SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1996 Commission file number 0-14280
FIRST FINANCIAL BANCORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
IOWA 42-1259867
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
204 East Washington Street, Iowa City, Iowa 52240
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code 319-356-9000
NOT APPLICABLE
- --------------------------------------------------------------------------------
(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. (1) Yes X . No . (2) Yes X . No. .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
SHARES OUTSTANDING
CLASS AT APRIL 30, 1996
----- -------------------
Common stock, $1.25 par value 2,361,803
1
<PAGE>
FIRST FINANCIAL BANCORPORATION
Index to Form 10-Q
Page
PART I - Financial Information Number
Item 1. Financial statements
Consolidated balance sheets 3
Unaudited consolidated statements of income 4
Unaudited consolidated statements of cash flows 5 - 6
Consolidated statement of stockholders' equity 7
Note to consolidated financial statements 8 - 9
Item 2. Management's discussion and analysis of financial 10 - 11
condition and results of operations
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K 12 - 19
Signatures 20
2
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORPORATION
AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<S> <C> <C>
March 31, December 31,
1996 1995*
----------- --------------
ASSETS
Cash and due from banks $ 18,032 $ 16,443
Investment securities:
Available for sale (cost 1996 $121, 954; December 31, 1995 $123,442) 121,790 123,886
Federal funds sold 14,350 3,225
Loans, net of unearned income $ 293,645 $ 294,529
Less: Allowance for possible loan losses (3,611) (3,602)
--------- ---------
Net loans $ 290,034 $ 290,927
--------- ---------
Bank premises and equipment, net 12,474 12,488
Accrued interest receivable 3,652 3,367
Income tax refund receivable - - 222
Deferred income taxes 159 - -
Intangible assets 739 779
Prepaid pension cost 2,981 2,860
Other assets 3,293 3,039
--------- ---------
$ 467,504 $ 457,236
========= =========
LIABILITIES
Noninterest-bearing deposits $ 43,968 $ 46,192
Interest-bearing deposits 351,830 338,863
--------- ---------
Total deposits $ 395,798 $ 385,055
Federal Home Loan advances 17,154 17,469
Other borrowings - - 67
Accrued interest payable 1,458 1,553
Income tax payable 291 - -
Deferred income taxes - - 68
Accounts payable and other accrued expenses 2,513 2,817
--------- ---------
$ 417,234 $ 407,029
--------- ---------
STOCKHOLDERS' EQUITY
Capital stock, common $1.25 par value; authorized 5,000,000
shares; issued 1996 2,368,766 shares; 1995 2,383,241 shares (Note 5) $ 2,961 $ 2,979
Additional paid-in capital 3,611 4,095
Retained earnings 43,821 42,854
Unrealized gains (losses) on debt securities, net (103) 279
--------- ---------
$ 50,290 $ 50,207
--------- ---------
$ 467,504 $ 457,236
========= =========
*Condensed from audited financial statements.
