1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended:...................................March 31, 1997 [ ] 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 issuers classes of common stock, as of the latest practicable date. Common Stock, no par value Outstanding at May 13, 1997 3,051,504 common shares 2 FIRST CITIZENS BANC CORP Index PART I. Financial Information ITEM 1. Financial Statements: Consolidated Balance Sheets (unaudited) March 31, 1997 and December 31, 1996..............................3 Consolidated Statements of Income (unaudited) Three months ended March 31, 1997 and 1996........................4 Consolidated Statement of Shareholders' Equity (unaudited) Three months ended March 31, 1997 and 1996........................5 Consolidated Statement of Cash Flows (unaudited) Three months ended March 31, 1997 and 1996........................6 Notes to Consolidated Financial Statements (Unaudited).............7-14 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................15-18 PART II. Other Information ITEM 1. Legal Proceedings....................................................19 ITEM 2. Changes in Securities................................................19 ITEM 3. Defaults upon Senior Securities......................................19 ITEM 4. Submission of Matters to a Vote of Security Holders..................19 ITEM 5. Other Information....................................................19 ITEM 6. (a) Exhibits.........................................................19 SIGNATURES .................................................................20 3 FIRST CITIZENS BANC CORP Consolidated Balance Sheet (Unaudited) December 31, Assets March 31, 1997 1996 -------------- ------------- Cash and due from banks $ 13,753,871 $ 11,615,060 Federal funds sold 8,148,000 8,521,000 Securities (Note 3) Available-for-sale 59,526,663 58,971,155 Held-to-maturity 9,238,939 9,789,977 ------------- ------------- Total investment securities 68,765,602 68,761,132 Loans (Notes 4) 206,754,828 205,127,385 Less: Allowance for possible loan losses (Note 5) (2,681,049) (2,642,000) ------------- ------------- Net Loans 204,073,779 202,485,385 Office premises and equipment, net 7,271,064 6,373,506 Accrued interest receivable 2,077,305 1,823,667 Intangible assets 3,092,047 1,679,465 Other assets 2,054,395 1,518,404 ------------- ------------- Total assets $ 309,236,063 $ 302,777,619 ============= ============= Liabilities Deposits Interest bearing $ 219,738,583 $ 215,873,075 Noninterest bearing 29,129,771 24,624,624 ------------- ------------- Total deposits 248,868,354 240,497,699 Federal Home Loan Bank borrowings 15,382,102 15,671,686 Securities sold under agreements to repurchase 6,180,638 9,157,032 U. S. Treasury interest-bearing demand notes payable 1,897,262 1,388,979 Accrued interest, taxes and other expenses 2,132,572 1,634,915 ------------- ------------- Total liabilities 274,460,928 268,350,311 Commitments and contingencies (Note 6) Shareholders' Equity Common stock, no par value, 10,000,000 shares authorized, 3,051,504 shares issued and outstanding 15,257,520 15,257,520 Retained Earnings 19,489,418 19,005,014 Unrealized gain on securities available for sale 28,197 164,774 ------------- ------------- Total shareholders' equity 34,775,135 34,427,308 ------------- ------------- Total liabilities and shareholders' equity $ 309,236,063 $ 302,777,619 ============= ============= See notes to interim consolidated financial statements. Page 3 4 FIRST CITIZENS BANC CORP Consolidated Statements of Income (Unaudited) Three months ended March 31, ------------------------- 1997 1996 INTEREST INCOME: Interest and fees on loans $4,381,966 $4,210,065 Interest and dividends on securities Taxable 648,566 640,603 Nontaxable 341,412 376,944 Interest on federal funds sold 122,087 112,793 Other interest income 1,024 1,266 ---------- ---------- Total interest income 5,495,055 5,341,671 INTEREST EXPENSE: Interest on deposits 2,003,429 2,011,216 Interest on FHLB borrowings 222,949 238,895 Interest on other borrowings 73,788 88,436 ---------- ---------- Total interest expense 2,300,166 2,338,547 ---------- ---------- NET INTEREST INCOME 3,194,889 3,003,124 PROVISION FOR LOAN LOSSES (Note 5) 98,500 69,500 ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,096,389 2,933,624 NONINTEREST INCOME: Computer center service charges and retail sales 576,742 521,991 Service charges on deposit accounts 