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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, 2000
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 May 8, 2000 there were 1,445,034 shares of Common Stock, no par
value, outstanding.
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<PAGE>
<TABLE>
FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
PART I
Item 1. Financial Statements .................................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................... 6
Item 3. Quantitative and Qualitative Disclosures about Market Risk............... 11
PART II
Item 1. Legal Proceedings ....................................................... 11
Item 2. Changes in Securities ................................................... 11
Item 3. Defaults Upon Senior Securities ......................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ..................... 11
Item 5. Other Information ....................................................... 11
Item 6. Exhibits and Reports on Form 8-K ........................................ 11
</TABLE>
<PAGE>
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share amounts)
<CAPTION>
Mar. 31 Dec. 31
2000 1999
--------- ---------
<S> <C> <C>
Assets
Cash and due from banks $ 9,654 $ 9,309
Federal funds sold 1,300 100
Investment securities available for sale, at fair value 35,019 36,096
Loans 111,221 112,174
Less allowance for loan losses (Note 3) 2,617 2,580
--------- ---------
Net loans 108,604 109,594
Bank premises and equipment, net 7,198 7,096
Accrued interest receivable 1,373 1,487
Other assets 12,966 12,652
--------- ---------
$ 176,114 $ 176,334
========= ==========
Liabilities and Stockholders' Equity
Liabilities:
Deposits
Noninterest bearing $ 19,471 $ 21,054
Interest bearing 141,025 135,107
--------- ---------
Total deposits 160,496 156,161
Accrued interest payable 294 304
Short term borrowings -- 4,300
Other liabilities 556 1,048
--------- ---------
Total liabilities 161,346
161,813
Stockholders' equity:
Common stock - no par value; authorized 9,000,000 shares, issued and
outstanding in 2000 and 1999, 1,445,034 and 1,433,734,
respectively 8,518 8,433
Retained earnings 6,627 6,354
Accumulated other comprehensive loss (377) (266)
--------- ---------
Total stockholders' equity 14,768 14,521
--------- ---------
$ 176,114 $ 176,334
<FN>
See accompanying notes.
</FN>
</TABLE>
1
<PAGE>
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands except per share amounts)
Three Months Ended March 31,
2000 1999
------ ------
(Dollar amounts in thousands,
except per share amounts)
Interest income:
Loans, including fees $2,564 $2,246
Investment securities:
Taxable 453 580
Exempt from Federal taxes 137 52
Federal funds sold 42 80
------ ------
Total interest income 3,196 2,958
Interest expense:
Deposit accounts 1,035 938
------ ------
Net interest income 2,161 2,020
Provision for loan losses 35 100
------ ------
Net interest income after provision for loan 2,126 1,920
losses
Noninterest income:
Service charges 315 208
Premiums and fees from SBA and mortgage operations 190 216
Miscellaneous 157 61
------ ------
Total noninterest income 662 485
Noninterest expense:
Salaries and employee benefits 1,118 932
Occupancy 201 199
Equipment 179 156
Other 841 702
------ ------
Total noninterest expense 2,339 1,989
------ ------
Income before provision for income taxes 449 416
Provision for income taxes 103 143
------ ------
Net income $ 346 $ 273
====== ======
Net income per share:
Basic (Note 2) $ 0.23 $ 0.19
====== ======
Diluted (Note 2) $ 0.22 $ 0.19
====== ======
See accompanying notes.
