-----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, N5K/8xDzvsBM2N861bGacb9BHqKDk6qq3kmtUkl7Ourp1UyMqNjkXmraAA6lGK+e zYTje/D5Q+vskDrZT7Ie3Q== 0000950005-00-000683.txt : 20000516 0000950005-00-000683.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950005-00-000683 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL BANCORP /CA/ CENTRAL INDEX KEY: 0000729502 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 942822858 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12499 FILM NUMBER: 634600 BUSINESS ADDRESS: STREET 1: 701 S HAM LN CITY: LODI STATE: CA ZIP: 95242 BUSINESS PHONE: 2093672000 MAIL ADDRESS: STREET 1: 701 S HAM LANE CITY: LODI STATE: CA ZIP: 95242 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number : 0-12499 First Financial Bancorp (Exact name of registrant as specified in its charter) California 94-28222858 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 South Ham Lane , Lodi, California 95242 (Address of principal executive offices) (Zip Code) (209)-367-2000 (Registrant's telephone number, including area code) NA (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No As of May 8, 2000 there were 1,445,034 shares of Common Stock, no par value, outstanding. ================================================================================ FIRST FINANCIAL BANCORP FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 TABLE OF CONTENTS
Page ---- PART I Item 1. Financial Statements .................................................... 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................................... 6 Item 3. Quantitative and Qualitative Disclosures about Market Risk............... 11 PART II Item 1. Legal Proceedings ....................................................... 11 Item 2. Changes in Securities ................................................... 11 Item 3. Defaults Upon Senior Securities ......................................... 11 Item 4. Submission of Matters to a Vote of Security Holders ..................... 11 Item 5. Other Information ....................................................... 11 Item 6. Exhibits and Reports on Form 8-K ........................................ 11
ITEM 1. FINANCIAL STATEMENTS FIRST FINANCIAL BANCORP AND SUBSIDIARIES Consolidated Balance Sheets (in thousands except share amounts)
Mar. 31 Dec. 31 2000 1999 --------- --------- Assets Cash and due from banks $ 9,654 $ 9,309 Federal funds sold 1,300 100 Investment securities available for sale, at fair value 35,019 36,096 Loans 111,221 112,174 Less allowance for loan losses (Note 3) 2,617 2,580 --------- --------- Net loans 108,604 109,594 Bank premises and equipment, net 7,198 7,096 Accrued interest receivable 1,373 1,487 Other assets 12,966 12,652 --------- --------- $ 176,114 $ 176,334 ========= ========== Liabilities and Stockholders' Equity Liabilities: Deposits Noninterest bearing $ 19,471 $ 21,054 Interest bearing 141,025 135,107 --------- --------- Total deposits 160,496 156,161 Accrued interest payable 294 304 Short term borrowings -- 4,300 Other liabilities 556 1,048 --------- --------- Total liabilities 161,346 161,813 Stockholders' equity: Common stock - no par value; authorized 9,000,000 shares, issued and outstanding in 2000 and 1999, 1,445,034 and 1,433,734, respectively 8,518 8,433 Retained earnings 6,627 6,354 Accumulated other comprehensive loss (377) (266) --------- --------- Total stockholders' equity 14,768 14,521 --------- --------- $ 176,114 $ 176,334 See accompanying notes.
