Rurban Financial Corp. Reports 2012 Third Quarter Results

DEFIANCE, Ohio, Oct. 23, 2012 (GLOBE NEWSWIRE) -- 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 third quarter and nine months ended September 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 September 30, 2012, Rurban reported net income of $1.3 million, or $0.27 per diluted share, compared to net income of $0.60 million, or $0.12 per diluted share, for the quarter ended September 30, 2011, and net income of $1.0 million, or $0.21 per diluted share, for the quarter ended June 30, 2012.

For the first nine months of 2012, net income was $3.3 million, or $0.68 per common share, compared to $1.4 million, or $0.29 per common share, for the prior-year nine month period. Excluding non-recurring items totaling $0.86 million after tax ($1.3 million pretax) from the first nine months of 2011, mainly from a balance sheet restructuring and a contract buyout penalty paid to RDSI, core earnings for the first nine months of 2011 were $0.53 million, or $0.11 per share.

Key items for the 2012 third quarter include:
  • Profitability improvement continues. The return on average assets rose to 82 bps this quarter, raising the YTD return to 69 bps.
  • Mortgage originations and gains on sale both reached a record level this past quarter.
  • Quarterly noninterest expense continues to trend downward albeit at a modest pace. Profitability improvement in 2012 has been derived primarily from fee income.
  • Portfolio loans increased by $16 million over the past twelve months, up 3.7 percent, led by commercial real estate. Recent growth consisted primarily of HELOCs and agricultural loans.
  • Nonperforming assets declined by $1.2 million, or 11 percent compared to September 30, 2011; they now stand at $9.4 million, or 1.49 percent of total assets. Reserve coverage of nonperforming loans at quarter-end was 96 percent.
  • Tangible leverage improved by 32 basis points from the prior quarter, to 5.53 percent; all bank regulatory ratios are in excess of "well-capitalized" levels.

"Our increasingly strong performance reflects the growing synergies within our organization," stated Mark Klein, president and chief executive officer of Rurban Financial Corp. "Our strategy to build revenue is based on harnessing the energy and expertise of our bankers to build exceptional client relationships. State Bank is unique for a bank its size, with high level regional decision-makers located in the field alongside their bankers whom they quarterback on a day-to-day basis. Proximity to both clients and staff ensures that all aspects of the relationship are addressed and working smoothly. This includes impeccable service as well as the identification and fulfillment of client product needs.

"As a result of these growing synergies, we continue to attract new relationships as well as deepen existing ones. Our clients provide us with numerous opportunities to book high quality loans that are well-structured and appropriately priced. Despite the competitive loan environment, we have not compromised our strong underwriting standards. Our deposit market share is growing in nearly every region, and the mix continues to improve, all of which contributed to a 19 percent decline in our funding costs compared to last year. Every department of the Bank is positioned to refer opportunities to other areas of the Bank; 74 percent of all employees generated a referral last year that resulted in an additional piece of business. Similarly, we are seeing the impact with our mortgage lenders who just completed a record quarter of originations, and with our credit administration staff, where 2012 losses have declined to 23 basis points of average loans.

"Finally, we are also seeing it in our growing cash flow, which has enabled us to repay one quarter earlier than we had anticipated the interest on our trust preferred securities, which we had deferred since September 2010. Beginning next year, we should see a benefit to earnings from these reduced interest costs.

"Although revenue at RDSI has been declining due to market constraints, we have been successful in expanding several relationships and reducing costs to maintain a profit year to date.

"Overall," concluded Mr. Klein, "we are pleased with our continuing progress to become a higher-performing bank, and have every reason to expect that the strategies we have in place will continue to build momentum."

RESULTS OF OPERATIONS

Consolidated Revenue

Total revenue, consisting of net interest income on a fully tax equivalent basis ("FTE") and noninterest income, was $8.9 million for the third quarter of 2012, up $0.97 million, or 12.2 percent, from the third quarter of 2011, and higher by $0.37 million, or 4.3 percent, from the linked quarter.

Net interest income (FTE) for the 2012 third quarter was $5.52 million, 0.7 percent ahead of third quarter 2011. Average earning assets grew 2.4 percent; however, volume gains were partially offset by a seven basis point decline year over year in the net interest margin (FTE) to 3.91 percent. Relative to the 2012 second quarter, net interest income (FTE) grew 3.2 percent (12.7 percent annualized) as a result of substantial loan growth (up 1.7 percent for the quarter, or 6.8 percent annualized); this change in asset mix contributed to a ten basis point improvement in the net interest margin despite modestly declining yields.

