U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________ TO __________
Commission file number - 33-53596
FC BANC CORP.
_______________________________________________________________
(Exact name of small business issuer as specified in its charter)
OHIO 34-1718070
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Farmers Citizens Bank Building,
105 Washington Square
Box 567, Bucyrus, Ohio 44820-0567
- ------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(419) 562-7040
-------------------------
(Issuer's telephone number)
N/A
-------
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No . . .
---
As of July 30, 1998, 321,038 shares of Common Stock of the Registrant were
outstanding. There were no preferred shares outstanding.
<PAGE>
FC BANC CORP.
BUCYRUS, OHIO
FORM 10-QSB
INDEX
================================================================================
Page Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- 3
June 30, 1998 and December 31, 1997
Condensed consolidated statements of income and 4
comprehensive income -- Three and six months ended
June 30, 1998 and 1997
Condensed consolidated statement of cash flows -- 5
Six months ended June 30, 1998 and 1997
Notes to condensed consolidated financial 6
statements -- June 30, 1998, 1997 and December 31, 1997
Item 2. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
PART II OTHER INFORMATION
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
Signatures 18
<PAGE>
<TABLE>
<CAPTION>
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED BALANCE SHEETS
==========================================================================================
(Dollars in thousands)
(Unaudited) (Unaudited)
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents
Cash and due from banks $ 3,899 $ 3,566
Interest-bearing demand deposits 1 1
Federal funds sold 0 0
------- -------
Total cash and cash equivalents 3,900 3,567
Investment securities, available-for-sale 39,285 32,460
Loans (net of unearned interest) 44,442 40,029
Less: allowance for loan losses (1,561) (1,480)
------- -------
Net loans 42,881 38,549
Premises and equipment 1,416 1,416
Accrued income receivable 791 733
Cash surrender value of life insurance 1,504 1,470
Deferred income taxes 464 285
Other assets 403 148
------- -------
TOTAL ASSETS $90,644 $78,628
======= =======
LIABILITIES
Deposits
Demand deposits $11,330 $ 9,708
Now accounts 13,464 9,509
Savings accounts 21,983 19,583
Time deposits of $100,000 or more 954 1,135
Other time deposits 29,106 26,157
------- -------
Total deposits 76,837 66,092
Federal funds purchased and securities sold
under agreement to repurchase 1,200 600
Other borrowed funds 0 41
Accrued interest payable 181 181
Accrued federal income taxes 406 59
Other liabilities 606 460
------- -------
TOTAL LIABILITIES 79,230 67,433
------- -------
SHAREHOLDERS' EQUITY
Preferred stock ( $25.00 par value) 750 shares authorized,
no shares issued 0 0
Common stock (no par value) 1,000,000 shares authorized;
332,816 shares issued 832 832
Additional paid-in capital 1,370 1,377
Retained earnings 9,752 9,461
Treasury stock, at cost: 11,778 and 11,628 shares (491) (491)
Accumulated other comprehensive income (49) 16
------- -------
TOTAL SHAREHOLDERS' EQUITY 11,414 11,195
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $90,644 $78,628
======= =======
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
================================================================================================================
(Dollars in thousands, except per share)
(Unaudited) (Unaudited)
3 Months Ended 6 Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $1,010 $ 910 $1,992 $1,806
Interest on investment securities:
Taxable 470 369 874 739
Exempt from federal income tax 90 73 169 148
Dividends 4 0 4 0
Interest on federal funds sold 9 6 38 16
------ ------ ------ ------
TOTAL INTEREST INCOME 1,583 1,358 3,077 2,709
------ ------ ------ ------
INTEREST EXPENSE
Interest on interest-bearing demand accounts 75 68 141 142
Interest on savings accounts 155 137 310 269
Interest on certificates of deposit 416 322 799 636
Interest on federal funds purchased and securities sold
under agreement to repurchase 5 4 5 6
------ ------ ------ ------
TOTAL INTEREST EXPENSE 651 531 1,255 1,053
------ ------ ------ ------
NET INTEREST INCOME 932 827 1,822 1,656
Provision for loan losses (25) 7 (25) 27
