<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
MARK ONE
- --------
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the Transition Period From _______________ to _______________
Commission File Number 33-426222
---------
FIRST FINANCIAL CORPORATION
-------------------------------------------------------------------
(Exact Name of Small Business Issuer As Specified in its Charter)
Tennessee 62-1474162
- ------------------------------- ----------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
1691 N. Mt. Juliet Road, Mount Juliet, TN 37122
-----------------------------------------------
(Address of Principal Executive Offices)
(615) 754-2265
-----------------------------
(Issuer's Telephone Number)
Not Applicable
----------------------------------------------------
Former Name, Former Address and Former Fiscal Years,
If Changed Since Last Report
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
------- -------
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 923,764 .
-------------
Transitional Small Business Disclosure Format (check one).
YES NO X
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This filing contains 17 pages
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The Exhibit Index appears at sequential page number 16
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1
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial statements of the small business issuer
and its wholly-owned subsidiary are as follows:
Consolidated Balance Sheets - June 30, 1996 and December 31, 1995.
Consolidated Statements of Earnings - For the three months and six
months ended June 30, 1996 and 1995.
Consolidated Statements of Cash Flows - For the six months ended
June 30, 1996 and 1995.
2
<PAGE> 3
FIRST FINANCIAL CORPORATION
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
(In Thousands)
<S> <C> <C>
Assets
------
Loans $ 116,434 100,982
Less: Allowance for loan losses 1,382 1,246
--------- -------
Net loans 115,052 99,736
Securities available-for-sale, at market
amortized cost $41,539,000 and $43,345,000, respectively) 40,931 43,663
Loans held for sale 1,336 1,812
Interest-bearing deposits in other banks 105 203
Federal funds sold 475 1,365
--------- -------
Total earning assets 157,899 146,779
Cash and due from banks 4,862 4,268
Bank premises and equipment, net of accumulated depreciation 4,609 4,471
Accrued interest receivable 1,653 1,463
Other real estate 157 305
Other assets 929 469
--------- -------
$ 170,109 157,755
========= =======
Liabilities and Stockholders' Equity
------------------------------------
Deposits $ 154,851 142,922
Advances from Federal Home Loan Bank 1,238 1,331
Short-term borrowings 896 996
Other liabilities 1,148 1,064
Long-term debt 393 395
--------- -------
Total liabilities 158,526 146,708
--------- -------
Stockholders' equity:
Preferred stock, no par value, authorized
5,000,000 shares, no shares issued - -
Common stock, $2.50 par value;
authorized 5,000,000 shares and issued 1,061,690
shares at June 30, 1996 and 530,364 shares,
par value $5.00 at December 31, 1995 2,668 2,657
Additional paid-in capital 3,735 3,735
Retained earnings 6,814 5,715
Net unrealized gains (losses) on available-for-sale
securities, net of applicable income taxes (377) 197
--------- -------
12,840 12,304
Less cost of treasury stock of 137,926 shares at
June 30, 1996 and 68,963 shares at December 31, 1995 (1,257) (1,257)
--------- -------
Total stockholders' equity 11,583 11,047
--------- -------
$ 170,109 157,755
========= =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 4
FIRST FINANCIAL CORPORATION
Consolidated Statements of Earnings
Three Months and Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------------
1996 1995 1996 1995
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,906 2,409 $ 5,688 4,474
Interest and dividends on securities:
Taxable securities 508 460 1,032 907
Exempt from Federal income taxes 106 88 209 176
Interest on loans held for sale 33 9 60 22
Interest on federal funds sold 33 25 44 76
Interest on interest-bearing deposits in
other banks 2 2 5 5
--------- ------- --------- -------
Total interest income 3,588 2,993 7,038 5,660
--------- ------- --------- -------
Interest expense:
Interest on deposits 1,568 1,337 3,080 2,537
Interest on short term borrowings 18 23 37 46
Interest on advances from Federal Home
Loan Bank 22 28 46 57
Interest on Federal funds purchased 2 - 5 -
Interest on long-term debt 7 7 14 14
--------- ------- --------- -------
Total interest expense 1,617 1,395 3,182 2,654
--------- ------- --------- -------
