<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, 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 November 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 nine months ended September 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>
September 30 December 31
1999 1998
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and due from banks $ 19,192,339 $ 16,790,423
Federal funds sold 800,000 8,718,721
------------ ------------
Total cash and cash equivalents 19,992,339 25,509,144
Interest-bearing deposits in other
financial institutions 180,000 180,000
Securities available for sale 85,232,692 82,142,929
Loans held for sale, net of valuation allowance
($-0-) 9,660,212 18,509,275
Loans, net of allowance for losses of $5,804,781
in 1999 and $5,408,854 in 1998 468,423,145 388,560,699
Premises and equipment, net 11,902,324 11,400,045
Accrued interest and other assets 12,513,285 10,852,687
------------ ------------
Total assets $607,903,997 $537,154,779
============ ============
</TABLE>
(Continued)
3
<PAGE> 4
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
September 30 December 31
1999 1998
(Unaudited) (Note)
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest bearing $ 46,314,411 $ 48,135,487
Interest bearing 452,161,731 402,677,736
------------ ------------
Total deposits 498,476,142 450,813,223
Federal funds purchased 17,951,000 9,500,000
Short term notes payable 6,800,000 --
Advances from Federal Home Loan Bank (FHLB) 36,100,547 28,890,290
Accrued interest payable 2,017,135 1,685,437
Other liabilities 3,235,003 4,362,879
------------ ------------
Total liabilities 564,579,827 495,251,829
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 29,016,756 26,508,897
Accumulated other comprehensive income, net of
tax of $(517,474) in 1999 and $104,536 in 1998 (1,004,509) 202,922
Less: Unearned ESOP shares (unearned shares:
1999 - 51,752 1998 - 73,502) (982,951) (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 43,324,170 41,902,950
------------ ------------
Total liabilities and shareholders' equity $607,903,997 $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
September 30
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Interest income
Interest and fees on loans $10,399,874 $ 8,782,192
Interest and dividends on securities:
Taxable 1,083,024 996,248
Tax-exempt 135,130 73,737
Other 68,711 284,657
----------- -----------
Total interest income 11,686,739 10,136,834
Interest expense
Deposits 4,872,465 4,354,293
Borrowings 765,831 385,531
----------- -----------
Total interest expense 5,638,296 4,739,824
----------- -----------
Net interest income 6,048,443 5,397,010
Provision for loan losses 279,000 270,000
----------- -----------
Net interest income after provision
for loan losses 5,769,443 5,127,010
Noninterest income
Data processing fees 1,109,591 1,062,075
Trust fees 574,161 576,549
Service charges on deposit accounts 377,885 329,031
Net gain on sale of securities 13,521 9,495
Net gain on sale of loans 248,694 308,881
Other 140,458 169,937
----------- -----------
Total noninterest income 2,464,310 2,455,968
Noninterest expense
Salaries and employee benefits 3,548,925 3,210,187
Net occupancy expense 289,898 280,460
Equipment expense 728,087 611,657
Other 1,576,501 1,845,063
----------- -----------
Total noninterest expense 6,143,411 5,947,367
----------- -----------
Income before income taxes 2,090,342 1,635,611
Income tax expense 672,024 520,241
----------- -----------
Net income $ 1,418,318 $ 1,115,370
=========== ===========
Basic and diluted earnings per common share (Note B) $ 0.35 $ 0.27
=========== ===========
