UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________to___________________
Commission File Number: 0-024399
UNITED COMMUNITY FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
Ohio 34-1856319
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
275 Federal Plaza West, Youngstown, Ohio 44503
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (330) 742-0500
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Securities registered pursuant to Section 12(b) of the Act:
None None
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(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common shares, no par value per share
-----------------------------------------
(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such requirements for the past 90 days.
Yes / X / No / /
Indicate by check mark if there is no disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. / X /
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the last reported sale of March 24,
2000, was $223.9 million. (The exclusion from such amount of the market value
of the shares owned by any person shall not be deemed an admission by the
registrant that such person is an affiliate of the registrant.)
As of March 6, 2000 there were 37,756,582 of the Registrant's Common
Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II of Form 10-K - Portions of 1999 Annual Report to Shareholders
Part III of Form 10-K - Portions of Proxy Statement for the 2000 Annual Meeting
of Shareholders
TABLE OF CONTENTS
Item
Number Page
- ------ ----
PART I
1. Description of Business
General---------------------------------------------------------------------------------------1
Discussion of Forward-Looking Statements------------------------------------------------------1
Lending Activities----------------------------------------------------------------------------2
Investment Activities-------------------------------------------------------------------------12
Sources of Funds------------------------------------------------------------------------------16
Competition-----------------------------------------------------------------------------------19
Employees-------------------------------------------------------------------------------------19
Year 2000 Considerations----------------------------------------------------------------------19
Regulation------------------------------------------------------------------------------------19
2. Description of Property-------------------------------------------------------------------------21
3. Legal Proceedings-------------------------------------------------------------------------------22
4. Submission of Matters to a Vote of Security Holders---------------------------------------------22
PART II
5. Market for Registrant's Common Equity and Related Shareholder Matters---------------------------23
6. Selected Financial Data-------------------------------------------------------------------------23
7. Management's Discussion and Analysis of Financial Condition and Results of Operations-----------23
7A. Quantitative and Qualitative Disclosures About Market Risk--------------------------------------23
8. Financial Statements and Supplemental Data------------------------------------------------------23
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure------------23
PART III
10. Directors and Executive Officers of the Registrant----------------------------------------------24
11. Executive Compensation--------------------------------------------------------------------------24
12. Security Ownership of Certain Beneficial Owners and Management----------------------------------24
13. Certain Relationships and Related Transactions--------------------------------------------------24
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K---------------------------------24
Signatures------------------------------------------------------------------------------------------------26
Exhibit Index---------------------------------------------------------------------------------------------27
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
United Community Financial Corp. (United Community) was incorporated
in the State of Ohio in February 1998 for the purpose of owning all of the
outstanding capital stock of The Home Savings and Loan Company of Youngstown,
Ohio (Home Savings) issued upon the conversion of Home Savings from a mutual
savings association to a permanent capital stock savings association
(Conversion). The Conversion was completed on July 8, 1998. On August 12,
1999, Butler Wick Corp. (Butler Wick) became a wholly-owned subsidiary of
United Community.
Home Savings was organized as a mutual savings association under Ohio
law in 1889. As an Ohio savings association, Home Savings is subject to
supervision and regulation by the Office of Thrift Supervision (OTS), the Ohio
Department of Commerce, Division of Financial Institutions (Division) and the
Federal Deposit Insurance Corporation (FDIC). Home Savings is a member of the
Federal Home Loan Bank (FHLB) of Cincinnati and the deposits of Home Savings
are insured up to applicable limits by the FDIC in the Savings Association
Insurance Fund (SAIF).
As a savings and loan holding company, United Community is subject to
regulation, supervision and examination by the OTS, the Division and the
Securities and Exchange Commission (SEC). United Community's primary activity
is holding the common stock of Home Savings and Butler Wick. Consequently, the
following discussion focuses primarily on the business of Home Savings and
Butler Wick.
Home Savings conducts business from its main office located in
Youngstown, Ohio and 13 full-service branches, located in the Northern Ohio
communities of Austintown, Boardman, Canfield, Columbiana, East Palestine,
Liberty, Lisbon, Niles, Poland, Salem and Struthers. The principal business
of Home Savings is the origination of mortgage loans on one- to four-family
residential real estate located in Home Savings' primary market area, which
consists of northern Columbiana County, Mahoning County and southern Trumbull
County. Home Savings also originates loans secured by nonresidential real
estate. In addition to real estate lending, Home Savings originates
commercial loans and various types of consumer loans, including home equity
loans, education loans, loans secured by savings accounts, motor vehicles,
boats and recreational vehicles and unsecured loans. For liquidity and
interest rate risk management purposes, Home Savings invests in various
financial instruments discussed in the investment section. Funds for lending
and other investment activities are obtained primarily from savings deposits,
which are insured up to applicable limits by the FDIC, principal repayments
of loans and maturities of securities.
Interest on loans and other investments is Home Savings' primary
source of income. Home Savings' principal expense is interest paid on deposit
accounts. Operating results are dependent to a significant degree on the net
interest income of Home Savings, which is the difference between interest
earned on loans and other investments and interest paid on deposits. Like most
thrift institutions, Home Savings' interest income and interest expense are
significantly affected by general economic conditions and by the policies of
various regulatory authorities.
Butler Wick is the parent company for three wholly-owned
subsidiaries: Butler Wick & Co., Inc., Butler Wick Asset Management Company
and Butler Wick Trust Company. Butler Wick conducts business from its main
office located in Youngstown, Ohio, seven offices located in the Northern Ohio
communities of Alliance, Cleveland, Canfield, Kent, Warren, Canton, and Salem
and two offices in the Western Pennsylvania communities of Franklin and
Sharon. Butler Wick primarily sells common and preferred stocks, but also
offers an array of government, corporate and municipal bonds, unit trusts,
mutual funds, IRA's, money market accounts and certificates of deposit. Butler
Wick also offers investments in precious metals and a full line of life
insurance and annuity products, personal and corporate financial planning,
estate planning, pension and profit sharing.
DISCUSSION OF FORWARD-LOOKING STATEMENTS
When used in this Form 10-K or in future filings by United Community
with the Securities and Exchange Commission, 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
1
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.
LENDING ACTIVITIES
GENERAL. Home Savings' principal lending activity is the origination
of conventional real estate loans secured by one- to four-family residences
located in Home Savings' primary market area. Home Savings also originates
loans secured by multifamily and nonresidential real estate and originates
loans for the construction of one- to four-family residences, multifamily
properties and nonresidential real estate projects. In addition to real estate
lending, Home Savings originates commercial loans and various types of
consumer credits, including home equity loans, education loans, loans secured
by savings accounts, motor vehicles, boats and recreational vehicles and
unsecured loans.
2
LOAN PORTFOLIO COMPOSITION. The following table presents certain
information regarding the composition of Home Savings' loan portfolio at the
dates indicated:
At December 31,
-------------------------------------------------------------------------
1999 1998 1997
---------------------- ------------------------ -----------------------
Percent of Percent of Percent of
Amount Total loans Amount Total loans Amount Total loans
-------- ------------ --------- ------------- --------- -----------
(Dollars in thousands)
Real estate loans:
Permanent
One- to four-family $546,888 70.92% $516,767 73.84% $489,677 74.19%
Multifamily 7,838 1.02 8,172 1.17 8,944 1.36
Nonresidential 28,701 3.72 31,308 4.47 33,479 5.07
Land 299 0.04 190 0.03 285 0.04
--------- -------- ---------- --------- ---------- --------
Total permanent 583,726 75.70 556,437 79.51 532,385 80.66
Construction loans:
One- to four-family 27,486 3.57 25,691 3.67 24,044 3.64
Multifamily and nonresidential 1,637 0.21 833 0.12 325 0.05
--------- -------- ---------- --------- ---------- --------
Total construction 29,123 3.78 26,524 3.79 24,369 3.69
--------- -------- ---------- --------- ---------- --------
Total real estate loans 612,849 79.48 582,961 83.30 556,754 84.35
Consumer loans
Home equity 19,151 2.48 18,321 2.62 17,097 2.59
Auto 1,130 0.15 1,603 0.23 2,457 0.37
Education 3,860 0.50 3,993 0.57 3,479 0.53
Other (1) 18,998 2.46 17,856 2.55 20,355 3.08
--------- -------- ---------- --------- ---------- --------
Total consumer 43,139 5.59 41,773 5.97 43,388 6.57
Commercial loans 115,108 14.93 75,085 10.73 59,897 9.08
--------- -------- ---------- --------- ---------- --------
Total loans 771,096 100.00% 699,819 100.00% 660,039 100.00%
======= ========= =========
Less net items 48,009 42,321 26,803
--------- ---------- ----------
Total loans, net $723,087 $657,498 $633,236
========= ========== ==========
-----------------------------------------------------
1996 1995
-----------------------------------------------------
Percent of Percent of
Amount Total loans Amount Total loans
-----------------------------------------------------
Real estate loans:
Permanent
One- to four-family $482,089 75.23% $428,213 75.39%
Multifamily 8,778 1.37 16,042 2.82
Nonresidential 35,315 5.51 36,845 6.48
Land 195 0.03 1,280 0.23
---------- --------- ---------- ---------
Total permanent 526,377 82.14 482,380 84.92
Construction loans:
One- to four-family 27,610 4.31 19,804 3.49
Multifamily and nonresidential 490 0.08 597 0.11
---------- --------- ---------- ---------
Total construction 28,100 4.39 20,401 3.60
---------- --------- ---------- ---------
Total real estate loans 554,477 86.53 502,781 88.52
Consumer loans
Home equity 14,581 2.28 11,439 2.01
Auto 3,486 0.54 4,582 0.81
Education 2,701 0.42 2,788 0.49
Other (1) 18,837 2.94 17,384 3.06
---------- --------- ---------- ---------
Total consumer 39,605 6.18 36,193 6.37
Commercial loans 46,742 7.29 29,043 5.11
---------- --------- ---------- ---------
Total loans 640,824 100.00% 568,017 100.00%
========= =========
Less net items 23,901 21,328
---------- ----------
Total loans, net $616,923 $546,689
========== ==========
- --------------------------
(1) Consists of overdraft protection loans and loans to individuals secured by
demand accounts, deposits, automobiles, boats and one- to four-family
residences.
