EXHIBIT 99
For Immediate Release
Thursday, July 8, 2004
Contact: David G. Ratz, Executive Vice President & COO
(740) 286-3283
Oak Hill Financial Reports 9% Increase in 2nd Quarter Earnings
Jackson, Ohio -- Oak Hill Financial, Inc. (Nasdaq NMS: OAKF) today reported net
earnings from operations for the three months ended June 30, 2004 of $3,248,000,
or $.57 per diluted share, which was in line with analysts' consensus estimate
(source: Thomson Financial as reported by nasdaq.com). The second quarter 2004
earnings represent an increase of 9.2% over the $2,975,000, or $.53 per diluted
share, in net earnings from operations that the company recorded for the quarter
ended June 30, 2003.
For the six months ended June 30, 2004, Oak Hill Financial recorded net earnings
from operations of $6,395,000, or $1.12 per diluted share, an increase of 9.9%
over the $5,821,000, or $1.04 per diluted share, in net earnings from operations
for the first six months of 2003.
The operating earnings for the second quarter and first six months of 2003 have
been adjusted for non-recurring tax savings of $133,000 and $266,000,
respectively, resulting from a one-time tax savings of $531,000 for the full
year 2003. Including the non-recurring savings, the company's net income was
$3,108,000, or $.55 per diluted share, for the second quarter of 2003 and
$6,087,000, or $1.09 per diluted share, for the first half of 2003.
The company's total assets ended the second quarter of 2004 at $980.8 million,
an increase of 13.5% over the $863.9 million in total assets recorded at June
30, 2003, and 2.7% over the $955.4 million in assets on the books at March 31,
2004. Net loans at June 30, 2004 were $845.9 million, up 14.2% over the $740.9
million in net loans at June 30, 2003, and 2.0% over the $829.1 million in net
loans at the end of the first quarter of 2004.
Reviewing Oak Hill Financial's second quarter results, President and CEO R. E.
Coffman, Jr. said, "We are generally pleased with the quarter. We continued to
find ways to replace the revenues we generated from mortgage originations in the
past two years. Commercial and home equity loans posted strong growth, and our
people did a good job with the net interest margin in the face of ongoing
pressure from low interest rates. We are also very pleased with our asset
quality numbers, and we were able to reduce our nonperforming loans and assets
considerably during the quarter. Charge-offs were slightly higher than average,
but much of that was related to the resolution of several problem loans."
Addressing the outlook for Oak Hill Financial, Coffman said, "A key focus for us
is on building our newer revenue areas such as SBA lending, and we plan further
expansion into high potential market areas. At the same time, we're keeping a
close eye on our day-to-day expenses. Right now, loan demand looks good, and our
local economies show further signs of
improvement. Higher interest rates will also work in our favor. Put it all
together, and we remain confident about the remainder of the year and beyond."
Key Issue Review and Outlook
Net Interest Margin - Net interest margin for the second quarter was 4.06%, as
compared to the 4.27% posted in the second quarter of 2003 and the 4.11%
recorded for the first quarter of 2004. The performance of the margin was at the
lower end of management's expected range and resulted primarily from continued
pressure on asset yields while liability costs appear to have reached a level
beyond which further decreases are unlikely. However, management believes that,
in the current rate environment, the margin can be maintained at a level
sufficient for 2004 earnings to be within the company's estimated range. The
recent increase in interest rates is beneficial to the margin, and any
subsequent increases are expected to have a positive impact as well.
Operating Expenses - Non-interest expenses were 2.73% of average assets for the
second quarter of 2004, which compares to 2.89% for the second quarter of 2003
and 2.69% for the first quarter of 2004. The company's efficiency ratio for the
second quarter of 2004 was 53.8%, as compared to 53.1% in the prior year's
quarter and 54.4% in the first quarter of 2004.
