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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, 2005
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)401 Clinton Street, Defiance, Ohio
    
    43512(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code:
    
    (419) 783-8950
 None
  Title of each class
 o þ
 o þ
 þ o
 þ
  Large Accelerate Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



RURBAN FINANCIAL CORP.
 2005 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 HoldersPART 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 and Executive Officers of the RegistrantItem 11.
    
    Executive CompensationItem 12.
    
    Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13.
    
    Certain Relationships and Related TransactionsItem 14.
    
    Principal Accountant Fees and ServicesPART IVItem 15.
    
    Exhibits and Financial Statement SchedulesSignatures and CertificationsEX-3.5EX-10.10EX-10.11EX-10.12EX-10.13EX-10.14EX-21EX-23.1EX-31.1EX-31.2EX-32.1
  
 2.




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




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RMC
   RFCBC
  RDSI
   RST I
  RST II
  ROC
   4.




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Competition
     Supervision and Regulation
  Regulation of Bank Holding Companies and Their Subsidiaries in General
     5.




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Written Agreement
  Dividends
  Transactions with Affiliates, Directors, Executive Officers and Shareholders
   
    
    limits 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 that banks capital
stock and surplus (i.e., tangible capital);
    
    limits the extent to which a bank or its subsidiaries may engage in covered
transactions with all affiliates to 20% of that banks capital stock and surplus; and
    
    requires 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.
   6.




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Regulatory Capital
    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;
 7.




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
    
    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
ration reaches certain levels; and
    
    Revising the rules and procedures for risk-based premium assessments.
  Monetary Policy and Economic Conditions
  Holding Company Activities
    8.




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Sarbanes-Oxley Act of 2002 and Related Rules Affecting Corporate Governance
     Effect of Environmental Regulation
  Available Information
  9.




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Statistical Financial Information Regarding the Company
 Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
 
 10.




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I.
    
    DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY;INTEREST RATES AND INTEREST DIFFERENTIAL
  2005
    
    
    2004
    
    
    2003Average
    
    
    
    
    
    
    Avg
    
    
    Average
    
    
    
    
    
    
    Avg
    
    
    Average
    
    
    
    
    
    
    AvgBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(dollars in thousands)Assets:SecuritiesTaxable
    
    $
    108,306
    
    
    $
    4,337
    
    
    
    4.00
    %
    
    $
    100,517
    
    
    $
    3,568
    
    
    
    3.57
    %
    
    $
    94,771
    
    
    $
    2,806
    
    
    
    2.98
    %Non-taxable (1)
    
    
    7,248
    
    
    
    403
    
    
    
    5.56
    %
    
    
    4,426
    
    
    
    249
    
    
    
    5.63
    %
    
    
    4,696
    
    
    
    261
    
    
    
    5.55
    %Federal funds sold
    
    
    4,881
    
    
    
    160
    
    
    
    3.28
    %
    
    
    4,557
    
    
    
    79
    
    
    
    1.34
    %
    
    
    26,130
    
    
    
    401
    
    
    
    1.48
    %Loans, net (2)
    
    
    268,158
    
    
    
    16,659
    
    
    
    6.21
    %
    
    
    271,503
    
    
    
    16,217
    
    
    
    5.97
    %
    
    
    385,153
    
    
    
    24,395
    
    
    
    6.33
    %Total earning assets
    
    
    388,593
    
    
    
    21,559
    
    
    
    5.55
    %
    
    
    381,003
    
    
    
    20,113
    
    
    
    5.28
    %
    
    
    510,750
    
    
    
    27,863
    
    
    
    5.46
    %Cash and due from banks
    
    
    9,653
    
    
    
    
    
    
    
    
    
    
    
    12,179
    
    
    
    
    
    
    
    
    
    
    
    23,580Allowance for loan losses
    
    
    (4,885
    )
    
    
    
    
    
    
    
    
    
    
    (7,123
    )
    
    
    
    
    
    
    
    
    
    
    (13,755
    )Premises and equipment
    
    
    15,570
    
    
    
    
    
    
    
    
    
    
    
    12,168
    
    
    
    
    
    
    
    
    
    
    
    14,089Other assets
    
    
    24,435
    
    
    
    
    
    
    
    
    
    
    
    19,574
    
    
    
    
    
    
    
    
    
    
    
    14,707Total assets
    
    $
    433,366
    
    
    
    
    
    
    
    
    
    
    $
    417,801
    
    
    
    
    
    
    
    
    
    
    $
    549,371Liabilities:Deposits
Savings and interest-bearing
    
    $
    102,453
    
    
    $
    716
    
    
    
    0.70
    %
    
    $
    94,051
    
    
    $
    350
    
    
    
    0.37
    %
    
    $
    124,828
    
    
    $
    781
    
    
    
    0.63
    %Time deposits
    
    
    167,140
    
    
    
    4,935
    
    
    
    2.95
    %
    
    
    162,865
    
    
    
    4,205
    
    
    
    2.58
    %
    
    
    267,227
    
    
    
    9,244
    
    
    
    3.46
    %Short-term borrowings
    
    
    6,854
    
    
    
    165
    
    
    
    2.41
    %
    
    
    4,613
    
    
    
    53
    
    
    
    1.15
    %
    
    
    
    
    
    
    
    
    
    
    Advances from FHLB
    
    
    46,376
    
    
    
    2,040
    
    
    
    4.40
    %
    
    
    48,814
    
    
    
    1,877
    
    
    
    3.85
    %
    
    
    40,809
    
    
    
    2,276
    
    
    
    5.58
    %Trust preferred securities
    
    
    14,434
    
    
    
    1,275
    
    
    
    8.83
    %
    
    
    10,248
    
    
    
    1,119
    
    
    
    10.92
    %
    
    
    10,000
    
    
    
    1,075
    
    
    
    10.75
    %Other borrowed funds
    
    
    2,247
    
    
    
    237
    
    
    
    10.55
    %
    
    
    5,039
    
    
    
    347
    
    
    
    6.89
    %
    
    
    10,314
    
    
    
    596
    
    
    
    5.78
    %Total
interest-bearing liabilities
    
    
    339,504
    
    
    
    9,368
    
    
    
    2.76
    %
    
    
    325,630
    
    
    
    7,951
    
    
    
    2.44
    %
    
    
    453,178
    
    
    
    13,972
    
    
    
    3.08
    %Demand deposits
    
    
    36,675
    
    
    
    
    
    
    
    
    
    
    
    38,134
    
    
    
    
    
    
    
    
    
    
    
    43,729Other liabilities
    
    
    6,105
    
    
    
    
    
    
    
    
    
    
    
    4,758
    
    
    
    
    
    
    
    
    
    
    
    7,865Total liabilities
    
    
    382,284
    
    
    
    
    
    
    
    
    
    
    
    368,522
    
    
    
    
    
    
    
    
    
    
    
    504,772Shareholders equity
    
    
    51,083
    
    
    
    
    
    
    
    
    
    
    
    49,279
    
    
    
    
    
    
    
    
    
    
    
    44,599Total liabilities and
shareholders equity
    
    $
    433,367
    
    
    
    
    
    
    
    
    
    
    $
    417,801
    
    
    
    
    
    
    
    
    
    
    $
    549,371Net interest income (tax
equivalent basis)
    
    
    
    
    
    $
    12,191
    
    
    
    
    
    
    
    
    
    
    $
    12,162
    
    
    
    
    
    
    
    
    
    
    $
    13,891Net interest income as a
percent
of average interest-earning
assets
    
    
    
    
    
    
    
    
    
    
    3.14
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %
    
    
    
    
    
    
    
    
    
    
    2.72
    %
 
 (1)
    Interest is computed on a tax equivalent basis using a 34% statutory tax rate. The tax equivalent adjustment was $137, $84 and $89 in 2005, 2004 and 2003, respectively.(2)
    Non-accruing loans and loans held for sale are included in the average balances. 11.




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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:
 
 TotalVariance
    
    
    Variance Attributable To2005/2004
    
    
    Volume
    
    
    Rate(dollars in thousands)Interest incomeSecuritiesTaxable
    
    $
    751
    
    
    $
    291
    
    
    $
    460Non-taxable
    
    
    154
    
    
    
    157
    
    
    
    (3
    )Federal funds sold
    
    
    99
    
    
    
    5
    
    
    
    94Loans, 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
 
 12.




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I.
    
    DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY;INTEREST RATES AND INTEREST DIFFERENTIAL(Continued)
 TotalVariance
    
    
    Variance Attributable To2004/2003
    
    
    Volume
    
    
    Rate(dollars in thousands)Interest incomeSecuritiesTaxable
    
    $
    765
    
    
    $
    179
    
    
    $
    586Non-taxable
    
    
    (12
    )
    
    
    (15
    )
    
    
    3Federal funds sold
    
    
    (325
    )
    
    
    (290
    )
    
    
    (35
    )Loans, net of unearned income
and deferred loan fees
    
    
    (8,178
    )
    
    
    (6,855
    )
    
    
    (1,323
    )(7,750
    )
    
    
    (6,981
    )
    
    
    (769
    )Interest expenseDepositsSavings and interest-bearing
demand deposits
    
    
    (431
    )
    
    
    (163
    )
    
    
    (268
    )Time deposits
    
    
    (5,039
    )
    
    
    (3,055
    )
    
    
    (1,984
    )Short-term borrowings
    
    
    53
    
    
    
    53
    
    
    
    0Advances from FHLB
    
    
    (399
    )
    
    
    393
    
    
    
    (792
    )Trust preferred securities
    
    
    44
    
    
    
    27
    
    
    
    17Other borrowed funds
    
    
    (249
    )
    
    
    (348
    )
    
    
    99(6,021
    )
    
    
    (3,093
    )
    
    
    (2,928
    )Net interest income
    
    $
    (1,729
    )
    
    $
    (3,888
    )
    
    $
    2,159
 
 13.




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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:
 2005
    
    
    2004
    
    
    2003(dollars in thousands)U.S. Treasury and government agencies
    
    $
    91,021
    
    
    $
    64,483
    
    
    $
    43,868State and political subdivisions
    
    
    12,942
    
    
    
    4,692
    
    
    
    4,203Mortgage-backed securities
    
    
    36,571
    
    
    
    40,704
    
    
    
    59,238Other securities
    
    
    1,305
    
    
    
    50
    
    
    
    50Marketable equity securities
    
    
    23
    
    
    
    9
    
    
    
    35Total
    
    $
    141,862
    
    
    $
    109,938
    
    
    $
    107,394
 B.
    
    The maturity distribution and weighted average yield of securities available for sale
at December 31, 2005 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
    
    $
    8,060
    
    
    $
    14,596
    
    
    $
    65,367
    
    
    $
    2,998Obligations of states and political
subdivisions
    
    
    151
    
    
    
    1,019
    
    
    
    1,407
    
    
    
    10,365Mortgage-backed securities
    
    
    183
    
    
    
    9,693
    
    
    
    4,385
    
    
    
    22,310Other securities
    
    
    298
    
    
    
    1,007Marketable equity securities
    
    
    23$
    8,715
    
    
    $
    26,315
    
    
    $
    71,159
    
    
    $
    35,673Weighted average yield (1)
    
    
    2.47
    %
    
    
    3.50
    %
    
    
    4.43
    %
    
    
    4.15
    %
 
 (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,
2005.
 
 14.




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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:
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(dollars in thousands)Commercial and
Agricultural
    
    $
    187,667
    
    
    $
    163,845
    
    
    $
    188,532
    
    
    $
    321,726
    
    
    $
    388,673Real estate
mortgage
    
    
    89,086
    
    
    
    63,828
    
    
    
    46,718
    
    
    
    84,432
    
    
    
    106,689Consumer
loans to
individuals
    
    
    48,877
    
    
    
    31,949
    
    
    
    37,310
    
    
    
    60,139
    
    
    
    76,513Leases
    
    
    1,661
    
    
    
    5,128
    
    
    
    11,775
    
    
    
    21,509
    
    
    
    28,752Total loans
    
    $
    327,291
    
    
    $
    264,750
    
    
    $
    284,335
    
    
    $
    487,806
    
    
    $
    600,627Real estate
mortgage
loans held
for resale
    
    $
    224
    
    
    $
    113
    
    
    $
    219
    
    
    $
    63,536
    
    
    $
    440
 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, 2005 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
    
    $
    52,258After one year but within five years
    
    
    58,182After five years
    
    
    77,227Total commercial and agricultural loans
    
    $
    187,667
 
 15.




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III.
    
    LOAN PORTFOLIO(Continued)
 Commercial and Agricultural
 Interest SensitivityFixed
    
    
    VariableRate
    
    
    Rate
    
    
    Total(dollars in thousands)Due after one year but
within five years
    
    $
    17,397
    
    
    $
    40,785
    
    
    $
    58,182Due after five years
    
    
    5,420
    
    
    
    71,807
    
    
    
    77,227Total
    
    $
    22,817
    
    
    $
    112,592
    
    
    $
    135,409
 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.
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(dollars in thousands)(a) Loans accounted for on a
non-accrual basis
    
    $
    6,270
    
    
    $
    13,384
    
    
    $
    18,352
    
    
    $
    18,259
    
    
    $
    12,557(b) Accruing loans which
are contractually
past due 90 days or
more as to interest
or principal payments
    
    
    5
    
    
    
    11
    
    
    
    
    
    
    
    476
    
    
    
    2,131(c) Loans not included in (a)
which are Troubled
Debt Restructurings as
defined by Statement of
Financial Accounting
Standards No. 15
    
    
    825
    
    
    
    1,570
    
    
    
    5,058
    
    
    
    
    
    
    
    Total non-performing
loans
    
    $
    7,100
    
    
    $
    14,965
    
    
    $
    23,410
    
    
    $
    18,735
    
    
    $
    14,688(d) Other loans defined as
impaired
    
    $
    3,283
    
    
    $
    4,671
    
    
    $
    9,099
    
    
    $
    3,166
    
    
    $
    
 
 16.




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III.
    
    LOAN PORTFOLIO(Continued)
  2005(In thousands)Cash basis interest
income recognized
on impaired loans
outstanding at
December 31, 2005
    
    $
    232Interest income
actually recorded
on impaired loans
and included in net
income for the
period
    
    
    224
 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, 2005, in addition to the $7,100,000 of loans reported under
Item III. C. 1. (which includes all loans classified by management as doubtful or
loss), there are approximately $8,721,000 in other outstanding loans where known
information about possible credit problems of the borrowers causes 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.




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III.
    
    LOAN PORTFOLIO(Continued)
 3.
    
    Foreign OutstandingsNone4.
    
    Loan ConcentrationsAt December 31, 2005, loans outstanding related to agricultural operations or
collateralized by agricultural real estate aggregated approximately $40,237,000.
 D.
    
    Other Interest-Bearing AssetsThere are no other interest-bearing assets as of December 31, 2005 which are required
to be disclosed under Item III. C. 1 or Item III. C. 2. if such assets were loans.
 18.




