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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 September 30, 2002
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 November 1, 2002 there were 1,614,300 shares of Common Stock, no
par value, outstanding.
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FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER AND NINE MONTH PERIOD ENDED SEPTEMBER 30, 2002
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 ................................................................ 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................ 17
PART II
Item 1. Legal Proceedings .................................................................... 17
Item 2. Changes in Securities ................................................................ 17
Item 3. Defaults Upon Senior Securities ...................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders .................................. 17
Item 5. Other Information .................................................................... 17
Item 6. Exhibits and Reports on Form 8-K ..................................................... 17
i
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(in thousands except share amounts)
September 30, December 31,
Assets 2002 2001
- ------ -------- --------
Cash and due from banks $ 14,517 $ 13,328
Federal funds sold and securities purchased under resale agreements 12,028 6,129
Investment securities available for sale, at fair value 31,043 41,015
Loans held for sale 6,188 3,876
Loans, net of deferred loan fees 157,248 138,098
Less allowance for loan losses 3,090 2,668
-------- --------
Net loans 154,158 135,430
Premises and equipment, net 6,975 7,185
Accrued interest receivable 1,086 1,265
Other assets 20,057 17,947
-------- --------
Total Assets $246,052 $226,175
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Deposits
Noninterest bearing $ 36,338 $ 29,758
Interest bearing 174,222 171,813
-------- --------
Total deposits 210,560 201,571
Accrued interest payable 147 307
Short term borrowings 8,059 4,000
Other liabilities 2,913 2,434
-------- --------
Total liabilities 221,679 208,312
Obligated mandatorily redeemable capital
securities of subsidiary trust 5,000 --
-------- --------
Stockholders' equity:
Preferred stock - no par value; authorized 1,000,000 shares, no shares
issued and outstanding
Common stock - no par value; authorized 9,000,000 shares, issued and
outstanding in 2002 and 2001, 1,640,146 and 1,622,300 respectively 10,310 10,191
Retained earnings 8,407 7,317
Accumulated other comprehensive income 656 355
-------- --------
Total stockholders' equity 19,373 17,863
-------- --------
$246,052 $226,175
======== ========
See accompanying notes.
-1-
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
2002 2001 2002 2001
------- ------- ------- -------
Interest income:
Loans, including fees $ 3,081 $ 2,892 8,862 8,222
Investment securities:
Taxable 389 549 1,177 1,397
Exempt from federal taxes 39 58 128 196
Federal funds sold 30 64 111 441
------- ------- ------- -------
Total interest income 3,539 3,563 10,278 10,256
Interest expense:
Deposit accounts 702 1,185 2,563 3,517
Other borrowings 97 1 201 5
------- ------- ------- -------
Total interest expense 799 1,186 2,764 3,522
------- ------- ------- -------
Net interest income 2,740 2,377 7,514 6,734
Provision for loan losses 162 55 538 245
------- ------- ------- -------
Net interest income after provision for
loan losses 2,578 2,322 6,976 6,489
Noninterest income:
Gain on sale of investment securities 341 267 603 267
Gain (loss) on sale of other real estate (6) -- 16 222
Gain on sale of loans 296 144 670 384
Service charges 404 346 1,181 1,052
Servicing fees from SBA and mortgage
operations 114 85 296 265
Other 269 188 792 551
------- ------- ------- -------
Total noninterest income 1,418 1,030 3,558 2,741
Noninterest expense:
Salaries and employee benefits 1,644 1,508 4,720 4,309
Occupancy 271 246 764 696
Equipment 290 240 769 721
Other 875 939 2,833 2,654
------- ------- ------- -------
Total noninterest expense 3,080 2,933 9,086 8,380
------- ------- ------- -------
Income before provision for income taxes 916 419 1,448 850
Provision for income tax expense 304 97 358 120
------- ------- ------- -------
Net income $ 612 322 1,090 730
======= ======= ======= =======
Earnings per share:
------- ------- ------- -------
Basic $ 0.37 0.20 0.66 0.45
======= ======= ======= =======
Diluted $ 0.36 0.19 0.64 0.44
======= ======= ======= =======
See accompanying notes.
