##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-13507
 RURBAN
FINANCIAL CORP.
  Ohio
    
    34-1395608(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 401 Clinton Street, Defiance, Ohio 43512
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
 þ o
  o o þ
 o þ
  Common Shares, without par value
    
    5,027,433 shares(class)
    
    (Outstanding at May 9, 2007)




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##### 



RURBAN FINANCIAL CORP.
 FORM 10-Q
 TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSignaturesEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
  3




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##### Table of Contents



Rurban Financial Corp.
 Condensed Consolidated Balance Sheets  March 31, 2007 and December 31, 2006
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)AssetsCash and due from banks
    
    $
    10,627,291
    
    
    $
    13,381,791Federal funds sold
    
    
    6,500,000
    
    
    
    9,100,000Cash and cash equivalents
    
    
    17,127,291
    
    
    
    22,481,791Interest-bearing deposits
    
    
    150,000
    
    
    
    150,000Available-for-sale securities
    
    
    97,148,409
    
    
    
    102,462,075Loans held for sale
    
    
    110,697
    
    
    
    390,100Loans, net of unearned income
    
    
    373,293,814
    
    
    
    370,101,809Allowance for loan losses
    
    
    (3,768,814
    )
    
    
    (3,717,377
    )Premises and equipment
    
    
    15,912,493
    
    
    
    15,449,774Purchased software
    
    
    4,482,113
    
    
    
    4,618,691Federal Reserve and Federal Home Loan Bank stock
    
    
    4,040,700
    
    
    
    3,993,450Foreclosed assets held for sale, net
    
    
    9,400
    
    
    
    82,397Interest receivable
    
    
    2,820,915
    
    
    
    3,129,774Goodwill
    
    
    13,690,092
    
    
    
    13,674,058Core deposits and other intangibles
    
    
    5,683,598
    
    
    
    5,858,982Cash value of life insurance
    
    
    10,861,017
    
    
    
    10,771,843Other
    
    
    7,323,829
    
    
    
    6,559,886Total assets
    
    $
    548,885,554
    
    
    $
    556,007,253
 See notes to condensed consolidated financial statements (unaudited)
 Note: The balance sheet at December 31, 2006 has been derived from the
audited consolidated financial statements at that date.
 4




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##### Table of Contents



Rurban Financial Corp.
 Condensed Consolidated Balance Sheets (continued)  March 31, 2007 and December 31, 2006
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Liabilities and Stockholders EquityLiabilitiesDepositsDemand
    
    $
    43,759,627
    
    
    $
    46,565,554Savings, interest checking and money market
    
    
    136,754,887
    
    
    
    130,267,333Time
    
    
    232,078,426
    
    
    
    237,722,558Total deposits
    
    
    412,592,940
    
    
    
    414,555,445Notes payable
    
    
    2,515,911
    
    
    
    2,589,207Federal Home Loan Bank advances
    
    
    17,500,000
    
    
    
    21,000,000Retail repurchase agreements
    
    
    30,827,195
    
    
    
    32,270,900Trust preferred securities
    
    
    20,620,000
    
    
    
    20,620,000Interest payable
    
    
    2,233,625
    
    
    
    2,224,413Other liabilities
    
    
    4,884,579
    
    
    
    5,792,135Total liabilities
    
    
    491,174,250
    
    
    
    499,052,100Commitments and Contingent LiabilitiesStockholders EquityCommon stock, $2.50 stated value; authorized
10,000,000 shares; 5,027,433 shares outstanding
    
    
    12,568,583
    
    
    
    12,568,583Additional paid-in capital
    
    
    14,872,424
    
    
    
    14,859,165Retained earnings
    
    
    30,808,105
    
    
    
    30,407,298Accumulated other comprehensive loss
    
    
    (537,808
    )
    
    
    (879,893
    )Total stockholders equity
    
    
    57,711,304
    
    
    
    56,955,153Total liabilities and stockholders equity
    
    $
    548,885,554
    
    
    $
    556,007,253
 See notes to condensed consolidated financial statements (unaudited)
 Note: The balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date.
 5




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Rurban Financial Corp.
 Condensed Consolidated Statements of Income (Unaudited)  Three Months Ended
 March 31,
    
    
    March 31,2007
    
    
    2006Interest IncomeLoansTaxable
    
    $
    6,676,813
    
    
    $
    5,554,154Tax-exempt
    
    
    17,293
    
    
    
