<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:.............................September 30, 1999
OR
[ ] 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 issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value
Outstanding at November 12, 1999
4,220,515 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)
September 30, 1999 and December 31, 1998.......................................3
Consolidated Statements of Income (unaudited)
Three and nine months ended September 30, 1999 and 1998........................4
Consolidated Statement of Shareholders' Equity (unaudited)
For the years ended December 31, 1997 and 1998 and
nine months ended September 30, 1999...........................................5
Consolidated Statement of Cash Flows (unaudited)
Nine months ended September 30, 1999 and 1998..................................6
Notes to Consolidated Financial Statements (unaudited)..........................7-14
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................15-22
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk..........................22-23
PART II. Other Information
ITEM 1. Legal Proceedings......................................................................24
ITEM 2. Changes in Securities and Use of Proceeds..............................................24
ITEM 3. Defaults Upon Senior Securities........................................................24
ITEM 4. Submission of Matters to a Vote of Security Holders....................................24
ITEM 5. Other Information......................................................................24
ITEM 6. Exhibits and Reports on Form 8-K.......................................................24
SIGNATURES......................................................................................25
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FIRST CITIZENS BANC CORP
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
Assets 1999 1998
----------------- -----------------
<S> <C> <C>
Cash and due from banks $ 15,413,537 $ 16,443,613
Federal funds sold 16,035,000 19,950,000
Interest-bearing deposits 51,031 248,282
Securities
Available-for-sale 157,237,187 171,952,700
Held-to-maturity (Estimated Fair Value of $547,626 at
September 30, 1999, and $832,632 at December 31, 1998) 542,752 810,122
----------------- -----------------
Total securities 157,779,939 172,762,822
Loans held for sale 2,570,250 2,273,509
Loans 283,430,976 283,349,201
Less: Allowance for loan losses (4,396,278) (4,567,126)
----------------- -----------------
Net loans 279,034,698 278,782,075
Office premises and equipment, net 7,145,044 7,363,513
Intangible assets 2,284,427 2,533,963
Accrued Interest and other assets 6,630,177 8,531,086
Total assets $ 486,944,103 $ 508,888,863
================= =================
Liabilities
Deposits
Noninterest-bearing deposits $ 39,647,596 $ 38,574,055
Interest-bearing deposits 365,155,303 379,325,190
----------------- -----------------
Total deposits 404,802,899 417,899,245
Federal Home Loan Bank borrowings 2,093,875 13,235,165
Securities sold under agreements to repurchase 21,030,872 16,369,681
U. S. Treasury interest-bearing demand deposit note payable 3,867,006 971,558
Accrued interest, taxes and other expenses 3,287,996 6,672,283
----------------- -----------------
Total liabilities 435,082,648 455,147,932
Shareholders' Equity
Common stock, no par value; 10,000,000 shares authorized,
4,263,401 shares issued 23,257,520 23,257,520
Retained earnings 28,964,022 26,811,264
Treasury stock, 42,886 shares at cost at September 30, 1999 (1,221,832) 0
Accumulated other comprehensive income 861,745 3,672,147
----------------- -----------------
Total shareholders' equity 51,861,455 53,740,931
----------------- -----------------
Total liabilities and shareholders' equity $ 486,944,103 $ 508,888,863
================= =================
</TABLE>
See notes to interim consolidated financial statements Page 3
<PAGE> 4
<TABLE>
<CAPTION>
FIRST CITIZENS BANC CORP
Consolidated Statements of Income (Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------ ---------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 5,780,632 $ 5,961,748 $ 17,281,195 $ 18,146,363
Taxable securities 1,667,880 1,780,788 5,062,013 4,961,311
Nontaxable securities 571,152 541,086 1,742,112 1,559,154
Federal funds sold 153,220 254,504 483,027 707,354
Other 19,105 1,902 51,348 31,251
------------ ------------ ------------- -------------
Total interest income 8,191,989 8,540,028 24,619,695 25,405,433
INTEREST EXPENSE:
Deposits 3,510,323 4,031,569 10,734,834 11,982,405
FHLB Borrowings 29,514 197,124 225,118 604,656
Other 173,830 164,730 484,837 416,263
------------ ------------ ------------- -------------
Total interest expense 3,713,667 4,393,423 11,444,789 13,003,324
------------ ------------ ------------- -------------
NET INTEREST INCOME 4,478,322 4,146,605 13,174,906 12,402,109
PROVISION FOR LOAN LOSSES 75,000 83,000 231,000 299,000
------------ ------------ ------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,403,322 4,063,605 12,943,906 12,103,109
NONINTEREST INCOME:
Computer center data processing fees 238,012 445,379 972,399 1,264,074
Service charges 263,061 246,750 746,664 714,577
Net gain on sale of securities 19,455 1,000 750,316 20,580
Net gain on sale of loans 11,539 73,112 139,129 153,016
Other 442,840 364,939 1,149,133 1,061,889
------------ ------------ ------------- -------------
Total noninterest income 974,907 1,131,180 3,757,641 3,214,136
NONINTEREST EXPENSE:
Salaries, wages and benefits 1,627,367 1,806,712 5,043,280 5,231,574
Net occupancy expense 188,830 110,377 589,807 437,797
Equipment expense 216,575 186,402 609,464 540,532