See Notes to Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORPORATION
AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1996 and 1995
(Amounts in Thousands, Except per Share Data)
<S> <C> <C>
1996 1995
------- -------
Interest income:
Interest and fees on loans $ 6,196 $ 5,949
Interest on investment securities
Taxable 1,450 1,240
Nontaxable 363 338
Interest on federal funds sold 142 70
------- -------
Total interest income $ 8,151 $ 7,597
------- -------
Interest expense:
Interest on deposits $ 3,804 $ 3,299
Interest on federal funds purchased and
securities sold under agreements to repurchase 1 13
Interest on Federal Home Loan Bank advances 262 304
------- -------
Total interest expense $ 4,067 $ 3,616
------- -------
Net interest income $ 4,084 $ 3,981
Provision for loan losses 72 100
------- -------
Net interest income after provision
for loan losses $ 4,012 $ 3,881
------- -------
Noninterest income:
Trust fees $ 757 $ 708
Service charges and fees on deposit accounts 395 325
Other service charges, commissions and fees 554 350
------- -------
$ 1,706 $ 1,383
------- -------
Noninterest expenses:
Salaries and employee benefits $ 1,729 $ 1,847
Occupancy expenses 290 301
Furniture and equipment 385 385
Data processing 269 263
Office supplies and postage 273 250
Other expenses 737 755
------- -------
$ 3,683 $ 3,801
------- -------
Income before income taxes $ 2,035 $ 1,463
Federal and state income taxes 605 392
------- -------
Net Income $ 1,430 $ 1,071
======= =======
Average common stock and common equivalent shares 2,391,540 2,391,248
========= =========
Earnings per common and
common equivalent share (Note 5) $ .60 $ .45
======= =======
Dividends per common share $ .195 $ .185
======= =======
See Note to Consolidated Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORPORATION
AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Three Months Ended
March 31, 1996 and 1995
(Amounts in Thousands)
<S> <C> <C>
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,430 $ 1,071
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 281 303
Amortization 40 42
Provision for loan losses 72 100
Amortization of investment security discount 34 52
(Increase) decrease in accrued interest receivable (285) (308)
(Increase)in prepaid pension costs (121) - -
(Increase) in other assets (254) (698)
Increase (decrease) in accrued interest and other liabilities (399) 189
Change in accrued income taxes 513 360
-------- --------
Net cash provided by operating activities $ 1,311 $ 1,111
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Available for sale securities:
Maturities $ 5,532 $ 7,026
Purchases (4,079) (4,566)
Held to maturity securities:
Maturities - - 1,922
Purchases - - (958)
Fed funds sold, net (11,125) (16,650)
Net (increase) decrease in loan balances outstanding 821 (694)
Purchases of bank premises and equipment (267) (897)
-------- --------
Net cash (used in) investing activities $ (9,118) $(14,817)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit balances $ 10,743 $ 20,533
Federal funds purchased and securities sold under agreement
to repurchase - - (3,200)
Repayment of other borrowings (67) - -
Repayment of note principal - - (161)
Federal Home Loan Bank advances (315) (214)
Dividends paid (463) (441)
Stock options exercised 434 248
Common stock redeemed (290) (69)
Common stock purchased (646) - -
-------- --------
Net cash provided by financing activities $ 9,396 $ 16,696
-------- --------
Increase in cash and due from banks $ 1,589 $ 2,990
CASH AND DUE FROM BANKS
Beginning balance 16,443 13,196
-------- --------
Ending balance $ 18,032 $ 16,186
======== ========
See Notes to Financial Statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORPORATION
AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS
OF CASH FLOWS Three Months
Ended March 31, 1996 and 1995
(Amounts in Thousands)
<S> <C> <C>
1996 1995
-------- --------
SUPPLEMENTAL DISCLOSURES
Cash payments for:
Interest paid to depositors, on note payable,
on federal funds purchased and securities
sold under agreements to repurchase $ 4,162 $ 3,579
Noncash transactions:
Net unrealized gains (losses) on debt securities (609) 841
Deferred income taxes on unrealized gains (losses)
on debt securities (227) 314
Other real estate owned property
received in satisfaction of debt 157 - -
See Notes to Financial Statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three months ended Unrealized
March 31, 1996 and year ended Common Stock Additional gains (losses)
December 31, 1995 (In Thousands $1.25 Par Value Paid-In Retained on debt
of Dollars, Except Per Share Data) Number Amount Capital Earnings securities, net Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 2,374 $ 2,967 $ 3,928 $ 40,095 $ (1,745) $ 45,245
Net income -- -- -- 4,570 -- 4,570
Cash dividends ($.76 per share) -- -- -- (1,811) -- (1,811)
Stock options exercised for
12,087 shares 12 15 233 -- -- 248
Redemption of 2,772 shares of
common stock (3) (3) (66) -- -- (69)
Unrealized gains on debt securities,
net of deferred tax effect -- -- -- -- 2,024 2,024
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31,1995 2,383 $ 2,979 $ 4,095 $ 42,854 $ 279 $ 50,207
Net income -- -- -- 1,430 -- 1,430
Cash dividends ($.195 per share) -- -- -- (463) -- (463)
Stock options exercised for 21,200 shares 21 26 408 -- -- 434
Redemption of 11,375 shares of common stock (11) (14) (276) -- -- (290)
Purchase of 24,300 shares of common
stock (Note 5) (24) (30) (616) -- -- (646)
Unrealized (losses) on debt securities,
net of deferred tax effect -- -- -- -- (382) (382)
- -------------------------------------------------------------------------------------------------------------------------
Balance March 31, 1996 $ 2,369 $ 2,961 $ 3,611 $ 43,821 $ (103) $ 50,290
======== ======== ======== ======== ========= ========
See Notes to Financial Statements.
