-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BdC4b3ZCZKYTH9YWFhvIZcej/6+g4g8cdPD9qc+05+dSrjKPBDcY8WYrEYZV/QHk AdULIjw9PdXAWXX28Dvqmg== 0000950152-95-000895.txt : 19950509 0000950152-95-000895.hdr.sgml : 19950509 ACCESSION NUMBER: 0000950152-95-000895 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950508 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: 95535417 BUSINESS ADDRESS: STREET 1: 300 HIGH STREET CITY: HAMILTON STATE: OH ZIP: 45011 BUSINESS PHONE: 5138674700 MAIL ADDRESS: STREET 1: 300 HIGH STREET STREET 2: P O BOX 376 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, 1995 ------------------------- 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, 1995 ----------------------------- ------------------------------ Common stock, $8.00 par value 12,211,490 2 FIRST FINANCIAL BANCORP. INDEX Page No. PART I-FINANCIAL INFORMATION Consolidated Balance Sheets - March 31, 1995 and December 31, 1994 1 Consolidated Statements of Earnings - Three Months Ended March 31, 1995 and 1994 2 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1995 and 1994 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 4 Submission of Matters to a Vote of Security Holders 12 Item 6 Exhibits and Reports on Form 8-K 12 SIGNATURE 13
3 PART I - FINANCIAL INFORMATION FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)
March 31, December 31, 1995 1994 ------------ ----------- ASSETS Cash and due from banks $ 92,734 $ 103,752 Interest-bearing deposits with other banks 4,517 8,055 Federal funds sold and securities purchased under agreements to resell 198 97 Investment securities held-to-maturity (market value - $126,377 at March 31, 1995 and $140,319 at December 31, 1994) 120,765 135,187 Investment securities available-for-sale, at market value 211,556 242,410 Loans Commercial 311,415 286,635 Real estate-construction 24,292 29,273 Real estate-mortgage 747,261 746,150 Installment 297,747 285,412 Credit card 13,850 15,599 Lease financing 15,897 16,102 ----------- ----------- Total loans 1,410,462 1,379,171 Less Unearned income 312 304 Allowance for loan losses 18,904 18,609 ----------- ----------- Net loans 1,391,246 1,360,258 Premises and equipment 37,750 37,999 Deferred income taxes 4,583 5,904 Accrued interest and other assets 29,992 28,981 ----------- ----------- TOTAL ASSETS $1,893,341 $1,922,643 =========== =========== LIABILITIES Deposits Noninterest-bearing $ 184,417 $ 201,331 Interest-bearing 1,406,278 1,385,993 ----------- ----------- Total deposits 1,590,695 1,587,324 Short-term borrowings Federal funds purchased and securities sold under agreements to repurchase 74,336 81,609 Other 6,066 41,510 ----------- ----------- Total short-term borrowings 80,402 123,119 Accrued interest and other liabilities 20,992 17,527 ----------- ----------- TOTAL LIABILITIES 1,692,089 1,727,970 SHAREHOLDERS' EQUITY Common stock - par value, $8 per share Authorized - 25,000,000 shares Issued - 12,209,474 in 1995, 12,204,575 in 1994 97,676 97,637 Surplus 15,074 15,027 Retained earnings 88,944 84,748 Unrealized net losses on securities available-for-sale (384) (2,712) Restricted stock awards (58) (27) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 201,252 194,673 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,893,341 $ 1,922,643 =========== =========== 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, -------------------- 1995 1994 --------- --------- INTEREST INCOME Loans, including fees $ 29,988 $ 24,291 Investment securities Taxable 3,998 4,632 Tax-exempt 2,083 2,548 --------- --------- Total investment interest 6,081 7,180 Interest-bearing deposits with other banks 75 126 Federal funds sold and securities purchased under agreements to resell 18 138 --------- --------- TOTAL INTEREST INCOME 36,162 31,735 INTEREST EXPENSE Deposits 13,035 11,412 Short-term borrowings 1,460 188 Long-term borrowings 0 53 --------- --------- TOTAL INTEREST EXPENSE 14,495 11,653 --------- --------- NET INTEREST INCOME 21,667 20,082 Provision for loan losses 393 169 --------- --------- Net interest income after provision for loan losses 21,274 19,913 NONINTEREST INCOME Service charges on deposit accounts 2,022 1,978 Trust income 1,894 1,797 Investment securities gains 13 6 Other 944 1,323 --------- --------- TOTAL NONINTEREST INCOME 4,873 5,104 NONINTEREST EXPENSES Salaries and employee benefits 8,076 7,808 Net occupancy expenses 1,081 1,096 Furniture and equipment expenses 806 764 Data processing expenses 1,317 1,284 Deposit insurance expense 886 883 State taxes 400 477 Other 3,095 3,077 --------- --------- TOTAL NONINTEREST