-----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, FRPyu8ezG8V7Y9PnVJf1z3/HEIpo0vLyBV88kqtLo1DxIe/DfrQBjGdCU7N8hUx7 sG0v8Q1WNy4YzLpDmKJlqA== 0000950152-99-004581.txt : 19990518 0000950152-99-004581.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950152-99-004581 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99626130 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 10-Q 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, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.......................to........................ Commission File Number:.................................................0-25980 First Citizens Banc Corp ------------------------ (Exact name of registrant as specified in its charter) Ohio 34-1558688 ---- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 100 East Water Street, Sandusky, Ohio 44870 ------------------------------------------------------------------------ (Address of principle executive offices) (Zip Code) Registrant's telephone number, including area code: (419) 625-4121 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes --- No --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, no par value Outstanding at May 12, 1999 4,262,795 common shares 2
FIRST CITIZENS BANC CORP Index PART I. Financial Information ITEM 1. Financial Statements: Consolidated Balance Sheets (unaudited) March 31, 1999 and December 31, 1998...................................3 Consolidated Statements of Income (unaudited) Three months ended March 31, 1999 and 1998.............................4 Consolidated Statement of Shareholders' Equity (unaudited) For the years ended December 31, 1997 and 1998 and three months ended March 31, 1999......................................5 Consolidated Statement of Cash Flows (unaudited) Three months ended March 31, 1999 and 1998.............................6 Notes to Consolidated Financial Statements (unaudited)..................7-14 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................15-21 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.............21-22 PART II. Other Information ITEM 1. Legal Proceedings.........................................................23 ITEM 2. Changes in Securities and Use of Proceeds.................................23 ITEM 3. Defaults Upon Senior Securities...........................................23 ITEM 4. Submission of Matters to a Vote of Security Holders.......................23 ITEM 5. Other Information.........................................................23 ITEM 6. Exhibits and Reports on Form 8-K..........................................23 SIGNATURES.........................................................................24
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FIRST CITIZENS BANC CORP Consolidated Balance Sheet (Unaudited) March 31, December 31, Assets 1999 1998 ------------- ------------- Cash and due from banks $ 14,351,356 $ 16,443,613 Federal funds sold 16,270,000 19,950,000 Interest-bearing deposits 248,282 248,282 Securities Available for sale 163,610,803 171,952,700 Held to maturity (Estimated Fair Value of $708,338 at March 31, 1999 and $823,632 at December 31, 1998) 700,386 810,122 ------------- ------------- Total securities 164,311,189 172,762,822 Loans held for sale 1,174,850 2,273,509 Loans 279,815,943 283,349,201 Less: Allowance for loan losses (4,475,703) (4,567,126) ------------- ------------- Net Loans 275,340,240 278,782,075 Office premises and equipment, net 7,285,850 7,363,513 Intangible assets 2,452,451 2,533,963 Accrued interest and other assets 6,606,864 8,531,086 ------------- ------------- Total assets $ 488,041,082 $ 508,888,863 ============= ============= Liabilities Deposits Noninterest-bearing $ 38,642,499 $ 38,574,055 Interest-bearing 373,434,666 379,325,190 ------------- ------------- Total deposits 412,077,165 417,899,245 Federal Home Loan Bank borrowings 2,359,262 13,235,165 Securities sold under agreements to repurchase 12,937,971 16,369,681 U. S. Treasury interest-bearing demand notes payable 814,543 971,558 Accrued expenses and other liabilities 6,037,223 6,672,283 ------------- ------------- Total liabilities 434,226,164 455,147,932 Shareholders' Equity Common stock, no par value; 10,000,000 shares authorized, 4,263,401 shares issued and outstanding 23,257,520 23,257,520 Retained earnings 27,984,701 26,811,264 Treasury stock, 250 shares at cost at March 31, 1999 (6,750) 0 Accumulated other comprehensive income 2,579,447 3,672,147 ------------- ------------- Total shareholders' equity 53,814,918 53,740,931 ------------- ------------- Total liabilities and shareholders' equity $ 488,041,082 $ 508,888,863 ============= =============
See notes to interim consolidated financial statements. Page 3 4 FIRST CITIZENS BANC CORP Consolidated Statements of Income (Unaudited)
