OHIO LEGACY CORP ANNOUNCES SECOND QUARTER RESULTS
Wooster, Ohio, July 16, 2008 - Ohio Legacy Corp (NASDAQ: OLCB) today reported 2008 second quarter net income of $63,340 or $0.03 per share compared to ($34,317) or ($0.02), during the second quarter of 2007.
Earnings for the first six months of 2008 were $32,241, or $0.01 per common share, compared with ($39,763) or ($0.02) per common share for the comparable year-ago period.
The following key items summarize the Company’s financial results through June 30, 2008:
| § | Interest expense has been reduced on all major funding categories. |
| § | Net interest margin was 3.38% for the period, a marked improvement over previous quarters. |
| § | Non interest income performed as expected during the period. |
| § | Non interest expense fully reflects the cost savings measures implemented over the last three quarters. |
| § | Charge-offs remained low for both the quarter and the first six months of the year. |
Credit Quality - The provision for loan losses totaled $5,000 and $11,500, respectively, for the quarter and the first six months of 2008. The Company’s level of non-performing loans remained high, but stable with $4.0 million categorized as non-accrual and $3.8 million as other real estate owned (OREO.) Criticized substandard loans that are still accruing also remained high at $3.0 million. Management believes that these loans are correctly valued as a result of charges taken during the third and fourth quarters of 2007. The Company is actively monitoring all substandard, non-accrual and OREO assets through monthly or more frequent reviews of each relationship.
Net Interest Income - Interest income was down compared to the same period in 2007, reflecting the reduction of $38.9 million in earning assets associated with the sale of loans associated with the Millersburg office during the third quarter of 2007. Respectively, for the quarter and for the first six months of 2008 interest income was down $877,000 or 24.2% and $1.7 million or 23.8% compared to the same periods a year ago. Interest expense for the same periods declined $749,000 or 36.6% and $1.3 million or 32.5%. The net interest margin increased to 3.38% in the second quarter, compared to 2.99% for the same period last year. For the year to date through June 30, the net interest margin was 3.33% compared to 3.06% in 2007.
Noninterest Income - Compared to the second quarter and the first six months of 2007, noninterest income fell $48,000 and $109,000, respectively. A decrease in service charge income as a result of the sale of the Millersburg office accounts for most of the reduction. We are pleased with the performance of our fee businesses against our financial plan for 2008. Our partnership with Midwest Real Estate Services began in May and was profitable in June. We look for improved performance from this partnership in the form of higher gains on loan sales as the housing segment begins to stabilize.
Noninterest Expense - The Company continued to focus on reducing and stabilizing noninterest expense levels resulting in declines of $287,000 or 15.0% and $573,000 or 18.8% for the quarter and the first six months of 2008 compared to 2007. Salaries accounted for the largest share of this reduction, with decreases of $148,000 and $379,000 for the quarter and the first half of the year.
Loans and Leases - Loan balances decreased $5.1 million from December 31, 2007. Our financial plan for 2008 did not include any loan growth, which reflects the Company’s decision to reduce the concentration of commercial real estate assets in our portfolio. Commercial real estate loans have declined $6.4 million since the end of 2007, and residential real estate loans have increased by $3.1 million.
Deposits - Demand deposits were up $1.1 million or 4.1% since December 31, 2007. Money market and savings balances increased $6.5 million or 8.9% for the same period. Certificates of deposit declined by $4.3 million or 5.9% since year end. The changes in the mix of deposits reflect the Company’s continued focus on growing core deposit relationships and reducing its dependence on higher cost CDs.
STRATEGIC DEVELOPMENTS - The Company signed agreements with Midwest Mortgage Processing LLC and JMC Marketing LLC and opened mortgage loan production offices in the Dayton and Columbus areas in May. This business effort broke even in May and was profitable in June. Both of these housing markets are more stable than northern Ohio and represent an opportunity to leverage the mortgage processing staff investment that we made in the fall of 2006. As the regulatory environment for mortgage bankers tightens, we are confident the opportunity to hire mortgage experts in stable to growing markets will increase. We believe this strategy complements our core banking initiatives and will contribute to our goal of becoming a profitable, superior small business bank.
During the second quarter, the Company was able to take advantage of the earlier declines in rates and lower our cost of funds on most products. However, the continuing demand for liquidity by the large super-regional banking competitors which operate in our markets has led to retail pricing on both demand and term deposits that is well above national averages and significantly above our prices. We are attempting to use our service advantage to combat these pricing differences and believe that we have done so effectively over the last few months. However, if these competitors continue to raise rates in an effort to satisfy their cash needs, our ability to maintain deposit rates at reasonable levels will diminish severely, resulting in a negative impact on the net interest margin.