    12,235SecuritiesTaxable
    
    
    1,091,197
    
    
    
    1,312,600Tax-exempt
    
    
    153,057
    
    
    
    131,833Other
    
    
    78,468
    
    
    
    36,267Total interest income
    
    
    8,016,828
    
    
    
    7,047,089Interest ExpenseDeposits
    
    
    3,333,730
    
    
    
    2,121,214Other borrowings
    
    
    51,072
    
    
    
    26,299Retail repurchase agreements
    
    
    343,849
    
    
    
    124,277Federal Home Loan Bank advances
    
    
    249,587
    
    
    
    482,821Trust preferred securities
    
    
    445,314
    
    
    
    428,422Total interest expense
    
    
    4,423,552
    
    
    
    3,183,033Net Interest Income
    
    
    3,593,276
    
    
    
    3,864,056Provision for Loan Losses
    
    
    92,640
    
    
    
    246,000Net Interest Income After Provision for Loan Losses
    
    
    3,500,636
    
    
    
    3,618,056Non-interest IncomeData service fees
    
    
    4,834,136
    
    
    
    3,241,134Trust fees
    
    
    826,382
    
    
    
    815,451Customer service fees
    
    
    528,424
    
    
    
    550,067Net gains on loan sales
    
    
    54,279
    
    
    
    61,046Loan servicing fees
    
    
    108,706
    
    
    
    86,694Gain (loss) on sale of assets
    
    
    35,967
    
    
    
    (19,126
    )Other
    
    
    350,848
    
    
    
    273,034Total non-interest income
    
    
    6,738,742
    
    
    
    5,008,300
 See notes to condensed consolidated financial statements (unaudited)
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Rurban Financial Corp.
 Condensed Consolidated Statements of Income (Unaudited) (continued)
Three Months Ended
 March 31,
    
    
    March 31,2007
    
    
    2006Non-interest ExpenseSalaries and employee benefits
    
    $
    4,396,787
    
    
    $
    3,857,734Net occupancy expense
    
    
    527,133
    
    
    
    439,948Equipment expense
    
    
    1,605,873
    
    
    
    1,375,828Data processing fees
    
    
    156,181
    
    
    
    136,590Professional fees
    
    
    677,391
    
    
    
    519,365Marketing expense
    
    
    155,685
    
    
    
    126,448Printing and office supplies
    
    
    198,092
    
    
    
    152,984Telephone and communications
    
    
    445,204
    
    
    
    402,367Postage and delivery expense
    
    
    392,261
    
    
    
    131,994State, local and other taxes
    
    
    199,741
    
    
    
    133,858Employee expense
    
    
    255,069
    
    
    
    249,388Other
    
    
    290,836
    
    
    
    423,527Total non-interest expense
    
    
    9,300,253
    
    
    
    7,950,031Income Before Income Tax
    
    
    939,125
    
    
    
    676,325Provision for Income Taxes
    
    
    236,672
    
    
    
    153,780Net Income
    
    $
    702,453
    
    
    $
    522,545Basic Earnings Per Share
    
    $
    0.14
    
    
    $
    0.10Diluted Earnings Per Share
    
    $
    0.14
    
    
    $
    0.10Dividends Declared Per Share
    
    $
    0.06
    
    
    $
    0.05
 See notes to condensed consolidated financial statements (unaudited)
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RURBAN FINANCIAL CORP.
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY (UNAUDITED)
 Three Months EndedMarch 31, 2007
    
    
    March 31, 2006Balance at beginning of period
    
    $
    56,955,153
    
    
    $
    54,450,648Net Income
    
    
    702,453
    
    
    
    522,545Other comprehensive income (loss):Net change in unrealized gains (losses)
on securities available for sale, net
    
    
    342,085
    
    
    
    (675,829
    )Total comprehensive income (loss)
    
    
    1,044,538
    
    
    
    (153,284
    )Cash dividend
    
    
    (301,646
    )
    
    
    (251,372
    )Stock option expense
    
    
    13,259
    
    
    
    5,940Balance at end of period
    
    $
    57,711,304
    
    
    $
    54,051,932
 See notes to condensed consolidated financial statements (unaudited)
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Rurban Financial Corp.
 Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
 March 31, 2007
    
    
    March 31, 2006Operating ActivitiesNet income
    
    $
    702,453
    
    
    $
    522,545Items not requiring (providing) cashDepreciation and amortization
    
    
    968,860
    
    
    
