UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2000
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 executive office) (Zip Code)
Registrant's telephone number, including area code: (740) 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 July 28, 2000 the latest practicable date, 5,188,306 shares of
the registrant's common stock, $.50 stated value, were issued and outstanding.
<PAGE>
Oak Hill Financial, Inc.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3: Quantitative and Qualitative Disclosures About Market Risk 15
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 16
Item 2: Changes in Securities and Use of Proceeds 16
Item 3: Default Upon Senior Securities 16
Item 4: Submission of Matters to a Vote of Security Holders 16
Item 5: Other Information 16
Item 6: Exhibits and Reports on Form 8-K 16
Signatures
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Oak Hill Financial, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
June30, December 31,
ASSETS 2000 1999
<S> <C> <C>
Cash and due from banks $ 12,230 $ 14,675
Federal funds sold 191 3,854
Investment securities designated as held to maturity - at cost
(approximate market value of $4,796 at June 30, 2000) 4,947 -
Investment securities designated as available for sale - at market 54,054 53,338
Loans receivable - net 547,649 507,726
Loans held for sale - at lower of cost or market - 243
Office premises and equipment - net 9,350 9,256
Federal Home Loan Bank stock - at cost 4,574 4,079
Accrued interest receivable 3,924 3,593
Goodwill - net 266 283
Prepaid expenses and other assets 1,613 312
Prepaid federal income tax - 1,220
Deferred federal income tax asset 2,050 1,521
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Total assets $640,848 $600,100
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $501,113 $488,880
Securities sold under agreements to repurchase 377 1,172
Advances from the Federal Home Loan Bank 82,371 59,680
Guaranteed preferred beneficial interests in the Corporation's
junior subordinated debentures 5,000 -
Accrued interest payable and other liabilities 3,324 2,644
Federal income taxes payable 102 -
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Total liabilities 592,287 552,376
Stockholders' equity
Common stock - $.50 stated value; authorized 15,000,000 shares, 5,402,851 and
5,369,576 shares issued at June 30, 2000 and December 31, 1999, respectively 2,701 2,683
Additional paid-in capital 4,925 4,650
Retained earnings 45,243 42,724
Treasury stock (181,945 and 50,900 shares - at cost at
June 30, 2000 and December 31, 1999, respectively) (2,661) (755)
Accumulated comprehensive loss:
Unrealized losses on securities designated as available
for sale, net of related tax effects (1,647) (1,578)
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Total stockholders' equity 48,561 47,724
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Total liabilities and stockholders' equity $640,848 $600,100
======= =======
</TABLE>
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Oak Hill Financial, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Six Months Ended Three Months Ended
June 30 June 30
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Interest income
Loans $23,511 $18,512 $12,105 $ 9,328
Investment securities 1,816 2,767 948 1,346
Interest-bearing deposits and other 221 394 93 181
------ ------ ------ ------
Total interest income 25,548 21,673 13,146 10,855
Interest expense
Deposits 11,092 9,596 5,732 4,705
Borrowings 2,060 1,093 1,178 559
------ ------ ------ ------
Total interest expense 13,152 10,689 6,910 5,264
------ ------ ------ ------
Net interest income 12,396 10,984 6,236 5,591
Provision for losses on loans 858 719 498 409
------ ------ ------ ------
Net interest income after
provision for losses on loans 11,538 10,265 5,738 5,182
Other income
Gain on sale of loans 66 463 5 154
Gain on investment securities transactions - 18 - 3
Service fees, charges and other operating 1,202 973 642 529
------ ------ ------ ------
Total other income 1,268 1,454 647 686
General, administrative and other expense
Employee compensation and benefits 4,225 3,677 2,029 1,842
Occupancy and equipment 922 852 457 436
Federal deposit insurance premiums 49 58 25 25
Franchise taxes 266 267 123 122
Other operating 1,977 1,482 1,034 761
------ ------ ------ ------
Total general, administrative
and other expense 7,439 6,336 3,668 3,186
------ ------ ------ ------
Earnings before income taxes 5,367 5,383 2,717 2,682
Federal income taxes
Current 2,288 1,769 461 921
Deferred (492) (5) 450 (43)
------ ------ ------ ------
Total federal income taxes 1,796 1,764 911 878
------ ------ ------ ------
NET EARNINGS $ 3,571 $ 3,619 $ 1,806 $ 1,804
