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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:...............................September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from......................to.........................
Commission File Number:..................................................0-25980
First Citizens Banc Corp
(Exact name of registrant as specified in its charter)
Ohio 34-1558688
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
100 East Water Street, Sandusky, Ohio 44870
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 625-4121
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes
-------
No
-------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value
Outstanding at November 14, 2002
5,033,203 common shares
FIRST CITIZENS BANC CORP
Index
PART I. Financial Information
ITEM 1. Financial Statements:
Consolidated Balance Sheets (unaudited)
September 30, 2002 and December 31, 2001........................... 3
Consolidated Statements of Income (unaudited)
Three and nine months ended September 30, 2002 and 2001............ 4
Consolidated Statements of Comprehensive Income (unaudited)
Three and nine months ended September 30, 2002 and 2001............ 5
Consolidated Statement of Shareholders' Equity (unaudited)
Nine months ended September 30, 2002 and 2001...................... 6
Condensed Consolidated Statement of Cash Flows (unaudited)
Nine months ended September 30, 2002 and 2001...................... 7
Notes to Consolidated Financial Statements (unaudited)................. 8-18
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 19-24
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk............. 25-26
ITEM 4. Controls and Procedures................................................ 27
PART II. Other Information
ITEM 1. Legal Proceedings...................................................... 28
ITEM 2. Changes in Securities and Use of Proceeds.............................. 28
ITEM 3. Defaults upon Senior Securities........................................ 28
ITEM 4. Submission of Matters to a Vote of Security Holders.................... 28
ITEM 5. Other Information...................................................... 28
ITEM 6. Exhibits and Reports on Form 8-K....................................... 28
SIGNATURES...................................................................... 29
Certifications.................................................................. 30-34
FIRST CITIZENS BANC CORP
Consolidated Balance Sheets
(In thousands, except share data)
September 30, December 31,
Assets 2002 2001
--------- ---------
Cash and due from financial institutions $ 22,291 $ 19,227
Federal Funds Sold 30,400 6,025
Securities available-for-sale 143,941 108,230
Securities held-to-maturity (Estimated Fair Value of $125 at
September 30, 2002, and $143 at December 31, 2001) 121 139
Federal Home Loan Bank, Federal Reserve, and Independent
State Bank of Ohio stock 6,283 5,357
Loans held for sale 1,233 2,307
Loans, net 421,683 331,347
Office premises and equipment, net 8,198 7,003
Goodwill 15,052 672
Other intangible assets 3,098 871
Accrued interest and other assets 8,922 6,493
--------- ---------
Total assets $ 661,222 $ 487,671
========= =========
Liabilities
Deposits
Noninterest-bearing 64,843 44,612
Interest-bearing 480,279 365,566
--------- ---------
Total deposits 545,122 410,178
Federal Home Loan Bank advances 342 811
Securities sold under agreements to repurchase 15,413 10,311
U. S. Treasury interest-bearing demand note payable 3,889 720
Notes payable 14,000 14,000
Obligated mandatory redeemable capital securities of
subsidiary trust 5,000 --
Accrued interest, taxes and other expenses 3,837 2,924
--------- ---------
Total liabilities 587,603 438,944
Shareholders' Equity
Common stock, no par value; 10,000,000 shares authorized,
5,326,441 shares issued at September 30, 2002 and
4,263,401 shares issued at December 31, 2001 47,370 23,258
Retained earnings 30,923 28,844
Treasury stock, 293,238 shares at cost at September 30, 2002,
180,782 shares at cost at December 31, 2001 (7,241) (4,919)
Accumulated other comprehensive income 2,567 1,544
--------- ---------
Total shareholders' equity 73,619 48,727
--------- ---------
Total liabilities and shareholders' equity $ 661,222 $ 487,671
========= =========
See notes to interim consolidated financial statements Page 3
Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
INTEREST INCOME:
Loans, including fees $ 7,959 $ 7,238 $ 22,156 $ 22,141
Taxable securities 1,092 1,065 3,112 3,317
Nontaxable securities 408 416 1,196 1,304
Federal funds sold and other 170 205 381 379
---------- ---------- ---------- ----------
Total interest income 9,629 8,924 26,845 27,141
INTEREST EXPENSE:
Deposits 2,796 3,467 8,365 10,836
FHLB Borrowings 4 15 23 51
Other 216 386 636 1,403
---------- ---------- ---------- ----------
Total interest expense 3,016 3,868 9,024 12,290
---------- ---------- ---------- ----------
NET INTEREST INCOME 6,613 5,056 17,821 14,851
PROVISION FOR LOAN LOSSES 238 135 624 656
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6,375 4,921 17,197 14,195
NONINTEREST INCOME:
Computer center data processing fees 280 283 886 889
Service charges 765 427 2,089 1,240
Net gain (loss) on sale of securities 2 5 4 5
Net gain (loss) on sale of loans 91 148 190 289
Other 699 559 1,775 1,398
---------- ---------- ---------- ----------
Total noninterest income 1,837 1,422 4,944 3,821
NONINTEREST EXPENSE:
Salaries, wages and benefits 2,309 1,904 6,737 5,822
Net occupancy expense 270 209 776 678
Equipment expense 309 291 912 813
Data processing expense 233 186 647 554
State franchise tax 178 190 494 553
Professional services 264 194 643 556
Other operating expenses 1,594 1,334 4,322 3,713
---------- ---------- ---------- ----------
Total noninterest expense 5,157 4,308 14,531 12,689
---------- ---------- ---------- ----------
Income before taxes 3,055 2,035 7,610 5,327
Income tax expense 983 531 2,218 1,482
---------- ---------- ---------- ----------
Net Income $ 2,072 $ 1,504 $ 5,392 $ 3,845
========== ========== ========== ==========
Basic and diluted earnings per share $ 0.41 $ 0.37 $ 1.14 $ 0.94
