<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, 1999.
-------------
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
4,140,718 on August 1, 1999.
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, 1999 are not
necessarily indicative of the results for the complete year.
2
<PAGE> 3
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
June 30 December 31
1999 1998
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and due from banks $ 13,223,135 $ 16,790,423
Federal funds sold 47,000 8,718,721
------------ ------------
Total cash and cash equivalents 13,270,135 25,509,144
Interest-bearing deposits in other
financial institutions 180,000 180,000
Securities available for sale 84,296,618 82,142,929
Loans held for sale, net of valuation allowance
($-0-) 13,133,517 18,509,275
Loans, net of allowance for losses of $5,631,044
in 1999 and $5,408,854 in 1998 440,314,818 388,560,699
Premises and equipment, net 11,265,817 11,400,045
Accrued interest and other assets 12,060,750 10,852,687
------------ ------------
Total assets $574,521,655 $537,154,779
============ ============
</TABLE>
(Continued)
3
<PAGE> 4
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
June 30 December 31
1999 1998
------------- -------------
(Unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing $ 43,978,673 $ 48,135,487
Interest bearing 432,459,754 402,677,736
------------- -------------
Total deposits 476,438,427 450,813,223
Federal funds purchased 12,040,000 9,500,000
Short term note payable 5,200,000 --
Advances from Federal Home Loan Bank (FHLB) 33,164,783 28,890,290
Accrued interest payable 1,752,431 1,685,437
Other liabilities 3,330,412 4,362,879
------------- -------------
Total liabilities 531,926,053 495,251,829
Shareholders' equity
Common stock, stated value $2.50 per share
shares authorized: 10,000,000;
shares issued: 4,575,702;
shares outstanding:
1999 - 4,140,718, 1998 - 4,140,518 11,439,255 11,439,255
Additional paid-in capital 11,518,727 11,518,727
Retained earnings 28,012,507 26,508,897
Accumulated other comprehensive income, net of
tax of $(355,202) in 1999 and $104,536 in 1998 (689,510) 202,922
Less: Unearned ESOP shares (unearned shares:
1999 - 55,240 1998 - 60,756) (1,022,269) (1,100,905)
Less: Treasury stock, at cost 1999 - 434,984 shares
at cost, 1998 - 435,184 shares at cost (6,663,108) (6,665,946)
------------- -------------
Total shareholders' equity 42,595,602 41,902,950
------------- -------------
Total liabilities and shareholders' equity $ 574,521,655 $ 537,154,779
============= =============
</TABLE>
See notes to condensed consolidated unaudited financial statements
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
4
<PAGE> 5
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Three Months Ended
June 30
---------------------------
1999 1998
<S> <C> <C>
Interest income
Interest and fees on loans $ 9,770,932 $ 8,804,232
Interest and dividends on securities:
Taxable 1,066,030 1,001,816
Tax-exempt 114,629 68,521
Other 125,097 230,521
----------- -----------
Total interest income 11,076,688 10,105,090
Interest expense
Deposits 4,544,338 4,358,348
Borrowings 755,681 320,104
----------- -----------
Total interest expense 5,300,019 4,678,452
----------- -----------
Net interest income 5,776,669 5,426,638
Provision for loan losses 276,000 270,000
----------- -----------
Net interest income after provision
for loan losses 5,500,669 5,156,638
Noninterest income
Data processing fees 887,540 654,229
Trust fees 611,034 712,148
Service charges on deposit accounts 350,629 297,899
Net gain on sale of securities 1,183 4,161
Net gain on sale of loans 410,971 413,455
