-----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, S7Vgn3F4bZChee6NxA3Lt2b1uRBXiIXuG66nUjHourc/Vyqblz4Oj1QE8yl1mM3Z qJ/dvQtdIim8GTE1LbqOcA== 0000950005-01-500146.txt : 20010516 0000950005-01-500146.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950005-01-500146 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1638084 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 p1366010q.txt
=========================================================================================== 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, 2001 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 7, 2001 there were 1,526,663 shares of Common Stock, no par value, outstanding. ===========================================================================================
FIRST FINANCIAL BANCORP FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001 TABLE OF CONTENTS Page PART I Item 1. Consolidated Financial Statements and Notes to Consolidated Financial Statements.............................................. 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................. 7 Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 12 PART II Item 1. Legal Proceedings................................................. 12 Item 2. Changes in Securities............................................. 12 Item 3. Defaults Upon Senior Securities................................... 12 Item 4. Submission of Matters to a Vote of Security Holders .............. 12 Item 5. Other Information................................................. 12 Item 6. Exhibits and Reports on Form 8-K.................................. 12 i ITEM 1. FINANCIAL STATEMENTS FIRST FINANCIAL BANCORP AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (in thousands except share amounts)
Mar. 31, Dec. 31, Assets 2001 2000 ---------------- ---------------- Cash and due from banks $ 11,734 $ 10,909 Federal funds sold and securities purchased under resale agreements 15,437 10,115 Investment securities available for sale, at fair value 30,179 29,560 Loans held for sale 1,692 1,292 Loans, net of deferred loan fees 112,782 113,292 Less allowance for loan losses 2,684 2,499 ---------------- ---------------- Net loans 110,098 110,793 Premises and equipment, net 6,944 7,002 Accrued interest receivable 1,228 1,447 Other assets 15,070 13,946 ---------------- ---------------- Total Assets $ 192,382 $ 185,064 ================ ================ Liabilities and Stockholders' Equity Liabilities: Deposits Noninterest bearing $ 22,810 $ 24,223 Interest bearing 150,608 138,038 ---------------- ---------------- Total deposits 173,418 162,261 Accrued interest payable 319 316 Short term borrowings - 4,588 Other liabilities 1,742 1,445 ----------------- ---------------- Total liabilities 175,479 168,610 Stockholders' equity: Common stock - no par value; authorized 9,000,000 shares, issued and outstanding in 2001 and 2000, 1,526,663 and 1,526,063, respectively 9,344 9,338 Retained earnings 7,086 6,831 Accumulated other comprehensive income 473 285 ---------------- ---------------- Total stockholders' equity 16,903 16,454 ---------------- ---------------- $ 192,382 $ 185,064 ================ ================ See accompanying notes.
1 FIRST FINANCIAL BANCORP AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) (in thousands except per share amounts)
Three Months Ended March 31, 2001 2000 ------ ------ Interest income: Loans, including fees $2,685 $2,564 Investment securities: Taxable 373 453 Exempt from Federal taxes 71 137 Federal funds sold 181 42 ------ ------ Total interest income 3,310 3,196 Interest expense: Deposit accounts 1,103 955 Other borrowings 3 80 ------ ------ Total interest expense 1,106 1,035 Net interest income 2,204 2,161 Provision for loan losses 190 35 ------ ------ Net interest income after provision for loan losses 2,014 2,126 Noninterest income: Gain on sale of other real estate 222 -- Service charges 333 315 Premiums and fees from SBA and mortgage operations 217 190 Miscellaneous 181 157 ------ ------ Total noninterest income 953 662 Noninterest expense: Salaries and employee benefits 1,405 1,118 Occupancy 221 201 Equipment 231 179 Other 808 841 ------ ------ Total noninterest expense 2,665 2,339 ------ ------ Income before provision for income taxes 302 449 Provision for income taxes 47 103 ------ ------ Net income $ 255 $ 346 ====== ====== Net income per share: Basic $ 0.16 $ 0.22 ====== ====== Diluted $ 0.16 $ 0.21 ====== ====== Dividends declared per share $ -- $ 0.05 ====== ====== See accompanying notes.
