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 MARCH 31, 1999.
[ ] 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 April 30, 1999, 633,617 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
March 31, 1999 and December 31, 1998
Condensed consolidated statements of income -- 4
Three months ended March 31, 1999 and 1998
Condensed consolidated statements of changes in 5
shareholders' equity -- Three months ended March 31, 1999
and year ended December 31, 1998
Condensed consolidated statement of cash flows -- 6
Three months ended March 31, 1999 and 1998
Notes to condensed consolidated financial statements -- 7
March 31, 1999 and December 31, 1998
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 16
<PAGE>
<TABLE>
<CAPTION>
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollars in thousands)
(Unaudited)
At March 31, At December 31,
------------ ---------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and amounts due from banks $ 2,631 $ 3,964
Interest-bearing demand deposits in other banks 6 5
Federal funds sold 300 3,500
-------- --------
Total cash and cash equivalents 2,937 7,469
Investment securities, available-for-sale 37,644 37,319
Loans 47,722 45,649
Allowance for loan losses (1,702) (1,725)
-------- --------
Net Loans 46,020 43,924
Premises and equipment 1,661 1,489
Accrued interest receivable 844 711
Cash surrender value of life insurance 2,924 2,385
Deferred income taxes 320 316
Other assets 154 72
------- -------
TOTAL ASSETS $92,504 $93,685
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing 9,679 10,517
Interest-bearing 70,378 70,794
------- -------
Total deposits 80,057 81,311
------- -------
Borrowed funds 0 0
Accrued interest payable 156 188
Other liabilities 543 639
------- -------
TOTAL LIABILITIES 80,756 82,138
SHAREHOLDERS' EQUITY
Preferred shares of $25 par value;
750 authorized; none issued 0 0
Common shares, no par value; 4,000,000 shares
authorized; 665,632 shares issued 832 832
Additional paid-in capital 1,370 1,370
Retained earnings 10,320 10,079
Treasury shares, at cost (721) (685)
Accumulated other comprehensive income (53) (49)
------- -------
TOTAL SHAREHOLDERS' EQUITY 11,748 11,547
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $92,504 $93,685
======= =======
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
(Dollars in thousands)
(Unaudited) (Unaudited)
3 Months Ended 3 Months Ended
March 31, March 31,
--------- ---------
1999 1998
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $1,052 $ 982
Interest and dividends on investment securities 508 483
Interest on federal funds sold 21 29
Interest on bank deposits 0 0
------ ------
TOTAL INTEREST INCOME 1,581 1,494
------ ------
INTEREST EXPENSE
Interest on deposits 616 604
Interest on borrowed funds 0 0
------ ------
TOTAL INTEREST EXPENSE 616 604
------ ------
NET INTEREST INCOME 965 890
Provision for loan losses (25) 0
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 990 890
OTHER INCOME
Service charges 110 107
Gains from sales of investment securities, net 0 4
Life insurance buildup 35 17
Other income 11 3
------ ------
TOTAL OTHER INCOME 156 131
OTHER EXPENSES
Salaries and employee benefits 379 331
Net occupancy and equipment expenses 166 138
Advertising and public relations 35 20
Directors' fees 19 17
Legal and professional 37 45
State taxes 40 40
Supplies 25 40
Other expenses 124 102
------ ------
TOTAL OTHER EXPENSES 825 733
------ ------
NET INCOME BEFORE FEDERAL INCOME TAX EXPENSE 321 288
Federal income tax expense 80 68
------ ------
NET INCOME $ 241 $ 220
====== ======
EARNINGS PER SHARE:
Earnings per common share - basic $0.38 $0.34
Earnings per common share - diluted $0.37 $0.34
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes
<PAGE>
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Dollars in thousands)
Number of Shares Amounts
--------------------------- -----------------------------------------------------------
Accumulated
Additional Other Compre-
Common Treasury Common Paid-In Retained Treasury Comprehensive hensive
Stock Stock Stock Capital Earnings Stock Income Income
----- ----- ----- ------- -------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 665,632 23,256 $832 $1,370 $ 9,461 $(484) $16
Net Income 1,001 $1,001
