EXHIBIT 99.1
Ohio Legacy Corp Announces Fourth Quarter and Full Year Results
WOOSTER, Ohio--(BUSINESS WIRE)--Feb. 22, 2005--Ohio Legacy Corp
(NASDAQ:OLCB) today reported net earnings for the three months ended December
31, 2004, of $425,000 or $0.19 per share, compared to $188,000, or $0.08 per
share, during the fourth quarter of 2003. Net earnings totaled $1,273,000 for
the full year, or $0.58 per share, which included a tax benefit of $86,000
related to the reversal of a deferred tax valuation allowance. Pretax earnings
rose 95% from the $609,000 recorded in 2003. Assets totaled $195.1 million at
December 31, 2004, a 23% increase from the end of 2003. Assets increased through
organic deposit growth and the acquisition of a banking office in Wooster, Ohio.
Asset mix was the same at the end of 2004 compared 2003, with loans comprising
68% of total assets each period.
Net Interest Income - During the three months ended December 31, 2004, net
interest income grew to $1.6 million, compared to $1.2 million in the fourth
quarter of 2003. Net interest margin increased to 3.52% in the fourth quarter of
2004 compared to 3.28% in 2003. Interest rate spread was 3.23% compared to 2.93%
in the year-ago period.
Net interest income increased 38% to $5.8 million for the full year of
2004. The increase in interest rate spread, driven by falling rates on the CD
portfolio, positively impacted net interest income. Interest rate spread
improved to 3.11% in 2004 from 2.75% in 2003. Net interest margin rose to 3.41%
in 2004 from 3.10% during 2003. While margin and spread improved during the
year, the yield on assets fell 21 basis points to 5.58%. The cost of funds fell
57 basis points, or 19%, to 2.47% during 2004.
Prepayments and refinancing of loans in a low interest rate environment
negatively impacted the yield on the Company's loan portfolio in 2004. Yield on
loans fell to 6.37% in 2004 from 6.94% in 2003. On average, loans comprised 73%
of average interest-earning assets throughout 2004, compared to 68% in 2003.
The cost of all liability funding sources fell during 2004, except for
money market deposit accounts, which increased 64 basis points. In an attempt to
increase core deposits and retain customers who were planning to move their
accounts to competitors selling attractive short-term money market rates, the
Company offered a competitive rate on its money market product.
The maturity of 77% of the December 2003 CD portfolio during 2004 drove
down the cost of CDs by 83 basis points, or 21%. The Company must now manage its
fixed-term and core deposit portfolios in an interest rate environment much
different than has been encountered since its inception in 2000. In general,
rates have fallen each year since 2001 and the Company has enjoyed a consistent
reduction in deposit costs as fixed-term accounts matured. However, the CD
portfolio is now positioned to reprice upward upon maturity in 2005.
Noninterest Income - For the year ended December 31, 2004, noninterest
income decreased to $446,000 from $469,000 in 2003. In early 2003, the
securities portfolio was used as a source of liquidity to fund loans as the
Company did not have FHLB membership or the ability to borrow. In 2004, the
Company was unable to sell securities as most of the portfolio was pledged as
collateral for FHLB advances, especially in the second and third quarters of
2004 during the plateau of the CD maturities discussed earlier. Therefore, gains
on securities sales were only $8,000 in 2004 compared to $113,000 in 2003.
Excluding gains on securities sales, noninterest income increased 23%,
which was attributable to a higher level of demand deposit balances during the
year. Noninterest income excluding securities gains was 0.25% of average assets
during 2004 and 2003.
Noninterest Expense - Total noninterest expense increased to $4.7 million
during 2004, a 31% increase from 2003. The efficiency ratio improved to 74.8%
during 2004 compared to 79.8% during 2003 while noninterest expense as a percent
of average assets increased to 2.64% in 2004 from 2.55% in 2003. This was caused
by improvement in net interest income as a result of falling deposit rates
outweighing the increase in overhead expenses and asset growth.
Salaries and benefits were higher in 2004, reflecting a higher level of
employment at the Bank. The addition of a branch in Wooster added $75,000 in
employee costs and bonuses added $54,000 in wage expense during the fourth
quarter.
Occupancy and equipment expenses increased with the addition of a banking
office in August 2004 and the expansion of operations space in late 2003. Rent
and depreciation increased $55,000 in 2004 due to those items. The Company
expects occupancy and equipment expense to increase with the addition of another
banking location, which will be constructed in 2005.
