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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 June 30, 1997
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 June 30, 1997 there were 1,328,842 shares of Common Stock, no par value,
outstanding.
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<PAGE>
FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
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.......................................................... 8
Item 2. Changes in Securities...................................................... 8
Item 3. Defaults Upon Senior Securities............................................ 8
Item 4. Submission of Matters to a Vote of Security Holders........................ 8
Item 5. Other Information.......................................................... 9
Item 6. Exhibits and Reports on Form 8-K........................................... 9
</TABLE>
i
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
JUNE 30 DEC. 31
1997 1996
------- --------
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 6,163 $ 4,748
Federal funds sold 3,300 1,100
Investment Securities:
Held-to-maturity securities at amortized cost, market value of
$1,923 and $1,888 at June 30, 1997 and Dec. 31, 1996 1,788 1,789
Available-for-sale securities, at fair value 56,429 35,124
-------- --------
Total investments 58,217 36,913
Loans 58,377 53,879
Less: allowance for loan losses 1,493 1,207
-------- --------
Net loans 56,884 52,672
Premises and equipment, net 7,452 6,723
Accrued interest receivable 1,658 1,060
Other assets 3,096 1,697
-------- --------
Total Assets $136,770 $104,913
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits
Noninterest bearing $ 12,844 $ 9,066
Interest bearing 110,827 83,141
-------- --------
Total deposits 123,671 92,207
Accrued interest payable 446 324
Other liabilities 271 493
-------- --------
Total liabilities 124,388 93,024
Stockholders' equity:
Common stock - no par value; authorized 9,000,000 shares, issued and
outstanding in 1997 and 1996, 1,328,842 and, 1,308,950 shares 7,428 7,324
Retained earnings 4,852 4,438
Net unrealized holding gains on available-for-sale securities 102 127
-------- --------
Total stockholders' equity 12,382 11,889
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $136,770 $104,913
======== ========
</TABLE>
1
<PAGE>
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
1997 1996 1997 1996
---- ---- ---- ----
(Dollar amounts in thousands, (Dollar amounts in thousands,
except per share amounts) except per share amounts)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $1,504 $1,387 $3,328 $2,731
Investment securities:
Taxable 900 453 1,499 902
Exempt from Federal taxes 77 84 146 169
Federal funds sold 67 44 202 106
------ ------ ------ ------
Total interest income 2,548 1,968 5,175 3,908
INTEREST EXPENSE:
Deposit accounts 960 747 1,785 1,506
Other ---- 69 ---- 138
------ ------ ------ ------
Total interest expense 960 816 1,785 1,644
------ ------ ------ ------
Net interest income 1,588 1,152 3,390 2,264
Provision for loan losses 20 130 (60) 185
------ ------ ------ ------
Net interest income after provision for loan losses 1,568 1,022 3,450 2,079
NONINTEREST INCOME:
Service charges 212 139 382 262
Premiums and fees from SBA and mortgage operations 182 119 308 214
Miscellaneous 17 12 27 23
------ ------ ------ ------
Total noninterest income 411 270 717 499
NONINTEREST EXPENSE:
Salaries and employee benefits 800 552 1,556 1,098
Occupancy 143 130 266 248
Equipment 119 69 212 154
Other 636 324 1,312 680
------ ------ ------ ------
Total noninterest expense 1,698 1,075 3,346 2,180
------ ------ ------ ------
Income before provision for income taxes 281 217 821 398
Provision for income taxes 75 55 275 108
------ ------ ------ ------
Net Income $ 206 $ 162 $ 546 $ 290
====== ====== ====== ======
EARNINGS PER SHARE:
Net Income $ 0.15 $ 0.12 $ 0.40 $ 0.22
====== ====== ====== ======
</TABLE>
2
<PAGE>
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended June 30,
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 546 $ 290
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in loans held for sale (630) (10)
Increase in deferred loan income 67 73
Provision for other real estate owned losses 50 4
