Exhibit 99.1

 

 

Rurban Financial Corp. Reports 2012 Second Quarter Results

 

DEFIANCE, Ohio, July 24, 2012 (GlobeNewswire) — Rurban Financial Corp. (NASDAQ: RBNF) (“Rurban” or “the Company”), a diversified financial services company providing full-service community banking, mortgage banking, wealth management and item processing services, today reported earnings for the second quarter and six months ended June 30, 2012.

 

Consolidated earnings for Rurban Financial Corp. include the results of Rurban’s Banking Group, consisting primarily of The State Bank and Trust Company (“State Bank” or “the Bank”), and Rurban's data services subsidiary, Rurbanc Data Services, Inc. (dba “RDSI Banking Systems” or "RDSI"). For the quarter ended June 30, 2012, Rurban reported net income of $1.0 million, or $0.21 per diluted share, compared to net income of $0.78 million, or $0.16 per diluted share, for the quarter ended June 30, 2011, and net income of $0.97 million, or $0.20 per diluted share, for the quarter ended March 31, 2012.

 

For the first six months of 2012, net income was $1.99 million, or $0.41 per common share, compared to $0.79 million, or $0.16 per common share, for the prior-year six month period. Excluding non-recurring items from the second quarter of 2011, including a gain of $1.87 million and a prepayment penalty of $1.08 million, both related to the balance sheet restructuring reported in the June 2011 quarter, as well as a contract buyout penalty paid to RDSI of $0.52 million, core earnings for the second quarter and first six months of 2011 were a loss of $0.09 million, or $(0.02) per share, and a loss of $0.08 million, or $(0.02) per share, respectively.

 

Key items for the 2012 second quarter include:

 

·

Rurban continues to improve profitability, reporting a quarterly ROA of 63 basis points compared to 45 basis points for the last twelve months.

 

·

Noninterest income has benefited from sustained activity in the mortgage market; year-to-date, mortgage banking contributed 40 percent of noninterest income compared to 14 percent for the prior-year six month period.

 

·

Quarterly noninterest expense has stabilized at approximately $6.87 million, or 4.27 percent of average assets. Although the ratio declined by 33 basis points from the year ago quarter primarily as a result of a ten percent staff reduction, operating expenses still represent a major opportunity for profitability improvement.

 

 

·

Portfolio loans grew $14.6 million, or 3.3 percent, over the past twelve months. Loan growth consisted primarily of $10.9 million of commercial real estate loans booked in the most recent quarter.

 

	·	Year over year, nonperforming assets declined by $2.6 million, or 23 percent, to $8.86 million, or 1.40 percent of total assets. Reserve coverage of nonperforming loans at quarter-end was 93 percent compared to 69 percent at June 30, 2011.

·

On a consolidated level, Rurban’s tangible leverage improved by 83 basis points from the prior year second quarter, to 5.21 percent; it still remains a focus of management attention.

 

Mark Klein, President and Chief Executive Officer of Rurban Financial Corp., stated, “It is a pleasure to report another straight-forward quarter of strong operating performance. We hit the million dollar mark for net income this quarter, an event that last transpired exactly three years ago while RDSI was still generating $5 million of revenue per quarter. Although that source of revenue is now greatly diminished, we’ve offset the decline with other sources of revenue and a much more efficiently managed organization.

 

“We are energized and well-positioned to capitalize on our improved efficiencies and commitment to growth; our pipeline has been replenishing each quarter primarily with commercial and residential real estate loans. Although some of our markets are certainly not high growth, the experience of our lenders has prevailed; we grew nearly $12 million of commercial and commercial real estate loans this past quarter, despite tough underwriting standards that have maintained asset quality near the top of our peer group. In addition, our mortgage bankers originated approximately $80 million of residential real estate loans this past quarter, nearly all of which was sold. These two product lines – commercial real estate loans to hold in portfolio and residential mortgages that we originate for sale but continue to service – account for much of our six percent core revenue growth this past year.

 

“Our data services subsidiary, RDSI, continues to advance. Our banking clients are beginning to extend out their renewal contracts for years rather than months, and we are in the process of booking some new business. Although we haven’t retained 100% of our item processing customer base over the past year, the vast majority are still with us, and some have even expanded their relationship. This is a strong signal that clients are recognizing our efforts to stabilize RDSI, and that they have faith in its future.

 

“We have much to be optimistic about. Our bankers are combing the countryside, and the cities, as well, for new business opportunities. We opened a second loan production office in Columbus this past quarter to provide an additional base for our commercial and mortgage bankers. The demand is there, and now we have more lenders to respond effectively to these opportunities.

 

 

“We are pleased with our progress, and it is gratifying to see an improvement in our shareholders’ value. We continue to search for opportunities to grow and become more efficient, and we are becoming increasingly successful in these endeavors across-the-board.”

 

RESULTS OF OPERATIONS

 

Consolidated Revenue

 

Total operating revenue, consisting of net interest income on a fully tax equivalent basis (“FTE”) and noninterest income from operations, was $8.56 million for the second quarter of 2012, up $0.48 million, or 6.0 percent, from the second quarter of 2011, and higher by $0.11 million, or 1.3 percent, from the linked quarter.

 

Net interest income (FTE) for the 2012 second quarter was $5.36 million, which was flat year over year but substantially higher than the previous quarter. Net interest income was positively impacted by the restoration of a more normalized net interest margin (FTE) of 3.81 percent for the second quarter 2012, as compared to 3.60 percent and 3.83 percent for the linked and prior-year second quarters, respectively. Although downward pressure on earning asset yields continues, liability costs are still declining, but to a lesser extent.

