<PAGE> 1
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, 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 2,284,009 on October 31, 1997.
<PAGE> 2
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, 1997 are not necessarily indicative of the results for the complete year.
<PAGE> 3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and due from banks $ 15,196,973 $ 18,718,263
Federal funds sold 7,765,398 15,309,000
------------ ------------
TOTAL CASH AND CASH EQUIVALENTS 22,962,371 34,027,263
Interest-bearing deposits in other
financial institutions 180,000 180,000
Securities available for sale 71,354,881 66,635,889
Loans held for sale, net of valuation allowance of
$7,000 in 1997 and $31,119 in 1996 1,951,151 1,875,636
Loans, net of allowance for losses of $5,497,319
in 1997 and $5,066,600 in 1996 349,325,227 313,379,240
Premises and equipment, net 8,478,928 8,827,838
Accrued interest and other assets 9,511,583 8,346,907
------------ ------------
TOTAL ASSETS $463,764,141 $433,272,773
============ ============
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------ -----------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 40,111,116 $ 42,323,683
Interest bearing 368,763,225 345,442,390
------------ ------------
408,874,341 387,766,073
Accrued expenses and other liabilities 10,346,885 4,018,052
------------ ------------
419,221,226 391,784,125
Common stock subject to repurchase obligation
in ESOP (shares outstanding:
1997 - 326,719, 1996 - 328,582) 9,393,171 9,387,588
Unearned ESOP shares (unearned shares:
1997 - 43,111 1996 - 46,879) (1,490,000) (1,490,000)
Common stock, stated value $2.50 per share
Authorized--10,000,000 shares
Shares issued 1997-1,961,132, 1996 -
1,959,269 and outstanding 1997 - 1,957,290,
1996 - 1,959,269 4,902,830 4,898,173
Additional paid-in capital 8,662,715 8,672,955
Retained Earnings 23,002,625 20,024,916
Net unrealized appreciation (depreciation) 183,952 (4,984)
on securities available-for-sale (net of tax
of $94,763 in 1997 and $(2,567)
in 1996)
Less: Treasury stock, at cost, 3842 shares (112,378)
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $463,764,141 $433,272,773
============ ============
</TABLE>
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.
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended
September 30
----------------------------
1997 1996
<S> <C> <C>
Interest Income:
Interest and fees on loans $8,291,913 $7,248,382
Interest and dividends on securities:
Taxable 921,429 889,529
Tax-exempt 78,025 99,757
Other 153,230 74,059
---------- ----------
TOTAL INTEREST INCOME 9,444,597 8,311,727
Interest Expense:
Deposits 4,172,681 3,640,940
Short-term borrowings 104,386 47,409
---------- ----------
TOTAL INTEREST EXPENSE 4,277,067 3,688,349
---------- ----------
NET INTEREST INCOME 5,167,530 4,623,378
Provision for loan losses 245,000 225,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,922,530 4,398,378
Noninterest income:
Trust fees 603,048 532,000
Service charges on deposit accounts 294,247 315,303
Data processing fees 719,024 499,850
Gain (Loss) on sale of securities available-for-sale 63,541 394
Gain (loss) on sale of loans-net 80,437
Other 306,302 131,241
---------- ----------
TOTAL NONINTEREST INCOME 2,066,599 1,478,788
Noninterest expense:
Salaries and employee benefits 2,616,187 2,008,164
Net occupancy expense 277,103 233,955
Equipment expense 509,879 482,834
Other 1,486,156 1,524,927
---------- ----------
TOTAL NONINTEREST EXPENSE 4,889,325 4,249,880
---------- ----------
INCOME BEFORE INCOME TAXES 2,099,804 1,627,286
Income Tax Expense 662,677 550,097
---------- ----------
NET INCOME $1,437,127 $1,077,189
========== ==========
Net income per Common Share (Note B) $ 0.63 $ 0.49
Average shares outstanding (Note B) 2,287,224 2,179,378
</TABLE>
See notes to condensed consolidated unaudited financial statements
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------------------------
1997 1996
<S> <C> <C>
Interest Income:
Interest and fees on loans $23,698,807 $20,916,789
Interest and dividends on securities:
Taxable 2,771,672 3,014,791
Tax-exempt 230,864 319,920
Other 633,933 244,812
----------- -----------
TOTAL INTEREST INCOME 27,335,276 24,496,312
Interest Expense:
Deposits 11,907,408 10,683,142
Short-term borrowings 170,934 120,589
----------- -----------
TOTAL INTEREST EXPENSE 12,078,342 10,803,731
----------- -----------
NET INTEREST INCOME 15,256,934 13,692,581
Provision for loan losses 696,000 751,009
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 14,560,934 12,941,572
Noninterest income:
Trust fees 1,762,886 1,544,315
Service charges on deposit accounts 843,429 907,352
Data processing fees 1,914,962 1,639,051
