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First Citizens Banc Corp. Reports Operating Results (10-Q)

August 10, 2009 | About:

First Citizens Banc Corp. (FCZA) filed Quarterly Report for the period ended 2009-06-30.

First Citizens Banc Corp. is a bank financial holding company. Through the subsidiary banks the Corporation is primarily engaged in the business of commercial banking which accounts for substantially all of its revenue operating income and assets. The subsidiaries are: The Citizens Banking Company The Farmers State Bank and The Castalia Banking Company. First Citizens Banc Corp. has a market cap of $47.48 million; its shares were traded at around $6.16 with and P/S ratio of 0.66. The dividend yield of First Citizens Banc Corp. stocks is 0.65%. First Citizens Banc Corp. had an annual average earning growth of 5.4% over the past 5 years.

Highlight of Business Operations:

Net loans have decreased $14,990, or 1.9 percent since December 31, 2008. The commercial real estate portfolio increased by $12,674. The commercial and agricultural, real estate and real estate construction loan portfolios decreased $4,172, $16,031 and $2,875, respectively, while consumer loans and leases portfolios decreased a total of $1,520 and $39, respectively. Other loans increased by $348. The increase in commercial real estate loans is mainly due to aggressive calling efforts by the commercial lending officers. The decrease in commercial and agriculture loans is the result of seasonality. The decrease in real estate and consumer loans is mainly the result of a decline in the housing market and the Corporations decision to originate and sell the majority of mortgage loans on the secondary market.

Shareholders equity at June 30, 2009 was $98,695, or 9.0 percent of total assets, compared to $76,617 at December 31, 2008, or 7.3 percent of total assets. The increase in shareholders equity resulted from earnings of $1,128, less dividends paid of $2,056, and a decrease in the market value of securities available for sale, net of tax, of $178. Additionally, on January 23, 2009, the Corporation issued $23,184 in preferred stock to the U.S. Treasury. The Corporation paid cash dividends to common shareholders of $.15 per common share on February 1, 2009 and $.07 per common share on May 1, 2009. The Corporation paid cash dividends to the U.S. Treasury of $71 on February 15, 2009 and $289 May 15, 2009. The result of the payment of these preferred dividends was a reduction in the earnings available to common shareholders of $.05 per share. The Corporation paid cash dividends of $.28 per common share on each of February 1, 2008 and May 1, 2008. Total outstanding shares at June 30, 2009 and June 30, 2008 were 7,707,917.

Non-interest income for the first six months of 2009 was $4,863, a decrease of $46 or 0.9 percent from the same period in 2008. Declines in Trust fees of $206 and Service charges of $5 are related to current economic conditions. ATM fee income for the first half of 2009 was $822, up $175 or 27.0 percent over the first half of 2008. This increase can be attributed to a change in ATM processing systems. The change resulted in increased interchange income, along with a $125 incentive to switch. Computer center processing fee income for the first half of 2009 was $239, down $152 or 38.9 percent over the first half of 2008. This decrease is the result of restructuring communication lines, as well as the loss of service provided to one financial institution. Other non-interest income for the first half of 2009 was $444, up $337 or 315.0 percent over the first half of 2008. Other non-interest income of $237, related to the resolution of three loans obtained in the Futura merger, was recorded in the first quarter of 2009. These loans were recorded at fair value at the time of the merger and have subsequently been settled at a higher value. Also, net gain on sale of securities declined in 2009 because of a nonrecurring gain related to the redemption of VISA stock of $183 that was posted in 2008.

Non-interest expense for the first six months of 2009 was $18,560, a decrease of $465 or 2.4 percent, from $19,025 reported for the same period of 2008. Salary and other employee costs were $8,316, down $431 or 5.3 percent as compared to the first half of 2008. The Corporation has instituted a salary freeze for 2009, which has helped keep salary expenses in line with last year. In addition, the Corporation changed the commission structure and suspended the contribution into its profit sharing 401 (k) plan during 2009 resulting in approximately $543 in savings for the first half of 2009. Occupancy and equipment costs were $2,226, down $180 or 7.5 percent compared to the same period of 2008. Computer processing costs were $558, down $147, or 20.9 percent compared to last year as a result of conversion costs associated with acquisitions paid during 2008. State franchise taxes decreased by $199 compared to the same period of 2008. Franchise tax is based on the prior end-of-year capital of the Corporation. The large goodwill impairment charge booked prior to 2008 year end directly led to the decrease in franchise tax. Amortization expense decreased $96, or 13.0 percent from the first half of 2008, related to scheduled amortization of intangible assets associated with mergers. FDIC insurance assessments have increased by $1,125 during the first six months of 2009, as compared to the same period of 2008. The Corporation had been offsetting the FDIC assessment with a One-Time Assessment Credit issued in 2007. This credit was applied over eight quarters and ran out in the first quarter of 2009. Additionally, the increase is due to an increase in the assessment rate charged by the FDIC. Finally, the Corporation accrued $502 during the second quarter for the FDICs special emergency assessment, which was charged to all depository institutions insured by the FDIC. Other operating expenses decreased $488, or 11.4 percent from the first half of 2008. A majority of the Corporations other operating expenses declined compared to the first half of 2008.

Noninterest expense for the second quarter of 2009 was $9,313, a decrease of $262 or 2.7 percent, from $9,575 reported for the same period in 2008. Salaries and other employee costs were $4,002, down $406 or 9.2 percent as compared to the same period in 2008. The Corporation has instituted a salary freeze for 2009, which has helped keep salary expenses in line with last year. In addition, the Corporation changed the commission structure and suspended the contribution into its profit sharing 401 (k) plan during 2009 resulting in approximately $412 in savings for the second quarter of 2009. Occupancy and equipment costs were $1,065, down $153 or 12.6 percent compared to the same period of 2008. Computer processing costs were $275, down $26 or 8.6 percent compared to last years second quarter. FDIC insurance assessments were $932, up $908 compared to the second quarter of 2008. The Corporation had been offsetting the FDIC assessment with a One-Time Assessment Credit issued in 2007. This credit was applied over eight quarters and ran out in the first quarter of 2009. Additionally, the increase is due to an increase in the assessment rate charged by the FDIC. State franchise taxes decreased $12 compared to the second quarter of 2008. Amortization expense in the second quarter decreased $15 or 4.5 percent from the same period of 2008. Finally, other operating expenses were $1,711, down $577 or 25.2 percent as compared to the second quarter of 2008. A majority of the Corporations other operating expenses declined compared to the second quarter of 2008.

Cash from operations for the six months ended June 30, 2009 was $4,239. This includes net income of $1,128 plus net adjustments of $3,111 to reconcile net earnings to net cash provided by operations. Cash from investing activities was $(16,629) for the six months ended June 30, 2009. The use of cash from investing activities is primarily due to securities purchases. Cash received from maturing and called securities totaled $63,036. This increase in cash was offset by the purchase of securities of $89,495. Additionally, cash was increased by the net change in loans of $8,922. Cash from financing activities in the first six months of 2009 totaled $46,105. A major source of cash for financing activities is the net change in deposits. Cash provided by the net change in deposits was $62,320 in the first half of 2009. The large increase in deposits was primarily due to the Corporations participation in the CDARS program, which added $44,297 in deposits during the first half of 2009. Cash was used by the decrease in long-term borrowings of $20,500. Cash of $23,184 was provided from the issuance of Senior Preferred Shares to the U.S. Treasury. Cash from operating activities and financing activities exceeded cash from investing activities by $33,715. These

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