<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 SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the Transition Period From to
------------------ ------------------
Commission File Number 33-42622
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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: 930,988.
------------
Transitional Small Business Disclosure Format (check one).
YES NO X
----- -----
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 - September 30, 1996 and December 31, 1995.
Consolidated Statements of Earnings - For the three months and nine
months ended September 30, 1996 and 1995.
Consolidated Statements of Cash Flows - For the nine months ended
September 30, 1996 and 1995.
2
<PAGE> 3
FIRST FINANCIAL CORPORATION
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- -------------
(In Thousands)
Assets
<S> <C> <C>
Loans $121,110 100,982
Less: Allowance for loan losses 1,507 1,246
-------- --------
Net loans 119,603 99,736
Securities available-for-sale, at market
(amortized cost $40,967,000 and
$43,345,000, respectively) 40,477 43,663
Loans held for sale 1,530 1,812
Interest-bearing deposits in other banks 107 203
Federal funds sold 4,025 1,365
-------- --------
Total earning assets 165,742 146,779
Cash and due from banks 5,510 4,268
Bank premises and equipment, net of
accumulated depreciation 4,729 4,471
Accrued interest receivable 1,611 1,463
Other real estate 2 305
Other assets 1,204 469
-------- --------
$178,798 157,755
======== ========
Liabilities and Stockholders' Equity
Deposits $163,119 142,922
Advances from Federal Home Loan Bank 1,085 1,331
Short-term borrowings 800 996
Other liabilities 1,228 1,064
Long-term debt 392 395
-------- --------
Total liabilities 166,624 146,708
-------- --------
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 1,068,914
shares at September 30, 1996 and 530,364
shares, par value $5.00 at December 31,
1995 2,686 2,657
Additional paid-in capital 3,836 3,735
Retained earnings 7,213 5,715
Unrealized gains (losses) on available-for-
sale, net of applicable income taxes (304) 197
-------- --------
13,431 12,304
Less cost of treasury stock of 137,926 shares
at September 30, 1996 and 68,963 shares at
December 31, 1995 (1,257) (1,257)
-------- --------
Total stockholders' equity 12,174 11,047
-------- --------
$178,798 157,755
======== ========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 4
FIRST FINANCIAL CORPORATION
Consolidated Statements of Earnings
Three Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
(Dollars In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,068 2,603 $ 8,756 7,077
Interest on dividends on securities:
Taxable securities 504 485 1,536 1,392
Exempt from Federal income taxes 109 90 318 266
Interest on loans held for sale 22 20 82 42
Interest on federal funds sold 29 85 73 161
Interest on interest-bearing deposits in other
banks and other interest 2 3 7 8
--------- -------- --------- ---------
Total interest income 3,734 3,286 10,772 8,946
--------- -------- --------- ---------
Interest expense:
Interest on deposits 1,646 1,506 4,726 4,043
Interest on short term borrowings 16 22 53 68
Interest on advances from Federal Home Loan
Bank 22 27 68 84
Interest on Federal funds purchased 2 - 7 -
Interest on long-term debt 7 7 21 21
--------- -------- --------- ---------
Total interest expense 1,693 1,562 4,875 4,216
--------- -------- --------- ---------
Net interest income 2,041 1,724 5,897 4,730
Provision for loan losses 90 137 250 294
--------- -------- --------- ---------
Net interest income after provision for
loan losses 1,951 1,587 5,647 4,436
Non-interest income:
Service charges on deposit accounts 218 197 61 577
Other fees and commissions 57 38 157 99
Other income 179 191 519 435
Gain on sale of securities - - 7 -
--------- -------- --------- ---------
454 426 1,298 1,111
--------- -------- --------- ---------
Non-interest expenses:
Salaries and employee benefits 849 722 2,459 2,026
Occupancy expenses, net 77 46 220 158
Furniture and equipment expense 114 128 347 349
Other operating expenses 470 403 1,350 1,234
Loss on sale of securities 2 1 2 64
--------- -------- --------- ---------
1,512 1,300 4,378 3,831
--------- -------- --------- ---------
Earnings before income taxes 893 713 2,567 1,716
Income taxes 308 242 883 572
--------- -------- --------- ---------
Net earnings $ 585 471 1,684 1,144
========= ======= ========= =========
Weighted average number of shares and common
equivalents outstanding 945,551 929,172 941,500 929,466
========= ======= ========= =========
Net earnings per common and common equivalent
shares $ .62 .50 1.79 1.23
