-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pi+Kj30Gnmlr9xcdlaGBKcRlzN9CxTViAKkKTd4YPmncKG0JMWfSM2zrUEmdnJsm fkHtAAEyWyAVhOOoc1MN4g== 0000950152-96-002249.txt : 19960513 0000950152-96-002249.hdr.sgml : 19960513 ACCESSION NUMBER: 0000950152-96-002249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL BANCORP /OH/ CENTRAL INDEX KEY: 0000708955 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 311042001 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12379 FILM NUMBER: 96559762 BUSINESS ADDRESS: STREET 1: THIRD & HIGH ST CITY: HAMILTON STATE: OH ZIP: 45011 BUSINESS PHONE: 5138674700 MAIL ADDRESS: STREET 1: THIRD & HIGH ST CITY: HAMILTON STATE: OH ZIP: 45011 10-Q 1 FIRST FINANCIAL BANCORP 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1996 ------------------------ OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- ------------------ Commission file number 0-12379 ------- FIRST FINANCIAL BANCORP. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-1042001 - ------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 300 High Street, Hamilton, Ohio 45011 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (513) 867-4700 ------------------- 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 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. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 1, 1996 - ----------------------------- -------------------------- Common stock, $8.00 par value 13,388,384 2 FIRST FINANCIAL BANCORP. INDEX
Page No. -------- Part I-Financial Information Consolidated Balance Sheets - March 31, 1996 and December 31, 1995 1 Consolidated Statements of Earnings - Three Months Ended March 31, 1996 and 1995 2 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1996 and 1995 3 Notes to Consolidated Financial Statements 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II-Other Information Item 5 Other Information 12 Item 6 Exhibits and Reports on Form 8-K 14 Signatures 15
3 PART I - FINANCIAL INFORMATION FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)
March 31, December 31, ASSETS 1996 1995 ------------ ------------ Cash and due from banks $ 95,773 $ 108,685 Interest-bearing deposits with other banks 8,431 6,882 Federal funds sold and securities purchased under agreements to resell 6,869 14,802 Investment securities held-to-maturity, at cost (market value - $94,346 at March 31, 1996 and $100,512 at December 31, 1995) 88,206 93,522 Investment securities available-for-sale, at market value (cost of $270,461 at March 31, 1996 and $291,766 at December 31, 1995) 271,570 294,052 Loans Commercial 347,596 340,942 Real estate-construction 38,103 41,845 Real estate-mortgage 789,131 788,805 Installment 333,918 329,034 Credit card 13,521 15,406 Lease financing 15,848 16,557 ---------- ---------- Total loans 1,538,117 1,532,589 Less Unearned income 665 573 Allowance for loan losses 20,659 20,437 ---------- ---------- Net loans 1,516,793 1,511,579 Premises and equipment 40,074 39,931 Deferred income taxes 3,774 3,369 Accrued interest and other assets 39,292 30,553 ---------- ---------- TOTAL ASSETS $2,070,782 $2,103,375 ========== ========== LIABILITIES Deposits Noninterest-bearing $ 205,837 $ 220,061 Interest-bearing 1,560,319 1,565,501 ---------- ---------- Total deposits 1,766,156 1,785,562 Short-term borrowings Federal funds purchased and securities sold under agreements to repurchase 33,042 49,483 Other 3,869 8,889 ---------- ---------- Total short-term borrowings 36,911 58,372 Long-term borrowings 3,558 2,820 Accrued interest and other liabilities 26,727 22,446 ---------- ---------- TOTAL LIABILITIES 1,833,352 1,869,200 SHAREHOLDERS' EQUITY Common stock - par value, $8 per share Authorized - 25,000,000 shares Issued - 13,022,970 in 1996 and 13,013,422 in 1995 104,184 104,107 Surplus 13,793 13,577 Retained earnings 119,021 115,102 Unrealized net gains on investment securities available-for-sale, net of deferred income taxes 695 1,437 Restricted stock awards (263) (48) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 237,430 234,175 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,070,782 $2,103,375 ========== ==========
See notes to consolidated financial statements. 1 4 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollars in thousands, except per share data)
