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, 1997.
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 Identification No.)
incorporation or organization)
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
2,287,851 on May 1, 1997.
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<PAGE>
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, 1997 are not
necessarily indicative of the results for the complete year.
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<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
March 31 December 31
1997 1996
----------- -----------
(Unaudited) (Note)
ASSETS
Cash and due from banks $ 17,016,254 $ 18,718,263
Federal funds sold 19,182,582 15,309,000
------------ ------------
TOTAL CASH AND CASH EQUIVALENTS 36,198,836 34,027,263
Interest-bearing deposits in other
financial institutions 180,000 180,000
Securities available for sale 67,134,780 66,635,889
Loans held for sale, net of valuation allowance of
$86,000 in 1997 and $31,119 in 1996 2,206,172 1,875,636
Loans, net of allowance for losses of $5,274,050
in 1997 and $5,066,600 in 1996 317,914,551 313,379,240
Premises and equipment, net 8,904,426 8,827,838
Accrued interest and other assets 9,797,731 8,346,907
------------ ------------
TOTAL ASSETS $442,336,496 $433,272,773
============ ============
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<PAGE>
<TABLE>
March 31 December 31
1997 1996
----------- -----------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 43,137,462 $ 42,323,683
Interest bearing 351,895,158 345,442,390
------------- -------------
TOTAL DEPOSITS 395,032,620 387,766,073
Accrued expenses and other liabilities 5,163,032 4,018,052
------------- -------------
TOTAL LIABILITIES 400,195,652 391,784,125
Common stock subject to repurchase obligation
in ESOP (shares outstanding:
1997 - 328,582, 1996 - 328,582) 9,387,588 9,387,588
Unearned ESOP shares (unearned shares:
1997 - 46,879, 1996 - 46,879) (1,490,000) (1,490,000)
Common stock, stated value $2.50 per share
Authorized--10,000,000 shares
1,959,269 shares issued and outstanding
in 1997 and 1996 4,898,173 4,898,173
Additional paid-in capital 8,672,955 8,672,955
Retained Earnings 20,955,448 20,024,916
Net unrealized appreciation (depreciation)
on securities available-for-sale (net of tax
of $145,953 in 1997 and $(2,567) in 1996) (283,320) (4,984)
------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 442,336,496 $ 433,272,773
============= =============
See notes to condensed consolidated unaudited financial statements
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statement at that date.
</TABLE>
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<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
----------------------------
1997 1996
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 7,438,472 $ 6,697,541
Interest and dividends on securities:
Taxable 899,304 1,126,254
Tax-exempt 78,511 111,425
Other 266,514 106,714
----------- -----------
TOTAL INTEREST INCOME 8,682,801 8,041,934
Interest Expense:
Deposits 3,776,545 3,556,004
Short-term borrowings 7,798 11,809
----------- -----------
TOTAL INTEREST EXPENSE 3,784,343 3,567,813
----------- -----------
NET INTEREST INCOME 4,898,458 4,474,121
Provision for losses 216,000 256,009
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 4,682,458 4,218,112
Noninterest income:
Trust Department 574,445 508,315
Service charges on deposit accounts 274,112 281,997
Data processing fees 623,649 617,014
(Loss) on sale of securities available-for-sale (2,687) - - -
Net Gain (loss) on sale of loans 200,656 (2,765)
Other 162,789 135,373
----------- -----------
TOTAL NONINTEREST INCOME 1,832,964 1,539,934
Noninterest expense:
Salaries and employee benefits 2,372,774 1,952,077
Net occupancy expense 253,267 253,420
Equipment expense 513,077 518,947
Other 1,396,097 1,323,578
----------- -----------
TOTAL NONINTEREST EXPENSE 4,535,215 4 ,048,022
BEFORE INCOME TAXES 1,980,207 1,710,024
Income Tax Expense 637,862 567,337
----------- -----------
NET INCOME $ 1,342,345 $ 1,142,687
=========== ===========
Net income per Common Share (Note B) $ 0.59 $ 0.52
Average shares outstanding (Note B) 2,287,851 2,184,378
See notes to condensed consolidated unaudited financial statements
</TABLE>
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<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHARE HOLDERS EQUITY
(UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three month periods ended March 31, 1996 and 1997
Net Unrealized
Appreciation
(Depreciation) on
Additional Securities Available
Common Paid-In Retained For Sale, Net
Stock Capital Earnings of Tax
------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at January 1, 1996 $4,717,277 $5,798,813 $ 19,779,897 $ 449,477
Net income for the three month period -- -- 1,142,687 --
Cash dividends declared ($0.15 per share) -- -- (327,656) --
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of ($74,827) -- -- -- (145,253)
------------------------------------------------------
Balances at March 31, 1996 $4,717,277 $5,798,813 $ 20,594,928 $ 304,224
