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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT of 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Clinton Street, Defiance, Ohio 43512
- ---------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 783-8950
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, Without Par Value (2,184,378 outstanding at March 1, 1996)
(Title of Class)
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Based upon the average bid and asked prices of the Common Shares of the
Registrant on March 1, 1996, the aggregate market value of the Common Shares
of the Registrant held by non-affiliates on that date was $68,222,050.
Documents Incorporated by Reference:
Portions of the Registrant's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held on April 22, 1996 are incorporated by
reference into Part III of this Annual Report on Form 10-K.
Exhibit Index on Page 74
Page 1 of 108 Pages.
PART I
Item 1. Business.
General
Rurban Financial Corp., an Ohio corporation (the "Corporation"), is a
bank holding company under the Bank Holding Company Act of 1956, as amended,
and is subject to regulation by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). The executive officers of the
Corporation are located at 401 Clinton Street, Defiance, Ohio 43512.
Through its subsidiaries, The State Bank and Trust Company, Defiance,
Ohio ("State Bank"), The Peoples Banking Company, Findlay, Ohio ("Peoples
Bank"), The First National Bank of Ottawa ("First National Bank") and The
Citizens Savings Bank Company, Pemberville, Ohio ("Citizens Bank"), the
Corporation is engaged in the business of commercial banking. The
Corporation's subsidiary, Rurbanc Data Services, Inc. ("Rurbanc"), is engaged
in the related business of providing data processing services, principally to
banks. The Corporation's subsidiary, Rurban Life Insurance Company ("Rurban
Life"), is engaged in the related business of accepting life and disability
reinsurance ceded in part by USLIFE Credit Life Insurance Company ("USLIFE")
from the credit life and disability insurance purchased by customers of State
Bank, Peoples Bank, First National Bank and Citizens Bank from USLIFE in
connection with revolving credit loans secured by mortgages and with certain
installment loans made to such customers by State Bank, Peoples Bank, First
National Bank and Citizens Bank.
General Description of Holding Company Group
State Bank
State Bank is an Ohio state-chartered bank. State Bank presently
operates seven branch offices in Defiance County, Ohio (six in the city of
Defiance and one in Ney), one branch office in adjacent Paulding County, Ohio
and three branch offices in Fulton County, Ohio (one in each of Delta, Lyons
and Wauseon). At December 31, 1995, State Bank had 119 full-time equivalent
employees.
State Bank offers a full range of commercial banking services, including
checking and NOW accounts; passbook savings and money market accounts;
automatic teller machines; commercial, installment, agricultural and
residential mortgage loans (including "Home Value Equity" line of credit
loans); personal and corporate trust services; commercial leasing; bank credit
card services; safe deposit rentals; and other personalized banking services.
In addition, State Bank serves as a correspondent (federal funds investing and
check clearing purposes) for five financial institutions in the region
(including Peoples Bank and First National Bank).
Peoples Bank
Peoples Bank is an Ohio state-chartered bank. The main office of Peoples
Bank is located in Findlay, Ohio. Peoples Bank provides checking and NOW
accounts; passbook savings and money market accounts; time certificates of
deposit; commercial loans, student loans and real estate mortgage loans; trust
services; and safe deposit rental facilities. Peoples Bank also operates
full-service branches in Findlay and McComb, Ohio. At December 31, 1995,
Peoples Bank had 24 full-time equivalent employees.
First National Bank
First National Bank is a national banking association. The executive
offices of First National Bank are located at 405 East Main Street, Ottawa,
Ohio. At its present location on Main Street, First National Bank operates
four drive-in teller lanes and an automatic teller machine with a traditional
banking lobby on the first floor. First National Bank presently operates no
branch offices. At December 31, 1995, First National Bank had 15 full-time
equivalent employees.
First National Bank offers a full range of commercial banking services,
including checking and NOW accounts; passbook savings and money market
accounts; automatic teller machines; commercial, installment, agricultural and
residential mortgage loans; personal and corporate trust services; commercial
leasing; bank credit card services; safe deposit rentals; and other
personalized banking services.
Citizens Bank
Citizens Bank is an Ohio state-chartered bank. The main office of
Citizens Bank is located in Pemberville, Ohio. Citizens Bank provides checking
and NOW accounts; passbook savings and money market accounts; time
certificates of deposit; commercial, installment, agricultural and residential
loans; personal and corporate trust services; commercial leasing; bank credit
card services; safe deposit rentals; and other personalized banking services.
Citizens Bank also operates a full-service branch in Gibsonburg, Ohio. At
December 31, 1995, Citizens Bank had 28 full-time equivalent employees.
Rurbanc
Substantially all of Rurbanc's business is comprised of providing data
processing services to 32 financial institutions primarily in the northwest
area of Ohio (including State Bank, Peoples Bank, First National Bank and
Citizens Bank), including information processing for financial institution
customer services, deposit account information and data analysis. Rurbanc also
provides payroll services for customers which are not financial institutions.
At December 31, 1995, Rurbanc had 18 full-time equivalent employees.
Rurban Life
Rurban Life commenced its business of transacting insurance as an
Arizona life and disability reinsurer in January, 1988. Rurban Life may accept
life and disability reinsurance ceded to Rurban Life by an insurance company
authorized to write life and disability insurance, provided that the amount
accepted does not exceed certain limitations imposed under Arizona law. Rurban
Life is not currently authorized to write life and disability insurance on a
direct basis. Rurban Life accepts reinsurance ceded in part by USLIFE from the
credit life and disability insurance purchased by customers of State Bank,
Peoples Bank, First National Bank and Citizens Bank from USLIFE in connection
with revolving credit loans secured by mortgages and with certain installment
loans made to such customers by State Bank, Peoples Bank, First National Bank
and Citizens Bank. The operations of Rurban Life do not materially impact the
consolidated results of operations of the Corporation. As of December 31,
1995, Rurban Life has not accepted any other reinsurance. Rurban Life does not
currently intend to accept any other reinsurance in the immediate future. At
December 31, 1995, Rurban Life had no employees.
Competition
State Bank, Peoples Bank, First National Bank and Citizens Bank
experience significant competition in attracting depositors and borrowers.
Competition in lending activities comes principally from other commercial
banks in the lending areas of State Bank, Peoples Bank, First National Bank
and Citizens Bank, and, to a lesser extent, from savings associations,
insurance companies, governmental agencies, credit unions, securities
brokerage firms and pension funds. The primary factors in competing for loans
are interest rates charged and overall banking services.
Competition for deposits comes from other commercial banks, savings
associations, money market funds and credit unions as well as from insurance
companies and securities brokerage firms. The primary factors in competing for
deposits are interest rates paid on deposits, account liquidity and
convenience of office location.
Rurbanc also operates in a highly competitive field. Rurbanc competes
primarily on the basis of the value and quality of its data processing
services, and service and convenience to its customers.
Rurban Life operates in the highly competitive industry of credit life
and disability insurance. A large number of stock and mutual insurance
companies also operating in this industry have been in existence for longer
periods of time and have substantially greater financial resources than does
Rurban Life. The principal methods of competition in the credit life and
disability insurance industry are the availability of coverages, premium rates
and quality of service. The Corporation believes that Rurban Life has a
competitive advantage due to the fact that the business of Rurban Life is
limited to the accepting of life and disability reinsurance ceded in part by
USLIFE from the credit life and disability insurance purchased by loan
customers of State Bank, Peoples Bank, First National Bank and Citizens Bank.
Supervision and Regulation
The following is a summary of certain statutes and regulations affecting
the Corporation and its subsidiaries. The summary is qualified in its entirety
by reference to such statutes and regulations.
The Corporation is a bank holding company under the Bank Holding Company
Act of 1956, as amended, which restricts the activities of the Corporation and
the acquisition by the Corporation of voting shares or assets of any bank,
savings association or other company. The Corporation is also subject to the
reporting requirements of, and examination and regulation by, the Federal
Reserve Board. Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve Act on transactions with
affiliates, including any loans or extensions of credit to the bank holding
company or any of its subsidiaries, investments in the stock or other
securities thereof and the taking of such stock or securities as collateral
for loans or extensions of credit to any borrower; the issuance of guarantees,
acceptances or letters of credit on behalf of the bank holding company and its
subsidiaries; purchases or sales of securities or other assets; and the
payment of money or furnishing of services to the bank holding company and
other subsidiaries. A bank holding company and its subsidiaries are prohibited
from engaging in certain tying arrangements in connection with extensions of
credit and/or the provision of other property or services to a customer by the
bank holding company or its subsidiaries.
Bank holding companies are prohibited from acquiring direct or indirect
control of more than 5% of any class of voting stock or substantially all of
the assets of any bank holding company without the prior approval of the
Federal Reserve Board. In addition, acquisitions across state lines are
limited to acquiring banks in those states specifically authorizing such
interstate acquisitions. However, since September 1995, federal law has
permitted interstate acquisitions of banks, if the bank acquired retains its
separate charter.
As a national bank, First National Bank is supervised and regulated by
the Comptroller of the Currency. As Ohio state-chartered banks, State Bank,
Peoples Bank and Citizens Bank are supervised and regulated by the Ohio
Division of Banks and the Federal Deposit Insurance Corporation ("FDIC"). The
deposits of State Bank, Peoples Bank, First National Bank and Citizens Bank
are insured by the FDIC and those entities are subject to the applicable
provisions of the Federal Deposit Insurance Act. A subsidiary of a bank
holding company can be liable to reimburse the FDIC if the FDIC incurs or
anticipates a loss because of a default of another FDIC-insured subsidiary of
the bank holding company or in connection with FDIC assistance provided to
such subsidiary in danger of default. In addition, the holding company of any
insured financial institution that submits a capital plan under the federal
banking agencies' regulations on prompt corrective action guarantees a portion
of the institution's capital shortfall, as discussed below.
Various requirements and restrictions under the laws of the United
States and the State of Ohio affect the operations of State Bank, Peoples
Bank, First National Bank and Citizens Bank including requirements to maintain
reserves against deposits, restrictions on the nature and amount of loans
which may be made and the interest that may be charged thereon, restrictions
relating to investments
and other activities, limitations on credit exposure to correspondent
banks, limitations on activities based on capital and surplus, limitations on
payment of dividends, and limitations on branching. Pursuant to recent federal
legislation, First National Bank may branch across state lines, if permitted
by the law of the other state. In addition, effective June 1997, such
interstate branching by First National Bank will be authorized, unless the law
of the other state specifically prohibits the interstate branching authority
granted by federal law.
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies and for state member banks, such as State Bank and
Citizens Bank. The risk-based capital guidelines include both a definition of
capital and a framework for calculating weighted risk assets by assigning
assets and off-balance sheet items to broad risk categories. The minimum ratio
of total capital to weighted risk assets (including certain off-balance sheet
items, such as standby letters of credit) is 8%. At least 4.0 percentage
points is to be comprised of common stockholders' equity (including retained
earnings but excluding treasury stock), noncumulative perpetual preferred
stock, a limited amount of cumulative perpetual preferred stock, and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and
certain other intangible assets ("Tier 1 capital"). The remainder ("Tier 2
capital") may consist, among other things, of mandatory convertible debt
securities, a limited amount of subordinated debt, other preferred stock and a
limited amount of allowance for loan and lease losses. The Federal Reserve
Board also imposes a minimum leverage ratio (Tier 1 capital to total assets)
of 4% for bank holding companies and state member banks that meet certain
specified conditions, including no operational, financial or supervisory
deficiencies, and including having the highest regulatory rating. The minimum
leverage ratio is 1.0-2.0% higher for other bank holding companies and state
member banks based on their particular circumstances and risk profiles and
those experiencing or anticipating significant growth. National bank
subsidiaries, such as First National Bank, are subject to similar capital
requirements adopted by the Comptroller of the Currency, and state non-member
bank subsidiaries, such as Peoples Bank, are subject to similar capital
requirements adopted by the FDIC. Under an outstanding proposal of the
Comptroller and the FDIC to establish an interest rate risk component, First
National Bank, State Bank, Peoples Bank and Citizens Bank may be required to
have additional capital if their interest rate risk exposure exceeds
acceptable levels provided for in the regulation when adopted.
The Corporation and its subsidiaries currently satisfy all capital
requirements. Failure to meet applicable capital guidelines could subject a
banking institution to a variety of enforcement remedies available to federal
and state regulatory authorities, including the termination of deposit
insurance by the FDIC.
The federal banking regulators have established regulations governing
prompt corrective action to resolve capital deficient banks. Under these
regulations, institutions which become undercapitalized become subject to
mandatory regulatory scrutiny and limitations, which increase as capital
continues to decrease. Such institutions are also required to file capital
plans with their primary federal regulator, and their holding companies must
guarantee the capital shortfall up to 5% of the assets of the capital
deficient institution at the time it becomes undercapitalized.
The ability of a bank holding company to obtain funds for the payment of
dividends and for other cash requirements is largely dependent on the amount
of dividends which may be declared by its subsidiary banks and other
subsidiaries. However, the Federal Reserve Board expects the Corporation to
serve as a source of strength to its subsidiary banks, which may require it to
retain capital for further investment in the subsidiaries, rather than for
dividends for shareholders of the Corporation. State Bank, Peoples Bank, First
National Bank and Citizens Bank may not pay dividends to the Corporation if,
after paying such dividends, they would fail to meet the required minimum
levels under the risk-based capital guidelines and the minimum leverage ratio
requirements. State Bank, Peoples Bank, First National Bank and Citizens Bank
must have the approval of their respective regulatory authorities if a
dividend in any year would cause the total dividends for that year to exceed
the sum of the current year's net profits and the retained net profits for the
preceding two years, less required transfers to surplus. Payment of dividends
by the bank subsidiaries may be restricted at any time at the discretion of
the regulatory authorities, if they deem such dividends to constitute an
unsafe and/or unsound banking practice. These provisions could have the effect
of limiting the Corporation's ability to pay dividends on its outstanding
common shares.
Rurban Life is chartered by the State of Arizona and is subject to
regulation, supervision, and examination by the Arizona Department of
Insurance. The powers of regulation and supervision of the Arizona Department
of Insurance relate generally to such matters as minimum capitalization, the
grant and revocation of certificates of authority to transact business, the
nature of and limitations on investments, the maintenance of reserves, the
form and content of required financial statements, reporting requirements and
other matters pertaining to life and disability insurance companies.
Monetary Policy and Economic Conditions
The commercial banking business is affected not only by general economic
conditions, but also by the policies of various governmental regulatory
authorities, including the Federal Reserve Board. The Federal Reserve Board
regulates money and credit conditions and interest rates in order to influence
general economic conditions primarily through open market operations in U.S.
Government securities, changes in the discount rate on bank borrowings and
changes in reserve requirements against bank deposits. These policies and
regulations significantly affect the overall growth and distribution of bank
loans, investments and deposits, and the interest rates charged on loans as
well as the interest rates paid on deposits and accounts.
The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of commercial banks in the past
and are expected to continue to have significant effects in the future. In
view of the changing conditions in the economy and the money market and the
activities of monetary and fiscal authorities, no definitive predictions can
be made as to future changes in interest rates, credit availability or deposit
levels.
Statistical Financial Information Regarding the Corporation
The following schedules and tables analyze certain elements of the
consolidated balance sheets and statements of income of the Corporation and
its subsidiaries, as required under Exchange Act Industry Guide 3 promulgated
by the Securities and Exchange Commission, and should be read in conjunction
with the narrative analysis presented in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation and the Consolidated
Financial Statements of the Corporation and its subsidiaries included at pages
46 through 73 of this Annual Report on Form 10-K.
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
A. The following are the average balance sheets for the years ending
December 31:
1995 1994 1993
---- ---- ----
ASSETS
Interest-earning assets
Securities available-for-sale(1)
Taxable $64,643,230 $51,347,311 $ -
Non-taxable 25,869 - -
Securities held-to-maturity
Taxable 1,485,961 370,644 -
Non-taxable 9,416,228 7,584,860 -
Investment securities
Taxable - - 55,916,157
Non-taxable - - 8,518,053
Federal funds sold 10,145,738 5,162,152 3,047,975
Loans, net of unearned income
and deferred loan fees(2) 282,864,867 249,993,210 225,013,808
----------- ----------- -----------
Total interest-earning assets 368,581,893 314,458,177 292,495,993
Allowance for loan losses (4,606,629) (4,089,404) (3,461,056)
----------- ----------- -----------
363,975,264 310,368,773 289,034,937
Noninterest-earning assets
Cash and due from banks 17,670,513 11,613,379 13,090,931
Premises and equipment, net 8,857,350 7,766,744 7,031,156
Accrued interest receivable
and other assets 8,056,940 5,368,618 5,072,715
----------- ----------- -----------
$398,560,067 $335,117,514 $314,229,739
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Deposits
Savings and interest-bearing
demand deposits $83,243,571 $70,551,648 $63,445,763
Time deposits 231,640,466 191,533,849 183,162,012
Federal funds purchased and
securities sold under agree-
ments to repurchase 684,484 2,488,229 1,567,400
----------- ----------- -----------
Total interest-bearing
liabilities 315,568,521 264,573,726 248,175,175
Noninterest-bearing liabilities
Demand deposits 41,427,007 37,778,969 33,874,124
Accrued interest payable and
other liabilities 3,687,999 2,150,694 2,214,232
----------- ----------- -----------
360,683,527 304,503,389 284,263,531
Shareholders' equity(3)(4) 37,876,540 30,614,125 29,966,208
----------- ----------- -----------
$398,560,067 $335,117,514 $314,229,739
__________________________
(1) Securities available-for-sale are carried at fair value. The average
balance includes quarterly average balances of the market value
adjustments and daily average balances for the amortized cost of
securities.
