JACKSON, Ohio, July 12 /PRNewswire-FirstCall/ -- Oak Hill Financial, Inc. today reported net earnings (U.S. GAAP) for the three months ended June 30, 2007 of $4,613,000, or $0.86 per diluted share. The second quarter 2007 earnings compare to the $2,994,000, or $0.54 per diluted share, in net earnings that the company recorded for the quarter ended June 30, 2006, and to the $2,613,000, or $0.48 per diluted share, in net earnings reported for the first quarter of 2007.
For the six months ended June 30, 2007, Oak Hill Financial recorded net earnings (U.S. GAAP) of $7,226,000, or $1.34 per diluted share, as compared to the $6,488,000, or $1.16 per diluted share, in net earnings for the first six months of 2006.
The net earnings for the second quarter and first six months of 2007 include a $1,648,000 non-taxable gain on bank-owned life insurance. Excluding this item, the company's net income was $2,965,000, or $0.55 per diluted share, for the second quarter of 2007 and $5,578,000, or $1.03 per diluted share, for the first six months of 2007.
The company's total assets ended the second quarter of 2007 at $1.29 billion, as compared to the $1.26 billion in total assets recorded at June 30, 2006. Net loans at June 30, 2007 were $1.03 billion, which was essentially unchanged from June 30, 2006.
Reviewing Oak Hill Financial's second quarter results, President and CEO R. E. Coffman, Jr. said, "We continue to make progress in growing our revenues and bottom line. On a linked-quarter basis, operating revenues in the second quarter were up 7%. We had a strong increase in non-interest income, and net interest income increased as well. Although we continue to experience pressure on the net interest margin, the margin in the second quarter was in line with our expectations. While the increase in revenues was offset somewhat by higher operating expenses, operating earnings for the second quarter were still up over 13% as compared to the first quarter."
Coffman continued, "Loan volume was moderate during the quarter, but we did have some loan payoffs and we sold $2.3 million in classified loans, both of which affected our overall loan totals. Going forward, we continue to work diligently on reducing our nonperforming loans, and we remain optimistic that we will be able to further improve this area."
Key Issue Review and Outlook
Net Interest Margin -- Net interest margin for the second quarter was 3.19%, as compared to the 3.34% posted in the second quarter of 2006 and the 3.24% recorded for the first quarter of 2007. The current interest rate environment continues to affect asset yields, although liability costs have leveled off, which in turn has brought some degree of stabilization to the margin in recent months.
Operating Expenses -- Non-interest expenses from continuing operations were 2.76% of average assets for the second quarter of 2007, which compares to 2.64% for the second quarter of 2006 and 2.63% for the first quarter of 2007. On a linked-quarter basis, the increase in operating expenses was due primarily to increases in credit and collections expense and mark-to-market adjustments related to interest rate swaps. The company's efficiency ratio from operations for the second quarter of 2007 was 66.0%, as compared to 59.8% in the prior year's quarter and 63.4% in the first quarter of 2007.
Non-Interest Income -- Non-interest income from operations, which excludes the $1.6 million nontaxable gain on bank-owned life insurance mentioned earlier in this release, was $3.5 million in the second quarter, which was comparable to the second quarter of 2006 and an increase of 28.0% over the first quarter of 2007. The linked-quarter growth in non-interest income from operations resulted primarily from increases in deposit service charges and insurance and investment services commissions, and lower losses on sale of other real estate owned (OREO). Offsetting the linked quarter increase was increased amortization and impairment of mortgage servicing rights, which the company accounts for as a reduction in other non-interest income.
Asset Quality -- At the end of the second quarter, the nonperforming loans/total loans and nonperforming assets/total assets ratios were 1.38% and 1.30%, respectively, as compared to the 1.36% and 1.31%, respectively, recorded at March 31, 2007. During the second quarter, the company sold three adversely classified, but still performing, loans totaling $2.3 million and disposed of $324,000 of OREO. Going forward, the company intends to pursue additional sales of nonperforming and classified loans and assets.
The company's net charge-offs (non-annualized) were 0.06% of average loans for the second quarter of 2007, as compared to 0.04% in the first quarter. Nearly 33% of the company's net charge-offs for the second quarter were the result of the sale of the classified loans. Annualized net charge-offs were 0.19% through the first six months of 2007, which is in line with its historical range of 0.20% to 0.25%. However, the potential disposition of nonperforming loans could effect future net charge-offs.
