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 2004
YOUNGSTOWN, Ohio (July 15, 2004) - United Community Financial Corp. (United
Community) (Nasdaq: UCFC), holding company of The Home Savings and Loan Co.
(Home Savings) and Butler Wick Corp. (Butler Wick), today reported net income of
$5.0 million, or $0.17 per diluted share, for the quarter ended June 30, 2004,
compared to $7.0 million, or $0.22 per diluted share, for the second quarter of
2003. Annualized return on average equity for the second quarter of 2004 was
8.12 % versus 10.23% for the same period in 2003.
For the six months ended June 30, 2004, net income was $10.5 million, or $0.35
per diluted share, compared with $12.0 million, or $0.38 per diluted share, for
the six months ended June 30, 2003. Annualized return on average equity for the
first half of 2004 was 8.06%, as compared to 8.74% in the prior year.
Chairman and Chief Executive Officer Douglas M. McKay commented, "As
anticipated, the gain on loans sold has decreased significantly from the prior
year. Home Savings recorded a gain of $4.2 million in June 2003 from a
non-recurring sale of mortgage loans from the portfolio. In addition, mortgage
loan originations and sales have declined in 2004 as interest rates have started
to trend upward. Furthermore, during the first half of 2004, growth and
diversification in the loan portfolio continue to play a key role in positioning
the organization for the future." Continuing, "We have seen some compression in
net interest income and the net interest margin," said McKay, "although both
performance measurements remain strong. Improving trends in service charges and
other fee income along with disciplined expense control have been important
contributors to our overall performance. Management continues to remain focused
on providing solid constant value to our shareholders."
Second Quarter Results
- ----------------------
Net interest income for the second quarter was $18.2 million, up from $18.1
million in the second quarter of last year. The average balance of interest
earning assets increased 5.7% from the second quarter of last year, with
continued strong growth in average loans. The average loan balance increased
14.3% from last year. Average deposits were down 3.3% from the same quarter last
year. The net
interest margin was 3.64%, a decrease of 12 basis points from the last quarter
and a decrease of 20 basis points from the second quarter a year ago. The lower
net interest margin reflects the impact of additional borrowings related to the
self- tender offer completed at the end of the first quarter and the impact of
the extended low rate environment.
The provision for loan losses declined $333,000 for the three months ended June
30, 2004, compared to the same period in 2003. This decrease was based on an
analytical review of the allowance for loan losses after consideration was given
to levels and trends of delinquencies, reserve coverage ratios and other factors
in relation to the loan portfolio.
Total non-interest income decreased $4.5 million to $8.7 million for the three
months ended June 30, 2004, compared to $13.2 million for the same period in
2003. The primary reason for the change is a decrease in the net gain on the
sale of loans of $5.6 million. During the second quarter of 2003 Home Savings
sold newly originated loans and fixed rate loans from the portfolio to help
manage interest rate risk. These sales resulted in gains of approximately $6.4
million. In comparison, during the three months ended June 30, 2004, Home
Savings sold newly originated loans that resulted in gains of $788,000.
Partially offsetting the change in net gain on the sale of loans was an increase
in service fees and other charges of $1.1 million.
Non-interest expense decreased $959,000 in the second quarter of 2004 compared
to the same period in 2003, primarily as a result of a $785,000 decrease in
salaries and employee benefits. This decrease in salaries and employee benefits
is primarily due to the change in market value of retention plan assets of
$475,000 during the same time period and a decrease of $605,000 in recognition
and retention plan expenses at both Butler Wick and Home Savings.
Year to Date Results
- --------------------
Net income for the first six months of 2004 decreased $1.5 million from the same
period in 2003. The decrease is primarily a result of a decrease of $479,000 in
net interest income, a decrease in non-interest income of $2.1 million and an
increase in non-interest expense of $399,000. These changes were partially
offset by decreases in the provision for loan losses of $570,000 and the
provision for income taxes of $921,000.
Net interest income decreased $479,000 as a result of a $3.3 million decrease in
interest income offset by a decrease in interest expense of $2.9 million. The
decrease in interest income is a result of a 55 basis point decrease in yield on
interest earning assets driven by reductions in the average balances of
securities of $69.7 million, other interest earning assets of $28.2 million and
loans held for sale of $21.3 million. These decreases were partially offset by
an increase in the average balance of net loans of $186.8 million. Interest
expense decreased $2.9 million primarily as a result of a decline in the average
balance of deposits of $73.5 million and a 42 basis point reduction in cost of
total interest bearing liabilities.
The provision for loan losses declined $570,000 for the six months ended June
30, 2004, compared to the first six months of 2003. This decrease was based on
an analytical review of the allowance for loan losses after consideration was
given to levels and trends of delinquencies, reserve coverage ratios and other
factors in relation to the loan portfolio.
Non-interest income decreased as a result of a reduction in gains on loans sold
of $6.8 million. This decrease was partially offset by increases in service fees
and other charges of $2.2 million and brokerage commissions of $1.5 million.
