SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 16, 2002
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United Community Financial Corp.
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(Exact name of registrant as specified in its charter)
Ohio 0-24399 34-1856319
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(State or other jurisdiction (Commission (IRS Employer of
incorporation) File Number) Identification Number)
275 Federal Plaza West
Youngstown, Ohio 44503-1203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 742-0500
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Not Applicable
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(Former name or former address, if changes since last report.)
Item 5: Other Events
UNITED COMMUNITY FINANCIAL CORP.
275 Federal Plaza West
Youngstown, Ohio 44503-1203
FOR IMMEDIATE RELEASE
Patrick A. Kelly
Chief Financial Officer
(330) 742-0500, Ext. 2592
UNITED COMMUNITY FINANCIAL CORP. ANNOUNCES
EARNINGS FOR THIRD QUARTER 2002
YOUNGSTOWN, Ohio (October 16, 2002) - United Community Financial Corp. (Nasdaq:
UCFC), holding company of The Home Savings and Loan Co. and Butler Wick Corp.,
today reported net income of $5.2 million, or $0.16 per diluted share, for the
quarter ended September 30, 2002, compared with $4.0 million, or $0.12 per
diluted share, for the third quarter of 2001. For the nine months ended
September 30, 2002, net income was $15.5 million, or $0.48 per diluted share,
compared with $10.1 million, or $0.31 per diluted share, for the nine months
ended September 30, 2001.
"The first three quarters of 2002 have been very good for United Community with
a 53% increase in net income over the same period of the prior year," said
Douglas M. McKay, chairman and chief executive officer of United Community.
"United Community has been able to reduce debt while continuing to expand our
customer base through the acquisition of Potters Financial Corp. and by
increasing both loans and deposits. The results through nine months also showed
continuing improvement in our return on average assets and return on average
equity compared with prior periods."
Third Quarter Results
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United Community's net interest income for the three months ended September 30,
2002 increased $2.6 million over the same period in 2001 and noninterest income
increased $1.0 million over the same quarter in the previous year. These
increases were partially offset by a $1.5 million increase in noninterest
expense and a $285,000 increase in the provision for loan losses.
The increase in net interest income is primarily due to a decrease in interest
expense on deposits and other borrowed funds as a result of the current interest
rate environment. These decreases were partially offset by a decrease in
interest earned on loans, securities and margin accounts.
The increase in noninterest income was primarily a result of increases in gains
on loans sold, commissions and service fees and other charges. These increases
were partially offset by a decline in other income, underwriting and investment
banking and other recognized losses as a result of the disposal of fixed assets.
Due to the current interest rate environment, United Community has been
selling new loan originations to help reduce interest rate risk. United
Community became active in the secondary market in 2001 and anticipates
continuing to sell newly originated loans in the future.
The increase in noninterest expense was primarily due to a $1.5 million increase
in salaries and employee benefits, primarily as a result of the additional staff
acquired from Potters. Increases in occupancy, equipment and data processing and
other expenses, all primarily related to the acquisition, also contributed to
the increase in noninterest expense. These increases were partially offset by a
decrease in the amortization of the core deposit intangible.
Year to Date Results
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Net interest income for the nine months ended September 30, 2002 increased $13.1
million and noninterest income increased $5.3 million over the previous year.
These increases were partially offset by a $9.2 million increase in noninterest
expense and a $900,000 increase in the provision for loan losses.
The increase in net interest income for the first nine months of 2002 compared
to 2001 is primarily due to an increase of $17.9 million in loan income as a
result of new loan originations and the acquisitions of Industrial and Potters.
This increase was partially offset by an increase in other borrowed funds of
$1.0 million and decreases in interest earned on securities of $3.2 million and
margin accounts of $874,000.
Noninterest income increased for the nine months ended September 30, 2002
compared to the same period in 2001 as a result of increases in gains on loans
sold of $4.4 million, increases in service fees and other charges, gains
recognized on securities and other income. The increase in other income was
related to the sale of Anthem stock received by Home Savings in the
demutualization of Anthem. These increases were partially offset by a decline in
underwriting and investment banking fees and other recognized losses primarily
as a result of the disposal of fixed assets.
Noninterest expense increased partially as a result of an increase in salaries
and employee benefits costs, which is primarily a result of the acquisitions of
Industrial and Potters. Adding to the increase in noninterest expense were
increases in the amortization of core deposit intangible related to the two
acquisitions, occupancy, equipment and data processing and other expenses. The
increase in other expense is primarily due the costs associated with the early
extinguishment of debt that has been reclassified from extraordinary items in
accordance with SFAS No. 145, which was adopted on April 1, 2002.
Financial Condition
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United Community's annualized return on average assets and annualized return on
average equity were 1.02% and 7.71%, respectively, for the nine months ended
September 30, 2002. The annualized returns on average assets and average equity
were 0.86% and 5.19%, respectively, for the nine months ended September 30,
2001.