Net interest income 1,971 1,598 3,856 3,006
Provision for loan losses 80 82 160 157
--------- ------- --------- -------
Net interest income after provision for
loan losses 1,891 1,516 3,696 2,849
--------- ------- --------- -------
Non-interest income:
Service charges on deposit accounts 210 201 397 380
Other fees and commissions 50 35 100 61
Other income 178 129 340 244
Gain on sale of securities 1 - 7 -
--------- ------- --------- -------
439 365 844 685
--------- ------- --------- -------
Non-interest expenses:
Salaries and employee benefits 842 653 1,610 1,304
Occupancy expenses, net 68 58 143 112
Furniture and equipment expense 113 109 233 221
Other operating expenses 460 429 880 831
Loss on sale of securities - 36 - 63
--------- ------- --------- -------
1,483 1,285 2,866 2,531
--------- ------- --------- -------
Earnings before income taxes 847 596 1,674 1,003
Income taxes 291 200 575 330
--------- ------- --------- -------
Net earnings $ 556 396 1,099 673
========= ======= ========= =======
Weighted average number of shares and
common equivalent shares outstanding 936,696 938,698 936,643 938,864
========= ======= ========= =======
Net earnings per common and common equivalent
share .59 .42 1.17 .72
========= ======= ========= =======
Dividends per share $ - - - -
========= ======= ========= =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 5
FIRST FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 6,854 5,371
Fees and commissions received 536 459
Interest paid (3,119) (2,437)
Originations of loans held for sale (17,085) (9,837)
Proceeds from loan sales 17,862 9,547
Cash paid to suppliers and employees (2,742) (2,401)
Income taxes paid (628) (381)
--------- -------
Net cash provided by operating activities 1,678 321
--------- -------
Cash flows from investing activities:
Loans made to customers, net of repayments (15,407) (13,277)
Proceeds from sales of available-for-sale
securities 6,365 2,483
Proceeds from maturities of available-for-sale securities 2,895 699
Purchase of available-for-sale securities (7,453) (4,908)
Purchase of held-to-maturity securities - (1,071)
Proceeds from maturities of held-to-maturity securities - 1,224
Decrease in interest bearing deposits in other banks 98 -
Purchase of premise and equipment (296) (177)
Proceeds from sales of premise and equipment - -
Proceeds from sale of other real estate 82 -
Increase in other real estate (3) (3)
--------- -------
Net cash used in investing activities (13,719) (15,030)
--------- -------
Cash flows from financing activities:
Net increase in time deposits 7,985 10,583
Net increase in non-interest bearing, savings
and NOW deposit accounts 3,944 5,262
Decrease in note payable - line of credit (90)
Payments to acquire treasury stock - (6)
Repayment of short-term borrowings (100) -
Repayment of advances from Federal Home Loan Bank (93) (30)
Repayment of long-term debt (2) (3)
Issuance of common stock 11 -
--------- -------
Net cash provided by financing activities 11,745 15,716
--------- -------
Net increase (decrease) in cash and cash equivalents (296) 1,007
Cash and cash equivalents at beginning of period 5,633 5,375
--------- -------
Cash and cash equivalents at end of period $ 5,337 6,382
========= =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 6
FIRST FINANCIAL CORPORATION
Consolidated Statements of Cash Flows, Continued
Six Months Ended June 30, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
(In Thousands)
<S> <C> <C>
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $ 1,099 673
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 168 147
Provision for loan losses 160 157
Loss (gain) on sale of available-for-
sale securities (7) 63
Loss on sale - other real estate - 2
Decrease (increase) in loans held for sale 476 (516)
Increase in interest receivable (190) (286)
Increase in other assets, net (112) (153)
Increase in other liabilities 21 17
Increase in interest payable 63 217
------- ----
Total adjustments 579 (352)
------- ----
Net cash provided by
operating activities $ 1,678 321
======= ====
Supplemental schedule of non-cash activities:
Unrealized gain (loss) in value of
securities available-for-sale, net
of tax benefits of $351 in 1996 and
income taxes of $207 in 1995. $ (574) 339
======= ====
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
6
<PAGE> 7
FIRST FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Basis of Presentation
The unaudited consolidated financial statements include the accounts of First
Financial Corporation and its wholly-owned subsidiary, First Bank and Trust
(First Bank).
