First Financial Corporation Reports 2021 Results


TERRE HAUTE, Ind., Feb. 01, 2022 (GLOBE NEWSWIRE) -- First Financial Corporation (NASDAQ:THFF) today announced results for the period ending December 31, 2021. These quarterly comparisons include the Corporation's acquisition of Hancock Bancorp, Inc., Hawesville, Kentucky, on November 5, 2021. Total assets acquired were $326 million, including $234 million in loans and $285 million in deposits.

For the quarter:

  • Net income was $7.4 million reflecting $1.0 million in merger expenses, $4.0 million in merger related provision expense for Hancock, and $1.6 million in expense related to our previously announced branch optimization strategy in which nine branches were closed and consolidated into nearby locations. This compared to $15.7 million for the same period of 2020;
  • Adjusted net income would have been $13.0 million or $0.99 per common share excluding the merger and branch optimization expenses incurred. 1
  • Diluted net income per common share of $0.58 compared to $1.15 for the same period of 2020; and
  • Return on average assets was 0.58% compared to 1.39% for the three months ended December 31, 2020.

The Corporation further reported results for the twelve months ending December 31, 2021:

  • Net income was $53.0 million compared to $53.8 million for the same period of 2020;
  • Adjusted net income would have been $58.4 million or $4.43 per common share excluding the merger and branch optimization expenses incurred. 1
  • Diluted net income per common share of $4.02 compared to $3.93 for the same period of 2020; and
  • Return on average assets was 1.10% compared to 1.25% for the twelve months ended December 31, 2020.

1 Non-GAAP financial measure that Management believes is useful for investors and management to understand the effects of certain non-recurring noninterest items and provide additional perspective on the Corporation’s performance over time as well as comparison to the Corporation’s peers and evaluating the financial results of the Corporation – please refer to the Non GAAP reconciliations contained in this release.

“We are pleased with our fourth quarter results,” said Norman L. Lowery, Chairman and Chief Executive Officer. “We completed our recently announced merger with Hancock Bancorp and completed the system conversion during the quarter, allowing us to expand our presence in Kentucky, including the attractive Bowling Green, Kentucky market. We also completed our recently announced branch optimization strategy during the quarter, which is projected to save $2.3 million per year in operating expenses, but still retain the ability to serve customers in these markets. Lastly, we had exceptional loan growth during the quarter. Total loans grew by $113.0 million, or 4.55% excluding the transaction.”

Average Total Loans
Average total loans for the fourth quarter of 2021 were $2.63 billion versus $2.68 billion for the comparable period in 2020.

Total Loans Outstanding
Total loans outstanding as of December 31, 2021 were $2.82 billion compared to $2.61 billion as of December 31, 2020, an increase of $206 million or 7.88%. On a linked quarter basis, total loans grew $336 million or 13.55%. Excluding the transaction, total loans grew $113 million or 4.55%. PPP loans decreased $16 million.

Average Total Deposits
Average total deposits for the quarter ended December 31, 2021, were $4.31 billion versus $3.74 billion as of December 31, 2020, an increase of $571 million or 15.24%.

Total Deposits
Total deposits were $4.41 billion as of December 31, 2021, compared to $3.76 billion as of December 31, 2020, an increase of $654 million or 17.40%. On a linked quarter basis, total deposits increased $381 million or 9.46% from $4.03 billion for the quarter ending September 30, 2021.

Book Value Per Share
Book Value per share was $46.13 at December 31, 2021, compared to $44.03 at December 31, 2020, an increase of 4.76%.

Shareholder Equity
Shareholder equity at December 31, 2021, was $582.6 million compared to $597.0 million on December 31, 2020. In the quarter the Corporation repurchased 273,166 shares of its common stock, bringing total shares repurchased to 980,900 for 2021.

Tangible Common Equity to Tangible Asset Ratio
The Corporation’s tangible common equity to tangible asset ratio was 9.62% at December 31, 2021, compared to 11.40% at December 31, 2020.

Net Interest Income
Net interest income for the fourth quarter of 2021 was $36.8 million, compared to $37.6 million reported for the same period of 2020.

Net Interest Margin
The net interest margin for the quarter ended December 31, 2021, was 3.08% compared to the 4.11% reported at December 31, 2020.

Nonperforming Loans
Nonperforming loans as of December 31, 2021, were $15.0 million versus $21.8 million as of December 31, 2020. The ratio of nonperforming loans to total loans and leases was 0.53% as of December 31, 2021, versus 0.84% as of December 31, 2020.

