Back to GetFilings.com
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to___________________________
Commission file number 0-13507
RURBAN FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1395608
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
401 Clinton Street, Defiance, Ohio 43512
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(419) 783-8950
----------------------------------------------------
(Registrant's telephone number, including area code)
None
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for such shorter period 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes [ ] No [X]
The number of common shares of Rurban Financial Corp. outstanding was
4,569,162 on May 1, 2005.
1
RURBAN FINANCIAL CORP.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification (Principal
Executive Officer)
Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification (Principal
Financial Officer)
Exhibit 32.1 - Section 1350 Certification (Principal Executive Officer)
Exhibit 32.2 - Section 1350 Certification (Principal Financial Officer)
Signatures
EX-31.1 302 Certification
EX-31.2 302 Certification
EX-32.1 906 Certification
EX-32.2 906 Certification
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim condensed consolidated financial statements of Rurban Financial
Corp. ("Rurban" or the "Company") are unaudited; however, the information
contained herein reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of financial condition and results
of operations for the interim periods presented. All adjustments reflected in
these financial statements are of a normal recurring nature in accordance with
Rule 10-01(b)(8) of Regulation S-X. Results of operations for the three months
ended March 31, 2005 are not necessarily indicative of results for the complete
year.
3
RURBAN FINANCIAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2005, DECEMBER 31, 2004 AND MARCH 31, 2004
ASSETS
(UNAUDITED) (UNAUDITED)
-------------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2005 2004 2004
------------ ------------- ------------
Cash and due from banks $ 8,773,625 $ 10,617,766 $ 10,819,543
Federal funds sold 4,300,000 -- 14,700,000
------------ ------------- ------------
Cash and cash equivalents 13,073,625 10,617,766 25,519,543
Interest-bearing deposits 150,000 150,000 250,000
Available-for-sale securities 102,673,228 108,720,491 97,885,459
Loans held for sale 260,000 112,900 231,758
Loans, net of unearned income 266,046,311 264,480,789 269,316,021
Allowance for loan losses (4,800,293) (4,899,063) (8,244,713)
Premises and equipment 7,837,007 7,740,442 6,672,371
Purchased software 4,622,428 4,564,474 4,122,818
Federal Reserve and Federal Home Loan Bank stock 2,818,400 2,793,000 2,767,200
Foreclosed assets held for sale, net 757,476 720,000 957,711
Interest receivable 1,937,445 1,984,452 1,797,944
Deferred income taxes -- -- 2,189,970
Goodwill 2,144,304 2,144,304 2,144,304
Core deposits and other intangibles 520,740 542,978 618,018
Cash value of life insurance 9,242,417 9,146,816 9,899,734
Other 7,197,400 6,529,397 5,622,804
------------ ------------- ------------
Total assets $414,480,488 $ 415,348,746 $421,750,942
============ ============= ============
See notes to condensed consolidated financial statements (unaudited)
Note: The balance sheet at December 31, 2004 has been derived from the
audited consolidated financial statements at that date.
4
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED) (UNAUDITED)
----------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2005 2004 2004
------------ ------------ ------------
LIABILITIES
Deposits
Demand $ 36,498,890 $ 37,831,810 $ 33,468,275
Savings, interest checking and money market 96,376,323 87,795,630 103,624,318
Time 152,042,228 153,996,874 170,634,579
------------ ------------ ------------
Total deposits 284,917,441 279,624,314 307,727,172
Notes payable 2,757,609 3,079,656 5,311,364
Federal Home Loan Bank advances 53,500,000 56,000,000 39,000,000
Federal funds purchased 5,000,000 7,500,000 --
Retail repurchase agreements 4,352,712 4,059,151 4,738,985
Trust preferred securities 10,310,000 10,310,000 10,310,000
Interest payable 934,065 994,114 840,073
Deferred income taxes 622,618 523,111 --
Other liabilities 2,309,282 2,952,605 4,549,718
------------ ------------ ------------
Total liabilities 364,703,727 365,042,951 372,477,312
------------ ------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, $2.50 stated value; authorized 10,000,000 shares; issued
4,575,702; outstanding March 31, 2005 - 4,568,488, December 31, 2004
- 4,568,388 and March 31, 2004 - 4,567,296 shares 11,439,255 11,439,255 11,439,255
Additional paid-in capital 11,003,574 11,003,642 11,007,086
Retained earnings 29,353,780 28,943,736 26,821,465
Unearned employee stock ownership plan (ESOP) shares -- -- (124,175)
Accumulated other comprehensive income (1,743,600) (803,189) 422,947
Treasury stock, at cost
Common; March 31, 2005 - 7,214, December 31, 2004 - 7,314 and March
31, 2004 - 8,406 shares (276,248) (277,649) (292,948)
------------ ------------ ------------
Total stockholders' equity 49,776,761 50,305,795 49,273,630
------------ ------------ ------------
Total liabilities and stockholders' equity $414,480,488 $415,348,746 $421,750,942
============ ============ ============
See notes to condensed consolidated financial statements (unaudited)
Note: The balance sheet at December 31, 2004 has been derived from the
audited consolidated financial statements at that date.
5
RURBAN FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
MARCH 31, MARCH 31,
2005 2004
--------------- --------------
INTEREST INCOME
Loans
Taxable $ 3,913,966 $ 4,241,313
Tax-exempt 15,506 18,645
Securities
Taxable 1,054,459 782,522
Tax-exempt 42,024 41,322
Other 18,258 30,075
--------------- --------------
Total interest income 5,044,213 5,113,877
--------------- --------------
INTEREST EXPENSE
Deposits 1,103,421 1,279,031
Other borrowings 70,274 158,357
Retail repurchase agreements 17,648 8,496
Federal Home Loan Bank advances 586,552 407,563
Trust preferred securities 269,408 276,250
--------------- --------------
Total interest expense 2,047,303 2,129,697
--------------- --------------
NET INTEREST INCOME 2,996,910 2,984,180
PROVISION FOR LOAN LOSSES - 150,000
--------------- --------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,996,910 2,834,180
--------------- --------------
NON-INTEREST INCOME
Data service fees 2,955,705 2,691,238
Trust fees 804,493 843,529
Customer service fees 436,716 513,845
Net gains on loan sales 8,070 10,128
Net realized gains (losses) on sales of 61,074
available-for-sale securities (8,750)
Loan servicing fees 66,843 96,765
Loss on sale of assets (38,958) (18,415)
Other 186,406 136,850
--------------- --------------
Total non-interest income 4,410,525 4,335,014
--------------- --------------
See notes to condensed consolidated financial statements (unaudited)
6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
MARCH 31, MARCH 31,
2005 2004
--------------- --------------
NON-INTEREST EXPENSE
Salaries and employee benefits $ 3,231,323 $ 3,173,660
Net occupancy expense 290,155 251,426
Equipment expense 1,253,099 1,039,093
Data processing fees 91,197 140,434
Professional fees 518,530 468,519
Marketing expense 80,716 104,209
Printing and office supplies 151,242 145,776
Telephone and communications 149,803 145,826
Postage and delivery expense 74,051 90,589
State, local and other taxes 144,527 203,099
Employee expense 236,071 157,180
Other 299,186 369,388
--------------- --------------
Total non-interest expense 6,519,900 6,289,199
--------------- --------------
INCOME BEFORE INCOME TAX 887,535 879,995
PROVISION FOR INCOME TAXES 249,070 267,973
--------------- --------------
NET INCOME $ 638,465 $ 612,022
=============== ==============
BASIC EARNINGS PER SHARE $ 0.14 $ 0.13
=============== ==============
DILUTED EARNINGS PER SHARE $ 0.14 $ 0.13
=============== ==============
DIVIDENDS DECLARED PER SHARE $ 0.05 $ -
=============== ==============
See notes to condensed consolidated financial statements (unaudited)
7
RURBAN FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (UNAUDITED)
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004
Total Total
Stockholders' Stockholders'
Equity Equity
--------------- --------------
Balance at beginning of period $ 50,305,795 $ 48,382,756
Net Income 638,465 612,022
Other comprehensive income (loss):
Net change in unrealized gains (losses)
on securities available for sale, net (940,408) 221,864
--------------- --------------
Total comprehensive income (301,943) 833,886
Cash dividend (228,424) -
Stock options exercised 1,333 17,670
Paydown of ESOP loan - 39,318
--------------- --------------
Balance at end of period $ 49,776,761 $ 49,273,630
=============== ==============
See notes to condensed consolidated financial statements (unaudited)
8
RURBAN FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31, MARCH 31,
2005 2004
-------------- ----------------
OPERATING ACTIVITIES
Net income $ 638,465 $ 612,022
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 736,990 564,862