(2) Loan balances include principal balances of nonaccrual loans.
(3) Shown net of average net unrealized appreciation (depreciation) on
securities available-for-sale, net of tax.
(4) Includes common stock subject to repurchase obligation in ESOP.
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
B. The following tables set forth, for the years indicated, the condensed
average balances of interest-earning assets and interest-bearing
liabilities, the interest earned or paid on such amounts, and the
average interest rates earned or paid thereon.
--------------------1995-------------------
Average Average
Balance Interest Rate
------- -------- -------
INTEREST-EARNING ASSETS
Securities(1)
Taxable $66,675,224 $3,756,764 5.63%
Non-taxable 9,442,097 645,724(2) 6.84(2)
Federal funds sold 10,145,738 707,596 6.97
Loans, net of unearned income
and deferred loan fees 282,864,867(3) 26,539,689(4) 9.38
----------- ---------- --------
Total interest-earning
assets $369,127,926 31,649,773(2) 8.57%(2)
============
INTEREST-BEARING LIABILITIES
Deposits
Savings and interest-bearing
demand deposits $83,243,571 2,088,899 2.51
Time deposits 231,640,466 12,109,099 5.23
Federal funds purchased and
securities sold under agree-
ments to repurchase 684,484 40,050 5.85
----------- ----------
Total interest-bearing
liabilities $ 315,568,521 14,238,048 4.51%
============= -------------
Net interest income $17,411,725(2)
==============
Net interest income as a percent
of average interest-earning assets 4.72%(2)
========
_________________________
(1) Securities balances represent daily average balances for the amortized
cost of securities.
(2) Computed on tax equivalent basis for non-taxable securities (34%
statutory tax rate in 1995).
(3) Loan balances include principal balances of nonaccrual loans.
(4) Includes fees on loans of $967,504 in 1995.
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
--------------------1994-----------------
Average Average
Balance Interest Rate
INTEREST-EARNING ASSETS
Securities(1)
Taxable $52,307,884 $2,485,695 4.75%
Non-taxable 7,584,860 524,977(2) 6.92(2)
Federal funds sold 5,162,152 220,244 4.27
Loans, net of unearned income
and deferred loan fees 249,993,210(3) 20,421,474(4) 8.17
----------- ----------
Total interest-earning
assets $315,048,106 23,652,390(2) 7.51%(2)
============
INTEREST-BEARING LIABILITIES
Deposits
Savings and interest-bearing
demand deposits $70,551,648 1,900,683 2.69
Time deposits 191,533,849 7,586,023 3.96
Federal funds purchased and
securities sold under agree-
ments to repurchase 2,488,229 125,647 5.05
----------- ----------
Total interest-bearing
liabilities $ 264,573,726 9,612,353 3.63%
============= ------------
Net interest income $14,040,037(2)
===========
Net interest income as a percent
of average interest-earning assets 4.46%(2)
=====
_________________________
(1) Securities balances represent daily average balances for the amortized
cost of securities.
(2) Computed on tax equivalent basis for non-taxable securities (34%
statutory tax rate in 1994).
(3) Loan balances include principal balances of nonaccrual loans.
(4) Includes fees on loans of $797,957 in 1994.
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
---------------------1993----------------
Average Average
Balance Interest Rate
INTEREST-EARNING ASSETS
Securities(1)
Taxable $55,916,157 $2,989,616 5.35%
Non-taxable 8,518,053 675,121(2) 7.93(2)
Federal funds sold 3,047,975 94,625 3.10
Loans, net of unearned income
and deferred loan fees 225,013,808(3) 17,948,466(4) 7.98
----------- ----------
Total interest-earning
assets $292,495,993 21,707,828(2) 7.42%(2)
============
INTEREST-BEARING LIABILITIES
Deposits
Savings and interest-bearing
demand deposits $63,445,763 1,778,120 2.80%
Time deposits 183,162,012 7,078,584 3.86
Federal funds purchased and
securities sold under agree-
ments to repurchase 1,567,400 52,406 3.34
----------- ----------
Total interest-bearing
liabilities $ 248,175,175 8,909,110 3.59%
============= -----------
Net interest income $12,798,718 (2)
===========
Net interest income as a percent
of average interest-earning assets 4.38%(2)
=====
_________________________
(1) Securities balances represent daily average balances for the amortized
cost of securities.
(2) Computed on tax equivalent basis for non-taxable securities (34%
statutory tax rate in 1993).
(3) Loan balances include principal balances of nonaccrual loans.
(4) Includes fees on loans of $705,978 in 1993.
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
C. The following tables set forth the effect of volume and rate changes on
interest income and expense for the periods indicated. For purposes of
these tables, changes in interest due to volume and rate were determined
as follows:
Volume Variance - change in volume multiplied by the previous year's
rate.
Rate Variance - change in rate multiplied by the previous year's volume.
Rate/Volume Variance - change in volume multiplied by the change in
rate. This variance was allocated to volume variance and rate variance
in proportion to the relationship of the absolute dollar amount of the
change in each.
Interest on non-taxable securities has been adjusted to a fully tax
equivalent basis using a statutory tax rate of 34% in 1995, 1994 and
1993.
Total
Variance Variance Attributable To
1995/1994 Volume Rate
--------- ------ -------
Interest income
Securities
Taxable $1,271,069 $ 758,382 $ 512,687
Non-taxable 120,747 127,084 (6,337)
Federal funds sold 487,352 294,045 193,307
Loans, net of unearned income
and deferred loan fees 6,118,215 2,872,531 3,245,684
---------- ---------- ----------
7,997,383 4,052,042 3,945,341
Interest expense
Deposits
Savings and interest-bearing
demand deposits 188,216 324,954 (136,738)
Time deposits 4,523,076 1,789,516 2,733,560
Federal funds purchased and
securities sold under agreements
to repurchase (85,597) (102,943) 17,346
---------- ---------- ----------
4,625,695 2,011,527 2,614,168
---------- ---------- ----------
Net interest income $3,371,688 $2,040,515 $1,331,173
========== ========== ==========
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
Total
Variance Variance Attributable To
1994/1993 Volume Rate
--------- ------ ------
Interest income
Securities
Taxable $ (503,921) $ (185,042) $ (318,879)
Non-taxable (150,144) (69,617) (80,527)
Federal funds sold 125,619 81,591 44,028
Loans, net of unearned income
and deferred loan fees 2,473,008 2,031,958 441,050
---------- ---------- ----------
1,944,562 1,858,890 85,672
Interest expense
Deposits
Savings and interest-bearing
demand deposits 122,563 193,417 (70,854)
Time deposits 507,439 328,750 178,689
Federal funds purchased and
securities sold under agreements
to repurchase 73,241 39,196 34,045
---------- ---------- ----------
703,243 561,363 141,880
---------- ---------- ----------
Net interest income $1,241,319 $1,297,527 $ (56,208)
========== ========== ==========
II. INVESTMENT PORTFOLIO
A. The book value of securities available-for-sale as of December 31 are
summarized as follows:
1995 1994 1993
---- ---- ----
U.S. Treasury and U.S. Government
agency securities $74,251,501 $50,533,082 $ -
Obligations of states and
political subdivisions 9,543,395 - -
Mortgage-backed securities 5,345,748 8,402,970 -
Marketable equity securities 1,189,222 875,803 -
---------- ----------- ----------
$90,329,866 $59,811,855 $ -
=========== =========== ==========
The book value of securities held-to-maturity as of December 31 are
summarized as follows:
1995 1994 1993
---- ---- ----
U.S. Treasury and U.S. Government
agency securities $ - $ 1,482,576 $ -
Obligations of states and
political subdivisions - 8,888,336 -
---------- ----------- ----------
$ - $10,370,912 $ -
========== =========== ==========
The book value of investment securities as of December 31 are summarized
as follows:
1995 1994 1993
---- ---- ----
U.S. Treasury and U.S. Government
agency securities $ - $ - $32,059,109
Obligations of states and
political subdivisions - - 6,527,912
Federal Reserve Bank stock - - 240,000
---------- ----------- ----------
$ - $ - $38,827,021
========== =========== ===========
The book value of securities held for sale as of December 31 are
summarized as follows:
1995 1994 1993
---- ---- ----
U.S. Treasury and U.S. Government
agency securities $ - $ - $16,424,157
Mortgage-backed securities - - 3,340,691
Marketable equity securities - - 322,292
---------- ----------- ----------
$ - $ - $20,087,140
========== =========== ===========
II. INVESTMENT PORTFOLIO (Continued)
- ------------------------------------------------------------------------------
B. The maturity distribution and weighted average interest rates of
securities available-for-sale at December 31, 1995 are as follows:
------------------Maturing-----------------
After One Year
Within But Within
One Year Five Years
-------- --------------
Amount Rate Amount Rate
------ ------ ------ ------
U.S. Treasury and U.S. Government
agency securities $25,523,007 5.43% $48,682,150 6.37%
Mortgage-backed securities(1) - - 5,345,748 6.61
Obligations of state and
political subdivisions(2) 3,958,600 6.13 3,207,024 7.81
---------- -----------
$29,481,607 5.52% $57,234,922 6.47%
=========== ====== =========== ======
------------------Maturing-----------------
After Five Years
But Within After
Ten Years Ten Years
---------------- ---------
Amount Rate Amount Rate
U.S. Treasury and U.S. Government
agency securities $ 10,067 7.05% $ 36,277 6.04%
Obligations of state and
political subdivisions(2) 2,377,771 8.24 - -
Marketable Equity Securities - - 1,189,222 6.00
---------- -----------
$2,387,838 8.23% $ 1,225,499 6.00%
========== ==== =========== ======
(1) Maturity based upon estimated weighted-average life.
(2) Yields are presented on a tax-equivalent basis (34% statutory rate).
The weighted average interest rates are based on coupon rates for
securities purchased at par value and on effective interest rates
considering amortization or accretion if the securities were purchased at
a premium or discount.
C. Excluding those holdings of the investment portfolio in U.S. Treasury
securities and other agencies of the U.S. Government, there were no
securities of any one issuer which exceeded 10% of the shareholders'
equity of the Corporation at December 31, 1995.
III. LOAN PORTFOLIO
A. Types of Loans - Total loans on the balance sheet are comprised of
the following classifications at December 31 for the years
indicated:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Commercial,
financial and
agricultural $ 63,444,036 $ 62,866,040 $ 51,078,815 $ 43,003,215 $38,417,355
Real estate
mortgage 152,555,540 152,136,086 122,313,826 114,584,845 99,163,541
Installment
loans to
individuals 61,600,664 65,676,876 54,420,469 53,326,547 43,818,794
Lease
financing - - - 7,689 60,954
---------- ----------- ----------- ----------- -----------
$277,600,240 $280,679,002 $227,813,110 $210,922,296 $181,460,644
============ ============ ============ ============ ============
Real estate
mortgage
loans held
for resale $2,949,293 $ 4,689,611 $ 4,669,580 $ 1,447,050 $ 2,916,590
========== =========== =========== ============ ============
B. Maturities and Sensitivities of Loans to Changes in Interest Rates
- The following table shows the amounts of commercial, financial
and agricultural loans outstanding as of December 31, 1995 which,
based on remaining scheduled repayments of principal, are due in
the periods indicated. Also, the amounts have been classified
according to sensitivity to changes in interest rates for loans due
after one year. (Variable-rate loans are those loans with floating
or adjustable interest rates.)
Commercial,
Financial and
Maturing Agricultural
---------------- -------------
Within one year $38,324,128
After one year but within five years 17,123,093
After five years 7,996,815
-----------
$63,444,036
Commercial, Financial and Agricultural
Interest Sensitivity
--------------------
Fixed Variable
Rate Rate Total
----- -------- -------
Due after one year but
within five years $6,281,947 $10,841,146 $17,123,093
Due after five years 1,853,492 6,143,323 7,996,815
---------- ---------- ----------
$8,135,439 $16,984,469 $25,119,908
========== =========== ===========
III. LOAN PORTFOLIO (Continued)
C. Risk Elements
1. Nonaccrual, Past Due and Restructured Loans - The following
schedule summarizes nonaccrual, past due and restructured loans
at December 31.
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands)
(a) Loans accounted for on a
nonaccrual basis $2,403(1) $ 3,538 $ 3,621 $ 1,239 $ 1,284
(b) Accruing loans which
are contractually
past due 90 days or
more as to interest
or principal payments 711 1,198 200 105 452
(c) Loans not included in (a)
or (b) which are
"Troubled Debt Restruc-
turings" as defined by
Statement of Financial
Accounting Standards
No. 15 - - - - -
------ ------- ------ ------ -------
$3,114 $ 4,736 $3,821 $1,344 $ 1,736
====== ======= ====== ====== =======
(1) Includes loans defined as "impaired" under SFAS No. 114.
Management believes the allowance for loan losses balance at December 31, 1995
is adequate to absorb any losses on nonperforming loans, as the allowance
balance is maintained by management at a level considered adequate to cover
losses that are currently anticipated based on past loss experience, general
economic conditions, information about specific borrower situations including
their financial position and collateral values, and other factors and
estimates which are subject to change over time.
1995
(In thousands)
Gross interest income that would have
been recorded in 1995 on nonaccrual loans
outstanding at December 31, 1995 if the
loans had been current, in accordance
with their original terms and had been
outstanding throughout the period or
since origination if held for part
of the period ................................................... $ 332
Interest income actually recorded on
nonaccrual loans and included in net
income for the period ........................................... (41)
-------
Interest income not recognized during
the period ...................................................... $ 291
=======
III. LOAN PORTFOLIO (Continued)
1. Discussion of the Nonaccrual Policy
The accrual of interest income is discontinued when the
collection of a loan or interest, in whole or in part, is
doubtful. When interest accruals are discontinued, interest
income accrued in the current period is reversed. While loans
which are past due 90 days or more as to interest or principal
payments are considered for nonaccrual status, management may
elect to continue the accrual of interest when the estimated
net realizable value of collateral, in management's judgment,
is sufficient to cover the principal balance and accrued
interest.
2. Potential Problem Loans
As of December 31, 1995, there are approximately $3,815,000 in
outstanding loans where known information about possible credit
problems of the borrowers causes management to have serious
doubts as to the ability of such borrowers to comply with the
present loan repayment terms and which may result in disclosure
of such loans pursuant to Item III. C.1. Consideration was
given to loans classified for regulatory purposes as loss,
doubtful, substandard, or special mention that have not been
disclosed in Section 1 above. To the extent that these loans
are not included in the $3,815,000 potential problem loans
described above, management believes that these loans do not
represent or result from trends or uncertainties which
management reasonably expects will materially impact future
operating results, liquidity, or capital resources, or
management believes that these loans do not represent material
credits about which management is aware of any information
which causes management to have serious doubts as to the
ability of such borrowers to comply with the present loan
repayment terms.
3. Foreign Outstandings
None
4. Loan Concentrations
At December 31, 1995, loans outstanding related to agricultural
operations or collateralized by agricultural real estate
aggregated approximately $39,695,000. At December 31, 1995,
there were no agriculture loans which were accounted for on a
nonaccrual basis; and there are approximately $190,000 of
accruing agriculture loans which are contractually past due
ninety days or more as to interest or principal payments.
