the
adequacy of the allowances for loan losses.
-14-
<PAGE>
Non-Accrual Loans:
FFC places loans into a non-accrual status when loans are contractually
delinquent more than 90 days. If appropriate, loans may be placed into
non-accrual status prior to becoming 90 days delinquent based upon management's
analysis. Non-accrual loans are summarized, for the dates indicated, in the
following table:
June 30, December 31,
1996 1995
------------- ------------
(In thousands)
One- to four-family residential $ 6,769 $ 6,449
Multi-family residential 287 873
Commercial and other real estate 170 162
Manufactured housing 930 926
Consumer and other 4,096 3,836
------- -------
$12,252 $12,246
======= =======
Non-accrual loans remained steady at $12.3 million at June 30, 1996
versus $12.2 million at December 31, 1995. As a percentage of net loans
receivable, non-accrual loans increased slightly to 0.35% at June 30, 1996 from
0.34% at December 31, 1995. The 1996 net increase in non-accrual loans reflects
the offsetting effect of an increase in credit card loan non-accrual loans of
$300,000 and a decrease of $200,000 in residential mortgage loan non-accrual
accounts. The increase in credit card non-accrual loans is indicative of the
national delinquency trends and statistics for this product, however, FFC
continues to experience somewhat smaller increases in overall credit card
delinquencies. This is demonstrated by a decrease of $300,000 in the 30-90 day
delinquent credit card accounts between year-end 1995 and June 30, 1996, as
scheduled in the previous section. The residential mortgage loan non-accrual
decrease represents normal changes as loans either return to more current
performance (lesser delinquency) or migrate to foreclosed status if the
delinquency is not cured. Consumer loan, manufactured housing loan and
commercial mortgage loan non-accrual totals changed by lesser amounts. FFC has
had no significant troubled debt restructurings during 1996.
All loans included in non-accrual status have been considered by
management in its review of the adequacy of allowances for loan losses.
Non-Performing MBSs:
At June 30, 1996, FFC had two non-performing MBSs with a carrying value
of $7.9 million, the estimated fair value of these securities. Each of these
MBSs was originally structured as a mezzanine security, which is subordinate to
the senior position of that issue but is structured to be superior to other
subordinate positions designed to absorb first losses. FFC has not received full
monthly payments on these securities since 1993. The payments have been
interrupted due to delinquencies and foreclosures in the underlying mortgage
portfolio and all of the cash flows are currently directed to owners of the
senior position(s). Further delayed receipt of payments is probable. The
underlying loans comprising these securities had been serviced by a California
institution under the control of the Resolution Trust Corporation ("RTC").
During 1994 and 1995, servicing was transferred from the RTC
-15-
<PAGE>
to the trustee and subsequently to a third-party servicer. Availability of
current information as to future performance of these MBSs continues to be
limited.
In 1994, independent national rating agencies downgraded these mezzanine
securities to below investment grade. Subsequently, writedowns of $13.1 million,
including $5.0 million in 1996, have been recorded reflecting permanent
impairment of these securities having an original aggregate par value of
approximately $21.8 million. The writedowns are based upon information from the
rating agencies as well as discounted cash flow analyses performed by
management, using current assumptions for delinquency levels, foreclosure rates,
recovery ratios in the underlying portfolios, market prices, and other factors.
Relative to both mezzanine issues, the positions subordinate to FFC have been
eliminated and principal losses of approximately $5.2 million have been
realized, including $4.4 million during 1996. These realized principal losses
were anticipated in the aforementioned $13.1 million writedown previously taken.
Independent national rating agencies have also downgraded, to below
investment grade, additional MBSs of four unrelated issuers in which FFC has
senior ownership positions having an aggregate par value, amortized cost and
carrying value of $19.9 million, $19.4 million and $17.2 million, respectively,
at June 30, 1996. Three of these senior position securities continue to be
performing assets and are superior to subordinate positions amounting to 7.10%
of the current aggregate par value of the related mortgage pool securities at
June 30, 1996.
Relative to the fourth senior position MBS, collateralized by
multi-family properties located in California, the positions subordinate to FFC
have been eliminated during 1996. Based upon this event and other factors,
management has determined that permanent impairment of this security has
occurred and the security, thus, has been written down in the second quarter of
1996 by $900,000 to its approximate fair value of $2.8 million. Principal losses
of $104,000 have been realized since the writedown. This senior position
security has otherwise continued to be a performing asset.
As part of its current investment policy, FFC does not purchase any
subordinated position MBSs and has further strengthened the criteria for private
issuer MBS purchases.
No private issuer MBSs have been purchased since 1992.
Management has taken writedowns relating to the above referenced
securities based upon its evaluations, including information from the rating
agencies as well as discounted cash flow analyses performed by management, which
are based upon certain assumptions for future delinquency levels, foreclosure
rates and recovery ratios in the underlying portfolios. There can be no
assurance that these evaluations will remain the same in the future should
economic conditions, market conditions, or other factors differ significantly
from the assumptions used. As such, further writedowns could be experienced in
the future. Management has the intent and ability to retain its investment in
these securities for a period of time sufficient to allow for anticipated
recovery of fair value.
Allowances for Loan Losses:
FFC's loan portfolios and off-balance sheet financial guarantees are
evaluated on a continuing basis to determine the additions to the allowances for
losses and the related balance in the allowances. These evaluations consider
several factors including, but not
-16-
<PAGE>
limited to, general economic conditions, loan portfolio compositions, loan
delinquencies, prior loss experience, and management's estimation of future
potential losses. The evaluation of allowances for loan losses includes a review
of both known loan problems as well as a review of potential problems based upon
historical trends and ratios.
A summary of activity in the allowances for loan losses, for the three
months and six months ended June 30, 1996 and 1995, follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------------
1996 1995 1996 1995
-------- -------- -------- ------
(In thousands)
<S> <C> <C> <C> <C>
Allowances at beginning of period $24,236 $25,149 $25,235 $25,180
Provisions 2,180 2,073 4,080 4,192
Charge-offs (2,937) (2,961) (6,070) (5,499)
Recoveries 276 382 510 770
------- ------- ------- -------
Allowances at end of period $23,755 $24,643 $23,755 $24,643
======= ======= ======= =======
</TABLE>
A discussion of loan loss provisions and charge-offs is presented in
"Management's Discussion and Analysis--Comparison of the Unaudited Consolidated
Statements of Income for the Three Months and Six Months Ended June 30, 1996 and
1995." An analysis of allowances by loan category and the percentage of such
allowances by category and in the aggregate to loans receivable at the dates
indicated, follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------------------- ----------------------
As Percentage As Percentage
Allowance Of Total Loans Allowance Of Total Loans
Amount In Category Amount In Category
------ ----------- ------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Credit cards $ 6,629 3.14% $ 6,425 3.00%
Residential real estate 6,874 .34 7,726 .34
Manufactured housing 2,283 1.89 3,034 2.18
Commercial and non-resi-
dential real estate 3,684 2.08 3,823 2.50
Consumer 3,249 .81 3,029 .84
Home equity 546 .19 562 .20
Commercial business 445 3.31 585 3.40
Education 45 .02 51 .02
------- -------
$23,755 .68% $25,235 .70%
======= ===== ======= =====
</TABLE>
The allowances for loan losses were $23.8 million, or 0.68% of loans
receivable, at June 30, 1996 compared to $25.2 million, or 0.70%, at December
31, 1995. The allowances for losses represented 193.89% of non-accrual loans at
June 30, 1996 as compared to 206.07% at the end of 1995. The decrease in the
aggregate allowances for losses from year-end 1995 to June 30, 1996 relates
primarily to residential real estate loans and manufactured housing loans based
upon the resolution of certain problem loan groups during 1996, for which
allowances had been previously established. Management believes that the
allowances for losses are sufficient based upon its current evaluations.
-17-
<PAGE>
Foreclosed Properties and Repossessed Assets:
Foreclosed properties and other repossessed assets are summarized, for
the dates indicated, as follows:
June 30, December 31,
1996 1995
------------- -------------
(In thousands)
Foreclosed real estate properties $ 2,378 $ 3,967
Manufactured housing owned 247 303
Consumer and other repossessed assets 84 102
------- -------
2,709 4,372
Less allowances for losses (424) (993)
------- -------
$ 2,285 $ 3,379
======= =======
Foreclosed properties, net of allowances for losses, decreased $1.1
million to $2.3 million at June 30, 1996 from $3.4 million at December 31, 1995.
