UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHNAGE ACT OF 1934
For the Quarter Ended March 31, 2005
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 S. R. 93 45640
Jackson, Ohio (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (740) 286-3283
Indicate by check mark 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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes X No
--- ---
As of May 9, 2005, the latest practicable date, 5,816,457 shares of the
Registrant's common stock, without par value, were outstanding.
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 14
Item 3: Quantitative and Qualitative Disclosures About Market Risk 16
Item 4: Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 17
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3: Default Upon Senior Securities 18
Item 4: Submission of Matters to a Vote of Security Holders 18
Item 5: Other Information 18
Item 6: Exhibits 18
Signatures 19
Certifications 20
-2-
PART I - FINANCIAL INFORMATION
Item 1:
Oak Hill Financial, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
March 31, December 31,
(In thousands, except share data) 2005 2004
- --------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 24,721 $ 31,009
Federal funds sold 269 988
Investment securities designated as available for sale - at market 104,084 88,383
Investment securities designated as held to maturity - at cost (approximate market
value of $3,847 and $3,853 at March 31, 2005 and December 31, 2004, respectively) 3,635 3,640
Loans receivable - net 926,578 912,282
Loans held for sale - at lower of cost or market -- 256
Office premises and equipment - net 15,673 15,489
Federal Home Loan Bank stock - at cost 6,663 6,590
Real estate acquired through foreclosure 943 1,614
Accrued interest receivable on loans 3,576 3,407
Accrued interest receivable on investment securities 924 527
Goodwill - net 1,686 1,674
Core deposit intangible 1,198 1,270
Bank owned life insurance 10,197 10,118
Prepaid expenses and other assets 2,876 2,505
Prepaid federal income taxes 1,719 2,929
Deferred federal income taxes 934 359
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,105,676 $ 1,083,040
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand $ 81,125 $ 88,712
Savings and time deposits 777,031 773,384
- --------------------------------------------------------------------------------------------------------------------
Total deposits 858,156 862,096
Securities sold under agreements to repurchase 16,600 5,359
Advances from the Federal Home Loan Bank 122,607 105,601
Notes payable -- 2,700
Guaranteed preferred beneficial interests in the Company's
junior subordinated debentures 18,000 18,000
Accrued interest payable and other liabilities 3,525 4,241
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 1,018,888 997,997
Stockholders' equity
Common stock - $.50 stated value; authorized 15,000,000 shares
5,653,583 shares issued at March 31, 2005 and December 31, 2004 2,827 2,827
Additional paid-in capital 6,474 6,658
Retained earnings 80,382 78,071
Treasury stock (75,680 and 96,302 shares at March 31, 2005 and
December 31, 2004, respectively - at cost) (2,451) (3,118)
Accumulated comprehensive income (loss):
Unrealized gain (loss) on securities designated as available for sale, net
of related tax effects (444) 605
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 86,788 85,043
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,105,676 $ 1,083,040
====================================================================================================================
-3-
Oak Hill Financial, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
For the Three Months Ended
--------------------------
March 31,
(In thousands, except share data) 2005 2004
- ------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans $ 14,740 $ 13,299
Investment securities 944 825
Interest-bearing deposits and other 93 64
- ------------------------------------------------------------------------------------------------------
Total interest income 15,777 14,188
INTEREST EXPENSE
Deposits 4,710 3,722
Borrowings 1,381 1,188
- ------------------------------------------------------------------------------------------------------
Total interest expense 6,091 4,910
- ------------------------------------------------------------------------------------------------------
Net interest income 9,686 9,278
Provision for losses on loans 750 575
- ------------------------------------------------------------------------------------------------------
Net interest income after provision for losses on loans 8,936 8,703
OTHER INCOME
Service fees, charges and other operating 1,407 1,186
Insurance commissions 671 737
Gain on sale of loans 318 295
Gain on sale of securities 143 134
- ------------------------------------------------------------------------------------------------------
Total other income 2,539 2,352
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
Employee compensation and benefits 3,582 3,440
Occupancy and equipment 1,002 833
Federal deposit insurance premiums 30 26
Franchise taxes 53 244
Other operating 1,911 1,790
Merger-related expenses 317 --
- ------------------------------------------------------------------------------------------------------
Total general, administrative and other expense 6,895 6,333
- ------------------------------------------------------------------------------------------------------
Earnings before federal income taxes 4,580 4,722
FEDERAL INCOME TAXES
Current 1,351 1,592
Deferred (31) (17)
- ------------------------------------------------------------------------------------------------------
Total federal income taxes 1,320 1,575
- ------------------------------------------------------------------------------------------------------
NET EARNINGS $ 3,260 $ 3,147
======================================================================================================
EARNINGS PER SHARE
Basic $ .59 $ .56
======================================================================================================
Diluted $ .57 $ .55
======================================================================================================
-4-
Oak Hill Financial, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended
--------------------------
March 31,
(In thousands) 2005 2004
- --------------------------------------------------------------------------------------------------------------
Net earnings $ 3,260 $ 3,147
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities designated as available for sale,
net of taxes (benefits) of $(515) and $164, respectively (956) 304
Reclassification adjustment for realized gains included in net earnings,
net of taxes of $50 and $47, respectively (93) (87)
- --------------------------------------------------------------------------------------------------------------
Comprehensive income $ 2,211 $ 3,364
==============================================================================================================
Accumulated comprehensive income (loss) $ (444) $ 1,132
==============================================================================================================
-5-