2
<PAGE>
<TABLE>
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(in thousands except share amounts)
<CAPTION>
Three Months Ended March 31, 1999
Accumulated
Common Common Other
Stock Stock Comprehensive Retained Comprehensive
Description Shares Amounts Income Earnings Income Total
- ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 1,349,292 $ 7,584 5,971 302 13,857
Comprehensive income:
Net income $ 273 273 273
---------------
Other comprehensive loss:
Unrealized holding losses on
securities available for sale
arising during the current period,
net of tax benefit of $48 (98)
---------------
Total other comprehensive loss (98) (98) (98)
===============
Comprehensive income $ 175
===============
Options exercised 30,525 206 206
Cash dividend declared (68) (68)
============ ============ ======== ================ ============
Balance at March 31, 1999 1,379,817 $ 7,790 6,176 204 14,170
============ ============ ======== ================ ============
Three Months Ended March 31, 2000
Accumulated
Common Common Other
Stock Stock Comprehensive Retained Comprehensive
Description Shares Amounts Income Earnings Loss Total
- ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------
1,433,734 $ 8,433 6,354 (266) 14,521
Balance at December 31, 1999
Comprehensive income:
Net income $ 346 346 346
---------------
Other comprehensive loss:
Unrealized holding losses on
securities available for sale
arising during the current period,
net of tax benefit of $81 (111)
---------------
Total other comprehensive loss (111) (111) (111)
===============
Comprehensive income $ 235
===============
Options exercised 11,300 85 85
Cash dividend (73) (73)
============ ============ ======== ================ ============
Balance at March 31, 2000 1,445,034 $ 8,518 6,627 (377) 14,768
============ ============ ======== ================ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended March 31,
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by (used in)
operating activities: $ 346 $ 273
Decrease in loans held for sale (193) (2,164)
Increase (decrease) in deferred loan income 8 (11)
Depreciation and amortization 309 266
Provision for loan losses 35 100
Decrease in accrued interest receivable 114 289
Decrease in accrued interest payable (10) (54)
Decrease in other liabilities (492) (83)
Increase in cash surrender value of life insurance (108) (29)
Decrease (increase) in other assets 711 (10)
-------- --------
Net cash provided by (used in) operating activities 720 (1,423)
Cash flows from investing activities:
Proceeds from maturity of available-for-sale securities 1,733 6,313
Proceeds from sale of available-for-sale securities -- 750
Purchases of available-for-sale securities (899) (8,150)
Net decrease in loans made to customers 1,140 4,256
Proceeds from sale of other real estate 10 --
Purchase of cash surrender value life insurance (900) --
Purchases of bank premises and equipment (306) (159)
-------- --------
Net cash provided by investing activities 778 3,010
Cash flows from financing activities:
Net increase (decrease) in deposits 4,335 (1,203)
Decrease in other borrowings (4,300) --
Dividends paid (73) (68)
Proceeds from issuance of common stock 85 206
-------- --------
Net cash provided by (used in) financing activities 47 (1,065)
Net increase in cash and cash equivalents 1,545 522
Cash and cash equivalents at beginning of period 9,409 12,129
-------- --------
Cash and cash equivalents at end of period $ 10,954 $ 12,651
======== ========
Supplemental Discolsures of Cash Flow Information:
Cash paid for interest payments $ 1,045 992
Cash paid for taxes $ 120 50
<FN>
See accompanying notes.
</FN>
</TABLE>
4
<PAGE>
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000 and December 31, 1999
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of First Financial Bancorp (the
Company) and its subsidiaries, Bank of Lodi, N.A., (the Bank) and Western
Auxiliary Corporation (WAC) conform with generally accepted accounting
principles and prevailing practices within the banking industry. In
preparing the consolidated financial statements, Management is required to
make estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the balance sheet and revenue and expense
for the period. Actual results could differ from those estimates applied in
the preparation of the consolidated financial statements. There were no new
accounting standards adopted during the current period.
(2) Weighted Average Shares Outstanding
Per share information is based on weighted average number of shares of
common stock outstanding during each three-month period after giving
retroactive effect for the five percent stock dividend declared for
shareholders of record May 9, 2000, payable May 23, 2000. Basic earnings
per share (EPS) is computed by dividing net income available to
shareholders by the weighted average common shares outstanding during the
period. Diluted earnings per share is computed by dividing net income
available to shareholders by the weighted average common shares outstanding
during the period plus potential common shares outstanding. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company.
