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:....................................June 30, 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 August 14, 2001
4,082,619 common shares
FIRST CITIZENS BANC CORP
2
Index
PART I. Financial Information
ITEM 1. Financial Statements:
Consolidated Balance Sheets (unaudited)
June 30, 2001 and December 31, 2000 ........................... 3
Consolidated Statements of Income (unaudited)
Three and six months ended June 30, 2001 and 2000 ............. 4
Consolidated Statements of Comprehensive Income (unaudited)
Three and six months ended June 30, 2001 and 2000 ............. 5
Consolidated Statement of Shareholders' Equity (unaudited)
For the years ended December 31, 2000 and
Six months ended June 30, 2001 ................................ 6
Condensed Consolidated Statement of Cash Flows (unaudited)
Six months ended June 30, 2001 and 2000 ....................... 7
Notes to Consolidated Financial Statements (unaudited) ............ 8-17
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 18-23
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk ........ 23-25
PART II. Other Information
ITEM 1. Legal Proceedings ................................................. 26
ITEM 2. Changes in Securities and Use of Proceeds ......................... 26
ITEM 3. Defaults Upon Senior Securities ................................... 26
ITEM 4. Submission of Matters to a Vote of Security Holders ............... 26
ITEM 5. Other Information ................................................. 26
ITEM 6. Exhibits and Reports on Form 8-K .................................. 27
SIGNATURES ................................................................ 28
3
FIRST CITIZENS BANC CORP
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
June 30, December 31,
Assets 2001 2000
--------- ------------
Cash and due from banks $ 15,396 $ 15,735
Federal Funds Sold 4,880 0
Interest-bearing deposits 0 51
Securities
Available-for-sale 112,179 115,514
Held-to-maturity (Estimated Fair Value of $235 at
June 30, 2001, and $278 at December 31, 2000) 230 278
--------- ---------
Total securities 112,409 115,792
Loans held for sale 1,292 571
Loans 348,970 346,089
Less: Allowance for loan losses (4,353) (4,107)
--------- ---------
Net loans 344,617 341,982
Office premises and equipment, net 7,132 7,221
Intangible assets 1,706 1,869
Accrued interest and other assets 6,454 6,038
--------- ---------
Total assets $ 489,006 $ 489,259
========= =========
Liabilities
Deposits
Noninterest-bearing deposits $ 43,189 $ 42,306
Interest-bearing deposits 370,144 349,662
--------- ---------
Total deposits 413,333 391,968
Federal Home Loan Bank borrowings 1,108 1,400
Securities sold under agreements to repurchase 10,365 12,946
U. S. Treasury interest-bearing demand deposit note payable 2,034 1,207
Notes payable to other financial institutions 14,000 10,600
Federal funds purchased 0 20,000
Accrued interest, taxes and other expenses 3,202 3,213
--------- ---------
Total liabilities 444,042 441,334
Shareholders' Equity
Common stock, no par value; 10,000,000 shares authorized,
4,263,401 shares issued 23,258 23,258
Retained earnings 29,485 28,614
Treasury stock, 180,782 shares at cost at June 30, 2001,
175,782 shares at cost at December 31, 2000 (4,919) (4,818)
Accumulated other comprehensive income 2,020 871
--------- ---------
Total shareholders' equity 49,844 47,925
--------- ---------
Total liabilities and shareholders' equity $ 493,886 $ 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 Six months ended
June 30, June 30,
2001 2000 2001 2000
----------- ----------- ----------- -----------
INTEREST INCOME:
Loans, including fees $ 7,399 $ 6,405 $ 14,903 $ 12,340
Taxable securities 1,094 1,416 2,252 2,932
Nontaxable securities 441 546 888 1,093
Federal funds sold 117 8 161 41
Other 3 10 13 24
----------- ----------- ----------- -----------
Total interest income 9,054 8,385 18,217 16,430
INTEREST EXPENSE:
Deposits 3,677 3,428 7,369 6,870
FHLB Borrowings 17 25 36 52
Other 430 346 1,017 498
----------- ----------- ----------- -----------
Total interest expense 4,124 3,799 8,422 7,420
----------- ----------- ----------- -----------
NET INTEREST INCOME 4,930 4,586 9,795 9,010
PROVISION FOR LOAN LOSSES 225 120 521 215
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,705 4,466 9,274 8,795
NONINTEREST INCOME:
Computer center data processing fees 303 300 606 563
Service charges 413 448 813 900
Net gain/(loss) on sale of securities 0 (43) 0 (44)
Net gain/(loss) on sale of loans 89 (65) 141 (65)
Other 420 378 839 783
----------- ----------- ----------- -----------
Total noninterest income 1,225 1,018 2,399 2,137
NONINTEREST EXPENSE:
Salaries, wages and benefits 1,970 1,708 3,918 3,355
Net occupancy expense 232 196 469 396
Equipment expense 270 278 522 521
Data processing expense 185 186 368 353
State franchise tax 181 155 363 302