Noninterest Income

Noninterest income was $3.4 million for the third quarter of 2012, an increase of $0.93 million from the $2.5 million reported for the year-ago third quarter and $0.2 million higher than the second quarter of 2012. Higher gains on loan sales, which for the third quarter included non-mortgage SBA and FSA loan sales, more than offset the decline in RDSI fee income.
Data Services          
($'s in thousands) Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Sep. 2011
Data Processing & Network Services $ 229 $ 194 $ 177 $ 320 $ 292
Payment Solutions 541 633 708 720 784
Contract Buyout (53) -- 551 -- --
RDSI Gross Revenue 717 827 1,436 1,040 1,076
Less: Intercompany (232) (251) (793) (369) (333)
Net Data Services Fees $ 485 $ 576 $ 643 $ 671 $ 743

Gross revenue generated by RDSI, including services provided to Rurban/State Bank, was $0.72 million for the third quarter of 2012. Excluding Rurban/State Bank intercompany transactions from the quarter, net data services fees were $0.49 million for the current quarter compared to $0.74 million for the year-ago third quarter, a decline of $0.26 million.
Mortgage Banking  
  Three Months Ended
($'s in thousands) Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Sep. 2011
Mortgage originations $ 90,685 $ 79,901 $ 68,331 $ 85,114 $ 68,989
Mortgage sales 81,862 75,227 64,212 81,046 56,438
Mortgage servicing portfolio 488,930 459,380 422,802 402,062 370,033
Mortgage servicing rights 3,346 3,359 3,359 2,820 2,709
           
Mortgage servicing revenue:          
Loan servicing fees 297 274 259 242 226
OMSR amortization (369) (254) (349) (329) (251)
Net administrative fees (72) 20 (90) (87) (25)
OMSR valuation adjustment (120) (185) 419 (221) (771)
Net loan servicing fees (192) (165) 329 (308) (796)
Gain on sale of mortgages 1,571 1,395 1,181 1,529 1,101
Mortgage banking revenue, net $1,379 $1,230 $1,510 $1,221 $ 305

Mortgage banking continued its banner year, with third quarter loan originations reaching a new high: $90.7 million, up $21.7 million, or 31 percent, from the $69.0 million generated in the third quarter of 2011, and higher by $10.8 million than the previous quarter. Sales into the secondary market kept pace, with third quarter sales of $81.9 million, up $25.4 million, or 45 percent, above the $56.4 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 $1.38 million for the third quarter of 2012 compared to $1.23 million for the linked quarter and $0.31 million for the year-ago third quarter. Year-to-date, the net mortgage servicing valuation adjustment was $0.11 million; the last two quarter's negative valuation adjustments have virtually offset the large gain of the first quarter. The mortgage servicing portfolio at the end of the third quarter of 2012 was $488.9 million, up $118.9 million, or 32.1 percent, from 2011 third quarter-end.

Mortgage banking revenues accounted for 40.5 percent of noninterest income in the third quarter of 2012 compared to 12.3 percent in the year-earlier third quarter where impairment valuations reduced the contribution of mortgage banking. Excluding mortgage banking and data services fees, the $1.5 million remainder of noninterest income in the third quarter of 2012 was derived primarily from wealth management and customer service fees; each of these two business lines have contributed a remarkably stable stream of fee income modestly in excess of $0.6 million every quarter. In addition, during the third quarter, Rurban sold several SBA and FSA guaranteed loans which generated $170,000 of revenue. These gains offset $151,000 of losses on residential real estate properties sold at auction during the quarter.

Rurban's revenue stream has benefited from the magnitude and diversity of its fee income. The Company remains highly diversified for its asset size; core noninterest income contributed 37.8 percent of third quarter 2012 core revenue; this compares to 31.1 percent for the year-ago third quarter.

Loan Loss Provision

The loan loss provision was $300,000 for the third quarter of 2012, unchanged from the third quarter of 2011, but higher by $100,000 from the linked quarter. The provision expense declined by $744,000, or 44 percent, year to date, reflecting a 19 percent decline in nonperforming loans, as well as a 64 percent decline in net charge-offs. As of September 30, 2012, the loan loss reserve was 1.47 percent of total loans, relatively unchanged throughout the past twelve months as a percentage of loans. At current levels, the loan loss reserve provides 96 percent coverage of nonperforming loans compared to reserve coverage of 72 percent at third quarter-end 2011.

Noninterest Expense

For the third quarter of 2012, noninterest expense was $6.73 million compared to $6.87 million and $6.82 million for the linked and year-ago quarters, respectively. Rurban has taken steps to make its salary structure more responsive to revenue growth through the implementation of incentive and commission-based compensation. Excluding $0.55 million and $0.27 million of commissions paid primarily to State Bank's mortgage bankers in the third quarters of 2012 and 2011, respectively, salary expense declined 8.0 percent, consistent with a decline of 16 full-time equivalent staff, or 7.4 percent, over the past twelve-month period. Reflecting this improvement in third quarter 2012 operating revenue and expense, the core efficiency ratio declined to 73.0 percent, from 83.1 percent for the year-ago quarter.

