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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER: 0-12499
FIRST FINANCIAL BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-28222858
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
701 SOUTH HAM LANE, LODI, CALIFORNIA 95242
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(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 March 31, 1996, there were 1,306,996 shares of Common Stock, no par
value, outstanding.
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FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<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............................................ 6
Item 2. Changes in Securities........................................ 6
Item 3. Defaults Upon Senior Securities.............................. 6
Item 4. Submission of Matters to a Vote of Security Holders.......... 6
Item 5. Other Information............................................ 6
Item 6. Exhibits and Reports on Form 8-K............................. 7
</TABLE>
i
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MAR. 31 DEC. 31
1996 1995
------- --------
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 3,378 4,488
Federal funds sold 4,400 3,300
Investment Securities:
Held-to-maturity securities at amortized cost,
market value of $2,156 and $2,170 at
Mar. 31, 1996 and Dec. 31, 1995 2,038 2,036
Available-for-sale securities, at fair value 32,437 34,909
-------- ------
Total investments 34,475 36,945
Loans 54,053 51,483
Less: allowance for loan losses 987 959
-------- -------
Net loans 53,066 50,524
Bank premises and equipment, net 6,289 6,449
Accrued interest receivable 1,105 1,139
Other assets 1,501 1,127
-------- -------
Total Assets $104,214 103,972
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits
Noninterest bearing $ 7,053 7,863
Interest bearing 82,380 81,353
-------- -------
Total deposits 89,433 89,216
Accrued interest payable 393 408
Other liabilities 226 199
Note payable 2,577 2,585
-------- -------
Total liabilities 92,629 92,408
-------- -------
Stockholders' equity:
Common stock - no par value; authorized 9,000,000
shares, issued and outstanding in 1996 and 1995,
1,306,996 and, 1,306,296 shares 7,314 7,314
Retained earnings 4,122 4,059
Net unrealized holding gains on available-for-sale
securities 149 191
-------- ------
Total stockholders' equity 11,585 11,564
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $104,214 103,972
======== =======
</TABLE>
1
<PAGE>
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Interest income:
Loans, including fees $1,344 1,533
Investment securities:
Taxable 449 351
Exempt from Federal taxes 85 91
Federal funds sold 62 37
------ -----
Total interest income 1,940 2,012
Interest expense:
Deposit accounts 759 654
Other 69 70
------ -----
Total interest expense 828 724
------ -----
Net interest income 1,112 1,288
Provision for loan losses 55 20
------ -----
Net interest income after provision for
loan losses 1,057 1,268
------ -----
Noninterest income:
Service charges 123 129
Premiums and fees from SBA and mortgage operations 95 72
Miscellaneous 11 12
------ -----
Total noninterest income 229 213
------ -----
Noninterest expense:
Salaries and employee benefits 546 549
Occupancy 118 97
Equipment 85 98
Other 356 405
------ -----
Total noninterest expense 1,105 1,149
------ -----
Income before provision for income taxes 181 332
Provision for income taxes 53 98
------ -----
Net Income $ 128 234
====== =====
EARNINGS PER SHARE:
Net Income $ 0.10 0.18
====== =====
</TABLE>
2
<PAGE>
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 128 234
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in loans held for sale 925 (553)
Increase (decrease) in deferred loan income 5 (1)
Provision for other real estate owned losses 4 ----
Depreciation and amortization 99 106
Provision for loan losses 55 20
Provision for deferred taxes (3) 114
Decrease in accrued interest receivable 34 100
(Decrease) increase in accrued interest payable (15) 5
Increase (decrease) in other liabilities 27 (439)
Decrease (increase) in other assets 43 (81)
------- ------
Net cash provided (used in) by operating activities 1,302 (495)
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of available-for-sale securities 5,445 10,046
Purchases of available-for-sale securities (3,044) (5,779)
Increase in loans made to customers (3,527) (73)
