**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-K**




**(Mark
      One)**





**x**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
                EXCHANGE ACT of 1934****For
                the fiscal year ended December 31, 2007****OR****o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
                EXCHANGE ACT OF 1934****For
                the transition period from ___________ to
                ____________**





**Commission
                File Number 0-13507****RURBAN
                FINANCIAL CORP.**(Exact
                name of Registrant as specified in its
                charter)





**Ohio**
            
            **34-1395608**(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)**401
                Clinton Street, Defiance, Ohio**
            
            **43512**(Address
                of principal executive offices)
            
            (Zip
                Code)Registrant’s
                telephone number, including area code:
            
            **(419)
                783-8950**Securities
                registered pursuant to Section 12(b) of the
                Act:





**Title
                of each class**
            
            **Name
                of each exchange on which registered**Common
                Shares, Without Par Value
            
            The
                NASDAQ Stock Market, LLC





Securities
                registered pursuant to Section 12(g) of the Act:**Not
                Applicable**




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes
oNo
x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


Yes
oNo
x




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes xNo
o







Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this Form 10-K. x




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer”, “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. Large Accelerate Filer
oAccelerated Filer oNon-Accelerated
      Filer oSmaller Reporting Company x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes oNo
x




The
      aggregate market value of the common shares of the registrant held by
      non-affiliates computed by reference to the price at which the common shares
      were last sold as of the last business day of the registrant’s most recently
      completed second fiscal quarter was $59,158,736.




The
      number of common shares of the registrant outstanding at March 12, 2008 was
      4,941,933.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




Portions
      of the Registrant’s definitive Proxy Statement for its Annual Meeting of
      Shareholders to be held on April 17, 2008 are incorporated by reference into
      Part III of this Annual Report on Form 10-K.





**RURBAN
      FINANCIAL CORP.**





**2007
      ANNUAL REPORT ON FORM 10-K**





**TABLE
      OF CONTENTS**





**PART
                I**Item
                1.
            Business
            4Item
                1A.
            Risk
                Factors
            24Item
                1B.
            Unresolved
                Staff Comments
            27Item
                2.
            Properties
            27Item
                3.
            Legal
                Proceedings
            29Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            29Supplemental
                Item: Executive Officers of the Registrant
            30**PART
                II**Item
                5.
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            32Item
                6.
            Selected
                Financial Data
            35Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            36Item
                7A.
            Qualitative
                and Quantitative Disclosures about Market Risk
            53Item
                8.
            Financial
                Statements and Supplementary Data
            53Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            53Item
                9A.
            Controls
                and Procedures
            53Item
                9B.
            Other
                Information
            5354**PART
                III**Item
                10.
            Directors,
                Executive Officers of the Registrant and Corporate
                Governance
            54Item
                11.
            Executive
                Compensation
            55Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            55Item
                13.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            55Item
                14.
            Principal
                Accountant Fees and Services
            55**PART
                IV**Item
                15.
            Exhibits
                and Financial Statement Schedules
            56Signatures
                and Certifications
            57


3.





**PART
      I**




Item
      1.Business.




General




Rurban
      Financial Corp., an Ohio corporation (the “Company”), is a bank holding company
      registered under the Bank Holding Company Act of 1956, as amended, and is
      subject to regulation by the Board of Governors of the Federal Reserve System
      (the “Federal Reserve Board”). The Company was organized in 1983. The executive
      offices of the Company are located at 401 Clinton Street, Defiance, Ohio
      43512.




Through
      its direct and indirect subsidiaries, The State Bank and Trust Company (“State
      Bank”), RFCBC, Inc. (“RFCBC”), Rurbanc Data Services, Inc. (“RDSI”), Diverse
      Computer Marketers, Inc. (“DCM”), Reliance Financial Services (“RFS”), Rurban
      Mortgage Company (“RMC”), Rurban Statutory Trust I (“RST I”), and Rurban
      Statutory Trust II (“RST II”), the Company is engaged in a variety of
      activities, including commercial banking, data and item processing, and trust
      and financial services, as explained in more detail below.




General
      Description of Holding Company Group




State
      Bank




State
      Bank is an Ohio state-chartered bank. State Bank presently operates six branch
      offices in Defiance County, Ohio (five in the city of Defiance and one in Ney),
      two branch offices in adjacent Paulding County, Ohio (one each in Paulding
      and
      Oakwood), three branch offices in Fulton County, Ohio (one each in Delta, Lyons
      and Wauseon), two branch offices in Allen County, Ohio (two in the city of
      Lima), three branch offices in Wood County, Ohio (one each in Luckey, Walbridge
      and Perrysburg) and one office in adjacent Lucas County, Ohio, a Loan Production
      Office in Franklin County, and one branch office in Allen County, Indiana.
      At
      December 31, 2007, State Bank had 162 full-time equivalent
      employees.




State
      Bank offers a full range of commercial banking services, including checking
      accounts, passbook savings, money market accounts and time certificates of
      deposit; automatic teller machines; commercial, consumer, agricultural and
      residential mortgage loans (including “Home Value Equity” line of credit loans);
      personal and corporate trust services; commercial leasing; bank credit card
      services; safe deposit box rentals; Internet and telephone banking and other
      personalized banking services.




RFS
      is a
      trust and financial services company and was merged into State Bank during
      2007.
      RFS offers various trust and financial services, including asset management
      services for individuals and corporate employee benefit plans, as well as
      brokerage services through Raymond James Financial, Inc.




RMC




RMC
      is an
      Ohio corporation and wholly-owned subsidiary of State Bank. RMC is a mortgage
      company; however, it ceased originating mortgage loans in the second quarter
      of
      2000 and is presently inactive.




At
      December 31, 2007, RMC had no employees.




RFCBC




RFCBC
      is
      an Ohio corporation and wholly-owned subsidiary of the Company that was
      incorporated in August 2004. RFCBC operates as a loan subsidiary in servicing
      and working out problem loans. At December 31, 2007, RFCBC had no
      employees.


4.


RDSI




RDSI
      has
      been in operation since 1964 and became an Ohio corporation in June 1976. RDSI
      has two operating locations: one in Defiance, Ohio, and one in Holland,
      Michigan. At December 31, 2007, RDSI had 70 full-time equivalent
      employees.




RDSI
      delivers software systems to the banking industry which provide a broad range
      of
      data processing and item processing services in an outsourced environment
      utilizing Information Technology Inc. (ITI) software.




DCM




DCM
      was
      acquired in September of 2006. DCM is a Michigan corporation and a wholly-owned
      subsidiary of RDSI. DCM has one operating location: Lansing, Michigan. At
      December 31, 2007, DCM had 29 full-time equivalent employees.




DCM
      delivers item processing services to the banking industry in an outsourced
      environment utilizing BankWare software.




DCM
      was
      merged into RDSI effective December 31, 2007 and now operates as a division
      of
      RDSI doing business as “DCM”.




RST
      I




RST
      I is
      a trust that was organized in August 2000. In September 2000, RST I closed
      a
      pooled private offering of 10,000 Capital Securities with liquidation amount
      of
      $1,000 per security. The proceeds of the offering were loaned to the Company
      in
      exchange for junior subordinated debentures with terms similar to the Capital
      Securities. The sole assets of RST I are the junior subordinated debentures
      and
      the back-up obligations, which in the aggregate, constitute a full and
      unconditional guarantee by the Company of the obligations of RST I under the
      Capital Securities.




RST
      II




RST
      II is
      a trust that was organized in August 2005. In September 2005, RST II closed
      a
      pooled private offering of 10,000 Capital Securities with a liquidation amount
      of $1,000 per security. The proceeds of the offering were loaned to the Company
      in exchange for junior subordinated debentures with terms similar to the Capital
      Securities. The sole assets of RST II are the junior subordinated debentures
      and
      the back-up obligations, which in the aggregate, constitute a full and
      unconditional guarantee by the Company of the obligations of RST II under the
      Capital Securities.




Recent
      Developments




During
      the first quarter of 2007, Rurban merged Reliance Financial Services, N.A.,
      its
      trust and investment subsidiary, and The Exchange Bank, its recently acquired
      community bank, into The State Bank and Trust Company. This action has allowed
      efficiencies leading to continuing core profit improvement at The State Bank
      and
      Trust Company.





State
      Bank continues to expand its reach to higher-growth markets. In January 2007,
      the Fort Wayne, Indiana Loan Production Office was converted to a full-service
      branch. State Bank continued its entrance to growth markets by opening a Loan
      Production Office in Columbus, Ohio in December, 2007.





RDSI
      and
      DCM, Rurban’s data and item processing subsidiaries, reported another record
      year. The total number of banks being processed increased by 5 to 117. Revenue
      increased to $20.6 million, a $4.3 million, or 27% increase, over the previous
      year’s results. Net income was a record $2.5 million for the
      year.


5.


On
      April
      12, 2007, Rurban initiated a stock repurchase program, authorizing the
      repurchase of up to 250,000 shares, or approximately 5%, of the Company’s
      outstanding shares. As of the end of the fourth quarter, Rurban repurchased
      48,500 shares at an average cost of $12.58 per share.





Rurban
      increased its dividend to shareholders from $0.21 per share during 2006 to
      $0.26
      per share in 2007.




Competition




State
      Bank experiences significant competition in attracting depositors and borrowers.
      Competition in lending activities comes principally from other commercial banks
      in the lending areas of State Bank, and, to a lesser extent, from savings
      associations, insurance companies, governmental agencies, credit unions,
      securities brokerage firms and pension funds. The primary factors in competing
      for loans are interest rates charged and overall banking services.




State
      Bank’s competition for deposits comes from other commercial banks, savings
      associations, money market funds and credit unions as well as from insurance
      companies and securities brokerage firms. The primary factors in competing
      for
      deposits are interest rates paid on deposits, account liquidity and convenience
      of office location.




RDSI
      and
      DCM also operate in a highly competitive field. RDSI and DCM compete primarily
      on the basis of the value and quality of their data processing and item
      processing services and service and convenience to their customers.




RFS
      operates in the highly competitive trust services field and its competition
      consists primarily of other Ohio bank trust departments.




**Supervision
      and Regulation**




The
      following is a summary of certain statutes and regulations affecting the Company
      and its subsidiaries. The summary is qualified in its entirety by reference
      to
      such statutes and regulations.




Regulation
      of Bank Holding Companies and Their Subsidiaries in General




The
      Company is a bank holding company and, as such, is subject to regulation under
      the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company
      Act”). The Bank Holding Company Act requires the prior approval of the Federal
      Reserve Board before a bank holding company may acquire direct or indirect
      ownership or control of more than 5% of the voting shares of any bank (unless
      the bank is already majority owned by the bank holding company), acquire all
      or
      substantially all of the assets of another bank or bank holding company, or
      merge or consolidate with any other bank holding company. Subject to certain
      exceptions, the Bank Holding Company Act also prohibits a bank holding company
      from acquiring 5% of the voting shares of any company that is not a bank and
      from engaging in any business other than banking or managing or controlling
      banks. The primary exception to this prohibition allows a bank holding company
      to own shares in any company the activities of which the Federal Reserve Board
      had determined, as of November 19, 1999, to be so closely related to banking
      as
      to be a proper incident thereto.




The
      Company is subject to the reporting requirements of, and examination and
      regulation by, the Federal Reserve Board. The Federal Reserve Board has
      extensive enforcement authority over bank holding companies, including, without
      limitation, the ability to assess civil money penalties, issue cease and desist
      or removal orders, and require that a bank holding company divest subsidiaries,
      including its subsidiary banks. In general, the Federal Reserve Board may
      initiate enforcement actions for violations of laws and regulations and unsafe
      or unsound practices. A bank holding company and its subsidiaries are prohibited
      from engaging in certain tying arrangements in connection with extensions of
      credit and/or the provision of other property or services to a customer by
      the
      bank holding company or its subsidiaries.


6.


State
      Bank is a member of the Federal Reserve System, so its primary federal regulator
      is the Federal Reserve Board. The Federal Reserve Board issues regulations
      governing the operations of State Bank and examines State Bank. The Federal
      Reserve Board may initiate enforcement action against insured depository
      institutions and affiliated persons for violations of laws and regulations
      and
      for engaging in unsafe or unsound practices. The deposits of State Bank are
      insured by the Federal Deposit Insurance Corporation (“FDIC”) and are subject to
      the applicable provisions of the Federal Deposit Insurance Act.




As
      a
      state-chartered bank incorporated under Ohio law, State Bank is also subject
      to
      regulation, supervision and examination by the Ohio Division of Financial
      Institutions (the “Division”). The Division may initiate supervisory measures or
      formal enforcement actions against Ohio state-chartered banks and, if the
      grounds provided by law exist, the Division may place an Ohio bank in
      conservatorship or receivership. Whenever the Superintendent of Financial
      Institutions considers it necessary or appropriate, the Superintendent may
      also
      examine the affairs of any holding company or any affiliate or subsidiary of
      an
      Ohio bank.




Various
      requirements and restrictions under the laws of the United States and the State
      of Ohio affect the operations of State Bank, including requirements to maintain
      reserves against deposits, restrictions on the nature and amount of loans which
      may be made and the interest that may be charged thereon, restrictions relating
      to investments and other activities, limitations on credit exposure to
      correspondent banks, limitations on activities based on capital and surplus,
      limitations on payment of dividends, and limitations on branching. Various
      consumer laws and regulations also affect the operations of State
      Bank.




The
      Federal Home Loan Banks (“FHLBs”) provide credit to their members in the form of
      advances. As a member of the FHLB of Cincinnati, State Bank must maintain
      certain minimum investments in the capital stock of the FHLB of Cincinnati.
      State Bank was in compliance with these requirements at December 31,
      2007.




Dividends




The
      ability of the Company to obtain funds for the payment of dividends and for
      other cash requirements is largely dependent on the amount of dividends that
      may
      be declared by its subsidiaries. State Bank may not pay dividends to the Company
      if, after paying such dividends, it would fail to meet the required minimum
      levels under the risk-based capital guidelines and the minimum leverage ratio
      requirements. State Bank must obtain the approval of the Federal Reserve Board
      and the Ohio Division of Financial Institutions if a dividend in any year would
      cause the total dividends for that year to exceed the sum of the current year’s
      net profits and the retained net profits for the preceding two years, less
      required transfers to surplus. Payment of dividends by State Bank may be
      restricted at any time at the discretion of the regulatory authorities, if
      they
      deem such dividends to constitute an unsafe and/or unsound banking practice.
      These provisions could have the effect of limiting the Company’s ability to pay
      dividends on its outstanding common shares. Moreover, the Federal Reserve Board
      expects the Company to serve as a source of strength to its subsidiary banks,
      which may require it to retain capital for further investment in the subsidiary,
      rather than for dividends to shareholders of the Company.




Transactions
      with Affiliates, Directors, Executive Officers and Shareholders




Sections
      23A and 23B of the Federal Reserve Act and Federal Reserve Board
      Regulation W restrict transactions by banks and their subsidiaries with
      their affiliates. Any company or entity that controls, is controlled by or
      is
      under common control with a bank is generally considered to be an affiliate
      of
      the bank.


7.


In
      general, Sections 23A and 23B and Regulation W:




·
            limit
                the extent to which a bank or its subsidiaries may engage in “covered
                transactions” with any one affiliate to an amount equal to 10% of the
                bank’s capital stock and surplus (i.e., tangible
                capital);




·
            limit
                the extent to which a bank or its subsidiaries may engage in “covered
                transactions” with all affiliates to 20% of the bank’s capital stock and
                surplus; and




·
            require
                that all covered transactions be on terms substantially the same,
                or at
                least as favorable to the bank or subsidiary, as those provided to
                non-affiliates.




The
      term
“covered transaction” includes the making of loans, purchase of assets, issuance
      of a guarantee and similar types of transactions.





A
      bank’s
      authority to extend credit to executive officers, directors and greater than
      10%
      shareholders, as well as entities such persons control, is subject to Sections
      22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated
      thereunder by the Federal Reserve Board. Among other things, these loans must
      be
      made on terms substantially the same as those offered to unaffiliated
      individuals (or be made under a benefit or compensation program and on terms
      widely available to employees) and must not involve a greater than normal risk
      of repayment. In addition, the amount of loans a bank may make to these persons
      is based, in part, on the bank’s capital position, and specified approval
      procedures must be followed in making loans which exceed specified
      amounts.





Regulatory
      Capital




The
      Federal Reserve Board has adopted risk-based capital guidelines for bank holding
      companies and for state member banks, such as State Bank. The risk-based capital
      guidelines include both a definition of capital and a framework for calculating
      risk weighted assets by assigning assets and off-balance-sheet items to broad
      risk categories. The minimum ratio of total capital to risk weighted assets
      (including certain off-balance-sheet items, such as standby letters of credit)
      is 8%. Of that 8%, 4% is to be comprised of common shareholders’ equity
      (including retained earnings but excluding treasury stock), non-cumulative
      perpetual preferred stock, a limited amount of cumulative perpetual preferred
      stock, and minority interests in equity accounts of consolidated subsidiaries,
      less goodwill and certain other intangible assets (“Tier 1 capital”). The
      remainder (“Tier 2 capital”) may consist, among other things, of certain amounts
      of mandatory convertible debt securities, subordinated debt, preferred stock
      not
      qualifying as Tier 1 capital, an allowance for loan and lease losses and net
      unrealized gains, after applicable taxes, on available-for-sale equity
      securities with readily determinable fair values, all subject to limitations
      established by the guidelines. The Federal Reserve Board also imposes a minimum
      leverage ratio (Tier 1 capital to total assets) of 3% for bank holding companies
      and state member banks that meet certain specified conditions, including no
      operational, financial or supervisory deficiencies, and including having the
      highest regulatory rating. The minimum leverage ratio is 1%-2% higher for other
      bank holding companies and state member banks based on their particular
      circumstances and risk profiles and those experiencing or anticipating
      significant growth. Failure to meet applicable capital guidelines could subject
      a banking institution to a variety of enforcement remedies available to federal
      and state regulatory authorities, including the termination of deposit insurance
      by the FDIC.




The
      federal banking regulators have established regulations governing prompt
      corrective action to resolve capital deficient banks. The regulations establish
      five capital level categories: well capitalized, adequately capitalized,
      undercapitalized, significantly undercapitalized and critically
      undercapitalized. Under these regulations, institutions which become
      undercapitalized can become subject to mandatory regulatory scrutiny and
      limitations, which increase as capital decreases. Such institutions may also
      be
      required to file capital plans with their primary federal regulator, and their
      holding companies may be required guarantee the capital shortfall up to 5%
      of
      the assets of the capital deficient institution at the time it becomes
      undercapitalized.


8.


The
      Company and State Bank, at year end 2007, were categorized as “well
      capitalized”.




Deposit
      Insurance Assessments




In
      February of 2006, President Bush signed into law the Deposit Insurance Reform
      Act of 2005 and its companion bill, the Deposit Insurance Reform Conforming
      Amendments Act of 2005 (collectively, the “Deposit Insurance Reform Acts”),
      which provide for the Bank Insurance Fund (BIF) and the Savings Association
      Insurance Fund (SAIF) to be merged into a new Deposit Insurance Fund (DIF).
      The
      Deposit Insurance Reform Acts provide for several additional changes to the
      deposit insurance system, including the following:




·
            Increasing
                the deposit insurance limit for retirement accounts from $100,000
                to
                $250,000;




·
            Adjusting
                the deposit insurance limits (currently $100,000 for most accounts)
                every
                five years based on an inflation index, with the first adjustment
                to be
                effective on January 1, 2011;




·
            Providing
                pass-through deposit insurance for the deposits of employee benefit
                plans
                (but prohibiting undercapitalized depository institutions from accepting
                employee benefit plan deposits);




·
            Allocating
                an aggregate of $4.7 billion of one-time credits to offset the premiums
                of
                depository institutions based on their assessment bases at the end
                of
                1996;




·
            Establishing
                rules for awarding cash dividends to depository institutions, based
                on
                their relative contributions to the DIF and its predecessor funds,
                when
                the DIF reserve ratio reaches certain levels;
                and




·
            Revising
                the rules and procedures for risk-based premium
                assessments.




On
      January 1, 2007, final rules under the Deposit Insurance Reform Acts became
      effective. The final rules set a base assessment schedule for 2007 for DIF
      premiums. For banks with less than $10 billion in assets, the premium assessment
      rates are based on a combination of financial ratios and CAMELS component
      ratings. The final rules also provide a one-time credit to institutions to
      offset amounts owed for deposit insurance.




The
      Company does not expect that the Deposit Insurance Reform Acts will have a
      significant impact on the Company or its subsidiary banks in fiscal year
      2007.




Monetary
      Policy and Economic Conditions




The
      commercial banking business is affected not only by general economic conditions,
      but also by the policies of various governmental regulatory authorities,
      including the Federal Reserve Board. The Federal Reserve Board regulates money
      and credit conditions and interest rates in order to influence general economic
      conditions primarily through open market operations in U.S. Government
      securities, changes in the discount rate on bank borrowings and changes in
      reserve requirements against bank deposits. These policies and regulations
      significantly affect the overall growth and distribution of bank loans,
      investments and deposits, and the interest rates charged on loans as well as
      the
      interest rates paid on deposits and accounts.




Holding
      Company Activities




In
      November 1999, the Gramm-Leach-Bliley Act was enacted, permitting bank holding
      companies to become financial holding companies and thereby affiliate with
      securities firms and insurance companies and engage in other activities that
      are
      financial in nature. A bank holding company may become a financial holding
      company if each of its subsidiary banks is well capitalized under the Federal
      Deposit Insurance Corporation Act of 1991 prompt corrective action provisions,
      is well managed, and has at least a satisfactory rating under the Community
      Reinvestment Act by filing a declaration that the bank holding company wishes
      to
      become a financial holding company. No regulatory approval is required for
      a
      financial holding company to acquire a company, other than a bank or savings
      association, engaged in activities that are financial in nature or incidental
      to
      activities that are financial in nature, as determined by the Federal Reserve
      Board.


9.


The
      Gramm-Leach-Bliley Act defines “financial in nature” to include: (i) securities
      underwriting, dealing and market making; (ii) sponsoring mutual funds and
      investment companies; (iii) insurance underwriting and agency; (iv) merchant
      banking activities; and (v) activities that the Federal Reserve Board has
      determined to be closely related to banking.




The
      Company has not elected to become a financial holding company. The Company
      intends to continue to analyze the proposed advantages and disadvantages of
      becoming a financial holding company on a periodic basis.




SEC
      Regulation




The
      Company is subject to the jurisdiction of the Securities and Exchange Commission
      (the “SEC”) and certain state securities authorities relating to the offering
      and sale of its securities. The Company is subject to the registration,
      reporting and other regulatory requirements of the Securities Act of 1933,
      as
      amended, and the Exchange Act and the rules adopted by the SEC under those
      acts.
      The Company’s common shares are listed on The NASDAQ Global Market under the
      symbol “RBNF”, and the Company is subject to the NASDAQ rules and regulations
      applicable to listed companies.




Sarbanes-Oxley
      Act of 2002 and Related Rules Affecting Corporate Governance




As
      mandated by the Sarbanes-Oxley Act of 2002, the SEC has adopted rules and
      regulations governing, among other issues, corporate governance, auditing and
      accounting and executive compensation, and enhanced the timely disclosure of
      corporate information. The SEC has also approved corporate governance rules
      promulgated by The NASDAQ Stock Market, Inc. (“NASDAQ”). The Board of Directors
      of the Company has taken a series of actions to comply with the new NASDAQ
      and
      SEC rules and to further strengthen its corporate governance practices. The
      Company has adopted and implemented a Code of Conduct and Ethics and a copy
      of
      that policy can be found on the Company’s website at www.rurbanfinancial.netby first clicking “Corporate Governance” and then “Code of Conduct”. The
      Company has also adopted charters of the Audit Committee, the Compensation
      Committee and the Executive Governance and Nominating Committee, which charters
      are available on the Company’s website at www.rurbanfinancial.net by
      first clicking “Corporate Governance” and then “Supplementary
      Info”.




Effect
      of Environmental Regulation




Compliance
      with federal, state and local provisions regulating the discharge of materials
      into the environment, or otherwise relating to the protection of the
      environment, has not had a material effect upon the capital expenditures,
      earnings or competitive position of the Company and its subsidiaries. The
      Company believes that the nature of the operations of its subsidiaries has
      little, if any, environmental impact. The Company, therefore, anticipates no
      material capital expenditures for environmental control facilities for its
      current fiscal year or for the foreseeable future. The Company’s subsidiaries
      may be required to make capital expenditures for environmental control
      facilities related to properties which they may acquire through foreclosure
      proceedings in the future; however, the amount of such capital expenditures,
      if
      any, is not currently determinable.


10.


Available
      Information





The
      Company will provide, without charge, to each shareholder, upon written request
      to Rurban Financial Corp., P.O. Box 467, Defiance, Ohio 43512, Attention: Valda
      Colbart, Investor Relations Department, a copy of the Company's Annual Report
      on
      Form 10-K, including the Financial Statements and Schedules thereto required
      to
      be filed with the SEC, for the Company's most recent fiscal year.




Statistical
      Financial Information Regarding the Company




The
      following schedules and tables analyze certain elements of the consolidated
      balance sheets and statements of income of the Company and its subsidiaries,
      as
      required under Exchange Act Industry Guide 3 promulgated by the SEC, and should
      be read in conjunction with the narrative analysis presented in Item 7.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations and the
      Consolidated Financial Statements of the Company and its subsidiaries included
      at pages F-1 through F-53 of this Annual Report on **** Form
      10-K.


11.





**I.**
            **DISTRIBUTION
                OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;****INTEREST
                RATES AND****INTEREST****DIFFERENTIAL**





The
      following are the condensed average balance sheets for the years ending December
      31 and the interest earned or paid on such amounts and the average interest
      rate
      thereon:


2007
              
              2006
              
              2005($in
                  thousands)
              
              Average
                  Balance
              
              Interest
              
              Average
                Rate
              
              Average
                  Balance
              
              Interest
              
              Average
                Rate
              
              Average
                  Balance
              
              Interest
              
              Average
                Rate**Assets:**SecuritiesTaxable
              
              $
              84,389
              
              $
              4,284
              
              
              5.08
              %
              $
              119,394
              
              $
              5,212
              
              
              4.37
              %
              $
              108,306
              
              $
              4,337
              
              
              4.00
              %Non-taxable
                  (1)
              
              
              16,405
              
              
              978
              
              
              5.96
              %
              
              14,497
              
              
              848
              
              
              5.85
              %
              
              7,248
              
              
              403
              
              
              5.56
              %Federal
                  funds sold
              
              
              5,072
              
              
              225
              
              
              4.44
              %
              
              2,259
              
              
              177
              
              
              7.84
              %
              
              4,881
              
              
              160
              
              
              3.28
              %Loans,
                  net (2)(3)
              
              
              381,449
              
              
              27,893
              
              
              7.31
              %
              
              354,400
              
              
              25,055
              
              
              7.07
              %
              
              268,158
              
              
              16,659
              
              
              6.21
              %Total
                  earning assets
              
              
              487,315
              
              
              33,380
              
              
              6.85
              %
              
              490,550
              
              
              31,292
              
              
              6.38
              %
              
              388,593
              
              
              21,559
              
              
              5.55
              %Cash
                  and due from banks
              
              
              11,605
              
              
              
              
              
              
              
              
              11,827
              
              
              
              
              
              
              
              
              9,653Allowance
                  for loan losses
              
              
              (3,843
              )
              
              
              
              
              
              
              
              (4,495
              )
              
              
              
              
              
              
              
              (4,885
              )Premises
                  and equipment
              
              
              19,788
              
              
              
              
              
              
              
              
              19,387
              
              
              
              
              
              
              
              
              15,570Other
                  assets
              
              
              41,707
              
              
              
              
              
              
              
              
              36,825
              
              
              
              
              
              
              
              
              24,435Total
                  assets
              
              $
              556,572
              
              
              
              
              
              
              
              $
              554,094
              
              
              
              
              
              
              
              $
              433,366**Liabilities**DepositsSavings
                  and interest-bearing demand deposits
              
              $
              138,314
              
              $
              2,714
              
              
              1.96
              %
              $
              127,179
              
              $
              1,656
              
              
              1.30
              %
              $
              102,453
              
              $
              716
              
              
              0.70
              %Time
                  deposits
              
              
              231,605
              
              
              10,882
              
              
              4.70
              %
              
              228,193
              
              
              9,366
              
              
              4.10
              %
              
              167,140
              
              
              4,935
              
              
              2.95
              %Short-term
                  borrowings
              
              
              36,588
              
              
              1,653
              
              
              4.52
              %
              
              21,965
              
              
              946
              
              
              4.30
              %
              
              6,854
              
              
              165
              
              
              2.41
              %Advances
                  from FHLB
              
              
              19,329
              
              
              1,037
              
              
              5.36
              %
              
              41,353
              
              
              2,106
              
              
              5.09
              %
              
              46,376
              
              
              2,040
              
              
              4.40
              %Junior
                  subordinated debentures
              
              
              20,620
              
              
              1,809
              
              
              8.77
              %
              
              20,620
              
              
              1,787
              
              
              8.67
              %
              
              14,434
              
              
              1,275
              
              
              8.83
              %Other
                  borrowed funds
              
              
              1,641
              
              
              127
              
              
              7.74
              %
              
              939
              
              
              75
              
              
              7.98
              %
              
              2,247
              
              
              237
              
              
              10.55
              %Total
                  interest-bearing liabilities
              
              
              448,097
              
              
              18,222
              
              
              4.07
              %
              
              440,249
              
              
              15,936
              
              
              3.62
              %
              
              339,504
              
              
              9,368
              
              
              2.76
              %Demand
                  deposits
              
              
              42,848
              
              
              
              
              
              
              
              
              47,176
              
              
              
              
              
              
              
              
              36,675Other
                  liabilities
              
              
              7,682
              
              
              
              
              
              
              
              
              12,168
              
              
              
              
              
              
              
              
              6,105Total
                  liabilities
              
              
              498,627
              
              
              
              
              
              
              
              
              499,593
              
              
              
              
              
              
              
              
              382,284Shareholders'
                  equity
              
              
              57,945
              
              
              
              
              
              
              
              
              54,501
              
              
              
              
              
              
              
              
              51,083Total
                  liabilities and shareholders' equity
              
              $
              556,572
              
              
              
              
              
              
              
              $
              554,094
              
              
              
              
              
              
              
              $
              433,367Net
                  interest income (tax equivalent basis)
              
              
              
              
              $
              15,158
              
              
              
              
              
              
              
              $
              15,356
              
              
              
              
              
              
              
              $
              12,191Net
                  interest income as a percentof
                  average interest-earning assets
              
              
              
              
              
              
              
              
              3.11
              %
              
              
              
              
              
              
              
              3.13
              %
              
              
              
              
              
              
              
              3.14
              %




(1)
                Interest
                    is computed on a tax equivalent basis using a 34% statutory tax
                    rate. The
                    tax equivalent adjustment was $333, $288 and $137 in 2007, 2006
                    and
                    2005, respectively.
 (2)
                Nonaccruing
                    loans and loans held for sale are included in the average
                    balances.
 (3)
              Interest
                  is computed on a tax equivalent basis using a 34% statutory tax
                  rate. The
                  tax equivalent adjustment was $38 and $33 in 2007 and 2006
                  respectively.




12.


**I.**
            **DISTRIBUTION
                OF ASSETS, LIABILITIES AND SHAREHOLDERS'
                EQUITY;**


**INTEREST
                RATES AND****INTEREST****DIFFERENTIAL**(Continued)





The
      following tables set forth the effect of volume and rate changes on interest
      income and expense for the periods indicated. For purposes of these tables,
      changes in interest due to volume and rate were determined as
      follows:





Volume
      Variance - change in volume multiplied by the previous year's rate.


Rate
      Variance - change in rate multiplied by the previous year's volume.


Rate/Volume
      Variance - change in volume multiplied by the change in rate. This variance
      was
      allocated to volume variance and rate variance in proportion to the relationship
      of the absolute dollar amount of the change in each.


Interest
      on non-taxable securities has been adjusted to a fully tax equivalent basis
      using a statutory tax rate of 34% in 2007, 2006 and 2005.




TotalVariance
              
              Variance
                  Attributable To2007/2006
              
              Volume
              
              Rate(dollars
                  in thousands)**Interest
                  income**SecuritiesTaxable
              
              $
              (928
              )
              $
              (1,688
              )
              $
              760Non-taxable
              
              
              130
              
              
              113
              
              
              17Federal
                  funds sold
              
              
              48
              
              
              149
              
              
              (101
              )Loans,
                  net of unearned income and deferred loan fees
              
              
              2,838
              
              
              1,958
              
              
              8802,088
              
              
              532
              
              
              1,556**Interest
                  expense**DepositsSavings
                  and interest-bearing demand deposits
              
              
              1,058
              
              
              156
              
              
              902Time
                  deposits
              
              
              1,516
              
              
              142
              
              
              1,374Short-term
                  borrowings
              
              
              707
              
              
              659
              
              
              48Advances
                  from FHLB
              
              
              (1,069
              )
              
              (1,176
              )
              
              107Trust
                  preferred securities
              
              
              22
              
              
              -
              
              
              22Other
                  borrowed funds
              
              
              52
              
              
              54
              
              
              (2
              )2,286
              
              
              (165
              )
              
              2,451**Net
                  interest income**
              
              $
              (198
              )
              $
              697
              
              $
              (895
              )


13.