129,409 116,520 Security gain/(loss) 6,250 5,500 Other operating income 213,324 220,851 ---------- ---------- Total noninterest income 925,725 864,862 NONINTEREST EXPENSE: Salaries, wages and benefits 1,419,562 1,308,774 Net occupancy expense 142,763 134,694 Equipment 178,624 152,016 FDIC Premiums 7,705 1,000 Franchise Tax 109,058 112,457 Professional Fees 131,920 127,116 Other operating expenses 772,565 595,835 ---------- ---------- Total noninterest expense 2,762,197 2,431,892 ---------- ---------- Income before taxes 1,259,917 1,366,594 Provision for Income Taxes 348,302 372,790 ---------- ---------- Net Income $ 911,615 $ 993,804 ========== ========== Per share data (based on 3,051,504 shares) Earnings per share $ 0.30 $ 0.33 Dividends declared $ 0.14 $ 0.13 See notes to interim consolidated financial statements Page 4 5 FIRST CITIZENS BANC CORP Consolidated Statement of Shareholders' Equity (Unaudited) Three months ended March 31, --------------------------------- 1997 1996 Balance at beginning of period $34,427,308 $33,806,791 Net earnings 911,615 993,804 Cash dividends (427,211) (381,438) Market adjustment on securities available for sale (136,577) (206,651) ------------ ------------ Balance at end of period $34,775,135 $34,212,506 ============ ============ See notes to interim consolidated financial statements Page 5 6 FIRST CITIZENS BANC CORP Consolidated Statement of Cash Flows (Unaudited) Three months ended March 31, ----------------------------- 1997 1996 Cash flows from operating activities Net Income $ 911,615 $ 993,804 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of office premises and equipment 157,253 146,512 Amortization of goodwill 81,512 50,384 Provision for loan losses 98,500 25,838 Change in deferred loan fees (12,282) (14,043) Net amortization of security premiums and discounts 32,811 34,856 Change in accrued interest receivable (253,638) 255,346 Change in other assets (535,991) (461,083) Change in accrued interest, taxes and other expenses 540,364 (267,717) ------------ ------------ Net cash from operating activities 1,020,144 763,897 Cash flows from investing activities Maturities and calls of securities, held-to-maturity 542,219 2,196,541 Maturities and calls of securities, available-for-sale 3,094,740 2,265,278 Purchases of securities, available-to-sale (3,881,185) (2,202,356) Loans made to customers, net of principal collected (1,674,612) 2,672,113 Change in federal funds sold 373,000 (923,000) Purchases of office premises and equipment (98,666) (159,029) ------------ ------------ Net cash from investing activities (1,644,504) 3,849,547 Cash flows from financing activities Branch acquisition 12,153,945 0 Repayments of FHLB borrowings (289,584) (273,638) Net change in deposits (6,205,868) (2,456,334) Change in securities sold under agreements to repurchase (2,976,394) (4,406,516) Change in U. S. Treasury interest-bearing demand notes payable 508,283 913,336 Cash dividends paid (427,211) (381,438) ------------ ------------ Net cash from financing activities 2,763,171 (6,604,590) ------------ ------------ Net change in cash and cash equivalents 2,138,811 (1,991,146) Cash and due from banks at beginning of period 11,615,060 16,295,910 ------------ ------------ Cash and due from banks at end of period $ 13,753,871 $ 14,304,764 ============ ============ Supplemental disclosures: Cash paid during the period for: Interest $ 2,276,508 $ 2,343,374 Income taxes 0 $ 95,000 See notes to interim consolidated financial statements Page 6 7 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- (1) Consolidated Financial Statements The consolidated financial statements include the accounts of First Citizens Banc Corp (Corporation) and it wholly-owned subsidiaries, The Citizens Banking Company (Citizens), The Castalia Banking Company (Castalia), SCC Resources, Inc. (SCC), and R. A. Reynolds Appraisal Service, Inc. (Reynolds). All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated balance sheets as of March 31, 1997 and December 31, 1996; the consolidated statements of income for the three month periods ended March 31, 1997 and 1996; the consolidated statement of shareholders' equity for the three months ended March 31, 1997 and 1996; and the consolidated statement of cash flows for the three month periods ended March 31, 1997 and 1996 have been prepared by the Corporation without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Corporation's financial position