Other 623,510 216,568
----------- -----------
Total noninterest income 2,884,867 2,298,460
Noninterest expense
Salaries and employee benefits 3,702,553 3,292,776
Net occupancy expense 294,385 261,188
Equipment expense 731,992 593,519
Other 1,773,185 1,838,873
----------- -----------
Total noninterest expense 6,502,115 5,986,356
----------- -----------
Income before income taxes 1,883,421 1,468,742
Income tax expense 608,770 450,903
----------- -----------
Net income $ 1,274,651 $ 1,017,839
=========== ===========
Basic and diluted earnings per common share (Note B) $ 0.31 $ 0.25
=========== ===========
</TABLE>
See notes to condensed consolidated unaudited financial statements
5
<PAGE> 6
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Six Months Ended
June 30
---------------------------
1999 1998
<S> <C> <C>
Interest Income
Interest and fees on loans $18,826,234 $17,313,066
Interest and dividends on securities:
Taxable 2,063,867 1,946,632
Tax-exempt 233,969 138,046
Other 237,724 372,903
----------- -----------
Total interest income 21,361,794 19,770,647
Interest Expense
Deposits 8,972,607 8,591,847
Borrowings 1,165,340 543,648
----------- -----------
Total interest expense 10,137,947 9,135,495
----------- -----------
Net interest income 11,223,847 10,635,152
Provision for loan losses 552,000 540,000
----------- -----------
Net interest income after provision
for loan losses 10,671,847 10,095,152
Noninterest income
Data processing fees 1,782,646 1,363,004
Trust fees 1,259,676 1,345,742
Service charges on deposit accounts 687,600 567,793
Net gain (loss) on sale of securities 1,915 37,836
Net gain on sale of loans 779,074 898,323
Other 951,178 447,742
----------- -----------
Total noninterest income
5,462,089 4,660,440
Noninterest expense
Salaries and employee benefits 7,245,419 6,552,795
Net occupancy expense 594,389 533,179
Equipment expense 1,445,376 1,152,880
Other 3,546,506 3,523,402
----------- -----------
Total noninterest expense 12,831,690 11,762,256
----------- -----------
Income before income taxes 3,302,246 2,993,336
Income tax expense 975,545 963,897
----------- -----------
Net income $ 2,326,701 $ 2,029,439
=========== ===========
Basic and diluted earnings per common share (Note B) $ 0.57 $ 0.50
=========== ===========
</TABLE>
See notes to condensed consolidated unaudited financial statements
6
<PAGE> 7
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Accumulated
Additional Other Unearned
Common Paid-In Retained Comprehensve ESOP Treasury
Stock Capital Earnings Income, Net of Tax Shares Stock Totals
----------- ----------- ----------- ------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $11,439,255 $11,518,727 $26,508,897 $ 202,922 $(1,100,905) $(6,665,946) $41,902,950
Net income for the six month
period -- -- 2,326,701 -- -- -- 2,326,701
Net change in unrealized
appreciation (depreciation)
on securities available for
sale, net of tax of $459,738 -- -- -- (892,432) -- -- (892,432)
-----------
Total comprehensive income 1,434,269
Cash dividends declared
($0.20 per share) -- -- (823,091) -- -- -- (823,091)
Paydown of ESOP loan -- -- -- -- 78,636 -- 78,636
Issuance of 200 treasury
shares due to exercise of
stock options -- -- -- -- -- 2,838 2,838
--------------------------------------------------------------------------------------------------
Balance at June 30, 1999 $11,439,255 $11,518,727 $28,012,507 $(689,510) $(1,022,269) $(6,663,108) $42,595,602
==================================================================================================
</TABLE>
See notes to condensed consolidated unaudited financial statements.