Professional services 220 294 362 571
Other operating expenses 1,221 956 2,379 1,919
----------- ----------- ----------- -----------
Total noninterest expense 4,279 3,773 8,381 7,417
----------- ----------- ----------- -----------
Income before taxes 1,651 1,711 3,292 3,515
Income tax expense 491 447 951 946
----------- ----------- ----------- -----------
Net Income $ 1,160 $ 1,264 $ 2,341 $ 2,569
=========== =========== =========== ===========
Earnings per share $ 0.28 $ 0.31 $ 0.57 $ 0.62
Dividends declared per share $ 0.18 $ 0.17 $ 0.36 $ 0.34
Wtd. avg. shares during the period 4,082,619 4,108,449 4,083,144 4,123,688
See notes to interim consolidated financial statements Page 4
5
FIRST CITIZENS BANC CORP
Consolidated Comprehensive Income Statements (Unaudited)
(In thousands)
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
------- ------- ------- -------
Net income $ 1,160 $ 1,264 $ 2,341 $ 2,569
Other Comprehensive Income (Loss):
Unrealized holding gains and (losses) on available for sale
securities 252 285 1,740 (346)
Reclassification adjustment for (gains) and losses later
recognized in income -- 43 -- 44
------- ------- ------- -------
Net unrealized gains and (losses) 252 328 1,740 (302)
Tax effect (85) (112) (591) 103
------- ------- ------- -------
Total other comprehensive income (loss) 167 216 1,149 (199)
------- ------- ------- -------
Comprehensive income $ 1,327 $ 1,480 $ 3,490 $ 2,370
======= ======= ======= =======
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 ($1.24 per share) (5,088) (5,088)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 2000 4,087,619 23,258 28,614 (4,818) 871 47,925
Net income 2,341 2,341
Change in unrealized gain/(loss) on
securities available for sale, net
of reclassifications and tax effects 1,149 1,149
Purchase of treasury stock, at cost (5,000) (101) (101)
Cash dividends ($.36 per share) (1,470) (1,470)
--------- --------- --------- --------- --------- ---------
Balance, June 30, 2001 4,082,619 $ 23,258 $ 29,485 $ (4,919) $ 2,020 $ 49,844
========= ========= ========= ========= ========= =========
See notes to interim consolidated financial statements Page 6
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FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
Six months ended June 30,
-------------------------
2001 2000
---- ----
Net cash from operating activities $ 1,738 $ 1,530
Cash flows from investing activities
Maturities of deposits held in other institutions 51 --
Maturities and calls of securities, held-to-maturity 47 35
Maturities and calls of securities, available-for-sale 9,425 9,090
Purchases of securities, available-for-sale (4,358) (2,135)
Proceeds from sale of securities, available-for-sale -- 11,688
Loans made to customers, net of principal collected (3,134) (15,798)
Loans purchased -- (7,364)
Change in federal funds sold (4,880) 4,600
Proceeds from sale of property and equipment 4 32
Purchases of office premises and equipment (380) (180)
-------- --------
Net cash from investing activities (3,225) (32)
Cash flows from financing activities
Repayment of FHLB borrowings (292) (276)
Net change in deposits 21,365 (7,944)
Change in securities sold under agreements to repurchase (2,581) (3,731)
Change in U. S. Treasury interest-bearing demand note payable 827 (269)
Change in notes payable 3,400 --
Change in federal funds purchased (20,000) 15,280
Purchases of treasury stock (101) (1,577)
Cash dividends paid (1,470) (1,407)
-------- --------
Net cash from financing activities 1,148 76
-------- --------
Net change in cash and due from banks (339) 1,574
Cash and due from banks at beginning of period 15,735 14,598
-------- --------
Cash and due from banks at end of period $ 15,396 $ 16,172
======== ========
Cash paid during the period for:
Interest $ 7,817 $ 8,533
Income taxes $ 960 $ 720
See notes to interim consolidated financial statements Page 7
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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), Mr. Money Finance Company, (Mr. Money), First Citizens
Title Insurance Agency, and First Citizens Insurance Agency, 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 June 30,
2001 and its results of operations and changes in cash flows for the
periods ended June 30, 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 accounting principles generally accepted in the
United States of America have been omitted. The results of operations
for the period ended June 30, 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. Through June 30, 2001, 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 4.9% 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
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
insurance agreement. At June 30, 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
adoption of SFAS No. 133 on January 1, 2001 did not have a significant
impact on the Corporation's financial statements.
