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October 26, 2009 (FinancialWire) -- Rurban Financial Corp. (NASDAQ: RBNF), a provider of full-service community banking, investment management, trust services and bank data and item processing, board of directors has approved proceeding with the appropriate filings with the SEC in connection with the contemplated spin-off of Rurban's technology subsidiary, Rurbanc Data Services, Inc. (RDSI Banking Systems). Rurban and RDSI Banking Systems are in the process of preparing the SEC filings and plan to begin filing with the SEC within the next few weeks.
Rurban currently anticipates that the spin-off would be completed in the first quarter of 2010, subject to the satisfaction of a number of conditions. The conditions include final approval by the Rurban board of directors of the spin-off and its terms, the SEC filings becoming effective under applicable SEC laws and regulations, the successful conversion of The State Bank and Trust company, Rurban's banking subsidiary, to New Core Banking Systems' Single Source software, and the satisfaction of the conditions to the merger between RDSI Banking Systems and New Core Banking Systems under the terms of the Agreement and Plan of Reorganization entered into on April 25, 2009.
The contemplated spin-off would be effected through a dividend of the common shares of RDSI Banking Systems to the shareholders of Rurban, resulting in RDSI Banking Systems becoming a separate and independent public company. The shareholders of Rurban would retain their shares of Rurban, which would continue as a publicly-held corporation with The State Bank and Trust company as its primary holding. The State Bank and Trust company has assets of approximately $650 million and operates in the Northwest corner of Ohio with lending services in Columbus, Ohio and a banking center in Fort Wayne, Indiana.
It is anticipated that the merger of RDSI Banking Systems and New Core Banking Systems will be completed immediately following the contemplated spin-off of RDSI Banking Systems. As previously announced, the shareholders of New Core Banking Systems will be entitled to receive up to 31% of the outstanding common shares of RDSI Banking Systems immediately following the merger. The issuance of the common shares to the shareholders of New Core Banking Systems in the merger will have the effect of diluting the ownership percentage represented by the common shares of RDSI Banking Systems received by Rurban shareholders in the spin-off, and RDSI Banking Systems will own the intellectual property of New Core Banking Systems by virtue of the merger.
Following the spin-off, RDSI Banking Systems will continue as a data and item processing company. RDSI is already offering New Core Banking Systems' Single Source software to its current data processing customers who are now being serviced using ITI software. The sales process of offering the Single Source software is a complex effort involving software presentations, viewing of test software, and the individual bank client's due diligence, concluding with approval by the client's board of directors. While RDSI anticipates loss of some banking clients, RDSI is encouraged that it currently has one banking site utilizing the software, a major conversion scheduled for the fourth quarter of 2009 (The State Bank and Trust company), four executed contracts, and nine letters of intent to convert to the new software. RDSI currently has 49 proposals submitted to various banks. RDSI believes this represents the largest launch of a new core banking system in the U.S.
Anticipating an end to data processing operations using the current ITI software, Rurban commenced an accelerated depreciation expense of its ITI software and associated software starting in August 1, 2009, with the entire balance of $4.7 million expected to be written-off by the last half of 2010. Non-recurring legal and compliance expenses will also be incurred as the documentation for the spin-off is completed and the transition is executed. These expenses began in the first quarter of 2009 and will continue through the first quarter of 2010.
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Free annual reports for companies mentioned in the news are available through the Free Annual Reports Service (http://investrend.ar.wilink.com/?level=279).
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