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 The Quarterly Period Ended March 31, 2006
Commission File Number 0-16759
FIRST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1546989
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
One First Financial Plaza, Terre Haute, IN 47807
(Address of principal executive office) (Zip Code)
(812)238-6000
(Registrant's telephone number, including area code)
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 period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No .
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer Accelerated filer X Non-accelerated filer .
--- --- ---
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes No X .
--- ---
As of April 28, 2006, the Registrant had outstanding 13,313,785 shares of common
stock, without par value.
FIRST FINANCIAL CORPORATION
FORM 10-Q
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets.................................... 3
Consolidated Statements of Income.............................. 4
Consolidated Statements of Shareholders' Equity................ 5
Consolidated Statements of Cash Flows.......................... 6
Notes to Consolidated Financial Statements..................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 10
Item 4. Controls and Procedures................................... 11
PART II. Other Information:
Item 1. Legal Proceedings ........................................ 12
Item 1A. Risk Factors............................................. 12
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.................................................. 12
Item 3. Defaults upon Senior Securities........................... 12
Item 4. Submission of Matters to a Vote of Security Holders....... 12
Item 5. Other Information......................................... 12
Item 6. Exhibits.................................................. 13
Signatures........................................................ 14
2
Part I - Financial Information
Item 1. Financial Statements
FIRST FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
March 31, December 31,
2006 2005
----------- ------------
(Unaudited)
ASSETS
Cash and due from banks $ 68,891 $ 78,201
Federal funds sold and short-term investments 28,407 2,982
Securities available-for-sale 558,038 536,291
Loans:
Commercial, financial and agricultural 387,020 382,214
Real estate - construction 29,939 31,918
Real estate - mortgage 696,774 707,008
Installment 264,827 272,062
Lease financing 2,977 2,845
---------- ----------
1,381,537 1,396,047
Less:
Unearned income (279) (306)
Allowance for loan losses (16,859) (16,042)
---------- ----------
1,364,399 1,379,699
---------- ----------
Accrued interest receivable 11,513 12,537
Premises and equipment, net 30,833 31,270
Bank-owned life insurance 56,332 55,832
Goodwill 7,102 7,102
Other intangible assets 2,721 2,860
Other real estate owned 4,406 4,115
Other assets 22,128 26,029
---------- ----------
TOTAL ASSETS $2,154,770 $2,136,918
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 189,097 $ 182,416
Interest-bearing:
Certificates of deposit of $100 or more 217,192 189,493
Other interest-bearing deposits 1,096,755 1,093,009
---------- ----------
1,503,044 1,464,918
Short-term borrowings 9,462 26,224
Other borrowings 343,855 343,866
Other liabilities 26,576 32,587
---------- ----------
TOTAL LIABILITIES 1,882,937 1,867,595
---------- ----------
Shareholders' equity
Common stock, $.125 stated value per share;
Authorized shares--40,000,000 Issued shares-
14,450,966 Outstanding shares--13,313,785 in
2006 and 13,373,570 in 2005 1,806 1,806
Additional paid-in capital 67,670 67,670
Retained earnings 229,219 223,710
Accumulated other comprehensive income 594 1,903
Treasury shares at cost 1,137,181 in 2006 and
1,077,396 in 2005 (27,456) (25,766)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 271,833 269,323
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,154,770 $2,136,918
========== ==========
See accompanying notes.