Three months ended March 31, -------------------- 1996 1995 --------- --------- INTEREST INCOME Loans, including fees $ 34,475 $ 29,988 Investment securities Taxable 4,710 3,998 Tax-exempt 1,486 2,083 --------- --------- Total investment interest 6,196 6,081 Interest-bearing deposits with other banks 118 75 Federal funds sold and securities purchased under agreements to resell 148 18 --------- --------- TOTAL INTEREST INCOME 40,937 36,162 INTEREST EXPENSE Deposits 16,198 13,035 Short-term borrowings 557 1,460 Long-term borrowings 52 0 --------- --------- Total interest expense 16,807 14,495 --------- --------- NET INTEREST INCOME 24,130 21,667 Provision for loan losses 606 393 --------- --------- Net interest income after provision for loan losses 23,524 21,274 NONINTEREST INCOME Service charges on deposit accounts 2,183 2,022 Trust income 2,086 1,894 Investment securities gains 0 13 Other 988 944 --------- --------- Total noninterest income 5,257 4,873 NONINTEREST EXPENSES Salaries and employee benefits 9,146 8,076 Net occupancy expenses 1,215 1,081 Furniture and equipment expenses 931 806 Data processing expenses 1,169 1,317 Deposit insurance expense 211 886 State taxes 416 400 Other 4,040 3,095 --------- --------- TOTAL NONINTEREST EXPENSES 17,128 15,661 --------- --------- Income before income taxes 11,653 10,486 Income tax expense 3,827 3,117 --------- --------- NET EARNINGS $ 7,826 $ 7,369 ========= ========= Net earnings per common share $ 0.60 $ 0.60 ========= ========= Cash dividends declared per share $ 0.30 $ 0.26 ========= ========= Average shares outstanding 13,019,885 12,206,529 ========== ==========
See notes to consolidated financial statements. 2 5 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Three months ended March 31, ---------------------- 1996 1995 ----------- --------- OPERATING ACTIVITIES Net earnings $ 7,826 $ 7,369 Adjustments to reconcile net earnings to net cash provided by operating activities Provision for loan losses 606 393 Provision for depreciation and amortization 964 921 Net amortization of investment security premiums and accretion of discounts 156 400 Realized investment security gains 0 (13) Originations of mortgage loans held for sale (10,226) (1,760) Gains from sales of mortgage loans held for sale (160) (24) Proceeds from sale of mortgage loans held for sale 10,386 1,784 Deferred income taxes 31 0 Decrease in interest receivable 489 771 Increase in cash surrender value of life insurance (7,990) 0 Increase in prepaid expenses (646) (1,785) Increase in accrued expenses 3,482 2,680 (Decrease) increase in interest payable (90) 1,187 Other (43) (1,008) ---------- ---------- Net cash provided by operating activities 4,785 10,915 INVESTING ACTIVITIES Proceeds from sales of investment securities available-for-sale 0 18,224 Proceeds from calls, paydowns and maturities of investment securities available-for-sale 56,776 23,227 Purchases of investment securities available-for-sale (35,470) (7,280) Proceeds from calls, paydowns and maturities of investment securities held-to-maturity 5,969 14,375 Purchases of investment securities held-to-maturity (650) (15) Net (increase) decrease in interest-bearing deposits with other banks (1,549) 3,538 Net decrease (increase) in federal funds sold and securities purchased under agreements to resell 7,933 (101) Net increase in loans and leases (6,016) (31,744) Recoveries from loans and leases previously charged off 226 269 Proceeds from disposal of other real estate owned 28 541 Purchases of premises and equipment (975) (500) ---------- ---------- Net cash provided by investing activities 26,272 20,534 FINANCING ACTIVITIES Net (decrease) increase in total deposits (19,406) 3,371 Net decrease in short-term borrowings (21,461) (42,717) Increase in long-term borrowings 738 0 Cash dividends declared (3,907) (3,174) Proceeds from exercise of stock options, net of shares purchased 67 53 --------- --------- Net cash used in financing activities (43,969) (42,467) --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (12,912) (11,018) Cash and cash equivalents at beginning of period 108,685 103,752 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 95,773 $ 92,734 ========= =========
