<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 JUNE 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
2,287,851 on August 1, 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 six months ended June 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>
June 30 December 31
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and due from banks $ 19,725,777 $ 18,718,263
Federal funds sold 5,086,113 15,309,000
------------ ------------
TOTAL CASH AND CASH EQUIVALENTS 24,811,890 34,027,263
Interest-bearing deposits in other
financial institutions 180,000 180,000
Securities available for sale 68,885,753 66,635,889
Loans held for sale, net of valuation allowance of
$37,000 in 1997 and $31,119 in 1996 2,242,669 1,875,636
Loans, net of allowance for losses of $5,343,341
in 1997 and $5,066,600 in 1996 341,771,924 313,379,240
Premises and equipment, net 8,735,976 8,827,838
Accrued interest and other assets 9,090,809 8,346,907
------------ ------------
TOTAL ASSETS $455,719,021 $433,272,773
============ ============
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------------- -------------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 40,521,068 $ 42,323,683
Interest bearing 354,462,246 345,442,390
------------- -------------
TOTAL DEPOSITS 394,983,314 387,766,073
Borrowed Funds 13,163,384 - - -
Accrued expenses and other liabilities 4,085,514 4,018,052
------------- -------------
TOTAL LIABILITIES 412,232,212 391,784,125
Common stock subject to repurchase obligation in ESOP (shares
outstanding:
1997 - 328,582, 1996 - 328,582) 9,857,460 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 8,203,083 8,672,955
Retained Earnings 21,977,311 20,024,916
Net unrealized appreciation (depreciation)
on securities available-for-sale (net of tax
of $21,008 in 1997 and $(2,567)
in 1996) 40,782 (4,984)
------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 455,719,021 $ 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
June 30
----------------------
1997 1996
<S> <C> <C>
Interest Income:
Interest and fees on loans $7,968,422 $6,970,866
Interest and dividends on securities:
Taxable 950,939 999,008
Tax-exempt 74,328 108,738
Other 214,189 64,039
---------- ----------
TOTAL INTEREST INCOME 9,207,878 8,142,651
Interest Expense:
Deposits 3,958,182 3,486,198
Short-term borrowings 58,750 61,371
---------- ----------
TOTAL INTEREST EXPENSE 4,016,932 3,547,569
---------- ----------
NET INTEREST INCOME 5,190,946 4,595,082
Provision for losses 235,000 270,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 4,955,946 4,325,082
Noninterest income:
Trust Department 585,393 504,000
Service charges on deposit accounts 275,070 310,052
Data processing fees 572,289 522,187
Gain (Loss) on sale of securities available-for-sale (29,330) 11,519
Net Gain (loss) on sale of loans 150,737 0
Other 116,899 127,632
---------- ----------
TOTAL NONINTEREST INCOME 1,671,058 1,475,390
Noninterest expense:
Salaries and employee benefits 2,423,964 1,934,431
Net occupancy expense 255,909 264,787
Equipment expense 501,974 472,961
Other 1,336,886 1,406,557
---------- ----------
TOTAL NONINTEREST EXPENSE 4,518,733 4,078,736
---------- ----------
INCOME BEFORE INCOME TAXES 2,108,271 1,721,736
Income Tax Expense 674,595 540,398
---------- ----------
NET INCOME $1,433,676 $1,181,338
========== ==========
Net income per Common Share (Note B) $ 0.63 $ 0.54
Average shares outstanding (Note B) 2,287,851 2,183,554
</TABLE>
See notes to condensed consolidated unaudited financial statements
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------------
1997 1996
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 15,406,894 $13,668,407
Interest and dividends on securities:
Taxable 1,850,243 2,125,262
Tax-exempt 152,839 220,163
Other 480,703 170,753
------------ -----------
TOTAL INTEREST INCOME 17,890,679 16,184,585
Interest Expense:
Deposits 7,734,727 7,042,202
Short-term borrowings 66,548 73,180
------------ -----------
TOTAL INTEREST EXPENSE 7,801,275 7,115,382
------------ -----------
NET INTEREST INCOME 10,089,404 9,069,203
Provision for losses 451,000 526,009
------------ -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOSSES 9,638,404 8,543,194
Noninterest income:
Trust Department 1,159,838 1,012,315
