<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:...................................June 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 August 12, 1997
3,051,504 common shares
<PAGE> 2
FIRST CITIZENS BANC CORP
Index
<TABLE>
<CAPTION>
PART I. Financial Information
<S> <C>
ITEM 1. Financial Statements:
Consolidated Balance Sheets (unaudited)
June 30, 1997 and December 31, 1996..........................................3
Consolidated Statements of Income (unaudited)
Three and six months ended June 30, 1997 and 1996............................4
Consolidated Statements of Shareholders' Equity (unaudited)
Three and six months ended June 30, 1997 and 1996............................5
Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 1997 and 1996......................................6
Notes to Consolidated Financial Statements (unaudited)........................7-14
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................15-19
PART II. Other Information
ITEM 1. Legal Proceedings ..............................................................20
ITEM 2. Changes in Securities ..........................................................20
ITEM 3. Defaults upon Senior Securities ................................................20
ITEM 4. Submission of Matters to a Vote of Security Holders .........................20-21
ITEM 5. Other Information ..............................................................21
ITEM 6. (a) Exhibits ...................................................................21
SIGNATURES ............................................................................22
</TABLE>
<PAGE> 3
FIRST CITIZENS BANC CORP
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Unaudited)
June 30 December 31
Assets 1997 1996
------------- -------------
<S> <C> <C>
Cash and due from banks 14,656,860 11,615,060
Federal funds sold 6,872,000 8,521,000
Securities (Note 3)
Available-for-sale 57,639,135 58,971,155
Held-to-maturity 8,519,571 9,789,977
------------- -------------
Total securities 66,158,706 68,761,132
Loans (Note 4) 218,506,559 205,127,385
Less: Allowance for possible loan losses (Note 5) (2,755,880) (2,642,000)
------------- -------------
Net Loans 215,750,679 202,485,385
Office premises and equipment, net 7,229,434 6,373,506
Accrued interest receivable 2,194,867 1,823,667
Intangible assets 3,010,535 1,679,465
Other assets 2,036,321 1,518,404
------------- -------------
Total assets 317,909,402 302,777,619
============= =============
Liabilities
Deposits
Interest bearing deposits 220,607,697 215,873,075
Noninterest bearing deposits 33,708,908 24,624,624
------------- -------------
Total deposits 254,316,605 240,497,699
Federal Home Loan Bank borrowings 15,088,267 15,671,686
Securities sold under agreements to repurchase 8,910,684 9,157,032
U. S. Treasury interest bearing demand notes payable 2,301,569 1,388,979
Accrued interest, taxes and other expenses 1,825,461 1,634,915
------------- -------------
Total liabilities 282,442,586 268,350,311
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 19,978,830 19,005,014
Unrealized gain on securities available for sale 230,466 164,774
------------- -------------
Total shareholders' equity 35,466,816 34,427,308
------------- -------------
Total liabilities and shareholders' equity 317,909,402 302,777,619
============= =============
</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 Six months ended
June 30, June 30,
------------------------- ---------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,567,740 $4,218,431 $ 8,949,706 $ 8,428,496
Interest and dividends on securities
Taxable 621,601 669,750 1,270,167 1,358,554
Nontaxable 330,735 365,965 672,147 742,909
Interest on federal funds sold 98,105 103,777 220,192 216,570
Other interest income 12,751 976 13,775 2,242
---------- ---------- ----------- -----------
Total interest income 5,630,932 5,358,899 11,125,987 10,748,771
INTEREST EXPENSE:
Interest on deposits 2,056,206 1,971,774 4,059,635 3,982,990
Interest on FHLB borrowings 218,700 234,980 441,649 473,875
Interest on other borrowings 58,610 72,482 132,398 160,918
---------- ---------- ----------- -----------
Total interest expense 2,333,516 2,279,236 4,633,682 4,617,783
---------- ---------- ----------- -----------
NET INTEREST INCOME 3,297,416 3,079,663 6,492,305 6,130,988
PROVISION FOR LOAN LOSSES (Note 5) 103,000 79,500 201,500 149,000
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER 3,194,416 3,000,163 6,290,805 5,981,988
PROVISION FOR LOAN LOSSES
NONINTEREST INCOME:
Computer center service charges and retail sales 533,648 533,245 1,110,390 1,055,236
Service charges on deposit accounts 131,230 120,907 260,639 237,427
Security gain 0 10,350 6,250 15,850
Other operating income 243,308 196,333 456,632 368,984
---------- ---------- ----------- -----------
Total noninterest income 908,186 860,835 1,833,911 1,677,497
NONINTEREST EXPENSE:
Salaries, wages and benefits 1,420,294 1,308,190 2,839,856 2,616,964
Net occupancy expense 148,981 137,494 291,744 272,188
Equipment 183,420 156,794 362,044 308,810
FDIC Premiums 7,777 1,500 15,482 2,500
Franchise Tax 107,041 106,852 216,099 219,309
Professional Fees 155,399 134,815 287,319 261,931
Other operating expenses 795,054 626,397 1,567,619 1,222,233
---------- ---------- ----------- -----------
Total noninterest expense 2,817,966 2,472,042 5,580,163 4,903,935
---------- ---------- ----------- -----------
Income before taxes 1,284,636 1,388,956 2,544,553 2,755,550
Provision for Income taxes 368,014 387,969 716,316 760,759
---------- ---------- ----------- -----------
Net Income $ 916,622 $1,000,987 $ 1,828,237 $ 1,994,791
========== ========== =========== ===========
Per share data (based on 3,051,504 shares)
Earnings per share $ 0.30 $ 0.33 $ 0.60 $ 0.65
========== ========== =========== ===========
Dividends declared $ 0.140 $ 0.1275 $ 0.2800 $ 0.2525
========== ========== =========== ===========
</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 Six months ended
June 30, June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Balance at beginning of period $ 34,775,135 $ 34,212,506 $ 34,427,308 $ 33,806,791
Net earnings 916,622 1,000,987 1,828,237 1,994,791
Cash dividends (427,210) (389,067) (854,421) (770,505)
Market adjustment on securities
available for sale 202,269 (325,244) 65,692 (531,895)
------------ ------------ ------------ ------------
Balance at end of period $ 35,466,816 $ 34,499,182 $ 35,466,816 $ 34,499,182
============ ============ ============ ============
</TABLE>
See notes to interim consolidated financial statements Page 5
<PAGE> 6
FIRST CITIZENS BANC CORP
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 1,828,237 $ 1,994,791
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of office premises and equipment 316,184 307,090
Amortization of goodwill 163,024 100,767
Provision for loan losses 201,500 149,000
Change in deferred loan fees (25,113) (5,619)
Net amortization of security premiums and discounts 57,967 65,331
Change in accrued interest receivable (371,200) (98,278)
Change in other assets (517,917) (326,697)
Change in accrued interest, taxes and other expenses 129,044 (647,267)
------------ ------------
Net cash from operating activities 1,781,726 1,539,118
------------ ------------
Cash flows from investing activities:
Maturities and calls of securities, held-to-maturity 1,250,302 3,766,546
Maturities and calls of securities, available-for-sale 7,274,063 6,191,462
Purchases of securities, available-to-sale (5,880,373) (7,393,476)
Loans made to customers, net of principal collected (13,441,681) (1,132,925)
Change in federal funds sold 1,649,000 (345,000)
Purchases of office premises and equipment (215,967) (296,628)
------------ ------------
Net cash from investing activities (9,364,656) 789,979
------------ ------------
Cash flows from financing activities:
Cash and cash equivalents received from branch acquisition 12,153,945 0
Repayments of FHLB borrowings (583,419) (551,191)
Change in deposits (757,617) (5,038,221)
Change in securities sold under agreements to repurchase (246,348) (290,190)
Change in U. S. Treasury interest-bearing demand notes payable 912,590 1,340,632
Cash dividends paid (854,421) (770,505)
------------ ------------
Net cash from financing activities 10,624,730 (5,309,475)
------------ ------------
Net Change in cash and due from banks 3,041,800 (2,980,378)
Cash and due from banks at beginning of period 11,615,060 16,295,910
------------ ------------
Cash and due from banks at end of period $ 14,656,860 $ 13,315,532
============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest $ 4,710,137 $ 4,780,528
============ ============
Federal Income taxes $ 626,000 $ 705,000
============ ============
</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 June 30, 1997 and December 31,
1996; the consolidated statements of income for the three month periods
ended June 30, 1997 and 1996, and for the six month periods ended June
30, 1997 and 1996; the consolidated statement of shareholders' equity
for the three months ended June 30, 1997 and 1996, and for the six
month periods ended June 30, 1997 and 1996; and the consolidated
statement of cash flows for the six month periods ended June 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 June 30, 1997 and its results of operations
and changes in cash flows for the periods ended June 30, 1997 and 1996
have been made. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. The results of
operations for the period ended June 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 Corporations'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 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
Page 7
<PAGE> 8
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
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.
