<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: March 31, 2000
----------------------
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 (I.R.S. Employer
of incorporation 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 May 12, 2000
4,111,119 common shares
<PAGE> 2
FIRST CITIZENS BANC CORP
Index
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. Financial Information
ITEM 1. Financial Statements:
Consolidated Balance Sheets (unaudited)
March 31, 2000 and December 31, 1999.........................................................3
Consolidated Statements of Income (unaudited)
Three months ended March 31, 2000 and 1999...................................................4
Consolidated Statement of Shareholders' Equity (unaudited)
For the years ended December 31, 1998 and 1999 and
three months ended March 31, 2000............................................................5
Consolidated Statement of Cash Flows (unaudited)
Three months ended March 31, 2000 and 1999...................................................6
Notes to Consolidated Financial Statements (unaudited)........................................7-14
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................15-19
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...................................19-20
PART II. Other Information
ITEM 1. Legal Proceedings...............................................................................21
ITEM 2. Changes in Securities and Use of Proceeds.......................................................21
ITEM 3. Defaults Upon Senior Securities.................................................................21
ITEM 4. Submission of Matters to a Vote of Security Holders.............................................21
ITEM 5. Other Information...............................................................................21
ITEM 6. Exhibits and Reports on Form 8-K................................................................21
SIGNATURES ..............................................................................................22
</TABLE>
<PAGE> 3
FIRST CITIZENS BANC CORP
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
Assets 2000 1999
------------- -------------
<S> <C> <C>
Cash and due from banks $ 17,950,413 $ 14,598,566
Federal funds sold 8,180,000 4,600,000
Interest-bearing deposits 51,031 51,031
Securities
Available-for-sale 145,588,408 150,254,933
Held-to-maturity (Estimated Fair Value of $384,698 at
March 31, 2000, and $407,765 at December 31, 1999) 386,386 406,108
------------- -------------
Total securities 145,974,794 150,661,041
Loans held for sale 2,627,000 2,217,250
Loans 300,246,572 288,719,850
Less: Allowance for loan losses (4,252,233) (4,273,825)
------------- -------------
Net loans 295,994,339 284,446,025
Office premises and equipment, net 7,318,536 7,457,886
Intangible assets 2,116,404 2,197,916
Accrued Interest and other assets 7,261,991 5,990,342
------------- -------------
Total assets $ 487,474,508 $ 472,220,057
============= =============
Liabilities
Deposits
Noninterest-bearing deposits $ 41,385,284 $ 40,246,502
Interest-bearing deposits 384,101,141 362,913,881
------------- -------------
Total deposits 425,486,425 403,160,383
Federal Home Loan Bank borrowings 1,822,140 1,958,960
Securities sold under agreements to repurchase 9,398,266 12,975,188
U. S. Treasury interest-bearing demand deposit note payable 1,006,037 3,065,681
Accrued interest, taxes and other expenses 2,703,318 2,865,057
------------- -------------
Total liabilities 440,416,186 424,025,269
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 28,608,848 28,010,371
Treasury stock, 147,282 shares at cost at March 31, 2000, 100,586
shares at cost at December 31, 1999 (4,195,993) (2,877,032)
Accumulated other comprehensive income/(loss) (612,053) (196,071)
------------- -------------
Total shareholders' equity 47,058,322 48,194,788
------------- -------------
Total liabilities and shareholders' equity $ 487,474,508 $ 472,220,057
============= =============
</TABLE>
See notes to interim consolidated financial statements Page 3
<PAGE> 4
FIRST CITIZENS BANC CORP
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
2000 1999
<S> <C> <C>
INTEREST INCOME:
Loans, including fees $ 5,935,049 $5,800,900
Taxable securities 1,515,858 1,721,105
Nontaxable securities 547,126 581,025
Federal funds sold 33,386 175,819
Other 13,619 21,035
----------- ----------
Total interest income 8,045,038 8,299,884
INTEREST EXPENSE:
Deposits 3,441,590 3,649,220
FHLB Borrowings 26,901 163,064
Other 151,910 157,332
----------- ----------
Total interest expense 3,620,401 3,969,616
----------- ----------
NET INTEREST INCOME 4,424,637 4,330,268
PROVISION FOR LOAN LOSSES 95,000 68,000
----------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,329,637 4,262,268
NONINTEREST INCOME:
Computer center data processing fees 262,295 509,696
Service charges 452,062 240,641
Net gain/(loss) on sale of securities (1,108) 727,304
Net gain on sale of loans 0 94,518
Other 405,614 332,608
----------- ----------
Total noninterest income 1,118,863 1,904,767
NONINTEREST EXPENSE:
Salaries, wages and benefits 1,647,411 1,780,196