2 FIRST FINANCIAL BANCORP AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Income (Unaudited) (in thousands except share amounts)
Three Months Ended March 31, 2001 Accumulated Common Common Other Stock Stock Comprehensive Retained Comprehensive Description Shares Amounts Income Earnings Income Total - ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------ Balance at December 31, 2000 1,526,063 $ 9,338 6,831 285 16,454 Comprehensive income: Net income $ 255 255 255 --------------- Other comprehensive loss: Unrealized holding gain arising during the current period, net of tax effect of $137 188 --------------- Total other comprehensive income 188 188 188 --------------- Comprehensive income $ 443 =============== Options exercised 600 6 6 ------------ ------------ -------- ---------------- ------------ Balance at March 31, 2001 1,526,663 $ 9,344 7,086 473 16,903 ============ ============ ======== ================ ============ Three Months Ended March 31, 2000 Accumulated Common Common Other Stock Stock Comprehensive Retained Comprehensive Description Shares Amounts Income Earnings Loss Total - ------------------------------------- ------------ ------------ --------------- -------- ---------------- ------------ Balance at December 31, 1999 1,433,734 $ 8,433 6,354 (266) 14,521 Comprehensive income: Net income $ 346 346 346 --------------- Other comprehensive loss: Unrealized holding losses on securities available for sale arising during the current period, (111) net of tax benefit of $81 --------------- 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 (Unaudited) (in thousands) Three Months Ended March 31,
2001 2000 ------------- ------------ Cash flows from operating activities: Net income $ 255 $ 346 Adjustments to reconcile net income to net cash provided by operating activities: Increase in loans held for sale (293) (193) Gain on sale of loans (107) (80) (Decrease) increase in deferred loan income (30) 8 Depreciation and amortization 387 309 Provision for loan losses 190 35 Gain on sale of other real estate owned (222) - Decrease in accrued interest receivable 219 114 Increase (decrease) in accrued interest payable 3 (10) Increase (decrease) in other liabilities 297 (492) Increase in cash surrender value of life insurance (142) (108) (Increase) decrease in other assets (239) 711 ------------- ------------ Net cash provided by operating activities 318 640 Cash flows from investing activities: Proceeds from maturity of available-for-sale securities 7,888 1,733 Proceeds from sale of available-for-sale securities (8,104) (899) Net decrease in loans made to customers 535 1,220 Proceeds from sale of other real estate 627 10 Purchase of cash surrender value life insurance (1,500) (900) Purchases of bank premises and equipment (192) (306) ------------- ------------ Net cash (used in) provided by investing activities (746) 858 Cash flows from financing activities: Net increase in deposits 11,157 4,335 Decrease in other borrowings (4,588) (4,300) Dividends paid - (73) Proceeds from issuance of common stock 6 85 ------------ ------------ Net cash provided by financing activities 6,575 47 Net increase in cash and cash equivalents 6,147 1,545 Cash and cash equivalents at beginning of period 21,024 9,409 ------------ ------------ Cash and cash equivalents at end of period $ 27,171 $ 10,954 ============ ============ Supplemental Discolsures of Cash Flow Information: Cash paid for interest payments $ 1,103 1,045 Cash paid for taxes $ 10 120 See accompanying notes.