Other comprehensive income
Change in unrealized
gain (loss) on securities
available-for-sale, net of
deferred income tax of $31 (65) (65)
-----
Comprehensive income $ 936
=====
Dividends declared-common ($0.60) per shares (383)
Purchase of 7,447 common shares 7,447 (201)
------- ------- ------ ------ ------ ------ ------
Balance at December 31, 1998 665,632 30,703 832 1,370 10,079 (685) (49)
Net Income 241 $ 241
Other comprehensive income
Change in unrealized
gain (loss) on securities
available-for-sale, net of
deferred income tax of $2 (4) (4)
-----
Comprehensive income $ 237
=====
Purchase of 1,312 common shares 1,312 (36)
------- ------ ------ ------ ------- ------ -----
Balances at March 31, 1999 665,632 32,015 $ 832 $1,370 $10,320 $(721) $(53)
======= ====== ====== ====== ======= ====== =====
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited) (Unaudited)
3 Months Ended 3 Months Ended
March 31, March 31,
-------- ---------
1999 1998
---- ----
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 241 $ 220
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (25) 0
Loss on sales of available-for-sale securities, net 0 (4)
Income accrued on life insurance contracts (35) (17)
Depreciation 95 69
Deferred income taxes 1 (20)
Investment securities amortization (accretion), net 57 3
Net change in:
Accrued interest receivable (132) 6
Accrued interest payable (32) (10)
Other assets (81) (178)
Other liabilities (97) 315
------- ------
Net cash provided by (used in) operating activities (10) 384
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale (3,924) (8,602)
Proceeds from sales of securities available-for-sale 0 3,514
Proceeds from maturities of securities available-for-sale 3,535 496
Purchase of loans 0 0
Net decrease in loans (2,072) (1,845)
Purchase of premises and equipment (267) (39)
Purchase of life insurance contracts (505) 0
------ ------
Net cash used in investing activities (3,233) (6,476)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in:
Noninterest-bearing, interest bearing, demand,
and savings deposits (2,185) 4,979
Certificates of deposit 932 3,542
Net increase (decrease) in short-term borrowed funds 0 (600)
Proceeds from note payable 0 0
Payments on note payable 0 0
Purchase of treasury stock (36) (1)
Cash dividends paid 0 0
------ ------
Net cash provided by (used in) financing activities (1,289) 7,920
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (4,532) 1,828
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,469 3,567
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,937 $5,395
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for interest $ 648 $ 614
Cash paid during the year for income taxes 171 62
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes
<PAGE>
FC BANC CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999, and December 31,1998
(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 position as of March 31,
1999, and December 31, 1998, and the results of operations for the three
months ended March 31, 1999 and 1998, and the cash flows for the three months
ended March 31, 1999 and 1998. 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 months ended March 31, 1999, 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)
Three months ended Year ended
March 31, December 31,
1999 1998
---- ----
Balance, beginning of period $1,725 $1,480
Provision for loan losses (25) (75)
Recoveries 31 379
Charge-offs (29) (59)
------ ------
Balance, end of period $1,702 $1,725
====== ======
<PAGE>
NOTE 3. REGULATORY CAPITAL
The following table illustrates the compliance by the Bank with currently
applicable regulatory capital requirements at March 31, 1999.
<TABLE>
<CAPTION>
(Dollars in thousands)
Categorized as "Well"
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
------ ----------------- ----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<C> <C> <C> <C> <C> <C>
Total Risk-Based Capital
(To Risk-Weighted Assets) $12,427 23.15% $4,294 8.00% $5,367 10.00%
Tier I Capital
(To Risk-Weighted Assets) 11,743 21.88% 2,147 4.00% 3,220 6.00%
Tier I Capital
(To Total Assets) 11,743 12.68% 3,704 4.00% 4,630 5.00%
Tangible Capital
(To Total Assets) 11,743 12.68% 3,704 4.00% N/A N/A
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.