Net occupancy expense 200,023 196,938
Equipment expense 242,153 186,792
FDIC Premiums 17,138 12,245
State franchise tax 147,089 150,756
Professional services 276,955 268,029
Amortization of intangible assets 81,512 81,512
Other operating expenses 1,031,681 906,115
----------- ----------
Total noninterest expense 3,643,962 3,582,583
----------- ----------
Income before taxes 1,804,538 2,584,452
Income tax expense 499,164 728,871
----------- ----------
Net Income $ 1,305,374 $1,855,581
=========== ==========
Earnings per share $ 0.32 $ 0.44
Dividends declared $ 0.17 $ 0.16
Wtd. avg. shares during the period 4,138,927 4,263,345
</TABLE>
See notes to interim consolidated financial statements Page 4
<PAGE> 5
FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
Form 10-Q
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
Outstanding Retained Treasury Comprehensive Shareholders'
Shares Amount Earnings Stock Income/(Loss) Equity
----------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 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/(loss) 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 6,062,169 6,062,169
Change in unrealized gain/(loss) on
securities available for sale (3,868,218) (3,868,218)
-----------
Total 2,193,951
Purchase of treasury stock, at cost (100,586) (2,877,032) (2,877,032)
Cash dividends ($1.15 per share) (4,863,062) (4,863,062)
--------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 4,162,815 23,257,520 28,010,371 (2,877,032) 196,071 48,194,788
Comprehensive Income:
Net income 1,305,374 1,305,374
Change in unrealized gain/(loss) on
securities available for sale (415,982) (415,982)
-----------
Total 889,392
Purchase of treasury stock, at cost (46,696) (1,318,961) (1,318,961)
Cash dividends ($.17 per share) (706,897) (706,897)
--------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 4,116,119 $23,257,520 $28,608,848 $(4,195,993) $ (612,053) $47,058,322
--------- ----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to interim consolidated financial statements Page 5
<PAGE> 6
FIRST CITIZENS BANC CORP
Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 1,305,374 $ 1,855,581
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization of office premises and equipment 229,062 228,682
Amortization of intangible assets 81,512 81,512
Provision for loan losses 95,000 68,000
Loans originated for sale (409,750) (2,308,150)
Proceeds from sale of loans -- 3,447,478
Gain on sale of loans -- (94,518)
Security (gains)/losses 1,108 (727,304)
Change in deferred loan fees 23,907 (26,725)
Net amortization of security premiums and discounts 147,577 155,810
Change in accrued interest and other assets (1,271,648) 1,978,071
Change in accrued interest, taxes and other expenses 52,554 (72,153)
------------ ------------
Net cash from operating activities 254,696 4,586,284
Cash flows from investing activities
Maturities and calls of securities, held-to-maturity 19,626 109,419
Maturities and calls of securities, available-for-sale 3,176,856 12,232,503
Purchases of securities, available-for-sale (1,089,006) (6,183,990)
Proceeds from sale of securities, available-for-sale 1,799,811 1,209,587
Loans made to customers, net of principal collected (6,575,417) 3,400,560
Loans purchased (5,091,804) --
Change in federal funds sold (3,580,000) 3,680,000
Proceeds from sale of property and equipment 12,585 1,627
Purchases of office premises and equipment (102,298) (152,645)
------------ ------------
Net cash from investing activities (11,429,647) 14,297,061
Cash flows from financing activities
Repayment of FHLB borrowings (136,820) (10,875,903)
Net change in deposits 22,326,042 (5,822,080)
Change in securities sold under agreements to repurchase (3,576,922) (3,431,710)
Change in U. S. Treasury interest-bearing demand note payable (2,059,644) (157,015)
Purchases of treasury stock (1,318,961) (6,750)
Cash dividends paid (706,897) (682,144)
------------ ------------
Net cash from financing activities 14,526,798 (20,975,602)
------------ ------------
Net change in cash and due from banks 3,351,847 (2,092,257)
Cash and due from banks at beginning of period 14,598,566 16,443,613
------------ ------------
Cash and due from banks at end of period $ 17,950,413 $ 14,351,356
============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest $ 4,429,456 $ 4,796,761
Income taxes $ 0 $ 0
</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 March 31, 2000; the
consolidated statements of income for the three month period ended
March 31, 2000 and 1999; the consolidated statement of shareholders'
equity for the three months ended March 31, 2000; and the consolidated
statements of cash flows for the three month periods ended March 31,
2000 and 1999. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the Corporation's financial position as of March 31, 2000 and its
results of operations and changes in cash flows for the periods ended
March 31, 2000 and 1999 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 March 31, 2000
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 1999 annual report. The Corporation has consistently
followed these policies in preparing this Form 10-Q.