The year-over-year decrease in the operating expense ratio was driven by the
company's cost control efforts, which resulted in a 5.3% increase in operating
expenses as compared to a 13.5% increase in total assets. In particular, the
company's compensation and benefits expense increased a nominal 0.5%
year-over-year. This was partially offset by a 9.2% increase in occupancy and
equipment expense, due primarily to the construction and opening of new branch
offices and higher maintenance expenses.
Non-Interest Income - Non-interest income, including gain on sale of loans, was
$2,875,000 in the second quarter, a decrease of 5.8% from the second quarter of
2003 but an increase of 22.2% over the first quarter of 2004. Gain on sale of
loans was the largest component of the year-over-year decrease, as residential
loan volume was substantially below the prior year's levels. The decrease in
residential lending was mitigated somewhat by an increase in SBA lending
activity. Offsetting the overall decline in gain on sale of loans were increases
in insurance commissions, deposit service charges, and other customer charges,
coupled with lower amortization and impairment of mortgage servicing rights,
which the company accounts for as a reduction in other non-interest income.
Asset Quality - At the end of the second quarter, the nonperforming loans/total
loans and nonperforming assets/total assets ratios were 0.76% and 0.72%,
respectively, reflecting an improvement from the 0.90% and 0.88%, respectively,
recorded at March 31, 2004. During the quarter, the company was able to
partially resolve the largest of its nonperforming loans, which had been
reviewed in earlier releases. Real estate partially securing this loan, which at
March 31 represented 0.13% of the nonperforming loan ratio, was sold at auction,
and a small charge-off was taken on the remaining balance. As a result, the
balance on this credit has been reduced by approximately 50% and the company is
in a much stronger position on the remainder. The nonperforming loan and asset
ratios were further enhanced by the sale during the second quarter of several
OREO properties and foreclosed real estate.
As of June 30, the largest remaining nonperforming loan, which has also been
discussed in previous releases, contributed 0.09% to the nonperforming loan
ratio. The other nonperforming loans are a mix of commercial real estate,
commercial, residential real estate and consumer loans.
In part due to the resolution of several problem credits via foreclosure and
OREO sales discussed above, the company's net charge-offs (non-annualized) were
0.07% of total loans for the quarter, as compared to 0.04% in the first quarter.
However, the annualized rate through six months of 0.23% is consistent with
management's objective of maintaining net charge-offs in the 0.20% range for the
full year.
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. On this basis, management maintained the ALLL/total loans ratio at
1.32%.
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 diversification of non-interest revenues are also
major elements in the company's strategy.
Asset/Loan Growth - The company's total assets grew at a 10.6% annual rate
during the second quarter, while loans increased at an annualized 8.1%, with
commercial loans and home equity lines of credit being the primary contributors
to the quarter's growth. While annualized loan growth was below management's 13%
objective for 2004, the company had several large loans payoff during the
quarter, including two large relationships whose exit from the portfolio the
company encouraged due to quality concerns. The volume of loans originated was
strong during the second quarter and the company continues to experience a
healthy level of loan demand. Therefore, management remains optimistic that the
13% growth target will be attained. However, management remains committed that
loan growth will not come at the expense of credit quality or the company's
earnings objectives.
Expansion - At the end of the second quarter, the company's Oak Hill Banks
subsidiary opened a full-service branch in Grove City, Ohio, a suburb of
Columbus. The new branch incorporates the operations of a temporary loan
production office that the bank opened in Grove City earlier this year. In
addition, the bank has a branch office under construction in Chillicothe, Ohio.
This will be the company's third banking office in Chillicothe and its fourth in
Ross County, which is contiguous to the company's home county of Jackson.
Estimate - The company has narrowed the range of its earnings estimate for the
full year 2004 to $2.28 to $2.35 per share.
