-----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, KvhR+2lHYrQj4dzi71R9qIa2jQ+qrmDzTS6KxshtHad//xEM8Db7K16+pwZM1KPt +pHicC8EnxgoUk98WFnjRQ== 0000950152-00-003895.txt : 20000512 0000950152-00-003895.hdr.sgml : 20000512 ACCESSION NUMBER: 0000950152-00-003895 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 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: SEC FILE NUMBER: 000-12379 FILM NUMBER: 626345 BUSINESS ADDRESS: STREET 1: 300 HIGH ST CITY: HAMILTON STATE: OH ZIP: 45011 BUSINESS PHONE: 5138674700 MAIL ADDRESS: STREET 1: 300 HIGH ST CITY: HAMILTON STATE: OH ZIP: 45011 10-Q 1 FIRST FINANCIAL BANCORP 10-Q 1 FORM 10-Q UNITED STATES 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, 2000 -------------------------------------------------- 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 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. 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 April 28, 2000 -------------------------- ----------------------------- Common stock, No par value 46,545,096 2 FIRST FINANCIAL BANCORP. INDEX
Page No. -------- Part I-Financial Information Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 1 Consolidated Statements of Earnings - Three Months Ended March 31, 2000 and 1999 2 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 3 Consolidated Statements of Changes in Shareholders" Equity Three Months Ended March 31, 2000 and 1999 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II-Other Information Item 6 Exhibits and Reports on Form 8-K 15 Signatures 16
3 PART I - FINANCIAL INFORMATION FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, dollars in thousands)
March 31, December 31, 2000 1999 ----------- ---------- ASSETS Cash and due from banks $ 171,741 $ 225,837 Interest-bearing deposits with other banks 13,290 8,867 Federal funds sold and securities purchased under agreements to resell 451 5,621 Investment securities held-to-maturity, at cost (market value - $32,485 at March 31, 2000 and $32,498 at December 31, 1999) 31,880 31,765 Investment securities available-for-sale, at market 544,759 490,126 Loans Commercial 776,881 769,454 Real estate-construction 121,798 111,458 Real estate-mortgage 1,469,340 1,467,591 Installment 632,029 623,091 Credit card 20,743 22,408 Lease financing 45,983 46,508 ----------- ---------- Total loans 3,066,774 3,040,510 Less Unearned income 4,263 4,134 Allowance for loan losses 40,192 39,340 ----------- ---------- Net loans 3,022,319 2,997,036 Premises and equipment 58,950 59,004 Goodwill 29,699 30,077 Other intangibles 10,042 10,522 Deferred income taxes 8,290 8,008 Accrued interest and other assets 80,851 73,830 ----------- ---------- TOTAL ASSETS $3,972,272 $3,940,693 =========== ========== LIABILITIES Deposits Noninterest-bearing $ 417,941 $ 408,712 Interest-bearing 2,632,846 2,582,501 ----------- ---------- Total deposits 3,050,787 2,991,213 Short-term borrowings Federal funds purchased and securities sold under agreements to repurchase 101,148 83,353 Federal Home Loan Bank borrowings 270,550 294,235 Other 1,848 4,530 ----------- ---------- Total short-term borrowings 373,546 382,118 Long-term borrowings 142,856 161,799 Accrued interest and other liabilities 31,897 33,024 ----------- ---------- TOTAL LIABILITIES 3,599,086 3,568,154 SHAREHOLDERS' EQUITY Common stock - no par value Authorized - 160,000,000 shares Issued - 46,913,096 in 2000 and 46,869,107 in 1999 374,237 373,447 Retained earnings 12,700 5,904 Accumulated comprehensive income (7,165) (6,398) Restricted stock awards (1,107) (414) Treasury stock, at cost, 295,600 shares in 2000 and 0 shares in 1999 (5,479) 0 ----------- ---------- TOTAL SHAREHOLDERS' EQUITY 373,186 372,539 ----------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,972,272 $3,940,693 =========== ==========