Three months ended March 31, ------------------------ 1999 1998 ---------- ---------- INTEREST INCOME: Loans, including fees $5,800,900 $6,245,801 Taxable securities 1,721,105 1,535,265 Nontaxable securities 581,025 502,087 Federal funds sold 175,819 202,445 Other 21,035 15,646 ---------- ---------- Total interest income 8,299,884 8,501,244 INTEREST EXPENSE: Deposits 3,649,220 3,951,970 FHLB borrowings 163,064 207,241 Other 157,332 120,864 ---------- ---------- Total interest expense 3,969,616 4,280,075 ---------- ---------- NET INTEREST INCOME 4,330,268 4,221,169 PROVISION FOR LOAN LOSSES 68,000 108,000 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,262,268 4,113,169 NONINTEREST INCOME: Computer center data processing fees 509,696 462,092 Service charges 240,641 209,661 Net gain on sales of securities 727,304 19,580 Net gain on sales of loans 94,518 33,965 Other 332,608 244,551 ---------- ---------- Total noninterest income 1,904,767 969,849 NONINTEREST EXPENSE: Salaries, wages and benefits 1,780,196 1,703,670 Net occupancy expense 196,938 167,744 Equipment expense 186,792 171,754 FDIC premiums 12,245 18,971 State franchise tax 150,756 173,982 Professional services 268,029 176,032 Amortization of intangible assets 81,512 81,512 Other operating expenses 906,115 825,776 ---------- ---------- Total noninterest expense 3,582,583 3,319,441 ---------- ---------- Income before taxes 2,584,452 1,763,577 Income tax expense 728,871 503,158 ---------- ---------- Net Income $1,855,581 $1,260,419 ========== ========== Earnings per share $ 0.44 $ 0.30 Dividends declared $ 0.16 $ 0.15 Weighted average shares during the period 4,263,345 4,263,401
See notes to interim consolidated financial statements Page 4 5 FIRST CITIZENS BANC CORP Condensed Consolidated Statement of Shareholders' Equity (Unaudited) Form 10-Q
Unrealized Gain on Securities Total Common Stock Retained Treasury Available Shareholders' Shares Amount Earnings Stock for Sale Equity Balance, January 1, 1997 4,263,401 $23,257,520 $24,619,419 $ 0 $ 811,399 $48,688,338 Comprehensive income: Net income 4,440,544 4,440,544 Change in unrealized gain on securities available for sale 1,615,663 1,615,663 ----------- Total 6,056,207 Cash dividends ($1.07 per share) (3,265,110) (3,265,110) Cash dividends declared Farmers, pior to merger (280,000) (280,000) --------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1997 4,263,401 23,257,520 25,514,853 0 2,427,062 51,199,435 Comprehensive income: Net income 5,760,667 5,760,667 Change in unrealized gain on securities available for sale 1,245,085 1,245,085 ----------- Total 7,005,752 Cash paid for fractional shares (3,451) (3,451) Cash dividends ($1.11 per share) (4,368,805) (4,368,805) Cash dividends declared Farmers, pior to merger (92,000) (92,000) --------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1998 4,263,401 23,257,520 26,811,264 0 3,672,147 53,740,931 Comprehensive income: Net income 1,855,581 1,855,581 Change in unrealized gain on securities available for sale (1,092,700) (1,092,700) ----------- Total 762,881 Purchase of treasury stock at cost (250) (6,750) (6,750) Cash dividends ($.16 per share) (682,144) (682,144) --------- ----------- ----------- ----------- ----------- ----------- Balance, March 31, 1999 4,263,151 $23,257,520 $27,984,701 $ (6,750) $ 2,579,447 $53,814,918 ========= =========== =========== =========== =========== ===========
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, ----------------------------- 1999 1998 Cash flows from operating activities Net Income $ 1,855,581 $ 1,260,419 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization of office premises and equipment 228,682 202,999 Amortization of intangible assets 81,512 81,512 Provision for loan losses 68,000 108,000 Loans originated for sale (2,308,150) (1,738,080) Proceeds form sale of loans 3,447,478 1,260,463 Gain on sale of loans (94,518) (33,965) Security gains (727,304) (19,580) Change in deferred loan fees (26,725) (43,887) Net amortization of security premiums and discounts 155,810 55,598 Change in accrued interest and other assets 1,978,071 (504,165) Change in accrued interest, taxes and other expenses (72,153) (1,171,542) ------------ ------------ Net cash from operating activities 4,586,284 (542,228) Cash flows from investing activities Maturities of interest bearing deposits 99,000 Maturities and calls of securities, held-to-maturity 109,419 2,132,011 Maturities and calls of securities, available-for-sale 12,232,503 8,717,503 Purchases of securities, available-to-sale (6,183,990) (11,586,574) Proceeds from sale of securities, available-to-sale 1,209,587 Loans made to customers, net of principal collected 3,400,560 3,002,940 Change in federal funds sold 3,680,000 (1,540,000) Proceeds from sale of property and equipment 1,627 25,613 Purchases of office premises and equipment (152,645) (141,926) ------------ ------------ Net cash from investing activities 14,297,061 708,567 Cash flows from financing activities Repayments of FHLB borrowings (10,875,903) (305,294) Net change in deposits (5,822,080) (1,345,641) Change in securities sold under agreements to repurchase (3,431,710) 1,502,463 Change in U. S. Treasury interest-bearing demand notes payable (157,015) (2,162,408) Purchases of treasury stock (6,750) Cash dividends paid (682,144) (737,726) ------------ ------------ Net cash from financing activities (20,975,602) (3,048,606) ------------ ------------ Net change in cash and cash equivalents (2,092,257) (2,882,267) Cash and due from banks at beginning of period 16,443,613 17,695,634 ------------ ------------ Cash and due from banks at end of period $ 14,351,356 $ 14,813,367 ============ ============ Supplemental disclosures: Cash paid during the period for: Interest $ 4,796,761 $ 5,226,007 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), The Farmers State Bank of New Washington (Farmers), 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, 1999 and December 31, 1998; the consolidated statements of income for the three month periods ended March 31, 1999 and 1998; the consolidated statement of shareholders' equity for the three months ended March 31, 1999 and the years ended December 31, 1998 and 1997; and the consolidated statements of cash flows for the three month periods ended March 31, 1999 and 1998 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, 1999 and its results of operations and changes in cash flows for the periods ended March 31, 1999 and 1998 have been made. The accompanying consolidated financial statements have been prepared in accordance with instructions of Form 10-Q, and therefore certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The results of operations for the period ended March 31, 1999 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Corporation described in the notes to financial statements contained in the Corporation's 1998 annual report. The Corporation has consistently followed these policies in preparing this Form 10-Q. Income tax expense is based on the effective tax rate expected to be applicable for the entire year. The Corporation follows the liability method of accounting for income taxes. The liability method provides that deferred tax assets and liabilities are recorded at enacted tax rates based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as "temporary differences." A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Certain items in the 1998 financial statements have been reclassified to correspond with the 1999 presentation. Page 7 8 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- The Corporation elected to present comprehensive income and the accumulated balance in the Consolidated Statement of Shareholders' Equity for interim reporting purposes. The table below presents the reclassification adjustments related to comprehensive income. Reclassification adjustments are needed when an item is included in the net income in one period and comprehensive income in another accounting period. Other comprehensive income components and related taxes for the three months ended March 31, 1999 and 1998.
Three months ended March 31, 1999 1998 ---- ---- Unrealized holding gains and (losses) on available for sale securities $ (928,306) $ 590,386 Reclassification adjustment for (gains) and losses later recognized in income (727,304) (19,580) --------------- ----------- Net unrealized gains and (losses) (1,655,610) 570,806 Tax effect 562,910 (194,074) --------------- ----------- Other comprehensive income $ (1,092,700) $ 376,732 =============== ===========
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. SFAS No. 133 does not allow hedging of a security which is classified as held to maturity, accordingly, upon adoption of SFAS No. 133, companies may reclassify any security from held to maturity to available for sale if they wish to be able to hedge the security in the future. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999 with early adoption encouraged for any fiscal quarter beginning July 1, 1998 or later, with no retroactive application. Management does not expect the adoption of SFAS No. 133 to have a significant impact on The Corporation's financial statements. Page 8 9 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" changes the way companies involved in mortgage baking account for certain securities and other interests they retain after securitizing mortgage loans that were held for sale. SFAS No. 134 allows any retained mortgage-backed securities after a securitization of mortgage loans held for sale to be classified based on holding intent on accordance with SFAS No. 115, except in cases where the retained mortgage-backed security is committed to be sold before or during the securitization process in which case it must be classified as trading. Previously, all retained mortgage-backed securities were required to be classified as trading. SFAS No. 134 was effective as of January 1, 1999, and did not have a significant impact on the Corporation's financial statements. (2) Securities Securities at March 31, 1999 and December 31, 1998 were as follows:
