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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER : 0-12499
FIRST FINANCIAL BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 94-28222858
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
701 SOUTH HAM LANE, LODI, CALIFORNIA 95242
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(209)-367-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NA
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ X ] Yes [ ] No
As of June 30, 1996, there were 1,307,021 shares of Common Stock, no par
value, outstanding.
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FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
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.................................. 6
Item 2. Changes in Securities.............................. 6
Item 3. Defaults Upon Senior Securities.................... 6
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................... 7
i
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
JUNE 30 DEC. 31
ASSETS 1996 1995
- ------ -------- -------
Cash and due from banks $ 4,901 $ 4,488
Federal funds sold 1,500 3,300
Investment Securities:
Held-to-maturity securities at amortized cost, market value of
$2,137 and $2,170 at June 30, 1996 and Dec. 31, 1995 2,038 2,036
Available-for-sale securities, at fair value 30,894 34,909
-------- --------
Total investments 32,932 36,945
Loans 56,123 51,483
Less: allowance for loan losses 1,168 959
-------- --------
Net loans 54,955 50,524
Bank premises and equipment, net 6,931 6,449
Accrued interest receivable 1,224 1,139
Other assets 1,269 1,127
-------- --------
Total Assets $103,712 $103,972
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits
Noninterest bearing $ 8,305 $ 7,863
Interest bearing 80,765 81,353
-------- --------
Total deposits 89,070 89,216
Accrued interest payable 406 408
Other liabilities 117 199
Note payable 2,568 2,585
-------- --------
Total liabilities 92,161 92,408
-------- --------
Stockholders' equity:
Common stock - no par value; authorized 9,000,000 shares,
issued and outstanding in 1996 and 1995, 1,307,021
and, 1,306,296 shares 7,314 7,314
Retained earnings 4,218 4,059
Net unrealized holding gains on available-for-sale securities 19 191
Total stockholders' equity 11,551 11,564
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $103,712 $103,972
======== ========
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
1996 1995 1996 1995
---- ---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS, (DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS) EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME:
Loans, including fees $1,387 $1,560 $2,731 $3,093
Investment securities:
Taxable 453 312 902 663
Exempt from Federal taxes 84 92 169 183
Federal funds sold 44 38 106 75
------ ------ ------ ------
Total interest income 1,968 2,002 3,908 4,014
INTEREST EXPENSE:
Deposit accounts 747 703 1,506 1,357
Other 69 70 138 140
------ ------ ------ ------
Total interest expense 816 773 1,644 1,497
------ ------ ------ ------
Net interest income 1,152 1,229 2,264 2,517
Provision for loan losses 130 15 185 35
------ ------ ------ ------
Net interest income after provision
for loan losses 1,022 1,214 2,079 2,482
NONINTEREST INCOME:
Service charges 139 132 262 261
Premiums and fees from SBA and
mortgage operations 119 98 214 170
Miscellaneous 12 9 23 21
------ ------ ------ ------
Total noninterest income 270 239 499 452
NONINTEREST EXPENSE:
Salaries and employee benefits 552 533 1,098 1,082
Occupancy 130 102 248 199
Equipment 69 93 154 191
Other 324 350 680 755
------ ------ ------ ------
Total noninterest expense 1,075 1,078 2,180 2,227
------ ------ ------ ------
Income before provision for income
taxes 217 375 398 707
Provision for income taxes 55 131 108 229
------ ------ ------ ------
Net Income $ 162 $ 244 $ 290 $ 478
====== ====== ====== ======
EARNINGS PER SHARE:
Net Income $ 0.12 $ 0.19 $ 0.22 $ 0.36
====== ====== ====== ======
2
FIRST FINANCIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED JUNE 30
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 290 $ 478
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in loans held for sale (10) (4)
Increase in deferred loan income 73 12
Provision for other real estate owned losses 4 --
Depreciation and amortization 201 213
Provision for loan losses 185 35
Provision for deferred taxes (4) 126
Increase in accrued interest receivable (85) (116)
(Decrease) increase in accrued interest payable (2) 44
Decrease in other liabilities (82) (532)
Increase in other assets (99) (81)
------- -------
Net cash provided by operating activities 471 175
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of available-for-sale securities 11,679 13,451