The accompanying consolidated financial statements have been prepared, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the statements contain all adjustments and
disclosures necessary to summarize fairly the financial position of the Company
as of June 30, 1996 and December 31, 1995, and the results of operations for
the three months and six months ended June 30, 1996 and 1995 and changes in
cash flows for the six months ended June 30, 1996 and 1995, respectively. All
significant intercompany transactions have been eliminated. The interim
consolidated financial statements should be read in conjunction with the notes
to the consolidated financial statements presented in the Company's 1995 Annual
Report to stockholders. The results for interim periods are not necessarily
indicative of results to be expected for the complete fiscal year.
Allowance for Loan Losses
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1995
---- ----
(In Thousands)
<S> <C> <C>
Balance, January 1, 1996 and 1995,
respectively $ 1,246 932
Add (deduct):
Losses charged to allowance (40) (35)
Recoveries credited to allowance 16 18
Provision for loan losses 160 157
------- -----
Balance, June 30, 1996 and 1995,
respectively $ 1,382 1,072
======= =====
</TABLE>
Earnings Per Share
The computation of earnings per common share and common equivalent share is
based upon the weighted average number of common shares outstanding during the
period plus the effect of common shares contingently issuable from stock
options. On April 18, 1996, the stockholders approved a two-for-one stock
split effective for shareholders of record on May 1, 1996. The weighted
average number of shares outstanding used in the computation of earnings per
share and dividends per share has been retroactively adjusted to reflect the
stock split.
7
<PAGE> 8
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation
The purpose of this discussion is to provide insight into the
financial condition and results of operations of the Registrant and its
subsidiary. This discussion should be read in conjunction with the
consolidated financial statements. Reference should also be made to the
Company's 1995 Annual Report to stockholders for a complete discussion of
factors that impact liquidity, capital and the results of operations.
Liquidity and Interest Rate Sensitivity Management
The concept of liquidity involves the ability of the Company and its
subsidiary to meet future cash flow requirements, particularly those of
customers who are either withdrawing funds from their accounts or borrowing to
meet their credit needs.
Proper asset/liability management is necessary to maintain stability
in the balance of interest-sensitive assets to interest-sensitive liabilities
in order to provide a stable growth in net interest margins. Earnings on
interest-sensitive assets such as loans tied to the prime rate of interest and
federal funds sold, may vary considerably from fixed rate assets such as
long-term investment securities and fixed rate loans. Interest-sensitive
liabilities such as large certificates of deposit and money market
certificates, generally require higher costs than fixed rate instruments such
as passbook savings.
Banks, in general, must maintain large cash balances to meet
day-to-day cash flow requirements as well as maintaining required reserves for
regulatory agencies. The cash balances maintained are the primary source of
liquidity. Federal funds sold, which are basically overnight or short-term
loans to other banks that increase the other bank's required reserves, are also
a major source of liquidity.
The Company's investment portfolio consists of earning assets that
provide interest income. For those securities classified as held-to-maturity,
the Company has the ability and intent to hold these securities to maturity or
on a long-term basis. Securities classified as available-for-sale include
securities intended to be used as a part of the Company's asset/liability
strategy and/or securities that may be sold in response to changes in interest
rate, prepayment risk, the need or desire to increase capital and similar
economic factors. The Company has $7,014,000 of securities scheduled to mature
or reprice in the next twelve months.
