EXHIBIT 99
UNITED COMMUNITY FINANCIAL CORP.
275 Federal Plaza West
Youngstown, Ohio 44503-1203
FOR IMMEDIATE RELEASE
Patrick A. Kelly
Chief Financial Officer
(330) 742-0500, Ext. 2592
UNITED COMMUNITY FINANCIAL CORP. ANNOUNCES
EARNINGS FOR SECOND QUARTER 2003
YOUNGSTOWN, Ohio (July 16, 2003) - United Community Financial Corp. (Nasdaq:
UCFC), holding company of The Home Savings and Loan Co. and Butler Wick Corp.,
today reported net income of $7.0 million, or $0.22 per diluted share, for the
quarter ended June 30, 2003 compared to $6.0 million, or $0.19 per diluted
share, for the second quarter of 2002. For the six months ended June 30, 2003,
net income was $12.0 million, or $0.38 per diluted share, compared with $10.3
million, or $0.32 per diluted share, for the six months ended June 30, 2002.
"United Community has had a strong first half of 2003, increasing earnings per
share 19% over last year," said Douglas M. McKay, Chairman and Chief Executive
Officer of United Community. "We are particularly pleased with the fact that we
have been able to maintain a strong net interest margin and an improved
efficiency ratio throughout this same time period."
Second Quarter Results
Net income increased $1.0 million for the three months ended June 30, 2003,
compared to the same period in 2002. Net interest income decreased by $605,000,
while the provision for loan losses increased by $1.8 million. Noninterest
income increased $4.7 million, which can mainly be attributed to an increase of
$3.8 million in gains recognized from the sale of loans. The increase in
noninterest income was partially offset by increased noninterest expense.
The decrease in net interest income is a result of decreases in interest rates
on loans and securities, which was primarily offset by a lowering of interest
rates on deposits. Additionally, effecting the decrease in net interest income
was the level of refinancing activity during the quarter, which has caused a
decline in average outstanding loans. As a result of this activity, the net
interest margin declined 8 basis points to 3.84% for the three months ended June
30, 2003.
During the second quarter of 2003, United Community sold newly originated loans
and fixed rate loans from the portfolio to help manage interest rate risk. These
sales resulted in gains of approximately $2.2 million and $4.2 million,
respectively. In comparison, during the three months ended June 30, 2002, United
Community sold newly originated loans that resulted in $673,000 in gains and
loans out of the portfolio that resulted in $2.2 million in gains. Increases in
gains on securities of $750,000, which are largely related to the market
valuation of the trading securities portfolio, and $237,000 in commission income
also contributed to the increase in noninterest income. These increases were
partially offset by a $379,000 decline in service fees and other charges, which
is principally a result of an impairment charge on mortgage servicing rights.
Noninterest expense increased $1.4 million in the second quarter of 2003
compared to the same period in 2002 primarily as a result of a $2.0 million
increase in salaries and employee benefits and a $309,000 increase in equipment
and data processing. The increase in salaries and employee benefits is primarily
due to a $977,000 charge for post retirement benefits as a result of increased
heath care costs and an $806,000 increase in the market valuation of the Butler
Wick retention plan. These increases were partially offset by decreases of
$712,000 in other noninterest expense and $261,000 in the amortization of the
core deposit intangible related to the acquisitions of Potters Financial
Corporation (Potters) and Industrial Bancorp. The decline in other expense is
primarily due to decreases in advertising costs, franchise taxes and telephone
expense.
YEAR TO DATE RESULTS
Net interest income for the six months ended June 30, 2003 increased $1.7
million and noninterest income increased $4.7 million over the same period in
the previous year. These increases were partially offset by a $2.8 million
increase in noninterest expense and a $1.2 million increase in the provision for
loan loss reserves.