A summary of the activity in allowances for losses on foreclosed
properties, for the three months and six months ended June 30, 1996 and 1995, is
presented below.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Allowances at beginning
of period $ 868 $1,095 $ 993 $1,146
Provisions (332) 15 (332) 30
Charge-offs (112) (24) (237) (90)
------ ------ ------ ------
Allowances at end of
period $ 424 $1,086 $ 424 $1,086
====== ====== ====== ======
</TABLE>
The allowances for losses on foreclosed properties have been maintained
at levels adequate to provide for reasonable potential losses within the
existing foreclosed property portfolio. The most recent additions of foreclosed
properties have been residential properties with lower risks which allows for
the reduction of the allowance balance while realizing losses within the current
portfolio of properties. Provisions for losses on foreclosed properties were
credited during the second quarter of 1996 to reverse the allowance related to
non-residential properties, none of which are in inventory at June 30, 1996.
A large commercial real estate property (having a carrying amount of
$1.0 million or greater) in Fort Worth, Texas included in foreclosed properties
at December 31, 1995 was sold during the second quarter of 1996. Also included
in the table below is a previously foreclosed property (Milwaukee) which was
transferred to FFC and is currently classified as a real estate investment held
for sale. These properties are carried at the lower of cost or fair value.
Carrying Value At
-----------------
Property June 30, December 31,
Type Property Location 1996 1995
- -------- ----------------- ------------- -------------
(In thousands)
Retail Milwaukee, Wisconsin $ 1,049 $ 1,089
Retail Fort Worth, Texas -- 1,000
-18-
<PAGE>
All of the above foreclosed real estate properties, repossessed assets
and real estate investments held for sale have been considered by management in
its evaluation of the adequacy of allowances for losses.
Classified Assets, Including Non-Performing Assets:
For regulatory purposes, FF Bank utilizes a comprehensive classification
system for thrift institution problem assets. This classification system
requires that problem assets be classified as "substandard", "doubtful" or
"loss," depending upon certain characteristics of the particular asset or group
of assets as defined by supervisory regulations.
An asset is classified "substandard" if management believes it contains
defined characteristics relating to borrower net worth, paying capacity or value
of collateral which indicate that some loss is distinctly possible if noted
deficiencies are not corrected. "Doubtful" assets have the same characteristics
present in substandard assets but to a more serious degree, to the belief of
management, such that it is improbable that the asset could be collected or
liquidated in full. "Loss" assets are deemed to be uncollectible or of such
minimal value that their continuance as assets without being specifically
reserved is not warranted. Substandard and doubtful classifications require the
establishment of prudent general allowance for loss amounts while loss assets,
to the extent that such assets are classified as a "loss", require a 100%
specific allowance or that the asset be charged off.
In general, classified assets include non-performing assets plus other
loans and assets, including contingent liabilities (see Note D), meeting the
criteria for classification. Non- performing assets include non-accrual loans,
non-performing MBSs or assets i) which were previously loans which are not
substantially performing under the contractual terms of the original notes, or
ii) for which known information about possible credit problems of borrowers
causes management to have serious doubts as to the ability of such borrowers to
comply with current contractual terms. This non-performing characteristic
impacts directly upon the interest income normally expected from such assets.
Specifically included are the loans held on a non-accrual basis, non-performing
MBSs, and real estate judgments subject to redemption and foreclosed properties
for which FF Bank has obtained title.
-19-
<PAGE>
Classified assets, including non-performing assets, for FF Bank,
categorized by type of asset are set forth in the following table:
June 30, December 31,
1996 1995
------------- ------------
(In thousands)
Classified assets:
Non-performing assets:
Non-accrual loans $12,252 $12,246
Non-performing MBSs 7,930 12,858
Real estate held for sale by FFC 1,269 1,309
Foreclosed properties and other
repossessed assets 2,285 3,379
------- -------
Total Non-Performing Assets 23,736 29,792
Add back general valuation allowances net-
ted against foreclosed properties above 424 993
Adjustment for non-performing residential
loans not classified due to low
loan-to-appraisal value (626) (584)
Adjustment for real estate held for sale
not included in FF Bank classified
assets (1,269) (1,309)
Additional classified performing loans:
Residential real estate 141 1,013
Commercial real estate 6,442 5,890
Consumer and other 1,004 698
Additional classified performing MBS 2,775 --
------- -------
Total Classified Assets $32,627 $36,493
======= =======
During the six months ended June 30, 1996, classified assets decreased
$3.9 million to $32.6 million from $36.5 million at December 31, 1995 as the net
result of the $5.0 million decrease in the carrying value of two non-accrual
mortgage-backed securities referred to previously (see "Non-Performing MBSs"),
the $2.8 million addition of the performing senior position MBS collateralized
by multi-family properties, as also discussed above, and the $1.7 million
reduction in the combined foreclosed property inventory ($1.1 million) plus its
related general allowance for loss add-back ($600,000). The changes in
additional classifications for various other performing loan categories
virtually offset as such commercial real estate mortgages and consumer-related
loans increased and residential mortgage loans decreased. These additional
classifications are based on certain characteristics identified as potential
weaknesses. As a percentage of total assets, classified assets decreased from
0.67% at year-end 1995 to 0.58% at June 30, 1996.
The following table sets forth, at the dates indicated, one
performing commercial real estate mortgage loan in excess of $1.0 million,
included in classified assets due to the possible adverse effects of
identifiable future events.
Loan Amount Classified
----------------------
Property Type Of Property June 30, December 31,
Loan Collateral Location 1996 1995
- ---------------- ---------- ----------- -----------
(In thousands)
Office/Land Sheboygan, Wisconsin $ 3,577 $3,596
All adversely classified assets at June 30, 1996, have been considered
by management in its evaluation of the adequacy of allowances for losses.
-20-
<PAGE>
Deposits and Other Liabilities:
Deposits increased $21.5 million during the six months ended June 30,
1996 including interest credits of $80.2 million. Excluding the interest
credits, the net deposit withdrawals were reduced due to the success of a new
program for short-term certificate of deposit accounts. The weighted average
cost of deposits of 4.43% at June 30, 1996 was lower than the 4.55% reported at
December 31, 1995.
Advance payments by borrowers for taxes and insurance increased by
$31.8 million during the first six months of 1996 as a result of the normal
cumulative monthly escrow deposits made by borrowers less interim payments of
taxes and insurance premiums.
Other liabilities decreased $38.5 million from December 31, 1995 to
June 30, 1996. The higher other liabilities balance at year-end 1995 represented
the outstanding real estate property tax checks issued to municipalities on
behalf of the borrowers and as those checks were paid during early 1996, other
liabilities decreased significantly.
Borrowings:
At June 30, 1996, FFC's consolidated borrowings increased to $640.9
million from $570.5 million at December 31, 1995. In January 1996, FFC redeemed
all of its outstanding 8% Subordinated Notes due November, 1999, which
aggregated $54.9 million at the date of redemption. This redemption was offset
by a $138.1 million net increase in shorter-term FHLB advances used to fund the
purchase of U.S. Government Agency mortgage-backed securities.
Stockholders' Equity:
Stockholders' equity at June 30, 1996 was $407.9 million, or 7.31% of
total assets, as compared to $384.9 million, or 7.04% of total assets, at
December 31, 1995. The major changes in stockholders' equity included i) net
income of $34.2 million earned during the first six months of 1996 offset by ii)
cash dividend payments to stockholders of $9.0 million. Stockholders' equity per
share increased from $12.97 per share at year-end 1995 to $13.64 per share at
June 30, 1996.
Regulatory Capital:
As set forth in Note F to the unaudited consolidated financial
statements, FF Bank exceeds all regulatory capital requirements mandated by the
OTS and FDIC.
-21-
<PAGE>
Loan Originations:
A comparison of loan originations for the first six months of 1996 and
1995, including loans originated for sale (but excluding purchases of MBSs), is
set forth below:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------
1996 Percent 1995 Percent
-------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loan Type
Mortgage:
One- to four-family $ 347,146 60.0% $ 195,499 49.2%
Multi-family 19,429 3.4 12,630 3.2
Commercial/non-residential 40,185 6.9 10,733 2.7
---------- ----- ---------- -----
Total mortgage origina-
tions 406,760 70.3 218,862 55.1
Consumer 137,469 23.7 105,563 26.6
Student 33,585 5.8 41,026 10.3
Home equity-net 533 .1 30,092 7.6
Commercial business 579 .1 1,677 .4
---------- ----- ---------- ----
Total loans originated 578,926 100.0% 397,220 100.0%
===== =====
Decrease(increase) in undisbursed
loan proceeds (18,547) 6,586
---------- ----------
Total loans disbursed $ 560,379 $ 403,806
========== ==========
</TABLE>
Total loan originations increased to $578.9 million for the first six
months of 1996 from $397.2 million for the same period in 1995. This net 1996
increase of $181.7 million was primarily attributable to a $187.9 million
increase in mortgage loan originations.
