UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1995
Commission File Number : 0-12499
First Financial Bancorp
(Exact name of registrant as specified in its charter)
California (State or other jurisdiction of incorporation or
organization)
94-28222858
(I.R.S. Employer Identification No.)
701 South Ham Lane, Lodi, California 95242 (Address of principal
executive offices)
(209)-367-2000
(Registrant's telephone number, including area code)
NA
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months(or
for such shorter period that the registrant was required to file
such reports),and (2) has been subject to such filing requirements
for the past 90 days.
[ X ] Yes [ ] No
As of June 30, 1995, there were 1,306,971 shares of Common
Stock, no par value, outstanding.
FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30 1995
TABLE OF CONTENTS
Page
PART I
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 4
PART II
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security
Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 8
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARY
Consolidated Balance Sheets
(in thousands)
6/30/95 12/31/94
ASSETS
Cash and due from banks $ 3,944 $ 5,199
Federal funds sold 2,600 2,000
Investment securities:
Held-to-maturity securities (at
amortized cost, market value of
$2,173 and $2,118 at 6/30/95 and
12/31/94) 2,038 2,038
Available-for-sale securities, at
fair value 23,905 31,062
Total Investments 25,943 33,100
Loans 57,605 56,939
Less: Allowance for loan losses 1,021 1,127
Net loans 56,584 55,812
Bank premises and equipment, net 6,528 6,640
Accrued interest receivable 1,219 1,103
Other assets 1,209 1,313
Total Assets $98,027 $105,167
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing $ 6,751 $ 8,415
Interest bearing 76,803 81,564
Total deposits 83,554 89,979
Accrued interest payable 344 300
Other liabilities 236 1,660
Note payable 2,602 2,618
Total liabilities 86,736 94,557
Stockholders' equity:
Common stock - no par value;
authorized 9,000,000 shares,
issued and outstanding in 1995
and 1994, 1,306,971 and,
1,306,296 shares 7,314 7,310
Retained earnings 3,825 3,412
Net unrealized holding gains on
available-for sale securities 152 (112)
Total stockholders' equity 11,291 10,610
Total Liabilities and Stockholders'
Equity $98,027 $105,167
Page 1
FIRST FINANCIAL BANCORP AND SUBSIDIARY
Consolidated Statements of Income
(in thousands except per share amounts)
Three months ended June 30 Six months ended June 30
1995 1994 1995 1994
Interest income:
Loans, including fees $1,560 $1,491 $3,093 $2,853
Investment securities:
Taxable 312 226 663 425
Exempt from Federal taxes 92 92 183 185
Federal funds sold 38 22 75 59
Deposits in banks and other
interest income 0 1 0 2
Total interest income 2,002 1,832 4,014 3,524
Interest expense:
Deposit accounts 703 606 1,357 1,201
Other 70 70 140 141
Total interest expense 773 676 1,497 1,342
Net interest income 1,229 1,156 2,517 2,182
Provision for loan losses 15 39 35 74
Net interest income
after provision for
loan losses 1,214 1,117 2,482 2,108
Noninterest income:
Service charges 132 139 261 285
Premiums and fees from
SBA and mortgage
operations 98 102 170 248
Miscellaneous 9 13 21 27
Total noninterest income 239 254 452 560
Noninterest expense:
Salaries and employee
benefits 533 560 1,082 1,119
Occupancy 102 99 199 193
Equipment 93 96 191 189
Other 350 389 755 774
Total noninterest expense 1,078 1,144 2,227 2,275
Income before provision
for income taxes 375 227 707 393
Provision for income taxes 131 54 229 104
Net income $ 244 $ 173 478 289
Earnings per share:
Primary $ 0.19 $ 0.13 $0.37 $ 0.22
Fully diluted $ 0.19 $ 0.13 $0.36 $ 0.22
Page 2
FIRST FINANCIAL BANCORP AND SUBSIDIARY
Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended June 30
1995 1994
Cash flows from operating activities:
Net income $ 478 $ 289
Adjustments to reconcile net income to
net cash provided by operating activities:
(Decrease) increase in loans held for sale (4) 437
Increase in deferred loan income 12 48