<TABLE>
Basic and diluted earnings per share for the three months ended March 31,
2000 and 1999 were computed as follows:
<CAPTION>
Income Shares Per-Share
Three months ended March 31, 2000 (numerator) (denominator) Amount
---------------------------------------------------------- ------------------ ------------------- ----------
<S> <C> <C> <C>
Basic earnings per share $ 346,000 1,509,565 $ .23
Effect of dilutive securities - 32,240 -
------------------ -------------------
Diluted earnings per share $ 346,000 1,541,805 $ .22
================== ===================
Income Shares Per-Share
Three months ended March 31, 1999 (numerator) (denominator) Amount
---------------------------------------------------------- ------------------ ------------------- ----------
Basic earnings per share $ 273,000 1,423,873 $ .19
Effect of dilutive securities - 48,769 -
------------------ -------------------
Diluted earnings per share $ 273,000 1,472,642 $ .19
================== ===================
</TABLE>
(3) Allowance for Loan Losses
Quarter Year
Ended Ended
3/31/00 12/31/99
---------- ---------
Balance at beginning of period $ 2,580,000 1,564,000
Loans charged off (4,000) (110,000)
Recoveries 6,000 75,000
Provisions charged to operations 35,000 1,051,000
---------- ---------
Balance at end of period $ 2,617,000 2,580,000
=========== =========
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Cautionary Statement for the Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
The Company is including the following cautionary statement to take advantage of
the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995 for any forward-looking statement made by, or on behalf of, the Company.
The factors identified in this cautionary statement are important factors (but
not necessarily all important factors) that could cause actual results to differ
materially from those expressed in any forward-looking statement made by, or on
behalf of, the Company.
Where any such forward-looking statement includes a statement of the assumptions
of bases underlying such forward-looking statement, the Company cautions that,
while it believes such assumptions or bases to be reasonable and makes them in
good faith, assumed facts or bases almost always vary from actual results, and
the differences between assumed facts or bases and actual results can be
material, depending on the circumstances. Where, in any forward-looking
statement, the Company expresses an expectation or belief as to future results,
such expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result, or be achieved or accomplished.
Taking into account the foregoing, such risks and uncertainties include, but are
not limited to, the following factors: competitive pressure in the banking
industry; changes in the interest rate environment; general economic conditions,
either nationally or regionally becoming less favorable than expected and
resulting in, among other things, a deterioration in credit quality and an
increase in the provision for possible loan losses; changes in the regulatory
environment; changes in business conditions; volatility of rate sensitive
deposits; operational risks, including data processing system failures or fraud;
asset/liability matching risks and liquidity risks; and changes in the
securities markets.
The following discussion addresses information pertaining to the financial
condition and results of operations of the Company that may not be otherwise
apparent from a review of the consolidated financial statements and related
footnotes. It should be read in conjunction with those statements and notes
found on pages 1 through 5, as well as other information presented throughout
this report.
Changes in Financial Condition
Consolidated total assets at March 31, 2000 were decreased approximately
$200,000 from December 31, 1999. While non-interest bearing deposits decreased
by $1.6 million or 7.5% during the first quarter, interest bearing deposits
increased $5.9 million or 4.4%. The decrease in non-interest bearing deposits is
consistent with historical trends which reflect a seasonal decline in deposits
during the first quarter that is typically associated with the local
agricultural industry. The increase in interest bearing deposits is the direct
result of a certificate of deposit campaign initiated by the company during the
month of February, 2000. During that time, the Company increased total
certificates of deposit by approximately $6.3 million. The primary purpose of
the Certificate of Deposit campaign was not to generate new deposits. Rather,
the purpose was to bring new account relationships to the Company while
introducing a sales type culture to the company's employees. As part of the
campaign, the Company initiated an employee referral and incentive program
designed to promote individual sales activity.
The loan portfolio decreased by 1%, or $1 million, from December 31, 1999 to
March 31, 2000. The decrease reflects the sale of approximately $1.2 million in
Small Business Administration ("SBA") and mortgage loans which were held for
sale to the secondary market at December 31, 1999. At March 31, 2000, the Bank
did not have any loans held for sale to the secondary market. The portion of the
commercial loan portfolio consisting of agriculture loans started to increase
towards the end of 1999 and decreased by approximately $750,000 during the first
quarter of 2000. Agriculture lines of credit are cyclical in nature as
historically borrowers draw on their lines of credit in the Spring. It is
anticipated that the agriculture loans will peak to $21 million in the Summer
before payoffs occur in the Fall. At March 31, 2000, agricultural loans totaled
approximately $17.1 million. Real estate and construction loans increased 3%,
and 4%, respectively, from the end of 1999. Commercial (excluding agriculture
loans), mortgage and SBA loans decreased 9%, 12%, and 2%, respectively, during
the first quarter.
