CONFORMED COPY
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995.
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______________to_______________
Commission file number 0-13507
RURBAN FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Ohio 34-1395608
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
401 Clinton Street, Defiance, Ohio 43512
(Address of principal executive offices)
(Zip Code)
(419) 783-8950
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
The number of common shares of Rurban Financial Corp.
outstanding was 2,184,378 on August 1, 1995.
1
PART 1 - FINANCIAL INFORMATION
Item 1. Financial statements
The interim consolidated financial statements of Rurban Financial
Corp. are unaudited; however, the information contained herein reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of financial condition and results of operations for the interim
periods presented. All adjustments reflected in these financial statements
are of a normal recurring nature in accordance with Rule 10-01(b) (8) of
Regulation S-X. Results of operations for the six months ended June 30, 1995
are not necessarily indicative of the results for the complete year.
2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
June 30 December 31
1995 1994
(Unaudited) (Note)
ASSETS
Cash and due from banks $ 17,904,353 $ 20,606,577
Federal funds sold 13,073,000 4,571,594
TOTAL CASH AND CASH EQUIVALENTS 30,977,353 25,178,171
Interest bearing deposits in other
financial institutions 180,000 346,324
Securities available-for-sale 62,343,655 59,811,855
Securities held-to-maturity (estimated market
value of $10,710,000 and $10,346,000
respectively) 10,759,414 10,370,912
Loans, net of allowance for losses of
$4,223,836 and $4,770,000 respectively 275,990,854 275,646,798
Loans held for sale 4,121,780 4,689,611
Premises and equipment, net 8,922,810 9,264,085
Accrued interest and other assets 8,713,299 8,239,728
TOTAL ASSETS $402,009,165 $393,547,484
3
June 30 December 31
1995 1994
(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 41,532,966 $ 50,381,190
Interest bearing 318,839,179 304,264,446
TOTAL DEPOSITS 360,372,145 354,645,636
Accrued expenses and other liabilities 3,442,499 3,227,261
TOTAL LIABILITIES 363,814,644 357,872,897
SHAREHOLDERS' EQUITY
Common Shares, stated value $2.50
a share:
Authorized--5,000,000 shares
Issued--2,184,378 shares 5,460,945 5,460,945
Capital Surplus 14,388,172 14,388,172
Retained earnings 18,326,075 16,995,711
Net unrealized gain/(loss) on available-
for-sale securities (net of tax of
$9,957 and $602,851 respectively) 19,329 (1,170,241)
TOTAL SHAREHOLDERS' EQUITY 38,194,521 35,674,587
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 402,009,165 $ 393,547,484
See notes to condensed consolidated unaudited financial statements
Note: The balance sheet at December 31, 1994, has been derived from the
audited financial statements at that date.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
June 30
1995 1994
Interest income:
Interest and fees on loans $ 6,578,911 $ 4,721,474
Interest and dividends on securities:
Taxable 814,576 580,989
Tax-exempt 105,898 87,617
Other 205,719 39,739
TOTAL INTEREST INCOME 7,705,104 5,429,819
Interest expense:
Deposits 3,539,606 2,173,485
Short-term borrowings 2,671 22,930
TOTAL INTEREST EXPENSE 3,542,277 2,196,415
NET INTEREST INCOME 4,162,827 3,233,404
Provision for losses 265,000 232,500
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 3,897,827 3,000,904
Noninterest income:
Trust department 479,966 460,531
Service charges on
deposit accounts 299,147 237,650
Data processing fees 474,397 487,077
Gain on sale of securities available-for-sale 6,156 - - -
Loss on calls of securities held-to-maturity - - - - - -
Other 197,024 110,289
TOTAL NONINTEREST INCOME 1,456,690 1,295,547
Noninterest expense:
Salaries and employee
benefits 1,655,920 1,409,730
Net occupancy expense 209,089 191,205
Equipment expense 484,770 267,134
Other 1,429,694 1,210,878
TOTAL NONINTEREST EXPENSE 3,779,473 3,078,947