========= ======= ========= =========
Dividends per share $ .20 .175 .20 .175
========= ======= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 5
FIRST FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
Nine Months Ended September 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 $ 10,635 8,558
Fees and commissions received 831 698
Interest paid (4,765) (3,867)
Originations of loans held for sale (23,923) (18,361)
Proceeds from loan sales 24,665 18,776
Cash paid to suppliers and employees (4,174) (3,529)
Income taxes paid (943) (620)
---------- ---------
Net cash provided by operating activities 2,326 1,655
---------- ---------
Cash flows from investing activities:
Loans made to customers, net of repayments (20,048) (17,978)
Proceeds from sales of available-for-sale securities 8,713 3,530
Proceeds from maturities of available-for-sale
securities 3,685 851
Purchase of available-for-sale securities (10,026) (9,126)
Purchase of held-to-maturity securities - (2,289)
Proceeds from maturities of held-to-maturity
securities - 1,556
Decrease (increase) in interest-bearing deposits
in financial institutions 96 (2)
Purchase of premise and equipment (774) (399)
Proceeds from sales of other real estate 239 -
Increase in other real estate (5) (9)
---------- ---------
Net cash used in investing activities (18,120) (23,866)
---------- ---------
Cash flows from financing activities:
Net increase in time deposits 12,711 14,572
Net increase in non-interest bearing, savings
and NOW deposit accounts 7,486 11,386
Purchase of treasury stock - (8)
Payment of dividend (67) (162)
Issuance of common stock 11 -
Repayment on note payable - line of credit (196) (90)
Repayment of long-term debt (3) (4)
Repayment from advances from Federal
Home Loan Bank (246) (232)
---------- ---------
Net cash provided by financing activities 19,696 25,462
---------- ---------
Net increase in cash and cash equivalents 3,902 3,251
Cash and cash equivalents at beginning of period 5,633 5,375
---------- ---------
Cash and cash equivalents at end of period. $ 9,535 8,626
========== =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 6
FIRST FINANCIAL CORPORATION
Consolidated Statements of Cash Flows, Continued
Nine Months Ended September 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 $ 1,684 1,144
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 254 222
Provision for loan losses 250 294
Gain on sale of investment securities -
available-for-sale (7) -
Loss on sale of investment securities -
available-for-sale 2 64
Loss on sale - other real estate 1
Decrease in loans held for sale 282 2
Increase in interest receivable (148) (382)
Increase in other assets, net (155) (54)
Increase in other liabilities 54 15
Increase (decrease) in interest payable 110 349
-------- -------
Total adjustments 642 511
-------- -------
Net cash provided by operating
activities $ 2,326 1,655
======== =======
Supplemental Schedule of Noncash Activities:
Unrealized gain (loss) in value of securities
available-for-sale, net of tax benefits of
$186,000 and income taxes of $234,000 in
1995. $ (501) 384
======== =======
Dividends reinvestment plan:
Common stock issued pursuant to
dividend reinvestment plan 119 -
======== =======
</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 September 30, 1996 and December 31, 1995, and the results of operations
for the three months and nine months ended September 30, 1996 and 1995 and
changes in cash flows for the nine months ended September 30, 1996 and 1995.
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 Annual
Report to stockholders. The results for interim periods are not necessarily
indicative of results to be expected for the complete year.
Allowance for Loan Losses
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1996 1995
---------- --------
(In Thousands)
<S> <C> <C>
Balance, January 1, 1996 and 1995,
respectively 1,246 932
Add (deduct):
Losses charged to allowance (64) (67)
Recoveries credited to allowance 75 27
Provision for loan losses 250 294
---------- --------
Balance, September 30, 1996 and 1995,
respectively $ 1,507 1,186
========== ========
</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 $7,697,000 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
September 30, 1996 commercial loans of approximately $26 million and other
loans (mortgage and consumer) of approximately $54 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 $22 million will become due or subject to repricing during the
next twelve months. The Bank's deposit base increased approximately $20.2
million during the nine months ended September 30, 1996.
