<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarter Ended: SEPTEMBER 30, 1996 Commission File Number: 0-19837
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FIRST FINANCIAL CORPORATION OF WESTERN MARYLAND
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(Exact name of registrant as specified in its charter)
DELAWARE 52-1700036
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
118 BALTIMORE STREET, CUMBERLAND, MARYLAND 21502
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 724-3363
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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. X Yes No
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Number of shares outstanding of common stock as of October 29, 1996:
COMMON STOCK, $1.00 PAR VALUE 2,128,648 SHARES
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(Class) (Outstanding)
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FIRST FINANCIAL CORPORATION OF WESTERN MARYLAND
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of September 30, 1996 (Unaudited) and June 30, 1996 ........... 1
Consolidated Statements of Operations (Unaudited) for the
three months ended September 30, 1996 and 1995 ................... 2
Consolidated Statements of Cash Flows (Unaudited) for the
three months ended September 30, 1996 and 1995 ................... 3
Notes to Consolidated Financial Statements ....................... 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ................ 5-9
PART II -- OTHER INFORMATION
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Item 3. Legal Proceedings ................................................ 9
Item 4. Changes in Securities ............................................ 9
Item 5. Defaults Upon Senior Securities .................................. 9
Item 6. Submission of Matters to a Vote of Security Holders .............. 9
Item 7. Other Information ................................................ 9
Item 8. Exhibits and Reports on Form 8-K ............................... 9-10
Signatures ....................................................... 11
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PART I -- FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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FIRST FINANCIAL CORPORATION OF WESTERN MARYLAND AND SUBSIDIARIES
Consolidated Statements of Financial Condition
September 30, 1996 and June 30, 1996
(Dollar amounts in thousands)
September 30, June 30,
1996 1996
(Unaudited)
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ASSETS:
Cash on hand and in banks $ 2,753 $ 2,953
Interest-earning deposits 1,064 5,623
Securities available for sale; cost of $0 and $50 -- 75
Securities held to maturity; market value of
$52,390 and $51,374 52,365 51,476
Loans receivable, net 270,365 243,113
Accrued interest receivable 2,082 2,076
Federal Home Loan Bank (FHLB) stock 2,097 2,097
Real estate acquired through foreclosure, net 679 655
Premises and equipment, net 10,690 10,921
Prepaid expenses and other assets 1,262 673
Deferred income taxes 2,148 2,332
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$345,505 $321,994
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LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits $280,705 $274,756
Advance payments by borrowers for taxes
and insurance 1,627 1,704
FHLB advances 17,500 --
Employee Stock Ownership Plan (ESOP) debt 483 483
Accrued expenses and other liabilities 4,822 3,344
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Total liabilities 305,137 280,287
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STOCKHOLDERS' EQUITY:
Serial preferred stock, $1 par value, 2,000,000
shares authorized; none issued -- --
Common stock, $1 par value, 5,000,000 shares
authorized; issued and outstanding
2,188,184 and 2,188,184 2,188 2,188
Additional paid-in capital 11,559 11,559
Retained earnings, substantially restricted 28,389 28,602
Treasury stock, at cost; 63,848 and 11,445 shares (1,344) (233)
Unearned ESOP shares (424) (424)
Unrealized gain on securities available
for sale, net -- 15
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Total stockholders' equity 40,368 41,707
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$345,505 $321,994
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See accompanying notes to consolidated financial statements.
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FIRST FINANCIAL CORPORATION OF WESTERN MARYLAND AND SUBSIDIARIES
Consolidated Statements of Operations
For three months ended September 30, 1996 and 1995
(Unaudited)
(Dollar amounts in thousands, except share data)
Three months ended
September 30,
----------------------
1996 1995
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INTEREST INCOME:
Loans receivable $ 6,084 $ 4,988
Securities 842 1,187
Other 73 169
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TOTAL INTEREST INCOME 6,999 6,344
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INTEREST EXPENSE:
Deposits 2,912 3,030
Borrowed funds 109 17
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TOTAL INTEREST EXPENSE 3,021 3,047
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NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 3,978 3,297
Provision for loan losses 75 150
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,903 3,147
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OTHER OPERATING INCOME:
Loan fees and service charges 238 167
Other non-interest income 89 38
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TOTAL OTHER OPERATING INCOME 327 205
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OTHER OPERATING EXPENSES:
Compensation and employee benefits 1,166 1,039
Occupancy and equipment 313 287
Federal deposit insurance 2,051 165
Data processing 99 96
Professional fees 117 138
Other 398 314
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TOTAL OTHER OPERATING EXPENSES 4,144 2,039
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NET INCOME BEFORE INCOME TAXES 86 1,313
Provision for income taxes 43 512
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NET INCOME $ 43 $ 801
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NET INCOME PER SHARE $ 0.02 $ 0.37
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See accompanying notes to consolidated financial statements.
