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Rurban Financial Corp. Reports 2012 Fourth Quarter and Full-Year Results

  • Full year earnings per share of $0.99, nearly triple the results of 2011
  • Loan growth of 4.7% year over year
  • Nonperforming assets declined to 1.40% of total assets
  • Tangible leverage of 5.70% -- approaching near-term goal of 6%
  • Fourth quarter ROA at 95 basis points

DEFIANCE, Ohio, Jan. 23, 2013 (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 fourth quarter and twelve months ended December 31, 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 2012 fiscal year, net income was $4.81 million, or $0.99 per diluted share, compared to $1.66 million, or $0.34 per diluted share, for the 2011 fiscal year. Excluding a 2012 net gain of $0.20 million after-tax ($0.30 million pretax) from non-recurring items, primarily from the settlement of RDSI matters, including litigation and contract buyouts, 2012 core earnings were $4.62 million, or $0.95 per diluted share. This compares to 2011 core earnings of $1.46 million, or $0.30 per common share, excluding a net gain of $0.21 million ($0.32 million pretax), primarily from balance sheet restructuring, RDSI contract buyouts and RDSI write-downs.

RURBAN FINANCIAL CORP.
Reconciliation of Non-GAAP Financial Matters to GAAP Financial Matters
Three Months Ended Twelve Months Ended
($ in Thousands) December 2012 September 2012 June 2012 March 2012 December 2011 December 2012 December 2011
GAAP Earnings $ 1,524 $ 1,304 $ 1,014 $ 972 $ 274 $ 4,814 $ 1,664
Realized securities gains (1) -- -- -- -- -- -- (1,871)
Prepayment penalties (1) -- -- -- -- -- -- 1,083
RDSI Settlement (2) (334) -- -- -- -- (334) --
Branch writedown (1) 65 -- -- -- -- 65 --
Hardware write-offs (2) -- -- -- -- 609 -- 609
New Core litigation costs (2) 115 -- -- -- -- 115 --
Contract buyouts (2) -- (53) -- (90) -- (143) (519)
Writedown of goodwill and intangibles (2) -- -- -- -- 381 -- 381
Total non-core items (154) (53) -- (90) 990 (297) (317)
Income tax effect on non-core items 52 18 -- 31 (336) 101 108
After-tax non- core items (102) (35) -- (59) 653 (196) (209)
Core recurring net income $ 1,442 $ 1,269 $ 1,014 $ 913 $ 927 $ 4,618 $ 1,455
(1) State Bank
(2) RDSI

For the quarter ended December 31, 2012, Rurban reported net income of $1.52 million, or $0.31 per diluted share, compared to net income of $0.27 million, or $0.06 per diluted share, for the fourth quarter 2011. Excluding a one-time net gain of $0.10 million ($0.15 million pretax) for the 2012 fourth quarter and a net charge of $0.65 million ($0.99 million pretax) for the 2011 fourth quarter, operating earnings were $1.42 million for the quarter ended December 31, 2012 compared to $0.93 million for the fourth quarter 2011, up 53.4 percent. For the 2012 third quarter, net income was $1.3 million on a GAAP basis, and $1.27 million from operations; earnings from operations for the 2012 fourth quarter were 13.6 percent ahead of the linked quarter.

Mark Klein, president and chief executive officer of Rurban Financial Corp., stated, "I continue to be pleased with our progress toward higher performance. Our primary focus this past year has been to improve profitability. With our strong fourth quarter, we have moved closer to our near-term goal of one percent ROA and top-quartile performance. Over the last twelve month period, we have significantly improved our risk profile, reducing nonperforming assets to under $9 million, while strengthening reserves and tangible capital. Although growth is not our primary consideration, it is gratifying to have expanded our loan portfolio by nearly five percent, especially since loan growth in the community banking sector has been difficult for many banks to achieve. In this context, Rurban has distinguished itself not only with strong loan growth, but also strong asset quality and an attractive fee-generating capability, another rarity among community banks. These three qualities – loan growth, asset quality and revenue diversity – position us to manage our bottom line more successfully than many banks our size. We see no impediments on the near horizon to interfere with our controlled pace of performance enhancement."

RESULTS OF OPERATIONS

Consolidated Revenue

Total revenue, consisting of net interest income on a fully tax equivalent basis ("FTE") and noninterest income, was $35.9 million for 2012, up $0.8 million, or 2.4 percent, from the prior-year twelve-month period. For the fourth quarter of 2012, total revenue was $9.9 million, up $1.1 million, or 12.4 percent, from the year-ago quarter.