3 6 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Three months ended March 31, ---------------------- 1996 1995 ---------- --------- Supplemental disclosures Interest paid $ 16,897 $ 13,308 ========== ========= Income taxes paid $ 332 $ 85 ========== ========= Recognition of deferred tax assets attributable to FASB Statement No. 115 $ 436 $ 1,321 ========== ========= Acquisition of other real estate owned through foreclosure $ 10 $ 101 ========== ========= Issuance of restricted stock awards $ 226 $ 33 ========== =========
See notes to consolidated financial statements. 4 7 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The consolidated financial statements for interim periods are unaudited; however, in the opinion of the management of First Financial Bancorp. ("Bancorp"), all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation have been included. NOTE 1: BASIS OF PRESENTATION The consolidated financial statements of Bancorp, a bank and savings and loan holding company, include the accounts of Bancorp and its wholly-owned subsidiaries - First National Bank of Southwestern Ohio, Citizens Commercial Bank & Trust Company, Van Wert National Bank, Union Trust Bank, Indiana Lawrence Bank, Fidelity Federal Savings Bank, Citizens First State Bank, Home Federal Bank, A Federal Savings Bank, Union Bank & Trust Company, The Clyde Savings Bank Company, Peoples Bank and Trust Company and Bright National Bank. All significant intercompany transactions and accounts have been eliminated in consolidation. Intangible assets arising from the acquisition of subsidiaries are being amortized over varying periods, none of which currently exceeds 15 years. Core deposit balances are being amortized over varying periods, none of which currently exceeds 10 years. The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore, do not include all information and footnotes necessary to be in conformity with generally accepted accounting principles. The Consolidated Statements of Cash Flows has been presented utilizing the indirect method. For purposes of the Consolidated Statements of Cash Flows, Bancorp considers cash and due from banks as cash and cash equivalents. The assumed exercise of stock options would not have a materially dilutive effect, therefore, fully diluted earnings per share is not presented. NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK In the normal course of business, Bancorp offers a variety of financial instruments with off- balance-sheet risk to its customers to aid them in meeting their requirements for liquidity and credit enhancement and to reduce its own exposure to fluctuations in interest rates. These financial instruments include standby letters of credit and commitments outstanding to extend credit. Generally accepted accounting principles do not require these financial instruments to be recorded in the consolidated financial statements, and accordingly, they are not. Bancorp does not use off-balance-sheet derivative financial instruments (such as interest rate swaps) as defined in the Financial Accounting Standards Board's (FASB) Statement No. 119 "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments". Bancorp's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for standby letters of credit and commitments outstanding to extend credit is represented by the contractual amounts of those instruments. Bancorp uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Following is a discussion of these transactions. Standby letters of credit are conditional commitments issued by Bancorp to guarantee the performance of a customer to a third party. Bancorp's portfolio of standby letters of credit consists primarily of performance assurances made on behalf of customers who have a 5 8 contractual commitment to produce or deliver goods or services. The risk to Bancorp arises from its obligation to make payment in the event of the customers' contractual default. As of March 31, 1996, Bancorp had issued standby letters of credit aggregating $13,528,000 compared to $10,989,000 issued as of December 31, 1995. Management conducts regular reviews of these instruments on an individual customer basis, and the results are considered in assessing the adequacy