 

Noninterest Income

 

Noninterest income was $3.21 million for the second quarter of 2012, a decline of $1.9 million from the $5.1 million reported for the year-ago second quarter and $0.3 million less than the first quarter of 2012. Excluding from 2011 second quarter fee income the nonrecurring gain of $1.87 million from the sale of securities and the $0.52 million prepayment penalty received by RDSI, noninterest income from operations for the second quarter of 2012 increased by $0.5 million, or 18.5 percent; higher net revenue from mortgage banking was the primary growth factor. Compared to the linked quarter, a $0.49 million swing in net loan servicing fees accounted for the majority of the negative variance.

 

Data Services

($’s in thousands)		Jun. 2012				Mar. 2012				Dec. 2011				Sep. 2011				Jun. 2011
Data Processing & Network Services		$	194			$	177			$	320			$	292			$	302
Payment Solutions			633				708				720				784				823
Contract Buyout			-				551				-				-				519
RDSI Gross Revenue			827				1,436				1,040				1,076				1,644
Less: Intercompany			(251	)			(793	)			(369	)			(333	)			(340	)
Nonrecurring																			(519	)
Net Data Services Fees		$	576			$	643			$	671			$	743			$	785

 

Gross revenue generated by RDSI, including services provided to Rurban/State Bank, was $0.83 million for the second quarter of 2012. Excluding Rurban/State Bank intercompany transactions from both quarters and the one-time prepayment penalty from the 2011 quarter, net data services fees were $0.58 million for the current quarter compared to $0.79 million for the year-ago second quarter, a decline of $0.21 million. RDSI currently has contracts with 25 item processing clients, and is in the process of adding two new accounts.

 

 

Mortgage Banking 

		Three Months Ended
($’s in thousands)		Jun. 2012				Mar. 2012				Dec. 2011				Sep. 2011				Jun. 2011
Mortgage originations		$	79,901			$	68,331			$	85,114			$	68,989			$	38,099
Mortgage sales			75,227				64,212				81,046				56,438				30,017
Mortgage servicing portfolio			459,380				422,802				402,062				370,033				351,888
Mortgage servicing rights			3,359				3,359				2,820				2,709				3,294
Mortgage servicing revenue:
Loan servicing fees			274				259				242				226				217
OMSR amortization			(254	)			(349	)			(329	)			(251	)			(94	)
Net administrative fees			20				(90	)			(87	)			(25	)			123
OMSR valuation adjustment			(185	)			419				(221	)			(771	)			(127	)
Net loan servicing fees			(165	)			329				(308	)			(796	)			(4	)
Gain on sale of mortgages			1,395				1,181				1,529				1,101				565
Mortgage banking revenue, net		$	1,230			$	1,510			$	1,221			$	305			$	561

 

Mortgage loan originations continued to be exceptionally strong for the second quarter of 2012: $79.9 million, up $41.8 million, or 110 percent, from the $38.1 million generated in the second quarter of 2011, and higher by $11.6 million than the previous quarter. Sales into the secondary market were also exceptionally strong: $75.2 million, up $45.2 million, or 151 percent, above the $30.0 million sold in the year ago-quarter.

 

Net mortgage banking income, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $1.23 million for the second quarter of 2012 compared to $1.51 million for the linked quarter and $0.56 million for the year-ago second quarter. Year-to-date, the net mortgage servicing valuation adjustment was $0.23 million; this quarter’s negative valuation adjustment partially offset the large gain of the previous quarter. The mortgage servicing portfolio at the end of the second quarter 2012 was $459.4 million, up $107.5 million, or 30.5 percent, from 2011 second quarter-end.

 

The remainder of noninterest income was $1.40 million for the second quarter of 2012, derived from wealth management and customer service fees, plus other income primarily from bank-owned life insurance; these fees were virtually unchanged from the linked and year-ago quarters. These areas have provided ongoing stability to Rurban’s noninterest income stream. Rurban remains highly diversified for a company of its asset size. Core noninterest income contributed 37.5 percent of second quarter 2012 operating revenue; this compares to a 33.5 percent contribution for second quarter 2011.

 

Loan Loss Provision

 

The loan loss provision was $0.20 million for the second quarter of 2012, a decline of $0.69 million from the second quarter of 2011, and lower by $0.25 million from the linked quarter. The decreased provision expense reflects a 24 percent decline in nonperforming loans over the past twelve months, and an 82 percent decline in net charge-offs. At second quarter-end 2012, the loan loss reserve was $6.62 million, or 1.46 percent of total loans, providing 93 percent coverage of nonperforming loans at quarter-end; this compares to reserve coverage of 69 percent at second quarter-end 2011. Nonperforming loans declined by $2.23 million year over year, while net charge-offs declined by $0.86 million.

 

 

Noninterest Expense

 

For the second quarter of 2012, noninterest expense was $6.87 million compared to $6.67 million and $8.40 million for the linked and year-ago quarters, respectively. Excluding the $1.1 million prepayment penalty reported for the 2011 second quarter, noninterest expense from operations declined by $0.44 million, or 6.1 percent. Although expenses were reduced in virtually every category with the important exception of compensation expense, the largest improvement was in the professional fee category, which accounted for approximately 50 percent of the expense decline year over year. Excluding $0.55 million and $0.15 million of commissions paid primarily to State Bank’s mortgage bankers in the second quarters of 2012 and 2011, respectively, salary expense declined 8.4 percent, consistent with a decline of 24 FTE staff, or 10.5 percent, over the past twelve-month period. Reflecting this improvement in second quarter 2012 operating revenue and expense, the efficiency ratio declined to 77.7 percent, from 86.3 percent for the year-ago quarter.