as of March 31, 1997 and its results of operations and changes in cash flows for the periods ended March 31, 1997 and 1996 have been made. The accompanying consolidated financial statements have been prepared in accordance with instructions of form 10-Q and therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The results of operations for the period ended March 31, 1997 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 1996 annual report. The Corporation has consistently followed these policies in preparing this form 10-Q. The provision for income taxes is based on the effective tax rate expected to be applicable for the entire year. The corporation follows the liability method of accounting for income taxes. The liability method provides that deferred tax assets and liabilities are recorded based on the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, using enacted tax rates. Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities",was issued by the Financial Accounting Standards Board ("FASB") in 1996. It revises the accounting for transfers of financial assets, such as loans and securities, and for distinguishing between sales and secured borrowings. It was originally effective for some transactions in 1997 and others in 1998. SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125" was issued in December 1996. SFAS No. 127 defers for one year the Page 7 8 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- effective date of provisions related to securities lending, repurchase agreements and other similar transactions. The remaining portions of SFAS No. 125 will continue to be effective January 1, 1997. SFAS No. 125 did not have a material impact on the Corporation's financial statements. In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which is effective for the financial statements for periods ending after December 15, 1997, including interim periods. SFAS No. 128 simplifies the calculation of earnings per share by replacing primary EPS with basic EPS. It also requires dual presentation of basic EPS and diluted EPS for entities with complex capital structures. Basic EPS includes no dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in earnings such as stock options, warrants or other common stock equivalents. All prior period EPS data will be restated to conform with the new presentation. (2) Branch Acquisition On January 21, 1997, Citizens acquired from EST National Bank of Elyria, Ohio, certain assets including cash and premises and equipment and assumed certain deposit and other liabilities of two branch banking offices. The transaction was accounted for as a purchase, and accordingly, the acquired assets and liabilities have been recorded based on their respective market values at the date acquisition. A summary of the assets acquired and the liabilities assumed are as follows: ASSETS LIABILITIES Cash and cash equivalents $12,153,945 Noninterest bearing deposits $4,559,545 Premises and equipment 956,145 Interest bearing deposits 10,016,978 ------------------ Identified intangible assets 1,494,094 Total deposits 14,576,523 ------------------ Total assets $14,604,184 ================== Other liabilities 27,661 ------------------ Total liabilities $14,604,184 ================== Page 8 9 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- (3) Securities The gross unrealized gains and losses of securities as presented in the consolidated balance sheets at March 31, 1997 and December 31,1996 are as follows: March 31, 1997 Gross Gross Amortized Unrealized Unrealized Estimated Fair AVAILABLE FOR SALE Cost Gains Losses Value ----------------- ----------------- ----------------- ------------------ U.S. Treasury securities and obligations of U.S. government corporations and agencies $37,037,977 $10,505 ($256,584) $36,791,898 Obligations of state and political subdivisions 18,836,155 374,797 (85,118) 19,125,834 Other securities, including mortgage- backed securities 3,609,809 (878) 3,608,931 ----------------- ----------------- ----------------- ------------------ $59,483,941 $385,302 ($342,580) $59,526,663 =========== ======== ========== =========== March 31, 1997 Gross Gross Amortized Unrealized Unrealized Estimated Fair HELD TO MATURITY Cost Gains Losses Value ----------------- ----------------- ----------------- ------------------ U.S. Treasury securities and obligations of U.S. government corporations and agencies $1,000,000 $16,563 $1,016,563 