    847,743Provision for loan losses
    
    
    92,640
    
    
    
    246,000Expense of stock option plan
    
    
    13,259
    
    
    
    5,940Amortization of premiums and discounts on securities
    
    
    25,649
    
    
    
    74,956Amortization of intangible assets
    
    
    175,384
    
    
    
    116,760Deferred income taxes
    
    
    (157,478
    )
    
    
    (868,939
    )FHLB Stock Dividends
    
    
    (47,250
    )
    
    
    (41,900
    )Proceeds from sale of loans held for sale
    
    
    4,808,032
    
    
    
    3,489,321Originations of loans held for sale
    
    
    (4,474,350
    )
    
    
    (3,244,275
    )Gain from sale of loans
    
    
    (54,279
    )
    
    
    (61,046
    )(Gain) loss on sale of foreclosed assets
    
    
    (9,040
    )
    
    
    6,452(Gain) loss on sales of fixed assets
    
    
    (26,927
    )
    
    
    12,674Changes inInterest receivable
    
    
    308,859
    
    
    
    243,356Other assets
    
    
    (853,117
    )
    
    
    (1,156,765
    )Interest payable and other liabilities
    
    
    (917,091
    )
    
    
    (66,900
    )Net cash provided by operating activities
    
    
    555,604
    
    
    
    125,922Investing ActivitiesPurchases of available-for-sale securities
    
    
    (5,722,790
    )
    
    
    (9,659,256
    )Proceeds from maturities of available-for-sale securities
    
    
    11,529,117
    
    
    
    2,577,430Proceeds from sales of available-for-sale securities
    
    
    
    
    
    
    15,562,738Net change in loans
    
    
    (3,326,187
    )
    
    
    (11,439,615
    )Purchase of premises and equipment and software
    
    
    (1,502,472
    )
    
    
    (2,137,041
    )Proceeds from sales of premises and equipment
    
    
    234,397
    
    
    
    23,741Proceeds from sale of foreclosed assets
    
    
    175,016
    
    
    
    44,115Cash paid to shareholders of Exchange Bank acquisition
    
    
    
    
    
    
    (6,453,084
    )Cash paid for Diverse Computer Marketers, Inc. acquisition
    
    
    (16,034
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    1,371,047
    
    
    
    (11,480,972
    )
 See notes to condensed consolidated financial statements (unaudited)
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Rurban Financial Corp.
 Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)
Three Months Ended
 March 31, 2007
    
    
    March 31, 2006Financing ActivitiesNet increase (decrease) in demand deposits, money market, interest
checking and savings accounts
    
    $
    3,681,627
    
    
    $
    (1,787,363
    )Net increase (decrease) in certificates of deposit
    
    
    (5,644,131
    )
    
    
    15,475,580Net increase (decrease) in securities sold under agreements to repurchase
    
    
    (1,443,705
    )
    
    
    9,323,080Net decrease in federal funds purchased
    
    
    
    
    
    
    (4,600,000
    )Proceeds from Federal Home Loan Bank advances
    
    
    
    
    
    
    10,400,000Repayment of Federal Home Loan Bank advances
    
    
    (3,500,000
    )
    
    
    (12,400,000
    )Repayment of notes payable
    
    
    (73,296
    )
    
    
    (938,572
    )Dividends paid
    
    
    (301,646
    )
    
    
    (251,372
    )Net cash (used in) provided by financing activities
    
    
    (7,281,151
    )
    
    
    15,221,353Increase (Decrease) in Cash and Cash Equivalents
    
    
    (5,354,500
    )
    
    
    3,866,303Cash and Cash Equivalents, Beginning of Year
    
    
    22,481,791
    
    
    
    12,650,839Cash and Cash Equivalents, End of Period
    
    $
    17,127,291
    
    
    $
    16,517,142Supplemental Cash Flows InformationInterest paid
    
    $
    4,414,340
    
    
    $
    3,069,232Transfer of loans to foreclosed assets
    
    $
    28,244
    
    
    $
    244,088
 See notes to condensed consolidated financial statements (unaudited)
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RURBAN FINANCIAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 NOTE ABASIS OF PRESENTATION
    NOTE BEARNINGS PER SHARE
  Three Months EndedMarch 31,2007
    
    2006Basic earnings per share
    
    
    5,027,433
    
    
    
    5,027,433Diluted earnings per share
    
    
    5,027,613
    
    
    
