WOOSTER, Ohio, Nov. 3, 2003 (PRIMEZONE) -- Ohio Legacy Corp (Nasdaq:OLCB), the parent of Ohio Legacy Bank, N.A. ("Bank"), today reported net income for the three months ending September 30, 2003, of $125,000 or $0.06 per share. The Company earned $44,349, or $0.05 per share, during the third quarter of 2002. During the third quarter of 2003, net loans increased $12.1 million, or 13.8%, to $99.4 million and deposits increased $2.6 million to $121.2 million.
Net income decreased during the third quarter of 2003 compared to the second quarter of 2003 primarily as a result of lower yields on the security portfolio, an increase in the provision for loan losses due to strong loan growth and lagging reductions in core deposit rates. While net income fell, a number of positive items occurred during the third quarter that should provide a solid foundation for future growth in earnings and assets:
- Gross loans exceeded $100 million at the end of the quarter;
- Our cost of funds continues to decrease and the opportunity exists for improvement in the fourth quarter of 2003 and early 2004;
- Our recent membership to the Federal Home Loan Bank of Cincinnati provides a facility for leveraging the balance sheet to accelerate return on equity and
- The hiring of a Chief Operations Officer and a seasoned commercial lender in our Wayne County Region will help to improve efficiency in operations and generate commercial credit in an attractive, growing market area.
Loans and Asset Quality - An increase in construction activity as weather improved and the economic outlook stabilized helped to drive growth in the loan portfolio during the third quarter, especially in late September. At September 30, 2003, the loan portfolio (before the allowance for loan losses) was $100.5 million, an increase of $21.4 million from December 31, 2002. The Company's provision for loan losses was $146,000 during the three months ended September 30, 2003, compared to $104,000 during the quarter ended September 30, 2002, and $78,000 during the quarter ended June 30, 2003. The increase in the provision was a result of the growth in loan balances as asset quality remained high and the allowance for loan losses decreased slightly as a percent of loans to 1.06% at the end of the quarter.
Net charge-offs during the three months ended September 30, 2003, totaled $49,000. At September 30, 2003, the Company had one impaired loan with a balance of $124,000. All other delinquency metrics improved from the second quarter as no loans were on nonaccrual status and no loans were past due more than 90 days at the end of the quarter. "Asset quality remains exceptional," commented Dwight Douce, President and Chief Executive Officer of the Company. He continued, "Our ability to generate over $21 million of loans during the year and incur losses of only $78,000 on a portfolio that now exceeds $100 million is a testament to our strict underwriting standards. Recent improvement in national economic indicators and employment performance should continue to provide opportunities for Ohio Legacy Bank to meet the financing needs of the growing small businesses in northeast Ohio."
Net Interest Income - During the three months ended September 30, 2003, net interest income was $1.0 million compared to $759,000 during the third quarter of 2002, primarily as a result of a higher balance of interest-earning assets. Net interest margin improved to 3.06% in 2003 from 2.73% in the third quarter of 2002 and interest rate spread improved to 2.72% during the third quarter of 2003 compared to 2.60% during the third quarter of 2002.
The yield on interest-earning assets fell to 5.67% during the third quarter of 2003 compared to 6.30% in the third quarter of 2002 and 5.85% in the second quarter of 2003. During the third quarter of 2003, the yield on securities fell 72 basis points (bp) to 3.15% and the yield on loans decreased 27 bp to a still strong 6.90%. We have structured our security portfolio to provide liquidity to fund loans by investing primarily in mortgage-backed securities. Higher principal prepayments as interest rates fell during the first half of 2003 resulted in excess funds being reinvested in lower-yielding securities. The Company's cost of funds declined to 2.95% in the third quarter of 2003, compared to 3.70% in the third quarter of 2002 and 3.10% during the second quarter of 2003. The average cost of funds of core deposits fell 108 basis points, or 46%, for the third quarter of 2003 compared to the third quarter of 2002. At the same time, the cost of certificates of deposit fell only 46 basis points, or 11%. We have a pool of certificates of deposit offered in early-2001 that comprises 41% of the certificate of deposit portfolio at September 30, 2003, and carries an average rate of 5.06%. This product will begin to mature in early 2004.
Noninterest Income - Total noninterest income was $134,000 for the three months ended September 30, 2003, compared to $67,000 for the same period in 2002. The 2003 amount includes $42,000 of net gains from the sales of securities. Annualized noninterest income, excluding gains on securities sales, improved as a percent of average assets to 0.26% during the third quarter of 2003 compared to 0.23% during the third quarter of 2002. The increase in overdraft fees and other service charges on deposit accounts was due to higher volume of deposit customers and the related fees associated with those accounts.