In September 2000, the Financial Accounting Standards Board issued SFAS
No.140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 140 replaces SFAS No. 125 and
resolves various implementation issues while carrying forward most of
the provisions of SFAS No. 125 without change. SFAS No. 140 revises
standards for transfers of financial assets by clarifying criteria and
expanding guidance for determining whether the transferor has
relinquished control and the transfer is therefore accounted for as a
sale. SFAS No. 140 also adopts new accounting requirements for pledged
collateral and requires new disclosures about securitizations and
pledged collateral. SFAS No. 140 was effective for transfers occurring
after March 31, 2001 and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15,
2000. The adoption of this standard has not had a material effect on
the Corporation's financial statements.
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141. "Business
Combinations."SFAS No. 141 requires all business combinations within
its scope to be accounted for using the purchase method, rather than
the pooling-of-interests method. The provisions of this Statement apply
to all business combinations initiated after June 30, 2001. The
adoption of this statement will only impact the Company's financial
statements if it enters into a business combination.
Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets", which addresses the accounting for such assets
arising from prior and future business combinations. Upon the adoption
of this Statement, goodwill arising from business combinations will no
longer be amortized, but rather will be assessed regularly for
impairment, with any such impairment recognized as a reduction to
earnings in the period identified. The Company is required to adopt
this Statement on January 1, 2002 and early adoption is not permitted.
The Company has not yet assessed the impact of this statement on its
financial statements.
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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 June 30, 2001 and December 31, 2000 were as follows:
June 30, 2001
Gross Gross
AVAILABLE FOR SALE Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
U.S. Treasury securities and obligations of
U.S. Government corporations and agencies $ 45,031 $ 984 $ 0 $ 46,015
Obligations of state and political subdivisions 42,075 974 (5) 43,044
Corporate obligations 6,227 81 (25) 6,283
Other securities, including mortgage-backed
securities and equity securities 15,786 1,051 0 16,837
--------- ---------- ---------- ---------
$ 109,119 $ 3,090 $ (30) $ 112,179
========= ========= ========= =========
June 30, 2001
Gross Gross
HELD TO MATURITY Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
Obligations of state and political subdivisions $155 $ 3 $- $158
Other securities, including mortgage-backed
securities and equity securities 75 2 - 77
---- ---- -- ----
$230 $ 5 $- $235
==== ==== == ====
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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 Unrealized Unrealized
Cost Gains Losses Fair 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 Unrealized Unrealized
Cost Gains Losses Fair 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
===== ===== ===== =====
The amortized cost and fair value of securities at June 30, 2001, by
contractual maturity, are
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
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 Cost Fair Value
-------------- ----------
Due in one year or less $ 27,380 $ 27,605
Due after one year through five years 57,044 58,569
Due after five years through ten years 8,909 9,168
Due after ten years 0 0
Mortgage-backed securities 9,540 9,647
Equity securities 6,246 7,190
-------- --------
Total securities available for sale $109,119 $112,179
======== ========
Estimated Fair
HELD TO MATURITY Amortized Cost Value
-------------- --------------
Due in one year or less $ 78 $ 79
Due after one year through five years 77 79
Mortgage-backed securities 75 77
---- ----
Total securities held to maturity $230 $235
==== ====
Proceeds from sales of securities, gross realized gains and gross realized
losses were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2001 2000 2001 2000
---- -------- ---- --------
Proceeds $-- $ 9,888 $-- $ 11,688
Gross gains -- -- -- 19
Gross losses -- (47) -- (67)
Security gains due
to calls prior to
maturity -- 4 -- 4
Securities with a carrying value of approximately $68,237 and $58,088
were pledged as of June
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
30, 2001 and December 31, 2000, respectively, to secure public
deposits, other deposits and liabilities as required by law.
