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:...............................September 30, 2003
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. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of Exchange Act). Yes [X] 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 November 14, 2003
5,033,203 common shares
FIRST CITIZENS BANC CORP
Index
PART I. Financial Information
ITEM 1. Financial Statements:
Consolidated Balance Sheets (unaudited)
September 30, 2003 and December 31, 2002..........................................3
Consolidated Statements of Income (unaudited)
Three and nine months ended September 30, 2003 and 2002...........................4
Consolidated Statements of Comprehensive Income (unaudited)
Three and nine months ended September 30, 2003 and 2002...........................5
Consolidated Statement of Shareholders' Equity (unaudited)
Nine months ended September 30, 2003 and 2002.....................................6
Condensed Consolidated Statement of Cash Flows (unaudited)
Nine months ended September 30, 2003 and 2002.....................................7
Notes to Interim Consolidated Financial Statements (unaudited).....................8-17
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.........................................................18-24
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk........................24-25
ITEM 4. Controls and Procedures...........................................................25-26
PART II. Other Information
ITEM 1. Legal Proceedings....................................................................27
ITEM 2. Changes in Securities and Use of Proceeds............................................27
ITEM 3. Defaults upon Senior Securities......................................................27
ITEM 4. Submission of Matters to a Vote of Security Holders..................................27
ITEM 5. Other Information....................................................................27
ITEM 6. Exhibits and Reports on Form 8-K.....................................................27
Signatures .................................................................................28
FIRST CITIZENS BANC CORP
Consolidated Balance Sheets (Unaudited)
(In thousands, except share data)
September 30, December 31,
ASSETS 2003 2002
------------- ------------
Cash and due from financial institutions $ 25,629 $ 23,797
Federal funds sold - 12,700
Securities available for sale 119,834 155,168
Securities held to maturity (Fair value of $23 in
2003 and $44 in 2002) 22 42
Loans held for sale 2,992 1,390
Loans, net of allowance of $5,796 and $6,325 452,313 415,682
FHLB, FRB and GLBB stock 7,121 6,752
Premises and equipment, net 9,502 8,219
Goodwill 15,052 15,052
Core deposit and other intangibles 2,635 3,000
Other assets 7,679 9,832
--------- ---------
Total assets $ 642,779 $ 651,634
========= =========
LIABILITIES
Deposits
Noninterest-bearing $ 71,650 $ 70,527
Interest-bearing 454,076 469,372
--------- ---------
Total deposits 525,726 539,899
Federal Home Loan Bank advances - 183
Securities sold under agreements to repurchase 13,694 13,509
U. S. Treasury interest-bearing demand note payable 711 5,000
Federal funds purchased 6,425 -
Notes payable 9,000 13,000
Trust preferred securities 12,500 5,000
Accrued expenses and other liabilities 2,990 3,354
--------- ---------
Total liabilities 571,046 579,945
SHAREHOLDERS' EQUITY
Common stock, no par value, 10,000,000 shares authorized,
5,326,441 shares issued 47,370 47,370
Retained earnings 30,521 29,588
Treasury stock, 293,238 shares at cost (7,241) (7,241)
Accumulated other comprehensive income 1,083 1,972
--------- ---------
Total shareholders' equity 71,733 71,689
--------- ---------
Total liabilities and shareholders' equity $ 642,779 $ 651,634
========= =========
See notes to interim consolidated financial statements Page 3
FIRST CITIZENS BANC CORP
Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
2003 2002 2003 2002
Interest and dividend income
Loans, including fees $ 7,010 $ 7,959 $ 21,143 $ 22,156
Taxable securities 793 1,092 2,886 3,112
Tax-exempt securities 372 408 1,150 1,196
Federal funds sold and other 7 170 87 381
---------- ---------- ---------- ----------
Total interest income 8,182 9,629 25,266 26,845
Interest expense
Deposits 1,755 2,796 5,796 8,365
Federal Home Loan Bank advances - 4 2 23
Trust preferred securities 138 25 352 96
Other 109 191 372 540
---------- ---------- ---------- ----------
Total interest expense 2,002 3,016 6,522 9,024
---------- ---------- ---------- ----------
Net interest income 6,180 6,613 18,744 17,821
Provision for loan losses 520 238 990 624
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 5,660 6,375 17,754 17,197
Noninterest income
Computer center data processing fees 290 280 885 886
Service charges 756 765 2,294 2,089
Net gain on sale/calls of securities 9 2 300 4
Net gain on sale of loans 204 91 554 190
Other 509 699 1,852 1,775
---------- ---------- ---------- ----------
Total noninterest income 1,768 1,837 5,885 4,944
Noninterest expense
Salaries, wages and benefits 2,685 2,309 7,916 6,737
Net occupancy expense 300 270 927 776
Equipment expense 304 309 915 912
Contracted data processing 215 233 683 647
State franchise tax 173 178 583 494
Professional services 185 264 668 643
