The Henry County Bank 2007 Annual Report

Dear Shareholders and Friends:

The economy, for numerous months, has made the headlines nearly every day, and the stock market has reacted with unprecedented percentages of daily swings. With all of the tenuous news reports, first and foremost, I am happy to inform you that 2007 was a year of progress for Comunibanc Corp. and its wholly-owned subsidiary, The Henry County Bank. Our improvement over 2006 is encouraging and confirms that our strategic planning is effective in responding to the substantial challenges of the economic markets.

While the entire banking industry has felt the fallout of the difficult housing and mortgage markets, you probably have read about others in our industry which have experienced losses as a result of the sub-prime lending market. The Henry County Bank avoided many of these pitfalls by maintaining our strategy of realistic, effective lending. While our lending practices may have seemed too conservative when compared to other lending practices in the past few years, this strategy has protected us from the related losses that other financial institutions are now experiencing.

In general, the sub-prime mortgage bust did not impact community banks to a large degree. In fact, the mortgage business is gravitating back to regulated institutions, resulting in a positive boost to banks such as ours. The recent declines in mortgage rates provide an opportunity for the Bank to assist homeowners to refinance with more traditional long-term mortgages. Our attractive mortgage rates resulted in an impressive increase in The Henry County Bank mortgage loan portfolio of 17.7% in 2007. Total deposits increased by 6.0% during the same period.

While we have experienced growth at the Bank in the last year, we are going to have an extremely challenging year in 2008. Already the Federal Reserve has lowered short term rates followed by a reduction of the Prime interest rate several times in order to stabilize concerns about the economy and to boost consumer spending. Our team of management, associates, and directors must react quickly and cohesively in responding to these opportunities to maximize our returns.

As we learn to adapt to the impact of the global economy, we will continue to help customers deal with the local impact of the housing crisis as best we can. We see this as an opportunity to further their trust and relationship with The Henry County Bank reinforcing our tradition of loyal service to our customers.

Comunibanc Corp. reported consolidated earnings per share of $1.25 for shareholders in 2007. This is an increase of $0.14 per share over 2006. Our net interest margin for the year was 3.26%, again up from the previous year margin of 3.17%. Cash dividends paid to our shareholders were $0.64 per share for the year, with a market price per share at year-end 2007 of $23.00 per share.

The total assets of the Corporation increased by 7.09% to $209,874,209 as of December 31, 2007. The return on average assets for the year increased to .50%, compared to .47% in 2006, and the return on average shareholder’s equity increased to 5.49%, compared to 5.22% in 2006. While we are pleased with these results at the same time we must factor in the impact of the loss of manufacturing jobs in the area, the fear of pending layoffs from local industries, high fuel costs, the high rate of foreclosures in Ohio, and the lack of significant industrial growth in our county.

Thanks to the vigilant monitoring of the past due loan portfolio by our loan officers and the collection department, combined with our consistent collection efforts, the allocation to our provision for loan losses for 2007 was $29,154. The aggregate allowance for loan losses as of December 31, 2007 is $1,355,000 or 1.14% of loans.

Our efforts in 2007 continued to market The Henry County Bank in areas of growth outside of the county. The Loan Production Office in Bowling Green has been developing relationships that are resulting in commercial and residential lending for the Bank, and increased exposure for banking opportunities in the near future.

The Henry County Bank is working hard to serve the agricultural industries in Henry and surrounding counties. The Bank continues with the Farm Service Agency (FSA) Loan Guarantee Program to enhance our capabilities to accommodate the needs of the agricultural industry.

Farmland prices in our region have climbed 11% or more over the past year; the largest one-year increase in almost 30 years. This is good for landowners, but can put growers who lease land at risk because of higher land rent. Our professional Ag-lenders can help smooth out the effects of these increases and the volatility of the grain markets, because they understand agriculture and the specialized needs of the farmer and farm operations. Northwest Ohio has some of the best farmland in the Midwest. Additionally, we have an ample supply of fresh water, increasing demand for corn, soybeans, and sunflower seeds, all for biofuels. The strong push for ethanol production has definitely affected the economic future of agriculture. The U.S. Route 24 Fort to Port project, a four lane highway between Ft. Wayne, Indiana and Toledo, Ohio is now underway. Napoleon is very attractively positioned on this highway to bring in new commercial and agriculture related industry. The Henry County Bank is prepared and aggressively pursuing all avenues to meet the anticipated growth opportunities along this major highway corridor. This assuredly will provide continued growth for the community, county and our Bank.

Also, as we live longer, now more than ever, financial and retirement planning are key to developing a life-long plan for financial security. With the increasing complexity of the financial landscape, the Bank began providing investment and financial retirement planning within Northwest Capital Financial Group of Napoleon through HCB Financial Services over a year ago. Today, this is an integral component of our services to solidify our customer relationships with a varying array of products in a banking environment, much like a financial service center.

As I write this today the big question is – What’s in store for 2008? With all the negative news surrounding every aspect of the financial markets it would be difficult to find some optimism. Nonetheless, our number one goal for 2008 is not different than past years – and that is – improve. The strategy to accomplish that goal is recognizing the opportunities for positive growth by maintaining our focus on continued market expansion and penetration, building strong relationships with our customers, coupled with increased revenue through fee based products, and maintaining asset quality. Ultimately to you, our shareholder, enhanced returns on your investment.

We are thankful for the continued efforts of our directors for their insight and at the same time our dedicated officers and associates who rise to the challenges of new technology and increased responsibilities.

As always, we thank our customers and our shareholders for your trust, your loyal patronage, and confidence in Comunibanc Corp., parent company of The Henry County Bank. We pledge to continue our record of stable growth through strong management and commitment to ALWAYS IMPROVE.

Sincerely,

William L. Wendt
President