EXHIBIT 99
For Immediate Release{PRIVATE}
Thursday, October 9, 2003
Contact: David G. Ratz, Executive Vice President & COO
(740) 286-3283
Oak Hill Financial Earnings Up 15% in Third Quarter
Jackson, Ohio -- Oak Hill Financial, Inc. (Nasdaq NMS: OAKF) today reported net
earnings from operations for the three months ended September 30, 2003 of
$3,121,000, or $.55 per diluted share. The third quarter 2003 earnings represent
an increase of 15.3% over the $2,708,000, or $.49 per diluted share, in net
earnings from operations that the company recorded for the quarter ended
September 30, 2002.
For the nine months ended September 30, 2003, Oak Hill Financial recorded net
earnings from operations of $8,942,000, or $1.59 per diluted share, an increase
of 15.0% over the $7,775,000, or $1.43 per diluted share, in net earnings from
operations for the first nine months of 2002.
The operating earnings for the third quarter and first nine months of 2003 have
been adjusted for non-recurring tax savings of $133,000 and $399,000,
respectively, resulting from a one-time tax savings of $533,000 for the full
year 2003. Including the non-recurring savings, the company's net income was
$3,254,000, or $.57 per diluted share, for the third quarter and $9,341,000, or
$1.66 per diluted share, for the first nine months of 2003.
The company's total assets ended the third quarter of 2003 at $904.0 million, an
increase of 7.1% over the $844.1 million in total assets recorded at September
30, 2002, and 4.6% over the $863.9 million in assets on the books at June 30,
2003. Net loans at September 30, 2003 were $778.5 million, up 12.0% over the
$695.1 million in net loans at September 30, 2002, and 5.1% over the $740.9
million in net loans at the end of the second quarter of 2003.
In reviewing the third quarter results, Oak Hill Financial Chairman and CEO John
D. Kidd said, "We continue to be very pleased with our earnings performance.
Revenues for the third quarter were up nearly 17% over the third quarter of
2002, driven by a 68% increase in non-interest income. We are also pleased with
the results of our loan production efforts, as our loans have grown over 5%
since June 30, with a 14% increase in commercial real estate loans leading the
way."
Looking ahead to the fourth quarter and beyond, Kidd stated, "It appears that
the boom in mortgage lending has peaked, which creates the challenge going
forward of replacing that revenue stream. We're facing that challenge by
aggressively pursuing loan growth. We've been able to build considerable
momentum in other areas of lending, and the pipeline is particularly strong in
commercial real estate. Also, while mortgage originations will be lower, we've
shaped our mortgage area to be an ongoing line of business and we have an
excellent servicing portfolio. Our other fee income areas are doing very well,
SBA lending is expected to grow, and credit quality and operating expenses are
stable. The net interest margin is also a challenge, but we are hopeful that
overall loan growth and growth in other non-interest revenues will allow our
earnings momentum to continue through the remainder of the year and into 2004."
Key Issue Review and Outlook
Net Interest Margin - Net interest margin for the third quarter was 4.03%, as
compared to the 4.10% posted in the third quarter of 2002 and the 4.27% recorded
for the second quarter of 2003. The third quarter margin was below management's
expectations and resulted primarily from continuing pressure on asset yields -
particularly yields on commercial and residential real estate loans - due to the
low interest rate environment. The decline was partially offset by a 5.7%
increase in demand deposits during the quarter, continuing a trend sparked by
the company's marketing and sales efforts. While the margin will continue to
come under pressure if rates remain at their current low levels, management
believes that it has stabilized and can be maintained in the current range.
Operating Expenses - Non-interest expenses were 2.79% of average assets for the
third quarter of 2003, as compared to 2.65% for the third quarter of 2002 and
the 2.95% posted for the second quarter of 2003. On a dollar basis, operating
expenses declined slightly in the third quarter versus the second quarter. The
linked quarter improvement reflects the company's success at growing into
expense levels established in earlier quarters with the addition of new
facilities, management and staff to facilitate the company's growth objectives.
Also, due to the combination of higher revenues and stable expenses, the
company's efficiency ratio improved to 52.1% for the third quarter of 2003, as
compared to the prior year's 55.1% and the 53.1% posted for the second quarter
of 2003.
