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, 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 August 2, 1999, 630,427 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, 1999 and December 31, 1998
Condensed consolidated statements of income -- 4
Six months ended June 30, 1999 and 1998
Condensed consolidated statements of changes in
shareholders' equity -- Six months ended June 30, 1999
and year ended December 31, 1998 5
Condensed consolidated statement of cash flows
Six months ended June 30, 1999 and 1998 6
Notes to condensed consolidated financial statements 7
June 30, 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>
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED BALANCE SHEETS
===============================================================================
[CAPTION]
<TABLE>
(Dollars in thousands)
(Unaudited) (Unaudited)
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents
Cash and due from banks $ 3,149 $ 3,964
Interest-bearing demand deposits 11 5
Federal funds sold 300 3,500
-------- --------
Total cash and cash equivalents 3,460 7,469
Investment securities, available-for-sale 37,259 37,319
Loans (net of unearned interest) 50,853 45,649
Less: allowance for loan losses (1,680) (1,725)
-------- --------
Net loans 49,173 43,924
Premises and equipment 1,897 1,489
Accrued income receivable 757 711
Cash surrender value of life insurance 2,264 2,385
Deferred income taxes 468 316
Other assets 164 72
-------- --------
TOTAL ASSETS $95,442 $93,685
LIABILITIES
Deposits
Demand deposits $ 9,274 $10,517
Now accounts 12,026 13,175
Savings accounts 26,562 24,195
Time deposits of $100,000 or more 1,191 1,327
Other time deposits 34,240 32,097
-------- --------
Total deposits 83,293 81,311
Other borrowed funds 32 0
Accrued interest payable 178 188
Accrued federal income taxes 10 173
Other liabilities 504 466
--------- --------
TOTAL LIABILITIES 84,017 82,138
SHAREHOLDERS' EQUITY
Preferred stock ( $25.00 par value) 750 shares authorized,
no shares issued 0 0
Common stock (no par value) 4,000,000 shares authorized,
665,632 shares issued 832 832
Additional paid-in capital 1,370 1,370
Retained earnings 10,401 10,079
Treasury stock, at cost: 35,205 and 30,703 shares (363) (49)
Accumulated other comprehensive income (815) (685)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 11,425 11,547
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $95,442 $93,685
======== ========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes
<PAGE>
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF INCOME
=============================================================================
<TABLE>
<CAPTION>
(Dollars in thousands, except per share)
(Unaudited) (Unaudited)
3 Months Ended 6 Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,096 $ 1,010 $ 2,148 $ 1,992
Interest on investment securities:
Taxable 420 474 845 878
Exempt from federal income tax 80 90 163 169
Interest on federal funds sold 37 9 58 38
------- ------- ------- -------
TOTAL INTEREST INCOME 1,633 1,583 3,214 3,077
INTEREST EXPENSE
Interest on interest-bearing demand accounts 59 75 116 141
Interest on savings accounts 151 155 289 310
Interest on certificates of deposit 435 416 856 799
Interest on federal funds purchased and
securities sold under agreement
to repurchase 0 5 0 5
------- -------- ------- -------
TOTAL INTEREST EXPENSE 645 651 1,261 1,255
------- -------- ------- -------
NET INTEREST INCOME 988 932 1,953 1,822
Provision for loan losses (25) (25) (50) (25)
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS 1,013 957 2,003 1,847
NON-INTEREST INCOME
Service charges on deposit accounts 106 106 203 199
Other service charges 9 7 17 15
Life insurance 36 17 72 34
Safe/night deposit 3 3 9 9
Investment security gains (losses) (3) 3 (3) 8
Other income (3) 32 8 33
------- ------- ------- -------
TOTAL NON-INTEREST INCOME 148 168 306 298
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and benefits 387 353 768 683
Net occupancy and equipment expense 175 165 340 303
FDIC deposit insurance expense 2 2 5 4
State and other taxes 39 40 79 79
Other expense 189 212 427 435
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE 792 772 1,619 1,504
------- ------- ------- -------
NET INCOME BEFORE FEDERAL INCOME
TAX EXPENSE 369 353 690 641
Federal income tax expense 98 89 178 157
------- ------- ------- -------
NET INCOME $ 271 $ 264 $ 512 $ 484
======= ======= ======= =======
PER SHARE DATA:
Basic net income $0.43 $0.41 $0.81 $0.75
Diluted net income $0.42 $0.39 $0.80 $0.72