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, ---------------------- 2000 1999 ------- ------- INTEREST INCOME Loans, including fees $67,110 $58,488 Investment securities Taxable 6,320 5,970 Tax-exempt 2,165 2,353 ------- ------- Total investment interest 8,485 8,323 Interest-bearing deposits with other banks 131 56 Federal funds sold and securities purchased under agreements to resell 41 71 ------- ------- TOTAL INTEREST INCOME 75,767 66,938 INTEREST EXPENSE Deposits 26,011 23,769 Short-term borrowings 5,323 1,551 Long-term borrowings 1,838 1,902 ------- ------- TOTAL INTEREST EXPENSE 33,172 27,222 ------- ------- NET INTEREST INCOME 42,595 39,716 Provision for loan losses 2,361 2,532 ------- ------- Net interest income after provision for loan losses 40,234 37,184 NONINTEREST INCOME Service charges on deposit accounts 4,322 3,715 Trust revenues 3,588 3,437 Investment securities gains 14 55 Other 2,228 2,889 ------- ------- Total noninterest income 10,152 10,096 NONINTEREST EXPENSES Salaries and employee benefits 16,316 15,007 Net occupancy 1,929 1,829 Furniture and equipment 1,566 1,556 Data processing 1,976 1,673 Deposit insurance 147 142 State taxes 625 505 Amortization of intangibles 842 943 Other 6,020 6,012 ------- ------- Total noninterest expenses 29,421 27,667 ------- ------- Income before income taxes 20,965 19,613 Income tax expense 7,095 6,532 ------- ------- NET EARNINGS $13,870 $13,081 ======= ======= Net earnings per share - basic $ 0.30 $ 0.28 ======= ======= Net earnings per share - diluted $ 0.30 $ 0.28 ======= ======= Cash dividends declared per share $ 0.15 $ 0.14 ======= ======= Average basic shares outstanding 46,812,024 46,819,427 ========== ========== Average diluted shares outstanding 46,906,676 46,991,822 ========== ==========
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, --------------------- 2000 1999 --------- --------- OPERATING ACTIVITIES Net earnings $ 13,870 $ 13,081 Adjustments to reconcile net earnings to net cash provided by operating activities Provision for loan losses 2,361 2,532 Provision for depreciation and amortization 2,298 3,348 Net (accretion) amortization of investment security premiums and accretion of discounts (85) 273 Realized investment security gains (14) (55) Originations of mortgage loans held for sale (17,742) (60,767) Gains from sales of mortgage loans held for sale (197) (988) Proceeds from sale of mortgage loans held for sale 17,939 61,755 Deferred income taxes 87 (1,331) Increase in interest receivable (759) (982) Increase in cash surrender value of life insurance (4,047) (3,252) Increase in prepaid expenses (1,571) (1,162) Increase in accrued expenses 5,113 5,108 Increase (decrease) in interest payable 798 (604) Decrease in dividends payable (6,980) (795) Other (819) (1,975) --------- --------- Net cash provided by operating activities 10,252 14,186 INVESTING ACTIVITIES Proceeds from sales of investment securities available-for-sale 0 12,483 Proceeds from calls, paydowns and maturities of investment securities available-for-sale 12,307 52,766 Purchases of investment securities available-for-sale (40,878) (37,516) Proceeds from, paydowns and maturities of investment securities held-to-maturity 2,119 3,281 Purchases of investment securities held-to-maturity (2,120) 0 Net increase in interest-bearing deposits with other banks (4,423) (6,531) Net decrease (increase) in federal funds sold and securities purchased under agreements to resell 5,170 (6,421) Net increase in loans and leases (55,817) (63,618) Recoveries from loans and leases previously charged off 580 604 Proceeds from disposal of other real estate owned 544 102 Purchases of premises and equipment (1,353) (2,620) --------- --------- Net cash used in investing activities (83,871) (47,470) FINANCING ACTIVITIES Net increase (decrease) in total deposits 59,574 (17,725) Net (decrease) increase in short-term borrowings (8,572) 21,200 Net (decrease) increase in long-term borrowings (18,943) 9,100 Cash dividends declared (7,074) (5,778) Purchase of common stock (5,479) 0 Proceeds from exercise of stock options, net of shares purchased 17 548 --------- --------- Net cash provided by financing activities 19,523 7,345 --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (54,096) (25,939) Cash and cash equivalents at beginning of period 225,837 164,500 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 171,741 $ 138,561 ========= =========
