-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NvdfzrGJ1DH5vyca5LlgjJZO/Z0bJSVxhguS67zBYm6n+onBGGyHW5guasCU0adS 7wl3aRGREq96decOs+XPEA== 0000950132-02-000206.txt : 20020814 0000950132-02-000206.hdr.sgml : 20020814 20020814173904 ACCESSION NUMBER: 0000950132-02-000206 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FC BANC CORP CENTRAL INDEX KEY: 0000893539 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 341718070 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-25616 FILM NUMBER: 02737247 BUSINESS ADDRESS: STREET 1: 123 NORTH SANDUSKY AVE STREET 2: BOX 5657 CITY: BUCYRUS STATE: OH ZIP: 44820 BUSINESS PHONE: 4195627040 MAIL ADDRESS: STREET 1: 123 NNORTH SANDUSKY AVE STREET 2: BOX 567 CITY: BUCYRUS STATE: OH ZIP: 44820 10QSB 1 d10qsb.txt FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ Commission File Number - 33-53596 FC BANC CORP. --------------------------------- (Exact name of small business issuer as specified in its charter) OHIO 34-1718070 -------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer identification no.) Incorporation or organization) Farmers Citizens Bank Building, 105 Washington Square Box 567, Bucyrus, Ohio 44820-0567 ------------------------------- ---------- (Address of principal executive offices) (Zip code) (419) 562-7040 ---------------- (Issuer's telephone number) N/A --- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes X No _____ As of August 9, 2002, 579,862 shares of Common Stock of the Registrant were outstanding. There were no preferred shares outstanding. Transitional Small Business Disclosure Format (Check One) Yes _____ No X FC BANC CORP. BUCYRUS, OHIO FORM 10-QSB INDEX ================================================================================ Page Number PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheet 3 June 30, 2002 and December 31, 2001 Consolidated Statement of Income 4 Three and six months ended June 30,2002 and 2001 Consolidated Statement of Comprehensive Income 5 Three and six months ended June 30, 2002 and 2001 Consolidated Statement of Changes in Shareholders' Equity - Six months ended June 30, 2002 6 and year ended December 31, 2001 Consolidated Statement of Cash Flows 7 Six months ended June 30, 2002 and 2001 Notes to Unaudited Consolidated Financial Statement 8 June 30, 2002 and December 31, 2001 Item 2. Management's Discussion and Analysis of Financial 11 Condition and Results of Operations PART II OTHER INFORMATION Item 1. Legal Proceedings 19 Item 2. Changes in Securities 19 Item 3. Defaults upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19 Signatures 21 2 FC BANC CORP, INC. BUCYRUS, OHIO CONSOLIDATED BALANCE SHEET (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------- (Dollars in thousands) At June 30, At December 31, ------------ --------------- 2002 2001 --------- --------- ASSETS Cash and cash equivalents: Cash and amounts due from banks $ 3,002 $ 3,659 Federal funds sold -- 3,000 --------- --------- Total cash and cash equivalents 3,002 6,659 Investment securities, available-for-sale 39,862 33,989 Loans 65,635 61,038 Allowance for loan losses (1,221) (1,499) --------- --------- Net Loans 64,414 59,539 --------- --------- Premises and equipment 6,785 4,575 Accrued interest and other assets 4,830 4,799 --------- --------- TOTAL ASSETS $ 118,893 $ 109,561 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 11,662 $ 12,718 Interest-bearing 75,454 73,035 --------- --------- Total deposits 87,116 85,753 Short-term borrowings 6,658 4,085 Other borrowings 10,954 6,009 Accrued interest and other liabilities 1,700 1,535 --------- --------- TOTAL LIABILITIES 106,428 97,382 --------- --------- SHAREHOLDERS' EQUITY Preferred stock of $25 par value; 750 shares authorized, no shares -- -- issued and outstanding Common shares, no par value; 4,000,000 shares authorized; 665,632 shares issued 832 832 Additional paid-in capital 1,366 1,366 Retained earnings 12,119 11,793 Treasury shares, at cost; 85,770 and 75,478 (2,137) (1,921) Accumulated other comprehensive income 285 109 --------- --------- TOTAL SHAREHOLDERS' EQUITY 12,465 12,179 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 118,893 $ 109,561 ========= =========
- -------------------------------------------------------------------------------- See accompanying notes to unaudited consolidated financial statements 3 FC BANC CORP. Bucyrus, Ohio CONSOLIDATED STATEMENT OF INCOME (unaudited)
