<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:..............................September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from..................to............................
Commission File Number:................................................0-25980
First Citizens Banc Corp
------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-1558688
---- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
100 East Water Street, Sandusky, Ohio 44870
-----------------------------------------------------------
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 625-4121
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
Common Stock, no par value
Outstanding at November 12, 1997
3,051,504 common shares
<PAGE> 2
FIRST CITIZENS BANC CORP
Index
<TABLE>
<CAPTION>
PART I. Financial Information
<S> <C> <C>
ITEM 1. Financial Statements:(Unaudited)
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996.........................................3
Consolidated Statements of Income
Three and nine months ended September 30, 1997 and 1996..........................4
Condensed Consolidated Statements of Shareholders' Equity
Three and nine months ended September 30, 1997 and 1996..........................5
Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996....................................6
Notes to Consolidated Financial Statements........................................7-15
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................16-21
PART II. Other Information
ITEM 1. Legal Proceedings ..................................................................22
ITEM 2. Changes in Securities ..............................................................22
ITEM 3. Defaults upon Senior Securities ....................................................22
ITEM 4. Submission of Matters to a Vote of Security Holders ................................22
ITEM 5. Other Information ..................................................................22
ITEM 6. (a) Exhibits........................................................................22
(b) Reports on Form 8-K ............................................................22
SIGNATURES ................................................................................23
</TABLE>
<PAGE> 3
FIRST CITIZENS BANC CORP
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
Assets 1997 1996
---------------- ----------------
<S> <C> <C>
Cash and due from banks $ 12,314,467 $ 11,615,060
Federal funds sold 7,462,000 8,521,000
Securities
Available-for-sale 57,680,659 58,971,155
Held-to-maturity 7,616,683 9,789,977
------------- -------------
Total securities 65,297,342 68,761,132
Loans 221,491,064 205,127,385
Less: Allowance for possible loan losses (2,809,282) (2,642,000)
------------- -------------
Net Loans 218,681,782 202,485,385
Office premises and equipment, net 7,102,512 6,373,506
Accrued interest receivable 2,212,859 1,823,667
Intangible assets 2,929,023 1,679,465
Other assets 1,876,880 1,518,404
------------- -------------
Total assets $ 317,876,865 $ 302,777,619
============= =============
Liabilities
Deposits
Interest bearing deposits $ 225,943,331 $ 215,873,075
Noninterest bearing deposits 28,304,280 24,624,624
------------- -------------
Total deposits 254,247,611 240,497,699
Federal Home Loan Bank borrowings 14,790,282 15,671,686
Securities sold under agreements to repurchase 8,793,421 9,157,032
U. S. Treasury interest bearing demand notes payable 2,449,491 1,388,979
Accrued interest, taxes and other expenses 1,491,628 1,634,915
------------- -------------
Total liabilities 281,772,433 268,350,311
Shareholders' Equity
Common stock, no par value; 10,000,000 shares authorized,
3,051,504 shares issued and outstanding 15,257,520 15,257,520
Retained earnings 20,531,292 19,005,014
Unrealized gain on securities available for sale 315,620 164,774
------------- -------------
Total shareholders' equity 36,104,432 34,427,308
------------- -------------
Total liabilities and shareholders' equity $ 317,876,865 $ 302,777,619
============= =============
</TABLE>
See notes to interim consolidated financial statements. Page 3
<PAGE> 4
FIRST CITIZENS BANC CORP
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- -----------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,725,894 $4,312,625 $13,675,600 $12,741,121
Interest and dividends on securities
Taxable 613,331 680,172 1,883,498 2,038,726
Nontaxable 322,132 343,840 994,279 1,086,749
Interest on federal funds sold 114,062 155,447 334,254 372,017
Other interest income 10,464 1,764 24,239 4,006
---------- ---------- ----------- -----------
Total interest income 5,785,883 5,493,848 16,911,870 16,242,619
INTEREST EXPENSE:
Interest on deposits 2,147,006 1,983,765 6,206,641 5,966,755
Interest on FHLB borrowings 214,547 231,010 656,196 704,885
Interest on other borrowings 100,452 107,984 232,850 268,902
---------- ---------- ----------- -----------
Total interest expense 2,462,005 2,322,759 7,095,687 6,940,542
---------- ---------- ----------- -----------
NET INTEREST INCOME 3,323,878 3,171,089 9,816,183 9,302,077
PROVISION FOR LOAN LOSSES 118,000 89,500 319,500 238,500
