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Wednesday, October 08, 2003
PRESS RELEASE
Lawrence Financial Holdings, Inc. Announces
Diluted Earnings Per Share of $0.15 for Third Quarter 2003
LAWRENCE FINANCIAL HOLDINGS, INC. - Ironton, Ohio (OTCBB:LWFH) reported basic
earnings per share of $0.16 and diluted earnings per share of $0.15 for the
third quarter ended September 30, 2003 compared to $0.09 per share (both basic
and diluted) for the same period in 2002. In the first nine months of 2003 the
Company is reporting basic earnings per share of $0.56 and diluted earnings per
share of $0.55 compared to $0.67 and $0.65 per share (basic and diluted) for the
same period in 2002. Net income for the third quarter of 2003 was $93,000, a
increase of $33,000, or 55%, when compared to third quarter of 2002. During the
first nine months of 2003 net income was $344,000, a decrease of $108,000, or
24%, when compared to the first nine months of 2002. Mr. Jack Blair, President
and CEO of Lawrence Financial Holdings, Inc. remarked:
"We knew going into 2003 that there would be significant costs
associated with the conversion to a new data processor. Through the
first nine months of this year data processing costs have increased by
$109,000 over the same period in 2002, the majority of which was due to
the deconversion. We also knew that the Company would be expanding
back-room operations to include two new departments, proof and
bookkeeping, and purchasing new computer and communications equipment
in order to establish a Wide-Area-Network providing instant access to
needed information at every workstation. These changes are now in place
and we are beginning to realize the anticipated cost savings. DP costs
in the fourth quarter of 2003 should be between $25,000 to $30,000
below comparable costs for the same period in 2002. The combination of
improved services, products, management systems and reduced data
processing costs have created a welcomed opportunity for the Company to
enhance both customer service and shareholder value.
Once again I want to use the earnings release to discuss the
Company's non-performing assets and allowance for loan losses ("ALL").
During the first nine months of 2003, the Company has experienced net
charge-offs to the ALL of approximately $765,000, of which $283,000
occurred in the third quarter, $272,000 in the second quarter and
$210,000 in the first quarter. At September 30, 2003, the Company had a
ratio of ALL to gross loans of 1.20% compared to 1.22% at the end of
the prior quarter and 1.10% on the same date in 2002. Through the first
nine months of 2003 the Company has expensed $690,000 in provision for
loan losses. We expect to increase our monthly provision for loan
losses in the fourth quarter of 2003 from $65,000 per month to at least
$75,000 per month, or $225,000 for the quarter.
We believe charge-offs will likely continue at current levels
through the fourth quarter of 2003. The Company will continue to
closely monitor the adequacy of our
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ALL in a manner consistent with generally accepted account principals
("GAAP") and regulatory guidelines.
Directly following my comments you will find our discussion of
non-performing assets ("NPA's") for the third quarter of 2003 with
tabular data for the current quarter and the prior four quarters. The
sharp increase in NPA volume over the second quarter of 2003 reflects
the impact from changing the classification of one commercial real
estate loan, with a balance of $577,000, from the "Watch List" to the
"Substandard" category. The Company is in first position on the real
estate which secures this loan and we have the personal guarantees of
the borrowers. The change in this loan's classification was made at the
request of the Office of Thrift Supervision as part of their regularly
scheduled Safety and Soundness and Compliance Examination. Absent the
impact of this one loan our NPA volume at the end of the third quarter
of 2003 reflected the continuance of the positive trend seen in the
previous three quarters, down to $1.4 million, or 1.08% of assets.
Economic conditions continue to negatively impact the
Company's earnings as we continue to provide for probable and incurred
loan losses and experience elevated non-interest expenses. The
Company's net interest margin remains strong, when compared to peer,
but we have experienced increased margin pressure in the third quarter
as loans are paid down at a faster pace than they can be generated.
During the first nine months of 2003 the Company has incurred elevated
non-interest expenses associated with strategic enhancements to systems
and personnel which will result in the banking subsidiary being more
closely aligned with the products and services offered by a community
bank than a traditional thrift. The Company continues to experience
considerable benefits from stable, low cost funding sources."