The allowance for loan losses (the "allowance") is established through a
provision for possible loan losses charged to expense. The allowance at March
31, 2000 was in excess of the December 31, 1999 allowance by $37 thousand, or
1.4%, as a result of a provision for $35 thousand and net recoveries of $2
thousand. Nonperforming loans increased by $2.3 million, to $4.6 million from
December 31, 1999 to March 31, 2000, and the allowance for loan losses to
nonperforming loan coverage ratio decreased to 0.57 times from 2.74 times. The
increase in nonaccrual loans was primarily attributable to three
6
<PAGE>
loans totaling approximately $1.8 million. Management believes that the
allowance at March 31, 2000 is adequate to absorb known and reasonably estimated
loan losses. However, there can be no assurances that future economic events may
negatively impact the Bank's borrowers, thereby causing loan losses to exceed
the current allowance. The following tables depict activity in the allowance for
loan losses and allocation of reserves for and at the three and twelve months
ended March 31, 2000 and December 31, 1999, respectively:
Analysis of the Allowance for Loan
Losses
Quarter Year
Ended Ended
3/31/00 12/31/99
------- -------
Balance at beginning of period $ 2,580 1,564
Charge-offs:
Commercial -- (90)
Real estate -- --
Consumer (4) (20)
------- -------
Total charge-offs (4) (110)
Recoveries:
Commercial -- 68
Real estate -- --
Consumer 6 7
------- -------
Total recoveries 6 75
------- -------
Net recoveries (charge-offs) 2 (35)
Provision charged to operations 35 1,051
------- -------
Balance at end of period $ 2,617 2,580
======= =======
Allocation of the Allowance for Loan Losses
3/31/00 3/31/00 12/31/99 12/31/99
Loan Category Amount % of Loans Amount % of Loans
- ------------- ------ ---------- ------ ----------
Commercial 647 78.69% 538 79.03%
Real Estate 301 18.34% 366 18.04%
Consumer 2 2.97% 1 2.93%
Unallocated 1,667 N/A 1,675 N/A
--------- ------ ----- ------
$ 2,617 100.00% 2,580 100.00%
========= ====== ===== ======
Investments
Investment in bonds decreased by $1.1 million, or 3%, from December 31, 1999 to
March 31, 2000. The decline represents matured bonds and securities
contractually called by issuers. The matured and called bonds over the first
quarter of 2000 were reinvested primarily in Federal funds in order to avoid
market risk over the short-term before funding loans.
7
<PAGE>
Equity
Consolidated equity increased by $247 thousand from December 31, 1999 to March
31, 2000. Consolidated equity represented 8.39% and 8.23% of consolidated assets
at March 31, 2000 and December 31, 1999, respectively. Stock option exercises
during the three months ended March 31, 2000 increased equity by $85 thousand.
The increase in equity from earnings of $346 thousand for the three months ended
March 31, 2000 exceeded reductions from dividend payments of $73 thousand and a
reduction to equity of $111 thousand to reflect the after-tax market value
decline of the available-for-sale investment securities portfolio. The decrease
in the investment security portfolio's market value reflects the increase in the
level market interest rates at March 31, 2000 compared to December 31, 1999.
The total risk-based capital ratio for the Company's wholly owned subsidiary,
Bank of Lodi was 10.79% at March 31, 2000 compared to 10.51% at December 31,
1999. The increase in the total risk-based capital ratio is largely a function
of the increased earnings of the Company. For each dollar in new loans,
risk-weighted assets increase by eighty cents. The Bank's leverage capital ratio
was 7.73% at March 31, 2000 versus 7.82% at December 31, 1999. The capital
ratios are in excess of the regulatory minimums for a well-capitalized bank.