Net interest income (FTE) for 2012 was $21.1 million, virtually unchanged from the $21.3 million reported for 2011. The 0.76 percent decline in net interest income resulted from a five basis point, or 1.3 percent, decline in the net interest margin (FTE), to an average of 3.76 percent for the twelve months of 2012, partially offset by a $2.8 million, or 0.5 percent, increase in average earning assets. Net interest income (FTE) for the 2012 fourth quarter was $5.25 million, a decline of $0.13 million, or 2.5 percent, from the fourth quarter 2011. Average earning assets grew $8.6 million year over year: however, average loan growth was $17.7 million. The $9.1 million difference was funded from the securities portfolio. Mr. Klein continued, "Our funding costs continue to decline, albeit more modestly in recent quarters. We have preserved our margins to the extent possible in this challenging interest-rate environment by shifting our earning asset mix in favor of higher-yielding loans."

Noninterest Income

Noninterest income was $14.8 million for the year ended December 31, 2012, an increase of $1.0 million, or 7.1 percent, from the $13.9 million reported for 2011. Non-core gains for 2012 totaled $0.48 million, all related to RDSI matters, including contract buyouts and a vendor settlement, while for 2011, non-core gains totaled $2.4 million, including RDSI contract buyouts and $1.87 million of securities gains. Excluding these one-time items, noninterest income from operations grew 25.3 percent, from $11.5 million in 2011 to $14.4 million for 2012. Fourth quarter 2012 noninterest income, less the $0.33 million vendor settlement, grew 26 percent to $4.3 million.

Despite the loss of RDSI data processing fee income, Rurban continues to report an exceptional level of noninterest income. Fees contributed 45 percent of operating revenue for the 2012 fourth quarter, and 41 percent for the full year. Higher gains on loan sales and a lower impairment of mortgage servicing rights (MSR) in both the fourth quarter and the full year contributed to the growth of 2012 noninterest income.

Data Services
Three Months Ended Twelve Months Ended
($'s in thousands) Dec. 2012 Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Dec. 2012 Dec. 2011
Data Processing & Network Services $ 179 $ 229 $ 194 $ 177 $ 320 $ 779 $ 1,281
Payment Solutions 549 488 633 708 720 2,378 3,254
Contract Buyout -- 53 -- 551 -- 604 519
Vendor Settlement 334 -- -- -- -- 334 --
RDSI Gross Revenue 1,062 780 827 1,436 1,040 4,095 5,054
Less: Intercompany (251) (285) (251) (793) (369) (1,580) (1,424)
Net Data Services Fees $ 811 $ 485 $ 576 $ 643 $ 671 $ 2,515 $ 3,630
Core Data Services Fees $ 477 $ 432 $ 576 $ 553 $ 671 $ 2,038 $ 3,111

RDSI gross revenue was $4.1 million for 2012, a decline of $0.96 million, or 19 percent, from the $5.0 million reported for 2011. Included in revenue for both years were certain one-time items arising from RDSI's transition to become an exclusive provider of item processing and network services; for 2012, contract buyouts and a vendor settlement boosted gross revenue by $0.94 million while in 2011, the gain from a contract buyout contributed $0.52 million. Excluding these one-time items, gross revenue from operations was $3.2 million compared to $4.5 million for 2011, a decline of 30.4 percent year over year. Intercompany sales to State Bank accounted for $1.6 million in 2012, including a one-time contract buyout fee of $0.46 million paid by State Bank to RDSI in the first quarter of 2012; for 2011, intercompany sales were $1.4 million. Excluding intercompany sales and one-time items, core net data services fees to third parties were $2.0 million in 2012 and $3.1 million in 2011, a decline of $1.1 million or 34.5 percent.

During the fourth quarter of 2012, RDSI settled all pending litigation with New Core Holdings relating to earlier agreements and transactions, incurring one-time legal expenses of $115,000. In addition, RDSI recognized a $0.33 million gain from the settlement of a vendor agreement. According to Mr. Klein, "RDSI has nearly completed its transformation to a more focused organization committed to network services and item processing for the banking sector. At the same time, we continue to explore opportunities to leverage our technology toward applications that might expand our core expertise into new and profitable directions."

Mortgage Banking
Three Months Ended Twelve Months Ended
($'s in thousands) Dec. 2012 Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Dec. 2012 Dec. 2011
Mortgage originations $ 93,619 $ 90,685 $ 79,901 $ 68,331 $ 85,114 $ 332,535 $ 220,208
Mortgage sales 93,993 81,862 75,227 64,212 81,046 315,294 197,500
Mortgage servicing portfolio 528,086 488,930 459,380 422,802 402,062 528,086 402,062
Mortgage servicing rights 3,775 3,346 3,359 3,359 2,820 3,775 2,820
Mortgage servicing revenue:
Loan servicing fees 319 297 274 259 242 1,149 894
Less: OMSR amortization (362) (369) (254) (349) (329) 1,335 745
Net administrative fees (43) (72) 20 (90) (87) (186) 149
Less: OMSR valuation adjustment 195 (120) (185) 419 (221) 310 (1,119)
Net loan servicing fees 152 (192) (165) 329 (308) 124 (970)
Gain on sale of mortgages 2,136 1,572 1,395 1,181 1,529 6,284 3,620
Mortgage banking revenue, net $2,288 $1,380 $1,230 $1,510 $1,221 $6,408 $2,650

Mortgage banking continued its banner year, with fourth quarter loan originations reaching a new high: $93.6 million, up $8.5 million, or 10 percent, from the $85.1 million generated in the fourth quarter of 2011, and higher by $2.9 million than the third quarter. For the twelve month period, originations were $332.5 million, up 51 percent above 2011, with loan sales into the secondary market also at record levels: $315.3 million, up $118 million, or 60 percent above 2011 levels.