of Bancorp's allowance for loan losses. Management does not anticipate any material losses as a result of these letters of credit. Loan commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp evaluates each customer's creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by Bancorp upon extension of credit, is based on management's credit evaluation of the counterparty. The collateral held varies, but may include securities, real estate, inventory, plant, or equipment. Bancorp had commitments outstanding to extend credit totaling $250,535,000 at March 31, 1996 and $243,430,000 at December 31, 1995. Management does not anticipate any material losses as a result of these commitments. NOTE 3: SUBSEQUENT EVENTS On April 1, 1996 Bancorp issued 363,373 shares of its common stock in exchange for all the outstanding common stock of F&M Bancorp (F&M) of Rochester, Indiana. Upon consummation of the merger, F&M was merged out of existence and Farmers & Merchant's Bank of Rochester, F&M's only subsidiary, was merged with and into Indiana Lawrence Bank (Indiana Lawrence), a wholly owned subsidiary of Bancorp. Farmers & Merchants Bank of Rochester's offices became branches of Indiana Lawrence, the surviving entity. This merger was accounted for as an immaterial pooling-of-interests and accordingly, the consolidated financial statements, including earnings per share, will not be restated for periods prior to April 1, 1996. NOTE 4: ACCOUNTING CHANGES In May 1995, the Financial Accounting Standards Board (FASB) issued Statement No. 122 on accounting for mortgage servicing rights, which Bancorp adopted effective January 1, 1996. The financial impact of adopting this statement was immaterial. Bancorp is required to adopt SFAS No. 123 "Accounting for Stock-based Compensation" by December 31, 1996. Bancorp is in the process of analyzing this statement and does not anticipate the impact of adoption will have a material effect on its consolidated financial position or earnings. 6 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST FINANCIAL BANCORP. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA
1996 1995 ---------- ------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- ---------- --------- (Dollars in thousands) Net Earnings $ 7,826 $ 8,314 $ 8,117 $ 7,989 $ 7,369 Average Consolidated Balance Sheet Items: Loans less unearned income 1,528,462 1,526,017 1,449,366 1,418,520 1,394,024 Investment securities 373,359 381,238 332,720 321,336 347,172 Other earning assets 18,482 28,359 13,269 4,084 7,056 ---------- ---------- ---------- ---------- ---------- Total Earning Assets 1,920,303 1,935,614 1,795,355 1,743,940 1,748,252 Total assets 2,059,649 2,070,338 1,923,339 1,868,384 1,871,532 Deposits 1,749,361 1,757,020 1,618,998 1,573,997 1,551,899 Shareholders' equity 236,539 232,471 216,164 203,469 197,050 Key Ratios: Average equity to average total assets 11.48% 11.23% 11.24% 10.89% 10.53% Return on average total assets 1.52% 1.61% 1.69% 1.71% 1.57% Return on average equity 13.23% 14.31% 15.02% 15.71% 14.96% Net interest margin (fully tax equivalent) 5.21% 5.22% 5.28% 5.22% 5.23%
NET INTEREST INCOME Net interest income, the principal source of earnings, is the amount by which interest and fees generated by earning assets exceed the interest costs of liabilities obtained to fund them. For analytical purposes, interest income presented in the table below has been adjusted to a tax equivalent basis assuming a 35% marginal tax rate for interest earned on tax-exempt assets such as municipal loans, tax-free leases and investments. This is to recognize the income tax savings which facilitates a comparison between taxable and tax-exempt assets. The tax equivalent adjustment to interest income has gradually declined over the periods presented as a result of a decline in tax-exempt assets. As shown below, net interest income on a fully tax equivalent basis has increased $2,138,000 over the first quarter of 1995. Continued loan growth, particularly in commercial and installment loans, contributed to higher net interest income in the first quarter of 1996. Increased calls and maturities of tax-exempt securities contributed to the gradual decrease of the tax equivalent adjustment to interest income.