-2-
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity and Comprehensive Income
(Unaudited)
(in thousands except share amounts)
Nine Months Ended September 30, 2002
Accumulated
Common Common Other
Stock Stock Comprehensive Retained Comprehensive
Description Shares Amounts Income Earnings Income Total
- ------------------------------------- ------------ ------------ --------------- ------------- ----------------- ---------------
Balance at December 31, 2001 1,622,300 $ 10,191 7,317 355 17,863
Comprehensive income:
Net income $ 1,090 1,090 1,090
---------------
Other comprehensive income:
Unrealized holding gain
arising during the current 657
period, net of tax
effect of $521
Reclassification adjustment
due to gains realized,
net of tax effect of $247 (356)
Total other comprehensive
income, net of
tax effect of $274 301 301
---------------
301
---------------
Comprehensive income $ 1,391
===============
Options exercised 31,516 281 281
Stock repurchase (13,670) (162) (162)
------------ ------------ ------------- ----------------- ---------------
Balance at September 30, 2002 1,640,146 $ 10,310 8,407 656 19,373
============ ============ ============= ================= ===============
See accompanying notes.
-3-
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended September 30,
2002 2001
--------- ---------
Cash flows from operating activities:
Net income $ 1,090 $ 730
Adjustments to reconcile net income to net cash
used in operating activities:
Loans held for sale:
Increase in loans held for sale (1,642) (2,188)
Gain on sale of loans (670) (384)
Increase in deferred loan income 67 129
Depreciation and amortization 1,313 970
Provision for loan losses 538 245
Gain on sale of securities (603) (267)
Gain on sale of other real estate owned (16) (222)
Decrease in accrued interest receivable 179 105
(Decrease) increase in accrued interest payable (160) 14
Increase in other liabilities 479 551
Increase in cash surrender value of life insurance (493) (429)
Increase in other assets (2,208) (1,227)
--------- ---------
Net cash used in operating activities (2,126) (1,973)
Cash flows from investing activities:
Investment securities available-for-sale
Purchases (25,892) (28,040)
Proceeds from prepayments 9,597 5,660
Proceeds from maturity 3,600 9,374
Proceeds from sale 23,487 3,578
Net increase in loans made to customers (47,463) (27,668)
Proceeds from sale of loans 28,040 12,786
Proceeds from sale of other real estate 296 627
Purchase of cash surrender value life insurance -- (2,000)
Purchases of bank premises and equipment (618) (851)
--------- ---------
Net cash used in investing activities (8,953) (26,534)
Cash flows from financing activities:
Net increase in deposits 8,989 28,985
Proceeds from issuance of company obligated mandatorily redeemable
securities of subsidiary trust 5,000 --
Increase (decrease) in other borrowings 4,059 (4,588)
Payment for fractional stock dividends -- (4)
Payments for repurchase of common stock (162) --
Proceeds from issuance of common stock 281 88
--------- ---------
Net cash provided by financing activities 18,167 24,481
Net increase (decrease) in cash and cash equivalents 7,088 (4,026)
Cash and cash equivalents at beginning of period 19,457 21,024
--------- ---------
Cash and cash equivalents at end of period $ 26,545 $ 16,998
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest payments $ 2,924 $ 3,508
Cash paid for taxes 707 417
Loans transferred to other real estate owned -- 90
See accompanying notes.
-4-
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
(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), Western
Auxiliary Corporation (WAC) and First Financial (CA) Statutory Trust I
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.
Certain amounts in the prior year have been reclassified to conform with the
current presentation. These reclassifications have no effect on previously
reported income.
(2) Earnings Per Share
Per share information is based on weighted average number of shares of
common stock outstanding during each three and nine month period. Basic
earnings per share (EPS) is computed by dividing net income available to
common shareholders by the weighted average common shares outstanding during
the period. Diluted earnings per share is computed by dividing net income
available to common 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 and nine month period ending September 30, 2002 and 2001:
Income Shares Per Share
Three months ended September 30, 2002 (numerator) (denominator) Amount
------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 612,000 1,642,422 $ .37
Effect of dilutive stock options - 55,626 -
--------------- ---------------
Diluted earnings per share $ 612,000 1,698,048 $ .36
=============== ===============
Income Shares Per Share
Three months ended September 30, 2001 (numerator) (denominator) Amount
------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 322,000 1,614,300 $ .20
Effect of dilutive stock options - 38,537 -
--------------- ---------------
Diluted earnings per share $ 322,000 1,652,837 $ .19
=============== ===============
Income Shares Per Share
Nine months ended September 30, 2002 (numerator) (denominator) Amount
------------------------------------------------------------------------------------------------------------
Basic earnings per share $1,090,000 1,648,865 $ .66
Effect of dilutive stock options - 56,116 -
--------------- ---------------
Diluted earnings per share $1,090,000 1,704,981 $ .64
=============== ===============
Income Shares Per Share
Nine months ended September 30, 2001 (numerator) (denominator) Amount
------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 730,000 1,607,178 $ .45
Effect of dilutive stock options - 37,562 -
--------------- ----------------
Diluted earnings per share $ 730,000 1,644,740 $ .44
=============== ================
-5-
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
(3) Allowance for Loan Losses
The following summarizes changes in the allowance for loan losses for the
nine month periods ended September 30, 2002 and 2001 and the twelve month
period ended December 31, 2001:
(in thousands) 9/30/02 9/30/01 12/31/01
-------------- ------------- --------------
Balance at beginning of period $ 2,668 2,499 2,499
Loans charged off (146) (194) (283)
Recoveries 30 22 61
Provisions charged to operations 538 245 391
-------------- ------------- --------------
Balance at end of period $ 3,090 2,572 2,668
============== ============= ==============
(4) Trust Preferred Securities
On March 26, 2002, First Financial (CA) Statutory Trust I (Trust), a
Connecticut statutory business trust and 100%-owned finance subsidiary of
First Financial Bancorp, issued $5 million in floating rate Cumulative Trust
Preferred Securities (Securities). The securities have an initial interest
rate of 5.59% and mature on March 26, 2032, but prior redemption is
permitted under certain circumstances, such as changes in tax or regulatory
capital rules. The principal asset of the Trust is a $5.2 million floating
rate subordinated debenture of the Company. The subordinated debenture bears
an initial interest rate of 5.59% and matures March 26, 2032, subject to
prior redemption under certain circumstances. First Financial Bancorp owns
all of the common securities of the Trust.