Oak Hill Financial, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the Three Months Ended
--------------------------
March 31,
(In thousands) 2005 2004
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings for the period $ 3,260 $ 3,147
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 418 246
Gain on sale of securities (143) (134)
Amortization of premiums and discounts on investment
securities - net 219 212
Amortization of mortgage servicing rights 106 148
Proceeds from sale of loans in secondary market 9,792 10,858
Loans disbursed for sale in secondary market (9,338) (10,894)
Gain on sale of loans (198) (163)
Loss on disposition of assets 95 --
Amortization of deferred loan origination costs and fees - net (42) (42)
Loss on sale of other real estate owned 16 11
Federal Home Loan Bank stock dividends (73) (60)
Provision for losses on loans 750 575
Tax benefit of stock options exercised 142 462
Bank owned life insurance income (79) ` --
Increase (decrease) in cash due to changes in:
Prepaid expenses and other assets (371) (236)
Accrued interest receivable (566) (350)
Accrued interest payable and other liabilities (716) (2,008)
Federal income taxes
Current 1,210 1,100
Deferred (31) (17)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,451 2,855
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Loan disbursements (80,265) (89,982)
Principal repayments on loans 65,032 71,130
Principal repayments on mortgage-backed securities designated
as available for sale 4,149 3,751
Proceeds from sale of investment securities designated
as available for sale 4,501 3,431
Proceeds from maturity of investment securities 1,290 3,000
Proceeds from disposition of assets 8 --
Proceeds from sale of other real estate owned 688 158
Purchase of investment securities designated
as available-for-sale (27,305) (11,802)
Purchase of Saltsman Insurance Agency (12) --
Purchase of other real estate owned -- (169)
(Increase) decrease in federal funds sold - net 719 (18)
Purchase of office premises and equipment (594) (193)
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (31,789) (20,694)
- -------------------------------------------------------------------------------------------------------------
Net cash used in operating and investing activities
(balance carried forward) (27,338) (17,839)
- -------------------------------------------------------------------------------------------------------------
-6-
Oak Hill Financial, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)
For the Three Months Ended
--------------------------
March 31,
(In thousands) 2005 2004
- ------------------------------------------------------------------------------------------------------------------
Net cash used in operating and investing activities
(balance brought forward) (27,338) (17,839)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from (repayments of) securities sold under agreement to repurchase 11,241 (779)
Net increase (decrease) in deposit accounts (3,889) 54,677
Proceeds from Federal Home Loan Bank advances 18,000 --
Repayments of Federal Home Loan Bank advances (994) (34,571)
Repayments of notes payable (2,700) (50)
Dividends on common shares (949) (828)
Purchase of treasury shares -- (4,369)
Proceeds from issuance of shares under stock option plan 341 1,234
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 21,050 15,314
- ------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (6,288) (2,525)
Cash and cash equivalents at beginning of period 31,009 20,390
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 24,721 $ 17,865
==================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Federal income taxes $ -- $ --
- ------------------------------------------------------------------------------------------------------------------
Interest on deposits and borrowings $ 6,140 $ 4,990
==================================================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Unrealized gains (losses) on securities designated as available for sale,
net of related tax effects $ (1,049) $ 217
==================================================================================================================
Recognition of mortgage servicing rights in accordance with SFAS No. 140 $ 120 $ 132
==================================================================================================================
Transfer from loans to real estate acquired through foreclosure $ 33 $ 471
==================================================================================================================
Loans identified as held-for-sale $ -- $ 747
==================================================================================================================
Treasury shares issued for options exercised $ -- $ 747
==================================================================================================================
-7-
Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2005 and 2004
1. Basis of Presentation
---------------------
Oak Hill Financial, Inc. (the "Company") is a financial holding company
the principal assets of which have been its ownership of Oak Hill Banks ("Oak
Hill") and Oak Hill Financial Insurance Agency, Inc. dba MPA Group Insurance
Specialists ("MPA"). The Company also owns forty-nine percent of Oak Hill Title
Agency, LLC ("Oak Hill Title") which provides title services for commercial and
residential real estate transactions. Accordingly, the Company's results of
operations are primarily dependent upon the results of operations of its
subsidiaries.
On October 9, 2004, the Company acquired Ripley National Bank ("Ripley")
for $5.3 million in cash. As part of the transaction, the Company acquired
full-service offices in Ripley and Georgetown, Ohio, involving total loans of
$39.1 million, $51.6 million in deposits and $58.6 million in total assets.
On December 31, 2004, the Company sold the consumer loan portfolio of
Action Finance Company. The portfolio, which was comprised of small consumer and
second mortgage loans, totaled $8.7 million. Concurrent with the sale, the
Company closed its five retail lending offices in southern Ohio.
Oak Hill conducts a general commercial banking business in southern and
central Ohio which consists of attracting deposits from the general public and
applying those funds to the origination of loans for commercial, consumer and
residential purposes. MPA is an insurance agency specializing in group health
insurance and other employee benefits.
Oak Hill's profitability is significantly dependent on net interest
income, which is the difference between interest income generated from
interest-earning assets (i.e., loans and investments) and the interest expense
paid on interest-bearing liabilities (i.e., customer deposits and borrowed
funds). Net interest income is affected by the relative amount of
interest-earning assets and interest-bearing liabilities and the interest
received or paid on these balances. The level of interest rates paid or received
by Oak Hill can be significantly influenced by a number of competitive factors,
such as governmental monetary policy, that are outside of management's control.
