EXHIBIT 99
For Immediate Release
Thursday, January 9, 2003 Contact: David G. Ratz,
Executive Vice President & COO
(740) 286-3283
Oak Hill Financial Earnings Up 14% in Fourth Quarter 2002
Jackson, Ohio -- Oak Hill Financial, Inc. (Nasdaq NMS: OAKF) today reported net
earnings from operations for the three months ended December 31, 2002 of
$2,727,000, or $.50 per diluted share, which exceeded analysts' consensus
estimate of $.49 per share (source: I/B/E/S as reported by nasdaq.com). The
fourth quarter 2002 earnings represent an increase of 13.9% over the $2,394,000,
or $.45 per diluted share, in operating earnings that the company recorded for
the quarter ended December 31, 2001.
For the fiscal year ended December 31, 2002, Oak Hill Financial recorded net
earnings from operations of $10,502,000, or $1.93 per diluted share, an increase
of 26.5% over the $8,299,000, or $1.57 per diluted share, in operating earnings
for fiscal 2001. The 2002 operating earnings exclude a $122,000 pre-tax gain on
the sale of a former branch location and pre-tax expenses of $367,000 related to
the company's November 30, 2002 merger of its Oak Hill Banks and Towne Bank
subsidiaries. Including those items, the company's net income for 2002 was
$10,340,000, or $1.90 per diluted share.
Oak Hill Financial's total assets ended 2002 at $833.6 million, an increase of
7.1% over the $778.3 million in assets recorded at December 31, 2001. Net loans
at December 31, 2002 were $701.9 million, up 8.6% from December 31, 2001, while
deposits increased 8.4% to end the year 2002 at $663.8 million.
While both loans and retail deposits increased during the fourth quarter, total
assets decreased 1.2% from September 30 to December 31 as a result of several
actions taken by management to enhance the company's future earnings outlook.
Specifically, the company shed several investment securities whose total return
potential had diminished in the current interest rate environment. On the
liability side, management took advantage of opportunities to reduce certain
higher-cost borrowings and brokered deposits during the fourth quarter, thereby
bolstering the net interest margin.
Reviewing the fourth quarter and the fiscal year 2002, Oak Hill Financial
Chairman and CEO John D. Kidd said, "We had ambitious goals for earnings growth
this year, and we are extremely pleased with the results. Our operating earnings
were up almost 27% this year, and that comes on the heels of a 24% increase in
2001. We asked a lot from our people this year, and at all levels they
delivered."
"The key to our earnings growth remains the same - increasing revenues and
greater efficiency," Kidd explained. "For the year, net revenues were up 15% as
compared to a 9% increase in operating expenses. Our success at controlling
expenses is reflected in the fact that our efficiency ratio was under 55% for
the year, which was a substantial improvement over the 57% efficiency ratio that
we had in 2001. We also became more efficient as the year wore on, with the
efficiency ratio in the fourth quarter falling under 52%."
"We were able to resolve some credit issues and end the quarter with improved
credit quality. We had previously reported a large non-performing loan, which we
were able to workout successfully with a lower-than-anticipated loss. We also
took an aggressive approach toward several smaller nonperforming credits, with
the result that our charge-offs were up in the fourth quarter. However,
charge-offs were still consistent with peer group norms for the year."
Looking forward to 2003, Kidd stated, "We have good momentum in revenues and
earnings going into the new year. November was a record month for our mortgage
origination function, and December was better than November. Although we
continue to experience some loan payoffs due to the low rate environment, our
commercial real estate portfolio continues to grow, and our commercial loans
have rebounded as well. We've been able to stabilize the net interest margin,
and the performance of our insurance services and other fee income product lines
continues to be strong. Also, we believe that further improvement in our
efficiency is likely, particularly as a result of the merger of Oak Hill Banks
and Towne Bank, and we are anticipating a lower level of charge-offs for the
year. As a result, at this point we think that 2003 will be another good year
for Oak Hill Financial and our shareholders."