Purchases of available-for-sale securities (7,958) (6,841)
Increase in loans made to customers (4,679) (837)
Proceeds from the sale of other real estate 79 --
Purchases of bank premises and equipment (685) (101)
------- -------
Net cash (used in) provided by investing activities (1,564) 5,672
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (146) (6,425)
Payments on note payable (17) (16)
Dividends Paid (131) (65)
Proceeds from issuance of common stock -- 4
------- -------
Net cash used in financing activities (294) (6,502)
------- -------
Net decrease in cash and cash equivalents (1,387) (655)
Cash and cash equivalents at beginning of period 7,788 7,199
------- -------
Cash and cash equivalents at end of period $ 6,401 $ 6,544
======= =======
3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
CHANGES IN FINANCIAL CONDITION
Consolidated total assets at June 30, 1996 were $260 thousand below the
comparable level at December 31, 1995. Although total assets were virtually
unchanged, there were several changes in the mix of assets. The loan portfolio
grew by $4.6 million, or 9%, from December 31, 1995 to June 30, 1996. The
portfolio growth reflects both improvements in the local economy and the result
of focused and disciplined business development efforts. The growth in the
loan portfolio was funded by net maturities in the investment portfolio which
declined by $4 million, or 11%. Bank premises and equipment increased by $482
thousand, or 7%, reflecting the investment in a new information system to which
the company converted in mid-June, 1996.
Total deposits were $89.1 million at June 30, 1996 compared to $89.2 million at
December 31, 1995. Despite little change in total deposits, noninterest bearing
deposits increased by $442 thousand, or 6%. Total deposits increased by $5.5
million, or 7%, over the comparable total at June 30, 1995. Focused business
development efforts coupled with the fallout from recent merger activity among
large banks have generated increases in new consumer and business deposit
account relationships.
The allowance for loan losses at June 30, 1996 is in excess of the December 31,
1995 balance by $209 thousand, or 22%. The increased reserve can be attributed
to both the increased loan volume since December 31, 1995 as well as loan loss
provisions charged against income to provide for specific credit exposure that
has developed for certain identifiable loans. Nonaccrual loans increased by
$451 thousand, or 42% from December 31, 1995 to June 30, 1996, and the allowance
for loan losses nonaccrual coverage ratio declined to .76 times from .89 times.
Total portfolio delinquency at June 30, 1996 was 4.14%, compared to 4.37% at
March 31, 1996 and 2.57% at December 31, 1995. Management believes that the
allowance for loan losses at June 30, 1996 is adequate. The following tables
depicts activity in the allowance for loan losses and allocation of reserves for
and at the six and twelve months ended June 30, 1996 and December 31, 1995,
respectively:
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
6/30/96 12/31/95
-------- ----------
Balance at beginning of period 959 1,127
Charge-offs:
Commercial 75 357
Real estate -- 30
Consumer 35 95
-------- ----------
Total charge-offs 110 482
Recoveries:
Commercial 127 174
Real estate -- --
Consumer 7 25
-------- ----------
Total recoveries 134 199
-------- ----------
Net charge-offs (24) 283
Additions charged to operations 185 115
-------- ----------
Balance at end of period 1,168 959
======== ==========
Ratio of net charge-offs to average loans outstanding (.04%) 0.51%
======== ==========
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
6/30/96 6/30/96 12/31/95 12/31/95
LOAN CATEGORY AMOUNT % OF LOANS AMOUNT % OF LOANS
-------------- ------- ---------- -------- ----------
Commercial 501 68.80% 295 84.29%
Real Estate 43 25.89% 38 10.86%
Consumer 36 5.31% 17 4.85%
Unallocated 588 N/A 608 N/A
----- ----- ---- ------
1,168 100.00% 959 100.00%
===== ====== ==== ======
4
Consolidated equity declined by $13 thousand from December 31, 1995 to June 30,
1996. Consolidated equity represented 11.14% of consolidated assets at June 30,
1996 compared to 11.12% at December 31, 1995. The increase in equity from
earnings of $290 thousand for the six months ended June 30, 1996 was more than
offset by dividend payments of $131 thousand and a reduction to equity of $172
thousand to reflect the after-tax market value decline of the available-for-sale
portion of the investment portfolio. The decline in investment portfolio market
value reflects the impact of rising market interest rates during the six months
ended June 30, 1996. The risk capital position of the Company's subsidiary,
Bank of Lodi, NA, declined slightly as a result of increased lending volume.
