Exhibit 13.1

     

Five Year Condensed Consolidated Financial Summary

		2009				2008				2007				2006				2005
Earnings
Net Income (000)		$	1,655			$	(38,978	)		$	6,885			$	6,160			$	6,659
Preferred dividends (000)		$	(940	)		$	—			$	—			$	—			$	—
Net Income/(loss) available to common shareholders (000)		$	715			$	(38,978	)		$	6,885			$	6,160			$	6,659
Per Common Share (1)
Earnings/(loss) (basic and diluted)		$	0.21			$	(5.06	)		$	1.25			$	1.12			$	1.15
Earnings/(loss), available to common shareholders (basic and diluted)		$	0.09			$	(5.06	)		$	1.25			$	1.12			$	1.15
Book Value		$	12.82			$	9.94			$	16.37			$	14.53			$	15.02
Dividends Paid		$	0.25			$	0.91			$	1.12			$	1.12			$	1.12
Balances
Assets (millions)		$	1,102.8			$	1,053.6			$	1,119.3			$	749.0			$	750.9
Deposits (millions)		$	856.1			$	809.9			$	839.8			$	564.6			$	577.1
Net Loans (millions)		$	775.5			$	787.8			$	787.4			$	549.7			$	514.8
Shareholders’ Equity (millions)		$	98.8			$	76.6			$	126.2			$	79.5			$	87.1
Performance Ratios
Return on Average Assets			0.15	%			(3.54	)%			0.88	%			0.83	%			0.85	%
Return on Average Equity			1.68	%			(31.57	)%			8.78	%			7.68	%			7.69	%
Equity Capital Ratio			8.96	%			7.27	%			11.27	%			10.61	%			11.60	%
Net Loans to Deposit Ratio			90.59	%			97.27	%			93.76	%			97.36	%			89.20	%
Loss Allowance to Total Loans			1.93	%			1.11	%			0.93	%			1.45	%			1.76	%

Dear Shareholder:

     I am pleased to report that we did earn a profit of $1,655,000 or $.21 per common share for the year 2009. Certainly not the profit we wanted to see, but it is a profit nonetheless. As stated many times before in our communications, the results reflect the impact of this recession. Below is an apples-to- apples recap of the last three years which clearly shows the recession’s impact.

		2009				2008				2007
Net Income Before Economic Issues		$	18,212,000			$	14,684,000			$	11,304,000
Less:
Provision for Loan Losses			13,323,000				8,207,000				1,020,000
Other Bad Debt & Collection Expense			1,500,000				604,000				318,000
FDIC Premiums			1,971,000				191,000				68,000
Total Economic Issues			16,794,000				9,002,000				1,406,000
Net Income before Goodwill & Tax			1,418,000				5,682,000				9,898,000
Non-Cash Goodwill Write-down			—				(43,291,000	)			—
Federal Income Tax			237,000				(1,369,000	)			(3,013,000	)
Net Income (Loss)		$	1,655,000			$	(38,978,000	)		$	6,885,000

     We are very pleased with the growth in Net Income before Economic Issues. This number reflects our work to maintain margin dollars and implement efficiencies which reduced non-interest expenses. Our success in these areas has allowed us to absorb the negative financial impact of the recession and still earn a profit. The last available peer comparison from the Federal Reserve’s September 2009 Uniform Bank Holding Company Performance Report, which compares the performance of 295 companies our size for the first nine months of 2009, indicates that while we earned .20% on assets, our peer group lost (.20%) on assets.

Below is a three year comparison of key year-end balance sheet numbers.

		2009				2008				2007
Total Assets		$	1,102,812,000			$	1,053,611,000			$	1,119,257,000
Total Loans			775,547,000				787,789,000				787,386,000
Total Securities			207,292,000				150,936,000				144,351,000
Total Deposits			856,052,000				809,921,000				839,820,000

     In this economy, we have purposely held the size of the company (reflected by total assets) at approximately $1,100,000,000. From 2008 to 2009 our deposits grew from $809,921,000 to $856,098,000. As a community bank, we are in the business of taking customers’ deposits and putting them to work in loans or investments. During 2009, the increase in deposits was primarily used for investments, which increased from $150,936,000 to $207,292,000. Our loan totals actually decreased slightly from $787,789,000 to $775,548,000 – about 1 ¹/2 %.

     We receive approximately $14,000,000 in payments from our loan customers each month, so we need at least $14,000,000 a month in new loans just to keep the amount of our total outstanding loans even. Again it’s reflective of the economy that loan demand has been down slightly, and we will not lessen our loan standards or reach outside of our markets or customer base for loan growth.

     As we enter this third year of recession our short term goal will remain the same – to weather the economic downturn and come out of it with the least amount of negative impact to the company. To achieve this goal, our priorities will continue to focus on capital, liquidity, and asset quality.

Capital

     By historical standards the bank remains, by definition, well capitalized. Over the last two years, the marketplace and the regulators have encouraged the conservation and/or the accumulation of capital. This is a sound approach given the unknown continuing financial impact of the recession. Positive earnings, limited dividends, and holding the asset size of the bank at approximately $1,100,000,000 allows us the ability to manage the bank’s capital needs. In 2009 we participated in the U.S. Treasury’s Capital Purchase Program (CPP) which added $23,184,000 in additional capital to the holding company. This additional capital took the form of preferred stock issued to the U. S. Treasury. The addition of the preferred stock increased the holding company’s Tier I capital level from 5.8% at year end 2008 to 9.6% at year end 2009. I understand (and share) the concern over participation in government programs, but the additional capital has significantly strengthened the ability of the company to endure a prolonged recession of unpredictable depth. Over the next several years and as the economy improves we will need to balance the use of our earnings for shareholder dividends, accumulation of capital for growth, and eventually retiring the treasury stock.

Liquidity

     Maintaining adequate liquidity remains a top priority issue for the company. We are pleased with our base of core deposits and access to outside sources of liquidity. At December 31, 2009, our available day to day operational liquidity was approximately $201,000,000. This was equal to approximately 23.5% of deposits at year end. Not to be confused with capital, the day to day operational liquidity is the money that we can raise to fund new loans or investments or to put additional cash in our vaults. This liquidity can also be used to supplement temporary decreases in our deposit balances. For example, when our business customers write checks for their quarterly tax payments or our customers write their checks to pay their property taxes, our total deposit balances will decrease. We can draw on our sources of liquidity to make up the decrease. Our comfort level with our liquidity resources at year-end is high.

Asset Quality

     Asset Quality remains our biggest challenge. First we had the impact of the financial crises. Fortunately, we had avoided the types of loans and investments embroiled in the crises. However, we are now dealing with the aftereffects. The fallout from any recession is unemployment, and we are experiencing unprecedented levels of unemployment in our communities.

     At the time of this writing, unemployment in three counties within our market area is greater than 14% with the highest over 17%. Unemployment in our remaining counties where we operate is greater than 10% with the exception of Franklin and Madison County which are less than 10%. This level of unemployment tends to create a vicious cycle of reduced spending on the part of consumers, reduced sales for businesses, efforts by businesses to reduce wage and other expenses and ultimately less economic activity and higher unemployment. Lower tax receipts and the budget issues faced by many local governments are forcing cuts which will exacerbate the unemployment problem.

     We have seen a mixed impact on our small business customers. Small businesses are typically the financial and employment backbone of the communities where we operate. Some have a product mix or line of business which are faring well in spite of the economy. Others are not. A number of these businesses had the ability to weather a recession of 12 or even 18 months – but now their resources are

being strained. We will generally try to work with a customer who is cooperative when it seems possible to save a viable business. When we do not see a reasonable alternative, we will take the actions necessary to limit our losses.

     The chart below recaps our year-end loan balances by the general loan types and the corresponding charge-offs for the year 2009.

		12/31/09				2009
Loan Type		Balances				Charge-offs
Commercial and Agriculture		$	96,298,000			$	1,493,000
Commercial Real Estate			335,652,000				2,377,000
Residential Real Estate			314,552,000				3,029,000
Real Estate Construction			30,068,000				497,000
Consumer and Other			14,564,000				655,000
Total		$	791,134,000			$	8,051,000

This indicates that the economic issues have affected all types of loans. Although you may have read about problems related to commercial real estate loans, from our experience, the recession has had an effect on all types of borrowers.

2010 and Beyond

     In last year’s letter I indicated that 2009 was going to be a challenging year – perhaps more challenging than 2008. This was, in fact, the case. We can repeat that statement with respect to 2010. We do not expect to see a quick recovery in Ohio. Still, we cannot forget the first series of numbers provided in this letter – the ability of this company to generate core earnings. This is significant. The company has not shown internal systemic or structural problems that we must divert resources to remedy. Our issues are driven from outside the company, and we expect that those issues – through time, patience, and staying with the plan — will pass.

     While significant time and energy are being devoted to managing this company through the effects of the economic downturn, we have not lessened our commitment to our communities and to the customers who support this company. In 2009 we had a positive response to the campaign and promotions related to our 125^th anniversary. We have seen growth in the number of deposit accounts and wealth management accounts. And although the total dollar amount of our loans was down slightly at year-end 2009, we have taken advantage of many new sound loan opportunities in our newer markets, such as Franklin County, where the impact of the recession has been less than in some of our other markets. We have used the fallout from cuts at the big regional banks to selectively add customers and experienced staff, which should make us a stronger and more diversified institution going forward.