Amortization of intangible assets 129 98 365 227
Other operating expenses 1,620 1,496 4,756 4,095
---------- ---------- ---------- ----------
Total noninterest expense 5,611 5,157 16,813 14,531
---------- ---------- ---------- ----------
Income before taxes 1,817 3,055 6,826 7,610
Income tax expense 510 983 1,966 2,218
---------- ---------- ---------- ----------
Net Income $ 1,307 $ 2,072 $ 4,860 $ 5,392
========== ========== ========== ==========
Earnings per share, basic $ 0.26 $ 0.41 $ 0.97 $ 1.14
Weighted average basic common shares 5,033,203 5,033,203 5,033,203 4,736,909
Earnings per share, diluted $ 0.26 $ 0.41 $ 0.96 $ 1.14
Weighted average diluted common shares 5,040,939 5,035,077 5,041,951 4,737,303
See notes to interim consolidated financial statements Page 4
FIRST CITIZENS BANC CORP
Consolidated Comprehensive Income Statements (Unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Net income $ 1,307 $ 2,072 $ 4,860 $ 5,392
Unrealized holding gains and (losses)
on available for sale securities (1,131) 877 (1,047) 1,554
Reclassification adjustment for (gains)
and losses later recognized in income (9) (2) (300) (4)
------- ------- ------- -------
Net unrealized gains and (losses) (1,140) 875 (1,347) 1,550
Tax effect 387 (297) 458 (527)
------- ------- ------- -------
Total other comprehensive income (loss) (753) 578 (889) 1,023
------- ------- ------- -------
Comprehensive income $ 554 $ 2,650 $ 3,971 $ 6,415
======= ======= ======= =======
See notes to interim consolidated financial statements Page 5
FIRST CITIZENS BANC CORP
Consolidated Statement of Shareholders' Equity (Unaudited)
(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, 2002 4,082,619 $ 23,258 $ 28,844 $ (4,919) $ 1,544 $ 48,727
Net income - - 5,392 - - 5,392
Change in unrealized gain (loss) on
securities available for sale, net
of reclassifications and tax effects - - - - 1,023 1,023
Issuance of common shares for merger,
net of issuance costs 1,063,040 24,112 - - - 24,112
Purchase of treasury stock, at cost (112,456) - - (2,322) - (2,322)
Cash dividends ($.69 per share) - - (3,313) - - (3,313)
--------- --------- --------- --------- -------- ---------
Balance, September 30, 2002 5,033,203 $ 47,370 $ 30,923 $ (7,241) $ 2,567 $ 73,619
========== ========= ========= ========= ======== =========
Balance, January 1, 2003 5,033,203 $ 47,370 $ 29,588 $ (7,241) $ 1,972 $ 71,689
Net income - - 4,860 - - 4,860
Change in unrealized gain (loss) on
securities available for sale, net
of reclassifications and tax effects - - - - (889) (889)
Cash dividends ($.78 per share) - - (3,927) - - (3,927)
--------- --------- --------- --------- -------- ---------
Balance, September 30, 2003 5,033,203 $ 47,370 $ 30,521 $ (7,241) $ 1,083 $ 71,733
========== ========= ========= ========= ======== =========
See notes to interim consolidated financial statements Page 6
FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
Nine months ended September 30,
----------------------------------------
2003 2002
-------------------- -----------------
Net cash from operating activities $ 8,404 $ 6,276
Cash flows from investing activities
Maturities and calls of securities, held-to-maturity 20 17
Maturities and calls of securities, available-for-sale 55,243 43,293
Purchases of securities, available-for-sale (29,090) (62,913)
Proceeds from sale of securities, available-for-sale 7,124 4
Purchases of FRB Stock (195) -
Loans made to customers, net of principal collected (37,683) 7,105
Change in federal funds sold 12,700 (19,875)
Proceeds from sale of property and equipment 7 2
Net purchases of office premises and equipment (2,001) (440)
--------- ---------
Net cash from investing activities 6,125 (32,807)
Cash flows from financing activities
Net cash received in acquisition - 3,083
Repayment of FHLB borrowings (183) (468)
Net change in deposits (14,173) 21,995
Change in securities sold under agreements to repurchase 185 4,786
Change in U. S. Treasury interest-bearing demand note payable (4,289) 3,170
Changes in notes payable (4,000) (2,185)
Changes in fed funds purchased 6,425 -
Purchases of treasury stock - (2,322)
Net proceeds from obligated mandatorily redeemable capital securities 7,265 4,849
Cash dividends paid (3,927) (3,313)
--------- ---------
Net cash from financing activities (12,697) 29,595
--------- ---------
Net change in cash and due from banks 1,832 3,064
Cash and due from banks at beginning of period 23,797 19,227
--------- ---------
Cash and due from banks at end of period $ 25,629 $ 22,291
========= =========
Cash paid during the period for:
Interest $ 6,728 $ 10,825
Income taxes $ 1,915 $ 1,778
See notes to interim consolidated financial statements Page 7
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 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, Inc. (Title Agency), First Citizens
Insurance Agency, Inc. (Insurance Agency), First Citizens Statutory Trust I
(Trust I), and First Citizens Statutory Trust II (Trust II) together
referred to as the Corporation. Citizens and Farmers are collectively
referred to as the Banks. As of January 2, 2003, another wholly owned
subsidiary, The Castalia Banking Company, was merged into Citizens. All
significant inter-company 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 September 30, 2003 and its results
