WOOSTER, Ohio, Feb. 12, 2004 (PRIMEZONE) -- Ohio Legacy Corp. (Nasdaq:OLCB), the parent of Ohio Legacy Bank, N.A., today reported net income for the three months ending December 31, 2003, of $188,000 or $0.08 per share, compared to $71,000, or $0.07 per share, during the fourth quarter of 2002. Net income for the full fiscal year was $609,000, or $0.29 per share, during 2003 compared to a loss of ($51,000) in fiscal 2002. This represents the Company's first full year and sixth consecutive quarter of profitability since its inception in October of 2000. During the year ended December 31, 2003, total assets increased 16.9% to $159.1 million from $136.1 million at December 31, 2002. During the fourth quarter of 2003, net loans increased $9.3 million, or 9.4%, to $108.8 million, capping off a 39% annual increase in net loans from the end of last year.
"The year 2003 proved to be a year of success for Ohio Legacy Corp.," commented L. Dwight Douce, President and Chief Executive Officer of the Company. "In October 2000, we came to our shareholders with a business plan to attain profitability quickly and soundly. Our execution of that plan is evidenced by our ability to have originated and operated three de novo branches in highly competitive, distinct markets at a profit for six out of twelve quarters, in spite of a recession, declining interest rates, Corporate scandals and foreign wars. We did not experience full-year margin compression during 2003, as many in the banking industry did, as our net interest margin and interest rate spread increased 50 and 31 basis points, respectively." Offering observations on the increase in merger activity in the banking industry in early 2004, Mr. Douce continued, "We believe the consolidation of regional and national banks provides additional opportunity for us to win new customers who may be disappointed with the level of customer service they receive from large banks. Specifically, three banks in our markets announced they would be acquired by larger institutions that currently do not have a significant presence in those markets, nor are they locally-owned and operated. Additionally, we expect these transactions to provide opportunities for us to expand in markets that may not be of material concern to the large commercial banks, but which are attractive to us. We look forward to continued growth in assets and net income through our dedication to serving the financial services needs of consumers and small businesses in the communities we serve."
Loans and Asset Quality - At December 31, 2003, the loan portfolio, net of the allowance for loan losses and deferred fees, was $108.8 million, an increase of $30.5 million, or 38.9%, from December 31, 2002. The loan growth resulted primarily from an increase in residential real estate, construction, and commercial real estate loans. While residential real estate loans represented the largest nominal increase in balances during the year, it should be noted that a number of commercial loans are secured by the primary residence of the business owner and those loans typically carry a higher interest rate than traditional retail residential real estate loans. Additionally, residential real estate loans, as a percentage of the entire loan portfolio, declined during the year. We expect construction loans to continue to grow through 2004 as there are a number of construction projects about to commence in our markets.
Asset quality continues to be strong. Net charge-offs during 2003 were $134,000, with $113,000 comprised of residential real estate and consumer loans. Included in net charge-offs is one property that was repossessed in December 2003, resulting in a loss of $54,000 as the property was written down to its estimated fair value. Other real estate owned was $70,000 at December 31, 2003, and nonperforming loans totaled $154,000. The allowance for loan losses increased to $1.1 million at December 31, 2003, but declined as a percentage of loans to 1.02%. At December 31, 2002, the allowance as a percentage of loans was 1.06%.
Securities - In late December 2003, to leverage our strong capital position, we borrowed $10.0 million from the FHLB and purchased $10.0 million in mortgage-backed securities (MBS). We structured the transaction by laddering maturities of advances to coincide with the cash flows from the MBS, with some maturity mismatches. However, we were cautious in our selection of securities to acquire as we were willing to sacrifice net yield on the mismatch in order to reduce the extension risk of the assets in an assumed increasing rate environment. The spread during the first year of the transaction is estimated to be 160 basis points (bp), which should increase net interest income by approximately $150,000 during 2004.