(Dollars in thousands, except per share) Three Months Six Months Ended Ended June 30, June 30, 2002 2001 2002 2001 ------- ------- ------- ------- INTEREST INCOME Interest and fees on loans $ 1,263 $ 1,374 $ 2,496 $ 2,722 Interest and dividends on investment securities 471 373 870 752 Interest on federal funds sold 2 56 17 108 ------- ------- ------- ------- TOTAL INTEREST INCOME 1,736 1,803 3,383 3,582 ------- ------- ------- ------- INTEREST EXPENSE Interest on deposits 330 662 780 1,393 Interest on borrowed funds 136 99 224 150 ------- ------- ------- ------- TOTAL INTEREST EXPENSE 466 761 1,004 1,543 ------- ------- ------- ------- NET INTEREST INCOME 1,270 1,042 2,379 2,039 Provision for loan losses (275) -- (275) -- ------- ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS 1,545 1,042 2,654 2,039 OTHER INCOME Service charges and other income 152 156 291 308 Bank owned life insurance earnings 32 32 64 64 Investment securities gains, net 14 -- 16 -- ------- ------- ------- ------- TOTAL OTHER INCOME 198 188 371 372 ------- ------- ------- ------- OTHER EXPENSES Salaries and benefits 542 450 1,344 877 Net occupancy and equipment expenses 148 163 286 340 Legal and professional 49 68 97 108 State taxes 37 37 75 75 Other expenses 358 195 570 506 ------- ------- ------- ------- TOTAL NON-INTEREST EXPENSE 1,134 980 2,372 1,906 ------- ------- ------- ------- INCOME BEFORE FEDERAL INCOME TAX 609 250 653 505 Federal income tax expense 163 57 142 117 ------- ------- ------- ------- NET INCOME $ 446 $ 193 $ 511 $ 388 ======= ======= ======= ======= DIVIDENDS PER SHARE $ 0.16 $ 0.16 $ 0.32 $ 0.32 EARNINGS PER SHARE: Earnings per common share - basic $ 0.77 $ 0.32 $ 0.88 $ 0.64 Earnings per common share - diluted $ 0.77 $ 0.32 $ 0.88 $ 0.64
- -------------------------------------------------------------------------------- See accompanying notes to unaudited consolidated financial statements 4 FC BANC CORP, INC. BUCYRUS, OHIO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 2002 2001 2002 2001 -------------------------- ------------------------------ Net Income $ 446 $ 193 $ 511 $ 388 Other comprehensive income: Unrealized gains(losses) on available for sale securities 424 318 282 347 Less: Reclassification adjustment for gain included in net income (14) - (16) - ---- ----- ----- ----- Other comprehensive income before tax 410 318 266 347 Income tax expense related to other comprehensive income 139 108 90 118 ----- ----- ----- ----- Other comprehensive income, net of tax 271 210 176 229 ----- ----- ----- ----- Comprehensive income $ 717 $ 403 $ 687 $ 617 ===== ===== ===== =====
See accompanying notes to the unaudited consolidated financial statements 5 FC BANC CORP, INC. BUCYRUS, OHIO CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Accumulated Additional Other Total Common paid-in Retained Comprehensive Treausry Stockholders Stock capital Earnings Income(loss) Stock Equity -------------------------------------------------------------------------- (Dollars in thousands) Balances at December 31, 2000 $ 832 $ 1,366 $ 11,212 $ (74) $ (1,560) $ 11,776 Net Income 963 963 Other comprehensive income: Unrealized gain on available for sale Securities, net of reclassification Adjustment, net of taxes of $95 183 183 Comprehensive Income Cash Dividends ($.64 per share) (382) (382) Purchase of treasury stock (361) (361) -------------------------------------------------------------------------- Balances at December 31, 2001 832 1,366 11,793 109 (1,921) 12,179 Net Income 511 511 Other comprehensive income: Unrealized gain on available for sale Securities, net of reclassification Adjustment, net of taxes of $49 176 176 Comprehensive Income Cash Dividends ($.16 per share) (185) (185) Purchase of treasury stock (216) (216) -------------------------------------------------------------------------- Balances at June 30, 2002 $ 832 $ 1,366 $ 12,119 $ 285 $ (2,137) $ 12,465 ======== ======== ======== ========= ======== ========
See accompanying notes to unaudited consolidated financial statements 6 FC BANC CORP, INC. BUCYRUS, OHIO CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in thousands) Six Months Six Months Ended Ended June 30 June 30 ---------- ---------- 2002 2001 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 511 $ 388 Adjustments to reconcile net income to net cash Provided by operating activities: Investments Gain, net 16 0 Provision for loan losses (275) 0 Income accrued on life insurance contracts (64) (64) Depreciation 107 155 Deferred income taxes (60) (54) Investment securities amortization (accretion), net 102 61 Net change in: Accrued interest receivable 3 (63) Accrued interest payable (3) 5 Other assets (104) (200) Other liabilities 171 85 ---------- ---------- Net cash provided by operating activities 404 546 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities available-for-sale (18,016) (304) Proceeds from Sales of Securities 6,794 0 Proceeds from sale of premises and equipment -- 8 Proceeds from maturities of securities available-for-sale 5,870 3,224 Net increase in loans (4,875) (3,755) Purchase of premises and equipment (2,317) (314) ---------- ---------- Net cash used in investing activities (12,544) (1,141) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in: Noninterest-bearing, interest bearing, demand, and savings deposits (1,053) (4,106) Certificates of deposit 2,419 2,950 Net increase in short-term borrowed funds 2,561 1,400 Proceeds from long-term FHLB advances 5,000 0 Payments on long-term debts (43) (3) Exercise of stock options 0 52 Purchase of treasury stock (216) (240) Cash dividends paid (185) (198) ---------- ---------- Net cash provided by (used in) financing activities 8,483 (145) ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (3,657) (740) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,659 4,321 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 3,002 3,581 ========== ========== SUPPLEMENTAL DISCLOSURES Cash paid during the period for interest 1,111 1,365 Cash paid during the period for income taxes 174 156