One- to four-family mortgage loan originations increased $151.6 million
to $347.1 million for the first six months of 1996 as compared to $195.5 million
for the same period in 1995. At June 30, 1996, one- to four-family mortgage loan
applications in process and commitments totaled $72.9 million and $30.5 million,
respectively, as compared to $51.2 million and $24.7 million at December 31,
1995. The increase in originations, applications in process, and commitments
reflects increased borrower demand as interest rates during the first six months
of 1996 were lower than the market interest rates during the same period in
1995. Approximately 37% of originations for the first six months of 1996 were
adjustable-rate mortgage loans which are held for investment purposes. With the
decrease in interest rates compared to the first six months of 1995, borrower
preference has turned toward fixed-rate mortgage loans. Longer-term fixed-rate
mortgages are normally sold into the secondary market.
Consumer loan originations increased $31.9 million to $137.5 million in
the first six months of 1996 as customer usage of this product continues to
grow.
Student loan originations decreased $7.4 million to $33.6 million during
the first six months of 1996 as a result of a decrease in government guaranteed
portfolio acquisitions from other lenders.
Home equity loan balances remained constant at $285 million as new
originations were offset by refinancing and payoffs resulting in record
repayment levels for the product line in the first six months of 1996.
-22-
<PAGE>
Credit card loans decreased $3.2 million in the first six months of 1996
due to net decreases in credit card loan balances which are included in loan
repayments in FFC's consolidated statement of cash flows. Credit card balances
traditionally decrease in the first part of the year due to normal seasonal
reductions of consumer demand following the calendar year end.
Asset/Liability Management:
The objective of FFC's asset/liability policy is to manage interest rate
risk so as to maximize net interest income over time in changing interest-rate
environments. To this end, management believes that strategies for managing
interest-rate risk must be responsive to changes in the interest-rate
environment and must recognize and accommodate the market demands for particular
types of deposit and loan products.
Interest-bearing assets and liabilities can be analyzed by measuring the
magnitude by which such assets and liabilities are interest-rate sensitive and
by monitoring an institution's interest-rate sensitivity "gap." An asset or
liability is determined to be interest-rate sensitive within a specific time
frame if it matures or reprices within that time period. An interest-rate
sensitivity "gap" is defined as the difference between the amount of
interest-earning assets anticipated to mature or reprice within a specific time
period and the amount of interest-costing liabilities anticipated to mature or
reprice within the same time period. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities that mature or reprice within a given time frame. A gap is
considered negative when the amount of interest-rate sensitive liabilities
exceeds the amount of interest-rate sensitive assets that mature or reprice
within a specified time period.
The table on page 25 sets forth the combined estimated
maturity/repricing structure of FFC's consolidated interest-earning assets
(including net items) and interest-costing liabilities at June 30, 1996.
Assumptions regarding prepayment and withdrawal rates are based upon FFC's
historical experience, and management believes such assumptions are reasonable.
The table does not necessarily indicate the impact of general interest rate
movements on FFC's net interest income because repricing of certain categories
of assets and liabilities through, for example, prepayments of loans and
withdrawals of deposits, is beyond FFC's control. As a result, certain assets
and liabilities indicated as repricing within a stated period may in fact
reprice at different times and at different rate levels. Further, in the event
of a change in interest rates, prepayment and early withdrawal levels may
deviate significantly from those assumed in calculating the data in the table.
FFC's consolidated negative one-year interest-rate sensitivity gap at
June 30, 1996 was $169.2 million or 3.03% of total assets. The one-year negative
gap decreased $30.7 million from the December 31, 1995 negative gap of $199.8
million or 3.65% of total assets at that date.
FFC's consolidated one-year negative gap position of 3.03% at June 30,
1996 falls within management's operating range of a 10% positive gap position to
a 10% negative gap position. In view of the current interest-rate environment
and the related impact on customer behavior, management believes that it is
extremely important to weigh and balance the effect of asset/liability
management decisions in the short-term in its efforts to maintain net interest
margins and acceptable future profitability. As such, management believes that
it has been
-23-
<PAGE>
able to achieve a consistent net interest margin while still meeting its
asset/liability management objectives.
In compliance with OTS regulations, FF Bank also measures and evaluates
interest-rate risk via a separate methodology. The net market value of
interest-sensitive assets and liabilities is determined by measuring the net
present value of future cash flows under varying interest rate scenarios in
which interest rates would theoretically increase or decrease up to 400 basis
points on a sudden and prolonged basis. This theoretical analysis at the end of
the second quarter of 1996 indicates that FF Bank's current financial position
should adequately protect FF Bank, and thus FFC, from the effects of rapid rate
changes. The OTS has added an interest-rate risk capital calculation such that
an institution with a measured interest-rate risk exposure greater than
specified levels must deduct an interest-rate risk component when calculating
the OTS risk-based capital requirement. The final implementation of this rule
was pending at June 30, 1996 as the OTS has delayed the effective date of the
regulation pending its adoption of a process by which an institution may appeal
an OTS interest-rate risk capital deduction determination. At June 30, 1996, FF
Bank would not have been required to deduct an interest-rate risk component
under the OTS regulations.
-24-
<PAGE>
FIRST FINANCIAL CORPORATION CONSOLIDATED GAP ANALYSIS AT JUNE 30, 1996
<TABLE>
<CAPTION>
Three Greater Greater Greater Greater
Months Four Months Than One Than Three Than Five Than Ten Greater
and Through Through Through Through Through Than
Under One Year Three Years Five Years Ten Years 20 Years 20 Years Total
--------- ---------- ----------- ----------- ---------- ---------- -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rate-sensitive assets:
Investments and interest-
earning deposits, including
federal funds (a)(b) $ 120,701 $ 12,677 $ 41,110 $ 65,714 $ 574 $ 32,407 $ 36,392 $ 309,575
Mortgage-related securities (b) 572,770 779,861 34,294 20,915 25,990 6,932 66 1,440,828
Mortgage loans:
Fixed-rate (c)(d) 67,278 131,559 285,792 204,734 273,819 182,394 3,850 1,149,426
Adjustable-rate (c) 204,768 499,684 370,242 -- -- -- -- 1,074,694
Other loans 692,224 219,138 214,597 84,832 54,781 12,852 0 1,278,424
---------- ---------- ---------- ---------- -------- -------- ---------- -----------
1,657,741 1,642,919 946,035 376,195 355,164 234,585 40,308 5,252,947
Rate-sensitive liabilities:
Deposits (e)(f):
Checking 125,189 26,136 65,271 51,018 79,922 72,623 39,920 460,079
Money market accounts 99,766 44,389 101,995 53,037 44,816 11,377 1,264 356,644
Passbook 275,759 199,259 61,893 44,563 64,172 40,840 9,580 696,066
Certificates of deposit 721,448 1,350,470 750,504 141,461 3,441 -- -- 2,967,324
Borrowings 627,298 100 4,654 2,797 832 1,910 3,320 640,911
---------- ---------- ---------- ---------- -------- -------- ---------- -----------
1,849,460 1,620,354 984,317 292,876 193,183 126,750 54,084 5,121,024
---------- ---------- ---------- ---------- -------- -------- ---------- -----------
GAP (repricing difference) $ (191,719) $ 22,565 $ (38,282) $ 83,319 $161,981 $107,835 $ (13,776) $ 131,923
========== ========== ========== ========== ======== ======== ========== ===========
Cumulative GAP $ (191,719) $ (169,154) $ (207,436) $ (124,117) $ 37,864 $145,699 $ 131,923
========== ========== ========== ========== ======== ======== ==========
Cumulative GAP/Total assets (3.44)% (3.03)% (3.72)% (2.22)% 0.68% 2.61% 2.36%
========== ========== ========== ========== ======== ======== ==========
<FN>
(a) Investments are adjusted to include FHLB stock totaling $32.4 million as
investments in the "Greater Than Ten Through 20 Years" category.
(b) Investment and mortgage-related securities are presented at carrying
value, including net unrealized gain or loss on available-for-sale
securities.
(c) Based upon 1) contractual maturity, 2) repricing date, if applicable, 3)
scheduled repayments of principal and 4) projected prepayments of
principal based upon FFC's historical experience as modified for current
market conditions.
(d) Includes loans held for sale.
(e) Deposits include $45.0 million of advance payments by borrowers for tax
and insurance and exclude accrued interest on deposits of $10.9 million.