1 FIRST FINANCIAL BANCORP AND SUBSIDIARIES Consolidated Statements of Income (in thousands except per share amounts) Three Months Ended March 31, 2000 1999 ------ ------ (Dollar amounts in thousands, except per share amounts) Interest income: Loans, including fees $2,564 $2,246 Investment securities: Taxable 453 580 Exempt from Federal taxes 137 52 Federal funds sold 42 80 ------ ------ Total interest income 3,196 2,958 Interest expense: Deposit accounts 1,035 938 ------ ------ Net interest income 2,161 2,020 Provision for loan losses 35 100 ------ ------ Net interest income after provision for loan 2,126 1,920 losses Noninterest income: Service charges 315 208 Premiums and fees from SBA and mortgage operations 190 216 Miscellaneous 157 61 ------ ------ Total noninterest income 662 485 Noninterest expense: Salaries and employee benefits 1,118 932 Occupancy 201 199 Equipment 179 156 Other 841 702 ------ ------ Total noninterest expense 2,339 1,989 ------ ------ Income before provision for income taxes 449 416 Provision for income taxes 103 143 ------ ------ Net income $ 346 $ 273 ====== ====== Net income per share: Basic (Note 2) $ 0.23 $ 0.19 ====== ====== Diluted (Note 2) $ 0.22 $ 0.19 ====== ====== See accompanying notes. 2 FIRST FINANCIAL BANCORP AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income (in thousands except share amounts)
Three Months Ended March 31, 1999 Accumulated Common Common Other Stock Stock Comprehensive Retained Comprehensive Description Shares Amounts Income Earnings Income Total - ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------ Balance at December 31, 1998 1,349,292 $ 7,584 5,971 302 13,857 Comprehensive income: Net income $ 273 273 273 --------------- Other comprehensive loss: Unrealized holding losses on securities available for sale arising during the current period, net of tax benefit of $48 (98) --------------- Total other comprehensive loss (98) (98) (98) =============== Comprehensive income $ 175 =============== Options exercised 30,525 206 206 Cash dividend declared (68) (68) ============ ============ ======== ================ ============ Balance at March 31, 1999 1,379,817 $ 7,790 6,176 204 14,170 ============ ============ ======== ================ ============ Three Months Ended March 31, 2000 Accumulated Common Common Other Stock Stock Comprehensive Retained Comprehensive Description Shares Amounts Income Earnings Loss Total - ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------ 1,433,734 $ 8,433 6,354 (266) 14,521 Balance at December 31, 1999 Comprehensive income: Net income $ 346 346 346 --------------- Other comprehensive loss: Unrealized holding losses on securities available for sale arising during the current period, net of tax benefit of $81 (111) --------------- Total other comprehensive loss (111) (111) (111) =============== Comprehensive income $ 235 =============== Options exercised 11,300 85 85 Cash dividend (73) (73) ============ ============ ======== ================ ============ Balance at March 31, 2000 1,445,034 $ 8,518 6,627 (377) 14,768 ============ ============ ======== ================ ============ See accompanying notes.
3 FIRST FINANCIAL BANCORP AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) Three Months Ended March 31,
2000 1999 -------- -------- Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by (used in) operating activities: $ 346 $ 273 Decrease in loans held for sale (193) (2,164) Increase (decrease) in deferred loan income 8 (11) Depreciation and amortization 309 266 Provision for loan losses 35 100 Decrease in accrued interest receivable 114 289 Decrease in accrued interest payable (10) (54) Decrease in other liabilities (492) (83) Increase in cash surrender value of life insurance (108) (29) Decrease (increase) in other assets 711 (10) -------- -------- Net cash provided by (used in) operating activities 720 (1,423) Cash flows from investing activities: Proceeds from maturity of available-for-sale securities 1,733 6,313 Proceeds from sale of available-for-sale securities -- 750 Purchases of available-for-sale securities (899) (8,150) Net decrease in loans made to customers 1,140 4,256 Proceeds from sale of other real estate 10 -- Purchase of cash surrender value life insurance (900) -- Purchases of bank premises and equipment (306) (159) -------- -------- Net cash provided by investing activities 778 3,010 Cash flows from financing activities: Net increase (decrease) in deposits 4,335 (1,203) Decrease in other borrowings (4,300) -- Dividends paid (73) (68) Proceeds from issuance of common stock 85 206 -------- -------- Net cash provided by (used in) financing activities 47 (1,065) Net increase in cash and cash equivalents 1,545 522 Cash and cash equivalents at beginning of period 9,409 12,129 -------- -------- Cash and cash equivalents at end of period $ 10,954 $ 12,651 ======== ======== Supplemental Discolsures of Cash Flow Information: Cash paid for interest payments $ 1,045 992 Cash paid for taxes $ 120 50 See accompanying notes.