The increase in net interest income for the six months of fiscal 2003 compared
to 2002 is primarily due to a decrease of $6.9 million in interest expense on
deposits, which is mostly related to a decrease in interest rates and a decrease
in certificates of deposit. This decrease was partially offset by a $4.7 million
decline in interest earned on loans, as a result of a decrease in the average
balance of loans and a decrease in interest rates, and decreases in interest
earned on securities and other interest-earning assets.
Noninterest income increased for the six months ended June 30, 2003 compared to
the same period in 2002 as a result of increases of $5.0 million in gains on the
sale of loans and $493,000 in net gains on securities. These increases were
partially offset by decreases of $481,000 in service fees and other charges,
which is primarily a result of an impairment charge on mortgage servicing
rights, and $552,000 in other income. The decrease in other income was
predominately due to the acquisition of stock through the demutualization of
Anthem in 2002, which Home Savings received as a result of Anthem being the
health care provider for its employees.
Noninterest expense increased $2.8 million primarily as a result of a $3.2
million increase in salaries and employee benefits and $834,000 in equipment and
data processing. The increase in salaries and employee benefits is primarily
related to a $1.8 million charge for post retirement benefits as a result of
increased health care costs, increased salaries from the acquisition of Potters
that occurred in the second quarter of 2002 and an increase in the valuation of
the Butler Wick retention plan. These increases were partially offset by
decreases of $510,000 in the amortization of core deposit intangibles,
related to the acquisitions of Industrial Bancorp and Potters, and $919,000 in
other expense. The decline in other expense is predominately due to charges
recognized in the first quarter of 2002 as a result of the early extinguishments
of debt that did not reoccur in 2003. During 2002, United Community determined
that it was advantageous to extinguish debt early and incur associated fees due
to economic conditions and cash inflows from sales of loans.
FINANCIAL CONDITION
United Community's return on average assets and return on average equity were
1.20% and 8.74%, respectively, for the six months ended June 30, 2003. The
returns on average assets and average equity were 1.00% and 7.71%, respectively,
for the six months ended June 30, 2002.
Total assets decreased by $10.6 million, or 0.54%, to $2.0 billion at June 30,
2003 compared with December 31, 2002. Securities increased $45.6 million, bank
owned life insurance increased $20.0 million, other assets increased $1.3
million and deposits declined $55.2 million. These changes were funded by
decreases of $48.3 million in cash and cash equivalents, $17.3 million in loans
and $11.2 million in loans held for sale and an increase of $35.2 million in
other borrowed funds.
Net loans decreased $17.3 million, or 1.2%, from December 31, 2002 to June 30,
2003. Home Savings had a decrease of $160.1 million in real estate loans mainly
as a result of the sale of approximately $90.4 million of fixed rate loans from
the portfolio to help manage interest rate risk and continued refinancing
activity in the portfolio as a result of the current interest rate environment.
This decrease was partially offset by increases of $78.1 million in construction
loans, $20.8 million in consumer loans and $2.4 million in commercial loans.
With this change in the composition of the loan portfolio from real estate loans
to other portfolios, an increase of $968,000 in nonperforming loans and current
economic conditions, the allowance for loan losses increased $1.2 million, or
7.81%, to $16.3 million at June 30, 2003 compared to $15.1 million at December
31, 2002. The allowance for loan losses is monitored closely and may be
increased or decreased depending on current data. The allowance for loan losses
as a percentage of total loans increased to 1.10% at June 30, 2003 compared to
1.01% at December 31, 2002.
During the second quarter of 2003, Home Savings invested $20.0 million in bank
owned life insurance, which represents insurance on the lives of certain
employees where Home Savings is the beneficiary. The purpose of this investment
is to partially cover the cost of Home Savings' existing benefit plans. Bank
owned life insurance provides a long-term asset to offset long-term benefit
liabilities, while generating competitive investment yields. Increases in the
Home Savings' policy cash value are tax deferred and death benefit proceeds
received by Home Savings are tax-free.