Noninterest Expense - Total noninterest expense increased to $903,000 for the three months ended September 30, 2003, compared to $678,000 during the same period in 2002. The efficiency ratio improved to 79.7% during the third quarter of 2003 compared to 82.0% during the third quarter of 2002 while annualized noninterest expense as a percent of average assets was 2.54% in the third quarter of 2003 compared to 2.28% in 2002. This dichotomy is caused by the significant improvement in the Company's net interest margin as a result of falling deposit rates outweighing the increase in overhead expenses and slower asset growth.
Salaries and benefits are higher in 2003 reflecting a higher level of employment at the Bank, including the hiring of new members of management, lenders and staff hired during the second half of 2002 to support the lending function. Professional fees have remained flat, comparing the third quarters of 2003 and 2002, as the Bank began utilizing outside consultants to assist management with the OCC Agreement in the third quarter of 2002.
Ohio franchise tax is assessed on the Bank based on its capital balance. The trust preferred securities and common stock offerings in 2002 resulted in capital contributions to the Bank; therefore, franchise taxes are higher in 2003.
Data processing expense has increased as a result of higher transaction volumes and additional services offered to our customers, including check imaging, which will be launched during the fourth quarter of 2003. Other expenses increased primarily as a result of increased Bank Insurance Fund premiums and higher transaction fees with the Federal Reserve Bank as a result of our deposit growth during 2002 and 2003 and higher loan expenses from loan growth during 2003.
Regulatory Matters - On June 18, 2002, Ohio Legacy Bank and the Office of the Comptroller of the Currency ("OCC") entered into an agreement ("OCC Agreement") to address certain issues identified during the OCC's examination of the Bank in January 2002. The Bank has implemented comprehensive strategic, capital and staffing plans and is working to comply with other requirements under the agreement. During the third quarter of 2003, in response to progress made by management under the terms of the OCC Agreement, the OCC modified the agreement, effective October 1, 2003. Previously, the Bank's average asset growth was restricted to no greater than 5% each calendar quarter. The modification relieves the Bank of the quarterly compliance requirement and implements an annual growth restriction of no greater than 22% over the Bank's average assets during the third quarter of 2003.
About Ohio Legacy Corp
Ohio Legacy Corp is a bank holding company headquartered in Wooster, Ohio. Its operating subsidiary, Ohio Legacy Bank, N.A., provides financial services to small businesses and consumers though three full-service banking locations in Canton, Millersburg and Wooster, Ohio.
Forward-Looking Statements Disclosure
This release contains certain forward-looking statements related to the future performance and financial condition of Ohio Legacy Corp. These statements, which are subject to numerous risks and uncertainties, are presented in good faith based on the Company's current condition and management's understanding, expectations, and assumptions regarding its future prospects as of the date of this release. Actual results could differ materially from those projected or implied by the statements contained herein. The factors that could affect the Company's future results are set forth in the periodic reports and registration statements filed by the Company with the Securities and Exchange Commission.
OHIO LEGACY CORP
CONSOLIDATED BALANCE SHEETS
As of September 30, 2003, and December 31, 2002
-----------------------------------------------------------------
September 30, December 31,
2003 2002
------------- -------------
(unaudited)
ASSETS
Cash and due from banks $ 5,471,492 $ 5,301,451
Federal funds sold and
interest-bearing deposits
in other institutions 8,062,000 10,418,000
------------- -------------
Cash and cash equivalents 13,533,492 15,719,451
Securities available for sale 29,972,045 38,722,169
Loans, net 99,473,461 78,291,832
Federal agency stock 846,700 318,900