**I.**
            **DISTRIBUTION
                OF ASSETS, LIABILITIES AND SHAREHOLDERS'
                EQUITY;**


**INTEREST
                RATES AND****INTEREST****DIFFERENTIAL**(Continued)


TotalVariance
              
              Variance Attributable To2006/2005
              
              Volume
              
              Rate(dollars
                  in thousands)**Interest
                  income**SecuritiesTaxable
              
              $
              875
              
              $
              465
              
              $
              410Non-taxable
              
              
              445
              
              
              423
              
              
              22Federal
                  funds sold
              
              
              17
              
              
              (119
              )
              
              136Loans,
                  net of unearned income and deferred loan fees
              
              
              8,396
              
              
              5,875
              
              
              2,5219,733
              
              
              6,644
              
              
              3,089**Interest
                  expense**DepositsSavings
                  and interest-bearing demand deposits
              
              
              940
              
              
              205
              
              
              735Time
                  deposits
              
              
              4,431
              
              
              2,143
              
              
              2,288Short-term
                  borrowings
              
              
              781
              
              
              575
              
              
              206Advances
                  from FHLB
              
              
              66
              
              
              (235
              )
              
              301Trust
                  preferred securities
              
              
              512
              
              
              537
              
              
              (25
              )Other
                  borrowed funds
              
              
              (162
              )
              
              (114
              )
              
              (48
              )$
              6,568
              
              $
              3,111
              
              $
              3,457**Net
                  interest income**
              
              $
              3,165
              
              $
              3,533
              
              $
              (368
              )


14.


**II.**
            **INVESTMENT
                PORTFOLIO**





A.
            The
                book value of securities available for sale as of December 31 in each
                of the following years are summarized as
                follows:


**Book
                  Value of Securities**2007
              
              2006
              
              2005(dollars
                  in thousands)U.S.
                  Treaury and government agencies
              
              $
              40,189
              
              $
              58,123
              
              $
              89,671State
                  and political subdivisions
              
              
              16,019
              
              
              15,465
              
              
              12,694Mortgage-backed
                  securities
              
              
              36,380
              
              
              28,770
              
              
              35,660Other
                  securities
              
              
              50
              
              
              81
              
              
              1,305Marketable
                  equity securities
              
              
              23
              
              
              23
              
              
              23Total
              
              $
              92,661
              
              $
              102,462
              
              $
              139,353





B.
            The
                maturity distribution and weighted average interest rates of securities
                available for sale at December 31, 2007 are set forth in the table
                below.
                The weighted average interest rates are based on coupon rates for
                securities purchased at par value and on effective interest rates
                considering amortization or accretion if the securities were purchased
                at
                a premium or discount.:


MaturingAfter One Year
              
              After Five YearsWithin
              
              but within
              
              but within
              
              AfterOne Year
              
              Five Years
              
              Ten Years
              
              Ten Years(dollars
                  in thousands)U.S.
                  Treaury and government agencies
              
              $
              -
              
              $
              1,153
              
              $
              39,036
              
              $
              -State
                  and political subdivisions
              
              
              554
              
              
              603
              
              
              2,150
              
              
              12,712Mortgage-backed
                  securities
              
              
              176
              
              
              3,178
              
              
              3,229
              
              
              29,797Other
                  securities
              
              
              -
              
              
              50
              
              
              -
              
              
              -Total
              
              $
              730
              
              $
              4,984
              
              $
              44,415
              
              $
              42,509Marketable
                  equity securities with no maturity
              
              $
              23Weighted
                  average yield (1)
              
              
              2.61
              %
              
              4.68
              %
              
              4.90
              %
              
              5.13
              %





(1)
            Yields
                are not presented on a tax-equivalent
                basis.





C.
            Excluding
                those holdings of the investment portfolio in U.S. Treasury securities
                and
                other agencies of the U.S. Government, there were no other securities
                of
                any one issuer which exceeded 10% of the shareholders' equity of
                the
                Company at December 31,
                2007.


15.




**III.**
            **LOAN
                PORTFOLIO**





A.
            Types
                of Loans - Total loans on the balance sheet are comprised of the
                following
                classifications at December 31 for the years
                indicated:




**Types
                  of Loans**(dollars
                  in thousands)
              
              2007
              
              2006
              
              2005
              
              2004
              
              2003Commercial
                  and Agricultural
              
              $
              253,202
              
              $
              225,827
              
              $
              187,667
              
              $
              188,532
              
              $
              188,532Real
                  estate mortgage
              
              
              84,621
              
              
              94,389
              
              
              89,086
              
              
              63,828
              
              
              46,718Consumer
                  loans to individuals
              
              
              51,358
              
              
              49,314
              
              
              48,877
              
              
              31,949
              
              
              37,310Leases
              
              
              330
              
              
              857
              
              
              1,661
              
              
              5,128
              
              
              11,775Total
                  loans
              
              $
              389,511
              
              $
              370,387
              
              $
              327,291
              
              $
              264,750
              
              $
              284,335Real
                  estate mortgage loans held for resale
              
              $
              1,650
              
              $
              390
              
              $
              224
              
              $
              113
              
              $
              219





Concentrations
      of Credit Risk :
      The
      Company grants commercial, real estate and installment loans to customers mainly
      in northwest Ohio. Commercial loans include loans collateralized by commercial
      real estate, business assets and, in the case of agricultural loans, crops
      and
      farm equipment. As of December 31, 2007, commercial and agricultural loans
      made up approximately 65% of the loan portfolio and the loans are expected
      to be
      repaid from cash flow from operations of businesses. As of December 31,
      2007, residential first mortgage loans made up approximately 21.7% of the loan
      portfolio and are collateralized by first mortgages on residential real estate.
      As of December 31, 2007, consumer loans to individuals made up
      approximately 13.3% of the loan portfolio and are primarily collateralized
      by
      consumer assets.





B.
            Maturities
                and Sensitivities of Loans to Changes in Interest Rates - The following
                table shows the amounts of commercial and agricultural loans outstanding
                as of December 31, 2007 which, based on remaining scheduled
                repayments of principal, are due in the periods indicated. Also,
                the
                amounts have been classified according to sensitivity to changes
                in
                interest rates for commercial and agricultural loans due after one
                year.
                (Variable-rate loans are those loans with floating or adjustable
                interest
                rates.)




Maturing
              (dollars
                in thousands)
            
            Commercial and
              AgriculturalWithin
                one year
            
            $
            63,266After
                one year but within five years
            
            
            75,597After
                five years
            
            
            114,339Total
                commercial and agricultural loans
            
            $
            253,202


16.


**III.**  **LOAN**  **PORTFOLIO** (Continued)




**Commercial
                  And Agricultural**Interest
                  SensitivityFixed
              
              VariableRate
              
              Rate
              
              Total(dollars
                  in thousands)Due
                  after one year but within five years
              
              $
              22,681
              
              $
              52,916
              
              $
              75,597Due
                  after five years
              
              
              11,086
              
              
              103,253
              
              
              114,339Total
              
              $
              33,767
              
              $
              156,169
              
              $
              189,936





C.
            Risk
                Elements





1.
            Non-accrual,
                Past Due, Restructured and Impaired Loans – The following schedule
                summarizes non-accrual, past due, restructured and impaired loans
                at
                December 31 in each of the following
                years.




2007
              
              2006
              
              2005
              
              2004
              
              2003(dollars
                  in thousands)(a)
                  Loans accounted for on a non-accrual basis
              
              $
              5,990
              
              $
              3,828
              
              $
              6,270
              
              $
              13,384
              
              $
              18,352(b)
                  Accuring loans which are contractually past due 90 days or more
                  as to
                  interest or principal payments
              
              
              -
              
              
              -
              
              
              5
              
              
              11
              
              
              -(c)
                  Loans not included in (a) which are "Troubled Debt Restructurings"
                  as
                  defined by Statement of Financial Accounting Standards No.
                  15
              
              
              159
              
              
              166
              
              
              825
              
              
              1,570
              
              
              5,058Total
                  non-performing loans
              
              $
              6,149
              
              $
              3,994
              
              $
              7,100
              
              $
              14,965
              
              $
              23,410(d)
                  Other loans defined as impaired
              
              $
              593
              
              $
              82
              
              $
              3,283
              
              $
              4,671
              
              $
              9,099


2007(In
                thousands)Cash
                basis interest income recognized on impaired loans outstanding at
                December 31, 2007
            
            $
            75Interest
                income actually recorded on impaired loans and included in net income
                for
                the period
            
            
            632007
                unrecorded interest income on non-accrual loans
            
            
            351


17.


**III.**
            **LOAN****PORTFOLIO**(Continued)





Management
      believes the allowance for loan losses at December 31, 2007 is adequate to
      absorb any losses on non-performing loans, as the allowance balance is
      maintained by management at a level considered adequate to cover losses that
      are
      probable based on past loss experience, general economic conditions, information
      about specific borrower situations, including their financial position and
      collateral values, and other factors and estimates which are subject to change
      over time.




1.
            Discussion
                of the Non-accrual Policy





The
                accrual of interest income is discontinued when the collection of
                a loan
                or interest, in whole or in part, is doubtful. When interest accruals
                are
                discontinued, interest income accrued in the current period is reversed.
                While loans which are past due 90 days or more as to interest or
                principal
                payments are considered for non-accrual status, management may elect
                to
                continue the accrual of interest when the estimated net realizable
                value
                of collateral, in management’s judgment, is sufficient to cover the
                principal balance and accrued interest. These policies apply to both
                commercial and consumer loans.





2.
            Potential
                Problem Loans





As
                of December 31, 2007, in addition to the $6,149,000 of loans reported
                under Item III.C.1. above (which amount includes all loans classified
                by
                management as doubtful or loss), there were approximately $1,416,000
                in
                other outstanding loans where known information about possible credit
                problems of the borrowers caused management to have concerns as to
                the
                ability of such borrowers to comply with the present loan repayment
                terms
                (loans classified as substandard by management) and which may result
                in
                disclosure of such loans pursuant to Item III.C.1. at some future
                date. In
                regard to loans classified as substandard, management believes that
                such
                potential problem loans have been adequately evaluated in the allowance
                of
                loan losses.


18.


**III.**
            **LOAN****PORTFOLIO**(Continued)





3.
            Foreign
                Outstandings





None





4.
            Loan
                Concentrations





At
                December 31, 2007, loans outstanding related to agricultural
                operations or collateralized by agricultural real estate aggregated
                approximately $43,369,000, or 11.1 % of total
                loans.





D.
            Other
                Interest-Bearing Assets





There
                were no other interest-bearing assets as of December 31, 2007 which
                would be required to be disclosed under Item III.C.1 or Item III.C.2.
                if
                such assets were loans.




19.


**IV.**
            **SUMMARY
                OF LOAN LOSS EXPERIENCE**





A.
            The
                following schedule presents an analysis of the allowance for loan
                losses,
                average loan data and related ratios for the years ended
                December 31:




2007
              
              2006
              
              2005
              
              2004
              
              2003(dollars
                  in thousands)**Loans**Loans
                  outstanding at end of period
              
              $
              389,269
              
              $
              370,102
              
              $
              327,048
              
              $
              264,481
              
              $
              284,104Average
                  loans outstanding during period
              
              $
              381,453
              
              $
              354,726
              
              $
              268,158
              
              $
              271,503
              
              $
              385,153**Allowance
                  for loan losses**Balance
                  at beginning of period
              
              $
              3,717
              
              $
              4,700
              
              $
              4,899
              
              $
              10,181
              
              $
              17,694Balance,
                  Exchange
              
              
              
              
              
              
              
              
              910Balance,
                  OakwoodLoans
                  charged-offCommercial
                  and agricultural loans
              
              
              (104
              )
              
              (1,277
              )
              
              (2,760
              )
              
              (6,599
              )
              
              (10,089
              )Real
                  estate mortgage
              
              
              (81
              )
              
              (100
              )
              
              (133
              )
              
              (12
              )
              
              (195
              )Leases
              
              
              -
              
              
              -
              
              
              (208
              )
              
              (70
              )
              
              (225
              )Consumer
                  loans to individuals
              
              
              (247
              )
              
              (440
              )
              
              (308
              )
              
              (308
              )
              
              (1,345
              )(432
              )
              
              (1,817
              )
              
              (3,409
              )
              
              (6,989
              )
              
              (11,854
              )Recoveries
                  of loans previously charged-offCommercial
                  and agricultural loans
              
              
              85
              
              
              419
              
              
              1,566
              
              
              1,835
              
              
              2,497Real
                  estate mortgage
              
              
              4
              
              
              75
              
              
              2
              
              
              52
              
              
              86Leases
              
              
              -
              
              
              -
              
              
              4
              
              
              31
              
              
              109Consumer
                  loans to individuals
              
              
              95
              
              
              162
              
              
              145
              
              
              188
              
              
              447184
              
              
              656
              
              
              1,717
              
              
              2,106
              
              
              3,139Net
                  loans charged-off
              
              
              (248
              )
              
              (1,160
              )
              
              (1,692
              )
              
              (4,883
              )
              
              (8,715
              )Provision
                  for loan losses
              
              
              521
              
              
              178
              
              
              583
              
              
              (399
              )
              
              1,202Balance
                  at end of period
              
              $
              3,990
              
              $
              3,717
              
              $
              4,700
              
              $
              4,899
              
              $
              10,181Ratio
                  of net charge-offs during the period to average loans outstanding
                  during
                  the period
              
              
              0.07
              %
              
              0.33
              %
              
              0.63
              %
              
              1.80
              %
              
              2.26
              %





The
      allowance for loan losses balance and the provision for loan losses are
      determined by management based upon periodic reviews of the loan portfolio.
      In
      addition, management considered the level of charge-offs on loans as well as
      the
      fluctuations of charge-offs and recoveries on loans in the factors which caused
      these changes. Estimating the risk of loss and the amount of loss is necessarily
      subjective. Accordingly, the allowance is maintained by management at a level
      considered adequate to cover losses that are currently anticipated based on
      past
      loss experience, economic conditions, information about specific borrower
      situations including their financial position and collateral values and other
      factors and estimates which are subject to change over time.


20.


**IV.**
            **SUMMARY****OF****LOAN****LOSS****EXPERIENCE**(Continued)





B.
            The
                following schedule provides a breakdown of the allowance for loan
                losses
                allocated by type of loan and related
                ratios.




(dollars
                  in thousands)
              
              Allocation
                  of the Allowance for Loan LossesPercentage
              
              
              
              Percentage
              
              
              
              Percentage
              
              
              
              Percentage
              
              
              
              Percentageof Loans In
              
              
              
              of Loans In
              
              
              
              of Loans In
              
              
              
              of Loans In
              
              
              
              of Loans InEach
              
              
              
              Each
              
              
              
              Each
              
              
              
              Each
              
              
              
              EachCategory to
              
              
              
              Category to
              
              
              
              Category to
              
              
              
              Category to
              
              
              
              Category toAllowance
              
              Total
              
              Allowance
              
              Total
              
              Allowance
              
              Total
              
              Allowance
              
              Total
              
              Allowance
              
              TotalAmount
              
              Loans
              
              Amount
              
              Loans
              
              Amount
              
              Loans
              
              Amount
              
              Loans
              
              Amount
              
              LoansDecember 31, 2007
              
              December 31, 2006
              
              December 31, 2005
              
              December 31, 2004
              
              December 31, 2003Commercial
                  and agricultural
              
              $
              2,945
              
              
              73.8
              %
              $
              2,945
              
              
              79.2
              %
              $
              3,728
              
              
              57.3
              %
              $
              4,502
              
              
              61.9
              %
              $
              9,649
              
              
              66.3
              %Residential
                  first mortgage
              
              
              590
              
              
              14.8
              %
              
              317
              
              
              8.5
              %
              
              291
              
              
              27.2
              %
              
              141
              
              
              24.1
              %
              
              75
              
              
              16.4
              %Consumer
                  loans to individuals
              
              
              455
              
              
              11.4
              %
              
              455
              
              
              12.3
              %
              
              681
              
              
              15.5
              %
              
              256
              
              
              14.0
              %
              
              457
              
              
              17.3
              %$
              3,990
              
              
              100.0
              %
              $
              3,717
              
              
              100.0
              %
              $
              4,700
              
              
              100.0
              %
              $
              4,899
              
              
              100.0
              %
              $
              10,181
              
              
              100.0
              %





While
      management's periodic analysis of the adequacy of the allowance for loan losses
      may allocate portions of the allowance for specific problem loan situations,
      the
      entire allowance is available for any loan charge-offs that
      occur.


21.


**V.**
            **DEPOSITS**





The
                average amount of deposits and average rates paid are summarized
                as
                follows for the years ended
                December 31:


2007
                
                2006
                
                2005Average
                
                Average
                
                Average
                
                Average
                
                Average
                
                AverageAmount
                
                Rate
                
                Amount
                
                Rate
                
                Amount
                
                Rate(dollars
                    in thousands)Savings
                    and interest-bearing demand deposits
                
                $
                138,314
                
                
                1.96
                %
                $
                127,179
                
                
                1.30
                %
                $
                102,453
                
                
                0.70
                %Time
                    deposits
                
                
                231,604
                
                
                4.70
                %
                
                228,193
                
                
                4.10
                %
                
                167,140
                
                
                2.95
                %Demand
                    deposits (non-interest-bearing)
                
                
                42,849
                
                
                —
                
                
                47,176
                
                
                —
                
                
                36,675
                
                
                —$
                412,767
                
                
                
                
                $
                402,548
                
                
                
                
                $
                306,268





Maturities
                of time certificates of deposit and other time deposits of $100,000
                or
                more outstanding at December 31, 2007 are summarized as
                follows:





Amount(dollars in thousands)Three
                months or less
            
            $
            11,594Over
                three months and through six months
            
            
            17,216Over
                six months and through twelve months
            
            
            20,310Over
                twelve months
            
            
            8,231Total
            
            $
            57,351


22.


**VI.**
            **RETURN
                ON EQUITY AND ASSETS**





The
                ratio of net income to average shareholders' equity and average total
                assets and certain other ratios are as follows for periods ended
                December
                31:


2007
              
              2006
              
              2005(dollars
                  in thousands)Average
                  total assets
              
              $
              556,572
              
              $
              554,094
              
              $
              433,367Average
                  shareholders’ equity
              
              $
              57,945
              
              $
              54,501
              
              $
              51,083Net
                  income
              
              $
              3,257
              
              $
              2,760
              
              $
              673Cash
                  dividends declared
              
              $
              1,303
              
              $
              1,056
              
              $
              914Return
                  on average total assets
              
              
              0.59
              %
              
              0.50
              %
              
              0.16
              %Return
                  on average shareholders' equity
              
              
              5.62
              %
              
              5.06
              %
              
              1.32
              %Dividend
                  payout ratio (1)
              
              
              40.01
              
              
              38.25
              
              
              133.33Average
                  shareholders' equity to average total assets
              
              
              10.41
              %
              
              9.84
              %
              
              11.79
              %





(1)  Cash
      dividends declared divided by net income.





**VII.**
            **SHORT-TERM
                BORROWINGS**





The
                Company did have short-term borrowings during 2005 but the average
                ending
                balance for the period did not exceed 30% or more of shareholders’ equity.





The
                following information is reported for short-term borrowings for 2007
                and
                2006:





2007
              
              2006(dollars in thousands)Amount
                  outstanding at end of year
              
              $
              43,006
              
              $
              32,271Weighted
                  average interest rate at end of year
              
              
              4.38
              %
              
              4.43
              %Maximum
                  amount outstanding at any month end
              
              $
              46,966
              
              $
              32,584Average
                  amount outstanding during the year
              
              $
              36,588
              
              $
              21,965Weighted
                  average interest rate during the year
              
              
              4.51
              %
              
              4.30
              %


23.


Item
      1A. Risk Factors




**Cautionary
      Statement Regarding Forward-Looking Information**




Certain
      statements contained in this Annual Report on Form 10-K, and in other statements
      that we make from time to time in filings by the Company with the SEC, in press
      releases, and in oral and written statements made by or with the approval of
      the
      Company which are not statements of historical fact constitute forward-looking
      statements with in the meaning of the Private Securities Litigation Reform
      Act
      of 1995. These
      forward-looking statements include statements preceded by or that include the
      words or phases “anticipates,” “believes,” “plans,” “intends,” “expects,”
“projects,” “estimates,” “should,” “may,” “would be,” “will allow,” “will likely
      result,” “will continue,” “will remain,” or similar expressions.




The
      Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
      forward-looking statements to encourage companies to provide prospective
      information so long as those statements are identified as forward-looking and
      are accompanied by meaningful cautionary statements identifying important
      factors that could cause actual results to differ materially from those
      discussed in the forward-looking statements. We desire to take advantage of
      the
“safe harbor” provisions of the Act.




Forward-looking
      statements involve risks and uncertainties. Actual results may differ materially
      from those predicted by the forward-looking statements because of various
      factors and possible events, including those factors identified below. There
      is
      also the risk that the Company’s management or Board of Directors incorrectly
      analyzes these risks and forces, or that the strategies the Company develops
      to
      address them are unsuccessful.




Forward-looking
      statements speak only as of that date on which they are made. Except as may
      be
      required by law, the Company undertakes no obligation to update any
      forward-looking statement to reflect events or circumstances after the date
      on
      which the statement is made to reflect unanticipated events.




All
      forward-looking statements attributable to the Company or any person acting
      on
      our behalf are qualified in their entirety by the following cautionary
      statements.




*Adverse
      Economic Conditions could adversely affect our financial condition results
      of
      operations.*




Our
      success depends significantly upon the general economic conditions in the local
      markets in which we operate, as well as the strength of the U.S. economy in
      general. Conditions such as inflation, recession, unemployment, money supply
      and
      other factors outside our control may adversely affect our asset quality,
      deposit levels and loan demand and, therefore, our financial condition and
      results of operations. Decreases in real estate values could adversely affect
      the value of property used as collateral for our real estate loans. In addition,
      adverse changes in the economy could adversely affect the ability of our
      borrowers to make timely repayments of their loans, which could have an adverse
      impact on our financial condition and results of operations. The substantial
      majority of our loans are to individuals and businesses in Northwestern Ohio.
      As
      a result, adverse economic in this market area, including the loss of certain
      significant employers, could reduce our growth and generally affect our
      financial condition and results of operations.




*Changes
      in interest rates could have a material adverse effect on our financial
      condition and results of operations.*




Our
      earnings depend substantially on our interest spread, which is the difference
      between the rates we earn on loans, securities and other earning assets and
      the
      interest rates we pay on deposits and other borrowings. These rates will depend
      on many factors that are partly or entirely outside of our control, including
      general economic conditions and the policies of various governmental and
      regulatory authorities. While we have taken measures intended to manage the
      risks of operating in a changing rate environment, there can be no assurance
      that such measures will be effective in avoiding undue interest rate risk.
      As
      market interest rates rise, we will have competitive pressures to increase
      the
      rates we pay on deposits, which will result in a decrease in net interest income
      and could have a material adverse effect on our financial condition and results
      of operations.


24.


*We
      operate in an extremely competitive market, and our business will suffer if
      we
      are unable to compete effectively.*




In
      our
      market area, we encounter significant competition from other commercial banks,
      savings and loan associations, credit unions, mortgage banking firms, consumer
      finance companies and other financial institutions. The increasingly competitive
      environment is a result primarily of changes in regulation, changes in
      technology and product delivery systems and the accelerating pace of
      consolidation among financial service providers. If we fail to adequately
      address each of the competitive pressures in the banking industry, our financial
      condition and results of operations could be adversely affected.




*If
      our actual loan losses exceed our allowance for loan losses, our net income
      will
      decrease.*




Our
      loan
      customers may not repay their loans according to their terms, and the collateral
      securing the payment of these loans may be insufficient to pay any remaining
      loan balance. We may experience significant loan losses, which could have a
      material adverse effect on our operating results. In accordance with accounting
      principles generally accepted in the United States, we maintain an allowance
      for
      loan losses to provide for loan defaults and non-performance, which when
      combined, we refer to as the allowance for loan losses. Our allowance for loan
      losses may not be adequate to cover actual credit losses, and future provisions
      for credit losses could have a material adverse effect on our operating results.
      Our allowance for loan losses is based on prior experience, as well as an
      evaluation of the risks in the current portfolio. The amount of future losses
      is
      susceptible to changes in economic, operating and other conditions, including
      changes in interest rates that may be beyond our control, and these losses
      may
      exceed current estimates. Federal regulatory agencies, as an integral part
      of
      their examination process, review our loans and allowance for loan losses.
      We
      cannot assure you that we will not further increase the allowance for loan
      losses or that regulators will not require us to increase this allowance. Either
      of these occurrences could have a material adverse effect on our financial
      condition and results of operations.




*Our
      earnings are significantly affected by federal regulation and the monetary
      policies of the federal government and its agencies.*




Any
      changes to state and federal banking laws and regulations may negatively impact
      our ability to expand our services and to increase the value of our business.
      We
      are subject to extensive state and federal regulation, supervision, and
      legislation that govern almost all aspects of our operations. These laws may
      change from time to time and are mainly intended for the protection of
      consumers, depositors and the deposit insurance funds. In addition, our earnings
      are affected by the monetary policies of the Board of Governors of the Federal
      Reserve. These policies, which include regulating the national supply of bank
      reserves and bank credit, can have a major effect upon the source and cost
      of
      funds and the rates of return earned on loans and investments. The Federal
      Reserve influences the size and distribution of bank reserves through its open
      market operations and changes in cash reserve requirements against member bank
      deposits. Future changes in laws or regulations or their interpretation or
      enforcement could be materially adverse to our business and
      shareholders.




*Our
      business strategy includes significant growth plans. Our financial condition
      and
      results of operations could be negatively affected if we fail to grow or fail
      to
      manage our growth effectively.*




We
      intend
      to continue pursuing a profitable growth strategy. Our prospects must be
      considered in light of the risks, expenses and difficulties encountered by
      companies in significant growth stages of development. We cannot assure you
      that
      we will be able to expand our market presence in our existing markets or
      successfully enter new markets or that any such expansion will not adversely
      affect our business, future prospects, financial condition or results of
      operations or adversely affect our ability to successfully implement our
      business strategy. Also, if we grow more slowly than anticipated, our operating
      results could be materially affected.


25.


Our
      ability to grow successfully will depend on a variety of factors including
      the
      continued availability of desirable business opportunities, the competitive
      responses from other financial institutions in our market areas and our ability
      to manage our growth. While we believe we have the management resources and
      internal systems in place to successfully manage our future growth, there can
      be
      no assurance growth opportunities will be available or growth will be
      successfully managed.




*Our
      success depends upon our ability to attract and retain key personnel.*




Our
      success depends upon the continued service of our senior management team and
      upon our ability to attract and retain qualified financial services personnel.
      Competition for qualified employees is intense. We can not assure you that
      we
      will be able to retain our existing key personnel or attract additional
      qualified personnel. If we lose the services of our key personnel, or are unable
      to attract additional qualified personnel, our business, financial condition
      and
      results of operations could be adversely affected.




*We
      depend upon the accuracy and completeness of information about customers.*





In
      deciding whether to extend credit or enter into other transactions with
      customers, we may rely on information provided to us by customers, including
      financial statements and other financial information. We may also rely on
      representations of customers as to the accuracy and completeness of that
      information and, with respect to financial statements, on reports of independent
      auditors. For example, in deciding whether to extend credit to a business,
      we
      may assume that the customer’s audited financial statements conform with
      generally accepted accounting principles and present fairly, in all material
      respects, the financial condition, results of operations and cash flows of
      the
      customer, and we may also rely on the audit report covering those financial
      statements. Our financial condition and results of operations could be
      negatively impacted to the extent we rely on financial statements that do not
      comply with generally accepted accounting principles or that are materially
      misleading.





*Our
      ability to pay cash dividends is limited, and we may be unable to pay cash
      dividends in the future even if we elect to do so.*





We
      are
      dependent primarily upon the earnings of our operating subsidiaries for funds
      to
      pay dividends on our common shares. The payment of dividends by us is also
      subject to regulatory restrictions. As a result, any payment of dividends in
      the
      future will be dependent, in large part, on our ability to satisfy these
      regulatory restrictions and our subsidiaries’ earnings, capital requirements,
      financial condition and other factors. Although our financial earnings and
      financial condition have allowed us to declare and pay periodic cash dividends
      to our shareholders, there can be no assurance that our dividend policy or
      size
      of dividend distribution will continue in the future. Our failure to pay
      dividends on our common shares could have a material adverse effect on the
      market price of our common shares.





*RDSI
      relies on the continued functioning of its data center and the integrity of
      the
      data it processes.*





RDSI’s
      data center is an integral part of its business. Damage to RDSI’s data center
      due to acts of terrorism, fire, power loss, telecommunications failure and
      other
      disasters could have a material adverse effect on RDSI’s business, operating
      results and financial condition. In addition, RDSI relies on the integrity
      of
      the data it processes. If this data is incorrect or somewhat tainted, client
      relations and confidence in RDSI’s services could be impaired, which would harm
      RDSI’s business.


26.


*A
      limited trading market exists for our common shares which could lead to price
      volatility.*





Your
      ability to sell or purchase our common shares depends upon the existence of
      an
      active trading market for our common shares. While our stock is quoted on the
      NASDAQ Global Market, it trades infrequently. As a result, you may be unable
      to
      sell or purchase our common shares at the volume, price and time you desire.
      The
      limited trading market for our common shares may cause fluctuations in the
      market value of our common shares to be exaggerated, leading to price volatility
      in excess of that which would occur in a more active trading
      market.




*The
      preparation of our financial statements requires the use of estimates that
      may
      vary from actual results.*




The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the U.S. requires management to make
      significant estimates that affect the financial statements. Two of our most
      critical estimates are the level of the allowance for loan losses and the
      accounting for goodwill and other intangibles. Because of the inherent nature
      of
      these estimates, we cannot provide complete assurance that we will not be
      required to charge earnings for significant unexpected loan losses, nor that
      we
      will not recognize a material provision for impairment of our goodwill. For
      additional information regarding these critical estimates, see Item 7.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations beginning on page 36 of this Annual Report on Form 10-K.




*Changes
      in accounting standards could impact our results of
      operations.*




The
      accounting standard setters, including the Financial Accounting Standards Board,
      the SEC and other regulatory bodies, periodically change the financial
      accounting and reporting standards that govern the preparation of our
      consolidated financial statements. These changes can be difficult to predict
      and
      can materially affect how we record and report our financial condition and
      results of operations. In some cases, we could be required to apply a new or
      revised standard retroactively, which would result in the restatement of our
      financial statements for prior periods.




Item
      1B. Unresolved Staff Comments




Not
      Applicable




Item
      2.Properties .




The
      Company’s principal executive offices are located at 401 Clinton Street,
      Defiance, Ohio. This facility is owned by State Bank, and a portion of the
      facility is leased to the Company.




The
      following is a listing and brief description of the properties owned or leased
      by State Bank and used in its business:




1.
            State
                Bank’s main office is owned and located at 401 Clinton Street, Defiance,
                Ohio. State Bank leases portions of this facility to the Company
                and the
                RFS division of State Bank. (Banking and
                Other)




2.
            State
                Bank owns a drive-thru branch office located at 510 Third Street,
                Defiance, Ohio. (Banking)




3.
            State
                Bank owns a full service branch office located at 150 West Main Street,
                Ney, Ohio. (Banking)




4.
            State
                Bank leases a parcel of land for a full service branch office (Owned)
                located at 1600 North Clinton Street, Defiance, Ohio, pursuant to
                a
                15-year lease. (Banking)




27.


5.
            State
                Bank owns a drive-thru branch office located at 1856 East Second
                Street,
                Defiance, Ohio. (Banking)




6.
            State
                Bank owns a full service branch office located at 220 North Main
                Street,
                Paulding, Ohio. (Banking)




7.
            State
                Bank owns a full service branch office located at 312 Main Street,
                Delta, Ohio. (Banking)




8.
            State
                Bank owns a full service branch office located at 133 E. Morenci
                Street, Lyons, Ohio. (Banking)




9.
            State
                Bank owns a full service branch office located at 515 Parkview,
                Wauseon, Ohio. (Banking)




10.
            State
                Bank leases a full service branch office located in the Chief Market
                Square supermarket at 705 Deatrick Street, Defiance, Ohio, pursuant
                to a
                15-year lease. (Banking)




11.
            State
                Bank owns a full service branch office located at 218 North First
                Street,
                Oakwood, Ohio. (Banking)




12.
            State
                Bank owns a full service branch office located at 930 West Market
                Street,
                Lima, Ohio. (Banking)




13.
            State
                Bank owns a full service branch office located at 2903 Elida Road,
                Lima,
                Ohio. (Banking)




14.
            State
                Bank owns a full service branch office located at 12832 Coldwater
                Road,
                Fort Wayne, Indiana. (Banking)




15.
            State
                Bank owns a full service branch office located at 235 Main Street,
                Luckey,
                Ohio. (Banking)




16.
            State
                Bank owns a full service branch office located at 311 Main Street,
                Walbridge, Ohio. (Banking)




17.
            State
                Bank owns a full service branch office located at 610 East South
                Boundary,
                Perrysburg, Ohio. (Banking)




18.
            State
                Bank owns a full service branch office located at 6401 Monroe Street,
                Sylvania, Ohio. (Banking)




19.
            State
                Bank leases a loan production office located at 75 South High Street,
                #8,
                Dublin, Ohio. (Banking)




RDSI
      leases office space located at 7622 St Rt. 66, Defiance, Ohio, office space
      located at 2010 S. Jefferson Ave., Defiance, Ohio, office space located at
      11952
      James Street, Holland, Michigan and office space located at 105 East Holland
      Street, Archbold, Ohio.