Net mortgage banking income, consisting primarily of gains on the sale of mortgage loans and to a lesser extent, net loan servicing fees, was $6.4 million for the 2012 fiscal year. Loan sales strengthened with each successive quarter throughout the year, and generated a higher spread every quarter as well. The gain on sale of mortgages averaged 1.36 percent for 2012 compared to a spread of 1.08 percent for 2011, generating $6.3 million of 2012 gains – 74 percent ahead of 2011.

Net mortgage servicing fees were $0.12 million in 2012 compared to a loss of $0.97 million for 2011. The net mortgage servicing valuation adjustment ended 2012 in positive territory, with a gain of $0.31 million for the twelve month period; this compares to the $1.1 million charge incurred for 2011. The mortgage servicing portfolio at the end of the fourth quarter of 2012 was $528 million, up $126 million, or 31.3 percent, from 2011 fourth quarter-end.

"Like many banks in this environment," explained Mr. Klein, "we have looked to mortgage banking to drive revenue growth. We have succeeded on all fronts this past year. With two-thirds of our total production coming from clients new to our bank, we have opportunities to leverage this entry-level, yet highly visible, mortgage servicing product into multifaceted, profitable relationships."

Mortgage banking revenues accounted for 43 percent of noninterest income during the twelve months of 2012 compared to 19 percent in 2011 where impairment valuations reduced the contribution of mortgage banking. Excluding mortgage banking and data services fees, the remainder of noninterest income in both years was derived primarily from wealth management and customer service fees; each of these two business lines has contributed a remarkably stable stream of fee income modestly in excess of $2.5 million every year. In addition, Rurban sold several SBA and FSA guaranteed loans which generated revenue of $264,000 in 2012 and $208,000 in 2011.

Loan Loss Provision

The loan loss provision was $1.35 million for 2012, a decline of $0.64 million, or 32 percent, from the previous year. The decreasing provision expense reflects a 20 percent decline in nonperforming loans over the past twelve months, and a $1.1 million lower level of charge-offs. The loan loss reserve at year-end 2012 was 1.47 percent of total loans, providing 104 percent coverage of nonperforming loans at December 31, 2012; this compares to reserve coverage of 79 percent at year-end 2011. For the fourth quarter of 2012, the $0.40 million provision more than replaced net charge-offs of $0.29 million.

Noninterest Expense

Noninterest expense for 2012 was $27.5 million compared to $30.3 million for the previous year. In 2012, nonrecurring charges totaled $0.18 million, including $0.12 million for the settlement of all pending New Core litigation and $0.65 million for a branch writedown, all of which occurred in the 2012 fourth quarter; for 2011, nonrecurring charges totaled $2.1 million, including $1.1 million of prepayment penalties incurred during the Bank's balance sheet restructuring, and $1.0 million of RDSI write-downs and write-offs. Excluding these one-time items, 2012 operating expenses declined by 3.1 percent year over year.

Savings were achieved across the board, with the exception of salaries and benefits expense, which grew $0.34 million, or 2.4 percent. Increased compensation expense reflects the higher level of mortgage banking activity, since mortgage bankers receive commissions based on volume of originations. Excluding mortgage banking commission of $2.1 million in 2012 and $0.9 million in 2011, the remaining consolidated total compensation expense declined by $1.0 million, or 6.3 percent year over year. Mr. Klein added, "We are making steady progress with our cost-savings initiatives, but much of our progress is masked by our growing and highly profitable non-bank activities, where expense growth, especially compensation expense, has been more closely tied to revenue growth." Reflecting this improvement, the core efficiency ratio declined to 73.8 percent, from 77.6 percent for the preceding year.

For the fourth quarter of 2012, noninterest expense was $7.2 million compared to $8.0 million for the 2011 fourth quarter. Excluding nonrecurring items totaling $0.18 million in 2012 and $1.0 million in 2011, noninterest expense from operations was virtually unchanged at $7.0 million for both fourth quarters.

BALANCE SHEET

Total assets as of December 31, 2012 were $638.2 million, an increase of $9.6 million, or 1.5 percent, above levels at December 31, 2011. Over the same twelve-month time frame, total deposits grew $8.2 million, or 1.6 percent, and loans grew $20.8 million, or 4.7 percent. 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 63 percent of total deposits compared to 57 percent for the prior year-end. The continuing decline in interest rates, combined with a lower-cost deposit mix, has contributed to a 25 basis point decline in the cost of fourth quarter deposits compared to the year-earlier fourth quarter; however, the improvement has narrowed by only three basis points from the linked quarter, suggesting that further progress may be more difficult.