The Securities, the assets of the Trust, and the common securities issued by
the Trust are redeemable in whole or in part on or after March 26, 2007, or
at any time in whole, but not in part, from the date of issuance upon the
occurrence of certain events. The Securities are included in Tier 1 capital
for regulatory capital adequacy determination purposes, subject to certain
limitations. The obligations of the Company with respect to the issuance of
the Securities constitute a full and unconditional guarantee by the Company
of the Trust's obligation with respect to the Securities.
Subject to certain exceptions and limitations, the Company may, from time to
time, defer subordinated debenture interest payments, which would result in
a deferral of distribution payments on the related Securities and, with
certain exceptions, prevent the Company from declaring or paying cash
distributions on the Company's common stock or debt securities that rank
junior to the subordinated debenture.
(5) Basis of Presentation
First Financial Bancorp is the holding company for Bank of Lodi, N.A.,
Western Auxiliary Corporation and First Financial (CA) Statutory Trust I. 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 and nine months ended September
30, 2002 are not necessarily indicative of the results which may be expected
for the year ended December 31, 2002. The unaudited consolidated financial
statements presented herein should be read in conjunction with the
consolidated financial statements and notes included in the 2001 Annual
Report to Shareholders.
-6-
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
(6) Impact Of Recently Issued Accounting Standards
In July 2001, the FASB issued Statement No. 142, Goodwill and Other
Intangible Assets. Statement No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead
tested for impairment at least annually in accordance with the provisions of
Statement No. 142. Statement No. 142 also requires that intangible assets
with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment
in accordance with Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
The Company adopted the provisions of Statement No. 142 on January 1, 2002.
The adoption of Statement No. 142 did not have a material impact on the
financial condition or operating results of the Company. At June 30, 2002,
the Company's goodwill totaled $16 thousand, net of accumulated amortization
of $42 thousand and intangible assets (consisting of core deposit premiums)
totaled $412 thousand, net of accumulated amortization of $1,563 thousand.
Goodwill and intangible assets are amortized over 7 years.
The Financial Accounting Standards Board (FASB) issued Statement No. 143,
Accounting for Asset Retirement Obligations in August 2001. This Statement
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. As a result, FASB Statement No. 143 applies to all
entities that have legal obligations associated with the retirement of
long-lived tangible assets that result from the acquisition, construction,
development or normal use of the asset. As used in this Statement, a legal
obligation results from existing law, statute, ordinance, written or oral
contract, or by legal construction of a contract under the doctrine of
promissory estoppels. Statement No. 143 requires an enterprise to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of a
tangible long-lived asset. Since the requirement is to recognize the
obligation when incurred, approaches that have been used in the past to
accrue the asset retirement obligation over the life of the asset are no
longer acceptable. Statement No. 143 also requires the enterprise to record
the contra to the initial obligation as an increase to the carrying amount
of the related long-lived asset (i.e., the associated asset retirement
costs) and to depreciate that cost over the remaining useful life of the
asset. The liability is changed at the end of each period to reflect the
passage of time (i.e., accretion expense) and changes in the estimated
future cash flows underlying the initial fair value measurement. Enterprises
are required to adopt Statement No. 143 for fiscal years beginning after
June 15, 2002. Early adoption is encouraged. The Company does not expect
adoption of Statement No. 143 to have a material impact on the financial
condition or operating results of the Company.