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 accounting
principles generally accepted in the United States of America. 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-K for the year ended December 31, 2004. However, all
adjustments (consisting 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 months
ended March 31, 2005 are not necessarily indicative of the results that 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 and MPA. The Company effectively
controls Oak Hill Title; therefore, its accounts are also included in the
financial statements of the Company with the remaining ownership being accounted
for as minority interest. All intercompany balances and transactions have been
eliminated.
3. Liquidity and Capital Resources
-------------------------------
Like other financial institutions, the Company must ensure that sufficient
funds are available to meet deposit withdrawals, loan commitments, and expenses.
Control of the Company's cash flow requires the anticipation of deposit flows
and loan payments. The Company's primary sources of funds are deposits,
borrowings and principal and interest payments on loans. The Company uses funds
from deposit inflows, proceeds from borrowings and principal and interest
payments on loans primarily to originate loans, and to purchase short-term
investment securities and interest-bearing deposits.
At March 31, 2005, the Company had $216.9 million of certificates of
deposit maturing within one year. It has been the Company's historic experience
that such certificates of deposit will be replaced or renewed with Oak Hill at
market rates of interest. It is management's belief that maturing certificates
of deposit over the next year will similarly be replaced or renewed with Oak
Hill at market rates of interest without a material adverse effect on the
results of operations.
-8-
Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2005 and 2004
3. Liquidity and Capital Resources (continued)
--------------------------------------------
In the event that certificates of deposit cannot be renewed at prevalent
market rates, the Company can obtain up to a maximum of $186.3 million in
advances from the Federal Home Loan Bank of Cincinnati (FHLB). Also, as an
operational philosophy, the Company seeks to obtain advances to help with
asset/liability management and liquidity. At March 31, 2005, the Company had
$122.6 million of outstanding FHLB advances.
The Company engages in off-balance sheet credit-related activities that
could require the Company to make cash payments in the event that specified
future events occur. The contractual amounts of these activities represent the
maximum exposure to the Company. However, certain off-balance sheet commitments
are expected to expire or be only partially used; therefore, the total amount of
commitments does not necessarily represent future cash requirements. These
off-balance sheet activities are necessary to meet the financing needs of the
Company's customers. At March 31, 2005, the Company had total off-balance sheet
contractual commitments consisting of $24.6 million to originate loans, or loans
committed but not closed, $131.1 million in unused lines of credit and letters
of credit totaling $15.2 million. Funding for these amounts is expected to be
provided by the sources described above. Management believes the Company has
adequate resources to meet its normal funding requirements.
The table below details the amount of loan commitments, unused lines of
credit and letters of credit outstanding at March 31, 2005, by expiration
period:
One year Two to After
(In thousands) or less three years three years Total
- --------------------------------------------------------------------------------
Loan commitments $24,644 $ -- $ -- $ 24,644
Unused lines of credit 72,489 16,137 42,498 131,124
Letters of credit 1,057 4,150 10,000 15,207
- --------------------------------------------------------------------------------
$98,190 $20,287 $ 52,498 $170,975
================================================================================
The table below details the amount of contractual obligations outstanding
at March 31, 2005, by expiration period:
One year Two to After
(In thousands) or less three years three years Total
- ---------------------------------------------------------------------------------------------------------------------
Advances from the Federal Home Loan Bank $60,687 $ 7,874 $ 54,046 $122,607
Securities sold under agreement to repurchase -- -- 10,000 10,000
Guaranteed preferred beneficial interests in the Corporation's
junior subordinated debentures -- -- 18,000 18,000
Lease obligations 710 1,557 2,129 4,396
- ---------------------------------------------------------------------------------------------------------------------
$61,397 $ 9,431 $ 84,175 $155,003
=====================================================================================================================
4. Earnings Per Share
------------------
Basic earnings per common share is computed based upon the
weighted-average number of common shares outstanding during the period. Diluted
earnings per common share is computed including the dilutive effect of
additional potential common shares issuable under stock options. The
computations were as follows for the three-month periods ended March 31:
2005 2004
- --------------------------------------------------------------------------------
Weighted-average common shares outstanding (basic) 5,566,360 5,582,171
Dilutive effect of assumed exercise of stock options 151,821 154,989
- --------------------------------------------------------------------------------
Weighted-average common shares outstanding (diluted) 5,718,181 5,737,160
================================================================================
-9-
Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2005 and 2004
4. Earnings Per Share (continued)
------------------------------
Options to purchase 125,450 shares of common stock with a weighted-average
exercise price of $37.21 were outstanding at March 31, 2005 but were excluded
from the computation of common share equivalents for the period ended March 31,
2005 because their exercise prices were greater than the average market price of
the common shares.
5. Critical Accounting Policies
----------------------------
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to use judgments in making estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses. The
following critical accounting policies are based upon judgments and assumptions
by management that include inherent risks and uncertainties.
Allowance for Losses on Loans: The balance in this account is an
accounting estimate of probable but unconfirmed asset impairment that has
occurred in the Company's loan portfolio as of the date of the consolidated
financial statements before losses have been confirmed resulting in a subsequent
charge-off or write-down. It is the Company's policy to provide valuation
allowances for estimated losses on loans based upon past loss experience,
adjusted for changes in trends and conditions of the certain items, including:
o Local market areas and national economic developments;
o Levels of and trends in delinquencies and impaired loans;
o Levels of and trends in recoveries of prior charge-offs;
o Adverse situations that may affect specific borrowers' ability to repay;
o Effects of any changes in lending policies and procedures;
o Credit concentrations;
o Experience, ability, and depth of lending management and credit
administration staff;
o Volume and terms of loans; and
o Current collateral values, where appropriate.