Quarter Ended 1996 1995 ---------- ------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- ---------- --------- (Dollars in thousands) Interest income $40,937 $41,685 $38,860 $37,144 $36,162 Interest expense 16,807 17,393 16,152 15,476 14,495 ------- ------- ------- ------- ------- Net interest income 24,130 24,292 22,708 21,668 21,667 Tax equivalent adjustment to interest income 866 976 1,008 1,111 1,191 ------- ------- ------- ------- ------- Net interest income (fully tax equivalent) $24,996 $25,268 $23,716 $22,779 $22,858 ======= ======= ======= ======= =======
7 10 RATE/VOLUME ANALYSIS The impact of changes in volume and interest rates on net interest income is illustrated in the table below. As shown, increases in rates had a significant impact on both interest income and interest expense for the three month period ended March 31, 1996 in comparison to 1995. The increase in rates had slightly more impact on interest income than interest expense. The primary factor, however, for increased net interest income for the periods presented was a significant increase in the volume of earning assets. The change in interest due to the combined effect of both rate and volume has been allocated to the volume and rate variance on a prorated basis.
Three Months Ended Change Due To: Mar. 31, 1996 ---------------- Over 1995 Rate Volume --------- ---- ------ (Dollars in thousands) Interest income $ 4,775 $ 1,133 $ 3,642 Interest expense 2,312 1,092 1,220 -------- -------- -------- Net interest income $ 2,463 $ 41 $ 2,422 ======== ======== ========
OPERATING RESULTS Net operating income represents net earnings before net securities transactions. Net operating income for the first three months of 1996 was $7,816,000 which was an increase of $479,000 or 6.53% over that reported in the same period in 1995. This increase in net operating income can be primarily attributed to an increase in net interest income of $2,463,000 or 11.4%. Noninterest income, excluding securities transactions, for the first three months of 1996 increased 8.17% in comparison to the same period in 1995. These positive variances were offset by increases in provision for loan losses, noninterest expense and income tax expense. The increase in income tax expense is discussed in the next section. The increase in noninterest expense was 9.37%. INCOME TAXES For the first three months of 1996, income tax expense was $3,827,000 compared to $3,117,000 for the same period in 1995, or an increase of $710,000. In 1996, $3,837,000 of the tax expense was related to operating income with a tax benefit of $10,000 related to securities transactions. In the first three months of 1995, income tax expense related to operating income was $3,136,000 with a tax benefit related to securities transactions of $19,000. The increase in taxes on operating income was due to the increase in operating income before taxes and securities transactions of $1,180,000 or 11.3% over that reported for the first three months of 1995 and a higher effective tax rate for the period in 1996. The higher effective tax rate was primarily attributable to significant calls of tax-exempt securities which decreased tax-exempt income. NET EARNINGS Net earnings for the first three months of 1996 were $457,000 or 6.20% greater than that recorded during the same period in 1995. As was discussed previously, net operating income was $7,816,000 which was 6.53% greater than the same period in 1995. Net securities gains through March 31, 1996 were $10,000 compared to $32,000 for the period ending March 31, 1995. ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is maintained at a level believed adequate by management to absorb estimated probable credit losses. Management's periodic evaluation of the adequacy of the allowance is based on Bancorp's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payments), 8 11 the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. At March 31, 1996 and 1995, the recorded investment in loans that are considered to be impaired under FASB Statement No. 114 was $1,776,000 and $1,142,000, respectively, all of which were on a nonaccrual basis. The related allowance for loan losses on these impaired loans was $720,000 at March 31, 1996 and $423,000 at March 31, 1995. There were no impaired loans that as a result of write-downs did not have an allowance for loan losses. The average recorded investment in impaired loans for the respective quarters ended March 31, 1996 and 1995, was approximately $1,785,000 and $1,148,000. For the three months ended March 31, 1996, Bancorp recognized interest income on those impaired loans of $16,000 compared to $27,000 for the same period in 1995. Bancorp recognizes income on impaired loans using the cash basis method. The table below indicates the activity in the allowance for loan losses for the quarters presented.