4 FIRST FINANCIAL BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2000 and December 31, 1999 (1) Summary of Significant Accounting Policies The accounting and reporting policies of First Financial Bancorp (the Company) and its subsidiaries, Bank of Lodi, N.A., (the Bank) and Western Auxiliary Corporation (WAC) conform with generally accepted accounting principles and prevailing practices within the banking industry. In preparing the consolidated financial statements, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenue and expense for the period. Actual results could differ from those estimates applied in the preparation of the consolidated financial statements. There were no new accounting standards adopted during the current period. (2) Weighted Average Shares Outstanding Per share information is based on weighted average number of shares of common stock outstanding during each three-month period after giving retroactive effect for the five percent stock dividend declared for shareholders of record May 9, 2000, payable May 23, 2000. Basic earnings per share (EPS) is computed by dividing net income available to shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to shareholders by the weighted average common shares outstanding during the period plus potential common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Basic and diluted earnings per share for the three months ended March 31, 2000 and 1999 were computed as follows:
Income Shares Per-Share Three months ended March 31, 2000 (numerator) (denominator) Amount ---------------------------------------------------------- ------------------ ------------------- ---------- Basic earnings per share $ 346,000 1,509,565 $ .23 Effect of dilutive securities - 32,240 - ------------------ ------------------- Diluted earnings per share $ 346,000 1,541,805 $ .22 ================== =================== Income Shares Per-Share Three months ended March 31, 1999 (numerator) (denominator) Amount ---------------------------------------------------------- ------------------ ------------------- ---------- Basic earnings per share $ 273,000 1,423,873 $ .19 Effect of dilutive securities - 48,769 - ------------------ ------------------- Diluted earnings per share $ 273,000 1,472,642 $ .19 ================== ===================
(3) Allowance for Loan Losses Quarter Year Ended Ended 3/31/00 12/31/99 ---------- --------- Balance at beginning of period $ 2,580,000 1,564,000 Loans charged off (4,000) (110,000) Recoveries 6,000 75,000 Provisions charged to operations 35,000 1,051,000 ---------- --------- Balance at end of period $ 2,617,000 2,580,000 =========== ========= 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Cautionary Statement for the Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The Company is including the following cautionary statement to take advantage of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statement made by, or on behalf of, the Company. The factors identified in this cautionary statement are important factors (but not necessarily all important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Where any such forward-looking statement includes a statement of the assumptions of bases underlying such forward-looking statement, the Company cautions that, while it believes such assumptions or bases to be reasonable and makes them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. Where, in any forward-looking statement, the Company expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result, or be achieved or accomplished. Taking into account the foregoing, such risks and uncertainties include, but are not limited to, the following factors: competitive pressure in the banking industry; changes in the interest rate environment; general economic conditions, either nationally or regionally becoming less favorable than expected and resulting in, among other things, a deterioration in credit quality and an increase in the provision for possible loan losses; changes in the regulatory environment; changes in business conditions; volatility of rate sensitive deposits; operational risks, including data processing system failures or fraud; asset/liability matching risks and liquidity risks; and changes in the securities markets. The following discussion addresses information pertaining to the financial condition and results of operations of the Company that may not be otherwise apparent from a review of the consolidated financial statements and related footnotes. It should be read in conjunction with those statements and notes found on pages 1 through 5, as well as other information presented throughout this report. Changes in Financial Condition Consolidated total assets at March 31, 2000 