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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission file number
December 31, 2002 0-16759
FIRST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1546989
(State of Incorporation) (I.R.S. Employer Identification No.)
One First Financial Plaza 47807
Terre Haute, IN
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (812) 238-6000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------- -----------------------------------------
Common Stock, no par value Nasdaq
Securities registered pursuant to Section 12(g) of the Act: None
Indicated 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
item 405 of regulation 8-K is not contained herein, and will not be contained,
to the of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to the
form 10-K. X
---
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes X No
--- ---
As of June 30, 2002 the aggregate market value of the voting stock held by
nonaffiliates of the registrant based on the average bid and ask prices of such
stock was $321,713,799. (For purposes of this calculation, the Corporation
excluded the stock owned by certain beneficial owners and management and the
Corporation's ESOP.)
Shares of Common Stock outstanding as of January 31, 2003--6,809,085
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2002 Annual Report to Shareholders are incorporated by
reference into Parts I and II. Portions of the Definitive Proxy Statement for
the First Financial Corporation Annual Meeting to be held April 16, 2003 are
incorporated by reference into Part III.
FORM 10-K CROSS-REFERENCE INDEX
PAGE
PART I
Item 1 Business ................................................ 2
Item 2 Properties .............................................. 2
Item 3 Legal Proceedings ....................................... 2
Item 4 Submission of Matters to a Vote of Security Holders ..... 2
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters ..................................... 3
Item 6 Selected Financial Data ................................. 3
Item 7 Management's Discussion and Analysis of Financial
Conditions and Results of Operations .................... 3
Item 7A Quantitative and Qualitative Disclosures about Market
Risk .................................................... 3
Item 8 Financial Statements and Supplementary Data ............. 3
Item 9 Changes in and Disagreement with Accountants
on Accounting and Financial Disclosures ................. 3
PART III
Item 10 Directors and Executive Officers of Registrant .......... 3
Item 11 Executive Compensation .................................. 3
Item 12 Security Ownership of Certain Beneficial
Owners and Management ................................... 3
Item 13 Certain Relationships and Related Transactions .......... 4
PART IV
Item 14 Controls and Procedures ................................. 4
Item 15 Exhibits, Financial Statement Schedules and
Reports on Form 8-K .................................... 4, 5
Signatures .............................................. 5
CEO and CFO Certifications .............................. 6, 7
Subsidiaries of the Registrant .................. Exhibit 21
1
PART I
ITEM 1. BUSINESS
First Financial Corporation (the Corporation) became a multi-bank holding
company in 1984 and a financial services holding company in 2001. For more
information on the Corporation's business, please refer to the following
sections of the 2002 Annual Report to Shareholders:
1. Description of services, affiliations, number of employees, and
competition, on page 30.
2. Information regarding supervision of the Corporation, on page 14.
3. Details regarding competition, on page 30.
ITEM 2. PROPERTIES
First Financial Corporation is located in a four-story office building in
downtown Terre Haute that was occupied in June 1988. It is leased to Terre Haute
First National Bank, a wholly-owned subsidiary (the Bank). The Bank also owns
two other facilities in downtown Terre Haute. One is leased to another party and
the other is a 50,000-square-foot building housing operations and
administrative staff and equipment. In addition, the Bank holds in fee four
other branch buildings. One of the branch buildings is a single-story
36,000-square-foot building which is located in a Terre Haute suburban area. Six
other branch bank buildings are leased by the Bank. The expiration dates on the
leases are June 30, 2012, February 14, 2011, May 31, 2011, September 1, 2006,
June 30, 2004 and December 31, 2003.
Facilities of the Corporation's subsidiary, First State Bank, include its
main office in Brazil, Indiana and four branch facilities in Brazil, Clay City
and Poland, Indiana. All five buildings are held in fee by First State.
Facilities of the Corporation's subsidiary, First Citizens State Bank of
Newport, include its main office in Newport, Indiana and three branch facilities
in Cayuga and Clinton, Indiana. All four buildings are held in fee by First
Citizens.
Facilities of the Corporation's subsidiary, First Farmers State Bank,
include its main office in Sullivan, Indiana and seven branch facilities in
Carlisle, Dugger, Farmersburg, Hymera, Monroe City, Sandborn and Worthington,
Indiana. All eight buildings are held in fee by First Farmers.
The facility of the Corporation's subsidiary, First Ridge Farm State Bank,
includes an office facility in Ridge Farm, Illinois. The building is held in fee
by First Ridge Farm State.
Facilities of the Corporation's subsidiary, First Parke State Bank, include
its main office in Rockville, Indiana and four branch facilities in Rockville,
Marshall, Montezuma and Rosedale, Indiana. All five buildings are held in fee by
First Parke.
The facility of the Corporation's subsidiary, First National Bank of
Marshall, includes an office facility in Marshall, Illinois. The building is
held in fee by First National Bank of Marshall.
Facilities of the Corporation's subsidiary, First Crawford State Bank,
include its main office in Robinson, Illinois and two branch facilities in
Oblong and Sumner, Illinois. All three buildings are held in fee by First
Crawford.
The facility of the Corporation's subsidiary, The Morris Plan Company,
includes an office facility in Terre Haute, Indiana. The building is leased by
The Morris Plan Company. The expiration date on the lease is August 31, 2008.
Facilities of the Corporation's subsidiary, Forrest Sherer, Inc., include
its main office and one satellite office in Terre Haute, Indiana. The buildings
are held in fee by Forrest Sherer, Inc.
Facilities of the Corporation's subsidiary, First Community Bank, N.A.,
include its main office in Olney, Illinois, and five branch facilities in Olney,
Lawrenceville, Fairfield, Newton and Charleston, Illinois. All of the buildings
are held in fee by First Community Bank, N.A., except the Olney branch, which is
leased. The expiration date on the lease is March 1, 2005.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings which involve the
Corporation or its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
2
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
See "Market and Dividend information" on page 41 of the 2002 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
See "Five Year Comparison of Selected Financial Data" on page 9 of the 2002
Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
See "Management's Discussion and Analysis" on pages 30 through 39 of the
2002 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Interest Rate Risk" section of "Management's Discussion and Analysis"
on pages 38 and 39 of the 2002 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Consolidated Balance Sheets" on page 10, "Consolidated Statements of
Income" on page 11, "Consolidated Statements of Changes in Shareholders Equity"
on page 12, "Consolidated Statements of Cash Flows" on page 13, and "Notes to
Consolidated Financial Statements" on pages 14-28. "Responsibility for Financial
Statements" and "Report of Independent Auditors" can be found on page 29.
Statistical disclosure by Bank Holding Company include the following
information:
1. "Volume/Rate Analysis," on page 32.
2. "Loan Portfolio," on page 34.
3. "Allowance for Loan Losses," on page 35.
4. "Under-Performing Loans," on page 36.
5. "Deposits," on page 37.
6. "Short-Term Borrowings," on page 37.
7. "Consolidated Balance Sheet-Average Balances and Interest Rates," on
page 40.
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
See "Nominees for Terms to Expire in 2006," "Other Executive Officers of the
Corporation" and "Section 16(a) Beneficial Ownership Reporting Compliance" on
pages 2, 3 and 10 of the Annual Proxy Statement of First Financial Corporation.
ITEM 11. EXECUTIVE COMPENSATION
See "Compensation of Directors" on page 3, "Compensation of Officers" on
pages 3 through 5, and "Employment Contracts" and "Comparative Performance
Graph" on pages 7 and 8 of the Annual Proxy Statement of First Financial
Corporation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Nominees for Terms to Expire in 2006," "Other Executive Officers of the
Corporation" and "Section 16(a) Beneficial Ownership Reporting Compliance" on
pages 2, 3 and 10 and "Principal Shareholders and Security Ownership of
Management" on page 9 of the Annual Proxy Statement of First Financial
Corporation.