of operations and changes in cash flows for the periods ended September 30,
2003 and 2002 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 September 30, 2003
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 2002
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 2003, SCC provided item processing for nine
financial institutions in addition to the two subsidiary banks. SCC
accounted for 2.8% of the Corporation's total revenues through September
30, 2003. Reynolds provides real estate appraisal services for lending
purposes to subsidiary banks and other financial institutions. Reynolds
accounted for 1.1% 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 4.2% of total Corporation revenues. First Citizens Title
Insurance Agency Inc. was formed to provide customers with a seamless
mortgage product with improved service. Commission revenue was less than 1
Page 8
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
percent of total revenue for the period ended September 30, 2003. First
Citizens Insurance Agency Inc. was formed to allow the Corporation to
participate in commission revenue generated through its third party
insurance agreement. Insurance commission revenue is less than 1 percent of
total revenue for the period ended September 30, 2003. First Citizens
Statutory Trust I, formed in 2002, and First Citizens Statutory Trust II,
formed in March 2003, are special purpose entities for the purpose of
issuing floating rate obligated mandatorily redeemable capital securities
as part of a pooled transaction. Trust I was a $5,000, 5.59% issuance while
Trust II was a $7,500, 4.41% issuance. Management considers the Corporation
to operate primarily in one reportable segment, banking. To prepare
financial statements in conformity with accounting principles generally
accepted in the United States of America, 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.
On December 31, 2002, SFAS No. 148, "Accounting for Stock-Based
Compensation" was issued and amended SFAS No. 123. Employee compensation
expense under stock options is reported using the intrinsic value method.
No stock-based compensation cost is reflected in net income, as all options
granted had an exercise price equal to or greater than the market price of
the underlying common stock at date of grant. The following table
illustrates the effect on net income and earnings per share if expense was
measured using the fair value recognition provisions of SFAS No. 123. No
stock options were granted prior to July 2, 2002. As a result, pro forma
expense disclosures for the three and nine months ended September 30, 2002
are the same.
Page 9
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Three months ended Nine months ended
September 30, 2003 September 30, 2003
------------------ ------------------
Net income as reported $ 1,307 $ 4,860
Deduct: Stock-based compensation expense
determined under fair value based method 23 45
------- ------
Pro forma net income 1,284 4,815
======= ======
Basic earnings per share as reported $ 0.26 $ 0.97
Pro forma basic earnings per share 0.26 0.96
Diluted earnings per share as reported $ 0.26 $ 0.96
Pro forma diluted earnings per share 0.25 0.96
Three months ended Nine months ended
September 30, 2002 September 30, 2002
------------------ ------------------
Net income as reported $ 2,072 $ 5,392
Deduct: Stock-based compensation expense
determined under fair value based method 8 8
------- ------
Pro forma net income 2,064 5,384
======= ======
Basic earnings per share as reported $ 0.41 $ 1.14
Pro forma basic earnings per share 0.41 1.14
Diluted earnings per share as reported $ 0.41 $ 1.14
Pro forma diluted earnings per share 0.41 1.14
The Corporation granted 30,700 options on July 2, 2002 at an exercise price of
$20.50. The Corporation granted an additional 16,000 options at an exercise
price of $35.00 on April 15, 2003. The following weighted-average assumptions
were used to compute the pro forma effects of the option grant. The options vest
three years after the date of grant.
April 15, July 2,
2003 2002
---- ----
Risk-free interest rate 3.98% 4.77%
Expected option life 10 years 10 years
Expected stock price volatility 22.62% 19.37%
Dividend yield 2.97% 4.44%
Calculated fair value $ 8.23 $ 3.33
Page 10
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
New Accounting Standards
The Financial Accounting Standards Board (FASB) recently issued two new
accounting standards, Statement 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, and Statement 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity, both of which generally become effective in the
quarter beginning July 1, 2003. Management determined that, upon adopting
the new standards, they will not materially affect the Company's operating
results or financial condition.
On January 1, 2003, the Company adopted Interpretation 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees. On July 1, 2003, the
Company adopted Statement 149, amendment of Statement 133 on Derivative
Instruments and Hedging Activities, and Statement 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equities. On October 1, 2003, the Company adopted Interpretation 46,
Consolidation of Variable Interest Entities. Adoption of the new standards
did not materially affect the Company's operating results or financial
condition.
