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, 1997
-------------------
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 36,217,543 Shares
--------------------------------------- -------------------------
Class Outstanding at July 31, 1997
<PAGE>
FIRST FINANCIAL CORPORATION
FORM 10-Q INDEX
Part I - Financial Information
Consolidated Balance Sheets as of June 30, 1997
(Unaudited) and December 31, 1996
Unaudited Consolidated Statements of Income for
the Three Months and Six Months Ended
June 30, 1997 and 1996
Unaudited Consolidated Statement of Changes in
Stockholders' Equity for the Six Months Ended
June 30, 1997
Unaudited Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1997 and 1996
Notes to Unaudited Consolidated Financial Statements
Management's Discussion and Analysis:
Comparison of the Consolidated Balance Sheets
at June 30, 1997 (Unaudited) and December 31,
1996
Comparison of the Unaudited Consolidated Statements
of Income for the Three Months and Six Months Ended
June 30, 1997 and 1996
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibits
-1-
<PAGE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
JUNE 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
---------- ----------
(In thousands)
<S> <C> <C>
Cash $ 91,459 $ 133,529
Federal funds sold 2,616 2,513
Interest-earning deposits 31,328 18,043
---------- ----------
Cash and cash equivalents 125,403 154,085
Securities available for sale (at fair value):
Investment securities 154,716 136,477
Mortgage-related securities 1,278,940 1,048,085
Securities held to maturity (at amortized cost):
Investment securities (fair value of
$55,929,000--1997 and $57,996,000--1996) 56,261 58,434
Mortgage-related securities (fair value of
$540,488,000--1997 and $597,106,000--1996) 563,742 602,352
Loans receivable:
Held for sale 19,467 19,119
Held for investment 3,547,321 3,493,700
Foreclosed properties and repossessed assets 4,026 3,997
Real estate held for investment or sale 7,407 7,431
Office properties and equipment 50,470 50,428
Intangible assets, less accumulated amortization 10,995 12,739
Other assets 112,753 113,584
---------- ----------
$5,931,501 $5,700,431
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $4,517,674 $4,444,932
Borrowings 908,096 769,526
Advance payments by borrowers
for taxes and insurance 41,220 13,382
Other liabilities 41,786 62,080
---------- ----------
Total liabilities 5,508,776 5,289,920
Stockholders' equity:
Serial preferred stock, $1 par value:
Authorized, 3,000,000 shares
None issued
Common stock, $1 par value:
Authorized, 75,000,000 shares
Issued, 37,658,986 (1997),
37,450,879 (1996)
Outstanding, 36,209,366 (1997)
36,802,484 (1996) 37,659 37,451
Additional paid-in capital 45,029 43,668
Net unrealized gain on
securities available for sale 4,829 1,300
Treasury stock, 1,449,620 (1997) and
648,395 (1996) shares, at cost (35,495) (14,447)
Retained earnings 370,703 342,539
---------- ----------
Total stockholders' equity 422,725 410,511
---------- ----------
$5,931,501 $5,700,431
========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
-2-
<PAGE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------
1997 1996 1997 1996
-------- --------- -------- ------
(In thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Interest income:
Mortgage loans $ 43,720 $ 43,406 $ 86,808 $ 89,285
Other loans 30,803 31,374 61,431 63,033
Mortgage-related securities 32,128 20,658 62,485 42,487
Investments 3,953 6,501 8,039 10,756
-------- -------- -------- --------
Total interest income 110,604 101,939 218,763 205,561
Interest expense:
Deposits 50,513 49,678 100,284 100,045
Borrowings 11,940 6,534 22,693 13,820
-------- -------- -------- --------
Total interest expense 62,453 56,212 122,977 113,865
-------- -------- -------- --------
Net interest income 48,151 45,727 95,786 91,696
Provision for losses on loans 2,100 2,180 4,350 4,080
-------- -------- -------- --------
46,051 43,547 91,436 87,616
Non-interest income:
Deposit account service fees 3,747 3,334 7,116 6,476
Loan fees and service charges 3,476 3,020 6,696 5,749
Insurance and brokerage sales
commissions 1,938 1,779 3,878 3,611
Service fees on loans sold 1,310 1,564 2,711 3,097
Net gain on disposition of loans
and mortgage-related securities 697 447 1,825 708
Net gain on sales of securities
available for sale -- 391 102 404
Other 979 843 1,816 1,590
-------- -------- -------- --------
Total non-interest income 12,147 11,378 24,144 21,635
-------- -------- -------- --------
Operating income 58,198 54,925 115,580 109,251
-------- -------- -------- --------
Non-interest expense:
Compensation, payroll taxes
and benefits 12,863 11,183 25,673 23,266
Occupancy 2,362 2,374 4,922 4,832
Data processing 1,914 1,885 3,751 3,750
Marketing 1,668 1,613 3,564 3,270
Telephone and postage 1,592 1,587 3,369 3,285
Loan expenses 1,561 1,883 3,014 3,604
Furniture and equipment 1,070 1,254 2,207 2,614
Amortization of intangible assets 872 1,265 1,744 2,529
Federal deposit insurance premiums 723 2,542 1,430 5,103
Net income from foreclosed
properties (60) (183) (85) (123)
Other 2,506 2,890 5,162 5,558
-------- -------- -------- --------
Total non-interest expense 27,071 28,293 54,751 57,688
-------- -------- -------- --------
Income before income taxes
and extraordinary item 31,127 26,632 60,829 51,563
Income taxes 11,147 9,051 21,739 16,648
-------- -------- -------- --------
Income before extraordinary item 19,980 17,581 39,090 34,915
Extraordinary item -- -- -- (686)
-------- -------- -------- --------
Net income $ 19,980 $ 17,581 $ 39,090 $ 34,229
======== ======== ======== ========
Earnings per share:
Primary and fully diluted:
Income before extraordinary
item $ 0.54 $ 0.46 $ 1.05 $ 0.92
Extraordinary item -- -- -- (0.02)
-------- -------- -------- --------
Net income $ 0.54 $ 0.46 $ 1.05 $ 0.90
======== ======== ======== ========
Cash dividends per share $ 0.15 $ 0.12 $ 0.30 $ 0.24
======== ======== ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
-3-
<PAGE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NET
UNREALIZED
COMMON HOLDING
STOCK AND GAIN ON
ADDITIONAL SECURITIES
PAID-IN AVAILABLE TREASURY RETAINED STOCKHOLDERS'
CAPITAL FOR SALE STOCK EARNINGS EQUITY
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1996 $ 81,119 $ 1,300 $(14,447) $342,539 $410,511
Net income for the
six months ended
June 30, 1997 39,090 39,090
Cash dividends paid
($0.30 per share) (10,926) (10,926)
Exercise of stock
options 1,569 1,569
Change in net un-
realized holding
gain on
securities
available for
sale (net of
taxes) 3,529 3,529
Treasury stock
purchased (21,048) (21,048)
-------- -------- -------- -------- --------
BALANCES AT
JUNE 30, 1997 $ 82,688 $ 4,829 $(35,495) $370,703 $422,725
======== ======== ======== ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
-4-
<PAGE>
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------------------
1997 1996
---------- -------
OPERATING ACTIVITIES (In thousands)
<S> <C> <C>
Net income $ 39,090 $ 34,229
Adjustments to reconcile net income to net cash provided
by operating activities:
Decrease (increase) in accrued interest on loans (1,158) 898
Increase in accrued interest on deposits 3,765 2,706
Loans originated for sale (61,850) (138,695)
Proceeds from sales of loans held for sale 74,374 172,115
Provision for depreciation 2,538 2,938
Provision for losses on loans and other assets 4,350 3,748
Amortization of intangible assets and servicing rights 2,824 3,436
Net gain on sales of loans and other assets (1,923) (1,112)
Other 1,679 (27,303)
----------- --------
Net cash provided by operating activities 63,689 52,960
INVESTING ACTIVITIES
Proceeds from sales of investment securities available
for sale 10,295 2,513
Proceeds from sales of mortgage-related securities
available for sale 20,610 334,923
Proceeds from maturities of investment securities held
to maturity 1,911 54,309
Proceeds from maturities of investment securities
available for sale 2,818 5,247
Purchases of investment securities held to maturity -- (29,849)
Purchases of investment securities available for sale (31,350) (77,994)
Purchases of mortgage-related securities (288,441) (458,337)
Principal payments received on mortgage-related securities 89,102 111,251
Principal collected on loans receivable 345,390 334,750
Loans originated for portfolio (419,606) (421,684)
Additions to office properties and equipment (2,396) (2,634)
Proceeds from sales of foreclosed properties and
repossessed assets 3,974 4,269
---------- ----------
Net cash used in investing activities (267,693) (143,236)
FINANCING ACTIVITIES
Net increase in deposits 68,977 18,821
Net increase in advance payments by borrowers for
taxes and insurance 27,838 31,778
Funding of official checks for borrower tax escrows (29,658) (35,692)
Net increase (decrease) in reverse repurchase agreements 94,246 (11,297)
Proceeds from borrowings 1,113,400 887,500
Repayments of borrowings (1,069,076) (805,800)
Proceeds from exercise of stock options 1,569 1,333
Purchase of treasury stock (21,048) --
Payments of cash dividends to stockholders (10,926) (8,968)
---------- ----------
Net cash provided by financing activities 175,322 77,675
---------- ----------
Decrease in cash and cash equivalents (28,682) (12,601)
Cash and cash equivalents at beginning of period 154,085 172,109
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 125,403 $ 159,508
========== ==========
</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. In preparing the consolidated financial statements in
conformity with generally accepted accounting principles, management is required
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates. The operating results for the first six months of
1997 are not necessarily indicative of the results which may be expected for the
entire 1997 fiscal year. The December 31, 1996 balance sheet included herein is
derived from the consolidated financial statements included in FFC's 1996 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 1996 Annual Report to
Shareholders.
