UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 1995
Commission File Number : 0-12499
First Financial Bancorp
(Exact name of registrant as specified in its charter)
California (State or other jurisdiction of incorporation or
organization)
94-28222858
(I.R.S. Employer Identification No.)
701 South Ham Lane, Lodi, California 95242 (Address of principal
executive offices)
(209)-367-2000
(Registrant's telephone number, including area code)
NA
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate 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(or
for such shorter period that the registrant was required to file
such reports),and (2) has been subject to such filing requirements
for the past 90 days.
[ X ] Yes [ ] No
As of September 30, 1995, there were 1,306,481 shares of Common
Stock, no par value, outstanding.
<PAGE>
FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
PART I
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 4
PART II
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security
Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
FIRST FINANCIAL BANCORP AND SUBSIDIARY
Consolidated Balance Sheets
(in thousands)
<CAPTION>
9/30/95 12/31/94
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,649 $ 5,199
Federal funds sold 1,000 2,000
Investment securities:
Held-to-maturity securities (at
amortized cost, market value of
$2,186 and $2,118 at 9/30/95 and
12/31/94) 2,037 2,038
Available-for-sale securities, at
fair value 31,348 31,062
Total Investments 33,385 33,100
Loans 54,365 56,939
Less: Allowance for loan losses 924 1,127
Net loans 53,441 55,812
Bank premises and equipment, net 6,434 6,640
Accrued interest receivable 1,201 1,103
Other assets 1,103 1,313
Total Assets $101,213 $105,167
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing $ 7,694 $ 8,415
Interest bearing 78,897 81,564
Total deposits 86,591 89,979
Accrued interest payable 367 300
Other liabilities 207 1,660
Note payable 2,595 2,618
Total liabilities 89,760 94,557
Stockholders' equity:
Common stock - no par value;
authorized 9,000,000 shares,
issued and outstanding in 1995
and 1994, 1,306,996 and,
1,306,296 shares 7,314 7,310
Retained earnings 3,980 3,412
Net unrealized holding gains on
available-for sale securities 159 (112)
Total stockholders' equity 11,453 10,610
Total Liabilities and Stockholders'
Equity $101,213 $105,167
</TABLE>
Page 1
<PAGE>
<TABLE>
FIRST FINANCIAL BANCORP AND SUBSIDIARY
Consolidated Statements of Income
(in thousands except per share amounts)
<CAPTION>
Three months ended Sept 30 Six months ended Sept 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income:
Loans, including fee $1,560 $1,522 $4,653 $4,375
Investment securities:
Taxable 343 268 1,006 693
Exempt from Federal taxes 85 92 268 277
Federal funds sold 48 35 123 94
Deposits in banks and other
interest income 0 1 0 3
Total interest income 2,036 1,918 6,050 5,442
Interest expense:
Deposit accounts 745 625 2,102 1,826
Other 69 71 209 212
Total interest expense 814 696 2,311 2,038
Net interest income 1,222 1,222 3,739 3,404
Provision for loan losses 51 61 86 135
Net interest income
after provision for
loan losses 1,171 1,161 3,653 3,269
Noninterest income:
Service charges 122 139 383 424
Premiums and fees from
SBA and mortgage
operations 142 113 312 361
Miscellaneous 7 12 28 39
Total noninterest income 271 264 723 824
Noninterest expense:
Salaries and employee
benefits 579 556 1,661 1,675
Occupancy 114 115 313 308
Equipment 93 91 284 280
Other 316 735 1,071 1,509
Total noninterest expense 1,102 1,497 3,329 3,772
Income before provision
for income taxes 340 (72) 1,047 321
Provision for income taxes 119 (37) 348 67
Net income $ 221 $ (35) 699 254
Earnings per share:
Primary $ 0.17 $ (0.03) $0.54 $ 0.19
Fully diluted $ 0.17 $ (0.03) $0.53 $ 0.19
</TABLE>
Page 2
<PAGE>
<TABLE>
FIRST FINANCIAL BANCORP AND SUBSIDIARY
Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended Sept 30
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 699 $ 254
Adjustments to reconcile net income to
net cash provided by operating activities:
(Decrease) increase in loans held for sale 229 198
Increase in deferred loan income 17 48
Loss on sale of other
real estate owned 0 3
Depreciation and amortization 320 324
Provision for loan losses 86 135
Provision for deferred taxes 447 (43)
Increase in accrued interest
receivable (98) (163)
Increase (decrease) in accrued
interest payable 67 (23)
Decrease in other liabilities (453) 323
(Increase) decrease in other assets (338) (16)
Net cash provided by operating activities 976 1,040
Cash flows from investing activities:
Proceeds from maturity of held-to-
maturity securities 1 46
Proceeds from maturity of available-
for-sale securities 17,639 24,258
Purchases of available-for-sale
securities (18,461) (26,449)