7
<PAGE> 8
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Accumulated
Additional Other Unearned
Common Paid-In Retained Comprehensive ESOP Treasury
Stock Capital Earnings Income, Net of Tax Shares Stock Totals
----------- ----------- ----------- ------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 $ 5,719,628 $17,239,088 $23,891,983 $218,840 $(1,299,000) $(6,676,611) $39,093,928
Net income for the six month
period -- -- 2,029,439 -- -- -- 2,029,439
Net change in unrealized
appreciation (depreciation)
on securities available for
sale, net of tax of $18,615 -- -- -- (36,135) --
-- (36,135)
-----------
Total comprehensive income 1,993,304
Declaration of a 2 for 1
stock split and issuance of
2,287,851 common shares 5,719,627 (5,719,627) -- -- -- -- --
Cash dividends declared
($.20 per share) -- -- (827,964) -- -- -- (827,964)
--------------------------------------------------------------------------------------------------
Balance at June 30, 1998 $11,439,255 $11,519,461 $25,093,458 $182,705 $(1,299,000) $(6,676,611) $40,259,268
==================================================================================================
</TABLE>
See notes to condensed consolidated unaudited financial statements.
8
<PAGE> 9
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Six Months Ended
June 30
-------------------------------
1999 1998
<S> <C> <C>
Cash Flows From Operating Activities:
Cash received from customers' fees and commissions $ 4,681,100 $ 3,724,281
Cash paid to suppliers and employees (12,247,029) (11,431,864)
Loans originated for sale (68,630,226) (38,357,230)
Proceeds from sales of loans held for sale 74,785,058 30,780,261
Interest received 20,632,531 19,899,585
Interest paid (10,070,953) (9,096,068)
Income taxes paid (1,365,000) (1,110,000)
------------ ------------
Net cash from operating activities 7,785,481 (5,591,035)
Cash Flows From Investing Activities:
Net decrease in interest earning desposits
in other financial institutions -- (6,429)
Proceeds from principal repayments, maturities and calls of
Securities available for sale 16,577,567 12,960,636
Proceeds from sales of available for sale securities 6,639,566 19,169,759
Purchase of securities available for sale (26,730,112) (34,447,926)
Net change (increase)/decrease in loans (52,624,645) 2,539,792
Recoveries on loan charge-offs 318,526 146,768
Premises and equipment expenditures (610,852) (2,587,664)
------------ ------------
Net cash from investing activities (56,429,950) (2,225,064)
Cash Flows From Financing Activities:
Net change in deposits 25,625,204 3,458,457
Net change in federal funds purchased 2,540,000 (4,929,000)
Proceeds from short term note payable 5,200,000 --
Proceeds from FHLB advances 5,500,000 21,100,000
Repayment of FHLB advances (1,225,507) (1,053,835)
Proceeds from exercise of stock options 2,838 --
Dividends paid (1,237,075) (827,964)
------------ ------------
Net cash from financing activities 36,405,460 17,747,658
------------ ------------
Net change in cash and cash equivalents (12,239,009) 9,931,559
Cash and cash equivalents at beginning of period 25,509,144 22,222,385
------------ ------------
Cash and cash equivalents at end of period $ 13,270,135 $ 32,153,944
============ ============
</TABLE>
See notes to condensed consolidated unaudited financial statements
9
<PAGE> 10
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Six Months Ended
June 30
------------------------------
1999 1998
<S> <C> <C>
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 2,326,701 2,029,439
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 979,787 761,328
Amortization of intangible assets 105,000 139,225
Provision for loan losses 552,000 540,000
Net gain on sale of securities available for sale (1,915) (37,836)
Loans originated for sale (68,630,226) (38,357,230)
Proceeds from sales of loans held for sale 74,785,058 30,780,261
Net gain on loan sales (779,074) (898,323)
Net gain on sale of fixed assets (225,672) --
Paydown of ESOP loan 78,636 --
Increase/(decrease) in other liabilities and interest payable (551,489) 181,988
(Increase)/decrease in other assets and interest receivable (853,325) (729,887)
------------ ------------
Net cash from operating activities $ 7,785,481 $ (5,591,035)
============ ============
</TABLE>
10
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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, 1998.
