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, 1996
[ ] 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
incorporation or organization) Identification No.)
Farmers Citizens Bank Building, 105 Washington Square 44820-0567
Box 567, Bucyrus, Ohio
(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 . . .
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes . . No . .
Applicable only to corporate issuers
As of July 31, 1996, 325,020 shares of Common Stock of the Registrant were
outstanding. There were no preferred shares outstanding.
Transitional Small Business Disclosure Format (Check one): Yes . . No X
FC BANC CORP.
BUCYRUS, OHIO
FORM 10-QSB
INDEX
Page Number
PART I FINANCIAL INFORMATION
Item. 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- 3
June 30, 1996 and December 31, 1995
Condensed consolidated statements of income -- 4
Three months ended June 30, 1996 and 1995
Six months ended June 30,1996 and 1995
Condensed consolidated statements of changes 5
in shareholders' equity --
Six months ended June 30, 1996 and 1995
Notes to condensed consolidated financial 6
statements -- June 30, 1996
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED BALANCE SHEETS
______________________________________________________________________________
< ---------- Dollars in thousands ----------->
June 30, December 31,
(Unaudited) (Unaudited)
1996 1995
Assets
Cash and due from banks $ 5,811 $ 5,329
Interest-bearing time deposits 0 0
Federal funds sold 0 4,200
Securities being held to maturity 0 0
Securities available for sale,
at fair value 36,520 33,869
Loans (net of unearned interest) 37,621 37,179
Less: Allowance for loan losses (1,318) (1,297)
Loans - net 36,303 35,882
Properties and equipment 1,567 1,406
Accrued income receivable 872 769
Deferred federal income taxes 595 467
Other assets 1,717 1,776
Total assets $83,385 $83,698
Liabilities
Demand deposits $23,701 $24,374
Savings 20,791 21,541
Time, $100,000 or over 2,011 837
Other time deposits 25,207 24,139
Total deposits 71,710 70,891
Borrowed funds 500 1,525
Accrued interest payable 197 212
Accrued expenses and other liabilities 565 310
Total liabilities $72,972 $72,938
Shareholders' equity
Common stock -- $2.50 par value 832 832
Authorized -- 500,000 shares
Issued -- 332,816 shares
Surplus 1,373 1,370
Retained earnings 8,878 8,653
Treasury stock (7,796 shares in 1996 and (318) 0
-0- shares in 1995)
Unrealized gain (loss) on securities
available for sale (352) (95)
Total equity 10,413 10,760
Total liabilities and shareholders' equity $83,385 $83,698
_________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF INCOME
_______________________________________________________________________________
<---------Dollars in thousands, except per share amounts---------->
3 Months Ended 6 Months Ended
June 30, June 30,
1996 1995 1996 1995
Interest income
Interest and fees on loans $ 844 $ 816 $1,665 $1,626
Interest on investment
securities:
Taxable 413 404 807 825
Exempt from federal
income tax 104 119 208 241
Interest on federal funds sold 23 24 80 54
Interest on deposits with banks 0 2 0 6
Total interest income 1,384 1,365 2,760 2,752
Interest expense
Interest on deposits 572 606 1,143 1,189
Interest on federal
funds purchased and
securities sold under
agreement to repurchase 1 7 17 20
Total interest expense 573 613 1,160 1,209
Net interest income 811 752 1,600 1,543
Provision for loan losses 0 0 0 204
Net interest income after
provision for loan loss 811 752 1,600 1,339
Other income
Service charges on
deposit accounts 97 123 181 206
Net investment security
profits or losses 0 (2) 0 (2)
Other income 27 2 86 39
Total other income 124 123 267 243
Other expense
Salaries and employee
benefits 487 331 868 653
Net occupancy expense 90 94 191 167
Equipment expense 32 22 67 34
FDIC deposit insurance
expense 5 47 10 79
State & other taxes 41 41 81 82
Other expense 216 176 422 348
Total other expense 871 711 1,639 1,363
Income before income taxes 64 164 228 219
Income Tax Expense (14) 16 3 (6)
Net Income 78 148 225 225
______________________________________________________________________________
Per share data:
Weighted average
shares outstanding 327,150 332,816 327,778 332,816
Net income per share
of common stock 0.24 0.44 0.69 0.67
______________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
_______________________________________________________________________________
(Dollars in thousands)
(Unaudited)
Unrealized
Gain/Loss
on Total
Common Securities Share-
Common Retained Treasury Available holders'
Stock Surplus Earnings Stock For Sale Equity
Balance at 12/31/94 $ 832 $1,370 $8,509 $ -0- $(893) $ 9,818
Net income 225 225
Change in unrealized
securities loss 709 709
Balance at 6/30/95 $ 832 $1,370 $8,734 $ -0- $(184) $10,752
Balance at 12/31/95 $ 832 $1,370 $8,653 $ -0- $ (95) $10,760
Net income 225 225
Purchase of 8,549
treasury shares (365) (365)
Sale of 753 treasury shares 3 47 50
Change in unrealized
securities loss (257) (257)
Balance at 6/30/96 $ 832 $1,373 $8,878 $ (318) $(352) $10,413
________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
FC BANC CORP.
