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, 2001
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 incorporation (I.R.S. Employer
or organization) Identification Number)
100 East Water Street, Sandusky, Ohio 44870
-------------------------------------------------------
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 625-4121
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes
-----
No
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value
Outstanding at May 11, 2001
4,082,619 common shares
2
FIRST CITIZENS BANC CORP
Index
PART I. Financial Information
ITEM 1. Financial Statements:
Consolidated Balance Sheets (unaudited)
March 31, 2001 and December 31, 2000.........................................................3
Consolidated Statements of Income (unaudited)
Three months ended March 31, 2001 and 2000...................................................4
Consolidated Statements of Comprehensive Income (unaudited)
Three months ended March 31, 2001 and 2000...................................................5
Consolidated Statement of Shareholders' Equity (unaudited)
For the years ended December 31, 2000 and
three months ended March 31, 2001............................................................6
Condensed Consolidated Statement of Cash Flows (unaudited)
Three months ended March 31, 2001 and 2000...................................................7
Notes to Consolidated Financial Statements (unaudited)........................................8-15
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................16-20
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk........................................20-21
PART II. Other Information
ITEM 1. Legal Proceedings....................................................................................22
ITEM 2. Changes in Securities and Use of Proceeds............................................................22
ITEM 3. Defaults Upon Senior Securities......................................................................22
ITEM 4. Submission of Matters to a Vote of Security Holders..................................................22
ITEM 5. Other Information....................................................................................22
ITEM 6. Exhibits and Reports on Form 8-K.....................................................................22
SIGNATURES....................................................................................................23
3
FIRST CITIZENS BANC CORP
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
March 31, December 31,
Assets 2001 2000
---------------- ----------------
Cash and due from banks $ 21,368 $ 15,735
Interest-bearing deposits 0 51
Securities
Available-for-sale 115,717 115,514
Held-to-maturity (Estimated Fair Value of $277 at
March 31, 2001, and $278 at December 31, 2000) 274 278
---------------- ----------------
Total securities 115,991 115,792
Loans held for sale 949 571
Loans 350,664 346,089
Less: Allowance for loan losses (4,319) (4,107)
---------------- ----------------
Net loans 346,345 341,982
Office premises and equipment, net 7,151 7,221
Intangible assets 1,788 1,869
Accrued interest and other assets 6,428 6,038
---------------- ----------------
Total assets $ 500,020 $ 489,259
================ ================
Liabilities
Deposits
Noninterest-bearing deposits $ 41,653 $ 42,306
Interest-bearing deposits 368,048 349,662
---------------- ----------------
Total deposits 409,701 391,968
Federal Home Loan Bank borrowings 1,255 1,400
Securities sold under agreements to repurchase 12,065 12,946
U. S. Treasury interest-bearing demand deposit note payable 384 1,207
Notes payable to other financial institutions 14,000 10,600
Federal funds purchased 9,665 20,000
Accrued interest, taxes and other expenses 3,698 3,213
---------------- ----------------
Total liabilities 450,768 441,334
Shareholders' Equity
Common stock, no par value; 10,000,000 shares authorized,
4,263,401 shares issued 23,258 23,258
Retained earnings 29,060 28,614
Treasury stock, 180,782 shares at cost at March 31, 2001,
175,782 shares at cost at December 31, 2000 (4,919) (4,818)
Accumulated other comprehensive income 1,853 871
---------------- ----------------
Total shareholders' equity 49,252 47,925
---------------- ----------------
Total liabilities and shareholders' equity $ 500,020 $ 489,259
================ ================
See notes to interim consolidated financial statements Page 3
4
FIRST CITIZENS BANC CORP
Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
Three months ended
March 31,
-----------------------------------
2001 2000
INTEREST INCOME:
Loans, including fees $ 7,504 $ 5,935
Taxable securities 1,158 1,516
Nontaxable securities 447 547
Federal funds sold 44 33
Other 10 14
--------------- ---------------
Total interest income 9,163 8,045
INTEREST EXPENSE:
Deposits 3,692 3,441
FHLB Borrowings 19 27
Other 587 152
--------------- ---------------
Total interest expense 4,298 3,620
--------------- ---------------
NET INTEREST INCOME 4,865 4,425
PROVISION FOR LOAN LOSSES 296 95
--------------- ---------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,569 4,330
NONINTEREST INCOME:
Computer center data processing fees 303 262