See accompanying notes to unaudited consolidated financial statements 7 FC BANC CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except per share amounts) June 30, 2002 and December 31, 2001 (Unaudited) ================================================================================ NOTE 1. BASIS OF PRESENTATION In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of FC Banc Corp.'s ("Company" or "Bancorp") financial position as of June 30, 2002, and December 31, 2001, and the results of operations for the three and six months ended June 30, 2002 and 2001, and the cash flows for the six months ended June 30, 2002 and 2001. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB. The results of operations for the six months ended June 30, 2002, are not necessarily indicative of the results which may be expected for the entire fiscal year. NOTE 2 EARNINGS PER SHARE There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Income will be used as the numerator. The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation.
Three Months Ended Six Months Ended June 30, June 30, 2002 2001 2002 2001 ---------------------- ------------------- Weighted-average common shares outstanding used to calculate basic earnings per share 579,862 600,007 581,523 600,305 Additional common stock equivalents(stock options) used to calculate diluted earnings per share -- 5,599 -- 7,176 ------- ------- ------- ------- Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share 579,862 605,606 581,523 607,481 ======= ======= ======= =======
Options to purchase 38,300 shares of common stock at prices from $22.00 to $28.50 were outstanding as of June 30, 2002, but were not included in the computation of diluted EPS because to do so would have been anti-dilutive. Options to purchase 58,710 shares of common stock at prices from $22.00 to $28.50 were outstanding as of June 30, 2001. Of these shares, 16,400 shares were not included in the computation of diluted EPS because to do so would have been anti-dilutive. 8 NOTE 3 RECENT ACCOUNTING PRONOUNCEMENTS In July, 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 141, Business Combinations, effective for all business combinations initiated after June 30, 2001, as well as all business combinations accounted for by the purchase method that are completed after June 30, 2001. The new statement requires that the purchase method of accounting be used for all business combinations and prohibits the use of the pooling-of-interests method. FAS No. 141 also specifies criteria which must be met for intangible assets acquired in a purchase method business combination to be recognized and reported apart from goodwill. The adoption of Statement No. 141 did not have a material effect on the Company's financial position or results of operations. On January 1, 2002, the Company adopted FAS No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. This statement changes the accounting for goodwill from an amortization method to an impairment-only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations, was discontinued. However, this new statement did not amend FAS No. 72, Accounting for Certain Acquisitions of Banking or Thrift Institutions, which requires recognition and amortization of unidentified intangible assets relating to the acquisition of financial institutions or branches thereof. The FASB has undertaken a limited scope project to reconsider the provisions of FAS No. 72 in 2002 and has issued an exposure draft of a proposed statement, Acquisitions of Certain Financial Statements, that would remove acquisitions of financial institutions from the scope of FAS No. 72. The exposure draft states that unless a branch acquisition meets the definition of a business combination, it is an acquisition of net assets and would not result in the recognition of goodwill. Thereby any unidentifiable intangible asset would continue to be amortized. The adoption of FAS No. 142 did not have a material effect on the Company's financial position or results of operations. In April 2002, the FASB issued FAS No. 145, "Recission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections". FAS No. 145 rescinds FAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now be used to classify those gains and losses. This statement also amends FAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This statement also makes technical corrections to existing pronouncements, which are not substantive but in some cases may change accounting practice. FAS No. 145 is effective for transactions occurring after May 15, 2002. The adoption of FAS No. 145 did not have a material effect on the Company's financial position or results of operations. 