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER 3,205,878 3,081,589 9,496,683 9,063,577
PROVISION FOR LOAN LOSSES
NONINTEREST INCOME:
Computer center service charges and retail sales 543,849 501,171 1,654,239 1,556,407
Service charges on deposit accounts 132,020 127,464 392,659 364,891
Security gain 159,073 2,000 165,323 17,850
Other operating income 312,606 220,420 769,238 589,404
---------- ---------- ----------- -----------
Total noninterest income 1,147,548 851,055 2,981,459 2,528,552
NONINTEREST EXPENSE:
Salaries, wages and benefits 1,443,699 1,315,957 4,283,555 3,932,921
Net occupancy expense 186,162 141,857 477,906 414,045
Equipment 183,877 158,310 545,921 467,120
FDIC Premiums 7,747 1,000 23,229 3,500
Franchise Tax 109,187 100,417 325,286 319,726
Professional Fees 196,122 140,359 483,441 402,290
Other operating expenses 820,812 667,319 2,388,431 1,889,552
---------- ---------- ----------- -----------
Total noninterest expense 2,947,606 2,525,219 8,527,769 7,429,154
---------- ---------- ----------- -----------
Income before taxes 1,405,820 1,407,425 3,950,373 4,162,975
Provision for income taxes 426,147 396,825 1,142,463 1,157,584
---------- ---------- ----------- -----------
Net income $ 979,673 $1,010,600 $ 2,807,910 $ 3,005,391
========== ========== =========== ===========
Per share data (based on 3,051,504 shares)
Earnings per share $ 0.32 $ 0.33 $ 0.92 $ 0.98
========== ========== =========== ===========
Dividends declared $ 0.1400 $ 0.1300 $ 0.4200 $ 0.3825
========== ========== =========== ===========
</TABLE>
See notes to interim consolidated financial statements Page 4
<PAGE> 5
FIRST CITIZENS BANC CORP
Consolidated Statements of Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Balance at beginning of period $ 35,466,816 $ 34,499,182 $ 34,427,308 $ 33,806,791
Net earnings 979,673 1,010,600 2,807,910 3,005,391
Cash dividends (427,211) (396,696) (1,281,632) (1,167,200)
Market adjustment on securities
available for sale 85,154 125,695 150,846 (406,201)
------------ ------------ ------------ ------------
Balance at end of period $ 36,104,432 $ 35,238,781 $ 36,104,432 $ 35,238,781
============ ============ ============ ============
</TABLE>
See notes to interim consolidated financial statements Page 5
<PAGE> 6
FIRST CITIZENS BANC CORP
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 2,807,910 $ 3,005,391
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of office premises and equipment 506,290 458,325
Gain on disposal of office premises and equipment --- (2,343)
Amortization of intangible assets 244,536 151,151
Provision for loan losses 319,500 238,500
Gain on securities (165,323) (17,850)
Change in deferred loan fees (51,538) (1,698)
Net amortization of security premiums and discounts 83,812 97,783
Change in accrued interest receivable (389,192) 192,322
Change in other assets (358,476) (474,186)
Change in accrued interest, taxes and other expenses (248,655) (492,796)
------------ ------------
Net cash from operating activities 2,748,864 3,154,599
Cash flows from investing activities:
Maturities and calls of securities, held-to-maturity 2,146,604 5,340,226
Maturities and calls of securities, available-for-sale 12,886,917 7,600,777
Purchases of securities, available-to-sale (11,259,667) (9,891,620)
Loans made to customers, net of principal collected (16,464,359) (4,572,736)
Change in federal funds sold 1,059,000 (1,535,000)
Proceeds from sale of office premises and equipment --- 325,000
Purchases of office premises and equipment (279,151) (527,442)
------------ ------------
Net cash from investing activities (11,910,656) (3,260,795)
Cash flows from financing activities:
Cash and cash equivalents received from branch acquisition 12,153,945 ---
Repayments of FHLB borrowings (881,404) (832,717)
Change in deposits (826,611) (3,840,283)
Change in securities sold under agreements to repurchase (363,611) 1,065,749
Change in U. S. Treasury interest-bearing demand notes payable 1,060,512 1,538,157
Cash dividends paid (1,281,632) (1,167,200)
------------ ------------
Net cash from financing activities 9,861,199 (3,236,294)
------------ ------------
Net Change in cash and due from banks 699,407 (3,342,490)
Cash and due from banks at beginning of period 11,615,060 16,295,910
------------ ------------
Cash and due from banks at end of period $ 12,314,467 $ 12,953,420
============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest $ 7,164,337 $ 7,085,265
============ ============
Federal Income taxes $ 1,051,000 $ 1,105,000
============ ============
</TABLE>
See notes to interim consolidated financial statements Page 6
<PAGE> 7
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
(1) Consolidated Financial Statements
The consolidated financial statements include the accounts of First
Citizens Banc Corp (Corporation) and it wholly-owned subsidiaries, The
Citizens Banking Company (Citizens), The Castalia Banking Company
(Castalia), SCC Resources, Inc. (SCC), and R. A. Reynolds Appraisal
Service, Inc. (Reynolds). All significant intercompany balances and
transactions have been eliminated in consolidation.
