##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT of 1934
 For the fiscal year ended December 31, 2006
 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.
  Ohio
    
    34-1395608(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)401 Clinton Street, Defiance, Ohio
    
    43512(Address of principal executive offices)
    
    (Zip Code)
 (419) 783-8950
  None
  Title of each class  Common Shares, Without Par Value
 o þ
 o þ
 þ o
 o
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



RURBAN FINANCIAL CORP.
 2006 ANNUAL REPORT ON FORM 10-K
 TABLE OF CONTENTS
 PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersSupplemental Item: Executive Officers of the RegistrantPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Qualitative and Quantitative Disclosures about Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers of the Registrant and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSignatures and CertificationsEX-2.4EX-10.20EX-21EX-23.1EX-31.1EX-31.2EX-32.1
  2.




---



##### Table of Contents



PART I
 
 Item 1. Business
 General
   General Description of Holding Company Group
 State Bank
   Exchange Bank
   RFS
  3.




---



##### Table of Contents



RMC
   RFCBC
  RDSI
   DCM
   RST I
  RST II
  4.




---



##### Table of Contents



ROC
   Recent Developments
  Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Competition
     Supervision and Regulation
  Regulation of Bank Holding Companies and Their Subsidiaries in General
  5.




---



##### Table of Contents



Dividends
  6.




---



##### Table of Contents



Transactions with Affiliates, Directors, Executive Officers and Shareholders
   
    
    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.
   Regulatory Capital
  7.




---



##### Table of Contents



Deposit Insurance Assessments
  
    
    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.
  Monetary Policy and Economic Conditions
  8.




---



##### Table of Contents



Holding Company Activities
    Sarbanes-Oxley Act of 2002 and Related Rules Affecting Corporate Governance
     9.




---



##### Table of Contents



www.rurbanfinancial.net www.rurbanfinancial.net
 Effect of Environmental Regulation
  Available Information
  Statistical Financial Information Regarding the Company
 Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations Form 10-K.
 10.




---



##### Table of Contents



I.
    
    DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIALThe 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:
 2006
    
    
    2005
    
    
    2004Average
    
    
    
    
    
    
    Avg
    
    
    Average
    
    
    
    
    
    
    Avg
    
    
    Average
    
    
    
    
    
    
    AvgBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(dollars in thousands)Assets:SecuritiesTaxable
    
    $
    119,394
    
    
    $
    5,212
    
    
    
    4.37
    %
    
    $
    108,306
    
    
    $
    4,337
    
    
    
    4.00
    %
    
    $
    100,517
    
    
    $
    3,568
    
    
    
    3.55
    %Non-taxable (1)
    
    
    14,497
    
    
    
    848
    
    
    
    5.85
    %
    
    
    7,248
    
    
    
    403
    
    
    
    5.56
    %
    
    
    4,426
    
    
    
    249
    
    
    
    5.63
    %Federal funds sold and other
    
    
    2,259
    
    
    
    177
    
    
    
    7.84
    %
    
    
    4,881
    
    
    
    160
    
    
    
    3.28
    %
    
    
    4,557
    
    
    
    79
    
    
    
    1.73
    %Loans, net (2)(3)
    
    
    354,400
    
    
    
    25,055
    
    
    
    7.07
    %
    
    
    268,158
    
    
    
    16,659
    
    
    
    6.21
    %
    
    
    271,503
    
    
    
    16,217
    
    
    
    5.97
    %Total earning assets
    
    
    490,550
    
    
    
    31,292
    
    
    
    6.38
    %
    
    
    388,593
    
    
    
    21,559
    
    
    
    5.55
    %
    
    
    381,003
    
    
    
    20,113
    
    
    
    5.28
    %Cash and due from banks
    
    
    11,827
    
    
    
    
    
    
    
    
    
    
    
    9,653
    
    
    
    
    
    
    
    
    
    
    
    12,179Allowance for loan losses
    
    
    (4,495
    )
    
    
    
    
    
    
    
    
    
    
    (4,885
    )
    
    
    
    
    
    
    
    
    
    
    (7,123
    )Premises and equipment
    
    
    19,387
    
    
    
    
    
    
    
    
    
    
    
    15,570
    
    
    
    
    
    
    
    
    
    
    
    12,168Other assets
    
    
    36,825
    
    
    
    
    
    
    
    
    
    
    
    24,435
    
    
    
    
    
    
    
    
    
    
    
    19,574Total assets
    
    $
    554,094
    
    
    
    
    
    
    
    
    
    
    $
    433,366
    
    
    
    
    
    
    
    
    
    
    $
    417,801Liabilities:DepositsSavings and interest-bearing
    
    $
    127,179
    
    
    $
    1,656
    
    
    
    1.30
    %
    
    $
    102,453
    
    
    $
    716
    
    
    
    0.70
    %
    
    $
    94,051
    
    
    $
    350
    
    
    
    0.37
    %Time deposits
    
    
    228,193
    
    
    
    9,366
    
    
    
    4.10
    %
    
    
    167,140
    
    
    
    4,935
    
    
    
    2.95
    %
    
    
    162,865
    
    
    
    4,205
    
    
    
    2.58
    %Short-term borrowings
    
    
    21,965
    
    
    
    946
    
    
    
    4.30
    %
    
    
    6,854
    
    
    
    165
    
    
    
    2.41
    %
    
    
    4,613
    
    
    
    53
    
    
    
    1.15
    %Advances from FHLB
    
    
    41,353
    
    
    
    2,106
    
    
    
    5.09
    %
    
    
    46,376
    
    
    
    2,040
    
    
    
    4.40
    %
    
    
    48,814
    
    
    
    1,877
    
    
    
    3.85
    %Trust preferred securities
    
    
    20,620
    
    
    
    1,787
    
    
    
    8.67
    %
    
    
    14,434
    
    
    
    1,275
    
    
    
    8.83
    %
    
    
    10,248
    
    
    
    1,119
    
    
    
    10.92
    %Other borrowed funds
    
    
    939
    
    
    
    75
    
    
    
    7.98
    %
    
    
    2,247
    
    
    
    237
    
    
    
    10.55
    %
    
    
    5,039
    
    
    
    347
    
    
    
    6.89
    %Total interest-bearing liabilities
    
    
    440,249
    
    
    
    15,936
    
    
    
    3.62
    %
    
    
    339,504
    
    
    
    9,368
    
    
    
    2.76
    %
    
    
    325,630
    
    
    
    7,951
    
    
    
    2.44
    %Demand deposits
    
    
    47,176
    
    
    
    
    
    
    
    
    
    
    
    36,675
    
    
    
    
    
    
    
    
    
    
    
    38,134Other liabilities
    
    
    12,168
    
    
    
    
    
    
    
    
    
    
    
    6,105
    
    
    
    
    
    
    
    
    
    
    
    4,758Total liabilities
    
    
    499,593
    
    
    
    
    
    
    
    
    
    
    
    382,284
    
    
    
    
    
    
    
    
    
    
    
    368,522Shareholders equity
    
    
    54,501
    
    
    
    
    
    
    
    
    
    
    
    51,083
    
    
    
    
    
    
    
    
    
    
    
    49,279Total liabilities and shareholders
equity
    
    $
    554,094
    
    
    
    
    
    
    
    
    
    
    $
    433,367
    
    
    
    
    
    
    
    
    
    
    $
    417,801Net interest income (tax equivalent
basis)
    
    
    
    
    
    $
    15,356
    
    
    
    
    
    
    
    
    
    
    $
    12,191
    
    
    
    
    
    
    
    
    
    
    $
    12,162Net interest income as a percent
of average interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.13
    %
    
    
    
    
    
    
    
    
    
    
    3.14
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %
 
 1)
    
    Interest is computed on a tax equivalent basis using a 34% statutory tax rate. The tax
equivalent adjustment was $288, $137 and $84 in 2006, 2005 and 2004, respectively.(2)
    
    Non-accruing 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 $33 in 2006. 11.




---



##### Table of Contents



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 2006, 2005 and 2004.
 TotalVariance
    
    
    Variance Attributable To2006/2005
    
    
    Volume
    
    
    Rate(dollars in thousands)Interest incomeSecuritiesTaxable
    
    $
    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
    
    
    
    3,089Interest expenseDepositsSavings 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
    
    
    
    3,457Net interest income
    
    $
    3,165
    
    
    $
    3,533
    
    
    $
    (368
    )
 12.




---



##### Table of Contents



I.
    
    DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL(Continued)
 TotalVariance
    
    
    Variance Attributable To2005/2004
    
    
    Volume
    
    
    Rate(dollars in thousands)Interest incomeSecuritiesTaxable
    
    $
    769
    
    
    $
    290
    
    
    $
    479Non-taxable
    
    
    154
    
    
    
    157
    
    
    
    (3
    )Federal funds sold
    
    
    81
    
    
    
    6
    
    
    
    75Loans, net of unearned income
and deferred loan fees
    
    
    442
    
    
    
    (202
    )
    
    
    6441,446
    
    
    
    251
    
    
    
    1,195Interest expenseDepositsSavings and interest-bearing
demand deposits
    
    
    366
    
    
    
    34
    
    
    
    332Time deposits
    
    
    730
    
    
    
    113
    
    
    
    617Short-term borrowings
    
    
    112
    
    
    
    34
    
    
    
    78Advances from FHLB
    
    
    163
    
    
    
    (97
    )
    
    
    260Trust preferred securities
    
    
    156
    
    
    
    397
    
    
    
    (241
    )Other borrowed funds
    
    
    (110
    )
    
    
    (244
    )
    
    
    1341,417
    
    
    
    237
    
    
    
    1,180Net interest income
    
    $
    29
    
    
    $
    14
    
    
    $
    15
 13.




---



##### Table of Contents



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:
 2006
    
    
    2005
    
    
    2004(dollars in thousands)U.S. Treasury and government agencies
    
    $
    58,123
    
    
    $
    89,671
    
    
    $
    63,647State and political subdivisions
    
    
    15,465
    
    
    
    12,694
    
    
    
    4,699Mortgage-backed securities
    
    
    28,770
    
    
    
    35,660
    
    
    
    40,316Other securities
    
    
    81
    
    
    
    1305
    
    
    
    50Marketable equity securities
    
    
    23
    
    
    
    23
    
    
    
    8Total
    
    $
    102,462
    
    
    $
    139,353
    
    
    $
    108,720
 B.
    
    The maturity distribution and weighted average yield of securities available for sale
at December 31, 2006 are as follows:
 MaturingAfter One Year
    
    
    After Five YearsWithin
    
    
    But Within
    
    
    But Within
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Ten Years
    
    
    Ten YearsU.S. Treasury and Government agencies
    
    $
    1,499
    
    
    $
    9,493
    
    
    $
    47,131
    
    
    $
    Obligations of states and political
subdivisions
    
    
    345
    
    
    
    661
    
    
    
    2,267
    
    
    
    12,191Mortgage-backed securities
    
    
    120
    
    
    
    3,712
    
    
    
    4,921
    
    
    
    20,018Other securities
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    2,014
    
    
    $
    13,866
    
    
    $
    54,319
    
    
    $
    32,209Marketable equity securities with no
maturity
    
    $
    54Weighted average yield (1)
    
    
    4.78
    %
    
    
    3.97
    %
    
    
    4.79
    %
    
    
    4.58
    %
 
 (1)
    
    Yields are not presented on a tax-equivalent basis. 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.
 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,
2006.
 14.




---



##### Table of Contents



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:
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(dollars in thousands)Commercial and
Agricultural
    
    $
    225,827
    
    
    $
    187,667
    
    
    $
    188,532
    
    
    $
    188,532
    
    
    $
    321,726Real estate
mortgage
    
    
    94,389
    
    
    
    89,086
    
    
    
    63,828
    
    
    
    46,718
    
    
    
    84,432Consumer
loans to
individuals
    
    
    49,314
    
    
    
    48,877
    
    
    
    31,949
    
    
    
    37,310
    
    
    
    60,139Leases
    
    
    857
    
    
    
    1,661
    
    
    
    5,128
    
    
    
    11,775
    
    
    
    21,509Total loans
    
    $
    370,387
    
    
    $
    327,291
    
    
    $
    264,750
    
    
    $
    284,335
    
    
    $
    487,806Real estate
mortgage
loans held
for resale
    
    $
    390
    
    
    $
    224
    
    
    $
    113
    
    
    $
    219
    
    
    $
    63,536
 Concentrations of Credit Risk
 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, 2006 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.)
 Commercial andMaturing
    
    AgriculturalWithin one year
    
    $
    56,685After one year but within five years
    
    
    64,538After five years
    
    
    104,604Total commercial and agricultural loans
    
    $
    225,827
 15.




---



##### Table of Contents



III.
    
    LOAN PORTFOLIO(Continued)
 Commercial and Agricultural
 Interest SensitivityFixed
    
    
    VariableRate
    
    
    Rate
    
    
    Total(dollars in thousands)Due after one year but
within five years
    
    $
    18,423
    
    
    $
    46,115
    
    
    $
    64,538Due after five years
    
    
    5,951
    
    
    
    98,653
    
    
    
    104,604Total
    
    $
    24,374
    
    
    $
    144,768
    
    
    $
    169,142
 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.
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(dollars in thousands)(a
    )
    
    Loans accounted for on a
non-accrual basis
    
    $
    3,828
    
    
    $
    6,270
    
    
    $
    13,384
    
    
    $
    18,352
    
    
    $
    18,259(b
    )
    
    Accruing loans which
are contractually
past due 90 days or
more as to interest
or principal payments
    
    
    
    
    
    
    5
    
    
    
    11
    
    
    
    
    
    
    
    476(c
    )
    
    Loans not included in (a)
which are Troubled
Debt Restructurings as
defined by Statement of
Financial Accounting
Standards No. 15
    
    
    166
    
    
    
    825
    
    
    
    1,570
    
    
    
    5,058
    
    
    
    Total non-performing
loans
    
    $
    3,994
    
    
    $
    7,100
    
    
    $
    14,965
    
    
    $
    23,410
    
    
    $
    18,735(d
    )
    
    Other loans defined as
impaired
    
    $
    82
    
    
    $
    3,283
    
    
    $
    4,671
    
    
    $
    9,099
    
    
    $
    3,166
 2006(In thousands)Cash basis interest income recognized on impaired loans outstanding at December 31, 2006
    
    $
    51Interest income actually recorded on impaired loans and included in net income for the period
    
    
    472006 unrecorded interest income on non-accrual loans
    
    
    207
 16.




---



##### Table of Contents



III. LOAN PORTFOLIO
  1.
    
    Discussion of the Non-accrual PolicyThe 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 LoansAs of December 31, 2006, in addition to the $3,994,000 of loans reported under
Item III.C.1. above (which amount includes all loans classified by management as
doubtful or loss), there were approximately $3,991,000 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.
 17.




---



##### Table of Contents



III. LOAN PORTFOLIO
 3.
    
    Foreign OutstandingsNone4.
    
    Loan ConcentrationsAt December 31, 2006, loans outstanding related to agricultural operations or
collateralized by agricultural real estate aggregated approximately $44,683,000.
 D.
    
    Other Interest-Bearing AssetsThere were no other interest-bearing assets as of December 31, 2006 which would be
required to be disclosed under Item III.C.1 or Item III.C.2. if such assets were
loans.
 18.




