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, 1996.
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, 1996.
1
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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,
1996 are not necessarily indicative of the results for the complete year.
2
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
March 31 December 31
1996 1995
----------- -----------
(Unaudited) (Note)
ASSETS
Cash and due from banks ..................... $ 14,898,753 $ 21,067,131
Federal funds sold .......................... 6,031,140 7,312,525
TOTAL CASH AND CASH EQUIVALENTS ..... 20,929,893 28,379,656
Interest bearing deposits in other
financial institutions .................... 180,000 180,000
Securities available-for-sale ............... 81,368,552 90,329,866
Loans, net of allowance for losses of
$4,352,151 and $4,270,000 respectively .... 280,070,068 273,094,844
Loans held for sale .......................... 6,175,765 2,949,293
Premises and equipment, net .................. 8,085,096 8,383,717
Accrued interest and other assets ............ 8,746,752 7,908,389
TOTAL ASSETS ...... $405,556,126 $411,225,765
3
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March 31 December 31
1996 1995
(Unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing ........................ $ 41,712,137 $ 48,721,000
Interest bearing ........................... 319,779,484 319,075,538
------------ ------------
TOTAL DEPOSITS ....... 361,491,621 367,796,538
Accrued expenses and other liabilities ....... 3,316,236 3,350,736
TOTAL LIABILITIES ...... 364,807,857 371,147,274
Common stock subject to repurchase
obligation in ESOP (297,467 shares
outstanding in 1996 and 1995) .............. 9,333,027 9,333,027
Common stock, stated value $2.50
a share:
Authorized--5,000,000 shares
1,886,911 shares outstanding in
1996 and 1995 .............................. 4,717,277 4,717,277
Capital Surplus .............................. 5,798,813 5,798,813
Retained earnings ............................ 20,594,928 19,779,897
Net unrealized gain/(loss) on available-
for-sale securities (net of tax of
$156,721 and $231,549 respectively) ....... 304,224 449,477
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ..... $405,556,126 $411,225,765
============ ============
See notes to condensed consolidated unaudited financial statements
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date.
4
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
1996 1995
Interest income:
Interest and fees on loans ...................... $6,697,541 $ 6,308,185
Interest and dividends on securities:
Taxable ........................................ 1,126,254 810,255
Tax-exempt ..................................... 111,425 106,075
Other ........................................... 106,714 90,837
---------- -----------
TOTAL INTEREST INCOME ......................... 8,041,934 7,315,352
Interest expense:
Deposits ........................................ 3,556,004 3,246,191
Short-term borrowings ........................... 11,809 34,689
---------- -----------
TOTAL INTEREST EXPENSE ........................ 3,567,813 3,280,880
---------- -----------
NET INTEREST INCOME ........................ 4,474,121 4,034,472
Provision for losses ............................. 256,009 240,000
---------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES ........................ 4,218,112 3,794,472
Noninterest income:
Trust department ................................ 508,315 457,393
Service charges on
deposit accounts ............................... 281,997 272,443
Data processing fees ............................ 617,014 481,658
Loss on sale of securities available-for-sale ... - - - (3,043)
Other ........................................... 132,608 144,087
---------- -----------
TOTAL NONINTEREST INCOME ................... 1,539,934 1,352,538
Noninterest expense:
Salaries and employee
benefits ....................................... 1,952,077 1,685,257
Net occupancy expense ........................... 253,420 215,674
Equipment expense ............................... 518,947 486,059
Other ........................................... 1,323,578 1,372,821
---------- -----------
TOTAL NONINTEREST EXPENSE .................. 4,048,022 3,759,811
---------- -----------
INCOME BEFORE
INCOME TAXES ........................ 1,710,024 1,387,199
Applicable income taxes .......................... 567,337 455,055
---------- -----------
NET INCOME ........................ $1,142,687 $ 932,144
========== ===========
Net income per Common
Share (Note B) .................................. $ .52 $ .43
Average shares outstanding (Note B) .............. 2,184,378 2,184,378
See notes to condensed consolidated unaudited financial statements
5
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
1996 1995
Balance beginning of period .................... $ 40,078,491 $ 35,674,587
Net Income ..................................... 1,142,687 932,144
Cash dividends declared ($.15
per share) .................................... (327,656) (327,656)
Change in net unrealized holding gains (losses)
on available-for-sale securities .............. (145,253) 705,069
Balance end of period .......................... $ 40,748,269 $ 36,984,144
============ ============
See notes to condensed consolidated unaudited financial statements
6
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
1996 1995
Cash Flows From Operating Activities
Cash received from customers' fees and
commissions .................................. $ 1,539,934 $ 1,355,581
Cash paid to suppliers and employees .......... (3,694,180) (5,196,876)
Loans originated for sale ..................... (7,592,418) --
Proceeds from sales of loans held for sale .... 4,363,181 --
Interest received ............................. 7,614,982 6,978,041
Interest paid ............................... (3,588,032)
(3,066,418)
Income taxes paid ............................ (970,000) (5,000)
------------ ------------
Net Cash from operating activities ........... (2,326,533) 65,328
------------ ------------
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 ................. 13,900,334 7,893,786
Securities held-to-maturity ................... -- 163,051
Purchase of securities available-for-sale ..... (5,159,101) (3,502,969)
Purchase of securities held-to-maturity ....... -- (451,360)
Net (increase)/decrease in loans .............. (7,297,930) (650,366)
Proceeds from sales of loans .................. -- 847,714
Recoveries on loan charge-offs ................ 77,142 57,941
Premises and equipment expenditures ........... (11,102) (156,050)
------------ ------------
Net cash from investing activities ........... 1,509,343 4,368,071
------------ ------------
Cash Flows From Financing Activities
Net Increase/(decrease) in deposits ........... (6,304,917) (3,547,352)
Dividends paid ................................ (327,656) (327,656)
------------ ------------
Net cash from financing activities ........... (6,632,573) (3,875,008)
------------ ------------
Net Change In Cash And Cash Equivalents ........ (7,449,763) 558,391
Cash And Cash Equivalents At Beginning Of Year . 28,379,656 25,178,171
------------ ------------
Cash And Cash Equivalents At End Of Period ..... $ 20,929,893 $ 25,736,562
============ ============
7
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CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED (UNAUDITED)
Three Months Ended
March 31
1996 1995
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income ....................................... $ 1,142,687 $ 932,144
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation ................................... 309,723 292,727
Amortization of intangible assets .............. 134,500 82,500
Provision for loan losses ...................... 256,009 240,000
Loss on available-for-sale-security sold ....... -- 3,043
Loans originated for sale ...................... (7,592,418)
Proceeds from sales of loans held for sale ..... 4,363,181
Net (gains)/losses on loan sales ............... 2,765
Increase/(decrease) in deferred loan fees ...... (10,445) (2,561)
(Increase)/decrease in interest receivable ..... (419,272) (334,750)
(Increase)/decrease in other assets ............ (478,763) (561,822)
Increase/(decrease) in interest payable ........ (20,219) 214,462
Increase/(decrease) in income taxes payable .... (402,663) 450,055
Increase/(decrease) in other liabilities ....... 388,382 (1,250,470)
----------- -----------
Net cash from operating activities ............ $(2,326,533) $ 65,328
=========== ===========
8
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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, 1995.