EXPENSES 15,661 15,389 --------- --------- Income before income taxes 10,486 9,628 Income tax expense 3,117 2,626 --------- --------- NET EARNINGS $ 7,369 $ 7,002 ========= ========= Net earnings per common share $ 0.60 $ 0.57 ========= ========= Cash dividends declared per share $ 0.26 $ 0.22 ========= ========= Average shares outstanding 12,206,529 12,210,706 ========== ========== 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, ---------------------- 1995 1994 ---------- --------- OPERATING ACTIVITIES Net earnings $ 7,369 $ 7,002 Adjustments to reconcile net earnings to net cash provided by operating activities Provision for loan losses 393 169 Provision for depreciation and amortization 921 868 Net amortization of investment security premiums and accretion of discounts 400 523 Deferred income taxes 0 953 Realized investment security gains (13) (6) Originations of mortgage loans held for sale (1,760) (24,208) Gains from sales of mortgage loans held for sale (24) (278) Proceeds from sale of mortgage loans held for sale 1,784 24,486 Decrease (increase) in interest receivable 771 (1,100) Increase in prepaid expenses (1,785) (1,757) Increase in accrued expenses 2,680 936 Increase (decrease) in interest payable 1,187 (256) Other (1,008) (1,052) ---------- ---------- Net cash provided by operating activities 10,915 6,280 INVESTING ACTIVITIES Proceeds from sales of securities available-for-sale 18,224 2,003 Proceeds from calls, paydowns and maturities of securities available-for-sale 23,227 20,839 Purchases of securities available-for-sale (7,280) (33,999) Proceeds from calls, paydowns and maturities of securities held-to-maturity 14,375 10,035 Purchases of securities held-to-maturity (15) (5,249) Net decrease in interest-bearing deposits with other banks 3,538 8,367 Net (increase) decrease in federal funds sold and securities purchased under agreements to resell (101) 11,509 Net increase in loans and leases (31,744) (15,012) Recoveries from loans and leases previously charged off 269 242 Proceeds from disposal of other real estate owned 541 378 Purchases of premises and equipment (500) (1,000) ---------- ---------- Net cash provided by (used in) investing activities 20,534 (1,887) FINANCING ACTIVITIES Net increase in total deposits 3,371 1,603 Net decrease in short-term borrowings (42,717) (464) Principal payments of long-term borrowings 0 (1,857) Cash dividends declared (3,174) (2,627) Exercise of stock options 53 145 ---------- ---------- Net cash used in financing activities (42,467) (3,200) ---------- ---------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (11,018) 1,193 Cash and cash equivalents at beginning of period 103,752 88,926 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 92,734 $ 90,119 ========== ==========
3 6 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Three months ended March 31, ----------------------- 1995 1994 ---------- ---------- Supplemental disclosures Interest paid $ 13,308 $ 11,909 ========== ========== Income taxes paid $ 85 $ 161 ========== ========== Recognition of deferred tax assets (liabilities) attributable to FASB Statement No. 115 $ 1,321 $ (941) ========== ========== Acquisition of other real estate owned through foreclosure $ 101 $ 75 ========== ========== Issuance of restricted stock awards $ 33 ========== Transfer of securities to available-for-sale upon adoption of FASB Statement No. 115 $272,856 ========== 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, Fayette Federal Savings Bank, Home Federal Bank - A Federal Savings Bank, Union Bank & Trust Company, and The Clyde Savings Bank Company. 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. 5 8 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, 1995, Bancorp had issued standby letters of credit aggregating $10,573,000 compared to $9,976,000 issued as of December 31, 1994. 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 $202,299,000 at March 31, 1995 and $216,802,000 at December 31, 1994. Management does not anticipate any material losses as a result of these commitments. NOTE 3: PENDING MERGERS On December 29, 1994, Bancorp signed a Definitive Agreement of Merger with Peoples Bank and Trust Company, Sunman, Indiana. Subject to required shareholder and regulatory approvals, the merger of this $52 million bank is expected to be consummated during the third quarter of 1995 and be accounted for using the pooling-of-interests method of accounting. On February 20, 1995, Bancorp signed a Definitive Agreement of Merger with Bright Financial Services, Inc., Flora, Indiana. Bright