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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 419-785-3663Source:Rurban Financial Corp.