Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
FCZA > SEC Filings for FCZA > Form 10-Q on 8-Nov-2012All Recent SEC Filings

Show all filings for FIRST CITIZENS BANC CORP /OH

Form 10-Q for FIRST CITIZENS BANC CORP /OH


8-Nov-2012

Quarterly Report

Management's Discussion and Analysis of Financial Condition and Results of Operations

Form 10-Q

(Amounts in thousands, except share data)

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion focuses on the consolidated financial condition of the Corporation at September 30, 2012 compared to December 31, 2011 and the consolidated results of operations for the three and nine-month periods ended September 30, 2012, compared to the same periods in 2011. This discussion should be read in conjunction with the consolidated financial statements and footnotes included in this Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements by the Corporation relating to various matters, including, without limitation, anticipated operating results, credit quality expectations, economic trends (including interest rates) and similar matters. Such statements are based upon the current beliefs and expectations of the Corporation's management and are subject to risks and uncertainties. While the Corporation believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could prove to be inaccurate, and accordingly, actual results and experiences could differ materially from the anticipated results or other expectations expressed by the Corporation in its forward-looking statements. Factors that could cause actual results or experiences to differ from results discussed in the forward-looking statements include, but are not limited to, regional and national economic conditions; volatility and direction of market interest rates; credit risks of lending activities; governmental legislation and regulation, including changes in accounting regulation or standards; material unforeseen changes in the financial condition or results of operations of the Corporation's clients; increases in FDIC insurance premiums and assessments; and other risks identified from time-to-time in the Corporation's other public documents on file with the SEC, including those risks identified in Item 1A of Part 1 of the Corporation's Annual Report on Form 10-K.

The Corporation does not undertake, and specifically disclaims, any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements, and the purpose of this section is to secure the use of the safe harbor provisions.

Financial Condition

Total assets of the Corporation at September 30, 2012 were $1,121,875 compared to $1,112,977 at December 31, 2011, an increase of $8,898, or 0.8 percent. The increase in total assets was mainly attributed to an increase in loans, net of allowance and investment securities offset by a decrease in cash and due from banks. Total liabilities at September 30, 2012 were $1,016,980 compared to $1,010,449 at December 31, 2011, an increase of $6,531, or 0.6 percent. The increase in total liabilities was mainly attributed to increases in non interest-bearing deposits and interest-bearing deposits offset by a decrease in FHLB advances.

Page 36


Table of Contents

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)

Net loans have increased $17,172 or 2.2 percent since December 31, 2011. The commercial real estate and real estate construction portfolios increased $33,683 and $5,615, respectively since December 31, 2011, while the commercial and agricultural, real estate and consumer loan portfolios decreased $1,547, $18,155 and $2,192, respectively. The current increase in commercial real estate loans is mainly due to increased opportunities from our larger markets and calling efforts by the commercial lending officers. The current increase in real estate construction is mainly due to an increase in the demand for construction loans. The current decrease in commercial and agricultural loans is the result of the pay down of loan balances on agricultural loans. The current decrease in real estate and consumer loans is mainly the result of the economic downturn and high unemployment rates in our market area, coupled with the Corporation's decision to originate and sell the majority of mortgage loans in the secondary market.

Loans held for sale have increased $151 or 25.3 percent since December 31, 2011. At September 30, 2012, the net loan to deposit ratio was 85.4 percent compared to 84.8 percent at December 31, 2011. This ratio has increased in 2012 due to an increase in loans.