3
LOAN MATURITY. The following table sets forth certain information as of
December 31, 1999, regarding the dollar amount of loans maturing in Home
Savings' portfolio based on their contractual terms to maturity. Demand loans
and other loans having no stated schedule of repayments or no stated maturity
are reported as due in one year or less. Mortgage loans originated by Home
Savings generally include due-on-sale clauses that provide Home Savings with the
contractual right to deem the loan immediately due and payable in the event the
borrower transfers the ownership of the property without Home Savings' consent.
The table does not include the effects of possible prepayments or scheduled
repayments.
Principal repayments contractually due in the years ended December 31,
---------------------------------------------------------------------------------------
2003 - 2005 - 2010 - 2015 and
2000 2001 2002 2004 2009 2014 thereafter Total
---- ---- ------ --------- ------ ------ ---------- -----
(In thousands)
Residential real estate loans(1) $35,895 $29,183 $30,101 $62,204 $158,865 $116,131 $150,306 $582,685
Nonresidential real estate loans 1,839 3,567 2,122 4,676 10,085 5,373 2,502 30,164
Commercial loans 36,883 13,116 10,011 12,399 20,198 14,241 8,260 115,108
Consumer loans 5,346 4,772 3,897 5,186 21,201 1,736 1,001 43,139
----- ----- ----- ----- ------ ----- ----- ------
Total $79,963 $50,638 $46,131 $84,465 $210,349 $137,481 $162,069 $771,096
======= ======= ======= ======= ======== ======== ======== ========
- -------------------
(1) Includes permanent and construction loans for one- to four-family and
multi-family properties and land loans.
The next table sets forth the dollar amount of all loans due after
December 31, 2000, which have fixed or adjustable interest rates:
Due after December 31, 2000
-----------------------------
(In thousands)
Fixed rate of interest $545,995
Adjustable rate of interest 145,138
----------
$691,133
==========
LOANS SECURED BY ONE- TO FOUR-FAMILY REAL ESTATE. The principal
lending activity of Home Savings is the origination of conventional loans
secured by first mortgages on one- to four-family residences, primarily
single-family homes, located within Home Savings' primary market area. At
December 31, 1999, Home Savings' one- to four-family residential real estate
loans totaled approximately $546.9 million, or 70.9% of total loans. At
December 31, 1999, $2.9 million, or 0.5%, of Home Savings' one-to four-family
loans were nonperforming.
OTS regulations and Ohio law limit the amount which Home Savings may
lend in relationship to the appraised value of the real estate and
improvements which will secure the loan at the time of loan origination. In
accordance with such regulations, Home Savings makes loans on one- to
four-family residences of up to 97% of the value of the real estate and
improvements thereon (LTV), although the majority of such loans have LTVs of
80% or less. Loans on single-family, owner-occupied residences located in
low-to-moderate income census track locations are granted up to a 97% LTV,
although Home Savings requires private mortgage insurance on the portion of
the principal amount that exceeds 85% of the appraised value of the property
securing the loan.
Home Savings currently offers fixed-rate mortgage loans and
adjustable-rate mortgage loans (ARMs) for terms of up to 30 years. Although
Home Savings' loan portfolio includes a significant amount of 30-year
fixed-rate loans, most loans currently originated by Home Savings are 15-year
fixed-rate loans. The interest rate adjustment periods on ARMs are typically
one or three years. The maximum interest rate adjustment on most of the ARMs
is 2.0% on any adjustment date and a total of 6.0% over the life of the loan.
The interest rate adjustments on one-year and three-year ARMs presently
offered by Home Savings are indexed to the weekly average rate on the
one-year and three-year U.S. Treasury securities, respectively. Rate
adjustments are computed by adding a stated margin, to the index. Home
Savings does not offer ARMs to borrowers on one- to four-family residences
with LTVs of 95%.
-4-
Home Savings issues standby loan origination commitments to
qualified borrowers primarily for the purchase of single-family residential
real estate. Such commitments are made on specified terms and conditions and
are made for periods of up to 60 days, during which time the interest rate is
locked in.
LOANS SECURED BY MULTIFAMILY RESIDENCES. Home Savings originates
loans secured by multifamily properties which contain more than four units,
although this is not a significant component of Home Savings' lending
activities. Multifamily loans are offered with adjustable rates of interest,
which adjust according to a specified index, and typically have terms ranging
from five to ten years and LTVs of up to 75%.
Multifamily lending is generally considered to involve a higher
degree of risk than one- to four-family residential lending because the
borrower typically depends upon income generated by the project to cover
operating expenses and debt service. The profitability of a project can be
affected by economic conditions, government policies and other factors beyond
the control of the borrower. Home Savings attempts to reduce the risk
associated with multifamily lending by evaluating the creditworthiness of the
borrower and the projected income from the project and by obtaining personal
guaranties on loans made to corporations and partnerships. Home Savings
requires borrowers to submit financial statements annually to enable Home
Savings to monitor the loan and requires an assignment of rents.
At December 31, 1999, loans secured by multifamily properties
totaled approximately $7.8 million, or 1.0% of total loans. The largest loan
had a principal balance of $1.4 million.
LOANS SECURED BY NONRESIDENTIAL REAL ESTATE. Home Savings originates
loans secured by nonresidential real estate. Home Savings' nonresidential
real estate loans have adjustable rates, terms of up to 25 years and
generally LTVs of up to 80%. Among the properties securing Home Savings'
nonresidential real estate loans are shopping centers, hotels, motels and
freezer warehouses. The majority of such properties are located within Home
Savings' primary lending area. Home Savings has been involved for over 20
years in freezer warehouse financing through a Youngstown area real estate
developer who specializes in the construction of freezer facilities.
Nonresidential real estate lending is generally considered to
involve a higher degree of risk than residential lending due to the
relatively larger loan amounts and the effects of general economic conditions
on the successful operation of income-producing properties. Home Savings has
endeavored to reduce such risk by evaluating the credit history of the
borrower, the location of the real estate, the financial condition of the
borrower, the quality and characteristics of the income stream generated by
the property and the appraisals supporting the property's valuation. At
December 31, 1999, Home Savings' largest loan secured by nonresidential real
estate had a balance of $7.2 million and was performing according to its
terms.
At December 31, 1999, approximately $28.7 million, or 3.7%, of Home
Savings' total loans were secured by mortgages on nonresidential real estate.
CONSTRUCTION LOANS. Home Savings makes loans for the construction of
one- to four-family residences, multifamily properties and nonresidential
real estate projects. Residential construction loans are made to both
owner-occupants and to builders on a speculative (unsold) basis. Construction
loans to owner-occupants are structured as permanent loans with fixed or
adjustable rates of interest and terms of up to 30 years. During the first
year, while the residence is being constructed, the borrower is required to
pay interest only at a fixed rate. Construction loans for one- to four-family
residences have LTVs of up to 85%, and construction loans for commercial,
multifamily and nonresidential properties have LTVs of up to 75%, with the
value of the land included as part of the owner's equity. At December 31,
1999, Home Savings had approximately $29.1 million, or 3.8% of its total
loans, invested in construction loans, including $27.5 million in one- to
four-family residential construction and approximately $173,000 in
multifamily construction loans. No commercial construction loans were
outstanding at that date.
Approximately 50% of Home Savings' construction loans to builders
are made for homes to which the builder does not have a contract with a
buyer. Home Savings, however, generally limits speculative loans to builders
with whom Home Savings has a long-standing relationship and limits the number
of outstanding loans on unsold homes under construction within a specific
area.
Construction loans generally involve greater underwriting and
default risks than do loans secured by mortgages on existing properties
because construction loans are more difficult to appraise and to monitor.
Loan funds are advanced upon
-5-
the security of the project under construction. In the event a default on a
construction loan occurs and foreclosure follows, Home Savings must take
control of the project and attempt either to arrange for completion of
construction or dispose of the unfinished project.