D. Other Interest-Bearing Assets
Other than approximately $320,000 held as other real estate owned,
there are no other interest-bearing assets as of December 31, 1995
which would be required to be disclosed under Item III. C.1 or 2 if
such assets were loans.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. The following schedule presents an analysis of the allowance for loan
losses, average loan data and related ratios for the years ended December
31:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Loans
Loans outstanding at end of
period(1) $280,314,137 $285,106,409 $232,317,346 $212,173,944 $184,247,730
============ ============ ============ ============ ============
Average loans outstanding during
period(1) $282,864,867 $249,993,210 $225,013,808 $197,052,054 $167,909,156
============ ============ ============ ============ ============
Allowance for loan losses
Balance at beginning of period $ 4,770,000 $ 3,390,000 $ 3,086,443 $ 2,701,835 $ 2,150,100
Allowance of acquired Bank - 1,100,000 - - 210,000
Loans charged off
Commercial, financial and
agricultural loans (1,267,028) (275,543) (139,250) (185,084) (99,535)
Real estate mortgage (509,108) (66,531) (118,054) (80,949) (89,014)
Installment loans (874,690) (408,879) (676,436) (504,107) (560,499)
------------ ----------- ----------- ------------ -----------
(2,650,826) (750,953) (933,740) (770,140) (749,048)
Recoveries of loans previously
charged off
Commercial, financial and
agricultural loans 497,437 85,052 89,832 92,388 86,638
Real estate mortgage 23,432 56,809 114,156 42,195 43,209
Installment loans 178,059 187,602 237,823 251,827 150,664
------------ ----------- ----------- ------------ -----------
698,928 329,463 441,811 386,410 280,511
------------ ----------- ----------- ------------ -----------
Net loans charged off (1,951,898) (421,490) (491,929) (383,730) (468,537)
Provision charged to operating
expense 1,451,898 701,490 795,486 768,338 810,272
------------ ----------- ----------- ------------ -----------
Balance at end of period $ 4,270,000 $ 4,770,000 $ 3,390,000 $ 3,086,443 $ 2,701,835
============ =========== =========== ============ ===========
Ratio of net charge-offs to average
loans outstanding for period .69% .17% .22% .19% .28%
=== === === === ===
(1) Net of unearned income and deferred loan fees
The allowance for loan losses balance and the provision charged to
expense are judgmentally determined by management based upon
periodic reviews of the loan portfolio. In addition, management
considered the level of charge-offs on loans as well as the
fluctuations of charge-offs and recoveries on loans including the
factors which caused these changes. Estimating the risk of loss and
the amount of loss is necessarily subjective. Accordingly, the
allowance is maintained by management at a level considered
adequate to cover losses that are currently anticipated based on
past loss experience, general economic conditions, information
about specific borrower situations including their financial
position and collateral values and other factors and estimates
which are subject to change over time. The increase in loans
charged off in 1995 as compared to 1994 is due largely to the
charge off of certain credits which were previously reported on a
nonaccrual basis.
IV. SUMMARY OF LOAN LOSS EXPERIENCE (Continued)
B. The following schedule is a breakdown of the allowance for loan losses
allocated by type of loan and related ratios.
Allocation of the Allowance for Loan Losses
-------------------------------------------
Percentage Percentage
of Loans of Loans
In Each In Each
Category to Category To
Allowance Total Allowance Total
Amount Loans Amount Loans
--------- ----------- --------- ---------
December 31, 1995 December 31, 1994
Commercial, financial
and agricultural $1,665,000 22.9% $1,764,900 22.4%
Real estate mortgage 512,000 54.9 572,400 54.2
Installment loans 1,452,000 22.2 1,621,800 23.4
Lease financing - - - -
Unallocated 641,000 N/A 810,900 N/A
---------- --- ---------- ---
$4,270,000 100.0% $4,770,000 100.0%
========== ===== ========== =====
December 31, 1993 December 31, 1992
Commercial, financial
and agricultural $1,220,400 22.4% $1,072,000 20.4%
Real estate mortgage 372,900 53.7 343,000 54.3
Installment loans 1,084,800 23.9 1,020,443 25.2
Lease financing - - 1,000 .1
Unallocated 711,900 N/A 650,000 N/A
---------- --- ---------- ---
$3,390,000 100.0% $3,086,443 100.0%
========== ===== ========== =====
December 31, 1991
-------------------
Commercial, financial
and agricultural $ 835,000 21.2%
Real estate mortgage 300,000 54.6
Installment loans 951,835 24.1
Lease financing 15,000 .1
Unallocated 600,000 N/A
---------- ---
$2,701,835 100.0%
========== ======
While management's periodic analysis of the adequacy of the allowance
for loan losses may allocate portions of the allowance for specific
problem loan situations, the entire allowance is available for any
loan charge-offs that occur.
V. DEPOSITS
The average amount of deposits and average rates paid are summarized as
follows for the years ended December 31:
1 9 9 5 1 9 9 4 1 9 9 3
------- ------- -------
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate
--------- --------- --------- --------- ---------
Savings and interest-bearing demand deposits $ 83,243,571 2.51% $ 70,551,648 2.69% $ 63,445,763 2.80%
Time deposits 231,640,466 5.23 191,533,849 3.96 183,162,012 3.86
Demand deposits (noninterest-bearing) 41,427,007 37,778,969 33,874,124
------------ ------------ -----------
$356,311,044 $299,864,466 $280,481,899
============ ============ ============
Maturities of time certificates of deposit and other time deposits of
$100,000 or more outstanding at December 31, 1995 are summarized as
follows:
Amount
--------
Three months or less ......................................... $14,772,940
Over three months and through six months ..................... 7,529,668
Over six months and through twelve months .................... 6,500,836
Over twelve months ........................................... 4,622,089
----------
$33,425,533
===========
VI. RETURN ON EQUITY AND ASSETS
The ratio of net income to average shareholders' equity and average
total assets and certain other ratios are as follows:
1995 1994 1993
---- ---- ----
Average total assets $398,560,067 $335,117,514 $314,229,739
============ ============ ============
Average shareholders'
equity (1) (2) $ 37,876,540 $ 30,614,125 $ 29,966,208
============ ============ ============
Average shareholders'
equity (1) (3) $ 29,792,748 $ 24,588,737 $ 25,412,300
============ ============ ============
Net income $ 4,094,813 $ 3,910,374 $ 3,874,981
============ ============ ============
Cash dividends declared $ 1,310,627 $ 1,264,128 $ 1,221,980
============ ============ ============
Return on average total
assets 1.03% 1.17% 1.23%
==== ==== ====
Return on average share-
holders' equity (2) 10.81% 12.77% 12.93%
===== ===== =====
Return on average share-
holders' equity (3) 13.74% 15.90% 15.25%
===== ===== =====
Dividend payout percentage (4) 32.01% 32.33% 31.54%
===== ===== =====
Average shareholders'
equity (2) to average total
assets 9.50% 9.14% 9.54%
==== ==== ====
Average shareholders'
equity (3) to average total
assets 7.48% 7.34% 8.09%
==== ==== ====
(1) Net of average unrealized appreciation or depreciation on securities
available-for-sale.
(2) Includes common stock subject to repurchase obligation in ESOP.
(3) Excludes common stock subject to repurchase obligation in ESOP.
(4) Dividends declared divided by net income.
VII. SHORT-TERM BORROWINGS
The Corporation did not have any category of short-term borrowings for
which the average balance outstanding during the reported periods was 30
percent or more of shareholders' equity at the end of the reported
periods.
Effect of Environmental Regulation
Compliance with federal, state and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had a material effect upon the capital
expenditures, earnings or competitive position of the Corporation and its
subsidiaries. The Corporation believes that the nature of the operations of
its subsidiaries has little, if any, environmental impact. The Corporation,
therefore, anticipates no material capital expenditures for environmental
control facilities for its current fiscal year or for the foreseeable future.
The Corporation's subsidiaries may be required to make capital expenditures
for environmental control facilities related to properties which they may
acquire through foreclosure proceedings in the future; however, the amount of
such capital expenditures, if any, is not currently determinable.
Item 2. Properties.
The following is a listing and brief description of the properties owned
or leased by State Bank and used in its business:
1. Its main office is a two-story brick building
located at 401 Clinton Street, Defiance, Ohio, which was
built in 1971. Including a basement addition built in 1991,
it contains 33,400 square feet of floor space. Approximately
1,100 square feet on the second floor and 1,900 on the lower
level presently are leased to Rurbanc.
2. A branch office located in downtown Defiance, Ohio
containing 3,600 square feet of floor space was built in
1961. It contains a three-bay drive-in, two inside teller
locations and a night deposit unit.
3. A full service branch office located on Main Street
in Ney, Ohio containing 1,536 square feet of floor space was
opened in 1968.
4. A full service branch office located at 1796 North
Clinton Street, Defiance, Ohio containing 2,120 square feet
of floor space was opened in 1968. It is a free standing
structure located in front of a shopping center.
5. A full service branch office located at 1856 East
Second Street, Defiance, Ohio containing 2,160 square feet
of floor space was opened in 1972. It is a free standing
structure located in front of a shopping center.
6. A full service branch office located at 2010
South Jefferson, Defiance, Ohio containing 2,160 square
feet of floor space was opened in 1979. It is located in a
primarily residential area.
7. A full service branch office located at 220 North
Main Street, Paulding, Ohio containing 6,200 square feet of
floor space was opened in 1980.
8. A full service branch office located at 312 Main
Street, Delta, Ohio containing 3,470 square feet of floor
space was acquired from Society Bank & Trust
("Society") in 1992.
9. A full service branch office located at 133 E.
Morenci Street, Lyons, Ohio containing 2,578 square feet of
floor space was acquired from Society in 1992.
10. A full service branch office located at 515
Parkview, Wauseon, Ohio containing 3,850 square feet of
floor space was acquired from Society in 1992.
11. A full service branch located in the Chief Market
Square supermarket at 705 Deatrick Street, Defiance, Ohio
and containing 425 square feet was opened in 1993. State
Bank leases the space in which this branch is located
pursuant to a 15-year lease.
The following is a listing and brief description of the properties owned
by Peoples Bank and used in its business:
1. The full service main office located at 301 South
Main Street, Findlay, Ohio was opened in 1990. It contains
approximately 30,000 square feet of floor space, of which
12,000 is used by an unrelated law firm.
2. A full service branch office located at 124 East
Main Street, McComb, Ohio was opened in 1990. It contains
approximately 3,600 square feet of floor space.
3. A full service branch office located at 1330 North
Main Street, Findlay, Ohio, was opened in 1979. It contains
approximately 1,500 square feet of floor space.
The only real property owned by First National Bank is the location of
the Bank at 405 East Main Street, Ottawa, Ohio. First National Bank's facility
is a two-story brick and steel building containing approximately 7,100 square
feet of space. The first floor is a traditional banking lobby and the second
floor contains proof/bookkeeping and office space.
The following is a listing and brief description of the properties owned
by Citizens Bank and used in its business:
1. The full service main office is located at 132 East
Front Street, Pemberville, Ohio and contains 6,389 square
feet. It was built near the turn of the century and was
completely remodeled and added on to in 1992.
2. A full service branch office located at 230
West Madison Street, Gibsonburg, Ohio occupies 2,520 square
feet and was built in 1988.
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Corporation or any
of its subsidiaries is a party or to which any of their property is subject,
except routine legal proceedings to which the Corporation or any of its
subsidiaries is a party incidental to its banking business. None of such
proceedings are considered by the Corporation to be material.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
The following table lists the names and ages of the executive officers
of the Corporation as of the date of this Annual Report on Form 10-K, the
positions presently held by each such executive officer and the business
experience of each such executive officer during the past five years. Unless
otherwise indicated, each person has held his principal occupation(s) for more
than five years. All executive officers serve at the pleasure of the Board of
Directors of the Corporation.
Position(s) Held with the
Corporation and its Subsidiaries
Name Age and Principal Occupation(s)
------ ----- -----------------------------------
Thomas C. Williams 47 President and Chief Executive Officer of
the Corporation and of State Bank since
June 1995; President of FirstMerit Bank,
FSB, Clearwater, Florida, from 1994 to
June, 1995; Senior Vice President and
Managing Officer of the Northern Region
of The First National Bank of Ohio,
Cleveland, Ohio, from 1990 to 1994;
Director of the Corporation, State Bank
and Rurbanc.
David E. Manz 46 Executive Vice President, Secretary and
Treasurer since 1992, Chief Financial
Officer since 1990, and Vice President
from 1990 to 1992, of the Corporation;
President and Chief Executive Officer
of Rurbanc since 1988; Executive Vice
President since 1992, Senior Vice Presi-
dent from 1991 to 1992, and Vice President
from 1983 to 1991, of State Bank; Director
of the Corporation and Rurbanc.
Edward L. Yoder 50 Vice President of the Corporation since
1992; Executive Vice President since 1992,
Senior Vice President from 1991 to 1992,
and Vice President from 1981 to 1991, of
State Bank; President and Chief Executive
Officer of Rurban Life since 1992;
Director of Rurban Life.
Robert W. Constien 43 Vice President of the Corporation since
1994; Executive Vice President since 1994,
Senior Vice President from 1991 to 1993,
Vice President from 1987 to 1991, and a
Trust Officer since 1987, of State Bank.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The common shares of the Corporation are traded on a limited basis in
the over-the-counter market. The table below sets forth the high and low bid
quotations for, and the cash dividends declared with respect to, the common
shares of the Corporation, for the indicated periods. The bid quotations were
obtained from one of the securities dealers who makes a market in the
Corporation's common shares (the Corporation is aware of three securities
dealers who make a market in its common shares). The bid quotations reflect
the prices at which purchases and sales of the Corporation's common shares
could be made during each period and not inter-dealer prices. The bid
quotations reflect retail mark-ups, but not commissions or retail mark-downs.
The bid quotations represent actual transactions in the Corporation's common
shares. The per share amounts have been restated for the two-for-one stock
split in January 1994.
Per Share Per Share
Bid Prices Dividends
1994 High Low Declared
---- ---- --- --------
First Quarter $ 21.00 $ 18.25 $ .15
Second Quarter 23.00 20.00 .15
Third Quarter 24.00 22.00 .15
Fourth Quarter 25.50 24.00 .15
1995
First Quarter $ 25.50 $ 23.75 $ .15
Second Quarter 27.75 25.13 .15
Third Quarter 30.50 27.75 .15
Fourth Quarter 32.38 29.38 .15
There can be no assurance as to the amount of dividends which will be
declared with respect to the common shares of the Corporation in the future,
since such dividends are subject to the discretion of the Corporation's Board
of Directors, cash needs, general business conditions, dividends from the
subsidiaries and applicable governmental regulations and policies. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Capital Resources and Note 1 of Notes to Consolidated Financial
Statements.
The approximate number of holders of outstanding common shares of the
Corporation, based upon the number of record holders as of December 31, 1995,
is 1,056.
Item 6. Selected Financial Data.
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
Year Ended December 31, 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
EARNINGS
Total interest income .... $ 31,430 $ 23,474 $ 21,478 $ 22,716 $ 23,757
Total interest expense ... 14,238 9,612 8,909 10,754 12,817
Net interest income ...... 17,192 13,862 12,569 11,962 10,940
Provision for loan losses 1,452 701 795 768 810
Total noninterest income . 5,753 5,312 5,434 5,124 3,996
Total noninterest expense 15,272 12,664 11,510 10,813 9,848
Income tax expense ....... 2,127 1,899 1,823 1,766 1,272
Net income ............... 4,095 3,910 3,875 3,739 3,006
- -----------------------------------------------------------------------------------------
PER SHARE DATA (1)
Net income ............... $ 1.87 $ 1.89 $ 1.91 $ 1.84 $ 1.50
Cash dividends declared .. 0.60 0.60 0.60 0.59 0.60
Average shareholders' .... 37,877 30,614 29,966 27,374 23,761
equity (2)
Average total assets ..... 398,560 335,118 314,230 297,720 259,843
- -----------------------------------------------------------------------------------------
RATIOS
Return on average total .. 1.03% 1.17% 1.23% 1.26% 1.16%
assets
Average shareholders'
equity(2)
to average total assets 9.50 9.14 9.54 9.19 9.14
Return on average
shareholders'
equity(2) .............. 10.81 12.77 12.93 13.66 12.65
Dividend payout ratio
(dividends
divided by net income) 32.01 32.33 31.54 32.10 39.93
- -----------------------------------------------------------------------------------------
PERIOD END TOTALS
Total assets ............. $411,226 $393,547 $317,845 $310,143 $274,851
Total loans and leases ... 277,600 280,679 227,813 210,922 181,461
Total deposits ........... 367,797 354,646 283,603 279,696 241,843
Shareholders' equity(2) .. 40,078 35,675 31,293 28,640 26,107
Book value per common .... 18.35 16.33 15.42 14.11 12.86
share (1)(2)
- --------------------------------------------------------------------------------
(1) Per share data restated for 1994 two-for-one stock split and 1992 15%
stock dividend.
(2) Includes common shares subject to repurchase obligation in ESOP.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Earnings Summary
Consolidated net income for the Corporation for 1995 was $4,095,000, up
from $3,910,000 in 1994 and $3,875,000 in 1993. Net income per share was $1.87
in 1995, a decrease of 1% from $1.89 in 1994. The 1994 net income per share
results represented a 1% decrease from $1.91 in 1993. Cash dividends declared
per share amounted to $.60 in 1995, 1994 and 1993. Per share data has been
adjusted to reflect the two-for-one stock split paid in January of 1994.
Results Of Operations
1995 Compared With 1994
Net interest income for 1995 was $17,192,000, an increase of $3,331,000
(24%) over 1994. The increase is primarily due to the additional net interest
income resulting from a 13% increase in the average balance of total loans,
net of unearned income and deferred loan fees. Net interest income was
significantly impacted by the acquisition of Citizens Bank in October of 1994.
For the year ended December 31, 1994, approximately three months of net
interest income was recorded for Citizens Bank in the Corporation's
consolidated net interest income as compared to a full year of net interest
income for December 31, 1995. Net interest income was also favorably impacted
by a 121 basis point increase in the average yield on loans due to higher
average rates charged on loans resulting from an upward movement of interest
rates during 1995. This contributed to a 26 basis point increase in average
tax equivalent net interest margin from 4.46% in 1994 to 4.72% in 1995. The
tax equivalent yield on average balances of interest-earning assets increased
from 7.51% for 1994 to 8.57% in 1995 due to the upward movement of interest
rates during 1995.