3 6 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Three months ended March 31, --------------------- 2000 1999 -------- -------- Supplemental disclosures Interest paid $ 32,374 $ 27,930 ======== ======== Income taxes paid $ 2,763 $ 1,162 ======== ======== Recognition of deferred tax assets attributable to FASB Statement No. 115 $ 369 $ 629 ======== ======== Acquisition of other real estate owned through foreclosure $ 450 $ 67 ======== ======== Issuance of restricted stock awards $ 772 $ 143 ======== ======== Securitization of loans $ 27,206 $ 0 ======== ========
See notes to consolidated financial statements. 4 7 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS" EQUITY (Unaudited) (Dollars in thousands)
Three months ended March 31, ------------------------ 2000 1999 --------- --------- Balances at January 1, as restated $ 372,539 $ 358,265 Net earnings 13,870 13,081 Other comprehensive income, net of taxes: Change in unrealized gains on securities, available for sale (767) (1,908) --------- --------- Comprehensive income 13,103 11,173 Cash dividends declared (7,074) (5,778) Purchase of common stock (5,479) 0 Exercise of stock options, net shares purchased 17 548 Amortization of restricted stock awards 80 42 --------- --------- Balance at March 31 $ 373,186 $ 364,250 ========= =========
See notes to consolidated financial statements. 5 8 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 financial holding company, include the accounts of Bancorp and its wholly-owned subsidiaries - First National Bank of Southwestern Ohio, Community First Bank & Trust, 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 (dba Community First Finance), Farmers State Bank, National Bank of Hastings, Vevay Deposit Bank, Sand Ridge Bank, Hebron Deposit Bank, and First Financial Service Corporation. 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 exceeds 25 years. Core deposit balances are being amortized over varying periods, none of which currently exceeds 10 years. Bancorp received authorization from the Federal Reserve on March 13, 2000 to convert from a bank and savings and loan holding company to a financial holding company. Bancorp is now permitted to own and operate insurance agencies and certain other financial services firms under the provisions of the Gramm-Leach-Bliley Act enacted on November 12, 1999. On March 29, 2000, Bancorp signed a letter of intent to purchase the Ohio City Insurance Agency which was founded in 1997 with headquarters in Ohio City, Ohio. Bancorp completed the purchase of the Ohio City Insurance Agency on May 1, 2000. The financial impact of Ohio City Insurance Agency and the purchase price for the transaction are not material. 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. 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 6 9 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, 2000, Bancorp had issued standby letters of credit aggregating $18,780,000 compared to $18,028,000 issued as of December 31, 1999. 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 $510,251,000 at March 31, 2000 and $508,366,000 at December 31, 1999. Management does not anticipate any material losses as a result of these commitments. NOTE 3: COMPREHENSIVE INCOME In 1998, Bancorp adopted FASB No. 130, Reporting Comprehensive Income. The statement establishes standards for the reporting and display of comprehensive income. Bancorp elected to present the required disclosures in the Consolidated Statement of Changes in Shareholders Equity. Disclosure of the reclassification adjustments for the three months ended March 31, 2000 and 1999 are shown below.