Dividends declared per share $ 0.25 $ 0.18 $ 0.69 $ 0.54
Wtd. avg. shares during the period -
basic 5,033,203 4,082,619 4,736,909 4,082,967
Wtd. avg. shares during the period -
dilutive 5,035,077 4,082,619 4,737,303 4,082,967
See notes to interim consolidated financial statements Page 4
FIRST CITIZENS BANC CORP
Consolidated Comprehensive Income Statements (Unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
------- ------- ------- -------
Net income $ 2,072 $ 1,504 $ 5,392 $ 3,845
Other Comprehensive Income:
Unrealized holding gains on available for
sale securities 877 704 1,554 2,443
Reclassification adjustment for gains
later recognized in income (2) (5) (4) (5)
------- ------- ------- -------
Net unrealized gains 875 699 1,550 2,438
Tax effect (297) (238) (527) (829)
------- ------- ------- -------
Total other comprehensive income 578 461 1,023 1,609
------- ------- ------- -------
Comprehensive income $ 2,650 $ 1,965 $ 6,415 $ 5,454
======= ======= ======= =======
See notes to interim consolidated financial statements Page 5
FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
(In thousands, except share data)
Accumulated
Common Stock Other Total
Outstanding Retained Treasury Comprehensive Shareholders'
Shares Amount Earnings Stock Income Equity
---------- ---------- ---------- ---------- ---------- ----------
Balance, January 1, 2001 4,087,619 $ 23,258 $ 28,614 $ (4,818) $ 871 $ 47,925
Net income -- -- 3,845 -- -- 3,845
Change in unrealized gain on
securities available for sale,
net of reclassifications and
tax effects -- -- -- -- 1,609 1,609
Purchase of treasury stock, at cost (5,000) -- -- (101) -- (101)
Cash dividends ($.54 per share) -- -- (2,205) -- -- (2,205)
---------- ---------- ---------- ---------- ---------- ----------
Balance, September 30, 2001 4,082,619 23,258 30,254 (4,919) 2,480 51,073
========== ========== ========== ========== ========== ==========
Balance, January 1, 2002 4,082,619 $ 23,258 $ 28,844 $ (4,919) $ 1,544 $ 48,727
Net income -- -- 5,392 -- -- 5,392
Change in unrealized gain on
securities available for sale,
net of reclassifications and
tax effects -- -- -- -- 1,023 1,023
Issuance of common shares for merger,
net of issuance costs 1,063,040 24,116 -- -- -- 24,116
Cash paid for fractional shares (4) (4)
Purchase of treasury stock, at cost (112,456) -- -- (2,322) -- (2,322)
Cash dividends ($.69 per share) -- -- (3,313) -- -- (3,313)
---------- ---------- ---------- ---------- ---------- ----------
Balance, September 30, 2002 5,033,203 47,370 30,923 (7,241) 2,567 73,619
========== ========== ========== ========== ========== ==========
See notes to interim consolidated financial statements Page 6
FIRST CITIZENS BANC CORP
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
Nine months ended September 30,
------------------------------
2002 2001
-------- --------
Net cash from operating activities $ 6,130 $ 3,955
Cash flows from investing activities
Net cash received in acquisition 3,078 --
Maturities of deposits held in other institutions -- 51
Maturities and calls of securities, held-to-maturity 17 58
Maturities and calls of securities, available-for-sale 43,293 18,895
Purchases of securities, available-for-sale (62,913) (16,609)
Proceeds from sale of securities, available-for-sale 4 --
Loans made to customers, net of principal collected 7,105 6,410
Change in federal funds sold (19,875) (15,100)
Proceeds from sale of property and equipment 2 5
Purchases of office premises and equipment (440) (604)
-------- --------
Net cash from investing activities (29,729) (6,894)
Cash flows from financing activities
Repayment of FHLB borrowings (468) (440)
Net change in deposits 21,995 26,438
Change in securities sold under agreements to repurchase 4,786 349
Change in U.S. Treasury interest-bearing demand note payable 3,170 1,606
Change in notes payable (2,185) 3,400
Change in federal funds purchased -- (20,000)
Proceeds from issuance of mandatorily redeemable capital securities
of subsidiary trust 5,000 --
Purchases of treasury stock (2,322) (101)
Cash dividends paid (3,313) (2,205)
-------- --------
Net cash from financing activities 26,663 9,047
-------- --------
Net change in cash and due from banks 3,064 6,108
Cash and due from banks at beginning of period 19,227 15,735
-------- --------
Cash and due from banks at end of period $ 22,291 $ 21,843
======== ========
Cash paid during the period for:
Interest $ 10,825 $ 13,286
Income taxes $ 1,778 $ 1,360
See notes to interim consolidated financial statements Page 7
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
(1) Consolidated Financial Statements
The consolidated financial statements include the accounts of First
Citizens Banc Corp (First Citizens) and its wholly-owned subsidiaries, The
Citizens Banking Company (Citizens), The Castalia Banking Company
(Castalia), The Farmers State Bank of New Washington (Farmers), SCC
Resources, Inc. (SCC), R. A. Reynolds Appraisal Service, Inc., (Reynolds),
Mr. Money Finance Company (Mr. Money), First Citizens Title Insurance
Agency, First Citizens Insurance Agency and First Citizens Statutory
Trust, together referred to as the Corporation. All significant
inter-company balances and transactions have been eliminated in
consolidation.
The consolidated financial statements have been prepared by the
Corporation without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the Corporation's financial position as of September 30, 2002 and
its results of operations and changes in cash flows for the periods ended
September 30, 2002 and 2001 have been made. The accompanying consolidated
financial statements have been prepared in accordance with instructions of
Form 10-Q, and therefore certain information and footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America
have been omitted. The results of operations for the period ended
September 30, 2002 are not necessarily indicative of the operating results
for the full year. Reference is made to the accounting policies of the
Corporation described in the notes to financial statements contained in
the Corporation's 2001 annual report. The Corporation has consistently
followed these policies in preparing this Form 10-Q.