-7-
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
On October 3, 2001, the Financial Accounting Standards Board issued FASB
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. While Statement No. 144
supersedes FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it retains
many of the fundamental provisions of that Statement. Statement No. 144 also
supersedes the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business.
However, it retains the requirement in Opinion 30 to report separately
discontinued operations and extends that reporting to a component of an
entity that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale. By broadening the
presentation of discontinued operations to include more disposal
transactions, the FASB has enhanced management's ability to provide
information that helps financial statement users to assess the effects of a
disposal transaction on the ongoing operations of an entity. The Company
adopted the provisions of Statement 144 on January 1, 2002. The adoption of
Statement No. 144 did not have a material impact on the financial condition
or operating results of the Company.
Statement Financial Accounting Standards No. 145 rescinds SFAS No. 4, which
requires all gains and losses from extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of related income
tax effect. As a result, the criteria in Opinion No. 30 will now be used to
classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no
longer necessary because SFAS No. 4 has been rescinded. The accounting,
disclosure and financial statements provision of SFAS No. 145 are effective
for financial statements in fiscal years beginning after May 15, 2002. Any
gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented that does not meet the
criteria in Opinion No. 30 for classification as an extraordinary item shall
be reclassified. The implementation of Statement No. 145 is not expected to
have a material impact on the financial condition or operating results of
the Company.
The Financial Accounting Standards Board issued FASB Statement No. 146,
Accounting for Costs Associated with Exit or Disposal Activities which
requires the Company to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to
an exit or disposal plan. SFAS 146 replaces Emerging Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The provisions of SFAS 146 are to be
applied prospectively to exit or disposal activities initiated after
December 31, 2002.
-8-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 8, as well as other information presented throughout
this report.
Critical Accounting Policies and Estimates
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, income and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to the allowance for loan losses, other real
estate owned, investments and income taxes. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements. The Company maintains an allowance for loan losses
resulting from the inability to make required loan payments. If the financial
conditions of the Company's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. The Company invests in debt and equity securities. If the Company
believes these securities have experienced a decline in value that is other than
temporary, an investment impairment charge is recorded. Future adverse changes
in market conditions or poor operating results of underlying investments could
result in losses or an inability to recover the carrying value of the
investments that may not be reflected in an investment's carrying value, thereby
requiring an impairment charge in the future.
-9-
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 8, as well as other information presented throughout
this report.
Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon the evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
Changes in Financial Condition
Consolidated total assets at September 30, 2002 were approximately $246 million,
which represents an increase of $19,877 thousand, or 8.8%, above the figure
reported at December 31, 2001. The increase in total assets was attributable to
an $8,989 thousand, or 4.5% increase in deposits, and a $4,059 thousand, or
101.5% increase in short term borrowings as compared to December 31, 2001. The
increase is also attributable to the $5,000 thousand proceeds from issuance of
company obligated mandatorily redeemable securities of a subsidiary trust
(preferred trust). The growth in deposits is the result of a $6,580 thousand, or
22.1%, increase in demand deposit accounts, $11,120 thousand, or 52.4% increase
in money market accounts, $5,578 thousand, or 17.5% increase in savings accounts
and a $14,740 thousand, or 21.1% decrease in Certificates of Deposit from
December 31, 2001 to September 30, 2002. The decrease in certificates of deposit
resulted from management's continued decision to focus on increasing core
deposits rather than pay higher interest rates for certificates of deposit. In
order to maintain a desired level of liquidity, the company obtained short-term
borrowings and sold securities under agreements to repurchase (reverse repo).
Total gross loans, which include loans held for sale, increased $21,462
thousand, or 15.1%, from December 31, 2001 to September 30, 2002. The net
increase in gross loans is the result of a $8,608 thousand, or 16.3% increase in
real estate loans, $4,035 thousand, or 29.4% increase in construction loans,
$3,637 thousand, or 12.2% increase in SBA loans, $2,312 thousand, or 59.6%
increase in loans held for sale, $2,060 thousand, or 9.2% increase in commercial
loans, $1,455 thousand, or 9.0% increase in agricultural loans and a $561
thousand, or 15.3% decrease in consumer loans.
Allowance for Loan Losses
The allowance for loan losses (the "allowance") is established through a
provision for loan losses charged to expense. The allowance at September 30,
2002 increased $422 thousand, or 15.8%, when compared to December 31, 2001, as a
result of a provision for $538 thousand and net charge offs totaling $115
thousand. This compares to a provision of $245 thousand for the first nine
months of 2001. The increased provision is a result of the general growth of the
loan portfolio during the first nine months of 2002 ($21.5 million, or 15.1%)
exceeding the rate that occurred during the first nine months of 2001 ($17,063
thousand, or 14.9%).
