For Immediate Release
Thursday, January 17, 2002
Contact: David G. Ratz, Executive Vice President & COO
(740) 286-3283
Oak Hill Financial Earnings Up 49% in Fourth Quarter 2001
Jackson, Ohio -- Oak Hill Financial, Inc. (Nasdaq NMS: OAKF) today reported net
earnings for the three months ended December 31, 2001 of $2,394,000, or $.45 per
diluted share, which exceed analysts' consensus estimate of $.425 per share
(source: Thomson Financial I/B/E/S as reported on nasdaq.com). The fourth
quarter 2001 earnings represent an increase of 49.2% over the $1,605,000, or
$.30 per diluted share, in operating earnings that the company recorded for the
quarter ended December 31, 2000.
For the fiscal year ended December 31, 2001, Oak Hill Financial recorded net
earnings from operations of $8,299,000, or $1.57 per diluted share, an increase
of 23.7% over the $6,710,000, or $1.23 per diluted share, in operating earnings
for fiscal 2000. The 2001 operating earnings exclude a $900,000 pre-tax gain on
the sale of a branch office of the company's Towne Bank subsidiary and pre-tax
expenses of $259,000 related to the company's August 31, 2001 merger with
employee benefits agency Innovative Financial Services, Inc. Including those
items, the company's net income for 2001 was $8,722,000, or $1.65 per diluted
share. All historical financial information has been restated to reflect the
Innovative Financial Services merger, which was accounted for as a pooling of
interests.
Oak Hill Financial's total assets ended 2001 at $778.3 million, an increase of
12.0% over the $694.9 million in assets recorded at December 31, 2000. Net loans
at December 31, 2001 were $646.1 million, up 7.8% from December 31, 2000, while
deposits increased 8.9% to end the year 2001 at $612.2 million. Also, investment
securities increased 28.6% to $79.0 million, with most of the increase coming in
the fourth quarter, as management undertook an expanded investment program
designed to take advantage of opportunities to increase net interest income and
the total return of the investment portfolio.
Reviewing the fourth quarter and the fiscal year 2001, Oak Hill Financial
President and CEO John D. Kidd said, "We are extremely pleased with the
company's performance this year. Our entire management team was very focused on
increasing shareholder value in 2001. With a lot of hard work from a lot of
people, we substantially exceeded our goals, and the company is in great shape
for the future."
"The primary drivers of the growth in earnings were substantial increases in net
interest income and gain on sale of loans, coupled with improved efficiency,"
Kidd added. "For the year, net revenues were up nearly 18%, while expenses were
only up 16%. The fourth quarter was even stronger, with net revenues up 21% over
the fourth quarter of 2000, while expenses were up less than 13%. We're in the
middle of a major upgrade to our data processing systems, yet our operating
costs remain under control."
Looking forward to 2002, Kidd stated, "We believe that earnings will continue to
improve. We've got good growth momentum in both loans and deposits to start the
year, and we've pushed net interest margin into a range that will support
continued earnings growth. Non-interest income continues to be strong, asset
quality is improving, and we believe that we can maintain our current level of
efficiency. We expect 2002 to be another good year for the company."
Page 1 of 10
Key Issue Review and Outlook
Net Interest Margin - Improvement in the net interest margin was a key focus
throughout 2001, and management is very pleased with the performance of the
margin. Net interest margin for the fourth quarter of 2001 was 4.37%, an
increase over the 4.12% posted in the third quarter and a substantial
improvement over the 3.89% posted in the fourth quarter of 2000. Throughout the
year, the net interest margin benefited from the downward repricing of time
deposits and indexed liabilities tied to short-term Treasury bills. While the
yields on adjustable-rate loans declined as well, contractual floors on many of
these loans and overall loan growth mitigated the effect of lower rates. In the
fourth quarter, the company generated an inflow of low-cost core deposits, which
resulted in further margin enhancement. Looking forward, management believes
that a minor rate cut during the first quarter of 2002 would not materially
affect the margin and expects the net interest margin in the first quarter to be
at or above 4.20%. If interest rates rise, the net interest margin should
increase.
