<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, 1998.
--------------
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
4,053,596 on July 31, 1998.
1
<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,
1998 are not necessarily indicative of the results for the complete year.
2
<PAGE> 3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
---------- -----------
(Unaudited) (Note)
ASSETS
<S> <C> <C>
Cash and due from banks $ 16,750 559 $ 15,552,385
Federal funds sold 15,403,385 6,670,000
------------ -------------
TOTAL CASH AND CASH EQUIVALENTS 32,153,944 22,222,385
Interest-bearing deposits in other
financial institutions 536,206 529,777
Securities available for sale 73,989,484 71,683,120
Loans held for sale, net of valuation allowance of
$-0- in 1998 and $-0- in 1997 12,879,619 4,404,327
Loans, net of allowance for losses of $5,307,791
in 1998 and $5,239,601 in 1997 350,981,149 354,207,709
Premises and equipment, net 10,410,879 8,583,961
Accrued interest and other assets 10,330,473 9,739,811
------------ -------------
TOTAL ASSETS $491,281,754 $471,371,090
============ ===========
</TABLE>
(Continued)
3
<PAGE> 4
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
------------ -------------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 39,780,796 $ 46,149,132
Interest bearing 378,858,947 369,032,154
------------ -------------
Total Deposits 418,639,743 415,181,286
Federal funds purchased 0 4,929,000
Advances from Federal Home Loan Bank (FHLB) 27,576,032 7,529,867
Accrued interest payable 1,616,567 1,577,140
Other liabilities 3,190,144 3,059,869
-------------- --------------
TOTAL LIABILITIES 451,022,486 432,277,162
Common stock subject to repurchase obligation
in ESOP (shares outstanding:
1998 - 653,224, 1997 - 326,612) 12,411,256 10,124,972
Unearned ESOP shares (unearned shares:
1998 - 86,222, 1997 - 43,111) (1,299,000) (1,299,000)
Common stock, stated value $2.50 per share
shares authorized: 10,000,000;
shares issued: 1998-4,575,702, 1997 -2,287,851;
shares outstanding:
1998 - 3,486,594, 1997 - 1,743,297 9,806,196 4,903,098
Additional paid-in capital 741,264 7,930,646
Retained earnings 25,093,458 23,891,983
Net unrealized appreciation (depreciation)
on securities available-for-sale (net of tax
of $94,120 in 1998 and $106,988 in 1997) 182,705 218,840
Treasury stock, at cost 1998 - 435,884 shares at cost,
1997 - 217,942 shares at cost (6,676,611) (6,676,611)
--------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $491,281,754 $471,371,090
============ ============
</TABLE>
See notes to condensed consolidated unaudited financial statements
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statement report dated January 30, 1998.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
-------------------------------
1998 1997
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 8,804,232 $ 7,968,422
Interest and dividends on securities:
Taxable 1,001,816 950,939
Tax-exempt 68,521 74,328
Other 230,521 214,189
------------ -----------
TOTAL INTEREST INCOME 10,105,090 9,207,878
Interest Expense:
Deposits 4,358,348 3,958,182
Borrowings 320,104 58,750
------------ -----------
TOTAL INTEREST EXPENSE 4,678,452 4,016,932
------------ -----------
NET INTEREST INCOME 5,426,638 5,190,946
Provision for loan losses 270,000 235,000
------------ -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,156,638 4,955,946
Noninterest income:
Data processing fees 654,229 572,289
Trust fees 712,148 585,393
Service charges on deposit accounts 297,899 275,070
Net gain (loss) on sale of securities 4,161 (29,330)
Net gain on sale of loans 413,455 150,737
Other 216,568 116,899
------------- ----------
TOTAL NONINTEREST INCOME 2,298,460 1,671,058
Noninterest expense:
Salaries and employee benefits 3,292,776 2,423,964
Net occupancy expense 261,188 255,909
Equipment expense 593,519 501,974
Other 1,838,873 1,336,886
------------- -------------
TOTAL NONINTEREST EXPENSE 5,986,356 4,518,733
------------- -------------
INCOME BEFORE INCOME TAXES 1,468,742 2,108,271
Income tax expense 450,903 674,595
------------- -------------
NET INCOME $ 1,017,839 $ 1,433,676
============= =============
Basic earnings per Common Share (Note B) $ 0.25 $ 0.31
============= =============
Diluted earnings per Common Share (Note B) $ 0.25 $ 0.31
============= =============
</TABLE>