were decreased approximately $200,000 from December 31, 1999. While non-interest bearing deposits decreased by $1.6 million or 7.5% during the first quarter, interest bearing deposits increased $5.9 million or 4.4%. The decrease in non-interest bearing deposits is consistent with historical trends which reflect a seasonal decline in deposits during the first quarter that is typically associated with the local agricultural industry. The increase in interest bearing deposits is the direct result of a certificate of deposit campaign initiated by the company during the month of February, 2000. During that time, the Company increased total certificates of deposit by approximately $6.3 million. The primary purpose of the Certificate of Deposit campaign was not to generate new deposits. Rather, the purpose was to bring new account relationships to the Company while introducing a sales type culture to the company's employees. As part of the campaign, the Company initiated an employee referral and incentive program designed to promote individual sales activity. The loan portfolio decreased by 1%, or $1 million, from December 31, 1999 to March 31, 2000. The decrease reflects the sale of approximately $1.2 million in Small Business Administration ("SBA") and mortgage loans which were held for sale to the secondary market at December 31, 1999. At March 31, 2000, the Bank did not have any loans held for sale to the secondary market. The portion of the commercial loan portfolio consisting of agriculture loans started to increase towards the end of 1999 and decreased by approximately $750,000 during the first quarter of 2000. Agriculture lines of credit are cyclical in nature as historically borrowers draw on their lines of credit in the Spring. It is anticipated that the agriculture loans will peak to $21 million in the Summer before payoffs occur in the Fall. At March 31, 2000, agricultural loans totaled approximately $17.1 million. Real estate and construction loans increased 3%, and 4%, respectively, from the end of 1999. Commercial (excluding agriculture loans), mortgage and SBA loans decreased 9%, 12%, and 2%, respectively, during the first quarter. The allowance for loan losses (the "allowance") is established through a provision for possible loan losses charged to expense. The allowance at March 31, 2000 was in excess of the December 31, 1999 allowance by $37 thousand, or 1.4%, as a result of a provision for $35 thousand and net recoveries of $2 thousand. Nonperforming loans increased by $2.3 million, to $4.6 million from December 31, 1999 to March 31, 2000, and the allowance for loan losses to nonperforming loan coverage ratio decreased to 0.57 times from 2.74 times. The increase in nonaccrual loans was primarily attributable to three 6 loans totaling approximately $1.8 million. Management believes that the allowance at March 31, 2000 is adequate to absorb known and reasonably estimated loan losses. However, there can be no assurances that future economic events may negatively impact the Bank's borrowers, thereby causing loan losses to exceed the current allowance. The following tables depict activity in the allowance for loan losses and allocation of reserves for and at the three and twelve months ended March 31, 2000 and December 31, 1999, respectively: Analysis of the Allowance for Loan Losses Quarter Year Ended Ended 3/31/00 12/31/99 ------- ------- Balance at beginning of period $ 2,580 1,564 Charge-offs: Commercial -- (90) Real estate -- -- Consumer (4) (20) ------- ------- Total charge-offs (4) (110) Recoveries: Commercial -- 68 Real estate -- -- Consumer 6 7 ------- ------- Total recoveries 6 75 ------- ------- Net recoveries (charge-offs) 2 (35) Provision charged to operations 35 1,051 ------- ------- Balance at end of period $ 2,617 2,580 ======= ======= Allocation of the Allowance for Loan Losses 3/31/00 3/31/00 12/31/99 12/31/99 Loan Category Amount % of Loans Amount % of Loans - ------------- ------ ---------- ------ ---------- Commercial 647 78.69% 538 79.03% Real Estate 301 18.34% 366 18.04% Consumer 2 2.97% 1 2.93% Unallocated 1,667 N/A 1,675 N/A --------- ------ ----- ------ $ 2,617 100.00% 2,580 100.00% ========= ====== ===== ====== Investments Investment in bonds decreased by $1.1 million, or 3%, from December 31, 1999 to March 31, 2000. The decline represents matured bonds and securities contractually called by issuers. The matured and called bonds over the first quarter of 2000 were reinvested primarily in Federal funds in order to avoid market risk over the short-term before funding loans. 