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 4,084,102 and
4,082,621 for the three and six months ended June 30, 1999 and 4,066,316 and
4,066,316 for the three and six months ended June 30, 1998. The number of shares
used in the computation of diluted earnings per common share was 4,088,650 and
4,091,717 for the three and six months ended June 30, 1999 and 4,082,316 and
4,082,716 for the three and six months ended June 30, 1998.
NOTE C-- ACCOUNTING STANDARD IMPLEMENTED IN 1999
No new accounting standards have been implemented during the first six months of
1999.
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 and six months ended June 30, 1999.
NOTE E - BENEFIT PLANS
The Company's Board of Directors 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 key employees and directors of the Company and its
subsidiaries. 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. 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, 1999 and 1998.
11
<PAGE> 12
NOTE E - BENEFIT PLANS (Continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net income for the six months ended June 30 $2,326,701 $2,029,439
Proforma net income for the six months ended June 30 2,285,386 1,966,799
Basic and diluted earnings per common share as reported $ .57 $ .50
Proforma basic and diluted earnings per common share $ .56 $ .46
</TABLE>
The proforma effects are computed using option pricing models, using the
following weighted-average assumptions as of
grant date.
<TABLE>
<CAPTION>
1999 Grant 1998 Grant 1997 Grant
---------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rate 5.38% 5.38% 6.50%
Expected option life 10 10 10
Expected stock price volatility 7.13% 5.45% 5.45%
Dividend yield 2.67% 2.16% 2.39%
</TABLE>
In future years, the proforma effect of not applying this standard is expected
to increase as additional options are granted.
Information about option grants follows:
<TABLE>
<CAPTION>
Number of
Outstanding Exercise
Options Price
------- -----
<S> <C> <C>
Outstanding, January 1, 1999 217,800 $15.09
Granted 4,750 18.50
Exercised (200) 14.19
-------
Outstanding, June 30, 1999 222,350 15.15
</TABLE>
Options outstanding and exercisable at June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
----------- -----------
Weighted Average Weighted
Remaining Average
Exercise Contractual Exercise
Prices Number Life (in years) Number Price
------ ------ --------------- ------ -----
<S> <C> <C> <C> <C>
$14.19 172,100 7.84 33,700 $14.19
$18.50 50,250 8.96 9,000 --
------- ------
Outstanding at year end 222,350 8.09 42,700 14.19
</TABLE>
NOTE F - SEGMENT INFORMATION
The reportable segments are determined by the products and services offered,
primarily distinguished between banking, mortgage banking and data processing
operations. Other segments include the accounts of the holding company, Rurban
Financial Corp., which provides management services to its subsidiaries;
Reliance Financial Services, N.A., which provides trust and financial services
to customers nationwide; and Rurban Life, which provides insurance products to
customers of the Corporation's subsidiary banks. Information reported internally
for performance assessment follows.
12
<PAGE> 13
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
NOTE F - SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
1999
- ---- Mortgage Data Total Intersegment Consolidated
Banking Banking Processing Other Segments Elimination Totals
------- ------- ---------- ----- -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement information:
- -----------------------------
Net interest income (expense) $ 11,033,077 $ 285,320 $ (75,329) $ (19,221) $ 11,223,847 $ -- $ 11,223,847
Other revenue - external
customers 1,374,470 535,085 2,154,366 1,478,491 5,542,412 (80,323) 5,462,089
Other revenue - other segments (28,545) -- 678,237 28,545 678,237 (678,237) --
------------ ----------- ---------- ---------- ------------ ------------ ------------
Net interest income
and other revenue 12,379,002 820,405 2,757,274 1,487,815 17,444,496 (758,560) 16,685,936
Noninterest expense 7,716,307 801,262 2,480,234 2,592,447 13,590,250 (758,560) 12,831,690
Significant non-cash items:
Depreciation and
amortization 379,676 44,501 589,233 90,345 1,103,755 -- 1,103,755
Provision for loan losses (552,000) -- -- -- (552,000) -- (552,000)
Income tax expense (benefit) 1,252,646 4,036 94,194 (375,331) 975,545 -- 975,545
Segment profit (loss) 2,858,049 15,107 182,847 (729,302) 2,326,701 -- 2,326,701
Balance sheet information:
- --------------------------
Total assets 567,515,869 14,504,531 4,825,616 4,416,703 591,262,719 (16,741,064) 574,521,655
Goodwill and intangibles 570,000 45,000 -- -- 615,000 -- 615,000
Premises and equipment
expenditures, net 490,145 (5,715) 289,671 61,947 836,048 -- 836,048
</TABLE>
13
<PAGE> 14
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. ("Reliance"), a wholly owned subsidiary of
State Bank, provides trust and financial services to customers nationwide.