See notes to condensed consolidated unaudited financial statements
5
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended
JUNE 30
-----------------------
1998 1997
---- ----
<S> <C> <C>
Net income $1,017,839 $1,433,676
Other comprehensive income, net of tax:
Change in unrealized gain (loss) on securities, (48,951) 343,460
net of tax of $ (25,223) in 1998 and $176,933 in 1997
Less: Reclassification adjustment for accumulated
gains (losses) included in net income, net of tax
of $1,415 in 1998 and $ (9,972) in 1997 2,746 (19,358)
----- --------
Other comprehensive income (46,205) 324,102
-------------- ---------
Comprehensive income $ 971,634 $1,757,778
============== ============
</TABLE>
See notes to condensed consolidated unaudited financial statements
6
<PAGE> 7
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
JUNE 30
------------------------------
1998 1997
<S> <C> <C>
Interest Income:
Interest and fees on loans $17,313,066 $15,406,894
Interest and dividends on securities:
Taxable 1,946,632 1,850,243
Tax-exempt 138,046 152,839
Other 372,903 480,703
----------- -----------
TOTAL INTEREST INCOME 19,770,647 17,890,679
Interest Expense:
Deposits 8,591,847 7,734,727
Borrowings 543,648 66,548
----------- ----------
TOTAL INTEREST EXPENSE 9,135,495 7,801,275
----------- ----------
NET INTEREST INCOME 10,635,152 10,089,404
Provision for loan losses 540,000 451,000
------------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 10,095,152 9,638,404
Noninterest income:
Data processing fees 1,363,004 1,195,938
Trust fees 1,345,742 1,159,838
Service charges on deposit accounts 567,793 549,182
Net gain (loss) on sale of securities 37,836 (32,017)
Net gain on sale of loans 898,323 351,393
Other 447,742 279,688
------------ ----------
TOTAL NONINTEREST INCOME 4,660,440 3,504,022
Noninterest expense:
Salaries and employee benefits 6,552,795 4,796,738
Net occupancy expense 533,179 509,176
Equipment expense 1,152,880 1,015,051
Other 3,523,402 2,732,983
------------- ----------
TOTAL NONINTEREST EXPENSE 11,762,256 9,053,948
------------- ----------
INCOME BEFORE INCOME TAXES 2,993,336 4,088,478
Income tax expense 963,897 1,312,457
------------- ----------
NET INCOME $ 2,029,439 $ 2,776,021
============= ============
Basic earnings per Common Share (Note B) $ 0.50 $ 0.61
============= ============
Diluted earnings per Common Share (Note B) $ 0.50 $ 0.61
============= ============
</TABLE>
See notes to condensed consolidated unaudited financial statements
7
<PAGE> 8
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
JUNE 30
----------------------
1998 1997
---- ----
<S> <C> <C>
Net income $ 2,029,439 $ 2,776,021
Other comprehensive income, net of tax:
Change in unrealized gain (loss) on securities, (61,107) 66,898
net of tax of $ (25,223) in 1998 and $34,460 in 1997
Less: Reclassification adjustment for accumulated
gains (losses) included in net income, net of tax
of $12,864 in 1998 and $ (10,885) in 1997 24,972 (21,132)
----------- -----------
Other comprehensive income (36,135) 45,766
----------- -----------
Comprehensive income $ 1,993,304 $ 2,821,787
=========== ===========
</TABLE>
See notes to condensed consolidated unaudited financial statements
8
<PAGE> 9
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<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>
Balance at January 1, 1998 4,903,098 7,930,646 23,891,983 218,840 (6,676,611)
Net income for the six month period -- -- 2,029,439 --
Cash dividends declared ($0.20 per share) -- -- (827,964) -- --
2 for 1 stock split (issuance of 4,903,098 (4 903,098)
2,287,851 common shares and
326,612 common shares subject
to repurchase obligation in ESOP
Adjustment for common stock subject to
repurchase agreement -- (2,286,284) -- -- --
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of ($ 12,286) -- -- (36,,135) --
----------- --------- ---------- ------- ----------
Balance at June 30, 1998 $ 9,806,196 $ 741,264 $ 25,093,458 $182,705 (6,676,611)
=========== ========= ========== ======= ==========
</TABLE>
See notes to condensed consolidated unaudited financial statements
9
<PAGE> 10
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
JUNE 30
------------------------
1998 1997
---------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Cash received from customers' fees and commissions $ 3,724,281 $ 3,184,646