Additional audit costs as a result of the Sarbanes Oxley Act of 2002 and
the retention of human resource consulting firms to assist with the development
of an internal personnel management program and management succession planning
increased professional fees in 2004.
Data processing expense increased during 2004 as a result of higher
transaction volumes, more deposit and loan accounts and additional services
offered to customers, including set-up costs for internet banking and online
bill payment. The Company had 7,100 and 9,400 deposit accounts at December 31,
2003 and 2004, respectively, an increase of 32% during 2004.
The Company increased its marketing expenditures in 2004 to improve name
recognition and attract new customers on the heels of recent mergers and
acquisitions in its primary market areas. Stationery and supplies costs rose
with the increases in accounts serviced and transactions processed and with the
integration of the branch acquired in August 2004. Other expenses increased
primarily from higher Bank Insurance Fund premiums and deposit transaction costs
as a result of deposit growth.
Loans and Asset Quality. At December 31, 2004, the loan portfolio, net of
the allowance for loan losses and deferred fees, was $132.1 million, an increase
of $23.3 million, or 21%, from December 31, 2003. Loans increased $2.6 million
during the fourth quarter of 2004.
Although the Company encountered many early repayments of loans during the
second half of the year, the mix of loans in the portfolio was stable for most
of the year. The shift in mix that did occur, favored commercial real estate
loans. The commercial real estate portfolio showed the largest growth of all
segments, increasing $11.9 million, or 49%, during the year. This growth
includes the purchase of $5.0 million of participation loans during the first
quarter of 2004. Loans secured by one-to-four family residential real estate
experienced the next largest increase, growing $8.2 million, or 19% during 2004.
Approximately half of the one-to-four family residential real estate loans
originated during 2004 was variable-rate, based on Prime or the three-year
Treasury.
Nonperforming loans totaled $1.1 million at December 31, 2004, compared to
$154,000 at December 31, 2003. Loans are considered nonperforming if they are
over impaired or if they are in nonaccrual status. Most of the nonperforming
loan balances are associated with two loans to one borrower, each secured by
multifamily residential real estate. These loans totaled $723,000 at December
31, 2004.
The allowance for loan losses increased to $1.3 million at December 31,
2004. The allowance for loan losses as a percentage of loans decreased to 0.95%
at December 31, 2004, from 1.02% at December 31, 2003; a decrease that can be
supported by the quality of underwriting and absence of losses and delinquencies
through most of 2004. Net charge-offs during the year were $164,000 compared to
$137,000 in 2003.
Deposits. Total deposits increased $34.5 million, or 28% during 2004. Core
deposit balances increased $13.3 million, or 24%, but decreased as a percent of
total deposits to 44%, compared to 45% at the end of 2003. While purchased core
deposits accounted for $4.9 million of the increase, same-store core deposits
increased $8.3 million, or 15% during the year. Fourth quarter deposits
increased $15.4 million, with certificates of deposits comprising $10.1 million
of the growth.
OUTLOOK
Compared to peers, the Company has historically had a higher ratio of
assets per employee. Due to increasing complexity in the Company's products and
services and to prepare a foundation for future growth, management is planning
to continue investment in personnel and product in 2005.
These people include branch personnel for the Company's fifth banking
office, which will be located in North Canton, Ohio, and should open in the
fourth quarter of 2005, as well as additional sales officers to enhance the
lending team and to develop a stronger retail banking program. A number of
back-office positions will be filled to ensure sound implementation of policies
and procedures and to assist with requirements of the Sarbanes-Oxley Act.
In April 2004, the Company implemented a new suite of checking accounts
that offers a number of benefits and services to customers. The launch of
internet banking and online bill payment, including online cash management
services for commercial deposit customers, during the first quarter of 2005
should further improve the Company's deposit product line.
While these initiatives will increase noninterest expense, management
believes the Company's existing markets are favorable to support continued
growth in loans and deposits to leverage an attractive return on the investment.
During 2004, a number of merger and acquisition transactions were announced in
the Company's market areas. Management believes the consolidation of regional
and national banks provides additional opportunity for the Company to win new
customers who may be disappointed with the level of service they receive from
large banks. Additionally, these transactions may provide opportunities for
branch network expansion in rural and third-tier urban markets.