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##### 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:
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(dollars in thousands)LoansLoans outstanding at end of period (1)
    
    $
    327,272
    
    
    $
    264,594
    
    
    $
    284,323
    
    
    $
    551,011
    
    
    $
    600,731Average loans outstanding during period (1)
    
    $
    268,158
    
    
    $
    271,503
    
    
    $
    385,153
    
    
    $
    627,685
    
    
    $
    583,239Allowance for loan lossesBalance at beginning of period
    
    $
    4,899
    
    
    $
    10,181
    
    
    $
    17,694
    
    
    $
    9,239
    
    
    $
    7,215Balance, Exchange
    
    
    910Balance, Oakwood
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,427Loans charged-offCommercial and agricultural loans
    
    
    (2,760
    )
    
    
    (6,599
    )
    
    
    (10,089
    )
    
    
    (19,584
    )
    
    
    (6,089
    )Real estate mortgage
    
    
    (133
    )
    
    
    (12
    )
    
    
    (195
    )
    
    
    (496
    )
    
    
    (54
    )Leases
    
    
    (208
    )
    
    
    (70
    )
    
    
    (225
    )
    
    
    (173
    )
    
    
    (146
    )Consumer loans to individuals
    
    
    (308
    )
    
    
    (308
    )
    
    
    (1,345
    )
    
    
    (1,520
    )
    
    
    (884
    )(3,409
    )
    
    
    (6,989
    )
    
    
    (11,854
    )
    
    
    (21,773
    )
    
    
    (7,173
    )Recoveries of loans previously charged-offCommercial and agricultural loans
    
    
    1,566
    
    
    
    1,835
    
    
    
    2,497
    
    
    
    892
    
    
    
    110Real estate mortgage
    
    
    2
    
    
    
    52
    
    
    
    86
    
    
    
    28
    
    
    
    1Leases
    
    
    4
    
    
    
    31
    
    
    
    109
    
    
    
    27
    
    
    
    12Consumer loans to individuals
    
    
    145
    
    
    
    188
    
    
    
    447
    
    
    
    324
    
    
    
    3411,717
    
    
    
    2,106
    
    
    
    3,139
    
    
    
    1,271
    
    
    
    464Net loans charged-off
    
    
    (1,692
    )
    
    
    (4,883
    )
    
    
    (8,715
    )
    
    
    (20,502
    )
    
    
    (6,709
    )Provision for loan losses
    
    
    583
    
    
    
    (399
    )
    
    
    1,202
    
    
    
    27,530
    
    
    
    8,733Balance at end of period
    
    $
    4,700
    
    
    $
    4,899
    
    
    $
    10,181
    
    
    $
    17,694
    
    
    $
    9,239Ratio of net charge-offs during the period to
average loans outstanding during the period
    
    
    0.63
    %
    
    
    1.80
    %
    
    
    2.26
    %
    
    
    3.27
    %
    
    
    1.15
    %
 
 (1)
    
    Net of unearned income and deferred loan fees, including loans held for sale 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.




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##### Table of Contents



IV.
    
    SUMMARY OF LOAN LOSS EXPERIENCE(Continued)
 B.
    
    The following schedule is 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
    
    
    
    
    
    
    of Loans
    
    
    
    
    
    
    of Loans
    
    
    
    
    
    
    of Loans
    
    
    
    
    
    
    of LoansIn Each
    
    
    
    
    
    
    In Each
    
    
    
    
    
    
    In Each
    
    
    
    
    
    
    In Each
    
    
    
    
    
    
    In 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, 2005
    
    
    December 31, 2004
    
    
    December 31, 2003
    
    
    December 31, 2002
    
    
    December 31, 2001*(dollars in thousands)Commercial and agricultural
    
    $
    3,728
    
    
    
    57.3
    %
    
    $
    4,502
    
    
    
    61.9
    %
    
    $
    9,649
    
    
    
    66.3
    %
    
    $
    16,518
    
    
    
    66.0
    %
    
    $
    8,222
    
    
    
    64.7
    %Residential first mortgage
    
    
    291
    
    
    
    27.2
    
    
    
    141
    
    
    
    24.1
    
    
    
    75
    
    
    
    16.4
    
    
    
    204
    
    
    
    17.3
    
    
    
    126
    
    
    
    17.8Consumer loans to
individuals
    
    
    681
    
    
    
    15.5
    
    
    
    256
    
    
    
    14.0
    
    
    
    457
    
    
    
    17.3
    
    
    
    972
    
    
    
    16.7
    
    
    
    891
    
    
    
    17.5Unallocated
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    N/A
    
    
    
    *
    
    
    
    N/A
    
    
    
    *
    
    
    
    N/A$
    4,700
    
    
    
    100.0
    %
    
    $
    4,899
    
    
    
    100.0
    %
    
    $
    10,181
    
    
    
    100.0
    %
    
    $
    17,694
    
    
    
    100.0
    %
    
    $
    9,239
    
    
    
    100.0
    %
 
 *
    
    In 2001, management established a revised methodology for allocating the allowance for loan
losses which includes identifying specific allocations for impaired and problem loans and
quantifying general allocations for other loans based on a detailed evaluation of historical
loss ratios. Adjustments are then made to these amounts based on various quantifiable
information related to individual portfolio risk factors. Additional adjustments are made
based on local and national economic trends and their estimated impact on the industries to
which the Company and its subsidiaries extend credit. Prior to 2001, individual portfolio
risk factors allocations were made on a more subjective basis. Management believes the new
methodology more appropriately allocates the allowance for known and inherent risks within the
individual loan portfolios.  20.




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##### Table of Contents



V.
    
    DEPOSITS
  2 0 0 5
    
    
    2 0 0 4
    
    
    2 0 0 3Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(dollars in thousands)Savings and interest-bearing demand deposits
    
    $
    102,453
    
    
    
    0.70
    %
    
    $
    94,051
    
    
    
    0.37
    %
    
    $
    124,828
    
    
    
    0.63
    %Time deposits
    
    
    167,140
    
    
    
    2.95
    
    
    
    162,865
    
    
    
    2.58
    
    
    
    267,227
    
    
    
    3.46Demand deposits (non-interestbearing)
    
    
    36,675
    
    
    
    
    
    
    
    38,134
    
    
    
    
    
    
    
    43,729
    
    
    
    $
    306,268
    
    
    
    
    
    
    $
    295,050
    
    
    
    
    
    
    $
    435,784
  AmountThree months or less
    
    $
    16,083Over three months and through six months
    
    
    18,150Over six months and through twelve months
    
    
    9,314Over twelve months
    
    
    15,720$
    59,267
 21.




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##### Table of Contents



VI.
    
    RETURN ON EQUITY AND ASSETS
  2005
    
    
    2004
    
    
    2003(dollars in thousands)Average total assets
    
    $
    433,367
    
    
    $
    417,801
    
    
    $
    549,371Average shareholders equity
    
    $
    51,083
    
    
    $
    49,279
    
    
    $
    44,599Net income
    
    $
    673
    
    
    $
    2,734
    
    
    $
    12,305Cash dividends declared
    
    $
    914
    
    
    $
    
    
    
    $
    Return on average total assets
    
    
    0.16
    %
    
    
    0.65
    %
    
    
    2.24
    %Return on average share-
holders equity
    
    
    1.32
    %
    
    
    5.55
    %
    
    
    27.59
    %Dividend payout ratio (1)
    
    
    133.33
    
    
    
    N/A
    
    
    
    N/AAverage shareholders equity
to average total assets
    
    
    11.79
    %
    
    
    11.79
    %
    
    
    8.12
    %
 
 (1)
    
    Cash dividends declared divided by net income. VII.
    
    SHORT-TERM BORROWINGS
   2003(dollars in  thousands)Amount outstanding at end of year
    
    $
    13,924Weighted average interest rate at end of year
    
    
    1.08
    %Maximum amount outstanding at any month end
    
    $
    15,765Average amount outstanding during the year
    
    $
    11,144Weighted average interest rate during the year
    
    
    1.17
    %
 22.




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##### 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.
  23.




---



##### Table of Contents



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




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##### Table of Contents



Our success depends upon our ability to attract and retain key personnel.
  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.
  A limited trading market exists for our common shares which could lead to price volatility.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties.
  25.




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##### Table of Contents



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 in 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 1796 North Clinton
Street, Defiance, Ohio. (Banking)5.
    
    State Bank owns a full service 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)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)
  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 940 Clarion Avenue,
Holland, Ohio. (Banking)4.
    
    Exchange owns a full service branch office located at 610 East South
Boundary, Perrysburg, Ohio. (Banking)
 26.




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##### Table of Contents



5.
    
    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.




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##### Table of Contents



Supplemental Item: Executive Officers of the Registrant
  Position(s) Held with the Company andName
    
    Age
    
    its Subsidiaries and Principal Occupation(s)Steven D. VanDemark
    
    
    53
    
    
    Chairman of the Board of Directors of the
Company since 1992; Chairman of the Board of
Directors of State Bank since 1992; Director
of State Bank since 1990; Director of RDSI
since 1997; Director of RFCBC since 2004;
General Manager of Defiance Publishing
Company, Defiance, Ohio, a newspaper
publisher, since 1985.Kenneth A. Joyce
    
    
    58
    
    
    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; Director of Exchange since January
2006; and; Director of ROC since January
2006.Henry R. Thiemann
    
    
    59
    
    
    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.Jeffrey D. Sewell
    
    
    47
    
    
    President and Chief Executive Officer of ROC
since December 2005; Executive Vice President
and Chief Operating Officer of State Bank
from June 2005 to December 2005; Chairman of
the Board of Directors of RFS since January
2006; President of RFS from 2002 to June
2005; Trust Operation Supervisor 1998 to 2002
of RFS; Director of RDSI since 2005; Director
of RFS since 2002 and; Director of ROC since
January 2006.Duane L. Sinn
    
    
    35
    
    
    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.
 28.




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##### Table of Contents



Position(s) Held with the Company andName
    
    Age
    
    its Subsidiaries and Principal Occupation(s)Mark A. Klein
    
    
    51
    
    
    President and Chief Executive Officer of
State Bank since January 2006; Senior Vice
President Private Banking of Sky Bank,
Toledo, OH from 2004 to January 2006; Vice
President and Team Leader of Sky Bank,
Toledo, OH from 2000 to 2004; Director of
State Bank since 2006 and; Director of ROC
since January 2006.
 
 PART II
 
 Item 5. Market for Registrants Common Shares and Related Shareholder Matters
  Per Share
    
    Per ShareBid Prices
    
    Dividends2005
    
    High
    
    Low
    
    DeclaredFirst Quarter
    
    $
    14.49
    
    
    $
    13.50
    
    
    $
    .050Second Quarter
    
    
    14.47
    
    
    
    12.65
    
    
    
    .050Third Quarter
    
    
    13.50
    
    
    
    12.50
    
    
    
    .050Fourth Quarter
    
    
    13.00
    
    
    
    11.50
    
    
    
    .050
 2004First Quarter
    
    $
    15.50
    
    
    $
    13.32
    
    
    $
    .000Second Quarter
    
    
    15.15
    
    
    
    11.25
    
    
    
    .000Third Quarter
    
    
    13.15
    
    
    
    11.90
    
    
    
    .000Fourth Quarter
    
    
    14.25
    
    
    
    12.57
    
    
    
    .000
   29.




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##### Table of Contents



Item 6. Selected Financial Data .
 SUMMARY OF SELECTED FINANCIAL DATA
 FINANCIAL HIGHLIGHTS
  Year Ended December 312005
    
    2004
    
    2003
    
    2002
    
    2001EARNINGSInterest income
    
    $
    21,422
    
    
    $
    20,028
    
    
    $
    27,774
    
    
    $
    48,591
    
    
    $
    56,519Interest expense
    
    
    9,368
    
    
    
    7,951
    
    
    
    13,972
    
    
    
    24,813
    
    
    
    30,778Net interest income
    
    
    12,054
    
    
    
    12,077
    
    
    
    13,802
    
    
    
    23,778
    
    
    
    25,741Provision for loan losses
    
    
    583
    
    
    
    (399
    )
    
    
    1,202
    
    
    
    27,531
    
    
    
    8,733Noninterest income
    
    
    17,471
    
    
    
    16,691
    
    
    
    34,687
    
    
    
    13,779
    
    
    
    14,162Noninterest expense
    
    
    28,187
    
    
    
    25,324
    
    
    
    28,678
    
    
    
    30,479
    
    
    
    28,018Provision (credit)
for income taxes
    
    
    81
    
    
    
    1,109
    
    
    
    6,303
    
    
    
    (7,044
    )
    
    
    899Net income (loss)
    
    
    673
    
    
    
    2,734
    
    
    
    12,305
    
    
    
    (13,408
    )
    
    
    2,253PEP SHARE DATA (1)Basic earnings
    
    $
    0.15
    
    
    $
    0.60
    
    
    $
    2.71
    
    
    ($
    2.95
    )
    
    $
    0.50Diluted earnings
    
    
    0.15
    
    
    
    0.60
    
    
    
    2.70
    
    
    
    (2.95
    )
    
    
    0.50Cash dividends declared
    
    
    0.20
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    0.26
    
    
    
    0.47AVERAGE BALANCESAverage shareholders
equity
    
    $
    51,083
    
    
    $
    49,279
    
    
    $
    44,599
    
    
    $
    44,674
    
    
    $
    52,708Average total assets
    
    
    433,367
    
    
    
    417,801
    
    
    
    549,371
    
    
    
    791,091
    
    
    
    722,827RATIOSReturn on average
shareholders equity
    
    
    1.32
    %
    
    
    5.55
    %
    
    
    27.59
    %
    
    
    (30.01
    )%
    
    
    4.27
    %Return on average total
assets
    
    
    0.16
    
    
    
    0.65
    
    
    
    2.24
    
    
    
    (1.69
    )
    
    
    0.31Cash dividend payout
ratio (cash dividends
divided by net income)
    
    
    133.33
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    95.80Average shareholders
equity to average total
assets
    
    
    11.79
    
    
    
    11.79
    
    
    
    8.12
    
    
    
    5.65
    
    
    
    7.29PERIOD END TOTALSTotal assets
    
    $
    530,542
    
    
    $
    415,349
    
    
    $
    435,312
    
    
    $
    742,317
    
    
    $
    746,209Total investments and
fed funds sold
    
    
    139,353
    
    
    
    108,720
    
    
    
    117,699
    
    
    
    129,109
    
    
    
    101,140Total loans and leases
    
    
    327,048
    
    
    
    264,481
    
    
    
    284,104
    
    
    
    487,475
    
    
    
    600,291Loans held for sale
    
    
    224
    
    
    
    113
    
    
    
    219
    
    
    
    63,536
    
    
    
    440Total deposits
    
    
    384,838
    
    
    
    279,624
    
    
    
    317,475
    
    
    
    636,035
    
    
    
    610,860Notes Payable
    
    
    939
    
    
    
    3,080
    
    
    
    10,328
    
    
    
    6,000
    
    
    
    0Advances from FHLB
    
    
    45,500
    
    
    
    56,000
    
    
    
    39,000
    
    
    
    47,850
    
    
    
    54,275Trust Preferred Securities
    
    
    20,620
    
    
    
    10,310
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000Shareholders equity
    
    
    54,451
    
    
    
    50,306
    
    
    
    48,383
    
    
    
    36,382
    
    
    
    50,829Shareholders equity
per share (1)
    
    
    10.83
    
    
    
    11.01
    
    
    
    10.60
    
    
    
    7.97
    
    
    
    11.14
 (1)
    
    Per share data restated for 5% stock dividend declared in 2000 and 2001. 30.




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
   Critical Accounting Policies
  Allowance for Loan Losses 
   31.