Credit Loss Provision
The provision for credit losses for the three months ended December 31, 2021, was $5.7 million, including the $4.0 million related to the Hancock Bancorp merger, compared to the $448 thousand provision for the fourth quarter of 2020. In the first three quarters of 2020 the provision was calculated using the incurred loss basis. Beginning in the fourth quarter 2020, the provision was calculated using the current expected credit loss accounting standard.

Net Charge-Offs
In the fourth quarter of 2021 net charge-offs were $1.8 million compared to $416 thousand in the same period of 2020.

Allowance for Credit Losses
In March 2020 due to the uncertainty surrounding the global pandemic and as provided by the Coronavirus Aid Relief and Economic Security Act the Corporation elected to delay the implementation of the Current Expected Credit Loss accounting standard. On December 31, 2020 the Corporation adopted ASU 2016-13 (topic 326), “Measurement of Credit Losses on Financial Instruments” commonly referenced as the Current Expected Credit Loss (“CECL”) model. CECL was retrospectively adopted on January 1, 2020.

The Corporation’s allowance for credit losses as of December 31, 2021, was $48.3 million compared to $43.6 million as of December 31, 2020. The allowance for credit losses as a percent of total loans was 1.72% as of December 31, 2021, compared to 1.67% as of December 31, 2020.

Non-Interest Income
Non-interest income for the three months ended December 31, 2021 and 2020 was $10.8 million and $12.9 million, respectively.

Non-Interest Expense
Non-interest expense for the three months ended December 31, 2021, was $33.3 million compared to $31.2 million in 2020. There were $1.0 million of expenses in the quarter related to the Hancock Bancorp merger and $1.6 million related to branch optimization.

Efficiency Ratio
The Corporation’s efficiency ratio was 68.37% for the quarter ending December 31, 2021, versus 60.60% for the same period in 2020, which was also impacted by the Hancock Bancorp merger and branch optimization.

Income Taxes
Income tax expense for the twelve months ended December 31, 2021, was $12.6 million versus $11.7 million for the same period in 2020. The effective tax rate for 2021 was 19.24% compared to 17.84% for 2020.

About First Financial Corporation
First Financial Corporation (NASDAQ:THFF) is the holding company for First Financial Bank N.A. and The Morris Plan Company of Terre Haute, Inc. First Financial Bank N.A. is the fifth oldest national bank in the United States, operating 78 banking centers in Illinois, Indiana, Kentucky and Tennessee. The Morris Plan Company of Terre Haute, Inc. is a state industrial chartered financial institution operating one office in Terre Haute, Indiana. Additional information is available at www.first-online.bank.

Investor Contact:
Rodger A. McHargue
Chief Financial Officer
P: 812-238-6334
E: rmchargue@first-online.com

    
  Three Months EndedYear Ended
  December 31,September 30,December 31,December 31,December 31,
  20212021202020212020
END OF PERIOD BALANCES      
Assets $5,170,799$4,804,569 $4,560,959$5,170,799$4,560,959
Deposits $4,409,569$4,028,636 $3,755,945$4,409,569$3,755,945
Loans, including net deferred loan costs $2,815,895$2,479,910 $2,610,294$2,815,895$2,610,294
Allowance for Credit Losses $48,305$39,486 $43,637$48,305$43,637
Total Equity $582,576$594,935 $596,992$582,576$596,992
Tangible Common Equity (a) $488,417$508,618 $509,428$488,417$509,428
       
AVERAGE BALANCES      
Total Assets $5,086,702$4,818,880 $4,532,078$4,814,350$4,312,919
Earning Assets $4,875,039$4,615,235 $3,736,217$4,611,741$3,714,794
Investments $1,410,351$1,325,651 $1,058,925$1,278,498$1,011,324
Loans $2,633,559$2,515,639 $2,676,041$2,602,344$2,702,225
Total Deposits $4,312,115$4,041,441 $3,741,155$4,037,876$3,532,736
Interest-Bearing Deposits $3,823,428$3,223,948 $3,005,337$3,320,112$2,872,725
Interest-Bearing Liabilities $110,490$106,936 $98,922$107,367$108,948
Total Equity $589,197$599,011 $610,879$597,369$593,791
       
INCOME STATEMENT DATA      
Net Interest Income $36,832$36,028 $37,570$143,401$146,346
Net Interest Income Fully Tax Equivalent (b) $37,953$37,134 $38,606$147,765$150,590
Provision for Credit Losses $5,710$(1,500)$448$2,466$10,528
Non-interest Income $10,767$11,092 $12,866$42,084$42,476
Non-interest Expense $33,312$28,459 $31,191$117,406$112,758
Net Income $7,398$16,098 $15,739$52,987$53,844
       