Page 1 of 10
Key Issue Review and Outlook
Net Interest Margin - Net interest margin for the fourth quarter was 4.14%,
which was an improvement over the third quarter's 4.10%. The margin benefited
from the elimination of certain higher-cost borrowings and brokered deposits and
a leveling off of asset yields, which had been declining due to the reduction in
interest rates over the past two years. Looking forward, management believes
that if rates remain stable, the net interest margin in the first quarter of
2003 should remain at or near 4.10%. In a rising rate environment, the net
interest margin should increase.
Operating Expenses & Efficiency - The company's non-interest expense was 2.64%
of average assets for the fourth quarter of 2002, which compares to 2.71% in the
fourth quarter of 2001. Similarly, the company's efficiency ratio for the fourth
quarter of 2002 improved to 51.78% as compared to 52.41% for the fourth quarter
of 2001. For the full year 2002, the non-interest expense to average assets and
efficiency ratios were 2.72% and 54.76%, respectively, versus 2.81% and 57.17%
for the year 2001. With a continued focus on controlling operating expenses,
management's objective for 2003 is to maintain the ratio of non-interest expense
to average assets under 2.65% and the efficiency ratio at or below 52%.
Non-Interest Income - Non-interest income in the fourth quarter was $2,373,000,
an increase of 20.4% over the third quarter of 2002 and 47.8% over the fourth
quarter of 2001. For the year 2002, non-interest income was up 27.0% over the
year 2001. Of the components of non-interest income, gain on the sale of
mortgage and SBA loans was extremely strong due to the low interest rate
environment. Insurance commissions and revenue from mortgage servicing,
brokerage services, and ATMs also posted substantial increases for the year.
Management anticipates that a high level of gain on sale of loans will continue
through the first quarter, with future quarters dependent on the interest rate
environment. For 2003, the company is projecting a moderate increase in
non-interest income through growth in SBA loan originations, title insurance,
insurance and brokerage commissions, and the introduction of new fee-producing
services.
Asset Quality - The company's nonperforming loans/total loans and nonperforming
assets/total assets ratios decreased from 1.42% and 1.19%, respectively, at
September 30 to 1.03% and .88%, respectively, at December 31. The decline in the
nonperforming ratios is largely attributable to the successful workout in
December of a single large loan that had gone on nonaccrual status in the third
quarter. The resolution involved the sale without foreclosure of the commercial
real estate securing the loan at a loss of $180,000 to the company, an amount
substantially less than the potential loss previously estimated by management.
The positive impact on the nonperforming loan ratio from the resolution of this
credit was partially offset by the inclusion of another, smaller commercial real
estate loan on the nonperforming list. Although this loan had been performing as
agreed, recent unfavorable action taken by a local governmental authority
appears to have negatively impacted the value of the collateral securing the
loan. Therefore, management believed it prudent to charge-off a substantial
portion of this loan during the fourth quarter. The remaining balance on this
credit accounts for 0.13% of the nonperforming loan ratio, and management
expects no additional loss.
The largest of the remaining non-performing loans, which the company has
discussed in earlier releases, accounts for approximately 0.18% of the
nonperforming loan ratio. As previously reported, a charge-off was taken against
this loan in the third quarter, and management expects the remaining potential
loss to be $100,000 or less. Further, management expects that the potential loss
from all other nonperforming loans combined will not exceed $300,000.
Net charge-offs (non-annualized) for the fourth quarter were 0.12% of total
loans. This level of charge-offs reflects management's desire to quickly reduce
the company's exposure to problem credits. Further, the two charge-offs
discussed above accounted for over 70% of the company's net charge-offs for the
quarter.
For the full year 2002, net charge-offs were 0.28%, which is 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
1.29% of total loans, as compared to 1.27% at the end of the third quarter and
1.28% at the end of 2001. Management will continue to focus on improving the
company's asset quality in 2003.
Page 2 of 10
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 subsidiaries.
Non-interest income growth and diversification of non-interest revenues are also
key elements of the company's strategy, and cross-selling additional services to
the company's diverse customer base remains a major focus in the pursuit of
non-interest income.