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##### Table of Contents



Goodwill
and Other Intangibles 
 Impact of Accounting Changes
   Acquisitions
 Lima Branches
   32.




---



##### Table of Contents



Loans
    
    $
    5,887,339Core deposit intangible
    
    
    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 assumed
    
    
    60,491,687Net liabilities assumed
    
    $
    (48,636,044
    )
   Exchange Bancshares, Inc.
    33.




---



##### Table of Contents



Cash and cash equivalents
    
    $
    2,292,907Investments
    
    
    16,703,037Loans
    
    
    56,147,296Core deposit intangible
    
    
    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
  EARNINGS SUMMARY
   CHANGES IN FINANCIAL CONDITION
  34.




---



##### Table of Contents



Significant Events of 2005
          35.




---



##### Table of Contents



RESULTS OF OPERATIONS
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    %Change
    
    
    2004
    
    
    2003
    
    
    %Change(dollars in thousands except per share data)Total Assets
    
    $
    530,542
    
    
    $
    415,349
    
    
    
    +28
    %
    
    $
    415,349
    
    
    $
    435,312
    
    
    
    -5
    %Total Securities
    
    $
    139,353
    
    
    $
    108,720
    
    
    
    +28
    %
    
    $
    108,720
    
    
    $
    107,699
    
    
    
    1
    %Loans Held for Sale
    
    
    224
    
    
    
    113
    
    
    
    
    N/A
    
    
    113
    
    
    
    219
    
    
    
    
    N/ALoans (Net)
    
    
    322,348
    
    
    
    259,582
    
    
    
    +24
    %
    
    
    259,582
    
    
    
    273,923
    
    
    
    -5
    %Allowance for Loan Losses
    
    
    4,700
    
    
    
    4,899
    
    
    
    -4
    %
    
    
    4,899
    
    
    
    10,181
    
    
    
    -52
    %Total Deposits
    
    
    384,838
    
    
    
    279,624
    
    
    
    +38
    %
    
    
    279,624
    
    
    
    317,475
    
    
    
    -12
    %Total Revenues (Net)
    
    
    29,525
    
    
    
    28,768
    
    
    
    +3
    %
    
    
    28,768
    
    
    
    48,489
    
    
    
    -41
    %Net Interest Income
    
    
    12,054
    
    
    
    12,077
    
    
    
    
    
    
    
    12,077
    
    
    
    13,802
    
    
    
    -12
    %Loan Loss Provision (credit)
    
    
    583
    
    
    
    (399
    )
    
    
    
    N/A
    
    
    (399
    )
    
    
    1,202
    
    
    
    +133
    %Noninterest Income
    
    
    17,471
    
    
    
    16,691
    
    
    
    +5
    %
    
    
    16,691
    
    
    
    34,687
    
    
    
    -52
    %Non-interest Expense
    
    
    28,187
    
    
    
    25,324
    
    
    
    +11
    %
    
    
    25,324
    
    
    
    28,678
    
    
    
    -12
    %Net Income
    
    
    673
    
    
    
    2,734
    
    
    
    
    N/A
    
    
    2,734
    
    
    
    12,305
    
    
    
    
    N/ABasic Earnings per Share
    
    $
    0.15
    
    
    $
    0.60
    
    
    
    
    N/A
    
    $
    0.60
    
    
    $
    2.71
    
    
    
    
    N/ADiluted Earnings per Share
    
    $
    0.15
    
    
    $
    0.60
    
    
    
    
    N/A
    
    $
    0.60
    
    
    $
    2.70
    
    
    
    
    N/A
 Net Interest Income
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    % Change
    
    
    2004
    
    
    2003
    
    
    % Change(dollars in thousands)Net Interest Income
    
    $
    12,054
    
    
    $
    12,077
    
    
    
    
    
    
    $
    12,077
    
    
    $
    13,802
    
    
    
    -12
    %
 Net interest income
 36.




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##### Table of Contents



Net interest income
 Loan Loss Provision
 The provision for loan losses
 The provision for loan losses
 Non-interest Income
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    % Change
    
    
    2004
    
    
    2003
    
    
    % Change(dollars in thousands)Total Non-interest Income
    
    $
    17,471
    
    
    $
    16,691
    
    
    
    +5
    %
    
    $
    16,691
    
    
    $
    34,687
    
    
    
    -52
    %- Data Service Fees
    
    $
    11,842
    
    
    $
    10,478
    
    
    
    +13
    %
    
    $
    10,478
    
    
    $
    8,972
    
    
    
    +17
    %- Trust Fees
    
    $
    3,133
    
    
    $
    3,042
    
    
    
    +3
    %
    
    $
    3,042
    
    
    $
    2,602
    
    
    
    +17
    %- Deposit Service Fees
    
    $
    1,860
    
    
    $
    1,985
    
    
    
    -6
    %
    
    $
    1,985
    
    
    $
    2,179
    
    
    
    -9
    %- Gains on Sale of Loans
    
    $
    (437
    )
    
    $
    41
    
    
    
    
    N/A
    
    $
    41
    
    
    $
    416
    
    
    
    -90
    %- Gains on Sale of Branches
    
    $
    
    
    
    $
    
    
    
    
    
    N/A
    
    $
    
    
    
    $
    19,901
    
    
    
    
    N/A- Gains (losses) on Sale of
Securities
    
    $
    25
    
    
    $
    241
    
    
    
    
    N/A
    
    $
    241
    
    
    $
    24
    
    
    
    
    N/A- Other
    
    $
    1,048
    
    
    $
    904
    
    
    
    +16
    %
    
    $
    904
    
    
    $
    593
    
    
    
    +52
    %
 37.




---



##### Table of Contents



Total non-interest income
 Total non-interest income
 Rurbanc Data Services, Inc. (RDSI)
 Year Ended
    
    Year EndedDecember 31,
    
    December 31,2005
    
    2004
    
    % Change
    
    2004
    
    2003
    
    % Change(Dollars in thousands)Data Service Fees
    
    $
    11,842
    
    
    $
    10,478
    
    
    
    +13
    %
    
    $
    10,478
    
    
    $
    8,972
    
    
    
    +17
    %
 Data service fees
 RDSI provides
 38.




---



##### Table of Contents



RDSIs growth
 Non-interest Expense
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    % Change
    
    
    2004
    
    
    2003
    
    
    % Change(dollars in thousands)Total Non-interest Expense
    
    $
    28,187
    
    
    $
    25,324
    
    
    
    +11
    %
    
    $
    25,324
    
    
    $
    28,678
    
    
    
    -12
    %- Salaries & Employee Benefits
    
    $
    13,519
    
    
    $
    12,993
    
    
    
    +4
    %
    
    $
    12,993
    
    
    $
    13,428
    
    
    
    -3
    %- Professional Fees
    
    $
    2,730
    
    
    $
    2,253
    
    
    
    +21
    %
    
    $
    2,253
    
    
    $
    4,172
    
    
    
    -46
    %- All Other
    
    $
    11,938
    
    
    $
    10,078
    
    
    
    +18
    %
    
    $
    10,078
    
    
    $
    11,078
    
    
    
    -9
    %
 Non-interest expense
 Non-interest expense
 FINANCIAL CONDITION
 Investments
   39.




---



##### Table of Contents



Loans
 Period Ended% of
    
    
    
    
    
    
    % of
    
    
    %
    
    
    
    
    
    
    % of
    
    
    %12/31/05
    
    
    Total
    
    
    12/31/04
    
    
    Total
    
    
    Inc/(Dec)
    
    
    12/31/03
    
    
    Total
    
    
    Inc/(Dec)(dollars in thousands)Commercial
    
    $
    79,359
    
    
    
    24
    %
    
    $
    58,499
    
    
    
    22
    %
    
    
    36
    %
    
    $
    89,471
    
    
    
    31
    %
    
    
    (35
    )%Commercial r.e.
    
    
    68,072
    
    
    
    21
    %
    
    
    64,107
    
    
    
    24
    %
    
    
    6
    %
    
    
    62,340
    
    
    
    22
    %
    
    
    3
    %Agricultural
    
    
    40,236
    
    
    
    12
    %
    
    
    41,240
    
    
    
    16
    %
    
    
    (2
    )%
    
    
    36,722
    
    
    
    13
    %
    
    
    12
    %Residential
    
    
    89,086
    
    
    
    27
    %
    
    
    63,828
    
    
    
    24
    %
    
    
    40
    %
    
    
    46,718
    
    
    
    16
    %
    
    
    37
    %Consumer
    
    
    48,877
    
    
    
    15
    %
    
    
    31,949
    
    
    
    12
    %
    
    
    53
    %
    
    
    37,310
    
    
    
    13
    %
    
    
    (14
    )%Leases
    
    
    1,661
    
    
    
    1
    %
    
    
    5,127
    
    
    
    2
    %
    
    
    (68
    )%
    
    
    11,774
    
    
    
    5
    %
    
    
    (56
    )%Loans
    
    $
    327,291
    
    
    
    
    
    
    $
    264,750
    
    
    
    
    
    
    
    24
    %
    
    $
    284,335
    
    
    
    
    
    
    
    (7
    )%Loans held for sale
    
    
    224
    
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    219Total
    
    $
    327,515
    
    
    
    
    
    
    $
    264,863
    
    
    
    
    
    
    
    
    
    
    $
    284,554
 Loans
 
 Asset Quality
 Period Ended December 31,(dollars in millions)Change in
    
    
    
    
    
    
    Change inDollars/
    
    
    
    
    
    
    Dollars/12/31/05
    
    
    12/31/04
    
    
    Percentages
    
    
    12/31/03
    
    
    percentagesNon-performing loans
    
    $
    6.3
    
    
    $
    14.4
    
    
    $
    -8.1
    
    
    $
    18.4
    
    
    $
    -4.0Non-performing assets
    
    $
    8.9
    
    
    $
    15.4
    
    
    $
    -6.5
    
    
    $
    19.9
    
    
    $
    -4.5Non-performing assets/loans
plus OREO
    
    
    2.70
    %
    
    
    5.80
    %
    
    
    -3.10
    %
    
    
    6.96
    %
    
    
    -1.16
    %Non-performing assets/total
assets
    
    
    1.67
    %
    
    
    3.71
    %
    
    
    -2.04
    %
    
    
    4.57
    %
    
    
    -0.86
    %Net chargeoffs
    
    $
    1.7
    
    
    $
    4.9
    
    
    $
    -3.2
    
    
    $
    8.7
    
    
    $
    -3.8Net chargeoffs/total loans
    
    
    0.52
    %
    
    
    1.81
    %
    
    
    -1.29
    %
    
    
    3.06
    %
    
    
    -1.25
    %Loan loss provision (credit)
    
    $
    .6
    
    
    $
    (.4
    )
    
    $
    +1.0
    
    
    $
    1.2
    
    
    $
    -1.6Allowance for loan losses
    
    $
    4.7
    
    
    $
    4.9
    
    
    $
    -0.2
    
    
    $
    10.2
    
    
    $
    -5.3Allowance/loans
    
    
    1.44
    %
    
    
    1.85
    %
    
    
    -0.41
    %
    
    
    3.58
    %
    
    
    -1.73
    %Allowance/non-performing
loans
    
    
    75
    %
    
    
    34
    %
    
    
    +41
    %
    
    
    55
    %
    
    
    -21
    %Allowance/non-performing
assets
    
    
    53
    %
    
    
    32
    %
    
    
    +21
    %
    
    
    51
    %
    
    
    -19
    %
 Asset quality
 Allowance for Loan Losses
  
    
    Grade 5  Special Mention: Potential weaknesses that
deserve managements close attention
    
    Grade 6  Substandard: Inadequately protected, with
well-defined weakness that jeopardize liquidation of debt
 40.




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##### Table of Contents




    
    Grade 7  Doubtful: Inherent weaknesses well-defined and
high probability of loss (impaired)
    
    Grade 8  Loss: Considered uncollectible. May have
recovery or salvage value with future collection efforts (these loans
are either fully reserved or charged off)
 allowance for loan losses
 12/31/05
    
    
    12/31/04
    
    
    Increase (Decrease)Loan
    
    
    Allocation
    
    
    Loan
    
    
    Allocation
    
    
    Loan
    
    
    AllocationBalance
    
    
    $
    
    
    %
    
    
    Balance
    
    
    $
    
    
    %
    
    
    Balance
    
    
    $
    
    
    %Allocations for
individual loans
graded doubtful
(impaired)
    
    $
    6.1
    
    
    $
    2.0
    
    
    
    32.79
    %
    
    $
    11.4
    
    
    $
    1.3
    
    
    
    11.40
    %
    
    $
    -5.3
    
    
    $
    0.7
    
    
    
    21.39
    %Allocations for
individual loans
graded substandard
    
    
    7.7
    
    
    
    0.5
    
    
    
    6.49
    
    
    
    15.5
    
    
    
    1.0
    
    
    
    6.45
    
    
    
    -7.8
    
    
    
    -0.5
    
    
    
    0.04Allocations for
individual loans
graded special
mention*
    
    
    12.2
    
    
    
    0.4
    
    
    
    3.28
    
    
    
    13.6
    
    
    
    0.4
    
    
    
    2.94
    
    
    
    -1.4
    
    
    
    
    
    
    
    0.34General allowance
based on chargeoff
history of nine
categories of loans
    
    
    301.5
    
    
    
    1.8
    
    
    
    0.60
    
    
    
    224.4
    
    
    
    2.2
    
    
    
    0.98
    
    
    
    77.1
    
    
    
    -0.4
    
    
    
    -0.38TOTAL
    
    $
    327.5
    
    
    $
    4.7
    
    
    
    1.44
    %
    
    $
    264.9
    
    
    $
    4.9
    
    
    
    1.85
    %
    
    $
    62.6
    
    
    $
    -0.2
    
    
    
    -0.41
    %
 
 *
    
    The Company changed its methodology during 2003. Special Mention loans are allocated at 3%.    
    
    Borrower financial information received;
    
    Physical inspections of collateral securing loans performed, new
appraisals of collateral securing loans received, and other
information regarding borrower collateral levels; and
    
    Consideration of exposures to industries potentially most affected
by current risks in the economic and political environment.
 CAPITAL RESOURCES
 Stockholders equity
 Total consolidated regulatory (risk-based) capital
 41.




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##### Table of Contents



Planned Purchases of Premises and Equipment
 Management plans to purchase
 LIQUIDITY
 Liquidity relates primarily
 The Companys residential first mortgage portfolio
 The cash flow statements
 The Company experienced
 Net cash flow from investing activities
 Net cash flow from financing activities
 42.




---



##### 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
    
    $
    45,500,000
    
    
    $
    16,500,000
    
    
    
    5,000,000
    
    
    $
    5,000,000
    
    
    $
    19,000,000Other Debt Obligations
    
    
    21,558,572
    
    
    
    451,681
    
    
    
    486,891
    
    
    
    0
    
    
    
    20,620,000Capital Lease Obligations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Operating Lease Obligations
    
    
    2,040,696
    
    
    
    261,600
    
    
    
    523,200
    
    
    
    523,200
    
    
    
    732,696Purchase Obligations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Other Long-Term
Liabilities Reflected on
the Registrants Balance
Sheet under GAAP
    
    
    208,558,046
    
    
    
    138,786,242
    
    
    
    63,928,459
    
    
    
    4,998,570
    
    
    
    844,775Total
    
    $
    277,657,314
    
    
    $
    155,999,523
    
    
    $
    69,938,550
    
    
    $
    10,521,770
    
    
    $
    41,197,471
  
 43.