Provision for loan losses - 150,000
ESOP shares earned - 39,318
Amortization of premiums and discounts on securities 13,587 259,897
Amortization of intangible assets 22,238 26,969
Deferred income taxes 583,961 -
Proceeds from sale of loans held for sale 660,670 1,074,695
Originations of loans held for sale (799,700) (1,064,567)
Gain from sale of loans (8,070) (10,128)
Loss on sales of foreclosed assets 48,278 18,415
FHLB Stock Dividends (25,400) (22,300)
Gain on sales of premises and equipment (9,320) (15,955)
Net realized (gains) losses on available-for-sale
securities 8,750 (61,074)
Changes in
Interest receivable 47,007 202,788
Other assets (661,081) (863,380)
Interest payable and other liabilities (703,370) (503,223)
-------------- ----------------
Net cash provided by operating activities 553,005 440,249
-------------- ----------------
INVESTING ACTIVITIES
Net change in interest-bearing deposits - 10,000
Purchases of available-for-sale securities (4,004,375) (15,838,469)
Proceeds from maturities of available-for-sale securities 4,476,852 12,141,146
Proceeds from the sales of available-for-sale securities 4,127,585 13,647,795
Net change in loans (1,977,925) 12,609,750
Purchase of bank owned life insurance - (8,000,000)
Purchase of premises and equipment (891,509) (441,020)
Purchase of Federal Home Loan and Federal Reserve Bank
stock - (383,300)
Proceeds from sale of Federal Home Loan and Federal
Reserve Bank stock - 383,300
Proceeds from sales of premises and equipment 9,320 210,513
Proceeds from the sale of foreclosed assets 125,356 493,538
-------------- ----------------
Net cash provided by investing activities 1,865,304 14,833,253
-------------- ----------------
See notes to condensed consolidated financial statements (unaudited)
9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
MARCH 31, MARCH 31,
2005 2004
---------------- ---------------
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, money market,
interest checking and savings accounts $ 7,247,773 $ (5,713,586)
Net decrease in certificates of deposit (1,954,646) (4,033,991)
Net increase in securities sold under agreements to repurchase 293,561 815,231
Net decrease in federal funds purchased (2,500,000) -
Proceeds from Federal Home Loan Bank advances 12,500,000 -
Repayment of Federal Home Loan Bank advances (15,000,000) -
Repayment of notes payable (322,047) (5,016,235)
Dividends paid (228,424) -
Proceeds from stock options exercised 1,333 17,670
---------------- ---------------
Net cash provided by (used in) financing activities 37,550 (13,930,911)
---------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS 2,455,859 1,342,591
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 10,617,766 24,176,952
---------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,073,625 $ 25,519,543
================ ===============
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 2,107,352 $ 3,363,927
Transfer of loans to foreclosed assets $ 313,633 $ 79,113
See notes to condensed consolidated financial statements (unaudited)
10
RURBAN FINANCIAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The financial
statements reflect all adjustments that are, in the opinion of management,
necessary to fairly present the financial position, results of operations and
cash flows of the Company. Those adjustments consist only of normal recurring
adjustments. Results of operations for the three months ended March 31, 2005 are
not necessarily indicative of results for the complete year.
The condensed consolidated balance sheet of the Company as of December 31, 2004
has been derived from the audited consolidated balance sheet of the Company as
of that date.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004.
The Company accounts for its stock option plan under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
grant date. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value provisions of FASB
Statement No. 123, "Accounting for Stock-Based Compensation," to stock-based
employee compensation.
Three Months Ended
March 31,
2005 2004
----------- ------------
Net income (loss), as reported $ 638,465 $ 612,022
Less: Total stock-based employee
compensation cost determined under
the fair value based method, net of
income taxes (11,880) (49,183)
----------- -----------
Pro forma net income $ 626,585 $ 562,839
=========== ===========
Earnings per share:
Basic - as reported $ 0.14 $ 0.13
Basic - pro forma $ 0.14 $ 0.12
Diluted - as reported $ 0.14 $ 0.13
Diluted - pro forma $ 0.14 $ 0.12
NOTE B--EARNINGS PER SHARE
Earnings per share have been computed based on the weighted average number of
shares outstanding during the periods presented. For the periods ended March 31,
2005 and 2004, stock options totaling 66,308 and 29,227 shares of common stock
were not considered in computing EPS as they were anti-dilutive. The number of
shares used in the computation of basic and diluted earnings per share was:
11
Three Months Ended
March 31,
------------------------------
2005 2004
--------- ---------
Basic earnings per share 4,568,399 4,554,959
Diluted earnings per share 4,572,788 4,561,694
NOTE C - LOANS, RISK ELEMENTS AND ALLOWANCE FOR LOAN LOSSES
Total loans on the balance sheet are comprised of the following classifications
at:
March 31, December 31, March 31,
2005 2004 2004
------------- ------------- -------------
Commercial $ 60,130,766 $ 58,498,557 $ 78,264,048
Commercial real estate 65,039,558 64,107,549 59,711,735
Agricultural 42,077,524 41,239,895 38,445,599
Residential real estate 62,903,667 63,828,237 47,227,550
Consumer 32,072,744 31,948,581 36,009,987
Lease financing 4,074,254 5,127,639 9,900,170
------------- ------------- -------------
Total loans 266,298,513 264,750,458 269,559,089
Less
Net deferred loan fees, premiums and discounts (252,202) (269,669) (243,068)
------------- ------------- -------------
Loans, net of unearned income $ 266,046,311 $ 264,480,789 $ 269,316,021
============= ============= =============
Allowance for loan losses $ (4,800,293) $ (4,899,063) $ (8,244,713)
============= ============= =============
The following is a summary of the activity in the allowance for loan losses
account for the three months ended March 31, 2005 and 2004 and the year ended
December 31, 2004.
March 31, December 31, March 31,
2005 2004 2004
----------- ------------ ------------
Balance, beginning of year $ 4,899,063 $ 10,181,135 $ 10,181,135
Provision charged to expense - (399,483) 150,000
Recoveries 183,580 2,106,470 561,284
Loans charged off (282,350) (6,989,059) (2,647,706)
----------- ------------ ------------
Balance, end of period $ 4,800,293 $ 4,899,063 $ 8,244,713
=========== ============ ============
12
The following schedule summarizes nonaccrual, past due and impaired loans at:
March 31, December 31, March 31,
2005 2004 2004
----------- ----------- -----------
Non-accrual loans $14,817,000 $13,384,000 $17,853,000
Accruing loans which are contractually
past due 90 days or more as to interest or
principal payments 50,100 11,000 -
----------- ----------- -----------
Total non-performing loans $14,867,100 $13,395,000 $17,853,000
=========== =========== ===========
Individual loans determined to be impaired, including non-accrual loans, were as
follows:
March 31, December 31, March 31,
2005 2004 2004
----------- ----------- -----------
Loans with no allowance for loan losses allocated $ 923,000 $ 975,000 $ 156,000
Loans with allowance for loan losses allocated 13,303,000 10,411,000 15,108,000
----------- ----------- -----------
Total impaired loans $14,226,000 $11,386,000 $15,264,000
=========== =========== ===========
Amount of allowance allocated $ 1,660,000 $ 1,265,000 $ 3,209,000
=========== =========== ===========
NOTE D - ACQUISITIONS
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
On March 15, 2005, State Bank and Trust Company ("State Bank"), a wholly owned
subsidiary of Rurban, entered into a Branch Purchase and Assumption Agreement
(the "Purchase Agreement") with Liberty Savings Bank, FSB ("Liberty Savings"), a
subsidiary of Liberty Capital, Inc. The Purchase Agreement provides for the sale
to State Bank of two of Liberty Savings' bank branches and one non-banking
facility located in Lima, Ohio. The transaction includes the acquisition of
approximately $61.9 million in deposits and $5.4 million in loans. This
transaction is expected to be completed in June 2005.
The foregoing description of the Purchase Agreement is a summary and is
qualified in its entirety by reference to the full text of the Purchase
Agreement, which is filed as Exhibit 2 to Rurban's Current Report on Form 8-K
filed with the Securities and Exchange Commission ("SEC") on March 21, 2005.
On May 9, 2005, Rurban issued a news release announcing that it had received
regulatory approval from the Federal Reserve Bank of Cleveland and the Ohio
Division of Financial Institutions for its subsidiary, State Bank, to purchase
two Lima, Ohio branch offices of Liberty Savings. A copy of the May 9, 2005 news
release is attached as Exhibit 99 to Rurban's Current Report on Form 8-K filed
with the SEC on May 10, 2005.