(f) FFC has assumed that its passbook savings, checking accounts and money
market accounts would have projected annual withdrawal rates, based upon
FFC's historical experience, of 26%, 34% and 42%, respectively.
</FN>
</TABLE>
-25-
<PAGE>
COMPARISON OF THE
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
Selected Income Statement Information:
For the second quarter of 1996, FFC reported net income of $17.6
million, up from the $16.3 million reported for the second quarter of 1995.
Fully diluted earnings per share for the 1996 quarter amounted to $0.58 per
share as compared to $0.54 per share for the 1995 quarter. The annualized return
on assets for the second quarter of 1996 increased to 1.29% from 1.19% for 1995,
while the annualized return on average equity for the second quarter of 1996 was
17.41%, compared to 18.76% for the second quarter of 1995.
For the first half of 1996, FFC reported income, before an
extraordinary charge, of $34.9 million and net income of $34.2 million. In
comparison, net income of $27.1 million was reported for the first half of 1995.
The 1996 extraordinary charge of $686,000 , or $0.02 per share, resulted from
costs associated with the early redemption of FFC's outstanding subordinated
notes originally scheduled to mature in November 1999. First half 1995 results
included a $4.0 million acquisition charge, or $0.14 per share, related to the
FirstRock acquisition. Fully diluted earnings per share for the first half of
1996 amounted to $1.14 per share prior to the extraordinary charge, while net
income per share was $1.12 per share as compared to $0.90 per share for the
first half of 1995. Excluding the 1996 extraordinary item and the 1995
acquisition charge, the annualized return on assets for the first half of 1996
increased to 1.28% from 1.14% for 1995, while the annualized return on average
equity for the first half of 1996 was 17.55%, compared to 18.28% for the same
period of 1995.
Net Interest Income:
Net interest income increased $200,000 to $45.7 million during the
second quarter of 1996 from $45.5 million for the second quarter of 1995 due to
the net effect of i) a decrease in average balances of interest-earning assets
and interest-bearing liabilities from $5.225 billion and $5.054 billion,
respectively, in 1995 to $5.186 billion and $4.938 billion, respectively, in
1996, and ii) an increase in the net interest margin to 3.52% for the second
quarter of 1996 from the 3.47% reported for the second quarter of 1995. The
decrease in average interest-earning assets in 1996 was offset by an improvement
in the earning-asset ratio from 103.29% in 1995 to 105.01% in 1996. The average
yield of interest-earning assets (8.02% in 1995 versus 7.87% in 1996) decreased
by 15 basis points, in comparison to a 13 basis point decrease in the average
cost of interest-bearing liabilities (4.70% in 1995 versus 4.57% in 1996).
Net interest income remained at $91.7 million during the first six
months of 1996 and 1995, primarily due to a decrease in average balances of
interest-earning assets and interest-bearing liabilities from $5.234 billion and
$5.069 billion, respectively, in 1995 to $5.180 billion and $4.939 billion,
respectively, in 1996. The net interest margin of 3.53% for the first six months
of 1996, however, was up from the 3.47% reported for the first six months of
1995. The decrease in average interest-earning assets in 1996 was offset by an
improvement in the earning-asset ratio from 103.25% in 1995 to 104.86% in 1996.
The average yield of interest-earning assets (7.93% in 1995 versus 7.95% in
1996) increased by 2
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<PAGE>
basis points, which was the same as the increase in the average cost of
interest-bearing liabilities (4.61% in 1995 versus 4.63% in 1996).
Interest Spread:
The following table sets forth the weighted average yield earned on
FFC's interest-earning assets, the weighted average interest rate paid on
deposits and borrowings, the net spread between yield earned and rates paid and
the net interest margin during the three months and six months ended June 30,
1996 and 1995. A comparison of similar data at June 30, 1996 and 1995 is also
shown.
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended At
June 30, June 30, June 30,
------------------ ----------------- --------------
1996 1995 1996 1995 1996 1995
-------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Weighted average yield on
interest-earning assets 7.87% 8.02% 7.95% 7.93% 7.98% 8.01%
Weighted average rate paid
on deposits and borrowings 4.57 4.70 4.63 4.61 4.61 4.74
----- ----- ----- ----- ----- -----
Interest spread 3.30% 3.32% 3.32% 3.32% 3.37% 3.27%
===== ===== ===== ===== ===== =====
Net interest margin (net
interest income as a
percentage of earning
assets) 3.52% 3.47% 3.53% 3.47% 3.50% 3.40%
===== ===== ===== ===== ===== =====
</TABLE>
The interest spread remained stable for both the three month and six
month periods ended June 30, 1996 and 1995 due to the factors noted above. The
interest margin increased to 3.52% and 3.53%, respectively for the three month
and six month periods ended June 30, 1996 as compared to 3.47% for the 1995
periods. The interest spread and the net interest margin were 3.37% and 3.50%,
respectively, at June 30, 1996 up from 3.27% and 3.40%, respectively, at June
30, 1995.
Provisions For Losses on Loans:
Provisions for loan losses increased by $100,000 for the second quarter
of 1996 as compared to the 1995 quarter while the provisions decreased $100,000
to $4.1 million for the six months ended June 30, 1996 compared to the same
period in 1995. Charge-offs for all periods displayed exceeded related period
provisions due to i) previously provided for charge-offs related to the
manufactured housing portfolio and ii) lower provisions added to the loss
allowances for residential mortgage loans based on current evaluations of the
portfolio.
-27-
<PAGE>
The following table summarizes FFC's net charge-off experience by
category for the three months and six months ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- --------------------
1996 1995 1996 1995
------------ ----------- ---------- -------
Net Net Net Net
Charge-offs Charge-offs Charge-offs Charge-offs
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loan Type
- ---------
Credit cards $2,197 $1,733 $4,313 $3,174
Manufactured housing 286 251 478 691
Residential real estate 47 436 400 564
Consumer and other 130 50 199 13
Commercial business 1 109 170 287
------ ------ ------ ------
$2,661 $2,579 $5,560 $4,729
====== ====== ====== ======
Net charge-offs as a
percent of average loans
outstanding (annualized) 0.30% 0.29% 0.31% 0.27%
====== ====== ====== ======
</TABLE>
The $100,000 increase in net charge-offs for the quarter ended June 30,
1996 versus the same period in 1995 relates primarily to the increase in credit
card loan net charge-offs. Similarly, the $900,000 increase in net chargeoffs
for the first six months of 1996 compared to the first six months of 1995
relates primarily to the credit card loss experience. While the current
increased level of credit card loan net charge-offs is following the national
trend, FFC's experience is at a somewhat lower percentage than the national
averages. Management has increased the provisions for losses allocated to credit
card loss allowances to keep pace with net charge-off experience and has
increased the allowance at June 30, 1996 to 3.14% of credit card loan balances
from 3.00% as of December 31, 1995.
The OTS and the FDIC, as an integral part of their supervisory
examination process, periodically review FF Bank's allowances for losses. These
agencies may require FF Bank to recognize additions to the allowances based upon
their judgment of information available to them at the time of their
examination. A regularly scheduled supervisory examination by the OTS was
completed in early 1996 and no material corrective actions were required.
Management of FFC and FF Bank believe that the current level of
provisions for losses are sufficient based upon its allowance criteria. See
"Allowances for Loan Losses" for further discussion.
Non-Interest Income:
Non-interest income increased to $11.4 million for the quarter ended
June 30, 1996 from $10.4 million in 1995. Deposit fee income increased $300,000
in 1996. Service fees on loans sold decreased $200,000 in 1996 as the average
servicing rate on such serviced loans continued to decline as a result of
competition in the secondary mortgage market. The gain on disposition of loans,
MBSs, and investment securities increased $600,000 in 1996 due to the net effect
of i) a realized gain of $2.4 million on the sale of available-for-sale MBSs and
investment securities during the second quarter of 1996, ii) an unrealized loss
of $2.8 million recorded as a result of the writedown of three MBSs (see
"Non-Performing MBSs") and iii) an increase of $1.0 million on gains achieved
upon the sale of loans in the secondary mortgage market and the realization of
related originated mortgage servicing rights ("OMSRs"). Gains realized from the
sale of loans, and the recognition of related OMSRs,
-28-
<PAGE>
increased in 1996 due to the lower interest-rate environment prevailing during
the early part of second quarter of 1996, compared to 1995, as borrowers shifted
to longer term fixed-rate financing and as a result of a change in accounting
methodology. (See Note I to Unaudited Consolidated Financial Statements). FFC
sells long-term, fixed-rate mortgage loans in the normal course of interest-rate
risk management. Gains or losses realized from the sale of loans held for sale
and the recognition of related OMSRs can fluctuate significantly from period to
period depending upon the volatility of interest rates and the volume of loan
originations. Thus, results of sales in any one period may not be indicative of
future results.