DCM
      leases office space located at 3101 Technology Blvd., Suite B, Lansing,
      Michigan.


28.


Item
      3.Legal
      Proceedings .




There
      are
      no pending legal proceedings to which the Company or any of its subsidiaries
      is
      a party or to which any of their property is subject, except routine legal
      proceedings incidental to their business. None of such proceedings are
      considered by the Company to be material.




Item
      4.Submission
      of Matters to a Vote of Security Holders .




Not
      applicable.


29.


Supplemental
      Item: Executive
      Officers of the Registrant .




The
      following table lists the names and ages of the executive officers of the
      Company as of March 21, 2008, the positions presently held by each executive
      officer and the business experience of each executive officer during the past
      five years. Unless otherwise indicated, each person has held his principal
      occupation(s) for more than five years.




Name
            
            Age
            
            Position(s)
                Held with the Company and
              its
                Subsidiaries and Principal Occupation(s)Kenneth
                A. Joyce
            
            59
            
            President
                and Chief Executive Officer of the Company since 2002; Chairman,
                Chief
                Executive Officer and a Director of Rurbanc Data Services, Inc. (“RDSI”)
                since 1997; Director of State Bank since 2002; Director of RFCBC
                since
                2004; Chairman and Former Director of Reliance Financial Services
                (now a
                division of State Bank) (“RFS”) since 2005; Member of RFS Investment
                Committee since March 2007; Director of The Exchange Bank (“Exchange
                Bank”) from 2006 to March 2007; Chairman, CEO and Director of Rurban
                Operations Corp. (“ROC”) from 2006 to March 2007; Member of RFS Investment
                Committee since March 2007; Chairman and Director of Diverse Computer
                Marketers, Inc. (“DCM”) from 2006 to December 2007; Director of
                Promedica-Defiance Regional Medical Center and Promedica Physicians
                Group;
                Chairman of Promedica-Defiance Regional Medical Center Finance Committee;
                Chairman and Director of United Way (non-profit); Director of Kettenring
                Country Club.Henry
                R. Thiemann
            
            61
            
            President
                of RDSI since September, 2007; President & Chief Executive Officer of
                RFCBC; Former President, Chief Executive Officer and Director of
                The
                Exchange Bank from 2006 to March 2007; Chief Operating Officer of
                the
                Company from May 2005 to December 2005; Executive Vice President
                and Chief
                Operating Officer of State Bank from 2002 to May 2005; President
                and Chief
                Executive Officer of RFCBC since 2004; Senior Vice President and
                Operations Manager of the Company from 1998 to 2001; Director of
                RFCBC
                since 2004; President and Director of RMC since August 1999; Former
                Director of ROC; Former Director of RFS.Duane
                L. Sinn
            
            37
            
            Executive
                Vice President and Chief Financial Officer of the Company since December
                2005; Senior Vice President and Financial Analysis Manager of State
                Bank
                from 2004 to December 2005; Senior Vice President and Controller
                of the
                Company from 2000 to 2004; Former Director of ROC; Former Director
                of
                RFS.


30.






Name
            
            Age
            
            Position(s)
                Held with the Company and
              its Subsidiaries and Principal Occupation(s)Mark
                A. Klein
            
            
            53
            
            
            President
                and Chief Executive Officer of State Bank since January 2006; Senior
                Vice
                President Private Banking of Sky Bank, Toledo, Ohio from 2004 to
                January
                2006; Vice President and Team Leader of Sky Bank, Toledo, Ohio from
                2000
                to 2004; Director of State Bank since 2006; Member of RFS Investment
                Committee since March 2007; Former Director of ROC; Former Director
                of
                RFS.




31.




**PART
      II**





Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities .





**Market
      Information**





The
      common shares of the Company are traded on The NASDAQ Global Market (symbol
      “RBNF”). The table below sets forth the high and low sales prices and the cash
      dividends declared with respect to the common shares of the Company for the
      indicated periods. The high and low prices reflect actual prices for purchases
      and sales of the Company's common shares as reported by NASDAQ and not
      inter-dealer prices.


Per
                Share
            
            Per
                ShareSales
                Prices
            
            Dividends2007
            
            High
            
            Low
            
            DeclaredFirst
                Quarter
            
            $
            11.92
            
            $
            10.66
            
            $
            .060Second
                Quarter
            
            
            12.82
            
            
            11.71
            
            
            .060Third
                Quarter
            
            
            12.90
            
            
            12.46
            
            
            .070Fourth
                Quarter
            
            
            13.25
            
            
            10.25
            
            
            .0702006
            
            
            High
            
            
            Low
            
            
            DeclaredFirst
                Quarter
            
            $
            13.00
            
            $
            11.16
            
            $
            .050Second
                Quarter
            
            
            12.44
            
            
            10.90
            
            
            .050Third
                Quarter
            
            
            12.00
            
            
            10.82
            
            
            .050Fourth
                Quarter
            
            
            11.79
            
            
            10.50
            
            
            .060





The
      Company plans to continue to pay regular quarterly cash dividends. However,
      there can be no assurance as to the amount of dividends which will be declared
      with respect to the common shares of the Company in the future, since such
      dividends are subject to the discretion of the Company’s Board of Directors,
      cash needs, general business conditions, dividends from the subsidiaries and
      applicable governmental regulations and policies. For a discussion of the
      regulatory limitations on our ability to pay dividends, see “Supervision and
      Regulation - Dividends” in Part I of this Annual Report on Form
      10-K.





During
      the Fourth Quarter 2007, there were no sales of unregistered
      securities.





The
      approximate number of holders of the outstanding common shares of the Company,
      as of February 21, 2008, was 2,415.


32.





Repurchases
      of Common Shares





The
      following table provides information regarding repurchases of the Company’s
      common shares during the three months ended December 31, 2007:





Period
            
            Total
                Number of
              Shares Purchased
              (1)
            
            Average Price
              Paid
                per Share
            
            Total
                Number of
              Shares
                Purchased
              as
                Part of Publicly
              Announced Plans
              or
                Programs
            
            Maximum
              Number
                (or
              Approximate
              Dollar
                Value) of
              Shares
                that May
              Yet
                Be Purchased
              Under the Plans or
              Programs
                (2)October
                1 through October 31, 2007
            
            
            5,731
            
            $
            12.80
            
            
            5,500
            
            
            216,500November
                1 through November 30, 2007
            
            
            12,642
            
            $
            12.72
            
            
            11,000
            
            
            205,500December
                1 through December 31, 2007
            
            
            4,995
            
            $
            12.45
            
            
            4,000
            
            
            201,500





(1)
            All
                of the repurchased shares, other than the shares repurchased as part
                of
                the publicly announced plan, were purchased in the open market by
                Reliance
                Financial Services, an indirect subsidiary of the Company, in its
                capacity
                as the administrator of the Company’s Employee Stock Ownership and Savings
                Plan.


(2)
            On
                April 12, 2007 the Company announced that its Board of Directors
                had
                authorized a stock repurchase program pursuant to which the Company
                may
                purchase up to 250,000 common shares over the ensuing 15-month
                period.




Share
      Performance





*The
      following graph and related information shall not be deemed “soliciting
      material” or to be “filed” with the Securities and Exchange Commission, nor
      shall such information be deemed to be incorporated by reference into any future
      filing under the Securities Act of 1933 or Securities Exchange Act of 1934,
      each
      as amended, except to the extent that the Company specifically incorporates
      it
      by reference into such filing.*





Provided
      below is a line graph comparing the yearly percentage change in the Company’s
      cumulative total shareholder return on its common shares with an index for
      the
      NASDAQ Stock Market (U.S. Companies) comprised of all domestic common shares
      traded on the NASDAQ Global Market System and the NASDAQ Small-Cap Market and
      an
      index for NASDAQ Bank Stocks comprised of all depository institutions (SIC
      Code
      #602) and holding and other investment companies (SIC Code #671) that are traded
      on the NASDAQ Global Market System and the NASDAQ Small-Cap Market (“NASDAQ Bank
      Stocks”) for the five-year period ended December 31, 2007.




33.









***Period
                  Ending******Index***
              
              **12/31/02**
              
              **12/31/03**
              
              **12/31/04**
              
              **12/31/05**
              
              **12/31/06**
              
              **12/31/07**Rurban
                  Financial Corp.
              
              
              100.00
              
              
              149.25
              
              
              149.78
              
              
              128.84
              
              
              119.88
              
              
              142.00NASDAQ
                  Composite
              
              
              100.00
              
              
              150.01
              
              
              162.89
              
              
              165.13
              
              
              180.85
              
              
              198.60NASDAQ
                  Bank
              
              
              100.00
              
              
              129.93
              
              
              144.21
              
              
              137.97
              
              
              153.15
              
              
              119.35





Source
                : SNL Financial LC, Charlottesville, VA****
            (434)
                977-1600©
                2007
            **www.snl.com**




34.


Item
      6.Selected
      Financial Data.





**SUMMARY
      OF SELECTED FINANCIAL DATA**




**FINANCIAL
        HIGHLIGHTS**
  (Dollars
        in thousands except per share data)
 
 Year
                  Ended December 312007
              
              2006
              
              2005
              
              2004
              
              2003**EARNINGS**Interest
                  income
              
              $
              33,010
              
              $
              30,971
              
              $
              21,422
              
              $
              20,028
              
              $
              27,774Interest
                  expense
              
              
              18,222
              
              
              15,936
              
              
              9,368
              
              
              7,951
              
              
              13,972Net
                  interest income
              
              
              14,788
              
              
              15,035
              
              
              12,054
              
              
              12,077
              
              
              13,802Provision
                  (credit) for loan losses
              
              
              521
              
              
              178
              
              
              583
              
              
              (399
              )
              
              1,202Noninterest
                  income
              
              
              26,861
              
              
              23,755
              
              
              18,338
              
              
              17,376
              
              
              35,169Noninterest
                  expense
              
              
              36,637
              
              
              34,904
              
              
              29,054
              
              
              26,009
              
              
              29,160Provision
                  (credit)for
                  income taxes
              
              
              1,234
              
              
              948
              
              
              81
              
              
              1,109
              
              
              6,303Net
                  income (loss)
              
              
              3,257
              
              
              2,760
              
              
              673
              
              
              2,734
              
              
              12,305**PER
                  SHARE DATA**Basic
                  earnings
              
              $
              0.65
              
              $
              0.55
              
              $
              0.15
              
              $
              0.60
              
              $
              2.71Diluted
                  earnings
              
              
              0.65
              
              
              0.55
              
              
              0.15
              
              
              0.60
              
              
              2.70Cash
                  dividends declared
              
              
              0.26
              
              
              0.21
              
              
              0.20
              
              
              N/A
              
              
              N/A**AVERAGE
                  BALANCES**Average
                  shareholders’ equity
              
              $
              57,945
              
              $
              54,501
              
              $
              51,083
              
              $
              49,279
              
              $
              44,599Average
                  total assets
              
              
              556,572
              
              
              554,095
              
              
              433,366
              
              
              417,801
              
              
              549,371**RATIOS**Return
                  on averageshareholders'
                  equity
              
              
              5.62
              %
              
              5.06
              %
              
              1.32
              %
              
              5.55
              %
              
              27.59
              %Return
                  on average total assets
              
              
              0.59
              
              
              0.50
              
              
              0.16
              
              
              0.65
              
              
              2.24Cash
                  dividend payoutratio
                  (cash dividends divided by net income)
              
              
              40.01
              
              
              38.25
              
              
              133.33
              
              
              N/A
              
              
              N/AAverage
                  shareholders'equity to average total assets
              
              
              10.41
              
              
              9.84
              
              
              11.79
              
              
              11.79
              
              
              8.12**PERIOD
                  END TOTALS**Total
                  assets
              
              $
              561,214
              
              $
              556,007
              
              $
              530,542
              
              $
              415,349
              
              $
              435,312Total
                  investments andfed
                  funds sold
              
              
              94,661
              
              
              111,562
              
              
              139,353
              
              
              108,720
              
              
              117,699Total
                  loans and leases
              
              
              389,269
              
              
              370,102
              
              
              327,048
              
              
              264,481
              
              
              284,104Loans
                  held for sale
              
              
              1,650
              
              
              390
              
              
              224
              
              
              113
              
              
              219Total
                  deposits
              
              
              406,031
              
              
              414,555
              
              
              384,838
              
              
              279,624
              
              
              317,475Notes
                  Payable
              
              
              922
              
              
              2,589
              
              
              939
              
              
              3,080
              
              
              10,328Advances
                  from FHLB
              
              
              24,000
              
              
              21,000
              
              
              45,500
              
              
              56,000
              
              
              39,000Trust
                  Preferred Securities
              
              
              20,620
              
              
              20,620
              
              
              20,620
              
              
              10,310
              
              
              10,000Shareholders'
                  equity
              
              
              59,325
              
              
              56,955
              
              
              54,451
              
              
              50,306
              
              
              48,383Shareholders'
                  equityper
                  share
              
              $
              11.92
              
              $
              11.33
              
              $
              10.83
              
              $
              11.01
              
              $
              10.60


35.





Item
      7. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations





Rurban
      Financial Corp. (“Rurban”), is a bank holding company registered with the
      Federal Reserve Board under the Bank Holding Company Act of 1956, as amended.
      Through its direct and indirect subsidiaries, Rurban is engaged in commercial
      banking, computerized data and item processing, and trust and financial
      services.





The
      following discussion is intended to provide a review of the consolidated
      financial condition and results of operations of Rurban and its subsidiaries
      (collectively, the “Company”). This discussion should be read in conjunction
      with the Company’s consolidated financial statements and related footnotes for
      the year ended December 31, 2007.




**Critical
      Accounting Policies**





The
      accounting and reporting policies of the Company are in accordance with
      accounting principles generally accepted in the United States and conform to
      general practices within the banking industry. The Company’s significant
      accounting policies are described in detail in the notes to the Company’s
      consolidated financial statements for the year ended December 31, 2007. The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions.
      The
      Company’s financial position and results of operations can be affected by these
      estimates and assumptions and are integral to the understanding of reported
      results. Critical accounting policies are those policies that management
      believes are the most important to the portrayal of the Company’s financial
      condition and results, and they require management to make estimates that are
      difficult, subjective or complex.





**Allowance
      for Loan Losses -** The
      allowance for loan losses provides coverage for probable losses inherent in
      the
      Company’s loan portfolio. Management evaluates the adequacy of the allowance for
      loan losses each quarter based on changes, if any, in underwriting activities,
      loan portfolio composition (including product mix and geographic, industry
      or
      customer-specific concentrations), trends in loan performance, regulatory
      guidance and economic factors. This evaluation is inherently subjective, as
      it
      requires the use of significant management estimates. Many factors can affect
      management’s estimates of specific and expected losses, including volatility of
      default probabilities, rating migrations, loss severity and economic and
      political conditions. The allowance is increased through provisions charged
      to
      operating earnings and reduced by net charge-offs.





The
      Company determines the amount of the allowance based on relative risk
      characteristics of the loan portfolio. The allowance recorded for commercial
      loans is based on reviews of individual credit relationships and an analysis
      of
      the migration of commercial loans and actual loss experience. The allowance
      recorded for homogeneous consumer loans is based on an analysis of loan mix,
      risk characteristics of the portfolio, fraud loss and bankruptcy experiences,
      and historical losses, adjusted for current trends, for each homogeneous
      category or group of loans. The allowance for credit losses relating to impaired
      loans is based on each impaired loan’s observable market price, the collateral
      for certain collateral-dependent loans, or the discounted cash flows using
      the
      loan’s effective interest rate.





Regardless
      of the extent of the Company’s analysis of customer performance, portfolio
      trends or risk management processes, certain inherent but undetected losses
      are
      probable within the loan portfolio. This is due to several factors including
      inherent delays in obtaining information regarding a customer’s financial
      condition or changes in their unique business conditions, the subjective nature
      of individual loan evaluations, collateral assessments and the interpretation
      of
      economic trends. Volatility of economic or customer-specific conditions
      affecting the identification and estimation of losses for larger non-homogeneous
      credits and the sensitivity of assumptions utilized to establish allowances
      for
      homogenous groups of loans are also factors. The Company estimates a range
      of
      inherent losses related to the existence of these exposures. The estimates
      are
      based upon the Company’s evaluation of imprecise risk associated with the
      commercial and consumer allowance levels and the estimated impact of the current
      economic environment.


36.





**Goodwill
      and Other Intangibles** ***-*** The
      Company records all assets and liabilities acquired in purchase acquisitions,
      including goodwill and other intangibles, at fair value as required by SFAS
      141.
      Goodwill is subject, at a minimum, to annual tests for impairment. Other
      intangible assets are amortized over their estimated useful lives using
      straight-line and accelerated methods, and are subject to impairment if events
      or circumstances indicate a possible inability to realize the carrying amount.
      The initial goodwill and other intangibles recorded and subsequent impairment
      analysis requires management to make subjective judgments concerning estimates
      of how the acquired asset will perform in the future. Events and factors that
      may significantly affect the estimates include, among others, customer
      attrition, changes in revenue growth trends, specific industry conditions and
      changes in competition.





**Impact
      of Accounting Changes**





In
      March 2006, the FASB issued Statement of Financial Accounting Standards
      No. 156, *Accounting
      for Servicing of Financial Assets: an amendment of FASB Statement No. 140* (FAS
      140
      and FAS 156). FAS 140 establishes, among other things, the accounting for all
      separately recognized servicing assets and servicing liabilities. This Statement
      amends FAS 140 to require that all separately recognized servicing assets and
      servicing liabilities be initially measured at fair value, if practicable.
      This
      Statement permits, but does not require, the subsequent measurement of
      separately recognized servicing assets and servicing liabilities at fair value.
      Under this Statement, an entity can elect subsequent fair value measurement
      to
      account for its separately recognized servicing assets and servicing
      liabilities. Adoption of this Statement is required as of the beginning of
      the
      first fiscal year that begins after September 15, 2006. On January 1, 2007,
      the Company adopted SFAS No. 156. The adoption of SFAS No. 156 did not have
      a
      material impact on the financial position and results of operations of the
      Company.





The
      Company or one of its subsidiaries files income tax returns in the U.S. federal
      and multiple-state jurisdictions. With few exceptions, the Company is no longer
      subject to U.S. federal, state and local examinations by tax authorities for
      years before 2004.





The
      Company adopted the provisions of the Financial Accounting Standards Board
      (FASB) Interpretation 48 (FIN 48), *[Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement  No.
      109* ],
      on
      January 1, 2007. FIN 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. As a result of the implementation
      of
      FIN 48, the Company did not become aware of any liability for uncertain tax
      positions that it believes should be recognized in the financial
      statements.





In
      February 2007, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards No. 159, [ *The
      Fair Value Option for Financial Assets and Financial Liabilities - including
      an
      amendment of FASB Statement No. 115 (SFAS No. 159)* ].
      SFAS
      No. 159 permits the Company to choose to measure certain financial assets and
      liabilities at fair value that are not currently required to be measured at
      fair
      value (i.e. the Fair Value Option). Election of the Fair Value Option is made
      on
      an instrument-by-instrument basis and is irrevocable. At the adoption date,
      unrealized gains and losses on financial assets and liabilities for which the
      Fair Value Option has been elected would be reported as a cumulative adjustment
      to beginning retained earnings. If we elect the Fair Value Option for certain
      financial assets and liabilities, we will report unrealized gains and losses
      due
      to changes in their fair value in earnings at each subsequent reporting date.
      SFAS No. 159 is effective as of January 1, 2008. Management has evaluated the
      potential impact of adopting SFAS No. 159 on the Company consolidated financial
      statements and does not expect it will have any material impact to the financial
      position and results of operations of the Company.


37.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, [ *Fair
      Value Measurements (FAS 157)* ].
      FAS
      157 enhances existing guidance for measuring assets and liabilities using fair
      value. Prior to the issuance of FAS 157, guidance for applying fair value was
      incorporated in several accounting pronouncements. FAS 157 provides a single
      definition of fair value, together with a framework for measuring it, and
      requires additional disclosure about the use of fair value to measure assets
      and
      liabilities. FAS 157 also emphasizes that fair value is a market-based
      measurement, not an entity-specific measurement, and sets out a fair value
      hierarchy with the highest priority being quoted prices in active markets.
      Under
      FAS 157, fair value measurements are disclosed by level within that hierarchy.
      While FAS 157 does not add any new fair value measurements, it does change
      current practice. Changes to practice include: (1) a requirement for an
      entity to include its own credit standing in the measurement of its liabilities;
      (2) a modification of the transaction price presumption; (3) a
      prohibition on the use of block discounts when valuing large blocks of
      securities for broker-dealers and investment companies; and (4) a
      requirement to adjust the value of restricted stock for the effect of the
      restriction even if the restriction lapses within one year. FAS 157 is effective
      for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal
      years.





At
      its
      September 2006 meeting, the Emerging Issues Task Force (“EITF”) reached a final
      consensus on Issue No. 06-4, [ *Accounting
      for*  *Deferred
      Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
      Life
      Insurance Arrangements].* The
      consensus stipulates that an agreement by an employer to share a portion of
      the
      proceeds of a life insurance policy with an employee during the postretirement
      period is a postretirement benefit arrangement required to be accounted for
      under Statement No. 106 (“SFAS No. 106”) or Accounting Principles Board (APB)
      Opinion No. 12, Omnibus Opinion-1967. The consensus concludes that the purchase
      of a split-dollar life insurance policy does not constitute a settlement under
      SFAS No. 106 and, therefore, a liability for the postretirement obligation
      must
      be recognized under SFAS No. 106 if the benefit is offered under an arrangement
      that constitutes a plan or under APB No. 12 if it is not part of a plan. Issue
      06-04 is effective for annual or interim reporting periods beginning after
      December 15, 2007. The Company has endorsement split-dollar life insurance
      policies. A liability is expected to be recorded in the first quarter of 2008,
      however; there will be no material impact to the financial position and results
      of operations as a result of the implementation of EITF 06-04.





In
      September 2006, the FASB ratified a consensus opinion by the EITF on EITF Issue
      06-5, [ *Accounting
      for Purchases of Life Insurance-Determining the Amount That Could Be Realized
      in
      Accordance with FASB Technical Bulletin No. 85-4 (Accounting for Purchases
      of
      Life Insurance)* ].
      EITF
      Issue 06-5 requires policy holders to consider other amounts included in the
      contractual terms of an insurance policy, in addition to cash surrender value,
      for purposes of determining the amount that could be realized under the terms
      of
      the insurance contract. If it is probable that contractual terms would limit
      the
      amount that could be realized under the insurance contract, those contractual
      limitations should be considered when determining the realizable amounts. The
      amount that could be realized under the insurance contract should be determined
      on an individual policy (or certificate) level and should include any amount
      realized on the assumed surrender of the last individual policy or certificate
      in a group policy.





The
      Company holds several life insurance policies; however, the policies do not
      contain any provisions that would restrict or reduce the cash surrender value
      of
      the policies. The consensus in EITF Issue 06-5 is effective for fiscal years
      beginning after December 15, 2006. The application of this guidance did not
      have
      a material adverse effect on the Company’s financial position or results


of
      operations.


38.


**Acquisitions**





**Diverse
      Computer Marketers**


On
      September 2, 2006, Rurbanc Data Services, Inc (“RDSI”), the bank data processing
      subsidiary of Rurban Financial Corp. (“Rurban”), completed its acquisition of
      Diverse Computer Marketers, Inc., a Michigan corporation, and a related Indiana
      corporation, DCM Indiana, Inc. Rurban subsequently merged DCM Indiana, Inc.
      into
      Diverse Computer Marketers, Inc. (“DCM”). DCM now operates as a separate
      subsidiary of RDSI. As a result of this acquisition, the Company will have
      an
      opportunity to grow its item processing business.





Under
      the
      terms of the Stock Purchase Agreement, RDSI acquired all of the outstanding
      stock of the DCM Companies from their shareholders for an aggregate purchase
      price of $5.0 million. An additional $250,000 was payable to the
      shareholders contingent upon the continuation of profitable growth over the
      first year of combined operations. The final payment of $266,559 was made in
      2007. The entire purchase price was paid in cash. The results of DCM’s
      operations have been included in Rurban’s consolidated statement of income from
      the date of acquisition.





The
      following tables summarize the estimated fair values of the net assets acquired
      and the computation of the purchase price and goodwill related to the
      acquisitions.





Assets:Cash
            
            $
            118,137Accounts
                receivable
            
            
            419,151Premises
                and equipment
            
            
            207,644Goodwill
            
            
            4,795,144Other
                intangibles
            
            
            2,652,000Other
                assets
            
            
            158,241Total
                Assets
            
            
            8,350,317Liabilities:Accounts
                payable
            
            
            1,188,289Borrowings
            
            
            1,284,427Other
                liabilities
            
            
            886,510Total
                Liabilities
            
            
            3,359,226Net
                assets acquired
            
            $
            4,991,091





The
      signficant intangible assets acquired include the customer related intangible
      of
      $2,389,000, the Trademark of $180,000 and the non-compete agreements of $83,000,
      which have useful lives of 180, 36 and 36 months, respectively, and will be
      amortized using the straight-line method. The $4.8 million of goodwill was
      assigned entirely to the data processing unit and is not expected to be
      deductible for tax purposes. This analysis is based upon an initial third party
      opinion and is subject to change for up to twelve months.





Under
      terms of the Stock Purchase Agreement, and immediately prior to the closing,
      the
      disaster recovery services portion of the DCM business was spun-off. As DCM
      records did not include separate financial information for the disaster recovery
      services, historical financial information for the purchased portion of the
      business is not available. Therefore, pro forma information that discloses
      the
      results of operations as though the business combination had been completed
      at
      the beginning of the period is not included.




39.





**EARNINGS
      SUMMARY**





Net
      income for 2007 was $3.3 million, or $0.65 per diluted share, compared with
      net
      income of $2.8 million, or $0.55 per diluted share, and net income of $673,000,
      or $0.15 per diluted share, reported for 2006 and 2005, respectively. Cash
      dividends per share were $0.26 in 2007, $0.21 in 2006 and $0.20 in 2005.




Rurban
      continued to make significant progress in 2007, as the Company continued its
      path of improving profitability. Rurban achieved four consecutive quarters
      of
      core earnings improvement. Revenue continued to grow and the company executed
      significant non-interest expense reductions within the Banking Group. The
      earnings improvement was driven by both the banking and data and item processing
      segments of Rurban. Many of the non-interest expense reductions were due to
      the
      company merging four separate charters into the lead bank, The State Bank and
      Trust Company. It also represents a new beginning for Rurban, where the Company
      can focus its energies on growth, efficiency and profitability. In the fourth
      quarter of 2006, the Company announced additional steps to complete its
      restructuring. The Company completed initiatives in 2007 to bring these final
      steps to closure, streamlining Rurban into a holding company with a
      single-chartered community bank and a dynamic data processing company. Net
      income for 2006 was impacted by asset quality combined with continued
      improvement in the revenue stream of RDSI. Also negatively impacting earnings
      in
      2006 was the RFCBC loan sale and acquisition costs relating to the acquisitions
      that were necessary for the growth strategy to pave the way for future earnings.





**CHANGES
      IN FINANCIAL CONDITION**




Balance
      sheet growth over the past twelve months has been achieved exclusively
      through organic
      growth. Total loans increased 5.2%, or $19.2 million, over the course of 2007,
      funded largely by cash and the liquidation of investment securities. As a result
      of this restructure, assets grew only 1% year-over-year to $561.2
      million.


40.





**Significant
      Events of 2007**




During
      the first quarter of 2007, Rurban merged Reliance Financial Services, N.A.,
      its
      trust and investment subsidiary, and The Exchange Bank, its recently acquired
      community bank, into The State Bank and Trust Company. This action has allowed
      efficiencies leading to continuing core profit improvement at The State Bank
      and
      Trust Company.





State
      Bank continues to expand its reach to higher-growth markets. In January 2007,
      the Fort Wayne, Indiana Loan Production Office was converted to a full-service
      branch. State Bank continued its entrance to growth markets by opening a Loan
      Production Office in Columbus, Ohio in December, 2007.





RDSI
      and
      DCM, Rurban’s data and item processing subsidiaries, reported another record
      year. The total number of banks being processed increased by 5 to 117. Revenue
      increased to $20.6 million, a $4.3 million, or 27% increase, over the previous
      year’s results. Net income was a record $2.5 million for the year.




On
      April
      12, 2007, Rurban initiated a stock repurchase program, authorizing the
      repurchase of up to 250,000 shares, or approximately 5%, of the Company’s
      outstanding shares. As of the end of the fourth quarter, Rurban repurchased
      48,500 shares at an average cost of $12.58.





Rurban
      increased its dividend to shareholders from $0.21 per share during 2006 to
      $0.26
      per share in 2007.





**Significant
      Events of 2006**




During
      the fourth quarter of 2006, Rurban increased its quarterly dividend by 20%,
      to
      $0.06 per share.





Fourth
      quarter 2006 results include actions that resulted in after-tax charges/income
      of $474,000 for balance sheet restructuring, merger-related expenses of
      $187,000, recovery of WorldCom bond losses totaling $587,000, and a gain
      associated with the sale of the credit card portfolio of $488,000.





Rurban
      received regulatory approval to open a full-service banking center in Fort
      Wayne, Indiana, where it previously had a Loan Production Office. This full
      service branch opened on January 2, 2007.





Rurban
      announced the planned merger of Reliance Financial Services, N.A., Rurban’s
      trust and investment subsidiary, and The Exchange Bank, its recently acquired
      community bank, into its lead bank, The State Bank and Trust Company, subject
      to
      regulatory approval. An after-tax charge of $187,000 for this merger was
      recorded during the fourth quarter as stated earlier.





On
      September 2, 2006, Rurbanc Data Services, Inc. (“RDSI”), the bank data
      processing subsidiary of Rurban Financial Corp. (“Rurban”), completed its
      acquisition of Diverse Computer Marketers, Inc.


41.





**RESULTS
      OF OPERATIONS**





Year
                Ended
              December
                31,
            
            Year
                Ended
              December
                31,2007
            
            2006
            
            %
                Change
            
            2006
            
            2005
            
            %
                Change(dollars
                in thousands except per share data)Total
                Assets
            
            $
            561,214
            
            $
            556,007
            
            
            +1
            %
            $
            556,007
            
            $
            530,542
            
            
            +5
            %Total
                Securities
            
            
            92,661
            
            
            102,462
            
            
            -10
            %
            
            102,462
            
            
            139,353
            
            
            -27
            %Loans
                Held for Sale
            
            
            1,650
            
            
            390
            
            
            N/A
            
            
            390
            
            
            224
            
            
            N/ALoans
                (Net)
            
            
            385,278
            
            
            366,384
            
            
            +5
            %
            
            366,384
            
            
            322,348
            
            
            +14
            %Allowance
                for Loan Losses
            
            
            3,990
            
            
            3,717
            
            
            +7
            %
            
            3,717
            
            
            4,700
            
            
            -21
            %Total
                Deposits
            
            $
            406,031
            
            $
            414,555
            
            
            -2
            %
            $
            414,555
            
            $
            384,838
            
            
            +8
            %Total
                Revenues
            
            $
            41,648
            
            $
            38,790
            
            
            +7
            %
            $
            38,790
            
            $
            30,392
            
            
            +28
            %Net
                Interest Income
            
            
            14,787
            
            
            15,034
            
            
            -2
            %
            
            15,034
            
            
            12,054
            
            
            +25
            %Loan
                Loss Provision (credit)
            
            
            521
            
            
            178
            
            
            N/A
            
            
            178
            
            
            583
            
            
            -70
            %Noninterest
                Income
            
            
            26,861
            
            
            23,755
            
            
            +13
            %
            
            23,755
            
            
            18,338
            
            
            +13
            %Non-interest
                Expense
            
            
            36,637
            
            
            34,904
            
            
            +5
            %
            
            34,904
            
            
            29,054
            
            
            +20
            %Net
                Income
            
            
            3,257
            
            
            2,760
            
            
            +18
            %
            
            2,760
            
            
            673
            
            
            +310
            %Basic
                Earnings per Share
            
            $
            0.65
            
            $
            0.55
            
            
            N/A
            
            $
            0.55
            
            $
            0.15
            
            
            N/ADiluted
                Earnings per Share
            
            $
            0.65
            
            $
            0.55
            
            
            N/A
            
            $
            0.55
            
            $
            0.15
            
            
            N/A





**Net
      Interest Income**





Year
                Ended
              December
                31,
            
            Year
                Ended
              December
                31,2007
            
            2006
            
            %
                Change
            
            2006
            
            2005
            
            %
                Change(dollars
                in thousands)Net
                Interest Income
            
            $
            14,787
            
            $
            15,034
            
            
            -2
            %
            $
            15,034
            
            $
            12,054
            
            
            +25
            %





**Net
      interest income** was
      $14.8 million for 2007 compared to $15.0 million for 2006, a decrease of 1.6%,
      which primarily resulted from margin compression. Average earning assets also
      decreased to $488.3 million in 2007 compared to $490.6 million in 2006 as a
      result of repositioning the balance sheet to improve the net interest margin.
      Over the past 12 months, the company was successful in converting lower yielding
      investments into a funding source for loan growth and converted higher cost
      deposits to core deposits and increased wholesale funding due to favorable
      rates.