Financial Services, Inc. is a one-bank holding company whose only subsidiary is the $110 million Bright National Bank. Subject to required shareholder and regulatory approvals, this merger is also expected to be consummated during the third quarter of 1995 and be accounted for using the pooling-of-interests method of accounting. NOTE 4: ACCOUNTING CHANGES Bancorp adopted FASB Statement No. 114 "Accounting by Creditors for Impairment of a Loan", as amended by FASB Statement No. 118 "Accounting by Creditors for Impairment of a Loan -Income Recognition and Disclosures" effective January 1, 1995. The adoption of the standard did not have a material impact on Bancorp's financial position or results of operations. For additional disclosures refer to the MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ALLOWANCE FOR LOAN LOSSES and NONPERFORMING/UNDERPERFORMING ASSETS sections. 6 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST FINANCIAL BANCORP. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA
1995 1994 ---------- -------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- ---------- ---------- (Dollars in thousands) Net Earnings $ 7,369 $ 6,516 $ 7,161 $ 7,494 $ 7,002 Average Consolidated Balance Sheet Items: Loans less unearned income 1,394,024 1,345,953 1,291,400 1,232,887 1,188,826 Investment securities (including available-for-sale) 347,172 393,912 421,654 437,978 440,824 Other earning assets 7,056 5,696 9,761 16,616 30,909 ---------- ---------- ---------- ---------- ---------- Total Earning Assets 1,748,252 1,745,561 1,722,815 1,687,481 1,660,559 Total assets 1,871,532 1,878,577 1,851,992 1,817,432 1,786,797 Deposits 1,551,899 1,576,111 1,567,006 1,566,535 1,554,221 Shareholders' equity 197,050 192,414 191,555 187,922 182,983 Key Ratios: Average equity to average total assets 10.53% 10.24% 10.34% 10.34% 10.24% Return on average total assets 1.57% 1.39% 1.55% 1.65% 1.57% Return on average equity 14.96% 13.55% 14.95% 15.95% 15.31% Net interest margin (fully tax equivalent) 5.23% 5.30% 5.24% 5.26% 5.18%
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. As shown below, net interest income on a fully tax equivalent basis has increased $1,347,000 over the first quarter of 1994. However, net interest income declined slightly from the fourth quarter of 1994. The rise in interest rates during the fourth quarter of 1994 significantly impacted competitive pressures to raise core deposit rates during the first quarter of 1995. It is anticipated that it will be difficult to maintain the same high level of net interest margin realized in 1994 during 1995. The tax equivalent adjustment to interest income has gradually declined over the periods presented as a result of a decline in tax-exempt assets.
QUARTER ENDED 1995 1994 -------- -------------------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 -------- ---------- ---------- ---------- ---------- (Dollars in thousands) Interest income $36,162 $35,317 $33,913 $32,539 $31,735 Interest expense 14,495 13,487 12,685 11,762 11,653 ------- ------- ------- ------- ------- Net interest income 21,667 21,830 21,228 20,777 20,082 Tax equivalent adjustment to interest income 1,191 1,308 1,336 1,409 1,429 ------- ------- ------- ------- ------- Net interest income (fully tax equivalent) $22,858 $23,138 $22,564 $22,186 $21,511 ======= ======= ======= ======= =======
RATE/VOLUME ANALYSIS 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. The impact of changes in volume and interest rates on net interest income is illustrated on the following page. 7 10 The increase in volume of earning assets outweighed the increase in interest-bearing liabilities, resulting in an increase to net interest income of $1,197,000 for the three months ended March 31, 1995 in comparison to the same period in 1994. The increase in rate for earning assets had a favorable effect on interest income and the increase in rate for interest-bearing liabilities had an unfavorable effect on interest expense. However, the effect on earning assets was greater resulting in an increase in net interest income of $388,000 year-to-date 1995 in comparison to the same period in 1994. The combined effect of rate and volume on earning assets caused interest income to increase by $4,427,000 year-to-date March 31, 1995 versus 1994. The combined effect on interest-bearing liabilities caused 1995's interest expense to increase by $2,842,000 year-to-date versus 1994, thus, providing the $1,585,000 increase in net interest income for the three months of 1995 over that reported for the same period in 1994.