8
<PAGE> 9
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
A secondary source of liquidity is the Bank's loan portfolio. At
June 30, 1996 commercial loans of approximately $25 million and other loans
(mortgage and consumer) of approximately $51 million either will become due or
will be subject to rate adjustments within twelve months from the respective
date. Continued emphasis will be placed on structuring adjustable rate loans.
As for liabilities, certificates of deposit of $100,000 or greater of
approximately $21 million will become due or subject to repricing during the
next twelve months. The Bank's deposit base increased approximately $11.9
million during the six months ended June 30, 1996.
The Company also has the ability to meet its liquidity needs through
advances from the Federal Home Loan Bank. At June 30, 1996 the Bank had
$1,238,000 of these advances.
As of June 30, 1996, the Bank's liability sensitivity was 19.2%,
excess of interest sensitive liabilities over earning assets divided by total
assets at the one year threshold. Management estimates, based on a static GAP
analysis using historical earnings change ratios, an increase in prime of 1.0%
would increase net interest income by $160,000, while a decrease in the prime
rate of 1.0% would decrease net interest income by $160,000.
It is anticipated that with present maturities, the anticipated growth
in deposit base, and the efforts of management in its asset/liability
management program, liquidity will not pose a problem in the foreseeable
future. At the present time, there are no known trends or any known
commitments, demands, events or uncertainties that will result in or that are
reasonably likely to result in the Company's liquidity changing in any material
way. Liquidity was 23.1% at June 30, 1996 and 28.5% at December 31, 1995.
Capital Resources
A primary source of capital is internal growth through retained
earnings. The ratio of stockholders' equity to total assets was 6.8% at
June 30, 1996 and 7.0% at December 31, 1995. Total assets increased 7.8%
during the six months ended June 30, 1996. Cash dividends of $.35 per share
($.175 per share after giving effect to the 1996 stock split) were paid during
the year ended December 31, 1995. No cash dividends have been paid during the
first six months of 1996 or 1995. Cash dividends will be paid or increased in
the remainder of 1996 over 1995 only in the discretion of the Board of
Directors to the extent profits increase. Effective June 6, 1996, the Company
offered each shareholder the option to participate in a Dividend Reinvestment
Plan. The plan offers eligible shareholders the opportunity to purchase
additional shares of common stock, upon the Company's declaration of dividends.
No material changes in the mix or cost of capital is anticipated in the
foreseeable future.
At the present time there are no material commitments for capital
expenditures other than the planned branch described below.
9
<PAGE> 10
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
Capital Resources, Continued
The FDIC, which is the subsidiary's primary Federal regulator, has
specified new guidelines for purposes of evaluating a bank's capital adequacy.
Under these guidelines, a credit risk is assigned to various categories of
assets and commitments ranging from 0% to 100% based on the risk associated
with the asset or commitment.
The following schedule details the Company's risk-based capital at
June 30, 1996 (excluding the effect of the adoption of SFAS No. 115):
<TABLE>
<CAPTION>
In Thousands
--------------------
(except percentages)
<S> <C>
Tier I capital:
Stockholders' equity $ 11,960
Tier II capital:
Allowable allowance for loan losses 1,382
---------
Total capital $ 13,342
=========
Risk-weighted assets $ 130,277
=========
Risk-based capital ratios:
Tier I capital ratio 9.18%
=========
Tier II capital ratio 10.24%
=========
</TABLE>
The Company is required to maintain a Tier II capital to risk weighted
asset ratio of 8% and a Tier I capital to risk weighted asset ratio of 4%. At
June 30, 1996, the Company and its subsidiary bank were in compliance with
these requirements.
In addition, the Company and its subsidiary are required to maintain a
leverage ratio (defined as equity divided by the most recent quarter average
total assets) of 4%. The leverage ratio at June 30, 1996 was 7.10%.