Premises and equipment, net 2,065,806 2,185,108
Accrued interest receivable
and other assets 1,072,275 810,017
------------- -------------
Total assets $ 146,963,779 $ 136,047,477
============= =============
LIABILITIES
Deposits:
Noninterest-bearing demand $ 6,028,511 $ 4,992,413
Interest-bearing demand 8,622,324 7,206,953
Savings 42,360,565 39,886,817
Certificates of deposit 64,226,879 62,805,167
------------- -------------
Total deposits 121,238,279 114,891,350
Federal Home Loan Bank advances 5,000,000 --
Other borrowed funds -- 105,000
Trust preferred securities 3,325,000 3,325,000
Capital lease obligations 978,446 983,439
Accrued interest payable and
other liabilities 673,061 1,739,633
------------- -------------
Total liabilities 131,214,786 121,044,422
SHAREHOLDERS' EQUITY
Preferred stock, no par value,
500,000 shares authorized,
none outstanding -- --
Common stock, no par value,
5,000,000 shares authorized,
2,115,700 and 1,965,700 shares
issued and outstanding at
September 30, 2003, and
December 31, 2002, respectively 17,678,955 16,546,465
Accumulated deficit (1,743,585) (2,164,585)
Accumulated other comprehensive
income (loss) (186,377) 621,175
------------- -------------
Total shareholders' equity 15,748,993 15,003,055
------------- -------------
Total liabilities and
shareholders' equity $ 146,963,779 $ 136,047,477
============= =============
OHIO LEGACY CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2003 and 2002
--------------------------------------------------------------------
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Interest
income:
Loans $1,621,437 $1,316,349 $4,566,173 $3,628,798
Securities 278,570 402,154 1,072,785 1,048,610
Federal funds
sold and
other 23,664 21,854 87,180 95,012
---------- ---------- ---------- ----------
Total interest
income 1,923,671 1,740,357 5,726,138 4,772,420
Interest
expense:
Deposits 770,067 869,325 2,397,339 2,615,748
Other
borrowings 113,365 112,242 337,119 243,497
---------- ---------- ---------- ----------
Total interest
expense 883,432 981,567 2,734,458 2,859,245
---------- ---------- ---------- ----------
Net interest
income 1,040,239 758,790 2,991,680 1,913,175
Provision for
loan losses 146,000 104,000 303,500 354,956
---------- ---------- ---------- ----------
Net interest
income after
provision for
loan losses 894,239 654,790 2,688,180 1,558,219
Noninterest
income:
Service charges
and other fees 89,093 64,862 241,350 181,073
Gain on sales
of securities
available for
sale 41,754 -- 116,242 --
Other income 3,146 2,410 8,121 6,233
---------- ---------- ---------- ----------
Total other
income 133,993 67,272 365,713 187,306
Noninterest
expense:
Salaries and
benefits 423,010 306,395 1,159,050 820,562
Occupancy and
equipment 143,459 126,905 420,430 346,625
Professional
fees 80,707 81,971 290,512 179,389
Franchise
tax 44,921 20,027 139,918 68,396
Data processing 84,616 57,867 237,192 168,555
Marketing and
advertising 22,859 15,307 76,757 53,155
Stationery and
supplies 21,299 17,706 61,394 66,784
Other expenses 82,361 51,535 247,640 163,370
---------- ---------- ---------- ----------
Total
noninterest
expense 903,232 677,713 2,632,893 1,866,836
---------- ---------- ---------- ----------
Income before
income taxes 125,000 44,349 421,000 (121,311)
Income tax
benefit
(expense) -- -- -- --
---------- ---------- ---------- ----------
Net income
(loss) $ 125,000 $ 44,349 $ 421,000 $ (121,311)
========== ========== ========== ==========
Basic earnings
(loss) per
share $ 0.06 $ 0.05 $ 0.20 $ (0.13)
Diluted earnings
(loss) per
share $ 0.06 0.05 0.20 (0.13)
Basic weighted
average shares
outstanding 2,115,700 965,500 2,106,359 965,500
Diluted weighted
average shares
outstanding 2,119,583 965,500 2,108,455 965,500
OHIO LEGACY CORP
QUARTERLY BALANCE SHEETS
(Dollars in thousands)
--------------------------------------------------------------------
2003 2002
---------------------------- ------------------
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
-------- -------- -------- -------- --------
Cash and cash
equivalents $ 13,533 $ 15,865 $ 8,349 $ 15,719 $ 9,816
Securities 29,972 35,543 40,562 38,722 30,750
Loans 100,536 88,372 82,636 79,129 75,509
Allowance for
loan losses (1,063) (966) (891) (837) (739)
Premises and
equipment, net 2,066 2,117 2,146 2,185 2,231
