<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 28, 1998
First Citizens Banc Corp
------------------------
(Exact name of Registrant as specified in its charter)
Ohio 0-25980 34-1558688
---- ------- ----------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
100 East Water Street, P.O. Box 5016, Sandusky, Ohio 44870
----------------------------------------------------------
(Address of principle executive offices)
Registrant's telephone number, including area code: (419) 625-4121
N/A
---
(Former name or former address, if changed since last report)
Date of report: July 10, 1998
-------------
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As previously reported by First Citizens Banc Corp ("First Citizens")
on its current report on Form 8-K filed with the Securities and Exchange
Commission on May 13, 1998, on April 28, 1998, First Citizens acquired Farmers
State Bank of New Washington, Ohio ("Farmers"). First Citizens had previously
announced that an Agreement and Plan of Merger (the "Agreement") was signed by
First Citizens and Farmers on July 3, 1997. The terms of the transaction were
negotiated by First Citizens with the Board of Directors of Farmers and Austin
Associates, Inc., which represented Farmers.
The transaction was completed when Farmers became a wholly owned
subsidiary of First Citizens. Farmers will continue its present business of
providing banking services to the local and surrounding communities. 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 exchanged 6.06 shares
(the "Exchange Ratio") 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 $41.8
million, or $209.07 per share of Farmers stock.
In accordance with Item 7 of Form 8-K, First Citizens is submitting
with this filing the required historical financial information of Farmers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a)(i) The following audited financial statements of Farmers
required by item 7(a) of Form 8-K are incorporated herein:
Farmers State Bank, Balance Sheets
December 31, 1997 and 1996...............................5
Farmers State Bank, Statements of Income
The years ended December 31, 1997 and 1996...............6
Farmers State Bank, Statement of Shareholders' Equity
The years ended December 31, 1997 and 1996...............7
Farmers State Bank, Statements of Cash Flows
The years ended December 31, 1997 and 1996...............8
Notes to Farmers State Bank's Financial Statements.......9-24
2
<PAGE> 3
(ii) The following unaudited financial statements of Farmers,
required by Item 7(a) of Form 8-K, are incorporated herein:
Unaudited Farmers State Bank Condensed Interim Balance Sheet
March 31, 1998..............................................25
Unaudited Farmers State Bank Condensed Interim Statements of
Income
The three months ended March 31, 1998 and 1997..............26
Unaudited Farmers State Bank Condensed Interim Statements of
Cash Flows
The three months ended March 31, 1998 and 1997..............27
Notes to Farmers State Bank's Condensed Interim Financial
Statements....................................................28
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1998..............................................29
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1997...........................................30
Unaudited Pro Forma Consolidated Statement of Income
March 31, 1998..............................................31
Unaudited Pro Forma Consolidated Statement of Income
December 31, 1997...........................................32
Unaudited Pro Forma Consolidated Statement of Income
March 31, 1997................................................33
(b) Exhibits
The Agreement and Plan of Merger signed by First Citizens and
Farmers was filed as an exhibit to First Citizens Report on
Form 8-K dated July 3, 1997 and filed on July 10, 1997.
Financial Data Schedules for the fiscal year ended December 31,
1997 and for the interim year to date period ended March 31,
1998 are incorporated herein.
3
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Farmers State Bank
New Washington, Ohio
We have audited the accompanying balance sheets of The Farmers State Bank as of
December 31, 1997 and 1996, and the related statements of income, changes in
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Farmers State Bank as of
December 31, 1997 and 1996, and the results of its operations, and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
June 10, 1998
4
<PAGE> 5
THE FARMERS STATE BANK
BALANCE SHEETS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
ASSETS
<S> <C> <C>
Cash and due from banks $ 3,367,509 $ 2,531,372
Federal funds sold 7,200,000 900,000
Interest-bearing deposits 347,282 1,033,282
Securities available for sale 78,748,373 54,850,367
Securities held to maturity (Estimated fair value of
$34,778,689 at December 31, 1996) 33,831,385
Loans
Total loans 67,888,080 58,830,332
Allowance for loan losses (1,908,051) (1,293,038)
------------- -------------
Net loans 65,980,029 57,537,294
Office premises and equipment, net 569,035 602,352
Accrued interest and other assets 1,983,046 1,844,716
------------- -------------
Total assets $ 158,195,274 $ 153,130,768
============= =============
LIABILITIES
Deposits
Noninterest-bearing $ 5,361,649 $ 4,958,736
Interest-bearing 131,818,415 130,353,188
------------- -------------
Total deposits 137,180,064 135,311,924
Securities sold under repurchase agreements 900,000 800,000
U.S. Treasury interest-bearing demand note payable 461,817 387,522
Accrued interest, taxes and other liabilities 3,301,903 2,370,292
------------- -------------
Total liabilities 141,843,784 138,869,738
------------- -------------
SHAREHOLDERS' EQUITY
Common stock, $20.00 par value: 200,000 shares authorized,
issued and outstanding at December 31, 1997 and 1996 4,000,000 4,000,000
Additional paid-in capital 4,000,000 4,000,000
Retained earnings 6,340,596 5,614,405
Unrealized gain on securities available for sale, net of tax 2,010,894 646,625
------------- -------------
Total shareholders' equity 16,351,490 14,261,030
------------- -------------
Total liabilities and shareholders' equity $ 158,195,274 $ 153,130,768
============= =============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
THE FARMERS STATE BANK
STATEMENTS OF INCOME
Years ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 5,812,836 $ 4,822,646
Taxable securities 4,024,769 4,377,844
Nontaxable securities 858,718 880,366
Federal funds sold 99,760 156,267
Interest bearing deposits 31,069 93,012
Other, including dividends 283,194 240,850
------------ ------------
Total interest income 11,110,346 10,570,985
INTEREST EXPENSE
Deposits 6,796,697 6,549,900
Other borrowings 68,589 54,514
------------ ------------
Total interest expense 6,865,286 6,604,414
------------ ------------
NET INTEREST INCOME 4,245,060 3,966,571
Provision for loan losses 694,805 365,000
------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,550,255 3,601,571
NONINTEREST INCOME
Service charges on deposit accounts 134,206 128,049
Security gains (losses), net (106,629) 6,172
Other 46,388 60,722
------------ ------------
Total noninterest income 73,965 194,943
NONINTEREST EXPENSE
Salaries, wages and benefits 1,156,761 1,137,062
Occupancy expense 97,653 82,163
Equipment expense 48,445 73,711
Federal deposit insurance premiums 16,805 2,000
State franchise tax 195,273 175,041
Professional fees 469,223 8,613
Other operating expenses 367,282 332,852
------------ ------------
Total noninterest expense 2,351,442 1,811,442
------------ ------------
Income before taxes 1,272,778 1,985,072
Income tax expense 266,587 381,720
------------ ------------
NET INCOME $ 1,006,191 $ 1,603,352
============ ============
EARNINGS PER COMMON SHARE $ 5.03 $ 8.02
============ ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
THE FARMERS STATE BANK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
` Unrealized
Gain on
Additional Securities Total
Common Paid-in Retained Available Shareholders'
Stock Capital Earnings For Sale Equity
----- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 3,000,000 $ 5,000,000 $ 4,291,053 $ 464,761 $ 12,755,814
Stock split, (50,000 shares
issued) 1,000,000 (1,000,000)
Net income 1,603,352 1,603,352
Cash dividends
($ 1.40 per share) (280,000) (280,000)
Change in unrealized gain on
securities available for sale 181,864 181,864
------------- ------------- -------------- ------------- ---------------
Balance, December 31, 1996 4,000,000 4,000,000 5,614,405 646,625 14,261,030
Net income 1,006,191 1,006,191
Cash dividends
($ 1.40 per share) (280,000) (280,000)
Change in unrealized gain on
securities available for sale 1,364,269 1,364,269
------------- ------------- -------------- ------------- ---------------
Balance, December 31, 1997 $ 4,000,000 $ 4,000,000 $ 6,340,596 $ 2,010,894 $ 16,351,490
============= ============= ============== ============= ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
THE FARMERS STATE BANK
STATEMENTS OF CASH FLOWS
Years ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,006,191 $ 1,603,352
Adjustments to reconcile net income to net cash from
operating activities
Security amortization, net 40,523 32,006
Depreciation 73,532 71,049
Amortization of goodwill 10,017 11,836
Security (gains) losses, net 106,629 (6,172)
Provision for loan losses 694,805 365,000
Deferred income taxes (150,342) (86,672)
Change in
Net deferred loan fees 12,867 35,109
Accrued interest receivable 96,698 (129,203)
Other assets (245,045) 25,580
Accrued interest, taxes and other liabilities 379,150 53,024
------------ ------------
Net cash from operating activities 2,025,025 1,974,909
CASH FLOWS FROM INVESTING ACTIVITIES
Securities held to maturity
Proceeds from maturities and repayments 2,077,889 990,789
Purchases (4,447,289) (991,858)
Sales 1,329,289
Securities available for sale
Proceeds from maturities and repayments 7,038,591 6,419,674
Purchases (4,572,779) (9,106,711)
Sales 10,427,598 158,857
Maturity of interest-bearing deposit 686,000 588,749
Loan originations, net of loan payments (9,150,407) (10,845,599)
Property and equipment expenditures (40,215) (161,268)
Change in federal funds sold (6,300,000) 900,000
------------ ------------
Net cash from investing activities (2,951,323) (12,047,367)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 1,868,140 8,412,849
Net change in securities sold under repurchase agreements 100,000 100,000
Cash dividends paid (280,000) (240,000)
Change in U.S. Treasury interest-bearing notes payable 74,295 169,122
------------ ------------
Net cash from financing activities 1,762,435 8,441,971
------------ ------------
Net change in cash and cash equivalents 836,137 (1,630,487)
Cash and cash equivalents at beginning of period 2,531,372 4,161,859
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,367,509 $ 2,531,372
============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the accounting policies adopted by The Farmers
State Bank which have a significant effect on the financial statements.
NATURE OF OPERATIONS: The Bank is primarily engaged in the business of
commercial and retail banking in Crawford County, Ohio and the communities of
Richwood and Green Camp, Ohio. The Bank provides a broad range of banking and
financial services including accepting demand, savings and time deposits and
granting commercial, real estate and consumer loans.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS: To prepare financial
statements in conformity with generally accepted accounting principles,
management makes estimates and assumptions based on available information. These
estimates and assumptions affect the amounts reported in the financial
statements and the disclosures provided. Future results could differ from these
estimates. The allowance for loan losses, fair values of financial instruments
and status of contingencies are particularly subject to change.
CASH: For purposes of reporting cash flows, the Bank considers "cash and cash
equivalents" to include cash on hand and demand deposits with financial
institutions. The Bank reports net cash flows for federal funds sold, customer
loan transactions, deposit transactions, securities sold under agreements to
repurchase and other short-term borrowings. For the years ended December 31,
1997, and 1996, the Bank paid interest of $6,839,000 and $6,521,000, and income
taxes of $480,000 and $382,000. Noncash transactions included transfers from
loans to other real estate owned totaling $82,000 and transfers of securities
held to maturity to securities available for sale of $34,998,000 in the year
ended December 31, 1997.
SECURITIES: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported separately in shareholders'
equity, net of tax. Securities are written down to fair value when a decline in
fair value is not temporary. Interest and dividend income, adjusted by
amortization of purchase premium or discount, is included in earnings. Realized
gains or losses are determined based on the amortized cost of the specific
security sold.
LOANS: Loans are reported at the principal balance outstanding, net of unearned
interest and deferred loan fees and costs. Interest income is reported on the
interest method and includes amortization of net deferred loan fees and costs
over the loan term.
Interest income is not reported when full loan repayment is in doubt, typically
when payments are past due over 90 days. Payments received on such loans are
reported as principal reductions.
(Continued)
9
<PAGE> 10
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and decreased by
charge-offs, net of recoveries. Management estimates the allowance balance
required based on past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral, current economic conditions
and other factors.
Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage, consumer and credit card loans, and on an
individual basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral. Loans
are evaluated for impairment when payments are delayed, typically 90 days or
more, or when it is probable that not all principal and interest amounts will be
collected according to the original terms of the loan.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using both straight-line and
accelerated methods over the estimated useful life of the asset. These assets
are reviewed for impairment under SFAS No. 121 when events indicate the carrying
amount may not be recoverable. Maintenance and repairs are expensed and major
improvements are capitalized.
OTHER REAL ESTATE OWNED: Real estate properties acquired in collection of a loan
are recorded at fair value at acquisition. Any reduction from carrying value of
the related loan to fair value at the time of acquisition is accounted for as a
loan loss. After acquisition, a valuation allowance reduces the reported amount
to the lower of the initial amount, or fair value less costs to sell. Expenses,
gains and losses on disposition and changes in the valuation allowance are
reported in other expenses. Other real estate owned included in other assets
totaled approximately $82,000 at December 31, 1997. The Bank did not own any
other real estate at December 31, 1996.
INCOME TAXES: Income tax expense is the sum of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax consequences or temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
(Continued)
10
<PAGE> 11
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CONCENTRATIONS OF CREDIT RISK: Most of the business activity of the Bank is with
customers located within Crawford County, Ohio and the communities of Richwood
and Green Camp, Ohio. Loans secured by one- to four-family residential
properties approximated $39,414,000 and $33,607,000 at December 31, 1997 and
1996. Agricultural loans approximated $8,406,000 and $7,826,000 at December 31,
1997 and 1996. Other than agricultural loans, the Bank had no significant
concentrations of loans in any one industry as of December 31, 1997 and 1996.
The Bank has not experienced any unusual losses in any type of loan category or
industry.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.
