-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LvTHcr52/ktgi40cJ/cLD/33vEuq8TUecx6ofzL5ttxg+1zQs64uDUbVI66FSrvl UxUjAK3xwEXAvo69ZxtXBA== 0000950152-98-004410.txt : 19980514 0000950152-98-004410.hdr.sgml : 19980514 ACCESSION NUMBER: 0000950152-98-004410 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CITIZENS BANC CORP /OH CENTRAL INDEX KEY: 0000944745 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 341558688 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25980 FILM NUMBER: 98618698 BUSINESS ADDRESS: STREET 1: 100 EAST WATER ST STREET 2: P O BOX 5016 CITY: SANDUSKY STATE: OH ZIP: 44870 BUSINESS PHONE: 4196254121 MAIL ADDRESS: STREET 1: 100 EAST WATER ST STREET 2: P O BOX 5016 CITY: SANDUSKY STATE: OH ZIP: 44870 10-Q 1 FIRST CITIZENS BANC CORP 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended:..................................March 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.......................to........................ Commission File Number:................................................0-25980 First Citizens Banc Corp ------------------------ (Exact name of Registrant as specified in its charter) Ohio 34-1558688 ---- ---------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification Number) 100 East Water Street, Sandusky, Ohio 44870 ------------------------------------------------- (Address of principle executive offices) (Zip Code) Registrant's telephone number, including area code: (419) 625-4121 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes ---- No ----- Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. Common Stock, no par value Outstanding at May 13, 1998 4,263,401 common shares 2 FIRST CITIZENS BANC CORP Index
PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets (unaudited) March 31, 1998 and December 31, 1997.........................................................3 Consolidated Statements of Income (unaudited) Three months ended March 31, 1998 and 1997...................................................4 Consolidated Statement of Shareholders' Equity (unaudited) Three months ended March 31, 1998 and 1997...................................................5 Consolidated Statement of Cash Flows (unaudited) Three months ended March 31, 1998 and 1997...................................................6 Notes to Consolidated Financial Statements (Unaudited)........................................7-14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................................15-20 PART II. Other Information Item 1. Legal Proceedings...............................................................................22 Item 2. Changes in Securities...........................................................................22 Item 3. Defaults upon Senior Securities.................................................................22 Item 4. Submission of Matters to a Vote of Security Holders.............................................22 Item 5. Other Information...............................................................................22 Item 6. (a) Exhibits....................................................................................22 Signatures ............................................................................................23
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FIRST CITIZENS BANC CORP Consolidated Balance Sheet (Unaudited) December 31, Assets March 31, 1998 1997 --------------- ------------- Cash and due from banks $ 11,935,231 $ 14,328,125 Federal funds sold 12,540,000 10,400,000 Securities (Note 2) Available-for-sale 62,726,700 58,468,703 Held-to-maturity 4,601,684 6,737,206 ------------- ------------- Total investment securities 67,328,384 65,205,909 Loans available for sale 1,202,580 690,998 Loans (Notes 3) 224,122,815 224,557,029 Less: Allowance for possible loan losses (Note 4) (2,821,613) (2,799,000) ------------- ------------- Net Loans 221,301,202 221,758,029 Office premises and equipment, net 6,887,238 6,993,953 Accrued interest receivable 2,306,969 2,027,743 Intangible assets 2,765,999 2,847,511 Other assets 1,689,531 1,670,830 ------------- ------------- Total assets $ 327,957,134 $ 325,923,098 ============= ============= Liabilities Deposits Interest bearing $ 236,849,500 $ 233,528,600 Noninterest bearing 30,470,905 31,474,577 ------------- ------------- Total deposits 267,320,405 265,003,177 Federal Home Loan Bank borrowings 14,182,740 14,488,034 Securities sold under agreements to repurchase 8,331,809 6,879,346 U. S. Treasury interest-bearing demand notes payable 1,212,262 2,913,641 Accrued interest, taxes and other expenses 1,604,260 1,790,955 ------------- ------------- Total liabilities 292,651,476 291,075,153 Commitments and contingencies (Note 5) Shareholders' Equity Common stock, no par value, 10,000,000 shares authorized, 3,051,504 shares issued and outstanding 15,257,520 15,257,520 Retained Earnings 19,615,763 19,174,257 Unrealized gain on securities available for sale 432,375 416,168 ------------- ------------- Total shareholders' equity 35,305,658 34,847,945 ------------- ------------- Total liabilities and shareholder $ 327,957,134 $ 325,923,098 ============= =============