3
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Certain Relationships" on page 3, and "Transactions with Management" on
page 8 of the Annual Proxy Statement of First Financial Corporation.
PART IV
ITEM 14. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, we carried out an
evaluation (the "Evaluation"), under the supervision and with the
participation of our President and Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"), of the effectiveness of the design and operation of
our disclosure controls and procedures ("Disclosure Controls"). Based on the
Evaluation, our CEO and CFO concluded that, subject to the limitations noted
below, our Disclosure Controls are effective in alerting them in a timely way to
material information required to be included in our periodic SEC reports.
CHANGES IN INTERNAL CONTROLS
We have also evaluated our internal controls for financial reporting, and
there have been no significant changes in our internal controls subsequent to
the date of their last evaluation.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS
A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any within the company, have
been detected. These inherent limitations include the realities that judgements
in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the control.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of the Registrant
and its subsidiaries are included in the Annual Report of First
Financial Corporation attached:
Consolidated Balance Sheets--December 31, 2002 and 2001
Consolidated Statements of Income--Years ended December 31, 2002,
2001, and 2000
Consolidated Statements of Changes in Shareholders' Equity--Years
ended December 31, 2002, 2001, and 2000
Consolidated Statements of Cash Flows--Years ended
December 31, 2002, 2001, and 2000 Notes to Consolidated Financial
Statements
(2) Schedules to the Consolidated Financial Statements required by
Article 9 of Regulation S-X are not required, inapplicable, or the
required information has been disclosed elsewhere.
(3) Listing of Exhibits:
4
Exhibit Number Description
------------- -----------
21 Subsidiaries
(b) Reports on Forms 8-K--None
(c) Exhibits--Exhibits to (a) (3) listed above are attached to this report.
(d) Financial Statements Schedules--No schedules are required to be
submitted. See response to ITEM 14 (a) (2).
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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
/s/ Michael A. Carty
------------------------------
Michael A. Carty, Treasurer
(Principal Financial Officer
and Principal Accounting
Officer)
Date: February 18, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
NAME DATE
- ---- ----
/s/ Donald E. Smith February 18, 2003
- -----------------------------------------
Donald E. Smith, President & Director
(Principal Executive Officer)
/s/ Walter A. Bledsoe February 18, 2003
- -----------------------------------------
Walter A. Bledsoe, Director
/s/ B. Guille Cox, Jr. February 18, 2003
- -----------------------------------------
B. Guille Cox, Jr., Director
/s/ Thomas T. Dinkel February 18, 2003
- -----------------------------------------
Thomas T. Dinkel, Director
February 18, 2003
- -----------------------------------------
Anton H. George, Director
February 18, 2003
- -----------------------------------------
Mari H. George, Director
/s/ Gregory L. Gibson February 18, 2003
- -----------------------------------------
Gregory L. Gibson, Director
/s/ Norman L. Lowery February 18, 2003
- -----------------------------------------
Norman L. Lowery, Director
/s/ William A. Niemeyer February 18, 2003
- -----------------------------------------
William A. Niemeyer, Director
/s/ Patrick O'Leary February 18, 2003
- -----------------------------------------
Patrick O'Leary, Director
- ----------------------------------------- February 18, 2003
Chapman J. Root II, Director
/s/ Virginia L. Smith February 18, 2003
- -----------------------------------------
Virginia L. Smith, Director
5
CEO AND CFO CERTIFICATIONS
I, Norman L. Lowery, certify that:
1) I have reviewed this annual report on Form 10-K of First Financial
Corporation;
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 17, 2003
/s/ Norman L. Lowery
- --------------------
Norman L. Lowery
Vice Chairman and CEO
6
I, Michael A. Carty, certify that:
1) I have reviewed this annual report on Form 10-K of First Financial
Corporation;
2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 17, 2003
/s/ Michael A. Carty
- ---------------------
Michael A. Carty
Secretary, Treasurer and CFO
7
2002 ANNUAL REPORT
FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA
(Dollar amounts in thousands,
except per share amounts) 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $2,169,748 $2,041,905 $2,043,267 $1,905,201 $1,849,752
Securities 511,548 463,509 568,405 594,319 633,365
Net loans 1,432,564 1,348,461 1,298,006 1,191,898 1,111,765
Deposits 1,434,654 1,313,656 1,322,559 1,256,115 1,260,365
Borrowings 457,645 480,674 507,771 445,821 385,700
Shareholders' equity 241,971 217,511 191,223 168,682 182,183
INCOME STATEMENT DATA:
Interest income 136,262 144,673 146,417 133,576 129,137
Interest expense 58,086 74,125 80,583 66,815 66,430
Net interest income 78,176 70,548 65,834 66,761 62,707
Provision for loan losses 9,478 6,615 4,392 4,725 5,396
Other income 30,468 21,468 13,610 12,012 10,611
Other expenses 63,317 53,329 42,703 43,543 42,567
Net income 28,640 24,196 23,213 21,622 18,558
PER SHARE DATA:
Net income 4.20 3.56 3.45 3.10 2.58
Cash dividends 1.24 1.14 1.08 .94 .84
PERFORMANCE RATIOS:
Net income to average assets 1.30% 1.19% 1.18% 1.16% 1.07%
Net income to average
shareholders' equity 12.01 11.33 12.98 12.55 10.76
Average total capital
to average assets 11.73 11.38 9.97 10.13 10.71
Average shareholders' equity
to average assets 10.80 10.46 9.10 9.28 9.90
Dividend payout 29.57 32.28 31.19 30.10 32.54
8
FIRST FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------
(Dollar amounts in thousands, except per share data) 2002 2001
- --------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 96,043 $ 68,205
Federal funds sold 50 43,376
Available-for-sale securities 511,548 463,509
Loans, net of allowance of $21,249 in 2002 and $18,313 in 2001 1,411,315 1,330,148
Accrued interest receivable 15,199 14,948
Premises and equipment, net 29,809 26,237
Bank-owned life insurance 47,736 47,756
Goodwill 7,102 7,102
Other intangible assets 4,289 3,767
Other real estate owned 5,006 3,499
Other assets 41,651 33,358
----------- -----------
TOTAL ASSETS $ 2,169,748 $ 2,041,905
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing $ 146,585 $ 163,985
Interest-bearing:
Certificates of deposit of $100 or more 200,325 204,474
Other interest-bearing deposits 1,087,744 945,197
----------- -----------
1,434,654 1,313,656
Short-term borrowings 34,355 54,596
Other borrowings 423,290 426,078
Other liabilities 35,478 30,064
----------- -----------
TOTAL LIABILITIES 1,927,777 1,824,394
Shareholders' equity
Common stock, $.125 stated value per share,
Authorized shares -- 40,000,000
Issued shares -- 7,225,483
Outstanding shares -- 6,809,445 in 2002 and 6,844,260 in 2001 903 903
Additional capital 66,809 66,680
Retained earnings 178,209 158,038
Accumulated other comprehensive income 14,276 8,299
Less: Treasury shares at cost -- 416,038 in 2002 and 381,223 in 2001 (18,226) (16,409)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 241,971 217,511
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,169,748 $ 2,041,905
=========== ===========
See accompanying notes.