The consolidated balance sheets as of September 30, 1997 and December
31, 1996; the consolidated statements of income for the three months
ended September 30, 1997 and 1996, and for the nine months ended
September 30, 1997 and 1996; the condensed consolidated statement of
shareholders' equity for the three months ended September 30, 1997 and
1996, and for the nine month periods ended September 30, 1997 and 1996;
and the consolidated statement of cash flows for the nine month periods
ended September 30, 1997 and 1996 have been prepared by the Corporation
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the Corporation's financial position as of September 30, 1997 and its
results of operations and changes in cash flows for the periods ended
September 30, 1997 and 1996 have been made. The accompanying
consolidated financial statements have been prepared in accordance with
the instructions of Form 10-Q and therefore do not purport to contain
all necessary financial disclosures required by generally accepted
accounting principles. The results of operations for the period ended
September 30, 1997 are not necessarily indicative of the operating
results for the full year. Reference is made to the accounting policies
of the Corporation described in the notes to financial statements
contained in the Corporation's 1996 annual report. The Corporation has
consistently followed these policies in preparing this form 10-Q.
The provision for income taxes is based on the effective tax rate
expected to be applicable for the entire year. The corporation follows
the liability method of accounting for income taxes. The liability
method provides that deferred tax assets and liabilities are recorded
based on the difference between the tax basis of assets and liabilities
and their carrying amounts for financial reporting purposes, using
enacted tax rates.
Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities",was issued by the Financial Accounting
Standards Board ("FASB") in 1996. It revises the accounting for
transfers of financial assets, such as loans and securities, and for
distinguishing between sales and secured borrowings. It was originally
effective for some transactions in 1997 and others
Page 7
<PAGE> 8
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
in 1998. SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125" was issued in December 1996. SFAS
No. 127 defers for one year the effective date of provisions related to
securities lending, repurchase agreements and other similar
transactions. The remaining portions of SFAS No. 125 will continue to
be effective January 1, 1997. SFAS No. 125 did not have a material
impact on the Corporation's financial statements.
In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which
is effective for the financial statements for periods ending after
December 15, 1997, including interim periods. SFAS No. 128 simplifies
the calculation of earnings per share by replacing primary EPS with
basic EPS. It also requires dual presentation of basic EPS and diluted
EPS for entities with complex capital structures. Basic EPS includes no
dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding for the
period. Diluted EPS reflects the potential dilution of securities that
could share in earnings such as stock options, warrants or other common
stock equivalents. All prior period EPS data will be restated to
conform with the new presentation.
In February 1997, the FASB issued SFAS No. 129, "Disclosures of
Information about Capital Structure." SFAS No. 129 consolidated
existing accounting guidance relating to disclosure about a company's
capital structure. Public Companies generally have been required to
make disclosures now required by SFAS and, therefore, SFAS No. 129
should have no impact on the Corporation. SFAS No. 129 is effective for
financial statements for periods ending after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. SFAS
No. 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income
for the period in that financial statement.
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. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier
Page 8
<PAGE> 9
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
periods provided for comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information." This statement significantly
changes the way that the public business enterprises report information
about operating segments in annual financial statements and requires
that those enterprises report selected information about reportable
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information
about an enterprise's reportable operating segments which is based on
reporting information the way that management organizes segments within
the enterprise for making operating decisions and assessing
performance. For many enterprises, The management approach will likely
result in more segments being reported. In addition, the Statement
requires that selected information be reported in interim financial
statements. SFAS No. 131 is effective for financial statements for the
periods beginning after December 15, 1997.