======================================================
Balances at January 1, 1997 $4,898,173 $8,672,955 $ 20,024,916 $ (4,984)
Net income for the three month period -- -- 1,342,345 --
Cash dividends declared ($0.18 per share) -- -- (411,813) --
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of $(143,385) -- -- -- (278,336)
------------------------------------------------------
Balance at March 31, 1997 $4,898,173 $8,672,955 $ 20,955,448 $(283,320)
======================================================
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<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Three Months Ended
March 31
-------------------------------
1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Cash received from customers' fees and commissions $ 1,634,995 $ 1,539,934
Cash paid to suppliers and employees (4,373,832) (3,694,180)
Loans originated for sale (5,092,949) (7,592,417)
Proceeds from sales of loans held for sale 4,963,069 4,363,181
Interest received 8,640,874 7,614,982
Interest paid (3,782,321) (3,588,032)
Income taxes paid (575,000) (970,000)
------------ ------------
Net cash from operating activities 1,414,836 (2,326,533)
------------ ------------
Cash Flows From Investing Activities:
Net decrease in interest earning deposits
in other financial institutions -- --
Proceeds from principal repayments, maturities and calls of:
Securities available-for-sale 14,162,927 13,900,334
Purchase of securities available-for-sale (15,117,597) (5,159,101)
Net (increase)/decrease in loans (4,927,311) (7,297,930)
Recoveries on loan charge-offs 176,000 77,142
Premises and equipment expenditures (392,016) (11,102)
------------ ------------
Net cash from investing activities 6,097,997) 1,509,343
------------ ------------
Cash Flows From Financing Activities:
Net increase/(decrease) in deposits 7,266,547 (6,304,917)
Dividends paid (411,813) (327,656)
------------ ------------
Net cash from financing activities 6,854,734 (6,632,573)
------------ ------------
Net Change In Cash And Cash Equivalents 2,171,573 (7,449,763)
Cash And Cash Equivalents At Beginning Of Year 34,027,263 28,379,656
------------ ------------
Cash And Cash Equivalents At End Of Period $ 36,198,836 $ 20,929,893
============ ============
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<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS -- CONTINUED (UNAUDITED)
Three Months Ended
March 31
-------------------------------
1997 1996
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 1,342,345 $ 1,142,687
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 346,798 309,723
Amortization of intangible assets 45,000 134,500
Provision for loan losses 216,000 256,009
Loss on available for sale securities sold 2,687 - - -
Loans originated for sale (5,092,949) (7,592,418)
Proceeds from sales of loans held for sale 4,963,069 4,363,181
Net (gains)/losses on loan sales (200,656) 2,765
Increase/(decrease) in other liabilities and interest payable 1,144,980 (44,945)
(Increase)/decrease in other assets and interest receivable (1,352,438) (898,035)
------------ ------------
Net cash from operating activities $ 1,414,836 $ (2,326,533)
============ ============
</TABLE>
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<PAGE>
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 10-Q. 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, 1996.
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 2,287,851 for 1997 and
2,184,378 for 1996.
NOTE C - ACCOUNTING STANDARDS IMPLEMENTED IN 1997
SFAS No. 125, Accounting for Transfer and Servicing of Financial Assets and
Extinguishment of Liabilities, provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
and requires a consistent application of a financial-components approach that
focuses on control. Under that approach, after a transfer of financial assets,
an entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred and derecognizes liabilities when extinguished. SFAS
No. 125 also supersedes SFAS No. 122, and requires that servicing assets and
liabilities be subsequently measured by amortization in proportion to and over
the period of estimated net servicing obligation based on their fair values.
SFAS No. 125 applies to transfers and extinguishments occurring after December
31, 1996, and early or retroactive application is not permitted. The statements
will not have a material effect on the Corporation's consolidated financial
position or results of operations.
NOTE D - RISK ELEMENTS AND LOAN LOSS RESERVE
There have been no changes in the Risk Elements and Loan Loss Reserve activity
that would materially effect the Corporation's financial position or results of
operations for the three months ended March 31, 1997.
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<PAGE>
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 Company ("Citizens Bank")
are engaged only in the industry segment of commercial banking. Rurban's
subsidiary, Rurbanc Data Services, Inc., ("RDSI"), 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.