Oak Hill Financial is a financial holding company headquartered in Jackson,
Ohio. Its subsidiaries, Oak Hill Banks and Action Finance Company, operate 27
full-service banking offices, four 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 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)
July 8, 2004 Press Release
At June 30,
(In thousands) 2003 2004
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SUMMARY OF FINANCIAL CONDITION
Total assets $980,783 $863,941
Interest-bearing deposits and federal funds sold 4,331 2,003
Investment securities 78,106 76,337
Loans receivable - net 845,893 740,887
Deposits 779,890 679,742
Federal Home Loan Bank advances and other borrowings 116,159 107,504
Stockholders' equity 81,235 73,482
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 For the
three months ended six months ended
June 30, June 30,
(In thousands, except share data) 2004 2003 2004 2003
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RECONCILIATION OF NON-GAAP NET EARNINGS,
DILUTED EARNINGS PER SHARE AND OTHER PERFORMANCE MEASURES
Net earnings (U.S. GAAP) $ 3,248 $ 3,108 $ 6,395 $ 6,087
Non-recurring items, net of tax:
Reduction in tax expense -- (133) -- (266)
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Net earnings from operations $ 3,248 $ 2,975 $ 6,395 $ 5,821
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Diluted earnings per share (U.S. GAAP) $ 0.57 $ 0.55 $ 1.12 $ 1.09
Non-recurring items, net of tax:
Reduction in tax expense -- (0.02) -- (0.05)
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Diluted earnings per share from operations $ 0.57 $ 0.53 $ 1.12 $ 1.04
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Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
July 8, 2004 Press Release
For the For the
June 30, June 30,
(In thousands, except share data) 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NON-GAAP NET EARNINGS,
DILUTED EARNINGS PER SHARE AND OTHER PERFORMANCE MEASURES (continued)
Non-interest expense (U.S. GAAP) $ 6,591 $ 6,059 $12,924 $11,962
Non-recurring items:
Reduction in tax expense -- 202 -- 405
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Non-interest expense from operations $ 6,591 $ 6,261 $12,924 $12,367
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SUMMARY OF OPERATIONS (1)
Interest income $14,374 $13,776 $28,562 $27,516
Interest expense 4,966 5,140 9,876 10,460
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Net interest income 9,408 8,636 18,686 17,056
Provision for losses on loans 819 1,031 1,394 1,540
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Net interest income after provision for losses on loans 8,589 7,605 17,292 15,516
Gain on sale of loans 605 1,293 900 2,218
Insurance commissions 775 717 1,512 1,393
Other non-interest income 1,495 1,042 2,815 1,844
General, administrative and other expense 6,591 6,261 12,924 12,367
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Earnings before federal income taxes 4,873 4,396 9,595 8,604
Federal income taxes 1,625 1,421 3,200 2,783
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Net earnings from operations $ 3,248 $ 2,975 $ 6,395 $ 5,821
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SELECTED PERFORMANCE RATIOS FROM OPERATIONS (1)(4)
Diluted earnings per share (3) $ 0.57 $ 0.53 $ 1.12 $ 1.04
- ----------------------------------------------------------------------------------------------------------------------------
Return on average assets 1.34% 1.40% 1.34% 1.39%
Return on average equity 16.25% 16.54% 15.91% 16.64%
Non-interest expense to average assets 2.73% 2.95% 2.71% 2.96%
Efficiency ratio 53.76% 53.07% 54.09% 54.66%
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
July 8, 2004 Press Release
At or For the At or For the
three months ended six months ended
June 30, June 30,
(In thousands, except share data) 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE INFORMATION (U.S. GAAP)
Basic earnings per share (2) $ 0.59 $ 0.57 $ 1.15 $ 1.12
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Diluted earnings per share (3) $ 0.57 $ 0.55 $ 1.12 $ 1.09
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Dividends per share $ 0.15 $ 0.13 $ 0.30 $ 0.26
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Book value per share $ 14.67 $ 13.41
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OTHER STATISTICAL AND OPERATING DATA (U.S. GAAP) (4)
Return on average assets 1.34% 1.48% 1.34% 1.46%
Return on average equity 16.25% 17.67% 15.91% 17.40%
Non-interest expense to average assets 2.73% 2.89% 2.71% 2.86%
Net interest margin (fully-taxable equivalent) 4.06% 4.27% 4.09% 4.28%
Total allowance for losses on loans to non-performing loans 173.94% 122.40%
Total allowance for losses on loans to total loans 1.32% 1.31%
Non-performing loans to total loans 0.76% 1.07%
Non-performing assets to total assets 0.72% 0.96%
Net charge-offs to average loans (actual for the period) 0.07% 0.08% 0.11% 0.11%
Net charge-offs to average loans (annualized) 0.29% 0.31% 0.23% 0.22%
Equity to assets at period end 8.28% 8.51%
Efficiency ratio 53.76% 51.36% 54.09% 52.87%
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(1) Includes $202,500 and $405,000, pre-tax reduction in tax expense for the
three and six months ended June 30, 2003, respectively, resulting from a
one-time pre-tax savings of $810,000 for 2003.