3
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
Three Months Ended
March 31,
-------------------------
2006 2005
----------- -----------
(Unaudited) (Unaudited)
INTEREST INCOME:
Loans, including related fees $24,106 $23,294
Securities:
Taxable 5,065 3,757
Tax-exempt 1,535 1,652
Other 717 662
------- -------
TOTAL INTEREST INCOME 31,423 29,365
------- -------
INTEREST EXPENSE:
Deposits 8,198 5,953
Short-term borrowings 142 198
Other borrowings 4,687 4,871
------- -------
TOTAL INTEREST EXPENSE 13,027 11,022
------- -------
NET INTEREST INCOME 18,396 18,343
Provision for loan losses 2,203 2,223
------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 16,193 16,120
------- -------
NON-INTEREST INCOME:
Trust department income 914 975
Service charges and fees on deposit accounts 2,737 2,605
Other service charges and fees 1,347 1,617
Securities gains/(losses), net 8 6
Insurance commissions 1,374 1,339
Gain on sales of mortgage loans 131 187
Other 902 1,003
------- -------
TOTAL NON-INTEREST INCOME 7,413 7,732
------- -------
NON-INTEREST EXPENSE:
Salaries and employee benefits 10,259 9,264
Occupancy expense 941 989
Equipment expense 1,043 918
Other 3,973 4,170
------- -------
TOTAL NON-INTEREST EXPENSE 16,216 15,341
------- -------
INCOME BEFORE INCOME TAXES 7,390 8,511
Provision for income taxes 1,881 2,200
------- -------
NET INCOME $ 5,509 $ 6,311
======= =======
PER SHARE DATA:
Basic and Diluted $ .41 $ .47
======= =======
Earnings per share
Weighted average number of shares outstanding (in thousands) 13,351 13,521
======= =======
See accompanying notes.
4
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Months Ended
March 31, 2006, and 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)
Accumulated
Other
Common Additional Retained Comprehensive Treasury
Stock Capital Earnings Income/(Loss) Stock Total
------ ---------- -------- ------------- --------- --------
Balance, January 1, 2005 $1,806 $67,519 $211,623 $ 8,357 $ (20,970) $268,335
Comprehensive income:
Net income 6,311 6,311
Change in net unrealized
gains/(losses) on securities
available for-sale (3,105) (3,105)
--------
Total comprehensive income/(loss) 3,206
Treasury stock purchase (1,367) (1,367)
------ ------- -------- ------- --------- --------
Balance, March 31, 2005 $1,806 $67,519 $217,934 $ 5,252 $ (22,337) $270,174
====== ======= ======== ======= ========= ========
Balance, January 1, 2006 $1,806 $67,670 $223,710 $ 1,903 ($25,766) $269,323
Comprehensive income:
Net income -- -- 5,509 -- -- 5,509
Change in net unrealized
gains/(losses) on securities
available for-sale -- -- -- (1,309) -- (1,309)
--------
Total comprehensive income/(loss) 4,200
Treasury stock purchase -- -- -- (1,690) (1,690)
====== ======= ======== ======= ======== ========
Balance, March 31, 2006 $1,806 $67,670 $229,219 $ 594 $ (27,456) $271,833
See accompanying notes.
5
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands, except per share data)
Three Months Ended
March 31,
-------------------
2006 2005
-------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,509 $ 6,311
Adjustments to reconcile net income to net cash
provided by operating activities:
Net amortization/ (accretion) of premiums and discounts on investments (517) (141)
Provision for loan losses 2,203 2,223
Securities (gains) losses (8) (6)
Depreciation and amortization 881 832
Other, net 4,890 2,023
-------- --------
NET CASH FROM OPERATING ACTIVITIES 12,958 11,242
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of securities available-for-sale 736 1,629
Maturities and principal reductions on securities available-for-sale 25,383 32,141
Purchases of securities available-for-sale (49,523) (41,854)
Loans made to customers, net of repayments 12,806 12,813
Net change in federal funds sold (25,425) 4,250
Additions to premises and equipment (305) (735)
-------- --------
NET CASH FROM INVESTING ACTIVITIES (36,328) 8,244
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits 38,126 23,336
Net change in short-term borrowings (16,762) (54,693)
Dividends paid (5,603) (5,414)
Purchase of treasury stock (1,690) (1,367)
Repayments on other borrowings (11) (10)
-------- --------
NET CASH FROM FINANCING ACTIVITIES 14,060 (38,148)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (9,310) (18,662)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 78,201 94,928
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 68,891 $ 76,266
======== ========
See accompanying notes.
6
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying March 31, 2006 and 2005 consolidated financial statements
are unaudited. The December 31, 2005 consolidated financial statements are as
reported in the First Financial Corporation (the "Corporation") 2005 annual
report. The information presented does not include all information and footnotes
required by U.S. generally accepted accounting procedures for complete financial
statements. The following notes should be read together with notes to the
consolidated financial statements included in the 2005 annual report filed with
the Securities and Exchange Commission as an exhibit to Form 10-K.