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. The number of
shares used in the computation of earnings per common share was 2,184,378 for
1995 and 1996.
9
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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 decreased $13,184,605 from
December 31, 1995 to March 31, 1996. Liquid assets were 30% of total assets at
December 31, 1995 and 27% of total assets at March 31, 1996. This difference
represents normal fluctuation and was not due to any change in policy of
management regarding liquidity.
Capital Resources
Total shareholders' equity was $40,748,269 (which includes $9,333,000 of
common stock subject to repurchase obligation in ESOP) as of March 31, 1996,
an increase of $669,778 over total shareholders' equity of $40,078,491 as of
December 31, 1995. This increase was attributed to earnings of $1,142,687 less
dividends declared, during the three months ended March 31, 1996, of $327,656
less change in net unrealized gain/(loss) on available-for-sale securities of
$145,253.
The following table provides the minimum regulatory capital requirements and
the Corporation's capital ratios at March 31, 1996.
Minimum Regulatory Corporation's
Capital Requirements Capital Ratio
Ratio of tier 1 capital to
weighted-risk assets .................... 4.00% 14.07%
Ratio of total capital to
weighted-risk assets .................... 8.00% 15.32%
Ratio of shareholders' equity
to weighted risk assets ................. 4.00% 14.48%
Leverage Ratio ............................ 4.00% 9.71%
Ratio of total shareholders'
equity to total assets .................. None 10.05%
The Corporation's subsidiaries meet the applicable minimum regulatory capital
requirements at March 31, 1996. 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.
10
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As of March 31, 1996, 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 Cor-
poration's liquidity, capital resources or operations.
Supplemental Information
Nonperforming loans decreased $767,000 from December 31, 1995 to March 31,
1996 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 March 31, 1996
compared to December 31, 1995.
Material Changes in Results of Operations
Net interest income for the quarter ended March 31, 1996 was $4,474,121, an
increase of $439,649 (11%) over the same period in 1995. This increase is due
to an increase in the amount of earning assets and a favorable increase in
yields on those assets.
Total noninterest income increased $187,396 (14%) to $1,539,934 due mainly to
an increase of $50,922 (11%) in Trust Department fees and an increase in data
processing fees of $135,356 (28%).
Total noninterest expense increased $288,211 (8%) for the quarter ended March
31, 1996 when compared to the same period in 1995. This was due primarily to
normal increase in salaries and benefits of $266,820 (16%).
Income tax expense for the quarter was $567,337, an increase of $112,282 over
the same period in 1995 due to an increase in taxable income.
The result of all these factors is an increase in net income of $210,543 (23%)
to $1,142,687 for the three months ended March 31, 1996 when compared to the
same period in 1995.
11
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PART 11 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See index to exhibits on pages 13 and 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, 1996 By /s/Thomas C. Williams
Thomas C. Williams
President
By /s/David E. Manz
David E. Manz
Executive Vice President &
Chief Financial Officer
12
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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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 14,889,753
<INT-BEARING-DEPOSITS> 180,000
<FED-FUNDS-SOLD> 6,031,140
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,368,552
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 290,597,984
<ALLOWANCE> 4,352,151
<TOTAL-ASSETS> 405,556,126
<DEPOSITS> 361,491,621
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,316,236
<LONG-TERM> 0
0
0
<COMMON> 5,460,945
<OTHER-SE> 35,287,324
<TOTAL-LIABILITIES-AND-EQUITY> 405,556,126
<INTEREST-LOAN> 6,697,541
<INTEREST-INVEST> 1,237,679
<INTEREST-OTHER> 106,714
<INTEREST-TOTAL> 8,041,934
<INTEREST-DEPOSIT> 3,556,004
<INTEREST-EXPENSE> 3,567,813
<INTEREST-INCOME-NET> 4,474,121
<LOAN-LOSSES> 256,009
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,048,022
<INCOME-PRETAX> 1,710,024
<INCOME-PRE-EXTRAORDINARY> 1,710,024
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,142,687
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,270,000
<CHARGE-OFFS> 251,000
<RECOVERIES> 77,142
<ALLOWANCE-CLOSE> 4,352,151
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