See notes to interim consolidated financial statements. Page 3 4
FIRST CITIZENS BANC CORP Consolidated Statements of Income (Unaudited) Three months ended March 31, ------------------------- 1998 1997 INTEREST INCOME: Interest and fees on loans $4,773,417 $4,381,966 Interest and dividends on securities Taxable 613,052 648,566 Nontaxable 303,404 341,412 Interest on federal funds sold 131,252 122,087 Other interest income 9,693 1,024 ---------- ---------- Total interest income 5,830,818 5,495,055 INTEREST EXPENSE: Interest on deposits 2,286,183 2,003,429 Interest on FHLB borrowings 207,241 222,949 Interest on other borrowings 107,974 73,788 ---------- ---------- Total interest expense 2,601,398 2,300,166 ---------- ---------- NET INTEREST INCOME 3,229,420 3,194,889 PROVISION FOR LOAN LOSSES (Note 4) 108,000 98,500 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,121,420 3,096,389 NONINTEREST INCOME: Computer center service charges and retail sales 462,092 576,742 Service charges on deposit accounts 138,956 129,409 Security gain/(loss) 19,580 6,250 Gain on sale of loans 33,965 0 Other operating income 237,684 213,324 ---------- ---------- Total noninterest income 892,277 925,725 NONINTEREST EXPENSE: Salaries and wages 1,180,621 1,269,006 Employee benefits 212,517 150,556 Net occupancy expense 141,643 142,763 Equipment 164,604 178,624 FDIC Premiums 14,720 7,705 Franchise Tax 117,732 109,058 Professional Fees 151,623 131,920 Goodwill amortization 81,512 81,512 Other operating expenses 679,335 691,053 ---------- ---------- Total noninterest expense 2,744,307 2,762,197 ---------- ---------- Income before taxes 1,269,390 1,259,917 Provision for Income Taxes 370,158 348,302 ---------- ---------- Net Income $ 899,232 $ 911,615 ========== ========== Per share data (based on 3,051,504 shares) Earnings per share $ 0.29 $ 0.30 Dividends declared $ 0.15 $ 0.14
See notes to interim consolidated financial statements Page 4 5 FIRST CITIZENS BANC CORP Condensed Consolidated Statement of Shareholders' Equity (Unaudited) Form 10-Q
Accumulated Other Total Common Stock Retained Comprehensive Comprehensive Shareholders' Shares Amount Earnings Income Income Equity Balance, December 31, 1995 762,876 15,257,520 18,160,292 388,979 33,806,791 Net income 3,964,886 3,964,886 3,964,886 300% stock split 2,288,628 Other comprehensive income, net of tax: Unrealized gain/loss on securities (224,205) (224,205) (224,205) ------------ Comprehensive income $ 3,740,681 ============ Cash dividends ($1.02 per share) (3,120,163) (3,120,163) Balance, December 31, 1996 3,051,504 15,257,520 19,005,015 164,774 34,427,309 Net income 3,434,353 3,434,353 3,434,353 Other comprehensive income, net of tax: Unrealized gain/loss on securities 251,394 251,394 251,394 ------------ Comprehensive income $ 3,685,747 ============ Cash dividends ($1.07 per share) (3,265,111) (3,265,111) Balance, December 31, 1997 3,051,504 $ 15,257,520 $ 19,174,257 416,168 $34,847,945 Net income 899,232 899,232 899,232 Other comprehensive income, net of tax: Unrealized gain/loss on securities 16,207 16,207 16,207 ------------ Comprehensive income $ 915,439 ============ Cash dividends ($.15 per share) (457,726) (457,726) ---------- ------------- ------------- -------- ----------- Balance, March 31, 1998 3,051,504 $ 15,257,520 $ 19,615,763 432,375 $35,305,658 ========== ============= ============= ======== ===========
See notes to interim consolidated financial statements Page 5 6 FIRST CITIZENS BANC CORP Consolidated Statement of Cash Flows (Unaudited)
Three months ended March 31, -------------------- 1998 1997 Cash flows from operating activities Net Income $ 899,232 $ 911,615 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of office premises and equipment 190,269 157,253 Amortization of goodwill 81,512 81,512 Provision for loan losses 108,000 98,500 Loans originated for sale (1,738,080) Proceeds form sale of loans 1,260,463 Gain on sale of loans (33,965) Change in deferred loan fees (29,185) (12,282) Net amortization of security premiums and discounts 35,636 32,811 Change in accrued interest receivable (279,226) (253,638) Change in other assets (18,701) (535,991) Change in accrued interest, taxes and other expenses (195,044) 540,364 ------------ ------------ Net cash from operating activities 280,911 1,020,144 Cash flows from investing activities Maturities and calls of securities, held-to-maturity 2,132,011 542,219 Maturities and calls of securities, available-for-sale 3,106,399 3,094,740 Purchases of securities, available-to-sale (7,371,965) (3,881,185) Loans made to customers, net of principal collected 378,012 (1,674,612) Change in