</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>
Nine Months Ended
September 30
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Interest Income
Interest and fees on loans $29,226,108 $26,095,258
Interest and dividends on securities:
Taxable 3,146,891 2,942,880
Tax-exempt 369,099 211,783
Other 306,435 657,560
----------- -----------
Total interest income 33,048,533 29,907,481
Interest Expense
Deposits 13,845,072 12,946,140
Borrowings 1,931,171 929,179
----------- -----------
Total interest expense 15,776,243 13,875,319
----------- -----------
Net interest income 17,272,290 16,032,162
Provision for loan losses 831,000 810,000
----------- -----------
Net interest income after provision
for loan losses 16,441,290 15,222,162
Noninterest income
Data processing fees 3,263,957 2,607,026
Trust fees 1,833,837 1,922,291
Service charges on deposit accounts 1,065,485 896,824
Net gain (loss) on sale of securities 15,436 47,331
Net gain on sale of loans 1,027,768 1,207,204
Other 719,916 435,732
----------- -----------
Total noninterest income 7,926,399 7,116,408
Noninterest expense
Salaries and employee benefits 10,794,344 9,762,982
Net occupancy expense 884,287 813,639
Equipment expense 2,173,463 1,764,537
Other 5,123,007 5,368,465
----------- -----------
Total noninterest expense 18,975,101 17,709,623
----------- -----------
Income before income taxes 5,392,588 4,628,947
Income tax expense 1,647,569 1,484,138
----------- -----------
Net income $ 3,745,019 $ 3,144,809
=========== ===========
Basic and diluted earnings per common share (Note B) $ 0.92 $ 0.77
=========== ===========
</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
Other
Additional Comprehensve Unearned
Common Paid-In Retained Income, Net ESOP Treasury
Stock Capital Earnings 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 nine month period -- -- 3,745,019 -- -- -- 3,745,019
Net change in unrealized
appreciation (depreciation) on
securities available for sale, net
of tax of $622,010 -- -- -- (1,207,431) -- -- (1,207,431)
-----------
Total comprehensive income 2,537,588
Cash dividends declared ($0.30 per
share) -- -- (1,237,160) -- -- -- (1,237,160)
Paydown of ESOP loan -- -- -- -- 117,954 -- 117,954
Issuance of 200 treasury shares
due to exercise of stock options -- -- -- -- -- 2,838 2,838
---------------------------------------------------------------------------------------------
Balance at September 30, 1999 $11,439,255 $11,518,727 $29,016,756 ($1,004,509) ($ 982,951) ($6,663,108) $43,324,170
=============================================================================================
</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
Other
Additional Comprehensve Unearned
Common Paid-In Retained Income, Net ESOP Treasury
Stock Capital Earnings 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 nine month period -- -- 3,144,809 -- -- -- 3,144,809
Net change in unrealized
appreciation (depreciation) on
securities available for sale, net
of tax of $103,122 -- -- -- 200,177 -- -- 200,177
-----------
Total comprehensive income 3,344,986
Declaration of a 2 for 1 stock split
and issuance of 2,287,851 common
shares 5,719,627 (5,719,627) -- -- -- -- --
Cash dividends declared ($.30 per
share) -- -- (1,241,946) -- -- -- (1,241,946)
---------------------------------------------------------------------------------------------
Balance at September 30, 1998 $11,439,255 $11,519,461 $25,794,846 $419,017 ($1,299,000) ($6,676,611) $41,196,968
=============================================================================================
</TABLE>
See notes to condensed consolidated unaudited financial statements.
