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 JUNE 30, 2001.
[ ] 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 (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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 June 30, 2001, 600,000 common shares of 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
June 30, 2001 and December 31, 2000
Consolidated statements of income - 4
Three and six months ended June 30,
2001 and 2000
Consolidated statements of changes in 5
Shareholders' equity - Six months ended
June 30, 2001
And year ended December 31, 2000
Consolidated statement of cash flows - 6
Six months ended June 30, 2001 and 2000
Notes to consolidated financial statements 7
June 30, 2001 and December 31, 2000
Item 2. Management's Discussion and Analysis of 12
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security 18
Holders
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
FC BANC CORP
BUCYRUS, OHIO
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31,
2001 2000
---------- --------------
ASSETS
Cash and cash equivalents
Cash and amounts due from banks. . . . . . . . . . $ 3,170 $ 3,675
Federal Funds Sold . . . . . . . . . . . . . . . . 3,900 1,200
Interest-bearing demand deposits in other banks. . 9 10
---------- --------------
Total cash and cash equivalents. . . . . . . . . . 7,079 4,885
Investment securities, available-for-sale. . . . . 27,848 27,977
Loans. . . . . . . . . . . . . . . . . . . . . . . 64,388 62,679
Allowance for loan losses. . . . . . . . . . . . . (1,486) (1,496)
---------- --------------
Net loans. . . . . . . . . . . . . . . . . . . . . 62,902 61,183
Premises and equipment, net. . . . . . . . . . . . 2,589 2,041
Accrued interest receivable. . . . . . . . . . . . 769 750
Cash surrender value of life insurance . . . . . . 2,548 2,489
Deferred income taxes. . . . . . . . . . . . . . . 337 391
Other assets . . . . . . . . . . . . . . . . . . . 569 415
---------- --------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . $ 104,641 $ 100,131
========== ==============
LIABILITIES
Deposits
Noninterest-bearing. . . . . . . . . . . . . . . . $ 11,805 $ 11,636
Interest-bearing . . . . . . . . . . . . . . . . . 70,114 73,291
---------- --------------
Total deposits . . . . . . . . . . . . . . . . . . 81,919 84,927
Borrowed Funds . . . . . . . . . . . . . . . . . . 9,409 2,258
Accrued interest payable . . . . . . . . . . . . . 175 228
Other liabilities. . . . . . . . . . . . . . . . . 1,077 942
---------- --------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . 92,580 88,355
---------- --------------
SHAREHOLDERS' EQUITY
Common stock of no par value;
4,000,000 shares authorized, 665,632 shares issued 832 832
Additional paid-in capital . . . . . . . . . . . . 1,366 1,366
Retained earnings. . . . . . . . . . . . . . . . . 11,408 11,212
Treasury stock, at cost; 49,387 and 43,441 shares. (1,700) (1,560)
Accumulated other comprehensive income . . . . . . 155 (74)
---------- --------------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . 12,061 11,776
---------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . $ 104,641 $ 100,131
========== ==============
_________________________
See accompanying notes
FC BANC CORP
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(unaudited) (unaudited)
3 Months Ended 6 Months Ended
June 30, June 30,
2001 2000 2001 2000
---- ---- ---- ----
INTEREST INCOME
Interest and fees on loans $ 1,374 $ 1,275 $ 2,722 $ 2,470
Interest and dividends on investment securities 373 485 752 988
Interest on federal funds sold 56 3 108 5
-------- ------- ------- -------
TOTAL INTEREST INCOME 1,803 1,763 3,582 3,463
------- ------- ------- -------
INTEREST EXPENSE
Interest on deposits 662 698 1,393 1,350
Interest on borrowed funds 99 13 150 20
------ -------- ------- ------
TOTAL INTEREST EXPENSE 761 711 1,543 1,370
------- -------- ------- ------
NET INTEREST INCOME 1,042 1,052 2,039 2,093
Provision for loan losses 0 (50) 0 (84)
------ -------- ------- ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSS 1,042 1,102 2,039 2,177
OTHER INCOME
Service charges 139 130 279 246
Life insurance buildup 32 33 64 63
Other income 17 5 29 12
------ -------- ------ ------
TOTAL OTHER INCOME 188 168 372 321
------ -------- ------ ------
OTHER EXPENSES
Salaries and benefits 450 440 877 882
Net occupancy and equipment expenses 163 165 340 319