9 FC BANC CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except per share amounts) June 30, 2002 and December 31, 2001 (Unaudited) ================================================================================ In October 2001, the FASB issued FAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. FAS 144 supercedes FAS 121 and applies to all long-lived assets (including discontinued operations) and consequently amends APB Opinion No. 30, Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business. FAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. FAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively. The adoption of this statement did not have a material effect on the Company's financial statements. In July 2002, the FASB issued FAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. This statement replaces EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The new statement will be effective for exit or disposal activities initiated after December 31, 2002, the adoption of which is not expected to have a material effect on the Company's financial statements. 10 FC BANC CORP. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (numbers in thousands except per share amounts) SAFE HARBOR CLAUSE This report contains certain "forward-looking statements." The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protection of such safe harbor with respect to all such forward-looking statements. These forward-looking statements, which are included in Management's Discussion and Analysis, describe future plans or strategies and include the Company's expectations of future financial results. The words "believe," "expect," "anticipate," "estimate," "project," and similar expressions identify forward-looking statements. The Company's ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include interest rate trends, the general economic climate in the Company's market area and the country as a whole, loan delinquency rates, and changes in federal and state regulations. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. SARBANES-OXLEY ACT OF 2002 On July 30, 2002 the President signed into law the Sarbanes-Oxley Act of 2002 (the Act), following an investigative order proposed by the SEC on chief financial officers and chief executive officers of 947 large public companies on June 27, 2002. Additional regulations are expected to be promulgated by the SEC. As a result of the accounting restatements by large public companies, the passage of the Act and regulations expected to be implemented by the SEC, publicly-registered companies, such as the Company, will be subject to additional reporting regulations and disclosure. These new regulations, which are intended to curtail corporate fraud, will require certain officers to personally certify certain SEC filings and financial statements and may require additional measures to be taken by our outside auditors, officers and directors. The loss of investor confidence in the stock market and the new laws and regulations will increase non-interest expenses of the Company and could adversely affect the prices of publicly-traded stocks, such as the Company. GENERAL The Company is a bank holding company whose activities are primarily limited to holding the stock of The Farmers Citizens Bank, Bucyrus, Ohio ("Bank"). The Bank conducts a general banking business in north central Ohio that consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and non-residential purposes. The 11 Bank's profitability is significantly dependent on net interest income that is the difference between interest income generated from interest-earning assets (i.e., loans and investments) and the interest expense paid on interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and interest received or paid on these balances. The level of interest rates paid or received by the Bank can be significantly influenced by a number of environmental factors, such as governmental monetary policy, that are outside of management control. Earnings per common share were computed by dividing net income by the weighted-average number of shares outstanding for the six-month periods ended June 30, 2002 and 2001. The consolidated financial information presented herein has been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing consolidated financial statements in accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from such estimates. FC BANC CORP. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (numbers in thousands except per share amounts) ================================================================================ The Company is subject to regulation by the Board of Governors of the Federal Reserve System, which limits the activities in which the Company and the Bank may engage. The Bank is supervised by the State of Ohio, Division of Financial Institutions and its deposits are insured up to applicable limits under the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"). The Bank is a member of the Federal Reserve System and is subject to its supervision. The Company and the Bank must file with the U.S. Securities and Exchange Commission, the Federal Reserve Board and Ohio Division of Financial Institutions the prescribed periodic reports containing full and accurate statements of its affairs. The Bank has four banking offices located in Crawford, Morrow and Knox Counties, Ohio. The primary market area of the Bank is North Central Ohio, which includes Crawford, Morrow, Knox and contiguous counties. Throughout last year and the beginning of this year the bank has worked on two exhilarating construction projects. Construction is now complete on our new main office in Bucyrus. Banking services were made available in this facility on May 15, 2002. Grand opening festivities were held during the week of May 20-25, 2002. We believe that this building will allow us to better serve our customers, create a positive work environment for our employees, and demonstrates our true commitment to future growth and development in Bucyrus. Our second construction project began in November 2001 when we broke ground for our new Fredericktown office. Banking services were made available in this new facility on May 13,2002. Grand Opening festivities for this office were held during the week of May 20-25, 2002. Our First Class presence in Fredericktown continues to grow along with that community. We look forward to sharing the numerous amenities of both buildings with our shareholders, customers, and communities. 12 CHANGES IN FINANCIAL CONDITION At June 30, 2002, the consolidated assets of the Company totaled $118.9 million, an increase of $9.3 million, or 8.49%, from $109.6 million at December 31, 2001. The increase in total assets resulted primarily from net loan growth of $4.9 million, net investment growth of $2.9 million, and premises and equipment growth of $2.2 million. Net loans receivable increased by $4.9 million, or 8.24%, to $64.4 million at June 30, 2002, compared to $59.5 million at December 31, 2001. Commercial loans, consumer loans, and loans secured by real estate have increased by $1.8 million, $1.6 million and $1.2 million, respectively. Loan growth in the second quarter was $4.6 million. This growth occurred because management has been more aggressive in pricing of loans. Even though management has adopted a more aggressive approach, the quality of our loan portfolio has not changed. We expect our loan growth to continue in the third quarter. Investment securities increased by $5.9 million, or 17.35% to $39.9 million at June 30, 2002, compared to $34.0 million at December 31, 2001. The investment portfolio has grown due to an investment strategy to leverage the bank through the use of Federal Home Bank Advances. FC BANC CORP. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (numbers in thousands except per share amounts) Total cash and cash equivalents declined by $3.7 million to $3.0 million at June 30, 2002, compared to $6.7 million at December 31, 2001. The decline was mostly due to overnight Federal Funds Sold being invested. Deposit liabilities increased by $1.3 million, or 1.51%, to $87.1 million at June 30, 2002, from $85.8 million at December 31, 2001. Savings accounts and certificates of deposits increased by $0.1 million and $4.9 million, respectively. Money Market Accounts, NOW accounts and demand deposits declined by $0.9 million, $1.7 million, and $1.1 million, respectively. Certificate of Deposits have grown due to increases in the Excel-A-Rate CD. Money Market Accounts, NOW accounts, and demand deposits have decreased due to unfavorable market conditions. Total shareholders' equity was $12.5 million at June 30, 2002 as compared to $12.2 million on December 31, 2001. During the first six months of 2002 shareholders equity increased due to net income of $0.5 million and comprehensive income of $0.2 million. Decreased were due to purchase of treasury shares of $0.2 million, and shareholder dividends of $0.2 million. The Bank's liquidity, primarily represented by cash and cash equivalents, is a result of its operating, investing and financing activities. Principal sources of funds are deposits, loan and mortgage-backed security repayments, maturities of securities and other funds provided by operations. The Bank also has the ability to borrow from the Federal Home Bank of Cincinnati ("FHLB") as well as the Federal Reserve Bank of Cleveland ("FRB" or "Fed"). While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan and mortgage-backed security prepayments are more influenced by interest rates, general economic conditions and competition. The Bank maintains investments in liquid assets based upon management's assessment 13 of (i) the need for funds, (ii) expected deposit flows, (iii) the yields available on short-term liquid assets and (iv) the objectives of the asset/liability management program. In the ordinary course of business, part of such liquid investments is composed of deposits at correspondent banks. Although the amount on deposit at such banks often exceeds the $100,000 limit covered by FDIC insurance, the