Declining interest rates also contributed to the 37 basis point decline in earning asset yield over the past year. Management's decision to fund higher-yielding loans from the securities portfolio has moderated the decline in earning asset yield, which currently stands at 4.56 percent as of the fourth quarter of 2012. Unlike deposit costs, however, asset yields have continued to decline, with fourth quarter lower by 22 basis points compared to the linked quarter.

Loan Portfolio
($ in Thousands) Dec. 2012 Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011 Variance YOY
Commercial & Industrial (C&I) $ 81,491 $ 76,043 $ 75,964 $ 78,450 $ 78,112 $ 3,379
% of Total 17.6% 16.7% 16.8% 17.8% 17.7% 4.3%
Commercial Real Estate 201,392 198,682 199,918 188,984 187,829 13,563
% of Total 43.5% 43.6% 44.2% 43.0% 42.4% 7.2%
Agriculture 42,276 42,988 41,093 37,741 38,361 3,915
% of Total 9.1% 9.4% 9.1% 8.6% 8.7% 10.2%
Residential Real Estate 87,859 85,727 85,046 84,771 87,656 203
% of Total 19.0% 18.8% 18.8% 19.3% 19.8% 0.2%
Consumer & Other 50,371 51,581 50,089 49,775 50,596 (225)
% of Total 10.9% 11.3% 11.1% 11.3% 11.4% (0.4%)
Total Loans $463,389 $455,021 $452,110 $439,721 $442,554 $ 20,835
4.7%

Total loans were $463.4 million at December 31, 2012 compared to $442.6 million for the prior-year period, up $20.8 million, or 4.7 percent. Commercial real estate ("CRE") loans accounted for nearly 65 percent of total loan growth over the past twelve-month period, up $13.6 million, or 7.2 percent. CRE loans currently comprise 43.5 percent of State Bank's loan portfolio, followed by residential real estate and C&I loans, at 19.0 percent and 17.6 percent, respectively. Although CRE loans showed the largest dollar increase, agriculture loans grew by a robust 10.2 percent, adding nearly $4 million this past year.

ASSET QUALITY

Rurban's strong underwriting and credit administration expertise continue to position the asset quality in the top quartile of its peers, with only 1.42 percent of its loan portfolio on nonperforming status. Nonaccruing loans were $5.3 million as of December 31, 2012, a decline of $1.6 million, or 23 percent from the year-earlier level. The greatest improvement was reflected in the C&I portfolio, where nonaccrual loans declined over the past twelve months by $1.1 million, or 48 percent; they now stand at $1.2 million as of December 31, 2012. Currently, Rurban has only one nonperforming relationship that exceeds $1.0 million; the three largest nonperforming loans total $3.0 million, accounting for 33 percent of nonperforming assets.

Summary of Nonperforming Assets
($ in Thousands)
Nonaccruing Loan Category Dec. 2012 Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011
Commercial & Industrial (C&I) $ 1,246 $ 1,362 $ 1,467 $ 2,021 $ 2,393
% of Total C&I loans 1.53% 1.78% 1.93% 2.58% 3.06%
Commercial Real Estate (CRE) 782 448 1,345 1,481 1,456
% of Total CRE loans 0.39% 0.23% 0.67% 0.78% 0.78%
Agriculture -- 3 -- 113 --
% of Total Ag loans -- 0.01% -- 0.30% --
Residential Real Estate 2,631 2,607 1,958 1,840 2,471
% of Total Res. RE loans 2.99% 3.04% 2.30% 2.17% 2.82%
Consumer & Other 646 829 545 1,056 580
% of Consumer & Other loans 1.28% 1.61% 1.09% 2.12% 1.15%
Total Nonaccruing Loans 5,305 5,249 5,315 6,511 6,900
% of Total Loans 1.14% 1.15% 1.18% 1.48% 1.56%
Accruing Restructured Loans 1,258 1,735 1,837 1,593 1,334
Total Nonperforming Loans $ 6,563 $ 6,984 $ 7,152 $ 8,104 $ 8,234
% of Total Loans 1.42% 1.53% 1.58% 1.84% 1.86%
OREO & Repossessed Vehicles 2,367 2,415 1,708 1,807 1,830
Total Nonperforming Assets $ 8,930 $ 9,399 $ 8,860 $ 9,911 $ 10,064
% of Total Assets 1.40% 1.49% 1.40% 1.54% 1.60%

Rurban's strong underwriting and credit administration expertise position the quality of its loan portfolio in the top quartile of its asset peers, with only 1.42 percent of loans on nonperforming status. Nonaccruing loans were $5.3 million as of December 31, 2012, a decline of $1.6 million, or 23 percent from the year-earlier level. The greatest improvement was reflected in the C&I portfolio, where nonaccrual loans declined over the past twelve months by $1.1 million, or 48 percent; they now stand at $1.2 million as of December 31, 2012. Currently, Rurban has only one nonperforming relationship that exceeds $1.0 million; the three largest nonperforming loans total $3.0 million, accounting for 33 percent of nonperforming assets.