FDIC Premiums 11,931 68,306 36,347 92,837
State franchise tax 143,725 152,131 440,966 491,501
Professional services 115,730 137,605 759,113 690,428
Other operating expenses 1,451,724 1,109,023 3,402,749 3,049,344
------------ ------------ ------------- -------------
Total noninterest expense 3,755,882 3,570,556 10,881,726 10,534,013
------------ ------------ ------------- -------------
Income before taxes 1,622,347 1,624,229 5,819,821 4,783,232
Income tax expense 472,367 448,654 1,621,382 1,338,097
------------ ------------ ------------- -------------
Net Income 1,149,980 $ 1,175,575 $ 4,198,439 $ 3,445,135
Earnings per share $ 0.27 $ 0.28 $ 0.99 $ 0.81
Dividends declared $ 0.16 $ 0.15 $ 0.48 $ 0.45
Wtd. avg. shares during the period 4,253,920 4,263,401 4,259,995 4,263,401
</TABLE>
See notes to interim consolidated financial statements Page 4
<PAGE> 5
<TABLE>
<CAPTION>
FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
Form 10-Q
Accumulated
Other Total
Common Stock Retained Treasury Comprehensive Shareholders'
Shares Amount Earnings Stock Income Equity
------------ ------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,1997 4,263,401 $ 23,257,520 $ 24,619,419 $ 0 $ 811,399 $ 48,688,338
Comprehensive income:
Net income 4,440,544 4,440,544
Change in unrealized gain on
securities available for sale 1,615,663 1,615,663
-------------
Total 6,056,207
Cash dividends ($1.07 per share) (3,265,110) (3,265,110)
Cash dividends declared by Farmers,
prior to merger (280,000) (280,000)
------------ ------------- ------------- ------------- -------------- -------------
Balance, December 31, 1997 4,263,401 23,257,520 25,514,853 0 2,427,062 51,199,435
Comprehensive income:
Net income 5,760,667 5,760,667
Change in unrealized gain on
securities available for sale 1,245,085 1,245,085
-------------
Total 7,005,752
Cash paid for fractional shares (3,451) (3,451)
Cash dividends ($1.11 per share) (4,368,805) (4,368,805)
Cash dividends declared by Farmers,
prior to merger (92,000) (92,000)
------------ ------------- ------------- ------------- -------------- -------------
Balance, December 31, 1998 4,263,401 23,257,520 26,811,264 0 3,672,147 53,740,931
Comprehensive income:
Net income 4,198,439 4,198,439
Change in unrealized gain on
securities available for sale (2,810,402) (2,810,402)
-------------
Total 1,388,037
Purchase of treasury stock, at cost (42,886) (1,221,832) (1,221,832)
Cash dividends ($.48 per share) (2,045,681) (2,045,681)
------------ ------------- ------------- ------------- -------------- -------------
Balance, September 30, 1999 4,220,515 $ 23,257,520 $ 28,964,022 $ (1,221,832) $ 861,745 $ 51,861,455
============ ============= ============= ============= ============== =============
</TABLE>
See notes to interim consolidated financial statements Page 5
<PAGE> 6
<TABLE>
<CAPTION>
FIRST CITIZENS BANC CORP
Consolidated Statement of Cash Flows (Unaudited)
Nine months ended September 30,
--------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 4,198,439 $ 3,445,135
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization of office premises and equipment 709,408 587,545
Amortization of intangible assets 249,536 249,536
Provision for loan losses 231,000 299,000
Loans originated for sale (8,809,418) (5,857,897)
Proceeds from sale of loans 8,573,581 6,289,875
Gain on sale of loans (139,129) (153,016)
Security gains (750,316) (20,580)
Change in deferred loan fees (150,336) (135,250)
Net amortization of security premiums and discounts 483,175 224,515
Change in accrued interest and other assets 1,979,135 (49,645)
Change in accrued interest, taxes and other expenses (1,584,094) (1,649,659)
------------- --------------
Net cash from operating activities 4,990,981 3,229,559
Cash flows from investing activities
Maturities of interest bearing deposits 197,251 99,000
Maturities and calls of securities, held-to-maturity 266,854 4,511,872
Maturities and calls of securities, available-for-sale 22,442,842 36,457,456
Purchases of securities, available-for-sale (17,457,333) (58,755,209)
Proceeds from sale of securities, available-for-sale 5,739,474 0
Loans made to customers, net of principal collected (333,287) 7,151,717
Change in federal funds sold 3,915,000 1,795,000
Proceeds from sale of property and equipment 1,627 64,436
Purchases of office premises and equipment (844,975) (592,971)
------------- --------------
Net cash from investing activities 13,927,453 (9,268,699)
Cash flows from financing activities
Repayment of FHLB borrowings (11,141,290) (932,945)
Net change in deposits (13,096,346) 4,192,717
Change in securities sold under agreements to repurchase 4,661,191 8,327,086
Change in U. S. Treasury interest-bearing demand note payable 2,895,448 (2,328,090)
Purchases of treasury stock (1,221,832) 0
Cash dividends paid (2,045,681) (1,650,410)
------------- --------------
Net cash from financing activities (19,948,510) 7,608,358
Net change in cash and due from banks (1,030,076) 1,569,218
Cash and due from banks at beginning of period 16,443,613 17,695,634
Cash and due from banks at end of period $ 15,413,537 $ 19,264,852
============= ==============
Supplemental disclosures:
Cash paid during the period for:
Interest $ 12,100,261 $ 13,538,096
Income taxes $ 1,970,000 $ 1,030,000
</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 (First Citizens) and it wholly-owned subsidiaries,
The Citizens Banking Company (Citizens), The Castalia Banking Company
(Castalia), The Farmers State Bank of New Washington (Farmers), SCC
Resources, Inc. (SCC), and R. A. Reynolds Appraisal Service, Inc.,
(Reynolds), together referred to as the Corporation. All significant
intercompany balances and transactions have been eliminated in
consolidation.