13
SUBSEQUENT EVENT
On April 13, 2005, Rurban, entered into an Agreement and Plan of Merger (the
"Merger Agreement") for the acquisition of Exchange Bancshares, Inc., an Ohio
corporation ("Exchange"), and its wholly-owned subsidiary, The Exchange Bank,
headquartered in Luckey, Ohio. In accordance with the terms and conditions of
the Merger Agreement, Exchange will be merged with and into Rurban, with Rurban
being the surviving corporation in the merger. The Exchange Bank will operate as
a separate bank subsidiary of Rurban following the completion of the merger.
Pursuant to the terms of the Merger Agreement, one-half of the outstanding
common shares of Exchange Bancshares will be exchanged for cash and the other
half the of outstanding common shares will be exchanged for common shares of
Rurban. Subject to certain adjustments set forth in the Merger Agreement, each
outstanding common share of Exchange will be converted into either $22.00 in
cash or 1.555 common shares of Rurban. Shareholders of Exchange Bancshares who
hold 100 or fewer shares will receive all cash, while shareholders holding more
than 100 shares may elect cash, Rurban common shares or a combination of cash
and Rurban common shares.
The Merger Agreement provides for a reduction in the purchase price per share to
be paid by Rurban in the merger in the event the shareholders' equity of
Exchange Bancshares (as adjusted in accordance with the Merger Agreement) falls
below $8.1 million prior to the closing. On April 13, 2005, Exchange filed a
Current Report on Form 8-K (the "Exchange 8-K") with the SEC, which disclosed
that Exchange had received a comment letter from the SEC relating to the
accounting and reporting by Exchange of its valuation allowance for deferred tax
assets in fiscal years ended December 31, 2002, 2003 and 2004. The Exchange 8-K
also stated that, in the event Exchange is required to revise its 2004 financial
statements to reflect changes in the valuation allowance for deferred tax
assets, the shareholders' equity of Exchange may be negatively impacted and
could result in a reduction in the per share purchase price to be paid by Rurban
in the merger.
The merger is subject to approval by federal and state regulators and the
shareholders of Exchange, as well as the satisfaction of other customary
conditions set forth in the Merger Agreement.
The foregoing description of the Purchase Agreement is a summary and is
qualified in its entirety by reference to the full text of the Merger Agreement,
which is filed as Exhibit 2.1 to the Exchange 8-K.
NOTE E - NOTE PAYABLE
RFCBC, Inc. has a note payable to The Union Banking Company secured by the
common stock of Rurbanc Data Services, Inc. ("RDSI") and substantially all of
the assets of RFCBC, Inc. The note requires quarterly principal payments of
$300,000 together with interest at the prime rate plus 1% (6.75% at March 31,
2005) and matures on June 6, 2006. The principal note balance was $1,700,000 as
of March 31, 2005, $2,000,000 as of December 31, 2004 and $4,600,000 as of March
31, 2004.
RDSI has two notes payable to State Bank. The notes were originated in September
of 2004 and had a combined principal balance of $2,028,574, of which $1,128,574
was participated to F&M Bank. The first note was secured by equipment and second
lien positions on all business assets and requires monthly payments of $15,857,
with interest at 6.50%. The participated principal note balance was $738,483 as
of March 31, 2005 and $773,654 as of December 31, 2004. The second note was
secured by equipment and second lien positions on all business assets and
requires monthly payments of
14
$6,272, with interest at 6.50%. The participated principal note balance was
$292,091 as of March 31, 2005 and $306,002 as of December 31, 2004.
State Bank has a note payable to Ford Motor Credit Company secured by the
vehicle being purchased. The note requires monthly payments of $795 and matures
on January 5, 2008. The principal note balance was $27,035 as of March 31, 2005.
NOTE F - REGULATORY MATTERS
The Company and State Bank are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators. If undertaken, these actions
could have a direct material adverse effect on the Company's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and State Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and State Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). As of March 31, 2005, the Company and
State Bank exceeded all "well-capitalized" requirements to which they are
subject.
As of December 31, 2004, the most recent notification to the regulators
categorized The State Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, State Bank
must maintain capital ratios as set forth in the following table. There are no
conditions or events since that notification that management believes have
changed State Bank's category.
15
The Company's consolidated and State Bank's actual capital amounts (in millions)
and ratios are also presented in the following table.
TO BE WELL CAPITALIZED
MINIMUM REQUIRED FOR UNDER PROMPT CORRECTIVE
ACTUAL CAPITAL ADEQUACY PURPOSES ACTION PROVISIONS
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
As of March 31, 2005
Total Capital
(to Risk-Weighted Assets)
Consolidated $ 62.4 22.0% $ 22.7 8.0% $ -- N/A
State Bank 39.9 15.2 20.9 8.0 26.2 10.0
Tier I Capital
(to Risk-Weighted Assets)
Consolidated 58.8 20.7 11.4 4.0 -- N/A
State Bank 37.0 14.1 10.5 4.0 15.7 6.0
Tier I Capital
(to Average Assets)
Consolidated 58.8 14.3 16.5 4.0 -- N/A
State Bank 37.0 9.5 15.5 4.0 19.4 5.0
As of December 31, 2004
Total Capital
(to Risk-Weighted Assets)
Consolidated $ 61.9 22.0% $ 22.5 8.0% $ -- N/A
State Bank 39.4 15.3 20.7 8.0 25.8 10.0
Tier I Capital
(to Risk-Weighted Assets)
Consolidated 58.4 20.7 11.3 4.0 -- N/A
State Bank 36.3 14.0 10.3 4.0 15.5 6.0
Tier I Capital
(to Average Assets)
Consolidated 58.4 14.2 16.5 4.0 -- N/A
State Bank 36.3 9.3 15.6 4.0 19.5 5.0
NOTE G - CONTINGENT LIABILITIES
There are various contingent liabilities that are not reflected in the
consolidated financial statements, including claims and legal actions arising in
the ordinary course of business. In the opinion of management, after
consultation with legal counsel, the ultimate disposition of these matters is
not expected to have a material effect on the Company's consolidated financial
condition or results of operations.
NOTE H - NEW ACCOUNTING PRONOUNCEMENTS
In March 2004, FASB issued the proposed EITF Issue 03-01, "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments,"
which will require an investor holding a debt security in the Available for Sale
(AFS) portfolio whose fair value is below cost (an impaired security) to declare
the "intent and ability" to hold that security until its value has recovered up
to cost. If the investor does declare this intent and ability, the impairment is
considered "temporary." Otherwise, the impairment is classified as "other than
temporary" and must be recognized immediately as a permanent write-down through
the income statement. FASB has not yet
16
determined the time frame of implementing this guidance. The Company believes
that this proposed issue will have little or no material impact.
In December 2004, FASB issued a revision to Statement No. 123. Statement No.
123(R), "Share-Based Payment," will provide investors and other users of
financial statements with more complete and neutral financial information by
requiring that the compensation cost relating to share-based payment
transactions be recognized in the financial statements. The effective date for
this statement has been established by the SEC to be as of the first annual
period that begins after June 15, 2005. The Company is evaluating the impact of
this pronouncement and expects it to be comparable to the pro-forma effects of
applying the original SFAS 123 as detailed in Note A.
NOTE I - COMMITMENTS AND CREDIT RISK
As of March 31, 2005, loan commitments and unused lines of credit totaled
$49,681,000 standby letters of credit totaled $422,000 and no commercial letters
of credit were outstanding.
NOTE J - SEGMENT INFORMATION
The reportable segments are determined by the products and services offered,
primarily distinguished between banking and data processing operations. Other
segments include the accounts of the holding company, Rurban, which provides
management and operational services to its subsidiaries; and Reliance Financial
Services, N.A., which provides trust and financial services to customers
nationwide. Information reported internally for performance assessment follows.