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1999
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS
Income available to
common shareholders $241,454 634,367 $0.38
Effect of dilutive securities: None 9,512 ($0.01)
-------- ------- -----
Diluted EPS Income available to
common shareholders +
assumed conversions $241,454 643,879 $0.37
======== ======= =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1998
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS
Income available to
common shareholders $219,608 653,564 $0.34
Effect of dilutive securities: None 0 $0.00
-------- ------- -----
Diluted EPS Income available to
common shareholders +
assumed conversions $219,608 653,564 $0.34
======== ======= =====
</TABLE>
NOTE 5. 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.
<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-month periods
ended March 31, 1999 and 1998. Prior period earnings per share calculations
were restated to reflect the one-for-one stock split which was effective
August 14, 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.
<PAGE>
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.
Year 2000 Readiness
The Year 2000 problem was created by computer programmers in the 1950's.
In order to save money and storage space, they used two digit date fields to
represent Year information. They anticipated that systems would be obsolete
by the Year 2000. Instead of writing new programs and fixing the problem, the
old programs were modified. Thus, some truncated fields may not work with
dates beyond 1999. Correct processing of date oriented information is
critical to the operation of all financial institutions. Failure of these
processes could severely hinder the ability to continue operations and provide
customer service. Because of the critical nature of the issue, the Company
established a committee in the third quarter of 1997 to address "Year 2000"
issues. The core data processing software used by the Company and Bank was
purchased from a nationally known software vendor. They are completely aware
of the potential problems, and have made it a part of their maintenance cycle
to handle the Year 2000. Their software was designed to process calendar year
calculations using all four date digits. For display or report purposes, two
digit dates are sometimes displayed or represented. No calculations are
performed using two digit date codes.
The federal regulatory agencies that regulate the Company an Bank
have instituted mandatory interagency guidelines establishing Year 2000
standards for safety and soundness in order to ensure Year 2000 compliance by
financial institutions. The federal banking regulatory agencies are
overseeing this effort and are examining financial institutions periodically
to track their Year 2000 compliance progress. The Company and Bank are
working to satisfy the regulatory guidelines but there can be no assurance
that all interim milestones will be met. However, management believes that
the Company and Bank will be substantially compliant with Year 2000
guidelines. Our Company is fully committed to addressing the Year 2000
problem. Our goal is to ensure that our systems will handle the new century
date change smoothly so that our customers will not be inconvenienced.
We are identifying relevant systems; repairing, replacing, or upgrading
systems to resolve potential problems; and testing systems for Year 2000
compatibility. We are also working closely with our third-party service
providers to monitor their readiness for Year 2000. Management has been
assured by their software vendors that any program changes necessary to ensure
Year 2000 compliance will be completed in adequate time to prevent any
foreseeable processing problems. We have substantially completed the testing
and plan to have all system changes implemented by June 30, 1999, as required
by federal bank regulators. We will have alternative methods of doing
business as a contingency should problems occur.
The Company's Business Resumption Contingency Planning Policy was
completed in prior to March 31, 1999. The policy identifies key milestones
and includes information collection tools, establishes a reporting system and
details work plans which are essential to the drafting of the appropriate
contingency plans. The contingency plans will address actions to be taken to
continue operations in the event of system failure due to areas that cannot be
tested in advance, such as power and telephone service, which are vital to
business continuation.