Balance Sheet

Total assets as of September 30, 2012 were $630.2 million, an increase of $6.4 million, or 1.0 percent, from September 30, 2011. Over the same twelve-month time frame, total deposits grew $0.9 million and loans grew $16.1 million. This higher level of loans outstanding relative to assets has provided support to Rurban's net interest margin as has the shift in deposit mix further toward lower-cost non-maturity deposits, which now comprise 61 percent of total deposits compared to 57 percent for the year-ago quarter. Improvements in the deposit mix, combined with the continuing decline in interest rates, reduced the cost of interest-bearing liabilities a further 21 basis points, or 17.7 percent, during the course of the past twelve months, to 98 basis points. The same factors, a change in the mix and declining rates, contributed to the 29 basis point, or 5.7 percent, decline in earning asset yields.
Loan Portfolio            
($ in Thousands) Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Sep. 2011 Variance YOY
Commercial & Industrial (C&I) $ 76,043 $ 75,964 $ 78,450 $ 78,112 $ 77,269 $ (1,226)
% of Total 16.7% 16.8% 17.8% 17.7% 17.6% (1.6%)
Commercial Real Estate 198,682 199,918 188,984 187,829 186,411 12,271
% of Total 43.6% 44.2% 43.0% 42.4% 42.4% 6.6%
Agriculture 42,988 41,093 37,741 38,361 38,601 4,387
% of Total 9.4% 9.1% 8.6% 8.7% 8.8% 11.4%
Residential Real Estate 85,727 85,046 84,771 87,656 85,399 328
% of Total 18.8% 18.8% 19.3% 19.8% 19.5% 0.4%
Consumer & Other 51,581 50,089 49,775 50,596 51,246 335
% of Total 11.3% 11.1% 11.3% 11.4% 11.7% 0.7%
             
Total Loans $455,021 $452,110 $439,721 $442,554 $438,926 $ 16,095
            3.7%

Total loans were $455.0 million at September 30, 2012 compared to $438.9 million for the prior-year period, up $16.1 million, or 3.7 percent. Commercial real estate ("CRE") loans accounted for 76 percent of total loan growth over the past twelve-month period, up $12.3 million, or 6.6 percent. CRE loans currently comprise 43.6 percent of State Bank's loan portfolio, followed by residential real estate and C&I loans, at 18.8 percent and 16.7 percent, respectively. Although CRE loans showed the largest dollar increase at $12.3 million, agriculture loans showed the highest growth rate year over year, at 11.4 percent.

Asset Quality

Nonaccruing loans were $5.2 million as of September 30, 2012, a decline of $2.1 million, or 28 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 $1.8 million, or 80 percent, to $0.45 million as of September 30, 2012. Currently, Rurban has only two nonperforming relationships that exceed $1.0 million; together, they account for $2.3 million, or 25 percent, of nonperforming assets.
Summary of Nonperforming Assets
($ in Thousands)          
Nonaccruing Loan Category Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Sep. 2011
Commercial & Industrial (C&I) $ 1,362 $ 1,467 $ 2,021 $ 2,393 $ 2,466
% of Total C&I loans 1.78% 1.93%  2.58% 3.06% 3.19%
Commercial Real Estate 448 1,345 1,481 1,456 2,210
% of Total CRE loans 0.23% 0.67% 0.78% 0.78% 1.19%
Agriculture 3 -- 113 -- 87
% of Total Ag loans 0.01% -- 0.30% -- 0.23%
Residential Real Estate 2,607 1,958 1,840 2,471 2,107
% of Total Res. RE loans 3.04% 2.30% 2.17% 2.82% 2.47%
Consumer & Other 829 545 1,056 580 461
% of Consumer & Other loans 1.61% 1.09% 2.12% 1.15% 0.90%
Total Nonaccruing Loans 5,249 5,315 6,511 6,900 7,331
% of Total Loans 1.15% 1.18% 1.48% 1.56% 1.67%
Accruing Restructured Loans 1,735 1,837 1,593 1,334 1,311
Total Nonperforming Loans $ 6,984 $ 7,152 $ 8,104 $ 8,234 $ 8,642
% of Total Loans 1.53% 1.58% 1.84% 1.86% 1.97%
OREO & Repossessed Vehicles 2,415 1,708 1,807 1,830 1,970
Total Nonperforming Assets 9,399 $ 8,860 $ 9,911 $ 10,064 $ 10,612
% of Total Assets 1.49% 1.40% 1.54% 1.60% 1.70%

Rurban moved one large loan in excess of $500,000 to nonperforming status this past quarter. Apart from this one major addition, problem assets continue to reduce at an expeditious rate.
NONPERFORMING ASSET RECONCILIATION
           
($ in Thousands) Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Sep. 2011
Beginning Balance $ 8,860 $ 9,911 $ 10,064 $ 10,612 $ 11,441
Additions 1,396 1,209 906 1,193 432
Returns to performing status (163) (306) (419) (169) (206)
Principal payments (146) (1,773) (402) (375) (281)
Sale of OREO/OAO (152) (147) (23) (358) (246)
Loan charge-offs (294) (220) (474) (648) (527)
Valuation write-downs -- (58) -- (214) --
Restructured Loan Activity (102) 244 259 23 (1)
Net Change 522 (1,051) (153) (548) (829)
Total $ 9,399 $ 8,860 $ 9,911 $ 10,064 $ 10,612