The Corporation provides financial services through its offices in the
Ohio counties of Erie, Crawford, Huron, Marion, Ottawa, and Union. Its
primary deposit products are checking, savings, and term certificate
accounts, and its primary lending products are residential mortgage,
commercial, and installment loans. Substantially all loans are secured by
specific items of collateral including business assets, consumer assets
and real estate. Commercial loans are expected to be repaid from cash flow
from operations of businesses. Real estate loans are secured by both
residential and commercial real estate. Other financial instruments that
potentially represent concentrations of credit risk include deposit
accounts in other financial institutions. In 2002, SCC provided item
processing for 9 financial institutions in addition to the three
subsidiary banks. Through September 30, 2002, SCC accounted for
approximately 2.8% of the Corporation's total consolidated revenues.
Reynolds provides real estate appraisal services for lending purposes to
subsidiary banks and other financial institutions. Reynolds accounts for
less than 1.0% of total Corporation consolidated revenues. Mr. Money
provides consumer and real estate financing that the Banks would not
normally provide to B and C credits at a rate commensurate with the risk.
Mr. Money accounted for 4.5% of total Corporation revenues. First Citizens
Title Insurance Agency Inc. has been formed to provide customers with a
seamless mortgage product with improved service. First Citizens Insurance
Agency Inc was formed to allow the Corporation to
Page 8
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
participate in commission revenue generated through its third party
insurance agreement. Insurance commission revenue is less than 1.0% of
total revenue for the period ended September 30, 2002.
To prepare financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes
estimates and assumptions based on available information. These estimates
and assumptions affect the amounts reported in financial statements and
the disclosures provided, and future results could differ. The allowance
for loan losses, fair values of financial instruments, and status of
contingencies are particularly subject to change.
Income tax expense is based on the effective tax rate expected to be
applicable for the entire year. Income tax expense is the total of the
current year income tax due or refundable and the change in deferred tax
assets and liabilities. Deferred tax assets and liabilities are the
expected future tax amounts for the temporary differences between carrying
amounts and tax basis of assets and liabilities, computed using enacted
tax rates. A valuation allowance, if needed, reduces deferred tax assets
to the amount expected to be realized.
Certain items in the 2001 financial statements have been reclassified to
correspond with the 2002 presentation.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets", which addresses the accounting for such assets arising from prior
and future business combinations. Upon the adoption of this Statement,
goodwill arising from business combinations will no longer be amortized,
but rather will be assessed regularly for impairment, with any such
impairment recognized as a reduction to earnings in the period identified.
The Corporation was required to adopt this Statement on January 1, 2002.
Prior to the adoption of SFAS No. 142, the Corporation's annual
amortization of goodwill was $201.
The previously reported net income adjusted to eliminate prior period
goodwill is as follows:
Three months Nine months
ended ended
September 30, 2001 September 30, 2001
------------------ ------------------
Reported net income $1,504 $3,845
Add back: goodwill amortization 50 151
------ ------
Adjusted net income $1,554 $3,996
====== ======
Basic and diluted earnings per share as adjusted $ 0.38 $ 0.98
====== ======
Page 9
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which amends SFAS No. 121 by
addressing business segments accounted for as a discontinued operation
under Accounting Principles Board Opinion No. 30. This Statement was
effective beginning after January 1, 2002. The effect of this Statement on
the financial position and results of operations of the Corporation was
not material.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendments of FASB Statement No. 13, and
Technical Corrections". This Statement eliminates inconsistency between
the required accounting for certain lease modifications that have economic
effects similar to sale-leaseback transactions and sale-leaseback
transactions. The Corporation does not believe this statement will have a
material effect on its financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This Statement addresses the
timing of recognition of a liability for exit and disposal cost at the
time a liability is incurred, rather than at a plan commitment date, as
previously required. Exit or disposal costs will be measured at fair
value, and the recorded liability will be subsequently adjusted for
changes in estimated cash flows. This Statement is required to be
effective for exit or disposal activities entered after December 31, 2002,
and early adoption is encouraged. The Corporation does not believe this
statement will have a material effect on its financial position or results
of operations.
SFAS No. 147, "Acquisitions of Certain Financial Institutions" became
effective October 1, 2002. This standard requires any unidentifiable
intangible asset previously recorded as the result of a business
combination to be reclassified as goodwill and the amortization of this
asset will cease. The effect of this standard on the financial position
and results of operations of the Corporation is not expected to be
material.
Page 10
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
(2) Securities
Securities at September 30, 2002 and December 31, 2001 were as follows:
September 30, 2002
Gross Gross
AVAILABLE FOR SALE Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- --------- --------- ---------
U.S. Treasury securities and obligations of
U.S. government agencies $ 82,165 $ 1,596 $ (2) $ 83,759
Obligations of state and political subdivisions 43,044 2,014 (15) 45,043
Corporate bonds 2,438 51 -- 2,489
Other securities, including mortgage-backed
securities and equity securities 12,405 247 (2) 12,650
--------- --------- --------- ---------
$ 140,052 $ 3,908 $ (19) $ 143,941
========= ========= ========= =========
September 30, 2002
Gross Gross
HELD TO MATURITY Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---- ----- ------ ----------
Obligations of state and political
subdivisions $ 77 $ 1 $ -- $ 78
Other securities, including mortgage-
backed securities 44 3 -- 47
---- ---- ---- ----
$121 $ 4 $ -- $125
==== ==== ==== ====
Page 11
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
December 31, 2001
Gross Gross
AVAILABLE FOR SALE Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------- --------- --------- ---------
U.S. Treasury securities and obligations of
U.S. government agencies $ 54,106 $ 1,263 $ (7) $ 55,362
Obligations of state and political subdivisions 37,627 931 (7) 38,551
Corporate bonds 4,567 59 (8) 4,618
Mortgage-backed securities 9,591 122 (14) 9,699
--------- --------- --------- ---------
$ 105,891 $ 2,375 $ (36) $ 108,230
========= ========= ========= =========
December 31, 2001
Gross Gross
HELD TO MATURITY Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---- ----- ------ ----------
Obligations of state and political subdivisions $ 78 $ 2 $ -- $ 80
Other securities, including mortgage-backed
securities 61 2 -- 63
---- ---- ---- ----
$139 $ 4 $ -- $143
==== ==== ==== ====
Page 12
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
The amortized cost and fair value of securities at September 30, 2002, by
contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because issuers may have the right to call or
prepay obligations. Securities not due at a single maturity date,
primarily mortgage-backed securities and equity securities are shown
separately.