The following reports have been prepared by the Corporation without
audit: The consolidated balance sheets as of September 30, 1999 and
December 31, 1998; the consolidated statements of income for the three
and nine month periods ended September 30, 1999 and 1998; the
consolidated statement of shareholders' equity for the nine months
ended September 30, 1999 and the years ended December 31, 1998 and
1997; and the consolidated statements of cash flows for the nine month
periods ended September 30, 1999 and 1998. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Corporation's financial
position as of September 30, 1999 and its results of operations and
changes in cash flows for the periods ended September 30, 1999 and 1998
have been made. The accompanying consolidated financial statements have
been prepared in accordance with instructions of Form 10-Q, and
therefore 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 September 30, 1999 are not necessarily
indicative of the operating results for the full year. Reference is
made to the accounting policies of the Corporation described in the
notes to financial statements contained in the Corporation's 1998
annual report. The Corporation has consistently followed these policies
in preparing this Form 10-Q.
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 financial statements and the disclosures provided,
and future results could differ. The allowance for loan losses, fair
values of financial instruments, and status of contingencies are
particularly subject to change.
Income tax expense 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 at enacted tax
rates based on the difference between the tax basis of assets and
liabilities and their carrying amounts for financial reporting
purposes, referred to as "temporary differences." A valuation
allowance, if needed, reduces deferred tax assets to the amount
expected to be realized.
Page 7
<PAGE> 8
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
Certain items in the 1998 financial statements have been reclassified
to correspond with the 1999 presentation.
The Corporation elected to present comprehensive income and the
accumulated balance in the Consolidated Statement of Shareholders'
Equity for interim reporting purposes. The table below presents the
reclassification adjustments related to comprehensive income.
Reclassification adjustments are needed when an item is included in the
net income in one period and comprehensive income in another accounting
period.
Other comprehensive income (loss) components and related taxes for the
three and nine months ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Unrealized holding gains and
(losses) on available for sale $ (597,969) $ 782,033 $ (3,507,871) $ 1,507,974
securities
Reclassification adjustment for
(gains) and losses later recognized (19,455) (1,000) (750,316) (20,580)
-------- ------- --------- --------
in income
Net unrealized gains and (losses) (617,424) 781,033 (4,258,187) 1,487,394
Tax effect 209,924 (265,549) 1,447,785 (390,395)
------- --------- --------- ---------
Other comprehensive income (loss) $ (407,500) $ 515,484 $ (2,810,402) $ 1,096,999
=========== =========== ============ ===========
</TABLE>
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133
requires companies to record derivatives on the balance sheet as assets
or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. SFAS No. 133 does not allow
hedging of a security which is classified as held to maturity.
Accordingly, upon adoption of SFAS No. 133, companies may reclassify
any security from held to maturity to available for sale if they wish
to be able to hedge the security in the future. SFAS No. 133, as
amended by SFAS No. 137, is effective for fiscal years beginning after
June 15, 2000 with early adoption encouraged for any fiscal quarter
beginning July 1, 1998 or later, with no retroactive application.
Management does not expect the adoption of SFAS No. 133 to have a
significant impact on the Corporation's financial statements.
Page 8
<PAGE> 9
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained After
the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise" changes the way companies involved in mortgage
banking account for certain securities and other interests they retain
after securitizing mortgage loans that were held for sale. SFAS No. 134
allows any retained mortgage-backed securities after a securitization
of mortgage loans held for sale to be classified based on holding
intent in accordance with SFAS No. 115, except in cases where the
retained mortgage-backed security is committed to be sold before or
during the securitization process in which case it must be classified
as trading. Previously, all retained mortgage-backed securities were
required to be classified as trading. SFAS No. 134 was effective as of
January 1, 1999, and did not have a significant impact on the
Corporation's financial statements.
(2) Securities
Securities at September 30, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
September 30, 1999
Gross Gross
AVAILABLE FOR SALE Amortized Unrealized Unrealized Fair
Cost Gains Loss Value
--------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government corporations
and agencies $ 64,676,495 $ 110,561 $ (551,183) $ 64,235,873
Obligations of state and political
subdivisions 53,903,608 488,076 (512,886) 53,878,798
Other securities, including mortgage-
backed and equity securities 37,351,409 2,185,351 (414,244) 39,122,516
-------------- ----------- ------------ -------------
$ 155,931,512 $ 2,783,988 $ (1,478,313) $ 157,237,187
============== =========== ============ =============
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
Gross Gross Gross
HELD TO MATURITY Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
-------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Obligations of state and political
subdivisions $ 355,000 $ 1,541 $ 0 $ 356,541
Other securities, including mortgage-
backed securities 187,752 3,387 (54) 191,085
-------------- ----------- ------------ -------------
$ 542,752 $ 4,928 $ (54) $ 547,626
============== =========== ============ =============
</TABLE>
Page 9
<PAGE> 10
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1998
Gross Gross
Unrealized Unrealized Fair
AVAILABLE FOR SALE Amortized Cost Gains Losses Value
----------------- ------------ --------------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government corporations
and agencies $ 69,024,266 $ 1,198,600 $ (98,129) $ 70,124,737
Obligations of state and political
subdivisions 52,759,051 1,661,950 (17,364) 54,403,637
Other securities, including mortgage-
backed and equity securities 44,605,521 2,858,743 (39,938) 47,424,326
------------- ------------- ------------- -------------
$ 166,388,838 $ 5,719,293 $ (155,431) $ 171,952,700
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
Gross Gross
Unrealized Unrealized Fair
HELD TO MATURITY Amortized Cost Gains Losses Value
----------------- ------------ --------------- --------
<S> <C> <C> <C> <C>
Obligations of state and political
subdivisions $ 355,000 $ 7,564 $ 0 $ 362,564
Other securities, including mortgage-
backed securities 455,122 6,054 (108) 461,068
------------- ------------- ------------- -------------
$ 810,122 $ 13,618 $ (108) $ 823,632
============= ============= ============= =============
</TABLE>
Page 10
<PAGE> 11
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- -----------------------------------------------------------------------
The amortized cost and fair value of securities at September 30, 1999, by
contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because issuers may have the right to call or prepay
obligations. Securities not due at a single maturity date, primarily
mortgage-backed securities and equity securities are shown separately.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE Amortized Cost Fair Value
-------------- --------------------
<S> <C> <C>
Due in one year or less $ 28,231,998 $ 28,278,705
Due after one year through five years 85,258,469 84,806,051
Due after five years through ten years 20,870,707 20,711,496
Due after ten years 213,441 211,648
Mortgage-backed securities 19,582,616 19,297,821
Equity securities 1,774,281 3,931,466
------------ ------------
Total securities available for sale $155,931,512 $157,237,187
============ ============
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY Amortized Cost Estimated Fair Value
------------- -------------------
<S> <C> <C>
Due in one year or less $ 122,500 $ 122,895
Due after one year through five years 232,500 233,646
Mortgage-backed securities 187,752 191,085
------------ ------------
Total securities held to maturity $ 542,752 $ 547,626
============ ============
</TABLE>
Proceeds from sales of securities available for sale during the nine months
ended September 30, 1999 totaled $5,739,474 resulting in gross gains of
$750,316. Proceeds from the sales of securities available for sale during the
three months ended September 30, 1999 totaled $3,520,080 resulting in gross
gains of $9,482. Securities called or settled by the issuer during the three and
nine months ended September 30, 1999 resulted in gains of $9,973. Securities
called or settled by the issuer resulted in gains of $1,000 for the three months
ended September 30, 1999 and $20,580 for the nine months ended September 30,
1998.