NOTE B - FIRST FINANCIAL CORPORATION
At June 30, 1997, 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 primarily comprised of providing limited administrative services
to FF Bank.
NOTE C - EARNINGS PER SHARE
Primary and fully diluted earnings per share for the periods ended June
30, 1997 and 1996 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. See Exhibit 11 to this
Report for a detailed computation of earnings per share.
-6-
<PAGE>
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", effective for periods ending after December 15, 1997. Early application
of SFAS No. 128 is not permitted. Pro forma earnings per share ("EPS") data
using the criteria set forth by SFAS No. 128, would be as follows for the
periods presented:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- ------
Basic EPS $ 0.55 $ 0.47 $ 1.07 $ 0.92
Diluted EPS $ 0.54 $ 0.46 $ 1.05 $ 0.90
NOTE D - DIVIDENDS PAID OR DECLARED TO STOCKHOLDERS
The Board of Directors of FFC on May 21, 1997, declared a $0.15 per
share quarterly cash dividend payable on June 30, 1997 to shareholders of record
of FFC common stock on June 13, 1997.
NOTE E - 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, 1997, bond issues totaling
$6.9 million are supported by such letters of credit. At June 30, 1997, each of
the outstanding bonds for which FF Bank has issued letters of credit is current
with regard to debt service payments.
NOTE F - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
FOR THE
SIX MONTHS ENDED
JUNE 30,
1997 1996
-------- ------
(In thousands)
Supplemental disclosure of cash flow information:
Cash paid or credited to accounts during
period for:
Interest on deposits and borrowings $118,321 $111,090
Income taxes 20,452 16,877
Non-cash investing activities:
Mortgage loans transferred to held for sale
portfolio 12,473 21,775
Loans receivable transferred to foreclosed
properties 3,772 3,214
Mortgage loans securitized and transferred to
mortgage-related securities available for sale -- 161,087
-7-
<PAGE>
NOTE G - STOCK SPLIT
On December 30, 1996, FFC distributed a five-for-four stock split to
shareholders of record on December 16, 1996. All numbers of shares and per share
amounts included herein have been adjusted to reflect this distribution.
NOTE H - PENDING MERGER
On May 14, 1997, Associated Banc-Corp ("Associated") of Green Bay,
Wisconsin and FFC announced the signing of a definitive agreement for a
merger-of-equals in a stock-for-stock transaction (the "Merger"). The merger
agreement provides for each share of FFC common stock to be exchanged for .765
shares of Associated common stock on a tax-free basis. The merger, which
requires approval by shareholders of both companies and regulatory authorities,
is expected to be completed later in 1997. This transaction will be accounted
for as a pooling-of-interests. The merged company will retain the Associated
name and Associated will be the surviving holding company for FF Bank.
Headquarters has been designated to be in Green Bay and it is anticipated that
significant operations will remain in both Stevens Point and Green Bay. Pursuant
to the execution of the definitive agreement to merge, each company executed a
stock option agreement providing for the purchase of 19.9% of the other's common
stock under specified circumstances. This Merger will result in an institution
with combined assets of approximately $10.5 billion, equity capital of
approximately $900 million and a network of over 220 full-service banking
locations throughout Wisconsin and Illinois.
Management of FFC anticipates that, following the Merger, the combined
institution will develop a comprehensive business plan. The development of this
plan will include the re-evaluation of interest rate risk and credit risk with
the intent to implement the current policies, procedures and practices of
Associated, which in some cases differ from those of FFC. Management further
anticipates that these evaluations may result in changes in i) the intent
regarding the holding period of certain securities and ii) the level of
allowances for credit losses.
NOTE I - STOCK REPURCHASE PROGRAM
In conjunction with the announcement of its proposed merger with
Associated, FFC immediately terminated its previously announced stock repurchase
program. Prior to the termination of the program, FFC repurchased 260,000 shares
of its common stock at an average cost of $25.33 per share during the second
quarter and 801,225 shares at an average cost of $26.27 per share during the six
months ended June 30, 1997. At June 30, 1997, FFC had 1,449,620 outstanding
treasury shares.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF THE CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1997 (UNAUDITED) WITH DECEMBER 31, 1996
GENERAL:
Total assets increased to $5.932 billion at June 30, 1997 from $5.700
billion at December 31, 1996. Deposits increased to $4.518 billion at June 30,
1997 from $4.445 billion at year-end 1996 and borrowings increased to $908.1
million from $769.5 million during the same time frame. Advance payments by
borrowers for taxes and insurance increased by $27.8 million between December
31, 1996 and June 30, 1997 and other liabilities decreased $20.3 million from
December 31, 1996 to June 30, 1997. Stockholders' equity at June 30, 1997 was
$422.7 million, up from $410.5 million at year-end 1996.
LIQUIDITY AND CAPITAL RESOURCES:
At June 30, 1997, total consolidated liquidity, consisting of cash,
cash equivalents, and investment securities represented 5.67% of FFC's total
assets compared with 6.12% at December 31, 1996. FF Bank is in compliance with
requirements relating to minimum levels of liquid assets as defined by the
Office of Thrift Supervision ("OTS") regulations. The ongoing management of
liquid assets is an integral part of FFC's overall asset/liability management
program as described 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, 1997 decreased by
$12.6 million as compared to December 31, 1996 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:
CONSOLIDATED BALANCE BALANCE
BALANCE SHEET DECEMBER 31, INCREASES JUNE 30,
CLASSIFICATION 1996 (DECREASES) 1997
- ------------------- ------------ ----------- --------
(In thousands)
Cash and cash equivalents $ 154,085 $ (28,682) $ 125,403
Securities available for sale:
Investment securities 136,477 18,239 154,716
Mortgage-related securities 1,048,085 230,855 1,278,940
Securities held to maturity:
Investment securities 58,434 (2,173) 56,261
Mortgage-related securities 602,352 (38,610) 563,742
Loans receivable, including loans
held for sale 3,512,819 53,969 3,566,788
Office properties 50,428 42 50,470
Intangible assets 12,739 (1,744) 10,995
Deposits 4,444,932 72,742 4,517,674
Borrowings 769,526 138,570 908,096
Advance payments by
borrowers for taxes
and insurance 13,382 27,838 41,220
Other liabilities 62,080 (20,294) 41,786
Stockholders' equity 410,511 12,214 422,725
-9-
<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
additional working capital and borrowings are available through the capital
markets, the Federal Home Loan Bank ("FHLB") and other sources.
On an unconsolidated basis, FFC had cash of $20.2 million. The principal
sources of funds for FFC are dividends from FF Bank and earnings on cash
reserves. Applicable rules and regulations of the OTS impose limitations on
capital distributions by savings institutions such as FF Bank. Savings
institutions 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. For a discussion
of regulatory capital requirements, see "Regulatory Capital."
TOTAL LOANS RECEIVABLE AND HELD FOR SALE:
Total loans, including loans held for sale, increased $54.0 million to
$3.567 billion at June 30, 1997. Total loans are summarized below as of the
dates indicated.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, INCREASE
1997 1996 (DECREASE)
------------- ------------ ----------
(In thousands)
<S> <C> <C> <C>
Real estate loans:
One- to four-family $ 1,914,769 $1,884,018 $ 30,751
Multi-family 239,342 238,766 576
Commercial and non-residential 183,496 176,911 6,585
---------- --------- ---------
Total real estate loans 2,337,607 2,299,695 37,912
Other loans:
Consumer 446,824 415,155 31,669
Home equity 302,332 296,749 5,583
Education 277,546 269,633 7,913
Credit cards 169,632 179,352 (9,720)
Manufactured housing 90,464 104,783 (14,319)
Business 10,395 11,728 (1,333)
Less net items to loans receivable (68,012) (64,276) (3,736)
---------- ---------- ---------
Total loans (including loans held
for sale) $3,566,788 $3,512,819 $ 53,969
========== ========== =========
</TABLE>
Total real estate loans increased $37.9 million to $2.338 billion at
June 30, 1997, from $2.300 billion at December 31, 1996 including a $30.8
million increase in one- to four-family real estate loans in the first half of
1997.
-10-
<PAGE>
Consumer loan balances increased $31.7 million and education loans
increased $7.9 million in the first six months of 1997 as originations outpaced
repayments for these product lines. Credit card loan balances decreased $9.7
million in the first six months of 1997 which is consistent with historical
seasonal declines in this portfolio. Manufactured housing loan balances
decreased $14.3 million as FFC had previously ceased originating manufactured
housing loans and borrowers make repayments.
Mortgage loans held for sale were $19.5 million at June 30, 1997, as
compared to $19.1 million at the end of 1996. Off-balance sheet commitments to
extend credit and to sell mortgage loans totaled $54.0 million and $26.8
million, respectively, at June 30, 1997, as compared to $30.2 million and $20.7
million, respectively, at December 31, 1996. During the six months ended June
30, 1997, market interest rates initially moved higher than year-end 1996 rates
but then trended downward back to 1996 year-end levels. 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 $192.3
million during the six months ended June 30, 1997 primarily as a result of the
net effect of i) the purchase of $288.4 million of U.S. Government agency-backed
MBSs offset by ii) sales of MBSs having an aggregate par value of $20.6 million
and iii) principal repayments of $89.1 million. At the end of the second
quarter, FF Bank had commitments to purchase U.S. Government agency-backed MBSs
having an aggregate par value of $61.0 million.