Depreciation and amortization 520 201
Provision for loan losses (60) 185
Provision for deferred taxes (58) (4)
Increase in accrued interest receivable (598) (85)
Increase (decrease) in accrued interest payable 122 (2)
Decrease in other liabilities (202) (82)
Decrease (increase) in other assets 264 (99)
-------- -------
Net cash provided by operating activities 21 471
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of available-for-sale securities 7,860 11,679
Proceeds from sale of available-for-sale securities 22,000 ----
Purchases of available-for-sale securities (51,210) (7,958)
Increase in net loans made to customers (3,478) (4,679)
Proceeds from the sale of other real estate ---- 79
Purchases of premises and equipment (3,014) (685)
-------- -------
Net cash used in investing activities (27,842) (1,564)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 31,464 (146)
Payments on note payable ---- (17)
Dividends paid (132) (131)
Proceeds from issuance of common stock 104 ----
-------- -------
Net cash provided by (used in) financing activities 31,436 (294)
-------- -------
Net increase (decrease) in cash and cash equivalents 3,615 (1,387)
Cash and cash equivalents at beginning of period 5,848 7,788
-------- -------
Cash and cash equivalents at end of period $ 9,463 $ 6,401
======== =======
</TABLE>
3
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
CHANGES IN FINANCIAL CONDITION
Consolidated total assets at June 30, 1997 were $31.9 million above the
comparable balance at December 31, 1996. The 30% increase in assets was due
primarily to Bank of Lodi's February 22, 1997 acquisition of three branches from
Wells Fargo Bank which added $34 million to total deposits as of the closing
date. The deposit funds received in the acquisition of these branches have been
invested primarily in investment securities, which increased $21.3 million from
December 31, 1996 and loans, which increased by $4.5 million from December 31,
1996. Bank premises and equipment and other assets also increased primarily as a
result of the branch acquisition. Bank premises and equipment increased by $729
thousand, or 11%. Other assets increased by $1.4 million, or 83%.
On February 22, 1997, the Company's wholly owned subsidiary, Bank of Lodi,
completed the acquisition of the Galt, Plymouth, and San Andreas, California,
branches of Wells Fargo Bank. Bank of Lodi purchased the premises and equipment
of the Plymouth and San Andreas branches and assumed the building lease for the
Galt branch. Bank of Lodi also purchased the furniture and equipment of all
three branches and paid a premium for the deposits of each branch. The total
cost of acquiring the branches, including payments to Wells Fargo Bank as well
as other direct costs associated with the purchase, was $2.86 million. The
transaction was accounted for using the purchase method of accounting.
Accordingly, the purchase price was allocated first to identifiable tangible
assets based upon those asset's fair value and then to identifiable intangible
assets based upon the asset's fair value. The excess of the purchase price over
identifiable tangible and intangible assets was allocated to goodwill.
Allocations to identifiable tangible assets, identifiable intangible assets, and
goodwill were $856 thousand, $1.98 million, and $24 thousand, respectively.
Deposits totaling $34 million were acquired in the transaction.
Total deposits were $123.7 million at June 30, 1997 compared to $92.2 million at
December 31, 1996. Total deposits increased by $31.5 million, or 34%, A total of
$34 million in deposits were received when Bank of Lodi acquired three branches
from Wells Fargo Bank. The decrease in deposits subsequent to the acquisition of
new branches is principally the result of prevailing seasonal factors related to
the agricultural economy within the company's market area. Noninterest bearing
demand deposits increased by $3.8 million or 42% due to continued business
development success amd a more favorable noninterest bearing mix in the deposits
acquired from Wells Fargo Bank. Average noninterest bearing demand deposits for
the six months ended June 30, 1997 were 11% of total average deposits compared
to 8% for the comparable prior year period.