8
<PAGE> 9
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Nine Months Ended
September 30
-------------------------------
1999 1998
------------ -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Cash received from customers' fees and commissions $ 6,883,195 $ 6,135,402
Cash paid to suppliers and employees (17,904,498) (16,344,565)
Loans originated for sale (83,452,860) (57,006,133)
Proceeds from sales of loans held for sale 93,329,691 51,947,731
Interest received 31,810,484 29,496,863
Interest paid (15,444,545) (13,811,244)
Income taxes paid (1,850,000) (1,540,000)
------------ ------------
Net cash from operating activities 13,371,467 (1,121,946)
Cash Flows From Investing Activities:
Net decrease in interest earning desposits
in other financial institutions -- 349,777
Proceeds from principal repayments, maturities and calls of
Securities available for sale 24,931,904 17,321,235
Proceeds from sales of available for sale securities 18,134,400 24,229,557
Purchase of securities available for sale (48,024,426) (51,111,695)
Net increase in loans (81,135,246) (8,338,156)
Recoveries on loan charge-offs 441,800 268,018
Premises and equipment expenditures (1,712,486) (3,763,946)
------------ ------------
Net cash from investing activities (87,364,054) (21,045,210)
Cash Flows From Financing Activities:
Net change in deposits 47,662,919 6,803,963
Net change in federal funds purchased 8,451,000 (4,929,000)
Proceeds from short term note payable 6,800,000 --
Proceeds from FHLB advances 9,000,000 25,100,000
Repayment of FHLB advances (1,789,743) (1,178,275)
Proceeds from exercise of stock options 2,838 --
Dividends paid (1,651,232) (1,241,946)
------------ ------------
Net cash from financing activities 68,475,782 24,554,742
------------ ------------
Net change in cash and cash equivalents (5,516,805) 2,387,586
Cash and cash equivalents at beginning of period 25,509,144 22,222,385
------------ ------------
Cash and cash equivalents at end of period $ 19,992,339 $ 24,609,971
============ ============
</TABLE>
See notes to condensed consolidated unaudited financial statements
9
<PAGE> 10
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
<CAPTION>
Nine Months Ended
September 30
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Reconciliation Of Net Income To Net
Cash From Operating Activities
Net income $ 3,745,019 3,144,809
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 1,490,442 1,172,636
Amortization of intangible assets 157,500 208,422
Provision for loan losses 831,000 810,000
Net gain on sale of securities available for sale (15,436) (47,331)
Loans originated for sale (83,452,860) (57,006,133)
Proceeds from sales of loans held for sale 93,329,691 51,947,731
Net gain on loan sales (1,027,768) (1,207,204)
Net gain on sale of fixed assets (225,881) --
Paydown of ESOP loan 117,954 --
Increase/(decrease) in other liabilities and interest payable (382,106) 254,428
(Increase)/decrease in other assets and interest receivable (1,196,088) (399,304)
------------ ------------
Net cash from operating activities $ 13,371,467 $ (1,121,946)
============ ============
</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 4,078,091 and
4,078,085 for the three and nine months ended September 30, 1999 and 4,059,322
and 4,063,505 for the three and nine months ended September 30, 1998. The number
of shares used in the computation of diluted earnings per common share was
4,080,100 and 4,086,834 for the three and nine months ended September 30, 1999
and 4,078,063 and 4,085,665 for the three and nine months ended September 30,
1998.
NOTE C-- ACCOUNTING STANDARD IMPLEMENTED IN 1999
No new accounting standards have been implemented during the first nine 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 nine months ended September 30, 1999.
NOTE E - BENEFIT PLANS
The Corporation'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 Corporation's
common stock may be granted to key employees and directors of the Corporation
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 nine months ended September 30, 1999 and 1998.
11
<PAGE> 12
NOTE E - BENEFIT PLANS (Continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net income for the nine months ended September 30 $3,745,019 $3,144,809
Proforma net income for the nine months ended September 30 3,681,660 3,038,157
Basic and diluted earnings per common share as reported $ .92 $ .77
Proforma basic and diluted earnings per common share $ .90 $ .74
</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
Forfeitures (1,000) 18.50
Exercised (200) 14.19
-------
Outstanding, September 30, 1999 221,350 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 7.59 33,700 $14.19
$18.50 49,250 8.71 8,900 18.50
------- ------
Outstanding at year end 221,350 7.84 42,600 15.09
</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
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
NOTE F - SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
Mortgage Data Total Intersegment Consolidated
1999 Banking Banking Processing Other Segments Elimination Totals
- ---- ------- ------- ---------- ----- -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement information:
- -----------------------------
Net interest income (expense) $ 17,095,150 $ 397,609 $ (107,662) $ (112,808) $ 17,272,290 $ -- $ 17,272,290
Other revenue - external
customers 1,949,922 677,056 3,263,957 2,224,700 8,115,636 (189,237) 7,926,399
Other revenue - other segments -- -- 1,018,005 44,888 1,062,893 (1,062,893) --
------------ ---------- ---------- ----------- ------------- ----------- ------------
Net interest income
and other revenue 19,045,072 1,074,666 4,174,300 2.156,780 26,405,930 (1,252,129) 25,198,689
Noninterest expense 11,562,194 1,059,977 3,765,710 3,839,350 20,227,231 (1,252,129) 18,975,101
Significant non-cash items:
Depreciation and
amortization 470,159 74,963 811,916 133,404 1,490,442 -- 1,490,442
Provision for loan losses (831,000) -- -- -- (831,000) -- (831,000)
Income tax expense (benefit) 2,075,120 4,990 138,920 (571,462) 1,647,569 -- 1,647,569
Segment profit (loss) 4,576,759 9,698 269,670 (1,111,108) 3,745,019 -- 3,745,019
Balance sheet information:
- --------------------------
Total assets 602,556,460 13,794,554 5,380,934 4,653,254 626,385,202 (18,481,204) 607,903,997
Goodwill and intangibles 525,000 37,500 -- -- 562,500 -- 562,500
Premises and equipment 395,909 2,194 1,265,626 48,757 1,712,486 -- 1,712,486
expenditures, net
</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 in other financial institutions, securities and
loans held for sale. These assets are commonly referred to as liquid assets.