17
NOTE J -- SEGMENT INFORMATION (Continued)
As of and for the three months ended March 31, 2005
Data Total Intersegment Consolidated
Banking Processing Other Segments Elimination Totals
------------ ----------- ----------- ------------ ------------ ------------
Income statement information:
Net interest income (expense) $ 3,340,193 $ (63,767) $ (279,516) $ 2,996,910 $ 2,996,910
Non-interest income - external
customers 636,568 2,955,705 818,252 4,410,525 4,410,525
Non-interest income - other segments - 329,850 451,275 781,125 (781,125) -
------------ ----------- ----------- ------------ ------------ ------------
Total revenue 3,976,761 3,221,788 990,011 8,188,560 (781,125) 7,407,435
Non-interest expense 3,713,285 2,487,389 1,100,351 7,301,025 (781,125) 6,519,900
Significant non-cash items:
Depreciation and
amortization 146,239 564,218 26,533 736,990 - 736,990
Provision for loan losses - - - - - -
Income tax expense (benefit) 125,835 242,205 (118,970) 249,070 - 249,070
Segment profit (loss) $ 370,948 $ 492,194 $ (224,677) $ 638,465 $ - $ 638,465
Balance sheet information:
Total assets $407,198,943 $10,583,816 $ 4,126,544 $421,909,303 $ (7,428,815) $414,480,488
Goodwill and intangibles 2,665,044 - - 2,665,044 - 2,665,044
Premises and equipment
expenditures, Three months
ended March 31, 2005 164,795 706,011 20,703 891,509 - 891,509
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Rurban Financial Corp. ("Rurban" or "the Company") was incorporated on February
23, 1983, under the laws of the State of Ohio. Rurban is a bank holding company
registered with the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended. Rurban's subsidiary, The State Bank and Trust Company ("State
Bank"), is engaged in commercial banking. RFC Banking Company was created June
30, 2001 through the merger of The Peoples Banking Company, The First National
Bank of Ottawa and The Citizens Savings Bank Company. As of June 6, 2003, RFC
Banking Company completed the sale of all its active banking locations,
retaining only selected loans. Following the sale, RFC Banking Company ceased
doing business as a bank and operated as a loan subsidiary of Rurban in
servicing and working out the retained loans. During the third quarter of 2004,
the Company liquidated RFC Banking Company, and the assets and liabilities of
RFC Banking Company were distributed to the Company. Additionally during the
third quarter, the Company formed a new wholly-owned Ohio Corporation, RFCBC,
Inc., to serve as an asset resolution company. The assets and liabilities that
had been distributed to the Company in the liquidation of RFC Banking Company,
were transferred to the new subsidiary, RFCBC, Inc.
Rurban's subsidiary, Rurbanc Data Services, Inc. ("RDSI"), provides computerized
data processing services to community banks and businesses including State Bank.
Rurban Statutory Trust I ("RST") was established in August 2000. In September
2000, RST completed a pooled private offering of 10,000 Capital Securities with
a liquidation amount of $1,000 per security. The proceeds of the offering were
loaned to the Company in exchange for junior subordinated debentures of the
Company with terms substantially similar to the Capital Securities. The sole
assets of RST are the junior subordinated debentures, and the back-up
obligations, in the aggregate, constitute a full and unconditional guarantee by
the Company of the obligations of RST under the Capital Securities. In December
2003, FASB issued a revision to FIN 46 to clarify certain provisions that
affected the accounting for trust preferred securities. As a result of the
provisions in FIN 46, RST was deconsolidated as of March 31, 2004, with the
Company accounting for its investment in RST as assets, its junior subordinated
debentures as debt, and the interest paid thereon as interest expense. The
Company had always classified the trust preferred securities as debt, but the
Company eliminated its common stock investment as a result of the provisions in
FIN 46.
Reliance Financial Services, N.A. ("Reliance"), a wholly owned subsidiary of
State Bank, provides trust and financial services to customers nationwide.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements within this document which are not statements of historical
fact constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
risks and uncertainties and actual results may differ materially from those
predicted by the forward-looking statements. These risks and uncertainties
include, but are not limited to, risks and uncertainties inherent in the
national and regional banking, insurance and mortgage industries, competitive
factors specific to markets in which Rurban and its subsidiaries operate, future
interest rate levels, legislative and regulatory actions, capital market
conditions, general economic conditions, geopolitical events, the loss of key
personnel and other factors.
The Company is confident that the previously discussed acquisitions in Note D
will have no material disruptions with its customers and the anticipated closing
dates will be met.
19
Forward-looking statements speak only as of the date on which they are made, and
Rurban undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the statement is made.
All subsequent written and oral forward-looking statements attributable to
Rurban or any person acting on our behalf are qualified by these cautionary
statements.
The following discussion is intended to provide a review of the consolidated
financial condition and results of operations of Rurban. This discussion should
be read in conjunction with the consolidated financial statements and related
footnotes in Rurban's 2004 Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 filed with the Securities and Exchange Commission.
CRITICAL ACCOUNTING POLICIES
The accounting and reporting policies of the Company are in accordance with
accounting principles generally accepted in the United States and conform to
general practices within the banking industry. The Company's significant
accounting policies are described in detail in the notes to the Company's
consolidated financial statements for the year ended December 31, 2004. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions. The
Company's financial position and results of operations can be affected by these
estimates and assumptions and are integral to the understanding of reported
results. Critical accounting policies are those policies that management
believes are the most important to the portrayal of the Company's financial
condition and results, and they require management to make estimates that are
difficult, subjective, or complex.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses provides coverage for
probable losses inherent in the Company's loan portfolio. Management evaluates
the adequacy of the allowance for loan losses each quarter based on changes, if
any, in underwriting activities, loan portfolio composition (including product
mix and geographic, industry or customer-specific concentrations), trends in
loan performance, regulatory guidance and economic factors. This evaluation is
inherently subjective, as it requires the use of significant management
estimates. Many factors can affect management's estimates of specific and
expected losses, including volatility of default probabilities, rating
migrations, loss severity and economic and political conditions. The allowance
is increased through provisions charged to operating earnings and reduced by net
charge-offs.
The Company determines the amount of the allowance based on relative risk
characteristics of the loan portfolio. The allowance recorded for commercial
loans is based on reviews of individual credit relationships and an analysis of
the migration of commercial loans and actual loss experience. The allowance
recorded for homogeneous consumer loans is based on an analysis of loan mix,
risk characteristics of the portfolio, fraud loss and bankruptcy experiences,
and historical losses, adjusted for current trends, for each homogeneous
category or group of loans. The allowance for credit losses relating to impaired
loans is based on the loan's observable market price, the collateral for certain
collateral-dependent loans, or the discounted cash flows using the loan's
effective interest rate.
Regardless of the extent of the Company's analysis of customer performance,
portfolio trends or risk management processes, certain inherent but undetected
losses are probable within the loan portfolio. This is due to several factors,
including inherent delays in obtaining information regarding a customer's
financial condition or changes in their unique business conditions, the
subjective nature of individual loan evaluations, collateral assessments and the
interpretation of economic trends. Volatility of economic or customer-specific
conditions affecting the identification and estimation of losses for larger
20
non-homogeneous credits and the sensitivity of assumptions utilized to establish
allowances for homogenous groups of loans are also factors. The Company
estimates a range of inherent losses related to the existence of these
exposures. The estimates are based upon the Company's evaluation of imprecise
risk associated with the commercial and consumer allowance levels and the
estimated impact of the current economic environment.
GOODWILL AND OTHER INTANGIBLES - The Company records all assets and liabilities
acquired in purchase acquisitions, including goodwill and other intangibles, at
fair value as required by SFAS 141. Goodwill is subject, at a minimum, to annual
tests for impairment. Other intangible assets are amortized over their estimated
useful lives using straight-line or accelerated methods, and are subject to
impairment if events or circumstances indicate a possible inability to realize
the carrying amount. The initial goodwill and other intangibles recorded and
subsequent impairment analysis requires management to make subjective judgments
concerning estimates of how the acquired asset will perform in the future.
Events and factors that may significantly effect the estimates include, among
others, customer attrition, changes in revenue growth trends, specific industry
conditions and changes in competition.
IMPACT OF ACCOUNTING CHANGES
In March 2004, FASB issued the proposed EITF Issue 03-01, "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments",
which will require an investor holding a debt security in the Available for Sale
(AFS) portfolio whose fair value is below cost (an impaired security) declare
the "intent and ability" to hold that security until its value has recovered up
to cost. If the investor does declare this intent and ability, the impairment is
considered "temporary". Otherwise, the impairment is classified as "other than
temporary" and must be recognized immediately as a permanent write-down through
the income statement. FASB has not yet determined the timeframe of implementing
this guidance.
In December 2004, FASB issued a revision to Statement No. 123. Statement No.
123(R), "Share-Based Payment," will provide investors and other users of
financial statements with more complete and neutral financial information by
requiring that the compensation cost relating to share-based payment
transactions be recognized in the financial statements. The effective date for
this statement has been established by the Securities and Exchange Commission
("SEC") to be as of the first annual period that begins after June 15, 2005. The
Company is evaluating the impact of this pronouncement and expects it to be
comparable to the pro-forma effects of applying the original SFAS 123 as
detailed in Note A.