 

Balance Sheet

 

Total assets as of June 30, 2012 were $632.5 million, an increase of $14.5 million, or 2.3 percent, from June 30, 2011. Total deposits as of second quarter-end 2012 were $518.7 million, higher by $22.8 million than at second quarter-end 2011. Over the past twelve months, the deposit mix shifted further toward lower-cost non-maturity deposits, which now comprise 60 percent of total deposits compared to 57 percent for the year-ago quarter. As a result of the improved mix combined with a continuation of declining interest rates, the cost of deposits declined from 79 basis points to 58 basis points. The balance sheet deleveraging completed in June 2011 further improved the liability mix and improved funding costs; the transaction reduced the average balance of higher-cost repos and FHLB advances from $59.1 million for the June 2011 quarter to $31.1 million for the 2012 June quarter, and reduced the weighted average interest rate from 3.09 percent to 1.72 percent for the current June quarter.

 

Loan Portfolio

 

($ in Thousands)		Jun. 2012				Mar. 2012				Dec. 2011				Sep. 2011				Jun. 2011				Variance YOY
Commercial & Industrial (C&I)		$	75,964			$	78,450			$	78,112			$	77,269			$	74,613			$	1,351
% of Total			16.8	%			17.8	%			17.7	%			17.6	%			17.0	%			1.8	%
Commercial Real Estate			199,918				188,984				187,829				186,411				190,625				9,293
% of Total			44.2	%			43.0	%			42.4	%			42.4	%			43.6	%			4.9	%
Agriculture			41,093				37,741				38,361				38,601				38,453				2,640
% of Total			9.1	%			8.6	%			8.7	%			8.8	%			8.8	%			6.9	%
Residential Real Estate			85,046				84,771				87,656				85,399				82,782				2,264
% of Total			18.8	%			19.3	%			19.8	%			19.5	%			18.9	%			2.7	%
Consumer & Other			50,089				49,775				50,596				51,246				51,078				(989	)
% of Total			11.1	%			11.3	%			11.4	%			11.7	%			11.7	%			(1.9	)%
Total Loans		$	452,110			$	439,721			$	442,554			$	438,926			$	437,551			$	14,559
																							3.3	%

 

  

Total loans held for investment (“HFI”) were $452.1 million at June 30, 2012 compared to $437.6 million for the prior-year quarter-end, up $14.6 million, or 3.3 percent. Commercial real estate (“CRE”) loans accounted for 64 percent of total loan growth over the past twelve-month period, up $9.3 million, or 4.9 percent. However, the majority of this CRE loan growth occurred during the most recent quarter; CRE outstandings increased by $10.9 million since March 31, 2012 (up 5.8 percent) to $199.9 million at June 30, 2012. CRE loans are the largest loan category, comprising 44 percent of State Bank’s loan portfolio. Residential real estate and C&I loans comprised the next largest loan categories, at 18.8 percent and 16.8 percent, respectively, as of June 30, 2012.

 

Asset Quality

 

Summary of Nonperforming Assets

 

($ in Thousands)

 

Nonaccruing Loan Category		Jun. 2012				Mar. 2012				Dec. 2011				Sep. 2011				Jun. 2011
Commercial & Industrial (C&I)		$	1,467			$	2,021			$	2,393			$	2,466			$	2,507
% of Total C&I loans			1.93	%			2.58	%			3.06	%			3.19	%			3.36	%
Commercial Real Estate			1,345				1,481				1,456				2,210				2,620
% of Total CRE loans			0.67	%			0.78	%			0.78	%			1.19	%			1.37	%
Agriculture			-				113				-				87				87
% of Total Ag loans			-				0.30	%			-				0.23	%			0.23	%
Residential Real Estate			1,958				1,840				2,471				2,107				2,436
% of Total Res. RE loans			2.30	%			2.17	%			2.82	%			2.47	%			2.94	%
Consumer & Other			545				1,056				580				461				423
% of Consumer & Other loans			1.09	%			2.12	%			1.15	%			0.90	%			0.83	%
Total Nonaccruing Loans			5,315				6,511				6,900				7,331				8,073
% of Total Loans			1.18	%			1.48	%			1.56	%			1.67	%			1.85	%
Accruing Restructured Loans			1,837				1,593				1,334				1,311				1,312
Total Nonperforming Loans		$	7,152			$	8,104			$	8,234			$	8,642			$	9,385
% of Total Loans			1.58	%			1.84	%			1.86	%			1.97	%			2.14	%
OREO & Repossessed Vehicles			1,708				1,807				1,830				1,970				2,056
Total Nonperforming Assets		$	8,860			$	9,911			$	10,064			$	10,612			$	11,441
% of Total Assets			1.40	%			1.54	%			1.60	%			1.70	%			1.85	%

 

Nonaccruing loans were $5.3 million as of June 30, 2012, a decline of $2.8 million, or 34 percent from the year-earlier level. The greatest improvement was reflected in the CRE portfolio, where nonaccrual loans declined over the past twelve months by $1.3 million, or 49 percent, to $1.3 million as of June 30, 2012. Currently, Rurban has only two nonperforming relationships that exceed $1.0 million; together, they account for $2.3 million, or 26 percent, of nonperforming assets.

 

 

NONPERFORMING ASSET RECONCILIATION

 

($ in Thousands)		Jun. 2012				Mar. 2012				Dec. 2011				Sep. 2011				Jun. 2011
Beginning Balance		$	9,911			$	10,064			$	10,612			$	11,441			$	14,274
Additions			1,209				906				1,193				432				289
Returns to performing status			(306	)			(419	)			(169	)			(206	)			(352	)
Principal payments			(1,773	)			(402	)			(375	)			(281	)			(844	)
Sale of OREO/OAO			(147	)			(23	)			(358	)			(246	)			(416	)
Loan charge-offs			(220	)			(474	)			(648	)			(527	)			(1,593	)
Valuation write-downs			(58	)			-				(214	)			-				-
Restructured Loan Activity			244				259				23				(1	)			83
Net Change			(1,051	)			(153	)			(548	)			(829	)			(2,833	)
Total		$	8,860			$	9,911			$	10,064			$	10,612			$	11,441

 

Capitalization

 

All capital ratios continue to improve; however, capital adequacy remains an important focus of management attention. Tangible leverage increased 83 basis points over the past twelve months, and now stands at 5.21 percent. All bank regulatory ratios remain in excess of “well-capitalized” levels, and continue to improve, as do capital ratios at the holding company level. At June 30, 2012, State Bank’s Total Risk-Based Capital was $56.0 million, $19.3 million above the well-capitalized level; the Total Risk-based Capital Ratio was 12.2 percent. As of June 30, 2012, Rurban had 4,861,779 common shares outstanding.