Service charges 400 452
Net gain/(loss) on sale of securities 0 (1)
Net gain/(loss) on sale of loans 52 0
Other 418 406
--------------- ---------------
Total noninterest income 1,173 1,119
NONINTEREST EXPENSE:
Salaries, wages and benefits 1,948 1,647
Net occupancy expense 237 200
Equipment expense 252 242
Computer processing 182 167
State franchise tax 182 147
Professional services 142 172
Amortization of intangible assets 82 82
Other operating expenses 1,076 987
--------------- ---------------
Total noninterest expense 4,101 3,644
--------------- ---------------
Income before taxes 1,641 1,805
Income tax expense 460 499
--------------- ---------------
Net Income $ 1,181 $ 1,306
=============== ===============
Earnings per share $ 0.29 $ 0.32
Dividends declared per share $ 0.18 $ 0.17
Wtd. avg. shares during the period 4,083,675 4,138,927
See notes to interim consolidated financial statements Page 4
5
FIRST CITIZENS BANC CORP
Consolidated Comprehensive Income Statements (Unaudited)
(In thousands)
Three months ended
March 31,
2001 2000
---- ----
Net income $ 1,181 $ 1,306
Other Comprehensive Income (Loss):
Unrealized holding gains and (losses) on available for sale securities 1,488 (631)
Reclassification adjustment for (gains) and losses later recognized in income -- 1
------- -------
Net unrealized gains and (losses) 1,488 (630)
Tax effect (506) 214
------- -------
Total other comprehensive income (loss) 982 (416)
------- -------
Comprehensive income $ 2,163 $ 890
======= =======
See notes to interim consolidated financial statements Page 5
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FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
Form 10-Q
(In thousands, except share data)
Accumulated
Common Stock Other Total
Outstanding Retained Treasury Comprehensive Shareholders'
Shares Amount Earnings Stock Income/(Loss) Equity
------------ ------------ ------------ -------------- -------------- ------------
Balance, January 1, 2000 4,162,815 $ 23,258 $ 28,010 $ (2,877) $ (196) $ 48,195
Net income 5,692 5,692
Change in unrealized gain/(loss) on
securities available for sale, net
of reclassifications and tax effects 1,067 1,067
Purchase of treasury stock, at cost (75,196) (1,941) (1,941)
Cash dividends ($1.24 per share) (5,088) (5,088)
------------ ------------ ------------ -------------- -------------- -------------
Balance, December 31, 2000 4,087,619 23,258 28,614 (4,818) 871 47,925
Net income 1,181 1,181
Change in unrealized gain/(loss) on
securities available for sale, net
of reclassifications and tax effects 982 982
Purchase of treasury stock, at cost (5,000) (101) (101)
Cash dividends ($.18 per share) (735) (735)
------------ ------------ ------------ -------------- -------------- -------------
Balance, March 31, 2001 4,082,619 $ 23,258 $ 29,060 $ (4,919) $ 1,853 $ 49,252
============ ============ ============ ============== ============== =============
See notes to interim consolidated financial statements Page 6
7
FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
Three months ended March 31,
-----------------------------------
2001 2000
--------------- ---------------
Net cash from operating activities $ 1,020 $ 255
Cash flows from investing activities
Maturities of deposits held in other institutions 51 -
Maturities and calls of securities, held-to-maturity 4 20
Maturities and calls of securities, available-for-sale 2,267 3,177
Purchases of securities, available-for-sale (998) (1,089)
Proceeds from sale of securities, available-for-sale - 1,800
Loans made to customers, net of principal collected (4,661) (6,576)
Loans purchased - (5,092)
Change in federal funds sold - (3,580)
Proceeds from sale of property and equipment - 12
Purchases of office premises and equipment (163) (102)
----------------- -----------------
Net cash from investing activities (3,500) (11,430)
Cash flows from financing activities
Repayment of FHLB borrowings (145) (137)
Net change in deposits 17,733 22,326
Change in securities sold under agreements to repurchase (881) (3,577)
Change in U. S. Treasury interest-bearing demand note payable (823) (2,060)
Change in notes payable 3,400 -
Change in federal funds purchased (10,335) -
Purchases of treasury stock (101) (1,319)
Cash dividends paid (735) (707)
----------------- -----------------
Net cash from financing activities 8,113 14,526
----------------- -----------------
Net change in cash and due from banks 5,633 3,351
Cash and due from banks at beginning of period 15,735 14,599
----------------- -----------------
Cash and due from banks at end of period $ 21,368 $ 17,950
================= =================
Cash paid during the period for:
Interest $ 5,226 $ 4,429
Income taxes $ 0 $ 0
See notes to interim consolidated financial statements Page 7
8
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
(1) Consolidated Financial Statements
The consolidated financial statements include the accounts of First
Citizens Banc Corp (First Citizens) 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), R. A. Reynolds Appraisal Service, Inc.,
(Reynolds), and Mr. Money Finance Company, (Mr. Money), together
referred to as the Corporation. All significant intercompany balances
and transactions have been eliminated in consolidation.