Increase in loans made to customers 1,947 1,052
Proceeds from sale of other real estate 0 370
Purchase of bank premises and equipment ( 114) ( 60)
Net cash provided by investing
activities 1,012 (783)
Cash flows from financing activities:
Net decrease in deposits (3,388) 3,172
Payments on note payable ( 23) ( 22)
Dividends paid (131) ( 131)
Proceeds from issuance of common stock 4 4
Net cash used in financing activities (3,538) 3,023
Net (decrease) increase in cash
and cash equivalents ( 1,550) 3,280
Cash and cash equivalents
at beginning of period 7,199 6,424
Cash and cash equivalents
at end of period $5,649 $9,704
</TABLE>
Page 3
<PAGE>
Management's Discussion and Analysis
Changes in Financial Position
Consolidated total assets at September 30, 1995 were $101.2 million,
representing a decline of $4.0 million, or 3.8%, from December 31, 1995
The decline was the result of a decrease of $1.4 million in other liabilities
and a decrease in deposits of $3.4 million, or 3.8%. The decrease in other
liabilities represents the settlement of a securities purchase obligation
outstanding at December 31, 1995 and the settlement of litigation pending
as of December 31, 1995. The deposit outflow and reduction in other
liabilities were funded by decreases in cash and federal funds sold balances
as well as a net decrease of $2.6 million, or 4.5%, in loans outstanding.
The decline in deposits is principally seasonal in nature. Deposits generally
experience a seasonal peak during the fourth quarter of each year in
connection with the culmination of local agricultural harvests.
Those seasonal inflows reverse during the first quarter when the
agricultural cycle begins again. Noninterest bearing and interest bearing
deposits declined by 8.6% and 3.3%, respectively, from December 31, 1994
to September 30, 1995. The loan portfolio declined by $2.6 million, or
4.5%, from December 31,1994 to September 30, 1995. The decline was
centered principally in the construction and commercial segments of the
portfolio, reflecting continued soft economic conditions in the local
market area.
The allowance for loan losses declined by $203 thousand, or 18%, from
December 31, 1994 to September 30, 1995. Net charge-off for the
period were $289 thousand, while the provision for loan losses charged
against income was $86 thousand. Charge-off activity exceeded that of
the comparable prior year period and represented the resolution of
several credits that had been reserved for in previous periods. Portfolio
delinquency at September 30, 1995 was 2.95% compared to 2.71% at
December 31, 1994. Nonaccrual loans at September 30, 1995 were
$1.2 million compared to $765 thousand at December 31, 1995. The
increase in nonaccrual loans reflects a small number of loans with
identifiable weaknesses that developed during 1995. The following
table provides the detail of activity in the reserve for loan losses for
the nine months ended September 30, 1995:
The following table depicts activity in the allowance for loan losses
and allocation of reserves for and at nine and twelve months ended
September, 30, 1995 and December 31, 1994, respectively.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
9/30/95 12/31/94
Balance at beginning of period 1,127 924
Charge-offs:
Commercial 323 98
Consumer 79 77
Real estate 30 77
Total charge-offs 432 175
Recoveries:
Commercial 118 37
Consumer 24 18
Total recoveries 142 55
Net charge-offs 290 120
Additions charged to operations 86 323
Balance at end of period 923 1,127
Ratio of net charge-offs to average loans
outstanding .50% .20%
Allocation of the Allowance for Loan Losses
6/30/95 6/30/95 12/31/94 12/31/94
Loan Category Amount % of Loans Amount % of Loans
Commercial 251 57.24% 376 78.25%
Real estate 31 38.56% 121 17.12%
Consumer 6 4.20% 4 4.63%
Unallocated 635 N/A 626 N/A
Totals 923 100% 1,127 100%
The adoption and application of the Financial Accounting Standards Board's
Statement of Financial Accounting Standard (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by Statement No. 118, Accounting
by Creditors for Impairment of a Loan-Income Recognition and Disclosures
(SFAS 114), does not have a material impact on the basis of presentation for
the aforementioned tables
Consolidated capital was $11.5 million at September 30, 1995, an
increase of $840 thousand, or 7.9%, over consolidated capital at
December 31, 1994. The principal components of the increase in capital
were net income of $699 thousand and an increase of $271 thousand
in net unrealized gains on investment securities available for sale.
Dividends of $130 thousand have been paid as of September 30, 1995 and
since December 31, 1994. In addition, the Board of Directors of Firs
Financial Bancorp have declared a $.05 per share dividend payable
November 30, 1995 to shareholders of record on November 15, 1995.