---



##### Table of Contents



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:
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(dollars in thousands)LoansLoans outstanding at end of period
    
    $
    370,102
    
    
    $
    327,048
    
    
    $
    264,481
    
    
    $
    284,104
    
    
    $
    487,475Average loans outstanding during period
    
    $
    354,726
    
    
    $
    268,158
    
    
    $
    271,503
    
    
    $
    385,153
    
    
    $
    627,685Allowance for loan lossesBalance at beginning of period
    
    $
    4,700
    
    
    $
    4,899
    
    
    $
    10,181
    
    
    $
    17,694
    
    
    $
    9,239Balance, Exchange
    
    
    
    
    
    
    910Balance, Oakwood
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,427Loans charged-offCommercial and agricultural loans
    
    
    (1,277
    )
    
    
    (2,760
    )
    
    
    (6,599
    )
    
    
    (10,089
    )
    
    
    (19,584
    )Real estate mortgage
    
    
    (100
    )
    
    
    (133
    )
    
    
    (12
    )
    
    
    (195
    )
    
    
    496
    )Leases
    
    
    
    
    
    
    (208
    )
    
    
    (70
    )
    
    
    (225
    )
    
    
    (173
    )Consumer loans to individuals
    
    
    (440
    )
    
    
    (308
    )
    
    
    (308
    )
    
    
    (1,345
    )
    
    
    (1,520
    )(1,817
    )
    
    
    (3,409
    )
    
    
    (6,989
    )
    
    
    (11,854
    )
    
    
    (21,773
    )Recoveries of loans previously charged-offCommercial and agricultural loans
    
    
    419
    
    
    
    1,566
    
    
    
    1,835
    
    
    
    2,497
    
    
    
    892Real estate mortgage
    
    
    75
    
    
    
    2
    
    
    
    52
    
    
    
    86
    
    
    
    28Leases
    
    
    
    
    
    
    4
    
    
    
    31
    
    
    
    109
    
    
    
    27Consumer loans to individuals
    
    
    162
    
    
    
    145
    
    
    
    188
    
    
    
    447
    
    
    
    324656
    
    
    
    1,717
    
    
    
    2,106
    
    
    
    3,139
    
    
    
    1,271Net loans charged-off
    
    
    (1,160
    )
    
    
    (1,692
    )
    
    
    (4,883
    )
    
    
    (8,715
    )
    
    
    (20,502
    )Provision for loan losses
    
    
    178
    
    
    
    583
    
    
    
    (399
    )
    
    
    1,202
    
    
    
    27,530Balance at end of period
    
    $
    3,717
    
    
    $
    4,700
    
    
    $
    4,899
    
    
    $
    10,181
    
    
    $
    17,694Ratio of net charge-offs during the period to
average loans outstanding during the period
    
    
    0.33
    %
    
    
    0.63
    %
    
    
    1.80
    %
    
    
    2.26
    %
    
    
    3.27
    %
 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.
 19.




---



##### Table of Contents



IV. SUMMARY OF LOAN LOSS EXPERIENCE
 B.
    
    The following schedule provides a breakdown of the allowance for loan losses
allocated by type of loan and related ratios.
 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, 2006
    
    
    December 31, 2005
    
    
    December 31, 2004
    
    
    December 31, 2003
    
    
    December 31, 2002(dollars in thousands)Commercial and agricultural
    
    $
    2,945
    
    
    
    79.2
    %
    
    $
    3,728
    
    
    
    57.3
    %
    
    $
    4,502
    
    
    
    61.9
    %
    
    $
    9,649
    
    
    
    66.3
    %
    
    $
    16,518
    
    
    
    66.0
    %Residential first mortgage
    
    
    317
    
    
    
    8.5
    %
    
    
    291
    
    
    
    27.2
    %
    
    
    141
    
    
    
    24.1
    %
    
    
    75
    
    
    
    16.4
    %
    
    
    204
    
    
    
    17.3
    %Consumer loans to individuals
    
    
    455
    
    
    
    12.3
    %
    
    
    681
    
    
    
    15.5
    %
    
    
    256
    
    
    
    14.0
    %
    
    
    457
    
    
    
    17.3
    %
    
    
    972
    
    
    
    16.7
    %$
    3,717
    
    
    
    100.0
    %
    
    $
    4,700
    
    
    
    100.0
    %
    
    $
    4,899
    
    
    
    100.0
    %
    
    $
    10,181
    
    
    
    100.0
    %
    
    $
    17,694
    
    
    
    100.0
    %
  20.




---



##### Table of Contents



V.
    
    DEPOSITSThe average amount of deposits and average rates paid are summarized as follows for the years
ended December 31:
 2006
    
    
    2005
    
    
    2004Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Savings and interest-bearing demand deposits
    
    $
    127,179
    
    
    
    1.30
    %
    
    $
    102,453
    
    
    
    0.70
    %
    
    $
    94,051
    
    
    
    0.37
    %Time deposits
    
    
    228,193
    
    
    
    4.10
    
    
    
    167,140
    
    
    
    2.95
    
    
    
    162,865
    
    
    
    2.58Demand deposits (non-interest-bearing)
    
    
    47,176
    
    
    
    
    
    
    
    36,675
    
    
    
    
    
    
    
    38,134
    
    
    
    $
    402,548
    
    
    
    
    
    
    $
    306,268
    
    
    
    
    
    
    $
    295,050
 Maturities of time certificates of deposit and other time deposits of $100,000 or more outstanding at December 31,
2006 are summarized as follows:
 AmountThree months or less
    
    $
    23,936Over three months and through six months
    
    
    14,401Over six months and through twelve months
    
    
    19,560Over twelve months
    
    
    16,633Total
    
    $
    74,530
 21.




---



##### Table of Contents



VI.
    
    RETURN ON EQUITY AND ASSETSThe ratio of net income to average shareholders equity and average total assets and certain
other ratios are as follows for periods ended December 31:
 2006
    
    
    2005
    
    
    2004(dollars in thousands)Average total assets
    
    $
    554,094
    
    
    $
    433,367
    
    
    $
    417,801Average shareholders equity
    
    $
    54,501
    
    
    $
    51,083
    
    
    $
    49,279Net income
    
    $
    2,760
    
    
    $
    673
    
    
    $
    2,734Cash dividends declared
    
    $
    1,056
    
    
    $
    914
    
    
    $
    Return on average total assets
    
    
    0.50
    %
    
    
    0.16
    %
    
    
    0.65
    %Return on average share-
holders equity
    
    
    5.06
    %
    
    
    1.32
    %
    
    
    5.55
    %Dividend payout ratio (1)
    
    
    38.25
    
    
    
    133.33
    
    
    
    N/AAverage shareholders equity
to average total assets
    
    
    9.84
    %
    
    
    11.79
    %
    
    
    11.79
    %
 
 (1)
    
    Cash dividends declared divided by net income. VII.
    
    SHORT-TERM BORROWINGSThe Company did have short-term borrowings during 2005 and 2004, 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 2006:
 2006(dollars in thousands)Amount outstanding at end of year
    
    $
    32,271Weighted average interest rate at end of year
    
    
    4.43
    %Maximum amount outstanding at any month end
    
    $
    32,584Average amount outstanding during the year
    
    $
    21,965Weighted average interest rate during the year
    
    
    4.30
    %
 22.




---



##### Table of Contents



Item 1A. Risk Factors
 Cautionary Statement Regarding Forward-Looking Information
     Changes in interest rates could have a material adverse effect on our financial condition and
results of operations.
  We operate in an extremely competitive market, and our business will suffer if we are unable to
compete effectively.
 23.




---



##### Table of Contents



If our actual loan losses exceed our allowance for loan losses, our net income will decrease.
  Our earnings are significantly affected by federal regulation and the monetary policies of the
federal government and its agencies.
  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.
   24.




---



##### Table of Contents



Our success depends upon our ability to attract and retain key personnel.
  We depend upon the accuracy and completeness of information about customers.
  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.
  RDSI relies on the continued functioning of its data center and the integrity of the data it
processes.
  25.




---



##### Table of Contents



A limited trading market exists for our common shares which could lead to price volatility.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties.
   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 RFS.
(Banking and Other)2.
    
    State Bank owns a drive through branch office located at 510 Third Street,
Defiance, Ohio. (Banking)3.
    
    State Bank owns a full service branch office located on Main Street in Ney,
Ohio. (Banking)4.
    
    State Bank owns a full service branch office located at 1600 North Clinton
Street, Defiance, Ohio. (Banking)5.
    
    State Bank owns a drive through 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 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)
 26.




---



##### Table of Contents



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)
  1.
    
    Exchanges main office is owned and located at 235 Main Street, Luckey,
Ohio. (Banking)2.
    
    Exchange owns a full service branch office located at 311 Main Street,
Walbridge, Ohio. (Banking)3.
    
    Exchange owns a full service branch office located at 610 East South
Boundary, Perrysburg, Ohio. (Banking)4.
    
    Exchange owns a full service branch office located at 6401 Monroe Street,
Sylvania, Ohio. (Banking)
    
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  27.




---



##### Table of Contents



Supplemental Item: Executive Officers of the Registrant
  Position(s) Held with the Company andName
    
    Age
    
    its Subsidiaries and Principal Occupation(s)Kenneth A. Joyce
    
    
    59
    
    
    President and Chief Executive Officer of the
Company since August 2002; Chairman and Chief
Executive Officer of RDSI since October 1997;
Director of State Bank since 2002; Director of
RDSI since 1997; Director of RFCBC since 2004;
Chairman and Director of RFS since 2005;
Director of Exchange since January 2006; and;
Chairman, CEO and Director of ROC since January
2006; Director of Promedica  Defiance Regional
Medical Center and Promedica Physicians Group;
Chairman of Promedica  Defiance Regional
Medical Center Finance Committee; Director and
President of the Board of United Way
(non-profit); Director of Kettenring Country
Club.Henry R. Thiemann
    
    
    60
    
    
    President and Chief Executive Officer of
Exchange Bank since December 31, 2005; 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 Exchange since
January 2006; Director of RFCBC since 2004;
President of RMC since August 1999; Director of
RMC since August 1999; Director of ROC since
January 2006; Director of RFS since 2006;
Director of RDSI since December 2006.Duane L. Sinn
    
    
    36
    
    
    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 and; Treasurer
and Director of ROC since January 2006; and
Director of RFS since 2006.Mark A. Klein
    
    
    52
    
    
    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;
Director of ROC since January 2006 and Director
of RFS since 2006.
 28.




---



##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Shares and Related Shareholder Matters
  Per Share
    
    Per ShareBid Prices
    
    DividendsHigh
    
    Low
    
    Declared2006First Quarter
    
    $
    13.00
    
    
    $
    11.16
    
    
    $
    .050Second Quarter
    
    
    12.44
    
    
    
    10.90
    
    
    
    .050Third Quarter
    
    
    12.00
    
    
    
    10.82
    
    
    
    .050Fourth Quarter
    
    
    11.79
    
    
    
    10.50
    
    
    
    .0602005First Quarter
    
    $
    14.49
    
    
    $
    13.50
    
    
    $
    .050Second Quarter
    
    
    14.47
    
    
    
    12.65
    
    
    
    .050Third Quarter
    
    
    13.50
    
    
    
    12.50
    
    
    
    .050Fourth Quarter
    
    
    13.00
    
    
    
    11.50
    
    
    
    .050
    Share Performance
  29.




---



##### Table of Contents



Rurban Financial Corp.
 
 Period EndingIndex
    
    
    12/31/01
    
    
    
    12/31/02
    
    
    
    12/31/03
    
    
    
    12/31/04
    
    
    
    12/31/05
    
    
    
    12/31/06Rurban Financial Corp.
    
    
    
    100.00
    
    
    
    
    69.18
    
    
    
    
    103.25
    
    
    
    
    103.62
    
    
    
    
    89.14
    
    
    
    
    82.94NASDAQ Composite
    
    
    
    100.00
    
    
    
    
    68.76
    
    
    
    
    103.67
    
    
    
    
    113.16
    
    
    
    
    115.57
    
    
    
    
    127.58NASDAQ Bank Index
    
    
    
    100.00
    
    
    
    
    106.95
    
    
    
    
    142.29
    
    
    
    
    161.73
    
    
    
    
    158.61
    
    
    
    
    180.53
 Source : SNL Financial LC, Charlottesville, VA
    
    (434) 977-1600© 2007
    
    www.snl.com
 30.




---



##### Table of Contents



Item 6. Selected Financial Data.
 SUMMARY OF SELECTED FINANCIAL DATA
 FINANCIAL HIGHLIGHTS
 Year Ended December 312006
    
    2005
    
    2004
    
    2003
    
    2002EARNINGSInterest income
    
    $
    30,971
    
    
    $
    21,422
    
    
    $
    20,028
    
    
    $
    27,774
    
    
    $
    48,591Interest expense
    
    
    15,936
    
    
    
    9,368
    
    
    
    7,951
    
    
    
    13,972
    
    
    
    24,813Net interest income
    
    
    15,035
    
    
    
    12,054
    
    
    
    12,077
    
    
    
    13,802
    
    
    
    23,778Provision (credit) for loan losses
    
    
    178
    
    
    
    583
    
    
    
    (399
    )
    
    
    1,202
    
    
    
    27,531Noninterest income
    
    
    23,755
    
    
    
    18,338
    
    
    
    17,376
    
    
    
    35,169
    
    
    
    14,121Noninterest expense
    
    
    34,904
    
    
    
    29,054
    
    
    
    26,009
    
    
    
    29,160
    
    
    
    30,820Provision (credit)
for income taxes
    
    
    948
    
    
    
    81
    
    
    
    1,109
    
    
    
    6,303
    
    
    
    (7,044
    )Net income (loss)
    
    
    2,760
    
    
    
    673
    
    
    
    2,734
    
    
    
    12,305
    
    
    
    (13,408
    )PER SHARE DATABasic earnings
    
    $
    0.55
    
    
    $
    0.15
    
    
    $
    0.60
    
    
    $
    2.71
    
    
    
    ($2.95
    )Diluted earnings
    
    
    0.55
    
    
    
    0.15
    
    
    
    0.60
    
    
    
    2.70
    
    
    
    (2.95
    )Cash dividends declared
    
    
    0.21
    
    
    
    0.20
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    0.26AVERAGE BALANCESAverage shareholders equity
    
    $
    54,501
    
    
    $
    51,083
    
    
    $
    49,279
    
    
    $
    44,599
    
    
    $
    44,674Average total assets
    
    
    554,095
    
    
    
    433,366
    
    
    
    417,801
    
    
    
    549,371
    
    
    
    791,091RATIOSReturn on average
shareholders equity
    
    
    5.06
    %
    
    
    1.32
    %
    
    
    5.55
    %
    
    
    27.59
    %
    
    
    (30.01
    )%Return on average total assets
    
    
    0.50
    
    
    
    0.16
    
    
    
    0.65
    
    
    
    2.24
    
    
    
    (1.69
    )Cash dividend payout
ratio (cash dividends
divided by net income)
    
    
    38.25
    
    
    
    133.33
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAverage shareholders
equity to average total
assets
    
    
    9.84
    
    
    
    11.79
    
    
    
    11.79
    
    
    
    8.12
    
    
    
    5.65PERIOD END TOTALSTotal assets
    
    $
    556,007
    
    
    $
    530,542
    
    
    $
    415,349
    
    
    $
    435,312
    
    
    $
    742,317Total investments and
fed funds sold
    
    
    111,562
    
    
    
    139,353
    
    
    
    108,720
    
    
    
    117,699
    
    
    
    129,109Total loans and leases
    
    
    370,102
    
    
    
    327,048
    
    
    
    264,481
    
    
    
    284,104
    
    
    
    487,475Loans held for sale
    
    
    390
    
    
    
    224
    
    
    
    113
    
    
    
    219
    
    
    
    63,536Total deposits
    
    
    414,555
    
    
    
    384,838
    
    
    
    279,624
    
    
    
    317,475
    
    
    
    636,035Notes Payable
    
    
    2,589
    
    
    
    939
    
    
    
    3,080
    
    
    
    10,328
    
    
    
    6,000Advances from FHLB
    
    
    21,000
    
    
    
    45,500
    
    
    
    56,000
    
    
    
    39,000
    
    
    
    47,850Trust Preferred Securities
    
    
    20,620
    
    
    
    20,620
    
    
    
    10,310
    
    
    
    10,000
    
    
    
    10,000Shareholders equity
    
    
    56,955
    
    
    
    54,451
    
    
    
    50,306
    
    
    
    48,383
    
    
    
    36,382Shareholders equity
per share
    
    $
    11.33
    
    
    $
    10.83
    
    
    $
    11.01
    
    
    $
    10.60
    
    
    $
    7.97
 31.