 

About Rurban Financial Corp.

 

Based in Defiance, Ohio, Rurban Financial Corp. is a financial services holding company with two wholly-owned operating subsidiaries: The State Bank and Trust Company (State Bank) and RDSI Banking Systems (RDSI). State Bank operates through 18 banking centers in seven Northwestern Ohio counties, and one center in Fort Wayne, Indiana; and two loan production offices in Columbus, Ohio and one loan production office in Angola, Indiana. The Bank offers a full range of financial services for consumers and small businesses, including wealth management, mortgage banking, commercial and agricultural lending. RDSI provides item processing services to community banks located in the Midwest. Rurban’s common stock is listed on the NASDAQ Global Market under the symbol RBNF.

 

Forward-Looking Statements

 

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. 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 except as required by law. All subsequent written and oral forward-looking statements attributable to Rurban or any person acting on its behalf are qualified by these cautionary statements.

 

 

Non-GAAP Financial Measures

 

In addition to results presented in accordance with GAAP, this release contains certain non-GAAP financial measures. Management believes that providing certain non-GAAP financial measures provides investors with information useful in understanding Rurban’s financial performance, its performance trends and financial position. Specifically, Rurban provides measures based on “core operating earnings,” which excludes merger, integration and restructuring expenses that are not reflective of on-going operations or not expected to recur. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results.

 

Contact Information:

Anthony V. Cosentino, CFO

419-785-3663

  

 

RURBAN FINANCIAL CORP. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Unaudited)

 

		June				March				December				September				June
($ in Thousands)		2012				2012				2011				2011				2011
ASSETS
Cash and due from banks		$	14,636			$	29,602			$	14,846			$	13,764			$	10,486
Investment Securities:
Securities available for sale, at fair value			102,537				110,603				111,978				104,615				104,770
Other securities - FRB and FHLB Stock			3,748				3,685				3,685				3,748				3,748
Total investment securities			106,285				114,288				115,663				108,363				108,518
Loans held for sale			10,595				11,384				5,238				10,590				7,211
Loans, net of unearned income			452,110				439,721				442,554				438,926				437,551
Allowance for loan losses			(6,618	)			(6,609	)			(6,529	)			(6,235	)			(6,444	)
Net loans			445,492				433,112				436,025				432,691				431,107
Premises and equipment, net			13,190				13,282				13,773				14,120				14,359
Purchased software			355				386				159				805				875
Cash surrender value of life insurance			12,401				12,312				12,224				12,134				12,042
Goodwill			16,353				16,353				16,353				16,734				16,734
Core deposits and other intangibles			1,534				1,691				1,849				2,006				2,191
Foreclosed assets held for sale, net			1,708				1,807				1,830				1,970				2,056
Mortgage servicing rights			3,359				3,359				2,820				2,709				3,294
Accrued interest receivable			1,597				1,802				1,635				2,061				1,959
Other assets			5,026				5,598				6,249				5,846				7,229
Total assets		$	632,531			$	644,976			$	628,664			$	623,793			$	618,061
LIABILITIES AND EQUITY
Deposits
Non interest bearing demand		$	68,918			$	71,077			$	65,963			$	62,080			$	59,651
Interest bearing demand			109,268				118,898				107,446				103,229				101,972
Savings			53,777				52,599				49,665				48,146				48,771
Money market			81,114				82,799				74,244				79,163				72,823
Time deposits			205,584				210,119				221,447				221,731				212,653
Total deposits			518,661				535,492				518,765				514,349				495,870
Notes payable			2,249				2,519				2,788				2,865				3,142
Advances from Federal Home Loan Bank			17,500				12,611				12,776				12,940				24,602
Fed funds purchased			-				-				-				-				2,000
Repurchase agreements			15,824				17,771				18,779				18,778				19,867
Trust preferred securities			20,620				20,620				20,620				20,620				20,620
Accrued interest payable			3,836				3,556				2,954				2,704				2,392
Other liabilities			3,567				3,381				4,050				3,985				3,554
Total liabilities			582,257				595,950				580,732				576,241				572,047
Equity
Preferred stock			-				-				-				-				-
Common stock			12,569				12,569				12,569				12,569				12,569
Additional paid-in capital			15,350				15,338				15,323				15,302				15,280
Retained earnings			22,452				21,438				20,466				20,192				19,590
Accumulated other comprehensive income			1,672				1,450				1,343				1,258				344
Treasury stock			(1,769	)			(1,769	)			(1,769	)			(1,769	)			(1,769	)
Total equity			50,274				49,026				47,932				47,552				46,014
Total liabilities and equity		$	632,531			$	644,976			$	628,664			$	623,793			$	618,061

 

 

RURBAN FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATION - (Unaudited)

  

