FC Banc (FCBZ) 10QSB 2005 Q1 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005.

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM            TO            

Commission file number - 33-53596

FC BANC CORP.

(Exact name of small business issuer as specified in its charter)

OHIO	34-1718070
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Farmers Citizens Bank Building, 105 Washington Square Box 567, Bucyrus, Ohio	44820-0567
(Address of principal executive offices)	(Zip Code)

(419) 562-7040

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

As of April 22, 2005, 579,040 shares of Common Stock of the Registrant were outstanding. There were no preferred shares outstanding.

Transitional Small Business Disclosure Format (Check One)    Yes  ¨    No  x

FC BANC CORP.

FORM 10-QSB

INDEX

		Page Number
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheet March 31, 2005 and December 31, 2004	3
	Consolidated Statement of Income Three months ended March 31, 2005 and 2004	4
	Consolidated Statement of Comprehensive Income (Loss) Three months ended March 31, 2005 and 2004	5
	Consolidated Statement of Changes in Shareholders’ Equity — Three months ended March 31, 2005	6
	Consolidated Statement of Cash Flows Three months ended March 31, 2005 and 2004	7
	Notes to Unaudited Consolidated Financial Statements	8-12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13-17
Item 3.	Controls and Procedures	17
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults upon Senior Securities	18
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 5.	Other Information	18
Item 6.	Exhibits	18
Signatures		19

2

FC BANC CORP, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

	(Dollars in thousands)
	At March 31, 2005			At December 31, 2004
ASSETS
Cash and cash equivalents:
Cash and amounts due from banks	$	3,636		$	3,584
Federal Funds Sold		800			—
Total cash and cash equivalents		4,436			3,584
Investment securities, available-for-sale		65,906			53,749
Loans		80,125			79,655
Allowance for loan losses		(997	)		(966	)
Net Loans		79,128			78,689
Premises and equipment		6,592			6,698
Bank-owned life insurance		3,026			3,001
Accrued interest and other assets		3,146			2,570
TOTAL ASSETS	$	162,234		$	148,291
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing	$	14,845		$	14,259
Interest-bearing		86,565			86,951
Total deposits		101,410			101,210
Short-term borrowings		14,731			11,621
Other borrowings		30,439			20,887
Accrued interest and other liabilities		2,762			1,305
TOTAL LIABILITIES		149,342			135,023
SHAREHOLDERS’ EQUITY
Common shares, no par value; 4,000,000 shares authorized; 665,632 shares issued		832			832
Additional paid-in capital		1,358			1,358
Retained earnings		13,362			13,269
Treasury shares, at cost; 86,592 and 86,800		(2,190	)		(2,196	)
Accumulated other comprehensive income (loss)		(470	)		5
TOTAL SHAREHOLDERS’ EQUITY		12,892			13,268
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	162,234		$	148,291

See accompanying notes to unaudited consolidated financial statements

3

FC BANC CORP, INC.

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

	(Dollars in thousands except earnings per share amounts)
	Three Months Ended March 31, 2005		Three Months Ended March 31, 2004
INTEREST INCOME
Interest and fees on loans	$	1,222	$	1,291
Interest and dividends on investment securities		591		485
Interest on federal funds sold		4		3
TOTAL INTEREST INCOME		1,817		1,779
INTEREST EXPENSE
Interest on deposits		419		419
Interest on borrowed funds		295		236
TOTAL INTEREST EXPENSE		714		655
NET INTEREST INCOME		1,103		1,124
Provision for loan losses		35		—
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		1,068		1,124
OTHER INCOME
Service charges		145		150
Investment securities gains, net		121		—
Bank owned life insurance earnings		28		42
Other income		98		83
TOTAL OTHER INCOME		392		275
OTHER EXPENSES
Salaries and employee benefits		571		517
Net occupancy and equipment		184		199
Legal and professional fees		69		55
Data processing		106		103
State taxes		41		43
Other expenses		246		192
TOTAL OTHER EXPENSES		1,217		1,109
NET INCOME BEFORE FEDERAL INCOME TAX EXPENSE		243		290
Federal income tax expense		40		21
NET INCOME	$	203	$	269
EARNINGS PER SHARE:
Earnings per common share – basic	$	0.38	$	0.47
Earnings per common share – diluted	$	0.38	$	0.46