     We appreciate the overwhelming support we have continued to receive from shareholders during these trying times, and we will continue to keep you informed on the status of your company.

Very truly yours,

James O. Miller
President & CEO

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ANNUAL REPORT

CONTENTS

Five –Year Selected Consolidated Financial Data			1
Common Stock and Shareholder Matters			3
General Development of Business			3
Management’s Discussion and Analysis of Financial Condition and Results of Operations			4
Quantitative and Qualitative Disclosures about Market Risk			20
Financial Statements
Management’s Report on Internal Control over Financial Reporting			24
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Statements			25
Report of Independent Registered Public Accounting Firm on Financial Statements			26
Consolidated Balance Sheets			28
Consolidated Statements of Operations			29
Consolidated Statements of Changes in Shareholders’ Equity			30
Consolidated Statements of Cash Flow			33
Notes to Consolidated Financial Statements			35

Five-Year Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

		Year ended December 31,
		2009				2008				2007				2006				2005
Statements of income:
Total interest and dividend income		$	55,191			$	62,267			$	49,947			$	45,876			$	42,438
Total interest expense			14,918				21,780				20,371				15,615				11,591
Net interest income			40,273				40,487				29,576				30,261				30,847
Provision for loan losses			13,323				8,207				1,020				1,128				1,123
Net interest income after provision for loan losses			26,950				32,280				28,556				29,133				29,724
Security gains/(losses)			75				193				(1	)			—				(13	)
Other noninterest income			9,558				9,463				7,506				6,670				7,851
Total noninterest income			9,633				9,656				7,505				6,670				7,838
Goodwill Impairment			—				43,291				—				—				—
Other noninterest expense			35,165				36,254				26,163				26,977				27,929
Total noninterest expense			35,165				79,545				26,163				26,977				27,929
Income (loss) before federal income taxes			1,418				(37,609	)			9,898				8,826				9,633
Federal income tax expense (benefit)			(237	)			1,369				3,013				2,666				2,974
Net income (loss)		$	1,655			$	(38,978	)		$	6,885			$	6,160			$	6,659
Preferred stock dividends			941				—				—				—				—
Net income (loss) available to common shareholders		$	714			$	(38,978	)		$	6,885			$	6,160			$	6,659
Per share of common stock:
Earnings (loss) (basic and diluted)		$	0.21			$	(5.06	)		$	1.25			$	1.12			$	1.15
Earnings (loss) (basic and diluted) available to common shareholders			0.09				(5.06	)			1.25				1.12				1.15
Dividends			0.25				0.91				1.12				1.12				1.12
Book value			12.82				9.94				16.37				14.53				15.02
Average common shares outstanding:
Basic			7,707,917				7,707,917				5,505,023				5,520,692				5,804,361
Diluted			7,707,917				7,707,917				5,505,023				5,520,692				5,805,681
Year-end balances:
Loans, net		$	775,547			$	787,789			$	787,386			$	549,665			$	514,770
Securities			222,674				167,159				158,920				119,398				136,674
Total assets			1,102,812				1,053,611				1,119,257				748,986				750,936
Deposits			856,102				809,921				839,820				564,551				577,105
Borrowings			139,105				155,038				145,051				96,754				81,402
Shareholders’ equity			98,797				76,617				126,156				79,472				87,110
Average balances:
Loans, net		$	777,825			$	791,298			$	579,025			$	530,409			$	532,620
Securities			197,826				163,054				118,542				126,645				150,184
Total assets			1,102,779				1,099,943				780,769				739,571				780,321
Deposits			763,488				808,646				574,133				566,584				609,564
Borrowings			127,793				162,400				118,375				87,825				80,056
Shareholders’ equity			98,454				123,468				78,435				80,182				86,586

Five-Year Selected Ratios

		Year ended December 31,
		2009				2008				2007				2006				2005
Net yield on average interest-earning assets			3.91	%			4.18	%			4.17	%			4.49	%			4.31	%
Return on average total assets			0.15				(3.54	)			0.89				0.83				0.85
Return on average shareholders’ equity			1.68				(31.57	)			8.78				7.68				7.69
Average shareholders’ equity as a percent of average total assets			8.97				11.22				10.05				10.84				11.10
Net loan charge-offs as a percent of average total loans			0.87				0.84				0.52				0.42				0.66
Allowance for loan losses as a percent of loans at year-end			1.93				1.11				0.93				1.45				1.76
Shareholders’ equity as a percent of total year-end assets			8.96				7.27				11.28				10.61				11.60

A copy of Form 10-K, as filed with the Securities and Exchange Commission, will be furnished, free of charge, to shareholders, upon written request to the Secretary of First Citizens Banc Corp, 100 East Water Street, Sandusky, Ohio 44870.

Common Stock and Shareholder Matters

The common shares of First Citizens Banc Corp trade on The NASDAQ Stock Market under the symbol “FCZA”. As of December 31, 2009, there were 7,707,917 shares outstanding held by approximately 1,435 shareholders of record (not including the number of persons or entities holding stock in nominee or street name through various brokerage firms). Information below is the range of sales prices for each quarter for the last two years.

2009
First Quarter		Second Quarter		Third Quarter		Fourth Quarter
$5.99 to $8.00		$5.01 to $8.42		$4.25 to $6.30		$4.27 to $5.90

2008
First Quarter		Second Quarter		Third Quarter		Fourth Quarter
$13.20 to $15.50		$11.01 to $14.84		$9.00 to $13.44		$5.37 to $10.12

Dividends per share declared by the Corporation on common shares were as follows:

		2009				2008
First quarter		$	0.15			$	0.28
Second quarter			0.07				0.28
Third quarter			0.01				0.20
Fourth quarter			0.02				0.15
		$	0.25			$	0.91

Information regarding potential restrictions on dividends paid can be found in Note 18 to the Consolidated Financial Statements.

General Development of Business
(Dollars in thousands, except for per share data)

FIRST CITIZENS BANC CORP (FCBC) was organized under the laws of the State of Ohio on February 19, 1987 and is a registered financial holding company under the Gramm-Leach-Bliley Financial Modernization Act of 1999, as amended. FCBC and its subsidiaries are sometimes referred to together as the Corporation. The Corporation’s office is located at 100 East Water Street, Sandusky, Ohio. The Corporation had total consolidated assets of $1,102,812 at December 31, 2009.

THE CITIZENS BANKING COMPANY (Citizens), owned by the Corporation since 1987, opened for business in 1884 as The Citizens National Bank. In 1898, Citizens was reorganized under Ohio banking law and was known as The Citizens Bank and Trust Company. In 1908, Citizens surrendered its trust charter and began operation under its current name. Citizens maintains its main office at 100 East Water Street, Sandusky, Ohio and operates branch banking offices in the following Ohio communities; Sandusky (2), Norwalk (2), Berlin Heights, Huron, Castalia, New Washington, Shelby (3), Willard, Chatfield, Tiro, Greenwich, Plymouth, Shiloh, Akron, Dublin, Hilliard, Plain City, Russells Point, Urbana (2), West Liberty and Quincy. Additionally, Citizens operates a loan production office in Port Clinton, Ohio. On December 31, 2008 Citizens closed its branch banking office located in Crestline, Ohio. Citizens accounts for 99.6% of the Corporation’s consolidated assets at December 31, 2009.

SCC RESOURCES INC. (SCC) was organized under the laws of the State of Ohio. Begun as a joint venture of three local Sandusky, Ohio banks in 1966, SCC provided item-processing services for financial institutions, including Citizens, and other nonrelated entities. The Corporation acquired total ownership of SCC in February 1993. As of June 30, 2009, this subsidiary was merged with Citizens. Citizens continued item-processing for the non-related financial institutions.

FIRST CITIZENS INSURANCE AGENCY INC. (Insurance Agency) was formed to allow the Corporation to participate in commission revenue generated through its third party insurance agreement. Assets of the Insurance Agency are less than one percent of the Corporation’s consolidated assets as of December 31, 2009.

WATER STREET PROPERTIES (Water St.) was formed to hold properties repossessed by FCBC subsidiaries. Water St. accounted for less than one percent of the Corporation’s consolidated assets as of December 31, 2009.

FIRST CITIZENS INVESTMENTS, INC. (FCI) is wholly-owned by Citizens to hold and manage its securities portfolio. The operations of FCI are located in Wilmington, Delaware.

FIRST CITIZENS CAPITAL LLC (FCC) is wholly-owned by Citizens to hold inter-company debt that is eliminated in consolidation. The operations of FCC are located in Wilmington, Delaware.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — As of December 31, 2009 and December 31, 2008 and for the Years Ending December 31, 2009, 2008 and 2007

(Dollars in thousands, except per share data)

General

The following paragraphs more fully discuss the significant highlights, changes and trends as they relate to the Corporation’s financial condition, results of operations, liquidity and capital resources as of December 31, 2009 and 2008, and during the three-year period ended December 31, 2009. This discussion should be read in conjunction with the Consolidated Financial Statements and notes to the Consolidated Financial Statements, which are included elsewhere in this report.

