-----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, L+XeIZTlSppD0BF4Ail/psAUhJLEqLtov2OLMiKcfgXzgsOIRb9RKAafXd8CgPjT yMFFh6CM8uqlXRuyzmjd4w== 0000950152-97-003880.txt : 19970515 0000950152-97-003880.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950152-97-003880 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL BANCORP /OH/ CENTRAL INDEX KEY: 0000708955 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] 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: 97604201 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 10-Q 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, 1997 ----------------------------- 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, 1997 ----------------------------- -------------------------- Common stock, $8.00 par value 15,037,691 2 FIRST FINANCIAL BANCORP. INDEX
Page No. -------- Part I-Financial Information Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 1 Consolidated Statements of Earnings - Three Months Ended March 31, 1997 and 1996 2 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1997 and 1996 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 6 Exhibits and Reports on Form 8-K 12 Signatures 13
3 PART I - FINANCIAL INFORMATION FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, dollars in thousands)
March 31, December 31, 1997 1996 --------- ------------ Assets Cash and due from banks $ 110,896 $ 110,767 Interest-bearing deposits with other banks 3,774 5,079 Federal funds sold and securities purchased under agreements to resell 12,758 12,201 Investment securities held-to-maturity, at cost (market value - $70,835 at March 31, 1997 and $83,441 at December 31, 1996) 67,496 78,945 Investment securities available-for-sale, at market 301,120 290,701 Loans Commercial 411,270 398,034 Real estate-construction 43,032 43,262 Real estate-mortgage 875,460 863,414 Installment 384,667 366,051 Credit card 14,818 16,107 Lease financing 15,024 14,821 ---------- ---------- Total loans 1,744,271 1,701,689 Less Unearned income 1,376 1,425 Allowance for loan losses 23,651 22,672 ---------- ---------- Net loans 1,719,244 1,677,592 Premises and equipment 43,034 42,633 Deferred income taxes 3,524 2,802 Accrued interest and other assets 46,805 40,991 ---------- ---------- Total assets $2,308,651 $2,261,711 ========== ========== Liabilities Deposits Noninterest-bearing $ 230,298 $ 238,415 Interest-bearing 1,667,238 1,641,551 ---------- ---------- Total deposits 1,897,536 1,879,966 Short-term borrowings Federal funds purchased and securities sold under agreements to repurchase 42,674 35,304 Federal Home Loan Bank borrowings 59,000 56,500 Other 2,281 1,975 ---------- ---------- Total short-term borrowings 103,955 93,779 Long-term borrowings 11,223 6,506 Accrued interest and other liabilities 28,439 22,978 ---------- ---------- Total liabilities 2,041,153 2,003,229 Shareholders' equity Common stock - par value, $8 per share Authorized - 25,000,000 shares Issued - 15,050,158 in 1997 and 14,727,772 in 1996 120,401 117,822 Surplus 45,336 47,125 Retained earnings 102,511 93,369 Unrealized net gains on investment securities available-for-sale, net of deferred income taxes 129 1,162 Restricted stock awards (421) (220) Treasury stock, at cost, 15,301 shares in 1997 and 25,907 shares in 1996 (458) (776) ---------- ---------- Total shareholders' equity 267,498 258,482 ---------- ---------- Total liabilities and shareholders' equity $2,308,651 $2,261,711 ========== ==========
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, 1997 1996 -------- --------- Interest income Loans, including fees $39,016 $34,475 Investment securities Taxable 4,743 4,710 Tax-exempt 1,337 1,486 ------- ------- Total investment interest 6,080 6,196 Interest-bearing deposits with other banks 79 118 Federal funds sold and securities purchased under agreements to resell 194 148 ------- ------- Total interest income 45,369 40,937 Interest expense Deposits 16,825 16,198 Short-term borrowings 1,148 557 Long-term borrowings 158 52 ------- ------- Total interest expense 18,131 16,807 ------- ------- Net interest income 27,238 24,130 Provision for loan losses 860 606 ------- ------- Net interest income after provision for loan losses 26,378 23,524 Noninterest income Service charges on deposit accounts 2,373 2,183 Trust