Capitalization

Capital ratios continue to improve, but still remain at the low end of management's objectives. Tangible leverage increased 90 basis points over the past twelve months, and now stands at 5.53 percent. All bank regulatory ratios remain in excess of "well-capitalized" levels, and have improved relative to the prior year and linked quarter; holding company ratios have shown consistent quarterly improvement since mid-year 2011. At September 30, 2012, State Bank's Total Risk-Based Capital was $58.0 million, $20.7 million above the well-capitalized level; the Total Risk-based Capital Ratio was 12.4 percent. As of September 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 three loan production offices: two in Columbus, Ohio and one 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.
RURBAN FINANCIAL CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Unaudited)
           
  September June March December September
($ in Thousands) 2012 2012 2012 2011 2011
ASSETS          
Cash and due from banks  $ 10,289  $ 14,636  $ 29,602  $ 14,846  $ 13,764
           
Securities available for sale, at fair value  101,247  102,537  110,603  111,978  104,615
Other securities - FRB and FHLB Stock  3,748  3,748  3,685  3,685  3,748
Total investment securities  104,995  106,285  114,288  115,663  108,363
           
Loans held for sale  11,584  10,595  11,384  5,238  10,590
           
Loans, net of unearned income  455,021  452,110  439,721  442,554  438,926
Allowance for loan losses  (6,696)  (6,618)  (6,609)  (6,529)  (6,235)
Net loans  448,325  445,492  433,112  436,025  432,691
           
Premises and equipment, net  12,898  13,190  13,282  13,773  14,120
Purchased software  334  355  386  159  805
Cash surrender value of life insurance  12,491  12,401  12,312  12,224  12,134
Goodwill  16,353  16,353  16,353  16,353  16,734
Core deposits and other intangibles  1,376  1,534  1,691  1,849  2,006
Foreclosed assets held for sale, net  2,415  1,708  1,807  1,830  1,970
Mortgage servicing rights  3,346  3,359  3,359  2,820  2,709
Accrued interest receivable  1,832  1,597  1,802  1,635  2,061
Other assets  3,967  5,026  5,598  6,249  5,846
Total assets  $ 630,205  $ 632,531  $ 644,976  $ 628,664  $ 623,793
           
           
LIABILITIES AND EQUITY          
Deposits          
Non interest bearing demand  $ 69,250  $ 68,918  $ 71,077  $ 65,963  $ 62,080
Interest bearing demand  112,230  109,268  118,898  107,446  103,229
Savings  53,505  53,777  52,599  49,665  48,146
Money market  78,006  81,114  82,799  74,244  79,163
Time deposits  202,259  205,584  210,119  221,447  221,731
Total deposits  515,250  518,661  535,492  518,765  514,349
           
Notes payable  1,975  2,249  2,519  2,788  2,865
Advances from Federal Home Loan Bank  18,500  17,500  12,611  12,776  12,940
Repurchase agreements  13,735  15,824  17,771  18,779  18,778
Trust preferred securities  20,620  20,620  20,620  20,620  20,620
Accrued interest payable  4,223  3,836  3,556  2,954  2,704
Other liabilities  3,972  3,567  3,381  4,050  3,985
Total liabilities  578,275  582,257  595,950  580,732  576,241
           
Equity          
Preferred stock  --   --   --   --   -- 
Common stock   12,569  12,569  12,569  12,569  12,569
Additional paid-in capital  15,363  15,350  15,338  15,323  15,302
Retained earnings  23,755  22,452  21,438  20,466  20,192
Accumulated other comprehensive income  2,012  1,672  1,450  1,343  1,258
Treasury stock  (1,769)  (1,769)  (1,769)  (1,769)  (1,769)
Total equity  51,930  50,274  49,026  47,932  47,552
           
Total liabilities and equity  $ 630,205  $ 632,531  $ 644,976  $ 628,664  $ 623,793
               
               
RURBAN FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)
               
($ in thousands, except per share data) Three Months Ended Nine Months Ended
  September June March December September September September
Interest income 2012 2012 2012 2011 2011 2012 2011
Loans              
 Taxable   $ 6,106  $ 6,037  $ 5,928  $ 6,171  $ 6,251  $ 18,071  $ 18,273
 Nontaxable  21  24  23  24  24  68  50
Securities              
 Taxable   383  403  399  387  446  1,185  1,623
 Nontaxable  156  146  147  170  172  449  810
Total interest income  6,666  6,610  6,497  6,752  6,893  19,773  20,756
               
Interest expense              
Deposits  694  768  854  946  976  2,316  3,035
Other borrowings  17  (2)  34  22  25  49  74
Repurchase Agreements  11  60  68  70  72  139  842
Federal Home Loan Bank advances  92  75  74  77  79  241  325
Trust preferred securities  418  441  592  358  356  1,451  1,049
Total interest expense  1,232  1,342  1,622  1,473  1,508  4,196  5,325
               