See accompanying notes to unaudited consolidated financial statements

4

FC BANC CORP, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	Three Months Ended March 31
	2005			2004
	(dollars in thousands)
Net income	$	203		$	269
Other comprehensive income (loss):
Unrealized gain (losses) on available for sale securities	$	(839	)	$	544
Less: Reclassification adjustment for gain included in net income		121			—
Other comprehensive gain (loss) before taxes		(718	)		544
Income tax expense (benefit) related to other comprehensive income (loss)		(243	)		185
Other comprehensive gain (loss)		(475	)		359
Comprehensive income (loss)	$	(272	)	$	628

See accompanying notes to the unaudited consolidated financial statements

5

FC BANC CORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)

	Common Shares		Additional paid-in capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Shares			Total Shareholders Equity
	(Dollars in thousands, except per share data)
Balances at December 31, 2004	$	832	$	1,358	$	13,269		$	5		$	(2,196	)	$	13,268
Net income						203									203
Other comprehensive loss:
Unrealized loss on available for sale Securities, net of reclassification Adjustment, net of tax benefit of $243									(475	)					(475	)
Comprehensive income
Cash dividends ($.19 per share)						(110	)								(110	)
Purchase of treasury stock
Exercise of Stock Options (225 shares)												(6	)		(6	)
Balances at March 31, 2005	$	832	$	1,358	$	13,362		$	(470	)	$	(2,190	)	$	12,892

See accompanying notes to unaudited consolidated financial statements

6

FC BANC CORP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

	(Dollars in thousands)
	Three Months Ended March 31 2005			Three Months Ended March 31 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	203		$	269
Adjustments to reconcile net income to net cash Provided by operating activities:
Provision for loan losses		35			—
Investments gains, net		(121	)		—
Originations from sale of loans		—			(11,864	)
Proceeds from sale of loans		—			11,881
Gain from sale of loans		—			(17	)
Depreciation, amortization, accretion, and deferred loan fees		122			274
Deferred income taxes		86			222
Net change in:
Accrued interest receivable		(84	)		(5	)
Accrued interest payable		(2	)		(11	)
Other assets		(348	)		(325	)
Other liabilities		1,458			50
Net cash provided by operating activities		1,349			474
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale		(21,138	)		(2,549	)
Proceeds from sales of securities		6,508			0
Proceeds from maturities and repayments of securities available-for-sale		1,862			2,587
Purchases of regulatory stock		(10	)		(9	)
Net increase in loans		474			9,867
Purchase of premises and equipment		(3	)		(105	)
Net cash (used for) provided by investing activities		(13,255	)		9,791
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		200			405
Net increase in short-term borrowed funds		3,110			2,915
Proceeds from long-term FHLB advances		10,000			—
Repayments on borrowings		(448	)		(1,440	)
Purchase of treasury stock		—			(12	)
Exercise of stock options		6			92
Cash dividends paid		(110	)		(109	)
Net cash provided by financing activities		12,758			1,851
NET INCREASE IN CASH AND CASH EQUIVALENTS		852			12,116
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		3,584			3,936
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	4,436		$	16,052
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest	$	713		$	665
Cash paid during the period for income taxes		—			235

7

FC BANC CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands except per share amounts)

March 31, 2005

NOTE 1. BASIS OF PRESENTATION

In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of FC Banc Corp.’s (“Company” or “Bancorp”) financial position as of March 31, 2005, and December 31, 2004, and the results of operations for the three months ended March 31, 2005 and 2004, and the cash flows for the three months ended March 31, 2005 and 2004. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB. The results of operations for the three months ended March 31, 2005, are not necessarily indicative of the results which may be expected for the entire fiscal year.

The Company maintains a stock option plan for key officers, employees, and non-employee directors. The Company accounts for the plan under provisions of APB Opinion No. 25,“Accounting for Stock Issued to Employees,” and related interpretations. Under this opinion, no compensation expense has been recognized with respect to the plan because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the grant date.