2) Securities
Securities at September 30, 2003 and December 31, 2002 were as follows:
September 30, 2003
Gross Gross
AVAILABLE FOR SALE Unrealized Unrealized
Fair Value Gains Losses
---------------- -------------------- ---------------
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 68,487 $ 822 $ 11
Corporate bonds 1,036 9 11
Obligations of states and political subdivisions 40,375 1,535 38
Other securities, including mortgage-backed
securities and equity securities 9,936 165 52
---------- -------- ------
$ 119,834 $ 2,531 $ 112
========== ======== ======
Page 11
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
September 30, 2003
Gross Gross
Carrying Unrecognized Unrecognized
HELD TO MATURITY Value Gains Losses Fair Value
-------------- ----------------- ------------------ ---------------
Mortgage-backed securities $ 22 $ 1 $ - $ 23
============== ================= ================== ===============
December 31, 2002
Gross Gross
AVAILABLE FOR SALE Unrealized Unrealized
Fair Value Gains Losses
------------ -------------- ----------
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 102,780 $ 1,822 $ -
Corporate bonds 2,475 45 -
Obligations of states and political subdivisions 41,458 1,688 (36)
Other securities, including mortgage-backed
securities and equity securities 8,455 247 -
---------- -------- -------
$ 155,168 $ 3,802 $ (36)
========== ======== =======
December 31, 2002
Gross Gross
Carrying Unrecognized Unrecognized
HELD TO MATURITY Value Gains Losses Fair Value
-------------- ----------------- ------------------ ---------------
Mortgage-backed securities $ 42 $ 2 $ - $ 44
============== ================= ================== ===============
Page 12
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 September 30, 2003, 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 Cost Fair Value
---------------- ----------------
Due in one year or less $ 66,679 $ 67,294
Due after one year through five years 33,993 35,442
Due after five years through ten years 4,654 4,908
Due after ten years 2,266 2,254
Mortgage-backed securities 9,233 9,263
Equity securities 590 673
---------------- ----------------
Total securities available for sale $ 117,415 $ 119,834
================ ================
Estimated
HELD TO MATURITY Carrying Amount Fair Value
---------------- ----------------
Mortgage-backed securities $ 22 $ 23
================ ================
Proceeds from sales of securities, gross realized gains and gross realized
losses were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------- -------------------------------------
2003 2002 2003 2002
----------------- ------------------ ----------------- -----------------
Proceeds $ - $ - $ 7,124 $ -
Gross gains - - 289 -
Gross losses - - - -
Security gains due to calls
prior to maturity 9 2 11 4
Securities with a carrying value of approximately $86,704 and $102,072 were
pledged as of September 30, 2003 and December 31, 2002, respectively, to
secure public deposits, other deposits and liabilities as required by law.
Page 13
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
(3) Loans
Loans at September 30, 2003 and December 31, 2002 were as follows:
9/30/2003 12/31/2002
---------- ----------
Commercial and Agriculture $ 48,766 $ 46,495
Commercial real estate 152,864 116,674
Real Estate - mortgage 202,598 210,931
Real Estate - construction 18,695 13,179
Consumer 27,291 30,278
Credit card and other 5,925 3,700
Leases 2,535 1,302
---------- ----------
Total loans 458,674 422,559
Allowance for loan losses (5,796) (6,325)
Deferred loan fees (562) (546)
Unearned interest (3) (6)
---------- ----------
Net loans $ 452,313 $ 415,682
========== ==========
(4) Allowance for Loan Losses
A summary of the activity in the allowance for loan losses was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
2003 2002 2003 2002
-------------- --------------- -------------- ---------------
Balance beginning of period $ 5,857 $ 6,359 $ 6,325 $ 4,865
Balance from acquisition - - - 1,426
Loans charged-off (649) (428) (1,745) (941)
Recoveries 68 130 226 325
Provision for loan losses 520 238 990 624
-------- -------- -------- --------
Balance September 30, $ 5,796 $ 6,299 $ 5,796 $ 6,299
======== ======== ======== ========
Page 14
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 and nine
months ended September 30.
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------ -------------
Average investment in impaired loans $5,793 $6,867 $5,939 $5,227
Interest income recognized on impaired
loans including interest income
recognized on cash basis 90 100 277 251
Interest income recognized on impaired
loans on cash basis 90 100 277 251
Information regarding impaired loans at September 30, 2003 and December 31,
2002 was as follows:
9/30/03 12/31/02
----------------- -----------------
Balance impaired loans $ 5,900 $ 5,999
Less portion for which no allowance for loan
losses is allocated 1,368 -
----------------- -----------------
Portion of impaired loan balance for which an
allowance for credit losses is allocated $ 4,532 $ 5,999
================= =================
Portion of allowance for loan losses allocated to
the impaired loan balance $ 732 $ 1,033
================= =================
Nonperforming loans were as follows.
9/30/03 12/31/02
----------------- -----------------
Loans past due over 90 days still on accrual $ 3,910 $ 2,414
Nonaccrual $ 3,191 $ 3,468
Nonperforming loans include both smaller balance homogeneous loans, such as
residential mortgage and consumer loans, that are collectively evaluated for
impairment and individual classified impaired loans.
Page 15
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 September 30, 2003 and December 31, 2002.