Asset/Loan Growth - As mentioned, the company's assets decreased 1.2% from
September 30 to December 31 as the company sold numerous investment securities
and repaid borrowed funds and brokered deposit. Loans increased 1.0% during the
same period as originations remained strong but payoffs continued as customers
sought lower rates. The company's objectives for 2003 call for approximately 10%
growth in loans and assets. However, management's first priority remains the
company's earnings target. Management continues to be willing to accept a lower
growth rate to maintain net interest income and an acceptable level of credit
quality.
Merger of Subsidiaries - On November 30, 2002, the company completed the
previously announced merger of its Oak Hill Banks and Towne Bank subsidiaries.
The combined bank, which retained the Oak Hill Banks name, has offices across
southern Ohio and in the fast-growing Cincinnati-Dayton and Columbus
metropolitan markets. Management expects that the merger will result in $300,000
in cost savings in 2003 and $450,000 in subsequent years.
Estimates - Management estimates that earnings per share from operations for
2003 will be in the range of $2.08 to $2.18. Earnings per share for the first
quarter of 2003 are expected to be between $.50 and $.52. Management has
developed several possible scenarios under which the 2003 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. Its subsidiaries, Oak Hill Banks and Action Finance Company, operate 24
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.
Page 3 of 10
Oak Hill Financial, Inc.
January 9, 2003 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,
2002 2001 2002 2001
(unaudited) (unaudited)
SUMMARY OF FINANCIAL CONDITION
Total assets $833,629 $778,332
Interest bearing deposits
and federal funds sold 5,699 11,929
Investment securities 83,789 78,981
Loans receivable -- net 701,944 646,081
Deposits 663,813 612,204
Federal Home Loan Bank
advances and other borrowings 99,358 104,860
Stockholders' equity 66,881 56,349
SUMMARY OF OPERATIONS(1)(2)
Interest income 14,287 14,713 57,222 59,704
Interest expense 5,911 6,813 24,723 30,777
------ ------ ------- -------
Net interest income 8,376 7,900 32,499 28,927
Provision for loan losses 1,105 972 2,757 2,591
------ ------ ------- -------
Net interest income after
provision for loan losses 7,271 6,928 29,742 26,336
Gain on sale of loans 954 489 2,358 1,385
Insurance commissions 669 544 2,457 2,203
Other non-interest income 750 573 3,176 2,702
Non-interest expense 5,618 5,123 22,297 20,412
------ ------ ------- -------
Earnings before federal income taxes 4,026 3,411 15,436 12,214
Federal income taxes 1,299 1,017 4,934 3,915
------ ------ ------- -------
Net earnings $ 2,727 $ 2,394 $ 10,502 $ 8,299
====== ====== ======= =======
Page 4 of 10
Oak Hill Financial, Inc.
January 9, 2003 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,
2002 2001 2002 2001
(unaudited) (unaudited)
PER SHARE INFORMATION
Basic earnings per share (3) $ 0.47 $ 0.45 $ 1.94 $ 1.66
===== ===== ===== =====
Diluted earnings per share (4) $ 0.46 $ 0.45 $ 1.90 $ 1.65
===== ===== ===== =====
Dividends per share (3) $ 0.13 $ 0.12 $ 0.49 $ 0.44
===== ===== ===== =====
Book value per share $12.46 $10.70
===== =====
SELECTED PERFORMANCE RATIOS FROM CONTINUING OPERATIONS(1)(2)(5)
Basic earnings per share (3) $ 0.51 $ 0.45 $ 1.97 $ 1.58
===== ===== ===== =====
Diluted earnings per share (4) $ 0.50 $ 0.45 $ 1.93 $ 1.57
===== ===== ===== =====
Return on average assets 1.28% 1.27% 1.28% 1.14%
Return on average equity 16.44% 16.82% 17.03% 15.65%
Non-interest expense to average assets 2.64% 2.71% 2.72% 2.81%
Dividend payout ratio 25.58% 26.40% 24.86% 27.97%
Efficiency ratio 51.78% 52.41% 54.76% 57.17%
OTHER STATISTICAL AND OPERATING DATA(5)
Net interest margin (fully-taxable equivalent) 4.14% 4.37% 4.18% 4.17%
Total allowance for loan losses
to nonperforming loans 125.29% 159.99%
Total allowance for loan losses
to total loans 1.29% 1.28%
Nonperforming loans to total loans 1.03% 0.80%
Nonperforming assets to total assets 0.88% 0.87%
Net charge-offs to average loans (actual for the period) 0.12% 0.09% 0.28% 0.23%
Net charge-offs to average loans (annualized) 0.50% 0.37% 0.28% 0.23%
Equity to assets at period end 8.02% 7.24%
(1) 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.