(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 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 8
<PAGE> 9
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
(3) Securities
The gross unrealized gains and losses of the securities, as presented
in the consolidated balance sheets at June 30, 1997 and December 31,
1996 are as follows:
<TABLE>
<CAPTION>
June 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 $35,033,460 $18,703 ($115,783) $34,936,380
Obligations of state and political
subdivisions 18,597,513 474,637 (27,696) 19,044,454
Other securities, including mortgage-
backed securities 3,658,971 0 (670) 3,658,301
----------- --------- ------------ -----------
$57,289,944 $493,340 ($144,149) $57,639,135
=========== ========= ============ ===========
<CAPTION>
June 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 $12,813 $0 $1,012,813
Obligations of state and political
subdivisions 5,448,373 88,027 (8,676) 5,527,724
Other securities, including mortgage-
backed securities 2,071,198 9,170 (7,611) 2,072,757
----------- --------- ------------ -----------
$8,519,571 $110,010 ($16,287) $8,613,294
=========== ========= ============ ===========
</TABLE>
Page 9
<PAGE> 10
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 0 (468) 3,610,592
----------- --------- ------------ -----------
$58,721,498 $491,700 ($242,043) $58,971,155
=========== ========= ============ ===========
<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 $0 $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 10
<PAGE> 11
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
The amortized cost and estimated fair value of securities at June 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 $22,071,331 $22,035,996
Due after one year through five years 20,710,629 20,931,077
Due after five years through ten years 10,024,298 10,168,773
Due after ten years 824,715 844,988
Mortgage-backed securities 47,021 46,351
Other securities 3,611,950 3,611,950
----------- -----------
Total securities available for sale $57,289,944 $57,639,135
=========== ===========
HELD TO MATURITY
Due in one year or less $4,599,335 $4,645,023
Due after one year through five years 1,849,035 1,895,511
Mortgage-backed securities 2,071,201 2,072,760
----------- -----------
Total securities held to maturity $8,519,571 $8,613,294
=========== ===========
</TABLE>
No securities were sold during the six months ended June 30, 1997 or 1996.
Securities called or settled by the issuer in 1996 resulted in gains of $6,250
for the six months ended June 30, 1997 and $15,850 for the six months ended June
30, 1996.
Securities with a carrying value of approximately $37,186,000 and $33,650,000
were pledged as of June 30, 1997 and December 31, 1996, respectively, to secure
public deposits, other deposits and liabilities as required by law.
Page 11
<PAGE> 12
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>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Commercial & agriculture $43,800,858 $42,038,299
Real estate - mortgage 137,013,263 131,491,632
Real estate - construction 1,419,601 2,079,810
Consumer loans 35,664,998 29,232,380
Credit card and other 1,747,406 1,449,945
Deferred Loan Fees (1,139,568) (1,164,681)
------------- -------------
Total loans $218,506,558 $205,127,385
============= =============
</TABLE>
(5) Allowance for Loan Losses
A summary of the activity in the allowance for loan losses for the six
months ended June 30, 1997 and June 30, 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Balance January 1, $2,642,000 $2,602,000
Loans Charged Off (183,599) (167,931)
Recoveries of Loans 95,979 69,036
Provision for loan losses 201,500 149,000
------------- -------------
Balance June 30, $2,755,880 $2,652,105
============= =============
</TABLE>
Page 12
<PAGE> 13
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
Information regarding impaired loans is as follows for the six months ended June
30.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Average investment in impaired loans $1,910,217 $2,126,587
Interest income recognized on impaired loans
including interest income recognized on cash
basis $83,969 $68,281
Interest income recognized on impaired loans $83,969 $68,281
on cash basis
</TABLE>
Information regarding impaired loans at June 30, 1997 and December 31, 1996 is
as follows:
<TABLE>
<CAPTION>
6/30/97 12/31/96
---------- ----------
<S> <C> <C>
Balance impaired loans $1,866,000 $1,982,000
Less portion for which no allowance for loan
losses is allocated $0 $0
Portion of impaired loan balance for which an
allowance for credit losses is allocated $1,866,000 $1,982,000
Portion of allowance for loan losses allocated to $466,000 $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 13
<PAGE> 14
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 June
30, 1997 and December 31, 1996.