4 FIRST FINANCIAL BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2001 and December 31, 2000 (Unaudited) (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 accounting principles generally accepted in the United States of America 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 8, 2001, payable May 22, 2001. 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. The following table provides a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation of the three month periods ending March 31, 2001 and 2000:
Income Shares Per-Share Three months ended March 31, 2001 (numerator) (denominator) Amount ----------------------------------------------------------------------------------------- Basic earnings per share $ 255,000 1,602,653 $ .16 Effect of dilutive securities - 33,377 - ------------------------------------ Diluted earnings per share $ 255,000 1,636,030 $ .16 ==================================== Income Shares Per-Share Three months ended March 31, 2000 (numerator) (denominator) Amount ----------------------------------------------------------------------------------------- Basic earnings per share $ 346,000 1,585,043 $ .22 Effect of dilutive securities - 33,852 - ------------------------------------ Diluted earnings per share $ 346,000 1,618,895 $ .21 ====================================
(3) Allowance for Loan Losses Quarter Year Ended Ended (in thousands) 3/31/01 12/31/00 -------- ---------- Balance at beginning of period $ 2,499 2,580 Loans charged off (15) (246) Recoveries 10 30 Provisions charged to operations 190 135 ------- ----- Balance at end of period $ 2,684 2,499 ======= ===== 5 (4) 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, 2001 are not necessarily indicative of the results which may be expected for the year ended December 31, 2001. The unaudited consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements and notes included in the 2000 Annual Report to Shareholders. 6 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 6, as well as other information presented throughout this report. Changes in Financial Condition Consolidated total assets at March 31, 2001 increased $7,318 thousand, or 4.0%, from December 31, 2000. While non-interest bearing deposits decreased by $1,413 thousand, or 5.8%, during the first quarter, interest bearing deposits increased $12,570 thousand, or 9.1%. 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 management's desire to increase market share for deposits and to provide liquidity to meet the projected loan growth for 2001. During the first quarter of 2001, the Company experienced an increase of $4,203 thousand, or 9.5%, $1,385 thousand, or 5.2%, and $8,419 thousand, or 16.3%, in NOW accounts, savings accounts and certificates of deposit, respectively, and a decrease of $1,437 thousand, or 9.4%, in money market accounts. The increase in certificates of deposit resulted from the Company offering deposit rates at or slightly above the rates offered in its immediate market area. In addition, the new certificates of deposit are from depositors in the local markets in which the Company operates and does not consist of brokered deposits. Total gross loans decreased by $110 thousand, or 0.1%, from December 31, 2000 to March 31, 2001. The net decrease in gross loans is primarily the result of increases of $1,545 thousand, or 11.5%, $536 thousand, or 3.1%, and $400 thousand, or 31%, in commercial loans, agricultural loans and loans which were held for sale to the secondary market, respectively, combined with a decrease of $2,305 thousand, or 5.2%, in real estate loans. During the first quarter of 2001, the Company opened a Small Business Administration ("SBA") loan production office in Folsom California, moving its operations for SBA loans from its Lodi office to the Folsom area. The allowance for loan losses (the "allowance") is established through a provision for possible loan losses charged to expense. The allowance at March 31, 2001 was in excess of the December 31, 2000 allowance by $185 thousand, or 7.4%, as a result of a provision for $190 thousand combined with net charge offs of $5 thousand. Nonperforming loans decreased by $24 thousand, to $5,631 thousand at March 31, 2001. Management continues to actively work to resolve the nonperforming loans, the majority of which are secured by real estate that, in the opinion of management, are well collateralized. Management believes that the allowance at March 31, 2001 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. 