Contract Amount
---------------
9/30/2003 12/31/2002
--------- ----------
Commitment to extend credit:
Lines of credit $ 52,453 $ 53,175
Construction loans 7,563 3,292
Credit cards 45 6,127
Overdraft protection 6,654 5,258
Letters of credit 3,721 547
-------- --------
$ 70,436 $ 68,399
======== ========
Commitments to make loans are generally made for a period of one year or
less. Fixed rate loan commitments included above totaled $5,405 at
September 30, 2003 and had interest rates ranging from 3.50% to 8.00% with
maturities extended up to 30 years. Fixed rate loan commitments included
above totaled $8,078 at December 31, 2002 with interest rates ranging from
3.25% to 10.50% 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 September 30, 2003 and December 31, 2002 approximated $8,510 and
$6,843.
(6) Trust Preferred Securities
FCBC issued $5,000 of 5.59% floating rate trust preferred securities in
March 2002, and $7,500 of 4.41% floating rate trust preferred securities in
March 2003 through special purpose subsidiaries, each as part of a pooled
transaction. As of September 30, 2003, the rate on the Trust I issuance was
4.61% while the rate on the Trust II issuance was 4.16%. The
Page 16
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Corporation's trust preferred securities may be redeemed by the
Corporation, in whole but not in part, prior to March 26, 2007 for Trust I
and March 26, 2008 for Trust II, subject to the occurrence and continuation
of a special event, at a redemption price of 107.50% of the face value of
the capital securities. On or after March 26, 2007 and March 26, 2008, the
trust preferred securities may be redeemed at face value. The Corporation's
trust preferred securities are considered Tier II capital for regulatory
reporting purposes. Debt issuance costs of $151 and $235 are being
amortized over the term of the securities.
Page 17
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 September 30, 2003, compared to December 31,
2002 and the consolidated results of operations for the three month and
nine month periods ending September 30, 2003 compared to the same periods
in 2002. 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 September 30, 2003 totaled $642,779
compared to $651,634 at December 31, 2002. This was a decrease of $8,855,
or 1.4 percent. Within the structure of the assets, net loans have
increased $36,631, or 8.8 percent since December 31, 2002. The commercial
real estate portfolio increased by $36,190 and the commercial and
agriculture portfolio increased $2,271, while residential real estate and
consumer loans decreased by $8,333 and $2,987 respectively. This is
reflective of a shift in focus by the Corporation toward commercial
lending. In the current low interest rate environment, the greatest demand
for residential real estate loans has been for a fixed rate loan. Rather
than add these loans to the portfolio, the Corporation has generally sold
these loans on the secondary market. This has
Page 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)
- --------------------------------------------------------------------------------
allowed for additional funding to be used for commercial lending. This
shift in focus has also reduced the interest rate risk on the loan
portfolio as well as positioned the Corporation to improve its yield on the
loan portfolio when rates begin to increase. The Corporation has grown the
commercial portfolio by expanding into new markets, such as opening a new
loan office in Marion County, hiring lending officers native to the new
markets, and taking a proactive approach in contacting new and current
clients. These activities have allowed the Corporation to continue to grow
the commercial loan portfolio. 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 $14,317 at September 30, 2003 compared
to $13,728 at December 31, 2002. Loans held-for-sale increased $1,602, or
115.3 percent from December 31, 2002, as customers continued the recent
trend of refinancing real estate mortgages. At September 30, 2003, the net
loan to deposit ratio was 86.0 percent compared to 77.0 percent at December
31, 2002.
For the nine months of operations in 2003, $990 was placed into the
allowance for loan losses from earnings compared to $624 for the same
period of 2002. The increase in the provision was a result of net
charge-offs for the first nine months of 2003 increasing to $1,519 compared
to $616 for the same period of 2002. However, because Independent Community
Bank Corp. (ICBC), which was acquired in April 2002, already had specific
reserves in place for its impaired loans at the time of the merger,
management did not believe replenishing the allowance back to the December
31, 2002 level as a percentage of loans was necessary. As a result, at
September 30, 2003 the allowance for loan losses as a percent of total
loans declined to 1.27 percent compared to 1.50 percent at December 31,
2002. 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.
At September 30, 2003, available for sale securities totaled $119,834
compared to $155,168 at December 31, 2002, a decrease of $35,334. The
decrease in securities was due to paydowns, calls, maturities and sales of
its portfolio. Funds from the decline in securities were used to fund other
assets, such as loans. Bank stocks increased $369 from December 31, 2002,
due to a purchase of $195 in FRB stock and $174 in FHLB stock dividends.
Office premises and equipment have increased $1,283 and intangible assets
have decreased $365 since December 31, 2002. The increase in office
premises and equipment is attributed to new purchases of $2,001,
depreciation of $711, and disposals of $7. The new purchases consist
primarily of a new operations center scheduled to open in November 2003.
Intangible assets decreased due to amortization of the core deposit premium
and noncompete agreement.
Page 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)
- --------------------------------------------------------------------------------
Total deposits at September 30, 2003 decreased $14,173 from year-end 2002.