Quarter Ended 1996 1995 ---------- --------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- --------- --------- (Dollars in thousands) Balance at beginning of period $20,437 $19,364 $18,948 $18,904 $18,609 Allowance acquired through merger 956 206 Provision for loan losses 606 957 532 226 393 Loans charged off (610) (1,161) (551) (565) (367) Recoveries 226 321 229 383 269 -------- --------- -------- -------- -------- Net charge offs (384) (840) (322) (182) (98) -------- --------- -------- -------- -------- Balance at end of period $20,659 $20,437 $19,364 $18,948 $18,904 ======== ========= ======== ======== ======== Ratios: Allowance to period end loans, net of unearned income 1.34% 1.33% 1.33% 1.33% 1.34% Recoveries to charge offs 37.05% 27.65% 41.56% 67.79% 73.30% Allowance as a multiple of net charge offs 53.80X 24.33X 60.14X 104.11X 192.90X
NONPERFORMING/UNDERPERFORMING ASSETS The table on the following page shows the categories which are included in nonperforming and underperforming assets. Nonperforming assets decreased $282,000 or 4.48% in the first quarter of 1996 when compared to the first quarter of 1995, and in that same period, accruing loans past due 90 days or more increased $337,000. Nonperforming assets increased $1,059,000 or 21.4% in the first quarter of 1996 when compared to the fourth quarter of 1995. There were no individually large loans contributing to this increase. While the percentage increase may seem large, the level of nonperforming assets in the current quarter is similar to 1995 levels. Accruing loans, including loans impaired under FASB Statement No. 114, which are past due 90 days or more where there is not a likelihood of becoming current are transferred to nonaccrual loans. However, those loans, which management feels will become current and, therefore accruing, will be classified as "Accruing loans 90 days or more past due" until they become current. 9 12
Quarter Ended 1996 1995 ---------- --------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- --------- --------- (Dollars in thousands) Nonaccrual loans $ 3,789 $ 2,764 $ 3,522 $ 3,631 $ 3,457 Restructured loans 582 517 551 571 1,173 OREO/ISF* 1,646 1,677 1,648 1,616 1,669 -------- -------- -------- -------- ------- Total nonperforming assets 6,017 4,958 5,721 5,818 6,299 Accruing loans past due 90 days or more 1,037 1,071 881 859 700 -------- -------- -------- -------- ------- Total underperforming assets $ 7,054 $ 6,029 $ 6,602 $ 6,677 $ 6,999 ======== ======== ======== ======== ======= Nonperforming assets as a percent of loans, net of unearned income plus OREO/ISF 0.39% 0.32% 0.39% 0.41% 0.45% ======== ======== ======== ======== ======== Underperforming assets as a percent of loans, net of unearned income plus OREO/ISF 0.46% 0.39% 0.45% 0.47% 0.50% ======== ======== ======== ========= ======== *Other real estate owned/In-substance foreclosure
In accordance with FASB Statement No. 114, a loan is classified as in-substance foreclosure when Bancorp has taken possession of the collateral regardless of whether formal foreclosure proceedings take place. Loans previously classified as in-substance foreclosure but for which Bancorp had not taken possession of the collateral have not been reclassified to loans due to immateriality. LIQUIDITY AND CAPITAL RESOURCES Liquidity management is the process by which Bancorp provides for the continuing flow of funds necessary to meet its financial commitments on a timely basis. These commitments include withdrawals by depositors, funding credit commitments to borrowers, shareholder dividends, paying expenses of operations, and funding capital expenditures. Liquidity is derived primarily from deposit growth, maturing loans, the maturity of investment securities, access to other funding sources and markets, and a strong capital position. The most stable source of liability-funded liquidity for both the long-term and short-term is deposit growth and retention in the core deposit base. At the end of the first quarter of 1996 Bancorp's deposit liabilities had decreased by 1.09% from