The consolidated financial statements 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,
2001 and its results of operations and changes in cash flows for the
periods ended March 31, 2001 and 2000 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, 2001
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 2000 annual report. The Corporation has consistently
followed these policies in preparing this Form 10-Q.
The Corporation provides financial services through its offices in the
Ohio counties of Erie, Crawford, Huron, Marion, Ottawa, Richland and
Union. Its primary deposit products are checking, savings, and term
certificate accounts, and its primary lending products are residential
mortgage, commercial, and installment loans. Substantially all loans
are secured by specific items of collateral including business assets,
consumer assets and real estate. Commercial loans are expected to be
repaid from cash flow from operations of businesses. Real estate loans
are secured by both residential and commercial real estate. Other
financial instruments that potentially represent concentrations of
credit risk include deposit accounts in other financial institutions.
In 2001, SCC provided item processing for 12 financial institutions in
addition to the three subsidiary banks. SCC accounted for less than
3.0% of the Corporation's total revenues. Reynolds provides real estate
appraisal services for lending purposes to subsidiary banks and other
financial institutions. Reynolds accounts for less than 1.0% of total
Corporation revenues. Mr. Money provides consumer and real estate
financing that the Banks would not normally provide to B and C credits
at a rate commensurate with the risk. Mr. Money accounted for 4.7% of
total Corporation revenues. In September 2000 the Corporation formed
two new affiliates; First Citizens Title Insurance Agency Inc. and
First Citizens Insurance Agency Inc. First Citizens Title Insurance
Agency Inc. has been formed to provide customers with a seamless
mortgage product with improved service. First Citizens Insurance Agency
Inc was formed to allow the Corporation to participate in commission
revenue generated through its third party insurance
Page 8
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
agreement. At March 31, 2001, both First Citizens Title Insurance
Agency Inc. and First Citizens Insurance Agency Inc were inactive.
Management considers the Corporation to operate primarily in one
reportable segment, banking.
To prepare financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the
amounts reported in financial statements and the disclosures provided,
and future results could differ. The allowance for loan losses, fair
values of financial instruments, and status of contingencies are
particularly subject to change.
Income tax expense is based on the effective tax rate expected to be
applicable for the entire year. Income tax expense is the total of the
current year income tax due or refundable and the change in deferred
tax assets and liabilities. Deferred tax assets and liabilities are the
expected future tax amounts for the temporary differences between
carrying amounts and tax basis of assets and liabilities, computed
using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.
Certain items in the 2000 financial statements have been reclassified
to correspond with the 2001 presentation.
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 that is classified as held to maturity. The
Corporation did not reclassify any securities upon adoption of SFAS No,
133. SFAS No. 133, as deferred by SFAS No. 137 and amended by SFAS No.
138, is effective for fiscal years beginning after June 15, 2000 with
early adoption encouraged for any fiscal quarter beginning July 1, 1998
or later, with no retroactive application. The adoption of SFAS No. 133
on January 1, 2001 did not have a significant impact on the
Corporation's financial statements.