March 31, 1999 Gross Gross Unrealized Unrealized AVAILABLE FOR SALE Amortized Cost Gains Losses Fair Value --------------- ------------ ----------- ------------- U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 65,250,743 $ 580,611 $ (120,345) $ 65,711,009 Obligations of state and political subdivisions 52,798,808 1,301,603 (51,514) 54,048,897 Corporate bonds 17,720,285 70,801 (15,575) 17,775,511 Equity securities 1,385,237 2,184,293 (20,155) 3,549,375 Other securities, including mortgage- backed securities 22,547,478 47,434 (68,901) 22,526,011 --------------- ------------ ----------- ------------- $ 159,702,551 $ 4,184,742 $ (276,490) $ 163,610,803 =============== ============ =========== =============
Page 9 10 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - --------------------------------------------------------------------------------
March 31, 1999 Gross Gross Amortized Unrealized Unrealized HELD TO MATURITY Cost Gains Losses Fair Value ------------- ------------- ------------- ------------- Obligations of state and political subdivisions $ 355,000 $ 2,982 $ 0 $ 357,982 Other securities, including mortgage backed securities 345,386 5,119 (149) 350,356 ------------- ------------- ------------- ------------- $ 700,386 $ 8,101 $ (149) $ 708,338 ============= ============= ============= =============
December 31, 1998 Gross Gross Amortized Unrealized Unrealized AVAILABLE FOR SALE Cost Gains Losses Fair Value ------------- ------------- ------------- ------------- U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 69,024,266 $ 1,198,600 $ (98,129) $ 70,124,737 Obligations of state and political subdivisions 52,759,051 1,661,950 (17,364) 54,403,637 Corporate bonds 17,957,515 166,350 (7,115) 18,116,750 Equity securities 1,867,519 2,605,797 (22,405) 4,450,911 Other securities, including mortgage backed securities 24,780,487 86,596 (10,418) 24,856,665 ------------- ------------- ------------- ------------- $ 166,388,838 $ 5,719,293 $ (155,431) $ 171,952,700 ============= ============= ============= =============
Gross Gross Amortized Unrealized Unrealized HELD TO MATURITY Cost Gains Losses Fair Value ------------- ------------- ------------- ------------- Obligations of state and political subdivisions $ 355,000 $ 7,564 $ 0 $ 362,564 Other securities, including mortgage backed securities 455,122 6,054 (108) 461,068 ------------- ------------- ------------- ------------- $ 810,122 $ 13,618 $ (108) $ 823,632 ============= ============= ============= =============
Page 10 11 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- The amortized cost and fair value of securities at March 31, 1999, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Securities not due at a single maturity date, primarily mortgage-backed securities and equity securities are shown separately.
Amortized Cost Fair Value ------------ ------------ AVAILABLE FOR SALE Due in one year or less $ 22,140,648 $ 22,289,523 Due after one year through five years 91,284,790 92,276,401 Due after five years through ten years 22,130,650 22,746,268 Due after ten years 213,748 223,225 Mortgage-backed securities 22,547,478 22,526,011 Equity securities 1,385,237 3,549,375 ------------ ------------ Total securities available for sale $159,702,551 $163,610,803 ============ ============
Amortized Estimated Cost Fair Value ------------ ------------ HELD TO MATURITY Due in one year or less $ 122,500 $ 124,100 Due after one year through five years 232,500 233,882 Mortgage-backed securities 345,386 350,356 ------------ ------------ Total securities held to maturity $ 700,386 $ 708,338 ============ ============
Proceeds from sales of securities available for sale totaled $1,209,587 resulting in gross gains of $727,304. No securities were called or settled by the issuer during the three months ended March 31, 1999. Securities called or settled by the issuer resulted in gains of $19,580 for the three months ended March 31, 1998. Securities with a carrying value of approximately $62,635,000 and $60,960,000 were pledged as of March 31, 1999 and December 31, 1998, 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 at March 31, 1999 and December 31, 1998 were as follows:
3/31/1999 12/31/1998 --------- ---------- Commercial and Agriculture $ 27,642,367 $ 28,415,462 Real Estate - mortgage 218,949,775 221,438,442 Real Estate - construction 2,731,181 3,492,928 Consumer 30,195,448 29,957,511 Credit card and other 1,602,325 1,426,312 Deferred loan fees (1,113,792) (1,140,518) Unearned interest (191,361) (240,936) ------------ ------------ Total $279,815,943 $283,349,201 ============ ============
(4) Allowance for Loan Losses A summary of the activity in the allowance for loan losses for the three months ended March 31, 1999 and 1998 was as follows:
1999 1998 ---------- ---------- Balance January 1, $4,567,126 $4,707,051 Loans charged-off (215,949) (156,216) Recoveries 56,526 45,865 Provision for loan losses 68,000 108,000 ---------- ---------- Balance March 31, $4,475,703 $4,704,700 ========== ==========
Page 12 13 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- Information regarding impaired loans was as follows for the three months ended March 31.
