U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
__________ TO __________
Commission file number - 33-53596
FC BANC CORP
----------------------------------
(Exact name of small business issuer as specified in its charter)
OHIO 34-1718070
------------------------------ ----------------------------------
(State or other jurisdiction of
incorporation or organization) (I.R.S.Employer Identification No.)
Farmers Citizens Bank Building,
105 Washington Square
Box 567, Bucyrus, Ohio 44820-0567
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(419) 562-7040
--------------
(Issuer's telephone number)
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No . . .
------
As of November 02, 2000, 605,820 shares of Common Stock of the Registrant
were outstanding. There were no preferred shares outstanding.
FC BANC CORP.
BUCYRUS, OHIO
FORM 10-QSB
INDEX
=============================================================================
Page Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - 3
September 30, 2000 and December 31, 1999
Consolidated statements of income - 4
Three and nine months ended September 30, 2000 and 1999
Consolidated statements of changes in 5
Shareholders' equity - Nine months ended September 30,
2000 and year ended December 31, 1999
Consolidated statement of cash flows - 6
Nine months ended September 30, 2000 and 1999
Notes to consolidated financial statements 7
September 30, 2000 and December 31, 1999
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
(Dollars in thousands)
(Unaudited)
Sept. 30, Dec. 31,
2000 1999
---- ----
ASSETS
Cash and cash equivalents
Cash and amounts due from banks $ 3,501 $ 4,311
Interest-bearing demand deposits in other banks 0 10
-------- -------
Total cash and cash equivalents 3,501 4,321
Investment securities, available-for-sale 30,999 34,795
Loans 61,627 55,975
Allowance for loan losses (1,582) (1,732)
-------- -------
Net loans 60,045 54,243
Premises and equipment, net 2,121 2,108
Accrued interest receivable 928 683
Cash surrender value of life insurance 2,460 2,373
Deferred income taxes 532 537
Other assets 413 127
-------- -------
TOTAL ASSETS $100,999 $99,187
LIABILITIES
Deposits
Noninterest-bearing $ 10,405 $11,426
Interest-bearing 76,187 75,533
-------- -------
Total deposits 86,592 86,959
Federal Funds Purchased 1,700 0
Note payable 24 29
Accrued interest payable 201 184
Other liabilities 951 662
-------- -------
TOTAL LIABILITIES 89,468 87,834
-------- -------
SHAREHOLDERS' EQUITY
Preferred stock of $25 par value; 750 shares
authorized, no shares issued and outstanding 0 0
Common stock of no par value;
4,000,000 shares authorized, 665,632 shares issued 832 832
Additional paid-in capital 1,366 1,371
Retained earnings 11,168 10,720
Treasury stock, at cost; 58,741 and 43,441 shares (1,501) (1,047)
Accumulated other comprehensive income (334) (523)
-------- -------
TOTAL SHAREHOLDERS' EQUITY 11,531 11,353
-------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $100,999 $99,187
======== =======
______________________________________________
See Notes to Consolidated Financial Statements.
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
(Dollars in thousands, except per share)
(unaudited) (unaudited)
3 Months Ended 9 Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
INTEREST INCOME
Interest and fees on loans $ 1,337 $ 1,149 $ 3,809 $ 3,297
Interest and dividends on investment securities 475 516 1,461 1,524
Interest on federal funds sold 2 23 7 81
-------- ------- ------- -------
TOTAL INTEREST INCOME 1,814 1,688 5,277 4,902
------- ------- ------- -------
INTEREST EXPENSE
Interest on deposits 753 656 2,103 1,917
Interest on borrowed funds 12 1 32 1
------- ------- ------- -------
TOTAL INTEREST EXPENSE 765 657 2,135 1,918
------- ------- ------- -------
NET INTEREST INCOME 1,049 1,031 3,142 2,984
Provision for loan losses (50) (50) (134) (100)
------- ------ ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS 1,099 1,081 3,276 3,084
OTHER INCOME
Service charges 136 130 385 363
Loss on sale of investment securities 0 0 0 (3)
Gain (loss) on sale of fixed assets 0 1 (3) 1
Life insurance buildup 32 28 95 101
Other income 0 0 12 3
------ ------ ------- -------
TOTAL OTHER INCOME 168 159 489 465
------ ------ ------- -------
OTHER EXPENSES
Salaries and benefits 442 436 1,324 1,209
Net occupancy and equipment expenses 197 184 516 524
Supplies 27 20 76 66
Advertising and public relations 30 20 64 75
Directors' fees 21 17 63 52
Legal and professional 33 27 91 84
State taxes 35 21 106 100
Other expenses 153 151 512 391
------ ------ ------- -------
TOTAL NON-INTEREST EXPENSE 938 876 2,752 2,501
------ ------ ------- -------
NET INCOME BEFORE FEDERAL INCOME
TAX EXPENSE 329 364 1,013 1,048
Federal income tax expense 87 98 268 274
------ ------ ------ ------
NET INCOME $ 242 $ 266 $ 745 $ 774
====== ====== ====== ======
EARNINGS PER SHARE:
Earnings per common share - basic $0.40 $0.43 $1.20 $1.22
Earnings per common share - diluted $0.39 $0.42 $1.19 $1.21
- ----------------------------------------------
See Notes to Consolidated Financial Statements.