The average rate on interest-bearing liabilities for 1995 was 4.51%, an
increase of 88 basis points from 3.63% for 1994. This increase was primarily
the result of an increase in interest rates paid on time deposits when the
interest rates were rising during the early part of 1995.
At December 31, 1995, net loans amounted to $273,095,000, a decrease of
1% over net loans of $275,647,000 at December 31, 1994. This decrease is
primarily due to the lower demand for consumer loans in 1995 compared to 1994.
With the recent decrease in interest rates, management expects increased
refinancing activity may lead to net mortgage loan growth if the Corporation
is able to refinance loans currently held by other financial institutions.
Lower rates are expected to boost the growth of small businesses by lowering
borrowing costs. Management expects this to lead to increased demand for
commercial, financial and agricultural loans.
At December 31, 1995, approximately $2.9 million of real estate mortgage
loans were held for sale in the secondary market. During 1995, approximately
$10.4 million of real estate mortgage loans were originated for sale and
approximately $12.2 million were sold in the secondary market. This represents
a decrease of $325,000 (3%) in loans sold in 1995 as compared to 1994.
Mortgage loans originated for sale decreased $2.1 million in 1995, as compared
to 1994, primarily due to increasing interest rates in the early part of 1995
which slowed the demand for mortgage loan refinancings. Net gains on loan
sales for 1995 totaled $84,000, a decrease of $28,000 (25%) as compared to
1994. The Corporation continues to retain the servicing of these loans as a
fee generating service. Primarily, loans originated for sale are fixed rate
mortgage loans. Management anticipates an increase in the volume of loans
originated for sale in 1996 as compared to 1995 based on the lowering of
interest rates in the first quarter of 1996.
Securities totaled $90,330,000 at December 31, 1995 which represented an
increase of $20,147,000 (29%) from total securities of $70,183,000 at December
31, 1994. The increase in securities is primarily due to a growing deposit
base, outpacing loan demand, as customers take advantage of the deposit
services being offered by the Corporation. In November 1995, the Financial
Accounting Standards Board ("FASB") issued its Special Report, A Guide to
Implementation of SFAS No. 115 on Accounting for Certain Investments in Debt
and Equity Securities ("Guide"). As permitted by the Guide, on December 31,
1995, the Corporation made a one-time reassessment and transferred securities
from the held-to-maturity portfolio to the available-for-sale portfolio. At
the date of transfer, these securities had an amortized cost of $10,854,000
and the transfer increased the unrealized gain on securities
available-for-sale by $211,000 and shareholders' equity by $139,000, net of
tax of $72,000. As of December 31, 1995, all securities of the Corporation
consisted of available-for-sale securities. The available-for-sale securities
represent those securities the Corporation may decide to sell if needed for
liquidity, asset/liability management or other reasons. These securities are
reported at fair value with unrealized gains and losses included as a separate
component of shareholders' equity, net of tax. This resulted in a net addition
to shareholders' equity of approximately $449,000 at December 31, 1995.
Total deposits at December 31, 1995 amounted to $367,797,000, an
increase of $13,151,000 (4%) over total deposits of $354,646,000 at December
31, 1994. The increase of deposits is believed to have occurred as a result of
increased deposit services and flexibility of products offered. Management
believes that customers continue to place a value on federal insurance on
deposit accounts and that, to the extent the Corporation continues to pay
competitive rates on deposits and continues to provide flexibility of deposit
products, the Corporation will be able to maintain its deposit levels.
The provision for loan losses which was charged to operations was based
on the amount of net losses incurred and management's estimation of future
losses based on an evaluation of portfolio risk and economic factors. The
provision for loan losses was $1,452,000 in 1995 compared to $701,000 in 1994.
The increased provision and decrease in the allowance in 1995 as compared to
1994 is due largely to the charge off of certain credits which were previously
reported on a nonaccrual basis. The amount of allowance acquired through the
acquisition of Citizens Bank in 1994 was $1.1 million. The allowance at
December 31, 1995 was $4,270,000 or 1.54% of total loans, net of deferred loan
fees, compared to $4,770,000 or 1.70% of total loans, net of deferred loan
fees, at December 31, 1994.
Management adopted Statement of Financial Accounting Standards (SFAS)
No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS
No. 118, effective January 1, 1995, which requires recognition of loan
impairment. Loans are considered impaired if full principal or interest
payments are not anticipated in accordance with the contractual loan terms.
Impaired loans are carried at the present value of expected future cash flows
discounted at the loan's effective interest rate or at the fair value of the
collateral if the loan is collateral dependent. Under this guidance, the
carrying value of impaired loans is periodically adjusted to reflect cash
payments, revised estimates of future cash flows and increases in the present
value of expected cash flows due to the passage of time. A portion of the
allowance for loan losses is allocated to impaired loans. The effect of
adopting these standards in 1995 was not material.
Smaller-balance homogeneous loans are evaluated for impairment in total.
Such loans include residential first mortgage loans secured by one-to-four
family residences, residential construction loans, and automobile, home equity
and second mortgage loans. Commercial loans and mortgage loans secured by
other properties are evaluated individually for impairment. When analysis of
borrower operating results and financial condition indicates that underlying
cash flows of the borrower's business are not adequate to meet its debt
service requirements, the loan is evaluated for impairment. Often this is
associated with a delay or shortfall in payments of 30 days or more.
Commercial loans are rated on a scale of 1 to 5, with 1 being satisfactory, 2
watch, 3 substandard, 4 doubtful, and 5 as loss which are then charged off.
Loans graded a 4 or worse are considered for impairment. Loans are generally
moved to nonaccrual status when 90 days or more past due. These loans are
often considered impaired. Impaired loans, or portions thereof, are charged
off when deemed uncollectible. This typically occurs when the loan is 120 days
or more past due. At December 31, 1995, the Corporation classified four loan
relationships as impaired, totaling $1,835,000. Management allocated $643,000
of the allowance for loan losses to impaired loans at December 31, 1995.
Management allocated approximately 39% of the allowance for loan losses
to commercial, financial and agricultural loans; 34% to installment loans; and
12% to real estate mortgage loans at December 31, 1995, leaving a balance of
15% unallocated. Nonperforming loans decreased to $3,114,000 at December 31,
1995 from $4,736,000 at December 31, 1994. The decrease in nonperforming loans
relates primarily to the charge off of certain nonperforming loans in 1995.
Management believes the allowance for loan losses balance at December 31, 1995
is adequate to absorb losses on these and other loans, as the allowance
balance is maintained by management at a level considered adequate to cover
losses that are currently anticipated based on past loss experience, general
economic conditions, information about specific borrower situations including
their financial position and collateral values, and other factors and
estimates which are subject to change over time.
Total noninterest income increased $440,000 (8%) to $5,753,000 in 1995
from $5,313,000 in 1994, primarily due to increases in three areas. The
Corporation's service charges on deposits increased $163,000 (16%) to
$1,185,000 in 1995 compared to $1,022,000 in 1994, trust department income
increased $161,000 (9%) to $1,946,000 in 1995 from $1,785,000 in 1994 and data
processing fees increased $107,000 (6%) to $2,039,000 in 1995 compared to
$1,932,000 in 1994. A significant factor in the increase in noninterest income
was the addition of Citizens Bank in the fourth quarter of 1994, resulting in
a full year of noninterest income for Citizens Bank in 1995 as compared to
approximately three months of noninterest income in 1994.
Total noninterest expense increased $2,608,000 (21%) to $15,272,000 in
1995, from $12,664,000 in 1994, primarily due to the following factors.
Salaries and employee benefits increased $1,173,000 (20%) to $6,909,000 in
1995 compared to $5,736,000 in 1994. This increase is due to normal annual
salary increases and the inclusion of Citizen Bank's salary and employee
benefits for the entire year for 1995 compared to approximately three months
in 1994. Equipment rentals, depreciation and maintenance expenses increased
$638,000 (51%) to $1,890,000 in 1995 compared to $1,252,000 in 1994. This
increase is largely due to depreciation on the new data processing equipment
at Rurbanc, which was placed in service in the last quarter of 1994, resulting
in a full year of depreciation in 1995. Other expenses increased $716,000
(15%) primarily due to increases in professional fees of $244,000, increases
in the amortization of intangible assets of $417,000 and a general increase in
all operating expenses, partially offset by a decrease in FDIC insurance
expense. Another significant factor in the increase in other expenses was the
addition of Citizens Bank in the fourth quarter of 1994, resulting in a full
year of other expenses for Citizens Bank in 1995 as compared to approximately
three months of other expenses in 1994.
Income tax expense for the year ended December 31, 1995 was $2,127,000,
an increase of $228,000 (12%) from 1994. This increase was primarily
attributable to an increase in income before income tax expense.
Several new accounting standards have been issued by the FASB that will
apply in 1996. SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets To Be Disposed Of", requires a review of
long-term assets for impairment of recorded value and resulting write-downs if
the value is impaired. SFAS No. 122, "Accounting for Mortgage Servicing
Rights", requires recognition of an asset when servicing rights are retained
on in-house originated loans that are sold. These statements are not expected
to have a material effect on the Corporation's consolidated financial position
or results of operations.
1994 Compared With 1993
Net interest income for 1994 was $13,862,000, an increase of $1,292,000
(10%) over 1993. The increase was primarily due to the additional net interest
income resulting from an 11% increase in the average balance of total loans,
net of unearned income and deferred loan fees. Approximately one-third of this
increase was attributable to the acquisition of Citizens Bank, located in
Pemberville, Ohio, in October of 1994. Net interest income was also favorably
impacted by a 19 basis point increase in the average yield on loans. This
contributed to an 8 basis point increase in average tax equivalent net
interest margin from 4.38% in 1993 to 4.46% in 1994. The tax equivalent yield
on average balances of interest-earning assets increased from 7.42% for 1993
to 7.51% in 1994 due to increasing interest rates during most of 1994.
The average rate on interest-bearing liabilities for 1994 was 3.63%, an
increase of 4 basis points from 3.59% for 1993. This increase was primarily
the result of an increase in interest rates paid on time deposits.
At December 31, 1994, net loans amounted to $275,647,000, an increase of
23% over net loans of $224,258,000 at December 31, 1993. The increase in loans
was primarily funded by an increase of 25% in total deposits from 1993 to
1994. Of the $51,389,000 increase in net loans, approximately $35 million was
attributable to the acquisition of Citizens Bank.
At December 31, 1993, approximately $4.7 million of real estate mortgage
loans were held for sale. During 1994, approximately $12.5 million of real
estate mortgage loans were originated for sale and approximately $12.5 million
were sold in the secondary market. This represented a decrease of $28.9
million (70%) in loans sold in 1994 as compared to 1993. Net gains realized on
loan sales for 1994 totaled $112,000, a decrease of $318,000 (74%) as compared
to 1993. The Corporation continued to retain the servicing of these loans as a
fee generating service. As of December 31, 1994, loans held for sale in the
secondary market totaled approximately $4.7 million. Mortgage loans originated
for sale decreased $32.1 million in 1994, as compared to 1993, primarily due
to increasing interest rates and the resulting decrease in customer
refinancings throughout most of 1994. Primarily, loans originated for sale
were fixed rate mortgage loans.
Securities totaled $70,183,000 at December 31, 1994 which represented an
increase of $11,269,000 (19%) from total securities of $58,914,000 at December
31, 1993. The increase in securities was primarily due to securities acquired
in the acquisition of Citizens Bank. On January 1, 1994, the Corporation
adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". As a result, the Corporation classified $59,812,000 of securities
as available-for-sale and $10,371,000 of securities as held-to-maturity at
December 31, 1994. The available-for-sale securities represent those
securities the Corporation may decide to sell if needed for liquidity, asset
liability management or other reasons. These securities are reported at fair
value with unrealized gains and losses included as a separate component of
shareholders' equity, net of tax. This resulted in a net reduction to
shareholders' equity of $1,170,000 at December 31, 1994. The held-to-maturity
securities represent those securities which the Corporation has the positive
intent and ability to hold to maturity, and are reported at amortized cost.
Total deposits at December 31, 1994 amounted to $354,646,000, an
increase of $71,043,000 (25%) over total deposits of $283,603,000 at December
31, 1993. The acquisition of Citizens Bank brought in approximately $56
million in deposits. The additional increase of deposits was believed to have
occurred as a result of increased deposit services and flexibility of products
offered.
The provision for loan losses which was charged to operations was based
on the growth of the loan portfolio, the amount of net losses incurred and
management's estimation of future losses based on an evaluation of portfolio
risk and economic factors. The provision for loan losses was $701,000 in 1994
compared to $795,000 in 1993. The amount of allowance for loan losses acquired
through the acquisition of Citizens Bank was $1.1 million. The allowance at
December 31, 1994 was $4,770,000 or 1.70% of total loans, net of deferred loan
fees, compared to $3,390,000 or 1.49% of total loans, net of deferred loan
fees, at December 31, 1993.
Management allocated approximately 37% of the allowance for loan losses
to commercial, financial and agricultural loans; 34% to installment loans; and
12% to real estate mortgage loans at December 31, 1994, leaving a balance of
17% unallocated. Nonperforming loans increased to $4,736,000 at December 31,
1994 from $3,821,000 at December 31, 1993. The increase in nonperforming loans
was primarily due to one large commercial borrower totaling approximately
$832,000 at December 31, 1994 being 90 days or more past due.
Total noninterest income decreased $121,000 (2%) to $5,313,000 in 1994
primarily due to decreases in two areas. Data processing fees decreased
$51,000 (3%) to $1,932,000 in 1994 compared to $1,983,000 in 1993. Also, as
discussed above, the Corporation did not sell as many loans in the secondary
market in 1994 resulting in a decline in net gains on loan sales of $318,000
(74%) from $430,000 in 1993 to $112,000 in 1994. These decreases were
partially offset by increases in service charges on deposits, trust department
income and other noninterest income.
Total noninterest expense increased $1,154,000 (10%) to $12,664,000 in
1994, primarily due to the following factors. Salaries and employee benefits
increased $461,000 (9%) due in part to the acquisition of Citizens Bank as
well as normal annual salary increases. Equipment rentals, depreciation and
maintenance increased $190,000 (18%) of which $54,000 was due to the
acquisition of Citizens Bank. Other expenses increased $534,000 (12%)
primarily due to increases in professional fees of $121,000 (17%), advertising
expense of $72,000 (45%), state, local and other taxes of $82,000 (16%) and
other operating expenses of $225,000 (25%). The most significant factor in the
increase in other expenses of $534,000 was the addition of Citizens Bank.
Income tax expense for the year ended December 31, 1994 was $1,899,000,
an increase of $76,000 (4%) from 1994. This increase was primarily
attributable to an increase in income before income tax expense and a
reduction in the level of tax-exempt income in 1994 as compared to 1993.
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,
deposits in other financial institutions, federal funds sold, securities and
loans held for sale. These assets are commonly referred to as liquid assets.
Liquid assets were $121,839,000 at December 31, 1995 compared to $100,397,000
at December 31, 1994 and $82,100,000 at December 31, 1993. Liquidity levels
increased $21,442,000 from 1994 to 1995 primarily due to the increase in cash
and cash equivalents and securities available-for-sale. Management recognizes
that securities may need to be sold in the future to help fund loan demand
and, accordingly, as of December 31, 1995, $90,330,000 of securities were
classified as available-for-sale. Management believes its current liquidity
level is sufficient to meet anticipated future growth.
The cash flow statements for the periods presented provide an indication
of the Corporation's sources and uses of cash as well as an indication of the
ability of the Corporation to maintain an adequate level of liquidity. A
discussion of the cash flow statements for 1995, 1994 and 1993 follows.
For all periods presented, the Corporation experienced a net increase in
cash from operating activities. Net cash from operating activities was
$8,033,000, $6,856,000 and $2,681,000 for the years ended December 31, 1995,
1994 and 1993, respectively. The increase in net cash from operating
activities of $1,177,000 for 1995 as compared to 1994 was primarily due to an
increase in interest received on interest-earning assets which outpaced an
increase in interest paid on interest-bearing liabilities. Net cash from
operating activities increased $4,175,000 in 1994 as compared to 1993
primarily due to changes in activity related to loans originated for sale and
an increase in interest received on interest-earning assets outpacing the
increase in interest paid on interest-bearing liabilities due to the
acquisition of Citizens Bank in October of 1994 and rising interest rates.
Net cash flow from investing activities was $(16,672,000), $(13,086,000)
and $(9,212,000) for the years ended December 31, 1995, 1994 and 1993,
respectively. The changes in net cash from investing activities include the
result of normal maturities and reinvestments of securities as well as
financing loan growth and premises and equipment expenditures. In 1995, the
Corporation received $2,263,000 from sales of securities available-for-sale
and $25,509,000 from principal repayments, maturities and calls of securities,
and had a cash outflow of $45,462,000 for the purchase of securities. In 1994,
the Corporation received $3,266,000 in net cash as a result of the acquisition
of Citizens Bank.