During the first quarter of 1997, the Corporation opened Peoples Savings Bank
d.b.a. Rurban Mortgage Company, a residential mortgage loan production office in
Clearwater, Florida. This office underwrites, processes, closes and sells
residential first mortgages acquired through a network of real estate mortgage
brokers in the Tampa Bay market.
LIQUIDITY
Liquidity relates primarily to the Corporation's ability to fund loan demand,
meet deposit customers' withdrawal requirements and provide for operating
expenses. Assets used to satisfy these needs consist of cash, federal funds
sold, securities and loans held for sale. These assets are commonly referred to
as liquid assets. Liquid assets were $106 million at March 31, 1997 compared to
$103 million at December 31, 1996. The $3 million increase in liquid assets
represents normal fluctuation and was not due to any change in policy of
management regarding liquidity. Management recognizes that securities may need
to be sold in the future to help fund loan demand and, accordingly, as of March
31, 1997, the entire securities portfolio of $67.1 million was classified as
available-for-sale.
CAPITAL RESOURCES
Total shareholders' equity plus common stock subject to repurchase obligation in
ESOP, net of unearned ESOP shares was $42,141,000 as of March 31, 1997, an
increase of $652,000 over $41,489,000 as of December 31, 1996. The increase was
primarily due to 1997 net income of $1,342,000, offset by cash dividends of
$412,000 and a net change in unrealized appreciation (depreciation) in
securities available for sale, net of tax of $(279,000).
The Corporation's subsidiaries exceed the applicable minimum regulatory capital
requirements at March 31, 1997.
As of March 31, 1997, management is not aware of any current recommendations 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.
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<PAGE>
Supplemental Information
Nonperforming loans increased $290,000 from December 31, 1996 to $1,345,000 or
0.42% of net loans at March 31, 1997.
Material Changes in Financial Condition
Loans grew $4.5 million from December 31, 1996 to $318 million at March 31,
1997; an annualized rate of 5.8 %.
Deposits grew $7.2 million from December 31, 1996 to $395 million at March 31,
1997; an annualized rate of 7.5%.
Material Changes in Results of Operations
Net interest income for the quarter ended March 31, 1997 was $4,898,458, an
increase of $424,337 (9.5%) over the same period in 1996. 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 $293,030 to $1,832,964 due mainly to an
increase of $66,130 in Trust Department fees and a March 1997 entry to record
the $230,000 estimated value of servicing rights on $23 million of loans sold
since the adoption of FAS 122 on January 1, 1996.
Total noninterest expense increased $487,193 for the quarter ended March 31,
1997 when compared to the same period in 1996. This was due primarily to
increases in salaries and benefits of $420,697.
Income tax expense for the quarter was $637,862, an increase of $70,525 over the
same period in 1996 due to an increase in taxable income.
The result of all these factors was an increase in net income of $199,658 to
$1,342,345 for the three months ended March 31, 1997 when compared to the same
period in 1996.
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<PAGE>
PART 11 - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
See index on 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 15, 1997 By /s/ Thomas C. Williams
_________________________________
Thomas C. Williams
President & CEO
By /s/ Richard C. Warrener
_________________________________
Richard C. Warrener
Senior Vice President &
Chief Financial Officer
<PAGE>
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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 17,016,254
<INT-BEARING-DEPOSITS> 180,000
<FED-FUNDS-SOLD> 19,182,582
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,134,780
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 320,120,723
<ALLOWANCE> 5,360,050
<TOTAL-ASSETS> 442,336,496
<DEPOSITS> 395,032,620
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,163,032
<LONG-TERM> 0
0
0
<COMMON> 4,898,173
<OTHER-SE> 29,345,083
<TOTAL-LIABILITIES-AND-EQUITY> 442,336,496
<INTEREST-LOAN> 7,438,472
<INTEREST-INVEST> 977,815
<INTEREST-OTHER> 266,514
<INTEREST-TOTAL> 8,682,801
<INTEREST-DEPOSIT> 3,776,545
<INTEREST-EXPENSE> 3,784,343
<INTEREST-INCOME-NET> 4,898,458
<LOAN-LOSSES> 216,000
<SECURITIES-GAINS> (2,687)
<EXPENSE-OTHER> 4,535,215
<INCOME-PRETAX> 1,980,207
<INCOME-PRE-EXTRAORDINARY> 1,980,207
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,342,345
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<YIELD-ACTUAL> 4.70
<LOANS-NON> 1,344,787
<LOANS-PAST> 4,522,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,367,787
<ALLOWANCE-OPEN> 5,066,600
<CHARGE-OFFS> 184,550
<RECOVERIES> 176,000
<ALLOWANCE-CLOSE> 5,274,050
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 650,000
</TABLE>
