For Immediate Release
Thursday, July 19, 2001
Contact: David G. Ratz, Chief Administrative Officer
(740) 286-3283
Oak Hill Financial Announces Increased Earnings
Jackson, Ohio -- Oak Hill Financial, Inc. (Nasdaq NMS: OAKF) today reported net
earnings for the three months ended June 30, 2001 of $1,955,000, or $.39 per
diluted share, which exceeded analysts' consensus estimate of $.37 per share
(source: I/B/E/S as reported by nasdaq.com). The second quarter 2001 earnings
represent an increase of 8.3% over the $1,806,000, or $.34 per diluted share, in
net earnings that the company recorded for the quarter ended June 30, 2000.
For the six months ended June 30, 2001, Oak Hill Financial recorded net earnings
of $3,723,000, or $0.73 per diluted share, which compares to the $3,571,000, or
$.67 per diluted share, in net earnings for the first six months of 2000.
The company's total assets ended the second quarter of 2001 at $724.6 million,
an increase of 13.1% over the $640.8 million in total assets recorded at June
30, 2000, and marginally higher than the $723.3 million in assets on the books
at March 31, 2001. Net loans at June 30, 2001 were $612.3 million, up 11.8% from
June 30, 2000, and a slight decrease from the $614.4 in net loans at the end of
the first quarter.
Explaining the second quarter results, Oak Hill Financial President and CEO John
D. Kidd said, "The upswing in earnings is revenue driven. Net interest income in
the second quarter was up over 12 percent and non-interest income was up nearly
36 percent over the second quarter of last year. Also, our success in taking
advantage of the demand for fixed-rate mortgage loans due to the lower interest
rates resulted in substantial income from the sale of loans in the secondary
market. While the mortgage refinancing boom affected our overall growth, we had
a very good quarter on the commercial side as commercial and commercial real
estate loans grew nearly five percent from March 31 to June 30. "
Addressing the outlook for Oak Hill Financial, Kidd stated, "We believe the
company should have good earnings momentum through the remainder of 2001 and
into 2002. Our loan pipeline is filling rapidly, and we expect continued growth
in the commercial area. Non-interest income should remain strong, and net
interest income will benefit from the large amount of liabilities that will
reprice downward in the coming months. Finally, we continue to be very effective
in mortgage origination, and our revenues should be enhanced regardless of
whether the loans are held in portfolio or sold in the secondary market."
Oak Hill Financial also announced the appointment of William S. Siders to the
company's board of directors. Siders was formerly the Managing Officer of Blue
Ash Building & Loan Association of Blue Ash, Ohio, which was acquired by Oak
Hill Financial in 1999 and renamed Towne Bank. Siders will remain a director of
the Towne subsidiary.
Page 1 of 10
Key Issue Review and Outlook
Net Interest Margin - Net interest margin for the second quarter was 3.99%,
which was unchanged from the first quarter. The static second quarter figure is
due primarily to timing differences in the repricing of indexed assets and
liabilities resulting from the reduction in interest rates by the Federal
Reserve Board on April 18. As a result, the margin was depressed in the month of
May but rebounded strongly in June. If the Federal Reserve does not further
reduce interest rates by more than 25 basis points, management believes that the
net interest margin will be at or above 4.10% for the third quarter of 2001.
Depending on the timing, a larger rate reduction would tend to hold the net
interest margin closer to the second quarter level.
Operating Expenses - Non-interest expense was 2.61% of average assets for the
second quarter of 2001, which compares to 2.36% for the second quarter of 2000.
The increase resulted primarily from higher employee benefits and incentive
compensation costs and the addition of several commercial loan officers to take
advantage of growth opportunities at the company's bank subsidiaries. Management
now estimates that non-interest expenses for the entire year 2001 will be in the
range of 2.55% to 2.60% of average assets. At this point, a similar expense load
is anticipated for 2002.
Non-Interest Income - Non-interest income (excluding gain on sale of loans) in
the second quarter was $872,000, an increase of 35.8% over the second quarter of
2000 and 18.5% over the first quarter of 2000. The growth in non-interest income
continues to result from increases in certain fees and charges, more aggressive
collection of existing service charges, and cross-selling of additional
fee-producing services. In addition, gain on sale of loans was $258,000 in the
second quarter, as compared to $5,000 in the second quarter of 2000 and $137,000
in the first quarter of 2001. Management believes that the demand for fixed-rate
mortgages may be leveling off, and further increases in the gain on sale of
loans are not anticipated.