1. The significant accounting policies followed by the Corporation and its
subsidiaries for interim financial reporting are consistent with the accounting
policies followed for annual financial reporting. All adjustments which are, in
the opinion of management, necessary for a fair statement of the results for the
periods reported have been included in the accompanying consolidated financial
statements and are of a normal recurring nature. The Corporation reports
financial information for only one segment, banking. Some items in the prior
year financials were reclassified to conform to the current presentation.
2. A loan is considered to be impaired when, based upon current information and
events, it is probable that the Corporation will be unable to collect all
amounts due according to the contractual terms of the loan. Impairment is
primarily measured based on the fair value of the loan's collateral. The
following table summarizes impaired loan information:
(000's)
------------------------
March 31, December 31,
2006 2005
--------- ------------
Impaired loans with related allowance for loan losses
calculated under SFAS No. 114 $1,937 $3,622
Impaired loans with no related allowance for loan
losses 501 500
------ ------
$2,438 $4,122
====== ======
Interest payments on impaired loans are typically applied to principal
unless collection of the principal amount is deemed to be fully assured, in
which case interest is recognized on a cash basis.
3. Securities
The amortized cost and fair value of the Corporation's investments are
shown below. All securities are classified as available-for-sale.
(000's) (000's)
March 31, 2006 December 31, 2005
--------------------------- ---------------------------
Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ---------- -------------- ----------
United States Government entity mortgage-backed securities $335,934 $328,588 $306,697 $301,403
Collateralized Mortgage Obligations 127 134 2,357 2,360
State and Municipal Obligations 127,566 13,399 129,916 134,045
Corporate Obligations 88,978 89,417 89,740 90,224
Equity Securities 4,446 8,500 4,410 8,259
-------- -------- -------- --------
$557,051 $558,038 $533,120 $536,291
======== ======== ======== ========
4. Short-Term Borrowings
Period-end short-term borrowings were comprised of the following:
(000's)
------------------------
March 31, December 31,
2006 2005
--------- ------------
Federal Funds Purchased $4,460 $19,032
Repurchase Agreements 4,943 5,579
Note Payable - U.S. Government 59 1,613
------ -------
$9,462 $26,224
====== =======
7
5. Other Borrowings
Other borrowings at period-end are summarized as follows:
(000's)
------------------------
March 31, December 31,
2006 2005
--------- ------------
FHLB advances $337,255 $337,266
City of Terre Haute, Indiana economic development
revenue bonds 6,600 6,600
-------- --------
$343,855 $343,866
======== ========
6. Components of Net Periodic Benefit Cost
Three Months ended March 31,
(000's)
----------------------------------
Post-Retirement
Pension Benefits Health Benefits
---------------- ---------------
2006 2005 2006 2005
----- ----- ---- ----
Service cost $ 749 $ 701 $ 29 $ 35
Interest cost 591 622 75 80
Expected return on plan assets (698) (821) -- --
Amortization of transition obligation -- -- 15 15
Amortization of prior service cost 14 14 -- --
Amortization of net (gain) loss 190 62 60 63
----- ----- ---- ----
Net Periodic Benefit Cost $ 846 $ 578 $179 $193
===== ===== ==== ====
Employer Contributions
First Financial Corporation previously disclosed in its financial
statements for the year ended December 31, 2005 that it expected to contribute
$1.5 and $1.2 million respectively to its Pension Plan and ESOP and $294,000 to
the Post Retirement Health Benefits Plan in 2006. First Financial Corporation
anticipates contributing $1.5and $1.2 million respectively to its Pension Plan
and ESOP in 2006. Contributions of $118,000 have been made through the first
quarter of 2006 for the Post Retirement Health Benefits plan. First Financial
Corporation anticipates contributing an additional $200,000 to the Post
Retirement Health Benefits plan in 2006.
ITEMS 2. and 3. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Quantitative and Qualitative Disclosures About Market
Risk
The purpose of this discussion is to point out key factors in the
Corporation's recent performance compared with earlier periods. The discussion
should be read in conjunction with the financial statements beginning on page
three of this report. All figures are for the consolidated entities. It is
presumed the readers of these financial statements and of the following
narrative have previously read the Corporation's annual report for 2005.