Non-performing assets increased in the third quarter of 2003. NPA's
totaled $2.0 million at September 30, 2003, or 1.52% of assets. The following
table provides a summary of non-performing asset balances for the current
quarter and the prior four quarters (Loan Accruing Interest "Accr"; Loan in
Non-Accrual status "N-Accr"; Other Real Estate Owned "OREO"):
--------------- -------- ---------- ------------ ---------- ---------- ---------- ---------- ---------
NPA NPA Accr Accr N-Accr N-Accr OREO OREO
Quarter $* % $* % $* % $* %
Ended Assets Assets Assets Assets
--------------- -------- ---------- ------------ ---------- ---------- ---------- ---------- ---------
09/30/03 $2,002 1.52% $1,475 1.12% $528 0.40% $158 0.12%
06/30/03 1,518 1.12% 672 0.50% 771 0.57% 75 0.06%
03/31/03 1,823 1.34% 1,056 0.78% 656 0.48% 111 0.08%
12/31/02 2,118 1.58% 1,436 1.07% 531 0.41% 151 0.10%
09/30/02 1,650 1.21% 980 0.72% 593 0.43% 77 0.06%
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* All dollar values are shown in thousands.
Lawrence Financial reported earnings for the third quarter and the nine
months ended September 30, 2003, of $93,000 and $344,000, respectively, compared
to $60,000 and $452,000, respectively, for the same periods in 2002. Net
interest income was $1.2 million for the three months ended September 30, 2003,
and $3.8 million for the first nine months of 2003 reflecting decrease of
$49,000 when compared to the third quarter of 2002 and no change from the first
nine months in 2002. Net interest margin for the third quarter of 2003 averaged
4.02% compared to 4.05% for the same period in 2002. Through the first nine
months of 2003 net interest margin averaged 4.07% compared to 4.07% for the same
period in 2002. For the nine months ended September 30, 2003, the average yield
on earning assets was 6.05%, a decrease of 112 basis points when compared to the
same period in 2002. The reduction in the yield on earning assets was offset by
a reduction in the average cost of funding for earning assets which was 1.98%
for the nine month ended September 30, 2003, a decrease of 113 basis points when
compared to the same period in 2002. This reduction in cost was generated by
changes in both the mix of, and the rate paid for, interest bearing deposits.
The Company had no borrowed funds during the quarter.
Non-interest income increased $212,000, or 40%, for the nine-month period
as compared to the same period ended September 30, 2002. In 2003 the Company
recognized $300,000 in non-interest income in the first quarter, $203,000 in the
second quarter and $239,000 in the third quarter of 2003 compared to $166,000,
$173,000, and $189,000 respectively, for the same periods in 2002. In the first
nine months of 2003, the Company recognized $194,000 in gains from the sale of
securities and a loss of ($18,000) from the sale of assets.
Non-interest expense increased $422,000, or 14%, for the nine months ended
September 30, 2003, as compared to the same period in 2002. The Company
experienced a $189,000, or 15%, increase in salaries, wages and benefits paid
during the first nine months of 2003 compared to the same period in 2002, which
reflects the addition of employees in the loan collection, loan review, internal
audit and operations departments within the Company's banking subsidiary. In
addition to increased salaries, wages and benefits: fees related to data
processing services have increased by $109,000, or 27%, with approximately
$80,000 of the increase directly related to the July, 2003 deconversion from our
previous data processor; legal fees paid have increased $32,000, or 23%, most of
which is a result of actions taken in the collection of delinquent loans; and
miscellaneous expenses related to the repossession of indirect loans increased
$26,000, or 19%, compared to expenses recorded for this activity in the first
nine months of 2002.
Provision for loan losses was $690,000, a decrease of $12,000, or 2%, for
the nine month period ending September 30, 2003 when compared to the same period
in 2002. At September 30, 2003, the Company's allowance for loan losses as a
percentage of gross loans outstanding decreased by 2 basis points, from 1.22% to
1.20%, when compared to totals at September 30, 2002.