Home Savings also originates a limited number of loans secured by
vacant land for the construction of single-family houses. Home Savings' land
loans are generally fixed-rate loans for terms up to five years and require a
LTV of 75% or less. At December 31, 1999, approximately $299,000, or 0.04%,
of Home Savings' total loans were secured by land loans made to individuals
intending to construct and occupy single-family residences on the properties.
COMMERCIAL LOANS. Home Savings makes commercial loans to businesses
in its primary market area, including traditional lines of credit, revolving
lines of credit, term loans and acquisition and development loans. The LTV
ratios for commercial loans depend upon the nature of the underlying
collateral, but generally commercial loans are made with LTVs of 50 to 75%
and have adjustable interest rates. Lines of credit and revolving credits are
generally priced on a floating rate basis, which is tied to the prime rate or
U.S. Treasury bill rate. Term and time loans are usually adjustable, but can
have fixed rates of interest and terms from one to five years.
At December 31, 1999, Home Savings had approximately $115.1 million,
or 14.9% of total loans, invested in commercial loans. The majority of these
loans are secured by a security interest in inventory, accounts receivable,
machinery, investment property, vehicles or other assets of the borrower.
Home Savings also originates unsecured commercial loans including lines of
credit for periods of less than 12 months, short-term loans and,
occasionally, term loans for periods of up to 36 months. These loans are
underwritten based on the creditworthiness of the borrowers and the
guarantors. As a result of the addition of experienced loan personnel and the
implementation of enhanced underwriting procedures, Home Savings intends to
increase its unsecured commercial loan volume in the future.
Commercial loans are generally deemed to entail significantly
greater risk than real estate lending. The repayment of commercial loans is
typically dependent on the income stream and successful operation of a
business, which can be affected by economic conditions. The collateral for
commercial loans, if any, often consists of rapidly depreciating assets.
CONSUMER LOANS. Home Savings originates various types of consumer
credit loans, including home equity loans, education loans, loans secured by
savings accounts, vehicle loans and unsecured loans. Consumer loans are made
at fixed and adjustable rates of interest and for varying terms based on the
type of loan. Consumer loans secured by a deposit or savings account are made
for up to 90% of the principal balance of the account and generally have
adjustable rates, which adjust based on the weekly average yield on U.S.
Treasury securities plus a margin.
For new automobiles, loans are originated for up to 90% of the value
of the car with terms of up to five years, and for used automobiles, loans
are made for up to the average value of the car model and a term of four
years. All automobile loans are originated directly by Home Savings. At
December 31, 1999, automobile loans amounted to $1.1 million, or 0.2%, of
Home Savings' consumer loan portfolio.
Home Savings makes closed-end home equity loans in an amount, which
when added to the prior indebtedness secured by the real estate, does not
exceed 90% of the estimated value of the real estate. Home equity loans are
typically secured by a second mortgage on the real estate. Home Savings
frequently holds the first mortgage, although Home Savings will make home
equity loans in cases where another lender holds the first mortgage. Home
Savings also offers home equity loans with a line of credit feature. Home
equity loans are made with adjustable and fixed rates of interest. Fixed-rate
home equity loans have terms of ten years but can be called after five years.
Rate adjustments on adjustable home equity loans are determined by adding a
3.0% margin for loans on one- to four-family residences of up to 80% LTV or
by adding a 4.0% margin for loans on one- to four-family residences of up to
90% LTV to the one-year U.S. Treasury index. At December 31, 1999,
approximately $19.2 million, or 2.5%, of Home Savings' consumer loan
portfolio consisted of home equity loans.
Consumer loans may entail greater credit risk than do residential
mortgage loans. The risk of default on consumer loans increases during
periods of recession, high unemployment, and other adverse economic
conditions. Although Home Savings has not had significant delinquencies on
consumer loans, no assurance can be provided that delinquencies will not
increase.
-6-
At December 31, 1999, Home Savings had approximately $43.1 million,
or 5.6% of its total loans, invested in consumer loans. Home Savings
anticipates a moderate increase in its consumer loan portfolio in the future
as a result of increased cross-selling efforts to existing customers.
LOAN SOLICITATION AND PROCESSING. The lending activities of Home
Savings are subject to the written, non-discriminatory underwriting standards
and loan origination procedures approved by Home Savings' Board of Directors
(Board). Loan originations are generally obtained from existing customers and
members of the local community and from referrals by real estate brokers,
lawyers, accountants, and current and former customers. Home Savings also
advertises in the local print media, radio and television.
Each of Home Savings' 14 offices has loan personnel who can accept
loan applications, which are then forwarded to Home Savings' Underwriting
Department for processing and approval. In underwriting real estate loans,
Home Savings typically obtains a credit report, verification of employment
and other documentation concerning the creditworthiness of the borrower. An
appraisal of the fair market value of the real estate that will be given as
security for the loan is prepared by one of Home Savings' in-house licensed
appraisers or an approved fee appraiser. For certain large nonresidential
real estate loans, the appraisal will be conducted by an outside fee
appraiser whose report is reviewed by Home Savings' chief appraiser. Upon the
completion of the appraisal and the receipt of information on the credit
history of the borrower, the application for a loan is submitted for review
to the appropriate persons. Commercial, residential and nonresidential real
estate loans up to $1.0 million may be approved by an authorized loan officer
or executive officer. All loans of $1.0 million or more require approval by
two executive officers and a majority of the Board of Directors.
Borrowers are required to carry satisfactory fire and casualty
insurance and flood insurance, if applicable, and to name Home Savings as an
insured mortgagee. Home Savings generally obtains an attorney's opinion of
title, although title insurance may be obtained on larger nonresidential real
estate loans.
The procedure for approval of construction loans is the same as for
permanent real estate loans, except that an appraiser evaluates the building
plans, construction specifications and estimates of construction costs. Home
Savings also evaluates the feasibility of the proposed construction project
and the experience and record of the builder. Once approved, the construction
loan is disbursed in installments based upon periodic inspections of
construction progress.
Consumer loans are underwritten on the basis of the borrower's
credit history and an analysis of the borrower's income and expenses, ability
to repay the loan, and the value of the collateral, if any.
LOAN ORIGINATIONS AND PURCHASES. Historically, Home Savings has
originated substantially all of the loans in its portfolio and has held them
until maturity. Nevertheless, Home Savings' residential loans are generally
made on terms and conditions and documentation which conform to the secondary
market guidelines for sale to the Federal Home Loan Mortgage Company (FHLMC)
and other institutional investors in the secondary market. Education loans
are sold, once the borrower has graduated, to the Student Loan Marketing
Association. Home Savings does not originate first mortgage loans insured by
the Federal Housing Authority or guaranteed by the Veterans Administration,
but it has purchased such loans as well as participation interests in such
loans.
-7-
Home Savings has not sold any loans during the years ended December 31,
1999, 1998 and 1997. The following table presents Home Savings' total loan
origination and repayment activity for the years indicated:
Year ended December 31,
----------------------------------
1999 1998 1997
-------- -------- --------
(In thousands)
Loans originated:
Real estate:
Permanent:
One- to four-family $113,651 $140,344 $ 68,303
Multifamily 63 - -
Nonresidential 292 340 218
Land 750 810 -
-------- -------- --------
Total permanent 114,756 141,494 68,521
Construction:
One- to four-family 28,695 28,226 25,440
Multifamily 340 180 1,390
-------- -------- --------
Total construction 29,035 28,406 26,830
-------- -------- --------
Total real estate loans originated 143,791 169,900 95,351
Consumer 15,631 15,535 17,038
Commercial 85,454 44,050 20,968
-------- -------- --------
Total loans originated 244,876 229,485 133,357
Loans purchased - 11 116
-------- -------- --------
Total loans originated and purchased 244,876 229,496 133,473
Principal repayments 179,906 205,791 119,120
-------- -------- --------
Net increase in loans $ 64,970 $ 23,705 $ 14,353
======== ======== ========
At December 31, 1999, Home Savings had $18.5 million of outstanding
commitments to originate loans and $42.6 million available to borrowers under
consumer and commercial lines of credit. At December 31, 1999, Home Savings had
$11.6 million in undisbursed funds related to construction loans in process.
LOAN ORIGINATION AND OTHER FEES. Home Savings realizes loan origination
fees and other fee income from its lending activities. A fee of 2.0% of the loan
amount, up to $1,000, is charged for fixed-rate residential real estate loans
and Home Savings charges an origination fee of 2.0% of the loan amount, up to
$850, for adjustable-rate residential real estate loans. Loan origination fees
for nonresidential real estate loans and commercial loans are negotiated on an
individual basis. In addition, Home Savings realizes income from late payment
charges and fees for other miscellaneous services.
Loan origination fees and other fees are a volatile source of income,
varying with the volume of lending, loan repayments and general economic
conditions. All nonrefundable loan origination fees and certain direct loan
origination costs are deferred and recognized in accordance with Statement of
Financial Accounting Standards (SFAS) No. 91 as an adjustment to yield for the
life of the related loan.