Total risk-based and leverage capital of the company's subsidiary,
Bank of Lodi, were 14.4% and 9.0%, respectively.
Results of Operation
Three Months Ended September 30, 1995
Earnings for the three months ended September 30, 1995 were $221
thousand, or $256 thousand more than the $35 thousand loss for the
comparable year ago quarter. Return on average assets and average equity
were .88% and 7.8%, respectively. The increase in earnings was driven
by an increase in SBA and mortgage income combined with lower
operating expenses and a reduction in the provision for loan losses.
Net interest income was equal to the prior year quarter. While average
earning assets declined by approximately $1.3 million, or 1.4%, net
interest margin increased by 8 basis points, to 5.53%, and offset
the impact of the decline in earning asset volume. The yield on earning
assets exceeded the prior year yield by 66 basis points, while the cost of
deposits rose by 63 basis points. Net interest income would have
exceeded that of the prior year quarter by $42 thousand if the mix of
earnings assets would have been constant. Loans as a percentage of
average earning assets declined to 65% from 67%, while certificates of
deposit as a percentage of average deposits increased to 37% from 34%.
SBA and mortgage income increased by $29 thousand, or 26%, over the
prior year quarter. The increase was attributable principally to an increase
in the sales volume of the guaranteed portion of SBA loan origination's and
growth in loan servicing income. Mortgage origination's continue to be
weaker than in recent years as a result of the level of interest rates and
weakness in the local economy. Noninterest expenses declined by $395
thousand, or 26%, from the prior year quarter. The prior year quarter contained
charges accrued to provide for costs associated with the management
transition that took place in the latter half of 1994. Excluding those charges,
noninterest expenses increased by 2.4% over the prior year quarter.
Salaries and benefit expenses rose by $23 thousand, or 4.1%, reflecting full
staffing levels in the current year and, to a lesser extent, general increases
in wage levels. The company's subsidiary, Bank of Lodi, received a $46
thousand refund of deposit insurance premiums from the FDIC
during the quarter. The refund was the result of an 82.6% decrease in the
deposit insurance rate that was retroactive to May 1, 1995 and included
the subsequent period through September 30, 1995. The refund
reduced other noninterest expenses.
Nine Months Ended September 30, 1995
Earnings for the nine months ended September 30, 1995 were $699
thousand, or $445 thousand more than the $254 thousand for the comparable
year ago period. Return on average assets and average equity were .93% and
8.4%, respectively, compared to .34% and 3.16% for the prior year period.
The increase in earnings of 175% was driven by growth in net interest income,
a lower provision for loan losses, and a significant reduction in noninterest
expenses. Noninterest income declined relative to the previous year.
Net interest income increased by $335 thousand, or 9.8%. Net interest
margin increased by 53 basis points to 5.66%, while average earning assets
declined by $340 thousand or .4%. The yield on average earning assets
increased by 96 basis points while the cost of deposits and other funding
increased by 48 basis points. Average loans outstanding as a percentage
of average earning assets declined to 65% from 69%, while average
certificates of deposit as a percentage of average deposits increased to 37%
from 34%. Without the foregoing mix changes, net interest income would
have been approximately $151 thousand higher.
The provision for loan losses declined by $49 thousand, or 36%. The
decline reflects general improvement in the credit quality of the loan
portfolio relative to the prior year period. Asset quality and changes in the
allowance for loan losses are discussed under Changes in Financial Condition.
Noninterest income declined by $101 thousand, or 12%. Service charge
income declined by $41 thousand due to lower returned item volumes.
SBA and mortgage income declined by $49 thousand due to lower SBA volume
in the first six months of the year. Although SBA volumes are generally
down in 1995 due to increased competition in that sector of the lending
environment and changes in the SBA program that delayed activity, some
of the decline is attributed to a reorganization of the SBA lending function
at the company's subsidiary, Bank of Lodi, that took place in early 1995.
Noninterest expenses declined by $443 thousand, or 11.7%. The prior year
period contained charges accrued to provide for costs associated with the
management transition that took place in the latter half of 1994. Excluding
those charges, noninterest expenses declined by 1.1% over the prior
year period. The general decline in noninterest expenses exclusive of the
change related to the prior year transition reflects lower staffing levels in
the first part of 1995 relative to the previous year as well as widespread
efforts to control other noninterest expenses. The disparity in staffing
levels was principally related to the management transition, and nearly all
open positions have now been filled. The company's subsidiary, Bank of Lodi,
received a $46 thousand refund of deposit insurance premiums from the FDIC
during the third quarter. The refund reflects an 82.6% decrease in the
deposit insurance premium rate that was retroactive to May 1, 1995
and included the subsequent period through September 30, 1995.