Nonperforming Asset Reconciliation
($ in Thousands) Dec. 2012 Sep. 2012 Jun. 2012 Mar. 2012 Dec. 2011
Beginning Balance $ 9,399 $ 8,860 $ 9,911 $ 10,064 $ 10,612
Additions 1,026 1,396 1,209 906 1,193
Returns to performing status (226) (163) (306) (419) (169)
Principal payments (228) (146) (1,773) (402) (375)
Sale of OREO/OAO (264) (152) (147) (23) (358)
Loan charge-offs (300) (294) (220) (474) (648)
Valuation write-downs -- -- (58) -- (214)
Restructured Loan Activity (477) (102) 244 259 23
Net Change 469 522 (1,051) (153) (548)
Ending Balance $ 8,930 $ 9,399 $ 8,860 $ 9,911 $ 10,064

Nonperforming assets now stand at $8.9 million, or 1.40 percent of assets. They declined by $1.1 million over the past twelve months, or approximately $0.28 million per quarter, through a combination of asset sales, charge-offs, principal payments, and credit improvements. The loan loss provision has exceeded net charge-offs each quarter.

30-89 Day Loan Delinquencies December September June March December
($ in thousands) 2012 2012 2012 2012 2011
30-59 days past due $ 2,058 434 1,385 271 1,002
60-89 days past due $ 537 221 778 294 978
Total 30-89 Days Delinquent $ 2,595 655 2,163 565 1,980
% of Total Loans 0.56% 0.14% 0.48% 0.13% 0.45%