    5,028,183
 NOTE C  LOANS, RISK ELEMENTS AND ALLOWANCE FOR LOAN LOSSES
  March, 31
    
    
    December 31,2007
    
    
    2006Commercial
    
    $
    71,791,498
    
    
    $
    71,640,907Commercial real estate
    
    
    112,288,346
    
    
    
    109,503,312Agricultural
    
    
    47,551,562
    
    
    
    44,682,699Residential real estate
    
    
    90,009,697
    
    
    
    94,389,118Consumer
    
    
    51,309,799
    
    
    
    49,314,080Lease financing
    
    
    607,712
    
    
    
    856,808Total loans
    
    
    373,558,614
    
    
    
    370,386,924Less
 11




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March, 31
    
    
    December 31,2007
    
    
    2006Net deferred loan fees, premiums and discounts
    
    
    (264,800
    )
    
    
    (285,115
    )Loans, net of unearned income
    
    $
    373,293,814
    
    
    $
    370,101,809Allowance for loan losses
    
    $
    (3,768,814
    )
    
    $
    (3,717,377
    )
  Three Months EndedMarch 31,2007
    
    
    2006Balance, beginning of period
    
    $
    3,717,377
    
    
    $
    4,699,827Provision charged to expense
    
    
    92,640
    
    
    
    246,000Recoveries
    
    
    54,044
    
    
    
    143,301Loans charged off
    
    
    (95,247
    )
    
    
    (740,587
    )Balance, end of period
    
    $
    3,768,814
    
    
    $
    4,348,541
  March 31,
    
    
    December 31,2007
    
    
    2006Non-accrual loans
    
    $
    4,103,000
    
    
    $
    3,828,000Accruing loans which are contractually
past due 90 days or more as to interest or
principal payments
    
    
    
    
    
    
    Total non-performing loans
    
    $
    4,103,000
    
    
    $
    3,828,000
  March 31,
    
    
    December 31,2007
    
    
    2006Loans with no allowance for loan losses allocated
    
    $
    825,000
    
    
    $
    608,000Loans with allowance for loan losses allocated
    
    
    1,565,000
    
    
    
    1,514,000Total impaired loans
    
    $
    2,390,000
    
    
    $
    2,122,000Amount of allowance allocated
    
    $
    170,000
    
    
    $
    225,000
 NOTE D  REGULATORY MATTERS
  12




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\

To Be Well Capitalized UnderMinimum Required For
    
    Prompt Corrective ActionActual
    
    Capital Adequacy Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of March 31, 2007Total Capital
(to Risk-Weighted Assets)Consolidated
    
    $
    62.4
    
    
    
    16.1
    %
    
    $
    31.1
    
    
    
    8.0
    %
    
    $
    
    
    
    
    N/AState Bank
    
    
    47.3
    
    
    
    12.6
    
    
    
    30.2
    
    
    
    8.0
    
    
    
    37.7
    
    
    
    10.0Tier I Capital
(to Risk-Weighted Assets)Consolidated
    
    
    58.1
    
    
    
    14.9
    
    
    
    15.6
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    43.5
    
    
    
    11.5
    
    
    
    15.1
    
    
    
    4.0
    
    
    
    22.6
    
    
    
    6.0Tier I Capital
(to Average Assets)Consolidated
    
    
    58.1
    
    
    
    10.9
    
    
    
    21.4
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    43.5
    
    
    
    8.3
    
    
    
    20.9
    
    
    
    4.0
    
    
    
    26.1
    
    
    
    5.0As of December 31, 2006Total Capital
(to Risk-Weighted Assets)Consolidated
    
    $
    62.0
    
    
    
    16.0
    %
    
    $
    30.9
    
    
    
    8.0
    %
    
    $
    
    
    
    
    N/AState Bank
    
    
    38.9
    
    
    
    12.2
    
    
    
    25.4
    
    
    
    8.0
    
    
    
    31.8
    
    
    
    10.0Exchange Bank
    
    
    7.8
    
    
    
    13.2
    
    
    
    4.8
    
    
    
    8.0
    
    
    
    6.0
    
    
    
    10.0Tier I Capital
(to Risk-Weighted Assets)Consolidated
    
    
    57.6
    
    
    
    14.9
    
    
    
    15.5
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    35.9
    
    
    
    11.3
    
    
    
    12.7
    
    
    
    4.0
    
    
    
    19.1
    
    
    
    6.0Exchange Bank
    
    
    7.1
    
    
    