Supplies 20 21 43 49
Advertising and public relations 24 20 45 34
Directors' fees 23 19 45 41
Legal and professional 68 23 108 58
State taxes 37 35 75 71
Other expenses 195 210 373 360
------ -------- ------ ------
TOTAL NON-INTEREST EXPENSE 980 933 1,906 1,814
------ -------- ------ ------
NET INCOME BEFORE FEDERAL INCOME
TAX EXPENSE 250 337 505 684
Federal income tax expense 57 88 117 181
------ -------- ------ ------
NET INCOME $ 193 $ 249 $ 388 $ 503
====== ======== ====== ======
EARNINGS PER SHARE
Earnings per common share - basic $0.32 $0.40 $0.64 $0.81
Earnings per common share - diluted $0.32 $0.40 $0.64 $0.80
_________________________
See accompanying notes
FC BANC CORP
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
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, 1999 $665,632 $43,441 $832 $1,371 $10,720 $(1,047) $(523)
Comprehensive Income
Net Income 886 $886
Other comprehensive income, net of tax:
Change in unrealized
Gain (loss) on securities
Available-for-sale, net of
Deferred income 449 449
------
Total Comprehensive income $1,335
======
Dividends declared-common ($0.64) (394)
per share
Sale of treasury stock (2,360) (5) 57
Purchase of 19,696 common shares 19,696 (570)
-------- ------- ---- ------- ------- ------- ------
Balances at December 31, 2000 665,632 60,777 832 1,366 11,212 (1,560) ( 74)
Comprehensive Income
Net Income 388 $ 388
Other comprehensive income
Change in unrealized
Gain (loss) on securities
Available-for-sale, net of
Deferred income tax 229 229
------
Total Comprehensive income $ 617
======
Dividends declared - common ($0.32)
per share (192)
Purchase of 4,855 common shares 4,855 (140)
-------- -------- ------ ------ ------ -------- ------
Balances at June 30, 2001 $665,632 $65,632 $832 $1,366 $11,408 $(1,700) $ 155
======== ======== ==== ====== ======= ======== ======
_________________________
See accompanying notes
FC BANC CORP
BUCYRUS, OHIO
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited) (Unaudited)
6 Months Ended 6 Months Ended
June 30, June 30,
----------------------- ----------------
2001 2000
----------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 388 $ 503
Adjustments to reconcile net income to net cash
Provided by operating activities:
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . 0 (84)
Income accrued on life insurance contracts . . . . . . . . . . . . . (64) (67)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 184
Loss on sale of Premises and equipment. . . . . . . . . . . . . . 0 (2)
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . (54) (90)
Investment securities amortization (accretion), net. . . . . . . . . 61 275
Net change in:
Accrued interest receivable. . . . . . . . . . . . . . . . . . . . . (19) (63)
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . (53) 5
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154) (200)
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 135 85
----------------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . . . . . . . 395 546
----------------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available-for-sale . . . . . . . . . . . . . (5,580) (304)
Proceeds from maturities of securities available-for-sale. . . . . . 5,990 3,224
Net increase in loans. . . . . . . . . . . . . . . . . . . . . . . . (1,719) (3,755)
Proceeds from sale of premises and equipment . . . . . . . . . . . . 0 8
Purchase of premises and equipment . . . . . . . . . . . . . . . . . (703) (314)
----------------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES. . . . . . . . . . . . . . . . (2,012) (1,141)
----------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in:
Noninterest-bearing, interest-bearing, demand, and savings deposits (547) (4,106)
Certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . (2,461) 2,950
Net increase in short-term borrowed funds. . . . . . . . . . . . . . 3,159 1,400
Proceeds from long-term borrowed funds . . . . . . . . . . . . . . . 4,000 0
Payment on long-term borrowed funds. . . . . . . . . . . . . . . . . (8) (3)
Proceeds from Stock Option exercises . . . . . . . . . . . . . . . . 0 52
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . (140) (240)
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . (192) (198)
----------------------- ----------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES. . . . . . . . . 3,811 (145)
