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 THIRD QUARTER 2003
YOUNGSTOWN, Ohio (October 15, 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 $5.8 million, or $0.17 per diluted share, for the
quarter ended September 30, 2003 compared to $5.2 million, or $0.16 per diluted
share, for the third quarter of 2002. For the nine months ended September 30,
2003, net income was $17.8 million, or $0.55 per diluted share, compared with
$15.5 million, or $0.48 per diluted share, for the nine months ended September
30, 2002.
"During the first nine months of 2003, United Community has continued to show a
strong earnings trend, resulting in a total increase of 15% in earnings per
share over the prior year," said Douglas M. McKay, Chairman and Chief Executive
Officer of United Community. "At the same time, we have met market demands with
record volumes of loan originations and sales, while growing our other loan
portfolios to position ourselves for changes in the current interest rate
environment."
Third Quarter Results
Net income increased $578,000 for the three months ended September 30, 2003
compared to the same period in 2002. Net interest income decreased by $865,000
and the provision for loan losses decreased by $179,000 during the same period.
Additionally, noninterest income increased $3.8 million, which was partially
offset by a $2.4 million increase in 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 an increase in the
average balance of securities and a lowering of interest rates on deposits. As a
result of this activity, the net interest margin declined 10 basis points to
3.79% for the three months ended September 30, 2003.
The increase in noninterest income was primarily a result of increases in gains
recognized on the sale of loans and securities, increases in commissions
received and underwriting and investment banking income and an increase in other
income. The increase in other income is mainly attributable to income recognized
from an investment in bank owned life insurance. Due to the current interest
rate environment, United Community has been selling new loan originations to
help manage interest rate
risk. United Community became active in the secondary market in 2001 and
anticipates continuing to sell newly originated loans in the future.
Noninterest expense increased primarily as a result of increases in the market
valuation of retention plan assets and a charge for post retirement medical
benefits as a result of rising health care cost. In addition, provisions for
bonuses and commissions earned rose as a result of increased underwriting and
investment banking activity in the third quarter of 2003. Increases in occupancy
and equipment and data processing expense, which were partially offset by a
decline in the amortization of the core deposit intangible, also contributed to
the increase in noninterest expense.
Year to Date Results
Net interest income for the nine months ended September 30, 2003 increased
$806,000 and noninterest income increased $8.5 million over the same period in
the previous year. These increases were partially offset by a $5.2 million
increase in noninterest expense and a $991,000 increase in the provision for
loan loss reserves.
The increase in net interest income for the nine months of fiscal 2003 compared
to 2002 is primarily due to a decrease in interest expense on deposits, which is
mostly related to a decrease in interest rates and a decrease in the average
balance of certificates of deposit outstanding. This decrease was partially
offset by a decline in interest earned on loans, as a result of a decrease in
interest rates and a decrease in the average balance of loans, and decreases in
interest earned on securities and other interest-earning assets.
Noninterest income increased for the nine months ended September 30, 2003
compared to the same period in 2002 as a result of increases in gains recognized
on the sale of loans and securities, commissions earned and underwriting and
investment banking income. These increases were partially offset by decreases in
service fees and 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 and recorded in other income in 2002 as a result of
Anthem being the health care provider for its employees.
Noninterest expense increased $5.2 million primarily as a result of increases in
salaries and employee benefits and equipment and data processing. The increase
in salaries and employee benefits is primarily related to a charge for post
retirement benefits as a result of increased health care costs, personnel
additions from the acquisition of Potters Financial Corporation (Potters) that
occurred in the second quarter of 2002, an increase in the valuation of the
Butler Wick retention plan and increases in bonus accruals. These increases were
partially offset by decreases in the amortization of core deposit intangibles,
related to the acquisitions of Industrial Bancorp and Potters, and 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
1.19% and 8.58%, respectively, for the nine months ended September 30, 2003. The
returns on average assets and average equity were 1.02% and 7.71%, respectively,
for the nine months ended September 30, 2002.
