þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 34-1558688 | |
State or other jurisdiction of incorporation or organization |
(IRS Employer Identification No.) |
|
100 East Water Street, Sandusky, Ohio | 44870 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Common shares, no par value | The NASDAQ Stock Market LLC (NASDAQ Capital Market) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if smaller reporting company) |
Part I |
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Item 1. Business |
4 | |||
Item 1A. Risk Factors |
22 | |||
Item 1B. Unresolved Staff Comments |
27 | |||
Item 2. Properties |
27 | |||
Item 3. Legal Proceedings |
27 | |||
Item 4. [Removed and Reserved] |
29 | |||
Part II |
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Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities |
29 | |||
Item 6. Selected Financial Data |
29 | |||
Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations |
29 | |||
Item 7A. Quantitative and Qualitative Disclosures About Market Risk |
29 | |||
Item 8. Financial Statements and Supplementary Data |
29 | |||
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure |
30 | |||
Item 9A. Controls and Procedures |
30 | |||
Item 9B. Other Information |
30 | |||
Part III |
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Item 10. Directors, Executive Officers and Corporate Governance |
31 | |||
Item 11. Executive Compensation |
31 | |||
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters |
31 | |||
Item 13. Certain Relationships and Related Transactions, and Director Independence |
31 | |||
Item 14. Principal Accountant Fees and Services |
32 | |||
Part IV |
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Item 15. Exhibits and Financial Statement Schedules |
32 | |||
Signatures |
36 |
(a) | General Development of Business |
FIRST CITIZENS BANC CORP (FCBC) was organized under the laws of the State of Ohio on February 19, 1987 and is a registered financial holding company under the Gramm-Leach-Bliley Act of 1999, as amended. FCBCs office is located at 100 East Water Street, Sandusky, Ohio. FCBC and its subsidiaries are sometimes referred to together as the Corporation. The Corporation had total consolidated assets of $1,100,622 at December 31, 2010. |
THE CITIZENS BANKING COMPANY (Citizens), owned by FCBC since 1987, opened for business in 1884 as The Citizens National Bank. In 1898, Citizens was reorganized under Ohio banking law and was known as The Citizens Bank and Trust Company. In 1908, Citizens surrendered its trust charter and began operation under its current name. Citizens is an insured bank under the Federal Deposit Insurance Act. Citizens maintains its main office at 100 East Water Street, Sandusky, Ohio and operates branch banking offices in the following Ohio communities: Sandusky (2), Norwalk (2), Berlin Heights, Huron, Castalia, New Washington, Shelby (3), Willard, Crestline, Chatfield, Tiro, Greenwich, Plymouth, Shiloh, Akron, Dublin, Hilliard, Plain City, Russells Point, Urbana (2) , West Liberty and Quincy. Additionally, Citizens operates a loan production office in Port Clinton, Ohio. Citizens accounted for 99.6% of the Corporations consolidated assets at December 31, 2010. |
SCC RESOURCES INC. (SCC) was organized under the laws of the State of Ohio. SCC began as a joint venture of three local Sandusky, Ohio banks in 1966. SCC provides item-processing services for financial institutions, including Citizens, and other nonrelated entities. The Corporation acquired total ownership of SCC in February 1993. In the third quarter of 2009, SCC was merged with and into Citizens. |
FIRST CITIZENS INSURANCE AGENCY, INC. (Insurance Agency) was formed in 2001 to allow the Corporation to participate in commission revenue generated through its third party insurance agreement. Assets of the Insurance Agency were not significant as of December 31, 2010. |
WATER STREET PROPERTIES (Water St.) was formed in 2003 to hold properties repossessed by FCBC subsidiaries. Assets of Water St. were not significant as of December 31, 2010. |
FIRST CITIZENS INVESTMENTS, INC. (FCI) was formed in the fourth quarter of 2007 as a wholly-owned subsidiary of Citizens to hold and manage its securities portfolio. The operations of FCI are located in Wilmington, Delaware. |
FIRST CITIZENS CAPITAL LLC (FCC) was also formed in the fourth quarter of 2007 as a wholly-owned subsidiary of Citizens to hold inter-company debt that is eliminated in consolidation. The operations of FCC are located in Wilmington, Delaware. |
(b) | Industry Segments |
FCBC is a financial holding company. Through the subsidiary bank, the Corporation is primarily engaged in the business of community banking, which accounts for substantially all of its revenue, operating income and assets. |
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(c) | Narrative Description of Business |
General |
The Corporations primary business is incidental to the subsidiary bank. Citizens, located in Erie, Crawford, Champaign, Franklin, Logan, Summit, Huron, Ottawa, Union and Richland Counties, Ohio, conducts a general banking business that involves collecting customer deposits, making loans, purchasing securities, and offering Trust services. |
Interest and fees on loans accounted for 71% of total revenue for 2010, 72% of total revenue for 2009, and 75% of total revenue for 2008. The Corporations primary focus of lending continues to be real estate loans, both residential and commercial in nature. Residential real estate mortgages comprised 39% of the total loan portfolio in 2010, 40% of the total loan portfolio in 2009, and 41% of the total loan portfolio in 2008. Commercial real estate loans comprised 44% of the total loan portfolio in 2010, 42% in 2009, and 39% in 2008. Commercial and agricultural loans comprised 11% of the total loan portfolio in 2010, 12% in 2009 and 14% in 2008. Citizens loan portfolio does not include any foreign-based loans, loans to lesser-developed countries or loans to FCBC. |
On a parent company only basis, FCBCs primary source of funds is the receipt of dividends paid by its subsidiaries, principally Citizens. The ability of the Citizens to pay dividends is subject to limitations under various laws and regulations and to prudent and sound banking principles. Generally, subject to certain minimum capital requirements, the Citizens may not declare a dividend without the approval of the State of Ohio Division of Financial Institutions unless the total of the dividends in a calendar year exceeds the total net profits of the bank for the year combined with the retained profits of the bank for the two preceding years. At December 31, 2010, Citizens was restricted from paying any additional dividends to the Corporation without obtaining regulatory approval. |
The Corporations business is not seasonal, nor is it dependent on a single or small group of customers. |
In the opinion of management, the Corporation does not have exposure to material costs associated with environmental hazardous waste mitigation or cleanup. |
Competition |
The market area for Citizens is Erie, Crawford, Champaign, Franklin, Logan, Summit, Huron, Ottawa, Union and Richland Counties in Ohio. Traditional financial service competition for Citizens consists of large regional financial institutions, community banks, thrifts and credit unions operating within Citizens market area. Nontraditional sources of competition for loan and deposit dollars come from captive auto finance companies, mortgage banking companies, internet banks, brokerage companies, insurance companies and direct mutual funds. |
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Employees |
FCBC has no employees. The subsidiary companies employ approximately 290 full-time equivalent employees to whom a variety of benefits are provided. FCBC and its subsidiaries are not parties to any collective bargaining agreements. Management considers its relationship with its employees to be good. | ||
Supervision and Regulation |
The Bank Holding Company Act: As a financial holding company, FCBC is subject to regulation under the Bank Holding Company Act of 1956, as amended (the BHCA) and the examination and reporting requirements of the Board of Governors of the Federal Reserve System (Federal Reserve Board). Under the BHCA, FCBC is subject to periodic examination by the Federal Reserve Board and is required to file periodic reports regarding its operations and any additional information that the Federal Reserve Board may require. |
The Federal Reserve Board also has extensive enforcement authority over financial and bank holding companies, including the ability to assess civil money penalties, issue cease and desist and removal orders, and require that a financial or bank holding company divest subsidiaries, including its subsidiary banks. |
Under Federal Reserve Board policy, a financial or bank holding company is expected to act as a source of strength to each of its subsidiary banks. In accordance with this policy, the Federal Reserve Board may require a financial or bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice. |
The BHCA generally limits the activities of a bank holding company to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries and engaging in any other activities that the Federal Reserve Board has determined to be so closely related to banking or to managing or controlling banks as to be a proper incident to those activities. In addition, the BHCA requires every bank holding company to obtain the approval of the Federal Reserve Board prior to acquiring all or substantially all of the assets of any bank or another financial or bank holding company, acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank not already majority-owned by it, or merging or consolidating with another financial or bank holding company. |
The Gramm-Leach-Bliley Act of 1999 (GLBA) permits qualifying bank holding companies to become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized under the Federal Deposit Insurance Corporation Act of 1991 prompt corrective action provisions, is well managed, and has at least a satisfactory rating under the Community Reinvestment Act, by filing a declaration that the bank holding company wishes to become a financial holding company. In March, 2000, FCBC became a financial holding company. No regulatory approval is required for a financial holding company to acquire a company, other than a bank or a savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board. |
The GLBA defines financial in nature to include: |
| securities underwriting, dealing and market making; | ||
| sponsoring mutual funds and investment companies; | ||
| insurance underwriting and agency; | ||
| merchant banking; and |
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| activities that the Federal Reserve Board has determined to be closely related to banking. |
Transactions with Affiliates, Directors, Executive Officers and Shareholders: Transactions between Citizens and its affiliates, including FCBC, are subject to Sections 23A and 23B of the Federal Reserve Act, and Federal Reserve Board Regulation W, which generally limit the extent to which Citizens may engage in covered transactions with affiliates and require that the terms of such transactions be the same, or at least as favorable, to Citizens as the terms provided in a similar transaction between Citizens and an unrelated party. The term covered transaction includes the making of loans to an affiliate, the purchase of assets from an affiliate, the issuance of a guarantee on behalf of an affiliate, the purchase of securities issued by an affiliate and other similar types of transactions. |
A banks authority to extend credit to executive officers, directors and greater than 10% shareholders, as well as entities such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the Federal Reserve Board. Among other things, these loans must be made on terms (including interest rates charged and collateral required) substantially the same as those offered to unaffiliated individuals or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of repayment. In addition, the amount of loans a bank may make to these affiliated persons is based, in part, on the banks capital position, and specified approval procedures must be followed in making loans which exceed specified amounts. |
Banking subsidiaries of financial and bank holding companies are also subject to federal regulation regarding such matters as reserves, limitations on the nature and amount of loans and investments, issuance or retirement of its own securities, limitations on the payment of dividends and other aspects of banking operations. |
Privacy Provisions of Gramm-Leach-Bliley Act: Under the GLBA, federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. These rules contain extensive provisions on a customers right to privacy of non-public personal information. Except in certain cases, an institution may not provide personal information to unaffiliated third parties unless the institution discloses that such information may be disclosed and the customer is given the opportunity to opt out of such disclosure. The privacy provisions of the GLBA affect how consumer information is conveyed to outside vendors. FCBC and its subsidiaries are also subject to certain state laws that deal with the use and distribution of non-public personal information. |
Federal Deposit Insurance Corporation (FDIC): The FDIC is an independent federal agency which insures the deposits of federally-insured banks and savings associations up to certain prescribed limits and safeguards the safety and soundness of financial institutions. The deposits of Citizens are subject to the deposit insurance assessments of the FDIC. Under the FDICs deposit insurance assessment system, the assessment rate for any insured institution may vary according to regulatory capital levels of the institution and other factors such as supervisory evaluations. |
The FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the insurance fund and may initiate enforcement actions against a bank, after first giving the institutions primary regulatory authority an opportunity to take such action. The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC. |
Community Reinvestment Act: The Community Reinvestment Act requires depository institutions to assist in meeting the credit needs of their market areas, including low- and moderate-income areas, consistent with safe and sound banking practice. Under this Act, each institution is required to adopt a |
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statement for each of its market areas describing the depositary institutions efforts to assist in its communitys credit needs. Depositary institutions are periodically examined for compliance and assigned ratings. Banking regulators consider these ratings when considering approval of a proposed transaction by an institution. |
USA Patriot Act of 2001: The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA Patriot Act) gives the United States Government greater powers over financial institutions to combat money laundering and terrorist access to the financial system in our country. The USA Patriot Act requires the Corporation to establish a program for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity. |
Sarbanes-Oxley Act of 2002: As mandated by the Sarbanes-Oxley Act of 2002, the SEC has adopted rules and regulations governing, among other matters, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information. The NASDAQ Stock Market LLC (Nasdaq) has also adopted corporate governance rules. The Board of Directors of the Corporation has taken a series of actions to strengthen and improve the Corporations governance practices in light of the rules of the SEC and Nasdaq. The Board of Directors has adopted charters for the Audit Committee, the Compensation Committee and the Nominating Committee, as well as a Code of Conduct (Ethics) applicable to all directors, officers and employees of the Corporation. In addition, in accordance with section 302(a) of the Sarbanes-Oxley Act, written certifications by FCBCs Chief Executive Officer and Chief Financial Officer are required. These certifications attest that FCBCs quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact. See Item 9(a) Controls and Procedures in Part II of this Form 10-K for FCBCs evaluation of its disclosure controls and procedures. |
Regulation of Bank Subsidiary: As an Ohio chartered bank, Citizens, is subject to supervision and regulation by the State of Ohio Department of Commerce, Division of Financial Institutions (ODFI). In addition, Citizens is a member of the Federal Reserve System and, therefore, is subject to supervision and regulation by the Federal Reserve Board. Citizens is subject to periodic examinations by the ODFI, and Citizens is additionally subject to periodic examinations by the Federal Reserve Board. These examinations are designed primarily for the protection of the depositors of the bank and not shareholders. |