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
(Dollars in thousands)
(Unaudited)
Number of Shares Amount
--------------------------- ---------------------------------------------------------
Accumulated
Other
Additional Comprehen- Comprehen-
Common Treasury Common paid-in Retained Treasury sive sive
stock stock stock capital earnings stock Income Income
----- ----- ----- ------- -------- ----- ------ ------
Balances at December 31, 1998
As previously stated 665,632 30,703 $832 $1,370 $10,079 $(685) $ (49)
Under accrual of employee benefit
Expense (45)
------- ------- ---- ------- ------- ------ ------
Balances at December 31, 1998
As restated 665,632 30,703 832 1,370 10,034 (685) (49)
Comprehensive Income
Net Income 1,071 $1,071
Other comprehensive income,
net of tax:
Change in unrealized
Gain (loss) on securities
Available-for-sale, net of
Deferred income tax of $237 (474) (474)
------
Total Comprehensive income $ 597
======
Dividends declared-common
($0.61 per share) (385)
Sale of treasury stock (1,000) 1 23
Purchase of 13,738 common shares 13,738 (385)
------- ------ --- ----- ----- ------ ----
Balances at December 31, 1999 665,632 43,441 832 1,371 10,720 (1,047) (523)
Comprehensive Income
Net Income 745 $ 745
Other comprehensive income
Change in unrealized
Gain (loss) on securities
Available-for-sale, net of
Deferred income tax of $(95) 189 189
-----
Total Comprehensive income $ 934
=====
Dividends declared -common
($0.48 per share) (297)
Sale of treasury stock (2,360) (5) 57
Purchase of 17,660 common shares 17,660 (511)
------- ------ ---- ------ ------- ------- ------
Balances at September 30, 2000 665,632 58,741 $832 $1,366 $11,168 $(1,501) $(334)
======= ====== ==== ====== ======= ======== ======
- -----------------------------------------------
See Notes to Consolidated Financial Statements.
FC BANC CORP, INC.
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CASH FLOWS
==============================================================================
(Dollars in thousands)
(Unaudited)
9 Months Ended 9 Months Ended
Sept. 30, Sept. 30,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 745 $ 774
Adjustments to reconcile net income to net cash
Provided by operating activities:
Provision for loan losses (134) (100)
Loss on sale of investment securities 0 3
Income accrued on life insurance contracts (87) (95)
Depreciation 282 308
Gain on sale of Premises and equipment (3) (1)
Deferred income taxes 200 7
Investment securities amortization (accretion), net (271) 158
Net change in:
Accrued interest receivable (245) (218)
Accrued interest payable 17 (30)
Other assets (286) (26)
Other liabilities 289 (102)
------ ------
Net cash provided by operating activities 507 678
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available-for-sale (104) (7,213)
Proceeds from sale of available-for-sale securities 0 713
Proceeds from maturities of securities available-for-sale 4,171 7,575
Net increase in loans (5,668) (6,518)
Proceeds from sales of life insurance contracts 0 694
Purchases of life insurance contracts 0 (505)
Proceeds from sale of premises and equipment 8 1
Purchase of premises and equipment (306) (856)
------ ------
Net cash used in investing activities (1,899) (6,109)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in:
Noninterest-bearing, interest-bearing, demand,
and savings deposits (4,708) (459)
Certificates of deposit 4,341 4,676
Net increase in short-term borrowed funds 1,700 0
Payments on long-term (5) 0
Proceeds from long-term debt 0 31
Exercise of stock options 52 20
Purchase of treasury stock (511) (192)
Cash dividends paid (297) (284)
------ ------
Net cash provided by financing activities 572 3,792
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS (820) (1,639)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,321 7,469
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,501 $5,830
====== ======
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for interest $2,118 $1,947
Cash paid during the period for income taxes 235 416
- ----------------------------------------------
See Notes to Consolidated Financial Statements.
