First Financial Corporation

THFF Details

First Financial Corporation (NASDAQ: THFF) is the financial holding company for First Financial Bank N.A., and The Morris Plan Company of Terre Haute, Inc., and offers a comprehensive range of financial services through its subsidiaries, including business, mortgage, consumer loans, trust account services, depositor services, and insurance services. In addition, THFF provides commercial (Commercial and Real Estate, Farmland, Non-Farm, Non-Residential, Agriculture, and other commercial loans) and residential (Multifamily) mortgages.

Merger with Hancock: On August 10, 2021, THFF announced an all-cash acquisition of Hancock Bancorp, Inc., the bank holding company of Hancock Bank & Trust Company, valued at USD 31.35 million. The deal is projected to be about 7% accretive to earnings per share for THFF, with the transaction expected to close in Q4FY21.

H1FY21 Results: The company reported a slight decline of 6.73% in total interest income to USD 75.23 million during H1FY21 (ended June 30, 2021) compared to USD 80.66 million during H1FY20. However, there was a slight increase in net income to USD 29.49 million during H1FY21 vs. USD 24.11 million during H1FY20. Net Interest Margin (NIM) declined by 80 bps YoY to 3.25% during H1FY21. As of June 30, 2021, the company's total deposits increased to USD 3.99 billion vs. USD 3.76 billion as of December 31, 2020, and Non-Performing loans (NPLs) decreased to USD 20.02 million from USD 21.90 million as of FY20 end.

Key Risks: West-central Indiana, east-central Illinois, western Kentucky, and middle and western Tennessee are the company's primary markets. As a result, any significant deterioration in these areas' economic conditions might impact the borrowers' liquidity, leading to a rise in non-performing assets. Furthermore, as of December 31, 2020, commercial and real estate loans accounted for roughly 58% of the bank's loan portfolio. Therefore, the collapse of one or more of these loans might lead to a significant rise in non-performing loans and a reduction in interest revenue, putting the company's operations at risk.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM 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 (Source: REFINITIV)

Stock Recommendation: THFF's share price has declined by 13.24% in the past six months and is currently leaning towards the mid-band of the 52-week range of USD 30.02 to USD 47.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 39.41. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 46.73. Considering the correction in the stock price in the past six months, a decline in NPLs, market dominance, consistent dividend yield, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 39.19, up 0.08% as of September 16, 2021, 12:21 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.