Non-interest income increased to $21.6 million for the six months ended
June 30, 1996 from $20.6 million in 1995. Deposit fee income increased $900,000
in 1996. Insurance and brokerage sales commissions decreased $200,000 as FFC's
insurance agency subsidiary realized a one-time premium in the first quarter of
1995. The gain on disposition of loans, MBSs, and investment securities
increased $800,000 in 1996 due to the net effect of i) a realized gain of $3.6
million on the sale of available-for-sale MBSs and investment securities during
the first half of 1996, ii) an unrealized loss of $5.0 million recorded as a
result of the writedown of three MBSs (see "Non-Performing MBSs") and iii) an
increase of $2.1 million on gains achieved upon the sale of loans in the
secondary mortgage market and the realization of related OMSRs. Gains realized
from the sale of loans, and the recognition of related OMSRs, increased in 1996
due to the lower interest-rate environment prevailing during 1996. Other income
declined $300,000 in 1996 from 1995 as a result of interest realized in 1995
upon the settlement of open federal income tax issues relating to taxable years
ending prior to 1989.
Non-Interest Expense:
Non-interest expenses decreased $200,000 for the quarter ended June 30,
1996 as compared to the same period in 1995, as FFC continues to effectively
control operating costs. Non-interest expenses, excluding the FFC acquisition
charge, decreased as a percentage of average assets to 2.07% for the second
quarter of 1996 as compared to 2.08% for the same period in 1995. Controllable
non-interest expenses, which exclude the amortization of intangible assets and
the net cost of operations of foreclosed properties increased slightly to 2.00%
of average assets for the quarter ended June 30, 1996 as compared to 1.98% for
the same period in 1995. Conversely, FFC's efficiency ratio (which represents
the ratio of controllable expenses to recurring income) improved to 48.36% for
the quarter ended June 30, 1996, as compared to 48.90% for the corresponding
1995 period.
Non-interest expenses decreased approximately $7.8 million for the six
months ended June 30, 1996 as compared to the same period in 1995, primarily due
to i) acquisition costs, totaling $6.5 million, incurred relative to the 1995
FirstRock acquisition and ii) the consolidation of operations following that
acquisition. Non-interest expenses, excluding the FFC acquisition charge,
decreased as a percentage of average assets to 2.12% for the first six months of
1996 as compared to 2.15% for the same period in 1995. Controllable non-interest
expenses, which exclude the amortization of intangible assets and the net cost
of operations of foreclosed properties, decreased to 2.03% of average assets for
the six months ended June 30, 1996 as compared to 2.06% for the same period in
1995. In addition, the efficiency ratio improved to 49.26% for the six months
ended June 30, 1996, as compared to 50.36% for the corresponding 1995 period.
-29-
<PAGE>
Income Taxes:
Income tax expense increased $100,000 and $1.1 million for the second
quarter and first six months, respectively, of 1996 as compared to similar
periods of 1995. The nominal quarter-to-quarter increase is directly related to
the 5.3% increase in pre-tax income between the 1995 quarter and 1996 quarter.
The $1.1 million income tax expense increase for the first six months of 1996
represents a 7.4% increase while pre-tax income for the period rose 20.9%. This
is primarily the result of the realization during early 1996 of a $1.4 million
credit upon the completion of a federal tax audit for the taxable years 1989
through 1991. Upon completion of the audit, the settlement of certain issues
resulted either in refunds of taxes previously paid or on which deferred tax
asset allowances had been previously provided. Excluding the impact of the
refund, the effective income tax rate, as a percent of pre-tax income, decreased
to 35.0% for the first six months of 1996 from 36.4% in 1995.
Regulatory Issues:
FF Bank's deposits are insured by the Savings Association Insurance Fund
("SAIF") of the FDIC. Deposit insurance premiums to both the SAIF and the Bank
Insurance Fund ("BIF") of the FDIC were identical when both funds were created
in 1989, with an eight cent differential between the premiums paid by
well-capitalized institutions and the premiums paid by under-capitalized
institutions (23 cents to 31 cents per $100 of assessable deposits). Deposit
insurance premiums for the SAIF and the BIF, which insures deposits in national
and state-chartered banks, are set to facilitate each fund achieving its
designated reserve ratio. In August 1995, the FDIC determined that the BIF had
achieved its designated reserve ratio and lowered BIF deposit insurance premium
rates for all but the riskiest institutions. Effective January 1, 1996, BIF
deposit insurance premiums for well-capitalized banks were further reduced to
the statutory minimum of $2,000 per institution per year. Because the SAIF
remains significantly below its designated reserve ratio, SAIF deposit insurance
premiums were not reduced and remain at 0.23% to 0.31% of deposits, based upon
an institution's supervisory evaluations and capital levels. The current
discrepancy in deposit insurance premiums between the BIF and the SAIF could
place FF Bank at a competitive disadvantage to BIF insured institutions.
The current financial condition of the SAIF has resulted in various
legislative proposals to recapitalize the SAIF. A legislative solution may
involve a one-time special assessment or other features such as a merger of the
SAIF into the BIF. FFC is unable to predict whether any legislation will be
enacted or the amount or applicable retroactive date of any one-time assessment
or the rates that would then apply to assessable SAIF deposits.
Subsequent Events:
Subsequent to the end of the second quarter, FFC received regulatory
approvals (from the FDIC, the State of Wisconsin and the OTS) to charter a de
novo BIF-insured, state-chartered savings bank, First Financial Savings Bank
("FFSB"). It is anticipated that FFSB will open for business during the third
quarter and take advantage of the lower insurance of accounts assessments for
BIF-insured institutions compared to SAIF-insured institutions as FF Bank
depositors voluntarily move their funds to FFSB. The pace of customer migration
to FFSB cannot be reasonably estimated at this time and, as such, future
reductions in FDIC premiums cannot be predicted with certainty.
-30-
<PAGE>
FF Bank also received regulatory approvals from the Office of the
Comptroller of the Currency ("OCC") and the OTS, to charter a limited-purpose
national credit card bank ("CEBA-Bank"). The CEBA-Bank, an operating subsidiary
of FF Bank, became operational during the third quarter of 1996 and has the
authority to export Wisconsin rates and fees nationwide to all FFC credit card
customers under the National Bank Act. It is expected that such uniform
application of law will i) reduce compliance costs, ii) reduce the risk of
violation of local law and iii) allow FFC and its subsidiary banks to enhance
their credit card rate and fee structure, thereby potentially increasing FFC's
profitability depending upon customer behavior and other factors. It is not
management's intention to expand the scope of FFC's credit card operations as a
result of the formation of the CEBA-Bank. Rather, management intends to more
effectively manage the current credit card base.
-31-
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q or future filings by FFC with the Securities
and Exchange Commission, in FFC's press releases or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project" or similar expressions
are intended to identify "forward- looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. FFC wishes to caution readers
not to place undue reliance on any such forward- looking statements, which speak
only as of the date made, and to advise readers that various factors could
affect FFC's financial performance and could cause FFC's actual results for
future periods to differ materially from those anticipated or projected. Such
factors include, but are not limited to: i) general market rates, ii) general
economic conditions, iii) legislative/regulatory changes, iv) monetary and
fiscal policies of the U.S. Treasury and the Federal Reserve, v) changes in the
quality or composition of FFC's loan and investment portfolios, vi) demand for
loan products, vii) deposit flows, viii) competition, ix) demand for financial
services in FFC's markets, and x) changes in accounting principles, policies or
guidelines.
FFC does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
-32-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a. On April 17, 1996 the Corporation held an Annual Meeting of
Shareholders (the "Annual Meeting").
b. Set forth below is certain information with respect to i)
individuals nominated for election as directors at the Annual
Meeting and ii) continuing directors whose terms do not expire
until future annual meetings.
Nominated for For Term
Three-Year Terms To Expire
---------------- ---------
Robert T. Kehr 1999
Robert P. Konopacky 1999
Ralph R. Staven 1999
Arlyn G. West 1999
Continuing Directors
--------------------
Robert S. Gaiswinkler 1997
Gordon M. Haferbecker 1997
James O. Heinecke 1998
Paul C. Kehrer (deceased - June, 1996) 1998
Dr. George R. Leach 1997
Ignatius H. Robers 1998
John C. Seramur 1997
John H. Sproule 1998
Norman L. Wanta 1998
c. Set forth below is a description of the matters voted upon at
the Annual Meeting. The number of votes cast for, or withheld
and abstentions is set forth below:
Four directors were elected for a term of three years. A list of
these directors (including the votes for or withheld) is noted
below:
Votes For Votes Withheld
--------- --------------
Robert T. Kehr 26,289,393 246,083
Robert P. Konopacky 26,227,158 308,318
Ralph R. Staven 26,220,485 314,991
Arlyn G. West 26,185,808 349,668
d. Not applicable.