The Corporation provides financial services through its offices in the
Ohio counties of Erie, Crawford, Marion and Union. Its primary deposit
products are checking, savings, and term certificate accounts, and its
primary lending products are residential mortgage, commercial, and
installment loans. Substantially all loans are secured by specific
items of collateral including business assets, consumer assets and real
estate. Commercial loans are expected to be repaid from cash flow from
operations of businesses. Real estate loans are secured by both
residential and commercial real estate. Other financial instruments
that potentially represent concentrations of credit risk include
deposit accounts in other financial institutions. In 2000, SCC provided
item processing for 10 financial institutions in addition to the three
subsidiary banks. SCC accounted for 4.5% of the Corporation's total
revenues. Reynolds provides real estate appraisal services for lending
purposes to subsidiary banks and other financial institutions. Reynolds
accounts for less than 1.0% of total Corporation revenues. Management
considers the Corporation to operate primarily in one reportable
segment, banking
To prepare financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions based
on available information. These estimates
Page 7
<PAGE> 8
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
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.
Certain items in the 1999 financial statements have been reclassified
to correspond with the 2000 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 months ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
--------- -----------
<S> <C> <C>
Unrealized holding gains and (losses)
on available for sale securities $(631,383) $ (928,306)
Reclassification adjustment for (gains)
and losses later recognized in income 1,108 (727,304)
--------- -----------
Net unrealized gains and (losses) (630,275) (1,655,610)
Tax effect 214,293 562,910
--------- -----------
Other comprehensive income (loss) $(415,982) $(1,092,700)
========= ===========
</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
Page 8
<PAGE> 9
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
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 that 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.
(2) Securities
Securities at March 31, 2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
March 31, 2000
Gross Gross
Unrealized Unrealized
AVAILABLE FOR SALE Amortized Cost Gains Losses Fair Value
-------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government corporations
and agencies $ 61,763,011 $ 18,481 $ (1,277,449) $ 60,504,043
Obligations of state and political
subdivisions 52,690,835 234,187 (798,461) 52,126,561
Other securities, including mortgage-
backed and equity securities 32,061,913 1,556,765 (660,874) 32,957,804
------------ ----------- ------------- ------------
$146,515,759 $ 1,809,433 $ (2,736,784) $145,588,408
============ =========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
March 31, 2000
Gross Gross
Unrealized Unrealized
HELD TO MATURITY Amortized Cost Gains Losses Fair Value
-------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Obligations of state and political
subdivisions $232,500 $ 0 $ (1,267) $231,233
Other securities, including mortgage-
backed securities 153,886 322 (743) 153,465
-------- ------- --------- --------
$386,386 $ 322 $ (2,010) $384,698
======== ======= ========= ========
</TABLE>
Page 9
<PAGE> 10
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999
Gross Gross
Unrealized Unrealized
AVAILABLE FOR SALE Amortized Cost Gains Losses Fair Value
-------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government corporations
and agencies $ 64,114,363 $ 32,178 $ (921,945) $ 63,224,596
Obligations of state and political
subdivisions 53,004,191 328,583 (727,110) 52,605,664
Other securities, including mortgage-
backed securities 33,433,455 1,524,465 (533,247) 34,424,673
------------ ----------- ------------- ------------
$150,552,009 $ 1,885,226 $ (2,182,302) $150,254,933
============ =========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