(3) Loans
Loans at June 30, 2001 and December 31, 2000 were as follows:
6/30/2001 12/31/2000
--------- ----------
Commercial and Agriculture $ 26,902 $ 26,416
Commercial real estate 66,107 60,546
Real Estate - mortgage 212,810 217,344
Real Estate - construction 13,162 9,684
Consumer 27,139 29,509
Credit card and other 3,123 2,979
Leases 678 590
--------- ---------
Total loans 349,921 347,068
Allowance for loan losses (4,353) (4,107)
Deferred loan fees (936) (957)
Unearned interest (15) (22)
--------- ---------
Net loans $ 344,617 $ 341,982
========= =========
(4) Allowance for Loan Losses
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
A summary of the activity in the allowance for loan losses was as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2001 2000 2001 2000
------- ------- ------- -------
Balance beginning of period $ 4,319 $ 4,252 $ 4,107 $ 4,274
Loans charged-off (305) (187) (468) (351)
Recoveries 114 102 193 149
Provision for loan losses 225 120 521 215
------- ------- ------- -------
Balance June 30, $ 4,353 $ 4,287 $ 4,353 $ 4,287
======= ======= ======= =======
Information regarding impaired loans was as follows for the six months
ended June 30.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2001 2000 2001 2000
------ ------ ------ ------
Average investment in impaired loans $2,410 $3,543 $3,335 $3,746
Interest income recognized on impaired loans
including interest income recognized on cash basis 79 64 101 144
Interest income recognized on impaired loans
on cash basis 79 64 101 144
Information regarding impaired loans at June 30, 2001 and December 31,
2000 was as follows:
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
6/30/01 12/31/00
------- --------
Balance impaired loans $3,757 $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 $3,757 $5,152
====== ======
Portion of allowance for loan losses allocated to
the impaired loan balance $ 590 $1,179
====== ======
Nonperforming loans were as follows.
June 30, December 31,
2001 2000
------- ------------
Loans past due over 90 days still on accrual $2,141 $ 558
Nonaccrual 4,440 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.
(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 June 30, 2001 and December 31, 2000.
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First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Contract Amount
-----------------------------------
June 30, 2001 December 31, 2000
------------- -----------------
Commitment to extend credit:
Lines of credit and construction loans $28,436 $28,170
Credit cards 4,646 4,564
Letters of credit 398 339
------- -------
$33,480 $33,073
======= =======
Commitments to make loans are generally made for a period of one year
or less. Fixed rate loan commitments included above totaled $5,494 at
June 30, 2001 and had interest rates ranging from 4.00% 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 June 30, 2001 and December 31, 2000 approximated $4,254
and $4,148.
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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 June 30, 2001, compared to
December 31, 2000 and the consolidated results of operations for the
three month and six month periods ending June 30, 2001 compared to the
same periods 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 June 30, 2001 totaled $493,886
compared to $489,259 at December 31, 2000. This was an increase of
$4,627, or 0.9 percent. Within the structure of the assets, net loans
have increased $2,635, or 0.8 percent since December 31, 2000,
primarily in the area of commercial real estate loans. Mr. Money was
formed in late 2000 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 $16,288 at June 30, 2001 compared to $12,143
at December 31, 2000. Loans held for sale increased $721, or 126.37
percent from December 31, 2000. The balance in loans held for sale is
Page 18
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)
a function of the demand for fixed rate mortgages. As rates began to
fall in the first half of 2001, the demand for fixed rate mortgages
increased. In May of 2001, Farmers State Bank sold $2,613 in fixed rate
loans, thus reducing the net increase in loans. Farmers State Bank sold
the loans in its portfolio to decrease interest rate risk inherent with
fixed rate long-term mortgages. At June 30, 2001, the net loan to
deposit ratio was 83.4 percent compared to 87.2 percent at December 31,
2000. The slight decline was due to $21,365 increase in deposits.
At June 30, 2001, $112,179, or 99.8 percent of the security portfolio
was classified as available for sale. The $230 remainder of the
portfolio was classified as held to maturity. Securities decreased
$3,382 from December 31, 2000 due to maturities exceeding purchases.