(2) Branch Acquisition
On January 21, 1997, Citizens acquired from EST National Bank of
Elyria, Ohio, certain assets including cash and premises and equipment
and assumed certain deposit and other liabilities of two branch banking
offices. The transaction was accounted for as a purchase, and
accordingly, the acquired assets and liabilities have been recorded
based on their respective market values at the date of acquisition. A
summary of the assets acquired and the liabilities assumed are as
follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
<S> <C> <C> <C>
Cash and cash equivalents $12,153,945 Noninterest bearing deposits $4,559,545
Premises and equipment 956,145 Interest bearing deposits 10,016,978
--------------
Identified intangible assets 1,494,094 Total deposits 14,576,523
--------------
Total assets $14,604,184
==============
Other liabilities 27,661
--------------
Total liabilities $14,604,184
==============
</TABLE>
Page 9
<PAGE> 10
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
(3) Securities
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities, as presented in the consolidated balance
sheets at September 30, 1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
September 30, 1997
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
AVAILABLE FOR SALE Cost Gains Losses Value
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $34,087,736 $67,507 ($102,491) $34,052,752
Obligations of state and political
subdivisions 18,396,565 540,050 (26,293) 18,910,322
Other securities, including mortgage-
backed securities 4,718,148 --- (563) 4,717,585
----------------- ----------------- ----------------- ------------------
$57,202,449 $607,557 ($129,347) $57,680,659
=========== ======== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1997
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
HELD TO MATURITY Cost Gains Losses Value
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $1,000,000 $7,813 --- $1,007,813
Obligations of state and political
subdivisions 4,712,673 61,520 (3,710) 4,770,483
Other securities, including mortgage-
backed securities 1,904,010 9,858 (4,573) 1,909,295
----------------- ----------------- ----------------- ------------------
$7,616,683 $79,191 ($8,283) $7,687,591
========== ======= ======== ==========
</TABLE>
Page 10
<PAGE> 11
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
AVAILABLE FOR SALE Cost Gains Losses Value
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $37,000,835 $58,526 ($155,293) $36,904,068
Obligations of state and political
subdivisions 18,109,603 433,174 (86,282) 18,456,495
Other securities, including mortgage-
backed securities 3,611,060 --- (468) 3,610,592
----------------- ----------------- ----------------- ------------------
$58,721,498 $491,700 ($242,043) $58,971,155
=========== ======== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
HELD TO MATURITY Cost Gains Losses Value
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $1,000,000 $23,125 --- $1,023,125
Obligations of states and political
subdivisions 6,329,284 141,366 (7,318) 6,463,332
Other securities, including mortgage-
backed securities 2,460,693 12,007 (10,648) 2,462,052
----------------- ----------------- ----------------- ------------------
$9,789,977 $176,498 ($17,966) $9,948,509
========== ======== ========= ==========
</TABLE>
Page 11
<PAGE> 12
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
The amortized cost and estimated fair value of securities at September 30, 1997,
by contractual maturity , are shown below. Actual maturities may differ from
contractual maturities because issuers may have the right to call or prepay
obligations.
<TABLE>
<CAPTION>
Estimated Fair
Amortized Cost Value
<S> <C> <C>
AVAILABLE FOR SALE
Due in one year or less $18,069,433 $18,043,705
Due after one year through five years 23,778,255 24,063,006
Due after five years through ten years 9,498,755 9,710,016
Due after ten years 1,137,858 1,146,347
Mortgage-backed securities 45,379 44,816
Other securities 4,672,769 4,672,769
---------------------- ----------------------
Total securities available for sale $57,202,449 $57,680,659
====================== ======================
HELD TO MATURITY
Due in one year or less $4,423,279 $4,463,314
Due after one year through five years 1,289,394 1,314,982
Mortgage-backed securities 1,904,010 1,909,295
---------------------- ----------------------
Total securities held to maturity $7,616,683 $7,687,591
====================== ======================
</TABLE>
No securities were sold during the nine months ended September 30, 1997 or 1996.
Securities called or settled by the issuer in 1996 resulted in gains of $165,323
for the nine months ended September 30, 1997 and $17,850 for the nine months
ended September 30, 1996. The increase in gains in 1997 is the result of
recoveries on a security that was written off in 1995.
Securities with a carrying value of approximately $36,937,000 and $33,650,000
were pledged as of September 30, 1997 and December 31, 1996, respectively, to
secure public deposits, other deposits and liabilities as required by law.
Page 12
<PAGE> 13
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
(4) Loans
Loans as presented in the consolidated balance sheets are comprised of
the following classifications:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
--------------------------- ---------------------------
<S> <C> <C>
Commercial & agriculture $44,777,465 $42,038,299
Real estate - mortgage 136,680,705 131,491,632
Real estate - construction 1,647,936 2,079,810
Consumer loans 37,914,585 29,232,380
Credit card and other 1,583,516 1,449,945
Deferred Loan Fees (1,113,143) (1,164,681)
--------------------------- ---------------------------
Total loans $221,491,064 $205,127,385
============ ============
</TABLE>
(5) Allowance for Loan Losses
A summary of the activity in the allowance for loan losses for the nine
months ended September 30, 1997 and September 30, 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------- ---------------------
<S> <C> <C> <C>
Balance January 1, $2,642,000 $2,602,000
Loans Charged Off (268,844) (288,831)
Recoveries of Loans 116,626 97,196
Provision for loan losses 319,500 238,500
-------------------- ---------------------
Balance September 30, $2,809,282 $2,648,865
========== ==========
</TABLE>
Page 13
<PAGE> 14
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
Information regarding impaired loans is as follows for the nine months ended
September 30.