At September 30, 2002, nonperforming loans were $2,946 thousand, or 1.8% of
gross loans outstanding. This compares to $3,246 thousand or 2.3% of gross loans
outstanding at December 31, 2001. The allowance to nonperforming loan coverage
ratio increased to 1.05 times at September 30, 2002 from 0.82 times at December
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 the allowance for loan
losses at September 30, 2002 is adequate to absorb known and reasonably
estimable 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.
-10-
The following tables depict activity in the allowance for loan losses and
allocation of reserves as of and for the nine months and year ended September
30, 2002 and December 31, 2001, respectively:
Analysis of the Allowance for Loan Losses
September 30, December 31,
(in thousands) 2002 2001
----------- -----------
Balance at beginning of period $ 2,668 $ 2,499
Charge-offs:
Commercial (59) (226)
Real estate (62) --
Consumer (25) (57)
----------- -----------
Total charge-offs (146) (283)
Recoveries:
Commercial 24 21
Real estate -- --
Consumer 6 40
----------- -----------
Total recoveries 30 61
----------- -----------
Net charge-offs (116) (222)
Provision charged to operations 538 391
----------- -----------
Balance at end of period $ 3,090 $ 2,668
=========== ===========
Allocation of the Allowance for Loan Losses
------------------------------ -----------------------------
September 30, 2002 December 31, 2001
------------------------------ -----------------------------
Amount Percent Amount Percent
Loan Category (000's) of Loans (000's) of Loans
- ---------------------------------------- ------------- ------------- ------------- -------------
Commercial and other real estate $ 2,229 86.80% $ 2,122 87.82%
Real estate construction 790 11.23% 466 9.61%
Installment and other 71 .97% 80 2.57%
$ 3,090 100.00% $ 2,668 100.00%
Investments
Investments consist of federal funds sold and investment securities. Investment
securities decreased $9,972 thousand, or 24.3%, from December 31, 2001 to
September 30, 2002. Federal funds sold increased $5,899 thousand, or 96.2% from
December 31, 2001 to September 30, 2002. The decrease in investment securities
and the corresponding increase in federal funds sold are due to prepayments and
maturities of mortgage-backed securities. The funds provide cash flow for
funding new loan growth.
Equity
Consolidated equity increased $1,510 thousand from December 31, 2001 to
September 30, 2002. Consolidated equity represented 7.87% and 7.90% of
consolidated assets at September 30, 2002 and December 31, 2001, respectively.
In addition to the earnings of $1,090 thousand, equity capital increased by $281
thousand from the exercise of stock options over the nine months ended September
30, 2002 and $301 thousand to reflect the increase in the after-tax market value
of the available-for-sale investment securities portfolio. The increase in the
investment security portfolio's market value reflects the decrease in the level
of market interest rates at September 30, 2002 compared to December 31, 2001.
Year-to-date capital reductions totaled $162 thousand resulting from the
repurchase of shares of the Company's common stock. The total risk-based capital
ratio for the Company's wholly owned subsidiary, Bank of Lodi was 10.99% at
September 30, 2002 compared to 10.24% at December 31, 2001. The Bank's leverage
capital ratio was 8.16% at September 30, 2002 versus 7.45% at December 31, 2001.
The capital ratios are in excess of the regulatory minimums for a
well-capitalized bank.
The funds for the capital contribution by the holding company were provided as a
result of a $5 million floating rate pooled trust preferred securities offering
which closed March 26, 2002. Subsequent to the issuance of the trust preferred
securities the Company announced a stock repurchase program effective through
December 31, 2002 whereby the Company, as authorized by the Board of Directors,
intends to purchase up to $2 million of the Company's common stock in privately
negotiated transactions or on the open market. The Board allocated $2 million of
the proceeds from the trust preferred securities offering to be used to fund the
stock repurchase program.
-11-
Changes in Results of Operations - Three and Nine Months ended September 30,
2002
Summary of Earnings Performance
------------------------ ------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Earnings (in thousands) $ 612 $ 322 $ 1,090 $ 730
Basic earnings per share $ 0.37 $ 0.20 $ 0.66 $ 0.45
Diluted earnings per share $ 0.36 $ 0.19 $ 0.64 $ 0.44
Return on average assets 1.01% 0.62% 0.62% 0.49%
Return on average equity 12.97% 7.70% 7.90% 5.78%
Average equity to average assets 7.75% 8.07% 7.79% 8.54%
The Company reported net income of $612 thousand ($.36 per share, diluted) for
the three months ended September 30, 2002, compared to $322 thousand ($.19 per
share, diluted) for the same period in 2001. Net income for the nine months
ended September 30, 2002 was $1,090 thousand ($.64 per share, diluted) compared
to $730 thousand ($.44 per share, diluted). The increase in net income for the
third quarter in 2002 when compared to the same period one year ago is due to an
increase of $363 thousand in net interest income, an increase of $107 thousand
in the provision for loan losses, an increase of $388 thousand in noninterest
income, an increase of $147 thousand in noninterest expense and an increase of
$207 thousand in the provision for income taxes. The increase in net income
during the first nine months of 2002 when compared to the same period in 2001 is
due to an increase of $780 thousand in net interest income, an increase of $293
thousand in the provision for loan losses, an increase of $817 thousand in
noninterest income, an increase of $706 thousand in noninterest expense and an
increase of $238 thousand in the provision for income taxes.