DIVIDEND RESTRICTION: Banking regulations require the maintenance of certain
capital levels and may limit the amount of dividends which may be paid. For
regulatory capital requirements, see a separate note.
EARNINGS PER SHARE: Earnings per share is computed based on the weighted average
number of shares of capital stock outstanding during each period which totaled
200,000 shares for the years ended December 31, 1997 and 1996. Dividends per
share are based on the number of shares outstanding at the declaration date
giving retroactive effect to stock splits.
RECLASSIFICATIONS: Certain items in the 1996 financial statements have been
reclassified to conform to the 1997 presentation.
(Continued)
11
<PAGE> 12
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of securities at December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
December 31, 1997
------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 39,072,312 $ 207,279 $ (133,020) $ 39,146,571
Mortgage-backed securities 14,574,434 29,763 (34,094) 14,570,103
Obligations of state and political
Subdivisions 14,094,477 690,539 14,785,016
Corporate bonds 4,551,174 29,706 (8,371) 4,572,509
Equity securities 3,234,209 2,460,081 (20,116) 5,674,174
---------------- -------------- -------------- ----------------
$ 75,526,606 $ 3,417,368 $ (195,601) $ 78,748,373
================ ============== ============= ================
<CAPTION>
December 31, 1996
------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
AVAILABLE FOR SALE
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 35,026,307 $ 98,764 $ (440,674) $ 34,684,397
Mortgage-backed securities 15,000,755 24,189 (60,881) 14,964,063
Equity securities 3,548,130 1,832,926 (179,149) 5,201,907
---------------- -------------- ------------- ----------------
$ 53,575,192 $ 1,955,879 $ (680,704) $ 54,850,367
================ ============== ============= ================
HELD TO MATURITY
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 14,898,233 $ 380,536 $ (240,394) $ 15,038,375
Obligations of state and political
subdivisions 15,376,100 765,457 (367) 16,141,190
Mortgage-backed securities 512,041 24,446 (18) 536,469
Corporate bonds 3,045,011 27,585 (9,941) 3,062,655
---------------- -------------- ------------- ----------------
$ 33,831,385 $ 1,198,024 $ (250,720) $ 34,778,689
================ ============== ============= ================
</TABLE>
(Continued)
12
<PAGE> 13
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
The following table sets forth the amortized cost and estimated fair values of
mortgage-backed securities by issuing agency as of December 31, 1997 and 1996.
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------------------ --------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
FHLMC $ 5,758,525 $ 5,754,385 $ 5,935,124 $ 5,927,968
FNMA 8,553,015 8,532,128 9,065,631 9,036,095
GNMA 262,894 283,590
---------------- ----------------
$ 14,574,434 $ 14,570,103 $ 15,000,755 $ 14,964,063
================ ================ =============== ===============
HELD TO MATURITY
FNMA $ 176,941 $ 176,941
GNMA 335,100 359,528
--------------- ---------------
$ 512,041 $ 536,469
=============== ===============
</TABLE>
The amortized cost and estimated fair value of securities at December 31, 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>
December 31, 1997
-----------------
Estimated
Amortized Fair
Cost Value
---- -----
<S> <C> <C>
AVAILABLE FOR SALE
Due in one year or less $ 7,861,050 $ 7,844,124
Due after one year through five years 28,845,430 29,274,879
Due after five years through ten years 20,896,556 21,261,186
Due after ten years 114,927 123,907
Mortgage-backed securities 14,574,434 14,570,103
Equity securities 3,234,209 5,674,174
--------------- ----------------
$ 75,526,606 $ 78,748,373
=============== ================
</TABLE>
(Continued)
13
<PAGE> 14
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
Proceeds from sales of securities, gross realized gains and gross realized
losses for the years ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Realized Realized
Sales Proceeds Gains Losses
-------------- ----- ------
<S> <C> <C> <C>
Year ended December 31, 1997 $11,757,000 $ 63,000 $ 170,000
Year ended December 31, 1996 159,000 6,000
</TABLE>
During 1997, the Bank sold securities classified as held to maturity for
interest rate risk management purposes. As a result, all remaining
held-to-maturity securities were transferred to the available-for-sale portfolio
as of December 31, 1997. Proceeds from these sales totaled $1,329,289, resulting
in gross realized gains of $45,289. These sales are included in the above
totals. The amortized cost of the remaining held-to-maturity portfolio
transferred to available for sale was $34,998,000. The net unrealized gain on
these securities was $720,000 on the date of transfer.
Securities with a carrying value of approximately $11,561,000 and $8,660,000
were pledged as of December 31, 1997 and 1996 to secure public deposits, and
other deposits and liabilities as required or permitted by law.
NOTE 3 - LOANS
Loans as presented on the balance sheet are comprised of the following
classifications at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Commercial and agricultural $ 21,926,200 $ 19,958,639
Real estate - mortgage 42,142,615 34,018,581
Real estate - construction 1,270,203 1,368,501
Consumer 2,506,301 3,009,473
Other 400,000
Leases 736,042 882,540
--------------- ----------------
68,581,361 59,637,734
Deferred loan fees (213,134) (200,267)
Unearned interest (480,147) (607,135)
--------------- ----------------
Total loans $ 67,888,080 $ 58,830,332
=============== ================
</TABLE>
(Continued)
14
<PAGE> 15
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 3 - LOANS (Continued)
Certain directors and executive officers, including their immediate families and
companies in which they are principal owners, are loan customers of the Bank.
The following is a summary of activity during the year ended December 31, 1997
for such loans.
<TABLE>
<CAPTION>
<S> <C>
Balance, January 1, 1997 $ 821,290
New loans and advances 264,100
Repayments (713,087)
Other changes 135,894
--------------
Balance, December 31, 1997 $ 508,197
==============
</TABLE>
Other changes represents loans guaranteed by an individual who became a Director
in 1997.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance, beginning of period $ 1,293,038 $ 982,569
Provision for loan losses 694,805 365,000
Loans charged off (128,162) (75,125)
Recoveries 48,370 20,594
-------------- --------------
Balance, end of period $ 1,908,051 $ 1,293,038
============== ==============
</TABLE>
Information with respect to impaired loans is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance of impaired loans for which no allowance
for loss has been allocated $ 36,000
Balance of impaired loans for which an allowance
for loss has been allocated $ 2,618,000 1,197,000
Portion of allowance for loan loss allocated to
impaired loans 787,000 525,000
Average balance of impaired loans during year 1,925,000 1,177,000
Interest income recognized during impairment 197,000 103,000
Interest income recognized on a cash basis 194,000 2,000
</TABLE>
(Continued)
15
<PAGE> 16
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ 13,938 $ 13,938
Buildings and improvements 696,225 696,225
Furniture and equipment 467,439 427,224
--------------- ----------------
Total 1,177,602 1,137,387
Accumulated depreciation 608,567 535,035
--------------- ----------------
Premises and equipment, net $ 569,035 $ 602,352
=============== ================
</TABLE>
NOTE 6 - INTEREST-BEARING DEPOSITS
Interest-bearing deposits as of December 31, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Demand $ 11,290,067 $ 10,466,616
Statement and passbook savings 22,579,520 24,869,027
Certificates of deposit:
$100,000 and greater 13,445,329 14,276,885
Other 84,503,499 80,740,660
---------------- -----------------
Total $ 131,818,415 $ 130,353,188
================ ================
</TABLE>
At December 31, 1997, the scheduled maturities of certificates of deposit were
as follows:
<TABLE>
<S> <C>
1998 $ 59,728,583
1999 24,124,583
2000 11,934,265
2001 2,161,397
---------------
Total $ 97,948,828
===============
</TABLE>
(Continued)
16
<PAGE> 17
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 7 - OTHER BORROWINGS
Securities sold under agreements to repurchase, treasury tax and loan deposits
and federal funds purchased are financing arrangements used by the Bank.