Cash paid to suppliers and employees (11,431,864) (8,427,694)
Loans originated for sale (38,357,230) (12,428,726)
Proceeds from sales of loans held for sale 30,780,261 12,351,481
Interest received 19,899,585 17,542,926
Interest paid (9,096,068) (7,664,284)
Income taxes paid (1,110,000) (1,577,000)
------------ ------------
Net cash from operating activities (5,591,035) 2,981,349
------------ ------------
Cash Flows From Investing Activities:
Net decrease in interest bearing deposits
in other financial institutions (6,429)
Proceeds from principal repayments, maturities and calls of:
Securities available for sale 12,960,636
Proceeds from sales of available-for-sale 19,169,759 20,357,913
Purchase of securities available-for-sale (34,447,926) (22,821,827)
Net (increase)/decrease in loans 2,539,792 (29,095,684)
Recoveries on loan charge-offs 146,768 252,000
Premises and equipment expenditures (2,587,664) (446,123)
------------ ------------
Net cash from investing activities (2,225,064) (31,753,721)
------------ ------------
Cash Flows From Financing Activities:
Net increase/(decrease) in deposits 3,458,457 7,217,241
Net charge in federal funds purchased (4,929,000) --
Proceeds from FHLB advances 21,100,000 13,163,384
Repayment of FHLB advances (1,053,835) --
Dividends paid (827,964) (823,626)
------------ ------------
Net cash from financing activities 17,747,658 19,556,999
------------ ------------
Net Change In Cash And Cash Equivalents 9,931,559 (9,215,373)
Cash And Cash Equivalents At Beginning Of Year 22,222,385 34,027,263
------------ ------------
Cash And Cash Equivalents At End Of Period $ 32,153,944 $ 24,811,890
============ ============
</TABLE>
See notes to condensed consolidated unaudited financial statements
10
<PAGE> 11
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
JUNE 30
----------------------
1998 1997
<S> <C> <C>
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 2,029,439 $ 2,776,021
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 761,328 737,985
Amortization of intangible assets 139,225 90,000
Provision for loan losses 540,000 451,000
(Gain)/loss on sale of securities available for sale (37,836) 32,017
Loans originated for sale (38,357,230) (12,428,726)
Proceeds from sales of loans held for sale 30,780,261 12,351,481
Net (gains)/losses on loan sales (898,323) (351,393)
Increase/(decrease) in other liabilities and interest payable 181,988 (743,902)
(Increase)/decrease in other assets and interest receivable (729,887) 67,462
------------ ------------
Net cash from operating activities $ (5,591,035) $ 2,981,945
============ ============
</TABLE>
11
<PAGE> 12
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, 1997.
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 basic earnings per common share was 4,053,596 for
1998 and 4,575,702 for 1997. The number of shares used in the computation of
diluted earnings per common share was 4,069,596 for 1998 and 4,575,702 for 1997.
NOTE C-- ACCOUNTING STANDARD IMPLEMENTED IN 1998
SFAS No. 130, Reporting Comprehensive Income, requires comprehensive income to
be reported for all periods. Comprehensive income includes both net income and
other comprehensive income. Other comprehensive income includes the change in
unrealized gains and losses on securities available for sale.
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 six months ended June 30, 1998.
12
<PAGE> 13
NOTE E - BENEFIT PLANS
The Company's Board of Directors and its shareholders adopted a stock option
plan in 1997. Under the terms of this plan, options for up to 400,000 shares of
the Company's common stock may be granted to employees and directors of the
Company and its subsidiaries. The exercise price of the options is determined at
the time of grant by a committee of the Board of Directors and cannot be less
than the fair market value of the stock on the date of grant.
SFAS No. 123 requires proforma disclosures for companies that do not adopt its
fair value accounting method for stock-based employee compensation. Accordingly,
the following proforma information presents net income and earnings per common
share had the fair value method been used to measure compensation cost for stock
option plans. Compensation cost actually recognized for stock options was $-0-
for the six months ended June 30, 1998 and 1997.
The fair value of options granted during 1998 and 1997 is estimated using the
following weighted average information: risk-free interest rate of 6.5%,
expected life of 10 years, expected volatility of stock price of .05 and
expected dividends of 2.39% per year.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net income for the six months ended June 30 $2,029,439 $2,776,021
Proforma net income for the six months ended June 30 1,882,267 2,776,021
Basic earnings per common share as reported $.50 $.61
Diluted earnings per common share as reported $.50 $.61
Proforma basic earnings per common share $.46 $.61
Proforma diluted earnings per common share $.46 $.61
</TABLE>
In future years, the proforma effect of not applying this standard is expected
to increase as additional options are granted.
Stock option plans are used to reward employees and provide them with an
additional equity interest. Options are issued for 10 year periods with varying
vesting periods. Information about option grants follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
NUMBER OF AVERAGE AVERAGE
OUTSTANDING EXERCISE FAIR VALUE
OPTIONS PRICE OF GRANTS
----------- -------- -----------
<S> <C> <C> <C>
Outstanding, January 1, 1997 -- -- --
Granted, October 22, 1997 179,000 14.19 3.77
Forfeiture (4,000) 14.19 3.77
Grants, June 15, 1998 45,500 18.50 5.33
Outstanding, June 30, 1998 220,500 15.08 7.08
</TABLE>
13
<PAGE> 14
The weighted average remaining contractual life of options outstanding at March
31, 1998 was approximately nine years. There were no stock options exercisable
at March 31, 1998.
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.
Reliance Financial Services, N.A., a wholly owned subsidiary of State Bank,
provides trust and financial services to customers nationwide.
Rurban Mortgage Company, a wholly owned subsidiary of State Bank, operates a
residential mortgage loan production office in Clearwater, Florida. This office
underwrites, processes, closes and sells residential mortgages acquired through
a network of real estate mortgage lenders in the Tampa Bay market and community
banks in Ohio, including the four Rurban subsidiary banks.
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 $120 million at June 30, 1998, compared to
$99 million at December 31, 1997. The $21 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 June
30, 1998, the entire securities portfolio of $74.0 million was classified as
available-for-sale.
CAPITAL RESOURCES
TOTAL SHAREHOLDER'S EQUITY PLUS COMMON STOCK SUBJECT TO REPURCHASE OBLIGATION IN
ESOP, NET OF UNEARNED ESOP SHARES was $40,259,000 as of June 30, 1998, an
increase of $1,165,000 over $39,094,000 as of December 31, 1997. The increase
was primarily due to 1998 net income of $2,029,400, offset by dividends declared
of $828,000 and a net change in unrealized appreciation (depreciation) in
securities available for sale, net of tax of $36,000.
THE CORPORATION'S SUBSIDIARIES exceed the applicable minimum regulatory capital
requirements at June 30, 1998.
AS OF JUNE 30, 1998, 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.
IMPACT OF YEAR 2000
The Corporation has conducted a comprehensive review of its computer systems to
identify applications that could be affected by the Year 2000 issue, and is
implementing a plan to address the issue. The Corporation's data processing is
14
<PAGE> 15
performed primarily in-house by RDSI; however, software and hardware utilized is
under maintenance agreements with third party vendors. The Corporation has
tested its primary business applications for Year 2000 compliance and has found
these primary applications to be Year 2000 ready. The next battery of testing
will be performed on the secondary business applications. This testing on the
secondary business applications will be completed by December 31, 1999. In
addition, the Corporation has identified certain of its hardware and software
equipment that will not be Year 2000 compliant and intends to purchase new
equipment and software prior to June 30, 1999. Management expects the costs of
addressing the impact of the Year 2000 to have significant impact on the
Corporation's consolidated financial position. The areas of impact in preparing
for Year 2000 are diverse and have a substantial impact on expenses. In addition
to direct and indirect costs, there has been/will be substantial redirection of
efforts normally dedicated to loan production.
SUPPLEMENTAL INFORMATION
Non performing loans increased $171,000 from December 31, 1997 to $2,936,000 or
0.81% of net loans at June 30, 1998.
MATERIAL CHANGES IN FINANCIAL CONDITION
Loans and loans held for sale increased $5.2 million from December 31, 1997 to
$364 million at June 30, 1998; an annualized rate of 2.9%.