Commitments to extend credit and letters of credit approximated the following
amounts at June 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
Contract Amount
---------------
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Commitment to extend credit:
Lines of credit and construction loans $15,876,000 $14,081,000
Credit cards 4,242,000 4,235,000
Letters of credit 334,000 62,000
----------- -----------
$20,452,000 $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 average reserve
balance maintained in accordance with such requirements for the periods ended
June 30, 1997 and December 31, 1996 approximated $1,784,000 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 14
<PAGE> 15
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 June 30, 1997, compared to December 31, 1996 and the
consolidated results of operations for the three and six month periods ended
June 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 June 30, 1997 totalled $317,909,402 compared
to $302,777,619 at December 31, 1996. This was an increase of $15,131,783 or 5.0
percent. Within the structure of the assets, net loans have increased
$13,265,294 since December 31, 1996. Office premises and equipment have
increased $855,928 and intangible assets have increased $1,331,070 since
December 31, 1996. The increase in these two areas is attributable to the
acquisition of two branches by The Citizens Banking Company.
Page 15
<PAGE> 16
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Form 10-Q
- --------------------------------------------------------------------------------
At June 30, 1997, $57,639,135 or 87.1 percent of the securities portfolio was
classed as available- for-sale. The remainder, $8,519,571 or 12.9 percent was
classified as held-to-maturity. Securities decreased $2,602,426 or 3.8 percent
from December 31, 1996. The decrease in the balances of the portfolio is a
result of maturities of securities. As of June 30, 1997, the net unrealized gain
of the available-for-sale portfolio was $349,191 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 June 30, 1997 increased $13,379,174 or 6.5 percent from year end
1996. At June 30, 1997, the net loan to deposit ratio was 84.8 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 loan promotion during the second
quarter of 1997.
At June 30, 1997, the allowance for loan losses as a percent of total loans was
1.26 percent compared to 1.29 percent at December 31, 1996. For the six months
of operations of 1997, $201,500 was placed into the allowance from earnings
compared to $149,000 for the same period of 1996. Net charge offs for the first
six months of 1997 were $87,620 compared to $98,895 for the same period of 1996.
Impaired loans at June 30, 1997 totalled $1,866,000 or 0.85 percent of the loan
portfolio compared to $1,982,000 or .97 percent of the loan portfolio at
December 31, 1996.
Total deposits at June 30, 1997 increased $13,818,906 from year end 1996.
Non-interest bearing deposits, representing demand deposit balances, increased
$9,084,284 from year end 1996. Interest bearing deposits, including savings and
time deposits, increased $4,734,622 from year end 1996. The year to date 1997
average balance of savings deposits has increased $1,705,000 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 $2,567,000 compared to the average balance for the
same period for 1996. The current average rate on these deposits is 5.20
percent.
Other borrowed funds have increased $82,823 from December 31, 1996 to June 30,
1997. Federal Home Loan Bank borrowings have decreased $583,419 as a result of
scheduled paydowns. Securities sold under agreements to repurchase have
decreased $246,348 and U.S. Treasury Tax Demand Notes have increased $912,590.
Shareholders' equity at June 30, 1997 was $35,466,816 which was 11.2 percent of
total assets. Shareholders' equity at December 31, 1996 was $34,427,308 which
was 11.4 percent of total assets. The increase in shareholders' equity was
represented by earnings of $1,828,237 less dividends of $854,421 and plus the
increase in the unrealized gain on securities available for sale of $65,692.
Total outstanding shares for the period December 31, 1996 to June 30, 1997 were
3,051,504. The
Page 16
<PAGE> 17
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Form 10-Q
- --------------------------------------------------------------------------------
company paid cash dividends on February 1, 1997 at the rate of $.14 per share,
and on May 1, 1997 at the rate of $.14.
Results of Operations
- ---------------------
Net income for the quarter ended June 30, 1997 were $916,612 or $.30 per common
share compared to $1,000,987 or $.33 per common share for the same period in
1996. This was a decrease of $84,365 or 8.4 percent. Net earnings for the six
month period ended June 30, 1997 were $1,828,237 or $.60 per common share
compared to $1,994,791 or $.65 per common share for the same period in 1996.
This was a decrease of $166,554 or 8.3 percent.