Asset Quality - The company's nonperforming loans/total loans and nonperforming
assets/total assets ratios were 0.89% and 0.77%, respectively, at June 30, up
slightly from the to 0.82% and 0.72%, respectively, posted at March 31. Of the
nonperforming loan ratio, a borrower with three commercial real estate loans
continues to represent approximately 0.25% of the total. As the company reported
previously, these loans are in foreclosure, and management believes that the
potential loss, if any, on these loans will be less than $300,000. Of the
remaining nonperforming loans, a single commercial real estate loan also
reported previously accounts for another 0.23% of the nonperforming loan ratio.
This loan is in foreclosure and, unless otherwise resolved, is scheduled for
sheriff's sale in September. Management believes that the company is very
well-secured on this loan, and no charge-off or write-down is expected.
Net charge-offs (non-annualized) in the second quarter were 0.05% of total
loans, as compared to 0.02% in the first quarter. The annualized rate through
six months of 0.14% is consistent with management's objective for 2001, which is
to keep net-charge-offs under 0.20%. To mitigate potential loan losses,
management continues to strengthen the allowance for losses on loans. In the
second quarter, the company took a loan loss provision sufficient to increase
the allowance for losses on loans from 1.22% at March 31 to 1.26% at June 30. In
light of current industry-wide concerns about credit quality and the company's
level of nonperforming loans, management now intends to maintain the allowance
at or above 1.25%, with appropriate adjustments to be made should any further
changes in credit quality occur.
Overall Strategy - With revenue growth as a key focus, Oak Hill Financial will
continue to pursue adjustable-rate commercial loans, commercial real estate
loans and residential mortgage loans; fixed-rate residential mortgage loans for
sale in the secondary market; and consumer loans. Management still believes that
commercial and commercial real estate loans hold the greatest potential for
growth and margin improvement within its bank subsidiaries, and the company's
emphasis will continue to be on these products. Also, the development of new
fee-producing products and cross-selling of additional services to the company's
commercial and retail customer base will be the primary drivers of continued
growth in non-interest income.
Page 2 of 10
Over the next 18 months, the company will undertake a comprehensive upgrading of
its data processing systems and facilities, which will facilitate long-term
growth and provide enhanced operating efficiency, customer service capabilities,
and opportunities for additional fee income and product sales.
Asset/Loan Growth - The company's previously released objectives for 2001 call
for approximately 12% growth in loans and assets. After posting 3.4% and 4.2%
(non-annualized) increases in loans and assets, respectively, in the first
quarter, totals at the end of the second quarter were essentially flat due to
residential mortgages refinancing from the company's portfolio to the secondary
market. Management believes that the 12% target is still attainable and is
working toward that goal. However, the net interest margin and credit quality
are given higher priority, and management is willing to accept a lower growth
rate for the remainder of 2001 to improve these key components of profitability.
Expansion - During the second quarter, the company's Oak Hill Banks subsidiary
opened a full-service branch banking office in Logan, Ohio and relocated its
loan production office in Groveport, Ohio to a new facility in downtown
Columbus. Oak Hill Banks is planning to establish another loan production office
later this year. Also during the quarter, the Towne Bank subsidiary filed a
regulatory application to establish a messenger service which will provide
deposit pick-up and other off-site transaction services to its growing base of
commercial accounts.
Branch Sale - On April 19, Towne Bank entered into a definitive agreement to
sell its branch office in Amelia, Ohio to another institution. The Amelia
office, which had $10.5 million in deposits at June 30, is geographically
isolated from Towne's other offices. Management believes that the sale will
allow Towne to reallocate resources to activities and locations with higher
earnings potential. Regulatory approval for the transaction has been granted,
and the sale is expected to close in September.
Estimates - Oak Hill Financial had previously estimated that 2001 earnings per
share from operations would be in the range of $1.40 to $1.50 per share. Based
on the company's current condition and management's expectations of improved
operating effectiveness and favorable interest rate trends, management has
increased its estimate of earnings per share for 2001 to a range of $1.50 to
$1.55, excluding any securities gains or losses or other non-recurring items.
Oak Hill Financial is a financial holding company headquartered in Jackson,
Ohio. Its subsidiaries, Oak Hill Banks, Towne Bank, and Action Finance Company,
operate 24 full-service banking offices, two bank loan production offices, and
six consumer finance offices in 15 counties across southern Ohio.
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.
Page 3 of 10
Oak Hill Financial, Inc.