Regulatory Capital Requirements: The FRB has adopted capital adequacy guidelines for bank holding companies, pursuant to which, on a consolidated basis, FCBC must maintain total capital of at least 8% of risk-weighted assets. Risk-weighted assets consist of all assets, plus credit equivalent amounts of certain off-balance sheet items, which are weighted at percentage levels ranging from 0% to 100%, based on the relative credit risk of the asset. At least half of the total capital to meet this risk-based requirement must consist of core or Tier 1 capital, which includes common stockholders equity, qualifying perpetual preferred stock (up to 25% of Tier 1 capital) and minority interests in the equity accounts of consolidated subsidiaries, less goodwill, certain other intangibles, and portions of certain non-financial equity investments. The remainder of total capital may consist of supplementary or Tier 2 capital. In addition to this risk-based capital requirement, the FRB requires bank holding companies to meet a leverage ratio of a minimum level of Tier 1 capital to average total consolidated assets of 3%, if they have the highest regulatory examination rating, well-diversified risk and minimal anticipated growth or expansion. All other bank holding companies are expected to maintain a leverage ratio of at least 4% of average total consolidated assets. Substantially similar capital requirements apply to state-chartered member banks, including Citizens. |
At December 31, 2010, both FCBC and Citizens were in compliance with these capital requirements. For FCBCs capital ratios, see Note 16 to the Corporations 2010 Consolidated Financial Statements. |
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The Federal Reserve Board has adopted regulations governing prompt corrective action to resolve the problems of capital deficient and otherwise troubled state-chartered member banks. At each successively lower defined capital category, a bank is subject to more restrictive and numerous mandatory or discretionary regulatory actions or limits, and the Federal Reserve Board has less flexibility in determining how to resolve the problems of the institution. In addition, the Federal Reserve Board generally can downgrade a banks capital category, notwithstanding its capital level, if, after notice and opportunity for hearings, the bank is deemed to be engaged in an unsafe or unsound practice, because it has not corrected deficiencies that resulted in it receiving a less than satisfactory examination rating on matters other than capital or it is deemed to be in an unsafe or unsound condition. Citizens capital at December 31, 2010, met the standards for the highest capital category, a well-capitalized bank. |
Federal Reserve Board regulations also limit the payment of dividends by Citizens to FCBC. Citizens may not pay a dividend if it would cause Citizens not to meet its capital requirements. In addition, the dividends that Citizens may pay to FCBC without prior approval of the Federal Reserve Board is limited to net income for the year plus its retained net income for the preceding two years. |
TARP Capital Purchase Program: On January 23, 2009, FCBC completed the sale to the United States Department of the Treasury (Treasury) of $23,184,000 of newly-issued FCBC non-voting preferred shares (Series A Preferred Shares) as part of the Capital Purchase Program (CPP) enacted by Treasury as part of the Troubled Assets Relief Program (TARP) under the Emergency Economic Stabilization Act of 2008 (EESA). To finalize FCBCs participation in the CPP, FCBC and the Treasury entered into a Letter Agreement, dated January 23, 2009, including the Securities Purchase Agreement Standard Terms attached thereto (the Securities Purchase Agreement). Pursuant to the terms of the Securities Purchase Agreement, FCBC issued and sold to Treasury (1) 23,184 shares of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value and having a liquidation preference of $1,000 per share (the Series A Preferred Shares), and (2) a warrant (the Warrant) to purchase 469,312 FCBC common shares, each without par value, at an exercise price of $7.41 per share. The Warrant has a ten-year term. All of the proceeds from the sale of the Series A Preferred Shares and the Warrant by FCBC to the U.S. Treasury under the CPP qualify as Tier 1 capital for regulatory purposes. The issuance and sale to the U.S. Treasury of the Series A Preferred Shares and the Warrant was a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act), pursuant to Section 4(2) of the Securities Act. |
As long as the Series A Preferred Shares remain outstanding, FCBC is permitted to declare and pay dividends on its common shares only if all accrued and unpaid dividends for all past dividend periods on the Series A Preferred Shares are fully paid. Until the third anniversary of the sale of the Series A Preferred Shares, unless such shares have been transferred or redeemed in whole, any increase in dividends on FCBCs common shares above the amount of the last quarterly cash dividend per share declared prior to October 14, 2008 ($0.15 per share) will require prior approval of Treasury. The terms of FCBCs agreement with Treasury allow for additional restrictions, including those on dividends, to be imposed by Treasury, including unilateral amendments required to comply with legislative changes. |
Under the terms of the Securities Purchase Agreement, FCBC is required to comply with various executive compensation standards applicable to FCBCs senior executive officers for the period during which the Treasury holds a debt or equity position in FCBC acquired under the CPP. These standards generally apply to FCBCs executive officers. The American Recovery and Reinvestment Act of 2009 (ARRA), which was passed by Congress and signed by the President on February 17, 2009, retroactively amended the executive compensation provisions applicable to participants in the CPP. On June 15, 2009, the Treasury established executive compensation and corporate governance standards applicable to TARP recipients, including FCBC, and their subsidiaries by publishing an interim final rule under 31 C.F.R. Part 30. On December 7, 2009, Treasury published technical amendments to the interim final rule (collectively, the interim final rule published on June 15, 2009 and the amendments published on December 7, 2009 are referred to as the Interim Final Rule). The executive compensation and corporate governance standards |
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established under ARRA and the Interim Final Rule remain in effect during the period in which any obligation arising from financial assistance provided under TARP remains outstanding, excluding any period during which Treasury holds only warrants to purchase common shares of FCBC. |
ARRA and the Interim Final Rule impose limitations on FCBCs executive compensation practices by, among other things: (i) limiting the deductibility, for U.S. federal income tax purposes, of compensation paid to any of our Senior Executive Officers (as defined in the Interim Final Rule) to $500,000 per year; (ii) prohibiting the payment or accrual of any bonus, retention award or incentive compensation to certain highly-compensated employees, except in the form and under the limited circumstances permitted by the Interim Final Rule; (iii) prohibiting the payment of golden parachute payments (as defined in the Interim Final Rule) to our Senior Executive Officers and certain other highly-compensated employees upon a departure from FCBC and its subsidiaries or due to a change in control of FCBC, except for payments for services performed or benefits accrued; (iv) requiring FCBC or the applicable subsidiary to claw back any bonus, retention award or incentive compensation paid (or under a legally binding obligation to be paid) to a Senior Executive Officer or any of our next 20 most highly-compensated employees if the payment was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (v) prohibiting FCBC and its subsidiaries from maintaining any Employee Compensation Plan (as defined in the Interim Final Rule) that would encourage the manipulation of FCBCs reported earnings to enhance the compensation of any of our employees; (vi) prohibiting FCBC and its subsidiaries from maintaining compensation plans and arrangements for our Senior Executive Officers that encourage our Senior Executive Officers to take unnecessary and excessive risks that threaten the value of FCBC; (vii) requiring FCBC and its subsidiaries to limit any Employee Compensation Plan that unnecessarily exposes FCBC to risk; (viii) prohibiting FCBC and its subsidiaries from providing (formally or informally) gross-ups to any of our Senior Executive Officers or our 20 next most highly-compensated employees; (ix) requiring that FCBC disclose to Treasury and FCBCs primary regulator the amount, nature and justification for offering to certain of our most highly-compensated employees any perquisites whose total value exceeds $25,000; (x) requiring that FCBC disclose to Treasury and FCBCs primary regulator whether FCBC, the FCBCs Board of Directors or the Compensation Committee engaged a compensation consultant and the services performed by that compensation consultant and any of its affiliates; (xi) requiring that FCBC disclose to Treasury the identity of our Senior Executive Officers and 20 next most highly-compensated employees; and (xii) subjecting any bonus, retention award or other compensation paid before February 17, 2009 to our Senior Executive Officers or our 20 next most highly-compensated employees to retroactive review by Treasury to determine whether any such payments were inconsistent with the purposes of TARP or otherwise contrary to the public interest. ARRA and the Interim Final Rule also required that the FCBC Board of Directors adopt a company-wide policy regarding excessive or luxury expenditures, which was adopted on September 10, 2009, and post this policy on the Corporations website. FCBC must also permit in its proxy statements for annual meetings of shareholders a non-binding say on pay shareholder vote on the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the SEC. |
Under ARRA, FCBC may redeem the Series A Preferred Shares and repurchase the Warrant without penalty and without the need to raise new capital, subject to Treasurys consultation with the appropriate regulatory agency, in which event the restrictions described above would no longer apply. |
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: On July 21, 2010, President Obama signed the Dodd-Frank Act Wall Street Reform and Consumer Protection Action of 2010 (the Dodd-Frank Act) into law. The Dodd-Frank Act is expected to significantly change the regulation of financial institutions and the financial services industry. Because the Dodd-Frank Act requires various federal agencies to adopt a broad range of regulations with significant discretion, many of the details of the new law and the effects they will have on the Corporation will not be known for months and even years. |
The following changes that will be implemented pursuant to the Dodd-Frank Act may have an effect on the Corporations business: |
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| the Dodd-Frank Act creates a Consumer Financial Protection Bureau with broad powers to adopt and enforce consumer protection regulations; | ||
| new capital regulations for bank holding companies will be adopted, which may impose stricter requirements, and any new trust preferred securities will no longer constitute Tier I capital; | ||
| the federal law prohibiting the payment of interest on commercial demand deposit accounts will be eliminated effective in July 2011; | ||
| the standard maximum amount of deposit insurance per customer is permanently increased to $250,000, and non-interest bearing transaction accounts will have unlimited insurance through December 31, 2012; | ||
| the assessment base for determining deposit insurance premiums will be expanded to include liabilities other than just deposits; and | ||
| new corporate governance requirements applicable generally to all public companies in all industries will require new compensation practices and disclosure requirements, including requiring companies to claw back incentive compensation under certain circumstances, to provide shareholders the opportunity to cast a non-binding vote on executive compensation and to consider the independence of compensation advisers. |
Many provisions of the Dodd-Frank Act have not yet been implemented and will require interpretation and rule making by federal regulators. While the ultimate effect of the Dodd-Frank Act on the Corporation cannot yet be determined, the law is likely to increase compliance costs and fees paid to regulators, along with possible restrictions on the operations of the Corporation. |
Ohio Department of Insurance: FCBCs insurance agency subsidiary is subject to the insurance laws and regulations of the State of Ohio and the Ohio Department of Insurance. The insurance laws and regulations require education and licensing of agencies and individual agents, require reports and impose business conduct rules. |
Effects of Government Monetary Policy |
The earnings of the Corporation are affected by general and local economic conditions and by the policies of various governmental regulatory authorities. In particular, the Federal Reserve Board regulates money and credit conditions and interest rates to influence general economic conditions, primarily through open market acquisitions or dispositions of United States Government securities, varying the discount rate on member bank borrowings and setting reserve requirements against member and nonmember bank deposits. Federal Reserve Board monetary policies have had a significant effect on the interest income and interest expense of commercial banks, including Citizens, and are expected to continue to do so in the future. |
Available Information |
FCBCs maintains an Internet website at www.fcza.com (this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate FCBCs website into this Annual Report on Form 10-K). FCBC makes available free of charge on or through its Internet website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as well as FCBCs definitive proxy statements filed pursuant to Section 14 of |
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the Exchange Act, as soon as reasonably practicable after FCBC electronically files such material with, or furnishes it to, the SEC. |
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Statistical Information |
The following section contains certain financial disclosures related to the Corporation as required under the Securities and Exchange Commissions Industry Guide 3, Statistical Disclosures by Bank Holding Companies, or a specific reference as to the location of the required disclosures in the Registrants 2010 Annual Report to Shareholders, portions of which are incorporated in this Form 10-K by reference. |
2010 | 2009 | 2008 | ||||||||||
(Dollars in thousands) | ||||||||||||
Available for sale (1) |
||||||||||||
U.S. Treasury securities and obligations
of U.S. Government corporations and agencies |
$ | 55,707 | $ | 89,550 | $ | 76,511 | ||||||
Obligations of states and political subdivisions |
60,469 | 52,420 | 34,673 | |||||||||
Mortgage-backed securities in government sponsored entities |
68,100 | 64,646 | 39,076 | |||||||||
Total debt securities |
184,276 | 206,616 | 150,260 | |||||||||
Equity securities in financial institutions |
676 | 676 | 676 | |||||||||
Total |
$ | 184,952 | $ | 207,292 | $ | 150,936 | ||||||
(1) | The Corporation had no securitites of an issuer where the aggregate carrying value of such securitites exceeded ten percent of shareholders equity. |
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After one | After five but | |||||||||||||||||||||||||||||||
Within one year | but within five years | within ten years | After ten years | |||||||||||||||||||||||||||||
Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Available for Sale (2) |
||||||||||||||||||||||||||||||||
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies |
$ | | | $ | | | $ | 11,136 | 2.59 | % | $ | 44,571 | 2.69 | % | ||||||||||||||||||
Obligations of states and
political subdivisions (1) |
783 | 4.11 | % | 4,150 | 4.16 | % | 3,461 | 3.83 | 52,075 | 4.81 | ||||||||||||||||||||||
Corporate bonds |
| | | | | | | | ||||||||||||||||||||||||
Mortgage-backed securities in
government sponsored entities |
7 | 4.24 | | | 3,946 | 1.61 | 64,147 | 3.64 | ||||||||||||||||||||||||
Total |
$ | 790 | 4.11 | % | $ | 4,150 | 4.16 | % | $ | 18,543 | 2.66 | % | $ | 160,793 | 3.64 | % | ||||||||||||||||
