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, 2002.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________ TO __________
Commission file number - 33-53596
FC BANC CORP.
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(Exact name of small business issuer as specified in its charter)
OHIO 34-1718070
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Farmers Citizens Bank Building,
105 Washington Square
Box 567, Bucyrus, Ohio 44820-0567
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(Address of principal executive offices) (Zip Code)
(419) 562-7040
-------------------------
(Issuer's telephone number)
N/A
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(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 30, 2002, 579,862 shares of Common Stock of the Registrant were
outstanding. There were no preferred shares outstanding.
FC BANC CORP.
BUCYRUS, OHIO
FORM 10-QSB
INDEX
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Page Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 3
March 31, 2002 and December 31, 2001
Consolidated Statements of Income 4
Three months ended March 31, 2002 and 2001
Consolidated Statement of Comprehensive Income 5
Three Months Ended March 31, 2002 and 2001
Consolidated Statements of Changes in
Shareholders' Equity -- Three months ended March 31, 2002 6
and year ended December 31, 2001
Consolidated Statement of Cash Flows 7
Three months ended March 31, 2002 and 2001
Notes to Unaudited Consolidated Financial Statements 8
March 31, 2002 and December 31, 2001
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
2
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
At March 31, At December 31,
------------------ --------------------
2002 2001
-------- --------
ASSETS
Cash and cash equivalents:
Cash and amounts due from banks $ 2,961 $ 3,659
Federal Funds Sold 2,300 3,000
-------- --------
Total cash and cash equivalents 5,261 6,659
Investment securities, available-for-sale 35,106 33,989
Loans 61,151 61,038
Allowance for loan losses (1,315) (1,499)
-------- --------
Net Loans 59,836 59,539
Premises and equipment 5,623 4,575
Accrued interest and other assets 4,678 4,799
-------- --------
TOTAL ASSETS $110,504 $109,561
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing 12,095 12,718
Interest-bearing 74,492 73,035
-------- --------
Total deposits 86,587 85,753
Short-term borrowings 4,268 4,085
Other borrowings 5,988 6,009
Accrued interest and other liabilities 1,821 1,535
-------- --------
TOTAL LIABILITIES 98,664 97,382
SHAREHOLDERS' EQUITY
Common shares, no par value; 4,000,000 shares
authorized; 665,632 shares issued 832 832
Additional paid-in capital 1,366 1,366
Retained earnings 11,765 11,793
Treasury shares, at cost; 85,770 and 75,478 (2,137) (1,921)
Accumulated other comprehensive income 14 109
-------- --------
TOTAL SHAREHOLDERS' EQUITY 11,840 12,179
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $110,504 $109,561
======== ========
- ---------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements
3
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)
3 Months Ended 3 Months Ended
March 31, March 31,
--------------- --------------
2002 2001
------ ------
INTEREST INCOME
Interest and fees on loans $1,233 $1,348
Interest and dividends on investment securities 399 379
Interest on federal funds sold 15 52
------ ------
TOTAL INTEREST INCOME 1,647 1,779
INTEREST EXPENSE
Interest on deposits 450 731
Interest on borrowed funds 88 51
------ ------
TOTAL INTEREST EXPENSE 538 782
------ ------
NET INTEREST INCOME 1,109 997
Provision for loan losses 0 0
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,109 997
OTHER INCOME
Service charges 139 140
Bank Owned Life Insurance Earnings 32 32
Investment Securities gains (losses),net 2 12
------ ------
TOTAL OTHER INCOME 173 184
OTHER EXPENSES
Salaries and employee benefits 802 427
Net occupancy and equipment expenses 138 177
Legal and professional 48 40
State taxes 38 38
Other expenses 212 178
------ ------
TOTAL OTHER EXPENSES 1,238 926
------ ------
NET INCOME BEFORE FEDERAL INCOME TAX EXPENSE 44 255
Federal income tax expense (benefit) (21) 60
------ ------
NET INCOME $ 65 $ 195
====== ======
EARNINGS PER SHARE:
Earnings per common share - basic $0.11 $0.32
Earnings per common share - diluted $0.11 $0.32
- --------------------------------------------------------------------------------
See accompanying notes to unaudited consolidated financial statements
4
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(dollars in thousands) Three Months Ended March 31
2002 2001
---- ----
Net Income $ 65 $195
Other Comprehensive Income:
Unrealized Losses (gains) on available for sale securities $(144) $ 29
Less: Reclassification adjustment for gain included in net income 0 0
----- ----
Other Comprehensive Income before tax (144) 29
Income tax Expense related to other comprehensive income ( 49) 10
----- ----
Other comprehensive income, net of tax (95) 19
----- ----
Comprehensive Income (30) 214
See accompanying notes to the unaudited consolidated financial statements
5
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Accumulated
Additional Other Total
Common paid-in Retained Comprehensive Treasury Stockholders Comprehensive
Stock capital Earnings Income(loss) Stock Equity Income