Changes in Results of Operations- Three Months ended March 31, 2000
Summary of Earnings Performance
- -------------------------------------------------------------------------------
For the three months ended March 31:
--------------------------------------------
2000 1999
---- ----
Net income (in thousands) $ 346 273
- ------------------------------------------------------ ------------------------
Basic net income per share $ .23 .19
Diluted net income per share .22 .19
Return on average assets 0.79% 0.68%
Return on average equity 9.46% 7.90%
Dividend payout ratio 20.58% 24.91%
- ------------------------------------------------------ ------------------------
- ------------------------------------------------------ ------------------------
Average equity to average assets 8.34% 8.55%
- ------------------------------------------------------ ------------------------
Net income for the quarter increased 27% compared to the first quarter of 1999.
Net interest income increased by 7% as a result of an increase in total average
loans combined with an overall increase in interest rates. Noninterest income
increased by 37%, while noninterest expense increased by 18%. Based upon the net
income for the three months ended March 31, 2000, the Company's board of
directors declared a 5% stock dividend payable May 23, 2000 to shareholders of
record on May 9, 2000.
8
<PAGE>
<TABLE>
Net Interest Income
The following table provides a detailed analysis of the net interest spread and
net interest margin for the periods indicated:
<CAPTION>
-------------------------------------- ------------------------------- --------------------------------
For the Quarter Ended For the Quarter Ended
March 31, 2000 March 31, 1999
(in thousands) (in thousands)
-------------------------------------- ------------------------------- --------------------------------
Average Income/ Average Income/
Balance Expenses Yield(1) Balance Expenses Yield(1)
------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Investment securities (1) $ 45,150 590 5.18% $ 48,425 632 5.29%
Federal funds sold 2,880 42 5.76% 6,796 80 4.77%
Loans (2) 111,250 2,564 9.14% 92,137 2,246 9.89%
------- ----- ----- ------ ----- -----
$159,280 3,196 7.96% $147,358 2,958 8.14%
========= ===== ==== ======== === ====
Liabilities:
Noninterest bearing deposits $ 19,320 -- -- $ 18,098 -- --
Savings, money market, & NOW deposits 83,820 335 1.59% 80,748 330 1.66%
Time deposits 51,890 620 4.74% 50,071 608 4.92%
Other borrowings 5,336 80
--------- -----
Total Liabilities $ 160,366 1,035 2.56% $148,917 938 2.55%
========= ===== ==== ======== === ====
Net Interest Spread 5.40% 5.59%
===== =====
-------------------------------------- ---------- ---------- --------- ---------- ----------- ---------
Earning Income Earning Income
Assets (Expense) Yield Assets (Expense) Yield
------ --------- ----- ------ --------- -----
Yield on average earning assets $159,280 3,196 8.14% $147,358 2,958 8.14%
Cost of funding average earning $159,280 (1,035) (2.56%) $147,358 (938) (2.58%)
------- ------- ----- -------
assets
Net Interest Margin $159,280 2,161 5.40% $147,358 2,020 5.56%
===== ===== ===== =====
-------------------------------------- ---------- ---------- --------- ---------- ----------- ---------
<FN>
(1) Yield for period annualized on actual number of days in period and based on a 365-day year.
(2) Income on tax-exempt securities has not been adjusted to a tax equivalent basis.
(3) Nonaccrual loans are included in the loan totals for each period; however, only collected interest on such
loans is included in interest income.
</FN>
</TABLE>
Net interest income for the first quarter of 2000 increased by $141 thousand, or
7%, over the same quarter of 1999. The net interest margin of 5.40% was a
decrease from the 5.56% for the first quarter of 1999, primarily as a result of
interest forgone on nonaccrual loans. During the first quarter of 2000, interest
income of $71 thousand was forgone as a result of loans placed on nonaccrual
during the quarter. The Company increased it tax exempt investment portfolio and
experienced corresponding reductions in money market funds. While the increase
in municipal securities reduced the pretax investment yield, it has reduced the
Company's overall effective tax rate. The Company's cost of funds have remained
relatively unchanged.
Loan yields for the first quarter of 2000 were 75 basis points lower from a year
ago, while average loans increased by $19.1 million, or 21%, over the prior
year. As a percentage of total earning assets, average loans outstanding were
70% compared to 63% at the end of the first quarter of 1999 and 69% at year-end
1999. The increased mix of loans in earning assets helped to offset the effect
of declining market yields in investments. The growth in average loans was the
result of persistent business development efforts on the part of the banks
officers and employees in both existing and new-branch markets and favorable
economic conditions that have stimulated mortgage demand and real estate
activity. The decline in loan yields was negatively impacted as a result of the
$2.3 million in loans placed on nonaccrual during the period.