**Net
      interest income**  was
      $15.0
      million for 2006, an increase of 24.7% above the prior year, which resulted
      from
      a 26.2% growth in average earning assets offset by a one basis point decline
      in
      the annual net interest margin to 3.13%. The growth in earning assets was
      attributable to the acquisition of Exchange Bank. The decrease in the net
      interest margin was largely due to the flat to sometimes invested yield curve,
      the high mix of investments to earning assets and the increase in funding cost
      throughout 2006.




42.




**Loan
      Loss Provision**





**The
      Provision for Loan Losses** of $521,000
      was taken in 2007 compared to $178,000 taken for 2006; the $343,000 increase
      reflects a more normal accrual in 2007. 2006 includes a release of $140,000
      reserve associated with the credit card portfolio, which has been sold with
      partial recourse to the bank.





**The
      Provision for Loan Losses** of $178,000
      was taken in 2006 compared to $583,000 taken for 2005; the $405,000 decrease
      reflects the lower level of risk in the loan portfolio, in addition to the
      release of the $140,000 reserve associated with the credit card portfolio,
      which
      has been sold with partial recourse to the bank. The fourth quarter loan loss
      provision of $(159,000) represents a $772,000 decrease from the prior-year
      fourth quarter, and reflects the same factors as above. The fourth quarter
      of
      2005 was impacted by a problem loan sale.




**Non-interest
      Income**





Year
                Ended
              December
                31,
            
            Year
                Ended
              December
                31,2007
            
            2006
            
            %
                Change
            
            2006
            
            2005
            
            %
                Change(dollars
                in thousands)Total
                Non-interest Income
            
            $
            26,861
            
            $
            23,755
            
            
            +13
            %
            $
            23,755
            
            $
            18,338
            
            
            +30
            %-
                Data Service Fees
            
            $
            19,382
            
            $
            15,011
            
            
            +29
            %
            $
            15,011
            
            $
            12,708
            
            
            +18
            %-
                Trust Fees
            
            $
            3,385
            
            $
            3,192
            
            
            +6
            %
            $
            3,192
            
            $
            3,134
            
            
            +2
            %-
                Deposit Service Fees
            
            $
            2,244
            
            $
            2,161
            
            
            +4
            %
            $
            2,161
            
            $
            1,860
            
            
            +16
            %-
                Gains on Sale of Loans
            
            $
            574
            
            $
            1,249
            
            
            N/A
            
            $
            1,249
            
            $
            (437
            )
            
            N/A-
                Investment Securities
              Recoveries
            
            $
            0
            
            $
            889
            
            
            N/A
            
            $
            889
            
            $
            -
            
            
            N/A-
                Gains (losses) on Sale of Securities
            
            $
            2
            
            $
            (495
            )
            
            N/A
            
            $
            (495
            )
            $
            25
            
            
            N/A-
                Other
            
            $
            1,274
            
            $
            1,748
            
            
            -27
            %
            $
            1,748
            
            $
            1,048
            
            
            +67
            %




**Total
      non-interest income** was
      $26.9 million for 2007 compared to $23.8 million for 2006, representing a $3.1
      million, or 13.1% increase year-over-year. Non-interest income in 2006 was
      increased a net $1.1 million from the one-time impact of a $495,000 charge
      taken
      to restructure the bond portfolio, an $889,000 recovery of losses previously
      recorded on WorldCom bonds, and a gain associated with the sale of the credit
      card portfolio of $740,000. Excluding these 2006 one-time items, non-interest
      income increased $4.2 million, or 18.7%, year-over-year. This increase was
      driven by a $4.4 million, or 29%, increase in data service fees, which were
      primarily attributable to the DCM acquisition.





**Total
      non-interest income** was
      $23.8 million for the year ended December 31, 2006, accounting for 61.2% of
      total 2006 revenue compared with 60.3% for the year earlier period. Excluding
      the one-time impact of a $495,000 charge taken to restructure the bond
      portfolio, an $889,000 recovery of WorldCom bond losses and a gain associated
      with the sale of the credit card portfolio of $740,000, 2006 total non-interest
      income was $22.6 million, up $4.2 million or 23.3% above the $18.3 million
      reported for the prior year. Over 63% of 2006 fee income was derived from RDSI,
      the data processing subsidiary, with smaller growth contributions from the
      Banking Group and Reliance. The increase in Deposit Service fees was due to
      the
      acquisition of Exchange Bank in 2006.




43.


**Rurbanc
      Data Services, Inc. (“RDSI”)**





Year
                Ended
              December
                31,
            
            Year
                Ended
              December
                31,2007
            
            2006
            
            %
                Change
            
            2006
            
            2005
            
            %
                Change(Dollars
                in thousands)Data
                Service Fees
            
            $
            19,382
            
            $
            15,011
            
            
            +29
            %
            $
            15,011
            
            $
            12,708
            
            
            +18
            %





**Data
      service fees** increased $4.4 million or 29% to $19.4 million in 2007 from $15.0 million in
      2006, and increased $2.3 million, or 18% from 2005 to 2006. Data processing
      fees
      contributed 72.2% of Rurban’s recurring non-interest income for 2007. The
      majority of the increase was due to RDSI core growth, as well as a full year
      of
      fee income from DCM, which was acquired on September 2, 2006. RDSI now services
      over 117 community banks.




Earnings
      for the 2007 fiscal year were $2.5 million compared to $2.1 million for 2006,
      up
      $390,000, or 18.7%. The Company continues to see a solid pipeline of potential
      customers for both the data processing and item processing business lines
      entering 2008 as six additional banks are scheduled to be converted by June
      of
      2008.





**RDSI
      and DCM provide** data
      processing and item processing services for 117 community banks in
      Arkansas, Florida, Illinois, Indiana, Michigan, Missouri, Nebraska, Nevada,
      Ohio
      and Wisconsin. RDSI and
      DCM differentiate themselves from their competition through the quality of
      their
      products and the excellence of their customer service. The applications utilized
      by RDSI are driven by world-class software. Customer service encompasses on-time
      delivery every morning and a discipline of responding to and resolving customer
      questions and issues within one hour. RDSI provides turnkey solutions for its
      clients through its partnerships with vendors experienced in a full array of
      banking products.





**Non-interest
      Expense**


Year
                Ended
              December
                31,
            
            Year
                Ended
              December
                31,2007
            
            2006
            
            %
                Change
            
            2006
            
            2005
            
            %
                Change(dollars
                in thousands)Total
                Non-interest Expense
            
            $
            36,637
            
            $
            34,904
            
            
            +5
            %
            $
            34,904
            
            $
            29,054
            
            
            +20
            %-
                Salaries & Employee Benefits
            
            $
            17,007
            
            $
            16,584
            
            
            +3
            %
            $
            16,584
            
            $
            13,519
            
            
            +23
            %-
                Professional Fees
            
            $
            2,227
            
            $
            2,396
            
            
            -7
            %
            $
            2,396
            
            $
            2,730
            
            
            -12
            %-All
                Other
            
            $
            17,403
            
            $
            15,924
            
            
            +9
            %
            $
            15,924
            
            $
            12,805
            
            
            +24
            %





**Non-interest
      expense** increased $1.7 million, or 4.9%, primarily from the additional expenses incurred
      within the Data Processing Group relating to the incorporation of full-year
      expenses from the DCM acquisition, which occurred in September of 2006. Data
      Processing Group expenses were $16.9 million in 2007 compared to $13.1 million
      in 2006. This $3.7 million increase in RDSI was partially offset by a $1.9
      million improvement within our Banking Group. This non-interest expense
      reduction was primarily the result of reductions in professional fees associated
      with loan workouts and the reduction of 42 full-time positions within the
      company, of which 23 were part of the Banking Group. This significantly reduced
      compensation and employee benefits expense. This reduction was also aided by
      approximately $500,000 of one-time expenses taken in the fourth quarter of
      2006
      as detailed below.


44.





**Non-interest
      expense** increased $5.8 million, or 20.0%, primarily from the additional expenses of
      $4.9
      million and $1.2 million, respectively, contributed by The Exchange Bank and
      DCM, which were acquired on December 31, 2005 and September 2, 2006,
      respectively. Excluding one-time 2006 charges including $215,000 associated
      with
      the prepayment of approximately $9.0 million of higher-cost FHLB advances and
      merger-related charges of approximately $283,000, including a fourth quarter
      charge to merge the two community banks, 2006 recurring non-interest expense
      was
      $34.4 million, up 18.4% from $29.1 million reported for 2005.





Salaries
      and benefits accounted for $3.1 million, or 52.4%, of the $5.8 million
      year-over-year increase in non-interest expenses with the addition of 36 FTE
      employees, bringing the total to 317. Improvements in State Bank’s operating
      expenses since the acquisition of the Lima branches in the second quarter of
      2005 partially offset higher spending levels in other categories.





**FINANCIAL
      CONDITION**




**Investments**




The
      Company evaluates its securities portfolio for impairment throughout the year.
      An impairment is recorded against individual equity securities if their cost
      significantly exceeds their fair value for a substantial amount of time. An
      impairment is also recorded for investments in debt securities, unless the
      decrease in fair value is attributable to interest rates and management has
      the
      intent and ability to retain the investment in the issuer for a period of time
      sufficient to allow for any anticipated recovery in market value.


Management
      believes that it has the ability and intent to retain the investments with
      a
      loss evidenced by the Company’s liquidity position discussed later in the
      Liquidity section, and over the past three years, the Company has had net gains
      on the sale of securities and any losses were minimal.





**Loans**




Period
                Ended12/31/07
            
            %
                of
              Total
            
            12/31/06
            
            %
                of
              Total
            
            %
              Inc/(Dec)
            
            12/31/05
            
            %
                of
              Total
            
            %
              Inc/(Dec)(dollars
                in thousands)Commercial
            
            $
            83,049
            
            
            21
            %
            $
            71,641
            
            
            19
            %
            
            16
            %
            $
            79,359
            
            
            24
            %
            
            (10
            )%Commercial
                R.E.
            
            
            126,785
            
            
            33
            %
            
            109,503
            
            
            30
            %
            
            16
            %
            
            68,072
            
            
            21
            %
            
            61
            %Agricultural
            
            
            43,369
            
            
            11
            %
            
            44,683
            
            
            12
            %
            
            (3
            )%
            
            40,236
            
            
            12
            %
            
            11
            %Residential
            
            
            84,621
            
            
            22
            %
            
            94,389
            
            
            25
            %
            
            (10
            )%
            
            89,086
            
            
            27
            %
            
            6
            %Consumer
            
            
            51,357
            
            
            13
            %
            
            49,314
            
            
            13
            %
            
            4
            %
            
            48,877
            
            
            15
            %
            
            1
            %Leases
            
            
            330
            
            
            0
            %
            
            857
            
            
            1
            %
            
            (61
            )%
            
            1,661
            
            
            1
            %
            
            (48
            )%Loans
            
            $
            389,511
            
            
            
            
            $
            370,387
            
            
            
            
            
            5
            %
            $
            327,291
            
            
            
            
            
            13
            %Loans
                held for sale
            
            
            1,650
            
            
            
            
            
            390
            
            
            
            
            
            
            
            
            224Total
            
            $
            391,161
            
            
            
            
            $
            370,777
            
            
            
            
            
            
            
            $
            327,515





**Loans** increased $19.2 million to $390 million at December 31, 2007. This growth was
      due to commercial loans increases as Residential and Consumer loan balances
      decreased slightly during 2007.




In
      2006,
      loans increased $43 million to $370 million at December 31, 2006. This growth
      is
      all organic in nature since the Exchange Bank acquisition balances were included
      as of December 31, 2005.


45.






**Asset
      Quality**




Period
                Ended December 31,(dollars
                in millions)12/31/07
            
            12/31/06
            
            Change in
              Dollars/
              Percentages
            
            12/31/05
            
            Change in
              Dollars/
              percentagesNon-performing
                loans
            
            $
            6.0
            
            $
            3.8
            
            $
            2.2
            
            $
            6.3
            
            $
            -2.5Non-performing
                assets
            
            $
            6.2
            
            $
            3.9
            
            $
            2.3
            
            $
            8.9
            
            $
            -5.0Non-performing
                assets/totalAssets
            
            
            1.10
            %
            
            0.70
            %
            
            40
            %
            
            1.67
            %
            
            -0.97
            %Net
                charge-offs
            
            $
            0.2
            
            $
            1.2
            
            $
            -1.0
            
            $
            1.7
            
            $
            -0.5Net
                charge-offs/total loans
            
            
            0.07
            %
            
            0.31
            %
            
            -0.24
            %
            
            0.52
            %
            
            -0.21
            %Loan
                loss provision (credit)
            
            $
            .5
            
            $
            .2
            
            $
            0.3
            
            $
            .6
            
            $
            -0.4Allowance
                for loan losses
            
            $
            3.9
            
            $
            3.7
            
            $
            0.2
            
            $
            4.7
            
            $
            -1.0Allowance/loans
            
            
            1.03
            %
            
            1.00
            %
            
            .03
            %
            
            1.44
            %
            
            -0.44
            %Allowance/non-performingLoans
            
            
            65
            %
            
            97
            %
            
            -32
            %
            
            75
            %
            
            +22
            %Allowance/non-performingAssets
            
            
            65
            %
            
            95
            %
            
            -30
            %
            
            53
            %
            
            +42
            %




**A
      Provision for Loan Losses** of $521,000
      was taken in 2007 compared to $178,000 taken for 2006. The 2006 provision was
      reduced by the release of $140,000 provision associated with the credit card
      portfolio sold at the end of 2006. The fourth quarter loan loss provision of
      $142,000 represents a normal accrual for the company given our loan growth
      and
      net charge-offs of $89,000, or .09%, of average loans.





**Non-performing
      assets** (loans +
      OREO + OAO) were $6.2 million, or 1.10 %, of total assets at December 31, 2007,
      an increase of $2.3 million from a year-ago. This increase, which originated
      in
      the second quarter of 2007, is due to three commercial loan relationships that
      are being worked out with minimal, if any, expected loss.





**CAPITAL
      RESOURCES**





**Stockholders’
      equity** at
      December 31, 2007, was $59.3 million, equivalent to 10.6% of total assets.
      On a
      tangible basis, the ratio was 7.1%. The total risk-based capital ratio was
      16.0%
      at December 31, 2007, well in excess of the “well-capitalized” regulatory
      threshold of 10%.





**Total
      consolidated regulatory (risk-based) capital** was
      $64.2 million at December 31, 2007, and $62.0 million at December 31, 2006.
      As
      of December 31, 2007, $19.7 million of the $20 million of trust preferred
      securities qualified as Tier 1 capital.





**Planned
      Purchases of Premises and Equipment**




**Management
      plans to purchase** additional premises and equipment to meet the current and future needs of the
      Company’s customers. These purchases, including buildings and improvements and
      furniture and equipment (which includes computer hardware, software, office
      furniture and license agreements), are currently expected to total approximately
      $4.4 million over the next year. These purchases are expected to be funded
      by
      cash on hand and from cash generated from current operations.




46.


**LIQUIDITY**





**Liquidity
      relates primarily** to the
      Company’s ability to fund loan demand, meet deposit customers’ withdrawal
      requirements and provide for operating expenses. Assets used to satisfy these
      needs consist of cash and due from banks, federal funds sold, interest earning
      deposits in other financial institutions, securities available for sale and
      loans held for sale. These assets are commonly referred to as liquid assets.
      Liquid assets were $111.5 million at December 31, 2007 compared to $125.5
      million at December 31, 2006. During 2007, the company continued to liquidate
      investments and use the funding to grow the loan portfolio.  Rurban
      restructured its balance sheet during the fourth quarter of 2006 to improve
      its
      net interest margin going forward, by selling $17.5 million of investment
      securities, or approximately 13% of its investment portfolio, with an average
      yield of 3.89%. Approximately $12 million of the proceeds were used to repay
      higher-cost, non-core funding, namely, long-term advances from the Federal
      Home
      Loan Bank and other borrowings that had a cost in excess of 5.25%. The remaining
      proceeds of approximately $5.5 million were used to fund the bank’s growing
      commercial loan portfolio. The
      Company views this level of liquidity as appropriate.





**The
      Company’s commercial real estate and residential first mortgage
      portfolio** of
      $211.4 million at December 31, 2007, and residential first mortgage portfolio
      of
      $94.4 million at December 31, 2006, which can and has been readily used to
      collateralize borrowings, is an additional source of liquidity. Management
      believes the Company’s current liquidity level, without these borrowings, is
      sufficient to meet its liquidity needs. At December 31, 2007, all eligible
      commercial real estate and first mortgage loans were pledged under an FHLB
      blanket lien.





**The
      cash flow statements** for the
      periods presented provide an indication of the Company’s sources and uses of
      cash as well as an indication of the ability of the Company to maintain an
      adequate level of liquidity. A discussion of the cash flow statements for 2007,
      2006 and 2005 follows.





**The
      Company experienced** positive
      cash flows from operating activities in 2007, 2006 and 2005. Net cash from
      operating activities was $5.9 million, $4.7 million and $4.2 million for the
      years ended December 31, 2007, 2006 and 2005, respectively.





**Cash
      flow from investing activities** was a
      use of cash of $12.8 million and $21.0 million for December 31, 2007 and 2006
      respectively, and net funds provided of $28.9 million for the year ended
      December 31, 2005. The changes in net cash from investing activities for 2007
      include the purchase of bank owned life insurance of $1.0 million and purchases
      of premises and equipment of $3.7 million. The changes in net cash from
      investing activities for 2006 include the cash paid to the shareholders of
      Exchange Bank that totaled $6.5 million and cash paid to the shareholders of
      DCM
      that totaled $4.9 million. In 2007, 2006 and 2005, the Company received $3.5
      million, $33.3 million and $5.2 million, respectively, from sales of securities
      available for sale, while proceeds from repayments, maturities and calls of
      securities were $37.2 million, $19.5 million and $17.1 million in 2007, 2006
      and
      2005, respectively.




**Net
      cash flow from financing activities** was $1.6
      million, $26.1 million, and $(31.1) million for the years ended
      December 31, 2007, 2006 and 2005, respectively. The net cash increase was
      primarily due to an increase in securities sold under agreement to repurchase
      of
      $10.7 million $26.2 million and $2.0 for December 31, 2007, 2006 and 2005
      respectively. Other significant changes for 2007, 2006 and 2005 include $3.0
      million, $(24.5) million and $(14.0) million in net borrowings from the FHLB.
      Additionally $(8.5) million, $29.7 million and $(23.1) million of the change
      is
      attributable to the change in deposits. Also, in 2005, the Company received
      proceeds of $10.3 million from the trust preferred issuance.


47.


**Off-Balance-Sheet
      Borrowing Arrangements:**





Significant
      additional off-balance-sheet liquidity is available in the form of FHLB
      advances, unused federal funds lines from correspondent banks, and the national
      certificate of deposit market. Management expects the risk of changes in
      off-balance-sheet arrangements to be immaterial to earnings.





Approximately
      $139.8 million commercial real estate and residential first mortgage loans
      of
      the Company’s $211.4 million portfolio qualify to collateralize FHLB borrowings
      and have been pledged to meet FHLB collateralization requirements as of December
      31, 2007. Based on the current collateralization requirements of the FHLB,
      approximately $21.4 million of additional borrowing capacity existed at December
      31, 2007.





At
      December 31, 2007, the Company had $20.9 million in federal funds lines. As
      of
      December 31, 2006, the Company had $21.8 million in federal funds lines. There
      were no Federal funds borrowed at December 31, 2007 and 2006. The Company also
      had $9.8 million in unpledged securities that may be used to pledge for
      additional borrowings.




**TABULAR
      DISCLOSURE OF CONTRACTUAL OBLIGATIONS**





**Payment
                  due by period****Contractual
                  Obligations**
              
              **Total**
              
              **Less**
                **than 1**
                **year**
              
              **1 – 3**
                **years**
              
              **3 – 5**
                **Years**
              
              **More**
                **than 5**
                **years**Long-Term
                  Debt Obligations
              
              $
              24,000,000
              
              $
              2,000,000
              
              $
              16,500,000
              
              $
              5,500,000
              
              $
              -Other
                  Debt Obligations
              
              
              21,542,457
              
              
              340,288
              
              
              582,169
              
              
              -
              
              
              20,620,000Capital
                  Lease Obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Operating
                  Lease Obligations
              
              
              2,433,393
              
              
              411,551
              
              
              675,147
              
              
              513,283
              
              
              833,412Purchase
                  Obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Other
                  Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under
                  GAAP
              
              
              223,480,842
              
              
              183,913,727
              
              
              34,587,157
              
              
              4,363,903
              
              
              616,055Total
              
              $
              271,456,692
              
              $
              186,665,566
              
              $
              52,344,473
              
              $
              10,377,186
              
              $
              22,069,467





The
      Company’s contractual obligations as of December 31, 2007 were comprised of
      long-term debt obligations, other debt obligations, operating lease obligations
      and other long-term liabilities. Long-term debt obligations are comprised of
      FHLB Advances of $24.0 million. Other debt obligations are comprised of Trust
      Preferred securities of $20.6 million and Notes Payable of $922,000. The
      operating lease obligation is a lease on the RDSI-South building, of $99,600
      per
      year, the RDSI-North building of $162,000 a year and the DCM-Lansing facility
      of
      $89,400 per year. Other long-term liabilities include time deposits of $223.5
      million.


48.


**ASSET
      LIABILITY MANAGEMENT**





**Asset
      liability management** involves
      developing and monitoring strategies to maintain sufficient liquidity, maximize
      net interest income and minimize the impact that significant fluctuations in
      market interest rates would have on earnings. The business of the Company and
      the composition of its balance sheet consist of investments in interest-earning
      assets (primarily loans, mortgage-backed securities, and securities available
      for sale) which are primarily funded by interest-bearing liabilities (deposits
      and borrowings). With the exception of specific loans which are originated
      and
      held for sale, all of the financial instruments of the Company are for other
      than trading purposes. All of the Company’s transactions are denominated in U.S.
      dollars with no specific foreign exchange exposure. In addition, the Company
      has
      limited exposure to commodity prices related to agricultural loans. The impact
      of changes in foreign exchange rates and commodity prices on interest rates
      are
      assumed to be insignificant. The Company’s financial instruments have varying
      levels of sensitivity to changes in market interest rates resulting in market
      risk. Interest rate risk is the Company’s primary market risk exposure; to a
      lesser extent, liquidity risk also impacts market risk exposure.





**Interest
      rate risk** is the
      exposure of a banking institution’s financial condition to adverse movements in
      interest rates. Accepting this risk can be an important source of profitability
      and shareholder value; however, excessive levels of interest rate risk could
      pose a significant threat to the Company’s earnings and capital base.
      Accordingly, effective risk management that maintains interest rate risks at
      prudent levels is essential to the Company’s safety and soundness.





**Evaluating
      a financial institution’s exposure** to
      changes in interest rates includes assessing both the adequacy of the management
      process used to control interest rate risk and the organization’s quantitative
      level of exposure. When assessing the interest rate risk management process,
      the
      Company seeks to ensure that appropriate policies, procedures, management
      information systems, and internal controls are in place to maintain interest
      rate risks at prudent levels of consistency and continuity. Evaluating the
      quantitative level of interest rate risk exposure requires the Company to assess
      the existing and potential future effects of changes in interest rates on its
      consolidated financial condition, including capital adequacy, earnings,
      liquidity, and asset quality (when appropriate).





**The
      Federal Reserve Board** together
      with the Office of the Comptroller of the Currency and the Federal Deposit
      Insurance Company, adopted a Joint Agency Policy Statement on interest rate
      risk
      effective June 26, 1996. The policy statement provides guidance to examiners
      and
      bankers on sound practices for managing interest rate risk, which will form
      the
      basis for ongoing evaluation of the adequacy of interest rate risk management
      at
      supervised institutions. The policy statement also outlines fundamental elements
      of sound management that have been identified in prior Federal Reserve guidance
      and discusses the importance of these elements in the context of managing
      interest rate risk. Specifically, the guidance emphasizes the need for active
      board of director and senior management oversight and a comprehensive risk
      management process that effectively identifies, measures, and controls interest
      rate risk.





**Financial
      institutions** derive
      their income primarily from the excess of interest collected over interest
      paid.
      The rates of interest an institution earns on its assets and owes on its
      liabilities generally are established contractually for a period of time. Since
      market interest rates change over time, an institution is exposed to lower
      profit margins (or losses) if it cannot adapt to interest rate changes. For
      example, assume that an institution’s assets carry intermediate or long term
      fixed rates and that those assets are funded with short-term liabilities. If
      market interest rates rise by the time the short-term liabilities must be
      refinanced, the increase in the institution’s interest expense on its
      liabilities may not be sufficiently offset if assets continue to earn at the
      long-term fixed rates. Accordingly, an institution’s profits could decrease on
      existing assets because the institution will either have lower net interest
      income or possibly, net interest expense. Similar risks exist when assets are
      subject to contractual interest rate ceilings, or rate sensitive assets are
      funded by longer-term, fixed-rate liabilities in a declining rate
      environment.


49.





**There
      are several ways** an
      institution can manage interest rate risk including: 1) matching repricing
      periods for new assets and liabilities, for example, by shortening terms of
      new
      loans or investments; 2) selling existing assets or repaying certain
      liabilities; and 3) hedging existing assets, liabilities, or anticipated
      transactions. An institution might also invest in more complex financial
      instruments intended to hedge or otherwise change interest rate risk. Interest
      rate swaps, futures contacts, options on futures contracts, and other such
      derivative financial instruments can be used for this purpose. Because these
      instruments are sensitive to interest rate changes, they require management’s
      expertise to be effective. The Company has not purchased derivative financial
      instruments in the past but may purchase such instruments in the future if
      market conditions are favorable.





**Quantitative
      Market Risk Disclosure.** The
      following table provides information about the Company’s financial instruments
      used for purposes other than trading that are sensitive to changes in interest
      rates as of December 31, 2007. It does not present when these items may actually
      reprice. For loans receivable, securities, and liabilities with contractual
      maturities, the table presents principal cash flows and related weighted-average
      interest rates by contractual maturities as well as the historical impact of
      interest rate fluctuations on the prepayment of loans and mortgage backed
      securities. For core deposits (demand deposits, interest-bearing checking,
      savings, and money market deposits) that have no contractual maturity, the
      table
      presents principal cash flows and applicable related weighted-average interest
      rates based upon the Company’s historical experience, management’s judgment and
      statistical analysis, as applicable, concerning their most likely withdrawal
      behaviors. The current historical interest rates for core deposits have been
      assumed to apply for future periods in this table as the actual interest rates
      that will need to be paid to maintain these deposits are not currently known.
      Weighted average variable rates are based upon contractual rates existing at
      the
      reporting date.




50.




**Principal/Notional
        Amount Maturing or Assumed to be Withdrawn In:**
 **(Dollars
        in thousands)**




2008
            
            2009
            
            2010
            
            2011
            
            2012
            
            Thereafter
            
            Total**Rate-sensitive
                assets:**Variable
                rate loans
            
            $
            56,126
            
            $
            8,708
            
            $
            3,386
            
            $
            1,804
            
            $
            1,100
            
            $
            1,661
            
            $
            72,785Average
                interest rate
            
            
            7.78
            %
            
            7.46
            %
            
            7.46
            %
            
            7.39
            %
            
            7.35
            %
            
            7.41
            %
            
            7.70
            %Adjustable
                rate loans
            
            $
            28,267
            
            $
            26,477
            
            $
            21,171
            
            $
            17,274
            
            $
            14,117
            
            $
            70,909
            
            $
            178,215Average
                interest rate
            
            
            7.00
            %
            
            6.94
            %
            
            6.94
            %
            
            6.89
            %
            
            7.00
            %
            
            7.04
            %
            
            6.99
            %Fixed
                rate loans
            
            $
            44,051
            
            $
            25,687
            
            $
            17,053
            
            $
            14,858
            
            $
            9,799
            
            $
            28,470
            
            $
            139,918Average
                interest rate
            
            
            6.81
            %
            
            6.68
            %
            
            6.56
            %
            
            6.59
            %
            
            6.27
            %
            
            5.24
            %
            
            6.38
            %Total
                loans
            
            $
            128,444
            
            $
            60,872
            
            $
            41,610
            
            $
            33,936
            
            $
            25,016
            
            $
            101,040
            
            $
            390,918Average
                interest rate
            
            
            7.28
            %
            
            6.91
            %
            
            6.83
            %
            
            6.78
            %
            
            6.73
            %
            
            6.54
            %
            
            6.90
            %Fixed
                rate investment securities
            
            $
            44,124
            
            $
            7,674
            
            $
            3,800
            
            $
            3,242
            
            $
            1,764
            
            $
            29,654
            
            $
            90,258Average
                interest rate
            
            
            5.24
            %
            
            4.62
            %
            
            5.03
            %
            
            5.18
            %
            
            5.61
            %
            
            4.81
            %
            
            5.04
            %Variable
                rate investment securities
            
            $
            2,339
            
            $
            1,026
            
            $
            262
            
            $
            169
            
            $
            132
            
            $
            2,497
            
            $
            6,425Average
                interest rate
            
            
            5.60
            %
            
            5.32
            %
            
            5.59
            %
            
            5.58
            %
            
            5.25
            %
            
            4.88
            %
            
            5.26
            %Federal
                Funds Sold & Other
            
            $
            2,000
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            2,000Average
                interest rate
            
            
            2.99
            %
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            2.99
            %Total
                rate sensitive assets
            
            $
            176,907
            
            $
            69,572
            
            $
            45,672
            
            $
            37,347
            
            $
            26,912
            
            $
            133,191
            
            $
            489,601Average
                interest rate
            
            
            6.70
            %
            
            6.63
            %
            
            6.67
            %
            
            6.64
            %
            
            6.65
            %
            
            6.12
            %
            
            6.52
            %**Rate
                sensitive liabilities:**Demand
                - non interest-bearing
            
            $
            8,313
            
            $
            8,314
            
            $
            8,314
            
            $
            8,314
            
            $
            8,286
            
            $
            0
            
            $
            41,541Demand
                - interest bearing
            
            $
            10,884
            
            $
            10,884
            
            $
            10,884
            
            $
            10,884
            
            $
            10,771
            
            $
            0
            
            $
            54,307Average
                interest rate
            
            
            1.13
            %
            
            1.13
            %
            
            1.13
            %
            
            1.13
            %
            
            1.13
            %
            
            0.00
            %
            
            1.13
            %Money
                market accounts
            
            $
            12,300
            
            $
            12,300
            
            $
            12,300
            
            $
            12,300
            
            $
            12,180
            
            $
            0
            
            $
            61,380Average
                interest rate
            
            
            2.81
            %
            
            2.81
            %
            
            2.81
            %
            
            2.81
            %
            
            2.81
            %
            
            0.00
            %
            
            2.81
            %Savings
            
            $
            5,075
            
            $
            4,968
            
            $
            4,968
            
            $
            4,968
            
            $
            5,341
            
            $
            0
            
            $
            25,320Average
                interest rate
            
            
            0.27
            %
            
            0.27
            %
            
            0.27
            %
            
            0.27
            %
            
            0.27
            %
            
            0.00
            %
            
            0.27
            %Certificates
                of deposit
            
            $
            185,011
            
            $
            26,248
            
            $
            6,864
            
            $
            1,977
            
            $
            2,391
            
            $
            992
            
            $
            223,483Average
                interest rate
            
            
            4.23
            %
            
            4.20
            %
            
            3.48
            %
            
            5.02
            %
            
            4.15
            %
            
            2.65
            %
            
            4.20
            %Fixed
                rate FHLB advances
            
            $
            2,000
            
            $
            5,500
            
            $
            11,000
            
            $
            5,500
            
            $
            0
            
            $
            0
            
            $
            24,000Average
                interest rate
            
            
            5.22
            %
            
            4.48
            %
            
            5.38
            %
            
            5.11
            %
            
            0.00
            %
            
            0.00
            %
            
            5.10
            %Fixed
                rate Notes Payable
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            10,310
            
            $
            10,310Average
                interest rate
            
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            10.60
            %
            
            10.60
            %Variable
                rate Notes Payable
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            922
            
            $
            0
            
            $
            10,310
            
            $
            11,232Average
                interest rate
            
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            7.75
            %
            
            0.00
            %
            
            6.49
            %
            
            6.59
            %Fed
                Funds Purchased & Repos
            
            $
            8,006
            
            $
            0
            
            $
            0
            
            $
            15,000
            
            $
            20,000
            
            $
            0
            
            $
            43,006Average
                interest rate
            
            
            2.86
            %
            
            0.00
            %
            
            0.00
            %
            
            4.77
            %
            
            4.74
            %
            
            0.00
            %
            
            4.40
            %Total
                rate sensitive liabilities
            
            $
            231,589
            
            $
            68,214
            
            $
            54,330
            
            $
            59,865
            
            $
            58,969
            
            $
            21,612
            
            $
            494,579Average
                interest rate
            
            
            3.73
            %
            
            2.68
            %
            
            2.41
            %
            
            2.75
            %
            
            2.59
            %
            
            8.27
            %
            
            3.38
            %




51.





