Western Ohio Financial (NASDAQ:WOFC)
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Western Ohio Financial Corporation Announces Second Quarter
Earnings and Declares Dividend
SPRINGFIELD, Ohio, July 22 /PRNewswire-FirstCall/ -- Western Ohio Financial
Corporation (NASDAQ:WOFC), parent corporation of Cornerstone Bank, Springfield,
Ohio, today announced the Company's second quarter earnings and the declaration
of a quarterly dividend payment. A quarterly dividend of 25 cents per share
will be paid on August 18, 2004 to shareholders of record on August 4, 2004.
Net income for the three months ended June 30, 2004 was $505,000 compared to
$615,000 for the comparable quarter of 2003, while net income for the six
months ended June 30, 2004 was $1.0 million versus $1.2 million for the
comparable period of 2003. Earnings per share amounted to $0.27 and $0.55 on a
fully diluted basis for the three months and six months ended June 30, 2004,
respectively. Earnings per share on a fully diluted basis amounted to $0.35 and
$0.71 for the comparable periods of 2003, respectively.
The decline in the Company's financial results for the second quarter and first
half of 2004 from the comparable periods of 2003 was substantially attributable
to merger-related expenses related to the recently announced merger with
Wesbanco, Inc. of Wheeling, West Virginia. The attached exhibit provides net
income and earnings per share in conformance with generally accepted accounting
principles (GAAP) and on a non-GAAP basis by excluding merger-related expenses
to provide comparability with the Company's operating results from the second
quarter and first six months of 2003. The adjusted operating results of the
Company for the second quarter of 2004 were net income of $660,000 and earnings
per share on a fully diluted basis of $0.36, reflecting increases of $45,000,
or 7.3%, and $0.01, or 2.9%, respectively above the results of the comparable
quarter of 2003.
Net interest income of $2.5 million for the quarter ended June 30, 2004
represented an increase of approximately $92,000, or 3.9% above the quarter
ended June 30, 2003. The improvement in net interest income was attributed to a
higher level of average interest-earning assets; however continued margin
compression negatively impacted revenue as the net interest margin for the
second quarter amounted to 2.53% versus 2.90% in the second quarter of 2003.
Specifically, the accelerated amortization of premiums, amounting to
approximately $119,000, attributed to prepayments on purchased loans of $13.5
million, negatively impacted net interest income in the current quarter.
Additionally, due to the historical low level of interest rates, the Company
experienced a limited ability to lower interest rates on its deposit products.
Net interest income of $5.0 million for the first six months of 2004
represented an increase of $199,000, or 4.2%, from the comparable period of
2003. The six-month results for net interest income were impacted by the same
factors as previously noted for the current quarter coupled with the
accelerated amortization of premiums associated with prepayments of investment
securities.
Noninterest income for the quarter ended June 30, 2004 amounted to $852,000,
reflecting an increase of $71,000, or 9.1%, relative to the comparable quarter
of 2003. The increase was primarily related to an increase on the gains from
the sale of Real Estate Owned (REO) coupled with an increase in the net
mortgage servicing income, which were partially offset by a decline in gains on
the sale of loans and Bank Owned Life Insurance (BOLI) income. Gains related to
the sale of REO property acquired through foreclosure on delinquent residential
mortgage loans amounted to $56,000 in the second quarter of 2004 versus only
$1,000 in the comparable quarter of 2003. Mortgage servicing fees were
relatively constant year-over-year; however, the amortization of mortgage
servicing rights related to the servicing portfolio was accelerated in the
second quarter of 2003 due to a significantly higher level of prepayments on
serviced loans resulting in an impairment charge of approximately $70,000.
There were no corresponding impairment charges in the current quarter.
Gains on the sale of loans of approximately $39,000 in the second quarter of
2004 declined by approximately $65,000 from the second quarter of the previous
year due to a lower level of originations and refinancing activity in the
current quarter. The BOLI income, which is based upon the increase in the cash
surrender value of the life insurance, amounted to approximately $105,000 in
the second quarter of 2004, reflecting a decline of $19,000 from the prior
year's second quarter revenue due to the change from a guaranteed rate from the
insurance carriers in the initial year of the policies to market rates in the
current year.
Noninterest income for the six months ended June 30, 2004 amounted to $1.6
million, representing a decline of $30,000, or 1.9%, from the comparable period
of 2003. In addition to the changes in gains on the sale of loans and REO
property, BOLI income and net mortgage servicing income previously noted in the
second quarter comparisons, gains on the sale of investments of $16,000 for the
first six months ended June 30, 2004 declined from $71,000 for the comparable
period of 2003.
Finally, noninterest expense of $2.5 million for the second quarter of 2004
increased by $274,000, or 12.3%, from $2.2 million in the comparable quarter of
2003. Professional services, which amounted to $409,000 in the second quarter
of 2004 and increased $283,000 from the level of the second quarter of 2003,
accounted for the majority of the increase in noninterest expense. Legal
services and investment banking fees totaling $235,000, which were related to
the previously announced merger with Wesbanco on April 1, 2004, represented the
largest segment of the increase in professional services. In addition, legal
and proxy solicitation expenses amounting to $52,000 related to the Company's
defense of a potential proxy fight with a large shareholder accounted for the
remainder of the increase in professional services. Salaries and benefits
expense, which amounted to $1.2 million in the second quarter of 2004,
increased by $69,000, or 6.2%, from the level of the comparable quarter of 2003
due primarily to the increase in the employee stock ownership plan (ESOP)
expense of approximately $37,000 due to a significantly higher stock price
during the second quarter of 2004.