====== ====== ====== ======
EARNINGS PER SHARE
Basic $.67 $.68 $.34 $.34
=== === === ===
Diluted $.67 $.67 $.34 $.33
=== === === ===
</TABLE>
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Oak Hill Financial, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Six Months Three Months
Ended Ended
June 30, June 30,
2000 1999 2000 1999
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net earnings $ 3,571 $ 3,619 $ 1,806 $ 1,804
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities
designated as available for sale,
net of tax of $(37), $(659), $38, and $(509)
for the respective periods (69) (1,268) 74 (987)
Reclassification adjustment for gains included
in net earnings, net of tax of $(6) and $(1)
for the six and three months ended June 30, 1999 - (12) - (2)
------ ------- ------ ------
Comprehensive income $ 3,645 $ 2,339 $ 1,880 $ 815
====== ====== ====== ======
Accumulated other comprehensive loss $(1,647) $(1,136) $(1,647) $(1,136)
====== ====== ====== ======
</TABLE>
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Oak Hill Financial, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
(In thousands)
2000 1999
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 3,571 $ 3,619
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization 397 369
Amortization of premiums and discounts on investment securities - net 28 119
Amortization of deferred loan origination costs 75 187
Federal Home Loan Bank stock dividends (135) (129)
Loans originated for sale in secondary market (4,143) (24,428)
Proceeds from sale of loans in the secondary market 4,399 26,942
Gain on sale of loans (13) (221)
Provision for losses on loans 858 719
Gain on investment securities transactions - (18)
Loss on sale of assets 19 -
Increase (decrease) in cash due to changes in:
Accrued interest receivable (331) 106
Prepaid expenses and other assets (988) (652)
Accrued expenses and other liabilities 680 188
Federal income taxes
Current 1,322 235
Deferred (492) (5)
------- -------
Net cash provided by operating activities 5,247 7,031
Cash flows provided by (used in) investing activities:
Loan principal repayments 111,408 89,877
Loan disbursements (152,844) (118,063)
Purchase of loans - (432)
Principal repayments on mortgage-backed securities
designated as available-for-sale 766 2,403
Principal repayments on mortgage-backed securities
designated as held-to-maturity - 2,956
Proceeds from maturity and redemption of investment securities 330 13,745
Proceeds from investment securities transactions - 3,777
Purchase of office premises and equipment (516) (565)
Proceeds from sale of assets 290 18
Purchase of investment securities designated as available-for-sale (1,946) (16,088)
Purchase of investment securities designated as held-to-maturity (4,947) (543)
Decrease in federal funds sold - net 3,663 9,583
Purchase of Federal Home Loan Bank stock (360) -
------- -------
Net cash used in investing activities (44,156) (13,332)
------- -------
Net cash used in operating and investing
activities (balance carried forward) (38,909) (6,301)
------- -------
</TABLE>
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Oak Hill Financial, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended June 30,
(In thousands)
2000 1999
(Restated)
<S> <C> <C>
Net cash used in operating and investing
activities (balance brought forward) $ (38,909) $ (6,301)
Cash flows provided by (used in) financing activities:
Proceeds from (repayments of) securities sold under agreement to repurchase (795) 39
Net increase (decrease) in deposit accounts 12,233 (7,285)
Proceeds from Federal Home Loan Bank advances 556,405 21,890
Repayment of Federal Home Loan Bank advances (533,714) (11,450)
Increase in federal funds purchased - net - 700
Proceeds from issuance of shares under stock option plan 293 240
Proceeds from issuance of debt securities 5,000 -
Advances by borrowers for taxes and insurance - (442)
Accounts payable on mortgage loans serviced for others - (16)
Purchase of treasury stock (1,906) -
Dividends paid on common shares (1,052) (840)
------- -------
Net cash provided by financing activities 36,464 2,836
------- -------
Net decrease in cash and cash equivalents (2,445) (3,465)
Cash and cash equivalents at beginning of period 14,675 13,650
------- -------
Cash and cash equivalents at end of period $ 12,230 $ 10,185
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes $ 1,285 $ 1,535
======= =======
Interest on deposits and borrowed money $ 12,694 $ 10,897
======= =======
Supplemental disclosure of noncash investing activities:
Transfers of loans held for investment to held for sale $ - $ 456
======= =======
Transfers of loans held for sale to held for investment $ - $ 873
