<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For the quarter ended
Commission File Number: 0-22394
FIRST FINANCIAL BANCORP, INC.
(exact name of registrant as specified in its charter)
Delaware 36-3899034
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
121 East Locust Street, Belvidere, Illinois 61008
(Address of Principal Executive Offices) (Zip Code)
(815) 544-3167 or (800) 544-3093
(Registrants Telephone Number including area code)
Indicate by check mark whether the registrant (1) has filed all the
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 the issuer's classes of
common stock, as of the latest practicable date.
As of October 31, 1996 the Registrant had 452,470 shares issued and
outstanding.
<PAGE>2
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. FINANCIAL STATEMENTS - UNAUDITED Number
Consolidated Statement of Financial Condition as of September 30, 1996 3
Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 1996 and 1995 4
Consolidated Statement of Stockholders' Equity for the Nine
Months Ended September 30, 1996 5
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995 6
Notes to Unaudited Consolidated Financial Statements 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
Part II. OTHER INFORMATION 19
<PAGE>3
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF
FINANCIAL CONDITION
---------------------------------------------------
(Unaudited)
<S> <C>
September 30,
1996
---------------
ASSETS (In Thousands)
Cash on hand and non-interest-earning deposits $454
Interest-earning deposits 1,422
---------------
Total cash and cash equivalents 1,876
Investment securities available for sale, at market value 8,742
Mortgage-backed securities available for sale, at market value 8,757
Investment securities held to maturity (market value of $79) 79
Mortgage-backed securities held to maturity (market value of $1,020) 1,070
First mortgage loans held for sale 390
Loans receivable, net 72,640
Accrued interest receivable 584
Premises and equipment 969
Investment in stock of Federal Home Loan Bank of
Chicago, at cost 1,148
Other assets 888
---------------
Total assets $97,143
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $65,884
Borrowings from FHLB 22,550
Advance payments by borrowers for taxes and
insurance 178
Other liabilities 1,021
---------------
Total liabilities 89,633
---------------
COMMITMENTS AND CONTINGENCIES (See Notes)
STOCKHOLDERS' EQUITY
Common Stock - $0.10 par value, 1,500,000 shares authorized,
501,086 shares issued and 452,309 shares outstand 51
Additional paid-in capital 3,736
Retained earnings, substantially restricted 5,214
Treasury stock, at cost, 35,190 shares (841)
Common stock purchased by:
Employee stock ownership plan (109)
Management recognition and retention plans (26)
Net unrealized loss on investment securities
available for sale, net of taxes (515)
---------------
Total stockholders' equity 7,510
---------------
Total liabilities and stockholders' equity $97,143
===============
</TABLE>
<PAGE>4
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------------
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
------------- ------------- ------------- --------------
(In Thousands)
Interest income:
First mortgage loans $1,218 $861 $3,313 $2,542
Other loans 187 157 502 431
Mortgage-backed securities 150 152 469 458
Investment securities 151 144 393 446
Interest-earning deposits 6 28 37 56
------------- ------------- ------------- -------------
Total interest income 1,712 1,342 4,714 3,933
------------- ------------- ------------- -------------
Interest expense:
Deposit accounts 738 745 2,223 2,017
FHLB advances 290 0 521 31
------------- ------------- ------------- -------------
Total interest expense 1,028 745 2,744 2,048
------------- ------------- ------------- -------------
Net interest income 684 597 1,970 1,885
Provision for loss on loans 70 35 125 39
------------- ------------- ------------- -------------
Net interest income after provision for loss 614 562 1,845 1,846
------------- ------------- ------------- -------------
Non-interest income:
Loan servicing fees and charges 54 57 132 139
Service charges on deposit accounts 41 43 133 123
Gain on sales of loans 23 37 64 106
Loss on sales of investments and mortgage-backed securities 0 0 (14) 0
Loss on sales/disposal of assets (1) 0 (10) 0
Other 18 20 45 255
------------- ------------- ------------ -------------
Total non-interest income 135 157 350 623
------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits 289 275 890 1,151
Occupancy and equipment 61 54 178 149
Data processing 38 35 121 106
Federal deposit insurance premiums 458 37 534 105
Loan origination and servicing 44 29 116 53
Other 123 100 401 337
------------- ------------- ------------- -------------
Total non-interest expense 1,013 530 2,240 1,901
------------- ------------- ------------- -------------
Income (loss) before income taxes (264) 189 (45) 568
Income taxes (benefit) (95) (86) (26) 40
------------- ------------- ------------- -------------
Net income (loss) ($169) $275 ($19) $528
------------- ------------- ------------- -------------
Primary earnings (loss) per share ($0.38) $0.58 ($0.04) $1.11
</TABLE>
<PAGE>5
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized Loss
on Investment
Additional Stock Stock Securities
Common Paid-in Retained Treasury Purchased Purchased Available for
Stock Capital Earnings Stock by ESOP by RRP's Sale Total
--------- ---------- ---------- --------- ---------- ----------- --------------- ---------
Balance, December 31, 1995 $50 $3,677 $5,233 ($460) ($149) ($31) ($448) $7,872
Net income -- -- (19) -- -- -- -- (19)
Amortization of RRP's -- -- -- -- -- 5 -- 5
Option Proceeds 1 32 -- -- -- -- -- 33
Release of earned ESOP
shares, 5,085 shares -- 27 -- -- 40 -- -- 67
Purchase of treasury stock,
23,693 shares, at cost -- -- -- (381) -- -- -- (381)
Net change in unrealized loss
on investment securities
available for sale, net of
deferred income taxes of -- -- -- -- -- -- (67) (67)
--------- ---------- ---------- --------- ---------- ----------- --------------- ----------
Balance, September 30, 1996 $51 $3,736 $5,214 ($841) ($109) ($26) ($515) $7,510
========= ========== ========== ========= ========== =========== =============== ==========
</TABLE>
<PAGE>6
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------
(Unaudited)
Nine Months Ended