For the nine months of operations in 2012, $5,565 was placed into the allowance for loan losses from earnings, compared to $7,700 in the same period of 2011. The economic downturn and high unemployment rates in our market area continue to stress the ability of some customers to make payments on their loans. Although general reserves required decreased compared to December 31, 2011, specific reserves increased during the same period. Detailed analyses of potential losses in the loan portfolio indicated that a reduced provision was appropriate. Net charge-offs have decreased to $5,333, compared to $6,781 in 2011. For the first nine months of 2012, the Corporation has charged off one hundred and ninety-three loans. One hundred and two real estate mortgage loans totaling $2,451 net of recoveries, thirty-four commercial real estate loans totaling $2,235 net of recoveries, twenty-three commercial and agriculture loans totaling $330 net of recoveries, and five real estate construction loan totaling $192 net of recoveries were charged off in the first nine months of the year. In addition, twenty-nine consumer loans totaling $124, net of recoveries, were charged off. For each loan category, as well as in total, the percentage of net charge-offs to loans was less than one percent. Nonperforming loans have increased by $7,966, of which $15 was due to a decrease in loans past due 90 days but still accruing and $7,981 was due to an increase in loans on nonaccrual status. Each of these factors was considered by management as part of the examination of both the level and mix of the allowance by loan type as well as the overall level of the allowance. Management specifically evaluates loans that are impaired, or graded as doubtful by the internal grading function for estimates of loss. To evaluate the adequacy of the allowance for loan losses to cover probable losses in the portfolio, management considers specific reserve allocations for identified portfolio loans, reserves for delinquencies and historical reserve allocations. The composition and overall level of the loan portfolio and charge-off activity are also factors used to determine the amount of the allowance for loan losses.

Page 37


Table of Contents

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)

Management analyzes commercial and commercial real estate loans, with balances of $350 or larger, on an individual basis and classifies a loan as impaired when an analysis of the borrower's operating results and financial condition indicates that underlying cash flows are not adequate to meet its debt service requirements. Often this is associated with a delay or shortfall in payments of 90 days or more. In addition, loans held for sale and leases are excluded from consideration as impaired. Loans are generally moved to nonaccrual status when 90 days or more past due. Impaired loans, or portions thereof, are charged-off when deemed uncollectible. The allowance for loan losses as a percent of total loans was 2.68 percent at September 30, 2012 and 2.71 percent at December 31, 2011.

The available for sale security portfolio increased by $5,711, from $204,633 at December 31, 2011, to $210,344 at September 30, 2012. The increase is the result of additional securities purchases made in the first nine months of 2012 above scheduled maturities and reinvestment of profits. The Corporation continued utilizing letters of credit from the Federal Home Loan Bank (FHLB) to replace maturing securities that were pledged for public entities. As of September 30, 2012, the Corporation was in compliance with all pledging requirements.

Bank owned life insurance (BOLI) increased $476 from December 31, 2011 to September 30, 2012 due to increases in the cash surrender value of the underlying insurance policies.

Office premises and equipment, net, have decreased $394 from December 31, 2011 to September 30, 2012, as a result of depreciation of $1,091 and disposals of $5, offset by new purchases of $702.

Total deposits at September 30, 2012 increased $13,991 from year-end 2011. Noninterest-bearing deposits increased $6,406 from year-end 2011, while interest-bearing deposits, including savings and time deposits, increased $7,585 from December 31, 2011. The primary reason for the increase in noninterest-bearing deposits was due to an increase in commercial accounts, which tend to fluctuate. The interest-bearing deposit increase was due to an increase in savings accounts, interest-bearing demand accounts and brokered deposits offset by decreases in time certificates and individual retirement accounts (IRA). Savings accounts increased $6,979 from year-end 2011, which included increases of $8,244 in statement savings, offset by decreases of $725 in corporate savings, $988 in money market savings and $236 in public fund money market savings. Interest-bearing demand accounts increased $17,792 from year end 2011, which included increases of $9,930 in interest-bearing checking accounts, $7,831 in interest-bearing public funds, offset by a decrease of $1,532 in NOW public funds. Time certificates, individual retirement accounts (IRA) and Certificate of Deposit Account Registry Service (CDARS) accounts decreased $23,947, $2,162 and $1,169, respectively, while brokered deposits increased $10,096 from year end 2011. The year-to-date average balance of total deposits decreased $805 compared to the average balance for the same period in 2011. The decrease in average balance is due to decreases of $17,991 in time certificates and $13,290 in CDARS accounts, offset by increases of $16,201 in demand deposit accounts, $9,695 in statement savings accounts and $2,601 in money market savings.