INCOME BEFORE
INCOME TAXES 1,575,044 1,217,504
Applicable income taxes 521,511 389,907
NET INCOME $1,053,533 $ 827,597
Net income per Common
Share (Note B) $ .48 $ .41
Average shares outstanding (Note B) 2,184,378 2,029,378
See notes to condensed consolidated unaudited financial statements
5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Six Months Ended
June 30
1995 1994
Interest income: $ 12,887,096 $ 9,186,513
Interest and fees on loans
Interest and dividends on securities:
Taxable 1,624,831 1,175,272
Tax-exempt 211,973 184,090
Other 296,556 109,721
TOTAL INTEREST INCOME 15,020,456 10,655,596
Interest expense:
Deposits 6,785,797 4,233,316
Short-term borrowings 37,360 24,457
TOTAL INTEREST EXPENSE 6,823,157 4,257,773
NET INTEREST INCOME 8,197,299 6,397,823
Provision for losses 505,000 465,000
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 7,692,299 5,932,823
Noninterest income:
Trust department 937,359 826,531
Service charges on
deposit accounts 571,590 484,169
Data processing fees 956,055 984,940
Gain on sale of securities available-for-sale 3,113 - - -
Loss on calls of securities held-to-maturity - - - (981)
Other 341,111 206,893
TOTAL NONINTEREST INCOME 2,809,228 2,501,552
Noninterest expense:
Salaries and employee
benefits 3,341,177 2,809,809
Net occupancy expense 424,763 383,654
Equipment expense 970,829 559,875
Other 2,802,515 2,210,938
TOTAL NONINTEREST EXPENSE 7,539,284 5,964,276
INCOME BEFORE
INCOME TAXES 2,962,243 2,470,099
Applicable income taxes 976,566 797,598
NET INCOME $ 1,985,677 $ 1,672,501
Net income per Common
Share (Note B) $ .91 $ .82
Average shares outstanding (Note B) 2,184,378 2,029,378
See notes to condensed consolidated unaudited financial statements
6
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Balance beginning of
period $36,984,144 $31,679,068 $35,674,587 $31,292,709
Net Income 1,053,533 827,597 1,985,677 1,672,501
Cash dividends declared
($.15 and $.30 per
share in 1995 and 1994) (327,657) (304,406) (655,313) (608,814)
Unrealized holding gains
on available-for-sale
securities upon adoption
of SFAS No. 115 on
January 1, 1994 - - - - - - - - - 198,496
Change in net unrealized
holding gains (losses) on
available-for-sale
securities 484,501 (210,323) 1,189,570 (562,956)
Balance end of period $38,194,521 $31,991,936 $38,194,521 $31,991,936
See notes to condensed consolidated unaudited financial statements
7
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Six Months Ended
June 30
1995 1994
Cash Flows From Operating Activities
Cash received from customers' fees and
commissions $ 2,806,115 $ 2,502,533
Cash paid to suppliers and employees (8,041,244) (5,946,332)
Interest received 14,681,283 10,685,154
Interest paid (6,561,120) (4,247,187)
Income taxes paid (696,000) (791,650)
Net Cash from operating activities 2,189,034 2,202,518
Cash Flows From Investing Activities
Net decrease in interest earning deposits
in other financial institutions 166,324 - - -
Proceeds from principal repayments,
maturities and calls of:
Securities available-for-sale 15,224,472 12,950,132
Securities held-to-maturity 921,359 552,595
Purchase of securities available-for-sale (15,950,781) (13,236,656)
Purchase of securities held-to-maturity (1,309,861) (1,124,404)
Net (increase)/decrease in loans (4,066,258) (19,325,274)
Proceeds from sales of loans 3,601,800 7,820,067
Recoveries on loan charge-offs 190,836 124,121
Premises and equipment expenditures (238,939) (186,017)
Net cash from investing activities (1,461,048) (12,425,436)
Cash Flows From Financing Activities
Net Increase/(decrease) in deposits 5,726,509 (1,799,772)
Net increase/(decrease) in short-term
borrowings - - - 8,200,000
Dividends paid (655,313) (608,814)
Net cash from financing activities 5,071,196 5,791,414
Net Change In Cash And Cash Equivalents 5,799,182 (4,431,504)
Cash And Cash Equivalents At Beginning Of Year 25,178,171 18,336,732
Cash And Cash Equivalents At End Of Period $30,977,353 $13,905,228
8
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED (UNAUDITED)