9
2002 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
------------------------------------
(Dollar amounts in thousands, except per share data) 2002 2001 2000
- --------------------------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME:
Loans, including related fees $105,566 $108,658 $107,145
Securities:
Taxable 19,129 24,622 30,535
Tax-exempt 8,326 8,326 8,357
Other 3,241 3,067 380
-------- -------- --------
TOTAL INTEREST AND DIVIDEND INCOME 136,262 144,673 146,417
INTEREST EXPENSE:
Deposits 34,607 47,208 49,892
Short-term borrowings 687 2,514 4,747
Other borrowings 22,792 24,403 25,944
-------- -------- --------
TOTAL INTEREST EXPENSE 58,086 74,125 80,583
-------- -------- --------
NET INTEREST INCOME 78,176 70,548 65,834
Provision for loan losses 9,478 6,615 4,392
-------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 68,698 63,933 61,442
NON-INTEREST INCOME:
Trust and financial services 3,419 3,545 3,633
Service charges and fees on deposit accounts 6,183 5,470 4,638
Other service charges and fees 5,369 4,327 3,116
Securities gains 154 180 145
Insurance commissions 6,136 3,763 555
Gain on sale of mortgage loans 2,767 2,209 275
Gain on life insurance benefit 3,916 -- --
Other 2,524 1,974 1,248
-------- -------- --------
TOTAL NON-INTEREST INCOME 30,468 21,468 13,610
NON-INTEREST EXPENSES:
Salaries and employee benefits 36,528 30,544 23,055
Occupancy expense 3,707 3,692 3,105
Equipment expense 3,306 3,448 3,717
Other 19,776 15,645 12,826
-------- -------- --------
TOTAL NON-INTEREST EXPENSE 63,317 53,329 42,703
-------- -------- --------
INCOME BEFORE INCOME TAXES 35,849 32,072 32,349
Provision for income taxes 7,209 7,876 9,136
-------- -------- --------
NET INCOME $ 28,640 $ 24,196 $ 23,213
======== ======== ========
EARNINGS PER SHARE:
NET INCOME $ 4.20 $ 3.56 $ 3.45
======== ======== ========
Weighted average number of shares outstanding (in thousands) 6,826 6,800 6,730
======== ======== ========
See accompanying notes.
10
FIRST FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Accumulated
Other
Common Additional Retained Comprehensive Treasury
(Dollar amounts in thousands, except per share data) Stock Capital Earnings Income Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 2000 $ 903 $ 66,680 $ 125,680 $ (7,819) $ (16,762) $ 168,682
Comprehensive income:
Net income -- -- 23,213 -- -- 23,213
Other comprehensive income, net of tax:
Change in net unrealized gains/losses
on available-for-sale securities -- -- -- 11,719 -- 11,719
---------
Total comprehensive income 34,932
Treasury stock purchase (151,181 shares) -- -- -- -- (5,151) (5,151)
Cash dividends, $1.08 per share -- -- (7,240) -- -- (7,240)
------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 2000 903 66,680 141,653 3,900 (21,913) 191,223
Comprehensive income:
Net income -- -- 24,196 -- -- 24,196
Other comprehensive income, net of tax:
Change in net unrealized gains/losses
on available-for-sale securities -- -- -- 4,399 -- 4,399
---------
Total comprehensive income 28,595
Issuance of treasury stock (182,672 shares) -- -- -- -- 6,801 6,801
Treasury stock purchase (32,649 shares) -- -- -- -- (1,297) (1,297)
Cash dividends, $1.14 per share -- -- (7,811) -- -- (7,811)
------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 2001 903 66,680 158,038 8,299 (16,409) 217,511
Comprehensive income:
Net income -- -- 28,640 -- -- 28,640
Other comprehensive income, net of tax:
Change in net unrealized gains/losses
on available-for-sale securities -- -- -- 5,977 -- 5,977
---------
Total comprehensive income 34,617
Contribution of 20,750 shares to ESOP -- 129 -- -- 909 1,038
Treasury stock purchase (55,565 shares) -- -- -- -- (2,726) (2,726)
Cash dividends, $1.24 per share -- -- (8,469) -- -- (8,469)
------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 2002 $ 903 $ 66,809 $ 178,209 $ 14,276 $ (18,226) $ 241,971
======= ========= ========= ========= ========= =========
See accompanying notes.
11
2002 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
-------------------------------------------
(Dollar amounts in thousands, except per share data) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 28,640 $ 24,196 $ 23,213
Adjustments to reconcile net income to net cash
provided by operating activities:
Net (accretion) amortization on securities (941) (2,128) (2,171)
Provision for loan losses 9,478 6,615 4,392
Securities gains (154) (180) (145)
Depreciation and amortization 2,950 3,500 3,318
Provision for deferred income taxes (827) 110 225
Net change in accrued interest receivable 1,036 2,855 (3,100)
Contribution of shares to ESOP 1,038 -- --
Other, net (6,342) (4,202) (17,169)
--------- --------- ---------
NET CASH FROM OPERATING ACTIVITIES 34,878 30,766 8,563
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale securities 9,736 1,097 42,037
Maturities and principal reductions on available-for-sale securities 131,304 156,938 55,881
Purchases of available-for-sale securities (140,015) (43,499) (51,659)
Purchase of bank-owned life insurance -- -- (45,000)
Loans made to customers, net of repayments 6,237 (57,521) (108,050)
Net change in federal funds sold 43,326 (39,201) (3,985)
Purchase of Forrest Sherer Inc. -- (1,699) --
Purchase of Community Financial Corp. 14,554 -- --
Additions to premises and equipment (2,442) (2,548) (3,417)
--------- --------- ---------
NET CASH FROM INVESTING ACTIVITIES 62,700 13,567 (114,193)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits (25,638) (8,903) 66,444
Net change in other short-term borrowings (25,379) 35,888 (44,791)
Dividends paid (8,209) (7,586) (6,933)
Purchases of treasury stock (2,726) (1,297) (5,151)
Proceeds from other borrowings 21,006 78,923 563,800
Repayments on other borrowings (28,794) (141,908) (457,059)
--------- --------- ---------
NET CASH FROM FINANCING ACTIVITIES (69,740) (44,883) 116,310
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 27,838 (550) 10,680
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 68,205 68,755 58,075
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 96,043 $ 68,205 $ 68,755
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 58,925 $ 76,049 $ 80,514
========= ========= =========
Income taxes $ 11,388 $ 7,533 $ 10,114
========= ========= =========
See accompanying notes.
12
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
ORGANIZATION: The consolidated financial statements of First Financial
Corporation and its subsidiaries (the Corporation) include the parent
company and its wholly-owned subsidiaries, Terre Haute First National Bank
of Vigo County, Indiana (Terre Haute First), The Morris Plan Company of
Terre Haute (Morris Plan), First State Bank of Clay County, Indiana (State),
First Citizens State Bank of Vermillion County, Indiana (Citizens), First
Farmers State Bank of Sullivan County, Indiana (Farmers), First Parke State
Bank of Parke County, Indiana (Parke), First Ridge Farm State Bank of
Vermilion County, Illinois (Ridge Farm), First National Bank of Marshall of
Clark County, Illinois (Marshall), First Crawford State Bank of Crawford
County, Illinois (Crawford) and First Financial Reinsurance Company, a
corporation incorporated in the country of Turks and Caicos Islands (FFRC).
In 2001 the Corporation acquired Forrest Sherer Inc., a full-line insurance
agency headquartered in Terre Haute, Indiana. In 2002 the Corporation
acquired First Community Bank, N.A. of Richland County, Illinois
(Community).
Terre Haute First also has two investment subsidiaries, Portfolio Management
Specialists A (Specialists A) and Portfolio Management Specialists B
(Specialists B), which were established to hold and manage certain
securities as part of a strategy to manage taxable income and reduce tax
expense. Specialists A and Specialists B subsequently entered into a limited
partnership agreement, Global Portfolio Limited Partners. At December 31,
2002, $194.2 million of securities were owned by these subsidiaries.
The Corporation, which is headquartered in Terre Haute, Indiana, offers a
wide variety of financial services including commercial, mortgage and
consumer lending, lease financing, trust account services and depositor
services through its ten subsidiaries.
Terre Haute First is the largest bank in Vigo County. It operates 12
full-service banking branches within the county. It also has a main office
in downtown Terre Haute and an operations center/office building in southern
Terre Haute.