The aforementioned acquisition of three branches from Wells Fargo Bank and the
resulting increase in deposits significantly increased the liquidity of Bank of
Lodi. In the weeks immediately following the acquisition, approximately one half
of the deposits acquired had been invested in US Agency securities and, to a
lesser degree, mortgage backed securities. The remaineder has been invested in
two institutional money market mutual funds. The purchases of U.S. Agency
securities included both medium term notes due in four to five years and
callable securities with final maturities in three to ten years. The callable
securities have from one to three years of call protection. Mortgage backed
securities purchased were fixed-rate GNMA pass-through certificates with an
average life of approximately nine years. In addition to the investment
portfollio activity, funds were also invested in new loans to borrowers in both
existing and newly expanded market areas. Loans increased by $4.5 million, or 8%
from December 31, 1996. Management believes that the current liquidity position
of Bank of Lodi is adequate to support future loan demand, capital investment,
and deposit activity.
The allowance for loan losses at June 30, 1997 is in excess of the December 31,
1996 allowance by $286 thousand, or 24%. The principal reason for the increase
was an increase in the specific reserves for certain loans that exhibited
increased loss exposure subsequent to December 31, 1996. There were loan
recoveries during the quarter ended March 31, 1997 of several loans that had
been charged off in previous years totaling $341 thousand. Based upon the
resulting reserve position after recoveries and increases in specific reserves
for certain loans, $80 thousand of the reserve was reversed and credited to
income in the form of a negative loan loss provision for that quarter. After a
loan loss provision of $20 thousand for the quarter ended June 30, 1997, the
provision for loan losses for the six months ended June 30, 1997 was negative in
the amount of $60 thousand. Nonaccrual loans decreased by $235 thousand, or 28%
from December 31, 1996 to June 30, 1997, and the allowance for loan losses
nonaccrual coverage ratio increased to 2.45 times from 1.34 times. Total
nonaccrual and nonperforming loans to total loans at June 30, 1997 were 2.14%,
compared to 3.21% at December 31, 1996. Management believes that the allowance
for loan losses at June 30, 1997 is adequate. The following tables depicts
activity in the allowance for loan losses and allocation of reserves for and at
the six and twelve months ended June 30, 1997 and December 31, 1996,
respectively:
4
<PAGE>
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
6/30/97 12/31/96
-------- ----------
<S> <C> <C>
Balance at beginning of period 1,207 959
Charge-offs:
Commercial 1 237
Real estate -- --
Consumer 7 97
----- -----
Total charge-offs 8 334
Recoveries:
Commercial 345 260
Real estate -- --
Consumer 9 12
----- -----
Total recoveries 354 272
----- -----
Net charge-offs (346) 62
(reductions)/additions (credited to)/charged to operations (60) 310
----- -----
Balance at end of period 1,493 1,207
===== =====
Ratio of net charge-offs to average loans outstanding (.01%) 0.11%
===== =====
</TABLE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
3/31/97 3/31/97 12/31/96 12/31/96
LOAN CATEGORY AMOUNT % OF LOANS AMOUNT % OF LOANS
------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Commercial 674 90.84% 490 91.41%
Real Estate 64 8.63% 45 8.40%
Consumer 4 .53% 1 .19%
Unallocated 751 N/A 671 N/A
----- ------- ----- ----------
1,493 100.00% 1,207 100.00%
===== ======= ===== ==========
</TABLE>
Consolidated equity increased by $493 thousand from December 31, 1996 to June
30, 1997. Consolidated equity represented 9.05% of consolidated assets at June
30, 1997 compared to 11.33% at December 31, 1996. The increase in equity from
earnings of $546 thousand for the six months ended June 30, 1997 exceeded
reductions from dividend payments of $132 thousand and a reduction to equity of
$25 thousand to reflect the after-tax market value decline of the available-for-
sale portion of the investment portfolio. The decline in investment portfolio
market value reflects the impact of rising market interest rates during the six
months ended June 30, 1997 relative to December 31, 1996. The risk capital
position of the Company's subsidiary, Bank of Lodi, NA, declined as a result of
the afforementioned acquisition of three branches from Wells Fargo Bank. The
total risk-based capital ratio was 13.19% at June 30, 1997 compared to 17.0% at
December 31, 1996. The Bank's leverage capital ratio was 7.36% at June 30, 1997
versus 10.8% at December 31, 1996. Nothwithstanding the decline in the capital
ratios, the resulting ratios are in excess of the regulatory minimums for a
well-capitalized bank.