Page 9
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
(2) Securities
Securities at March 31, 2001 and December 31, 2000 were as follows:
March 31, 2001
Gross Gross
AVAILABLE FOR SALE Amortized Cost Unrealized Unrealized Fair
Gains Losses Value
-------------- -------------- --------------- --------------
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies $ 47,820 $ 866 $ 0 $ 48,686
Obligations of state and political subdivisions 42,855 1,026 (4) 43,877
Corporate obligations 5,620 62 (82) 5,600
Other securities, including mortgage-backed
securities and equity securities 16,614 940 0 17,554
--------------- --------------- --------------- ---------------
$ 112,909 $ 2,894 $ (86) $ 115,717
=============== =============== =============== ===============
March 31, 2001
Gross Gross
HELD TO MATURITY Amortized Cost Unrealized Unrealized Fair
Gains Losses Value
-------------- -------------- --------------- --------------
Obligations of state and political subdivisions $ 155 $ 1 $ - $ 156
Other securities, including mortgage-backed
securities and equity securities 119 2 - 121
--------------- --------------- --------------- ---------------
$ 274 $ 3 $ - $ 277
=============== =============== =============== ===============
Page 10
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
December 31, 2000
Gross Gross
AVAILABLE FOR SALE Amortized Cost Unrealized Unrealized Fair
Gains Losses Value
-------------- -------------- --------------- --------------
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies $ 47,834 $ 325 $ (130) $ 48,029
Obligations of state and political subdivisions 43,500 516 (97) 43,919
Corporate obligations 5,630 9 (226) 5,413
Other securities, including mortgage-backed
securities and equity securities 17,230 1,024 (101) 18,153
------------- ------------- --------------- -------------
$ 114,194 $ 1,874 $ (554) $ 115,514
============= ============= =============== =============
December 31, 2000
Gross Gross
HELD TO MATURITY Amortized Cost Unrealized Unrealized Fair
Gains Losses Value
-------------- -------------- --------------- --------------
Obligations of state and political subdivisions $ 155 $ 1 $ 0 $ 156
Other securities, including mortgage-backed
securities and equity securities 123 0 (1) 122
------------- ------------- --------------- -------------
$ 278 $ 1 $ (1) $ 278
============= ============= =============== =============
Page 11
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
The amortized cost and fair value of securities at March 31, 2001, 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.
AVAILABLE FOR SALE Amortized Fair
Cost Value
-------- --------
Due in one year or less $ 22,891 $ 23,029
Due after one year through five years 63,028 64,429
Due after five years through ten years 10,376 10,705
Due after ten years 0 0
Mortgage-backed securities 10,465 10,533
Equity securities 6,149 7,021
-------- --------
Total securities available for sale $112,909 $115,717
======== ========
HELD TO MATURITY Amortized Estimated
Cost Fair Value
-------- --------
Due in one year or less $ 78 $ 78
Due after one year through five years 77 78
Mortgage-backed securities 119 121
--- ---
Total securities held to maturity $ 274 $ 277
=== ===
Proceeds from sales of securities, gross realized gains and gross realized
losses were as follows:
Three Months Ended
March 31,
------------------------------------------
2001 2000
------------------- -------------------
Proceeds $ - $ 1,800
Gross gains - -
Gross losses - (1)
Page 12
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
Securities with a carrying value of approximately $68,464 and $58,088
were pledged as of March 31, 2001 and December 31, 2000, respectively,
to secure public deposits, other deposits and liabilities as required
by law.
(3) Loans
Loans at March 31, 2001 and December 31, 2000 were as follows:
3/31/2001 12/31/2000
--------- ----------
Commercial and Agriculture $ 25,031 $ 26,416
Commercial real estate 62,831 60,546
Real Estate - mortgage 219,304 217,344
Real Estate - construction 12,325 9,684
Consumer 28,665 29,509
Credit card and other 2,783 2,979
Leases 702 590
--------- ---------
Total loans 351,641 347,068
Allowance for loan losses (4,319) (4,107)
Deferred loan fees (958) (957)
Unearned interest (19) (22)
--------- ---------
Net loans $ 346,345 $ 341,982
========= =========
(4) Allowance for Loan Losses
A summary of the activity in the allowance for loan losses for the
three months ended March 31, 2001 and 2000 was as follows:
2001 2000
---- ----
Balance January 1, $ 4,107 $ 4,274
Loans charged-off (163) (164)
Recoveries 79 47
Provision for loan losses 296 95
------- -------
Balance March 31, $ 4,319 $ 4,252
======= =======
Page 13
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
Information regarding impaired loans was as follows for the three
months ended March 31.