December 31, 1995. Another source of funding is through short-term borrowings. Bancorp's short-term borrowings decreased to $36,911,000 at March 31, 1996, compared to $58,372,000 at December 31, 1995. The principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. At March 31, 1996, securities maturing in one year or less amounted to $58,880,000, representing 16.4% of the total of the investment securities portfolio. In addition, other types of assets such as cash and due from banks, federal funds sold and securities purchased under agreements to resell, as well as loans and interest-bearing deposits with other banks maturing within one year, are sources of liquidity. Total asset-funded sources of liquidity at March 31, 1996, amounted to $447,513,000, representing 21.6% of total assets. Sources of long-term asset funded liquidity are derived from the maturity of investment securities and maturing loans in excess of one year. At March 31, 1996, Bancorp had classified $271,570,000 in investment securities available-for-sale. Management examines Bancorp's liquidity needs in establishing this classification in accordance with the Financial Accounting Standards Board Statement No. 115 on accounting for certain investments in debt and equity securities. 10 13 Liquidity is very important and as such is both monitored and managed closely by the asset/liability committee at each affiliate. Liquidity may be used to fund capital expenditures. Capital expenditures were $975,000 for the first three months of 1996. In addition, remodeling is a planned and ongoing process given the 77 offices of Bancorp and its subsidiaries. Material commitments for capital expenditures as of March 31, 1996 were approximately $1,045,000. Management believes that Bancorp has sufficient liquidity to fund its current commitments. CAPITAL ADEQUACY The Federal Reserve established risk-based capital requirements for U.S. banking organizations which have been adopted by the Office of Thrift Supervision for savings and loan associations. Risk weights are assigned to on-and off-balance sheet items in arriving at risk-adjusted total assets. Regulatory capital is divided by risk-adjusted total assets, with the resulting ratio compared to a minimum standard to determine whether a bank has adequate capital. Fully phased-in guidelines require 4.00% for Tier I capital, which consists mainly of common shareholders' equity net of intangibles, and 8.00% for total capital (Tier I plus Tier II supplementary capital). Bancorp's Tier I ratio at March 31, 1996, was 15.1% and its total capital ratio was 16.3%. While Bancorp's ratios are well above the guidelines, management will continue to monitor the asset mix, product pricing, and the allowance for loan losses, which are the areas determined to be most affected by these requirements. The following table illustrates the risk-based capital calculations and ratios for the past five quarters.
Quarter Ended 1996 1995 ---------- ---------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- ---------- --------- (Dollars in thousands) Tier I Capital: Shareholder's equity $ 237,430 $ 234,175 $ 220,561 $ 207,279 $ 201,252 Less: Intangible assets 3,601 3,770 3,711 3,883 4,056 Less: Unrealized net securities gains (losses) 695 1,437 865 759 (384) ---------- ---------- ---------- ---------- ---------- Total Tier I Capital $ 233,134 $ 228,968 $ 215,985 $ 202,637 $ 197,580 ========== ========== ========== ========== ========== Total Risk-Based Capital: Tier I Capital $ 233,134 $ 228,968 $ 215,985 $ 202,637 $ 197,580 Qualifying Allowance for Loan Losses 19,355 19,127 18,052 17,603 17,290 ---------- ---------- ---------- ---------- ---------- Total Risk-Based Capital $ 252,489 $ 248,095 $ 234,037 $ 220,240 $ 214,870 ========== ========== ========== ========== ========== Risk Weighted Assets $1,548,397 $1,530,181 $1,444,180 $1,408,270 $1,383,180 ========== ========== ========== ========== ========== Risk-Based Ratios: Tier I 15.06% 14.96% 14.96% 14.39% 14.28% ========== ========== ========== ========== ========== Total Risk-Based Capital 16.31% 16.21% 16.21% 15.64% 15.53% ========== ========== ========== ========== ==========
