<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
---------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File Number 0-26876
---------------
OAK HILL FINANCIAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1010517
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14621 State Route 93
Jackson, Ohio 45640
- --------------------- ----------
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (614) 286-3283
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
--- ---
As of November 12, 1997, the latest practicable date, 3,517,190 shares of the
registrant's common stock, $.50 stated value, were issued and outstanding.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
Page 1 of 17 pages
<PAGE> 2
Oak Hill Financial, Inc.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
PART II - OTHER INFORMATION 15
SIGNATURES 16
</TABLE>
<PAGE> 3
OAK HILL FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
<S> <C> <C>
Cash and due from banks $ 6,704 $ 7,378
Federal funds sold 5,407 4,135
Investment securities designated as available for sale - at market 45,009 37,501
Loans receivable - net 221,904 190,396
Loans held for sale - at lower of cost or market -- 140
Office premises and equipment - net 3,406 3,403
Federal Home Loan Bank stock - at cost 1,770 1,585
Accrued interest receivable 1,718 1,435
Prepaid expenses and other assets 237 156
Prepaid federal income taxes 46 --
Deferred federal income tax asset 704 772
-------- --------
Total assets $286,905 $246,901
======== ========
</TABLE>
3
<PAGE> 4
OAK HILL FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
(In thousands, except share data)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
<S> <C> <C>
Deposits $241,629 $209,593
Securities sold under agreements to repurchase 1,564 130
Advances from the Federal Home Loan Bank 17,315 13,604
Accrued interest payable and other liabilities 1,138 545
Federal income taxes payable -- 66
-------- --------
Total liabilities 261,646 223,938
Stockholders' equity
Common stock - $.50 stated value; authorized 5,000,000 shares, 2,884,700 shares
issued 1,442 1,442
Additional paid-in capital 4,227 4,227
Retained earnings 19,522 17,290
Treasury stock (11,200 shares at cost) (28) (28)
Unrealized gains on securities designated as available
for sale, net of related tax effects 96 32
-------- --------
Total stockholders' equity 25,259 22,963
-------- --------
Total liabilities and stockholders' equity $286,905 $246,901
======== ========
</TABLE>
4
<PAGE> 5
OAK HILL FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Loans $14,243 $11,925 $5,102 $4,157
Investment securities 2,052 1,829 689 666
Interest-bearing deposits and other 334 387 136 76
------- ------- ------ ------
Total interest income 16,629 14,141 5,927 4,899
Interest expense
Deposits 7,093 6,032 2,477 2,034
Borrowings 764 559 331 212
------- ------- ------ ------
Total interest expense 7,857 6,591 2,808 2,246
------- ------- ------ ------
Net interest income 8,772 7,550 3,119 2,653
Provision for losses on loans 393 535 90 243
------- ------- ------ ------
Net interest income after
provision for losses on loans 8,379 7,015 3,029 2,410
Other income
Gain on sale of loans 54 66 18 13
Gain on sale of securities designated as available for sale 3 27 3 --
Service fees, charges and other operating 928 816 307 284
------- ------- ------ ------
Total other income 985 909 328 297
General, administrative and other expense
Employee compensation and benefits 2,733 2,481 959 864
Occupancy and equipment 771 640 261 231
Federal deposit insurance premiums 27 1 7 --
Franchise taxes 249 217 79 67
Other operating 1,493 1,054 677 324
------- ------- ------ ------
Total general, administrative
and other expense 5,273 4,393 1,983 1,486
------- ------- ------ ------
Earnings before income taxes 4,091 3,531 1,374 1,221
Federal income taxes
Current 1,378 1,173 449 451
Deferred (36) (20) -- (39)
------- ------- ------ ------
Total federal income taxes 1,342 1,153 449 412
------- ------- ------ ------
NET EARNINGS $ 2,749 $ 2,378 $ 925 $ 809
======= ======= ====== ======
EARNINGS PER SHARE $ .95 $ .83 $ .32 $ .28
======= ======= ====== ======
</TABLE>
5
<PAGE> 6
OAK HILL FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
(In thousands)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 2,749 $ 2,378
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization 369 290
Amortization of premiums on investment securities 10 (33)
Amortization of deferred loan origination costs 127 47
Federal Home Loan Bank stock dividends (185) (82)
Loans originated for sale in secondary market (5,403) (5,939)
Proceeds from sale of loans in the secondary market 5,597 6,043
Gain on sale of loans (54) (66)
Provision for losses on loans 393 535
Gain on sale of investment securities (3) (27)
Gain on sale of assets (15) (7)
Increase (decrease) in cash due to changes in:
Accrued interest receivable (284) (168)
Prepaid expenses and other assets (81) (3)
Accrued expenses and other liabilities 593 444
Federal income taxes
Current (60) 33
Deferred (36) (20)
--------- --------
Net cash provided by operating activities 3,717 3,425
Cash flows provided by (used in) investing activities:
Loan principal repayments 82,359 64,432
Loan disbursements (114,387) (85,641)
Principal repayments on mortgage-backed securities 1,003 1,042
Proceeds from maturity and redemption of investment securities 15,905 11,472
Proceeds from sale of investment
securities designated as available for sale -- 1,973
Purchase of office premises and equipment (382) (739)
Proceeds from sale of assets 25 32
Purchase of investment securities
designated as available for sale (24,306) (25,996)
Purchase of Federal Home Loan Bank stock -- (561)
(Increase) decrease in federal funds sold - net (1,272) 7,761
--------- --------
Net cash used in investing activities (41,055) (26,225)
--------- --------
Net cash used in operating and investing
activities (balance carried forward) (37,338) (22,800)
--------- --------
</TABLE>
6
<PAGE> 7
OAK HILL FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended September 30,
(In thousands)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net cash used in operating and investing
activities (balance brought forward) $(37,338) $(22,800)
Cash flows provided by (used in) financing activities:
Proceeds from securities sold under agreement to repurchase 1,434 --
Net increase in deposit accounts 32,036 20,132
Proceeds from Federal Home Loan Bank advances 12,020 14,043
Repayment of Federal Home Loan Bank advances (8,309) (9,701)
Proceeds from exercise of stock options -- 10
Dividends paid on common shares (517) (432)
-------- --------
Net cash provided by financing activities 36,664 24,052
-------- --------
Net increase (decrease) in cash and cash equivalents (674) 1,252
Cash and cash equivalents at beginning of period 7,378 6,250
-------- --------
Cash and cash equivalents at end of period $ 6,704 $ 7,502
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 1,309 $ 1,139
======== ========
Interest on deposits and borrowed money $ 7,768 $ 6,571
======== ========
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ 64 $ (268)
======== ========
</TABLE>
7
<PAGE> 8
OAK HILL FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and,
therefore, do not include information or footnotes necessary for a
complete presentation of financial position, results of operations and
cash flows in conformity with generally accepted accounting principles.
Accordingly, these financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of the
Company included in the Annual Report on Form 10-KSB for the year ended
December 31, 1996. However, all adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial statements have
been included. The results of operations for the three and nine month
periods ended September 30, 1997 and 1996, are not necessarily
indicative of the results which may be expected for the entire year.
2. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Oak Hill
Financial, Inc. (the "Company") and its wholly owned subsidiary Oak
Hill Banks (the "Bank"). All significant intercompany balances and
transactions have been eliminated.
3. Earnings Per Share
------------------
Earnings per share for the nine month periods ended September 30, 1997
and 1996 is based on 2,873,500 weighted average shares outstanding.
4. Effects of Recent Accounting Pronouncements
-------------------------------------------
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfers of Financial Assets, Servicing Rights, and
Extinguishment of Liabilities," that provides accounting guidance on
transfers of financial assets, servicing of financial assets, and
extinguishment of liabilities. SFAS No. 125 introduces an approach to
accounting for transfers of financial assets that provides a means of
dealing with more complex transactions in which the seller disposes of
only a partial interest in the assets, retains rights or obligations,
makes use of special purpose entities in the transaction or otherwise
has continuing involvement with the transferred assets. The new
accounting method referred to as the financial components approach,
provides that the carrying amount of the financial assets transferred
be allocated to components of the transaction based on their relative
fair values. SFAS No. 125 provides criteria for determining whether
control of assets has been relinquished and whether a sale has
occurred. If the transfer does not qualify as a sale, it is accounted
for as a secured borrowing. Transactions subject to the provisions of
SFAS No. 125 include among others, transfers involving repurchase
agreements, securitizations of financial assets, loan participations,
factoring arrangements and transfers of receivables with recourse.
An entity that undertakes an obligation to service financial assets
recognizes either a servicing asset or liability for the servicing
contract (unless related to a securitizations of assets, and all the
securitized assets are retained and classified as held to maturity). A
servicing asset or liability that is purchased or assumed is initially
recognized at its fair value. Servicing assets and liabilities are
amortized in proportion to and over the period of estimated net
servicing income or net servicing loss and are subject to subsequent
assessments for impairment based on fair value.