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,
1997 1996
----------- --------
(In thousands)
ISSUER/SECURITY TYPE
U.S. Government agencies:
Mortgage-backed certificates $1,323,218 $1,093,513
Collateralized mortgage
obligations ("CMOs") 280,171 282,894
---------- ----------
Total agencies 1,603,389 1,376,407
---------- ----------
Non-agency:
Mortgage-backed certificates 238,913 273,595
CMOs 380 435
---------- ----------
Total non-agency 239,293 274,030
---------- ----------
Totals $1,842,682 $1,650,437
========== ==========
FINANCIAL STATEMENT CLASSIFICATION
Available-for-sale portfolio $1,278,940 $1,048,085
Held-to-maturity portfolio 563,742 602,352
---------- ----------
Total carrying value $1,842,682 $1,650,437
========== ==========
-11-
<PAGE>
During the first six months of 1997, FFC reduced its holdings of non-agency
MBSs by $34.7 million from $274.0 million at the end of 1996 to $239.3 million
at June 30, 1997.
FFC's portfolio of MBSs totaled approximately $1.843 billion at June 30,
1997:
<TABLE>
<CAPTION>
AMORTIZED FAIR CARRYING
COST VALUE VALUE
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
U.S. Government agencies $ 1,592,943 $ 1,579,742 $ 1,603,389
Non-agency:
Securities rated AA or above 215,724 216,313 215,939
Securities rated below AA, but
of investment grade 9,814 9,300 9,281
Securities rated below
investment grade 15,921 14,073 14,073
----------- ----------- -----------
$ 1,834,402 $ 1,819,428 $ 1,842,682
=========== =========== ===========
</TABLE>
The non-agency securities are of investment grade, except for four securities
which are rated below investment grade. Each of these securities was issued by
an unrelated company, and have an aggregate carrying value of $14.1 million.
Based upon i) the results of FFC management's most current review of the
performance characteristics of the underlying mortgage loans collateralizing
these below-investment-grade securities and ii) the fact that these securities
continue to perform, management believes that these MBSs have a net realizable
value in excess of their indicated fair value and/or amortized cost and that any
indicated impairment in fair value is temporary. FFC's management also has the
intent and the ability to retain its investment in these securities for a period
of time sufficient to allow for any anticipated recovery of market value.
LOAN DELINQUENCIES:
FFC monitors the delinquency status of its loan portfolio on a constant
basis and initiates 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,
1997 1996
------------- --------
(In thousands)
Residential real estate loans $ 4,820 $ 7,241
Manufactured housing loans 1,130 2,314
Credit card loans 2,630 2,863
Commercial real estate loans -- 125
Consumer and other loans 1,847 1,658
Student loans 22,621 23,034
------- -------
$33,048 $37,235
======= =======
-12-
<PAGE>
At June 30, 1997, the 90 days or less delinquencies decreased $4.2
million to $33.0 million from $37.2 million at year-end 1996. As a percent of
total loans receivable, these loan delinquencies decreased from 1.06% at the end
of 1996 to 0.93% at June 30, 1997. The decrease in 90 days or less delinquencies
relates to the net effect of changes of such delinquencies for various loan
categories, including the more significant as follows, i) a decrease of $2.4
million for residential mortgage loans and ii) a decrease of $1.2 million for
manufactured housing loans. These decreases were supplemented with smaller
decreases in delinquencies for commercial real estate loans, credit card loans
and student loans and offset by a small increase in consumer loan delinquencies.
All delinquent loans have been considered by management in its
evaluation of the adequacy of the allowances for loan losses.
NON-ACCRUAL AND IMPAIRED 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,
1997 1996
------------ --------
(In thousands)
One- to four-family residential $ 5,714 $ 6,325
Multi-family residential 1,500 1,607
Commercial and other real estate 83 98
Credit cards 2,208 2,106
Manufactured housing 943 1,164
Consumer and other 950 688
------- -------
$11,398 $11,988
======= =======
Non-accrual loans decreased by $600,000 to $11.4 million at June 30,
1997 versus $12.0 million at December 31, 1996. As a percentage of net loans
receivable, non-accrual loans decreased to 0.32% at June 30, 1997 from 0.34% at
December 31, 1996.
The credit card non-accrual loans remained relatively stable during the
first six months of 1997. FFC is still showing credit card delinquencies
somewhat higher than its historical delinquency levels, following national
delinquency trends and statistics for this product. However, FFC continues to
experience significantly smaller overall credit card delinquencies compared to
such national statistics.
Impaired loans as defined in SFAS No. 114, "Impairment of Loans," are
not significant at June 30, 1997. FFC has had no significant troubled debt
restructurings during the first half of 1997. All loans included in non-accrual
status have been considered by management in its review of the adequacy of
allowances for loan losses.
-13-
<PAGE>
ALLOWANCES FOR LOAN LOSSES:
FFC's loan portfolios 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
limited to, general economic conditions, loan portfolio compositions, loan
collateral value, 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, 1997 and 1996, follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------
1997 1996 1997 1996
-------- -------- ------ ------
(In thousands)
<S> <C> <C> <C> <C>
Allowances at beginning of period $22,926 $24,236 $23,228 $25,235
Provisions 2,100 2,180 4,350 4,080
Charge-offs (2,417) (2,937) (5,347) (6,070)
Recoveries 351 276 729 510
------- ------- ------- -------
Allowances at end of period $22,960 $23,755 $22,960 $23,755
======= ======= ======= =======
</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, 1997 and
1996." 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, 1997 DECEMBER 31, 1996
------------------------- ---------------------
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 $ 6,552 3.86% $ 6,783 3.78%
Residential real estate 6,486 .31 6,610 .31
Manufactured housing 1,627 1.80 1,814 1.73
Commercial and non-resi-
dential real estate 3,764 2.06 3,621 2.00
Consumer 3,669 .82 3,462 .83
Home equity 575 .19 572 .19
Commercial business 278 2.67 343 2.92
Education 9 -- 23 .01
------- -------
$22,960 .64% $23,228 .66%
======= ===== ======= =====
</TABLE>
The allowances for loan losses were $23.0 million, or 0.64% of loans
receivable, at June 30, 1997 compared to $23.2 million, or 0.66%, at December
31, 1996. The allowances for losses represented 201% of non-accrual loans at
June 30, 1997 as compared to 194% at the end of 1996. The decrease of $200,000
in the aggregate allowances for losses from year-end 1996 to June 30, 1997 is
the net result of relatively small increases and decreases for the various loan
categories. FFC management believes that the allowances for losses are
sufficient based upon its current evaluations.
-14-
<PAGE>
CLASSIFIED ASSETS:
For regulatory purposes, FF Bank utilizes a comprehensive classification
system for thrift institution problem assets. In general, classified assets
include non-performing assets plus other loans and assets, including contingent
liabilities (see Note E), 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 securities, and real estate
judgments subject to redemption and foreclosed properties for which FF Bank has
obtained title.
Classified assets for FF Bank, including non-performing assets,
categorized by type of asset are set forth in the following table:
JUNE 30, DECEMBER 31,
1997 1996
------------ --------
(In thousands)
CLASSIFIED ASSETS:
Non-performing assets:
Non-accrual loans $11,398 $11,988
Foreclosed properties and other
repossessed assets 4,026 3,997
------- -------
TOTAL NON-PERFORMING ASSETS 15,424 15,985
Additional classified performing loans:
Residential real estate 145 545
Commercial real estate 5,726 6,105
Consumer and other 345 580
Other assets 2,094 2,491
Other adjustments - net (1,493) (1,638)
------- -------
TOTAL CLASSIFIED ASSETS $22,241 $24,068
======= =======
During the six months ended June 30, 1997, classified assets decreased
$1.9 million to $22.2 million from $24.1 million at December 31, 1996 primarily
as the net result of the $600,000 decrease in non-accrual loans, as discussed in
an earlier section, a combined $1.1 million decrease in additional classified
residential, commercial real estate and consumer/other loans, and a decrease of
$400,000 in other classified assets. These additional classifications are based
on certain characteristics identified as potential weaknesses. As a percentage
of total assets, classified assets decreased from 0.42% at year-end 1996 to
0.37% at June 30, 1997.
All adversely classified assets and off-balance sheet financial
guarantees at June 30, 1997, have been considered by FFC management in its
evaluation of the adequacy of allowances for losses.
-15-
<PAGE>
DEPOSITS AND OTHER LIABILITIES:
Deposits increased $72.8 million during the six months ended June 30,
1997 including interest credits of $80.4 million and net cash outflows of $7.6
million. The weighted average cost of deposits of 4.51% at June 30, 1997 was
down from the 4.59% reported at December 31, 1996.
Advance payments by borrowers for taxes and insurance increased by
$27.8 million during the first six months of 1997 as a result of the normal
cumulative monthly escrow deposits made by borrowers less interim payments of
taxes and insurance premiums.
Other liabilities decreased $20.3 million from $62.1 million at
December 31, 1996 to $41.8 million at June 30, 1997. The higher other
liabilities balance at year-end 1996 included outstanding real estate property
tax checks of $29.7 million issued to municipalities on behalf of the borrowers
and as those checks were paid during early 1997, the other liabilities balance
decreased.
BORROWINGS:
At June 30, 1997, FFC's consolidated borrowings increased $138.6
million to $908.1 million from $769.5 million at December 31, 1996. This
increase was primarily due to a $94.2 million net increase in short-term reverse
repurchase agreements and a $45.4 million net increase in shorter-term FHLB
advances. These additional borrowings were used primarily to fund loans and
purchases of U.S. Government agency MBSs.
