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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from to
Commission File Number : 0-12499
First Financial Bancorp
(Exact name of registrant as specified in its charter)
California 94-28222858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 South Ham Lane , Lodi, California 95242
Address of principal executive offices) (Zip Code)
(209)-367-2000
(Registrant's telephone number, including area code)
NA
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
As of May 7, 2001 there were 1,526,663 shares of Common Stock, no par value, outstanding.
===========================================================================================
FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
TABLE OF CONTENTS
Page
PART I
Item 1. Consolidated Financial Statements and Notes to Consolidated
Financial Statements.............................................. 1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 12
PART II
Item 1. Legal Proceedings................................................. 12
Item 2. Changes in Securities............................................. 12
Item 3. Defaults Upon Senior Securities................................... 12
Item 4. Submission of Matters to a Vote of Security Holders .............. 12
Item 5. Other Information................................................. 12
Item 6. Exhibits and Reports on Form 8-K.................................. 12
i
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(in thousands except share amounts)
Mar. 31, Dec. 31,
Assets 2001 2000
---------------- ----------------
Cash and due from banks $ 11,734 $ 10,909
Federal funds sold and securities purchased under resale agreements 15,437 10,115
Investment securities available for sale, at fair value 30,179 29,560
Loans held for sale 1,692 1,292
Loans, net of deferred loan fees 112,782 113,292
Less allowance for loan losses 2,684 2,499
---------------- ----------------
Net loans 110,098 110,793
Premises and equipment, net 6,944 7,002
Accrued interest receivable 1,228 1,447
Other assets 15,070 13,946
---------------- ----------------
Total Assets $ 192,382 $ 185,064
================ ================
Liabilities and Stockholders' Equity
Liabilities:
Deposits
Noninterest bearing $ 22,810 $ 24,223
Interest bearing 150,608 138,038
---------------- ----------------
Total deposits 173,418 162,261
Accrued interest payable 319 316
Short term borrowings - 4,588
Other liabilities 1,742 1,445
----------------- ----------------
Total liabilities 175,479 168,610
Stockholders' equity:
Common stock - no par value; authorized 9,000,000
shares, issued and outstanding in 2001 and 2000,
1,526,663 and 1,526,063, respectively 9,344 9,338
Retained earnings 7,086 6,831
Accumulated other comprehensive income 473 285
---------------- ----------------
Total stockholders' equity 16,903 16,454
---------------- ----------------
$ 192,382 $ 185,064
================ ================
<FN>
See accompanying notes.
</FN>
1
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(in thousands except per share amounts)
Three Months Ended March 31,
2001 2000
------ ------
Interest income:
Loans, including fees $2,685 $2,564
Investment securities:
Taxable 373 453
Exempt from Federal taxes 71 137
Federal funds sold 181 42
------ ------
Total interest income 3,310 3,196
Interest expense:
Deposit accounts 1,103 955
Other borrowings 3 80
------ ------
Total interest expense 1,106 1,035
Net interest income 2,204 2,161
Provision for loan losses 190 35
------ ------
Net interest income after provision for loan losses 2,014 2,126
Noninterest income:
Gain on sale of other real estate 222 --
Service charges 333 315
Premiums and fees from SBA and mortgage operations 217 190
Miscellaneous 181 157
------ ------
Total noninterest income 953 662
Noninterest expense:
Salaries and employee benefits 1,405 1,118
Occupancy 221 201
Equipment 231 179
Other 808 841
------ ------
Total noninterest expense 2,665 2,339
------ ------
Income before provision for income taxes 302 449
Provision for income taxes 47 103
------ ------
Net income $ 255 $ 346
====== ======
Net income per share:
Basic $ 0.16 $ 0.22
====== ======
Diluted $ 0.16 $ 0.21
====== ======
Dividends declared per share $ -- $ 0.05
====== ======
<FN>
See accompanying notes.