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FIRST FINANCIAL CORPORATION OF WESTERN MARYLAND AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three months ended September 30, 1996 and 1995
(Unaudited)
(Dollar amounts in thousands)
Three months ended
September 30,
---------------------
1996 1995
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OPERATING ACTIVITIES:
Net income $ 43 $ 801
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Loans originated for sale (750) (3,515)
Sales of loans originated for sale 750 3,133
Gain on sales of securities available for sale (51) --
Deferred loan fees and loan discounts (487) (11)
Depreciation and amortization 188 151
Provision for loan losses 75 150
Deferred income taxes -- 409
Other 1,228 1,032
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NET CASH PROVIDED BY OPERATING ACTIVITIES 996 2,150
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INVESTING ACTIVITIES:
Loan originations and purchases (50,326) (13,148)
Sales of loans 2,000 --
Repayments on loans 21,435 13,806
Repayments of securities available for sale -- 408
Sales of securities available for sale 101 --
Purchases of securities held to maturity (9,993) --
Maturities of securities held to maturity 7,000 2,000
Repayments of securities held to maturity 2,084 2,085
Proceeds from sale of real estate acquired
through foreclosure (REO) 27 348
Purchases of premises and equipment (88) (228)
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NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (27,760) 5,271
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FINANCING ACTIVITIES:
Dividends paid (256) (259)
Net increase in deposits 5,872 3,642
Net change in FHLB advances 17,500 (3,000)
Exercise of stock options -- 204
Payments to acquire treasury stock (1,111) --
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NET CASH PROVIDED BY FINANCING ACTIVITIES 22,005 587
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(Decrease) increase in cash equivalents (4,759) 8,008
Cash equivalents at beginning of period 8,576 5,348
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Cash equivalents at end of period $ 3,817 $ 13,356
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SUPPLEMENTAL INFORMATION:
Interest paid $ 2,839 $ 3,031
Income taxes paid 290 353
NON-CASH TRANSACTIONS:
Transfers from loans receivable to REO 66 --
See accompanying notes to consolidated financial statements.
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FIRST FINANCIAL CORPORATION OF WESTERN MARYLAND AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As of and for the three month periods ended September 30, 1996 and 1995
(Unaudited)
1. BASIS OF PRESENTATION
First Financial Corporation of Western Maryland (the Corporation) is a
unitary thrift holding company. The Corporation's consolidated financial
statements include the accounts of its wholly-owned capital stock federal
savings bank subsidiary, First Federal Savings Bank of Western Maryland (the
Bank) and the Bank's subsidiaries. The accompanying unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring accruals, which are necessary, in the opinion of management, to
fairly reflect the Corporation's financial position and results of operations.
The results of operations for the three months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the entire
fiscal year.
Certain amounts in the fiscal 1996 financial statements have been
reclassified to conform to the presentation for fiscal 1997.
2. NET INCOME PER SHARE OF COMMON STOCK
Net income per common share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
Outstanding shares include common stock equivalents, which consist of certain
outstanding stock options and certain shares owned by the Corporation's
Employee Stock Ownership Plan (ESOP). The average number of shares
outstanding for the three month periods ended September 30, 1996 and 1995 was
2,155,488 and 2,182,236, respectively. The Corporation has not separately
reported fully diluted earnings per share as it is not different than primary
earnings per share.