(1) | Weighted average yields on nontaxable obligations have been computed based on actual yields stated on the security. | |
(2) | The weighted average yield has been computed using the historical amortized cost for available-for-sale securities. |
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Commercial and agricultural |
$ | 84,913 | $ | 96,298 | $ | 109,375 | $ | 96,385 | $ | 56,789 | ||||||||||
Commercial real estate |
336,251 | 335,626 | 313,000 | 299,005 | 218,084 | |||||||||||||||
Residential real estate |
295,038 | 314,552 | 325,962 | 343,160 | 234,344 | |||||||||||||||
Real estate construction |
39,341 | 29,970 | 30,628 | 33,480 | 28,294 | |||||||||||||||
Consumer |
11,590 | 14,083 | 17,409 | 20,359 | 19,909 | |||||||||||||||
Leases |
190 | 207 | 164 | 185 | 267 | |||||||||||||||
Credit card and other |
| 82 | 400 | 2,467 | 341 | |||||||||||||||
$ | 767,323 | $ | 790,818 | $ | 796,938 | $ | 795,041 | $ | 558,028 | |||||||||||
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Maturing | ||||||||||||||||
After one | ||||||||||||||||
Within | but within | After | ||||||||||||||
one year | five years | five years | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial and agricultural |
$ | 25,285 | $ | 25,772 | $ | 33,856 | $ | 84,913 | ||||||||
Commercial real estate |
18,848 | 51,096 | 266,307 | 336,251 | ||||||||||||
Real estate construction |
8,638 | 10,223 | 20,480 | 39,341 | ||||||||||||
$ | 52,771 | $ | 87,091 | $ | 320,643 | $ | 460,505 | |||||||||
Interest | ||||||||
Sensitivity | ||||||||
Fixed | Variable | |||||||
rate | rate | |||||||
(Dollars in thousands) | ||||||||
Due after one but within five years |
$ | 42,398 | $ | 44,693 | ||||
Due after five years |
63,373 | 257,270 | ||||||
$ | 105,771 | $ | 301,963 | |||||
16
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Loans accounted for on a nonaccrual basis (1) |
$ | 22,175 | $ | 25,198 | $ | 17,943 | $ | 9,308 | $ | 7,576 | ||||||||||
Loans contractually past due 90 days or
more as to principal or interest payments (2) |
2,241 | 514 | 3,053 | 2,423 | 2,717 | |||||||||||||||
Loans whose terms have been renegotiated to
provide a reduction or deferral of interest or
principal because of deterioration in the
financial position of the borrower (3) |
8,561 | 9,163 | 1,173 | 2,435 | 3,291 | |||||||||||||||
Total |
$ | 32,977 | $ | 34,875 | $ | 22,169 | $ | 14,166 | $ | 13,584 | ||||||||||
Impaired loans included in above totals |
11,390 | 13,989 | 8,800 | 3,757 | 3,934 | |||||||||||||||
Impaired loans not included in above totals |
5,114 | 8,747 | 5,837 | 9,208 | 12,812 | |||||||||||||||
Total impaired loans |
$ | 16,504 | $ | 22,736 | $ | 14,637 | $ | 12,965 | $ | 16,746 | ||||||||||
(1) | A loan is placed on nonaccrual status when doubt exists as to the collectibility of the loan, including any accrued interest. With a few immaterial exceptions, commercial and agricultural, commercial real estate, residential real estate and construction loans past due 90 days are placed on nonaccrual unless they are well collateralized and in the process of collection. Generally, consumer loans are charged-off within 30 days after becoming past due 90 days unless they are well collateralized and in the process of collection. Credit card loans are charged-off before reaching 120 days of delinquency. Once a loan is placed on nonaccrual, interest is then recognized on a cash basis where future collections of principal is probable. | |
(2) | Excludes loans accounted for on a nonaccrual basis. | |
(3) | Excludes loans accounted for on a nonaccrual basis and loans contractually past due ninety days or more as to principal or interest payments. |
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Interest income on impaired loans, including
interest income recognized on a cash basis |
$ | 570 | $ | 828 | $ | 626 | $ | 1,008 | $ | 533 | ||||||||||
Interest income on impaired loans recognized on
a cash basis |
$ | 570 | $ | 828 | $ | 626 | $ | 1,008 | $ | 533 | ||||||||||
17
18
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Daily average amount of loans
net of unearned income |
$ | 784,263 | $ | 789,347 | $ | 799,413 | $ | 586,889 | $ | 539,241 | ||||||||||
Allowance for loan losses at
beginning of year |
$ | 15,271 | $ | 8,862 | $ | 7,374 | $ | 8,060 | $ | 9,212 | ||||||||||
Loan charge-offs: |
||||||||||||||||||||
Commercial and |
2,710 | 3,013 | 2,478 | 1,802 | 1,272 | |||||||||||||||
agricultural |
||||||||||||||||||||
Commercial real estate |
4,653 | 1,493 | 2,530 | 736 | 913 | |||||||||||||||
Real estate mortgage |
4,029 | 2,393 | 1,952 | 711 | 416 | |||||||||||||||
Real estate construction |
799 | 497 | 33 | 29 | | |||||||||||||||
Consumer |
460 | 655 | 788 | 750 | 865 | |||||||||||||||
Leases |
| | 17 | | | |||||||||||||||
Credit card and other |
| | | | | |||||||||||||||
12,651 | 8,051 | 7,798 | 4,028 | 3,466 | ||||||||||||||||
Recoveries of loans previously |
||||||||||||||||||||
Charged-off: |
||||||||||||||||||||
Commercial and |
303 | 204 | 389 | 310 | 110 | |||||||||||||||
agricultural |
||||||||||||||||||||
Commercial real estate |
650 | 364 | 158 | 242 | 146 | |||||||||||||||
Real estate mortgage |
99 | 363 | 197 | 173 | 443 | |||||||||||||||
Real estate construction |
| | 18 | 7 | | |||||||||||||||
Consumer |
156 | 206 | 282 | 311 | 479 | |||||||||||||||
Leases |
| | 35 | | | |||||||||||||||
Credit card and other |
| | | 2 | 8 | |||||||||||||||
1,208 | 1,137 | 1,079 | 1,045 | 1,186 | ||||||||||||||||
Net charge-offs (1) |
(11,443 | ) | (6,914 | ) | (6,719 | ) | (2,983 | ) | (2,280 | ) | ||||||||||
Balance from acquisition |
| | | 1,277 | | |||||||||||||||
Provision for loan losses (2) |
17,940 | 13,323 | 8,207 | 1,020 | 1,128 | |||||||||||||||
Allowance for loan losses
at end of year |
$ | 21,768 | $ | 15,271 | $ | 8,862 | $ | 7,374 | $ | 8,060 | ||||||||||
Allowance for loan losses as a percent
of loans at year-end |
2.84 | % | 1.93 | % | 1.11 | % | 0.93 | % | 1.45 | % | ||||||||||
Ratio of net charge-offs during the year
to average loans outstanding |
1.46 | % | 0.88 | % | 0.84 | % | 0.52 | % | 0.42 | % | ||||||||||
(1) | The amount of net charge-offs fluctuates from year to year due to factors relating to the condition of the general economy and specific business. | |
(2) | The determination of the balance of the allowance for loan losses is based on an analysis of the loan portfolio and reflects an amount that, in managements judgment, is adequate to provide for probable incurred loan losses. Such analysis is based on a review of specific loans, the character of the loan portfolio, current economic conditions, and such other factors as management believes require current recognition in estimating probable incurred loan losses. |
19
2010 | 2009 | |||||||||||||||
Percentage | Percentage | |||||||||||||||
of loans to | of loans to | |||||||||||||||
Allowance | total loans | Allowance | total loans | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial and agriculture |
$ | 4,377 | 11.1 | % | $ | 2,957 | 12.2 | % | ||||||||
Commercial real estate |
5,604 | 43.8 | 6,042 | 42.4 | ||||||||||||
Real estate mortgage |
8,662 | 38.5 | 3,917 | 39.8 | ||||||||||||
Real estate construction |
1,531 | 5.1 | 1,109 | 3.8 | ||||||||||||
Consumer |
726 | 1.5 | 401 | 1.8 | ||||||||||||
Credit card and other |
| | | | ||||||||||||
Unallocated |
868 | | 845 | | ||||||||||||
$ | 21,768 | 100.0 | % | $ | 15,271 | 100.0 | % | |||||||||
2008 | 2007 | |||||||||||||||
Percentage | Percentage | |||||||||||||||
of loans to | of loans to | |||||||||||||||
Allowance | total loans | Allowance | total loans | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial and agriculture |
$ | 1,220 | 13.7 | % | $ | 1,735 | 12.4 | % | ||||||||
Commercial real estate |
3,330 | 39.3 | 3,059 | 37.7 | ||||||||||||
Real estate mortgage |
2,524 | 40.9 | 1,551 | 43.0 | ||||||||||||
Real estate construction |
699 | 3.8 | 183 | 4.1 | ||||||||||||
Consumer |
442 | 2.2 | 359 | 2.5 | ||||||||||||
Credit card and other |
| 0.1 | | 0.3 | ||||||||||||
Leases |
| | | | ||||||||||||
Unallocated |
647 | | 487 | | ||||||||||||
$ | 8,862 | 100.0 | % | $ | 7,374 | 100.0 | % | |||||||||
2006 | ||||||||
Percentage | ||||||||
of loans to | ||||||||
Allowance | total loans | |||||||
(Dollars in thousands) | ||||||||
Commercial and agriculture |
$ | 1,742 | 10.2 | % | ||||
Commercial real estate |
3,230 | 39.1 | ||||||
Real estate mortgage |
1,458 | 42.0 | ||||||
Real estate construction |
1,037 | 5.1 | ||||||
Consumer |
357 | 3.5 | ||||||
Credit card and other |
| | ||||||
Leases |
| 0.1 | ||||||
Unallocated |
236 | | ||||||
$ | 8,060 | 100.0 | % | |||||
20
2010 | 2009 | 2008 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
balance | rate paid | balance | rate paid | balance | rate paid | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Noninterest-bearing
demand deposits |
$ | 144,711 | N/A | $ | 126,934 | N/A | $ | 121,541 | N/A | |||||||||||||||
Interest-bearing demand
deposits |
144,800 | 0.34 | % | 146,089 | 0.40 | % | 151,959 | 1.36 | % | |||||||||||||||
Savings, including Money
Market deposit accounts |
262,109 | 0.40 | % | 226,265 | 0.64 | % | 204,646 | 0.98 | % | |||||||||||||||
Certificates of deposit,
including IRAs |
341,153 | 1.66 | % | 364,200 | 2.34 | % | 327,502 | 3.46 | % | |||||||||||||||
$ | 892,773 | $ | 863,488 | $ | 805,648 | |||||||||||||||||||
Individual | ||||||||||||
Certificates | Retirement | |||||||||||
of Deposits | Accounts | Total | ||||||||||
(Dollars in thousands) | ||||||||||||
3 months or less |
$ | 31,693 | $ | 673 | $ | 32,366 | ||||||
Over 3 through 6 months |
32,763 | 565 | 33,328 | |||||||||
Over 6 through 12 months |
14,900 | 3,522 | 18,422 | |||||||||
Over 12 months |
29,547 | 1,802 | 31,349 | |||||||||
$ | 108,903 | $ | 6,562 | $ | 115,465 | |||||||
21
22
| inflation; | ||
| recession; | ||
| unemployment; | ||
| money supply; | ||
| international disorders; and | ||
| instability in domestic and foreign financial markets. |
23
| A decrease in the demand for loans and other products and services offered by us; | ||
| A further impairment of certain intangible assets, such as goodwill; | ||
| An increase in the number of clients who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us. An increase in the number of delinquencies, bankruptcies or defaults could result in a higher level of nonperforming assets, net charge-offs, provision for loan losses, and valuation adjustments on loans held for sale. |
24
25
26
27
28
29
30
Number of | ||||||||||||
securities to be | Number of securities | |||||||||||
issued upon | Weighted-average | remaining available for | ||||||||||
exercise of | exercise price of | future issuance under equity | ||||||||||
outstanding | outstanding | compensation plans | ||||||||||
options, warrants | options, warrants | (excluding securities | ||||||||||
and rights | and rights | reflected in column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity compensation plans
approved by security holders |
29,500 | $ | 25.42 | 0 | (1) | |||||||
Equity compensation plans
not approved by security
holders |
0 | 0 | 0 | |||||||||
Total |
29,500 | $ | 25.42 | 0 |
(1) | The Corporations Stock Option and Stock Appreciation Rights Plan expired in 2010, and no further stock options or other awards may be granted by the Corporation under such plan. |
31
1 | Financial Statements. . First Citizens Banc Corps Report of Independent Auditors and Consolidated Financial Statements and accompanying notes are listed below and are incorporated herein by reference from pages 23 through 71 of the 2010 Annual Report (included as Exhibit 13.1 hereto). |
2 | Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. |
32
Exhibit | Description | Location | ||
3.1(a)
|
Articles of Incorporation, as amended, of First Citizens Banc Corp. | Filed as Exhibit 3.1 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 16, 2006 and incorporated herein by reference. (File No. 0-25980) | ||
3.1(b)
|
Certificate of Amendment by Shareholders or Members as filed with the Ohio Secretary of State on January 12, 2009, evidencing the adoption by the shareholders of First Citizens Banc Corp on January 5, 2009 of an amendment to Article FOURTH to authorize the issuance of up to 200,000 preferred shares, without par value. | Filed as Exhibit 3.1(B) to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 16, 2009 and incorporated herein by reference. (File No. 0-25980) | ||
3.1(c)
|
Certificate of Amendment by Directors or Incorporators to Articles, filed with the Ohio Secretary of State on January 21, 2009, evidencing adoption of an amendment by the Board of Directors of First Citizens Banc Corp to Article FOURTH to establish the express terms of the Fixed Rate Cumulative Perpetual Preferred Shares, Series A, of First Citizens. | Filed as Exhibit 3.1 to First Citizens Banc Corps Current Report on Form 8-K dated and filed January 26, 2009, and incorporated herein by reference. (File No. 0-25980) | ||
3.2
|
Amended and restated Code of Regulations of First Citizens Banc Corp (adopted April 17, 2007). | Filed as Exhibit 3.1 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 16, 2009 and incorporated herein by reference. (File No. 0-25980) | ||
4.1
|
Certificate for Registrants Common Stock | Filed as Exhibit 4.1 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 16, 2006 and incorporated herein by reference. (File No. 0-25980) | ||
4.2
|
Warrant to purchase 469,312 Shares of Common Stock of First Citizens Banc Corp, issued to the U.S. Department of the Treasury on January 23, 2009. | Filed as Exhibit 4.1 to First Citizens Banc Corps Current Report on Form 8-K dated and filed January 26, 2009, and incorporated herein by reference. (File No. 0-25980) | ||
4.3
|
Agreement to furnish instrument and agreements defining rights of holders of long-term debt. | Included herewith. | ||
10.1*
|
First Citizens Banc Corp Stock Option and Stock Appreciation Rights Plan dated April 18, 2000. | Filed as Exhibit 10.1 to First Citizens Banc Corps Current Report on Form 8-K filed on November 21, 2005 and incorporated herein by reference. (File No. 0-25980) | ||
10.2*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and James O. Miller. | Filed as Exhibit 10.2 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.3*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and Todd A. Michel. | Filed as Exhibit 10.3 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). |
33
Exhibit | Description | Location | ||
10.4*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and Richard J. Dutton. | Filed as Exhibit 10.4 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.5*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and James E. McGookey. | Filed as Exhibit 10.5 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.6*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and Charles C. Riesterer. | Filed as Exhibit 10.6 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.7*
|
Letter Agreement, dated January 20, 2009, including the Securities Purchase Agreement Standard Terms attached thereto as Exhibit A, between First Citizens Banc Corp and the U.S. Department of the Treasury. | Filed as Exhibit 10.1 to First Citizens Banc Corps Current Report on Form 8-K dated and filed January 26, 2009, and incorporated herein by reference (File No. 0-25980). | ||
10.8*
|
Change in Control Agreement James O. Miller. | Filed as Exhibit 10.6 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). | ||
10.9*
|
Change in Control Agreement Charles C. Riesterer. | Filed as Exhibit 10.7 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). | ||
10.10*
|
Change in Control Agreement Todd A. Michel. | Filed as Exhibit 10.8 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). | ||
10.11*
|
Change in Control Agreement Leroy C. Link. | Filed as Exhibit 10.9 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). | ||
11.1
|
Statement regarding earnings per share | Included in Note 20 to the Consolidated Financial Statements filed as Exhibit 13.1 of this Annual Report on Form 10-K. | ||
13.1
|
First Citizens Banc Corp 2010 Annual Report to Shareholders. (not deemed filed except for portions which are specifically incorporated by reference in this Annual Report on Form 10-K) | Included herewith |
34
Exhibit | Description | Location | ||
21.1
|
Subsidiaries of FCBC | Included herewith | ||
23.1
|
Consent of S.R. Snodgrass, A.C. | Included herewith | ||
31.1
|
Rule 13a-14(a)/15-d-14(a) Certification of Chief Executive Officer | Included herewith | ||
31.2
|
Rule 13a-14(a)/15-d-14(a) Certification of Chief Financial Officer | Included herewith | ||
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Included herewith | ||
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Included herewith | ||
99.1
|
Certification Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008 and 31 CFR 30.15 Principal Executive Officer | Included herewith | ||
99.2
|
Certification Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008 and 31 CFR 30.15 Principal Financial Officer | Included herewith |