Three months ended March 31, --------------------- 2000 1999 ------- ------- Other comprehensive income, net of tax: Unrealized holding losses arising during period $ (759) $(1,874) Less: reclassification adjustment for gains included in net income 8 34 ------- ------- Other comprehensive loss $ (767) $(1,908) ======= =======
7 10 NOTE 4: MERGER AND RESTRUCTURING CHARGES In the second quarter of 1999, Bancorp recorded merger and restructuring charges of approximately $6.9 million before taxes or $5.5 million after taxes to coincide with its mergers with Sand Ridge Financial Corporation (Sand Ridge) and Hebron Bancorp, Inc. (Hebron) and its plan for some operational consolidation, affiliate restructuring and the discontinuation of a product line. The components of these charges and the remaining unpaid amounts at December 31, 1999 and March 31, 2000 are shown in the following table. During the first quarter, based on current information, estimated liabilities associated with the merger and restructuring charges were reduced by $353,000. As of March 31, 2000, of the four facilities to be disposed of, two properties have been sold and one facility remains to be sold. Bancorp has decided to retain one property for use in another capacity due to a new initiative at an affiliate. Bancorp expects that the remaining balance in the liability account will be substantially utilized during 2000.
(Dollars in thousands) Charges Remaining Accrued Liability Liability Description of Charges in 1999 12/31/99 3/31/00 - ---------------------- ------- -------- ------- Merger costs $2,899 $ 219 $ 25 Disposals of property 1,574 115 115 Discontinued product line 1,100 167 167 Operations/affiliate restructuring 1,357 523 197 ------ ------ ------ Total $6,930 $1,024 $ 504 ====== ====== ======
8 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST FINANCIAL BANCORP. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA
2000 1999 ---------- -------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- ---------- --------- (Dollars in thousands) Net earnings $ 13,870 $ 13,992 $ 14,535 $ 8,715 $ 13,081 Net earnings-adjusted (a) 14,169 Net earnings per share-basic 0.30 0.30 0.31 0.19 0.28 Net earnings per share-diluted 0.30 0.30 0.31 0.19 0.28 Net earnings per share-diluted-adjusted (a) 0.30 Average Consolidated Balance Sheet Items: Loans less unearned income 3,066,552 3,022,313 2,933,882 2,796,591 2,657,522 Investment securities 536,148 531,709 549,441 558,475 577,436 Other earning assets 13,304 13,958 12,787 18,576 10,678 ---------- ---------- ---------- ---------- ---------- Total earning assets 3,616,004 3,567,980 3,496,110 3,373,642 3,245,636 Total assets 3,904,639 3,865,437 3,757,969 3,610,779 3,505,738 Deposits 2,990,226 2,985,289 2,892,952 2,907,268 2,827,604 Shareholders' equity 372,424 369,442 366,022 368,271 360,234 Key Ratios: Average equity to average total assets 9.54% 9.56% 9.74% 10.20% 10.28% Return on average total assets 1.43% 1.44% 1.53% 0.97% 1.51% Return on average total assets-adjusted (a) 1.57% Return on average equity 14.98% 15.03% 15.75% 9.49% 14.73% Return on average equity-adjusted (a) 15.36% Net interest margin (fully tax equivalent) 4.88% 4.86% 4.92% 5.03% 5.13%
(a) Excluding after-tax merger and restructuring charges of $5.5 million in the second quarter of 1999. 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 $2,787,000 or 6.79% over the first quarter of 1999. Continued loan growth in all major loan categories contributed to higher net interest income in the first quarter of 2000.
