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: July 17, 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.)
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 SECOND QUARTER 2002
ITEM 5: OTHER EVENTS
YOUNGSTOWN, Ohio (July 17, 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 $6.0 million, or $0.19 per diluted share, for the
quarter ended June 30, 2002, compared to $2.9 million, or $0.09 per diluted
share, for the second quarter of 2001. For the six months ended June 30, 2002,
net income was $10.3 million, or $0.32 per diluted share, compared with $6.1
million, or $0.19 per diluted share, for the six months ended June 30, 2001.
"The first two quarters of 2002 have been very good for United Community with a
67% increase in net income over the prior year," said Douglas M. McKay, chairman
and chief executive officer of United Community. "So far this year, United
Community has been able to reduce debt while continuing to expand our base
through the acquisition of Potters Financial Corp. and by increasing both loans
and deposits."
SECOND QUARTER RESULTS
United Community's net interest income for the three months ended June 30, 2002
increased $6.5 million over the same period in 2001, and noninterest income
increased $2.3 million over the same quarter in the previous year. These
increases were partially offset by a $3.8 million increase in noninterest
expense and a $282,000 increase in the provision for loan losses.
The increase in net interest income is primarily due to an increase in interest
income on loans, which was partially offset by increases in interest expense on
deposits and other borrowed funds and a decrease in interest earned on
securities and margin accounts. The increases in interest income and interest
expense were primarily due to increases in loans and deposits.
The increase in noninterest income was primarily a result of increases in gains
on loans sold, in commissions and in service fees and other charges, which were
partially offset by realized losses on securities and other assets. United
Community realized net gains of $264,000 and $14,000 on sales of securities and
other assets, respectively, in the same quarter of the prior year. During the
second quarter of 2002, United Community sold approximately $107.9 million in
fixed rate loans out of the
portfolio to help reduce interest rate risk, which resulted in a gain of
approximately $2.0 million. 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 due partially to a $1.4 million
increase in salaries and employee benefits, primarily as a result of the
additional staff acquired from Industrial Bancorp and Potters. Increases in the
amortization of core deposit intangible, occupancy, equipment and data
processing and other expenses also contributed to the increase in noninterest
expense. Increases in occupancy and equipment and data processing are all
primarily related to the two acquisitions. The increase in other expense is
related to the costs associated with the early extinguishment of debt. In
accordance with SFAS No. 145, which was adopted on April 1, 2002, these costs,
which were previously recognized as an extraordinary item in the first quarter,
have been reclassified as an ordinary expense and are reported in other
expense.
YEAR TO DATE RESULTS
Net interest income for the six months ended June 30, 2002 increased $10.5
million and noninterest income increased $4.2 million over the previous year.
These increases were partially offset by a $7.8 million increase in noninterest
expense and an increase in the provision for loan loss reserves.
The increase in net interest income for the first six months of 2002 compared
to 2001 is primarily due to an increase of $18.5 million in loan income as a
result of new loan originations and the acquisitions of Industrial and Potters.
This increase was offset by increases in interest expense on deposits of $2.7
million and other borrowed funds of $2.0 million and decreases in interest
earned on securities of $2.8 million and margin accounts of $690,000.
Noninterest income increased for the six months ended June 30, 2002 compared to
the same period in 2001 as a result of increases in gains on loans sold of $3.4
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, which is primarily due to expenses related to an increase
in full time equivalent employees as 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
United Community's annualized return on average assets and annualized return on
average equity were 1.00% and 7.71%, respectively, for the six months ended June
30, 2002. The annualized returns on average assets and average equity were 0.92%
and 4.72%, respectively, for the six months ended June 30, 2001.
Total shareholders' equity increased $4.9 million from December 31, 2001 to June
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 June
30, 2002 was $7.55 per share.
Total assets increased by $61.9 million, or 3.2%, to $2.0 billion at June 30,
2002 compared with December 31, 2001, primarily as a result of the acquisition
of Potters. Loans increased $99.7 million, securities increased $23.8 million,
goodwill increased $13.9 million and other borrowed funds decreased $76.3
million. These changes were funded by a $63.5 million decline in cash and cash
equivalents, a $13.8 million decrease in loans held for sale and a $135.6
million increase in deposits.
Net loans increased $99.7 million, or 7.1%, from December 31, 2001 to June 30,
2002. Home Savings had increases of $41.1 million in consumer loans, $23.2
million in real estate loans, $18.2 million in construction loans and $25.2
million in commercial loans. The allowance for loan losses increased $2.9
million, or 25.1%, to $14.4 million at June 30, 2002 compared to $11.5 million
at December 31, 2001. Of this increase, approximately $1.9 million was acquired
from Potters. The remaining increase was an increase in the provision for loan
losses less net charge offs. 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 0.94% at June 30, 2002
compared to 0.81% at December 31, 2001.
Deposits increased $135.6 million, or 9.8%, from December 31, 2001 to June 30,
2002, primarily as a result of deposits acquired from Potters. Increases in
Home Savings' deposits primarily consisted of a $14.7 million increase in
checking accounts and a $11.3 million increase in savings accounts, which were
partially offset by a $3.2 million decrease in certificates of deposit. Other
borrowed funds decreased $76.3 million 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 for the first time, 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: July 16, 2002
UNITED COMMUNITY FINANCIAL CORP.
