First Financial Corporation Reports 2014 Results

TERRE HAUTE, IN--(Marketwired - Feb 3, 2015) - First Financial Corporation (NASDAQ: THFF) today announced results for the fourth quarter of 2014 and the year ended December 31, 2014. Net income for the three months ending December 31, 2014 increased 2.89% to $9.2 million compared to $8.9 million for the same period of 2013. Diluted net income per common share increased 5.97% to $0.71 from $0.67 for the comparable period of 2013.

The Corporation further reported net income of $33.8 million for the twelve months ended December 31, 2014 versus $31.5 million for the comparable period of 2013, an increase of 7.10%. Diluted net income per common share also increased 7.59% to $2.55 for the twelve months ended December 31, 2014 versus $2.37 for the comparable period of 2013. Return on assets for the twelve months ended December 31, 2014 was 1.12% compared to 1.06% for the twelve months ended December 31, 2013.

Earnings for the twelve-month period ended December 31, 2014 were negatively impacted by a non-cash provision for state income tax expense of $607,541, which resulted from the revaluation of the Corporation's state deferred tax items. The tax rate, currently 8.0%, is scheduled to drop to 6.5% for 2017. The new legislation further reduces the rate to 4.9%, beginning in 2019. The lower tax rate going forward reduces the benefit provided by the Corporation's existing deferred tax items.

Average total loans for the fourth quarter of 2014 were $1.80 billion versus $1.79 billion for the comparable period in 2013, an increase of $6.7 million or .37%. Total loans outstanding however decreased $10.0 million, or .56%, from $1.79 billion as of December 31, 2013 to $1.78 billion as of December 31, 2014 primarily due to payoffs in the 4th quarter related to the sale of businesses. On a linked quarter basis, average total loans decreased $9.0 million, or .50%, from $1.81 billion for the quarter ending September 30, 2014.

Average total deposits for the quarter ended December 31, 2014 were $2.47 billion versus $2.54 billion as of December 31, 2013, a decrease of 2.73%. Non-interest bearing deposits, however, increased 7.50% while interest earning deposits decreased 2.02%.

The company's tangible common equity to tangible asset ratio was 12.40% at December 31, 2014, compared to 11.49% at December 31, 2013, a 7.92% increase.

Due to the prolonged low interest rate environment net interest income for the fourth quarter of 2014 was $26.9 million, a decrease of 2.22% over the $27.6 million reported for the same period of 2013. The net interest margin for the quarter ended December 31, 2014 decreased to 3.99% from the 4.04% reported at December 31, 2013.

Asset quality remains strong with nonperforming loans decreasing 20.1% to $31.29 million as of December 31, 2014 versus $39.15 million as of December 31, 2013. The ratio of nonperforming loans to total loans and leases also decreased to 1.76% as of December 31, 2014 versus 2.19% as of December 31, 2013.

The provision for loan losses for the three months ended December 31, 2014 was $1.96 million compared to the $1.38 million provision for the fourth quarter of 2013. Net charge-offs were $618 thousand for the fourth quarter of 2014 compared to $3.14 million in the same period of 2013. The Corporation's allowance for loan losses as of December 31, 2014 was $18.8 million compared to $20.1 million as of December 31, 2013. The allowance for loan losses as a percent of total loans was 1.06% as of December 31, 2014 compared to 1.12% as of December 31, 2013.

Non-interest income for the three months ended December 31, 2014 and 2013 was $10.6 and $11.3 million, respectively, a 5.88% decrease. Non-interest income for the years ended December 31, 2014 and 2013 was $40.8 and $40.5 million. Increased income from electronic banking fees and deposit account charges effectively offset the reduced gains from the sale of mortgage loans.

Non-interest expense for the three months ended December 31, 2014 decreased $1.03 million to $23.1 million compared to $24.2 million in 2013. On a linked quarter basis, non-interest expense decreased $1.58 million from $24.7 million for the quarter ended September 30, 2014. On a year-over-year basis, salaries and employee benefits increased $839 thousand driven by the branch expansion and normal merit increases. Occupancy expenses increased $1.1million due to the branch expansion and weather-related expenses. The Corporation's efficiency ratio was 59.11% for the quarter ending December 31, 2014 versus 61.39% for the same period in 2013.

Book value per share was $31.61 at December 31, 2014, a 9.22% increase from the $28.94 at December 31, 2013. Shareholders' equity increased 2.08% to $394.2 million from $386.2 million on December 31, 2013.

Norman L. Lowery, President and Chief Executive Officer, commented, "We are pleased with our 2014 results as First Financial delivered another year of solid performance. 2014 net income was the second highest in the history of the Corporation and allowed us to increase our dividend for the 26th consecutive year."