Deposits decreased $55.2 million, or 3.72%, from December 31, 2002 to June 30,
2003. Decreases in Home Savings' deposits are mainly due to a $78.3 million
decrease in certificates of deposit, which was partially offset by a $16.0
million increase in savings accounts and $7.1 million increase in checking
accounts.
Other borrowed funds increased $35.2 million, or 16.76%, from December 31, 2002
to June 30, 2003. The increase consisted of an increase in long term advances
from the Federal Home Loan Bank (FHLB) of $22.4 million, short term FHLB
advances of $9.4 million and other short term borrowing as a result of bond
positions entered into by Butler Wick.
Total shareholders' equity increased $1.5 million from December 31, 2002 to June
30, 2003. The increase was largely due to income for the year partially offset
by treasury stock purchases and quarterly dividend payments. Tangible book value
and book value as of June 30, 2003 were $6.92 and $8.02 per share, respectively.
Home Savings and Butler Wick are wholly owned subsidiaries of United Community
Financial Corp. Home Savings operates 34 full service banking offices and 5 loan
production offices located throughout Northern Ohio and Western Pennsylvania.
Butler Wick has 12 office locations providing full service retail brokerage;
capital markets and trust services throughout Northern Ohio and Western
Pennsylvania. Additional information on United Community, Home Savings and
Butler Wick may be found on United Community's web site: www.ucfconline.com.
###
When used in this Form 8-K or in United Community's press release the words
or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties including changes in economic conditions in 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.
UNITED COMMUNITY FINANCIAL CORP.
As of As of
June 30, 2003 December 31, 2002
------------- -----------------
(In thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA (UNAUDITED):
ASSETS
Cash and cash equivalents $ 62,679 $ 110,936
Securities 287,879 242,328
Federal Home Loan Bank stock 21,488 21,069
Loans held for sale 34,640 45,825
Loans 1,477,188 1,493,312
Allowance for loan losses (16,278) (15,099)
Real estate owned 519 994
Goodwill 33,593 33,593
Core deposit intangible 4,372 5,101
Bank Owned Life Insurance 20,011 -
Other assets 53,393 52,072
------------- -------------
Total assets $ 1,979,484 $ 1,990,131
============= =============
LIABILITIES
Deposits $ 1,426,744 $ 1,481,901
Other borrowed funds 245,228 210,024
Other liabilities 31,441 23,637
------------- -------------
Total liabilities 1,703,413 1,715,562
SHAREHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized and unissued
at June 30, 2003 - -
Common stock-no par value; 499,000,000 shares authorized; 37,802,081
and 37,803,269 issued, respectively 138,607 138,207
Retained earnings 179,296 172,080
Other comprehensive income 1,898 2,363
Unearned compensation (17,949) (19,724)
Treasury stock, at cost; 3,373,697 and 2,558,214 shares, respectively (25,781) (18,357)
------------- -------------
Total shareholders' equity 276,071 274,569
------------- -------------
Total liabilities and shareholders' equity $ 1,979,484 $ 1,990,131
============= =============
Book value per share $ 8.02 $ 7.79
Tangible book value per share $ 6.92 $ 6.69
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
------------- ------------ ------------- -------------
(In thousands, except per
share data)
SELECTED EARNINGS DATA (UNAUDITED):
Interest income $ 28,304 $ 32,458 $ 58,047 $ 63,584
Interest expense 10,177 13,726 21,408 28,619
----------- ----------- ----------- -----------
Net interest income 18,127 18,732 36,639 34,965