Three Months Ended Change Due To: Mar. 31, 1995 ----------------------- Over 1994 Rate Volume -------------- --------- --------- (Dollars in thousands) Interest income $ 4,427 $ 2,697 $ 1,730 Interest expense 2,842 2,309 533 -------- -------- -------- Net interest income $ 1,585 $ 388 $ 1,197 ======== ======== ========
OPERATING RESULTS Net operating income represents net earnings before net securities transactions. Net operating income for the first three months of 1995 was $7,337,000 which was an increase of $339,000 or 4.84% over that reported in the same period in 1994. This increase in net operating income can be primarily attributed to an increase in net interest income of $1,585,000 or 7.89%. The positive variance in net interest income was 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. Noninterest income for the first three months of 1995 decreased 4.53% in comparison to the same period in 1994 due to nonrecurring items in 1994. The majority of the nonrecurring items realized in 1994 were attributable to gains on the sale of loans. INCOME TAXES For the first three months of 1995, income tax expense was $3,117,000 compared to $2,626,000 for the same period in 1994, or an increase of $491,000. In 1995, $3,136,000 of the tax expense was related to operating income with a tax benefit of $19,000 related to securities transactions. In the first three months of 1994, income tax expense related to operating income was $2,624,000 with a tax expense related to securities transactions of $2,000. The significant increase in taxes on operating income was due to the increase in operating income before taxes and securities transactions of $851,000 or 8.84% over that reported for the first three months of 1994 and a higher effective tax rate for the period in 1995. The higher effective tax rate was somewhat attributable to the effect of calls and decreased income from tax-exempt securities. NET EARNINGS Net earnings for the first three months of 1995 were $367,000 or 5.24% more than that recorded during the same period in 1994. As was discussed previously, net operating income was $7,337,000 which was 4.84% greater than the same period in 1994. Net securities gains through March 31, 1995 were $32,000 compared to $4,000 for the same period in 1994. 8 11 ALLOWANCE FOR LOAN LOSSES Beginning in 1995, Bancorp adopted FASB Statement No. 114. Under the new standard, the 1995 allowance for loan losses related to loans that are identified for evaluation in accordance with FASB Statement No. 114 is based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans. Prior to 1995, the allowance for loan losses related to these loans was based on undiscounted cash flows or the fair value of the collateral for collateral dependent loans. 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), 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, 1995, the recorded investment in loans that are considered to be impaired under FASB Statement No. 114 was $1,142,000, all of which were on a nonaccrual basis. The related allowance for loan losses on these impaired loans was $423,000. 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 quarter ended March 31, 1995, was approximately $1,148,000. For the quarter ended March 31, 1995, Bancorp recognized interest income on those impaired loans of $27,000. 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 1995 1994 -------- -------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 -------- -------- -------- -------- -------- (Dollars in thousands) Balance at beginning of period $18,609 $18,441 $18,504 $18,367 $18,380 Provision for loan losses 393 611 298 190 169 Loans charged off (367) (713) (643) (372) (424) Recoveries 269 270 282 319 242 -------- -------- -------- -------- -------- Net charge offs (98) (443) (361) (53) (182) -------- -------- -------- -------- -------- Balance at end of period $18,904 $18,609 $18,441 $18,504 $18,367 ======== ======== ======== ======== ======== Ratios: Allowance to period end loans, net of unearned income 1.34% 1.35% 1.40% 1.46% 1.53% Recoveries to charge offs 73.30% 37.87% 43.86% 85.75% 57.08% Allowance as a multiple of net charge offs 192.90X 42.01X 51.08X 349.13X 100.92X
NONPERFORMING/UNDERPERFORMING ASSETS The table on the following page shows the categories which are included in nonperforming and underperforming assets. Nonperforming assets decreased $1,375,000 or 17.9% in the first quarter of 1995 when compared to the first quarter of 1994. In that same period, accruing loans past due 90 days or more decreased $399,000. 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 1995 1994 -------- -------------------------------------- Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 -------- -------- -------- -------- -------- (Dollars in thousands) Nonaccrual loans $ 3,457 $ 2,412 $ 2,938 $ 3,288 $ 3,952 Restructured loans 1,173 1,429 1,245 1,259 373 OREO/ISF* 1,669 2,116 2,164 2,953 3,349 -------- -------- -------- -------- -------- Total nonperforming assets 6,299 5,957 6,347 7,500 7,674 Accruing loans past due 90 days or more 700 683 944 877 1,099 -------- -------- -------- -------- -------- Total underperforming assets $ 6,999 $ 6,640 $ 7,291 $ 8,377 $ 8,773 ======== ======== ======== ======== ======== Nonperforming assets as a percent of loans, net of unearned income plus OREO/ISF 0.45% 0.43% 0.48% 0.59% 0.64% ======== ======== ======== ======== ======== Underperforming assets as a percent of loans, net of unearned income plus OREO/ISF 0.50% 0.48% 0.55% 0.66% 0.73% ======== ======== ======== ======== ======== *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. At December 31, 1994, loans classified as in-substance foreclosure were $70,000. 