Total assets decreased by $10.6 million, or 0.53%, to $2.0 billion at September
30, 2003 compared with December 31, 2002. Loans increased $44.4 million, bank
owned life insurance increased $20.3 million, securities increased $5.1 million,
other assets increased $3.0 million and deposits declined $54.0 million. These
changes were funded by decreases of $78.2 million in cash and cash equivalents,
$3.4 million in loans held for sale and an increase of $33.4 million in other
borrowed funds.
Net loans increased $44.4 million, or 3.0%, from December 31, 2002 to September
30, 2003. Home Savings had increases of $135.8 million in commercial real estate
loans, $137.4 million in construction loans, $39.7 million in consumer loans and
$796,000 in commercial loans. These increases were partially offset by a
decrease of $276.3 million in one to four family 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. With this
change in the composition of the loan portfolio from real estate loans to other
portfolios, an increase of $5.4 million in nonperforming loans and current
economic conditions, the allowance for loan losses increased $874,000, or 5.79%,
to $16.0 million at September 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 1.04% at September 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. 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 $54.0 million, or 3.65%, from December 31, 2002 to September
30, 2003. Decreases in Home Savings' deposits are mainly due to a $61.3 million
decrease in certificates of deposit and a $20.3 million decline in NOW accounts,
which was partially offset by a $27.6 million increase in savings accounts.
Other borrowed funds increased $33.4 million, or 15.91%, from December 31, 2002
to September 30, 2003. The increase consisted of increases in long term advances
from the Federal Home Loan Bank (FHLB) of $12.2 million, short term FHLB
advances of $8.7 million, $8.3 million in repurchase agreements and other short
term borrowings as a result of bond positions entered into by Butler Wick.
Total shareholders' equity increased $4.4 million from December 31, 2002 to
September 30, 2003, 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 September 30, 2003 were $7.03 and $8.12 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
September 30, 2003 December 31, 2002
------------------ -----------------
(In thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA (UNAUDITED):
ASSETS
Cash and cash equivalents $ 32,734 $ 110,936
Securities 247,384 242,328
Federal Home Loan Bank stock 21,705 21,069
Loans held for sale 42,470 45,825
Loans 1,537,735 1,493,312
Allowance for loan losses (15,973) (15,099)
Real estate owned 546 994
Goodwill 33,593 33,593
Core deposit intangible 4,065 5,101
Bank Owned Life Insurance 20,253 --
Other assets 55,069 52,072
----------- -----------
Total assets $ 1,979,581 $ 1,990,131
=========== ===========
LIABILITIES
Deposits $ 1,427,882 $ 1,481,901
Other borrowed funds 243,434 210,024
Other liabilities 29,323 23,637
----------- -----------
Total liabilities 1,700,639 1,715,562
SHAREHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares
authorized and unissued at September 30, 2003 -- --
Common stock-no par value; 499,000,000 shares
authorized; 37,804,457 and 37,803,269 issued,
respectively 139,086 138,207
Retained earnings 182,700 172,080
Other comprehensive income 1,127 2,363
Unearned compensation (17,207) (19,724)
Treasury stock, at cost; 3,462,770 and
2,558,214 shares, respectively (26,764) (18,357)
----------- -----------
Total shareholders' equity 278,942 274,569
----------- -----------
Total liabilities and shareholders' equity $ 1,979,581 $ 1,990,131
=========== ===========
Book value per share $ 8.12 $ 7.79
