Oak Hill Financial Announces 1st Quarter Earnings JACKSON, Ohio,
April 14 /PRNewswire-FirstCall/ -- Oak Hill Financial, Inc.
(NASDAQ:OAKF) today reported net earnings from operations for the
three months ended March 31, 2005 of $3,296,000, or $.58 per
diluted share, an increase of 4.7% over the $3,147,000, or $.55 per
diluted share, in net earnings that the company recorded for the
quarter ended March 31, 2004. The first quarter 2005 operating
earnings exclude $317,000 of expenses related to Oak Hill
Financial's acquisition of Ripley National Bank in the fourth
quarter of 2004 and its acquisition of Lawrence Financial Holdings,
Inc. on April 1, 2005. In addition, the first quarter operating
earnings exclude the effect of a $261,000 reduction in tax expense
resulting from a tax savings of $1.0 million for the full year
2005. Including those items, the company's net income for the first
quarter of 2005 was $3,260,000 or $.57 per diluted share. Oak Hill
Financial's total assets increased 15.7% over the prior year,
ending the first quarter of 2005 at $1.11 billion as compared to
$955.4 million at March 31, 2004. Net loans at March 31, 2005 were
$926.6 million, up 11.8% from March 31, 2004. Asset and loan growth
were bolstered by the fourth quarter 2004 Ripley National Bank
acquisition, which added $58.6 million in assets and $39.1 million
in loans to Oak Hill Financial's totals. The Lawrence Financial
Holdings acquisition, the impact of which is not reflected in the
March 31, 2005 totals, brought $116.9 million in assets, $76.5
million in net loans, $104.2 million in deposits, and $9.5 million
in equity to Oak Hill Financial. Reviewing the first quarter, Oak
Hill Financial President and CEO R. E. Coffman, Jr. said, "Although
we have reason to be optimistic about the remainder of the year, we
are disappointed with our first quarter results. Basically, our
revenues did not come in where we needed them to be. The flattening
yield curve put pressure on the net interest margin which, combined
with slow loan growth, resulted in a linked-quarter decline in net
interest income. Also, gain on sale of loans and insurance
commissions were off from the fourth quarter of 2004. On the other
hand, operating expenses were lower in the first quarter, which
somewhat mitigated the decline in revenues." Coffman added, "On the
upside, our March earnings were significantly better than January
or February, and loan demand is showing signs of improving. As we
move through the year, most of the cost savings associated with our
acquisition of Ripley National Bank will be fully realized, and we
will begin to see the cost savings from Lawrence Financial Holdings
as well. The keys for the year are going to be maintaining the net
interest margin and growing the loan portfolio while maintaining
credit quality." Key Issue Review and Outlook Net Interest Margin
-- Net interest margin for the first quarter was 3.89%, as compared
to the 3.96% recorded for the fourth quarter of 2004. Much of the
decline was due to the company's sale on December 31, 2004 of the
higher-yielding consumer loan portfolio of its Action Finance
Company subsidiary. Still, the first quarter margin was below
management's expectations and was the result of the flatter yield
curve, a highly price- competitive marketplace for commercial and
commercial real estate loans, and upward pressure on funding costs
with respect to both retail deposits within the company's market
areas and wholesale funding sources. However, the margin was at its
lowest point during January and subsequently rebounded in February
and March. Management believes that the margin will benefit if
interest rates in general continue to increase. Operating Expenses
& Efficiency -- On an operating basis, non-interest expense was
2.57% of average assets for the first quarter of 2005, as compared
to 2.69% for the first quarter of 2004 and 2.70% in the fourth
quarter. The efficiency ratios for the same periods were relatively
consistent at 55.0%, 54.4%, and 55.3%, respectively. On the expense
side, the linked-quarter improvement was attributable to decreases
in salary expense, depreciation and amortization, ATM expense,
credit and collection expense and, in general, to the company's
cost control efforts, which had a positive impact on a broad range
of operating expense categories. The overall decrease in expenses
was mitigated somewhat by increased maintenance, utilities, and
property tax expense. Non-Interest Income -- Non-interest income
was $2,539,000 in the first quarter, an increase of 8.0% over the
first quarter of 2004, but a decrease of 6.8% from the fourth
quarter of 2004 (the fourth quarter comparison excludes losses
related to the sale of the Action Finance portfolio). The decrease
on a linked-quarter basis was primarily the result of decreases in
deposit service charges, insurance commissions, and gain on sale of
loans. The decrease was partially offset by recovery of impairment
on mortgage servicing rights, gains on securities transactions, and
ATM fee income. Asset Quality -- At the end of the first quarter,
the nonperforming loans/total loans and nonperforming assets/total
assets ratios were 0.82% and 0.78%, respectively, as compared to
the 0.69% and 0.73%, respectively, posted at December 31, 2004. The
largest of the non-performing loans represents 0.09% of the
nonperforming loan ratio. Two other loans from a single borrower
contributed 0.07% to the nonperforming loan ratio. The remaining
nonperforming loans are a mix of commercial real estate,
commercial, residential real estate, and consumer loans. In
addition, the company has a higher-than-average amount of
commercial and commercial real estate loans that are currently past
due but were less than 90 days delinquent and accruing at March 31.
