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 March 31, 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 May 1, 1995.
Page 1 of 14
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 three months ended March 31,
1995 are not necessarily indicative of the results for the complete year.
Page 2 of 14
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
March 31 December 31
1995 1994
(Unaudited) (Note)
ASSETS
Cash and due from banks $ 15,420,040 $ 20,606,577
Federal funds sold 10,316,522 4,571,594
TOTAL CASH AND CASH EQUIVALENTS 25,736,562 25,178,171
Interest bearing deposits in other
financial institutions 180,000 346,324
Securities available-for-sale 56,486,281 59,811,855
Securities held-to-maturity (estimated market
value of $10,713,000 and $10,346,000
respectively) 10,659,221 10,370,912
Loans, net of allowance for losses of
$4,802,941 and $4,770,000 respectively 275,345,919 275,646,798
Loans held for sale 4,497,762 4,689,611
Premises and equipment, net 9,127,408 9,264,085
Accrued interest and other assets 8,690,583 8,239,728
TOTAL ASSETS $390,723,736 $393,547,484
Page 3 of 14
March 31 December 31
1995 1994
(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 39,924,858 $ 50,381,190
Interest bearing 311,173,426 304,264,446
TOTAL DEPOSITS 351,098,284 354,645,636
Accrued expenses and other liabilities 2,641,308 3,227,261
TOTAL LIABILITIES 353,739,592 357,872,897
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 17,600,199 16,995,711
Net unrealized depreciation on available-
for-sale securities (net of tax of
$239,634 and $602,851 respectively) (465,172) (1,170,241)
TOTAL SHAREHOLDERS' EQUITY 36,984,144 35,674,587
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 390,723,736 $ 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.
Page 4 of 14
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
1995 1994
Interest income:
Interest and fees on loans $ 6,308,185 $ 4,465,039
Interest and dividends on securities:
Taxable 810,255 594,283
Tax-exempt 106,075 96,473
Other 90,837 69,982
TOTAL INTEREST INCOME 7,315,352 5,225,777
Interest expense:
Deposits 3,246,191 2,059,831
Short-term borrowings 34,689 1,527
TOTAL INTEREST EXPENSE 3,280,880 2,061,358
NET INTEREST INCOME 4,034,472 3,164,419
Provision for losses 240,000 232,500
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 3,794,472 2,931,919
Noninterest income:
Trust department 457,393 366,000
Service charges on
deposit accounts 272,443 246,519
Data processing fees 481,658 497,863
Loss on sale of securities available-for-sale (3,043) - - -
Loss on calls of securities held-to-maturity - - - (981)
Other 144,087 96,604
TOTAL NONINTEREST INCOME 1,352,538 1,206,005
Noninterest expense:
Salaries and employee
benefits 1,685,257 1,400,079
Net occupancy expense 215,674 192,449
Equipment expense 486,059 292,741
Other 1,372,821 1,000,060
TOTAL NONINTEREST EXPENSE 3,759,811 2,885,329
INCOME BEFORE
INCOME TAXES 1,387,199 1,252,595
Applicable income taxes 455,055 407,691
NET INCOME $ 932,144 $ 844,904
Net income per Common
Share (Note B) $ .43 $ .42
Average shares outstanding (Note B) 2,184,378 2,029,378
See notes to condensed consolidated unaudited financial statements
Page 5 of 14
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
1995 1994
Balance beginning of
period $ 35,674,587 $ 31,292,709
Net Income 932,144 844,904
Cash dividends declared ($.15
per share) (327,656) (304,408)
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 705,069 (352,633)
Balance end of period $ 36,984,144 $ 31,679,068
See notes to condensed consolidated unaudited financial statements.