		Three Months Ended																				Six Months Ended
($ in Thousands)		June				March				December				September				June				June				June
		2012				2012				2011				2011				2011				2012				2011
Interest income
Loans
Taxable		$	6,037			$	5,928			$	6,171			$	6,251			$	6,170			$	11,965			$	12,022
Nontaxable			24				23				24				24				15				47				26
Securities
Taxable			403				399				387				446				566				802				1,177
Nontaxable			146				147				170				172				302				293				638
Other			-				-				-				-				-				-				-
Total interest income			6,610				6,497				6,752				6,893				7,053				13,107				13,863
Interest expense
Deposits			768				854				946				976				1,010				1,622				2,059
Other borrowings			(2	)			34				22				25				24				32				49
Repurchase Agreements			60				68				70				72				344				128				770
Federal Home Loan Bank advances			75				74				77				79				113				149				246
Trust preferred securities			441				592				358				356				349				1,033				693
Total interest expense			1,342				1,622				1,473				1,508				1,840				2,964				3,817
Net interest income			5,268				4,875				5,279				5,385				5,213				10,143				10,046
Provision for loan losses			200				450				299				297				898				650				1,397
Net interest income after provision for loan losses			5,068				4,425				4,980				5,088				4,315				9,493				8,649
Noninterest income
Data service fees			576				643				671				743				1,304				1,219				2,216
Trust fees			607				642				623				629				669				1,249				1,364
Customer service fees			668				631				647				664				640				1,299				1,221
Gain on sale of mortgage  and OMSR's			1,395				1,181				1,529				1,101				565				2,576				990
Mortgage loan servicing fees, net			(165	)			329				(308	)			(796	)			(4	)			164				135
Gain on sale of non-mortgage loans			-				-				127				-				38				-				81
Net gain (loss) on sales of securities			-				-				-				-				1,871				-				1,871
Loss on sale or disposal of assets			(50	)			(56	)			(46	)			(27	)			(160	)			(106	)			(260	)
Other income			177				211				180				161				174				388				342
Total non-interest income			3,208				3,581				3,423				2,475				5,097				6,789				7,960
Noninterest expense
Salaries and employee benefits			3,597				3,499				3,488				3,583				3,573				7,096				7,103
Net occupancy expense			528				548				531				568				517				1,076				1,101
Equipment expense			712				711				709				690				718				1,423				1,429
FDIC insurance expense			223				214				191				145				254				437				572
Fixed asset and software impairment			-				-				609				-				-				-				-
Data processing fees			121				113				131				158				192				234				336
Professional fees			390				385				493				377				577				775				1,051
Marketing expense			103				90				93				89				90				193				146
Printing and office supplies			67				78				52				86				119				145				195
Telephone and communication			139				144				139				141				143				283				300
Postage and delivery expense			200				229				235				260				259				429				603
State, local and other taxes			118				120				77				103				134				238				278
Employee expense			119				106				113				143				172				225				268
Goodwill Impairment			-				-				381				-				-				-				-
Other intangible amortization expense			158				157				157				185				197				315				394
OREO Impairment			58				-				214				-				-				58				-
Other expenses			338				282				359				295				1,453				620				1,682
Total non-interest expense			6,871				6,676				7,972				6,823				8,398				13,547				15,458
Income before income tax expense			1,405				1,330				431				740				1,014				2,735				1,151
Income tax expense			391				358				157				137				237				749				363
Net income		$	1,014				972			$	274			$	603			$	777			$	1,986			$	788
Common share data:
Basic earnings per common share		$	0.21				0.20			$	0.06			$	0.12			$	0.16			$	0.41			$	0.16
Diluted earnings per common share		$	0.21				0.20			$	0.06			$	0.12			$	0.16			$	0.41			$	0.16
Average shares outstanding:
Basic:			4,862				4,862				4,862				4,862				4,862				4,862				4,862
Diluted:			4,862				4,862				4,862				4,862				4,862				4,862				4,862

 

 

RURBAN FINANCIAL CORP.

CONSOLIDATED FINANCIAL HIGHLIGHTS - (Unaudited)

 