Loss on sale of other
real estate owned 0 3
Depreciation and amortization 213 218
Provision for loan losses 35 74
Provision for deferred taxes 126 (11)
Increase in accrued interest
receivable (116) (145)
Increase (decrease) in accrued
interest payable 44 ( 33)
Decrease in other liabilities (532) ( 102)
(Increase) decrease in other assets ( 81) 85
Net cash provided by operating activities 175 863
Cash flows from investing activities:
Proceeds from maturity of held-to-
maturity securities 0 46
Proceeds from maturity of available-
for-sale securities 13,451 8,828
Purchases of available-for-sale
securities (6,841) (6,673)
Increase in loans made to customers ( 837) (801)
Proceeds from sale of other real estate 0 338
Purchase of bank premises and equipment ( 101) ( 51)
Net cash provided by investing
activities 5,672 1,687
Cash flows from financing activities:
Net decrease in deposits (6,425) (1,493)
Payments on note payable ( 16) ( 15)
Dividends paid (65) ( 131)
Proceeds from issuance of common stock 4 0
Net cash used in financing activities (6,502) (1,639)
Net (decrease) increase in cash
and cash equivalents ( 655) 911
Cash and cash equivalents
at beginning of period 7,199 6,424
Cash and cash equivalents
at end of period $6,544 $7,335
Page 3
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATION
Changes in Financial Condition
Consolidated assets at June 30, 1995 were below the level at December 31, 1994
by $7.1 million, or 7%. The reduced level is attributable to a net decrease in
deposits of $6.4 million, or 7%, and the payment of $1 million to settle 1994
securities purchases with 1995 settlement dates. The decline in deposits is
principally seasonal in nature and results primarily from agricultural
activity. Net investment security maturities of $7.1 million provided the
necessary liquidity to fund the deposit reduction.
The allowance for loan losses as a percentage of gross loans outstanding is
1.77% at June 30, 1995 compared to 1.98% at December 31, 1994. Nonaccrual
loans as a percentage of total loans increased to 2.45% at June 30, 1995, up
from 1.34% at December 31, 1994. The nonaccrual coverage of the allowance
for loan losses decreased to .72% times at June 30, 1995 from 1.47 times at
December 31, 1994.
Total portfolio delinquency at June 30, 1995 stood at 4.64% compared to 2.71%
at December 31, 1994.
The increased level of non accrual loans is not indicative of overall
portfolio deterioration. Additions to nonaccrual loans resulted from a
small number of loans with specific isolated weaknesses, and adequate
reserves have been provided for those loans at June 30, 1995. The increased
delinquency rate is largely a function of loan renewals that had not been
processed prior to June 30, 1995.
The following table depicts activity in the allowance for loan losses
and allocation of reserves for and at the six and twelve months ended June 30,
1995 and December 31, 1994, respectively.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
6/30/95 12/31/94
Balance at beginning of period 1,127 924
Charge-offs:
Commercial 156 98
Consumer 56 77
Total charge-offs 212 175
Recoveries:
Commercial 57 37
Consumer 14 18
Total recoveries 71 55
Net charge-offs 141 120
Additions charged to operations 35 323
Balance at end of period 1,021 1,127
Ratio of net charge-offs to average loans
outstanding .25 .20
Allocation of the Allowance for Loan Losses
6/30/95 6/30/95 12/31/94 12/31/94
Loan Category Amount % of Loans Amount % of Loans
Commercial 369 57.24% 376 78.25%
Real estate 51 38.56% 121 17.12%
Consumer 2 4.20% 4 4.63%
Unallocated 599 N/A 626 N/A
Totals 1,021 100% 1,127 100%
The adoption and application of the Financial Accounting Standards Board's
Statement of Financial Accounting Standard (SFAS) No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by Statement No. 118, Accounting
by Creditors for Impairment of a Loan-Income Recognition and Disclosures
(SFAS 114), does not have a material impact on the basis of presentation for the
aforementioned tables.
