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: January 29, 2003
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
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. 592
UNITED COMMUNITY FINANCIAL CORP. ANNOUNCES
EARNINGS FOR FOURTH QUARTER AND YEAR END 2002
YOUNGSTOWN, Ohio (January 29, 2003) - United Community Financial Corp. (Nasdaq:
UCFC), holding company of The Home Savings and Loan Co. and Butler Wick Corp.,
announced today financial results for the fourth quarter and year end fiscal
2002.
For the fourth quarter ended December 31, 2002, net income was reported as $5.4
million, or $0.17 per diluted share, compared to $5.6 million, or $0.17 per
diluted share, for the fourth quarter of 2001. For the year ended December 31,
2002, net income was $20.8 million, or $0.65 per diluted share, compared with
$15.7 million, or $0.48 per diluted share, for the year ended December 31, 2001.
"2002 proved to be an excellent year for United Community," said Douglas M.
McKay, chairman and chief executive officer of United Community. "We experienced
a 33% increase in net income over 2001 while reducing our debt. We also
continued to expand our customer base through the acquisition of Potters
Financial Corp. and by opening a Home Savings branch in Mentor, Ohio and a
Butler Wick office in Columbus, Ohio. During 2002, United Community also showed
continuing improvement in our efficiency ratio, return on average assets and
return on average equity compared with 2001."
Fourth Quarter Results
United Community's net interest income for the three months ended December 31,
2002 increased $2.5 million over the same period in 2001, while noninterest
income decreased $2.6 million over the same quarter in the previous year. The
increase in net interest income was also offset by a $1.4 million increase in
noninterest expense and a $150,000 increase in the provision for loan losses.
The increase in net interest income can be attributed to a reduction in interest
expense on deposits and other borrowed funds due to the current interest rate
environment, which, in turn, were partially offset by a decrease in interest
earned on securities and margin accounts. The decrease in noninterest income was
directly a result of a decline in gains on loans sold, underwriting and
investment banking income and an increase in other recognized losses due to the
disposal of fixed assets. These changes were partially offset by increases in
gains recognized on securities, service fees and other charges.
In 2001, United Community became active in the secondary market and during the
fourth quarter of that year, in order to improve the company's interest rate
risk profile, sold fixed rate loans out of the portfolio, resulting in large
gains. Due to the current interest rate environment, United Community has been
selling new loan originations to help reduce interest rate risk. The smaller net
gains reported in the fourth quarter of 2002 relate to the sale of new
originations, which it anticipates continuing to do in the future.
The increase in noninterest expense was primarily the result of an increase in
compensation due to the additional staff acquired from Potters, as well as
increases in occupancy, equipment, data processing and other expenses related to
the acquisition. These increases were partially offset by a decrease in the
amortization of the core deposit intangible.
Year to Date Results
Net interest income for the year ended December 31, 2002 increased $15.5 million
and noninterest income increased $2.6 million over the previous year, both of
which were partially offset by a $10.7 million increase in noninterest expense
and a $1.1 million increase in the provision for loan losses.
The growth in net interest income for 2002 as compared to 2001 is primarily due
to an increase of $17.8 million in loan income from new loan originations and
the acquisitions of Industrial Bancorp and Potters Financial Corp., as well as a
$3.1 million decline in interest expense on deposits. This increase was
partially offset by decreases in interest earned on securities of $3.9 million
and margin accounts of $944,000.
The increase in noninterest income was a result of a $2.0 million increase in
gains recognized on securities, $1.0 million in other income, $469,000 in gains
on loans sold and $467,000 in service fees and other charges. The growth in
other income was related to the sale of stock received by Home Savings in the
demutualization of Anthem. These changes were partially offset by a decline in
underwriting and investment banking fees and other recognized losses as a result
of the disposal of fixed assets.
Noninterest expense grew in part because of an increase in the amortization of
core deposit intangible and compensation costs related to the two acquisitions.
Contributing factors also included occupancy, equipment, data processing and
other expenses, which were largely due to costs associated with the early
extinguishment of debt reclassified from extraordinary items in accordance with
SFAS No. 145 adopted on April 1, 2002.