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
On March 15, 2005, State Bank, a wholly owned subsidiary of the Company.,
entered into a Branch Purchase and Assumption Agreement (the "Purchase
Agreement") with Liberty Savings Bank, FSB ("Liberty Savings"), a subsidiary of
Liberty Capital, Inc. The Purchase Agreement provides for the sale to State Bank
of two of Liberty Savings' bank branches and one non-banking facility located in
Lima, Ohio. The transaction includes the acquisition of approximately $61.9
million in deposits and $5.4 million in loans. This transaction is expected to
be completed in June 2005.
The foregoing description of the Purchase Agreement is a summary and is
qualified in its entirety by reference to the full text of the Purchase
Agreement, which is filed as Exhibit 2 to Current Report on Form 8-K filed by
the Company with the SEC on March 21, 2005.
21
On May 9, 2005, Rurban issued a news release announcing that it had received
regulatory approval from the Federal Reserve Bank of Cleveland and the Ohio
Division of Financial Institutions for its subsidiary, State Bank, to purchase
two Lima, Ohio branch offices of Liberty Savings. A copy of the May 9, 2005 news
release is attached as Exhibit 99 to Rurban's Current Report on Form 8-K filed
with the SEC on May 10, 2005
SUBSEQUENT EVENT
On April 13, 2005, the Company, entered into an Agreement and Plan of Merger
(the "Merger Agreement") for the acquisition of Exchange Bancshares, Inc., an
Ohio corporation ("Exchange"), and its wholly-owned subsidiary, The Exchange
Bank, headquartered in Luckey, Ohio. In accordance with the terms and conditions
of the Merger Agreement, Exchange will be merged with and into Rurban, with
Rurban being the surviving corporation in the merger. The Exchange Bank will
operate as a separate bank subsidiary of Rurban following completion of the
merger.
Pursuant to the terms of the Merger Agreement, one-half of the outstanding
common shares of Exchange Bancshares will be exchanged for cash and the other
half of outstanding common shares will be exchanged for common shares of Rurban.
Subject to certain adjustments set forth in the Merger Agreement, each
outstanding common share of Exchange will be converted into either $22.00 in
cash or 1.555 common shares of Rurban. Shareholders of Exchange Bancshares who
hold 100 or fewer shares will receive all cash, while shareholders holding more
than 100 shares may elect cash, Rurban common shares or a combination of cash
and Rurban common shares.
The Merger Agreement provides for a reduction in the purchase price per share to
be paid by Rurban in the merger in the event the shareholders' equity of
Exchange Bancshares (as adjusted in accordance with the Merger Agreement) falls
below $8.1 million prior to the closing. On April 13, 2005, Exchange filed a
Current Report on Form 8-K (the "Exchange 8-K") with the SEC, which disclosed
that Exchange had received a comment letter from the SEC relating to the
accounting and reporting by Exchange of its valuation allowance for deferred tax
assets in the fiscal years ended December 31, 2002, 2003 and 2004. The Exchange
8-K also stated that, in the event Exchange is required to revise its 2004
financial statements to reflect changes in the valuation allowance for deferred
tax assets, the shareholders' equity of Exchange may be negatively impacted and
could result in a reduction in the per share purchase price to be paid by Rurban
in the merger.
The merger is subject to approval by federal and state regulators and the
shareholders of Exchange, as well as the satisfaction of other customary
conditions set forth in the Merger Agreement.
The foregoing description of the Purchase Agreement is a summary and is
qualified in its entirety by reference to the full text of the Merger Agreement,
which is filed as Exhibit 2.1 to the Current Report on Form 8-K filed by the
Company with the SEC on April 14, 2005.
QUARTERLY EARNINGS SUMMARY
Net income for the first quarter of 2005 was $638,000, or $0.14 per diluted
share, versus $612,000, or $0.13 per diluted share, for the first quarter of
2004. The quarterly increase in net income is mainly driven by data processing
fees being $264,000 more than the first quarter of 2004 mostly offset by
equipment expense being $214,000 higher in the first quarter of 2005 attributed
to equipment purchases and maintenance contracts relating to the growth of RDSI.
RDSI acquired six new data
22
processing customers in the first quarter of 2005 and three of these will be
item processing clients as well.
Net interest income increased $13,000 to $3.0 million for the three months ended
March 31, 2005 compared to $3.0 million for the first quarter 2004. The increase
in net interest income is attributed to the 19 basis point improvement in the
net interest margin to 3.28% compared to 3.09% in the first quarter of 2004,
partially offset by a 3.6% decline in average earning assets. The Company
continues to maintain its conservative posture on asset quality and adheres to
its disciplined approach to loan growth. As a result, the Company has managed
its balance sheet to benefit from rising interest rates.
The provision for loan losses was $0 for the first quarter of 2005 compared to
$150,000 for the first quarter of 2004. Loan loss reserves were 1.81% of total
loans in the first quarter of 2005 compared to 3.06% in the first quarter of
2004.
Non-interest income increased $76,000 to $4.4 million in the first quarter of
2005 compared to $4.3 million for the first quarter of 2004. The increase in
non-interest income was mainly the result of the increase in data processing
fees of $264,000 associated with the expansion of RDSI's customer base and a
higher level of termination fees from several banks that were merged and left
the system. The quarterly increase was mostly offset by trust fees at RFS being
$40,000 lower due to the decline in the equity markets in the first quarter of
2005 and a one-time new customer conversion fee in the first quarter of 2004.
Customer service fees and mortgage banking income also declined due to lower
average volume levels of transaction accounts and lower mortgage originations.
Non-interest expense increased $231,000 to $6.5 million for the first quarter of
2005 compared to $6.3 million for the first quarter of 2004. The majority of
expense categories showed only modest changes reflecting the Company's focus on
cost containment. The only material increase is the aforementioned equipment
expenses relating to RDSI.
CHANGES IN FINANCIAL CONDITION
MARCH 31, 2005 VS. DECEMBER 31, 2004
At March 31, 2005, total assets were $414.5 million, a decrease of $0.8 million
from December 31, 2004. The decrease was primarily attributable to a decrease in
available for sale securities of $6.0 million partially offset by increases in
loans and federal funds sold of $1.6 and $4.3 million, respectively.
At March 31, 2005, the decrease in total liabilities and shareholders' equity of
$0.8 million from December 31, 2004 was mainly attributable to decreases in FHLB
Advances of $2.5 million, federal funds purchased of $2.5 million, and other
liabilities of $0.6 million mostly offset by an increase in deposits of $5.3
million.
MARCH 31, 2005 VS. MARCH 31, 2004
As of March 31, 2005, total assets decreased $7.3 million from March 31, 2004.
The decrease was mainly due to reductions in federal funds sold of $10.4 million
and loans of $3.3 million relating to the planned exit of out-of-market loans
partially offset by an increase in available-for-sale securities of $4.8
million.
23
As of March 31, 2005, total liabilities and shareholders' equity decreased $7.3
million. The decrease was mainly attributed to a decrease in total deposits of
$22.8 million partially offset by an increase of $14.5 million in FHLB advances.
LINKED QUARTER COMPARISON
The Company reported a net profit for the first quarter of 2005 of $638,000, or
$0.14 per diluted share, versus a net profit of $715,000, or $0.16 per diluted
share, for the fourth quarter of 2004. The first quarter profit was mainly due
to an improvement in the net interest margin coupled with an increase in data
processing fee income from RDSI as well as a reduction in the provision for loan
losses as a result of continued improvements in credit quality.
Net interest income decreased $32,000 or 1% to $3.0 million for the first
quarter of 2005 when compared to the fourth quarter of 2004. This decrease was
driven by the impact of a $1.3 million reduction in average loan volume coupled
with an increase in funding costs as the decrease of $3.3 million of average
deposits were replaced with additional borrowings.
A comparison of financial results for the quarter ended March 31, 2005 to the
previous quarter ended December 31, 2004 is as follows:
Linked
Three Months Ended Quarter
03/31/05 12/31/04 % Change
--------- --------- --------
(dollars in millions, except per share data)
Total Assets $ 414 $ 415 --
Loans Held for Sale 0.3 0.1 --
Loans (net of unearned income) 266 264 +1%
Allowance for Loan Losses 4.8 4.9 -2%
Total Deposits 285 280 +2%
Net interest Income 3.0 3.0 --
Loan Loss Provision -- (0.5) --
Non-interest Income 4.4 4.2 +5%
Non-interest Expense 6.5 6.6 -1%
Net Income 0.6 0.7 --
Basic Earnings Per Share $ 0.14 $ 0.16 --
Diluted Earnings Per Share $ 0.14 $ 0.16 --
On a linked quarter basis, total loans increased $2 million and total assets
remained relatively flat. Although there was an increase in total loans for the
linked quarter, residential loans decreased primarily due to rising mortgage
rates in the first quarter of 2005 resulting in a slow-down in loan production.