This Quarterly Report on Form 10-Q contains forward-looking statements.
Forward-looking statements provide current expectations or forecasts of future
events and are not guarantees of future performance, nor should they be relied
upon as representing management's views as of any subsequent date. The
forward-looking statements are based on management's expectations and are
subject to a number of risks and uncertainties. Although management believes
that the expectations reflected in such forward-looking statements are
reasonable, actual results may differ materially from those expressed or implied
in such statements. Risks and uncertainties that could cause actual results to
differ materially include, without limitation, the Corporation's ability to
effectively execute its business plans; changes in general economic and
financial market conditions; changes in interest rates; changes in the
competitive environment; continuing consolidation in the financial services
industry; new litigation or changes in existing litigation; losses, customer
bankruptcy, claims and assessments; changes in banking regulations or other
regulatory or legislative requirements affecting the Corporation's business; and
changes in accounting policies or procedures as may be required by the Financial
Accounting Standards Board or other regulatory agencies. Additional information
concerning factors that could cause actual results to differ materially from
those expressed or implied in the forward-looking statements is available in the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2005,
and subsequent filings with the United States Securities and Exchange Commission
(SEC). Copies of these filings are available at no cost on the SEC's Web site at
www.sec.gov or on the Corporation's Web site at www.first-online.com. Management
may elect to update forward-looking statements at some future point; however, it
specifically disclaims any obligation to do so.
8
Critical Accounting Policies
Certain of the Corporation's accounting policies are important to the
portrayal of the Corporation's financial condition and results of operations,
since they require management to make difficult, complex or subjective
judgments, some of which may relate to matters that are inherently uncertain.
Estimates associated with these policies are susceptible to material changes as
a result of changes in facts and circumstances. Facts and circumstances which
could affect these judgments include, but without limitation, changes in
interest rates, in the performance of the economy or in the financial condition
of borrowers. Management believes that its critical accounting policies include
determining the allowance for loan losses and the valuation of goodwill. See
further discussion of these critical accounting policies in the 2005 Annual
Report on Form 10-K.
Summary of Operating Results
Net income for the three months ended March 31, 2006 was $5.5 million
compared to $6.3 million in the same period in 2005. Basic earnings per share
decreased to $0.41 for the first quarter of 2006 compared to $0.47 for 2005, a
12.8% decrease.
The primary components of income and expense affecting net income are
discussed in the following analysis.
Net Interest Income
The Corporation's primary source of earnings is net interest income, which
is the difference between the interest earned on loans and other investments and
the interest paid for deposits and other sources of funds. Net interest income
increased to $18.4 million in the first three months of 2006 from $18.3 million
in the same period in 2005, a 0.3% increase. The net interest margin increased
to 3.94% in 2006 from 3.92% in 2005, a 0.5% increase, driven by an increase in
the proportion of funding provided by non-interest bearing deposits.
Non-Interest Income
The Non-interest income for the quarter was $7.4 million. Reduced income
from loan originations, which are down as a result of lower loan demand, was the
major difference between these results and the $7.7 million of non-interest
income for the same period in 2005. Deposit fee income was increased which
directly relates to the higher level of deposits in 2006.
Non-Interest Expenses
The Corporation's non-interest expense for the quarter ended March 31, 2006
compared to the same period in 2005 increased by $875 thousand or 5.7%.
Equipment expenses and personnel costs were higher during the first quarter of
2006 compared to the same period of 2005. Cost increases included merit
increases in salaries and higher benefit costs. First Financial Bank opened a
new branch, which contributes to the increase in non-interest expense for the
first three months of 2006 compared to the same period of 2005. Income tax
expense remained relatively level. The effective tax rate for the two periods
was 25.5% and 25.9% respectively.
Allowance for Loan Losses
The Corporation's provision for loan losses decreased $20 thousand for the
first three months of 2006 compared to the same period of 2005. Net charge-offs
for the first three months of 2006 were $1.4 million compared to $2.1 million
for the same period in 2005. This is the lowest volume of net charge off's for a
three month period since the third quarter of 2004. The allowance for loan
losses has decreased from 1.38% of gross loans, or $20.1 million at March 31,
2005 to 1.22% of gross loans, or $16.9 million at March 31, 2006. Based on
management's analysis of the current portfolio, an evaluation that includes
consideration of historical loss experience and probable incurred losses on
identified problem loans, management believes the allowance is adequate.