Quarter Ended 2000 1999 ------- ------------------------------------------ Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ------- ------- ------- ------- ------- (Dollars in thousands) Interest income $75,767 $74,382 $72,274 $68,804 $66,938 Interest expense 33,172 31,927 30,269 27,776 27,222 ------- ------- ------- ------- ------- Net interest income 42,595 42,455 42,005 41,028 39,716 Tax equivalent adjustment to interest income 1,246 1,278 1,318 1,312 1,338 ------- ------- ------- ------- ------- Net interest income (fully tax equivalent) $43,841 $43,733 $43,323 $42,340 $41,054 ======= ======= ======= ======= =======
RATE/VOLUME ANALYSIS The impact of changes in volume and interest rates on net interest income is illustrated in the following table. As shown, the primary factor for the increased net interest income was the increased volume of average earning assets, specifically, a 15.4% increase in average loans, 9 12 somewhat offset by the increased volume of interest-bearing liabilities. Also, the recent increase in interest rates had a greater impact on interest-bearing liabilities than on earning assets, thereby effectively causing a reduction to net interest income. 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, 2000 ------------------- Over 1999 Rate Volume -------- --------- -------- (Dollars in thousands) Interest income $ 8,829 $ 1,084 $ 7,745 Interest expense 5,950 2,311 3,639 -------- --------- -------- Net interest income $ 2,879 $ (1,227) $ 4,106 ======== ========= ========
OPERATING RESULTS Net operating income represents net earnings before net securities transactions. Net operating income for the first three months of 2000 was $13,862,000 which was an increase of $815,000 or 6.25% over that reported in the same period in 1999. This increase in net operating income can be primarily attributed to an increase in net interest income of $2,879,000 or 7.25%. The increase in net interest income was driven by the loan growth. Noninterest income, excluding securities transactions, for the first three months of 2000 increased $97,000 or 0.97% in comparison to the same period in 1999. Continued strong growth in service charges on deposit accounts was offset by the decrease in gain on loan sales. The increase in trust fees was less than has been the trend due to lower market values on several large holdings. The increase in noninterest expense was 6.34% primarily as a result of increased salary and employee benefit expense. Bancorp's adjusted diluted earnings per share on a "cash basis", which excludes the effect of amortization of goodwill and core deposits, (tax effected when applicable), were $0.31 for the first three months of 2000 which is a 6.90% increase over the $0.29 for the same period in 1999. These calculations were specifically formulated by Bancorp and may not be comparable to similarly titled measures reported by other companies. INCOME TAXES For the first three months of 2000, income tax expense was $7,095,000 compared to $6,532,000 for the same period in 1999, or an increase of $563,000. In 2000, $7,089,000 of the tax expense was related to operating income with a tax expense of $6,000 related to securities transactions. In the first three months of 1999, income tax expense related to operating income was $6,511,000 with a tax expense related to securities transactions of $21,000. The increase in taxes on operating income was due to the increase in operating income before taxes and securities transactions of $1,393,000 or 7.14% over that reported for the first three months of 1999 and a slightly higher effective tax rate for the period in 2000. NET EARNINGS Net earnings for the first three months of 2000 were $13,870,000 or 6.03% greater than that recorded during the same period in 1999. As was discussed previously, net operating income was $13,862,000 which was 6.25% greater than the same period in 1999. Net securities gains through March 31, 2000 were $8,000 compared to $34,000 for the period ending March 31, 1999. 10 13 ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is maintained at a level believed adequate by management to cover losses inherent in the portfolio. 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), the estimated value of any underlying collateral, composition of the loan portfolio, 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, 2000 and 1999, the recorded investment in loans that are considered to be impaired with an allowance under FASB Statement No. 114 was $6,141,000 and $3,191,000, respectively, all of which were on a nonaccrual basis. The related allowance for loan losses on these impaired loans was $2,426,000 at March 31, 2000 and $492,000 at March 31, 1999. There were $55,000 and $56,000 in 2000 and 1999, respectively in 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, 2000 and 1999, was approximately $3,706,000 and $2,973,000. For the three months ended March 31, 2000, Bancorp recognized interest income on those impaired loans of $5,000 compared to $17,000 for the same period in 1999. Bancorp recognizes income on impaired loans using the cash basis method. The table on the following page indicates the activity in the allowance for loan losses for the quarters presented.