Had compensation expense for the stock option plans been recognized in accordance with the fair value accounting provisions of FAS No. 123,Accounting for Stock-Based Compensation, net income applicable to common stock and basic and diluted net income per common share for the three months ended March 31, 2005 and 2004 would have been as follows:

	Three Months Ended
	2005		2004
Net income, as reported	$	203	$	269
Less proforma expense related to stock options		2		9
Proforma net income	$	201	$	260
Basic net income per common share:
As reported	$	0.38	$	0.47
Pro forma		0.35		0.45
Diluted net income per common share:
As reported	$	0.38	$	0.46
Pro forma		0.35		0.45

8

For purposes of computing pro forma results, the Company estimated the fair values of stock options using the Black-Scholes option pricing model. The model requires the use of subjective assumptions which can materially affect fair value estimates. Therefore, the pro forma results are estimates of results of operations as if compensation expense had been recognized for the stock option plans.

The fair value of each stock option granted was estimated using the following weighted-average assumptions:

Grant Year	Expected Dividend Yield		Risk-Free Interest Rate		Expected Volatility		Remaining Expected Life (in years)
1997	1.10	%	6.89	%	6.41	%	9.32
1998	1.05	%	5.77	%	27.00	%	9.18
1999	1.02	%	5.17	%	15.25	%	9.24
2000	1.02	%	6.75	%	5.56	%	9.05
2001	1.03	%	5.37	%	3.59	%	9.51
2002	1.03	%	4.05	%	16.50	%	9.89
2004	1.03	%	4.08	%	26.53	%	9.13

NOTE 2 EARNINGS PER SHARE

There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Income will be used as the numerator. The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation.

	Three Months Ended March 31,
	2005	2004
Weighted-average common shares outstanding used to calculate basic earnings per share	578,970	576,692
Additional common stock equivalents(stock options) used to calculate diluted earnings per share.	2,051	3,716
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share	581,019	580,409

Options to purchase 7,275 shares of common stock outstanding as of the three months ended March 31, 2005 at prices from $28.50 to $31.00 were not included in the computation of diluted EPS because to do so would have been anti-dilutive. There were no options that were antidilutive as of March 31, 2004.

9

NOTE 3 RECENT ACCOUNTING PRONOUNCEMENTS

In April, the Securities and Exchange Commission adopted a new rule that amends the compliance dates for Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS No. 123R). The Statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability instruments issued. FAS No. 123 (Revised 2004) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The Company will adopt FAS No. 123 (Revised 2004) on January 1, 2006 and is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations.

In December 2004, FASB issued FAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. FAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of FAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

NOTE 4 REGULATORY CAPITAL

The Company’s actual capital ratios are presented in the following table which shows the Company met all regulatory capital requirements. The capital position of the Bank does not differ significantly from the Company’s.

	2005				2004
	Amount		Ratio		Amount		Ratio
Total Capital (to Risk-weighted Assets)
Actual	$	14,359	15.23	%	$	14,413	15.67	%
For Capital Adequacy Purposes		7,542	8.00			7,358	8.00
To Be Well Capitalized		9,427	10.00			9,198	10.00
Tier I Capital (to Risk-weighted Assets)
Actual	$	13,362	14.18	%	$	13,263	14.42	%
For Capital Adequacy Purposes		3,771	4.00			3,679	4.00
To Be Well Capitalized		5,686	6.00			5,519	6.00
Tier I Capital (to Average Assets)
Actual	$	13,362	8.78	%	$	13,263	8.89	%
For Capital Adequacy Purposes		6,086	4.00			5,968	4.00
To Be Well Capitalized		7,608	5.00			7,460	5.00

10

FC BANC CORP.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(numbers in thousands except per share amounts)

Safe Harbor Clause

This report contains certain “forward-looking statements.” The Company desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protection of such safe harbor with respect to all such forward-looking statements. These forward-looking statements, which are included in Management’s Discussion and Analysis, describe future plans or strategies and include the Company’s expectations of future financial results. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” and similar expressions identify forward-looking statements. The Company’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include interest rate trends, the general economic climate in the Company’s market area and the country as a whole, loan delinquency rates, and changes in federal and state regulations. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.