Net cash flow from financing activities was $11,840,000, $13,071,000 and
$3,685,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
The net cash increase was primarily attributable to growth in total deposits
of $13,151,000, $15,335,000 and $3,907,000 in 1995, 1994 and 1993,
respectively.
Management of interest sensitivity is accomplished by matching the
maturities of interest-earning assets and interest-bearing liabilities. The
following table illustrates the asset (liability) funding gaps for selected
maturity periods as of December 31, 1995.
INTEREST SENSITIVITY GAP ANALYSIS
------------Repricable or Maturing Within-------------
0-6 6-12 Total 1 Over 1 Total
Months Months yr. yr.
(000) (000) (000) (000) (000)
----- ----- ----- ----- -----
ASSETS
Interest-earning deposits
in other financial
institutions $ 20 $ 100 $ 120 $ 60 $ 180
Federal funds sold 7,313 - 7,313 - 7,313
Securities 15,414 17,695 33,109 57,221 90,330
Loans/loans held for sale 141,051 66,598 207,649 72,665 280,314
--------- -------- -------- --------- --------
Total interest-earning $163,798 $ 84,393 $248,191 $129,946 $378,137
assets ======== ======== ======== ======== ========
LIABILITIES
Interest-bearing deposits $232,458 $ 42,155 $274,613 $ 44,463 $319,076
======== ======== ======== ======== ========
Assets (liability) GAP $(68,660) $ 42,238 $(26,422) $ 85,483 $ 59,061
GAP ratio (assets/ 70% 200% 90% 292% 119%
liabilities)
Capital Resources
Total shareholders' equity was $40,078,000 (which includes $9,333,000 of
common shares subject to repurchase obligation in ESOP) as of December 31,
1995, an increase of $4,403,000 over total shareholders' equity of $35,675,000
as of December 31, 1994. The increase in total shareholders' equity was
primarily due to 1995 net income of $4,095,000 and $1,619,000 net change in
unrealized appreciation on securities available-for-sale, net of tax,
partially offset by dividends of $1,311,000. Under risk-based capital
guidelines issued by the Federal Reserve Board, the Corporation and its
subsidiary banks are required to maintain a minimum risk-based capital ratio
of 8% and a minimum leverage ratio of 4% as of December 31, 1995. While
risk-based capital guidelines consider on-balance-sheet and off-balance-sheet
risk, the minimum leverage ratio measures capital in relation to total
on-balance-sheet assets.
The components of risk-based capital are tier 1 capital and tier 2
capital. The definition of capital, used in the leverage ratio, is identical
to tier 1 capital under risk-based capital guidelines. Tier 1 capital is total
shareholders' equity less intangible assets and tier 2 capital includes total
allowance for loan losses in the calculation of total capital for risk-based
capital purposes. The allowance for loan losses is includable in tier 2
capital up to a maximum of 1.25% of risk-weighted assets. The net unrealized
appreciation/depreciation on securities available-for-sale, net of tax, under
SFAS No. 115 is not considered for meeting regulatory capital requirements.
The following table provides the minimum regulatory capital requirements and
the Corporation's capital ratios at December 31, 1995:
TYPE OF CAPITAL RATIO
Minimum
Regulatory
Capital Corporation's
Requirements Capital
12/31/95 Ratio
----------- -------------
Ratio of tier 1 capital to weighted-risk assets 4.00% 14.51%
Ratio of total capital to weighted-risk assets 8.00% 15.76%
Leverage Ratio 4.00% 9.26%
Ratio of total shareholders' equity to total assets N/A 9.75%
The Corporation's subsidiaries meet the applicable minimum regulatory
capital requirements at December 31, 1995. The Corporation remains comfortably
above the minimum regulatory capital requirements. The banking regulators may
alter minimum capital requirements as a result of revising their internal
policies and their ratings of the Corporation's subsidiary banks.
Restrictions exist regarding the ability of the subsidiary banks to
transfer funds to the Corporation in the form of cash dividends, loans or
advances. (See Note 1 to Consolidated Financial Statements.) These
restrictions have had no major impact on the Corporation's dividend policy or
operations and it is not anticipated that they will have any major impact in
the future.
As of December 31, 1995, 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 Inflation And Changing Prices
The majority of assets and liabilities of the Corporation are monetary
in nature and therefore the Corporation differs greatly from most commercial
and industrial companies that have significant investments in fixed assets or
inventories. However, inflation does have an important impact on the growth of
total assets in the banking industry and the resulting need to increase equity
capital at higher than normal rates in order to maintain an appropriate equity
to assets ratio. Inflation significantly affects noninterest expense, which
tends to rise during periods of general inflation.
Management believes the most significant impact on financial results is
the Corporation's ability to react to changes in interest rates. Management
seeks to maintain an essentially balanced position between interest sensitive
assets and liabilities and actively manages the amount of securities
available-for-sale in order to protect against the effects of wide interest
rate fluctuations on net income and shareholders' equity.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Balance Sheets of the Corporation and its subsidiaries
as of December 31, 1995 and December 31, 1994, the related Consolidated
Statements of Income, Changes in Shareholders' Equity and Cash Flows for each
of the years in the three-year period ended December 31, 1995, the related
Notes to Consolidated Financial Statements and the Report of Independent
Auditors, appear on pages 46 through 73 of this Annual Report on Form 10-K.
The Corporation is not required to furnish the supplementary financial
information specified by Item 302 of Regulation S-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
In accordance with General Instruction G(3), the information called for
in this Item 10 is incorporated herein by reference to the Corporation's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Corporation's Annual Meeting
of Shareholders to be held on April 22, 1996, under the captions "ELECTION OF
DIRECTORS" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT." In addition, certain information concerning the executive
officers of the Corporation called for in this Item 10 is set forth in the
portion of Part I of this Annual Report on Form 10-K entitled "Executive
Officers of the Registrant" in accordance with General Instruction G(3).
Item 11. Executive Compensation.
In accordance with General Instruction G(3), the information called for
in this Item 11 is incorporated herein by reference to the Corporation's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Corporation's Annual Meeting
of Shareholders to be held on April 22, 1996, under the captions "COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS" and "COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION." Neither the "REPORT ON EXECUTIVE COMPENSATION" nor
the "PERFORMANCE GRAPH" included in the Corporation's definitive Proxy
Statement relating to the Corporation's Annual Meeting of Shareholders to be
held on April 22, 1996, shall be deemed to be incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
In accordance with General Instruction G(3), the information called for
in this Item 12 is incorporated herein by reference to the Corporation's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Corporation's Annual Meeting
of Shareholders to be held on April 22, 1996, under the caption "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
Item 13. Certain Relationships and Related Transactions.
In accordance with General Instruction G(3), the information called for
in this Item 13 is incorporated herein by reference to the Corporation's
definitive Proxy Statement, filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, relating to the Corporation's Annual Meeting
of Shareholders to be held on April 22, 1996, under the caption "TRANSACTIONS
INVOLVING MANAGEMENT."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements.
For a list of all financial statements included in this Annual Report
on Form 10-K, see "Index to Financial Statements" at page 45.
(a) (2) Financial Statement Schedules.
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and,
therefore, have been omitted.
(a) (3) Exhibits.
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits" at page
74. The following table provides certain information concerning
executive compensation plans and arrangements required to be filed as
exhibits to this Annual Report on Form 10-K.
Executive Compensation Plans and Arrangements
Exhibit No. Description Location
10(a) Employees' Stock Ownership Incorporated herein by
Plan of Rurban Financial Corp. reference to the
Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1991 (File
No. 0-13507) [Exhibit
10(a)].
10(b) First Amendment to Employees' Incorporated herein by
Stock Ownership Plan of Rurban reference to the
Financial Corp., dated June Corporation's Annual
14, 1993 and made to be Report on Form 10-K for
effective as of January 1, 1993 the fiscal year ended
December 31, 1993 (File
No. 0-13507) [Exhibit
10(b)].
10(c) Second Amendment to Employees' Incorporated herein by
Stock Ownership Plan of Rurban reference to the
Financial Corp., dated March Corporation's Annual
14, 1994 and made to be Report on Form 10-K for
effective as of January 1, 1993 the fiscal year ended
December 31, 1993 (File
No. 0-13507) [Exhibit
10(c)].
10(d) Third Amendment to Employees' Incorporated herein by
Stock Ownership Plan of Rurban reference to the
Financial Corp., dated March Corporation's Annual
13, 1995 Report on Form 10-K for
the fiscal year ended
December 31, 1994 (File
No. 0-13507) [Exhibit
10(d)].
10(e) Fourth Amendment to Employees' Pages 79 through 81 of
Stock Ownership Plan of Rurban this Annual Report on Form
Financial Corp., dated 10-K.
June 10, 1995 and made to be
effective as of January 1, 1995
10(f) The Rurban Financial Corp. Incorporated herein by
Savings Plan and Trust reference to the
Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1988 (File
No. 0-13507) [Exhibit
10(d)].
10(g) First Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to the
and Trust, dated December 10, Corporation's Annual
1990 and effective January 1, Report on Form 10-K for
1990 the fiscal year ended
December 31, 1990 (File
No. 0-13507) [Exhibit
10(g)].
10(h) Second Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to the
and Trust, dated March 11, Corporation's Annual
1991, effective February 1, Report on Form 10-K for
1991 the fiscal year ended
December 31, 1992 (File
No. 0-13507) [Exhibit
10(d)].
10(i) Third Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to the
and Trust, dated June 11, 1991 Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1992 (File
No. 0-13507) [Exhibit
10(e)].
10(j) Fourth Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to the
and Trust, dated July 14, Corporation's Annual
1992, effective May 1, 1992 Report on Form 10-K for
the fiscal year ended
December 31, 1992 (File
No. 0-13507) [Exhibit
10(f)].
10(k) Fifth Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to the
and Trust, dated March 14, 1994 Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1993 (File
No. 0-13507) [Exhibit
10(i)].
10(l) Sixth Amendment to The Rurban Pages 82 through 84 of
Financial Corp. Savings Plan this Annual Report on Form
and Trust dated May 1, 1995 10-K.
10(m) Summary of Incentive Incorporated herein by
Compensation Plan of State Bank reference to the
Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1993 (File
No. 0-13507) [Exhibit
10(j)].
10(n) Summary of Bonus Program Incorporated herein by
adopted by the Trust reference to the
Department of State Bank for Corporation's Annual
the benefit of Robert W. Report on Form 10-K for
Constien in his capacity as the fiscal year ended
Manager of the Trust Department December 31, 1991 (File
No. 0-13507) [Exhibit
10(e)].
10(o) Summary of Bonus Program for Incorporated herein by
the Trust Department of State reference to the
Bank Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1992 (File
No. 0-13507) [Exhibit
10(i)].
10(p) Summary of Sales Bonus Program Incorporated herein by
of State Bank reference to the
Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1994 (File
No. 0-13507) [Exhibit
10(n)].
10(q) Summary of Rurban Financial Incorporated herein by
Corp. Bonus Plan reference to the
Corporation's Annual
Report on Form 10-K for
the fiscal year ended
December 31, 1993 (File
No. 0-13507) [Exhibit
10(q)].
10(r) Executive Salary Continuation Incorporated herein by
Agreement, dated December 15, reference to the
1994, between Rurban Financial Corporation's Annual
Corp. and Richard C. Burrows Report on Form 10-K for
the fiscal year ended
December 31, 1994 (File
No. 0-13507)
[Exhibit 10(p)].
10(s) Executive Salary Continuation Pages 85 through 93 of
Agreement, dated October 11, this Annual Report on Form
1995, between Rurban Financial 10-K.
Corp. and Thomas C. Williams;
and Schedule A to
Exhibit 10(s) identifying
other identical Executive
Salary Continuation Agreements
between executive officers of
Rurban Financial Corp. and
Rurban Financial Corp.
10(t)
Description of Split-Dollar Page 94 of this Annual
Insurance Policies Maintained Report on Form 10-K.
for Certain Executive Officers
of Rurban Financial Corp.
(b) Reports on Form 8-K.
There were no Current Reports on Form 8-K filed during the fiscal
quarter ended December 31, 1995.
(c) Exhibits.
Exhibits filed with this Annual Report on Form 10-K are attached hereto.
For a list of such exhibits, see "Index to Exhibits" at page 74.
(d) Financial Statement Schedules.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
RURBAN FINANCIAL CORP.
Date: March 26, 1996 By: Thomas C. Williams, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Date Capacity
------ ------ ----------
*Thomas C. Williams * President, Chief Executive Officer,
Principal Executive Officer and
Director
*David E. Manz * Executive Vice President, Secretary,
Treasurer, Chief Financial Officer,
Principal Financial and Accounting
Officer and Director
*Richard C. Burrows * Director
*John R. Compo * Director
*Robert A. Fawcett, Jr. * Director
*Richard Z. Graham * Director
*John H. Moore * Director
*Merlin W. Mygrant * Director
*Steven D. VanDemark * Director
*J. Michael Walz, D.D.S. * Director
*By: Thomas C. Williams
(Attorney-in-Fact)
Date: March 26, 1996
RURBAN FINANCIAL CORP.
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1995
INDEX TO FINANCIAL STATEMENTS
Pages in
this Annual
Report on
Description Form 10-K
Report of Independent Auditors.................................... 46
Consolidated Balance Sheets at December 31, 1995
and 1994........................................................ 47-48
Consolidated Statements of Income for the years
ended December 31, 1995, 1994 and 1993.......................... 49
Consolidated Statements of Changes in Shareholders'
Equity for the three years ended December 31,
1995............................................................ 50
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and
1993............................................................ 51-52
Notes to Consolidated Financial Statements........................ 53-73
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Rurban Financial Corp.
Defiance, Ohio
We have audited the accompanying consolidated balance sheets of Rurban
Financial Corp. as of December 31, 1995 and 1994 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
years ended December 31, 1995, 1994 and 1993. These financial statements are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rurban
Financial Corp. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years ended December 31, 1995, 1994 and
1993 in conformity with generally accepted accounting principles.
As discussed in Note 1, the Corporation adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", as of January 1, 1994.
Crowe, Chizek and Company LLP
South Bend, Indiana
January 19, 1996
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
---- ----
ASSETS
Cash and due from banks (Note 10) ............ $ 21,067,131 $ 20,606,577
Federal funds sold ........................... 7,312,525 4,571,594
------------- -------------
Total cash and cash equivalents ........... 28,379,656 25,178,171
------------- -------------
Interest-earning deposits in other financial
institutions ............................... 180,000 346,324
Securities available-for-sale (Note 2) ....... 90,329,866 59,811,855
Securities held-to-maturity (Note 2)
(Fair value: 1994 - $ 10,346,000) .......... -- 10,370,912
Loans
Commercial, financial and agricultural .... 63,444,036 62,866,040
Real estate mortgage ...................... 152,555,540 152,136,086
Installment ............................... 61,600,664 65,676,876
------------- -------------
Total loans ............................ 277,600,240 280,679,002
Deferred loan fees, net ................... (235,396) (262,204)
Allowance for loan losses (Note 3) ........ (4,270,000) (4,770,000)
------------- -------------
Net loans .............................. 273,094,844 275,646,798
------------- -------------
Loans held for sale .......................... 2,949,293 4,689,611
Premises and equipment, net (Note 4) ......... 8,383,717 9,264,085
Accrued interest receivable .................. 3,240,154 2,694,374
Other assets ................................. 4,668,235 5,545,354
------------- -------------
Total assets ........................... $ 411,225,765 $ 393,547,484
============= =============
See accompanying notes to consolidated financial statements.
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing ...................... $ 48,721,000 $ 50,381,190
Interest-bearing (Note 5) ................ 319,075,538 304,264,446
------------ -------------
Total deposits ........................ 367,796,538 354,645,636
------------ -------------
Accrued interest payable .................... 1,035,048 908,248
Other liabilities ........................... 2,315,688 2,319,013
------------ -------------
Total liabilities ..................... 371,147,274 357,872,897
Commitments, off-balance-sheet risk and
contingencies (Note 10)
Common stock subject to repurchase obligation
in ESOP (Note 6) (1995 - 297,467 shares out-
standing; 1994 - 271,428 shares outstanding) . 9,333,027 6,834,557
Common stock: stated value $2.50 per share;
5,000,000 shares authorized; 1995 - 1,886,911
shares outstanding; 1994 - 1,912,950 shares
outstanding .................................. 4,717,277 4,782,375
Additional paid-in capital ..................... 5,798,813 8,232,185
Retained earnings .............................. 19,779,897 16,995,711
Net unrealized appreciation (depreciation) on
securities available-for-sale, net of tax of
$231,549 in 1995 and $602,851 in 1994 ........ 449,477 (1,170,241)
------------ -------------
Total liabilities and shareholders' equity .. $411,225,765 $ 393,547,484
============ =============
See accompanying notes to consolidated financial statements.