----------------------- ----------------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . . . . . 2,194 (740)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . 4,885 4,321
----------------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . $ 7,079 $ 3,581
======================= ================
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for interest . . . . . . . . . . . . . . . $ 1,543 $ 1,365
Cash paid during the year for income taxes . . . . . . . . . . . . . 100 156
_________________________
See accompanying notes
FC BANC CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2001 and December 31, 2000
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 June 30,
2001, and December 31, 2000, and the results of operations for the three- and
six-months ended June 30, 2001 and 2000, and the cash flows for the six months
ended June 30, 2001 and 2000. 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 six- months ended
June 30, 2001, 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)
Six months ended Year ended
June 30, December 31,
2001 2000
----------------------- --------------
Balance, beginning of period $ 1,496 $ 1,732
Provision for loan losses. . 0 (134)
Recoveries . . . . . . . . . 42 81
Charge-offs. . . . . . . . . (52) (183)
----------------------- --------------
Balance, end of period . . . $ 1,486 $ 1,496
======================= ==============
NOTE 3. BORROWED FUNDS
Borrowed Funds are comprised of the following at:
(Dollars in thousands)
Current
Interest Balance
Rate June 30, 2001
----------------------- --------------
REPURCHASE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,394 $ 2,235
FEDERAL HOME LOAN ADVANCES
Fixed Rate Advances with Monthly Interest
Advance due February 22, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . 5.47% $ 1,000
Advance due March 21, 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.35% 1,000
Total Federal Home Bank Advances . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000 $ 0
LONG-TERM DEBT
Note payable to correspondent bank, due. . . . . . . . . . . . . . . . . . . . . $ 1,996 $ 0
May 18, 2011 with monthly principal
and interest payments at 1% below
prime to reprice after five years.
Note payable, due January 15, 2004, with monthly principal and interest payments 6.00% $ 19
--------------
TOTAL BORROWED FUNDS. . . . . . . . . . . . . $ 9,409
======================= ==============
December 31, 2000
------------------
REPURCHASE AGREEMENTS
FEDERAL HOME LOAN ADVANCES
Fixed Rate Advances with Monthly Interest
Advance due February 22, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
Advance due March 21, 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Total Federal Home Bank Advances
LONG-TERM DEBT
Note payable to correspondent bank, due
May 18, 2011 with monthly principal
and interest payments at 1% below
prime to reprice after five years.
Note payable, due January 15, 2004, with monthly principal and interest payments $ 23
------------------
$ 2,235
==================
TOTAL BORROWED FUNDS
Securities (with a carrying value of $5,969,000) sold under agreement to
repurchase generally mature within one to four days from the transaction date.
The securities underlying the agreements were maintained under the Bank's
control. The following applied during the periods in 2001 and 2000.
(Dollars in thousands)
2001 2000
----------------------- -------
Interest Rate at Period End. . . . . . . . . . . . . . 3.75% 6.35%
Highest Month End Amount Outstanding During the Period $ 6,159 $2,235
Average Amount Outstanding During the Period . . . . . 4,683 396
Average Rate of Interest for the Period. . . . . . . . 4.52% 6.51%
The aggregate minimum future annual principal payments on FHLB advances are as
follows:
(Dollars in thousands)
2001. . . . . $ 0
2002. . . . . 0
2003. . . . . 0
2004. . . . . $ 1,000
2005. . . . . 0
After 2005. 1,000
-----------------------
2,000
=======================
The aggregate minimum future annual principal payments on Notes Payable are as
follows:
(Dollars in thousands)
2001. . . . . $ 30
2002. . . . . 62
2003. . . . . 67
2004. . . . . 63
2005. . . . . 66
After 2005. 1,727
-----------------------
2,015
=======================
NOTE 4. REGULATORY CAPITAL
The following table illustrates the compliance by the Bank with currently
applicable regulatory capital requirements at June 30, 2001.