Gain (Loss) on sale of securities available-for-sale 31,524 11,913
Net Gain (loss) on sale of loans 431,830 --
Other 585,990 391,481
----------- -----------
TOTAL NONINTEREST INCOME 5,570,621 4,494,112
Noninterest expense:
Salaries and employee benefits 7,412,925 5,894,672
Net occupancy expense 786,279 752,162
Equipment expense 1,524,930 1,474,742
Other 4,219,735 4,255,062
----------- -----------
TOTAL NONINTEREST EXPENSE 13,943,869 12,376,638
----------- -----------
INCOME BEFORE INCOME TAXES 6,187,686 5,059,046
Income Tax Expense 1,975,134 1,657,832
----------- -----------
NET INCOME $ 4,212,552 $ 3,401,214
=========== ===========
Net income per Common Share (Note B) $ 1.84 $ 1.56
Average shares outstanding (Note B) 2,287,639 2,182,571
</TABLE>
See notes to condensed consolidated unaudited financial statements
<PAGE> 7
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHARE HOLDERS EQUITY
(UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
Nine month period ended September 30, 1997
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation) on
Additional Securities Available
Common Paid-In Retained For Sale, Net Treasury
Stock Capital Earnings of Tax Stock at Cost
---------- ---------- ----------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 $4,898,173 $8,672,955 $20,024,916 $ (4,984) $ 0
Net income for the nine month period -- 4,212,552
Cash dividends declared
($0.54 per share) -- (1,234,843)
Reduction of repurchase obligation
in ESOP (1,863 shares) 4,657 48,904
Change in market value of ESOP
shares -- (59,144) --
Acquisition of stock for Treasury
(3,842 shares) (112,378)
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of $94,763 -- -- -- 188,936
----------------------------------------------------------------------------------
Balance at September 30, 1997 $4,902,830 $8,662,715 $23,002,625 $183,952 $(112,378)
==================================================================================
</TABLE>
<PAGE> 8
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended
September, 30
----------------------------------
1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Cash received from customers' fees and commissions $ 5,107,267 $ 4,482,199
Cash paid to suppliers and employees (17,118,834) (11,572,299)
Loans originated for sale (18,486,433) (17,360,432)
Proceeds from sales of loans held for sale 18,842,748 15,753,698
Interest received 27,173,417 24,028,489
Interest paid (12,739,745) (10,526,116)
Income taxes paid 2,241,000 (1,518,500)
------------ ------------
Net cash from operating activities 5,019,420 3,287,039
------------ ------------
Cash Flows From Investing Activities:
Proceeds from sales of securities available-for-sale 17,160,080
Proceeds from principal repayments, maturities and calls of
securities available-for-sale 15,046,993 37,694,386
Purchase of securities available-for-sale (37,040,335) (13,848,478)
Net (increase)/decrease in loans (37,312,309) (37,580,477)
Recoveries on loan charge-offs 400,322 (228,010)
Premises and equipment expenditures (331,612) (1,227,092)
------------ ------------
Net cash from investing activities (42,076,861) (15,189,671)
------------ ------------
Cash Flows From Financing Activities:
Net increase/(decrease) in deposits 21,108,268 12,123,087
Net increase/(decrease) in short term borrowings 6,231,502 2,000,000
Common stock retirement 0 (170,625)
Purchase of treasury stock (112,378)
Dividends paid (1,234,843) (2,487,745)
------------ ------------
Net cash from financing activities 25,992,549 11,464,717
------------ ------------
Net Change In Cash And Cash Equivalents (11,064,892) (437,915)
Cash And Cash Equivalents At Beginning Of Year 34,027,263 28,379,656
------------ ------------
Cash And Cash Equivalents At End Of Period $ 22,962,371 $ 27,941,741
============ ============
</TABLE>
<PAGE> 9
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------------
1997 1996
<S> <C> <C>
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 4,212,552 $ 3,401,214
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 1,112,582 896,938
Amortization of intangible assets 135,000 234,000
Provision for loan losses 696,000 751,009
Net (gains)/losses on securities (31,524) (11,913)
Loans originated for sale (18,486,433) (17,360,432)
Proceeds from sales of loans held for sale 18,842,748 15,753,698
Net (gains)/losses on loan sales (431,830) 212,198
Increase/(decrease) in accrued interest and other assets (1,032,243) (542,721)
(Increase)/decrease in accrued expenses and other liabilities 2,568 (46,952)
------------ ------------
Net cash from operating activities $ 5,019,420 $ 3,287,039
============ ============
</TABLE>
<PAGE> 10
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 2,287,639 for 1997 and
2,183,554 for 1996.