7
</TABLE>
<PAGE>
FIRST FINANCIAL BANCORPORATION
AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 1996 and 1995
Note 1. Interim Financial Statements
Interim consolidated financial statements have not been examined by
independent public accountants, but include all adjustments
(consisting only of normal recurring accruals) which in the opinion of
management are necessary for a fair presentation of the results for
those periods. The results of operation for the interim periods are
not necessarily indicative of the results for a full year.
Note 2. Principles of consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries, First National Bank,
Iowa City, Iowa, and First National Bank, Cedar Rapids, Iowa, both of
which are wholly-owned. All material intercompany accounts and
transactions have been eliminated in consolidation.
Note 3. Presentation of cash flows:
For purposes of reporting cash flows, cash and due from banks includes
cash on hand and amounts due from banks. Cash flows from deposits,
federal funds purchased, federal funds sold and loan balances are
treated as net increases or decreases.
Note 4. Deferred income taxes:
Deferred income taxes are provided under the liability method whereby
deferred tax assets are recognized for deductible temporary
differences and net operating loss and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax basis.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Note 5. Earnings per common and common equivalent share:
For 1996 and 1995, earnings per common and common equivalent share are
determined by dividing net income by the weighted average number of
common and common equivalent shares outstanding during the year.
Dilutive common stock equivalents related to the stock option plan
were determined using the treasury stock method. Earnings per share
and common equivalent share assuming full dilution are the same as
earnings per common and common equivalent share. In the first quarter
of 1996, the Company purchased 24,300 shares of its common stock under
a repurchase plan which authorizes up to 120,000 shares to be
repurchased through July 31, 1996.
Note 6. Accounting by creditors for impairment of a loan
The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" in the second
quarter of 1995. Under the new standard, a loan is considered
impaired, based on current information and events, if it is probable
that the Company will be unable to collect the schedule payments of
principal or interest when due according to the contractual terms of
the loan agreement. Impaired loans include all nonaccrual loans.
The measurement of impaired loans is generally based on the present
value of expected future cash flows discounted at the historical
effective rate, except that all collateral dependent loans are
measured for impairment based on the fair value of the collateral.
SFAS 114 does not apply to large groups of smaller balance homogeneous
loans that are collectively evaluated for impairment, except for those
loans restructured under trouble debt restructuring. Loans
collectively evaluated for impairment include certain smaller balance
commercial loans, consumer loans, residential real estate loans, and
credit card loans, and are not included in the data that follows.
8
<PAGE>
(In Thousands)
The following table summarizes As of
impaired loan information. March 31, 1996
- --------------------------------------------------------------------------------
Impaired loans $142
Impaired loans with related reserve for
loan losses calculated under SFAS 114 142
Amount of reserve for loan losses allocated
to the impaired loan balance 25
The adoption of SFAS 114 did not result in additional provisions for
loan losses primarily because the majority of impaired loan valuations
continue to be based on the fair value of collateral and because the
existing provision evaluations methods had included impaired loans as
defined by SFAS 114. Impairment losses are included in the provision
for loan and lease losses.