Obligations of state and political subdivisions 6,005,141 113,631 ($7,788) 6,110,984 Other securities, including mortgage- backed securities 2,233,798 5,815 (14,087) 2,225,526 ----------------- ----------------- ----------------- ------------------ $9,238,939 $136,009 ($21,875) $9,353,073 ========== ======== ========= ========== Page 9 10 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- December 31, 1996 Gross Gross Amortized Unrealized Unrealized Estimated Fair AVAILABLE FOR SALE Cost Gains Losses Value ----------------- ----------------- ----------------- ------------------ U.S. Treasury securities and obligations of U.S. government corporations and agencies $37,000,835 $58,526 ($155,293) $36,904,068 Obligations of state and political subdivisions 18,109,603 433,174 (86,282) 18,456,495 Other securities, including mortgage- backed securities 3,611,060 (468) 3,610,592 ----------------- ----------------- ----------------- ------------------ $58,721,498 $491,700 ($242,043) $58,971,155 =========== ======== ========== =========== December 31, 1996 Gross Gross Amortized Unrealized Unrealized Estimated Fair HELD TO MATURITY Cost Gains Losses Value ----------------- ----------------- ----------------- ------------------ U.S. Treasury securities and obligations of U.S. government corporations and agencies $1,000,000 $23,125 $1,023,125 Obligations of states and political subdivisions 6,329,284 141,366 ($7,318) 6,463,332 Other securities, including mortgage- backed securities 2,460,693 12,007 (10,648) 2,462,052 ----------------- ----------------- ----------------- ------------------ $9,789,977 $176,498 ($17,966) $9,948,509 ========== ======== ========= ========== Page 10 11 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- The amortized cost and estimated fair value of debt securities at March 31, 1997, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Estimated Fair Amortized Cost Value AVAILABLE FOR SALE Due in one year or less $15,084,048 $15,060,227 Due after one year through five years 29,201,785 29,229,390 Due after five years through ten years 10,552,276 10,588,959 Due after ten years 1,036,023 1,039,156 Mortgage-backed securities 48,559 47,681 Other securities 3,561,250 3,561,250 ----------- ----------- Total securities available for sale $59,483,941 $59,526,663 =========== =========== HELD TO MATURITY Due in one year or less $4,178,500 $4,225,650 Due after one year through five years 2,826,641 2,901,897 Mortgage-backed securities 2,233,798 2,225,526 ----------- ----------- Total securities held to maturity $9,238,939 $9,353,073 =========== =========== No securities were sold during the three months ended March 31, 1997 or 1996. Securities called or settled by the issuer resulted in gains of $6,250 for the three months ended March 31, 1997 and $5,500 for the three months ended March 31, 1996. Securities with a carrying value of approximately $38,955,000 and $33,650,000 were pledged as of March 31, 1997 and December 31, 1996, respectively, to secure public deposits, other deposits and liabilities as required by law. Page 11 12 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- (4) Loans Loans as presented in the consolidated balance sheet are comprised of the following classifications: 3/31/97 12/31/96 -------------- --------------- Commercial and agriculture $40,055,751 $42,038,299 Real estate - mortgage 134,083,729 131,491,632 Real estate - construction 1,829,605 2,079,810 Consumer 30,214,799 29,232,380 Credit card and other 1,723,340 1,449,945 Deferred loan fees (1,152,399) (1,164,681) -------------- --------------- Total loans $206,754,828 $205,127,397 ============ ============ (5) Allowance for Loan Losses A summary of the activity in the allowance for loan losses for the three months ended March 31, 1997 and March 31, 1996 is as follows: 1997 1996 ------------ ------------- Balance January 1, $2,642,000 $2,602,000 Loans charged off (115,635) (72,863) Recoveries 56,184 29,201 Provision for loan losses 98,500 69,500 ------------ ------------- Balance March 31, $2,681,049 $2,627,838 ========== ========== Page 12 13 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- Information regarding impaired loans is as follows for the three months ended March 31. 