1999 1998 ---- ---- Average investment in impaired loans $3,685,000 $4,292,000 Interest income recognized on impaired loans including interest income recognized on cash basis 47,556 63,107 Interest Income recognized on impaired loans on cash basis 47,556 63,107
Information regarding impaired loans at March 31, 1999 and December 31, 1998 was as follows:
3/31/99 12/31/98 ------- -------- Balance impaired loans $3,739,000 $4,159,000 Less portion for which no allowance for loan losses is allocated -- -- Portion of impaired loan balance for which an allowance for credit losses is allocated $3,739,000 $4,159,000 ========== ========== Portion of allowance for loan losses allocated to the impaired loan balace $1,126,000 $1,173,000 ========== ==========
(5) Commitments, Contingencies and Off-Balance Sheet Risk The Bank subsidiaries are parties to financial instruments with off-balance sheet risk in the normal course of business to meet financing needs of their customers. These include commitments to make or purchase loans, undisbursed lines of credit, undisbursed credit card balances and letters of credit. The Banks' exposure to credit loss in the event of nonperformance by the other party to the financial instrument is represented by the contractual amount of those instruments. The Banks follow the same credit policy to make such commitments as they use for loans recorded on the consolidated balance sheets. Since many commitments to make loans expire without being used, the amount does not necessarily represent future cash commitments. Collateral obtained relating to the commitments is determined using management's credit evaluation of the borrower and may include real estate, vehicles, business assets, deposits and other items. The Banks do make Page 13 14 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- fixed rate loan commitments for short periods of time. However, such commitments were immaterial as of March 31, 1999 and December 31, 1998. Commitments to extend credit and letters of credit approximated the following amounts at March 31, 1999 and December 31, 1998.
Contract Amount --------------- December 31, March 31, 1999 1998 -------------- ----------- Commitment to extend credit: Lines of credit and construction loans $24,648,000 $23,412,000 Credit cards 3,615,000 3,315,000 Letters of credit 514,000 623,000 ----------- ----------- $28,777,000 $27,350,000 =========== ===========
The Banks are required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board requirements. The average reserve balance maintained in accordance with such requirements for the periods ended March 31, 1999 and December 31, 1998 approximated $2,791,000 and $2,326,000. In the normal course of business, the Corporation and its subsidiaries are involved in various legal actions, but in the opinion of management and its legal counsel, ultimate disposition of such legal matters is not expected to have a material adverse effect on the consolidated financial statements. Page 14 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, 1999, compared to December 31, 1998 and the consolidated results of operations for the three month period ending March 31, 1999 compared to the same period in 1998. This discussion should be read in conjunction with the consolidated financial statements and footnotes included in this Form 10-Q. The registrant is not aware of any trends, events or uncertainties that will have, or are reasonably likely to have, a material effect on the liquidity, capital resources, or operations except as discussed herein. Also, the registrant is not aware of any current recommendation by regulatory authorities, which would have a material effect if implemented. When used in this form 10-Q or future filings by the Corporation with the Securities and Exchange Commission, in press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "believe," or similar expressions are intended to identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Corporation wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and to advise readers that various factors, including regional and national economic conditions, changes in levels of market interest rates, credit risks of lending activities and competitive and regulatory factors, could effect the Corporation's financial performance and could cause the Corporation's actual results for future periods to differ materially from those anticipated or projected. The Corporation does not undertake, and specifically disclaims, any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements. See Exhibit 99, which is incorporated herein by reference. FINANCIAL CONDITION Total assets of the Corporation at March 31, 1999 totaled $488,041,082 compared to $508,888,863 at December 31, 1998. This was a decrease of $20,847,781 or 4.1 percent. Within the structure of the assets, net loans have decreased $3,441,835 or 1.2 percent since December 31, 1998, due in part to slow loan demand. Finally, the Corporation is now selling mortgages on the secondary market. For the first three months of 1998, loans originated for sale totaled $2,308,150. Loans held-for-sale Page 15 16 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - -------------------------------------------------------------------------------- decreased $1,098,659, or 48.3 percent from December 31, 1998. At March 31, 1999, the net loan to deposit ratio was 66.8 percent compared to 66.7 percent at December 31, 1998. At March 31, 1999, $163,610,803, or 99.6 percent of the security portfolio was classified as available for sale. The remainder of $700,386 was classified as held to maturity. Securities decreased $8,451,633 from December 31, 1998. Some matured securities were not replaced in order to increase liquidity. Additionally, equity securities with a market value of $1,209,587 were sold during the