</FN>
2
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(Unaudited)
(in thousands except share amounts)
Three Months Ended March 31, 2001
Accumulated
Common Common Other
Stock Stock Comprehensive Retained Comprehensive
Description Shares Amounts Income Earnings Income Total
- ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------
Balance at December 31, 2000 1,526,063 $ 9,338 6,831 285 16,454
Comprehensive income:
Net income $ 255 255 255
---------------
Other comprehensive loss:
Unrealized holding gain arising
during the current period, net of tax
effect of $137 188
---------------
Total other comprehensive income 188 188 188
---------------
Comprehensive income $ 443
===============
Options exercised 600 6 6
------------ ------------ -------- ---------------- ------------
Balance at March 31, 2001 1,526,663 $ 9,344 7,086 473 16,903
============ ============ ======== ================ ============
Three Months Ended March 31, 2000
Accumulated
Common Common Other
Stock Stock Comprehensive Retained Comprehensive
Description Shares Amounts Income Earnings Loss Total
- ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------
Balance at December 31, 1999 1,433,734 $ 8,433 6,354 (266) 14,521
Comprehensive income:
Net income $ 346 346 346
---------------
Other comprehensive loss:
Unrealized holding losses on
securities available for sale
arising during the current period, (111)
net of tax benefit of $81
---------------
Total other comprehensive loss (111) (111) (111)
---------------
Comprehensive income $ 235
===============
Options exercised 11,300 85 85
Cash dividend (73) (73)
------------ ------------ -------- ---------------- ------------
Balance at March 31, 2000 1,445,034 $ 8,518 6,627 (377) 14,768
============ ============ ======== ================ ============
<FN>
See accompanying notes.
</FN>
3
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended March 31,
2001 2000
------------- ------------
Cash flows from operating activities:
Net income $ 255 $ 346
Adjustments to reconcile net income to net cash provided
by operating activities:
Increase in loans held for sale (293) (193)
Gain on sale of loans (107) (80)
(Decrease) increase in deferred loan income (30) 8
Depreciation and amortization 387 309
Provision for loan losses 190 35
Gain on sale of other real estate owned (222) -
Decrease in accrued interest receivable 219 114
Increase (decrease) in accrued interest payable 3 (10)
Increase (decrease) in other liabilities 297 (492)
Increase in cash surrender value of life insurance (142) (108)
(Increase) decrease in other assets (239) 711
------------- ------------
Net cash provided by operating activities 318 640
Cash flows from investing activities:
Proceeds from maturity of available-for-sale
securities 7,888 1,733
Proceeds from sale of available-for-sale securities (8,104) (899)
Net decrease in loans made to customers 535 1,220
Proceeds from sale of other real estate 627 10
Purchase of cash surrender value life insurance (1,500) (900)
Purchases of bank premises and equipment (192) (306)
------------- ------------
Net cash (used in) provided by
investing activities (746) 858
Cash flows from financing activities:
Net increase in deposits 11,157 4,335
Decrease in other borrowings (4,588) (4,300)
Dividends paid - (73)
Proceeds from issuance of common stock 6 85
------------ ------------
Net cash provided by financing activities 6,575 47
Net increase in cash and cash equivalents 6,147 1,545
Cash and cash equivalents at beginning of period 21,024 9,409
------------ ------------
Cash and cash equivalents at end of period $ 27,171 $ 10,954
============ ============
Supplemental Discolsures of Cash Flow Information:
Cash paid for interest payments $ 1,103 1,045
Cash paid for taxes $ 10 120
<FN>
See accompanying notes.
</FN>
4
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001 and December 31, 2000
(Unaudited)
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of First Financial Bancorp (the
Company) and its subsidiaries, Bank of Lodi, N.A., (the Bank) and Western
Auxiliary Corporation (WAC) conform with accounting principles generally
accepted in the United States of America and prevailing practices within
the banking industry. In preparing the consolidated financial statements,
Management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and revenue and expense for the period. Actual results could differ
from those estimates applied in the preparation of the consolidated
financial statements. There were no new accounting standards adopted during
the current period.
(2) Weighted Average Shares Outstanding
Per share information is based on weighted average number of shares of
common stock outstanding during each three-month period after giving
retroactive effect for the five percent stock dividend declared for
shareholders of record May 8, 2001, payable May 22, 2001. Basic earnings
per share (EPS) is computed by dividing net income available to
shareholders by the weighted average common shares outstanding during the
period. Diluted earnings per share is computed by dividing net income
available to shareholders by the weighted average common shares outstanding
during the period plus potential common shares outstanding. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company.