September 30,
----------------------
<S> <C> <C>
1996 1995
---------- ---------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ($19) $528
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of:
Premiums, discounts and deferred fees on loans, mortgage-backed
and investment securities 15 11
Net excess servicing fees and originated mortgage servicing rights 24 13
Management recognition and retention plans 5 89
Employee stock ownership plan 67 70
Provision for losses on loans and foreclosed real estate 126 39
FHLB stock dividends 0 (7)
(Gain) loss on sale of:
Loans (64) (106)
Investment and mortgage-backed securities 14 0
Other 9 2
Depreciation of premises and equipment 78 56
Originations of loans held for sale, net of origination fees and principal collected (5,941) (5,135)
Proceeds from sales of loans held for sale 5,940 4,951
Increase (decrease) in cash flows due to other changes in:
Accrued interest receivable (123) 18
Other assets (135) (75)
Other liabilities 507 (34)
-------- ---------
Net cash provided by operating activities 503 420
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations net of principal collected on loans (15,140) (2,741)
Purchases of:
Whole loan participations (7,763) 0
Mortgage-backed securities available for sale (1,250) (137)
Investment securities available for sale (3,901) (2,242)
Stock of the FHLB of Chicago (667) (34)
Proceeds from:
Sales of investment securities available for sale 736 0
Maturities and calls of investment securities available for sale 4,000 1,950
Maturities and calls of investment securities held to maturity 200 500
Principal collected on mortgage-backed securities 1,081 543
Purchase of premises and equipment (255) (72)
-------- ---------
Net cash used in investing activities (22,959) (2,233)
</TABLE>
<PAGE>7
<TABLE>
-------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITES
Net increase in deposit accounts (346) 6,870
Issuance of common stock 33 40
Repurchase of common stock (381) (416)
Borrowings on advances from the FHLB of Chicago 38,850 3,250
Principal payments on advances from the FHLB of Chicago (16,300) (6,250)
Net increase in advance payments by borrowers for taxes and insurance (82) (139)
-------- ---------
Net cash provided by financing activities 21,774 3,355
-------- ---------
Net increase (decrease) in cash and cash equivalents (682) 1,542
Cash and cash equivalents at beginning of period 2,558 1,899
-------- ---------
Cash and equivalents at end of period $1,876 $3,441
-------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $2,652 $2,034
Income Taxes 70 165
Noncash Items
Transfer of held for sale loans to portfolio, at market 41 391
</TABLE>
<PAGE>8
FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
September 30, 1996 and 1995
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for
interim financial information and with the instructions to Form 10-QSB and
Item 310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair comparison have been included.
The results of operations and other data for the interim periods are not
necessarily indicative of results that may be expected for the year ending
December 31, 1996.
The unaudited consolidated financial statements consist of the statement of
financial condition as of September 30, 1996, the statements of income for
the three and nine months ended September 30, 1996 and 1995, the statement of
stockholder's equity for the nine months ended September 30, 1996, and the
statements of cash flows for the nine months ended September 30, 1996 and
1995, which include the accounts of First Financial Bancorp, Inc.
(the "Company") and its wholly-owned subsidiary, First Federal Savings Bank
(the "Bank") and the Bank's wholly-owned subsidiary, First Financial Services
of Belvidere Illinois, Inc., for the three and nine months ended September
30, 1996 and 1995. All material intercompany accounts and transactions have
been eliminated in consolidation.
(2) CONVERSION TO STOCK OWNERSHIP
On June 10, 1993, the Board of Directors of the Bank adopted a plan of
conversion pursuant to which the Bank converted from a federally chartered
mutual savings and loan association to a federally chartered stock savings
bank with the concurrent formation of the Company. On October 1, 1993,
pursuant to the plan of conversion, the Company issued 484,338 shares of
common stock at $8.00 per share to depositors and borrowers of the Bank and
to community members during the subscription offering. Total net proceeds
were $3,473,471 and are reflected as common stock and additional paid in
capital in the accompanying consolidated statement of financial condition.
The Company utilized $2,200,000 of the net proceeds to acquire all of the
issued and outstanding capital stock of the Bank.
As a part of the conversion to stock form, the Bank formed an Employee Stock
Ownership Plan ("ESOP") for eligible employees. The ESOP purchased 33,903
shares of the Company's stock at $8.00 per share. The ESOP borrowed $271,224
from the Company to purchase the shares. The Bank will make scheduled
contributions for 5 years to the ESOP sufficient to service the amount
borrowed. Additionally, the Bank established Recognition and Retention Plans,
which purchased in the aggregate 19,374 shares of the Company's stock in the
conversion at $8.00 per share. The funds used to acquire the Recognition and
Retention Plans' shares were contributed by the Bank. The total shares
authorized were awarded to officers, outside directors and certain key
employees in order to provide them with a proprietary interest in the Company
in a manner designed to encourage such personnel to remain with the Bank.
The cost will be amortized to compensation expense over three years as the
individuals become vested in their stock awards.
(3) EARNINGS PER SHARE
Primary earnings per share information for the three and nine months ended
September 30, 1996 and 1995 is based on the weighted average number of common
shares outstanding during the respective periods of 448,901 and 471,717 for
the three months ended September 30, and 453,268 and 474,127 for the nine
months ended September 30. The Bank's ESOP held 15,258 unallocated shares as
of September 30, 1996, and the Recognition and Retention Plans held 3,043
unallocated shares. Fully diluted earnings per share is not separately
disclosed since the effect of dilution is immaterial.