Fiscal 2004 began with a historically steep Treasury yield curve. Fiscal
2005 has commenced with what is shaping up to be a historically flat yield
curve. This flattening yield curve will place pressure on interest rate spread
as short-term rates, which usually drive core deposit costs, are expected to
continue their rise in 2005. Approximately 18% of the loan portfolio is indexed
to the Prime rate and 41% is indexed to the three-year treasury. However, only
26% of the loan portfolio is scheduled to reprice in 2005. Additionally, the CD
portfolio contains adjustable-rate products that may increase the Company's
funding costs in 2005. Approximately 7% of the December 2004 CD portfolio
reprices monthly based on the one-year Treasury. Another 40% of the portfolio
can be adjusted once over the life of the account at the request of the
customer.
As a result of these dynamics, the Company is significantly reliant on
leveraging its interest rate spread as continued growth in the Company's
profitability is dependent upon management's ability to increase the loan
portfolio to offset rising funding and overhead costs during 2005.
ANNUAL MEETING
The Board of Directors of Ohio Legacy Corp has declared March 1, 2005, to
be the date of record for the Company's 2005 Annual Meeting of Shareholders. The
annual meeting will be held at 10:00 AM Eastern Time on April 28, 2005, at the
Holiday Inn of Belden Village, located at 4520 Everhard Road NW, North Canton,
Ohio.
ABOUT OHIO LEGACY CORP
Ohio Legacy Corp is a bank holding company headquartered in Wooster, Ohio.
Its subsidiary, Ohio Legacy Bank, N.A., provides financial services to small
businesses and consumers though four full-service banking locations in Canton,
Millersburg and Wooster, Ohio.
FORWARD-LOOKING STATEMENTS DISCLOSURE
This release contains certain forward-looking statements related to the
future performance and financial condition of Ohio Legacy Corp. 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.
OHIO LEGACY CORP
CONSOLIDATED BALANCE SHEETS
As of December 31, 2004 and 2003
2004 2003
------------- -------------
ASSETS
Cash and due from banks $ 4,571,131 $ 4,370,383
Federal funds sold and interest-bearing
deposits in financial institutions 12,418,192 3,814,436
------------ ------------
Cash and cash equivalents 16,989,323 8,184,819
Securities available for sale 39,357,929 38,054,644
Securities held to maturity (fair value
of $640,429) 647,981 -
Loans, net 132,084,072 108,792,368
Federal bank stock 1,375,650 1,039,200
Premises and equipment, net 2,269,068 2,036,544
Other real estate owned - 70,000
Intangible asset 669,174 -
Accrued interest receivable and
other assets 1,658,860 880,904
------------ ------------
Total assets $195,052,057 $159,058,479
============ ============
LIABILITIES
Deposits:
Noninterest-bearing demand $ 11,914,867 $ 7,133,620
Interest-bearing demand 13,262,252 8,962,743
Savings 43,847,951 39,667,717
Certificates of deposit, net 88,617,541 67,387,021
------------ ------------
Total deposits 157,642,611 123,151,101
Federal Home Loan Bank advances 15,295,144 14,759,314
Subordinated debentures 3,325,000 3,325,000
Capital lease obligations 968,712 976,643
Accrued interest payable and
other liabilities 580,216 801,954
------------ ------------
Total liabilities 177,811,683 143,014,012
SHAREHOLDERS' EQUITY
Preferred stock, no par value,
500,000 shares authorized and
none outstanding - -
Common stock, no par value,
5,000,000 shares authorized and
2,121,220 and 2,118,000 outstanding
in 2004 and 2003 17,734,155 17,701,955
Accumulated deficit (282,585) (1,555,585)
Accumulated other comprehensive
income (loss) (211,196) (101,903)
------------ ------------
Total shareholders' equity 17,240,374 16,044,467
------------ ------------
Total liabilities and
shareholders' equity $195,052,057 $159,058,479
============ ============