AVAILABLE FOR SALE Amortized Cost Fair Value
-------------- ----------
Due in one year or less $ 49,385 $ 49,982
Due after one year through five years 69,446 71,886
Due after five years through ten years 6,988 7,561
Due after ten years 1,828 1,862
Mortgage-backed securities 11,967 12,142
Equity securities 438 508
-------- --------
Total securities available for sale $140,052 $143,941
======== ========
Estimated Fair
HELD TO MATURITY Amortized Cost Value
-------------- ----
Due in one year or less $ 77 $ 78
Mortgage-backed securities 44 47
---- ----
Total securities held to maturity $121 $125
==== ====
Proceeds from sales of securities, gross realized gains and gross realized
losses were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Proceeds $ - $ - $ - $ -
Gross gains - - - -
Gross losses - - - -
Security gains due to calls
prior to maturity 2 5 4 5
Securities with a carrying value of approximately $92,223 and $71,106 were
pledged as of September 30, 2002 and December 31, 2001, respectively, to
secure public deposits, other deposits and liabilities as required by law.
Page 13
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
(3) Loans
Loans at September 30, 2002 and December 31, 2001 were as follows:
9/30/2002 12/31/2001
--------- ----------
Commercial and Agriculture $ 44,302 $ 26,708
Commercial real estate 122,674 70,616
Real Estate - mortgage 212,009 204,496
Real Estate - construction 12,360 9,402
Consumer 32,359 23,100
Credit card and other 3,409 2,315
Leases 1,420 435
--------- ---------
Total loans 428,533 337,072
Allowance for loan losses (6,299) (4,865)
Deferred loan fees (543) (848)
Unearned interest (8) (12)
--------- ---------
Net loans $ 421,683 $ 331,347
========= =========
(4) Allowance for Loan Losses
A summary of the activity in the allowance for loan losses was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2002 2001 2002 2001
------- ------- ------- -------
Balance beginning of period $ 6,359 $ 4,353 $ 4,865 $ 4,107
Acquisitions -- -- 1,426 --
Loans charged-off (428) (324) (941) (792)
Recoveries 130 126 325 319
Provision for loan losses 238 135 624 656
------- ------- ------- -------
Balance September 30, $ 6,299 $ 4,290 $ 6,299 $ 4,290
======= ======= ======= =======
Information regarding impaired loans was as follows for the three and nine
months ended September 30.
Page 14
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2002 2001 2002 2001
---- ---- ---- ----
Average investment in impaired loans $6,867 $2,863 $5,227 $2,993
Interest income recognized on impaired
loans including interest income
recognized on cash basis 100 41 251 142
Interest income recognized on impaired
loans on cash basis 100 41 251 142
Information regarding impaired loans at September 30, 2002 and December
31, 2001 was as follows:
9/30/02 12/31/01
------- --------
Balance impaired loans $7,015 $1,592
Less portion for which no allowance for loan
losses is allocated -- --
------ ------
Portion of impaired loan balance for which an
allowance for credit losses is allocated $7,015 $1,592
====== ======
Portion of allowance for loan losses allocated to
the impaired loan balance $1,734 $ 544
====== ======
Nonperforming loans were as follows:
9/30/02 12/31/01
------- --------
Loans past due over 90 days still on accrual $2,771 $2,818
Nonaccrual $3,001 $2,413
Nonperforming loans include some loans, which are classified as impaired
and smaller balance homogeneous loans, such as residential mortgages and
consumer loans that are collectively evaluated for impairment.
Page 15
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
(5) Commitments, Contingencies and Off-Balance Sheet Risk
Some financial instruments, such as loan commitments, credit lines,
letters of credit and overdraft protection are issued to meet customers
financing needs. These are agreements to provide credit or to support the
credit of others, as long as the conditions established in the contract
are met, and usually have expiration dates. Commitments may expire without
being used. Off-balance-sheet risk of credit loss exists up to the face
amount of these instruments, although material losses are not anticipated.
The same credit policies are used to make such commitments as are used for
loans, including obtaining collateral at exercise of commitment.
The contractual amount of financial instruments with off-balance-sheet
risk was as follows for September 30, 2002 and December 31, 2001.
Contract Amount
---------------
9/30/2002 12/31/2001
--------- ----------
Commitment to extend credit:
Lines of credit and construction loans $53,550 $36,828
Credit cards 6,144 7,005
Letters of credit 1,112 888
------- -------
$60,806 $44,721
======= =======
Commitments to make loans are generally made for a period of one year or
less. Fixed-rate loan commitments included above totaled $7,060 at
September 30, 2002 and had interest rates ranging from 2.50% to 11.00%
with maturities extended up to 30 years. Fixed-rate loan commitments
included above totaled $7,277 at December 31, 2001 with interest rates
ranging from 4.75% to 10.00% with maturities extended up to 30 years.
The Banks are required to maintain certain reserve balances on hand in
accordance with the Federal Reserve Board requirements. The average
reserve balance maintained in accordance with such requirements for the
periods ended September 30, 2002 and December 31, 2001 approximated $6,966
and $4,670.