Forward-Looking Statements

This report includes forward-looking statements by the Corporation relating to such matters as anticipated operating results, business line results, credit quality expectations, prospects for new lines of business, 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 experience 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 experience 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 Securities and Exchange Commission.

The Corporation is not aware of any trends, events or uncertainties that will have or are reasonably likely to have a material effect on its liquidity, capital resources or operations except as discussed herein. 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

At December 31, 2009, total assets were $1,102,812, compared to $1,053,611 at December 31, 2008. The increase in assets is primarily the result of an increase in the investment portfolio, which was funded primarily by increased deposits. Other factors contributing to the change in assets are discussed in the following sections.

At $775,547, net loans have declined from December 31, 2008, down 1.6%. The mix of the loan portfolio shifted in 2009 toward Commercial Real Estate. The shift was made up by growth in Commercial Real Estate of $22,653 and declines in Commercial, Residential Real Estate, Real Estate Construction, Consumer and Other loans of $28,457. The decline in the consumer loan portfolio has continued largely due to products such as same as cash loans and other lending alternatives in the market place that are being used by consumers rather than the traditional consumer lending that the Corporation offers. These changes were also the product of management’s approach over the last year and a half. Our focus continues to be more about asset quality and less about loan growth. We also refocused on selling fixed rate mortgages on the secondary market, rather than booking them into the portfolio. While the primary goal was to try to improve asset quality, a secondary result was that these measures helped preserve liquidity.

Year-end deposit balances totaled $856,052 in 2009 compared to $809,921 in 2008, an increase of $46,131, or 5.7%. Non-interest bearing demand deposits increased by $18,518, or 15.2% and savings accounts increased by $116,450 from 2008 to 2009. Interest bearing demand deposits decreased by $85,498 and time deposit accounts decreased by $3,339, from 2008 to 2009. A primary factor of the increase in deposits, especially savings, can be attributed to the decline in the economy, as customers seem to be staying out of the market and spending less. Average deposit balances for 2009 were $763,488 compared to $808,646 for 2008, a decrease of 5.6%. Non-interest bearing deposits averaged $126,934 for 2009, compared to $124,541 for 2008, increasing $2,393, or 1.9%. Savings, NOW, and MMIA accounts averaged $372,354 for 2009 compared to $356,603 for 2008. Average certificates of deposit increased $36,698 to total an average balance of $364,200 for 2009.

Borrowings from the Federal Home Loan Bank (FHLB) of Cincinnati were $85,364 at December 31, 2009. The detail of these borrowings can be found in Note 9 to the Consolidated Financial Statements. The increase of $15,382 from year-end 2008 was primarily the result of two additional $10,000 long-term FHLB advance in the third quarter of 2009. The advances were part of a strategy to pre-fund two FHLB advances coming due in 2010. The term on the first advance is thirty-seven months and has a fixed rate of 1.91%, and the term on the second advance is sixty months and has a fixed rate of 2.96%.

The Corporation paid off notes outstanding with other financial institutions during the first quarter of 2009 totaling $20,500.

Citizens offers repurchase agreements in the form of sweep accounts to commercial checking account customers. These repurchase agreements totaled $21,920 at December 31, 2009 compared to $31,143 at December 31, 2008. Obligations of U.S. government agencies maintained under Citizens’ control are pledged as collateral for the repurchase agreements.

Securities available for sale increased a total of $56,356, or 37.3% from $150,936 on December 31, 2008 to $207,292 on December 31, 2009. U.S. Treasury securities and obligations of U.S. government agencies

increased $13,039, from $76,511 at December 31, 2008 to $89,550 at December 31, 2009. Obligations of states and political subdivisions available for sale increased $17,747 from 2008 to 2009. Mortgage-backed securities increased by $25,570 to total $64,646 at December 31, 2009. The Corporation continued utilizing letters of credit from the FHLB to replace maturing securities that were pledged for public entities. As of December 31, 2009, the Corporation was in compliance with all pledging requirements.

Mortgage-backed securities totaled $64,646 at December 31, 2009 and none are considered unusual or “high risk” securities as defined by regulating authorities. Of this total, $58,076 are pass-through securities issued by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) and $6,570 are collateralized by mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or Government National Mortgage Association (GNMA). The average interest rate of the mortgage-backed portfolio at December 31, 2009 was 5.68%. The average maturity at December 31, 2009 was approximately 5.37 years. The Corporation has not invested in any derivative securities.

Securities available for sale had an estimated fair value at December 31, 2009 of $207,292. This fair value includes unrealized gains of approximately $3,282 and unrealized losses of approximately $1,465. Net unrealized gains totaled $1,817 on December 31, 2009 compared to net unrealized gains of $2,376 on December 31, 2008. The change in unrealized gains is primarily due to changes in market interest rates. Note 3 to the Consolidated Financial Statements provides more information on unrealized gains and losses.

Premises and equipment, net of accumulated depreciation, decreased $1,294 from December 31, 2008 to December 31, 2009. The decrease in office premises and equipment is attributed to new purchases of $535, depreciation of $1,812 and disposals of $17.

Other assets have increased $8,073 from December 31, 2008 to December 31, 2009. The increase is primarily the result of the Corporation’s FDIC premium prepayment. In addition, the Corporation’s current and deferred tax position changed from a net liability to a net asset.

Total shareholders’ equity increased $22,180, or 28.9% during 2009 to $98,797. On January 23, 2009, the Corporation issued to the U.S. Treasury $23,184 of cumulative perpetual preferred shares, with a liquidation preference of $1,000 per share (the Senior Preferred Shares), pursuant to the Capital Purchase Program (CPP) established by the U.S. Treasury as part of the Trouble Asset Relief Program (TARP) under the Emergency Economic Stabilization Act of 2008 (EESA). The remaining change in shareholders’ equity resulted from earnings of $1,655, less dividends of $2,868 and accretion of the discount on stock warrants of $15, the decrease in the market value of securities available for sale, net of tax, of $369 and the change in the Corporation’s pension liability, net of tax of $578. For further explanation of these items, see Note 1 and Note 14 to the Consolidated Financial Statements. The Corporation paid a cash dividend on February 1, 2009 at a rate of $.15 per share, on May 1, 2009 at a rate of $.07 per share, on August 1, 2009 at a rate of $.01 per share and on November 1, 2009, at a rate of $.02 per share. Total outstanding shares at December 31, 2009 were 7,707,917. The ratio of total shareholders’ equity to total assets was 8.9% at December 31, 2009 compared to 7.3% at December 31, 2008.

Results of Operations

The operating results of the Corporation are affected by general economic conditions, the monetary and fiscal policies of federal agencies and the regulatory policies of agencies that regulate financial institutions. The Corporation’s cost of funds is influenced by interest rates on competing investments and general market rates of interest. Lending activities are influenced by the demand for real estate loans and other types of loans, which in turn is affected by the interest rates at which such loans are made, general economic conditions and the availability of funds for lending activities.

The Corporation’s net income primarily depends on its net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and securities, and interest expense incurred on interest-bearing liabilities, such as deposits and borrowings. The level of net interest income is dependent on the interest rate environment and the volume and composition of interest-earning assets and interest-bearing liabilities. Net income is also affected by provisions for loan losses, service charges, gains on the sale of assets, other income, noninterest expense and income taxes.

Comparison of Results of Operations for the Year Ended December 31, 2009 and December 31, 2008

Net Income (Loss)

The Corporation’s net income for the year ended December 31, 2009 was $1,655, compared to net loss of $38,978 for the year ended December 31, 2008. The net loss in 2008 would have been net income of $4,313 without the goodwill impairment of $43,291. The change in net income was the result of the items discussed in the following sections.

Net Interest Income

Net interest income for 2009 was $40,273, a decrease of $214, or less than 1.0% from 2008. Although average earning assets increased 6.5% from 2008, market rates in 2009 led to a decline in interest income, mostly in the loan portfolio. This decrease was partially offset by a decrease in interest expense on interest-bearing liabilities of $6,862, a 31.5% decline. Average balances in time deposits increased 11.2% from 2008, due primarily to the Corporation’s participation in the CDARS program, beginning at the end of 2008. The Corporation continues to examine its rate structure to ensure that its interest rates are competitive and reflective of the current rate environment in which it competes.

Total interest income decreased $7,076, or 11.4% for 2009. The decrease was a result of the yield on earning assets more than offsetting the effect of the increase in volume of interest earning assets. Average loans decreased $10,066 from 2008 to 2009. Interest earned on the Corporation’s loan portfolio declined as both the average balances and yield declined. The average balance of the securities portfolio for 2009 compared to 2008 increased $34,888, mainly due to reallocation from federal funds sold to investments. Interest earned on the security portfolio, including bank stocks, increased mainly due to the increase in average balances. Average balances of Federal Funds sold and interest-bearing deposits in other banks both increased in 2009.