($ in thousands except per share data)		Three Months Ended																				Six Months Ended
		June				March				December				September				June				June				June
SUMMARY OF OPERATIONS		2012				2012				2011				2011				2011				2012				2011
Net interest income		$	5,268				4,875				5,279				5,385				5,213				10,143				10,046
Tax-equivalent adjustment		$	88				88				100				101				163				175				342
Tax-equivalent net interest income (core)		$	5,356				4,963				5,379				5,486				5,376				10,318				10,388
Provision for loan loss		$	200				450				299				297				898				650				1,397
Noninterest income		$	3,208				3,581				3,423				2,475				5,097				6,789				7,960
Less: Non core items		$	-				(90	)			-				-				(2,390	)			(90	)			(2,390	)
Core noninterest income		$	3,208				3,491				3,423				2,475				2,707				6,699				5,569
Total revenue, tax-equivalent		$	8,564				8,544				8,802				7,961				10,473				17,107				18,348
Core revenue, tax-equivalent		$	8,564				8,454				8,802				7,961				8,083				17,017				15,957
Noninterest expense		$	6,871				6,676				7,972				6,823				8,398				13,547				15,458
Less: Non core items		$	-				-				990				-				1,083				-				1,083
Core noninterest expense		$	6,871				6,676				6,982				6,823				7,315				13,547				14,375
Pre provision pretax income (loss)		$	1,605				1,780				730				1,037				1,912				3,385				2,548
Core pre provision pretax income		$	1,605				1,690				1,720				1,037				604				3,295				1,240
Pretax income (loss)		$	1,405				1,330				431				740				1,013				2,735				1,151
Net income (loss)		$	1,014				972				274				603				777				1,986				788
Core earnings (loss) after tax		$	1,014				913				927				603				(86	)			1,927				(75	)
PER SHARE INFORMATION:
Basic & diluted earnings		$	0.21				0.20				0.06				0.12				0.16				0.41				0.16
Core earnings		$	0.21				0.19				0.19				0.12				(0.02	)			0.40				(0.02	)
Book value per common share		$	10.34				10.08				9.86				9.78				9.46				10.34				9.46
PERFORMANCE RATIOS:
Return on average assets			0.63	%			0.61	%			0.17	%			0.38	%			0.48	%			0.62	%			0.24	%
Core return on average assets			0.63	%			0.57	%			0.58	%			0.38	%			(0.05	)%			0.60	%			(0.02	)%
Return on average common equity			8.20	%			8.04	%			2.33	%			5.12	%			6.66	%			8.12	%			3.39	%
Core return on avg. tangible common equity			13.01	%			12.18	%			13.21	%			8.80	%			(1.29	)%			12.47	%			(0.55	)%
Earning asset yield			4.76	%			4.77	%			4.93	%			5.07	%			5.14	%			4.77	%			5.05	%
Cost of interest bearing liabilities			1.05	%			1.28	%			1.15	%			1.19	%			1.39	%			1.16	%			1.43	%
Core efficiency ratio			77.66	%			76.17	%			74.80	%			83.05	%			86.30	%			77.01	%			87.61	%
Core noninterest expense/average assets			4.27	%			4.20	%			4.39	%			4.35	%			4.51	%			4.23	%			4.39	%
Core noninterest income/operating revenue			37.46	%			40.86	%			38.89	%			31.09	%			25.84	%			39.16	%			30.35	%
Net interest margin			3.75	%			3.53	%			3.80	%			3.90	%			3.71	%			3.64	%			3.57	%
Tax equivalent effect			0.06	%			0.07	%			0.07	%			0.08	%			0.12	%			0.06	%			0.12	%
Net interest margin - fully tax equivalent basis			3.81	%			3.60	%			3.87	%			3.98	%			3.83	%			3.70	%			3.69	%
ASSET QUALITY RATIOS:
Gross charge-offs		$	252				474				648				527				1,593				726				2,232
Recoveries		$	62				104				642				21				545				166				563
Net charge-offs		$	190				370				6				506				1,048				560				1,669
Nonaccruing loans/total loans			1.18	%			1.48	%			1.56	%			1.67	%			1.85	%			1.18	%			1.85	%
Nonperforming loans/total loans			1.58	%			1.84	%			1.86	%			1.97	%			2.14	%			1.58	%			2.14	%
Nonaccruing assets/ loans & OREO			1.55	%			1.88	%			1.96	%			2.11	%			2.30	%			1.55	%			2.30	%
Nonperforming assets/total assets			1.40	%			1.54	%			1.60	%			1.70	%			1.85	%			1.40	%			1.85	%
Allowance for loan loss/nonperforming loans			92.5	%			81.6	%			79.3	%			72.1	%			68.7	%			92.5	%			68.7	%
Allowance for loan loss/total loans			1.46	%			1.50	%			1.48	%			1.42	%			1.47	%			1.46	%			1.47	%
Net loan charge-offs/average loans (ann.)			0.17	%			0.34	%			0.01	%			0.46	%			0.96	%			0.25	%			0.79	%
Loan loss provision/net charge-offs			105.22	%			121.52	%			5243.77	%			58.69	%			85.74	%			115.99	%			83.73	%
CAPITAL & LIQUDITY RATIOS:
Loans/Deposits			87.17	%			82.12	%			85.31	%			85.34	%			88.24	%			87.17	%			88.24	%
Equity/Assets			7.95	%			7.60	%			7.62	%			7.62	%			7.44	%			7.95	%			7.44	%
Tangible equity/Tangible assets			5.21	%			4.88	%			4.85	%			4.63	%			4.38	%			5.21	%			4.38	%
END OF PERIOD BALANCES
Total loans		$	452,110				439,721				442,554				438,926				437,551				452,110				437,551
Total assets		$	632,531				644,976				628,664				623,793				618,061				632,531				618,061
Deposits		$	518,661				535,492				518,765				514,349				495,870				518,661				495,870
Stockholders equity		$	50,274				49,026				47,932				47,552				46,014				50,274				46,014
Intangibles		$	18,242				18,430				18,361				19,545				19,800				18,242				19,800
Tangible equity		$	32,032				30,596				29,571				28,007				26,214				32,032				26,214
Full-time equivalent employees			204				203				210				215				228				204				228
AVERAGE BALANCES
Total loans		$	454,354				436,384				437,020				437,744				434,700				448,642				422,512
Total earning assets		$	562,169				552,016				556,004				551,744				561,353				557,371				562,386
Total assets		$	643,859				635,849				636,932				627,291				648,681				639,926				655,233
Deposits		$	527,992				523,193				522,472				512,190				510,591				525,313				515,270
Stockholders equity		$	49,464				48,377				47,035				47,087				46,629				48,946				46,452
Tangible equity		$	31,165				29,981				28,082				27,414				26,694				30,889				27,323

 

 

RURBAN FINANCIAL CORP.

Rate Volume Analysis - (Unaudited)

For the Three and Six Months Ended June 30, 2012 and 2011

 

($ in Thousands)		Three Months Ended June 30, 2012												Three Months Ended June 30, 2011
		Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate
Assets
Taxable securities		$	93,458				403				1.73	%		$	100,559				566				2.25	%
Non-taxable securities			14,357				221				6.16	%			26,094				457				7.01	%
Federal funds sold			-				-				N/A				-				-				N/A
Loans, net			454,354				6,074				5.35	%			434,700				6,193				5.70	%
Total earning assets		$	562,169				6,698				4.77	%		$	561,353				7,216				5.14	%
Cash and due from banks			24,109												28,732
Allowance for loan losses			(6,368	)											(6,665	)
Premises and equipment			15,119												16,501
Other assets			48,830												48,760
Total assets		$	643,859											$	648,681
Liabilities
Savings and interest-bearing demand		$	250,496				52				0.08	%		$	233,437				92				0.16	%
Time deposits			208,205				716				1.37	%			214,108				918				1.71	%
Repurchase agreements			17,957				60				1.34	%			41,409				344				3.33	%
Advances from FHLB			13,134				74				2.25	%			17,738				113				2.56	%
Junior subordinated debentures			20,620				421				8.17	%			20,620				349				6.77	%
Notes payable & other borrowed funds			2,178				19				3.52	%			1,498				24				6.53	%
Total interest-bearing liabilities		$	512,591				1,342				1.05	%		$	528,810				1,840				1.39	%
Non interest-bearing demand			69,291												63,046
Other liabilities			12,514												10,196
Total liabilities			594,395												602,052
Equity		$	49,464											$	46,629
Total liabilities and equity		$	643,859											$	648,681
Net interest income (tax equivalent basis)						$	5,356											$	5,376
Net interest income as a percent of average interest-earning assets											3.81	%											3.83	%