**Principal/Notional
      Amount Maturing or Assumed to be Withdrawn In:**


**(Dollars
      in Thousands)**





Comparison
                of 2007 to 2006:
            
            First
            
            YearsYear
            
            2 –
                5
            
            Thereafter
            
            TotalTotal
                rate-sensitive assets:At
                December 31, 2007
            
            $
            176,907
            
            $
            179,502
            
            $
            133,191
            
            $
            489,601At
                December 31, 2006
            
            
            195,015
            
            
            170,804
            
            
            120,379
            
            
            486,198Increase
                (decrease)
            
            $
            (18,108
            )
            $
            8,698
            
            $
            12,812
            
            $
            3,403Total
                rate-sensitive liabilities:At
                December 31, 2007
            
            $
            231,589
            
            $
            241,378
            
            $
            21,612
            
            $
            494,579At
                December 31, 2006
            
            
            232,446
            
            
            237,240
            
            
            21,349
            
            
            491,035Increase
                (decrease)
            
            $
            (857
            )
            $
            4,138
            
            $
            263
            
            $
            3,544





**The
      above table** reflects
      expected maturities, not expected repricing. The contractual maturities adjusted
      for anticipated prepayments and anticipated renewals at current interest rates,
      as shown in the preceding table, are only part of the Company’s interest rate
      risk profile. Other important factors include the ratio of rate-sensitive assets
      to rate sensitive liabilities (which takes into consideration loan repricing
      frequency but not when deposits may be repriced) and the general level and
      direction of market interest rates. For core deposits, the repricing frequency
      is assumed to be longer than when such deposits actually reprice. For some
      rate
      sensitive liabilities, their repricing frequency is the same as their
      contractual maturity. For variable rate loans receivable, repricing frequency
      can be daily or monthly. For adjustable rate loans receivable, repricing can
      be
      as frequent as annually for loans whose contractual maturities range from one
      to
      thirty years. In 2006, the Company’s liquidation of a portion of the investment
      securities and its ability to obtain below market funding through repurchase
      agreements helped balance deposit expenses in the midst of four interest rate
      increases. The Company continued to reposition its balance sheet in 2007 by
      liquidating investments and reducing high cost certificates of deposit which
      had
      a positive impact on the margin and helped balance the gap
      position.





**The
      Company manages** its
      interest rate risk by the employment of strategies to assure that desired levels
      of both interest-earning assets and interest-bearing liabilities mature or
      reprice with similar time frames. Such strategies include: 1) loans receivable
      which are renewed (and repriced) annually, 2) variable rate loans, 3)
      certificates of deposit with terms from one month to six years, 4) securities
      available for sale which mature at various times primarily from one through
      ten
      years, 5) federal funds borrowings with terms of one day to 90 days, and 6)
      Federal Home Loan Bank borrowings with terms of one day to ten years.




**Impact
      of Inflation and Changing Prices**




**The
      majority of assets and liabilities** of the
      Company are monetary in nature and therefore the Company differs greatly from
      most commercial and industrial companies that have significant investments
      in
      fixed assets or inventories. However, inflation does have an important impact
      on
      the growth of total assets in the banking industry and the resulting need to
      increase equity capital at higher than normal rates in order to maintain an
      appropriate equity to assets ratio. Inflation significantly affects noninterest
      expense, which tends to rise during periods of general inflation.




**Management
      believes** the most
      significant impact on financial results is the Company’s ability to react to
      changes in interest rates. Management seeks to maintain an essentially balanced
      position between interest sensitive assets and liabilities and actively manages
      the amount of securities available for sale in order to protect against the
      effects of wide interest rate fluctuations on net income and shareholders’
equity.




52.


Item
      7A.Quantitative
      and Qualitative Disclosures About Market Risk .




The
      disclosures required by this item appear under the caption “Asset Liability
      Management” in Item
      7. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations beginning on page 36 of this Annual Report on Form 10-K.




Item
      8.Financial
      Statements and Supplementary Data .




The
      Consolidated Balance Sheets of the Company and its subsidiaries as of
      December 31, 2007 and December 31, 2006, the related Consolidated
      Statements of Income, Changes in Shareholders’ Equity and Cash Flows for each of
      the years in the three-year period ended December 31, 2007, the
      related Notes to Consolidated Financial Statements and the Report of Independent
      Registered Public Accounting Firm, appear on pages F-1 through F-53 of this
      Annual Report on Form 10-K.




Item
      9.Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure .




Not
      Applicable.





Item
      9A. Controls and Procedures





Evaluation
      of Disclosure Controls and Procedures





With
      the
      participation of the President and Chief Executive Officer (the principal
      executive officer) and the Executive Vice President and Chief Financial Officer
      (the principal financial officer) of the Company, the Company’s management has
      evaluated the effectiveness of the Company’s disclosure controls and procedures
      (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”)) as of the end of the period covered by this Annual
      Report on Form 10-K. Based on that evaluation, the Company’s President and Chief
      Executive Officer and the Company’s Executive Vice President and Chief Financial
      Officer concluded that:





·
            information
                required to be disclosed by the Company in this Annual Report on
                Form 10-K
                and the other reports that the Company files or submits under the
                Exchange
                Act would be accumulated and communicated to the Company’s management,
                including its principal executive officer and principal financial
                officer,
                as appropriate to allow timely decisions regarding required
                disclosure;





·
            information
                required to be disclosed by the Company in this Annual Report on
                Form 10-K
                and the other reports that the Company files or submits under the
                Exchange
                Act would be recorded, processed, summarized and reported within
                the time
                periods specified in the SEC’s rules and forms;
                and





·
            the
                Company’s disclosure controls and procedures were effective as of the end
                of the fiscal year covered by this Annual Report on Form
                10-K.





Management’s
      Annual Report on Internal Control Over Financial Reporting





The
      “Management’s Report on Internal Control Over Financial Reporting” is provided
      on page F-0 of this Annual Report on Form 10-K.




53.


Changes
      in Internal Controls Over Financial Reporting





No
      changes were made in the Company’s internal control over financial reporting (as
      defined in Rule 13a-15(f) under the Exchange Act) that occurred during the
      Company’s fiscal quarter ended December 31, 2007, that have materially affected,
      or are reasonably likely to materially affect, the Company’s internal control
      over financial reporting.





Item
      9B. Other Information





Not
      Applicable.





**PART
      III**




Item
      10.Directors
      and Executive Officers of the Registrant and Corporate
      Governance .




**Directors
      and Executive Officers**





The
      information required by Item 401 of SEC Regulation S-K concerning
      the directors of the Company is incorporated herein by reference from the
      disclosure included in the Company’s definitive Proxy Statement relating to the
      Annual Meeting of Shareholders to be held on April 17, 2008 (the “2008
      Proxy Statement”), under the caption “ELECTION OF DIRECTORS”. The information
      concerning the executive officers of the Company required by Item 401 of
      SEC Regulation S-K is set forth in the portion of Part I of this
      Annual Report on Form 10-K entitled “Supplemental Item: Executive Officers of
      the Registrant.”





**Compliance
      with Section 16(a) of the Exchange Act**





The
      information required by Item 405 of SEC Regulation S-K is incorporated
      herein by reference from the disclosure included in the Company’s 2008 Proxy
      Statement under the caption “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
      COMPLIANCE.”





**Committee
      Charters and Code of Conduct and Ethics**





The
      Company’s Board of Directors has adopted charters for each of the Audit
      Committee, the Compensation Committee and the Executive Governance and
      Nominating Committee. A copy of these charters is available on the Company’s
      Internet website at www.rurbanfinancial.net by first clicking “Corporate
      Governance” and then “Supplementary Info”. The Company has adopted a Code of
      Conduct and Ethics that applies to the Company’s directors, officers and
      employees. A copy of the Code of Conduct and Ethics is available on the
      Company’s Internet website at www.rurbanfinancial.net under the
“Corporate Governance” tab. Interested persons may also obtain copies of the
      Code of Conduct and Ethics, the Audit Committee charter, the Compensation
      Committee charter and the Executive Governance and Nominating Committee charter,
      without charge, by writing to Rurban Financial Corp., Attn: Investor Relations,
      401 Clinton Street, Defiance, OH 43512.


54.




**Director
      Nominating Procedures**




The
      information required by Item 407(c)(3) of SEC Regulation S-K is incorporated
      herein by reference from the disclosure to be included under the caption
“CORPORATE GOVERNANCE – Nominating Procedures” in the Company’s 2008 Proxy
      Statement.




**Audit
      Committee**




The
      information required by Items 407(d)(4) and 407(d)(5) of SEC Regulation S-K
      is
      incorporated herein by reference from the disclosure to be included under the
      caption “MEETINGS AND COMMITTEES OF THE BOARD - Committees of the Board – Audit
      Committee” in the Company’s 2008 Proxy Statement.




Item
      11.Executive
      Compensation .




The
      information required by Item 402 of SEC Regulation S-K is incorporated herein
      by
      reference to the information contained in the Company’s 2008 Proxy Statement
      under the captions “COMPENSATION OF EXECUTIVE OFFICERS” and “DIRECTOR
      COMPENSATION”.





Item
      12.Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters .




The
      information required by Item 403 of SEC Regulation S-K is incorporated herein
      by
      reference from the disclosure included in the Company’s 2008 Proxy Statement
      under the caption “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT”.




The
      information required by Item 201(d) of SEC Regulation S-K is incorporated herein
      by reference to the information contained in the Company’s 2008 Proxy Statement
      under the caption “Proposal No. 2–Approval of Rurban Financial Corp. 2007 Stock
      Incentive Plan – Equity Compensation Plan Information.”




Item
      13.Certain
      Relationships and Related Transactions, and Director
      Independence .




The
      information required by Item 404 of SEC Regulation S-K is incorporated herein
      by
      reference to the information contained in the Company’s 2008 Proxy Statement
      under the caption “TRANSACTIONS WITH RELATED PERSONS”.




The
      information required by Item 407(a) of SEC Regulation S-K is incorporated herein
      by reference to the information contained in the Company’s 2008 Proxy Statement
      under the caption “CORPORATE GOVERNANCE – Director Independence”.




Item
      14. Principal Accountant Fees and Services





The
      information required to be disclosed in this Item 14 is incorporated herein
      by
      reference to the information contained in the Company’s 2008 Proxy Statement
      under the caption “AUDIT COMMITTEE DISCLOSURE” – Pre-Approval of Services
      Performed by Independent Registered Public Accounting Firm” and “AUDIT COMMITTEE
      DISCLOSURE” – Services of Independent Registered Public Accounting Firm for the
      2007 Fiscal Year”.




55.





PART
      IV




Item
      15.Exhibits
      and Financial Statement Schedules




(a)  (1)
            Financial
                Statements.




A
      list of
      all financial statements included in this Annual Report on Form 10-K is included
      under “ INDEX
      TO
      CONSOLIDATED FINANCIAL STATEMENTS ”
on
      page
      59 herein.




(a)  (2)
            Financial
                Statement Schedules.




All
      schedules for which provision is made in the applicable accounting regulations
      of the Securities and Exchange Commission are not required under the related
      instructions or are inapplicable and, therefore, have been omitted.




(a)  (3)
            Exhibits.




The
      exhibits listed on the “INDEX TO EXHIBITS” beginning on page 113 of this Annual
      Report on Form 10-K are filed with this Annual Report on Form 10-K or
      incorporated herein by reference.




56.


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this Report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




RURBAN FINANCIAL CORP./s/
                Duane L. SinnDate:
                March 21, 2008
            By:
            Duane L. Sinn, Executive Vice President andChief Financial Officer




**Power
      of Attorney**




KNOW
      ALL
      MEN BY THESE PRESENTS, that each undersigned officer and/or director of Rurban
      Financial Corp., an Ohio corporation (the “Corporation”), which is about to file
      with the Securities and Exchange Commission, Washington, D.C., under the
      provisions of the Securities Exchange Act of 1934, as amended, the Annual Report
      of the Corporation on Form 10-K for the fiscal year ended December 31, 2007,
      hereby constitutes and appoints Kenneth A. Joyce and Duane L. Sinn, and each
      of
      them, as his true and lawful attorneys-in-fact and agents, with full power
      of
      substitution and resubstitution, for him and in his name, place and stead,
      in
      any and all capacities, to sign both the Annual Report on Form 10-K and any
      and
      all amendments and documents related thereto, and to file the same, and any
      and
      all exhibits, financial statements and schedules related thereto, and other
      documents in connection therewith, with the Securities and Exchange Commission
      and the NASDAQ Stock Market, granting unto said attorneys-in-fact and agents,
      and substitute or substitutes, full power and authority to do and perform each
      and every act and thing requisite and necessary to be done in and about the
      premises, as fully to all intents and purposes as he might or could do in
      person, hereby ratifying and confirming all things that each of said
      attorneys-in-fact and agents, or either of them or his or their substitute
      or
      substitutes, may lawfully do or cause to be done by virtue hereof.





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.




Name
              
              Date
              
              Capacity/s/
                  Kenneth A, Joyce
              
              March
                  21, 2008
              
              President,
                  Chief Executive Officer, andKenneth
                  A. Joyce
              
              
              
              Director/s/
                  Duane L. Sinn
              
              March
                  21, 2008
              
              Executive
                  Vice President and ChiefDuane
                  L. Sinn
              
              
              
              Financial
                  Officer/s/
                  Thomas A. Buis
              
              March
                  21, 2008
              
              DirectorThomas
                  A. Buis




57.




/s/
                Thomas M. Callan
              
              March
                  21, 2008
              
              DirectorThomas
                  M. Callan/s/
                  John R. Compo
              
              March
                  21, 2008
              
              DirectorJohn
                  R. Compo/s/
                  John Fahl
              
              March
                  21, 2008
              
              DirectorJohn
                  Fahl/s/
                  Robert A. Fawcett, Jr.
              
              March
                  21, 2008
              
              DirectorRobert
                  A. Fawcett, Jr./s/
                  Richard L. Hardgrove
              
              March
                  21, 2008
              
              DirectorRichard
                  L. Hardgrove/s/
                  Rita A. Kissner
              
              March
                  21, 2008
              
              DirectorRita
                  A. Kissner/s/
                  Thomas L. Sauer
              
              March
                  21, 2008
              
              DirectorThomas
                  L. Sauer/s/
                  Steven D. VanDemark
              
              March
                  21, 2008
              
              DirectorSteven
                  D. VanDemark/s/
                  J. Michael Walz, D.D.S.
              
              March
                  21, 2008
              
              DirectorJ.
                  Michael Walz, D.D.SDate:
                  March 21, 2008




58.


**Rurban
      Financial Corp.**


**December
      31, 2006 and 2005**




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**Management’s
                Report on Internal Control Over Financial
                Reporting**
            
            
            **F-
                0****Report
                of Independent Registered Public Accounting Firm**
            
            
            **F-1****Consolidated
                Financial Statements**Balance
                Sheets
            
            
            F-2 to F-3Statements
                of Income
            
            
            F-4 to F-5Statements
                of Stockholders’ Equity
            
            
            F-6Statements
                of Cash Flows
            
            
            F-7 to F-8Notes
                to Financial Statements
            
            
            F-9 to F-52




59.


**Management’s
      Report on Internal Control Over Financial Reporting**





The
      management of Rurban Financial Corp. (the “Corporation”) is responsible for
      establishing and maintaining adequate internal control over financial reporting
      as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act
      of
      1934. The Corporation’s internal control over financial reporting is designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in conformity
      with United States generally accepted accounting principles. The Corporation’s
      internal control over financial reporting includes those policies and procedures
      that:




a)
            Pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of the assets of
                the
                Corporation and its consolidated
                subsidiaries;




b)
            Provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in conformity with United States
                generally accepted accounting principles, and that receipts and
                expenditures of the Corporation and its consolidated subsidiaries
                are
                being made only in accordance with authorizations of management and
                directors of the Corporation; and




c)
            Provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of the assets of the
                Corporation and its consolidated subsidiaries that could have a material
                effect on the financial statements.




With
      the
      supervision and participation of our President and Chief Executive Officer,
      and
      our Chief Financial Officer, management assessed the effectiveness of the
      Corporation’s internal control over financial reporting as of December 31, 2007,
      based on the criteria set forth for effective internal control over financial
      reporting by the Committee of Sponsoring Organizations of the Treadway
      Commission in “Internal Control Integrated Framework.” Based on our assessment
      and those criteria, management concluded that, as of December 31, 2007, the
      Corporation’s internal control over financial reporting is
      effective.





This
      Annual Report does not include an attestation report of the Corporation’s
      registered public accounting firm regarding internal control over financial
      reporting. Management’s report was not subject to attestation by the
      Corporation’s registered public accounting firm pursuant to temporary rules of
      the Securities and Exchange Commission that permit the Corporation to provide
      only management’s report in this Annual Report.





RURBAN
      FINANCIAL CORP.




Rurban
            RurbanKenneth
              A. Joyce
            Duane
              L. SinnPresident
              and Chief Executive Officer
            Chief
              Financial Officer




February
      14, 2008


F-0.




Rurban





**Report
      of Independent Registered Public Accounting Firm**





Audit
      Committee, Board of Directors and Stockholders


Rurban
      Financial Corp.


Defiance,
      Ohio





We
      have
      audited the accompanying consolidated balance sheets of Rurban Financial Corp.
      as of December 31, 2007 and 2006, and the related consolidated statements of
      income, stockholders’ equity and cash flows for each of the years in the
      three-year period ended December 31, 2007. The Company's management is
      responsible for these financial statements. Our responsibility is to express
      an
      opinion on these financial statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. The Company is not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audits included consideration of internal
      control over financial reporting as a basis for designing auditing procedures
      that are appropriate in the circumstances, but not for the purpose of expressing
      an opinion on the effectiveness of the Company's internal control over financial
      reporting. Accordingly, we express no such opinion. Our audits also included
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management and evaluating the overall financial
      statement presentation. We believe that our audits provide a reasonable basis
      for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Rurban Financial Corp.
      as of
      December 31, 2007 and 2006, and the results of its operations and its cash
      flows
      for each of the years in the three-year period ended December 31, 2007, in
      conformity with accounting principles generally accepted in the United States
      of
      America.




Rurban




Cincinnati,
      Ohio


February
      14, 2008


F1


**Rurban
      Financial Corp.**


**Consolidated
      Balance Sheets**


**December
      31**




**Assets**


**2007**
            
            **2006**Cash
                and due from banks
            
            $
            15,183,627
            
            $
            13,381,791Federal
                funds sold
            
            
            2,000,000
            
            
            9,100,000Cash
                and cash equivalents
            
            
            17,183,627
            
            
            22,481,791Interest-bearing
                deposits
            
            
            -
            
            
            150,000Available-for-sale
                securities
            
            
            92,661,386
            
            
            102,462,075Loans
                held for sale
            
            
            1,649,758
            
            
            390,100Loans,
                net of unearned income
            
            
            389,268,744
            
            
            370,101,809Allowance
                for loan losses
            
            
            (3,990,455
            )
            
            (3,717,377
            )Premises
                and equipment
            
            
            15,128,754
            
            
            15,449,774Federal
                Reserve and Federal Home Loan Bank stock, at cost
            
            
            4,021,200
            
            
            3,993,450Foreclosed
                assets held for sale, net
            
            
            124,131
            
            
            82,397Interest
                receivable
            
            
            3,008,968
            
            
            3,129,774Goodwill
            
            
            13,940,618
            
            
            13,674,058Core
                deposits and other intangibles
            
            
            5,135,228
            
            
            5,858,982Purchased
                software
            
            
            4,282,563
            
            
            4,618,691Cash
                value of life insurance
            
            
            12,160,581
            
            
            10,771,843Other
            
            
            6,638,895
            
            
            6,559,886Total
                assets
            
            $
            561,213,998
            
            $
            556,007,253




*See
      Notes to Consolidated Financial Statements*




F2


**Rurban
      Financial Corp.**


**Consolidated
      Balance Sheets**


**December
      31**




**Liabilities
        and Stockholders’ Equity**


**2007**
            
            **2006****Liabilities**DepositsDemand
            
            $
            41,541,297
            
            $
            46,565,554Savings,
                interest checking and money market
            
            
            141,009,043
            
            
            130,267,333Time
            
            
            223,480,842
            
            
            237,722,558Total
                deposits
            
            
            406,031,182
            
            
            414,555,445Short-term
                borrowings
            
            
            43,006,438
            
            
            32,270,900Notes
                payable
            
            
            922,457
            
            
            2,589,207Federal
                Home Loan Bank advances
            
            
            24,000,000
            
            
            21,000,000Trust
                preferred securities
            
            
            20,620,000
            
            
            20,620,000Interest
                payable
            
            
            2,532,914
            
            
            2,224,413Deferred
                income taxes
            
            
            1,310,602
            
            
            1,610,462Other
                liabilities
            
            
            3,465,171
            
            
            4,181,673Total
                liabilities
            
            
            501,888,764
            
            
            499,052,100**Commitments
                and Contingent Liabilities****Stockholders’
                Equity**Common
                stock, $2.50 stated value; authorized 10,000,000 shares; 5,027,433
                shares
                outstanding
            
            
            12,568,583
            
            
            12,568,583Additional
                paid-in capital
            
            
            14,923,571
            
            
            14,859,165Retained
                earnings
            
            
            32,361,106
            
            
            30,407,298Accumulated
                other comprehensive income (loss)
            
            
            82,235
            
            
            (879,893
            )Treasury
                Stock, at cost Common; 2007 - 48,500 shares, 2006 - 0
                 shares
            
            
            (610,260
            )
            
            -Total
                stockholders’ equity
            
            
            59,325,235
            
            
            56,955,153Total
                liabilities and stockholders’ equity
            
            $
            561,213,998
            
            $
            556,007,253


F3


**Rurban
      Financial Corp.**


**Consolidated
      Statements of Income**


**Years
      Ended December 31**




**2007**
            
            **2006**
            
            **2005****Interest
                Income**LoansTaxable
            
            $
            27,782,068
            
            $
            24,958,988
            
            $
            16,593,703Tax-exempt
            
            
            73,451
            
            
            63,356
            
            
            64,609SecuritiesTaxable
            
            
            4,283,508
            
            
            5,211,672
            
            
            4,337,477Tax-exempt
            
            
            645,451
            
            
            559,518
            
            
            265,959Other
            
            
            225,151
            
            
            176,884
            
            
            160,240Total
                interest income
            
            
            33,009,629
            
            
            30,970,418
            
            
            21,421,988**Interest
                Expense**Deposits
            
            
            13,595,896
            
            
            11,022,161
            
            
            5,651,372Notes
                payable
            
            
            126,812
            
            
            74,904
            
            
            334,713Repurchase
                Agreements
            
            
            1,615,016
            
            
            848,277
            
            
            -Federal
                funds purchased
            
            
            39,047
            
            
            97,226
            
            
            67,300Federal
                Home Loan Bank advances
            
            
            1,037,026
            
            
            2,106,385
            
            
            2,039,851Trust
                preferred securities
            
            
            1,808,520
            
            
            1,787,023
            
            
            1,275,168Total
                interest expense
            
            
            18,222,317
            
            
            15,935,976
            
            
            9,368,404**Net
                Interest Income**
            
            
            14,787,312
            
            
            15,034,442
            
            
            12,053,584**Provision
                for Loan Losses**
            
            
            521,306
            
            
            177,838
            
            
            583,402**Net
                Interest Income After Provision for Loan Losses**
            
            
            14,266,006
            
            
            14,856,604
            
            
            11,470,182**Non-interest
                Income**Data
                service fees
            
            
            19,382,115
            
            
            15,011,143
            
            
            12,708,407Trust
                fees
            
            
            3,385,320
            
            
            3,192,025
            
            
            3,133,550Customer
                service fees
            
            
            2,243,745
            
            
            2,161,153
            
            
            1,859,547Net
                gains (losses) on loan sales
            
            
            574,000
            
            
            1,310,536
            
            
            (436,971
            )Net
                realized gains on sales of available-for-sale securities
            
            
            1,998
            
            
            (494,885
            )
            
            25,300Investment
                securities recoveries
            
            
            -
            
            
            889,454
            
            
            -Loan
                servicing fees
            
            
            227,017
            
            
            358,321
            
            
            306,929Gain
                on sale of assets
            
            
            29,477
            
            
            94,198
            
            
            -Other
            
            
            1,017,727
            
            
            1,233,376
            
            
            741,340Total
                non-interest income
            
            $
            26,861,399
            
            $
            23,755,321
            
            $
            18,338,102


*See
      Notes to Consolidated Financial Statements*


F4


**Rurban
      Financial Corp.**


**Consolidated
      Statements of Income**


**Years
      Ended December 31**




**2007**
            
            **2006**
            
            **2005****Non-interest
                Expense**Salaries
                and employee benefits
            
            $
            17,007,314
            
            $
            16,584,146
            
            $
            13,518,749Net
                occupancy expense
            
            
            1,994,299
            
            
            1,840,864
            
            
            1,214,169Equipment
                expense
            
            
            6,586,623
            
            
            5,850,281
            
            
            5,148,458Data
                processing fees
            
            
            469,808
            
            
            562,265
            
            
            411,465Professional
                fees
            
            
            2,226,577
            
            
            2,395,863
            
            
            2,730,337Marketing
                expense
            
            
            820,528
            
            
            669,764
            
            
            445,656Printing
                and office supplies
            
            
            661,760
            
            
            619,100
            
            
            524,473Telephone
                and communications
            
            
            1,781,277
            
            
            1,705,261
            
            
            1,549,449Postage
                and delivery expense
            
            
            1,545,340
            
            
            735,210
            
            
            313,379Insurance
                expense
            
            
            140,651
            
            
            171,363
            
            
            218,484Employee
                expense
            
            
            1,083,056
            
            
            978,832
            
            
            994,735State,
                local and other taxes
            
            
            584,031
            
            
            674,280
            
            
            572,456FHLB
                prepayment penalties
            
            
            -
            
            
            214,886
            
            
            -Other
            
            
            1,735,346
            
            
            1,901,452
            
            
            1,412,030Total
                non-interest expense
            
            
            36,636,610
            
            
            34,903,567
            
            
            29,053,840**Income
                Before Income Tax**
            
            
            4,490,795
            
            
            3,708,358
            
            
            754,444**Provision
                for Income Taxes**
            
            
            1,234,160
            
            
            948,116
            
            
            81,353**Net
                Income**
            
            $
            3,256,635
            
            $
            2,760,242
            
            $
            673,091**Basic
                Earnings Per Share**
            
            $
            0.65
            
            $
            0.55
            
            $
            0.15**Diluted
                Earnings Per Share**
            
            $
            0.65
            
            $
            0.55
            
            $
            0.15


F5


**Rurban
      Financial Corp.**


**Consolidated
      Statements of Stockholders’ Equity**


**Years
      Ended December 31**


**Common
                  Stock**
              
              **Additional**
                **Paid-In
                  Capital**
              
              **Retained**
                **Earnings**
              
              **Accumulated**
                **Other**
                **Comprehensive**
                **Income
                  (Loss)**
              
              **Treasury**
                **Stock**
              
              **Total****Balance,
                  January 1, 2005**
              
              $
              11,439,255
              
              $
              11,003,642
              
              $
              28,943,736
              
              $
              (803,189
              )
              $
              (277,649
              )
              $
              50,305,795Comprehensive
                  IncomeNet
                  Income
              
              
              
              
              
              
              
              
              673,091
              
              
              
              
              
              
              
              
              673,091Change
                  in unrealized gain (loss) on securities available for sale, net
                  of
                  reclassification adjustment and tax effect
              
              
              
              
              
              
              
              
              
              
              
              (852,673
              )
              
              
              
              
              (852,673
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (179,582
              )Dividends
                  on common stock, $0.20 per share
              
              
              
              
              
              
              
              
              (914,010
              )
              
              
              
              
              
              
              
              (914,010
              )Stock
                  options exercised (2,929 treasury shares)
              
              
              
              
              
              (4,158
              )
              
              
              
              
              
              
              
              40,753
              
              
              36,595Treasure
                  stock retired (4,358 treasury shares)
              
              
              (10,962
              )
              
              (225,934
              )
              
              
              
              
              
              
              
              236,896
              
              
              -Exchange
                  acquisition
              
              
              1,140,290
              
              
              4,061,560
              
              
              
              
              
              
              
              
              
              
              
              5,201,850**Balance,
                  December 31, 2005**
              
              
              12,568,583
              
              
              14,835,110
              
              
              28,702,817
              
              
              (1,655,862
              )
              
              -
              
              
              54,450,648Comprehensive
                  IncomeNet
                  Income
              
              
              
              
              
              
              
              
              2,760,242
              
              
              
              
              
              
              
              
              2,760,242Change
                  in unrealized gain (loss) on securities available for sale, net
                  of
                  reclassification adjustment and tax effect
              
              
              
              
              
              
              
              
              
              
              
              775,969
              
              
              
              
              
              775,969Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,536,211Dividends
                  on common stock, $0.21 per share
              
              
              
              
              
              
              
              
              (1,055,761
              )
              
              
              
              
              
              
              
              (1,055,761
              )Expense
                  of stock option plan
              
              
              
              
              
              24,055
              
              
              
              
              
              
              
              
              
              
              
              24,055**Balance,
                  December 31, 2006**
              
              
              12,568,583
              
              
              14,859,165
              
              
              30,407,298
              
              
              (879,893
              )
              
              -
              
              
              56,955,153Comprehensive
                  IncomeNet
                  Income
              
              
              
              
              
              
              
              
              3,256,635
              
              
              
              
              
              
              
              
              3,256,635Change
                  in unrealized gain (loss) on securities available for sale, net
                  of
                  reclassification adjustment and tax effect
              
              
              
              
              
              
              
              
              
              
              
              962,128
              
              
              
              
              
              962,128Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4,218,763Dividends
                  on common stock, $0.26 per share
              
              
              
              
              
              
              
              
              (1,302,827
              )
              
              
              
              
              
              
              
              (1,302,827
              )Expense
                  of stock option plan
              
              
              
              
              
              64,406
              
              
              
              
              
              
              
              
              
              
              
              64,406Shares
                  repurchased under stock repurchase plan
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (610,260
              )
              
              (610,260
              )**Balance,
                  December 31, 2007**
              
              $
              12,568,583
              
              $
              14,923,571
              
              $
              32,361,106
              
              $
              82,235
              
              $
              (610,260
              )
              $
              59,325,235
  *See
        Notes to Consolidated Financial Statements*


F6


**Rurban
      Financial Corp.**


**Consolidated
      Statements of Cash Flows**


**Years
      Ended December 31**




**2007**
            
            **2006**
            
            **2005****Operating
                Activities**Net
                income
            
            $
            3,256,635
            
            $
            2,760,242
            
            $
            673,091Items
                not requiring (providing) cashDepreciation
                and amortization
            
            
            3,969,922
            
            
            3,544,965
            
            
            3,108,693Provision
                (credit) for loan losses
            
            
            521,306
            
            
            177,838
            
            
            583,402Expense
                of stock option plan
            
            
            64,406
            
            
            24,055
            
            
            -Amortization
                of premiums and discounts on securities
            
            
            48,799
            
            
            206,096
            
            
            218,221Amortization
                of intangible assets
            
            
            723,754
            
            
            535,351
            
            
            131,826Deferred
                income taxes
            
            
            (795,035
            )
            
            (460,305
            )
            
            384,337FHLB
                Stock Dividends
            
            
            (47,250
            )
            
            (385,950
            )
            
            (116,800
            )Proceeds
                from sale of loans held for sale
            
            
            18,032,822
            
            
            11,328,770
            
            
            5,481,329Originations
                of loans held for sale
            
            
            (18,718,482
            )
            
            (11,326,566
            )
            
            (6,029,400
            )(Gain)
                loss from sale of loans
            
            
            (574,000
            )
            
            (1,249,148
            )
            
            436,971(Gain)
                loss on sale of foreclosed assets
            
            
            -
            
            
            (113,729
            )
            
            214,642(Gain)
                loss on sales of fixed assets
            
            
            (29,396
            )
            
            19,530
            
            
            18,817Net
                realized gains (losses) on available-for-sale securities
            
            
            -
            
            
            494,885
            
            
            (25,300
            )Changes
                inInterest
                receivable
            
            
            120,806
            
            
            (119,419
            )
            
            (513,229
            )Other
                assets
            
            
            (254,227
            )
            
            296,344
            
            
            (1,241,089
            )Interest
                payable and other liabilities
            
            
            (408,466
            )
            
            (1,081,796
            )
            
            899,500Net
                cash provided by operating activities
            
            
            5,911,594
            
            
            4,651,163
            
            
            4,225,011**Investing
                Activities**Net
                change in interest-bearing deposits
            
            
            150,000
            
            
            -
            
            
            -Purchases
                of available-for-sale securities
            
            
            (29,501,721
            )
            