CHANGES IN RESULTS OF OPERATION - THREE MONTHS ENDED JUNE 30, 1997
Net income for the three months ended June 30, 1997 was $206 thousand, or $.15
per share, and represented an increase of 27% relative to the three months ended
June 30, 1996. Annualized return on average assets and equity were .60% and
6.70%, respectively, compared to .62% and 5.6%, respectively, for the comparable
prior year quarter.
Net income excluding the amortization of goodwill and core deposit intangibles
("cash" or "tangible" earnings) for the three months ended June 30, 1997 was
$276 thousand, or $.20 per share, and represented an increase of 67% relative to
the three months ended June 30, 1996. Annualized return on average assets and
equity on this basis were .80% and 8.98% compared to .62% and 5.6%,
respectively, for the comparable prior year quarter. Following the acquisition
of branches from Wells Fargo Bank, "cash" earnings, "cash" return on average
assets, and "cash" return on average equity are the profitability measures that
are the most comparable to prior period measures. They are also the most
meaningful performance measures to shareholders because they measure the
Company's ability to support growth and pay dividends.
5
<PAGE>
Net interest income increased by $436 thousand, or 38% as a result of the
increase in earning assets related to the acquisition of new branches as well an
increase in net interest margin. The provision for loan losses declined by $110
thousand, or 85%. Noninterest income increased by $141 thousand, or 52%, while
noninterest expenses increased by $622 thousand, or 58%. Based upon the earnings
for the three months ended June 30, 1997, the board of directors of First
Financial Bancorp declared a cash dividend of $.05 per share, payable August 29,
1997, to shareholders of record August 15, 1997.
Net interest income increased by $436 thousand, or 38%, relative to the
comparable prior year quarter. Net interest margin increased to 5.22% for the
quarter compared to 4.98% in the prior year quarter. Average earning assets and
deposits for the three months ended June 30, 1997 increased by $29.1 million, or
31%, and $33.1 million, or 36%, respectively, over the prior year quarter.
Excluding the impact of lower interest rates and changes in the mix of earning
assets and deposits, net interest income increased $324 thousand as a result of
the higher volume of average earning assets and deposits. Earning assets yielded
8.38% for the quarter compared to 8.50% in the prior year quarter. Asset yields
for loans and investments were higher than the prior year due to a more
favorable mix of loans and a higher mix of callable agency securities in the
investment portfolio. Although average loans outstanding increased 4.1% over the
prior year quarter, loans as a percentage of earning assets declined to 47% from
59% as a result of the increase in average earning assets from the acquisition
of three branches in the first quarter of 1997. The mix of deposits shifted away
from higher cost certificates of deposit to lower cost noninterest bearing and
interest bearing demand deposit accounts. Average noninterest bearing deposits
to total deposits was 11% for the quarter compared to 8% in the prior year
quarter. Average certificates of deposit were 34% of average deposits and other
debt for the current quarter compared to 38% in the prior year. The mix of
deposits and other debt also improved due to the payoff of $2.6 million in
mortgage debt in November 1996. The impact of the changed earning asset mix
reduced interest income by $124 thousand for the quarter relative to the prior
year, while the changed deposit and debt mix reduced interest expense by $65
thousand. Finally, the impact of higher loan and investment portfolio rates and
lower deposit rates increased net interest income by $171 thousand.