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
   Critical Accounting Policies
  Allowance for Loan Losses 
   32.




---



##### Table of Contents



Goodwill and Other Intangibles -
 Impact of Accounting Changes
 Accounting for
Servicing of Financial Assets: an amendment of FASB Statement No. 140
 Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109
 Fair Value
Measurements
 33.




---



##### Table of Contents



34.




---



##### Table of Contents



Acquisitions
 Diverse Computer Marketers
    Assets:Cash
    
    $
    118,137Accounts receivable
    
    
    419,151Premises and equipment
    
    
    207,644Goodwill and other intangibles
    
    
    7,447,144Other 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
   35.




---



##### Table of Contents



EARNINGS SUMMARY
   CHANGES IN FINANCIAL CONDITION
  36.




---



##### Table of Contents



Significant Events of 2006
       Significant Events of 2005
     37.




---



##### Table of Contents



38.




---



##### Table of Contents



RESULTS OF OPERATIONS
 Year Ended
    
    Year EndedDecember 31,
    
    December 31,2006
    
    2005
    
    % Change
    
    2005
    
    2004
    
    % Change(dollars in thousands except per share data)Total Assets
    
    $
    556,007
    
    
    $
    530,542
    
    
    
    +5
    %
    
    $
    530,542
    
    
    $
    415,349
    
    
    
    +28
    %Total Securities
    
    
    102,462
    
    
    
    139,353
    
    
    
    -27
    %
    
    
    139,353
    
    
    
    108,720
    
    
    
    +28
    %Loans Held for Sale
    
    
    390
    
    
    
    224
    
    
    
    N/A
    
    
    
    224
    
    
    
    113
    
    
    
    N/ALoans (Net)
    
    
    366,384
    
    
    
    322,348
    
    
    
    +14
    %
    
    
    322,348
    
    
    
    259,582
    
    
    
    +24
    %Allowance for Loan Losses
    
    
    3,717
    
    
    
    4,700
    
    
    
    -21
    %
    
    
    4,700
    
    
    
    4,899
    
    
    
    -4
    %Total Deposits
    
    $
    414,555
    
    
    $
    384,838
    
    
    
    +8
    %
    
    $
    384,838
    
    
    $
    279,624
    
    
    
    +38
    %Total Revenues (Net)
    
    $
    38,790
    
    
    $
    30,392
    
    
    
    +28
    %
    
    $
    30,392
    
    
    $
    29,454
    
    
    
    +3
    %Net Interest Income
    
    
    15,034
    
    
    
    12,054
    
    
    
    +25
    %
    
    
    12,054
    
    
    
    12,077
    
    
    
    Loan Loss Provision (credit)
    
    
    178
    
    
    
    583
    
    
    
    -70
    %
    
    
    583
    
    
    
    (399
    )
    
    
    N/ANoninterest Income
    
    
    23,755
    
    
    
    18,338
    
    
    
    +13
    %
    
    
    18,338
    
    
    
    17,376
    
    
    
    +6
    %Non-interest Expense
    
    
    34,904
    
    
    
    29,054
    
    
    
    +20
    %
    
    
    29,054
    
    
    
    26,010
    
    
    
    +12
    %Net Income
    
    
    2,760
    
    
    
    673
    
    
    
    +310
    %
    
    
    673
    
    
    
    2,734
    
    
    
    -75
    %Basic Earnings per Share
    
    $
    0.55
    
    
    $
    0.15
    
    
    
    N/A
    
    
    $
    0.15
    
    
    $
    0.60
    
    
    
    N/ADiluted Earnings per Share
    
    $
    0.55
    
    
    $
    0.15
    
    
    
    N/A
    
    
    $
    0.15
    
    
    $
    0.60
    
    
    
    N/A
 Net Interest Income
 Year Ended
    
    Year EndedDecember 31,
    
    December 31,2006
    
    2005
    
    % Change
    
    2005
    
    2004
    % Change(dollars in thousands)Net Interest Income
    
    $
    15,034
    
    
    $
    12,054
    
    
    
    
    
    
    $
    12,054
    
    
    $
    12,077
    
    
    
    -12
    %
 Net interest income
 Net interest income
 39.




---



##### Table of Contents



Loan Loss Provision
 The Provision for Loan Losses
 The provision for loan losses
 Non-interest Income
 Year Ended
    
    Year EndedDecember 31,
    
    December 31,2006
    
    2005
    
    % Change
    2005
    
    2004
    
    % Change(dollars in thousands)Total Non-interest Income
    
    $
    23,755
    
    
    $
    18,338
    
    
    
    +30
    %
    
    $
    18,338
    
    
    $
    17,376
    
    
    
    +6
    %- Data Service Fees
    
    $
    15,011
    
    
    $
    12,708
    
    
    
    +18
    %
    
    $
    12,708
    
    
    $
    11,164
    
    
    
    +14
    %- Trust Fees
    
    $
    3,192
    
    
    $
    3,134
    
    
    
    +2
    %
    
    $
    3,134
    
    
    $
    3,042
    
    
    
    +3
    %- Deposit Service Fees
    
    $
    2,161
    
    
    $
    1,860
    
    
    
    +16
    %
    
    $
    1,860
    
    
    $
    1,985
    
    
    
    -6
    %- Gains on Sale of Loans
    
    $
    1,249
    
    
    $
    (437
    )
    
    
    N/A
    
    
    $
    (437
    )
    
    $
    41
    
    
    
    N/A- Investment Securities
Recoveries
    
    $
    889
    
    
    $
    
    
    
    
    N/A
    
    
    $
    
    
    
    $
    
    
    
    
    N/A- Gains (losses) on Sale
of Securities
    
    $
    (495
    )
    
    $
    25
    
    
    
    N/A
    
    
    $
    25
    
    
    $
    241
    
    
    
    -89
    %- Other
    
    $
    1,748
    
    
    $
    1,048
    
    
    
    +67
    %
    
    $
    1,048
    
    
    $
    904
    
    
    
    +16
    %
 Total non-interest income
 Total non-interest income
 40.




---



##### Table of Contents



Rurbanc Data Services, Inc. (RDSI)
 Year Ended
    
    Year EndedDecember 31,
    
    December 31,2006
    
    2005
    
    %Change
    
    2005
    
    2004
    
    % Change(Dollars in thousands)Data Service Fees
    
    $
    15,011
    
    
    $
    12,708
    
    
    
    +18
    %
    
    $
    12,708
    
    
    $
    11,164
    
    
    
    +14
    %
 Data service fees
 th
 RDSI and DCM provide
 Non-interest Expense
 Year Ended
    
    Year EndedDecember 31,
    
    December 31,2006
    
    2005
    
    %Change
    
    2005
    
    2004
    
    % Change(dollars in thousands)Total Non-interest Expense
    
    $
    34,904
    
    
    $
    29,054
    
    
    
    +20
    %
    
    $
    29,054
    
    
    $
    26,010
    
    
    
    +12
    %- Salaries & Employee Benefits
    
    $
    16,584
    
    
    $
    13,519
    
    
    
    +23
    %
    
    $
    13,519
    
    
    $
    12,993
    
    
    
    +4
    %- Professional Fees
    
    $
    2,396
    
    
    $
    2,730
    
    
    
    -12
    %
    
    $
    2,730
    
    
    $
    2,253
    
    
    
    +21
    %- All Other
    
    $
    15,924
    
    
    $
    12,805
    
    
    
    +24
    %
    
    $
    12,805
    
    
    $
    10,764
    
    
    
    +19
    %
 Non-interest expense
 41.




---



##### Table of Contents



Non-interest expense
 FINANCIAL CONDITION
 Investments
   Loans
 Period Ended% of
    
    
    
    
    
    
    % of
    
    
    %
    
    
    
    
    
    
    % of
    
    
    %12/31/06
    
    
    Total
    
    
    12/31/05
    
    
    Total
    
    
    Inc/(Dec)
    
    
    12/31/04
    
    
    Total
    
    
    Inc/(Dec)(dollars in thousands)Commercial
    
    $
    71,641
    
    
    
    19
    %
    
    $
    79,359
    
    
    
    24
    %
    
    
    (10
    )%
    
    $
    58,499
    
    
    
    22
    %
    
    
    36
    %Commercial R.E.
    
    
    109,503
    
    
    
    30
    %
    
    
    68,072
    
    
    
    21
    %
    
    
    61
    %
    
    
    64,107
    
    
    
    24
    %
    
    
    6
    %Agricultural
    
    
    44,683
    
    
    
    12
    %
    
    
    40,236
    
    
    
    12
    %
    
    
    11
    %
    
    
    41,240
    
    
    
    16
    %
    
    
    (2
    )%Residential
    
    
    94,389
    
    
    
    25
    %
    
    
    89,086
    
    
    
    27
    %
    
    
    6
    %
    
    
    63,828
    
    
    
    24
    %
    
    
    40
    %Consumer
    
    
    49,314
    
    
    
    13
    %
    
    
    48,877
    
    
    
    15
    %
    
    
    1
    %
    
    
    31,949
    
    
    
    12
    %
    
    
    53
    %Leases
    
    
    857
    
    
    
    1
    %
    
    
    1,661
    
    
    
    1
    %
    
    
    (48
    )%
    
    
    5,127
    
    
    
    2
    %
    
    
    (68
    )%Loans
    
    $
    370,387
    
    
    
    
    
    
    $
    327,291
    
    
    
    
    
    
    
    13
    %
    
    $
    264,750
    
    
    
    
    
    
    
    24
    %Loans held for sale
    
    
    390
    
    
    
    
    
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    113Total
    
    $
    370,777
    
    
    
    
    
    
    $
    327,515
    
    
    
    
    
    
    
    
    
    
    $
    264,863
 42.




---



##### Table of Contents



Loans
  43.




---



##### Table of Contents



Period Ended December 31(dollars in millions)Change in Dollars/
    
    
    
    
    
    Change in Dollars/12/31/2006
    
    12/31/2005
    
    Percentages
    
    12/31/2004
    
    percentagesAsset QualityNon-performing loans
    
    $
    3.80
    
    
    $
    6.30
    
    
    
    ($2.50
    )
    
    $
    14.40
    
    
    ($
    8.10
    )Non-performing assets
    
    $
    3.90
    
    
    $
    8.90
    
    
    
    ($5.00
    )
    
    $
    15.40
    
    
    ($
    6.50
    )Non-performing
assets/total
assets
    
    
    0.70
    %
    
    
    1.67
    %
    
    
    -0.97
    %
    
    
    3.71
    %
    
    
    -2.04
    %Net charge-offs
    
    $
    1.20
    
    
    $
    0.70
    
    
    
    ($0.50
    )
    
    $
    4.90
    
    
    ($
    3.20
    )Net
charge-offs/total
loans
    
    
    0.31
    %
    
    
    0.52
    %
    
    
    -0.21
    %
    
    
    1.81
    %
    
    
    -1.29
    %Loan loss provision
(credit)
    
    $
    0.20
    
    
    $
    0.60
    
    
    
    ($0.40
    )
    
    ($
    0.40
    )
    
    $
    1.00Allowance for loan
losses
    
    $
    3.70
    
    
    $
    4.70
    
    
    
    ($1.00
    )
    
    $
    4.90
    
    
    ($
    0.20
    )Allowance/loans
    
    
    1.00
    %
    
    
    1.44
    %
    
    
    -0.44
    %
    
    
    1.85
    %
    
    
    -0.41
    %Allowance/non-perform
ing
Loans
    
    
    97
    %
    
    
    75
    %
    
    
    22
    %
    
    
    34
    %
    
    
    41
    %Allowance/non-perform
ing
Assets
    
    
    95
    %
    
    
    53
    %
    
    
    42
    %
    
    
    32
    %
    
    
    21
    %
 Asset quality
 CAPITAL RESOURCES
 Stockholders equity
 Total consolidated regulatory (risk-based) capital
 Planned Purchases of Premises and Equipment
 Management plans to purchase
 44.




---



##### Table of Contents



LIQUIDITY
 Liquidity relates primarily
 The Companys residential first mortgage portfolio
 The cash flow statements
 The Company experienced
 Cash flow from investing activities
 Net cash flow from financing activities
 45.




---



##### Table of Contents



Off-Balance-Sheet Borrowing Arrangements:
    TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
 Payment due by periodLess
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    1  3
    
    3  5
    
    than 5Total
    
    year
    
    years
    
    Years
    
    yearsContractual ObligationsLong-Term Debt Obligations
    
    $
    21,000,000
    
    
    $
    5,500,000
    
    
    $
    4,000,000
    
    
    $
    11,500,000
    
    
    $
    Other Debt Obligations
    
    
    23,209,207
    
    
    
    503,762
    
    
    
    708,763
    
    
    
    1,376,682
    
    
    
    20,620,000Capital Lease Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    2,026,092
    
    
    
    378,894
    
    
    
    673,298
    
    
    
    514,900
    
    
    
    459,000Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term
Liabilities Reflected on
the Registrants Balance
Sheet under GAAP
    
    
    237,722,558
    
    
    
    185,915,277
    
    
    
    47,546,982
    
    
    
    3,535,802
    
    
    
    724,497Total
    
    $
    283,957,857
    
    
    $
    192,297,933
    
    
    $
    52,929,043
    
    
    $
    16,927,384
    
    
    $
    21,803,497
  
 46.




---



##### Table of Contents



ASSET LIABILITY MANAGEMENT
 Asset liability management
 Interest rate risk
 Evaluating a financial institutions exposure
 The Federal Reserve Board
 Financial institutions
 47.




---



##### Table of Contents



There are several ways
 Quantitative Market Risk Disclosure.
 48.