Noninterest-bearing deposits, representing demand deposit balances,
increased $1,123 from year-end 2002. Interest-bearing deposits, including
savings and time deposits, decreased $15,296 from year-end 2002. The
decline in interest-bearing deposits is primarily attributable to a
decrease in time deposit balances. These balances fluctuate throughout the
year. The year to date average balance of total deposits increased $43,184
compared to the average balance of the same period 2002. This increase in
average balance was primarily due to the merger of ICBC in April 2002.
ICBC's deposit balances totaled $111,968 at March 31, 2002. The year to
date 2003 average balance of savings deposits has increased $12,377
compared to the average balance of the same period for 2002. The current
average rate of these deposits is 0.45 percent compared to 1.67 percent in
2002. The year to date 2003 average balance of time certificates has
decreased $449 compared to the average balance for the same period for
2002. Additionally, the year to date 2003 average balances compared to the
same period in 2002 of Demand Deposits increased $15,787, while N.O.W.
accounts decreased $235, and Money Market Savings increased $19,033.
Total borrowed funds have increased $5,638 from December 31, 2002 to
September 30, 2003. The Corporation has notes outstanding with other
financial institutions totaling $9,000 at September 30, 2003 compared to
$13,000 at December 31, 2002. These notes were primarily used to fund the
loan growth at Mr. Money. Additionally, the Corporation increased its
Obligated Mandatorily Redeemable Capital Securities by $7,500. This
security, as well as the security of $5,000 in 2002, is a 30-year issuance.
These issuances were used to pay down a note used for funding Mr. Money
loans and stock repurchases. Additionally, a pool of low cost funds was
created at First Citizens which may be used for funding Mr. Money loan
growth, continued stock repurchases, as well as any other opportunities
which may present themselves in the future. Federal Home Loan Bank
borrowings have decreased $183 as a result of scheduled pay downs. In May,
the last of the FHLB borrowings were paid off. Securities sold under
agreements to repurchase, which tend to fluctuate, have increased $185,
U.S. Treasury Tax Demand Notes have decreased $4,289, and Federal funds
purchased increased $6,425. The increase in borrowing partially offset the
decline in deposits.
Shareholders' equity at September 30, 2003 was $71,733, or 11.2 percent of
total assets, compared to $71,689 at December 31, 2002, or 11.0 percent of
total assets. The change in shareholders' equity is made up of earnings of
$4,860, less dividends paid of $3,927 and the decrease in the market value
of securities available for sale, net of tax, of $889. The Corporation paid
cash dividends on February 1, 2003, May 1, 2003, and August 1, 2003 each at
a rate of $.26 per share. Total outstanding shares at September 30, 2003
were 5,033,203.
Page 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)
- --------------------------------------------------------------------------------
Results of Operations
Nine Months Ended September 30, 2003 and 2002
Net income for the nine months ended September 30, 2003 was $4,860, or $.96
per diluted share compared to $5,392 or $1.14 per diluted share for the
same period in 2002. This was a decrease of $532, or 9.9 percent. Some of
the reasons for the changes are explained below.
Total interest income for the first nine months of 2003 decreased $1,579,
or 5.9 percent compared to the same period in 2002. The average rate on
earning assets on a tax equivalent basis for the first nine months of 2003
was 5.35 percent and 6.38 percent for the first nine months of 2002. The
decrease in yield is a reflection of the rate environment we continue to
experience. Total interest expense for the first nine months of 2003 has
decreased by $2,502, or 27.7 percent compared to the same period of 2002.
This decrease is mainly attributed to a decrease in interest on deposits of
$2,569, a decrease in interest on FHLB borrowings of $21, a decrease in
interest on other borrowings of $168, partially offset by an increase of
$256 on Trust preferred securities. Interest on other borrowings decreased
due to the continued decline in interest rates on the borrowings. Interest
on FHLB borrowings decreased due to balances borrowed being lower in 2003.
The average rate on interest-bearing liabilities for the first nine months
of 2003 was 1.50 percent compared to 2.62 percent for the same period of
2002. The net interest margin on a tax equivalent basis was 4.36 percent
for the nine-month period ended September 30, 2003 and September 30, 2002.
Noninterest income for the first nine months of 2003 totaled $5,885,
compared to $4,944 for the same period of 2002, an increase of $941.
Service charges on deposit accounts increased $205 in 2003 compared to the
same period in 2002. Check Protect generated an additional $186 in service
charge income in the first nine months of the year 2003 compared to the
same period in 2002, due to the additional customer base created through
the ICBC merger. Revenue from computer operations decreased $1 and other
operating income increased $77. Within other operating income, Citizens
increased its commission from the origination of wholesale mortgages in
2003 to $230. Additionally, Citizens, through the merger with ICBC,
increased Trust income $84 in 2003 compared to the 2002. Gain on the sale
of loans increased $364 as loan customers continued to refinance into fixed
rate mortgages, which the Corporation typically sells on the secondary
market. Gains on sale of securities increased $296 due to sales and calls
at Citizens. In the current low interest rate environment, Citizens was
able to sell certain securities at a gain and reinvest the proceeds back
into the investment portfolio without a significant change in the book
yield or weighted average maturity of the portfolio.