Securities with a carrying value of approximately $62,114,000 and $60,960,000
were pledged as of September 30, 1999 and December 31, 1998, 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
- ------------------------------------------------------------------------------
(3) Loans
Loans at September 30, 1999 and December 31, 1998 were as follows:
<TABLE>
<CAPTION>
9/30/1999 12/31/1998
--------- ----------
<S> <C> <C>
Commercial and Agriculture $23,738,364 $28,415,462
Real Estate - mortgage 225,588,285 221,438,442
Real Estate - construction 4,221,641 3,492,928
Consumer 28,450,907 29,957,511
Credit card and other 2,582,694 1,426,312
Deferred loan fees (990,182) (1,140,518)
Unearned interest (160,733) (240,936)
------------ ------------
Total $283,430,976 $283,349,201
============ ============
</TABLE>
(4) Allowance for Loan Losses
A summary of the activity in the allowance for loan losses for the nine
months ended September 30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance January 1, $4,567,126 $4,707,051
Loans charged-off (592,128) (495,288)
Recoveries 190,280 170,680
Provision for loan losses 231,000 299,000
---------- ----------
Balance June 30, $4,396,278 $4,681,443
========== ==========
</TABLE>
Page 12
<PAGE> 13
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- ------------------------------------------------------------------------------
Information regarding impaired loans was as follows for the nine months ended
September 30.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Average investment in impaired loans $3,756,000 $3,854,000
Interest income recognized on impaired loans
including interest income recognized on cash basis 215,037 187,394
Interest Income recognized on impaired loans
on cash basis 215,037 187,394
</TABLE>
Information regarding impaired loans at September 30, 1999 and December 31, 1998
was as follows:
<TABLE>
<CAPTION>
9/30/1999 12/31/98
--------- --------
<S> <C> <C>
Balance impaired loans $3,781,000 $4,159,000
Less portion for which no allowance for loan
losses is allocated --- ---
----------------- -----------------
Portion of impaired loan balance for which an
allowance for credit losses is allocated $3,781,000 $4,159,000
================= =================
Portion of allowance for loan losses allocated to
the impaired loan balace $1,098,000 $1,173,000
================= =================
</TABLE>
(5) 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 consolidated balance
sheets. 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 Banks
do make fixed rate loan commitments for short periods of time. However,
such commitments were immaterial as of September 30, 1999 and December
31, 1998.
Page 13
<PAGE> 14
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- ------------------------------------------------------------------------------
Commitments to extend credit and letters of credit approximated the
following amounts at September 30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
Contract Amount
---------------
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Commitment to extend credit:
Lines of credit and construction loans $21,613,000 $23,412,000
Credit cards 2,629,000 3,315,000
Letters of credit 373,000 623,000
----------- -----------
$24,615,000 $27,350,000
=========== ===========
</TABLE>
The Banks 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 September 30, 1999 and December 31, 1998 approximated
$3,653,000 and $2,326,000.
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 September 30, 1999, compared
to December 31, 1998 and the consolidated results of operations for the
three and nine month periods ending September 30, 1999 compared to the
same periods in 1998. 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 a material effect if
implemented.
When used in this Form 10-Q or future filings by the Corporation with
the Securities and Exchange Commission, in press releases or other
public or shareholder communications, or in oral statements made with
the approval of an authorized executive officer, the words or phrases
"will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," "believe," or similar expressions
are intended to identify "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The
Corporation wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date
made, and to advise readers that various factors, including regional
and national economic conditions, changes in levels of market interest
rates, credit risks of lending activities and competitive and
regulatory factors, could effect the Corporation's financial
performance and could cause the Corporation's actual results for future
periods to differ materially from those anticipated or projected. The
Corporation does not undertake, and specifically disclaims, any
obligation to publicly release the result of any revisions, which may
be made to any forward-looking statements to reflect occurrence of
anticipated or unanticipated events or circumstances after the date of
such statements.
See Exhibit 99, which is incorporated herein by reference.
FINANCIAL CONDITION
Total assets of the Corporation at September 30, 1999 totaled
$486,944,103 compared to $508,888,863 at December 31, 1998. This was a
decrease of $21,944,760, or 4.3 percent. Within the structure of the
assets, net loans have increased only $252,623, or 0.1 percent since
December 31, 1998, due in part to slow loan demand. The demand for
mortgage loans has been mainly for fixed rate. These are the types of
loans the Corporation is selling on the secondary market. For the first
nine months of 1999, loans originated for sale totaled $8,809,418.