Proceeds from the sale of other real estate 79 ----
Purchases of bank premises and equipment (409) (80)
------- ------
Net cash (used in) provided by investing activities (1,456) 4,114
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) increase in deposits 217 (4,382)
Payments on note payable (8) (8)
Dividends Paid 65 ----
Proceeds from issuance of common stock ---- 1
------- ------
Net cash provided (used in) by financing activities 144 (4,389)
------- ------
Net decrease in cash and cash equivalents (10) (770)
Cash and cash equivalents at beginning of period 7,788 7,199
------- ------
Cash and cash equivalents at end of period $ 7,778 6,429
======= ======
</TABLE>
3
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
CHANGES IN FINANCIAL CONDITION
Consolidated assets increased by $242 thousand, or .2% from December 31, 1995 to
March 31, 1996. The increase in consolidated assets was driven by increased
deposits and was not comparable to the seasonal declines in deposits that are
typically experienced in the first quarter of each year. The departure from
seasonal deposit trends can be partially attributable to the benefit from the
fallout of deposits related to recent mergers among large banks as well as the
growing benefits being realized from new business development disciplines that
were established in late 1994. The Consolidated average assets for the first
quarter of 1996 exceed the comparable prior year quarter by 3.4%, or $3.4
million while average earning assets increased over the prior year quarter by
2.8%, or $2.5 million.
Loans outstanding increased by $2.6 million, or 5.0% from December 31, 1995 to
March 31, 1996. The increased loan activity is reflective of both stabilizing
economic conditions as well as the success of new business development
disciplines that were established in late 1994. New lending activity has been
centered principally in real estate and commercial lending, including
agriculture. The allowance for loan losses as a percentage of gross loans
outstanding was 1.83% at March 31, 1996 compared to 1.86% at December 31, 1995.
Nonaccrual loans increased by 15% from December 31, 1995 to March 31, 1996. The
nonaccrual coverage of the allowance for loan losses decreased to .80 times at
March 31, 1996 from .89 times at December 31, 1995. Total portfolio delinquency
at March 31, 1996 stood at 4.37% compared to 2.57% at December 31, 1995.
Management believes that the reserves established for nonaccrual loans are
adequate with respect to the credit risk for those loans. The increase in the
delinquency rate during the quarter is primarily attributable to the timing of
loan renewals rather than any significant deterioration in the overall quality
of the loan portfolio.
The following table depicts activity in the allowance for loan losses and
allocation of reserves for and at the three and twelve months ended March 31,
1996 and December 31, 1995, respectively:
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
3/31/96 12/31/95
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<S> <C> <C> <C> <C>
Balance at beginning of period 959 1,127
Charge-offs:
Commercial 75 357
Real estate --- 30
Consumer 25 95
----- -----
Total charge-offs 100 482
Recoveries:
Commercial 68 174
Real estate --- ---
Consumer 5 25
----- -----
Total recoveries 73 199
----- -----
Net charge-offs 27 283
Additions charged to operations 55 115
----- -----
Balance at end of period 987 959
===== =====
Ratio of net charge-offs to average loans outstanding 0.21% 0.51%
===== =====
<CAPTION>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
3/31/96 3/31/96 12/31/95 12/31/95
LOAN CATEGORY AMOUNT % OF LOANS AMOUNT % OF LOANS
------------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Commercial 339 75.59% 295 84.29%
Real Estate 54 19.19% 38 10.86%
Consumer 10 5.22% 17 4.85%
Unallocated 584 N/A 608 N/A
---- ------ ---- ------
987 100.00% 959 100.00%
==== ====== ==== ======
</TABLE>
4
<PAGE>
Consolidated equity increased to $11.59 million or 11.12% of total assets at
March 31, 1996 compared to $11.56 million or 11.12% of total assets at December
31, 1995. The valuation adjustment related to investment securities available
for sale reduced equity by $42 thousand at March 31, 1996 relative to December
31, 1995. The reduction in the unrealized holding gains for investments
available-for-sale is the result of rising interest rates during the quarter.