revenues 2,455 2,086 Investment securities gains 9 0 Other 1,350 988 ------- ------- Total noninterest income 6,187 5,257 Noninterest expenses Salaries and employee benefits 10,239 9,146 Net occupancy 1,311 1,215 Furniture and equipment 1,111 931 Data processing 1,228 1,169 Deposit insurance 65 211 State taxes 407 416 Other 4,159 4,040 ------- ------- Total noninterest expenses 18,520 17,128 ------- ------- Income before income taxes 14,045 11,653 Income tax expense 4,631 3,827 ------- ------- Net earnings $ 9,414 $ 7,826 ======= ======= Net earnings per common share $ 0.63 $ 0.55 ======= ======= Cash dividends declared per share $ 0.30 $ 0.27 ======= ======= Average shares outstanding 15,030,321 14,321,873 ========== ==========
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, 1997 1996 -------- -------- Operating activities Net earnings $ 9,414 $ 7,826 Adjustments to reconcile net earnings to net cash provided by operating activities Provision for loan losses 860 606 Provision for depreciation and amortization 1,243 964 Net amortization of investment security premiums and accretion of discounts 193 156 Realized investment security gains (9) 0 Originations of mortgage loans held for sale (10,673) (10,226) Gains from sales of mortgage loans held for sale (139) (160) Proceeds from sale of mortgage loans held for sale 10,812 10,386 Deferred income taxes (82) 31 (Increase) decrease in interest receivable (763) 489 Increase in cash surrender value of life insurance (3,193) (7,990) Increase in prepaid expenses (995) (646) Increase in accrued expenses 3,977 3,482 Increase (decrease) in interest payable 147 (90) Other 984 (43) -------- -------- Net cash provided by operating activities 11,776 4,785 Investing activities Proceeds from sales of investment securities available-for-sale 0 0 Proceeds from calls, paydowns and maturities of investment securities available-for-sale 17,431 56,776 Purchases of investment securities available-for-sale (24,929) (35,470) Proceeds from calls, paydowns and maturities of investment securities held-to-maturity 12,022 5,969 Purchases of investment securities held-to-maturity (356) (650) Net decrease (increase) in interest-bearing deposits with other banks 1,305 (1,549) Net decrease in federal funds sold and securities purchased under agreements to resell 5,343 7,933 Net increase in loans and leases (14,483) (6,016) Recoveries from loans and leases previously charged off 346 226 Proceeds from disposal of other real estate owned 149 28 Cash and cash equivalents acquired in merger 8,288 0 Purchases of premises and equipment (605) (975) -------- -------- Net cash provided by investing activities 4,511 26,272 Financing activities Net decrease in total deposits (26,586) (19,406) Net increase (decrease) in short-term borrowings 10,176 (21,461) Net increase in long-term borrowings 4,717 738 Cash dividends declared (4,510) (3,907) Proceeds from exercise of stock options, net of shares purchased 45 67 -------- -------- Net cash used in financing activities (16,158) (43,969) -------- -------- Increase (decrease) in cash and cash equivalents 129 (12,912) Cash and cash equivalents at beginning of period 110,767 108,685 -------- -------- Cash and cash equivalents at end of period $110,896 $ 95,773 ======== ========
3 6 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Three months ended March 31, 1997 1996 -------- -------- Supplemental disclosures Interest paid $20,100 $16,897 ======= ======= Income taxes paid $ 295 $ 332 ======= ======= Recognition of deferred tax assets attributable to FASB Statement No. 115 $ 610 $ 436 ======= ======= Acquisition of other real estate owned through foreclosure $ 238 $ 10 ======= ======= Issuance of restricted stock awards $ 226 $ 226 ======= =======