---



##### Table of Contents



Principal/Notional Amount Maturing or Assumed to be Withdrawn In:
(Dollars in thousands)
 2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    TotalRate-sensitive assetsVariable rate loans
    
    $
    58,761
    
    
    $
    8,567
    
    
    $
    4,083
    
    
    $
    2,246
    
    
    $
    1,267
    
    
    $
    2,036
    
    
    $
    76,960Average interest rate
    
    
    8.60
    %
    
    
    8.07
    %
    
    
    7.99
    %
    
    
    7.81
    %
    
    
    7.65
    %
    
    
    7.42
    %
    
    
    8.44
    %Adjustable rate loans
    
    $
    28,401
    
    
    $
    23,505
    
    
    $
    20,545
    
    
    $
    15,891
    
    
    $
    13,791
    
    
    $
    66,704
    
    
    $
    168,837Average interest rate
    
    
    6.81
    %
    
    
    6.80
    %
    
    
    6.71
    %
    
    
    6.73
    %
    
    
    6.63
    %
    
    
    6.74
    %
    
    
    6.74
    %Fixed rate loans
    
    $
    38,154
    
    
    $
    22,836
    
    
    $
    15,062
    
    
    $
    10,012
    
    
    $
    9,563
    
    
    $
    29,067
    
    
    $
    124,695Average interest rate
    
    
    6.51
    %
    
    
    6.61
    %
    
    
    6.44
    %
    
    
    6.30
    %
    
    
    6.39
    %
    
    
    5.60
    %
    
    
    6.28
    %Total loans
    
    $
    125,316
    
    
    $
    54,908
    
    
    $
    39,690
    
    
    $
    28,149
    
    
    $
    24,621
    
    
    $
    97,807
    
    
    $
    370,492Average interest rate
    
    
    7.56
    %
    
    
    6.92
    %
    
    
    6.74
    %
    
    
    6.66
    %
    
    
    6.59
    %
    
    
    6.41
    %
    
    
    6.94
    %Fixed rate investment securities
    
    $
    57,872
    
    
    $
    7,867
    
    
    $
    7,763
    
    
    $
    2,532
    
    
    $
    1,790
    
    
    $
    19,035
    
    
    $
    96,859Average interest rate
    
    
    4.56
    %
    
    
    5.11
    %
    
    
    4.59
    %
    
    
    5.07
    %
    
    
    5.36
    %
    
    
    4.17
    %
    
    
    4.56
    %Variable rate investment securities
    
    $
    2,577
    
    
    $
    1,956
    
    
    $
    1,005
    
    
    $
    347
    
    
    $
    175
    
    
    $
    3,537
    
    
    $
    9,597Average interest rate
    
    
    4.72
    %
    
    
    4.91
    %
    
    
    4.91
    %
    
    
    4.76
    %
    
    
    4.86
    %
    
    
    4.75
    %
    
    
    4.79
    %Federal Funds Sold & Other
    
    $
    9,250
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    9,250Average interest rate
    
    
    4.83
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.83
    %Total rate sensitive assets
    
    $
    195,015
    
    
    $
    64,731
    
    
    $
    48,458
    
    
    $
    31,028
    
    
    $
    26,586
    
    
    $
    120,379
    
    
    $
    486,198Average interest rate
    
    
    6.50
    %
    
    
    6.64
    %
    
    
    6.35
    %
    
    
    6.51
    %
    
    
    6.49
    %
    
    
    6.01
    %
    
    
    6.38
    %Rate sensitive liabilities:Demand  non interest-bearing
    
    $
    9,332
    
    
    $
    9,332
    
    
    $
    9,332
    
    
    $
    9,332
    
    
    $
    9,238
    
    
    $
    0
    
    
    $
    46,566Demand  interest bearing
    
    $
    8,804
    
    
    $
    8,804
    
    
    $
    8,804
    
    
    $
    8,804
    
    
    $
    8,717
    
    
    $
    0
    
    
    $
    43,933Average interest rate
    
    
    1.26
    %
    
    
    1.26
    %
    
    
    1.26
    %
    
    
    1.26
    %
    
    
    1.26
    %
    
    
    0.00
    %
    
    
    1.26
    %Money market accounts
    
    $
    11,839
    
    
    $
    11,838
    
    
    $
    11,838
    
    
    $
    11,838
    
    
    $
    11,722
    
    
    $
    0
    
    
    $
    59,075Average interest rate
    
    
    3.04
    %
    
    
    3.04
    %
    
    
    3.04
    %
    
    
    3.04
    %
    
    
    3.04
    %
    
    
    0.00
    %
    
    
    3.04
    %Savings
    
    $
    5,554
    
    
    $
    5,440
    
    
    $
    5,440
    
    
    $
    5,440
    
    
    $
    5,384
    
    
    $
    0
    
    
    $
    27,258Average interest rate
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.00
    %
    
    
    0.59
    %Certificates of deposit
    
    $
    183,946
    
    
    $
    40,950
    
    
    $
    4,994
    
    
    $
    2,430
    
    
    $
    4,674
    
    
    $
    729
    
    
    $
    237,723Average interest rate
    
    
    4.36
    %
    
    
    4.61
    %
    
    
    3.52
    %
    
    
    4.07
    %
    
    
    4.37
    %
    
    
    3.81
    %
    
    
    4.38
    %Fixed rate FHLB advances
    
    $
    2,000
    
    
    $
    2,000
    
    
    $
    2,000
    
    
    $
    4,000
    
    
    $
    7,500
    
    
    $
    0
    
    
    $
    17,500Average interest rate
    
    
    5.22
    %
    
    
    5.22
    %
    
    
    5.24
    %
    
    
    6.25
    %
    
    
    4.98
    %
    
    
    0.00
    %
    
    
    5.35
    %Variable rate FHLB advances
    
    $
    3,500
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3,500Average interest rate
    
    
    5.34
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    5.34
    %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
    
    $
    200
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    2,389
    
    
    $
    10,310
    
    
    $
    12,899Average interest rate
    
    
    8.75
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    7.75
    %
    
    
    6.67
    %
    
    
    6.90
    %Fed Funds Purchased & Repos
    
    $
    7,271
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    25,000
    
    
    $
    0
    
    
    $
    32,271Average interest rate
    
    
    3.48
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.71
    %
    
    
    0.00
    %
    
    
    4.43
    %Total rate sensitive liabilities
    
    $
    232,446
    
    
    $
    78,364
    
    
    $
    42,408
    
    
    $
    41,844
    
    
    $
    74,624
    
    
    $
    21,349
    
    
    $
    491,035Average interest rate
    
    
    3.91
    %
    
    
    3.18
    %
    
    
    1.85
    %
    
    
    2.03
    %
    
    
    3.27
    %
    
    
    8.47
    %
    
    
    3.56
    %
 49.




---



##### Table of Contents



Principal/Notional Amount Maturing or Assumed to be Withdrawn In:
(Dollars in Thousands)
 First
    
    
    YearsYear
    
    
    2  5
    
    
    Thereafter
    
    
    TotalComparison of 2006 to 2005:Total rate-sensitive assets:At December 31, 2006
    
    $
    195,015
    
    
    $
    170,804
    
    
    $
    120,379
    
    
    $
    486,198At December 31, 2005
    
    
    215,721
    
    
    
    162,891
    
    
    
    92,014
    
    
    
    470,626Increase (decrease)
    
    $
    (20,707
    )
    
    $
    7,913
    
    
    $
    (28,364
    )
    
    $
    15,572Total rate-sensitive
liabilities:At December 31, 2006
    
    $
    232,446
    
    
    $
    237,240
    
    
    $
    21,349
    
    
    $
    491,035At December 31, 2005
    
    
    200,846
    
    
    
    221,267
    
    
    
    40,464
    
    
    
    462,577Increase (decrease)
    
    $
    31,600
    
    
    $
    15,973
    
    
    $
    (19,115
    )
    
    $
    28,458
 The above table
 The Company manages
 Impact of Inflation and Changing Prices
 The majority of assets and liabilities
 Management believes
 50.




---



##### Table of Contents



Forward-Looking Statements
 When used in this filing
 The Company wishes to caution
 The Company does not undertake,
 51.




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  
    
    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 are effective as of the end of
the fiscal year covered by this Annual Report on Form 10-K to ensure that material
information relating to the Company and its consolidated subsidiaries is made known
to them, particularly during the period for which the Companys periodic reports,
including this Annual Report on Form 10-K, are being prepared.
 Changes in Internal Controls Over Financial Reporting
  52.




---



##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant and Corporate
Governance
      
 Item 11. Executive Compensation
  53.




---



##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
   54.




---



##### Table of Contents



Equity Compensation Plan Information
  (a)
    
    (b)
    
    (c)Number of securitiesremaining available forfuture issuance underNumber of securities to
    
    Weighted-average
    
    equity compensationbe issued upon exercise
    
    exercise price of
    
    plans (excludingof outstanding options,
    
    outstanding options,
    
    securities reflected inPlan Category
    
    warrants and rights
    
    warrants and rights
    
    column (a))Equity compensation
plans approved by
security holders
(1)
    
    
    325,274
    
    
    $
    13.41
    
    
    
    115,726Equity compensation
plans not approved
by security holders
(2)
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    325,274
    
    
    $
    13.41
    
    
    
    115,726
 
 (1)
    
    Information relates to the 1997 Rurban Financial Corp. Stock Option Plan.(2)
    
    Information relates to the Rurban Financial Corp. Employee Stock Purchase Plan (the ESPP).
All employees of the Company and its subsidiaries are eligible to participate in the ESPP
immediately following their date of hire. Participants are allowed to deduct from their
compensation for each payroll period an amount to be used to purchase common shares of the Company.
These funds are forwarded to Registrar and Transfer Company at the end of each payroll period and
Registrar and Transfer Company uses the funds to purchase common shares of the Company on the open
market for the participants. There is no limit as to the number of shares to be purchased through
the ESPP and as of December 31, 2006; there were no accrued purchased rights. The ESPP was not
approved by shareholders of the Company. 
 Item 13. Certain Relationships and Related Transactions and Director Independence
  55.




---



##### Table of Contents



Item 14. Principal Accounting Fees
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) (1)
    
    Financial Statements.
 For a list of all financial statements included in this Annual Report on Form 10-K, see
the Index to Financial Statements at page 59.
 (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.
 Exhibits filed with this Annual Report on Form 10-K are attached hereto or incorporated
into this Annual Report on Form 10-K by reference. For a list of such exhibits, see the
Index to Exhibits beginning at page E-1.
 56.




---



##### Table of Contents



SIGNATURES
  RURBAN FINANCIAL CORP.Date:
    
    March 22, 2007
    
    
    
    By:
    
    /s/ Duane L. Sinn

Duane L. Sinn, Executive Vice President and
Chief Financial Officer
 Power of Attorney
   Name
    
    Date
    
    Capacity/s/ Kenneth A, Joyce

Kenneth A. Joyce
    
    March 22, 2007
    
    President, Chief Executive Officer, and Director/s/ Duane L. Sinn
    
    March 22, 2007
    
    Executive Vice President
and Chief FinancialDuane L. Sinn
    
    
    
    Officer/s/ Thomas A. Buis
    
    March 20, 2007
    
    DirectorThomas A. Buis/s/ Thomas M. Callan
    
    March 20, 2007
    
    DirectorThomas M. Callan
 57.




---



##### Table of Contents



Name
    
    Date
    
    Capacity/s/ John R. Compo
    
    March 20, 2007
    
    DirectorJohn R. Compo/s/ John Fahl
    
    March 20, 2007
    
    DirectorJohn Fahl/s/ Robert A. Fawcett, Jr.
    
    March 20, 2007
    
    DirectorRobert A. Fawcett, Jr./s/ Richard L. Hardgrove
    
    March 20, 2007
    
    DirectorRichard L. Hardgrove/s/ Rita A. Kissner
    
    March 20, 2007
    
    DirectorRita A. Kissner/s/ Thomas L. Sauer
    
    March 20, 2007
    
    DirectorThomas L. Sauer/s/ Steven D. VanDemark
    
    March 20, 2007
    
    DirectorSteven D. VanDemark/s/ J. Michael Walz, D.D.S.
    
    March 20, 2007
    
    DirectorJ. Michael Walz, D.D.S
 58.




---



##### Table of Contents



Rurban Financial Corp.
 December 31, 2006 and 2005
 Contents
 Report of Independent Registered Public Accounting Firm
    

    F-1Consolidated Financial StatementsBalance 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-54
 59.




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    
 
 F-1




---



##### Table of Contents



Rurban Financial Corp.
 
 Consolidated Balance Sheets
 December 31
 2006
    
    
    2005AssetsCash and due from banks
    
    $
    13,381,791
    
    
    $
    12,650,839Federal funds sold
    
    
    9,100,000
    
    
    
    Cash and cash equivalents
    
    
    22,481,791
    
    
    
    12,650,839Interest-bearing deposits
    
    
    150,000
    
    
    
    150,000Available-for-sale securities
    
    
    102,462,075
    
    
    
    139,353,329Loans held for sale
    
    
    390,100
    
    
    
    224,000Loans, net of unearned income
    
    
    370,101,809
    
    
    
    327,048,229Allowance for loan losses
    
    
    (3,717,377
    )
    
    
    (4,699,827
    )Premises and equipment
    
    
    15,449,774
    
    
    
    13,346,632Federal Reserve and Federal Home Loan
Bank stock, at cost
    
    
    3,993,450
    
    
    
    3,607,500Foreclosed assets held for sale, net
    
    
    82,397
    
    
    
    2,309,900Interest receivable
    
    
    3,129,774
    
    
    
    3,010,355Goodwill
    
    
    13,674,058
    
    
    
    8,917,373Core deposits and other intangibles
    
    
    5,858,982
    
    
    
    3,742,333Purchased software
    
    
    4,618,691
    
    
    
    3,916,913Cash value of life insurance
    
    
    10,771,843
    
    
    
    10,443,487Other
    
    
    6,559,886
    
    
    
    6,521,213Total assets
    
    $
    556,007,253
    
    
    $
    530,542,276
 See Notes to Consolidated Financial Statements
 F-2




---



##### Table of Contents



Rurban Financial Corp.
 Consolidated Balance Sheets
 December 31
 2006
    
    
    2005Liabilities and Stockholders EquityLiabilitiesDepositsDemand
    
    $
    46,565,554
    
    
    $
    52,073,751Savings, interest checking and
money market
    
    
    130,267,333
    
    
    
    124,206,115Time
    
    
    237,722,558
    
    
    
    208,558,046Total deposits
    
    
    414,555,445
    
    
    
    384,837,912Short-term borrowings
    
    
    32,270,900
    
    
    
    10,680,420Notes payable
    
    
    2,589,207
    
    
    
    938,572Federal Home Loan Bank advances
    
    
    21,000,000
    
    
    
    45,500,000Trust preferred securities
    
    
    20,620,000
    
    
    
    20,620,000Interest payable
    
    
    2,224,413
    
    
    
    1,373,044Deferred income taxes
    
    
    1,610,462
    
    
    
    1,140,001Other liabilities
    
    
    4,181,673
    
    
    
    11,001,679Total liabilities
    
    
    499,052,100
    
    
    
    476,091,628Commitments and Contingent LiabilitiesStockholders EquityCommon stock, $2.50 stated value;
authorized 10,000,000
shares; 5,027,433 shares outstanding
    
    
    12,568,583
    
    
    
    12,568,583Additional paid-in capital
    
    
    14,859,165
    
    
    
    14,835,110Retained earnings
    
    
    30,407,298
    
    
    
    28,702,817Accumulated other comprehensive loss
    
    
    (879,893
    )
    
    
    (1,655,862
    )Total stockholders equity
    
    
    56,955,153
    
    
    
    54,450,648Total liabilities and
stockholders equity
    
    $
    556,007,253
    
    
    $
    530,542,276
 F-3




---



##### Table of Contents



Rurban Financial Corp.
 