Gross Gross
Unrealized Unrealized
HELD TO MATURITY Amortized Cost Gains Losses Fair Value
-------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Obligations of state and political
subdivisions $232,500 $ 475 $ (31) $232,944
Other securities, including mortgage-
backed securities 173,608 1,343 (130) 174,821
-------- ------- --------- --------
$406,108 $ 1,818 $ (161) $407,765
======== ======= ========= ========
</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 March 31, 2000, 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 $ 26,045,444 $ 25,945,818
Due after one year through five years 82,579,504 81,039,689
Due after five years through ten years 17,703,254 17,313,921
Due after ten years 570,000 569,504
Mortgage-backed securities 13,287,067 12,860,084
Equity securities 6,330,490 7,859,392
------------ ------------
Total securities available for sale $146,515,759 $145,588,408
============ ============
</TABLE>
<TABLE>
<CAPTION>
Estimated
HELD TO MATURITY Amortized Cost Fair Value
-------------- ------------
<S> <C> <C>
Due in one year or less $ 77,500 $ 77,490
Due after one year through five years 155,000 153,743
Mortgage-backed securities 153,886 153,465
-------- --------
Total securities held to maturity $386,386 $384,698
======== ========
</TABLE>
Proceeds from the sales of securities available for sale during the three months
ended March 31, 2000 totaled $1,799,811 resulting in gross losses of $1,108.
Proceeds from the sales of securities available for sale during the three months
ended March 31, 1999 totaled $1,209,587 resulting in gross gains of $727,304. No
securities were called or settled by the issuer during the three months ended
March 31, 2000 or March 31, 1999.
Securities with a carrying value of approximately $59,915,000 and $62,614,000
were pledged as of March 31, 2000 and December 31, 1999, 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 March 31, 2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
3/31/2000 12/31/1999
------------- -------------
<S> <C> <C>
Commercial and Agriculture $ 35,030,135 $ 36,310,141
Commercial real estate 53,165,111 48,301,000
Real Estate - mortgage 174,306,838 168,643,326
Real Estate - construction 5,385,755 4,482,294
Consumer 28,325,201 28,105,412
Credit card and other 5,037,374 3,967,453
Deferred loan fees (953,707) (977,613)
Unearned interest (50,135) (112,163)
------------- -------------
Total $ 300,246,572 $ 288,719,850
============= =============
</TABLE>
(4) Allowance for Loan Losses
A summary of the activity in the allowance for loan losses for the
three months ended March 31, 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Balance January 1, $ 4,273,825 $ 4,567,126
Loans charged-off (163,379) (215,949)
Recoveries 46,787 56,526
Provision for loan losses 95,000 68,000
----------- -----------
Balance March 31, $ 4,252,233 $ 4,475,703
=========== ===========
</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 three months ended
March 31.
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Average investment in impaired loans $3,976,000 $3,685,000
Interest income recognized on impaired loans
including interest income recognized on cash basis 80,500 47,556
Interest Income recognized on impaired loans
on cash basis 80,500 47,556
</TABLE>
Information regarding impaired loans at March 31, 2000 and December 31, 1999 was
as follows:
<TABLE>
<CAPTION>
3/31/2000 12/31/99
---------- ----------
<S> <C> <C>
Balance impaired loans $3,792,000 $4,160,000
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 $3,792,000 $4,160,000
========== ==========
Portion of allowance for loan losses allocated to
the impaired loan balace $1,065,000 $1,145,000
========== ==========
</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. Fixed
rate commitments at December 31, 1999 were $4,484,000 and had interest
rates ranging from
Page 13
<PAGE> 14
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
- --------------------------------------------------------------------------------
3.75% to 10.75% with maturities extended up to 30 years. No material
changes in fixed rate loan commitments have occurred in the first
quarter of 2000.