The provision for loan losses decreased by $110 thousand to $20 thousand. As
discussed above under Changes in Financial Condition, the allowance for loan
losses at June 30, 1997 increased in comparison to December 31, 1996, due to
increases in specific reserves for certain loans for which additional loss
exposure was exhibited during 1997. The majority of these increases were made
during the first quarter. The overall condition of the loan portfolio is
improved relative to the prior year and has resulted in a lower provision for
loan losses.
Noninterest income increased by $141 thousand, or 52%, reflecting increases in
both service charge income as well as income from SBA and mortgage operations.
Service charge income increased by 53% as a result of increased deposit account
and transaction volumes as well as increases in certain service charge rates
relative to the prior year quarter. Deposit account and transaction volumes
increased due to Bank of Lodi's acquisition of three branches during the first
quarter of 1997 as discussed above under Changes in Financial Condition as well
as new account activity at existing branches. SBA and mortgage income improved
by 53%. The principal element of increased SBA and mortgage income was increased
SBA loan origination and sale volume. Premium income related to SBA loan sales
rose by 89% over the prior year quarter due to continued improvement in the
climate for small business loans as well as focused business development
efforts.
Noninterest expenses increaesed by $622 thousand, or 58%, compared to the prior
year quarter. Salaries and benefit expenses increased due in part to incentive
compensation accruals related to increased profitability and SBA loan sales
volumes. Other noninterest expenses increased due to $120 thousand in
amortization of intangible assets acquired in Bank of Lodi's acquisition of
three branches, and provisions for losses on the sale of other real estate owned
totaling $54 thousand versus $4 thousand in the prior year quarter. Equipment
expenses increased as a result of new information systems that went into use
during June of 1996. The former information system was nearly fully depreciated
prior to its replacement, resulting in higher depreciation costs for technology
in the current year quarter. Excluding these items, total noninterest expenses
increased by $402 thousand, or 37%, reflecting salary and benefit expenses for
the newly acquired branches, the addition of one administrative officer, and
other operating expenses related to the expanded operational base of Bank of
Lodi. The acquisition by Bank of Lodi of three branches from Wells Fargo Bank is
discussed above under Changes in Financial Condition.
6
<PAGE>
CHANGES IN RESULTS OF OPERATION - SIX MONTHS ENDED JUNE 30, 1997
Net income for the six months ended June 30, 1997 was $546 thousand, or $.40 per
share, and represented an increase of 88% relative to the six months ended June
30, 1996. Annualized return on average assets and equity were .86% and 9.12%,
respectively, compared to .56% and 5.0%, respectively, for the comparable prior
year period.
Net income excluding the amortization of goodwill and core deposit intangibles
("cash" or "tangible" earnings) for the six months ended June 30, 1997 was $687
thousand, or $.50 per share, and represented an increase of 136% relative to the
three months ended June 30, 1996. Annualized return on average assets and equity
on this basis were 1.08% and 11.5% compared to .56% and 5.0%, respectively, for
the comparable prior year period. Following the acquisition of branches from
Wells Fargo Bank, "cash" earnings, "cash" return on average assets, and "cash"
return on average equity are the profitability measures that are the most
comparable to prior period measures. They are also the most meaningful
performance measures to shareholders because they measure the Company's ability
to support growth and pay dividends.
Net interest income increased as a result of the increase in earning assets
related to the acquisition of new branches and a widened net interest margin
which benefited from the collection of $445 thousand in nonaccrual interest on
several loans that had been charged off in previous years. Noninterest income
increased by $218 thousand, or 44%, while noninterest expenses increased by $1.2
million, or 53% due to increased operating expenses related to the acquisition
of three branches together with the related amortization of goodwill and core
deposit intangible assets.
Net interest income increased by $1.1 million or 50%, relative to the comparable
prior year period. Net interest margin increased to 5.97% for the period
compared to 4.91% in the prior year period. During the first quarter, interest
income totaling $445 thousand was recovered and recognized on several loans that
had been charged off in previous years. Excluding the recovered interest, net
interest margin was 5.18%, or 27 basis points higher than the prior year period.