The reversal of a previously established contingency reserve for income taxes
partially offset the increase in expenses. A successful appeal with the
Internal Revenue Service related to the timing of charged-off loans and
associated treatment of uncollectible interest resulted in a reversal of
$60,000 of this previously established contingency. If the merger-related
expenses of $235,000 were excluded from the results of the second quarter,
noninterest expense would have increased by only $39,000, or 1.7%, from the
comparable quarter of 2003.
Noninterest expense for the first six months of 2004 amounted to $4.9 million,
which represented an increase of $399,000, or 8.9%, above the comparable period
of 2003. The increase was mainly attributable to the merger- related costs and
higher ESOP expense previously noted. The year-over-year increase in
noninterest expense for the first six months of 2004 would have been $164,000,
or 3.7%, if the merger-related expenses of $235,000 were excluded from the
results for the first six months of 2004.
As of June 30, 2004, Western Ohio had total assets of $410.8 million, net loans
of $329.6 million, total deposits of $257.4 million and shareholders' equity of
$45.3 million.
John W. Raisbeck, President and Chief Executive Officer, stated, "The
previously announced merger with Wesbanco is progressing as planned and is
expected to be completed in late August pending shareholder and regulatory
approval. As a result of the pending merger, financial results were
significantly impacted by merger-related expenses in the recently completed
quarter. If the merger-related expenses were excluded from noninterest expense,
second quarter diluted earnings per share would have been $0.08 above the first
quarter of 2004 and $0.01 above the comparable quarter of 2003. The adjusted
operating earnings were more in line with historical financial results and were
accomplished despite the recent slowdown of our mortgage banking activity and
the negative impact on earnings of the higher level of prepayments on purchased
mortgage loans."
NON-GAAP FINANCIAL INFORMATION
This press release contains financial information determined in accordance with
methods other than generally accepted accounting principles (GAAP). Western
Ohio's management uses these non-GAAP measures in their analysis of the
Company's performance. These measures, shown on the attached exhibit, adjust
GAAP performance measures to exclude the impact of merger-related expenses.
Since merger-related expenses and their impact on Western Ohio's performance
are difficult to predict, management believes that their exclusion in financial
presentations provides useful supplemental information that is essential to a
proper understanding of the operating results of Western Ohio's core business.
FORWARD-LOOKING STATEMENTS
When used in the Company's press releases or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result," "project,"
"believe," or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
to advise readers that various factors -- including regional and national
economic conditions, changes in the levels of market interest rates, credit
risks of lending activities, and competitive and regulatory factors -- could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ materially from those anticipated or
projected.
The Company does not undertake -- and specifically disclaims any obligation --
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
WESTERN OHIO FINANCIAL CORPORATION
COMPARATIVE STATISTICS
Dollars in thousands except per share data)
June 30, December 31,
2004 2003
Total assets $410,775 $ 399,540
Total loans, net 329,628 334,469
Allowance for loan and lease losses 1,895 1,801
Securities 47,376 32,735
Deposits 257,441 248,681
Borrowed funds 105,084 103,473
Shareholders' equity 45,330 44,357
Book value per common share outstanding $25.04 $24.92
Market value per share $34.30 $32.08
For the Quarter Ended
June 30,
2004 2003
Net income $505 $615
Earnings per share
Basic $ 0.28 $ 0.36
Diluted $ 0.27 $ 0.35
Return on average assets 0.49% 0.71%
Return on average equity 4.44% 5.65%
Net income, excluding after-tax
merger-related expenses $ 660 $ 615
Basic EPS, excluding after-tax
merger-related expenses $ 0.37 $ 0.36
Diluted EPS, excluding after-tax
merger-related expenses $ 0.36 $ 0.35
For the Six Months Ended
June 30,
2004 2003
Net income $ 1,017 $ 1,236
Earnings per share
Basic $ 0.57 $ 0.72
Diluted $ 0.55 $ 0.71
Return on average assets 0.51% 0.72%
Return on average equity 4.50% 5.67%
Net income, excluding after-tax
merger-related expenses $ 1,172 $ 1,236
Basic EPS, excluding after-tax
merger-related expenses $ 0.65 $ 0.72
Diluted EPS, excluding after-tax
merger-related expenses $ 0.64 $ 0.71
Reconcilement of Non-GAAP Measures
(In Thousands)
For the Quarter Ended
Computation of Net Income excluding June 30,
Merger-related Expenses 2004 2003
GAAP Net Income $ 505 $ 615
Plus: Merger-related expenses 235 -
Less: Taxes on merger-related expenses (80) -
Net income, excluding merger-related expenses $ 660 $ 615
For the Six Months Ended
Computation of Net Income excluding June 30,
Merger-related Expenses 2004 2003
GAAP Net Income $ 1,017 $ 1,236
Plus: Merger-related expenses 235 -
Less: Taxes on merger-related expenses (80) -
Net income, excluding merger-related expenses $ 1,172 $ 1,236
DATASOURCE: Western Ohio Financial Corporation
CONTACT: John W. Raisbeck, President and CEO of Western Ohio Financial
Corporation, +1-937-327-1112