 Consolidated Statements of Income
 Years Ended December 31
 2006
    
    
    2005
    
    
    2004Interest IncomeLoansTaxable
    
    $
    24,958,988
    
    
    $
    16,593,703
    
    
    $
    16,151,220Tax-exempt
    
    
    63,356
    
    
    
    64,609
    
    
    
    65,711SecuritiesTaxable
    
    
    5,211,672
    
    
    
    4,337,477
    
    
    
    3,567,819Tax-exempt
    
    
    559,518
    
    
    
    265,959
    
    
    
    164,541Other
    
    
    176,884
    
    
    
    160,240
    
    
    
    78,549Total interest income
    
    
    30,970,418
    
    
    
    21,421,988
    
    
    
    20,027,840Interest ExpenseDeposits
    
    
    11,022,161
    
    
    
    5,651,372
    
    
    
    4,554,093Notes payable
    
    
    923,181
    
    
    
    334,713
    
    
    
    386,450Federal funds purchased
    
    
    97,226
    
    
    
    67,300
    
    
    
    13,896Federal Home Loan Bank advances
    
    
    2,106,385
    
    
    
    2,039,851
    
    
    
    1,877,284Trust preferred securities
    
    
    1,787,023
    
    
    
    1,275,168
    
    
    
    1,118,751Total interest expense
    
    
    15,935,976
    
    
    
    9,368,404
    
    
    
    7,950,474Net Interest Income
    
    
    15,034,442
    
    
    
    12,053,584
    
    
    
    12,077,366Provision (Credit) for Loan Losses
    
    
    177,838
    
    
    
    583,402
    
    
    
    (399,483
    )Net Interest Income After Provision
(Credit) for Loan Losses
    
    
    14,856,604
    
    
    
    11,470,182
    
    
    
    12,476,849Non-interest IncomeData service fees
    
    
    15,011,143
    
    
    
    12,708,407
    
    
    
    11,163,990Trust fees
    
    
    3,192,025
    
    
    
    3,133,550
    
    
    
    3,042,297Customer service fees
    
    
    2,161,153
    
    
    
    1,859,547
    
    
    
    1,985,389Net gains (losses) on loan
sales
    
    
    1,249,148
    
    
    
    (436,971
    )
    
    
    40,603Net realized gains on sales of
available-for-sale securities
    
    
    (494,885
    )
    
    
    25,300
    
    
    
    241,008Investment securities
recoveries
    
    
    889,454
    
    
    
    
    
    
    
    Loan servicing fees
    
    
    419,709
    
    
    
    306,929
    
    
    
    367,753Gain on sale of assets
    
    
    94,198
    
    
    
    
    
    
    
    Other
    
    
    1,233,376
    
    
    
    741,340
    
    
    
    535,336Total non-interest
income
    
    $
    23,755,321
    
    
    $
    18,338,102
    
    
    $
    17,376,376
 See Notes to Consolidated Financial Statements
 F-4




---



##### Table of Contents



Rurban Financial Corp.
 Consolidated Statements of Income
 Years Ended December 31
 2006
    
    
    2005
    
    
    2004Non-interest ExpenseSalaries and employee benefits
    
    $
    16,584,146
    
    
    $
    13,518,749
    
    
    $
    12,993,449Net occupancy expense
    
    
    1,840,864
    
    
    
    1,214,169
    
    
    
    981,700Equipment expense
    
    
    5,850,281
    
    
    
    5,148,458
    
    
    
    4,336,573Data processing fees
    
    
    562,265
    
    
    
    411,465
    
    
    
    371,153Professional fees
    
    
    2,395,863
    
    
    
    2,730,337
    
    
    
    2,252,677Marketing expense
    
    
    669,764
    
    
    
    445,656
    
    
    
    339,968Printing and office supplies
    
    
    619,100
    
    
    
    524,473
    
    
    
    423,030Telephone and communications
    
    
    1,705,261
    
    
    
    1,549,449
    
    
    
    1,323,273Postage and delivery expense
    
    
    735,210
    
    
    
    313,379
    
    
    
    347,494Insurance expense
    
    
    171,363
    
    
    
    218,484
    
    
    
    292,418Employee expense
    
    
    978,832
    
    
    
    994,735
    
    
    
    796,556State, local and other taxes
    
    
    674,280
    
    
    
    572,456
    
    
    
    591,142FHLB prepayment penalties
    
    
    214,886
    
    
    
    
    
    
    
    Other
    
    
    1,901,452
    
    
    
    1,412,030
    
    
    
    960,643Total non-interest expense
    
    
    34,903,567
    
    
    
    29,053,840
    
    
    
    26,010,076Income Before Income Tax
    
    
    3,708,358
    
    
    
    754,444
    
    
    
    3,843,149Provision for Income Taxes
    
    
    948,116
    
    
    
    81,353
    
    
    
    1,108,857Net Income
    
    $
    2,760,242
    
    
    $
    673,091
    
    
    $
    2,734,292Basic Earnings Per Share
    
    $
    0.55
    
    
    $
    0.15
    
    
    $
    0.60Diluted Earnings Per Share
    
    $
    0.55
    
    
    $
    0.15
    
    
    $
    0.60
 F-5




---



##### Table of Contents



Rurban Financial Corp.
 
 Consolidated Statements of Stockholders Equity
 Years Ended December 31
 AccumulatedAdditional
    
    
    
    
    
    
    Unearned
    
    
    OtherCommon
    
    
    Paid-in
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    TreasuryStock
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Stock
    
    
    TotalBalance, January 1, 2004
    
    $
    11,439,255
    
    
    $
    11,009,268
    
    
    $
    26,209,444
    
    
    $
    (163,493
    )
    
    $
    201,082
    
    
    $
    (312,800
    )
    
    $
    48,382,756Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    2,734,292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,734,292Change in unrealized
gain (loss) on
securities available
for sale, net of
reclassification
adjustment and tax
effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,004,271
    )
    
    
    
    
    
    
    (1,004,271
    )Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,730,021Stock options exercised
(158 treasury shares)
    
    
    
    
    
    
    (5,626
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,151
    
    
    
    29,525ESOP shares earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,493
    
    
    
    
    
    
    
    
    
    
    
    163,493Balance, December 31, 2004
    
    
    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
    
    
    
    
    
    
    
    163,493
    
    
    
    
    
    
    
    
    
    
    
    5,201,850Balance, 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
    )Shares issued under
stock option plan
    
    
    
    
    
    
    24,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,055Balance, December 31, 2006
    
    $
    12,568,583
    
    
    $
    14,859,165
    
    
    $
    30,407,298
    
    
    $
    
    
    
    $
    (879,893
    )
    
    $
    
    
    
    $
    56,955,153
 See Notes to Consolidated Financial Statements
 F-6




---



##### Table of Contents



Rurban Financial Corp.
 
 Consolidated Statements of Cash Flows
 Years Ended December 31
 2006
    
    
    2005
    
    
    2004Operating ActivitiesNet income
    
    $
    2,760,242
    
    
    $
    673,091
    
    
    $
    2,734,292Items not requiring (providing) cashDepreciation and amortization
    
    
    3,544,965
    
    
    
    3,108,693
    
    
    
    2,492,661Provision (credit) for loan losses
    
    
    177,838
    
    
    
    583,402
    
    
    
    (399,483
    )Expense of stock option plan
    
    
    24,055
    
    
    
    
    
    
    
    ESOP shares earned
    
    
    
    
    
    
    
    
    
    
    163,493Amortization of premiums and discounts on
securities
    
    
    206,096
    
    
    
    218,221
    
    
    
    469,148Amortization of intangible assets
    
    
    535,351
    
    
    
    131,826
    
    
    
    102,009Deferred income taxes
    
    
    (460,305
    )
    
    
    384,337
    
    
    
    3,344,719FHLB Stock Dividends
    
    
    (385,950
    )
    
    
    (116,800
    )
    
    
    (93,400
    )Proceeds from sale of loans held for sale
    
    
    11,328,770
    
    
    
    5,481,329
    
    
    
    5,709,084Originations of loans held for sale
    
    
    (11,326,566
    )
    
    
    (6,029,400
    )
    
    
    (5,562,628
    )(Gain) loss from sale of loans
    
    
    (1,249,148
    )
    
    
    436,971
    
    
    
    (40,603
    )(Gain) loss on sale of foreclosed assets
    
    
    (113,729
    )
    
    
    214,642
    
    
    
    (33,758
    )(Loss) on sales of fixed assets
    
    
    19,530
    
    
    
    18,817
    
    
    
    Net realized gains on available-for-sale securities
    
    
    494,885
    
    
    
    (25,300
    )
    
    
    (241,008
    )Changes inInterest receivable
    
    
    (119,419
    )
    
    
    (513,229
    )
    
    
    16,280Other assets
    
    
    296,344
    
    
    
    (1,241,089
    )
    
    
    (707,055
    )Interest payable and other liabilities
    
    
    (1,081,796
    )
    
    
    899,500
    
    
    
    (2,256,287
    )Net cash provided by operating activities
    
    
    4,651,163
    
    
    
    4,225,011
    
    
    
    5,697,464Investing ActivitiesNet change in interest-bearing deposits
    
    
    
    
    
    
    
    
    
    
    110,000Purchases of available-for-sale securities
    
    
    (15,375,196
    )
    
    
    (38,373,878
    )
    
    
    (88,396,063
    )Proceeds from maturities of available-for-sale
securities
    
    
    19,506,403
    
    
    
    17,107,354
    
    
    
    62,537,668Proceeds from sales of available-for-sale securities
    
    
    33,263,994
    
    
    
    5,154,173
    
    
    
    23,086,736Proceeds from sale of credit card portfolio and
non-performing loans
    
    
    5,760,603
    
    
    
    
    
    
    
    Net change in loans
    
    
    (49,367,497
    )
    
    
    (4,562,982
    )
    
    
    13,852,870Purchase of premises and equipment
    
    
    (9,042,264
    )
    
    
    (2,975,180
    )
    
    
    (3,652,078
    )Proceeds from sales of premises and equipment
    
    
    2,880,497
    
    
    
    93,216
    
    
    
    Purchase bank owned life insurance
    
    
    
    
    
    
    
    
    
    
    (8,000,000
    )Proceeds from sale of foreclosed assets
    
    
    2,811,928
    
    
    
    1,565,223
    
    
    
    1,592,373Purchase of Federal Home Loan and Federal Reserve Bank
stock
    
    
    
    
    
    
    
    
    
    
    (383,300
    )Cash paid to shareholders of Exchange Bank Acquisition
    
    
    (6,526,646
    )
    
    
    
    
    
    
    Cash paid to shareholders of Diverse Computer
Marketers, Inc. Acquisition
    
    
    (4,872,961
    )
    
    
    
    
    
    
    Proceeds from sale of Federal Home Loan Bank stock
    
    
    
    
    
    
    
    
    
    
    428,600Proceeds from assumption of net liabilities in business
acquisition
    
    
    
    
    
    
    50,928,950
    
    
    
    Net cash provided by (used in) investing
activities
    
    
    (20,961,139
    )
    
    
    28,936,876
    
    
    
    1,176,806
 See Notes to Consolidated Financial Statements
 F-7




---



##### Table of Contents



Rurban Financial Corp.
 Consolidated Statements of Cash Flows
Years Ended December 31
 2006
    
    
    2005
    
    
    2004Financing ActivitiesNet increase (decrease) in demand deposits, money
market, interest checking and savings accounts
    
    $
    553,021
    
    
    $
    (6,940,715
    )
    
    $
    (17,178,739
    )Net increase (decrease) in certificates of deposit
    
    
    29,164,512
    
    
    
    (16,360,869
    )
    
    
    (20,671,696
    )Net increase in securities sold under agreements
to repurchase
    
    
    26,190,480
    
    
    
    2,021,269
    
    
    
    135,397Net increase (decrease) in federal funds purchased
    
    
    (4,600,000
    )
    
    
    (2,900,000
    )
    
    
    7,500,000Proceeds from Federal Home Loan Bank advances
    
    
    47,900,000
    
    
    
    20,500,000
    
    
    
    66,500,000Repayment of Federal Home Loan Bank advances
    
    
    (72,400,000
    )
    
    
    (34,500,000
    )
    
    
    (49,500,000
    )Proceeds from notes payable
    
    
    2,700,000
    
    
    
    
    
    
    
    1,219,863Proceeds from trust preferred
    
    
    
    
    
    
    10,310,000
    
    
    
    Repayment of notes payable
    
    
    (2,311,326
    )
    
    
    (2,381,084
    )
    
    
    (8,467,806
    )Proceeds from stock options exercised
    
    
    
    
    
    
    36,595
    
    
    
    29,525Dividends paid
    
    
    (1,055,759
    )
    
    
    (914,010
    )
    
    
    Net cash (used in) provided by
financing activities
    
    
    26,140,928
    
    
    
    (31,128,814
    )
    
    
    (20,433,456
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    9,830,952
    
    
    
    2,033,073
    
    
    
    (13,559,186
    )Cash and Cash Equivalents, Beginning of Year
    
    
    12,650,839
    
    
    
    10,617,766
    
    
    
    24,176,952Cash and Cash Equivalents, End of Year
    
    $
    22,481,791
    
    
    $
    12,650,839
    
    
    $
    10,617,766Supplemental Cash Flows InformationInterest paid
    
    $
    15,084,607
    
    
    $
    8,989,474
    
    
    $
    9,303,363Income taxes paid (net of refunds)
    
    $
    (948,000
    )
    
    $
    (1,021,302
    )
    
    $
    (717,666
    )Common stock and payable issued for net assets in
Acquisition
    
    $
    
    
    
    $
    11,826,130
    
    
    $
    Transfer of loans to foreclosed assets
    
    $
    556,677
    
    
    $
    3,247,539
    
    
    $
    888,063
 See Notes to Consolidated Financial Statements
 F-8




---



##### Table of Contents



Rurban Financial Corp.
 