Provision for loan losses 1,702 532 2,398 1,228
Noninterest income:
Commissions 3,914 3,677 7,089 7,059
Service fees and other charges 1,632 2,011 3,432 3,913
Underwriting and investment banking 188 138 305 171
Net gains (losses)
Loans sold 6,430 2,673 8,440 3,449
Securities 456 (294) 804 311
Other 15 (165) (44) (165)
Other income 534 471 1,116 1,668
----------- ----------- ----------- -----------
Total noninterest income 13,169 8,511 21,142 16,406
Noninterest expense:
Salaries and employee benefits 11,938 9,947 22,840 19,670
Occupancy 916 878 1,745 1,550
Equipment and data processing 2,474 2,165 4,818 3,984
Amortization of core deposit intangible 340 601 729 1,239
Other noninterest expense 3,061 3,773 6,754 7,673
----------- ----------- ----------- -----------
Total noninterest expense 18,729 17,364 36,886 34,116
Income before taxes 10,865 9,347 18,497 16,027
Income taxes 3,837 3,350 6,490 5,775
----------- ----------- ----------- -----------
Net income $ 7,028 $ 5,997 $ 12,007 $ 10,252
=========== =========== =========== ===========
Basic earnings per share $ 0.22 $ 0.19 $ 0.38 $ 0.32
Diluted earnings per share $ 0.22 $ 0.19 $ 0.38 $ 0.32
Dividends paid per share $ 0.075 $ 0.075 $ 0.150 $ 0.150
Three Months Ended Three Months Ended Three Months Ended
June 30, March 31, December 31,
2003 2003 2002
------------------- --------------------- --------------------
(In thousands)
AVERAGE DAILY BALANCE OF SELECTED FINANCIAL CONDITION DATA (UNAUDITED):
Net loans (including allowance for loan losses $ 1,494,086 $ 1,459,191 $ 1,500,940
of $16,278, $15,584 and $15,099, respectively)
Loans held for sale 40,496 41,142 36,218
Securities 306,260 294,982 246,754
Margin accounts 14,255 14,382 15,683
Other interest-earning assets 31,562 79,498 94,420
Total interest-earning assets 1,886,659 1,889,195 1,894,015
Total assets 1,991,983 1,997,894 2,002,717
Certificates of deposit 756,609 805,590 824,516
Interest-bearing checking, demand and savings accounts 659,000 644,270 599,144
Other-interest bearing liabilities 235,362 210,250 215,389
Total interest-bearing liabilities 1,650,971 1,660,110 1,639,049
Noninterest-bearing deposits 59,130 59,105 55,562
Total noninterest-bearing liabilities 66,165 63,073 89,736
Total liabilities 1,717,136 1,723,183 1,728,785
Shareholders' equity 274,847 274,711 273,932
Common shares outstanding for basic EPS calculation 31,253 31,669 31,892
Common shares outstanding for diluted EPS calculation 31,839 32,011 32,376
SUPPLEMENTAL LOAN DATA:
Loans originated $ 455,674 $ 267,489 $ 260,383
Loans purchased 68,818 37,726 1,000
Loans sold 213,633 113,649 108,034
Loan chargeoffs 1,172 246 1,394
Recoveries on loans 15 35 28
As of As of As of
June 30, March 31, December 31,
2003 2003 2002
------------------- --------------------- --------------------
(In thousands, except employee data)
SUPPLEMENTAL DATA:
Nonaccrual loans $ 15,625 $ 14,732 $ 14,196
Restructured loans 1,952 1,877 1,271
Other real estate owned 519 1,236 994
Total nonperforming assets 18,096 17,845 16,461
Loans serviced for others 577,716 436,782 386,218
Number of full time equivalent employees 776 769 774
Securities trading 13,170 19,939 5,060
Securities available for sale 274,709 290,101 237,268
Federal Home Loan Bank stock 21,488 21,276 21,069
REGULATORY CAPITAL DATA:
Regulatory tangible capital $ 165,509 $ 157,192 $ 150,821
Tangible capital ratio 8.78 8.23 8.05
Regulatory core capital 165,509 157,192 150,821
Core capital ratio 8.78 8.23 8.05
Regulatory total capital 180,353 170,513 163,419
Total risk adjusted assets 1,483,047 1,351,232 1,295,667
Total risk adjusted ratio 12.16 12.62 12.61