First Financial Corporation is the holding company for First Financial Bank N.A. in Indiana and Illinois, The Morris Plan Company of Terre Haute and Forrest Sherer Inc. in Indiana.

			Three Months Ended									Year Ended
			December 31,			September 30,			December 31,			December 31,
			2014			2014			2013			2014			2013
END OF PERIOD BALANCES
	Assets		$	3,002,485		$	3,056,767		$	3,018,718		$	3,002,485		$	3,018,718
	Deposits			2,457,197			2,451,952			2,458,791			2,457,197			2,458,791
	Loans			1,781,428			1,811,325			1,791,428			1,781,428			1,791,428
	Allowance for Loan Losses			18,839			17,507			20,068			18,839			20,068
	Total Equity			394,214			403,873			386,195			394,214			386,195
	Tangible Common Equity			350,824			360,239			341,771			350,824			341,771
AVERAGE BALANCES
	Total Assets			3,027,478			3,004,862			3,085,186			3,020,068			2,976,100
	Earning Assets			2,792,506			2,794,572			2,793,686			2,793,424			2,733,926
	Investments			992,441			978,435			962,785			998,189			926,327
	Loans			1,800,065			1,809,077			1,793,349			1,795,235			1,807,599
	Total Deposits			2,469,170			2,403,368			2,538,492			2,461,253			2,381,322
	Interest-Bearing Deposits			1,917,728			1,886,628			2,029,229			1,934,597			1,901,663
	Interest-Bearing Liabilities			83,577			148,997			85,748			100,512			143,129
	Total Equity			412,296			400,142			384,022			403,413			377,686
INCOME STATEMENT DATA
	Net Interest Income			26,939			27,145			27,551			107,832			107,260
	Net Interest Income Fully Tax Equivalent			27,279			29,880			29,034			114,039			112,958
	Provision for Loan Losses			1,962			1,506			1,384			5,072			7,860
	Non-interest Income			10,615			10,494			11,278			40,785			40,455
	Non-interest Expense			23,125			24,705			24,153			95,584			94,554
	Net Income			9,181			8,272			8,923			33,772			31,534
PER SHARE DATA
	Basic and Diluted Net Income Per Common Share			0.71			0.62			0.67			2.55			2.37
	Cash Dividends Declared Per Common Share			0.49			-			0.48			0.98			0.96
	Book Value Per Common Share			31.61			31.16			28.94			30.46			28.94
	Tangible Book Value Per Common Share			27.11			27.79			25.61			27.11			25.61
	Basic Weighted Average Common Shares Outstanding			12,932,240			13,269,826			13,323,719			13,225,846			13,309,726

Key Ratios	Three Months Ended									Year Ended
	December 31,			September 30,			December 31,			December 31,
	2014			2014			2013			2014			2013
Return on average assets	1.21	%		1.10	%		1.16	%		1.12	%		1.06	%
Return on average common shareholder's equity	8.91	%		8.27	%		9.29	%		8.37	%		8.35	%
Efficiency ratio	59.11	%		63.00	%		61.39	%		61.74	%		62.02	%
Average equity to average assets	13.62	%		13.32	%		12.45	%		13.36	%		12.69	%
Net interest margin	3.99	%		4.15	%		4.04	%		4.08	%		4.13	%
Net charge-offs to average loans and leases	0.14	%		0.50	%		0.70	%		0.31	%		0.46	%
Loan and lease loss reserve to loans and leases	1.06	%		0.97	%		1.12	%		1.06	%		1.12	%
Loan and lease loss reserve to nonperforming loans	0.60	%		0.51	%		0.51	%		0.60	%		0.51	%
Nonperforming loans to loans	1.76	%		1.89	%		2.19	%		1.76	%		2.19	%
Tier 1 leverage	12.33	%		12.19	%		11.69	%		12.33	%		11.69	%
Risk-based capital - Tier 1	16.99	%		16.53	%		16.22	%		16.99	%		16.22	%

Asset Quality		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,
		2014			2014			2013			2014			2013
Accruing loans and leases past due 30-89 days		$	13,444		$	8,597		$	12,756		$	13,444		$	12,756
Accruing loans and leases past due 90 days or more		$	780		$	787		$	2,073,000		$	780		$	2,073
Nonaccrual loans and leases		$	15,754		$	18,673		$	19,779		$	15,754		$	19,779
Nonperforming loans		$	31,292		$	34,218		$	39,153		$	31,292		$	39,153
Other real estate owned		$	3,965		$	4,012		$	5,291		$	3,965		$	5,291
Total nonperforming assets		$	46,394		$	50,102		$	47,649		$	46,394		$	47,649
Total troubled debt restructurings		$	14,758		$	14,758		$	17,301		$	14,758		$	17,301
Gross charge-offs		$	2,308		$	2,656		$	3,754		$	9,450		$	13,387
Recoveries		$	1,690		$	378		$	618		$	3,836		$	5,022
Net charge-offs/(recoveries)		$	618		$	2,278		$	3,136		$	5,614		$	8,365

CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
		December 31,
(Dollar amounts in thousands, except per share data)		2014				2013
		(unaudited)
ASSETS
Cash and due from banks		$	78,102			$	71,033
Federal funds sold			8,000				4,276
Securities available-for-sale			897,053				914,560
Loans, net of allowance of $18,839 in 2014 and $20,068 in 2013			1,762,589				1,771,360
Restricted stock			16,404				21,057
Accrued interest receivable			11,593				11,554
Premises and equipment, net			51,802				51,449
Bank-owned life insurance			80,730				79,035
Goodwill			39,489				39,489
Other intangible assets			3,901				4,935
Other real estate owned			3,965				5,291
FDIC indemnification asset			(74	)			1,055
Other assets			48,931				43,624
TOTAL ASSETS		$	3,002,485			$	3,018,718
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest-bearing		$	556,389			$	506,815
Interest-bearing:
Certificates of deposit of $100 or more			155,274				179,177
Other interest-bearing deposits			1,745,534				1,772,799
			2,457,197				2,458,791
Short-term borrowings			48,015				59,592
Other borrowings			12,886				58,288
Other liabilities			90,173				55,852
TOTAL LIABILITIES			2,608,271				2,632,523
Shareholders' equity
Common stock, $.125 stated value per share;
Authorized shares-40,000,000
Issued shares-14,538,132 in 2014 and 14,516,113 in 2013
Outstanding shares-12,942,175 in 2014 and 13,343,029 in 2013			1,815				1,811
Additional paid-in capital			72,405				71,074
Retained earnings			377,970				357,083
Accumulated other comprehensive income (loss)			(14,529	)			(13,969	)
Less: Treasury shares at cost-1,595,957 in 2014 and 1,173,084 in 2013			(43,447	)			(29,804	)
TOTAL SHAREHOLDERS' EQUITY			394,214				386,195
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	3,002,485			$	3,018,718

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollar amounts in thousands, except per share data)
			Years Ended December 31,
(Dollar amounts in thousands, except per share data)			2014				2013				2012
			(unaudited)
INTEREST AND DIVIDEND INCOME:
Loans, including related fees			$	87,530			$	91,242			$	99,196
Securities:
Taxable				17,015				16,157				13,542
Tax-exempt				7,084				7,046				7,246
Other				1,729				1,776				2,321
TOTAL INTEREST AND DIVIDEND INCOME				113,358				116,221				122,305
INTEREST EXPENSE:
Deposits				4,624				5,886				8,520
Short-term borrowings				99				78				140
Other borrowings				803				2,997				4,733
TOTAL INTEREST EXPENSE				5,526				8,961				13,393
NET INTEREST INCOME				107,832				107,260				108,912
Net provision for loan losses				5,072				7,860				8,773
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES				102,760				99,400				100,139
NON-INTEREST INCOME:
Trust and financial services				5,860				6,035				5,804
Service charges and fees on deposit accounts				10,772				10,162				9,742
Other service charges and fees				11,697				11,081				9,710
Securities gain, net				(3	)			423				886
Other-than-temporary loss
Total impairment loss				-				-				(11	)
Loss recognized in other comprehensive income				-				-				-
	Net impairment loss recognized in earnings			-				-				(11	)
Insurance commissions				7,646				7,750				7,422
Gain on sale of mortgage loans				1,849				3,052				4,590
Other				2,964				1,952				1,404
TOTAL NON-INTEREST INCOME				40,785				40,455				39,547
NON-INTEREST EXPENSES:
Salaries and employee benefits				55,936				55,097				56,211
Occupancy expense				7,218				6,102				5,746
Equipment expense				7,269				6,348				5,489
Federal Deposit Insurance				1,931				2,052				1,949
Other				23,230				24,955				23,661
TOTAL NON-INTEREST EXPENSE				95,584				94,554				93,056
INCOME BEFORE INCOME TAXES				47,961				45,301				46,630
Provision for income taxes				14,189				13,767				13,818
NET INCOME			$	33,772			$	31,534			$	32,812
OTHER COMPREHENSIVE INCOME
Change in unrealized gains/losses on securities, net of reclassifications and taxes			$	13,913			$	(17,066	)		$	691
Change in funded status of post-retirement benefits, net of taxes			$	(14,473	)		$	10,569			$	2,331
COMPREHENSIVE INCOME			$	33,212			$	25,037			$	35,834
EARNINGS PER SHARE:
BASIC AND DILUTED			$	2.55			$	2.37			$	2.48
Weighted average number of shares outstanding (in thousands)				13,226				13,310				13,240