8
<PAGE> 9
OAK HILL FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS No. 125 provides that a liability is removed from the balance sheet
only if the debtor either pays the creditor and is relieved of its
obligation for the liability or is legally released from being the primary
obligor.
SFAS No. 125 is effective for transfers and servicing of financial assets
and extinguishment of liabilities occurring after December 31, 1997, and is
to be applied prospectively. Earlier or retroactive application is not
permitted. Management does not believe that adoption of SFAS No. 125 will
have a material adverse effect on the Company's consolidated financial
positions or results of operation.
In February 1997, the FASB issued SFAS No. 128 "Earnings Per Share",
which requires companies to present basic earnings per share and, if
applicable, diluted earnings per share, instead of primary and fully
diluted earnings per share, respectively. Basic earnings per share is
computed without including potential common shares, i.e. no dilutive
effect. Diluted earnings per share is computed taking into consideration
common shares outstanding and dilutive potential common shares, including
options, warrants, convertible securities and contingent stock agreements.
SFAS No. 128 is effective for periods ending after December 15, 1997. Early
application is not permitted. Based upon the provisions of SFAS No. 128,
the Corporation's basic and diluted earnings per share for the nine months
ended September 30, 1997, would have been $.32 and $.32, respectively.
In February 1997, the FASB issued SFAS No. 129 "Disclosures of
Information about Capital Structure." SFAS No. 129 consolidated existing
accounting guidance relating to disclosure about a company's capital
structure. SFAS No. 129 is effective for financial statements for periods
ending after December 15, 1997. SFAS No. 129 is not expected to have a
material impact on the Company's financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. SFAS No. 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. It does not require a specific format for the financial
statement but requires that an enterprise display an amount representing
total comprehensive income for the period in that financial statement.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in-capital in the equity section
of a statement of financial position. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is
required. SFAS No. 130 is not expected to have a material impact on the
Company's financial statements.
9
<PAGE> 10
OAK HILL FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 significantly changes
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about reportable segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. SFAS No. 131 uses a "management approach" to disclose financial
and descriptive information about the way that management organizes the
segments within the enterprise for making operating decisions and assessing
performance. For many enterprises, the management approach will likely
result in more segments being reported. In addition, SFAS No. 131 requires
significantly more information to be disclosed for each reportable segment
than is presently being reported in annual financial statements and also
requires that selected financial information be reported in interim
financial statements. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997. SFAS No. 131 is not expected to have a material
impact on the Company's financial statements.
10
<PAGE> 11
OAK HILL FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM DECEMBER 31, 1996 TO
SEPTEMBER 30, 1997
At September 30, 1997, the Company had total assets of $286.9 million,
an increase of approximately $40.0 million, or 16.2%, over December 31, 1996
levels. The increase in total assets was funded primarily by growth in the
deposit portfolio of $32.0 million, undistributed net earnings of $2.2 million,
and an increase in Federal Home Loan Bank advances of $3.7 million.
Cash, federal funds sold and investment securities totaled $57.1
million at September 30, 1997, an increase of $8.1 million, or 16.5%, over
December 31, 1996 levels. During the nine months ended September 30, 1997,
management purchased $24.3 million of investment securities, while $15.9 million
of securities matured. Securities purchased consisted primarily of U.S. treasury
notes and U.S. government agency securities. The increase reflects management's
efforts to maintain adequate levels of liquidity while maximizing yield on
short-term investments.
Loans receivable and loans held for sale totaled $221.9 million at
September 30, 1997, an increase of $31.4 million, or 16.5%, over the total at
December 31, 1996. Loan disbursements totaled approximately $119.8 million
during the 1997 nine month period, while principal repayments and sales amounted
to $82.4 million and $5.5 million respectively. Loan disbursements increased by
$28.2 million, or 30.8%, during the 1997 period, as compared to the comparable
period in 1996. Loans originated in 1997 were primarily comprised of commercial
loans, l-4 family loans and residential loans.
The Company's allowance for loan losses amounted to $2.9 million at
September 30, 1997, an increase of $290,000 or 11.0% over the total at December
31, 1996. The allowance for loan losses represented 1.30% and 1.37% of the total
loan portfolio at September 30, 1997 and December 31, 1996, respectively. The
Company's allowance represented 353.0% and 326.2% of non-performing loans, which
totaled $829,000 and $808,000 at September 30, 1997 and December 31, 1996,
respectively.