The following table provides a reconciliation of the numerator and
denominator of the basic and diluted earnings per share computation of the
three month periods ending March 31, 2001 and 2000:
Income Shares Per-Share
Three months ended March 31, 2001 (numerator) (denominator) Amount
-----------------------------------------------------------------------------------------
Basic earnings per share $ 255,000 1,602,653 $ .16
Effect of dilutive securities - 33,377 -
------------------------------------
Diluted earnings per share $ 255,000 1,636,030 $ .16
====================================
Income Shares Per-Share
Three months ended March 31, 2000 (numerator) (denominator) Amount
-----------------------------------------------------------------------------------------
Basic earnings per share $ 346,000 1,585,043 $ .22
Effect of dilutive securities - 33,852 -
------------------------------------
Diluted earnings per share $ 346,000 1,618,895 $ .21
====================================
(3) Allowance for Loan Losses
Quarter Year
Ended Ended
(in thousands) 3/31/01 12/31/00
-------- ----------
Balance at beginning of period $ 2,499 2,580
Loans charged off (15) (246)
Recoveries 10 30
Provisions charged to operations 190 135
------- -----
Balance at end of period $ 2,684 2,499
======= =====
5
(4) Basis of Presentation
First Financial Bancorp is the holding company for Bank of Lodi, N.A.
and Western Auxiliary Corporation. In the opinion of management, the
accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals and other accruals
as explained above) necessary for a fair presentation of financial
position as of the dates indicated and results of operations for the
periods shown. All material intercompany accounts and transactions have
been eliminated in consolidation. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts. The results for the three months
ended March 31, 2001 are not necessarily indicative of the results
which may be expected for the year ended December 31, 2001. The
unaudited consolidated financial statements presented herein should be
read in conjunction with the consolidated financial statements and
notes included in the 2000 Annual Report to Shareholders.
6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Cautionary Statement for the Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
The Company is including the following cautionary statement to take advantage of
the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995 for any forward-looking statement made by, or on behalf of, the Company.
The factors identified in this cautionary statement are important factors (but
not necessarily all important factors) that could cause actual results to differ
materially from those expressed in any forward-looking statement made by, or on
behalf of, the Company.
Where any such forward-looking statement includes a statement of the assumptions
of bases underlying such forward-looking statement, the Company cautions that,
while it believes such assumptions or bases to be reasonable and makes them in
good faith, assumed facts or bases almost always vary from actual results, and
the differences between assumed facts or bases and actual results can be
material, depending on the circumstances. Where, in any forward-looking
statement, the Company expresses an expectation or belief as to future results,
such expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result, or be achieved or accomplished.
Taking into account the foregoing, such risks and uncertainties include, but are
not limited to, the following factors: competitive pressure in the banking
industry; changes in the interest rate environment; general economic conditions,
either nationally or regionally becoming less favorable than expected and
resulting in, among other things, a deterioration in credit quality and an
increase in the provision for possible loan losses; changes in the regulatory
environment; changes in business conditions; volatility of rate sensitive
deposits; operational risks, including data processing system failures or fraud;
asset/liability matching risks and liquidity risks; and changes in the
securities markets.
The following discussion addresses information pertaining to the financial
condition and results of operations of the Company that may not be otherwise
apparent from a review of the consolidated financial statements and related
footnotes. It should be read in conjunction with those statements and notes
found on pages 1 through 6, as well as other information presented throughout
this report.
Changes in Financial Condition
Consolidated total assets at March 31, 2001 increased $7,318 thousand, or 4.0%,
from December 31, 2000. While non-interest bearing deposits decreased by $1,413
thousand, or 5.8%, during the first quarter, interest bearing deposits increased
$12,570 thousand, or 9.1%. The decrease in non-interest bearing deposits is
consistent with historical trends which reflect a seasonal decline in deposits
during the first quarter that is typically associated with the local
agricultural industry. The increase in interest bearing deposits is the direct
result of a management's desire to increase market share for deposits and to
provide liquidity to meet the projected loan growth for 2001. During the first
quarter of 2001, the Company experienced an increase of $4,203 thousand, or
9.5%, $1,385 thousand, or 5.2%, and $8,419 thousand, or 16.3%, in NOW accounts,
savings accounts and certificates of deposit, respectively, and a decrease of
$1,437 thousand, or 9.4%, in money market accounts. The increase in certificates
of deposit resulted from the Company offering deposit rates at or slightly above
the rates offered in its immediate market area. In addition, the new
certificates of deposit are from depositors in the local markets in which the
Company operates and does not consist of brokered deposits.