Net Interest Income - Net interest income increased 151.9% to $4.2 million during 2003, primarily as a result of the increase in interest-earning assets during the year. A shift in interest-earning assets from securities to loans helped to offset a lower interest rate environment in 2003 compared to 2002. The loan to deposit ratio increased to 88% in 2003 from 68% at the end of 2002 and loans as a percent of interest-earning assets increased to 72% from 61%. Net interest margin improved to 3.10% in 2003 from 2.60% during 2002, and the interest rate spread improved to 2.75% in 2003 from 2.44% in 2002. During the fourth quarter of 2003, margin and spread were 3.28% and 2.93%, respectively. While margin and spread improved during the year, the yield on assets fell 46 bp to 5.79% for the full year of 2003. The cost of funds fell 77 bp to 3.04% during 2003.
We expect continued improvement in interest margin as our certificate of deposit (CD) portfolio reprices downward in early 2004 as long as short-term rates remain at their historical lows through the first half of next year. During 2001, we offered a CD product with a three-year maturity that allowed customers to contribute additional principal to their account at their original rate, even if rates fell. We discontinued this product in late 2001. At December 31, 2003, this product totaled $27.1 million, or 40% of our CD portfolio, and carried an interest rate of 5.05%. The maturity of this pool should improve net interest margin and spread in early 2004 as current interest rates are offered at approximately 200 bp lower than the average maturing rate. Additionally, we plan to launch a number of new deposit products in 2004 to attract core deposits and reduce our dependence on higher-costing CDs.
Noninterest Income - For the year ended December 31, 2003, noninterest income increased to $469,000 from $261,000 in 2002. Service charges increased 137% during 2003, which was attributable to a higher level of demand deposit balances during the year. Net gains on securities sales were $113,000. Noninterest income (excluding securities gains) to average assets was 0.25% during 2003 compared to 0.23% during 2002.
Noninterest Expense - Total noninterest expense increased to $3.6 million during 2003 as compared to $2.6 million during 2002. The efficiency ratio improved to 79.8% during 2003 compared to 86.6% during 2002 while annualized noninterest expense as a percent of average assets increased to 2.55% in from 2.44% 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 were higher in 2003 reflecting a higher level of employment at the Bank, including the hiring of new members of management and lenders. Professional fees increased in 2003 as we utilized outside consultants to assist with the OCC Agreement and enhance our Corporate governance program. We expect professional fees to decrease in 2004, but they will probably be higher than 2002 as a result of additional procedures that we and our auditors must perform in order to comply with the requirements of the Sarbanes-Oxley Act.
We expect noninterest expense to continue to increase in the future through controlled growth in employees and banking facilities. However, the ratio of noninterest expense to average assets should decline somewhat during 2004, as the Company should attain asset growth without a commensurate increase in noninterest expenses. As a result, the Company's efficiency ratio should continue to improve.
Regulatory Matters - On June 18, 2002, the Bank and its primary regulator, the Office of the Comptroller of the Currency, entered into an 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. Previously, the Bank's average asset growth was restricted to no greater than 5% each calendar quarter. The modification removes the quarterly compliance requirement and implements an annual growth restriction of no greater than 22%.
About Ohio Legacy Corp.