The Company continues to promote the exiting of out-of-market loans.
TOTAL REVENUE
Three Months Ended
03/31/05 12/31/04 $Change %Change
-------- -------- ------- -------
(dollars in thousands)
Total Revenue $ 7,407 $ 7,222 $ +185 +3%
Total revenue (net interest income plus noninterest income) was $7.4 million for
the first quarter of 2005 compared to $7.2 million for the fourth quarter of
2004, up $185,000 or 3%.
24
NET INTEREST INCOME
Three Months Ended
03/31/05 12/31/04 $Change %Change
-------- -------- ------- -------
(dollars in thousands)
Net Interest Income $ 2,997 $ 3,029 $ -32 -11%
Net interest income decreased $32,000 in the first quarter of 2005 when compared
to the fourth quarter of 2004. The tax equivalent net interest margin for the
first quarter of 2005 was 3.28% compared to 3.24% for the previous quarter. The
increase in net interest margin was principally a result of a higher level of
investment portfolio earnings, the repricing of higher cost interest-bearing
liabilities, and the slight increase in outstanding loans.
LOAN LOSS PROVISION
The provision for loan losses was $0 for the first quarter of 2005 compared to a
$529,000 reduction in the fourth quarter of 2004. The decrease in the provision
in the fourth quarter was the result of the continued review and determination
of the level of reserves necessary to absorb probable losses in the loan
portfolio. This continued into the first quarter as the Company had no
provision. The results of the first quarter are discussed in the "Allowance for
Loan Losses" section.
NON-INTEREST INCOME
Three Months Ended
03/31/05 12/31/04 $Change %Change
-------- -------- ------- -------
(dollars in thousands)
Total Non-interest Income $ 4,411 $ 4,193 $ +218 +5%
- - Data Service Fees 2,956 2,795 +161 +6%
- - Trust Fees 804 740 +64 +9%
- - Deposit Service Fees 437 467 -30 -6%
- - Gains on Sale of Loans 8 14 -6 -43%
- - Gains on Sale of Securities (9) 5 -14 -
- - Gain (Loss) on Assets (39) (34) -5 -
- - Other 254 206 +48 +23%
Non-interest income increased by $218,000 to $4.4 million in the first quarter
of 2005 compared to $4.2 million in the fourth quarter of 2004. This increase is
mainly due to the Company's two non-bank subsidiaries, RDSI and RFS. RDSI's
continued improvement resulted in an increase of $161,000 in data processing
fees when compared to the previous quarter as a result of new banking clients
and new product implementation. RFS added another strong quarter of earnings
resulting in an increase of $64,000 in trust fees when compared to the previous
quarter.
25
NON-INTEREST EXPENSE
Three Months Ended
03/31/05 12/31/04 $Change %Change
-------- -------- ------- -------
(dollars in thousands)
Total Non-interest Expense $ 6,520 $ 6,560 $ -40 -1%
- - Salaries & Employee Benefits 3,231 3,290 -59 -2%
- - Equipment Expense 1,253 1,178 +75 +6%
- - Professional Fees 519 594 -75 -13%
- - All Other 1,517 1,498 +19 +1%
Non-interest expense for the first quarter of 2005 was $6.5 million compared to
$6.6 million for the fourth quarter of 2004, a decrease of $40,000 or 1%. The
quarterly decrease is due to a reduction in professional fees of $75,000 as a
result of a reduction in classified assets that required the assistance of legal
counsel and a decrease in salary and employee benefits of $59,000 due to first
quarter accrual adjustments for incentive compensation. The quarterly decrease
was somewhat offset by an increase in equipment expense of $75,000 mainly due to
new software and building purchases at RDSI associated with its new location.
LOANS
As of
% of % of Inc
03/31/05 Total 12/31/04 Total (Dec)
-------- ----- -------- ----- -----
(dollars in millions)
Commercial $ 60 23% $ 59 22% $ 1
Commercial real estate 65 24% 64 24% 1
Agricultural 42 16% 41 16% 1
Residential 63 24% 64 24% (1)
Consumer 32 12% 32 12% -
Leasing loans 4 1% 5 2% (1)
-------- -------- -----
Total $ 266 $ 265 $ 1
Loans held for sale 0.3 0.1 -
-------- -------- -----
Total $ 267 $ 265 $ 1
Loans increased $1 million from December 31, 2004 to March 31, 2005. During the
first quarter of 2005, the Company intensified its marketing efforts in
Northwest Ohio and continued its focus on sales resulting in an improvement in
loan volume, some of which is seasonally related to agriculture and some of
which may be attributed to an improved local economy.
26
ASSET QUALITY
As of and For the Quarter Ended
-------------------------------
(dollars in millions)
03/31/05 12/31/04 Change
-------- -------- --------
Non-performing loans $ 15.9 $ 14.4 $ +1.5
Non-performing assets 17.0 15.4 +1.6
Non-performing assets/ loan plus OREO 6.37% 5.80% +0.57%
Non-performing assets/ total assets 4.10% 3.71% +0.39%
Net chargeoffs 0.1 (0.1) +0.2
Net chargeoffs (annualized)/ total loans N/A N/A N/A
Loan loss provision -- (0.5) --
Allowance for loan loss - $ 4.8 4.9 -0.1
Allowance for loan loss - % 1.81% 1.85% -0.04%
Allowance/non-performing loans 30% 34% --
Allowance/non-performing assets 28% 32% --
Non-performing assets at March 31, 2005 increased to $17.0 million or 4.10% of
total assets, versus $15.4 million, or 3.71% at December 31, 2004, an increase
of $1.6 million. This increase is attributed to a $1.4 million increase in
non-accrual loans. Net chargeoffs for the first quarter of 2005 were $0.1
million compared to a net recovery of $0.1 million in the fourth quarter of
2004.
ALLOWANCE FOR LOAN LOSSES
The Company grades its loans using an eight grade system. Loans with concerns
are classified as either:
- Grade 5 - Special Mention: Potential weaknesses that deserve
management's close attention;
- Grade 6 - Substandard: Inadequately protected, with well-defined
weakness that jeopardize pay off of debt;
- Grade 7 - Doubtful: Inherent weaknesses which are well-defined
and a high probability of loss (impaired) (these loans are
typically reserved down to collateralized values); or
- Grade 8 - Loss: Considered uncollectible. May have recovery or
salvage value with future collection efforts (these loans are
either fully reserved or charged off).
27
The Company's allowance for loan losses has four components. Those components
are shown in the following table. Commercial, commercial real estate and
agricultural loans of over $100,000 are individually reviewed and assessed
regarding the need for an individual allocation.
----------03/31/05----------- -----------12/31/04----------
ALLOCATION ALLOCATION
LOAN ---------------- LOAN ----------------
BALANCE $ % BALANCE $ %
------- ----- ----- ------- ----- -----
Allocations for individual
commercial loans graded
Doubtful (impaired) $ 14.2 $ 1.7 11.97% $ 11.4 $ 1.3 11.40%
Allocations for individual
commercial loans graded
Substandard 9.4 0.6 6.38 15.5 1.0 6.45
Allocation based on Special
Mention loan balance 13.3 0.4 3.01 13.6 0.4 2.94
"General" allowance based on
chargeoff history of nine
categories of loans 229.6 2.1 0.91 224.4 2.2 0.98
------- ----- ----- ------- ----- -----
TOTAL $ 266.5 $ 4.8 1.81% $ 264.9 $ 4.9 1.85%
The amount of loans classified as doubtful increased $2.8 million to $14.2
million for the quarter ended March 31, 2005 and substandard loans decreased
$6.1 million to $9.4 million. Allowance allocations on doubtful loans increased
$0.4 million and the allowance allocations on substandard loans decreased $0.4
million from December 31, 2004. The allowance for loan losses at March 31, 2005
was $4.8 million or 1.81% of loans compared to $4.9 million or 1.85% at December
31, 2004.
CAPITAL RESOURCES
At March 31, 2005, actual capital levels (in millions) and minimum required
levels were:
Minimum Required
Minimum Required To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
----------------- ----------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- -------- -----
Total capital (to risk weighted assets)
Consolidated $ 62.4 22.0% $ 22.7 8.0% $ - N/A
State Bank 39.9 15.2 20.9 8.0 26.2 10.0
The Company and State Bank were categorized as well capitalized at March
31, 2005.