<TABLE>
<CAPTION>
1997 1996
-------------------- ---------------------
<S> <C> <C>
Average investment in impaired loans $1,893,998 $1,984,408
Interest income recognized on impaired loans
including interest income recognized on cash
basis $125,954 $102,421
Interest income recognized on impaired loans $125,954 $102,421
on cash basis
</TABLE>
Information regarding impaired loans at September 30, 1997 and December 31, 1996
is as follows:
<TABLE>
<CAPTION>
9/30/97 12/31/96
-------------------- ---------------------
<S> <C> <C>
Balance impaired loans $1,845,000 $1,982,000
Less portion for which no allowance for loan
losses is allocated --- ---
-------------------- ---------------------
Portion of impaired loan balance for which an
allowance for credit losses is allocated $1,845,000 $1,982,000
========== ==========
Portion of allowance for loan losses allocated to $449,000 $495,000
the impaired loan balance ======== ========
</TABLE>
(6) Commitments, Contingencies and Off-Balance Sheet Risk
The Bank subsidiaries are parties to financial instruments with off-balance
sheet risk in the normal course of business to meet financing needs of their
customers. These include commitments to make or purchase loans, undisbursed
lines of credit, undisbursed credit card balances and letters of credit. The
Banks' exposure to credit loss in the event of nonperformance by the other party
to the financial instrument is represented by the contractual amount of those
instruments. The Banks follow the same credit policy to make such commitments as
they use for loans recorded on the balance sheet. Since many commitments to make
loans expire without being used, the amount does not necessarily represent
future cash commitments. Collateral obtained relating to the commitments is
determined using management's credit evaluation of the borrower and may include
real estate, vehicles, business
Page 14
<PAGE> 15
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
assets, deposits and other items. The Banks do make fixed rate loan commitments
for short periods of time. However, such commitments were immaterial as of
September 30, 1997 and December 31, 1996.
Commitments to extend credit and letters of credit approximated the following
amounts at September 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
Contract Amount
---------------
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Commitment to extend credit:
Lines of credit and construction loans $17,111,000 $14,081,000
Credit cards 4,262,000 4,235,000
Letters of credit 339,000 62,000
--------------------------- ------------------------
$21,712,000 $18,378,000
</TABLE>
Citizens and Castalia are required to maintain certain reserve balances on hand
in accordance with the Federal Reserve Board requirements. The reserve balance
maintained in accordance with such requirements for the periods ended September
30, 1997 and December 31, 1996 approximated $2,118,000 and $1,702,000
respectively.
In the normal course of business, the Corporation and its subsidiaries are
involved in various legal actions, but in the opinion of management and its
legal counsel, ultimate disposition of such legal matters is not expected to
have a material adverse effect on the consolidated financial statements.
Page 15
<PAGE> 16
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
Introduction
- ------------
The following discussion focuses on the consolidated financial condition of
First Citizens Banc Corp at September 30, 1997, compared to December 31, 1996
and the consolidated results of operations for the three and nine months ended
September 30, 1997 compared to the same periods in 1996. This discussion should
be read in conjunction with the consolidated financial statements and footnotes
included in this Form 10-Q.
The registrant is not aware of any trends, events or uncertainties that will
have, or are reasonably likely to have, a material effect on the liquidity,
capital resources, or operations except as discussed herein. Also, the
registrant is not aware of any current recommendation by regulatory authorities
which would have such effect if implemented.
In addition to the historical information contained herein, the following
discussion contains forward- looking statements that involve risks and
uncertainties. Economic circumstances, the Corporation's operations, and the
Corporation's actual results could differ significantly from those disclosed in
forward-looking statements. Some of the factors that could cause or contribute
to such differences are discussed herein but also include changes in the economy
and interest rates in the nation and in the Corporation's general market area.
Some of the forward-looking statements included herein are the statements
regarding the following:
1. Management's determination of the amount of loan loss allowance and
the amount of the loan loss provision;
2. The sufficiency of the Corporation's liquidity and capital reserves.
See Exhibit 99, which is incorporated herein by reference.