3. LOANS RECEIVABLE
Loans receivable consist of the following:
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(IN THOUSANDS) September 30, 1996 June 30, 1996
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Mortgage loans:
Residential -- single family $ 143,018 $ 126,779
Residential -- multi family 30,905 29,071
Commercial real estate 59,270 55,104
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233,193 210,954
Other loans:
Automobile 31,850 29,410
Other consumer 14,579 11,177
Commercial business 3,181 3,263
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282,803 254,804
Less:
Allowance for loan losses 7,855 7,795
Deferred loan fees and net discounts 873 1,360
Loans in process 3,710 2,536
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$ 270,365 $ 243,113
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT ACCOUNTING AND REGULATORY MATTERS
The deposits of the Bank are currently insured by the Savings Association
Insurance Fund (SAIF) which is administered by the Federal Deposit Insurance
Corporation (FDIC). The FDIC also administers the Bank Insurance Fund (BIF)
which generally provides insurance for commercial bank deposits. Both the
SAIF and the BIF are required by law to attain and maintain a reserve ratio
of 1.25% of insured deposits. As the result of the BIF achieving a fully
funded status, the FDIC promulgated a regulation in November 1995, which
reduced deposit premiums paid by BIF-insured banks in the lowest risk
category from 27 basis points to zero (subject to an annual minimum of
$2,000).
On September 30, 1996, legislation was enacted into law to recapitalize the
SAIF through a one-time assessment on SAIF-insured deposits as of March 31,
1995. The special assessment amounted to approximately $4.5 billion or
approximately $0.65 for every $100 of assessable deposits. The Bank's
assessment amounted to $1.9 million ($1.2 million, net of income tax
benefit). As a result of the special assessment, it is anticipated that the
Bank's deposit insurance premiums will decrease from the current rate of
$0.23 per $100 of deposits to approximately $0.06 per $100 of deposits
beginning in January 1997.
CHANGES IN FINANCIAL CONDITION
GENERAL. The Corporation's total assets increased by $23.5 million or 7.3%
to $345.5 million at September 30, 1996 from $322.0 million at June 30, 1996.
This increase was primarily due to an increase of $27.3 million in loans
receivable partially offset by decreases of $4.8 million in cash and
interest-earning deposits. The increase in total assets reflects a
corresponding increase in total liabilities of $24.9 million or 8.9% and a
decrease in stockholders' equity of $1.3 million or 3.2%. The increase in
total liabilities includes a $17.5 million increase in Federal Home Loan Bank
(FHLB) advances outstanding and a $5.9 million or 2.2% increase in total
deposits.
CASH AND INTEREST-EARNING DEPOSITS. Cash and interest-earning deposits
decreased by $4.8 million or 55.5% to $3.8 million at September 30, 1996 from
$8.6 million at June 30, 1996. Cash on hand and interest-earning FHLB
deposits are increased by deposits from customers into savings and checking
accounts, loan and security repayments and proceeds from FHLB advances.
Decreases to cash result from customer withdraws, new loan originations,
security purchases and repayments of FHLB advances. The decrease in cash and
interest-earning deposits during the period is primarily due to excess cash
being used to partially fund the growth experienced in the Bank's loan
portfolios.
SECURITIES. Investment and mortgage-backed securities increased by $814,000
or 1.6% to $52.4 million at September 30, 1996 from $51.6 million at June 30,
1996. This net increase was attributable to $10.0 million of security
purchases, partially offset by $9.2 million of maturities and repayments of
principal during the period.
LOANS RECEIVABLE. Net loans receivable increased by $27.3 million or 11.2%
to $270.4 million at September 30, 1996 from $243.1 million at June 30, 1996.
Included in this increase was an increase of $16.2 million in single-family
residential mortgage loans, a $6.0 million increase in commercial real estate
and multi-family residential mortgage loans, a $2.4 million increase in
automobile loans and a $3.4 million increase in other consumer loans.
Offsetting these increases was a decrease of $82,000 in commercial business
loans.
NON-PERFORMING ASSETS. Non-performing assets, which include non-accrual
loans, loans delinquent due to maturity, troubled debt restructurings and
real estate acquired through foreclosure (REO) decreased by $368,000 or 5.7%
to $6.1 million at September 30, 1996 from $6.4 million at June 30, 1996.
The overall decrease in non-performing assets from June 30, 1996, was
primarily attributable to a $1.2 million reduction in non-accrual loans,
partially offset by increases of $775,000 in loans delinquent due to maturity
and a $24,000 increase in REO properties.
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DEPOSITS. Total deposits increased by $5.9 million or 2.2% to $280.7 million
at September 30, 1996 from $274.8 million at June 30, 1996. This increase
was primarily attributable to an increase of $11.1 million in time deposits,
partially offset by decreases of $2.4 million in savings and passbook
accounts and $2.8 million in checking and money market accounts.
STOCKHOLDERS' EQUITY. Stockholders' equity decreased by $1.3 million or 3.2%
to $40.4 million at September 30, 1996 from $41.7 million at June 30, 1996.