(In Thousands)
Three Months Ended
March 31,1996
- --------------------------------------------------------------------------------
Average impaired loans $227
Cash basis interest
income recognized on
impaired loans 18
Interest income that
would have been recorded
during the period on non-
accrual loans 5
- --------------------------------------------------------------------------------
Interest payments on impaired loans are typically applied to principal
unless future collectability of the recorded loan balance is expected,
in which case interest income is recognized on a cash basis.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
EARNINGS PERFORMANCE
Net income for the quarter ending March 31, 1996 was $1,430,000, an increase of
$359,00 or 33.5% from the same period in 1995.
DIVIDEND INFORMATION
In the first quarter of 1996, the Company paid cash dividends of $.195 per out-
standing share of common stock which totaled $463,000, compared to $.185 per
share and $441,000 in total for the same period in 1995. This represented an
increase of $.01 or 5.4% per outstanding share of common stock and $22,000 or 5%
in total cash dividends paid. The ability of the Company to pay dividends to its
shareholders is dependent on the profitability of the Iowa City Bank and to what
prudent and sound banking principles will permit. The payment of the dividends
(i) is not permitted without the approval of the Comptroller of the Currency
(OCC) except to the extent of net profits of the current fiscal year and
retained net profits of the two preceding fiscal years, and (ii) is not
permitted if the payment of a dividend would reduce the capital of a bank below
required levels. Given the Bank's capital position, the OCC minimum capital
criteria will not be restrictive.
NET INTEREST INCOME
Net interest income after provision for loan losses increased $131,000 or 3.4%
to $4,012,000 in the first quarter of 1996 when compared to 1995 totals. The
primary factor contributing to this increase in net interest income was asset
growth. The provision for loan losses decreased $28,000 or 28% to $72,000 when
compared to the 1995 provision of $100,000. This reduction in provision is
directly related to decreased nonaccrual loan balances.
Net interest income, on a fully tax-equivalent basis, for the first quarter of
1996 totaled $4,353,000, which was up $113,000 or 2.7% over the 4,240,000
reported for the same period in 1995. The increase in fully taxable-equivalent
net interest was also attributed to asset growth. The consolidated net interest
spreads and margins are presented in Table 2 for the first quarter of 1996 and
1995.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
As of March 31, 1996, the allowance for possible loan losses was 1.23% of total
outstanding loans compared to 1.22% as of December 31, 1995 and 1.16% as of
March 31, 1995. During the first quarter of 1996, the Company recorded net
charged off loans totaling $63,000 compared to $22,000 for the first quarter of
1995. The dollar amount of nonaccrual loans decreased from $907,000 as of March
31, 1995 to $142,000 as of March 31, 1996. Year-to-date provision expense
decreased $28,000 or 28% to $72,000 as of March 31, 1996 when compared to March
31, 1995. The provision was decreased primarily due to the reduction in
nonaccrual loan balances. There are no trends or uncertainties which management
expects to materially impact the adequacy of the allowance for loan losses or
precision expense in the foreseeable future.
NONINTEREST INCOME
Noninterest income for the quarter ending March 31, 1996 totaled $1,706,000,
which was an increase of $323,000 or 23.4% when compared to the $1,383,000 of
noninterest income reported for the quarter ending March 31, 1995. Service
charges and fees on deposit accounts increased $70,000 or 21.5% to $395,000 in
the first quarter of 1996, compared to total fees of $325,000 as of March 31,
1995. Other service charges, commissions, and fees increased $204,000 or 58.3%
over the first quarter of 1995. Included in this category are secondary market
mortgage loan fees, which increased $148,000 or 694.8% for the quarter. The
volume of secondary market mortgage loans was substantially higher in the first
quarter of 1996, compared to 1995, because of lower interest rates.
NONINTEREST EXPENSES
Noninterest expenses totaled $3,683,000 as of March 31,1996, decreasing $118,000
or 3.1% from $3,801,000 as March 31, 1995. The most significant decreases were
in the salaries and employee benefits category which decreased $118,000 or 6.4%
and FDIC insurance expense which decreased $175,00 or 85.2% in the first quarter
of 1996. Salaries and employee benefits decreased as a result of staff
reductions associated with attrition and a voluntary severance program which
took effect in February 1996.