Page 6 of 14
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
1995 1994
Cash Flows From Operating Activities
Cash received from customers' fees and
commissions $ 1,355,581 $ 1,206,986
Cash paid to suppliers and employees (5,196,876) (3,270,858)
Interest received 6,978,041 5,378,296
Interest paid (3,066,418) (2,024,624)
Income taxes paid (5,000) - - -
Net Cash from operating activities 65,328 1,289,800
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 7,893,786 8,473,318
Securities held-to-maturity 163,051 3,000
Purchase of securities available-for-sale (3,502,969) (9,022,721)
Purchase of securities held-to-maturity (451,360) (769,844)
Net (increase)/decrease in loans (650,366) (7,555,602)
Proceeds from sales of loans 847,714 6,455,649
Recoveries on loan charge-offs 57,941 55,553
Premises and equipment expenditures (156,050) (24,589)
Net cash from investing activities 4,368,071 (2,385,236)
Cash Flows From Financing Activities
Net Increase/(decrease) in deposits (3,547,352) 72,426
Net increase/(decrease) in short-term
borrowings - - - (1,000,000)
Dividends paid (327,656) (304,408)
Net cash from financing activities (3,875,008) (1,231,982)
Net Change In Cash And Cash Equivalent 558,391 (2,327,418)
Cash And Cash Equivalents At Beginning Of Year 25,178,171 18,336,732
Cash And Cash Equivalents At End Of Year $25,736,562 $16,009,314
Page 7 of 14
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED (UNAUDITED)
Three Months Ended
March 31
1995 1994
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 932,144 $ 844,904
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 292,727 201,755
Amortization of intangible assets 82,500 62,990
Provision for loan losses 240,000 232,500
Loss on held-to-maturity security called - - - 981
Loss on available-for-sale-security sold 3,043 - - -
Increase/(decrease) in deferred loan fees (2,561) 1,696
(Increase)/decrease in interest receivable (334,750) 150,823
(Increase)/decrease in other assets (561,822) (257,397)
Increase/(decrease) in interest payable 214,462 36,734
Increase/(decrease) in income taxes payable 450,055 407,691
Increase/(decrease) in other liabilities (1,250,470) (392,877)
Net cash from operating activities $ 65,328) $ 1,289,800
Page 8 of 14
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 Coproation's annual report for the year ended
December 31, 1994.
ALLOWANCE FOR LOAN LOSSES--An allowance for loan losses is established and
maintained because some loans may not be repaid in full. Increases to the
allowance are recorded by a provision for loan losses charged to expense.
Estimating the risk of loss and the amount of loss on any loan is necessarily
subjective. Accordingly, the allowance is maintained by management at a
level considered adequate to cover losses that are currently anticipated
based on past loss experience, general economic conditions, information about
specific borrower situations including their financial position and
collateral values, and other factors and estimates which are subject to
change over time. While management may periodically allocate portions of the
allowance for specific problem loan situations, the entire allowance is
available for any loan charge-offs that may occur. A loan is charged off by
management as a loss when deemed uncollectible, although collection efforts
continue and future recoveries may occur.
FASB Standards No. 114 and No. 118 were adopted January 1, 1995. Under
these standards, loans considered to be impaired are reduced to the present
value of expected future cash flows or to the fair value of collateral, by
allocating a portion of the allowance for loan losses to such loans. If
these allocations cause the allowance for loan losses to require increase,
such increase is reported as bad debt expense. The effect of adopting the
new guidance was not material to the Corporations consolidated financial
statements.
Interest Income--The carrying value of impaired loans are periodically
adjusted to reflect cash payments, revised estimates of future cash flows,
and increases in the present value for expected cash flows due to the passage
of time. Cash payments representing interest income are reported as such.
Other cash payments are reported as reductions in carrying value, while
increases or decreases due to changes in estimates of future payments and due
to passage of time are reported as bad debt expense, if reductions, or
otherwise as interest income.
Page 9 of 14
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--ALLOWANCE FOR LOAN LOSSES
The following is a summary of the activity in the allowance for loan losses
account for the quarter ended March 31, 1995:
Balance at beginning of quarter $ 4,770,000
Provision charged to expense 240,000
Recoveries credited to allowance 57,941
Losses charged to allowance (265,000)
Balance at end of quarter $ 4,802,941
Information regarding impaired loans is as follows for the quarter ended
March 31, 1995:
Average investment in impaired loans $ 2,297,987
Interest income recognized on impaired
loans including interest recognized
on cash basis -0-
Information regarding impaired loans at quarter-end is as follows:
Balance of impaired loans $ 3,540,298
Less portion for which no allowance
for loan losses is allocated -0-
Portion of impaired loan balance for which
an allowance for credit losses is allocated $ 3,540,298
Portion of allowance for loan losses
allocated to the impaired loan balance $ 1,006,719
Page 10 of 14
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 decreased 2,837,047 from
December 31, 1994 to March 31, 1995. Liquid assets were 26% of total assets
at December 31, 1994 and 25% of total assets at March 31, 1995. This
difference represents normal fluctuation and was not due to any change in
policy of management regarding liquidity.