7 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, 2001 and December 31, 2000, respectively: Analysis of the Allowance for Loan Losses Quarter Year Ended Ended 3/31/01 12/31/00 ------- -------- Balance at beginning of period $2,499 2,580 Charge-offs: Commercial -- (201) Real estate -- -- Consumer (15) (45) ------ ----- Total charge-offs (15) (246) Recoveries: Commercial 2 15 Real estate -- -- Consumer 8 15 ------ ----- Total recoveries 10 30 ------ ----- Net recoveries (charge-offs) (5) (216) Provision charged to operations 190 135 ------ ----- Balance at end of period $2,684 2,499 ====== ===== Allocation of the Allowance for Loan Losses 3/31/01 3/31/01 12/31/00 12/31/00 Loan Category Amount % of Loans Amount % of Loans - ------------- --------- ---------- --------- ---------- Commercial and other real estate $ 1,038 86.55% 879 86.46% Real estate construction 552 10.45% 594 10.41% Installment and other -- 3.00% 1 3.13% Unallocated 1,094 N/A 1,025 N/A --------- --------- --------- ---------- $ 2,684 100.00% 2,499 100.00% ========= ========= ========= ========== Investments Investment securities increased by $619 thousand, or 2.1%, from December 31, 2000 to March 31, 2001. The increase is primarily the result of purchases of $8,104 thousand combined with matured bonds and securities contractually called by issuers totaling $7,888 thousand. 8 Equity Consolidated equity increased by $449 thousand from December 31, 2000 to March 31, 2001. Consolidated equity represented 8.79% and 8.89% of consolidated assets at March 31, 2001 and December 31, 2000, respectively. The increase in equity during the first quarter of 2001 resulted from earnings of $255 thousand for the three months ended March 31, 2001 combined with an increase of $188 thousand to reflect the after-tax market value increase of the available-for-sale investment securities portfolio and a $6 thousand increase resulting from the exercise of stock options. The increase in the investment security portfolio's market value reflects the decrease in the level of market interest rates at March 31, 2001 compared to December 31, 2000. The total risk-based capital ratio for the Company's wholly owned subsidiary, Bank of Lodi was 11.27% at March 31, 2001 compared to 11.27% at December 31, 2000. The total risk-based capital ratio did not change during the first quarter of 2001 largely as a result of capital requirements resulting from increases in total risk-weighted assets being offset by 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 7.99% at March 31, 2001 versus 7.99% at December 31, 2000. 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, 2001 Summary of Earnings Performance - -------------------------------------------------------------------------------- For the three months ended March 31: ----------------------------------------- 2001 2000 ---- ---- Net income (in thousands) $ 255 $ 346 - -------------------------------------------------------------------------------- Basic net income per share $ .16 $ .22 Diluted net income per share .16 .21 Return on average assets 0.55% 0.79% Return on average equity 6.26% 9.46% Dividend payout ratio -- 20.58% - -------------------------------------------------------------------------------- Average quity to average assets 8.74% 8.34% - -------------------------------------------------------------------------------- Net income for the quarter decreased $91 thousand, or 26%, compared to the first quarter of 2000. Net interest income increased by 2% as a result of an increase in interest income, which increase resulted from an increase in total average loans combined with an overall increase in the yield on earning assets, offset by an increase in interest expense, which increase resulted from an increase in total average interest bearing deposits combined with an increase in rates paid on those deposits. The provision for loan losses increased $155 thousand, or 443%. Noninterest income increased $291 thousand, or 44%, while noninterest expense increased $326 thousand, or 14%. Based upon the net income for the three months ended March 31, 2001, the Company's Board of Directors declared a 5% stock dividend payable May 22, 2001 to shareholders of record on May 8, 2001. All earnings per share amounts have been adjusted to give retroactive effect for the stock dividend. 9 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, 2001 March 31, 2000 (in thousands) (in thousands) ----------------------------------------------------------------------------------------------------- Average Income/ Average Income/ Balance Expenses Yield(1) Balance Expenses Yield(1) ------- -------- -------- ------- -------- -------- Earning Assets: Investment securities (1) $ 25,318 444 7.11% $ 45,150 590 5.18% Federal funds sold 13,031 181 5.63% 2,880 42 5.76% Loans (2) 114,875 2,685 9.48% 111,250 2,564 9.14% ------- ----- ----- ------- ----- ----- $153,224 3,310 8.76% $159,280 3,196 7.96% ======= ===== ===== ======= ===== ===== Liabilities: Noninterest bearing deposits $ 22,344 -- -- $ 19,320 -- -- Savings, money market, & NOW deposits 86,709 342 1.38% 83,820 335 1.59% Time deposits 55,518 761 5.56% 51,890 620 4.74% Other borrowings 204 3 5.97% 5,336 80 6.00% ------- ----- ----- ------- ----- ----- Total Liabilities $164,775 1,106 2.72% $160,336 1,035 2.56% ------- ----- ----- ------- ----- ----- Net Interest Spread 6.04% 5.40% ===== ===== ---------------------------------------------------------------------------------------------------- Earning Income Earning Income Assets (Expense) Yield Assets (Expense) Yield ------- -------- -------- ------- -------- -------- Yield on average earning assets $153,224 3,310 8.76% $159,280 3,196 8.14% Cost of funding average earning $153,224 (1,106) (2.56%) $159,280 (1,035) (2.56%) ------- ------- ------- ------- assets Net Interest Margin $153,224 2,204 5.83% $159,280 2,161 5.40% ===== ===== ===== ===== ---------------------------------------------------------------------------------------------------- (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 2001 increased by $43 thousand, or 2%, over the same quarter of 2000. The net interest margin of 5.83% was an increase from the 5.40% for the first quarter of 2000, primarily as a result of an increase of $3,625 thousand, or 3.25%, in average loans which was offset by an increase of $3,628 thousand, or 6.99%, in certificates of deposit. In addition, the yield on loans and certificates of deposit increased as a result of the existing rate environments at the time the loans and certificates of deposit were originated. The average yield on the loans increased from 9.14% to 9.48% and the rate paid for certificates of deposit increased from 4.74% to 5.56% at March 31, 2000 to March 31, 2001, respectively. Nonaccrual loans at March 31, 2001 and March 31, 2000 totaled $5,631 thousand and $4,655 thousand, respectively. Interest forgone on nonaccrual loans totaled approximately $153 thousand and $71 thousand for the three months ending March 31, 2001 and 2000, respectively. 10 Average deposits for the three months ended March 31, 2001 increased by $9,541 thousand, or 6.15%, 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 to make up 13% and 12% of average total deposits at March 31, 2001 and 2000, respectively. This has helped to keep down the cost of funding earning assets. Average certificates of deposit were 32% of average deposits for the three months ended March 31, 2001 and for the same period in the prior year quarter. Provision for Loan Losses The Bank provided $190 thousand to the allowance in the first quarter of 2001 which is attributable to general loss reserves that have been established in connection with loan portfolio growth combined with management's assessment of the risks associated with the current economic environment. The allowance for loan losses is discussed above under Changes in Financial Condition. Noninterest Income Noninterest income for the first quarter of 2001 increased by $291 thousand, or 44.0%, over the same period last year. Of the increase, $222 thousand is attributable to gains resulting from the sale of real estate acquired through foreclosure. Income from the sale and servicing of loans totaled $107 thousand during the first quarter of 2001, which increased by $27 thousand, or 14.2%, compared to the prior year quarter. The increased income from the sale and servicing of loans is primarily the result of increased refinancing activity of residential mortgage loans which resulted from the recent decline in mortgage rates. Noninterest Expenses Noninterest expenses increased by $326 thousand, or 13.9%, compared to the prior year quarter. Personnel expense increased $287 thousand, or 25.7%, as a result of additions to staff during the year combined with general merit increases for existing personnel. Occupancy expense increased $20 thousand or 10.0% primarily as a result of the Company's relocation of its SBA office to Folsom, California. Equipment expense increased $52 thousand, or 29.1%, as a result of depreciation of new equipment. Other noninterest expense decreased $33 thousand, or 3.9%, primarily as a result of decreases in marketing expenses. The reduction in marketing expenses is the result of one time marketing programs initiated during the first quarter of 2000. 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, 2001 are not necessarily indicative of the results which may be expected for the year ended December 31, 2001. The unaudited consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements and notes included in the 2000 Annual Report to Shareholders. 11 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, 2001, 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 10 Form of Long Term Care Agreement by and between Bank of Lodi, N.A. and certain directors and executive officers. (b) Reports on Form 8-K Form 8-K dated April 24, 2001 announcing first quarter 2001 financial results and five percent stock dividend. 