1997 1996 ------------- -------------- Average investment in impaired loans $1,883,000 $2,340,000 Interest income recognized on impaired loans including interest income recognized on cash basis $42,366 $31,804 Interest income recognized on impaired loans on cash basis $42,366 $31,804 Information regarding impaired loans at March 31, 1997 and December 31, 1996 is as follows: 3/31/97 12/31/96 ------------- -------------- Balance impaired loans $1,883,000 $1,982,000 Less portion for which no allowance for loan losses is allocated --- --- Portion of impaired loan balance for which an allowance for credit losses is allocated 1,883,000 1,982,000 Portion of allowance for loan losses allocated to the impaired loan balance 471,000 495,000 (6) Commitments, Contingencies and Off-Balance Sheet Risk The Bank subsidiaries are parties to financial instruments with off-balance sheet risk in the normal course of business to meet financing needs of their customers. These include commitments to make or purchase loans, undisbursed lines of credit, undisbursed credit card balances and letters of credit. The Banks' exposure to credit loss in the event of nonperformance by the other party to the financial instrument is represented by the contractual amount of those instruments. The Banks follow the same credit policy to make such commitments as they use for loans recorded on the balance sheet. Since many commitments to make loans expire without being used, the amount does not necessarily represent future cash commitments. Collateral obtained relating to the commitments is Page 13 14 First Citizens Banc Corp Notes to Interim Consolidated Financial Statements (Unaudited) Form 10-Q - -------------------------------------------------------------------------------- determined using management's credit evaluation of the borrower and may include real estate, vehicles, business assets, deposits and other items. The Banks do make fixed rate loan commitments for short periods of time. However, such commitments were immaterial as of March 31, 1997 and December 31, 1996. Commitments to extend credit and letters of credit approximated the following amounts at March 31, 1997 and December 31, 1996. Contract Amount --------------- March 31, 1997 December 31, 1996 -------------- ----------------- Commitment to extend credit: Lines of credit and construction loans $13,597,000 $14,081,000 Credit cards 4,171,000 4,235,000 Letters of credit 297,000 62,000 --------------- --------------- $18,065,000 $18,378,000 Citizens and Castalia are required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board requirements. The average reserve balance maintained in accordance with such requirements for the periods ended March 31, 1997 and December 31, 1996 approximated $1,720,000 and $1,702,000 respectively. In the normal course of business, the Corporation and its subsidiaries are involved in various legal actions, but in the opinion of management and its legal counsel, ultimate disposition of such legal matters is not expected to have a material adverse effect on the consolidated financial statements. Page 14 15 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- Introduction - ------------ The following discussion focuses on the consolidated financial condition of First Citizens Banc Corp at March 31, 1997, compared to December 31, 1996 and the consolidated results of operations for the three month period ending March 31, 1997 compared to the same period in 1996. 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 such effect if implemented. In addition to the historical information contained herein, the following discussion contains forward- looking statements that involve risks and uncertainties. Economic circumstances, the Corporation's operations, and the Corporation's actual results could differ significantly from those disclosed in forward-looking statements. Some of the factors that could cause or contribute to such differences are discussed herein but also include changes in the economy and interest rates in the nation and in the Corporation's general market area. Some of the forward-looking statements included herein are the statements regarding the following: 1. Management's determination of the amount of loan loss allowance and the amount of the loan loss provision; 2. The sufficiency of the Corporation's liquidity and capital reserves See Exhibit 99, which is incorporated herein by reference. Financial Condition - ------------------- Total assets of the Corporation at March 31, 1997 totalled $309,236,063 compared to $302,777,619 at December 31, 1996. This was an increase of $6,458,444 or 2.1 percent. Within the structure of the