Non-performing Loans
Non-performing loans consist of (1) non-accrual loans on which the ultimate
collectibility of the full amount of interest is uncertain, (2) loans which have
been renegotiated to provide for a reduction or deferral of interest or
principal because of a deterioration in the financial position of the borrower,
and (3) loans past due ninety days or more as to principal or interest. A
summary of non-performing loans at March 31, 2006 and December 31, 2005 follows:
9
(000's)
----------------------------------
March 31, 2006 December 31, 2005
-------------- -----------------
Non-accrual loans $ 5,786 $ 8,464
Restructured loans 294 57
------- -------
6,080 8,521
Accruing loans past due over 90 days 5,321 6,354
------- -------
$11,401 $14,875
======= =======
Ratio of the allowance for loan losses
as a percentage of non-performing loans 148% 108%
The following loan categories comprise significant components of the
nonperforming loans:
(000's)
----------------------------------
March 31, 2006 December 31, 2005
-------------- -----------------
Non-Accrual Loans:
1-4 family residential $ 561 $1,118
Commercial loans 3,564 5,888
Installment loans 1,661 1,458
------ ------
$5,786 $8,464
====== ======
Past due 90 days or more:
1-4 family residential $2,224 $3,197
Commercial loans 2,720 1,554
Installment loans 377 1,603
------ ------
$5,321 $6,354
====== ======
Interest Rate Sensitivity and Liquidity
First Financial Corporation has established risk measures, limits and
policy guidelines for managing interest rate risk and liquidity. Responsibility
for management of these functions resides with the Asset Liability Committee.
The primary goal of the Asset Liability Committee is to maximize net interest
income within the interest rate risk limits approved by the Board of Directors.
Interest Rate Risk
Management considers interest rate risk to be the Corporation's most
significant market risk. Interest rate risk is the exposure to changes in net
interest income as a result of changes in interest rates. Consistency in the
Corporation's net interest income is largely dependent on the effective
management of this risk.
The Asset Liability position is measured using sophisticated risk
management tools, including earning simulation and market value of equity
sensitivity analysis. These tools allow management to quantify and monitor both
short-term and long-term exposure to interest rate risk. Simulation modeling
measures the effects of changes in interest rates, changes in the shape of the
yield curve and the effects of embedded options on net interest income. This
measure projects earnings in the various environments over the next three years.
It is important to note that measures of interest rate risk have limitations and
are dependent on various assumptions. These assumptions are inherently uncertain
and, as a result, the model cannot precisely predict the impact of interest rate
fluctuations on net interest income. Actual results will differ from simulated
results due to timing, frequency and amount of interest rate changes as well as
overall market conditions. The Committee has performed a thorough analysis of
these assumptions and believes them to be valid and theoretically sound. These
assumptions are continuously monitored for behavioral changes.
The Corporation from time to time utilizes derivatives to manage interest
rate risk. Management continuously evaluates the merits of such interest rate
risk products but does not anticipate the use of such products to become a major
part of the Corporation's risk management strategy.
The table below shows the Corporation's estimated sensitivity profile as of
March 31, 2006. The change in interest rates assumes a parallel shift in
interest rates of 100 and 200 basis points. Given a 100 basis point increase in
rates, net interest income would decrease .86% over the next 12 months and
increase .96% over the following 12 months. Given a 100 basis point decrease in
rates, net interest income would decrease 1.53% over the next 12 months and
decrease 3.46% over the following 12 months. These estimates assume all rate
changes occur overnight and management takes no action as a result of this
change.
10
Percentage Change in Net Interest Income
Basis Point ----------------------------------------
Interest Rate Change 12 months 24 months 36 months
-------------------- --------- --------- ---------
Down 200 -3.53% -7.47% -12.86%
Down 100 -1.53 -3.46 -6.24
Up 100 -.86 .96 4.01
Up 200 -4.76 -1.49 4.73
Typical rate shock analysis does not reflect management's ability to react
and thereby reduce the effect of rate changes, and represents a worst-case
scenario.