(4) COMMITMENTS AND CONTINGENCIES
Commitments to originate mortgage loans at September 30, 1996 were $3.0
million, of which $1.1 million were fixed rate loans with rates ranging from
7.750% to 10.125% with a weighted average rate of 8.962%. Commitments to
sell mortgage loans totaled $60,000 at September 30, 1996. As of September
30, 1996 remaining balances in loans sold under recourse agreements totaled
$1.7 million, unused adjustable rate lines of credit totaled $3.3 million and
unused lines of credit on credit cards totaled $1.8 million.
The Bank has pledged certain mortgage-backed securities and U.S. agency
securities worth $5.9 million at September 30, 1996 as collateral for
deposits in excess of federal deposit insurance limitations.
<PAGE>9
(5) FDIC SAIF ASSESSMENT
On September 30, 1996, the President signed into law the Deposit Insurance
Funds Act of 1996. Certain provisions within the Act require the Company to
pay a one-time assessment at the rate of $0.657 per $100.00 in assessable
deposits as of March 31, 1995 to recapitalize the Savings Association
Insurance Fund (SAIF). The total assessment for the Company, before taxes,
amounts to $417,000. This amount is included on the statement of operations
for the three and nine months ended September 30, 1996 under Federal deposit
insurance premiums. Net of taxes, the $276,000 assessment equates to a per
share charge of $0.61. Pursuant to this legislation, the FDIC/SAIF is
statutorily recapitalized and the Company's premiums for the fourth quarter
of 1996 are expected to drop from the current level of $0.23 per $100.00 in
assessable deposits to $0.18 per $100.00 and subsequently to $0.065 per
$100.00 for 1997 and beyond. Based on September 30, 1996 deposits, the
resulting savings in deposit insurance will be $0.07 per share in the fourth
quarter of 1996, and $0.24 per share for 1997. However, there can be no
assurance that the FDIC/SAIF will be able to maintain its statutory level of
capitalization during the coming years. Failure to maintain its capitalization
may impact the amount of savings negatively.
(7) LEGISLATIVE MATTERS
In August 1996, legislation was enacted requiring recapture of tax bad debt
reserves accumulated after 1987 over a six-year period starting in 1996.
However, the payment of the tax can be deferred in each of 1996 and 1997 if
an institution originates at least the same average annual principal amount
of mortgage loans that it originated in the six years prior to 1996.
Management estimates that the impact of this legislation will not be material
to the financial position or operations of the Company.
(8) SUBSEQUENT EVENTS
In October of 1996, the Company recorded an after-tax loss of $266,000 in
conjunction with the sale of $3.2 million in dual index short- to medium-term
agency notes purchased after the conversion in 1993. The sale was executed
as a restructuring of the balance sheet. The proceeds of the sale will be
reinvested in higher yielding assets through the remainder of 1996 and early
in 1997.
The Company notified the OTS during the month of October of its intention to
establish a branch facility in Rockford, Illinois. The Company has
maintained a mortgage origination office in Rockford since 1986 and is
seeking to better serve its existing customers in the area as well as serve the
rest of the Rockford market which has seen many of its community banks
acquired in recent years.
This will be the Company's first branching activity since the establishment of
its facility on the north side of Belvidere in 1978. The Company was
notified by the OTS October 23, 1996 that the agency takes no objections to
the establishment of such a branch by the Company.
<PAGE>10
(9) ADOPTION OF SFAS NO. 122
In May of 1995, the Financial Accounting Standards Board released SFAS No. 122
(SFAS 122), Accounting for Mortgage Servicing Rights, an amendment to FASB
Statement No. 65. SFAS 122 eliminates the accounting distinction between
rights to service mortgage loans for others that are acquired through loan
originations and those acquired through purchase transactions. Under SFAS
122 a banking enterprise allocates the total cost of originating a mortgage
loan between the loan without the servicing right and the right to service
that loan based on their relative fair market values, if it is practicable
for the loan. The assets are then amortized over the average life of the loan.
Periodically, the assets are examined on a disaggregated basis for impairment
based on fair values.
The Company elected to implement the standard as of January 1, 1995. During
the nine months ended September 30, 1996, the Company capitalized $25,000 of
originated mortgage servicing rights and gains on sales of loans were
increased by that amount. During the nine months ended September 30, 1996,
the Company recognized an impairment of $11,000 on originated mortgage
servicing rights with a book value of $90,000. This impairment was the
result of increased prepayments due to higher levels of refinancing activity
during the nine months for long term fixed rate loans similar to those which
the Company services.
(10) SFAS NO. 123
During 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation" which provides new accounting guidelines over the treatment of
employee stock options. The Statement gives entities a choice of either
adopting a new fair value method of accounting for employee stock options and
expensing any related compensation costs in the income statement, or
continuing to apply Accounting Principals Board Opinion No. 25 and provide
pro forma disclosure of the effect for financial statements beginning after
December 15, 1995. The Company currently intends to adopt the disclosure
method of this Statement.
(11) SFAS NO. 125
In June of 1996 the Financial Accounting Standards Board released Statement
No. 125 (SFAS 125) "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities. SFAS 125 applies to transfers and
extinguishments after December 31, 1996 and early or retroactive application
is not permitted.
<PAGE>11
ITEM 2
FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
First Financial Bancorp, Inc. (the "Company") is the holding company for
First Federal Savings Bank (the "Bank"), a federally chartered stock savings
bank. On October 1, 1993, the Bank completed its conversion from a mutual
savings and loan association to a stock savings bank, and in connection
herewith, the Company issued and sold to the public 484,338 shares of its
common stock at $8.00 per share. The Company utilized approximately 63% of
the net proceeds to acquire all of the issued and outstanding stock of the
Bank (100 shares). As a result of the conversion, the Bank's capital was
increased by approximately $2.2 million.