INCOME TAXES
Income tax expense for the first quarter of 1996 totaled $605,000 and was
comprised of federal income tax expense of $502,000 and state income tax expense
of $103,000 at the statutory tax rates of 34% and 5% respectively. In the first
quarter of 1995, income tax expense was $392,000, of which federal tax expense
was $317,000 and state tax expense was $75,000.
10
<PAGE>
FINANCIAL POSITION
TOTAL ASSETS
As of March 31, 1996, Company assets totaled $467,504,000 representing a
$14,328,000 or 3.2% increase over March 31, 1995 assets, of $453,176,000. This
asset growth was funded primarily by increased deposit balances of $13,002,000
or 3.4% and stockholders' equity of $3,709,000 or 8%. These sources of funds
were used to purchase investment securities. Investment securities balances
increased $15,196,000 or 14.3% to $121,790,000 since March 31, 1995.
TOTAL LOAN BALANCES
Total loan balances decreased by $884,000 or .3% to $293,645,000 as of March
31,1996 when compared to loan balances of $294,529,000 as of December 31, 1995.
The majority of this increase was in the residential mortgage loan category.
TOTAL DEPOSITS
Since December 31, 1995, total deposits increased $10,743,000 or 2.8% to
$395,798,000 as of March 31, 1996. The majority of this increase was in
interest-bearing deposit balances.
CAPITAL POSITION
The strength and soundness of a Company is reflected in the adequacy of its
capital position. Total capital as of March 31, 1996 was $53,901,000 which is up
to $92,000 or .2% from total capital of $53,809,000 as of December 31, 1995. The
ratio of capital to total assets as of March 31, 1996 is 11.5%, which is down
.3% from the December 31, 1996 ratio of 11.8%. Stockholders' equity increased
.27% compared to asset growth of 3.2%, resulting in the lower total capital-to-
total asset ratio. This ratio is substantially higher than the current Federal
Reserve guideline of 6.0%.
As of quarter-end March 31, 1996, the Company's Tier I capital ratio was 18.25%
and its total risk adjusted capital ratio (Tier I plus Tier II) was 19.47%
compared to 18.28% and 19.51%, respectively, as of December 31, 1995. Both of
these ratios exceed the regulatory minimums of 4.0 percent for Tier I and 8.0
percent for total risk adjusted capital. The Company's leverage capital was
11.53% as of March 31, 1996, compared to 11.46% at December 31, 1995,
substantially higher than the 3% regulatory floor.
CAPITAL EXPENDITURES
Through March 31, 1996, the Company recorded year-to-date capital expenditures
totaling approximately $267,000 relating to its general capital expenditures and
the final expenditures for the completion of the North Liberty and Iowa City
offices.
INTEREST RATE SENSITIVITY AND LIQUIDITY
ANALYSIS
Net interest income is the principal source of earnings for the Company. As
such, the profitability of the Company is dependent upon the ability of the
Company to properly manage its rate sensitive assets and liabilities to achieve
optimum earnings potential. This is accomplished by maintaining an appropriate
balance between interest-earning assets and interest-paying liabilities while
maintaining sufficient liquidity to meet the cash flow requirements of
customers. Marketable investments, maturing loans, Federal Funds Purchased in
conjunction with Federal Home Loan Bank advances offer a secondary source of
liquidity to the Company should a mismatch occur between demands for and sources
of funds. Over the past several years the Company has maintained sufficient
liquidity as a result of the maturity schedule of its investment portfolio and
stability of its core deposits. Management continually monitors its liquidity
position and interest rate sensitivity and makes appropriate adjustments as
needed to reduce the adverse effects of changes in market interest rates. Table
1 summarizes various repricing periods of the Company's interest-earnings assets
and interest-paying liabilities as of March 31, 1996. This table indicates that
the Company is asset sensitive within a twelve-month timeframe. Should interest
rates increase in the next year, net interest income may increase. If rates
would decrease, net interest income may decrease. To offset the effects of
decreasing market rates and reduce the exposure of the positive gap, management
could lengthen the maturities of investment securities and could shorten the
maturities of deposits in conjunction with decreasing the interest rates paid on
long-term time deposits.