(6) Obligated Mandatorily Redeemable Capital Securities
In March 2002, FCBC issued $5,000 of 5.59% floating rate obligated
mandatorily redeemable capital securities through a special purpose
subsidiary as part of a pooled transaction. The Corporation's obligated
mandatorily redeemable capital securities may be redeemed by the
Corporation, in whole but not in part, prior to March 26, 2007 and subject
to the occurrence and continuation of a special event, at a redemption
price of 107.50% of the face value of the
Page 16
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
capital securities. On or after March 26, 2007, the capital securities may
be redeemed at face value. The Corporation's mandatorily redeemable
capital securities are considered Tier I capital for regulatory reporting
purposes.
(7) Merger
On April 1, 2002, the Corporation completed the merger of Independent
Community Banc Corp. ("ICBC") which was announced November 1, 2001. ICBC
merged with and into the Corporation and ICBC's subsidiary, The Citizens
National Bank of Norwalk, was merged with and into Citizens.
The Corporation issued 1,063,040 shares of common stock valued at
approximately $24,450 less stock issuance costs of $338. Total assets of
ICBC prior to the merger were $127,713, including $97,623 in loans and
$111,968 in deposits. The transaction was recorded as a purchase and,
accordingly, the operating results of ICBC have been included in the
Corporation's consolidated financial statements since the date of the
merger. The aggregate of the purchase price over the fair value of the net
assets acquired of approximately $13,495 is being evaluated for impairment
on an annual basis.
The following summarizes pro forma financial information for the three and
nine months ended September 30, 2002 and 2001, assuming the ICBC Merger
occurred as of January 2001.
Three months ended Nine months ended
September 30, September 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Net interest income after provision
for loan losses $ 6,375 $ 6,155 $18,487 $17,858
Net income 2,072 1,809 5,660 4,744
Basic and diluted earnings per share 0.41 0.35 0.98 0.93
These amounts include ICBC's actual results in 2001 and for the first
three months of 2002 prior to the merger and actual results for the six
months in 2002 after the merger. The pro forma results do not necessarily
represent results which would have occurred if the merger had taken place
on the basis assumed above, nor are they indicative of the results of
future combined operations.
Page 17
First Citizens Banc Corp
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.
At April 1, 2002
($000s)
Current Assets $ 122,380
Property, plant, and equipment 1,509
Intangible Assets 2,454
Goodwill 11,039
---------
Total assets acquired 137,382
Current Liabilities (114,396)
Long-Term Debt (2,185)
---------
Total assets assumed (116,581)
Net assets acquired 20,801
This acquisition provided The Corporation and its affiliate, Citizens, the
opportunity to expand south from Erie County into contiguous Huron County
and the City of Norwalk. The acquisition also provided the existing
Citizens access to trust services through ICBC's trust department.
(8) Stock Option Plan
The Corporation's shareholders approved a stock option plan on April 18,
2000. A total of 225,000 common shares are available for grant under the
plan. The number of shares may be adjusted by the Board in the event of an
increase or decrease in the number of common shares outstanding resulting
from dividend payments, stock splits, recapitalization, merger, share
exchange acquisition, combination or reclassification.
The Corporation granted 30,700 options to senior management of the
Corporation on July 2, 2002. The options vest in three years from the date
of grant. Each option entitles the holder to purchase a share of common
stock at the price of $20.50 per share and will expire ten years from the
date of issuance.
Page 18
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Introduction
The following discussion focuses on the consolidated financial condition
of First Citizens Banc Corp at September 30, 2002, compared to December
31, 2001 and the consolidated results of operations for the three-month
and nine-month periods ending September 30, 2002 compared to the same
periods in 2001. This discussion should be read in conjunction with the
consolidated financial statements and footnotes included in this Form
10-Q.
The registrant is not aware of any trends, events or uncertainties that
will have, or are reasonably likely to have, a material effect on the
liquidity, capital resources, or operations except as discussed herein.
Also, the registrant is not aware of any current recommendation by
regulatory authorities, which would have a material effect if implemented.
When used in this Form 10-Q or future filings by the Corporation with the
Securities and Exchange Commission, in press releases or other public or
shareholder communications, or in oral statements made with the approval
of an authorized executive officer, the words or phrases "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project," "believe," or similar expressions are intended to identify
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Corporation wishes to caution readers
not to place undue reliance on any such forward-looking statements, which
speak only as of the date made, and to advise readers that various
factors, including regional and national economic conditions, changes in
levels of market interest rates, credit risks of lending activities and
competitive and regulatory factors, could effect the Corporation's
financial performance and could cause the Corporation's actual results for
future periods to differ materially from those anticipated or projected.
The Corporation does not undertake, and specifically disclaims, any
obligation to publicly release the result of any revisions, which may be
made to any forward-looking statements to reflect occurrence of
anticipated or unanticipated events or circumstances after the date of
such statements.
See Exhibit 99, which is incorporated herein by reference.
Financial Condition
Total assets of the Corporation at September 30, 2002 totaled $661,222
compared to $487,671 at December 31, 2001. This was an increase of
$173,551, or 35.6 percent. The increase is primarily the result of the
acquisition of Independent Community Banc Corp. ("ICBC") on April 1, 2002.