STOCKHOLDERS' EQUITY:
Stockholders' equity at June 30, 1997, was $422.7 million, or 7.13% of
total assets, as compared to $410.5 million, or 7.20% of total assets, at
December 31, 1996. The major changes in stockholders' equity included i) net
income of $39.1 million earned during the first six months of 1997 and ii) an
improvement of $3.5 million in the net unrealized holding valuation on
available-for-sale securities offset by iii) cash dividend payments to
stockholders of $10.9 million and iv) the purchase of treasury stock at a cost
of $21.0 million. As indicated in Note I to the unaudited consolidated financial
statements, FFC's stock repurchase program was terminated during the second
quarter of 1997 in conjunction with the announcement of its proposed merger with
Associated. Stockholders' equity per share increased from $11.15 per share at
year-end 1996 to $11.67 per share at June 30, 1997.
REGULATORY CAPITAL:
FF Bank is subject to various OTS minimum capital measurements. The
level of FF Bank's deposit account insurance premiums also are impacted by the
amount of capital.
-16-
<PAGE>
As of June 30, 1997, FF Bank had regulatory capital well in excess of
applicable requirements. At that date, the following table summarizes FF Bank's
capital amounts and capital ratios, and the capital amounts and ratios required
by its regulators:
<TABLE>
<CAPTION>
MINIMUM
REQUIRED FOR MINIMUM REQUIRED
CAPITAL TO BE WELL
ADEQUACY CAPITALIZED UNDER
ACTUAL PURPOSES OTS REQUIREMENT
----------------------- ---------------------------- ---------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital (to
tangible assets) $380,689 6.43% $ 88,823 1.50%
Core leverage capital
(to adjusted
tangible assets) 390,451 6.58% 177,939 3.00% $296,564 5.00%
Risk-based capital
(to risk-based
assets) 413,280 14.19% 233,077 8.00% 291,346 10.00%
Core leverage capital
(to risk-based
assets) 390,451 13.40% 174,808 6.00%
</TABLE>
The OTS has proposed 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. Implementation of these rules remained
indefinitely delayed at June 30, 1997. Management of FFC and FF bank do not
believe that implementation of these rules would significantly impact the
capital requirements of FF bank or cause FF bank to fail to meet its regulatory
capital requirements.
LOAN ORIGINATIONS:
A comparison of loan originations and purchases, including loans
originated for sale but excluding purchases of MBSs, for the first six months of
1997 and 1996 is set forth below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------
1997 PERCENT 1996 PERCENT
-------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
LOAN TYPE
Mortgage:
One- to four-family $ 268,174 55.2% $ 347,146 60.0%
Multi-family 19,679 4.0 19,429 3.4
Commercial/non-residential 25,900 5.3 40,185 6.9
---------- ----- --------- -----
Total mortgage origina-
tions 313,753 64.5 406,760 70.3
Consumer 140,187 28.8 137,469 23.7
Student 26,363 5.4 33,585 5.8
Home equity-net 5,584 1.1 533 .1
Commercial business 160 .2 579 .1
---------- ----- --------- -----
Total loans originated 486,047 100.0% 578,926 100.0%
===== ======
Increase in undisbursed
loan proceeds (4,591) (18,547)
---------- ---------
Total loans disbursed $ 481,456 $ 560,379
========== =========
</TABLE>
Total loan originations decreased to $486.0 million for the first six
months of 1997 from $578.9 million for the same period in 1996. This net 1997
decrease of $92.9 million was primarily attributable to a $93.0 million decrease
in mortgage loan originations.
-17-
<PAGE>
One- to four-family mortgage loan originations decreased $78.9 million
to $268.2 million for the first six months of 1997 as compared to $347.1 million
for the same period in 1996. The decrease in originations in 1997 from 1996
reflects decreased borrower demand as interest rates during the first six months
of 1997 were generally higher than the market interest rates during the same
period in 1996. Approximately 59% of originations for the first six months of
1997 were adjustable-rate mortgage loans which are held for investment purposes.
Longer-term fixed-rate mortgages are normally sold into the secondary market. At
June 30, 1997, one- to four-family mortgage loan applications in process and
loan commitments totaled $55.0 million and $40.4 million, respectively, as
compared to $33.4 million and $20.8 million at December 31, 1996.
Student loan originations decreased to $26.4 million during the first
six months of 1997 from $33.6 million for the same period in 1996. This decrease
of $7.2 million in student loan originations is due to the conversion to direct
lending by a major university in FFC's market area.
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 20 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, 1997.
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.
-18-
<PAGE>
FFC's consolidated one-year interest-rate sensitivity gap at June 30,
1997 was a positive $47.2 million or 0.80% of total assets. This one-year
positive gap position compares to the December 31, 1996 negative gap of $102.6
million or 1.80% of total assets at that date.
FFC's consolidated one-year positive gap position of 0.80% at June 30,
1997 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 able to achieve a consistent net interest margin while still meeting
its asset/liability management objectives.
In this regard, FF Bank also measures and evaluates interest-rate risk
via a separate methodology pursuant to OTS regulations. 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 June 30,
1997 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 proposed 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 its OTS risk-based capital
requirement. The implementation of this rule remained indefinitely delayed at
the end of the second quarter. Management of FFC and FF Bank do not believe that
implementation of this rule would significantly impact the capital requirements
of FF Bank or cause FF Bank to fail to meet its capital requirements.
-19-
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL CORPORATION CONSOLIDATED GAP ANALYSIS AT JUNE 30, 1997
THREE GREATER GREATER GREATER GREATER
MONTHS FOUR MONTHS THAN ONE THAN THREE THAN FIVE THAN TEN
AND THROUGH THROUGH THROUGH THROUGH THROUGH
UNDER ONE YEAR THREE YEARS FIVE YEARS TEN YEARS 20 YEARS
--------- ---------- ----------- ----------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Rate-sensitive assets:
Investments and interest-
earning deposits, including
federal funds (a)(b) $ 93,398 $ 23,601 $ 27,317 $ 69,200 $ 402 $ 39,299
Mortgage-related securities (b) 1,058,951 487,249 96,870 66,988 80,093 52,109
Mortgage loans:
Fixed-rate (c)(d) 51,354 131,290 285,294 198,641 218,938 151,059
Adjustable-rate (c) 300,621 638,792 297,481 241 -- --
Other loans 723,392 204,403 215,369 82,583 54,976 9,320
---------- ---------- ---------- ---------- -------- --------
2,227,716 1,485,335 922,331 417,653 354,409 251,787
Rate-sensitive liabilities:
Deposits (e)(f):
Checking 123,285 25,804 64,467 50,469 79,185 72,797
Money market accounts 92,765 77,333 142,287 48,516 40,995 10,407
Passbook 263,107 194,742 50,826 36,594 52,696 33,537
Certificates of deposit 562,083 1,429,800 979,382 65,087 2,768 --
Borrowings 646,867 250,105 4,340 957 597 1,910
---------- ---------- ---------- ---------- -------- --------
1,688,107 1,977,784 1,241,302 201,623 176,241 118,651
---------- ---------- ---------- ---------- -------- --------
GAP (repricing difference) $ 539,609 $ (492,449) $ (318,971) $ 216,030 $178,168 $133,136
========== ========== ========== ========== ======== ========
Cumulative GAP $ 539,609 $ 47,160 $ (271,811) $ (55,781) $122,387 $255,523
========== ========== ========== ========== ======== ========
Cumulative GAP/Total assets 9.10% 0.80% (4.58)% (0.94)% 2.06% 4.31%
========== ========== ========== ========== ======== ========
</TABLE>
<PAGE>
GREATER
THAN
20 YEARS TOTAL
-------- -------
Rate-sensitive assets:
Investments and interest-
earning deposits, including
federal funds (a)(b) $ 31,003 $ 284,220
Mortgage-related securities (b) 422 1,842,682
Mortgage loans:
Fixed-rate (c)(d) 3,034 1,039,610
Adjustable-rate (c) -- 1,237,135
Other loans -- 1,290,043
---------- ----------
34,459 5,693,690
Rate-sensitive liabilities:
Deposits (e)(f):
Checking 40,048 456,055
Money market accounts 1,156 413,459
Passbook 7,866 639,368
Certificates of deposit -- 3,039,120
Borrowings 3,320 908,096
---------- ----------
52,390 5,456,098
---------- ----------
GAP (repricing difference) $ (17,931) $ 237,592
========== ==========
Cumulative GAP $ 237,592
==========
Cumulative GAP/Total assets 4.01%
==========
(a) Investments are adjusted to include FHLB stock totaling $39.3 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 $41.2 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.
-20-
<PAGE>
COMPARISON OF THE
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996
SELECTED INCOME STATEMENT INFORMATION:
For the second quarter of 1997, FFC reported net income of $20.0
million, up from the $17.6 million reported for the second quarter of 1996.
Fully diluted earnings per share for the 1997 quarter amounted to $0.54 per
share as compared to $0.46 per share for the 1996 quarter. The annualized return
on assets for the second quarter of 1997 increased to 1.37% from 1.29% for 1996,
while the annualized return on average equity for the second quarter of 1997
increased to 19.44% as compared to 17.41% for the second quarter of 1996.
For the first half of 1997, FFC reported net income of $39.1 million in
comparison with income, before an extraordinary charge, of $34.9 million for the
first half of 1996. The 1996 extraordinary charge, $686,000 or $0.02 per share,
related to costs associated with the early redemption of FFC's outstanding
subordinated notes originally scheduled to mature in 1999. Fully diluted
earnings per share for 1997 amounted to $1.05 per share as compared to $0.92 per
share prior to the extraordinary charge for 1996. Excluding the 1996
extraordinary item, the annualized return on assets for the first half of 1997
increased to 1.35% from 1.28% for 1996, while the annualized return on average
equity for the first half of 1997 increased to 18.92%, compared to 17.55% for
the first half of 1996.