EFFECT OF INFLATION
Inflation is a significant factor when considering the consolidated balance
sheet and the consolidated income statement. Inflation can directly affect the
level of asset growth during the year as well as the various components of the
income statement. While it is difficult to measure the effect of the inflation
directly, it is the practice of the Company to minimize the impact of inflation
in the future through its asset and liability management program, effective cost
controls and responsive service charge pricing. The ability of the Company to
position itself to minimize the effect of inflation can more readily be seen by
reference to the discussion herein of the Liquidity, Net Interest Income, and
Noninterest Income and Noninterest Expense sections.
11
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit
See Exhibit Index on Page 13
(b) Reports on Form 8-K
The Registrant did not file a Form 8-K in the last three calendar
months.
12
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith or incorporated by reference.
(Documents indicated by an * are incorporated hereby by reference.)
Page No. Of
Exhibit No. Description of Exhibits Form 10-Q
- --------------------------------------------------------------------------------
4 Instruments defining the rights of security holders,
including indentures. See "Description of the
Common Stock of the Holding Company" at *
page 30 of * Amendment No. 1 to the
Registration Statement Form S-4 filed
under Registration Number 33-893 dated
November 12, 1985.
11 Statement re computation of earnings per 14
common and common equivalent share
27 Financial Data Schedule as of March 31, 1996 **
28 Additional Exhibits:
Table 1 - Interest Rate Sensitivity and Liquidity Analysis 15
Table 2 - Analysis of Interest Rate Spread and Margin 16
Table 3 - Non accrual, Past Due and Restructured Loans 17
Table 4 - Summary of Loan Loss Experience 18
Table 5 - Allocation of the Allowance for Loan Losses 19
** Filed herewith.
13
<PAGE>
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORPORATION
AND SUBSIDIARY
(FIRST NATIONAL BANK, IOWA CITY, IOWA)
(FIRST NATIONAL BANK, CEDAR RAPIDS, IOWA)
EXHIBIT 11
STATEMENT RE COMPUTATION OF EARNINGS PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
Three Months Ended
March 31,
------------------------
<S> <C> <C>
1996 1995
--------- ---------
Shares of common stock, beginning (Note 5) 2,383,241 2,373,926
========= =========
Shares of common stock, ending 2,368,766 2,383,241
========= =========
Computation of weighted average number of common and common equivalent shares:
Common shares outstanding at the
beginning of the year 2,383,241 2,373,926
Weighted average number of
shares issued 14,211 8,058
Weighted average of the
common shares redeemed (Note 5) (11,762) (1,848)
Weighted average of the common equivalent shares
attributable to stock options granted, computed
under the treasury stock method 5,850 11,112
--------- ---------
Weighted average number of common and
common equivalent shares (Note 5) 2,391,540 2,391,248
========= =========
Earnings and earnings per common and common equivalent share: (Note 5)
Net income (in thousands) $1,430,000 $1,071,000
========== ==========
Earnings per common and
common equivalent share $ .60 $ .45
========== ==========
Dividends $ .195 $ .185
========== ==========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
INTEREST RATE SENSITIVITY AND LIQUIDITY ANALYSIS
March 31, 1996
-------------------------------------------------------------
MONTHS
-----------------------
After Three After One
Within Through Through Non-
(Dollars in Thousands) Three Twelve Five Years sensitive Total
------------------------------------------- ------------ ------------ ----------- ------------ --------
Interest earning assets:
<S> <C> <C> <C> <C> <C>
Federal funds sold $ 14,350 $ - - $ - - $ - - $ 14,350
Investment securities 24,273 13,815 50,412 33,290 121,790
Loans 44,670 68,358 161,023 19,594 293,645 (2)
Total interest earning assets 83,293 82,173 211,435 52,884 429,785
Interest paying liabilities:
Deposits 80,175 (1) 57,873 100,594 113,188 (1) 351,830 (3)
Long-term debt 450 4,700 11,904 100 17,154
Total interest paying liabilities 80,625 62,573 112,498 113,288 368,984
Net noninterest paying liabilities
Noninterest paying deposits net