Bank monitors the capital and financial condition of such institutions to ensure that such deposits do not expose the Bank to undue risk of loss. The Asset/Liability Management Committee of the Bank is responsible for liquidity management. This committee, which is comprised of various managers, has an Asset/Liability Policy that covers all assets and liabilities, as well as off-balance sheet items that are potential sources and uses of liquidity. The Bank's liquidity management objective is to maintain the ability to meet commitments to fund loans and to purchase securities, as well as to repay deposits and other liabilities in accordance with their terms. The Bank's overall approach to liquidity management is to ensure that sources of liquidity are sufficient in amounts and diversity to accommodate changes in loan demand FC BANC CORP. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (numbers in thousands except per share amounts) and deposit fluctuations without a material adverse impact on net income. The Committee monitors the Bank's liquidity needs on an ongoing basis. Currently the Bank has several sources available for both short- and long-term liquidity needs. These include, but are not restricted to advances from the FHLB, Federal Funds and borrowings from the Fed and other correspondent banks. The Bank is subject to various regulatory capital requirements administered by its primary federal regulator, the FRB. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material affect on the Company and the consolidated financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts of the Bank and classification under the prompt corrective action guidelines are also subject to qualitative judgements by the regulators about components, risk-weighing, and other factors. Qualitative measures established by regulation to ensure capital adequacy requires the Bank to maintain minimum amounts and ratios of: total risk-based capital and Tier I capital to risk-weighted assets (as defined by the regulations), and Tier I capital to average assets (as defined). Management believes, as of June 30, 2002, that the Bank meets all of the capital adequacy requirements to which it is subject. As of December 31, 2001, the most recent notification from the FDIC, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as specified by the regulators. There are no conditions or events 14 since the most recent notification that management believes have changed the Bank's prompt corrective action category. As of June 30, 2002, FC Banc Corp. had no commitments for capital expenditures. FC BANC CORP. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (numbers in thousands except per share amounts) RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED JUNE 30, 2002 AND 2001 GENERAL. Net income increased by $253 during the second quarter of 2002 as compared to the same three-month period ended June 30, 2001. This was due to increases in net interest income and non interest income, and a decrease in provision for loan losses, which were offset by increases in non interest expenses and federal income tax expense. NET INTEREST INCOME. Net interest income increased by $228 for the three months ended June 30, 2002 as compared to June 30, 2001. A decrease of $ 67 in interest income was offset by a decrease of $295 in interest expense. The bank's average earning assets increased by over five million dollars in the second quarter of 2002. The average monthly base net interest margin in the second quarter of 2002 was 4.28% compared to 4.07% in the second quarter of 2001. INTEREST INCOME. The decrease in the average rate earned on earning assets was the primary contributing factor to the decrease in interest income of $67, or 3.72%, for the three months ended June 30, 2002 compared to the same time period in 2001. Loan interest and fee income decreased by $111 resulting primarily from a decrease in interest rates. The average rate earned on loans fell ten basis points in the second quarter compared to six basis points in the same period in 2001. Interest and dividends on investment securities increased by $98 due to the growth of the investment portfolio. The investment portfolio grew by $1.5 million in the second quarter of 2002 compared to $0.5 million for 15 the same period in 2001. Also, income from federal funds sold decreased by $54 due to a decrease in average balance of $1.45 million. INTEREST EXPENSE. Interest expense on deposit liabilities decreased by $332, or 50.15% for the three months ended June 30, 2002, as compared to the same period in 2001. This was mostly due to average cost of funds for the three months ended June 30, 2002 of about 2.02% compared to 3.24% for the three months ended June 30, 2001. Interest expense on borrowed funds increased by $37, or 37.37% due to higher total borrowings. The bank took a Federal Home Loan Bank advance of $ $5.0 million in April of 2002. PROVISION FOR LOAN LOSSES. The Bank recorded net charge-offs of $4 during the three months ended June 30, 2002, compared to net charge-offs of $0.1 during the same period in 2001. Based upon continued strong credit quality the Bank recorded a negative provision for loan losses of $275 during the second quarter in 2002. We recorded no provision in the second quarter of 2001. Our Reserve for Loan Loss as of June 30, 2002 stood at $1.2 million or 1.86% of gross loans. This reserve FC BANC CORP. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (numbers in thousands except per share amounts) ================================================================================ which is significantly higher than peer group was increased in 1994 and 1995 specifically due to loan concerns of the regulators. Current evaluations of our portfolio by independent sources indicate that the risk no longer exists. The negative provision was based upon the results of ongoing loan reviews and composition of the loan portfolio, primarily loans secured by one- to four-family residential properties and other forms of collateral, which are considered to have less risk. Our review and analysis of the reserve for loan loss indicates that this ratio is adequate. NON-INTEREST INCOME. Non-interest income increased by $10, or 5.32%, to $198 for the three months ended June 30, 2002 from $188 for the three months ended June 30, 2001. The Bank had a net gain on sales of securities of $14 during the second quarter ending June 30, 2002, but had no gains in second quarter of 2001. NON-INTEREST EXPENSE. Non-interest expense increased by $154, or 15.71%, to $1,134 for the three months ended June 30, 2002, from $980 in the comparable period in 2001. Salaries and Benefits increased by $92 mostly due to increases in group health insurance expense. Net occupancy and equipment expense decreased due to decreases in utilities and maintenance expense. Other expenses increased by $163 due to increases in printing and supplies, postage, advertising/public relations, and computer expense. INCOME TAXES. The provision for income taxes increased by $106 for the three months ended June 30, 2002, compared with the prior year, primarily as a result of higher taxable income for the quarter. COMPARISON OF SIX MONTHS ENDED JUNE 30, 2002 AND 2001 16 GENERAL. Net income increased by $123 during the six months ended June 30, 2002 as compared to the same six-month period ended June 30, 2001. This was due to increases in net interest income and a decrease in provision for loan losses, which were offset by increases in non interest expenses and federal income tax expense. Also, non-interest income decreased by $1. NET INTEREST INCOME. Net interest income increased by $340 for the six months ended June 30, 2002 as compared to June 30, 2001. A decrease of $ 199 in interest income was offset by a decrease of $539 in interest expense. This was due to an increase in the bank's average earning assets of $6.0 million. In addition, the net interest margin for the six months ended June 30, 2002 was 4.73% compared to 4.58% in the first six months of 2001. INTEREST INCOME. A decrease of 100 basis points in the average rate earned on earning assets was the primary contributing factor to the decrease in interest income of $199, or 5.55%, for the six months ended June 30, 2002 compared to June 30, 2001. Loan interest and fee income decreased by $226 due to a 66 basis point decrease in the interest rate earned on the portfolio. Interest and dividends on investment securities increased by $118 due to growth of $9.6 million in the investment portfolio. FC BANC CORP. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (numbers in thousands except per share amounts) In addition, income from federal funds sold decreased by $91 due to less volume of $2.5 million, and a 258 basis point decrease in the rate earned. INTEREST EXPENSE. Interest expense on deposit liabilities decreased by $539, or 34.93% for the six months ended June 30, 2002, as compared to the same period in 2001. This was mostly due to average cost of funds for the six months ended June 30, 2002 of about 2.07% compared to 3.38% for the six months ended June 30, 2001. Interest expense on borrowed funds increased by $74, or 49.33% due to an increase of $6.3 million in total borrowings. PROVISION FOR LOAN LOSSES. The Bank recorded net charge-offs of $3 during the six months ended June 30, 2002, compared to net charge-offs of $10 during the same period in 2001. Based upon continued strong credit quality the Bank recorded a negative provision for loan losses of $275 during the first half of 2002. We recorded no provision in the first half of 2001. The reasons for the negative provision are discussed above in the Comparison of Three Months Ended June 30, 2002 and 2001. NON-INTEREST INCOME. Non-interest income for the six months ended June 30, 2002 was $371 compared to $372 for the six months ended June 30, 2001. Service fee income was $17 less than prior year to date. The Bank had a net gain on sales of securities of $16 during the six months ending June 30, 2002, but had no gains for the first six months of 2001. NON-INTEREST