First Financial Bancorp, Inc. is headquartered in Belvidere, Illinois and its
principal business currently consists of acting as the holding company of its
wholly-owned subsidiary, First Federal Savings Bank.
REGULATORY CAPITAL REQUIREMENTS
Current federal regulations, as mandated by the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), require
institutions to have a minimum regulatory tangible capital equal to 1.5% of
total assets, a minimum 3% core capital ratio, and a minimum 8% risk-based
capital ratio. Core capital is defined as common stockholder's equity
(including retained earnings), certain noncumulative perpetual preferred
stock and related surplus, minority interests in equity accounts of
consolidated subsidiaries, less intangibles other than certain purchased
mortgage servicing rights ("PMSRs").
The risk-based capital standard for savings institutions requires the
maintenance of total capital (which is defined as core capital and
supplementary capital) to risk-weighted assets of 8%. In determining the
amount of risk-weighted assets, all assets, including certain off-balance sheet
assets, are multiplied by a risk weight of 0% to 100%, as assigned by the OTS
capital regulation, based on the risks OTS believes are inherent in the type
of asset. The components of core capital are equivalent to those discussed
earlier under the 3% leverage standard. The components of supplementary
capital currently include cumulative preferred stock, long-term perpetual
preferred stock, mandatory convertible securities, subordinated debt and
intermediate preferred stock, and allowance for loans and lease losses.
Allowance for loan and leases losses includable in supplementary capital is
limited to a maximum of 1.25% of risk-adjusted assets. Overall, the amount
of supplementary capital included in total capital cannot exceed 100% of core
capital.
FDICIA (Federal Deposit Insurance Corporation Improvement Act of 1991)
required that the OTS (and other federal banking agencies) revise, in 1993,
risk-based capital standards, with appropriate transition rules, to ensure
that they take into account interest rate risk, concentration of credit risk
and the risks of nontraditional activities. On August 31, 1993, the OTS
issued a final rule which sets forth the methodology for calculating an
interest rate risk component that was incorporated into the OTS regulatory
capital rule effective January 1, 1994. Savings institutions with assets
less than $300 million and risk-based capital ratios in excess of 12% are not
subject to the interest rate risk component. The rule also provides that the
Director of the OTS may waive or defer an institution's interest rate risk
component on a case-by-case basis. The Bank has been notified that it is
currently exempt from the interest rate risk component.
<PAGE>12
At September 30, 1996, the Bank was in compliance with the capital
requirements, summarized as follows:
<TABLE>
<CAPTION>
Regulatory
Capital
Requirement Actual Capital Excess Capital
----------- --------------- --------------
% Amount % Amount % Amount
----- -------- ----- -------- ----- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible 1 1.50% $1,461 7.21% $7,023 5.71% $5,562
Core 1 3.00 2,922 7.21 7,023 4.21 4,101
Risk-Based 2
Current 8.00 4,109 14.46 7,427 6.46 3,318
Total assets for regulatory purposes $97,404
Total risk-weighted assets 51,368
------------------------------------------------------------------------
1 Percentages represent percent of total assets for regulatory purposes.
2 Percentages represent percent of total risk weighted assets.
</TABLE>
<TABLE>
<CAPTION>
At September 30, 1996, the difference between stockholder's equity in accordance with generally
accepted accounting principles (GAAP) and regulatory capital are summarized as follows:
(In Thousands)
<S> <C>
GAAP capital $6,484
Net unrealized loss on securities available for sale 539
-------
Capital for regulatory purposes $7,023
General loan loss allowances 412
Originated mortgage servicing rights (8)
-------
Risk-based capital $7,427
=======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, principal and interest
payments on loans and mortgage-backed securities, custodial account balances
held for borrowers of serviced loans and, advances from the Federal Home Loan
Bank of Chicago ("FHLB-Chicago"). While maturities and scheduled
amortization of loans and mortgage-backed securities are predictable sources
of funds, deposit flows and mortgage prepayments are greatly influenced by
general interest rates, economic conditions, and competition.
The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which may be varied at the direction
of the OTS depending upon economic conditions and deposit flows, is based
upon a percentage of the average daily balance of net deposits and short term
borrowings. The required ratio is currently 5.0%. The Bank's liquidity
ratio was 10.07% at September 30, 1996 compared to 14.4% at December 31, 1995.
The decrease reflects the leveraging of the Banks capital with borrowings and
the direction of assets towards consumer and mortgage lending as opposed to
investment securities.
The Bank's most liquid assets are cash and cash equivalents, which include
investments in highly liquid, short-term investments. The levels of these
assets are dependent on the Bank's operating, financing, lending, and
investing activities during any given period. At September 30, 1996, cash
and cash equivalents totaled $1.9 million as compared to $2.6 million at
December 31, 1995.
The Bank's cash flows are comprised of three classifications: cash flows
from operating activities, cash flows from investing activities, and cash
flows from financing activities. Cash flows provided by operating activities
for the nine months ended September 30, 1996, consisted primarily of proceeds
from sales of mortgage loans held for sale of $5.9 million offset by
originations, net of origination fees and principal repayments on such loans,
of $5.9 million. Cash flows provided by operating activities for the nine
months ended September 30, 1995 consisted primarily of sales of mortgage
loans held for sale of $5.0 million offset by $5.1 million in originations,
net of origination fees and principal repayments of such loans.
<PAGE>13
Cash flows used in investing activities for the nine months ended September
30, 1996 consisted primarily of $15.1 million in portfolio loan originations,
net of principal collected, purchases of whole loan participations of $7.8
million, purchases of mortgage backed and investment securities of $5.2
million, offset by sales, maturities, calls and principal repayments of
such securities of $6.0 million. Cash flows used in investing activities
for the nine months ended September 30, 1995 consisted primarily of
originations of portfolio loans of $2.7 million, net of principal collected
and purchases of investment securities of $2.2 million offset by maturities
and calls of such securities of $2.5 million and principal repayments on
mortgage-backed securities of $0.5 million.
