JACKSON, Ohio, April 13 /PRNewswire-FirstCall/ -- Oak Hill Financial, Inc. today reported net earnings for the three months ended March 31, 2006 of $3,494,000, or $0.62 per diluted share. The first quarter 2006 earnings represent a 7.2% increase over the $3,260,000, or $0.57 per diluted share, in net earnings that the company recorded for the quarter ended March 31, 2005.
The net earnings for the first quarter of 2005 include $317,000 of expenses related to Oak Hill Financial's acquisition of Ripley National Bank in the fourth quarter of 2004 and its acquisition of Lawrence Financial Holdings, Inc. on April 1, 2005. In addition, the first quarter 2005 earnings include the effect of a $261,000 reduction in tax expense resulting from a tax savings of $1.0 million for the full year 2005. Excluding those items, the company's net income from operations for the first quarter of 2005 was $3,296,000 or $.58 per diluted share.
The company's total assets ended the first quarter of 2006 at $1.25 billion, an increase of 12.7% over the $1.11 billion in total assets recorded at March 31, 2005. Net loans at March 31, 2006 were $1.02 billion, up 9.8% over the $926.6 million in net loans at March 31, 2005. The year-over- year comparisons are enhanced by Oak Hill Financial's acquisition of Lawrence Financial Holdings, which added $116.9 million in assets and $76.5 million in loans to Oak Hill Financial's totals.
Reviewing the first quarter of 2006, Oak Hill Financial President and CEO R.E. Coffman, Jr. said, "Our results for the quarter were mixed. We were pleased with our overall earnings. Also, we had a strong linked-quarter increase in non-interest income, operating expenses were in line, and net charge-offs were low. However, our non-performing loans increased and the net interest margin continues to be affected by the current rate environment."
"Right now, asset quality and the net interest margin are our top priorities," Coffman added. "We have become more conservative in our loan pricing and underwriting, and that is reflected in our loan totals. As we've said in the past, we will not trade-off the margin or credit quality for the sake of growth. On the liability side, we've held our time deposit rates in check while at the same time targeting lower-cost core deposits."
Looking forward, Coffman stated, "Our senior credit people are working diligently on our non-performing loans and we are exploring several avenues for improvement in this area. The loan pipeline is starting to pick up, and we are beginning to see the results of our expanded sales efforts. We're also seeing good results from our financial services, mortgage origination, and insurance areas, and we expect revenues from those activities to continue to grow."
Key Issue Review and Outlook
Net Interest Margin - Net interest margin for the first quarter was 3.48%, which was below management's expectations. The first quarter net interest margin compared to the 3.89% recorded in the first quarter of 2005 and the 3.60% posted for the fourth quarter of 2005. The net interest margin continues to be affected by the flat yield curve, aggressive loan and deposit pricing in the company's market areas, and the level of nonperforming loans. In response, the company has maintained a disciplined approach to both loan and time deposit pricing to support the margin. The company has also taken a more conservative approach to pricing certain core deposit accounts and has added borrowings with pricing structures that should help to mitigate the effects of the current rate environment.
Operating Expenses - Non-interest expenses from operations were 2.70% of average assets for the first quarter of 2006, which compares to 2.59% for the first quarter of 2005 and 2.67% for the fourth quarter of 2005. On a linked- quarter basis, compensation and benefits expense was up, due primarily to increases in employee benefits costs, which was offset by decreases in various miscellaneous expenses. The company's efficiency ratio from operations for the first quarter of 2006 was 60.1%, as compared to 55.0% in the first quarter of 2005 and 58.7% in the fourth quarter of 2005.
Non-Interest Income - Non-interest income from operations, including gain on sale of loans, was $3.3 million in the first quarter, an increase of 29.5% over the first quarter of 2005 and 6.7% over the fourth quarter of 2005. The linked-quarter increase was the result of increases in gain on sale of investments, investment services and insurance commissions, ATM income, and income from bank-owned life insurance. These increases were partially offset by a seasonal decline in deposit service charges.
Asset Quality - At the end of the first quarter, the nonperforming loans/total loans and nonperforming assets/total assets ratios were 2.35% and 2.01%, respectively, as compared to the 1.72% and 1.45%, respectively, recorded at December 31, 2005. The increase is primarily due to the movement to nonperforming status during the first quarter of several commercial real estate loans, including three loans from the same relationship totaling $3.1 million and individual loans of $1.1 million and $1.0 million.
As previously reported, the largest of the company's nonperforming loans is a group of commercial real estate loans from a single relationship with a net carrying value of $5.4 million. The second largest of the nonperforming loans, also reported previously, is a $3.4 million commercial real estate loan. The majority of the company's nonperforming loans - both overall and of those that went on nonperforming status during the first quarter - were originated in 2003 and earlier.