(2) Does not include a $122,000, pre-tax gain on sale of a former branch
location for the twelve months ended December 31, 2002, and $341,000 and
$367,000, pre-tax, merger-related charges for the three and twelve months
ended December 31, 2002.
(3) Based on 5,357,838, 5,317,313, 5,262,740 and 5,243,952 weighted-average
shares outstanding for the three and twelve months ended December 31, 2002
and 2001, respectively.
(4) Based on 5,492,513, 5,438,598, 5,309,854 and 5,285,954 weighted-average
shares outstanding for the three and twelve months ended December 31, 2002
and 2001, respectively.
(5) Annualized where appropriate.
Page 5 of 10
Oak Hill Financial, Inc.
January 9, 2003 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,
2002 2001 2002 2001
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL
BALANCE SHEET - ASSETS
Cash and cash equivalents 24,658 30,566
Trading account securities - -
Securities available for sale 81,214 75,574
Held to maturity securities 2,575 3,407
Other securities 5,764 5,356
Total securities 89,553 84,337
Total cash and securities 114,211 114,903
Loans and leases held for investment (1) 708,043 651,658
Loans and leases held for sale (1) 1,245 1,637
Total loans and leases (1) 709,288 653,295
Reserve for losses on loans 9,141 8,345
Goodwill 413 216
Other intangibles - -
Total intangible assets 413 216
Mortgage servicing rights 1,797 1,131
Purchased credit card relationships - -
Other real estate owned - 1,587
Other assets 17,061 15,545
Total assets 833,629 778,332
BALANCE SHEET - LIABILITIES
Deposits 663,813 612,204
Borrowings 94,358 99,860
Other liabilities 3,569 4,919
Total liabilities 761,740 716,983
Redeemable preferred stock - -
Trust preferred securities 5,000 5,000
Minority interest 8 -
Other mezzanine level items - -
Total mezzanine level items 5,008 5,000
Total liabilities and mezzanine 766,748 721,983
(1) Data is net of discount, gross of reserve.
Page 6 of 10
Oak Hill Financial, Inc.
January 9, 2003 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,
2002 2001 2002 2001
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
BALANCE SHEET - EQUITY
Preferred equity - -
Common equity 66,881 56,349
MEMO ITEM: Net unrealized gain (loss) on
securities held for sale (FASB 115 adjustment) 1,206 (61)
EOP shares outstanding (1) 5,369,208 5,267,295
Options outstanding 722,842 825,526
Treasury shares held by company 225,020 326,933
Repurchase plan announced? No No No No
# of shares to be repurchased in plan N/A N/A N/A 320,000
# of shares repurchased during period N/A N/A N/A 73,050
Average price of repurchased shares N/A N/A N/A $14.11
INCOME STATEMENT
Interest income 14,287 14,713 57,222 59,704
Interest expense 5,911 6,813 24,723 30,777
Net interest income 8,376 7,900 32,499 28,927
Net interest income (fully taxable equivalent) 8,508 8,133 33,055 29,380
Provision for loan losses 1,105 972 2,757 2,591
Nonrecurring income
Gain on sale of former branch location - - 122 900
Nonrecurring expense
Merger-related expenses 341 31 367 259
Trading account income - - - -
Foreign exchange income - - - -
Trust revenue - - - -
Insurance commissions 669 544 2,457 2,203
Service charges on deposits 459 509 1,734 1,979
Gain on sale of loans 954 489 2,358 1,385
Gain (loss) on investment securities transactions 14 (11) 315 31
Other noninterest income 277 75 1,127 692
Total noninterest income 2,373 1,606 7,991 6,290
(1) Excludes treasury shares.