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 1: Nature of Operations and Summary of Significant Accounting Policies
 Nature of Operations
  Principles of Consolidation
  Use of Estimates
  F-9




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
  Cash Equivalents
  Securities
     Mortgage Loans Held for Sale
  Loans
  F-10




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Allowance for Loan Losses
     Premises and Equipment
  F-11




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Federal Reserve and Federal Home Loan Bank Stock
  Foreclosed Assets Held for Sale
  Goodwill
  Intangible Assets
  Stock Options
 Accounting for Stock Issued
to Employees
 Share-Based Payment
 F-12




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
  Accounting
for Stock-based Compensation
 2005
    
    
    2004Net income, as reported
    
    $
    673,091
    
    
    $
    2,734,292Less: Total stock-based employee compensation
cost determined under the fair value based
method, net of income taxes
    
    
    (655,615
    )
    
    
    (196,730
    )Pro forma net income
    
    $
    17,476
    
    
    $
    2,537,562Earnings per share:Basic  as reported
    
    $
    0.15
    
    
    $
    0.60Basic  pro forma
    
    $
    0.00
    
    
    $
    0.56Diluted  as reported
    
    $
    0.15
    
    
    $
    0.60Diluted  pro forma
    
    $
    0.00
    
    
    $
    0.56
 Income Taxes
  Earnings Per Share
  F-13




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Reclassifications
  Note 2: Restriction on Cash and Due From Banks
  F-14




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 3: Securities
  Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    ApproximateAmortized Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-Sale Securities:December 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
    )
    
    $
    102,462,075December 31, 2005:U.S. Treasury and government
agencies
    
    $
    91,020,624
    
    
    $
    13,675
    
    
    $
    (1,363,079
    )
    
    $
    89,671,220Mortgage-backed securities
    
    
    36,571,076
    
    
    
    9,783
    
    
    
    (920,973
    )
    
    
    35,659,886State and political subdivision
    
    
    12,942,183
    
    
    
    6,713
    
    
    
    (255,001
    )
    
    
    12,693,895Equity securities
    
    
    23,000
    
    
    
    
    
    
    
    
    
    
    
    23,000Other securities
    
    
    1,305,328
    
    
    
    
    
    
    
    
    
    
    
    1,305,328$
    141,862,211
    
    
    $
    30,171
    
    
    $
    (2,539,053
    )
    
    $
    139,353,329
 F-15




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
  Available for SaleAmortized
    
    
    FairCost
    
    
    ValueWithin one year
    
    $
    1,994,691
    
    
    $
    1,992,866One to five years
    
    
    10,122,369
    
    
    
    10,055,193Five to ten years
    
    
    50,257,185
    
    
    
    49,397,992After ten years
    
    
    12,197,288
    
    
    
    12,191,64074,571,533
    
    
    
    73,637,691Mortgage-backed securities and equity securities
    
    
    29,223,713
    
    
    
    28,824,384Totals
    
    $
    103,795,246
    
    
    $
    102,462,075
       F-16




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
December 31, 2006 and 2005
  Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesAvailable-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
    )
  Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesAvailable-for-Sale
Securities:U.S. Treasury
and government
agencies
    
    $
    24,755,316
    
    
    $
    (313,414
    )
    
    $
    46,397,390
    
    
    $
    (1,049,665
    )
    
    $
    71,152,706
    
    
    $
    (1,363,079
    )Mortgage-backed
securities
    
    
    10,869,812
    
    
    
    (197,459
    )
    
    
    23,102,173
    
    
    
    (723,514
    )
    
    
    33,971,985
    
    
    
    (920,973
    )State and
political
subdivisions
    
    
    10,124,496
    
    
    
    (215,897
    )
    
    
    1,771,884
    
    
    
    (39,104
    )
    
    
    11,896,380
    
    
    
    (255,001
    )$
    45,749,624
    
    
    $
    (726,770
    )
    
    $
    71,271,447
    
    
    $
    (1,812,283
    )
    
    $
    117,021,071
    
    
    $
    (2,539,053
    )
 F-17




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 4: Loans and Allowance for Loan Losses
  2006
    
    
    2005Commercial
    
    $
    71,640,907
    
    
    $
    79,359,126Commercial real estate
    
    
    109,503,312
    
    
    
    68,071,738Agricultural
    
    
    44,682,699
    
    
    
    40,236,664Residential real estate
    
    
    94,389,118
    
    
    
    89,086,024Consumer
    
    
    49,314,080
    
    
    
    48,876,788Leasing
    
    
    856,808
    
    
    
    1,661,126Total loans
    
    
    370,386,924
    
    
    
    327,291,466LessNet deferred loan fees, premiums and discounts
    
    
    (285,115
    )
    
    
    (243,237
    )Loans, net of unearned income
    
    $
    370,101,809
    
    
    $
    327,048,229Allowance for loan losses
    
    $
    (3,717,377
    )
    
    $
    (4,699,827
    )
  2006
    
    
    2005
    
    
    2004Balance, beginning of year
    
    $
    4,699,827
    
    
    $
    4,899,063
    
    
    $
    10,181,135Balance, Exchange Bank
    
    
    
    
    
    
    910,004
    
    
    
    Provision (credit) charged

    
    
    177,838
    
    
    
    583,402
    
    
    
    (399,483
    )(credited) to expenseRecoveries
    
    
    656,963
    
    
    
    1,716,815
    
    
    
    2,106,470Losses charged off
    
    
    (1,817,251
    )
    
    
    (3,409,457
    )
    
    
    (6,989,059
    )Balance, end of year
    
    $
    3,717,377
    
    
    $
    4,699,827
    
    
    $
    4,899,063
 F-18




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
  2006
    
    
    2005
    
    
    2004Year-end impaired
loans with no
allowance for loan
losses allocated
    
    $
    607,469
    
    
    $
    1,676,128
    
    
    $
    975,000Year-end loans with
allowance for loan
losses allocated
    
    $
    1,514,169
    
    
    $
    4,460,129
    
    
    $
    10,411,000Total impaired loans
    
    $
    2,121,638
    
    
    $
    6,136,257
    
    
    $
    11,386,000Amount of allowance
allocated
    
    $
    224,630
    
    
    $
    1,992,807
    
    
    $
    1,265,000Average of impaired
loans during the
year
    
    $
    4,177,213
    
    
    $
    10,036,150
    
    
    $
    14,313,000Interest income
recognized during
impairment
    
    $
    46,917
    
    
    $
    223,782
    
    
    $
    433,242Cash-basis interest
income recognized
    
    $
    50,779
    
    
    $
    232,008
    
    
    $
    455,872
  Note 5: Premises and Equipment
  2006
    
    
    2005Land
    
    $
    1,544,883
    
    
    $
    1,558,946Buildings and improvements
    
    
    9,925,293
    
    
    
    11,145,608Equipment
    
    
    11,259,960
    
    
    
    11,300,093Construction in progress
    
    
    2,567,079
    
    
    
    67,77525,297,215
    
    
    
    24,072,422Less accumulated depreciation
    
    
    (9,847,441
    )
    
    
    (10,725,790
    )Net premises and equipment
    
    $
    15,449,774
    
    
    $
    13,346,632
 F-19




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 6: Goodwill
  2006
    
    
    2005
    
    
    2004Balance as of January 1
    
    $
    8,917,373
    
    
    $
    2,144,304
    
    
    $
    2,144,304Goodwill acquired
during the year 
Data Processing
    
    
    4,795,149
    
    
    
    
    
    
    
    Adjustment on final
allocation of
purchase price 
Banking
    
    
    (38,464
    )
    
    
    6,773,069
    
    
    
    Balance as of December 31
    
    $
    13,674,058
    
    
    $
    8,917,373
    
    
    $
    2,144,304
 F-20




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 7: Other Intangible Assets
  2006
    
    
    2005Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCore deposit intangible
    
    $
    4,039,615
    
    
    $
    (888,544
    )
    
    $
    4,039,615
    
    
    $
    (432,679
    )Customer relationship intangible
    
    
    200,627
    
    
    
    (76,405
    )
    
    
    200,627
    
    
    
    (65,230
    )Banking intangibles
    
    
    4,240,242
    
    
    
    (964,949
    )
    
    
    4,240,242
    
    
    
    (497,909
    )Customer relationship intangible
    
    
    2,389,000
    
    
    
    (53,089
    )
    
    
    
    
    
    
    Trademark intangible
    
    
    180,000
    
    
    
    (6,000
    )
    
    
    
    
    
    
    Non-compete intangible
    
    
    83,000
    
    
    
    (9,222
    )
    
    
    
    
    
    
    Data Processing intangibles
    
    
    2,652,000
    
    
    
    (68,311
    )
    
    
    
    
    
    
    Purchased software  Banking
    
    
    217,940
    
    
    
    (166,435
    )
    
    
    251,357
    
    
    
    (166,972
    )Purchased software  Data
Processing
    
    
    9,073,965
    
    
    
    (4,679,663
    )
    
    
    8,123,024
    
    
    
    (4,342,184
    )Purchased software  Other
    
    
    379,422
    
    
    
    (206,538
    )
    
    
    156,921
    
    
    
    (105,233
    )Purchased software
    
    
    9,671,327
    
    
    
    (5,052,636
    )
    
    
    8,531,302
    
    
    
    (4,614,389
    )Total
    
    $
    16,563,569
    
    
    $
    (6,085,896
    )
    
    $
    12,771,544
    
    
    $
    (5,112,298
    )
  2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011Core deposit intangible
    
    $
    397,436
    
    
    $
    397,436
    
    
    $
    397,436
    
    
    $
    397,436
    
    
    $
    397,436Customer relationship intangible
    
    
    59,370
    
    
    
    49,930
    
    
    
    42,337
    
    
    
    36,884
    
    
    
    31,063Banking intangibles
    
    
    456,806
    
    
    
    447,366
    
    
    
    439,773
    
    
    
    434,320
    
    
    
    428,499Customer Relationship intangible
    
    
    159,264
    
    
    
    159,264
    
    
    
    159,264
    
    
    
    159,264
    
    
    
    159,264Trademark intangible
    
    
    18,000
    
    
    
    18,000
    
    
    
    18,000
    
    
    
    18,000
    
    
    
    18,000Non-compete intangible
    
    
    27,667
    
    
    
    27,667
    
    
    
    18,445
    
    
    
    
    
    
    
    Data Processing intangibles
    
    
    204,931
    
    
    
    204,931
    
    
    
    195,709
    
    
    
    177,264
    
    
    
    177,264Purchased software  Banking
    
    
    22,221
    
    
    
    17,071
    
    
    
    12,211
    
    
    
    
    
    
    
    Purchased Software  Data Processing
    
    
    1,159,692
    
    
    
    969,541
    
    
    
    853,261
    
    
    
    767,126
    
    
    
    231,177Purchased Software  Other
    
    
    86,014
    
    
    
    48,787
    
    
    
    17,468
    
    
    
    16,294
    
    
    
    4,366Purchased Software
    
    
    1,267,927
    
    
    
    1,035,399
    
    
    
    882,940
    
    
    
    783,420
    
    
    
    235,543Total
    
    $
    1,929,664
    
    
    $
    1,687,696
    
    
    $
    1,518,422
    
    
    $
    1,395,004
    
    
    $
    841,306
 F-21




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 8: Interest-Bearing Time Deposits
   2007
    
    $
    185,915,2772008
    
    
    42,331,4622009
    
    
    5,215,5202010
    
    
    1,656,9672011
    
    
    1,878,835Thereafter
    
    
    724,497Total
    
    $
    237,722,558
  Note 9: Short-Term Borrowings
 2006
    
    
    2005Federal funds purchased
    
    $
    
    
    
    $
    4,600,000Securities sold under repurchase agreements  retail
    
    
    7,270,900
    
    
    
    7,270,900Securities sold under repurchase agreements  broker
    
    
    25,000,000
    
    
    
    Total short-term borrowings
    
    $
    32,270,900
    
    
    $
    10,680,420
  
 F-22




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
   F-23




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 10: Notes Payable
  2006
    
    
    2005Revolving Demand Note
payable in the amount of
$500,000, secured by all
business assets of DCM,
Inc. and RDSI monthly
payments of interest at
prime plus .5%
    
    $
    200,000
    
    
    $
    Note payable in the
amount of $2,500,000,
secured by all inventory,
equipment and receivables
of DCM and 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
    
    
    2,389,207
    
    
    
    Revolving Demand Note
payable in the amount of
$250,000, unsecured and
assumed from Exchange
Bancshares, monthly
payments of interest at
prime, maturing April 30,
2006 (paid off in January
2006)
    
    
    
    
    
    
    240,000Note payable in the
amount of $319,863,
secured by equipment of
RDSI, monthly payments of
$6,272 together with
interest at a fixed rate
of 6.5%, maturing
September 14, 2009 (paid
off in February 2006)
    
    
    
    
    
    
    48,837Note payable in the
amount of $1,708,711, of
which 47.328% was sold to
a third party bank,
secured by equipment and
disk systems of RDSI,
monthly payments of
$33,504 together with
interest at a fixed rate
of 6.5%, maturing
September 14, 2009 (paid
off in February 2006)
    
    
    
    
    
    
    629,856Note payable in the
amount of $28,626,
secured by a vehicle
owned by State Bank,
monthly payments of $795,
together with interest at
a fixed rate of 1.90%,
maturing January 5, 2008
(paid off in March 2006)
    
    
    
    
    
    
    19,879$
    2,589,207
    
    
    $
    938,572
 F-24




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
  Debt2007
    
    $
    503,7622008
    
    
    340,2882009
    
    
    368,4752010
    
    
    398,4942011
    
    
    978,188Total
    
    $
    2,589,207
 Note 11: Federal Home Loan Bank Advances
   Debt2007
    
    $
    5,500,0002008
    
    
    2,000,0002009
    
    
    2,000,0002010
    
    
    4,000,0002011
    
    
    7,500,000Thereafter
    
    
    Total
    
    $
    21,000,000
 F-25




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 12: Trust Preferred Securities
    F-26




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 13: Income Taxes
  For The Year Ended December 31,2006
    
    
    2005
    
    
    2004Taxes currently payable (refundable)
    
    $
    1,408,421
    
    
    $
    (302,984
    )
    
    $
    (2,235,862
    )Deferred income taxes
    
    
    (460,305
    )
    
    
    384,337
    
    
    
    3,344,719Income tax expense
    
    $
    948,116
    
    
    $
    81,353
    
    
    $
    1,108,857
  For The Year Ended December 31,2006
    
    
    2005
    
    
    2004Computed at the statutory rate (34%)
    
    $
    1,260,842
    
    
    $
    256,511
    
    
    $
    1,306,670Increase (decrease) resulting fromTax exempt interest
    
    
    (184,640
    )
    
    
    (103,015
    )
    
    
    (72,091
    )Other
    
    
    (128,086
    )
    
    
    (72,143
    )
    
    
    (125,722
    )Actual tax expense
    
    $
    948,116
    
    
    $
    81,353
    
    
    $
    1,108,857
 F-27




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
  At December 31,2006
    
    
    2005Deferred tax assetsAllowance for loan losses
    
    $
    1,121,589
    
    
    $
    1,438,141Accrued compensation and benefits
    
    
    279,153
    
    
    
    363,428Net deferred loan fees
    
    
    100,932
    
    
    
    91,756Unrealized losses on available-for-sale securities
    
    
    452,812
    
    
    
    852,695Purchase accounting adjustments
    
    
    188,644
    
    
    
    212,434NOL carry over
    
    
    751,000
    
    
    
    531,704Other
    
    
    3,166
    
    
    
    67,6472,897,296
    
    
    
    3,557,805Deferred tax liabilitiesDepreciation
    
    
    (974,157
    )
    
    
    (1,677,950
    )Mortgage servicing rights
    
    
    (71,078
    )
    
    
    (51,222
    )Mark to market adjustment
    
    
    (452,812
    )
    
    
    (852,695
    )Purchase accounting adjustments
    
    
    (2,350,013
    )
    
    
    (1,553,898
    )Prepaids
    
    
    (185,760
    )
    
    
    (147,841
    )FHLB stock dividends
    
    
    (422,314
    )
    
    
    (362,576
    )Other
    
    
    (51,624
    )
    
    
    (51,624
    )(4,507,758
    )
    
    
    (4,697,806
    )Net deferred tax liability
    
    $
    (1,610,462
    )
    