Liquid assets were $115 million at September 30, 1999, compared to $126 million
at December 31, 1998. The $11 million decrease in liquid assets represents
normal fluctuation and was not due to any change in policy of management
regarding liquidity. Management recognizes securities may need to be sold in the
future to help fund loan demand and, accordingly, as of September 30, 1999, the
entire securities portfolio of $85.2 million was classified as available for
sale.
CAPITAL RESOURCES
- -----------------
Total shareholder's equity net of unearned ESOP shares was $43,324,170 as of
September 30, 1999, an increase of $1,421,220 over $41,902,950 as of December
31, 1998. The increase was a result of 1999 net income of $3,745,019, offset by
dividends declared of $1,237,160, net change in unrealized depreciation on
securities available for sale, net of tax of $1,207,431, and a reduction in
unearned ESOP shares of $117,954.
The Corporation's subsidiaries exceed the applicable "well capitalized"
regulatory capital requirements at September 30, 1999.
As of September 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 nine months of the year, the
Corporation spent approximately $465,000 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 final quarter 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 $890,000 from December 31, 1998 to $2,732,000 or
0.58% of net loans at September 30, 1999.
Material Changes in Financial Condition
- ---------------------------------------
Loans and loans held for sale increased $71 million from December 31, 1998 to
$478 million at September 30, 1999; an annualized rate of 23.6%.
Deposits grew $48 million from December 31, 1998 to $498 million at September
30, 1999; an annualized rate of 14.1%.
Federal Funds purchased, short term notes payable and Federal Home Loan advances
increased $22 million from December 31, 1998 to $61 million at September 30,
1999; an annualized increase of 78.0%.
Material Changes in Results of Operations
- -----------------------------------------
Net interest income for the quarter ended September 30, 1999 was $6,048,443, an
increase of $651,433 (12.1%) over the same period in 1998. This increase was
primarily due to an increase in the amount of earning assets.
Total non-interest income increased $8,342 to $2,464,310 for the quarter.
Service charges on deposits increased $48, 854 (14.8%), net gains on sale of
loans decreased $60,187 (19.5%) and other non-interest income declined $29,479
(17.4%). Data processing fees increased $47,516 (4.5%). However, on a recurring
basis, data processing fees increased $342,000 as the third quarter of 1998
contained non-recurring fees of $294,000.
Total noninterest expense increased $196,044 (3.3%) for the quarter ended
September 30, 1999 when compared to the same period in 1998. Salaries and
employee benefits increased $338,738 (10.6%) due to annual merit increases and
the hiring
15
<PAGE> 16
of additional loan officers and data processing staff. Equipment expense
increased $116,430 (19%) primarily due to the addition of a second mainframe
computer at RDSI. Other operating expense decreased $268,562 (14%).
Income tax expense for the quarter was $672,024, an increase of $151,783 over
the same period in 1998.
The net result of these factors was an increase in net income of $302,948 to
$1,418,318 for the three months ended September 30, 1999 when compared to the
same period in 1998.