Operating Expenses & Efficiency - The company's non-interest expense was 2.71%
of average assets for the fourth quarter of 2001, which compares to 2.75% in the
fourth quarter of 2000. The company is in the process of a major upgrade and
conversion of its data processing system and facilities, which will facilitate
long-term growth and provide opportunities to improve efficiency, customer
service, fee income, and product sales. As the company is incurring higher
expenses due to the upgrade, management does not anticipate a significant change
in operating expenses as a percentage of average assets for the year 2002.
Therefore, this ratio is expected to be in the range of 2.70% to 2.80% for 2002.
For both the fourth quarter and the full year, the growth in net revenues
outpaced the growth in operating expenses. As a result, the company's efficiency
ratio for the fourth quarter of 2001 improved to 52.4% as compared to 60.4% for
the fourth quarter of 2000. Similarly, for the year 2001 the efficiency ratio
was 57.2% versus 59.3% for the year 2000. Management's objective for 2002 is to
maintain the efficiency ratio at or below 53.0%.
Non-Interest Income - Non-interest income in the fourth quarter was $1,606,000,
an increase of 7.0% over the third quarter of 2001 and 16.0% over the fourth
quarter of 2000. For the year 2001, non-interest income was up 30.3% over the
year 2000. Of the components of non-interest income, gain on sale of loans was
particularly strong due to the low interest rate environment. Management
anticipates that the current level of gain on sale of loans will continue
through the first quarter, with future quarters dependent on the interest rate
environment. For 2002, the company is anticipating a moderate increase in
non-interest income primarily through the introduction of new fee-producing
services, annual service charge adjustments, and growth in title insurance,
group health insurance, and non-deposit investment programs.
Asset Quality - The company's asset quality improved considerably during the
fourth quarter of 2001 as the nonperforming loans/total loans and nonperforming
assets/total assets ratios decreased from 1.22% and 1.06%, respectively, at
September 30 to 0.80% and 0.87%, respectively, at December 31. Of the
non-performing loan ratio, approximately 0.24% represents a single commercial
real estate loan that is new to the nonperforming list. The inclusion of this
loan was offset, however, by the resolution with no loss of a previously
nonperforming credit of similar size. Of the current nonperforming assets,
management projects a worst-case loss potential of $700,000.
Net charge-offs (non-annualized) for the fourth quarter were 0.09% of total
loans. This is somewhat higher than average and, consistent with the company's
recent practice, reflects management's more aggressive stance on charge-offs in
light of current economic conditions. For the full year 2001, net-chargeoffs
were 0.23%, slightly above the company's ongoing objective of 0.20% or less. To
further protect against potential losses, during the fourth quarter management
increased the allowance for loan losses to 1.28%, as compared to 1.25% at the
end of the third quarter and 1.19% at the end of 2000. At this point, management
does not anticipate significant changes in asset quality in the first quarter of
2002.
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 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 subsidiaries, and the year 2002
emphasis will continue to be on these products.
Page 2 of 10
Non-interest income growth and diversification of non-interest revenues are also
key elements of the company's strategy. Cross-selling additional services to the
company's diverse customer base will be a major focus in the pursuit of
non-interest income. Finally, the company will continue the aforementioned
growth of its investment portfolio to take advantage of opportunities to
increase net interest income and the total return of the portfolio.
Asset/Loan Growth - The company grew its assets rapidly during the fourth
quarter of 2001, posting an increase from September 30 to December 31 of 6.3%
(non-annualized). Loans increased 3.1% during the same period. The company's
objectives for 2002 call for approximately 12% growth in loans and assets.
However, management's first priority remains the company's earnings objectives.
Therefore, management continues to be willing to accept a lower growth rate to
maintain net interest income and an acceptable level of credit quality.
Conversely, if the economy begins to recover, management also believes that it
may be possible to pursue -- and attain -- a higher asset growth rate while
still achieving the company's earnings objectives.
Expansion - During the fourth quarter, the company's Oak Hill Banks subsidiary
established a branch banking office in the community of Proctorville, Ohio,
which is part of the Huntington, West Virginia metropolitan area. Also, Oak Hill
Banks opened a loan production office in Athens, Ohio. Focusing on commercial
lending, the new office complements the existing full-service branch operated by
the bank in that community.