Deposits grew $3.5 million from December 31, 1997 to $419 million at June 30,
1998; an annualized rate of 1.7%.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net interest income for the quarter ended June 30, 1998 was $5,426,628, an
increase of $235,692 over the same period in 1997. This increase was due to an
increase in the amount of earning assets and a favorable increase in yields on
those assets.
The expansion of existing sources and the development of new sources of
noninterest income is one of the key elements of the Company's strategic plan.
Total noninterest income increased $627,402 to $2,298,460 due mainly to
increases in net gains on sales of loans of $262,718, data processing fees of
$81,940 and trust fees of $126,755.
Total Noninterest expenses increased $1,467,623 for the quarter ended June 30,
1998 when compared to the same period 1997. The increase in salaries and
benefits of $868,812 represented 59% of the total increase in non-interest
expense. This increase was primarily due to the following factors; during 1997,
a number of human resource and technology investments were made, such as; the
start up of Rurban Mortgage division, the acquisition of S&L Financial Service
and the January 1, 1998 combination of those entities into a separate company.
To assure prudent management of our expansion efforts, additional staffing
investments were made in the areas of trust services, data processing, credit
quality/loan review, operations and holding company administration.
Income tax expense for the quarter was $450,903, a decrease of $223,692 over the
same period in 1997 due to a decrease in taxable income.
The result of all of these factors was a decrease in net income of $415,262 to
$1,017,839 for the three months ended June 30, 1998 when compared to the same
period in 1997.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's quantitative and
qualitative market risks since December 31, 1997.
15
<PAGE> 16
PART II - OTHER INFORMATION
---------------------------
ITEM 5: MEETING OF SHAREHOLDERS
As discussed in the Company's Proxy Statement for the 1998 Annual Meeting of
Shareholders, any qualified shareholder of the Company who intends to submit a
proposal to the Company at the 1999 Annual Meeting of Shareholders must submit
such proposal to the Company not later than November 29, 1998 to be considered
for inclusion in the Company's Proxy Statement and form of Proxy (the "Proxy
Materials") relating to that meeting. If a shareholder intends to present a
proposal at the 1999 Annual Meeting of Shareholders, but has not sought the
inclusion of such proposal in the Company's Proxy Materials, such proposal must
be received by the Company prior to February 16, 1999 or the Company's
management proxies for the 1999 Annual Meeting will be entitled to use their
discretionary voting authority should such proposal then be raised, without any
discussion of the matter in the Company's Proxy Materials.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
See index on exhibits on pages 18 and 19
(B) REPORTS ON FORM 8-K
None
16
<PAGE> 17
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 August 14, 1998 By /s/ Thomas C. Williams
---------------- --------------------------
Thomas C. Williams
President & CEO
By /s/ Richard C. Warrener
--------------------------
Richard C. Warrener
Executive Vice President &
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 16,750,559
<INT-BEARING-DEPOSITS> 536,206
<FED-FUNDS-SOLD> 15,403,385
<TRADING-ASSETS> 0
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<TOTAL-ASSETS> 491,281,754
<DEPOSITS> 418,639,743
<SHORT-TERM> 10,100,000
<LIABILITIES-OTHER> 4,806,711
<LONG-TERM> 17,476,032
0
0
<COMMON> 9,806,196
<OTHER-SE> 30,453,072
<TOTAL-LIABILITIES-AND-EQUITY> 491,281,754
<INTEREST-LOAN> 17,313,066
<INTEREST-INVEST> 2,084,678
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<INTEREST-TOTAL> 19,770,647
<INTEREST-DEPOSIT> 8,591,847
<INTEREST-EXPENSE> 9,135,495
<INTEREST-INCOME-NET> 10,635,152
<LOAN-LOSSES> 540,000
<SECURITIES-GAINS> 37,836
<EXPENSE-OTHER> 11,762,256
<INCOME-PRETAX> 2,993,336
<INCOME-PRE-EXTRAORDINARY> 2,993,336
<EXTRAORDINARY> 0
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<NET-INCOME> 2,029,439
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
<YIELD-ACTUAL> 4.51
<LOANS-NON> 1,187,024
<LOANS-PAST> 1,778,246
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<ALLOWANCE-OPEN> 5,239,601
<CHARGE-OFFS> 618,578
<RECOVERIES> 146,768
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<ALLOWANCE-DOMESTIC> 2,623,362
<ALLOWANCE-FOREIGN> 0
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</TABLE>