The Corporation operates 46 branches in west-central Indiana and
east-central Illinois. The Corporation's primary source of revenue is
derived from loans to customers, primarily middle-income individuals, and
investment activities.
REGULATORY AGENCIES: First Financial Corporation is a multi-bank holding
company and as such is regulated by various banking agencies. The holding
company is regulated by the Seventh District of the Federal Reserve System.
The national bank subsidiaries are regulated by the Office of the
Comptroller of the Currency. The state bank subsidiaries are jointly
regulated by their respective state banking organizations and the Federal
Deposit Insurance Corporation.
SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES: To prepare financial statements in conformity with
accounting principles generally accepted in the United States of America,
management makes estimates and assumptions based on available information.
These estimates and assumptions affect the amounts reported in the financial
statements and disclosures provided, and future results could differ. The
allowance for loan losses, carrying value of intangible assets and the fair
values of financial instruments are particularly subject to change.
CASH FLOWS: Cash and cash equivalents include cash and demand deposits with
other financial institutions. Net cash flows are reported for customer loan
and deposit transactions and short-term borrowings.
SECURITIES: The Corporation classifies all securities as "available for
sale." Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair
value with unrealized holdings gains and losses, net of taxes, reported in
other comprehensive income within shareholders' equity. Other securities,
such as Federal Home Loan Bank stock, are carried at cost.
Interest income includes amortization of purchase premium or discount.
Realized gains and losses on sales are based on the amortized cost of the
security sold. Securities are written down to fair value if and when a
decline in fair value is not temporary.
LOANS: Loans that management has the intent and ability to hold for the
foreseeable future until maturity or pay-off are reported at the principal
balance outstanding, net of unearned interest, deferred loan fees and costs,
and allowance for loan losses. Loans held for sale are reported at the lower
of cost or market, on an aggregate basis.
Interest income is reported on the interest method and includes amortization
of net deferred loan fees and costs over the loan term. Interest income is
not reported when full loan repayment is in doubt, typically when the loan
is impaired or payments are significantly past due. Payments received on
such loans are reported as principal reductions.
All interest accrued but not received for loans placed on nonaccrual is
reversed against interest income. Interest received on such loans is
accounted for on the cash-basis or cost-recovery method, until qualifying
for return to accrual. Loans are returned to accrual status when all the
principal and interest amounts contractually due are brought current and
future payments are reasonably assured.
13
2002 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision
for loan losses and decreased by charge-offs less recoveries. Management
estimates the allowance balance required using past loan loss experience,
the nature and volume of the portfolio, information about specific borrower
situations and estimated collateral values, economic conditions and other
factors. Allocations of the allowance may be made for specific loans, but
the entire allowance is available for any loan that, in management's
judgment, should be charged off. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan balance is
confirmed.
A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgages, consumer and credit card loans, and on an
individual basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present
value of estimated future cash flows, using the loan's existing rate, or at
the fair value of collateral if repayment is expected solely from the
collateral.
FORECLOSED ASSETS: Assets acquired through or instead of loan foreclosures
are initially recorded at fair value when acquired, establishing a new cost
basis. If fair value declines, a valuation allowance is recorded through
expense. Costs after acquisition are expensed.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed over the useful lives of
the assets.
SERVICING RIGHTS: Servicing rights are recognized as assets for the
allocated value of retained servicing rights on loans sold. Servicing rights
are expensed in proportion to, and over the period of, estimated net
servicing revenues. Impairment is evaluated based on the fair value of the
rights, using groupings of the underlying loans as to interest rates and
then, secondarily, as to geographic and prepayment characteristics. Any
impairment of a grouping is reported as a valuation allowance.
ACQUISITIONS: On January 31, 2002, the Corporation acquired all of the
outstanding stock of Community Financial Corporation (CFC) for $33 million
in cash. CFC is a bank holding company based in Olney, Illinois, which had
total assets of approximately $190 million and net assets of approximately
$32 million at acquisition. The fair values of significant assets acquired
and liabilities assumed were $98 million of loans, $48 million of cash and
cash equivalents, $38 million of securities and $148 million of deposits. A
core deposit intangible of approximately $1 million was recorded. The
transaction was accounted for as a purchase, and the results of operations
have been included since the transaction date. The core deposit is being
amortized over a 12-year period using an accelerated method.
On May 1, 2001, the Corporation acquired all of the outstanding common stock
of Forrest Sherer Inc. (FSI), a full-line insurance agency headquartered in
Terre Haute, Indiana. The purchase price was $8.5 million, consisting of the
issuance of 182,672 shares of the Corporation's common stock and the payment
of $1.7 million in cash. Assets acquired, liabilities assumed and net assets
at acquisition were not significant. The acquisition was accounted for as a
purchase and resulted in the recording of goodwill of approximately $5.4
million and a customer list intangible of approximately $3.1 million. The
results of operations have been included since the transaction date. The
customer list intangible is being amortized using an accelerated method over
ten years.
The following table presents pro-forma information for the periods ended
December 31 as if the acquisition of the bank and the insurance agency had
occurred at the beginning of 2002 and 2001. The pro forma information
includes adjustments for the amortization of intangibles arising from the
transaction. The pro forma financial information presented below does not
reflect earnings on excess cash acquired, additional fees that could be
earned on loans and deposits, or operating expense efficiencies. The pro
forma financial information is not necessarily indicative of the results of
operations as they would have been had the transaction been effected on the
assumed date.
(Dollar amounts in thousands) 2002 2001
------------------------------------------------------------------
Revenue $167,590 $181,562
Net Income 27,684 23,395
Earnings per share $ 4.06 $ 3.44
GOODWILL AND OTHER INTANGIBLE ASSETS: Goodwill results from prior business
acquisitions and represents the excess of the purchase price over the fair
value of acquired tangible assets and liabilities and identifiable
intangible assets. Upon adopting new accounting guidance on January 1,
2002, the Corporation ceased amortizing goodwill. Goodwill is assessed at
least annually for impairment and any such impairment will be recognized in
the period identified. The effect on net income of ceasing goodwill
amortization in 2002 was $513 thousand.
Other intangible assets consist of core deposit and acquired customer
relationship intangible assets arising from the whole bank, insurance agency
and branch acquisitions. They are initially measured at fair value and then
are amortized on an accelerated method over their estimated useful lives,
which are 12 and 10 years, respectively.
14
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LONG-TERM ASSETS: Premises and equipment and other long-term assets are
reviewed for impairment when events indicate their carrying amount may not
be recoverable from future undiscounted cash flows. If impaired, the assets
are recorded at fair value.
REPURCHASE AGREEMENTS: Substantially all repurchase agreement liabilities
represent amounts advanced by various customers. Securities are pledged to
cover these liabilities, which are not covered by federal deposit insurance.
The Corporation maintains possession of and control over these securities.
BENEFIT PLANS: Pension expense is the net of service and interest cost,
return on plan assets and amortization of gains and losses not immediately
recognized. The amount contributed is determined by a formula as decided by
the Board of Directors.
INCOME TAXES: Income tax expense is the total of the current year income tax
due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are the expected future tax amounts for
the temporary differences between carrying amounts and tax bases of assets
and liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.
FINANCIAL INSTRUMENTS: Financial instruments include credit instruments,
such as commitments to make loans and standby letters of credit, issued to
meet customer financing needs. The face amount for these items represents
the exposure to loss, before considering customer collateral or ability to
repay.
DERIVATIVES: All derivative instruments are recorded at their fair values.
If derivative instruments are designated as fair value hedges, both the
change in the fair value of the hedge and in the fair value of the hedged
item are included in current earnings. Fair value adjustments related to
cash flow hedges are recorded in other comprehensive income and reclassified
to earnings when the hedged transaction is reflected in earnings.
Ineffective portions of hedges are reflected in income currently.