Management continues to implement its plan to maximize the leverage
position of the Company consistent with safe and sound business practices and
the current regulatory environment. Past decisions by management have
committed the Company to a path of growth to achieve the strategic goals of
maximum leverage. Management is cognizant of the pressures of this philosophy
but believe various combinations of retained earnings, additional capital stock
issues, preferred stock offerings, and other avenues will enable the Company to
maintain a capital position consistent with sound banking principles and at the
same time reward stockholders with significant profits.
10
<PAGE> 11
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
Capital Resources, Continued
Effective January 1, 1992, the Company acquired 100% of the common
stock of First Bank; and accordingly, became a one bank holding company. The
Board of Directors and management believe that the holding company structure
will permit greater flexibility in the expansion of First Bank's present
business and will assist the Bank in being more responsive to its customers'
broadening and changing financial needs. In particular, the holding company
structure was adopted to provide greater flexibility in raising additional
capital for First Bank. Greater flexibility in raising capital is an important
component in seeking to assure that the growth of the Bank's capital will keep
pace with its asset growth.
There is no established trading market for the Company's stock. From
time to time the Company may acquire shares of its stock to provide liquidity
in the shares. All shares of common stock have been retroactively adjusted for
the two-for-one stock split approved on April 18, 1996. During the six months
ended June 30, 1996, the Company issued 962 shares of its common voting stock
in connection with the exercise of stock options. During the year ended
December 31, 1995, the Company redeemed 468 shares of its common voting stock
at $13.00 per share, in an aggregate amount totaling approximately $5,000.
These trades may involve the Company, its directors and officers and,
accordingly, may not be reliable indicators of value.
In April, 1993, the stockholders approved a stock option plan whereby
159,000 shares of the Company's stock is available for issuance to directors,
officers and employees of the Company. At June 30, 1996, 79,400 shares had
been granted at $10.00 per share (1,320 shares have been exercised at June 30,
1996), 2,000 shares had been granted at $12.00 per share (200 shares have been
exercised at June 30, 1996), 4,000 shares were granted at $13.00 per share,
29,792 shares were granted at $15.00 per share (170 shares have been exercised
at June 30, 1996). The options are granted at the estimated market price of
the stock at the date the option was granted. At June 30, 1996 there were
113,502 shares granted but not exercised. The options are generally
exercisable ratably over a ten year period from the date granted. At June 30,
1996 options to purchase 43,808 common shares were available for grant in
future years. The shares related to the stock option have been adjusted for
the 2 for 1 stock split in 1996.
At present, the net book value of premises and equipment is 39.8% of
the Company's capital. The Company is in the process of completing the
permanent branch facility in Smyrna, Tennessee. Management believes that this
facility will help diversify the risk associated with being established in only
one market while generating growth and profits for the Company. At present the
ratio of fixed assets to capital at the subsidiary bank level is 37.2%. These
premises are being leased for $350 per month ($4,200 annually). Investment in
fixed assets can have a detrimental impact on profits particularly in the short
term.
11
<PAGE> 12
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
Results of Operations
Net earnings were $1,099,000 for the six months ended June 30, 1996 as
compared to $673,000 for the same period in 1995. Earnings per share increased
from $.72 in 1995 to $1.17 for the same period in 1996.
As in most financial institutions, a major element in analyzing the
statement of earnings is net interest income, which is the excess of interest
earned over interest paid. This is particularly true with the volatility in
interest rates encountered in recent years.
The Company's interest income, excluding tax equivalent adjustments,
increased by $1,378,000 or 24.3% during the six months ended June 30, 1996 and
$1,591,000 or 39.1% for the same period in 1995. Interest income for the
quarter ended June 30, 1996 increased $595,000 or 19.9% over the quarter ended
June 30, 1995 and $138,000 or 4.0% over the first quarter of 1996. The
increases were primarily attributable to higher volumes of earning assets. The
ratio of average earning assets to total average assets was 91.2% for the six
months ended June 30, 1996 and 93.1% for the year ended December 31, 1995.