-33-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits:
Exhibit 3(b) - Bylaws
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedules
b. Reports on Form 8-K:
None
-34-
<PAGE>
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
Date: August 8, 1996 /s/ John C. Seramur
--------------------
John C. Seramur, President
(Chief Executive Officer) and Director
Date: August 8, 1996 /s/ Thomas H. Neuschaefer
--------------------------
Thomas H. Neuschaefer
Vice President, Treasurer and Chief
Financial Officer
-35-
<PAGE>
EXHIBIT INDEX
3(b) - Bylaws
11 - Computation of Earnings Per Share
27 - Financial Data Schedules
EXHIBIT 3(b)
Bylaws of Registrant
(Amended April 17, 1996)
<PAGE>
FIRST FINANCIAL CORPORATION
(a Wisconsin Corporation)
---------------------------------
RESTATED*
BYLAWS
----------------------------------
- -----------------------------------------
* As amended through April 17, 1996.
<PAGE>
Table of Contents
-----------------
Page
1. OFFICES
1.1 Registered Office 1
1.2 Other Offices 1
2. MEETING OF SHAREHOLDERS
2.1 Place of Meetings 1
2.2 Annual Meetings 1
2.3 Business at Annual Meeting 1
2.4 Special Meetings
2.5 Notice of Meetings 3
2.6 Business of Special Meetings 3
2.7 Quorum of Meetings 3
2.8 Voting and Proxies 3
2.9 Required Vote 3
3. DIRECTORS
3.1 Powers 4
3.2 Number 4
3.3 Classification 4
3.4 Term of Office 5
3.5 Nominees 5
3.6 Vacancies 6
3.7 Place of Meetings 7
3.8 Annual Organization Meeting 7
3.9 Regular Meetings 7
3.10 Special Meetings 7
3.11 Quorum and Voting at Meetings 7
3.12 Committees 7
3.13 Informal Action 8
3.14 Compensation 9
3.15 Resignation 9
3.16 Removal 9
4. NOTICE OF MEETINGS
4.1 Notice Procedure 10
4.2 Waiver of Notice 10
5. OFFICERS
5.1 Positions 10
5.2 Appointment 11
5.3 Compensation 11
5.4 Term of Office 11
-i-
<PAGE>
5.5 Chairman of the Board 11
5.6 President 11
5.7 Vice President 11
5.8 Secretary 12
5.9 Assistant Secretary 12
5.10 Treasurer 13
5.11 Assistant Treasurer 13
6. SHARES
6.1 Certificates Representing Shares 13
6.2 Lost Certificates 14
6.3 Transfers 14
6.4 Fixing Record Date 15
6.5 Registered Shareholders 15
6.6 Record of Shareholders 15
6.7 Inspection of Records 16
7. Indemnification of Officers and Directors 16
8. Amendments 16
-ii-
<PAGE>
BYLAWS
OF
FIRST FINANCIAL CORPORATION
1. Offices.
1.1. Registered Office. The registered office of this corporation
shall be in the City of Madison, County of Dane, State of Wisconsin, and the
registered agent in charge thereof shall be The Corporation Trust Company, 222
West Washington Avenue, Madison, Wisconsin 25703.
1.2. Other Offices. This corporation may also have offices at such
other places, both within and without the State of Wisconsin, as the board of
directors may from time to time determine or the business of this corporation
may require.
2. Meetings of Shareholders.
2.1. Place of Meetings. Meetings of shareholders of this corporation
for any purpose may be held at such place, within or without the State of
Wisconsin, as may be fixed by the board of directors and stated in the notice of
the meeting.
2.2. Annual Meetings. The first annual meeting of shareholders shall
be held at the time and place fixed by the board of directors and stated in the
notice of the meeting. Annual meetings of shareholders, commencing with the year
1985, shall be held on the third Wednesday of April at 2:00 p.m. or at such
other date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting. Shareholders shall elect
directors and transact such other business as may properly be brought before the
annual meeting.
2.3. Business at Annual Meeting. At an annual meeting of the
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any
-1-
<PAGE>
supplement thereto) given by or at the direction of the board of directors, (b)
otherwise properly brought before the meeting by or at the direction of the
board of directors, or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, a shareholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 30 days prior to the meeting; provided, however, that
in the event that less than 45 days' notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by the shareholder
to be timely must be so received not later than the close of business on the
15th day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A shareholder's notice to
the secretary shall set forth as to each matter the shareholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
shareholder, and (d) any material interest of the shareholder in such business.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this section 2.3. The chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this section
2.3, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
2.4. Special Meetings. Special meetings of shareholders for any
purpose or purposes may be called as provided by the Articles of Incorporation
of this corporation.
-2-
<PAGE>
2.5. Notice of Meetings. Written notice stating the place, day and
hour of each meeting of shareholders and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than 20 nor more than 70 days before the date of the meeting, either personally
or by mail, by or at the direction of the chairman of the board, the president,
the secretary, or other officer calling the meeting, to each shareholder of
record entitled to vote at the meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail addressed to the
shareholder at his address as it appears on the stock record books or similar
records of this corporation, with postage thereon prepaid.
2.6. Business of Special Meetings. Business transacted at any special
meeting of shareholders shall be limited to the purposes stated in the notice.
2.7. Quorum of Meetings. Except as otherwise provided by statute or
by the Articles of Incorporation of this corporation, the holders of a majority
of the shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of shareholders.
2.8. Voting and Proxies. Unless otherwise provided in the Articles of
Incorporation of this corporation, each outstanding common share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. A shareholder may vote either in person or by proxy
appointed in writing by the shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid 11 months from the date of its
execution, unless otherwise provided in the proxy.
2.9. Required Vote. If a quorum is present, the affirmative vote of
the majority of the shares, represented at the meeting and entitled to vote on
the matter, shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by statute, the Articles of
Incorporation of this corporation or these bylaws. Notwithstanding the
foregoing, candidates for election as members of the board of directors, up to
the number of directors to be
-3-
<PAGE>
chosen, who receive the highest number of votes, shall stand elected, and an
absolute majority of votes cast shall not be a prerequisite to the election of
any candidate to the board of directors.
3. Directors.
3.1. Powers. The business and affairs of this corporation shall be
managed by its board of directors, which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation of this corporation or by these bylaws directed or
required to be exercised or done by the shareholders.
3.2 Number and Election. The number of directors which shall
constitute the whole board shall not be less than 12 nor more than 24. The
initial board shall consist of 12 directors. When a public offering of the
common stock of this corporation commences, upon the closing of which First
State Savings of Wisconsin will become a wholly-owned subsidiary of this
corporation, the board shall be increased to 24 members. Thereafter, within the
limits above specified, the numbers of directors shall be determined by
resolution of the board of directors adopted by not less than two-thirds of the
directors then in office. Directors shall be elected only by shareholders at
annual meetings of shareholders, other than the first board of directors and
except as provided in sections 3.4 and 3.5 hereof, and each director elected
shall hold office for the term for which he is elected and until his successor
is elected and qualified or until his earlier resignation or removal. Each
director is required to own not less than 100 shares of common stock of this
corporation, provided that this requirement shall not apply until this
corporation becomes a publicly-owned company. Each director is required to be a
resident of the State of Wisconsin at the time of his initial election as a
director.
3.3. Classification. The board of directors shall divide the
directors into three classes and, when the number of directors is changed, shall
determine the class or classes to which the increased or decreased number of
directors shall be apportioned; provided, that the directors in each class shall
-4-
<PAGE>
be as nearly equal in number as possible; provided, further, that no decrease in
the number of directors shall affect the term of any director then in office.
3.4. Term of Office. The term of office of directors initially elected
by the sole subscriber or elected in connection with First State Savings of
Wisconsin becoming a wholly-owned subsidiary of this corporation shall be as
follows: the term of office of directors of the first class shall expire at the
1985 annual meeting of shareholders; the term of office of directors of the
second class shall expire at the 1986 annual meeting of shareholders, and the
term of office of directors of the third class shall expire at the 1987 annual
meeting of shareholders, and, as to directors of each class, when their
respective successors are elected and qualified. At the 1985 annual meeting of
shareholders and of each subsequent annual meeting of shareholders, directors
elected to succeed those whose terms are expiring shall be elected for a term of
office to expire at the third succeeding annual meeting of shareholders and when
their respective successors are elected and qualified.