------ ------ ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS 957 820 1,847 1,629
NON-INTEREST INCOME
Service charges on deposit accounts 106 83 199 164
Other service charges 7 0 15 0
Life insurance 17 17 34 34
Safe/night deposit 3 0 9 0
Investment security gains 3 0 8 0
Other income 31 31 33 53
------ ------ ------ ------
TOTAL NON-INTEREST INCOME 167 131 298 251
------ ------ ------ ------
NON-INTEREST EXPENSE
Salaries and benefits 353 303 683 597
Net occupancy and equipment expense 165 122 303 253
FDIC deposit insurance expense 2 7 4 14
State and other taxes 40 40 79 82
Other expense 212 195 435 414
------ ------ ------ ------
TOTAL NON-INTEREST EXPENSE 772 667 1,504 1,360
------ ------ ------ ------
NET INCOME BEFORE FEDERAL INCOME
TAX EXPENSE 353 284 641 520
Federal income tax expense 89 70 157 122
------ ------ ------ ------
NET INCOME 264 214 484 398
Other comprehensive income (67) 140 (65) 60
------ ------ ------ ------
TOTAL COMPREHENSIVE INCOME $ 197 $ 354 $ 419 $ 458
====== ====== ====== ======
PER SHARE DATA:
Basic net income $ 0.82 $ 0.66 $ 1.51 $ 1.23
Diluted net income 0.78 0.66 1.44 1.23
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================================
(Dollars in thousands)
(Unaudited) (Unaudited)
6 Months Ended 6 Months Ended
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 484 $ 398
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 164 132
Provision for loan losses 0 27
Provision for deferred taxes (50) 0
Gain (loss) on sale of investments (8) 0
Income accrued on life insurance contracts (34) 0
Amortization/Accretion - net 34 30
Changes in operating assets and liabilities:
Increase in other assets (74) (77)
Increase in taxes payable 167 61
Increase (decrease) in accrued income receivable (58) 110
Decrease in accrued interest payable (94) (18)
Increase in other liabilities 144 97
------- -------
Total adjustments 283 362
------- -------
Net cash provided by operating activities 767 760
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available-for-sale securities 4,342 3,679
Purchase of available-for-sale securities (13,380) (1,290)
Net change in loans (4,431) 1,074
Proceeds from sale of available-for-sale securities 2,095 1,001
Purchase of premises and equipment (164) (37)
------- -------
Net cash used in investing activities (11,538) 4,427
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand and savings deposits 7,977 (6,795)
Net increase in certificates of deposit 2,767 0
Net decrease in short-term borrowings 600 700
Proceeds from long-term debt (41) 0
Purchase of treasury stock (7) (168)
Dividends paid (193) 0
------- -------
Net cash provided by financing activities 11,103 (6,263)
------- -------
Net increase(decrease) in cash and cash equivalents 332 (1,076)
Cash and cash equivalents at beginning of period 3,567 5,057
------- -------
Cash and cash equivalents at end of period $ 3,899 $ 3,981
======= =======
SUPPLEMENTAL INFORMATION:
Cash paid for:
Interest $ 1,255 $ 1,071
Net income taxes 40 61
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
FC BANC CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998, 1997 and December 31,1997
(Unaudited)
================================================================================
NOTE 1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair presentation
of FC Banc Corp.'s ("Company" or "Bancorp") financial condition as of June 30,
1998, and December 31, 1997, and the results of operations for the three and
six months ended June 30, 1998 and 1997, and the cash flows for the six months
ended June 30, 1998 and 1997. Certain information and note disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB. The results of operations for the
three and six months ended June 30, 1998, are not necessarily indicative of
the results which may be expected for the entire fiscal year.
NOTE 2. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
(Dollars in thousands)
Six months ended Year ended
June 30, December 31,
1998 1997
---- ----
Balance, beginning of period $1,480 $1,263
Provision for loan losses (25) 27
Charge-offs (39) (418)
Recoveries 145 608
------ ------
Balance, end of period $1,561 $1,480
====== ======
6
<PAGE>
NOTE 3. REGULATORY CAPITAL
The following table illustrates the compliance by the Bank with currently
applicable regulatory capital requirements at June 30, 1998.