United Community's return on average assets and return on average equity were
1.04% and 7.74%, respectively, for the year ended December 31, 2002, while the
returns on average assets and average equity were 0.97% and 6.03%, respectively,
for the previous year.
Financial Condition
Total shareholders' equity increased $12.7 million from December 31, 2001 to
December 31, 2002. This was principally due to income for the period, offset by
quarterly dividend payments and treasury stock purchases. Book value as of
December 31, 2002 was $7.79 per share.
Total assets increased by $45.4 million, or 2.3%, to $2.0 billion at December
31, 2002 compared with December 31, 2001, again as a result of the Potters
acquisition. Loans increased $71.7 million, securities by $35.3 million,
goodwill by $13.9 million, while other borrowed funds decreased $61.6 million.
These changes were funded by a $94.9 million decline in cash and cash
equivalents and a $98.5 million increase in deposits.
Net loans remained strong, increasing $71.7 million, or 5.1%, from December 31,
2001 to December 31, 2002. Specifically, Home Savings showed growth of $44.8
million in consumer loans, $19.4 million in commercial loans, $15.1 million in
construction loans and $2.5 million in real estate loans. The allowance for loan
losses increased $3.6 million, or 31.5% over last year to $15.1 million at
December 31, 2002, of which, approximately $1.9 million was acquired from
Potters. The remainder was due to an increase in the provision for loan losses
less net chargeoffs, which can be attributed to growth in the loan portfolio, as
well as current market conditions. The allowance for loan losses as a percentage
of total loans increased to 1.01% at December 31, 2002 compared to 0.81% at
December 31, 2001.
Deposits increased $98.5 million, or 7.1%, from December 31, 2001 to December
31, 2002, mainly comprised of deposits acquired from Potters. While current rate
conditions led Home Savings to realize a $13.6 million decrease in certificates
of deposit, this was overcompensated by increases of $44.9 million in savings
accounts and $67.2 million in checking accounts. Other borrowed funds decreased
$61.6 million from December 31, 2001 to December 31, 2002, due mostly to the
maturity and early extinguishment of Federal Home Loan Bank debt.
"We remained focused on our three initiatives of growth, profitability and
capital management throughout 2002," said McKay. "The acquisition of Potters
helped to strengthen our position in our current market, while the opening of
our new offices have provided growth opportunities in new market areas. We are
well positioned to continue to build on our record of success and are therefore
anticipating another strong year in 2003."
Home Savings and Butler Wick are wholly owned subsidiaries of United Community
Financial Corp. Home Savings operates 34 full service banking offices and 4 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.
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 result 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: January 28, 2003
UNITED COMMUNITY FINANCIAL CORP.
As of As of
December 31, 2002 December 31, 2001
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(In thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA:
ASSETS
Cash and cash equivalents $ 110,936 $ 205,883
Investment securities 242,328 206,998
Federal Home Loan Bank stock 21,069 18,760
Loans held for sale 45,825 20,192
Loans 1,493,312 1,417,959
Allowance for loan losses (15,099) (11,480)
Real estate owned 994 477
Goodwill 33,593 19,664
Core deposit intangible 5,101 6,312
Other assets 52,072 60,015
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Total assets $ 1,990,131 $ 1,944,780
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LIABILITIES
Deposits $ 1,481,901 $ 1,383,418
Other borrowed funds 210,024 271,631
Other liabilities 23,637 27,851
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Total liabilities 1,715,562 1,682,900
SHAREHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized
and unissued at December 31, 2002 -- --
Common stock-no par value; 499,000,000 shares authorized;
37,803,269 and 37,754,086 issued, respectively 138,207 136,903
Retained earnings 172,080 160,915
Other comprehensive income 2,363 1,402
Unearned compensation (19,724) (22,988)
Treasury stock, at cost; 2,558,214 and 2,086,500
shares, respectively (18,357) (14,352)