Capital Resources
Capital Resources increased $1,309,557 between December 31, 1994 and March
31, 1995. This increase was attributed to earnings of $932,144 less
dividends declared, during the three months ended March 31, 1995, of $327,656
plus change in net unrealized depreciation on available-for-sale securities
of $705,069.
The following table provides the minimum regulatory capital requirements and
the Corporation's capital ratios at March 31, 1995.
Minimum Regulatory Corporation's
Capital Requirements Capital Ratio
Ratio of tier 1 capital to
weighted-risk assets 4.00% 13.19%
Ratio of total capital to
weighted-risk assets 8.00% 14.44%
Ratio of shareholders' equity
to weighted risk assets 4.00% 13.88%
Leverage Ratio 4.00% 9.15%
Ratio of total shareholders'
equity to total assets None 9.47
Page 11 of 14
The Corporation's subsidiaries meet the applicable minimum regulatory capital
requirements at March 31, 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.
As of March 31, 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 increased $1,578,000 from December 31, 1994 to March 31,
1995 primarily due to three large commercial loan customers for whom
recognition of future interest income had become questionable.
Material Changes in Financial Condition
There were no material changes in financial condition as of March 31, 1995
compared to December 31, 1994.
Material Changes in Results of Operations
Net interest income for the quarter ended March 31, 1995 was $4,034,472, an
increase of $870,053 (27%) over the same period in 1994. The increase is
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 $146,533 (12%) to $1,352,538 due mainly
to an increase of $91,393 (25%) in Trust Department fees and an increase in
service charges on deposits of $25,924 (11%) and other income of $47,483
(49%) due partly to the acquisition of Citizens Bank.
Total noninterest expense increased $874,482 (30%) to $3,759,811 for the
quarter ended March 31, 1995 when compared to the same period in 1994, due
to the following factors. Salaries and employee benefits increased $285,178
(20%) due in part to the acquisition of Citizens Bank as well as to normal
salary increases. Equipment expense increased $194,318 (66%) due mainly to
a major conversion process undertaken by Rurbanc. The most significant
factor in the increase in other expenses of $372,761 was the acquisition of
Citizens Bank along with normal inflation.
Income tax expense for the quarter was $455,055, an increase of $47,364 over
the same period in 1994 due to an increase in taxable income.
The result of all these factors is an increase in net income of $87,240 (10%)
to $932,144 for the three months ended March 31, 1995.
Page 12 of 14
PART 11 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See index to exhibits on page 14
(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.
Date May 8, 1995 By /s/Richard C. Burrows
Richard C. Burrows
President
By /s/David E. Manz
David E. Manz
Executive Vice President &
Chief Financial Officer
Page 13 of 14
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 15,420,040
<INT-BEARING-DEPOSITS> 180,000
<FED-FUNDS-SOLD> 10,316,522
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,486,281
<INVESTMENTS-CARRYING> 10,659,221
<INVESTMENTS-MARKET> 10,713,000
<LOANS> 284,646,622
<ALLOWANCE> 4,802,941
<TOTAL-ASSETS> 390,723,736
<DEPOSITS> 351,098,284
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,641,308
<LONG-TERM> 0
<COMMON> 5,460,945
0
0
<OTHER-SE> 31,523,199
<TOTAL-LIABILITIES-AND-EQUITY> 390,723,736
<INTEREST-LOAN> 6,308,185
<INTEREST-INVEST> 916,330
<INTEREST-OTHER> 90,837
<INTEREST-TOTAL> 7,315,352
<INTEREST-DEPOSIT> 3,246,191
<INTEREST-EXPENSE> 3,280,880
<INTEREST-INCOME-NET> 4,034,472
<LOAN-LOSSES> 240,000
<SECURITIES-GAINS> (3,043)
<EXPENSE-OTHER> 3,759,811
<INCOME-PRETAX> 1,387,199
<INCOME-PRE-EXTRAORDINARY> 1,387,199
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 932,144
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,770,000
<CHARGE-OFFS> 265,000
<RECOVERIES> 57,941
<ALLOWANCE-CLOSE> 4,802,941
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