General

FC Banc Corp was established on February 1, 1994 as a bank holding company whose activities are primarily limited to holding the stock of The Farmers Citizens Bank, Bucyrus, Ohio (“Bank”). Farmers Citizens Bank was chartered on October 1, 1907, and officially opened for business on January 6, 1908. Farmers Citizens Bank has provided continuous customer service to Crawford County for more than 90 years. The Bank conducts a general banking business in north central Ohio that consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and non-residential purposes. The Bank’s principal types of lending are in commercial real estate, residential real estate, and consumer. The banks lending policies specify loan to value ratios low enough to minimize the risk. Another factor that minimizes the risk is our knowledge of the market area. Farmers Citizens Bank is a community bank and this helps us in knowing our customers and market area. Also, the bank is continuously reviewing its underwriting procedures and policies. In the consumer loan area, the bank specializes in home equity loans and loans for late model cars. Usually, the collateral held is sufficient to minimize risk. The Bank’s profitability is significantly dependent on net interest income. That is the difference between interest income generated from interest-earning assets (i.e., loans and investments) and the interest expense paid on interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and interest received or paid on these balances. The level of interest rates paid or received by the Bank can be significantly influenced by a number of environmental factors, such as governmental monetary policy, that are outside of management control.

The consolidated financial information presented herein has been prepared in conformity with U.S. generally accepted accounting principles (GAAP). In preparing consolidated financial statements in accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from such estimates.

11

The Company is subject to regulation by the Board of Governors of the Federal Reserve System, which limits the activities in which the Company and the Bank may engage. The Bank is supervised by the State of Ohio, Division of Financial Institutions and its deposits are insured up to applicable limits under the Bank Insurance Fund (“BIF”) of the Federal Deposit Insurance Corporation (“FDIC”). The Bank is a member of the Federal Reserve System and is subject to its supervision. The Company and the Bank must file with the U.S. Securities and Exchange Commission, the Federal Reserve Board and Ohio Division of Financial Institutions the prescribed periodic reports containing full and accurate statements of its affairs.

The Bank has four banking offices located in Crawford, Morrow and Knox Counties, Ohio. The primary market area of the Bank is North Central Ohio, which includes Crawford, Morrow, Knox and contiguous counties. The Banks main office is about 60 miles north of the state capital, Columbus, Ohio. Our Bank has various competition in all of the markets we serve. In Bucyrus, there are five other commercial banks. In both Cardington and Fredericktown, there are one. All of our markets are within a short distance to other markets that present another dozen or so competitors. In addition, there are no less than ten mortgages companies in each and every market we serve. In our direct markets, the Bank has approximately 20% market share of deposits. The economy of our markets is driven by several major components: Manufacturing, retail trade, governmental service, general service, and agricultural. Census date indicates a positive trend in our Morrow and Knox counties areas and a steady trend in Crawford County. The general economic conditions of all three of our markets is reflective of the State of Ohio and to a certain extent our national economy. Overall, the general outlook for the economy is cautiously optimistic. Moderate growth to stable conditions is seen, but in general the economy has not shown positive signs of a robust economy. The financial services industry is highly competitive. The Bank competes with financial services providers, such as banks, savings associations, credit unions, finance companies, mortgage banking companies, insurance companies, and money market and mutual fund companies. The Bank also faces increased competition from non-banking institutions such as brokerage houses and insurance companies, as well as from financial service subsidiaries of commercial and manufacturing companies. Many of these competitors enjoy the benefits of advanced technology, fewer regulatory constraints and lower cost structures.

12

FC BANC CORP.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(numbers in thousands except per share amounts)

Changes in Financial Condition

At March 31, 2005, the consolidated assets of the Company totaled $162.2 million, an increase of $13.9 million, or 9.37%, from $148.3 million at December 31, 2004. The increase in total assets resulted from growth in investment securities available for sale of $12.2 million, and other assets of $0.5 million.