ICBC had assets of $127,713 at March 31, 2002. Within the structure of the
assets, net loans have increased $90,336, or 27.3 percent since December
31, 2001. This includes ICBC's loan balance of $97,623. The commercial
real estate portfolio increased by $52,058, while residential real estate
loans increased by $7,513, commercial and agriculture loans increased by
$17,594 and consumer loans increased by $9,259. ICBC's balances for these
items were $24,734 in commercial, $36,658 in residential real estate,
$18,911 in
Page 19
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
commercial and agriculture and $15,811 in consumer loans. The
Corporation's focus continues to be toward commercial loans and away from
residential real estate and consumer loans. In the current low interest
rate environment, the greatest demand for residential real estate loans
has been for a fixed-rate loan. Rather than add these loans to the
portfolio, the Corporation has generally sold these loans on the secondary
market. This has allowed for additional funding to be used for commercial
lending. In the current rate environment, there has been pressure on the
margin, but management believes the loan portfolio is being positioned for
the future. Mr. Money was formed to service the needs of B and C credit
customers for consumer and real estate financing that the Banks would not
normally provide, and at a rate commensurate with the risk. Mr. Money had
loans outstanding of $14,002 at September 30, 2002. Loans held-for-sale
decreased $1,074, or 46.6 percent from December 31, 2001. At September 30,
2002, the net loan to deposit ratio was 77.4 percent compared to 80.8
percent at December 31, 2001.
For the nine months of operations in 2002, $624 was placed into the
allowance for loan losses from earnings compared to $656 for the same
period of 2001. Impaired loans have increased, which include those
acquired in ICBC's portfolio. ICBC already had specific allowances in
place for its impaired loans; therefore, management felt the allowance was
adequate with no additional provision for these loans. To evaluate the
adequacy of the allowance for loan losses to cover probable losses in the
portfolio, management considers specific allowance allocations for
identified portfolio loans, allowances for delinquencies, historical
allowance allocations and general trends in the economy. The composition
and overall level of the loan portfolio and charge-off activity are also
factors used to determine provisions to the allowance. Net charge-offs for
the first nine months of 2002 were $616 compared to $473 for the same
period of 2001. This increase is the result of increased net charge-offs
at Citizens and Mr. Money. The September 30, 2002 allowance for loan
losses as a percent of total loans was 1.49 percent compared to 1.42
percent at December 31, 2001.
At September 30, 2002, $143,941 or 99.9 percent of the security portfolio
was classified as available for sale. The $121 remainder of the portfolio
was classified as held to maturity. Securities increased $35,693 from
December 31, 2001. The balance of the ICBC investment portfolio at March
31, 2002 was $15,412. Purchases of investments were made to meet
additional pledging requirements and to try to gain additional yield
compared to federal funds sold, which are the excess funds provided by
deposits and other borrowings that were not utilized for loans.
Office premises and equipment have increased $1,195 and intangible assets
have increased $16,607 since December 31, 2001. The increase in office
premises and equipment is attributed to new purchases of $440 and
depreciation of $751, along with the addition of ICBC's fixed assets of
$1,510. The intangibles increased as a result of the purchase accounting
entries for goodwill and core deposit intangible related to the merger.
Page 20
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Accrued interest and other assets totaled $8,922 at September 30, 2002
compared to $6,493 at December 31, 2001, an increase of $2,429. This
increase was due to increases in deferred tax assets of $465, an increase
in receivables of $1,187, and an increase in accrued interest of $1,242.
The increase in deferred tax assets and accrued interest can be attributed
to the ICBC merger.
Total deposits at September 30, 2002 increased $134,944 from year-end
2001. Noninterest-bearing deposits, representing demand deposit balances,
increased $20,231 from year-end 2001, including $14,417 of ICBC balances.
Interest-bearing deposits, including savings and time deposits, increased
$114,713 from year-end 2001, including $97,551 of ICBC balances. The year
to date 2002 average balance of savings deposits has increased $29,452
compared to the average balance of the same period for 2001. The current
average rate of these deposits is 1.67 percent compared to 2.27 percent in
2001. The year to date 2002 average balance of time certificates has
increased $11,576 compared to the average balance for the same period for
2001. Under current market conditions, the Banks have been less aggressive
in their efforts to attract deposits. However, depositors seem to be
looking for shorter term, more liquid products to invest their money. As a
result, the banks have seen an increase in deposits, particularly in the
savings and money market products.
Total borrowed funds have increased $12,802 from December 31, 2001 to
September 30, 2002. The Corporation has notes outstanding with other
financial institutions totaling $14,000 at September 30, 2002. These notes
were primarily used to fund the loan growth at Mr. Money. Additionally,
the Corporation has $5,000 in long-term borrowings due to the issuance of
an obligated mandatorily redeemable capital security. This borrowing is a
30-year issuance. Federal Home Loan Bank borrowings have decreased $469 as
a result of scheduled pay downs. Securities sold under agreements to
repurchase, which tend to fluctuate, have increased $5,102. U.S. Treasury
Tax Demand Notes, which also tend to fluctuate, have increased $3,169.
Shareholders' equity at September 30, 2002 was $73,619, or 11.1 percent of
total assets, compared to $48,727 at December 31, 2001, or 10.0 percent of
total assets. The change in shareholders' equity is made up of earnings of
$5,392, less dividends paid of $3,313, less the purchase of 112,456
treasury shares for $2,322 and the increase in the market value of
securities available for sale, net of tax, of $1,023. The merger with ICBC
also resulted in an increase to capital of $24,112. The Corporation paid a
cash dividend on February 1, 2002 at a rate of $.19 per share, and on May
1, 2002 and August 1, 2002, each at a rate of $.25 per share. Total
outstanding shares at September 30, 2002 were 5,033,203.
Page 21
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Results of Operations
Nine Months Ended September 30, 2002 and 2001
Net income for the nine months ended September 30, 2002 was $5,392, or
$1.14 per common share compared to $3,845, or $.94 per common share for
the same period in 2001. This was an increase of $1,547, or 40.2 percent.
Some of the reasons for the changes are explained below.