Liquidity Risk
Liquidity is measured by each bank's ability to raise funds to meet the
obligations of its customers, including deposit withdrawals and credit needs.
This is accomplished primarily by maintaining sufficient liquid assets in the
form of investment securities and core deposits. The Corporation has $13.9
million of investments that mature throughout the coming 12 months. The
Corporation also anticipates $69.6 million of principal payments from
mortgage-backed securities. Given the current rate environment, the Corporation
anticipates $16.8 million in securities to be called within the next 12 months.
With these sources of funds, the Corporation currently anticipates adequate
liquidity to meet the expected obligations of its customers.
Financial Condition
Comparing the first quarter of 2006 to the same period in 2005, average net
loans are down 4.7% to $1.37 billion from $1.43 billion in 2005. Average
deposits are up $16.6 million to $1.48 billion. Contributing to the improved net
interest margin was the increase in average non-interest bearing deposits of
18.8% or $29.2 million. The investment portfolio and federal funds sold
increased by an average of $52.4 million. Average shareholders' equity increased
$566 thousand. This financial performance increased book value per share 2.0% to
$20.42 at March 31, 2006 from $20.02 at March 31, 2005. Book value per share is
calculated by dividing the total shareholders' equity by the number of shares
outstanding.
Capital Adequacy
As of March 31, 2006, the most recent notification from the respective
regulatory agencies categorized the subsidiary banks as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized the banks must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the bank's
category.
To Be Well
March 31, 2006 December 31, 2005 Capitalized
-------------- ----------------- -----------
Total risk-based capital ratio
Corporation 17.48% 16.99% N/A
First Financial Bank 17.61% 17.09% 10.00%
Tier I risk-based capital ratio
Corporation 16.42% 15.99% N/A
First Financial Bank 16.67% 16.20% 6.00%
Tier I leverage capital ratio
Corporation 12.29% 11.89% N/A
First Financial Bank 12.18% 11.94% 5.00%
ITEM 4. Controls and Procedures
First Financial Corporation's management is responsible for establishing
and maintaining effective disclosure controls and procedures, as defined under
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of
March 31, 2006, an evaluation was performed under the supervision and with the
participation of management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Corporation's disclosure controls and procedures. Based on that evaluation,
management concluded that the Corporation's disclosure controls and procedures
as of March 31, 2006 were effective in ensuring material information required to
be disclosed in this Quarterly Report on Form 10-Q was recorded, processed,
summarized, and reported on a timely basis. Additionally, there were no changes
in the Corporation's internal control over financial reporting that occurred
during the quarter ended March 31, 2006 that have materially affected, or are
reasonably likely to materially affect, the Corporation's internal control over
financial reporting.
11
PART II - Other Information
ITEM 1. Legal Proceedings.
There are no material pending legal proceedings, other than routine
litigation incidental to the business of the Corporation or its subsidiaries, to
which the Corporation or any of the subsidiaries is a party or of which any of
their respective property is subject. Further, there is no material legal
proceeding in which any director, officer, principal shareholder, or affiliate
of the Corporation or any of its subsidiaries, or any associate of such
director, officer, principal shareholder or affiliate is a party, or has a
material interest, adverse to the Corporation or any of its subsidiaries.
ITEM 1A. Risk Factors.
There have been no material changes in the risk factors from those
disclosed in the Corporation's 2005 Annual Report on Form 10-K.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) None.
(b) Not applicable.
(c) Purchases of Equity Securities
The Corporation periodically acquires shares of its common stock directly
from shareholders in individually negotiated transactions. The Corporation has
not adopted a formal policy or adopted a formal program for repurchases of
shares of its common stock. Following is certain information regarding shares of
common stock purchased by the Corporation during the quarter covered by this
report.
(c)
Total Number Of Shares (d)
(a) (b) Purchased As Part Of Maximum Number Of
Total Number Of Average Price Publicly Announced Shares That May Yet
Shares Purchased Paid Per Share Plans Or Programs * Be Purchased *
---------------- -------------- ---------------------- -------------------
January 1 - 31, 2006 5,000 27.85 N/A N/A
February 1 - 28, 2006 25,786 27.75 N/A N/A
March 1 - 31, 2006 28,999 28.79 N/A N/A
Total 59,785 28.26 N/A N/A
* The Corporation has not adopted a formal policy or program regarding
repurchases of its shares of stock.
