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 SEPTEMBER 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 November 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 nine months ended September 30,
1995 are not necessarily indicative of the results for the complete year.
2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
September 30 December 31
1995 1994
(Unaudited) (Note)
ASSETS
Cash and due from banks $ 16,598,434 $ 20,606,577
Federal funds sold 12,324,613 4,571,594
------------ ------------
TOTAL CASH AND CASH EQUIVALENTS 28,923,047 25,178,171
Interest bearing deposits in other
financial institutions 180,000 346,324
Securities available-for-sale 69,991,936 59,811,855
Securities held-to-maturity (estimated market
value of $10,747,000 and $10,346,000
respectively) 10,734,736 10,370,912
Loans, net of allowance for losses of
$4,252,463 and $4,770,000 respectively 277,667,616 275,646,798
Loans held for sale 2,870,913 4,689,611
Premises and equipment, net 8,714,460 9,264,085
Accrued interest and other assets 8,955,162 8,239,728
----------- -----------
TOTAL ASSETS $408,037,870 $393,547,484
----------- ===========
3
September 30 December 31
1995 1994
(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 42,130,887 $ 50,381,190
Interest bearing 323,135,464 304,264,446
------------ ------------
TOTAL DEPOSITS 365,266,351 354,645,636
Accrued expenses and other liabilities 3,681,027 3,227,261
TOTAL LIABILITIES 368,947,378 357,872,897
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 19,193,603 16,995,711
Net unrealized gain/(loss) on available-
for-sale securities (net of tax of
$24,610 and $602,851 respectively) 47,772 (1,170,241)
------------- ------------
TOTAL SHAREHOLDERS' EQUITY 39,090,492 35,674,587
------------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 408,037,870 $ 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
September 30
1995 1994
Interest income:
Interest and fees on loans $ 6,790,990 $ 5,140,215
Interest and dividends on securities:
Taxable 1,006,080 545,452
Tax-exempt 107,738 68,937
Other 206,551 23,920
--------- ---------
TOTAL INTEREST INCOME 8,111,359 5,778,524
Interest expense:
Deposits 3,663,033 2,304,986
Short-term borrowings 548 82,567
--------- ---------
TOTAL INTEREST EXPENSE 3,663,581 2,387,553
--------- ---------
NET INTEREST INCOME 4,447,778 3,390,971
Provision for losses 280,435 232,500
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 4,167,343 3,158,471
Noninterest income:
Trust department 495,607 478,950
Service charges on
deposit accounts 318,031 249,126
Data processing fees 507,444 484,410
Gain on sale of securities available-for-sale - - - - - -
Loss on calls of securities held-to-maturity - - - - - -
Other 117,489 112,016
--------- ---------
TOTAL NONINTEREST INCOME 1,438,571 1,324,502
Noninterest expense:
Salaries and employee
benefits 1,776,951 1,378,400
Net occupancy expense 229,141 187,843
Equipment expense 406,030 285,755
Other 1,396,455 1,085,997
--------- ---------
TOTAL NONINTEREST EXPENSE 3,808,577 2,937,995
--------- ---------
INCOME BEFORE
INCOME TAXES 1,797,337 1,544,978
Applicable income taxes 602,153 512,730
--------- ---------
NET INCOME $1,195,184 $1,032,248
========= =========
Net income per Common
Share (Note B) $ .55 $ .51
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
Nine Months Ended
September 30
1995 1994
Interest income: $ 19,678,086 $ 14,326,728
Interest and fees on loans
Interest and dividends on securities:
Taxable 2,630,911 1,720,724
Tax-exempt 319,711 253,027
Other 503,107 133,641
---------- ----------
TOTAL INTEREST INCOME 23,131,815 16,434,120
Interest expense:
Deposits 10,448,830 6,538,302
Short-term borrowings 37,908 107,024
---------- ----------
TOTAL INTEREST EXPENSE 10,486,738 6,645,326
---------- ----------
NET INTEREST INCOME 12,645,077 9,788,794
Provision for losses 785,435 697,500
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 11,859,642 9,091,294
Noninterest income:
Trust department 1,432,966 1,305,481
Service charges on
deposit accounts 889,621 733,295
Data processing fees 1,463,499 1,469,350
Gain on sale of securities available-for-sale 3,113 - - -
Loss on calls of securities held-to-maturity - - - (981)
Other 458,600 318,909
---------- ----------
TOTAL NONINTEREST INCOME 4,247,799 3,826,054
Noninterest expense:
Salaries and employee
benefits 5,118,128 4,188,209
Net occupancy expense 653,904 571,497
Equipment expense 1,376,859 845,630
Other 4,198,970 3,296,935
---------- ----------
TOTAL NONINTEREST EXPENSE 11,347,861 8,902,271
INCOME BEFORE
INCOME TAXES 4,759,580 4,015,077
Applicable income taxes 1,578,719 1,310,328
---------- ----------
NET INCOME $ 3,180,861 $ 2,704,749
---------- ==========
Net income per Common
Share (Note B) $ 1.46 $ 1.33
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 Nine Months Ended
September 30 September 30
1995 1994 1995 1994
Balance beginning of
period $38,194,521 $31,991,936 $35,674,587 $31,292,709
Net Income 1,195,184 1,032,248 3,180,861 2,704,749
Cash dividends declared
($.15 and $.45 per
share in 1995 and 1994) (327,656) (304,407) (982,969) (913,221)
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 28,443 (137,215) 1,218,013 (700,171)
--------- ---------- ---------- ----------
Balance end of period $39,090,492 $32,582,562 $39,090,492 $32,582,562
========== ========== ========== ==========
See notes to condensed consolidated unaudited financial statements
7
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Nine Months Ended
September 30
1995 1994
Cash Flows From Operating Activities
Cash received from customers' fees and
commissions $ 4,244,686 $ 3,827,035
Cash paid to suppliers and employees (10,830,653) (8,507,745)
Interest received 22,112,347 16,415,426