Total gross loans decreased by $110 thousand, or 0.1%, from December 31, 2000 to
March 31, 2001. The net decrease in gross loans is primarily the result of
increases of $1,545 thousand, or 11.5%, $536 thousand, or 3.1%, and $400
thousand, or 31%, in commercial loans, agricultural loans and loans which were
held for sale to the secondary market, respectively, combined with a decrease of
$2,305 thousand, or 5.2%, in real estate loans. During the first quarter of
2001, the Company opened a Small Business Administration ("SBA") loan production
office in Folsom California, moving its operations for SBA loans from its Lodi
office to the Folsom area.
The allowance for loan losses (the "allowance") is established through a
provision for possible loan losses charged to expense. The allowance at March
31, 2001 was in excess of the December 31, 2000 allowance by $185 thousand, or
7.4%, as a result of a provision for $190 thousand combined with net charge offs
of $5 thousand. Nonperforming loans decreased by $24 thousand, to $5,631
thousand at March 31, 2001. Management continues to actively work to resolve the
nonperforming loans, the majority of which are secured by real estate that, in
the opinion of management, are well collateralized. Management believes that the
allowance at March 31, 2001 is adequate to absorb known and reasonably estimated
loan losses. However, there can be no assurances that future economic events may
negatively impact the Bank's borrowers, thereby causing loan losses to exceed
the current allowance.
7
The following tables depict activity in the allowance for loan losses and
allocation of reserves for and at the three and twelve months ended March 31,
2001 and December 31, 2000, respectively:
Analysis of the Allowance for Loan Losses
Quarter Year
Ended Ended
3/31/01 12/31/00
------- --------
Balance at beginning of period $2,499 2,580
Charge-offs:
Commercial -- (201)
Real estate -- --
Consumer (15) (45)
------ -----
Total charge-offs (15) (246)
Recoveries:
Commercial 2 15
Real estate -- --
Consumer 8 15
------ -----
Total recoveries 10 30
------ -----
Net recoveries (charge-offs) (5) (216)
Provision charged to operations 190 135
------ -----
Balance at end of period $2,684 2,499
====== =====
Allocation of the Allowance for Loan Losses
3/31/01 3/31/01 12/31/00 12/31/00
Loan Category Amount % of Loans Amount % of Loans
- ------------- --------- ---------- --------- ----------
Commercial and other real estate $ 1,038 86.55% 879 86.46%
Real estate construction 552 10.45% 594 10.41%
Installment and other -- 3.00% 1 3.13%
Unallocated 1,094 N/A 1,025 N/A
--------- --------- --------- ----------
$ 2,684 100.00% 2,499 100.00%
========= ========= ========= ==========
Investments
Investment securities increased by $619 thousand, or 2.1%, from December 31,
2000 to March 31, 2001. The increase is primarily the result of purchases of
$8,104 thousand combined with matured bonds and securities contractually called
by issuers totaling $7,888 thousand.
8
Equity
Consolidated equity increased by $449 thousand from December 31, 2000 to March
31, 2001. Consolidated equity represented 8.79% and 8.89% of consolidated assets
at March 31, 2001 and December 31, 2000, respectively. The increase in equity
during the first quarter of 2001 resulted from earnings of $255 thousand for the
three months ended March 31, 2001 combined with an increase of $188 thousand to
reflect the after-tax market value increase of the available-for-sale investment
securities portfolio and a $6 thousand increase resulting from the exercise of
stock options. The increase in the investment security portfolio's market value
reflects the decrease in the level of market interest rates at March 31, 2001
compared to December 31, 2000.
The total risk-based capital ratio for the Company's wholly owned subsidiary,
Bank of Lodi was 11.27% at March 31, 2001 compared to 11.27% at December 31,
2000. The total risk-based capital ratio did not change during the first quarter
of 2001 largely as a result of capital requirements resulting from increases in
total risk-weighted assets being offset by increased earnings of the Company.
For each dollar in new loans, risk-weighted assets increase by eighty cents. The
Bank's leverage capital ratio was 7.99% at March 31, 2001 versus 7.99% at
December 31, 2000. The capital ratios are in excess of the regulatory minimums
for a well-capitalized bank.