Consistent with generally accepted accounting principles and regulatory guidelines, the company uses various formulas to determine its allowance for loan and lease losses (ALLL). The methodology takes into consideration charge- offs as well as 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. Using this methodology, the loans involved in the second quarter loan sales had previously been allocated specific amounts for expected losses in the ALLL. As a result, management's most recent analysis of the above factors indicated that an ALLL/total loans ratio of 1.22% was appropriate at June 30, 2007.
Asset/Loan Growth -- Oak Hill Financial's total assets and net loans were essentially flat during the second quarter as moderate loan volume was offset by the payoff of several commercial real estate loans and the classified loan sale. In addition, management continues to maintain tighter underwriting standards and a conservative approach to loan pricing.
Total deposits on a linked-quarter basis were also flat, with growth in money market and interest bearing transaction accounts offset by declines in non-core interest bearing deposits as the company allowed maturing brokered deposits and other large time deposits to run off without replacement.
Oak Hill Financial is a financial holding company headquartered in Jackson, Ohio. Its subsidiary, Oak Hill Banks, operates 36 full-service banking offices and one bank loan production office in 15 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. Additional information about Oak Hill Financial can be found on the company's website at http://www.oakf.com/.
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)
July 12, 2007 Press Release
At June 30,
(In thousands) 2007 2006
SUMMARY OF FINANCIAL CONDITION
Total assets $1,287,263 $1,262,771
Interest-bearing deposits and federal
funds sold 1,927 3,431
Investment securities 160,385 143,124
Loans receivable - net 1,027,954 1,023,629
Deposits 958,200 978,038
Federal Home Loan Bank advances and
other borrowings 228,174 190,083
Stockholders' equity 95,440 90,246
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 reporting 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 For the
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands,
except share data) 2007 2006 2007 2006
RECONCILIATION OF NON-GAAP NET EARNINGS,
DILUTED EARNINGS PER SHARE AND OTHER PERFORMANCE RATIOS
Net earnings (U.S. GAAP) $4,613 $2,994 $7,226 $6,488
Non-recurring items:
Non-taxable gain on bank
owned life insurance (1,648) - (1,648) -
Net earnings from operations $2,965 $2,994 $5,578 $6,488
Diluted earnings per share
(U.S. GAAP) $0.86 $0.54 $1.34 $1.16
Non-recurring items:
Non-taxable gain on bank
owned life insurance (0.31) - (0.31) -
Diluted earnings per share
from operations $0.55 $0.54 $1.03 $1.16
Non-interest income
(U.S. GAAP) $5,159 $3,507 $7,903 $6,794
Non-recurring items:
Non-taxable gain on bank
owned life insurance (1,648) - (1,648) -
Non-interest income from
operations $3,511 $3,507 $6,255 $6,794
SUMMARY OF OPERATIONS(1)
Interest income $21,247 $19,647 $42,160 $38,618
Interest expense 11,903 10,127 23,548 19,407
Net interest income 9,344 9,520 18,612 19,211
Provision for losses on loans 282 1,073 825 1,273
Net interest income after
provision losses on loans 9,062 8,447 17,787 17,938
Gain on sale of loans 203 333 350 542
Commissions income 934 873 1,750 1,693
Other non-interest income 2,374 2,301 4,155 4,559
General, administrative and
other expense 8,872 8,267 17,109 16,516
Earnings before federal
income tax 3,701 3,687 6,933 8,216
Federal income taxes 1,011 943 1,905 2,228
Federal new markets tax credit (275) (250) (550) (500)
Net earnings from operations $2,965 $2,994 $5,578 $6,488
SELECTED PERFORMANCE RATIOS FROM OPERATIONS(1)
Diluted earnings per share $0.55 $0.54 $1.03 $1.16
Return on average assets 0.92% 0.96% 0.88% 1.05%
Return on average equity 12.64% 13.01% 12.08% 14.05%
Efficiency ratio 66.02% 59.76% 64.73% 59.95%
PER SHARE INFORMATION (U.S. GAAP)
Basic earnings per share(2) $0.86 $0.55 $1.35 $1.18
Diluted earnings per share(3) $0.86 $0.54 $1.34 $1.16
Dividends per share $0.21 $0.19 $0.42 $0.39
Book value per share $17.85 $16.78
OTHER STATISTICAL AND OPERATING DATA (U.S. GAAP)(4)
Return on average assets 1.43% 0.96% 1.13% 1.05%
Return on average equity 19.66% 13.01% 15.65% 14.05%
Non-interest expense to
average assets 2.76% 2.64% 2.69% 2.67%
Net interest margin
(fully-taxable equivalent) 3.19% 3.34% 3.22% 3.41%
Total allowance for losses
on loans to non-performing
loans 88.82% 73.86%
Total allowance for losses
on loans to total loans
1.22% 1.32%
Non-performing loans to
total loans 1.38% 1.79%
Non-performing assets to
total assets 1.30% 1.55%
Net charge-offs to average
loans (actual for the period) 0.06% 0.11% 0.10% 0.12%
Net charge-offs to average
loans (annualized) 0.23% 0.43% 0.19% 0.24%
Equity to assets at period end 7.41% 7.15%
Efficiency ratio 58.68% 59.76% 60.85% 59.95%
(1) Does not include a $1.6 million non-taxable gain on bank owned life
insurance for the three and six months ended June 30, 2007.