assets, net loans have increased $1,588,394 since December 31, 1996. Office premises and equipment have increased $887,558 and intangible assets have increased $1,412,582 since December 31, 1996. The increase in these two areas is attributable to the acquisition of two branches by The Citizens Banking Company. Page 15 16 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - -------------------------------------------------------------------------------- At March 31, 1997, $59,526,663 or 86.6 percent of the portfolio was classified as available-for-sale. The remainder of $9,238,939 was classified as held-to-maturity. Securities remained nearly the same, increasing only $4,470 from December 31, 1996. As of March 31, 1997, the net unrealized gain of the available-for-sale portfolio was $42,722 compared to $249,657 at December 31, 1996. The decrease in the net unrealized gain reflects changes in market values due to the current interest rate environment. Total loans at March 31, 1997 increased $1,627,443 or 0.8 percent from year end 1996. At March 31, 1997, the net loan to deposit ratio was 82.0 percent compared to 84.2 percent at December 31, 1996. This is reflective of the increase in deposits acquired in the purchase of two branches exceeding the loan growth during the first quarter of 1997. At March 31, 1997, the allowance for loan losses as a percent of total loans was 1.30 percent compared to 1.29 percent at December 31, 1996. For the three months of operations of 1997, $98,500 was placed into the allowance from earnings compared to $69,500 for the same period of 1996. Net charge offs for the first three months of 1997 were $59,451 compared to $43,662 for the same period of 1996. Impaired loans at March 31, 1997 totalled $1,883,000 or 0.9 percent of the loan portfolio compared to $1,982,000 or 1.0 percent of the loan portfolio at December 31, 1996. Total deposits at March 31, 1997 increased $8,370,655 from year-end 1996. Noninterest bearing deposits, representing demand deposit balances, increased $4,505,147 from year-end 1996. Interest bearing deposits, including savings and time deposits, decreased $3,865,508 from year-end 1996. The year to date 1997 average balance of savings deposits has increased $1,240,000 compared to the average balance of the same period for 1996. The current average rate of these deposits is 2.81 percent. The year to date 1997 average balance of time certificates has increased $1,451,000 compared to the average balance for the same period for 1996. The current average rate on these deposits is 5.15 percent. Other borrowed funds have decreased $2,757,695 from December 31, 1996 to March 31, 1997. Federal Home Loan Bank borrowings have decreased $289,584 as a result of scheduled paydowns. Securities sold under agreements to repurchase have decreased $2,976,394 and U.S. Treasury Tax Demand Notes have increased $508,283. Shareholders' equity at March 31, 1997 was $34,775,135 which was 11.2 percent of total assets. Shareholders' equity at December 31, 1996 was $34,427,308 which was 11.4 percent of total assets. The increase in shareholders' equity was represented by earnings of $911,615 less dividends of $427,211 and less the decrease in the unrealized gain on securities available for sale of $136,577. Page 16 17 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- The company paid a cash dividend February 1, 1997 at the rate of $.14 per share. Total outstanding shares for the period December 31, 1996 to March 31, 1997 were 3,051,504. Results of Operations - --------------------- Net income for the quarter ended March 31, 1997 were $911,615 or $.30 per common share compared to $993,804 or $.33 per common share for the same period in 1996. This was an decrease of $82,189 or 8.3 percent. Net interest income for the first quarter 1997 totalled $3,194,889 compared to $3,003,124 for the first quarter of 1996. This was an increase of $191,765 or 6.4 percent. Total interest income for the first three months of 1997 has increased $153,384 or 2.9 percent compared to the same period of 1996. The average rate on earning assets on a tax equivalent basis for the first three months of 1997 was 8.01 percent compared to 7.81 percent for the same period of 1996. Total interest expense for the first three months of 1997 has decreased $38,381 or 1.6 percent compared to the same period of 1996. The average rate on paying liabilities for the first three months of 1997 was 3.84 