The company's net charge-offs (non-annualized) were 0.01% of total loans for the quarter, as compared to 0.03% in the fourth quarter of 2005 and 0.06% in the first quarter of 2005. The company expects net charge-offs for the full year 2006 to be in line with its historical range of 0.20% to 0.25% annually.
Consistent with generally accepted accounting principles and regulatory guidelines, the company uses various formulas to determine its allowance for loan losses (ALL). 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. Management's ongoing analysis of the above factors indicated that an ALL/total loans ratio of 1.33% was appropriate at March 31, 2006.
Asset/Loan Growth - Oak Hill Financial's total assets increased at a 1.7% annual rate from December 31, 2005 to March 31, 2006, while net loans grew at an annualized 0.8%. Total deposits increased on a linked-quarter basis at an annualized 0.9% as strong growth in money market deposit accounts was somewhat offset by a decline in quarter-end transaction balances. Also, the company allowed maturing brokered deposits to run off without replacement. Management anticipates low to moderate loan growth for the full year 2006.
Stock Buyback - In January 2006, Oak Hill Financial completed the share repurchase program that it announced in May 2005. Under that program, the company repurchased a total of 290,000 shares of its common stock, of which 52,055 shares were repurchased in the first quarter of 2006.
On February 21, 2006, the company announced that its board of directors authorized the repurchase of an additional 278,000 shares, or approximately 5.0 percent, of its outstanding common stock. During the first quarter, 22,400 shares were repurchased under the new program.
Expansion - In January, the company's Oak Hill Banks affiliate opened a Business Financial Center in the Ohio community of Lancaster to serve the lending, depository, and financial services needs of small and mid-size businesses in that market. A second Business Financial Center in Athens, Ohio, is scheduled to open in the second quarter, as is a new full-service banking office in Mt. Orab, Ohio, a growing community east of Cincinnati. Later in 2006 and into 2007, the company expects to pursue additional expansion opportunities in suburban Columbus and the Cincinnati-Dayton region.
Estimates - Management has reiterated its estimate that earnings per share for 2006 will be in the range of $2.45 to $2.55.
Oak Hill Financial is a financial holding company headquartered in Jackson, Ohio. Its subsidiary, Oak Hill Banks, operates 35 full-service banking offices and three bank loan production offices in 16 counties across southern and central Ohio. A second subsidiary, Oak Hill Financial Insurance Agency, provides group health plans, benefits administration, and other insurance services to 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.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
April 13, 2006 Press Release
At March 31,
(In thousands) 2006 2005
SUMMARY OF FINANCIAL CONDITION
Total assets $1,246,229 $1,105,676
Interest-bearing deposits and
federal funds sold 1,693 1,872
Investment securities 136,066 107,719
Loans receivable - net 1,017,074 926,578
Deposits 980,654 858,156
Federal Home Loan Bank advances and
other borrowings 167,169 157,207
Stockholders' equity 94,234 86,788
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 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 is presented in the tables below.
For the Three Months Ended
March 31,
(In thousands, except share data) 2006 2005
RECONCILIATION OF NON-GAAP NET EARNINGS,
DILUTED EARNINGS PER SHARE AND OTHER
PERFORMANCE RATIOS
Net earnings (U.S. GAAP) $3,494 $3,260
Non-recurring items, net of tax:
Merger-related expenses - 206
Reduction in tax expense - (170)
Net earnings from operations $3,494 $3,296
Diluted earnings per share (U.S. GAAP) $0.62 $0.57
Non-recurring items, net of tax:
Merger-related expenses - 0.04
Reduction in tax expense - (0.03)
Diluted earnings per share from operations $0.62 $0.58
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
April 13, 2006 Press Release
For the Three Months Ended
March 31,
(In thousands, except share data) 2006 2005
RECONCILIATION OF NON-GAAP NET EARNINGS,
DILUTED EARNINGS PER SHARE AND OTHER
PERFORMANCE RATIOS (continued)
Non-interest expense (U.S. GAAP) $8,249 $6,895
Non-recurring items:
Merger-related expenses - (317)