Cash flows provided by financing activities for the nine months ended
September 30, 1996 consisted of borrowings from the FHLB Chicago of $38.9
million, offset by $16.3 million in principal repayments on such borrowings,
outflows from deposit accounts of $0.3 million, a net decrease of $0.1 million
in advanced payments for taxes and insurance and repurchase of common stock
totaling $0.4 million as the Company completed its OTS-approved 5% stock
repurchase program, repurchasing 23,594 shares.
Cash provided by financing activities for the nine months ended September 30,
1995 consisted of inflows to deposit accounts of $6.9 million, borrowings
from the FHLB of Chicago of $3.3 million, offset by $6.3 million in principal
repayments on such borrowings, a net decrease of $0.1 million in advanced
payments for taxes and insurance and repurchase of common stock of $0.4
million as the Company completed its OTS-approved 5% stock repurchase
program, repurchasing 24,298 shares.
At September 30, 1996, the Bank had outstanding loan commitments of $3.0
million. The Bank anticipates that it will have sufficient funds available
to meet its current loan origination and purchase commitments. Certificates
of deposit which are scheduled to mature in less than one year from September
30, 1996, totaled $25.0 million. Management believes that a significant
portion of such deposits will remain with the Bank.
CHANGES IN FINANCIAL CONDITION
As of September 30, 1996, total assets of the Company were $97.1 million, an
increase of $22.2 million, or 29.7%, from December 31, 1995 assets of $74.9
million.
Cash and cash equivalents totaled $1.9 million at September 30, 1996, a
decrease of $0.7 million, or 26.7% from December 31, 1995.
Investment securities held to maturity and available for sale totaled $8.8
million at September 30, 1996, a decrease of $1.0 million, or 9.9%, from the
December 31, 1995 total of $9.8 million. Calls, maturities and sales of $4.9
million were partially offset by purchases of $3.9 million. Mortgage-backed
securities held to maturity and available for sale totaled $9.8 million at
September 30, 1996, unchanged from the December 31, 1995 total. Purchases of
$1.3 million were offset by principal repayments of $1.0 million and market
value declines of $0.3 million.
First mortgage loans held for sale totaled $0.4 million at September 30,
1996, unchanged from December 31, 1995. Originations, net of origination fees
and principal collected were equal to sales of first mortgage loans with both
at $5.9 million. Commitments to sell first mortgage loans at September 30,
1996 were $0.1 million compared to $0.3 million at December 31, 1995.
Net loans receivable totaled $72.6 million at September 30, 1996 as compared
to $49.8 million at December 31, 1995, an increase of $22.8 million, or
45.7%. The increase in loans is primarily attributable to management
directing more originations to the Company's portfolio in an effort to
increase the interest income of the Company. Loans serviced for others
totaled 1,083 loans with a balance of $53.2 million at September 30, 1996, as
compared to 1,155 loans with a balance of $55.8 million at December 31, 1995.
Deposit accounts totaled $65.9 million at September 30, 1996 as compared to
$66.2 million at December 31, 1995, a decrease of $0.3 million, or 0.5%. The
slight decrease in the deposit base materialized as management analyzed
alternate funding sources for the Company's growth. FHLB advances proved to
be a more cost effective alternative considering the deposit insurance
premium disparity during the nine months ended September 30, 1996. Certain
deposit products were highlighted throughout the course of the nine months in
order to retain existing depositors. In addition, the Company introduced
check imaging to the Boone county market.
Advances from the Federal Home Loan Bank of Chicago totaled $22.6 million at
September 30, 1996, an increase of $22.6 million from December 31, 1995. The
Company began using advances in lieu of deposits to facilitate the growth
that it has been able to experience in its asset base. With the resolution
of the FDIC/SAIF problem, management anticipates redirecting portions of the
liability portfolio into deposit products.
<PAGE>14
<TABLE>
<CAPTION>
ASSET QUALITY
The following table sets forth information regarding loans delinquent more
than 90 days, non- performing loans less than 90 days delinquent and real
estate owned.
At September At December
30, 1996 31, 1995
------------ -----------
(Dollars in Thousands)
-----------------------------
<S> <C> <C>
Loans delinquent 90 days or more
Accruing:
First mortgage loans:
1-4 family residential $198 $196
Other loans 2 3
----- -----
Total $200 $199
Non-accruing:
First mortgage loans
1-4 family residential $143 $ 82
Other loans 73 118
----- -----
Total $216 $200
Loans delinquent 89 days or less
Other loans 6 19
Total non-performing loans $422 $418
===== =====
Total real estate owned, net of related
allowances for losses $ 0 $ 0
Total non-performing assets $422 $418
===== =====
Total loans delinquent 90 days or more
to net loans receivable 1 0.58% 0.83%
Total loans delinquent 90 days or more
to total assets 0.43 0.56
Total non-performing loans and REO to
total assets 0.43 0.56
</TABLE>
- - - --------------------------------------------------------------------------
1 Net loans receivable includes loans held for sale of $390,000 and $391,000 at
September 30, 1996 and December 31, 1995 respectively .