The refund reduced other noninterest expenses.
Basis of Presentation
First Financial Bancorp is the holding company for the Bank of Lodi, N. A..
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of financial position as of the
dates indicated and results of operations for the periods shown. All
material intercompany accounts and transactions have been eliminated in
consolidation. In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts. The results
for the nine months ended September 30, 1995 are not necessarily indicative
of the results which may be expected for the year ended December 31, 1995.
The unaudited consolidated financial statements presented herein should be
read in conjunction with the consolidated financial statements and notes
included in the 1994 Annual Report to Shareholders.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on April 25, 1995. The
purpose of the meeting was to elect the Company's board of directors and approve
an amendment to the 1991 Director Stock Option Plan. The following directors
were elected based upon the votes cast as indicated:
<TABLE>
<CAPTION>
Votes Votes Votes
Director "for" "against" "withheld"
<S> <C> <C> <C>
Bozant Katzakian 769,857 0 26,494
Angelo J. Anagnos 769,416 0 26,935
Daniel R. Anderson 769,725 0 26,626
Raymond H. Coldani 769,725 0 26,626
Benjamin R. Goehring 769,593 0 26,758
Michael D. Ramsey 769,725 0 26,626
Frank M. Sasaki 769,857 0 26,494
Weldon D. Schumacher 769,593 0 26,758
Dennis R. Swanson 769,196 0 27,155
</TABLE>
The amendment to the 1991 Director Stock Option Plan was approved
based upon the following votes cast as indicated:
For: 716,512 Against: 29,889 Abstain: 49,950
There were 1,306,446 shares issued and outstanding as of the record
date, March 1, 1995.
ITEM 5. OTHER INFORMATION
Not applicable.
Page 7
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
(a) EXHIBITS
<CAPTION>
Exhibit Number
<S> <C>
2 Not applicable.
4 Registrant's current Bylaws.
10 Post Effective Amendment No. 1 to Form S8 Registration Statement
(File Number 3340954).
11 Primary and fully diluted earnings per common and common
equivalent share are calculated by dividing net income by the
weighted-average number of common and common share equivalents
outstanding during the period. Stock options are considered
common share equivalents for this calculation. Weighted average
shares used in the computation of primary and fully diluted
earnings per share were 1,312,955 and 1,316,182, respectively
for the quarter ended June 30, 1995. Weighted average shares
used in the computation of both primary and fully diluted earnings
per share were 1,306,007 for the quarter ended June 30, 1994.
15 Not applicable.
16 Not applicable.
18 Not applicable.
19 Not applicable.
20 Not applicable.
23 Not applicable.
24 Not applicable.
25 Not applicable.
27 Financial Data Schedule (filed electronically).
28 Not applicable.
</TABLE>
(b) REPORTS ON FORM 8-K
On November 3, 1995, the company filed a Form 8-K dated November 3, 1995
regarding earnings for thethird quarter of 1995 and the declaration of
a cash dividend.
Page 8
<PAGE>
SIGNATURES
Pursuant to the requirements 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 BANCORP
/s/ David M. Philipp
David M. Philipp
Senior Vice-President
Chief Financial Officer
Corporate Secretary
Dated May 15, 1995
Page 9
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,649,000
<INT-BEARING-DEPOSITS> 78,897,000
<FED-FUNDS-SOLD> 1,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 33,113,000
<INVESTMENTS-MARKET> 33,521,000
<LOANS> 54,365,000
<ALLOWANCE> 924,000
<TOTAL-ASSETS> 101,213,000
<DEPOSITS> 86,591,000
<SHORT-TERM> 367,000
<LIABILITIES-OTHER> 207,000
<LONG-TERM> 2,595,000
<COMMON> 7,314,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 101,213,000
<INTEREST-LOAN> 4,653,000
<INTEREST-INVEST> 1,334,000
<INTEREST-OTHER> 123,000
<INTEREST-TOTAL> 6,050,000
<INTEREST-DEPOSIT> 2,102,000
<INTEREST-EXPENSE> 2,311,000
<INTEREST-INCOME-NET> 3,739,000
<LOAN-LOSSES> 86,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,329,000
<INCOME-PRETAX> 1,047,000
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 699,000
<EPS-PRIMARY> .54
<EPS-DILUTED> .53
<YIELD-ACTUAL> .059
<LOANS-NON> 1,172,000
<LOANS-PAST> 93,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,127,000
<CHARGE-OFFS> 431,000
<RECOVERIES> 142,000
<ALLOWANCE-CLOSE> 923,000
<ALLOWANCE-DOMESTIC> 923,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