7 Equity Consolidated equity increased by $247 thousand from December 31, 1999 to March 31, 2000. Consolidated equity represented 8.39% and 8.23% of consolidated assets at March 31, 2000 and December 31, 1999, respectively. Stock option exercises during the three months ended March 31, 2000 increased equity by $85 thousand. The increase in equity from earnings of $346 thousand for the three months ended March 31, 2000 exceeded reductions from dividend payments of $73 thousand and a reduction to equity of $111 thousand to reflect the after-tax market value decline of the available-for-sale investment securities portfolio. The decrease in the investment security portfolio's market value reflects the increase in the level market interest rates at March 31, 2000 compared to December 31, 1999. The total risk-based capital ratio for the Company's wholly owned subsidiary, Bank of Lodi was 10.79% at March 31, 2000 compared to 10.51% at December 31, 1999. The increase in the total risk-based capital ratio is largely a function of the increased earnings of the Company. For each dollar in new loans, risk-weighted assets increase by eighty cents. The Bank's leverage capital ratio was 7.73% at March 31, 2000 versus 7.82% at December 31, 1999. The capital ratios are in excess of the regulatory minimums for a well-capitalized bank. Changes in Results of Operations- Three Months ended March 31, 2000 Summary of Earnings Performance - ------------------------------------------------------------------------------- For the three months ended March 31: -------------------------------------------- 2000 1999 ---- ---- Net income (in thousands) $ 346 273 - ------------------------------------------------------ ------------------------ Basic net income per share $ .23 .19 Diluted net income per share .22 .19 Return on average assets 0.79% 0.68% Return on average equity 9.46% 7.90% Dividend payout ratio 20.58% 24.91% - ------------------------------------------------------ ------------------------ - ------------------------------------------------------ ------------------------ Average equity to average assets 8.34% 8.55% - ------------------------------------------------------ ------------------------ Net income for the quarter increased 27% compared to the first quarter of 1999. Net interest income increased by 7% as a result of an increase in total average loans combined with an overall increase in interest rates. Noninterest income increased by 37%, while noninterest expense increased by 18%. Based upon the net income for the three months ended March 31, 2000, the Company's board of directors declared a 5% stock dividend payable May 23, 2000 to shareholders of record on May 9, 2000. 8 Net Interest Income The following table provides a detailed analysis of the net interest spread and net interest margin for the periods indicated:
-------------------------------------- ------------------------------- -------------------------------- For the Quarter Ended For the Quarter Ended March 31, 2000 March 31, 1999 (in thousands) (in thousands) -------------------------------------- ------------------------------- -------------------------------- Average Income/ Average Income/ Balance Expenses Yield(1) Balance Expenses Yield(1) ------- -------- -------- ------- -------- -------- Earning Assets: Investment securities (1) $ 45,150 590 5.18% $ 48,425 632 5.29% Federal funds sold 2,880 42 5.76% 6,796 80 4.77% Loans (2) 111,250 2,564 9.14% 92,137 2,246 9.89% ------- ----- ----- ------ ----- ----- $159,280 3,196 7.96% $147,358 2,958 8.14% ========= ===== ==== ======== === ==== Liabilities: Noninterest bearing deposits $ 19,320 -- -- $ 18,098 -- -- Savings, money market, & NOW deposits 83,820 335 1.59% 80,748 330 1.66% Time deposits 51,890 620 4.74% 50,071 608 4.92% Other borrowings 5,336 80 --------- ----- Total Liabilities $ 160,366 1,035 2.56% $148,917 938 2.55% ========= ===== ==== ======== === ==== Net Interest Spread 5.40% 5.59% ===== ===== -------------------------------------- ---------- ---------- --------- ---------- ----------- --------- Earning Income Earning Income Assets (Expense) Yield Assets (Expense) Yield ------ --------- ----- ------ --------- ----- Yield on average earning assets $159,280 3,196 8.14% $147,358 2,958 8.14% Cost of funding average earning $159,280 (1,035) (2.56%) $147,358 (938) (2.58%) ------- ------- ----- ------- assets Net Interest Margin $159,280 2,161 5.40% $147,358 2,020 5.56% ===== ===== ===== ===== -------------------------------------- ---------- ---------- --------- ---------- ----------- --------- (1) Yield for period annualized on actual number of days in period and based on a 365-day year. (2) Income on tax-exempt securities has not been adjusted to a tax equivalent basis. (3) Nonaccrual loans are included in the loan totals for each period; however, only collected interest on such loans is included in interest income.