This decrease was primarily the result of the $1.1 million acquisition of
treasury shares during the quarter, $256,000 in dividends paid and $15,000
recorded to recognize the net change in unrealized gains/losses on securities
available for sale (AFS). Partially offsetting these decreases was the
$43,000 net income for the first three months of fiscal 1997.
RESULTS OF OPERATIONS
GENERAL. The Corporation recorded net income of $43,000 for the three months
ended September 30, 1996, as compared to net income of $801,000 for the same
period last fiscal year. The $758,000 decrease in net income for the
three-month period ended September 30, 1996, as compared to the three months
ended September 30, 1995, was primarily attributable to an increase of $2.1
million or 103.2% in other operating expenses resulting from the $1.9 million
one-time SAIF insurance fund recapitalization charge. This decrease in net
income was partially offset by an increase of $681,000 or 20.7% in net
interest income, a $75,000 or 50.0% decrease in provision for loan losses, a
$122,000 or 59.5% increase in other operating income and a $469,000 or 91.6%
decrease in the provision for income taxes.
NET INTEREST INCOME. Net interest income is determined by the Corporation's
interest rate spread (i.e., the difference between the yields earned on
interest-earning assets and the rates paid on interest-bearing liabilities)
and the relative amounts, or volumes, of interest-earning assets and
interest-bearing liabilities. Net interest income was $4.0 million for the
three months ended September 30, 1996, as compared to $3.3 million for the
same period last fiscal year. This $681,000 or 20.7% increase in net
interest income was attributable to an increase in interest income of
$655,000 or 10.3% and a $26,000 or 0.9% decrease in interest expense.
INTEREST INCOME. Interest income was $7.0 million for the three months ended
September 30, 1996, as compared to $6.3 million for the same period in the
last fiscal year. The $655,000 or 10.3% increase in interest income was
attributable to increases in interest income recorded on loans, partially
offset by a decrease in income from securities and interest-earning deposits.
Interest income from loans receivable increased by $1.1 million or 22.0% for
the three months ended September 30, 1996, as compared to the same period
last fiscal year due primarily to an increase in loans outstanding during the
respective periods. Average loans outstanding increased $34.8 million or
15.1% to $265.7 million for the quarter ended September 30, 1996 from $230.9
million for the same period last fiscal year.
Interest income from securities was $842,000 for the three months ended
September 30, 1996, as compared to $1.2 million for the three months ended
September 30, 1995. The $345,000 or 29.1% decrease was attributable to lower
average balances invested, partially offset by higher yields realized during
the respective periods. Average securities outstanding decreased $28.8
million or 36.7% to $49.7 million for the quarter ended September 30, 1996
from $78.6 million for the same period last fiscal year. This decrease in
the average balance resulted primarily from the sale of approximately $28.5
million of investment securities during January 1996. In addition, the
yields earned on the security portfolio increased to 6.97% at September 30,
1996 compared to 6.31% at September 30, 1995. During the quarters ended June
30, 1996 and September 30, 1996 the Bank purchased approximately $18.0
million of callable agency bonds with an average yield of 7.53%.
Other interest income, which consists primarily of income from
interest-earning deposits, decreased by $96,000 or 56.8% for the three months
ended September 30, 1996, as compared to the same period last fiscal year.
This decreases was primarily attributable to changes in the average balance
of interest-earning deposits which fluctuate according to the Bank's
operational liquidity requirements.
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INTEREST EXPENSE. Interest expense for the three months ended September 30,
1996 was $26,000 or 0.9% lower than that for the corresponding three month
period in the last fiscal year. This decrease was attributable to a decrease
in interest paid on deposits, partially offset by an increase in interest
paid on borrowed funds.
Interest expense on deposits decreased by $118,000 or 3.9% for the three
months ended September 30, 1996, as compared to the same period in the last
fiscal year. This decrease was attributable to both a reduction in the
average balance of deposits and to a lower cost of deposits for the three
months ended September 30, 1996 as compared with the same period in the last
fiscal year. Average deposits outstanding decreased $6.9 million or 2.4% to
$281.0 million for the quarter ended September 30, 1996 from $288.0 million
for the same period in the last fiscal year. This decrease resulted as part
of management's emphasis to maximize net interest income and net interest
margin rather than focus only on increasing the Bank's deposit base. This
strategy was effective in reducing the Bank's overall cost of deposits to
4.11% at September 30, 1996 from 4.17% at September 30, 1995.
