SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 20, 1999
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United Community Financial Corp.
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(Exact name of registrant as specified in its charter)
Ohio 0-24399 34-1856319
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(State or other jurisdiction (Commission (IRS Employer of
incorporation ) File Number) Identification Number)
275 Federal Plaza West
Youngstown, Ohio 44503-1203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 742-0500
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Not Applicable
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(Former name or former address, if changes since last report.)
UNITED COMMUNITY FINANCIAL CORP.
275 Federal Plaza West
Youngstown, Ohio 44503-1203
FOR IMMEDIATE RELEASE
Douglas M. McKay
President
(330) 742-0500, Ext. 801
UNITED COMMUNITY FINANCIAL CORP. ANNOUNCES
LOSS FOR THIRD QUARTER 1999
Youngstown, Ohio - October 20, 1999 - United Community Financial Corp. (Nasdaq:
UCFC), holding company for The Home Savings and Loan Company of Youngstown,
Ohio, and Butler Wick Corp., announced a net loss for the three months ended
September 30, 1999 of $1.9 million, or $(0.06) per diluted share. The loss was
primarily due to a $6.4 million one-time compensation expense due to the effect
of the $6.00 per share special capital distribution in The United Community
Financial Corp. Recognition and Retention Plan (RRP) and a $3.3 million
compensation expense for the first year of the RRP. Diluted earnings per share
for the same quarter would have been $0.07 excluding the compensation expense
for the RRP related to the $6.00 per share capital distribution and the Butler
Wick acquisition expense. The purpose of the RRP, which was approved by the
shareholders on July 12, 1999, is to reward and retain directors, directors
emeritus, officers and employees of United Community and Home Savings who are in
key positions of responsibility by providing them with an ownership interest in
United Community. As of September 30, 1999 United Community has awarded
approximately 20% of the 1,342,334 shares granted to eligible individuals. The
remaining 80% of the shares granted will be awarded over the next four years.
Net loss for the three months ended September 30, 1998 was $1.6 million, or
$(0.05) per diluted share, primarily due to an $11.8 million contribution to The
Home Savings and Loan Company Charitable Foundation.
A more direct comparison of operating results is to compare pre-tax core
earnings for the two periods. Core earnings are defined as pre-tax earnings
adjusted for securities sales transactions, unrealized gains or losses in the
trading portfolio and unusual or nonrecurring expense or income items. Core
earnings for the three months ended September 30, 1999 were $4.0 million
compared to $9.1 million for the three months ended September 30, 1998. The
primary reason for the decrease in core earnings is a $3.8 million increase
in salaries and employee benefits due to a $3.3 million expense for the
shares awarded in the first year of the RRP program.
Net income for the nine months ended September 30, 1999 was $8.5 million, or
$0.25 diluted earnings per share, compared to $5.2 million for the nine months
ended September 30, 1998. The increase in the
current period is primarily due to an increase in net interest income. Core
earnings, as defined above, for the nine months ended September 30, 1999 were
$20.1 million, or $0.38 per diluted share, compared to $19.3 million for the
same period in 1998.
Douglas M. McKay, President of United Community, stated, "On September 30,
1999 United Community's Board of Directors approved a special capital
distribution of $6.00 per share which will be paid on October 26, 1999. This
will reduce United Community's capital to asset ratio from slightly over 36%
to approximately 23%, leaving United Community ample capital to support
future growth as we continue to pursue opportunities for expansion of our
financial services network. The third quarter loss was due to the initial
implementation of the RRP program combined with the effect of the special
capital distribution on the RRP program. The RRP program should provide a
future benefit for United Community's shareholders by helping United
Community to retain the expertise of individuals in key positions by
providing them with an ownership interest in United Community. The future
impact to earnings caused by the RRP plan will be greatly reduced in
comparison to this third quarter initial implementation of the RRP."
Total shareholders' equity decreased $217.3 million, or 45.77%, to $257.5
million at September 30, 1999 from $474.8 million at December 31, 1998. The
primary reason for the decrease is the $226.5 million decrease in common stock
as a result of the $6.00 per share special capital distribution. This decrease
was offset by earnings for the nine months, which were partially offset by
quarterly dividends of $0.075 per share paid in March, June and September of
1999. Book value per share was $7.29 as of September 30, 1999. Total assets
increased $14.0 million, or 1.08%, from December 31, 1998 to September 30, 1999
primarily as a result of a $52.5 million increase in net loans and a $67.3
million increase in securities. These increases were offset by a $112.8 million
decline in cash and cash equivalents as funds from cash and cash equivalents
were invested in short-term securities that were designated as available for
sale. This investment decision enabled United Community to take advantage of the
current interest rate environment by investing in higher yielding securities
while providing a great deal of liquidity and flexibility. Other liabilities
increased $226.1 million to $244.6 million primarily due to the $226.5 million
payable for the $6.00 per share special capital distribution which is to be paid
on October 26, 1999.