9
<PAGE>
Average deposits for the three months ended March 31, 2000 increased by $6
million, or 4%, compared to the prior year quarter. Average noninterest bearing
deposits have kept pace with the growth in interest bearing deposits from a year
ago and continue to make up 12% of average total deposits. This has helped to
keep down the cost of funding earning assets. Average certificates of deposit
were 33% of average deposits for the three months ended March 31, 2000 and for
the same period in the prior year quarter.
Provision for Loan Losses
The Bank provided $35 thousand to the allowance in the first quarter of 2000
which is attributable to general loss reserves that have been established in
connection with loan portfolio growth. The allowance for loan losses is
discussed above under Changes in Financial Condition.
Noninterest Income
Noninterest income for the first quarter of 2000 increased by $177 thousand, or
37%, over the same period last year. Of the increase, $107 thousand is
attributable to increases on service charges on deposit accounts. The increase
in service charge income comes as a result of a 4% increase in average demand
and savings accounts combined with general increases in deposit product pricing.
Income from the sale and servicing of loans decreased by $26 thousand, or 12%,
compared to the prior year quarter. The decreased income from the sale and
servicing of loans is due to a general decline in these markets as compared to
the same quarter of 1999.
Noninterest Expenses
Noninterest expenses increased by $350 thousand, or 18%, compared to the prior
year quarter. Personnel expense increased $186 thousand, or 20%, as a result of
additions to staff during the year combined with general merit increases for
existing personnel. Occupancy expense increased $2 thousand or 1%. Equipment
expense increased $23 thousand, or 15%, as a result of depreciation of new
equipment. Other noninterest expense increased $139 thousand, or 20%, primarily
as a result of an increase of $82 thousand in marketing expense and an increase
of $44 thousand in consulting fees. The increase in marketing expense resulted
from efforts initiated to promote the Bank, its products and services. The
increase in consulting fees resulted from the Bank's strategic efforts to
increase revenue sources and the utilization of technology.
Basis of Presentation
First Financial Bancorp is the holding company for Bank of Lodi, N.A. and
Western Auxiliary Corporation. 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 months ended March
31, 2000 are not necessarily indicative of the results which may be expected for
the year ended December 31, 1999. The unaudited consolidated financial
statements presented herein should be read in conjunction with the consolidated
financial statements and notes included in the 1999 Annual Report to
Shareholders.
10
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
While there are several varieties of market risk, the market risk material to
the Company and the Bank is interest rate risk. Within the context of interest
rate risk, market risk is the risk of loss due to changes in market interest
rates that have an adverse effect on net interest income, earnings, capital or
the fair value of financial instruments. Exposure to this type of risk is a
regular part of a financial institution's operations. The fundamental activities
of making loans, purchasing investment securities, and accepting deposits
inherently involve exposure to interest rate risk. The Company monitors the
repricing differences between assets and liabilities on a regular basis and
estimates exposure to net interest income, net income, and capital based upon
assumed changes in the market yield curve. As of and for the three months ended
March 31, 2000, there were no material changes in the market risk profile of the
Company or the Bank as described in the Company's 2000 Form 10-K.
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
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
3(a) Articles of Incorporation, as amended, filed
as Exhibit 3.1 to the Company's General Form
for Registration of Securities on Form 10,
filed on September 21, 1983, is hereby
incorporated by reference.
3(b) Bylaws, as amended, filed as Exhibit 3(b) to
the Company's Form 10K for the year ended
December 31, 1998 are hereby incorporated by
reference.
4 Specimen Common Stock Certificate, filed as
Exhibit 4.1 to the Company's General Form
for Registration of Securities on Form 10,
filed on September 21, 1983, is hereby
incorporated by reference.
10(a) First Financial Bancorp 1991 Director Stock
Option Plan and form of Nonstatutory Stock
Option Agreement, filed as Exhibit 4.1 to
the Company's Form S-8 Registration
Statement (Registration No. 33-40954), filed
on May 31, 1991, is hereby incorporated by
reference.