The company's senior credit administration team is aggressively
pursuing the resolution of this group of loans. While management is
hopeful that these issues can be resolved successfully, there is a
possibility that the non-performing loans and non- performing
assets ratios and/or net charge-offs could increase in the coming
quarters due to potential deterioration in these credits. Net
charge-offs (non-annualized) for the first quarter were 0.06% of
loans, with an annualized rate of 0.23%, an improvement over the
0.33% annualized net charge-off rate for the fourth quarter of
2004. The first quarter net charge-offs are consistent with
management's objective of maintaining net charge-offs in the 0.20%
range for the full year 2005. Consistent with generally accepted
accounting principles and regulatory guidelines, the company uses
various formulas to determine its allowance for loan and lease
losses (ALLL). The methodology takes into consideration not only
charge-offs but also the rated quality of the company's loans based
on loan review grades and the types and amounts of loans comprising
the portfolio, while allowing some discretion by management to make
adjustments based on near-term economic conditions. This
methodology resulted in an ALLL/total loans ratio of 1.29% at March
31, 2005, an increase from the 1.28% at the end the fourth quarter
of 2004. Overall Strategy -- Oak Hill Financial will continue to
pursue revenue growth through originating adjustable-rate
commercial loans, commercial real estate loans, and residential
mortgage loans; fixed-rate residential mortgage loans and SBA loans
for sale in the secondary market; and consumer loans. Management
continues to believe that commercial and commercial real estate
loans hold the greatest potential for growth and margin improvement
within its bank subsidiary. Non-interest income growth and
continued diversification of non-interest revenues remain major
elements in the company's strategy, and the company is undertaking
several major initiatives to facilitate growth in these areas,
particularly with respect to insurance and investment services.
Asset/Loan Growth -- The company's total assets grew at an 8.4%
annual rate during the first quarter, driven primarily by a managed
increase in the investment portfolio. Loans increased at an
annualized rate of 6.2%, with multi-family residential and
commercial real estate loans being the primary contributors to the
quarter's growth. While growth is behind the pace relative to
management's objectives for 2005, the majority of the company's
growth traditionally comes in the second through fourth quarters.
Moving into the second quarter, the company's loan pipeline is
steadily increasing. However, growth may be mitigated by the
potential payoff of one or more large loans as borrowers seek rates
below which the company believes it is prudent to offer. Expansion
& Branching -- To focus on realizing the full potential of its
Ripley National Bank and Lawrence Financial Holdings acquisitions,
the company has revised its branch expansion plans for 2005. Two de
novo branches are now planned. During the second quarter, the
company expects to open its second branch in Circleville, Ohio. A
branch in Mt. Orab, Ohio is planned for late 2005. The Lawrence
Financial Holdings acquisition left the company with overlapping
bank branches in the Ohio communities of Proctorville and
Wheelersburg. Management believes that consolidating the
overlapping offices will result in considerable cost savings with
no significant impact on customer service or retention. Therefore,
at the end of April, the company will be combining its branches in
these communities. Further, the company operated a loan production
office in a separate facility on the site of its Wheelersburg
branch. The LPO will be integrated into the consolidated
Wheelersburg office, which will be located in a larger branch
facility acquired in the Lawrence Financial Holdings transaction.