In conjunction with a law firm, the company also formed a title insurance agency
during the quarter to take advantage of the non-interest income opportunities
created by the substantial number of commercial and residential real estate
loans generated by its banking subsidiaries.
Management - Richard P. LeGrand retired as President & CEO of the Oak Hill Banks
subsidiary on December 31, 2001. He will continue to serve as an Executive Vice
President and Director of Oak Hill Financial, where he will be active in
investments and large commercial loans. Scott J. Hinsch, Jr., a 27-year banking
veteran who joined the company in 1999, succeeded Mr. LeGrand at Oak Hill Banks.
In turn, Darrell D. Boggs, who joined the bank in 1978, was appointed to replace
Mr. Hinsch as the bank's Chief Operating Officer.
Also, David G. Ratz was appointed Executive Vice President and Chief Operating
Officer of Oak Hill Financial. Mr. Ratz joined the company in 1995 and had
previously served as Chief Administrative Officer and as Executive Vice
President of Oak Hill Banks.
Estimates - Management has increased its earnings per share estimate for 2002 to
a range of $1.75 to $1.85. Earnings per share for the first quarter of 2002 is
expected to be between $.44 and $.46. Management has developed several possible
scenarios under which the 2002 earnings estimate can be achieved and believes it
is attainable under low, moderate, and high-growth scenarios.
Oak Hill Financial is a financial holding company headquartered in Jackson,
Ohio. Three of its subsidiaries, Oak Hill Banks, Towne Bank, and Action Finance
Company, are involved in commercial banking and consumer finance. Combined, they
operate 24 full-service banking offices, two bank loan production offices, and
six consumer finance offices in 15 counties across southern and central Ohio. A
fourth subsidiary, Innovative Financial Services, is an insurance agency
specializing in group health insurance that services over 350 group plans
throughout the same region.
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.
January 17, 2002 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, twelve months ended December 31,
2001 2000 2001 2000
(unaudited) (unaudited)
SUMMARY OF FINANCIAL CONDITION(1)
Total assets $778,332 $694,905
Interest bearing deposits
and federal funds sold 11,929 442
Investment securities 78,981 61,427
Loans receivable -- net 646,081 599,086
Deposits 612,204 562,414
Federal Home Loan Bank
advances and other borrowings 104,860 77,595
Stockholders' equity 56,349 50,224
SUMMARY OF OPERATIONS(1)(2)(3)
Interest income 14,713 14,903 59,704 54,579
Interest expense 6,813 8,456 30,777 29,506
------ ------ ------- -------
Net interest income 7,900 6,447 28,927 25,073
Provision for loan losses 972 697 2,591 2,263
------ ------ ------- -------
Net interest income after
provision for loan losses 6,928 5,750 26,336 22,810
Gain on sale of loans 489 2 1,385 89
Insurance commissions 544 574 2,203 2,090
Other non-interest income 573 809 2,702 2,649
Non-interest expense 5,123 4,719 20,412 17,562
------ ------ ------- -------
Earnings before federal income taxes 3,411 2,416 12,214 10,076
Federal income taxes 1,017 811 3,915 3,366
------ ------ ------- -------
Net earnings $ 2,394 $ 1,605 $ 8,299 $ 6,710
====== ====== ======= =======
Page 4 of 10
Oak Hill Financial, Inc.