Financial Condition
- -------------------
Total assets of the Corporation at September 30, 1997 totaled $317,876,865
compared to $302,777,619 at December 31, 1996. This was an increase of
$15,099,246 or 5.0 percent. Within the structure of the assets, net loans have
increased $16,196,397 since December 31, 1996. Office premises and equipment
have increased $729,006 and intangible assets have increased $1,249,558 since
December 31, 1996. The increase in these two areas is attributable to the
acquisition of two branches by The Citizens Banking Company.
Page 16
<PAGE> 17
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
At September 30, 1997, $57,680,659 or 88.3 percent of the securities portfolio
was classed as available-for-sale. The remainder, $7,616,683 or 11.7 percent was
classified as held-to-maturity. Securities decreased $3,463,790 or 5.0 percent
from December 31, 1996. The decrease in the balances of the portfolio is a
result of maturities and calls of securities being reinvested in loans rather
than entirely in securities. As of September 30, 1997, the net unrealized gain
of the available- for-sale portfolio was $478,210 compared to $249,657 at
December 31, 1996. The increase in the net unrealized gain reflects changes in
market values due to the current interest rate environment.
Total loans at September 30, 1997 increased $16,363,679 or 8.0 percent from
year-end 1996. At September 30, 1997, the net loan to deposit ratio was 86.0
percent compared to 84.2 percent at December 31, 1996. This increase in the loan
to deposit ratio is due partly to loan growth generated by a home equity loan
promotion held in conjunction with the local "Home Show"during the second
quarter of 1997.
At September 30, 1997, the allowance for loan losses as a percent of total loans
was 1.27 percent compared to 1.29 percent at December 31, 1996. For the nine
months of operations of 1997, $319,500 was placed into the allowance from
earnings compared to $238,500 for the same period of 1996. Net charge-offs for
the first nine months of 1997 were $152,218 compared to $191,635 for the same
period of 1996. Impaired loans at September 30, 1997 totaled $1,845,000 or 0.83
percent of the loan portfolio compared to $1,982,000 or .97 percent of the loan
portfolio at December 31, 1996. The majority of the growth relates to branch
purchases previously discussed.
Total deposits at September 30, 1997 increased $13,749,912 from year-end 1996.
Noninterest bearing deposits, representing demand deposit balances, increased
$3,679,656 from year-end 1996. Interest bearing deposits, including savings and
time deposits, increased $10,070,256 from year-end 1996. The year to date 1997
average balance of savings deposits has increased $1,598,000 compared to the
average balance of the same period for 1996. The current average rate of these
deposits is 2.80 percent. The year to date 1997 average balance of time
certificates has increased $4,462,000 compared to the average balance for the
same period for 1996. The current average rate on these deposits is 5.31
percent.
Other borrowed funds have decreased $184,503 from December 31, 1996 to September
30, 1997. Federal Home Loan Bank borrowings have decreased $881,404 as a result
of scheduled paydowns. Securities sold under agreements to repurchase have
decreased $363,611 and U.S. Treasury Tax Demand Notes have increased $1,060,512.
Shareholders' equity at September 30, 1997 was $36,104,432 which was 11.4
percent of total assets. Shareholders' equity at December 31, 1996 was
$34,427,308 which was also 11.4 percent of total assets. The increase in
shareholders' equity was represented by earnings of $2,807,910 less
Page 17
<PAGE> 18
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
dividends of $1,281,632 and plus the increase in the unrealized gain on
securities available for sale, net of tax, of $150,846. Total outstanding shares
for the period December 31, 1996 to September 30, 1997 were 3,051,504. The
company paid cash dividends on February 1, 1997, May 1, 1997 and on August 1,
1997, each at the rate of $.14 per share.
Results of Operations
- ---------------------
Net income for the quarter ended September 30, 1997 was $979,673 or $.32 per
common share, compared to $1,010,600 or $.33 per common share for the same
period in 1996. This was a decrease of $30,927 or 3.1 percent. Net earnings for
the nine month period ended September 30, 1997 were $2,807,910 or $.92 per
common share compared to $3,005,391 or $.98 per common share for the same period
in 1996. This was a decrease of $197,481 or 6.6 percent.