</TABLE>
- ------------------------------------------------------------------------------
See accompanying notes
<PAGE>
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
(Dollars in thousands)
(Unaudited) (Unaudited)
6 Months Ended 6 Months Ended
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 512 $ 484
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 195 164
Provision for loan losses (50) (25)
Provision for deferred taxes 6 (146)
Gain (loss) on sale of investments 3 (8)
Income accrued on life insurance contracts (72) (34)
Amortization/Accretion - net 108 34
Changes in operating assets and liabilities:
(Increase) decrease in other assets 107 (216)
Increase (decrease) in taxes payable (163) 348
Decrease in accrued income receivable (46) (58)
Decrease in accrued interest payable (10) 0
Increase in other liabilities 38 146
------ ------
Total adjustments 116 205
------ ------
Net cash provided by operating activities 629 689
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available-for-sale securities 5,971 4,342
Purchase of available-for-sale securities (7,208) (13,380)
Net change in loans (5,207) (4,431)
Proceeds from sale of available-for-sale securities 714 2,172
Purchase of premises and equipment (603) (164)
------ ------
Net cash used in investing activities (6,333) (11,461)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand and savings deposits (25) 7,977
Net increase in certificates of deposit 2,007 2,768
Net decrease in short-term borrowings 0 600
Proceeds from long-term debt 32 (41)
Purchase of treasury stock (148) (7)
Sale of treasury stock 18 0
Purchase of treasury stock (190) (193)
------ ------
Net cash provided by financing activities 1,694 11,104
------ ------
Net increase in cash and cash equivalents (4,009) 332
Cash and cash equivalents at beginning of period 7,469 3,567
------ ------
Cash and cash equivalents at end of period $3,460 $3,899
====== ======
SUPPLEMENTAL INFORMATION:
Cash paid for:
Interest $1,271 $1,255
Net income taxes 335 40
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes
<PAGE>
FC BANC CORP
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six Months Ended June 30, 1999 and Year Ended December 31, 1998
===============================================================================
<TABLE>
<CAPTION>
(Dollars in thousands)
Accumulated
Other Total Other
Compre- Share- Compre-
Common Paid-in Retained Treasury hensive holders' hensive
Stock Capital Earnings Stock Income Equity Income
----- ------- -------- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997 $ 832 $1,370 $ 9,461 $(484) $ 16 $11,195
Comprehensive Income
Net Income
Other comprehensive income, 1,001 1,001 $1,001
net of tax:
Change in unrealized
gain (loss) on securities
available-for-sale,
net of deferred income tax of #31
Total comprehensive income (65) (65) (65)
------
$936
======
Dividends declared - common ($.60) per share) (383) (383)
Purchseof 7,447 shares of tresury stock (201) (201)
----- ------ ------ --- ---- -------
Balance at December 31, 1998 832 1,370 10,079 (685) (49) 11,547
Net Income
Other comprehensive income, 512 512 $512
net of tax:
Change in unrealized
gain (loss) on securities
available-for-sale,
net of deferred income tax of $157
Total comprehensive income (314) (314) (314)
$198
====
Dividends declared - common ($.30 per share) (190) (190)
Purchase 5,302 shares of treasury stock (148) (148)
Sale of 800 shares of treasury stock 18 18
---- ------ ------- ----- ----- -------
Balances at June 30, 1999 $ 832 $1,370 $10,401 $(815) $(363) $11,425
==== ====== ======= ====== ====== =======
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes
FC BANC CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 (Unaudited) and December 31,1998
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 June 30,
1999, and December 31, 1998, and the results of operations for the three-and
six-months ended June 30, 1999 and 1998, and the cash flows for the six months
ended June 30, 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 six
months ended June 30, 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)
Six months ended Year ended
June 30, December 31,
1999 1998
---- ----
Balance, beginning of period $1,725 $1,480
Provision for loan losses (50) (75)
Recoveries 39 379
Charge-offs (34) (59)
------ ------
Balance, end of period $1,680 $1,725
====== ======
<PAGE>
NOTE 3. REGULATORY CAPITAL
The following table illustrates the compliance by the Bank with currently
applicable regulatory capital requirements at June 30, 1999.