The cash inflow was used to support the modest loan growth.
For the six months of operations in 2001, $521 was placed into the
allowance for loan losses from earnings compared to $215 for the same
period of 2000. The increased provision is due to an increase in net
charge-offs as well as an increase in nonperforming loans.
Additionally, Mr. Money established allowance for loan losses at a
higher level than the banks due to the higher credit risks associated
with the loans they originate. To evaluate the adequacy of the
allowance for 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 six months of 2001 were $468
compared to $202 for the same period of 2000. The increase was due to
charge-offs at Mr. Money and installment charge-offs at The Citizens
Banking Company. The June 30, 2001 allowance for loan losses as a
percent of total loans was 1.25 percent compared to 1.19 percent at
December 31, 2000.
Office premises and equipment have decreased $89 and intangible assets
have decreased $163 since December 31, 2000. The decrease in office
premises and equipment is attributed to new purchases of $380,
disposals of $4, and depreciation of $465. Intangible assets decreased
due to amortization.
Accrued interest and other assets totaled $6,454 at June 30, 2001
compared to $6,038 at December 31, 2000, an increase of $416. Of the
$416, $281 was primarily due to a higher interest receivable balance at
Mr. Money which was a result of higher loan volume and higher interest
rates charged on its loans compared to the three banks.
Total deposits at June 30, 2001 increased $21,365 from year-end 2000.
Noninterest-bearing deposits, representing demand deposit balances,
increased $883 from year-end 2000. Interest-bearing deposits, including
savings and time deposits, increased $20,482 from year-end 2000. The
year to date 2001 average balance of savings deposits has decreased
$6,412 compared to the average balance of the same period for 2000. The
growth in deposits was used to reduce the amount of borrowed funds. The
current average rate of these deposits is 2.34 percent compared to 2.36
percent in 2000. The year to date 2001 average balance of time
certificates has increased
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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)
$13,091 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. The current
average rate on deposits is 5.09 percent which is the same as it was
for the comparable period in 2000.
Total borrowed funds have decreased $18,646 from December 31, 2000 to
June 30, 2001. Federal funds purchased have decreased $20,000 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 June
30, 2001. These notes were used to fund the loan growth at Mr. Money.
Federal Home Loan Bank borrowings have decreased $292 as a result of
scheduled pay downs. Securities sold under agreements to repurchase,
which tend to fluctuate, have decreased $2,581 and U.S. Treasury Tax
Demand Notes have increased $827.
Shareholders' equity at June 30, 2001 was $49,844, which was 10.1
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 $2,341, less dividends
paid of $1,470 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 $1,149. The Corporation paid cash dividends on February 1,
2001 and on May 1, 2001 each at a rate of $.18 per share. Total
outstanding shares at June 30, 2001 were 4,082,619.
Results of Operations
Six Months Ended June 30, 2001 and 2000
Net income for the six months ended June 30, 2001 was $2,341, or $.57
per common share compared to $2,569, or $.62 per common share for the
same period in 2000. This was a decrease of $228, or 8.9 percent. Some
of the reasons for the changes are explained below.
Total interest income for the first six months of 2001 increased
$1,787, or 10.9 percent compared to the same period in 2000. The
average rate on earning assets on a tax equivalent basis for the first
six months of 2001 was 7.67 percent and 7.32 percent for the first six
months of 2000. The decrease in yield is due to the assets booked in
2000 at higher rates. Total interest expense for the first six months
of 2001 has increased $1,002, or 13.5 percent compared to the same
period of 2000. This increase is mainly attributed to an increase in
interest on deposits of $499 and an increase in interest on other
borrowings of $519. Interest on FHLB borrowings is down due to balances
borrowed being lower in 2001. The average rate on interest-bearing
liabilities for the first six months of 2001 was 4.28 percent compared
to 3.97 percent for the same period of 2000.
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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)
The net interest margin on a tax equivalent basis was 4.21 percent for
the six-month period ended June 30, 2001 and 4.03 percent for the same
period ended June 30, 2000.