Net interest income after provision for loan losses for the third quarter 1997
totaled $3,205,878 compared to $3,081,589 for the third quarter of 1996. This
was an increase of $124,289 or 4.0 percent. Net interest income after provision
for loan losses for the first nine months of 1997 totaled $9,496,683 compared to
$9,063,577 for the first nine months of 1996. This was an increase of $433,106
or 4.8 percent. Total interest income for the first nine months of 1997 has
increased $669,251 or 4.1 percent compared to the same period of 1996. While the
average rate on earning assets on a tax equivalent basis for the first nine
months of 1997 has decreased to 7.89 percent compared to 8.06 percent for the
same period of 1996, total interest income has increased because of a higher
average balance of interest earning assets, largely due to loan growth added
since December 31, 1996. Interest expense on deposits for the first nine months
of 1997 has increased $239,886 compared to the same period of 1996 due to the
additional deposits acquired in the purchase of two branches. Interest expense
on FHLB borrowings decreased $48,689 and interest expense on other borrowings
decreased $36,052, resulting in a net increase in total interest expense for the
first nine months of 1997 of $155,145, or 2.2 percent compared to the same
period of 1996 The net interest margin on a tax equivalent basis for the first
nine months was 4.68 percent for the period ended September 30, 1997 and 4.74
percent for the period ended September 30, 1996.
Noninterest income for the third quarter 1997 totaled $1,147,548 compared to
$851,055 for the third quarter 1996. This was an increase of $296,493 or 34.8
percent and is attributed to increased computer center service charges and
retail sales of $42,678, increased other operating income of $92,186 and
increased gain on securities of $157,073. The increase in gain on securities is
a result of recoveries made on a security written off in 1995. Noninterest
income for the first nine months of 1997 totaled $2,981,459 compared to
$2,528,552 for the same period in 1996. This was an increase of $452,907 or 17.9
percent and is attributed to increases in revenue from the computer operations
of $97,832, increased service charge on deposit accounts of $27,768, increased
gain on
Page 18
<PAGE> 19
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
securities of $147,473 and increased other operating income of $179,834. The
major factors which make up the increase in other operating income are ATM
service fee income and brokerage services income. ATM income increased $77,333
because the Banks instituted a surcharge for foreign-card usage at their ATMs.
Brokerage services income increased $30,393 because of an increase in the volume
of business in that area. Other operating income increased for the reasons
previously mentioned.
Noninterest expense for the third quarter 1997 totaled $2,947,606 compared to
$2,525,219 for the third quarter 1996. This was an increase of $422,387 or 16.7
percent. Noninterest expense for the first nine months of 1997 totaled
$8,527,769 compared to $7,429,154 for the first nine months of 1996. This was an
increase of $1,098,615 or 14.8 percent. The largest monetary increase in
non-interest expense is in salaries, wages and employee benefits, which
increased $350,634 or 8.9 percent for the first nine months of 1997 compared to
the same period of 1996. The increase in salaries, wages and employee benefits
is due to additional staffing brought on by the acquisition of two branches.
Federal Income Taxes
- --------------------
The federal income tax expense for the third quarter 1997 totaled $426,147
compared to $396,825 for the third quarter 1996. This was a increase of $29,322
or 7.4 percent. The federal income tax expense for the first nine months of 1997
totaled $1,142,463 compared to $1,157,584 for the same period of 1996. This was
a decrease of $15,121 or 1.3 percent. The decrease in the federal income taxes
is a result of the decrease in total earnings before taxes of $212,602.
Capital Resources
- -----------------
Shareholders' equity totaled $36,104,432 at September 30, 1997 compared to
$34,427,308 at December 31, 1996. All of the capital ratios exceed the
regulatory minimum guidelines as identified in the following table:
<TABLE>
<CAPTION>
Corporation Ratios Regulatory
9/30/97 12/31/96 Minimums
------- -------- --------
<S> <C> <C> <C>
Tier I Risk Based Capital 19.30% 20.76% 4.00%
Total Risk Based Capital 20.56% 22.20% 8.00%
Leverage Ratio 10.23% 10.64% 4.00-5.00%
</TABLE>
Page 19
<PAGE> 20
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
The Corporation paid cash dividends of $.14 per common share on February 1,
1997, May 1, 1997 and August 1, 1997 compared to $.125 per common share the
February 1, 1996, $.1275 per common share on May 1, 1996 and $.14 per common
share on August 1, 1996. 1997 year-to-date dividends paid have increased $.0275
per common share from year-to-date 1996.
Capital expenditures totaled $1,235,296 for the first nine months of 1997
compared to $527,442 for the same period of 1996. The capital expenditures for
the first nine months of 1997 include $956,145 of premises and equipment
acquired in the purchase of two branches.
First Citizens Banc Corp ("First Citizens") and The Farmers State Bank of New
Washington ("Farmers") have signed a definitive agreement for the affiliation of
Farmers with First Citizens. Farmers, a commercial bank located in New
Washington, Ohio, having total assets at September 30, 1997 of 155,306,000, is
expected to become a separate operating subsidiary of First Citizens and operate
under its current name and charter. Farmers operates banking offices in New
Washington, Tiro and Chatfield in Crawford County; Green Camp in Marion County;
and Richwood in Union County.