Net interest income  5,434  5,268  4,875  5,279  5,385  15,577  15,431
               
Provision for loan losses   300  200  450  299  297  950  1,694
               
Net interest income after provision for loan losses  5,134  5,068  4,425  4,980  5,088  14,627  13,737
               
Noninterest income              
Data service fees  485  576  643  671  743  1,704  2,959
Trust fees  646  607  642  623  629  1,895  1,993
Customer service fees  677  668  631  647  664  1,976  1,885
Gain on sale of mortgage and OMSR's  1,572  1,395  1,181  1,529  1,101  4,148  2,091
Mortgage loan servicing fees, net  (192)  (165)  329  (308)  (796)  (28)  (661)
Gain on sale of non-mortgage loans  170  --   --   127  --   170  81
Net gain on sales of securities  --   --   --   --   --   --   1,871
Loss on sale or disposal of assets  (151)  (50)  (56)  (46)  (27)  (257)  (287)
Other income  201  177  211  180  161  589  503
Total non-interest income  3,408  3,208  3,581  3,423  2,475  10,197  10,435
               
               
Noninterest expense              
Salaries and employee benefits  3,597  3,597  3,499  3,488  3,583  10,693  10,686
Net occupancy expense  515  528  548  531  568  1,591  1,669
Equipment expense  722  712  711  709  690  2,145  2,119
FDIC insurance expense  91  223  214  191  145  528  717
Fixed asset and software impairment  --   --   --   609  --   --   -- 
Data processing fees  103  121  113  131  158  337  494
Professional fees  451  390  385  493  377  1,226  1,428
Marketing expense  85  103  90  93  89  278  235
Printing and office supplies  39  67  78  52  86  184  281
Telephone and communication  151  139  144  139  141  434  441
Postage and delivery expense  223  200  229  235  260  652  863
State, local and other taxes  128  118  120  77  103  366  381
Employee expense  118  119  106  113  143  343  411
Other intangible amortization expense  157  158  157  157  185  472  579
OREO Impairment  --   58  --   214  --   58  -- 
Other expenses  345  338  282  359  295  965  1,977
Total non-interest expense  6,725  6,871  6,676  7,972  6,823  20,272  22,281
               
Income before income tax expense  1,817  1,405  1,330  431  740  4,552  1,891
Income tax expense   513  391  358  157  137  1,262  500
               
Net income   $ 1,304  $ 1,014  $ 972  $ 274  $ 603  $ 3,290  $ 1,391
               
Common share data:              
Basic earnings per common share  $ 0.27  $ 0.21  $ 0.20  $ 0.06  $ 0.12  $ 0.68  $ 0.29
Diluted earnings per common share  $ 0.27  $ 0.21  $ 0.20  $ 0.06  $ 0.12  $ 0.68  $ 0.29
               
Average shares outstanding ($ in thousands):              
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 Nine Months Ended
  September June March December September September September
SUMMARY OF OPERATIONS 2012 2012 2012 2011 2011 2012 2011
Net interest income  $ 5,434  5,268  4,875  5,279  5,385  15,577  15,431
Tax-equivalent adjustment  $ 91  88  88  100  101  266  443
Tax-equivalent net interest income (core)  $ 5,525  5,356  4,963  5,379  5,486  15,843  15,874
Provision for loan loss  $ 300  200  450  299  297  950  1,694
Noninterest income  $ 3,408  3,208  3,581  3,423  2,475  10,197  10,435
Less: Non core items  $ (53)  --   (90)  --   --   (143)  (2,390)
Core noninterest income  $ 3,355  3,208  3,491  3,423  2,475  10,054  8,044
Total revenue, tax-equivalent  $ 8,933  8,564  8,544  8,802  7,961  26,040  26,309
Core revenue, tax-equivalent  $ 8,880  8,564  8,454  8,802  7,961  25,897  23,918
Noninterest expense  $ 6,725  6,871  6,676  7,972  6,823  20,272  22,281
Less: Non core items  $ --   --   --   990  --   --   1,083
Core noninterest expense  $ 6,725  6,871  6,676  6,982  6,823  20,272  21,198
Pre provision pretax income  $ 2,117  1,605  1,780  730  1,037  5,502  3,585
Core pre provision pretax income  $ 2,064  1,605  1,690  1,720  1,037  5,359  2,277
Pretax income  $ 1,817  1,405  1,330  431  740  4,552  1,891
Net income  $ 1,304  1,014  972  274  603  3,290  1,391
Core earnings after tax  $ 1,269  1,014  913  927  603  3,196  528
               
PER SHARE INFORMATION:              
Basic & diluted earnings  $ 0.27 0.21 0.20 0.06 0.12  0.68  0.29
Core earnings  $ 0.26 0.21 0.19 0.19 0.12  0.66  0.11
Book value per common share  $ 10.68  10.34  10.08  9.86  9.78  10.68  9.78
               