Equity was also reduced by $65 thousand during the quarter as a result of the
$.05 per share dividend declared in connection with earnings for the fourth
quarter of 1995. The risk capital position of the Company's subsidiary, Bank of
Lodi, NA, declined slightly as a result of the growth in deposits and loans
during the quarter. The total risk-based capital ratio was 14.73% at March 31,
1996 versus 15.1% at December 31, 1995. The Bank's leverage capital ratio was
9.05% at March 31, 1996 versus 9.0% at December 31, 1995.
CHANGES IN RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1996 decreased by $106 thousand,
or approximately 45% over the first quarter of 1995. Earnings per share for the
same periods were $.10 per share compared to $.18 per share. Return on average
assets and average equity for the quarter ended March 31, 1996 were .49% and
4.4%, respectively, compared to .94% and 8.7%, respectively, for the quarter
ended March 31, 1995. Based upon the operating results for the quarter ended
March 31, 1996, the board of directors of First Financial Bancorp declared a
cash dividend of $.05 per share, payable May 30, 1996 to shareholders of record
on May 15, 1996.
A significant decline in net interest income and an increase in the provision
for loan losses for the quarter relative to the prior year absorbed the benefit
of several operational improvements with respect to other income and expenses.
Net interest income declined by 13.6% due to the impact of recent interest rate
reductions engineered by the Federal Reserve. In addition, the provision for
loan losses increased by $35 thousand. Noninterest income increased by 7.7% on
the strength of increased premium income from SBA and mortgage operations, and
noninterest expenses declined by 3.8%.
Net interest income declined by $176 thousand, or 13.6% compared to the prior
year quarter. Interest income declined by $72 thousand or 3.6%, while interest
expenses increased $104 thousand or 14.4%. The yield on earning assets was
significantly reduced by recent Federal Reserve action that served to reduce
interest rates. The impact of reduced interest rates on deposits generally lags
the immediate change in market rates, thus the cost of deposits only now fully
reflects the Federal Reserves interest rate increases that had preceded the
recent decreases. The impact of changing market interest rates was partially
mitigated by growth in average earning assets of $2.5 million, or 2.8%. The
growth in average earning assets added $38 thousand to net interest income. The
impact of changing market interest rates reduced net interest income by $131
thousand, while changes in the mix of earning assets and deposits relative to
the prior year accounted for the remaining net interest reduction of $82
thousand. Average loans declined to 57% of average earning assets from 64% in
the previous year, while average investments and federal funds sold increased to
43% of average earning assets form 36%. Noninterest bearing demand deposits
remained at 8% of total deposits, NOW and money market deposits declined to 34%
of total deposits from 35%, and certificates of deposit increased to 38% of
deposits from 36%.
The provision for loan losses for the quarter ended March 31, 1996 was $55
thousand compared to $20 thousand in the prior year. The increase reflects the
need to provide for specific reserves against certain nonaccrual loans, and is
not indicative of general deterioration in the broader portfolio.
Noninterest income increased by $16 thousand, or 7.7% compared to the prior year
quarter The increase reflects improved origination and loan sale volume in the
mortgage and SBA operating areas which experienced a 31.5% increase in revenue
over the previous year. While economic conditions have stabilized in the
company's market area, the increased volumes are principally the result of
improved marketing and officer calling efforts that were initiated in the
previous year.
Noninterest expenses declined by $44 thousand, or 3.8%, compared to the prior
year. The decline was centered principally in other noninterest expenses,
although there was a decline in salaries and employee benefits as well as
equipment expenses. The majority of the decline in other noninterest expenses
reflects the reduced deposit insurance assessments for 1996 compared to 1995.