* | Management contract or compensatory plan or arrangement |
35
(Registrant)
|
First Citizens Banc Corp | |||
By
|
/s/ James O. Miller
|
|||
By
|
/s/ Todd A. Michel
|
|||
Date:
|
March 9, 2011 |
/s/ John O. Bacon
|
/s/ W. Patrick Murray
|
|||
/s/ Laurence A. Bettcher
|
/s/ Allen R. Nickles, CPA, CFE, FCPA
|
|||
/s/ Barry W. Boerger
|
/s/ John P. Pheiffer | |||
Barry W. Boerger, Director
|
John P. Pheiffer, Director | |||
/s/ Thomas A. Depler
|
/s/ J. William Springer | |||
Thomas A. Depler, Director
|
J. William Springer, Director | |||
/s/ Blythe A. Friedley
|
/s/ David A. Voight | |||
Blythe A. Friedley, Director
|
David A. Voight, Chairman of the Board | |||
/s/ James D. Heckelman
|
/s/ Richard A Weidrick, CPA, PFS | |||
James D. Heckelman, Director
|
Richard A Weidrick, CPA, PFS | |||
/s/ Allen R. Maurice
|
/s/ Daniel J. White | |||
Allen R. Maurice, Director
|
Daniel J. White, Director | |||
/s/ James O. Miller
|
/s/ Gerald B. Wurm | |||
James O. Miller, President & CEO, Director
|
Gerald B. Wurm, Director | |||
/s/ Margaret A. Murray |
||||
Margaret A. Murray, Director |
36
Exhibit | Description | Location | ||
3.1(a)
|
Articles of Incorporation, as amended, of First Citizens Banc Corp. | Filed as Exhibit 3.1 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 16, 2006 and incorporated herein by reference. (File No. 0-25980) | ||
3.1(b)
|
Certificate of Amendment by Shareholders or Members as filed with the Ohio Secretary of State on January 12, 2009, evidencing the adoption by the shareholders of First Citizens Banc Corp on January 5, 2009 of an amendment to Article FOURTH to authorize the issuance of up to 200,000 preferred shares, without par value. | Filed as Exhibit 3.1(B) to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 16, 2009 and incorporated herein by reference. (File No. 0-25980) | ||
3.1(c)
|
Certificate of Amendment by Directors or Incorporators to Articles, filed with the Ohio Secretary of State on January 21, 2009, evidencing adoption of an amendment by the Board of Directors of First Citizens Banc Corp to Article FOURTH to establish the express terms of the Fixed Rate Cumulative Perpetual Preferred Shares, Series A, of First Citizens. | Filed as Exhibit 3.1 to First Citizens Banc Corps Current Report on Form 8-K dated and filed January 26, 2009, and incorporated herein by reference. (File No. 0-25980) | ||
3.2
|
Amended and restated Code of Regulations of First Citizens Banc Corp (adopted April 17, 2007). | Filed as Exhibit 3.1 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 16, 2009 and incorporated herein by reference. (File No. 0-25980) | ||
4.1
|
Certificate for Registrants Common Stock | Filed as Exhibit 4.1 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 16, 2006 and incorporated herein by reference. (File No. 0-25980) | ||
4.2
|
Warrant to purchase 469,312 Shares of Common Stock of First Citizens Banc Corp, issued to the U.S. Department of the Treasury on January 23, 2009. | Filed as Exhibit 4.1 to First Citizens Banc Corps Current Report on Form 8-K dated and filed January 26, 2009, and incorporated herein by reference. (File No. 0-25980) | ||
4.3
|
Agreement to furnish instrument and agreements defining rights of holders of long-term debt. | Included herewith. | ||
10.1*
|
First Citizens Banc Corp Stock Option and Stock Appreciation Rights Plan dated April 18, 2000. | Filed as Exhibit 10.1 to First Citizens Banc Corps Current Report on Form 8-K filed on November 21, 2005 and incorporated herein by reference. (File No. 0-25980) |
37
Exhibit | Description | Location | ||
10.2*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and James O. Miller. | Filed as Exhibit 10.2 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.3*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and Todd A. Michel. | Filed as Exhibit 10.3 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.4*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and Richard J. Dutton. | Filed as Exhibit 10.4 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.5*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and James E. McGookey. | Filed as Exhibit 10.5 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.6*
|
Letter Agreement, dated December 23, 2009, between First Citizens Banc Corp and Charles C. Riesterer. | Filed as Exhibit 10.6 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 and incorporated herein by reference (File No. 0-25980). | ||
10.7*
|
Letter Agreement, dated January 20, 2009, including the Securities Purchase Agreement Standard Terms attached thereto as Exhibit A, between First Citizens Banc Corp and the U.S. Department of the Treasury. | Filed as Exhibit 10.1 to First Citizens Banc Corps Current Report on Form 8-K dated and filed January 26, 2009, and incorporated herein by reference (File No. 0-25980). | ||
10.8*
|
Change in Control Agreement James O. Miller. | Filed as Exhibit 10.6 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). | ||
10.9*
|
Change in Control Agreement Charles C. Riesterer. | Filed as Exhibit 10.7 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). | ||
10.10*
|
Change in Control Agreement Todd A. Michel. | Filed as Exhibit 10.8 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). | ||
10.11*
|
Change in Control Agreement Leroy C. Link. | Filed as Exhibit 10.9 to First Citizens Banc Corps Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005 and incorporated herein by reference (File No. 0-25980). |
38
Exhibit | Description | Location | ||
11.1
|
Statement regarding earnings per share | Included in Note 20 to the Consolidated Financial Statements filed as Exhibit 13.1 of this Annual Report on Form 10-K. | ||
13.1
|
First Citizens Banc Corp 2010 Annual Report to Shareholders. (not deemed filed except for portions which are specifically incorporated by reference in this Annual Report on Form 10-K) | Included herewith | ||
21.1
|
Subsidiaries of FCBC | Included herewith | ||
23.1
|
Consent of S.R. Snodgrass, A.C. | Included herewith | ||
31.1
|
Rule 13a-14(a)/15-d-14(a) Certification of Chief Executive Officer | Included herewith | ||
31.2
|
Rule 13a-14(a)/15-d-14(a) Certification of Chief Financial Officer | Included herewith | ||
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Included herewith | ||
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Included herewith | ||
99.1
|
Certification Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008 and 31 CFR 30.15 Principal Executive Officer | Included herewith | ||
99.2
|
Certification Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008 and 31 CFR 30.15 Principal Financial Officer | Included herewith |
* | Management contract or compensatory plan or arrangement |
39
/s/ James O. Miller
|
||
President and Chief Executive Officer |
First Citizens Banc Corp2010 Annual Report |
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Earnigs |
||||||||||||||||||||
Net Income (000) |
$ | (1,268 | ) | $ | 1,655 | (38,978 | ) | $ | 6,885 | $ | 6,160 | |||||||||
Preferred dividends and discount accretion
on warrants (000) |
$ | (1,176 | ) | $ | (955 | ) | $ | | $ | | $ | | ||||||||
Net Income/(loss) available to
common shareholders (000) |
$ | (2,444 | ) | $ | 700 | (38,978 | ) | $ | 6,885 | $ | 6,160 | |||||||||
Per Common Share (1) |
||||||||||||||||||||
Earnings/(loss) (basic and diluted) |
$ | (0.16 | ) | $ | 0.21 | $ | (5.06 | ) | $ | 1.25 | $ | 1.12 | ||||||||
Earnings/(loss), available to common
shareholders (basic and diluted) |
$ | (0.32 | ) | $ | 0.09 | $ | (5.06 | ) | $ | 1.25 | $ | 1.12 | ||||||||
Book Value |
$ | 12.58 | $ | 12.82 | $ | 9.94 | $ | 16.37 | $ | 14.53 | ||||||||||
Dividends Paid |
$ | 0.00 | $ | 0.25 | $ | 0.91 | $ | 1.12 | $ | 1.12 | ||||||||||
Balances |
||||||||||||||||||||
Assets (millions) |
$ | 1,100.7 | $ | 1,102.8 | $ | 1,053.6 | $ | 1,119.3 | $ | 749.0 | ||||||||||
Deposits (millions) |
$ | 892.5 | $ | 856.1 | $ | 809.9 | $ | 839.8 | $ | 564.6 | ||||||||||
Net Loans (millions) |
$ | 745.6 | $ | 775.5 | $ | 787.8 | $ | 787.4 | $ | 549.7 | ||||||||||
Shareholders Equity (millions) |
$ | 97.0 | $ | 98.8 | $ | 76.6 | $ | 126.2 | $ | 79.5 | ||||||||||
Performance Ratios |
||||||||||||||||||||
Return on Average Assets |
(0.11 | )% | 0.15 | % | (3.54 | )% | 0.89 | % | 0.83 | % | ||||||||||
Return on Average Equity |
(1.27 | )% | 1.68 | % | (31.57 | )% | 8.78 | % | 7.68 | % | ||||||||||
Equity Capital Ratio |
8.81 | % | 8.96 | % | 7.27 | % | 11.28 | % | 10.61 | % | ||||||||||
Net Loans to Deposit Ratio |
83.54 | % | 90.59 | % | 97.27 | % | 93.76 | % | 97.36 | % | ||||||||||
Loss Allowance to Total Loans |
2.84 | % | 1.93 | % | 1.11 | % | 0.93 | % | 1.45 | % |
(1) | Per share data has been adjusted for the business combination with Futura Banc Corp. in 2007. |
2010 | 2009 | 2008* | ||||||||||
Earnings Before Economic Issues |
$ | 2.39 | $ | 2.36 | $ | 1.89 | ||||||
Provision for Loan Losses |
2.33 | 1.73 | 1.06 | |||||||||
FDIC Insurance Premiums |
0.19 | 0.26 | 0.01 | |||||||||
Collection and Repossession Expenses |
0.20 | 0.19 | 0.08 | |||||||||
Investment Security Impairment |
0.07 | 0.19 | 0.08 | |||||||||
Total Economic Issues |
2.80 | 2.37 | 1.23 | |||||||||
Taxes |
0.24 | 0.03 | (0.18 | ) | ||||||||
Net Income |
$ | (0.16 | ) | $ | 0.02 | $ | 0.48 |
12/31/2010 | 2010 | |||||||
Balances | Charge-offs | |||||||
Loan Type |
||||||||
Commercial and Agriculture |
$ | 84,913,000 | $ | 2,710,000 | ||||
Commercial Real Estate |
336,251,000 | 4,653,000 | ||||||
Residential Real Estate |
295,038,000 | 4,029,000 | ||||||
Real Estate Construction |
39,341,000 | 799,000 | ||||||
Consumer and Other |
11,780,000 | 460,000 | ||||||
Total |
$ | 767,323,000 | $ | 12,651,000 |
Very truly yours, |
||||
James O. Miller President & C.E.O. |
||||
* | This comparison is based on a consistent number of 7,707,917 shares outstanding and excludes the 2008 non-cash write-down of goodwill, which was $5.62 per share. |
Five Year Selected Consolidated Financial Data |
1 | |||
Common Stock and Shareholder Matters |
3 | |||
General Development of Business |
3 | |||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
4 | |||
Quantitative and Qualitative Disclosures about Market Risk |
16 | |||
Financial Statements |
||||
Managements Report on Internal Control over Financial Reporting |
20 | |||
Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Statements |
21 | |||
Report of Independent Registered Public Accounting Firm on Financial Statements |
22 | |||
Consolidated Balance Sheets |
23 | |||
Consolidated Statements of Operations |
24 | |||
Consolidated Statements of Changes in Shareholders Equity |
25 | |||
Consolidated Statements of Cash Flow |
27 | |||
Notes to Consolidated Financial Statements |
29 |
Year ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Statements of income: |
||||||||||||||||||||
Total interest and dividend income |
$ | 51,925 | $ | 55,191 | $ | 62,267 | $ | 49,947 | $ | 45,876 | ||||||||||
Total interest expense |
10,464 | 14,918 | 21,780 | 20,371 | 15,615 | |||||||||||||||
Net interest income |
41,461 | 40,273 | 40,487 | 29,576 | 30,261 | |||||||||||||||
Provision for loan losses |
17,940 | 13,323 | 8,207 | 1,020 | 1,128 | |||||||||||||||
Net interest income after
provision for loan losses |
23,521 | 26,950 | 32,280 | 28,556 | 29,133 | |||||||||||||||
Security gains/(losses) |
212 | 75 | 193 | (1 | ) | | ||||||||||||||
Other noninterest income |
9,269 | 9,558 | 9,463 | 7,506 | 6,670 | |||||||||||||||
Total noninterest income |
9,481 | 9,633 | 9,656 | 7,505 | 6,670 | |||||||||||||||
Goodwill impairment |
| | 43,291 | | | |||||||||||||||
Other noninterest expense |
36,101 | 35,165 | 36,254 | 26,163 | 26,977 | |||||||||||||||
Total noninterest expense |
36,101 | 35,165 | 79,545 | 26,163 | 26,977 | |||||||||||||||
Income (loss) before federal income taxes |
(3,099 | ) | 1,418 | (37,609 | ) | 9,898 | 8,826 | |||||||||||||
Federal income tax expense (benefit) |
(1,831 | ) | (237 | ) | 1,369 | 3,013 | 2,666 | |||||||||||||
Net income (loss) |
$ | (1,268 | ) | $ | 1,655 | $ | (38,978 | ) | $ | 6,885 | $ | 6,160 | ||||||||
Preferred stock dividends and
discount accretion |
1,176 | 955 | | | | |||||||||||||||
Net income (loss) available to
common shareholders |
$ | (2,444 | ) | $ | 700 | $ | (38,978 | ) | $ | 6,885 | $ | 6,160 | ||||||||
Per share of common stock: |
||||||||||||||||||||
Earnings (loss) (basic and diluted) |
$ | (0.16 | ) | $ | 0.21 | $ | (5.06 | ) | $ | 1.25 | $ | 1.12 | ||||||||
Earnings (loss) (basic and diluted)
available to common shareholders |
(0.32 | ) | 0.09 | (5.06 | ) | 1.25 | 1.12 | |||||||||||||
Dividends |
| 0.25 | 0.91 | 1.12 | 1.12 | |||||||||||||||
Book value |
12.58 | 12.82 | 9.94 | 16.37 | 14.53 | |||||||||||||||
Average common shares outstanding: |
||||||||||||||||||||
Basic |
7,707,917 | 7,707,917 | 7,707,917 | 5,505,023 | 5,520,692 | |||||||||||||||
Diluted |
7,707,917 | 7,707,917 | 7,707,917 | 5,505,023 | 5,520,692 | |||||||||||||||
Year-end balances: |
||||||||||||||||||||
Loans, net |
$ | 745,555 | $ | 775,547 | $ | 787,789 | $ | 787,386 | $ | 549,665 | ||||||||||
Securities |
200,296 | 222,674 | 167,159 | 158,920 | 119,398 | |||||||||||||||
Total assets |
1,100,622 | 1,102,812 | 1,053,611 | 1,119,257 | 748,986 | |||||||||||||||
Deposits |
892,463 | 856,102 | 809,921 | 839,820 | 564,551 | |||||||||||||||
Borrowings |
103,604 | 139,105 | 155,038 | 145,051 | 96,754 | |||||||||||||||
Shareholders equity |
96,950 | 98,797 | 76,617 | 126,156 | 79,472 | |||||||||||||||
Average balances: |
||||||||||||||||||||
Loans, net |
$ | 765,821 | $ | 777,825 | $ | 791,298 | $ | 579,025 | $ | 530,409 | ||||||||||
Securities |
212,038 | 197,826 | 163,054 | 118,542 | 126,645 | |||||||||||||||
Total assets |
1,121,105 | 1,102,779 | 1,099,943 | 780,769 | 739,571 | |||||||||||||||
Deposits |
892,773 | 863,488 | 808,646 | 574,133 | 566,584 | |||||||||||||||
Borrowings |
117,280 | 127,793 | 162,400 | 118,375 | 87,825 | |||||||||||||||
Shareholders equity |
99,648 | 98,454 | 123,468 | 78,435 | 80,182 |
1
Year ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net yield on average interest-earning assets |
3.94 | % | 3.91 | % | 4.18 | % | 4.17 | % | 4.49 | % | ||||||||||
Return on average total assets |
(0.11 | ) | 0.15 | (3.54 | ) | 0.89 | 0.83 | |||||||||||||
Return on average shareholders equity |
(1.27 | ) | 1.68 | (31.57 | ) | 8.78 | 7.68 | |||||||||||||
Average shareholders equity as a percent
of average total assets |
8.89 | 8.97 | 11.22 | 10.05 | 10.84 | |||||||||||||||
Net loan charge-offs as a percent of
average total loans |
1.46 | 0.87 | 0.84 | 0.52 | 0.42 | |||||||||||||||
Allowance for loan losses as a percent
of loans at year-end |
2.84 | 1.93 | 1.11 | 0.93 | 1.45 | |||||||||||||||
Shareholders equity as a percent
of total year-end assets |
8.81 | 8.96 | 7.27 | 11.28 | 10.61 |
2
2010 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
$4.05 to $5.64 | $4.36 to $6.26 | $4.00 to $5.30 | $3.65 to $4.40 |
2009 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
$5.99 to $8.00 | $5.01 to $8.42 | $4.25 to $6.30 | $4.27 to $5.90 |
2010 | 2009 | |||||||
First quarter |
$ | | $ | 0.15 | ||||
Second quarter |
| 0.07 | ||||||
Third quarter |
| 0.01 | ||||||
Fourth quarter |
| 0.02 | ||||||
$ | | $ | 0.25 | |||||
3
4
5
6
7
As of and for year | ||||||||
ended December 31, | ||||||||
2010 | 2009 | |||||||
Net loan charge-offs |
$ | 11,443 | $ | 6,914 | ||||
Provision for loan losses charged to expense |
17,940 | 13,323 | ||||||
Net loan charge-offs as a percent of average outstanding loans |
1.46 | % | 0.88 | % | ||||
Allowance for loan losses |
$ | 21,768 | $ | 15,271 | ||||
Allowance for loan losses as a percent of
year-end outstanding loans |
2.84 | % | 1.93 | % | ||||
Allowance for loan losses as a percent of impaired loans |
131.90 | % | 67.17 | % | ||||
Impaired loans |
$ | 16,504 | $ | 22,736 | ||||
Impaired loans as a percent of gross year-end loans (1) |
2.15 | % | 2.87 | % | ||||
Nonaccrual and 90 days or more past due loans |
$ | 24,416 | $ | 25,571 | ||||
Nonaccrual and 90 days or more past due loans
as a percent of gross year-end loans (1) |
3.18 | % | 3.24 | % |
(1) | Nonperforming loans are a combination of Nonaccrual loans and loans past due more that 90 days and still accruing. A loan is considered nonaccrual if it is maintained on a cash basis because of deterioration in the borrowers financial condition, where payment in full of principal or interest is not expected and where the principal and interest have been in default for 90 days, unless the asset is both well-secured and in process of collection. A loan is considered impaired when it is probable that all of the interest and principal due will not be collected according to the terms of the contractual agreement. Some loans may be included in both categories. |
8
9
10
2010 | 2009 | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
balance | Interest | rate | balance | Interest | rate | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans (1)(2)(3) |