======= =======
Transfer of allowance for loan losses from a general to a specific allocation $ - $ 22
======= =======
Transfer from loans to real estate acquired through foreclosure $ 873 $ 136
======= =======
Unrealized losses on securities designated as available
for sale, net of related tax effects $ (69) $ (1,280)
======= =======
Recognition of mortgage servicing rights in
accordance with SFAS No. 125 $ 53 $ 242
======= =======
</TABLE>
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Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
On October 1, 1999, Oak Hill Financial, Inc. (the "Company")
combined with Towne Financial Corporation ("Towne Financial") and its
wholly-owned subsidiary Blue Ash Building and Loan Company ("Blue Ash")
in a transaction whereby Towne Financial was merged with and into the
Company and Blue Ash, renamed Towne Bank ("Towne"), became a
wholly-owned subsidiary of the Company. The transaction was accounted
for as a pooling-of-interests. Accordingly, the consolidated financial
statements have been restated to reflect the effects of the business
combination as of January 1, 1999. Pursuant to the merger agreement,
the Company issued 917,361 shares of common stock in exchange for the
shares of Towne.
The accompanying unaudited consolidated financial statements
were prepared in accordance with instructions for Form 10-Q 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 Oak
Hill Financial, Inc. (the "Company") included in the Annual Report on
Form 10-K for the year ended December 31, 1999. 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 six month periods ended June 30, 2000 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
the Company and its wholly owned subsidiaries Oak Hill Banks (the
"Bank"), Towne, (collectively hereinafter the "Banks"), and Action
Finance Company ("Action"). All significant intercompany balances and
transactions have been eliminated.
3. Earnings Per Share
Basic earnings per share is computed based upon the
weighted-average shares outstanding during the period. Weighted-average
common shares outstanding totaled 5,308,940, 5,285,922, 5,224,241, and
5,285,799 for the three and six-month periods ended June 30, 2000 and
1999, respectively. Diluted earnings per share are computed taking into
consideration common shares outstanding and dilutive potential common
shares to be issued under the Company's stock option plan.
Weighted-average common shares deemed outstanding for purposes of
computing diluted earnings per share totaled 5,308,940, 5,285,922,
5,395,933, and 5,396,334 for the three and six-month periods ended June
30, 2000 and 1999, respectively. There were 171,692, and 110,535
incremental shares related to the assumed exercise of stock options
included in the computation of diluted earnings per share for the three
and six-month periods ended June 30, 1999. Options to purchase 592,026
shares of common stock with a weighted-average exercise price of $14.64
were outstanding at June 30, 2000, but were excluded from the
computation of common shares equivalent because their exercise prices
were greater than the average market price of the common shares.
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Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Effects of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities,"
which requires entities to recognize all derivatives in their financial
statements as either assets or liabilities measured at fair value. SFAS
No. 133 also specifies new methods of accounting for hedging
activities, prescribes the items and transactions that may be hedged,
and specifies detailed criteria to be met to qualify for hedging
accounting.
The definition of derivative financial instruments is complex,
but in general, it is an instrument with one or more underlyings, such
as interest rate or foreign exchange rate that is applied to a notional
amount, such as an amount of currency, to determine the settlement
amount(s). It generally requires no initial investment and can be
settled net or by delivery of an asset that is readily convertible to
cash. SFAS No. 133 applies to derivatives embedded in other contracts,
unless the underling of the embedded derivative is clearly and closely
related to the host contract. SFAS No. 133, as amended by SFAS No. 137,
is effective for fiscal years beginning after June 15, 2000. On
adoption, entities are permitted to transfer held-to-maturity debt
securities to an available-for-sale or trading category without calling
into question their intent to hold other debt securities to maturity in
the future. SFAS No. 133 is not expected to have a material effect on
the Company's financial position or results of operations.