PERFORMANCE RATIOS:              
Return on average assets 0.82% 0.63% 0.61% 0.17% 0.38% 0.69% 0.29%
Core return on average assets 0.80% 0.63% 0.57% 0.58% 0.38% 0.67% 0.11%
Return on average common equity 10.25% 8.20% 8.04% 2.33% 5.12% 8.84% 3.97%
Core return on avg. tangible common equity 15.49% 13.01% 12.18% 13.21% 8.80% 13.57% 2.54%
Earning asset yield 4.78% 4.76% 4.77% 4.93% 5.07% 4.77% 5.06%
Cost of interest bearing liabilities 0.98% 1.05% 1.28% 1.15% 1.19% 1.10% 1.35%
Core efficiency ratio 72.61% 77.66% 76.17% 74.80% 83.05% 75.43% 85.18%
Core net interest income/ Average assets 3.48% 3.33% 3.12% 3.38% 3.50% 3.31% 3.28%
Core noninterest income/ Average assets 2.11% 1.99% 2.20% 2.15% 1.58% 2.10% 1.66%
Core noninterest expense/ Average assets 4.24% 4.27% 4.20% 4.39% 4.35% 4.23% 4.38%
Core noninterest income/ Operating revenue 37.56% 37.46% 40.86% 38.89% 31.09% 38.61% 30.58%
Net interest margin 3.85% 3.75% 3.53% 3.80% 3.90% 3.71% 3.68%
Tax equivalent effect 0.06% 0.06% 0.07% 0.07% 0.08% 0.06% 0.11%
Net interest margin - fully tax equivalent basis 3.91% 3.81% 3.60% 3.87% 3.98% 3.77% 3.79%
               
ASSET QUALITY RATIOS:              
Gross charge-offs  $ 302  252  474  648  527  1,028  2,759
Recoveries  $ 78  62  104  642  21  244  584
Net charge-offs  $ 223  190  370  6  506  784  2,175
Nonaccruing loans/ Total loans 1.15% 1.18% 1.48% 1.56% 1.67% 1.15% 1.67%
Nonperforming loans/ Total loans 1.53% 1.58% 1.84% 1.86% 1.97% 1.53% 1.97%
Nonperforming assets/ Loans & OREO 2.05% 1.95% 2.24% 2.26% 2.41% 2.05% 2.41%
Nonperforming assets/ Total assets 1.49% 1.40% 1.54% 1.60% 1.70% 1.49% 1.70%
Allowance for loan loss/ Nonperforming loans 95.9% 92.5% 81.6% 79.3% 72.1% 95.9% 72.1%
Allowance for loan loss/ Total loans 1.47% 1.46% 1.50% 1.48% 1.42% 1.47% 1.42%
Net loan charge-offs/ Average loans (ann.) 0.20% 0.17% 0.34% 0.01% 0.46% 0.23% 0.67%
Loan loss provision/ Net charge-offs 134.46% 105.22% 121.52% 5243.77% 58.69% 121.22% 77.92%
               
CAPITAL & LIQUIDITY RATIOS:              
Loans/ Deposits 88.31% 87.17% 82.12% 85.31% 85.34% 88.31% 85.34%
Equity/ Assets 8.24% 7.95% 7.60% 7.62% 7.62% 8.24% 7.62%
Tangible equity/ Tangible assets 5.53% 5.21% 4.88% 4.85% 4.63% 5.53% 4.63%
               
END OF PERIOD BALANCES              
Total loans  $ 455,021  452,110  439,721  442,554  438,926  455,021 438,926
Total assets  $ 630,205  632,531  644,976  628,664  623,793  630,205 623,793
Deposits  $ 515,250  518,661  535,492  518,765  514,349  515,250 514,349
Stockholders equity  $ 51,930  50,274  49,026  47,932  47,552  51,930 47,552
Tangible equity  $ 33,867  32,032  30,596  29,571  28,007  33,867 28,007
Full-time equivalent employees  199  204  203  210  215  199 215
               
AVERAGE BALANCES              
Total loans  $ 454,634  446,786  436,384  437,020  437,744  445,982  435,855
Total earning assets  $ 565,144  562,169  552,016  556,004  551,744  559,795  558,721
Total assets  $ 635,012  643,859  635,849  636,932  627,291  638,275  645,803
Deposits  $ 515,795  527,992  523,193  522,472  512,190  522,149  514,197
Stockholders equity  $ 50,905  49,464  48,377  47,035  47,087  49,622  46,742
Tangible equity  $ 32,779  31,165  29,981  28,082  27,414  31,405  27,711
             