---



##### Table of Contents



ASSET LIABILITY MANAGEMENT
 Asset liability management
 Interest rate risk
 Evaluating a financial institutions exposure
 The Federal Reserve Board
 Financial institutions
 There are several ways
 44.




---



##### Table of Contents



Quantitative Market Risk Disclosure.
 45.




---



##### Table of Contents



Principal/Notional Amount Maturing or Assumed to be Withdrawn In:
(Dollars in thousands)
 2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    TotalRate-sensitive assetsVariable rate loans
    
    $
    60,603
    
    
    $
    11,792
    
    
    $
    5,792
    
    
    $
    3,111
    
    
    $
    1,730
    
    
    $
    1,930
    
    
    $
    84,958Average interest rate
    
    
    7.51
    %
    
    
    7.05
    %
    
    
    7.02
    %
    
    
    7.01
    %
    
    
    6.97
    %
    
    
    6.96
    %
    
    
    7.37
    %Adjustable rate loans
    
    $
    24,720
    
    
    $
    19,834
    
    
    $
    14,301
    
    
    $
    14,188
    
    
    $
    9,623
    
    
    $
    48,215
    
    
    $
    130,881Average interest rate
    
    
    6.22
    %
    
    
    6.18
    %
    
    
    6.01
    %
    
    
    5.95
    %
    
    
    5.99
    %
    
    
    5.93
    %
    
    
    6.04
    %Fixed rate loans
    
    $
    37,928
    
    
    $
    21,925
    
    
    $
    13,593
    
    
    $
    9,130
    
    
    $
    6,400
    
    
    $
    22,700
    
    
    $
    111,676Average interest rate
    
    
    5.95
    %
    
    
    5.97
    %
    
    
    6.08
    %
    
    
    5.90
    %
    
    
    5.75
    %
    
    
    5.40
    %
    
    
    5.84
    %Total loans
    
    $
    123,251
    
    
    $
    53,551
    
    
    $
    33,686
    
    
    $
    26,429
    
    
    $
    17,753
    
    
    $
    72,845
    
    
    $
    327,515Average interest rate
    
    
    6.77
    %
    
    
    6.29
    %
    
    
    6.21
    %
    
    
    6.06
    %
    
    
    6.00
    %
    
    
    5.79
    %
    
    
    6.32
    %Fixed rate investment securities
    
    $
    88,439
    
    
    $
    10,973
    
    
    $
    8,621
    
    
    $
    5,597
    
    
    $
    310
    
    
    $
    15,720
    
    
    $
    129,660Average interest rate
    
    
    4.08
    %
    
    
    3.74
    %
    
    
    4.12
    %
    
    
    4.04
    %
    
    
    3.90
    %
    
    
    4.36
    %
    
    
    4.09
    %Variable rate investment securities
    
    $
    4,031
    
    
    $
    3,063
    
    
    $
    1,938
    
    
    $
    589
    
    
    $
    231
    
    
    $
    3,449
    
    
    $
    13,301Average interest rate
    
    
    4.54
    %
    
    
    4.45
    %
    
    
    4.32
    %
    
    
    4.21
    %
    
    
    4.40
    %
    
    
    4.53
    %
    
    
    4.47
    %Federal Funds Sold & Other
    
    $
    0
    
    
    $
    0
    
    
    $
    150
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    150Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    2.64
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    2.64
    %Total rate sensitive assets
    
    $
    215,721
    
    
    $
    67,587
    
    
    $
    44,395
    
    
    $
    32,615
    
    
    $
    18,294
    
    
    $
    92,014
    
    
    $
    470,626Average interest rate
    
    
    5.63
    %
    
    
    5.79
    %
    
    
    5.71
    %
    
    
    5.68
    %
    
    
    5.94
    %
    
    
    5.50
    %
    
    
    5.65
    %Rate sensitive liabilities:Demand  non interest-bearing
    
    $
    10,440
    
    
    $
    10,441
    
    
    $
    10,441
    
    
    $
    10,441
    
    
    $
    10,310
    
    
    $
    0
    
    
    $
    52,073Demand  interest bearing
    
    $
    9,972
    
    
    $
    9,972
    
    
    $
    9,972
    
    
    $
    9,972
    
    
    $
    9,872
    
    
    $
    0
    
    
    $
    49,760Average interest rate
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    1.19
    %
    
    
    0.00
    %
    
    
    1.19
    %Money market accounts
    
    $
    8,440
    
    
    $
    8,440
    
    
    $
    8,440
    
    
    $
    8,440
    
    
    $
    8,356
    
    
    $
    0
    
    
    $
    42,116Average interest rate
    
    
    1.18
    %
    
    
    1.22
    %
    
    
    1.22
    %
    
    
    1.22
    %
    
    
    1.22
    %
    
    
    0.00
    %
    
    
    1.21
    %Savings
    
    $
    7,538
    
    
    $
    7,413
    
    
    $
    7,413
    
    
    $
    7,413
    
    
    $
    7,373
    
    
    $
    0
    
    
    $
    37,150Average interest rate
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.59
    %
    
    
    0.00
    %
    
    
    0.59
    %Certificates of deposit
    
    $
    137,036
    
    
    $
    51,616
    
    
    $
    10,266
    
    
    $
    2,799
    
    
    $
    1,178
    
    
    $
    844
    
    
    $
    203,739Average interest rate
    
    
    3.15
    %
    
    
    3.69
    %
    
    
    3.30
    %
    
    
    3.28
    %
    
    
    3.92
    %
    
    
    3.93
    %
    
    
    3.30
    %Fixed rate FHLB advances
    
    $
    5,000
    
    
    $
    0
    
    
    $
    5,000
    
    
    $
    1,000
    
    
    $
    4,000
    
    
    $
    19,000
    
    
    $
    34,000Average interest rate
    
    
    2.84
    %
    
    
    0.00
    %
    
    
    5.53
    %
    
    
    4.52
    %
    
    
    6.25
    %
    
    
    3.96
    %
    
    
    4.31
    %Variable rate FHLB advances
    
    $
    11,500
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    11,500Average interest rate
    
    
    4.33
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    4.33
    %Fixed rate Notes Payable
    
    $
    240
    
    
    $
    0
    
    
    $
    20
    
    
    $
    679
    
    
    $
    0
    
    
    $
    20,620
    
    
    $
    21,559Average interest rate
    
    
    7.25
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    6.50
    %
    
    
    0.00
    %
    
    
    8.25
    %
    
    
    8.17
    %Variable rate Notes Payable
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Fed Funds Purchased & Repos
    
    $
    10,680
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    10,680Average interest rate
    
    
    3.40
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    3.40
    %Total rate sensitive liabilities
    
    $
    200,846
    
    
    $
    87,882
    
    
    $
    51,552
    
    
    $
    40,744
    
    
    $
    41,089
    
    
    $
    40,464
    
    
    $
    462,577Average interest rate
    
    
    2.79
    %
    
    
    2.47
    %
    
    
    1.71
    %
    
    
    1.10
    %
    
    
    1.36
    %
    
    
    6.14
    %
    
    
    2.62
    %
 46.




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##### Table of Contents



Principal/Notional Amount Maturing or Assumed to be Withdrawn In:
(Dollars in Thousands)
 First
    
    
    YearsYear
    
    
    2  5
    
    
    Thereafter
    
    
    TotalComparison of 2005 to 2004:Total rate-sensitive assets:At December 31, 2005
    
    $
    215,721
    
    
    $
    162,891
    
    
    $
    92,014
    
    
    $
    470,626At December 31, 2004
    
    
    131,266
    
    
    
    151,944
    
    
    
    93,317
    
    
    
    376,527Increase (decrease)
    
    $
    84,455
    
    
    $
    10,947
    
    
    $
    (1,303
    )
    
    $
    94,099Total rate-sensitive liabilities:At December 31, 2005
    
    $
    200,846
    
    
    $
    221,267
    
    
    $
    40,464
    
    
    $
    462,577At December 31, 2004
    
    $
    152,986
    
    
    $
    174,129
    
    
    $
    33,459
    
    
    $
    360,574Increase (decrease)
    
    $
    47,860
    
    
    $
    47,138
    
    
    $
    7,005
    
    
    $
    102,003
 The above table
 The Company manages
 Impact of Inflation and Changing Prices
 The majority of assets and liabilities
 Management believes
 47.




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##### Table of Contents



Forward-Looking Statements
 When used in this filing
 The Company wishes to caution
 The Company does not undertake,
 48.




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##### Table of Contents



Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
  
 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
  49.




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##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10.
Directors and Executive Officers of the Registrant
     
 Item 11.
Executive Compensation
  50.




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##### Table of Contents



Supplemental Executive Retirement Plan Agreements
  th nd
 or
  
    
    a portion of the executive officers Annual Direct Salary (15% for Mr.
Joyce, 10% for Messrs. Sinn and Thiemann, and 5% for Messrs. Klein and Sewell) if
the executive officer terminates employment after age 55 and before age 60;
    
    a portion of the executive officers Annual Direct Salary (20% for Mr.
Joyce, 15% Messrs. Sinn and Thiemann, and 10% for Messrs. Klein and Sewell) if the
executive officer terminates employment after age 60 and before age 65 (after age
59 and before age 61 for Mr. Joyce); or
    
    a portion of the executive officers Annual Direct Salary (25% for Mr.
Joyce; 20% for Messrs. Sinn and Thiemann, and 15% for Mr. Klein and Mr. Sewell) if
the executive officer terminates employment at age 65 (age 62 for Mr. Joyce).
 51.




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##### Table of Contents



Termination for Cause or Without
Good Reason
    
    
    providing financial or executive assistance to any person or entity
(1) located within 50 miles of the office of the Company or its subsidiary at which
the executive officer works and (2) engaged in the banking or financial services
industry or any other activity engaged in by the Company or its subsidiaries at the
beginning of the non-competition period;
    
    directly or indirectly soliciting, inducing or encouraging any of the
customers or referral sources of the Company and its subsidiaries (who were
customers or referral sources during the executive officers employment) to become
a customer or referral source of another company; and
    
    directly or indirectly contacting, soliciting or inducing any of the
employees of the Company and its subsidiaries (who were employees during the
executive officers employment) to terminate their employment with the Company or
its subsidiaries or to seek, obtain or accept employment with another company.
   52.




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##### Table of Contents



Change in Control Agreements
   
    
    the last day of the twelfth complete calendar month beginning after
the change in control;
    
    60 days after the date the executive officer learns of an event
occurring during the Protection Period which falls within the definition of Good
Reason and which the Company or its successor concealed (the Change in Control
Agreements use substantially the same definition of Good Reason described below
under Employment Agreement  Termination by the Company Without Cause or by Mr.
Joyce for Good Reason); and
    
    60 days after the conclusion of an unsuccessful attempt to terminate
the executive officer for Cause (the Change in Control Agreements use
substantially the same definition of Cause described below under Employment
Agreement  Termination for Cause or Without
Good Reason).
  
    
    the executive officers employment is terminated before the beginning
of a Protection Period;
    
    the executive officer is reassigned before the beginning of a
Protection Period to a more junior position (unless a majority of the employees in
the new job classification have change in control agreements);
 53.




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##### Table of Contents




    
    the executive officer agrees to terminate his Change in Control
Agreement; or
    
    all payments due to the executive officer under the Change in Control
Agreement have been paid.
  
    
    any transaction that would be required to be reported in a proxy
statement sent to the Companys shareholders;
    
    a merger or consolidation of the Company or the purchase of all or
substantially all of the Companys assets by another person or group, in each case,
resulting in less than a majority of the successor entitys outstanding voting
stock being owned immediately after the transaction by the holders of the Companys
voting stock before the transaction;
    
    any person becoming a beneficial owner of securities representing
50% or more of the combined voting power of the Company eligible to vote for the
election of the Companys Board of Directors;
    
    any person other than the Company, the executive officer or the Rurban
ESOP and Savings Plan becoming the beneficial owner of securities representing 25%
or more of the combined voting power of the Company (disregarding any securities
which were not acquired for the purpose of changing or influencing control of the
Company);
    
    individuals who constitute the Companys Board of Directors on March
1, 2006 ceasing for any reason to constitute at least a majority of the members of
the Companys Board of Directors (unless the new directors were approved by the
vote of at least 2/3rds of the then incumbent directors); or
    
    any other change of control of the Company similar in effect to any of
the foregoing.
  
    
    pay the executive officer a lump sum cash payment equal to 2 times
(1.5 times for Mr. Sewell) the executive officers Annual Direct Salary (i.e., the
highest base salary paid to the executive officer for any calendar month during the
36-month period preceding the termination of his employment, multiplied by 12);
    
    provide the executive officer and his family (if the executive officer
elected family coverage prior to the termination of his employment) with continued
health care, life insurance and disability insurance coverage without cost to the
executive for a period of two years (1.5 years for Mr. Sewell), at the same level
and subject to the same terms that were in effect on the first day of the
Protection Period; and
    
    any other payments or benefits to which the executive officer is
entitled under the terms of any other agreement, arrangement, plan or program in
which he participates.
 54.




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##### Table of Contents




    
    providing financial or executive assistance to any person or entity
(1) located within 50 miles of the office of the Company or its subsidiary at which
the executive officer works and (2) engaged in the banking or financial services
industry or any other activity engaged in by the Company or its subsidiaries on the
date of the change in control;
    
    directly or indirectly contacting, soliciting or inducing any of the
customers or referral sources of the Company and its subsidiaries (who were
customers or referral sources during the executive officers employment) to become
a customer or referral source of another company; and
    
    directly or indirectly soliciting, inducing or encouraging any of the
employees of the Company or its successor and their subsidiaries (who were
employees during the
 55.




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##### Table of Contents



Employment Agreement
   Term
  56.




---



##### Table of Contents



Compensation
  
    
    receive bonuses from time to time as the Company, in its sole discretion, deems
appropriate;
    
    receive paid vacation time in accordance with policies established by the Companys
Board of Directors;
    
    participate any of the Companys employee benefit plans (provided that the Company
may not change any of its employee benefits in any way that would adversely affect Mr.
Joyce, unless the change would apply to all of the Companys executive officers and
would not affect Mr. Joyce disproportionately); and
    
    receive prompt reimbursement for all reasonable business expenses he incurs in
accordance with the policies and procedures established by the Companys Board of
Directors.
 Termination Resulting from Disability or Death
  Termination for Cause or Without Good Reason
  
    
    the willful failure to substantially perform job duties;
    
    willfully engaging in misconduct injurious to the Company;
    
    dishonesty, insubordination or gross negligence in the performance of duties;
    
    breach of a fiduciary duty involving personal gain or profit;
    
    any violation of any law, rule or regulation governing public companies, banks or
bank officers or any regulatory enforcement actions issued by a regulatory authority
against the executive;
    
    conduct which brings public discredit to the Company;
 57.