FC BANC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2000 and December 31,1999
NOTE 1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited interim consolidated
financial statements contain all adjustments necessary for a fair presentation
of FC Banc Corp.'s ("Company" or "Bancorp") financial position as of
September 30, 2000, and December 31, 1999, and the results of operations for
the three-and nine-months ended September 30, 2000 and 1999, and the cash flows
for the nine months ended September 30, 2000 and 1999. Certain information
and note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. It is suggested that these interim consolidated financial
statements be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB.
The results of operations for the three-and-nine months ended September 30,
2000, are not necessarily indicative of the results which may be expected for
the entire fiscal year.
NOTE 2. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
(Dollars in thousands)
Nine months ended Year ended
September 30, December 31,
2000 1999
---- ----
Balance, beginning of period $1,732 $1,725
Provision for loan losses (134) (130)
Recoveries 78 205
Charge-offs (94) (68)
------ ------
Balance, end of period $1,582 $1,732
====== ======
NOTE 3. REGULATORY CAPITAL
The following table illustrates the compliance by the Bank with currently
applicable regulatory capital requirements at September 30, 2000.
(Dollars in thousands)
Categorized
"Well
Capitalized"
Required Under Prompt
For Capital Corrective
Adequacy Action
Actual Purposes Provisions
------ -------- ----------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Total Risk-Based Capital
(To Risk-Weighted Assets) $12,444 19.18% $5,189 8.00% $6,487 10.00%
Tier I Capital
(To Risk-Weighted Assets) 11,624 17.92% 2,595 4.00% 3,892 6.00%
Tier I Capital
(To Total Assets) 11,624 11.51% 4,041 4.00% 5,051 5.00%
Tangible Capital
(To Total Assets) 11,624 11.22% 4,041 4.00% N/A N/A
NOTE 4. EARNINGS PER SHARE
Earnings per share ("EPS") is computed in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
was adopted by the Company as of December 31, 1997. Common stock equivalents
include shares granted under the Stock Option Plan ("SOP"). Following is a
reconciliation of the numerators and denominators of the basic and diluted
EPS calculations.
For the Three Months Ended September 30, 2000
---------------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
--------- ------------- ------
Basic EPS $242,196 612,703 $0.40
Income available to
common shareholders
Effect of dilutive securities:
Stock Options None 5,319 (0.01)
------- ------
Diluted EPS Income available to
common shareholders +
assumed conversions $242,196 618,022 $ 0.39
======== ======= ======
For the Three Months Ended September 30, 1999
---------------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
--------- ----------- ------
Basic EPS $265,930 625,286 $ 0.43
Income available to
common shareholders
Effect of dilutive securities:
Stock Options None 10,318 (0.01)
------- ------
Diluted EPS Income available to
common shareholders +
assumed conversions $265,930 635,604 $ 0.42
======== ======= ======
For the Nine Months Ended September 30, 2000
--------------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
--------- ------------ ------
Basic EPS $744,985 618,662 $1.20
Income available to
common shareholders
Effect of dilutive securities:
Stock Options None 5,071 (0.01)
------- -----
Diluted EPS Income available to
common shareholders +
assumed conversions $744,985 623,733 $1.19
======== ======= =====
For the Nine Months Ended September 30, 1999
--------------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
--------- ------------- ------
Basic EPS $773,623 631,757 $1.22
Income available to
common shareholders
Effect of dilutive securities:
Stock Options None 9,731 (0.01)
------- ------
Diluted EPS Income available to
common shareholders +
assumed conversions $773,623 641,488 $1.21
======== ======= =====
NOTE 5. RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for 1999 have been
reclassified to conform to the 2000 presentation.
FC BANC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
==============================================================================
Safe Harbor Clause
This report contains certain "forward-looking statements." The Company
desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and is including this statement for
the express purpose of availing itself of the protection of such safe harbor
with respect to all such forward-looking statements. These forward-looking
statements, which are included in Management's Discussion and Analysis,
describe future plans or strategies and include the Company's expectations of
future financial results. The words "believe," "expect," "anticipate,"
"estimate," "project," and similar expressions identify forward-looking
statements. The Company's ability to predict results or the effect of future
plans or strategies is inherently uncertain. Factors which could affect
actual results include interest rate trends, the general economic climate in
the Company's market area and the country as a whole, loan delinquency rates,
and changes in federal and state regulations. These factors should be
considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements.
