WOOSTER, Ohio, May 1, 2003 (PRIMEZONE) -- Ohio Legacy Corp (Nasdaq:OLCB), the parent of Ohio Legacy Bank (the "Bank"), today reported net earnings for the three months ended March 31, 2003, of $136,000 or $0.07 per share compared to a loss of ($102,000) or ($0.11) per share during the first quarter of 2002. Total assets at March 31, 2003, were $138.0 million, an increase of $1.9 million from December 31, 2002. During the quarter, net loans increased to $81.7 million from $78.3 million and deposits increased $1.2 million to $116.1 million.
Key Issue Review
Net interest income -- During the three months ended March 31, 2003, net interest income increased to $945,000 compared to $513,000 during the first quarter of 2002, primarily as a result of a higher balance of interest-earning assets. Net interest margin improved to 2.91% in 2003 from 2.38% in the first quarter of 2002 and 2.84% during the fourth quarter of 2002. Interest rate spread improved to 2.54% in 2003 from 2.12% during the first quarter of 2002. The yield on earning assets fell to 5.83% compared to 6.26% in the first quarter of 2002 and from 6.18% in the fourth quarter of 2002. This reflects the $8.7 million of new capital proceeds from the common stock offering that has been invested in securities until loans are originated. The Company's cost of funds declined to 3.29% in the first quarter of 2003, compared to 4.14% in the first quarter of 2002 and 3.49% in the fourth quarter of 2002, as deposit rates were adjusted downward during the quarter.
Noninterest income -- Total noninterest income was $127,000 for the three months ended March 31, 2003, compared to $58,000 for the same period in 2002. The 2003 amount includes $58,000 of gains from the sale of securities during the first quarter of 2003. As a result of the strong growth in deposits and the $12.0 million of capital raised through the trust preferred securities and common stock offerings in 2002, the Bank's interest-earning assets are overweighted towards securities as the offerings' proceeds have been invested in securities. The Bank may need to sell securities in the future to meet loan and deposit demands and has structured its securities portfolio accordingly with short-term callable notes and mortgage-backed securities to provide liquidity and to mitigate pricing risk. The increase in overdraft fees and other service charges on deposit accounts was due to the higher volume of deposit customers and the related fees associated with those accounts.
Noninterest Expense -- Total noninterest expense increased to $856,000 for the three months ended March 31, 2003, as compared to $547,000 for the same period in 2002 and $731,000 in the fourth quarter in 2002. The Company's efficiency ratio was 84.4% during the first quarter of 2003 compared to 95.8% and 81.2% during the first and fourth quarters of 2002, respectively. Annualized noninterest expense as a percent of average assets was 2.49% in 2003 compared to 2.38% and 2.35% during the first and fourth quarters of 2002, respectively.
Salaries and benefits are higher in 2003 because the Company hired two new members of management in January 2003: a Chief Financial Officer and a Vice President of Information Technology. These individuals were hired in response to the strong growth in the Company's assets and an increase in the complexity of the organization. Their focus in 2003 is improving operations and controls so the Bank may achieve full compliance with the OCC Agreement described below.
Additionally, the Bank operated two offices during the first quarter of 2002, but had three locations in the first quarter of 2003. The Millersburg office opened in March 2002 with a full staff; therefore, the first quarter of 2003 reflects a higher level of employment at the Bank. Occupancy and equipment costs are also higher in 2003 as a result of the opening of the Millersburg office.
Professional fees have increased as the Bank utilized outside consultants to assist management with the OCC Agreement and enhance the corporate governance and oversight responsibilities of management and the board of directors under the requirements of the Sarbanes-Oxley Act and new rules promulgated by the National Association of Securities Dealers. Management expects professional fees to increase over the next two quarters as the Company continues to address the staffing plan and comprehensive information technology review required by the OCC.
Loans -- At March 31, 2003, total loans (before the allowance for loan losses and deferred fees) were $82.8 million, an increase of $3.6 million from December 31, 2002. The Company had growth in all loan categories except multifamily residential real estate. While total loans have increased $18.0 million, or 27.8% over the last twelve months, the growth in the loan portfolio in 2003 is being impacted by pricing pressures from competitors for new loans and on retention of our current loan customers. Approximately $11.7 million of new loan originations were funded during the first quarter of 2003. However, principal repayments and payoffs reduced net growth in total loans to $3.6 million as customers shopped for lower rates.
"While the current low interest rate environment is challenging, we are focused on continuing to improve our net interest margin," commented L. Dwight Douce, the Company's Chief Executive Officer. "We are likely to encounter a reduction in our loan portfolio yield in the short-term. We may need to offer competitive variable-rate products to generate growth and improve our loan to deposit ratio and net interest margin. As the low interest rate environment is creating pressure on our loan yields, we should benefit from the continued downward pricing adjustments on our deposits. Approximately 17% of our certificates of deposits portfolio will mature in the second quarter which should provide an increase in our net interest margin as those certificates reprice downward."