Tangible book value per share $ 7.03 $ 6.69
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------- -------- -------- --------
(In thousands, except
per share data)
SELECTED EARNINGS DATA (UNAUDITED):
Interest income $27,045 $ 31,547 $ 85,091 $ 95,134
Interest expense 9,515 13,152 30,923 41,772
------- -------- -------- --------
Net interest income 17,530 18,395 54,168 53,362
Provision for loan losses 571 750 2,969 1,978
Noninterest income:
Commissions 3,923 3,189 11,012 10,248
Service fees and other charges 2,234 2,075 5,666 5,988
Underwriting and investment banking 720 22 1,025 193
Net gains (losses)
Loans sold 2,449 1,309 10,888 4,758
Securities 128 (490) 933 (180)
Other -- (89) (45) (254)
Other income 849 481 1,965 2,149
------- -------- -------- --------
Total noninterest income 10,303 6,497 31,444 22,902
Noninterest expense:
Salaries and employee benefits 11,679 9,568 34,519 29,238
Occupancy 968 818 2,713 2,369
Equipment and data processing 2,401 2,048 7,219 6,033
Amortization of core deposit intangible 307 507 1,035 1,746
Other noninterest expense 3,014 3,032 9,766 10,704
------- -------- -------- --------
Total noninterest expense 18,369 15,973 55,252 50,090
Income before taxes 8,893 8,169 27,391 24,196
Income taxes 3,110 2,964 9,600 8,739
------- -------- -------- --------
Net income $ 5,783 $ 5,205 $ 17,791 $ 15,457
======= ======== ======== ========
Basic earnings per share $ 0.18 $ 0.16 $ 0.56 $ 0.48
Diluted earnings per share $ 0.17 $ 0.16 $ 0.55 $ 0.48
Dividends paid per share $ 0.075 $ 0.075 $ 0.225 $ 0.225
Three Months Ended Three Months Ended Three Months Ended
September 30, June 30, March 31,
2003 2003 2003
------------------ ------------------ ------------------
(In thousands)
AVERAGE DAILY BALANCE OF SELECTED FINANCIAL
CONDITION DATA (UNAUDITED):
Net loans (including allowance for loan losses
of $15,973, $16,278 and $15,584, respectively) $1,483,019 $1,494,086 $1,459,191
Loans held for sale 51,796 40,496 41,142
Securities 269,890 306,260 294,982
Margin accounts 14,106 14,255 14,382
Other interest-earning assets 30,728 31,562 79,498
Total interest-earning assets 1,849,539 1,886,659 1,889,195
Total assets 1,974,949 1,991,983 1,997,894
Certificates of deposit 741,432 756,609 805,590
Interest-bearing checking, demand and savings accounts 645,213 659,000 644,270
Other-interest bearing liabilities 235,520 235,362 210,250
Total interest-bearing liabilities 1,622,165 1,650,971 1,660,110
Noninterest-bearing deposits 61,379 59,130 59,105
Total noninterest-bearing liabilities 73,255 66,165 63,073
Total liabilities 1,695,420 1,717,136 1,723,183
Shareholders' equity 279,529 274,847 274,711
Common shares outstanding for basic EPS calculation 31,440 31,253 31,669
Common shares outstanding for diluted EPS calculation 31,884 31,839 32,011
SUPPLEMENTAL LOAN DATA:
Loans originated $ 435,636 $ 455,674 $ 267,489
Loans purchased 52,428 68,818 37,726
Loans sold 163,290 213,633 113,649
Loan chargeoffs 889 1,172 246
Recoveries on loans 13 15 35
As of As of As of
September 30, June 30, March 31,
2003 2003 2003
------------- -------- ---------
(In thousands, except employee data)
SUPPLEMENTAL DATA:
Nonaccrual loans $ 14,423 $ 15,625 $ 14,732
Restructured loans 1,923 1,952 1,877
Other real estate owned 546 519 1,236
Total nonperforming assets 16,892 18,096 17,845
Loans serviced for others 615,352 577,716 436,782
Number of full time equivalent employees 773 776 769
Securities trading 12,735 13,170 19,939
Securities available for sale 234,649 274,709 290,101
Federal Home Loan Bank stock 21,705 21,488 21,276
REGULATORY CAPITAL DATA:
Tier 1 leverage ratio 9.08 8.78 8.23
Tier 1 risk-based capital ratio 10.96 11.13 11.63
Total risk-based capital ratio 11.98 12.13 12.62