<TABLE>
<CAPTION>
(Dollars in thousands)
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Risk-Based Capital $11,984 23.59% $ 4,064 8.0% $ 5,080 10.0%
(To Risk-Weighted Assets)
Tier I Capital 11,338 22.32% 2,032 4.0% 3,048 6.0%
(To Risk-Weighted Assets)
Tier I Capital 11,338 12.71% 3,624 4.0% 4,530 5.0%
(To Total Assets)
Tangible Capital 11,338 12.71% 3,624 4.0% N/A N/A
(To Total Assets)
</TABLE>
NOTE 4. EARNINGS PER SHARE
Earnings per share ("EPS") is computed in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
was adopted by the Company as of December 31, 1997. Common stock equivalents
include shares granted under the Stock Option Plan ("SOP"). Following is a
reconciliation of the numerators and denominators of the basic and diluted EPS
calculations.
For the Three Months Ended June 30, 1998
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to
common shareholders $264,317 321,108 $0.82
=====
Effect of dilutive securities:
None 0 18,710
-------- -------
Diluted EPS
Income available to
common shareholders +
assumed conversions $264,317 339,818 $0.78
======== ======= =====
7
<PAGE>
For the Three Months Ended June 30, 1997
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to
common shareholders $213,850 322,359 $0.66
=====
Effect of dilutive securities:
None 0 0
-------- -------
Diluted EPS
Income available to
common shareholders +
assumed conversions $213,850 322,359 $0.66
======== ======= =====
For the Six Months Ended June 30, 1998
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to
common shareholders $483,925 321,145 $1.51
=====
Effect of dilutive securities:
None 0 15,195
-------- -------
Diluted EPS
Income available to
common shareholders +
assumed conversions $483,925 336,340 $1.44
======== ======= =====
For the Six Months Ended June 30, 1997
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to
common shareholders $398,374 323,374 $1.23
=====
Effect of dilutive securities:
None 0 0
-------- -------
Diluted EPS
Income available to
common shareholders +
assumed conversions $398,374 323,374 $1.23
======== ======= =====
8
<PAGE>
NOTE 5. COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, "Reporting Comprehensive Income", effective
January 1, 1998, which establishes standards for reporting comprehensive
income and its components (revenues, expenses, gains and losses). Components
of comprehensive income are net income and all other non-owner changes in
equity. SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement
of financial position. Reclassification of financial statements for earlier
periods provided for comparative purposes is required.
The Company has chosen to disclose comprehensive income. Components of
comprehensive income are displayed net of income taxes. The following table
sets forth the related tax effects allocated to each element of comprehensive
income for the three and six months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three months ended June 30, 1998
----------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period $ (97) $ 32 $ (65)
Less: reclassification adjustment
for (gains) losses realized in
net income (3) 1 (2)
------- ------- -------
Net unrealized gains (losses) (100) 33 (67)
------- ------- -------
Other comprehensive income $ (100) $ 33 $ (67)
======= ======= =======
<CAPTION>
(Dollars in thousands)
Three months ended June 30, 1997
----------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period $ 210 $ (70) $ 140
Less: reclassification adjustment
for (gains) losses realized in
net income 0 0 0
------- ------- -------
Net unrealized gains (losses) 210 (70) 140
------- ------- -------
Other comprehensive income $ 210 $ (70) $ 140
======= ======= =======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands)
Six months ended June 30, 1998
------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period $ (90) $ 31 $ (59)
Less: reclassification adjustment
for (gains) losses realized in
net income (8) 2 (6)
------ ------ ------
Net unrealized gains (losses) (98) 33 (65)
------ ------ ------
Other comprehensive income $ (98) $ 33 $ (65)
====== ====== ======
<CAPTION>
(Dollars in thousands)
Six months ended June 30, 1997
-----------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period $ 90 $ (30) $ 60
Less: reclassification adjustment
for (gains) losses realized in
net income 0 0 0
------ ------ ------
Net unrealized gains (losses) 90 (30) 60
------ ------ ------
Other comprehensive income $ 90 $ (30) $ 60
====== ====== ======
</TABLE>
The following table sets forth the components of accumulated other
comprehensive income for the three and six months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three months ended Six months ended
June 30, June 30,
-------- ________
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $ 18 $ (244) $ 16 $ (164)
Unrealized gains (losses) on securities, net (67) 140 (65) 60
------- ------- ------- -------
Ending balance $ (49) $ (104) $ (49) $ (104)
======= ======= ======= =======
</TABLE>
10
<PAGE>
NOTE 6. RECLASSIFICATIONS
Certain amounts in the prior period's financial statements have been
reclassified to be consistent with the current period's presentation. The
reclassifications have no effect on net income.