Commitments to extend credit and letters of credit approximated the
following amounts at March 31, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
Contract Amount
---------------
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Commitment to extend credit:
Lines of credit and construction loans $23,847,000 $23,982,000
Credit cards 3,618,000 3,078,000
Letters of credit 495,000 507,000
----------- -----------
$27,960,000 $27,567,000
=========== ===========
</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 March 31, 2000 and December 31, 1999 approximated
$4,316,000 and $3,065,000.
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 March 31, 2000, compared to
December 31, 1999 and the consolidated results of operations for the
three month periods ending March 31, 2000 compared to the same period
in 1999. 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 March 31, 2000 totaled $487,474,508
compared to $472,220,057 at December 31, 1999. This was an increase of
$15,254,451, or 3.2 percent. Within the structure of the assets, net
loans have increased $11,548,314, or 4.1 percent since December 31,
1999, primarily in the area of commercial and residential real estate
loans. Included in the increase in loans was $5,091,804 of commercial
and residential real estate loans purchased by Farmers from another
financial institution. The loans were purchased because management did
not feel loan demand was as strong as desired. Given similar
circumstances, management would consider purchasing loans in the
future. Loans held-for-sale increased $409,750, or 18.5 percent
Page 15
<PAGE> 16
First Citizens Banc Corp
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
from December 31, 1999. At March 31, 2000, the net loan to deposit
ratio was 69.6 percent compared to 70.6 percent at December 31, 1999.
At March 31, 2000, $145,588,408, or 99.7 percent of the security
portfolio was classified as available for sale. The remainder of
$386,386 was classified as held to maturity. Securities decreased
$4,686,247 from December 31, 1999. Some matured securities were not
replaced in order to increase liquidity and partially fund loan
growth.
For the three months of operations in 2000, $95,000 was placed into the
allowance for loan losses from earnings compared to $68,000 for the
same period of 1999. The increased provision is a result of loan
growth. The calculation of specific reserves, reserves for
delinquencies and historical reserve are representative of the reserves
necessary for probable losses in the portfolio. The composition and
overall level of the loan portfolio and charge-off activity are all
factors used to determine provisions to the reserve. Net charge-offs
for the first three months of 2000 were $116,592 compared to $159,423
for the same period of 1999. The March 31, 2000 allowance for loan
losses as a percent of total loans was 1.42 percent compared to 1.48
percent at December 31, 1999.
Office premises and equipment have decreased $139,350 and intangible
assets have decreased $81,512 since December 31, 1999. The decrease in
office premises and equipment is attributed to new purchases of
$102,298, disposals of $12,585 and depreciation of $229,062.
Accrued interest and other assets totaled $7,261,991 at March 31, 2000
compared to $5,990,342 at December 31, 1999, an increase of $1,271,649.
This increase was primarily due to increases in deferred taxes of
$927,865 and interest receivable at the banks of $258,717.
Total deposits at March 31, 2000 increased $22,326,042 from year-end
1999. Noninterest-bearing deposits, representing demand deposit
balances, increased $1,138,782 from year-end 1999. Interest-bearing
deposits, including savings and time deposits, increased $21,187,260
from year-end 1999. Interest-bearing deposits are higher due to
municipal deposits on the last day of the quarter. This money was
transferred out within two weeks of the deposit. The year to date 2000
average balance of savings deposits has decreased $794,000 compared to
the average balance of the same period for 1999. The current average
rate of these deposits is 2.37 percent compared to 2.39 percent in
1999. The year to date 2000 average balance of time certificates has
decreased $16,411,000 compared to the average balance for the same
period for 1999. The average balance of time certificates is down due
to efforts to control deposit costs. Such efforts have led to higher
priced deposits leaving the banks. The current average rate on these
deposits is 4.92 percent compared to 5.13 percent for the same period
in 1999.
Other borrowed funds have decreased $5,773,386 from December 31, 1999
to March 31, 2000. Federal Home Loan Bank borrowings have decreased
$136,820 as a result of scheduled
Page 16
<PAGE> 17
First Citizens Banc Corp
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
paydowns. Securities sold under agreements to repurchase, which tend to
fluctuate, have decreased $3,576,922 and U.S. Treasury Tax Demand Notes
have decreased $2,059,644.