LOANS TO ONE BORROWER LIMITS. OTS regulations generally limit the
aggregate amount that Home Savings may lend to any one borrower to an amount
equal to 15.0% of Home Savings' unimpaired capital and unimpaired surplus
(Lending Limit Capital). A savings association may lend to one borrower an
additional amount not to exceed 10.0% of Home Savings' Lending Limit Capital if
the additional amount is fully secured by certain forms of "readily marketable
collateral." Real estate is not considered "readily marketable collateral." In
applying this limit, the regulations require that loans to certain related or
affiliated borrowers be aggregated.
Based on such limits, Home Savings could lend approximately $49.0
million to one borrower at December 31, 1999. The largest amount Home Savings
had outstanding to one borrower at December 31, 1999, was $9.9 million, which
-8-
consisted of three loans secured by a first mortgage on freezer warehouses. At
December 31, 1999, this loan was performing in accordance with its terms.
DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS. Home
Savings attempts to maintain a high level of asset quality through sound
underwriting policies and aggressive collection practices.
At the beginning of each month, the Collections Department of Home
Savings receives a report on all delinquent loans. When a loan payment has not
been made by the fifteenth of the month, a late notice is sent and a penalty of
five percent of the payment due is assessed. Once a loan is 60 days delinquent,
a second notice is sent and the Collections Department contacts the borrower by
telephone. The Collections Department will generally continue to attempt to
bring the loan current through telephone calls or personal visits until the loan
has been delinquent 90 to 120 days. If the loan has not been brought current by
the 120th day, a member of the Collections Department will present the loan to
Home Savings' Pre-Foreclosure Committee which meets weekly. If the
Pre-Foreclosure Committee agrees to recommend the commencement of foreclosure
proceedings, the loan is presented to the Executive Committee of the Board of
Home Savings (Executive Committee) which normally refers the loan to Home
Savings' in-house legal staff. A decision as to whether and when to initiate
foreclosure proceedings is based on such factors as the amount of the
outstanding balance in relation to the original indebtedness, the extent of the
delinquency, the borrower's ability and willingness to cooperate in curing the
delinquency and any environmental issues that may need to be addressed.
The following table reflects the amount of loans in a delinquent status
as of the dates indicated:
At December 31,
----------------------------------------------------------------
1999 1998
----------------------------- -------------------------------
Percent of Percent of
total total
Number Amount loans Number Amount loans
------ ------ ------- ------ ------ -------
(Dollars in thousands)
Loans delinquent for:
30-59 days 284 $10,775 1.49% 232 $ 8,236 1.25%
60-89 days 93 3,298 .46 89 2,462 0.37
90 days or over 156 3,615 .50 189 5,729 0.87
---- ------- ---- ----- ------- ----
Total delinquent loans 533 $17,688 2.45% 510 $16,427 2.49%
==== ======= ==== ===== ======= ====
Nonperforming assets include nonaccruing loans, restructured loans,
real estate acquired by foreclosure or by deed-in-lieu thereof, in-substance
foreclosures and repossessed assets.
Loans are reviewed through monthly reports to the Board and weekly
reports to senior management and are placed on nonaccrual status when collection
in full is considered doubtful by management. Interest accrued and unpaid at the
time a loan is placed on nonaccrual status is charged against interest income.
Subsequent cash payments are generally applied to interest income unless, in the
opinion of management, the collection of principal and interest is doubtful. In
those cases, subsequent cash payments would be applied to principal.
-9-
The following table sets forth information with respect to Home
Savings' nonperforming loans and other assets at the dates indicated:
At December 31,
---------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(Dollars in thousands)
Nonperforming loans:
Nonaccrual loans
Real estate loans:
One- to four-family $ 2,923 $ 3,655 $ 5,540 $ 5,343 $ 3,542
Multifamily and nonresidential 82 378 649 704 1,082
Construction (net of loans in process) and land 272 233 769 491 7
------- ------- ------- ------- -------
Total real estate loans 3,277 4,266 6,958 6,538 4,631
Consumer 132 317 404 517 298
Commercial 206 1,146 2,129 2,059 260
------- ------- ------- ------- -------
Total nonaccrual loans 3,615 5,729 9,491 9,114 5,189
Restructured real estate loans 317 1,832 644 698 891
------- ------- ------- ------- -------
Total nonperforming loans 3,932 7,561 10,135 9,812 6,080
Real estate acquired through foreclosure and other
repossessed assets 157 78 55 29 46
------- ------- ------- ------- -------
Total nonperforming assets $ 4,089 $ 7,639 $10,190 $ 9,841 $ 6,126
======= ======= ======= ======= =======
Nonperforming loans as a percent of loans 0.54% 1.15% 1.60% 1.59% 1.11%
Nonperforming assets as a percent of total assets 0.30 0.59 0.95 0.90 0.56
Allowance for loan losses as a percent of
nonperforming loans 164.86 84.62 59.02 51.37 84.18
Allowance for loan losses as a percent of total loans
before allowance 0.88 0.96 0.94 0.81 0.93
For 1999, approximately $335,000 in interest income would have been
recorded had nonaccruing and restructured loans been accruing pursuant to
contractual terms. During 1999 interest collected on such loans and included in
net income was approximately $174,000.
Nonaccrual and restructured loans decreased approximately $3.5 million
to $4.1 million at December 31, 1999, from $7.6 million at December 31, 1998.
Nonaccrual one- to four-family mortgage loans and commercial loans decreased
$732,000 and $940,000, respectively. The reduction of the one- to four-family
loans was due to a number of loans becoming current on their payments. The
reduction in nonaccrual commercial loans was the result of one loan being
reclassified as restructured. The reduction in restructured real estate loans is
primarily due to a $1.3 million loan being reclassified as not restructured. At
December 31, 1999, total nonaccrual and restructured loans accounted for 0.54%
of net loans receivable, compared to 1.15% at December 31, 1998. Total
nonperforming assets were 0.30% of total assets as of December 31, 1999, a
decrease of 0.29% from 0.59% as of December 31, 1998.
Real estate acquired in settlement of loans is classified separately on
the balance sheet at fair value as of the date of acquisition. After
foreclosure, the loan is written down to the value of the underlying collateral
by a charge to the allowance for loan losses, if necessary. Any subsequent
write-downs are charged against operating expenses. Operating expenses of such
properties, net of related income or loss on disposition, are included in other
expenses. At December 31, 1999, the carrying value of real estate acquired in
settlement of loans was $157,000, and consisted of three single-family
properties.
Home Savings classifies its assets in accordance with federal
regulations. Problem assets are classified as "special mention", "substandard,"
"doubtful" or "loss." "Substandard" assets have one or more defined weaknesses
and are characterized by the distinct possibility that Home Savings will sustain
some loss if the deficiencies are not corrected. "Doubtful" assets have the same
weaknesses as "substandard" assets, with the additional characteristics that (i)
the weaknesses make collection or liquidation in full, on the basis of currently
existing facts, conditions and values, questionable and (ii) there is a high
possibility of loss. An asset classified as "loss" is considered uncollectible
and of such little value that its continuance as an asset of Home Savings is not
warranted. Federal regulations also contain a "special mention" category,
-10-
consisting of assets which do not currently expose an institution to a
sufficient degree of risk to warrant classification but which possess credit
deficiencies or potential weaknesses deserving management's close attention.
Home Savings classifies its commercial loans on a periodic basis, not
less often than annually, according to a nine-level risk rating system that
includes, in addition to the "substandard," "doubtful" and "loss," categories
discussed above, further classifications of "prime," "good," "satisfactory,"
"fair," "watch" and "uncertain."
Commercial loans that are classified "prime," "good," "satisfactory" or
"fair" possess levels of risk, if any, which are generally acceptable to Home
Savings. "Watch" assets are the equivalent of "special mention" assets discussed
above and a loan which is classified as "uncertain" represents a loan for which
there is insufficient current information on the borrower to evaluate the
primary source of payment. A loan may only be maintained as "uncertain" for 90
days while additional information is obtained, subject to one 90-day extension
by the Commercial Loan Manager or a higher level officer.
The aggregate amounts of Home Savings' classified assets at the dates
indicated were as follows:
At December 31,
---------------------
1999 1998
------ ------
(In thousands)
Classified assets:
Substandard $4,323 $8,034
Doubtful - -
Loss 148 95
------ ------
Total classified assets $4,471 $8,129
====== ======
Home Savings analyzes each classified asset quarterly to determine
whether changes in the classifications are appropriate under the circumstances.
Such analysis focuses on a variety of factors, including the amount of, and the
reasons for, any delinquency, the use of the real estate securing the loan, the
financial condition of the borrower, and the appraised value of the real estate.
As such factors change, the classification of the asset will change accordingly.
Home Savings establishes a general allowance for loan losses for any
loan classified as special mention, substandard or doubtful. If an asset, or
portion thereof, is classified as loss, Home Savings establishes a specific
allowance for loss in the amount of 100% of the portion of the asset classified
loss or charges off the portion of any real estate loan deemed to be
uncollectible.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is
established at a level believed adequate by management to absorb probable losses
inherent in the loan portfolio. Management's determination of the adequacy of
the allowance is based upon estimates derived from an analysis of individual
credits, prior and current loss experience, loan portfolio delinquency levels,
overall growth in the loan portfolio and current economic conditions.
