EXHIBIT 99
UNITED COMMUNITY FINANCIAL CORP.
275 Federal Plaza West
Youngstown, Ohio 44503-1203
275 Federal Plaza West
Youngstown, Ohio 44503-1203
FOR IMMEDIATE RELEASE
Contact:
Patrick A. Kelly
Chief Financial Officer
(330) 742-0500, Ext. 2592
Patrick A. Kelly
Chief Financial Officer
(330) 742-0500, Ext. 2592
United Community Financial Corp. Announces Increased Earnings for the First Quarter of 2006
YOUNGSTOWN, Ohio (April 19, 2006) — United Community Financial Corp. (Company) (Nasdaq: UCFC), holding company of The Home Savings and Loan Company (Home Savings) and Butler Wick Corp. (Butler Wick), today reported net income of $6.1 million, or $0.21 per diluted share, for the three months ended March 31, 2006, compared to $4.9 million, or $0.17 per diluted share, for the three months ended March 31, 2005. Annualized return on average equity for the three months ended March 31, 2006 was 9.06% compared to 7.62% for the same period in 2005.
Chairman and Chief Executive Officer Douglas M. McKay commented, “We are very pleased with the strong start to 2006. Going forward, the Company intends to build on our past success with a disciplined approach to growth. In addition, we will continue to emphasize growth of our core operations. Finally, we have set objectives and goals focusing on a continued increase in shareholder value in the new year.”
Year-to-date Results
Net interest income for the three months ended March 31, 2006, grew by $1.9 million, or 10.3% over the first three months of 2005. The change is due largely to an increase of $7.4 million in interest earned on loans and $461,000 in interest earned on available for sale securities, offset by increases in interest expense on deposits of $4.4 million and interest expense on Federal Home Loan Bank advances of $1.0 million. An increase in the average outstanding balance of net loans raised interest income by $4.0 million and changing interest rates accounted for the remaining $3.4 million of the increase. The increase in interest bearing liabilities raised interest expense $3.5 million while changing interest rates accounted for $2.4 million of the expense.
The Company’s net interest margin for the first three months of 2006 was 3.44%, which decreased by two basis points compared to the same period in 2005. This change was a result of the continuation of the flattening of the yield curve and a modest narrowing of spreads. Management will continue to monitor the composition of the loan portfolio and deposit pricing throughout the year.
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The provision for loan losses increased $105,000, or 16.6% for the three months ended March 31, 2006 compared to the three months ended March 31, 2005. Management estimates the provision required based on an analysis using past loan loss experience, loan portfolio growth, information about specific borrower situations, estimated collateral values, general economic conditions and other factors.
Non-interest income increased $942,000 for the first three months of 2006 compared to the first three months of 2005. The increase is due to higher brokerage commissions received in 2006, higher gains recognized on the sale of loans and securities and increased service fees earned by Home Savings and Butler Wick.
Non-interest expense rose $700,000 during the period ended March 31, 2006, compared to the same period in 2005. This increase is a result of employee compensation and benefits increasing $912,000, which is attributable to greater commission expenses, rising healthcare costs and an increase in number of employees. Offsetting the aforementioned increase was a decrease in other expenses consisting, in part, of legal and audit fees.
The change in the provision for income taxes is a result of changes in pre-tax income reported by the Company. During the period ended March 31, 2006, the Company recorded a $3.3 million provision for income taxes. This is an increase of $824,000 over the same period in 2005 as a result of higher pre-tax income earned in 2006 compared to 2005. The effective tax rate at March 31, 2006 was 34.8% compared to 33.4% at March 31, 2005.
United Community’s return on average assets and return on average equity improved to 0.97% and 9.06%, respectively, for the three months ended March 31, 2006. The returns on average assets and average equity were 0.85% and 7.62%, respectively, for the three months ended March 31, 2005.
Financial Condition
Total assets increased $66.9 million to $2.6 billion at March 31, 2006, from $2.5 billion at December 31, 2005. This change was due to increases in net loans of $53.7 million, securities of $14.0 million and $6.3 million in loans held for sale. Partially offsetting this growth was a decline in cash and cash equivalents of $6.9 million.
During the first three months of 2006, growth aggregating $53.7 million occurred in the loan portfolio, net of allowance for loan losses. Real estate loans increased $39.7 million, construction loans increased $11.7 million and consumer loans increased $3.9 million. These increases were offset by a decrease in commercial loans of $1.4 million. The allowance for loan losses was $16.0 million at March 31, 2006 compared to $15.7 million at December 31, 2005. Management estimates the allowance required based on an analysis using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, general economic conditions in the market area and other factors. The allowance for loan losses as a percentage of total loans was 0.74% at March 31, 2006 and December 31, 2005.
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Cash and cash equivalents decreased $6.9 million during the first three months of 2006. Home Savings had decreases in deposits at the Federal Reserve of $2.6 million, vault cash held at the branches of $1.1 million and cash awaiting delivery to the branches of $1.9 million. Butler Wick had a decrease in cash and cash equivalents of $1.2 million as a result of reducing borrowings.