11
<PAGE>
FC BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
================================================================================
Safe Harbor Clause
This report contains certain "forward-looking statements." The Company
desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and is including this statement for
the express purpose of availing itself of the protection of such safe harbor
with respect to all such forward-looking statements. These forward-looking
statements, which are included in Management's Discussion and Analysis,
describe future plans or strategies and include the Company's expectations of
future financial results. The words "believe," "expect," "anticipate,"
"estimate," "project," and similar expressions identify forward-looking
statements. The Company's ability to predict results or the effect of future
plans or strategies is inherently uncertain. Factors which could affect
actual results include interest rate trends, the general economic climate in
the Company's market area and the country as a whole, loan delinquency rates,
and changes in federal and state regulations. These factors should be
considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements.
General
The Company is a bank holding company whose activities are primarily
limited to holding the stock of The Farmers Citizens Bank, Bucyrus, Ohio,
("Bank"). The Bank conducts a general banking business in northwest Ohio
which consists of attracting deposits from the general public and applying
those funds to the origination of loans for residential, consumer and
non-residential purposes. The Bank's profitability is significantly dependent
on net interest income which is the difference between interest income
generated from interest-earning assets (i.e., loans and investments) and the
interest expense paid on interest-bearing liabilities (i.e., customer deposits
and borrowed funds). Net interest income is affected by the relative amount
of interest-earning assets and interest-bearing liabilities and interest
received or paid on these balances. The level of interest rates paid or
received by the Bank can be significantly influenced by a number of
environmental factors, such as governmental monetary policy, that are outside
of management control.
Earnings per common share were computed by dividing net income by the
weighted-average number of shares outstanding for the three- and six-month
periods ended June 30, 1998.
The consolidated financial information presented herein has been prepared
in accordance with generally accepted accounting principles ("GAAP") and
general accounting practices within the financial services industry. In
preparing consolidated financial statements in accordance with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Actual results could differ from
such estimates.
The Company is subject to regulation by the Board of Governors of the
Federal Reserve System which limits the activities in which the Company and
the Bank may engage. The Bank is supervised by the State of Ohio, Division of
Financial Institutions and its deposits are insured up to applicable limits
under the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC"). The Bank is a member of the Federal Reserve System and
is subject to its supervision. The Company and the Bank must file with the
U.S. Securities and Exchange Commission, the Federal Reserve Board and Ohio
Division of Financial Institutions the prescribed periodic reports containing
full and accurate statements of its affairs.
The Bank conducts its business through its four offices located in Crawford
and Morrow Counties, Ohio. The primary market area of the Bank is Crawford
and Morrow and contiguous counties in northwest central Ohio.
12
<PAGE>
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") also
issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 redefines how operating segments are determined
and requires disclosure of certain financial and descriptive information about
the Company's operating segments. This statement supercedes SFAS No. 14,
"Financial Reporting for Segments of Business Enterprises." The new standard
becomes effective for years beginning after December 15, 1997, and requires
that comparative information from earlier periods be restated to conform to
the requirements of this standard. The adoption of this statement is not
material to the Company.
Changes in Financial Condition
At June 30, 1998, the consolidated assets of the Company totaled $90.6
million, an increase of $12.0 million, or 15.29%, from $78.6 million at
December 31, 1997. The increase in total assets was primarily the result of
an $10.7 million increase in deposits which were utilized to fund a net
increase of $6.8 million in investments and $4.4 million in loan growth. The
remainder of the funds were invested in federal funds sold and other
short-term interest-bearing deposits.
Net loans receivable increased by $4.3 million, or 11.24%, to $42.8
million at June 30, 1998, compared to $38.5 million at December 31, 1997. The
increase was primarily in the real estate related loan portfolio where the new
loan demand continued to exceed loan repayments.
Investment securities increased $6.8 million, or 21.03%, from $32.5
million at December 31, 1997, to $39.3 million at June 30, 1998. The increase
was primarily the result of rapid deposit growth realized from the opening of
the Cardington, Ohio branch office which is a part of the Company's strategy
to expand their market presence and customer base.