------------------------------------------------------------------------------------------
(Dollars in thousands)
Balances at December 31, 2000 832 1,366 11,212 (74) (1,560) 11,776
Net Income 963 963 963
Other comprehensive income:
Unrealized gain on available for sale
Securities, net of reclassification
Adjustment, net of taxes of $95 183 183 183
------
Comprehensive Income 1,146
Cash Dividends ($.64 per share) (382) (382)
Purchase of treasury stock (361) (361)
----------------------------------------------------------------------
Balances at December 31, 2001 832 1,366 11,793 109 (1,921) 12,179
Net Income 65 65 65
Other comprehensive income:
Unrealized gain on available for sale
Securities, net of reclassification
Adjustment, net of taxes of $49 (95) (95) (95)
------
Comprehensive Income (30)
Cash Dividends ($.16 per share) (93) (93)
Purchase of treasury stock (216) (216)
----------------------------------------------------------------------
Balances at March 31, 2002 832 1,366 11,765 14 (2,137) 11,840
Components of comprehensive income loss: 2002
----
Change in net unrealized gain(loss)
On investments available for sale $ (94)
Realized (gains) losses included in net income,
Net of taxes of $1 (1)
-----
Total (95)
See accompanying notes to unaudited consolidated financial statements
6
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
3 Months Ended 3 Months Ended
March 31 March 31
-------------- --------------
2002 2001
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 65 195
Adjustments to reconcile net income to net cash
Provided by operating activities:
Investments Gain (Losses), net 2 0
Provision for loan losses 0 0
Income accrued on life insurance contracts (29) (32)
Depreciation 47 82
Deferred income taxes 78 0
Investment securities amortization (accretion), net 21 16
Purchase of loans 0 (526)
Net change in:
Accrued interest receivable (38) 11
Accrued interest payable (16) (29)
Other assets (266) (50)
Other liabilities 302 117
------ ------
Net cash provided by (used in) operating activities 166 (216)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale (6,030) (3,151)
Proceeds from Sales of Securities 3,054 0
Proceeds from maturities of securities available-for-sale 2,070 4,549
Net increase in loans (297) (375)
Purchase of premises and equipment (1,048) (200)
------ ------
Net cash provided by (used in) investing activities (2,251) 823
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in:
Noninterest-bearing, interest bearing, demand, and savings deposits (623) (1,692)
Certificates of deposit 1,457 125
Net increase in short-term borrowed funds 183 2,903
Proceeds from long-term FHLB advances 0 2,000
Payments on long-term debts (21) (2)
Exercise of stock options 0 0
Purchase of treasury stock (216) (127)
Cash dividends paid (93) (96)
------ ------
Net cash (used in) financing activities 687 3,111
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (1,398) 3,718
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,659 4,885
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 5,261 8,603
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest 538 782
Cash paid during the period for income taxes 100 0
7
FC BANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
March 31, 2002 and December 31, 2001
(Unaudited)
================================================================================
NOTE 1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary for a fair presentation of FC Banc
Corp.'s ("Company" or "Bancorp") financial position as of March 31, 2002, and
December 31, 2001, and the results of operations for the three months ended
March 31, 2002 and 2001, and the cash flows for the three months ended March 31,
2002 and 2001. Certain information and note disclosures normally included in
financial statements prepared in accordance with 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, 2002, are
not necessarily indicative of the results which may be expected for the entire
fiscal year.
NOTE 2 RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (FAS) No. 141, Business Combinations,
effective for all business combinations initiated after June 30, 2001, as well
as all business combinations accounted for by the purchase method that are
completed after June 30, 2001. The new statement requires that the purchase
method of accounting be used for all business combinations and prohibits the use
of the pooling-of-interests method. The adoption of Statement No. 141 did not
have a material effect on the Company's financial position or results of
operations.
In July 2001, the FASB issued FAS No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. The statement
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Thus, amortization of goodwill, including goodwill
recorded in past business combinations, will cease upon adoption of this
statement. However, the new statement did not amend FAS 72, Accounting for
Certain Acquisitions of Banking or Thrift Institutions, which requires
recognition and amortization of unidentified intangible assets relating to the
acquisition of financial institutions or branches thereof. The FASB has decided
to undertake a limited scope project to reconsider the provisions of FAS 72 in
2002. Therefore, the adoption of Statement No. 142 did not have a material
effect on the Company's financial position or results of operations.