Page 38


Table of Contents

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)

Total borrowed funds have decreased $8,529 from December 31, 2011 to September 30, 2012. At September 30, 2012, the Corporation had $40,270 in outstanding Federal Home Loan Bank advances compared to $50,295 at December 31, 2011. The Corporation had a FHLB advance mature during the nine months ended September 30, 2012. The advance matured on September 26, 2012, in the amount of $10,000. This advance had terms of thirty-seven months with a fixed rate of 1.91%. The advance was not replaced. Securities sold under agreements to repurchase, which tend to fluctuate due to timing of deposits, have increased $1,496 from December 31, 2011 to September 30, 2012.

Shareholders' equity at September 30, 2012 was $104,895, or 9.4 percent of total assets, compared to $102,528, or 9.2 percent of total assets at December 31, 2011. The increase in shareholders' equity resulted from net income of $3,613 plus the increase in the fair value of securities available for sale, net of tax, of $881 less preferred dividends and common dividends paid of $869 and $694, respectively. In addition, on July 3, 2012, the U.S. Treasury completed the sale of Preferred Shares and the Corporation paid $564 to redeem common stock warrants. Total outstanding common shares at September 30, 2012 and 2011 were 7,707,917.

Results of Operations

Nine Months Ended September 30, 2012 and 2011

The Corporation had net income of $3,613 for the nine months ended September 30, 2012, an increase of $1,144 from net income of $2,469 for the same nine months of 2011. Basic and diluted earnings per common share were $.36 for the nine months of 2012, compared to $0.21 for the same period in 2011. The primary reasons for the changes in net income are explained below.

Net interest income for the nine months ended September 30, 2012 was $30,619, a decrease of $345 from $30,964 in the same nine months of 2011. Net interest income, the difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the most significant component of the Corporation's earnings. Net interest income is affected by changes in volume, rates and composition of interest-earning assets and interest-bearing liabilities. Total interest income for the nine months ended September 30, 2012 was $35,405, a decrease of $1,320 from $36,725 in the same nine months of 2011. Average earning assets decreased 1.2 percent from the nine month period last year. Average loans, securities and interest-bearing deposits in other banks for the nine months of 2012 increased 2.0 percent, 4.7 percent and 14.3 percent respectively compared to the nine months of last year. These increases were offset by a decrease in average federal funds sold compared to the same period of 2011. The yield on earning assets decreased 9 basis points for the first nine months of 2012 compared to the same period last year. The yield on loans, taxable securities and non-taxable securities decreased 26, 47 and 11 basis points respectively during the first nine months of 2012 compared to the first nine months of last year. These factors combined resulted in the decrease in total interest income for the first nine months of 2012. Total interest expense for the nine months ended September 30, 2012 was $4,786, a decrease of $975 from $5,761 in the same nine months of 2011. Interest expense on certificates of deposit decreased $697 or 21.4 percent in the first nine months of 2012 compared to the same period in 2011. Average time deposits for the first nine months of 2012 decreased 10.9 percent compared to 2011. The interest rate paid on time deposits during the first nine months of 2012 also decreased as compared to the same period in 2011 by 16 basis points. The Corporation's net yield on interest-earning assets for the nine months ended September 30, 2012 and 2011 was 3.94% and 3.91%, respectively.

Page 39


Table of Contents

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)

The following table presents the condensed average balance sheets for the nine months ended September 30, 2012 and 2011. Rates are computed on a tax equivalent basis. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities.