$ | 784,263 | $ | 44,252 | 5.64 | % | $ | 789,347 | $ | 46,715 | 5.92 | % | ||||||||||||
Taxable securities (4) |
168,224 | 5,813 | 3.52 | % | 156,536 | 6,759 | 4.37 | % | ||||||||||||||||
Non-taxable
securities (4)(5) |
43,814 | 1,818 | 4.25 | % | 41,290 | 1,686 | 4.16 | % | ||||||||||||||||
Federal funds sold |
42,330 | 39 | 0.09 | % | 30,248 | 21 | 0.07 | % | ||||||||||||||||
Interest-bearing deposits in other banks |
14,099 | 3 | 0.02 | % | 14,701 | 10 | 0.07 | % | ||||||||||||||||
Total interest-earning assets |
1,052,730 | 51,925 | 4.94 | % | 1,032,122 | 55,191 | 5.36 | % | ||||||||||||||||
Noninterest-earning assets: |
||||||||||||||||||||||||
Cash and due from financial institutions |
8,241 | 7,403 | ||||||||||||||||||||||
Premises and equipment, net |
19,010 | 20,521 | ||||||||||||||||||||||
Accrued interest receivable |
5,303 | 5,885 | ||||||||||||||||||||||
Intangible assets |
27,643 | 28,900 | ||||||||||||||||||||||
Other assets |
14,540 | 7,872 | ||||||||||||||||||||||
Bank owned life insurance |
12,080 | 11,598 | ||||||||||||||||||||||
Less allowance for loan losses |
(18,442 | ) | (11,522 | ) | ||||||||||||||||||||
Total |
$ | 1,121,105 | $ | 1,102,779 | ||||||||||||||||||||
(1) | For purposes of these computations, the daily average loan amounts outstanding are net of unearned income and include loans held for sale. | |
(2) | Included in loan interest income are loan fees of $216 in 2010 and $189 in 2009. | |
(3) | Non-accrual loans are included in loan totals and do not have a material impact on the analysis presented. | |
(4) | Average balance is computed using the carrying value of securities. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities. | |
(5) | Interest income is reported on a historical basis without tax-equivalent adjustment. |
11
2010 | 2009 | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
balance | Interest | rate | balance | Interest | rate | |||||||||||||||||||
Liabilities and
Shareholders Equity |
||||||||||||||||||||||||
Interest-bearing
liabilities: |
||||||||||||||||||||||||
Savings and interest-
bearing demand
accounts |
$ | 406,909 | $ | 1,526 | 0.38 | % | $ | 372,354 | $ | 2,027 | 0.54 | % | ||||||||||||
Certificates of deposit |
341,153 | 5,657 | 1.66 | % | 364,200 | 8,508 | 2.34 | % | ||||||||||||||||
Federal Home Loan
Bank advances |
64,126 | 2,394 | 3.73 | % | 67,179 | 2,848 | 4.24 | % | ||||||||||||||||
Securities sold under
repurchase agreements |
21,519 | 66 | 0.31 | % | 26,676 | 133 | 0.50 | % | ||||||||||||||||
Federal funds purchased |
| | 0.00 | % | 11 | | 0.00 | % | ||||||||||||||||
Notes payable |
| | 0.00 | % | 2,247 | 108 | 4.81 | % | ||||||||||||||||
Subordinated debentures |
30,349 | 821 | 2.71 | % | 30,349 | 1,295 | 4.27 | % | ||||||||||||||||
U.S. Treasury demand
notes payable |
1,286 | | 0.00 | % | 1,331 | | 0.00 | % | ||||||||||||||||
Total interest-
bearing liabilities |
865,342 | 10,464 | 1.21 | % | 864,347 | 14,919 | 1.73 | % | ||||||||||||||||
Noninterest-bearing
liabilities: |
||||||||||||||||||||||||
Demand deposits |
144,711 | 126,934 | ||||||||||||||||||||||
Other liabilities |
11,404 | 13,044 | ||||||||||||||||||||||
156,115 | 139,978 | |||||||||||||||||||||||
Shareholders equity |
99,648 | 98,454 | ||||||||||||||||||||||
Total |
$ | 1,121,105 | $ | 1,102,779 | ||||||||||||||||||||
Net interest income and
interest rate spread |
$ | 41,461 | 3.73 | % | $ | 40,272 | 3.63 | % | ||||||||||||||||
Net yield on interest-
earning assets |
3.94 | % | 3.91 | % | ||||||||||||||||||||
12
2010 compared to 2009 | ||||||||||||
Increase (decrease) due to: | ||||||||||||
Volume(1) | Rate(1) | Net | ||||||||||
(Dollars in thousands) | ||||||||||||
Interest income: |
||||||||||||
Loans |
$ | (299 | ) | $ | (2,164 | ) | $ | (2,463 | ) | |||
Taxable securities |
517 | (1,463 | ) | (946 | ) | |||||||
Nontaxable securities |
113 | 19 | 132 | |||||||||
Federal funds sold |
10 | 8 | 18 | |||||||||
Interest-bearing
deposits
in other banks |
| (7 | ) | (7 | ) | |||||||
Total interest income |
$ | 341 | $ | (3,607 | ) | $ | (3,266 | ) | ||||
Interest expense: |
||||||||||||
Savings and interest
-bearing
demand accounts |
175 | (676 | ) | (501 | ) | |||||||
Certificates of deposit |
(510 | ) | (2,341 | ) | (2,851 | ) | ||||||
Federal Home Loan
Bank advances |
(126 | ) | (328 | ) | (454 | ) | ||||||
Securities sold under
repurchase agreements |
(22 | ) | (45 | ) | (67 | ) | ||||||
Note payable |
(108 | ) | | (108 | ) | |||||||
Subordinated debentures |
| (473 | ) | (473 | ) | |||||||
U.S. Treasury demand
notes payable |
| | | |||||||||
Total interest expense |
$ | (591 | ) | $ | (3,863 | ) | $ | (4,454 | ) | |||
Net interest income |
$ | 932 | $ | 256 | $ | 1,188 | ||||||
(1) | The change in interest income and interest expense due to changes in both volume and rate, which cannot be segregated, has been allocated proportionately to the change due to volume and the change due to rate. |
13
14
15
One year | One to | Three to | Over five | |||||||||||||||||
Contractual Obligations | or less | three years | five years | years | Total | |||||||||||||||
Deposits without a stated maturity |
$ | 568,840 | $ | | $ | | $ | | $ | 568,840 | ||||||||||
Certificates of deposit |
208,375 | 82,676 | 21,424 | 11,148 | 323,623 | |||||||||||||||
FHLB advances, securities sold
under agreements to repurchase
and U.S. Treasury interest-
bearing demand note |
23,885 | 32,569 | 15,223 | 2,500 | 74,177 | |||||||||||||||
Subordinated debentures (1) |
| | | 29,427 | 29,427 | |||||||||||||||
Operating leases |
339 | 583 | 376 | 175 | 1,473 |
(1) | The subordinated debentures consist of $2,000, $2,500, $5,000, $7,500, and $12,500 debentures. |
16
17
Net Portfolio Value | ||||||||||||||||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||||||
Change in | Dollar | Dollar | Percent | Dollar | Dollar | Percent | ||||||||||||||||||||||
Rates | Amount | Change | Change | Amount | Change | Change | ||||||||||||||||||||||
+200bp | $ | 145,476 | $ | 160 | 0 | % | $ | 143,173 | $ | (6,648 | ) | -4 | % | |||||||||||||||
+100bp | 150,062 | 4,746 | 3 | % | 151,656 | 1,835 | 1 | % | ||||||||||||||||||||
Base | 145,316 | | | 149,821 | | | ||||||||||||||||||||||
-100bp | 154,728 | 9,412 | 6 | % | 157,937 | 8,116 | 5 | % |
18
19
James O. Miller President, Chief Executive Officer |
Todd A. Michel Senior Vice President, Controller |
20
21
22
2010 | 2009 | |||||||
ASSETS |
||||||||
Cash and due from financial institutions |
$ | 79,030 | $ | 26,942 | ||||
Securities available for sale |
184,952 | 207,292 | ||||||
Loans, net of allowance of $21,768 and $15,271 |
745,555 | 775,547 | ||||||
Other securities |
15,344 | 15,382 | ||||||
Premises and equipment, net |
18,129 | 19,702 | ||||||
Accrued interest receivable |
4,382 | 5,425 | ||||||
Goodwill |
21,720 | 21,720 | ||||||
Other intangible assets |
5,275 | 6,492 | ||||||
Bank owned life insurance |
12,320 | 11,848 | ||||||
Other assets |
13,915 | 12,462 | ||||||
Total assets |
$ | 1,100,622 | $ | 1,102,812 | ||||
LIABILITIES |
||||||||
Deposits |
||||||||
Noninterest-bearing |
$ | 157,529 | $ | 140,659 | ||||
Interest-bearing |
734,934 | 715,393 | ||||||
Total deposits |
892,463 | 856,052 | ||||||
Federal Home Loan Bank advances |
50,327 | 85,364 | ||||||
Securities sold under agreements to repurchase |
21,842 | 21,920 | ||||||
U. S. Treasury interest-bearing demand note payable |
2,008 | 2,394 | ||||||
Subordinated debentures |
29,427 | 29,427 | ||||||
Accrued expenses and other liabilities |
7,605 | 8,858 | ||||||
Total liabilities |
1,003,672 | 1,004,015 | ||||||
SHAREHOLDERS EQUITY |
||||||||
Preferred stock, 200,000 shares authorized, 23,184 shares issued |
23,134 | 23,117 | ||||||
Common stock, no par value, 20,000,000 shares authorized,
8,455,881 shares issued |
114,447 | 114,447 | ||||||
Accumulated deficit |
(20,218 | ) | (17,774 | ) | ||||
Treasury stock, 747,964 shares at cost |
(17,235 | ) | (17,235 | ) | ||||
Accumulated other comprehensive loss |
(3,178 | ) | (3,758 | ) | ||||
Total shareholders equity |
96,950 | 98,797 | ||||||
Total liabilities and shareholders equity |
$ | 1,100,622 | $ | 1,102,812 | ||||
23
2010 | 2009 | |||||||
Interest and dividend income |
||||||||
Loans, including fees |
$ | 44,252 | $ | 46,715 | ||||
Taxable securities |
5,813 | 6,759 | ||||||
Tax-exempt securities |
1,818 | 1,686 | ||||||
Federal funds sold and other |
42 | 31 | ||||||
Total interest income |
51,925 | 55,191 | ||||||
Interest expense |
||||||||
Deposits |
7,183 | 10,535 | ||||||
Federal Home Loan Bank advances |
2,394 | 2,848 | ||||||
Subordinated debentures |
817 | 1,295 | ||||||
Other |
70 | 240 | ||||||
Total interest expense |
10,464 | 14,918 | ||||||
Net interest income |
41,461 | 40,273 | ||||||
Provision for loan losses |
17,940 | 13,323 | ||||||
Net interest income after provision for loan losses |
23,521 | 26,950 | ||||||
Noninterest income |
||||||||
Computer center item processing fees |
257 | 374 | ||||||
Service charges |
4,556 | 4,829 | ||||||
Net gains on sale of securities |
212 | 75 | ||||||
ATM fees |
1,752 | 1,634 | ||||||
Trust fees |
1,864 | 1,588 | ||||||
Bank owned life insurance |
472 | 483 | ||||||
Impairment loss on investment securities |
(575 | ) | | |||||
Other |
943 | 1,164 | ||||||
Total noninterest income |
9,481 | 10,147 | ||||||
Noninterest expense |
||||||||
Salaries, wages and benefits |
17,212 | 15,631 | ||||||
Net occupancy expense |
2,356 | 2,336 | ||||||
Equipment expense |
1,522 | 1,884 | ||||||
Contracted data processing |
929 | 1,091 | ||||||
FDIC Assessment |
1,580 | 1,971 | ||||||
State franchise tax |
984 | 1,086 | ||||||
Professional services |
1,383 | 1,139 | ||||||
Amortization of intangible assets |
1,218 | 1,288 | ||||||
ATM expense |
688 | 737 | ||||||
Telephone |
534 | 612 | ||||||
Marketing expense |
630 | 414 | ||||||
Repossession expense |
944 | 679 | ||||||
Loss on sale of fixed assets |
79 | 14 | ||||||
Loss on sale of other real estate owned |
320 | 500 | ||||||
Other operating expenses |
5,722 | 6,297 | ||||||
Total noninterest expense |
36,101 | 35,679 | ||||||
Income (loss) before income taxes (benefit) |
(3,099 | ) | 1,418 | |||||
Income tax benefit |
(1,831 | ) | (237 | ) | ||||
Net income (loss) |
$ | (1,268 | ) | $ | 1,655 | |||
Preferred stock dividends and discount accretion |
1,176 | 955 | ||||||
Net income (loss) available to common shareholders |
$ | (2,444 | ) | $ | 700 | |||
Earnings (loss) per common share, basic and diluted |
$ | (0.32 | ) | $ | 0.09 | |||
Weighted average basic common shares |
7,707,917 | 7,707,917 | ||||||
24
Accumulated | ||||||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | (Accumulated | Treasury | Comprehensive | Shareholders | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | deficit) | Stock | Income (Loss) | Equity | |||||||||||||||||||||||||
Balance, December 31, 2008 |
| $ | | 7,707,917 | $ | 114,365 | $ | (16,546 | ) | $ | (17,235 | ) | $ | (3,967 | ) | $ | 76,617 | |||||||||||||||
Comprehensive Income: |
||||||||||||||||||||||||||||||||
Net income |
1,655 | 1,655 | ||||||||||||||||||||||||||||||
Change in funded status on pension
benefits, net of tax |
578 | 578 | ||||||||||||||||||||||||||||||
Unrealized loss on securities available
for sale, net of reclassification and
tax effects |
(369 | ) | (369 | ) | ||||||||||||||||||||||||||||
Total Comprehensive income |
1,864 | |||||||||||||||||||||||||||||||
Preferred stock issued |
23,184 | 23,184 | 23,184 | |||||||||||||||||||||||||||||
Discount on preferred stock issued |
(82 | ) | (82 | ) | ||||||||||||||||||||||||||||
Amortization of discount on preferred stock |
15 | (15 | ) | | ||||||||||||||||||||||||||||
Common stock warrant issued |
82 | 82 | ||||||||||||||||||||||||||||||
Cash dividends ($0.25 per share) |
(1,928 | ) | (1,928 | ) | ||||||||||||||||||||||||||||
Preferred stock dividends |
(940 | ) | (940 | ) | ||||||||||||||||||||||||||||
Balance, December 31, 2009 |
23,184 | $ | 23,117 | 7,707,917 | $ | 114,447 | $ | (17,774 | ) | $ | (17,235 | ) | $ | (3,758 | ) | $ | 98,797 | |||||||||||||||
25
Accumulated | ||||||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | (Accumulated | Treasury | Comprehensive | Shareholders | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | deficit) | Stock | Income (Loss) | Equity | |||||||||||||||||||||||||
Balance, December 31, 2009 |
23,184 | $ | 23,117 | 7,707,917 | $ | 114,447 | $ | (17,774 | ) | $ | (17,235 | ) | $ | (3,758 | ) | $ | 98,797 | |||||||||||||||
Comprehensive Loss: |
||||||||||||||||||||||||||||||||
Net income |
(1,268 | ) | (1,268 | ) | ||||||||||||||||||||||||||||
Change in funded status on pension
benefits, net of tax |
621 | 621 | ||||||||||||||||||||||||||||||
Unrealized loss on securities available
for sale, net of reclassification
and tax effects |
(41 | ) | (41 | ) | ||||||||||||||||||||||||||||
Total comprehensive loss |
(688 | ) | ||||||||||||||||||||||||||||||
Amortization of discount on preferred stock |
17 | (17 | ) | | ||||||||||||||||||||||||||||
Preferred stock dividends |
(1,159 | ) | (1,159 | ) | ||||||||||||||||||||||||||||
Balance, December 31, 2010 |
23,184 | $ | 23,134 | 7,707,917 | $ | 114,447 | $ | (20,218 | ) | $ | (17,235 | ) | $ | (3,178 | ) | $ | 96,950 | |||||||||||||||
26
2010 | 2009 | |||||||
Cash flows from operating activities |
||||||||
Net income (loss) |
$ | (1,268 | ) | $ | 1,655 | |||
Adjustments to reconcile net income (loss) to net cash from operating activities |
||||||||
Security amortization, net of accretion |
178 | (1,284 | ) | |||||
Depreciation |
1,590 | 1,812 | ||||||
Loss on sale of fixed assets |
79 | 14 | ||||||
Amortization of intangible assets |
1,218 | 1,288 | ||||||
Net realized (gain) loss on sale of securities |
(212 | ) | (75 | ) | ||||
Provision for loan losses |
17,940 | 13,323 | ||||||
Gain on sale of loans |
(3 | ) | (10 | ) | ||||
Loss on sale of OREO properties |
320 | 500 | ||||||
Impairment on investment security |
575 | | ||||||
Bank owned life insurance |
(472 | ) | (483 | ) | ||||
Deferred income taxes |
(2,642 | ) | (262 | ) | ||||
Prepaid FDIC Premium |
1,450 | (5,168 | ) | |||||
Change in |
||||||||
Net deferred loan fees |
270 | 532 | ||||||
Accrued interest payable |
(104 | ) | (291 | ) | ||||
Accrued interest receivable |
1,043 | 339 | ||||||
Other |
(376 | ) | (2,474 | ) | ||||
Taxes and other expenses |
(507 | ) | (2,118 | ) | ||||
Net cash from operating activities |
19,079 | 7,298 | ||||||
Cash flows from (used for) investing activities |
||||||||
Securities available for sale |
||||||||
Maturities, prepayments and calls |
94,649 | 104,937 | ||||||
Sales |
4,525 | | ||||||
Purchases |
(77,437 | ) | (160,493 | ) | ||||
Redemption of Federal Reserve stock |
110 | 841 | ||||||
Purchases of Federal Reserve stock |
(72 | ) | | |||||
Loan originations, net of loan payments |
10,351 | (3,748 | ) | |||||
Proceeds from sale of OREO properties |
1,149 | 1,461 | ||||||
Property and equipment purchases |
(1,193 | ) | (535 | ) | ||||
Proceeds from sale of property and equipment |
1,176 | 17 | ||||||
Net cash from (used for) investing activities |
33,258 | (57,520 | ) | |||||
27
2010 | 2009 | |||||||
Cash flows from (used for) financing activities |
||||||||
Increase in deposits |
36,411 | 46,131 | ||||||
Repayment of Federal Home Loan Bank advances |
(37 | ) | (118 | ) | ||||
Net change in short-term FHLB advances |
(5,000 | ) | (2,000 | ) | ||||
Repayment of long-term FHLB advances |
(30,000 | ) | (2,500 | ) | ||||
Proceeds from long-term FHLB advances |
| 20,000 | ||||||
Decrease in securities sold under repurchase agreements |
(78 | ) | (9,223 | ) | ||||
Decrease in U.S. Treasury interest-bearing notes payable |
(386 | ) | (1,592 | ) | ||||
Decrease in short-term note payable |
| (20,500 | ) | |||||
Cash dividends paid |
(1,159 | ) | (2,868 | ) | ||||
Issuance of preferred stock and common stock warrants |
| 23,184 | ||||||
Net cash from (used for) financing activities |
(249 | ) | 50,514 | |||||
Increase in cash and due from financial institutions |
52,088 | 293 | ||||||
Cash and due from financial institutions at beginning of year |
26,942 | 26,649 | ||||||
Cash and due from financial institutions at end of year |
$ | 79,030 | $ | 26,942 | ||||
Supplemental cash flow information: |
||||||||
Interest paid |
10,568 | 15,295 | ||||||
Income taxes paid |
650 | 1,475 | ||||||
Supplemental non-cash disclosures: |
||||||||
Transfer of loans from portfolio to other real estate owned |
$ | 1,431 | $ | 2,135 |
28
29
30
31
| Changes in economic and business conditions | ||
| Changes in lending policies and procedures |
| Changes in experience and depth of lending and management staff |
| Changes in concentrations within the loan portfolio |
| Changes in past due, classified and nonaccrual loans and TDRs |
| Changes in quality of Banks credit review system |
| Changes in competition or legal and regulatory requirements |
32
33
34
35
36
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
2010 |
||||||||||||||||
U.S. Treasury securities and obligations of U.S.