CAPITALIZATION

Capital ratios continue to improve, but still remain at the low end of management's objectives. The tangible leverage ratio improved by 85 basis points over the past twelve months, and now stands at 5.70 percent. All bank regulatory ratios remain in excess of "well-capitalized" levels, and have improved relative to the prior year; holding company ratios have also demonstrated consistent quarterly improvement since mid-year 2011. At December 31, 2012, State Bank's Total Risk-Based Capital was estimated to be $57.1 million, $19.6 million above the well-capitalized level; with the Total Risk-based Capital Ratio estimated at 12.0 percent. As of December 31, 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. Additional factors that could cause results to differ materially from those described above can be found in Rurban's 2011 Annual Report on Form 10-K and documents subsequently filed by Rurban with the Securities and Exchange Commission. 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)
($ in Thousands) December
2012
September
2012
June
2012
March
2012
December
2011
ASSETS
Cash and due from banks $ 19,144 $ 10,289 $ 14,636 $ 29,602 $ 14,846
Securities available for sale, at fair value 98,702 101,247 102,537 110,603 111,978
Other securities - FRB and FHLB Stock 3,748 3,748 3,748 3,685 3,685
Total investment securities 102,450 104,995 106,285 114,288 115,663
Loans held for sale 6,147 11,584 10,595 11,384 5,238
Loans, net of unearned income 463,389 455,021 452,110 439,721 442,554
Allowance for loan losses (6,811) (6,696) (6,618) (6,609) (6,529)
Net loans 456,578 448,325 445,492 433,112 436,025
Premises and equipment, net 12,633 12,898 13,190 13,282 13,773
Purchased software 330 334 355 386 159
Cash surrender value of life insurance 12,577 12,491 12,401 12,312 12,224
Goodwill 16,353 16,353 16,353 16,353 16,353
Core deposits and other intangibles 1,219 1,376 1,534 1,691 1,849
Foreclosed assets held for sale, net 2,367 2,415 1,708 1,807 1,830
Mortgage servicing rights 3,775 3,346 3,359 3,359 2,820
Accrued interest receivable 1,235 1,832 1,597 1,802 1,635
Other assets 3,426 3,967 5,026 5,598 6,249
Total assets $ 638,234 $ 630,205 $ 632,531 $ 644,976 $ 628,664
LIABILITIES AND EQUITY
Deposits
Non interest bearing demand $ 77,799 $ 69,250 $ 68,918 $ 71,077 $ 65,963
Interest bearing demand 117,289 112,230 109,268 118,898 107,446
Savings 57,461 53,505 53,777 52,599 49,665
Money market 80,381 78,006 81,114 82,799 74,244
Time deposits 194,071 202,259 205,584 210,119 221,447
Total deposits 527,001 515,250 518,661 535,492 518,765
Notes payable 1,702 1,975 2,249 2,519 2,788
Advances from Federal Home Loan Bank 21,000 18,500 17,500 12,611 12,776
Repurchase agreements 10,333 13,735 15,824 17,771 18,779
Trust preferred securities 20,620 20,620 20,620 20,620 20,620
Accrued interest payable 138 4,223 3,836 3,556 2,954
Other liabilities 4,156 3,972 3,567 3,381 4,050
Total liabilities 584,950 578,275 582,257 595,950 580,732
Equity
Preferred stock -- -- -- -- --
Common stock 12,569 12,569 12,569 12,569 12,569
Additional paid-in capital 15,374 15,363 15,350 15,338 15,323
Retained earnings 25,280 23,755 22,452 21,438 20,466
Accumulated other comprehensive income 1,830 2,012 1,672 1,450 1,343
Treasury stock (1,769) (1,769) (1,769) (1,769) (1,769)
Total equity 53,284 51,930 50,274 49,026 47,932
Total liabilities and equity $ 638,234 $ 630,205 $ 632,531 $ 644,976 $ 628,664
RURBAN FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)
($ in thousands, except share data) Three Months Ended Twelve Months Ended
Interest income December
2012
September
2012
June
2012
March
2012
December
2011
December
2012
December
2011
Loans
Taxable $ 5,840 $ 6,106 $ 6,037 $ 5,928 $ 6,171 $ 23,911 $ 24,444
Nontaxable 22 21 24 23 24 90 75
Securities
Taxable 330 383 403 399 387 1,515 2,010
Nontaxable 157 156 146 147 170 606 980
Total interest income 6,349 6,666 6,610 6,497 6,752 26,122 27,509
Interest expense
Deposits 653 694 768 854 946 2,969 3,982
Other borrowings 15 17 (2) 34 22 64 96
Repurchase Agreements 3 11 60 68 70 142 912
Federal Home Loan Bank advances 92 92 75 74 77 333 402
Trust preferred securities 431 418 441 592 358 1,882 1,406
Total interest expense 1,194 1,232 1,342 1,622 1,473 5,390 6,798
Net interest income 5,155 5,434 5,268 4,875 5,279 20,732 20,711
Provision for loan losses 400 300 200 450 299 1,350 1,994
Net interest income after provision for loan losses 4,755 5,134 5,068 4,425 4,980 19,382 18,717
Noninterest income
Data service fees 811 485 576 643 671 2,515 3,630
Trust fees 606 646 607 642 623 2,501 2,616
Customer service fees 648 677 668 631 647 2,624 2,531
Gain on sale of mtg. loans & OMSR's 2,136 1,572 1,395 1,181 1,529 6,284 3,620
Mortgage loan servicing fees, net 152 (192) (165) 329 (308) 124 (970)
Gain on sale of non-mortgage loans 94 170 -- -- 127 264 208
Net gain on sales of securities -- -- -- -- -- -- 1,871
Loss on sale or disposal of assets (54) (151) (50) (56) (46) (311) (333)
Other income 255 201 177 211 180 844 684
Total non-interest income 4,648 3,408 3,208 3,581 3,423 14,845 13,857
Noninterest expense
Salaries and employee benefits 3,825 3,597 3,597 3,499 3,488 14,518 14,174
Net occupancy expense 494 515 528 548 531 2,085 2,201
Equipment expense 692 722 712 711 709 2,837 2,827
FDIC insurance expense 100 91 223 214 191 628 908
Fixed asset and software impairment 65 -- -- -- 609 65 609
Data processing fees 132 103 121 113 131 469 625
Professional fees 686 451 390 385 493 1,912 1,920
Marketing expense 115 85 103 90 93 393 328
Printing and office supplies 46 39 67 78 52 230 333
Telephone and communication 146 151 139 144 139 580 580