Consequently, these estimates are particularly susceptible to changes that could
result in a material adjustment to results of operations. The provision for loan
losses represents a charge against current earnings in order to maintain the
allowance for loan losses at an appropriate level.
In determining the adequacy of the allowance for loan loss, management
reviews and evaluates on a quarterly basis the necessity of a reserve for
individual loans classified by management. The specifically allocated reserve
for a classified loan is determined based on management's estimate of the
borrower's ability to repay the loan given the availability of collateral, other
sources of cash flow, and legal options available to Home Savings. Once a review
is completed, the need for a specific reserve is determined by the Home Savings
Asset Classification Committee and allocated to the loan. Other loans not
specifically reviewed by management are evaluated using the historical
charge-off experience ratio calculated by type of loan. The historical
charge-off experience ratio factors into account the homogeneous nature of the
loans, the geographical lending areas involved, regulatory examination findings,
specific grading systems applied and any other known factors which may impact
the ratios used. Specific reserves on individual loans and historical ratios are
reviewed quarterly and adjusted as necessary based on subsequent collections,
loan upgrades or downgrades, nonperforming trends or actual principal
charge-off. When evaluating the adequacy of the allowance for loan losses,
consideration is given to geographic concentration and the closely associated
effect changing economic conditions have on Home Savings.
-11-
The following table sets forth an analysis of Home Savings' allowance
for loan losses for the periods indicated:
Year ended December 31,
---------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(Dollars in thousands)
Balance at beginning of period $ 6,398 $ 5,982 $ 5,040 $ 5,118 $ 5,111
Provision for (recovery of) loan loss allowances 100 650 (1,546) - -
Charge-offs:
Real estate (60) (47) (403) (28) (373)
Consumer (65) (72) (43) (57) (21)
Commercial - (151) - - -
------- ------- ------- ------- -------
Total charge-offs (125) (270) (446) (85) (394)
------- ------- ------- ------- -------
Recoveries:
Real estate 21 25 2,930 4 365
Consumer 9 10 4 3 10
Commercial 2 1 - - 26
------- ------- ------- ------- -------
Total recoveries 32 36 2,934 7 401
------- ------- ------- ------- -------
Net recoveries (charge-offs) (93) (234) 2,488 (78) 7
------- ------- ------- ------- -------
Balance at end of year $ 6,405 $ 6,398 $ 5,982 $ 5,040 $ 5,118
======= ======= ======= ======= =======
Ratio of net recoveries (charge-offs)
to average net loans (0.01)% (0.04)% 0.40% (0.01)% 0.00%
Ratio of net recoveries (charge-offs) to
provision for (recovery of) loan loss
allowances (93.00)% (36.00)% 160.93% N/A N/A
The following table sets forth the allocation of the allowance for loan
losses by category. The allocations are based on management's assessment of the
risk characteristics of each of the components of the total loan portfolio and
are subject to change as and when the risk factors of each component change. The
allocation is not indicative of either the specific amounts or the loan
categories in which future charge-offs may be taken, nor should it be taken as
an indicator of future loss trends. The allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not restrict the use of the allowance to absorb losses in any category.
At December 31,
-----------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
loans in each loans in each loans in each loans in each loans in each
category category category category category
Amount to total loans Amount to total loans Amount to total loans Amount to total loans Amount to total loans
------ -------------- ------ -------------- ------ -------------- ------ -------------- ------ --------------
(Dollars in thousands)
Real estate loans $4,182 79.48% $4,220 83.30% $4,242 84.35% $4,561 86.53% $4,585 88.52%
Consumer loans 555 5.59 611 5.97 673 6.57 322 6.18 376 6.37
Commercial loans 1,668 14.93 1,567 10.73 1,067 9.08 157 7.29 157 5.11
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total $6,405 100.00% $6,398 100.00% $5,982 100.00% $5,040 100.00% $5,118 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
INVESTMENT ACTIVITIES
GENERAL. Investment and mortgage related securities are classified upon
acquisition as available for sale, held to maturity, or trading. Securities
classified as available for sale are carried at estimated fair value with the
unrealized holding gain or loss, net of taxes, reflected as a component of
retained earnings. Securities classified as held to maturity are carried at
amortized cost. Securities classified as trading are carried at estimated fair
value with the unrealized holding gain or loss reflected as a component of
income. Home Savings recognizes premiums and discounts in interest income over
the period to maturity by the level yield method and realized gains or losses on
the sale of debt securities based on the amortized cost of the specific
securities sold.
-12-
HOME SAVINGS INVESTMENT ACTIVITY. Federal regulations and Ohio law
permit Home Savings to invest in various types of investment securities,
including interest-bearing deposits in other financial institutions, federal
funds, U.S. Treasury and agency obligations, mortgage related-securities, and
certain other specified investments. The Board has adopted an investment policy
which authorizes management to make investments in U.S. Treasury obligations,
U.S. Federal agency and federally-sponsored corporation obligations,
mortgage-related securities issued or sponsored by Federal National Mortgage
Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government
National Mortgage Association (GNMA), and collateralized mortgage obligations
(CMOs) issued or sponsored by FNMA and FHLMC, as well as private issuers,
investment-grade municipal obligations, creditworthy, unrated securities issued
by municipalities in which an office of Home Savings is located,
investment-grade corporate debt securities, investment-grade asset-backed
securities, certificates of deposit that are fully-insured by the FDIC, bankers'
acceptances, federal funds and money market funds . Home Savings' investment
policy is designed primarily to provide and maintain liquidity within regulatory
guidelines, to maintain a balance of high quality investments to minimize risk,
and to maximize return without sacrificing liquidity and safety. The investment
activities of Home Savings are supervised by Home Savings' Investment Committee
and investment purchases are monitored weekly by the Executive Committee.
Home Savings maintains a significant portfolio of mortgage-backed
securities and CMOs. Mortgage -backed securities are sponsored by FNMA, GNMA and
FHLMC. Mortgage-backed securities generally entitle Home Savings to receive a
portion of the cash flows from an identified pool of mortgages. GNMA securities,
FNMA securities and a majority of Home Savings' FHLMC securities are guaranteed
by the issuing agency as to timely payment of principal and interest. The
balance of Home Savings' FHLMC securities are guaranteed as to timely payment of
interest and eventual payment of principal. The CMOs, which are rated the
highest credit quality by a nationally recognized rating agency, are a type of
debt security issued by a special-purpose entity that aggregrates pools of
mortgages and mortgage-related securities and creates different classes of
securities with varying maturities and amortization schedules, as well as a
residual interest, with each class possessing different risk characteristics.
The cash flows from the underlying collateral are generally divided into
tranches or classes which have descending priorities with respect to the
distribution of principal and interest repayment of the underlying mortgages, as
opposed to pass through mortgage-backed securities where cash flows are
distributed pro rata to all security holders. In contrast to mortgage-backed
securities from which cash flow is received (and hence, prepayment risk is
shared) pro rata by all securities holders, the cash flow from the mortgages or
mortgage-related securities underlying CMOs is paid in accordance with
predetermined priority to investors holding various tranches of such securities
or obligations. A particular tranche of CMOs may therefore carry prepayment risk
that differs from that of both the underlying collateral and other tranches.
Accordingly, CMOs attempt to moderate risks associated with conventional
mortgage-related securities resulting from unexpected prepayment activity.
Home Savings is exposed to prepayment risk and reinvestment risk to the
extent that actual prepayments will differ from those estimated in pricing the
security, which may result in adjustments to the net yield on such securities.
Mortgage related securities enable Home Savings to generate positive interest
rate spreads with minimal administrative expense and reduce credit risk due to
either guarantees provided by the issuer or the high credit rating by the rating
agency. Mortgage related securities classified as available for sale also
provide Home Savings with an additional source of liquid funds. Home Savings
also invests in short maturity, medium-term corporate notes of investment grade.
The notes, which include debentures and collateralized notes, generally provide
a spread above the risk-free rate afforded by comparable maturity U.S. Treasury
securities.
BUTLER WICK INVESTMENT ACTIVITIES. Butler Wick holds securities in
three subsidiaries, Butler Wick & Co Inc., Butler Wick Trust Company (Ohio) and
Butler Wick Trust Company (Pennsylvania). Butler Wick & Co., Inc. invests in
municipal securities and to a lesser extent government agency securities for
sale to clients. These securities are held as available for sale. Butler Wick &
Co., Inc does not make markets in equity securities.
In order to qualify as a fiduciary in both the State of Ohio and in the
Commonwealth of Pennsylvania, Butler Wick Trust Company deposited United States
Government obligations having a principal value of $100,000 with the Federal
Reserve Bank for each state of incorporation. In addition to these deposits,
U.S. Government obligations are owned by Butler Wick Trust Company (OH). All of
these securities are classified as held to maturity.
UNITED COMMUNITY INVESTMENT ACTIVITIES. Funds maintained by United
Community for general corporate purposes, including possible acquisitions, are
invested in investment grade corporate notes, federally-sponsored corporate
-13-
obligations, and equity securities. In addition, United Community invests in
Eurodollars, which is a short-term investment. These types of investments
provide a great deal of liquidity and flexibility.