January 17, 2002 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, twelve months ended December 31,
2001 2000 2001 2000
(unaudited) (unaudited)
PER SHARE INFORMATION(1)
Basic earnings per share (4) $0.45 $0.23 $ 1.66 $1.17
==== ==== ===== ====
Diluted earnings per share (5) $0.45 $0.23 $ 1.65 $1.16
==== ==== ===== ====
Dividends per share (4) $0.12 $0.10 $ 0.44 $0.39
==== ==== ===== ====
Book value per share $10.70 $9.51
===== ====
SELECTED PERFORMANCE RATIOS FROM CONTINUING OPERATIONS(1)(2)(3)(5)
Basic earnings per share (4) $0.45 $0.30 $1.58 $1.24
==== ==== ==== ====
Diluted earnings per share (5) $0.45 $0.30 $1.57 $1.23
==== ==== ==== ====
Return on average assets 1.27% 0.93% 1.14% 1.05%
Return on average equity 16.82% 12.84% 15.65% 13.66%
Non-interest expense to average assets 2.71% 2.75% 2.81% 2.74%
Dividend payout ratio 26.40% 34.40% 27.97% 31.74%
Efficiency ratio 52.41% 60.40% 57.17% 59.28%
OTHER STATISTICAL AND OPERATING DATA (6)
Net interest margin (fully taxable equivalent) 4.37% 3.89% 4.17% 4.06%
Total allowance for loan losses
to nonperforming loans 159.99% 250.81%
Total allowance for loan losses
to total loans 1.28% 1.19%
Nonperforming loans to total loans 0.80% 0.47%
Nonperforming assets to total assets 0.87% 0.45%
Net charge-offs to average loans (actual for the period) 0.09% 0.07% 0.23% 0.22%
Net charge-offs to average loans (annualized) 0.37% 0.27% 0.23% 0.22%
Equity to assets at period end 7.24% 7.22%
(1) Restated as appropriate to reflect the merger with Innovative Financial
Services on August 31, 2001, which was accounted for as a
pooling-of-interests.
(2) Does not include $375,000 and $184,000, pre-tax, securities losses and
asset impairment charges, respectively, for the three and nine months ended
December 31, 2001, and $381,000 and $184,000, pre-tax, securities losses
and asset impairment charges, respectively, for the twelve months Ended
December 31, 2000.
(3) Does not include $31,000 and $259,000, pre-tax, merger-related charges for
the three and twelve months ended December 31, 2001, and a $900,000 gain on
the sale of the Towne Bank Amelia branch for the twelve months ended
December 31, 2001.
(4) Based on 5,262,740, 5,243,952, 5,296,267 and 5,401,421 weighted-average
shares outstanding for the three and twelve month periods ended December
31, 2001, and December 31, 2000, respectively.
(5) Based on 5,309,854, 5,285,954, 5,345,597 and 5,449,452 weighted-average
shares outstanding for the three and twelve month periods ended December
31, 2001, and December 31, 2000, respectively.
(6) Annualized where appropriate.
Page 5 of 10
Oak Hill Financial, Inc.
January 17, 2002 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, twelve months ended December 31,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL
BALANCE SHEET - ASSETS
Cash and cash equivalents 30,566 13,307
Trading account securities - -
Securities available for sale 75,574 56,480
Held to maturity securities 3,407 4,947
Other securities 5,356 4,981
Total securities 84,337 66,408
Total cash and securities 114,903 79,715
Loans and leases held for investment (1) 651,658 605,136
Loans and leases held for sale (1) 1,637 183
Total loans and leases (1) 653,295 605,319
Reserve for losses on loans 8,345 7,197
Goodwill 216 249
Other intangibles - -
Total intangible assets 216 249
Mortgage servicing rights 1,131 964
Purchased credit card relationships - -
Other real estate owned 1,587 232
Other assets 15,545 15,623
Total assets 778,332 694,905
BALANCE SHEET - LIABILITIES
Deposits 612,204 562,414
Borrowings 99,860 72,595
Other liabilities 4,919 4,672
Total liabilities 716,983 639,681
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 721,983 644,681
(1) Data is net of discount, gross of reserve.
Page 6 of 10
Oak Hill Financial, Inc.
January 17, 2002 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, twelve months ended December 31,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
BALANCE SHEET - EQUITY
Preferred equity - -
Common equity 56,349 50,224
MEMO ITEM: Net unrealized gain (loss) on
securities held for sale (FASB 115 adjustment) (61) (34)
EOP shares outstanding (1) 5,267,295 5,281,270
Options outstanding 825,526 713,301
Treasury shares held by company 326,933 304,470
Repurchase plan announced? No No No Yes
# of shares to be repurchased in plan N/A 320,000 320,000 320,000
# of shares repurchased during period N/A 36,775 73,050 253,570
Average price of repurchased shares N/A $15.31 $14.11 $15.48
INCOME STATEMENT
Interest income 14,713 14,903 59,704 54,579
Interest expense 6,813 8,456 30,777 29,506
Net interest income 7,900 6,447 28,927 25,073
Net interest income (fully taxable equivalent) 8,133 6,477 29,380 25,187
Provision for loan losses 972 697 2,591 2,263
Nonrecurring income - - 900 -
Nonrecurring expense 31 184 259 184
Trading account income - - - -
Foreign exchange income - - - -
Trust revenue - - - -
Insurance commissions 544 574 2,203 2,090
Service charges on deposits 509 433 1,979 1,513
Gain on sale of loans 489 2 1,385 89
Gain (loss) on investment securities transactions (11) (313) 31 (319)
Other noninterest income 75 314 692 1,074
Total noninterest income 1,606 1,010 6,290 4,447
(1) Excludes treasury shares.