Net interest income for the nine months ended September 30, 1999 was $17,272,290
an increase of $1,240,128 (8%) over the same period in 1998. The increase was a
primarily due to an increase in earning assets.
Total non-interest income increased $809,991 for the nine months ended September
30, 1999. Data processing increased $656,931 (25%) as a result of an increase in
community banks serviced from 34 in September 1998 to 50 in September 1999.
Service charges on deposits increased $168,661 (19%), net gains on sale of loans
decreased $179,436 (15%) and other income increased $284,184 (65%) primarily due
to a $220,000 gain on the sale of a branch site in the second quarter.
Total non interest expense increased $1,265,478 (7%) for the nine months ended
September 30, 1999, when compared to the same period of 1998. Salaries and
employee benefits increased $1,031,362 (11%), equipment and occupancy increased
$479,574 (19%) primarily due to increased hardware and software depreciation
related to the September 1998 purchase of RDSI's second mainframe computer and
subsequent growth in the volume of accounts processed and other expenses
decreased $245,458 (5%).
Income tax expense for the nine months was $1,647,569, an increase of $163,431
over the same period in 1998.
The net result of these factors was an increase in net income of $600,210 to
$3,745,019 for the nine months ended September 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 September 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 9/30/99 to 12/31/98
Total rate sensitive assets:
At December 31, 1998 $230,007 $231,979 $ 41,876 $503,862
At September 30, 1999 283,711 264,727 21,648 570,086
-------- -------- -------- --------
Increase (decrease) 53,704 32,748 (20,228) 66,224
Total rate sensitive liabilities:
At December 31, 1998 $283,558 $112,995 $ 92,650 $489,203
At September 30, 1999 341,571 124,643 93,133 559,347
-------- -------- -------- --------
Increase (decrease) 58,013 11,648 483 70,144
</TABLE>
16
<PAGE> 17
Total rate sensitive assets increased approximately $66 million for the nine
months, due to a $71 million increase in loans. Of this increase, $59 million
was in Commercial loans
Total rate sensitive liabilities increased approximately $70 million during the
nine months. Deposits increased $48 million primarily certificates of deposits
and money market accounts. During the nine months, the increase in rates has
caused many customers to shorten their certificate of deposit maturities,
resulting in an increase of $58 million in rate sensitive liabilities with
maturities within in year.
17
<PAGE> 18
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 November 12, 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
19
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 19,192,339
<INT-BEARING-DEPOSITS> 180,000
<FED-FUNDS-SOLD> 800,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 85,232,692
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 478,083,357
<ALLOWANCE> 5,804,781
<TOTAL-ASSETS> 607,903,997
<DEPOSITS> 498,476,142
<SHORT-TERM> 28,601,000
<LIABILITIES-OTHER> 5,252,138
<LONG-TERM> 32,250,547
0
0
<COMMON> 11,439,255
<OTHER-SE> 31,884,915
<TOTAL-LIABILITIES-AND-EQUITY> 607,903,997
<INTEREST-LOAN> 29,226,108
<INTEREST-INVEST> 3,515,990
<INTEREST-OTHER> 306,435
<INTEREST-TOTAL> 33,048,533
<INTEREST-DEPOSIT> 13,845,072
<INTEREST-EXPENSE> 15,776,243
<INTEREST-INCOME-NET> 17,272,290
<LOAN-LOSSES> 831,000
<SECURITIES-GAINS> 15,436
<EXPENSE-OTHER> 18,975,101
<INCOME-PRETAX> 5,392,588
<INCOME-PRE-EXTRAORDINARY> 5,392,588
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,745,019
<EPS-BASIC> .92
<EPS-DILUTED> .92
<YIELD-ACTUAL> 4.35
<LOANS-NON> 1,521,205
<LOANS-PAST> 1,210,476
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,506,374
<ALLOWANCE-OPEN> 5,408,854
<CHARGE-OFFS> 876,870
<RECOVERIES> 441,797
<ALLOWANCE-CLOSE> 5,804,781
<ALLOWANCE-DOMESTIC> 4,107,666
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,697,115
</TABLE>