The deposit portfolio totaled $241.6 million at September 30, 1997, an
increase of $32.0 million, or 15.3%, over December 31, 1996 levels. The increase
resulted from management's marketing efforts and continued growth at newer
branch facilities.
Advances from the Federal Home Loan Bank totaled $17.3 million at
September 30, 1997, an increase of $3.7 million over the total at December 31,
1996. The increase in advances was used primarily to fund growth in the loan
portfolio.
The Company and the Bank are required to maintain minimum regulatory
capital pursuant to federal regulations. At September 30, 1997, the Company's
and the Bank's respective regulatory capital totals substantially exceeded all
regulatory capital requirements.
11
<PAGE> 12
OAK HILL FINANCIAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and nine month periods ended September 30, 1997 and 1996
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER
30, 1997 AND 1996.
General
- -------
Net earnings for the nine months ended September 30, 1997, totaled
$2.7 million, an increase of $371,000, or 15.6%, over the $2.4 million in net
earnings reported in the comparable 1996 period. The increase in earnings in the
1997 period is primarily attributable to a $1.4 million increase in net interest
income after provision for losses on loans, which was partially offset by an
$880,000 increase in general, administrative and other expense and an increase
in the federal income tax provision of $189,000.
Net Interest Income
- -------------------
Total interest income for the nine months ended September 30, 1997
increased by $2.5 million, or 17.6 %, generally reflecting the effects of growth
in average interest-earning assets from $215.6 million to $277.0 million for
the nine month periods ending September 30, 1996 and 1997, respectively,
coupled with an increase in the weighted-average yield year-to-year. Similarly,
total expense increased for the nine months ended September 30, 1997 by $1.3
million, or 19.2%, reflecting the growth in interest-bearing liabilities from
$181.9 million to $234.9 million, as well as an increase in the
weighted-average cost of funds, during the respective nine month periods.
Provision for Losses on Loans
- -----------------------------
The provision for losses totaled $393,000 for the nine months ended
September 30, 1997, a decrease of $142,000 from the comparable 1996 period. The
decrease is primarily attributable to the fact that loan losses for the nine
months ended September 30, 1997, were considerably less as compared to the 1996
period. Consequently, management reduced the loan loss provision from 1.35% to
1.30% of total loans outstanding.
Although management believes that it uses the best information
available in providing for possible loan losses and believes that the allowance
is adequate at September 30, 1997, future adjustments to the allowance could be
necessary and net earnings could be affected if circumstances and/or economic
conditions differ substantially from the assumptions used in making the initial
determinations.
Other Income
- ------------
Other income increased for the nine months ended September 30, 1997,
by $76,000 or 8.4% over the comparable 1996 period. The increase in other income
is primarily attributable to a $112,000 increase in service fees, charges and
other operating income, which was partially offset by a decrease in the gain on
sale of loans of $12,000, or 18.2%, and a decrease in gain on sale of securities
designated as available for sale of $24,000 or 88.9%.
General Administrative and Other Expense
- ----------------------------------------
General, administrative and other expense increased for the nine
months ended September 30, 1997, by $880,000 or 20.0%. The increase was due
primarily to a $252,000, or 10.2%, increase in employee compensation and
benefits, a $131,000, or 20.5%, increase in occupancy and equipment expense, and
an increase in federal deposit insurance premiums and franchise taxes of $26,000
and $32,000, respectively. Other operating expenses also increased year-to-year
by $439,000 or 41.7%
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and nine month periods ended September 30, 1997 and 1996
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 (CONTINUED)
The increase in employee compensation and benefits is due primarily to
additional personnel costs associated with two new branch openings, which were
partially offset by an increase in deferred costs related to greater lending
volume year-to-year. The increase in occupancy and equipment expense is also
attributable to the opening of the new branch facilities. The increase in
federal deposit insurance premiums resulted primarily from an increase in
premium rates assessed in 1997. The increase in franchise taxes resulted from an
increase in stockholders' equity. Other operating expenses increased due
primarily to increased branch operations and non-recurring expenses totaling
$276,000 directly related to the previously announced merger with Unity Savings
Bank, McArthur, Ohio.
Federal Income Taxes
- --------------------
The provision for federal income taxes increased by $189,000, or 16.4%,
during the nine months ended September 30, 1997, as compared to the same period
in 1996, due primarily to a $560,000, or 15.9%, increase in net earnings before
taxes year to year. The effective tax rates for the nine month periods ended
September 30, 1997 and 1996 were 32.8% and 32.7%, respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996
General
- -------
Net earnings for the three months ended September 30, 1997 totaled
$925,000, an increase of $116,000, or 14.3%, over the $809,000 in net earnings
reported in the comparable 1996 period. The increase in earnings in the 1997
period is primarily attributable to a $619,000 increase in net interest income
after provision for losses on loans, which was partially offset by a $497,000
increase in general, administrative and other expense and an increase in the
federal income tax provision of $37,000.