Noninterest expense for the nine months ended September 30, 2003 totaled
$16,813 compared to $14,531 for the same period in 2002. This was an
increase of $2,282, or 15.7 percent. Salaries and benefits increased
$1,179, or 17.5 percent compared to the first nine months of 2002. This
increase is attributed to the addition of new Citizens branches created
Page 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)
- --------------------------------------------------------------------------------
by the merger, as well as Farmers and Mr. Money expanding their offices to
new areas in 2003. Occupancy expense increased $151 compared to 2002 due to
the same reasons salaries and benefits increased. Equipment expense
increased $3 and computer processing expense increased by $36. State
franchise taxes increased $89 compared to the first nine months in 2002.
This increase was due to the addition of ICBC, the addition of the Title
Agency and the Insurance Agency, and two franchise tax refunds received by
FCBC in 2002. Professional fees increased $25 and other operating expenses
increased $661 compared to last year. The increase in other operating
expenses, such as a $69 increase in courier expenses, was primarily due to
the addition of ICBC and the expenses associated with operating additional
branches from the merger and the additional branches added with Farmers and
Mr. Money expanding their offices. The Corporation continues to
aggressively market its affiliates, as exhibited by a $45 increase in
advertising expense through the first nine months of the year. While
continuing to expand into new markets, the Corporation wants to ensure that
the new markets know that we have the ability to serve their financial
needs.
Income tax expense for the first nine months of 2003 totaled $1,966
compared to $2,218 for the first nine months of 2002. This was a decrease
of $252, or 11.4 percent. The decrease in the federal income taxes is a
result of the decrease in total income before taxes of $784. The effective
tax rates were comparable for the nine-month periods ended September 30,
2003 and September 30, 2002, at 28.8% and 29.1%, respectively.
Three Months Ended September 30, 2003 and 2002
Net income for the three months ended September 30, 2003 was $1,307 or $.26
per diluted share compared to $2,072 or $.41 per diluted share for the same
period in 2002. This was a decrease of $765, or 36.9 percent. Some of the
reasons for the changes are explained below.
Total interest income for the third quarter of 2003 decreased $1,447, or
15.0 percent compared to the same period in 2002. Interest on fees and
loans decreased $949, or 11.9 percent compared to the same period in 2002.
This decrease is mainly due to the continued decline in rate of the loan
portfolio. The average rate on earning assets on a tax equivalent basis for
the third quarter of 2003 was 5.39 percent and 6.24 percent for the same
period of 2002. Total interest expense for the third quarter of 2003
decreased $1,014, or 33.6 percent compared to the same period of 2002. The
average rate on interest-bearing liabilities for the third quarter of 2003
was 1.53 percent compared to 2.50 percent for the same period of 2002. The
net interest margin on a tax equivalent basis was 4.33 percent for the
three-month periods ended September 30, 2003 and September 2002.
Noninterest income for the third quarter of 2003 totaled $1,768, compared
to $1,837 for the same period of 2002, a decrease of $69. Service charge
fees decreased $9 in the third quarter 2003 compared to the same period in
2002. Check Protect generated an additional $14 in service charge income.
Computer processing fees increased $10 compared to the third
Page 22
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)
- --------------------------------------------------------------------------------
quarter 2002. Gains on sale of loans increased $113 as customers continued
to refinance into fixed rate mortgages during the quarter. Other operating
income decreased $190.
Noninterest expense for the quarter ended September 30, 2003 totaled $5,611
compared to $5,157 for the same period in 2002. This was an increase of
$454, or 8.8 percent. Salaries and benefits increased $376, or 16.3 percent
compared to the third quarter of 2002, due primarily to Farmers and Mr.
Money expanding their offices to new areas in 2003. Occupancy expense
increased $30, equipment expense decreased $5, and computer processing
expense decreased by $18 compared to the third quarter last year. Other
operating expenses increased $124 primarily due to the expenses related to
operating the new branches opened in 2003.
Income tax expense for the third quarter totaled $510 compared to $983 for
the same period in 2002. This was a decrease of $473, or 48.1 percent. The
effective tax rates were comparable for the three-month periods ended
September 30, 2003 and September 30, 2002, were 28.1% and 32.2%,
respectively.
Capital Resources
Shareholders' equity totaled $71,733, at September 30, 2003 compared to
$71,689 at December 31, 2002. All of the capital ratios exceed the
regulatory minimum guidelines as identified in the following table:
To Be Well
Capitalized
Under Prompt
For Capital Corrective
Corporation Ratios Adequacy Action
9/30/2003 12/31/02 Purposes Provisions
---------------- ---------------- ------------------- ------------------
Tier I Risk Based Capital 9.8% 12.5% 4.0% 6.0%
Total Risk Based Capital 13.2% 14.9% 8.0% 10.0%
Leverage Ratio 8.3% 8.0% 4.0% 5.0%
FCBC issued $5,000 of 5.59% floating rate trust preferred securities in
March 2002 and $7,500 of 4.41% floating rate trust preferred securities in
March 2003 through special purpose subsidiaries, each as part of a pooled
transaction. The Corporation's trust preferred securities are considered
Tier II capital for regulatory reporting purposes.