    $
    (1,140,001
    )
  Note 14: Other Comprehensive Loss
  2006
    
    2005
    
    2004Unrealized gains (losses) on securities
available for sale
    
    $
    680,825
    
    
    $
    (1,266,627
    )
    
    $
    (1,280,615
    )Reclassification for realized amount included
in income
    
    
    494,885
    
    
    
    (25,300
    )
    
    
    (241,008
    )Other comprehensive income (loss),
before tax effect
    
    
    1,175,710
    
    
    
    (1,291,927
    )
    
    
    (1,521,623
    )Tax expense (benefit)
    
    
    399,741
    
    
    
    (439,254
    )
    
    
    (517,352
    )Other comprehensive income (loss)
    
    $
    775,969
    
    
    $
    (852,673
    )
    
    $
    (1,004,271
    )
 F-28




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 15: Regulatory Matters
    F-29




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
  To Be Well CapitalizedFor Capital Adequacy
    
    Under Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2006Total Capital
(to Risk-Weighted Assets)Consolidated
    
    $
    62.0
    
    
    
    16.0
    %
    
    $
    30.9
    
    
    
    8.0
    %
    
    $
    
    
    
    
    N/AState Bank
    
    
    38.9
    
    
    
    12.2
    
    
    
    25.4
    
    
    
    8.0
    
    
    
    31.8
    
    
    
    10.0
    %Exchange Bank
    
    
    7.8
    
    
    
    13.2
    
    
    
    4.8
    
    
    
    8.0
    
    
    
    6.0
    
    
    
    10.0Tier I Capital
(to Risk-Weighted Assets)Consolidated
    
    
    57.6
    
    
    
    14.9
    
    
    
    15.5
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    35.9
    
    
    
    11.3
    
    
    
    12.7
    
    
    
    4.0
    
    
    
    19.1
    
    
    
    6.0Exchange Bank
    
    
    7.1
    
    
    
    11.9
    
    
    
    2.4
    
    
    
    4.0
    
    
    
    3.6
    
    
    
    6.0Tier I Capital
(to Average Assets)Consolidated
    
    
    57.6
    
    
    
    10.5
    
    
    
    22.0
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    35.9
    
    
    
    7.9
    
    
    
    18.2
    
    
    
    4.0
    
    
    
    22.8
    
    
    
    5.0Exchange Bank
    
    
    7.1
    
    
    
    8.7
    
    
    
    3.3
    
    
    
    4.0
    
    
    
    4.1
    
    
    
    5.0As of December 31, 2005Total Capital
(to Risk-Weighted Assets)Consolidated
    
    $
    67.8
    
    
    
    19.3
    %
    
    $
    28.1
    
    
    
    8.0
    %
    
    $
    
    
    
    
    N/AState Bank
    
    
    36.6
    
    
    
    13.0
    
    
    
    22.6
    
    
    
    8.0
    
    
    
    28.2
    
    
    
    10.0
    %Exchange Bank
    
    
    7.5
    
    
    
    13.8
    
    
    
    4.4
    
    
    
    8.0
    
    
    
    5.5
    
    
    
    10.0Tier I Capital
(to Risk-Weighted Assets)Consolidated
    
    
    62.1
    
    
    
    17.7
    
    
    
    14.0
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    33.5
    
    
    
    11.9
    
    
    
    11.3
    
    
    
    4.0
    
    
    
    16.9
    
    
    
    6.0Exchange Bank
    
    
    6.9
    
    
    
    12.6
    
    
    
    2.2
    
    
    
    4.0
    
    
    
    3.3
    
    
    
    6.0Tier I Capital
(to Average Assets)Consolidated
    
    
    62.1
    
    
    
    14.4
    
    
    
    17.2
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    33.5
    
    
    
    8.0
    
    
    
    16.7
    
    
    
    4.0
    
    
    
    20.8
    
    
    
    5.0Exchange Bank
    
    
    6.9
    
    
    
    8.5
    
    
    
    3.2
    
    
    
    4.0
    
    
    
    4.1
    
    
    
    5.0
  F-30




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
  Note 16: Related Party Transactions
  2006
    
    
    2005Balance, January 1
    
    $
    2,394,000
    
    
    $
    3,959,000New Loans
    
    
    5,936,000
    
    
    
    5,915,000Repayments
    
    
    (4,997,000
    )
    
    
    (5,206,000
    )Other changes
    
    
    121,000
    
    
    
    (2,274,000
    )Balance, December 31
    
    $
    3,454,000
    
    
    $
    2,394,000
   Note 17: Employee Benefits
  F-31




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
        F-32




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 18: Stock Option Plan
    2006
    
    2005
    
    2004Expected volatility
    
    
    18.5
    %
    
    
    23.7-27.7
    %
    
    
    24.5
    %Weighted-average volatility
    
    
    18.5
    %
    
    
    26.7
    %
    
    
    24.5
    %Expected dividends
    
    
    1.7
    %
    
    
    0-1.5
    %
    
    
    0.0
    %Expected term (in years)
    
    
    10
    
    
    
    10
    
    
    
    10Risk-free rate
    
    
    2.3
    %
    
    
    4.5-4.5
    %
    
    
    1.2
    %
 F-33




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
  2006Weighted-AverageWeighted-
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateShares
    
    
    Exercise Price
    
    
    Term
    
    
    Intrinsic ValueOutstanding, beginning
of year
    
    
    357,886
    
    
    $
    13.44Granted
    
    
    5,000
    
    
    
    10.91Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    37,613
    
    
    
    13.37Outstanding, end of year
    
    
    325,274
    
    
    $
    13.41
    
    
    
    4.99
    
    
    $
    Exercisable, end of year
    
    
    304,274
    
    
    $
    13.50
    
    
    
    4.71
    
    
    $
    
   F-34




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 19: Earnings Per Share
  Year Ended December 31, 2006Weighted-
    
    
    PerAverage
    
    
    ShareIncome
    
    
    Shares
    
    
    AmountBasic 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
  Year Ended December 31, 2005Weighted-
    
    
    PerAverage
    
    
    ShareIncome
    
    
    Shares
    
    
    AmountBasic 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
 F-35




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
  Year Ended December 31, 2004Weighted-
    
    
    PerAverage
    
    
    ShareIncome
    
    
    Shares
    
    
    AmountBasic earnings per shareNet income
available to common
shareholders
    
    $
    2,734,292
    
    
    
    4,559,459
    
    
    $
    0.60Effect of dilutive securitiesStock options
    
    
    
    
    
    
    12,680Diluted earnings per shareIncome available to
common shareholders
and assumed
conversions
    
    $
    2,734,292
    
    
    
    4,572,139
    
    
    $
    0.60
  F-36




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 20: Leases
   2007
    
    $
    378,8942008
    
    
    350,9512009
    
    
    322,3472010
    
    
    261,6002011
    
    
    253,300Thereafter
    
    
    459,000Total minimum lease payments
    
    $
    2,026,092
 F-37




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 21: Disclosures about Fair Value of Financial Instruments
  December 31, 2006
    
    December 31, 2005Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assetsCash and cash equivalents
    
    $
    22,481,791
    
    
    $
    22,482,000
    
    
    $
    12,650,839
    
    
    $
    12,651,000Interest-bearing deposits
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000Available-for-sale securities
    
    
    102,462,075
    
    
    
    102,462,000
    
    
    
    139,353,329
    
    
    
    139,353,000Loans including loans held for sale, net
    
    
    366,774,532
    
    
    
    364,490,109
    
    
    
    322,572,403
    
    
    
    320,313,000Stock in FRB and FHLB
    
    
    3,993,450
    
    
    
    3,993,000
    
    
    
    3,607,500
    
    
    
    3,608,000Accrued interest receivable
    
    
    3,129,774
    
    
    
    3,130,000
    
    
    
    3,010,355
    
    
    
    3,010,000Financial liabilitiesDeposits
    
    $
    414,555,445
    
    
    $
    413,990,242
    
    
    $
    384,837,912
    
    
    $
    383,785,000Securities sold under agreements to
repurchase
    
    
    32,270,900
    
    
    
    31,674,000
    
    
    
    6,080,420
    
    
    
    6,080,000Federal funds purchased
    
    
    
    
    
    
    
    
    
    
    4,600,000
    
    
    
    4,600,000Note payable
    
    
    2,589,207
    
    
    
    2,589,000
    
    
    
    938,572
    
    
    
    939,000FHLB advances
    
    
    21,000,000
    
    
    
    20,982,000
    
    
    
    45,500,000
    
    
    
    46,046,000Trust preferred securities
    
    
    20,620,000
    
    
    
    21,257,000
    
    
    
    20,620,000
    
    
    
    20,537,000Accrued interest payable
    
    
    2,224,413
    
    
    
    2,224,000
    
    
    
    1,373,044
    
    
    
    1,373,000
 F-38




---



##### Table of Contents



F-39




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
  F-40




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 22: Commitments and Credit Risk
     2006
    
    
    2005Loan commitments and unused lines of credit
    
    $
    71,545,000
    
    
    $
    69,584,000Standby letters of credit
    
    
    582,000
    
    
    
    657,000Total
    
    $
    72,127,000
    
    
    $
    70,241,000
  F-41




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
   Note 23: Future Change in Accounting Principle
 Accounting for Servicing of Financial Assets: an amendment of FASB Statement No. 140
 Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109
 Fair
Value Measurements
 F-42




---



##### Table of Contents



F-43




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Note 24: Condensed Financial Information (Parent Company Only)
  Condensed Balance Sheets
 2006
    
    
    2005AssetsCash and cash equivalents
    
    $
    7,102,859
    
    
    $
    15,590,954Investment in common stock of banking
subsidiaries
    
    
    56,448,620
    
    
    
    58,870,748Investment in nonbanking subsidiaries
    
    
    13,846,560
    
    
    
    6,277,462Other assets
    
    
    2,103,164
    
    
    
    2,529,825Total assets
    
    $
    79,501,203
    
    
    $
    83,268,989LiabilitiesTrust preferred securities
    
    $
    20,000,000
    
    
    $
    20,000,000Notes payable
    
    
    0
    
    
    
    240,000Borrowings from nonbanking subsidiaries
    
    
    620,000
    
    
    
    620,000Other liabilities
    
    
    1,926,050
    
    
    
    7,958,341Total liabilities
    
    
    22,546,050
    
    
    
    28,818,341Stockholders Equity
    
    
    56,955,153
    
    
    
    54,450,648Total liabilities and stockholders equity
    
    $
    79,501,203
    
    
    $
    83,268,989
 F-44




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Condensed Statements of Income
 2006
    
    
    2005
    
    
    2004IncomeInterest Income
    
    $
    3,099
    
    
    $
    2,126
    
    
    $
    1,875Dividends from subsidiariesBanking Subsidiaries
    
    
    6,400,000
    
    
    
    7,153,134
    
    
    
    2,185,720Nonbanking subsidiaries
    
    
    
    
    
    
    1,513,000
    
    
    
    995,043Total
    
    
    6,400,000
    
    
    
    8,666,134
    
    
    
    3,180,763Other income
    
    
    1,491,158
    
    
    
    1,091,721
    
    
    
    1,128,316Total income
    
    
    7,894,257
    
    
    
    9,759,981
    
    
    
    4,310,954ExpensesInterest expense
    
    
    1,787,023
    
    
    
    1,364,168
    
    
    
    1,155,729Other expense
    
    
    2,683,109
    
    
    
    2,514,712
    
    
    
    2,206,457Total expenses
    
    
    4,470,132
    
    
    
    3,878,880
    
    
    
    3,362,186Income before income tax and equity
in undistributed income of
subsidiaries
    
    
    3,424,125
    
    
    
    5,881,101
    
    
    
    948,768Income tax
    
    
    (1,011,797
    )
    
    
    (946,911
    )
    
    
    (757,526
    )Income before equity in undistributed
income of subsidiaries
    
    
    4,435,922
    
    
    
    6,828,012
    
    
    
    1,706,294Equity in undistributed (excess
distributed)
income of subsidiariesBanking subsidiaries
    
    
    (3,797,432
    )
    
    
    (6,383,468
    )
    
    
    131,679Nonbanking subsidiaries
    
    
    2,121,752
    
    
    
    228,547
    
    
    
    896,319Total
    
    
    (1,675,680
    )
    
    
    (6,154,921
    )
    
    
    1,027,998Net income
    
    $
    2,760,242
    
    
    $
    673,091
    
    
    $
    2,734,292
 F-45




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 Condensed Statements of Cash Flows
 2006
    
    
    2005
    
    
    2004Operating ActivitiesNet income
    
    $
    2,760,242
    
    
    $
    673,091
    
    
    $
    2,734,292Items not requiring (providing)
cashEquity in (undistributed) excess
distributed net income of
subsidiaries
    
    
    2,204,917
    
    
    
    6,192,398
    
    
    
    (1,027,998
    )Other assets
    
    
    (49,256
    )
    
    
    (15,230
    )
    
    
    (1,059,391
    )Other liabilities
    
    
    (6,032,292
    )
    
    
    629,444
    
    
    
    (1,049,450
    )Net cash provided by (used
in)
operating activities
    
    
    (1,116,389
    )
    
    
    7,479,703
    
    
    
    (402,547
    )Investing ActivitiesInvestment 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
    
    
    
    
    
    
    3,029
    
    
    
    Net cash (used in) investing
activities
    
    
    (6,100,000
    )
    
    
    (1,321,494
    )
    
    
    Financing ActivitiesCash dividends paid
    
    
    (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
    
    
    
    
    
    
    10,310,000
    
    
    
    Shares issued under Stock Option
Plan
    
    
    24,055
    
    
    
    
    
    
    
    Proceeds from exercise of stock
options
    
    
    
    
    
    
    36,595
    
    
    
    29,525Net cash provided by (used in)
financing activities
    
    
    (1,271,706
    )
    
    
    9,105,970
    
    
    
    29,525Net Change in Cash and Cash Equivalents
    
    
    (8,488,095
    )
    
    
    15,264,179
    
    
    
    (373,022
    )Cash and Cash Equivalents at Beginning
of Year
    
    
    15,590,954
    
    
    
    326,775
    
    
    
    699,797Cash and Cash Equivalents at End of
Year
    
    $
    7,102,859
    
    
    $
    15,590,954
    
    
    $
    326,775Supplemental cash flow informationCommon stock and payable issued for
net
assets in acquisition
    
    $
    
    
    
    $
    11,826,130
    
    
    $
    
 F-46




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 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, Exchange Bank, and RFCBC. 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 and RFS, which provides trust and financial services to customers nationwide.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.
 Data
    
    
    
    
    
    Total
    
    Intersegment
    
    ConsolidatedBanking
    
    Processing
    
    Other
    
    Segments
    
    Elimination
    
    Totals2006Income Statement
Information:Net interest income
(expense)
    
    $
    17,021,780
    
    
    $
    (264,336
    )
    
    $
    (1,723,002
    )
    
    $
    15,034,442
    
    
    $
    
    
    
    $
    15,034,442Other revenue-external
customers
    
    
    4,875,166
    
    
    
    15,011,143
    
    
    
    3,869,012
    
    
    
    23,755,321
    
    
    
    
    
    
    
    23,755,321Other revenue-other
segments
    
    
    
    
    
    
    1,551,655
    
    
    
    4,180,992
    
    
    
    5,732,647
    
    
    
    (5,732,647
    )
    
    
    Net interest income and
other revenue
    
    
    21,896,946
    
    
    