2001 2000
---- ----
Average investment in impaired loans $ 3,123 $ 3,976
Interest income recognized on impaired loans
including interest income recognized on cash basis 22 80
Interest Income recognized on impaired loans
on cash basis 22 80
Information regarding impaired loans at March 31, 2001 and December 31,
2000 was as follows:
3/31/01 12/31/00
------- --------
Balance impaired loans $ 1,063 $ 5,152
Less portion for which no allowance for loan
losses is allocated - -
----------- -----------
Portion of impaired loan balance for which an
allowance for credit losses is allocated $ 1,063 $ 5,152
=========== ===========
Portion of allowance for loan losses allocated to
the impaired loan balace $ 313 $ 1,179
=========== ===========
Nonperforming loans were as follows.
March 31, 2001 December 31, 2000
---------------- -----------------
Loans past due over 90 days still on accrual $ 1,923 $ 558
Nonaccrual 2,386 1,368
Nonperforming loans would include some loans, which are classified as
impaired, and smaller balance homogeneous loans, such as residential
mortgages and consumer loans, that are collectively evaluated for
impairment.
Page 14
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
(5) Commitments, Contingencies and Off-Balance Sheet Risk
Some financial instruments, such as loan commitments, credit lines,
letters of credit and overdraft protection are issued to meet customers
financing needs. These are agreements to provide credit or to support
the credit of others, as long as the conditions established in the
contract are met, and usually have expiration dates. Commitments may
expire without being used. Off-balance-sheet risk of credit loss exists
up to the face amount of these instruments, although material losses
are not anticipated. The same credit policies are used to make such
commitments as are used for loans, including obtaining collateral at
exercise of commitment.
The contractual amount of financial instruments with off-balance-sheet
risk was as follows for March 31, 2001 and December 31, 2000.
Contract Amount
---------------
March 31, 2001 December 31, 2000
------------------ -------------------
Commitment to extend credit:
Lines of credit and construction
loans $ 29,849 $ 28,170
Credit cards 6,981 4,564
Letters of credit 383 339
------------------ -------------------
$ 37,213 $ 33,073
================== ===================
Commitments to make loans are generally made for a period of one year
or less. Fixed rate loan commitments included above totaled $4,610 at
March 31, 2001 and had interest rates ranging from 5.25% to 12.50% with
maturities extended up to 30 years. Fixed rate loan commitments
included above totaled $6,064 at December 31, 2000 with interest rates
ranging from 5.00% to 12.50% with maturities extended up to 30 years.
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, 2001 and December 31, 2000 approximated $4,071
and $4,148.
Page 15
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First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
INTRODUCTION
The following discussion focuses on the consolidated financial
condition of First Citizens Banc Corp at March 31, 2001, compared to
December 31, 2000 and the consolidated results of operations for the
three-month period ending March 31, 2001 compared to the same period in
2000. 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, 2001 totaled $500,020
compared to $489,259 at December 31, 2000. This was an increase of
$10,761, or 2.2 percent. Within the structure of the assets, net loans
have increased $4,363, or 1.3 percent since December 31, 2000,
primarily in the area of commercial and residential real estate loans,
a portion of which was generated by Mr. Money. Mr. Money was formed to
service the needs of B and C credit customers for consumer and real
estate financing that the Banks would not normally provide, and at a
rate commensurate with the risk. Mr. Money had loans outstanding of
$15,189 at March 31, 2001. Loans held-for-sale increased $378, or 66.2
percent from December 31, 2000. The balance in loans held for sale
Page 16
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First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
is a function of the demand for fixed rate mortgages. As rates began to
fall in the first quarter of 2001, the demand for fixed rate mortgages
increased. At March 31, 2001, the net loan to deposit ratio was 84.5
percent compared to 87.2 percent at December 31, 2000.
At March 31, 2001, $115,717, or 99.8 percent of the security portfolio
was classified as available for sale. The $274 remainder of the
portfolio was classified as held to maturity. Securities increased $200
from December 31, 2000.