Physical control is maintained for all securities sold under repurchase
agreements. Information concerning securities sold under agreements to
repurchase for the years ended December 31, 1997 and 1996, is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Average balance during the year $ 863,793 $ 905,737
Average interest rate during the year 5.45% 5.02%
Maximum month-end balance during the year $ 1,050,000 $ 1,100,000
</TABLE>
Securities underlying repurchase agreements at December 31, 1997 and 1996, were
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Carrying value of securities $ 1,018,437 $ 999,778
Fair Value 1,018,437 1,036,045
</TABLE>
NOTE 8 - INCOME TAXES
Income tax expense for the years ended December 31, 1997 and 1996, consists of
the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current $ 416,929 $ 468,392
Deferred (150,342) (86,672)
------------ ------------
Total provision for income taxes $ 266,587 $ 381,720
============ ============
</TABLE>
(Continued)
17
<PAGE> 18
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 8 - INCOME TAXES (Continued)
The differences between the financial statement income tax expense and amounts
computed by applying the statutory federal income tax rate of 34% to income
before income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Income taxes computed at the statutory federal
tax rate $ 432,745 $ 674,924
Add (subtract) tax effect of
Nontaxable interest income, less related
nondeductible interest expenses (245,866) (251,579)
Dividends received deduction (47,588) (41,625)
Nondeductible reorganization costs 105,992
Other 21,304
------------ ------------
Total income tax provision $ 266,587 $ 381,720
============ ============
</TABLE>
The tax effects of principal temporary differences and the resulting deferred
tax assets and liabilities at December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Allowance for loan losses $ 593,631 $ 384,527
Deferred loan fees 10,470 15,705
Nonaccrual loan interest 7,713
Other 20,661
-------------- --------------
Deferred tax asset 604,101 428,606
-------------- --------------
Leases (44,320) (24,705)
Federal Home Loan Bank stock dividends (12,954) (2,448)
Tax depreciation in excess of book (40,930) (45,898)
Unrealized gain on securities available for sale (1,035,915) (333,111)
-------------- --------------
Deferred tax liability (1,134,119) (406,162)
-------------- --------------
Net deferred tax $ (530,018) $ 22,444
============== ==============
</TABLE>
(Continued)
18
<PAGE> 19
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 9 - PENSION PLANS
The Bank maintains a fully insured defined benefit pension plan covering
substantially all employees. Participants are fully vested after 7 years of
participation. The normal retirement benefit is equal to 20% of the average
monthly compensation. Monthly benefits are reduced proportionately for each
month of service less than 300 at the normal retirement date.
The Bank funds all pension costs through the annual purchase of retirement
income insurance and retirement annuity policies.
NOTE 10 - COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET RISK
The Bank is party 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 and
letters of credit. The Bank's exposure to credit loss in case of nonperformance
by the other party to the financial instrument is represented by the contractual
amount of those instruments. The Bank follows the same credit policy to make
such commitments as is used 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 assets, deposits and
other items. The Bank does make fixed rate loan commitments for short periods of
time. However, such commitments were immaterial as of and for the years ending
December 31, 1997 and 1996.
Commitments to extend credit and letters of credit approximated the following
amounts at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Contract Amount
---------------
1997 1996
---- ----
<S> <C> <C>
Commitments to extend credit:
Lines of credit and construction loans $ 3,363,000 $ 3,153,000
Letters of credit 230,000 331,000
-------------- --------------
$ 3,593,000 $ 3,484,000
============== ==============
</TABLE>
The Bank was required to maintain a $375,000 clearing balance with the Federal
Reserve Bank at December 31, 1997 and 1996.
(Continued)
19
<PAGE> 20
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 10 - COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET RISK
(Continued)
In the normal course of business, the Bank is involved in various legal actions
but, in the opinion of management and its legal counsel, ultimate disposition of
such matters is not expected to have a material adverse effect on the financial
statements.
NOTE 11 - RESTRICTIONS ON RETAINED EARNINGS
Payment of dividends by the Bank is subject to restrictions by its regulatory
agencies. These restrictions generally limit dividends to the current and prior
two years net income as defined by the regulations, and dividends may not reduce
capital levels below minimum regulatory requirements. In addition, as more fully
discussed below, the Bank must obtain prior approval of its regulators before
declaring any dividend that would reduce the Tier 1 leverage ratio (as defined)
below 7.5%. Under the most restrictive of these requirements, the Bank estimates
that retained earnings available for payment of dividends approximates
$2,388,000 at December 31, 1997.
NOTE 12 - REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of assets, liabilities and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier I capital (as defined) to average
assets (as defined).
As of December 31, 1997, the most recent notification from its primary regulator
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table.
(Continued)
20
<PAGE> 21
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 12 - REGULATORY CAPITAL REQUIREMENTS (Continued)
At December 31, 1997 and 1996, the Bank's actual capital levels and minimum
required levels were (dollar amounts in thousands):
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
December 31, 1997
-----------------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk
weighted assets) $ 15,238 20.99% $ 5,808 8.00% $ 7,260 10.00%
Tier I capital (to risk
weighted assets) 14,318 19.72 2,904 4.00 4,356 6.00
Tier I capital
(to average assets) 14,318 9.00 6,363 4.00 7,954 5.00
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
December 31, 1996
-----------------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk
weighted assets) $ 14,530 19.08% $ 6,090 8.00% $ 7,620 10.00%
Tier I capital (to risk
weighted assets) 13,580 17.83 3,050 4.00 4,570 6.00
Tier I capital
(to average assets) 13,580 9.10 5,970 4.00 7,460 5.00
</TABLE>
At December 31, 1997 and 1996, the Bank was categorized as well capitalized.
Management is not aware of any events or circumstances that have occurred that
would change the Bank's capital category. Pursuant to a Memorandum of
Understanding dated October 31, 1997, by and among the Bank, the Ohio Division
of Financial Institutions and the Federal Deposit Insurance Corporation, which
is more fully discussed in Note 14, the Bank must refrain from paying dividends
without prior approval if the Bank's Tier I capital to average assets is below
7.50%.