Credit quality continues to be our greatest concern. While our impaired asset numbers are stable, they are also too high by nearly every measure. We are committed to reducing our non-accrual loans, OREO assets and criticized-substandard loans in an orderly manner. The realities of the housing downturn will force us to hold some of these assets longer than we would like. However, as stated previously, Management believes that these assets have been correctly valued and the risk of additional material loss is low.
ABOUT OHIO LEGACY CORP
Ohio Legacy Corp is a bank holding company headquartered in Wooster, Ohio. Its subsidiary, Ohio Legacy Bank, N.A., provides financial services to small businesses and consumers though four full-service banking locations in Canton and Wooster, Ohio.
FORWARD-LOOKING STATEMENTS DISCLOSURE
This release contains certain forward-looking statements related to the future performance and financial condition of Ohio Legacy Corp. 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.
OHIO LEGACY CORP
CONSOLIDATED BALANCE SHEETS
As of June 30, 2008, and December 31, 2007
| | | June 30, | | December 31, | |
| | | 2008 | | 2007 | |
| | | (unaudited) | | | |
ASSETS | | | | | |
| Cash and due from banks | | $ | 6,971,962 | | $ | 5,764,580 | |
| Federal funds sold and interest-bearing deposits in financial institutions | | | 195,641 | | | 1,350,625 | |
Cash and cash equivalents | | | 7,167,603 | | | 7,115,205 | |
| Certificate of deposit in financial institution | | | 100,000 | | | 100,000 | |
| Securities available for sale | | | 36,397,869 | | | 29,010,334 | |
| Securities held to maturity (fair value of $2,950,711 and $2,995,122 at June 30, 2008 and December 31, 2007) | | | 3,001,289 | | | 3,002,754 | |
Loans, net of allowance of $1,632,253 and $1,622,906 at June 30, 2008 and December 31, 2007 | | | 127,495,148 | | | 132,554,377 | |
| Federal bank stock | | | 1,448,550 | | | 1,541,200 | |
| Premises and equipment, net | | | 2,790,152 | | | 2,901,906 | |
| Intangible assets | | | 100,119 | | | 150,322 | |
| Other real estate owned | | | 3,749,757 | | | 2,416,367 | |
| Accrued interest receivable and other assets | | | 1,873,503 | | | 1,488,214 | |
| | | | | | | | |
Total assets | | $ | 184,123,990 | | $ | 180,280,679 | |
| | | | | | | | |
LIABILITIES | | | | | | | |
| Deposits: | | | | | | | |
Noninterest-bearing demand | | $ | 16,176,263 | | $ | 14,329,339 | |
Interest-bearing demand | | | 9,271,565 | | | 9,995,343 | |
Savings and money market | | | 53,993,617 | | | 49,566,417 | |
Certificates of deposit, net | | | 69,132,514 | | | 73,458,253 | |
Total deposits | | | 148,573,959 | | | 147,349,352 | |
| Repurchase agreements | | | 1,350,808 | | | 2,022,869 | |
| Short term Federal Home Loan Bank advances | | | 1,950,000 | | | 2,025,000 | |
| Long term Federal Home Loan Bank advances | | | 16,000,000 | | | 12,000,000 | |
| Subordinated debentures | | | - | | | - | |
| Capital lease obligations | | | 481,585 | | | 493,168 | |
| Accrued interest payable and other liabilities | | | 715,230 | | | 1,076,647 | |
Total liabilities | | | 169,071,582 | | | 164,967,036 | |
| | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | |
Preferred stock, no par value, 500,000 shares authorized, none outstanding | | | - | | | - | |
Common stock, no par value, 5,000,000 shares authorized, 2,214,564 shares issued and outstanding at June 30, 2008, and December 31, 2007, respectively | | | 18,799,339 | | | 18,781,925 | |
| Accumulated earnings | | | (3,439,977 | ) | | (3,472,218 | ) |
| Accumulated other comprehensive loss | | | (306,954 | ) | | 3,936 | |
Total shareholders’ equity | | | 15,052,408 | | | 15,313,643 | |
| | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 184,123,990 | | $ | 180,280,679 | |
OHIO LEGACY CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2008 and 2007
(Unaudited)