Page 4
Consolidated equity increased to $11.29 million or 11.5% of total assets at
June 30, 1995 compared to $10.61 million or 10.09% of total assets at
December 31,1994. The valuation account related to investment securities
available for sale increased to a $152 thousand addition to capital at
June 30, 1995 from a $112 thousand deduction from capital at December 31,
1994. The increase in the investment valuation account reflects the market
appreciation of investment securities related to the general decline in
interest rates that occurred between December 31, 1994 and June 30, 1995.
The capital position of the Company's subsidiary, Bank of Lodi, NA, also
increased. The total risk-based capital ratio was 13.54% at June 30, 1995
versus 12.73% at December 31, 1994. The Bank's leverage capital ratio was
9.05% at June 30, 1995 versus 7.89% at December 31, 1994.
Changes in Results of Operations
Six Months Ended June 30, 1995:
Net income for the six months ended June 30, 1995 was $478 thousand and
represented an increase of $189 thousand, or 65%, over the comparable prior
year period.
Net interest income for the six months ended June 30, 1995 was $335 thousand,
or 15% above the comparable prior year period and is the net result of the
following principle changes in volumes and yields. Average earning assets
increased by .35% and average earning asset funding decreased by .8% over the
comparable prior year period, resulting in a benefit to net interest income
of $23 thousand. A 74 basis point increase in the net interest margin
resulted in a $419 thousand increase in net interest income over the comparable
prior year period. Average loans outstanding declined by approximately 7%
relative to the prior year period. Average noninterest bearing deposits and
certificates of deposit increased by approximately 32% and 6%, respectively,
while average interest bearing demand deposits declined by approximately 12%.
The change in the loan and deposit mix reduced net interest income by $108
thousand in relation to the comparable prior year period.
The loan loss provision for the six months ended June 30, 1995 was $35 thousand,
or 53%, below the comparable prior year total. See the Changes in Financial
Condition portion of Management's Discussion and Analysis for a discussion of
the loan portfolio and changes in the allowance for loan losses.
Noninterest income for the six months ended June 30, 1995 was $108 thousand,
or 19%, below the comparable prior year period. The majority of the decrease
is due to a $86 thousand, or 31%, decrease in SBA and mortgage income.
Although the number of SBA loan sales originated is comparable to that of the
prior year period, the average balance of new loans originated is lower than
that of the prior year, resulting in lower premiums earned. Mortgage loan
volume is down approximately 30% from that of the comparable prior year
period, reflecting stagnant purchase and refinance conditions in the local
residential real estate market.
Page 5
Noninterest expenses for the six months ended June 30, 1995 decreased from the
comparable prior year level by $48 thousand or 2%. The most significant
component of the reduction in noninterest expense was a $37 thousand, or 3%
decrease in salary and benefit expenses due to lower staffing levels during
1995. The decrease in other operating expenses are principally a result of
widespread reductions in administrative costs.
Three Months Ended June 30, 1995:
Net income for the three months ended June 30, 1995 was $244 thousand,
or $.19 per share. The earnings represent an increase of 41% over the
$173 thousand, or $.13 per share, earned for the quarter ended June 30, 1994
and 4.3% over the $234 thousand, or $.18 per share, earned for the quarter
ended March 31, 1995. Return on average assets and average equity increased
to .99% and 8.9%, respectively, compared to .69% and 6.3%, respectively, for
the comparable prior year quarter.
Net interest income for the second quarter of 1995 increased by 6% over the
comparable prior year quarter and is the net result of the following principle
changes in volumes and yields. Although average earning assets declined by
1.5%, the related decline of $10 thousand in net interest income was offset
by a $136 thousand benefit from a 42 basis point increase in net interest
margin. Average loans outstanding declined by approximately 7% relative to
the prior year quarter. Average noninterest bearing deposits and
certificates of deposit increased by approximately 26% and 7%, respectively,
while average interest bearing demand deposits declined by approximately 16%.