Excluding deposit insurance assessments, other noninterest expenses increased
over the prior year due to increased transaction volumes and increased
professional expenses related to loan resolution efforts and other management
consulting costs. Occupancy expenses increased by $21 thousand, or 22%, due to
increased vacancy in the company's headquarters building. Management is
actively seeking tenants to occupy approximately 7,700 feet of vacant space.
5
<PAGE>
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 three
months ended March 31, 1996 are not necessarily indicative of the results which
may be expected for the year ended December 31, 1996. The unaudited
consolidated financial statements presented herein should be read in conjunction
with the consolidated financial statements and notes included in the 1995 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 23,
1996. The purpose of the meeting was to elect the company's board of
directors. The following directors were elected based upon the votes
cast as indicated: Angelo J. Anagnos: for - 870,462, against - 0,
withheld - 3,531; Raymond H. Coldani: for - 868,875, against - 0,
withheld - 5,118; Benjamin R. Goehring: for - 870,330, against - 0,
withheld - 3,663; Bozant Katzakian: for - 828, 643, against - 0,
withheld - 45,350; Michael D. Ramsey: for - 870,462, against -0,
withheld - 3,531; Frank M. Sasaki: for - 870,462, against - 0, withheld
- 3,531; Weldon D. Schumacher: for - 870,462, against - 0, withheld -
3,531; Dennis R. Swanson: for - 869,933, against - 0, withheld - 4,060.
There were 1,306,996 shares issued and outstanding as of the record
date, March 1, 1996.
ITEM 5. OTHER INFORMATION
Not applicable.
6
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<C> <S>
2 Not Applicable.
4 Registrant's current Bylaws.
10 Post Effective Amendment No. 1 to Form S8 Registration Statement
(File Number 3340954).
11 Earnings per common and common share equivalents 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 earnings per share
were 1,339,543 and 1,308,351 for the quarters ended March 31, 1996
and 1995, respectively.
15 Not Applicable.
16 Not Applicable.
18 Not Applicable.
19 Not Applicable.
20 Not Applicable.
23 Notice of Annual Meeting and Proxy Statement dated March 29, 1996;
filed April 1, 1996.
24 Not Applicable
25 Not Applicable
27 Financial Data Schedule
28 Not Applicable
(b) REPORTS ON FORM 8-K
On April 29, 1996, the company filed a Form 8-K dated April 29, 1996
regarding earnings for the first quarter of 1996 and the declaration
of a cash dividend.
</TABLE>
7
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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
Date May 15, 1996 /s/ David M. Philipp
------------ ----------------------------
David M. Philipp
Executive Vice-President
Chief Financial Officer
Corporate Secretary
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,378,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32,437,000
<INVESTMENTS-CARRYING> 2,038,000
<INVESTMENTS-MARKET> 2,156,000
<LOANS> 54,053,000
<ALLOWANCE> 987,000
<TOTAL-ASSETS> 104,214,000
<DEPOSITS> 89,433,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 619,000
<LONG-TERM> 2,577,000
0
0
<COMMON> 7,314,000
<OTHER-SE> 4,271,000
<TOTAL-LIABILITIES-AND-EQUITY> 104,214,000
<INTEREST-LOAN> 1,344,000
<INTEREST-INVEST> 534,000
<INTEREST-OTHER> 62,000
<INTEREST-TOTAL> 1,940,000
<INTEREST-DEPOSIT> 759,000
<INTEREST-EXPENSE> 828,000
<INTEREST-INCOME-NET> 1,112,000
<LOAN-LOSSES> 55,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,105,000
<INCOME-PRETAX> 181,000
<INCOME-PRE-EXTRAORDINARY> 181,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,000
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
<YIELD-ACTUAL> 4.85
<LOANS-NON> 1,236,000
<LOANS-PAST> 405,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 959,000
<CHARGE-OFFS> 100,000
<RECOVERIES> 73,000
<ALLOWANCE-CLOSE> 987,000
<ALLOWANCE-DOMESTIC> 987,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 584,000
</TABLE>