Total interest income for the first nine months of 2002 decreased $296, or
1.1 percent compared to the same period in 2001. The average rate on
earning assets on a tax equivalent basis for the first nine months of 2002
was 6.38 percent and 7.51 percent for the first nine months of 2001. Total
interest expense for the first nine months of 2002 has decreased $3,266,
or 26.6 percent compared to the same period of 2001. The decrease in both
interest income and interest expense can be attributed to the rate
environment we are currently experiencing. Specifically, interest on
deposits is down $2,471, interest on other borrowings is down $767 and
interest on FHLB borrowings is down $28. The average rate on
interest-bearing liabilities for the first nine months of 2002 was 2.62
percent compared to 4.09 percent for the same period of 2001. The net
interest margin on a tax equivalent basis was 4.36 percent for the
nine-month period ended September 30, 2002 and 4.26 percent for the same
period ended September 30, 2001.
Noninterest income for the first nine months of 2002 totaled $4,944,
compared to $3,821 for the same period of 2001, an increase of $1,123. The
majority of the increase resulted from the acquisition of ICBC. Also, the
Banks introduced new deposit products which generated $430 of additional
fee income. Other operating income increased $377. The Corporation's
appraisal company increased revenues by $20.
Noninterest expense for the nine months ended September 30, 2002 totaled
$14,531 compared to $12,689 for the same period in 2001. This was an
increase of $1,842, or 14.5 percent. Salaries and benefits increased $915,
or 15.7 percent compared to the first nine months of 2001. Occupancy
expense increased $98, equipment expense increased $99, computer
processing expense increased by $93 and professional fees increased $87
compared to last year. All of these changes are largely attributed to the
acquisition of ICBC.
Income tax expense for the first nine months of 2002 totaled $2,218
compared to $1,482 for the first nine months of 2001. This was an increase
of $736, or 49.7 percent. The increase in federal income taxes is a result
of increased income before taxes. The effective tax rates for the
nine-month periods ended September 30, 2002 and September 30, 2001, were
29.1% and 27.8% respectively. The primary reasons for the increase in the
effective tax rate were a decrease in nontaxable securities and interest
income, and the nondeductability of the purchase accounting adjustments in
the ICBC acquisition.
Page 22
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Three Months Ended September 30, 2002 and 2001
Net income for the three months ended September 30, 2002 was $2,072 or
$.41 per common share compared to $1,504, or $.37 per common share for the
same period in 2001. This was an increase of $568, or 37.8 percent. Some
of the reasons for the changes are explained below.
Total interest income for the third quarter of 2002 increased $705, or 7.9
percent compared to the same period in 2001. Interest on fees and loans
increased $721, or 10.0 percent compared to the same period in 2001. This
increase is mainly due to increased loan volume associated with the
acquisition of ICBC. The average rate on earning assets on a tax
equivalent basis for the third quarter of 2002 was 6.24 percent and 7.26
percent for the same period of 2001. The increase in volume more than
offset the decrease in yield. Total interest expense for the third quarter
of 2002 decreased $852, or 22.0 percent compared to the same period of
2001. The average rate on interest-bearing liabilities for the third
quarter of 2002 was 2.50 percent compared to 3.71 percent for the same
period of 2001. The 121 basis point decrease in average rate offset any
increase in interest expense related to additional volume from the ICBC
purchase and additional volume related to growth. The net interest margin
on a tax equivalent basis was 4.33 percent for the three-month period
ended September 30, 2002 and 4.34 percent for the same period ended
September 30, 2001.
Noninterest income for the third quarter of 2002 totaled $1,837, compared
to $1,422 for the same period of 2001, an increase of $415. The Banks
introduced new deposit products which generated $185 of additional fee
income for the quarter. Other service charges increased $153 compared to
the third quarter 2001, with the majority of the increases resulting from
the acquisition of ICBC. Other operating income increased $140, including
$64 in Trust income and $62 in commission on origination of wholesale
mortgages for outside firms.
Noninterest expense for the quarter ended September 30, 2002 totaled
$5,157 compared to $4,308 for the same period in 2001. This was an
increase of $849, or 19.7 percent. Salaries and benefits increased $405,
or 21.3 percent compared to the third quarter of 2001. Occupancy expense
increased $61, equipment expense increased $18, and computer processing
expense increased by $47 compared to the third quarter last year. All of
these changes are largely attributed to the acquisition of ICBC.
Income tax expense for the third quarter totaled $983 compared to $531 for
the same period in 2001. This was an increase of $452, or 85.1 percent.
The effective tax rate was 32.2% for the three-month period ended
September 30, 2002, and 26.1% for the three-month period ended September
30, 2001. The provision for income taxes increased during the third
quarter 2002 based on management's estimate of the Corporation's year-end
effective tax rate.
Page 23
First Citizens Banc Corp
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Capital Resources
Shareholders' equity totaled $73,619, at September 30, 2002 compared to
$48,727 at December 31, 2001. All of the capital ratios exceed the
regulatory minimum guidelines as identified in the following table:
To Be Well
Capitalized
Under Prompt
For Capital Corrective
Corporation Ratios Adequacy Action
9/30/02 12/31/01 Purposes Provisions
------- -------- -------- ----------
Tier I Risk Based Capital 12.8% 14.7% 4.0% 6.0%
Total Risk Based Capital 14.0% 16.0% 8.0% 10.0%
Leverage Ratio 8.3% 9.1% 4.0% 5.0%
The Corporation paid a cash dividend of $.19 per common share on
February 1, 2002, and $.25 per common share on both May 1, 2002 and
August 1, 2002 compared to $.18 per common share each on February 1,
2001, May 1, 2001, and August 1, 2001.
Liquidity
Liquidity as it relates to the banking entities of the Corporation is
the ability to meet the cash demand and credit needs of its customers.
The Banks, through their respective correspondent banks, maintain
federal funds borrowing lines totaling $50,931 and the Banks have
additional borrowing availability at the Federal Home Loan Bank of
Cincinnati of $80,890 at September 30, 2002. Finally, 99.9% of the
Corporation's security portfolio has been classified as available for
sale, which provides additional liquidity.