    16,298,462
    
    
    
    6,327,002
    
    
    
    44,522,410
    
    
    
    (5,732,647
    )
    
    
    38,789,763Noninterest expense
    
    
    19,312,823
    
    
    
    13,142,661
    
    
    
    8,180,730
    
    
    
    40,636,214
    
    
    
    (5,732,647
    )
    
    
    34,903,567Significant noncash items:Depreciation and
amortization
    
    
    794,929
    
    
    
    2,505,065
    
    
    
    244,971
    
    
    
    3,544,965
    
    
    
    
    
    
    
    3,544,965Provision for loan losses
    
    
    177,838
    
    
    
    
    
    
    
    
    
    
    
    177,838
    
    
    
    
    
    
    
    177,838Income tax expense
    
    
    518,646
    
    
    
    1,072,973
    
    
    
    (643,503
    )
    
    
    948,116
    
    
    
    
    
    
    
    948,116Segment profit
    
    $
    1,887,639
    
    
    $
    2,082,828
    
    
    $
    (1,210,225
    )
    
    $
    2,760,242
    
    
    
    
    
    
    $
    2,760,242Balance sheet information:Total assets
    
    $
    537,216,244
    
    
    $
    20,306,144
    
    
    $
    12,535,236
    
    
    $
    570,057,623
    
    
    $
    (14,050,371
    )
    
    $
    556,007,253Goodwill and intangibles
    
    
    12,154,202
    
    
    
    7,378,838
    
    
    
    
    
    
    
    19,533,040
    
    
    
    
    
    
    
    19,533,040Premises and equipment
expenditures
    
    $
    2,994,741
    
    
    $
    5,820,264
    
    
    $
    227,259
    
    
    $
    9,042,264
    
    
    
    
    
    
    $
    9,042,264
 F-47




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Data
    
    
    
    
    
    Total
    
    Intersegment
    
    ConsolidatedBanking
    
    Processing
    
    Other
    
    Segments
    
    Elimination
    
    Totals2005Income Statement
Information:Net interest income
(expense)
    
    $
    13,607,036
    
    
    $
    (234,741
    )
    
    $
    (1,318,711
    )
    
    $
    12,053,584
    
    
    $
    
    
    
    $
    12,053,584Other revenue-external
customers
    
    
    2,422,644
    
    
    
    12,708,407
    
    
    
    3,207,051
    
    
    
    18,338,102
    
    
    
    
    
    
    
    18,338,102Other revenue-other
segments
    
    
    759,649
    
    
    
    1,354,001
    
    
    
    979,638
    
    
    
    3,093,288
    
    
    
    (3,093,288
    )
    
    
    Net interest income and
other revenue
    
    
    16,789,329
    
    
    
    13,827,667
    
    
    
    2,867,978
    
    
    
    33,484,974
    
    
    
    (3,093,288
    )
    
    
    30,391,686Noninterest expense
    
    
    16,319,085
    
    
    
    11,164,340
    
    
    
    4,663,703
    
    
    
    32,147,128
    
    
    
    (3,093,288
    )
    
    
    29,053,840Significant noncash items:Depreciation and
amortization
    
    
    668,288
    
    
    
    2,287,592
    
    
    
    124,784
    
    
    
    3,080,664
    
    
    
    
    
    
    
    3,080,664Provision for loan losses
    
    
    583,402
    
    
    
    
    
    
    
    
    
    
    
    583,402
    
    
    
    
    
    
    
    583,402Income tax expense
    
    
    (245,779
    )
    
    
    945,869
    
    
    
    (618,737
    )
    
    
    81,353
    
    
    
    
    
    
    
    81,353Segment profit
    
    $
    132,621
    
    
    $
    1,717,458
    
    
    $
    (1,176,988
    )
    
    $
    673,091
    
    
    
    
    
    
    $
    673,091Balance sheet information:Total assets
    
    $
    520,581,903
    
    
    $
    10,204,699
    
    
    $
    20,931,806
    
    
    $
    551,718,408
    
    
    $
    (21,176,132
    )
    
    $
    530,542,276Goodwill and intangibles
    
    
    12,659,706
    
    
    
    
    
    
    
    
    
    
    
    12,659,706
    
    
    
    
    
    
    
    12,659,706Premises and equipment
expenditures
    
    $
    662,245
    
    
    $
    2,252,592
    
    
    $
    183,697
    
    
    $
    3,098,534
    
    
    
    
    
    
    $
    3,098,534
 Data
    
    
    
    
    
    Total
    
    Intersegment
    
    ConsolidatedBanking
    
    Processing
    
    Other
    
    Segments
    
    Elimination
    
    Totals2004Income Statement
Information:Net interest income
(expense)
    
    $
    13,447,380
    
    
    $
    (217,829
    )
    
    $
    (1,140,245
    )
    
    $
    12,089,306
    
    
    $
    (11,940
    )
    
    $
    12,077,366Other revenue-external
customers
    
    
    3,169,122
    
    
    
    11,163,990
    
    
    
    3,031,324
    
    
    
    17,364,436
    
    
    
    11,940
    
    
    
    17,376,376Other revenue-other
segments
    
    
    904,220
    
    
    
    1,314,942
    
    
    
    1,091,753
    
    
    
    3,310,915
    
    
    
    (3,310,915
    )
    
    
    Net interest income and
other revenue
    
    
    17,520,722
    
    
    
    12,261,103
    
    
    
    2,982,832
    
    
    
    32,764,657
    
    
    
    (3,310,915
    )
    
    
    29,453,742Noninterest expense
    
    
    15,258,307
    
    
    
    9,650,869
    
    
    
    4,411,815
    
    
    
    29,320,991
    
    
    
    (3,310,915
    )
    
    
    26,010,076Significant noncash items:Depreciation and
amortization
    
    
    534,415
    
    
    
    1,857,524
    
    
    
    100,722
    
    
    
    2,492,661
    
    
    
    
    
    
    
    2,492,661Provision for loan losses
    
    
    (399,483
    )
    
    
    
    
    
    
    
    
    
    
    (399,483
    )
    
    
    
    
    
    
    (399,483
    )Income tax expense
    
    
    919,192
    
    
    
    688,498
    
    
    
    (498,833
    )
    
    
    1,108,857
    
    
    
    
    
    
    
    1,108,857Segment profit
    
    $
    1,742,706
    
    
    $
    1,921,736
    
    
    $
    (930,150
    )
    
    $
    2,734,292
    
    
    
    
    
    
    $
    2,734,292Balance sheet information:Total assets
    
    $
    407,831,742
    
    
    $
    10,974,521
    
    
    $
    4,030,214
    
    
    $
    422,836,477
    
    
    $
    (7,487,731
    )
    
    $
    415,348,746Goodwill and intangibles
    
    
    2,687,282
    
    
    
    
    
    
    
    
    
    
    
    2,687,282
    
    
    
    
    
    
    
    2,687,282Premises and equipment
expenditures
    
    $
    415,402
    
    
    $
    3,098,388
    
    
    $
    138,288
    
    
    $
    3,652,078
    
    
    
    
    
    
    $
    3,652,078
 F-48




---



##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
 Note 26:   Quarterly Financial Information (Unaudited)
  March
    
    June
    
    September
    
    DecemberDecember 31, 2006Interest 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 loan
losses
    
    
    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
 March
    
    June
    
    September
    
    DecemberDecember 31, 2005Interest income
    
    $
    5,044,213
    
    
    $
    5,133,104
    
    
    $
    5,429,354
    
    
    $
    5,815,317Interest expense
    
    
    2,047,303
    
    
    
    2,205,784
    
    
    
    2,446,879
    
    
    
    2,668,437Net interest income
    
    
    2,996,910
    
    
    
    2,927,320
    
    
    
    2,982,475
    
    
    
    3,146,880Provision for loan
losses
    
    
    
    
    
    
    352,000
    
    
    
    (382,000
    )
    
    
    613,402Noninterest income
    
    
    4,627,031
    
    
    
    4,639,945
    
    
    
    4,594,610
    
    
    
    4,476,517Noninterest expense
    
    
    6,736,406
    
    
    
    7,466,199
    
    
    
    7,219,077
    
    
    
    7,632,157Income tax expense
    
    
    249,070
    
    
    
    (137,232
    )
    
    
    247,824
    
    
    
    (278,308
    )Net income
    
    
    638,465
    
    
    
    (113,702
    )
    
    
    492,184
    
    
    
    (343,854
    )Earnings per shareBasis
    
    
    0.14
    
    
    
    (0.02
    )
    
    
    0.11
    
    
    
    (0.08
    )Diluted
    
    
    0.14
    
    
    
    (0.02
    )
    
    
    0.11
    
    
    
    (0.08
    )Dividends per share
    
    
    0.05
    
    
    
    0.05
    
    
    
    0.05
    
    
    
    0.05
 F-49




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 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 to merge its banking group consisting of State
Bank and Trust Co., Exchange Bank, Rurban Operations Company and Reliance Financials Services into
the State Bank and Trust Co. charter. The company expects the merger to be completed by the end of
the first quarter of 2007 pending regulatory approval.During the fourth quarter of 2005, RFCBC completed a loan sale of approximately $8.4 million of
problem loans. This resulted in write-downs and a pre-tax loss of approximately $1.45 million
(including expenses incurred with the sale). Including additional adjustments taken to reserves,
the net after-tax impact was a loss of approximately $745,000 taken in the fourth quarter of 2005.
 F-50




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 NOTE 27: BUSINESS ACQUISITIONS
 Diverse Computer MarketersOn 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 is payable to the shareholders contingent upon the continuation of
profitable growth over the first year of combined operations. 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
 F-51




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 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 120, 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.Exchange BankOn December 31, 2005, the Company acquired Exchange Bancshares, Inc. (Exchange). Exchange
was merged with and into the Company, with the Company being the surviving corporation of the
merger. Exchanges wholly-owned subsidiary, Exchange Bank, now operates as a separate
subsidiary of the Company. As a result of this acquisition, the Company will have an
opportunity to increase its loan and deposit base and reduce transaction costs. The Company
also expects to reduce costs through economies of scale.The Company paid approximately $12.0 million in cash and stock in the Exchange acquisition.
The cash outlay for this acquisition was approximately $6.5 million or $22.00 per share for
50% of the outstanding shares of Exchange Bancshares as of December 31, 2005. Exchange had
586,644 shares outstanding as of December 31, 2005. The 456,116 shares of the Company stock
issue for this acquisition was $5.5 million or $11.78 per share. The value of the 456,116
common shares was determined by the market price as of December 31, 2005.
 F-52




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 The following table summarizes the estimated fair values of the assets and liabilities
acquired as of December 31, 2005.
 Cash and cash equivalents
    
    $
    2,292,907Investments
    
    
    16,703,037Loans
    
    
    56,147,296Core deposits
    
    
    2,578,606Goodwill
    
    
    2,825,301Premises and equipment
    
    
    4,121,433Other assets
    
    
    497,079Total assets acquired
    
    $
    85,165,659Deposits
    
    $
    68,132,043Debt
    
    
    3,740,000Other liabilities
    
    
    1,312,051Total liabilities assumed
    
    
    73,184,094Net assets acquired
    
    $
    11,981,565
 The only significant intangible asset acquired was the core deposit base, which has a
useful life of eight and one half years and will be amortized using the straight-line method.
The $2.8 million of goodwill was assigned entirely to the banking segment of the business
and is not expected to be deductible for tax purposes.The following proforma disclosures, including the effect of the purchase accounting, depict
the results of operations as though the acquisition of Exchange had taken place at the
beginning of each period.
 Year Ended December 31,($ 000s)
    
    2005
    
    2004Net interest income
    
    $
    15,424
    
    
    $
    15,572Net income
    
    $
    (1,286
    )
    
    $
    1,933Per share  combined:Basic net income
    
    $
    (0.26
    )
    
    $
    0.39Diluted net income
    
    $
    (0.26
    )
    
    $
    0.38
 Lima BranchesOn June 17, 2005, the Company acquired certain assets and certain liabilities of two branches
in Lima, Ohio from Liberty Savings Bank. The Company paid a net premium of approximately
$4.7
 F-53




---



##### Table of Contents



Rurban Financial Corp.
 Notes to Consolidated Financial Statements
 December 31, 2006 and 2005
 million. As a result of this acquisition, the Company will have an opportunity to increase
its loan and deposit base. The Company also expects to reduce costs through economies of
scale.The following table summarizes the estimated fair values of the assets acquired and
liabilities assumed as of June 17, 2005.
 Loans
    
    $
    5,887,339Core deposits
    
    
    752,574Goodwill
    
    
    3,947,768Accrued interest receivable
    
    
    28,962Premises and equipment
    
    
    1,239,000Total assets acquired
    
    
    11,855,643Deposits
    
    
    60,383,141Accrued interest payable
    
    
    62,114Other liabilities
    
    
    46,432Total liabilities assume
    
    
    60,491,687Net liabilities assumed
    
    $
    (48,636,044
    )
 The difference between book value of assets acquired and liabilities assumed from Liberty
Savings Bank was paid to the Company in cash, which was used to fund loan growth and purchase
investment securities.The only significant intangible asset acquired was the core deposit base, which has a useful
life of approximately eight years and will be amortized using the straight-line method. The
$3.9 million in goodwill was assigned entirely to the banking segment of the business and is
expected to be deductible for tax purposes.The operating information from the purchased branches was not available from the sellers and
therefore, the proforma information is omitted.
 F-54




---



##### Table of Contents



RURBAN FINANCIAL CORP.
 ANNUAL REPORT ON FORM 10-K  FOR FISCAL YEAR ENDED DECEMBER 31, 2006
  Exhibit No.
    
    Description
    
    Location2.1
    
    Branch Purchase and Assumption
Agreement dated as of March 15, 2005
between Liberty Savings Bank, FSB and
State Bank and Trust Company
    
    Incorporated herein
by reference to
Exhibit 2 to the
Companys Current
Report on Form 8-K
filed March 21,
2005 (File No.
0-13507).2.2
    
    Agreement and Plan of Merger, dated as
of April 13, 2005, by and between
Rurban Financial Corp. and Exchange
Bancshares, Inc.
    
    Incorporated herein
by reference to
Exhibit 2.1 to the
Companys Current
Report on Form 8-K
filed April 14,
2005 (File No.
0-13507).2.3
    
    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).2.4
    
    Agreement and Plan of Merger, dated as
of December 31, 2006, by and among The
State Bank and Trust Company, The
Exchange Bank and Reliance Financial
Services, N.A.
    
    Filed herewith.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).
 E-1




---



##### Table of Contents



Exhibit No.
    
    Description
    
    Location3.4
    
    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).4.3
    
    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).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).
 E-2




---



##### Table of Contents



Exhibit No.
    
    Description
    
    Location10.5*
    
    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).10.8*
    
    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).
 E-3




---



##### Table of Contents



Exhibit No.
    
    Description
    
    Location10.14*
    
    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).10.16*
    
    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
    
    Filed herewith.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.23.1
    
    Consent of BKD, LLP
    
    Filed herewith.31.1
    
    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.
 E-4




---



##### Table of Contents



Exhibit No.
    
    Description
    
    Location32.1
    
    Section 1350 Certification  Principal
Executive Officer and Principal
Financial Officer
    
    Filed herewith.
 
 *
    
    Management contract or compensatory plan or arrangement. E-5