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Oak Hill Financial, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from December 31, 1999 to June 30,
2000
At June 30, 2000, the Company had total assets of $640.8 million, an
increase of approximately $40.7 million, or 6.8%, over December 31, 1999 levels.
The increase in total assets was funded primarily by growth in the deposit
portfolio of $12.2 million, undistributed net earnings of $2.5 million and
increases of $22.7 million and $5.0 million in Federal Home Loan Bank advances
and capital securities, respectively.
Cash, federal funds sold and investment securities totaled $71.4 million at
June 30, 2000, a decrease of $445,000, or 0.6%, from December 31, 1999 levels.
During the six months ended June 30, 2000, management purchased $6.9 million of
investment securities, while $1.1 million of securities matured or were called.
Securities purchased consisted primarily of U.S. government agency securities
and trust preferred securities, the latter of which were classified as
held-to-maturity.
Loans receivable and loans held for sale totaled $547.6 million at June 30,
2000, an increase of $39.7 million, or 7.8%, over the total at December 31,
1999. Loan disbursements totaled approximately $157.0 million during the 2000
six-month period, while principal repayments and sales amounted to $112.0
million and $4.4 million, respectively. Loan disbursements increased by $14.5
million, or 10.2%, during the 2000 period, as compared to the comparable period
in 1999. Loans originated in 2000 were primarily comprised of commercial and 1-4
family residential loans.
The Company's allowance for loan losses amounted to $6.5 million at June
30, 2000, an increase of $337,000, or 5.5%, over the total at December 31, 1999.
The allowance for loan losses represented 1.17% of the total loan portfolio at
June 30, 2000, as compared to 1.19% at December 31, 1999. Net charge-offs
totaled approximately $521,000 and $352,000 for the six months ended June 30,
2000 and 1999, respectively. The Company's allowance represented 405.8% and
192.4% of non-performing loans, which totaled $1.6 million and $3.2 million at
June 30, 2000 and December 31, 1999, respectively. Nonperforming loans at June
30, 2000 consisted of $587,000 in installment loans and $1.0 million of loans
secured primarily by commercial real estate and 1 - 4 family residential real
estate. In management's opinion, all nonperforming loans at June 30, 2000 were
adequately collateralized.
The deposit portfolio totaled $501.1 million at June 30, 2000, an increase
of $12.2 million, or 2.5%, over December 31, 1999 levels. The increase resulted
primarily from management's marketing efforts and competitive pricing with
respect to midterm certificates of deposit products throughout the Banks' branch
network. Proceeds from deposit growth were utilized primarily to fund loan
originations.
Advances from the Federal Home Loan Bank totaled $82.4 million at June 30,
2000, an increase of $22.7 million, or 38.0%, over December 31, 1999. Proceeds
from advances were used to fund loan originations during the period.
In March 2000, a Delaware statutory business trust owned by the Company
(the "Trust"), issued $5.0 million of mandatorily redeemable debt securities.
The debt securities issued by the Trust are included in the Company's regulatory
capital, specifically as a component of Tier I capital. The proceeds from the
issuance of the debt securities and common securities were used by the Trust to
purchase from the Company $5.0 million of junior subordinated debentures
maturing on March 8, 2030. The subordinated debentures
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<PAGE>
Oak Hill Financial, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Discussion of Financial Condition Changes from December 31, 1999 to June 30,
2000 (continued)
are the sole assets of the Trust, and the Company owns all of the common
securities of the Trust. Interest payments on the debt securities are to be made
semi-annually at an annual interest rate of 10 7/8% and are reported as a
component of interest expense on borrowings. The net proceeds received by the
Company from the sale of the debt securities were used for general corporate
purposes, including repaying existing indebtedness, repurchasing the Company's
stock, extending credit to the Company's subsidiaries, and providing general
working capital.
The Bank is required to maintain minimum regulatory capital pursuant to
federal regulations. At June 30, 2000, the Bank's regulatory capital
substantially exceeded all regulatory capital requirements.