(Continued)
21
<PAGE> 22
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 13 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair values of financial instruments are as
follows as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 3,367,509 $ 3,368,000 $ 2,531,372 $ 2,531,000
Federal funds sold 7,200,000 7,200,000 900,000 900,000
Interest-bearing deposits 347,282 347,000 1,033,282 1,033,000
Securities available for sale 78,748,373 78,748,000 54,850,367 54,850,000
Securities held to maturity 33,831,385 34,779,000
Net loans 65,980,029 66,395,000 57,537,294 58,626,000
Accrued interest receivable 1,324,204 1,324,000 1,420,902 1,421,000
Financial liabilities:
Deposits (137,180,064) (137,428,000) (135,311,924) (135,811,000)
Securities sold under repurchase
agreements and other borrowings (1,361,817) (1,362,000) (1,187,522) (1,188,000)
Accrued interest payable (1,693,749) (1,694,000) (1,667,315) (1,667,000)
</TABLE>
The estimated fair value approximates carrying amount for all items except those
described below. Estimated fair value for securities is based on quoted market
values for the individual securities or for equivalent securities. Estimated
fair value for loans is based on the rates charged at year end for new loans
with similar maturities, applied until the loan is assumed to reprice or be
paid. Estimated fair value for IRAs and certificates of deposit is based on the
rates paid at year end for new deposits, applied until maturity. Estimated fair
value for other financial instruments and off-balance-sheet loan commitments are
considered nominal.
NOTE 14 -OTHER REGULATORY MATTERS
The Bank is subject to regulation by the Ohio Division of Financial Institutions
(ODFI) and the Federal Deposit Insurance Corporation (FDIC). Pursuant to a
Memorandum of Understanding (the "MOU") dated October 31, 1997 by and among the
Bank, the ODFI and the FDIC, the Bank has agreed to comply with certain
directives which are intended to correct operational deficiencies identified in
the ODFI's March 14, 1997 Examination Report (the "Examination Report") and
improve the Bank's overall financial condition. The MOU specifies various
deadlines (generally ranging from 10 to 90 days from the date of the MOU) for
the implementation of certain corrective measures and requires that such
measures be maintained until such time as the MOU is stayed, modified,
terminated or suspended by the ODFI and the FDIC.
(Continued)
22
<PAGE> 23
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 14 -OTHER REGULATORY MATTERS (Continued)
The MOU requires the Bank to, among other things:
i. Achieve and maintain an adequate valuation reserve for loan losses;
conduct a quarterly assessment of the loan loss reserve and
nonperforming loans; refile Reports of Condition and Income for
December 31, 1996 and the first three quarters of 1997 to reflect an
appropriate level of Allowance for Loan and Lease Losses; maintain
documentation in support of the foregoing; and, submit to the ODFI and
the FDIC a record of the methodology used for determining loan loss
reserves.
ii. Develop a written plan designed to improve the Bank's position on
certain loans more than $100,000 that are past due on principal or
interest by 90 days or more.
iii.Prepare and submit to the ODFI and the FDIC for review and approval
(a) a management plan describing actions to be taken by the Bank's
Board of Directors to strengthen management and improve the Board's
supervision of the Bank's affairs, (b) an amended written loan policy
including the recommendations detailed in the Examination Report, (c)
written loan review procedures designed to identify and categorize
problem credit and assess the overall quality of the loan portfolio,
(d) an amended approval policy and procedures consistent with the
Examination Report and regulatory guidelines (e) an amended written
investment policy consistent with regulatory guidelines (f) an amended
interest risk policy and procedures consistent with the Examination
Report and regulatory guidelines and (g) quarterly progress reports
detailing the actions taken to secure compliance with the MOU and the
results thereof.
iv. Establish procedures to ensure that (a) the Bank's officers and
employees are aware of, have access to, and adhere to the Bank's loan
policy, (b) exceptions to the Bank's loan policy are approved in
advanced by the Board of Directors, and (c) the reasons for any such
exceptions are noted in the Board minutes and maintained in the
obligor's file.
v. Refrain from (a) declaring or paying dividends without the prior
written approval of the ODFI and the FDIC when the Bank's tier one
leverage ratio is below 7.5% or (b) extending any additional credit to
any borrower who is an obligor to the Bank on any extension of credit
or portion thereof that has been charged-off or classified
"substandard," "doubtful" or "loss" in the Examination Report or in any
subsequent examination report so long as such credit remains
uncollected, unless the addition extension of credit has been
authorized in advanced by the Bank's Board of Directors in accordance
with certain standards and supported by certain documentation.
(Continued)
23
<PAGE> 24
THE FARMERS STATE BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
NOTE 14 -OTHER REGULATORY MATTERS (Continued)
vi. Take all necessary steps consistent with sound banking practices to (a)
address all violations described in the Examination Report and refrain
from engaging in such violations in the future, (b) eliminate and/or
correct problems relating to credit information and collateral
documentation and ensure proper collection and maintenance of such
information and documentation in the future, and (c) ensure all
deficiencies in internal routine and controls, as identified in the
Examination Report, are eliminated and/or corrected and procedures are
implemented to maintain a sound system of internal controls.
vii. Establish a Compliance Committee comprised of outside directors to
monitor compliance with the MOU and written policies and procedures.
viii. Adopt all plans, policies and procedures required by the MOU and
fully comply with all of the terms thereof.
Management and the Board of Directors have implemented corrective actions to
comply with provisions of the MOU.
NOTE 15 - MERGER
On July 3, 1997, the Bank entered a definitive agreement to merge with First
Citizens Banc Corp (First Citizens) of Sandusky, Ohio. This agreement, as
amended, specified that the Bank would receive 6.06 shares of First Citizens'
common stock for each of the 200,000 shares of Bank stock outstanding. The
merger, which was consummated on April 28, 1998, has been approved by both
companies' regulatory agencies and shareholders. The transaction was accounted
for using the pooling-of-interest method of accounting.
24
<PAGE> 25
THE FARMERS STATE BANK
CONDENSED BALANCE SHEET
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
1998
----
<S> <C>
ASSETS
Cash and due from banks $ 2,878,136
Federal funds sold 6,600,000
Interest-bearing deposits 248,282
Securities available for sale 77,897,747
Loans
Total loans 65,252,890
Allowance for loan losses (1,883,087)
-------------
Net loans 63,369,803
Office premises and equipment, net 589,064
Accrued interest and other assets 2,189,284
-------------
Total assets $ 153,772,316
=============
LIABILITIES
Deposits
Noninterest-bearing $ 4,475,113
Interest-bearing 129,042,082
Total deposits 133,517,195
Securities sold under repurchase agreements 950,000
U.S. Treasury interest-bearing demand note payable 788
Accrued interest, taxes and other liabilities 2,231,131
-------------
Total liabilities 136,699,114
SHAREHOLDERS' EQUITY
Common stock, $20.00 par value: 200,000 shares authorized, issued and
outstanding at March 31, 1998 4,000,000
Additional paid-in capital 4,000,000
Retained earnings 6,701,783
Unrealized gain on securities available for sale, net of tax 2,371,419
-------------
Total shareholders' equity 17,073,202
-------------
Total liabilities and shareholders' equity $ 153,772,316
=============
</TABLE>
See accompanying notes to financial statements.