NET INTEREST INCOME:
Net interest income increased $2.5 million to $48.2 million during the
second quarter of 1997 from $45.7 million for the second quarter of 1996,
primarily due to an increase in average balances of interest-earning assets and
interest-bearing liabilities from $5.186 billion and $4.938 billion,
respectively, in 1996 to $5.629 billion and $5.357 billion, respectively, in
1997. The net interest margin of 3.41% for the second quarter of 1997, however,
was down from the 3.52% reported for the second quarter of 1996. The decrease in
the margin in 1997 was offset by an improvement in the earning-asset ratio from
105.01% in 1996 to 105.08% in 1997. The average yield on interest-earning assets
(7.87% in 1996 versus 7.86% in 1997) decreased by 1 basis point, while the
average cost of interest-bearing liabilities (4.57% in 1996 versus 4.67% in
1997), increased ten basis points, reflecting a higher cost of funds in 1997.
Net interest income increased $4.1 million to $95.8 million during the
first half of 1997 from $91.7 million for the first half of 1996, primarily due
to an increase in average balances of interest-earning assets and
interest-bearing liabilities from $5.180 billion and $4.940 billion,
respectively, in 1996 to $5.563 billion and $5.295 billion, respectively, in
1997. The net interest margin of 3.42% reported for the first half of 1997,
however, was down from the 3.53% reported for the first half of 1996. The
decrease in the margin in 1997 was offset by an improvement in the earning-asset
ratio from 104.86% in 1996 to 105.06% in 1997. The average yield on
interest-earning assets (7.95% in 1996 versus 7.87% in 1997) decreased by eight
basis points, while the average cost of interest-bearing liabilities (4.63% in
1996 versus 4.68% in 1997), increased five basis points. The decrease in the
margin and the average yield on earning assets relates to the sale of credit
card loans and mortgage-backed securities during the latter half of 1996.
-21-
<PAGE>
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 quarter and the six months ended June 30,
1997 and 1996. A comparison of similar data at June 30, 1997 and 1996 is also
shown.
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED AT
JUNE 30, JUNE 30, JUNE 30,
------------------ ---------------- -------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Weighted average yield
on interest-earning
assets 7.86% 7.87% 7.87% 7.95% 7.84% 7.98%
Weighted average rate
paid on deposits and
borrowings 4.67 4.57 4.68 4.63 4.71 4.61
----- ----- ----- ----- ----- -----
Interest spread 3.19% 3.30% 3.19% 3.32% 3.13% 3.37%
===== ===== ===== ===== ===== =====
Net interest margin
(net interest income
as a percentage of
earning assets) 3.41% 3.52% 3.42% 3.53% 3.34% 3.50%
===== ===== ===== ===== ===== =====
</TABLE>
The interest spread was 3.19% for both the three months and six months
ended June 30, 1997, as compared to 3.30% and 3.32%, respectively, for the same
periods in 1996. The interest margin decreased to 3.42% for the six month period
ended June 30, 1997 from 3.53% for the 1996 period, due to the factors noted
above. The interest spread and the net interest margin were 3.13% and 3.34%,
respectively, at June 30, 1997 as compared to 3.37% and 3.50%, respectively, at
June 30, 1996.
PROVISIONS FOR LOSSES ON LOANS:
Provisions for loan losses decreased $100,000 to $2.1 million for the
second quarter of 1997 compared to $2.2 million for the 1996 quarter while the
provisions for loan losses increased $300,000 between the 1996 and 1997 first
six-month periods. Net charge-offs for the second quarter of 1997 approximated
related period provisions. Net charge-offs for the first six months of 1997
exceeded the related period provisions by $200,000 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.
-22-
<PAGE>
The following table summarizes FFC's net charge-off experience by
category for the three months and six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
NET NET NET NET
CHARGE-OFFS CHARGE-OFFS CHARGE-OFFS CHARGE-OFFS
----------- ----------- ----------- -----------
LOAN TYPE (Dollars in thousands)
<S> <C> <C> <C> <C>
Credit cards $1,656 $1,832 $3,417 $5,006
Manufactured housing 152 233 585 924
Residential real estate 62 172 146 736
Consumer and other 194 139 359 232
Commercial business 2 9 111 216
------ ------ ------ ------
$2,066 $2,385 $4,618 $7,114
====== ====== ====== ======
Net charge-offs as a
percent of average loans
outstanding (annualized) 0.23% 0.27% 0.26% 0.27%
====== ====== ====== ======
</TABLE>
The $300,000 decrease in net charge-offs for the quarter ended June 30,
1997 versus the same period in 1996 reflects the net decreases for various loan
category net charge-offs with the exception of a small increase in consumer loan
net charge-offs as this portfolio continues to expand. The $1.7 million of net
credit card loan charge-offs for the three months ended June 30, 1997, while
decreased from the 1996 level, remains higher than historical levels. The
current increased level of credit card loan net charge-offs is following
national trends; however, FFC's experience is at a somewhat lower percentage
than the national averages. During the third quarter of 1996, FFC sold an
affinity group of the credit card loan portfolio that was experiencing higher
than average delinquencies and charge-offs and that sale has helped to reduce
1997 credit card losses. FFC management continues to closely monitor the
provisions for losses allocated to credit card loss allowances to keep pace with
net charge-off experience and that allowance at June 30, 1997 is 3.86% of credit
card loan balances compared to 3.78% as of December 31, 1996.
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 1997 and no 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.
-23-
<PAGE>
NON-INTEREST INCOME:
Changes in non-interest income for the periods indicated are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------- --------------------------------------
INCREASE INCREASE
1997 1996 (DECREASE) 1997 1996 (DECREASE)
-------- -------- ---------- ------- ------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
INCOME CATEGORY
Deposit account
service fees $ 3,747 $ 3,334 $ 413 $ 7,116 $ 6,476 $ 640
Loan fees and
service charges 3,476 3,020 456 6,696 5,749 947
Insurance and
brokerage
commissions 1,938 1,779 159 3,878 3,611 267
Service fees on
loan sold 1,310 1,564 (254) 2,711 3,097 (386)
Gain on sales
of loans and MBSs 697 447 250 1,825 708 1,117
Gain on sales of
investments -- 391 (391) 102 404 (302)
Other 979 843 136 1,816 1,590 226
------- ------- -------- ------- ------- --------
$12,147 $11,378 $ 769 $24,144 $21,635 $ 2,509
======= ======= ======== ======= ======= ========
</TABLE>
Non-interest income increased $800,000 for the second quarter of 1997
as compared to the 1996 quarter. FFC's fee-based income continued to increase as
i) deposit-related fees were up $400,000, ii) loan fees were up $500,000 and
iii) insurance/brokerage sales commissions increased $200,000. Net gains on the
disposition of loans and MBSs increased $300,000 as a net result of i) a
decrease of $500,000 in gains achieved upon the sale of loans in the secondary
mortgage market and the realization of related originated mortgage servicing
rights ("OMSRs") and ii) a decrease of $800,000 in the loss realized upon the
disposition of MBSs. The 1997 decrease in gains on sales of loans, and the
recognition of related OMSRs, was related to the lower level of production of
fixed-rate mortgage loans as general interest rates fluctuated during the course
of the second quarter and borrowers selected fixed-rate loans less often than in
1996. 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 related recognition of 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. FFC realized gains of $2.2 million on the sale of
MBSs in the second quarter of 1996 offset by a loss of $3.0 million recognized
in the same quarter on sales of MBSs and an impairment writedown of non-agency
MBSs.
Non-interest income increased $2.5 million for the first half of 1997
as compared to the 1996. FFC's fee-based income continued to increase as i)
deposit-related fees were up $600,000, ii) loan fees were up $900,000, and iii)
insurance/brokerage sales commissions increased $300,000. Net gains on the
disposition of loans and MBSs increased $1.1 million as a net result of i) a
decrease of $1.2 million in gains achieved upon the sale of loans in the
secondary mortgage market and the realization of related OMSRs, and ii) a
decrease of $2.3 million in losses realized upon the disposition of MBSs. The
1997 decrease in gains on sales of loans, and the recognition of related OMSRs,
was related to the lower level of production of fixed-rate mortgage loans as
general interest rates fluctuated during the course of the first half.
-24-
<PAGE>
NON-INTEREST EXPENSE:
A summary of changes in non-interest expense, for the periods indicated and by
major categories, follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------------ ---------------------------------------
INCREASE INCREASE
1997 1996 (DECREASE) 1997 1996 (DECREASE)
-------- -------- ---------- ------- ------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
EXPENSES CATEGORY
Compensation and
benefits $12,863 $11,183 $1,680 $25,673 $23,266 $ 2,407
Occupancy 2,362 2,374 (12) 4,922 4,832 90
Marketing 1,668 1,613 55 3,564 3,270 294
Amortization of
intangible assets 872 1,265 (393) 1,744 2,529 (785)
Federal deposit
insurance premium 723 2,542 (1,819) 1,430 5,103 (3,673)
All other 8,583 9,316 (733) 17,418 18,688 (1,270)
------- ------- -------- ------- ------- -------
$27,071 $28,293 $ (1,222) $54,751 $57,688 $(2,937)
======= ======= ======== ======= ======= =======
</TABLE>
Non-interest expense decreased approximately $1.2 million and $2.9
million for the quarter and six months ended June 30, 1997 as compared to 1996.
These decreases are primarily related to the decrease in federal deposit
insurance premiums in 1997 following legislation in 1996 to create relative
parity between the bank and thrift insurance funds of the Federal Deposit
Insurance Corporation. Compensation and benefits increased in 1997 compared to
1996 primarily due to benefits realized by FFC in 1996 from the use of its
Employee Stock Ownership Plan ("ESOP"), acquired in a 1995 acquisition, in place
of FFC's normal profit sharing contribution. The ESOP shares, which were
purchased in 1992, were grandfathered from Statement of Position ("SOP") No.