Total interest expense decreased $6,862, or 31.5% for 2009 compared to 2008. The decrease in interest expense can be attributed to declines in market rates and the corresponding repricing of deposits and other sources of funding. Total average balance of interest-bearing liabilities increased $17,842 while the average rate decreased 85 basis points in 2009. Average interest-bearing deposits increased $52,449 from 2008 to 2009. The increase in average interest-bearing deposits, offset by a decline in rate of approximately 86 basis points, caused interest expense on deposits to decrease $6,862. Interest expense on FHLB borrowings decreased $283 due primarily to a decrease in average volume of $10,384. The average balance in subordinated debenture did not change from 2008 to 2009, but the rate on these securities decreased 149 basis points, resulting in a decrease in interest expense of $453. Other borrowings decreased $24,234 in balance from 2008 to 2009. The decrease in other borrowings is mainly the result of the Corporation paying off a borrowing agreement with Key Bank, NA. At December 31, 2008, $20,500 was outstanding on the borrowing and was paid off in the first quarter of 2009.

Refer to “Distribution of Assets, Liabilities and Shareholders’ Equity, Interest Rates and Interest Differential” and “Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate” on pages 15 through 17 for further analysis of the impact of changes in interest-bearing assets and liabilities on the Corporation’s net interest income.

Provision and Allowance for Loan Losses

The following table contains information relating to the provision for loan losses, activity in and analysis of the allowance for loan losses as of and for each of the three years in the period ended December 31, 2009.

		As of and for year ended
		December 31,
		2009				2008				2007
Net loan charge-offs		$	6,914			$	6,719			$	2,983
Provision for loan losses charged to expense			13,323				8,207				1,020
Net loan charge-offs as a percent of average outstanding loans			0.88	%			0.84	%			0.52	%
Allowance for loan losses		$	15,271			$	8,862			$	7,374
Allowance for loan losses as a percent of year-end outstanding loans			1.93	%			1.11	%			0.93	%
Allowance for loan losses as a percent of impaired loans			67.17	%			60.55	%			56.88	%
Impaired loans		$	22,736			$	14,637			$	12,965
Impaired loans as a percent of gross year-end loans (1)			2.87	%			1.84	%			1.64	%
Nonaccrual and 90 days or more past due loans		$	25,571			$	20,996			$	11,731
Nonaccrual and 90 days or more past due loans as a percent of gross year-end loans (1)			3.24	%			2.64	%			1.48	%

The Corporation’s policy is to maintain the allowance for loan losses at a level sufficient to provide for probable losses incurred in the current portfolio. Management’s periodic evaluation of the adequacy of the allowance is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, the estimated value of any underlying collateral and current economic conditions.

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 $13,323, $8,207, and $1,020, in 2009, 2008 and 2007, respectively. The Corporation’s provision for loan losses increased again during 2009 in conjunction with an increase in the Corporation’s level of non-performing loans resulting from a continued deterioration in local economic conditions. Other factors could impact the provisions for loan losses, such as the level of higher risk loans in the portfolio, changes in practices related to loans, changes in collateral values and other factors. The Corporation does not originate high loan-to-value mortgages, interest only loans, sub-prime or teaser-rate loans. While the Corporation does originate adjustable-rate mortgages and junior lien mortgages, at $67,424, or 8.5%, they comprise a relatively small portion of the total loan portfolio. The adjustable-rate loans have caps on the annual and total changes in the rates which would limit large rate increases that might result in a borrower’s inability to service the loan. The only change in the Corporation’s approach is to the way it views net charge-off history. At the beginning of 2008, the Corporation reduced the period of time for which it reviewed loan charge-offs from three

years to two years. Management believes the higher volume of loan charge-offs in the last two years are more indicative of future losses in the loan portfolio. We do this calculation for each specific type of loan, such as Commercial, Commercial Real Estate, Residential Real Estate, Construction, Consumer and other types of loans. We also do not make mortgage loans of greater than 80% of the appraised value. While deterioration of collateral is a concern, mortgage loans with current loan-to-values greater than 100% are minimal. Impaired loans at December 31, 2009 were $22,736 or 2.9% of gross year-end loans, compared to $14,637 or 1.8% of gross loans outstanding at December 31, 2008. In addition, nonaccrual and 90 days or more past due loans as a percent of gross loans were 3.2% at December 31, 2009 compared to 2.6% at December 31, 2008.

Efforts are continually made to examine 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 pools of similar loans, historical reserve allocations and current economic factors. 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.

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.

Noninterest Income

Noninterest income totaled $10,133 in 2009 compared to $9,969 in 2008, an increase of 1.7%. The significant items contributing to this change are as follows.

Service charges paid to Citizens increased $50 compared to 2008. The increased revenues were primarily due to higher volume of usage of deposit accounts services. Revenue from computer operations decreased in 2009, down $340 from 2008 due to a decrease in the number of financial institutions for which processing is provided, as well as a result of restructuring communication lines. Declines in Trust fees of $316 are related to current economic conditions. ATM fee income increased in 2009, up $266 from 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. Revenue from bank owned life insurance decreased $6 in 2009 compared to the same period in 2008, which is the net change related to interest and mortality cost. The disposal of premises and equipment in 2009 resulted in a loss of $14 compared to losses of $137 for 2008.

Noninterest Expense

Noninterest expense totaled $35,665 in 2009, a decrease of $44,193, or 55.3% over 2008. The large decrease is primarily the result of $43,291 nonrecurring Goodwill impairment booked in 2008. The following discussion highlights other significant items that resulted in increases or decreases in the components of noninterest expense.

Salaries and wages totaled $13,020 in 2009 compared to $14,388 in 2008, a decrease of $1,368. The decrease is attributable to a general salary freeze put in place for 2009, as well as a suspension of commission payments. Additionally, there were 17 fewer full-time equivalent employees compared to 2008. The Corporation’s self-insured health plan costs decreased $147 in 2009, as the Corporation

continues to monitor and adapt the plan to better manage the continued increases in medical costs. The Corporation’s pension plan expenses increased $1,009 in 2009 compared to 2008, due mainly to the large loss in fair value of the plan assets in 2008. This decrease was due to a plan amendment that prevents new employees from entering the defined benefit plan of the Corporation after January 1, 2007.

Net occupancy expense was fairly flat from 2008 to 2009, down just $10, while Equipment expense decreased $401, mainly as a result of reduced depreciation expense.

State franchise taxes decreased $46 in 2009 compared to 2008. This decrease is attributable to the goodwill impairment charge booked in 2008.

Professional services expenses decreased for 2009 compared to 2008 by $32. Other expense decreased by $220 in 2009 compared to 2008. Amortization of intangible assets decreased $179 from 2008. One intangible asset was completely amortized in 2008, while the others decreased in 2009 due to the accelerated nature of the amortization schedules.

FDIC assessments increased in 2009 to $1,971, up from $191 in 2008. The increase occurred for several reasons. First, the Corporation was required, along with all other institutions, to pay a Special Emergency Assessment. This amounted to $502 of additional expense in 2009 that was not required in 2008. Second, our 2008 assessment was reduced by approximately $415 due to one-time credits granted by the FDIC and applied against our 2008 assessment. Finally, the FDIC increased the assessment rate it charges to all institutions. For institutions in our risk category, the average assessment rate nearly doubled from 2008 levels. These changes, coupled with an increase in our assessment base, led to the large increase in FDIC assessment expense.

Sales of other real estate owned resulted in recognized losses of $500 on the sale of 35 properties in 2009 compared to losses of $313 on the sale of 24 properties in 2008.

Income Tax Expense

Income before federal income taxes amounted to $1,655 in 2009 and ($37,609) in 2008. The Corporation’s effective income tax rate for 2009 was (16.7%) as a result of the non-taxable BOLI income and nontaxable securities income being a larger percentage of income before taxes. The effective income tax rate for 2008 was (3.5%) as a result of non-tax deductible goodwill impairment.

Comparison of Results of Operations for the Year Ended December 31, 2008 and December 31, 2007

Net Income (Loss)

The Corporation’s net loss for the year ended December 31, 2008 was $38,978, compared to net income of $6,885 for the year ended December 31, 2007. The net loss in 2008 would have been net income of $4,313 without the goodwill impairment of $43,291. The change in net income was the result of the items discussed in the following sections.

Net Interest Income

Net interest income for 2008 was $40,487, an increase of $10,911, or 36.9% from 2007. The change in net interest income for 2008 was the result of an increase in interest income on earning assets of $12,320 from 2007. Average earning assets increased 36.5% from 2007 from a combination of organic growth and an acquisition. Average loans increased 36.2% over 2007, mainly due to the acquisition of Futura Banc Corporation. This increase was partially offset by an increase in interest expense on interest-bearing liabilities of $1,409. Average balances in time deposits increased 40.3% from 2007, mainly due to the acquisition of Futura Banc Corporation and the assumption of deposits from Miami Valley Bank. The

Corporation continues to examine its rate structure to ensure that its interest rates are competitive and reflective of the current rate environment in which it competes.