Quarter Ended 2000 1999 -------- ----------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 -------- -------- -------- -------- -------- (Dollars in thousands) Balance at beginning of period $ 39,340 $ 38,729 $ 37,505 $ 36,319 $ 34,800 Provision for discontinued product lines 1,100 Provision for loan losses 2,361 3,205 2,117 1,378 2,532 Loans charged off (2,089) (3,113) (1,869) (2,762) (1,617) Recoveries 580 519 976 1,470 604 -------- -------- -------- -------- -------- Net charge offs (1,509) (2,594) (893) (1,292) (1,013) -------- -------- -------- -------- -------- Balance at end of period $ 40,192 $ 39,340 $ 38,729 $ 37,505 $ 36,319 ======== ======== ======== ======== ======== Ratios: Allowance to period end loans, net of unearned income 1.31% 1.30% 1.30% 1.31% 1.34% Recoveries to charge offs 27.76% 16.67% 52.22% 53.22% 37.35% Allowance as a multiple of net charge offs 26.63X 15.17X 43.37X 29.03X 35.85X
NONPERFORMING/UNDERPERFORMING ASSETS The table on the following page shows the categories which are included in nonperforming and underperforming assets. Nonperforming assets have increased $8,335,000 in the first quarter of 2000 when compared to the first quarter of 1999. While it appears that the nonperforming assets have increased significantly, loan volume has also increased significantly. In the first quarter of 2000 when compared to the first quarter of 1999, accruing loans past due 90 days or more decreased $194,000. Restructured loans have decreased $929,000, primarily due to one unsecured commercial loan which was moved to nonaccrual status the first quarter of 2000. Nonaccrual loans have increased $7,868,000, which is composed primarily of commercial, multi-family and 1-4 family residential investment properties. Other real estate owned increased $1,396,000 in the first quarter of 2000 compared to the first quarter of 1999, primarily from foreclosures on commercial, multi-family and 1-4 family residential mortgage loans. Accruing loans, including 11 14 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, are classified as "Accruing loans 90 days or more past due" until they become current.
Quarter Ended 2000 1999 ------- ---------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ------- ------- ------- ------- ------- (Dollars in thousands) Nonaccrual loans $15,019 $11,283 $10,430 $ 9,219 $ 7,151 Restructured loans 637 2,244 1,354 1,411 1,566 OREO 1,551 1,707 354 332 155 ------- ------- ------- ------- ------- Total nonperforming assets 17,207 15,234 12,138 10,962 8,872 Accruing loans past due 90 days or more 2,252 2,777 3,318 3,796 2,446 ------- ------- ------- ------- ------- Total underperforming assets $19,459 $18,011 $15,456 $14,758 $11,318 ======= ======= ======= ======= ======= Nonperforming assets as a percent of loans, net of unearned income plus OREO 0.56% 0.50% 0.41% 0.38% 0.33% ======= ======= ======= ======= ======= Underperforming assets as a percent of loans, net of unearned income plus OREO 0.64% 0.59% 0.52% 0.52% 0.42% ======= ======= ======= ======= =======
*Other real estate owned 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 2000 Bancorp's deposit liabilities had increased by 1.99% from December 31, 1999. Another source of funding is through short-term borrowings. Bancorp's short-term borrowings decreased to $373,546,000 at March 31, 2000, compared to $382,118,000 at December 31, 1999, a decrease of $8,572,000 or 2.24%. The principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. At March 31, 2000, securities maturing in one year or less amounted to $35,854,000 representing 6.22% 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, 2000, amounted to $741,015,000 representing 18.7% 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, 2000, Bancorp had classified $544,759,000 in investment securities available-for-sale, of which approximately $229,341,000 were pledged to secure public deposits. 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. 12 15 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 $1,353,000 for the first three months of 2000. In addition, remodeling is a planned and ongoing process given the 115 offices of Bancorp and its subsidiaries. Material commitments for capital expenditures as of March 31, 2000 were approximately $1,635,000. Management believes that Bancorp has sufficient liquidity to fund its current commitments. One balance sheet management item of note, Bancorp's cash and due from banks decreased significantly as Y2K reserves were reduced to normal levels. 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, 2000, was 12.4%, its Total risked-based capital was 13.7% and its Leverage ratio was 8.88%. 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 quarters presented.