| | | For the Three Months Ended | | For the Six Months Ended | |
| | | June 30, | | June 30, | |
| | | 2008 | | 2007 | | 2008 | | 2007 | |
| Interest income: | | | | | | | | | |
Loans, including fees | | $ | 2,202,766 | | $ | 3,259,258 | | $ | 4,530,466 | | $ | 6,500,532 | |
Securities | | | 485,164 | | | 287,256 | | | 912,659 | | | 586,025 | |
Interest-bearing deposits and federal funds sold | | | 28,306 | | | 42,574 | | | 60,423 | | | 143,022 | |
Dividends on federal bank stock | | | 20,493 | | | 24,300 | | | 41,702 | | | 48,123 | |
Total interest and dividend income | | | 2,736,729 | | | 3,613,388 | | | 5,545,250 | | | 7,277,702 | |
| | | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | |
Deposits | | | 1,092,626 | | | 1,711,647 | | | 2,324,214 | | | 3,422,874 | |
| Short term Federal Home Loan Bank advances | | | 3,756 | | | 26,138 | | | 28,570 | | | 26,138 | |
| Long term Federal Home Loan Bank advances | | | 176,106 | | | 174,363 | | | 339,546 | | | 370,201 | |
| Subordinated debentures | | | - | | | 70,722 | | | - | | | 141,445 | |
| Repurchase agreements | | | 5,373 | | | 27,561 | | | 17,833 | | | 41,122 | |
| Capital leases | | | 19,600 | | | 36,373 | | | 39,431 | | | 73,040 | |
Total interest expense | | | 1,297,461 | | | 2,046,774 | | | 2,749,594 | | | 4,074,820 | |
| | | | | | | | | | | | | | |
| Net interest income | | | 1,439,268 | | | 1,566,614 | | | 2,795,656 | | | 3,202,882 | |
| | | | | | | | | | | | | | |
| Provision for loan losses | | | 5,000 | | | 14,000 | | | 11,500 | | | 57,000 | |
| | | | | | | | | | | | | | |
| Net interest income after provision for loan losses | | | 1,434,268 | | | 1,552,614 | | | 2,784,156 | | | 3,145,882 | |
| | | | | | | | | | | | | | |
| Noninterest income: | | | | | | | | | | | | | |
Service charges and other fees | | | 246,404 | | | 289,994 | | | 460,651 | | | 555,633 | |
Gain on sale of loans | | | 63,993 | | | 44,344 | | | 95,018 | | | 95,295 | |
Gain on redemption of equity interest in Visa | | | - | | | - | | | 27,561 | | | - | |
Gain (loss) on disposition of other real estate owned | | | - | | | (620 | ) | | - | | | 4,831 | |
Other income | | | 6,180 | | | 30,377 | | | 17,543 | | | 53,573 | |
Total noninterest income | | | 316,577 | | | 364,095 | | | 600,773 | | | 709,332 | |
| | | | | | | | | | | | | | |
| Noninterest expense: | | | | | | | | | | | | | |
Salaries and benefits | | | 838,435 | | | 986,213 | | | 1,634,903 | | | 2,013,735 | |
Occupancy and equipment | | | 229,388 | | | 232,750 | | | 456,483 | | | 469,564 | |
Professional fees | | | 82,972 | | | 173,155 | | | 180,899 | | | 290,306 | |
Franchise tax | | | 48,821 | | | 62,903 | | | 99,071 | | | 126,653 | |
Data processing | | | 165,111 | | | 175,952 | | | 335,367 | | | 349,704 | |
Marketing and advertising | | | 35,826 | | | 51,925 | | | 95,737 | | | 101,846 | |
Stationery and supplies | | | 24,760 | | | 25,533 | | | 52,140 | | | 60,420 | |
| Intangible asset amortization | | | 23,960 | | | 34,229 | | | 50,202 | | | 71,025 | |
| Deposit expense and insurance | | | 68,300 | | | 76,453 | | | 129,437 | | | 118,601 | |
Other expenses | | | 169,932 | | | 155,417 | | | 318,449 | | | 324,072 | |
Total noninterest expense | | | 1,687,505 | | | 1,974,530 | | | 3,352,688 | | | 3,925,926 | |
| | | | | | | | | | | | | | |
| Earnings before income tax expense | | | 63,340 | | | (57,821 | ) | | 32,241 | | | (70,712 | ) |
| Income tax expense | | | - | | | (23,504 | ) | | - | | | (30,949 | ) |
| | | | | | | | | | | | | | |
| Net earnings | | $ | 63,340 | | $ | (34,317 | ) | $ | 32,241 | | $ | (39,763 | ) |
| | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.03 | | $ | (0.02 | ) | $ | 0.01 | | $ | (0.02 | ) |
| Diluted earnings per share | | | 0.03 | | | (0.02 | ) | | 0.01 | | | (0.02 | ) |
Contact: D. Michael Kramer, President and Chief Executive Officer
330-263-1955
http://www.ohiolegacycorp.com