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##### Table of Contents




    
    conviction of, or plea of guilty or nolo contendre to, a felony, crime of falsehood
or a crime involving moral turpitude;
    
    unlawful discrimination or harassment affecting the Companys employees, customers,
business associates or contractors;
    
    theft or abuse of the Companys property;
    
    the recommendation of a state or federal bank regulatory authority to remove the
executive from his position with the Company;
    
    willful failure to follow the good faith lawful instructions of the Companys Board
of Directors;
    
    material breach by the executive of any contract or agreement with the Company; or
    
    unauthorized disclosure of the Companys trade secrets or confidential information.
 Termination by the Company Without Cause or by Mr. Joyce for Good Reason
  
    
    pay Mr. Joyce an amount equal to twice his Agreed Compensation
(i.e., the sum of (a) the average of Mr. Joyces annual base salary for the five
calendar years immediately preceding his termination and (b) the average of Mr.
Joyces annual bonuses for the five calendar years immediately preceding his
termination) in 24 equal monthly installments;
    
    provide Mr. Joyce and his family (if he elected family coverage prior
to the termination of his employment) with continued health care, life insurance
and disability insurance coverage without cost to the executive for a period of one
year, at the same level and subject to the same terms that were in effect at any
time during the two years prior of his termination; and
    
    pay Mr. Joyce any other payments or benefits to which he is entitled
under the terms of any other agreement, arrangement, plan or program in which he
participates.
  
    
    the assignment of duties and responsibilities inconsistent with Mr. Joyces
status as Chief Executive Officer;
    
    requiring Mr. Joyce to move his office more than 50 miles from the location of
the Companys principal office in Defiance, Ohio;
    
    reducing Mr. Joyces annual base salary (except for reductions resulting from a
national financial depression or bank emergency and implemented for all of the
Companys senior management);
 58.




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##### Table of Contents




    
    materially reducing the employee benefits afforded to Mr. Joyce (unless the
reduction applies to all of the Companys executive officers);
    
    the Companys attempt to amend or terminate the Employment Agreement without Mr.
Joyces consent;
    
    the failure of any successor of the Company to assume the Companys obligations
under the Employment Agreement; and
    
    any unsuccessful attempt to terminate Mr. Joyce for Cause.
 Termination in Connection With a Change in Control
  
    
    pay Mr. Joyce a lump sum cash payment 2.99 times his Agreed
Compensation;
    
    provide Mr. Joyce and his family (if he elected family coverage prior
to the termination of his employment) with continued health care, life insurance
and disability insurance coverage without cost to the executive for a period of
three years, at the same level and subject to the same terms that were in effect at
any time during the two years prior of his termination; and
    
    pay Mr. Joyce any other payments or benefits to which he is entitled
under the terms of any other agreement, arrangement, plan or program in which he
participates.
   No Mitigation
  Employee Benefits
  59.




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##### Table of Contents



Parachute Payments
   Non-Compete
  
    
    providing financial or executive assistance to any person or entity
located within 50 miles of the Companys main office in Defiance, Ohio and engaged
in the banking or financial services industry or any other activity engaged in by
the Company or its subsidiaries;
    
    directly or indirectly contacting, soliciting or inducing any of the
customers or referral sources of the Company and its subsidiaries (who were
customers or referral sources during his employment) to become a customer or
referral source of another company; and
    
    directly or indirectly soliciting, inducing or encouraging any of the
employees of the Company or its successor and their subsidiaries (who were
employees during his employment) to terminate their employment with the Company or
its successor and their subsidiaries or to seek, obtain or accept employment with
another company.
  Disputes
  Deferred Compensation Rules
  60.




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##### Table of Contents



Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
   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)
    
    
    357,886
    
    
    $
    13.44
    
    
    
    83,114Equity
compensation plans not approved by
security holders (2)
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    357,886
    
    
    $
    13.44
    
    
    
    83,114
 
 (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 61.




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##### Table of Contents



Item 13.
Certain Relationships and Related Transactions
  
 Item 14. Principal Accounting Fees
  
 PART IV
 
 Item 15.
Exhibits and Financial Statement Schedules
 Financial Statements
  Financial Statement Schedules
  Exhibits
  Exhibits
  Financial Statements Schedules
  62.




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##### Table of Contents



SIGNATURES
  RURBAN FINANCIAL CORP./s/ Duane L. SinnDate:      March 24, 2006
    By:
    Duane L. Sinn, Executive Vice President andChief Financial Officer Power of Attorney
   Name
    
    Date
    
    Capacity/s/ Kenneth A, Joyce

Kenneth A. Joyce
    
    March 24, 2006
    
    President, Chief Executive
Officer, Principal
Executive Officer and
Director/s/ Duane L. Sinn

Duane L. Sinn
    
    March 24, 2006
    
    Chief Financial Officer, Executive Vice President/s/ Thomas A. Buis

Thomas A. Buis
    
    March 24, 2006
    
    Director
 63.




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##### Table of Contents



Name
    
    Date
    
    Capacity/s/ Thomas M. Callan

Thomas M. Callan
    
    March 24, 2006
    
    Director/s/ John R. Compo

John R. Compo
    
    March 24, 2006
    
    Director/s/ John Fahl

John Fahl
    
    March 24, 2006
    
    Director/s/ Robert A. Fawcett, Jr.

Robert A. Fawcett, Jr.
    
    March 24, 2006
    
    Director/s/ Richard L. Hardgrove

Richard L. Hardgrove
    
    March 24, 2006
    
    Director/s/ Rita A. Kissner

Rita A. Kissner
    
    March 24, 2006
    
    Director/s/ Thomas L. Sauer

Thomas L. Sauer
    
    March 24, 2006
    
    Director/s/ Steven D. VanDemark

Steven D. VanDemark
    
    March 24, 2006
    
    Director/s/ J. Michael Walz, D.D.S.

J. Michael Walz, D.D.S
    
    March 24, 2006
    
    Director
  64.




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##### Table of Contents



Rurban Financial Corp.
 December 31, 2005 and 2004
 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-46
 71.




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    
 
 F1




---



##### Table of Contents



Rurban Financial Corp.
 
 Consolidated Balance Sheets
 December 31
 Assets
 2005
    
    
    2004Cash and cash equivalents
    
    $
    12,650,839
    
    
    $
    10,617,766Interest-bearing deposits
    
    
    150,000
    
    
    
    150,000Available-for-sale securities
    
    
    139,353,329
    
    
    
    108,720,491Loans held for sale
    
    
    224,000
    
    
    
    112,900Loans, net of unearned income
    
    
    327,048,229
    
    
    
    264,480,789Allowance for loan losses
    
    
    (4,699,827
    )
    
    
    (4,899,063
    )Premises and equipment
    
    
    13,346,632
    
    
    
    7,740,442Federal Reserve and Federal Home Loan Bank stock, at cost
    
    
    3,607,500
    
    
    
    2,793,000Foreclosed assets held for sale, net
    
    
    2,309,900
    
    
    
    720,000Interest receivable
    
    
    3,010,355
    
    
    
    1,984,452Goodwill
    
    
    8,917,373
    
    
    
    2,144,304Core deposits and other intangibles
    
    
    3,742,333
    
    
    
    542,978Purchased software
    
    
    3,916,913
    
    
    
    4,564,474Cash value of life insurance
    
    
    10,443,487
    
    
    
    9,146,816Other
    
    
    6,521,213
    
    
    
    6,529,397Total assets
    
    $
    530,542,276
    
    
    $
    415,348,746
 See Notes to Consolidated Financial Statements
 F2




---



##### Table of Contents



Rurban Financial Corp.
 Consolidated Balance Sheets
December 31
 Liabilities and Stockholders Equity
 2005
    
    
    2004LiabilitiesDepositsDemand
    
    $
    52,073,751
    
    
    $
    37,831,810Savings, interest checking and money market
    
    
    124,206,115
    
    
    
    87,795,630Time
    
    
    208,558,046
    
    
    
    153,996,874Total deposits
    
    
    384,837,912
    
    
    
    279,624,314Short-term borrowings
    
    
    10,680,420
    
    
    
    11,559,151Notes payable
    
    
    938,572
    
    
    
    3,079,656Federal Home Loan Bank advances
    
    
    45,500,000
    
    
    
    56,000,000Trust preferred securities
    
    
    20,620,000
    
    
    
    10,310,000Interest payable
    
    
    1,373,044
    
    
    
    994,114Deferred income taxes
    
    
    1,140,001
    
    
    
    523,111Other liabilities
    
    
    11,001,679
    
    
    
    2,952,605Total liabilities
    
    
    476,091,628
    
    
    
    365,042,951Commitments and Contingent LiabilitiesStockholders EquityCommon stock, $2.50 stated value; authorized
10,000,000 shares; issued 5,027,433 shares;
outstanding 2005  5,027,433 shares, 2004 
4,568,388 shares
    
    
    12,568,583
    
    
    
    11,439,255Additional paid-in capital
    
    
    14,835,110
    
    
    
    11,003,642Retained earnings
    
    
    28,702,817
    
    
    
    28,943,736Accumulated other comprehensive loss
    
    
    (1,655,862
    )
    
    
    (803,189
    )Treasury stock, at cost
Common; 2005  0 shares, 2004  7,314 shares
    
    
    
    
    
    
    (277,649
    )Total stockholders equity
    
    
    54,450,648
    
    
    
    50,305,795Total liabilities and stockholders equity
    
    $
    530,542,276
    
    
    $
    415,348,746
 F3




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##### Table of Contents



Rurban Financial Corp.
 
 Consolidated Statements of Income
Years Ended December 31
 2005
    
    
    2004
    
    
    2003Interest IncomeLoansTaxable
    
    $
    16,593,703
    
    
    $
    16,151,220
    
    
    $
    24,305,358Tax-exempt
    
    
    64,609
    
    
    
    65,711
    
    
    
    89,356SecuritiesTaxable
    
    
    4,337,477
    
    
    
    3,567,819
    
    
    
    2,805,614Tax-exempt
    
    
    265,959
    
    
    
    164,541
    
    
    
    172,063Other
    
    
    160,240
    
    
    
    78,549
    
    
    
    401,459Total interest income
    
    
    21,421,988
    
    
    
    20,027,840
    
    
    
    27,773,850Interest ExpenseDeposits
    
    
    5,651,372
    
    
    
    4,554,093
    
    
    
    10,024,718Notes payable
    
    
    334,713
    
    
    
    386,450
    
    
    
    596,418Federal funds purchased
    
    
    67,300
    
    
    
    13,896
    
    
    
    Federal Home Loan Bank advances
    
    
    2,039,851
    
    
    
    1,877,284
    
    
    
    2,276,439Trust preferred securities
    
    
    1,275,168
    
    
    
    1,118,751
    
    
    
    1,074,722Total interest expense
    
    
    9,368,404
    
    
    
    7,950,474
    
    
    
    13,972,297Net Interest Income
    
    
    12,053,584
    
    
    
    12,077,366
    
    
    
    13,801,553Provision (Credit) for Loan Losses
    
    
    583,402
    
    
    
    (399,483
    )
    
    
    1,202,000Net Interest Income After Provision
(Credit) for Loan Losses
    
    
    11,470,182
    
    
    
    12,476,849
    
    
    
    12,599,553Non-interest IncomeData service fees
    
    
    11,841,765
    
    
    
    10,478,245
    
    
    
    8,971,632Trust fees
    
    
    3,133,550
    
    
    
    3,042,297
    
    
    
    2,602,270Customer service fees
    
    
    1,859,547
    
    
    
    1,985,389
    
    
    
    2,179,036Net gains (losses) on loan sales
    
    
    (436,971
    )
    
    
    40,603
    
    
    
    415,851Net realized gains on sales of
available-for-sale securities
    
    
    25,300
    
    
    
    241,008
    
    
    
    23,632Loan servicing fees
    
    
    306,929
    
    
    
    367,753
    
    
    
    394,647Gain on sale of branches
    
    
    
    
    
    
    
    
    
    
    19,900,945Other
    
    
    741,340
    
    
    
    535,336
    
    
    
    199,343Total non-interest income
    
    $
    17,471,460
    
    
    $
    16,690,631
    
    
    $
    34,687,356
 See Notes to Consolidated Financial Statements
 F4




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##### Table of Contents



Rurban Financial Corp.
Consolidated Statements of Income
 Years Ended December 31
 2005
    
    
    2004
    
    
    2003Non-interest ExpenseSalaries and employee benefits
    
    $
    13,518,749
    
    
    $
    12,993,449
    
    
    $
    13,428,366Net occupancy expense
    
    
    1,214,169
    
    
    
    981,700
    
    
    
    1,183,569Equipment expense
    
    
    5,148,458
    
    
    
    4,336,573
    
    
    
    4,201,260Data processing fees
    
    
    411,465
    
    
    
    371,153
    
    
    
    435,700Professional fees
    
    
    2,730,337
    
    
    
    2,252,677
    
    
    
    4,171,758Marketing expense
    
    
    445,656
    
    
    
    339,968
    
    
    
    397,137Printing and office supplies
    
    
    524,473
    
    
    
    423,030
    
    
    
    472,193Telephone and communications
    
    
    682,807
    
    
    
    637,528
    
    
    
    716,227Postage and delivery expense
    
    
    313,379
    
    
    
    347,494
    
    
    
    540,339Insurance expense
    
    
    218,484
    
    
    
    292,418
    
    
    
    568,946Employee expense
    
    
    994,735
    
    
    
    796,556
    
    
    
    951,997State, local and other taxes
    
    
    572,456
    
    
    
    591,142
    
    
    
    617,036Other
    
    
    1,412,030
    
    
    
    960,643
    
    
    
    993,807Total non-interest expense
    
    
    28,187,198
    
    
    
    25,324,331
    
    
    
    28,678,335Income Before Income Tax
    
    
    754,444
    
    
    
    3,843,149
    
    
    
    18,608,574Provision for Income Taxes
    
    
    81,353
    
    
    
    1,108,857
    
    
    
    6,303,342Net Income
    
    $
    673,091
    
    
    $
    2,734,292
    
    
    $
    12,305,232Basic Earnings Per Share
    
    $
    0.15
    
    
    $
    0.60
    
    
    $
    2.71Diluted Earnings Per Share
    
    $
    0.15
    
    
    $
    0.60
    
    
    $
    2.70
 F5




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##### 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, 2003
    
    $
    11,439,255
    
    
    $
    11,009,733
    
    
    $
    13,904,212
    
    
    $
    (320,765
    )
    
    $
    664,911
    
    
    $
    (315,014
    )
    
    $
    36,382,332Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    12,305,232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,305,232Change in unrealized
gain (loss) on
securities available
for sale, net of
reclassification
adjustment and tax
effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (463,829
    )
    
    
    
    
    
    
    (463,829
    )Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,841,403Stock options exercised
(1,208 treasury shares)
    
    
    
    
    
    
    (465
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,214
    
    
    
    1,749ESOP shares earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157,272
    
    
    
    
    
    
    
    
    
    
    
    157,272Balance, December 31, 2003
    
    
    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 (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    36,595Treasury stock retired
(4,358 treasury shares)
    
    
    (10,962
    )
    
    
    (225,934
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236,896
    
    
    
    Exchange Acquisition
    
    
    1,140,290
    
    
    
    4,061,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,201,850Balance, December 31, 2005
    
    $
    12,568,583
    
    
    $
    14,835,110
    
    
    $
    28,702,817
    
    
    $
    
    
    
    $
    (1,655,862
    )
    
    $
    
    
    
    $
    54,450,648
 See Notes to Consolidated Financial Statements
 F6




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##### Table of Contents









Rurban Financial Corp.
 