Rurban Mortgage Company ("Rurban Mortgage"), 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, Florida 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' withdrawl requirements and provide for operating
expenses. Assets used to satisfy these needs consist of cash, federal funds
sold, interest-bearing deposits on other financial institutions, securities and
loans held for sale. These assets are commonly referred to as liquid assets.
Liquid assets were $111 million at June 30, 1999, compared to $126 million at
December 31, 1998. The $15 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, 1999, the
entire securities portfolio of $84.3 million was classified as available for
sale.
CAPITAL RESOURCES
- -----------------
Total shareholder's equity net of unearned ESOP shares was $42,596,000 as of
June 30, 1999, an increase of $693,000 over $41,903,000 as of December 31, 1998.
The increase was primarily due to 1999 net income of $2,326,701, offset by
dividends declared of $823,091 and a net change in unrealized depreciation on
securities available for sale, net of tax of $892,432.
The Corporation's subsidiaries exceed the applicable minimum regulatory capital
requirements at June 30, 1999.
As of June 30, 1999, 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.
14
<PAGE> 15
IMPACT OF YEAR 2000
- -------------------
There have been no material changes in the Corporation's plans to or status of
addressing the Year 2000 issue. During the first half of the year, the company
spent approximately $337,000 of the budgeted $750,000 of Y2K out of pocket
expenses.
All phases of the Y2K plan have been completed. The Corporation has tested its
mission critical business applications for Y2K compliance and has found these
systems to be Y2K ready. The Corporation has developed extensive and detailed
business resumption contingency plans and a liquidity contingency plan. Planned
activities during the last half
of the calendar year include:
o Continued testing of systems
o Continued contact with customers and vendors to assess their Y2K
readiness and its potential impact on the Corporation
o Refinement and validation of contingency plans
o Employee training in execution of contingency plans
o Continued Y2K communication efforts to educate and update
employees, directors, shareholders, customers and community
members and to calm fears which may develop due to
sensationalized media coverage of the millennium change.
Supplemental Information
- ------------------------
Non performing loans decreased $666,000 from December 31, 1998 to $2,956,000 or
0.67% of net loans at June 30, 1999.
Material Changes in Financial Condition
- ---------------------------------------
Loans and loans held for sale increased $46 million from December 31, 1998 to
$453 million at June 30, 1999; an annualized rate of 21.4%.
Deposits grew $25.6 million from December 31, 1998 to $476 million at June 30,
1999; an annualized rate of 11.1%.
Material Changes in Results of Operations
- -----------------------------------------
Net interest income for the quarter ended June 30, 1999 was $5,776,669, an
increase of $350,031 (6.5%) over the same period in 1998. This increase was
primarily due to an increase in the amount of earning assets.
Total noninterest income increased $586,407 to $2,884,867 for the quarter due
mainly to increases in data processing fees of $233,311, service charges of
$52,730 and other income of $406,942 partially offset by decreases in trust
fees, gains on sales of securities and gains on sales of loans. Other income for
the quarter included a $220,000 gain on sale of a
branch site.