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Interest income
Interest and fees on loans $26,539,689 $20,421,474 $17,948,466
Interest and dividends on securities
Taxable 3,756,764 2,485,695 2,989,616
Non-taxable 426,178 346,485 445,580
Other interest income 707,596 220,244 94,625
---------- ----------- ----------
Total interest income 31,430,227 23,473,898 21,478,287
Interest expense
Interest on deposits (Note 5) 14,197,998 9,486,706 8,856,704
Interest on short-term borrowings 40,050 125,647 52,406
---------- ----------- ----------
Total interest expense 14,238,048 9,612,353 8,909,110
---------- ----------- ----------
Net interest income 17,192,179 13,861,545 12,569,177
Provision for loan losses (Note 3) 1,451,898 701,490 795,486
---------- ----------- ----------
Net interest income after provision
for loan losses 15,740,281 13,160,055 11,773,691
Noninterest income
Service charges on deposits 1,184,787 1,021,685 1,004,321
Trust department income 1,946,013 1,784,626 1,616,930
Data processing fees 2,038,948 1,932,045 1,982,739
Net securities gains (losses)
(Notes 2 and 8) 3,113 (8,556) (6,399)
Net gains on loan sales 83,919 112,156 430,321
Other income 496,419 470,727 405,917
---------- ----------- ----------
Total noninterest income 5,753,199 5,312,683 5,433,829
Noninterest expense
Salaries and employee benefits
(Note 6) 6,909,268 5,736,434 5,275,815
Net occupancy expense of premises 869,678 788,377 818,739
Equipment rentals, depreciation and
maintenance 1,889,540 1,251,898 1,061,832
Other expenses (Note 7) 5,603,077 4,886,990 4,353,348
---------- ----------- ----------
Total noninterest expense 15,271,563 12,663,699 11,509,734
---------- ----------- ----------
Income before income tax expense 6,221,917 5,809,039 5,697,786
Income tax expense (Note 8) 2,127,104 1,898,665 1,822,805
---------- ----------- ----------
Net income $4,094,813 $ 3,910,374 $3,874,981
========== =========== ==========
Earnings per common share (Note 1) $ 1.87 $ 1.89 $ 1.91
=========== ============ ===========
See accompanying notes to consolidated financial statements.
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Three years ended December 31, 1995
Net Unrealized
Appreciation
Common Stock (Depreciation)
Subject On Securities
To Repurchase Additional Available-
Obligation in Common Paid-In Retained For-Sale, Treasury
ESOP Stock Capital Earnings Net of Tax Stock
Balances at January 1,
1993 $3,891,597 $ 4,419,320 $8,649,167 $11,696,464 $ - $ (16,840)
Net income for the year - - - 3,874,981 - -
Cash dividends declared
($0.60 per share) - - - (1,221,980) - -
Transfer to common stock
subject to repurchase
obligation in ESOP 1,324,621 500 (1,325,121) - - -
Retirements of treasury
stock - (16,840) - - - 16,840
--------- --------- --------- --------- --------- --------
Balances at December 31,
1993 5,216,218 4,402,980 7,324,046 14,349,465 - -
Adoption of SFAS No. 115,
net of tax of $102,256
(Note 1) - - - - 198,496 -
Net income for the year - - - 3,910,374 - -
Cash dividends declared
($0.60 per share) - - - (1,264,128) - -
Transfer to common stock
subject to repurchase
obligation in ESOP 1,618,339 (8,105) (1,610,234) - - -
Common stock issued
during the year (Note 1) - 387,500 2,518,373 - - -
Net change in unrealized
appreciation
(depreciation) on
securities available-
for-sale, net of tax of
$705,107 - - - - (1,368,737) -
--------- --------- --------- --------- --------- --------
Balances at December 31,
1994 6,834,557 4,782,375 8,232,185 16,995,711 (1,170,241) -
Net income for the year - - - 4,094,813 - -
Cash dividends declared
($0.60 per share) - - - (1,310,627) - -
Transfer to common stock
subject to repurchase
obligation in ESOP 2,498,470 (65,098) (2,433,372) - - -
Net change in unrealized
appreciation
(depreciation) on
securities available-
for-sale, net of tax of
$834,400 - - - - 1,619,718 -
--------- --------- --------- --------- --------- --------
Balances at December 31,
1995 $9,333,027 $ 4,717,277 $5,798,813 $19,779,897 $ 49,477 $ -
========== ============ ========== ========== ========== ========
See accompanying notes to consolidated financial statements.
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities
Cash received from customers - fees
and commissions ....................... $ 5,666,167 $ 5,209,083 $ 5,009,907
Cash paid to suppliers and employees .... (14,117,567) (10,448,128) (10,125,110)
Loans originated for sale ............... (10,418,133) (12,503,521) (44,609,167)
Proceeds from sales of loans
held for sale ......................... 12,242,370 12,595,646 41,816,958
Interest received ....................... 30,857,639 23,249,685 21,600,312
Interest paid ........................... (14,111,248) (9,353,404) (9,078,862)
Income taxes paid ....................... (2,086,479) (1,893,366) (1,933,000)
------------ ------------ ------------
Net cash from operating activities ... 8,032,749 6,855,995 2,681,038
Cash flows from investing activities
Net change in interest-earning
deposits in other financial
institutions .......................... 166,324 (166,324) (80,000)
Proceeds from sales of:
Securities available-for-sale ........ 2,263,104 -- --
Securities held for sale ............. -- -- 1,025,941
Proceeds from principal repayments,
maturities, and calls of:
Securities available-for-sale ........ 22,190,401 22,285,066 --
Securities held-to-maturity .......... 3,318,925 2,250,856 --
Investment securities ................ -- -- 27,927,979
Securities held for sale ............. -- -- 4,529,222
Purchase of:
Securities available-for-sale ........ (41,660,219) (17,500,656) --
Securities held-to-maturity .......... (3,802,079) (4,433,520) --
Investment securities ................ -- -- (19,878,601)
Securities held for sale ............. -- -- (4,959,433)
Net change in loans ..................... 427,936 (17,010,807) (17,824,554)
Recoveries on loan charge-offs .......... 698,928 329,463 441,811
Premises and equipment expenditures ..... (274,859) (2,105,869) (394,756)
Purchase of banking subsidiary,
net of cash received .................. -- 3,265,954 --
------------ ------------ ------------
Net cash from investing
activities ........................ (16,671,539) (13,085,837) (9,212,391)
Cash flows from financing activities
Net change in deposits .................. 13,150,902 15,335,409 3,906,855
Net change in short-term borrowings ..... -- (1,000,000) 1,000,000
Cash dividends paid ..................... (1,310,627) (1,264,128) (1,221,980)
------------ ------------ ------------
Net cash from financing activities ... 11,840,275 13,071,281 3,684,875
------------ ------------ ------------
Net change in cash and cash equivalents .... 3,201,485 6,841,439 (2,846,478)
Cash and cash equivalents at
beginning of year ........................ 25,178,171 18,336,732 21,183,210
------------ ------------ ------------
Cash and cash equivalents at end of year ... $ 28,379,656 $ 25,178,171 $ 18,336,732
============ ============ ============
Reconciliation of net income to
net cash from operating activities
Net income .............................. $ 4,094,813 $ 3,910,374 $ 3,874,981
Adjustments to reconcile net income
to net cash from operating activities
Depreciation ......................... 1,155,227 961,919 776,557
Amortization of intangible assets .... 634,000 217,000 203,000
Provision for loan losses ............ 1,451,898 701,490 795,486
Net securities (gains) losses (Note 2) (3,113) 8,556 6,399
Loans originated for sale ............ (10,418,133) (12,503,521) (44,609,167)
Proceeds from sales of loans
held for sale ...................... 12,242,370 12,595,646 41,816,958
Net gains on loan sales .............. (83,919) (112,156) (430,321)
Change in assets and liabilities,
net of effects from acquisition
of branches and purchase
of banking subsidiary
Deferred loan fees, net .............. (26,808) 37,822 (30,058)
Accrued interest receivable .......... (545,780) (262,035) 152,083
Income taxes receivable .............. 40,625 5,299 (110,195)
Other assets ......................... (631,906) 234,380 93,004
Accrued interest payable ............. 126,800 258,949 (169,752)
Other liabilities .................... (3,325) 802,272 312,063
------------ ------------ ------------
Net cash from operating activities $ 8,032,749 $ 6,855,995 $ 2,681,038
============ ============ ============
See also Note 14
See accompanying notes to consolidated financial statements.
RURBAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994, and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Industry Segment Information: Rurban Financial Corp.
is a bank holding company, organized under Ohio law, that owns all the
outstanding stock of The State Bank and Trust Company ("State Bank"), The
Peoples Banking Company ("Peoples Bank"), The First National Bank of Ottawa
("First National Bank"), The Citizens Savings Bank Company ("Citizens Savings
Bank"), Rurbanc Data Services, Inc. ("RDSI") and Rurban Life Insurance Company
("Rurban Life") (together referred to as "the Corporation"). The Corporation's
subsidiary banks grant credit and accept deposits from their customers in the
normal course of business primarily in the northwestern Ohio region. Rurbanc's
business is comprised of providing data processing services primarily to
financial institutions located in the northwest area of Ohio. Rurban Life
accepts reinsurance ceded in part by USLIFE from the credit life and
disability insurance purchased by customers of the Corporation's subsidiary
banks. The Corporation operates primarily in the banking industry which
accounts for more than 90% of its revenues, operating income and assets.
Basis of Reporting: The accompanying consolidated financial statements in-
clude the accounts of Rurban Financial Corp. and its wholly-owned
subsidiaries. All significant inter-company balances and transactions have
been eliminated in consolidation.
On October 3, 1994, the Corporation acquired 100% of the common stock of
Citizens Savings Bank located in Pemberville, Ohio with approximately $60
million in assets. The transaction was accounted for as a purchase. Citizens
Savings Bank's results of operations are included in the income statement of
the Corporation beginning as of the purchase date. Each share of Citizens
Savings Bank's common stock was exchanged for $73.39 in cash or 3.91 common
shares of the Corporation's common stock. The Corporation paid a total of
$2,378,046 and issued 155,000 common shares in the acquisition.
Presented below are the consolidated proforma results of operations of the
Corporation for the years ended December 31, 1994 and 1993, assuming this
acquisition had occurred as of January 1, of each year.
1994 1993
---- ----
Net interest income ............................ $15,569,000 $14,965,000
Net income ..................................... 3,687,000 3,382,000
Earnings per share ............................. 1.69 1.55
Use of Estimates In Preparing Financial Statements: The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect
the reported amounts of assets, liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Certain Significant Estimates: Areas involving the use of management's
estimates and assumptions include the allowance for loan losses, the
realization of deferred tax assets, fair values of securities and other
financial instruments, the determination and carrying value of impaired loans,
the carrying value of loans held for sale, the carrying value of other real
estate, the determination of other-than-temporary reductions in the fair value
of securities, recognition and measurement of loss contingencies, depreciation
of premises and equipment and the carrying value and amortization of
intangibles. Estimates that are more susceptible to change in the near term
include the allowance for loan losses, securities valuations, the carrying
value of loans held for sale, the carrying value of intangibles and the
realization of deferred tax assets.
Certain Vulnerability Due to Certain Concentrations: Management is of the
opinion that no concentrations exist that make the Corporation vulnerable to
the risk of near-term severe impact.
Securities: On January 1, 1994, the Corporation adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The Corporation classifies
securities into held-to-maturity, available-for-sale and trading categories.
Held-to-maturity securities are those which the Corporation has the positive
intent and ability to hold to maturity, and are reported at amortized cost.
Available-for-sale securities are those the Corporation may decide to sell if
needed for liquidity, asset-liability management or other reasons.
Available-for-sale securities are reported at fair value, with unrealized
gains and losses included as a separate component of shareholders' equity, net
of tax. Trading securities are bought principally for sale in the near term,
and are reported at fair value with unrealized gains and losses included in
earnings. Adoption of SFAS No. 115 on January 1, 1994 increased shareholders'
equity by $198,496, net of $102,256 tax effect.
In November 1995, the Financial Accounting Standards Board ("FASB") issued its
Special Report, A Guide to Implementation of SFAS No. 115 on Accounting for
Certain Investments in Debt and Equity Securities ("Guide"). As permitted by
the Guide, on December 31, 1995, the Corporation made a one-time reassessment
and transferred securities from the held-to-maturity portfolio to the
available-for-sale portfolio. At the date of transfer, these securities had an
amortized cost of $10,854,066 and the transfer increased the unrealized gain
on securities available-for-sale by $210,566 and shareholders' equity by
$138,974, net of tax of $71,592.
Realized gains and losses resulting from the sale of securities are computed
by the specific identification method. Interest and dividend income, adjusted
by amortization of purchase premium or discount, is included in earnings.
Premiums and discounts on securities are recognized using the level yield
method over the estimated life of the security.
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Prior to January 1, 1994, securities were reported at amortized cost, except
for securities held for sale, which were reported at the lower of cost or
market value in the aggregate. Net unrealized losses were recognized in a
valuation allowance by charges to income.
Loans Held for Sale: Loans intended for sale are carried at the lower of cost
or estimated market value in the aggregate. Net unrealized losses are
recognized in a valuation allowance by charges to income.
Interest Income on Loans: Interest on loans is accrued over the term of the
loans based upon the principal outstanding. Management reviews loans
delinquent 90 days or more to determine if the interest accrual should be
discontinued. When serious doubt exists as to the collectibility of a loan,
the accrual of interest is discontinued. Effective January 1, 1995, under SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan", as amended by
SFAS No. 118, the carrying value of impaired loans is periodically adjusted to
reflect cash payments, revised estimates of future cash flows, and increases
in the present value of expected cash flows due to the passage of time. Cash
payments representing interest income are reported as such and other cash
payments are reported as reductions in carrying value. Increases or decreases
in carrying value due to changes in estimates of future payments or the
passage of time are reported as a component of the provision for loan losses.
Loan Fees and Costs: Loan fees, net of direct origination costs, are deferred.
The net amount deferred is reported in the consolidated balance sheets as part
of loans and is recognized into interest income over the term of the loan
using the level yield method.
Allowance For Loan Losses: An allowance for loan losses is established and
maintained because some loans may not be repaid in full. Increases to the
allowance are recorded by a provision for loan losses charged to expense.
Estimating the risk of loss and the amount of loss on any loan is necessarily
subjective. Accordingly, the allowance is maintained by management at a level
considered adequate to cover losses that are currently anticipated based on
past loss experience, general economic conditions, information about specific
borrower situations including their financial position and collateral values,
and other factors and estimates which are subject to change over time. While
management may periodically allocate portions of the allowance for specific
problem loan situations, the entire allowance is available for any loan
charge-offs that may occur. A loan is charged off by management as a loss when
deemed uncollectible, although collection efforts continue and future
recoveries may occur.
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
SFAS No. 114 and SFAS No. 118 were adopted effective January 1, 1995 and
require recognition of loan impairment. Loans are considered impaired if full
principal or interest payments are not anticipated in accordance with the
contractual loan terms. Impaired loans are carried at the present value of
expected future cash flows discounted at the loan's effective interest rate or
at the fair value of the collateral if the loan is collateral dependent. A
portion of the allowance for loan losses is allocated to impaired loans. If
these allocations cause the allowance for loan losses to require increase,
such increase is reported as a component of the provision for loan losses. The
effect of adopting these standards in 1995 was not material.
Smaller-balance homogeneous loans are evaluated for impairment in total. Such
loans include residential first mortgage loans secured by one-to-four family
residences, residential construction loans, and automobile, home equity and
second mortgage loans. Commercial loans and mortgage loans secured by other
properties are evaluated individually for impairment. When analysis of
borrower operating results and financial condition indicates that underlying
cash flows of the borrower's business are not adequate to meet its debt
service requirements, the loan is evaluated for impairment. Often this is
associated with a delay or shortfall in payments of 30 days or more.
Commercial loans are rated on a scale of 1 to 5, with 1 being satisfactory, 2
watch, 3 substandard, 4 doubtful, and 5 as loss which are then charged off.
Loans graded a 4 or worse are considered for impairment. Loans are generally
moved to nonaccrual status when 90 days or more past due. These loans are
often considered impaired. Impaired loans, or portions thereof, are charged
off when deemed uncollectible. This typically occurs when the loan is 120 days
or more past due. The nature of disclosures for impaired loans is considered
generally comparable to prior nonaccrual and renegotiated loans and
non-performing and past-due asset disclosures.
Premises and Equipment: Buildings and improvements are depreciated using
primarily the straight-line method with useful lives ranging from 10 to 50
years. Furniture and equipment are depreciated using the straight-line and
declining-balance methods with useful lives ranging predominantly from 5 to 20
years. Maintenance and repairs are expensed and major improvements are
capitalized.
Intangible Assets: Goodwill arising from the acquisition of subsidiary banks
is amortized over 5 to 25 years using the straight-line method. Core deposit
intangibles are amortized on an accelerated basis over 10 years, the estimated
life of the deposits acquired. As of December 31, 1995, unamortized goodwill
totaled approximately $784,000 and unamortized core deposit intangibles
totaled approximately $521,000.