93-6 issued by the American Institute of Certified Public Accountants. Expense
for ESOP shares allocated to FFC employees was recorded at cost as opposed to
market value as required by SOP No. 93-6 for shares acquired after 1992. As of
year end 1996, all ESOP shares were fully allocated to FFC employees and no
further grandfathered benefit will be available. FFC realized a benefit of
$800,000 and $1.1 million, respectively, for the quarter and the six months
ended June 30, 1996, relative to the use of the ESOP. The decrease in the
amortization of intangible assets relates to a change in accounting for such
assets in the latter part of 1996.
Non-interest expense decreased as a percentage of average assets to
1.85% and 1.89% for the quarter and six months ended June 30, 1997 compared to
2.07% and 2.12%, respectively, for the same periods in 1996. Controllable
non-interest expenses, which exclude the amortization of intangible assets and
significant one-time expenditures (if any), decreased to 1.80% and 1.83% of
average assets for the quarter and six months ended June 30, 1997 as compared to
2.00% and 2.03% for 1996. In addition, FFC's efficiency ratio (which represents
the ratio of controllable expenses to recurring income) improved to 44.06% and
44.99%, respectively, for the quarter and six months ended June 30, 1997 as
compared to 48.36% and 49.26% for the same periods in 1996.
-25-
<PAGE>
INCOME TAXES:
Income tax expense increased $5.1 million for the first half of 1997 as
compared to 1996. This increase is related to i) the 18.0% increase in pre-tax
income in 1997, and ii) the realization during 1996 of $2.2 million in credits
upon the completion of a federal tax audit for the taxable years 1989 through
1991 as well as the resolution of other tax matters. These latter factors
resulted in either refunds of taxes previously paid or a reduction in deferred
tax asset allowances which had been previously provided. As a result of the
above factors, FFC's effective tax rate increased from 32.3% in 1996 to $35.7%
in 1997.
-26-
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain "forward-looking statements." FFC desires
to take advantage of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 and is including this statement for the express
purpose of availing itself of the protection of the safe harbor with respect to
all of such forward-looking statements. These forward-looking statements
describe future plans or strategies and include FFC's expectations of future
financial results. The words "believe," "expect," "anticipate," "estimate,"
"project," and similar expressions identify forward-looking statements. FFC's
ability to predict results or the effect of future plans or strategies is
inherently uncertain. Factors which could affect actual results 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. These factors
should be considered in evaluating the forward-looking statements, and undue
reliance should not be placed on such statements.
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.
-27-
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. On April 22, 1997, the Corporation held an Annual Meeting of
Shareholders (the "Annual Meeting"). Matters put to vote at the
Annual Meeting included i) the election of three directors, and
ii) a proposal to amend FFC's Articles of Incorporation to reduce
the minimum size of FFC's Board of Directors from 12 directors to
7 directors.
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 S. Gaiswinkler 2000
Dr. George R. Leach 2000
John C. Seramur 2000
Continuing Directors
James O. Heinecke 1998
Robert T. Kehr 1999
Robert P. Konopacky 1999
Ignatius H. Robers 1998
John H. Sproule 1998
Ralph R. Staven 1999
Norman L. Wanta 1998
Arlyn G. West 1999
c. Set forth below are i) a description of the matters voted upon at
the Annual Meeting and ii) the number of votes cast for, withheld
or abstained relative to these matters:
1. Three 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 S. Gaiswinkler 32,452,045 126,797
Dr. George R. Leach 32,351,083 227,759
John C. Seramur 32,461,759 117,084
2. FFC's articles of incorporation were amended to reduce
the minimum size of FFC's Board of Directors from 12
directors to 7 directors with 31,741,187 votes for this
action, 586,394 votes against and 251,262 votes
abstaining.
d. Not applicable.
-28-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits:
Exhibit 3(a) - Articles of Incorporation, as amended on April
22, 1997
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K:
On April 22, 1997, FFC announced its second stock repurchase
agreement following the expiration of its first repurchase
program. Under the second program, up to 5% of FFC's
outstanding shares (up to 1,850,000 shares) could be
repurchased (see Form 8-K filed May 29, 1997 regarding the
termination of this program).
On May 29, 1997, FFC filed a Current Report on Form 8-K with
the Securities and Exchange Commission to report the
announcement on May 14, 1997 that i) FFC had entered into an
Agreement and Plan of Merger with Associated Banc-Corp of
Green Bay, Wisconsin, ii) in connection with the Agreement,
each of the companies entered into separate Option Agreements
to purchase newly-issued shares of common stock equal to 19.9%
of the outstanding shares of the other company under certain
circumstances, and iii) FFC had terminated its stock
repurchase program in conjunction with the Agreement.
-29-
<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 14, 1997 /s/ John C. Seramur
--------------------
John C. Seramur, President
(Chief Executive Officer) and Director
Date: August 14, 1997 /s/ Thomas H. Neuschaefer
--------------------------
Thomas H. Neuschaefer
Vice President, Treasurer and Chief
Financial Officer
-30-
<PAGE>
EXHIBIT INDEX
3(a) - Articles of Incorporation, as amended on
April 22, 1997
11 - Computation of Earnings Per Share
27 - Financial Data Schedule
<PAGE>
EXHIBIT 3(a)
Articles of Incorporation, as amended on April 22, 1997
<PAGE>
RESTATED
ARTICLES OF INCORPORATION
OF
FIRST FINANCIAL CORPORATION
ARTICLE 1. Corporate Name. The name of the corporation is First Financial
Corporation (hereinafter called the "Corporation").
ARTICLE 2. Duration. The duration of the Corporation is perpetual.
ARTICLE 3. Purposes. The purpose for which the Corporation is organized is
to engage in any lawful activity within the purposes for which corporations may
be organized under the Wisconsin Business Corporation Law.
ARTICLE 4. Capital Stock. The total number of shares of all classes of the
capital stock which the Corporation has authority to issue is seventy-eight
million (78,000,000) of which seventy-five million (75,000,000) shall be common
stock, $1.00 par value per share, amounting in the aggregate to seventy-five
million dollars ($75,000,000), and three million (3,000,000) shall be serial
preferred stock, $1.00 par value per share, amounting in the aggregate to three
million dollars ($3,000,000). The shares may be issued by the Corporation from
time to time as approved by its board of directors without the approval of its
shareholders. The consideration for the issuance of the shares shall be paid in
full before their issuance and shall not be less than the par value per share.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of the shares of the Corporation. The consideration for
the shares shall be paid in whole or in part in money, in other property,
tangible or intangible, or in labor or services actually performed for the
Corporation. In the absence of fraud in the transaction, the judgment of the
board of directors or the shareholders, as the case may be, as to the value of
the consideration received for the shares shall be conclusive. Upon payment of
such consideration such shares shall be deemed to be fully paid and
nonassessable by the Corporation.
A description of the different classes and series of the Corporation's
capital stock and a statement of the powers, designations, preferences,
limitations and relative rights of the shares of each class of and series of
capital stock are as follows:
A. Common Stock. Except as provided in this Article 4 (or in any resolution
or resolutions adopted by the board of directors pursuant hereto) the holders of
the common stock shall exclusively possess all voting power. Each holder of
shares of common stock shall be entitled to one vote for each share held by such
holder. There shall be no cumulative voting rights in the election of directors.
Each share of common stock shall have the same relative rights as and be
identical in all respects with all other shares of common stock.
1
<PAGE>
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund or retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends; but only when and as
declared by the board of directors.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid to or set aside for the holders of
any class having preferences over the common stock in the event of liquidation,
dissolution or winding up of the full preferential amounts of which they are
respectively entitled, the holders of the common stock, and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
B. Serial Preferred Stock. The board of directors of the Corporation is
authorized, by resolution or resolutions from time to time adopted, to provide
for the issuance of serial preferred stock in series, including convertible
preferred stock, and to fix and state the voting powers, full or limited, or no
voting powers, and such designations, preferences, limitations and relative
rights thereof. Each share of each series of serial preferred stock shall have
the same relative rights as and be identical in all respects with all other
shares of the same series.
Duplicate copies of a resolution adopted by the directors pursuant to this
Article 4 with a certificate thereto affixed, signed by the president or a vice
president and a secretary or an assistant secretary and sealed with the
corporate seal, stating the fact and date of adoption, and that such copies are
true copies of the original shall be filed in the office of the secretary of
state and recorded in the office of the register of deeds of the county in which
the registered office of the Corporation is located, and when so filed and
recorded shall constitute an amendment to these Articles of Incorporation.
ARTICLE 5. Preemptive Rights. Holders of the capital stock of the
Corporation shall not be entitled to preemptive rights with respect to any
shares or other securities of the Corporation which may be issued.
ARTICLE 6. Internal Affairs. The Corporation shall be under the direction
of a board of directors. The board of directors shall consist of not less than
twelve (12) nor more than twenty-four (24) directors. The number of directors
shall be as stated in the Corporation's by-laws, as may be amended from time to
time. 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 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; and provided that no
classification of directors shall be effective prior to the first annual meeting
of shareholders.
2
<PAGE>
The term of office of directors elected at the first annual meeting of
shareholders shall be as follows: the term of office of directors of the first
class shall expire at the first annual meeting of shareholders after their
election; the term of office of directors of the second class shall expire at
the second annual meeting of shareholders after their election and the term of
office of directors of the third class shall expire at the third annual meeting
of shareholders after their election; and, as to directors of each class, when
their respective successors are elected and qualified. At 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. Any vacancy occurring in the board of directors, including any
vacancy created by reason of an increase in the number of directors, shall be
filled by a majority vote of the directors then in office, whether or not a
quorum, and any director so chosen shall hold office until the next election of
directors by the shareholders.
