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, 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) 56 2-70 40
(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 October 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
Page 1 of 12
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
September 30, 1996 and December 31, 1995
Condensed consolidated statements of income -- 4
Three months ended September 30, 1996 and 1995
Nine months ended September 30, 1996 and 1995
Condensed consolidated statement of cash flows -- 5
Nine months ended September 30, 1996 and 1995
Notes to condensed consolidated financial 6
statements -- September 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 ------>
September 30, December 31,
(Unaudited) (Unaudited)
1996 1995
Assets
Cash and due from banks $ 2,714 $ 5,329
Interest-bearing time deposits 0 0
Federal funds sold 600 4,200
Securities being held to maturity 0 0
Securities available for sale,
at fair value 34,068 33,869
Loans (net of unearned interest) 37,627 37,179
Less: Allowance for loan losses 1,323) (1,297)
------ ------
Loans - net 36,304 35,882
Properties and equipment 1,525 1,406
Accrued income receivable 842 769
Deferred federal income taxes 557 467
Other assets 1,741 1,776
------- -------
Total assets $78,351 $83,698
======= =======
Liabilities
Demand deposits $21,411 $24,374
Savings 20,429 21,541
Time, $100,000 or over 2,987 2,494
Other time deposits 22,060 22,482
------ ------
Total deposits 66,887 70,891
Borrowed funds 0 1,525
Accrued interest payable 157 212
Accrued expenses and other liabilities 579 310
------- -------
Total liabilities $67,623 $72,938
Shareholders' equity
Common stock -- $ 2.50 par value 832 832
Authorized -- 500,000 shares
Issued -- 332,816 shares
Surplus 1,375 1,370
Retained earnings 9,117 8,653
Treasury stock (7,796 shares in 1996 (321) 0
and-0- shares in 1995)
Unrealized gain (loss) on securities
available for sale (275) (95)
------ ------
Total equity 10,728 10,760
Total liabilities and ------- -------
shareholders' equity $78,351 $83,698
======= =======
________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
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FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF INCOME
<-------Dollars in thousands,
except per share amounts-------->
3 Months Ended 9 Months Ended
September 30, September 30,
1996 1995 1996 1995
Interest income
Interest and fees on loans $ 886 $ 859 $2,551 $2,485
Interest on investment
securities:
Taxable 421 349 1,228 1,174
Exempt from federal
income tax 103 115 311 356
Interest on federal funds sold 11 49 91 103
Interest on deposits with banks 0 3 0 103
----- ----- ----- -----
Total interest income 1,421 1,375 4,181 4,127
Interest expense
Interest on deposits:
Demand and savings deposits 223 283 678 854
Time deposits 335 338 1,023 956
Interest on borrowed funds 3 4 20 24
----- ----- ----- -----
Total interest expense 561 625 1,721 1,834
----- ----- ----- -----
Net interest income 860 750 2,460 2,293
Provision for loan losses 0 0 0 204
----- ----- ----- -----
Net interest income after
provision for loan loss 860 750 2,460 2,089
Other income
Service charges on deposit
accounts 85 53 266 259
Net investment security profits
or losses 0 4 (14) 2
Net gain on sale of loans 24 0 24 0
Other income 47 74 133 113
----- ----- ----- -----
Total other income 156 131 409 374
Other expense
Salaries and employee benefits 359 333 1,227 986
Net occupancy expense 91 88 282 255
Equipment expense 26 26 93 60
FDIC deposit insurance expense 5 0 15 79
State & other taxes 40 41 121 123
Other expense 187 208 595 556
----- ----- ----- -----
Total other expense 708 696 2,333 2,059
Income before income taxes 308 185 536 404
Income tax expense 70 24 73 18
------- ------- ------- ------
Net Income $ 238 $ 161 $ 463 $ 386
________________________________________________________________________________
Per share data:
Weighted average shares
outstanding 325,020 332,816 326,031 332,816
Net income per share of
common stock $ 0.73 $ 0.48 $ 1.42 $ 1.16
________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
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FC BANC CORP.
Bucyrus, Ohio
CONSOLIDATED STATEMENTS OF CASH FLOWS
________________________________________________________________________________
<------- Dollars in thousands ------->
9 Months Ended 9 Months Ended
September 30, September 30,
1996 1995
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net Income $ 463 $ 386
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 206 181
Provision for loan losses 0 204
Provision for deferred taxes (2) (7)
Gain/Loss on investments 14 (2)
Gain on loans sold (24) 0
Amortization/Accretion - net 54 44
Change in accrued income and other assets (140) (195)
Change in accrued expenses and other
liabilities 315 (74)
------ ------
Total adjustments 423 151
------ ------
Net cash provided by operating activities 886 537
Cash flows from investing activities:
Net change in investment certificates 0 100
Net change in federal funds sold 3,600 (300)
Securities held to maturity:
Proceeds from maturities 0 3,687
Proceeds from sales 0 0
Purchases 0 (199)
Securities available for sale:
Proceeds from maturities 5,026 413
Proceeds from sales 2,422 3,705
Purchases (7,982) (1,494)
Net change in loans (1,517) (2,305)
Capital purchases (325) (100)
Proceeds from loans 1,119 0
------ ------
Net cash used in investing activities 2,343 3,507
Cash flows from financing activities:
Net change in deposits (4,003) (2,969)
Net change in short-term borrowing (1,525) (1,250)
Purchase of treasury stock (393) 0
Sale of treasury stock 78 0
------ ------
Net cash provided by financing activities (5,843) (4,219)
------ ------
Net decrease in cash and cash equivalents (2,614) (175)
Cash and cash equivalents at beginning of
period 5,328 5,018
------- -------
Cash and cash equivalents at end of period $ 2,714 $ 4,843
________________________________________________________________________________
Supplemental information:
Cash paid for:
Interest paid $1,777 $ 1,861
Net Income taxes paid $ (113) $ 87
________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
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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 c onsolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-KSB for the
year ended December 31, 1995.