An allowance for loan losses is maintained at a level considered by management
to be adequate to absorb future loan losses. Management of the Bank, in
determining the provision for loan losses, considers the risks inherent in
its portfolio and changes in the nature and volume of its loan activities,
along with general economic conditions. The Bank maintains a loan review
system which allows for a periodic review of its loan portfolio and the early
identification of potential problem loans. Such system takes into
consideration, among other things, delinquency status, size of loans, type of
collateral and financial condition of the borrowers. The delinquencies have
been and are expected to remain relatively stable, and management believes
that the provision balance at September 30, 1996 is both adequate to absorb
any future losses if the real estate market experienced any weaknesses or if
the local economy were to experience a recessionary period, and is
representative of a conservative approach. Although the Bank maintains its
allowance for losses on loans at a level which it considers to be adequate to
provide for potential losses, there can be no assurance that such losses will
not exceed the estimated amounts or that the Bank will not be required to make
additions to the allowance for losses on loans in the future. Future
additions to the Bank's allowance for loan losses and any changes in the
related ratio of the allowance for loan losses to non-performing loans are
dependent upon the economy, changes in real estate values and interest rates,
and inflation.
The allowance for loan loss was $445,000 at September 30, 1996, which
represented 105.45% of non-performing loans and non-performing assets. These
ratios compare to 78.95% of non-performing loans and non-performing assets at
December 31, 1995. The increased allowance to non-performing assets ratio
reflects the changing makeup of the Company's loan portfolio including the
success with the Company's home equity line of credit program as well as the
issuance of its new credit card.
<PAGE>15
RESULTS OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996
AND 1995.
GENERAL
The net loss for the three months ended September 30, 1996 was $169,000
compared to net income of $275,000 for the three months ended September 30,
1995, a decrease of $444,000, or 161.5%. Excluding the after tax effect of
the FDIC/SAIF assessment, a non-recurring event, net income for the three
months ended September 30, 1996 was $107,000 while net income for the three
months ended September 30, 1995 was $109,000 exclusive of a non-recurring
taxation issue. After excluding the non-recurring events, the slight
decrease in the earnings from year to year was due to the increase in the
Company's cost of funds as a result of the deposit insurance premium
disparity coupled with a decrease in non-interest income of $22,000, and an
increase in non-interest expense, exclusive of the two aforementioned issues,
of $40,000. Non-interest expense for the three months ended September 30,
1996, exclusive of the FDIC/SAIF assessment and the taxation issue,
increased 7.2%, or $40,000, from the three month ended September 30, 1995,
while non-interest income decreased $22,000, or 14.0% to $135,000 for the
three months ended September 30, 1996, from $157,000 for the three months
ended September 30, 1995. Total interest income increased $370,000 or 27.6% to
$1,712,000 for the three months ended September 30, 1996, from $1,342,000 for
the three months ended September 30, 1995, while interest expense increased
$283,000, or 38.0%, to $1,028,000 for the three months ended September 30,
1996, from $745,000 for the three months ended September 30, 1995.
NET INTEREST INCOME
The Company's net interest income before provision for loan losses was
$684,000 for the three months ended September 30, 1996 as compared to
$597,000 for the three months ended September 30, 1995, an increase of
$87,000, or 14.6%. This increase in net interest income in the 1996 period
was primarily due to increases in interest income on first mortgage loans and
other loans attributable to large increases in the average balances of such
accounts more than offsetting the interest expense on FHLB advances.
Interest income on interest-earning assets totaled $1,712,000 for the three
months ended September 30, 1996, as compared to $1,342,000 for the same
period in 1995, an increase of $370,000 or 27.6%. Interest expense on
interest-bearing liabilities totaled $1,028,000 for the three months ended
September 30, 1996, as compared to $745,000 for the same period in 1995, an
increase of $283,000, or 38.0%. The increase in net interest income occurred
notwithstanding a decrease in the Company's net interest spread, which
decreased 30 basis points to 2.60% for the three months ended September 30,
1996 from 2.90% for the three months ended September 30, 1995.
PROVISION FOR LOAN LOSSES
The Bank's provision for loan losses increased $35,000 for the three months
ended September 30, 1996 to $70,000 for the three months ended September 30,
1996 from $35,000 for the three months ended September 30, 1995. The
increased provision was due to the exceptional growth in the loan portfolio
as well as coverage for the Company's issuance of its new credit card. The
card was marketed, starting late in the first quarter, to the Company's
existing qualifying customers and then to non-customers in Boone County.
Non-performing loans increased to $422,000 at September 30, 1996 from
$418,000 at December 31, 1995.
NON-INTEREST INCOME
Non-interest income decreased $22,000, or 14.0%, to $135,000 for the three
months ended September 30, 1996 from $157,000 for the same period in 1995.
The primary reason for the drop was the decrease in profits on sales of
loans. Because the Company has retained 15 year mortgages in its portfolio
throughout the course of 1996, there have been fewer loans originated for
sale into the secondary market. The resulting decreased balances on loans
serviced for others has also led to a decline in loan servicing fees and
charges of $3,000 to $54,000 for the three months ended September 30, 1996.
Loans serviced for others carried balances of $53.2 million at September 30,
1996 compared to $55.5 million at September 30, 1995.
<PAGE>16
NON-INTEREST EXPENSE
Non-interest expense, net of the effect of the non-recurring FDIC/SAIF
assessment in 1996 and the taxation issue from 1995, increased $40,000, or
7.2%, to $596,000 for the three months ended September 30, 1996 from $556,000
for the three months ended September 30, 1995. The increase was due primarily
to increases of $15,000 and $14,000 respectively in loan origination and
servicing expenses and compensation and benefits. The primary reason for the
increase in loan origination and servicing expenses was the accelerated level
of commissions paid to originators due to the increase in origination volume.