federal funds sold (2,140,000) 373,000 Proceeds from sale of property and equipment 25,613 Purchases of office premises and equipment (109,167) (98,666) ------------ ------------ Net cash from investing activities (3,979,097) (1,644,504) Cash flows from financing activities Branch acquisition 0 12,153,945 Repayments of FHLB borrowings (305,294) (289,584) Net change in deposits 2,317,228 (6,205,868) Change in securities sold under agreements to repurchase 1,452,463 (2,976,394) Change in U. S. Treasury interest-bearing demand notes payable (1,701,379) 508,283 Cash dividends paid (457,726) (427,211) ------------ ------------ Net cash from financing activities 1,305,292 2,763,171 ------------ ------------ Net change in cash and cash equivalents (2,392,894) 2,138,811 Cash and due from banks at beginning of period 14,328,125 11,615,060 ------------ ------------ Cash and due from banks at end of period $ 11,935,231 $ 13,753,871 ============ ============ Supplemental disclosures: Cash paid during the period for: Interest $ 2,599,070 $ 2,276,508 Income taxes 0 $ 0
See notes to interim consolidated financial statements Page 6 7 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------ (1) Consolidated Financial Statements The consolidated financial statements include the accounts of First Citizens Banc Corp (Corporation) and it wholly-owned subsidiaries, The Citizens Banking Company (Citizens), The Castalia Banking Company (Castalia), SCC Resources, Inc. (SCC), and R. A. Reynolds Appraisal Service, Inc. (Reynolds). All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated balance sheets as of March 31, 1998 and December 31, 1997; the consolidated statements of income for the three month periods ended March 31, 1998 and 1997; the consolidated statement of shareholders' equity for the periods ended December 31, 1996, December 31, 1997 and March 31, 1998; and the consolidated statement of cash flows for the three month periods ended March 31, 1998 and 1997 have been prepared by the Corporation without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Corporation's financial position as of March 31, 1998 and its results of operations and changes in cash flows for the periods ended March 31, 1998 and 1997 have been made. The accompanying consolidated financial statements have been prepared in accordance with instructions of form 10-Q and therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The results of operations for the period ended March 31, 1998 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Corporation described in the notes to financial statements contained in the Corporation's 1997 annual report. The Corporation has consistently followed these policies in preparing this form 10-Q. The provision for income taxes is based on the effective tax rate expected to be applicable for the entire year. The corporation follows the liability method of accounting for income taxes. The liability method provides that deferred tax assets and liabilities are recorded based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, using enacted tax rates. Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities",was issued by the Financial Accounting Standards Board ("FASB") in 1997. It revises the accounting for transfers of financial assets, such as loans and securities, and for distinguishing between sales and secured borrowings. It was originally effective for some transactions in 1997 and others in 1998. SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125" was issued in December 1997. SFAS No. 127 defers for one year the Page 7 8 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------ effective date of provisions related to securities lending, repurchase agreements and other similar transactions. The remaining portions of SFAS No. 125 will continue to be effective January 1, 1997. SFAS No. 125 did not have a material impact on the Corporation's financial statements. In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which is effective for the financial statements for periods ending after December 15, 1997, including interim periods. SFAS No. 128 simplifies the calculation of earnings per share by replacing primary EPS with basic EPS. It also requires dual presentation of basic EPS and diluted EPS for entities with complex capital structures. Basic EPS includes no dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in earnings such as stock options, warrants or other common stock equivalents. All prior period EPS data will be restated to conform with the new presentation. Page 8 9 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------- (2) Securities The gross unrealized gains and losses of securities as presented in the consolidated balance sheets at March 31, 1998 and December 31,1997 are as follows:
March 31, 1998 Gross Gross Amortized Unrealized Unrealized Estimated Fair AVAILABLE FOR SALE Cost Gains Losses Value ------------ -------------- ----------------- ------------- U.S. Treasury securities and obligations of U.S. government corporations and agencies $32,100,051 $ 134,274 ($ 16,822) $32,217,503 Obligations of state and political subdivisions 22,945,414 534,238 (6,688) 23,472,964 Other securities, including mortgage- backed securities 7,025,889 13,526 (3,182) 7,036,233 ----------- --------- ------------ ----------- $62,071,354 $ 682,038 ($ 26,692) $62,726,700 =========== ========= ============ ===========
March 31, 1998 Gross Gross Amortized Unrealized Unrealized Estimated Fair HELD TO MATURITY Cost Gains Losses Value ---------- ----------- ----------- ---------- U.S. Treasury securities and obligations of U.S. government corporations and agencies Obligations of state and political subdivisions $3,170,965 $ 34,157 $ 3,205,122 Other securities, including mortgage- backed securities 1,430,719 12,020 ($ 1,018) 1,441,721 ---------- -------- ----------- ---------- $4,601,684 $ 46,177 ($ 1,018) $4,646,843 ========== ======== =========== ==========
Page 9 10 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------
December 31, 1997 Gross Gross Amortized Unrealized Unrealized Estimated Fair AVAILABLE FOR SALE Cost Gains Losses Value ------------- ---------- ------------- ------------ U.S. Treasury securities and obligations of U.S. government corporations and agencies $33,085,104 $ 101,144 ($ 46,511) $33,139,737 Obligations of state and political subdivisions 19,233,997 583,780 (16,135) 19,801,642 Other securities, including mortgage- backed securities 5,519,045 8,537 (258) 5,527,324 ----------- --------- ------------ ----------- $57,838,146 $ 693,461 ($ 62,904) $58,468,703 =========== ========= ============ ===========
December 31, 1997 Gross Gross Amortized Unrealized Unrealized Estimated Fair HELD TO MATURITY Cost Gains Losses Value ----------- ---------- ------------- ------------ U.S. Treasury securities and obligations of U.S. government corporations and agencies $1,000,000 $ 2,500 $ 1,002,500 Obligations of states and political subdivisions 4,004,519 50,389 ($ 5,613) 4,049,295 Other securities, including mortgage- backed securities 1,732,687 13,974 (2,067) 1,744,594 ---------- -------- ----------- ---------- $6,737,206 $ 66,863 ($ 7,680) $6,796,389 ========== ======== =========== ==========
Page 10 11 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------- The amortized cost and estimated fair value of debt securities at March 31, 1998, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.
Estimated Fair Amortized Cost Value AVAILABLE FOR SALE Due in one year or less $20,434,509 $20,465,087 Due after one year through five years 24,446,202 24,818,503 Due after five years through ten years 9,716,482 9,946,936 Due after ten years 448,271 459,939 Mortgage-backed securities 40,922 41,550 Other securities 6,984,967 6,994,685 ----------- ----------- Total securities available for sale $62,071,353 $62,726,700 =========== =========== HELD TO MATURITY Due in one year or less $ 2,815,965 $ 2,845,603 Due after one year through five years 355,000 359,520 Mortgage-backed securities 461,614 467,772 Other securities 969,105 973,949 ----------- ----------- Total securities held to maturity $ 4,601,684 $ 4,646,844 =========== ===========
No securities were sold during the three months ended March 31, 1998 or 1997. Securities called or settled by the issuer resulted in gains of $19,580 for the three months ended March 31, 1998 and $6,250 for the three months ended March 31, 1997. Securities with a carrying value of approximately $36,491,000 and $36,757,000 were pledged as of March 31, 1998 and December 31, 1997, respectively, to secure public deposits, other deposits and liabilities as required by law. Page 11 12 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------ (3) Loans Loans as presented in the consolidated balance sheet are comprised of the following classifications:
3/31/98 12/31/97 ---------------- ------------- Commercial and agriculture $ 48,206,071 $ 47,043,354 Real estate - mortgage 134,015,536 135,635,917 Real estate - construction 1,741,441 2,652,565 Consumer 39,512,305 38,621,281 Credit card and other 1,708,163 1,693,798 Deferred loan fees (1,060,700) (1,089,886) ------------- ------------- Total loans $ 224,122,816 $ 224,557,029 ============= =============
(4) Allowance for Loan Losses A summary of the activity in the allowance for loan losses for the three months ended March 31, 1998 and March 31, 1997 is as follows:
1998 1997 ------------- ------------- Balance January 1, $ 2,799,000 $ 2,642,000 Loans charged off (128,216) (115,635) Recoveries 42,829 56,184 Provision for loan losses 108,000 98,500 ----------- ----------- Balance March 31, $ 2,821,613 $ 2,681,049 =========== ===========
Page 12 13 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------- Information regarding impaired loans is as follows for the three months ended March 31.