General
The Company is a bank holding company whose activities are primarily
limited to holding the stock of The Farmers Citizens Bank, Bucyrus, Ohio,
("Bank"). The Bank conducts a general banking business in North Central Ohio
that consists of attracting deposits from the general public and applying
those funds to the origination of loans for residential, consumer and
non-residential purposes. The Bank's profitability is significantly
dependent on net interest income that is the difference between interest
income generated from interest-earning assets (i.e., loans and investments)
and the interest expense paid on interest-bearing liabilities (i.e., customer
deposits and borrowed funds). Net interest income is affected by the relative
amount of interest-earning assets and interest-bearing liabilities and
interest received or paid on these balances. The level of interest rates
paid or received by the Bank can be significantly influenced by a number of
environmental factors, such as governmental monetary policy, that are outside
of management control.
Earnings per common share were computed by dividing net income by the
weighted-average number of shares outstanding for the three-and nine-month
periods ended September 30, 2000 and 1999.
The consolidated financial information presented herein has been prepared
in accordance with generally accepted accounting principles ("GAAP") and
general accounting practices within the financial services industry. In
preparing consolidated financial statements in accordance with GAAP, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and expenses
during the reporting period. Actual results could differ from such estimates.
The Company is subject to regulation by the Board of Governors of the
Federal Reserve System which limits the activities in which the Company and
the Bank may engage. The Bank is supervised by the State of Ohio, Division of
Financial Institutions and its deposits are insured up to applicable limits
under the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC"). The Bank is a member of the Federal Reserve System and
is subject to its supervision. The Company and the Bank must file with the
U.S. Securities and Exchange Commission, the Federal Reserve Board and Ohio
Division of Financial Institutions the prescribed periodic reports containing
full and accurate statements of its affairs.
In June 2000 the Bank opened its newest banking center in Fredericktown,
Ohio. The Bank now operates five banking offices located in Crawford, Morrow
and Knox Counties, Ohio. The primary market area of the Bank is North Central
Ohio that includes Crawford, Morrow, Knox and contiguous counties.
The Bank continues to focus on providing First Class Banking (trade mark)
to its customers. In April, 2000 the Bank introduced Phone Access Banking
(trade mark) (1-877-562-4FCB) that allows customers to access their bank
account information 24 hours a day. Also, the Bank has engaged FundsExpress to
assist in the development of internet banking products that will offer new and
existing customers a hometown banking experience while utilizing the latest
in banking technology. The internet banking experience will be developed in
three phases consisting of information, inquiry and transactional phases. In
early October the Bank completed the informational phase and has established a
website that may be accessed at www.farmerscitizensbank.com. The inquiry
phase where customers will be allowed to view their account activity should be
completed by the first quarter of 2001. The transaction phase where customers
may perform online transactions should be available by the third quarter of
2001.
In addition, the Bank's board of directors approved the demolition and
reconstruction of our Main Office located at 105 Washington Square, Bucyrus,
Ohio. Management expects the demolition and reconstruction process to begin
in December 2000 with an anticipated completion date in the fourth quarter of
2001. The main purpose of the project is to modernize the primary banking
facility that will enhance our ability to attract and retain quality
employees, allow for the delivery of various financial products and services
requested from our customers, and improve upon our existing operating
efficiencies.
Changes in Financial Condition
At September 30, 2000, the consolidated assets of the Company totaled
$101.0 million, an increase of $1.8 million, or 1.83%, from $99.2 million at
December 31, 1999. The increase in total assets resulted primarily from loan
growth of $5.6 million that was funded by a $4.1 million reduction in
investment securities available-for-sale and $1.7 million increase in
short-term borrowings.
Loans secured by real estate and consumer loans increased by $4.4 million
and $2.3 million, respectively. Somewhat offsetting these increases was a
decline in Commercial and Industrial loans of $1.2 million.
Investment securities available-for-sale declined by $3.8 million, or
10.92% to $31.0 million at September 30, 2000, compared to $34.8 million at
December 31, 1999. The decline resulted from normal amortization and scheduled
maturities of securities. The cash generated was used to fund loan growth and
other operations of the Bank.
Cash and cash equivalents declined by $0.8 million to $3.5 million at
September 30, 2000, compared to $4.3 million at December 31, 1999. The
decline was attributable to the reduction of cash reserves that were set aside
for potential problems related to the Year 2000 ("Y2K"). The Bank did not
experience any losses related to Y2K, therefore $1.0 million was reinvested
into earning assets in January 2000.
Deposit liabilities decreased by $0.4 million, or 0.42%, to $86.6 million
at September 30, 2000, from $87.0 million at December 31, 1999. Demand, money
market and savings balances declined by $1.0 million, $2.5 million, $1.6
million, respectively. While interest bearing demand and certificates of
deposit increased by $.03 million and $4.3 million, respectively.