Excluding the recovered interest, the remaining increase in net interest income
of $680 thousand represents the net impact of significant changes in the volume
and mix of earning assets and deposits as well as the general level of interest
rates.
Average earning assets and deposits for the six months ended June 30, 1997
increased by $21.4 million, or 23%, and $23.4 million, or 26%, respectively,
over the prior year period. Excluding the impact of lower interest rates and
changes in the mix of earning assets and deposits, net interest income increased
$243 thousand as a result of the higher volume of average earning assets and
deposits. Earning assets yielded 9.11% for the period compared to 8.48% in the
prior year period. Excluding recovered interest, earning asset yields were 8.33%
or 15 basis points below the prior year period. Asset yields for loans and
investments were higher than the prior year due to a more favorable mix of loans
and a higher mix of callable agency securities in the investment portfolio.
Although average loans outstanding increased over the prior year quarter, loans
as a percentage of earning assets declined to 49% from 58% as a result of the
increase in average earning assets from the branch acquisition. The mix of
deposits shifted away from higher cost certificates of deposit to lower cost
noninterest bearing and interest bearing demand deposit accounts. Average
certificates of deposit were 35% of average deposits and other debt for the
period compared to 38% in the prior year. The mix of deposits and other debt
also improved due to the payoff of $2.6 million in mortgage debt in November
1996.
The provision for loan losses decreased by $245 thousand to a negative provision
of $60 thousand. Total recoveries of loans charged off in previous years added
$354 thousand to the allowance for loan losses during the period. Management's
analysis of the allowance for loan losses as of March 31, 1997 indicated an
overfunded condition, and $80 thousand of the reserve was credited to the
provision for loan losses at that time. A provision of $20 thousand was made
during the second quarter of 1997. As discussed above under Changes in Financial
Condition, the allowance for loan losses at June 30, 1997 increased in
comparison to December 31, 1996, due to increases in specific reserves for
certain loans for which additional loss exposure was exhibited during the
period.
Noninterest income increased by $218 thousand, or 44%, reflecting increases in
both service charge income as well as income from SBA and mortgage operations.
Service charge income increased by 46% as a result of increased deposit account
and transaction volumes as well as increases in certain service charge rates.
Deposit account and transaction volumes increased due to Bank of Lodi's
acquisition of three branches as discussed above under Changes in Financial
Condition as well as new account activity at existing branches. SBA and mortgage
income improved by 44%. The principal element of increased SBA and mortgage
income was increased SBA loan origination and sale volumes. Premium income
related to SBA loan sales rose by 85% over the prior year period due to
continued improvement in the climate for small business loans as well as focused
business development efforts.
7
<PAGE>
Noninterest expenses increaesed by $1.2 million, or 53%, compared to the prior
year period. Salaries and benefit expenses increased due in part to incentive
compensation accruals related to increased profitability and SBA loan sales
volumes. Other noninterest expenses increased due to the amortization of
intangible assets received in Bank of Lodi's acquisition of three branches,
provisions for losses on the sale of other real estate owned, provision for
losses in connection with the reclamation of deposit account cash items, and the
accrual of legal and professional costs associated with loan loss resolution.
Equipment expenses increased as a result of new information systems that went
into use during June of 1996. The former information system was nearly fully
depreciated prior to its replacement, resulting in higher depreciation costs for
technology in the current year period. The afformentioned salary and other
noninterest expense items which are not comparable to the prior year total
approximately $520 thousand in the aggregate. Excluding these items, total
noninterest expenses increased by $645 thousand, or 30%, reflecting salary and
benefit expenses for the newly acquired branches, the addition of one
administrative officer, and other operating expenses related to the expanded
operational base of Bank of Lodi. The acquisition by Bank of Lodi of three
branches from Wells Fargo Bank is discussed above under Changes in Financial
Condition.