When the collection of a loan becomes doubtful, or otherwise troubled, the
Company records a loan loss provision equal to the difference between the fair
value of the property securing the loan and the loan's carrying value. Unsecured
credits are charged-off upon becoming contractually delinquent for greater than
90 days. Major loans and major lending areas are reviewed periodically to
determine potential problems at an early date. The allowance for loan losses is
increased by charges to earnings and decreased by charge-offs (net of
recoveries).
The Company accounts for its allowance for losses on loans in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 5, "Accounting for
Contingencies," and SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan." Both Statements require the Company to evaluate the collectibility of
both contractual interest and principal loan payments. SFAS No. 5 requires the
accrual of a loss when it is probable that a loan has been impaired and the
amount of the loss can be reasonably estimated. SFAS No. 114 requires that
impaired loans be measured based upon the present value of expected future cash
flows discounted at the loan's effective interest rate or, as an alternative, at
the loans' observable market price or fair value of the collateral.
A loan is defined under SFAS No. 114 as impaired when, based on current
information and events, it is probable that a creditor will be unable to collect
all amounts due according to the contractual terms of the loan agreement. In
applying the provisions of SFAS No. 114, the Company considers its investment in
one-to-four family residential loans, consumer installment loans and credit card
loans to be homogeneous and therefore excluded from separate identification for
evaluation of impairment. These homogeneous loan groups are evaluated for
impairment in accordance with SFAS No. 5. With respect to the Company's
investment in commercial and
-10-
Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2005 and 2004
5. Critical Accounting Policies (continued)
----------------------------------------
other loans, and its evaluation of impairment thereof, management believes such
loans are adequately collateralized and as a result impaired loans are carried
as a practical expedient at the lower of cost or fair value.
It is the Company's policy to charge off unsecured credits that are more
than ninety days delinquent. Similarly, collateral dependent loans which are
more than ninety days delinquent are considered to constitute more than a
minimum delay in repayment and are evaluated for impairment under SFAS No. 114
at that time.
Mortgage Servicing Rights: Mortgage servicing rights are accounted for
pursuant to the provisions of SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
requires that the Company recognize as separate assets, rights to service
mortgage loans for others, regardless of how those servicing rights are
acquired. An institution that acquires mortgage servicing rights through either
the purchase or origination of mortgage loans and sells those loans with
servicing rights retained must allocate some of the cost of the loans to the
mortgage servicing rights.
The mortgage servicing rights recorded by the Company, calculated in
accordance with the provisions of SFAS No. 140, were segregated into pools for
valuation purposes, using as pooling criteria the loan term and coupon rate.
Once pooled, each grouping of loans was evaluated on a discounted earnings basis
to determine the present value of future earnings that a purchaser could expect
to realize from each portfolio. Earnings were projected from a variety of
sources including loan servicing fees, interest earned on float, net interest
earned on escrows, miscellaneous income, and costs to service the loans. The
present value of future earnings is the "economic" value of the pool, i.e., the
net realizable present value to an acquirer of the acquired servicing.
SFAS No. 140 requires that capitalized mortgage servicing rights and
capitalized excess servicing receivables be amortized in proportion to and over
the period of estimated net servicing income and assessed for impairment.
Impairment is measured based on fair value. The valuation of mortgage servicing
rights is influenced by market factors, including servicing volumes and market
prices, as well as management's assumptions regarding mortgage prepayment speeds
and interest rates. Management utilizes periodic third-party valuations by
qualified market professionals to evaluate the fair value of its capitalized
mortgage servicing assets.
Goodwill and Other Intangible Assets. The Company has recorded goodwill
and core deposit intangibles as a result of merger and acquisition activity.
Goodwill represents the excess purchase price paid over the net book value
of the assets acquired in a merger or acquisition. Pursuant to SFAS No. 142,
"Goodwill and Intangible Assets," goodwill is not amortized, but is tested for
impairment at the reporting unit annually and whenever an impairment indicator
arises. The evaluation involves assigning assets and liabilities to reporting
units and comparing the fair value of each reporting unit to its carrying value
including goodwill. If the fair value of a reporting unit exceeds its carrying
amount, goodwill is not considered impaired. However, if the carrying amount of
the reporting unit exceeds the fair value, goodwill is considered impaired. The
impairment loss equals the excess of carrying value over fair value.
Core deposit intangibles represent the value of long-term deposit
relationships and are amortized over their estimated useful lives. The Company
annually evaluates these estimated useful lives. If the Company determines that
events or circumstances warrant a change in these estimated useful lives, the
Company will adjust the amortization of the core deposit intangibles, which
could affect future amortization expense.
6. Stock-Based Compensation
------------------------
The Company has stock incentive plans that provide for grants of options,
restricted stock and other equity-based instruments of up to 1,200,000
authorized, but unissued shares of its common stock. The Company accounts for
its stock incentive plans in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," which contains a fair value-based method for valuing
stock-based compensation that entities may use, which measures compensation cost
at the grant date based on the fair value of the award. Compensation is then
recognized over the service period, which is usually the vesting period.
Alternatively, SFAS No. 123 permits entities to continue to account for stock
options and similar equity instruments under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." Entities that
continue to account for stock options using APB Opinion No. 25 are required to
make pro forma disclosures of net earnings and earnings per share, as if the
fair value-based method of accounting defined in SFAS No. 123 had been applied.
-11-
Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2005 and 2004
6. Stock-Based Compensation (continued)
------------------------------------
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock incentive plans. Accordingly, no compensation cost has
been recognized for the plan. Had compensation cost for the Company's stock
incentive plan been determined based on the fair value at the grant dates for
awards under the plan consistent with the accounting method utilized in SFAS No.