Non-Interest Income - Non-interest income, including the gain on sale of loans,
was $3,302,000 in the third quarter, an increase of 67.5% over the third quarter
of 2002 and 8.2% over the second quarter of 2003. As in recent quarters, gain on
sale of loans was the largest component of the year-over-year increase, and
commissions on the sales of group health and title insurance, and service
charges on deposit accounts also posted strong increases. Consistent with
national trends, the demand for fixed-rate mortgages abated in the latter part
of the third quarter, and management expects lower gains on sales from mortgage
origination activities in the fourth quarter. However, the company retains the
servicing rights on the mortgage loans it originates, and the success of its
origination efforts in recent quarters has resulted in a substantial increase in
its servicing portfolio, with a corresponding increase in revenues expected in
future periods. Also, future periods should benefit as the company continues to
pursue SBA lending, an area which it currently has a healthy pipeline.
Asset Quality - At the end of the third quarter, the nonperforming loans/total
loans and nonperforming assets/total assets ratios were 1.02% and 0.95%,
respectively, as compared to the 1.07% and 0.96%, respectively, recorded at June
30, 2003. The largest of the non-performing loans, which the company has
discussed in earlier releases, represents 0.15% of the nonperforming loan ratio.
Another non-performing loan, also discussed in a previous release, contributed
0.10% to the nonperforming loan ratio. The remaining nonperforming loans are a
mix of commercial real estate, commercial, residential real estate and consumer
loans. The largest of these represents 0.06% of the nonperforming loan ratio.
The expected loss on all nonperforming loans combined is about $650,000.
The company continued to take an aggressive posture toward problem credits in
the third quarter, with net charge-offs (non-annualized) at 0.06% of total loans
for the quarter, as compared to 0.08% in the second quarter. The annualized rate
through nine months of 0.23% remains consistent with management's objective of
maintaining net charge-offs in the 0.20% range for the full year.
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
believes 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 diversification of non-interest revenues are also
major elements in the company's strategy. In this regard, SBA loans will receive
greater emphasis as the demand for fixed-rate residential mortgages moderates.
Further, cross-selling additional services to the company's diverse customer
base and expanding the range and penetration of fee-generating services remain
key factors in the company's pursuit of non-interest income.
Asset/Loan Growth - The company's total assets grew at an 18.5% annual rate
during the third quarter, while loans increased at a very healthy 20.3% annual
rate. As previously released, the company's objectives for 2003 called for
approximately 10% growth in both loans and assets. Through nine months, loans
have already exceeded this objective with an increase of 10.9%, and assets are
on track to surpass the target in the fourth quarter. Further, management
believes that continued growth can offset both the softness in the net interest
margin and the expected decline in gain on sale of loans and, therefore, growth
will be aggressively pursued. However, balance sheet growth will not come at the
expense of credit quality and must contribute to attaining the company's
earnings objectives.
Estimate - The company has narrowed the range of its earnings estimate for the
full year 2003 to $2.11 to $2.14 per share.
Oak Hill Financial is a financial holding company headquartered in Jackson,
Ohio. Its subsidiaries, Oak Hill Banks and Action Finance Company, operate 25
full-service banking offices, five bank loan production offices, and six
consumer finance offices in 15 counties across southern and central Ohio. A
third subsidiary, Oak Hill Financial Insurance Agency, provides group health
plans and other insurance services to over 350 business 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)
October 9, 2003 Press Release
At September 30,
(In thousands) 2003 2002
- --------------------------------------------------------------------------------
SUMMARY OF FINANCIAL CONDITION
Total assets $904,006 $844,051
Interest-bearing deposits and federal funds sold 1,100 7,068
Investment securities 76,608 91,207
Loans receivable - net 778,484 695,073
Deposits 684,865 662,613
Federal Home Loan Bank advances and other borrowings 139,969 112,339
Stockholders' equity 76,503 65,263
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 reporting 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 to its operating
information is presented in the table below.