Total shareholders' equity increased $8.5 million from December 31, 2001 to
September 30, 2002. The increase was primarily due to income for the period,
offset by quarterly dividend payments and treasury stock purchases. Book value
as of September 30, 2002 was $7.65 per share.
Total assets increased by $84.5 million, or 4.3%, to $2.0 billion at September
30, 2002 compared with December 31, 2001, primarily as a result of the
acquisition of Potters. Loans increased $123.4 million, securities increased
$94.1 million, goodwill increased $13.9 million and other borrowed funds
decreased $18.9 million. These changes were funded by a $148.1 million decline
in cash and cash equivalents and a $101.8 million increase in deposits.
Net loans increased $123.4 million, or 8.8%, from December 31, 2001 to September
30, 2002. Home Savings had increases of $54.5 million in consumer loans, $49.4
million in real estate loans, $15.1 million in construction loans and $12.0
million in commercial loans. The allowance for loan losses increased $3.4
million, or 29.5%, to $14.9 million at September 30, 2002 compared with $11.5
million at December 31, 2001. Of this increase, approximately $1.9 million was
acquired from Potters. The remaining increase was a result of an increase in the
provision for loan losses less net chargeoffs. The increase in the provision is
due to the increase in the loan portfolio and current market conditions. The
allowance for loan losses as a percentage of total loans increased to 0.96% at
September 30, 2002 compared to 0.81% at December 31, 2001.
Deposits increased $101.8 million, or 7.4%, from December 31, 2001 to September
30, 2002, primarily as a result of deposits acquired from Potters. Increases in
Home Savings' deposits primarily consisted of a $58.6 million increase in
savings accounts, a $33.9 million increase in checking accounts and a $10.2
million increase in certificates of deposit. Other borrowed funds decreased
$18.9 million from December 31, 2001 to September 30, 2002, due primarily to the
maturity and early extinguishment of Federal Home Loan Bank debt.
"We are continuing to pursue our three initiatives of growth, profitability and
capital management in 2002," said McKay. "Our acquisition of Potters is helping
to strengthen our position in our current market and providing opportunities in
new market areas. Our assets exceed $2.0 billion, our earnings are up
considerably from last year and assuming the real estate market remains strong,
we're anticipating continued good results for the remainder of the year."
Home Savings and Butler Wick are wholly owned subsidiaries of United Community
Financial Corp. Home Savings operates 33 full service banking offices and 5 loan
production offices, including the former Potters offices, located throughout
Northern Ohio and Western Pennsylvania. Butler Wick has 12 office locations
providing full service retail brokerage, capital markets and trust services
throughout Northern Ohio and Western Pennsylvania. Additional information on
United Community, Home Savings and Butler Wick may be found on United
Community's web site: www.ucfconline.com.
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When used in this Form 8-K or in future filings by United Community
with the SEC, in United Community'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," "are
expected to," "will continue," "is anticipated," "estimate," "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in United Community's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in Home
Savings' market area, demand for investments in Butler Wick's market area and
competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. United
Community
cautions readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. United Community advises
readers that the factors listed above could affect United Community's financial
performance and could cause United Community's actual results for future periods
to differ materially from any opinions or statements expressed with respect to
future periods in any current statements.
United Community 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 events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED COMMUNITY FINANCIAL CORP.
By: /s/ Patrick A. Kelly
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Patrick A. Kelly
Chief Financial Officer
Dated: October 16, 2002
UNITED COMMUNITY FINANCIAL CORP.