On August 12, 1999, United Community completed its acquisition of Butler Wick
whereby Butler Wick became a wholly-owned subsidiary of United Community. In
connection with the acquisition, United Community issued 1.7 million common
shares in exchange for all of Butler Wick's shares outstanding. The acquisition
was accounted for by the pooling of interests method of accounting. In
accordance with the pooling of interests method of accounting, all prior period
financial information has been restated to include Butler Wick's financial data.
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. Through these subsidiaries, Butler Wick's business includes investment
brokerage, which it has conducted for over 70 years, and a network of integrated
financial services, including asset management, trust and estate services,
public finance and insurance. Butler Wick and its subsidiaries have ten offices
throughout northeastern Ohio and western Pennsylvania.
Home Savings, the wholly-owned subsidiary of United Community, has 14 offices
located throughout Mahoning, Columbiana and Trumbull Counties in Northeastern
Ohio. Additional information on United Community, Home Savings and Butler Wick
may be found on United Community's web site: www.ucfcorp.com.
UNITED COMMUNITY FINANCIAL CORP.
As of As of
September 30, 1999 December 31,1998
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(In thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA:
ASSETS
Cash and cash equivalents $ 59,564 $ 172,409
Mortgage-backed securities 265,330 281,889
Investment securities 203,850 119,997
Federal Home Loan Bank stock 12,603 11,958
Net loans receivable:
Loans held for investment 712,848 659,903
Loans held for sale 3,604 3,993
Allowance for loan losses (6,422) (6,398)
Real estate owned 222 78
Other assets 60,058 53,860
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Total assets $ 1,311,657 $ 1,297,689
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LIABILITIES
Deposits $ 777,541 $ 777,583
Other borrowed funds 32,014 26,727
Other liabilities 244,621 18,558
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Total liabilities $ 1,054,176 $ 822,868
SHAREHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized and unissued
at September 30, 1999 - -
Common stock-no par value; 499,000,000 shares authorized; 37,758,166
shares issued and 35,308,637 outstanding at September 30, 1999 $ 136,016 $ 345,872
Retained earnings 154,281 154,078
Other comprehensive income (1,750) 733
Unearned compensation (31,066) (25,862)
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Total shareholders' equity $ 257,481 $ 474,821
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Total liabilities and shareholders' equity $ 1,311,657 $ 1,297,689
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Book value per share $ 7.29 $ 14.03
Dividends paid per share per quarter $ 0.075 $ 0.075
Three Months Ended Three Months Ended Three Months Ended
September 30, June 30, September 30,
1999 1999 1998
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(In thousands, except per share data)
SELECTED EARNINGS DATA:
Interest income $ 22,699 $ 22,390 $ 23,661
Interest expense 7,850 7,764 8,657
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Net interest income 14,849 14,626 15,004
Provision for loan losses - 25 100
Noninterest income:
Commissions 3,563 4,224 4,104
Service fees and other charges 1,085 1,234 1,111
Underwriting and investment banking 40 102 255
Net gains (losses)
Securities - 40 -
Other (2) (10) -
Unrealized gain (loss) trading securities 21 (17) 136
Other income 155 188 498
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Total noninterest income 4,862 5,761 6,104
Noninterest expense
Salaries and employee benefits 18,110 7,864 7,824
Occupancy 500 515 522
Equipment and data processing 1,234 1,308 1,273
Acquisition expense 431 - -
Other noninterest expense 2,295 2,356 13,974
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Total noninterest expense 22,570 12,043 23,593
(Loss) Income before taxes (2,859) 8,319 (2,585)
Income taxes (916) 3,017 (977)
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Net (loss) income $ (1,943) $ 5,302 $ (1,608)
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Basic and diluted earnings per share $ (0.06) $ 0.16 $ (0.05)
Three Months Ended Three Months Ended Three Months Ended
September 30, June 30, September 30,
1999 1999 1998
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(In thousands, except per share data)
SELECTED CORE EARNINGS DATA:
Interest income $ 22,699 $ 22,390 $ 23,661
Interest expense 7,850 7,764 8,657
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Net interest income 14,849 14,626 15,004
Provision for loan losses - 25 100
Noninterest income:
Commissions 3,563 4,224 4,104
Service fees and other charges 1,085 1,234 1,111
Underwriting and investment banking 40 102 255
Net gains (losses)
Securities - - -
Other - - -
Unrealized gain (loss) trading securities - - -
Other income 155 188 498
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Total noninterest income 4,843 5,748 5,968
Noninterest expense
Salaries and employee benefits 11,668 7,864 7,824