Other Real Estate Owned: Real estate properties acquired through, or in lieu
of, loan foreclosure are initially recorded at fair value at the date of
acquisition. Any reduction to fair value from the carrying value of the
related loan at the time of acquisition is accounted for as a loan loss and
charged against the allowance for loan losses. After acquisition, a valuation
allowance is recorded through a charge to income for the amount of estimated
selling costs. Valuations are periodically performed by management, and
valuation allowances are adjusted through a charge to income for changes in
fair value or estimated selling costs. Other real estate owned amounted to
approximately $320,000 and $400,000 at December 31, 1995 and 1994,
respectively, and is included in other assets in the consolidated balance
sheets.
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Income Taxes: The Corporation files an annual consolidated federal income tax
return. Income tax is based upon the asset and liability method. The asset and
liability method requires the Corporation to record income tax expense based
on the amount of taxes due on its consolidated tax return plus deferred taxes
computed based on the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, using enacted tax rates.
Employee Benefits (See Note 6): The Corporation sponsors an employee stock
ownership plan (ESOP) and 401(k) profit sharing plan for which contributions
are made and expensed annually. The Corporation provides split-dollar life
insurance plans for certain executive officers of the Corporation. Also, the
Corporation sponsors a supplemental retirement plan for certain executive
officers of the Corporation.
Postretirement Health Care Benefits: The Corporation sponsors a postretirement
health care plan that covers both salaried and nonsalaried employees.
Effective January 1, 1993, the Corporation adopted the provisions of SFAS No.
106, "Employers' Accounting For Postretirement Benefits Other Than Pensions".
SFAS No. 106 requires the accrual, during the years that employees render the
necessary service, of the expected cost of providing postretirement health
care benefits to employees and their beneficiaries and covered dependents. The
Corporation's postretirement health care plan provides that retired employees
may remain on the Corporation's health care plan with each retiree's
out-of-pocket contribution to the Corporation equal to their premium expense
determined exclusively on the loss experience of the retirees in the plan.
The impact of adopting the guidance was not material.
Earnings Per Common Share: Earnings and dividends per common share have been
computed based on the weighted average number of shares outstanding during the
periods presented, restated for all stock dividends and stock splits. In 1994,
a two-for-one split was declared and paid. The number of shares used in the
computation of earnings per common share was 2,184,378 for 1995, 2,067,597 for
1994 and 2,029,378 for 1993.
Dividend Restriction: Certain restrictions exist regarding the ability of
the subsidiaries to transfer funds to Rurban Financial Corp. in the form of
cash dividends, loans or advances. As of December 31, 1995, approximately
$3,665,000 of undistributed earnings of the subsidiaries, included in
consolidated retained earnings, was available for distribution to Rurban
Financial Corp. as dividends without prior regulatory approval.
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Concentrations of Credit Risk: The Corporation grants commercial, real estate
and installment loans to customers mainly in northwest Ohio. Commercial loans
include loans collateralized by business assets and agricultural loans
collateralized by crops and farm equipment. Commercial loans make up
approximately 23% of the loan portfolio and the loans are expected to be
repaid from cash flow from operations of businesses. Real estate loans make up
approximately 55% of the loan portfolio and are collateralized by both
commercial and residential real estate. Installment loans make up
approximately 22% of the loan portfolio and are primarily collateralized by
consumer assets.
Financial Instruments With Off-Balance-Sheet Risk: The Corporation, in the
normal course of business, makes commitments to extend credit which are not
reflected in the consolidated financial statements. A summary of these com-
mitments is disclosed in Note 10.
Statements of Cash Flows: For purposes of reporting cash flows, cash and cash
equivalents is defined to include cash on hand, demand deposits in other
financial institutions and federal funds sold with maturities of 90 days or
less. The Corporation reports net cash flows for customer loan transactions,
deposit transactions, short-term borrowings with maturities of 90 days or less
and interest-earning deposits in other financial institutions.
Reclassifications: Certain amounts appearing in the financial statements and
notes thereto for the years ended December 31, 1994 and 1993 have been
reclassified to conform with the December 31, 1995 presentation.
NOTE 2 - SECURITIES
Information related to the amortized cost and fair value of securities at
December 31, 1995 and 1994 is provided below:
Gross Gross
Securities Available-for-Sale Amortized Unrealized Unrealized
1995 Cost Gains Losses Fair Value
----------------------------- --------- ---------- ---------- ----------
U.S. Treasury and U.S.
Government agency
securities $73,799,068 $574,819 $(122,386) $74,251,501
Obligations of states and
political subdivisions 9,365,076 191,846 (13,527) 9,543,395
Mortgage-backed securities 5,295,474 62,183 (11,909) 5,345,748
----------- -------- --------- ----------
Total debt securities
available-for-sale 88,459,618 828,848 (147,822) 89,140,644
Marketable equity securities 1,189,222 - - 1,189,222
----------- -------- --------- ----------
Total securities available-
for-sale $89,648,840 $828,848 $(147,822) $90,329,866
=========== ======== ========= ===========
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
- --------------------------------------------------------------------------------
Gross Gross
Securities Available-for-Sale Amortized Unrealized Unrealized
1994 Cost Gains Losses Fair Value
----------------------------- --------- ---------- ---------- ----------
U.S. Treasury and U.S.
Government agency
securities $51,925,952 $ 712 $(1,393,582) $50,533,082
Mortgage-backed securities 8,783,192 19,356 (399,578) 8,402,970
----------- -------- --------- ----------
Total debt securities
available-for-sale 60,709,144 20,068 (1,793,160) 58,936,052
Marketable equity securities 875,803 - - 875,803
----------- -------- --------- ----------
Total securities available-
for-sale $61,584,947 $ 20,068 $(1,793,160) $59,811,855
=========== ======== =========== ===========
Gross Gross
Securities Held-to-Maturity Amortized Unrealized Unrealized
1994 Cost Gains Losses Fair Value
--------------------------- --------- ---------- ---------- ----------
U.S. Treasury and U.S.
Government agency
securities $ 1,482,576 $ 1,811 $ (3,387) $1,481,000
Obligations of states and
political subdivisions 8,888,336 74,229 (97,565) 8,865,000
----------- -------- --------- ----------
Total securities held-
to-maturity $10,370,912 $ 76,040 $(100,952) $10,346,000
=========== ======== ========= ===========
The amortized cost and fair values of debt securities at December 31, 1995, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Available-for-Sale
--------------------
Amortized
Cost Fair Value
---------- ----------
Due in one year or less $29,399,818 $29,481,607
Due after one year through five years 51,421,608 51,889,174
Due after five years through ten years 2,302,918 2,387,838
Due after ten years 39,800 36,277
---------- -----------
83,164,144 83,794,896
Mortgage-backed securities 5,295,474 5,345,748
---------- -----------
Total debt securities $88,459,618 $89,140,644
=========== ===========
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
- --------------------------------------------------------------------------------
Proceeds, gross gains and gross losses realized from sales of securities for
the years ended December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993
---- ---- ----
Proceeds from sales of debt
securities available-for-sale $2,263,104 $ - $ -
Proceeds from sales of marketable
equity securities held for sale - - 1,025,941
--------- ----------- -----------
Total proceeds from sales
of securities $2,263,104 $ - $ 1,025,941
========== ============ ===========
Gross gains from sales of debt
securities available-for-sale $ 11,975 $ - $ -
Gross losses from sales of debt
securities available-for-sale (8,672) - -
Net losses on calls of securities
available-for-sale (190) - -
Net losses on calls of securities
held-to-maturity - (8,556) -
Net losses from sales of marketable
equity securities held for sale
and calls of debt investment
securities - - (6,399)
--------- ----------- ---------
Net securities gains (losses) $ 3,113 $ (8,556) $ (6,399)
========== ========== ===========
At December 31, 1995 there were no holdings of securities of any one issuer,
other than the U.S. Government and its agencies and corporations, in an amount
greater than 10% of shareholders' equity.
Securities with an amortized cost of approximately $47,893,000 and $40,753,000
as of December 31, 1995 and 1994, respectively, were pledged to secure public
and trust deposits.
- --------------------------------------------------------------------------------
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------
The following is a summary of the activity in the allowance for loan losses
account for the years ended December 31, 1995, 1994 and 1993:
1995 1994 1993
---- ---- ----
Balance at beginning of year $4,770,000 $3,390,000 $3,086,443
Allowance of acquired bank - 1,100,000 -
Provision for loan losses 1,451,898 701,490 795,486
Recoveries credited to the allowance 698,928 329,463 441,811
Losses charged to the allowance (2,650,826) (750,953) (933,740)
---------- ---------- ---------
Balance at end of year $4,270,000 $4,770,000 $3,390,000
========== ========== ==========
At December 31, 1995 and 1994, loans past due more than 90 days and still
accruing interest approximated $711,000 and $1,198,000, respectively.
Information regarding impaired loans is as follows for the year ending
December 31, 1995:
Average investment in impaired loans $2,542,000
Interest income recognized on impaired loans
including interest income recognized on cash basis 32,000
Interest income recognized on impaired loans on cash basis 32,000
Information regarding impaired loans at December 31, 1995
is as follows:
Balance of impaired loans $1,835,000
Less portion for which no allowance for loan losses is allocated (302,000)
Portion of impaired loan balance for which an
allowance for loan losses is allocated $1,533,000
==========
Portion of allowance for loan losses allocated to impaired
loan balance $ 643,000
==========
Loans on which the recognition of interest has been discontinued or reduced
totaled approximately $3,538,000 at December 31, 1994. Interest income not
recognized on these loans totaled approximately $289,000 and $189,000 during
1994 and 1993, respectively.
- --------------------------------------------------------------------------------
NOTE 4 - PREMISES AND EQUIPMENT, NET
- --------------------------------------------------------------------------------
Premises and equipment are stated at cost, less accumulated depreciation, and
consist of the following at December 31, 1995 and 1994:
1995 1994
Land $ 966,579 $ 976,579
Buildings and improvements 6,927,945 7,002,690
Furniture and equipment 5,980,928 5,647,452
---------- ----------
Total cost 13,875,452 13,626,721
Accumulated depreciation (5,491,735) (4,362,636)
---------- ----------
Premises and equipment, net $8,383,717 $9,264,085
========== ==========
NOTE 5 - INTEREST-BEARING DEPOSITS
Included in interest-bearing deposits are time deposits in denominations of
$100,000 or more of approximately $33,426,000 and $32,642,000 as of December
31, 1995 and 1994, respectively.
Interest expense on time deposits in denominations of $100,000 or more was
approximately $1,090,000, $1,205,000 and $1,012,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
NOTE 6 - EMPLOYEE BENEFITS
Employee Stock Ownership Plan: The Corporation has a noncontributory employee
stock ownership plan (ESOP) covering substantially all employees of the
Corporation's subsidiaries. Each eligible employee is vested based upon years
of service, including prior years of service. Contributions and related
expense attributable to the plan included in salaries and employee benefits
were approximately $374,000, $274,000 and $273,000 in 1995, 1994 and 1993,
respectively.
For corporations not listed on NASDAQ, ERISA rules require employers with an
ESOP to agree to repurchase shares from participants for a certain time period
following the distribution of shares to the participants. The Corporation's
common stock subject to repurchase obligation in ESOP had an estimated value
of $9,333,027 and $6,834,557 at December 31, 1995 and 1994, respectively.
- --------------------------------------------------------------------------------
NOTE 6 - EMPLOYEE BENEFITS (Continued)
- --------------------------------------------------------------------------------
401(k) Profit Sharing Plan: The Corporation has 401(k) profit sharing plans.
The annual expense of the plans is based on 50% matching of voluntary employee
contributions of up to 6% of individual compensation. Employee contributions
are vested immediately and the Corporation's matching contributions are fully
vested after six years. The plans cover substantially all employees of the
Corporation. Contributions and related expense attributable to the plans,
included in salaries and employee benefits, were approximately $101,000,
$88,000 and $93,000 in 1995, 1994 and 1993, respectively.
Life Insurance Plans: Life insurance plans are provided for certain executive
officers on a split-dollar basis and the Corporation is the owner of the
split-dollar policies. The officers are entitled to a sum equal to two times
either the employee's annual salary at death, if actively employed, or final
annual salary, if retired, less $50,000. The Corporation is entitled to the
remainder of the death proceeds less any loans on the policy and unpaid
interest or cash withdrawals previously incurred by the Corporation. The
employees have the right to designate a beneficiary(s) to receive their share
of the proceeds payable upon death. The cash surrender value of these life
insurance policies was approximately $596,000 and $556,000 at December 31,
1995 and 1994, respectively, and is included in other assets in the
consolidated balance sheets.
Supplemental Retirement Plan: During 1994, the Corporation established a
supplemental retirement plan for selected officers. The Corporation has
purchased insurance contracts on the lives of the participants in the
supplemental retirement plan and has named the Corporation as beneficiary.
While no direct contract exists between the supplemental retirement plan and
the life insurance contracts, it is management's current intent that the
proceeds from the insurance contracts will be used to help offset earlier
payments made under the supplemental retirement plan. The Corporation is
recording an expense equal to the projected present value of the payment due
at retirement based on the projected remaining years of service using the
projected unit credit method. The expense attributable to the plan, included
in salaries and employee benefits, was approximately $133,000 and $33,000 in
1995 and 1994, respectively. The cash surrender value of the life insurance
was approximately $1,439,000 and $1,383,000 at December 31, 1995 and 1994,
respectively, and is included in other assets in the consolidated balance
sheets.
NOTE 7 - OTHER EXPENSES
The following is an analysis of other expenses for the years ended
December 31, 1995, 1994 and 1993:
1995 1994 1993
Amortization of intangible assets $ 634,000 $ 217,000 $ 203,000
Advertising expense 259,938 233,548 161,511
Professional fees 1,097,162 853,241 732,151
Insurance expense 525,189 702,172 694,002
Data processing fees 436,983 323,942 333,079
Printing, stationery and supplies 604,340 587,995 594,609
Postage and delivery expense 304,362 241,441 214,213
State, local and other taxes 630,829 586,899 504,698
Other operating expenses 1,110,274 1,140,752 916,085
--------- ---------- ----------
Total other expenses $5,603,077 $4,886,990 $4,353,348
========== ========== ==========
- --------------------------------------------------------------------------------
NOTE 8 - INCOME TAX EXPENSE
- --------------------------------------------------------------------------------
Income tax expense consists of the following for the years ended December
31, 1995, 1994 and 1993:
1995 1994 1993
Current expense $2,915,522 $1,668,675 $1,801,099
Deferred expense (benefit) (788,418) 229,990 21,706
--------- ---------- ----------
Total income tax expense $2,127,104 $1,898,665 $1,822,805
========== ========== ==========
Tax expense (benefit) on net securities gains (losses) were $1,058, $(2,909)
and $(2,176) in 1995, 1994 and 1993, respectively.
The difference between the financial statement income tax expense and amounts
computed by applying the statutory federal income tax rate to income before
income tax expense is as follows for the years ended December 31, 1995, 1994
and 1993:
1995 1994 1993
---- ---- ----
Statutory tax rate 34% 34% 34%
Income taxes computed at
the statutory federal
income tax rate $2,115,452 $1,975,073 $1,937,247
Add (subtract) tax effect of:
Tax-exempt income (184,312) (149,706) (178,144)
Non-deductible expenses
and other 195,964 73,298 63,702
--------- ---------- ----------
Total income tax expense $2,127,104 $1,898,665 $1,822,805
========== ========== ==========
The components of the net deferred tax asset recorded in the consolidated
balance sheets as of December 31, 1995 and 1994 are as follows:
1995 1994
---- ----
Deferred tax assets
Provision for loan losses $1,061,264 $1,201,000
Market to market adjustment 162,050 -
Net deferred loan fees 65,309 89,149
Net unrealized depreciation on
securities available-for-sale - 602,851
Accrued compensation and benefits 185,003 147,428
AMT credit carryforward - 157,539
Other 118,250 111,338
---------- ----------
Total deferred tax assets $1,591,876 $2,309,305
========== ==========
- --------------------------------------------------------------------------------
NOTE 8 - INCOME TAX EXPENSE (Continued)
- --------------------------------------------------------------------------------
1995 1994
Deferred tax liabilities ------ ------
Net unrealized appreciation on
securities available-for-sale $(231,549) $ -
Depreciation (139,185) (44,544)
Purchase accounting adjustments (259,324) (397,136)
Market-to-market adjustment - (815,304)
Other (4,566) (49,087)
---------- ----------
Total deferred tax liabilities (634,624) (1,306,071)
Valuation allowance - -
--------- ----------
Net deferred tax asset $ 957,252 $1,003,234
========= ==========
NOTE 9 - RELATED PARTY TRANSACTIONS
Certain directors, executive officers and principal shareholders of the
Corporation, including associates of such persons, were loan customers during
1995. A summary of the related party loan activity, for loans aggregating
$60,000 or more to any one related party, follows:
Balance, January 1, 1995 ...................... $5,164,000
New loans .................................. 7,601,000
Repayments ................................. (9,111,000)
Other changes .............................. (142,000)
----------
Balance, December 31, 1995 .................... $3,512,000
==========
Other changes include adjustments for loans applicable to one reporting period
that are excludable from the other reporting period.