Reduction in tax expense - 261
Non-interest expense from operations $8,249 $6,839
SUMMARY OF OPERATIONS (1)(2)
Interest income $18,971 $15,777
Interest expense 9,280 6,091
Net interest income 9,691 9,686
Provision for losses on loans 200 750
Net interest income after
provision for losses on loans 9,491 8,936
Gain on sale of loans 209 318
Commissions income 820 671
Other non-interest income 2,258 1,550
General, administrative and other
expense 8,249 6,839
Earnings before federal income taxes 4,529 4,636
Federal income taxes 1,285 1,465
Federal new markets tax credit (250) (125)
Net earnings from operations $3,494 $3,296
SELECTED PERFORMANCE RATIOS FROM
OPERATIONS (1)(2)(4)(5)
Diluted earnings per share $0.62 $0.58
Return on average assets 1.14% 1.24%
Return on average equity 15.03% 15.49%
Non-interest expense to average assets 2.70% 2.57%
Efficiency ratio 60.14% 54.95%
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
April 13, 2006 Press Release
At or For the Three Months Ended
March 31,
(In thousands, except share data) 2006 2005
PER SHARE INFORMATION (U.S. GAAP)
Basic earnings per share (3) $0.63 $0.59
Diluted earnings per share (4) $0.62 $0.57
Dividends per share $0.19 $0.17
Book value per share $17.00 $15.56
OTHER STATISTICAL AND OPERATING DATA
(U.S. GAAP) (5)
Return on average assets 1.14% 1.23%
Return on average equity 15.03% 15.32%
Non-interest expense to average assets 2.70% 2.59%
Net interest margin (fully-taxable
equivalent) 3.48% 3.89%
Total allowance for losses on loans
to non-performing loans 56.61% 156.42%
Total allowance for losses on loans
to total loans 1.33% 1.29%
Non-performing loans to total loans 2.35% 0.82%
Non-performing assets to total assets 2.01% 0.78%
Net charge-offs to average loans
(actual for the period) 0.01% 0.06%
Net charge-offs to average loans
(annualized) 0.06% 0.23%
Equity to assets at period end 7.56% 7.85%
Efficiency ratio 60.14% 55.40%
(1) Excludes $261,000 reduction in tax expense for the three months ended
March 31, 2005 resulting from a tax savings of $1.0 million for 2005.
(2) Does not include $317,000 of merger-related charges for the three
months ended March 31, 2005.
(3) Based on 5,567,489 and 5,566,360 weighted-average shares outstanding
for the three months ended March 31, 2006 and 2005, respectively.
(4) Based on 5,667,373 and 5,718,181 weighted-average shares outstanding
for the three months ended March 31, 2006 and 2005, respectively.
(5) Annualized where appropriate.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
April 13, 2006 Press Release
At March 31,
(In thousands, except share data) 2006 2005
SUPPLEMENTAL DETAIL
BALANCE SHEET - ASSETS
Cash and cash equivalents 25,804 24,990
Trading account securities - -
Securities available for sale 132,453 104,084
Securities held to maturity 3,613 3,635
Other securities 7,734 6,663
Total securities 143,800 114,382
Total cash and securities 169,604 139,372
Loans and leases held for investment (1) 1,027,188 935,434
Loans and leases held for sale (1) 100 -
Total loans and leases (1) 1,027,288 935,434
Allowance for losses on loans 13,706 12,062
Goodwill 7,935 1,686
Other intangible assets 3,784 1,198
Total intangible assets 11,719 2,884
Mortgage servicing rights 3,492 3,206
Purchased credit card relationships - -
Other real estate owned 865 943
Bank owned life insurance 13,098 10,197
Other assets 33,869 25,702
Total assets 1,246,229 1,105,676
BALANCE SHEET - LIABILITIES
Deposits 980,654 858,156
Borrowings 144,169 139,207
Other liabilities 4,164 3,517
Total liabilities 1,128,987 1,000,880
Redeemable preferred stock - -
Trust preferred securities 23,000 18,000
Minority interests 8 8
Other mezzanine level items - -
Total mezzanine level items 23,008 18,008
Total liabilities and mezzanine
level items 1,151,995 1,018,888
BALANCE SHEET - EQUITY
Preferred equity - -
Common equity 94,234 86,788
MEMO ITEM: Net unrealized gain
(loss) on securities available
for sale, net of tax (548) (444)
End of period shares outstanding (2) 5,544,751 5,577,903
Options outstanding 464,533 556,961
Treasury shares held by the Company 329,883 75,680
(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)
April 13, 2006 Press Release
At or For the Three Months Ended
March 31,
(In thousands, except share data) 2006 2005
SUPPLEMENTAL DETAIL (continued)
Repurchase plan announced? Yes No
Number of shares to be repurchased
in plan(1) 278,000 N/A
Number of shares repurchased during