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, Bright National Bank, First Finance Mortgage Company of Southwestern Ohio, Farmers State Bank and National Bank of Hastings. 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. Average common shares outstanding have been adjusted for a 10% stock dividend declared by the Board of Directors on September 24, 1996, payable on November 1, 1996. Appropriately, shares outstanding and earnings and dividends per share in the accompanying financial statements have been restated to reflect the above-mentioned stock dividend. The 10% stock dividend was recorded by transferring the fair market value of the shares issued from retained earnings to common stock and surplus. 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". 5 8 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 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, 1997, Bancorp had issued standby letters of credit aggregating $10,985,000 compared to $9,706,000 issued as of December 31, 1996. 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 $293,053,000 at March 31, 1997 and $270,232,000 at December 31, 1996. Management does not anticipate any material losses as a result of these commitments. NOTE 3: BUSINESS COMBINATIONS On January 1, 1997, Bancorp issued 322,386 shares of its common stock in exchange for all the outstanding common stock of Hastings Financial Corporation (Hastings) of Hastings, Michigan. Upon consummation of the merger, Hastings was merged out of existence and National Bank of Hastings, Hasting's only subsidiary became a wholly owned subsidiary of Bancorp. This merger was accounted for as an immaterial pooling-of-interests and accordingly, the consolidated financial statements, including earnings per share, were not restated for periods prior to January 1, 1997. NOTE 4: PENDING MERGERS AND ACQUISITIONS On January 13, 1997, Bancorp signed a Plan and Agreement of Merger with Southeastern Indiana Bancorp (SIB). SIB's only subsidiary, Vevay Deposit Bank, has its main office and two other offices in Vevay, Indiana and an additional office in East Enterprise, Indiana. Under the terms of the merger agreement, Bancorp will pay $7,800,000 in cash for all the outstanding common stock of SIB. Upon consummation of the merger, SIB will be merged out of existence and Vevay Deposit Bank will become a wholly owned subsidiary of Bancorp. Subject to regulatory approval and approval by SIB's shareholders, the merger is expected to occur during the second quarter of 1997. The merger will be accounted for using the purchase method of accounting. 6 9 NOTE 5: ACCOUNTING CHANGES SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," was released in June 1996 and was effective for transactions occuring after December 31, 1996. Early adoption of SFAS No. 125 was not permitted. Under the provisions of SFAS No. 125, each party to a transaction recognizes only assets it controls and liabilities it has incurred, derecognizes assets only when control has been surrendered and derecognizes liabilities only when they have been extinguished. Transactions are to be separated into components and separate assets and liabilities may need to be recorded for the different components. The financial impact of adopting this statement was immaterial. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST FINANCIAL BANCORP. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA
1997 1996 ------- -------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ------- --------- ------- ------- -------- (Dollars in thousands) Net Earnings $ 9,414 $ 9,489 $ 7,580 $ 9,045 $ 7,826 Average Consolidated Balance Sheet Items: Loans less unearned income 1,730,946 1,665,127 1,635,564 1,588,249 1,528,462 Investment securities 369,438 376,345 381,986 380,887 373,359 Other earning assets 20,266 15,131 12,848 22,283 18,482 ---------- ---------- ---------- ---------- ---------- Total Earning Assets 2,120,650 2,056,603 2,030,398 1,991,419 1,920,303 Total assets 2,281,811 2,211,307 2,180,410 2,137,669 2,059,649 Deposits 1,888,159 1,831,974 1,803,351 1,813,461 1,749,361 Shareholders' equity 266,008 255,733 249,941 247,468 236,539 Key Ratios: Average equity to average total assets 11.66% 11.56% 11.46% 11.58% 11.48% Return on average total assets 1.65% 1.72% 1.39% 1.69% 1.52% Return on average equity 14.16% 14.84% 12.13% 14.62% 13.23% Net interest margin (fully tax equivalent) 5.29% 5.31% 5.25% 5.25% 5.21%
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 been declining due to increased calls and maturities of tax-exempt securities. As shown below, net interest income on a fully tax equivalent basis has increased $3,024,000 over the first quarter of 1996. Continued loan growth, particularly in commercial and installment loans, contributed to higher net interest income in the first quarter of 1997.