25
<PAGE> 26
THE FARMERS STATE BANK
CONDENSED STATEMENTS OF INCOME
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 1,511,067 $ 1,330,633
Taxable securities 873,966 1,076,634
Nontaxable securities 198,683 218,653
Federal funds sold 71,193 8,958
Interest bearing deposits 5,949 12,295
Other, including dividends 48,254 49,244
----------- -----------
Total interest income 2,709,112 2,696,417
INTEREST EXPENSE
Deposits 1,665,786 1,635,849
Other borrowings 12,890 16,172
----------- -----------
Total interest expense 1,678,676 1,652,021
----------- -----------
NET INTEREST INCOME 1,030,436 1,044,396
Provision for loan losses 15,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,030,436 1,029,396
NONINTEREST INCOME
Service charges on deposit accounts 33,147 34,729
Security losses, net (35,000)
Other 5,741 16,322
----------- -----------
Total noninterest income 38,888 16,051
NONINTEREST EXPENSE
Salaries, wages and benefits 310,532 264,552
Occupancy expense 26,101 20,891
Equipment expense 7,149 12,471
Federal deposit insurance premiums 4,251 3,875
State franchise tax 56,250 45,012
Professional fees 14,899 31,350
Other operating expenses 155,955 101,106
----------- -----------
Total noninterest expense 575,137 479,257
----------- -----------
Income before taxes 494,187 566,190
Income tax expense 133,000 127,000
----------- -----------
NET INCOME $ 361,187 $ 439,190
=========== ===========
EARNINGS PER COMMON SHARE $ 1.81 $ 2.20
=========== ===========
</TABLE>
See accompanying notes to financial statements.
26
<PAGE> 27
THE FARMERS STATE BANK
STATEMENTS OF CASH FLOWS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 361,187 $ 439,190
Adjustments to reconcile net income to net cash from
operating activities
Security amortization, net 19,962 9,524
Depreciation 12,730 18,097
Security losses, net - 35,000
Provision for loan losses - 15,000
Change in
Net deferred loan fees (14,702) 8,961
Accrued interest receivable (132,117) (114,810)
Other assets (74,121) (72,852)
Accrued interest, taxes and other liabilities (976,498) (798,026)
----------- -----------
Net cash from operating activities (803,559) (459,916)
CASH FLOWS FROM INVESTING ACTIVITIES
Securities held to maturity
Proceeds from maturities and repayments - 348,013
Purchases - (202,784)
Securities available for sale
Proceeds from maturities and repayments 5,591,524 134,350
Purchases (4,214,609) (500,000)
Sales 1,965,000
Maturities of interest-bearing deposit 99,000 194,000
Loan originations, net of loan payments 2,624,928 (2,370,225)
Property and equipment expenditures (32,759) (18,485)
Change in federal funds sold 600,000 500,000
----------- -----------
Net cash from investing activities 4,668,084 49,869
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (3,662,869) 1,261,641
Net change in securities sold under repurchase agreements 50,000 250,000
Change in U.S. Treasury interest-bearing notes payable (461,029) (134,847)
Cash dividends paid (280,000) (280,000)
----------- -----------
Net cash from financing activities (4,353,898) 1,096,794
----------- -----------
Net change in cash and cash equivalents (489,373) 686,747
Cash and cash equivalents at beginning of period 3,367,509 2,531,372
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,878,136 $ 3,218,119
=========== ===========
</TABLE>
See accompany notes to financial statements.
27
<PAGE> 28
THE FARMERS STATE BANK
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of The Farmers State Bank ("Bank") at March 31, 1998, and
its results of operations and cash flows for the three months ended March 31,
1998 and 1997. All such adjustments are normal and recurring in nature. The
accompanying condensed financial statements have been prepared in accordance
with Regulation S-X and, therefore, do not purport to contain all the necessary
financial disclosures required by generally accepted accounting principles that
might otherwise be necessary in the circumstances, and should be read in
conjunction with the financial statements and notes thereto of the Bank for the
year ended December 31, 1997. The accounting policies of the Bank described in
the notes to financial statements contained in the Bank's December 31, 1997,
financial statements, have been consistently followed in preparing these interim
condensed financial statements.
28
<PAGE> 29
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA PRO FORMA
CITIZENS FARMERS ADJUSTMENTS COMBINED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 11,935,231 $ 2,878,136 $ -- $ 14,813,367
Federal funds sold 12,540,000 6,600,000 -- 19,140,000
Interest-bearing deposits 248,282 -- 248,282
Securities
Available for sale 62,726,700 77,897,747 -- 140,624,447
Held to maturity 4,601,684 -- -- 4,601,684
Loans held for sale 1,202,580 -- -- 1,202,580
Loans
Total loans 224,122,815 65,252,890 -- 289,375,705
Allowance for loan losses (2,821,613) (1,883,087) -- (4,704,700)
------------- ------------- ------------- -------------
Net loans 221,301,202 63,369,803 -- 284,671,005
Office premises and equipment, net 6,887,238 589,064 -- 7,476,302
Intangible assets 2,765,999 22,500 -- 2,788,499
Accrued interest and other assets 3,996,500 2,166,784 -- 6,163,284
------------- ------------- ------------- -------------
Total assets $ 327,957,134 $ 153,772,316 $ -- $ 481,729,450
============= ============= ============= =============
LIABILITIES
Deposits $ 267,320,405 $ 133,517,195 $ -- $ 400,837,600
FHLB borrowings 14,182,740 -- -- 14,182,740
Securities sold under
repurchase agreements 8,331,809 950,000 -- 9,281,809
U.S. Treasury interest-
bearing demand note 1,212,262 788 -- 1,213,050
Accrued interest, taxes
and other liabilities 1,604,260 2,231,131 -- 3,835,391
------------- ------------- ------------- -------------
Total liabilities 292,651,476 136,699,114 -- 429,340,590
SHAREHOLDERS' EQUITY
Common stock 15,257,520 4,000,000 4,000,000 (A) 23,257,520
Additional paid-in capital -- 4,000,000 (4,000,000)(A)
Retained earnings 19,615,763 6,701,783 -- 26,317,546
Unrealized gain on securities
available for sale 432,375 2,371,419 -- 2,803,794
------------- ------------- ------------- -------------
Total shareholders' equity 35,305,658 17,073,202 -- 52,378,860