July 19, 2001 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data),
For the At or for the
three months ended June 30, six months ended June 30,
2001 2000 2001 2000
(unaudited) (unaudited)
SUMMARY OF FINANCIAL CONDITION
Total assets $ 724,590 $ 640,848
Interest bearing deposits
and federal funds sold 4,137 634
Investment securities 71,472 59,001
Loans receivable -- net 612,334 547,649
Deposits 584,431 501,113
Federal Home Loan Bank
advances and other borrowings 83,404 87,748
Stockholders' equity 51,900 48,561
SUMMARY OF OPERATIONS
Interest income 15,088 13,146 30,224 25,548
Interest expense 8,081 6,910 16,504 13,152
------ ------ ------- -------
Net interest income 7,007 6,236 13,720 12,396
Provision for loan losses 506 498 1,072 858
---- ---- ------ ----
Net interest income after
provision for loan losses 6,501 5,738 12,648 11,538
Gain on sale of loans 258 5 475 66
Other non-interest income 872 642 1,527 1,202
Non-interest expense 4,713 3,668 9,095 7,439
------ ------ ------ ------
Earnings before federal income taxes 2,918 2,717 5,555 5,367
Federal income taxes 963 911 1,832 1,796
---- ---- ------ ------
Net earnings $ 1,955 $ 1,806 $ 3,723 $ 3,571
======= ======== ======== ========
Page 4 of 10
Oak Hill Financial, Inc.
July 19, 2001 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data),
For the At or for the
three months ended June 30, six months ended June 30,
2001 2000 2001 2000
(unaudited) (unaudited)
PER SHARE INFORMATION
Basic earnings per share (1) $ 0.39 $ 0.34 $ 0.73 $ 0.67
======= ======= ======= =======
Diluted earnings per share (1) $ 0.39 $ 0.34 $ 0.73 $ 0.67
======= ======= ======= =======
Dividends per share (1) $ 0.11 $ 0.10 $ 0.22 $ 0.20
======= ======= ======= =======
Book value per share $ 10.29 $ 9.30
======== =======
OTHER STATISTICAL AND OPERATING DATA (2)
Return on average assets 1.08% 1.16% 1.05% 1.17%
Return on average equity 15.28% 14.90% 14.70% 14.80%
Net interest margin 3.99% 4.16% 3.99% 4.21%
Non-interest expense to average assets 2.61% 2.36% 2.57% 2.44%
Total allowance for loan losses
to nonperforming loans 142.05% 405.82%
Total allowance for loan losses
to total loans 1.26% 1.17%
Nonperforming loans to total loans 0.89% 0.29%
Nonperforming assets to total assets 0.77% 0.32%
Net charge-offs to average loans (actual for the period) 0.05% 0.03% 0.07% 0.10%
Net charge-offs to average loans (annualized) 0.18% 0.13% 0.14% 0.20%
Equity to assets at period end 7.16% 7.58%
Dividend payout ratio 28.38% 28.91% 29.83% 29.43%
(1) Based on 5,043,882, 5,067,192, 5,285,922, and 5,308,940 weighted-average
shares outstanding for the three and six month periods ended June 30, 2001,
and June 30, 2000, respectively.
(2) Annualized where appropriate.
Page 5 of 10
Oak Hill Financial, Inc.
July 19, 2001 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data),
For the At or for the
three months ended June 30, six months ended June 30,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL
BALANCE SHEET - ASSETS
Cash and cash equivalents 20,078 12,421
Trading account securities - -
Securities available for sale 66,525 54,054
Held to maturity securities 4,947 4,947
Other securities 5,162 4,574
Total securities 76,634 63,575
Total cash and securities 96,712 75,996
Loans and leases held for investment (1) 617,553 553,116
Loans and leases held for sale (1) 1,592 -
Total loans and leases (1) 619,145 553,116
Reserve for losses on loans 7,843 6,470
Goodwill 233 266
Other intangibles - -
Total intangible assets 233 266
Mortgage servicing rights 1,032 1,003
Purchased credit card relationships - -
Other real estate owned 61 482
Other assets 15,250 16,455
Total assets 724,590 640,848
BALANCE SHEET - LIABILITIES
Deposits 584,431 501,113
Borrowings 78,404 82,748
Other liabilities 4,855 3,426
Total liabilities 667,690 587,287
Redeemable preferred stock - -
Trust preferred securities 5,000 5,000
Minority interest - -
Other mezzanine level items - -
Total mezzanine level items 5,000 5,000
Total liabilities and mezzanine 672,690 592,287
(1) Data is net of discount, gross of reserve.
Page 6 of 10
Oak Hill Financial, Inc.