(2) Based on 5,341,939, 5,457,931, 5,333,287 and 5,512,408 weighted-
average shares outstanding for the three and six months ended June 30,
2007 and 2006, respectively.
(3) Based on 5,398,471, 5,545,728, 5,395,478 and 5,606,204 weighted-
average shares outstanding for the three and six months ended June 30,
2007 and 2006, respectively.
(4) Annualized where appropriate.
At June 30,
(In thousands, except share data) 2007 2006
SUPPLEMENTAL DETAIL
BALANCE SHEET - ASSETS
Cash and cash equivalents 22,128 24,754
Trading account securities - -
Securities available for sale 158,866 139,516
Securities held to maturity 1,519 3,608
Other securities 8,078 7,845
Total securities 168,463 150,969
Total cash and securities 190,591 175,723
Loans and leases held for investment(1) 1,037,258 1,033,359
Loans and leases held for sale(1) 239 455
Total loans and leases(1) 1,037,497 1,033,814
Allowance for losses on loans 12,748 13,678
Goodwill 8,485 7,935
Other intangible assets 2,720 3,556
Total intangible assets 11,205 11,491
Mortgage servicing rights 3,205 3,493
Purchased credit card relationships - -
Other real estate owned 2,375 1,018
Bank owned life insurance 13,038 13,216
Other assets 42,100 37,694
Total assets 1,287,263 1,262,771
BALANCE SHEET - LIABILITIES
Deposits 958,200 978,038
Borrowings 205,174 167,083
Other liabilities 5,441 4,396
Total liabilities 1,168,815 1,149,517
Redeemable preferred stock - -
Trust preferred securities 23,000 23,000
Minority interests 8 8
Other mezzanine level items - -
Total mezzanine level items 23,008 23,008
Total liabilities and mezzanine
level items 1,191,823 1,172,525
BALANCE SHEET - EQUITY
Preferred equity - -
Common equity 95,440 90,246
MEMO ITEM: Net unrealized gain (loss)
on securities available for sale,
net of tax (1,219) (1,817)
End of period shares outstanding(2) 5,345,554 5,379,756
Options outstanding 384,233 453,583
Treasury shares held by the Company 529,080 494,878
(1) Data is net of unearned interest, gross of allowance for losses on
loans
(2) Excludes treasury shares
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands,
except share data) 2007 2006 2007 2006
SUPPLEMENTAL DETAIL (continued)
Repurchase plan announced? No No No Yes
Number of shares to be
repurchased in plan(1) N/A N/A N/A 278,000
Number of shares repurchased
during the period(1) N/A 175,200 N/A 249,655
Average price of shares
repurchased(1) N/A $27.94 N/A $29.16
INCOME STATEMENT
Interest income 21,247 19,647 42,160 38,618
Interest expense 11,903 10,127 23,548 19,407
Net interest income 9,344 9,520 18,612 19,211
Net interest income
(fully-taxable equivalent) 9,694 9,888 19,320 19,962
Provision for losses on loans 282 1,073 825 1,273
Non-recurring expense:
Merger-related expenses - - - -
Trading account income - - - -
Foreign exchange income - - - -
Trust income - - - -
Commissions income 934 873 1,750 1,693
Service charges on deposits 1,570 1,358 2,800 2,565
Gain on sale of loans 203 333 350 542
Gain on investment securities
transactions 34 (35) 121 104
Other non-interest income 2,418 978 2,882 1,890
Total non-interest income 5,159 3,507 7,903 6,794
Employee compensation and
benefits 4,472 4,104 8,918 8,404
Occupancy and equipment
expense 1,137 987 2,301 1,980
Foreclosed property expense - - - -
Amortization of intangibles 175 229 391 512
Other general, administrative
and other expense 3,088 2,947 5,499 5,620
Total non-interest expenses 8,872 8,267 17,109 16,516
Net income before taxes 5,349 3,687 8,581 8,216
Federal income taxes 1,011 943 1,905 2,228
Federal new markets tax credit (275) (250) (550) (500)
Net income before
extraordinary items 4,613 2,994 7,226 6,488
Extraordinary items - - - -
Net income 4,613 2,994 7,226 6,488
CHARGE-OFFS
Loan charge-offs 815 1,475 1,456 2,214
Recoveries on loans 218 373 454 966
Net loan charge-offs 597 1,102 1,002 1,248
AVERAGE BALANCE SHEET
Average loans and leases 1,045,777 1,034,614 1,042,025 1,032,165
Average other earning
assets 172,243 151,785 168,998 148,194
(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
175,200 and 197,600 shares repurchased at an average price of $27.94
and $28.29 for the three and six months ended June 30, 2006 under the
new plan.