Interest expense increased by $528,000 the six months ended June 30,
1996 or 19.9% compared to an increase of $982,000 or 58.7% for the same period
in 1995. Interest expense for the quarter ended June 30, 1996 increased
$222,000 or 15.9% as compared to the quarter ended June 30, 1995 and increased
$52,000 or 3.3% over the first quarter of 1996. The increases in 1996 and 1995
can be attributable largely to an increase in volume, increase in weighted
average interest rates, as well as increases in the outstanding balance on the
line of credit, advances from the Federal Home Loan Bank and long-term debt.
The foregoing resulted in an increase in net interest income of
$850,000 or 28.3% during the first six months of 1996 and $609,000 or 25.4% in
the comparable period of 1995. Net interest income for the quarter ended
June 30, 1996 increased $373,000 or 23.3% as compared to $375,000 or 30.7% for
the comparable period of 1995.
Since assets are more sensitive to movements in rates this should
favor the income statement. Should loan demand not increase, the competition,
intent on increasing market share could drive interest expenses up and the
Company's net interest margin will decline.
12
<PAGE> 13
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
Results of Operations, Continued
The provision for loan losses was $160,000 for the first six months of
1996 compared to $157,000 for the same period in 1995. The provision for loan
losses is based on past loan experience and other factors which, in
management's judgment, deserve current recognition in estimating possible loan
losses. Such other factors considered by management include growth and
composition of the loan portfolio, review of specific loan problems, the
relationship of the allowance for loan losses to outstanding loans, adverse
situations that may affect the borrower's ability to repay, the estimated value
of any underlying collateral and current economic conditions that may affect
the borrower's ability to repay. Management has in place a system designed to
identify and monitor problem loans on a timely basis.
The following schedule details selected information as to
non-performing loans of the Company at June 30, 1996:
<TABLE>
<CAPTION>
Past Due
90 Days Non-Accrual
-------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 348 -
Installment loans 20 -
Commercial 56 -
------ -------
$ 424 -
====== =======
Renegotiated loans $ 496 -
====== =======
</TABLE>
At June 30, 1996, loans which include the above, totaling $1,303,000
were included in the Company's internal classified loan list. Of these loans
$694,000 are consumer and $609,000 are commercial loans. The collateral values
securing these loans are estimated at approximately $2,277,000, ($1,072,000
related to consumer loans and $1,205,000 related to commercial loans). Such
loans are listed as classified when information obtained about possible credit
problems of the borrower has prompted management to question the ability of the
borrower to comply with the agreed repayment terms of the loan agreement. The
loan classifications do not represent or result from trends or uncertainties
which management expects will materially impact future operating results,
liquidity or capital resources.
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.) at June 30,
1996 which would be required to be disclosed as past due, non-accrual,
restructured or potential problem loans, if such interest-bearing assets were
loans.
13
<PAGE> 14
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
Results of Operations, Continued
Non-interest income, excluding securities transactions, increased
$152,000 or 22.2% during the six months ended June 30, 1996 and decreased
$387,000 or 36.1% for the same period in 1995. The increase for the quarter
ended June 30, 1996 was $73,000 or 20.0% as compared to the comparable quarter
in 1995 and an increase of $39,000 or 9.8% as compared to the three months
ended March 31, 1996. The primary increase in non-interest income consists of
an increase in income generated from sales of mortgage loans. Mortgage loan
income (included in other income) for the six month period ended June 30, 1996,
was $331,000 as compared to $226,000 for the period ending June 30, 1995. The
increase of $105,000 or 46.5% has been caused by the increase in the
refinancing of mortgage loans as compared to the same period in last year.