Page 7 of 10
Oak Hill Financial, Inc.
January 9, 2003 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,
2002 2001 2002 2001
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
INCOME STATEMENT (CONTINUED)
Employee compensation and benefits expense 3,330 2,610 13,123 11,744
Occupancy and equipment expense 644 534 2,433 2,089
Foreclosed property expense - - - -
Amortization of intangibles - 9 - 34
Other general, administrative and other expense 1,644 1,970 6,741 6,545
Total noninterest expense 5,618 5,123 22,297 20,412
Net income before taxes 3,685 3,380 15,191 12,855
Tax provision 1,183 1,007 4,851 4,133
Net income before extraordinary items 2,502 2,373 10,340 8,722
Extraordinary and after-tax items - - - -
Net income 2,502 2,373 10,340 8,722
CHARGEOFFS
Loan chargeoffs 1,149 694 2,563 1,826
Recoveries on loans 266 102 602 383
Net loan chargeoffs 883 592 1,961 1,443
AVERAGE BALANCE SHEET
Average loans and leases 707,487 636,103 690,545 623,486
Average other earning assets 108,556 92,486 100,308 81,635
Average total earning assets 816,043 728,589 790,853 705,121
Average total assets 844,216 750,272 818,312 725,645
Average total time deposits 422,737 377,616 409,657 376,834
Average other interest-bearing deposits 184,984 163,608 183,198 155,405
Average total interest-bearing deposits 607,721 541,224 592,855 532,239
Average borrowings 105,716 94,157 101,818 87,151
Average interest-bearing liabilities 713,437 635,381 694,673 619,390
Average preferred equity - - - -
Average common equity 65,802 56,488 61,677 53,033
Page 8 of 10
Oak Hill Financial, Inc.
January 9, 2003 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,
2002 2001 2002 2001
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
ASSET QUALITY AND OTHER DATA
Nonaccrual loans 6,029 3,692
Renegotiated loans - -
Other real estate owned - 1,587
Total nonperforming assets 6,029 5,279
Loans 90+ days past due and still accruing 1,267 1,524
NPAs plus loans over 90 days delinquent 7,296 6,803
ADDITIONAL DATA
1-4 Family mortgage loans serviced for others 187,038 143,357
Proprietary mutual fund balances - -
Held to maturity securities (fair value) 2,522 3,343
EOP employees (full-time equivalent) 323 307
Total number of full-service banking offices 24 23
Total number of bank and thrift subsidiaries 1 2
Total number of ATMs 27 27
LOANS RECEIVABLE
Real estate 243,697 239,239
Commercial real estate 261,632 217,964
Commercial and other 130,163 117,419
Consumer 73,720 78,883
Credit cards 1,694 1,664
------- -------
Loans - gross 710,906 655,169
Unearned interest (1,618) (1,874)
------- -------
Loans - net of unearned interest 709,288 653,295
Reserve for loan losses (9,141) (8,345)
------- -------
Loans - net(1) 700,147 644,950
======= =======
(1) Does not include mortgage servicing assets.
Page 9 of 10
Oak Hill Financial, Inc.
January 9, 2003 Press Release
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
For the At or for the
three months ended December 31, nine months ended December 31,
2002 2001 2002 2001
(unaudited) (unaudited)
SUPPLEMENTAL DETAIL (CONTINUED)
DEPOSITS
Non-interest bearing 61,846 60,840
Core interest bearing 494,616 440,339
Non-core interest bearing 107,351 111,025
------- -------
Total deposits 663,813 612,204
======= =======
Fully-taxable equivalent yield/average earning assets 7.01% 8.08% 7.31% 8.53%
Cost/average earning assets 2.87% 3.71% 3.13% 4.36%
Net interest margin 4.14% 4.37% 4.18% 4.17%
Page 10 of 10