12 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 11, 2001 /s/ Allen R. Christenson ------------ ------------------------ Allen R. Christenson Senior Vice President Chief Financial Officer 13 EX-10 2 p13660exhibit10.txt LONG TERM CARE BENEFIT AGREEMENT EXHIBIT 10 - LONG TERM CARE BENEFIT AGREEMENT This Long Term Care Benefit Agreement (this "Agreement") is entered into as of ___________, 2001, by and between Bank of Lodi, N.A., a national banking association (the "Company") and ______________ ("Participant"). RECITALS Participant is [an executive employee] [a director] of the Company and is a valuable member of the Company's management. The Company desires to retain Participant' services and is willing to enter into this Agreement as a means of provided additional benefits to Participant. Therefore, in consideration of the services to be performed by Participant in the future, as well as the mutual promises and covenants contained herein, the Company and Participant agree as follows: AGREEMENT 1. Long Term Care Insurance Unless and until the Company's obligation is terminated under Section 2 or Section 4 of this Agreement, the Company shall pay the premiums due under the following long term care insurance policy for the benefit of Participant (the "Policy"): Insurer: ______________________________ Policy Number: ______________________________ Participant acknowledges that he has received a copy of the Policy. 2. Termination of Company's Obligation If Participant ceases to be [an employee] [a director] of the Company for any reason other than Participant's Retirement or a Change in Control of the Company prior to the time that all premiums due under the Policy have been paid, the Company's obligation to pay the premiums due under the Policy shall immediately terminate. In the event of such termination, the Company agrees that it will reasonably cooperate with Participant to enable Participant to assume the obligation to pay the premiums and to keep the Policy in force, provided that (i) the Company shall not be obligated to incur any additional expense or liability in connection with such assumption and (ii) Participant shall reimburse the Company for any premium paid by the Company to the extent such premium is attributable to a period of time subsequent to Participant's termination. For purposes of the preceding clause (ii), premiums shall be deemed to be paid in advance and premiums shall be allocated equally to each day of the time between premium due dates. If Participant remains as [an employee] [a director] of the Company until all premiums due under the Policy have been paid, Participant's rights under the Policy shall be fully vested and nonforfeitable. For purposes of this Agreement: "Retirement" shall mean Participant's ceasing to serve as [an executive officer] [a director] of the Company on or after Participant's [62nd] [75th] birthday; and "Change in Control" shall mean the occurrence of any of the following events with respect to the Company (with the term "Company" being defined for purposes of determining whether a "Change in Control" has occurred to include its parent holding company): (i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or in response to any other form or report to the regulatory agencies or governmental authorities having jurisdiction over the Company or any stock exchange on which the Company's shares are listed which requires the reporting of a change in control; (ii) any merger, consolidation or reorganization of the Company in which the Company does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) of any assets of the Company having an aggregate fair market value of fifty percent (50%) of the total value of the assets of the 14 Company, reflected in the most recent balance sheet of the Company; (iv) a transaction whereby any "person" (as such term is used in the Exchange Act) or any individual, corporation, partnership, trust or any other entity becomes the beneficial owner, directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or (v) a situation where, in any one-year period, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of each new Director is approved by a vote of at least three-quarters (3/4) of the Directors then still in office who were Directors at the beginning of the period. Notwithstanding the foregoing or anything else contained herein to the contrary, there shall not be a "Change of Control" for the purposes of this Agreement if the event which would otherwise come within the meaning of the term "Change of Control" involves (i) a reorganization at the direction of the Company solely to form a parent bank holding company which owns one hundred percent (100%) of the Company's common stock following the reorganization, or (ii) an Employee Stock Ownership Plan sponsored by the Company or its parent holding company which is the party that acquires "control" or is the principal participant in the transaction constituting a "Change in Control," as described above. 3. Limitation of Company's Obligation The Company's obligation under this Agreement shall be limited to the payment of premiums due under the Policy, in accordance with the terms and conditions of this Agreement. The Company shall have no responsibility for payment of any benefits under the Policy. The Company makes no representations or warranties regarding any benefits to be paid under the Policy, the eligibility of Participant to receive any such benefits, or the ability of the Insurer to pay any such benefits now or in the future. 