As of As of
JUNE 30, 2002 DECEMBER 31, 2001
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(In thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA:
ASSETS
Cash and cash equivalents $ 142,341 $ 205,883
Mortgage-related securities 136,975 145,867
Marketable securities 93,827 61,131
Federal Home Loan Bank stock 20,586 18,760
Loans held for sale 6,417 20,192
Loans 1,520,577 1,417,959
Allowance for loan losses (14,365) (11,480)
Real estate owned 1,167 477
Goodwill 33,583 19,664
Core deposit intangible 6,041 6,312
Other assets 59,511 60,015
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Total assets $ 2,006,660 $ 1,944,780
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LIABILITIES
Deposits $ 1,518,992 $ 1,383,418
Other borrowed funds 195,354 271,631
Other liabilities 25,542 27,851
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Total liabilities 1,739,888 1,682,900
SHAREHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized and unissued
at June 30, 2002 -- --
Common stock-no par value; 499,000,000 shares authorized; 37,734,780
and 37,754,086 issued, respectively 137,038 136,903
Retained earnings 166,335 160,915
Other comprehensive income 1,313 1,402
Unearned compensation (21,162) (22,988)
Treasury stock, at cost; 2,381,938 and 2,086,500 shares, respectively (16,752) (14,352)
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Total shareholders' equity 266,772 261,880
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Total liabilities and shareholders' equity $ 2,006,660 $ 1,944,780
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Book value per share $ 7.55 $ 7.34
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
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(In thousands, except per share data)
SELECTED EARNINGS DATA (UNAUDITED):
Interest income $ 32,598 $ 24,645 $ 63,860 $ 48,683
Interest expense 13,726 12,244 28,619 23,924
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Net interest income 18,872 12,401 35,241 24,759
Provision for loan losses 532 250 1,228 580
Noninterest income:
Commissions 3,677 3,421 7,059 7,012
Service fees and other charges 2,016 1,848 3,914 3,767
Underwriting and investment banking 138 321 171 383
Net gains (losses)
Loans sold 2,673 55 3,449 81
Securities (294) 264 311 191
Other (165) 14 (165) 5
Other income 327 195 1,391 468
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Total noninterest income 8,372 6,118 16,130 11,907
Noninterest expense:
Salaries and employee benefits 9,947 8,534 19,670 16,399
Occupancy 878 621 1,550 1,194
Equipment and data processing 2,165 1,775 3,984 3,394
Amortization of core deposit intangible 601 -- 1,239 --
Other noninterest expense 3,774 2,622 7,673 5,344
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Total noninterest expense 17,365 13,552 34,116 26,331
Income before taxes 9,347 4,717 16,027 9,755
Income taxes 3,350 1,779 5,775 3,614
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Net income $ 5,997 $ 2,938 $ 10,252 $ 6,141
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Basic earnings per share $ 0.19 $ 0.09 $ 0.32 $ 0.19
Diluted earnings per share $ 0.19 $ 0.09 $ 0.32 $ 0.19
Dividends paid per share $ 0.075 $ 0.075 $ 0.150 $ 0.150
Three Months Ended Three Months Ended Three Months Ended
June 30, March 31, December 31,
2002 2002 2001
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(Dollars in thousands)
AVERAGE DAILY BALANCE OF SELECTED FINANCIAL CONDITION DATA (UNAUDITED):
Net loans (including allowance for loan losses $ 1,582,747 $ 1,428,867 $ 1,391,902
of $14,365, $12,022 and $11,480, respectively)
Loans held for sale 6,486 15,852 51,524
Mortgage-related securities 125,139 136,163 157,949
Marketable securities 98,349 101,730 60,028
Margin accounts 18,430 20,440 21,203
Other interest-earning assets 80,641 165,669 153,898
Total interest-earning assets 1,911,792 1,868,721 1,836,504
Total assets 2,023,237 1,952,630 1,925,300
Certificates of deposit 880,608 839,288 831,856
Interest-bearing checking, demand and savings accounts 597,144 523,731 494,023
Other-interest bearing liabilities 197,727 254,272 272,071
Total interest-bearing liabilities 1,675,479 1,617,291 1,597,950
Noninterest-bearing deposits 43,345 37,005 32,550
Total noninterest-bearing liabilities 81,175 33,249 65,223
Total liabilities 1,756,654 1,687,545 1,695,723
Shareholders' equity 266,583 265,085 262,127
Common shares outstanding for basic EPS calculation 31,821,940 31,951,231 31,788,375
Common shares outstanding for diluted EPS calculation 32,254,684 32,212,143 31,912,640
SUPPLEMENTAL LOAN DATA:
Loans originated $ 215,637 $ 198,712 $ 212,200
Loans purchased 13,568 5,450 1,200
Loans sold 135,440 52,505 146,470
Loan chargeoffs 80 208 173
Recoveries on loans 22 54 6
As of As of As of
June 30, March 31, December 31,
2002 2002 2001
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SUPPLEMENTAL DATA:
Nonaccrual loans $ 12,189 $ 9,479 $ 10,889
Restructured loans 1,281 1,459 1,572
Other real estate owned 1,167 1,186 477
Total nonperforming assets 14,637 12,124 12,938
Loans serviced for others 332,448 215,001 178,932
Number of full time equivalent employees 777 726 723
Mortgage-related securities available for sale 73,992 54,533 67,069
Mortgage-related securities held to maturity 62,983 70,227 78,798
Marketable securities trading 5,033 6,514 8,352
Marketable securities available for sale 86,698 90,301 51,081
Marketable securities held to maturity 2,096 2,197 1,698
Federal Home Loan Bank stock 20,586 18,968 18,760
Fair value of held to maturity securities 67,372 73,654 82,339
REGULATORY CAPITAL DATA:
Regulatory tangible capital $ 166,533 $ 171,759 $ 168,233
Tangible capital ratio 8.67 9.28 9.07
Regulatory core capital 166,533 171,759 168,233
Core capital ratio 8.67 9.28 9.07
Regulatory total capital 177,766 182,158 178,196
Total risk adjusted assets 1,355,444 1,227,142 1,212,016
Total risk adjusted ratio 13.11 14.84 14.70