<TABLE>
<CAPTION>
(Dollars in thousands)
To Be Categorized as
"Well Capitalized"
Under Prompt
For Capital Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Risk-Based Capital
(To Risk-Weighted Assets) $12,315 22.02% $4,474 8.00% $5,592 10.00%
Tier I Capital
(To Risk-Weighted Assets) 11,604 20.75% N/A N/A 3,355 6.00%
Tier I Capital
(To Total Assets) 11,604 12.16% 3,817 4.00% 4,771 5.00%
Tangible Capital
(To Total Assets) 11,604 12.16% 3,817 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.
For the Three months Ended June 30, 1999
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to
common shareholders $270,989 632,447 $0.43
Effect of dilutive securities: 0 10,339
-------- -------
Diluted EPS Income available to
common shareholders +
assumed conversions $270,989 642,786 $0.42
======== ======= =====
<PAGE>
For the Three months Ended June 30, 1998
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ------------- ------
Basic EPS
Income available to
common shareholders $264,317 642,216 $0.41
Effect of dilutive securities: 0 37,420
-------- -------
Diluted EPS Income available to
common shareholders +
assumed conversions $264,317 679,636 $0.39
======== ======= =====
For the Six months Ended June 30, 1999
--------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
-------- ---------- -----
Basic EPS
Income available to
common shareholders $512,444 633,391 $0.81
Effect of dilutive securities: 0.00 9,495
-------- -------
Diluted EPS Income available to
common shareholders +
assumed conversions $512,444 642,886 $0.80
======== ======= =====
For the Six months Ended June 30, 1998
--------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- ------
Basic EPS
Income available to
common shareholders $483,925 642,290 $0.75
Effect of dilutive securities: 0 30,390
-------- -------
Diluted EPS Income available to
common shareholders +
assumed conversions $483,925 672,680 $0.72
======== ======= =====
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- and six-month
periods ended June 30, 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.
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.
<PAGE>
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 and 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 completed the testing and have
implemented all available system changes 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 prior to June 30, 1999. The policy identifies key milestones and
includes information collection tools, establishes a reporting system and detail
s work plans which are essential to the drafting of the appropriate
contingency plans. The contingency plans 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. Validation of the Contingency and Business Resumption
Plans and testing procedures has been completed by the bank's consultants.
Internal testing of the Contingency and Business Resumption Plans are
currently underway.
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 June 30,
1999, the Company had budgeted $202,000 for estimated Year 2000 implementation
costs. Thus far, the Company has incurred approximately $71,000 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 6 to 9 months, impacting fiscal years ending December 31, 1999 and 2000.
This estimate is based on information available at June 30, 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
an 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. Member of the bank's
senior management team have been actively involved with the local Y2K
committee.
<PAGE>
Current customer communication efforts include monthly statement
stuffers, drive-in envelops, speeches before local community gatherings, and
so forth.
Changes in Financial Condition
At June 30, 1999, the consolidated assets of the Company totaled $95.4
million, an increase of $1.7 million, or 1.88%, from $93.7 million at December
31, 1998. The increase in total assets was primarily the result of a $2.0
million increase in deposits which were utilized to partially satisfy credit
demands.
Net loans receivable increased by $5.3 million, or 11.95%, to $49.2
million at June 30, 1999, compared to $43.9 million at December 31, 1998. The
increase was primarily in the commercial and real estate related loan
portfolios where the new loan demand continued to exceed loan repayments.
Investment securities were relatively stable during the first six months
of 1999. The net decrease of $60,000, from December 31, 1998, was primarily
the result of the fluctuation in market values of the individual securities
within the investment portfolio.