Interest paid (10,399,355) (6,557,284)
Income taxes paid (1,211,500) (1,260,850)
----------- -----------
Net Cash from operating activities 3,915,525 3,916,582
----------- -----------
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 21,114,067 22,127,518
Securities held-to-maturity 1,633,886 873,006
Purchase of securities available-for-sale (29,445,561) (13,318,515)
Purchase of securities held-to-maturity (1,997,710) (2,035,646)
Net (increase)/decrease in loans (9,259,122) (27,357,491)
Proceeds from sales of loans 7,929,292 8,734,561
Recoveries on loan charge-offs 360,028 231,569
Premises and equipment expenditures (309,599) (225,807)
---------- ----------
Net cash from investing activities (9,808,395) (10,970,805)
---------- ----------
Cash Flows From Financing Activities
Net Increase/(decrease) in deposits 10,620,715 (1,342,860)
Net increase/(decrease) in short-term
borrowings - - - 4,200,000
Dividends paid (982,969) (913,221)
---------- ----------
Net cash from financing activities 9,637,746 1,943,919
---------- ----------
Net Change In Cash And Cash Equivalents 3,744,876 (5,110,304)
Cash And Cash Equivalents At Beginning Of Year 25,178,171 18,336,732
---------- ----------
Cash And Cash Equivalents At End Of Period $28,923,047 $13,226,428
========== ==========
8
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED (UNAUDITED)
Nine Months Ended
September 30
1995 1994
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 3,180,861 $ 2,704,749
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 859,224 641,043
Amortization of intangible assets 309,503 139,000
Provision for loan losses 785,435 697,500
Loss on held-to-maturity security called - - - 981
(Gain) on available-for-sale-securities sold (3,113) - - -
Increase/(decrease) in deferred loan fees (17,753) 19,782
(Increase)/decrease in interest receivable (1,001,715) (38,476)
(Increase)/decrease in other assets (650,683) (263,604)
Increase/(decrease) in interest payable 87,383 88,042
Increase/(decrease) in income taxes payable 367,219 49,478
Increase/(decrease) in other liabilities (836) (121,913)
---------- ---------
Net cash from operating activities $ 3,915,525 $ 3,916,582
========== =========
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.
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, amounts due from banks, securities,
federal funds sold and loans held for sale. These assets increased $12,303,759
from December 31, 1994 to September 30, 1995. Liquid assets were 26% of total
assets at December 31, 1994 and 28% of total assets at September 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 $3,415,905 between December 31, 1994 and
September 30, 1995. This increase was attributed to earnings of $3,180,861
less dividends declared, during the nine months ended September 30, 1995, of
$982,969 plus change in net unrealized gain/(loss) on available-for-sale
securities of $1,218,013.
The following table provides the minimum regulatory capital requirements
and the Corporation's capital ratios at September 30, 1995.
Minimum Regulatory Corporation's
Capital Requirements Capital Ratio
Ratio of tier 1 capital to
weighted-risk assets 4.00% 13.74%
Ratio of total capital to
weighted-risk assets 8.00% 14.99%
Ratio of shareholders' equity
to weighted risk assets 4.00% 14.34%
Leverage Ratio 4.00% 9.21%
Ratio of total shareholders'
equity to total assets None 9.58%
The Corporation's subsidiaries meet the applicable minimum regulatory
capital requirements at September 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 September 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 $2,172,000 from December 31, 1994 to
September 30, 1995 primarily due to the liquidation of several 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 September 30,
1995 compared to December 31, 1994.
Material Changes in Results of Operations
Net interest income for the quarter ended September 30, 1995 was
$4,447,778 an increase of $1,056,807 (31%) over the third quarter of 1994 and
for the nine months was $12,645,077, an increase of $2,856,283 (29%) 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 $114,069 (9%) to $1,438,571 for the
third quarter and $421,745 (11%) to $4,247,799 for the first nine months due
mainly to an increase of $16,657 (3%) and $127,485 (10%) in Trust Department
fees, an increase in service charges on deposits of $68,905 (28%) and $156,326
(21%) and an increase in other income of $5,473 (5%) and $139,691 (44%) due
partly to the acquisition of Citizens Bank.
Total noninterest expense increased $870,582 (30%) to $3,808,577 for the
quarter ended September 30, 1995 and $2,445,590 (27%) to $11,347,861 for the
nine months when compared to the same periods in 1994, due to the following
factors. Salaries and employee benefits increased $398,551 (29%) and $929,919
(22%), respectively, due in part to the acquisition of Citizens Bank as well
as to normal salary increases. Equipment expense increased $120,275 (42%) for
the quarter and $531,229 (63%) for the nine months due mainly to a major
conversion project undertaken by Rurbanc. The most significant factors in the
increases in other expenses of $310,458 (29%) and $902,035 (27%) were the
acquisition of Citizens Bank along with normal inflation.
Income tax expense for the quarter was $602,153, an increase of $89,423
and for the nine months was $1,578,719, an increase of $268,391, 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 $162,936
(16%) for the three months and an increase of $476,112 (18%) for the nine
months ended September 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
None
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.
November 6, 1995 By /s/Thomas C. Williams
Date 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