11 14 ACCOUNTING AND REGULATORY MATTERS On August 8, 1995, the Federal Deposit Insurance Corporation (FDIC) voted to retroactively lower the deposit insurance premiums commercial banks pay from $0.23 to $0.04 per $100 in insured deposits for well-capitalized institutions. In September of 1995, Bancorp's commercial banking subsidiaries received refunds on excess deposit insurance premiums paid from June to September. Accordingly, these refunds are reflected in the September 30, 1995 Consolidated Financial Statements. Premiums for thrifts were not revised. Bancorp currently has approximately $300,000,000 in deposits at its thrift subsidiaries insured under the Savings Association Insurance Fund (SAIF). Currently, the SAIF reserves are considered underfunded and regulatory discussions continue regarding options for restoring SAIF levels. These discussions include the possibility of a one-time charge to thrifts in 1996, which could have a material negative impact on Bancorp's thrifts. Management is not aware of any other events or regulatory recommendations which, if implemented, are likely to have a material effect on Bancorp's liquidity, capital resources, or operations. PART II-OTHER INFORMATION Item 5. OTHER INFORMATION The Registrant is setting forth on the following page an unaudited consolidated statement of earnings for the four months ended April 30, 1996. This financial statement covers the financial results of 30 days of post-merger combined operations of the Registrant and Farmers & Merchants Bank of Rochester. 12 15 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Dollars in thousands, except per share data) (Unaudited)
Four months ended April 30, 1996 -------------- INTEREST INCOME Loans, including fees $ 46,168 Investment securities Taxable 6,336 Tax-exempt 2,010 --------- Total investment securities interest 8,346 Interest-bearing deposits with other banks 162 Federal funds sold and securities purchased under agreements to resell 245 --------- TOTAL INTEREST INCOME 54,921 INTEREST EXPENSE Deposits 21,637 Short-term borrowings 730 Long-term borrowings 70 --------- TOTAL INTEREST EXPENSE 22,437 --------- NET INTEREST INCOME 32,484 Provision for loan losses 883 --------- Net interest income after provision for loan losses 31,601 NONINTEREST INCOME Service charges on deposit accounts 2,951 Trust income 2,807 Investment securities gains 1 Other 1,285 --------- Total noninterest income 7,044 NONINTEREST EXPENSES Salaries and employee benefits 12,252 Net occupancy expenses 1,625 Furniture and equipment expenses 1,267 Data processing expenses 1,572 Deposit insurance expense 268 State taxes 554 Other 5,322 --------- Total noninterest expenses 22,860 --------- Income before income taxes 15,785 Income tax expense 5,175 --------- NET EARNINGS $ 10,610 ========= Net earnings per common share $ 0.81 ========= Average shares outstanding 13,111,198 ==========
13 16 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (b) Reports on Form 8-K During the quarter ended March 31, 1996, the registrant did not file any reports on Form 8-K. 14 17 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 hereunto duly authorized. FIRST FINANCIAL BANCORP. ------------------------ (Registrant) /s/ Michael R. O'Dell /s/ Joseph M. Gallina - --------------------- --------------------- Michael R. O'Dell, Senior Vice Joseph M. Gallina, President, Chief Financial Comptroller Officer and Secretary (Principal Accounting Officer) Date May 7, 1996 Date May 7, 1996 ----------------------------- ---------------- 15 EX-27 2 EXHIBIT 27
9 0000708955 FIRST FINANCIAL BANCORP 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 95,773 8,431 6,869 0 271,570 88,206 94,346 1,537,452 20,659 2,070,782 1,766,156 36,911 26,727 3,558 104,184 0 0 133,246 2,070,782 34,475 6,196 266 40,937 16,198 16,807 24,130 606 0 17,128 11,653 11,653 0 0 7,826 .60 .60 8.71 3,789 1,037 582 0 20,437 610 226 20,659 0 0 0
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