 

		Six Months Ended June 30, 2012												Six Months Ended June 30, 2011
		Average								Average				Average								Average
		Balance				Interest				Rate				Balance				Interest				Rate
Assets
Taxable securities		$	89,234				802				1.80	%		$	103,189				1,177				2.28	%
Non-taxable securities			19,495				444				4.56	%			27,765				966				6.96	%
Federal funds sold			-				-				N/A				-				-				N/A
Loans, net			448,642				12,035				5.37	%			431,431				12,063				5.59	%
Total earning assets		$	557,371				13,282				4.77	%		$	562,386				14,205				5.05	%
Cash and due from banks			25,793												33,389
Allowance for loan losses			(6,405	)											(6,739	)
Premises and equipment			15,336												16,740
Other assets			47,831												49,456
Total assets		$	639,926											$	655,233
Liabilities
Savings and interest-bearing demand		$	245,623				120				0.10	%		$	237,167				209				0.18	%
Time deposits			211,445				1,502				1.42	%			214,122				1,850				1.73	%
Repurchase agreements			17,543				128				1.46	%			44,146				770				3.49	%
Advances from FHLB			12,901				149				2.31	%			17,479				246				2.81	%
Junior subordinated debentures			20,620				1,033				10.02	%			20,620				693				6.72	%
Notes payable & other borrowed funds			2,670				32				2.43	%			1,531				49				6.40	%
Total interest-bearing liabilities		$	510,803				2,964				1.16	%		$	535,065				3,817				1.43	%
Non interest-bearing demand			68,245												63,981
Other liabilities			11,932												9,734
Total liabilities			590,979												608,780
Equity		$	48,946											$	46,452
Total liabilities and equity		$	639,926											$	655,233
Net interest income (tax equivalent basis)						$	10,318											$	10,389
Net interest income as a percent of average interest-earning assets											3.70	%											3.69	%

 

 

Rurban Financial Corp.

Segment Reporting - (Unaudited)

Three Months Ended June 30, 2012

 

($ in Thousands)		Banking				Parent  Company and  Other				Total Banking,  Parent and Other				Data Services				Elimination Entries				Rurban Financial Corp.
Income Statement Measures
Interest income		$	6,693				-				6,693				-				(83	)			6,610
Interest expense			902				421				1,323				69				(50	)			1,342
Net interest income			5,791				(421	)			5,370				(69	)			(33	)			5,268
Provision for loan loss			200				-				200				-				-				200
Non-interest income			2,741				70				2,811				827				(430	)			3,208
Non-interest expense			6,083				370				6,453				841				(423	)			6,871
Net income - QTD		$	1,579				(471	)			1,108				(55	)			(39	)			1,014
Performance Measures
Average  assets - QTD		$	636,198				-				641,043				2,815				-				643,859
Return on average assets			0.99	%			-				0.69	%			-7.81	%			-				0.63	%
Average equity - QTD		$	70,342				-				49,464				(1,667	)			-				49,464
Return on average equity			8.98	%			-				8.96	%			-				-				8.20	%
Average loans - QTD		$	454,956				2,000				456,956				-				(2,602	)			454,354
Average deposits - QTD		$	529,346				-				529,346				-				(1,354	)			527,992

 

Rurban Financial Corp.

Segment Reporting - (Unaudited)

Six Months Ended June 30, 2012

 

		Banking				Parent Company and Other				Total Banking, Parent and  Other				Data Services				Elimination Entries				Rurban Financial Corp.
Income Statement Measures
Interest income		$	13,190				-				13,190				-				(83	)			13,107
Interest expense			1,899				1,033				2,932				82				(50	)			2,964
Net interest income			11,291				(1,033	)			10,258				(82	)			(33	)			10,143
Provision for loan loss			650				-				650				-				-				650
Non-interest income			5,785				139				5,924				2,263				(1,399	)			6,789
Non-interest expense			12,530				664				13,194				1,725				(1,372	)			13,547
Net income - YTD		$	2,763				(1,019	)			1,744				301				(59	)			1,986
Performance Measures
Average  assets - YTD		$	632,434				-				636,851				3,075								639,926
Return on average assets			0.87	%			-				0.37	%			13.05	%			-				0.62	%
Average equity - YTD		$	66,851				-				48,946				(1,758	)			-				48,946
Return on average equity			8.27	%			-				4.75	%			-				-				8.12	%
Average loans - YTD		$	449,170				2,000				451,170				-				(2,528	)			448,642
Average deposits - YTD		$	526,937				-				526,937				-				(1,624	)			525,313

 

 

RURBAN FINANCIAL CORP.