Total shareholders' equity increased by $0.2 million to $11.5 million at
September 30, 2000 as compared to December 31, 1999. During the first nine
months of 2000 the Bank earned net income of $0.7 million and the fair market
value of investment securities available-for-sale increased by $0.2 million.
The increase in shareholders' equity was partially offset by the payment of
dividends of $0.3 million and the purchase of treasury stock of $0.5 million.
The Bank's liquidity, primarily represented by cash and cash equivalents,
is a result of its operating, investing and financing activities. Principal
sources of funds are deposits, loan and mortgage-backed security repayments,
maturities of securities and other funds provided by operations. The Bank
also has the ability to borrow from the Federal Home Bank of Cincinnati
("FHLB"), certain correspondent banks, as well as the Federal Reserve Bank of
Cleveland ("FRB" or "FED"). While scheduled loan repayments and maturing
investments are relatively predictable, deposit flows and early loan and
mortgage-backed security prepayments are more influenced by interest rates,
general economic conditions and competition. The Bank maintains investments
in liquid assets based upon management's assessment of (i) the need for
funds, (ii) expected deposit flows, (iii) the yields available on short-term
liquid assets and (iv) the objectives of the asset/liability management
program. In the ordinary course of business, part of such liquid investments
is composed of deposits at correspondent banks. Although the amount on deposit
at such banks often exceeds the $100,000 limit covered by FDIC insurance, the
Bank monitors the capital of such institutions to ensure that such deposits do
not expose the Bank to undue risk of loss.
The Asset/Liability Management Committee ("ALM Committee" or "Committee")
of the Bank is responsible for liquidity management. This committee, which is
comprised of various managers, has a Funds Management Policy that covers all
assets and liabilities, as well as off-balance sheet items that are potential
sources and uses of liquidity. The Bank's liquidity management objective is
to maintain the ability to meet commitments to fund loans and to purchase
securities, as well as to repay deposits and other liabilities in accordance
with their terms. The Bank's overall approach to liquidity management is to
ensure that sources of liquidity are sufficient in amounts and diversity to
accommodate changes in loan demand and deposit fluctuations without a
material adverse impact on net income. The Committee monitors the Bank's
liquidity needs on an ongoing basis. Currently the Bank has several sources
available for both short- and long-term liquidity needs. These include, but are
not restricted to advances from the FHLB, Federal Funds and borrowings from
the Fed and other correspondent banks.
The Bank is subject to various regulatory capital requirements
administered by its primary federal regulator, the FRB. Failure to meet
minimum capital requirements can initiate certain mandatory, and possible
additional discretionary actions by regulators that, if undertaken, could
have a material affect on the Company and the consolidated financial
statements. Under the regulatory capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and classification
under the prompt corrective action guidelines are also subject to qualitative
judgements by the regulators about components, risk weighing, and other
factors.
Qualitative measures established by the regulation to ensure capital
adequacy requires the Bank to maintain minimum amounts and ratios of: total
risk-based capital and Tier I capital to risk-weighted assets (as defined by
the regulations), and Tier I capital to average assets (as defined).
Management believes, as of September 30, 2000, that the Bank meets all of the
capital adequacy requirements to which it is subject.
As of December 31, 1999, the most recent notification from the FDIC, the
Bank was categorized as well capitalized under the regulatory framework for
prompt corrective action. To remain categorized as well capitalized, the Bank
will have to maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as disclosed in Note 3 - Regulatory Capital. There are no
conditions or events since the most recent notification that management
believes have changed the Bank's prompt corrective action category.
At September 30, 2000, FC Banc Corp. had approximately $3.3 million in
commitments for capital expenditures. The majority of the commitment was
related to the demolition and reconstruction of the main office building
located at 105 Washington Square, Bucyrus, Ohio.
Results of Operations
Comparison of Three Months Ended September 30, 2000 and 1999
General. Net income decreased during the third quarter of 2000 as
compared to the same three-month period ended September 30, 1999. Net income
amounted to $242 thousand as compared to $266 thousand, a decrease of $24
thousand, or 9.02%. The decrease was primarily attributable to an increase in
operating expenses that were partially offset by increases in net interest
income and income on service charges.
Interest Income. The increase and mix of earning assets was the primary
contributing factor to the increase in interest income and fees on loans of
$188 thousand for the three months ended September 30, 2000 compared to 1999.