A portion of the funds received from the deposit increases were
temporally invested in federal funds until such time as they could be invested
in higher yielding loans or investment securities.
Deposit liabilities increased $10.7 million, or 16.26%, from $66.1
million at December 31, 1997, to $76.8 million at June 30, 1998. Management
attributes the majority of the increase to the expansion of the banking
operation while maintaining a competitive rate structure in the market area.
Interest credited on accounts also contributed to the increase.
Total shareholders' equity increased $218,000, or 1.95%, from $11.2
million at December 31, 1997, to $11.4 million at June 30, 1998. This
increase was primarily the result of $484,000 in earnings for the first two
quarters being offset by a decrease in other comprehensive income (unrealized
gains on securities available-for-sale) during the six months ended June 30,
1998 and the payment of a cash dividend to shareholders of $193,000.
The Bank's liquidity, primarily represented by cash and cash equivalents,
is a result of its operating, investing and financing activities. Principal
sources of funds are deposits, loan and mortgage-backed security repayments,
maturities of securities and other funds provided by operations. The Bank
also has the ability to borrow from the Federal Home Bank of Cincinnati
("FHLB") as well as the Federal Reserve Bank of Cleveland ("FRB"or "Fed").
While scheduled loan repayments and maturing investments are relatively
predictable, deposit flows and early loan and mortgage-backed security
prepayments are more influenced by interest rates, general economic conditions
and competition. The Bank maintains investments in liquid assets based upon
management's assessment of (i) the need for funds, (ii) expected deposit
flows, (iii) the yields available on short-term liquid assets and (iv) the
objectives of the asset/liability management program. In the ordinary course
of business, part of such liquid investments portfolio is composed of
deposits at correspondent banks. Although the amount on deposit at such banks
often exceeds the $100,000 limit covered by FDIC insurance, the Bank monitors
the capital of such institutions to ensure that such deposits do not expose
the Bank to undue risk of loss.
13
<PAGE>
The Asset/Liability Management Committee of the Bank is responsible for
liquidity management. This committee, which is comprised of various managers,
has an Asset/Liability Policy that covers all assets and liabilities, as well
as off-balance sheet items that are potential sources and uses of liquidity.
The Bank's liquidity management objective is to maintain the ability to meet
commitments to fund loans and to purchase securities, as well as to repay
deposits and other liabilities in accordance with their terms. The Bank's
overall approach to liquidity management is to ensure that sources of
liquidity are sufficient in amounts and diversity to accommodate changes in
loan demand and deposit fluctuations without a material adverse impact on net
income. The Committee monitors the Bank's liquidity needs on an ongoing
basis. Currently the Bank has several sources available for both short- and
long-term liquidity needs. These include, but are not restricted to advances
from the FHLB, Federal Funds and borrowings from the Fed and other
correspondent banking arrangements.
The Bank is subject to various regulatory capital requirements
administered by its primary federal regulator, the FRB. Failure to meet
minimum capital requirements can initiate certain mandatory, and possible
additional discretionary actions by regulators that, if undertaken, could have
a material affect on the Company and the consolidated financial statements.
Under the regulatory capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Bank must meet specific capital guidelines
that involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification under the prompt
corrective action guidelines are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Qualitative measures established by the regulation to ensure capital
adequacy requires the Bank to maintain minimum amounts and ratios of: total
risk-based capital and Tier I capital to risk-weighted assets (as defined by
the regulations), and Tier I capital to average assets (as defined).
Management believes, as of June 30, 1998, that the Bank meets all of the
capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the FDIC, the
Bank was categorized as well capitalized under the regulatory framework for
prompt corrective action. To remain categorized as well capitalized, the Bank
will have to maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as disclosed in Note 4 - Regulatory Capital. There are no
conditions or events since the most recent notification that management
believes have changed the Bank's prompt corrective action category.
At June 30, 1998, FC Banc Corp. had no material commitments for capital
expenditures.
Results of Operations
Comparison of Three Months Ended June 30, 1998 and 1997
General. Net income is continuing to increase at a steady pace during
the second three months of 1998, $264,000, as compared to the same three month
period ended June 30, 1997, $214,000, an increase of $50,000. This increase
was primarily attributed to an increase in net interest income, the absence of
a provision for loan losses coupled withincreases in other non-interest income.