Six Months Ended
June 30
1995 1994
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 1,985,677 $ 1,672,501
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 580,214 406,211
Amortization of intangible assets 165,000 106,000
Provision for loan losses 505,000 465,000
Loss on held-to-maturity security called - - - 981
(Gain) on available-for-sale-securities sold (3,113) - - -
Increase/(decrease) in deferred loan fees (7,603) 15,641
(Increase)/decrease in interest receivable (331,570) 13,917
(Increase)/decrease in other assets (919,809) (279,980)
Increase/(decrease) in interest payable 262,037 10,586
Increase/(decrease) in income taxes payable 280,566 5,948
Increase/(decrease) in other liabilities (327,365) (214,287)
Net cash from operating activities $ 2,189,034 $ 2,202,518
See note to condensed consolidated unaudited financial statements.
9
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10Q.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
For further information, refer to the consolidated financial statements and
footnotes included in the Corporation's annual report for the year ended
December 31, 1994.
NOTE B--EARNINGS AND DIVIDENDS PER COMMON SHARE
Earnings per common share have been computed based on the weighted average
number of shares outstanding during the periods presented. On January 7,
1994, the Board of Directors declared a two-for-one stock split payable on
January 28, 1994 increasing outstanding shares by 1,104,689 shares. Earnings
per share and dividends declared per common share have been restated for all
periods presented to give effect to the stock split. The number of shares
used in the computation of earnings per common share was 2,029,378 for 1994
and 2,184,378 for 1995.
NOTE C--ELECTION OF DIRECTORS
At the annual Meeting of Shareholders on April 24, 1995, an election of Class
1 Directors was held with the following results:
Votes Cast Votes Cast
Nominee For Against Abstentions
Richard C. Burrows 1,576,996 29,588 43,749
David E. Manz 1,570,825 35,759 43,749
Steven D. Van Demark 1,596,037 10,547 43,749
The following directors did not stand for election and their term of office
continued after the meeting:
John R. Compo John H. Moore
Robert A. Fawcett, Jr. Merlin W. Mygrant
Richard Z. Graham J. Michael Walz
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Rurban Financial Corp. ("Rurban") was incorporated on February 23, 1983,
under the laws of the State of Ohio. Rurban is a bank holding company
registered with the Federal Reserve Board under the Bank Holding Company Act
of 1956, as amended. Rurban's subsidiaries, The State Bank and Trust Company
("State Bank"), The Peoples Banking Company ("Peoples Bank"), The First
National Bank of Ottawa ("First National Bank") and the Citizens Savings Bank
("Citizens Bank") are engaged only in the industry segment of commercial
banking. Rurban's subsidiary, Rurbanc Data Services ("Rurbanc"), provides
computerized data processing services for the Corporation's subsidiary banks
as well as other banks and businesses. Rurban's subsidiary, Rurban Life
Insurance Company ("Rurban Life") has a certificate of authority from the
State of Arizona to transact insurance as a domestic life and disability
reinsurer.
Liquidity
Liquid assets consist of cash, amount due from banks, securities, federal
funds sold and loans held for sale. These assets increased 7,985,329 from
December 31, 1994 to June 30, 1995. Liquid assets were 26% of total assets
at December 31, 1994 and 27% of total assets at June 30, 1995. This
difference represents normal fluctuation and was not due to any change in
policy of management regarding liquidity.
Capital Resources
Capital Resources increased $2,519,934 between December 31, 1994 and June 30,
1995. This increase was attributed to earnings of $1,985,677 less dividends
declared, during the six months ended June 30, 1995, of $655,313 plus change
in net unrealized gain/(loss) on available-for-sale securities of $1,189,570.