Average loans outstanding for the quarter ended September 30, 2000 were $60.9
million up $9.3 million or 17.97% as compared to the quarter ended September
30, 1999. The increased loan volume contributed $193 thousand to interest
income. Excluding fees on loans, the average yield on loans declined from
8.46% for the quarter ended September 30, 1999 to 8.40% for the quarter ended
September 30, 2000. The decline in yield reduced interest income on loans by
$8 thousand. Fee income on loans increased by $3 thousand to $55 thousand for
the third quarter 2000 as compared to the third quarter 1999.
The increase in loan interest and fee income was partially offset by a
$62 thousand decrease in interest and dividend income from investment
securities, federal funds sold, and due from bank accounts. The decrease in
interest and dividend income from investments, federal funds sold and due from
banks resulted primarily from a reduction in average outstanding balances of
$7.2 million from the third quarter ended September 30, 1999 to September 30,
2000. The reduction in average outstanding balances lowered interest and
dividend income from investment securities, federal funds sold, and due from
bank accounts by $97 thousand for the three months ended September 30, 2000 as
compared to the three months ended September 30, 1999. The average yield on
investment securities, federal funds sold, and due from bank accounts
measured 6.10% for the three months ended September 30, 2000 up from 5.58% for
the three months ended September 30, 1999. The improved average yield added
$35 thousand to interest and dividend income from investment securities,
federal funds sold, and due from banks for the third quarter ended September
30,2000 as compared to the third quarter ended September 30, 1999.
Interest Expense. Interest expense on deposit liabilities increased by
$97 thousand, or 14.79% for the three months ended September 30, 2000, as
compared to the same period in 1999. Total average deposits outstanding
increased by $1.5 million to $87.0 million for the third quarter ended
September30, 2000, as compared to the third quarter ended September 30, 1999.
The increase in average deposits outstanding increased interest expense by $37
thousand while the average cost of deposits increased from 3.05% for the third
quarter ended September 30, 1999 to 3.44% for the third quarter ended
September 30, 2000. The increase in average yield added $60 thousand to
interest expense on deposits for the third quarter ended September 30, 2000 as
compared to the third quarter ended September 30, 1999. In addition, average
borrowings outstanding increased by $.7 million at September 30, 2000 as
compared to September 30, 1999. Interest expense from average borrowings
outstanding increased by $11 thousand for the third quarter ended September 30,
2000 compared to the third quarter ended September 30, 1999. The increase in
interest expense on borrowings was attributable to increased borrowings.
The Federal Reserve Open Market Committee has increased short-term rates
on federal funds by 175 basis points since June 1999. The interest rate on
federal funds increased from 4.75% to 6.50%. Due to competition and rising
interest rates the Bank's source of funding shifted from low cost money
market and savings accounts to higher cost certificates of deposits. From
September 30, 1999 to September 30, 2000 money market and savings deposits
declined by $2.7 million and $1.9 million, respectively. While certificates of
deposits increased by $4.5 million over the same period.
Net Interest Income. Net interest income is derived by the difference
between total interest income and total interest expense. The net interest
margin measures the bank's ability to generate net revenue from its average
earning assets (primarily loans and investments) less interest expense from
its source of funds (primarily deposits and borrowings). For the third
quarter ended September 30, 2000 net interest income totaled $1.0 million up
$18 thousand from the third quarter ended September 30, 1999. The net interest
margin for the third quarter ended September 30, 2000 was 4.44% compared to
4.57% for the third quarter ended September 30, 1999. Total average earning
assets outstanding increased by $2.0 million for the third quarter 2000
compared to 1999.
Provision for Loan Losses. The Bank recorded net chargeoffs of $15
thousand during the three months ended September 30, 2000, compared to net
recoveries of $20 thousand during the same period in 1999. Based upon continued
strong credit quality the Bank recorded a negative provision for loan losses
during the third quarter in 2000 and 1999. The negative provision was based
upon the results of independent loan reviews and composition of the loan
portfolio, primarily loans secured by one- to four-family residential
properties and other forms of collateral, that are considered to have less
risk.
Non-Interest Income. Non-interest income increased by $9 thousand, or
5.66%, to $168 thousand for the three months ended September 30, 2000, from
$159 thousand for the three months ended September 30, 1999. The increase was
primarily attributable to service charges on deposit accounts. No security
gains or losses were recognized for the three months ended September 30, 2000
and September 30, 1999.