OHIO LEGACY CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and twelve months ended December 31, 2004 and 2003
For the For the
three months ended twelve months ended
December 31, December 31,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Interest income:
Loans, including fees $2,119,406 $1,763,733 $7,982,123 $6,329,906
Securities 346,118 283,527 1,327,677 1,356,312
Interest-bearing
deposits and federal
funds sold 71,883 23,267 162,931 110,447
---------- ---------- ---------- ----------
Total interest
income 2,537,407 2,070,527 9,472,731 7,796,665
Interest expense:
Deposits 683,810 752,746 2,826,665 3,150,085
Other borrowings 213,941 145,515 873,017 476,578
---------- ---------- ---------- ----------
Total interest
expense 897,751 898,261 3,699,682 3,626,663
---------- ---------- ---------- ----------
Net interest income 1,639,656 1,172,266 5,773,049 4,170,002
Provision for
loan losses - 114,750 306,000 418,250
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 1,639,656 1,057,516 5,467,049 3,751,752
Noninterest income:
Service charges and
other fees 115,905 104,327 426,605 345,677
Gain (loss) on sales
of securities, net - (3,334) 7,910 112,908
Other income 4,367 1,840 11,534 9,961
---------- ---------- ---------- ----------
Total noninterest
income 120,272 102,833 446,049 468,546
Noninterest expense:
Salaries and benefits 659,123 446,714 2,141,525 1,605,764
Occupancy and
equipment 189,193 150,959 657,244 571,389
Professional fees 101,313 39,676 407,224 330,188
Franchise tax 56,034 44,920 233,474 184,838
Data processing 128,201 88,833 451,512 326,025
Marketing and
advertising 51,305 25,678 173,374 102,435
Stationery and
supplies 35,288 20,198 103,005 81,592
Amortization of
intangible asset 71,396 - 80,438 -
Other expenses 129,127 155,371 478,354 409,067
---------- ---------- ---------- ----------
Total noninterest
expense 1,420,980 972,349 4,726,150 3,611,298
---------- ---------- ---------- ----------
Earnings before
income tax expense 338,948 188,000 1,186,948 609,000
Income tax benefit (86,052) - (86,052) -
---------- ---------- ---------- ----------
Net earnings $ 425,000 $ 188,000 $1,273,000 $ 609,000
========== ========== ========== ==========
Basic earnings
per share $ 0.20 $ 0.09 $ 0.60 $ 0.29
Diluted earnings
per share $ 0.19 $ 0.08 $ 0.58 $ 0.29
Basic weighted average
shares outstanding 2,120,750 2,117,327 2,119,844 2,109,124
Diluted weighted
average shares
outstanding 2,206,031 2,469,640 2,182,245 2,112,539
OHIO LEGACY CORP
QUARTERLY BALANCE SHEETS
(Dollars in thousands)
2004 2003
--------------------------------------- ---------
Dec. 31 Sept. 30 June 30 March 31 Dec. 31
--------- --------- --------- --------- ---------
Cash and
cash equivalents $ 16,989 $ 14,756 $ 6,760 $ 11,541 $ 8,185
Securities 40,006 33,522 33,054 36,754 38,055
Loans, net of fees 133,348 130,745 129,405 117,463 109,914
Allowance for
loan losses (1,264) (1,288) (1,226) (1,189) (1,122)
Premises and
equipment, net 2,269 2,170 1,935 1,988 2,036
Core deposit
intangible 669 318 - - -
Other assets 3,035 2,593 2,603 2,293 1,990
-------- -------- -------- -------- --------
Total assets $195,052 $182,816 $172,531 $168,850 $159,058
======== ======== ======== ======== ========
Noninterest-bearing
demand $ 11,915 $ 11,621 $ 7,800 $ 7,095 $ 7,133
Interest-bearing
demand 13,262 13,161 11,702 9,214 8,963
Savings 43,848 38,941 38,987 38,443 39,668
Certificates of
deposit 88,618 78,565 70,228 73,071 67,387
-------- -------- -------- -------- --------
Total deposits 157,643 142,288 128,717 127,823 123,151
Other borrowings 19,589 22,960 27,329 23,697 19,061
Other liabilities 580 701 685 777 802
-------- -------- -------- -------- --------
Total liabilities 177,812 165,949 156,731 152,297 143,014
Shareholders' equity 17,240 16,867 15,800 16,553 16,044
-------- -------- -------- -------- --------
Total liabilities
and shareholders'