The following table provides the minimum regulatory capital requirements and
the Corporation's capital ratios at June 30, 1995.
Minimum Regulatory Corporation's
Capital Requirements Capital Ratio
Ratio of tier 1 capital to
weighted-risk assets 4.00% 13.41%
Ratio of total capital to
weighted-risk assets 8.00% 14.66%
Ratio of shareholders' equity
to weighted risk assets 4.00% 14.07%
Leverage Ratio 4.00% 9.10%
Ratio of total shareholders'
equity to total assets None 9.50%
The Corporation's subsidiaries meet the applicable minimum regulatory capital
requirements at June 30, 1995. The Corporation remains comfortably above the
minimum regulatory capital requirements. The Banking Regulators may alter
minimum capital requirements as a result of revising their internal policies
and their ratings of the Corporation's Subsidiary Banks.
11
As of June 30, 1995, management is not aware of any current recommendation
by banking regulatory authorities which if they were to be implemented would
have, or are reasonably likely to have, a material adverse effect on the
Corporation's liquidity, capital resources or operations.
Supplemental Information
Nonperforming loans decreased $1,696,000 from December 31, 1994 to June 30,
1995 primarily due to the liquidation of three large Commercial loans for
which recognition of future interest income had become questionable.
Material Changes in Financial Condition
There were no material changes in financial condition as of June 30, 1995
compared to December 31, 1994.
Material Changes in Results of Operations
Net interest income for the quarter ended June 30, 1995 was $4,162,827, an
increase of $929,423 (29%) over the second quarter of 1994 and for the six
months was $8,197,299, an increase of $1,799,476 (28%) over the same period
in 1994. These increases are primarily due to the acquisition of Citizens
Bank located in Pemberville, Ohio, in October of 1994, and a favorable
increase in yields on earning assets.
Total noninterest income increased $161,143 (12%) to $1,456,690 for the first
quarter and $307,676 (12%) to 2,809,228 for the first six months due mainly
to an increase of $19,435 (4%) and $110,828 (13%) in Trust Department fees,
an increase in service charges on deposits of $61,497 (26%) and $87,421 (18%)
and an increase in other income of $86,735 (79%) and $134,218 (65%) due
partly to the acquisition of Citizens Bank.
Total noninterest expense increased $799,526 (23%) to $3,779,473 for the
quarter ended June 30, 1995 and $1,575,008 (26%) to $7,539,284 for the six
months when compared to the same periods in 1994, due to the following
factors. Salaries and employee benefits increased $246,190 (17%) and
$531,368 (19%), respectively, due in part to the acquisition of Citizens Bank
as well as to normal salary increases. Equipment expense increased $217,636
(81%) for the quarter and $410,954 (73%) for the six months due mainly to a
major conversion project undertaken by Rurbanc. The most significant factors
in the increases in other expenses of $218,816 (18%) and $519,577 (27%) were
the acquisition of Citizens Bank along with normal inflation.
Income tax expense for the quarter was $521,511, an increase of $131,604 and
for the six months was $976,566, an increase of $178,968, over the same
periods in 1994, due to an increase in taxable income.
The result of all these factors is an increase in net income of $225,936
(27%) for the three months and an increase of $313,176 (19%) for the six
months ended June 30, 1995.
12
PART 11 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See index to exhibits on pages 14 and 15
(b) Reports on Form 8-K
On June 16, 1995, the registrant filed a Form 8-K to announce
that Thomas C. Williams has been elected President and CEO of
Rurban Financial Corp. and its wholly-owned subsidiary, The
State Bank and Trust Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
RURBAN FINANCIAL CORP.
Date August 1,1995 By /s/Thomas C. Williams
Thomas C. Williams
President
By /s/David E. Manz
David E. Manz
Executive Vice President &
Chief Financial Officer
13
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
27 FINANCIAL DATA SCHEDULE