Loans held-for-sale increased $296,741, or 13.1 percent from December
31, 1998. At September 30, 1999, the net loan to deposit ratio was 68.9
percent compared to 66.7 percent at December 31, 1998.
Page 15
<PAGE> 16
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
At September 30, 1999, $157,237,187, or 99.7 percent of the security
portfolio was classified as available for sale. The remainder of
$542,752 was classified as held to maturity. Securities decreased
$14,982,883 from December 31, 1998. Some matured securities were not
replaced in order to increase liquidity. Additionally, the majority of
gains on the sale of securities were generated by equity securities
sold during the nine months ended September 30, 1999, The equity
securities sold had a market value of $2,219,394.
For the nine months of operations in 1999, $231,000 was placed into the
allowance from earnings compared to $299,000 for the same period of
1998. The Corporation has placed an increased emphasis on valuation of
the reserve for loan losses. The calculation of specific reserves,
reserves for delinquencies and general reserves should be fairly
representative of the reserves necessary for probable losses in the
portfolio. The unallocated portion is reserved to cover situations not
addressed by the specific, delinquent or general portions, such as a
downturn in the economy. As a guideline for the unallocated portion of
the reserve, the Corporation uses a range of 25% to 35% of the total
reserve. If this range is exceeded, then provisions to the reserve will
be reduced. Net charge-offs for the first nine months of 1999 were
$401,848 compared to $324,608 for the same period of 1998. The
September 30, 1999 allowance for loan losses as a percent of total
loans was 1.55 percent compared to 1.61 percent at December 31, 1998.
Office premises and equipment have decreased $218,469 and intangible
assets have decreased $249,536 since December 31, 1998. The decrease in
office premises and equipment is attributed to new purchases of
$844,975 and disposals of $352,409, less proceeds from the sale of
equipment of $1,627 and depreciation of $709,408.
Accrued interest and other assets totaled $6,630,177 at September 30,
1999 compared to $8,531,086 at December 31, 1998, a decrease of
$1,900,909. This decrease was due to an increase in interest receivable
at the banks of $522,745, an increase in other assets of $543,038 and a
decrease in accounts receivable at SCC of $2,966,692. The receivable at
SCC was the result of an agreement with Jack Henry & Associates, Inc.
(JHA) that SCC sell all of their contracts to provide data processing
services to community banks. JHA agreed to pay a SCC a fee based upon
annual net revenue under a new JHA contract for each bank that signed a
five-year contract with JHA by January 31, 1999. The Corporation
recognized $2,966,692 of income as a result of the sale of the
contracts in 1998. Accounts receivable decreased in the first quarter
of 1999 when SCC received payment from JHA for the sale of the
processing contracts.
Total deposits at September 30, 1999 decreased $13,096,346 from
year-end 1998. Noninterest-bearing deposits, representing demand
deposit balances, increased $1,073,541 from year-end 1998.
Interest-bearing deposits, including savings and time deposits,
decreased $14,169,887 from year-end 1998. The year to date 1999 average
balance of savings deposits has increased $1,996,000 compared to the
average balance of the same period for 1998. The current average rate
of these deposits is 2.37 percent compared to 2.90 percent in 1998. The
decrease in the savings rate is due to the Banks lowering the savings
rate 50 basis points in the last quarter of
Page 16
<PAGE> 17
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
1998. The year to date 1999 average balance of time certificates has
decreased $2,562,000 compared to the average balance for the same
period for 1998. The current average rate on these deposits is 4.84
percent compared to 5.53 percent for the same period in 1998. This
decrease in rate is due to pricing strategies employed to help control
the cost of deposits as well as reaction to market interest rates
trending down during the last quarter of 1998. Management's decision to
lower rates is also the primary reason for the decline in balance. With
loan demand being slower than desired, management elected to be less
competitive in interest rates on deposits
Other borrowed funds have decreased $3,584,651 from December 31, 1998
to September 30, 1999. Federal Home Loan Bank borrowings have decreased
$11,141,290 as a result of scheduled paydowns. FHLB borrowings had
scheduled balloon payments of $10,655,937 in the first quarter of 1999.
The Corporation elected to use excess liquidity to repay these
borrowings, rather than replace them with other relatively higher
priced sources of funding. Securities sold under agreements to
repurchase, which tend to fluctuate, have increased $4,661,191 and U.S.
Treasury Tax Demand Notes have increased $2,895,448, pending payment to
the government.
Shareholders' equity at September 30, 1999 was $51,861,455, which was
10.7 percent of total assets. Shareholders' equity at December 31, 1998
was $53,740,931, which was 10.6 percent of total assets. The decrease
in shareholders' equity was represented by earnings of $4,198,439,
dividends paid of $2,045,681, the purchase of treasury stock for
$1,221,832 and the decrease in the unrealized gain on securities
available for sale of $2,810,402. The Corporation paid a cash dividends
on February 1, 1999, May 1, 1999 and August 1, 1999, each at a rate of
$.16 per share. Total outstanding shares at September 30, 1999 were
4,220,515.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 and 1998
Net income for the nine months ended September 30, 1999 was $4,198,439,
or $.99 per common share compared to $3,445,135, or $.81 per common
share for the same period in 1998. This was an increase of $753,304, or
21.9 percent. Some of the reasons for the changes are explained below.