percent compared to 3.99 percent for the same period of 1996. The net interest margin on a tax equivalent basis for the first three months was 4.74 percent for the three month period ended March 31, 1997 and 4.67 percent for the same period ended March 31, 1996. Noninterest income for the first quarter 1997 totalled $925,725 compared to $864,862 for the first quarter 1996. This was an increase of $60,863 or 7.0 percent and mainly attributed to increases in revenue from the computer operations of $54,751, increased service charges on deposit accounts of $12,889, and decreased other operating income of $7,527. Noninterest expense for the first quarter 1997 totalled $2,762,197 compared to $2,431,892 for the first quarter 1996. This was an increase of $330,305 or 13.6 percent. The single largest monetary increase in noninterest expense is in salaries, wages and employee benefits which increased $110,788 for the first three months of 1997 or 8.5 percent compared to the same period of 1996. The increase in salaries, wages and employee benefits is associated with the acquisition of two new branches. Provision for Income Taxes - -------------------------- The provision for income taxes for the first quarter 1997 totalled $348,302 compared to $372,790 for the first quarter 1996. This was an decrease of $24,488 or 6.6 percent. The decrease in the federal income taxes is a result of the decrease in total income before taxes of $106,677. Page 17 18 First Citizens Banc Corp Management's Discussion and Analysis of Financial Condition and Results of Operations Form 10-Q - ------------------------------------------------------------------------------- Capital Resources - ----------------- Shareholders equity totalled $34,775,135 at March 31, 1997 compared to $34,427,308 at December 31, 1996. All of the capital ratios exceed the regulatory minimum guidelines as identified in the following table: Corporation Ratios Regulatory 3/31/97 12/31/96 Minimums ------- -------- -------- Tier I Risk Based Capital 19.73% 20.75% 4.00% Total Risk Based Capital 20.99% 22.20% 8.00% Leverage Ratio 10.20% 10.64% 5.00% The Corporation paid cash dividends of $.14 per common share on February 1, 1997 compared to the February 1996 dividend of $.13 per common share. Capital expenditures totalled $1,054,811 for the first three months of 1997 compared to $159,029 for the same period of 1996. The capital expenditures for the first three months of 1997 include $956,145 of premises and equipment acquired in the purchase of two branches. 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. For the first three months of 1997 the Banks maintained a federal funds sold position that averaged $9,314,000 In addition, the Banks, through their respective correspondent banks maintain federal funds borrowing lines totalling $6,500,000 and the Banks have total borrowing availability at the Federal Home Loan Bank of Cincinnati of $10,417,898 at March 31, 1997. Finally, 86.6% of the Corporation's security portfolio has been classified as available for sale which provides additional liquidity. Page 18 19 First Citizens Banc Corp Other Information Form 10-Q - -------------------------------------------------------------------------------- Part II - Other Information ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. (A) EXHIBIT NO. 27 Financial Data Schedule.................................22 (B) EXHIBIT NO. 99 Safe Harbor Under the Private Securities Litigation Reform Act of 1995 (B) REPORTS ON FORM 8-K - None Page 19 20 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, The registrant has caused this report to be signed on its behalf the undersigned thereunto duly authorized. First Citizens Banc Corp /s/ David A. Voight May 13, 1997 - ---------------------------------------------- ------------ David A. Voight Date President /s/ James O. Miller May 13, 1997 - ----------------------------------------------- ------------ James O. Miller Date Senior Vice President Page 20 21 First Citizens Banc Corp Index to Exhibits Form 10-Q - -------------------------------------------------------------------------------- Exhibit Number Description Page Number - ------ ----------- ----------- 27 Financial Data Schedule 22 99 Safe Harbor Under the Private Securities Incorporated by reference to Exhibit Litigation Reform Act of 1995 99 to Annual Report on Form 10-K for the Year Ended December 31, 1996 filed by the registrant on February 24, 1997 Page 21