For the three months of operations in 2001, $296 was placed into the
allowance for loan losses from earnings compared to $95 for the same
period of 2000. The increased provision is mainly a result of loan
growth, including Mr. Money, which reserves for loans at a higher
level. To evaluate the adequacy of the allowance foe loan losses to
cover probable losses in the portfolio, management considers specific
reserve allocations for identified portfolio loans, reserves for
delinquencies and historical reserve allocations. The composition and
overall level of the loan portfolio and charge-off activity are also
factors used to determine provisions to the reserve. Charge-offs for
the first three months of 2001 were $163 compared to $164 for the same
period of 2000. The March 31, 2001 allowance for loan losses as a
percent of total loans was 1.23 percent compared to 1.19 percent at
December 31, 2000.
Office premises and equipment have decreased $70 and intangible assets
have decreased $82 since December 31, 2000. The decrease in office
premises and equipment is attributed to new purchases of $163 and
depreciation of $233. Intangible assets decreased due to amortization.
Accrued interest and other assets totaled $6,428 at March 31, 2001
compared to $6,038 at December 31, 2000, an increase of $390. This
increase was primarily due to increases in interest receivable of $248.
This increase is largely due to increased interest receivable at Mr.
Money.
Total deposits at March 31, 2001 increased $17,733 from year-end 2000.
Noninterest-bearing deposits, representing demand deposit balances,
decreased $653 from year-end 2000. Interest-bearing deposits, including
savings and time deposits, increased $18,386 from year-end 2000. The
year to date 2001 average balance of savings deposits has decreased
$2,299 compared to the average balance of the same period for 2000. The
current average rate of these deposits is 2.35 percent compared to 2.37
percent in 2000. The year to date 2001 average balance of time
certificates has increased $2,994 compared to the average balance for
the same period for 2000. In conjunction with market conditions, and in
order to remain competitive, the banks have offered special rates on
various certificates of deposit. As a result, the banks have
experienced shifting toward the special rate certificates of deposit.
Additionally, the banks usage of fed funds purchased as a funding
source has led to an increase in the overall rate on interest-bearing
liabilities. The current average rate on deposits is 5.50 percent
compared to 4.92 percent for the same period in 2000.
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18
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
Total borrowed funds have decreased $8,784 from December 31, 2000 to
March 31, 2001. Federal funds purchased have decreased $10,335 since
December 31, 2000. The need to use federal funds purchased has
decreased somewhat, due to increased deposits. However, in the short
term, there is still a need to supplement traditional funding sources
with non-deposit funding. In addition, the Corporation has notes
outstanding with other financial institutions totaling $14,000 at March
31, 2001. These notes were used to fund the loan growth at Mr. Money.
Federal Home Loan Bank borrowings have decreased $145 as a result of
scheduled pay downs. Securities sold under agreements to repurchase,
which tend to fluctuate, have decreased $881 and U.S. Treasury Tax
Demand Notes have decreased $823.
Shareholders' equity at March 31, 2001 was $49,252, which was 9.8
percent of total assets. Shareholders' equity at December 31, 2000 was
$47,925, which was 9.8 percent of total assets. The increase in
shareholders' equity is made up of earnings of $1,181, less dividends
paid of $735 and the purchase of 5,000 treasury shares for $101 and the
increase in the market value of securities available for sale, net of
tax, of $982. The Corporation paid cash dividends on February 1, 2001
at a rate of $.18 per share. Total outstanding shares at March 31, 2001
were 4,082,619.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 and 2000
Net income for the three months ended March 31, 2001 was $1,181, or
$.29 per common share compared to $1,306, or $.32 per common share for
the same period in 2000. This was a decrease of $125, or 9.6 percent.
Some of the reasons for the changes are explained below.
Total interest income for the first three months of 2001 increased
$1,118, or 13.9 percent compared to the same period in 2000. The
average rate on earning assets on a tax equivalent basis for the first
three months of 2001 was 7.65 percent and 7.25 percent for the first
three months of 2000. The increase in yield is due to the assets booked
in 2000 at higher rates. Total interest expense for the first three
months of 2001 has increased $678, or 18.7 percent compared to the same
period of 2000. This increase is mainly attributed to an increase in
interest on deposits of $251 and an increase in interest on other
borrowings of $435. Although the average balance on interest bearing
deposits is down for the first quarter 2001 compared to the first
quarter 2000, the rate on these deposits is up. Interest on other
borrowings increased due to increased usage of fed funds purchased as a
source of funding for loan growth. Interest on FHLB borrowings is down
due to balances borrowed being lower in 2001. The average rate on
interest-bearing liabilities for the first three months of 2001 was
4.22 percent compared to 3.89 percent for the same period of 2000. The
net interest margin on a tax equivalent basis was 4.14 percent for the
three-month period ended March 31, 2001 and 3.97 percent for the same
period ended March 31, 2000.