In order to fund the growth in the loan portfolio, the Company increased liabilities by $62.7 million. Approximately $61.3 million of this increase was in interest-bearing deposits. The remaining growth was due mostly to an increase in non-interest bearing deposits of $2.5 million.
Shareholders’ equity increased $4.2 million, or 1.6%, during the period ending March 31, 2006. The increase largely was attributable to increased earnings for the period offset by dividend payments made to shareholders during the quarter. Book value per share and tangible book value per share as of March 31, 2006, were $8.65 and $7.50, respectively. For the period ending December 31, 2005, book value per share and tangible book value per share were $8.52 and $7.37, respectively.
Home Savings and Butler Wick are wholly owned subsidiaries of the Company. Home Savings operates 37 full service banking offices and 6 loan production offices located throughout Ohio and Western Pennsylvania. Butler Wick has 21 offices providing full service retail brokerage, capital markets and trust services throughout Ohio and Western Pennsylvania. Additional information on the Company, Home Savings and Butler Wick may be found on the Company’s web site: www.ucfconline.com.
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When used in this press release 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 the Company’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. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
When used in this press release 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 the Company’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. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that 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.
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UNITED COMMUNITY FINANCIAL CORP.
| As of | As of | |||||||
| March 31, 2006 | December 31, 2005 | |||||||
| (Dollars in thousands, except per share data) | ||||||||
SELECTED FINANCIAL CONDITION DATA (UNAUDITED): | ||||||||
ASSETS | ||||||||
| Cash and cash equivalents | $ | 30,615 | $ | 37,545 | ||||
| Securities | 226,651 | 212,682 | ||||||
| Federal Home Loan Bank stock, at cost | 24,347 | 24,006 | ||||||
| Loans held for sale | 35,443 | 29,109 | ||||||
| Loans: | ||||||||
| Real estate | 1,272,049 | 1,232,318 | ||||||
| Construction | 468,041 | 456,346 | ||||||
| Consumer | 327,407 | 323,515 | ||||||
| Commercial | 99,614 | 100,977 | ||||||
| Allowance for loan losses | (15,981 | ) | (15,723 | ) | ||||
| Net loans | 2,151,130 | 2,097,433 | ||||||
| Real estate owned and other repossessed assets | 2,165 | 2,514 | ||||||
| Goodwill | 33,593 | 33,593 | ||||||
| Core deposit intangible | 1,985 | 2,118 | ||||||
| Cash surrender value of life insurance | 22,474 | 22,260 | ||||||
| Other assets | 67,325 | 67,590 | ||||||
| Total assets | $ | 2,595,728 | $ | 2,528,850 | ||||
LIABILITIES | ||||||||
| Deposits: | ||||||||
| Interest-bearing | $ | 1,646,248 | $ | 1,584,926 | ||||
| Noninterest-bearing | 99,431 | 96,918 | ||||||
| Federal Home Loan Bank advances | 447,253 | 475,549 | ||||||
| Repurchase agreements and other | 105,695 | 75,214 | ||||||
| Other liabilities | 28,186 | 31,508 | ||||||
| Total liabilities | 2,326,813 | 2,264,115 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
| Preferred stock-no par value; 1,000,000 shares authorized and unissued at March 31, 2006 | — | — | ||||||
| Common stock-no par value; 499,000,000 shares authorized; 37,804,457 issued | 144,351 | 143,896 | ||||||
| Retained earnings | 210,552 | 207,120 | ||||||
| Accumulated other comprehensive income | (2,333 | ) | (1,845 | ) | ||||
| Unearned compensation | (12,653 | ) | (13,108 | ) | ||||
| Treasury stock, at cost; 6,711,494 and 6,742,345 shares, respectively | (71,002 | ) | (71,328 | ) | ||||
| Total shareholders’ equity | 268,915 | 264,735 | ||||||
| Total liabilities and shareholders’ equity | $ | 2,595,728 | $ | 2,528,850 | ||||
| Book value per share | $ | 8.65 | $ | 8.52 | ||||
| Tangible book value per share | $ | 7.50 | $ | 7.37 | ||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2006 | 2005 | |||||||
| (Dollars in thousands, except per share data) | ||||||||
SELECTED EARNINGS DATA (UNAUDITED): | ||||||||
| Interest income | $ | 38,626 | $ | 30,763 | ||||