4. Income Tax Consequences The Company shall not be responsible for providing Participant with tax advice with respect to this Agreement or the transactions contemplated by this Agreement. Any tax liabilities incurred by Participant as a result of the transactions contemplated by this Agreement shall be the sole responsibility of Participant. The Company shall have the right to withhold from amounts due Participant, or to collect from Participant, any amount which the Company deems necessary to satisfy any taxes required by law to be withheld at any time by the Company, and the obligations of the Company under this Agreement shall be conditional upon payment of such taxes. 5. No Contract of Employment Although this Agreement is intended to provide Participant with an additional incentive to remain as [an employee] [a director] of the Company, this Agreement shall not be deemed to constitute a contract of employment between the Company and Participant. This Agreement shall have no impact or effect upon any separate written employment agreement which the Participant may have with the Company. 6. Section 280G Adjustment If all or any portion of the amounts payable by the Company pursuant to this Agreement, alone or together with other payments which Participant has the right to receive from the Company and/or its parent holding company, constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), that are subject to the excise tax imposed by Section 4999 of the Code (or similar tax and/or assessment), such amounts payable to Participant shall be reduced to the extent necessary, in the Company's reasonable judgment, to eliminate any excise tax pursuant to Section 4999 of the Code. 7. Status as Unsecured General Creditor Notwithstanding anything contained herein to the contrary: (i) Participant shall have no legal or equitable rights, interests or claims in or to any specific property or assets of the Company as a result of this Agreement; (ii) none of the Company's assets shall be held in or under any trust for the benefit of Participant, or held in any way as security for the fulfillment of the obligations of the Company under this Agreement; (iii) all of the Company's assets shall be and remain the general unpledged and unrestricted assets of the Company; (iv) the Company's obligation under this Agreement shall be that of an unfunded and unsecured promise by the Company to pay money in the future; and (v) Participant shall be an unsecured general creditor with respect to any benefits which may be payable under the terms of this Agreement. 15 8. Miscellaneous 8.1 Arbitration of Disputes. All claims, disputes and other matters in question arising out of or relating to this Agreement or the breach or interpretation thereof, other than those matters which are to be determined by the Company in its sole and absolute discretion, shall be resolved by binding arbitration before a representative member, selected by the mutual agreement of the parties, of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"), located in San Francisco, California. In the event JAMS is unable or unwilling to conduct the arbitration provided for under the terms of this Paragraph, or has discontinued its business, the parties agree that a representative member, selected by the mutual agreement of the parties of the American Arbitration Association ("AAA") located in San Francisco, California, shall conduct the binding arbitration referred to in this Paragraph. Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with JAMS (or AAA, if necessary). In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. The arbitration shall be subject to such rules of procedure used or established by JAMS, or if there are none, the rules of procedure used or established by AAA. Any award rendered by JAMS or AAA shall be final and binding upon the parties, and as applicable, their respective heirs, beneficiaries, legal representatives, agents, successors and assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforceable in accordance with, and shall be conducted consistently with, the provisions of Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration hereunder shall be conducted in Lodi, California, unless otherwise agreed to by the parties. 8.2 Attorneys' Fees. In the event of any arbitration or litigation concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement or the breach hereof, or the interpretation hereof, the prevailing party shall be entitled to recover from the losing party reasonable expenses, attorneys' fees and costs incurred in connection therewith or in the enforcement or collection of any judgment or award rendered therein. The "prevailing party" means the party determined by the arbitrator(s) or court, as the case may be, to have most nearly prevailed, even if such party did not prevail in all matters, not necessarily the one in whose favor a judgment is rendered. 