            (15,375,196
            )
            
            (38,373,878
            )Proceeds
                from maturities of available-for-sale securities
            
            
            37,247,138
            
            
            19,506,403
            
            
            17,107,354Proceeds
                from sales of available-for-sale securities
            
            
            3,464,242
            
            
            33,263,994
            
            
            5,154,173Proceeds
                from sale of credit card portfolio and non-performing
                loans
            
            
            -
            
            
            5,760,603
            
            
            -Net
                change in loans
            
            
            (19,653,367
            )
            
            (49,367,497
            )
            
            (4,562,982
            )Purchase
                of premises and equipment
            
            
            (3,701,669
            )
            
            (9,042,264
            )
            
            (2,975,180
            )Proceeds
                from sales of premises and equipment
            
            
            401,241
            
            
            2,880,497
            
            
            93,216Purchase
                bank owned life insurance
            
            
            (1,000,000
            )
            
            -
            
            
            -Proceeds
                from sale of foreclosed assets
            
            
            -
            
            
            2,811,928
            
            
            1,565,223Cash
                paid to shareholders of Exchange Bank Acquisition
            
            
            -
            
            
            (6,526,646
            )
            
            -Cash
                paid to shareholders of Diverse Computer Marketers, Inc.
                Acquisition
            
            
            (266,560
            )
            
            (4,872,961
            )
            
            -Proceeds
                from sale of Federal Reserve stock
            
            
            19,500
            
            
            -
            
            
            -Proceeds
                from assumption of net liabilities in business acquisition
            
            
            -
            
            
            -
            
            
            50,928,950Net
                cash provided by (used in) investing activities
            
            
            (12,841,196
            )
            
            (20,961,139
            )
            
            28,936,876


*See
      Notes to Consolidated Financial Statements*




F7


**Rurban
      Financial Corp.**


**Consolidated
      Statements of Cash Flows**


**Years
      Ended December 31**




**2007**
            
            **2006**
            
            **2005****Financing
                Activities**Net
                increase (decrease) in demand deposits, money market, interest checking
                and savings accounts
            
            $
            5,717,453
            
            $
            553,021
            
            $
            (6,940,715
            )Net
                increase (decrease) in certificates of deposit
            
            
            (14,241,716
            )
            
            29,164,512
            
            
            (16,360,869
            )Net
                increase in securities sold under agreements to repurchase
            
            
            10,735,538
            
            
            26,190,480
            
            
            2,021,269Net
                decrease in federal funds purchased
            
            
            —
            
            
            (4,600,000
            )
            
            (2,900,000
            )Proceeds
                from Federal Home Loan Bank advances
            
            
            14,000,000
            
            
            47,900,000
            
            
            20,500,000Repayment
                of Federal Home Loan Bank advances
            
            
            (11,000,000
            )
            
            (72,400,000
            )
            
            (34,500,000
            )Proceeds
                from notes payable
            
            
            —
            
            
            2,700,000
            
            
            —Proceeds
                from trust preferred
            
            
            —
            
            
            —
            
            
            10,310,000Repayment
                of notes payable
            
            
            (1,666,750
            )
            
            (2,311,326
            )
            
            (2,381,084
            )Proceeds
                from stock options exercised
            
            
            —
            
            
            —
            
            
            36,595Purchase
                of treasury stock
            
            
            (610,260
            )
            
            —
            
            
            —Dividends
                paid
            
            
            (1,302,827
            )
            
            (1,055,759
            )
            
            (914,010
            )Net
                cash (used in) provided by financing activities
            
            
            1,631,438
            
            
            26,140,928
            
            
            (31,128,814
            )**Increase
                (Decrease) in Cash and Cash Equivalents**
            
            
            (5,298,164
            )
            
            9,830,952
            
            
            2,033,073**Cash
                and Cash Equivalents, Beginning of Year**
            
            
            22,481,791
            
            
            12,650,839
            
            
            10,617,766**Cash
                and Cash Equivalents, End of Year**
            
            $
            17,183,627
            
            $
            22,481,791
            
            $
            12,650,839**Supplemental
                Cash Flows Information**Interest
                paid
            
            $
            17,913,818
            
            $
            15,084,607
            
            $
            8,989,474Income
                taxes paid - net of refunds
            
            $
            (2,430,000
            )
            $
            (948,000
            )
            $
            (1,021,302
            )Common
                stock and payable issued for net assets
                in Acquisition
            
            $
            —
            
            $
            —
            
            $
            11,826,130Transfer
                of loans to foreclosed assets
            
            $
            320,600
            
            $
            556,677
            
            $
            3,247,539


*See
        Notes to Consolidated Financial Statements*


F8


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
                1:**
            **Nature
                of Operations and Summary of Significant Accounting
                Policies**




***Nature
      of Operations***




Rurban
      Financial Corp. (“Company”) is a bank holding company whose principal activity
      is the ownership and management of its wholly-owned subsidiaries, The State
      Bank
      and Trust Company (“State Bank”), RFCBC, Inc. (“RFCBC”), Rurbanc Data Services,
      Inc. (“RDSI”), Rurban Statutory Trust I (“RST I”), and Rurban Statutory Trust II
      (“RST II”). State Bank owns all of the outstanding stock of Reliance Financial
      Services (“RFS”), and Rurban Mortgage Company (“RMC”). State Bank is primarily
      engaged in providing a full range of banking and financial services to
      individual and corporate customers in northwest Ohio and Northeast Indiana.
      State Bank is subject to competition from other financial institutions. State
      Bank is regulated by certain federal and state agencies and undergoes periodic
      examinations by those regulatory authorities. RFCBC operates as a loan
      subsidiary that continues to administer a classified loan. RDSI owns all the
      outstanding shares of Diverse Computer Marketing (“DCM”), and provides data and
      item processing services to community banks in Arkansas, Florida, Illinois,
      Indiana, Michigan, Missouri, Nebraska, Nevada, Ohio and Wisconsin. RFS offers
      a
      diversified array of trust and financial services to customers nationwide.
      RST I
      and RST II are trusts which were organized in 2000 and 2005, respectively,
      to
      manage the Company’s trust preferred securities.




***Principles
      of Consolidation***




The
      consolidated financial statements include the accounts of the Company, State
      Bank, RFCBC, RDSI and RMC. Exchange Bank’s balance sheet was consolidated at
      December 31, 2005, but not the income statement as a result of closing this
      acquisition at the close of business December 31, 2005. All significant
      intercompany accounts and transactions have been eliminated in
      consolidation.




***Use
      of Estimates***




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.


F9


**Rurban
        Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




Material
      estimates that are particularly susceptible to significant change relate to
      the
      determination of the allowance for loan losses and the valuation of real estate
      acquired in connection with foreclosures or in satisfaction of loans. In
      connection with the determination of the allowance for loan losses, management
      obtains independent appraisals for significant properties.




***Cash
      Equivalents***




The
      Company considers all liquid investments with original maturities of three
      months or less to be cash equivalents except for short-term U.S. Treasury
      securities which are classified as available-for-sale securities.




***Securities***




Available-for-sale
      securities, which include any security for which the Company has no immediate
      plan to sell but which may be sold in the future, are carried at fair value.
      Unrealized gains and losses are recorded, net of related income tax effects,
      in
      other comprehensive income.




Held-to-maturity
      securities, which include any security for which the Company has the positive
      intent and ability to hold until maturity, are carried at historical cost
      adjusted for amortization of premiums and accretion of discounts.




Amortization
      of premiums and accretion of discounts are recorded as interest income from
      securities. Realized gains and losses are recorded as net security gains
      (losses). Gains and losses on sales of securities are determined on the
      specific-identification method.




The
      Company evaluates its securities portfolio for impairment throughout the year.
      An impairment is recorded against individual equity securities if their cost
      significantly exceeds their fair value for a substantial amount of time. An
      impairment is also recorded for investments in debt securities, unless the
      decrease in fair value is attributable to interest rates and management has
      the
      intent and ability to retain the investment in the issuer for a period of time
      sufficient to allow for any anticipated recovery in market value.




***Mortgage
      Loans Held for Sale***




Mortgage
      loans originated and intended for sale in the secondary market are carried
      at
      the lower of cost or fair value in the aggregate. Net unrealized losses, if
      any,
      are recognized through a valuation allowance by charges to income.




***Loans***




Loans
      that management has the intent and ability to hold for the foreseeable future
      or
      until maturity or payoffs are reported at their outstanding principal balances
      adjusted for any charge-offs, the allowance for loan losses, any deferred fees
      or costs on originated loans and unamortized premiums or discounts on purchased
      loans. Interest income is reported on the interest method and includes
      amortization of net deferred loan fees and costs over the loan term. Generally,
      loans are placed on non-accrual status not later than 90 days past due, unless
      the loan is well-secured and in the process of collection.




F10


**Rurban
        Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




***Allowance
      for Loan Losses***




The
      allowance for loan losses is established as losses are estimated to have
      occurred through a provision for loan losses charged to income. Loan losses
      are
      charged against the allowance when management believes the uncollectibility
      of a
      loan balance is probable. Subsequent recoveries, if any, are credited to the
      allowance.




The
      allowance for loan losses is evaluated on a regular basis by management and
      is
      based upon management’s periodic review of the collectibility of the loans in
      light of historical experience, the nature and volume of the loan portfolio,
      adverse situations that may affect the borrower’s ability to repay, estimated
      value of any underlying collateral and prevailing economic conditions. This
      evaluation is inherently subjective as it requires estimates that are
      susceptible to significant revision as new information becomes
      available.




A
      loan is
      considered impaired when, based on current information and events, it is
      probable that State Bank will be unable to collect the scheduled payments of
      principal or interest when due according to the contractual terms of the loan
      agreement. Factors considered by management in determining impairment include
      payment status, collateral value and the probability of collecting scheduled
      principal and interest payments when due. Loans that experience insignificant
      payment delays and payment shortfalls generally are not classified as impaired.
      Management determines the significance of payment delays and payment shortfalls
      on a case-by-case basis, taking into consideration each of the circumstances
      surrounding the loan and the borrower, including the length of the delay, the
      reasons for the delay, the borrower’s prior payment record and the amount of the
      shortfall in relation to the principal and interest owed. Impairment is measured
      on a loan-by-loan basis for commercial, agricultural, and construction loans
      by
      either the present value of expected future cash flows discounted at the loan’s
      effective interest rate, the loan’s obtainable market price or the fair value of
      the collateral if the loan is collateral dependent.




Large
      groups of smaller balance homogenous loans are collectively evaluated for
      impairment. Accordingly, State Bank does not separately identify individual
      consumer and residential loans for impairment measurements.




***Premises
      and Equipment***




Depreciable
      assets are stated at cost less accumulated depreciation. Depreciation is charged
      to expense using the straight-line method for buildings and the declining
      balance method for equipment over the estimated useful lives of the assets.
      Leasehold improvements are capitalized and depreciated using the straight-line
      method over the terms of the respective leases.




F11


**Rurban
        Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




***Federal
      Reserve and Federal Home Loan Bank Stock***




Federal
      Reserve and Federal Home Loan Bank stock are required investments for
      institutions that are members of the Federal Reserve and Federal Home Loan
      Bank
      systems. The required investment in the common stock is based on a predetermined
      formula.




***Foreclosed
      Assets Held for Sale***




Assets
      acquired through, or in lieu of, loan foreclosure are held for sale and are
      initially recorded at fair value at the date of foreclosure, establishing a
      new
      cost basis. Subsequent to foreclosure, valuations are periodically performed
      by
      management and the assets are carried at the lower of the carrying amount or
      the
      fair value less cost to sell. Revenue and expenses from operations related
      to
      foreclosed assets and changes in the valuation allowance are included in net
      income or expense from foreclosed assets.




***Goodwill***




Goodwill
      is tested for impairment annually. If the implied fair value of goodwill is
      lower than its carrying amount, goodwill impairment is indicated and goodwill
      is
      written down to its implied fair value. Subsequent increases in goodwill value,
      if any, are not recognized in the financial statements.




***Intangible
      Assets***




Intangible
      assets are being amortized on a straight-line basis over weighted-average
      periods ranging from one to fifteen years. Such assets are periodically
      evaluated as to the recoverability of their carrying value. Purchased software
      is being amortized using the straight-line method over periods ranging from
      one
      to three years.




***Stock
      Options***




At
      December 31, 2007, the Company has a stock-based employee compensation plan,
      which is described more fully in Note 18. Prior to 2006, the Company accounted
      for this plan under the recognition and measurement principles of APB Opinion
      No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related Interpretations. Accordingly, in 2005 and 2004, no stock-based employee
      compensation cost is reflected in net income, as all options granted under
      this
      plan had an exercise price equal to the market value of the underlying common
      stock at the grant date.




Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      Statement of Financial Accounting Standards (SFAS) No. 123R, *Share-Based
      Payment* .
      The
      Company selected the modified prospective application. Accordingly, after
      January 1, 2006, the Company began expensing the fair value of stock options
      granted, modified, repurchased or cancelled. In accordance with Statement No.
      123 and related interpretations, no compensation expense was
      recognized.




F12


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




The
      following table illustrates the effect on 2005 net income and earnings per
      share
      if the Company had applied the fair value provisions of FASB Statement No.
      123, *Accounting
      for Stock-based Compensation* ,
      to
      stock-based employee compensation. In April 2005, the Company accelerated
      certain stock options to be immediately vested. In accordance with Statement
      No.
      123 and related interpretations, no compensation expense was recognized.




**2005**Net
                income, as reported
            
            $
            673,091Less:
                Total stock-based employee compensation cost determined under the
                fair
                value based method, net of income taxes
            
            
            (655,615
            )Pro
                forma net income
            
            $
            17,476Earnings
                per share:Basic
                – as reported
            
            $
            0.15Basic –
                pro forma
            
            $
            0.00Diluted –
                as reported
            
            $
            0.15Diluted –
                pro forma
            
            $
            0.00




***Income
      Taxes***




Deferred
      tax assets and liabilities are recognized for the tax effects of differences
      between the financial statement and tax basis of assets and liabilities. A
      valuation allowance is established to reduce deferred tax assets if it is more
      likely than not that a deferred tax asset will not be realized. The Company
      files consolidated income tax returns for its subsidiaries.




***Treasury
      Shares***




Treasury
      stock is stated at cost. Cost is determined by first-in, first-out method.
      On
      April 12, 2007, Rurban initiated a stock repurchase program, authorizing the
      repurchase of up to 250,000 shares or approximately five percent of the
      Company’s outstanding shares. As of year end the company repurchased 48,500
      shares at an average cost of $12.58.




***Earnings
      Per Share***




Earnings
      per share have been computed based upon the weighted-average common shares
      outstanding during each year. Unearned ESOP shares which have not vested have
      been excluded from the computation of average shares outstanding.




F13




**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




***Reclassifications***




Certain
      reclassifications have been made to the 2005 and 2006 financial statements
      to
      conform to the 2007 financial statement presentation. These reclassifications
      had no effect on net income.




**Note
                2:**
            **Restriction
                on Cash and Due From Banks**




State
      Bank is required to maintain reserve funds in cash and/or on deposit with the
      Federal Reserve Bank. The reserve required at December 31, 2007, was
      $1,344,000.


F14


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
                3:**
            **Securities**




The
      amortized cost and approximate fair values of securities were as
      follows:




**Amortized Cost**
            
            **Gross**
              **Unrealized**
              **Gains**
            
            **Gross**
              **Unrealized**
              **Losses**
            
            **Approximate**
              **Fair Value****Available-for-Sale
                Securities:**December
                31, 2007:U.S.
                Treasury and government Agencies
            
            $
            40,133,111
            
            $
            76,292
            
            $
            (20,040
            )
            $
            40,189,363Mortgage-backed
                securities
            
            
            36,339,539
            
            
            370,134
            
            
            (330,074
            )
            
            36,379,599State
                and political subdivision
            
            
            15,991,138
            
            
            91,752
            
            
            (64,211
            )
            
            16,018,679Equity
                securities
            
            
            23,000
            
            
            -
            
            
            -
            
            
            23,000Other
                securities
            
            
            50,000
            
            
            745
            
            
            -
            
            
            50,745$
            92,536,788
            
            $
            538,923
            
            $
            (414,325
            )
            $
            92,661,386December
                31, 2006:U.S.
                Treasury and government Agencies
            
            $
            59,021,221
            
            $
            -
            
            $
            (898,591
            )
            $
            58,122,630Mortgage-backed
                securities
            
            
            29,169,513
            
            
            48,022
            
            
            (447,351
            )
            
            28,770,184State
                and political subdivision
            
            
            15,500,312
            
            
            47,316
            
            
            (82,680
            )
            
            15,464,948Equity
                securities
            
            
            23,000
            
            
            -
            
            
            -
            
            
            23,000Other
                securities
            
            
            81,200
            
            
            113
            
            
            -
            
            
            81,313$
            103,795,246
            
            $
            95,451
            
            $
            (1,428,622
            )
            $
            102,462,075


F15




**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




The
      amortized cost and fair value of securities available for sale at
      December 31, 2007, by contractual maturity, are shown below. Expected
      maturities will differ from contractual maturities because issuers may have
      the
      right to call or prepay obligations with or without call or prepayment
      penalties.




**Available
                for Sale****Amortized**
              **Cost**
            
            **Fair**
              **Value**Within
                one year
            
            $
            557,490
            
            $
            554,396Due
                after one year through five years
            
            
            1,791,007
            
            
            1,806,566Due
                after five years through ten years
            
            
            41,137,626
            
            
            41,185,753Due
                after ten years
            
            
            12,688,126
            
            
            12,712,07256,174,249
            
            
            56,258,787Mortgage-backed
                securities and equity securities
            
            
            36,362,539
            
            
            36,402,599Totals
            
            $
            92,536,788
            
            $
            92,661,386







The
      carrying value of securities pledged as collateral, to secure public deposits
      and for other purposes, was $44,634,646 at December 31, 2007, and $61,186,085
      at
      December 31, 2006. The securities delivered for repurchase agreements were
      $38,184,453 at December 31, 2007, and $27,437,603 for 2006.




Gross
      gains of $1,998, $7,928, and $34,050 and gross losses of $0, $502,813, and
      $8,750 resulting from sales of available-for-sale securities were realized
      for
      2007, 2006 and 2005, respectively. The tax expense for net security gains
      (losses) for 2007, 2006, and 2005 was $679, $(168,000), and $9,000,
      respectively.




Certain
      investments in debt securities are reported in the financial statements at
      an
      amount less than their historical cost. Total fair value of these investments
      at
      December 31, 2007 and 2006, was $20,200,650 and $92,111,343 which is
      approximately 22% and 90% of the Company’s available-for-sale investment
      portfolio respectively.




Based
      on
      evaluation of available evidence, including recent changes in market interest
      rates, credit rating information and information obtained from regulatory
      filings, management believes the declines in fair value for these securities
      are
      temporary.




Should
      the impairment of any of these securities become other than temporary, the
      cost
      basis of the investment will be reduced and the resulting loss recognized in
      net
      income in the period the other-than-temporary impairment is
      identified.




In
      2002
      the Company took an after-tax loss of $1.1 million on an investment in WorldCom
      bonds. In 2006 $889,454 of this loss was recovered, which resulted in a $587,000
      after-tax gain.


F16


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




Securities
      with unrealized losses at December 31, 2007, are as follows:




**Less
                than 12 Months**
            
            **12
                Months or Longer**
            
            **Total****Fair
                Value**
            
            **Unrealized**
              **Losses**
            
            **Fair
                Value**
            
            **Unrealized**
              **Losses**
            
            **Fair
                Value**
            
            **Unrealized**
              **Losses****Available-for-Sale
                Securities:**U.S.
                Treasury and government agencies
            
            $
            0
            
            $
            0
            
            $
            3,979,960
            
            $
            (20,040
            )
            $
            3,979,960
            
            $
            (20,040
            )Mortgage-backed
                securities
            
            
            1,508,150
            
            
            (7,235
            )
            
            9,203,980
            
            
            (322,839
            )
            
            10,712,130
            
            
            (330,074
            )State
                and political subdivisions
            
            
            1,728,883
            
            
            (10,378
            )
            
            3,779,677
            
            
            (53,833
            )
            
            5,508,560
            
            
            (64,211
            )$
            3,237,033
            
            $
            (17,613
            )
            $
            16,963,617
            
            $
            (396,712
            )
            $
            20,200,650
            
            $
            (414,325
            )




Securities
      with unrealized losses at December 31, 2006, are as follows:




**Less
                than 12 Months**
            
            **12
                Months or Longer**
            
            **Total****Fair
                Value**
            
            **Unrealized
                Losses**
            
            **Fair
                Value**
            
            **Unrealized
                Losses**
            
            **Fair
                Value**
            
            **Unrealized
                Losses****Available-for-Sale
                Securities:**U.S.
                Treasury and government agencies
            
            $
            6,482,190
            
            $
            (16,767
            )
            $
            51,240,439
            
            $
            (881,824
            )
            $
            57,722,629
            
            $
            (898,591
            )Mortgage-backed
                securities
            
            
            5,689,252
            
            
            (56,739
            )
            
            18,064,045
            
            
            (390,612
            )
            
            23,753,297
            
            
            (447,351
            )State
                and political subdivisions
            
            
            6,975,811
            
            
            (27,974
            )
            
            3,659,606
            
            
            (54,706
            )
            
            10,635,417
            
            
            (82,680
            )$
            19,147,253
            
            $
            (101,480
            )
            $
            72,964,090
            
            $
            (1,327,142
            )
            $
            92,111,343
            
            $
            (1,428,622
            )




F17


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      4:**  **Loans
      and Allowance for Loan Losses**




Categories
      of loans at December 31 include:




**2007**
            
            **2006**Commercial
            
            $
            83,048,522
            
            $
            71,640,907Commercial
                real estate
            
            
            126,784,483
            
            
            109,503,312Agricultural
            
            
            43,369,266
            
            
            44,682,699Residential
                real estate
            
            
            84,620,992
            
            
            94,389,118Consumer
            
            
            51,357,419
            
            
            49,314,080Leasing
            
            
            330,000
            
            
            856,808Total
                loans
            
            
            389,510,682
            
            
            370,386,924LessNet
                deferred loan fees, premiums and discounts
            
            
            (241,938
            )
            
            (285,115
            )Loans,
                net of unearned income
            
            $
            389,268,744
            
            $
            370,101,809Allowance
                for loan losses
            
            $
            (3,990,455
            )
            $
            (3,717,377
            )




Activity
      in the allowance for loan losses was as follows:




**2007**
            
            **2006**
            
            **2005**Balance,
                beginning of year
            
            $
            3,717,377
            
            $
            4,699,827
            
            $
            4,899,063Balance,
                Exchange Bank
            
            
            -
            
            
            -
            
            
            910,004Provision
                charged to expense
            
            
            521,306
            
            
            177,838
            
            
            583,402Recoveries
            
            
            183,987
            
            
            656,963
            
            
            1,716,815Losses
                charged off
            
            
            (432,215
            )
            
            (1,817,251
            )
            
            (3,409,457
            )Balance,
                end of year
            
            $
            3,990,455
            
            $
            3,717,377
            
            $
            4,699,827


F18


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




Individual
      loans determined to be impaired were as follows:




**2007**
            
            **2006**
            
            **2005**Year-end
                impaired loans with no allowance for loan losses allocated
            
            $
            1,786,931
            
            $
            607,469
            
            $
            1,676,128Year-end
                loans with allowance for loan losses allocated
            
            $
            1,897,903
            
            $
            1,514,169
            
            $
            4,460,129Total
                impaired loans
            
            $
            3,684,834
            
            $
            2,121,638
            
            $
            6,136,257Amount
                of allowance allocated
            
            $
            332,805
            
            $
            224,630
            
            $
            1,992,807Average
                of impaired loans during the year
            
            $
            2,805,689
            
            $
            4,177,213
            
            $
            10,036,150Interest
                income recognized during impairment
            
            $
            63,425
            
            $
            46,917
            
            $
            223,782Cash-basis
                interest income recognized
            
            $
            74,940
            
            $
            50,779
            
            $
            232,008







At
      December 31, 2007, 2006, and 2005 accruing loans delinquent 90 days or more
      totaled $0, $0, and $5,200 respectively. Non-accruing loans at December 31,
      2007, 2006, and 2005 were $5,990,000, $3,828,000, and $6,270,000
      respectively.




**Note
      5:**  **Premises
      and Equipment**




Major
      classifications of premises and equipment stated at cost, were as follows at
      December 31:




**2007**
            
            **2006**Land
            
            $
            1,720,883
            
            $
            1,544,883Buildings
                and improvements
            
            
            12,327,515
            
            
            9,925,293Equipment
            
            
            11,878,202
            
            
            11,259,960Construction
                in progress
            
            
            447,295
            
            
            2,567,07926,373,895
            
            
            25,297,215Less
                accumulated depreciation
            
            
            (11,245,141
            )
            
            (9,847,441
            )Net
                premises and equipment
            
            $
            15,128,754
            
            $
            15,449,774




F19


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      6:**  **Goodwill**




The
      changes in the carrying amount of goodwill for the years ended December 31,
      2007, 2006 and 2005 were:




**2007**
            
            **2006**
            
            **2005**Balance
                as of January 1
            
            $
            13,674,058
            
            $
            8,917,373
            
            $
            2,144,304Adjustment
                (2007) and goodwill acquired during the year (2006) – Data
                Processing
            
            
            266,559
            
            
            4,795,149
            
            
            -Adjustment
                (2006) and goodwill acquired during the year (2005)–Banking
            
            
            -
            
            
            (38,464
            )
            
            6,773,069Balance
                as of December 31
            
            $
            13,940,618
            
            $
            13,674,058
            
            $
            8,917,373




F20


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      7:**  **Other
      Intangible Assets**




The
      carrying basis and accumulated amortization of recognized intangible assets
      at
      December 31, 2007 and 2006 were:


**2007**
              
              **2006****Gross Carrying**
              
              **Accumulated**
              
              **Gross Carrying**
              
              **Accumulated****Amount**
              
              **Amortization**
              
              **Amount**
              
              **Amortization**Core
                  deposit intangible
              
              $
              4,039,615
              
              
              (1,340,276
              )
              $
              4,039,615
              
              $
              (888,544
              )Customer
                  relationship intangible
              
              
              200,627
              
              
              (87,493
              )
              
              200,627
              
              
              (76,405
              )Banking
                  intangibles
              
              
              4,240,242
              
              
              (1,427,769
              )
              
              4,240,242
              
              
              (964,949
              )Customer
                  relationship intangible
              
              
              2,389,000
              
              
              (212,356
              )
              
              2,389,000
              
              
              (53,089
              )Trademark
                  intangible
              
              
              180,000
              
              
              (80,000
              )
              
              180,000
              
              
              (6,000
              )Non-compete
                  intangible
              
              
              83,000
              
              
              (36,889
              )
              
              83,000
              
              
              (9,222
              )Data
                  Processing intangibles
              
              
              2,652,000
              
              
              (329,245
              )
              
              2,652,000
              
              
              (68,311
              )Purchased
                  software - Banking
              
              
              645,778
              
              
              (447,930
              )
              
              217,940
              
              
              (166,435
              )Purchased
                  software – Data Processing
              
              
              9,928,769
              
              
              (6,010,019
              )
              
              9,073,965
              
              
              (4,679,663
              )Purchased
                  software - Other
              
              
              350,010
              
              
              (184,045
              )
              
              379,422
              
              
              (206,538
              )Purchased
                  software
              
              
              10,924,557
              
              
              (6,641,994
              )
              
              9,671,327
              
              
              (5,052,636
              )Total
              
              $
              17,816,799
              
              
              (8,399,008
              )
              $
              16,563,569
              
              $
              (6,085,896
              )




Amortization
      expense for core deposits and other for the years ended December 31, 2007,
      2006
      and 2005, was $723,754, $535,351 and $131,825, respectively. Amortization
      expense for purchased software for the years ended December 31, 2007, 2006
      and
      2005 was $1,339,276, $1,329,580 and $1,234,279, respectively Estimated
      amortization expense for each of the following five years is:





**2008**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **2012**Core
                deposit intangible
            
            $
            397,436
            
            $
            397,436
            
            $
            397,436
            
            $
            397,436
            
            $
            397,436Customer
                relationship intangible
            
            
            49,930
            
            
            42,337
            
            
            36,884
            
            
            31,069
            
            
            26,758Banking
                intangibles
            
            
            447,366
            
            
            439,773
            
            
            434,320
            
            
            428,505
            
            
            424,194Customer
                Relationship intangible
            
            
            159,267
            
            
            159,267
            
            
            159,267
            
            
            159,267
            
            
            159,267Trademark
                intangible
            
            
            60,000
            
            
            40,000
            
            
            -
            
            
            -
            
            
            -Non-compete
                intangible
            
            
            27,667
            
            
            40,000
            
            
            -
            
            
            -
            
            
            -Data
                Processing intangibles
            
            
            246,934
            
            
            239,267
            
            
            159,267
            
            
            159,267
            
            
            159,267Purchased
                software – Banking
            
            
            82,665
            
            
            69,033
            
            
            39,915
            
            
            159
            
            
            -Purchased
                Software – Data Processing
            
            
            1,164,433
            
            
            1,015,682
            
            
            870,160
            
            
            228,996
            
            
            153,561Purchased
                Software – Other
            
            
            80,127
            
            
            43,519
            
            
            29,609
            
            
            3,851
            
            
            -Purchased
                Software
            
            
            1,327,225
            
            
            1,128,234
            
            
            939,684
            
            
            233,006
            
            
            153,561Total
            
            $
            2,021,525
            
            $
            1,807,274
            
            $
            1,533,271
            
            $
            820,778
            
            $
            737,022




F21


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      8:**  **Interest-Bearing
      Time Deposits**




Interest-bearing
      time deposits in denominations of $100,000 or more were $57,351,000 on December
      31, 2007, and $75,847,000 on December 31, 2006. Certificates of deposit obtained
      from brokers totaled approximately $3,975,000 and $14,992,000 at December 31,
      2007 and 2006, respectively.




At
      December 31, 2007, the scheduled maturities of time deposits were as
      follows:




2008
            
            $
            183,913,7272009
            
            
            28,303,6382010
            
            
            6,283,5192011
            
            
            1,977,4912012
            
            
            2,386,412Thereafter
            
            
            616,055Total
            
            $
            223,480,842







Of
      the
      $3,975,000 in brokered deposits held at December 31, 2007, $2,670,000 mature
      within the next year.




**Note
      9:**  **Short-Term
      Borrowings**


**2007**
              
              **2006**Securities
                  sold under repurchase agreements - retail
              
              $
              8,006,438
              
              $
              7,270,900Securities
                  sold under repurchase agreements - broker
              
              
              35,000,000
              
              
              25,000,000Total
                  short-term borrowings
              
              $
              43,006,438
              
              $
              32,270,900




At
      December 31, 2007, The Bank had $20.9 million in federal funds lines, of which
      none were drawn upon. At December 31, 2006, The Bank had $21.8 million in
      federal funds lines, of which none was drawn on.


F22




**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




The
        Bank
        has retail repurchase agreements to facilitate cash management transactions
        with
        commercial customers. These obligations are secured by agency securities
        and
        such collateral is held by the Federal Home Loan Bank. At December 31, 2007,
        retail repurchase agreements totaled $8,006,438.
        The maximum amount of outstanding agreements at any month end during 2007
        and
        2006 totaled $8,941,000 and $7,400,000, respectively, and the monthly average
        of
        such agreements totaled $7,268,000 and $6,471,000, respectively. The agreements
        at December 31, 2007 and 2006 mature within one month.




The
      Bank
      also has repurchase agreements with brokerage firms who are in possession of
      the
      underlying securities. The securities are returned to The Bank on the repurchase
      date. The maximum amount of outstanding agreements at any month end during
      2007
      and 2006 totaled $35,000,000 and $25,000,000, respectively, and the monthly
      average of such agreements totaled $28,452,000 and $14,064,000, respectively.
      These repurchase agreements mature between 2011 and 2012 and at December 31,
      2007, totaled $35,000,000 with a weighted average interest rate at year-end
      of
      4.75%.


F23


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      10:**  **Notes
      Payable**




Notes
      payable at December 31, include:




**2007**
            
            **2006**Revolving
                Demand Note payable in the amount of $500,000, secured by all business
                assets of RDSI, monthly payments of interest at prime plus
                .5%
            
            $
            -
            
            $
            200,000Note
                payable in the amount of $2,500,000, secured by all inventory, equipment
                and receivables of RDSI, monthly payments of $41,042 together with
                interest at a variable rate equal to the 5 Year Treasury Index plus
                2.85%,
                maturing August 23, 2011
            
            $
            922,457
            
            
            2,389,207$
            922,457
            
            $
            2,589,207


F24


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




Aggregate
      annual maturities of notes payable at December 31, 2007, are:




Debt2008
            
            $
            340,2882009
            
            
            368,4752010
            
            
            213,694Total
            
            $
            922,457




**Note
      11:**  **Federal
      Home Loan Bank Advances**




The
      Federal Home Loan Bank advances were secured by mortgage loans and commercial
      real estate loans totaling $139,808,148 at December 31, 2007. Advances, at
      interest rates from 3.84 to 6.25 percent, are subject to restrictions or
      penalties in the event of prepayment.