Shareholders' equity at March 31, 2000 was $47,058,322, which was 9.7
percent of total assets. Shareholders' equity at December 31, 1999 was
$48,194,788, which was 10.2 percent of total assets. The decrease in
shareholders' equity is represented by earnings of $1,305,374,
dividends paid of $706,897, the purchase of treasury stock for
$1,318,961 and the decrease in the market value of securities available
for sale, net of tax, of $415,982. The Corporation paid a cash dividend
on February 1, 2000 at a rate of $.17 per share. Total outstanding
shares at March 31, 2000 were 4,116,119.
Results of Operations
Three Months Ended March 31, 2000 and 1999
Net income for the three months ended March 31, 2000 was $1,305,374, or
$.32 per common share compared to $1,855,581, or $.44 per common share
for the same period in 1999. This was a decrease of $550,207, or 29.7
percent. Some of the reasons for the changes are explained below.
Total interest income for the first three months of 2000 has decreased
$254,846, or 3.1 percent compared to the same period in 1999. The
average rate on earning assets on a tax equivalent basis for the first
three months of 2000 was 7.34 percent and 7.27 percent for the first
three months of 1999. A decline in the average balance led to the
decrease in interest income. Total interest expense for the first three
months of 2000 has decreased $349,215, or 8.8 percent compared to the
same period of 1999. This decrease is due mainly to a decrease in
interest on deposits of $207,630 and a decrease in interest on FHLB
borrowings. Interest on FHLB borrowings is down as a result of balances
borrowed being lower in 2000. The Corporation made scheduled balloon
payments on two FHLB advances during the second quarter of 1999, and
elected not to replace them. The average rate on interest-bearing
liabilities for the first three months of 2000 was 3.26 percent
compared to 3.37 percent for the same period of 1999. The net interest
margin on a tax equivalent basis was 4.08 percent for the three-month
period ended March 31, 2000 and 3.90 percent for the same period ended
March 31, 1999.
Noninterest income for the first three months of 2000 totaled
$1,118,863, compared to $1,904,767 for the same period of 1999, a
decrease of $785,904. Gain on securities for the first three months of
2000 decreased $728,412 compared to 1999. Revenue from computer
operations decreased $247,401 as a result of the sale of SCC's data
processing contracts. The last remaining processing customers of SCC
converted to Jack Henry and Associates by the end of the second quarter
1999.SCC still provides item processing for 10 financial institutions
in addition to the three subsidiary banks Other operating income
increased $73,006, due mainly to increased revenue from point-of-sale
terminal usage. Service charges on deposit accounts increased
Page 17
<PAGE> 18
First Citizens Banc Corp
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
$211,421 as a result of a comprehensive review program of all service
charges and fees undertaken at all three banks.
Gain on the sale of loans decreased $94,518 due to decreased volume of
loans sold caused by rising interest rates reducing demand for these
products.
Noninterest expense for the three months ended March 31, 2000 totaled
$3,643,962 compared to $3,582,583 for the same period in 1999. This was
an increase of $61,379, or 1.7 percent. Equipment expense increased
$55,361 as a result of increased depreciation and maintenance expense.
Salaries and benefits decreased $132,785, or 7.5 percent compared to
the first three months of 1999 as a result of fewer total employees, on
a full-time equivalent basis. The number of employees was reduced
through attrition as well as reductions based on staffing needs
resulting from SCC's sale of data processing contracts. The reduction
of salaries and benefits was offset by an increase in other expenses of
$125,566 compared to 1999.
Income Tax Expense
Income tax expense for the first three months of 2000 totaled $499,164
compared to $728,871 for the first three months of 1999. This was a
decrease of $229,707, or 31.5 percent. The decrease in the federal
income taxes is a result of the decrease in total income before taxes
of $779,914, attributed mostly to reduced income from the sale of
equity securities. The effective tax rates were comparable for the
three-month periods ended March 31, 2000 and March 31, 1999, at 27.7%
and 28.2% respectively.