Postage and delivery expense 204 223 200 229 235 856 1,099
State, local and other taxes 136 128 118 120 77 502 457
Employee expense 113 118 119 106 113 456 524
Goodwill Impairment -- -- -- -- 381 -- 381
Other intangible amortization expense 158 157 158 157 157 630 737
OREO Impairment -- -- 58 -- 214 58 214
Other expenses 300 345 338 282 359 1,265 2,336
Total non-interest expense 7,212 6,725 6,871 6,676 7,972 27,484 30,253
Income before income tax expense 2,191 1,817 1,405 1,330 431 6,743 2,322
Income tax expense 667 513 391 358 157 1,929 658
Net income $ 1,524 $ 1,304 $ 1,014 $ 972 $ 274 $ 4,814 $ 1,664
Common share data:
Basic earnings per common share $ 0.31 $ 0.27 $ 0.21 $ 0.20 $ 0.06 $ 0.99 $ 0.34
Diluted earnings per common share $ 0.31 $ 0.27 $ 0.21 $ 0.20 $ 0.06 $ 0.99 $ 0.34
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 Twelve Months Ended
SUMMARY OF OPERATIONS December
2012
September
2012
June
2012
March
2012
December
2011
December
2012
December
2011
Net interest income $ 5,155 5,434 5,268 4,875 5,279 20,732 20,709
Tax-equivalent adjustment $ 92 91 88 88 100 359 543
Tax-equivalent net interest income (core) $ 5,247 5,525 5,356 4,963 5,379 21,091 21,252
Provision for loan loss $ 400 300 200 450 299 1,350 1,994
Noninterest income $ 4,648 3,408 3,208 3,581 3,423 14,845 13,857
Less: Non core items $ (334) (53) -- (90) -- (477) (2,390)
Core noninterest income $ 4,314 3,355 3,208 3,491 3,423 14,368 11,467
Total revenue, tax-equivalent $ 9,895 8,933 8,564 8,544 8,802 35,936 35,111
Core revenue, tax-equivalent $ 9,561 8,880 8,564 8,454 8,802 35,459 32,720
Noninterest expense $ 7,212 6,725 6,871 6,676 7,972 27,484 30,253
Less: Non core items $ 180 -- -- -- 990 180 2,073
Core noninterest expense $ 7,032 6,725 6,871 6,676 6,982 27,304 28,180
Pre provision pretax income $ 2,591 2,117 1,605 1,780 730 8,093 4,315
Core pre provision pretax income $ 2,437 2,064 1,605 1,690 1,720 7,796 3,997
Pretax income $ 2,191 1,817 1,405 1,330 431 6,743 2,322
Net income $ 1,524 1,304 1,014 972 274 4,814 1,664
Core earnings after tax $ 1,422 1,269 1,014 913 927 4,618 1,455
PER SHARE INFORMATION:
Basic & diluted earnings $ 0.31 0.27 0.21 0.20 0.06 0.99 0.34
Core earnings $ 0.29 0.26 0.21 0.19 0.19 0.95 0.30
Book value per common share $ 10.96 10.68 10.34 10.08 9.86 10.96 9.86
PERFORMANCE RATIOS:
Return on average assets 0.95% 0.82% 0.63% 0.61% 0.17% 0.75% 0.26%
Core return on average assets 0.89% 0.80% 0.63% 0.57% 0.58% 0.72% 0.23%
Return on average common equity 11.64% 10.25% 8.20% 8.04% 2.33% 9.57% 3.54%
Core return on avg. tangible common equity 16.55% 15.49% 13.01% 12.18% 13.21% 14.39% 5.38%
Earning asset yield 4.50% 4.78% 4.76% 4.77% 4.93% 4.72% 5.06%
Cost of interest bearing liabilities 0.96% 0.98% 1.05% 1.28% 1.15% 1.07% 1.35%
Core efficiency ratio 69.47% 72.61% 77.66% 76.17% 74.80% 73.79% 77.55%
Core net interest income/ Average assets 3.28% 3.48% 3.33% 3.12% 3.38% 3.31% 3.30%
Core noninterest income/ Average assets 2.70% 2.11% 1.99% 2.20% 2.15% 2.25% 1.78%
Core noninterest expense/ Average assets 4.40% 4.24% 4.27% 4.20% 4.39% 4.28% 4.38%
Core noninterest income/ Operating revenue 43.60% 37.56% 37.46% 40.86% 38.89% 39.98% 32.66%
Net interest margin 3.65% 3.85% 3.75% 3.53% 3.80% 3.70% 3.71%
Tax equivalent effect 0.07% 0.06% 0.06% 0.07% 0.07% 0.06% 0.10%
Net interest margin - fully tax equivalent basis 3.72% 3.91% 3.81% 3.60% 3.87% 3.76% 3.81%
ASSET QUALITY RATIOS:
Gross charge-offs $ 300 302 252 474 648 1,328 3,406
Recoveries $ 15 78 62 104 642 259 1,226
Net charge-offs $ 285 223 190 370 6 1,068 2,181
Nonaccruing loans/ Total loans 1.14% 1.15% 1.18% 1.48% 1.56% 1.14% 1.56%
Nonperforming loans/ Total loans 1.42% 1.53% 1.58% 1.84% 1.86% 1.42% 1.86%
Nonperforming assets/ Loans & OREO 2.02% 2.05% 1.95% 2.24% 2.26% 2.02% 2.26%
Nonperforming assets/ Total assets 1.40% 1.49% 1.40% 1.54% 1.60% 1.40% 1.60%
Allowance for loan loss/ Nonperforming loans 103.8% 95.9% 92.5% 81.6% 79.3% 103.8% 79.3%
Allowance for loan loss/ Total loans 1.47% 1.47% 1.46% 1.50% 1.48% 1.47% 1.48%
Net loan charge-offs/ Average loans (ann.) 0.25% 0.20% 0.17% 0.34% 0.01% 0.24% 0.50%
Loan loss provision/ Net charge-offs 140.56% 134.46% 105.22% 121.52% 5243.77% 126.39% 77.92%
CAPITAL & LIQUIDITY RATIOS:
Loans/ Deposits 87.93% 88.31% 87.17% 82.12% 85.31% 87.93% 85.31%
Equity/ Assets 8.35% 8.24% 7.95% 7.60% 7.62% 8.35% 7.62%
Tangible equity/ Tangible assets 5.70% 5.53% 5.21% 4.88% 4.85% 5.70% 4.85%
END OF PERIOD BALANCES
Total loans $ 463,389 455,021 452,110 439,721 442,554 463,389 442,554
Total assets $ 638,234 630,205 632,531 644,976 628,664 638,234 628,664
Deposits $ 527,001 515,250 518,661 535,492 518,765 527,001 518,765
Stockholders equity $ 53,284 51,930 50,274 49,026 47,932 53,284 47,932
Tangible equity $ 35,382 33,867 32,032 30,596 29,571 35,382 29,571
Full-time equivalent employees 204 199 204 203 210 204 210
AVERAGE BALANCES
Total loans $ 455,705 454,634 446,786 436,384 437,020 448,294 438,383
Total earning assets $ 564,564 565,144 562,169 552,016 556,004 560,858 558,022
Total assets $ 639,048 635,012 643,859 635,849 636,932 638,035 643,528
Deposits $ 522,970 515,795 527,992 523,193 522,472 522,412 516,282
Stockholders equity $ 52,351 50,905 49,464 48,377 47,035 50,300 47,035
Intangibles $ 17,968 18,126 18,299 18,396 18,953 18,217 19,981
Tangible equity $ 34,383 32,779 31,165 29,981 28,082 32,083 27,054
RURBAN FINANCIAL CORP.
Rate Volume Analysis - (Unaudited)
For the Three and Twelve Months Ended December 31, 2012 and 2011
($ in Thousands) Three Months Ended December 31, 2012 Three Months Ended December 31, 2011
Assets Average
Balance