8
In August 2001, the FASB issued FAS No. 143, Accounting for Asset Retirement
Obligations, which requires that the fair value of a liability be recognized
when incurred for the retirement of a long-lived asset and the value of the
asset be increased by that amount. The statement also requires that the
liability be maintained at its present value in subsequent periods and outlines
certain disclosures for such obligations. The adoption of this statement, which
is effective January 1, 2003, is not expected to have a material effect on the
Company's financial statements.
In October 2001, the FASB issued FAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. FAS 144 supercedes FAS 121 and applies to all
long-lived assets (including discontinued operations) and consequently amends
APB Opinion No. 30, Reporting Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business. FAS 144 requires that long-lived assets
that are to be disposed of by sale be measured at the lower of book value or
fair value less costs to sell. FAS 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001 and, generally, its
provisions are to be applied prospectively. The adoption of this statement did
not have a material effect on the Company's financial statements.
9
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
The Company is a bank holding company whose activities are primarily
limited to holding the stock of The Farmers Citizens Bank, Bucyrus, Ohio
("Bank"). The Bank conducts a general banking business in north central Ohio
that consists of attracting deposits from the general public and applying those
funds to the origination of loans for residential, consumer and non-residential
purposes. The Bank's profitability is significantly dependent on net interest
income that is the difference between interest income generated from interest-
earning assets (i.e., loans and investments) and the interest expense paid on
interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net
interest income is affected by the relative amount of interest-earning assets
and interest-bearing liabilities and interest received or paid on these
balances. The level of interest rates paid or received by the Bank can be
significantly influenced by a number of environmental factors, such as
governmental monetary policy, that are outside of management control.
Earnings per common share were computed by dividing net income by the
weighted-average number of shares outstanding for the three-month periods ended
March 31, 2002 and 2001.
The consolidated financial information presented herein has been prepared
in conformity with accounting principles generally accepted in the United States
of America. In preparing consolidated financial statements in accordance with
GAAP, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from such
estimates.
10
FC BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(numbers in thousands except per share amounts)
The Company is subject to regulation by the Board of Governors of the
Federal Reserve System, which limits the activities in which the Company and the
Bank may engage. The Bank is supervised by the State of Ohio, Division of
Financial Institutions and its deposits are insured up to applicable limits
under the Bank Insurance Fund (ABIF=) of the Federal Deposit Insurance
Corporation ("FDIC"). The Bank is a member of the Federal Reserve System and is
subject to its supervision. The Company and the Bank must file with the U.S.
Securities and Exchange Commission, the Federal Reserve Board and Ohio Division
of Financial Institutions the prescribed periodic reports containing full and
accurate statements of its affairs.
The Bank has four banking offices located in Crawford, Morrow and Knox
Counties, Ohio. The primary market area of the Bank is North Central Ohio,
which includes Crawford, Morrow, Knox and contiguous counties. Throughout last
year and the beginning of this year the bank has worked on two exhilarating
construction projects. Construction is almost complete on our new main office in
Bucyrus. Construction progress photos can be viewed on our website,
www.farmerscitizensbank.com, so that you may follow the building progress.
- ---------------------------
Banking services will be available in our new facility on May 15, 2002, with
Grand Opening festivities during the week of May 20-25, 2002. We believe that
this building will allow us to better serve our customers, create a positive
work environment for our employees, and demonstrates our true commitment to
future growth and development in Bucyrus.
Our second construction project began in November 2001 when we broke ground
for our new Fredericktown office. Banking services will be available in this new
facility on May 13,2002. Grand Opening festivities for this office will also be
held during the week of May 20-25, 2002. Our First Class presence in
Fredericktown continues to grow along with that community. We look forward to
sharing the numerous amenities of both buildings with our shareholders,
customers, and communities.
Changes in Financial Condition
At March 31, 2002, the consolidated assets of the Company totaled $110.5
million, an increase of $0.9 million, or 0.82%, from $109.6 million at December
31, 2001. The increase in total assets resulted primarily from deposit growth
of $0.8 million.
Net loans receivable increased by $0.3 million, or 0.50%, to $59.8 million
at March 31, 2002, compared to $59.5 million at December 31, 2001. Loans
secured by real estate and consumer loans increased $0.2 million and $0.9
million, respectively. Based on the results from April of 2002, we expect
significant loan growth in the second quarter.