Any director may be removed for cause by an 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 that purpose. At least
twenty (20), but not more than sixty (60), days prior to such meeting of
shareholders, written notice shall be sent to the director or directors whose
removal will be considered at such meeting. No director may be removed as a
director except for cause.
The board of directors or the shareholders may adopt, alter, amend or
repeal the by-laws of the Corporation. 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.
Special meetings of the shareholders for any purpose or purposes may be
called at any time by the chairman of the board, the president, or a majority of
the directors then in office and shall be called by the chairman of the board,
the president, or the secretary upon the written request of the holders of not
less than one-third of all the stock of the Corporation entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered at the registered office of the Corporation addressed to
the chairman of the board, the president or the secretary.
ARTICLE 7. Indemnification. The Corporation shall indemnify each person
(and the heirs and legal representatives of such person) who is or was a
director or officer of the Corporation, or of any other corporation,
partnership, joint venture, trust or other enterprise which he or she served in
any capacity at the request of the Corporation, against any and all liability
and reasonable expense that may be incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding (whether brought by or in
the right of the Corporation or such other corporation, partnership, joint
venture, trust or other enterprise or otherwise), civil, criminal,
administrative or investigative, or threat thereof, or in connection with an
appeal relating thereto, in which he or she may become involved, as a party or
otherwise, by reason of his or her being or having been such director or
officer, or by reason of any past or future action or omission or alleged action
or omission (including those antedating the adoption of these Articles) by him
or her in such capacity, whether or not he or she continues to be such at the
time such liability or expense is incurred.
3
<PAGE>
Each person identified above shall be indemnified by the Corporation
provided such person acted in good faith, in what he or she believed to be in or
not opposed to the best interest of the Corporation or such other corporation,
partnership, joint venture, trust or other enterprise, as the case may be, and
in addition, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his or her conduct was unlawful.
Any such officer or director referred to in this Article may rely upon an
opinion of counsel, whether general counsel for the Corporation or any
designated counsel retained by the Corporation, to provide an opinion to such
person as to the propriety of acting and if said person relies upon said
opinion, he or she shall have deemed to have acted in good faith.
Any such officer or director referred to in this Article who has been
wholly successful, on the merits or otherwise, with respect to any claim,
action, suit, or proceeding shall have been deemed to have acted in good faith.
Termination of any claim, action, suit or proceeding by judgment,
settlement or conviction, or upon a plea of guilty or nolo contendere, or its
equivalent, shall not create a presumption that a director or officer did not
meet the standards of conduct set forth above.
As used in this Article, the terms "liability" and "expense" shall include,
but not be limited to, counsel fees and disbursements and amounts of judgments,
fines and penalties against, and amounts paid in settlement by or on behalf of a
director or officer. Expenses incurred with respect to any such claim, action,
suit or proceeding may be advanced by the Corporation prior to the final
disposition thereof upon receipt of an undertaking by on or behalf of the
recipient to repay such amount unless he or she is entitled to indemnification
under this Article.
The Corporation shall purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise against
liability asserted against him or her and incurred by him or her in any such
capacity or arising out of his status as such, whether or not the Corporation
would have power to indemnify him against such liability under the provision of
this Article.
The rights of indemnification provided in this Article shall be in addition
to any rights to which any person concerned may otherwise be entitled by contact
or as a matter of law, and irrespective of the provisions of this Article, the
board of directors may, at any time and from any time to time, approve
indemnification of directors, officers or employees to the full extend permitted
by the provisions of the Wisconsin Business Corporation Law at the time in
effect, whether on account of past or future actions.
ARTICLE 8. Registered Office and Registered Agent. The initial registered
office of the Corporation is located in Dane County, Wisconsin, the address of
such registered office is 222 West Washington Avenue, Madison, Wisconsin 53703,
and the name of its initial registered agent at such address is C T Corporation
System.
4
<PAGE>
ARTICLE 9. Beneficial Ownership Limitation. As long as the Corporation is
registered with the Federal Savings and Loan Insurance Corporation as a holding
company, no person shall directly or indirectly offer to acquire or acquire the
beneficial ownership of 10 percent or more of the issued and outstanding Voting
Stock (as defined in Article 10 hereto) of the Corporation, unless such offer to
acquire or acquisition has received the prior approvals of (i) the Federal
Savings and Loan Insurance Corporation, and (ii) the holders of at least
two-thirds of the outstanding Voting Stock of the Corporation entitled to vote
at a duly constituted meeting of shareholders called for such purpose. In the
event Voting Stock is acquired in violation of this Article 9, the excess shares
shall no longer be entitled to vote on any matter or take other shareholder
action or be counted in determining the total number of outstanding shares for
purposes of any matter involving shareholder action, and the board of directors
may cause such excess shares to be transferred to an independent trustee for
sale on the open market or otherwise, with the expenses of such trustee to be
paid out of the proceeds from such sale. The term "person" as used in this
Article 9 means an individual, group acting in concert, a corporation, a
partnership, an association, a joint stock company, a trust, and any
unincorporated organization or similar company. The term "offer" as used in this
Article 9 includes every offer to buy or acquire, solicitation of an offer to
sell, tender offer for, or request or invitation for tender of, a security or
interest in a security for value.
The board of directors of the Corporation, when evaluating any offer of
another person (as defined in Article 9 hereof) to (i) make a tender or exchange
offer for any equity security of the Corporation, (ii) merger or consolidate the
Corporation with another institution, or (iii) purchase or otherwise acquire all
or substantially all of the properties and assets of the Corporation, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation and its shareholders, give due consideration to all
relevant factors, including without limitation the social and economic effects
of acceptance of such offer on (a) depositors, borrowers and employees of
savings and loan association subsidiaries of the Corporation, and on the
communities in which such subsidiaries operate or are located and (b) the
ability of such subsidiaries to fulfill the objectives of savings and loan
associations under applicable Wisconsin and federal statutes and regulations.
ARTICLE 10. Certain Business Combinations.
Subsection 1. Vote Required for Certain Business Combinations.
A. Higher Vote for Certain Business Combinations. In
addition to any affirmative vote required by law or these Articles of
Incorporation, and except as otherwise expressly provided in subsection 2 of
this Article 10:
(i) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or (b) any
other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Shareholder; or
5
<PAGE>
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of transactions) to or with any Interested
Shareholder or any Affiliate of any Interested Shareholder
of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value of $1,000,000 or more; or
(iii) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Shareholder or any Affiliate of
any Interested Shareholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate Fair Market Value of $1,000,000 or more; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of an Interested Shareholder or any Affiliate of
any Interested Shareholder; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving an Interested Shareholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Shareholder or any Affiliate of any Interested Shareholder;
shall require the affirmative vote of (a) the holders of at least two-thirds of
the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (the "Voting
Stock"), voting together as a single class and (b) the holders of at least a
majority of the Voting Stock, voting together as a single class, excluding for
purposes of calculating both the affirmative vote and the number of outstanding
shares of Voting Stock all shares of Voting Stock of which the beneficial owner
is an Interested Shareholder or any Affiliate of an Interested Shareholder
referred to in clauses (i) through (v) referred to in this paragraph A. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law.
B. Definition of "Business Combination." The term "Business
Combination" as used in this Article 10 shall mean any transaction which is
referred to in any one or more of clauses (i) through (v) of paragraph A of this
subsection 1.
6
<PAGE>
Subsection 2. When Higher Vote is Not Required.
The provisions of subsection 1 of this Article 10 shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of these Articles of Incorporation, if all of the conditions specified
in either of the following paragraphs A and B are met:
A. Approval by Continuing Directors. The Business
Combination shall have been approved by a majority of the Continuing Directors
(as hereinafter defined).
B. Price and Procedure Requirements. All of the following
conditions shall have been met:
(i) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration
other than cash to be received per share by holders of
common stock in such Business Combination shall be at least
equal to the highest of the following:
(a) (if applicable) the highest per
share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested
Shareholder for any shares of common stock acquired by it
(1) within the two-year period immediately prior to the
first public announcement of the proposal of the Business
Combination (the "Announcement Date") or (2) in the
transaction in which it became an Interested Shareholder,
whichever is higher; or
(b) the Fair Market Value per share
of common stock on the Announcement Date or on the date on
which the Interested Shareholder became an Interested
Shareholder (such latter date is referred to in this Article
10 as the "Determination Date"), whichever is higher.
(ii) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be
received per share by holders of shares of any other class
of outstanding Voting Stock shall be at least equal to the
highest of the following (it being intended that the
requirements of this paragraph B (ii) shall be required to
be met with respect to every class of outstanding Voting
Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of
Voting Stock):
7
<PAGE>
(a) (if applicable) the highest per
share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested
Shareholder for any shares of such class of Voting Stock
acquired by it (1) within two-year period immediately prior
to the Announcement Date or (2) in the transaction in which
it became an Interested Shareholder, whichever is higher;
(b) (if applicable) the highest
preferential amount per share to which the holders of shares
of such class of Voting Stock are entitled in the event of
any voluntary or involuntary liquidation, dissolution or
winding up the Bank; or
(c) the Fair Market Value per share
of such class of Voting Stock on the Announcement Date or on
the Determination Date, whichever is higher.
(iii) The consideration to be received by holders of
outstanding Voting Stock (including common stock) in the
Business Combination shall be in cash or in the same form as
the Interested Shareholder has previously paid for shares of
such class of Voting Stock. If the Interested Shareholder
has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration
for such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such
class of Voting Stock previously acquired by it.
(iv) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such
Business Combination: (a) there shall have been (1) no
reduction in the annual rate of dividends paid on the
capital stock (except as necessary to reflect any
subdivision of the capital stock), except as approved by a
majority of the Continuing Directors, and (2) an increase in
such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding
shares of common stock, unless the failure so to increase
such annual rate is approved by a majority of the Continuing
Directors; and (b) such Interested Shareholder shall have
not become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction which results
in such Interested Shareholder becoming an Interested
Shareholder.