Aggregate
      annual maturities of Federal Home Loan Bank advances at December 31, 2007,
      are:




Debt2008
            
            $
            2,000,0002009
            
            
            5,500,0002010
            
            
            11,000,0002011
            
            
            5,500,000Total
            
            $
            24,000,000




F25


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      12:**  **Trust
      Preferred Securities**




On
      September 15, 2005, RST II, a wholly owned subsidiary of the Company, closed
      a
      pooled private offering of 10,000 Capital Securities with a liquidation amount
      of $1,000 per security. The proceeds of the offering were loaned to the Company
      in exchange for junior subordinated debentures with terms similar to the Capital
      Securities. The sole assets of RST II are the junior subordinated debentures
      of
      the Company and payments thereunder. The junior subordinated debentures and
      the
      back-up obligations, in the aggregate, constitute a full and unconditional
      guarantee by the Company of the obligations of RST
      II
      under the Capital Securities. Distributions on the Capital Securities are
      payable quarterly at an interest rate that changes quarterly and is based on
      the
      3-month LIBOR and are included in interest expense in the consolidated financial
      statements. These securities are considered Tier 1 capital (with certain
      limitations applicable) under current regulatory guidelines. As of December
      31,
      2007 and 2006, the outstanding principal balance of the Capital Securities
      was
      $10,000,000.




On
      September 7, 2000, RST I, a wholly owned subsidiary of the Company, closed
      a
      pooled private offering of 10,000 Capital Securities with a liquidation amount
      of $1,000 per security. The proceeds of the offering were loaned to the Company
      in exchange for junior subordinated debentures with terms similar to the Capital
      Securities. The sole assets of RST I are the junior subordinated debentures
      of
      the Company and payments thereunder. The junior subordinated debentures and
      the
      back-up obligations, in the aggregate, constitute a full and unconditional
      guarantee by the Company of the obligations of RST I under the Capital
      Securities. Distributions on the Capital Securities are payable semi-annually
      at
      the annual rate of 10.6% and are included in interest expense in the
      consolidated financial statements. These securities are considered Tier 1
      capital (with certain limitations applicable) under current regulatory
      guidelines. As of December 31, 2007 and 2006, the outstanding principal balance
      of the Capital Securities was $10,000,000.




The
      junior subordinated debentures are subject to mandatory redemption, in whole
      or
      in part, upon repayment of the Capital Securities at maturity or their earlier
      redemption at the liquidation amount. Subject to the Company having received
      prior approval of the Federal Reserve, if then required, the Capital Securities
      are redeemable prior to the maturity date of September 7, 2030, at the option
      of
      the Company; on or after September 7, 2020 at par; or on or after September
      7,
      2010 at a premium; or upon occurrence of specific events defined within the
      trust indenture.


F26


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      13:**  **Income
      Taxes**




The
      provision for income taxes includes these components:


**For
                  The Year Ended December 31,****2007**
              
              **2007**
              
              **2007**Taxes
                  currently payable (refundable)
              
              $
              2,029,195
              
              $
              1,408,421
              
              $
              (302,984
              )Deferred
                  income taxes
              
              
              (795,035
              )
              
              (460,305
              )
              
              384,337Income
                  tax expense
              
              $
              1,234,160
              
              $
              948,116
              
              $
              81,353







A
      reconciliation of income tax expense at the statutory rate to the Company’s
      actual income tax expense is shown below:


**For
                  The Year Ended December 31,****2007**
              
              **2007**
              
              **2007**Computed
                  at the statutory rate (34%)
              
              $
              1,526,870
              
              $
              1,260,842
              
              $
              256,511Increase
                  (decrease) resulting fromTax
                  exempt interest
              
              
              (211,646
              )
              
              (184,640
              )
              
              (103,015
              )Other
              
              
              (81,064
              )
              
              (128,086
              )
              
              (72,143
              )Actual
                  tax expense
              
              $
              1,234,160
              
              $
              948,116
              
              $
              81,353




F27


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




The
      tax
      effects of temporary differences related to deferred taxes shown on the balance
      sheets are:


**At
                  December 31,****2007**
              
              **2006**Deferred
                  tax assetsAllowance
                  for loan losses
              
              $
              1,244,891
              
              $
              1,121,589Accrued
                  compensation and benefits
              
              
              318,748
              
              
              279,153Net
                  deferred loan fees
              
              
              100,670
              
              
              100,932Unrealized
                  losses on available-for-sale securities
              
              
              -
              
              
              452,812Mark
                  to market adjustments
              
              
              42,363
              
              
              -Purchase
                  accounting adjustments
              
              
              164,796
              
              
              188,644NOL
                  carry over
              
              
              751,000
              
              
              751,000Other
              
              
              48,997
              
              
              3,1662,671,465
              
              
              2,897,296Deferred
                  tax liabilitiesDepreciation
              
              
              (973,163
              )
              
              (974,157
              )Mortgage
                  servicing rights
              
              
              (135,319
              )
              
              (71,078
              )Unrealized
                  gains on available-for-sale securities
              
              
              (42,363
              )
              
              -Mark
                  to market adjustment
              
              
              -
              
              
              (452,812
              )Purchase
                  accounting adjustments
              
              
              (2,226,793
              )
              
              (2,350,013
              )Prepaids
              
              
              (182,115
              )
              
              (185,760
              )FHLB
                  stock dividends
              
              
              (422,314
              )
              
              (422,314
              )Other
              
              
              -
              
              
              (51,624
              )(3,982,067
              )
              
              (4,507,758
              )Net
                  deferred tax liability
              
              $
              (1,310,602
              )
              $
              (1,610,462
              )





The
      NOL
      carry over begins to expire in 2024.





**Note
      14:**  **Other
      Comprehensive Loss**




Other
      comprehensive income (loss) components and related taxes are as
      follows:


**2007**
                
                **2006**
                
                **2005**Unrealized
                    gains (losses) on securities available for sale
                
                $
                1,459,768
                
                $
                680,825
                
                $
                (1,266,627
                )Reclassification
                    for realized amount included in income
                
                
                (1,998
                )
                
                494,885
                
                
                (25,300
                )Other
                    comprehensive income (loss), before tax effect
                
                
                1,457,770
                
                
                1,175,710
                
                
                (1,291,927
                )Tax
                    expense (benefit)
                
                
                495,642
                
                
                399,741
                
                
                (439,254
                )Other
                    comprehensive income (loss)
                
                $
                962,128
                
                $
                775,969
                
                $
                (852,673
                )


F28


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      15:**  **Regulatory
      Matters**




The
      Company and State Bank are subject to various regulatory capital requirements
      administered by the federal and state banking agencies. Failure to meet minimum
      capital requirements can initiate certain mandatory and possibly additional
      discretionary actions by regulators that, if undertaken, could have a direct
      material effect on the Company’s financial statements. Under capital adequacy
      guidelines and the regulatory framework for prompt corrective action, the
      Company and State Bank must meet specific capital guidelines that involve
      quantitative measures of assets, liabilities and certain off-balance-sheet
      items
      as calculated under regulatory accounting practices. The capital amounts and
      classification are also subject to qualitative judgments by the regulators
      about
      components, risk weightings and other factors.




Quantitative
      measures established by regulation to ensure capital adequacy require the
      Company and State Bank to maintain minimum amounts and ratios (set forth in
      the
      table below) of total and Tier I capital (as defined in the regulations) to
      risk-weighted assets (as defined), and of Tier I capital (as defined) to average
      assets (as defined). Management believes, as of December 31, 2007, that the
      Company and State Bank meet all capital adequacy requirements to which they
      are
      subject.




As
      of
      December 31, 2007, the most recent notification to the regulators categorized
      the State Bank as well capitalized under the regulatory framework for prompt
      corrective action. To be categorized as well capitalized, State Bank must
      maintain capital ratios as set forth in the table. There are no conditions
      or
      events since that notification that management believes have changed State
      Bank’s status as well-capitalized.




The
      Company’s consolidated, and State Bank’s actual, capital amounts (in millions)
      and ratios, as of December 31, 2007 and 2006, are also presented in the
      following table. On March 24, 2007, Exchange Bank was merged with and into
      the
      lead bank, State Bank.


F29


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




The
      Company and State Bank’s actual capital amounts (in millions) and ratios are
      also presented in the following table.


**Actual**
              
              **For
                  Capital Adequacy Purposes**
              
              **To
                  Be Well Capitalized Under Prompt Corrective Action
                  Provisions****Amount**
              
              **Ratio**
              
              **Amount**
              
              **Ratio**
              
              **Amount**
              
              **Ratio**As
                  of December 31, 2007Total
                  Capital(to
                  Risk-Weighted Assets)Consolidated
              
              $
              64.2
              
              
              15.9
              %
              $
              32.2
              
              
              8.0
              %
              $
              -
              
              
              N/AState
                  Bank
              
              
              49.5
              
              
              12.7
              
              
              31.3
              
              
              8.0
              
              
              39.1
              
              
              10.0
              %Tier
                  I Capital(to
                  Risk-Weighted Assets)Consolidated
              
              
              59.9
              
              
              14.9
              
              
              16.1
              
              
              4.0
              
              
              -
              
              
              N/AState
                  Bank
              
              
              45.5
              
              
              11.6
              
              
              15.6
              
              
              4.0
              
              
              23.5
              
              
              6.0Tier
                  I Capital(to
                  Average Assets)Consolidated
              
              
              59.9
              
              
              11.0
              
              
              21.9
              
              
              4.0
              
              
              -
              
              
              N/AState
                  Bank
              
              
              45.5
              
              
              8.4
              
              
              21.8
              
              
              4.0
              
              
              27.3
              
              
              5.0As
                  of December 31, 2006Total
                  Capital(to
                  Risk-Weighted Assets)Consolidated
              
              $
              62.0
              
              
              16.0
              %
              $
              30.9
              
              
              8.0
              %
              $
              -
              
              
              N/AState
                  Bank
              
              
              46.8
              
              
              12.4
              
              
              30.2
              
              
              8.0
              
              
              37.8
              
              
              10.0
              %Tier
                  I Capital(to
                  Risk-Weighted Assets)Consolidated
              
              
              57.6
              
              
              14.9
              
              
              15.5
              
              
              4.0
              
              
              -
              
              
              N/AState
                  Bank
              
              
              43.0
              
              
              11.4
              
              
              15.1
              
              
              4.0
              
              
              22.7
              
              
              6.0Tier
                  I Capital(to
                  Average Assets)Consolidated
              
              
              57.6
              
              
              10.5
              
              
              22.0
              
              
              4.0
              
              
              -
              
              
              N/AState
                  Bank
              
              
              43.0
              
              
              7.8
              
              
              22.0
              
              
              4.0
              
              
              27.5
              
              
              5.0




Dividends
      paid by Rurban are mainly provided for by dividends from its subsidiaries.
      However, certain restrictions exist regarding the ability of State Bank to
      transfer funds to Rurban in the form of cash dividends, loans or advances.
      Regulatory approval is required in order to pay dividends in excess of State
      Bank’s earnings retained for the current year plus retained net profits since
      January 1, 2005.




F30




**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




As
      of
      December 31, 2007, approximately $5.1 million was available for distribution
      to
      Rurban as dividends without prior regulatory approval. The 2006 table was
      consolidated for The State Bank and Trust Company and The Exchange
      Bank.




**Note
      16:**  **Related
      Party Transactions**




Certain
      directors, executive officers and principal shareholders of the Company,
      including associates of such persons, are loan customers. A summary of the
      related party loan activity, for loans aggregating $60,000 or more to any one
      related party, follows for the years ended December 31, 2007 and
      2006:




**2007**
            
            **2006**Balance,
                January 1
            
            $
            3,454,000
            
            $
            2,394,000New
                Loans
            
            
            3,751,000
            
            
            5,936,000Repayments
            
            
            (3,009,000
            )
            
            (4,997,000
            )Other
                changes
            
            
            1,805,000
            
            
            121,000Balance,
                December 31
            
            $
            6,001,000
            
            $
            3,454,000





In
      management’s opinion, such loans and other extensions of credit and deposits
      were made in the ordinary course of business and were made on substantially
      the
      same terms (including interest rates and collateral) as those prevailing at
      the
      time for comparable transactions with other persons. Further, in management’s
      opinion, these loans did not involve more than normal risk of collectibility
      or
      present other unfavorable features.




Deposits
      from related parties held at December 31, 2007 and 2006 totaled $977,000
      and $1,840,000, respectively.




**Note
      17:**  **Employee
      Benefits**




The
      Company has retirement savings 401(k) plans covering substantially all
      employees. Employees contributing up to 6% of their compensation receive a
      Company match of 50% of the employee’s contribution. Employee contributions are
      vested immediately and the Company’s matching contributions are fully vested
      after three years of employment. Employer contributions charged to expense
      for
      2007, 2006 and 2005 were $272,750, $307,000, and $257,600
      respectively.


F31


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




Also,
      the
      Company has deferred compensation agreements with certain active and retired
      officers. The agreements provide monthly payments for up to 15 years that equal
      15% to 25% of average compensation prior to retirement or death. The charge
      to
      expense for the current agreements was $166,000, $199,000, and $240,000 for
      2007, 2006 and 2005, respectively. In 2006 and 2005, previously accrued benefits
      under the agreements in the amount of $166,000 and $346,000, respectively,
      were
      reversed and credited to expense as a result of termination or resignation
      of
      certain officers. Such charges reflect the straight-line accrual over the period
      until full eligibility of the present value of benefits due each participant
      on
      the full eligibility date, using a 6% discount factor.




Life
      insurance plans are provided for certain executive officers on a split-dollar
      basis. The Company is the owner of the split-dollar policies. The officers
      are
      entitled to a sum equal to two times either the employee’s annual salary at
      death, if actively employed, or final annual salary, if retired, less $50,000,
      not to exceed the employee’s portion of the death benefit. The Company is
      entitled to the portion of the death proceeds which equates to the cash
      surrender value less any loans on the policy and unpaid interest or cash
      withdrawals previously incurred by the Company. The employees have the right
      to
      designate a beneficiary(s) to receive their share of the proceeds payable upon
      death. The cash surrender value of these life insurance policies and life
      insurance policies related to the Company’s supplemental retirement plan totaled
      approximately $2,011,589 at December 31, 2007, and $1,955,902 at December 31,
      2006.




Additional
      life insurance is provided to certain officers through a bank-owned life
      insurance policy (“BOLI”). By way of a separate split-dollar agreement, the
      policy interests are divided between the bank and the insured’s beneficiary. The
      bank owns the policy cash value and a portion of the policy net death benefit,
      over and above the cash value assigned to the insured’s beneficiary. During 2007
      the bank elected to add $1 million in additional BOLI on two key executive
      officers. The cash surrender value of all life insurance policies totaled
      approximately $10,148,992 at December 31, 2007, and $8,815,940 at December
      31,
      2006.




The
      Company has a noncontributory employee stock ownership plan (“ESOP”) covering
      substantially all employees of the Company and its subsidiaries. Voluntary
      contributions are made by the Company to the plan. Each eligible employee is
      vested based upon years of service, including prior years of service. The
      Company’s contributions to the account of each employee become fully vested
      after three years of service.




Compensation
      expense is recorded equal to the fair market value of the stock when
      contributions, which are determined annually by the Board of Directors of the
      Company, are made to the ESOP. Allocated shares in the ESOP for each of the
      three years ended December 31, 2007, 2006 and 2005, were 462,850, 497,955,
      and
      556,607, respectively.




Dividends
      on allocated shares are recorded as dividends and charged to retained earnings.
      Compensation expense is recorded equal to the fair market value of the stock
      when contributions, which are determined annually by the Board of Directors
      of
      the Company, are made to the ESOP.




ESOP
      expense for the years ended December 31, 2007, 2006 and 2005 was $565,644,
      $531,000, and $445,000, respectively.


F32


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      18:**  **Stock
      Option Plan**




In
      March,
      2007, the Company’s single share-based compensation plan expired. The
      compensation cost that has been charged against income for that plan was
      $64,406, $24,055, and $0 for 2007, 2006, and 2005, respectively. The total
      income tax benefit recognized in the income statement for share-based
      compensation arrangements was $21,898, $8,179, and $0 for 2007, 2006 and 2005,
      respectively.




The
      Company’s Stock Option Plan (the Plan), which is shareholder approved, permits
      the grant of share options to its employees for up to 441,000 shares of common
      stock. The Plan expired in March, 2007. The Company believes that such awards
      better align the interests of its employees with those of its shareholders.
      Option awards are generally granted with an exercise price equal to the market
      price of the Company’s stock at the date of grant; those option awards generally
      vest based on 5 years of continuous service and have 10-year contractual terms.




The
      fair
      value of each option award is estimated on the date of grant using a binomial
      option valuation model that uses the assumptions noted in the following table.
      Expected volatility is based on historical volatility of the Company’s stock and
      other factors. The Company uses historical data to estimate option exercise
      and
      employee termination within the valuation model; separate groups of employees
      that have similar historical exercise behavior are considered separately for
      valuation purposes. The expected term of options granted is derived from the
      output of the option valuation model and represents the period of time that
      options granted are expected to be outstanding. The risk-free rate for periods
      within the contractual life of the option is based on the U.S. Treasury yield
      curve in effect at the time of grant.




**2007**
            
            **2006**
            
            **2005**Expected
                volatility
            
            
            27.0
            %
            
            18.5
            %
            
            23.7-27.7
            %Weighted-average
                volatility
            
            
            27.01
            %
            
            18.5
            %
            
            26.7
            %Expected
                dividends
            
            
            2.0
            %
            
            1.7
            %
            
            0-1.5
            %Expected
                term (in years)
            
            
            10
            
            
            10
            
            
            10Risk-free
                rate
            
            
            4.72
            %
            
            2.3
            %
            
            4.5-4.5
            %


F33


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




A
      summary
      of option activity under the Plan as of December 31, 2007 and changes during
      the
      year then ended, is presented below:




**2007****Shares**
            
            **Weighted-**
              **Average**
              **Exercise Price**
            
            **Weighted-**
              **Average**
              **Remaining**
              **Contractual**
              **Term**
            
            **Aggregate**
              **Intrinsic Value**Outstanding,
                beginning of year
            
            
            325,274
            
            $
            13.41Granted
            
            
            114,640
            
            
            11.48Exercised
            
            
            -
            
            
            -Forfeited
            
            
            26,861
            
            
            13.53Expired
            
            
            71,074
            
            
            12.87Outstanding,
                end of year
            
            
            341,979
            
            $
            12.86
            
            
            6.63
            
            $
            179,217Exercisable,
                end of year
            
            
            212,089
            
            $
            13.67
            
            
            5.18
            
            $
            51,325




The
      weighted-average grant-date fair value of options granted during the years
      2007,
      2006 and 2005 was $3.02, $2.34 and $4.32, respectively. The total intrinsic
      value of options exercised during the years ended December 31, 2007, 2006 and
      2005, was $0, $0 and $2,017, respectively.




As
      of
      December 31, 2007, there was $323,425 of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted under the
      plan. That cost is expected to be recognized over a weighted-average period
      of
      2.08 years


F34


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      19:**  **Earnings
      Per Share**




Earnings
      per share (EPS) is computed as follows:




**Year
                Ended December 31, 2007****Income**
            
            **Weighted-**
              **Average**
              **Shares**
            
            **Per**
              **Share**
              **Amount**Basic
                earnings per shareNet
                income available to common shareholders
            
            $
            3,256,635
            
            
            5,010,987
            
            $
            0.65Effect
                of dilutive securitiesStock
                options
            
            
            -
            
            
            4,324Diluted
                earnings per shareIncome
                available to common shareholders and assumed conversions
            
            $
            3,256,635
            
            
            5,015,311
            
            $
            0.65




Options
      to purchase 176,278 common shares at $13.30 to $16.78 per share were outstanding
      at December 31, 2007, but were not included in the computation of diluted EPS
      because the options’ exercise price was greater than the average market price of
      the common shares.




**Year
                Ended December 31, 2006****Income**
            
            **Weighted-**
              **Average**
              **Shares**
            
            **Per**
              **Share**
              **Amount**Basic
                earnings per shareNet
                income available to common shareholders
            
            $
            2,760,242
            
            
            5,027,433
            
            $
            0.55Effect
                of dilutive securitiesStock
                options
            
            
            -
            
            
            1,442Diluted
                earnings per shareIncome
                available to common shareholders and assumed conversions
            
            $
            2,760,242
            
            
            5,028,875
            
            $
            0.55




F35


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




Options
      to purchase 285,838 common shares at $11.72 to $16.78 per share were outstanding
      at December 31, 2006, but were not included in the computation of diluted EPS
      because the options’ exercise price was greater than the average market price of
      the common shares.




**Year
                Ended December 31, 2005****Income**
            
            **Weighted-**
              **Average**
              **Shares**
            
            **Per**
              **Share**
              **Amount**Basic
                earnings per shareNet
                income available to common shareholders
            
            $
            673,091
            
            
            4,571,348
            
            $
            0.15Effect
                of dilutive securitiesStock
                options
            
            
            -
            
            
            13,058Diluted
                earnings per shareIncome
                available to common shareholders and assumed conversions
            
            $
            673,091
            
            
            4,584,406
            
            $
            0.15




Options
      to purchase 215,066 common shares at $13.30 to $16.78 per share were outstanding
      at December 31, 2005, but were not included in the computation of diluted EPS
      because the options’ exercise price was greater than the average market price of
      the common shares.


F36


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      20:**  **Leases**




The
      Company’s subsidiaries, The State Bank and Trust Company, RDSI, and DCM, have
      several noncancellable operating leases for business use that expire over the
      next ten years. These leases generally contain renewal options for periods
      of
      five years and require the lessee to pay all executory costs such as taxes,
      maintenance and insurance. Aggregate rental expense for these leases was
      $535,361, $307,393, and $249,504 for the years ended December 31, 2007, 2006
      and
      2005, respectively.




Future
      minimum lease payments under operating leases are:




2008
            
            $
            411,5512009
            
            
            367,9472010
            
            
            307,2002011
            
            
            303,0832012
            
            
            210,200Thereafter
            
            
            833,412Total
                minimum lease payments
            
            $
            2,433,393


F37


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      21:**  **Disclosures
      about Fair Value of Financial Instruments**




The
      following table presents estimated fair values of the Company’s financial
      instruments. The fair values of certain of these instruments were calculated
      by
      discounting expected cash flows, which involves significant judgments by
      management and uncertainties. Fair value is the estimated amount at which
      financial assets or liabilities could be exchanged in a current transaction
      between willing parties, other than in a forced or liquidation sale. Because
      no
      market exists for certain of these financial instruments and because management
      does not intend to sell these financial instruments, the Company does not know
      whether the fair values shown below represent values at which the respective
      financial instruments could be sold individually or in the
      aggregate


**December
                  31, 2007**
              
              **December
                  31, 2006****Carrying**
                **Amount**
              
              **Fair**
                **Value**
              
              **Carrying**
                **Amount**
              
              **Fair**
                **Value**Financial
                  assetsCash
                  and cash equivalents
              
              $
              17,183,627
              
              $
              17,184,000
              
              $
              22,481,791
              
              $
              22,482,000Interest-bearing
                  deposits
              
              
              -
              
              
              -
              
              
              150,000
              
              
              150,000Available-for-sale
                  securities
              
              
              92,661,386
              
              
              92,661,000
              
              
              102,462,075
              
              
              102,462,000Loans
                  including loans held for sale, net
              
              
              386,928,047
              
              
              388,253,000
              
              
              366,774,532
              
              
              364,490,000Stock
                  in FRB and FHLB
              
              
              4,021,200
              
              
              4,021,000
              
              
              3,993,450
              
              
              3,993,000Accrued
                  interest receivable
              
              
              3,008,968
              
              
              3,009,000
              
              
              3,129,774
              
              
              3,130,000Financial
                  liabilitiesDeposits
              
              $
              406,031,182
              
              $
              406,240,000
              
              $
              414,555,445
              
              $
              413,990,000Securities
                  sold under agreements to repurchase
              
              
              43,006,438
              
              
              43,110,000
              
              
              32,270,900
              
              
              31,674,000Note
                  payable
              
              
              922,457
              
              
              922,000
              
              
              2,589,207
              
              
              2,589,000FHLB
                  advances
              
              
              24,000,000
              
              
              24,823,000
              
              
              21,000,000
              
              
              20,982,000Trust
                  preferred securities
              
              
              20,620,000
              
              
              20,503,000
              
              
              20,620,000
              
              
              21,257,000Accrued
                  interest payable
              
              
              2,532,914
              
              
              2,533,000
              
              
              2,224,413
              
              
              2,224,000




For
      purposes of the above disclosures of estimated fair value, the following
      assumptions were used as of December 31, 2007 and 2006. The estimated fair
      value for cash and cash equivalents, interest-bearing deposits, FRB and FHLB
      stock, accrued interest receivable, demand deposits, savings accounts, interest
      checking accounts, certain money market deposits, short-term borrowings and
      interest payable is considered to approximate cost. The estimated fair value
      for
      securities is based on quoted market values for the individual securities or
      for
      equivalent securities. The estimated fair value for loans receivable, including
      loans held for sale, net, is based on estimates of the rate State Bank would
      charge for similar loans at December 31, 2007 and 2006 applied for the time
      period until the loans are assumed to re-price or be paid.


F38


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




The
      estimated fair value for fixed-maturity time deposits as well as borrowings
      is
      based on estimates of the rate State Bank paid on such liabilities at December
      31, 2007 and 2006, applied for the time period until maturity. The fair value
      of
      commitments is estimated using the fees currently charged to enter into similar
      agreements, taking into account the remaining terms of the agreements and the
      present creditworthiness of the counterparties. The estimated fair value for
      other financial instruments and off-balance sheet loan commitments approximate
      cost at December 31, 2007 and 2006 and are not considered significant to this
      presentation.


F39


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      22:**  **Commitments
      and Credit Risk**




State
      Bank grants commercial, agribusiness, consumer and residential loans to
      customers. Although State Bank has a diversified loan portfolio, agricultural
      loans comprised approximately 11% and 12% of the portfolio as of December 31,
      2007 and 2006, respectively.




Commitments
      to extend credit are agreements to lend to a customer as long as there is no
      violation of any condition established in the contract. Commitments generally
      have fixed expiration dates or other termination clauses and may require payment
      of a fee. Since a portion of the commitments may expire without being drawn
      upon, the total commitment amounts do not necessarily represent future cash
      requirements. Each customer’s creditworthiness is evaluated on a case-by-case
      basis. The amount of collateral obtained, if deemed necessary, is based on
      management’s credit evaluation of the customer. Collateral held varies, but may
      include accounts receivable, inventory, property, plant and equipment,
      commercial real estate and residential real estate.




Letters
      of credit are conditional commitments issued by State Bank to guarantee the
      performance of a customer to a third party. Those guarantees are primarily
      issued to support public and private borrowing arrangements, including
      commercial paper, bond financing and similar transactions. The credit risk
      involved in issuing letters of credit is essentially the same as that involved
      in extending loans to customers.




Lines
      of
      credit are agreements to lend to a customer as long as there is no violation
      of
      any condition established in the contract. Lines of credit generally have fixed
      expiration dates. Since a portion of the line may expire without being drawn
      upon, the total unused lines do not necessarily represent future cash
      requirements. Each customer’s creditworthiness is evaluated on a case-by-case
      basis. The amount of collateral obtained, if deemed necessary, is based on
      management’s credit evaluation of the customer. Collateral held varies but may
      include accounts receivable, inventory, property, plant and equipment,
      commercial real estate and residential real estate. Management uses the same
      credit policies in granting lines of credit as it does for on-balance-sheet
      instruments..




**2007**
            
            **2006**Loan
                commitments and unused lines of credit
            
            $
            76,445,000
            
            $
            71,545,000Standby
                letters of credit
            
            
            -
            
            
            582,000Commercial
                letters of credit
            
            
            377,000
            
            
            -Total
            
            $
            76,822,000
            
            $
            72,127,000




And
      from
      time to time certain due from bank accounts are in excess of federally insured
      limits


F40


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




There
      are
      various contingent liabilities that are not reflected in the consolidated
      financial statements, including claims and legal actions arising in the ordinary
      course of business. In the opinion of management, after consultation with legal
      counsel, the ultimate disposition of these matters is not expected to have
      a
      material effect on the Company’s consolidated financial condition or results of
      operations.




Salary
      continuation agreements with certain executive officers contain provisions
      regarding certain events leading to separation from the Company, before the
      executive officer’s normal retirement date, which could result in cash payments
      in excess of amounts accrued.




**Note
      23:**  **Future
      Change in Accounting Principle**




In
      March 2006, the FASB issued Statement of Financial Accounting Standards
      No. 156, *Accounting
      for Servicing of Financial Assets: an amendment of FASB Statement No. 140* (FAS
      140
      and FAS 156). FAS 140 establishes, among other things, the accounting for all
      separately recognized servicing assets and servicing liabilities. This Statement
      amends FAS 140 to require that all separately recognized servicing assets and
      servicing liabilities be initially measured at fair value, if practicable.
      This
      Statement permits, but does not require, the subsequent measurement of
      separately recognized servicing assets and servicing liabilities at fair value.
      Under this Statement, an entity can elect subsequent fair value measurement
      to
      account for its separately recognized servicing assets and servicing
      liabilities. Adoption of this Statement is required as of the beginning of
      the
      first fiscal year that begins after September 15, 2006. On January 1, 2007
      the Company adopted SFAS No. 156. The adoption of SFAS No. 156 did not have
      a
      material impact on the financial position and results of operations of the
      Company.





The
      Company or one of its subsidiaries files income tax returns in the U.S. federal
      and multiple-state jurisdictions. With few exceptions, the Company is no longer
      subject to U.S. federal, state and local examinations by tax authorities for
      years before 2004.





The
      Company adopted the provisions of the Financial Accounting Standards Board
      (FASB) Interpretation No.48 (FIN 48), Accounting for Uncertainty in Income
      Taxes—an interpretation of FASB Statement No. 109, on January 1, 2007. FIN
      48 prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. As a result of the implementation of FIN
      48,
      the Company did not become aware of any liability for uncertain tax positions
      that it believes should be recognized in the financial statements.





In
      February 2007, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities – including an amendment of FASB Statement
      No. 115 (SFAS No. 159). SFAS No. 159 permits us to choose to measure certain
      financial assets and liabilities at fair value that are not currently required
      to be measured at fair value (i.e. the Fair Value Option). Election of the
      Fair
      Value Option is made on an instrument-by-instrument basis and is irrevocable.
      At
      the adoption date, unrealized gains and losses on financial assets and
      liabilities for which the Fair Value Option has been elected would be reported
      as a cumulative adjustment to beginning retained earnings. If we elect the
      Fair
      Value Option for certain financial assets and liabilities, we will report
      unrealized gains and losses due to changes in their fair value in earnings
      at
      each subsequent reporting date. SFAS No. 159 is effective as of January 1,
      2008.
      Management has evaluated the potential impact of adopting SFAS No. 159 on our
      consolidated financial statements and found it will have no material impact
      to
      the financial position and results of operations of the Company.


F41


In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, Fair Value Measurements (FAS 157). FAS 157 enhances existing
      guidance for measuring assets and liabilities using fair value. Prior to the
      issuance of FAS 157, guidance for applying fair value was incorporated in
      several accounting pronouncements. FAS 157 provides a single definition of
      fair
      value, together with a framework for measuring it, and requires additional
      disclosure about the use of fair value to measure assets and liabilities. FAS
      157 also emphasizes that fair value is a market-based measurement, not an
      entity-specific measurement, and sets out a fair value hierarchy with the
      highest priority being quoted prices in active markets. Under FAS 157, fair
      value measurements are disclosed by level within that hierarchy. While FAS
      157
      does not add any new fair value measurements, it does change current practice.
      Changes to practice include: (1) a requirement for an entity to include its
      own credit standing in the measurement of its liabilities; (2) a
      modification of the transaction price presumption; (3) a prohibition on the
      use of block discounts when valuing large blocks of securities for
      broker-dealers and investment companies; and (4) a requirement to adjust
      the value of restricted stock for the effect of the restriction even if the
      restriction lapses within one year. FAS 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years.




At
      its
      September 2006 meeting, the Emerging Issues Task Force (“EITF”) reached a final
      consensus on Issue No. 06-4, *Accounting
      for*  *Deferred
      Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
      Life
      Insurance Arrangements.* The
      consensus stipulates that an agreement by an employer to share a portion of
      the
      proceeds of a life insurance policy with an employee during the postretirement
      period is a postretirement benefit arrangement required to be accounted for
      under Statement No. 106 (“SFAS No. 106”) or Accounting Principles Board (APB)
      Opinion No. 12, Omnibus Opinion-1967. The consensus concludes that the purchase
      of a split-dollar life insurance policy does not constitute a settlement under
      SFAS No. 106 and, therefore, a liability for the postretirement obligation
      must
      be recognized under SFAS No. 106 if the benefit is offered under an arrangement
      that constitutes a plan or under APB No. 12 if it is not part of a plan. Issue
      06-04 is effective for annual or interim reporting periods beginning after
      December 15, 2007. The Company has endorsement split-dollar life insurance
      policies. A liability is expected to be recorded in the first quarter of 2008,
      however; there will be no material impact to the financial position and results
      of operations as a result of the implementation of EITF 06-04.