Asset Quality -- The Company's provision for loan losses was $80,000 during the three months ended March 31, 2003, compared to $126,000 during the quarter ended March 31, 2002, and $98,000 during the quarter ended December 31, 2002. As a result of the pricing pressures noted above, loan growth during the first quarter of 2003 was at a slower pace than growth during the prior year periods, leading to a lower provision. However, the allowance for loan losses as a percentage of total loans increased to 1.07% at March 31, 2003, compared to 1.06% at December 31, 2002, and 0.79% at March 31, 2002. Net charge-offs during the three months ended March 31, 2003, totaled $26,000. At March 31, 2003, the Company had no nonperforming assets and no loans were delinquent more than 60 days. Mr. Douce commented, "We continue to be very pleased with our asset quality, especially given the current economic conditions."
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 Bank's examination in January 2002. Management is resolving the issues identified in the OCC Agreement, including the adoption of a strategic plan and a capital plan. The Bank is enhancing its comprehensive staffing plan, as required by the OCC Agreement, and is working to improve internal controls related to operations and information security.
Among other requirements, the OCC Agreement restricts the Bank's average asset growth to no more than 5% each calendar quarter. Providing an update on the Bank's progress towards compliance with the agreement, Mr. Douce stated, "Management is focused on complying with the requirements and restrictions of the OCC Agreement and is committed to working with the OCC to obtain relief from the asset growth restriction so the Company can return to its strategic plan of strong balance sheet growth, supported by solid asset quality."
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 its 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 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
March 31, 2003 and December 31, 2002
March 31, December 31,
2003 2002
------------ ------------
(unaudited)
ASSETS
Cash and due from banks $ 6,368,203 $ 5,301,451
Federal funds sold 1,981,000 10,418,000
------------ ------------
Cash and cash equivalents 8,349,203 15,719,451
Securities available for sale 40,562,084 38,722,169
Loans, net 81,744,566 78,291,832
Federal Reserve Bank stock 445,350 318,900
Premises and equipment, net 2,146,293 2,185,108
Accrued interest receivable
and other assets 4,728,694 810,017
------------ ------------
Total assets $137,976,190 $136,047,477
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 5,263,799 $ 4,992,413
Interest-bearing demand 6,536,626 7,206,953
Savings 40,559,531 39,886,817
Certificates of deposit 63,751,616 62,805,167
------------ ------------
Total deposits 116,111,572 114,891,350
Other borrowed funds -- 105,000
Capital lease obligations 981,837 983,439
Accrued interest payable
and other liabilities 1,447,609 1,739,633
Trust preferred securities 3,325,000 3,325,000
------------ ------------
Total liabilities 121,866,018 121,044,422
SHAREHOLDERS' EQUITY
Preferred stock -- --
Common stock 17,678,955 16,546,465
Accumulated deficit (2,028,585) (2,164,585)
Accumulated other comprehensive income 459,802 621,175
------------ ------------
Total shareholders' equity 16,110,172 15,003,055
------------ ------------
Total liabilities and
shareholders' equity $137,976,190 $136,047,477
============ ============
Book value per outstanding common share $ 7.61 $ 7.63
End of period common shares information:
Common shares outstanding 2,115,700 1,965,700
Common stock warrants outstanding 339,600 339,600
Common stock options outstanding 131,250 87,000
OHIO LEGACY CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2003 and 2002
For the Three Months Ended
March 31,
2003 2002
----------- -----------
Interest income:
Loans $ 1,427,655 $ 1,052,639
Securities 440,237 264,807
Interest-bearing deposits, federal
funds sold and other 29,847 33,040
----------- -----------
Total interest income 1,897,739 1,350,486
Interest expense:
Deposits 839,874 812,008
Other borrowings 112,643 25,226
----------- -----------
Total interest expense 952,517 837,234
----------- -----------
Net interest income 945,222 513,252
Provision for loan losses 80,000 125,956
----------- -----------
Net interest income after
provision for loan losses 865,222 387,296
Noninterest income:
Service charges and other fees 66,560 56,558
Gain on sales of securities
available for sale 57,849 --
Other income 2,654 1,781
----------- -----------
Total other income 127,063 58,339
Noninterest expense:
Salaries and benefits 380,160 236,326
Occupancy and equipment 139,174 97,678
Professional fees 80,264 46,838
Franchise tax 48,800 26,263
Data processing 76,061 52,116