Investment securities increased by $1.1 million, or 3.24% to $35.1 million
at March 31, 2002, compared to $34.0 million at December 31, 2001. The
investment portfolio was used as a place to put excess liquidity.
11
FC BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(numbers in thousands except per share amounts)
Total cash and cash equivalents declined by $1.4 million to $5.3 million at
March 31, 2002, compared to $6.7 million at December 31, 2001. The decline was
attributable to the better cash controls, and overnight Federal Funds Sold being
invested.
Deposit liabilities increased by $0.8 million, or 0.93%, to $86.6 million
at March 31, 2002, from $85.8 million at December 31, 2001. Money Market
accounts, savings accounts, and certificates of deposits increased by $0.3
million, $0.8 million, and $1.3 million, respectively. NOW accounts and demand
deposits declined by $1.0 million, and $0.6 million, respectively.
Total shareholders' equity was $11.8 million at March 31, 2002 as compared
to $12.2 million on December 31, 2001. During the first three months of 2002
shareholders equity decreased due to purchase of treasury shares of $0.2
million, a shareholders dividend of $0.1 million, and a decrease of $0.1 million
in accumulated other comprehensive income. .
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 Bank is responsible for
liquidity management. This committee, which is comprised of various managers,
has an Asset/Liability Policy that covers all assets and liabilities, as well as
off-balance sheet items that are potential sources and uses of liquidity. The
Bank's liquidity management objective is to maintain the ability to meet
commitments to fund loans and to purchase securities, as well as to repay
deposits and other liabilities in accordance with their terms. The Bank's
overall approach to liquidity management is to ensure that sources of liquidity
are sufficient in amounts and diversity to accommodate changes in loan demand
and deposit fluctuations without a material adverse impact on net income. The
Committee monitors the Bank's liquidity needs on an ongoing basis. Currently
the Bank has several sources available for both short- and long-term liquidity
needs. These include, but are not restricted to advances from the FHLB, Federal
Funds and borrowings from the Fed and other correspondent banks.
12
FC BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(numbers in thousands except per share amounts)
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 judgements by the regulators about
components, risk-weighing, and other factors.
Qualitative measures established by regulation to ensure capital adequacy
requires the Bank to maintain minimum amounts and ratios of: total risk-based
capital and Tier I capital to risk-weighted assets (as defined by the
regulations), and Tier I capital to average assets (as defined). Management
believes, as of March 31, 2002, that the Bank meets all of the capital adequacy
requirements to which it is subject.
As of December 31, 2001, the most recent notification from the FDIC, the
Bank was categorized as well capitalized under the regulatory framework for
prompt corrective action. To remain categorized as well capitalized, the Bank
will have to maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as specified by the regulators. There are no conditions or
events since the most recent notification that management believes have changed
the Bank's prompt corrective action category.
At March 31, 2002, FC Banc Corp. had approximately $0.8 million in
commitments for capital expenditures, primarily for construction of the new main
office in Bucyrus, and the new Fredericktown facility.
13
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, 2002 and 2001
General. Net income decreased during the first quarter of 2002 as compared
to the same three-month period ended March 31, 2001. Net income amounted to $65
thousand versus $195 thousand, a decrease of $130 thousand, or 66.7%. The
decrease was primarily attributed to the accrued expense associated with the
Board's decision to terminate the employment of its former President and CEO. On
May 7, 2002, the Bank and its parent Company entered into an agreement and
general release with Mr. G. Wildridge Holden. In consideration for Mr. Holden's
signing an agreement releasing the Bank and the Company from any claim that he
may have had in connection with his employment with the Company and the Bank,
the Company agreed to pay Mr.Holden various amounts of money to extinguish
previously existing contractual compensation entitlements with the Bank and the
Company. The agreement and the release was signed by Mr. Holden on April 29,
2002, and became effective on May 7, 2002. The Company, however, accrued for the
amounts due Mr. Holden under the agreement and general release signed by the
Company, the Bank, and Mr. Holden is included as Exhibit 99.1 to this form 10-Q
SB.
Net Interest Income. Net interest income increased by $112 for the three
months ended March 31, 2002 as compared to March 31, 2001. A decrease of $132 in
interest income was offset by a decrease of $244 in interest expense. The bank
has increased in average balances by over nine million dollars. The rate
variance is positive because the average rate earned on earning assets has
decreased by 115 basis points, but the cost of funds has decreased 132 basis
points.