July 19, 2001 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data),
For the At or for the
three months ended June 30, six months ended June 30,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
BALANCE SHEET - EQUITY
Preferred equity - -
Common equity 51,900 48,561
MEMO ITEM: Net unrealized gain (loss) on
securities held for sale (FASB 115 adjustment) 273 (1,647)
EOP shares outstanding (1) 5,044,294 5,220,906
Options outstanding 695,313 592,026
Treasury shares held by company 377,520 181,945
Repurchase plan announced? No Yes No Yes
# of shares to be repurchased in plan N/A 320,000 320,000 320,000
# of shares repurchased during period N/A 131,045 73,050 131,045
Average price of repurchased shares N/A $15.12 $14.11 $15.12
INCOME STATEMENT
Interest income 15,088 13,146 30,224 25,548
Interest expense 8,081 6,910 16,504 13,152
Net interest income 7,007 6,236 13,720 12,396
Net interest income (fully taxable equivalent) 7,078 6,265 13,849 12,454
Provision for loan losses 506 498 1,072 858
Nonrecurring income - - - -
Nonrecurring expense - - - -
Trading account income - - - -
Foreign exchange income - - - -
Trust revenue - - - -
Service charges on deposits 599 387 975 687
Gain on sale of loans 258 5 475 66
Gain on investment securities transactions 36 - 32 -
Other noninterest income 237 255 520 515
Total noninterest income 1,130 647 2,002 1,268
(1) Excludes treasury shares.
Page 7 of 10
Oak Hill Financial, Inc.
July 19, 2001 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data),
For the At or for the
three months ended June 30, six months ended June 30,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
INCOME STATEMENT (CONTINUED)
Employee compensation and benefits expense 2,860 2,029 5,586 4,225
Occupancy and equipment expense 475 457 987 922
Foreclosed property expense - - - -
Amortization of intangibles 8 9 17 17
Other general, administrative and other expense 1,370 1,173 2,505 2,275
Total noninterest expense 4,713 3,668 9,095 7,439
Net income before taxes 2,918 2,717 5,555 5,367
Tax provision 963 911 1,832 1,796
Net income before extraordinary items 1,955 1,806 3,723 3,571
Extraordinary and after-tax items - - - -
Net income 1,955 1,806 3,723 3,571
CHARGEOFFS
Loan chargeoffs 331 263 574 659
Recoveries on loans 50 92 148 138
Net loan chargeoffs 281 171 426 521
AVERAGE BALANCE SHEET
Average loans and leases 617,677 540,350 615,533 529,330
Average other earning assets 86,932 62,891 78,460 62,475
Average total earning assets 704,609 603,241 693,993 591,805
Average total assets 724,502 624,451 713,701 612,425
Average total time deposits 381,478 319,278 378,324 318,689
Average other interest-bearing deposits 158,046 137,045 153,087 133,285
Average total interest-bearing deposits 539,524 456,323 531,411 451,974
Average borrowings 82,380 71,561 81,596 65,261
Average interest-bearing liabilities 621,904 527,884 613,007 517,235
Average preferred equity - - - -
Average common equity 51,341 48,757 51,065 48,509
Page 8 of 10
Oak Hill Financial, Inc.
July 19, 2001 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data),
For the At or for the
three months ended June 30, six months ended June 30,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
ASSET QUALITY AND OTHER DATA
Nonaccrual loans 4,983 853
Renegotiated loans - -
Other real estate owned 61 482
Total nonperforming assets 5,044 1,335
Loans 90+ days past due and still accruing 538 741
NPAs plus loans over 90 days delinquent 5,582 2,076
ADDITIONAL DATA
1-4 Family mortgage loans serviced for others 129,859 115,432
Proprietary mutual fund balances - -
Held to maturity securities (fair value) 4,933 4,796
EOP employees (full-time equivalent) 287 270
Total number of full-service banking offices 24 23
Total number of bank and thrift subsidiaries 2 2
Total number of ATMs 26 20
LOANS RECEIVABLE
Real estate 219,306 232,189
Commercial real estate 224,077 170,662
Commercial and other 89,391 66,623
Consumer 87,008 84,795
Credit cards 1,519 1,367
------ ------
Loans - gross 621,301 555,636
Unearned interest (2,156) (2,520)
------- -------
Loans - net of unearned interest 619,145 553,116
-------- --------
Reserve for loan losses (7,843) (6,470)
------- -------
Loans - net(1) 611,302 546,646
======== ========
(1) Does not include mortgage servicing assets.
Page 9 of 10
Oak Hill Financial, Inc.
July 19, 2001 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data),
For the At or for the
three months ended June 30, six months ended June 30,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
DEPOSITS
Non-interest bearing 50,389 44,564
Core interest bearing 418,588 360,228
Non-core interest bearing 115,454 96,321
-------- -------
Total deposits 584,431 501,113
======== ========
Yield/average earning assets 8.59% 8.77% 8.78% 8.68%
Cost/average earning assets 4.60% 4.61% 4.79% 4.47%
Net interest margin 3.99% 4.16% 3.99% 4.21%
Page 10 of 10