government agencies |
$ | 55,398 | $ | 616 | $ | (307 | ) | $ | 55,707 | |||||||
Obligations of states and political subdivisions |
61,401 | 483 | (1,415 | ) | 60,469 | |||||||||||
Mortgage-back securities in government
sponsored entities |
65,917 | 2,236 | (53 | ) | 68,100 | |||||||||||
Total debt securities |
182,716 | 3,335 | (1,775 | ) | 184,276 | |||||||||||
Equity securities in financial institutions |
481 | 195 | | 676 | ||||||||||||
Total |
$ | 183,197 | $ | 3,530 | $ | (1,775 | ) | $ | 184,952 | |||||||
37
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
2009 |
||||||||||||||||
U.S. Treasury securities and obligations of U.S.
government agencies |
$ | 90,296 | $ | 401 | $ | (1,147 | ) | $ | 89,550 | |||||||
Obligations of states and political subdivisions |
51,701 | 1,023 | (304 | ) | 52,420 | |||||||||||
Mortgage-back securities in government
sponsored entities |
62,997 | 1,663 | (14 | ) | 64,646 | |||||||||||
Total debt securities |
204,994 | 3,087 | (1,465 | ) | 206,616 | |||||||||||
Equity securities in financial institutions |
481 | 195 | | 676 | ||||||||||||
Total |
$ | 205,475 | $ | 3,282 | $ | (1,465 | ) | $ | 207,292 | |||||||
Available for sale | ||||||||
Amortized Cost | Fair Value | |||||||
Due in one year or less |
$ | 774 | $ | 783 | ||||
Due from one to five years |
4,060 | 4,149 | ||||||
Due from five to ten years |
14,364 | 14,597 | ||||||
Due after ten years |
97,601 | 96,647 | ||||||
Mortgage-backed securities in
government sponsored entities |
65,917 | 68,100 | ||||||
Equity securities in financial institutions |
481 | 676 | ||||||
Total |
$ | 183,197 | $ | 184,952 | ||||
2010 | 2009 | |||||||
Sale proceeds |
$ | 4,525 | $ | | ||||
Gross realized gains |
189 | | ||||||
Gains from securities called or settled by the issuer |
23 | 75 |
38
2010 | 12 Months or less | More than 12 months | Total | |||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Description of Securities | Value | Loss | Value | Loss | Value | Loss | ||||||||||||||||||
U.S. Treasury securities and
obligations of U.S.
government agencies |
$ | 10,257 | $ | (307 | ) | $ | | $ | | $ | 10,257 | $ | (307 | ) | ||||||||||
Obligations of states and
political subdivisions |
34,938 | (1,359 | ) | 2,256 | (56 | ) | 37,194 | (1,415 | ) | |||||||||||||||
Mortgage-backed securities
in govt sponsored entities |
9,696 | (53 | ) | | | 9,696 | (53 | ) | ||||||||||||||||
Total temporarily impaired |
$ | 54,891 | $ | (1,719 | ) | $ | 2,256 | $ | (56 | ) | $ | 57,147 | $ | (1,775 | ) | |||||||||
2009 | 12 Months or less | More than 12 months | Total | |||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Description of Securities | Value | Loss | Value | Loss | Value | Loss | ||||||||||||||||||
U.S. Treasury securities and
obligations of U.S.
government agencies |
$ | 58,384 | $ | (1,147 | ) | $ | | $ | | $ | 58,384 | $ | (1,147 | ) | ||||||||||
Obligations of states and
political subdivisions |
12,000 | (241 | ) | 2,574 | (63 | ) | 14,574 | (304 | ) | |||||||||||||||
Mortgage-backed securities
in govt sponsored entities |
3,283 | (14 | ) | | | 3,283 | (14 | ) | ||||||||||||||||
Total temporarily impaired |
$ | 73,667 | $ | (1,402 | ) | $ | 2,574 | $ | (63 | ) | $ | 76,241 | $ | (1,465 | ) | |||||||||
39
| The length of time and the extent to which fair value has been below cost; |
| The severity of impairment; |
| The cause of the impairment and the financial condition and near-term prospects of the issuer; |
| If the company intends to sell the investment; |
| If its more-likely-than-not the Corporation will be required to sell the investment before recovering its amortized cost basis; and |
| If the Corporation does not expect to recover the investments entire amortized cost basis (even if the Corporation does not intend to sell the investment). |
| Identification and evaluation of investments that have indications of impairment; |
| Analysis of individual investments that have fair values less than amortized cost, including consideration of length of time investment has been in unrealized loss position and the expected recovery period; |
| Evaluation of factors or triggers that could cause individual investments to qualify as having other-than-temporary impairment; and |
| Documentation of these analyses, as required by policy. |
40
2010 | 2009 | |||||||
Commercial and agricultural |
$ | 84,913 | $ | 96,298 | ||||
Commercial real estate |
336,251 | 335,626 | ||||||
Residential real estate |
295,038 | 314,552 | ||||||
Real estate construction |
39,341 | 29,970 | ||||||
Consumer |
11,590 | 14,083 | ||||||
Credit card and other |
190 | 207 | ||||||
Leases |
| 82 | ||||||
Total Loans |
767,323 | 790,818 | ||||||
Allowance for loan losses |
(21,768 | ) | (15,271 | ) | ||||
Net loans |
$ | 745,555 | $ | 775,547 | ||||
Balance December 31, 2009 |
$ | 5,143 | ||
New loans and advances |
1,569 | |||
Repayments |
(1,366 | ) | ||
Effect of changes to related parties |
(110 | ) | ||
Balance December 31, 2010 |
$ | 5,236 | ||
| Changes in economic and business conditions |
| Changes in lending policies and procedures |
| Changes in experience and depth of lending and management staff |
| Changes in concentrations within the loan portfolio |
| Changes in past due, classified and nonaccrual loans and TDRs |
| Changes in quality of Banks credit review system |
| Changes in competition or legal and regulatory requirements |
41
2009 | 2008 | |||||||
Balance January 1 |
$ | 8,862 | $ | 7,374 | ||||
Provision for loan losses |
13,323 | 8,207 | ||||||
Loans charged-off |
(8,051 | ) | (7,798 | ) | ||||
Recoveries |
1,137 | 1,079 | ||||||
Balance December 31 |
$ | 15,271 | $ | 8,862 | ||||
Commercial | Commercial | Residential | Real Estate | |||||||||||||||||||||||||
& Agriculture | Real Estate | Real Estate | Construction | Consumer | Unallocated | Total | ||||||||||||||||||||||
Allowance for loan losses: |
||||||||||||||||||||||||||||
Beginning balance |
$ | 2,957 | $ | 6,042 | $ | 3,917 | $ | 1,109 | $ | 401 | $ | 845 | $ | 15,271 | ||||||||||||||
Charge-offs |
(2,710 | ) | (4,653 | ) | (4,029 | ) | (799 | ) | (460 | ) | | (12,651 | ) | |||||||||||||||
Recoveries |
303 | 650 | 99 | | 156 | | 1,208 | |||||||||||||||||||||
Provision |
3,827 | 3,565 | 8,675 | 1,221 | 629 | 23 | 17,940 | |||||||||||||||||||||
Ending Balance |
$ | 4,377 | $ | 5,604 | $ | 8,662 | $ | 1,531 | $ | 726 | $ | 868 | $ | 21,768 | ||||||||||||||
Ending balance: |
||||||||||||||||||||||||||||
Individually evaluated
for impairment |
$ | 1,322 | $ | 1,384 | $ | 355 | $ | 375 | $ | 427 | $ | | $ | 3,863 | ||||||||||||||
Ending balance: |
||||||||||||||||||||||||||||
Collectively evaluated
for impairment |
$ | 3,055 | $ | 4,220 | $ | 8,307 | $ | 1,156 | $ | 299 | $ | 868 | $ | 17,905 | ||||||||||||||
Loan balances outstanding: |
||||||||||||||||||||||||||||
Ending Balance |
$ | 84,913 | $ | 336,251 | $ | 295,038 | $ | 39,341 | $ | 11,780 | $ | 767,323 | ||||||||||||||||
Ending balance: |
||||||||||||||||||||||||||||
Individually evaluated
for impairment |
$ | 4,522 | $ | 7,814 | $ | 2,347 | $ | 1,821 | $ | | $ | 16,504 | ||||||||||||||||
Ending balance: |
||||||||||||||||||||||||||||
Collectively evaluated
for impairment |
$ | 80,391 | $ | 328,437 | $ | 292,691 | $ | 37,520 | $ | 11,780 | $ | 750,819 | ||||||||||||||||
42
| Pass loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. |
| Special Mention loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected. |
| Substandard loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. |
| Doubtful loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances. |
| Loss loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted. |
| Unrated Generally, consumer loans are not risk-graded, except when collateral is used for a business purpose |
Commercial | ||||||||||||||||||||||||
& | Commercial | Residential | Real Estate | |||||||||||||||||||||
Agriculture | Real Estate | Real Estate | Construction | Consumer | Total | |||||||||||||||||||
Pass |
$ | 70,825 | $ | 284,083 | $ | 111,248 | $ | 28,815 | $ | 556 | $ | 495,527 | ||||||||||||
Special Mention |
2,972 | 12,674 | 2,821 | 937 | | 19,404 | ||||||||||||||||||
Substandard |
11,116 | 39,416 | 16,482 | 7,492 | 44 | 74,550 | ||||||||||||||||||
Doubtful |
| 78 | | | | 78 | ||||||||||||||||||
Loss |
| | | | | | ||||||||||||||||||
Ending Balance |
$ | 84,913 | $ | 336,251 | $ | 130,551 | $ | 37,244 | $ | 600 | $ | 589,559 | ||||||||||||
43
Residential | Real Estate | |||||||||||||||
Real Estate | Construction | Consumer | Total | |||||||||||||
2010 |
||||||||||||||||
Performing |
$ | 162,702 | $ | 2,097 | $ | 11,169 | $ | 175,968 | ||||||||
Nonperforming |
1,785 | | 11 | 1,796 | ||||||||||||
Total |
$ | 164,487 | $ | 2,097 | $ | 11,180 | $ | 177,764 | ||||||||
30-59 | 60-89 | 90 Days | ||||||||||||||||||||||||||
Days | Days | or | Total | Total | ||||||||||||||||||||||||
Past Due | Past Due | Greater | Past Due | Current | Nonaccrual | Loans | ||||||||||||||||||||||
Commercial & Agriculture |
$ | 471 | $ | 309 | $ | 904 | $ | 1,684 | $ | 80,568 | $ | 2,661 | $ | 84,913 | ||||||||||||||
Commercial Real Estate |
3,467 | 39 | 349 | 3,855 | 324,337 | 8,059 | 336,251 | |||||||||||||||||||||
Residential Real Estate |
3,042 | 340 | 382 | 3,764 | 281,688 | 9,586 | 295,038 | |||||||||||||||||||||
Real Estate Construction |
258 | 246 | 581 | 1,085 | 36,387 | 1,869 | 39,341 | |||||||||||||||||||||
Consumer and Other |
118 | 39 | 25 | 182 | 11,598 | | 11,780 | |||||||||||||||||||||
Total |
$ | 7,356 | $ | 973 | $ | 2,241 | $ | 10,570 | $ | 734,578 | $ | 22,175 | $ | 767,323 | ||||||||||||||
44
Unpaid | Average | Interest | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | ||||||||||||||||
With no related allowance recorded: |
||||||||||||||||||||
Commericial & Agriculture |
$ | 1,858 | $ | 1,858 | $ | | $ | 3,129 | $ | 22 | ||||||||||
Commercial Real Estate |
1,849 | 1,849 | | 5,579 | 11 | |||||||||||||||
Residential Real Estate |
635 | 635 | | 2,035 | 31 | |||||||||||||||
Real Estate Construction |
477 | 477 | | 293 | 34 | |||||||||||||||
With an allowance recorded: |
||||||||||||||||||||
Commericial & Agriculture |
$ | 1,717 | $ | 2,664 | $ | 947 | $ | 1,612 | $ | 141 | ||||||||||
Commercial Real Estate |
4,582 | 5,966 | 1,384 | 4,569 | 256 | |||||||||||||||
Residential Real Estate |
1,357 | 1,712 | 355 | 1,146 | 69 | |||||||||||||||
Real Estate Construction |
969 | 1,344 | 375 | 1,377 | 7 | |||||||||||||||
Total: |
||||||||||||||||||||
Commericial & Agriculture |
$ | 3,575 | $ | 4,522 | $ | 947 | $ | 4,741 | $ | 163 | ||||||||||
Commercial Real Estate |
6,431 | 7,815 | 1,384 | 10,148 | 267 | |||||||||||||||
Residential Real Estate |
1,992 | 2,347 | 355 | 3,181 | 100 | |||||||||||||||
Real Estate Construction |
1,446 | 1,821 | 375 | 1,670 | 41 |
45
2010 | 2009 | |||||||
Land and improvements |
$ | 4,142 | $ | 4,502 | ||||
Buildings and improvements |
19,259 | 19,619 | ||||||
Furniture and equipment |
17,600 | 17,170 | ||||||
Total |
41,001 | 41,291 | ||||||
Accumulated depreciation |
(22,872 | ) | (21,589 | ) | ||||
Premises and equipment, net |
$ | 18,129 | $ | 19,702 | ||||
2011 |
$ | 339 | ||
2012 |
295 | |||
2013 |
288 | |||
2014 |
246 | |||
2015 |
130 | |||
Thereafter |
176 | |||
Total |
$ | 1,474 | ||
2010 | 2009 | |||||||
Beginning of year |
$ | 21,720 | $ | 21,720 | ||||
Impairment |
| | ||||||
Other adjustments |
| | ||||||
End of year |
$ | 21,720 | $ | 21,720 | ||||
46
47
2010 | 2009 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Core deposit and other intangibles |
$ | 11,619 | $ | 6,344 | $ | 13,113 | $ | 6,621 | ||||||||
2011 |
$ | 1,162 | ||
2012 |
974 | |||
2013 |
847 | |||
2014 |
769 | |||
2015 |
554 | |||
Thereafter |
969 | |||
$ | 5,275 | |||
2010 | 2009 | |||||||
Demand |
$ | 145,923 | $ | 139,468 | ||||
Statement and Passbook Savings |
265,388 | 239,777 | ||||||
Certificates of Deposit |
||||||||
In excess of $100 |
108,903 | 114,029 | ||||||
Other |
176,737 | 181,789 | ||||||
Individual Retirement Accounts |
37,983 | 40,330 | ||||||
Total |
$ | 734,934 | $ | 715,393 | ||||
48
2011 |
$ | 208,375 | ||
2012 |
72,220 | |||
2013 |
10,456 | |||
2014 |
18,080 | |||
2015 |
3,344 | |||
Thereafter |
11,148 | |||
Total |
$ | 323,623 | ||
2010 | 2009 | |||||||
Maturities January 2012 through January 2017, fixed rates
from 1.91% to 4.85%, averaging 3.48% |
$ | 50,327 | $ | 85,364 | ||||
2011 |
$ | 35 | ||
2012 |
32,534 | |||
2013 |
35 | |||
2014 |
10,223 | |||
2015 |
5,000 | |||
Thereafter |
2,500 | |||
Total |
$ | 50,327 | ||
49
2010 | 2009 | |||||||
Average balance during the year |
$ | 22,805 | $ | 28,007 | ||||
Average interest rate during the year |
0.29 | % | 0.47 | % | ||||
Maximum month-end balance during the year |
$ | 27,533 | $ | 33,847 | ||||
Weighted average interest rate at year end |
0.29 | % | 0.46 | % |
50
2010 | 2009 | |||||||
Current |
$ | (1,042 | ) | $ | 25 | |||
Deferred |
(789 | ) | (262 | ) | ||||
Income tax expense |
$ | (1,831 | ) | $ | (237 | ) | ||
2010 | 2009 | |||||||
Income taxes computed at the statutory federal tax rate |
$ | (1,053 | ) | $ | 482 | |||
Add (subtract) tax effect of: |
||||||||
Nontaxable interest income, net
of nondeductible interest expense |
(628 | ) | (590 | ) | ||||
Dividends received deduction |