As of As of
September 30, 2002 December 31, 2001
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(In thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA:
ASSETS
Cash and cash equivalents $ 57,780 $ 205,883
Mortgage-related securities 171,693 145,867
Marketable securities 129,434 61,131
Federal Home Loan Bank stock 20,832 18,760
Loans held for sale 22,124 20,192
Loans 1,544,712 1,417,959
Allowance for loan losses (14,865) (11,480)
Real estate owned 1,622 477
Goodwill 33,593 19,664
Core deposit intangible 5,534 6,312
Other assets 56,812 60,015
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Total assets $ 2,029,271 $ 1,944,780
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LIABILITIES
Deposits $ 1,485,174 $ 1,383,418
Other borrowed funds 252,751 271,631
Other liabilities 20,984 27,851
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Total liabilities 1,758,909 1,682,900
SHAREHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized and unissued
at September 30, 2002 - -
Common stock-no par value; 499,000,000 shares authorized; 37,804,457
and 37,754,086 issued, respectively 137,953 136,903
Retained earnings 169,126 160,915
Other comprehensive income 1,401 1,402
Unearned compensation (20,616) (22,988)
Treasury stock, at cost; 2,465,742 and 2,086,500 shares, respectively (17,502) (14,352)
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Total shareholders' equity 270,362 261,880
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Total liabilities and shareholders' equity $ 2,029,271 $ 1,944,780
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Book value per share $ 7.65 $ 7.34
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
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(In thousands, except per share data)
SELECTED EARNINGS DATA (UNAUDITED):
Interest income $ 31,770 $ 32,872 $ 95,633 $ 81,555
Interest expense 13,152 16,819 41,772 40,744
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Net interest income 18,618 16,053 53,861 40,811
Provision for loan losses 750 465 1,978 1,045
Noninterest income:
Commissions 3,189 3,019 10,248 10,031
Service fees and other charges 2,209 2,156 6,123 5,923
Underwriting and investment banking 22 127 193 511
Net gains (losses)
Loans sold 1,309 258 4,758 339
Securities (490) (655) (180) (465)
Other (89) 46 (254) 52
Other income 124 285 1,515 753
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Total noninterest income 6,274 5,236 22,403 17,144
Noninterest expense:
Salaries and employee benefits 9,568 8,097 29,238 24,496
Occupancy 818 702 2,369 1,896
Equipment and data processing 2,048 1,930 6,033 5,324
Amortization of core deposit intangible 507 915 1,746 915
Other noninterest expense 3,032 2,874 10,704 8,219
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Total noninterest expense 15,973 14,518 50,090 40,850
Income before taxes 8,169 6,306 24,196 16,060
Income taxes 2,964 2,341 8,739 5,954
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Net income $ 5,205 $ 3,965 $ 15,457 $ 10,106
======== ======== ======== ========
Basic earnings per share $ 0.16 $ 0.12 $ 0.48 $ 0.31
Diluted earnings per share $ 0.16 $ 0.12 $ 0.48 $ 0.31
Dividends paid per share $ 0.075 $ 0.075 $ 0.225 $ 0.225
Three Months Ended Three Months Ended Three Months Ended
September 30, June 30, March 31,
2002 2002 2002
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(Dollars in thousands)
AVERAGE DAILY BALANCE OF SELECTED FINANCIAL CONDITION DATA (UNAUDITED):
Net loans (including allowance for loan losses $ 1,518,533 $ 1,582,747 $ 1,428,867
of $14,865, $14,365 and $12,022, respectively)
Loans held for sale 14,922 6,486 15,852
Mortgage-related securities 157,092 125,139 136,163
Marketable securities 100,633 98,349 101,730
Margin accounts 16,980 18,430 20,440
Other interest-earning assets 85,323 80,641 165,669
Total interest-earning assets 1,893,483 1,911,792 1,868,721
Total assets 2,003,574 2,023,237 1,952,630
Certificates of deposit 855,939 880,608 839,288
Interest-bearing checking, demand and savings accounts 595,866 597,144 523,731
Other-interest bearing liabilities 198,047 197,727 254,272
Total interest-bearing liabilities 1,649,852 1,675,479 1,617,291
Noninterest-bearing deposits 47,255 43,345 37,005
Total noninterest-bearing liabilities 83,463 81,175 33,249
Total liabilities 1,733,315 1,756,654 1,687,545
Shareholders' equity 270,259 266,583 265,085
Common shares outstanding for basic EPS calculation 31,773,058 31,821,940 31,951,231
Common shares outstanding for diluted EPS calculation 32,318,094 32,254,684 32,212,143
SUPPLEMENTAL LOAN DATA:
Loans originated $ 220,129 $ 215,637 $ 198,712
Loans purchased 7,317 13,568 5,450
Loans sold 42,434 135,440 52,505
Loan chargeoffs 261 80 208
Recoveries on loans 35 22 54
As of As of As of
September 30, June 30, March 31,
2002 2002 2002
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SUPPLEMENTAL DATA:
Nonaccrual loans $ 13,466 $ 12,189 $ 9,479
Restructured loans 1,255 1,281 1,459
Other real estate owned 1,622 1,167 1,186
Total nonperforming assets 16,343 14,637 12,124
Loans serviced for others 341,027 332,448 215,001
Number of full time equivalent employees 789 777 726
Mortgage-related securities available for sale 114,372 73,992 54,533
Mortgage-related securities held to maturity 57,321 62,983 70,227
Marketable securities trading 44,401 5,033 6,514
Marketable securities available for sale 82,437 86,698 90,301
Marketable securities held to maturity 2,596 2,096 2,197
Federal Home Loan Bank stock 20,832 20,586 18,968
Fair value of held to maturity securities 62,914 67,372 73,654
REGULATORY CAPITAL DATA:
Regulatory tangible capital $ 173,854 $ 166,533 $ 171,759
Tangible capital ratio 9.11 8.67 9.28
Regulatory core capital 173,854 166,533 171,759
Core capital ratio 9.11 8.67 9.28
Regulatory total capital 184,935 177,766 182,158
Total risk adjusted assets 1,318,391 1,355,444 1,227,142
Total risk adjusted ratio 14.03 13.11 14.84