                                                                Nine Months Ended September 30,
                                                        2012                                        2011
                                                                     (Dollars in thousands)
                                         Average                      Yield/         Average                      Yield/
                                         balance        Interest      rate *         balance        Interest      rate *
Assets:
Interest-earning assets:
Loans                                  $   774,704      $  30,338        5.22 %    $   759,755      $  31,208        5.48 %
Taxable securities                         174,499          3,608        2.83 %        173,413          4,213        3.30 %
Non-taxable securities                      49,978          1,376        3.99 %         41,562          1,250        4.10 %
Federal funds sold                              -              -         0.00 %         42,568             19        0.06 %
Interest-bearing deposits in other
banks                                       47,436             83        0.23 %         41,512             35        0.11 %

Total interest-earning assets          $ 1,046,617         35,405        4.55 %    $ 1,058,810         36,725        4.64 %

Noninterest-earning assets:
Cash and due from financial
institutions                                22,570                                       9,422
Premises and equipment, net                 17,673                                      18,078
Accrued interest receivable                  4,358                                       4,907
Intangible assets                           25,483                                      26,599
Other assets                                 9,907                                      10,810
Bank owned life insurance                   18,182                                      17,527
Less allowance for loan losses             (21,816 )                                   (22,755 )

Total Assets                           $ 1,122,974                                 $ 1,123,398

Liabilities and Shareholders Equity:

Interest-bearing liabilities:
Demand and savings                     $   442,247      $     387        0.11 %    $   425,542      $     683        0.21 %
Time                                       274,866          2,568        1.25 %        308,597          3,265        1.41 %
US treasury demand                              -              -         0.00 %          1,404             -         0.00 %
FHLB                                        50,108          1,181        3.14 %         55,176          1,208        2.92 %
Other                                       18,039             15        0.11 %         20,262             27        0.18 %
Subordinated debentures                     30,349            635        2.79 %         30,349            578        2.54 %

Total interest-bearing liabilities     $   815,609          4,786        0.78 %    $   841,330          5,761        0.91 %

Noninterest-bearing deposits               191,134                                     174,352
Other liabilities                           12,442                                       8,710
Shareholders' Equity                       103,789                                      99,006

Total Liabilities and Shareholders'
Equity                                 $ 1,122,974                                 $ 1,123,398

Net interest income and interest
rate spread                                             $  30,619        3.77 %                     $  30,964        3.73 %
Net yield on interest earning assets                                     3.94 %                                      3.91 %

* - All yields and costs are presented on an annualized basis

Page 40


Table of Contents

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)

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. The following table is an analysis of the changes in interest income and expense between the nine-month periods ended September 30, 2012 and September 30, 2011. The table is presented on a fully tax-equivalent basis.

                                                      Increase (decrease) due to:
                                                 Volume(1)       Rate(1)         Net
                                                        (Dollars in thousands)
 Interest income:
 Loans                                          $       606      $ (1,476 )    $   (870 )
 Taxable securities                                      27          (632 )        (605 )
 Nontaxable securities                                  253          (127 )         126
 Federal funds sold                                     (19 )          -            (19 )
 Interest-bearing deposits in other banks                 6            42            48

 Total interest income                          $       873      $ (2,193 )    $ (1,320 )

 Interest expense:
 Savings and interest-bearing demand accounts            26          (322 )        (296 )
 Certificates of deposit                               (337 )        (360 )        (697 )
 Federal Home Loan Bank advances                       (116 )          89           (27 )
 Securities sold under repurchase agreements             (3 )          (9 )         (12 )
 Subordinated debentures                                 -             57            57

 Total interest expense                         $      (430 )    $   (545 )    $   (975 )

 Net interest income                            $     1,303      $ (1,648 )    $   (345 )

(1) The change in interest income and interest expense due to changes in both volume and rate, which cannot be segregated, has been allocated proportionately to the change due to volume and the change due to rate.