Estimate -- The company has revised its estimated range for
earnings per share from operations for the full year 2005 to $2.50
to $2.60 per share. Oak Hill Financial is a financial holding
company headquartered in Jackson, Ohio. Following the branch
consolidation discussed in this release, its subsidiary, Oak Hill
Banks, will operate 33 full-service banking offices and three bank
loan production offices in 15 counties across southern and central
Ohio. A second subsidiary, Oak Hill Financial Insurance Agency,
provides group health plans and other insurance services to private
and public-sector organizations throughout the same region. The
company also holds 49% of Oak Hill Title Agency, LLC, which
provides title services for commercial and residential real estate
transactions. Forward-Looking Statements Disclosure This release
contains certain forward-looking statements related to the future
performance and condition of Oak Hill Financial, Inc. These
statements, which are subject to numerous risks and uncertainties,
are presented in good faith based on the company's current
condition and management's understanding, expectations, and
assumptions regarding its future prospects as of the date of this
release. Actual results could differ materially from those
projected or implied by the statements contained herein. The
factors that could affect the company's future results are set
forth in the periodic reports and registration statements filed by
the company with the Securities and Exchange Commission. Oak Hill
Financial, Inc. SELECTED CONSOLIDATED FINANCIAL INFORMATION
(unaudited) April 14, 2005 Press Release At March 31, (In
thousands) 2005 2004 SUMMARY OF FINANCIAL CONDITION Total assets
$1,105,676 $955,413 Interest-bearing deposits and federal funds
sold 1,872 1,250 Investment securities 107,719 81,416 Loans
receivable - net 926,578 829,089 Deposits 858,156 772,498 Federal
Home Loan Bank advances and other borrowings 157,207 99,952
Stockholders' equity 86,788 79,791 The Company discloses net
earnings, diluted earnings per share and certain performance ratios
adjusted for non-recurring items. Management believes that
presenting this information is an additional measure of performance
that investors can use to compare operating results between
periods. These measures should not be considered an alternative to
measurements required by accounting principles generally accepted
in the United States of America ("U.S. GAAP"). In accordance with
Securities and Exchange Commission Regulation G, reconciliation of
the Company's U.S. GAAP information is presented in the tables
below. For the Three Months Ended March 31, (In thousands) 2005
2004 RECONCILIATION OF NON-GAAP NET EARNINGS, DILUTED EARNINGS PER
SHARE AND OTHER PERFORMANCE RATIOS Net earnings (U.S. GAAP) $3,260
$3,147 Non-recurring items, net of tax: Merger-related expenses 206
- Reduction in tax expense (170) - Net earnings from operations
$3,296 $3,147 Diluted earnings per share (U.S. GAAP) $0.57 $0.55
Non-recurring items, net of tax: Merger-related expenses 0.04
Reduction in tax expense (0.03) - Diluted earnings per share $0.58
$0.55 Oak Hill Financial, Inc. SELECTED CONSOLIDATED FINANCIAL
INFORMATION (unaudited) April 14, 2005 Press Release For the Three
Months Ended March 31, (In thousands) 2005 2004 RECONCILIATION OF
NON-GAAP NET EARNINGS, DILUTED EARNINGS PER SHARE AND OTHER
PERFORMANCE RATIOS (continued) Non-interest expense (U.S. GAAP)
$6,895 $6,333 Non-recurring items, net of tax: Merger-related
expenses (317) - Reduction in tax expense 261 - Net earnings from
operations $6,839 $6,333 SUMMARY OF OPERATIONS (1)(2) Interest
income $15,777 $14,188 Interest expense 6,091 4,910 Net interest
income 9,686 9,278 Provision for losses on loans 750 575 Net
interest income after provision for losses on loans 8,936 8,703
Gain on sale of loans 318 295 Insurance commissions 671 737 Other
non-interest income 1,550 1,320 General, administrative and other
expense 6,839 6,333 Earnings before federal income tax 4,636 4,722