Page 7 of 10
Oak Hill Financial, Inc.
January 17, 2002 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, twelve months ended December 31,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
INCOME STATEMENT (CONTINUED)
Employee compensation and benefits expense 2,610 2,668 11,744 10,058
Occupancy and equipment expense 534 519 2,089 1,981
Foreclosed property expense - - - -
Amortization of intangibles 9 9 34 34
Other general, administrative and other expense 1,970 1,523 6,545 5,489
Total noninterest expense 5,123 4,719 20,412 17,562
Net income before taxes 3,380 1,857 12,855 9,511
Tax provision 1,007 621 4,133 3,174
Net income before extraordinary items 2,373 1,236 8,722 6,337
Extraordinary and after-tax items - - - -
Net income 2,373 1,236 8,722 6,337
CHARGEOFFS
Loan chargeoffs 694 444 1,826 1,415
Recoveries on loans 102 61 383 215
Net loan chargeoffs 592 383 1,443 1,200
AVERAGE BALANCE SHEET
Average loans and leases 636,103 597,031 623,486 557,037
Average other earning assets 92,486 64,644 81,635 63,499
Average total earning assets 728,589 661,675 705,121 620,536
Average total assets 750,272 682,956 725,645 641,990
Average total time deposits 377,616 363,676 376,834 335,678
Average other interest-bearing deposits 163,608 144,308 155,405 137,471
Average total interest-bearing deposits 541,224 507,984 532,239 473,149
Average borrowings 94,157 75,554 87,151 72,029
Average interest-bearing liabilities 635,381 583,538 619,390 545,178
Average preferred equity - - - -
Average common equity 56,488 49,715 53,033 49,132
Page 8 of 10
Oak Hill Financial, Inc.
January 17, 2002 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, twelve months ended December 31,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
ASSET QUALITY AND OTHER DATA
Nonaccrual loans 3,692 2,351
Renegotiated loans - -
Other real estate owned 1,587 232
Total nonperforming assets 5,279 2,583
Loans 90+ days past due and still accruing 1,524 518
NPAs plus loans over 90 days delinquent 6,803 3,101
ADDITIONAL DATA
1-4 Family mortgage loans serviced for others 143,357 113,546
Proprietary mutual fund balances - -
Held to maturity securities (fair value) 3,343 4,598
EOP employees (full-time equivalent) 307 278
Total number of full-service banking offices 23 23
Total number of bank and thrift subsidiaries 2 2
Total number of ATMs 27 23
LOANS RECEIVABLE
Real estate 239,239 263,116
Commercial real estate 217,964 174,032
Commercial and other 117,419 77,697
Consumer 78,883 91,155
Credit cards 1,664 1,605
------- -------
Loans - gross 655,169 607,605
Unearned interest (1,874) (2,286)
------- -------
Loans - net of unearned interest 653,295 605,319
------- -------
Reserve for loan losses (8,345) (7,197)
------- -------
Loans - net(1) 644,950 598,122
======= =======
(1) Does not include mortgage servicing assets.
Page 9 of 10
Oak Hill Financial, Inc.
January 17, 2002 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, twelve months ended December 31,
2001 2000 2001 2000
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
DEPOSITS
Non-interest bearing 60,840 45,589
Core interest bearing 440,339 408,110
Non-core interest bearing 111,025 108,715
------- -------
Total deposits 612,204 562,414
======= =======
Fully taxable equivalent yield/average earning assets 8.08% 8.98% 8.53% 8.81%
Cost/average earning assets 3.71% 5.09% 4.36% 4.76%
Net interest margin (fully taxable equivalent 4.37% 3.89% 4.17% 4.06%
Page 10 of 10