Under the terms of the agreement, First Citizens will exchange 6.5 shares of its
common stock for each of the 200,000 shares of Farmers outstanding stock. Based
on the closing bid price of First Citizens on July 1, 1997 of $34.50, the
transaction would be valued at approximately $44.85 million, or $224.25 per
share of Farmers stock. The merger, which will be accounted for as a pooling of
interests, is expected to be consummated during February 1998, pending Farmers
and First Citizens shareholder approval, regulatory approval and other customary
conditions of closing. The transaction is expected to be a tax-free
reorganization for federal income tax purposes.
First Citizens currently plans to add additional personnel, equipment ATM's and
other operating improvements to Farmers. In addition, First Citizens expects to
offer additional loan, deposit, security brokerage, and trust products not
currently offered to Farmers customers. With the added operating expenditures,
and excluding the expected revenue enhancements, First Citizens estimates that
the transaction will be neutral to earnings per share in the first year
following the acquisition and will improve its earnings growth rate in the
future.
Liquidity
- ---------
Liquidity as it relates to the banking entities of the Corporation is the
ability to meet the cash demand and credit needs of its customers. For the first
nine months of 1997 the Banks maintained a federal funds sold position that
averaged $8,220,000. In addition, the Banks, through their respective
correspondent banks maintain federal funds borrowing lines totaling $11,500,000
and the Banks
Page 20
<PAGE> 21
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
have total borrowing availability at the Federal Home Loan Bank of Cincinnati of
$25,800,000, including additional borrowing capacity of $11,009,718 at September
30, 1997. Finally, 88.3 percent of the Corporation's security portfolio has been
classified as available for sale which provides additional liquidity.
Page 21
<PAGE> 22
First Citizens Banc Corp
Other Information
Form 10-Q
- --------------------------------------------------------------------------------
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. (a) EXHIBIT NO. 27 Financial Data Schedule . . . . .25
(b) EXHIBIT NO. 99 Safe Harbor Under the Private
Securities Litigation Reform Act of
1995
(b) REPORTS ON FORM 8-K - None
Page 22
<PAGE> 23
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, The
registrant has caused this report to be signed on its behalf the undersigned
thereunto duly authorized.
First Citizens Banc Corp
/s/ David A. Voight November 12, 1997
- ---------------------------------------- -----------------
David A. Voight Date
President
/s/ James O. Miller November 12, 1997
- ---------------------------------------- -----------------
James O. Miller Date
Senior Vice President
Page 23
<PAGE> 24
First Citizens Banc Corp
Index to Exhibits
Form 10-Q
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Exhibit
Number Description Page Number
- ------ ----------- -----------
<S> <C> <C>
27 Financial Data Schedule 25
99 Safe Harbor Under the Private Securities Incorporated by reference to Exhibit
Litigation Reform Act of 1995 99 to Annual Report on Form 10-K
for the Year Ended December 31,
1996 filed by the registrant on
March 21, 1997
</TABLE>
Page 24
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000944745
<NAME> FIRST CITIZENS BANC CORP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,314,467
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,462,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57,680,659
<INVESTMENTS-CARRYING> 7,616,683
<INVESTMENTS-MARKET> 7,687,591
<LOANS> 218,681,782
<ALLOWANCE> 2,809,282
<TOTAL-ASSETS> 317,876,865
<DEPOSITS> 254,247,611
<SHORT-TERM> 11,242,912
<LIABILITIES-OTHER> 1,491,628
<LONG-TERM> 14,790,282
0
0
<COMMON> 15,257,520
<OTHER-SE> 20,846,912
<TOTAL-LIABILITIES-AND-EQUITY> 317,876,865
<INTEREST-LOAN> 13,675,600
<INTEREST-INVEST> 2,877,777
<INTEREST-OTHER> 358,493
<INTEREST-TOTAL> 16,911,870
<INTEREST-DEPOSIT> 6,206,641
<INTEREST-EXPENSE> 7,095,687
<INTEREST-INCOME-NET> 9,816,183
<LOAN-LOSSES> 319,500
<SECURITIES-GAINS> 165,323
<EXPENSE-OTHER> 8,527,769
<INCOME-PRETAX> 3,950,373
<INCOME-PRE-EXTRAORDINARY> 2,807,910
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,807,910
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
<YIELD-ACTUAL> 4.68
<LOANS-NON> 1,258,000
<LOANS-PAST> 1,654,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,642,000
<CHARGE-OFFS> 268,844
<RECOVERIES> 116,626
<ALLOWANCE-CLOSE> 2,809,282
<ALLOWANCE-DOMESTIC> 2,809,282
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,591,000
</TABLE>