Interest expense on borrowed funds increased by $92,000 for the three months
ended September 30, 1996, as compared to the same period last fiscal year.
Interest expense on borrowed funds, which includes interest paid on FHLB
advances, the Corporation's ESOP debt expense and other miscellaneous interest
expenses, increased during the period due to increases in the average amount of
FHLB advances outstanding during the respective periods.
PROVISION FOR LOAN LOSSES. Provisions for loan losses were $75,000 for the
three months ended September 30, 1996, as compared to $150,000 for the same
period last fiscal year. This decrease reflects the Corporation's policy of
recording provisions for loan losses in amounts necessary to bring the total
allowance for loan losses to a level deemed adequate to cover potential
losses in the loan portfolio. In determining the appropriate level of
allowance for loan losses, management considers historical loss experience,
the present and prospective financial condition of borrowers, current and
prospective economic conditions (particularly as they relate to markets where
the Corporation originates loans), the status of non-performing assets, the
estimated underlying value of the collateral and other factors related to the
collectability of the loan portfolio.
OTHER OPERATING INCOME. Other operating income was $327,000 for the three
months ended September 30, 1996, as compared to $205,000 for the same period
last fiscal year. This $122,000 or 59.5% increase is due to security sale
gains of $51,000 and loan pre-payment fees of $50,000 recorded in the quarter
ended September 30, 1996 for which there were no corresponding amounts in the
prior fiscal period. The remaining variance can be attributed to slightly
different levels of loan origination fees and deposit service charges
recognized. Such income is recognized in proportion to the amount of loans
originated and the volume of customer transactions processed. Accordingly,
other operating income varies between periods due to fluctuations in the
volumes of these activities.
OTHER OPERATING EXPENSES. Total other operating expenses were $4.1 million
for the three months ended September 30, 1996, as compared to $2.0 million
for the same period last fiscal year. This $2.1 million or 103.2% increase
was primarily the result of the $1.9 million one-time SAIF recapitalization
assessment. Also contributing to this increase were increases in
compensation and employee benefits, occupancy and equipment costs, data
processing expenses and other operating costs. Partially offsetting these
increases was a decrease in professional fees.
Compensation and employee benefits increased by $127,000 or 12.2% for the
three months ended September 30, 1996, to the same period last fiscal year
due primarily to the current quarter impact of higher stock prices on stock
appreciation rights issued to former members of management pursuant to stock
based incentive plans. Also contributing to this increase were normal
inflationary increases in wages and employee benefits.
Occupancy and equipment expenses increased by $26,000 or 9.1% for the three
months ended September 30, 1996, as compared to the same period last fiscal
year primarily due to increases in depreciation expense. This increase
resulted from changes made during fiscal 1996 to the estimated remaining
useful lives of certain computer equipment purchased in prior periods.
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Federal deposit insurance premiums increased by $1.9 million for the three
months ended September 30, 1996, as compared to the same period last fiscal
year due primarily to the one-time SAIF recapitalization charge.
Data processing expenses increased by $3,000 or 3.1% for the three months
ended September 30, 1996, as compared to the same period last fiscal year.
This increase is primarily attributable to differences in the volume of
transactions processed during the respective periods.
Professional fees decreased by $21,000 or 15.2% for the three months ended
September 30, 1996, as compared to the same period last fiscal year as a
result of lower levels of expenditures relating to a reduction in auditing,
accounting and consulting expenses resulting from departmental
reorganizations and systems conversions which reduced the Bank's utilization
of outside sources for financial consulting and to a decrease in other
miscellaneous professional fees.
Other expenses increased by $84,000 or 26.8% for the three months ended
September 30, 1996, as compared to the same period last fiscal year due
primarily to increases in advertising costs, certain non-deferrable loan
origination costs relating to the increases in total loans outstanding and
office supplies expenses which relate mostly to timing differences in the
recognition of normal recurring expenditures. Partially offsetting these
increases was a decrease in proxy and stockholder relations expenses.