The Corporation provides for loan losses through regular provisions to the allowance for loan losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations required on the allowance for loan losses. Provisions for loan losses totaled $5,565 for the nine months ended September 30, 2012, compared to $7,700 for the same period in 2011. Although general reserves decreased compared to December 31, 2011, specific reserves increased during the same period. Management believes the overall adequacy of the reserve for loan losses supported a reduced provision, compared to September 30, 2011.

Non-interest income for the nine months ended September 30, 2012 was $8,333, an increase of $475 or 6.0 percent from $7,858 for the same period of 2011. Service charge fee income for the first nine months of 2012 was $3,243, down $107 or 3.2 percent over the same period of 2011. Trust fee income was $1,596, up $19 or 1.2 percent over the same period in 2011. ATM fee income for the first nine months of 2012 was $1,323, down $48 or 3.5 percent over the same period of 2011. BOLI contributed $476 to non-interest income during the nine months ended September 30, 2012. Net gain on sale of loans for the nine months ended September 30, 2012 was $456, up $383 over the same period in 2011. Other non-interest income was $1,239, up $229 over the same period in 2011 mainly as a result of the sale of loan collateral.

Page 41


Table of Contents

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)

Non-interest expense for the nine months ended September 30, 2012 was $28,745, an increase of $476, from $28,269 reported for the same period of 2011. Salary and other employee costs were $15,603, up $1,015 or 7.0 percent as compared to the same period of 2011. This increase is mainly due to an increase in staffing in the credit and special assets departments and higher insurance costs for the first nine months of 2012. The number of full-time equivalent employees increased during the first nine months of 2012 to 311.9, up 8.6, compared to the same period of 2011. Occupancy and equipment costs were $2,511, down $276 or 9.9 percent compared to the same period in 2011. This decrease is mainly due to decreases in utility, grounds maintenance and equipment depreciation expenses. The decrease in utility and grounds maintenance was the result of the mild winter weather. The decrease in equipment maintenance was the result of decreased depreciation costs as assets have aged. Contracted data processing costs were $705, up $93 or 15.2 percent compared to the same period in 2011. State franchise taxes decreased by $115 compared to the same period of 2011. Amortization expense decreased $130, or 14.9 percent from the same nine months of 2011, as a result of scheduled amortization of intangible assets associated with mergers. FDIC assessments were down by $257 during the first nine months of 2012 compared to the same period of 2011 as a result of a change in methodology used to calculate the assessment charged to banks. The change included both a new assessment base and a change in the assessment rate. Professional service costs were $2,080, up $575 or 38.2 percent compared to the same period in 2011. The increase is mainly due to consulting services for reducing communication expenses and streamlining the Corporation's communication services and employment search firms. In addition, professional fees have increased due to expenses related to the U. S. Treasury's auction of its preferred stock in the Corporation and professional services related to repossession expenses related to loans. Other operating expenses were $5,634, down $429 or 7.1 percent compared to the same period of 2011. The decrease in other operating expenses is due to losses on sale of OREO properties. During the nine month period ended September 30, 2012, the Corporation posted gains on the sale of OREO. For the same period in 2011, losses were posted for the sale of OREO properties. In addition, a majority of the Corporation's other operating expenses declined compared to the same period in 2011.

Income tax expense for the nine months ended September 30, 2012 totaled $1,029, up $645 or 168.0 percent compared to the same period in 2011. The increase in the federal income tax expense is mainly a result of an increase in taxable income, primarily due to reduced provision for loan losses, this year compared to last. The effective tax rates for the nine-month periods ended September 30, 2012 and September 30, 2011 were 22.2% and 13.5%, respectively. The increase in the effective tax rate is the result of an increase in taxable income compared to last year.

Page 42


Table of Contents

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, 2012 and 2011

The Corporation had net income of $1,384 for the three months ended September 30, 2012, an increase of $191 from net income of $1,193 for the same three months of 2011. Basic and diluted earnings per common share were $0.14 for the quarter ended September 30, 2012, compared to $0.12 for the same period in . . .

  Add FCZA to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for FCZA - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.