EARNINGS PER SHARE: Earnings per common share is net income divided by the
weighted average number of common shares outstanding during the period. The
Corporation does not have any potentially dilutive securities. Earnings and
dividends per share are restated for stock splits and dividends through the
date of issue of the financial statements.
COMPREHENSIVE INCOME: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains
and losses on securities available for sale, which are also recognized as
separate components of equity.
LOSS CONTINGENCIES: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when
the likelihood of loss is probable and an amount of range of loss can be
reasonably estimated. Management does not believe there are currently such
matters that will have a material effect on the financial statements.
DIVIDEND RESTRICTION: Banking regulations require maintaining certain
capital levels and may limit the dividends paid by the bank to the holding
company or by the holding company to shareholders.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Fair values of financial instruments
are estimated using relevant market information and other assumptions, as
more fully disclosed in a separate note. Fair value estimates involve
uncertainties and matters of significant judgment regarding interest rates,
credit risk, prepayments and other factors, especially in the absence of
broad markets for particular items. Changes in assumptions or market
conditions could significantly affect the estimates.
OPERATING SEGMENT: While the Corporation's chief decision-makers monitor the
revenue streams of the various products and services, the identifiable
segments are not material and operations are managed and financial
performance is evaluated on a corporate-wide basis. Accordingly, all of the
Corporation's financial service operations are considered by management to
be aggregated in one reportable operating segment, which is banking.
NEWLY ISSUED BUT NOT YET EFFECTIVE ACCOUNTING STANDARDS: New accounting
standards on asset retirement obligations, restructuring activities and exit
costs, operating leases and early extinguishment of debt were issued in
2002. Management has determined that when the new accounting standards are
adopted in 2003, they will not have a material impact on the Corporation's
financial condition or results of operations.
RECLASSIFICATIONS: Some items in prior year financial statements were
reclassified to conform to the current presentation.
15
2002 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. FAIR VALUES OF FINANCIAL INSTRUMENTS:
Carrying amount is the estimated fair value for cash and due from banks,
federal funds sold, short-term borrowings, Federal Home Loan Bank stock,
accrued interest receivable and payable, demand deposits, short-term debt
and variable-rate loans or deposits that reprice frequently and fully.
Security fair values are based on market prices or dealer quotes, and if no
such information is available, on the rate and term of the security and
information about the issuer. For fixed-rate loans or deposits, variable
rate loans or deposits with infrequent repricing or repricing limits, and
for longer-term borrowings, fair value is based on discounted cash flows
using current market rates applied to the estimated life and credit risk.
Fair values for impaired loans are estimated using discounted cash flow
analysis or underlying collateral values. Fair value of debt is based on
current rates for similar financing. The fair value of derivatives is based
on the current fees or cost that would be charged to enter into or terminate
such arrangements.
The carrying amount and estimated fair value of financial instruments are
presented in the table below and were determined based on the above
assumptions:
December 31,
---------------------------------------------------------------
2002 2001
---------------------------- -----------------------------
Carrying Fair Carrying Fair
(Dollar amounts in thousands) Value Value Value
- ----------------------------------------------------------------------------------------------------
Cash and due from banks $ 96,043 $ 96,043 $ 68,205 $ 68,205
Federal funds sold 50 50 43,376 43,376
Available-for-sale securities 511,548 511,548 463,509 463,509
Loans 1,433,212 1,438,723 1,349,184 1,358,630
Accrued interest receivable 15,199 15,199 14,948 14,948
Deposits (1,434,654) (1,446,483) (1,313,656) (1,326,743)
Short-term borrowings (34,355) (34,355) (54,596) (54,596)
Federal Home Loan Bank advances (397,190) (399,145) (419,478) (428,177)
Other borrowings (26,100) (26,100) (6,600) (6,600)
Accrued interest payable (4,001) (4,001) (4,807) (4,807)
Derivative financial instruments 3 3 759 759
3. RESTRICTIONS ON CASH AND DUE FROM BANKS:
Certain affiliate banks are required to maintain average reserve balances
with the Federal Reserve Bank. The amount of those reserve balances was
approximately $23.7 million and $17.1 million at December 31, 2002 and 2001,
respectively.
4. SECURITIES:
The fair value of available-for-sale securities and related gains and losses
recognized in accumulated other comprehensive income were as follows:
December 31, 2002
------------------------------------------------
Unrealized
Amortized ------------------------- Fair
(Dollar amounts in thousands) Cost Gains Losses Value
- ----------------------------------------------------------------------------------------
U.S. Government and its agencies $204,114 $ 8,451 $ (15) $212,550
Collateralized mortgage obligations 29,049 400 (3) 29,446
State and municipal 162,897 9,151 (316) 171,732
Corporate obligations 96,250 1,808 (238) 97,820
-------- -------- -------- --------
TOTAL $492,310 $ 19,810 $ (572) $511,548
======== ======== ======== ========
16
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
-------------------------------------------------------
Unrealized
Amortized --------------------------- Fair
(Dollar amounts in thousands) Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------
U.S. Government and its agencies $ 208,973 $ 4,776 $ (18) $ 213,731
Collateralized mortgage obligations 4,958 107 -- 5,065
State and municipal 162,886 4,547 (567) 166,866
Corporate obligations 77,576 810 (539) 77,847
--------- --------- --------- ---------
TOTAL $ 454,393 $ 10,240 $ (1,124) $ 463,509
========= ========= ========= =========
The Corporation invests in the equity securities of financial services
companies. These investments are considered to be available-for-sale and are
included in other assets on the consolidated balance sheet. Cost was $3.9
million and $3.7 million, and fair value was $8.4 million and $8.4 million
at December 31, 2002 and 2001, respectively.
The Corporation invested in bank-owned life insurance for an initial premium
of $45 million. The policies cover officers at the bank subsidiaries and the
Corporation is the beneficiary. These policies are designated as separate
account policies by the issuing insurance companies. The Corporation records
its investment in the policies at their current surrender value, which is
the fair value of the separate account assets plus or minus the
value/obligation under stable value guarantees issued by the insurance
companies. The stable value guarantees serve to set the annual change in
surrender value of the policies at annually agreed upon levels by
guaranteeing the period end value of the separate account assets.
As of December 31, 2002, the Corporation does not have any securities from
any issuer, other than the U.S. Government, with an aggregate book or fair
value that exceeds ten percent of shareholders' equity.
Securities with a fair value amounting to approximately $98.5 million and
$57.3 million at December 31, 2002 and 2001, respectively, were pledged as
collateral for borrowings and for other purposes.
Below is a summary of the gross gains and losses realized by the Corporation
from investments sold during the years ended December 31, 2002, 2001 and
2000, respectively.
(Dollar amounts in thousands) 2002 2001 2000
- ----------------------------------------------------------------------------
Proceeds $9,736 $1,097 $42,037
Gross gains 154 180 262
Gross losses -- -- (117)
Contractual maturities of debt securities at year-end 2002 were as follows.
Securities not due at a single maturity date, primarily mortgage-backed
securities, are shown separately. Also shown are the tax equivalent yields,
computed using a 35% rate based on weighted average yields of securities
maturing during each time period.