Ohio Legacy Corp. is a bank holding company headquartered in Wooster, Ohio. Its 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 December 31, 2003 and 2002
------------------------------------------------------------------
2003 2002
------------ ------------
ASSETS
Cash and due from banks $ 4,370,383 $ 5,301,451
Federal funds sold and
interest-bearing deposits in
financial institutions 3,814,436 10,418,000
------------ ------------
Cash and cash equivalents 8,184,819 15,719,451
Securities available for sale 38,054,644 38,722,169
Loans, net 108,792,368 78,291,832
Federal agency stock 1,039,200 318,900
Premises and equipment, net 2,036,544 2,185,108
Other real estate owned 70,000 --
Accrued interest receivable and
other assets 984,904 911,871
------------ ------------
Total assets $159,162,479 $136,149,331
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 7,133,620 $ 4,992,413
Interest-bearing demand 8,962,743 7,206,953
Savings 39,667,717 39,886,817
Certificates of deposit 67,387,021 62,805,167
------------ ------------
Total deposits 123,151,101 114,891,350
Other borrowed funds -- 105,000
Federal Home Loan Bank advances 14,759,314 --
Subordinated debentures 3,429,000 3,429,000
Capital lease obligations 976,643 983,439
Accrued interest payable and
other liabilities 801,954 1,737,487
------------ ------------
Total liabilities 143,118,012 121,146,276
SHAREHOLDERS' EQUITY
Preferred stock, no par value,
500,000 shares authorized, none
outstanding -- --
Common stock, no par value,
5,000,000 shares authorized and
2,118,000 outstanding in 2003 and
2,500,000 shares authorized and
1,965,700 outstanding in 2002 17,701,955 16,546,465
Accumulated deficit (1,555,585) (2,164,585)
Accumulated other comprehensive
income (101,903) 621,175
------------ ------------
Total shareholders' equity 16,044,467 15,003,055
------------ ------------
Total liabilities and
shareholders' equity $159,162,479 $136,149,331
============ ============
OHIO LEGACY CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 2003 and 2002
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2003 2002
----------- -----------
Interest income:
Loans, including fees $ 6,329,906 $ 5,034,267
Securities 1,356,312 1,411,037
Interest-bearing deposits,
federal funds sold and other 110,447 127,209
----------- -----------
Total interest income 7,796,665 6,572,513
Interest expense:
Deposits 3,150,085 3,476,439
Federal Home Loan Bank advances 38,879 --
Subordinated debentures and
other borrowings 284,360 219,427
Interest on capital leases 153,339 131,884
----------- -----------
Total interest expense 3,626,663 3,827,750
----------- -----------
Net interest income 4,170,002 2,744,763
Provision for loan losses 418,250 452,456
----------- -----------
Net interest income after provision
for loan losses 3,751,752 2,292,307
Noninterest income:
Service charges and other fees 345,677 251,845
Gains on sales of securities, net 112,908 --
Other income 9,961 8,858
----------- -----------
Total other income 468,546 260,703
Noninterest expense:
Salaries and benefits 1,605,764 1,149,196
Occupancy and equipment 571,389 483,451
Professional fees 330,188 234,382
Franchise tax 184,838 88,424
Data processing 326,025 233,199
Marketing and advertising 102,435 81,183
Stationery and supplies 81,592 85,979
Other expenses 409,067 247,757
----------- -----------
Total noninterest expense 3,611,298 2,603,571
----------- -----------
Net earnings (loss) before
income taxes 609,000 (50,561)
Income tax expense (benefit) -- --
----------- -----------
Net earnings (loss) $ 609,000 $ (50,561)
=========== ===========
Basic and diluted net
earnings (loss) per share $ 0.29 $ (0.05)
Average common and dilutive
potential common shares outstanding 2,112,539 984,727
OHIO LEGACY CORP
QUARTERLY BALANCE SHEETS
(Dollars in thousands)
--------------------------------------------------------------------
2003 2002
-------------------------------------- --------
Dec. 31 Sept. 30 June 30 March 31 Dec. 31
-------- -------- -------- -------- --------
Cash and cash
equivalents $ 8,185 $ 13,533 $ 15,865 $ 8,349 $ 15,719
Securities 38,055 29,972 35,543 40,562 38,722