Total interest income increased $12,320, or 24.7% for 2008. The increase in income was a result of the increase in volume on the interest earning assets. Average loans increased $212,524 from 2007 to 2008. Interest earned on the Corporation’s loan portfolio grew as the increase in average balances offset the decline in yield of 73 basis points. The average balance of the securities portfolio for 2008 compared to 2007 increased $40,118, mainly due to the acquisition of Futura Banc Corporation. Interest earned on the security portfolio, including bank stocks, increased mainly due to the increase in average balances. Average balances of Federal Funds sold and interest-bearing deposits in other banks increased $2,015.

Total interest expense increased $1,409, or 6.9% for 2008 compared to 2007. The increase in interest expense can be attributed to increased volume on average interest-bearing liabilities offset by a decline in the rate paid. Total average balance of interest-bearing liabilities increased $243,168 while the average rate decreased 81 basis points in 2008. Average interest-bearing deposits increased $199,143 from 2007 to 2008. The increase in average interest-bearing deposits offset by a decline in rate of approximately 65 basis points caused interest expense on deposits to increase $1,318. Interest expense on FHLB borrowings decreased $57 due primarily to the decrease in rate paid on the borrowings of 99 basis points. The average balance in subordinated debentures increased $4,397 from 2007 to 2008, but the rate on these securities decreased 114 basis points, resulting in a decrease in interest expense of $43. The increase in subordinated debentures is the result of the Corporation acquiring two additional trust preferred securities as part of the Futura acquisition. Other borrowings increased in balance from $29,102 in 2007 to $56,427 in 2008. The increase in other borrowings is mainly the result of the Corporation securing a borrowing agreement with Key Bank, NA. At December 31, 2008, $20,500 was outstanding on the borrowing. The additional borrowings resulted in an increase in interest expense of $191.

Refer to “Distribution of Assets, Liabilities and Shareholders’ Equity, Interest Rates and Interest Differential” and “Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate” on pages 15 through 17 for further analysis of the impact of changes in interest-bearing assets and liabilities on the Corporation’s net interest income.

Provision and Allowance for Loan Losses

The following table contains information relating to the provision for loan losses, activity in and analysis of the allowance for loan losses as of and for each of the three years in the period ended December 31, 2008.

		As of and for year ended
		December 31,
		2008				2007				2006
Net loan charge-offs		$	6,719			$	2,983			$	2,280
Provision for loan losses charged to expense			8,207				1,020				1,128
Net loan charge-offs as a percent of average outstanding loans			0.84	%			0.52	%			0.42	%
Allowance for loan losses		$	8,862			$	7,374			$	8,060
Allowance for loan losses as a percent of year-end outstanding loans			1.11	%			0.93	%			1.45	%
Allowance for loan losses as a percent of impaired loans			60.55	%			56.88	%			48.13	%
Impaired loans		$	14,637			$	12,965			$	16,746
Impaired loans as a percent of gross year-end loans (1)			1.84	%			1.64	%			3.00	%
Nonaccrual and 90 days or more past due loans		$	20,996			$	11,731			$	10,293
Nonaccrual and 90 days or more past due loans as a percent of gross year-end loans (1)			2.64	%			1.48	%			1.85	%

The Corporation’s policy is to maintain the allowance for loan losses at a level sufficient to provide for probable losses incurred in the current portfolio. Management’s periodic evaluation of the adequacy of the allowance is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, the estimated value of any underlying collateral and current economic conditions.

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 $8,207, $1,020, and $1,128, in 2008, 2007 and 2006, respectively. The Corporation’s provision for loan losses increased during 2008 in conjunction with an increase in the Corporation’s level of non-performing loans resulting from a rapid deterioration in local economic conditions. Impaired loans at December 31, 2008 were $14,637 or 1.8% of gross year-end loans, compared to $12,925 or 1.6% of gross loans outstanding at December 31, 2007. In addition, nonaccrual and 90 days or more past due loans as a percent of gross loans were 2.6% at December 31, 2008 compared to 1.4% at December 31, 2007.

Efforts are continually made to examine 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 pools of similar loans, historical reserve allocations and current economic factors. 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.

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.

Noninterest Income

Noninterest income totaled $9,969 in 2008 compared to $7,748 in 2007, an increase of 28.7%. In addition to the increase related to the 2007 mergers, the significant items contributing to this change are as follows.

Service charges paid to Citizens increased $1,221 compared to 2007, the increased revenues were primarily due to higher volumes in deposit accounts from acquisitions. Revenue from computer operations decreased in 2008, down $132 from 2007 due to a decrease in the number of financial institutions for which processing is provided. Revenue from bank owned life insurance decreased $41 in 2008 compared to the same period in 2007. The disposal of premises and equipment in 2008 resulted in a loss of $137 compared to losses of $64 for 2007, which led to an increase of $73 from last year.

Noninterest Expense

Noninterest expense totaled $79,858 in 2008, an increase of $53,452, or 202.4% over 2007. The following discussion highlights the significant items that resulted in increases or decreases in the components of noninterest expense.

Salaries and wages totaled $14,388 in 2008 compared to $10,908 in 2007 for an increase of $3,480. The increase in salaries was attributable to an increase of approximately 37 full-time equivalent employees compared to 2007. In addition, approximately $137 of severance cost relating to branch restructuring and loan production office closures were posted in the third quarter of 2008. Employees increased due to the acquisition of Futura Banc Corporation and the assumption of deposits of Miami Valley Bank in the fourth quarter of 2007. The Corporation subsequently purchased one of Miami Valley’s branch banking offices, and retained the employees of that branch. The Corporation’s self-insured health plan costs decreased $169 in 2008, as the Corporation continues to monitor and adapt the plan to better manage the continued increases in medical costs. The Corporation’s pension plan expenses decreased $607 in 2008 compared to 2007. This decrease was due to a plan amendment that prevents new employees from entering the defined benefit plan of the Corporation after January 1, 2007. The decrease was also due to settlement expenses in 2007 that we did not have in 2008.

Net occupancy expense increased $914 from $1,432 in 2007 to $2,346. The increase was a result of the acquisition of Futura Banc Corporation and subsequent purchase of one of Miami Valley’s branch banking offices.

Equipment expense increased $1,057 as a result of the acquisition of Futura Banc Corporation and subsequent purchase of one of Miami Valley’s branch banking offices. In addition, new equipment purchases by SCC to replace and update proof and image capabilities contributed to the increase as well.

Computer processing expense increased by $346 compared to last year primarily due to conversion costs associated with acquisitions.

State franchise taxes increased $259 in 2008 compared to 2007. This increase is attributable to the acquisitions in 2007.

Professional services expenses increased for 2008 compared to 2007 by $706. The primary cause of this increase is due to merger related audit fees, increased post merger legal fees associated with lending and collection activities and from consulting fees for employment searches.

Other expense increased in 2008 compared to 2007 by $46,542. The large increase includes $43,291 for goodwill impairment charges. Excluding the goodwill impairment charge, other expenses increased $3,251 in 2008. Amortization of intangible assets increased $735 from 2007, due to an increase in intangible assets, which is the result of the merger with Futura and acquisition of deposits from Miami Valley Bank. Other operating expense increases were primarily a result of merger, integration and restructuring charges recognized from the acquisition of Futura Banc Corporation.

The FDIC board agreed to impose an emergency special assessment of 20 basis points on all banks to restore the Deposit Insurance Fund to an acceptable level. The assessment, which was payable on September 30, 2009 is in addition to a planned increase in premiums and a change in the way regular premiums are assessed which the board also approved. The Corporation expects the impact of the emergency special assessment will approximate $500.

Sales of other real estate owned (OREO) resulted in recognized losses of $313 in 2008 compared to losses of $243 for 2007.

Income Tax Expense

Income before federal income taxes amounted to ($37,609) in 2008 and $9,898 in 2007. The Corporation’s effective income tax rate for 2008 was (3.5%) as a result of the non-tax deductible goodwill impairment. Without the goodwill impairment, the 2008 effective tax rate would have been 24.4%, compared to 30.4% in 2007.