Comparison of Results of Operations for the Six-Month Periods Ended June 30,
2000 and 1999
General
Net earnings for the six months ended June 30, 2000 totaled $3.6 million, a
decrease of $48,000, or 1.3%, from the net earnings reported in the comparable
1999 period. The decrease in earnings in the 2000 period is primarily
attributable to a $186,000 decrease in other income, a $1.1 million increase in
general, administrative and other expenses, and an increase in the federal
income tax provision of $32,000, which were partially offset by a $1.3 million
increase in net interest income after provision for losses on loans.
Net Interest Income
Total interest income for the six months ended June 30, 2000 increased by
$3.9 million, or 17.9%, reflecting the effects of growth in average
interest-earning assets from $532.4 million to $591.8 million for the six-month
periods ending June 30, 1999 and 2000, respectively, and an increase in the
weighted-average yield from 8.21% in 1999 to 8.68% in 2000. Similarly, total
interest expense increased for the six months ended June 30, 2000 by $2.5
million, or 23.0%, also reflecting the growth in average interest-bearing
liabilities from $463.2 million to $517.2 million for the six-month periods
ending June 30, 1999 and 2000, respectively, and an increase in the
weighted-average cost of funds from 4.65% in 1999 to 5.11% in 2000.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $1.4 million, or 12.9%, for the six
months ended June 30, 2000, as compared to the comparable period in 1999. The
interest rate spread amounted to 3.57% and 3.56% for the six months ended June
30, 2000 and 1999, while the net interest margin totaled 4.21% and 4.16% for the
six months ended June 30, 2000 and 1999, respectively.
Provision for Losses on Loans
The provision for losses on loans totaled $858,000 for the six months ended
June 30, 2000, a $139,000 increase over the comparable 1999 period. The increase
in the provision was primarily attributable to the growth in the loan portfolio
year-to-year.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 2000 and 1999
Comparison of Results of Operations for the Six-Month Periods Ended June 30,
2000 and 1999 (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 June 30, 2000, 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 decreased for the six months ended June 30, 2000 by $186,000,
or 12.8%, from the comparable 1999 period. The decrease resulted from a $397,000
decrease in gain on sale of loans and an $18,000 decrease in gain on investment
securities transactions, which were partially offset by a $229,000, or 23.5%,
increase in service fees, charges and other operating income. The decrease in
gain on sale of loans was due primarily to a $22.3 million, or 83.6%, reduction
in sales volume year-to-year. The decline in sales volume reflects the less
favorable market conditions resulting from the increase in interest rates over
the period. Management expects such a decline in sales volume to continue in the
current interest rate environment. The increase in service fees, charges and
other operating income was due primarily to increased product and service fees,
coupled with the Company's overall growth year-to-year.
General, Administrative and Other Expense
General, administrative and other expense increased for the six months
ended June 30, 2000 by $1.1 million, or 17.4%, over the comparable six-month
period in 1999. The increase was due primarily to a $548,000, or 14.9%, increase
in employee compensation and benefits, a $70,000, or 8.2%, increase in occupancy
and equipment expense, and a $495,000, or 33.4%, increase in other operating
expenses.
The increase in employee compensation and benefits was due primarily to
increased staffing levels required in connection with the establishment of five
new branch locations and additional management staffing, combined with normal
merit increases. The increase in occupancy and equipment expense, as well as
other operating expenses, resulted primarily from expenses related to the
addition of new branch facilities, combined with the Company's overall growth
year-to-year.
Federal Income Taxes
The provision for federal income taxes increased by $32,000, or 1.8%,
during the six months ended June 30, 2000, as compared to the same period in
1999. The effective tax rates for the six-month periods ended June 30, 2000 and
1999 were 33.5% and 32.8%, respectively.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 2000 and 1999
Comparison of Results of Operations for the Three-Month Periods Ended June 30,
2000 and 1999
General
Net earnings for the three months ended June 30, 2000 totaled $1.8 million,
an increase of $2,000, or 0.1%, over the amount reported in the comparable 1999
period. The increase in earnings in the 2000 period is primarily attributable to
a $556,000 increase in net interest income after provision for losses on loans,
which was partially offset by a $39,000 decrease in other income, a $482,000
increase in general, administrative and other expense and an increase in the
federal income tax provision of $33,000. .