Net interest income for the second quarter 1997 totalled $3,297,416 compared to
$3,079,663 for the second quarter of 1996. This was an increase of $217,753 or
7.1 percent. Net interest income for the first six months of 1997 totalled
$6,492,305 compared to $6,130,988 for the first six months of 1996. This was an
increase of $361,317 or 5.9 percent. Total interest income for the first six
months of 1997 has increased $377,216 or 3.5 percent compared to the same period
of 1996. The average rate on earning assets on a tax equivalent basis for the
first six months of 1997 was 7.90 percent compared to 8.05 percent for the same
period of 1996. Total interest expense for the first six months of 1997 has
increased $15,899 or .34 percent compared to the same period of 1996. The net
interest margin on a tax equivalent basis for the first six months was 4.70
percent for the six month period ended June 30, 1997 and 4.71 percent for the
same period ended June 30, 1996.
Noninterest income for the second quarter 1997 totalled $908,186 compared to
$860,835 for the second quarter 1996. This was an increase of $47,351 or 5.5
percent and is attributed to increased service charges on deposit accounts of
$10,323, decreased gain on securities of $10,350 and increased other operating
income of $46,975. Noninterest income for the first six months of 1997 totalled
$1,833,911 compared to $1,677,497 for the same period in 1996. This was an
increase of $156,414 or 9.3 percent and is attributed to increases in revenue
from the computer operations of $55,154, increased service charge on deposit
accounts of $23,212, decreased gain on securities of $9,600 and increased other
operating income of $87,648.
Noninterest expenses for the second quarter 1997 totalled $2,817,966 compared to
$2,472,042 for the second quarter 1996. This was an increase of $345,924 or 14.0
percent. Noninterest expenses for the first six months of 1997 totalled
$5,580,163 compared to $4,903,395 for the first six months of 1996. This was an
increase of $676,768 or 13.8 percent. The largest monetary increase in
non-interest expense is in salaries, wages and employee benefits, which
increased $222,892 or 8.5 percent for the first six 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.
Page 17
<PAGE> 18
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Form 10-Q
- --------------------------------------------------------------------------------
Federal Income Taxes
- --------------------
The federal income tax expense for the second quarter 1997 totalled $368,014
compared to $387,969 for the second quarter 1996. This was a decrease of $19,955
or 5.1 percent. The decrease in the federal income taxes is a result of the
decrease in total earnings before taxes of $104,320. The federal income tax
expense for the first half of 1997 totalled $716,316 compared to $760,759 for
the first half of 1996. This was a decrease of $44,443 or 5.8 percent. The
decrease in the federal income taxes is a result of the decrease in total
earnings before taxes of $210,997.
Capital Resources
- -----------------
Shareholders' equity totalled $35,466,816 at June 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
6/30/97 12/31/96 Minimums
------- -------- --------
<S> <C> <C> <C>
Tier I Risk Based Capital 19.12% 20.76% 4.00%
Total Risk Based Capital 20.38% 22.20% 8.00%
Leverage Ratio 10.29% 10.64% 4.00-5.00%
</TABLE>
The Corporation paid cash dividends of $.14 per common share on February 1, 1997
and $.14 per common share on May 1, 1997 compared to $.125 per common share the
February 1, 1996 and $.1275 per common share on May 1, 1996. 1997 year-to-date
dividends paid have increased $.0275 per common share from year-to-date 1996.
Capital expenditures totalled $1,172,112 for the first six months of 1997
compared to $418,128 for the same period of 1996. The capital expenditures for
the first six 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 March 31, 1997 of 153,900,000, 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
Page 18
<PAGE> 19
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Form 10-Q
- --------------------------------------------------------------------------------
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
six months of 1997 the Banks maintained a federal funds sold position that
averaged $8,223,000. In addition, the Banks, through their respective
correspondent banks maintain federal funds borrowing lines totalling $11,500,000
and the Banks have total borrowing availability at the Federal Home Loan Bank of
Cincinnati of $25,800,000, including additional borrowing capacity of
$10,613,342 at June 30, 1997. Finally, 87.1 percent of the Corporation's
investment and mortgage-backed investment portfolio has been classified as
available for sale which provides additional liquidity.
Page 19
<PAGE> 20
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
First Citizens Banc Corp held its annual meeting on April 15,
1997, for the purpose of considering and voting on the
following:
1.) To elect three Class III directors to serve for terms of
three years or until their successors are elected and
qualified.