three months ended March 31, 1999. For the three months of operations in 1999, $68,000 was placed into the allowance from earnings compared to $108,000 for the same period of 1998. Provisions to the allowance are down for a couple of reasons. First, loan volume is down. With the loan volume down, the allowance is also reduced. The second reason is that impaired loans are also down. Impaired loans at March 31, 1999 totaled approximately $3,739,000, or 1.3 percent of the loan portfolio compared to $4,159,000, or 1.5 percent of the loan portfolio at December 31, 1998. Each impaired loan has a specific reserve amount associated with it. As with loan volume, when impaired loans decrease, so will the reserve. Net charge-offs for the first three months of 1999 were $159,423 compared to $110,351 for the same period of 1998. The March 31, 1999 allowance for loan losses as a percent of total loans was 1.60 percent compared to 1.61 percent at December 31, 1998. Office premises and equipment have decreased $77,663 and intangible assets have decreased $81,512 since December 31, 1998. The decrease in office premises and equipment is attributed to new purchases of $152,645, less proceeds from the sale of equipment of $1,627 and depreciation of $228,682. Total deposits at March 31, 1999 decreased $5,822,080 from year-end 1998. Noninterest-bearing deposits, representing demand deposit balances, increased $68,444 from year-end 1998. Interest-bearing deposits, including savings and time deposits, decreased $5,890,524 from year-end 1998. The year to date 1999 average balance of savings deposits has increased $1,608,000 compared to the average balance of the same period for 1998. The current average rate of these deposits is 2.38 percent compared to 2.80 percent in 1998. The decrease in the savings rate is due to the Banks lowering the savings rate between 25 and 50 basis points. The year to date 1998 average balance of time certificates has increased $2,121,000 compared to the average balance for the same period for 1998. The current average rate on these deposits is 5.18 percent compared to 5.66 percent for the same period in 1998. This decrease in rate is due to pricing strategies employed to help control the cost of deposits, reaction to market interest rates trending down and slowing deposit growth during a period of slower loan demand. Page 16 17 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - -------------------------------------------------------------------------------- Other borrowed funds have decreased $14,464,628 from December 31, 1998 to March 31, 1999. Federal Home Loan Bank borrowings have decreased $10,875,903 as a result of scheduled paydowns. Securities sold under agreements to repurchase have decreased $3,431,710 and U.S. Treasury Tax Demand Notes have decreased $157,015. Shareholders' equity at March 31, 1999 was $53,814,918, which was 11.0 percent of total assets. Shareholders' equity at December 31, 1998 was $53,740,931, which was 10.6 percent of total assets. The increase in shareholders' equity was represented by earnings of $1,855,581, dividends paid of $682,144, the purchase of treasury stock for $6,750 and the decrease in the unrealized gain on securities available for sale of $1,092,700. The Corporation paid a cash dividend on February 1, 1999 at the rate of $.16 per share. Total outstanding shares at March 31, 1999 were 4,263,151. RESULTS OF OPERATIONS Net income for the quarter ended March 31, 1999 was $1,855,581, or $.44 per common share compared to $1,260,419, or $.30 per common share for the same period in 1998. This was an increase of $595,162, or 47.2 percent. Some of the reasons for the changes are explained below. Net interest income for the first quarter 1999 totaled $4,330,268 compared to $4,221,169 for the first quarter of 1998. This was an increase of $109,099, or 2.6 percent. Total interest income for the first three months of 1999 has decreased $201,360, or 2.4 percent compared to the same period in 1998. The average rate on earning assets on a tax equivalent basis for the first three months of 1999 was 7.27 percent and 7.72 percent for the first three months of 1998. Total interest expense for the first three months of 1999 has decreased $310,459, or 7.2 percent compared to the same period of 1998. This decrease is due mainly to a decrease in interest on deposits of $302,750. The average rate on interest-bearing liabilities for the first three months of 1999 was 3.37 percent compared to 3.78 percent for the same period of 1998. The net interest margin on a tax equivalent basis was 3.90 percent for the three-month period ended March 31, 1999 and 3.94 percent for the same period ended March 31, 1998. Noninterest income for the first quarter 1999 totaled $1,904,767 compared to $969,849 for the first quarter 1998, an increase of $934,918. Gain on securities for the quarter increased $707,724 compared to 1998. The large increase in the gain on securities was due to the sale of equity securities at Farmers. The equity securities were sold to take advantage of significant increases in the market value of the portfolio. Revenue from computer operations increased $47,604, other operating income increased $88,057, service charges on deposit accounts increased $30,980 and the gain on the sale of loans increased $60,553. Gain on the sale of loans increased due to increased volume of loans sold. Page 17 18 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - -------------------------------------------------------------------------------- Noninterest expense for the first quarter 1999 totaled $3,582,583 compared to $3,319,441 for the first quarter 1998. This was an increase of $263,142 or 7.9 percent. The largest change in noninterest expense was in professional fees. Professional fees increased $91,997, due mainly to costs associated with a change in accounting at Farmers. INCOME TAX EXPENSE Income tax expense for the first quarter of 1999 totaled $728,871 compared to $503,159 for the first quarter of 1998. This was an increase of $225,713 or 44.8 percent. The increase in the federal income taxes is a result of the increase in total income before taxes of $820,875, generated mostly by income from the sale of equity securities. The effective tax rate remained comparable for the three month periods, 28.2% for the three months ended March 31, 1999 and 28.5% for the three months ended March 31, 1998. CAPITAL RESOURCES Shareholders equity totaled $53,814,918 at March 31, 1999 compared to $53,740,931 at December 31, 1998. All of the capital ratios exceed the regulatory minimum guidelines as identified in the following table:
Corporation Ratios Regulatory 3/31/99 12/31/98 Minimums ------- -------- -------- Tier I Risk Based Capital 16.9% 15.7% 4.0% Total Risk Based Capital 18.2% 17.0% 8.0% Leverage Ratio 9.9% 9.5% 5.0%
The Corporation paid a cash dividend of $.16 per common share on February 1, 1999 compared to $.15 per common share on February 1, 1998. Capital expenditures totaled $151,018 for the first three months of 1999 compared to $109,167 for the same period of 1998. Page 18 19 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- 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 1999 the Banks maintained a federal funds sold position that averaged $15,161,000. In addition, the Banks, through their respective correspondent banks, maintain federal funds borrowing lines totaling $28,950,000 and the Banks have total borrowing availability at the Federal Home Loan Bank of Cincinnati of $12,244,911 at March 31, 1999. Finally, 99.6% of the Corporation's security portfolio has been classified as available for sale, which provides additional liquidity. YEAR 2000 ISSUE First Citizens Banc Corp realizes that the Year 2000 challenge is a serious problem for not only itself and other banks but for all organizations. Many computer systems that use dates to calculate any number of computations, functions, and a vast number of commands may begin to fail prior to or on the start of the new Year 2000. It is critical to the continuing operations of First Citizens Banc Corp that all its systems that are sensitive to the Year 2000 date change be identified and changed before any adverse situations occur. First Citizens Banc Corp's definition of Year 2000 Compliant is the capability of sustaining minimal business disruptions, readiness of system applications and preparation for response and recovery as necessary. System applications are considered Year 2000 ready when they continue to produce the same understandable, accurate and predictable results, regardless of the date. The Year 2000 Plan is broken into 5 separate parts. Each part is important to the end result of being 2000 compliant. Upon completion of the plan all items will have been examined and corrected (or documented as an exception). The phases are as follows: awareness, assessment, renovation, validation, and implementation. The awareness phase involves identifying the Year 2000 problem, gaining executive level support for recognizing the importance of the problem, and developing a team and strategy for handling the problem. First Citizens Banc Corp has appointed Year 2000 Directors and established Year 2000 Teams and an Executive Y2K Committee. To help inform our customer and our community of the Year 2000 issue, we have sent brochures out to our customers and held information seminars that were open to the public. Page 19 20 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- The assessment phase involves identifying the size and complexity of the problem as it relates to First Citizens Banc Corp, including identifying all software, hardware, systems, and internal and external interdependencies that are affected by the century change. From the regulatory perspective, this also includes identifying the resources needed, the time frames, and the processes necessary to handle the Year 2000 problem. Assessment lists have been completed listing those items that are Year 2000 susceptible, prioritizing them as to their importance. Maintaining this list and contact with all necessary vendors is an ongoing process. Questionnaires were sent out to loan and deposit customers to help address our credit and liquidity risks. The renovation phase involves programming or reprogramming systems, hardware and software upgrades, system replacements, and related changes that we will have to make to prepare all systems for the turn of the century. This includes ongoing contact with any third-party servicers or software providers that the bank may be using. First Citizens Banc Corp is having all incompliant hardware and software either updated or replaced. The validation phase is essentially the testing phase to determine that all upgrades or reprogrammed systems, as well as other systems that are believed to be Year 2000 compliant, are truly ready for the date change to January 1, 2000. First Citizens Banc Corp has developed a test plan to verify that all hardware and software in use will be ready for the Year 2000. Testing is currently ongoing and should be completed by June 30, 1999. The implementation phase involves certification that existing systems are ready to go, and that any new systems or changes to existing systems are compliant with the turn of the century requirements. Active involvement of all departments and teams will monitor new and existing items to insure that a smooth transition into the Year 2000 and beyond is achieved. In anticipation of potential Year 2000 problems, the Corporation has addressed both preventative measures and corrective actions. Management has set a maximum budget of $281,100 for Year 2000 related issues. Through