The increase in compensation expense is primarily attributable to general salary
level increases. In addition, occupancy and equipment increased $7,000 or
13.0% to $61,000 for the three months ended September 30, 1996, from $54,000
for the three months ended September 30, 1995. Such increases were the
result of increased investment in facilities and technology to improve
efficiency. Federal deposit insurance premiums, net of the effect of the
FDIC/SAIF assessment, also increased $4,000, or 10.8%, to $41,000 for the
three months ended September 30, 1996. With the FDIC/SAIF issue resolved,
deposit insurance rates are expected to decline 21.7% in the fourth quarter
of 1996 to $0.18 per $100.00 in assessable deposits and an additional 51.0%
in 1997 to $0.065 per $100.00 in assessable deposits.
SECONDARY MORTGAGE MARKET LOAN ACTIVITY
Proceeds from the sales of first mortgage loans into the secondary mortgage
market totaled $2.4 million and $2.9 million during the three months ended
September 30, 1996 and 1995, respectively. Gain on sales of mortgage loans,
net of a valuation allowance, for the three months ended September 30, 1996
totaled $23,000 compared to $37,000 for the same period in 1995. The decrease
was attributable to the lower volume of loans sold into the secondary market
during the three months ended September 30, 1996.
INCOME TAXES
For the three months ended September 30, 1996 income tax expense decreased
9,000, to a credit of $95,000 from a credit of $86,000 for the three months
ended September 30, 1995. The primary reason for the decrease was the
decrease in taxable income as a result of the FDIC/SAIF assessment. The
credit in the 1995 period related to income taxes previously accrued for
deductions claimed on the Bank's 1990 and 1991 Federal income tax returns.
The deductions were not realized for financial reporting purposes, since the
deductions were based upon issues that have yet to be settled by the IRS in
tax court. In addition, non-interest expense for the three months ended
September 30, 1995 included a credit of $26,000 for reduction of interest
previously accrued on the aforementioned tax liability.
RESULTS OF OPERATIONS - COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996
AND 1995.
GENERAL
The net loss for the nine months ended September 30, 1996 was $19,000
compared to net income of $528,000 for the nine months ended September 30,
1995, a decrease of $547,000, or 103.6%. Excluding the after tax effect of
the FDIC/SAIF assessment and the aforementioned taxation issue, non-recurring
events, net income for the nine months ended September 30, 1996 was $257,000
while net income for the nine months ended September 30, 1995 was $362,000.
The decrease in net income was primarily attributable to the increase in
non-interest expense of $104,000, excluding the benefits accruing to Mr.
David L. Beasley's estate(the Company's former Chief Executive Officer) upon
his death in the amount of $208,000, and the decrease in non-interest income
of $82,000, excluding the effects of the FDIC/SAIF assessment, the $191,000
in other income from a life insurance policy the Company held on Mr. Beasley
at the time of his death and the aforementioned taxation issue.
NET INTEREST INCOME
The Company's net interest income before provision for loan losses was
$1,970,000 for the nine months ended September 30, 1996 as compared to
$1,885,000 for the nine months ended September 30, 1995, an increase of
$85,000, or 4.5%. This increase in net interest income in the 1996 period was
primarily due to increases in interest income on first mortgage loans and
other loans attributable to large increases in the average balaces of such
assets more than offsetting the increase in interest expense on FHLB advances
and deposit accounts. Interest income on interest-earning assets totaled
$4,714,000 for the nine months ended September 30, 1996 as compared to
$3,933,000 for the same period in 1995, an increase of $781,000, or 19.9%.
Interest expense on interest-bearing liabilities totaled $2,744,000 for the
nine months ended September 30, 1996, as compared to $2,048,000 for the same
period in 1995, an increase of $696,000, or 34.0%. The increase in net
interest income occurred notwithstanding a decrease in the Company's net
interest spread, which decreased 52 basis points to 2.67% for the nine months
ended September 30, 1996 from 3.19% for the nine months ended September 30,
1995.
<PAGE>17
PROVISION FOR LOAN LOSSES
The Bank's provision for loan losses increased $86,000 for the nine months
ended September 30, 1996 to $125,000 for the nine months ended September 30,
1996 from $39,000 for the nine months ended September 30, 1995. The
increased provision was a result of management's evaluation of the general
valuation allowance in relation to the investment in loans receivable, net and a
reflection of the changing mixture including the addition of the Company's
own credit card receivables. Balances in the credit card accounts totaled
$811,000 at September 30, 1996. Unused credit lines totaled $1.8 million on
over 350 accounts opened during the nine months ended September 30, 1996.
NON-INTEREST INCOME
Non-interest income decreased $273,000, or 43.8%, to $350,000 for the nine
months ended September 30, 1996 from $623,000 for the same period in 1995.
Excluding the proceeds of the life insurance policy on Mr. Beasley (discussed
above), the decrease would have been $82,000 from $432,000 for the nine
months ended September 30, 1995. The decrease was primarily due to the
$66,000 decrease in overall gains on sales of assets, including loans. Gains
on sales of mortgage loans declined $42,000 as the Company sought to retain
more of its mortgage originations in its portfolio. Also decreasing overall
gains were the losses taken on the sales of securities and the losses taken
on disposals of equipment no longer in use as the Company upgraded facilities
and technology to promote the more efficient use of personnel. Other non-
interest income also decreased through the nine months ended September 30,
1996 to $45,000, from $64,000 (excluding the life insurance proceeds). The
decrease of $19,000, or 29.7%, was a result of isolated income generating
events that occurred in the 1995 period. Loan servicing fees and charges
decreased $7,000, to $132,000 for the nine months ended September 30, 1996,
from $139,000 as the portfolio of loans serviced for others decreased, reducing
service fee income. Partially offsetting the previously mentioned decreases
was an increase in service charges on deposit accounts as a new deposit
account fee structure was introduced in 1996 has bolstered deposit fee
income.