1998 1997 ----------- ---------- Average investment in impaired loans $1,817,000 $1,883,000 Interest income recognized on impaired loans including interest income recognized on cash basis $26,711 $42,366 Interest income recognized on impaired loans $26,711 $42,366 on cash basis
Information regarding impaired loans at March 31, 1998 and December 31, 1997 is as follows:
3/31/98 12/31/97 ------------ ------------ Balance impaired loans $1,816,000 $1,817,000 Less portion for which no allowance for loan losses is allocated --- --- Portion of impaired loan balance for which an allowance for credit losses is allocated 1,816,000 1,817,000 Portion of allowance for loan losses allocated to 454,000 466,000 the impaired loan balance
(5) Commitments, Contingencies and Off-Balance Sheet Risk The Bank subsidiaries are parties to financial instruments with off-balance sheet risk in the normal course of business to meet financing needs of their customers. These include commitments to make or purchase loans, undisbursed lines of credit, undisbursed credit card balances and letters of credit. The Banks' exposure to credit loss in the event of nonperformance by the other party to the financial instrument is represented by the contractual amount of those instruments. The Banks follow the same credit policy to make such commitments as they use for loans recorded on the balance sheet. Since many commitments to make loans expire without being used, the amount does not necessarily represent future cash commitments. Collateral obtained relating to the commitments is Page 13 14 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - ------------------------------------------------------------------------------- determined using management's credit evaluation of the borrower and may include real estate, vehicles, business assets, deposits and other items. The Banks do make fixed rate loan commitments for short periods of time. However, such commitments were immaterial as of March 31, 1998 and December 31, 1997. Commitments to extend credit and letters of credit approximated the following amounts at March 31, 1998 and December 31, 1997.
Contract Amount --------------- March 31, 1998 December 31, 1997 -------------- ------------------ Commitment to extend credit: Lines of credit and construction loans $14,696,000 $16,945,000 Credit cards 3,069,000 3,169,000 Letters of credit 376,000 447,000 ----------- ----------- $18,141,000 $20,561,000 =========== ===========
Citizens and Castalia are required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board requirements. The average reserve balance maintained in accordance with such requirements for the periods ended March 31, 1998 and December 31, 1997 approximated $1,519,000 and $1,682,000 respectively. In the normal course of business, the Corporation and its subsidiaries are involved in various legal actions, but in the opinion of management and its legal counsel, ultimate disposition of such legal matters is not expected to have a material adverse effect on the consolidated financial statements. Page 14 15 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- INTRODUCTION - ------------ The following discussion focuses on the consolidated financial condition of First Citizens Banc Corp at March 31, 1998, compared to December 31, 1997 and the consolidated results of operations for the three month period ending March 31, 1998 compared to the same period in 1997. This discussion should be read in conjunction with the consolidated financial statements and footnotes included in this Form 10-Q. The registrant is not aware of any trends, events or uncertainties that will have, or are reasonably likely to have, a material effect on the liquidity, capital resources, or operations except as discussed herein. Also, the registrant is not aware of any current recommendation by regulatory authorities which would have such effect if implemented. In addition to the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. Economic circumstances, the Corporation's operations, and the Corporation's actual results could differ significantly from those disclosed in forward-looking statements. Some of the factors that could cause or contribute to such differences are discussed herein but also include changes in the economy and interest rates in the nation and in the Corporation's general market area. Some of the forward-looking statements included herein are the statements regarding the following: 1. Management's determination of the amount of loan loss allowance and the amount of the loan loss provision; 2. The sufficiency of the Corporation's liquidity and capital reserves See Exhibit 99, which is incorporated herein by reference. FINANCIAL CONDITION - ------------------- Total assets of the Corporation at March 31, 1998 totaled $327,957,134 compared to $325,923,098 at December 31, 1997. This was an increase of $2,034,036 or 0.62 percent. Within the structure of the assets, net loans have decreased $456,827 since December 31, 1997. The decrease in loans is due to the fact that the corporation is now selling mortgages on the secondary market. For the first quarter of 1998, loans sold or available for sale totaled $1,047,082. Office premises and equipment have decreased $106,715 and intangible assets have decreased $81,512 since