1997 Quarter Ended 1996 ------- ------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ------- -------- ------- ------- -------- (Dollars in thousands) Interest income $45,369 $44,497 $43,582 $42,259 $40,937 Interest expense 18,131 18,058 17,793 17,049 16,807 ------- ------- ------- ------- ------- Net interest income 27,238 26,439 25,789 25,210 24,130 Tax equivalent adjustment to interest income 782 856 879 909 866 ------- ------- ------- ------- ------- Net interest income (fully tax equivalent) $28,020 $27,295 $26,668 $26,119 $24,996 ======= ======= ======= ======= =======
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, average earning assets had an increase in rates, while average interest-bearing liabilities experienced a decrease in rates for the three month period ended March 31, 1997 in comparison to the same period in 1996. The rates had more impact on interest expense than interest income. 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, 1997 ------------------- Over 1996 Rate Volume ------------- ------ -------- (Dollars in thousands) Interest income $4,432 $146 $4,286 Interest expense 1,324 (362) 1,686 ------ ---- ------ Net interest income $3,108 $508 $2,600 ====== ==== ======
OPERATING RESULTS Net operating income represents net earnings before net securities transactions. Net operating income for the first three months of 1997 was $9,408,000 which was an increase of $1,592,000 or 20.4% over that reported in the same period in 1996. This increase in net operating income can be primarily attributed to an increase in net interest income of $3,108,000 or 12.9%. Noninterest income, excluding securities transactions, for the first three months of 1997 increased 17.5% in comparison to the same period in 1996 as a result of new services and fees. 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 8.13%. INCOME TAXES For the first three months of 1997, income tax expense was $4,631,000 compared to $3,827,000 for the same period in 1996, or an increase of $804,000. In 1997, $4,628,000 of the tax expense was related to operating income with a tax expense of $3,000 related to securities transactions. In the first three months of 1996, income tax expense related to operating income was $3,837,000 with a tax benefit related to securities transactions of $10,000. The increase in taxes on operating income was due to the increase in operating income before taxes and securities transactions of $2,383,000 or 20.4% over that reported for the first three months of 1996 and a higher effective tax rate for the period in 1997. 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 1997 were $1,588,000 or 20.3% greater than that recorded during the same period in 1996. As was discussed previously, net operating income was $9,408,000 which was 20.4% greater than the same period in 1996. Net securities gains through March 31, 1997 were $6,000 compared to $10,000 for the period ending March 31, 1996. 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 8 11 timing of future payments), 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, 1997 and 1996, the recorded investment in loans that are considered to be impaired under FASB Statement No. 114 was $3,458,000 and $1,776,000, respectively, all of which were on a nonaccrual basis. The related allowance for loan losses on these impaired loans was $1,415,000 at March 31, 1997 and $720,000 at March 31, 1996. 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, 1997 and 1996, was approximately $3,040,000 and $1,785,000. For the three months ended March 31, 1997, Bancorp recognized interest income on those impaired loans of $64,000 compared to $16,000 for the same period in 1996. 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.
1997 Quarter Ended 1996 ------- --------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ------- -------- ------- ------- -------- (Dollars in thousands) Balance at beginning of period $22,672 $21,972 $21,605 $20,659 $20,437 Allowance acquired through merger 438 869 723 Provision for loan losses 860 966 1,097 764 606 Loans charged off (665) (1,447) (1,026) (880) (610) Recoveries 346 312 296 339 226 ------- ------- ------- ------- ------- Net charge offs (319) (1,135) (730) (541) (384) ------- ------- ------- ------- ------- Balance at end of period $23,651 $22,672 $21,972 $21,605 $20,659 ======= ======= ======= ======= ======= Ratios: Allowance to period end loans, net of unearned income 1.36% 1.33% 1.33% 1.34% 1.34% Recoveries to charge offs 52.03% 21.56% 28.85% 38.52% 37.05% Allowance as a multiple of net charge offs 74.14X 19.98X 30.10X 39.94X 53.80X
NONPERFORMING/UNDERPERFORMING ASSETS The table on the following page shows the categories which are included in nonperforming and underperforming assets. Nonperforming assets increased $1,489,000 or 24.7% in the first quarter of 1997 when compared to the first quarter of 1996, and in that same period, accruing loans past due 90 days or more decreased $28,000. Nonperforming assets increased $1,502,000 or 25.0% in the first quarter of 1997 when compared to the fourth quarter of 1996. There were no individually large loans contributing to this increase. While the increase may seem large, the level of nonperforming assets as a percentage of loans in the current quarter has only increased a small amount compared to 1996 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