NOTE 10 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES
The Corporation is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet financing needs of its
customers. These financial instruments include commitments to make loans,
unused lines of credit and standby letters of credit. The Corporation's
exposure to credit loss in the event of nonperformance by the other party to
the financial instruments for commitments to make loans, unused lines of
credit and standby letters of credit is represented by the contractual amount
of those instruments. The Corporation follows the same credit policy to make
such commitments as it uses for on-balance-sheet items.
- --------------------------------------------------------------------------------
NOTE 10 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES
- --------------------------------------------------------------------------------
(Continued)
The Corporation has the following commitments outstanding at December 31:
1995 1994
---- ----
Fixed rate loan commitments and unused
lines of credit $4,491,000 $ 4,733,000
Variable rate loan commitments and unused
lines of credit 47,552,000 51,699,000
Standby letters of credit 2,945,000 2,674,000
---------- -----------
$54,988,000 $59,106,000
=========== ===========
Fixed rate loan commitments and unused lines of credit, at December 31, 1995,
are at current rates, ranging primarily from 5.20% to 17.90% and are primarily
for terms of up to two years.
Variable rate loan commitments and unused lines of credit, at December 31,
1995, are at current rates, ranging primarily from 7.75% to 16.25% and are
primarily for terms of up to two years. The primary index used for adjustments
is the prime rate.
Since many commitments to make loans expire without being used, the amount
does not necessarily represent future cash commitments. In addition,
commitments to extend credit are arrangements to lend to customers as long as
there is no violation of any condition established in the contract. No losses
are anticipated as a result of these transactions. Collateral obtained upon
exercise of the commitment is determined using management's credit evaluation
of the borrower and may include real estate, business assets, consumer assets,
deposits and other items.
The Corporation was required to have approximately $3,475,000 and $3,438,000
of cash on hand or on deposit with the Federal Reserve Bank to meet regulatory
reserve requirements at December 31, 1995 and 1994, respectively. These
balances do not earn interest.
- --------------------------------------------------------------------------------
NOTE 11 - PARENT COMPANY FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Presented below are condensed financial statements for the parent company,
Rurban Financial Corp.:
CONDENSED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
====== ======
ASSETS
Cash and cash equivalents $ 844,790 $ 515,691
Securities available-for-sale 306,097 -
Investment in and advances to subsidiaries
Banking subsidiaries 36,520,419 33,541,947
Non-banking subsidiaries 2,238,418 2,014,227
----------- ----------
Total investment in subsidiaries 38,758,837 35,556,174
Other assets 834,052 50,843
----------- ----------
Total assets $40,743,776 $36,122,708
=========== ===========
LIABILITIES
Other liabilities $ 665,285 $ 448,121
----------- ----------
Total liabilities 665,285 448,121
COMMON STOCK SUBJECT TO REPURCHASE
OBLIGATION IN ESOP 9,333,027 6,834,557
OTHER SHAREHOLDERS' EQUITY 30,745,464 28,840,030
----------- ----------
Total liabilities and shareholders' equity $40,743,776 $36,122,708
=========== ===========
- --------------------------------------------------------------------------------
NOTE 11 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Income
Interest on securities-non-taxable $ 5,347 $ - $ -
Dividends from subsidiaries
Banking subsidiaries 3,015,000 3,900,000 1,125,000
Non-banking subsidiaries 75,000 300,000 325,000
---------- ---------- ---------
Total 3,090,000 4,200,000 1,450,000
Noninterest income 11,509 - -
---------- ---------- ---------
Total income 3,106,856 4,200,000 1,450,000
Noninterest expense 896,999 685,952 469,051
---------- ---------- ---------
Income before income tax benefit
and equity in undistributed net
income of subsidiaries 2,209,857 3,514,048 980,949
Income tax benefit 302,011 233,224 159,478
---------- ---------- ---------
Income before equity in undistributed
net income 2,511,868 3,747,272 1,140,427
Equity in undistributed net income
Banking subsidiaries 1,358,754 80,153 2,598,967
Non-banking subsidiaries 224,191 82,949 135,587
---------- ---------- ---------
Total 1,582,945 163,102 2,734,554
---------- ---------- ---------
Net income $4,094,813 $3,910,374 $3,874,981
========== ========== ==========
- --------------------------------------------------------------------------------
NOTE 11 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities
Dividends received from subsidiaries
Banking subsidiaries $3,015,000 $3,900,000 $1,125,000
Non-banking subsidiaries 75,000 300,000 325,000
---------- ---------- ---------
Total 3,090,000 4,200,000 1,450,000
Cash paid to suppliers and employees (681,050) (744,321) (262,616)
Income tax refunds 253,486 269,455 95,540
---------- ---------- ---------
Net cash from operating activities 2,662,436 3,725,134 1,282,924
Cash flows from investing activities
Investment in banking subsidiary - (2,378,046) -
Purchase of securities available-
for-sale (306,097) - -
Cash paid for life insurance premiums (716,613) - -
---------- ---------- ---------
Net cash from investing activities (1,022,710) (2,378,046) -
Cash flows from financing activities
Cash dividends paid (1,310,627) (1,264,128) (1,221,980)
---------- ---------- ----------
Net cash from financing activities (1,310,627) (1,264,128) (1,221,980)
---------- ---------- ----------
Net change in cash and cash equivalents 329,099 82,960 60,944
Cash and cash equivalents at beginning
of year 515,691 432,731 371,787
---------- ---------- ------------
Cash and cash equivalents at end of year $ 844,790 $ 515,691 $ 432,731
========== ========== ==========
- --------------------------------------------------------------------------------
NOTE 11 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Reconciliation of net income to net cash
from operating activities
Net income $4,094,813 $3,910,374 $3,874,981
Adjustments to reconcile net
income to net cash from operating
activities
Equity in undistributed net
income of subsidiaries
Banking subsidiaries (1,358,754) (80,153) (2,598,967)
Non-banking subsidiaries (224,191) (82,949) (135,587)
Change in income taxes receivable (48,525) 36,231 (63,938)
Change in other assets (18,071) - -
Change in other liabilities 217,164 (58,369) (206,435)
---------- ---------- ----------
Net cash from operating
activities $2,662,436 $3,725,134 $1,282,924
========== ========== ==========
Supplemental disclosures of cash
flow information
Non-cash increases related to Citizens
Bank acquisition (Note 1):
Common stock $ - $ 387,500 $ -
Additional paid-in capital - 2,518,373 $ -
- --------------------------------------------------------------------------------
NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
The following table shows the estimated fair values and the related carrying
values of the Corporation's financial instruments at December 31, 1995 and
1994. Items which are not financial instruments are not included.
1 9 9 5 1 9 9 4
------------------------ ----------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Cash and cash equivalents $28,379,656 $28,380,000 $25,178,171 $25,178,000
Interest-earning deposits
in other financial
institutions 180,000 180,000 346,324 346,000
Securities available-for-sale 90,329,866 90,330,000 59,811,855 59,812,000
Securities held-to-maturity - - 10,370,912 10,346,000
Loans, net of allowance for
loan losses (including
loans held for sale) 276,044,137 274,564,000 280,336,409 272,979,000
Demand and savings deposits (179,133,751) (179,134,000) (177,421,585) (177,422,000)
Time deposits (188,662,787) (190,368,000) (177,224,051) (177,341,000)
For purposes of the above disclosures of estimated fair value, the following
assumptions were used as of December 31, 1995 and 1994. The estimated fair
value for cash and cash equivalents is considered to approximate cost. The
estimated fair value for interest-earning deposits in other financial
institutions, securities available-for-sale and securities held-to-maturity is
based on quoted market values for the individual securities or for equivalent
securities. The estimated fair value for loans is based on estimates of the
difference in interest rates the Corporation would charge the borrowers for
similar such loans with similar maturities made at December 31, 1995 and 1994,
applied for an estimated time period until the loan is assumed to reprice or
be paid. The estimated fair value for demand and savings deposits is based on
their carrying value. The estimated fair value for time deposits is based on
estimates of the rate the Corporation would pay on such deposits at December
31, 1995 and 1994, applied for the time period until maturity. The estimated
fair value for other financial instruments and off-balance-sheet loan
commitments approximate cost at December 31, 1995 and 1994 and are not
considered significant to this presentation.
While these estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that were the Corporation to
have disposed of such items at December 31, 1995 and 1994, the estimated fair
values would necessarily have been achieved at that date, since market values
may differ depending on various circumstances. The estimated fair values at
December 31, 1995 and 1994 should not necessarily be considered to apply at
subsequent dates.
- --------------------------------------------------------------------------------
NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
- --------------------------------------------------------------------------------
In addition, other assets and liabilities of the Corporation that are not
defined as financial instruments are not included in the above disclosures,
such as premises and equipment. Also, non-financial instruments typically not
recognized in the financial statements nevertheless may have value but are not
included in the above disclosures. These include, among other items, the
estimated earnings power of core deposit accounts, the earnings potential of
loan servicing rights, the earnings potential of State Bank's and Peoples
Bank's trust departments, the trained work force, customer goodwill and
similar items.
NOTE 13 - IMPACT OF NEW ACCOUNTING STANDARDS
Several new accounting standards have been issued by the FASB that will apply
in 1996. SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets To Be Disposed Of", requires a review of long-term
assets for impairment of recorded value and resulting write-downs if the value
is impaired. SFAS No. 122, "Accounting for Mortgage Servicing Rights",
requires recognition of an asset when servicing rights are retained on
in-house originated loans that are sold. These statements are not expected to
have a material effect on the Corporation's consolidated financial position or
results of operations.
NOTE 14 - SUPPLEMENTAL CASH FLOW DISCLOSURES
On October 3, 1994, Rurban Financial Corp. purchased all of the common stock
of Citizens Bank for $2,378,046 in cash and issued 155,000 common shares at a
market value of $18.75 per share. In conjunction with the acquisition,
liabilities were assumed as follows:
Fair value of assets acquired ............................. $58,707,000
Cash paid ................................................. (2,378,046)
Common stock issued ....................................... (2,905,873)
-----------
Liabilities assumed .................................... $53,423,081
NOTE 14 - SUPPLEMENTAL CASH FLOW DISCLOSURES (Continued)
Additionally, transfers of securities were as follows:
1995 Transfer from securities held-to-maturity to
securities available-for-sale ........................... $10,854,066
1994 Transfer from investment securities and securities
held for sale to:
Securities available-for-sale ......................... 52,386,249
Securities held-to-maturity ........................... 6,527,912
1993 Transfer from investment securities to securities
held for sale ........................................... 1,533,028
RURBAN FINANCIAL CORP.
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1995
INDEX TO EXHIBITS
Exhibit No. Description Page No.
- ----------- ------------------------- --------------
3(a) Amended Articles of Incorporated herein by
Registrant, as amended reference to Registrant's
Annual Report on Form
10-K for the fiscal year
ended December 31, 1989
(File No. 0-13507)
[Exhibit 3(a)(i)].
3(b) Certificate of Amendment to Incorporated herein by
the Amended Articles of reference to Registrant's
Rurban Financial Corp. Annual Report on Form
10-K for the fiscal year
ended December 31, 1993
(File No. 0-13507)
[Exhibit 3(b)].
3(c) Regulations of Registrant, as Incorporated herein by
amended reference to Registrant's
Annual Report on Form 10-K
for the fiscal year ended
December 31, 1986 (File
No. 0-13507) [Exhibit 3(b)].
10(a) Employees' Stock Ownership Incorporated herein by
Plan of Rurban Financial Corp. reference to Registrant's
Annual Report on Form
10-K for the fiscal year
ended December 31, 1993
(File No. 0-13507)
[Exhibit 10(b)].
10(b) First Amendment to Employees' Incorporated herein by
Stock Ownership Plan of Rurban reference to Registrant's
Financial Corp., dated June 14, Annual Report on Form 10-K
1993 and made to be effective for the fiscal year ended
as of January 1, 1993 December 31, 1993 (File No.
0-13507) [Exhibit 10(b)].
10(c) Second Amendment to Employees' Incorporated herein by
Stock Ownership Plan of Rurban reference to Registrant's
Financial Corp., dated Annual Report on Form 10-K
March 14, 1994 and made to be for the fiscal year ended
effective as of January 1, 1993 December 31, 1993 (File
No. 0-13507) [Exhibit
10(c)].
10(d) Third Amendment to Employees' Incorporated herein by
Stock Ownership Plan of Rurban reference to Registrant's
Financial Corp., dated Annual Report on Form 10-K
March 13, 1995 for the fiscal year ended
December 31, 1994 (File
No. 0-13507) [Exhibit
10(d)].
10(e) Fourth Amendment to Pages 79 through 81.
Employees' Stock Ownership
Plan of Rurban Financial
Corp., dated June 10, 1995
and made to be effective as
of January 1, 1995
10(f) The Rurban Financial Corp. Incorporated herein by
Savings Plan and Trust reference to Registrant's
Annual Report on Form
10-K for the fiscal year
ended December 31, 1990
(File No. 0-13507)
[Exhibit 10(g)].
10(g) First Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to Registrant's
and Trust, dated December 10, Annual Report on
1990 and effective January 1, Form 10-K for the fiscal
1990 year ended December
31, 1990 (File
No. 0-13507)
[Exhibit 10(g)].
10(h) Second Amendment to The Incorporated herein by
Rurban Financial Corp. reference to Registrant's
Savings Plan and Trust, dated Annual Report on Form
March 11, 1991, effective 10-K for the fiscal year
February 1, 1991 ended December 31, 1992
(File No. 0-13507)
[Exhibit 10(d)].
10(i) Third Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to Registrant's
and Trust, dated June 11, 1991 Annual Report on Form
10-K for the fiscal year
ended December 31, 1992
(File No. 0-13507)
[Exhibit 10(e)].
10(j) Fourth Amendment to The Incorporated herein by
Rurban Financial Corp. reference to Registrant's
Savings Plan and Trust, dated Annual Report on Form
July 14, 1992, effective 10-K for the fiscal year
May 1, 1992 ended December 31, 1992
(File No. 0-13507)
[Exhibit 10(f)].
10(k) Fifth Amendment to The Rurban Incorporated herein by
Financial Corp. Savings Plan reference to Registrant's
and Trust, dated March 14, Annual Report on Form
1994 10-K for the fiscal year
ended December 31, 1993
(File No. 0-13507)
[Exhibit 10(i)].
10(l) Sixth Amendment to The Rurban Pages 82 through 84.
Financial Corp. Savings Plan
and Trust dated May 1, 1995
10(m) Summary of Incentive Incorporated herein by
Compensation Plan of State reference to Registrant's
Bank Annual Report on Form
10-K for the fiscal year
ended December 31, 1993
(File No. 0-13507)
[Exhibit 10(j)].
10(n) Summary of Bonus Program Incorporated herein by
adopted by the Trust reference to Registrant's
Department of State Bank for Annual Report on Form
the benefit of Robert W. 10-K for the fiscal year
Constien in his capacity as ended December 31, 1991
Manager of the Trust (File No. 0-13507)
Department [Exhibit 10(e)].
10(o) Summary of Bonus Program for Incorporated herein by
the Trust Department of State reference to Registrant's
Bank Annual Report on Form
10-K for the fiscal year
ended December 31, 1992
(File No. 0-13507
[Exhibit 10(i)].
10(p) Summary of Sales Bonus Incorporated herein by
Program of State Bank reference to Registrant's
Annual Report on Form
10-K for the fiscal year
ended December 31, 1994
(File No. 0-13507)
[Exhibit 10(n)].
10(q) Summary of Rurban Financial Incorporated herein by
Corp. Bonus Plan reference to Registrant's
Annual Report on Form
10-K for the fiscal year
ended December 31, 1993
(File No. 0-13507)
[Exhibit 10(q)].
10(r) Executive Salary Continuation Incorporated herein by
Agreement, dated December 15, reference to Registrant's
1994, between Rurban Annual Report on Form
Financial Corp. and Richard 10-K for the fiscal year
C. Burrows ended December 31, 1994
(File No. 0-13507)
[Exhibit 10(p)].
10(s) Executive Salary Continuation Pages 85 through 93.
Agreement, dated October 11,
1995, between Rurban Financial
Corp. and Thomas C. Williams;
and Schedule A to
Exhibit 10(s) identifying
other identical Executive
Salary Continuation Agreements
between executive officers of
Rurban Financial Corp. and
Rurban Financial Corp.
10(t) Description of Split-Dollar Page 94
Insurance Policies Maintained
for Certain Executive Officers
of Rurban Financial Corp.
11 Statement re Computation of Page 57 [included in
Per Share Earnings Note 1 of the Notes to
the Consolidated
Financial Statements of
Registrant in the
financial statements
portion of this Annual
Report on Form 10-K].
21 Subsidiaries of Registrant Incorporated herein by
reference to Registrant's
Annual Report on Form
10-K for the fiscal year
ended December 31, 1994
(File No. 0-13507)
[Exhibit 21].
24 Powers of Attorney Pages 95 through 105.
27 Financial Data Schedule Pages 106 through 108.