123, the Company's net earnings and earnings per share would have been reduced
to the pro-forma amounts indicated below for the three months ended March 31:
(In thousands, except share data) 2005 2004
- -------------------------------------------------------------------------------
Net earnings:
As reported $3,260 $3,147
Stock-based compensation, net of tax (259) (103)
- -------------------------------------------------------------------------------
Pro-forma net earnings $3,001 $3,044
===============================================================================
Basic earnings per share:
As reported $ .59 $ .56
Stock-based compensation, net of tax (.05) (.02)
- -------------------------------------------------------------------------------
Pro-forma $ .54 $ .54
===============================================================================
Diluted earnings per share:
As reported $ .57 $ .55
Stock-based compensation, net of tax (.05) (.02)
- -------------------------------------------------------------------------------
Pro-forma $ .52 $ .53
===============================================================================
The fair value of each option granted is estimated on the date of grant
using the modified Black-Scholes options-pricing model with the following
weighted-average assumptions used for grants in 2005, 2004 and 2003: dividend
yield of 1.6% for 2005 and 2004 and 2.3% for 2003; expected volatility 39.8% for
2005 and 2004 and 41.5% for 2003; risk-free interest rates of 3.65% for 2005 and
2004 and 3.38% for 2003; and expected lives of 4 years for 2005, 2004 and 2003.
A summary of the status of the Company's stock incentive plans as of March
31, 2005 and December 31, 2004 and 2003 and changes during the periods ended on
those dates is presented below:
Three months ended Year Ended
March 31, December 31,
2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
- ----------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of period 582,466 $ 22.21 572,397 $ 17.36 718,717 $ 15.35
Granted 2,000 37.72 130,500 37.19 68,000 30.46
Exercised (20,622) 16.55 (118,131) 15.87 (210,820) 14.77
Forfeited (6,883) 36.46 (2,300) 28.45 (3,500) 15.05
- ----------------------------------------------------------------------------------------------------------------------------
Outstanding at end of period 556,961 $ 22.30 582,466 $ 22.21 572,397 $ 17.36
============================================================================================================================
Options exercisable at period end 431,011 451,633 503,730
============================================================================================================================
Weighted-average fair value of options granted
during the period $ 13.14 $ 12.91 $ 9.31
============================================================================================================================
-12-
Oak Hill Financial, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2005 and 2004
6. Stock-Based Compensation (continued)
------------------------------------
The following information applies to options outstanding at March 31,
2005:
Range of exercise prices Number outstanding
- --------------------------------------------------------------------------------
$ 6.67 - $10.01 16,900
$10.02 - $15.03 44,413
$15.04 - $22.56 309,798
$22.57 - $33.86 60,400
$33.87 - $37.72 125,450
- --------------------------------------------------------------------------------
Total 556,961
================================================================================
Weighted-average exercise price $ 22.30
Weighted-average remaining contractual life 7.9 years
7. Effects of Recent Accounting Pronouncements
-------------------------------------------
In December 2004, the Financial Accounting Standards Board (the "FASB")
issued a revised Statement of Financial Accounting Standard ("SFAS") No. 123(R),
"Share-Based Payment," which establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services, primarily on accounting for transactions in which an entity obtains
employee services in share-based transactions. This Statement requires a public
entity to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award,
with limited exceptions. That cost will be recognized over the period during
which an employee is required to provide services in exchange for the awarded -
the requisite service period. No compensation cost is recognized for equity
instruments for which employees do not render the requisite service. Employee
share purchase plans will not result in recognition of compensation cost if
certain conditions are met.
Initially, the cost of employee services received in exchange for an award
of liability instruments will be measured based on current fair value; the fair
value of that award will be remeasured subsequently at each reporting date
through the settlement date. Changes in fair value during the requisite service
period will be recognized as compensation cost over that period. The grant-date
fair value of employee share options and similar instruments will be estimated
using option-pricing models adjusted for the unique characteristics of those
instruments (unless observable market prices for the same or similar instruments
are available). If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the
fair value of the modified award over the fair value of the original award
immediately before the modification.
Excess tax benefits, as defined by SFAS 123R, will be recognized as an
addition to additional paid in capital. Cash retained as a result of those
excess tax benefits will be presented in the statement of cash flows as
financing cash inflows. The write-off of deferred tax assets relating to
unrealized tax benefits associated with recognized compensation cost will be
recognized as income tax expense unless there are excess tax benefits from
previous awards remaining in additional paid in capital to which it can be
offset.
Effective April 2005, compensation cost is required to be recognized
beginning as of the first interim period of the fiscal year that begins on or
after June 15, 2005, or January 1, 2006 as to the Company. Management believes
the quarterly compensation cost, net of tax, will approximate the proforma
amount disclosed above.
-13-
Forward-Looking Statements
This report, including Management's Discussion and Analysis of Financial
Condition and Results of Operations, contains forward-looking statements about
the Company. These forward-looking statements include statements regarding
financial condition, results of operations, plans, objectives, and the future
performance and business of the Company, including management's establishment of
an allowance for loan losses, its statements regarding the adequacy of such
allowance for loan losses, and management's belief that the allowance for loan
losses is adequate. Forward-looking statements can be identified by the fact
that they do not relate strictly to historical or current facts.
