The Henry County Bank 2006 Annual Report

Dear Shareholders and Friends:

As I write this letter providing an overview of 2006 results, the sun is shining across the fields of glistening snow with the weather being bitter cold. This sudden and prolonged spell of cold temperatures is in stark contrast to the unseasonably warm temperatures of just a few weeks ago. By the time you read this, hints of spring will be in the air. Just as we deal with the challenging effects of the weather, we can also draw some parallels with the challenges that face the banking industry in general, and specifically, The Henry County Bank. We have to continually adapt to the changes in our economic climate through our internal forward strategic planning which covers all aspects of our daily and long-term operational expectations.

The Federal Reserve has left the Federal Fund Interest Rate unchanged since June of 2006 which in turn has maintained the Prime Interest Rate at 8.25%. The year ended with inflation stabilizing, while the Gross Domestic Product annual performance was the best in two years at 3.3%. However, as I have indicated in previous writings to you, the Bank is still feeling the impact of the seventeen previous prime rate increases since June of 2004, which exerts extreme pressure on our margins. Our loan portfolio is continually re-pricing, adjusting to the past increases. Because interest rates have stabilized since last June, the Bank is beginning to experience a more positive trend in our net interest margin. If all remains the same regarding the Prime Interest Rate or if the economic climate allows for future reductions in the Prime Interest Rate, we can expect further margin improvements in 2007.

Our returns for 2006 are less than the goals that we set forth in the beginning of the year, although we did anticipate increased obstacles to growth. Consequently, our mortgage loan portfolio decreased by 6.1% in 2006, and total deposits were lower by 1.4%. Further, Cominibanc Corp. and its wholly-owned subsidiary, The Henry County Bank, produced earnings per share of $1.11 for 2006. Additionally, and most importantly, we maintain and continue our strong foundation of capital.

Our net interest margin ended the year at 3.17%. Cash dividends paid to our shareholders were $0.64 per share for the year, which is a decrease over last year but not unexpected given the obstacles of the economic climate and interest rate pressures. We anticipate that this is not a trend, but an adjustment in our continued quest for maintaining satisfying returns to our shareholders. In December, the market price per share was $30.25.

The total assets of the Corporation were $195,970,842 on December 31, 2006. The 2006 return on average assets was .47% and the return on average shareholders' equity was 5.22%.

While the year end results are disappointing, there are sunny spots. Bankruptcies in Northwest Ohio plunged sharply after five years of significant increases in filings. This can be attributed to many factors, mainly the nation's new bankruptcy legislation making it more difficult for filing bankruptcy.

On the other hand, mortgage foreclosures have increased significantly in the past year in Ohio. Unfortunately, Ohio is one of the leading states in the nation in the number of foreclosures. The Henry County Bank maintains very high standards for loan management to minimize our risk factors, while still optimizing the utilization of deposits. This means our loan officers, assisted by our Credit Analyst, carefully evaluate loan applications to make wise lending decisions to protect the Bank - and also our customers. As the hometown Bank, we feel an obligation to intently guide our customers through the loan process, while taking into consideration all other lending factors, to ensure that the customer can reasonably repay the loan.

State legislation has been passed recently to protect consumers from the predatory lending practices that may be contributing to the high rates of foreclosures in Ohio. The Henry County Bank's collection department monitors the past due portfolio diligently for delinquent accounts, and works aggressively to resolve issues to prevent foreclosures whenever possible. The state reports that 7% of mortgage loans are in delinquency and this is a trend that we will watch very closely.

In 2006, we allocated $18,732 to our provision for loan losses, which is significately lower than in the previous several years. The aggregate allowance for loan losses as of December 31, 2006 is $1,350,000, or 1.20% of loans, and reflects the normal risk expected in our portfolio.

As most of you know, the major project of our Main Office expansion and remodeling was completed in 2006. This was an enormous undertaking for all of us as the construction process began in January of 2004 and concluded in August 2006 (2 years and 8 months). During the construction, banking departments and employees were temporarily moved elsewhere within our Main Office to accommodate the different phases of the project. When completed, they again moved, this time into their new permanent location. Throughout the entire process we remained open to our customers as we were adamant we provide full access to all of our services. The main office includes our corporate office and Main Office banking departments, comprising of 38 employees. The years of planning, the construction process, the new technology infrastructure, and the increased office space will all contribute to the Bank's ability to provide new products and excellent service to our customers. Ultimately to you, our shareholder, enhancement to your investment return and share value for the present and future. Further, we hope that our new building will be the spearhead for sorely needed economic development in the downtown area and foster a renewed pride in the property and businiess owners in the surrounding downtown blocks. During the construction process, our customers, employees, and you, our shareholders, have been very supportive and patient. I extend to all a sincere thank you.

To address increased competition in our Henry County communities, we are focusing on solidifying our local market base. We have also expanded our market area to nearby counties, where economic expansion is occurring at a faster rate than here in Henry County. A Loan Production Office was established in Bowling Green this past year and our Loan Officer is developing relationships with key business and development people for new business opportunities in commercial and residential lending. This is an investment in the long-term health of our banking institution through increased market penetration.

The Henry County Bank has forged an alliance with Northwest Capital Financial Group of Napoleon. This important service offers our customers full service investment advice and management within the Bank through HCB Financial Services. As financial planning is an important part of everyone's life decisions, we are pleased to offer this important service to our banking customers.

Henry County experienced a good season for agriculture in 2005, placing eighth in the state for corn production and fifteenth in soybean production. The 2006 growing season results were strong as well. The Henry County Bank is participating in the new FSA (Farm Service Agency) loan guarantee program. We are now able to provide farmers and agribusiness with long-term fixed rate loans for land purchases, operating funds, and equipment purchases. We have professional Ag-lenders who understand agriculture and the specialized needs of the farmer and farm operations, and they are comfortable meeting with our customers on the farm and walking the fields.

Henry County boasted an unemployment rate of under 5% in the fourth quarter of 2006, even with plants recently closed and several who have announced closings for 2007 and 2008 in the Napoleon and Archbold area. The overall effect will be the loss of approximately 900 jobs. These employment pressures affect all the businesses in the area, and the loss of tax dollars impacts communities negatively as well. On the positive side, the Fort to Port widening of U.S. 24 is an advantage to all of our communities, and we must position ourselves to aggressively search out economic development opportunities that will benefit from this transportation expansion.

First and foremost, The Henry County Bank serves the families and businesses that are vital to our communities. Our focus is on identifying the needs of our customers, building relationships with them, and providing the excellent level of service that they have counted on since 1936. We also have an obligation to meet the expectations of enhancement to shareholder value. In that regard, we are committed to the continued long-term success of the Bank.

As we move into 2007, we have one goal - IMPROVE -. Banks and nonbank entities are competing more aggressively for market share, thereby placing more pressure on margins. Even though the economic climate is somewhat cloudy, we are confident in the ability of our staff to provide the necessary effort and knowledge to maintain the continued success of The Henry County Bank - resulting in the continuance of positive returns to our shareholders.

We thank you, our shareholders, for your support; our customers for their loyalty; our staff for their strong commitment; and our Directors for guidance in 2006.

Sincerely,

William L. Wendt
President