Federal funds sold, which decreased $3.2 million during the first six
months of 1999, were primarily employed to fund the increased demand for
loans.
Deposit liabilities increased $2.0 million, or 2.44%, from $81.3 million
at December 31, 1998, to $83.3 million at June 30, 1999. Management
attributes the majority of the increase to the competitive rate structure in
the market area.
Total shareholders' equity decreased $122,000, or 1.06%, from $11.5
million at December 31, 1998, to $11.4 million at June 30, 1999. This
decrease was primarily the result of the payment of $190,000 in cash
dividends, the acquisition of 5,302 shares of treasury stock, $148,000, and a
decrease in other comprehensive income (unrealized losses on securities
carried as available-for-sale). Offsetting these decreases were $512,000 in
earnings for the first six months and the proceeds from the sale of treasury
stock to satisfy the stock options that were exercised.
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
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
<PAGE>
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 June 30, 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 June 30, 1999, FC Banc Corp. had no material commitments for capital
expenditures.
Results of Operations
Comparison of Three months Ended June 30, 1999 and 1998
General. Net income increased during the second quarter of 1999 as
compared to the same three month period ended June 30, 1998. Net income
amounted to $271,000 versus $264,000, an increase of $7,000, or 2.65%. 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 and occupancy and equipment expenses. Other
general operating expenses decreased by a total of $24,000 which also
contributed to the increase in net income.
Interest Income. The increase in average earning assets was the primary
contributing factor to the net increase in interest income of $50,000, or
3.16%, for the three months ended June 30, 1999 compared to 1998. The
increase was attributed to the additional loan interest and fee income of $86,00
0 resulting primarily from an increase in loans receivable and a $28,000
increase in federal funds sold income which was partially off-set by a $64,000
decrease in income from investment securities. These increases were
complemented by the $6,000 decrease in interest expense.
Interest Expense. Interest expense on deposit liabilities remained
relatively constant, decreasing by $1,000, for the three months ended June
30, 1999, as compared to the same period in 1998. Total deposits increased by
$6.5 million comparing June 30, 1999, to 1998, the average cost of funds for
the three months ended June 30, 1999, was 3.12%, as compared to 3.13% for the
same three month period in 1998.
Provision for Loan Losses. There were net recoveries of $3,000 during
the three months ended June 30, 1999, compared to net recoveries of $4,000
during the same period in 1998. There was a negative provision for loan
losses during the second quarter in both 1999 and 1998. The negative
provisions were 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 decreased $20,000, or 11.90%,
to $148,000 for the three months ended June 30, 1999, from $168,000 for the
three months ended June 30, 1998. The decrease was primarily attributable to
a $35,000 decrease other miscellaneous income and losses of $3,000 on the sale
of investment securities. The decrease was partially offset by an increase in
the cash surrender values of life insurance contracts, $19,000, and $2,000
<PAGE>
increase in other service charges. There were $3,000 in security gains
recognized during the three month period ended June 30, 1998.
Non-Interest Expense. Non-interest expense increased $20,000, or 2.59%,
to $792,000 for the three months ended June 30, 1999, from $772,000 in the
comparable period in 1998. Of this increase, $34,000 was attributable to an
increase in compensation and benefit expense in 1999, reflecting normal salary
benefit adjustments. Net occupancy and equipment expense increased $10,000,
or 6.06%, to $175,000 for the three months ended June 30, 1999, as compared to
the same period in 1998.
Income Taxes. The provision for income taxes increased $9,000 for the
three months ended June 30, 1999, compared with the prior year, primarily as a
result of higher taxable income for the quarter.
Comparison of Six months Ended June 30, 1999 and 1998
General. Net income increased during the first two quarters of 1999 as
compared to the same six month period ended June 30, 1998. Net income
amounted to $512,000 versus $484,000, an increase of $28,000, or 5.79%. 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 continued increase in average earning assets was
the primary contributing factor to the net increase in interest income of
$131,000, or 7.19%, for the six months ended June 30, 1999 compared to 1998.