By their nature, forward-looking statements are subject to numerous assumptions,
risks, and uncertainties. A number of factors could cause actual conditions,
events, or results to differ significantly and materially from those described
in the forward-looking statements. These factors include, but are not limited
to, those set forth below and under the heading "Business Risks" included in
Item 1 of the Company's Annual Report on Form 10-K for the year ended December
31, 2004 (2004 Form 10-K), and other factors described in the 2004 Form 10-K,
and from time-to-time in other filings with the Securities and Exchange
Commission.
Forward-looking statements speak only as of the date they are made. The Company
assumes no obligation to update forward-looking statements to reflect
circumstances or events that occur after the date the forward-looking statements
were made or to reflect the occurrence of unanticipated events.
Risk Factors
Oak Hill Financial, like other financial companies, is subject to a number of
risks, many of which are outside of management's control. Management strives to
mitigate those risks while optimizing returns. Among the risks assumed are: (1)
credit risk, which is the risk that loan and lease customers or other counter
parties will be unable to perform their contractual obligations, (2) market
risk, which is the risk that changes in market rates and prices will adversely
affect the Company's financial condition or results of operations, (3) liquidity
risk, which is the risk that the Company will have insufficient cash or access
to cash to meet operating needs, and (4) operational risk, which is the risk of
loss resulting from inadequate or failed internal processes, people, or systems,
or external events. The description of the Company's business contained in Item
1 of its 2004 Form 10-K, while not all inclusive, discusses a number of business
risks that, in addition to the other information in this report, readers should
carefully consider. Item 2:
Oak Hill Financial, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three month periods ended March 31, 2005 and 2004
Discussion of Financial Condition Changes from December 31, 2004 to March 31,
- -----------------------------------------------------------------------------
2005
- ----
The Company's total assets amounted to $1.1 billion as of March 31, 2005,
an increase of $22.6 million, or 2.1%, over the total at December 31, 2004. The
increase in assets was funded primarily through an increase in FHLB advances of
$17.0 million and a $10.0 million increase in reverse repurchase agreements,
which were partially offset by a $3.9 million decrease in deposits and a $2.7
million decrease in notes payable.
Cash and due from banks, federal funds sold, and investment securities,
including mortgage-backed securities, increased by $8.7 million, or 7.0%, to a
total of $132.7 million at March 31, 2005, compared to December 31, 2004.
Investment securities increased by $15.7 million, as purchases of $27.3 million
exceeded maturities and repayments of $5.4 million and sales of $4.4 million.
Federal funds sold decreased by $719,000 during the three-month period ended
March 31, 2005.
Loans receivable, including loans held for sale, totaled $926.6 million at
March 31, 2005, an increase of $14.0 million, or 1.5%, over the comparable
totals at December 31, 2004. Loan disbursements totaled $89.6 million during the
three-month period ended March 31, 2005, which were partially offset by loan
sales of $9.6 million and principal repayments of $65.0 million. Loan
disbursements and sales volume decreased by $11.3 million and $1.1 million,
respectively, as compared to the same period in 2004. Loan originations and
sales volume declined primarily due to the decrease in origination and sales of
residential real estate loans in the secondary market. Growth in the loan
portfolio during the three months ended March 31, 2005 was comprised of an $17.1
million, or 2.5%, increase in commercial and residential real estate loans,
which was partially offset by a $1.8 million, or 1.1%, decrease in consumer and
other loans, a $948,000, or 1.4%, decrease in installment loans, and a $152,000,
or 7.5%, decrease in credit card loans. The Company's allowance for loan losses
totaled $12.1 million at March 31, 2005, an increase of $215,000, or 1.8%, over
the total at
-14-
Oak Hill Financial, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three month periods ended March 31, 2005 and 2004
December 31, 2004. The allowance for loan losses represented 1.29% and 1.28% of
the total loan portfolio at March 31, 2005 and December 31, 2004, respectively.
Net charge-offs totaled approximately $535,000 and $350,000 for the three months
ended March 31, 2005 and 2004, respectively. The Company's allowance represented
156.4% and 186.8% of nonperforming loans, which totaled $7.7 million and $6.3
million at March 31, 2005 and December 31, 2004, respectively. At March 31,
2005, nonperforming loans were comprised of $476,000 in installment loans,
$717,000 in commercial and other loans, $2.9 million of loans secured primarily
by commercial real estate and $3.6 million of loans secured by one-to-four
family residential real estate. In management's opinion, all nonperforming loans
were adequately collateralized or reserved for at March 31, 2005.
Deposits totaled $858.2 million at March 31, 2005, a decrease of $3.9
million, or 0.5%, from the total at December 31, 2004. Brokered deposits
continued to be an integral part of the Company's overall funding strategy due
to competitive rates and lower operational costs compared with retail deposits.
Brokered deposits totaled $106.2 million with a weighted-average cost of 2.96%
at March 31, 2005, as compared to the $140.7 million in brokered deposits with a
2.71% weighted-average cost at December 31, 2004.
Advances from the Federal Home Loan Bank totaled $122.6 million at March
31, 2005, an increase of $17.0 million, or 16.1%, over the total at December 31,
2004. Securities sold under agreements to repurchase totaled $16.6 million at
March 31, 2005, an increase of $10.2 million, over the total at December 31,
2004. The increase resulted primarily from $10.0 million in reverse repurchase
agreements incepted in March 2005. Notes payable decreased $2.7 million as the
Company repaid a note to another financial institution.
The Company's stockholders' equity amounted to $86.8 million at March 31,
2005, an increase of $1.7 million, or 2.1%, over the balance at December 31,
2004. The increase resulted primarily from net earnings of $3.3 million and
proceeds from options exercised of $483,000, which were partially offset by
$949,000 dividends declared on common stock and a $1.0 million decrease in the
unrealized gain on securities to an overall unrealized loss on securities of
$444,000 at March 31, 2005.