ITEM 3. Defaults upon Senior Securities.
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
Not applicable.
12
ITEM 6. Exhibits.
Exhibit No: Description of Exhibit:
----------- -----------------------
3.1 Amended and Restated Articles of Incorporation of First Financial
Corporation, incorporated by reference to Exhibit 3(i) of the
Corporation's Form 10-Q filed for the quarter ended September 30,
2002.
3.2 Code of By-Laws of First Financial Corporation, incorporated by
reference to Exhibit 3(ii) of the Corporation's Form 10-Q filed
for the quarter ended September 30, 2002.
10.1 Employment Agreement for Norman L. Lowery, dated March 29, 2006
and effective January 1, 2006, incorporated by reference to
Exhibit 10.1 to the Corporation's Form 8-K filed on March 31,
2006.
10.2 2001 Long-Term Incentive Plan of First Financial Corporation,
incorporated by reference to Exhibit 10.3 of the Corporation's
Form 10-Q filed for the quarter ended September 30, 2002.
10.3 2006 Schedule of Director Compensation, incorporated by reference
to Exhibit 10.3 of the Corporation's Form 10-K filed for the
fiscal year ended December 31, 2005.
10.4 2006 Schedule of Named Executive Officer Compensation,
incorporated by reference to Exhibit 10.4 of the Corporation's
Form 10-K filed for the fiscal year ended December 31, 2005.
31.1 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form
10-Q for the quarter ended March 31, 2006 by Principal Executive
Officer, dated May 5 2006
31.2 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form
10-Q for the quarter ended March 31, 2006 by Principal Financial
Officer, dated May 5, 2006.
32.1 Certification, dated May 5, 2006, of Principal Executive Officer
and Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2005 on Form 10-Q for the quarter ended
March 31, 2006.
13
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
(Registrant)
Date: May 5, 2006 By /s/ Donald E. Smith
-------------------------------------
Donald E. Smith, Chairman
Date: May 5, 2006 By /s/ Norman L. Lowery
-------------------------------------
Norman L. Lowery, Vice Chairman and
CEO
Date: May 5, 2006 By /s/ Michael A. Carty
-------------------------------------
Michael A. Carty, Treasurer and CFO
14
Exhibit Index
Exhibit No: Description of Exhibit:
----------- -----------------------
3.1 Amended and Restated Articles of Incorporation of First Financial
Corporation, incorporated by reference to Exhibit 3(i) of the
Corporation's Form 10-Q filed for the quarter ended September 30,
2002.
3.2 Code of By-Laws of First Financial Corporation, incorporated by
reference to Exhibit 3(ii) of the Corporation's Form 10-Q filed
for the quarter ended September 30, 2002.
10.1 Employment Agreement for Norman L. Lowery, dated March 29, 2006
and effective January 1, 2006, incorporated by reference to
Exhibit 10.1 to the Corporation's Form 8-K filed on March 31,
2006.
10.2 2001 Long-Term Incentive Plan of First Financial Corporation,
incorporated by reference to Exhibit 10.3 of the Corporation's
Form 10-Q filed for the quarter ended September 30, 2002.
10.3 2006 Schedule of Director Compensation, incorporated by reference
to Exhibit 10.3 of the Corporation's Form 10-K filed for the
fiscal year ended December 31, 2005.
10.4 2006 Schedule of Named Executive Officer Compensation,
incorporated by reference to Exhibit 10.4 of the Corporation's
Form 10-K filed for the fiscal year ended December 31, 2005.
31.1 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form
10-Q for the quarter ended March 31, 2006 by Principal Executive
Officer, dated May 5 2006
31.2 Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form
10-Q for the quarter ended March 31, 2006 by Principal Financial
Officer, dated May 5, 2006.
32.1 Certification, dated May 5, 2006, of Principal Executive Officer
and Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2005 on Form 10-Q for the quarter ended
March 31, 2006.
15