Quarter Ended 2000 1999 ----------- ----------------------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ----------- ----------- ----------- ----------- ----------- (Dollars in thousands) Tier I Capital: Shareholder's equity $ 373,186 $ 372,539 $ 367,940 $ 361,158 $ 364,250 Less: Certain intangibles 36,854 37,610 38,364 38,992 39,802 Less: Accumulated comprehensive Income (7,165) (6,398) (3,987) (2,470) 3,041 ----------- ----------- ----------- ----------- ----------- Total Tier I capital $ 343,497 $ 341,327 $ 333,563 $ 324,636 $ 321,407 =========== =========== =========== =========== =========== Total risk-based capital: Tier I capital $ 343,497 $ 341,327 $ 333,563 $ 324,636 $ 321,407 Qualifying allowance for loan losses 34,617 35,636 35,280 33,462 31,517 ----------- ----------- ----------- ----------- ----------- Total risk-based capital $ 378,114 $ 376,963 $ 368,843 $ 358,098 $ 352,924 =========== =========== =========== =========== =========== Risk Weighted Assets $ 2,763,814 $ 2,847,221 $ 2,818,936 $ 2,672,881 $ 2,516,585 =========== =========== =========== =========== =========== Risk-based ratios: Tier I 12.43% 11.99% 11.83% 12.15% 12.77% =========== =========== =========== =========== =========== Total risk-based capital 13.68% 13.24% 13.08% 13.40% 14.02% =========== =========== =========== =========== =========== Leverage 8.88% 8.92% 9.04% 9.01% 9.27% =========== =========== =========== =========== ===========
13 16 FORWARD-LOOKING INFORMATION The Form 10-Q should be read in conjunction with the consolidated financial statements, notes and tables included elsewhere in this report and in the First Financial Bancorp. Annual Report on Form 10-K for the year ended December 31, 1999. Management's analysis may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties which may cause actual results to differ materially. For a discussion of certain factors that may cause such forward-looking statements to differ materially from actual results, refer to the 1999 Form 10-K. ACCOUNTING AND REGULATORY MATTERS Management is not aware of any events or regulatory recommendations which, if implemented, are likely to have a material effect on Bancorp's liquidity, capital resources, or operations. 14 17 PART II-OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K --------------------------------- (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K During the quarter ended March 31, 2000, the registrant did not file any reports on Form 8-K. 15 18 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/ C. Douglas Lefferson - ----------------------------------------- ------------------------ Michael R. O'Dell, Senior Vice C. Douglas Lefferson President, Chief Financial Comptroller Officer and Secretary (Principal Accounting Officer) Date May 11, 2000 Date May 11, 2000 ------------------------------------ -------------------------- 16 EX-27.1 2 EXHIBIT 27.1
9 0000708955 FIRST FINANCIAL BANCORP. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 171,741 13,290 451 0 544,759 31,880 32,485 3,062,511 40,192 3,972,272 3,050,787 373,546 31,897 142,856 0 0 374,237 (1,051) 3,972,272 67,110 8,485 172 75,767 28,011 33,172 42,595 2,361 14 28,421 20,965 13,870 0 0 13,870 0.30 0.30 8.57 15,019 2,252 637 0 39,340 2,089 580 40,192 40,192 0 0
EX-27.2 3 EXHIBIT 27.2
9 0000708955 FIRST FINANCIAL BANCORP. 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 225,837 8,867 5,621 0 490,126 31,785 32,498 3,036,376 39,340 3,940,693 2,991,213 382,118 33,024 161,799 0 0 373,447 (908) 3,940,693 249,113 32,629 656 282,398 97,552 117,194 165,204 9,232 50 120,661 76,623 50,323 0 0 50,323 1.07 1.07 8.41 11,283 2,414 2,777 79 34,800 9,381 3,569 39,340 28,944 0 10,396
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