The total risk-based capital ratio was 14.58% at June 30, 1996 compared to 15.1%
at December 31, 1995. The Bank's leverage capital ratio was 9.27% at June 30,
1996 versus 9.0% at December 31, 1995.
CHANGES IN RESULTS OF OPERATION - THREE MONTHS ENDED JUNE 30, 1996
Net income for the three months ended June 30, 1996 was $162 thousand, or $.12
per share, and represented a decline of 34% relative to the three months ended
June 30, 1995. Annualized return on average assets and equity were .62% and
5.7%, respectively, compared to .99% and 8.9%, respectively, for the comparable
prior year quarter. Improvements in noninterest income and noninterest expenses
were offset by a decline in net interest income and an increase in the provision
for loan losses. Based upon the earnings for the three months ended June 30,
1996, the board of directors of First Financial Bancorp declared a cash dividend
of $.05 per share, payable August 30, 1996 to shareholders of record August 15,
1996.
Net interest income declined by $77 thousand, or 6%, relative to the comparable
prior year quarter. The $77 difference represents the net impact of significant
changes in the volume and mix of earning assets and deposits as well as the
general level of interest rates. Average earning assets and deposits for the
three months ended June 30, 1996 increased by $5.8 million, or 6.7%, and $5.0
million, or 5.8%, respectively, over the prior year quarter. Excluding the
impact of lower interest rates and changes in the mix of earning assets and
deposits, net interest income was increased $89 thousand as a result of the
higher volume of average earning assets and deposits. Loans as a percentage of
earning assets declined to 59% from 67% for the comparable prior year quarter.
Average certificates of deposit to total deposits increased by 100 basis points
to 38%. The impact of these mix changes was a reduction of net interest income
for the quarter of $70 thousand excluding the impact of volume and rate changes.
Finally, the impact of lower interest rates relative to the prior year quarter
reduced net interest income by $96 thousand.
The provision for loan losses increased by $115 thousand to $130 thousand. The
increase reflects additions to the allowance for loan losses as necessitated by
conditions discussed above under Changes in Financial Condition.
Noninterest income increased by $31 thousand, or 13%, reflecting increases in
both service charge income as well as income for SBA and mortgage operations.
Service charge income increased as a result of increased deposit volumes as well
as slight changes in certain minimum deposit balance requirements. SBA and
mortgage income improved by 21%. Lower interest rates stimulated mortgage
demand above year-ago levels. A combination of focused business development
efforts and an improving local economy increased the volume of SBA originations
and sales.
Noninterest expenses were $3 thousand below the prior year level despite a 27%
increase in occupancy expenses. Occupancy expenses increased by $28 thousand as
a result of increased vacancy levels in the Company's headquarters building in
Lodi. Management is actively seeking tenants to occupy approximately 7,700 feet
of vacant space. Salaries and benefits expenses increased by 4% relative to the
prior year quarter. Equipment and other noninterest expenses declined by 26%
and 7%, respectively. The decline in equipment expenses reflects a reduction in
maintenance expenses for which the prior year quarter had a significant level of
charges that would not normally recur on an annual basis. The decline in other
noninterest expenses reflects a reduction in regulatory assessments, and to a
lesser extent, reductions in controllable administrative expenses.
CHANGES IN RESULTS OF OPERATION - SIX MONTHS ENDED JUNE 30, 1996
Net income for the six months ended June 30, 1996 was $290 thousand, or $.22 per
share, and represented a decline of 39% relative to the six months ended June
30, 1995. Annualized return on average assets and equity were .56% and 5.0%,
respectively, compared to .97% and 8.8%, respectively, for the comparable prior
year period. Improvements in noninterest income and noninterest expenses were
offset by a decline in net interest income and an increase in the provision for
loan losses.