Distribution of Assets, Liabilities and Shareholders’ Equity,
Interest Rates and Interest Differential

The following table sets forth, for the years ended December 31, 2009, 2008 and 2007, the distribution of assets, including interest amounts and average rates of major categories of interest-earning assets and interest-bearing liabilities (Dollars in thousands):

		2009												2008												2007
		Average								Yield/				Average								Yield/				Average								Yield/
Assets		balance				Interest				rate				balance				Interest				rate				balance				Interest				rate
Interest-earning assets:
Loans (1)(2)(3)		$	789,347			$	46,715				5.92	%		$	799,413			$	54,116				6.77	%		$	586,889			$	43,999				7.50	%
Taxable securities (4)			156,536				6,759				4.37	%			131,800				6,743				5.15	%			101,933				5,045				4.65	%
Non-taxable securities (4)(5)			41,290				1,686				4.16	%			31,254				1,270				4.07	%			16,609				673				4.06	%
Federal funds sold			30,248				21				0.07	%			3,139				52				1.66	%			3,561				151				4.24	%
Interest-bearing deposits in other banks			14,701				10				0.07	%			3,076				86				2.76	%			639				79				12.36	%
Total interest income assets			1,032,122				55,191				5.36	%			968,682				62,267				6.42	%			709,631				49,947				7.15	%
Noninterest-earning assets:
Cash and due from financial institutions			7,403												20,922												14,821
Premises and equipment, net			20,521												21,863												12,003
Accrued interest receivable			5,885												6,820												5,190
Intangible assets			28,900												74,489												29,213
Other assets			7,872												4,166												7,174
Bank owned life insurance			11,598												11,116												10,601
Less allowance for loan losses			(11,522	)											(8,115	)											(7,864	)
Total		$	1,102,779											$	1,099,943											$	780,769

Distribution of Assets, Liabilities and Shareholders’ Equity,
Interest Rates and Interest Differential (Continued)

The following table sets forth, for the years ended December 31, 2009, 2008 and 2007, the distribution of liabilities and shareholders’ equity, including interest amounts and average rates of major categories of interest-earning assets and interest-bearing liabilities (Dollars in thousands):

		2009												2008												2007
Liabilities and		Average								Yield/				Average								Yield/				Average								Yield/
Shareholders’ Equity		balance				Interest				rate				balance				Interest				rate				balance				Interest				rate
Interest-bearing liabilities:
Savings and interest- bearing demand accounts		$	372,354			$	2,027				0.54	%		$	356,603			$	4,060				1.14	%		$	250,938			$	4,021				1.60	%
Certificates of deposit			364,200				8,508				2.34	%			327,502				11,316				3.46	%			234,024				10,037				4.29	%
Federal Home Loan Bank advances			67,179				2,848				4.24	%			77,563				3,131				4.04	%			63,321				3,188				5.03	%
Securities sold under repurchase agreements			26,676				133				0.50	%			31,700				548				1.73	%			23,133				941				4.07	%
Federal funds purchased			11				—				0.00	%			—				—				0.00	%			—				—				0.00	%
Notes payable			2,247				108				4.81	%			21,074				947				4.49	%			4,624				318				6.88	%
Subordinated debentures			30,349				1,295				4.27	%			30,349				1,748				5.76	%			25,952				1,791				6.90	%
U.S. Treasury demand notes payable			1,331				—				0.00	%			1,714				30				1.17	%			1,345				75				5.58	%
Total interest- bearing liabilities			864,347				14,919				1.73	%			846,505				21,780				2.57	%			603,337				20,371				3.38	%
Noninterest-bearing liabilities:
Demand deposits			126,934												124,541												89,171
Other liabilities			13,044												5,429												9,826
			139,978												129,970												98,997
Shareholders’ equity			98,454												123,468												78,435
Total		$	1,102,779											$	1,099,943											$	780,769
Net interest income and interest rate spread						$	40,272				3.63	%						$	40,487				3.85	%						$	29,576				3.77	%
Net yield on interest- earning assets											3.91	%											4.18	%											4.17	%

Changes in Interest Income and Interest Expense
Resulting from Changes in Volume and Changes in Rate

The following table sets forth, for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rate.

		2009 compared to 2008												2008 compared to 2007
		Increase (decrease) due to:												Increase (decrease) due to:
		Volume(1)				Rate(1)				Net				Volume(1)				Rate(1)				Net
		(Dollars in thousands)
Interest income:
Loans		$	(674	)		$	(6,726	)		$	(7,400	)		$	14,713			$	(4,597	)		$	10,116
Taxable securities			1,201				(1,186	)			15				1,549				150				1,699
Nontaxable securities			431				(16	)			415				598				—				598
Federal funds sold			62				(93	)			(31	)			(16	)			(83	)			(99	)
Interest-bearing deposits in other banks			72				(147	)			(75	)			107				(101	)			6
Total interest income		$	1,092			$	(8,168	)		$	(7,076	)		$	16,951			$	(4,631	)		$	12,320
Interest expense:
Savings and interest-bearing demand accounts			172				(2,205	)			(2,033	)			1,403				(1,364	)			39
Certificates of deposit			1,162				(3,970	)			(2,808	)			3,485				(2,206	)			1,279
Federal Home Loan Bank advances			(435	)			142				(293	)			642				(689	)			(47	)
Securities sold under repurchase agreements			(76	)			(339	)			(415	)			270				(663	)			(393	)
Note payable			(901	)			62				(839	)			774				(145	)			629
Subordinated debentures			—				(453	)			(453	)			278				(321	)			(43	)
U.S. Treasury demand notes payable			(20	)			—				(20	)			16				(71	)			(55	)
Total interest expense		$	(98	)		$	(6,763	)		$	(6,861	)		$	6,868			$	(5,459	)		$	1,409
Net interest income		$	1,190			$	(1,405	)		$	(215	)		$	10,083			$	828			$	10,911

Liquidity and Capital Resources

Citizens maintains a conservative liquidity position. All securities are classified as available for sale. At December 31, 2009, securities with maturities of one year or less, totaled $5,739, or 2.8%, of the total security portfolio. The available for sale portfolio helps to provide the Corporation with the ability to meet its funding needs. The Consolidated Statements of Cash Flows contained in the Consolidated Financial Statements detail the Corporation’s cash flows from operating activities resulting from net earnings.

Cash from operations for 2009 was $7,305. The primary additions to cash from operating activities are from changes in amortization of intangible assets, the provision for loan losses and depreciation. The primary use of cash from operating activities are from changes in other, changes in taxes and other expenses, securities amortization, net of accretion and prepaid FDIC premiums. Cash from investing activities was $(57,526) in 2009. Security purchases and increases in loans were offset by security maturities and proceeds from the sale of OREO properties. Cash from financing activities in 2009 totaled $50,514. A major source of cash for financing activities is the net change in deposits. Cash provided by the net change in deposits was $46,131 in 2009. The large increase in deposits was primarily due to Citizens’ participation in the CDARS program, which added $42,994 in deposits during 2009. Cash of $23,184 was provided from the issuance of Senior Preferred Shares to the U.S. Treasury pursuant to the CPP. Cash of $15,500 was provided due to increases in long-term FHLB advances to pre-fund a portion of two FHLB advances coming due in 2010. Cash received from long-term FHLB advances totaled $20,000. This increase was offset by decreases in FHLB overnight funds and a maturity of a FHLB long-term advance of $2,000 and $2,500, respectively. The primary uses of cash in financing activities include changes in securities sold under repurchase agreements, changes in U.S. Treasury interest-bearing demand notes payable, the payment of dividends and the change in note payable. Cash from operating and financing activities exceeded cash from investing activities by $293. These factors led cash and cash equivalents to increase from $26,649 at December 31, 2008 to $26,942 at December 31, 2009.

Future loan demand of Citizens can be funded by increases in deposit accounts, proceeds from payments on existing loans, the maturity of securities, the issuances of trust preferred obligations, and the sale of securities classified as available for sale. Additional sources of funds may also come from borrowing in the Federal Funds market and/or borrowing from the FHLB. As of December 31, 2009, Citizens had total credit availability with the FHLB of $142,970 of which $85,364 was outstanding.

On a separate entity basis, the Corporation’s primary source of funds is dividends paid primarily by Citizens. Generally, subject to applicable minimum capital requirements, Citizens may declare a dividend without the approval of the Federal Reserve Bank of Cleveland and the State of Ohio Department of Commerce, Division of Financial Institutions, provided the total dividends in a calendar year do not exceed the total of its profits for that year combined with its retained profits for the two preceding years. In 2009, Citizens paid $4,699 in dividends to the Corporation, which accumulated cash at the Corporation to be used for general corporate purposes including funding payments on borrowings at the holding company level. At December 31, 2009, Citizens is unable to pay dividends to the Corporation without obtaining regulatory approval.

In addition to the restrictions placed on dividends by banking regulations, on January 23, 2009, the Corporation completed the issuance of $23 million of Senior Preferred Shares and related warrants under the U.S. Department of Treasury’s voluntary CPP. The Board and Management believe that while the Corporation was “Well Capitalized” under regulatory guidelines prior to the capital addition, in the currently uncertain economic environment it was prudent to further strengthen the Corporation’s capital position. As long as the Senior Preferred Shares remain outstanding, the Corporation is permitted to declare and pay dividends on its common shares only if all accrued and unpaid dividends for all past dividend periods on the Senior Preferred Shares are fully paid. Until the third anniversary of the sale of the Senior Preferred Shares, unless such shares have been transferred or redeemed in whole, any increase

in dividends on the Corporation’s common shares above the amount of the last quarterly cash dividend per share declared prior to October 14, 2008 ($0.15 per share) will require prior approval of Treasury.

The Corporation manages its liquidity and capital through quarterly Asset/Liability Committee (ALCO) meetings. The ALCO discusses issues like those in the above paragraphs as well as others that will affect future liquidity and capital position of the Corporation. The ALCO also examines interest rate risk and the effect that changes in rates will have on the Corporation. For more information about interest rate risk, please refer to the “Quantitative and Qualitative Disclosures about Market Risk” section.