The Company also has the ability to meet its liquidity needs
through advances from the Federal Home Loan Bank. At September 30, 1996 the
Company had $1,085,000 of these advances.
As of September 30, 1996, the Bank's liability sensitivity was
16.7% excess of interest sensitive liabilities over earning assets divided by
total assets at the one year threshold. Management estimates, based on its own
internal dynamic interest rate risk model, that a sudden increase in consensus
prime of 1% would result in a decrease in net interest income of 2.3%, or
$195,000. Conversely a decrease in consensus prime of 1% would increase net
interest income by 2.05% or $174,000.
Management works diligently to maintain proper liquidity. It is
anticipated that with present maturities, the projected 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 23.6% at
September 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 6.81% at
September 30, 1996 and 7.0% at December 31, 1995. Total assets increased 13.3%
during the nine months ended September 30, 1996. Cash dividends of $.20 per
outstanding share were declared July 1, 1996. Cash dividends paid during 1995
were $.35 per share ($.175 per share after giving effect to the 1996 stock
split). 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. Effective July 15, 1996, 7,224
additional shares of common stock were issued pursuant to the Plan. 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 Operations,
Continued
Capital Resources, Continued
The FDIC, which is the subsidiary's primary federal regulator, has
specified 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
September 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 $ 12,478
Tier II capital:
Allowable allowance for loan losses 1,507
-----------
Total capital $ 13,985
===========
Risk-weighted assets $ 135,639
===========
Risk-based capital ratios:
Tier I capital ratio 9.20%
===========
Tier II capital ratio 10.31%
===========
</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 September 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 a minimum of 4%. The leverage ratio at September 30,
1996 was 7.04%.
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 earnings
per share.
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 recommended the holding company structure
with a view to providing flexibility in the expansion of First Bank's present
business and to assist the Bank in being more responsive to its customers'
broadening and changing financial needs. In particular, the holding company
structure is believed to provide greater flexibility in raising additional
capital for First Bank. Greater flexibility in raising capital is necessary in
order to insure 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
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 September 30, 1996, 79,400
shares had been granted at $10.00 per share (1,320 shares have been exercised
at September 30, 1996); 2,000 shares had been granted at $12.00 per share (200
shares have been exercised at September 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 September 30, 1996). The options are granted at the
estimated market price of the stock at the date the option was granted. At
September 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 September 30, 1996 options to purchase 43,808 common shares were
available for grant in future years. During the nine months ended September 30,
1996, the Company issued 962 shares of its common voting stock in connection
with the exercise of stock options. 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 38.8%
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. These premises
are being leased for $3,388 per month. This lease will continue until the
completion of the permanent branch, which is estimated to be December, 1996.
Additionally, the Company leases another branch facility for $350 per month
($4,200 annually). At present the ratio of fixed assets to capital at the
subsidiary bank level is 36.7%. 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 $1,684,000 for the nine months ended September
30, 1996 as compared to $1,144,000 for the same period in 1995. Earnings per
share increased from $1.23 in 1995 to $1.79 for the same period in 1996.
As in most financial institutions, a major element in analyzing
the statement of earnings is net interest income, i.e., 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 $1,826,000 or 20.4% during the nine months ended
September 30, 1996 and $2,594,000 or 40.8% for the same period in 1995.
Interest income for the quarter ended September 30, 1996 increased $448,000 or
13.6% over the quarter ended September 30, 1995 and $146,000 or 4.1% over the
second quarter of 1996. The increases were primarily attributable to higher
volumes of earning assets offset by the declines in interest rates. The ratio
of average earning assets to total average assets was 90.9% for the nine months
ended September 30, 1996 and 93.1% for the year ended December 31, 1995.