    11.9
    
    
    
    2.4
    
    
    
    4.0
    
    
    
    3.6
    
    
    
    6.0
 13




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To Be Well Capitalized UnderMinimum Required For
    
    Prompt Corrective ActionActual
    
    
    
    
    
    Capital Adequacy Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTier I Capital
(to Average Assets)Consolidated
    
    
    57.6
    
    
    
    10.5
    
    
    
    22.0
    
    
    
    4.0
    
    
    
    
    
    
    
    N/AState Bank
    
    
    35.9
    
    
    
    7.9
    
    
    
    18.2
    
    
    
    4.0
    
    
    
    22.8
    
    
    
    5.0Exchange Bank
    
    
    7.1
    
    
    
    8.7
    
    
    
    3.3
    
    
    
    4.0
    
    
    
    4.1
    
    
    
    5.0
 NOTE E  CONTINGENT LIABILITIES
  NOTE F  NEW ACCOUNTING PRONOUNCEMENTS
 Accounting for
Servicing of Financial Assets: an amendment of FASB Statement No. 140
    14




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Fair Value
Measurements
 NOTE G  COMMITMENTS AND CREDIT RISK
  NOTE H  SEGMENT INFORMATION
  15




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Data
    
    
    
    
    
    
    Total
    
    
    Intersegment
    
    
    ConsolidatedIncome statement information:
    
    Banking
    
    
    Processing
    
    
    Other
    
    
    Segments
    
    
    Elimination
    
    
    TotalsNet interest income (expense)
    
    $
    4,131,429
    
    
    $
    (93,658
    )
    
    $
    (444,495
    )
    
    $
    3,593,276
    
    
    
    
    
    
    $
    3,593,276Non-interest income  external
customers
    
    
    1,889,737
    
    
    
    4,834,136
    
    
    
    14,869
    
    
    
    6,738,742
    
    
    
    
    
    
    
    6,738,742Non-interest income  other segments
    
    
    526,124
    
    
    
    415,225
    
    
    
    313,046
    
    
    
    1,254,395
    
    
    
    (1,254,395
    )
    
    
    Total revenue
    
    
    6,547,290
    
    
    
    5,155,703
    
    
    
    (116,580
    )
    
    
    11,586,413
    
    
    
    (1,254,395
    )
    
    
    10,332,018Non-interest expense
    
    
    5,710,203
    
    
    
    4,108,766
    
    
    
    735,679
    
    
    
    10,554,648
    
    
    
    (1,254,395
    )
    
    
    9,300,253Significant non-cash items:Depreciation and
amortization
    
    
    239,567
    
    
    
    699,637
    
    
    
    29,656
    
    
    
    968,860
    
    
    
    
    
    
    
    968,860Provision for loan losses
    
    
    92,640
    
    
    
    
    
    
    
    
    
    
    
    92,640
    
    
    
    
    
    
    
    92,640Income tax expense (benefit)
    
    
    173,944
    
    
    
    355,973
    
    
    
    (293,245
    )
    
    
    236,672
    
    
    
    
    
    
    
    236,672Segment profit (loss)
    
    $
    570,503
    
    
    $
    690,964
    
    
    $
    (559,014
    )
    
    $
    702,453
    
    
    $
    
    
    
    $
    702,453Balance sheet information:Total assets
    
    $
    530,459,372
    
    
    $
    21,097,318
    
    
    $
    8,460,028
    
    
    $
    560,016,718
    
    
    $
    (11,131,164
    )
    
    $
    548,885,554Goodwill and intangibles
    
    
    12,040,233
    
    
    
    7,333,457
    
    
    
    
    
    
    
    19,373,690
    
    
    
    
    
    
    
    19,373,690Premises and equipment expenditures
    
    
    730,435
    
    
    
    772,037
    
    
    
    
    
    
    
    1,502,472
    
    
    
    
    
    
    
    1,502,472
 16




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##### Table of Contents



Data
    
    
    
    
    
    
    Total
    
    
    Intersegment
    
    
    ConsolidatedIncome statement information:
    
    Banking
    
    
    Processing
    
    
    Other
    
    
    Segments
    
    
    Elimination
    
    
    TotalsNet interest income (expense)
    
    $
    4,341,794
    
    
    $
    (45,927
    )
    
    $
    (431,811
    )
    
    $
    3,864,056
    
    
    
    
    
    
    $
    3,864,056Non-interest income  external
customers
    
    
    1,747,037
    
    
    