December 31, 1997. The decrease in office premises and equipment is attributed to the sale of equipment of $25,613 and depreciation Page 15 16 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------ of $190,269 exceeding new purchases of $109,167. At March 31, 1998, $62,726,700 or 93.2 percent of the portfolio was classified as available-for-sale. The remainder of $4,601,684 was classified as held-to-maturity. Securities increased $2,122,475 from December 31, 1997. As of March 31, 1998, the net unrealized gain of the available-for-sale portfolio was $655,346 compared to $630,537 at December 31, 1997. The decrease in the net unrealized gain reflects changes in market values due to the current interest rate environment. Total loans at March 31, 1998 decreased $456,827 or 0.2 percent from year end 1997. Loans available-for-sale increased $511,582 or 74.0% from December 31, 1997. At March 31, 1998, the net loan to deposit ratio was 82.8 percent compared to 83.7 percent at December 31, 1997. At March 31, 1998, the allowance for loan losses as a percent of total loans was 1.26 percent compared to 1.25 percent at December 31, 1997. For the three months of operations of 1998, $108,500 was placed into the allowance from earnings compared to $98,500 for the same period of 1997. Net charge offs for the first three months of 1998 were $85,389 compared to $59,451 for the same period of 1997. Impaired loans at March 31, 1998 totaled $1,816,000 or 0.8 percent of the loan portfolio compared to $1,817,000 or 0.8 percent of the loan portfolio at December 31, 1997. Total deposits at March 31, 1998 increased $2,317,228 from year-end 1997. Noninterest bearing deposits, representing demand deposit balances, decreased $1,003,672 from year-end 1997. Interest bearing deposits, including savings and time deposits, increased $3,320,900 from year-end 1997. The year to date 1998 average balance of savings deposits has decreased $5,907,000 compared to the average balance of the same period for 1997. The current average rate of these deposits is 2.70 percent. The year to date 1998 average balance of time certificates has increased $18,315,000 compared to the average balance for the same period for 1997. The current average rate on these deposits is 5.39 percent. The average balance of certificates of deposit increased because of the introduction of a 13 month add-on certificate. Other borrowed funds have decreased $554,210 from December 31, 1997 to March 31, 1998. Federal Home Loan Bank borrowings have decreased $305,294 as a result of scheduled paydowns. Securities sold under agreements to repurchase have increased $1,452,463 and U.S. Treasury Tax Demand Notes have decreased $1,701,379. Shareholders' equity at March 31, 1998 was $35,305,658 which was 10.8 percent of total assets. Shareholders' equity at December 31, 1997 was $34,847,945 which was 10.7 percent of total assets. The increase in shareholders' equity was represented by earnings of $899,232 less dividends of $457,726 and less the decrease in the unrealized gain on securities available for sale of $16,207. The company paid a cash dividend February 1, 1997 at the rate of $.15 per share. Total outstanding Page 16 17 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- shares for the period December 31, 1997 to March 31, 1998 were 3,051,504. RESULTS OF OPERATIONS - --------------------- Net income for the quarter ended March 31, 1998 was $899,232 or $.29 per common share compared to $911,615 or $.30 per common share for the same period in 1997. This was an decrease of $12,383 or 1.4 percent. Net interest income for the first quarter 1998 totaled $3,229,420 compared to $3,194,889 for the first quarter of 1997. This was an increase of $34,531 or 1.1 percent. Total interest income for the first three months of 1998 has increased $335,763 or 6.1 percent compared to the same period of 1997. The average rate on earning assets on a tax equivalent basis for the first three months of 1998 and 1997 was 7.86 percent. Total interest expense for the first three months of 1998 has increased $301,232 or 13.1 percent compared to the same period of 1997. The average rate on paying liabilities for the first three months of 1998 was 4.11 percent compared to 3.84 percent for the same period of 1997. The net interest margin on a tax equivalent basis for the first three months was 4.43 percent for the three month period ended March 31, 1998 and 4.66 percent for the same period ended March 31, 1997. Noninterest income for the first quarter 1998 totaled $892,277 compared to $925,725 for the first quarter 1997. This was an decrease of $33,448 or 3.6 percent and mainly attributed to decreases in revenue from the computer operations of $114,650, increased service charges on deposit accounts of $9,547, and decreased other operating income of $7,527. The decrease in revenue from computer operations is the result of SCC Resources, Inc. selling its microcomputer division. Noninterest expense for the first quarter 1998 totaled $2,744,307 compared to $2,762,197 for the first quarter 1997. This was an decrease of $17,890 or 0.6 percent. The largest decrease in noninterest expense is in salaries, wages and employee benefits which decreased $26,424 for the first three months of 1998 or 1.9 percent compared to the same period of 