For the At or For the
three months ended nine months ended
September 30, September 30,
(In thousands, except share data) 2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------
RECONCILIATION OF NON-GAAP NET EARNINGS,
DILUTED EARNINGS PER SHARE AND OTHER PERFORMANCE MEASURES
Net earnings (U.S. GAAP) $ 3,254 $ 2,691 $ 9,341 $ 7,838
Non-recurring items, net of tax:
Merger-related expenses -- 17 -- 17
Gain on sale of a former branch location -- -- -- (80)
Reduction in tax expense (133) (399)
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Net earnings from operations $ 3,121 $ 2,708 $ 8,942 $ 7,775
==============================================================================================
Diluted earnings per share (U.S. GAAP) $ 0.57 $ 0.49 $ 1.66 $ 1.44
Non-recurring items, net of tax:
Merger-related expenses -- -- -- --
Gain on sale of a former branch location
-- -- -- (0.01)
Reduction in tax expense (0.02) -- (0.07) --
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Diluted earnings per share from operations $ 0.55 $ 0.49 $ 1.59 $ 1.43
==============================================================================================
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
October 9, 2003 Press Release
For the At or For the
three months ended nine months ended
September 30, September 30,
(In thousands, except share data) 2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NON-GAAP NET EARNINGS,
DILUTED EARNINGS PER SHARE AND OTHER PERFORMANCE MEASURES (continued)
Non-interest expense (U.S. GAAP) $ 5,946 $ 5,539 $ 17,908 $ 16,511
Non-recurring items:
Merger-related expenses -- (26) -- (26)
Reduction in tax expense 202 -- 607 --
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Non-interest expense from operations $ 6,148 $ 5,513 $ 18,515 $ 16,485
====================================================================================================================
Non-interest income (U.S. GAAP) $ 3,302 $ 1,971 $ 8,758 $ 5,547
Non-recurring items:
Gain on sale of a former branch location -- -- -- (122)
- --------------------------------------------------------------------------------------------------------------------
Non-interest income from operations $ 3,302 $ 1,971 $ 8,758 $ 5,425
====================================================================================================================
SUMMARY OF OPERATIONS (1)
Interest income $ 13,475 $14,247 $40,991 $42,935
Interest expense 5,003 6,116 15,464 18,812
- --------------------------------------------------------------------------------------------------------------------
Net interest income 8,472 8,131 25,527 24,123
Provision for losses on loans 966 605 2,506 1,652
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Net interest income after provision for losses on loans 7,506 7,526 23,021 22,471
Gain on sale of loans 1,473 697 3,691 1,405
Insurance commissions 718 650 2,111 1,788
Other non-interest income 1,111 624 2,956 2,232
General, administrative and other expense 6,148 5,513 18,515 16,485
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Earnings before federal income taxes 4,660 3,984 13,264 11,409
Federal income taxes 1,539 1,276 4,322 3,636
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Net earnings from operations $ 3,121 $ 2,708 $ 8,942 $ 7,775
====================================================================================================================
SELECTED PERFORMANCE RATIOS FROM OPERATIONS (1)(4)
Diluted earnings per share (3) $ 0.55 $ 0.49 $ 1.59 $ 1.43
====================================================================================================================
Return on average assets 1.42% 1.30% 1.40% 1.28%
Return on average equity 16.47% 17.07% 16.58% 17.26%
Non-interest expense to average assets 2.79% 2.65% 2.90% 2.75%
Efficiency ratio 52.13% 55.12% 53.80% 55.85%
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
October 9, 2003 Press Release
For the At or For the
three months ended nine months ended
September 30, September 30,
(In thousands, except share data) 2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------
PER SHARE INFORMATION (U.S. GAAP)
Basic earnings per share(2) $ 0.59 $ 0.50 $ 1.71 $ 1.48
====================================================================================================================
Diluted earnings per share(3) $ 0.57 $ 0.49 $ 1.66 $ 1.44
====================================================================================================================
Dividends per share(2) $ 0.13 $ 0.12 $ 0.39 $ 0.36
====================================================================================================================
Book value per share $ 13.83 $ 11.93
====================================================================================================================
OTHER STATISTICAL AND OPERATING DATA (U.S. GAAP) (4)
Return on average assets 1.48% 1.29% 1.47% 1.29%
Return on average equity 17.18% 16.96% 17.32% 17.39%
Non-interest expense to average assets 2.70% 2.66% 2.81% 2.76%
Net interest margin (fully-taxable equivalent) 4.03% 4.10% 4.20% 4.20%
Total allowance for losses on loans to non-performing loans 127.88% 89.15%
Total allowance for losses on loans to total loans 1.31% 1.27%
Non-performing loans to total loans 1.02% 1.42%
Non-performing assets to total assets
0.95% 1.19%
Net charge-offs to average loans (actual for the period) 0.06% 0.09% 0.17% 0.16%
Net charge-offs to average loans (annualized) 0.24% 0.37% 0.23% 0.21%
Equity to assets at period end 8.46% 7.58%
Efficiency ratio 50.42% 55.38% 52.03% 55.94%
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(1) Does not include a $122,000, pre-tax gain on the sale of a former branch
location for the nine months ended September 30, 2002, and $26,000,
pre-tax, merger-related charges for the three and nine months ended
September 30, 2002. Includes $202,500 and $607,500, pre-tax reduction in
tax expense for the three and nine months ended September 30, 2003,
respectively, resulting from a one-time pre-tax savings of $810,000 for
2003.