Available-for-Sale
---------------------- Weighted
Amortized Fair Average
(Dollar amounts in thousands) Cost Value Yields
- ------------------------------------------------------------------------------------------------------------------------
Due in one year or less $ 26,098 $ 26,225 5.14%
====
Due after one but within five years 81,633 84,788 6.45%
====
Due after five but within ten years 68,637 73,396 7.43%
====
Due after ten years 132,399 135,788 6.12%
====
Mortgage-backed securities, primarily issued by U.S. Government agencies 183,543 191,351 5.15%
-------- -------- ====
TOTAL $492,310 $511,548
======== ========
17
2002 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LOANS:
Loans are summarized as follows:
December 31,
----------------------------
(Dollar amounts in thousands) 2002 2001
- -----------------------------------------------------------------------
Commercial, financial and agricultural $ 331,316 $ 302,496
Real estate - construction 42,930 34,610
Real estate - mortgage 789,618 757,345
Installment 268,067 249,710
Lease financing 1,281 5,023
----------- -----------
Total gross loans 1,433,212 1,349,184
Less: unearned income (648) (723)
allowance for loan losses (21,249) (18,313)
----------- -----------
TOTAL $ 1,411,315 $ 1,330,148
=========== ===========
In the normal course of business, the Corporation's subsidiary banks make
loans to directors and executive officers and to their associates. These
related party loans are consistent with sound banking practices and are
within applicable bank regulatory lending limitations. In 2002 the
aggregate dollar amount of these loans to directors and executive officers
who held office at the end of the year amounted to $60.0 million at the
beginning of the year. During 2002, advances of $41.6 million and repayments
of $36.0 million were made with respect to related party loans for an
aggregate dollar amount outstanding of $65.6 million at December 31, 2002.
Loans serviced for others, which are not reported as assets, total $282.9
million and $175.2 million at year-end 2002 and 2001.
Activity for capitalized mortgage servicing rights and the related valuation
allowance was as follows:
December 31,
---------------------------
(Dollar amounts in thousands) 2002 2001
- --------------------------------------------------------------------------------
Servicing rights:
Beginning of year $ 1,478 $ 792
Additions 2,229 1,292
Amortized to expense (1,159) (606)
------- -------
End of year $ 2,548 $ 1,478
======= =======
Valuation allowance:
Beginning of year $ -- $ --
Additions expensed 500 --
------- -------
End of year $ 500 $ --
======= =======
6. ALLOWANCE FOR LOAN LOSSES:
Changes in the allowance for loan losses are summarized as follows:
December 31,
---------------------------------------
(Dollar amounts in thousands) 2002 2001 2000
- -------------------------------------------------------------------------------------
Balance at beginning of year $ 18,313 $ 19,072 $ 17,949
Addition resulting from acquisition 1,711 -- --
Provision for loan losses 9,478 6,615 4,392
Recoveries of loans previously charged off 1,885 1,669 1,394
Loans charged off (10,138) (9,043) (4,663)
-------- -------- --------
BALANCE AT END OF YEAR $ 21,249 $ 18,313 $ 19,072
======== ======== ========
18
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impaired loans were as follows:
December 31,
-------------------
(Dollar amounts in thousands) 2002 2001
- --------------------------------------------------------------------------------
Year-end loans with no allocated allowance for loan losses $ -- $ --
Year-end loans with allocated allowance for loan losses 8,812 3,610
------- -------
TOTAL $ 8,812 $ 3,610
======= =======
Amount of the allowance for loan losses allocated $ 3,283 $ 2,033
Average of impaired loans during the year 5,288 5,978
Nonperforming loans:
Loans past due over 90 days still on accrual 5,899 4,925
Non-accrual loans 11,807 8,854
7. PREMISES AND EQUIPMENT:
Premises and equipment are summarized as follows:
December 31,
-----------------------
(Dollar amounts in thousands) 2002 2001
---------------------------------------------------------------
Land $ 4,512 $ 3,885
Building and leasehold improvements 33,615 30,533
Furniture and equipment 25,368 25,113
-------- --------
63,495 59,531
Less accumulated depreciation (33,686) (33,294)
-------- --------
TOTAL $ 29,809 $ 26,237
======== ========
8. GOODWILL:
New accounting standards issued in 2001 required all business combinations
initiated after June 30, 2001, to be recorded using the purchase method of
accounting. Under the purchase method, all identifiable tangible and
intangible assets and liabilities of the acquired company are recorded at
fair value at date of acquisition, and the excess of cost over fair value of
net assets acquired is recorded as goodwill. Identifiable intangible assets
with finite useful lives are separated from goodwill and amortized over
their expected lives, whereas goodwill, both amounts previously recorded and
future amounts purchased, ceased being amortized on January 1, 2002. Annual
impairment testing is required for goodwill with impairment being recorded
if the carrying amount of goodwill exceeds its implied fair value.
The Corporation adopted this standard on January 1, 2002, and ceased
amortizing goodwill associated with the acquisitions of The Morris Plan
Company of Terre Haute in 1998 and Forrest Sherer Inc. in 2001. No
additional goodwill has been recorded during 2002. The Corporation completed
its annual impairment testing of goodwill during the second quarter and
management does not believe any amount of the goodwill is impaired. The $7.1
million of goodwill on the balance sheet is net of accumulated amortization
of $737 thousand.
Intangible assets subject to amortization at December 31, 2002, are as
follows:
Gross Accumulated
(Dollar amounts in thousands) Amount Amortization
- -----------------------------------------------------------------
Customer list intangible $3,108 $ 730
Core deposit intangible 2,193 605
Non-compete agreements 500 177
------ ------
$5,801 $1,512
====== ======
19
2002 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Estimated amortization expense for the next five years is as follows:
In thousands
2003 $ 627
2004 574
2005 542
2006 456
2007 392
If this standard had been in effect in 2001 and 2000, net income for the
year would not have included goodwill amortization of $399 thousand and $169
thousand and would have been $24.6 million and $23.4 million, respectively.
Earnings per share would have been $3.62 and $3.47.
9. DEPOSITS AND SHORT-TERM BORROWINGS:
Scheduled maturities of time deposits were as follows:
In thousands
2003 $309,010
2004 204,569
2005 149,765
2006 31,250
2007 48,718
Thereafter 352
--------
$743,664
========
Year-end short-term borrowings were comprised of the following:
(Dollar amounts in thousands) 2002 2001
- ----------------------------------------------------------
Federal funds purchased $16,311 $ 9,920
Repurchase agreements 13,237 37,400
Note payable - U.S. government 4,807 7,276
------- -------
TOTAL $34,355 $54,596
======= =======
Federal funds purchased are generally due in one day and bear interest at
market rates. Note payable - U.S. government is due on demand, secured by
a pledge of securities and bears interest at market rates.
10. OTHER BORROWINGS:
Other borrowings at December 31, 2002 and 2001 are summarized as follows:
(Dollar amounts in thousands) 2002 2001
- -------------------------------------------------------------------------------------------
FHLB advances $397,190 $419,478
Note payable to a financial institution 19,500 --
City of Terre Haute, Indiana economic development revenue bonds 6,600 6,600
-------- --------
TOTAL $423,290 $426,078
======== ========
The aggregate minimum annual retirements of other borrowings are as follows:
2003 $ 53,039
2004 29,319
2005 --
2006 361
2007 396
Thereafter 340,175
---------
$ 423,290
=========
20
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All of the Corporation's Indiana subsidiary banks are members of the Federal
Home Loan Bank (FHLB) of Indianapolis and, accordingly, are permitted to
obtain advances. The advances from the FHLB, aggregating $397.2 million at
December 31, 2002, accrue interest, payable monthly, at annual rates varying
from 4.6% to 6.6%. The advances are due at various dates through August
2017. FHLB advances are, generally, due in full at maturity. They are
secured by eligible securities totaling $117.8 million and a blanket pledge
on real estate loan collateral. Certain advances may be prepaid, without
penalty, prior to maturity. The FHLB can adjust the interest rate from fixed
to variable on certain advances, but those advances may then be prepaid,
without penalty.
On January 31, 2002, the Corporation entered into a revolving credit loan
agreement (Note) with a financial institution. The total principal amount of
loans outstanding at one time under this Note may not exceed $20 million.
The Note matures on January 29, 2003, but is renewable annually, and
requires quarterly payments of interest and a commitment fee of 0.15% on the
average daily amount of the commitment. The Note bears interest at the
London Interbank Offered Rate (LIBOR) and adjusts quarterly. At December 31,
2002, the interest rate was 2.295%. The Note is unsecured but requires the
Corporation to meet certain financial covenants. The Corporation was in
compliance with all its debt covenants.