WRITTEN AGREEMENT
On July 5, 2002, the Company and State Bank entered into a Written Agreement
("Agreement") with the Federal Reserve Bank of Cleveland and the Ohio Division
of Financial Institutions. The Agreement was the result of an examination of
State Bank as of December 31, 2001, which was conducted in March and April 2002.
A copy of the Agreement was attached as Exhibit 99(b) to the Form 8-K filed by
the Company on July 11, 2002.
Under the terms of the Agreement, State Bank and RFCBC, Inc. were prohibited
from paying dividends to the Company without prior regulatory approval. The
Agreement also prohibited the Company from paying trust preferred "dividends"
and common stock dividends without prior regulatory approval.
28
On February 18, 2005, the Company received notice from the Federal Reserve Bank
and the Ohio Department of Financial Institutions that approval was given
effective February 17, 2005 to release the Company and State Bank from the
Agreement.
GOALS FOR 2005 AND 2006
The Company's near term goals include:
- Continued focus on the quality of the loan underwriting process
- Continued efforts to reduce the level of problem loans
- Continued focus on Customer Relationship Management (CRM)
- Continued efforts to improve operational efficiencies
- Continue to build shareholder value and franchise value.
LIQUIDITY
Liquidity relates primarily to the Company'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 and due from banks, federal
funds sold, interest earning deposits in other financial institutions,
securities available-for sale and loans held for sale. These assets are commonly
referred to as liquid assets. Liquid assets were $116.2 million at March 31,
2005 compared to $119.6 million at December 31, 2004.
The Company's residential first mortgage portfolio of $62.9 million at March 31,
2005 and $63.8 million at December 31, 2004, which can and has been used to
collateralize borrowings, is an additional source of liquidity. Management
believes its current liquidity level is sufficient to meet its liquidity needs.
At March 31, 2005, all eligible mortgage loans were pledged under a Federal Home
Loan Bank ("FHLB") blanket lien.
The cash flow statements for the periods presented provide an indication of the
Company's sources and uses of cash as well as an indication of the ability of
the Company to maintain an adequate level of liquidity. A discussion of the cash
flow statements at March 31, 2005 and 2004 follows.
The Company experienced positive cash flows from operating activities at March
31, 2005 and 2004. Net cash from operating activities was $553,005 and $440,249,
respectively, at March 31, 2005 and 2004.
Net cash flow from investing activities was $1.9 million and $14.8 million at
March 31, 2005 and 2004 respectively. The changes in net cash from investing
activities at March 31, 2005 include an increase in securities of $4.6 million
partially offset by loan growth of $2.0 million. The changes in net cash from
investing activities at March 31, 2004 include a increase in securities of $10.0
million, a decrease in loans of $(12.6) million and changes in interest-bearing
deposits, purchases of premises and equipment and other investing activities.
Net cash flow from financing activities was $37,550 and $(13.9) million at March
31, 2005 and 2004, respectively. The net cash variance was primarily due to a
increase in total deposits of $5.3 million at March 31, 2005 compared to a
reduction of total deposits of $(9.7) million at March 31, 2004.
29
OFF-BALANCE-SHEET BORROWING ARRANGEMENTS:
Significant additional off-balance-sheet liquidity is available in the form of
FHLB advances, unused federal funds lines from correspondent banks, and the
national certificate of deposit market.
Approximately $54.0 million of the Company's $62.9 million residential first
mortgage loan portfolio qualifies to collateralize FHLB borrowings and was
pledged to meet FHLB collateralization requirements as of March 31, 2005. In
addition to residential first mortgage loans, $35.8 million in investment
securities are pledged to meet FHLB collateralization requirements. Based on the
current collateralization requirements of the FHLB, approximately $14.8 million
of additional borrowing capacity existed at March 31, 2005.
As of March 31, 2005, the Company had unused federal funds lines totaling $20.0
million from three correspondent banks. At December 31, 2004, the Company had
$13.0 million in fund lines. Federal funds borrowed were $5.0 million at March
31, 2005 and $7.5 million at December 31, 2004.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
MARCH 31, 2005
PAYMENT DUE BY PERIOD
----------------------------------------------------------------------------
LESS MORE
THAN 1 1 - 3 3 - 5 THAN 5
Contractual Obligations TOTAL YEAR YEARS YEARS YEARS
----------------------- ------------ ------------ ----------- ---------- -----------
Long-Term Debt Obligations $ 53,500,000 $ 19,500,000 $ 5,000,000 $6,000,000 $23,000,000
Other Debt Obligations 13,067,609 1,399,529 942,406 415,674 10,310,000
Capital Lease Obligations 0 0 0 0 0
Operating Lease Obligations 2,565,324 261,600 523,200 523,200 1,257,324
Purchase Obligations 0 0 0 0 0
Other Long-Term Liabilities
Reflected on the Registrant's
Balance Sheet under GAAP 152,042,228 90,114,383 59,958,915 1,765,456 203,474
------------ ------------ ----------- ---------- -----------
Total $221,175,161 $111,275,512 $66,424,521 $8,704,330 $34,770,798
============ ============ =========== ========== ===========
The Company's contractual obligations as of March 31, 2005 were evident in
long-term debt obligations, other debt obligations, operating lease obligations
and other long-term liabilities. Long-term debt obligations are comprised of
FHLB advances of $53.5 million. Other debt obligations are comprised of Trust
Preferred Securities of $10.3 million and Notes Payable of $2.8 million. The
operating lease obligation is a lease on the RDSI-South building of $99,600 a
year and the RDSI-North building of $162,000 a year. Other long-term liabilities
are comprised of time deposits of $152,042,228.
ASSET LIABILITY MANAGEMENT
Asset liability management involves developing and monitoring strategies to
maintain sufficient liquidity, maximize net interest income and minimize the
impact that significant fluctuations in market interest rates would have on
earnings. The business of the Company and the composition of its balance sheet
consists of investments in interest-earning assets (primarily loans,
mortgage-backed securities, and securities available for sale) which are
primarily funded by interest-bearing liabilities (deposits and
30
borrowings). With the exception of loans which are originated and held for sale,
all of the financial instruments of the Company are for other than trading
purposes. All of the Company's transactions are denominated in U.S. dollars with
no specific foreign exchange exposure. In addition, the Company has limited
exposure to commodity prices related to agricultural loans. The impact of
changes in foreign exchange rates and commodity prices on interest rates are
assumed to be insignificant. The Company's financial instruments have varying
levels of sensitivity to changes in market interest rates resulting in market
risk. Interest rate risk is the Company's primary market risk exposure; to a
lesser extent, liquidity risk also impacts market risk exposure.
Interest rate risk is the exposure of a banking institution's financial
condition to adverse movements in interest rates. Accepting this risk can be an
important source of profitability and stockholder value; however, excessive
levels of interest rate risk could pose a significant threat to the Company's
earnings and capital base. Accordingly, effective risk management that maintains
interest rate risks at prudent levels is essential to the Company's safety and
soundness.
Evaluating a financial institution's exposure to changes in interest rates
includes assessing both the adequacy of the management process used to control
interest rate risk and the organization's quantitative level of exposure. When
assessing the interest rate risk management process, the Company seeks to ensure
that appropriate policies, procedures, management information systems, and
internal controls are in place to maintain interest rate risks at prudent levels
of consistency and continuity. Evaluating the quantitative level of interest
rate risk exposure requires the Company to assess the existing and potential
future effects of changes in interest rates on its consolidated financial
condition, including capital adequacy, earnings, liquidity, and asset quality
(when appropriate).
The Federal Reserve Board, together with the Office of the Comptroller of the
Currency and the Federal Deposit Insurance Company, adopted a Joint Agency
Policy Statement on interest rate risk effective June 26, 1996. The policy
statement provides guidance to examiners and bankers on sound practices for
managing interest rate risk, and serves as the basis for ongoing evaluation of
the adequacy of interest rate risk management at supervised institutions. The
policy statement also outlines fundamental elements of sound management that
have been identified in prior Federal Reserve guidance and discusses the
importance of these elements in the context of managing interest rate risk.
Specifically, the guidance emphasizes the need for active Board of Director and
senior management oversight and a comprehensive risk management process that
effectively identifies, measures, and controls interest rate risk.