10(b) Amendment to First Financial Bancorp 1991
Director Stock Option Plan, filed as Exhibit
4.3 to the Company's Post-Effective
Amendment No. 1 to Form S-8 Registration
Statement (Registration No. 33-40954), filed
as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the period ended
March 31, 1995, is hereby incorporated by
reference.
10(c) First Financial Bancorp 1991 Employee Stock
Option Plan and forms of Incentive Stock
Option Agreement and Nonstatutory Stock
Option Agreement, filed as Exhibit 4.2 to
the Company's Form S-8 Registration
Statement (Registration No. 33-40954), filed
on May 31, 1991, is hereby incorporated by
reference.
11
<PAGE>
10(d) Bank of Lodi Employee Stock Ownership Plan,
filed as Exhibit 10 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1992, is hereby incorporated by
reference.
10(e) First Financial Bancorp 1997 Stock Option
Plan, filed as Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the period
ended September 30, 1997, is hereby
incorporated by reference.
10(f) Bank of Lodi Incentive Compensation Plan,
filed as Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the year
ended December 31, 1997, is hereby
incorporated by reference.
10(g) First Financial Bancorp 401(k) Profit
Sharing Plan, filed as Exhibit 10(g) to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1997, is hereby
incorporated by reference.
10(h) Employment Agreement dated as of September
30, 1998, between First Financial Bancorp
and Leon J. Zimmerman., filed as Exhibit
10(h) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September
30, 1998, is hereby incorporated by
reference.
10(i) Executive Supplemental Compensation
Agreement effective as of April 3, 1998,
between Bank of Lodi, N.A. and Leon J.
Zimmerman, filed as Exhibit 10(j) to the
Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998, is
hereby incorporated by reference.
10(j) Life Insurance Endorsement Method Split
Dollar Plan Agreement effective as of April
3, 1998, between Bank of Lodi, N.A. and Leon
J. Zimmerman, filed as Exhibit 10(l) to the
Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998, is
hereby incorporated by reference.
10(k) Life Insurance Endorsement Method Split
Dollar Plan Agreement effective as of April
3, 1998, between Bank of Lodi, N.A. and
David M. Philipp, filed as Exhibit 10(m) to
the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, is
hereby incorporated by reference.
10(l) Form of Director Supplemental Compensation
Agreement, effective as of April 3, 1998, as
executed between Bank of Lodi, N.A. and each
of Benjamin R. Goehring, Michael D. Ramsey,
Weldon D. Schumacher and Dennis R. Swanson,
filed as Exhibit 10(n) to the Company's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, is hereby
incorporated by reference.
10(m) Form of Life Insurance Endorsement Method
Split Dollar Plan Agreement, effective as of
April 3, 1998, as executed between Bank of
Lodi, N.A. and each of Benjamin R. Goehring,
Michael D. Ramsey, Weldon D. Schumacher and
Dennis R. Swanson, filed as Exhibit 10(o) to
the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, is
hereby incorporated by reference.
10(n) Form of Director Supplemental Compensation
Agreement, effective as of April 3, 1998, as
executed between Bank of Lodi, N.A. and each
of Angelo J. Anagnos, Raymond H. Coldani,
Bozant Katzakian and Frank M. Sasaki, filed
as Exhibit 10(p) to the Company's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1998, is hereby incorporated
by reference.
10(o) Form of Life Insurance Endorsement Method
Split Dollar Plan Agreement, effective as of
April 3, 1998, as executed between Bank of
Lodi, N.A. and each of Angelo J. Anagnos,
Raymond H. Coldani, Bozant Katzakian and
Frank M. Sasaki, filed as Exhibit 10(q) to
the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, is
hereby incorporated by reference.
27 Financial Data Schedule (electronic
submission only).
12
<PAGE>
(b) Reports on Form 8-K
Form 8-K dated March 28, 2000 announcing fourth quarter and
full year 1999 financial results and cash dividend.
Form 8-K dated April 25, 2000 announcing first quarter 2000
financial results and five percent stock dividend.
13
<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: May 8, 2000 /s/ Leon J. Zimmerman
--------------------------
Leon J. Zimmerman
President & CEO
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