The economic development revenue bonds (bonds) require periodic interest
payments each year until maturity or redemption. The interest rate, which
was 1.6% at December 31, 2002, and 1.7% at December 31, 2001, is determined
by a formula which considers rates for comparable bonds and is adjusted
periodically. The bonds are collateralized by a first mortgage on the
Corporation's headquarters building. The bonds mature December 1, 2015, but
bond holders may periodically require earlier redemption.
The Corporation maintains a letter of credit with another financial
institution, which could be used to repay the bonds, should they be called.
The letter of credit expires November 1, 2003, and will be automatically
extended for one year should the bonds still be outstanding. Assuming
redemption will be funded by the letter of credit, or by other similar
borrowings, there are no anticipated principal maturities of the bonds
within the next five years.
The debt agreement for the bonds requires the Corporation to meet certain
financial covenants. These covenants require the Corporation to maintain a
Tier I capital ratio of at least 6.2% and net income to average assets of
0.6%. At December 31, 2002 and 2001, the Corporation was in compliance with
all of its debt covenants.
11. INCOME TAXES:
Income tax expense is summarized as follows:
(Dollar amounts in thousands) 2002 2001 2000
- ------------------------------------------------------------------------
Federal:
Currently payable $ 6,880 $ 6,413 $ 7,372
Deferred (960) 68 167
------- ------- -------
5,920 6,481 7,539
State:
Currently payable 1,156 1,353 1,539
Deferred 133 42 58
------- ------- -------
1,289 1,395 1,597
------- ------- -------
TOTAL $ 7,209 $ 7,876 $ 9,136
======= ======= =======
The reconciliation of income tax expense with the amount computed by
applying the statutory federal income tax rate of 35% to income before
income taxes is summarized as follows:
(Dollar amounts in thousands) 2002 2001 2000
- -----------------------------------------------------------------------------------------------
Federal income taxes computed at the statutory rate $ 12,547 $ 11,225 $ 11,322
Add (deduct) tax effect of:
Tax exempt income (5,705) (3,683) (2,691)
State tax, net of federal benefit 838 907 1,038
Affordable housing credits (604) (604) (529)
Other, net 133 31 (4)
-------- -------- --------
TOTAL $ 7,209 $ 7,876 $ 9,136
======== ======== ========
21
2002 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 2002 and
2001, are as follows:
(Dollar amounts in thousands) 2002 2001
- ------------------------------------------------------------------------------------
Deferred tax assets:
Loan losses provision $ 8,340 $ 7,177
Deferred compensation 2,173 1,555
Compensated absences 468 383
Post-retirement benefits 594 762
Net operating loss carry forward 926 --
Other 733 320
Valuation allowance for deferred tax assets (926) --
-------- --------
GROSS DEFERRED ASSETS 12,308 10,197
-------- --------
Deferred tax liabilities:
Net unrealized gains on available-for-sale securities (9,518) (5,533)
Depreciation (1,144) (1,022)
Lease financing (127) (207)
Originated servicing rights (803) (579)
Pensions (1,652) (1,571)
Other (2,072) (1,135)
-------- --------
GROSS DEFERRED LIABILITIES (15,316) (10,047)
-------- --------
NET DEFERRED TAX ASSETS (LIABILITIES) $ (3,008) $ 150
======== ========
12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND DERIVATIVE
INSTRUMENTS:
The Corporation is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include conditional commitments and
stand-by letters of credit. The financial instruments involve to varying
degrees, elements of credit and interest rate risk in excess of amounts
recognized in the financial statements. The Corporation's maximum exposure
to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to make loans is limited generally by
the contractual amount of those instruments. The Corporation follows the
same credit policy to make such commitments as is followed for those loans
recorded in the consolidated financial statements.
The Corporation's customers had unused lines of credit of $230.8 million and
$208.4 million as of December 31, 2002 and 2001. In addition, the
Corporation had outstanding commitments of $5.8 million and $5.6 million
under standby letters of credit as of December 31, 2002 and 2001,
respectively. The majority of these commitments bear variable interest
rates. The Corporation is exposed to credit loss in the event the
counterparties to such agreements do not perform in accordance with the
agreements.
During 2000, the Corporation entered into an interest rate swap agreement
with a 24-month term and a notional principal balance of $10 million, under
which the Corporation made variable rate payments, based on LIBOR, and
received fixed rate payments. The interest rate swap was designated as a
hedge against a similar maturity certificate of deposit promotion. At
year-end 2001, the agreement had a fair market value of $513 thousand,
approximately the same amount as the fair value adjustment attributable to
the certificates of deposit. The interest rate swap is included in time
deposits on the consolidated statements of condition at December 31, 2001.
Net settlement expense or benefit is included in interest expense. The
interest rate swap expired in September 2002.
During 2001 the Corporation purchased an interest rate cap contract with a
notional principal balance of $50 million. The agreement requires the
counterparty to pay the Corporation the excess of the 3-month LIBOR over
6.00%. The cap has a 36-month term which runs through March 2004. No
payments are currently required under the agreement. The agreement was
entered into to help protect the Corporation's net interest income should
interest rates increase in excess of the cap's trigger amount. The interest
rate cap is carried at fair value, approximately $3 thousand at December 31,
2002, and is included in other assets on the statement of condition.
22
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. RETIREMENT PLANS:
Substantially all employees of the Corporation are covered by a retirement
program that consists of a defined benefit plan and an employee stock
ownership plan (ESOP). Plan assets consist primarily of the Corporation's
stock and obligations of U.S. Government agencies. Benefits under the
defined benefit plan are actuarially determined based on an employee's
service and compensation, as defined, and funded as necessary.
Assets in the ESOP are considered in calculating the funding to the defined
benefit plan required to provide such benefits. Any shortfall of benefits
under the ESOP are to be provided by the defined benefit plan. The ESOP may
provide benefits beyond those determined under the defined benefit plan.
Contributions to the ESOP are determined by the Corporation's Board of
Directors. The Corporation made contributions to the defined benefit plan of
$1,321 thousand, $1,155 thousand and $774 thousand in 2002, 2001 and 2000.
The Corporation contributed $1,038 thousand, $350 thousand and $750 thousand
to the ESOP in 2002, 2001 and 2000.
Pension expense included the following components:
(Dollar amounts in thousands) 2002 2001 2000
- --------------------------------------------------------------------------------
Service cost - benefits earned $ 2,065 $ 698 $ 899
Interest cost on projected benefit obligation 1,880 1,766 1,780
Expected return on plan assets (2,062) (1,679) (1,801)
Net amortization and deferral 181 296 (26)
------- ------- -------
Total pension expense $ 2,064 $ 1,081 $ 852
======= ======= =======
The information below sets forth the change in benefit obligation,
reconciliation of plan assets, and the funded status of the Corporation's
retirement program. Actuarial present value of benefits is based on service
to date and present pay levels.