-12-
Net Interest Income
The following tables provide a detailed analysis of the net interest spread and
net interest margin for the periods indicated:
------------------------------------------------------------------------------------------
For the Three Months Ended September 30,
------------------------------------------------------------------------------------------
2002 2001
------------------------------------------- -------------------------------------------
Average Income/ Yield Average Income/ Yield
(dollars in thousands) Balance Expense (1) Balance Expense (1)
----------- ------------- ---------- ----------- ------------ -----------
Earning Assets (1):
Investment securities (2) $ 36,766 $ 428 4.67% $ 43,536 $ 607 5.59%
Federal funds sold 7,020 30 1.71% 7,178 64 3.58%
Loans (2) (3) 160,315 3,081 7.71% 123,737 2,892 9.37%
----------- ------------- ---------- ----------- ------------ -----------
$ 204,101 $ 3,539 6.95% $ 451 $ 3,563 8.19%
=========== ============= ========== =========== ============ ===========
Liabilities (1):
Non-interest bearing
deposits $ 37,053 $ -- -- $ 26,362 $ -- --
Savings, money market, &
NOW deposits 118,508 332 1.12% 90,853 300 1.32%
Time deposits 56,347 370 2.63% 71,069 885 4.99%
Other borrowings 10,724 97 3.63% 96 1 4.18%
----------- ------------- ---------- ----------- ------------ -----------
Total Liabilities $ 222,632 $ 799 1.44% $ 380 $ 1,186 2.53%
=========== ============= ========== =========== ============ ===========
Net Interest Spread 5.51% 5.66%
========== ===========
------------------------------------------------------------------------------------------
Earning Income Earning Income
Assets (Expense) Yield Assets (Expense) Yield
----------- ------------- ---------- ----------- ------------ -----------
Yield on average earning $ 204,101 $ 3,539 6.95% $ 174,451 $ 3,563 8.19%
assets
Cost of funding average
earning assets $ 204,101 (799) (1.57)% $ 174,451 (1,186) (2.73)%
------------- ---------- ------------ -----------
Net Interest Margin $ 204,101 $ 740 5.38% $ 174,451 $ 377 5.46%
============= ========== ============ ===========
(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.
-13-
------------------------------------------------------------------------------------------
For the Nine Months Ended September 30,
------------------------------------------------------------------------------------------
2002 2001
------------------------------------------- -------------------------------------------
Average Income/ Yield Average Income/ Yield
(dollars in thousands) Balance Expense (1) Balance Expense (1)
----------- ------------- ---------- ----------- ------------ -----------
Earning Assets (1):
Investment securities (2) $ 35,690 $ 1,305 4.89% $ 34,143 $ 1,593 6.24%
Federal funds sold 8,428 111 1.76% 12,734 441 4.63%
Loans (2) (3) 152,858 8,862 7.75% 118,841 8,222 9.25%
----------- ------------- ---------- ----------- ------------ -----------
$ 196,976 $ 10,278 6.98% $ 718 $ 10,256 8.27%
=========== ============= ========== =========== ============ ===========
Liabilities (1):
Non-interest bearing
deposits $ 33,954 $ -- -- $ 24,439 $ -- --
Savings, money market, &
NOW deposits 109,919 1,015 1.23% 89,320 967 1.45%
Time deposits 64,105 1,549 3.23% 64,800 2,550 5.26%
Other borrowings 9,012 200 2.97% 126 5 5.31%
----------- ------------- ---------- ----------- ------------ -----------
Total Liabilities $ 216,990 $ 2,764 1.70% $ 685 $ 3,522 2.64%
=========== ============= ========== =========== ============ ===========
Net Interest Spread 5.28% 5.63%
========== ===========
------------------------------------------------------------------------------------------
Earning Income Earning Income
Assets (Expense) Yield Assets (Expense) Yield
----------- ------------- ---------- ----------- ------------ -----------
Yield on average earning $ 196,976 $ 10,278 6.98% $ 165,718 $ 10,256 8.27%
assets
Cost of funding average
earning assets $ 196,976 (2,764) (1.88)% $ 165,718 (3,522) (2.84)%
------------- ---------- ------------ -----------
Net Interest Margin $ 196,976 $ 7,514 5.10% $ 165,718 $ 6,734 5.43%
============= ========== ============ ===========
(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.