March 31, 1999, approximately $180,900 has been spent on solutions for possible problems. In addition to the dollars spent, specific contingency plans are in place for all mission critical items. Mission critical items are the programs that must be in place in order for the Corporation to continue operations with minimal business disruptions. The contingency plans vary widely and range from manual report preparation to telephone authorization of funds transfer to reliance on vendor's contingencies where no other alternative exists. Page 20 21 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- SALE OF DATA PROCESSING CONTRACTS AT SCC RESOURCES, INC. On June 19, 1998, SCC entered into an agreement with Jack Henry & Associates, Inc. (JHA) to sell all of the contracts for providing data processing services to community banks. JHA agreed to pay a fee based upon annual net revenue under e new JHA contract for each bank that signed a five-year contract with JHA by January 31, 1999. The Corporation recognized $2,966,692 of income as a result of the sale of the contracts in 1998. Expenses of $1,432,572 relating primarily to the write down of software and intangible assets, lease termination costs and employee severance costs were also recorded. The net gain of $1,534,120 was reflected in other income for the year ended December 31, 1999. SCC will continue to offer bookkeeping, proof and imaging services to its customer banks, as well as the affiliated banks. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Corporation's primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk. The Banks do not maintain a trading account for any class of financial instrument and the Corporation is not affected by foreign currency exchange rate risk or commodity price risk. Due to the basis in equities held by Farmers being so much less than the current fair value at this time, the Corporation is not subject to significant equity price risk. Interest rate risk is the risk that the Corporation's financial condition will be adversely affected due to movements in interest rates. The Corporation, like other financial institutions, is subject 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 Page 21 22 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- holds true in during periods of rising rates. The Corporation attempts to minimize the interest rate risk through management of the gap in order to achieve consistent shareholder return. The Corporation's Assets and Liability Management Policy is to maintain a laddered gap position. One strategy is to originate variable rate loans tied to market indices. Such loans reprice as the underlying market index changes. Currently, approximately 51.1% of the Corporation's loan portfolio reprices on at least an annual basis. The Corporation also invests excess funds in federal funds that mature and reprice daily. The Corporation's 1998 annual report details a table, which provides information about the Banks financial instruments that are sensitive to changes in interest rates as of December 31, 1998. The table is based on information and assumptions set forth in the notes. The Corporation believes the assumptions are reasonable. For loans, securities and liabilities with contractual maturities, the table represents principal cash flows and weighted average interest rate. For variable rate loans the contractual maturity and weighted average interest rate were used with an explanatory footnote as to repricing periods. For liabilities without contractual maturities such as demand and savings deposits, a decay rate was utilized to match their most likely withdrawal behavior. Management believes that no events have occurred since December 31, 1998 which would significantly change the ratio of rate sensitive liabilities for the given time horizon. Page 22 23 First Citizens Banc Corp Other Information Form 10-Q - ------------------------------------------------------------------------------- Part II - Other Information ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None Item 6. (a) Exhibit No. 27 Financial Data Schedule..........................26 (b) Exhibit No. 99 Safe Harbor under the Private Securities Litigation Reform Act of 1995 (c) Reports on Form 8-K - Incorporated by reference. Originally filed on February 3, 1999 announcing the February 1, 1999 dividend, implementation of the Dividend Reinvestment and Cash Purchase Program, and approval to purchase up to 168,000 shares of the Corporation's common stock over the next year. Page 23 24 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 17, 1999 - -------------------------- ------------------ David A. Voight Date President /s/ James O. Miller May 17, 1999 - -------------------------- ------------------ James O. Miller Date Executive Vice President Page 24 25 First Citizens Banc Corp Index to Exhibits Form 10-Q - --------------------------------------------------------------------------------
Exhibit Number Description Page Number - -------- ----------- ----------- 27 Financial Data Schedule 26 99 Safe Harbor Under the Private Securities Incorporated by Litigation Reform Act of 1995 reference to Exhibit 99 to Annual Report on Form 10-K for the Year Ended December 31, 1998 filed by the registrant on March 25, 1999
Page 25 EX-27 2 EXHIBIT 27
9 0000944745 FIRST CITIZENS BANC CORP 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 14,351,356 248,282 16,270,000 0 163,610,803 700,386 708,338 275,340,240 4,475,703 488,041,082 412,077,165 13,752,514 6,037,223 3,359,262 0 0 23,257,520 30,557,398 488,041,082 5,800,900 2,302,310 196,854 8,299,884 3,649,220 3,969,616 4,330,268 68,000 727,304 3,582,583 2,584,452 1,855,581 0 0 1,855,581 .44 .44 3.75 1,693,000 1,235,000 0 0 4,567,126 215,949 56,526 4,475,703 4,475,703 0 1,410,460
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