1997 Quarter Ended 1996 ------- --------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ------- -------- ------- ------- -------- (Dollars in thousands) Nonaccrual loans $6,611 $4,850 $5,028 $3,931 $3,789 Restructured loans 550 890 507 573 582 OREO/ISF* 345 264 1,118 1,777 1,646 ------ ------ ------ ------ ------ Total nonperforming assets 7,506 6,004 6,653 6,281 6,017 Accruing loans past due 90 days or more 1,009 906 1,238 1,198 1,037 ------ ------ ------ ------ ------ Total underperforming assets $8,515 $6,910 $7,891 $7,479 $7,054 ====== ====== ====== ====== ====== Nonperforming assets as a percent of loans, net of unearned income plus OREO/ISF 0.43% 0.35% 0.40% 0.39% 0.39% ====== ====== ====== ====== ====== Underperforming assets as a percent of loans, net of unearned income plus OREO/ISF 0.49% 0.41% 0.48% 0.46% 0.46% ====== ====== ====== ====== ======
*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. 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 1997 Bancorp's deposit liabilities had increased by 0.93% from December 31, 1996. Another source of funding is through short-term borrowings. Bancorp's short-term borrowings increased to $103,955,000 at March 31, 1997, compared to $93,779,000 at December 31, 1996. The principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. At March 31, 1997, securities maturing in one year or less amounted to $35,233,000, representing 9.56% 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, 1997, amounted to $474,231,000, representing 20.5% 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, 1997, Bancorp had classified $301,120,000 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 $605,000 for the first three months of 1997. In addition, remodeling is a planned and ongoing process given the 90 offices of Bancorp and its subsidiaries. Material commitments for capital expenditures as of March 31, 1997 were approximately $615,000. 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 ratios compared to minimum standards to determine whether a bank has adequate capital. Regulatory guidelines require a 4.00% Tier 1 capital ratio, an 8.00% Total risk-based capital ratio and a 4.00% Leverage ratio. Tier 1 capital consists primarily of common shareholders' equity, net of intangibles, and Total risked-based capital is Tier 1 capital plus Tier 2 supplementary capital, which is primarily the allowance for loan losses subject to certain limits. The Leverage ratio is a result of Tier 1 capital divided by average total assets less certain intangibles. Bancorp's Tier I ratio at March 31, 1997, was 16.0%, its Total risked-based capital was 17.3% and its Leverage ratio was 11.5%. While Bancorp subsidiaries' ratios are well above regulatory requirements, management will continue to monitor the asset mix which affects these ratios due to the risk weights assigned various assets, and the allowance for loan losses, which influences the Total risk-based capital ratio. The table below illustrates the risk-based capital calculations and ratios for the last two years.
1997 Quarter Ended 1996 ------- --------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ------- -------- ------- ------- -------- (Dollars in thousands) Tier I Capital: Shareholder's equity $ 267,498 $ 258,482 $ 252,376 $ 248,839 $ 237,430 Less: Intangible assets 5,187 4,154 1,528 1,586 1,644 Less: Unrealized net securities gains (losses) 129 1,162 154 (244) 695 ---------- ---------- ---------- ---------- ---------- Total Tier I Capital $ 262,182 $ 253,166 $ 250,694 $ 247,497 $ 235,091 ========== ========== ========== ========== ========== Total Risk-Based Capital: Tier I Capital $ 262,182 $ 253,166 $ 250,694 $ 247,497 $ 235,091 Qualifying Allowance for Loan Losses 20,468 19,856 19,263 18,833 17,947 ---------- ---------- ---------- ---------- ---------- Total Risk-Based Capital $ 282,650 $ 273,022 $ 269,957 $ 266,330 $ 253,038 ========== ========== ========== ========== ========== Risk Weighted Assets $1,637,465 $1,588,464 $1,538,359 $1,503,886 $1,433,051 ========== ========== ========== ========== ========== Risk-Based Ratios: Tier I 16.04% 15.94% 16.30% 16.46% 16.40% ========== ========== ========== ========== ========== Total Risk-Based Capital 17.30% 17.19% 17.55% 17.71% 17.66% ========== ========== ========== ========== ========== Leverage 11.52% 11.83% ========== ==========
11 14 ACCOUNTING AND REGULATORY MATTERS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128 on earnings per share presentation. This Statement is effective for financial statements for both interim and annual periods ending after December 15, 1997. FASB Statement No. 128 requires the presentation of basic (excludes dilution) and fully diluted earnings per share. The impact to Bancorp from adoption of this Statement is not expected to be material. Bancorp has presented earnings per share for the first quarter of 1997 of $0.63. Basic and diluted earnings per share for the same period calculated according to the new standard would also be $0.63. 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 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K On February 12, 1997, Bancorp filed a Form 8-K reporting the unaudited consolidated statement of earnings for the month ended January 31, 1997 which covered the financial results of more than 30 days of post-merger combined operations of Bancorp and National Bank of Hastings. See "Note 3: Business Combinations" for further information. 12 15 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 13, 1997 Date May 13, 1997 ----------------- ------------------- 13 EX-27 2 EXHIBIT 27
9 0000708955 FIRST FINANCIAL BANCORP 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 110,896 3,774 12,758 0 301,120 67,496 70,835 1,742,895 23,651 2,308,651 1,897,536 103,955 28,439 11,223 0 0 120,401 147,097 2,308,651 39,016 6,080 273 45,369 16,825 18,131 27,238 860 9 18,520 14,045 14,045 0 0 9,414 0.63 0.63 8.51 6,611 1,009 550 0 22,672 665 346 23,651 23,651 0 0
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