Service charges on deposit accounts 549,182 592,049
Data processing fees 1,195,938 1,139,201
Gain (Loss) on sale of securities available-for-sale (32,017) 11,519
Net Gain (loss) on sale of loans 351,393 12,850
Other 279,688 247,390
------------ -----------
TOTAL NONINTEREST INCOME 3,504,022 3,015,324
Noninterest expense:
Salaries and employee benefits 4,796,738 3,886,508
Net occupancy expense 509,176 518,207
Equipment expense 1,015,051 991,908
Other 2,733,579 2,730,135
------------ -----------
TOTAL NONINTEREST EXPENSE 9,054,544 8,126,758
------------ -----------
INCOME BEFORE INCOME TAXES 4,087,882 3,431,760
Income Tax Expense 1,312,457 1,107,735
------------ -----------
NET INCOME $ 2,775,425 $ 2,324,025
============ ===========
Net income per Common Share (Note B) $ 1.21 $ 1.06
Average shares outstanding (Note B) 2,287,851 2,183,554
</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
Six month period ended June 30, 1997
<TABLE>
<CAPTION>
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, 1997 $4,898,173 $ 8,672,955 $ 20,024,916 $ (4,984)
Net income for the six month period -- -- 2,775,425 --
Cash dividends declared ($0.36 per share) -- -- (823,030) --
Change in market value of ESOP shares -- (469,872) -- --
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of $(23,575) -- -- -- 45,766
---------- ----------- ------------ --------
Balance at June 30, 1997 $4,898,173 $ 8,203,083 $ 21,977,311 $ 40,782
========== =========== ============ ========
</TABLE>
<PAGE> 8
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------
1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Cash received from customers' fees and commissions $ 3,184,646 $ 3,003,805
Cash paid to suppliers and employees (8,506,049) (7,782,044)
Loans originated for sale (12,428,726) (14,589,566)
Proceeds from sales of loans held for sale 12,413,086 8,626,009
Interest received 17,542,926 16,038,025
Interest paid (7,664,284) (7,160,586)
Income taxes paid (1,577,000) (1,386,500)
------------ ------------
Net cash from operating activities 2,964,599 (3,250,857)
------------ ------------
Cash Flows From Investing Activities:
Proceeds from sale of securities available for sale 4,979,920 -0-
Proceeds from principal repayments, maturities and calls of
securities available-for-sale 15,529,367 29,689,533
Purchase of securities available-for-sale (22,821,827) (9,170,699)
Net (increase)/decrease in loans (29,095,684) (24,377,350)
Recoveries on loan charge-offs 252,000 241,296
Premises and equipment expenditures (581,343) (179,701)
------------ ------------
Net cash from investing activities (31,737,567) (3,796,921)
------------ ------------
Cash Flows From Financing Activities:
Net increase/(decrease) in deposits 7,217,241 (4,989,023)
Net increase/(decrease) in short term borrowings 13,163,384 2,668,000
Common stock retirement 0 (170,625)
Dividends paid (823,030) (655,312)
------------ ------------
Net cash from financing activities 19,557,595 (3,146,960)
------------ ------------
Net Change In Cash And Cash Equivalents (9,215,373) (10,194,738)
Cash And Cash Equivalents At Beginning Of Year 34,027,263 28,379,656
------------ ------------
Cash And Cash Equivalents At End Of Period $ 24,811,890 $ 18,184,918
============ ============
</TABLE>
<PAGE> 9
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
---------------------
1997 1996
<S> <C> <C>
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 2,775,425 $ 2,324,025
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 773,205 600,813
Amortization of intangible assets 90,000 184,000
Provision for loan losses 451,000 526,009
Net (gains)/losses on securities 32,017 (11,519)
Loans originated for sale (12,428,726) (14,589,566)
Proceeds from sales of loans held for sale 12,413,086 8,626,009
Net (gains)/losses on loan sales (351,393) (12,850)
Increase/(decrease) in accrued interest and other assets (857,477) (694,438)
(Increase)/decrease in accrued expenses and other liabilities 67,462 (203,340)
------------ ------------
Net cash from operating activities $ 2,964,599 $ (3,250,857)
============ ============
</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 2,287,851 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 six months ended June 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.