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Management considers the Company to be adequately reserved at the end of the
third quarter and will assess the need for additional reserves on at least a
quarterly basis.
Stockholders' equity at September 30, 2003, was $13.8 million, or 10.5% of
total assets. This balance is a decrease of $997,000, or 7%, when compared to
stockholder's equity at December 31, 2002. The decrease reflects additional
treasury stock purchases totaling $1.0 million and an increase in unrealized
losses in securities that are held as available for sale in the Company's
investment portfolio which were offset, in part, by net income for the period.
At September 30, 2003 book value per share was $21.21 compared to $20.97 at
December 31, 2002.
Lawrence Financial Holdings, Inc. is the holding company for Lawrence
Federal Savings Bank, a federally chartered savings bank headquartered in
Ironton, Ohio. Lawrence Federal operates a total of five full-service banking
offices with locations in Ironton, Chesapeake, South Point, Rome and
Wheelersburg in southeastern Ohio.
This release contains "forward-looking statements" which may describe
future plans and strategies, including our expectations of future financial
results. Management's ability to predict results or the effect of future plans
or strategies is inherently uncertain. Factors that could affect our actual
results include market interest rate trends, the general regional and national
economic climate, our ability to control costs and expenses, actions by our
competitors and federal and state regulation. As we have no control over these
factors, they should be considered in evaluating any forward-looking statements
and undue reliance should not be placed on such statements.
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LAWRENCE FINANCIAL HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
IN THOUSANDS, EXCEPT FOR PER-SHARE AMOUNTS
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
--------- --------- --------- --------
Operating Data:
Total interest income $ 1,788 $ 2,180 $ 5,657 $ 6,693
Total interest expense 556 898 1,864 2,900
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Net interest income 1,232 1,282 3,793 3,793
Provision for loan losses 195 372 690 702
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Net interest income after
provision for loan losses 1,037 910 3,103 3,091
Non-interest income 230 183 546 514
Gain or (loss) on sale sec 9 6 194 14
Non-interest expense 1,160 1,005 3,389 2,967
--------- ------------- ------- -------
Income before income taxes 116 94 454 652
Income taxes 23 34 110 200
--------- ------------- ------- -------
Net income $ 93 $ 60 $ 344 $ 452
======== ======= ======= =======
Per Common Share Data:
Basic:
Net Income $ 0.16 $ 0.09 $ 0.56 $ 0.67
Avg Shares Outstanding 599,042 643,186 611,244 669,952
Diluted:
Net Income $ 0.15 $ 0.09 $ 0.55 $ 0.65
Avg Shares Outstanding 621,128 664,592 628,690 693,196
Cash Dividends Per Common
Share Declared: $ 0.07 $ 0.07 $ 0.21 $ 0.21
Return on Average Equity: 2.66% 1.62% 3.26% 4.04%
Return on Average Assets: 0.28% 0.18% 0.34% 0.45%
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LAWRENCE FINANCIAL HOLDINGS, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS - CONTINUED
(UNAUDITED)
IN THOUSANDS OF DOLLARS
Selected Financial Condition Data As Of:
Current Year - 2003 Prior Year - 2002
Sep 30 Jun 30 Dec 31 Sep 30
---------- -------------- ----------- ----------
Total assets $ 131,373 $ 135,313 $ 134,389 $ 136,637
Cash and cash equivalents 15,777 11,250 16,141 17,343
Investment securities 24,462 26,256 14,192 11,620
Gross loans receivable 85,061 92,423 97,568 101,381
Allowance for loan losses 1,024 1,124 1,111 1,111
Loans receivable, net 84,037 91,299 96,457 100,270
Deposits 115,990 120,644 118,926 119,285
Federal Home Loan Bank advances -- -- -- 2,000
Stockholders' equity 13,793 13,888 14,789 14,615
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FOR MORE INFORMATION PLEASE CONTACT:
Lawrence Financial Holdings, Inc.
Jack Blair, President and CEO
or
RobRoy Walters, SVP and CFO
311 South Fifth Street
Ironton, Ohio 45638
Phone: (740) 532-0263
Fax: (740) 532-1885
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