BASIS OF PRESENTATION
First Financial Bancorp is the holding company for Bank of Lodi, N.A.. In the
opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting of normal recurring accruals and
other accruals as explained above) 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 and six months ended June 30, 1997 are not necessarily
indicative of the results which may be expected for the year ended December 31,
1997. The unaudited consolidated financial statements presented herein should be
read in conjunction with the consolidated financial statements and notes
included in the 1996 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 22,
1997. The purpose of the meeting was to elect the company's board of
directors and approve the First Financial Bancorp 1997 Stock Option
Plan. The following directors were elected based upon the votes cast
as indicated:
<TABLE>
<CAPTION>
Director Votes "for" Votes "against" Votes "withheld"
------- ----------- --------------- ----------------
<S> <C> <C> <C>
Angelo J. Anagnos 783,012 0 8,815
Raymond H. Coldani 783,012 0 8,815
Benjamin R. Goehring 783,012 0 8,815
Bozant Katzakian 783,012 0 8,815
Michael D. Ramsey 783,012 0 8,815
Frank M. Sasaki 783,012 0 8,815
Weldon D. Schumacher 783,012 0 8,815
Dennis R. Swanson 783,012 0 8,815
</TABLE>
8
<PAGE>
The First Financial Bancorp 1997 Stock Option Plan was approved with
712,755 votes for the plan, 23,857 votes against the plan, 7,129 votes
abstaining, and 48,086 broker non-votes.
There were 1,310,692 shares issued and outstanding as of the record
date, March 3, 1997.
ITEM 5. OTHER INFORMATION
On July 24, 1997, the First Financial Bancorp Board of Directors
declared a cash dividend of $.05 per share, payable August 29, 1997,
to shareholders of record on August 15, 1997. This is the tenth
consecutive quarterly dividend declared by First Financial Bancorp.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER
- ------
2 Not Applicable.
3 Registrant's current Bylaws.
10 Not Applicable
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 for the
three months ended June 30, 1997, and 1996, were 1,378,104 and
1,347,334, respectively. Weighted average shares used in the
computation of earnings per share for the six months ended June 30,
1997 and 1996 were 1,376,328 and 1,339,553.
15 Not Applicable.
16 Not Applicable.
18 Not Applicable.
19 Not Applicable.
22 Notice of Annual Meeting and Proxy Statement dated April 1, 1997;
filed March 31, 1997.
24 Not Applicable
27 Financial Data Schedule
28 Not Applicable
(b) REPORTS ON FORM 8-K
Not Applicable
9
<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
Date July 31, 1997 /s/ David M. Philipp
------------- ----------------------------
David M. Philipp
Executive Vice-President
Chief Financial Officer
Corporate Secretary
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1997 FIRST FINANCIAL BANCORP 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 6,163 6,163
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 3,300 3,300
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 56,429 56,429
<INVESTMENTS-CARRYING> 1,788 1,788
<INVESTMENTS-MARKET> 1,923 1,923
<LOANS> 58,377 58,377
<ALLOWANCE> 1,493 1,493
<TOTAL-ASSETS> 136,770 136,770
<DEPOSITS> 123,671 123,671
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 717 717
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0 0
0 0
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<OTHER-SE> 4,954 4,954
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<INTEREST-INVEST> 977 1,645
<INTEREST-OTHER> 67 202
<INTEREST-TOTAL> 2,548 5,175
<INTEREST-DEPOSIT> 960 1,785
<INTEREST-EXPENSE> 960 1,785
<INTEREST-INCOME-NET> 1,588 3,390
<LOAN-LOSSES> 20 (60)
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 1,698 3,346
<INCOME-PRETAX> 281 821
<INCOME-PRE-EXTRAORDINARY> 281 821
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 206 546
<EPS-PRIMARY> .15 .40
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