the period(1) 74,455 N/A
Average price of repurchased shares(1) $32.02 N/A
INCOME STATEMENT
Interest income 18,971 15,777
Interest expense 9,280 6,091
Net interest income 9,691 9,686
Net interest income (fully-taxable
equivalent) 10,074 9,904
Provision for losses on loans 200 750
Non-recurring expense:
Merger-related expenses - 317
Trading account income - -
Foreign exchange income - -
Trust income - -
Commissions income 820 671
Service charges on deposits 1,207 842
Gain on sale of loans 209 318
Gain on investment securities
transactions 139 143
Other non-interest income 912 565
Total non-interest income 3,287 2,539
Employee compensation and benefits 4,300 3,582
Occupancy and equipment expense 993 1,002
Foreclosed property expense - -
Amortization of intangibles 283 72
Other general, administrative and
other expense 2,673 1,922
Total non-interest expenses 8,249 6,578
Net income before taxes 4,529 4,580
Federal income taxes 1,285 1,445
Federal new markets tax credit (250) (125)
Net income before extraordinary items 3,494 3,260
Extraordinary items - -
Net income 3,494 3,260
CHARGE-OFFS
Loan charge-offs 739 717
Recoveries on loans 593 182
Net loan charge-offs 146 535
(1) There were 52,055 shares repurchased at an average price of $32.40
under the plan announced on May 26, 2005. These shares completed the
plan, and a new plan was announced on February 21, 2006. There were
22,400 shares repurchased at an average price of $31.01 under the new
plan.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
April 13, 2006 Press Release
At or For the Three Months Ended
March 31,
(In thousands, except share data) 2006 2005
SUPPLEMENTAL DETAIL (continued)
AVERAGE BALANCE SHEET
Average loans and leases 1,029,689 928,998
Average other earning assets 145,463 103,846
Average total earning assets 1,175,152 1,032,844
Average total assets 1,239,280 1,079,090
Average non-interest bearing
deposits 92,543 81,326
Average total time deposits 572,731 557,661
Average other interest-bearing
deposits 310,478 214,426
Average total interest-bearing
deposits 883,209 772,087
Average borrowings 164,945 137,305
Average interest-bearing liabilities 1,048,154 909,392
Average preferred equity - -
Average common equity 94,280 86,286
ASSET QUALITY AND OTHER DATA
Non-accrual loans 23,594 7,138
Renegotiated loans - -
Loans 90+ days past due and still
accruing 617 573
Total non-performing loans 24,211 7,711
Other real estate owned 865 943
Total non-performing assets 25,076 8,654
ADDITIONAL DATA
1 - 4 family mortgage loans serviced
for others 245,772 250,051
Proprietary mutual fund balances - -
Fair value of securities held to
maturity 3,799 3,847
Full-time equivalent employees 430 371
Total number of full-service banking
offices 35 29
Total number of bank and thrift
subsidiaries 1 1
Total number of ATMs 40 35
LOANS RECEIVABLE
1 - 4 family residential 238,247 200,938
Home equity 43,437 42,432
Multi-family residential 38,464 30,245
Commercial real estate 389,034 356,885
Construction and land development 53,962 64,010
Commercial and other 152,401 171,931
Consumer 109,768 67,126
Credit cards 1,975 1,868
Loans receivable - gross 1,027,288 935,435
Unearned interest - (1)
Loans receivable - net of
unearned interest 1,027,288 935,434
Allowance for losses on loans (13,706) (12,062)
Loans receivable - net (1) 1,013,582 923,372
(1) Does not include mortgage servicing rights.
Oak Hill Financial, Inc.
SELECTED CONSOLIDATED FINANCIAL INFORMATION (unaudited)
April 13, 2006 Press Release
At or For the Three Months Ended
March 31,
(In thousands, except share data) 2006 2005
SUPPLEMENTAL DETAIL (continued)
DEPOSITS
Transaction accounts
Non-interest bearing 91,788 81,125
Interest-bearing 75,952 67,015
Savings accounts 60,439 57,758
Money market deposit accounts 190,064 96,190
Other core interest-bearing 431,226 368,450
Total core deposit accounts 849,469 670,538
Non-core interest-bearing accounts 131,185 187,618
Total deposits 980,654 858,156
Yield/average earning assets (fully-
taxable equivalent) 6.68% 6.28%
Cost/average earning assets 3.20% 2.39%
Net interest income (fully-
taxable equivalent) 3.48% 3.89%
NEW MARKETS TAX CREDIT
Qualified equity investment in Oak Hill Banks
Community Development Corp. 20,000 10,000
Aggregate
QEI New Markets Tax Credit
Year Amount 2006 2007 2008 2009 2010 2011
2004 10,000 500 600 600 600 600 -
2005 10,000 500 500 600 600 600 600
Totals 20,000 1,000 1,100 1,200 1,200 1,200 600