The impact of loan and deposit mix changes was a decline in net interest
income of $53 thousand compared to the comparable prior year quarter.
Noninterest income and noninterest expense for the quarter ended June 30, 1995
both declined by 6%. SBA and mortgage income declined by $4 thousand, or 4%.
Service charge income fell by $7 thousand, or 5%, principally as a result of
declining returned check volumes. Salaries and benefits were reduced by $27
thousand, or 5%, while other noninterest expenses were reduced by $39
thousand, or 10%. The reduction in salaries and benefits was the result of
lower staffing and related benefit levels, while the reduction in other
noninterest expenses reflects widespread reductions in administrative costs
and lower legal and professional expenditures. The provision for loan losses
declined by $24 thousand, or 62%, as loan loss recoveries limited the need
for credit loss provisions.
Basis of Presentation
First Financial Bancorp is the holding company for the Bank of Lodi, N.A.. In
the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of financial position as of the
dates indicated and results of operations for the periods shown. All
material intercompany accounts and transactions have been eliminated in
consolidation. In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported amounts.
The results for the six months ended June 30, 1995 are not necessarily
indicative of the results which may be expected for the year ended December
31, 1995. The unaudited consolidated financial statements presented herein
should be read in conjunction with the consolidated financial statements and
notes included in the 1994 Annual Report to Shareholders.
Page 6
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on April 25, 1995. The
purpose of the meeting was to elect the Company's board of directors and approve
an amendment to the 1991 Director Stock Option Plan. The following directors
were elected based upon the votes cast as indicated:
Votes Votes Votes
Director "for" "against" "withheld"
Bozant Katzakian 769,857 0 26,494
Angelo J. Anagnos 769,416 0 26,935
Daniel R. Anderson 769,725 0 26,626
Raymond H. Coldani 769,725 0 26,626
Benjamin R. Goehring 769,593 0 26,758
Michael D. Ramsey 769,725 0 26,626
Frank M. Sasaki 769,857 0 26,494
Weldon D. Schumacher 769,593 0 26,758
Dennis R. Swanson 769,196 0 27,155
The amendment to the 1991 Director Stock Option Plan was approved
based upon the following votes cast as indicated:
For: 716,512 Against: 29,889 Abstain: 49,950
There were 1,306,446 shares issued and outstanding as of the record
date, March 1, 1995.
ITEM 5. OTHER INFORMATION
Not applicable.
Page 7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit Number
2 Not applicable.
4 Registrant's current Bylaws.
10 Amendment No. 1 to the 1991 Director Stock Option Plan filed as Post
Effective Amendment No. 1 to Form S8 Registration Statement
(File Number 3340954).
11 Primary and fully diluted earnings per common and common
equivalent share are calculated by dividing net income by the
weighted-average number of common and common share equivalents
outstanding during the period. Stock options are considered
common share equivalents for this calculation. Weighted average
shares used in the computation of primary and fully diluted
earnings per share were 1,312,955 and 1,316,182, respectively
for the quarter ended June 30, 1995. Weighted average shares
used in the computation of both primary and fully diluted earnings
per share were 1,306,007 for the quarter ended June 30, 1994.
15 Not applicable.
16 Not applicable.
18 Not applicable.
19 Not applicable.
20 Not applicable.
23 Not applicable.
24 Not applicable.
25 Not applicable.
27 Financial Data Schedule (filed electronically).
28 Not applicable.
(b) REPORTS ON FORM 8-K
On July 31, 1995, the company filed a Form 8-K dated July 31, 1995
regarding earnings for the second quarter of 1995 and the declaration of
a cash dividend.
Page 8
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
/s/ David M. Philipp
David M. Philipp
Senior Vice-President
Chief Financial Officer
Corporate Secretary
Dated May 15, 1995
Page 9