Federal income taxes 1,465 1,575 Federal new markets tax credit
(125) - Net earnings from operations $3,296 $3,147 SELECTED
PERFORMANCE RATIOS FROM OPERATIONS (1)(2)(4)(5) Diluted earnings
per share $0.58 $0.55 Return on average assets 1.24% 1.34% Return
on average equity 15.49% 15.62% Non-interest expense to average
assets 2.57% 2.69% Efficiency ratio 54.95% 54.44% Oak Hill
Financial, Inc. SELECTED CONSOLIDATED FINANCIAL INFORMATION
(unaudited) April 14, 2005 Press Release At or For the Three Months
Ended March 31, (In thousands, except share data) 2005 2004 PER
SHARE INFORMATION (U.S. GAAP) Basic earnings per share (3) $0.59
$0.56 Diluted earnings per share (4) $0.57 $0.55 Dividends per
share $0.17 $0.15 Book value per share $15.56 $14.46 OTHER
STATISTICAL AND OPERATING DATA (U.S. GAAP) (5) Return on average
assets 1.23% 1.34% Return on average equity 15.32% 15.62%
Non-interest expense to average assets 2.59% 2.69% Net interest
margin (fully-taxable equivalent) 3.89% 4.11% Total allowance for
losses on loans to non-performing loans 156.42% 146.36% Total
allowance for losses on loans to total loans 1.29% 1.32%
Non-performing loans to total loans 0.82% 0.90% Non-performing
assets to total assets 0.78% 0.88% Net charge-offs to average loans
(actual for the period) 0.06% 0.04% Net charge-offs to average
loans (annualized) 0.23% 0.17% Equity to assets at period end 7.85%
8.35% Efficiency ratio 55.40% 54.44% (1) Excludes $261,000
reduction in tax expense for the three months ended March 31, 2005
resulting from a tax savings of $1.0 million for 2005. (2) Does not
include $317,000 of merger-related charges for the three months
ended March 31, 2005. (3) Based on 5,566,360 and 5,582,171
weighted-average shares outstanding for the three months ended
March 31, 2005 and 2004, respectively. (4) Based on 5,718,181 and
5,737,110 weighted-average shares outstanding for the three months
ended March 31, 2005 and 2004, respectively. (5) Annualized where
appropriate. Oak Hill Financial, Inc. SELECTED CONSOLIDATED
FINANCIAL INFORMATION (unaudited) April 14, 2005 Press Release At
March 31, (In thousands, except share data) 2005 2004 SUPPLEMENTAL
DETAIL BALANCE SHEET - ASSETS Cash and cash equivalents 24,990
18,006 Trading account securities - - Securities available for sale
104,084 77,762 Securities held to maturity 3,635 3,654 Other
securities 6,663 6,058 Total securities 114,382 87,474 Total cash
and securities 139,372 105,480 Loans and leases held for investment
(1) 935,434 836,009 Loans and leases held for sale (1) - 1,140
Total loans and leases (1) 935,434 837,149 Allowance for losses on
loans 12,062 11,061 Goodwill 1,686 413 Other intangible assets
1,198 - Total intangible assets 2,884 413 Mortgage servicing rights
3,206 3,001 Purchased credit card relationships - - Other real
estate owned 943 885 Bank owned life insurance 10,197 - Other
assets 25,702 19,546 Total assets 1,105,676 955,413 BALANCE SHEET -
LIABILITIES Deposits 858,156 772,498 Borrowings 139,207 94,952
Other liabilities 3,517 3,164 Total liabilities 1,000,880 870,614
Redeemable preferred stock - - Trust preferred securities 18,000
5,000 Minority interests 8 8 Other mezzanine level items - - Total
mezzanine level items 18,008 5,008 Total liabilities and mezzanine
level items 1,018,888 875,622 BALANCE SHEET - EQUITY Preferred
equity - - Common equity 86,788 79,791 MEMO ITEM: Net unrealized
gain (loss) on securities available for sale, net of tax (2) (444)
1,133 End of period shares outstanding (2) 5,577,903 5,519,147
Options outstanding 556,961 490,700 Treasury shares held by the
Company 75,680 134,936 (1) Data is net of unearned interest, gross
of allowance for losses on loans (2) Excludes treasury shares Oak
Hill Financial, Inc. SELECTED CONSOLIDATED FINANCIAL INFORMATION
(unaudited) April 14, 2005 Press Release At or For the Three Months
Ended March 31, (In thousands, except share data) 2005 2004
SUPPLEMENTAL DETAIL (continued) Repurchase plan announced? No Yes
Number of shares to be repurchased in plan N/A 300,000 Number of
shares repurchased during the period N/A 134,936 Average price of