In
      September 2006, the FASB ratified a consensus opinion by the EITF on EITF Issue
      06-5, Accounting for Purchases of Life Insurance-Determining the Amount That
      Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4
      (Accounting for Purchases of Life Insurance). The issue requires policy holders
      to consider other amounts included in the contractual terms of an insurance
      policy, in addition to cash surrender value, for purposes of determining the
      amount that could be realized under the terms of the insurance contract. If
      it
      is probable that contractual terms would limit the amount that could be realized
      under the insurance contract, those contractual limitations should be considered
      when determining the realizable amounts. The amount that could be realized
      under
      the insurance contract should be determined on an individual policy (or
      certificate) level and should include any amount realized on the assumed
      surrender of the last individual policy or certificate in a group policy.


F42


The
      Company holds several life insurance policies, however, the policies do not
      contain any provisions that would restrict or reduce the cash surrender value
      of
      the policies. The consensus in EITF Issue 06-5 is effective for fiscal years
      beginning after December 15, 2006. The application of this guidance did not
      have
      a material adverse effect on the Company’s financial position or results of
      operations.





At
      its
      March 2007 meeting, the EITF reached a final consensus on Issue No. 06-10, *Accounting
      for Collateral Assignment Split-Dollar Life Insurance
      Arrangements.* A
      consensus was reached that an employer should recognize a liability for the
      postretirement benefit related to a collateral assignment split-dollar life
      insurance arrangement in accordance with either FASB Statement No. 106 or APB
      Opinion No. 12, as appropriate, if the employer has agreed to maintain a life
      insurance policy during the employee’s retirement or provide the employee with a
      death benefit based on the substantive agreement with the employee. A consensus
      also was reached that an employer should recognize and measure an asset based
      on
      the nature and substance of the collateral assignment split-dollar life
      insurance arrangement. The consensuses are effective for fiscal years beginning
      after December 15, 2007, including interim periods within those fiscal years,
      with early application permitted. The Company has endorsement split-dollar
      life
      insurance policies. The implementation of EITF 06-10 will not have a material
      impact on the financial position and results of operations of the
      Company.


F43


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**




**Note
      24:**  **Condensed
      Financial Information (Parent Company Only)**




Presented
      below is condensed financial information as to financial position, results
      of
      operations and cash flows of the Company:




**Condensed
      Balance Sheets**





**2007**
            
            **2006****Assets**Cash
                and cash equivalents
            
            $
            5,089,342
            
            $
            7,102,859Investment
                in common stock of banking subsidiaries
            
            
            58,521,717
            
            
            56,448,620Investment
                in nonbanking subsidiaries
            
            
            16,004,390
            
            
            13,846,560Other
                assets
            
            
            1,972,079
            
            
            2,103,164Total
                assets
            
            $
            81,587,528
            
            $
            79,501,203**Liabilities**Trust
                preferred securities
            
            $
            20,000,000
            
            $
            20,000,000Borrowings
                from non-banking subsidiaries
            
            
            620,000
            
            
            620,000Other
                liabilities
            
            
            1,642,294
            
            
            1,926,050Total
                liabilities
            
            
            22,262,294
            
            
            22,546,050**Stockholders'
                Equity**
            
            
            59,325,234
            
            
            56,955,153Total
                liabilities and stockholders' equity
            
            $
            81,587,528
            
            $
            79,501,203


F44


**Rurban
      Financial Corp.**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2007 and 2006**





**Condensed
      Statements of Income**





**2007**
            
            **2006**
            
            **2005****Income**Interest
                Income
            
            $
            4,324
            
            $
            3,099
            
            $
            2,126Dividends
                from subsidiariesBanking
                Subsidiaries
            
            
            1,200,000
            
            
            6,400,000
            
            
            7,153,134Nonbanking
                subsidiaries
            
            
            300,000
            
            
            -
            
            
            1,513,000Total
            
            
            1,500,000
            
            
            6,400,000
            
            
            8,666,134Other
                income
            
            
            1,353,760
            
            
            1,491,158
            
            
            1,091,721Total
                income
            
            
            2,858,084
            
            
            7,894,257
            
            
            9,759,981**Expenses**Interest
                expense
            
            
            1,808,520
            
            
            1,787,023
            
            
            1,364,168Other
                expense
            
            
            2,831,749
            
            
            2,683,109
            
            
            2,514,712Total
                expenses
            
            
            4,640,269
            
            
            4,470,132
            
            
            3,878,880**Income
                  before income tax and equityin undistributed income of
                  subsidiaries**
            
            
            (1,782,185
            )
            
            3,424,125
            
            
            5,881,101**Income
                tax**
            
            
            (1,115,943
            )
            
            (1,011,797
            )
            
            (946,911
            )**Income
                  before equity in undistributedincome of
                  subsidiaries**
            
            
            (666,242
            )
            
            4,435,922
            
            
            6,828,012**Equity
                  in undistributed (excess distributed)income
                  of subsidiaries****Banking
                subsidiaries**
            
            
            1,710,405
            
            
            (3,797,432
            )
            
            (6,383,468
            )**Nonbanking
                subsidiaries**
            
            
            2,212,472
            
            
            2,121,752
            
            
            228,547**Total**
            
            
            3,922,877
            
            
            (1,675,680
            )
            
            (6,154,921
            )**Net
                income**
            
            $
            3,256,635
            
            $
            2,760,242
            
            $
            673,091


F45




**Rurban
        Financial Corp.**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2007 and 2006**
  **Condensed
        Statements of Cash Flows**
 
 **2007**
              
              **2006**
              
              **2005****Operating
                  Activities**Net
                  income
              
              $
              3,256,635
              
              $
              2,760,242
              
              $
              673,091Items
                  not requiring (providing) cashEquity
                  in (undistributed) excess distributed net income of
                  subsidiaries
              
              
              (3,268,799
              )
              
              2,204,917
              
              
              6,192,398Expense
                  of stock option plan
              
              
              64,406
              
              
              24,055
              
              
              -Other
                  assets
              
              
              131,085
              
              
              (49,256
              )
              
              (15,230
              )Other
                  liabilities
              
              
              (283,757
              )
              
              (6,032,292
              )
              
              629,444Net
                  cash provided by (used in) operating activities
              
              
              (100,430
              )
              
              (1,092,334
              )
              
              7,479,703**Investing
                  Activities**Investment
                  in RST II
              
              
              -
              
              
              -
              
              
              (310,000
              )Investment
                  in RDSI
              
              
              -
              
              
              (5,500,000
              )
              
              -Investment
                  in ROC
              
              
              -
              
              
              (600,000
              )
              
              -Repayment
                  of policy loan
              
              
              -
              
              
              -
              
              
              (1,014,523
              )Proceeds
                  from liabilities assumed in business acquisition
              
              
              -
              
              
              -
              
              
              3,029Net
                  cash used in investing activities
              
              
              -
              
              
              (6,100,000
              )
              
              (1,321,494
              )**Financing
                  Activities**Cash
                  dividends paid
              
              
              (1,302,827
              )
              
              (1,055,761
              )
              
              (914,010
              )Payment
                  of registration costs and other acquisition costs
              
              
              -
              
              
              -
              
              
              (326,615
              )Repayment
                  of note payable
              
              
              -
              
              
              (240,000
              )
              
              -Proceeds
                  from subordinated debenture
              
              
              -
              
              
              -
              
              
              10,310,000Proceeds
                  from exercise of stock options
              
              
              -
              
              
              -
              
              
              36,595Purchase
                  of treasury stock
              
              
              (610,260
              )
              
              -
              
              
              -Net
                  cash provided by (used in) financing activities
              
              
              (1,913,087
              )
              
              (1,295,761
              )
              
              9,105,970**Net
                  Change in Cash and Cash Equivalents**
              
              
              (2,013,517
              )
              
              (8,488,095
              )
              
              15,264,179**Cash
                  and Cash Equivalents at Beginning of Year**
              
              
              7,102,859
              
              
              15,590,954
              
              
              326,775**Cash
                  and Cash Equivalents at End of Year**
              
              $
              5,089,342
              
              $
              7,102,859
              
              $
              15,590,954**Supplemental
                  cash flow information**Common
                  stock and payable issued for net assets in acquisition
              
              $
              -
              
              $
              -
              
              $
              11,826,130
  F46
  **Rurban
        Financial Corp.**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2007 and 2006**
  **Note 25:**
              **Segment
                  Information**
  The
        reportable segments are determined by the products and services offered,
        primarily distinguished between banking and data processing operations. Loans,
        investments, deposits and financial services provide the revenues in the
        banking
        segment and include the accounts of State Bank, RFCBC and RFS, which provides
        trust and financial services to customers nationwide.
  Service
        fees provide the revenues in the data processing operation and include the
        accounts of RDSI and DCM. Other segments include the accounts of the Company,
        Rurban Financial Corp., which provides management services to its subsidiaries.
  The
        accounting policies used are the same as those described in the summary of
        significant accounting policies. Segment performance is evaluated using net
        interest income, other revenue, operating expense and net income. Goodwill
        is
        allocated. Income taxes and indirect expenses are allocated on revenue.
        Transactions among segments are made at fair value. The Company allocates
        certain expenses to other segments. Information reported internally for
        performance assessment follows. Reclassifications have been made to the 2005
        and
        2006 tables to conform to the 2007 table, which include the consolidation
        of The
        State Bank and Trust Company, RFCBC and RFS into Banking, RDSI and DCM into
        Data
        Processing, and Rurban Financial Corp. into Other.
  **2007**
              
              **Banking**
              
              **Data Processing**
              
              **Other**
              
              **Total Segments**
              
              **IntersegmentElimination**
              
              **ConsolidatedTotals****Income
                  Statement Information:**Net
                  interest income (expense)
              
              $
              16,859,523
              
              $
              (268,014
              )
              $
              (1,804,197
              )
              $
              14,787,312
              
              $
              —
              
              $
              14,787,312Other
                  revenue-external customers
              
              
              7,434,979
              
              
              19,347,947
              
              
              78,473
              
              
              26,861,399
              
              
              —
              
              
              26,861,399Other
                  revenue-other segments
              
              
              551,681
              
              
              1,539,854
              
              
              1,314,861
              
              
              3,406,396
              
              
              (3,406,396
              )
              
              —Net
                  interest income and other revenue
              
              
              24,846,183
              
              
              20,619,787
              
              
              (410,863
              )
              
              45,055,107
              
              
              (3,406,396
              )
              
              41,648,711Noninterest
                  expense
              
              
              20,338,289
              
              
              16,872,968
              
              
              2,831,749
              
              
              40,043,006
              
              
              (3,406,396
              )
              
              36,636,610Significant
                  noncash items:Depreciation
                  and amortization
              
              
              999,594
              
              
              2,837,758
              
              
              132,570
              
              
              3,969,922
              
              
              —
              
              
              3,969,922Provision
                  for loan losses
              
              
              521,306
              
              
              —
              
              
              —
              
              
              521,306
              
              
              —
              
              
              521,306Income
                  tax expense
              
              
              1,076,183
              
              
              1,273,919
              
              
              (1,115,942
              )
              
              1,234,160
              
              
              —
              
              
              1,234,160Segment
                  profit
              
              $
              2,910,405
              
              $
              2,472,900
              
              $
              (2,126,670
              )
              $
              3,256,635
              
              
              —
              
              $
              3,256,635**Balance
                  sheet information:**Total
                  assets
              
              $
              541,717,871
              
              $
              20,419,865
              
              $
              81,439,870
              
              $
              643,577,606
              
              $
              (82,363,608
              )
              $
              561,213,998Goodwill
                  and intangibles
              
              
              11,691,382
              
              
              7,384,464
              
              
              —
              
              
              19,075,846
              
              
              —
              
              
              19,075,846Premises
                  and equipment expenditures
              
              $
              3,599,534
              
              $
              2,303,330
              
              $
              137,071
              
              $
              6,039,935
              
              
              —
              
              $
              6,039,935
  F47
  **Rurban
        Financial Corp.**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2007 and 2006**
 
 **200****6**
              
              **Banking**
              
              **DataProcessing**
              
              **Other**
              
              **Total Segments**
              
              **Intersegment Elimination**
              
              **Consolidated Totals****Income
                  Statement Information:**Net
                  interest income (expense)
              
              $
              17,082,702
              
              $
              (264,336
              )
              $
              (1,783,924
              )
              $
              15,034,442
              
              $
              —
              
              $
              15,034,442Other
                  revenue-external customers
              
              
              8,211,356
              
              
              15,011,143
              
              
              532,822
              
              
              23,755,321
              
              
              —
              
              
              23,755,321Other
                  revenue-other segments
              
              
              3,316,764
              
              
              1,551,655
              
              
              997,260
              
              
              5,865,679
              
              
              (5,865,679
              )
              
              —Net
                  interest income and other revenue
              
              
              28,610,822
              
              
              16,298,462
              
              
              (253,842
              )
              
              44,655,442
              
              
              (5,865,679
              )
              
              38,789,763Noninterest
                  expense
              
              
              24,943,476
              
              
              13,142,661
              
              
              2,683,109
              
              
              40,769,246
              
              
              (5,865,679
              )
              
              34,903,567Significant
                  noncash items:Depreciation
                  and amortization
              
              
              933,518
              
              
              2,505,065
              
              
              106,382
              
              
              3,544,965
              
              
              —
              
              
              3,544,965Provision
                  for loan losses
              
              
              177,838
              
              
              —
              
              
              —
              
              
              177,838
              
              
              —
              
              
              177,838Income
                  tax expense
              
              
              886,940
              
              
              1,072,973
              
              
              (1,011,797
              )
              
              948,116
              
              
              —
              
              
              948,116Segment
                  profit
              
              $
              2,602,568
              
              $
              2,082,828
              
              $
              (1,925,154
              )
              $
              2,760,242
              
              
              —
              
              $
              2,760,242**Balance
                  sheet information:**Total
                  assets
              
              $
              539,310,887
              
              $
              20,306,144
              
              $
              79,188,059
              
              $
              638,805,090
              
              $
              (82,797,837
              )
              $
              556,007,253Goodwill
                  and intangibles
              
              
              12,154,202
              
              
              7,378,838
              
              
              —
              
              
              19,533,040
              
              
              —
              
              
              19,533,040Premises
                  and equipment expenditures
              
              $
              3,079,231
              
              $
              5,820,264
              
              $
              142,769
              
              $
              9,042,264
              
              
              —
              
              $
              9,042,264**2005**
              
              
              **Banking**
              
              
              **Data Processing**
              
              
              **Other**
              
              
              **Total Segments**
              
              
              **Intersegment Elimination**
              
              
              **Consolidated Totals****Income
                  Statement Information:**Net
                  interest income (expense)
              
              $
              13,650,366
              
              $
              (234,741
              )
              $
              (1,362,041
              )
              $
              12,053,584
              
              $
              —
              
              $
              12,053,584Other
                  revenue-external customers
              
              
              5,556,794
              
              
              12,708,407
              
              
              72,901
              
              
              18,338,102
              
              
              —
              
              
              18,338,102Other
                  revenue-other segments
              
              
              910,827
              
              
              1,354,001
              
              
              870,005
              
              
              3,134,833
              
              
              (3,134,833
              )
              
              —Net
                  interest income and other revenue
              
              
              20,117,987
              
              
              13,827,667
              
              
              (419,135
              )
              
              33,526,519
              
              
              (3,134,833
              )
              
              30,391,686Non-interest
                  expense
              
              
              18,682,524
              
              
              11,164,340
              
              
              2,341,809
              
              
              32,188,673
              
              
              (3,134,833
              )
              
              29,053,840Significant
                  noncash items:Depreciation
                  and amortization
              
              
              731,976
              
              
              2,315,621
              
              
              61,096
              
              
              3,108,693
              
              
              —
              
              
              3,108,693Provision
                  for loan losses
              
              
              583,402
              
              
              —
              
              
              —
              
              
              583,402
              
              
              —
              
              
              583,402Income
                  tax expense
              
              
              82,395
              
              
              945,869
              
              
              (946,911
              )
              
              81,353
              
              
              —
              
              
              81,353Segment
                  profit
              
              $
              769,666
              
              $
              1,717,458
              
              $
              (1,814,033
              )
              $
              673,091
              
              
              —
              
              $
              673,091**Balance
                  sheet information:**Total
                  assets
              
              $
              521,117,797
              
              $
              10,204,699
              
              $
              82,155,101
              
              $
              613,477,597
              
              $
              (82,935,321
              )
              $
              530,542,276Goodwill
                  and intangibles
              
              
              12,659,706
              
              
              —
              
              
              —
              
              
              12,659,706
              
              
              —
              
              
              12,659,706Premises
                  and equipment expenditures
              
              $
              688,124
              
              $
              2,252,592
              
              $
              157,818
              
              $
              3,098,534
              
              
              —
              
              $
              3,098,534
  F48
 
 **Rurban
        Financial Corp.**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2007 and 2006**
 
 **NOTE 26:**
              **Quarterly
                  Financial Information
                  (Unaudited)**
  The
        following tables summarize selected quarterly results of operations for 2007
        and
        2006.
 
 **December
                  31, 2007**
              
              **March**
              
              **June**
              
              **September**
              
              **December**Interest
                  income
              
              $
              8,016,828
              
              $
              8,234,039
              
              $
              8,350,340
              
              $
              8,408,422Interest
                  expense
              
              
              4,423,552
              
              
              4,483,901
              
              
              4,689,389
              
              
              4,625,477Net
                  interest income
              
              
              3,593,276
              
              
              3,750,158
              
              
              3,660,591
              
              
              3,783,287Provision
                  for loan losses
              
              
              92,640
              
              
              145,594
              
              
              140,409
              
              
              142,663Noninterest
                  income
              
              
              6,738,742
              
              
              6,507,700
              
              
              6,782,842
              
              
              6,832,115Noninterest
                  expense
              
              
              9,300,253
              
              
              9,065,370
              
              
              9,106,400
              
              
              9,164,587Income
                  tax expense
              
              
              236,672
              
              
              261,829
              
              
              333,384
              
              
              402,275Net
                  income
              
              
              702,453
              
              
              785,045
              
              
              863,601
              
              
              905,536Earnings
                  per shareBasis
              
              
              0.14
              
              
              0.16
              
              
              0.17
              
              
              0.18Diluted
              
              
              0.14
              
              
              0.16
              
              
              0.17
              
              
              0.18Dividends
                  per share
              
              
              0.06
              
              
              0.06
              
              
              0.07
              
              
              0.07**December
                  31, 2006**
              
              
              **March**
              
              
              **June**
              
              
              **September**
              
              
              **December**Interest
                  income
              
              $
              7,047,089
              
              $
              7,542,688
              
              $
              8,157,473
              
              $
              8,223,168Interest
                  expense
              
              
              3,183,033
              
              
              3,712,225
              
              
              4,401,939
              
              
              4,638,779Net
                  interest income
              
              
              3,864,056
              
              
              3,830,463
              
              
              3,755,534
              
              
              3,584,389Provision
                  for loanlosses
              
              
              246,000
              
              
              56,321
              
              
              35,000
              
              
              (159,483
              )Noninterest
                  income
              
              
              5,008,299
              
              
              5,268,252
              
              
              5,902,756
              
              
              7,576,014Noninterest
                  expense
              
              
              7,950,031
              
              
              8,079,875
              
              
              8,514,656
              
              
              10,359,005Income
                  tax expense
              
              
              153,779
              
              
              248,996
              
              
              294,893
              
              
              250,448Net
                  income
              
              
              522,545
              
              
              713,523
              
              
              813,741
              
              
              710,433Earnings
                  per shareBasis
              
              
              0.10
              
              
              0.14
              
              
              0.16
              
              
              0.14Diluted
              
              
              0.10
              
              
              0.14
              
              
              0.16
              
              
              0.14Dividends
                  per share
              
              
              0.05
              
              
              0.05
              
              
              0.05
              
              
              0.06
  F49
  **Rurban
        Financial Corp.**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2007 and 2006**
  During
        the fourth quarter of 2006, the Company restructured its balance sheet and
        recorded losses of $718,000, recorded losses of $283,000 associated with
        the
        merger, recorded income of $890,000 on the recovery of bond losses and sold
        the
        credit card portfolio for a gain of $740,000. The merger charges relate to
        the
        Company’s plan at the time to merge its Banking Group, consisting of The State
        Bank and Trust Company, The Exchange Bank, Rurban Operations Company and
        Reliance Financials Services, N.A., into The State Bank and Trust Company
        charter. The Company completed the merger on March 24, 2007.
  F50
  **Rurban
        Financial Corp.**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2007 and 2006**
  **NOTE 27:**
              **BUSINESS
                  ACQUISITIONS**
  **Diverse
        Computer Marketers**
  On
        September 2, 2006, Rurbanc Data Services, Inc (“RDSI”), the bank data processing
        subsidiary of Rurban Financial Corp. (“Rurban”), completed its acquisition of
        Diverse Computer Marketers, Inc., a Michigan corporation, and a related Indiana
        corporation, DCM Indiana, Inc. Rurban subsequently merged DCM Indiana, Inc.
        into
        Diverse Computer Marketers, Inc. (“DCM”). DCM now operates as a separate
        subsidiary of RDSI. As a result of this acquisition, the Company will have
        an
        opportunity to grow its item processing business.
 
 Under
        the
        terms of the Stock Purchase Agreement, RDSI acquired all of the outstanding
        stock of the DCM Companies from their shareholders for an aggregate purchase
        price of $5.0 million. An additional $250,000 was payable to the
        shareholders contingent upon the continuation of profitable growth over the
        first year of combined operations. The final payment of $266,559 was made
        in
        2007. The entire purchase price was paid in cash. The results of DCM’s
        operations have been included in Rurban’s consolidated statement of income from
        the date of acquisition.
 
 The
        following tables summarize the estimated fair values of the net assets acquired
        and the computation of the purchase price and goodwill related to the
        acquisitions.
 
 Assets:Cash
              
              $
              118,137Accounts
                  receivable
              
              
              419,151Premises
                  and equipment
              
              
              207,644Goodwill
              
              
              4,795,144Other
                  intangibles
              
              
              2,652,000Other
                  assets
              
              
              158,241Total
                  Assets
              
              
              8,350,317Liabilities:Accounts
                  payable
              
              
              1,188,289Borrowings
              
              
              1,284,427Other
                  liabilities
              
              
              886,510Total
                  Liabilities
              
              
              3,359,226Net
                  assets acquired
              
              $
              4,991,091
  F51
 
 **Rurban
        Financial Corp.**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2007 and 2006**
  The
        signficant intangible assets acquired include the customer related intangible
        of
        $2,389,000, the Trademark of $180,000 and the non-compete agreements of $83,000,
        which have useful lives of 180, 36 and 36 months, respectively, and will
        be
        amortized using the straight-line method. The $4.8 million of goodwill was
        assigned entirely to the data processing unit and is not expected to be
        deductible for tax purposes. This analysis is based upon an initial third
        party
        opinion and is subject to change for up to twelve months.
 
 Under
        terms of the Stock Purchase Agreement, and immediately prior to the closing,
        the
        disaster recovery services portion of the DCM business was spun-off. As DCM
        records did not include separate financial information for the disaster recovery
        services, historical financial information for the purchased portion of the
        business is not available. Therefore, pro forma information that discloses
        the
        results of operations as though the business combination had been completed
        at
        the beginning of the period is not included.
  F52
  **RURBAN
        FINANCIAL CORP.**
 
 **ANNUAL
        REPORT ON FORM 10-K**
 **FOR
        FISCAL YEAR ENDED DECEMBER 31, 2007**
  INDEX
        TO
        EXHIBITS
 
 Exhibit No.
              
              Description
              
              Location2.1
              
              Stock
                  Purchase Agreement, dated as of May 19, 2006, by and among Rurbanc
                  Data
                  Services, Inc., Lance Thompson and Robert Church
              
              Incorporated
                  herein by reference to Exhibit 2.1 to the Company’s Current Report on Form
                  8-K filed May 24, 2006 (File No. 0-13507).3.1
              
              Amended
                  Articles of Registrant, as amended
              
              Incorporated
                  herein by reference to Exhibit 3(a)(i) to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1989 (File No.
                  0-13507).3.2
              
              Certificate
                  of Amendment to the Amended Articles of Rurban Financial
                  Corp.
              
              Incorporated
                  herein by reference to Exhibit 3(b) to the Company’s Annual Report on Form
                  10-K for the fiscal year ended December 31, 1993 (File No.
                  0-13507).3.3
              
              Certificate
                  of Amendment to the Amended Articles of Rurban Financial
                  Corp.
              
              Incorporated
                  herein by reference to Exhibit 3(c) to the Company’s Annual Report on Form
                  10-K for the fiscal year ended December 31, 1997 (File No.
                  0-13507).3.4
              
              Amended
                  and Restated Articles of Rurban Financial Corp.*[Note:
                  filed for purposes of SEC reporting compliance only - this document
                  has
                  not been filed with the Ohio Secretary of State.]*
              
              Incorporated
                  herein by reference to Exhibit 3(d) to the Company’s Annual Report on Form
                  10-K for the fiscal year ended December 31, 1997 (File No.
                  0-13507).3.5
              
              Amended
                  and Restated Regulations of Rurban Financial Corp.
              
              Incorporated
                  herein by reference to Exhibit 3.5 to the Company’s Annual Report on Form
                  10-K for the fiscal year ended December 31, 2005 (File No.
                  0-13507).4.1
              
              Indenture,
                  dated as of September 15, 2005, by and between Rurban Financial
                  Corp. and
                  Wilmington Trust Company, as Debenture Trustee, relating to Floating
                  Rate
                  Junior Subordinated Deferrable Interest Debentures
              
              Incorporated
                  herein by reference to Exhibit 4.1 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended September 30, 2005 (File
                  No.
                  0-13507).4.2
              
              Amended
                  and Restated Declaration of Trust of Rurban Statutory Trust II,
                  dated as
                  of September 15, 2005
              
              Incorporated
                  herein by reference to Exhibit 4.2 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended September 30, 2005 (File
                  No.
                  0-13507).
  60.
 
 Exhibit No.
              
              Description
              
              Location4.3
              
              Guarantee
                  Agreement, dated as of September 15, 2005, by and between Rurban
                  Financial
                  Corp. and Wilmington Trust Company, as Guarantee Trustee
              
              Incorporated
                  herein by reference to Exhibit 4.3 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended September 30, 2005 (File
                  No.
                  0-13507).4.4
              
              Agreement
                  to furnish instruments and agreements defining rights of holders
                  of
                  long-term debt
              
              Filed
                  herewith.10.1*
              
              Rurban
                  Financial Corp. Stock Option Plan
              
              Incorporated
                  herein by reference to Exhibit 10(u) to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1996 (File
                  No. 0-13507).10.2*
              
              Rurban
                  Financial Corp. Plan to Allow Directors to Elect to Defer
                  Compensation
              
              Incorporated
                  herein by reference to Exhibit 10(v) to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1996 (File
                  No.  0-13507).10.3*
              
              Form
                  of Non-Qualified Stock Option Agreement with Five-Year Vesting
                  under
                  Rurban Financial Corp. Stock Option Plan
              
              Incorporated
                  herein by reference to Exhibit 10(w) to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1997 (File No.
                  0-13507).10.4*
              
              Form
                  of Non-Qualified Stock Option Agreement with Vesting After One
                  Year of
                  Employment under Rurban Financial Corp. Stock Option Plan
              
              Incorporated
                  herein by reference to Exhibit 10(a) to the Company’s Current Report on
                  Form 8-K filed March 21, 2005 (File No. 0-13507).10.5*
              
              Form
                  of Incentive Stock Option Agreement with Five-Year Vesting under
                  Rurban
                  Financial Corp. Stock Option Plan
              
              Incorporated
                  herein by reference to Exhibit 10(x) to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1997 (File No.
                  0-13507).10.6*
              
              Form
                  of Incentive Stock Option Agreement with Vesting After One Year
                  of
                  Employment under Rurban Financial Corp. Stock Option Plan
              
              Incorporated
                  herein by reference to Exhibit 10(c) to the Company’s Current Report on
                  Form 8-K filed March 21, 2005 (File No. 0-13507).10.7*
              
              Form
                  of Stock Appreciation Rights under Rurban Financial Corp. Stock
                  Option
                  Plan
              
              Incorporated
                  herein by reference to Exhibit 10(b) to the Company’s Current Report on
                  Form 8-K filed March 21, 2005 (File No.
                  0-13507).
  61.
 
 Exhibit No.
              
              Description
              
              Location10.8*
              
              Employees’
                  Stock Ownership and Savings Plan of Rurban Financial Corp.
              
              Incorporated
                  herein by reference to Exhibit 10(y) to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1999 (File No.
                  0-13507).10.9*
              
              Rurban
                  Financial Corp. Employee Stock Purchase Plan
              
              Incorporated
                  herein by reference to Exhibit 10(z) to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 2002 (File
                  No. 0-13507).10.10*
              
              Employment
                  Agreement, executed March 6, 2006 and effective as of March 1,
                  2006, by
                  and between Rurban Financial Corp. and Kenneth A. Joyce
              
              Incorporated
                  herein by reference to Exhibit 10.10 to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 2005 (File No.
                  0-13507).10.11*
              
              First
                  Amendment to Employment Agreement, executed May 19, 2006 and effective
                  as
                  of March 1, 2006, by and between Rurban Financial Corp. and Kenneth
                  A.
                  Joyce
              
              Incorporated
                  herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended June 30, 2006 (File No.
                  0-13507).10.12*
              
              Supplemental
                  Executive Retirement Plan Agreement, executed March 13, 2006 and
                  effective
                  as of March 1, 2006, by and between Rurban Financial Corp. and
                  Kenneth A.
                  Joyce
              
              Incorporated
                  herein by reference to Exhibit 10.11 to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 2005 (File No.
                  0-13507).10.13*
              
              Schedule
                  identifying other substantially identical Supplemental Executive
                  Retirement Plan Agreements with executive officers of Rurban Financial
                  Corp. and its subsidiaries
              
              Incorporated
                  herein by reference to Exhibit 10.12 to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 2005 (File No.
                  0-13507).10.14*
              
              First
                  Amendment to Supplemental Executive Retirement Plan Agreement,
                  executed
                  May 16, 2006 and effective as of March 1, 2006, by and between
                  Rurban
                  Financial Corp. and Kenneth A. Joyce
              
              Incorporated
                  herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended June 30, 2006 (File No.
                  0-13507).10.15*
              
              Schedule
                  identifying other substantially identical First Amendments to Supplemental
                  Executive Retirement Plan Agreements with executive officers of
                  Rurban
                  Financial Corp. and its subsidiaries
              
              Incorporated
                  herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended June 30, 2006 (File No.
                  0-13507).
  62.
 
 Exhibit No.
              
              Description
              
              Location10.16*
              
              Change
                  in Control Agreement, executed March 9, 2006 and effective as of
                  March 1,
                  2006, by and between Rurban Financial Corp. and Duane L.
                  Sinn
              
              Incorporated
                  herein by reference to Exhibit 10.13 to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 2005 (File No.
                  0-13507).10.17*
              
              Schedule
                  identifying other substantially identical Change in Control Agreements
                  with executive officers of Rurban Financial Corp. and its
                  subsidiaries
              
              Incorporated
                  herein by reference to Exhibit 10.14 to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 2005 (File No.
                  0-13507).10.18*
              
              First
                  Amendment to Change in Control Agreement, executed May 17, 2006
                  and
                  effective as of March 1, 2006, by and between Rurban Financial
                  Corp. and
                  Duane L. Sinn
              
              Incorporated
                  herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended June 30, 2006 (File No.
                  0-13507).10.19*
              
              Schedule
                  identifying other substantially identical First Amendments to Change
                  in
                  Control Agreements with executive officers of Rurban Financial
                  Corp. and
                  its subsidiaries
              
              Incorporated
                  herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on
                  Form 10-Q for the quarterly period ended June 30, 2006 (File No.
                  0-13507).10.20*
              
              Non-Qualified
                  Deferred Compensation Plan effective as of January 1, 2007
              
              Incorprated
                  herein by reference to Exhibit 10.20 to the Company’s Annual Report on
                  Form 10-K for the fiscal year ended December 31, 2006 (File No.
                  0-13507)11
              
              Statement
                  re: Computation of Per Share Earnings
              
              Included
                  in Note 1 of the Notes to Consolidated Financial Statements of
                  Registrant in the financial statements portion of this Annual Report
                  on
                  Form 10-K.21
              
              Subsidiaries
                  of Registrant
              
              Filed
                  herewith.23
              
              Consent
                  of BKD, LLP
              
              Filed
                  herewith.24
              
              Power
                  of Attorney of Directors and Executive Officers
              
              Included
                  on signature page of this Annual Report on Form 10-K31.1
              
              Rule
                  13a-14(a)/15d-14(a) Certification - Principal Executive
                  Officer
              
              Filed
                  herewith.31.2
              
              Rule
                  13a-14(a)/15d-14(a) Certification - Principal Financial
                  Officer
              
              Filed
                  herewith.32.1
              
              Section
                  1350 Certification - Principal Executive Officer and Principal
                  Financial
                  Officer
              
              Filed
                  herewith.
  *
        Management contract or compensatory plan or arrangement.
  63.