Total cash and cash equivalents increased by $0.8 million to $4.4 million at March 31, 2005, compared to $3.6 million at December 31, 2004. The increase is in federal funds sold of $0.8 million was to cover short-term liquidity needs of the Bank.

Investment securities at March 31, 2005 increased by $12.2 million or 22.62% when compared to December 31, 2004. The increase was due to a return on equity enhancement strategy implemented in the first quarter. This strategy was implemented in order to take advantage of market opportunities. Investment securities and federal funds sold are consistently maintained at levels that will cover the short-term liquidity needs of the Bank. The Bank utilizes a number of outside sources to analyze, evaluate, and obtain advice relative to the management of its investment portfolio. The Bank does not invest in any one type of security over another. Funds allocated to the investment portfolio are constantly monitored by management to ensure that a proper ratio of liquidity and earnings is maintained.

Net loans receivable increased by $0.4 million, or 0.45%, to $79.1 million at March 31, 2005, compared to $78.7 million at December 31, 2004. The allowance for loan losses has stayed about the same as compared to December 31, 2004. The quality of our loan portfolio continues to be strong, as delinquencies continue to be below peer group.

Deposit liabilities increased by $0.2 million, or 0.20%, to $101.4 million at March 31, 2005, from $101.2 million at December 31, 2004. Non interest bearing checking accounts and time deposits increased by $0.6 million and $0.4 million, respectively. Money market accounts, savings accounts, and interest bearing checking accounts decreased by $0.2 million, $0.3 million, and $0.1 million, respectively. The growth in time deposits was due to promotions in the first quarter. Our strategy for 2005 is to continue to focus on obtaining lower cost deposits.

Short term borrowings increased by $3.1 million in the first quarter of 2005. This includes federal funds purchased and securities sold under agreements to repurchase. This increase was due to an increase in repurchase agreements.

Other borrowings increased by $9.5 million due to an increase in FHLB borrowings. This is the result of a return on equity enhancement strategy through the use of alternative sources of funds, typically borrowings. In using this strategy, the bank borrows funds and invests that money in mortgage backed securities with a similar average life. In the first quarter of 2005, the bank borrowed $10.0 million which was put into investments. Other purchases for this year have been offset by sales, maturities, and principle pay downs on mortgage back securities.

13

FC BANC CORP.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(numbers in thousands except per share amounts)

Total shareholders’ equity was $12.9 million at March 31, 2005 as compared to $13.3 million on December 31, 2004. During the first three months of 2005 shareholders equity decreased due to a decrease of $0.5 million in accumulated other comprehensive income and a shareholders dividend of $0.1 million, which was offset by net income of $0.2 million.

The Bank’s liquidity, primarily represented by cash and cash equivalents, is a result of its operating, investing and financing activities. Principal sources of funds are deposits, loan and mortgage-backed security repayments, maturities of securities and other funds provided by operations. The Bank also has the ability to borrow from the Federal Home Bank of Cincinnati (“FHLB”) as well as the Federal Reserve Bank of Cleveland (“FRB” or “Fed”). While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan and mortgage-backed security prepayments are more influenced by interest rates, general economic conditions and competition. The Bank maintains investments in liquid assets based upon management’s assessment of (i) the need for funds, (ii) expected deposit flows, (iii) the yields available on short-term liquid assets and (iv) the objectives of the asset/liability management program. In the ordinary course of business, part of such liquid investments is composed of deposits at correspondent banks. Although the amount on deposit at such banks often exceeds the $100,000 limit covered by FDIC insurance, the Bank monitors the capital and financial condition of such institutions to ensure that such deposits do not expose the Bank to undue risk of loss.

The Asset/Liability Management Committee of the Company is responsible for liquidity management. This committee, which is comprised of various managers, has an Asset/Liability Policy that covers all assets and liabilities, as well as off-balance sheet items that are potential sources and uses of liquidity. The Company’s liquidity management objective is to maintain the ability to meet commitments to fund loans and to purchase securities, as well as to repay deposits and other liabilities in accordance with their terms. The Company’s overall approach to liquidity management is to ensure that sources of liquidity are sufficient in amounts and diversity to accommodate changes in loan demand and deposit fluctuations without a material adverse impact on net income. The Committee monitors the Company’s liquidity needs on an ongoing basis. Currently the Company has several sources available for both short- and long-term liquidity needs. These include, but are not restricted to advances from the FHLB, Federal Funds and borrowings from the Fed and other correspondent banks.