SUMMARY OF NONPERFORMING ASSETS

 

($ in Thousands)		June				March				December				September				June
		2012				2012				2011				2011				2011
Commercial & industrial		$	1,467				2,021				2,393				2,466				2,507
Commercial real estate			1,345				1,481				1,456				2,210				2,620
Agricultural			-				113				-				87				87
Residential real estate			1,958				1,840				2,471				2,107				2,436
Home Equity Line of Credit (HELOC)			540				1,044				562				440				373
Consumer			5				12				18				21				50
Leasing			-				-				-				-				-
Total nonaccruing loans (1)		$	5,315				6,511				6,900				7,331				8,073
Other real estate owned (OREO) &
Repossessed vehicles		$	1,708				1,807				1,830				1,970				2,056
Total nonaccruing assets		$	7,023				8,318				8,730				9,301				10,129
Total allowance for loan losses		$	6,618				6,609				6,529				6,235				6,444
Accruing restructured loans (TDR's) (2)		$	1,837				1,593				1,334				1,311				1,312
Total nonperforming loans (nonaccruing loans & TDR's)		$	7,152				8,104				8,234				8,642				9,385
Total nonperforming assets		$	8,860				9,911				10,064				10,612				11,441

 

(1) Includes $1.83 million of restructured loans on nonaccruing status at June 30, 2012. There were no loans past due in excess of 90 days still accruing interest.

 

(2) Accruing restructured loans at June 30, 2012 consists primarily of residential and commercial real estate loans that have been modified and are performing in accordance with those modified terms.

 

		June				March				December				September				June
		2012				2012				2011				2011				2011
30-59 days past due		$	1,385				271				1,002				573				1,121
60-89 days past due		$	778				294				978				146				248
90 + days past due		$	2,787				4,926				5,064				6,052				6,809
Total delinquent loans		$	4,950				5,491				7,044				6,771				8,178

 

RURBAN FINANCIAL CORP.

TOTAL LOAN BALANCES

 

($ in Thousands)		June				March				December				September				June
		2012				2012				2011				2011				2011
Commercial & industrial			75,757				78,450				78,112				77,269				74,613
Commercial real estate			199,918				188,984				187,829				186,411				190,625
Agricultural			41,093				37,741				38,361				38,601				38,453
Residential real estate			85,046				84,771				87,656				85,399				82,782
Home Equity Line of Credit (HELOC)			39,983				40,435				41,704				41,710				41,675
Consumer			10,106				9,133				8,676				9,259				9,173
Leasing			207				207				216				277				230
Total loans			452,110				439,721				442,554				438,926				437,551
Loans held for sale			10,595				11,384				5,238				10,590				7,211

 

 

RURBAN FINANCIAL CORP.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

 

		Three Months Ended																				Six Months Ended
($ in Thousands)		June				March				December				September				June				June				June
		2012				2012				2011				2011				2011				2012				2011
GAAP Earnings		$	1,014				972				274				603				777				1,986				788
Realized securities gains (1)			-				-				-				-				(1,871	)			-				(1,871	)
Prepayment penalties (1)			-				-				-				-				1,083				-				1,083
Hardware write-offs (2)			-				-				609				-				-				-				-
Contract buyouts (2)			-				(90	)			-				-				(519	)			(90	)			(519	)
Writedown of goodwill and other intangibles (2)			-				-				381				-				-				-				-
Total non-core Items			-				(90	)			990				-				(1,307	)			(90	)			(1,307	)
Applicable income tax effect on non-core Items			-				31				(336	)			-				445				31				445
After-tax non core Items			-				(59	)			653				-				(863	)			(59	)			(863	)
Core recurring net income			1,014				913				927				603				(86	)			1,927				(75	)

 

(1) State Bank & Trust

(2) RDSI

 

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

 

		June				March				December				September				June				June				June
Dollars in thousands		2012				2012				2011				2011				2011				2012				2011
Recurring total revenue - excluding realized securities gains/losses, gains/losses on sales of assets, interest accrued on RDSI loans ("Core revenue")		$	8,564				8,454				8,802				7,961				8,083				17,017				15,957
Tax equivalent adjustment (1)			88				88				100				101				163				175				342
Contract buyouts (2)			-				(90	)			-				-				(519	)			(90	)			(519	)
Realized securities gains (1)			-				-				-				-				(1,871	)			-				(1,871	)
(Gains)/losses on sales of assets (1)			-				-				-				-				-				-				-
Total nonrecurring items			88				(2	)			100				101				(2,227	)			85				(2,048	)
Total GAAP revenue		$	8,476				8,456				8,702				7,860				10,310				16,932				18,006
Recurring net Interest Income - excluding interest accrued on New Core loan ("Core noninterest income")		$	5,356				4,963				5,379				5,486				5,376				10,318				10,388
Tax equivalent adjustment (1)			88				88				100				101				163				175				342
Total nonrecurring items			88				88				100				101				163				175				342
GAAP Net interest income		$	5,268				4,875				5,279				5,385				5,213				10,143				10,046
Recurring noninterest income - excluding realized securities gains/losses, gains/losses on sales of assets, etc. ("Core noninterest income")		$	3,208				3,491				3,423				2,475				2,707				6,699				5,569
Contract buyouts (2)			-				(90	)			-				-				(519	)			(90	)			(519	)
Realized securities gains (1)			-				-				-				-				(1,871	)			-				(1,871	)
Total nonrecurring items			-				(90	)			-				-				(2,390	)			(90	)			(2,390	)
GAAP noninterest income		$	3,208				3,581				3,423				2,475				5,097				6,789				7,960
Recurring loan loss provision		$	200				450				299				297				898				650				1,397
Total nonrecurring items			-				-				-				-				-				-				-
GAAP loan loss provision		$	200				450				299				297				898				650				1,397
Recurring noninterest expense — excluding unrealized OREO writedowns, writedowns of goodwill and other intangibles, software and hardware writedowns, contract write-offs, early termination fees and RDSI loan write-off		$	6,871				6,676				6,982				6,823				7,315				13,547				14,375
FHLB/REPO prepayment penalties (1)			-				-				-				-				1,083				-				1,083
Hardware write-offs (2)			-				-				609				-				-				-				-
Writedown of goodwill and other intangibles (2)			-				-				381				-				-				-				-
Total Nonrecurring items			-				-				990				-				1,083				-				1,083
GAAP Noninterest Expense		$	6,871				6,676				7,972				6,823				8,398				13,547				15,458