-14-
The following table sets forth the amortized cost and fair value of United
Community's consolidated available for sale and held to maturity investment
securities, FHLB stock, and mortgage-related securities at the dates indicated.
At December 31
------------------------------------------------------------------------------
1999 1998
------------------------------------- -------------------------------------
Amortized % of Fair % of Amortized % of Fair % of
Cost Total Value Total Cost Total Value Total
--------- ------- -------- ------- --------- ------- -------- -------
(Dollars in thousands)
Available for sale:
Short-term investments:
Federal funds $ 58,118 11.33% $ 58,118 11.48% $ 12,798 2.27% $ 12,798 2.25%
Money market funds 22,224 4.33 22,224 4.39 5,002 0.89 5,002 0.88
Eurodollars 129 0.03 129 0.03 133,813 23.74 133,813 23.52
Other 215 0.04 215 0.04 2,162 0.38 2,162 0.38
FHLB stock 12,825 2.50 12,825 2.53 11,958 2.12 11,958 2.10
Equity investments 1,864 0.36 1,715 0.34 1,312 0.24 1,312 0.23
Investment securities:
U.S. Treasury obligations 10,026 1.96 10,024 1.98 15,045 2.67 15,376 2.70
U.S. Government agency obligations 47,879 9.34 47,316 9.35 13,000 2.31 13,060 2.30
Corporate notes 102,341 19.96 101,444 20.05 82,249 14.59 82,452 14.49
Tax exempt municipal bonds 1,405 0.27 1,405 0.28 - - - -
Mortgage-backed securities:
FHLMC 24,992 4.87 24,667 4.87 38,732 6.87 39,450 6.94
FNMA 23,920 4.66 22,869 4.52 19,691 3.49 19,811 3.48
Private issues 439 0.09 429 0.08 2,106 0.37 2,029 0.36
Collateralized mortgage obligations:
FNMA 26,350 5.14 25,832 5.10 13,075 2.32 13,046 2.29
Private issues 40,868 7.98 39,762 7.86 24,753 4.39 24,554 4.32
-------- ------ ------- ------ -------- ------ -------- ------
Total available for sale 373,595 72.86 368,974 72.90 375,696 66.65 376,823 66.24
-------- ------ ------- ------ -------- ------ -------- ------
Held to maturity:
Investment securities:
U.S. Treasury obligations 1,091 0.21 1,098 0.22 4,993 0.89 5,016 0.88
Mortgage-backed securities:
GNMA 5,191 1.02 5,262 1.04 7,057 1.25 7,413 1.31
FHLMC 87,245 17.01 85,604 16.92 114,208 20.26 116,443 20.47
FNMA 45,643 8.90 45,127 8.92 61,734 10.95 63,154 11.10
-------- ------ ------- ------ -------- ------ -------- ------
Total held to maturity 139,170 27.14 137,091 27.10 187,992 33.35 192,026 33.76
-------- ------ ------- ------ -------- ------ -------- ------
Total investment portfolio $512,765 100.00% $506,065 100.00% $563,688 100.00% $568,849 100.00%
======== ======= ======== ======= ======== ======= ======== =======
At December 31
------------------------------------
1997
------------------------------------
Amortized % of Fair % of
Cost Total Value Total
--------- ------- -------- ------
(Dollars in thousands)
Available for sale:
Short-term investments:
Federal funds $ 19,879 5.22% $ 19,879 5.15%
Money market funds - - - -
Eurodollars - - - -
Other - - - -
FHLB stock 11,136 2.92 11,136 2.88
Equity investments 148 0.04 143 0.04
Investment securities:
U.S. Treasury obligations 20,072 5.27 20,224 5.24
U.S. Government agency obligations 5,000 1.31 5,038 1.30
Corporate notes 14,019 3.68 14,140 3.66
Tax exempt municipal bonds - - - -
Mortgage-backed securities:
FHLMC 54,039 14.19 54,827 14.20
FNMA 5,265 1.38 5,345 1.38
Private issues 2,322 0.61 2,244 0.58
Collateralized mortgage obligations:
FNMA - - - -
Private issues - - - -
-------- ------ -------- ------
Total available for sale 131,880 34.62 132,976 34.43
-------- ------ -------- ------
Held to maturity:
Investment securities:
U.S. Treasury obligations 5,168 1.36 5,213 1.35
Mortgage-backed securities:
GNMA 9,077 2.38 9,492 2.46
FHLMC 156,988 41.22 158,939 41.16
FNMA 77,783 20.42 79,555 20.60
-------- ------ -------- ------
Total held to maturity 249,016 65.38 253,199 65.57
-------- ------ -------- ------
Total investment portfolio $380,896 100.00% $386,175 100.00%
======== ======= ======== =======
-15-
The maturities of United Community's consolidated available for sale
and held to maturity investment securities at December 31, 1999, excluding FHLB
stock, and equity securities, are indicated in the following table:
At December 31, 1999
------------------------------------------------------------
After one through
One year or less five years Total
------------------ ------------------ ---------------------------
Amortized Average Amortized Average Amortized Fair Average
cost yield cost Yield cost value Yield
--------- ------- --------- ------- --------- ----- -------
(Dollars in thousands)
Short-term investments:
Federal funds $58,118 5.31% - - $ 58,118 $ 58,118 5.31%
Eurodollars 129 5.28 - - 129 129 5.28
Money market funds 22,224 4.87 - - 22,224 22,224 4.87
Liquid cash 215 5.24 - - 215 215 5.24
------- ---- -------- -------- -----
Total short-term investments $80,686 5.19 - - $ 80,686 $ 80,686 5.19%
======= ==== ======== ======== =====
Investment securities:
Available for sale $83,860 5.54% $77,791 5.91% $161,651 $160,189 5.76%
Held to maturity 693 5.17 398 6.18 1,091 1,098 5.53
------- ---- ------- ---- -------- -------- ----
Total investment securities $84,553 5.54% $78,189 5.91% $162,742 $161,287 5.76%
======= ==== ======= ==== ======== ======== ====
SOURCES OF FUNDS
GENERAL. Deposits have traditionally been the primary source of Home
Savings' funds for use in lending and other investment activities. In addition
to deposits, Home Savings derives funds from interest payments and principal
repayments on loans and income on earning assets. Loan payments are a relatively
stable source of funds, while deposit inflows and outflows fluctuate in response
to general interest rates and money market conditions. Home Savings may also
borrow from the FHLB as a source of funds.
DEPOSITS. Deposits are attracted principally from within Home Savings'
primary market area through the offering of a selection of deposit instruments,
including regular passbook savings accounts, demand deposits, individual
retirement accounts (IRAs), NOW accounts, money market accounts, and
certificates of deposit. Interest rates paid, maturity terms, service fees, and
withdrawal penalties for the various types of accounts are monitored weekly by
the Executive Committee. Home Savings does not use brokers to attract deposits.
The amount of deposits from outside Home Savings' primary market area is not
significant.
-16-
The following table sets forth the dollar amount of deposits in the
various types of accounts offered by Home Savings at the dates indicated:
At December 31,
------------------------------------------------------------------------------
1999 1998
----------------------------------- -------------------------------------
Percent Weighted Percent Weighted
of total average of total average
Amount deposits rate Amount deposits rate
------ -------- -------- ------ -------- --------
(Dollars in thousands)
Checking accounts:
Interest-bearing $ 72,642 8.71% 1.27% $ 69,284 8.91% 1.86%
Noninterest-bearing 9,981 1.19 - 6,933 0.89 -
Savings accounts 223,038 26.74 2.50 224,840 28.92 2.50
Money market accounts 73,698 8.84 3.71 44,764 5.76 2.57
-------- ------ ------ --------
Total transaction accounts 379,359 45.48 - 345,821 44.48 -
Certificates of deposit:
4.00% or less 595 0.07 - 506 0.06 -
4.01% - 6.00% 384,455 46.09 - 374,090 48.11 -
6.01% - 8.00% 69,286 8.31 - 57,166 7.35 -
8.01% - 10.00% 392 0.05 - - - -
-------- ------ ------ -------- ------ ------
Total certificates of deposit 454,728 54.52 5.26 431,762 55.52 5.35
-------- ------ ------ -------- ------ ------
Total deposits $834,087 100.00% 3.99% $777,583 100.00% 4.02%
======== ======= ====== ======== ======= ======
Total deposits increased by $56.5 million, or 7.3%, from December 31,
1998, to December 31, 1999.
The following table shows rate and maturity information for Home
Savings' certificates of deposit at December 31, 1999:
At December 31, 1999
--------------------------------------------------------
Over Over
Up to 1 year to 2 years to
Rate one year 2 years 3 years Thereafter Total
---- -------- --------- ---------- ---------- -----
(In thousands)
4.00% or less $ 373 $ 6 $ - $ 216 $ 595
4.01% to 6.00% 288,468 53,093 21,612 21,282 384,455
6.01% to 8.00% 36,829 7,932 20,041 4,484 69,286
8.01% to 10.00% 392 - - - 392
-------- -------- -------- -------- --------
Total certificates of deposit $326,062 $ 61,031 $ 41,653 $ 25,982 $454,728
======== ======== ======== ======== ========
Percent of total certificates
Of deposit 71.71 13.42 9.16 5.71 100.00%
At December 31, 1999, approximately $326.1 million of Home Savings'
certificates of deposit mature within one year. Based on past experience and
Home Savings' prevailing pricing strategies, management believes that a
substantial percentage of such certificates will be renewed with Home Savings at
maturity. If, however, Home Savings is unable to renew the maturing certificates
for any reason, borrowings of up to $256 million are available from the FHLB of
Cincinnati.