3.5. Nominees. Only persons who are nominated in accordance with the
procedures set forth in this section 3.5 shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
Corporation may be made at a meeting of shareholders by or at the direction of
the board of directors or by any shareholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with notice procedures
set forth in this section 3.5. Such nominations, other than those made by or at
the direction of the board of directors, shall be made pursuant to timely notice
in writing to the secretary of the Corporation. To be timely, a shareholder
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 30 days prior to the meeting; provided,
however, that in the event that less than 45 days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was
-5-
<PAGE>
mailed or such public disclosure was made. Such shareholder's notice shall set
forth (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to be named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the shareholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such shareholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such shareholder. At
the request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary of the
Corporation that information required to be set forth in the shareholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this section 3.5. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
bylaws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
3.6. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled, until the
next succeeding annual election, by the affirmative vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next annual
election or until a successor is elected and qualified, or until his earlier
resignation or removal. A vacancy
-6-
<PAGE>
created by a removal of a director by the vote of shareholders at an annual
meeting may be filled by the shareholders.
3.7. Place of Meetings. Meetings of the board of directors, both
regular or special, may be held either within or without the State of Wisconsin.
3.8. Annual Organization Meeting. The annual organization meeting of
the board of directors for the election of officers and such other business as
may come before the board shall be held following the annual meeting of
shareholders of this corporation or at such other time as shall be fixed by the
board of directors.
3.9. Regular Meetings. Regular meetings of the board of directors may
be held with or without notice and at such time and at such place as shall from
time to time be determined by the board of directors.
3.10. Special Meetings. Special meetings of the board of directors may
be called by the chairman of the board, the president or on a written request of
the majority of the directors then in office on five business days' notice to
each director, either personally or by mail or by telegram.
3.11. Quorum and Voting at Meetings. A majority of the directors then
in office shall constitute a quorum for the transaction of business unless a
greater number is required by statute. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless the act of greater number is required by statute or by the
Articles of Incorporation of this corporation or these bylaws. If a quorum shall
not be present at any meeting of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
3.12. Committees. The board of directors may, by resolution adopted by
a majority of the authorized number of directors, designate one or more
committees, each committee to consist of three or more directors elected by the
board of directors. The board may elect one or more directors as
-7-
<PAGE>
alternate members of any such committee, who may take the place of any absent
member or members at a meeting of such committee.
If a member of a committee shall be absent from any meeting, or
disqualified from voting thereat, the remaining member or members present and
not disqualified from voting, whether or not such member or members constitute a
quorum, may, by unanimous vote, appoint another member of the board of directors
to act at the meeting in place of an absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise, when the board of directors is not in session, all
the powers and authority of the board of directors in the management of the
business and affairs of this corporation, except action in respect to dividends
to shareholders, election of the principal officers, the filling of vacancies in
the board of directors or committees created pursuant to the authority set forth
in this section, the amendment of the Articles of Incorporation of this
corporation or the amendment of these bylaws.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
Unless otherwise specified in the resolution of the board of directors
designating the committee, at all times of each such committee of directors, the
majority of the total number of members of the committee shall constitute a
quorum for the transaction of business, and the vote of the majority of the
members of the committee present at any meeting of which there is a quorum shall
be the act of the committee. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors, when required.
3.13. Informal Action. Any action required by the Articles of
Incorporation of this corporation, these bylaws or by statute, to be taken at a
meeting of the board of directors or of any committee thereof, or any action
which may be taken at such a meeting, may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by all
members of the
-8-
<PAGE>
board or committee, as the case may be, entitled to vote with respect to the
subject matter thereof. Such consent shall have the same force and effect as a
unanimous vote and may be stated as such.
3.14. Compensation. Unless otherwise restricted by the Articles of
Incorporation or these bylaws, the board of directors, by the affirmative vote
of a majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation to all directors for services to this corporation as directors,
officers, or otherwise, or to delegate such authority to an appropriate
committee. The board of directors shall also have authority to provide for or
delegate authority to an appropriate committee to provide for reasonable
pensions, disability or death benefits, and other benefits or payments, to
directors, officers and employees and to their estates, families, dependents or
beneficiaries on account of prior services rendered by such directors, officers
and employees to this corporation. The directors may be paid their expenses, if
any, of attendance of each meeting of the board of directors and may be paid a
fixed sum for attendance at each meeting of the board of directors or a stated
salary as directed. No such payment shall preclude any director from serving
this corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be compensated for attending
committee meetings.
3.15. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the main office or offices of this
corporation addressed to the chairman of the board, the president or the
secretary. Unless otherwise specified, such resignation shall take effect upon
receipt by the chairman of the board, the president or the secretary.
3.16. Removal. Any director may be removed from office as provided in
the Articles of Incorporation of this corporation.
-9-
<PAGE>
4. Notices of Meetings.
4.1. Notice Procedure. Whenever, whether under the provisions of the
statute, the Articles of Incorporation of this corporation or these bylaws,
notice is required to be given to any director or shareholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or shareholder, at his address as it appears on
the records of this corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same is deposited in the United
States mail. Notice to directors may also be given by telegram, telephone,
telecopy or a similar telecommunications device.
4.2. Waivers of Notice. Whenever the giving of any notice is required
by statute, the Articles of Incorporation of this corporation or these bylaws, a
waiver thereof, in writing, signed at any time by the person or persons entitled
to such notice, shall be deemed equivalent to giving of such notice. Attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting and objects thereat to the transaction
of any business because the meeting is not lawfully called or convened.
5. Officers.
5.1. Positions. The officers of this corporation shall be chosen by
the board of directors and shall be a chairman of the board, a president, one or
more vice presidents, a secretary and a treasurer, who shall exercise such
powers and perform such duties as shall be determined by resolution of the board
of directors not inconsistent with the Articles of Incorporation of this
corporation or these bylaws. The board of directors may also choose such other
officers and assistant officers and agents as may be deemed necessary. Any two
or more of offices may be held by the same person except the offices of
president and secretary, and the offices of president and vice president.
-10-
<PAGE>
5.2. Appointment. The officers of this corporation shall be chosen by
the board of directors at its first meeting after each annual meeting of
shareholders.
5.3. Compensation. The board of directors shall have the authority to
provide for or to delegate authority to an appropriate committee to provide for
compensation of all officers and agents of the corporation.
5.4. Term of Office. The officers of this corporation shall hold
office until their successors are chosen and qualify or until their earlier
resignation or removal. Any officer may resign at any time upon written notice
to this corporation. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of this corporation will be served thereby, but such removal
shall be without prejudice to the contractual rights, if any, of the person so
removed. Any vacancy occurring as to any officer of this corporation shall be
filled by the board of directors.
5.5. Chairman of the Board. The directors shall appoint a chairman of
the board. Until January 1, 1987, the chairman of the board shall serve as the
chief executive officer of this corporation. The chairman of the board shall,
when present, preside at all meetings of the board of directors and shareholders
and shall perform such other duties and have such other power as may be vested
in the chairman of the board by the board directors.
5.6. President. The directors shall appoint a president. Until January
1, 1987, the president shall serve as the chief operating officer of this
corporation. Commencing January 1, 1987, the president shall serve as the chief
executive officer of this corporation. The president shall perform such duties
and have such power as may be vested in the president by the board of directors.
5.7. Vice President. In the absence of the chairman of the board and
the president or in the event of their inability or refusal to act, the vice
president, or in the event there be more than one vice president, the vice
presidents in the order designated, or in the absence of any designation, then
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<PAGE>
in the order of their election, shall perform the duties of the chairman of the
board and the president, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the chairman of the board and the
president. The vice presidents shall perform such other duties and have such
other powers such as the board of directors may from time to time prescribe.
5.8. Secretary. The secretary shall attend all meetings of the board
of directors and all meetings of the shareholders, and shall record all
proceedings of the meetings of the board of directors and of the shareholders in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings to the
board of directors, and shall perform such other duties as may be prescribed by
the board of directors. The secretary shall have custody of the corporate seal
of this corporation, and the secretary or an assistant secretary, shall have
authority to affix the same to any instrument requiring it, and when so fixed,
it may be attested by the signature of the secretary or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of this corporation and to attest the affixing
of such officer's signature. The secretary or an assistant secretary may also
attest all instruments given by the chairman of the board, the president or any
vice president.