Occupancy 500 515 522
Equipment and data processing 1,234 1,308 1,273
Acquisition expense - - -
Other noninterest expense 2,295 2,356 2,139
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Total noninterest expense 15,697 12,043 11,758
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Income before taxes $ 3,995 $ 8,306 $ 9,114
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Nine Months Ended Nine Months Ended
September 30, September 30,
1999 1998
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(In thousands, except per share data)
SELECTED EARNINGS DATA:
Interest income $ 67,136 $ 65,217
Interest expense 23,316 28,530
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Net interest income 43,820 36,687
Provision for loan losses 100 500
Noninterest income:
Commissions 11,891 11,657
Service fees and other charges 3,395 3,037
Underwriting and investment banking 396 489
Net gains (losses)
Securities 40 253
Other (11) (58)
Unrealized gain (loss) trading securities 141 149
Other income 520 871
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Total noninterest income 16,372 16,398
Noninterest expense
Salaries and employee benefits 33,803 21,123
Occupancy 1,473 1,458
Equipment and data processing 3,792 3,687
Acquisition expense 431 -
Other noninterest expense 7,206 18,486
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Total noninterest expense 46,705 44,754
Income before taxes 13,387 7,831
Income taxes 4,902 2,670
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Net income $ 8,485 $ 5,161
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Basic and diluted earnings per share $ 0.25 N/A
Nine Months Ended Nine Months Ended
September 30, September 30,
1999 1998
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(In thousands, except per share data)
SELECTED CORE EARNINGS DATA:
Interest income $ 67,136 $ 65,217
Interest expense 23,316 28,530
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Net interest income 43,820 36,687
Provision for loan losses 100 500
Noninterest income:
Commissions 11,891 11,657
Service fees and other charges 3,395 3,037
Underwriting and investment banking 396 489
Net gains (losses)
Securities - -
Other - -
Unrealized gain (loss) trading securities - -
Other income 520 871
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Total noninterest income 16,202 16,054
Noninterest expense
Salaries and employee benefits 27,360 21,123
Occupancy 1,473 1,458
Equipment and data processing 3,792 3,687
Acquisition expense - -
Other noninterest expense 7,206 6,642
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Total noninterest expense 39,831 32,910
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Income before taxes $ 20,091 $ 19,331
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Three Months Ended Three Months Ended Three Months Ended
September 30, June 30, March 31,
1999 1999 1999
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(Dollars in thousands)
AVERAGE DAILY BALANCE OF SELECTED FINANCIAL CONDITION DATA:
Net loans held for investment (including allowance for loan loss $ 694,989 $ 672,986 $ 660,225
of $6,422, $6,446 and $6,461, respectively)
Net loans held for sale 3,473 4,051 4,035
Mortgage-backed securities 274,326 272,823 270,668
Investment securities 208,554 162,006 128,478
Margin accounts 33,063 30,456 24,156
Other interest-earning assets 63,075 128,737 173,376
Total interest-earning assets 1,277,480 1,271,059 1,260,938
Total assets 1,315,286 1,306,084 1,294,979
Certificates of deposit 418,177 423,562 429,325
Checking, demand and savings accounts 356,063 350,471 340,454
Other interest bearing liabilities 28,694 24,462 19,425
Total interest-bearing liabilities 802,934 798,495 789,204
Total noninterest-bearing deposits 33,883 28,956 30,047
Total liabilities 836,817 827,451 819,251
Shareholders' equity 478,469 478,633 475,728
Common shares outstanding 34,454,284 33,898,237 33,856,778
SUPPLEMENTAL LOAN DATA:
Loans originated $ 69,720 $ 63,743 $ 56,542
Loans purchased - - -
Loan chargeoffs 29 29 22
Recoveries on loans 5 4 9
As of As of As of
September 30, 1999 June 30, 1999 March 31, 1999
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(Dollars in thousands)
SUPPLEMENTAL DATA:
Nonaccrual loans $ 3,687 $ 3,805 $ 4,856
Restructured loans 1,651 1,712 1,822
Other real estate owned 222 152 196
Total nonperforming assets 5,560 5,669 6,874
Loans serviced for others 5,408 5,535 5,696
Number of full time equivalent employees 585 575 570
Mortgage-backed securities available for sale 120,202 126,501 97,127
Mortgage-backed securities held to maturity 145,128 155,112 166,996
Investment securities trading 6,746 - -
Investment securities available for sale 197,104 205,469 129,221
Federal home loan bank stock 12,603 12,376 12,164
Fair value of held to maturity securities 144,265 155,838 170,127
REGULATORY CAPITAL DATA:
Regulatory tangible capital $ 315,424 $ 307,885 $ 303,666
Tangible capital ratio 27.71 27.00 26.97
Regulatory core capital 315,424 307,885 303,666
Core capital ratio 27.71 27.00 26.97
Regulatory total capital 321,693 314,235 310,031
Total risk adjusted assets 633,729 623,181 605,685
Total risk adjusted ratio 49.77 50.42 51.19