Non-Interest Expense. Non-interest expense ("NIE") increased by $62
thousand, or 7.08%, to $938 thousand for the three months ended September 30,
2000, from $876 thousand in the comparable period in 1999. In the third
quarter 2000, the Bank incurred a non-recurring expense of $19 thousand
related to the retirement of an obsolete fire alarm system. Also, during the
third quarter 2000, expenses related to compensation benefits, occupancy,
equipment and supplies increased by approximately $45 thousand as compared
to the third quarter 1999. The increased expenses were primarily related
to the opening of the Bank's Fredericktown office in May 2000. As of September
30, 2000 the ("NIE/Revenue") measured 77.07% and 73.61% for the three months
ended September 30, 2000 and 1999, respectively. The NIE/Revenue ratio reflects
the investment costs associated with product development, upgrading the Bank's
infrastructure and expansion into new markets.
Income Taxes. The provision for income taxes declined by $11 thousand
for the three months ended September 30, 2000, compared with the prior year,
primarily as a result of lower taxable income for the quarter.
Comparison of Nine months Ended September 30, 2000 and 1999
General. Net income for the first nine months of 2000 totaled $745
thousand that was $29 thousand less than the same period in 1999. The decline
was primarily attributable to increased operating expenses for salaries and
benefits, and computer services.
Interest Income. The increase and mix of average earning assets was the
primary contributing factor to the increase in interest income of $.04
million, or 7.65% for the nine months ended September 30, 2000 compared to the
same period in 1999.
Year to date average loans outstanding totaled $58.4 million in 2000, an
increase of 19.18%, as compared to 1999. The increase in average loans
outstanding added $0.6 million to interest income while the decline in yield
from 8.41% in 1999 to 8.36% in 2000 reduced interest income by $11 thousand.
In addition, the extra day for leap year 2000 added $6 thousand to interest
income.
Year to date average outstanding balances on investment securities
available-for-sale and federal funds sold declined from $39.0 million in 1999
to $32.2 million in 2000. The $6.8 million decline in outstanding reduced
interest income for the third quarter ended September 30, 2000 by $245
thousand as compared to the same period in 1999. The year to date average
yield on investment securities available-for-sale and federal funds sold
improved from 5.50% for 1999 to 6.10% in 2000. The improved yield added $107
thousand to interest income.
Interest Expense. Interest expense on deposit liabilities increased by
$0.2 million for the nine months ended September 30, 2000 as compared to
1999. Additional interest expense was recognized on borrowed funds that
amounted to $32 thousand in 2000 as compared to $1 thousand in 1999. From time
to time the Bank has used short-term borrowings from its correspondent banks
to fund loan growth. The year to date average outstanding balance on these
borrowings was $0.6 million at an average rate of 6.49%. The Bank's overall
cost of funds, including short-term borrowings, measured 3.31% as compared to
3.09% in 1999.
The change in deposit mix added to the increase in year to date interest
expense. The year to date average balance outstanding on certificates of
deposit grew from $34.9 million in 1999 to $39.4 million in 2000. The
increase in average outstanding balances increased interest expense by $166
thousand for 2000 as compared to 1999. The average yield on certificates of
deposit increased from 4.97% in 1999 to 5.17% in 2000. The increase in yield
added $57 thousand in interest expense in 2000 as compared to 1999.
The average outstanding balances for other interest bearing deposit
liabilities declined by $2.2 million for 2000 as compared to 1999. The
decline in average balances outstanding reduced interest expense by $48
thousand. The average yield on these deposits declined slightly from 2.20% in
1999 to 2.18% in 2000.
Net Interest Income. Net Interest income for the first nine months
ended September 30, 2000 totaled $3.1 million, up $0.2 million for the same
period in 1999. The increase was primarily attributable to an increase in
average earning assets outstanding and improvement in the Bank's net interest
margin. Total average earning assets consist of Federal Funds Sold, Interest
Bearing Demand Deposits in Other Banks, Investment Securities and Loans. As of
September 30, 2000 average earnings assets increased by $2.6 million to $90.6
million. The net interest margin measured 4.63% for the first nine months of
2000 as compared to 4.49% in 1999.
Provision for Loan Losses. For the first nine months of 2000 the Bank
recorded net chargeoffs of $16 thousand as compared to net recoveries of $137
thousand in 1999. The Bank also recorded negative provisions for loan losses
of $134 thousand and $100 thousand during the nine-month periods ending
September 30, 2000 and 1999, respectively. The negative provisions were based
upon the results of independent loan reviews and the composition of the loan
portfolio. As of September 30, 2000 the Bank reported zero non-performing
loans and $6 thousand of loans past due 30 days or more.
Non-Interest Income. Non-interest income increased by $24 thousand, or
5.16% to $489 thousand for the nine months ended September 30, 2000, from
$465 thousand for the nine months ended September 30, 1999. The increase was
primarily attributable to increased service charges. No security gains or
losses were recognized for the nine months ended September 30, 2000, however,
$3 thousand of security losses were recognized over the same period in 1999.