1997. The decrease in salaries, wages and employee benefits can be attributed to retirements, resignations and the sale of SCC Resources, Inc.'s Microcomputer division. These three factors accounted for a decrease in salaries, wages and employee benefits of approximately $73,000. This decrease was offset by merit increases and the salaries, wages and employee benefits of new hires, resulting in the net decrease of $26,424. PROVISION FOR INCOME TAXES - -------------------------- The provision for income taxes for the first quarter 1998 totaled $370,158 compared to $348,302 for Page 17 18 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- the first quarter 1997. This was an increase of $21,856 or 6.3 percent. The increase in the federal income taxes is a result of the increase in total income before taxes of $9,473, as well as a decrease in tax exempt interest income of $38,008. CAPITAL RESOURCES - ----------------- Shareholders equity totaled $35,305,658 at March 31, 1998 compared to $34,847,945 at December 31, 1997. All of the capital ratios exceed the regulatory minimum guidelines as identified in the following table:
Corporation Ratios Regulatory 3/31/98 12/31/97 Minimums ------- -------- -------- Tier I Risk Based Capital 16.38% 18.09% 4.00% Total Risk Based Capital 17.63% 19.34% 8.00% Leverage Ratio 9.99% 9.69% 5.00%
The Corporation paid cash dividends of $.15 per common share on February 1, 1998 compared to the February 1, 1997 dividend of $.14 per common share. Capital expenditures totaled $109,167 for the first three months of 1998 compared to $1,054,811 for the same period of 1997. The capital expenditures for the first three months of 1997 include $956,145 of premises and equipment acquired in the purchase of two branches. LIQUIDITY - --------- Liquidity as it relates to the banking entities of the Corporation is the ability to meet the cash demand and credit needs of its customers. For the first three months of 1998 the Banks maintained a federal funds sold position that averaged $9,640,000 In addition, the Banks, through their respective correspondent banks maintain federal funds borrowing lines totaling $16,900,000 and the Banks have total borrowing availability at the Federal Home Loan Bank of Cincinnati of $11,617,260 at March 31, 1998. Finally, 93.2% of the Corporation's security portfolio has been classified as available for sale which provides additional liquidity. Page 18 19 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- ASSET AND LIABILITY MANAGEMENT AND MARKET RISK - ---------------------------------------------- The Corporation's primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk. The Banks do not maintain a trading account for any class of financial instrument and the Corporation is not effected by foreign currency exchange rate risk or commodity price risk. Because the Corporation does not hold any equity securities other than stock in the FHLB of Cincinnati, the Corporation is not subject to equity price risk. Interest rate risk is the risk that the Corporation's financial condition will be adversely affected due to movements in interest rates. The Corporation, like other financial institutions, is subject to interest rate risk to the extent that its interest-earning assets reprice differently than interest-bearing liabilities. The income of financial institutions is primarily derived from the excess of interest earned on interest-earning assets over interest paid on interest-bearing liabilities. One of the Corporation's principal financial objectives is to achieve long-term profitability while reducing its exposure to fluctuations in interest rates. Accordingly, the Corporation places great importance on monitoring and controlling interest rate risk. There are several methods employed by the Corporation to monitor and control interest rate risk. One such method is using gap analysis. The gap is defined as the repricing variance between rate sensitive assets and rate sensitive liabilities within certain periods. The repricing can occur due to changes in rates on variable products as well as maturities of interest-earning assets and interest-bearing liabilities. A high ratio of interest sensitive liabilities, generally referred to as a negative gap, tends to benefit net interest income during periods of falling rates as the average rate on interest-bearing liabilities falls faster than the average rate earned on interest-earning assets. The opposite holds true in during periods of rising rates. The Corporation attempts to minimize the interest rate risk through management of the gap in order to achieve consistent shareholder return. The Corporation's Assets and Liability Management Policy is to maintain a laddered gap position. One strategy is to originate variable rate loans tied to market indices. Such loans reprice as the underlying market index changes. Currently, approximately 54.2% of the Corporation's loan portfolio reprices on at least an annual basis. The Corporation also invests excess funds in federal funds that mature and reprice daily. The Corporation's 1997 annual report details a table which provides information about the Banks financial instruments that are sensitive to changes in interest rates as of December 31, 1997. The table is based on information and assumptions set