-17-
The following table presents the amount of Home Savings' certificates
of deposit of $100,000 or more by the time remaining until maturity at December
31, 1999:
Maturity Amount
-------- ------
(In thousands)
Three months or less $10,397
Over 3 months to 6 months 11,407
Over 6 months to 12 months 6,496
Over 12 months 12,764
-------
Total $41,064
=======
Management believes that a substantial percentage of the above certificates will
be renewed with Home Savings at maturity.
The following table sets forth Home Savings' deposit account balance
activity for the periods indicated:
Year ended December 31,
-----------------------
1999 1998
-------- ---------
(Dollars in thousands)
Beginning balance $777,583 $ 886,808
Net increase (decrease) in deposits 26,806 (145,153)
------ --------
Net deposits before interest
credited 804,389 741,655
Interest credited 29,698 35,928
------ ------
Ending balance $834,087 $777,583
======== ========
Net increase (decrease) $56,504 $(109,225)
======= ==========
Percent increase (decrease) 7.27% (12.32)%
BORROWINGS. The FHLB system functions as a central reserve bank
providing credit for its member institutions and certain other financial
institutions. As a member in good standing of the FHLB of Cincinnati, Home
Savings is authorized to apply for advances from the FHLB of Cincinnati,
provided certain standards of creditworthiness have been met. Under current
regulations, an association must meet certain qualifications to be eligible for
FHLB advances. The extent to which an association is eligible for such advances
will depend upon whether it meets the Qualified Thrift Lender (QTL) test. If an
association meets the QTL test, Home Savings will be eligible for 100% of the
advances it would otherwise be eligible to receive. If an association does not
meet the QTL test, the association will be eligible for such advances only to
the extent it holds specified QTL test assets. At December 31, 1999, Home
Savings was in compliance with the QTL test. Although Home Savings may borrow up
to $256 million from the FHLB, there were no outstanding advances at December
31, 1999. In January 2000, however, Home Savings borrowed $110 million in short
term FHLB advances.
Butler Wick borrows on a secured basis to fund client receivables.
Short-term bank loans bear interest at the federal funds rate plus 1% and are
payable on demand. The loans are fully collateralized by marketable securities
from both customers' margin account securities and securities owned by Butler
Wick. Short-term borrowings also take the form of securities loaned to other
broker/dealers. Short-term borrowings are available to Butler Wick to the extent
of the loan value of the marketable securities.
During 1999, United Community borrowed $185.0 million from a commercial
bank to provide part of the funds for the special capital distribution. During
January 2000, the $185.0 million loan was repaid.
-18-
COMPETITION
Home Savings faces competition for deposits and loans from other
savings and loan associations, credit unions, banks and mortgage originators in
Home Savings' primary market area. The primary factors in competition for
deposits are customer service, convenience of office location and interest
rates. Home Savings competes for loan originations primarily through the
interest rates and loan fees it charges and through the efficiency and quality
of services it provides to borrowers. Competition is affected by, among other
things, the general availability of lendable funds, general and local economic
conditions, current interest rate levels and other factors which are not readily
predictable.
Butler Wick offers retail brokerage, asset management, and trust
services to clients primarily in Eastern Ohio and Western Pennsylvania. In each
of these businesses Butler Wick competes with both regional and national firms.
As a full service broker, Butler Wick competes based on personal service rather
than price. Butler Wick Asset Management Company and Butler Wick Trust Company
are the only such locally owned and managed financial services providers.
EMPLOYEES
At December 31, 1999, Home Savings and Butler Wick had 430 and 153
full-time equivalent employees, respectively. Home Savings and Butler Wick
believe that relations with their employees are good. Home Savings offers
health, life and disability benefits to all employees, a 401(k) plan, an
employee stock ownership plan and a post-retirement health plan for its eligible
employees. Home Savings had a defined benefit pension plan, which was terminated
effective July 31, 1999, subject to applicable regulatory approval. Butler Wick
offers health, life and disability to all employees, a 401(k), profit sharing
and a retention plan for its eligible employees. None of the employees of Home
Savings or Butler Wick are represented by a collective bargaining unit.
YEAR 2000 CONSIDERATIONS
All year 2000 readiness activities contemplated by United Community
were successfully implemented on or before December 31, 1999. On January 1,
2000, all mission critical facilities and transaction systems were successfully
tested. The results of these tests indicate that no irregularities occurred as a
result of or following the century date change.
REGULATION
United Community is a unitary savings and loan holding company within
the meaning of the Home Owners Loan Act, as amended (HOLA), and is subject to
regulation, examination, and oversight by the OTS, although there are
generally no restrictions on the activities of United Community unless the
OTS determines that there is reasonable cause to believe that an activity
constitutes a serious risk to the financial safety, soundness, or stability
of Home Savings. Home Savings is subject to regulation, examination, and
oversight by the OTS, the Division and the FDIC, and is also subject a
certain provisions of the Federal Reserve Act. Butler Wick is subject to
regulation by the SEC and NASD Regulation, Inc. United Community, Home
Savings and Butler Wick are also subject to the provisions of the Ohio
Revised Code applicable to corporations generally, including laws which
restrict takeover bids, tender offers and control-share acquisitions
involving public companies which have significant ties to Ohio.
The OTS, the FDIC, the Division, the SEC and the NASD each have various
powers to initiate supervisory measures or formal enforcement actions if the
United Community subsidiary they regulate does not comply with applicable
regulations. If the grounds provided by law exist, the OTS, the FDIC or the
Division may place Home Savings in conservatorship or receivership. Home Savings
is also subject to regulatory oversight under various consumer protection and
fair lending laws which govern, among other things, truth-in-lending
disclosures, equal credit opportunity, fair credit reporting and community
reinvestment. Failure to abide by federal laws and regulations governing
community reinvestment could limit the ability of Home Savings to open a new
branch or engage in a merger.
Federal law prohibits Home Savings from making a capital distribution
to anyone or paying management fees to any person having control of Home Savings
if, after such distribution or payment, Home Savings would be undercapitalized.
In addition, Home Savings may not pay any dividends if, as a result, its net
worth would be reduced below the amount required to be maintained for the
liquidation account established in connection with its mutual to stock
conversion.
-19-
Home Savings must file an application with, and obtain approval from, the OTS
(i) if the proposed distribution would cause total distributions for the
calendar year to exceed net income for that year to date plus Home Savings'
retained net income for that year to date plus the retained net income for
the preceding two years; (ii) if Home Savings would not be at least
adequately capitalized following the capital distribution; (iii) if the
proposed distribution would violate a prohibition contained in any applicable
statute, regulation or agreement between Home Savings and the OTS or the
FDIC, or any condition imposed on Home Savings in an OTS-approved application
or notice. If Home Savings is not required to file an application, it must
file a notice of the proposed capital distribution with the OTS. Home Savings
did not pay any dividends to United Community in 1999. In January, 2000, Home
Savings paid a dividend to United Community of $170.0 million, which was used
to pay a portion of the $185.0 million loan related to the $6.00 per share
special capital distribution.
Loans by Home Savings to executive officers, directors, and principal
shareholders and their related interests must conform to the lending limit on
loans to one borrower, and the total of such loans to executive officers,
directors, principal shareholders, and their related interests cannot exceed
specified limits. Most loans to directors, executive officers, and principal
shareholders must be approved in advance by a majority of the "disinterested"
members of the Board with any "interested" director not participating. All loans
to directors, executive officers, and principal shareholders must be made on
terms substantially the same as offered in comparable transactions with the
general public or as offered to all employees in a company-wide benefit program,
and loans to executive officers are subject to additional limitations. All other
transactions between Home Savings and its affiliates must comply with Sections
23A and 23B of the Federal Reserve Act (FRA). United Community and Butler Wick
are affiliates of Home Savings for this purpose.
Under federal law and regulations, no person, directly or indirectly,
or acting in concert with others, may acquire control of Home Savings or United
Community without 60 days' prior notice to the OTS. "Control" is generally
defined as having more than 25% ownership or voting power; however, ownership or
voting power of more than 10% may be deemed "control" if certain factors are in
place. If the acquisition of control is by a company, the acquiror must obtain
approval, rather than give notice, of the acquisition as a savings and loan
holding company. In addition, any merger of Home Savings must be approved by the
OTS as well as the Division. Further, any merger of United Community in which
United Community is not the resulting company must also be approved by both the
OTS and the Division.