(2) Based on 5,527,269, 5,464,060, 5,554,720 and 5,442,945 weighted-average
shares outstanding for the three and six months ended June 30, 2004 and
2003, respectively.
(3) Based on 5,667,667, 5,612,669, 5,702,415 and 5,585,894 weighted-average
shares outstanding for the three and six months ended June 30, 2004 and
2003, respectively.
(4) Annualized where appropriate.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
July 8, 2004 Press Release
At June 30
(In thousands, except share data) 2004 2003
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SUPPLEMENTAL DETAIL
BALANCE SHEET - ASSETS
Cash and cash equivalents 28,480 21,727
Trading account securities
Securities available for sale 74,456 72,670
Securities held to maturity 3,650 3,667
Other securities 6,118 5,879
Total securities 84,224 82,216
Total cash and securities 112,704 103,943
Loans and leases held for investment (1) 853,306 742,889
Loans and leases held for sale (1) 775 5,520
Total loans and leases (1) 854,081 748,409
Allowance for losses on loans 11,275 9,847
Goodwill 413 413
Other intangible assets -- --
Total intangible assets 413 413
Mortgage servicing rights 3,087 2,325
Purchased credit card relationships -- --
Other real estate owned 592 244
Other assets 21,181 18,454
Total assets 980,783 863,941
BALANCE SHEET - LIABILITIES
Deposits 779,890 679,742
Borrowings 111,159 102,504
Other liabilities 3,491 3,205
Total liabilities 894,540 785,451
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 899,548 790,459
BALANCE SHEET - EQUITY
Preferred equity -- --
Common equity 81,235 73,482
MEMO ITEM: Net unrealized gain (loss) on securities
available for sale, net of tax (250) 1,292
End of period shares outstanding (2) 5,538,906 5,478,181
Options outstanding 470,541 604,027
Treasury shares held by the Company 114,677 116,047
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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)
July 8, 2004 Press Release
At or For the At or For the
three months ended six months ended
June 30, June 30,
(In thousands, except share data) 2004 2003 2004 2003
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SUPPLEMENTAL DETAIL (continued)
Repurchase plan announced? No No Yes No
Number of shares to be repurchased in plan N/A N/A 300,000 N/A
Number of shares repurchased during the period -- N/A 134,936 N/A
Average price of repurchased shares -- N/A $ 32.38 N/A
INCOME STATEMENT
Interest income 14,374 13,776 28,562 27,516
Interest expense 4,966 5,140 9,876 10,460
Net interest income 9,408 8,636 18,686 17,056
Net interest income (fully-taxable equivalent) 9,536 8,775 18,940 17,329
Provision for losses on loans 819 1,031 1,394 1,540
Non-recurring income -- -- -- --
Trading account income -- -- -- --
Foreign exchange income -- -- -- --
Trust income -- -- -- --
Insurance commissions 775 717 1,512 1,393
Service charges on deposits 892 832 1,710 1,309
Gain on sale of loans 605 1,293 900 2,218
Gain on investment securities transactions 68 25 202 147
Other non-interest income 535 185 903 388
Total non-interest income 2,875 3,052 5,227 5,455
Employee compensation and benefits 3,638 3,619 7,078 7,174
Occupancy and equipment expense 787 698 1,620 1,459
Foreclosed property expense -- -- -- --
Amortization of intangibles -- -- -- --
Other general, administrative and other expense 2,166 1,742 4,226 3,329
Total non-interest expenses 6,591 6,059 12,924 11,962
Net income before taxes 4,873 4,598 9,595 9,009
Federal income taxes 1,625 1,490 3,200 2,922
Net income before extraordinary items 3,248 3,108 6,395 6,087
Extraordinary items -- -- -- --
Net income 3,248 3,108 6,395 6,087