The increase was attributed to the additional loan interest and fee income of
$156,000 resulting primarily from an increase in loans receivable and a
$20,000 increase in federal funds sold income which was partially off-set by
a $39,000 decrease in income from investment securities. These increases were
off-set by the $6,000 increase in interest expense.
Interest Expense. Interest expense on deposit liabilities increased
slightly, or $11,000, for the six months ended June 30, 1999, as compared to
the same period in 1998. Total deposits increased by $6.5 million comparing
June 30, 1999, to 1998, the average cost of funds for the first six months of
1999 was 3.12%, as compared to 3.13% for the same period in 1998. Overall,
the interest costs associated with the higher yielding deposit products
(primarily certificates of deposits) have continued their gradual decrease
while demand and savings deposit yields have remained relatively constant.
Provision for Loan Losses. There were net recoveries of $5,000 during
the six months ended June 30, 1999, compared to net recoveries of $106,000
during the same period in 1998. There were negative provisions for loan losses
of $50,000 and $25,000 during the six month periods ended June 30, 1999 and
1998, respectively. The negative provisions were 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 $8,000, or 2.98%, to
$306,000 for the six months ended June 30, 1999, from $298,000 for the six
months ended June 30, 1998. The increase was primarily attributable to a
$38,000 increase in cash surrender values of life insurance contracts and
$6,000 increase in service charges. There were $3,000 in security losses
recognized during the six month period ended June 30, 1999, as compared to
$8,000 in gains recognized on the sale of other investment securities during
the period ended June 30, 1998.
Non-Interest Expense. Non-interest expense increased $115,000, or 7.65%,
to $1.6 million for the six months ended June 30, 1999, from $1.5 million in
the comparable period in 1998. Of this increase, $85,000 was attributable to
an increase in compensation and benefit expense in 1999, reflecting normal salar
y benefit adjustments. Net occupancy and equipment expense increased $37,000,
or 12.21%, to $340,000 for the six months ended June 30, 1999, as compared to
the same period in 1998. The ratio of non-interest expense to average total
assets was 3.44% and 3.52% for the six months ended June 30, 1999 and 1998,
respectively.
<PAGE>
Income Taxes. The provision for income taxes increased $21,000 for the
six months ended June 30, 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
Not Applicable
ITEM 5 - OTHER INFORMATION
Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 27: Financial Data Schedule
b. No report on Form 8-K was filed during the quarter ended
June 30, 1999.
<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, hereunto duly authorized.
FC BANC CORP.
Date August 13, 1999 /s/ G.W. Holden
- ----------------------- ----------------------------------------
G. W. Holden
President and Chief Executive Officer
Date August 13, 1999 /s/ Jeffrey Wise
- ----------------------- ----------------------------------------
Jeffrey Wise
Principal Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998,
and the related Consolidated Income Statements for the three-and-six
months ended June 30, 1999 and 1998, 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-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 3,149
<INT-BEARING-DEPOSITS> 11
<FED-FUNDS-SOLD> 300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37,259
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 50,853
<ALLOWANCE> 1,680
<TOTAL-ASSETS> 95,442
<DEPOSITS> 83,293
<SHORT-TERM> 32
<LIABILITIES-OTHER> 692
<LONG-TERM> 0
0
0
<COMMON> 832
<OTHER-SE> 10,593
<TOTAL-LIABILITIES-AND-EQUITY> 95,442
<INTEREST-LOAN> 1,096
<INTEREST-INVEST> 500
<INTEREST-OTHER> 37
<INTEREST-TOTAL> 1,633
<INTEREST-DEPOSIT> 645
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 988
<LOAN-LOSSES> (25)
<SECURITIES-GAINS> (3)
<EXPENSE-OTHER> 792
<INCOME-PRETAX> 369
<INCOME-PRE-EXTRAORDINARY> 271
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 271
<EPS-BASIC> 0.43
<EPS-DILUTED> 0.42
<YIELD-ACTUAL> 4.54
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,702
<CHARGE-OFFS> 5
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 1,680
<ALLOWANCE-DOMESTIC> 1,680
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 76
</TABLE>