(Dollars in thousands)
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
----- ----- ------ ----- ------ -----
Total Risk-Based Capital
(To Risk-Weighted Assets) $12,499 19.43% $ 5,148 8.00% $6,435 10.00%
Tier I Capital
(To Risk-Weighted Assets) 11,686 18.16% 2,574 4.00% 3,861 6.00%
Tier I Capital
(To Total Assets) . . . . 11,686 11.20% 4,177 4.00% 5,221 5.00%
Tangible Capital
(To Total Assets) . . . . 11,686 11.20% 4,177 4.00% N/A N/A
NOTE 5. 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 June 30, 2001
------------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
------------------------------------------ ------------- --------
Basic EPS. . . . . . . . . . . . . . . . . $ 192,410 600,007 $ 0.32
Income available to
common shareholders
Effective of dilutive securities:. . . . . None 5,599 0.00
------------- --------
Diluted EPS Income available to. . . . . . $ 192,410 605,606 $ 0.32
========================================== ============= ========
common shareholders +
assumed conversions
For the Three Months Ended June 30, 2000
----------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
--------- --------------------
BASIC EPS. . . . . . . . . . . . . . . . . $ 249,075 617,595 $ 0.40
Income available to
common shareholders
Effective of dilutive securities:. . . . . None 10,413 0.00
------- -------
Diluted EPS Income available to. . . . . . $ 249,075 628,008 $ 0.40
============================================= ======== ========
common shareholders +
assumed conversions
For the Six Months Ended June 30, 2001
------------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
- --- --------- ------------- ------
Basic EPS. . . . . . . . . . . . . . . . . $ 388,069 600,305 $ 0.65
Income available to
common shareholders
Effective of dilutive securities:. . . . . None 7,176 (0.01)
-------- --------
Diluted EPS Income available to. . . . . . $ 388,069 607,481 $ 0.64
========================================== ======== ========
common shareholders +
assumed conversions
For the Six Months Ended June 30, 2000
----------------------------------------
Per
Income Shares Share
Numerator (Denominator) Amount
--------- ------------- -------
Basic EPS. . . . . . . . . . . . . . . . . $ 502,790 620,337 $ 0.81
Income available to
common shareholders
Effective of dilutive securities:. . . . . None 10,058 (0.01)
------------- --------
Diluted EPS Income available to. . . . . . $ 502,790 630,395 $ 0.80
========================================== ============= ========
common shareholders +
assumed conversions
NOTE 6. RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for 2000 have been
reclassified to conform to the 2001 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 six-month
periods ended June 30, 2001 and 2000.
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(TM) to its
customers. In June 2000, the Bank introduced Phone-Access Banking(TM)
(1-877-562-4FCB) that allows customers to access their bank account information
24 hours a day. Also, the Bank engaged FundsExpress to assist in the development
of internet banking products that offer new and existing customers a hometown
banking experience while utilizing the latest in banking technology. During the
second quarter of 2001 full internet banking services, including bill pay,
became available at www.farmerscitizensbank.com.
---------------------------
Construction on the Bank's new Main Office at 105 Washington Square, Bucyrus,
Ohio began in the second quarter of 2001 with completion expected in May 2002.
This project will modernize its primary banking facilities and increase the
efficiency of its operations.
CHANGES IN FINANCIAL CONDITION
At June 30, 2001, the consolidated assets of the Company totaled $104.6
million, an increase of $4.5 million, or 4.50%, from $100.1 million at December
31, 2000. The increase in total assets resulted primarily from an increase in
borrowed funds, which funded increases in overnight federal funds sold and
loans.
Net loans increased from $61.2 million on December 31, 2000 to $62.9
million on June 2001, an increase of $1.7 million or 2.81%. Loan growth was
primarily in installment loans, which increased by $0.8 million.
Investment securities available-for-sale declined by $0.1 million, or 0.46%
to $27.8 million at June 30, 2001, compared to $28.0 million at December 31,
2000. The decline was used to fund loan growth and other operations of the Bank.
Cash and cash equivalents increased by $2.2 million to $7.1 million at June
30, 2001 compared to $4.9 million at December 31, 2000. The increase was due to
the increase in borrowed funds of which some was invested in overnight federal
funds sold.
Premises and Equipment increased by $0.6 million to $2.6 million at June 30,
2001, compared to $2.0 million at December 31, 2000. The increase was due to
construction of the Main Office.