5.9. Assistant Secretary. The assistant secretary or if there be more
than one, the assistant secretaries in the order determined by the board of
directors, or if there shall have been not such determination, then in the order
of their election, shall, in the absence of the secretary or in the event of the
secretary's inability or refusal to act, perform the duties and exercise the
powers of the secretary and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
-12-
<PAGE>
5.10. Treasurer
.
Duties. The treasurer shall be the chief financial officer and
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements and books belonging to this
corporation, and shall deposit all monies and other valuable effects in the name
and to the credit of this corporation in such depositories as may be designated
by the board of directors. The treasurer shall disburse the funds of this
corporation as ordered by the board of directors, taking proper vouchers for
such disbursements, and shall render to the chairman of the board, the president
and the board of directors at its regular meetings, or whenever the board of
directors so requires, an account of all transactions as treasurer and of the
financial condition of this corporation.
5.11. Assistant Treasurer. The assistant treasurer, or if there shall
be more than one, the assistant treasurers in the order determined by the board
of directors, or if there shall have been no such determination, then in the
order of their election, shall, in the absence of the treasurer or in the event
of the treasurer's inability or refusal to act, perform the duties and exercise
the powers of the treasurer, and shall perform such other duties and handle such
other powers as the board of directors may from time to time prescribe.
6. Shares
6.1. Certificates Representing Shares. The shares of this corporation
shall be represented by certificates signed by the chairman of the board, the
president and the secretary of this corporation, and may be sealed with the seal
of this corporation or facsimile thereof. The signatures of the officers of this
corporation upon a certificate may be facsimiles if the certificate is manually
signed on behalf of a transfer agent, or a registrar, other than this
corporation itself or an employee of this corporation. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued
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<PAGE>
by this corporation with the same effect as if he were an officer at the date of
its issue. Every certificate shall set forth on the face or back of such
certificate, in full or in the form of a summary, all of the designations,
preferences, limitations and relative rights of the shares of each class
authorized to be issued, as required by the laws of the State of Wisconsin. In
lieu of such statement, the certificate may state, upon the face or back thereof
the designation of each class of shares having preferences or special rights in
the payment of dividends, in voting, upon liquidation or otherwise and such
other information concerning such shares as may be desired and shall state that
this corporation will upon request furnish any shareholder, without charge,
information as to the number of such shares authorized and outstanding and a
copy of the portions of the Articles of Incorporation containing the
designations, preferences, limitations and relative rights of all shares and any
series thereof.
6.2. Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by this
corporation alleged to have been lost or destroyed. The person claiming that the
certificate of the stock has been lost, stolen, or destroyed shall provide an
affidavit of that fact to this corporation. When authorizing such issuance of a
new certificate or certificates, the board of directors, in its discretion and
as a condition precedent to the issuance thereof, may prescribe terms and
conditions as it deems expedient and may require such indemnities as it deems
adequate to protect this corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost or destroyed.
6.3. Transfers. Upon surrender to this corporation or the transfer
agent of this corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of
this corporation.
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<PAGE>
6.4. Fixing Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors shall fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than 70 days
and, in case of a meeting of shareholders, not less than 20 days prior to the
date on which the particular action requiring determination of shareholders is
to be taken. When a record date has been determined for shareholders entitled to
vote in any meeting as provided in this Section, such record date shall apply to
any adjournment thereof.
6.5. Registered Shareholders. This corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and this corporation
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Wisconsin.
6.6. Record of Shareholders. The officer or agent having charge of the
stock transfer books for shares of this corporation shall before each meeting of
shareholders make a complete record of the shareholders entitled to vote at such
meeting or any adjournment thereof, with the address of and the number of shares
held by each, which records shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at any
meeting of shareholders. Failure to comply with the requirements of this Section
will not affect the validity of any action taken at such meeting.
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<PAGE>
6.7. Inspection of Records. Any person who shall have been a
shareholder of record for at least six months immediately preceding his demand
or who shall be the holder of record of at least five percent of all the
outstanding shares of this corporation upon written demand stating the purpose
thereof, shall have the right to examine, in person, or by agent or attorney, at
any reasonable time or times, for any proper purpose, its relevant books and
records of account, minutes and record of shareholders and to make extracts
therefrom. This Section shall not require this corporation to provide a
shareholder who wishes to communicate with other shareholders with a complete
record of the shareholders of this corporation. Such a request by a shareholder
shall be governed by the rules and regulations of the Securities and Exchange
Commission.
7. Indemnification of Officers and Directors
This corporation shall indemnify officers and directors as provided by
its Articles of Incorporation.
8. Amendments
The board of directors or the shareholders may adopt, alter, amend or
repeal these bylaws. Such action by the board of directors shall require the
affirmative vote of at least two-thirds of the directors then in office at a
duly constituted meeting of the board of directors called expressly for such
purpose. Such action by the shareholders shall require the affirmative vote of
at least two-thirds of the total votes eligible to be cast by shareholders at a
duly constituted meeting of shareholders called expressly for such purpose.
However, the directors shall have authority to change or repeal any bylaws
adopted by the shareholders within three years of the date of adoption by the
shareholders.
The foregoing bylaws were adopted by the stockholders of this
corporation on February 15, 1984 and amended on April 17, 1996.
/s/ Robert M. Salinger
------------------------------
Robert M. Salinger, Secretary
-16-
EXHIBIT 11
Computation of Earnings Per Share
<PAGE>
EXHIBIT 11
FIRST FINANCIAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For The For The
Three Months Ended Six Months Ended
June 30, June 30,
------------------ --------------------
1996 1995 1996 1995
------ ----- ------ -----
(In thousands, except
per share data)
PRIMARY EARNINGS PER SHARE
<S> <C> <C> <C> <C>
Income before extraordinary item $17,581 $16,305 $34,915 $27,132
Extraordinary item -- -- (686) --
------- ------- ------- -------
Net income $17,581 $16,305 $34,229 $27,132
======= ======= ======= =======
Shares:
Weighted average common shares
outstanding 29,898 29,351 29,853 29,270
Shares from assumed exercise of options
(as determined by the treasury stock
method) 613 736 623 756
------- ------- ------- -------
Common and common equivalent shares 30,511 30,087 30,476 30,026
======= ======= ======= =======
Primary Earnings Per Common Share:
Income before extraordinary item $ .58 $ .54 $ 1.14 $ .90
Extraordinary item -- -- (.02) --
------- ------- ------- -------
Net income $ .58 $ .54 $ 1.12 $ .90
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE
Income before extraordinary item $17,581 $16,305 $34,915 27,132
Extraordinary item -- -- (686) --
------- ------- ------- -------
Net income $17,581 $16,305 $34,229 $27,132
======= ======= ======= =======
Shares:
Weighted average common shares
outstanding 29,898 29,351 29,853 29,270
Shares from assumed exercise of options
(as determined by the treasury stock
method) 614 785 638 830
------- ------- ------- -------
Common and common equivalent shares 30,512 30,136 30,491 30,100
======= ======= ======= =======
Fully Diluted Earnings Per Common Share:
Income before extraordinary item $ .58 $ .54 $ 1.14 $ .90
Extraordinary item -- -- (.02) --
------- ------- ------- -------
Net income $ .58 $ .54 $ 1.12 $ .90
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 27
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Exhibit 27
First Financial Corporation
Article 9 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 125,883
<INT-BEARING-DEPOSITS> 29,244
<FED-FUNDS-SOLD> 4,381
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 929,722
<INVESTMENTS-CARRYING> 754,649
<INVESTMENTS-MARKET> 746,954
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<TOTAL-ASSETS> 5,579,294
<DEPOSITS> 4,446,052
<SHORT-TERM> 14,675
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<LONG-TERM> 626,236
0
0
<COMMON> 29,905
<OTHER-SE> 378,000
<TOTAL-LIABILITIES-AND-EQUITY> 5,579,294
<INTEREST-LOAN> 152,318
<INTEREST-INVEST> 53,243
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 205,561
<INTEREST-DEPOSIT> 100,045
<INTEREST-EXPENSE> 113,865
<INTEREST-INCOME-NET> 91,696
<LOAN-LOSSES> 4,080
<SECURITIES-GAINS> 1,112
<EXPENSE-OTHER> 57,688
<INCOME-PRETAX> 51,563
<INCOME-PRE-EXTRAORDINARY> 34,915
<EXTRAORDINARY> (686)
<CHANGES> 0
<NET-INCOME> 34,229
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
<YIELD-ACTUAL> 3.32
<LOANS-NON> 12,252
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,588
<ALLOWANCE-OPEN> 25,235
<CHARGE-OFFS> 6,070
<RECOVERIES> 510
<ALLOWANCE-CLOSE> 23,755
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 23,755
</TABLE>