A portion of the increase was off-set by an increase in non-interest expense.
Interest Income. The rapid increase in average earning assets
contributed to an increase in interest income of $225,000, or 16.57%, for the
three months ended June 30, 1998 compared to 1997. The increase was
attributed to the additional loan interest and fee income of $100,000
resulting primarily from an increase in loans receivable and a $122,000
increase in investment income as well as the $3,000 increase in income from
federal funds sold. These increases were off-set by the $120,000 increase in
interest expense.
Interest Expense. Interest expense on deposit liabilities increased
$119,000 for the three months ended June 30, 1998, as compared to the same
period in 1997. Total deposits increased by $10.7 million comparing June 30,
1998 to 1997, the average cost of funds over the past twelve months was 3.35%
which was relatively stable with a gradual rise and subsequent decline being
noted during the first four months of 1998.
14
<PAGE>
Provision for Loan Losses. There were net recoveries of $4,000 during
the three months ended June 30, 1998, compared to net recoveries of $102,000
during the same period in 1997. There was a negative provision for loan
losses during the second quarter in 1998 compared to a provision of $7,000
during the same period ending June 30, 1997. The negative provision was based
upon the results of the ongoing loan reviews and composition of the loan
portfolio, primarily loans secured by one- to four-family residential
properties and other forms of collateral, which are considered to have less
risk.
Non-Interest Income. Non-interest income increased $36,000, or 27.48%,
to $167,000 for the three months ended June 30, 1998, from $131,000 for the
three months ended June 30, 1997. The increase was primarily attributable to
a $23,000 increase in service charges on deposit accounts and $7,000 increase
in other service charges. There were $3,000 in gains recognized on the sale of
several available-for-sale investment securities during the period ended June
30, 1998.
Non-Interest Expense. Non-interest expense increased $104,000, or
15.74%, to $771,000 for the three months ended June 30, 1998, from $667,000 in
the comparable period in 1997. Of this increase, $50,000 was attributable to
an increase in compensation and benefit expense in 1998, reflecting normal
salary benefit adjustments. Net occupancy and equipment expense increased
$43,000, or 35.259%, to $165,000 for the three months ended June 30, 1998 as
compared to the same period in 1997. The ratio of non-interest expense to
average total assets was 3.54% and 3.49% for the three months ended June 30,
1998 and 1997, respectively.
Income Taxes. The provision for income taxes increased $19,000 for the
three months ended June 30, 1998, compared with the prior year, primarily as a
result of higher taxable income for the quarter.
Comparison of Six Months Ended June 30, 1998 and 1997
General. Net income is continuing to increase at a steady pace during
the first six months of 1998, $484,000, as compared to the same six month
period ended June 30, 1997, $398,000, an increase of $86,000. This increase
was primarily attributed to an increase in net interest income, a decrease in
the provision for loan losses and an increase in non-interest income. A
portion of the increase was off-set by an increase in non-interest expense.
Interest Income. The increases in average earning assets contributed to
the increase in interest income of $368,000, or 13.58%, for the six months
ended June 30, 1998 compared to 1997. The increase was attributed to the
additional loan interest and fee income of $186,000 resulting primarily from
an increase in loans receivable and a $160,000 increase in investment income
as well as the $22,000 increase in income from federal funds sold. These
increases were off-set by the $202,000 increase in interest expense.
Interest Expense. Interest expense on deposit liabilities increased
$203,000 for the six months ended June 30, 1998, as compared to the same
period in 1997. Total deposits increased by $10.7 million comparing June 30,
1998 to 1997, the average cost of funds over the past twelve months was 3.35%
with a gradual increase being noted during the first four months to 3.43% and
then dropping back to 3.35%. The Federal Funds purchased and securities sold
under agreement to repurchase were utilized by management as a funding source
in accordance with the asset/liability management program.
Provision for Loan Losses. There was a $25,000 negative provision for
loan losses during the first six months of 1998 as compared to a $27,000
provision during the same period in 1997. There were net recoveries of
$105,000 during the six months ended June 30, 1998, compared to net charge
offs of $7,000, during the same period ending June 30, 1997. The absence of a
provision was based upon the results of the ongoing loan reviews and
composition of the loan portfolio, primarily loans secured by one- to
four-family residential properties and other forms of collateral, which are
considered to have less risk.