 Consolidated Statements of Cash Flows
 Years Ended December 31
 2005
    
    
    2004
    
    
    2003Operating ActivitiesNet income
    
    $
    673,091
    
    
    $
    2,734,292
    
    
    $
    12,305,232Items not requiring (providing) cashDepreciation and amortization
    
    
    3,108,693
    
    
    
    2,492,661
    
    
    
    2,310,122Provision (credit) for loan losses
    
    
    583,402
    
    
    
    (399,483
    )
    
    
    1,202,000ESOP shares earned
    
    
    
    
    
    
    163,493
    
    
    
    157,272Amortization of premiums and discounts on
securities
    
    
    218,221
    
    
    
    469,148
    
    
    
    1,049,838Amortization of intangible assets
    
    
    131,826
    
    
    
    102,009
    
    
    
    125,790Deferred income taxes
    
    
    384,337
    
    
    
    3,344,719
    
    
    
    3,083,200FHLB Stock Dividends
    
    
    (116,800
    )
    
    
    (93,400
    )
    
    
    (120,400
    )(Gain) loss from sale of loans
    
    
    436,971
    
    
    
    (40,603
    )
    
    
    (415,851
    )Gain on sale of branches
    
    
    
    
    
    
    
    
    
    
    (19,900,945
    )(Gain) loss on sale of foreclosed assets
    
    
    214,642
    
    
    
    (33,758
    )
    
    
    248,951(Gain) losses on sales of fixed assets
    
    
    18,817
    
    
    
    
    
    
    
    (79,084
    )Net realized gains on available-for-sale securities
    
    
    (25,300
    )
    
    
    (241,008
    )
    
    
    (23,632
    )Changes inProceeds from sale of loans held for sale
    
    
    5,481,329
    
    
    
    5,709,084
    
    
    
    39,124,752Originations of loans held for sale
    
    
    (6,029,400
    )
    
    
    (5,562,628
    )
    
    
    (38,927,654
    )Interest receivable
    
    
    (513,229
    )
    
    
    16,280
    
    
    
    1,965,989Other assets
    
    
    (1,241,089
    )
    
    
    (707,055
    )
    
    
    3,218,909Interest payable and other liabilities
    
    
    899,500
    
    
    
    (2,256,287
    )
    
    
    237,820Net cash provided by operating activities
    
    
    4,225,011
    
    
    
    5,697,464
    
    
    
    5,562,309Investing ActivitiesNet change in interest-bearing deposits
    
    
    
    
    
    
    110,000
    
    
    
    Purchases of available-for-sale securities
    
    
    (38,373,878
    )
    
    
    (88,396,063
    )
    
    
    (133,540,054
    )Proceeds from maturities of available-for-sale
securities
    
    
    17,107,354
    
    
    
    62,537,668
    
    
    
    121,586,538Proceeds from sales of available-for-sale securities
    
    
    5,154,173
    
    
    
    23,086,736
    
    
    
    17,634,708Net change in loans
    
    
    (4,562,982
    )
    
    
    13,852,870
    
    
    
    127,071,877Purchase of premises and equipment
    
    
    (2,975,180
    )
    
    
    (3,652,078
    )
    
    
    (2,851,908
    )Proceeds from sales of premises and equipment
    
    
    93,216
    
    
    
    
    
    
    
    1,561,574Purchase bank owned life insurance
    
    
    
    
    
    
    (8,000,000
    )
    
    
    Proceeds from sale of foreclosed assets
    
    
    1,565,223
    
    
    
    1,592,373
    
    
    
    2,577,604Purchase of Federal Home Loan and Federal Reserve Bank
stock
    
    
    
    
    
    
    (383,300
    )
    
    
    Proceeds from sale of Federal Home Loan Bank stock
    
    
    
    
    
    
    428,600
    
    
    
    1,041,400Proceeds from assumption of net liabilities in business
acquisition
    
    
    50,928,950
    
    
    
    
    
    
    
    Payments for assumption of liabilities in branch sales
    
    
    
    
    
    
    
    
    
    
    (74,680,022
    )Net cash provided by investing activities
    
    
    28,936,876
    
    
    
    1,176,806
    
    
    
    60,401,717
 See Notes to Consolidated Financial Statements
 F7




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##### Table of Contents



Rurban Financial Corp.
 Consolidated Statements of Cash Flows
 Years Ended December 31
 2005
    
    
    2004
    
    
    2003Financing ActivitiesNet increase (decrease) in demand deposits, money
market, interest checking and savings accounts
    
    $
    (6,940,715
    )
    
    $
    (17,178,739
    )
    
    $
    33,380,843Net decrease in certificates of deposit
    
    
    (16,360,869
    )
    
    
    (20,671,696
    )
    
    
    (121,226,188
    )Net increase in securities sold under agreements
to repurchase
    
    
    2,021,269
    
    
    
    135,397
    
    
    
    3,923,754Net increase (decrease) in federal funds purchased
    
    
    (2,900,000
    )
    
    
    7,500,000
    
    
    
    Proceeds from Federal Home Loan Bank advances
    
    
    20,500,000
    
    
    
    66,500,000
    
    
    
    10,000,000Repayment of Federal Home Loan Bank advances
    
    
    (34,500,000
    )
    
    
    (49,500,000
    )
    
    
    (18,850,000
    )Proceeds from notes payable
    
    
    
    
    
    
    1,219,863
    
    
    
    10,097,881Proceeds from trust preferred
    
    
    10,310,000
    
    
    
    
    
    
    
    Repayment of notes payable
    
    
    (2,381,084
    )
    
    
    (8,467,806
    )
    
    
    (10,133,450
    )Proceeds from stock options exercised
    
    
    36,595
    
    
    
    29,525
    
    
    
    1,749Dividends paid
    
    
    (914,010
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (31,128,814
    )
    
    
    (20,433,456
    )
    
    
    (92,805,411
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    2,033,073
    
    
    
    (13,559,186
    )
    
    
    (26,841,385
    )Cash and Cash Equivalents, Beginning of Year
    
    
    10,617,766
    
    
    
    24,176,952
    
    
    
    51,018,337Cash and Cash Equivalents, End of Year
    
    $
    12,650,839
    
    
    $
    10,617,766
    
    
    $
    24,176,952Supplemental Cash Flows InformationInterest paid
    
    $
    8,989,474
    
    
    $
    9,303,363
    
    
    $
    14,596,442Income taxes paid (net of refunds)
    
    $
    (1,021,302
    )
    
    $
    (717,666
    )
    
    $
    (1,602,512
    )Note payable in lieu of cash as consideration in
branch sale
    
    $
    
    
    
    $
    
    
    
    $
    4,363,168Common stock and payable issued for net assets in
Acquisition
    
    $
    11,826,130
    
    
    $
    
    
    
    $
    Transfer of loans to foreclosed assets
    
    $
    3,247,539
    
    
    $
    888,063
    
    
    $
    2,256,831
 F8




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##### Table of Contents



Rurban Financial Corp.
 
 Notes to Consolidated Financial Statements
 December 31, 2005 and 2004
 Note 1: Nature of Operations and Summary of Significant Accounting Policies
 Nature of Operations
  Principles of Consolidation
 .
 Use of Estimates
   F9




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Cash Equivalents
  Securities
     Mortgage Loans Held for Sale
  Loans
  F10




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Allowance for Loan Losses
     Premises and Equipment
  Federal Reserve and Federal Home Loan Bank Stock
  F11




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Foreclosed Assets Held for Sale
  Goodwill
  Intangible Assets
  Treasury Stock
  Stock Options
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 F12




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 2005
    
    
    2004
    
    
    2003Net income, as reported
    
    $
    673,091
    
    
    $
    2,734,292
    
    
    $
    12,305,232Less: Total stock-based
employee compensation
cost determined under the
fair value based method,
net of income taxes
    
    
    (655,615
    )
    
    
    (196,730
    )
    
    
    (63,108
    )Pro forma net income
    
    $
    17,476
    
    
    $
    2,537,562
    
    
    $
    12,242,124Earnings per share:Basic  as reported
    
    $
    0.15
    
    
    $
    0.60
    
    
    $
    2.71Basic  pro forma
    
    $
    0.00
    
    
    $
    0.56
    
    
    $
    2.69Diluted  as reported
    
    $
    0.15
    
    
    $
    0.60
    
    
    $
    2.70Diluted  pro forma
    
    $
    0.00
    
    
    $
    0.56
    
    
    $
    2.69
 Income Taxes
  Earnings Per Share
  Reclassifications
  Note 2: Restriction on Cash and Due From Banks
  F13




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 3: Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-Sale
Securities:December 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
    )
    
    $
    139,353,329December 31, 2004:U.S. Treasury
and government
agencies
    
    $
    64,483,532
    
    
    $
    2,848
    
    
    $
    (838,900
    )
    
    $
    63,647,480Mortgage-backed
securities
    
    
    40,703,975
    
    
    
    64,949
    
    
    
    (452,420
    )
    
    
    40,316,504State and
political
subdivision
    
    
    4,691,938
    
    
    
    97,459
    
    
    
    (90,890
    )
    
    
    4,698,507Equity securities
    
    
    8,000
    
    
    
    
    
    
    
    
    
    
    
    8,000Other securities
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    50,000$
    109,937,445
    
    
    $
    165,256
    
    
    $
    (1,382,210
    )
    
    $
    108,720,491
 F14




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  Available for SaleAmortized
    
    
    FairCost
    
    
    ValueWithin one year
    
    $
    8,510,593
    
    
    $
    8,510,562One to five years
    
    
    16,621,488
    
    
    
    16,466,355Five to ten years
    
    
    66,773,830
    
    
    
    65,606,804After ten years
    
    
    13,362,223
    
    
    
    13,086,721105,268,134
    
    
    
    103,670,442Mortgage-backed securities and equity securities
    
    
    36,594,077
    
    
    
    35,682,887Totals
    
    $
    141,862,211
    
    
    $
    139,353,329
      F15




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized 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
    )
  Less than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesAvailable-for-Sale
Securities:U.S. Treasury
and government
agencies
    
    $
    56,657,342
    
    
    $
    (838,900
    )
    
    $
    
    
    
    $
    
    
    
    $
    56,657,342
    
    
    $
    (838,900
    )Mortgage-backed
securities
    
    
    22,520,674
    
    
    
    (239,195
    )
    
    
    11,950,258
    
    
    
    (213,225
    )
    
    
    34,470,932
    
    
    
    (452,420
    )State and
political
subdivisions
    
    
    1,963,998
    
    
    
    (90,890
    )
    
    
    
    
    
    
    
    
    
    
    1,963,998
    
    
    
    (90,890
    )$
    81,142,014
    
    
    $
    (1,168,985
    )
    
    $
    11,950,258
    
    
    $
    (213,225
    )
    
    $
    93,092,272
    
    
    $
    (1,382,210
    )
 F16




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 4: Loans and Allowance for Loan Losses
  2005
    
    
    2004Commercial
    
    $
    79,359,126
    
    
    $
    58,498,557Commercial real estate
    
    
    68,071,738
    
    
    
    64,107,549Agricultural
    
    
    40,236,664
    
    
    
    41,239,895Residential real estate
    
    
    89,086,024
    
    
    
    63,828,237Consumer
    
    
    48,876,788
    
    
    
    31,948,581Leasing
    
    
    1,661,126
    
    
    
    5,127,639Total loans
    
    
    327,291,466
    
    
    
    264,750,458LessNet deferred loan fees, premiums and discounts
    
    
    (243,237
    )
    
    
    (269,669
    )Loans, net of unearned income
    
    $
    327,048,229
    
    
    $
    264,480,789Allowance for loan losses
    
    $
    (4,699,827
    )
    
    $
    (4,899,063
    )
  2005
    
    
    2004
    
    
    2003Balance, beginning of year
    
    $
    4,899,063
    
    
    $
    10,181,135
    
    
    $
    17,693,841Balance, Exchange Bank
    
    
    910,004
    
    
    
    
    
    
    
    Provision (credit) charged
(credited) to expense
    
    
    583,402
    
    
    
    (399,483
    )
    
    
    1,202,000Recoveries
    
    
    1,716,815
    
    
    
    2,106,470
    
    
    
    3,139,534Losses charged off
    
    
    (3,409,457
    )
    
    
    (6,989,059
    )
    
    
    (11,854,240
    )Balance, end of year
    
    $
    4,699,827
    
    
    $
    4,899,063
    
    
    $
    10,181,135
 F17




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  2005
    
    
    2004
    
    
    2003Year-end impaired loans with no
allowance for loan losses allocated
    
    $
    1,676,128
    
    
    $
    975,000
    
    
    $
    153,000Year-end loans with allowance for
loan losses allocated
    
    
    4,460,129
    
    
    
    10,411,000
    
    
    
    19,685,000Total impaired loans
    
    $
    6,136,257
    
    
    $
    11,386,000
    
    
    $
    19,838,000Amount of allowance allocated
    
    $
    1,992,807
    
    
    $
    1,265,000
    
    
    $
    5,651,000Average of impaired loans during the
year
    
    $
    10,036,150
    
    
    $
    14,313,000
    
    
    $
    18,633,000Interest income recognized during
impairment
    
    $
    223,782
    
    
    $
    433,242
    
    
    $
    1,186,762Cash-basis interest income recognized
    
    $
    232,008
    
    
    $
    455,872
    
    
    $
    153,000
  Note 5: Assets and Liabilities Held for Sale
    F18




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 6: Premises and Equipment
  2005
    
    
    2004Land
    
    $
    1,558,946
    
    
    $
    684,825Buildings and improvements
    
    
    11,145,608
    
    
    
    5,260,531Equipment
    
    
    11,367,868
    
    
    
    8,599,36024,072,422
    
    
    
    14,544,716Less accumulated depreciation
    
    
    (10,725,790
    )
    
    
    (6,804,274
    )Net premises and equipment
    
    $
    13,346,632
    
    
    $
    7,740,442
 Note 7: Goodwill
  2005
    
    
    2004
    
    
    2003Balance as of January 1
    
    $
    2,144,304
    
    
    $
    2,144,304
    
    
    $
    2,323,643Goodwill acquired during the year-Lima
    
    
    3,947,768
    
    
    
    
    
    
    
    Goodwill acquired during the year-Exchange
    
    
    2,825,301
    
    
    
    
    
    
    
    Goodwill written off related to sales of
branches
    
    
    
    
    
    
    
    
    
    
    (179,339
    )Balance as of December 31
    
    $
    8,917,373
    
    
    $
    2,144,304
    
    
    $
    2,144,304
  F19




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 8: Other Intangible Assets
  2005
    
    
    2004Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCore deposits
    
    $
    708,435
    
    
    $
    (385,643
    )
    
    $
    708,435
    
    
    $
    (313,668
    )Lima core deposits
    
    
    752,574
    
    
    
    (47,036
    )
    
    
    
    
    
    
    Exchange core deposits
    
    
    2,578,606
    
    
    
    
    
    
    
    
    
    
    
    Purchased software
    
    
    8,531,302
    
    
    
    (4,614,389
    )
    
    
    7,984,840
    
    
    
    (3,420,366
    )Other
    
    
    200,627
    
    
    
    (65,230
    )
    
    
    200,627
    
    
    
    (52,416
    )$
    12,771,544
    
    
    $
    (5,112,298
    )
    
    $
    8,893,902
    
    
    $
    (3,786,450
    )
  Core Deposits
    
    PurchasedAnd Other
    
    Software2006
    
    
    468,188
    
    
    
    1,184,2402007
    
    
    456,806
    
    
    
    985,0172008
    
    
    447,366
    
    
    
    818,0252009
    
    
    439,773
    
    
    
    542,9492010
    
    
    434,320
    
    
    
    129,770
 F20




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 9: Interest-Bearing Deposits
   2006
    
    
    138,786,2422007
    
    
    52,788,5052008
    
    
    11,139,9542009
    
    
    3,133,4282010
    
    
    1,865,142Thereafter
    
    
    844,775$
    208,558,046
  Note 10: Short-Term Borrowings
 2005
    
    
    2004Federal funds purchased
    
    $
    4,600,000
    
    
    $
    7,500,000Securities sold under repurchase agreements
    
    
    6,080,420
    
    
    
    4,059,151Total short-term borrowings
    
    $
    10,680,420
    
    
    $
    11,559,151
   F21




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 11: Notes Payable
  2005
    
    
    2004Note payable in the amount of $9,000,000,
secured by the common stock of RDSI and
substantially all assets of RFCBC, principal
payments of $300,000 quarterly together with
interest at prime plus 2.5% (paid in 2005)
    
    $
    
    
    
    $
    2,000,000Note 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.
    