Noninterest income for the first six months of 2001 totaled $2,399,
compared to $2,137 for the same period of 2000, an increase of $262.
The main reason for the increase was due to gain on sales of loans
which were $141 for the six months ended June 30, 2001, versus a loss
of $65 in the prior year due to a write down of loans held for sale to
the lower of cost or market. Gain on the sale of loans increased
because falling interest rates increased the demand for fixed rate
mortgages. This increased the volume of loans sold, including the
Farmers State Bank sale of $2,613 in fixed rate mortgages.
Additionally, revenue from computer operations increased $44. SCC
provides item processing for 12 financial institutions in addition to
the three subsidiary banks. Other operating income increased $55. This
increase was mainly due to a $46 increase in revenues by the
corporation's appraisal company.
Noninterest expense for the six months ended June 30, 2001 totaled
$8,381 compared to $7,417 for the same period in 2000. This was an
increase of $964, or 13.0 percent. Salaries and benefits increased
$563, or 16.8 percent compared to the first six months of 2000 as a
result of the Corporation adding employees at each of 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 $209 decrease in professional fees, which was caused by a
reclassification of expenses. Also, net occupancy expense increased $73
compared to the first six months of 2000. The formation of Mr. Money,
the relocating of and opening of a new branch of the Citizens Banking
Company attributed for $74 of the increase of net occupancy expense.
Income tax expense for the first six months of 2001 totaled $951
compared to $946 for the first six months of 2000. This was an increase
of $5, or 0.5 percent. The increase in the federal income taxes is a
result of the decrease in nontaxable Municipal security income of $205.
The effective tax rates were comparable for the six-month periods ended
June 30, 2001 and June 30, 2000, at 28.9% and 26.9% respectively.
Three Months Ended June 30, 2001 and 2000
Net income for the three months ended June 30, 2001 was $1,160 or $.28
per common share compared to $1,264, or $.31 per common share for the
same period in 2000. This was a decrease of $104, or 8.2 percent. Some
of the reasons for the changes are explained below.
Total interest income for the second quarter of 2001 increased $669, or
8.0 percent compared to the same period in 2000. Interest on fees and
loans increased $994, or 15.5 percent compared to the same period in
2000. The average rate on earning assets on a tax equivalent basis for
the second quarter of 2001 was 7.58 percent and 7.39 percent for the
same period of 2000. Total interest expense for the second quarter of
2001 increased $325, or 8.6 percent compared to the same period of
2000. Interest on deposits increased $248, mainly due to an increase in
volume.
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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)
The average rate on interest-bearing liabilities for the second quarter
of 2001 was 4.14 percent compared to 4.07 percent for the same period
of 2000. The net interest margin on a tax equivalent basis was 4.24
percent for the three-month period ended June 30, 2000 and 4.04 percent
for the same period ended June 30, 2000.
Noninterest income for the second quarter of 2001 totaled $1,226,
compared to $1,018 for the same period of 2000, an increase of $208.
Gains on sales of loans increased $154 due to the same reasons as
discussed in the comparable six month periods. No gains on securities
were realized for the second quarter of 2001. However, this resulted in
a net increase of $43 due to net losses realized in the second quarter
of 2000. Revenue from computer operations increased $3. SCC provides
item processing for 12 financial institutions in addition to the three
subsidiary banks. Other operating income increased $43. Service charges
on deposit accounts decreased $35 as a result of decreased customer
overdrafts and new deposit products offered to them.
Noninterest expense for the three months ended June 30, 2001 totaled
$4,280 compared to $3,773 for the same period in 2000. This was an
increase of $507, or 13.4 percent. Salaries and benefits increased
$262, or 15.3 percent compared to the second quarter of 2000. Other
expenses increased by $265 compared to 2000. Professional fees
decreased by $74, or 25.2 percent compared to the same period of 2000.
Net occupancy expense increased $36, or 18.2 percent compared to the
same period of 2000. Both of these changes are due to the same reasons
as discussed in the comparable six month period.
Income tax expense for the second quarter totaled $491 compared to $447
for the same period in 2000. This was an increase of $44, or 9.96
percent. The increase in the federal income taxes is a result of the
decrease in nontaxable Municipal security income of $105. The effective
tax rates were comparable for the three-month periods ended June 30,
2001 and June 30, 2000, at 29.7% and 26.1%.