AND SUBSIDIARY
BUCYRUS, OHIO
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1995.
FC BANC CORP.
AND SUBSIDIARY
BUCYRUS, OHIO
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following focuses on the consolidated financial condition of F C Banc
Corp. at June 30, 1996, compared to December 31, 1995, and the results of
operations for the three and six month periods ended June 30, 1996, compared
to the same periods in 1995. The purpose of this discussion is to provide a
better understanding of the consolidated financial statements and footnotes
included in the Form 10-QSB. The Registrant is not aware of any market or
institutional trend, events or uncertainties that will have or are reasonably
likely to have a material effect on liquidity, capital resources or
operations except as discussed herein. Other than as discussed herein,
the Registrant is not aware of any current recommendations by regulatory
authorities which would have such effect if implemented.
Financial Condition
Liquidity
Liquidity relates to the Corporation's ability to meet cash demands of its
customers and their credit needs. Liquidity is provided by the Corporation's
ability to readily convert assets to cash and readily marketable, short-term
assets such as federal funds sold and deposits in other banks.
Cash, amounts due from banks and federal funds sold totaled $5,811,000 at
June 30, 1996. Investments and mortgage-backed securities available for sale
were $36,520,000 at June 30, 1996. This amount decreased by $751,000 from
March 31, 1996 and $1,067,000 from December 31, 1995 balances. These assets,
as well as anticipated deposit balance fluctuations, scheduled loan payments
and maturing investment securities, provide the Corporation with an adequate
source of funds for expected future demand for loans and for fluctuations in
deposit volume. They also provide management with the flexibility to change
the composition of interest earning assets as market conditions change in the
future.
Liability liquidity relates to the Corporation's ability to retain existing
deposits, obtain new deposits and borrow in the marketplace. Total deposits
remained relatively constant increasing by $312,000 for the three months ended
June 30, 1996 for a total of $819,000 since December 31, 1995. The Corporation
has experienced some deposit disintermediation during the first six months of
1996. This is evidenced by the reductions in demand deposit and NOW account and
savings account balances of $673,000 and $750,000 respectively being offset by
increases in time accounts balances of $2,242,000. Management anticipates some
continued disintermediation with total deposits to experience moderate growth
or remain stable during the rest of the year.
Access to advances from the Federal Reserve Bank (FRB) in the form of
Federal Funds Purchased and Securities Sold Under Agreement to Repurchase (Repo
Agreements) are supplemental sources of cash to meet liquidity needs.
Capital Resources
Shareholders' equity totaled $10,413,000 at June 30, 1996, compared to
$10,760,000 at December 31, 1995. This decrease was primarily due to the
acquisition of 7,796 shares of treasury stock and a net unrealized holding loss
on securities available-for-sale of $257,000. As of June 30, 1996, the
ratio of shareholders' equity to assets was 12.49% compared to 12.86% at
December 31, 1995.
Regulatory Capital Requirements
The Corporation complies with the capital requirements established by the
Federal Reserve System, which are summarized as follows:
Capital Position
Regulatory as of
Minimum June 30, 1996 December 31, 1995
Tier I 4.00% 22.29% 22.61%
risk-based
capital......
Total Risk- 8.00% 23.56% 23.88%
Based capital
Tier I 3.00% - 5.00% 12.95% 13.04%
leverage.....
Under "Prompt Corrective Action" regulations adopted in September 1992, the
Federal Deposit Insurance Corporation (FDIC) has defined five categories of
capitalization (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized). The
Corporation meets the "Well capitalized" definition, which requires a total
risk-based capital ratio of at least 10%, and a leverage ratio of at least 8%.
Under a current regulatory proposal, interest rate risk would become an
additional element in measuring risk-based capital. This proposed change is
not expected to significantly impact the Corporation's compliance with capital
guidelines.
Changes in Financial Condition
Consolidated total assets were $83,385,000 at the end of the current period
reflecting a decrease of $313,000 or 0.37% during the first six months of
1996. This reduction was primarily a result of market fluctuations in the
investment portfolio of $257,000 net of the deferred taxes. Overall the
investment portfolio increased by $2,651,000 since December 31, 1995 and the
loan portfolio also increased by $421,000. These increases were funded
primarily by the reduction of the federal funds sold of $4,200,000. The various
other assets were increased by smaller amounts. Cash and due from banks
increased by $482,000 while other assets increased by $333,000.