Other assets 1,920 1,550 5,174 1,129 1,183
-------- -------- -------- -------- --------
Total assets 146,964 $142,481 $137,976 $136,047 $118,750
======== ======== ======== ======== ========
Noninterest-bearing
demand $ 6,028 $ 6,078 $ 5,264 $ 4,992 $ 3,882
Interest-bearing
demand 8,622 7,862 6,537 7,207 5,823
Savings 42,361 42,142 40,559 39,886 38,208
Certificates of
deposit 64,227 62,527 63,751 62,806 58,188
-------- -------- -------- -------- --------
Total deposits 121,238 118,609 116,111 114,891 106,101
Other borrowings 9,304 4,305 4,307 4,413 4,415
Other liabilities 673 3,236 1,448 1,740 847
-------- -------- -------- -------- --------
Total liabilities 131,215 126,150 121,866 121,044 111,363
Shareholders' equity 15,749 16,331 16,110 15,003 7,387
-------- -------- -------- -------- --------
Total liabilities
and shareholders'
equity $146,964 $142,481 $137,976 $136,047 $118,750
======== ======== ======== ======== ========
LOAN PORTFOLIO:
---------------
Commercial $ 12,600 $ 12,924 $ 12,196 $ 10,206 $ 10,323
1-4 family
residential 38,564 32,483 31,455 31,346 29,965
Multifamily
residential 6,255 6,464 6,383 6,732 5,702
Commercial real
estate 23,342 21,006 20,051 18,385 18,262
Construction 8,990 5,949 4,675 4,636 3,985
Consumer and home
equity 10,952 9,677 8,022 7,926 7,371
Net deferred
loan fees (167) (131) (146) (102) (99)
-------- -------- -------- -------- --------
Loans $100,536 $ 88,372 $ 82,636 $ 79,129 $ 75,509
======== ======== ======== ======== ========
QUARTERLY AVERAGES:
-------------------
Fed funds and
securities (a) $ 41,890 $ 46,243 $ 50,804 $ 40,816 $ 38,039
Loans 93,287 84,898 79,346 75,692 73,068
Total interest-
earning assets 135,177 131,141 130,150 116,508 111,107
Total assets 142,019 139,038 137,793 124,255 118,736
Total assets,
year to date 139,617 138,109 -- 112,138 --
Interest-bearing
deposits 113,942 111,936 111,305 107,062 101,680
Other borrowings
and leases 4,694 4,306 4,405 4,414 4,416
Total interest-
bearing liabilities 118,636 116,242 115,710 111,476 106,096
Shareholders' equity 16,394 16,220 15,557 7,325 7,164
Shareholders' equity,
year to date 16,057 15,667 -- 6,998 --
--------
(a) Includes Federal Reserve Bank stock not classified in securities
on the consolidated balance sheets and interest-earning deposits
in financial institutions
OHIO LEGACY CORP
QUARTERLY STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
-------------------------------------------------------------------
2003 2002
---------------------------- ------------------
For the three
months ending Sept. 30 June 30 March 31 Dec. 31 Sept. 30
-------- ------- -------- ------- --------
Interest
income $1,923 $1,905 $1,898 $1,800 1,740
Interest
expense (883) (899) (953) (973) (981)
------ ------ ------ ------ -----
Net interest
income 1,040 1,006 945 827 759
Provision for
loan losses (146) (78) (80) (98) (104)
Noninterest
income 134 105 127 73 67
Noninterest
expense (903) (873) (856) (731) (678)
------ ------ ------ ------ -----
Net income $ 125 $ 160 $ 136 $ 71 44
====== ====== ====== ====== =====
Income per
share, diluted $ 0.06 $ 0.08 $ 0.07 $ 0.07 0.05
Common and
dilutive shares 2,120 2,119 2,088 1,042 966
SELECTED RATIOS:
Net interest
margin (a) 3.06% 3.09% 2.90% 2.84% 2.73%
Yield on interest-
earning assets 5.67% 5.85% 5.82% 6.18% 6.30%
Cost of funds 2.95% 3.10% 3.29% 3.49% 3.70%
Interest rate
spread (b) 2.72% 2.75% 2.53% 2.69% 2.60%
Efficiency
ratio (c) 79.7% 79.8% 84.4% 81.2% 82.0%
Allowance as a
percent of loans 1.06% 1.09% 1.07% 1.06% 0.98%
Net loans as a
percent of deposits 82.0% 73.7% 70.4% 68.1% 70.5%
Annualized net
charge-offs to
loans 0.20% 0.01% 0.13% 0.00% 0.00%
Annualized
noninterest income
to average
assets (d) 0.26% 0.25% 0.20% 0.24% 0.23%
Annualized non-
interest expense
to average
assets 2.54% 2.51% 2.49% 2.35% 2.28%
Annualized return
on average
assets 0.35% 0.46% 0.39% 0.23% 0.15%
Annualized return
on average
equity 3.05% 3.95% 3.50% 3.86% 2.46%
-------------------
(a) Net interest income, annualized, divided by average
interest-earning assets for the period
(b) Difference between the yield on interest-earning assets and the
cost of funds
(c) Noninterest expense divided by net interest income and
noninterest income, excluding gains on securities sales
(d) Excludes gains on securities sales
NM Not meaningful