All personal computers ("PCs") and related software throughout the
Company have been inventoried and tested for Year 2000 capabilities. The
Company is using two testing methods for PC certification of Year 2000
compatibility. PCs must pass both tests to be considered ready for Year
2000. Those PCs identified as non-Year 2000 compatible will be modified or
replaced . The Company believes that the Year 2000 issue will not pose
significant operational problems and is not anticipated to be material to its
financial position or results of operation in any given year. As of March 31,
1999, the Company had budgeted $202,000 for estimated Year 2000 implementation
costs. Thus far, the Company has incurred approximately $65,000 of related
Y2K expenses and management anticipates that total costs will not exceed the
budgeted amount. The remaining costs are expected to be expensed over the
next 9 to 12 months, impacting fiscal years ending December 31, 1999 and
2000. This estimate is based on information available at March 31, 1999, and
may be revised as additional information and actual costs become available.
Currently, customer awareness is one of the most critical; areas of the
Y2K Project. Management has been providing ongoing training to our staff in
am effort to prepare them to answer customer questions and concerns relative
to Y2K and its effect on them and their businesses. All employees have been
provided with various literature and other information to inform and educate
our customers. A committee has been formed comprised of representatives from
each of the local financial institutions in order to assume the community that
we are united in dealing with Y2K issues and concerns.
<PAGE>
Changes in Financial Condition
At March 31, 1999, the consolidated assets of the Company totaled $92.5
million, a decrease of $1.2 million, or 1.26%, from $93.7 million at December
31, 1998. The decrease in total assets was primarily the result of a $1.2
million decrease in deposits which were invested as federal funds sold.
Net loans receivable increased by $2.1 million, or 4.77%, to $46.0
million at March 31, 1999, compared to $43.9 million at December 31, 1998.
The increase was primarily in the real estate related loan portfolio where the
new loan demand continued to exceed loan repayments.
Investment securities were relatively stable during the first three
months of 1999. The increase of $325,000, or 0.87%, from $37.3 million at
December 31, 1998, to $37.6 million at March 31, 1999, was primarily the
result of the reallocation of funds from maturing securities.
Federal funds sold, which decreased $3.2 million during the first three
months of 1999, were primarily employed to fund the increased demand for
loans.
Deposit liabilities decreased $1.2 million, or 1.54%, from $81.3 million
at December 31, 1998, to $80.1 million at September 30, 1998. Management
attributes the majority of the decrease to the competitive rate structure in
the market area.
Total shareholders' equity increased $201,000, or 1.74%, from $11.5
million at December 31, 1998, to $11.7 million at March 31, 1999. This
increase was primarily the result of $241,000 in earnings for the first three
months being offset by the acquisition of 1,312 shares of treasury stock,
$36,000, and a slight decrease in other comprehensive income (unrealized losses
on securities available-for-sale) of $4,000 during the three months ended
March 31, 1999.
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.
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
<PAGE>
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 weighing, 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 March 31, 1999, that the Bank meets all of the
capital adequacy requirements to which it is subject.
As of December 31, 1998, 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 3 - 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 March 31, 1999, FC Banc Corp. had approximately $254,000 in
commitments for capital expenditures.
Results of Operations
Comparison of Three Months Ended March 31, 1999 and 1998
General. Net income increased during the first quarter of 1999 as
compared to the same three month period ended March 31, 1998. Net income
amounted to $241,000 versus $220,000, an increase of $21,000, or 9.55%. This
increase was primarily attributed to an increase in net interest income, a
negative provision for possible loan losses and the cash surrender values
buildup of life insurance policies. These increases were offset by increases
in salary and benefit costs, occupancy and equipment expenses and other
general operating expenses.
Interest Income. The rapid increase in average earning assets was the
primary contributing factor to the net increase in interest income of
$87,000, or 5.82%, for the three months ended March 31, 1999 compared to
1998. The increase was attributed to the additional loan interest and fee
income of $70,000 resulting primarily from an increase in loans receivable and
a $25,000 increase in investment income which was partially off-set by a
$8,000 decrease in income from federal funds sold. These increases were
off-set by the $12,000 increase in interest expense.