(1 | ) | (1 | ) | ||||
Cash surrender value of BOLI |
(160 | ) | (164 | ) | ||||
Other |
11 | 36 | ||||||
Income tax expense |
$ | (1,831 | ) | $ | (237 | ) | ||
51
2010 | 2009 | |||||||
Deferred tax assets |
||||||||
Allowance for loan losses |
$ | 7,401 | $ | 5,010 | ||||
Deferred compensation |
813 | 791 | ||||||
Intangible assets |
593 | 832 | ||||||
Pension costs |
1,201 | 1,779 | ||||||
OREO Writedowns |
101 | | ||||||
Leases |
1 | | ||||||
Impairment losses |
195 | | ||||||
Other |
10 | 68 | ||||||
Deferred tax asset |
10,315 | 8,480 | ||||||
Deferred tax liabilities |
||||||||
Tax depreciation in excess of book depreciation |
(525 | ) | (645 | ) | ||||
Discount accretion on securities |
(85 | ) | (105 | ) | ||||
Purchase accounting adjustments |
(2,500 | ) | (2,969 | ) | ||||
FHLB stock dividends |
(2,249 | ) | (2,249 | ) | ||||
Leases |
| (26 | ) | |||||
Deferred loan fees |
(134 | ) | (226 | ) | ||||
Unrealized gain on securities available for sale |
(597 | ) | (618 | ) | ||||
Other |
(1 | ) | (7 | ) | ||||
Deferred tax liability |
(6,091 | ) | (6,845 | ) | ||||
Net deferred tax asset |
$ | 4,224 | $ | 1,635 | ||||
52
2010 | 2009 | |||||||
Balance at January 1 |
$ | 140 | $ | 123 | ||||
Reductions for tax positions of prior years |
(47 | ) | | |||||
Reductions due to statute of limitations |
(93 | ) | | |||||
Balance at December 31 |
$ | | $ | 140 | ||||
53
2010 | 2009 | |||||||
Change in benefit obligation: |
||||||||
Beginning benefit obligation |
$ | 13,884 | $ | 12,841 | ||||
Service cost |
841 | 861 | ||||||
Interest cost |
760 | 742 | ||||||
Actuarial (gain)/loss |
97 | 328 | ||||||
Benefits paid |
(574 | ) | (888 | ) | ||||
Ending benefit obligation |
15,008 | 13,884 | ||||||
Change in plan assets, at fair value: |
||||||||
Beginning plan assets |
8,661 | 7,197 | ||||||
Actual return |
1,127 | 1,365 | ||||||
Employer contribution |
2,016 | 1,000 | ||||||
Benefits paid |
(574 | ) | (888 | ) | ||||
Administrative expenses |
(24 | ) | (13 | ) | ||||
Ending plan assets |
11,206 | 8,661 | ||||||
Funded status at end of year |
$ | (3,802 | ) | $ | (5,223 | ) | ||
2010 | 2009 | |||||||
Unrecognized actuarial loss (net of tax, of $2,232
in 2010 and $2,553 in 2009) |
$ | 4,335 | $ | 4,957 | ||||
54
2010 | 2009 | |||||||
Service cost |
$ | 841 | $ | 861 | ||||
Interest cost |
760 | 742 | ||||||
Expected return on plan assets |
(604 | ) | (501 | ) | ||||
Net amortization and deferral |
258 | 352 | ||||||
Measurement date change |
| | ||||||
Settlement |
| | ||||||
Net periodic benefit cost |
1,255 | 1,454 | ||||||
Net loss (gain) recognized in other comprehensive income |
(941 | ) | (875 | ) | ||||
Prior service cost (credit) |
| | ||||||
Amortization of prior service cost |
| | ||||||
Total recognized in other comprehensive income |
(941 | ) | (875 | ) | ||||
Total recognized in net periodic benefit cost
and other comprehensive income (before
tax) |
$ | 314 | $ | 579 |
2010 | 2009 | |||||||
Discount rate on benefit obligation |
5.04 | % | 5.15 | % | ||||
Long-term rate of return on plan assets |
7.00 | % | 7.00 | % | ||||
Rate of compensation increase |
3.00 | % | 3.00 | % |
2010 | 2009 | |||||||
Discount rate on benefit obligation |
5.15 | % | 5.43 | % | ||||
Long-term rate of return on plan assets |
7.00 | % | 7.00 | % | ||||
Rate of compensation increase |
3.00 | % | 3.00 | % |
55
Percentage of Plan | ||||||||||||
Target | Assets | |||||||||||
Allocation | at Year-end | |||||||||||
Asset Category | 2011 | 2010 | 2009 | |||||||||
Equity securities |
20-50 | % | 50.6 | % | 52.7 | % | ||||||
Debt securities |
30-60 | 43.9 | 39.3 | |||||||||
Money market funds |
20-30 | 5.5 | 8.0 | |||||||||
Total |
100.0 | % | 100.0 | % | ||||||||
56
December 31, 2010 | ||||||||||||||||
Level I | Level II | Level III | Total | |||||||||||||
Assets: |
||||||||||||||||
Equity securities |
$ | 5,670 | $ | | $ | | $ | 5,670 | ||||||||
Debt securities |
4,924 | | | 4,924 | ||||||||||||
Money market funds |
612 | | | 612 | ||||||||||||
Total assets at fair value |
$ | 11,206 | $ | | $ | | $ | 11,206 | ||||||||
December 31, 2009 | ||||||||||||||||
Level I | Level II | Level III | Total | |||||||||||||
Assets: |
||||||||||||||||
Equity securities |
$ | 4,562 | $ | | $ | | $ | 4,562 | ||||||||
Debt securities |
3,409 | | | 3,409 | ||||||||||||
Money market funds |
690 | | | 690 | ||||||||||||
Total assets at fair value |
$ | 8,661 | $ | | $ | | $ | 8,661 | ||||||||
2011 |
$ | 185 | ||
2012 |
252 | |||
2013 |
288 | |||
2014 |
444 | |||
2015 |
556 | |||
2016 through 2020 |
4,930 | |||
Total |
$ | 6,655 | ||
57
2010 | 2009 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Outstanding at beginning of year |
29,500 | $ | 25.42 | 29,500 | $ | 25.42 | ||||||||||
Granted |
| | | | ||||||||||||
Exercised |
| | | | ||||||||||||
Forfeited |
| | | | ||||||||||||
Outstanding at end of year |
29,500 | $ | 25.42 | 29,500 | $ | 25.42 | ||||||||||
Options exercisable at year-end |
29,500 | $ | 25.42 | 29,500 | $ | 25.42 | ||||||||||
Outstanding | ||||||||||
Weighted | ||||||||||
Average | Weighted | |||||||||
Remaining | Average | |||||||||
Contractual | Exercise | |||||||||
Exercise price | Number | Life | Price | |||||||
$20.50 |
19,500 | 1 yrs. 6 mos. | $ | 20.50 | ||||||
$35.00 |
10,000 | 2 yrs. 3.5 mos. | 35.00 | |||||||
Outstanding at year-end |
29,500 | 1 yrs. 9 mos. | $ | 25.42 | ||||||
58
59
Fair Value Measurements at December 31, 2010 Using: | ||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Assets: |
||||||||||||
Assets measured at fair value on a
recurring basis: |
||||||||||||
U.S. Treasury securities and obligations
of U.S. Government agencies |
$ | | $ | 55,707 | $ | | ||||||
Obligations of states and political
subdivisions |
| 59,909 | 560 | |||||||||
Mortgage-backed securities in government
sponsored entities |
| 68,100 | | |||||||||
Equity securities in financial institutions |
676 | | | |||||||||
Assets measured at fair value on a
nonrecurring basis: |
||||||||||||
Impaired Loans |
$ | | $ | 13,444 | $ | | ||||||
Other Real Estate Owned |
| 1,795 | | |||||||||
Mortgage Servicing Rights |
| 3 | |
Fair Value Measurements at December 31, 2009 Using: | ||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Assets: |
||||||||||||
Assets measured at fair value on a
recurring basis: |
||||||||||||
U.S. Treasury securities and obligations
of U.S. Government agencies |
$ | | $ | 89,550 | $ | | ||||||
Obligations of states and political
subdivisions |
| 52,420 | | |||||||||
Mortgage-backed securities in government
sponsored entities |
| 64,646 | | |||||||||
Equity securities in financial institutions |
676 | | | |||||||||
Assets measured at fair value on a
nonrecurring basis: |
||||||||||||
Impaired Loans |
$ | | $ | 19,410 | $ | | ||||||
Other Real Estate Owned |
| 1,834 | | |||||||||
Mortgage Servicing Rights |
| 78 | |
60
December 31, 2010 | December 31, 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Financial Assets: |
||||||||||||||||
Cash and due from financial institutions |
$ | 79,030 | $ | 79,030 | $ | 26,942 | $ | 26,942 | ||||||||
Loans, net of allowance for loan losses |
745,555 | 763,768 | 775,547 | 796,783 | ||||||||||||
Accrued interest receivable |
4,382 | 4,382 | 5,425 | 5,425 | ||||||||||||
Financial Liabilities: |
||||||||||||||||
Deposits |
892,463 | 895,950 | 856,052 | 863,106 | ||||||||||||
Federal Home Loan Bank advances |
50,327 | 53,162 | 85,364 | 82,353 | ||||||||||||
U.S. Treasury interest-bearing demand |
||||||||||||||||
note payable |
2,008 | 2,008 | 2,394 | 2,394 | ||||||||||||
Securities sold under agreement
to repurchase |
21,842 | 21,842 | 21,920 | 21,920 | ||||||||||||
Subordinated debentures |
29,427 | 15,883 | 29,427 | 14,501 | ||||||||||||
Accrued interest payable |
362 | 362 | 466 | 466 |
61
Securities available for sale |
||||
Beginning balance January 1, 2010 |
$ | | ||
Impairment charge on securities |
(575 | ) | ||
Net change in unrealized loss on securities |
(10 | ) | ||
Purchases, issuances, calls and settlements |
| |||
Transfers in and/or out of Level III |
1,145 | |||
Ending balance December 31, 2010 |
$ | 560 |
2010 | 2009 | |||||||||||||||
Fixed | Variable | Fixed | Variable | |||||||||||||
Rate | Rate | Rate | Rate | |||||||||||||
Commitments to extend credit: |
||||||||||||||||
Lines of credit and construction loans |
$ | 3,161 | $ | 98,083 | $ | 2,136 | $ | 98,420 | ||||||||
Overdraft protection |
| 12,500 | | 12,617 | ||||||||||||
Letters of credit |
275 | 1,288 | 52 | 1,974 | ||||||||||||
$ | 3,436 | $ | 111,871 | $ | 2,188 | $ | 113,011 | |||||||||
62
63
To Be Well | ||||||||||||||||||||||||
Capitalized Under | ||||||||||||||||||||||||
For Capital | Prompt Corrective | |||||||||||||||||||||||
Actual | Adequacy Purposes | Action Purposes | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
2010 |
||||||||||||||||||||||||
Total Capital to risk-
weighted assets |
||||||||||||||||||||||||
Consolidated |
$ | 111,224 | 15.1 | % | $ | 59,044 | 8.0 | % | n/a | n/a | ||||||||||||||
Citizens |
98,232 | 13.4 | 58,734 | 8.0 | $ | 73,417 | 10.0 | % | ||||||||||||||||
Tier I (Core) Capital to risk-
weighted assets |
||||||||||||||||||||||||
Consolidated |
101,755 | 13.8 | 29,537 | 4.0 | n/a | n/a | ||||||||||||||||||
Citizens |
88,902 | 12.1 | 29,365 | 4.0 | 44,047 | 6.0 | ||||||||||||||||||
Tier I (Core) Capital to
average assets |
||||||||||||||||||||||||
Consolidated |
101,755 | 9.3 | 44,002 | 4.0 | n/a | n/a | ||||||||||||||||||
Citizens |
88,902 | 8.1 | 43,956 | 4.0 | 54,946 | 5.0 | ||||||||||||||||||
2009 |
||||||||||||||||||||||||
Total Capital to risk-
weighted assets |
||||||||||||||||||||||||
Consolidated |
$ | 113,195 | 14.3 | % | $ | 63,548 | 8.0 | % | n/a | n/a | ||||||||||||||
Citizens |
98,156 | 12.4 | 63,326 | 8.0 | $ | 79,158 | 10.0 | % | ||||||||||||||||
Tier I (Core) Capital to risk-
weighted assets |
||||||||||||||||||||||||
Consolidated |
103,199 | 13.0 | 31,778 | 4.0 | n/a | n/a | ||||||||||||||||||
Citizens |
88,191 | 11.1 | 31,781 | 4.0 | 47,671 | 6.0 | ||||||||||||||||||
Tier I (Core) Capital to
average assets |
||||||||||||||||||||||||
Consolidated |
103,199 | 9.6 | 42,910 | 4.0 | n/a | n/a | ||||||||||||||||||
Citizens |
88,191 | 8.2 | 43,020 | 4.0 | 53,775 | 5.0 |
64
2010 | 2009 | |||||||
Assets: |
||||||||
Cash |
$ | 8,339 | $ | 12,194 | ||||
Securities available for sale |
676 | 676 | ||||||
Investment in bank subsidiary |
105,814 | 105,976 | ||||||
Investment in nonbank subsidiaries |
12,529 | 12,520 | ||||||
Other assets |
3,759 | 3,263 | ||||||
Total assets |
$ | 131,117 | $ | 134,629 | ||||
Liabilities and Shareholders Equity: |
||||||||
Deferred income taxes and other
liabilities |
$ | 4,740 | $ | 6,405 | ||||
Subordinated debentures |
29,427 | 29,427 | ||||||
Preferred stock |
23,134 | 23,117 | ||||||
Common stock |
114,447 | 114,447 | ||||||
Accumulated deficit |
(20,218 | ) | (17,774 | ) | ||||
Treasury Stock |
(17,235 | ) | (17,235 | ) | ||||
Accumulated other comprehensive loss |
(3,178 | ) | (3,758 | ) | ||||
Total liabilities and
shareholders equity |
$ | 131,117 | $ | 134,629 | ||||
2010 | 2009 | |||||||
Dividends from bank subsidiaries |
$ | | $ | 4,699 | ||||
Dividends from nonbank subsidiaries |
| | ||||||
Interest income |
| 8 | ||||||
Other income |
| 24 | ||||||
Provision for loan losses |
| (25 | ) | |||||
Interest expense |
(821 | ) | (1,402 | ) | ||||
Other expense, net |
(2,195 | ) | (2,057 | ) | ||||
(Deficit) earnings before equity in
undistributed net earnings
of subsidiaries |
(3,016 | ) | 1,247 | |||||
Income tax benefit |
1,026 | 1,174 | ||||||
Equity in undistributed net
earnings of subsidiaries |
722 | (766 | ) | |||||
Net income (loss) |
$ | (1,268 | ) | $ | 1,655 | |||
65
2010 | 2009 | |||||||
Operating activities: |
||||||||
Net income (loss) |
$ | (1,268 | ) | $ | 1,655 | |||
Adjustment to reconcile net income (loss) to net
cash provided by (used for) operating activities: |
||||||||
Change in other assets and other liabilities |
(706 | ) | 2,905 | |||||
Equity in undistributed net earnings of
subsidiaries |
(722 | ) | 766 | |||||
Net cash from operating activities |
(2,696 | ) | 5,326 | |||||
Financing activities: |
||||||||
Net change in note payable |
| (20,500 | ) | |||||
Proceeds from issuance of preferred stock |
| 23,184 | ||||||
Cash dividends paid |
(1,159 | ) | (2,868 | ) | ||||
Net cash used for financing activities |
(1,159 | ) | (184 | ) | ||||
Net change in cash and cash equivalents |
(3,855 | ) | 5,142 | |||||
Cash and cash equivalents at beginning of year |
12,194 | 7,052 | ||||||
Cash and cash equivalents at end of year |
$ | 8,339 | $ | 12,194 | ||||
66
2010 | 2009 | |||||||
Unrealized holding (gain) loss on
available for sale securities |
$ | (425 | ) | $ | (484 | ) | ||
Reclassification adjustments for (gain)
loss recognized in income |
363 | (75 | ) | |||||
Net unrealized loss |
(62 | ) | (559 | ) | ||||
Pension liability adjustment |
941 | 876 | ||||||
Tax effect |
(298 | ) | (108 | ) | ||||
Other comprehensive income |
$ | 581 | $ | 209 | ||||
Current | ||||||||||||
Balance at | Period | Balance at | ||||||||||
12/31/09 | Change | 12/31/10 | ||||||||||
Unrealized gains (losses) on securities available for sale |
$ | 1,199 | $ | (41 | ) | $ | 1,158 | |||||