Changes in Results of Operations- Three Months ended March 31, 2001
Summary of Earnings Performance
- --------------------------------------------------------------------------------
For the three months ended March 31:
-----------------------------------------
2001 2000
---- ----
Net income (in thousands) $ 255 $ 346
- --------------------------------------------------------------------------------
Basic net income per share $ .16 $ .22
Diluted net income per share .16 .21
Return on average assets 0.55% 0.79%
Return on average equity 6.26% 9.46%
Dividend payout ratio -- 20.58%
- --------------------------------------------------------------------------------
Average quity to average assets 8.74% 8.34%
- --------------------------------------------------------------------------------
Net income for the quarter decreased $91 thousand, or 26%, compared to the first
quarter of 2000. Net interest income increased by 2% as a result of an increase
in interest income, which increase resulted from an increase in total average
loans combined with an overall increase in the yield on earning assets, offset
by an increase in interest expense, which increase resulted from an increase in
total average interest bearing deposits combined with an increase in rates paid
on those deposits. The provision for loan losses increased $155 thousand, or
443%. Noninterest income increased $291 thousand, or 44%, while noninterest
expense increased $326 thousand, or 14%.
Based upon the net income for the three months ended March 31, 2001, the
Company's Board of Directors declared a 5% stock dividend payable May 22, 2001
to shareholders of record on May 8, 2001. All earnings per share amounts have
been adjusted to give retroactive effect for the stock dividend.
9
Net Interest Income
The following table provides a detailed analysis of the net interest spread and
net interest margin for the periods indicated:
-----------------------------------------------------------------------------------------------------
For the Quarter Ended For the Quarter Ended
March 31, 2001 March 31, 2000
(in thousands) (in thousands)
-----------------------------------------------------------------------------------------------------
Average Income/ Average Income/
Balance Expenses Yield(1) Balance Expenses Yield(1)
------- -------- -------- ------- -------- --------
Earning Assets:
Investment securities (1) $ 25,318 444 7.11% $ 45,150 590 5.18%
Federal funds sold 13,031 181 5.63% 2,880 42 5.76%
Loans (2) 114,875 2,685 9.48% 111,250 2,564 9.14%
------- ----- ----- ------- ----- -----
$153,224 3,310 8.76% $159,280 3,196 7.96%
======= ===== ===== ======= ===== =====
Liabilities:
Noninterest bearing deposits $ 22,344 -- -- $ 19,320 -- --
Savings, money market, & NOW deposits 86,709 342 1.38% 83,820 335 1.59%
Time deposits 55,518 761 5.56% 51,890 620 4.74%
Other borrowings 204 3 5.97% 5,336 80 6.00%
------- ----- ----- ------- ----- -----
Total Liabilities $164,775 1,106 2.72% $160,336 1,035 2.56%
------- ----- ----- ------- ----- -----
Net Interest Spread 6.04% 5.40%
===== =====
----------------------------------------------------------------------------------------------------
Earning Income Earning Income
Assets (Expense) Yield Assets (Expense) Yield
------- -------- -------- ------- -------- --------
Yield on average earning assets $153,224 3,310 8.76% $159,280 3,196 8.14%
Cost of funding average earning $153,224 (1,106) (2.56%) $159,280 (1,035) (2.56%)
------- ------- ------- -------
assets
Net Interest Margin $153,224 2,204 5.83% $159,280 2,161 5.40%
===== ===== ===== =====
----------------------------------------------------------------------------------------------------
<FN>
(1) Yield for period annualized on actual number of days in period and based on a 365-day year.
(2) Income on tax-exempt securities has not been adjusted to a tax equivalent basis.
(3) Nonaccrual loans are included in the loan totals for each period; however, only collected interest
on such loans is included in interest income.
</FN>
Net interest income for the first quarter of 2001 increased by $43 thousand, or
2%, over the same quarter of 2000. The net interest margin of 5.83% was an
increase from the 5.40% for the first quarter of 2000, primarily as a result of
an increase of $3,625 thousand, or 3.25%, in average loans which was offset by
an increase of $3,628 thousand, or 6.99%, in certificates of deposit. In
addition, the yield on loans and certificates of deposit increased as a result
of the existing rate environments at the time the loans and certificates of
deposit were originated. The average yield on the loans increased from 9.14% to
9.48% and the rate paid for certificates of deposit increased from 4.74% to
5.56% at March 31, 2000 to March 31, 2001, respectively.