Interest Expense. Interest expense on deposit liabilities increased
$12,000 for the three months ended March 31, 1999, as compared to the same
period in 1998. Total deposits increased by $1.3 million comparing March 31,
1999, to 1998, the average cost of funds for the first three months of 1999
was 3.13%, as compared to 3.53% for the same period in 1998.
Provision for Loan Losses. There were net recoveries of $2,000 during
the three months ended March 31, 1999, compared to net recoveries of $102,000
during the same period in 1998. There was a negative provision for loan
losses during the first quarter in 1999 compared to no provision during the
same period ending March 31, 1998. 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.
<PAGE>
Non-Interest Income. Non-interest income increased $25,000, or 19.08%,
to $156,000 for the three months ended March 31, 1999, from $131,000 for the
three months ended March 31, 1998. The increase was primarily attributable to
a $18,000 increase in cash surrender values of life insurance contracts and
$8,000 increase in other miscellaneous charges. There were no security gains
or losses recognized during the three month period ended March 31, 1999, as
compared to $4,000 in gains recognized on the sale of other investment
securities during the period ended March 31, 1998.
Non-Interest Expense. Non-interest expense increased $92,000, or 12.55%,
to $825,000 for the three months ended March 31, 1999, from $733,000 in the
comparable period in 1998. Of this increase, $48,000 was attributable to an
increase in compensation and benefit expense in 1999, reflecting normal salary
benefit adjustments. Net occupancy and equipment expense increased $28,000,
or 20.29%, to $166,000 for the three months ended March 31, 1999, as compared
to the same period in 1998. The ratio of non-interest expense to average
total assets was 0.89% and 0.90% for the three months ended March 31, 1999 and
1998, respectively.
Income Taxes. The provision for income taxes increased $12,000 for the
three months ended March 31, 1999, compared with the prior year, primarily as
a result of higher taxable income for the quarter.
<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
On March 24, 1999, the Corporation held its Annual Meeting of
Shareholders.
Each of the three directors nominated were elected to terms of
three (3) years expiring in 2002 by the following votes:
Samuel J. Harvey For: 443,268 Withheld: 10,734 Abstain: 0
------- ------ ---
Charles W. Kimerline For: 448,974 Withheld: 5,028 Abstain: 0
------- ----- ---
James B. Pigman For: 446,964 Withheld: 7,038 Abstain: 0
------- ----- ---
Three other matters were submitted to the shareholders, for which
the following votes were cast:
2. Approval of the amendment to the Articles of Incorporation of FC
Banc Corp. to increase authorized common stock, without par
value, from 1,000,000 to 4,000,000 shares:
For: 395,694 Against: 44,214 Abstain: 14,094
------- ------ ------
3. Approval of the amendment to the Code of Regulations,
Article 2, Section, 2.10 to change the circumstances under
which directors may be removed and the procedures for removal
of a director:
For: 421,690 Against: 5,650 Abstain: 26,662
------- ----- ------
4. Ratification of the selection of Robb, Dixon, Francis, Davis,
Oneson & Company as the auditors of FC Banc Corp. for the
current year:
For: 450,760 Against: 52 Abstain: 3,234
------- ----- -----
<PAGE>
ITEM 5 - OTHER INFORMATION
Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 27: Financial Data Schedule
b. A report on Form 8-K was filed on March 24, 1999 announcing
the commencement of a stock repurchase program to acquire
up to 31,111 common shares.
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, hereunto duly authorized.
FC BANC CORP
May 14, 1999 /s/ G.W. Holden
- -------------------------------- -------------------------------
Date G. W. Holden
President and
Chief Executive Officer
May 14, 1999 /s/ Jeffrey Wise
- -------------------------------- -------------------------------
Date Jeffrey Wise
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of March 31, 1999, and December 31, 1998,
and the related Consolidated Statements of Income for the three months
ended March 31, 1999 and 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000893539
<NAME> FC BANC CORP
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