Deposit liabilities decreased by $3.0 million, or 3.54%, to $81.9 million at
June 30, 2001, from $84.9 million at December 31, 2000. The decline was
attributable to the loss of public funds, which were transferred to repurchase
agreements. Certificate of deposits, interest-bearing demand, money market and
savings balances declined by $0.7 million, $1.6 million, $0.1 million and $0.7
million, respectively. Demand deposits increased by $0.2 million.
Total shareholders' equity increased by $0.3 million to $12.1 million at
June 30, 2001 as compared to December 31, 2000. During the first six months of
2001, the Bank earned net income of $0.4 million that was partially offset by
the payment of dividends of $0.2 million and the purchase of treasury stock of
$0.1 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 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 June 30, 2001, that the Bank meets all of the capital adequacy
requirements to which it is subject.
As of December 31, 2000, 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 4 - 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 June 30, 2001, FC Banc Corp had approximately $2.3 million in
commitments for capital expenditures.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2001 AND 2000
GENERAL. Net income decreased from $249 thousand in the second quarter of
2000 to $193 thousand in the second quarter of 2001. The decrease was primarily
attributable to changes in the provision for loan losses, a decrease in net
interest income and an increase in operating expenses that were partially offset
by an increase in non-interest income.
INTEREST INCOME. The increase in total earning assets was the primary
contributing factor to the increase in interest income of $40 thousand, or
2.27%, for the three months ended June 30, 2001 compared to 2000. Loan interest
and fee income increased by $99 thousand resulting primarily from an increase in
loans receivable. Loans receivable as of June 30, 2001 were $64.4 million up
$4.7 million as compared to June 30, 2000. The Bank increased its loan to
deposit ratio from 69.58% at June 30, 2000 to 78.60% at June 30, 2001. In
addition, interest earned on federal funds sold increased by $53 thousand.
The increases in loan interest and fee income and federal funds sold were
partially offset by a $112 thousand decrease in income from interest and
dividends on investment securities. The decrease in interest income from
investments resulted primarily from a reduction in average rates earned.
INTEREST EXPENSE. Interest expense on deposit liabilities decreased by $36
thousand, or 5.16% for the three months ended June 30, 2001, as compared to the
same period in 2000. This was mostly because total deposits decreased by $3.9
million from June 30, 2000, to June 30, 2001. Interest on borrowed funds
increased by $86 thousand for the three months ended June 30, 2001 as compared
to the same period in 2000. This was due to borrowings increasing by $8.0
million at June 30, 2001 as compared to June 30, 2000.
PROVISION FOR LOAN LOSSES. Due to strong loan quality, the bank did not record
a provision for loan loss expense in the second quarter of 2001. In the second
quarter of 2000, based upon continued strong credit quality, the Bank recorded a
negative provision for loan losses of $50 thousand. The negative provision was
based upon the results of the ongoing loan reviews and composition of the loan
portfolio, primarily loans secured by one- to four-family residential properties
and other forms of collateral, which are considered to have less risk.
NON-INTEREST INCOME. Non-interest income increased by $20 thousand, or 11.90%,
to $188 thousand for the three months ended June 30, 2001, from $168 thousand
for the three months ended June 30, 2000. The increase was primarily
attributable to increases in service charges on deposit accounts and commissions
earned. No security gains or losses were recognized for the three months ended
June 30, 2001 or for the three months ended June 30, 2000.
NON-INTEREST EXPENSE. Non-interest expense increased by $47 thousand, or
5.04%, to $980 thousand for the three months ended June 30, 2001, from $933
thousand in the comparable period in 2000. Of this, $45 thousand was
attributable to an increase in legal and professional fees expensed in the
second quarter of 2001 as compared to the second quarter of 2000. The other
significant non-interest expense was in development of internet banking. The
total expensed in the second quarter was approximately $18 thousand.
INCOME TAXES. The provision for income taxes declined by $31 thousand for the
three months ended June 30, 2001, compared with the prior year, primarily
because of lower taxable income for the quarter.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 AND 2000
GENERAL. Net income for the first six months of 2001 totaled $388
thousand, which was $115 thousand less than the same period in 2000. The decline
was primarily attributable to changes in the provision for loan losses,
increases in occupancy expense, legal and professional expense, and advertising
expense that were partially offset by an increase in non-interest income.