5
Net interest income declined by $253 thousand, or 10%, relative to the
comparable prior year quarter. Approximately 70%, or $176 thousand, of the $253
thousand decline occured during the first quarter of 1996. Deposit growth and
loan production accelerated during the second quarter of 1996 and reduced the
net interest difference with the comparable 1995 period. The $253 difference
represents the net impact of significant changes in the volume and mix of
earning assets and deposits as well as the general level of interest rates.
Average earning assets and deposits for the six months ended June 30, 1996
increased by $4.1 million, or 4.6%, and $3.4 million, or 3.9%, respectively,
over the prior year period. Excluding the impact of lower interest rates and
changes in the mix of earning assets and deposits, net interest income was
increased $127 thousand as a result of the higher volume of average earning
assets and deposits. Loans as a percentage of earning assets declined to 58%
from 65% for the comparable prior year period. Average certificates of deposit
to total deposits increased by 100 basis points to 38%. The impact of these mix
changes was a reduction of net interest income for the quarter of $191 thousand
excluding the impact of volume and rate changes. Finally, the impact of lower
interest rates relative to the prior year quarter reduced net interest income by
$189 thousand.
The provision for loan losses increased by $150 thousand to $185 thousand. The
increase principally reflects the additions to the allowance for loan losses
made during the second quarter as necessitated by conditions discussed above
under Changes in Financial Condition.
Noninterest income increased by $47 thousand, or 10%, reflecting increases in
income for SBA and mortgage operations. SBA and mortgage income improved by 26%.
Lower interest rates stimulated mortgage demand above year-ago levels. A
combination of focused business development efforts and an improving economy
increased the volume of SBA originations and sales.
Noninterest expenses were $47 thousand, or 2% below the prior year level despite
a 25% increase in occupancy expenses. Occupancy expenses increased by $49
thousand as a result of increased vacancy levels in the Company's headquarters
building in Lodi. Management is actively seeking tenants to occupy approximately
7,700 feet of vacant space. Salaries and benefits expenses increased by 1%
relative to the prior year period. Equipment and other noninterest expenses
declined by 19% and 10%, respectively. The decline in equipment expenses
reflects a reduction in maintenance expenses for which the prior year second
quarter had a significant level of charges that would not normally recur on an
annual basis. The decline in other noninterest expenses reflects a reduction in
regulatory assessments, and to a lesser extent, reductions in controllable
administrative expenses.
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 three and
six months ended June 30, 1996 are not necessarily indicative of the results
which may be expected for the year ended December 31, 1996. The unaudited
consolidated financial statements presented herein should be read in conjunction
with the consolidated financial statements and notes included in the 1995 Annual
Report to Shareholders.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On July 25, 1996, the First Financial Bancorp Board of Directors
declared a cash dividend of $.05 per share, payable August 30, 1996,
to shareholders of record on August 15, 1996. This is the sixth
consecutive quarterly dividend declared by First Financial Bancorp.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER
- ------
2 Not Applicable.
4 Registrant's current Bylaws.
10 Post Effective Amendment No. 1 to Form S8 Registration Statement (File
Number 3340954).
11 Earnings per common and common share equivalents are calculated by
dividing net income by the weighted-average number of common and
common share equivalents outstanding during the period. Stock options
are considered common share equivalents for this calculation. Weighted
average shares used in the computation of earnings per share for the
three months ended June 30,1996 and 1995 were 1,347,334 and 1,312,995,
respectively. Weighted average shares used in the computation of
earnings per share for the six months ended June 30,1996 and 1995 were
1,339,553 and 1,312,995, respectively.
15 Not Applicable.
16 Not Applicable.
18 Not Applicable.
19 Not Applicable.
20 Not Applicable.
23 Notice of Annual Meeting and Proxy Statement dated March 29, 1996;
filed April 1, 1996.
24 Not Applicable
25 Not Applicable
27 Financial Data Schedule
28 Not Applicable
(b) REPORTS ON FORM 8-K
Not Applicable
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST FINANCIAL BANCORP
Date July 31, 1996 /s/ David M. Philipp
------------- ----------------------------
David M. Philipp
Executive Vice-President
Chief Financial Officer
Corporate Secretary
8