Capital Resources
Shareholders' equity totaled $47,058,322 at March 31, 2000 compared to
$48,194,788 at December 31, 1999. All of the capital ratios exceed the
regulatory minimum guidelines as identified in the following table:
<TABLE>
<CAPTION>
Corporation Ratios Regulatory
3/31/00 12/31/99 Minimums
------- -------- ----------
<S> <C> <C> <C>
Tier I Risk Based Capital 15.4% 17.3% 4.0%
Total Risk Based Capital 16.6% 18.7% 8.0%
Leverage Ratio 9.8% 9.6% 4.0%
</TABLE>
The Corporation paid a cash dividend of $.17 per common share on
February 1, 2000, compared to $.16 per common share on February 1,
1999.
Page 18
<PAGE> 19
First Citizens Banc Corp
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
Capital expenditures totaled $102,298 for the first three months of
2000 compared to $152,645 for the same period of 1999.
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.
The Banks, through their respective correspondent banks, maintain
federal funds borrowing lines totaling $37,360,000 and the Banks have
additional borrowing availability at the Federal Home Loan Bank of
Cincinnati of $57,641,227 at March 31, 2000. Finally, 99.7% of the
Corporation's security portfolio has been classified as available for
sale, which provides additional liquidity.
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
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
Page 19
<PAGE> 20
First Citizens Banc Corp
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Form 10-Q
- --------------------------------------------------------------------------------
position. One strategy is to originate variable rate loans tied to
market indices. Such loans reprice as the underlying market index
changes. Currently, approximately 42.2 percent 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 1999 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, 1999. 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,
1999 which would significantly change the ratio of rate sensitive
liabilities for the given time horizon.
Page 20
<PAGE> 21
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
<TABLE>
<CAPTION>
<S> <C> <C>
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 - Filed on February 10, 2000, announcing 1999
earnings of $1.43 per share compared to $1.35 and $1.04 earnings
per share for 1998 and 1997, respectively.
</TABLE>
Page 21
<PAGE> 22
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, The
registrant has caused this report to be signed on its behalf the undersigned
thereunto duly authorized.
First Citizens Banc Corp
/s/ David A. Voight May 12, 2000
- ------------------------ ------------
David A. Voight Date
President
/s/ James O. Miller May 12, 2000
- ------------------------ ------------
James O. Miller Date
Executive Vice President
Page 22
<PAGE> 23
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, 1999 filed by the registrant on
March 24, 2000
</TABLE>
Page 23
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000944745
<NAME> FIRST CITIZENS BANC CORP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 17,950,413
<INT-BEARING-DEPOSITS> 51,031
<FED-FUNDS-SOLD> 8,180,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 145,588,408
<INVESTMENTS-CARRYING> 386,386
<INVESTMENTS-MARKET> 384,698
<LOANS> 295,994,339
<ALLOWANCE> 4,252,233
<TOTAL-ASSETS> 487,474,508
<DEPOSITS> 425,486,425
<SHORT-TERM> 10,404,303
<LIABILITIES-OTHER> 2,703,318
<LONG-TERM> 1,822,140
0
0
<COMMON> 23,257,520
<OTHER-SE> 23,800,802
<TOTAL-LIABILITIES-AND-EQUITY> 487,474,508
<INTEREST-LOAN> 5,935,049
<INTEREST-INVEST> 2,062,984
<INTEREST-OTHER> 47,005
<INTEREST-TOTAL> 8,045,038
<INTEREST-DEPOSIT> 3,441,590
<INTEREST-EXPENSE> 3,620,401
<INTEREST-INCOME-NET> 4,424,637
<LOAN-LOSSES> 95,000
<SECURITIES-GAINS> (1,108)
<EXPENSE-OTHER> 3,643,962
<INCOME-PRETAX> 1,804,538
<INCOME-PRE-EXTRAORDINARY> 1,305,374
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,305,374
<EPS-BASIC> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 3.87
<LOANS-NON> 1,339,000
<LOANS-PAST> 787,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,273,825
<CHARGE-OFFS> 163,379
<RECOVERIES> 46,787
<ALLOWANCE-CLOSE> 4,252,233
<ALLOWANCE-DOMESTIC> 4,252,233
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,962,619
</TABLE>