(2) Based on 5,517,166, 5,334,226, 5,467,958 and 5,233,713 weighted-average
shares outstanding for the three and nine months ended September 30, 2003
and 2002, respectively.
(3) Based on 5,683,867, 5,481,908, 5,613,075 and 5,286,066 weighted-average
shares outstanding for the three and nine months ended September 30, 2003
and 2002, respectively.
(4) Annualized where appropriate.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
October 9, 2003 Press Release
At September 30,
(In thousands, except share data) 2003 2002
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SUPPLEMENTAL DETAIL
BALANCE SHEET - ASSETS
Cash and cash equivalents 23,187 34,978
Trading account securities -- --
Securities available for sale 72,945 88,362
Securities held to maturity 3,663 2,575
Other securities 5,938 5,700
Total securities 82,546 96,907
Total cash and securities 105,733 131,885
Loans and leases held for investment (1) 784,324 700,487
Loans and leases held for sale (1) 1,738 2,057
Total loans and leases (1) 786,062 702,544
Allowance for losses on loans 10,335 8,919
Goodwill 413 413
Other intangible assets -- --
Total intangible assets 413 413
Mortgage servicing rights 2,757 1,448
Purchased credit card relationships -- --
Other real estate owned 475 19
Other assets 18,901 16,661
Total assets 904,006 844,051
BALANCE SHEET - LIABILITIES
Deposits 684,865 662,613
Borrowings 134,969 107,339
Other liabilities 2,661 3,828
Total liabilities 822,495 773,780
Redeemable preferred stock -- --
Trust preferred securities 5,000 5,000
Minority interests 8 8
Other mezzanine level items -- --
Total mezzanine level items 5,008 5,008
Total liabilities and mezzanine level items 827,503 778,788
BALANCE SHEET - EQUITY
Preferred equity -- --
Common equity 76,503 65,253
MEMO ITEM: Net unrealized gain (loss) on securities
available for sale, net of tax 698 1,697
End of period shares outstanding (2) 5,531,678 5,352,643
Options outstanding 550,030 738,478
Treasury shares held by the Company 62,550 241,585
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(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)
October 9, 2003 Press Release
For the At or For the
three months ended nine months ended
September 30, September 30,
(In thousands, except share data) 2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DETAIL (continued)
Repurchase plan announced? No No No No
Number of shares to be repurchased in plan N/A N/A N/A N/A
Number of shares repurchased during the period N/A N/A N/A N/A
Average price of repurchased shares N/A N/A N/A N/A
INCOME STATEMENT
Interest income 13,475 14,247 40,991 42,935
Interest expense 5,003 6,116 15,464 18,812
Net interest income 8,472 8,131 25,527 24,123
Net interest income (fully-taxable equivalent) 8,600 8,255 25,929 24,548
Provision for losses on loans 966 605 2,506 1,652
Non-recurring income:
Gain on sale of a former branch -- -- -- 122
Non-recurring expense:
Merger-related expenses -- 26 -- 26
Trading account income -- -- -- --
Foreign exchange income -- -- -- --
Trust income -- -- -- --
Insurance commissions 718 650 2,111 1,788
Service charges on deposits 870 419 2,179 1,275
Gain on sale of loans 1,473 697 3,691 1,405
Gain on investment securities transactions 110 224 257 301
Other non-interest income 131 (19) 520 656
Total non-interest income 3,302 1,971 8,758 5,425
Employee compensation and benefits 3,598 3,205 10,772 9,601
Occupancy and equipment expense 702 598 2,161 1,789
Foreclosed property expense -- -- -- --
Amortization of intangibles -- -- -- --
Other general, administrative and other expense 1,646 1,710 4,975 5,097
Total non-interest expenses 5,946 5,513 17,908 16,485