Investment Portfolio
The total investments outstanding increased during the second quarter
primarily due to the allocation of short-term unds in an effort to increase
yields. The valuation of the investment portfolio, which is all classified as
available-for-sale, continues to remain relatively stable as shown by the
aggregate market value decline for the second quarter of 1996 of $262,000,
as compared to $119,000 for the first quarter or l05 basis points since
December 31, 1995.
Allowance for Loan Loss
The allowance for loan losses was established and is maintained by periodic
charges to the provision for loan loss, an operating expense, in order to
provide for losses inherent in the Bank's loan portfolio. Loan losses and
recoveries are charged or credited respectively to the allowance for loan losses
as they occur.
The allowance/provision for loan losses is determined by management by
considering such factors as the size and character of the loan portfolio, loan
loss experience, problem loans, and economic conditions in the Bank's market
area. The risk associated with the lending operation can be minimized by
evaluating each loan independently based upon criteria which includes, but is
not limited to: (a) the purpose of the loan, (b) the credit history of the
borrower,(c) the borrower's financial standing and trends, (d) the market value
of the collateral involved, and (e) the down payment received.
Quarterly reviews of the loan portfolio are conducted to identify problem
loans and to determine appropriate courses of action on a loan by loan basis.
Collection policies have been developed to monitor the status of all loans.
Collection procedures are being activated when a loan becomes past due.
Current internal loan review procedures provide for the analysis of a
borrower's operating data, tax returns and financial statement performance
ratios for all significant commercial loans, regulatory classified loans, past
due loans and internally identified "watch" loans. Specifically these
procedures include; 1) the designation of an individual to function primarily
as a loan reviewer, 2) placing the loan reviewer under the direct supervision
of the senior lending officer, 3) utilization of a "loan risk rating system"
which prioritizes the loans to be reviewed, 4) review of all new credits by
the senior lending officer, 5) revision of the "watch list" with formal
presentation to the Board each quarter, and 6) utilization of the services of
an outside consulting firm to supplement the review function.
The entire allowance for loan losses is available to absorb any particular
loan loss. However, for analytical purposes, the allowance could be allocated
based upon net historical charge-offs of each type of loan for the last five
years. Such an allocation of the allowance account would be as follows:
Commercial Loans 69%, Real Estate Loans 18%, Installment Loans 1%, Credit
Card 1% and the remaining 11% unallocated. Currently, the losses experienced
combined with the type and market value of the collateral securing the loan
portfolio and the current financial standing of certain borrowers are the
primary factors for the larger percentage allocation.
Management believes significant factors affecting the allowance are being
reviewed regularly and that the allowance is adequate to cover potentially
uncollectible loans as of June 30, 1996. The Bank has no exposure from troubled
debt to lesser developed countries.
Results of Operations - Second Quarter 1996 vs Second Quarter 1995
Consolidated net income of $78,000 for the second quarter of 1996 was 53%
less than the $148,000 recorded for the second quarter of 1995. Expressed
as annualized returns on average assets and average shareholders' equity for
the second quarter respectively, net income for 1996 was 0.40% and 3.01%
compared to 0.63% and 5.61% for 1995. Earnings per share decreased $.20 to
$.24 per share for the second quarter 1996 compared to the same period in 1995.
The decreased level of net income for the second quarter of 1996 compared to
the second quarter of 1995, resulted primarily from increases in other operating
expenses, mainly salary and benefits ($156,000) which was partially offsetby
an increase in net interest income ($59,000).
Interest income was almost the same for both the second quarter of 1996 and
1995 increasing by only $19,000 in 1996. Total interest expense decreased by
$40,000. This occurred primarily as a result of decreasing yields on interest
earning assets and the restructuring of the deposit portfolio.
There was no provision for loan losses in either quarter primarily
attributed to those factors previously discussed above.
Net occupancy and equipment expenses were similar in both periods with only
slight inflationary increases noted.
Salary and benefit expenses increased as a direct result of management
changes that occurred during the first two quarters of 1996. It should also be
noted that the assessment for FDIC deposit insurance has decreased appreciably
in 1996.
FC BANC CORP.
BUCYRUS, OHIO
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
Form 8-K dated May 15, 1996 announcing the early retirement of
Robert L.Morton, President and CEO.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1993, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FC BANC CORP.
Date: August 14, 1996 Phillip W. Gerber
Phillip W. Gerber
President and Chief
Executive Officer