forth in the notes. The Corporation believes the assumptions are reasonable. For loans, securities and liabilities with contractual maturities, the table represents principal cash flows and weighted average interest rate. For variable rate loans the contractual maturity and weighted average interest rate were used. For liabilities without contractual maturities such as demand and savings Page 19 20 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------ deposits, a decay rate was utilized to match their most likely withdrawal behavior. Management believes that no events have occurred since December 31, 1997 which would significantly change the ratio of rate sensitive liabilities for the given time horizon. YEAR 2000 ISSUE - --------------- The Corporation is aware of the potential impact of the Year 2000 on data processing and technology. The Corporation's date processing subsidiary, SCC is totally dependent on its ability to process for the Corporation's subsidiary banks and other banking customers. SCC developed a Year 2000 project plan which was introduced in May 1997. This project plan has outlined the approach to the Year 2000 as being 1) an initial planning phase, 2) an assessment phase, 3) a strategy phase, and 4) an overall testing phase. Management of SCC has made the commitment that processing applications classified as high priority and determined to be essential to ongoing operation of the Banks and banking customers will be Year 2000 compatible by December 31, 1998. Other processing applications having lesser priority or where date calculations have no impact will be Year 2000 compliant by June 30, 1999. SCC communicates monthly with its customer banks on the status of its Year 2000 project. The Board of Directors of both Citizens and Castalia have named Year 2000 coordinators. Both Banks have conducted assessments to identify hardware, software and other processes that may be affected by the Year 2000 date change and that are not included in the services provided to the Banks by SCC. Throughout 1998, additional efforts are planned to renovate or replace functions determined by the assessment not to be Year 2000 compliant. In addition to the impact on its own systems, the Banks have recognized that borrowing customers could be impacted by the Year 2000 and that impact could impair the customers ability to meet their obligations. The Banks are communicating to significant borrowers the need to evaluate their systems. Management recognizes that costs are associated with Year 2000 efforts, but does not believe that these costs will materially affect the operations, liquidity or capital resources of the Corporation. PROPOSED MERGER - --------------- On July 3, 1997, The Corporation entered into a definitive agreement to acquire The Farmers State Bank ("Farmers") of New Washington, Ohio. This agreement, as amended, specifies that the Corporation will issue 6.06 shares of the Corporation's common stock for each of the 200,000 shares of Farmers outstanding. The merger is subject to the approval of both companies' regulatory agencies and the shareholders of both Farmer and First Citizens Banc Corp. The transaction is also subject to the pooling of interests method of accounting. The merger has received the approval of both companies regulatory agencies, as well as the shareholders of Farmers and First Citizens Banc Corp and was consummated on April 28, 1998. Page 20 21 First Citizens Banc Corp Other Information Form 10-Q - ------------------------------------------------------------------------------- Part II - Other Information ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. (a) EXHIBIT NO. 27 Financial Data Schedule...............24 (b) EXHIBIT NO. 99 Safe Harbor Under the Private Securities Litigation Reform Act of 1995 (b) REPORTS ON FORM 8-K - None Page 22 22 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, The registrant has caused this report to be signed on its behalf the undersigned thereunto duly authorized. First Citizens Banc Corp /s/ David A. Voight May 13, 1997 - ---------------------------------------------- ------------ David A. Voight Date President /s/ James O. Miller May 13, 1997 - ----------------------------------------------- ------------ James O. Miller Date Senior Vice President Page 23 23 First Citizens Banc Corp Index to Exhibits Form 10-Q - -------------------------------------------------------------------------------
Exhibit Number Description Page Number - ------ ----------- ----------- 27 Financial Data Schedule 24 99 Safe Harbor Under the Private Securities Incorporated by reference to Exhibit Litigation Reform Act of 1995 99 to Annual Report on Form 10-K for the Year Ended December 31, 1996 filed by the registrant on February 24, 1997
Page 24 EX-27 2 EXHIBIT 27
9 0000944745 First Citizens Banc Corp 3-MOS DEC-31-1997 JAN-01-1998 MAR-31-1998 11,935,231 0 12,540,000 0 62,726,700 4,601,684 4,646,843 221,301,202 2,821,613 327,957,134 267,320,405 9,544,071 1,604,260 14,182,740 0 0 15,257,520 20,048,138 327,957,134 4,773,417 916,456 140,945 5,830,818 2,286,183 2,601,398 3,229,420 108,000 19,580 2,744,307 1,269,390 899,232 0 0 899,232 .29 .29 4.43 1,338,000 1,188,000 0 0 2,799,000 128,216 42,829 2,821,613 2,821,613 0 1,543,906
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