Interest
Average
Rate
Average
Balance

Interest
Average
Rate
Taxable securities $ 84,945 330 1.55% $ 93,999 387 1.64%
Non-taxable securities 15,985 238 5.96% 15,235 257 6.75%
Federal funds sold -- -- N/A 870 1 0.26%
Loans, net 463,635 5,873 5.07% 445,900 6,208 5.57%
Total earning assets $ 564,564 6,441 4.56% $ 556,004 6,852 4.93%
Cash and due from banks 18,185 22,965
Allowance for loan losses (6,842) (6,161)
Premises and equipment 15,344 16,699
Other assets 47,595 47,425
Total assets $ 638,847 $ 636,932
Liabilities
Savings and interest-bearing demand $ 247,866 44 0.07% $ 233,149 57 0.10%
Time deposits 198,657 609 1.23% 223,179 889 1.59%
Repurchase agreements 11,711 3 0.10% 18,711 70 1.51%
Advances from FHLB 18,245 92 2.03% 12,832 77 2.39%
Junior subordinated debentures 20,620 419 8.13% 20,620 358 6.94%
Notes payable & other borrowed funds 1,791 27 6.03% 2,824 22 3.17%
Total interest-bearing liabilities $ 498,890 1,194 0.96% $ 511,314 1,473 1.15%
Non interest-bearing demand 76,447 66,144
Other liabilities 11,159 11,501
Total liabilities 586,496 588,959
Equity $ 52,351 $ 47,972
Total liabilities and equity $ 638,847 $ 636,932
Net interest income (tax equivalent basis) $ 5,247 $ 5,379
Net interest income as a percent of average interest-earning assets 3.72% 3.87%
Twelve Months Ended December 31, 2012 Twelve Months Ended December 31, 2011
Assets Average
Balance

Interest
Average
Rate
Average
Balance

Interest
Average
Rate
Taxable securities $ 90,182 1,515 1.68% $ 97,528 2,010 2.06%
Non-taxable securities 15,160 919 6.06% 21,892 1,483 6.77%
Federal funds sold -- -- N/A 219 1 0.25%
Loans, net 455,516 24,047 5.28% 438,383 24,558 5.60%
Total earning assets $ 560,858 26,481 4.72% $ 558,022 28,052 5.03%
Cash and due from banks 20,728 26,477
Allowance for loan losses (6,591) (6,534)
Premises and equipment 15,360 16,797
Other assets 47,680 48,766
Total assets $ 638,035 $ 643,528
Liabilities
Savings and interest-bearing demand $ 245,528 210 0.09% $ 234,497 182 0.08%
Time deposits 206,135 2,759 1.34% 217,546 3,800 1.75%
Repurchase agreements 15,180 142 0.94% 31,307 912 2.91%
Advances from FHLB 15,547 333 2.14% 15,674 402 2.57%
Junior subordinated debentures 20,620 1,815 8.80% 20,620 1,406 6.82%
Notes payable & other borrowed funds 2,058 131 6.36% 3,085 96 3.12%
Total interest-bearing liabilities $ 505,068 5,390 1.07% $ 522,728 6,798 1.30%
Non interest-bearing demand 70,749 64,239
Other liabilities 11,919 9,526
Total liabilities 587,736 596,493
Equity $ 50,300 $ 47,035
Total liabilities and equity $ 638,035 $ 643,528
Net interest income (tax equivalent basis) $ 21,091 $ 21,253
Net interest income as a percent of average interest-earning assets 3.76% 3.81%

CONTACT: Investor Contact Information: Anthony Cosentino Executive Vice President and Chief Financial Officer 419.785.3663 Tony.Cosentino@thebank-sbt.comSource:Rurban Financial Corp.