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 $96 million at June 30, 1997 compared to
$103 million at December 31, 1996. The $7 million decrease 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 June
30, 1997, the entire securities portfolio of $69.1 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 $43,487,000 as of June 30, 1997, an
increase of $1,998,000 over $41,489,000 as of December 31, 1996. The increase
was primarily due to 1997 net income of $2,775,000, offset by cash dividends of
$824,000 and a net change in unrealized appreciation in securities available for
sale (net of tax) of $46,000.
THE CORPORATION'S SUBSIDIARIES exceed the applicable minimum regulatory capital
requirements at June 30, 1997.
AS OF JUNE 30, 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.
<PAGE> 12
Supplemental Information
Nonperforming loans increased $493,000 from December 31, 1996 to $1,548,000 or
0.45% of net loans at June 30, 1997.
Material Changes in Financial Condition
Loans grew $28.4 million from December 31, 1996 to $342 million at June 30,
1997; an annualized rate of 18.1%. Borrowed funds consisting of federal funds
and Federal Home Loan Bank borrowings, were used to partially fund the loan
growth. Borrowed funds increased $13.2 million from December 31, 1996 to $13.2
million at June 30, 1997.
Deposits grew $7.2 million from December 31, 1996 to $395 million at June 30,
1997; an annualized rate of 3.7%.
Material Changes in Results of Operations
Net interest income for the quarter ended June 30, 1997 was $5,190,946, an
increase of $595,864 (13%) over the same period in 1996. For the six month
period, net interest income was $10,089,404 an increase of $1,020,201 (11%).
These increases were due to an increase in the amount of earning assets and
increase in yields on those assets.
Total noninterest income for the quarter ended June 30, 1997, increased $195,668
(13%) to $1,671,058 due mainly to a $150,737 increase in gain on sale of loans
and an increase of $81,393 in Trust fees. For the six month period, noninterest
income increased $488,698 (16%) to $3,504,022 due primarily to an increase of
$147,523 (15%) in trust fees and a $351,393 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 $439,997 (11%) for the quarter ended June
30, 1997 when compared to the same period in 1996 and $927,786 (11%) for the six
months. These increases were due primarily to increases in salaries and benefits
of $489,533 (25%) and $910,230 (23%), respectively.
Income tax expense for the six months was $1,312,457, an increase of $204,722
over the same period in 1996 due the increase in taxable income.
The combined result of these factors was an increase in net income of $252,338
(21%) to $1,433,676 for quarter ended June 30, 1997 when compared to the same
period in 1996 and an increase in net income for the six month period of
$451,400 (19%) to $2,775,425.
<PAGE> 13
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 ,1997 By
-------------------- -------------------------
Thomas C. Williams
President & CEO
By
-------------------------
Richard C. Warrener
Senior Vice President &
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 19,725,777
<INT-BEARING-DEPOSITS> 180,000
<FED-FUNDS-SOLD> 5,086,113
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 68,885,753
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 344,014,593
<ALLOWANCE> 5,343,341
<TOTAL-ASSETS> 455,719,021
<DEPOSITS> 394,983,314
<SHORT-TERM> 13,163,384
<LIABILITIES-OTHER> 12,452,974
<LONG-TERM> 0
0
0
<COMMON> 4,898,173
<OTHER-SE> 30,221,176
<TOTAL-LIABILITIES-AND-EQUITY> 455,719,021
<INTEREST-LOAN> 15,406,894
<INTEREST-INVEST> 2,003,082
<INTEREST-OTHER> 480,703
<INTEREST-TOTAL> 17,890,679
<INTEREST-DEPOSIT> 7,734,727
<INTEREST-EXPENSE> 7,801,275
<INTEREST-INCOME-NET> 10,089,404
<LOAN-LOSSES> 451,000
<SECURITIES-GAINS> (32,017)
<EXPENSE-OTHER> 9,054,544
<INCOME-PRETAX> 4,087,882
<INCOME-PRE-EXTRAORDINARY> 4,087,882
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,775,425
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
<YIELD-ACTUAL> 0
<LOANS-NON> 1,210,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,066,600
<CHARGE-OFFS> 426,259
<RECOVERIES> 252,000
<ALLOWANCE-CLOSE> 5,343,341
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