EXPENSE. Non-interest expense increased by $466, or 24.44%, to $2,372 for the six months ended June 30, 2002, from $1,906 in the comparable period in 2001. Salaries and Benefits increased by $467 due to the expense associated with the termination of the former President and CEO, and increases in group health insurance expense. Net occupancy and equipment expense decreased by $54 due to less depreciation expense. Other expenses increased by $64 with the most 17 significant increases in printing and supplies($14), advertising/public relations($23), and computer expense($17). INCOME TAXES. The provision for income taxes increased by $25 for the six months ended June 30, 2002, compared with the prior year, primarily because of higher taxable income for the quarter. CREDIT QUALITY RISK The following table identifies amounts of loan losses and non-performing loans. Past due loans are those that were contractually past due 90 days or more as to interest or principal payments (dollars in thousands). JUNE 30, DECEMBER 31, 2002 2001 - -------------------------------------------------------------------------------- Non-accruing loans $ 0 $ 0 Impaired loans 0 0 Accrual loans - 90 days or more past due 48 0 - -------------------------------------------------------------------------------- Total non-performing loans 48 0 - -------------------------------------------------------------------------------- Foreclosed assets held for sale 185 0 - -------------------------------------------------------------------------------- Total non-performing assets $ 233 $ 0 ================================================================================ Non-performing loans as a percent of loans net of unearned income 0.07% 0.00% ================================================================================ Non-performing assets as a percent of loans Net of unearned income 0.35% 0.00% ================================================================================ Interest does not accrue on non-accrual loans. Subsequent cash payments received are applied to the outstanding principal balance or recorded as interest income, depending upon management's assessment of its ultimate ability to collect principal and interest. 18 FC BANC CORP. PART II - OTHER INFORMATION ================================================================================ ITEM 1 - LEGAL PROCEEDINGS Not Applicable ITEM 2 - CHANGES IN SECURITIES Not Applicable ITEM 3 - DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5 - OTHER INFORMATION Not Applicable ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 19 Exhibit 3.1 Amended and Restated Articles of Incorporation of FC Banc Corp., filed as Exhibit 3 to Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference. Exhibit 3.2 Code of regulations of FC Banc Corp., filed as Exhibit 3 to Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference. Exhibit 4 For definition of rights of security holders please refer to Exhibit 3 on Form 10-KSB for the fiscal year ended December 31, 2000 and incorporated herein by reference. Exhibit 99.1 Independent Accountant's Report Exhibit 99.2- CEO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.3- CFO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 1. No report on Form 8-K was filed during the second quarter ended June 30, 2002. 20 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. FC BANC CORP. Date August 14, 2002 ------------------------- /s/ Coleman Clougherty ----------------------- Coleman Clougherty Chief Executive Officer Date August 14, 2002 ------------------------- /s/ Jeffrey Wise ----------------------- Jeffrey Wise Chief Financial Officer 21 EX-99.1 3 dex991.txt INDEPENDENT ACCOUNTANT'S REPORT EXHIBIT 99.1 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors and Stockholders FC Banc Corp. We have reviewed the accompanying consolidated balance sheet of FC Banc Corp. (the "Company") and subsidiary as of June 30, 2002, and the related consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 2002 and the consolidated statements of shareholders equity and cash flows for the six-month period ended June 30, 2002. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2001, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated January 18, 2002, we expressed an unqualified opinion on those consolidated financial statements. /s/ S.R. Snodgrass, A.C. Wexford, PA August 6, 2002 EX-99.2 4 dex992.txt CEO CERTIFICATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of FC Banc Corp. (the "Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Coleman J. Clougherty, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Coleman J. Clougherty Coleman J. Clougherty Chief Executive Officer August 14, 2002 EX-99.3 5 dex993.txt CFO CERTIFICATION EXHIBIT 99.3 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of FC Banc Corp. (the "Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey A. Wise, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jeffrey A. Wise Jeffrey A. Wise Chief Financial Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----