The Bank is subject to various regulatory capital requirements administered by its primary federal regulator, the FRB. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material affect on the Company and the consolidated financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk-weighing, and other factors.

14

FC BANC CORP.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(numbers in thousands except per share amounts)

Qualitative measures established by regulation to ensure capital adequacy requires the Bank to maintain minimum amounts and ratios of: total risk-based capital and Tier I capital to risk-weighted assets (as defined by the regulations), and Tier I capital to average assets (as defined). Management believes, as of March 31, 2005, that the Bank meets all of the capital adequacy requirements to which it is subject.

As of December 31, 2004, the most recent notification from the FDIC, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as specified by the regulators. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

15

FC BANC CORP.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(numbers in thousands except per share amounts)

Results of Operations

Comparison of Three Months Ended March 31, 2005 and 2004

General. Net income decreased by $66, from $269 to $203 during the first quarter of 2005 as compared to the same three-month period ended March 31, 2004.

Net Interest Income.Net interest income decreased by $21 for the three months ended March 31, 2005 as compared to March 31, 2004. An increase of $38 in interest income was offset by an increase of $59 in interest expense. The increase of $38 was because of a variety of factors. Total loan income decreased by $69 because average balances were $5.3 million less than last year. The decrease in loans was due to the sale of approximately $12.0 million in loans in March of 2004. Interest and dividends on investment securities increased by $106 due to an increase in average balances of $9.3 million and a 9 basis point increase in average rate earned. The average rate earned on earning assets was 5.26% for the first quarter of 2005 compared to 5.23% in the first quarter of 2004. Interest expense on deposit liabilities stayed about the same for the three months ended March 31, 2005, as compared to the same period in 2004. Average deposits decreased by $2.5 million comparing March 31, 2005 to 2004. The costs of funds increased by 6 basis points. An increase in other demand deposits of $1.0 million also had a positive impact. Interest expense paid on borrowings increased $59 due to a $5.4 million increase in average balances. The Bank’s average cost of funds (including borrowings) for the first three months of 2005 was 2.08%, as compared to 1.94% for the same period in 2004.

Provision for Loan Losses. A provision for loan losses of $35 has been provided in 2005 as a result of management’s thorough analysis of the banks portfolio and the factors surrounding the current market conditions. As of March 31, 2005, the reserve for loan losses was $997 which represents 1.25% of outstanding loans. The reserve continues to exceed peer groups and based upon both internal and external evaluations indicate that the levels of reserves are adequate given the risk within the loan portfolio. Current analysis indicated that this level of reserve is adequate given the current economic trends, delinquency patterns and loan quality within the various portfolios. The Bank did not expense any provision for loan losses during the first quarter of 2004. Our reserve for loan loss as of March 31, 2004 stood at $1.2 million or 1.55% of gross loans.

Non-Interest Income. Non-interest income increased by $117, or 42.55%, to $392 for the three months ended March 31, 2005, from $275 for the three months ended March 31, 2004. In 2005, we have recorded a gain of $121 from the sale of investment securities.

Non-Interest Expense. Non-interest expense increased by $108, or 9.74%, to $1,217 for the three months ended March 31, 2005, from $1,109 in the comparable period in 2004. Significant increases were in salaries and employee benefits of $54, legal and professional of $14, and other expenses of $35. Net occupancy and equipment decreased by $14. Net occupancy and equipment expense variances were due to decreases of $15 in maintenance and real estate tax expense. Other expense variances were increases in postage ($10), advertising ($8), and ATM fees ($54). The decrease in ATM Fees was due to a refund of $30 in 2004.

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FC BANC CORP.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(numbers in thousands except per share amounts)

Income Taxes. The provision for income taxes increased by $19 for the three months ended March 31, 2005, compared with the prior year, primarily as a result of lower tax exempt income in 2004.