Page 22
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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)
Capital Resources
Shareholders' equity totaled $49,844, at June 30, 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
6/30/01 12/31/00 Minimums
------- -------- ----------
Tier I Risk Based Capital 14.4% 14.1% 4.0%
Total Risk Based Capital 15.9% 15.3% 8.0%
Leverage Ratio 9.4% 9.3% 4.0%
The Corporation paid a cash dividend of $.18 per common share each on
February 1, 2001 and May 1, 2001 compared to $.17 per common share each
on February 1, 2000 and May 1, 2000.
Capital expenditures totaled $380 for the first six months of 2001
compared to $180 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 $76,706 at June 30, 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-
Page 23
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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)
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 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 40.9 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 following table provides information about the Corporation's
financial instruments that are sensitive to changes in interest rates
as of June 30, 2001 and December 31, 2000, based on certain prepayment
and account decay assumptions that management believes are reasonable.
The Corporation had no derivative financial instruments or trading
portfolio as of June 30, 2001 or December 31, 2000. Expected maturity
date values for interest-bearing core deposits were calculated based on
estimates of the period over which the deposits would be outstanding.
From a risk management perspective, the Corporation believes that
repricing dates for adjustable-rate instruments, as opposed to expected
maturity dates, may be a more relevant measure in analyzing the value
of such instruments. The Corporation's borrowings were tabulated by
contractual maturity dates and without regard to any conversion or
repricing dates.
Page 24
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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)
NET PORTFOLIO VALUE - JUNE 30, 2001
CHANGE IN RATES $ AMOUNT $ CHANGE % CHANGE
--------------- ---------- ----------- --------
+200 bp $ 41,378 $ (11,005) (21)%
+100 bp 46,916 (5,467) (10)%
Base 52,383 - -
-100 bp 57,548 5,165 10%
-200 bp 61,713 9,330 18%
NET PORTFOLIO VALUE - DECEMBER 31, 2000
CHANGE IN RATES $ AMOUNT $ CHANGE % CHANGE
--------------- ---------- ----------- --------
+200 bp $ 34,391 $ (7,728) (18)%
+100 bp 37,261 (5,627) (13)%
Base 42,888 - -
-100 bp 48,549 5,661 13%
-200 bp 53,576 10,668 25%
The reduction in the relative change in net portfolio value from 2000
to 2001, given the assumed immediate change in interest rates is
primarily a result of two factors. First, the reduction in long-term
interest rates during 2001 served to increase the base level of net
portfolio value due to the corresponding increase in the fair value of
loans and investments. In addition, the majority of new loans
originated in 2001 have interest rate adjustment features, which
lessens the impact of future rate changes.
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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
First Citizens Banc Corp held its annual meeting on April 17,
2001, for the purpose of considering and voting on the
following:
1.) To elect four Class III directors to serve terms of three
years or until their successors are elected and qualified.
Four directors, John L. Bacon, H. Lowell Hoffman,
M.D., Lowell W. Leech, and David A. Voight were nominated for
reelection and were subsequently reelected as directors. No
other issues were brought before the meeting.
The summary of the voting of common shares outstanding was as
follows:
Director Candidate For Withheld
------------------
John L. Bacon 3,446,734 32,020
H. Lowell Hoffman, M.D. 3,396,843 32,020
Lowell W. Leech 3,419,533 32,020
David A. Voight 3,445,831 32,020
The following directors' terms of office continued after the
meeting:
Robert L. Bordner, Mary Lee G. Close, Blythe A. Friedley,
Richard B. Fuller Dean S. Lucal, W. Patrick Murray, George L.
Mylander, Paul H. Phieffer, and Richard O. Wagner
ITEM 5. OTHER INFORMATION
None
Page 26
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First Citizens Banc Corp
Other Information
Form 10-Q
ITEM 6.(a) EXHIBIT NO. 99 Safe Harbor under the Private Securities
Litigation Reform Act of 1995....................
(b) REPORTS ON FORM 8-K - None.
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28
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 August 14, 2001
- ------------------- ---------------
David A. Voight Date
President
/s/ James O. Miller August 14, 2001
- ------------------- ---------------
James O. Miller Date
Executive Vice President
Page 28
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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 29