Capital Adequacy

The Corporation’s policy is, and always has been, to maintain its capital levels above the well capitalized regulatory standards. Under the regulatory capital standards, total capital has been defined as Tier I (core) capital and Tier II (supplementary) capital. The Corporation’s Tier I capital includes shareholders’ equity (net of unrealized security gains and losses) and subordinated debentures (subject to certain limits) while Tier II capital also includes the allowance for loan losses. The definition of risk-adjusted assets has also been modified to include items both on and off the balance sheet. Each item is then assigned a risk weight or risk adjustment factor to determine ratios of capital to risk adjusted assets. The standards require that total capital (Tier I plus Tier II) be a minimum of 8.0% of risk-adjusted assets, with at least 4.0% being in Tier I capital. To be well capitalized, a company must have a minimum of 10.0% of risk adjusted assets, with at least 6.0% being Tier I capital. The Corporation’s ratios as of December 31, 2009 and 2008 were 14.3% and 11.3% respectively for total risk-based capital, and 13.0% and 7.9% respectively for Tier I risk-based capital. The Corporation’s participation in the U.S. Treasury’s CPP led to improvement of the Corporation’s capital ratios by adding $23,184 in additional Tier I capital.

Additionally, the Federal Reserve Board has adopted minimum leverage-capital ratios. These standards were established to supplement the previously issued risk based capital standards. The leverage ratio standards use the existing Tier I capital definition, but the ratio is applied to average total assets instead of risk-adjusted assets. The standards require that Tier I capital be a minimum of 4.0% of total average assets for high rated entities such as the Corporation and a minimum of 5.0% of total average assets to be well capitalized. The Corporation’s leverage ratio was 9.6% and 5.8% at December 31, 2009 and 2008. As with the risk-based capital ratios above, the leverage ratio also improved as a result of the Corporation’s participation in the Treasury’s CPP.

Effects of Inflation

The Corporation’s balance sheet is typical of financial institutions and reflects a net positive monetary position whereby monetary assets exceed monetary liabilities. Monetary assets and liabilities are those which can be converted to a fixed number of dollars and include cash assets, securities, loans, money market instruments, deposits and borrowed funds.

During periods of inflation, a net positive monetary position may result in an overall decline in purchasing power of an entity. No clear evidence exists of a relationship between the purchasing power of an entity’s net positive monetary position and its future earnings. Moreover, the Corporation’s ability to preserve the purchasing power of its net positive monetary position will be partly influenced by the effectiveness of its asset/liability management program. Management does not believe that the effect of inflation on its nonmonetary assets (primarily bank premises and equipment) is material as such assets are not held for resale and significant disposals are not anticipated.

Fair Value of Financial Instruments

The Corporation has disclosed the estimated fair value of its financial instruments at December 31, 2009 and 2008 in Note 16 to the Consolidated Financial Statements. The fair value of loans at December 31, 2009 was 102.7% of the carrying value compared to 101.9% at December 31, 2008. The fair value of

deposits at December 31, 2009 was 100.9% of the carrying value compared to 100.1% at December 31, 2008.

Contractual Obligations

The following table represents significant fixed and determinable contractual obligations of the Corporation as of December 31, 2009.

		One year				One to				Three to				Over five
Contractual Obligations		or less				three years				five years				years				Total
Deposits without a stated maturity		$	519,904			$	—			$	—			$	—			$	519,904
Certificates of deposit			239,333				72,508				17,889				6,418				336,148
FHLB advances, securities sold under agreements to repurchase and U.S. Treasury interest- bearing demand note			59,354				32,566				15,258				2,500				109,678
Subordinated debentures (1)			—				—				—				29,427				29,427
Operating leases			305				499				428				263				1,495

The Corporation has retail repurchase agreements with clients within its local market areas. These borrowings are collateralized with securities owned by the Corporation. See Note 10 to the Consolidated Financial Statements for further detail. The Corporation also has a cash management advance line of credit and outstanding letters of credit with the FHLB. For further discussion, refer to Note 9 to the Consolidated Financial Statements.

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. All of the Corporation’s transactions are denominated in U.S. dollars with no specific foreign exchange exposure.

Interest-rate risk is the exposure of a banking organization’s financial condition to adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value. However, excessive levels of interest-rate risk can pose a significant threat to the Corporation’s earnings and capital base. Accordingly, effective risk management that maintains interest-rate risk at prudent levels is essential to the Corporation’s safety and soundness.

Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the management process used to control interest-rate risk and the organization’s quantitative level of exposure. When assessing the interest-rate risk management process, the Corporation seeks to ensure that appropriate policies, procedures, management information systems and internal controls are in place to maintain interest-rate risk at prudent levels with consistency and continuity. Evaluating the quantitative level of interest rate risk exposure requires the Corporation to assess the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity and, where appropriate, asset quality.

The Federal Reserve Board, together with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, adopted a Joint Agency Policy Statement on interest-rate risk, effective June 26, 1996. The policy statement provides guidance to examiners and bankers on sound practices for managing interest-rate risk, which will form the basis for ongoing evaluation of the adequacy of interest-rate risk management at supervised institutions. The policy statement also outlines fundamental

elements of sound management that have been identified in prior Federal Reserve guidance and discusses the importance of these elements in the context of managing interest-rate risk. Specifically, the guidance emphasizes the need for active board of director and senior management oversight and a comprehensive risk-management process that effectively identifies, measures, and controls interest-rate risk. Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest-rate changes. For example, assume that an institution’s assets carry intermediate- or long-term fixed rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could decrease on existing assets because the institution will have either lower net interest income or, possibly, net interest expense. Similar risks exist when assets are subject to contractual interest-rate ceilings, or rate sensitive assets are funded by longer-term, fixed-rate liabilities in a decreasing-rate environment.

Several techniques may be used by an institution to minimize interest-rate risk. One approach used by the Corporation is to periodically analyze its assets and liabilities and make future financing and investment decisions based on payment streams, interest rates, contractual maturities, and estimated sensitivity to actual or potential changes in market interest rates. Such activities fall under the broad definition of asset/liability management. The Corporation’s primary asset/liability management technique is the measurement of the Corporation’s asset/liability gap, that is, the difference between the cash flow amounts of interest sensitive assets and liabilities that will be refinanced (or repriced) during a given period. For example, if the asset amount to be repriced exceeds the corresponding liability amount for a certain day, month, year, or longer period, the institution is in an asset sensitive gap position. In this situation, net interest income would increase if market interest rates rose or decrease if market interest rates fell. If, alternatively, more liabilities than assets will reprice, the institution is in a liability sensitive position. Accordingly, net interest income would decline when rates rose and increase when rates fell. Also, these examples assume that interest rate changes for assets and liabilities are of the same magnitude, whereas actual interest rate changes generally differ in magnitude for assets and liabilities.

Several ways an institution can manage interest-rate risk include selling existing assets or repaying certain liabilities; matching repricing periods for new assets and liabilities, for example, by shortening terms of new loans or securities. Financial institutions are also subject to prepayment risk in falling rate environments. For example, mortgage loans and other financial assets may be prepaid by a debtor so that the debtor may refund its obligations at new, lower rates. The Corporation has not purchased derivative financial instruments in the past and does not intend to purchase such instruments in the near future. Prepayments of assets carrying higher rates reduce the Corporation’s interest income and overall asset yields. A large portion of an institution’s liabilities may be short term or due on demand, while most of its assets may be invested in long term loans or securities. Accordingly, the Corporation seeks to have in place sources of cash to meet short-term demands. These funds can be obtained by increasing deposits, borrowing, or selling assets. Also, FHLB advances and wholesale borrowings may also be used as important sources of liquidity for the Corporation.

The following table provides information about the Corporation’s financial instruments that are sensitive to changes in interest rates as of December 31, 2009 and 2008, 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 December 31, 2009 or 2008. Expected maturity date values for interest-bearing core deposits were calculated based on estimates of the period over which the deposits would be outstanding. The Corporation’s borrowings were tabulated by contractual maturity dates and without regard to any conversion or repricing dates.

Net Portfolio Value

		December 31, 2009												December 31, 2008
Change in		Dollar				Dollar				Percent				Dollar				Dollar				Percent
Rates		Amount				Change				Change				Amount				Change				Change
+200bp		$	143,173			$	(6,648	)			-4	%		$	106,377			$	(24	)			—
+100bp			151,656				1,835				1	%			107,705				1,304				1	%
Base			149,821				—				—				106,401				—				—
-100bp			157,937				8,116				5	%			112,159				5,758				5	%

The change in net portfolio value from December 31, 2008 to December 31, 2009, is primarily a result of two factors. First, the yield curve has shifted upward, especially the longer end of the curve, and the slope has steepened at the shorter end of the curve. Additionally, both the asset and funding mixes have changed. While assets increased, the mix also shifted away from loans toward securities and cash. The funding mix shifted from CDs and borrowed money to deposits. As a result, the Corporation has seen an increase in the base level of net portfolio value. A 100 basis point upward movement in rates would lead to a faster decrease in the fair value of liabilities, compared to assets, which would lead to an increase in the net portfolio value. This effect is opposite for a 200 basis point movement in rates, dues to projected changes related to the investment portfolio. A downward change in rates would also lead to an increase in the net portfolio value as the fair value of liabilities would increase more slowly than the fair value of the asset portfolio. The general trend in movements is similar to those at December 31, 2008, although the positive effect of rates moving up is increasing. Also, the relative changes will tend to be larger, given the changes in the mix of the assets and funding that we saw 2009.