Other increases in 1996 and 1995 resulted from increased service charges on
deposits, primarily for demand deposit and NOW accounts. These increases in
service charges were the result of additional volume combined with modest price
increases to offset a portion of the interest costs of NOW accounts and the
increased costs of processing the demand deposit accounts. Commissions and
service charges are monitored continually to insure maximum return based on
costs and competition.
There was a $7,000 security gain in the available-for-sale category
for the six months ended June 30, 1996 as compared to a $63,000 security loss
in 1995.
Non-interest expense, excluding securities transactions, increased
$398,000 or 16.1% during the first six months of 1996 and $270,000 or 12.3%
during the same period in 1995. The increase for the quarter ended June 30,
1996 was $234,000 or 18.7% as compared to the quarter ended June 30, 1995 and
$100,000 or 7.2% as compared to the three months ended March 31, 1996. The
increases in 1996 and 1995 were primarily attributable to increases in salaries
and employee benefits which is due to increased number of employees and
increases in annual compensation.
Management is not aware of any known trends, events or uncertainties
that will have or reasonably likely to have a material effect on the Company's
liquidity, capital resources or operations of the Company. The Company is not
aware of any current recommendations, which, if they were to be implemented,
would have a material effect on liquidity, capital resources or operations
other than as discussed in the capital resources section of this plan.
14
<PAGE> 15
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operation, Continued
Results of Operations, Continued
Impact of Inflation
The primary impact which inflation has on the results of the Company's
operations is evidenced by its effects on interest rates. Interest rates tend
to reflect, in part, the financial market's expectations of the level of
inflation and, therefore, will generally rise or fall as the level of expected
inflation fluctuates. To the extent interest rates paid on deposits and other
sources of funds rise or fall at a faster rate than the interest income earned
on funds, loans or investments, net interest income will vary. Inflation also
affects non-interest expenses as goods and services are purchased, although
this has not appeared to have a significant effect on net earnings. If the
inflation rate stays flat or increases slightly, the effect on profits will not
likely be significant.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule (for SEC use only) - This schedule
contains summary financial information extracted from the financial
statements of the Company at June 30, 1996 (unaudited) and is
qualified in its entirety by reference to such financial statements as
set forth in the Company's quarterly report on Form 10- QSB for the
period ending June 30, 1996.
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
16
<PAGE> 17
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST FINANCIAL CORPORATION
---------------------------------
(Registrant)
DATE: August 2, 1996 /s/ David Major
---------------------------- -------------------------------------
David Major
Chairman, President and Chief
Executive Officer
DATE: August 2, 1996 /s/ Sally Kimble
---------------------------- -------------------------------------
Sally Kimble
Treasurer, Chief Financial Officer,
and Chief Accounting Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANK HOLDING COMPANIES AND SAVINGS AND LOAN HOLDING
COMPANIES FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,862
<INT-BEARING-DEPOSITS> 105
<FED-FUNDS-SOLD> 475
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,931
<INVESTMENTS-CARRYING> 0
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<LOANS> 116,434
<ALLOWANCE> 1,382
<TOTAL-ASSETS> 170,109
<DEPOSITS> 154,851
<SHORT-TERM> 896
<LIABILITIES-OTHER> 1,148
<LONG-TERM> 1,631
0
0
<COMMON> 2,668
<OTHER-SE> 8,915
<TOTAL-LIABILITIES-AND-EQUITY> 170,109
<INTEREST-LOAN> 5,688
<INTEREST-INVEST> 1,241
<INTEREST-OTHER> 109
<INTEREST-TOTAL> 7,038
<INTEREST-DEPOSIT> 3,080
<INTEREST-EXPENSE> 3,182
<INTEREST-INCOME-NET> 3,856
<LOAN-LOSSES> 160
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 2,866
<INCOME-PRETAX> 1,674
<INCOME-PRE-EXTRAORDINARY> 1,674
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,099
<EPS-PRIMARY> 1.17
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<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 424
<LOANS-TROUBLED> 496
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<ALLOWANCE-OPEN> 1,246
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