Nonaccrual loans at March 31, 2001 and March 31, 2000 totaled $5,631 thousand
and $4,655 thousand, respectively. Interest forgone on nonaccrual loans totaled
approximately $153 thousand and $71 thousand for the three months ending March
31, 2001 and 2000, respectively.
10
Average deposits for the three months ended March 31, 2001 increased by $9,541
thousand, or 6.15%, compared to the prior year quarter. Average noninterest
bearing deposits have kept pace with the growth in interest bearing deposits
from a year ago and to make up 13% and 12% of average total deposits at March
31, 2001 and 2000, respectively. This has helped to keep down the cost of
funding earning assets. Average certificates of deposit were 32% of average
deposits for the three months ended March 31, 2001 and for the same period in
the prior year quarter.
Provision for Loan Losses
The Bank provided $190 thousand to the allowance in the first quarter of 2001
which is attributable to general loss reserves that have been established in
connection with loan portfolio growth combined with management's assessment of
the risks associated with the current economic environment. The allowance for
loan losses is discussed above under Changes in Financial Condition.
Noninterest Income
Noninterest income for the first quarter of 2001 increased by $291 thousand, or
44.0%, over the same period last year. Of the increase, $222 thousand is
attributable to gains resulting from the sale of real estate acquired through
foreclosure.
Income from the sale and servicing of loans totaled $107 thousand during the
first quarter of 2001, which increased by $27 thousand, or 14.2%, compared to
the prior year quarter. The increased income from the sale and servicing of
loans is primarily the result of increased refinancing activity of residential
mortgage loans which resulted from the recent decline in mortgage rates.
Noninterest Expenses
Noninterest expenses increased by $326 thousand, or 13.9%, compared to the prior
year quarter. Personnel expense increased $287 thousand, or 25.7%, as a result
of additions to staff during the year combined with general merit increases for
existing personnel. Occupancy expense increased $20 thousand or 10.0% primarily
as a result of the Company's relocation of its SBA office to Folsom, California.
Equipment expense increased $52 thousand, or 29.1%, as a result of depreciation
of new equipment. Other noninterest expense decreased $33 thousand, or 3.9%,
primarily as a result of decreases in marketing expenses. The reduction in
marketing expenses is the result of one time marketing programs initiated during
the first quarter of 2000.
Basis of Presentation
First Financial Bancorp is the holding company for Bank of Lodi, N.A. and
Western Auxiliary Corporation. In the opinion of management, the accompanying
unaudited consolidated financial statements reflect all adjustments (consisting
of normal recurring accruals and other accruals as explained above) necessary
for a fair presentation of financial position as of the dates indicated and
results of operations for the periods shown. All material intercompany accounts
and transactions have been eliminated in consolidation. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts. The results for the three months ended March
31, 2001 are not necessarily indicative of the results which may be expected for
the year ended December 31, 2001. The unaudited consolidated financial
statements presented herein should be read in conjunction with the consolidated
financial statements and notes included in the 2000 Annual Report to
Shareholders.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
While there are several varieties of market risk, the market risk material to
the Company and the Bank is interest rate risk. Within the context of interest
rate risk, market risk is the risk of loss due to changes in market interest
rates that have an adverse effect on net interest income, earnings, capital or
the fair value of financial instruments. Exposure to this type of risk is a
regular part of a financial institution's operations. The fundamental activities
of making loans, purchasing investment securities, and accepting deposits
inherently involve exposure to interest rate risk. The Company monitors the
repricing differences between assets and liabilities on a regular basis and
estimates exposure to net interest income, net income, and capital based upon
assumed changes in the market yield curve. As of and for the three months ended
March 31, 2001, there were no material changes in the market risk profile of the
Company or the Bank as described in the Company's 2000 Form 10-K.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
10 Form of Long Term Care Agreement by and between Bank of Lodi,
N.A. and certain directors and executive officers.
(b) Reports on Form 8-K
Form 8-K dated April 24, 2001 announcing first quarter 2001
financial results and five percent stock dividend.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST FINANCIAL BANCORP
Date: May 11, 2001 /s/ Allen R. Christenson
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Allen R. Christenson
Senior Vice President
Chief Financial Officer
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