Non-interest Expense. Non-Interest expense increased by $251 thousand,
or 10.04% to $2.7 million for the nine months ended September 30, 2000, from
$2.5 million for the nine months ended September 30, 1999. Of this increase,
$115 thousand was attributable to an increase in salaries and benefits that
reflect increased costs associated with staffing our Fredericktown office,
hiring a Vice President, and nominal merit increases. In addition, computer
services (included in other expenses) increased by $72 thousand, to $103
thousand for the nine months ended September 30, 2000 as compared to $31
thousand for the nine months ended September 30, 1999. The increase was
attributable to outsourcing the Bank's data processing function to a third
party servicer. After an extensive evaluation in mid 1999 management made the
strategic decision to outsource its data processing function rather than hire
additional personnel and invest in data processing hardware and software.
Most personnel assigned to the data processing function were retained and
given other functional duties.
Income Taxes. The provision for income taxes declined by $6 thousand
for the nine months ended September 30, 2000, compared with the same period
in 1999, primarily as a result of lower taxable income. Interest income on
tax-exempt securities for the nine months ended September 30, 2000 measured
$280 thousand down $26 thousand from the same period in 1999.
Forward Looking Commentary
Since June 1999 the Federal Open Market Committee ("FOMC") chaired by
Mr. Alan Greenspan has increased the overnight federal funds lending rate by
175 basis points from 4.75% to 6.50% as of September 30, 2000. The FOMC has
the responsibility of setting monetary policy in an effort to achieve one of
their primary objectives of controlling inflation.
The rise in short-term interest rates can have a negative impact on a
financial institutions net interest income. In the 1980's many savings and
loans were caught funding long-term fixed assets with short-term deposits and
suffered from declining earnings as interest expense on deposits increased at
a faster rate than interest income on earning assets.
The Bank's Asset Liability Management committee continually reviews its
policies and procedures to protect the bank's earnings from significant
increases or declines as interest rates move either higher or lower over the
next twelve months.
The board of directors and management has made a strong commitment to
provide First Class Banking products and services throughout our North
Central Ohio market. The financial services industry has undergone a
tremendous amount of change through various acts of deregulation and
technological innovations. Our challenge is to maintain the high level of
service our existing customers expect and deserve while developing new products
and services to meet the needs of our future customers.
When evaluating our strengths, weaknesses, threats and opportunities we
identified several areas that need improvement. These include the demolition
and reconstruction of a main office building that will build a foundation for
growth over the next 20 years. This significant investment will include
technological and product upgrades that will allow us to better serve our
customers and offer our employees a comfortable and efficient workplace.
We believe our capital investments in Cardington (1998), Fredericktown
(2000) and Bucyrus (2001) will position the Bank for future growth
opportunities. However, in the short run these capital investments will
increase our operating expenses and reduce our efficiency ratios.
We project our 2000 net income to be approximately $1.0 million prior to
a write-down of approximately $250 thousand for the remaining book value of
buildings that must be demolished to make room for the new structure in
Bucyrus. The demolition and construction of our new building is unique as the
main office Bank, operations and administrative staff will be temporarily
relocated to other locations. Our main office customers will be serviced by
our existing North and South locations in Bucyrus while the operations and
administrative staff are housed in a commercial building within Bucyrus.
In 2001 the Bank will incur leasehold improvement and moving expenses
related to the temporary relocation of the main office, operations and
administrative functions. The added expense in 2001 coupled with the challenge
of retaining customers throughout the construction process will most likely
have a negative impact on net income in 2001.
Management's current estimate for net income in 2001 approximates $.7
million, down from 1999 and 2000. Management is confident the temporary
downturn in net income in 2000 and 2001 due to capital investments in fixed
assets will begin to be recaptured in 2002 and beyond.
FC BANC CORP.
PART II - OTHER INFORMATION
==============================================================================
ITEM 1 - LEGAL PROCEEDINGS
Not Applicable
ITEM 2 - CHANGES IN SECURITIES
Not Applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5 - OTHER INFORMATION
Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibit 27: Financial Data Schedule
2. No report on Form 8-K was filed during the third quarter ended
on September 30, 2000.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
FC BANC CORP.
November 10, 2000 /s/ G.W. Holden
- ----------------- --------------------------------------
Date G. W. Holden
President and Chief Executive Officer
November 10, 2000 /s/ Jeffrey Wise
- ----------------- ------------------------------------
Date Jeffrey Wise
Principal Financial Officer