of cash and due from banks - - - - - - 25,936 25,936
Other assets, liabilities and equity net - - - - - - 34,865 34,865
Total noninterest rate sensitive assets
and liabilities - - - - - - 60,801 60,801
INTEREST SENSITIVE GAP 2,668 19,600 98,937 (121,205) - -
CUMULATIVE GAP 2,668 22,268 121,205 - - - -
CUMULATIVE % OF SENSITIVE 103% 116% 147% - - - -
ASSETS TO LIABILITIES
<FN>
(1) Based on an historical analysis of NOW, SuperNow, Savings and Money Market account balances, covering a seven year period
running from March, 1989 through December, 1995, a percentage of these deposit balances has been determined to be sensitive
to changes in interest rates. Respectively, approximately 30%, 50%, 30%, and 25% of these deposit balances were determined
to be interest rate sensitive. As such, these percentages of interest rate sensitive deposit balances were classified in the
first column titled "Within three months." The remainder of the balances were classified as noninterest rate sensitive
deposit balances and placed in the last column titled "non-sensitive."
(2) Of the $293,645,000 of total loans, $157,770,000 have fixed rates, while $141,875,000 have variable rates.
(3) Certificates of deposit comprise $189,374,000 of total deposits, while interest-paying demand deposits and savings deposit
balances accounted for $162,456,000 of this total.
</FN>
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
TABLE 2
ANALYSIS OF INTEREST RATE SPREAD AND MARGIN
THREE MONTHS ENDED
----------------------------------------------------------------
MARCH 31,1996 MARCH 31,1995
---------------------------- --------------------------
(Fully taxable-equivalent basis) Average Average Average Average
(Dollars In Thousands) Balance Rates Balance Rates
------------ ----------- ------------ ---------
<S> <C> <C> <C> <C>
Interest earning assets $ 427,628 7.89% $ 406,420 7.84%
Interest paying liabilities 362,128 4.52 346,082 4.24
Net interest spread 3.37 3.60
Net interest margin 4.06 4.23
</TABLE>
16
<PAGE>
TABLE 3
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
The following table summarizes the Registrant's nonaccrual, past due 90 days or
more and restructured loans as to interest or principal payments as of March 31,
1996 and March 31, 1995.
(In Thousands)
-----------------------------------
March 31,1996 March 31, 1995
------------- --------------
Nonaccrual loans $ 142 $ 907
Accruing loans
past due 90
days or more $ 810 $ 24
Restructured
loans None None
As of March 31, 1996 and March 31, 1995 total nonaccrual loans were comprised
primarily of loans collateralized by real estate. Non-accrual of interest may
occur on any loan whenever one or more of the following criteria is evident: (a)
there is substantial deterioration in the financial position of the borrower;
(b) the full payment of interest and principal can no longer be reasonably
expected; (c) the principal or interest on the loan has been in default for a
period of 90 days. In all cases, loans must be placed on nonaccural or charged
off at an earlier date if collection of principal or interest is considered
doubtful. All interest accrued but not collected for loans that are placed on
nonaccrual or charged off is reversed to interest income. The interest on these
loans is accounted for on the cash basis or cost recovery method, until
qualifying for return to accrual. Loans are returned to accrual status when all
the principal and interest amounts contractually due are reasonably assured of
repayment within a reasonable time frame and when the borrower has demonstrated
payment performance of cash or cash equivalents. Given the number of nonaccrual
loans and related underlying collateral, management does not anticipate any
significant impact to earnings.
The Registrant does not have a significant amount of loans which are past due
less than 90 days on which there are serious doubts as to the ability of the
borrowers to comply with the loan repayment terms.
The Registrant has no individual borrower or borrowers engaged in the same or
similar industry exceeding 10% of total loans. The Registrant has no other
interest-bearing assets, other than loans, that meet the nonaccrual, past due,
restructured or potential problem loan criteria. The Registrant has no foreign
loans outstanding.