| Interest expense | 17,936 | 12,011 | ||||||
| Net interest income | 20,690 | 18,752 | ||||||
| Provision for loan losses | 738 | 633 | ||||||
| Noninterest income: | ||||||||
| Brokerage commissions | 5,000 | 4,624 | ||||||
| Service fees and other charges | 3,197 | 3,118 | ||||||
| Underwriting and investment banking | 30 | 121 | ||||||
| Net gains (losses): | ||||||||
| Securities | 44 | 21 | ||||||
| Loans sold | 563 | 248 | ||||||
| Other | 4 | 5 | ||||||
| Other income: | 972 | 731 | ||||||
| Total noninterest income | 9,810 | 8,868 | ||||||
| Noninterest expense: | ||||||||
| Salaries and employee benefits | 13,524 | 12,612 | ||||||
| Occupancy | 1,108 | 1,048 | ||||||
| Equipment and data processing | 2,259 | 2,329 | ||||||
| Amortization of core deposit intangible | 133 | 186 | ||||||
| Other noninterest expense | 3,332 | 3,482 | ||||||
| Total noninterest expense | 20,356 | 19,657 | ||||||
| Income before taxes | 9,406 | 7,330 | ||||||
| Income taxes | 3,273 | 2,449 | ||||||
| Net income | $ | 6,133 | $ | 4,881 | ||||
| Basic earnings per share | $ | 0.21 | $ | 0.17 | ||||
| Diluted earnings per share | $ | 0.21 | $ | 0.17 | ||||
| Dividends paid per share | $ | 0.0900 | $ | 0.0825 | ||||
| Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||
| March 31, | December 31, | September 30, | ||||||||||
| 2006 | 2005 | 2005 | ||||||||||
| (Dollars and share data in thousands) | ||||||||||||
AVERAGE DAILY BALANCE OF SELECTED FINANCIAL CONDITION DATA (UNAUDITED): | ||||||||||||
| Net loans (including allowance for loan losses of $15,981, $15,723 and $15,284, respectively) | $ | 2,104,342 | $ | 2,076,737 | $ | 2,032,602 | ||||||
| Loans held for sale | 41,288 | 34,445 | 29,980 | |||||||||
| Securities | 217,388 | 210,703 | 199,744 | |||||||||
| Margin accounts | 15,626 | 16,394 | 15,486 | |||||||||
| Other interest-earning assets | 27,761 | 28,388 | 27,019 | |||||||||
| Total interest-earning assets | 2,406,405 | 2,366,667 | 2,304,831 | |||||||||
| Total assets | 2,540,531 | 2,502,945 | 2,436,612 | |||||||||
| Certificates of deposit | 1,085,200 | 1,036,628 | 966,216 | |||||||||
| Interest-bearing checking, demand and savings accounts | 525,965 | 518,547 | 541,398 | |||||||||
| Other interest-bearing liabilities | 520,698 | 547,758 | 540,114 | |||||||||
| Total interest-bearing liabilities | 2,131,863 | 2,102,933 | 2,047,728 | |||||||||
| Noninterest-bearing deposits | 94,977 | 92,833 | 91,393 | |||||||||
| Total noninterest-bearing liabilities | 138,003 | 132,723 | 126,817 | |||||||||
| Total liabilities | 2,269,866 | 2,235,656 | 2,174,545 | |||||||||
| Shareholders’ equity | 270,665 | 267,289 | 262,067 | |||||||||
| Common shares outstanding for basic EPS calculation | 28,989 | 28,867 | 28,774 | |||||||||
| Common shares outstanding for diluted EPS calculation | 29,396 | 29,239 | 29,117 | |||||||||
SUPPLEMENTAL LOAN DATA: | ||||||||||||
| Loans originated | $ | 295,379 | $ | 297,898 | $ | 379,658 | ||||||
| Loans purchased | 73,975 | 99,593 | 119,095 | |||||||||
| Loans sold | 40,391 | 65,410 | 70,394 | |||||||||
| Loan chargeoffs | 570 | 1,109 | 606 | |||||||||
| Recoveries on loans | 90 | 273 | 72 | |||||||||
| As of | As of | As of | ||||||||||
| March 31, | December 31, | September 30, | ||||||||||
| 2006 | 2005 | 2005 | ||||||||||
| (Dollars in thousands) | ||||||||||||
SUPPLEMENTAL DATA: | ||||||||||||
| Nonaccrual loans | $ | 29,701 | $ | 24,364 | $ | 24,133 | ||||||
| Restructured loans | 1,293 | 825 | 1,257 | |||||||||
| Real estate owned and other repossessed assets | 2,165 | 2,514 | 3,522 | |||||||||
| Total nonperforming assets | 34,167 | 28,181 | 29,193 | |||||||||
| Mortgage loans serviced for others | 828,787 | 816,024 | 724,429 | |||||||||
| Securities trading, at fair value | 9,211 | 10,812 | 17,135 | |||||||||
| Securities available for sale, at fair value | 217,440 | 201,870 | 172,340 | |||||||||
| Federal Home Loan Bank stock, at cost | 24,347 | 24,006 | 23,663 | |||||||||
| Number of full time equivalent employees | 829 | 824 | 799 | |||||||||
REGULATORY CAPITAL DATA: | ||||||||||||
| Tier 1 leverage ratio | 8.50 | % | 8.36 | % | 8.53 | % | ||||||
| Tier 1 risk-based capital ratio | 10.20 | % | 10.08 | % | 10.16 | % | ||||||
| Total risk-based capital ratio | 10.97 | % | 10.86 | % | 10.94 | % | ||||||