Unrealized loss on pension benefits |
(4,957 | ) | 622 | (4,335 | ) | |||||||
Total |
$ | (3,758 | ) | $ | 581 | $ | (3,177 | ) | ||||
67
2010 | 2009 | |||||||
Basic |
||||||||
Net income (loss) available to common shareholders |
$ | (2,447 | ) | $ | 700 | |||
Weighted Average common shares outstanding |
7,707,917 | 7,707,917 | ||||||
Basic earnings (loss) per share |
$ | (0.32 | ) | $ | 0.09 | |||
Diluted |
||||||||
Net income (loss) available to common shareholders |
$ | (2,447 | ) | $ | 700 | |||
Weighted average common shares outstanding
for basic earnings per common share |
7,707,917 | 7,707,917 | ||||||
Add: dilutive effects of assumed exercise of options |
| | ||||||
Average shares and dilutive potential common
shares outstanding |
7,707,917 | 7,707,917 | ||||||
Diluted earnings (loss) per share |
$ | (0.32 | ) | $ | 0.09 | |||
68
Net | Basic | Diluted | ||||||||||||||||||
Interest | Net Interest | Income/ | Earnings per | Earnings per | ||||||||||||||||
Income | Income | (Loss) | Common Share | Common Share | ||||||||||||||||
2010 |
||||||||||||||||||||
First quarter (1)(2)(3) |
$ | 13,173 | $ | 10,200 | $ | 36 | $ | (0.04 | ) | $ | (0.04 | ) | ||||||||
Second quarter (1)(2)(3) |
13,149 | 10,441 | (259 | ) | (0.07 | ) | (0.07 | ) | ||||||||||||
Third quarter (1)(2)(3) |
12,997 | 10,450 | (1,393 | ) | (0.22 | ) | (0.22 | ) | ||||||||||||
Fourth quarter (1)(2)(3) |
12,606 | 10,370 | 728 | 0.01 | 0.01 | |||||||||||||||
2009 |
||||||||||||||||||||
First quarter (4)(5) |
$ | 14,206 | $ | 9,867 | $ | 759 | $ | 0.09 | $ | 0.09 | ||||||||||
Second quarter (4)(5)(6) |
13,668 | 9,789 | 370 | 0.01 | 0.01 | |||||||||||||||
Third quarter (5)(7) |
13,639 | 10,056 | 499 | 0.02 | 0.02 | |||||||||||||||
Fourth quarter (5)(7) |
13,677 | 10,560 | 27 | (0.03 | ) | (0.03 | ) |
(1) | Interest income decreased as loans repriced downward. Loan volume also declined. | |
(2) | Interest expensed decreased as deposits repriced downward and the deposit mix shifted toward cheaper funding sources. | |
(3) | Net income was reduced by a large provision for loan losses. | |
(4) | Interest income decreased as loans repriced downward. Loan volume also declined through the first two quarters. | |
(5) | Net income was reduced primarily by a larger provision for loan losses. | |
(6) | Net income was reduced by the FDICs Special Emergency Assessment. | |
(7) | Net interest income recovered due to decreased interest costs on subordinated debentures. |
69
70
71
Subsidiary |
Jurisdiction of Organization | |
The Citizens Banking Company
|
Ohio | |
First Citizens Insurance Agency, Inc.
|
Ohio | |
Water Street Properties, Inc.
|
Ohio | |
First Citizens Investments, Inc.
|
Delaware | |
First Citizens Capital LLC
|
Delaware | |
First Citizens Statutory Trust II
|
Connecticut | |
First Citizens Statutory Trust III
|
Delaware | |
First Citizens Statutory Trust IV
|
Delaware | |
Futura TPF Trust I
|
Delaware | |
Futura TPF Trust II
|
Delaware |
1. | I have reviewed this Annual Report on Form 10-K of First Citizens Banc Corp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Signature and Title: /s/ James O. Miller, President, Chief Executive Officer | Date : March 9, 2011 |
1. | I have reviewed this Annual Report on Form 10-K of First Citizens Banc Corp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Signature and Title: /s/ Todd A. Michel, Senior Vice President, Controller | Date : March 9, 2011 |
(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 Corporation. |
(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 Corporation. |
(i) | The compensation committee of First Citizens Banc Corp. has discussed, reviewed, and evaluated with senior risk officers, as defined in the regulations and guidance established under Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA) (SEOs), at least every six months during the most recently completed fiscal year (the Applicable Period), the SEO compensation plans and employee compensation plans, each as defined in the regulations and guidance established under Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA), and the risks these plans pose to First Citizens Banc Corp.; |
(ii) | The compensation committee of First Citizens Banc Corp. has identified and limited during the Applicable Period any features in the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Citizens Banc Corp. and during that same Applicable Period has identified any features in the employee compensation plans that pose risks to First Citizens Banc Corp. and has limited those features to ensure that First Citizens Banc Corp. is not unnecessarily exposed to risks; |
(iii) | The compensation committee of First Citizens Banc Corp. has reviewed at least every six months during the Applicable Period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of First Citizens Banc Corp. to enhance the compensation of an employee, and has limited any such features; |
(iv) | The compensation committee of First Citizens Banc Corp. will certify to the reviews of the SEO compensation plans and employee compensation plans required under paragraphs (i) and (iii) above; |
(v) | The compensation committee of First Citizens Banc Corp. will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period, as defined in the regulations and guidance established under Section 111 of EESA, the features in |
(A) | SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Citizens Banc Corp.; | ||
(B) | Employee compensation plans that unnecessarily expose First Citizens Banc Corp. to risks; and | ||
(C) | Employee compensation plans that could encourage the manipulation of reported earnings of First Citizens Banc Corp. to enhance the compensation of an employee; |
(vi) | First Citizens Banc Corp. has required that bonus payments, as defined in the regulations and guidance established under Section 111 of EESA, of the SEOs and twenty next most highly compensated employees, as defined in the regulations and guidance established under Section 111 of EESA, be subject to a recovery or clawback provision during any part of the Applicable Period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; |
(vii) | First Citizens Banc Corp. has prohibited any golden parachute payment, as defined in the regulations and guidance established under Section 111 of EESA, to a SEO or any of the next five most highly compensated employees during the Applicable Period; | |
(viii) | First Citizens Banc Corp. has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during Applicable Period; |
(ix) | First Citizens Banc Corp. and its employees have complied with the excessive or luxury expenditures policy as defined in the regulations and guidance established under Section 111 of EESA during the Applicable Period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility, were properly approved; |
(x) | First Citizens Banc Corp. will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the Applicable Period; |
(xi) | First Citizens Banc Corp. will disclose the amount, nature, and justification for the offering during the Applicable Period of any perquisites, as defined in the regulations and guidance established under Section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii); |
(xii) | First Citizens Banc Corp. will disclose whether First Citizens Banc Corp., the board of directors of First Citizens Banc Corp., or the compensation committee of First Citizens Banc Corp. has engaged during the Applicable Period, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period; |
(xiii) | First Citizens Banc Corp. has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under Section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the Applicable Period; |
(xiv) | First Citizens Banc Corp. has substantially complied with all other requirements related to employee compensation that are provided in the agreement between First Citizens Banc Corp. and Treasury, including any amendments; |
(xv) | First Citizens Banc Corp. has submitted to Treasury a complete and accurate list of SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title and employer of each SEO and most highly compensated employee identified; and |
(xvi) | I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 USC 1001). |
Date: March 9, 2011 | /s/ James O. Miller | |||
James O. Miller | ||||
President and CEO | ||||
(i) | The compensation committee of First Citizens Banc Corp. has discussed, reviewed, and evaluated with senior risk officers, as defined in the regulations and guidance established under Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA) (SEOs), at least every six months during the most recently completed fiscal year (the Applicable Period), the SEO compensation plans and employee compensation plans, each as defined in the regulations and guidance established under Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA), and the risks these plans pose to First Citizens Banc Corp.; |
(ii) | The compensation committee of First Citizens Banc Corp. has identified and limited during the Applicable Period any features in the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Citizens Banc Corp. and during that same Applicable Period has identified any features in the employee compensation plans that pose risks to First Citizens Banc Corp. and has limited those features to ensure that First Citizens Banc Corp. is not unnecessarily exposed to risks; |
(iii) | The compensation committee of First Citizens Banc Corp. has reviewed at least every six months during the Applicable Period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of First Citizens Banc Corp. to enhance the compensation of an employee, and has limited any such features; |
(iv) | The compensation committee of First Citizens Banc Corp. will certify to the reviews of the SEO compensation plans and employee compensation plans required under paragraphs (i) and (iii) above; |
(v) | The compensation committee of First Citizens Banc Corp. will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period, as defined in the regulations and guidance established under Section 111 of EESA, the features in |
(A) | SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Citizens Banc Corp.; |
(B) | Employee compensation plans that unnecessarily expose First Citizens Banc Corp. to risks; and |
(C) | Employee compensation plans that could encourage the manipulation of reported earnings of First Citizens Banc Corp. to enhance the compensation of an employee; |
(vi) | First Citizens Banc Corp. has required that bonus payments, as defined in the regulations and guidance established under Section 111 of EESA, of the SEOs and twenty next most highly compensated employees, as defined in the regulations and guidance established under Section 111 of EESA, be subject to a recovery or clawback provision during any part of the Applicable Period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; |
(vii) | First Citizens Banc Corp. has prohibited any golden parachute payment, as defined in the regulations and guidance established under Section 111 of EESA, to a SEO or any of the next five most highly compensated employees during the Applicable Period; | |
(viii) | First Citizens Banc Corp. has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during Applicable Period; |
(ix) | First Citizens Banc Corp. and its employees have complied with the excessive or luxury expenditures policy as defined in the regulations and guidance established under Section 111 of EESA during the Applicable Period; and any expenses that, pursuant to this policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility, were properly approved; |
(x) | First Citizens Banc Corp. will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during the Applicable Period; |
(xi) | First Citizens Banc Corp. will disclose the amount, nature, and justification for the offering during the Applicable Period of any perquisites, as defined in the regulations and guidance established under Section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii); |
(xii) | First Citizens Banc Corp. will disclose whether First Citizens Banc Corp., the board of directors of First Citizens Banc Corp., or the compensation committee of First Citizens Banc Corp. has engaged during the Applicable Period, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period; |
(xiii) | First Citizens Banc Corp. has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under Section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the Applicable Period; |
(xiv) | First Citizens Banc Corp. has substantially complied with all other requirements related to employee compensation that are provided in the agreement between First Citizens Banc Corp. and Treasury, including any amendments; |
(xv) | First Citizens Banc Corp. has submitted to Treasury a complete and accurate list of SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title and employer of each SEO and most highly compensated employee identified; and |
(xvi) | I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 USC 1001). |
Date: March 9, 2011 | /s/ Todd A. Michel | |||
Todd A. Michel | ||||
Senior Vice President/Controller | ||||
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