A loan is considered restructured when the Company allows certain concessions to
financially troubled debtor that would not normally be considered. There were no
trouble debt restructuring loans for the reporting periods.
17
<PAGE>
<TABLE>
<CAPTION>
TABLE 4
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the Registrant's loan loss experience for the
three and nine month periods ended March 31, 1996 and March 31, 1995:
(In Thousands)
------------------------------
Three Months Ended
March 31,1996
1996 1995
------------ ------------
<S> <C> <C>
Balance of loan loss
allowance at
beginning of period $ 3,602 $ 3,354
------------ ------------
Charge-offs:
Commercial, financial
and agricultural $ - - $ 17
Real estate, mortgage 26 - -
Loans to individuals 47 63
------------ ------------
$ 73 $ 80
------------ ------------
Recoveries:
Commercial,
financial and
agricultural $ 2 $ 16
Real estate, mortgage - - 4
Loans to individuals 8 38
------------ ------------
$ 10 $ 58
------------ ------------
Net charge-offs $ 63 $ 22
------------ ------------
Provision for
loan losses (1) $ 72 $ 100
------------ ------------
Balance of loan
loss allowance
at end of period $ 3,611 $ 3,432
============ ============
Percentage of net charge-
offs during period
to average net loans
outstanding .02% .01%
============ ============
<FN>
1) For financial reporting purposes, management regularly reviews the loan
portfolio and determines a provision for loan losses based upon the
impact of economic conditions on the borrower's ability to repay, past
collection experience, the risk characteristics of the loan portfolio
and such other factors which deserve current recognition.
</FN>
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
TABLE 5
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The March 31, 1996 and March 31, 1995 allowance for loan losses have been
allocated as follows:
(In Thousands, Except for Percentages)
March 31, 1996 March 31, 1995
------------------------------------- -----------------------------------
Allocation Allocation
of Percentage of Percentage
Allowance of Loans Allowance of Loans
Amount by in Amount by in
Category Category Category Category
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance applicable to:
Allocated:
Commercial,
financial
and agricultural $3,205 11% $3,032 11%
Real estate 118 74 236 72
Installment Loans
to individuals 191 14 136 16
Unallocated: 97 1 28 1
---------- ---------- ---------- ----------
$3,611 100% $3,432 100%
========== ========== ========== ==========
</TABLE>
Management regularly reviews the loan portfolio and does not expect any unusual
material amount to be charged off in the future which would be significantly
different than the above historical experience.
19
<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 BANCORPORATION
(Registrant)
May 15, 1996 //s//A. Russell Schmeiser
------------------------- --------------------------------------
DATE A. Russell Schmeiser
Executive Vice President,
COO, Treasurer and Secretary
(Duly authorized officer of the
registrant and principal financial
officer)
20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 18,032
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 14,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 121,790
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 293,645
<ALLOWANCE> 3,611
<TOTAL-ASSETS> 467,504
<DEPOSITS> 394,798
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,262
<LONG-TERM> 17,154
0
0
<COMMON> 2,961
<OTHER-SE> 47,329
<TOTAL-LIABILITIES-AND-EQUITY> 467,504
<INTEREST-LOAN> 6,196
<INTEREST-INVEST> 1,813
<INTEREST-OTHER> 142
<INTEREST-TOTAL> 8,151
<INTEREST-DEPOSIT> 3,804
<INTEREST-EXPENSE> 4,067
<INTEREST-INCOME-NET> 4,084
<LOAN-LOSSES> 72
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 737
<INCOME-PRETAX> 2,035
<INCOME-PRE-EXTRAORDINARY> 2,035
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,430
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
<YIELD-ACTUAL> 4.06
<LOANS-NON> 142
<LOANS-PAST> 810
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5
<ALLOWANCE-OPEN> 3,602
<CHARGE-OFFS> 73
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 3,611
<ALLOWANCE-DOMESTIC> 3,611
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 97
</TABLE>