------------- ------------- ------------- -------------
Total liabilities and
shareholders' equity $ 327,957,134 $ 153,772,316 $ -- $ 481,729,450
============= ============= ============= =============
<FN>
- ----------
(A) Issuance of 1,212,000 First Citizens common shares in exchange for 200,000 Farmers common shares
</TABLE>
29
<PAGE> 30
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST PRO FORMA PRO FORMA
CITIZENS FARMERS ADJUSTMENTS COMBINED
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 14,328,125 $ 3,367,509 $ -- $ 17,695,634
Federal funds sold 10,400,000 7,200,000 -- 17,600,000
Interest-bearing deposits -- 347,282 -- 347,282
Securities
Available for sale 58,468,703 78,748,373 -- 137,217,076
Held to maturity 6,737,206 -- -- 6,737,206
Loans held for sale 690,998 -- -- 690,998
Loans
Total loans 224,557,029 67,888,080 -- 292,445,109
Allowance for loan losses (2,799,000) (1,908,051) -- (4,707,051)
------------- ------------- ------------ -------------
Net loans 221,758,029 65,980,029 -- 287,738,058
Office premises and equipment, net 6,993,953 569,035 -- 7,562,988
Intangible assets 2,847,511 22,500 -- 2,870,011
Accrued interest and other assets 3,698,573 1,960,546 -- 5,659,119
------------- ------------- ------------ -------------
Total assets $ 325,923,098 $ 158,195,274 $ -- $ 484,118,372
============= ============= ============ =============
LIABILITIES
Deposits $ 265,003,177 $ 137,180,064 $ -- $ 402,183,241
FHLB borrowings 14,488,034 -- -- 14,488,034
Securities sold under
repurchase agreements 6,879,346 900,000 -- 7,779,346
U.S. Treasury interest-
bearing demand note 2,913,641 461,817 -- 3,375,458
Accrued interest, taxes
and other liabilities 1,790,955 3,301,903 -- 5,092,858
------------- ------------- ------------ -------------
Total liabilities 291,075,153 141,843,784 -- 432,918,937
SHAREHOLDERS' EQUITY
Common stock 15,257,520 4,000,000 4,000,000 (A) 23,257,520
Additional paid-in capital -- 4,000,000 (4,000,000)(A) --
Retained earnings 19,174,257 6,340,596 -- 25,514,853
Unrealized gain on securities
available for sale 416,168 2,010,894 -- 2,427,062
------------- ------------- ------------ -------------
Total shareholders' equity 34,847,945 16,351,490 -- 51,199,435
------------- ------------- ------------ -------------
Total liabilities and
shareholders' equity $ 325,923,098 $ 158,195,274 $ -- $ 484,118,372
============= ============= ============ =============
<FN>
- ----------
(A) Issuance of 1,212,000 First Citizens common shares in exchange for 200,000 Farmers common shares.
</TABLE>
30
<PAGE> 31
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA PRO FORMA
CITIZENS FARMERS ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $4,773,417 $1,511,067 $ -- $6,284,484
Taxable securities 613,052 873,966 -- 1,487,018
Nontaxable securities 303,404 198,683 -- 502,087
Federal funds sold 131,252 71,193 -- 202,445
Interest-bearing deposits -- 5,949 -- 5,949
Other, including dividends 9,693 48,254 -- 57,947
---------- ---------- ----------- ----------
Total interest income 5,830,818 2,709,112 -- 8,539,930
INTEREST EXPENSE
Deposits 2,286,183 1,665,786 -- 3,951,969
FHLB borrowings 207,241 -- -- 207,241
Other borrowings 107,974 12,890 -- 120,864
---------- ---------- ----------- ----------
Total interest expense 2,601,398 1,678,676 -- 4,280,074
---------- ---------- ----------- ----------
Net interest income 3,229,420 1,030,436 -- 4,259,856
Provision for loan losses 108,000 -- -- 108,000
---------- ---------- ----------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,121,420 1,030,436 -- 4,151,856
NONINTEREST INCOME
Computer center data processing fees 462,092 -- -- 462,092
Service charges on deposit accounts 138,956 33,147 -- 172,103
Security gains, net 19,580 -- -- 19,580
Loan sale gains 33,965 -- -- 33,965
Other operating income 237,684 5,741 -- 243,425
---------- ---------- ----------- ----------
Total noninterest income 892,277 38,888 -- 931,165
NONINTEREST EXPENSE
Salaries, wages and benefits 1,393,138 310,532 -- 1,703,670
Net occupancy expense 141,643 26,101 -- 167,744
Equipment expense 164,604 7,149 -- 171,753
Federal deposit insurance premiums 14,720 4,251 -- 18,971
State franchise tax 117,732 56,250 -- 173,982
Professional fees 151,623 14,899 -- 166,522
Other operating expenses 760,847 155,955 -- 916,802
---------- ---------- ----------- ----------
Total noninterest expense 2,744,307 575,137 -- 3,319,444
---------- ---------- ----------- ----------
Income before taxes 1,269,390 494,187 -- 1,763,577
Income tax expense 370,158 133,000 -- 503,158
NET INCOME $ 899,232 $ 361,187 $ -- $1,260,419
========== ========== =========== ==========
Earnings per common share $ 0.29 $ 1.81 $ 0.30
========== ========== ==========
Weighted average shares outstanding 3,051,504 200,000 4,263,504
========= ======= =========
</TABLE>
31
<PAGE> 32
32
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA PRO FORMA
CITIZENS FARMERS ADJUSTMENTS COMBINED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 18,461,451 $ 5,812,836 $ -- $ 24,274,287
Taxable securities 2,512,639 4,024,769 -- 6,537,408
Nontaxable securities 1,307,425 858,718 -- 2,166,143
Federal funds sold 483,085 99,760 -- 582,845
Interest-bearing deposits -- 31,069 -- 31,069
Other, including dividends 33,292 283,194 -- 316,486
------------ ------------ ----------- ------------
Total interest income 22,797,892 11,110,346 -- 33,908,238
INTEREST EXPENSE
Deposits 8,450,754 6,796,697 -- 15,247,451
FHLB borrowings 866,482 -- -- 866,482
Other borrowings 492,478 68,589 -- 561,067
------------ ------------ ----------- ------------
Total interest expense 9,809,714 6,865,286 -- 16,675,000
------------ ------------ ----------- ------------
NET INTEREST INCOME 12,988,178 4,245,060 -- 17,233,238
Provision for loan losses 434,663 694,805 -- 1,129,468
------------ ------------ ----------- ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 12,553,515 3,550,255 -- 16,103,770
NONINTEREST INCOME
Computer center data processing fees 2,191,004 -- -- 2,191,004
Service charges on deposit accounts 530,525 134,206 -- 664,731
Security gains (losses), net 213,686 (106,629) -- 107,057
Loan sale gains 61,317 -- -- 61,317