shares repurchased N/A $32.38 INCOME STATEMENT Interest income
15,777 14,188 Interest expense 6,091 4,910 Net interest income
9,686 9,278 Net interest income (fully-taxable equivalent) 9,904
9,404 Provision for losses on loans 750 575 Non-recurring expense:
Merger-related expenses 317 - Trading account income - - Foreign
exchange income - - Trust income - - Insurance commissions 671 737
Service charges on deposits 842 818 Gain on sale of loans 318 295
Gain on investment securities transactions 143 134 Other
non-interest income 565 368 Total non-interest income 2,539 2,352
Employee compensation and benefits 3,582 3,440 Occupancy and
equipment expense 1,002 833 Foreclosed property expense - -
Amortization of intangibles 72 - Other general, administrative and
other expense 1,922 2,060 Total non-interest expenses 6,578 6,333
Net income before taxes 4,580 4,722 Federal income taxes 1,445
1,575 Federal new markets tax credit (125) - Net income before
extraordinary items 3,260 3,147 Extraordinary items - - Net income
3,260 3,147 CHARGE-OFFS Loan charge-offs 717 495 Recoveries on
loans 182 145 Net loan charge-offs 535 350 AVERAGE BALANCE SHEET
Average loans and leases 928,998 829,242 Average other earning
assets 103,846 90,571 Oak Hill Financial, Inc. SELECTED
CONSOLIDATED FINANCIAL INFORMATION (unaudited) April 14, 2005 Press
Release At or For the Three Months Ended March 31, (In thousands,
except share data) 2005 2004 SUPPLEMENTAL DETAIL (continued)
AVERAGE BALANCE SHEET (continued) Average total earning assets
1,032,844 919,813 Average total assets 1,079,090 947,964 Average
non-interest bearing deposits 81,326 65,207 Average total time
deposits 557,661 481,437 Average other interest-bearing deposits
214,426 192,883 Average total interest-bearing deposits 772,087
674,320 Average borrowings 137,305 124,295 Average interest-bearing
liabilities 909,392 798,615 Average preferred equity - - Average
common equity 86,286 81,023 ASSET QUALITY AND OTHER DATA
Non-accrual loans 7,138 6,930 Renegotiated loans - - Loans 90+ days
past due and still accruing 573 628 Total non-performing loans
7,711 7,558 Other real estate owned 943 885 Total non-performing
assets 8,654 8,443 ADDITIONAL DATA 1 - 4 family mortgage loans
serviced for others 250,051 254,791 Proprietary mutual fund
balances - - Fair value of securities held to maturity 3,847 3,655
Full-time equivalent employees 371 355 Total number of full-service
banking offices 29 26 Total number of bank and thrift subsidiaries
1 1 Total number of ATMs 35 30 LOANS RECEIVABLE 1 - 4 family
residential 200,938 175,283 Home equity 42,432 35,956 Multi-family
residential 30,245 23,773 Commercial real estate 356,885 318,601
Construction and land development 64,010 60,232 Commercial and
other 171,931 147,994 Consumer 67,126 75,167 Credit cards 1,868
1,582 Loans receivable - gross 935,435 838,588 Unearned interest
(1) (1,439) Loans receivable - net of unearned interest 935,434
837,149 Allowance for losses on loans (12,062) (11,061) Loans
receivable - net (1) 923,372 826,088 (1) Does not include mortgage
servicing rights. Oak Hill Financial, Inc. SELECTED CONSOLIDATED
FINANCIAL INFORMATION (unaudited) April 14, 2005 Press Release At
or For the Three Months Ended March 31, (In thousands, except share
data) 2005 2004 SUPPLEMENTAL DETAIL (continued) DEPOSITS
Transaction accounts Non-interest bearing 81,125 70,221
Interest-bearing 67,015 78,560 Savings accounts 57,758 49,632 Money
market deposit accounts 96,190 77,610 Other core interest-bearing
368,450 333,412 Total core deposit accounts 670,538 609,435
Non-core interest-bearing accounts 187,618 163,063 Total deposits
858,156 772,498 Yield/average earning assets (fully- taxable
equivalent) 6.28% 6.26% Cost/average interest earnings assets 2.39%
2.15% Net interest income (fully- taxable equivalent) 3.89% 4.11%
DATASOURCE: Oak Hill Financial, Inc. CONTACT: David G. Ratz,
Executive Vice President of Oak Hill Financial, Inc.,
+1-740-286-3283
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