    
    19,879
    
    
    
    Note 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
    
    
    48,837
    
    
    
    306,002Note payable in the amount of $1,708,711, of
which, 47.328% was sold to Farmers and
Merchants 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
    
    
    629,856
    
    
    
    773,654Revolving Demand Note payable in the amount of
$250,000, unsecured and assumed from Exchange
Bancshares, monthly payments of interest at
prime plus 0%, maturing April 30, 2006 (paid
off in January 2006)
    
    
    240,000
    
    
    
    $
    938,572
    
    
    $
    3,079,656
 F22




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  Debt2006
    
    
    451,6812007
    
    
    173,2572008
    
    
    175,5772009
    
    
    138,0572010
    
    
    $
    938,572
 Note 12: Federal Home Loan Bank Advances
   Debt2006
    
    
    16,500,0002007
    
    
    2008
    
    
    5,000,0002009
    
    
    1,000,0002010
    
    
    4,000,000Thereafter
    
    
    19,000,000$
    45,500,000
 F23




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 13: Trust Preferred Securities
     F24




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 14: Income Taxes
  For The Year Ended December 31,2005
    
    
    2004
    
    
    2003Taxes currently payable (refundable)
    
    $
    (302,984
    )
    
    $
    (2,235,862
    )
    
    $
    3,220,142Deferred income taxes
    
    
    384,337
    
    
    
    3,344,719
    
    
    
    3,083,200Income tax expense
    
    $
    81,353
    
    
    $
    1,108,857
    
    
    $
    6,303,342
  For The Year Ended December 31,2005
    
    
    2004
    
    
    2003Computed at the statutory rate (34%)
    
    $
    256,511
    
    
    $
    1,306,670
    
    
    $
    6,326,915Increase (decrease) resulting fromTax exempt interest
    
    
    (103,015
    )
    
    
    (72,091
    )
    
    
    (78,962
    )Nondeductible expenses and other
    
    
    (72,143
    )
    
    
    (125,722
    )
    
    
    55,389Actual tax expense
    
    $
    81,353
    
    
    $
    1,108,857
    
    
    $
    6,303,342
 F25




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  At December 31,2005
    
    
    2004Deferred tax assetsAllowance for loan losses
    
    $
    1,438,141
    
    
    $
    1,313,891Accrued compensation and benefits
    
    
    363,428
    
    
    
    388,745Net deferred loan fees
    
    
    91,756
    
    
    
    91,688Unrealized losses on available-for-sale securities
    
    
    852,695
    
    
    
    413,756Purchase accounting adjustments
    
    
    212,434
    
    
    
    NOL carry over
    
    
    531,704
    
    
    
    Other
    
    
    67,647
    
    
    
    29,9713,557,805
    
    
    
    2,238,051Deferred tax liabilitiesDepreciation
    
    
    (1,677,950
    )
    
    
    (1,742,905
    )Mortgage servicing rights
    
    
    (51,222
    )
    
    
    (51,222
    )Mark to market adjustment
    
    
    (852,695
    )
    
    
    (413,756
    )Purchase accounting adjustments
    
    
    (1,553,898
    )
    
    
    (97,190
    )Prepaids
    
    
    (147,841
    )
    
    
    (192,113
    )FHLB stock dividends
    
    
    (362,576
    )
    
    
    (263,976
    )Other
    
    
    (51,624
    )
    
    
    (4,697,806
    )
    
    
    (2,761,162
    )Net deferred tax liability
    
    $
    (1,140,001
    )
    
    $
    (523,111
    )
  Note 15: Other Comprehensive Loss
  For The Year Ended December 31,2005
    
    
    2004
    
    
    2003Unrealized gains (losses) on
securities available for sale
    
    $
    (1,266,627
    )
    
    $
    (1,280,615
    )
    
    $
    (679,139
    )Reclassification for realized
amount included in income
    
    
    (25,300
    )
    
    
    (241,008
    )
    
    
    (23,632
    )Other comprehensive
income (loss), before
tax effect
    
    
    (1,291,927
    )
    
    
    (1,521,623
    )
    
    
    (702,771
    )Tax benefit
    
    
    (439,254
    )
    
    
    (517,352
    )
    
    
    (238,942
    )Other comprehensive loss
    
    $
    (852,673
    )
    
    $
    (1,004,271
    )
    
    $
    (463,829
    )
 F26




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 16: Regulatory Matters
    F27




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  To Be Well CapitalizedFor Capital Adequacy
    
    Under Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs 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
    
    
    
    5.0As of December 31, 2004Total Capital

(to Risk-Weighted Assets)Consolidated
    
    $
    61.9
    
    
    
    22.0
    %
    
    $
    22.5
    
    
    
    8.0
    %
    
    $
    
    
    
    
    N/AState Bank
    
    
    39.4
    
    
    
    15.3
    
    
    
    20.7
    
    
    
    8.0
    
    
    
    25.8
    
    
    
    10.0
    %Tier I Capital

(to Risk-Weighted Assets)Consolidated
    
    
    58.4
    
    
    
    20.7
    
    
    
    11.3
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    36.3
    
    
    
    14.0
    
    
    
    10.3
    
    
    
    4.0
    
    
    
    15.5
    
    
    
    6.0Tier I Capital

(to Average Assets)Consolidated
    
    
    58.4
    
    
    
    14.2
    
    
    
    16.5
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    36.3
    
    
    
    9.3
    
    
    
    15.6
    
    
    
    4.0
    
    
    
    19.5
    
    
    
    5.0
  F28




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
   Note 17: Related Party Transactions
  2005
    
    
    2004Balance, January 1
    
    $
    3,959,000
    
    
    $
    2,065,000New loans
    
    
    5,915,000
    
    
    
    7,277,000Repayments
    
    
    (5,206,000
    )
    
    
    (7,205,000
    )Other changes
    
    
    (2,274,000
    )
    
    
    1,822,000Balance, December 31
    
    $
    2,394,000
    
    
    $
    3,959,000
   Note 18: Employee Benefits
  F29




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
        F30




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 19: Stock Option Plan
   2005
    
    
    2004
    
    
    2003Shares
    
    Weighted-
    
    Shares
    
    Weighted-
    
    Shares
    
    Weighted-Subject to
    
    Average
    
    Subject to
    
    Average
    
    Subject to
    
    AverageOutstanding
    
    Exercise
    
    Outstanding
    
    Exercise
    
    Outstanding
    
    ExerciseAwards
    
    Price
    
    Awards
    
    Price
    
    Awards
    
    PriceOutstanding beginning of year
    
    
    339,227
    
    
    $
    13.46
    
    
    
    183,584
    
    
    $
    13.07
    
    
    
    241,289
    
    
    $
    13.02Granted
    
    
    54,000
    
    
    
    13.48
    
    
    
    177,000
    
    
    
    13.85
    
    
    
    Exercised
    
    
    (2,929
    )
    
    
    12.49
    
    
    
    (2,509
    )
    
    
    11.77
    
    
    
    (158
    )
    
    
    11.07Forfeited
    
    
    (32,411
    )
    
    
    13.81
    
    
    
    (18,848
    )
    
    
    13.52
    
    
    
    (57,547
    )
    
    
    12.89Outstanding, end of year
    
    
    357,886
    
    
    
    13.44
    
    
    
    339,227
    
    
    
    13.46
    
    
    
    183,584
    
    
    
    13.07Options exercisable, end of year
    
    
    337,886
    
    
    
    13.50
    
    
    
    192,140
    
    
    
    13.29
    
    
    
    168,901
    
    
    
    13.17
  2005 (1)
    
    2004Dividend yields
    
    
    0.00% - 1.53
    %
    
    
    0.00
    %Volatility factors of
expected market price of
common stock
    
    
    23.74% -27.73
    %
    
    
    24.52
    %Risk-free interest rates
    
    
    4.46% - 4.52
    %
    
    
    1.24
    %Expected life of options
    
    10 years
    
    10 yearsWeighted-average fair value
of options granted during
the year
    
    $
    4.03  $6.97
    
    
    $
    4.79
 
 (1)
    
    There were two grants
in 2005; March 16, 2005 and
December 21, 2005. F31




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  Options Outstanding
    
    Options ExercisableWeighted-AverageRange of Exercise
    
    Number
    
    Remaining
    
    Weighted-Average
    
    Number
    
    Weighted-AveragePrices
    
    Outstanding
    
    Contractual Life
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$  9.90 to $12.87
    
    
    142,822
    
    
    3.68 years
    
    $
    12.24
    
    
    
    127,822
    
    
    $
    12.30$13.30 to $14.15
    
    
    189,024
    
    
    8.26 years
    
    $
    13.88
    
    
    
    184,024
    
    
    $
    13.88$15.20 to $16.78
    
    
    26,040
    
    
    3.03 years
    
    $
    16.76
    
    
    
    26,040
    
    
    $
    16.76
 Note 20: Earnings Per Share
  Year Ended December 31, 2005Weighted-Average
    
    
    Per 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
  F32




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Year Ended December 31, 2004Weighted-Average
    
    
    Per 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
  Year Ended December 31, 2003Weighted-Average
    
    
    Per ShareIncome
    
    
    Shares
    
    
    AmountBasic earnings per shareNet income available to
common shareholders
    
    $
    12,305,232
    
    
    
    4,545,320
    
    
    $
    2.71Effect of dilutive securitiesStock options
    
    
    
    
    
    
    6,829Diluted earnings per shareIncome available to
common shareholders and
assumed conversions
    
    $
    12,305,232
    
    
    
    4,552,149
    
    
    $
    2.70
  F33




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 21: Leases
   2006
    
    $
    261,6002007
    
    
    261,6002008
    
    
    261,6002009
    
    
    261,6002010
    
    
    261,600Thereafter
    
    
    732,696Total minimum lease payments
    
    $
    2,040,696
 F34




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 22: Disclosures about Fair Value of Financial Instruments
  December 31, 2005
    
    December 31, 2004Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assetsCash and cash equivalents
    
    $
    12,650,839
    
    
    $
    12,651,000
    
    
    $
    10,617,766
    
    
    $
    10,618,000Interest-bearing deposits
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000Available-for-sale securities
    
    
    139,353,329
    
    
    
    139,353,000
    
    
    
    108,720,491
    
    
    
    108,720,000Loans including loans held
for sale, net
    
    
    322,572,403
    
    
    
    320,313,000
    
    
    
    259,694,626
    
    
    
    259,181,000Stock in FRB and FHLB
    
    
    3,607,500
    
    
    
    3,608,000
    
    
    
    2,793,000
    
    
    
    2,793,000Accrued interest receivable
    
    
    3,010,355
    
    
    
    3,010,000
    
    
    
    1,984,452
    
    
    
    1,984,000Financial liabilitiesDeposits
    
    $
    384,837,912
    
    
    $
    383,785,000
    
    
    $
    279,624,314
    
    
    $
    277,854,000Securities sold under
agreements to repurchase
    
    
    6,080,420
    
    
    
    6,080,000
    
    
    
    4,059,151
    
    
    
    4,059,000Federal funds purchased
    
    
    4,600,000
    
    
    
    4,600,000
    
    
    
    7,500,000
    
    
    
    7,500,000Note payable
    
    
    938,572
    
    
    
    939,000
    
    
    
    3,079,656
    
    
    
    3,080,000FHLB advances
    
    
    45,500,000
    
    
    
    46,046,000
    
    
    
    56,000,000
    
    
    
    58,231,000Trust preferred securities
    
    
    20,620,000
    
    
    
    20,537,000
    
    
    
    10,310,000
    
    
    
    11,298,000Accrued interest payable
    
    
    1,373,044
    
    
    
    1,373,000
    
    
    
    994,114
    
    
    
    994,000
  F35




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  Note 23: Commitments and Credit Risk
     2005
    
    
    2004Loan commitments and unused lines of credit
    
    $
    69,584,000
    
    
    $
    49,242,000Standby letters of credit
    
    
    
    
    
    
    Commercial letters of credit
    
    
    657,000
    
    
    
    392,000$
    70,241,000
    
    
    $
    49,634,000
  F36




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
    Note 24: Future Change in Accounting Principle
 Share-Based Payment
 F37




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 25: Condensed Financial Information (Parent Company Only)
  Condensed Balance Sheets
 2005
    
    
    2004AssetsCash and cash equivalents
    
    $
    15,590,954
    
    
    $
    326,775Investment in common stock of banking subsidiaries
    
    
    58,870,748
    
    
    
    53,846,585Investment in nonbanking subsidiaries
    
    
    6,277,462
    
    
    
    5,776,392Other assets
    
    
    2,529,825
    
    
    
    1,500,072Total assets
    
    $
    83,268,989
    
    
    $
    61,449,824LiabilitiesTrust preferred securities
    
    $
    20,000,000
    
    
    $
    10,000,000Notes payable
    
    
    240,000
    
    
    
    Borrowings from nonbanking subsidiaries
    
    
    620,000
    
    
    
    310,000Other liabilities
    
    
    7,958,341
    
    
    
    834,029Total liabilities
    
    
    28,818,341
    
    
    
    11,144,029Stockholders Equity
    
    
    54,450,648
    
    
    
    50,305,795Total liabilities and stockholders equity
    
    $
    83,268,989
    
    
    $
    61,449,824
 F38




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Condensed Statements of Income
 2005
    
    
    2004
    
    
    2003IncomeInterest income
    
    $
    2,126
    
    
    $
    1,875
    
    
    $
    2,014Dividends from subsidiariesBanking subsidiaries
    
    
    7,153,134
    
    
    
    2,185,720
    
    
    
    5,169,456Nonbanking subsidiaries
    
    
    1,513,000
    
    
    
    995,043
    
    
    
    1,150,000Total
    
    
    8,666,134
    
    
    
    3,180,763
    
    
    
    6,319,456Other income
    
    
    1,091,721
    
    
    
    1,128,316
    
    
    
    2,496,981Total income
    
    
    9,759,981
    
    
    
    4,310,954
    
    
    
    8,818,451ExpensesInterest expense
    
    
    1,364,168
    
    
    
    1,155,729
    
    
    
    1,263,741Other expenses
    
    
    2,514,712
    
    
    