Non-Interest Income. Non-interest income increased $47,000, or 18.73%,
to $298,000 for the six months ended June 30, 1998, from $251,000 for the six
months ended June 30, 1997. The increase was primarily attributable to a
15
<PAGE>
$35,000 increase in service charges on deposit accounts and $15,000 increase
in other service charges. There were $8,000 in gains recognized on the sale of
several available-for-sale investment securities during the period ended June
30, 1998.
Non-Interest Expense. Non-interest expense increased $144,000, or 10.59%,
to $1.5 million for the six months ended June 30, 1998, from $1.4 million in
the comparable period in 1997. Of this increase, $86,000 was attributable to
an increase in compensation and benefit expense in 1998, reflecting normal
salary benefit adjustments. Net occupancy and equipment expense decreased
$50,000, or 16.50%, to $303,000 for the first six months ended June 30, 1998
as compared to the same period in 1997. The ratio of non-interest expense to
average total assets remained constant at 3.52% for the six month periods
ended June 30, 1998 and 1997.
Income Taxes. The provision for income taxes increased $35,000 for the
six months ended June 30, 1998, compared with the prior year, primarily as a
result of higher taxable income for the quarter.
16
<PAGE>
FC BANC CORP.
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
The Securities and Exchange Commission has recently amended
Rule 14a-4 to provide that with respect to a shareholder
proposal to be presented at an annual shareholders' meeting
other than pursuant to Rule 14a-8 (i.e., which is not to be
included in the registrant's proxy statement), the registrant's
management may exercise discretionary voting authority under
proxies solicited by it for the meeting, without mention of
the proposal in the proxy material, if it receives notice of the
proposed non-Rule 14a-8 shareholder action less than 45 days
prior to the calendar date its proxy materials were mailed for
the prior year's annual meeting.
As this new provision applies to the Company, in the event
notice of a non-Rule 14a-8 shareholder proposal to be presented
at the Company's 1999 Annual Meeting of Shareholders is received
by the Company after January 13, 1999, the Company will be
permitted to exercise discretionary voting authority under
proxies solicited by it with respect to the 1999 Annual Meeting.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 27: Financial Data Schedule
b. A report on Form 8-K was filed during the quarter ended
June 30, 1998.
17
<PAGE>
SIGNATURES
In accordance with 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.
FC BANC CORP.
Date /s/ August 14, 1998 /s/ G. W. Holden
------------------- -------------------------------------
G. W. Holden
President and Chief Executive Officer
Date /s/ August 14, 1998 /s/ Jeffrey Wise
------------------- --------------------------------------
Jeffrey Wise
Principal Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997, and the
related Consolidated Statements of Income and Comprehensive Income for the three
and six months ended June 30, 1998 and 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000893539
<NAME> FC BANC CORP.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 3,899
<INT-BEARING-DEPOSITS> 1
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,285
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 44,442
<ALLOWANCE> 1,561
<TOTAL-ASSETS> 90,644
<DEPOSITS> 76,837
<SHORT-TERM> 1,200
<LIABILITIES-OTHER> 1,193
<LONG-TERM> 0
832
0
<COMMON> 0
<OTHER-SE> 10,581
<TOTAL-LIABILITIES-AND-EQUITY> 90,644
<INTEREST-LOAN> 1,010
<INTEREST-INVEST> 564
<INTEREST-OTHER> 9
<INTEREST-TOTAL> 1,583
<INTEREST-DEPOSIT> 464
<INTEREST-EXPENSE> 651
<INTEREST-INCOME-NET> 932
<LOAN-LOSSES> (25)
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 771
<INCOME-PRETAX> 353
<INCOME-PRE-EXTRAORDINARY> 264
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0.78
<YIELD-ACTUAL> 4.35
<LOANS-NON> 0
<LOANS-PAST> 0
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<ALLOWANCE-OPEN> 1,582
<CHARGE-OFFS> 22
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<ALLOWANCE-CLOSE> 1,560
<ALLOWANCE-DOMESTIC> 1,560
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</TABLE>