Marketing and advertising 28,247 15,868
Stationery and supplies 18,756 24,553
Other expenses 84,823 47,770
----------- -----------
Total noninterest expense 856,285 547,412
----------- -----------
Net income (loss) $ 136,000 $ (101,777)
=========== ===========
Basic earnings (loss) per share $ 0.07 $ (0.11)
Diluted earnings (loss) per share $ 0.07 $ (0.11)
Basic weighted average shares outstanding 2,087,367 965,500
Diluted weighted average shares outstanding 2,087,930 965,500
OHIO LEGACY CORP
QUARTERLY BALANCE SHEET INFORMATION
(Dollars in thousands)
2003 2002
-------- --------------------------------------
March 31 March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- -------- --------
Cash and cash
equivalents $ 8,349 $ 12,421 $ 9,616 $ 9,816 $ 15,719
Securities 40,562 25,807 35,847 30,750 38,722
Loans 82,636 64,678 70,604 75,509 79,129
Allowance for
loan losses (891) (512) (635) (739) (837)
Premises and
equipment, net 2,146 2,187 2,287 2,231 2,185
Other assets 5,174 1,082 1,146 1,183 1,129
-------- -------- -------- -------- --------
Total assets $137,976 $105,663 $118,865 $118,750 $136,047
======== ======== ======== ======== ========
Noninterest-bearing
demand $ 5,264 $ 2,876 $ 5,620 $ 3,882 $ 4,992
Interest-bearing
demand 6,537 5,864 5,678 5,823 7,207
Savings 40,559 38,549 41,773 38,208 39,886
Certificates of
deposit 63,751 46,648 53,861 58,188 62,806
-------- -------- -------- -------- --------
Total deposits 116,111 93,937 106,932 106,101 114,891
Other borrowings,
leases and capital
securities 4,307 4,527 4,416 4,415 4,413
Other liabilities 1,448 627 576 847 1,740
-------- -------- -------- -------- --------
Total liabilities 121,866 99,091 111,924 111,363 121,044
Shareholders' equity 16,110 6,572 6,941 7,387 15,003
-------- -------- -------- -------- --------
Total liabilities
and shareholders'
equity $137,976 $105,663 $118,865 $118,750 $136,047
======== ======== ======== ======== ========
LOAN PORTFOLIO:
Commercial $ 12,196 $ 10,695 $ 8,924 $ 10,323 $ 10,206
1-4 family
residential 31,455 27,090 29,376 29,965 31,346
Multifamily
residential 6,383 3,413 4,268 5,702 6,732
Commercial
real estate 20,051 14,707 17,469 18,262 18,385
Construction 4,675 2,979 3,751 3,985 4,636
Consumer 8,022 5,882 6,908 7,371 7,926
Net deferred
loan fees (146) (88) (92) (99) (102)
-------- -------- -------- -------- --------
Loans 82,636 $ 64,678 $ 70,604 $ 75,509 $ 79,129
======== ======== ======== ======== ========
AVERAGE BALANCES:
Fed funds and
securities (a) $ 50,804 $ 27,895 $ 39,063 $ 38,039 $ 40,816
Loans, net 79,346 58,418 68,945 73,068 75,692
Total interest-
earning assets 130,150 86,313 108,008 111,107 116,508
Total assets 137,793 91,746 113,814 118,736 124,255
Total assets,
full year 137,793 112,138
Interest-bearing
deposits 111,305 80,052 98,515 101,680 107,062
Other borrowings
and leases 4,405 777 4,420 4,416 4,414
Total interest-
bearing
liabilities 115,710 80,829 102,935 106,096 111,476
Shareholders' equity 15,557 6,744 6,757 7,164 7,325
Shareholders' equity,
full year 15,557 6,998
(a) Includes Federal Reserve Bank stock classified in "Accrued
interest receivable and other assets" on the consolidated
balance sheets.
OHIO LEGACY CORP
QUARTERLY STATEMENT OF OPERATIONS INFORMATION
(Dollars in thousands, except per share data)
2003 2002
-------- --------------------------------------
March 31 March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- -------- --------
Interest income $ 1,898 $ 1,350 $ 1,682 $ 1,740 $ 1,800
Interest expense (953) (837) (1,041) (981) (973)
-------- -------- -------- -------- --------
Net interest income 945 513 641 759 827
Provision for
loan losses (80) (126) (125) (104) (98)
Noninterest income 127 58 62 67 73
Noninterest expense (856) (547) (642) (678) (731)
-------- -------- -------- -------- --------
Net income (loss) $ 136 $ (102) $ (64) $ 44 $ 71
======== ======== ======== ======== ========
Net income (loss)
per share $ 0.07 $ (0.11) $ (0.07) $ 0.05 $ 0.07
======== ======== ======== ======== ========
SELECTED RATIOS:
Net interest
margin (a) 2.91% 2.38% 2.37% 2.73% 2.84%
Yield on interest-
earning assets 5.83% 6.26% 6.23% 6.27% 6.18%
Cost of funds 3.29% 4.14% 4.05% 3.70% 3.49%
Interest rate
spread (b) 2.54% 2.12% 2.18% 2.57% 2.69%
Efficiency ratio (c) 84.4% 95.8% 91.3% 82.0% 81.2%
Allowance as a
percent of loans 1.07% 0.79% 0.90% 0.98% 1.06%
Net loans as a
percent of deposits 70.4% 68.3% 65.4% 70.5% 68.1%
Annualized net
charge-offs to
loans 0.13% 0.0% 0.0% 0.0% 0.0%
Annualized non-
interest income to
average assets 0.37% 0.25% 0.22% 0.23% 0.24%
Annualized non-
interest expense to
average assets 2.49% 2.38% 2.26% 2.28% 2.35%
Annualized return
on average assets 0.39% NM NM 0.15% 0.23%
Annualized return
on average equity 3.50% NM NM 2.46% 3.86%
(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
NM Not meaningful