Interest Income. The decrease in the average rate earned on earning assets was
the primary contributing factor to the decrease in interest income of $132, or
7.41%, for the three months ended March 31, 2002 compared to 2001. Loan
interest and fee income decreased by $115 resulting primarily from a decrease
in the average rate earned on loans of 62 basis points. Interest and dividends
on investment securities increased by $20. Additional income earned from growth
of the investment portfolio was partially offset by the decrease in the average
rate earned. The portfolio grew by about $8 million and the average rate earned
decreased by 160 basis points. This was a result of the many interest rate
reductions in 2001. Also, income from federal funds sold decreased by $37 due to
a 300 basis point decrease in average rate earned. This was also a result of the
many rate changes in 2001.
14
FC BANC CORP.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(numbers in thousands except per share amounts)
Interest Expense. Interest expense on deposit liabilities decreased by
$281, or 38.44% for the three months ended March 31, 2002, as compared to the
same period in 2001. Total average deposits increased by $2.0 million comparing
March 31, 2002, to 2001. In addition, average borrowings increased by $6.4
million at March 31, 2002 as compared to March 31, 2001. Comparing the first
quarter of 2002 to the first quarter of 2001 the Bank's average cost of funds
(including borrowings) for the first three months of 2001 was 2.23%, as compared
to 3.55% for the same period in 2001.
Provision for Loan Losses. The Bank recorded net chargeoffs of $184
thousand during the three months ended March 31, 2002, compared to net
chargeoffs of $10 thousand during the same period in 2001. The majority of the
charge-offs consisted of one loan, which was a residential real estate loan.
Based upon continued strong credit quality the Bank recorded no provision for
loan losses during the first quarter in 2002. Also, we recorded no provision in
the first quarter of 2001. No provision was based upon the results of ongoing
loan reviews and composition of the loan portfolio, primarily loans secured by
one- to four-family residential properties and other forms of collateral, which
are considered to have less risk.
Non-Interest Income. Non-interest income decreased by $1, or 0.54%, to
$183 thousand for the three months ended March 31, 2002, from $184 for the three
months ended March 31, 2001. The Bank had a gain on sales of securities of $12
during the first quarter ending March 31, 2002, but had no gains in first
quarter of 2001.
Non-Interest Expense. Non-interest expense increased by $322, or 34.77%,
to $1,248 for the three months ended March 31, 2002, from $926 in the comparable
period in 2001. This increase was mostly attributable to the increase in
salaries and employee benefits due to the expense associated with the
termination of the former President and CEO. The other main expense variances
were increases in computer services ($11, due to development of the internet
banking), legal and professional fees ($8, due to fees associated with the above
mentioned termination), and loss on sale of securities of $10. Depreciation
expense has decreased by $35 year to date. All other non-interest expenses were
consistent with the prior year.
Income Taxes. The provision for income taxes decreased by $81 for the
three months ended March 31, 2002, compared with the prior year, primarily as a
result of lower taxable income for the quarter.
15
FC BANC CORP.
PART II - OTHER INFORMATION
================================================================================
ITEM 1 - LEGAL PROCEEDINGS
Not Applicable
ITEM 2 - CHANGES IN SECURITIES
Not Applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 27, 2002, the Corporation held its Annual Meeting of
Shareholders.
Two matters were submitted to the shareholders, for which the
following votes were cast:
1. Each of the three directors nominated were elected to terms of
three (3) years expiring in 2005 by the following votes:
Patrick J. Drouhard For: 359,524 Withheld: 20,310
Samuel J. Harvey For: 359,524 Withheld: 20,310
Charles W. Kimerline For: 367,636 Withheld: 12,198
2. To ratify the appointment of S. R. Snodgrass as independent
auditor of FC Banc Corp for the fiscal year ending
December 31, 2002.
For: 370,692 Against: 4,058 Abstain: 5,084
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ITEM 5 - OTHER INFORMATION
Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description
99.1 Agreement and General Release by FC Banc Corp, The
Farmers Citizens Bank, and G. Wildridge Holden
effective as of May 7, 2002.
Report under Form 8-K filed on February 19, 2002 announcing the termination
of Mr. G. W. Holden as President, CEO, and Director of the Farmers Citizens
Bank and FC Banc Corp
Report under Form 8-K filed on March 27, 2002 announcing the Board
authorization of the repurchase of up to 4.99% of FC Banc Corp's
outstanding common stock.
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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 May 15, 2002 /s/ Coleman Clougherty
----------------- -------------------------------
Coleman Clougherty
Interim Chief Executive Officer
Date May 15, 2002 /s/ Jeffrey Wise
----------------- -------------------------------
Jeffrey Wise
Principal Financial Officer
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