Net Interest Income
Total interest income for the three months ended June 30, 2000 increased by
$2.3 million, or 21.1%, generally reflecting the effects of growth in average
interest-earning assets from $531.8 million to $603.2 million for the
three-month periods ending June 30, 1999 and 2000, respectively, and an increase
in the weighted-average yield from 8.19% in 1999 to 8.76% in 2000. Similarly,
total interest expense increased for the three months ended June 30, 2000 by
$1.6 million, or 31.3%, reflecting the growth in average interest-bearing
liabilities from $460.9 million to $527.9 million for the three-month periods
ended June 30, 1999 and 2000, respectively, and an increase in weighted-average
cost of funds from 4.58% in 1999 to 5.26% in 2000.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $645,000, or 11.5%, for the three
months ended June 30, 2000, as compared to the comparable quarter in 1999. The
interest rate spread amounted to 3.50% and 3.61% for the three months ended June
30, 2000 and 1999, while the net interest margin totaled 4.16% and 4.22% for the
three months ended June 30, 2000 and 1999, respectively.
Provision for Losses on Loans
The provision for losses on loans totaled $498,000 for the three months
ended June 30, 2000, an increase of $89,000, or 21.8%, over the comparable 1999
period. The increase in the provision was primarily attributable to growth in
the loan portfolio year-to-year.
Although management believes that it uses the best information available in
providing for possible loan losses and believes that the allowance is adequate
at June 30, 2000, 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 decreased for the three months ended June 30, 2000 by $39,000,
or 5.7%, from the comparable 1999 period. The decrease resulted from a $149,000
decrease in gain on sale of loans and a $3,000 decrease in gain on investment
securities transactions, which were partially offset by a $113,000, or 21.4%,
increase in service fees, charges and other operating income, due primarily to
increased product and service fees, coupled with the Company's overall growth
year-to-year.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 2000 and 1999
Comparison of Results of Operations for the Three-Month Periods Ended June 30,
2000 and 1999 (continued)
General, Administrative and Other Expense
General, administrative and other expense increased for the three months
ended June 30, 2000 by $482,000, or 15.1%. The increase was due primarily to a
$187,000, or 10.2%, increase in employee compensation and benefits, a $21,000,
or 4.8%, increase in occupancy and equipment expense, and a $273,000, or 35.9%,
increase in other operating expenses.
The increase in employee compensation and benefits was due primarily to
increased staffing levels required in connection with the establishment of five
new branch locations and additional management staffing, combined with normal
merit increases. The increase in occupancy and equipment expense, as well as
other operating expenses, resulted primarily from expenses related to the
addition of new branch facilities, combined with the Company's overall growth
year-to-year.
Federal Income Taxes
The provision for federal income taxes increased by $33,000, or 3.8%,
during the three months ended June 30, 2000, as compared to the same period in
1999. The effective tax rates for the three-month periods ended June 30, 2000
and 1999 were 33.5% and 32.7%, respectively.
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
Not applicable
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<PAGE>
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
None
ITEM 5. Other Information
On April 11, 2000, the Company announced its intention to
repurchase up to 320,000 shares, or approximately 6%, of its
outstanding common stock. The repurchase program will run
through December 31, 2000. The Company's Board of Directors
approved the buyback program in light of the existing market
conditions and the capital position of the Company. As of July
28, 2000, the Company had repurchased 163,645 shares at a
weighted-average price of $15.19 per share.
ITEM 6. Exhibits and Reports on Form 8-K
The Company has filed the following current reports on Form
8-K with the Securities and Exchange Commission:
(a) Form 8-K, dated July 10, 2000, filed with the Securities
and Exchange Commission on July 17, 2000.
Exhibits:
27.1 Financial Data Schedule for the six-month period ended
June 30, 2000.
27.2 Restated Financial Data Schedule for the
six-month period ended June 30, 1999.
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<PAGE>
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: July 31, 2000 By: /s/John D. Kidd
------------- ----------------------------
John D. Kidd
President
Date: July 31, 2000 By: /s/Ronald J. Copher
------------- ----------------------------
Ronald J. Copher
Chief Financial Officer
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