    3,241,134
    
    
    
    20,129
    
    
    
    5,008,300
    
    
    
    
    
    
    
    5,008,300Non-interest income  other segments
    
    
    26,241
    
    
    
    442,168
    
    
    
    292,740
    
    
    
    761,149
    
    
    
    (761,149
    )
    
    
    Total revenue
    
    
    6,115,072
    
    
    
    3,637,375
    
    
    
    (118,942
    )
    
    
    9,633,505
    
    
    
    (761,149
    )
    
    
    8,872,356Non-interest expense
    
    
    5,281,812
    
    
    
    2,807,194
    
    
    
    622,174
    
    
    
    8,711,180
    
    
    
    (761,149
    )
    
    
    7,950,031Significant non-cash items:Depreciation and
amortization
    
    
    241,260
    
    
    
    594,519
    
    
    
    11,964
    
    
    
    847,743
    
    
    
    
    
    
    
    847,743Provision for loan losses
    
    
    246,000
    
    
    
    
    
    
    
    
    
    
    
    246,000
    
    
    
    
    
    
    
    246,000Income tax expense (benefit)
    
    
    126,866
    
    
    
    282,262
    
    
    
    (255,348
    )
    
    
    153,780
    
    
    
    
    
    
    
    153,780Segment profit (loss)
    
    $
    460,394
    
    
    $
    547,919
    
    
    $
    (485,768
    )
    
    $
    522,545
    
    
    $
    
    
    
    $
    522,545Balance sheet information:Total assets
    
    $
    527,869,961
    
    
    $
    12,954,276
    
    
    $
    8,236,679
    
    
    $
    549,060,916
    
    
    $
    (10,859,689
    )
    
    $
    538,201,227Goodwill and intangibles
    
    
    12,430,920
    
    
    
    
    
    
    
    
    
    
    
    12,430,920
    
    
    
    
    
    
    
    12,430,920Premises and equipment expenditures
    
    
    320,856
    
    
    
    1,811,257
    
    
    
    4,928
    
    
    
    2,137,041
    
    
    
    
    
    
    
    2,137,041
 17




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Cautionary Statement Regarding Forward-Looking Information
  Overview of Rurban
   18




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Critical Accounting Policies
  Allowance for Loan Losses 
  19




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Goodwill and Other Intangibles 
 Impact of Accounting Changes
  Three Months Ended March 31, 2007 compared to Three Months Ended March 31, 2006
 Net Income:
 Net Interest Income:
 20




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Provision for Loan Losses:
 March 31,
    
    
    December 31,
    
    
    March 31,($ in Thousands)
    
    2007
    
    
    2006
    
    
    2006Non-performing Assets
    
    $
    4,112
    
    
    $
    3,910
    
    
    $
    8,833Allowance for loan losses / Total loans
    
    
    1.01
    %
    
    
    1.00
    %
    
    
    1.29
    %Allowance for loan
losses/Non-performing loans
    
    
    91.9
    %
    
    
    97.1
    %
    
    
    72.1
    %
 Non-interest Income:
 Non-interest Expense:
 Changes in Financial Condition
 March 31, 2007 vs. December 31, 2006
 21




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##### Table of Contents



Capital Resources
  Minimum RequiredMinimum Required
    
    
    To Be Well CapitalizedFor Capital
    
    
    Under Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk weighted assets)Consolidated
    
    $
    62.4
    
    
    
    16.1
    %
    
    $
    31.1
    
    
    
    8.0
    %
    
    $
    
    
    
    
    N/AState Bank
    
    
    47.3
    
    
    
    12.6
    
    
    
    30.2
    
    
    
    8.0
    
    
    
    37.7
    
    
    
    10.0
  22




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LIQUIDITY
       Off-Balance-Sheet Borrowing Arrangements:
  23




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##### Table of Contents



ASSET LIABILITY MANAGEMENT
    24




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  25




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##### Table of Contents



Principal/Notional Amount Maturing or Assumed to Withdraw In:
(Dollars in Thousands)
 Comparison of 2007 to 2006:
    
    First
    
    
    YearsTotal rate-sensitive assets:
    
    Year
    
    
    2  5
    
    
    Thereafter
    
    
    TotalAt March 31, 2007
    
    $
    181,757
    
    
    $
    183,792
    
    
    $
    115,695
    
    
    $
    481,244At December 31, 2006
    
    
    195,015
    
    
    