8
<PAGE>
(v) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall
not have received the benefit, directly or indirectly
(except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the
Corporation, whether in anticipation of or in connection
with such Business Combination or otherwise.
(vi) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall
be mailed to public shareholders of the Corporation at least
20 days prior to the consummation of such Business
Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions).
Subsection 3. Certain Definitions.
For the purposes of this Article 10:
A. A "person" shall mean any individual, firm, corporation or
other entity.
B. "Interested Shareholder" shall mean any person (other than
the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of the outstanding Voting
Stock; or
(ii) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the then outstanding
Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to
any shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
beneficially owned by any Interested Shareholder, if such
assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of
1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
9
<PAGE>
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right
is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
D. For the purpose of determining whether a person is an
Interested Shareholder pursuant to paragraph B of this subsection 3, the number
of shares of Voting Stock deemed to be outstanding shall include shares deemed
owned through application of paragraph C of this subsection 3 but shall not
include any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
F. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in paragraph B of this subsection 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the Corporation.
G. "Continuing Director" means any member of the board of
directors of the Corporation who is unaffiliated with the Interested Shareholder
and was a member of the board of directors of the Corporation prior to the time
that the Interested Shareholder became an Interested Shareholder, and any
successor of a Continuing Director who is unaffiliated with the Interested
Shareholder and is recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the board of directors of the Corporation.
10
<PAGE>
H. "Fair Market Value" means:
(i) in the case of stock, the highest closing sale
price during the 30- day period immediately preceding the
date in question of a share of such stock on the principal
United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities
Dealers, Inc. Automated Quotations Systems or any system
then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such
stock as determined by the board of directors of the
Corporation in good faith; and
(ii) in the case of property other than cash or stock
on the date in question as determined by the board of
directors of the Corporation in good faith.
Subsection 4. Powers of the Board of Directors.
A majority of the directors of the Corporation shall have the
power and duty to determine for the purposes of this Article 10, on the basis of
information known to them after reasonable inquiry, (A) whether a person is an
Interested Shareholder, (B) the number of shares of Voting Stock beneficially
owned by any person, (C) whether a person is an Affiliate or Associate of
another, and (D) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $1,000,000 or more.
Subsection 5. No Effect on Fiduciary Obligations of Interested
Shareholders.
Nothing contained in this Article 10 shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by law.
ARTICLE 11. Amendment of Articles of Incorporation. Except as set forth
in this Article or as otherwise required by law, no amendment, addition,
alteration, change or repeal of any provision of these Articles of Incorporation
shall be made, unless such is first proposed by the board of directors of the
Corporation, upon 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, and thereafter approved by the shareholders by the
affirmative vote of the holders of at least two-thirds of the shares entitled to
vote thereon, unless any class or series of shares is entitled to vote thereon
as a class in which event the proposed amendment, addition, alteration, change
or repeal of any provision of these Articles of Incorporation shall be adopted
upon receiving the affirmative vote of holders of a majority of the shares of
each class and of each series entitled to vote thereon and of the total shares
entitled to vote thereon. Any amendment, addition, alteration, change or repeal
of any provision of these Articles of Incorporation shall be effective on the
date it is filed with the Secretary of State of the State of Wisconsin or within
thirty-one (31) days after such filing if so specified in such approval of
shareholders.
11
<PAGE>
ARTICLE 12. Incorporators. The name and address of each incorporator
are as follows:
NAME ADDRESS
Ralph R. Staven 300 Wisconsin Avenue, Waukesha, Wisconsin 53187
Bruce R. Buss 1305 Main Street, Stevens Points, Wisconsin 54481
IN WITNESS WHEREOF, these Restated Articles of Incorporation have been
duly adopted by the Board of Directors of First Financial Corporation on January
18, 1995 pursuant to Sections 180.1007(1) and (2) of the Wisconsin Business
Corporation Law and supersede and take the place of the existing articles of
incorporation and any amendments to the articles of incorporation.
-------------------------------
Robert M. Salinger, Secretary
This document was drafted by:
Attorney Robert M. Salinger
RETURN TO:
Robert M. Salinger
1305 Main Street
Stevens Point, WI 54481-2811
12
<PAGE>
ARTICLES OF AMENDMENT
FIRST FINANCIAL CORPORATION
A WISCONSIN CORPORATION
1. The name of the corporation is First Financial Corporation, a
Wisconsin Corporation with its registered office in Dane County, Wisconsin.
2. The amendment to the Articles of Incorporation of First Financial
Corporation is as follows: ARTICLE 6 is amended to provide that the Board of
Directors shall consist of not less than 7 directors (formerly Article 6
provided that the Board of Directors shall consist of not less than 12
directors). This will be accomplished by deleting the second sentence of Article
6 and replacing it with the following:
"The Board of Directors shall consist of not less than seven
(7) nor more than twenty-four (24) Directors."
The remaining provisions of Article 6 (other than the second sentence, quoted
above) are unaffected by this Amendment and shall continue in full force and
effect.
3. Said Amendment to the Articles of Incorporation of First Financial
Corporation was adopted by the shareholders and the Board of Directors on April
22, 1997, in accordance with Section 180.1003, Wisconsin Statutes.
4. The total number of shares outstanding is seventy-five million
(75,000,000) common shares; the total number of shares entitled to vote on the
Amendment is thirty-six million nine hundred twelve thousand three hundred
twenty-six (36,912,326) common shares; and the affirmative number of votes
requisite for adoption for such Amendment was twenty-four million six hundred
eight thousand two hundred and eighteen (24,608,218) common shares.
5. The total number of shares voted for the Amendment was thirty-one
million seven hundred forty-one thousand one hundred eighty-seven (31,741,187)
common shares; the total number of shares voted against such Amendment was five
hundred eighty-six thousand three hundred ninety-four (586,394); and two hundred
fifty-one thousand two hundred sixty-two (251,262) common shares abstained.
<PAGE>
6. The effective time of this Amendment shall be the time of filing
these Articles of Amendment.
Executed in duplicate and sealed this 22nd day of April, 1997.
/s/ John C. Seramur
-----------------------------
John C. Seramur, President
(SEAL)
/s/ Robert M. Salinger
-----------------------------
Robert M. Salinger, Secretary
This document was drafted by:
Attorney Robert M. Salinger
Return to:
- ---------
Robert M. Salinger, Esq.
1305 Main Street
Stevens Point, WI 54481-2811
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,
------------------ --------------
1997 1996 1997 1996
------ ------ ------ -----
(In thousands, except
per share data)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
INCOME BEFORE EXTRAORDINARY ITEM $19,980 $17,581 $39,090 $34,915
EXTRAORDINARY ITEM -- -- -- (686)
------- ------- ------- -------
NET INCOME $19,980 $17,581 $39,090 $34,229
======= ======= ======= =======
SHARES:
Weighted average common shares
outstanding 36,214 37,372 36,477 37,316
Shares from assumed exercise of options
(as determined by the treasury stock
method) 788 767 809 779
------- ------- ------- -------
Common and common equivalent shares 37,002 38,139 37,286 38,095
======= ======= ======= =======
PRIMARY EARNINGS PER COMMON SHARE:
Income before extraordinary item $ .54 $ .46 $ 1.05 $ .92
Extraordinary item -- -- -- (.02)
------- ------- ------- -------
Net income $ .54 $ .46 $ 1.05 $ .90
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE
INCOME BEFORE EXTRAORDINARY ITEM $19,980 $17,581 $39,090 $34,915
EXTRAORDINARY ITEM -- -- -- (686)
------- ------- ------- -------
NET INCOME $19,980 $17,581 $39,090 $34,229
======= ======= ======= =======
SHARES:
Weighted average common shares
outstanding 36,214 37,372 36,477 37,316
Shares from assumed exercise of options
(as determined by the treasury stock
method) 812 768 842 797
------- ------- ------- -------
Common and common equivalent shares 37,026 38,140 37,319 38,113
======= ======= ======= =======
FULLY DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary item $ .54 $ .46 $ 1.05 $ .92
Extraordinary item -- -- -- (.02)
------- ------- ------- -------
Net income $ .54 $ .46 $ 1.05 $ .90
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 91,459
<INT-BEARING-DEPOSITS> 31,328
<FED-FUNDS-SOLD> 2,616
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,433,656
<INVESTMENTS-CARRYING> 620,003
<INVESTMENTS-MARKET> 596,417
<LOANS> 3,566,788
<ALLOWANCE> 22,960
<TOTAL-ASSETS> 5,931,501
<DEPOSITS> 4,517,674
<SHORT-TERM> 0
<LIABILITIES-OTHER> 83,006
<LONG-TERM> 908,096
0
0
<COMMON> 37,659
<OTHER-SE> 385,066
<TOTAL-LIABILITIES-AND-EQUITY> 5,931,501
<INTEREST-LOAN> 148,239
<INTEREST-INVEST> 70,524
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 218,763
<INTEREST-DEPOSIT> 100,284
<INTEREST-EXPENSE> 22,693
<INTEREST-INCOME-NET> 95,786
<LOAN-LOSSES> 4,350
<SECURITIES-GAINS> 102
<EXPENSE-OTHER> 54,751
<INCOME-PRETAX> 60,829
<INCOME-PRE-EXTRAORDINARY> 39,090
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,090
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
<YIELD-ACTUAL> 3.19
<LOANS-NON> 11,398
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,216
<ALLOWANCE-OPEN> 23,228
<CHARGE-OFFS> 5,347
<RECOVERIES> 729
<ALLOWANCE-CLOSE> 22,960
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 22,960
</TABLE>