The Corporation paid cash dividends of $.26 per common share each on
February 1, 2003, May 1, 2003, and August 1, 2003 compared to $.19 per
common share each on February 1, 2002 and $.25 per common share May 1, 2002
and August 1, 2002.
Page 23
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)
- --------------------------------------------------------------------------------
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 $49,750 and the Banks have additional borrowing
availability at the Federal Home Loan Bank of Cincinnati of $81,033 at
September 30, 2003. Liquidity is also evidenced by all but $22 of its
security portfolio being classified as available for sale.
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.
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 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 71.7 percent of
the
Page 24
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)
- --------------------------------------------------------------------------------
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 September
30, 2003 and December 31, 2002, 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
September 30, 2003 or December 31, 2002. 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.
Net Portfolio Value
September 30, 2003 December 31, 2002
-------------------------------------------- -------------------------------------------
Change in Dollar Dollar Percent Dollar Dollar Percent
Rates Amount Change Change Amount Change Change
--------- -------------------------------------------- -------------------------------------------
+400 bp 54,250 (19,154) -26% 55,141 (20,038) -27%
+300 bp 58,764 (14,640) -20% 60,093 (15,086) -20%
+200bp 63,371 (10,033) -14% 64,806 (10,373) -14%
+100bp 68,303 (5,101) -7% 70,702 (4,477) -6%
Base 73,404 - - 75,179 - -
-100bp 77,370 3,966 5% 79,921 4,742 6%
The relatively minor change in net portfolio value from December 31, 2002
to September 30, 2003, is primarily a result of two factors. First,
long-term interest rates have decreased only slightly during 2003. The
Corporation has seen an increase in the base level of net portfolio value
due to a slight increase in the fair value of loans and investments, as
well as a decrease in the fair value of certificates of deposits.
ITEM 4.
Controls and Procedures Disclosure
As of the end of the period covered by this quarterly report, an evaluation
was carried out under the supervision and with the participation of First
Citizens Banc Corp's management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934). Based on their evaluation, our
Chief Executive
Page 25
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)
- --------------------------------------------------------------------------------
Officer and Chief Financial Officer have concluded that the Company's
disclosure controls and procedures are, to the best of their knowledge,
effective to ensure that information required to be disclosed by First
Citizens Banc Corp in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms. Subsequent
to the date of their evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that there were no significant changes in
First Citizens Banc Corp's internal control or in other factors that could
significantly affect its internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Page 26
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. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT NO. 3 (I) Articles of Incorporation, as amended, of
First Citizens Banc Corp.
(B) EXHIBIT NO. 3 (II) Code of Regulations of First Citizens Banc
Corp.
(C) EXHIBIT NO. 4 Certificate for Registrant's Common Stock.
(D) EXHIBIT NO. 23 Consent of Independent Accountants
(E) EXHIBIT NO. 31.1 Certification of Chief Executive Officer
pursuant Section 302 of the Sarbanes-Oxley Act of 2002.
(F) EXHIBIT NO. 31.2 Certification of Chief Financial Officer
pursuant Section 302 of the Sarbanes-Oxley Act of 2002.
(G) EXHIBIT NO. 32.1 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(H) EXHIBIT NO. 32.2 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(I) EXHIBIT NO. 99 Safe Harbor under the Private Securities
Litigation Reform Act of 1995.
(J) REPORTS ON FORM 8-K - None
Page 27
First Citizens Banc Corp
Signatures
Form 10-Q
- --------------------------------------------------------------------------------
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 November 14, 2003
- ------------------------------------ -----------------
David A. Voight Date
President
/s/ James O. Miller November 14, 2003
- ------------------------------------ -----------------
James O. Miller Date
Executive Vice President
Page 28
First Citizens Banc Corp
Index to Exhibits
Form 10-Q
- --------------------------------------------------------------------------------
EXHIBITS
(3)(i) Articles of Incorporation, as amended, of First Citizens Banc Corp
are incorporated by reference to First Citizens Banc Corp's Form
10-K for the year ended December 31, 2000, filed on March 24,
2001.
(3)(ii) Code of Regulations of First Citizens Banc Corp is incorporated by
reference to First Citizens Banc Corp's Form 10-K for the year
ended December 31, 2000, filed on March 24, 2001.
(4) Certificate for Registrant's Common Stock is incorporated
by reference to First Citizens Banc Corp's Form 10-K for the year
ended December 31, 2000, filed on March 24, 2001.
(31.1) Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
(31.2) Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
(32.1) Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(32.2) Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(99) Safe Harbor under private Securities Litigation Reform Act of
1995 is incorporated by reference to Exhibit 99 of First Citizens
Banc Corp's Annual Report for the year ended December 31, 1999,
filed on March 24, 2000.
Page 29