Total interest income for the first nine months of 1999 has decreased
$785,738, or 3.1 percent compared to the same period in 1998. The
average rate on earning assets on a tax equivalent basis for the first
nine months of 1999 was 7.22 percent and 7.62 percent for the first
nine months of 1998. The decrease in rate on earning assets led to the
decrease in interest income. Total interest expense for the first nine
months of 1999 has decreased $1,558,535, or 12.0 percent compared to
the same period of 1998. This decrease is due mainly to a decrease in
interest on deposits of $1,247,571. This decrease is the result of both
a decrease in the balances of deposits as well as a decrease in the
rate paid on deposits. The average rate on interest-bearing liabilities
Page 17
<PAGE> 18
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
for the first nine months of 1999 was 3.89 percent compared to 4.45
percent for the same period of 1998. The net interest margin on a tax
equivalent basis was 3.97 percent for the nine-month period ended
September 30, 1999 and 3.89 percent for the same period ended September
30, 1998.
Noninterest income for the first nine months of 1999 totaled
$3,757,641, compared to $3,214,136 for the same period of 1998, an
increase of $543,505. Gain on securities for the first nine months of
1999 increased $729,736 compared to 1998. The large increase in the
gain on securities was due to the sale of equity securities at Farmers.
The equity securities were sold to take advantage of significant
increases in the market value of the portfolio. Revenue from computer
operations decreased $291,675 as a result of the sale of SCC's
processing contracts, other operating income increased $87,244, due
mainly to increased revenue from point-of-sale terminal usage, service
charges on deposit accounts increased $32,087 and the gain on the sale
of loans decreased $13,887. Gain on the sale of loans decreased due to
decreased volume of loans sold.
Noninterest expense for the nine months ended September 30, 1999
totaled $10,881,726 compared to $10,534,013 for the same period in
1998. This was an increase of $347,713, or 3.3 percent. The largest
increase in noninterest expense was in net occupancy expense. Net
occupancy expense increased $152,010, due mainly to increased rent
expense, building repair and maintenance, utilities and janitorial
expense. Equipment expense increased $68,932 as a result of increased
depreciation expense. Professional fees increased $68,685, due mainly
to a revenue enhancement and process improvement project currently
being undertaken.
Three Months Ended September 30, 1999 and 1998
Net income for the quarter ended September 30, 1999 was $1,149,980, or
$.27 per common share compared to $1,175,575, or $.28 per common share
for the same period in 1998. This was a decrease of $25,595, or 2.2
percent. Some of the reasons for the changes are explained below.
Net interest income for the third quarter 1999 totaled $4,478,322
compared to $4,146,605 for the third quarter of 1998. This was an
increase of $331,717, or 8.6 percent. The average rate on earning
assets on a tax equivalent basis for the third quarter of 1999 was 7.20
percent and 7.55 percent for the same period of 1998. The decrease in
rate on earning assets led to the decrease in interest income for the
third quarter 1999 compared to the same period in 1998. Total interest
expense for the third quarter of 1999 has decreased $679,756, or 15.5
percent compared to the same period of 1998. This decrease is due to a
decrease in interest on deposits of $521,246 and to a decrease in
interest on FHLB borrowings of $167,610. This decrease in interest on
deposits is the result of both a decrease in the balances as well as a
decrease in the rate paid on deposits. The decrease in interest on FHLB
borrowings is the result of a reduction of outstanding balances. The
average rate on interest-bearing liabilities for the three months ended
September 30, 1999 was 3.79 percent compared to 4.41 percent for the
same period of 1998. The net interest
Page 18
<PAGE> 19
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
margin on a tax equivalent basis was 4.04 percent for the three-month
period ended September 30, 1999 and 3.87 percent for the same period
ended September 30, 1998.
Noninterest income for the third quarter 1999 totaled $974,907 compared
to $1,131,180 for the third quarter 1998, a decrease of $156,273. Gain
on securities for the quarter increased $18,455 compared to 1998.
Revenue from computer operations decreased $207,367, other operating
income increased $77,901, service charges on deposit accounts increased
$16,311 and the gain on the sale of loans decreased $61,573. The
decrease in revenue from computer operations is the result of the sale
of the data processing contracts to JHA.
Noninterest expense for the third quarter 1999 totaled $3,755,882
compared to $3,570,556 for the third quarter 1998. This was an increase
of $185,326, or 5.2 percent. The largest change in noninterest expense
was a decrease of $179,345 in salaries and benefits. Several employees
retired at the end of 1998, none of which were replaced with new hires.
Net occupancy expense increased $78,453, due mainly to increased rent
expense, building repair and maintenance, utilities and janitorial
expense. Equipment expense increased $30,173 as a result of increased
depreciation expense. Other operating expense also increased, due to
increased credit card expense, increased advertising expense and ATM
expense.
INCOME TAX EXPENSE
Income tax expense for the first nine months of 1999 totaled $1,621,382
compared to $1,338,097 for the first nine months of 1998. This was an
increase of $283,285, or 21.2 percent. The increase in the federal
income taxes is a result of the increase in total income before taxes
of $1,036,589, generated mostly by income from the sale of equity
securities. The effective tax rates were comparable for the nine-month
periods ended September 30, 1999 and September 30, 1998, at 27.9% and
28.0% respectively.
Income tax expense for the third quarter of 1999 totaled $472,367
compared to $448,654 for the third quarter of 1998. This was an
increase of $23,713, or 5.3 percent. The effective tax rate was 29.1%
for the three months ended September 30, 1999 and 27.6% for the three
months ended September 30, 1998.
Page 19
<PAGE> 20
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
CAPITAL RESOURCES
Shareholders equity totaled $51,861,455 at September 30, 1999 compared
to $53,740,931 at December 31, 1998. All of the capital ratios exceed
the regulatory minimum guidelines as identified in the following table:
<TABLE>
<CAPTION>
Corporation Ratios Regulatory
9/30/99 12/31/98 Minimums
------- --------- ----------
<S> <C> <C> <C>
Tier I Risk Based Capital 17.0% 15.7% 4.0%
Total Risk Based Capital 18.2% 17.0% 8.0%
Leverage Ratio 10.1% 9.5% 4.0%
</TABLE>
The Corporation paid a cash dividends of $.16 per common share each on
February 1, 1999, May 1, 1999 and August 1, 1999 compared to $.15 per
common share each on February 1, 1998, May 1, 1998 and August 1, 1998.