    170,804
    
    
    
    120,379
    
    
    
    486,198Increase (decrease)
    
    $
    (13,258
    )
    
    $
    12,988
    
    
    $
    (4,684
    )
    
    $
    (4,954
    )Total rate-sensitive liabilities:At March 31, 2007
    
    $
    223,063
    
    
    $
    239,601
    
    
    $
    21,393
    
    
    $
    484,057At December 31, 2006
    
    
    232,446
    
    
    
    237,240
    
    
    
    21,349
    
    
    
    491,035Increase (decrease)
    
    $
    (9,383
    )
    
    $
    2,361
    
    
    $
    44
    
    
    $
    (6,978
    )
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  
    
    information required to be disclosed by the Company in this Quarterly Report on
Form 10-Q and other reports which the Company files or submits under the Exchange Act would be
accumulated and
 26




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##### Table of Contents




    
    information required to be disclosed by the Company in this Quarterly Report on
Form 10-Q and other reports which 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 quarterly period covered by this Quarterly Report on Form 10-Q to ensure that material
information relating to the Company and its consolidated subsidiaries is made known to them,
particularly during the period in which this Quarterly Report on Form 10-Q is being prepared.Changes in Internal Control Over Financial ReportingThere were no changes in the Companys internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) that occurred during the Companys fiscal quarter ended
March 31, 2007, that have materially affected or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
 27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 a.
    
    Not applicableb.
    
    Not applicablec.
    
    The following table provides information regarding repurchases of the Companys common shares during the three months ended March 31, 2007:
 Maximum Number(or ApproximateTotal Number of
    
    Dollar Value) ofShares Purchased
    
    Shares that May Yetas Part of Publicly
    
    Be Purchased UnderTotal Number of
    
    Average Price
    
    Announced Plans or
    
    the Plans orPeriod
    
    Shares Purchased (1)
    
    Paid per Share
    
    Programs
    
    ProgramsJanuary 1 through
January 31, 2007
    
    
    643
    
    
    $
    10.77
    
    
    
    
    February 1 through
February 28, 2007
    
    
    5,866
    
    
    $
    9.25
    
    
    
    
    March 1 through
March 31, 2007
    
    
    3,547
    
    
    $
    11.57
    
    
    
    
    
 
 (1)
    
    All of the repurchased shares were purchased in the open market by Reliance Financial
Services, N.A., an indirect subsidiary of the Company, in its capacity as the administrator
of the Companys Employee Stock Ownership and Savings Plan. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  a.
    
    On April 19, 2007, Rurban Financial Corp. held its Annual Meeting of Shareholders. At
the close of business on the February 21, 2007 record date, 5,027,433 Rurban Financial Corp.
 28




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##### Table of Contents



common shares of the Company were outstanding and 5,027,038 and entitled to vote (395
fractional shares from the dividend reinvestment plan are not entitled to vote). At the
Annual Meeting, 3,643,690, or 72.5% of the outstanding common shares entitled to vote at the
Annual Meeting were represented by proxy or in person.b.
    
    Directors elected at the Annual Meeting for a three year term:Thomas M. Callan
Richard L. Hardgrove
Steven D. VanDemarkDirectors whose term of office continued after the Annual Meeting:Thomas A. Buis
John R. Compo
John Fahl
Robert A. Fawcett, Jr.
Kenneth A. Joyce
Rita A. Kissner
Thomas L. Sauer
J. Michael Walzc.
    
    Results of Matters voted upon at the Annual Meeting:
Election of Directors:
 Nominee
    
    Votes For
    
    
    Votes WithheldThomas M. Callan
    
    
    3,485,734
    
    
    
    157,956Richard L. Hardgrove
    
    
    3,488,762
    
    
    
    154,928Steven D. VanDemark
    
    
    3,411,043
    
    
    
    232,647
 d.
    
    Not applicable
 
 Item 5. Other Information
  
 Item 6. Exhibits
  31.1
    
     Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)31.2
    
     Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)32.1
    
     Section 1350 Certification (Principal Executive Officer)32.2
    
     Section 1350 Certification (Principal Financial Officer)
 29




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##### Table of Contents



SIGNATURES
  RURBAN FINANCIAL CORP.Date: May 10, 2007
    By

/s/
Kenneth A. JoyceKenneth A. JoycePresident & Chief Executive Officer By

/s/
Duane L. SinnDuane L. SinnExecutive Vice President &
Chief Financial Officer 30