Comparison of Results of Operations for the Three-Month Periods Ended March 31,
- --------------------------------------------------------------------------------
2005 and 2004
- -------------
General
- -------
Net earnings for the three months ended March 31, 2005 totaled $3.3
million, a $113,000, or 3.6%, increase over the net earnings reported in the
comparable 2004 period. The increase in earnings resulted primarily from a
$408,000 increase in net interest income, a $187,000 increase in other income,
and a $255,000 decrease in the provision for federal income taxes, which were
partially offset by a $175,000 increase in the provision for losses on loans and
a $562,000 increase in general, administrative and other expense.
Net Interest Income
- -------------------
Total interest income for the three months ended March 31, 2005, amounted
to $15.8 million, an increase of $1.6 million, or 11.2%, over the comparable
2004 period. Interest income on loans totaled $14.7 million, an increase of $1.4
million, or 10.8%, over the 2004 period. This increase resulted primarily from a
$99.8 million, or 12.0%, increase in the weighted-average ("average") portfolio
balance, to a total of $929.0 million for the three months ended March 31, 2005,
which was partially offset by a 1 basis point decrease in the average
fully-taxable equivalent yield, to 6.45% for the three month period ended March
31, 2005. Interest income on investment securities and other interest-earning
assets increased by $148,000, or 16.6%. The increase resulted primarily from a
$13.3 million, or 14.7%, increase in the average portfolio balance, to a total
of $103.8 million for the three months ended March 31, 2005, coupled with a 33
basis point increase in the average fully-taxable equivalent yield, to 4.71% for
the three months ended March 31, 2005.
Total interest expense amounted to $6.1 million for the three months ended
March 31, 2005, an increase of $1.2 million, or 24.1%, from the comparable 2004
period. Interest expense on deposits increased by $988,000, or 26.5%, to a total
of $4.7 million for the three months ended March 31, 2005. The increase resulted
primarily from a 22 basis point increase in the average cost of deposits, to
2.24% for the three months ended March 31, 2005, coupled with a $113.9 million,
or 15.4%, increase in the average portfolio balance, to a total of $853.4
million for the three months ended March 31, 2005. Interest expense on
borrowings increased by $193,000, or 16.2%, for the three months ended March 31,
2005. The increase was due to a $13.0 million, or 10.5%, increase in the average
borrowings outstanding for the three months ended March 31, 2005, coupled with a
24 basis point increase in the average cost of borrowings, to 4.08%. The
increase in the level of yields on interest-earning assets and the cost of
interest-bearing liabilities was primarily due to the rising interest rate
environment for the three month period ended March 31, 2005.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $408,000, or 4.4%, for the three
months ended March 31, 2005, as compared to the same period in 2004. The
interest rate spread decreased by 18
-15-
Oak Hill Financial, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three month periods ended March 31, 2005 and 2004
basis points, to 3.79% for the three months ended March 31, 2005, compared to
3.97% for the three months ended March 31, 2004. The fully-taxable equivalent
net interest margin decreased by 22 basis points from, 4.11% to 3.89% for the
three months ended March 31, 2004 and 2005, respectively.
Provision for Losses on Loans
- -----------------------------
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the
Company, the status of past due principal and interest payments, general
economic conditions, particularly as such conditions relate to the Company's
market area and other factors related to the collectibility of the Company's
loan portfolio. As a result of such analysis, management recorded a $750,000
provision for losses on loans for the three months ended March 31, 2005, an
increase of $175,000, or 30.4%, compared to same period in 2004. The provision
for losses on loans for the three months ended March 31, 2005 was predicated
primarily upon the $14.3 million of growth in the gross loan portfolio, the
$535,000 of loans charged-off during the current quarter, and an increase in
nonperforming loans from $6.3 million at December 31, 2004 to $7.7 million at
March 31, 2005.
Consistent with the Company's policy for determining the adequacy of its
allowance for loan losses, management continues to closely monitor criticized
loans for, among other factors previously discussed, adverse situations
affecting borrowers' abilities to repay and an assessment of current collateral
values. Although management believes that it uses the best information available
in providing for possible loan losses, future adjustments to the allowance could
be necessary and net earnings could be affected.
Other Income
- ------------
Other income totaled $2.5 million for the three months ended March 31,
2005, a increase of $187,000, or 8.0%, over the amount reported in the
comparable 2004 period. This increase resulted primarily from a $221,000, or
18.6%, increase in service fees and charges, a $23,000, or 7.8%, increase in
gain on sale of loans, and a $9,000, or 6.7%, increase in gain on sale of
securities, which were partially offset by a $66,000, or 9.0%, decrease in
insurance commissions. The increase in service fees, charges and other income
was due primarily to an increase in ATM fees totaling $98,000, an increase in
bank owned life insurance income of $79,000, and a $54,000 decrease in
amortization and impairment of mortgage servicing rights for the three months
ended March 31, 2005. The gain on sale of loans is attributable to a $78,000
increase in gains from the sale of Small Business Administration loans, which
was offset by a $55,000 decrease in gains from the sale of residential real
estate loans.
General, Administrative and Other Expense
- -----------------------------------------
General, administrative and other expense totaled $6.9 million for the
three months ended March 31, 2005, an increase of $562,000, or 8.9%, over the
amount reported in the 2004 period. The increase resulted primarily from a
$438,000, or 24.5%, increase in other operating expenses including
merger-related expenses, a $169,000, or 20.3%, increase in occupancy and
equipment, and a $142,000, or 4.1%, increase in compensation and benefits, which
were partially offset by a $191,000, or 78.3%, decrease in franchise tax
expense.
