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Rurban Financial Corp. Announces Third Quarter 2010 Results

DEFIANCE, Ohio, Nov. 15, 2010 (GLOBE NEWSWIRE) -- Rurban Financial Corp. (Nasdaq:RBNF) ("Rurban" or the "Company"), a diversified financial services company providing full-service community banking, wealth management, and data/item processing services, today reported financial results for the third quarter and nine months ended September 30, 2010.

Net income for the third quarter of 2010 was $26,000, or $0.01 per diluted share, a decrease of $134,000, or 83.8 percent, from $160,000, or $0.03 per diluted share, for the third quarter of 2009. Net loss for the first nine months of 2010 was $9.03 million, or $(1.86) per diluted share, compared to net income of $2.27 million, or $0.46 per diluted share, for the comparable 2009 year-to-date period.

Included in the nine-month 2010 and 2009 periods were certain nonrecurring charges relating to the previously proposed spinoff of Rurban's data and item processing subsidiary, RDSI Banking Systems, Inc. ("RDSI"), and its subsequent merger with New Core Holdings, Inc. ("New Core"), which was announced in the second quarter of 2009, and the decision to terminate these transactions, which was announced in the second quarter of 2010. Impairments and write-offs of software, hardware and development costs related to these transactions were $10.0 million in year-to-date 2010 ($6.5 million after-tax), and $0.45 million in year-to-date 2009 ($0.30 million after tax).  Excluding these nonrecurring RDSI charges from GAAP results, the Company had an adjusted net loss from operations of $2.41 million for the 2010 year-to-date period compared to adjusted net income of $1.97 million for the comparable 2009 period.

The following table provides segment information for Rurban on a quarterly basis and identifies the nonrecurring charges reported by RDSI for each quarter. Rurban believes excluding those one-time charges provides useful information relating to Rurban's operating (core) performance.

 
After-Tax Earnings ($000s) Banking (GAAP) Data Processing (GAAP) Parent & Other Rurban Financial (GAAP) One-Time After-Tax RDSI Charges Core Rurban Financial (Non-GAAP)
3Q 2010 $ 548 $ (54) $ (468) $ 26 $ -0-- $ 26
2Q 2010 $(1,350) $ (6,446) $ (282) $ (8,078) $ (5,614) $ (2,464)
1Q 2010 $ 538 $ (879) $ (507) $ (848) $ (876) $ 28
4Q 2009 $ (577) $  (509) $ (798) $ (1,884) $ (509) $ (1,375)
3Q 2009 $ 712 $ 8 $ (560) $ 160 $ (293) $ 453

Highlights of the third quarter include:
  • Asset quality improved from year-end 2009 to September 20, 2010, as non-accruing loans declined significantly, down $8.4 million, or 45 percent, to $10.1 million, while foreclosed and repossessed assets remained under $2 million. Non-performing assets ("NPAs") were 1.77 percent of total assets at September 30, 2010 compared to 3.02 percent at year-end 2009. 
  • Mortgage originations, driven by strong results from the Columbus loan production office of Rurban's banking subsidiary, The State Bank and Trust Company ("State Bank"), were $67.8 million for the third quarter of 2010, generating $0.94 million in gains from mortgage loan sales. This compares to $42.3 million in originations and $0.40 million in gains for the year-ago third quarter.
  • RDSI made progress reducing its operating expenses to a level commensurate with its current revenue stream, resulting in a virtually breakeven quarter. Data Processing ("DP") clients are scheduled to complete their de-conversion by year-end, with State Bank remaining as RDSI's only DP client. Payment Solutions (a/k/a Item Processing) clients not tied to DP services remain in place and have generally not been affected by the deconversion of RDSI's DP clients.
  • Deposits grew $41 million since the June quarter, of which only $14 million were time deposits. The influx of deposits, despite their relatively low cost, combined with declining loan volume, contributed to a net interest margin decline from 3.87 percent and 3.72 percent for the year-ago and linked quarters, to 3.66 percent for the September 2010 quarter. 
  • Non-interest expenses declined $2.1 million compared to the year-ago quarter, primarily from a reduction of 64 full-time equivalent ("FTE") employees, or 20 percent, since third quarter 2009, as well as from the $0.45 million third quarter 2009 charge and subsequent charges taken by RDSI to account for impairments and write-downs of hardware and software. Year-over-year, third quarter equipment expense declined $1.2 million, or 57 percent, while salaries declined $1.36 million, or 25 percent. 
  • Capital ratios all remain in excess of "well-capitalized" for State Bank, although holding company ratios have declined somewhat as a result of the second quarter RDSI charge-offs.

Mark A. Klein, President and Chief Executive Officer of Rurban, commented, "We are pleased with the progress we are making in a number of areas. While we still have issues to address, most importantly, the future direction of RDSI, we have reason to be optimistic about future opportunities.

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