PER SHARE DATA      
Basic and Diluted Net Income Per Common Share $0.58$1.24 $1.15$4.02$3.93
Cash Dividends Declared Per Common Share $0.63$ $0.53$1.16$1.05
Book Value Per Common Share $46.13$46.22 $44.03$46.13$44.03
Tangible Book Value Per Common Share (c) $38.66$39.38 $37.64$38.67$37.57
Basic Weighted Average Common Shares Outstanding  12,804 13,019  13,695 13,190 13,716

(a) Tangible common equity is a non-GAAP financial measure derived from GAAP-based amounts. We calculate tangible common equity by excluding goodwill and other intangible assets from shareholder's equity.
(b) Net interest income fully tax equivalent is a non-GAAP financial measure derived from GAAP-based amounts. We calculate net interest income fully tax equivalent by adding back the tax equivalent factor of tax exempt income to net interest income. We calculate the tax equivalent factor of tax exempt income by dividing tax exempt income by the net of tax rate of 75%.
(c) Tangible book value per common share is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the factor by dividing average tangible common equity by average shares outstanding. We calculate average tangible common equity by excluding average intangible assets from average shareholder's equity.

    
Key Ratios Three Months EndedYear Ended
  December 31,September 30,December 31,December 31,December 31,
  20212021202020212020
Return on average assets 0.58%1.34%1.39%1.10%1.25%
Return on average common shareholder's equity 5.02%10.75%10.31%8.87%9.07%
Efficiency ratio 68.37%59.01%60.60%61.84%58.40%
Average equity to average assets 11.58%12.43%13.48%12.41%13.77%
Net interest margin (a) 3.08%3.22%4.11%3.20%4.05%
Net charge-offs to average loans and leases 0.27%0.04%0.05%0.10%0.13%
Credit loss reserve to loans and leases 1.72%1.59%1.67%1.72%1.67%
Credit loss reserve to nonperforming loans 321.78%210.83%216.28%324.11%210.37%
Nonperforming loans to loans and leases 0.53%0.79%0.84%0.53%0.84%
Tier 1 leverage 9.83%10.77%11.24%9.83%11.24%
Risk-based capital - Tier 1 14.37%16.63%16.11%14.37%16.11%

(a) Net interest margin is calculated on a tax equivalent basis.

Asset Quality Three Months EndedYear Ended
  December 31,September 30,December 31,December 31,December 31,
  20212021202020212020
Accruing loans and leases past due 30-89 days $17,096$10,765$17,309$17,096$17,309
Accruing loans and leases past due 90 days or more $515$1,355$2,324$515$2,324
Nonaccrual loans and leases $9,590$13,650$15,367$9,590$15,367
Total troubled debt restructuring $4,799$4,489$4,206$4,799$4,206
Other real estate owned $108$884$1,012$108$1,012
Nonperforming loans and other real estate owned $15,012$20,378$22,909$15,012$22,909
Total nonperforming assets $18,371$23,622$26,045$18,371$26,045
Gross charge-offs $3,113$1,614$1,954$8,216$8,396
Recoveries $1,312$1,344$1,538$5,569$4,917
Net charge-offs/(recoveries) $1,801$270$416$2,647$3,479


Non-GAAP Reconciliations     
($ in thousands, except EPS)4Q21 Adjustments Adjusted 4Q21
      
Net Interest Income$36,832  $  $36,832 
Provision for credit losses (5,710)  3,980 (a) (1,730)
Noninterest income 10,767      10,767 
Noninterest expense (33,312)  2,585 (b)(c) (30,727)
Income before Income Taxes$8,577  $6,565  $15,142 
Income Taxes (1,179)  (1,313)  (2,492)
Net Income$7,398  $5,252  $12,650 
Average Shares Outstanding 12,804   12,804   12,804 
Basic and Diluted Earnings Per Share$0.58  $0.41  $0.99 

(a) CECL provision addition for acquisition of Hancock Bancorp.
(b) Merger expenses: acquisition expense $810,000; severance $193,000.
(c) Branch optimization: lease termination $249,000; severance $144,000; real estate write downs $1,189,000.   

Non-GAAP Reconciliations     
($ in thousands, except EPS) 2021  Adjustments Adjusted 2021
      
Net Interest Income$143,401  $  $143,401 
Provision for credit losses (2,466)  3,980 (a) 1,514 
Noninterest income 42,084      42,084 
Noninterest expense (117,406)  2,827 (b)(c) (114,579)
Income before Income Taxes$65,613  $6,807  $72,420 
Income Taxes (12,626)  (1,361)  (13,987)
Net Income$52,987  $5,446  $58,433 
Average Shares Outstanding 13,190   13,190   13,190 
Basic and Diluted Earnings Per Share$4.02  $0.41  $4.43 

(a) CECL provision addition for acquisition of Hancock Bancorp.
(b) Merger expenses: acquisition expense $1,052,000; severance $193,000.
(c) Branch optimization: lease termination $249,000; severance $144,000; real estate write downs $1,189,000.


CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)

 December 31,
2021
 December 31,
2020
 (unaudited)
ASSETS   
Cash and due from banks$682,807  $657,470 
Federal funds sold 308   301 
Securities available-for-sale 1,364,734   1,020,744 
Loans:   
Commercial 1,674,066   1,521,711 
Residential 664,509   604,652 
Consumer 474,026   479,750 
  2,812,601   2,606,113 
(Less) plus:   
Net deferred loan costs 3,294   4,181 
Allowance for credit losses (48,305)  (43,637)
  2,767,590   2,566,657 
Restricted stock 16,200   14,812 
Accrued interest receivable 16,946   16,957 
Premises and equipment, net 69,522   62,063 
Bank-owned life insurance 116,997   95,849 
Goodwill 86,135   78,592 
Other intangible assets 8,024   8,972 
Other real estate owned 108   1,012 
Other assets 41,428   37,530 
TOTAL ASSETS$5,170,799  $4,560,959 
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Deposits:   
Non-interest-bearing$914,933  $732,694 
Interest-bearing:   
Certificates of deposit exceeding the FDIC insurance limits 74,015   107,764 
Other interest-bearing deposits 3,420,621   2,915,487 
  4,409,569   3,755,945 
Short-term borrowings 93,374   116,061 
FHLB advances 15,937   5,859 
Other liabilities 69,343   86,102 
TOTAL LIABILITIES 4,588,223   3,963,967 
    
Shareholders’ equity   
Common stock, $.125 stated value per share;   
Authorized shares-40,000,000   
Issued shares-16,096,313 in 2021 and 16,075,154 in 2020   
Outstanding shares-12,629,893 in 2021 and 13,558,511 in 2020 2,009   2,007 
Additional paid-in capital 141,979   140,820 
Retained earnings 559,139   521,103 
Accumulated other comprehensive income/(loss) (2,426)  9,764 
Less: Treasury shares at cost-3,466,420 in 2021 and 2,516,643 in 2020 (118,125)  (76,702)
TOTAL SHAREHOLDERS’ EQUITY 582,576   596,992 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$5,170,799  $4,560,959 


CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollar amounts in thousands, except per share data)

 Year Ended December 31,
  2021   2020   2019 
 (unaudited)
INTEREST INCOME:     
Loans, including related fees$128,000  $137,241  $124,788 
Securities:     
Taxable 13,998   13,625   15,191 
Tax-exempt 8,762   7,952   7,674 
Other 1,438   1,667   1,468 
TOTAL INTEREST INCOME 152,198   160,485   149,121 
INTEREST EXPENSE:     
Deposits 8,158   12,801   15,711 
Short-term borrowings 387   568   1,105 
Other borrowings 252   770   653 
TOTAL INTEREST EXPENSE 8,797   14,139   17,469 
NET INTEREST INCOME 143,401   146,346   131,652 
Provision for credit losses 2,466   10,528   4,700 
NET INTEREST INCOME AFTER PROVISION     
FOR LOAN LOSSES 140,935   135,818   126,952 
NON-INTEREST INCOME:     
Trust and financial services 5,255   5,423   5,036 
Service charges and fees on deposit accounts 10,089   10,256   11,795 
Other service charges and fees 18,212   15,644   14,012 
Securities gains (losses), net 114   233   44 
Gain on sales of mortgage loans 5,003   6,626   2,573 
Other 3,411   4,294   4,992 
TOTAL NON-INTEREST INCOME 42,084   42,476   38,452 
NON-INTEREST EXPENSE:     
Salaries and employee benefits 64,474   61,931   54,827 
Occupancy expense 8,774   8,202   7,600 
Equipment expense 10,174   10,568   8,244 
FDIC Expense 1,294   316   693 
Other 32,690   31,741   32,984 
TOTAL NON-INTEREST EXPENSE 117,406   112,758   104,348 
INCOME BEFORE INCOME TAXES 65,613   65,536   61,056 
Provision for income taxes 12,626   11,692   12,184 
NET INCOME 52,987   53,844   48,872 
OTHER COMPREHENSIVE INCOME     
Change in unrealized gains/(losses) on securities, net of reclassifications and taxes (18,148)  19,269   20,998 
Change in funded status of post retirement benefits, net of taxes 6,298   (2,004)  (5,045)
COMPREHENSIVE INCOME$41,137  $71,109  $64,825 
PER SHARE DATA     
Basic and Diluted Earnings per Share$4.02  $3.93  $3.80 
Weighted average number of shares outstanding (in thousands) 13,190   13,716   12,865