First Financial Corporation

THFF Details

First Financial Corporation (NASDAQ: THFF) operates as the holding company for First Financial Bank N.A., the fifth oldest national bank in the US with 80 banking centers in Illinois, Indiana, Kentucky, and Tennessee, and The Morris Plan Company of Terre Haute, Inc., a state industrial chartered financial institution with one office in Terre Haute, Indiana. Through its subsidiaries, the company offers various types of deposits and provides commercial loans for the expansion of business or financial asset purchases, residential real estate purchase and construction loans, home equity loans, and lease financing, trust account, depositor, and insurance services in the US.

Q1FY21 Results: The company witnessed a slight 3.35% decline in net interest income to USD 34.91 million in Q1FY21 (ending March 31, 2021) compared to USD 36.35 million in Q1FY20, owing to a 150 bps reduction in interest rate by the Federal Reserve in response to the COVID-19 pandemic. Net income for Q1FY21 was USD 12.88 million, up 5.71% from USD 12.18 million reported in Q1FY20. The total deposits increased to USD 3.91 billion as of March 31, 2021 from USD 3.29 billion reported at Q1FY20 end.

Key Risks: Most of the company’s operations are concentrated in certain regions of Indiana, Illinois, Kentucky, and Tennessee. Hence, adverse changes in economic conditions in these regions could impact FTFF’s financial conditions. Moreover, ~58% of THFF’s loan portfolio in FY20 consisted of commercial loans and commercial real estate loans, which generally have a more inherent risk of default than residential mortgage/consumer loans. Hence, the deterioration of even one of these loans could significantly increase the company’s nonperforming loans and cause a reduction in its interest income.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

THFF Daily Technical Chart

Stock Recommendation: THFF’s share price surged 9.13% and 39.44% in the past 6 and 9 months, respectively, but has declined 6.85% over the past 3 months. It is currently leaning towards the higher band of the 52-week range of USD 30.02 to USD 47.00. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 41.47. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 46.23. Considering the strong balance sheet, decent dividend yield, and current valuation, we recommend a “Watch” rating on the stock at the current price of USD 42.67, up 0.35% as on June 25, 2021, at 1:30 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.