INCOME TAXES. For the three months ended September 30, 1996 the Corporation
recorded provisions for income taxes of $43,000 as compared to $512,000 for
the same period last fiscal year. This decreases was due to lower pre-tax
income recorded during the three months ended September 30, 1996 than for the
corresponding period last fiscal year. These provisions for income taxes
reflect the Corporation's effective tax rate, which was approximately 38.0%
for both periods.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related notes of the Corporation
presented herein have been prepared in accordance with generally accepted
accounting principles which require the measurement of financial condition
and operating results in terms of historical dollars, without considering
changes in the relative purchasing power of money over time due to inflation.
Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to
a larger degree than interest rates. In the current interest rate
environment, liquidity and the maturity structure of the Corporation's assets
and liabilities are critical to the maintenance of acceptable performance
levels.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required by the Office of Thrift Supervision (OTS) to maintain
minimum levels of liquidity to assure its ability to meet demands for
customers withdrawals and the repayment of short term borrowings. The
liquidity requirement is calculated as a percentage of deposits and
short-term borrowings, as defined by the OTS, and currently must be
maintained at amounts not less than 5.0%. The Bank's liquidity ratios
fluctuate depending primarily upon deposit flows but have been consistently
maintained at levels in excess of the required percentage. At September 30,
1996 the Bank's liquidity ratio was approximately 7.2%. The sources of
liquidity and capital resources discussed above are believed by management to
be sufficient to fund outstanding loan commitments and meet other obligations.
Current regulatory requirements specify that the Bank and similar
institutions must maintain tangible capital equal to 1.5% of adjusted totals
assets, core capital equal to 3% of adjusted total assets and risk-based
capital equal to 8% of risk-weighted assets. The Office of the Comptroller
of the Currency and the FDIC have adopted more stringent core capital
requirements which require that the most highly rated banks have a minimum
core capital ratio of 3%, with an additional 100 to 200 basis point cushion
required for all
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other banks as established by the regulator on a case-by-case basis. Both
the FDIC and the OTS reserve the right to apply this higher standard to any
insured financial institution when considering an institution's capital
adequacy. At September 30, 1996, the Bank was in compliance with all
regulatory capital requirements with tangible, core and risk-based capital
ratios of 11.05%, 11.05% and 19.56%, respectively.
PART II -- OTHER INFORMATION
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ITEM 3. LEGAL PROCEEDINGS
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The Corporation and its subsidiaries are involved in various legal
proceedings occurring in the ordinary course of business. It is the opinion
of management, after consultation with legal counsel, that these matters will
not materially effect the Corporation's consolidated financial position or
results of operations.
ITEM 4. CHANGES IN SECURITIES
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None.
ITEM 5. DEFAULTS UPON SENIOR SECURITIES
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None.
ITEM 6. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
ITEM 7. OTHER INFORMATION
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None.
ITEM 8. EXHIBITS AND REPORTS ON FORM 8-K
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a. Exhibit 11 -- Statement re Computation of Net Income per Share of Common
Stock.
b. Form 8-K -- The Corporation filed a Form 8-K dated August 1, 1996 to
report earnings for the quarter and year ended June 30, 1996.
c. Form 8-K -- The Corporation filed a Form 8-K dated August 19, 1996 to
announce the engagement of Alex. Brown & Sons as the Corporation's
financial advisor in order to assist the Board of Directors in exploring
and evaluating the possible sale of the Corporation.
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EXHIBIT 11
Computation of Net Income per Share of Common Stock
Three Months Ended September 30,
--------------------------------
1996 1995
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Net income $ 43,099 $ 801,458
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Primary:
Weighted average number of shares
outstanding during the period 2,134,105 2,136,547
Dilutive impact of unexercised
common stock options 21,383 45,689
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Weighted average number of shares
outstanding for the period 2,155,488 2,182,236
---------- ----------
---------- ----------
Net income per share $ 0.02 $ 0.37
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---------- ----------
Fully diluted:
Weighted average number of shares
outstanding during the period 2,134,105 2,136,547
Dilutive impact of unexercised
common stock options 28,712 45,689
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Weighted average number of shares
outstanding for the period 2,162,817 2,182,236
---------- -----------
---------- -----------
Net income $ 0.02 $ 0.37
---------- -----------
---------- -----------
-10-
<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 OF WESTERN MARYLAND
Date: 10/29/96 BY: /S/ PATRICK J. COYNE
-------------------------------------
Patrick J. Coyne
Chairman of the Board
President and Chief Executive Officer
Date: 10/29/96 BY: /S/ WILLIAM C. MARSH
-------------------------------------
William C. Marsh
Executive Vice President
Chief Financial Officer
-11-
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