December 31,
------------------------
(Dollar amounts in thousands) 2002 2001
- ------------------------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at January 1 $ 30,293 $ 23,647
Service cost 2,065 698
Interest cost 1,880 1,766
Actuarial (gain) loss (2,349) 4,933
Benefits paid (615) (751)
------ ------
Benefit obligation at December 31 31,274 30,293
------ ------
Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1 25,887 20,929
Actual return on plan assets 1,665 4,204
Employer contributions 2,359 1,505
Benefits paid (615) (751)
------ ------
Fair value of plan assets at December 31 29,296 25,887
------ ------
Funded status:
Funded status at December 31 (1,978) (4,406)
Unrecognized prior service cost (213) (232)
Unrecognized net actuarial cost 6,496 8,648
-------- --------
Prepaid pension asset recognized in the consolidated balance sheets $ 4,305 $ 4,010
======== ========
Principal assumptions used:
Discount rate 6.50% 7.00%
Rate of increase in compensation levels 4.00 5.00
Expected long-term rate of return on plan assets 8.00 8.00
23
2002 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Corporation also provides medical benefits to its employees subsequent
to their retirement. Accrued post- retirement benefits as of December 31,
2002 and 2001 are as follows:
December 31,
------------------------
(Dollar amounts in thousands) 2002 2001
- ------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at January 1 $ 3,430 $ 3,009
Service cost 76 63
Interest cost 226 215
Plan participants' contributions 58 38
Actuarial (gain) loss 647 355
Actual benefits paid (356) (250)
------- -------
Benefit obligation at December 31 $ 4,081 $ 3,430
======= =======
Reconciliation of funded status:
Funded status $ 4,081 $ 3,430
Unrecognized transition obligation (663) (724)
Unrecognized net gain (loss) (2,031) (1,463)
------- -------
Accrued benefit cost $ 1,387 $ 1,243
======= =======
The post-retirement benefits paid in 2002 and 2001 of $356 thousand and $250
thousand, respectively, were fully funded by company and participant
contributions. There were no other changes to plan assets in 2002 and 2001.
Weighted-average assumptions as of December 31:
December 31,
-----------------------
2002 2001
- ------------------------------------------------------------------------
Discount rate 6.50% 7.00%
Initial weighted health care cost trend rate 7.50 7.50
Ultimate health care cost trend rate 5.00 5.00
Post-retirement health benefit expense included the following components:
Years Ended December 31,
-------------------------------
(Dollar amounts in thousands) 2002 2001 2000
- ---------------------------------------------------------------------------
Service cost $ 76 $ 63 $ 64
Interest cost 226 215 201
Amortization of transition obligation 60 60 60
Recognized actuarial loss 80 54 45
---- ---- ----
Net periodic benefit cost $442 $392 $370
==== ==== ====
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
the assumed health care cost trend rates would have the following effects:
1% Point 1% Point
Increase Decrease
- --------------------------------------------------------------------------------
Effect on total of service and interest cost components $ 42 $ (33)
Effect on post-retirement benefit obligation 187 (144)
24
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. OTHER COMPREHENSIVE INCOME:
Other comprehensive income components and related taxes were as follows:
(Dollar amounts in thousands) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------
Unrealized holding gains and losses on available-for-sale securities $ 10,116 $ 7,512 $ 19,676
Reclassification adjustments for gains and losses later
recognized in income (154) (180) (145)
-------- -------- --------
Net unrealized gains and losses 9,962 7,332 19,531
Tax effect (3,985) (2,933) (7,812)
-------- -------- --------
Other comprehensive income $ 5,977 $ 4,399 $ 11,719
======== ======== ========
15. REGULATORY MATTERS:
The Corporation and its bank affiliates are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory--and
possibly additional discretionary--actions by regulators that, if
undertaken, could have a direct material effect on the Corporation's
financial statements.
Further, the Corporation's primary source of funds to pay dividends to
shareholders is dividends from its subsidiary banks and compliance with
these capital requirements can affect the ability of the Corporation and its
banking affiliates to pay dividends. At December 31, 2002, approximately
$56.5 million of undistributed earnings of the subsidiary banks, included in
consolidated retained earnings, were available for distribution to the
Corporation without regulatory approval.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Corporation must meet specific capital guidelines
that involve quantitative measures of the Corporation's assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Corporation's capital amounts and classification
are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios of Total and
Tier I Capital to risk-weighted assets, and of Tier I Capital to average
assets. Management believes, as of December 31, 2002 and 2001, that the
Corporation meets all capital adequacy requirements to which it is subject.
As of December 31, 2002, the most recent notification from the respective
regulatory agencies categorized the Corporation and its subsidiary banks as
well capitalized under the regulatory framework for prompt corrective
action. To be categorized as adequately capitalized the Corporation 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 Corporation's
category.
The following table presents the actual and required capital amounts and
related ratios for the Corporation and the lead bank, Terre Haute First
National Bank, at year end 2002 and 2001.
25
2002 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- ----------------------------------- ------------------------------
(Dollar amounts in thousands) Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RISK-BASED CAPITAL
Corporation - 2002 $235,985 14.83% > or = to $127,296 > or = to 8.0% > or = to $159,120 > or = to 10.0%
Corporation - 2001 219,543 15.15% > or = to 115,943 > or = to 8.0% > or = to 144,929 > or = to 10.0%
Terre Haute First - 2002 149,778 15.56% > or = to 76,992 > or = to 8.0% > or = to 96,241 > or = to 10.0%
Terre Haute First - 2001 135,783 14.70% > or = to 73,912 > or = to 8.0% > or = to 92,389 > or = to 10.0%
TIER I RISK-BASED CAPITAL
Corporation - 2002 $216,078 13.58% > or = to $ 63,648 > or = to 4.0% > or = to $95,472 > or = to 6.0%
Corporation - 2001 201,424 13.90% > or = to 57,972 > or = to 4.0% > or = to 86,957 > or = to 6.0%
Terre Haute First - 2002 139,590 14.50% > or = to 38,496 > or = to 4.0% > or = to 57,744 > or = to 6.0%
Terre Haute First - 2001 126,555 13.70% > or = to 36,956 > or = to 4.0% > or = to 55,434 > or = to 6.0%
TIER I LEVERAGE CAPITAL
Corporation - 2002 $216,078 9.79% > or = to $ 88,323 > or = to 4.0% > or = to $110,404 > or = to 5.0%
Corporation - 2001 201,424 9.87% > or = to 81,651 > or = to 4.0% > or = to 102,064 > or = to 5.0%
Terre Haute First - 2002 139,590 10.85% > or = to 51,446 > or = to 4.0% > or = to 64,308 > or = to 5.0%
Terre Haute First - 2001 126,555 9.85% > or = to 51,418 > or = to 4.0% > or = to 64,273 > or = to 5.0%
16. PARENT COMPANY CONDENSED FINANCIAL STATEMENTS:
The parent company's condensed balance sheets as of December 31, 2002 and
2001, and the related condensed statements of income and cash flows for
each of the three years in the period ended December 31, 2002, are as
follows:
CONDENSED BALANCE SHEETS
December 31,
----------------------
(Dollar amounts in thousands) 2002 2001
- ----------------------------------------------------------------------------
ASSETS
Cash deposits in affiliated banks $ 5,037 $ 3,916
Investments in subsidiaries 256,608 211,234
Land and headquarters building, net 6,516 6,660
Other 10,688 10,721
-------- --------
TOTAL ASSETS $278,849 $232,531
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Borrowings $ 29,900 $ 8,100
Dividends payable 4,229 3,973
Other liabilities 2,749 2,947
-------- --------
TOTAL LIABILITIES 36,878 15,020
Shareholders' equity 241,971 217,511
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $278,849 $232,531
======== ========
26
FIRST FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF INCOME
Years Ended December 31,
-------------------------------------
(Dollar amounts in thousands) 2002 2001 2000
- -----------------------------------------------------------------------------------------
Dividends from subsidiaries $ 5,676 $ 10,485 $ 8,608
Other income 913 971 1,056
Interest on borrowings (673) (314) (370)
Other operating expenses (2,953) (2,801) (1,779)
-------- -------- --------
Income before income taxes and equity
in undistributed earnings of subsidiaries 2,963 8,341 7,515
Income tax benefit 1,074 863 571
-------- -------- --------
Income before equity in undistributed
earnings of subsidiaries 4,037 9,204 8,086
Equity in undistributed earnings of subsidiaries 24,603 14,992 15,127
-------- -------- --------
Net income $ 28,640 $ 24,196 $ 23,213
======== ======== ========
CONDENSED STATEMENTS OF CASH FLOWS