-20-
ITEM 2. DESCRIPTION OF PROPERTY
The following table sets forth certain information at December 31,
1999, regarding the properties on which the main office and the branch offices
of Home Savings are located:
Owned or Year Net book
Location Leased opened value Deposits
- -------- -------- ------ --------- --------
(In thousands)
275 Federal Plaza West Owned 1919 $970 $71,102
Youngstown, Ohio
32 State Street Owned 1916 292 88,250
Struthers, Ohio
4005 Hillman Way Owned 1958 503 98,169
Boardman, Ohio
650 East State Street Owned 1925 167 66,288
Salem, Ohio
6000 Mahoning Avenue Leased 1959 14 76,116
Austintown, Ohio
7525 Market Street Owned 1971 509 105,685
Boardman, Ohio
4259 Kirk Road Owned 1975 566 82,987
Austintown, Ohio
202 South Main Street Owned 1975 212 71,907
Poland, Ohio
3500 Belmont Avenue Owned 1976 305 60,613
Youngstown, Ohio
29 North Broad Street Owned 1977 278 34,751
Canfield, Ohio
980 Great East Plaza Leased 1980 11 19,937
Niles, Ohio
127 North Market Street Owned 1987 118 30,097
East Palestine, Ohio
210 West Lincoln Way Owned 1987 309 18,414
Lisbon, Ohio
148725 South Avenue Ext. Owned 1997 780 9,771
Columbiana, Ohio
- ----------------------------
-21-
The following table sets forth certain information at December 31,
1999, regarding the properties on which the main office and the branch offices
of Butler Wick are located:
Owned or Year
Location Leased opened
- -------- -------- ------
City Center One Bldg., Suite 700 Leased 1926
Youngstown, OH 44503
960 W. State Street Leased 1959
Alliance, OH 44601
1284 Liberty Street Leased 1932
Franklin, PA 16322
1 E. State Street Leased 1932
Sharon, PA 16146
25651 Detroit Road Leased 1990
Cleveland, OH 44145
3685 Stutz Drive, Suite 201 Leased 1999
Canfield, OH 44406
149 N Water Street Leased 1981
Kent, OH 44240
108 Main Street Leased 1932
Warren, OH 44481
3637 Medina Road, Suite 206* Leased 1997
Medina, OH 44256
4522 Fulton Drive NW Leased 1990
Canton, OH 44718
100 S. Broadway, 2nd Floor Leased 1956
Salem, OH 44460
* The Medina office is not a full service office, it is a satellite office of
the Cleveland office.
ITEM 3. LEGAL PROCEEDINGS
United Community is not presently involved in any material legal
proceedings. From time to time, United Community is a party to legal proceedings
incidental to its business to enforce its security interest in collateral
pledged to secure loans made by Home Savings and incidental to its securities
business offered by Butler Wick.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-22-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Quarterly stock price and dividends declared are shown in the following
table.
MARKET PRICE AND DIVIDENDS
---------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER 1999
---------------------------------------------------------------------------------------------------------------
1999
High $14.375 $14.688 $14.875 $15.500 $15.500
Low 11.250 10.750 12.000 9.563 9.563
Close 11.750 14.688 13.813 9.938 9.938
Dividends declared and paid 0.075 0.075 0.075 0.075 0.030
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER 1998
---------------------------------------------------------------------------------------------------------------
1998
High N/A N/A $18.130 $15.000 $18.130
Low N/A N/A 13.500 12.880 12.880
Close N/A N/A 14.000 14.880 14.880
Dividends declared and paid N/A N/A N/A 0.075 0.075
---------------------------------------------------------------------------------------------------------------
As of March 17, 2000, there were approximately 15,239 holders of United
Community Stock.
ITEM 6. SELECTED FINANCIAL DATA
The information contained in the 1999 Annual Report to Shareholders of
United Community (Annual Report) under the caption "Selected Financial Data and
Other Data" is incorporated herein by reference and attached hereto as part of
Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information contained in the Annual Report under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by reference and attached hereto as part of
Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained in the Annual Report under the caption "Asset
and Liability Management and Market Risk" is incorporated herein by reference
and attached hereto as part of Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Consolidated Financial Statements appearing in the Annual Report
and the report of Deloitte & Touche LLP dated January 26, 2000, are incorporated
herein by reference and attached hereto as part of Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On August 12, 1999, United Community acquired Butler Wick Corp. and
changed Butler Wick's independent public auditors from Packer, Thomas & Co. to
Deloitte & Touche LLP, the independent auditors of United Community. Packer,
Thomas & Co. served as Butler Wick's independent public auditors from the fiscal
year ended June 30, 1972 to the fiscal year ended June 25, 1999.
The reports of Packer, Thomas & Co. on the consolidated financial
statements of Butler Wick for the fiscal years ended June 25, 1999 and June
26, 1998, did not contain any adverse opinion or disclaimer of opinion nor
was it qualified or modified as to audit scope or accounting principles nor
did it include an explanatory paragraph for material uncertainties. There has
not been any disagreement between Packer, Thomas & Co. and Butler Wick's
management on any matter of accounting principles or practices, consolidated
financial statement disclosure or audit scope or procedure.
-23-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement for the 2000 Annual
Meeting of Shareholders of United Community (Proxy Statement), filed with the
Securities and Exchange Commission (Commission) on March 24, 2000, under the
captions "Proposal One - Election of Directors" and "Executive Officers," is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors - Certain Transactions" is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the Proxy Statement under the caption
"Voting Securities and Ownership of Certain Beneficial Owners and Management" is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) EXHIBITS
3.1 Articles of Incorporation
3.2 Amended Code of Regulations
10 Material Contracts
11 Statement Regarding Computation of Per Share Earnings
13 Portions of the 1999 Annual Report to Shareholders
20 Proxy Statement for 2000 Annual Meeting of Shareholders
21 Subsidiaries of Registrant
23.1 Deloitte & Touche LLP Consent
23.2 Packer, Thomas & Co. Consent
27 Financial Data Schedule
99 Independent Auditors' Report from Packer, Thomas & Co.
-24-
(b) FINANCIAL STATEMENT SCHEDULES. All schedules are omitted because they
are not applicable or the required information is shown in the
financial statements or notes thereto.
(c) REPORTS ON FORM 8-K. On October 20, 1999 an 8-K was filed for Item 5,
Other Events, providing the third quarter financial information news
release.
-25-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ Douglas M. McKay
-----------------------------------
Douglas M. McKay, President
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated.
/S/ Douglas M. McKay /S/ Richard M. Barrett
----------------------------------------- ---------------------------------
Douglas M. McKay, President and Director Richard M. Barrett, Director
Date: March 29, 2000 Date: March 29, 2000
/S/ John F. Zimmerman, Jr. /S/ Donald J. Varner
----------------------------------------- ---------------------------------
John F. Zimmerman, Jr., Director Donald J. Varner, Director
Date March 29, 2000 Date: March 29, 2000
/S/ Herbert F. Schuler, Sr. /S/ Patrick A. Kelly
----------------------------------------- ---------------------------------
Herbert F. Schuler, Sr., Director Patrick A. Kelly, Treasurer
(Principal Financial Officer)
Date: March 29, 2000 Date: March 29, 2000
/S/ Thomas J. Cavalier
-----------------------------------------
Thomas J. Cavalier, Director
Date: March 29, 2000
-26-
INDEX TO EXHIBITS
Exhibit Number
- --------------
3.1 Articles of Incorporation Incorporated by reference to the Registration Statement on
Form S-1 filed by UCFC on March 13, 1998 (S-1) with the
Securities and Exchange Commission (SEC), Exhibit 3.1
3.2 Amended Code of Regulations Incorporated by reference to the 1998 10-K filed by UCFC on
March 31, 1999, Exhibit 3.2
10.1 The Home Savings and Loan Company of Youngstown, Ohio Incorporated by reference to the Pre-Effective Amendment,
Employee Stock Ownership Plan Exhibit 10.3
10.2 Employment Agreement between The Home Savings
and Loan Company of Youngstown, Ohio and Douglas Incorporated by reference to the 1998 10-K filed by UCFC on
M. McKay, dated December 17, 1998. March 31, 1999, Exhibit 10.2
10.3 Employment Agreement between The Home Savings
and Loan Company of Youngstown, Ohio and Donald Incorporated by reference to the 1998 10-K filed by UCFC on
J. Varner, dated December 17, 1998. March 31, 1999, Exhibit 10.3
10.4 Employment Agreement between The Home Savings
and Loan Company of Youngstown, Ohio and Patrick A. Incorporated by reference to the 1998 10-K filed by UCFC on
Kelly, dated December 17, 1998. March 31, 1999, Exhibit 10.4
10.5 Employment Agreement between Butler Wick Corp.
and Thomas J. Cavalier, dated August 12, 1999
11 Statement Regarding Computation of Per Share Earnings Incorporated by reference to Note 18 to the Financial
Statements included in the Annual Report in Exhibit 13
13 Portions of the 1999 Annual Report to Shareholders
20 Proxy Statement for 2000 Annual Meeting of Incorporated by reference to the Proxy Statement, filed with
Shareholders the Securities and Exchange Commission on March 24, 2000
21 Subsidiaries of Registrant
23.1 Deloitte & Touche LLP Consent
23.2 Packer, Thomas & Co. Consent
27 Financial Data Schedule
99 Independent Auditors' Report from Packer, Thomas & Co.
-27-