    2,206,457
    
    
    
    3,176,605Total expenses
    
    
    3,878,880
    
    
    
    3,362,186
    
    
    
    4,440,346Income Before Income Tax and
Equity in Undistributed Income
of Subsidiaries
    
    
    5,881,101
    
    
    
    948,768
    
    
    
    4,378,105Income Tax Benefit
    
    
    (946,911
    )
    
    
    (757,526
    )
    
    
    (660,060
    )Income Before Equity in
Undistributed Income of
Subsidiaries
    
    
    6,828,012
    
    
    
    1,706,294
    
    
    
    5,038,165Equity in Undistributed (Excess
Distributed) Income of
SubsidiariesBanking subsidiaries
    
    
    (6,383,468
    )
    
    
    131,679
    
    
    
    6,901,065Nonbanking subsidiaries
    
    
    228,547
    
    
    
    896,319
    
    
    
    366,002Total
    
    
    (6,154,921
    )
    
    
    1,027,998
    
    
    
    7,267,067Net Income
    
    $
    673,091
    
    
    $
    2,734,292
    
    
    $
    12,305,232
 F39




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Condensed Statements of Cash Flows
 2005
    
    
    2004
    
    
    2003Operating ActivitiesNet income
    
    $
    673,091
    
    
    $
    2,734,292
    
    
    $
    12,305,232Items not requiring (providing) cashEquity in (undistributed) excess
distributed net income of
subsidiaries
    
    
    6,192,398
    
    
    
    (1,027,998
    )
    
    
    (7,267,067
    )Other assets
    
    
    (15,230
    )
    
    
    (1,059,391
    )
    
    
    220,878Other liabilities
    
    
    629,444
    
    
    
    (1,049,450
    )
    
    
    1,283,113Net cash provided by (used in)
operating activities
    
    
    7,479,703
    
    
    
    (402,547
    )
    
    
    6,542,156Investing ActivitiesInvestment in RST II
    
    
    (310,000
    )
    
    
    
    
    
    
    Repayment of note payable
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )Repayment of policy loan
    
    
    (1,014,523
    )Proceeds from liabilities assumed in
business acquisition
    
    
    3,029
    
    
    
    
    
    
    
    Net cash provided by (used in)
investing activities
    
    
    (1,321,494
    )
    
    
    
    
    
    
    (6,000,000
    )Financing ActivitiesCash dividends paid
    
    
    (914,010
    )
    
    
    
    
    
    
    Payment of registration costs and
other acquisition costs
    
    
    (326,615
    )
    
    
    
    
    
    
    Proceeds from subordinated debenture
    
    
    10,310,000
    
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    36,595
    
    
    
    29,525
    
    
    
    1,749Net cash provided by (used in)
financing activities
    
    
    9,105,970
    
    
    
    29,525
    
    
    
    1,749Net Change in Cash and Cash Equivalents
    
    
    15,264,179
    
    
    
    (373,022
    )
    
    
    543,905Cash and Cash Equivalents at Beginning of
Year
    
    
    326,775
    
    
    
    699,797
    
    
    
    155,892Cash and Cash Equivalents at End of Year
    
    $
    15,590,954
    
    
    $
    326,775
    
    
    $
    699,797Supplemental cash flow information:Common stock and payable issued for net
assets in acquisition
    
    $
    11,826,130
 F40




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 26: Segment Information
   Data
    
    
    
    
    
    
    Total
    
    
    Intersegment
    
    
    Consolidated2005
    
    Banking
    
    
    Processing
    
    
    Other
    
    
    Segments
    
    
    Elimination
    
    
    TotalsIncome 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
    
    
    
    11,841,765
    
    
    
    3,207,051
    
    
    
    17,471,460
    
    
    
    
    
    
    
    17,471,460Other revenue-other
segments
    
    
    
    
    
    
    1,354,001
    
    
    
    1,739,287
    
    
    
    3,093,288
    
    
    
    (3,093,288
    )
    
    
    Net interest income and
other revenue
    
    
    16,029,680
    
    
    
    12,961,025
    
    
    
    3,627,627
    
    
    
    32,618,332
    
    
    
    (3,093,288
    )
    
    
    29,525,044Noninterest expense
    
    
    16,319,085
    
    
    
    10,297,698
    
    
    
    4,663,703
    
    
    
    31,280,486
    
    
    
    (3,093,288
    )
    
    
    28,187,198Significant 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
 F41




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Data
    
    
    
    
    
    
    Total
    
    
    Intersegment
    
    
    Consolidated2004
    
    Banking
    
    
    Processing
    
    
    Other
    
    
    Segments
    
    
    Elimination
    
    
    TotalsIncome Statement
Information:Net interest income
(expense)
    
    $
    13,427,694
    
    
    $
    (217,829
    )
    
    $
    (1,120,559
    )
    
    $
    12,089,306
    
    
    $
    (11,940
    )
    
    $
    12,077,366Other revenue-external
customers
    
    
    3,169,122
    
    
    
    10,478,245
    
    
    
    3,031,324
    
    
    
    16,678,691
    
    
    
    11,940
    
    
    
    16,690,631Other revenue-other
segments
    
    
    
    
    
    
    1,314,942
    
    
    
    1,995,973
    
    
    
    3,310,915
    
    
    
    (3,310,915
    )
    
    
    Net interest income and
other revenue
    
    
    16,596,816
    
    
    
    11,575,358
    
    
    
    3,906,738
    
    
    
    32,078,912
    
    
    
    (3,310,915
    )
    
    
    28,767,997Noninterest expense
    
    
    15,258,307
    
    
    
    8,965,124
    
    
    
    4,441,815
    
    
    
    28,635,246
    
    
    
    (3,310,915
    )
    
    
    25,324,331Significant 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
    
    
    1,742,705
    
    
    
    1,921,737
    
    
    
    (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
 Data
    
    
    
    
    
    
    Total
    
    
    Intersegment
    
    
    Consolidated2003
    
    Banking
    
    
    Processing
    
    
    Other
    
    
    Segments
    
    
    Elimination
    
    
    TotalsIncome Statement
Information:Net interest income
(expense)
    
    $
    15,293,092
    
    
    $
    (286,906
    )
    
    $
    (1,204,633
    )
    
    $
    13,801,553
    
    
    $
    
    
    
    $
    13,801,553Other revenue-external
customers
    
    
    23,047,951
    
    
    
    8,971,632
    
    
    
    2,667,773
    
    
    
    34,687,356
    
    
    
    
    
    
    
    34,687,356Other revenue-other
segments
    
    
    
    
    
    
    1,580,426
    
    
    
    3,249,904
    
    
    
    4,830,330
    
    
    
    (4,830,330
    )
    
    
    Net interest income and
other revenue
    
    
    38,341,043
    
    
    
    10,265,152
    
    
    
    4,713,044
    
    
    
    53,319,239
    
    
    
    (4,830,330
    )
    
    
    48,488,909Noninterest expense
    
    
    20,308,343
    
    
    
    7,986,031
    
    
    
    5,214,291
    
    
    
    33,508,665
    
    
    
    (4,830,330
    )
    
    
    28,678,335Significant noncash items:Depreciation and
amortization
    
    
    585,735
    
    
    
    1,592,380
    
    
    
    132,007
    
    
    
    2,310,122
    
    
    
    
    
    
    
    2,310,122Provision for loan losses
    
    
    1,202,000
    
    
    
    
    
    
    
    
    
    
    
    1,202,000
    
    
    
    
    
    
    
    1,202,000Income tax expense
    
    
    5,968,819
    
    
    
    774,902
    
    
    
    (440,379
    )
    
    
    6,303,342
    
    
    
    
    
    
    
    6,303,342Segment profit
    
    
    11,655,187
    
    
    
    1,504,220
    
    
    
    (854,175
    )
    
    
    12,305,232
    
    
    
    
    
    
    
    12,305,232Balance sheet information:Total assets
    
    
    435,203,288
    
    
    
    8,434,735
    
    
    
    3,577,550
    
    
    
    447,215,573
    
    
    
    (11,903,701
    )
    
    
    435,311,872Goodwill and intangibles
    
    
    2,789,291
    
    
    
    
    
    
    
    
    
    
    
    2,789,291
    
    
    
    
    
    
    
    2,789,291Premises and equipment
expenditures
    
    
    529,051
    
    
    
    2,252,992
    
    
    
    69,865
    
    
    
    2,851,908
    
    
    
    
    
    
    
    2,851,908
 F42




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 27: Quarterly Financial Information (Unaudited)
  December 31, 2005
    
    March
    
    June
    
    September
    
    DecemberInterest 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
    
    
    0
    
    
    
    352,000
    
    
    
    (382,000
    )
    
    
    613,402Noninterest income
    
    
    4,410,525
    
    
    
    4,418,686
    
    
    
    4,385,971
    
    
    
    4,256,279Noninterest expense
    
    
    6,519,900
    
    
    
    7,244,940
    
    
    
    7,010,438
    
    
    
    7,411,919Income tax expense
    
    
    249,070
    
    
    
    (137,232
    )
    
    
    247,824
    
    
    
    (278,308
    )Net income
    
    
    638,465
    
    
    
    (113,702
    )
    
    
    492,184
    
    
    
    (343,854
    )Earnings per shareBasic
    
    
    0.14
    
    
    
    (0.02
    )
    
    
    0.11
    
    
    
    (0.08
    )Diluted
    
    
    0.14
    
    
    
    (0.02
    )
    
    
    0.11
    
    
    
    (0.08
    )Dividends per share
    
    
    .05
    
    
    
    .05
    
    
    
    .05
    
    
    
    .05
 December 31, 2004
    
    March
    
    June
    
    September
    
    DecemberInterest income
    
    $
    5,113,877
    
    
    $
    4,849,118
    
    
    $
    5,063,851
    
    
    $
    5,000,994Interest expense
    
    
    2,129,697
    
    
    
    1,939,239
    
    
    
    1,909,352
    
    
    
    1,972,186Net interest income
    
    
    2,984,180
    
    
    
    2,909,879
    
    
    
    3,154,499
    
    
    
    3,028,808Provision for loan losses
    
    
    150,000
    
    
    
    (340,000
    )
    
    
    319,517
    
    
    
    (529,000
    )Noninterest income
    
    
    4,335,014
    
    
    
    4,082,884
    
    
    
    4,080,007
    
    
    
    4,192,724Noninterest expense
    
    
    6,289,199
    
    
    
    6,564,712
    
    
    
    5,910,528
    
    
    
    6,559,892Income tax expense
    
    
    267,973
    
    
    
    59,008
    
    
    
    305,819
    
    
    
    476,055Net income
    
    
    612,022
    
    
    
    709,043
    
    
    
    698,642
    
    
    
    714,585Earnings per shareBasic
    
    
    0.13
    
    
    
    0.16
    
    
    
    0.15
    
    
    
    0.16Diluted
    
    
    0.13
    
    
    
    0.16
    
    
    
    0.15
    
    
    
    0.16Dividends per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   F43




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
 Note 28: Business Acquisitions
   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 assumed
    
    
    60,491,687Net liabilities assumed
    
    $
    (48,636,044
    )
   
 F44




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
    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
 
 F45




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##### Table of Contents



Rurban Financial Corp.
Notes to Consolidated Financial Statements
December 31, 2005 and 2004
  Year Ended December 31,($ 000s)
    
    2005
    
    
    2004
    
    
    2003Net interest income
    
    $
    15,424
    
    
    $
    15,572
    
    
    $
    17,660Net income
    
    $
    (1,286
    )
    
    $
    1,933
    
    
    $
    12,240Per share
 combined:Basic net income
    
    $
    (0.26
    )
    
    $
    0.39
    
    
    $
    2.45Diluted net income
    
    $
    (0.26
    )
    
    $
    0.38
    
    
    $
    2.44
 F46




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##### Table of Contents



RURBAN
FINANCIAL CORP.
 ANNUAL
REPORT ON FORM 10-K
 FOR FISCAL YEAR ENDED DECEMBER 31, 2005
  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).3.1
    
    Amended Articles of Registrant,
as amended
    
    Incorporated herein
by reference to
Exhibit 3(a)(i) to
the Companys
Annual Report on
Form 10-K for the
fiscal year ended
December 31, 1989
(File No. 0-13507).3.2
    
    Certificate of Amendment to the
Amended Articles of Rurban
Financial Corp.
    
    Incorporated herein
by reference to
Exhibit 3(b) to the
Companys Annual
Report on Form 10-K
for the fiscal year
ended December 31,
1993 (File No.
0-13507).3.3
    
    Certificate of Amendment to the
Amended Articles of Rurban
Financial Corp.
    
    Incorporated herein
by reference to
Exhibit 3(c) to the
Companys Annual
Report on Form 10-K
for the fiscal year
ended December 31,
1997 (File No.
0-13507).3.4
    
    Amended and Restated Articles
of Rurban Financial Corp. Note:
filed for purposes of SEC
reporting compliance only 
this document has not been
filed with the Ohio Secretary
of State.
    
    Incorporated herein
by reference to
Exhibit 3(d) to the
Companys Annual
Report on Form 10-K
for the fiscal year
ended December 31,
1997 (File No.
0-13507).3.5
    
    Amended and Restated
Regulations of Rurban Financial
Corp.
    
    Filed herewith.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).
 103.




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##### Table of Contents



Exhibit No.
    
    Description
    
    Location4.2
    
    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).10.5*
    
    Form of Incentive Stock Option
Agreement with Five-Year
Vesting under Rurban Financial
Corp. Stock Option Plan
    
    Incorporated herein
by reference to
Exhibit 10(x) to
the Companys
Annual Report on
Form 10-K for the
fiscal year ended
December 31, 1997
(File No. 0-13507).10.6*
    
    Form of Incentive Stock Option
Agreement with Vesting After
One Year of Employment under
Rurban Financial Corp. Stock
Option Plan
    
    Incorporated herein
by reference to
Exhibit 10(c) to
the Companys
Current Report on
Form 8-K filed
March 21, 2005
(File No. 0-13507).
 104.




---



##### Table of Contents



Exhibit No.
    
    Description
    
    Location10.7*
    
    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
    
    Filed herewith.10.11
    
    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
    
    Filed herewith.10.12
    
    Schedule A to Exhibit 10.11
identifying other substantially
identical Supplemental
Executive Retirement Plan
Agreements with executive
officers of Rurban Financial
Corp. and its subsidiaries
    
    Filed herewith.10.13
    
    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
    
    Filed herewith.10.14
    
    Schedule A to Exhibit 10.13
identifying other substantially
identical Change in Control
Agreements with executive
officers of Rurban Financial
Corp. and its subsidiaries
    
    Filed herewith.
 105.




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##### Table of Contents



Exhibit No.
    
    Description
    
    Location11
    
    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.32.1
    
    Section 1350 Certification 
Principal Executive Officer and
Principal Financial Officer
    
    Filed herewith.99(a)
    
    Report of Written Agreement
    
    Incorporated herein
by reference to
Exhibit 99(b) to
the Companys Form
8-K filed July 11,
2002 (File No.
0-13507).99(b)
    
    Termination of Written Agreement
    
    Incorporated herein
by reference to
Exhibit 99 to the
Companys Form 8-K
filed February 22,
2005 (File No.
0-13507).
 
 *
    
    Management contract or compensatory plan or arrangement. 106.