8.3 Notice. Any notice required or permitted of either Participant or the Company under this Agreement shall be deemed to have been duly given, if by personal delivery, upon the date received by the party or its authorized representative; if by facsimile, upon transmission to a telephone number previously provided by the party to whom the facsimile is transmitted as reflected in the records of the party transmitting the facsimile and upon reasonable confirmation of such transmission; and if by mail, on the third day after mailing via U.S. first class mail, registered or certified, postage prepaid and return receipt requested, and addressed to the party at the address given below for the receipt of notices, or such changed address as may be requested in writing by a party. If to the Company: Bank of Lodi, N.A. 701 S. Ham Lane Lodi, California 95242-3537 Attn: President If to Participant: ____________________ ____________________ ____________________ 8.4 Assignment. Participant shall have no power or right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part or all of the amounts payable hereunder, nor, prior to payment in accordance with the terms of this Agreement, shall any portion of such amounts be: (i) subject to seizure by any creditor of Participant by a proceeding at law or in equity, for the payment of any debts, judgments, alimony or separate maintenance obligations which may be owed by Participant, Participant's spouse or beneficiaries; or (ii) transferable by operation of law in the event of bankruptcy, insolvency or otherwise. Any such attempted assignment or transfer shall be void. 8.5 Binding Effect/Merger or Reorganization. This Agreement shall be binding upon and inure to the benefit of Participant and the Company and, as applicable, their respective heirs, beneficiaries, legal representatives, agents, successors and assigns. Accordingly, the Company shall not merge or consolidate into or with another corporation, or reorganize or sell substantially all of its assets to another corporation, firm or person, unless and until such succeeding or 18 continuing corporation, firm or person agrees to assume and discharge the obligations of the Company under this Agreement. In the alternative, the Company's parent holding company may agree to assume and discharge the obligation of the Company under this Agreement. Upon the occurrence of such event, the term "Company" as used in this Agreement shall be deemed to refer to such surviving or successor firm, person, entity or corporation, or the parent holding company, as the case may be. 8.6 Nonwaiver. The failure of either party to enforce at any time or for any period of time any one or more of the terms or conditions of this Agreement shall not be a waiver of such term(s) or condition(s) or of that party's right thereafter to enforce each and every term and condition of this Agreement. 8.7 Partial Invalidity. If any terms, provision, covenant, or condition of this Agreement is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant or condition invalid, void or unenforceable, and the Agreement shall remain in full force and effect notwithstanding such partial invalidity. 8.8 Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to the subject matter of this Agreement and contains all of the covenants and agreements between the parties with respect thereto. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party. 8.9 Modifications. Any modification of this Agreement shall be effective only if it is in writing and signed by each party or such party's authorized representative. 8.10 Paragraph Headings. The paragraph headings used in this Agreement are included solely for the convenience of the parties and shall not affect or be used in connection with the interpretation of this Agreement. 8.11 No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any person. 8.12 Governing Law. The laws of the State of California, other than those laws denominated choice of law rules, and where applicable, the rules and regulations of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, or any other regulatory agency or governmental authority having jurisdiction over the Company or its parent holding company, shall govern the validity, interpretation, construction and effect of this Agreement. IN WITNESS WHEREOF, the Company and Participant have executed this Agreement on the date first above-written in the City of Lodi, San Joaquin County, California. COMPANY PARTICIPANT Bank of Lodi, N.A. By:________________________________ _________________________________ Leon J. Zimmerman, ____________________ President and Chief Executive Officer 19 ACKNOWLEDGEMENT OF SPOUSE I am the spouse of the Participant named in this Agreement. I understand that the Insurer named in this Agreement has offered to Participant the right to purchase long term care insurance for me, at Participant's sole cost and expense (i.e., the Company is not obligated to pay the premiums on such insurance). Participant and I have jointly made the decision to purchase, or not to purchase, the long term care insurance for me. ----------------------------- (Signature) ----------------------------- (Name--Please Print) ----------------------------- (Date) -----END PRIVACY-ENHANCED MESSAGE-----