NOTE C- 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 nine months ended September 30, 1997.
<PAGE> 11
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 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 and in Ohio.
Material Changes in Financial Condition
- ---------------------------------------
During the nine months ended September 30, 1997 total loan growth was
approximately 15% or $36 million. The commercial business and real estate loan
portfolios accounted for a majority of the increase in loans. The commercial
loan portfolios grew by $21 million or 15%. The majority of the loan growth
occurred at State Bank and Trust, which had a net increase of $28 million.
The primary funding for loan growth was the growth of deposit balances of $21
million during the nine month period. $14 million of the increase in deposits
occurred within the last three months. The Company also borrows from the Federal
Home Loan Bank and through federal funds at other financial institutions. These
borrowings were reduced by over 50% from the prior quarter as deposit balances
increased.
Material Changes in Results of Operations
- -----------------------------------------
Net interest income for the quarter ended September 30, 1997 was $5,167,530 and
increase of $544,152 (12%) over the same period in 1996. For the nine month
period, net interest income was $15,256,934 and increase of $1,564,353 (11%).
These increases were due to an increase in the amount of earning assets and an
increase in yields on those assets.
Total noninterest income for the quarter ended September 30, 1997 increased
$587,811 (40%) to $2,066,599 due primarily to a $219,174 increase in data
processing fees and a $175,061 increase in other income from a $161,276 gain on
the sale of equity securities. For the nine month period, noninterest income
increased $1,076,509 (23%) to $5,570,621 due primarily to an increase of
$218,571 (14%) in trust fees, a $275,911 (17%) increase in data processing fees
and a $431,830 increase in gain on sale of loans which was primarily the result
of a first quarter entry to record the $230,000 estimated value of originated
mortgage servicing rights on $23 million of loans sold between the adoption of
FAS 122 On January 1, 1996 and March 31, 1997.
Total noninterest expense increased $639,445 (15%) for the quarter ended
September 30, 1997 when compared to the same period in 1996 and $1,567,231 (13%)
for the nine months. These increases were due primarily to increases in salaries
and benefits of $608,023 (30%) and $1,518,253 (26%) respectively. The increase
in 1997 was primarily due to staffing increases at State Bank, Rurban Mortgage
Company and Rurban Financial Corp..
The combined result of the factors was an increase in net income of $359,938
(33%) to $1,437,127 for the quarter ended September 30, 1997 when compared to
the same period in 1996 and an increase in net income for the nine month period
of $811,338 (24%) to $4,212,552.
<PAGE> 12
PART 11 - OTHER INFORMATION
---------------------------
Items 1 through 5 are not applicable
- ------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(A) Exhibits
--------
See index on exhibits on pages 15 and 16
(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 , 1997 By
-------------------- --------------------------
Thomas C. Williams
President & CEO
By
--------------------------
Richard C. Warrener
Senior Vice President &
Chief Financial Officer
<PAGE> 13
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,196,973
<INT-BEARING-DEPOSITS> 180,000
<FED-FUNDS-SOLD> 7,765,398
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 71,354,881
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 356,773,697
<ALLOWANCE> 5,497,319
<TOTAL-ASSETS> 463,764,141
<DEPOSITS> 408,874,341
<SHORT-TERM> 1,187,464
<LIABILITIES-OTHER> 4,159,421
<LONG-TERM> 5,000,000
0
0
<COMMON> 4,898,173
<OTHER-SE> 39,644,742
<TOTAL-LIABILITIES-AND-EQUITY> 463,764,141
<INTEREST-LOAN> 24,130,637
<INTEREST-INVEST> 3,002,536
<INTEREST-OTHER> 633,933
<INTEREST-TOTAL> 27,767,106
<INTEREST-DEPOSIT> 11,907,408
<INTEREST-EXPENSE> 12,078,342
<INTEREST-INCOME-NET> 15,688,764
<LOAN-LOSSES> 696,000
<SECURITIES-GAINS> 31,524
<EXPENSE-OTHER> 13,943,869
<INCOME-PRETAX> 6,187,696
<INCOME-PRE-EXTRAORDINARY> 6,187,696
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,212,552
<EPS-PRIMARY> 1.84
<EPS-DILUTED> 1.84
<YIELD-ACTUAL> 4.81
<LOANS-NON> 2,816,000
<LOANS-PAST> 656,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,100,000
<ALLOWANCE-OPEN> 5,066,600
<CHARGE-OFFS> 411,901
<RECOVERIES> 146,620
<ALLOWANCE-CLOSE> 5,497,319
<ALLOWANCE-DOMESTIC> 4,797,319
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 700,000
</TABLE>