             
RURBAN FINANCIAL CORP.
Rate Volume Analysis - (Unaudited)
For the Three and Nine Months Ended September 30, 2012 and 2011
($ in Thousands) Three Months Ended September 30, 2012 Three Months Ended September 30, 2011
  Average   Average Average   Average
Assets Balance Interest Rate Balance Interest Rate
Taxable securities  $ 87,528  383 1.75%  $ 91,436  446 2.25%
Non-taxable securities  15,566  236 6.06%  15,762  260 6.60%
Federal funds sold  --   --   N/A  --   --   N/A
Loans, net  462,050  6,138 5.31%  444,546  6,287 5.66%
 Total earning assets  $ 565,144  6,757 4.78%  $ 551,744  6,994 5.07%
Cash and due from banks  13,407      16,391    
Allowance for loan losses  (6,707)      (6,502)    
Premises and equipment  15,390      17,009    
Other assets  47,778      48,649    
 Total assets  $ 635,012      $ 627,291    
Liabilities            
Savings and interest-bearing demand  $ 243,004  47 0.08%  $ 230,591  88 0.15%
Time deposits  203,104  647 1.28%  218,647  889 1.71%
Repurchase agreements  13,972  11 0.31%  18,643  72 3.33%
Advances from FHLB  18,082  92 2.04%  14,967  79 2.56%
Junior subordinated debentures  20,620  403 7.82%  20,620  356 6.90%
Notes payable & other borrowed funds  2,076  31 5.97%  3,048  25 6.53%
 Total interest-bearing liabilities  $ 500,858  1,232 0.98%  $ 506,516  1,508 1.19%
             
Non interest-bearing demand  69,687      62,952    
Other liabilities  13,562      10,736    
 Total liabilities  584,107      580,204    
Equity  $ 50,905      $ 47,087    
             
 Total liabilities and equity  $ 635,012      $ 627,291    
             
Net interest income (tax equivalent basis)    $ 5,525      $ 5,486  
             
Net interest income as a percent of average interest-earning assets     3.91%     3.98%
             
  Nine Months Ended September 30, 2012 Nine Months Ended September 30, 2011
  Average   Average Average   Average
Assets Balance Interest Rate Balance Interest Rate
             
Taxable securities  $ 91,917  1,185 1.72%  $ 98,863  1,623 2.19%
Non-taxable securities  14,911  680 6.08%  24,003  1,226 6.81%
Federal funds sold  --   --   N/A  --   --   N/A
Loans, net  452,967  18,174 5.35%  435,855  18,350 5.61%
             
 Total earning assets  $ 559,795  20,039 4.77%  $ 558,721  21,200 5.06%
             
Cash and due from banks  21,740      27,660    
Allowance for loan losses  (6,506)      (6,659)    
Premises and equipment  14,962      16,837    
Other assets  48,285      49,244    
             
 Total assets  $ 638,275      $ 645,803    
             
Liabilities            
Savings and interest-bearing demand  $ 244,744  167 0.09%  $ 234,951  297 0.17%
Time deposits  208,645  2,149 1.37%  215,647  2,739 1.69%
Repurchase agreements  16,344  139 1.14%  35,552  842 3.16%
Advances from FHLB  14,641  241 2.19%  16,632  325 2.61%
Junior subordinated debentures  20,620  1,396 9.03%  20,620  1,048 6.78%
Notes payable & other borrowed funds  2,315  103 5.94%  3,171  74 3.10%
             
 Total interest-bearing liabilities  $ 507,308  4,196 1.10%  $ 526,574  5,325 1.35%
             
Non interest-bearing demand  68,761      63,599    
Other liabilities  12,584      8,889    
             
 Total liabilities  588,653      599,061    
             
Equity  $ 49,622      $ 46,742    
             
 Total liabilities and equity  $ 638,275      $ 645,803    
             
Net interest income (tax equivalent basis)    $ 15,843      $ 15,875  
             
Net interest income as a percent of average interest-earning assets     3.77%     3.79%
             
             
  Rurban Financial Corp.
  Segment Reporting - (Unaudited)
  Three Months Ended September 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  $ 6,666  $ --   $ 6,666  $ --   $ --   $ 6,666
Interest expense  798  418  1,216  16  --   1,232
             
Net interest income  5,868  (418)  5,450  (16)  --   5,434
             
Provision for loan loss   300  --   300  --   --   300
             
Non-interest income  3,017  84  3,101  717  (410)  3,408
Non-interest expense  6,068  290  6,358  736  (369)  6,725
             
Net income - QTD  $ 1,776  $ (437)  $ 1,339  $ (24)  $ (11)  $ 1,304
             
Performance Measures            
             
Average assets - QTD  $ 627,556  --   $ 632,423  $ 2,589  $ --   $ 635,012
Return on average assets 1.13%  --  0.85% -3.71%  --  0.82%
             
Average equity - QTD  $ 71,875  --   $ 50,905  $ (1,270)  --   $ 50,905
Return on average equity 9.88%  --  10.52%  --   --  10.25%
             
Average loans - QTD  $ 462,050  2,000  $ 464,050  --   $ (2,000)  $ 462,050
Average deposits - QTD  $ 518,100  --   $ 518,100  --   $ (2,304)  $ 515,795
             
             
  Rurban Financial Corp.
  Segment Reporting - (Unaudited)
  Nine Months Ended September 30, 2012
             
  Banking Parent Company and Other Total Banking, Parent and  Other Data Services Elimination Entries Rurban Financial Corp.
             