Net Interest Income
- -------------------
Total interest income for the three months ended September 30, 1997
increased by $1.0 million, or 21.0%, generally reflecting the effects of growth
in interest-earning assets for the three month periods ending September 30,
1996 and 1997, coupled with an increase in the weighted-average yield
year-to-year. Similarly, total interest expense increased for the three months
ended June 30, 1997 by $562,000 or 25.0%. The increase was primarily
attributable to the growth in interest-bearing liabilities as well as an
increase in the weighted-average cost of funds, during the respective three
month periods.
Provision for Losses on Loans
- -----------------------------
The provision for losses on loans totaled $90,000 for the three months
ended September 30, 1997, a decrease of $153,000 from the comparable 1996
period. The decrease is primarily attributable to the fact that loan losses for
the nine months ended September 30, 1997, were considerably less as compared to
the 1996 period. Consequently, management reduced the loan loss provision from
1.35% to 1.30% of total loans outstanding.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and nine month periods ended September 30, 1997 and 1996
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996 (CONTINUED)
Although management believes that it uses the best information
available in providing for possible loan losses and believes that the allowance
is adequate at September 30, 1997, future adjustments to the allowance could be
necessary and net earnings could be affected if circumstances and/or economic
conditions differ substantially from the assumptions used in making the initial
determinations.
Other Income
- ------------
Other income increased for the three months ended September 30, 1997
by $31,000, or 10.4%, over the comparable 1996 period. The increase is primarily
attributable to an increase of $23,000 in service fees, charges and other
operating income, an increase of $5,000 in gain on sale of loans, and an
increase of $3,000 in gain on sale of investments.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense increased for the three
months ended September 30, 1997, by $497,000, or 33.4%. The increase was due
primarily to a $95,000, or 11.0%, increase in employee compensation and
benefits, a $30,999, or 13.0%, increase in occupancy and equipment expense, and
an increase in federal deposit insurance premiums and franchise taxes of $7,000
and $12,000, respectively. Other operating expenses also increased year-to-year
by $353,000 or 109.0%.
The increase in employee compensation and benefits is due primarily to
the employment of additional staff the new banking offices, which was partially
offset by an increase in deferred costs related to greater lending volume
year-to-year. The increase in franchise taxes resulted from greater levels of
stockholders' equity in 1996. The increase in federal deposit insurance premiums
resulted primarily from an increase in premium rates assessed in 1997. Other
operating expenses increased due primarily to increased branch operations and
non-recurring expenses totaling $276,000, directly related to the previously
announced merger with Unity Savings Bank, McArthur, Ohio.
Federal Income Taxes
- --------------------
The provision for federal income taxes increased by $37,000, or 9.0%,
during the three months ended September 30, 1997, as compared to the same
period in 1996, due primarily to a $153,000, or 12.5%, increase in pretax
earnings year to year. The effective tax rates for the three month periods
ended September 30, 1997 and 1996 were 32.7% and 33.7%, respectively.
14
<PAGE> 15
OAK HILL FINANCIAL, INC.
PART II
ITEM 1. Legal Proceedings
-----------------
Not applicable
ITEM 2. Changes in Securities
---------------------
Not applicable
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Company held a special Shareholders' Meeting August 12, 1997.
Holders of 2,476,000 Common Shares of the Company were present
representing 86.2% of the Company's 2,873,500 Common Shares
outstanding.
(b) Not applicable
(c) The proposal for adoption of the Agreement and Plan of Merger and
Supplemental Agreement which would merge Unity Savings Bank into
Oak Hill Banks, a wholly owned subsidiary of the Company, was
approved with 2,468,500 votes FOR, 4,700 votes AGAINST, and 2,800
votes ABSTAIN.
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
The Company has filed the following current report on Form 8-K
with the Securities and Exchange Commission:
(a) A current report on Form 8-K, dated October 1, 1997, was
filed on October 14, 1997.
15
<PAGE> 16
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 12, 1997 By: /s/ John D. Kidd
----------------- ---------------------------
John D. Kidd
President
Date: November 12, 1997 By: /s/ H. Tim Bichsel
----------------- ---------------------------
H. Tim Bichsel
Chief Financial Officer
16
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