INTEREST INCOME. The increase in average earning assets was the primary
contributing factor to the increase in interest income of $119 thousand, or
3.44% for the six months ended June 30, 2001 compared to 2000. Year to date
average earning assets totaled $93.2 million in 2001 as compared to $89.1
million in 2000. For the first six months of 2001, interest and fees on loans
totaled $2.7 million, an increase of $0.3 million, as compared to 2000. The
positive increase was somewhat offset by a reduction of interest income from
dividends and investment securities and federal funds sold of $0.1 million in
2001 as compared to 2000.
INTEREST EXPENSE. Interest expense on deposit liabilities increased by $43
thousand for the six months ended June 30, 2001 as compared to 2000. This
increase was mostly due to a 17 basis-point (100 basis-points equals one
percent) increase in cost of funds. Interest expense on borrowed funds increased
by $130 thousand for the six months ended June 30, 2001 as compared to 2000.
This increase was due to the growth of borrowed funds. As of June 30, 2001
borrowed funds were $9.4 million compared to $1.4 million on June 30, 2000.
NET INTEREST INCOME. Net Interest income for the first six months
ended June 30, 2001 totaled $2.0 million, down $54 thousand for the same period
in 2000. This was mostly due to the decrease in the net interest margin. This
was mainly due to the increase in the cost of funds and the increase in
borrowings. These increases were partially offset by the increase in the total
of the earning assets of the bank.
PROVISION FOR LOAN LOSSES. For the first six months of 2001, the Bank
recorded net chargeoffs of $10 thousand as compared to net chargeoffs of $1
thousand in 2000. In the first six months of 2000, the Bank recorded negative
provisions for loan losses of $84 thousand. The negative provisions were based
upon the results of independent loan reviews and the composition of the loan
portfolio. The bank has not recorded any loan loss provision for 2001. As of
June 30, 2001, the Bank reported zero non-performing loans and no loans past due
30 days or more.
NON-INTEREST INCOME. Non-interest income increased by $51 thousand, or
15.89%, to $372 thousand for the six months ended June 30, 2001, from $321
thousand for the six months ended June 30, 2000. The increase was primarily
attributable to increased service charge income and commissions earned. No
security gains or losses were recognized for the six months ended June 30, 2001.
NON-INTEREST EXPENSE. Non-Interest expense increased by $0.1 million, or
5.07% to $1.9 million for the six months ended June 30, 2001, from $1.8 million
for the six months ended June 30, 2000. Of this increase, $50 thousand was
attributable to an increase in legal and professional fees. In addition,
occupancy and related expenses increased primarily due to the cost associated
with operating from our temporary facilities during the construction of the new
main office building. Computer service expense has increased by $22 thousand due
to development of the internet banking functions.
INCOME TAXES. The provision for income taxes decreased by $64 thousand for
the six months ended June 30, 2001, compared with the same period in 2000,
primarily as a result of lower taxable income.
FORWARD LOOKING COMMENTARY
Since June 2000 the Federal Open Market Committee ("FOMC") chaired by Mr.
Alan Greenspan has decreased the overnight federal funds lending rate six times
from 6.50% to 3.75% as of June 30, 2001. The FOMC has the responsibility of
setting monetary policy in an effort to achieve one of their primary objectives
of controlling inflation.
A rapid decline in short-term interest rates can have a negative impact on
a financial institution's net interest income as assets reprice faster than
liabilities.
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 FirstClass 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 construction
of a new 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, Fredericktown and Bucyrus
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 2001 net income will reflect a small decrease from 2000
primarily because of investments in fixed assets. We anticipate this utilization
of capital will improve our shareholders' return on average equity over time and
our common stock repurchase program will further increase our earnings per
share.
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. No report on Form 8-K was filed during the second quarter
ended on June30, 2001.
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
August 14, 2001
Date ----------------------------
G. W. Holden
President and Chief
Executive Officer
August 14, 2001
Date ----------------------------
Jeffrey Wise
Principal Financial Officer