Capital expenditures totaled $844,975 for the first nine months of 1999
compared to $592,971 for the same period of 1998. Capital expenditures
are much higher in 1999 than in 1998 for a few reasons. First, with the
conversion to JHA data processing, the Banks had conversion related
capital expenditures such as upgrading or replacing a portion of their
computer equipment. Citizens also purchased equipment for its Huron,
Ohio office. Finally, Farmers is in the process of renovating its New
Washington office, as well as opening a new branch. Farmers' projects
resulted in over $300,000 in capital expenditures.
LIQUIDITY
Liquidity as it relates to the banking entities of the Corporation is
the ability to meet the cash demand and credit needs of its customers.
For the first nine months of 1999 the Banks maintained a federal funds
sold position that averaged $13,217,000. In addition, the Banks,
through their respective correspondent banks, maintain federal funds
borrowing lines totaling $23,610,000 and the Banks have total borrowing
availability at the Federal Home Loan Bank of Cincinnati of $11,706,125
at September 30, 1999. Finally, 99.7% of the Corporation's security
portfolio has been classified as available for sale, which provides
additional liquidity.
YEAR 2000 ISSUE
First Citizens Banc Corp realizes that the Year 2000 challenge is a
serious problem for not only itself and other banks but for all
organizations. Many computer systems that use dates to
Page 20
<PAGE> 21
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
calculate any number of computations, functions, and a vast number of
commands may begin to fail prior to or on the start of the new Year
2000. It is critical to the continuing operations of First Citizens
Banc Corp that all its systems that are sensitive to the Year 2000 date
change be identified and changed before any adverse situations occur.
First Citizens Banc Corp's definition of Year 2000 Compliant is the
capability of sustaining minimal business disruptions, readiness of
system applications and preparation for response and recovery as
necessary. System applications are considered Year 2000 ready when they
continue to produce the same understandable, accurate and predictable
results, regardless of the date.
The Year 2000 Plan is broken into 5 separate parts. Each part is
important to the end result of being 2000 compliant. Upon completion of
the plan all items will have been examined and corrected (or documented
as an exception). The phases are as follows: awareness, assessment,
renovation, validation, and implementation.
The awareness phase involves identifying the Year 2000 problem, gaining
executive level support for recognizing the importance of the problem,
and developing a team and strategy for handling the problem. First
Citizens Banc Corp has appointed Year 2000 Directors and established
Year 2000 Teams and an Executive Y2K Committee. To help inform our
customer and our community of the Year 2000 issue, we have sent
brochures out to our customers and held information seminars that were
open to the public.
The assessment phase involves identifying the size and complexity of
the problem as it relates to First Citizens Banc Corp, including
identifying all software, hardware, systems, and internal and external
interdependencies that are affected by the century change. From the
regulatory perspective, this also includes identifying the resources
needed, the time frames, and the processes necessary to handle the Year
2000 problem. Assessment lists have been completed listing those items
that are Year 2000 susceptible, prioritizing them as to their
importance. Maintaining this list and contact with all necessary
vendors is an ongoing process. Questionnaires were sent out to loan and
deposit customers to help address our credit and liquidity risks.
The renovation phase involves programming or reprogramming systems,
hardware and software upgrades, system replacements, and related
changes that we will have to make to prepare all systems for the turn
of the century. This includes ongoing contact with any third-party
servicers or software providers that the bank may be using. First
Citizens Banc Corp is having all non-compliant hardware and software
either updated or replaced.
The validation phase is essentially the testing phase to determine that
all upgrades or reprogrammed systems, as well as other systems that are
believed to be Year 2000 compliant, are truly ready for the date change
to January 1, 2000. First Citizens Banc Corp has developed a test plan
to verify that all hardware and software in use will be ready for the
Year 2000. Testing is currently ongoing and was completed as planned by
June 30, 1999 for all mission critical items. Testing for all
non-critical items will be completed by November 15, 1999.
Page 21
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First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
The implementation phase involves certification that existing systems
are ready to go, and that any new systems or changes to existing
systems are compliant with the turn of the century requirements. Active
involvement of all departments and teams will monitor new and existing
items to insure that a smooth transition into the Year 2000 and beyond
is achieved.
In anticipation of potential Year 2000 problems, the Corporation has
addressed both preventative measures and corrective actions. Management
has set a maximum budget of $281,100 for Year 2000 related issues.
Through September 30, 1999, approximately $232,700 has been spent on
solutions for possible problems. In addition to the dollars spent,
specific contingency plans are in place for all mission critical items.
Mission critical items are the programs that must be in place in order
for the Corporation to continue operations with minimal business
disruptions. The contingency plans vary widely and range from manual
report preparation to telephone authorization of funds transfer to
reliance on vendor's contingency plans where no other alternative
exists.
SALE OF DATA PROCESSING CONTRACTS AT SCC RESOURCES, INC.
On June 19,1998, SCC entered into an agreement with Jack Henry &
Associates, Inc. (JHA) to sell all of the contracts for providing data
processing services to community banks. JHA agreed to pay a fee based
upon annual net revenue under the new JHA contract for each bank that
signed a five-year contract with JHA by January 31, 1999. The
Corporation recognized $2,966,692 of income as a result of the sale of
the contracts in 1998. Expenses of $1,432,572 relating primarily to the
write down of software and intangible assets, lease termination costs
and employee severance costs were also recorded. The net gain of
$1,534,120 was reflected in other income for the year ended December
31, 1998. All banks were converted to JHA's software by the end of June
1999. SCC will continue to offer bookkeeping, proof and imaging
services to its customer banks, as well as the affiliated banks.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's primary market risk exposure is interest rate risk
and, to a lesser extent, liquidity risk. The Banks do not maintain a
trading account for any class of financial instrument and the
Corporation is not affected by foreign currency exchange rate risk or
commodity price risk. Due to the basis in equities held by Farmers
being so much less than the current fair value at this time, the
Corporation is not subject to significant equity price risk.
