DEFIANCE - Rurban Financial Corp., battered by bad-loan problems this year, reported a second-quarter loss yesterday of $7.6 million mostly because of its swelling loan-loss reserves of $11.9 million, nearly twice what it had for all of last year.
The bank holding company, which is suspending its normal quarterly dividend of 13 cents a share for the last six months of the year, said it will sell some troubled loans during the third quarter and will sell its Cleveland office that produced some of the problem loans.
“I believe we will look back to August, 2002, as our turning point,” Kenneth Joyce, Rurban's newly named president and chief executive officer, said in a statement. “Sound, predictable earnings is what investors and customers expect from us, and that is what we plan to deliver.”
But there was no hint that the loan problems had grown so much two months ago when The Blade interviewed interim Rurban CEO Richard Burrows. He said the company's damage control was working and that by mid-May it had identified all known loan problems, which the firm attributed to weaknesses in several commercial loans.
Rurban said its net loss for the quarter ending June 30 was $1.68 a share, compared with profit of $1.1 million, or 25 cents a share a year ago. For the period a year ago, its loan-loss provisions were $1.5 million.
The Defiance firm's troubles began in the spring with the announcement it would have to restate last year's earnings to account for $6.7 million in bad-loan writeoffs for 2001. The bad-loan totals grew over a period of months. The company was sanctioned last month by the Federal Reserve Bank of Cleveland and Ohio's Division of Financial Institutions, including correcting deficiencies in lending standards and submitting a plan to strengthen management and supervision of officers.
Adding to its problems was the recent discovery that $2 million in bonds for the now-bankrupt WorldCom Group were valued at just $325,000. Rurban took a $1.7 million writedown in the quarter.
For the quarter, Rurban reported net interest income of $6.3 million, down 4 percent from $6.6 million in the same quarter a year ago. It also reported total assets of $788 million, up 11 percent from the same period a year ago but down from $811 million three months ago.
Rurban is the holding company for several northwest Ohio banks, including State Bank and Trust in Defiance, which this year took over most assets of the failed Oakwood Deposit Bank Co., a Paulding County institution that closed after an apparent $40 million fraud. Rurban's stock closed 9 cents lower yesterday at $10.15 a share in Nasdaq trading.