Loans 109,914 100,536 88,372 82,636 79,129
Allowance for
loan losses (1,122) (1,063) (966) (891) (837)
Premises and
equipment, net 2,037 2,066 2,117 2,146 2,185
Other assets 2,093 1,920 1,550 5,174 1,129
-------- -------- -------- -------- --------
Total assets 159,162 146,964 $142,481 $137,976 $136,047
======== ======== ======== ======== ========
Noninterest-bearing
demand $ 7,133 $ 6,028 $ 6,078 $ 5,264 $ 4,992
Interest-bearing
demand 8,963 8,622 7,862 6,537 7,207
Savings 39,668 42,361 42,142 40,559 39,886
Certificates of
deposit 67,387 64,227 62,527 63,751 62,806
-------- -------- -------- -------- --------
Total deposits 123,151 121,238 118,609 116,111 114,891
Other borrowings 19,165 9,304 4,305 4,307 4,413
Other liabilities 802 673 3,236 1,448 1,740
-------- -------- -------- -------- --------
Total liabilities 143,118 131,215 126,150 121,866 121,044
Shareholders'
equity 16,044 15,749 16,331 16,110 15,003
-------- -------- -------- -------- --------
Total liabilities
and shareholders'
equity $159,162 $146,964 $142,481 $137,976 $136,047
======== ======== ======== ======== ========
LOAN PORTFOLIO:
--------------
Commercial $ 12,699 $ 12,600 $ 12,924 $ 12,196 $ 10,206
1-4 family
residential 42,511 38,564 32,483 31,455 31,346
Multifamily
residential 8,121 6,255 6,464 6,383 6,732
Commercial real
estate 24,457 23,342 21,006 20,051 18,385
Construction 11,791 8,990 5,949 4,675 4,636
Consumer and
home equity 10,511 10,952 9,677 8,022 7,926
Net deferred loan
fees (176) (167) (131) (146) (102)
-------- -------- -------- -------- --------
Loans $109,914 $100,536 $ 88,372 $ 82,636 $ 79,129
======== ======== ======== ======== ========
QUARTERLY AVERAGES:
------------------
Fed funds and
securities(1) $ 36,135 $ 41,890 $ 46,243 $ 50,804 $ 40,816
Loans 106,260 93,287 84,898 79,346 75,692
Total interest-
earning assets 142,395 135,177 131,141 130,150 116,508
Total assets 148,516 142,019 139,038 137,793 124,255
Total assets,
year to date 141,946 139,617 138,109 -- 112,138
Interest-bearing
deposits 115,275 113,942 111,936 111,305 107,062
Other borrowings
and leases 10,682 4,694 4,306 4,405 4,414
Total interest-
bearing liabilities 125,957 118,636 116,242 115,710 111,476
Shareholders'
equity 15,856 16,394 16,220 15,557 7,325
Shareholders'
equity, year to
date 16,007 16,057 15,667 -- 6,998
(1) Includes federal agency 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 Dec. 31 Sept. 30 June 30 March 31 Dec. 31
------ ------ ------ ------ ------
Interest income $2,071 $1,923 $1,905 $1,898 $1,800
Interest expense (898) (881) (897) (951) (973)
------ ------ ------ ------ ------
Net interest income 1,173 1,042 1,008 947 827
Provision for loan
losses (114) (146) (78) (80) (98)
Noninterest income 102 134 105 127 73
Noninterest expense (973) (905) (875) (858) (731)
------ ------ ------ ------ ------
Net income $ 188 $ 125 $ 160 $ 136 $ 71
====== ====== ====== ====== ======
Income per share,
diluted $ 0.08 $ 0.06 $ 0.08 $ 0.07 $ 0.07
Common and dilutive
shares, avg 2,470 2,120 2,119 2,088 1,042
SELECTED RATIOS:
------
Net interest margin (1) 3.28% 3.06% 3.09% 2.90% 2.84%
Yield on interest-
earning assets 5.77% 5.67% 5.85% 5.82% 6.18%
Cost of funds 2.84% 2.95% 3.10% 3.29% 3.49%
Interest rate
spread (2) 2.93% 2.72% 2.75% 2.53% 2.69%
Efficiency ratio (3) 76.0% 79.7% 79.8% 84.4% 81.2%
Allowance as a percent
of loans 1.02% 1.06% 1.09% 1.07% 1.06%
Net loans as a percent
of deposits 88.3% 82.0% 73.7% 70.4% 68.1%
Annualized net charge-
offs to loans 0.21% 0.20% 0.01% 0.13% 0.00%
Annualized noninterest
income to average
assets (4) 0.29% 0.26% 0.25% 0.20% 0.24%
Annualized noninterest
expense to average
assets 2.61% 2.54% 2.51% 2.49% 2.35%
Annualized return on
average assets 0.51% 0.35% 0.46% 0.39% 0.23%
Annualized return on
average equity 4.74% 3.05% 3.95% 3.50% 3.86%
(1) Net interest income, annualized, divided by average
interest-earning assets for the period
(2) Difference between the yield on interest-earning assets and the
cost of funds
(3) Noninterest expense divided by net interest income and
noninterest income, excluding gains on securities sales
(4) Excludes gains on securities sales