NON-INTEREST EXPENSE
Non-interest expense increased $339,000, or 17.8%, to $2,240,000 for the nine
months ended September 30, 1996, from $1,901,000 for the nine months ended
September 30, 1995. Excluding the $417,000 effect of the non-recurring
FDIC/SAIF assessment on 1996 federal deposit insurance premiums, the $208,000
effect on compensation and benefits of Mr. Beasley's death during the 1995
period, and the $26,000 effect of the reversal of accrued interest on the
aforementioned taxation issue in the 1995 period, the increase in non-
interest expense was $104,000, or 6.1% of the $1,719,000 of 1995 non-interest
expense excluding such issues. The greatest share of the increase was in
loan origination and servicing expenses, which increased $63,000 to $116,000
for the nine months ended September 30, 1996, from $53,000 for the nine
months ended September 30, 1995 as commissions paid on loan originations
increased with the increase in mortgage loan originations. Increases also
occurred in occupancy and equipment, data processing, FDIC premiums (excluding
the FDIC/SAIF assessment) and other expenses. Occupancy and equipment
expenses increased $29,000 for the nine months ended September 30, 1996 to
$178,000 from $149,000 for the nine months ended September 30, 1995 as the
Company continued to invest in technology and facilities to improve
productivity. Other expenses increased, excluding the effect of the
aforementioned income tax issue in 1995, $28,000, to $401,000 for the nine
months ended September 30, 1996 from $363,000 for the same period in 1995.
The increase was primarily the result of increases in item processing costs
and advertising expenses. Partially offsetting the increase in the these non-
interest expenses was the decrease in compensation expenses of $261,000,
to $890,000 for the nine months ended September 30, 1996, from $1,151,000 for
the nine months ended September 30, 1995. Excluding the benefits accruing
to Mr. Beasley's estate upon his death in 1995, compensation decreased
$53,000, to $890,000 for the nine months ended September 30, 1996, from
$943,000 for the nine months ended September 30, 1995. The decrease is the
result of management's effort to control the largest component of non-interest
expense.
Deposit insurance premiums, excluding the non-recurring FDIC/SAIF assessment,
increased $12,000, to $117,000 for the nine months ended September 30, 1996
from $105,000 for the nine months ended September 30, 1995 as average
deposits were higher in the 1996 period. The FDIC/SAIF assessment of $417,000
will result in reduced deposit insurance premiums in future periods as long
as the FDIC/SAIF fund retains its statutory capitalization level. For the
remainder of 1996, deposit insurance rates will remain at $0.23 per $100.00
of assessable deposits with a rebate, payable after the quarter, estimated at
$0.05 per $100.00 in assessable deposits for amounts in excess of the statutory
capitalizaiton level of the FDIC/SAIF. For 1997, however, it has been
estimated that the rates will be approximately $0.065 per $100.00 of
assessable deposits.
<PAGE>18
SECONDARY MORTGAGE MARKET LOAN ACTIVITY
Proceeds from the sales of first mortgage loans into the secondary mortgage
market totaled $5.9 million and $5.0 million during the nine months ended
September 30, 1996 and 1995, respectively. Gain on sales of mortgage loans,
net of a valuation allowance, for the nine months ended September 30, 1996
totaled $64,000 compared to $106,000 for the same period in 1995, a decrease
of 39.6%.
INCOME TAXES
For the nine months ended September 30, 1996 income tax expense decreased
$66,000, to a credit of $26,000 for the nine months ended September 30, 1996
from $40,000 for the nine months ended September 30, 1995. The primary
reason for the decrease was the decrease in taxable income as a result of the
FDIC/SAIF assessment. The 1995 period also was effected by a credit of $140,000
related to income taxes previously accrued for deductions claimed on the
Bank's 1990 and 1991 Federal income tax returns. The deductions were not
realized for financial reporting purposes, since the deductions were based
upon issues that have yet to be settled by the IRS in tax court. In addition
non-interest expense for the nine months ended September 30, 1995 includes a
credit of $26,000 for reduction of interest previously accrued on the
aforementioned tax liability.
<PAGE>19
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are various claims and lawsuits incidental to the Registrant's
business in which the Registrant is periodically involved. In the opinion of
management, no material loss is expected from any such pending claims of
lawsuits.
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
No matters were submitted to a vote of security holders during the
period covered by this report.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable
FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
<PAGE>20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchanges 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, INC.
-----------------------------
(Registrant)
Dated: November 8, 1996 By: /s/ Steven C. Derr
---------------------
Steven C. Derr
President
Principal Executive Officer
Dated: November 8, 1996 By: /s/ Keith D. Hill
--------------------
Keith D. Hill
Treasurer
Principal Financial Officer
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 454
<INT-BEARING-DEPOSITS> 1422
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17499
<INVESTMENTS-CARRYING> 1149
<INVESTMENTS-MARKET> 1098
<LOANS> 72640
<ALLOWANCE> 445
<TOTAL-ASSETS> 97143
<DEPOSITS> 65884
<SHORT-TERM> 14850
<LIABILITIES-OTHER> 97143
<LONG-TERM> 7700
0
0
<COMMON> 51
<OTHER-SE> 7459
<TOTAL-LIABILITIES-AND-EQUITY> 97143
<INTEREST-LOAN> 3815
<INTEREST-INVEST> 899
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4714
<INTEREST-DEPOSIT> 2223
<INTEREST-EXPENSE> 2744
<INTEREST-INCOME-NET> 1970
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2240
<INCOME-PRETAX> (45)
<INCOME-PRE-EXTRAORDINARY> (45)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
<YIELD-ACTUAL> 2.67
<LOANS-NON> 216
<LOANS-PAST> 200
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 241
<ALLOWANCE-OPEN> 330
<CHARGE-OFFS> 19
<RECOVERIES> 9
<ALLOWANCE-CLOSE> 445
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 445
</TABLE>