The increase in occupancy and equipment expense was due primarily to a
$144,000, or 71.0%, increase in maintenance and maintenance contracts and a
$61,000, or 24.7%, increase in depreciation expense. The increase in other
expenses resulted primarily from a $72,000 increase in amortization of core
deposit intangible, a $55,000, or 31.3%, increase in professional fees, a
$29,000, or 30.3%, increase in ATM expenses, a $22,000, or 33.5%, increase in
travel expense, a $9,000, or 6.2%, increase in postage, coupled with incremental
increases in other operating expenses year-to-year. The increase in compensation
and benefits resulted primarily from a $44,000, or 1.4%, increase in salaries
and wages partially attributable to yearly salary increases, a $28,000, or
15.5%, increase in group insurance, and a $20,000 increase in directors' fees.
The decrease in franchise tax expense generally reflects a tax savings resulting
from the Ripley acquisition.
Federal Income Taxes
- --------------------
The provision for federal income taxes amounted to $1.3 million for the
three months ended March 31, 2005, a decrease of $255,000, or 16.2%, from the
comparable 2004 period. The decrease resulted primarily from a $142,000, or
3.0%, decrease in earnings before taxes, coupled with $125,000 in new markets
tax credits pursuant to Oak Hill Banks' $10.0 million qualified equity
investments in Oak Hill Community Development Corp. in 2004. The effective tax
rates were 28.8% and 33.4% for the three months ended March 31, 2005 and 2004,
respectively.
-16-
Oak Hill Financial, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three month periods ended March 31, 2005 and 2004
Subsequent Event
- ----------------
On April 1, 2005, the Company completed its previously announced merger
with Lawrence Financial Holdings, Inc. ("Lawrence Financial") for a purchase
price of approximately $15.2 million, of which $7.7 million was paid in cash. In
addition, the Company issued 221,501 share of common stock to Lawrence Financial
shareholders. The transaction added $116.9 million in assets, $76.5 million in
loans, $104.2 million in deposits and $9.5 million in equity to the Company.
Item 3: Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
There has been no significant change from disclosures included in
the Company's Annual Report on Form 10-K for the year ended December
31, 2004.
Item 4: Controls and Procedures
-----------------------
Disclosure Controls and Procedures
----------------------------------
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits
under the Securities Act of 1934, as amended (the "Exchange Act") is
recorded, processed, summarized and reported, within the time
periods specified in the SEC's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure.
At the end of the period covered by this report, the Company's
management, with the participation of its chief executive officer
and chief financial officer, carried out an evaluation of the
effectiveness of our disclosure controls and procedures pursuant to
Rule 13a-15 promulgated under the Exchange Act. Based upon this
evaluation and the material weaknesses in the Company's internal
controls discussed below, the Company's chief executive officer and
chief financial officer concluded that the Company's disclosure
controls and procedures were ineffective at March 31, 2005.
Internal Controls
-----------------
Management is also responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The
Company recently identified deficiencies in its internal control
over financial reporting, based on an evaluation of the
effectiveness of internal control over financial reporting. The
identified material weaknesses relate to incomplete documentation on
loan and wire transfer approvals.
Changes in Internal Control Over Financial Reporting
----------------------------------------------------
During the quarter ended March 31, 2005, the Company implemented
several changes to its internal control over financial reporting in
response to the aforementioned deficiencies identified as of
December 31, 2004. To address the material weakness related to
incomplete documentation on loan approvals, the Company implemented
the following remediation steps:
o The Company has reviewed and identified loan approval
procedures for revision;
o The Company has implemented revised procedures for centralized
approvals of installment loans; and
o The Company has implemented additional testing of loan
approvals.
To address the material weakness related to incomplete documentation
of wire transfer approvals, the Company has implemented the
following remediation steps:
o The Company has reviewed and identified wire transfer approval
procedures for revision; and
o The Company has implemented additional testing of wire
transfer approvals.
-17-
Oak Hill Financial, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three month periods ended March 31, 2005 and 2004
Item 4: Controls and Procedures (continued)
-----------------------------------
There were no additional changes in the Company's internal control
over financial reporting made during the quarter ended March 31,
2005, that have materially affected, or are reasonably likely to
materially affect , the Company's internal control over financial
reporting.
PART II - OTHER INFORMATION
Item1: Legal Proceedings
-----------------
Not applicable.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
-----------------------------------------------------------
Not applicable.
Item 3: Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5: Other Information
-----------------
Not applicable.
Item 6: Exhibits
--------
Exhibits:
Exhibit Number Description
-------------- -----------
31.1 Certification of Chief Executive Officer, R. E.
Coffman, Jr., dated May 10, 2005, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
("SOX").
31.2 Certification of Chief Financial Officer, Ron
J. Copher, dated May 10, 2005, pursuant to
Section 302 of SOX.
32.1 Certification by Chief Executive Officer, R. E.
Coffman, Jr., dated May 10, 2005, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of SOX.
32.2 Certification by Chief Financial Officer, Ron
J. Copher, dated May 10, 2005, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
-18-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Oak Hill Financial, Inc.
Date: May 10, 2005 By: /s/ R. E. Coffman, Jr,
----------------------------------------
R. E. Coffman, Jr.
President & Chief Executive Officer
Date: May 10, 2005 By: /s/ Ron J. Copher
----------------------------------------
Ron J. Copher
Chief Financial Officer
-19-