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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 September 30, 1996, compared to December 31, 1995, and the results of
operations for the three and nine month periods ended September 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 r egulatory
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 fe deral funds sold and deposits in other banks.
Cash, amounts due from banks and federal funds sold totaled $3,314,000 at
September 30, 1996. Investments and mortgage-backed securities available for
sale were $34,068,000 at September 30, 1996. This amount decreased by
$4,949,000 from June 30 , 1996 and $6,016,000 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 expect ed 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
decreased $4,823,000 in the third quarter primarily as a result of the loss of
$2 million of public fund deposits, normal seasonal fluctuations, and
managements decision not to aggressively price deposits. The net decrease since
December 31, 1995 totaled $4,004,000. The Corporation has experienced some
deposit disintermediation during the first nine months of 1996 which management
attributes primarily to customer awareness of rate differentiation. Management
does not anticipate any significant amount disintermediation through the end of
1996. Management expects total deposits to exp erience growth during the fourth
quarter as the crop harvests began in mid October.
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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 $10,728,000 at September 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 a vailable-for-sale of $180,000. As of September 30, 1996, the
ratio of shareholders' equity to assets was 13.69% 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 September 30, 1996 December 31, 1995
Tier I 4.00% 22.98% 22.61%
risk-based
capital......
Total Risk- 8.00% 24.25% 23.88%
Based capital
Tier I 3.00% - 5.00% 13.23% 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 unde rcapitalized, 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, inte rest 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 $78,351,000 at the end of the current period
reflecting a decrease of $5,347,000 or 6.38% during the first nine months of
1996. This reduction was primarily a result of the decreases in total deposits
of $4,004,000 and borrowed funds of $1,525,000 which resulted in the
corresponding decreases in liquid assets. Cash and due from banks decreased
$2,615 since December 31, 1995, and federal funds sold decreased by $3,600,000.
Market fluctuations in the investm ent portfolio of $180,000 net of the deferred
taxes also contributed to the total net decrease. The overall the investment
portfolio showed a slight increase of $379,000 since December 31, 1995 and the
loan portfolio increased by $448,000 net, after the sale of $1,096,000 of
student loans. The various other assets and liabilities were increased by
smaller amounts.
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Investment Portfolio
The total investments outstanding decreased during the third quarter
primarily due to the allocation of short-term funds 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 increase for the third quarter of 1996 of $116,000, as
compared to $381,000 decline for the first two quarters 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 charge d 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 ass ociated 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 stan ding 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 proced ures 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 internal ly 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 serv ices 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 66%, Real Estate Loans 24%, Installment Loans 1%, Credit Card
1% and the remaining 8% unallocated. Currently, the losses experienced
combined with the type and market value o f 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 September 30, 1996. The Bank has no exposure from
troubled debt to les ser developed countries.
Results of Operations - Third Quarter 1996 vs Third Quarter 1995
Consolidated net income of $238,000 for the third quarter of 1996 was 48%
more than the $161,000 recorded for the third quarter of 1995. Expressed as
annualized returns on average assets and average shareholders' equity for the
third quarter res pectively, net income for 1996 was 1.18% and 9.31% compared to
0.84% and 6.29% for 1995. Earnings per share increased $.25 to $.73 per share
for the third quarter 1996 compared to the same period in 1995.
- -9-
The increased level of net income for the third quarter of 1996 compared to
the third quarter of 1995, resulted primarily from increases in total interest
income ($46,000), decreases in total interest expense ($64 ,000), and increases
in other operating income, mainly gains on the sale of loans ($24,000) which
was partially offset by an increase in other operating expenses, mainly salaries
and benefits ($26,000). As a result of the increase in income, the pr ovision
for federal income taxes also increased.
Net interest income increased by $110,000 in the third quarter 1996 compared
to 1995 as a result of managements decision not to aggressively price deposits,
the competitive pricing loans products, and adjustments in the yields on the
investment p ortfolio.
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.
- -10-
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
No reports on Form 8-K were filed during the quarter.
- -11-
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, thereunto duly authorized.
FC BANC CORP.
Date NOVEMBER 14, 1996 s/Phillip W. Gerber
Phillip W. Gerber
President and Chief Executive Officer
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