Interest income for the third quarter of 2002 decreased by $24 thousand, or
0.7%, over the same quarter of 2001. The net interest margin of 5.38% for the
third quarter of 2002 decreased from 5.46% for the third quarter of 2001. While
the average earning assets increased for the third quarter 2002 over the same
period of 2001, interest rates decreased significantly resulting in decreased
interest income. For the first nine months of 2002, interest income increased by
$22 thousand, or 0.2%, over the same period one year ago. The net interest
margin of 5.10% for the first nine months of 2002 decreased from 5.43% over the
same period one year ago. Comparing the first nine months of 2002 to the same
period of 2001, interest income increased as a result of the increases in
average loans and earning assets combined with the recovery of interest income
from nonperforming loans.
-14-
Average gross loans for the three months ended September 30, 2002 increased by
$36,578 thousand, or 29.6% compared to the prior year quarter. For the first
nine months of 2002, average gross loans increased $34,017 thousand, or 28.6%,
compared to the first nine months of 2002. Average liabilities for the three
months ended September 30, 2002 increased by $34,252 thousand, or 18.2%,
compared to the prior year quarter. The average rate paid on savings, money
market and NOW accounts decreased from 1.32% in the third quarter of 2001 to
1.12% for the third quarter of 2002. The average rate paid on certificates of
deposits decreased, from 4.99% for the third quarter of 2001 to 2.63% for the
same quarter of 2002. For the first nine months of 2002, average liabilities
increased $38,305 thousand, or 21.4%, compared to the first nine months of 2001.
Interest income is also affected by nonaccrual loan activity. Interest forgone
or reversed on nonaccrual loans during the third quarter of 2002 totaled $67
thousand and during the first nine months of 2002 totaled $237 thousand. When
combined with the collection of interest on nonaccrual loans of $72 thousand for
the third quarter and $252 thousand year-to-date, there is a net recovery of $5
thousand for the third quarter of 2002 or $15 thousand for the first nine months
of 2002.
Average non-interest bearing deposits have increased as a percent of total
demand deposits from a year ago and make up 17% and 16% of average total
deposits for the third quarter and first nine months of 2002, respectively, as
compared to 14% for both the third quarter and first nine months of 2002. This
has helped to keep down the cost of funding earning assets. Average certificates
of deposit for the third quarter and the first nine months of 2002 were 27% and
31% of average deposits, respectively, compared to 38% and 36% for the same
periods of 2001.
Provision for Loan Losses
The provision for loan losses for the three and nine month periods ended
September 30, 2002 was $162 and $538 thousand compared with $55 thousand and
$245 thousand for the three and nine months periods ended September 30, 2001.
Also see "Allowance for Loan Losses" contained herein.
Noninterest Income
Noninterest income for the third quarter of 2002 increased $388 thousand, or
37.7%, over the same period last year. For the first nine months of 2002,
non-interest income increased $817 thousand, or 29.8% compared to the first nine
months of 2001.
Gains on the sale of investment securities totaling $341 thousand and $603
thousand were realized during the three and nine month periods ending September
30, 2002, respectively. Gains on the sale of investment securities of $267
thousand were realized for both the three and nine month periods ending
September 30, 2001.
Service charge income for the third quarter increased $58 thousand, or 16.8%,
compared to the same quarter of 2001. For the first nine months of 2002, service
charge income increased $129 thousand, or 12.3%, compared to the first nine
months of 2001. The increases are consistent with the growth in average interest
bearing demand deposits and savings accounts in 2002 as compared to 2001.
Income from the premiums and fees from SBA and mortgage operations increased
$181 thousand, or 79.0%, compared to the prior year third quarter. For the first
nine months of 2002, premiums and fees from SBA and mortgage operations
increased $317 thousand, or 48.8%, compared to the first nine months of 2001.
The increase in income is a result of increases in total volumes of loans
generated and sold, particularly in the area of mortgage loans. The increase in
mortgage loan activity is attributable to the decline in mortgage lending
interest rates that has resulted in an increase in the origination of new loans
in addition to increased refinancing activity of existing loans.
The Company purchased single-premium life insurance policies written on the
lives of certain officers and directors of the Company and the Bank. The
increase in the cash surrender value of these policies is included in other
noninterest income. For the three and nine months ended September 30, 2002 the
cash surrender value of life insurance increased $156 thousand and $493
thousand, respectively. For the same periods of 2001, the cash surrender value
increased $144 thousand and $429 thousand.