Financial institutions derive their income primarily from the excess of interest
collected over interest paid. The rates of interest an institution earns on its
assets and owes on its liabilities generally are established contractually for a
period of time. Since market interest rates change over time, an institution is
exposed to lower profit margins (or losses) if it cannot adapt to interest rate
changes. For example, assume that an institution's assets carry intermediate or
long term fixed rates and that those assets are funded with short-term
liabilities. If market interest rates rise by the time the short-term
liabilities must be refinanced, the increase in the institution's interest
expense on its liabilities may not be sufficiently offset if assets continue to
earn at the long-term fixed rates. Accordingly, an institution's profits could
decrease on existing assets because the institution will either have lower net
interest income or possibly, net interest expense. Similar risks exist when
assets are subject to contractual interest rate ceilings, or rate sensitive
assets are funded by longer-term, fixed-rate liabilities in a declining rate
environment.
There are several ways an institution can manage interest rate risk including:
1) matching repricing periods for new assets and liabilities, for example, by
shortening terms of new loans or investments; 2) selling existing assets or
repaying certain liabilities; and 3) hedging existing assets, liabilities, or
anticipated transactions. An institution might also invest in more complex
financial instruments intended to hedge or otherwise change interest rate risk.
Interest rate swaps, futures contacts, options on futures
31
contracts, and other such derivative financial instruments can be used for this
purpose. Because these instruments are sensitive to interest rate changes, they
require management's expertise to be effective. The Company has not purchased
derivative financial instruments in the past.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table provides information about the Company's financial
instruments used for purposes other than trading that are sensitive to changes
in interest rates as of March 31, 2005. It does not present when these items may
actually reprice. For loans receivable, securities, and liabilities with
contractual maturities, the table presents principal cash flows and related
weighted-average interest rates by contractual maturities as well as the
Company's historical experience of the impact of interest rate fluctuations on
the prepayment of loans and mortgage backed securities. For core deposits
(demand deposits, interest-bearing checking, savings, and money market deposits)
that have no contractual maturity, the table presents principal cash flows and,
as applicable, related weighted-average interest rates based upon the Company's
historical experience, management's judgment and statistical analysis, as
applicable, concerning their most likely withdrawal behaviors. The current
historical interest rates for core deposits have been assumed to apply for
future periods in this table as the actual interest rates that will need to be
paid to maintain these deposits are not currently known. Weighted average
variable rates are based upon contractual rates existing at the reporting date.
PRINCIPAL/NOTIONAL AMOUNT MATURING OR ASSUMED TO WITHDRAW IN:
(DOLLARS IN THOUSANDS)
First Years
Year 2 - 5 Thereafter Total
--------- --------- ---------- ---------
Comparison of 2005 to 2004:
Total rate-sensitive assets:
At March 31, 2005 $ 129,975 $ 149,958 $ 96,566 $ 376,499
At December 31, 2004 131,266 151,944 93,317 376,527
--------- --------- ---------- ---------
Increase (decrease) $ (1,291) $ (1,986) $ 3,249 $ (28)
Total rate-sensitive liabilities:
At March 31, 2005 $ 146,759 $ 180,553 $ 33,526 $ 360,838
At December 31, 2004 152,986 174,129 33,459 360,574
--------- --------- ---------- ---------
Increase (decrease) $ (6,227) $ 6,424 $ 67 $ 264
The above table reflects expected maturities, not expected repricing. The
contractual maturities adjusted for anticipated prepayments and anticipated
renewals at current interest rates, as shown in the preceding table, are only
part of the Company's interest rate risk profile. Other important factors
include the ratio of rate-sensitive assets to rate sensitive liabilities (which
takes into consideration loan repricing frequency but not when deposits may be
repriced) and the general level and direction of market interest rates. For core
deposits, the repricing frequency is assumed to be longer than when such
deposits actually reprice. For some rate sensitive liabilities, their repricing
frequency is the same as their contractual maturity. For variable rate loans
receivable, repricing frequency can be daily or monthly. For adjustable rate
loans receivable, repricing can be as frequent as annually for loans whose
contractual maturities range from one to thirty years. While increasingly
aggressive local market competition in lending rates has pushed loan rates
lower, the Company's increased reliance on non-core funding sources has
restricted the Company's ability to reduce funding rates in concert with
declines in lending rates.
The Company manages its interest rate risk by the employment of strategies to
assure that desired levels of both interest-earning assets and interest-bearing
liabilities mature or reprice with similar time frames. Such strategies include:
1) loans receivable which are renewed (and repriced) annually, 2) variable rate
loans, 3) certificates of deposit with terms from one month to six years and 4)
securities available for sale which mature at various times primarily from one
through ten years, 5) federal funds borrowings with terms of one day to 90 days,
and 6) Federal Home Loan Bank borrowings with terms of one day to ten years.
32
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
With the participation of the President and Chief Executive Officer (the
principal executive officer) and the Executive Vice President and Chief
Financial Officer (the principal financial officer) of the Company, the
Company's management has evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
quarterly period covered by this Quarterly Report on Form 10-Q. Based on that
evaluation, the Company's President and Chief Executive Officer and Executive
Vice President and Chief Financial Officer have concluded that:
- information required to be disclosed by the Company in this
Quarterly Report on Form 10-Q and other reports which the Company
files or submits under the Exchange Act would be accumulated and
communicated to the Company's management, including its principal
executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure;
- information required to be disclosed by the Company in this
Quarterly Report on Form 10-Q and other reports which the Company
files or submits under the Exchange Act would be recorded,
processed, summarized and reported within the time periods specified
in the SEC's rules and forms; and
- the Company's disclosure controls and procedures are effective as of
the end of the quarterly period covered by this Quarterly Report on
Form 10-Q to ensure that material information relating to the
Company and its consolidated subsidiaries is made known to them,
particularly during the period in which this Quarterly Report on
Form 10-Q is being prepared.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred
during the Company's fiscal quarter ended March 31, 2005, that have materially
affected or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
33
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
a. Not applicable
b. Not applicable
c. The following table provides information regarding repurchases of
the Company's common shares during the three months ended March 31,
2005:
Maximum Number
(or Approximate
Total Number of Dollar Value) of
Shares Purchased as Shares that May Yet
Part of Publicly Be Purchased Under
Total Number of Average Price Announced Plans or the Plans or
Period Shares Purchased (1) Paid per Share Programs Programs
- ------------------ -------------------- -------------- ------------------- --------------------
January 1 thru 1,306 $14.12
January 31, 2005 -- --
February 1 thru 2,049 $14.16
February 28, 2005 -- --
March 1 thru March 2,109 $14.02
31, 2005 -- --
(1) All of the repurchased shares were purchased by Reliance Financial
Services, N.A., an indirect subsidiary of the Company, in its capacity as
the administrator of the Company's Employee Stock Ownership and Savings
Plan.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
I. Annual Meeting of Shareholders - April 21, 2005
a. On April 21, 2005, Rurban Financial Corp. held its Annual Meeting of
Shareholders. At the close of business on the February 22, 2005
record date, 4,568,085 Rurban Financial Corp. common shares were
outstanding and entitled to vote. At the Annual Meeting, 3,624,742
or 79.3% of the outstanding common shares entitle to vote were
represented by proxy or in person.
b. Directors elected at the Annual Meeting for a three year term:
John R. Compo
John Fahl
Robert A. Fawcett, Jr.
Rita A. Kissner
34
Directors whose term of office continued after the Annual Meeting:
Thomas A. Buis
Thomas M. Callan
Richard L. Hardgrove
Eric C. Hench
Kenneth A. Joyce
Steven D. VanDemark
J. Michael Walz, D.D.S.
c. Results of Matters voted upon at the Annual Meeting: Election of
Directors:
Nominee Votes For Votes Withheld
- ---------------------- --------- --------------
John R. Compo 3,437,740 187,002
John Fahl 3,481,883 142,859
Robert A. Fawcett, Jr. 3,464,594 160,148
Rita A. Kissner 3,448,320 176,422
d. Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS
a. Exhibits
31.1 - Rule 13a-14(a)/15d-14(a) Certification (Principal Executive
Officer)
31.2 - Rule 13a-14(a)/15d-14(a) Certification (Principal Financial
Officer)
32.1 - Section 1350 Certification (Principal Executive Officer)
32.2 - Section 1350 Certification (Principal Financial Officer)
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
RURBAN FINANCIAL CORP.
Date: May 12, 2005 By /s/ Kenneth A. Joyce
------------------------
Kenneth A. Joyce
President & Chief
Executive Officer
By /s/ James E. Adams
--------------------------
James E. Adams
Executive Vice President &
Chief Financial Officer
36