Net income before taxes 4,862 3,958 13,871 11,507
Federal income taxes 1,608 1,267 4,530 3,669
Net income before extraordinary items 3,254 2,691 9,341 7,838
Extraordinary items -- -- -- --
Net income 3,254 2,691 9,341 7,838
CHARGE-OFFS
Loan charge-offs 575 761 1,643 1,413
Recoveries on loans 121 110 383 336
Net loan charge-offs 454 651 1,260 1,077
AVERAGE BALANCE SHEET
Average loans and leases 762,666 701,237 738,410 684,835
Average other earning assets 83,632 97,438 87,562 97,522
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
October 9, 2003 Press Release
For the At or For the
three months ended nine months ended
September 30, September 30,
(In thousands, except share data) 2003 2002 2003 2002
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SUPPLEMENTAL DETAIL (continued)
AVERAGE BALANCE SHEET (continued)
Average total earning assets 846,298 798,675 825,972 782,357
Average total assets 872,729 826,580 852,344 809,576
Average total time deposits 422,351 406,168 418,219 405,248
Average other interest-bearing deposits 192,719 187,988 187,423 182,597
Average total interest-bearing deposits 615,070 594,156 605,642 587,845
Average borrowings 115,758 107,655 109,922 100,474
Average interest-bearing liabilities 730,828 701,811 715,564 688,319
Average preferred equity -- -- -- --
Average common equity 75,165 62,948 72,092 60,246
ASSET QUALITY AND OTHER DATA
Non-accrual loans 7,737 7,610
Renegotiated loans -- --
Loans 90+ days past due and still accruing 345 2,395
Total non-performing loans 8,082 10,005
Other real estate owned 475 19
Total non-performing assets 8,557 10,024
ADDITIONAL DATA
1 - 4 family mortgage loans serviced for others 253,251 166,528
Proprietary mutual fund balances -- --
Fair value of securities held to maturity 3,517 2,490
Full-time equivalent employees 333 324
Total number of full-service banking offices 25 24
Total number of bank and thrift subsidiaries 1 2
Total number of ATMs 28 28
LOANS RECEIVABLE
Real estate 227,901 248,074
Commercial real estate 344,786 252,943
Commercial and other 139,221 125,888
Consumer 74,288 75,703
Credit cards 1,444 1,540
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Loans receivable - gross 787,640 704,148
Unearned interest (1,578) (1,604)
- ----------------------------------------------------------------------------------------------
Loans receivable - net of unearned interest 786,062 702,544
Allowance for losses on loans (10,335) (8,919)
- ----------------------------------------------------------------------------------------------
Loans receivable - net (1) 775,727 693,625
(1) Does not include mortgage servicing rights.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
October 9, 2003 Press Release
For the At or For the
three months ended nine months ended
September 30, September 30,
(In thousands, except share data) 2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DETAIL (continued)
DEPOSITS
Non-interest bearing 70,588 59,546
Core interest-bearing 501,865 489,647
Non-core interest-bearing 112,412 113,420
- ----------------------------------------------------------------------------------------------
Total deposits 684,865 662,613
==============================================================================================
Yield/average earning assets (fully-taxable equivalent) 6.38% 7.14% 6.70% 7.41%
Cost/average earning assets 2.35% 3.04% 2.50% 3.21%
- ----------------------------------------------------------------------------------------------
Net interest income (fully-taxable equivalent) 4.03% 4.10% 4.20% 4.20%
==============================================================================================