equity $195,052 $182,816 $172,531 $168,850 $159,058
======== ======== ======== ======== ========
LOAN PORTFOLIO:
- ---------------
Commercial $ 10,710 $ 11,751 $ 11,733 $ 11,491 $ 12,699
Residential
real estate 50,728 49,459 48,449 43,865 42,511
Multifamily
residential 10,148 10,119 10,049 9,690 8,121
Commercial
real estate 36,365 33,856 32,338 28,206 24,457
Construction 13,315 13,591 15,331 13,104 11,791
Consumer and
home equity 12,250 12,127 11,677 11,286 10,511
Net deferred
loan fees (168) (158) (172) (179) (176)
-------- -------- -------- -------- --------
Loans $133,348 $130,745 $129,405 $117,463 $109,914
======== ======== ======== ======== ========
QUARTERLY AVERAGES:
- -------------------
Fed funds sold and
securities (1) $ 49,690 $ 40,794 $ 40,745 $ 43,815 $ 36,135
Loans 132,607 131,248 125,102 111,273 106,260
Total
interest-earning
assets 182,297 172,042 165,847 155,088 142,395
Total assets 190,032 178,296 172,672 161,396 148,516
Total assets,
year to date 175,758 170,997 167,036 161,396 141,946
Interest-bearing
deposits 138,666 124,158 123,176 117,658 115,275
Other borrowings
and leases 22,204 27,982 25,203 19,903 10,682
Total
interest-bearing
liabilities 160,870 152,140 148,379 137,561 125,957
Shareholders' equity 16,851 16,235 16,093 16,182 15,856
Shareholders' equity,
year to date 16,341 16,167 16,139 16,182 16,007
(1) Includes federal agency stock not classified in securities on the
consolidated balance sheets and interest-earning deposits in
financial institutions
OHIO LEGACY CORP
QUARTERLY STATEMENTS OF OPERATIONS
(In thousands, except per share data and ratios)
2004 2003
----------------------------------- -------
For the three months ended Dec. 30 Sept. 30 June 30 March 31 Dec. 31
-------- -------- -------- -------- -------
Interest income $ 2,537 $ 2,427 $ 2,321 $ 2,188 $2,070
Interest expense (897) (910) (956) (937) (898)
------- ------- ------- ------- ------
Net interest income 1,640 1,517 1,365 1,251 1,172
Provision for loan losses - (71) (150) (85) (115)
Gain (Loss) on
sales of securities - (5) - 13 (3)
Noninterest income 120 113 115 90 106
Noninterest expense (1,421) (1,154) (1,104) (1,047) (972)
------- ------- ------- ------- ------
Net earnings before taxes 339 400 226 222 188
Income tax benefit 86 - - - -
------- ------- ------- ------- ------
Net income $ 425 $ 400 $ 226 $ 222 $ 188
======= ======= ======= ======= ======
Income per share, diluted $ 0.19 $ 0.19 $ 0.10 $ 0.10 $ 0.08
Common and dilutive
shares, avg. 2,206 2,157 2,181 2,181 2,178
SELECTED RATIOS:
- ----------------
Net interest margin (1) 3.52% 3.52% 3.28% 3.23% 3.28%
Yield on interest-earning
assets 5.53 5.58 5.59 5.66 5.77
Cost of funds 2.30 2.37 2.58 2.73 2.84
Interest rate spread (2) 3.23 3.21 3.01 2.93 2.93
Efficiency ratio (3) 76.68 70.80 74.59 78.09 76.00
Allowance as a percent
of loans 0.95 0.98 0.95 1.01 1.02
Net loans as a percent
of deposits 83.79 90.98 99.58 90.96 88.34
Annualized net charge-offs
to loans 0.08 0.03 0.36 0.06 0.21
Annualized
noninterest income to
average assets (4) 0.25 0.25 0.27 0.22 0.29
Annualized
noninterest expense to
average assets (5) 2.84 2.58 2.56 2.60 2.61
Annualized return on
average assets (6) 0.71 0.89 0.52 0.55 0.51
Annualized return on
average equity (6) 8.05 9.86 5.62 5.49 4.74
(1) Net interest income, annualized, divided by average
interest-earning assets for the period
(2) Difference between the yield on interest-earning assets and the
cost of funds
(3) Noninterest expense, excluding intangible asset amortization
divided by net interest income and noninterest income, excluding
gains and losses on securities sales
(4) Excludes gains and losses on securities sales
(5) Excludes intangible asset amortization
(6) Excludes income tax benefit in the quarter ended December 31, 2004
CONTACT: Ohio Legacy Corp
L. Dwight Douce or Eric S. Nadeau, 330-263-1955
http://www.ohiolegacycorp.com