Critical Accounting Policies

Allowance for Loan Losses

The allowance for loan losses is regularly reviewed by management to determine whether or not the amount is considered adequate to absorb probable losses in the loan portfolio. If not, an additional provision is made to increase the allowance. This evaluation includes specific loss estimates on certain individually reviewed loans, the pooling of commercial credits risk graded as special mention and substandard that are not individually examined, and general loss estimates that are based upon the size, quality, and concentration characteristics of the various loan portfolios, adverse situations that may affect a borrower’s ability to repay, and current economic and industry conditions, among other items.

Those judgments and assumptions that are most critical to the application of this accounting policy are assessing the initial and on-going credit-worthiness of the borrower, the amount and timing of future cash flows of the borrower that are available for repayment of the loan, the sufficiency of underlying collateral, the enforceability of third-party guarantees, the frequency and subjectivity of loan reviews and risk gradings, emerging or changing trends that might not be fully captured in the historical loss experience, and charges against the allowance for actual losses that are greater than previously estimated. These judgments and assumptions are dependent upon or can be influenced by a variety of factors including the breadth and depth of experience of lending officers, credit administration and the corporate loan review staff that periodically review the status of the loan, changing economic and industry conditions, changes in the financial condition of the borrower and changes in the value and availability of the underlying collateral and guarantees.

Management completes a similar process as above when the Corporation is in its due diligence phase of a potential merger. The allowance for loan losses at the target bank is evaluated for adequacy based on the

same factors as used in the Corporations’ own allowance calculation. Upon completion of the merger, this process is repeated and any excess or deficiency in the allowance is recognized.

Note 1 and Note 5 in the Notes to Consolidated Financial Statements provide additional information regarding Allowance for Loan Losses.

Goodwill

U.S. generally accepted accounting principles establish an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Management performed an evaluation of the Corporation’s goodwill during the fourth quarter of 2009. In performing its evaluation, management obtained several commonly used financial ratios from pending and completed purchase transactions for banks based in the Midwest. Management used these ratios to determine an implied market value for the Corporation. The implied market value was then used to determine whether or not the Corporation’s goodwill was impaired. Based on this analysis, management determined that goodwill was not impaired and therefore made no adjustment to the balance during 2009.

Management’s Report on Internal Control over Financial Reporting

We, as management of First Citizens Banc Corp, are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Corporation’s system of internal control over financial reporting as of December 31, 2009, in relation to criteria for effective internal control over financial reporting as described in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludes that, as of December 31, 2009, its system of internal control over financial reporting is effective and meets the criteria of the “Internal Control – Integrated Framework”. S.R. Snodgrass, A.C., independent registered public accounting firm, has issued an audit report on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2009.

Management is responsible for compliance with the federal and state laws and regulations concerning dividend restrictions and federal laws and regulations concerning loans to insiders designated by the FDIC as safety and soundness laws and regulations.

Management has assessed compliance by the Company with the designated laws and regulations relating to safety and soundness. Based on the assessment, management believes that the Company complied, in all significant respects, with the designated laws and regulations related to safety and soundness for the year ended December 31, 2009.

James O. Miller		Todd A. Michel
President, Chief Executive Officer		Senior Vice President, Controller

Sandusky, Ohio
March 10, 2010

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

To the Board of Directors and Shareholders
First Citizens Banc Corp
Sandusky, Ohio

We have audited First Citizens Banc Corp and subsidiaries’ internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). First Citizens Banc Corp’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report on Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, First citizens Banc Corp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of First Citizens Banc Corp and subsidiaries as of December 31, 2009, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the year then ended, and our report dated March 10, 2010, expressed in unqualified opinion.

Wexford, Pennsylvania
March 10, 2010

Report of Independent Registered Public Accounting Firm on Financial Statements

To the Board of Directors and Shareholders
First Citizens Banc Corp
Sandusky, Ohio

We have audited the accompanying consolidated balance sheets of First Citizens Banc Corp (the “Company”) and subsidiaries as of December 31, 2009, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of First Citizens Banc Corp and subsidiaries for the years ended December 31, 2008 and 2007, were audited by other auditors whose report, dated March 4, 2009, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the First Citizens Banc Corp and subsidiaries as of December 31, 2009, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), First Citizens Banc Corp and subsidiaries’ internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2010, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Wexford, Pennsylvania
March 10, 2010

Report of Independent Registered Public Accounting Firm on Financial Statements

Board of Directors and Shareholders
First Citizens Banc Corp
Sandusky, Ohio

We have audited the accompanying consolidated balance sheets of First Citizens Banc Corp, as of December 31, 2008, and the related statements of operations, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Citizens Banc Corp. as of December 31, 2008, and the results of this operations and its cash flows for each of the two years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

Crowe Horwath LLP

Cleveland, Ohio
March 4, 2009

FIRST CITIZENS BANC CORP
CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2008
(In thousands, except share data)

		2009				2008
ASSETS
Cash and due from financial institutions		$	26,942			$	26,649
Securities available for sale			207,292				150,936
Loans, net of allowance of $15,271 and $8,862			775,547				787,789
Other securities			15,382				16,223
Premises and equipment, net			19,702				20,996
Accrued interest receivable			5,425				5,764
Goodwill			21,720				21,720
Other intangible assets			6,492				7,780
Bank owned life insurance			11,848				11,365
Other assets			12,462				4,389
Total assets		$	1,102,812			$	1,053,611
LIABILITIES
Deposits
Non interest-bearing		$	140,659			$	122,141
Interest-bearing			715,393				687,780
Total deposits			856,052				809,921
Federal Home Loan Bank advances			85,364				69,982
Securities sold under agreements to repurchase			21,920				31,143
U. S. Treasury interest-bearing demand note payable			2,394				3,986
Notes payable			—				20,500
Subordinated debentures			29,427				29,427
Accrued expenses and other liabilities			8,858				12,035
Total liabilities			1,004,015				976,994
SHAREHOLDERS’ EQUITY
Preferred stock, 200,000 shares authorized, 23,184 shares issued			23,117				—
Common stock, no par value, 20,000,000 shares authorized, 8,455,881shares issued			114,447				114,365
Accumulated deficit			(17,774	)			(16,546	)
Treasury stock, 747,964 shares at cost			(17,235	)			(17,235	)
Accumulated other comprehensive loss			(3,758	)			(3,967	)
Total shareholders’ equity			98,797				76,617
Total liabilities and shareholders’ equity		$	1,102,812			$	1,053,611

See accompanying notes to consolidated financial statements.

FIRST CITIZENS BANC CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2009, 2008 and 2007
(In thousands, except per share data)

		2009				2008				2007
Interest and dividend income
Loans, including fees		$	46,715			$	54,116			$	43,999
Taxable securities			6,759				6,743				5,045
Tax-exempt securities			1,686				1,270				673
Federal funds sold and other			31				138				230
Total interest income			55,191				62,267				49,947
Interest expense
Deposits			10,535				15,376				14,058
Federal Home Loan Bank advances			2,848				3,131				3,188
Subordinated debentures			1,295				1,748				1,791
Other			240				1,525				1,334
Total interest expense			14,918				21,780				20,371
Net interest income			40,273				40,487				29,576
Provision for loan losses			13,323				8,207				1,020
Net interest income after provision for loan losses			26,950				32,280				28,556
Noninterest income
Computer center item processing fees			374				714				845
Service charges			4,829				4,779				3,558
Net gains (loss) on sale of securities			75				193				(1	)
Net gain on sale of loans			10				8				11
ATM fees			1,634				1,368				851
Trust fees			1,588				1,904				1,185
Bank owned life insurance			483				489				530
Other			1,140				514				769
Total noninterest income			10,133				9,969				7,748
Noninterest expense
Salaries and wages			13,020				14,388				10,908
Benefits			2,611				2,785				2,707
Net occupancy expense			2,336				2,346				1,432
Equipment expense			1,884				2,285				1,228
Contracted data processing			1,091				1,208				862
FDIC Assessment			1,971				191				68
State franchise tax			1,086				1,132				873
Professional services			1,818				1,850				1,144
Amortization of intangible assets			1,288				1,467				732
ATM expense			737				718				530
Telephone			612				932				424
Courier			558				680				667
Goodwill impairment			—				43,291				—
Loss on sale of other real estate owned			500				313				243
Other operating expenses			6,153				6,272				4,588
Total noninterest expense			35,665				79,858				26,406
Income (loss) before income taxes (benefit)			1,418				(37,609	)			9,898
Income tax expense (benefit)			(237	)			1,369				3,013
Net income (loss)		$	1,655			$	(38,978	)		$	6,885
Preferred stock dividends			940				—				—
Net income (loss) available to common shareholders		$	715			$	(38,978	)		$	6,885
Earnings (loss) per common share, basic and diluted		$	0.09			$	(5.06	)		$	1.25
Weighted average basic common shares			7,707,917				7,707,917				5,505,023