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 1995 Bancorp's deposit liabilities had increased by 0.21% from December 31, 1994. Another source of funding is through short-term borrowings. Bancorp's short-term borrowings decreased to $80,402,000 at March 31, 1995, compared to $123,119,000 at December 31, 1994. This higher short-term funding was required at December 31, 1994 in anticipation of maturing investment securities. The principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. At March 31, 1995, securities maturing in one year or less amounted to $94,169,000, representing 28.3% 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, 1995, amounted to $447,749,000, representing 23.6% 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, 1995, Bancorp had classified $211,556,000 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 $500,000 for the first three months of 1995. In addition, remodeling is a planned and ongoing process given the 69 offices of Bancorp and its subsidiaries. Material commitments for capital expenditures as of March 31, 1995 were approximately $1,256,000. A significant portion of these commitments are associated with plans for an additional branch office at First National Bank of Southwestern Ohio. 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 1 capital, which consists mainly of common shareholders' equity net of intangibles, and 8.00% for total capital (Tier 1 plus Tier 2 supplementary capital). Bancorp's Tier 1 ratio at March 31, 1995, was 14.3% and its total capital ratio was 15.5%. 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 1995 1994 ---------- ------------------------------------------------ Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 ---------- ---------- ---------- ---------- ---------- (Dollars in thousands) Tier I Capital: Shareholder's equity $ 201,252 $ 194,673 $ 194,033 $ 190,060 $ 187,396 Less: Intangible assets 4,056 4,230 4,446 4,625 4,805 Less: Unrealized net securities (losses)/gains (384) (2,712) (934) (571) 1,565 ---------- ---------- ---------- ---------- ---------- Total Tier I Capital $ 197,580 $ 193,155 $ 190,521 $ 186,006 $ 181,026 ========== ========== ========== ========== ========== Total Risk-Based Capital: Tier I Capital $ 197,580 $ 193,155 $ 190,521 $ 186,006 $ 181,026 Qualifying Allowance for Loan Losses 16,705 17,074 16,803 16,047 15,434 ---------- ---------- ---------- ---------- ---------- Total Risk-Based Capital $ 214,285 $ 210,229 $ 207,324 $ 202,053 $ 196,460 ========== ========== ========== ========== ========== Risk Weighted Assets $1,383,180 $1,365,882 $1,344,203 $1,283,793 $1,234,680 ========== ========== ========== ========== ========== Risk-Based Ratios: Tier I 14.28% 14.14% 14.17% 14.49% 14.66% ========== ========== ========== ========== ========== Total Risk-Based Capital 15.53% 15.39% 15.42% 15.74% 15.91% ========== ========== ========== ========== ==========
11 14 ACCOUNTING AND REGULATORY MATTERS 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 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- On April 25, 1995, Bancorp held its annual meeting of shareholders, the results of which follow: 1) Election of five directors: Abstentions/ % of Total Votes Broker Non- Name Term Votes For Shares Voted Against Votes ---- ---- --------- ------------ ------- ----------- Thomas C. Blake 3 years 10,769,045 99.84% 16,473 1,423,057 F. Elden Houts 3 years 10,770,197 99.86% 15,321 1,423,057 Charles T. Koehler 3 years 10,768,777 99.84% 16,741 1,423,057 Lauren N. Patch 3 years 10,767,883 99.83% 17,635 1,423,057 Paul G. Risser 3 years 10,744,014 99.61% 41,504 1,423,057
Directors whose terms continue beyond the Annual Meeting in 1995: Class I Term expiring in 1996: Arthur W. Bidwell Carl R. Fiora Vaden Fitton Barry J. Levey Joseph L. Marcum Class II Term expiring in 1997: Richard J. Fitton Murph Knapke Stanley N. Pontius Barry S. Porter Joel H. Schmidt No other matters were brought before the meeting for a vote. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (b) Reports on Form 8-K During the quarter ended March 31, 1995, the registrant did not file any reports on Form 8-K. 12 15 SIGNATURE 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) Date May 3, 1995 /s/ Michael R. O'Dell ---------------------- ------------------------- Michael R. O'Dell, Comptroller 13 EX-27 2 EXHIBIT 27
9 0000708955 FIRST FINANCIAL BANCORP 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 92,734 4,517 198 0 211,556 120,765 126,377 1,410,150 18,904 1,893,341 1,590,695 80,402 20,992 0 97,676 0 0 103,576 1,893,341 29,988 6,081 93 36,162 13,035 14,495 21,667 393 13 15,661 10,486 10,486 0 0 7,369 $ .60 $ .60 5.23 3,457 700 1,173 0 18,609 367 269 18,904 18,904 0 0
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