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19
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
Noninterest income for the first three months of 2001 totaled $1,173,
compared to $1,119 for the same period of 2000, an increase of $54.
Revenue from computer operations increased $41. SCC provides item
processing for 12 financial institutions in addition to the three
subsidiary banks. Other operating income increased $12.
Gain on the sale of loans increased $52 because falling interest rates
increased the demand for fixed rate mortgages. This increased the
volume of loans sold, thereby increasing gains.
Noninterest expense for the three months ended March 31, 2001 totaled
$4,101 compared to $3,644 for the same period in 2000. This was an
increase of $457, or 12.5 percent. Equipment expense increased $10 as a
result of increased depreciation and maintenance expense. Salaries and
benefits increased $301, or 18.3 percent compared to the first three
months of 2000 as a result of the Corporation adding employees at both
the existing affiliates as well as the new affiliate, Mr. Money.
Computer processing increased by $15 compared to last year. These
increases were offset by a $30 decrease in professional fees.
Income tax expense for the first three months of 2001 totaled $460
compared to $499 for the first three months of 2000. This was a
decrease of $39, or 7.8 percent. The decrease in the federal income
taxes is a result of the decrease in total income before taxes of $164.
The effective tax rates were comparable for the three-month periods
ended March 31, 2001 and March 31, 2000, at 28.0% and 27.6%
respectively.
CAPITAL RESOURCES
Shareholders' equity totaled $49,252, at March 31, 2001 compared to
$47,925 at December 31, 2000. All of the capital ratios exceed the
regulatory minimum guidelines as identified in the following table:
Corporation Ratios Regulatory
3/31/01 12/31/00 Minimums
------- -------- --------
Tier I Risk Based Capital 14.3% 14.1% 4.0%
Total Risk Based Capital 15.6% 15.3% 8.0%
Leverage Ratio 9.3% 9.3% 4.0%
The Corporation paid a cash dividend of $.18 per common share each on
February 1, 2001 compared to $.17 per common share each on February 1,
2000.
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20
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
Capital expenditures totaled $163 for the first three months of 2001
compared to $102 for the same period of 2000.
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.
The Banks, through their respective correspondent banks, maintain
federal funds borrowing lines totaling $45,261 and the Banks have
additional borrowing availability at the Federal Home Loan Bank of
Cincinnati of $67,165 at March 31, 2001. Finally, 99.8% of the
Corporation's security portfolio has been classified as available for
sale, which provides additional liquidity.
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 holds true during periods of rising rates. The Corporation
attempts to minimize the
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21
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- -------------------------------------------------------------------------------
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 46.0 percent of the Corporation's loan portfolio reprices
on at least an annual basis. The Corporation's usual practice is to
invest excess funds in federal funds that mature and reprice daily.
The Corporation's 2000 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, 2000. 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,
2000 which would significantly change the ratio of rate sensitive
assets and liabilities for the given time horizon.
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22
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. 99 Safe Harbor under the Private Securities
Litigation Reform Act of 1995
(b) REPORTS ON FORM 8-K - None.
Page 22
23
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 14, 2001
- ------------------------------------ ------------
David A. Voight Date
President
/s/ James O. Miller May 14, 2001
- ------------------------------------ ------------
James O. Miller Date
Executive Vice President
Page 23
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First Citizens Banc Corp
Index to Exhibits
Form 10-Q
- --------------------------------------------------------------------------------
Exhibit
Number Description Page Number
------ ----------- -----------
99 Safe Harbor Under the Private Securities Incorporated by reference to Exhibit 99 to
Litigation Reform Act of 1995 Annual Report for the Year Ended December 31,
2000 filed by the registrant on March 21, 2000
Page 24