2.) To ratify the appointment of Crowe, Chizek & Co. as
independent auditors for the calendar year 1997
3.) To consider and act upon the amendment to the
Corporation's Code of Regulations to provide that no Director
of the Corporation shall be of the age of seventy-five years
or more on the date of his election or appointment.
4.) To consider and act upon an amendment to the Code of
Regulations of The Citizens Banking Company providing that no
Director of that Corporation shall be of the age of
seventy-two years or more on the date of his election or
appointment, and to create the position of Director Emeritus.
5.) To consider and act upon an amendment to the Code of
Regulations of The Castalia Banking Company providing that no
Director of that Corporation shall be of the age of
seventy-two years or more on the date of his election or
appointment, and to create the position of Director Emeritus.
Three directors, Dean S. Lucal, W. Patrick Murray, Paul H.
Pheiffer were nominated for reelection and were subsequently
reelected as directors. No other issues were brought before
the meeting.
Page 20
<PAGE> 21
First Citizens Banc Corp
Other Information
Form 10-Q
- --------------------------------------------------------------------------------
The summary of the voting of 3,051,504 common shares outstanding were
as follows:
For Against Not Voted
Director Candidate
- ------------------
Dean S. Lucal 2,617,890 2,538 431,076
W. Patrick Murray 2,611,266 9,162 431,076
Paul H. Pheiffer 2,615,242 5,186 431,076
Accounting Firm
- ---------------
Crowe, Chizek & Co. 2,617,948 40 433,516
Amendments to Codes of
- ----------------------
Regulations
- -----------
First Citizens Banc Corp 2,182,627 59,978 808,899
The Citizens Banking Company 2,192,946 60,578 797,980
The Castalia Banking Company 2,189,643 48,686 813,175
ITEM 5. OTHER INFORMATION
None.
ITEM 6. (A) EXHIBIT NO. 27 Financial Data Schedule . . . . . . . . 24
(B) EXHIBIT NO. 99 Safe Harbor Under the Private Securities
Litigation Reform Act of 1995
(B) REPORTS ON FORM 8-K - None
Page 21
<PAGE> 22
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 August 12, 1997
- ------------------------- ---------------
David A. Voight Date
President
/s/ James O. Miller August 12, 1997
- ------------------------- ---------------
James O. Miller Date
Senior Vice President
Page 22
<PAGE> 23
First Citizens Banc Corp
Index to Exhibits
Form 10-Q
- --------------------------------------------------------------------------------
Exhibit
Number Description Page Number
- ------ ----------- -----------
27 Financial Data Schedule 24
99 Safe Harbor Under the Private Incorporated by reference to Exhibit
Securities Litigation Reform 99 to Annual Report on Form 10-K
Act of 1995 for the Year Ended December 31,
1996 filed by the registrant on
February 24, 1997
Page 23
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000944745
<NAME> FIRST CITIZENS BANC CORP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,656,860
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,872,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 57,539,135
<INVESTMENTS-CARRYING> 8,519,571
<INVESTMENTS-MARKET> 8,613,294
<LOANS> 215,750,679
<ALLOWANCE> 2,755,880
<TOTAL-ASSETS> 317,909,402
<DEPOSITS> 254,316,605
<SHORT-TERM> 11,212,253
<LIABILITIES-OTHER> 1,825,461
<LONG-TERM> 15,088,267
<COMMON> 15,257,520
0
0
<OTHER-SE> 20,209,296
<TOTAL-LIABILITIES-AND-EQUITY> 317,909,402
<INTEREST-LOAN> 8,962,069
<INTEREST-INVEST> 1,821,584
<INTEREST-OTHER> 342,334
<INTEREST-TOTAL> 11,125,987
<INTEREST-DEPOSIT> 4,059,635
<INTEREST-EXPENSE> 4,633,682
<INTEREST-INCOME-NET> 6,492,305
<LOAN-LOSSES> 201,500
<SECURITIES-GAINS> 6,250
<EXPENSE-OTHER> 5,580,163
<INCOME-PRETAX> 2,544,553
<INCOME-PRE-EXTRAORDINARY> 1,828,237
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,828,237
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<YIELD-ACTUAL> 4.70
<LOANS-NON> 1,030,000
<LOANS-PAST> 1,857,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,642,000
<CHARGE-OFFS> 183,599
<RECOVERIES> 95,979
<ALLOWANCE-CLOSE> 2,755,880
<ALLOWANCE-DOMESTIC> 2,755,880
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,590,000
</TABLE>