The Bank introduced a new debit card product during the fourth quarter of 2001.
Income generated from the debit card is included in other noninterest income.
For the third quarter of 2002, debit card income totaled $27 thousand and year
to date income totaled $78 thousand. Other noninterest income also includes fees
charged to non-bank customers for use of the Bank's automated teller machines.
For the three and nine month periods, income from noncustomers ATM fees
increased $30 thousand and $68 thousand, respectively compared to 2001.
-15-
Noninterest Expenses
Noninterest expenses increased by $147 thousand, or 5.0%, compared to the prior
year quarter. For the first nine months of 2002, non-interest expense increased
$706 thousand, or 8.4%, compared to the first nine months of 2001. The increase
in non-interest expense results primarily from increases in salary and benefits
and occupancy expenses combined with decreases in third party data processing,
consulting, and problem loan resolution expenses.
For the third quarter, salary and employee benefits expense increased $136
thousand, or 9.0%, occupancy expense increased $25 thousand, or 10.2%, equipment
expense increased $50 thousand, or 20.8%, while problem loan resolution expenses
decreased $30 thousand, or 111.1%, compared to the prior year.
Year to date, salary and employee benefits expense increased $411 thousand, or
9.5%, occupancy expense increased $68 thousand, or 9.8%, equipment expense
increased $48 thousand, or 6.7%, and accounting fees increased $60 thousand, or
72.3%, while consulting expenses decreased $45 thousand, or 46.4%, legal
expenses decreased $33 thousand, or 22.9%, and problem loan resolution expenses
decreased $28 thousand, or 48.3%, compared to the prior year.
Salary and employee benefits expense increased as a result of the addition of
certain staffing positions combined with general merit increases in salaries and
increased employee benefit costs. The increase in equipment expenses occurred
primarily as a result of the increase in depreciation expense for the new
equipment combined with other general upgrades in equipment and technology. The
increase in the accounting expenses relates primarily to the Company's expansion
of its internal audit function.
Income Taxes
The Company recorded a tax provision of $304 thousand and $97 thousand during
the third quarter of 2002 and 2001, respectively. For the first nine months of
2002, the provision for income taxes totaled $358 thousand compared to $120
thousand for the first nine months of 2001. The increase in income taxes during
the three month and nine month periods ending June 30, 2002 as compared to the
same periods in 2001 is primarily related to an overall increase in pretax
earnings.
Liquidity
The Company's primary source of liquidity is dividends from the Bank, which are
subject to regulatory limitations. The Company's primary uses of liquidity are
associated with dividend payments made to the shareholders, and operating
expenses.
The Bank's liquidity is managed on a daily basis by maintaining cash, federal
funds sold, and short-term investments at levels commensurate with the estimated
requirements for loan demand and fluctuations in deposits. Loan demand and
deposit fluctuations are affected by a number of factors, including economic
conditions, seasonality of the borrowing and deposit bases, and the general
level of interest rates. The Bank maintains three lines of credit with
correspondent banks as a supplemental source of short-term liquidity in the
event that saleable investment securities and loans or available new deposits
are not adequate to meet liquidity needs. The Bank has also established reverse
repurchase agreements with two brokerage firms which allow for short term
borrowings that are secured by the Bank's investment securities. Furthermore,
the Bank may also borrow on a short-term basis from the Federal Reserve in the
event that other liquidity sources are not adequate.
At September 30, 2002 liquidity was considered adequate, and funds available in
the local deposit market and scheduled maturities of investments are considered
sufficient to meet long-term liquidity needs. Compared to 2001 liquidity
increased in 2002 as a result of the growth in deposit portfolio combined with
the sales and maturities of available-for-sale investment securities.
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 and nine months
ended September 30, 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 2001 Annual Report
to Shareholders.
-16-
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 nine months ended
September 30, 2002, there were no material changes in the market risk profile of
the Company or the Bank as described in the Company's 2001 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
99.1 Certification of Registrant's Chief Executive Officer
Pursuant To 18 U.S.C. Section 1350
99.2 Certification of Registrant's Chief Financial Officer
Pursuant To 18 U.S.C. Section 1350
(b) Reports on Form 8-K
Not Applicable
-17-
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: November 13, 2002 /s/ Allen R. Christenson
------------------------
Allen R. Christenson
Senior Vice President
Chief Financial Officer
-18-
I, Leon Zimmerman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Financial
Bancorp;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Leon Zimmerman
-----------------------
Chief Executive Officer
-19-
I, Allen R. Christenson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Financial
Bancorp;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 13, 2002
/s/Allen R. Christenson
-----------------------
Chief Financial Officer
-20-