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands,
except share data) 2007 2006 2007 2006
SUPPLEMENTAL DETAIL (continued)
AVERAGE BALANCE SHEET (continued)
Average total earning
assets 1,218,020 1,186,399 1,211,023 1,180,359
Average total assets 1,291,111 1,253,840 1,284,018 1,246,153
Average non-interest
bearing deposits 95,409 92,624 93,356 92,584
Average total time
deposits 520,651 554,193 519,353 563,411
Average other interest-
bearing deposits 349,762 335,037 342,423 322,825
Average total interest-
bearing deposits 870,413 889,230 861,776 886,236
Average borrowings 226,931 175,142 231,300 170,071
Average interest-
bearing liabilities 1,097,344 1,064,372 1,093,076 1,056,307
Average preferred equity - - - -
Average common equity 94,114 92,270 93,122 93,183
ASSET QUALITY AND OTHER DATA
Non-accrual loans 14,183 16,538
Renegotiated loans - -
Loans 90+ days past due and
still accruing 169 1,979
Total non-performing loans 14,352 18,517
Other real estate owned 2,375 1,018
Total non-performing assets 16,727 19,535
ADDITIONAL DATA
1 - 4 family mortgage loans
serviced for others 227,758 241,465
Proprietary mutual fund balances - -
Fair value of securities held
to maturity 1,804 3,780
Full-time equivalent employees
425 438
Total number of full-service
banking offices 36 36
Total number of bank and thrift
subsidiaries 1 1
Total number of ATMs 42 41
LOANS RECEIVABLE
1 - 4 family residential 228,624 237,203
Home equity 40,694 43,385
Multi-family residential 39,297 41,789
Commercial real estate 419,222 391,000
Construction and land development 55,558 55,311
Commercial and other 155,549 152,494
Consumer 96,201 110,478
Credit cards 2,352 2,154
Loans receivable - gross 1,037,497 1,033,814
Unearned interest - -
Loans receivable - net of
unearned interest 1,037,497 1,033,814
Allowance for losses on loans (12,748) (13,678)
Loans receivable - net (1) 1,024,749 1,020,136
(1) Does not include mortgage servicing rights.
For the At or For the
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands,
except share data) 2007 2006 2007 2006
SUPPLEMENTAL DETAIL (continued)
DEPOSITS
Transaction accounts
Non-interest bearing 95,074 96,365
Interest-bearing 75,146 76,938
Savings accounts 48,037 56,599
Money market deposit accounts 225,863 203,209
Other core interest-bearing 384,748 432,686
Total core deposit accounts 828,868 865,797
Brokered deposits 38,339 46,366
Non-core interest-bearing accounts 90,993 65,875
Total deposits 958,200 978,038
Yield/average earning assets
(fully-taxable equivalent) 7.11% 6.76% 7.14% 6.73%
Cost/average interest
earnings assets 3.92% 3.42% 3.92% 3.32%
Net interest income
(fully-taxable equivalent) 3.19% 3.34% 3.22% 3.41%
NEW MARKETS TAX CREDIT
Qualified equity investment in Oak Hill Banks
Community Development Corp. 20,000 20,000
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