CREDIT QUALITY RISK

The following table identifies amounts of loan losses and non-performing loans. Past due loans are those that were contractually past due 90 days or more as to interest or principal payments (dollars in thousands).

	March 31, 2005			December 31, 2004
Non-accruing loans	$	352		$	191
Impaired loans		—			—
Accrual loans - 90 days or more past due		12			8
Total non-performing loans		364			199
Foreclosed assets held for sale		—			—
Total non-performing assets	$	364		$	199
Non-performing loans as a percent of loans net of unearned income		0.45	%		0.23	%
Non-performing assets as a percent of assets		0.22	%		0.13	%

A loan is placed on non-accrual when payment terms have been seriously violated (principal and/or interest payments are 90 days or more past due, deterioration of the borrower’s ability to repay, or significant decrease in value of the underlying loan collateral) and stays on non-accrual until the loan is brought current as to principal and interest. The classification of a loan or other asset as non-accruing does not indicate that loan principal and interest will not be collectible. The Bank adheres to the policy of the Federal Reserve that banks may not accrue interest on any loan when the principal or interest is past due and has remained unpaid for 90 days or more unless the loan is both well secured and in the process of collection.

Item 3 Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2005, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2005, in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

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There was no change in the Company’s internal control over financial reporting that occurred during the Company’s quarter ended March 31, 2005, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

FC BANC CORP.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Not Applicable

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not Applicable

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

ITEM 5 - OTHER INFORMATION

Not Applicable

ITEM 6 - EXHIBITS

(a) All applicable exhibits required by Item 601 of Regulation S-B are furnished with this report.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	FC BANC CORP.
Date April 26, 2005	By	/s/ Coleman J. Clougherty
		Coleman J. Clougherty
		President and Principal Executive Officer
Date April 26, 2005	By	/s/ Jeffrey A. Wise
		Jeffrey A. Wise
		Treasurer and Principal Accounting Officer

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Exhibit Index

Page Number	Exhibit
N/A	Exhibit 3.1 i Amended and Restated Articles of Incorporation of FC Banc Corp., filed as part of the Form 10KSB for the fiscal year ended December 31, 2002 and incorporated herein by reference.
N/A	Exhibit 3.1 ii Amendment to the Amended and Restated Articles of Incorporation of FC Banc Corp. filed as part of the Form 10QSB for the quarter ended March 31, 2004 and incorporated herein by reference.
N/A	Exhibit 3.2 Code of regulations of FC Banc Corp., filed February 24, 2003 as an exhibit the Schedule 14A, Proxy Statement for the fiscal year ended December 31, 2002 and incorporated herein by reference.
N/A	Exhibit 4 For definition of rights of security holders please refer to Schedule 14A, Proxy Statement for the fiscal year ended December 31, 2002 and incorporated herein by reference.
N/A	Exhibit 10.1 Employment Agreement dated January 11, 2005, between the Company and Coleman J. Clougherty, filed as Exhibit 10.1 to Form 8-K on March 15, 2005, and incorporated herein by reference
N/A	Exhibit 10.2 Employment Agreement dated March, 2005, between the Company and Jeffrey A. Wise, filed as Exhibit 10.1 to Form 8-K on January 31, 2005, and incorporated herein by reference
N/A	Exhibit 10.3 Change of Control Agreement dated January 24, 2005 between the Company and Jeffrey A. Wise, filed as Exhibit 10.2 to Form 8-K on January 31, 2005, and incorporated herein by reference
N/A	Exhibit 10.4 Change of Control Agreement dated February 10, 2005, between the Company and Anne Spreng Ferris, filed as Exhibit 10.3 to Form 10-K on March 30, 2005, and incorporated herein by reference
N/A	Exhibit 10.5 Change of Control Agreement dated January 31, 2005 between the Company an Matthew C. Evans, filed as Exhibit 10.5 to Form 10-K on March 30, 2005, and incorporated herein by reference
21	Exhibit 31.1 - CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
22	Exhibit 31.2 - CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
23	Exhibit 32.1 - CEO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
24	Exhibit 32.2 - CFO Certification Pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
25	Exhibit 99.1 Independent Accountant’s Report

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