Net interest income for the first quarter of 2000 increased by $141 thousand, or 7%, over the same quarter of 1999. The net interest margin of 5.40% was a decrease from the 5.56% for the first quarter of 1999, primarily as a result of interest forgone on nonaccrual loans. During the first quarter of 2000, interest income of $71 thousand was forgone as a result of loans placed on nonaccrual during the quarter. The Company increased it tax exempt investment portfolio and experienced corresponding reductions in money market funds. While the increase in municipal securities reduced the pretax investment yield, it has reduced the Company's overall effective tax rate. The Company's cost of funds have remained relatively unchanged. Loan yields for the first quarter of 2000 were 75 basis points lower from a year ago, while average loans increased by $19.1 million, or 21%, over the prior year. As a percentage of total earning assets, average loans outstanding were 70% compared to 63% at the end of the first quarter of 1999 and 69% at year-end 1999. The increased mix of loans in earning assets helped to offset the effect of declining market yields in investments. The growth in average loans was the result of persistent business development efforts on the part of the banks officers and employees in both existing and new-branch markets and favorable economic conditions that have stimulated mortgage demand and real estate activity. The decline in loan yields was negatively impacted as a result of the $2.3 million in loans placed on nonaccrual during the period. 9 Average deposits for the three months ended March 31, 2000 increased by $6 million, or 4%, compared to the prior year quarter. Average noninterest bearing deposits have kept pace with the growth in interest bearing deposits from a year ago and continue to make up 12% of average total deposits. This has helped to keep down the cost of funding earning assets. Average certificates of deposit were 33% of average deposits for the three months ended March 31, 2000 and for the same period in the prior year quarter. Provision for Loan Losses The Bank provided $35 thousand to the allowance in the first quarter of 2000 which is attributable to general loss reserves that have been established in connection with loan portfolio growth. The allowance for loan losses is discussed above under Changes in Financial Condition. Noninterest Income Noninterest income for the first quarter of 2000 increased by $177 thousand, or 37%, over the same period last year. Of the increase, $107 thousand is attributable to increases on service charges on deposit accounts. The increase in service charge income comes as a result of a 4% increase in average demand and savings accounts combined with general increases in deposit product pricing. Income from the sale and servicing of loans decreased by $26 thousand, or 12%, compared to the prior year quarter. The decreased income from the sale and servicing of loans is due to a general decline in these markets as compared to the same quarter of 1999. Noninterest Expenses Noninterest expenses increased by $350 thousand, or 18%, compared to the prior year quarter. Personnel expense increased $186 thousand, or 20%, as a result of additions to staff during the year combined with general merit increases for existing personnel. Occupancy expense increased $2 thousand or 1%. Equipment expense increased $23 thousand, or 15%, as a result of depreciation of new equipment. Other noninterest expense increased $139 thousand, or 20%, primarily as a result of an increase of $82 thousand in marketing expense and an increase of $44 thousand in consulting fees. The increase in marketing expense resulted from efforts initiated to promote the Bank, its products and services. The increase in consulting fees resulted from the Bank's strategic efforts to increase revenue sources and the utilization of technology. Basis of Presentation First Financial Bancorp is the holding company for Bank of Lodi, N.A. and Western Auxiliary Corporation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals and other accruals as explained above) necessary for a fair presentation of financial position as of the dates indicated and results of operations for the periods shown. All material intercompany accounts and transactions have been eliminated in consolidation. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts. The results for the three months ended March 31, 2000 are not necessarily indicative of the results which may be expected for the year ended December 31, 1999. The unaudited consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements and notes included in the 1999 Annual Report to Shareholders. 10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK While there are several varieties of market risk, the market risk material to the Company and the Bank is interest rate risk. Within the context of interest rate risk, market risk is the risk of loss due to changes in market interest rates that have an adverse effect on net interest income, earnings, capital or the fair value of financial instruments. Exposure to this type of risk is a regular part of a financial institution's operations. The fundamental activities of making loans, purchasing investment securities, and accepting deposits inherently involve exposure to interest rate risk. The Company monitors the repricing differences between assets and liabilities on a regular basis and estimates exposure to net interest income, net income, and capital based upon assumed changes in the market yield curve. As of and for the three months ended March 31, 2000, there were no material changes in the market risk profile of the Company or the Bank as described in the Company's 2000 Form 10-K. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not Applicable. ITEM 2. CHANGES IN SECURITIES Not Applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Not Applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description 3(a) Articles of Incorporation, as amended, filed as Exhibit 3.1 to the Company's General Form for Registration of Securities on Form 10, filed on September 21, 1983, is hereby incorporated by reference. 3(b) Bylaws, as amended, filed as Exhibit 3(b) to the Company's Form 10K for the year ended December 31, 1998 are hereby incorporated by reference. 4 Specimen Common Stock Certificate, filed as Exhibit 4.1 to the Company's General Form for Registration of Securities on Form 10, filed on September 21, 1983, is hereby incorporated by reference. 10(a) First Financial Bancorp 1991 Director Stock Option Plan and form of Nonstatutory Stock Option Agreement, filed as Exhibit 4.1 to the Company's Form S-8 Registration Statement (Registration No. 33-40954), filed on May 31, 1991, is hereby incorporated by reference. 10(b) Amendment to First Financial Bancorp 1991 Director Stock Option Plan, filed as Exhibit 4.3 to the Company's Post-Effective Amendment No. 1 to Form S-8 Registration Statement (Registration No. 33-40954), filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1995, is hereby incorporated by reference. 10(c) First Financial Bancorp 1991 Employee Stock Option Plan and forms of Incentive Stock Option Agreement and Nonstatutory Stock Option Agreement, filed as Exhibit 4.2 to the Company's Form S-8 Registration Statement (Registration No. 33-40954), filed on May 31, 1991, is hereby incorporated by reference. 11 10(d) Bank of Lodi Employee Stock Ownership Plan, filed as Exhibit 10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, is hereby incorporated by reference. 10(e) First Financial Bancorp 1997 Stock Option Plan, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1997, is hereby incorporated by reference. 10(f) Bank of Lodi Incentive Compensation Plan, filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, is hereby incorporated by reference. 10(g) First Financial Bancorp 401(k) Profit Sharing Plan, filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, is hereby incorporated by reference. 10(h) Employment Agreement dated as of September 30, 1998, between First Financial Bancorp and Leon J. Zimmerman., filed as Exhibit 10(h) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 10(i) Executive Supplemental Compensation Agreement effective as of April 3, 1998, between Bank of Lodi, N.A. and Leon J. Zimmerman, filed as Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 10(j) Life Insurance Endorsement Method Split Dollar Plan Agreement effective as of April 3, 1998, between Bank of Lodi, N.A. and Leon J. Zimmerman, filed as Exhibit 10(l) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 10(k) Life Insurance Endorsement Method Split Dollar Plan Agreement effective as of April 3, 1998, between Bank of Lodi, N.A. and David M. Philipp, filed as Exhibit 10(m) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 10(l) Form of Director Supplemental Compensation Agreement, effective as of April 3, 1998, as executed between Bank of Lodi, N.A. and each of Benjamin R. Goehring, Michael D. Ramsey, Weldon D. Schumacher and Dennis R. Swanson, filed as Exhibit 10(n) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 10(m) Form of Life Insurance Endorsement Method Split Dollar Plan Agreement, effective as of April 3, 1998, as executed between Bank of Lodi, N.A. and each of Benjamin R. Goehring, Michael D. Ramsey, Weldon D. Schumacher and Dennis R. Swanson, filed as Exhibit 10(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 10(n) Form of Director Supplemental Compensation Agreement, effective as of April 3, 1998, as executed between Bank of Lodi, N.A. and each of Angelo J. Anagnos, Raymond H. Coldani, Bozant Katzakian and Frank M. Sasaki, filed as Exhibit 10(p) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 10(o) Form of Life Insurance Endorsement Method Split Dollar Plan Agreement, effective as of April 3, 1998, as executed between Bank of Lodi, N.A. and each of Angelo J. Anagnos, Raymond H. Coldani, Bozant Katzakian and Frank M. Sasaki, filed as Exhibit 10(q) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is hereby incorporated by reference. 27 Financial Data Schedule (electronic submission only). 12 (b) Reports on Form 8-K Form 8-K dated March 28, 2000 announcing fourth quarter and full year 1999 financial results and cash dividend. Form 8-K dated April 25, 2000 announcing first quarter 2000 financial results and five percent stock dividend. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST FINANCIAL BANCORP Date: May 8, 2000 /s/ Leon J. Zimmerman -------------------------- Leon J. Zimmerman President & CEO EX-27 2 FINANCIAL DATA SCHEDULE
9 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 9,654 0 1,300 0 35,019 0 0 111,221 2,617 176,114 160,496 0 850 0 0 0 8,518 6,250 176,114 2,564 590 42 3,196 1,035 1,035 2,161 35 0 2,339 449 449 0 0 346 0.23 0.22 5.40 4,627 0 0 0 2,580 4 6 2,617 2,617 0 1,667
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