Income Statement Measures            
             
Interest income  $ 19,856  $ --   $ 19,856  $ --   $ (83)  $ 19,773
Interest expense  2,697  1,451  4,147  99  (50)  4,196
             
Net interest income  17,160  (1,451)  15,709  (99)  (33)  15,577
             
Provision for loan loss   950  --   950  --   --   950
             
Non-interest income  8,802  223  9,025  2,980  (1,808)  10,197
Non-interest expense  18,597  954  19,551  2,461  (1,740)  20,272
             
Net income - YTD  $ 4,539  $ (1,456)  $ 3,084  $ 277  $ (71)  $ 3,290
             
Performance Measures            
             
Average assets - YTD  $ 630,910  $ --   $ 635,356  $ 2,919    $ 638,275
Return on average assets 0.96%  --  0.65% 12.68%  --  0.69%
             
Average equity - YTD  $ 70,649  $ --   $ 49,622  $ (1,613)  $ --   $ 49,622
Return on average equity 8.57%  --  8.29%  --   --  8.84%
             
Average loans - YTD  $ 453,495  $ 2,000  $ 455,495  $ --   $ (2,528)  $ 452,967
Average deposits - YTD  $ 523,970  $ --   $ 523,970  $ --   $ (1,821)  $ 522,149
               
               
               
RURBAN FINANCIAL CORP.
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
               
  Three Months Ended Nine Months Ended
($ in Thousands) September June March December September September September
  2012 2012 2012 2011 2011 2012 2011
               
GAAP Earnings  $ 1,304  $ 1,014  $ 972  $ 274  $ 603  $ 3,290  $ 1,391
               
Realized securities gains (1)  --   --   --   --   --   --   (1,871)
Prepayment penalties (1)  --   --   --   --   --   --   1,083
Hardware write-offs (2)  --   --   --   609  --   --   -- 
Contract buyouts (2)  (53)  --   (90)  --   --   (143)  (519)
Writedown of goodwill and other intangibles (2)  --   --   --   381  --   --   -- 
               
Total non-core Items  (53)  --   (90)  990  --   (143)  (1,307)
               
Applicable income tax effect on non-core Items  18  --   31  (336)  --   49  445
After-tax non core Items  (35)  --   (59)  653  --   (94)  (863)
               
Core recurring net income  $ 1,269  $ 1,014  $ 913  $ 927  $ 603  $ 3,196  $ 528
               
(1) State Bank & Trust              
(2) RDSI              
               
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures          
               
               
  September June March December September September September
($ in Thousands) 2012 2012 2012 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")  8,933  8,564  8,454  8,802  7,961  25,950  23,918
               
Tax equivalent adjustment (1)  91  88  88  100  101  266  443
Contract buyouts (2)  --   --   (90)  --   --   (90)  (519)
Realized securities gains (1)  --   --   --   --   --   --   (1,871)
(Gains)/losses on sales of assets (1)  --   --   --   --   --   --   -- 
Total nonrecurring items  91  88  (2)  100  101  176  (1,947)
 Total GAAP revenue   8,842  8,476  8,456  8,702  7,860  25,774  25,866
               
               
 Recurring net Interest Income - excluding interest accrued on New Core loan ("Core noninterest income")   5,525  5,356  4,963  5,379  5,486  15,843  15,874
               
Tax equivalent adjustment (1)  91  88  88  100  101  266  443
Total nonrecurring items  91  88  88  100  101  266  443
GAAP Net interest income  5,434  5,268  4,875  5,279  5,385  15,577  15,431
               
               
Recurring noninterest income - excluding realized securities gains/losses, gains/losses on sales of assets, etc. ("Core noninterest income")  3,355  3,208  3,491  3,423  2,475  10,054  8,044
               
Contract buyouts (2)  (53)  --   (90)  --   --   (143)  (519)
Realized securities gains (1)  --   --   --   --   --   --   (1,871)
Total nonrecurring items  (53)  --   (90)  --   --   (143)  (2,390)
GAAP noninterest income  3,408  3,208  3,581  3,423  2,475  10,197  10,435
               
Recurring loan loss provision  300  200  450  299  297  950  1,694
               
Total nonrecurring items  --   --   --   --   --   --   -- 
GAAP loan loss provision  300  200  450  299  297  950  1,694
               
               
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  6,725  6,871  6,676  6,982  6,823  20,272  21,198
               
FHLB/REPO prepayment penalties (1)  --   --   --   --   --   --   1,083
Hardware write-offs (2)  --   --   --   609  --   --   -- 
Writedown of goodwill and other intangibles (2)  --   --   --   381  --   --   -- 
Total Nonrecurring items  --   --   --   990  --   --   1,083
GAAP Noninterest Expense  6,725  6,871  6,676  7,972  6,823  20,272  22,281
CONTACT: Anthony V. Cosentino         Executive Vice President & CFO         419-785-3663

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