A technology subsidiary of the holding company Rurban Financial Corp. must improve its capital position and strengthen operational oversight under a consent order with the Federal Reserve Board.
Rurban, of Defiance, Ohio, said in a Securities and Exchange Commission filing on Wednesday that it and its subsidiary, Rurbanc Data Services Inc., which provides item-processing services to small banks, entered into the order on March 9. The order also precludes the subsidiary from paying dividends to Rurban and Rurban from making loans to or capital investments in the subsidiary without the Fed's approval.
The order does not apply to Rurban's banking subsidiary, the State Bank and Trust Co.
Problems with Rurbanc Data Services, which does business as RDSI Banking Systems, surfaced last year after the parent company nixed plans to spin off RDSI and merge it with another technology firm. Rurban cited deficiencies in a new software system RDSI planned to convert its bank clients to.
Rurban's own bank, State Bank and Trust, encountered problems in running the new system and had to convert back to a previous platform.
Rurban also said in Wednesday's filing that it is revising previously stated year-end and fourth-quarter earnings because of a goodwill write-down pertaining to RDSI. Rurban will record a $4.68 million pre-tax, non-cash charge based on the "loss of data and item-processing customers of RDSI and the resulting decrease in the projected future revenues of RDSI."
As a result, Rurban will report a net loss of $14.56 million, or $3 per diluted share, for 2010 and a net loss of $5.53 million, or $1.14 per diluted share, for the fourth quarter.
In January, the company had reported a net loss of $9.88 million, or $2.03 per diluted share, for the year and a net loss of $853,000, or 18 cents per diluted share, for the fourth quarter.