Total noninterest expenses increased $515,759 for the quarter ended June 30,
1999 when compared to the same period in 1998. Salaries and employee benefits
increased $409,777 (12.4%) due to annual merit increases and the hiring of
additional loan officers and data processing staff. Equipment expense increased
$138,473 (23.3%), primarily due to the purchase of a second mainframe computer
in September 1998.
15
<PAGE> 16
(CONTINUED)
Income tax expense for the quarter was $608,770, an increase of $157,867 over
the same period in 1998.
The result of all of these factors was an increase in net income of $256,812 to
$1,274,651 for the three months ended June 30, 1999 when compared to the same
period in 1998.
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, 1998. The following table compares
rate sensitive assets and liabilities as of June 30, 1999 to December 31, 1998.
<TABLE>
Principal/Notional Amount Maturing In:
(Dollars In Thousands)
<CAPTION>
First Years
Year 1 to 5 Thereafter Total
---- ------ ---------- -----
<S> <C> <C> <C> <C>
Comparison of 6/30/99 to 12/31/98
Total rate sensitive assets:
At December 31, 1998 $230,007 $231,979 $ 41,876 $503,862
At June 30, 1999 284,621 241,252 18,066 543,939
-------- -------- -------- --------
Increase (decrease) 54,614 9,273 (23,810) 40,077
Total rate sensitive liabilities:
At December 31, 1998 $283,558 $112,996 $ 92,649 $489,203
At June 30, 1999 305,872 128,175 92,808 526,855
-------- -------- -------- --------
Increase (decrease) 22,314 15,179 (159) 37,652
</TABLE>
Total rate sensitive assets increased approximately $40 million during the six
months, due to a $46 million increase in loans. Of this increase, $40 million
was in Commercial loans.
Total rate sensitive liabilities increased approximately $38 million during the
six months. Deposits increased $25 million primarily certificates of deposits
and money market accounts. During the six months, as part of the Y2K liquidity
planning effort, customers were encouraged to lengthen certificate of deposit
maturities, resulting in an increase of $15 million in rate sensitive
liabilities with maturities from over one to five years.
16
<PAGE> 17
PART 11 - OTHER INFORMATION
---------------------------
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
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 16, 1999 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
<PAGE> 18
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 FINANCIAL DATA SCHEDULE
18
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,223,135
<INT-BEARING-DEPOSITS> 180,000
<FED-FUNDS-SOLD> 47,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 84,296,618
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 440,314,818
<ALLOWANCE> 5,631,044
<TOTAL-ASSETS> 574,521,655
<DEPOSITS> 476,438,427
<SHORT-TERM> 21,340,000
<LIABILITIES-OTHER> 5,082,843
<LONG-TERM> 29,064,783
0
0
<COMMON> 11,439,255
<OTHER-SE> 31,156,347
<TOTAL-LIABILITIES-AND-EQUITY> 574,521,655
<INTEREST-LOAN> 18,826,234
<INTEREST-INVEST> 2,297,836
<INTEREST-OTHER> 237,724
<INTEREST-TOTAL> 21,361,794
<INTEREST-DEPOSIT> 8,972,607
<INTEREST-EXPENSE> 10,137,947
<INTEREST-INCOME-NET> 11,223,847
<LOAN-LOSSES> 552,000
<SECURITIES-GAINS> 1,915
<EXPENSE-OTHER> 12,831,690
<INCOME-PRETAX> 3,302,246
<INCOME-PRE-EXTRAORDINARY> 3,302,246
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,326,701
<EPS-BASIC> .57
<EPS-DILUTED> .57
<YIELD-ACTUAL> 4.30
<LOANS-NON> 1,695,232
<LOANS-PAST> 1,261,208
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 9,391,804
<ALLOWANCE-OPEN> 5,408,854
<CHARGE-OFFS> 648,336
<RECOVERIES> 318,526
<ALLOWANCE-CLOSE> 5,631,044
<ALLOWANCE-DOMESTIC> 3,954,648
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,676,396
</TABLE>