CHARGE-OFFS
Loan charge-offs 791 687 1,286 1,067
Recoveries on loans 185 123 330 261
Net loan charge-offs 606 564 956 806
AVERAGE BALANCE SHEET
Average loans and leases 852,958 736,968 841,100 726,081
Average other earning assets 91,007 86,854 90,789 89,560
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
July 8, 2004 Press Release
At or For the At or For the
three months ended six months ended
June 30, June 30,
(In thousands, except share data) 2004 2003 2004 2003
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SUPPLEMENTAL DETAIL (continued)
AVERAGE BALANCE SHEET (continued)
Average total earning assets 943,965 823,822 931,889 815,641
Average total assets 972,792 850,350 960,378 841,983
Average non-interest bearing deposits 72,215 62,571 68,711 60,638
Average total time deposits 499,991 415,320 490,714 416,118
Average other interest-bearing deposits 204,449 187,399 198,666 184,732
Average total interest-bearing deposits 704,440 602,719 689,380 600,850
Average borrowings 113,337 109,985 118,816 106,956
Average interest-bearing liabilities 817,777 712,704 808,196 707,806
Average preferred equity -- -- -- --
Average common equity 80,416 72,160 80,852 70,535
ASSET QUALITY AND OTHER DATA
Non-accrual loans 5,737 7,373
Renegotiated loans -- --
Loans 90+ days past due and still accruing 745 673
Total non-performing loans 6,482 8,046
Other real estate owned 592 244
Total non-performing assets 7,074 8,290
ADDITIONAL DATA
1 - 4 family mortgage loans serviced for others 254,057 231,591
Proprietary mutual fund balances -- --
Fair value of securities held to maturity 3,508 3,696
Full-time equivalent employees 359 332
Total number of full-service banking offices 27 25
Total number of bank and thrift subsidiaries 1 1
Total number of ATMs 30 27
LOANS RECEIVABLE
1 - 4 family residential 176,593 172,479
Home equity 38,739 29,228
Multi-family residential 24,339 28,825
Commercial real estate 321,828 260,421
Construction and land development 57,690 42,417
Commercial and other 158,133 141,375
Consumer 76,546 73,852
Credit cards 1,663 1,405
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Loans receivable - gross 855,531 750,002
Unearned interest (1,450) (1,593)
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Loans receivable - net of unearned interest 854,081 748,409
Allowance for losses on loans (11,275) (9,847)
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Loans receivable - net (1) 842,806 738,562
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(1) Does not include mortgage servicing rights.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
July 8, 2004 Press Release
At or For the At or For the
three months ended six months ended
June 30, June 30,
(In thousands, except share data) 2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DETAIL (continued)
DEPOSITS
Transaction accounts
Non-interest bearing 73,102 66,809
Interest-bearing 71,064 63,431
Savings accounts 50,477 47,435
Money market deposit accounts 83,558 81,403
Other core interest-bearing 337,518 313,870
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Total core deposit accounts 615,719 572,948
Non-core interest-bearing 164,171 106,794
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Total deposits 779,890 679,742
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Yield/average earning assets (fully-taxable equivalent) 6.18% 6.77% 6.22% 6.87%
ost/average earning assets 2.12% 2.50% 2.13% 2.59%
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Net interest income (fully-taxable equivalent) 4.06% 4.27% 4.09% 4.28%
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