Interest rate risk is the risk that the Corporation's financial
condition will be adversely affected due to movements in interest
rates. The Corporation, like other financial institutions, is subject
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First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
- -------------------------------------------------------------------------------
to interest rate risk to the extent that its interest-earning assets
reprice differently than interest-bearing liabilities. The income of
financial institutions is primarily derived from the excess of interest
earned on interest-earning assets over interest paid on
interest-bearing liabilities. One of the Corporation's principal
financial objectives is to achieve long-term profitability while
reducing its exposure to fluctuations in interest rates. Accordingly,
the Corporation places great importance on monitoring and controlling
interest rate risk.
There are several methods employed by the Corporation to monitor and
control interest rate risk. One such method is using gap analysis. The
gap is defined as the repricing variance between rate sensitive assets
and rate sensitive liabilities within certain periods. The repricing
can occur due to changes in rates on variable products as well as
maturities of interest-earning assets and interest-bearing liabilities.
A high ratio of interest sensitive liabilities, generally referred to
as a negative gap, tends to benefit net interest income during periods
of falling rates as the average rate on interest-bearing liabilities
falls faster than the average rate earned on interest-earning assets.
The opposite holds true in during periods of rising rates. The
Corporation attempts to minimize the interest rate risk through
management of the gap in order to achieve consistent shareholder
return. The Corporation's Assets and Liability Management Policy is to
maintain a laddered gap position. One strategy is to originate variable
rate loans tied to market indices. Such loans reprice as the underlying
market index changes. Currently, approximately 51.1% of the
Corporation's loan portfolio reprices on at least an annual basis. The
Corporation also invests excess funds in federal funds that mature and
reprice daily.
The Corporation's 1998 annual report details a table, which provides
information about the Banks financial instruments that are sensitive to
changes in interest rates as of December 31, 1998. The table is based
on information and assumptions set forth in the notes. The Corporation
believes the assumptions are reasonable. For loans, securities and
liabilities with contractual maturities, the table represents principal
cash flows and weighted average interest rate. For variable rate loans
the contractual maturity and weighted average interest rate were used
with an explanatory footnote as to repricing periods. For liabilities
without contractual maturities such as demand and savings deposits, a
decay rate was utilized to match their most likely withdrawal behavior.
Management believes that no events have occurred since December 31,
1998 which would significantly change the ratio of rate sensitive
liabilities for the given time horizon.
Page 23
<PAGE> 24
First Citizens Banc Corp
Other Information
Form 10-Q
- -------------------------------------------------------------------------------
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. (A) EXHIBIT NO. 27 Financial Data Schedule ...................... 27
(B) EXHIBIT NO. 99 Safe Harbor under the Private Securities
Litigation Reform Act of 1995
(C) REPORTS ON FORM 8-K - None
Page 24
<PAGE> 25
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, The
registrant has caused this report to be signed on its behalf the undersigned
thereunto duly authorized.
First Citizens Banc Corp
/s/ David A. Voight November 12, 1999
- ------------------------------------ -----------------
David A. Voight Date
President
/s/ James O. Miller November 12, 1999
- ------------------------------------ ------------------
James O. Miller Date
Executive Vice President
Page 25
<PAGE> 26
First Citizens Banc Corp
Index to Exhibits
Form 10-Q
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Exhibit
Number Description Page Number
- ------- ------------- -----------
<S> <C> <C>
27 Financial Data Schedule 27
99 Safe Harbor Under the Private Securities Incorporated by reference to Exhibit 99 to
Litigation Reform Act of 1995 Annual Report on Form 10-K for the Year Ended
December 31, 1998 filed by the registrant on
March 25, 1999
</TABLE>
Page 26
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000944745
<NAME> FIRST CITIZENS BANC CORP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 15,413,537
<INT-BEARING-DEPOSITS> 51,031
<FED-FUNDS-SOLD> 16,035,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,237,187
<INVESTMENTS-CARRYING> 542,752
<INVESTMENTS-MARKET> 547,626
<LOANS> 279,034,698
<ALLOWANCE> 4,396,278
<TOTAL-ASSETS> 486,944,103
<DEPOSITS> 404,802,899
<SHORT-TERM> 24,897,878
<LIABILITIES-OTHER> 3,287,996
<LONG-TERM> 2,093,875
0
0
<COMMON> 23,257,520
<OTHER-SE> 28,603,935
<TOTAL-LIABILITIES-AND-EQUITY> 486,944,103
<INTEREST-LOAN> 17,281,195
<INTEREST-INVEST> 6,804,125
<INTEREST-OTHER> 534,375
<INTEREST-TOTAL> 24,619,695
<INTEREST-DEPOSIT> 10,734,834
<INTEREST-EXPENSE> 11,444,789
<INTEREST-INCOME-NET> 13,174,906
<LOAN-LOSSES> 231,000
<SECURITIES-GAINS> 750,316
<EXPENSE-OTHER> 10,881,726
<INCOME-PRETAX> 5,819,821
<INCOME-PRE-EXTRAORDINARY> 4,198,439
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,198,459
<EPS-BASIC> .99
<EPS-DILUTED> .99
<YIELD-ACTUAL> 3.74
<LOANS-NON> 2,289,000
<LOANS-PAST> 1,277,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,567,126
<CHARGE-OFFS> 592,128
<RECOVERIES> 190,280
<ALLOWANCE-CLOSE> 4,396,278
<ALLOWANCE-DOMESTIC> 4,396,278
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,453,242
</TABLE>