Interest expense increased by $659,000 for the nine months ended
September 30, 1996 or 15.6% compared to an increase of $1,538,000 or 57.4% for
the same period in 1995. Interest expense for the quarter ended September 30,
1996 increased $131,000 or 8.4% as compared to the quarter ended September 30,
1995 and increased $76,000 or 4.7% over the second quarter of 1996. The
increases in 1996 and 1995 can be attributable largely to an increase in volume
and an 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 contributed to an increase in net interest income of
$1,167,000 or 24.7% during the first nine months of 1996 and $1,056,000 or
28.7% in the comparable period of 1995. Net interest income for the quarter
ended September 30, 1996 increased $317,000 or 18.4% as compared to $447,000 or
35.0% for the comparable period of 1995.
12
<PAGE> 13
FIRST FINANCIAL CORPORATION
FORM 10-QSB, CONTINUED
Item 2. Management's Discussion and Analysis or Plan of Operations,
Continued
Results of Operations, Continued
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 would then be expected to decline.
The provision for loan losses was $250,000 for the first nine
months of 1996 compared to $294,000 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 for
identifying and monitoring problems on a timely basis.
The following schedule details selected information as to
non-performing loans of the Company at September 30, 1996:
<TABLE>
<CAPTION>
Past Due
90 Days Non-Accrual
------------------- ----------------
(In Thousands)
<S> <C> <C>
Real estate loans $ 294 -
Installment loans 35 -
Commercial 56 -
------------------ ----------------
$ 385 -
================== ================
Renegotiated loans $ 380 -
================== ================
</TABLE>
At September 30, 1996, loans which include the above, totaling
$1,840,000 were included in the Company's internal classified loan list. Of
these loans $977,000 are consumer and $863,000 are commercial loans. The
collateral values securing these loans total approximately $3,003,000,
($1,422,000 related to consumer loans and $1,581,000 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 repayment terms of the loan
agreement. The loan classifications do not represent or result from trends or
uncertainties which management expects will materially and adversely affect
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
September 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 Operations,
Continued
Results of Operations, Continued
Non-interest income, excluding securities transactions, increased
$180,000 or 16.2% during the nine months ended September 30, 1996 and decreased
$385,000 or 25.7% for the same period in 1995. The increase for the quarter
ended September 30, 1996 was $28,000 or 6.6% as compared to the comparable
quarter in 1995 and an increase of $16,000 or 3.6% as compared to the quarter
ended June 30, 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 nine month period ended September 30, 1996,
was $461,000 as compared to $414,000 for the period ending September 30, 1995.
The increase of $47,000 or 11.3% has been caused by the increase in the
refinancing of mortgage loans as compared to the same period in last year. The
decrease in 1995 resulted from a reduction in mortgage loan activity. 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 nine months ended September 30, 1996.
Non-interest expense, excluding securities transactions, increased
$609,000 or 16.2% during the first nine months of 1996 and $401,000 or 11.9%
during the same period in 1995. The increase for the quarter ended September
30, 1996 was $211,000 or 16.2% as compared to the comparable quarter in 1995
and an increase of $27,000 or 1.8% as compared to the quarter ended June 30,
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.
There was a $2,000 security loss in the available-for-sale
category for the nine months ended September 30, 1996. There were securities
losses for the nine months ended September 30, 1995 totaling $64,000.
Management is not aware of any known trends, events or
uncertainties that will, or is 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 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 Federal funds sold, loans or investment, net interest income
will vary. Inflation also impacts on non-interest expenses as goods and
services are purchased, although this has not had a significant effect on net
earnings. If the inflation rate stays flat or increases slightly, management
believes that the effect on profits will not 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 September 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 September 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 Securities 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: November 8, 1996 /s/ David Major
---------------- -----------------------------
David Major
Chairman, President and Chief
Executive Officer
DATE: November 8, 1996 /s/ Sally Kimble
---------------- ----------------------------------
Sally Kimble
Treasurer, Chief Financial Officer,
and Chief Accounting Officer
17
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<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,510
<INT-BEARING-DEPOSITS> 107
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0
0
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