Page 24
First Citizens Banc Corp
Quantitative and Qualitative Disclosures about Market Risk
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
The Corporation's primary market risk exposure is interest rate risk and,
to a lesser extent, liquidity risk. The Banks do not maintain a trading
account for any class of financial instrument and the Corporation is not
affected by foreign currency exchange rate risk or commodity price risk.
Interest rate risk is the risk that the Corporation's financial condition
will be adversely affected due to movements in interest rates. The
Corporation, like other financial institutions, is subject to interest
rate risk to the extent that its interest-earning assets reprice
differently than interest-bearing liabilities. The income of financial
institutions is primarily derived from the excess of interest earned on
interest-earning assets over interest paid on interest-bearing
liabilities. One of the Corporation's principal financial objectives is to
achieve long-term profitability while reducing its exposure to
fluctuations in interest rates. Accordingly, the Corporation places great
importance on monitoring and controlling interest rate risk.
There are several methods employed by the Corporation to monitor and
control interest rate risk. One such method is using gap analysis. The gap
is defined as the repricing variance between rate sensitive assets and
rate sensitive liabilities within certain periods. The repricing can occur
due to changes in rates on variable products as well as maturities of
interest-earning assets and interest-bearing liabilities. A high ratio of
interest sensitive liabilities, generally referred to as a negative gap,
tends to benefit net interest income during periods of falling rates as
the average rate on interest-bearing liabilities falls faster than the
average rate earned on interest-earning assets. The opposite holds true
during periods of rising rates. The Corporation attempts to minimize the
interest rate risk through management of the gap in order to achieve
consistent shareholder return. The Corporation's Assets and Liability
Management Policy is to maintain a laddered gap position. One strategy is
to originate variable rate loans tied to market indices. Such loans
reprice as the underlying market index changes. Currently, approximately
62.7 percent of the Corporation's loan portfolio reprices on at least an
annual basis. The Corporation's usual practice is to invest excess funds
in federal funds that mature and reprice daily.
The following table provides information about the Corporation's financial
instruments that are sensitive to changes in interest rates as of
September 30, 2002 and December 31, 2001, based on certain prepayment and
account decay assumptions that management believes are reasonable. The
Corporation had no derivative financial instruments or trading portfolio
as of September 30, 2002 or December 31, 2001.
Page 25
First Citizens Banc Corp
Quantitative and Qualitative Disclosures about Market Risk
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
Net Portfolio Value
September 30, 2002 December 31, 2001
----------------------------------- -----------------------------
Change in Dollar Dollar Percent Dollar Dollar Percent
Rates Amount Change Change Amount Change Change
----- ------ ------ ------ ------ ------ ------
+400 bp 54,231 (17,789) -25% 33,305 (18,807) -36%
+300 bp 58,218 (13,802) -19% 37,548 (14,564) -28%
+200 bp 62,698 (9,322) -13% 42,491 (9,621) -18%
+100 bp 68,337 (3,683) -5% 47,743 (4,369) -8%
Base 72,020 - - 52,112 - -
- -100 bp 75,986 3,966 6% 56,594 4,482 9%
The reduction in the relative change in net portfolio value from 2001 to
2002, given the assumed immediate change in interest rates is primarily a
result of two factors. First, long-term interest rates have decreased only
slightly during 2002. The Corporation has seen an increase in the base
level of net portfolio value due to a slight increase in the fair value of
loans and investments, as well as a decrease in the fair value of
certificates of deposits. In addition, the majority of new loans
originated in 2002 have interest rate adjustment features, which lessens
the impact of future rate changes.
Page 26
First Citizens Banc Corp
Controls and Procedures Disclosures
Form 10-Q
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
ITEM 4.
Controls and Procedures Disclosure
Within the 90-day period prior to the filing date of this report, an
evaluation was carried out under the supervision and with the
participation of First Citizens Banc Corp's management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness
of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934).
Based on their evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and
procedures are, to the best of their knowledge, effective to ensure that
information required to be disclosed by First Citizens Banc Corp in
reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Subsequent to the date
of their evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that there were no significant changes in First
Citizens Banc Corp's internal control or in other factors that could
significantly affect its internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Page 27
First Citizens Banc Corp
Other Information
Form 10-Q
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. (A) EXHIBIT NO. 99 - Safe Harbor under the Private Securities
Litigation Reform Act of 1995.
(B) EXHIBIT NO. 99.1 - Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(C) EXHIBIT NO. 99.2 - Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(D) REPORTS ON FORM 8-K - None
Page 28
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf the undersigned
thereunto duly authorized.
First Citizens Banc Corp
/s/ David A. Voight November 14, 2002
- ------------------------------------ -----------------
David A. Voight Date
President
/s/ James O. Miller November 14, 2002
- ------------------------------------ -----------------
James O. Miller Date
Executive Vice President
Page 29
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q
I, David A. Voight, certify that:
1) I have reviewed this quarterly report on Form 10-Q of First Citizens
Banc Corp;
2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3) Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have;
a). designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b). evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c). presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a). all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b). any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Signature and Title: /s/ David A. Voight, Chief Executive Officer
Date: November 14, 2002
Page 30
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q
I, Todd A. Michel, certify that:
1) I have reviewed this quarterly report on Form 10-Q of First Citizens Banc
Corp;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have;
a). designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b). evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c). presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
d). all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
e). any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Signature and Title: /s/ Todd A. Michel, Chief Financial Officer
Date: November 14, 2002
Page 31
First Citizens Banc Corp
Index to Exhibits
Form 10-Q
- --------------------------------------------------------------------------------
Exhibit
Number Description Page Number
- ------ ----------- -----------
99 Safe Harbor Under the Private Securities Incorporated by reference to Exhibit 99 to Annual
Litigation Reform Act of 1995 Report for the Year Ended December 31, 1999 filed by
the registrant on March 24, 2000.
99.1 Certification pursuant to 18 U.S.C. 33
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
99.2 Certification pursuant to 18 U.S.C. 34
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
Page 32