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Total shareholders' equity 274,569 261,880
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Total liabilities and shareholders' equity $ 1,990,131 $ 1,944,780
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Book value per share $ 7.79 $ 7.34
Three Months Ended Twelve Months Ended
December 31, December 31,
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2002 2001 2002 2001
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(In thousands, except per share data)
SELECTED EARNINGS DATA (UNAUDITED):
Interest income $ 31,062 $ 32,434 $ 126,693 $ 113,989
Interest expense 12,465 16,303 54,236 57,047
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Net interest income 18,597 16,131 72,457 56,942
Provision for loan losses 1,600 1,450 3,578 2,495
Noninterest income:
Commissions 3,429 3,380 13,677 13,411
Service fees and other charges 2,101 1,834 8,224 7,757
Underwriting and investment banking 119 806 312 1,316
Net gains (losses)
Loans sold 1,161 5,111 5,919 5,450
Securities 1,655 (13) 1,476 (477)
Other (260) (14) (515) 37
Other income 464 203 1,980 955
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Total noninterest income 8,669 11,307 31,073 28,449
Noninterest expense:
Salaries and employee benefits 10,679 10,033 39,917 34,528
Occupancy 817 679 3,186 2,575
Equipment and data processing 2,277 2,054 8,309 7,378
Amortization of core deposit intangible 434 756 2,180 1,671
Other noninterest expense 4,062 3,337 14,767 11,556
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Total noninterest expense 18,269 16,859 68,359 57,708
Income before taxes 7,397 9,129 31,593 25,188
Income taxes 2,037 3,555 10,776 9,509
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Net income $ 5,360 $ 5,574 $ 20,817 $ 15,679
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Basic earnings per share $ 0.17 $ 0.18 $ 0.65 $ 0.49
Diluted earnings per share $ 0.17 $ 0.17 $ 0.65 $ 0.48
Dividends paid per share $ 0.075 $ 0.075 $ 0.300 $ 0.300
Three Months Ended Three Months Ended Three Months Ended
December 31, September 30, June 30,
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
of $15,099, $14,865 and $14,365, respectively) $ 1,500,940 $ 1,518,533 $ 1,582,747
Loans held for sale 36,218 14,922 6,486
Investment securities 246,754 257,725 223,488
Margin accounts 15,683 16,980 18,430
Other interest-earning assets 94,420 85,323 80,641
Total interest-earning assets 1,894,015 1,893,483 1,911,792
Total assets 2,002,717 2,003,574 2,023,237
Certificates of deposit 824,516 855,939 880,608
Interest-bearing checking, demand and savings accounts 599,144 595,866 597,144
Other-interest bearing liabilities 215,389 198,047 197,727
Total interest-bearing liabilities 1,639,049 1,649,852 1,675,479
Noninterest-bearing deposits 55,562 47,255 43,345
Total noninterest-bearing liabilities 89,736 83,463 81,175
Total liabilities 1,728,785 1,733,315 1,756,654
Shareholders' equity 273,932 270,259 266,583
Common shares outstanding for basic EPS calculation 31,891,690 31,773,058 31,821,940
Common shares outstanding for diluted EPS calculation 32,375,598 32,318,094 32,254,684
SUPPLEMENTAL LOAN DATA:
Loans originated $ 260,383 $ 220,129 $ 215,637
Loans purchased 1,000 7,317 13,568
Loans sold 108,034 42,434 135,440
Loan chargeoffs 1,394 261 80
Recoveries on loans 28 35 22
As of As of As of
December 31, September 30, June 30,
2002 2002 2002
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SUPPLEMENTAL DATA:
Nonaccrual loans $ 14,196 $ 13,466 $ 12,189
Restructured loans 1,271 1,255 1,281
Other real estate owned 994 1,622 1,167
Total nonperforming assets 16,461 16,343 14,637
Loans serviced for others 386,218 341,027 332,448
Number of full time equivalent employees 774 789 777
Investment securities trading 5,060 44,401 5,033
Investment securities available for sale 237,268 196,809 160,690
Investment securities held to maturity 0 59,917 65,079
Federal Home Loan Bank stock 21,069 20,832 20,586
Fair value of held to maturity securities 0 62,914 67,372
REGULATORY CAPITAL DATA:
Regulatory tangible capital $ 150,821 $ 173,854 $ 166,533
Tangible capital ratio 8.05 9.11 8.67
Regulatory core capital 150,821 173,854 166,533
Core capital ratio 8.05 9.11 8.67
Regulatory total capital 163,419 184,929 177,766
Total risk adjusted assets 1,295,667 1,318,398 1,355,444
Total risk adjusted ratio 12.61 14.03 13.11