Other operating income 1,015,627 46,388 -- 1,062,015
------------ ------------ ----------- ------------
Total noninterest income 4,012,159 73,965 -- 4,086,124
NONINTEREST EXPENSE
Salaries, wages and benefits 5,917,264 1,156,761 -- 7,074,025
Net occupancy expense 563,504 97,653 -- 661,157
Equipment expense 812,538 48,445 -- 860,983
Federal deposit insurance premiums 31,145 16,805 -- 47,950
State franchise tax 435,788 195,273 -- 631,061
Professional fees 640,585 469,223 -- 1,109,808
Other operating expenses 3,438,145 367,282 -- 3,805,427
------------ ------------ ----------- ------------
Total noninterest expense 11,838,969 2,351,442 -- 14,190,411
------------ ------------ ----------- ------------
Income before taxes 4,726,705 1,272,778 -- 5,999,483
Income tax expense 1,292,352 266,587 -- 1,558,939
------------ ------------ ----------- ------------
NET INCOME $ 3,434,353 $ 1,006,191 $ -- $ 4,440,544
============ ============ =========== ============
Earnings per common share $ 1.13 $ 5.03 $ 1.04
============ ============ ============
Weighted average shares outstanding 3,051,504 200,000 4,263,504
========= ======= =========
</TABLE>
32
<PAGE> 33
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST PRO FORMA PRO FORMA
CITIZENS FARMERS ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 4,381,966 $ 1,330,633 $ -- $ 5,712,599
Taxable securities 648,566 1,076,634 -- 1,725,200
Nontaxable securities 341,412 218,653 -- 560,065
Federal funds sold 122,087 8,958 -- 131,045
Interest-bearing deposits -- 12,295 -- 12,295
Other, including dividends 1,024 49,244 -- 50,268
----------- ----------- ----------- -----------
Total interest income 5,495,055 2,696,417 -- 8,191,472
INTEREST EXPENSE
Deposits 2,003,429 1,635,849 -- 3,639,278
FHLB borrowings 222,949 -- -- 222,949
Other borrowings 73,788 16,172 -- 89,960
----------- ----------- ----------- -----------
Total interest expense 2,300,166 1,652,021 -- 3,952,187
----------- ----------- ----------- -----------
NET INTEREST INCOME 3,194,889 1,044,396 -- 4,239,285
Provision for loan losses 98,500 15,000 -- 113,500
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,096,389 1,029,396 -- 4,125,785
NONINTEREST INCOME
Computer center data processing fees 576,742 -- -- 576,742
Service charges on deposit accounts 129,409 34,729 -- 164,138
Security gains (losses), net 6,250 (35,000) -- (28,750)
Other operating income 213,324 16,322 -- 229,646
----------- ----------- ----------- -----------
Total noninterest income 925,725 16,051 -- 941,776
NONINTEREST EXPENSE
Salaries, wages and benefits 1,419,562 264,552 -- 1,684,114
Net occupancy expense 142,763 20,891 -- 163,654
Equipment expense 178,624 12,471 -- 191,095
Federal deposit insurance premiums 7,705 3,875 -- 11,580
State franchise tax 109,058 45,012 -- 154,070
Professional fees 131,920 31,350 -- 163,270
Other operating expenses 772,565 101,106 -- 873,671
----------- ----------- ----------- -----------
Total noninterest expense 2,762,197 479,257 -- 3,241,454
----------- ----------- ----------- -----------
Income before taxes 1,259,917 566,190 -- 1,826,107
Income tax expense 348,302 127,000 -- 475,302
NET INCOME $ 911,615 $ 439,190 $ -- $ 1,350,805
=========== =========== =========== ===========
Earnings per common share $ 0.30 $ 2.20 $ 0.32
=========== =========== ===========
Weighted average shares outstanding 3,051,504 200,000 4,263,504
=========== =========== ===========
</TABLE>
33
<PAGE> 34
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 July 10, 1998
- ----------------------------------- ---------------------
David A. Voight Date
President & Chief Executive Officer
34
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000944745
<NAME> FIRST CITIZENS BANC CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,367,509
<INT-BEARING-DEPOSITS> 347,282
<FED-FUNDS-SOLD> 7,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78,748,373
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 65,980,029
<ALLOWANCE> 1,908,051
<TOTAL-ASSETS> 158,195,274
<DEPOSITS> 137,180,064
<SHORT-TERM> 1,361,817
<LIABILITIES-OTHER> 3,301,903
<LONG-TERM> 0
0
0
<COMMON> 4,000,000
<OTHER-SE> 12,351,490
<TOTAL-LIABILITIES-AND-EQUITY> 158,195,274
<INTEREST-LOAN> 5,812,836
<INTEREST-INVEST> 4,883,487
<INTEREST-OTHER> 414,023
<INTEREST-TOTAL> 11,110,346
<INTEREST-DEPOSIT> 6,796,697
<INTEREST-EXPENSE> 6,865,286
<INTEREST-INCOME-NET> 4,250,060
<LOAN-LOSSES> 694,805
<SECURITIES-GAINS> (106,629)
<EXPENSE-OTHER> 2,351,442
<INCOME-PRETAX> 1,272,778
<INCOME-PRE-EXTRAORDINARY> 1,006,191
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,006,191
<EPS-PRIMARY> 5.03
<EPS-DILUTED> 5.03
<YIELD-ACTUAL> 7.40
<LOANS-NON> 764,000
<LOANS-PAST> 205,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,293,038
<CHARGE-OFFS> 128,162
<RECOVERIES> 48,370
<ALLOWANCE-CLOSE> 1,908,051
<ALLOWANCE-DOMESTIC> 1,908,051
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 136,893
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000944745
<NAME> FIRST CITIZENS BANC CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,878,136
<INT-BEARING-DEPOSITS> 248,282
<FED-FUNDS-SOLD> 6,600,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 77,897,747
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 63,369,803
<ALLOWANCE> 1,883,087
<TOTAL-ASSETS> 153,772,316
<DEPOSITS> 133,517,195
<SHORT-TERM> 950,788
<LIABILITIES-OTHER> 2,231,131
<LONG-TERM> 0
0
0
<COMMON> 4,000,000
<OTHER-SE> 13,073,202
<TOTAL-LIABILITIES-AND-EQUITY> 153,772,316
<INTEREST-LOAN> 1,511,067
<INTEREST-INVEST> 1,072,649
<INTEREST-OTHER> 125,396
<INTEREST-TOTAL> 2,709,112
<INTEREST-DEPOSIT> 1,665,786
<INTEREST-EXPENSE> 1,678,676
<INTEREST-INCOME-NET> 1,030,436
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 515,137
<INCOME-PRETAX> 494,187
<INCOME-PRE-EXTRAORDINARY> 361,187
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 361,187
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
<YIELD-ACTUAL> 7.20
<LOANS-NON> 837,000
<LOANS-PAST> 157,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,908,051
<CHARGE-OFFS> 28,000
<RECOVERIES> 3,036
<ALLOWANCE-CLOSE> 1,883,087
<ALLOWANCE-DOMESTIC> 1,883,087
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 136,893
</TABLE>