Non-interest expense increased $399,000 primarily as a result of an increase in
salaries and employee benefits of $979,000, offset by reductions in core deposit
intangible amortization and equipment and data processing expense of $243,000
and $283,000, respectively.
The provision for income tax decreased $921,000 during the first six months of
2004 compared to the same period in 2003 as a result of lower pretax income in
2004 than in 2003. The effective tax rate at June 30, 2004 was 34.7% as compared
to 35.1% for the same period in 2003.
Financial Condition
- -------------------
United Community's return on average assets and return on average equity were
1.00% and 8.06%, respectively, for the six months ended June 30, 2004. The
returns on average assets and average equity were 0.94% and 8.12 %,
respectively, for the three months ended June 30, 2004.
Total assets increased by $109.7 million, or 5.3%, to $2.2 billion at June 30,
2004, compared to December 31, 2003. The net change in assets was a result of
increases of $177.5 million in net loans, $14.0 million in trading securities
and $5.8 million in other assets, partially offset by decreases of $39.0 million
in cash and cash equivalents, $29.0 million in available for sale securities and
$19.6 million in loans held for sale. Total liabilities increased $145.3 million
primarily as a result of a $17.4 million increase in interest bearing deposits,
a $9.1 million increase in non-interest bearing deposits and a $120.0 million
increase in borrowings. The increase in borrowings is primarily a result of loan
growth and completing the self-tender offer.
Net loans increased $177.5 million, or 11.3%, from December 31, 2003 to June 30,
2004. Home Savings had increases of $12.8 million in real estate loans, $49.9
million in construction loans, $74.2 million in consumer loans and $30.0 million
in commercial loans. The allowance for loan losses increased $1.2 million at
June 30, 2004 to $16.3 million from $15.1 million at December 31, 2003. The
allowance for loan losses is monitored closely and may be increased or decreased
depending on a variety of factors such as levels and trends of delinquencies,
chargeoffs and recoveries and perceived risk in the portfolios. The allowance
for loan losses as a percentage of total loans was 0.92% at June 30, 2004,
compared to 0.94% at December 31, 2003.
The increase in short-term borrowed funds of $107.7 million from December 31,
2003 to June 30, 2004 was to fund loan growth in excess of deposit growth in
addition to completing the self-tender offer.
Total shareholders' equity decreased $35.6 million from December 31, 2003 to
June 30, 2004, largely due to the self-tender offer. Tangible book value and
book value as of June 30, 2004, were $6.65 and $7.84 per share, respectively.
Home Savings and Butler Wick are wholly owned subsidiaries of United Community
Financial Corp. Home Savings operates 35 full service banking offices and 5 loan
production offices located throughout 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 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, 2004 December 31, 2003
------------- -----------------
(In thousands, except per share data)
SELECTED FINANCIAL CONDITION DATA (UNAUDITED):
ASSETS
Cash and cash equivalents $ 42,123 $ 81,155
Securities 228,074 243,125
Federal Home Loan Bank stock 22,362 21,924
Loans held for sale 18,097 37,715
Loans 1,770,304 1,591,605
Allowance for loan losses (16,306) (15,111)
Real estate owned 637 1,299
Goodwill 33,593 33,593
Core deposit intangible 3,301 3,787
Cash surrender value of life insurance 20,981 20,496
Other assets 60,411 54,245
----------- -----------
Total assets $ 2,183,577 $ 2,073,833
=========== ===========
LIABILITIES
Deposits
Interest-bearing $ 1,377,644 $ 1,360,256
Noninterest-bearing 72,530 63,442
Other borrowed funds
Short-term 266,819 159,135
Long-term 191,683 179,328
Other liabilities 30,622 31,836
----------- ------------
Total liabilities 1,939,298 1,793,997
SHAREHOLDERS' EQUITY
Preferred stock-no par value; 1,000,000 shares authorized and unissued
at June 30, 2004 - -
Common stock-no par value; 499,000,000 shares authorized; 37,804,457
and 37,804,457 issued, respectively 140,534 139,526
Retained earnings 190,689 185,495
Other comprehensive income (903) 1,124
Unearned compensation (15,841) (16,752)
Treasury stock, at cost; 6,659,227 and 3,718,542 shares, respectively (70,200) (29,557)
----------- -----------
Total shareholders' equity 244,279 279,836
----------- -----------
Total liabilities and shareholders' equity $ 2,183,577 $ 2,073,833
=========== ===========
Book value per share $ 7.84 $ 8.21
Tangible book value per share $ 6.65 $ 7.11
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
-------- -------- -------- ---------
(In thousands, except per
share data)
SELECTED EARNINGS DATA (UNAUDITED):
Interest income $ 27,639 $ 28,304 $ 54,714 $ 58,047
Interest expense 9,488 10,177 18,554 21,408
-------- -------- -------- --------
Net interest income 18,151 18,127 36,160 36,639
Provision for loan losses 1,369 1,702 1,828 2,398
Noninterest income:
Commissions 3,895 3,914 8,547 7,089
Service fees and other charges 2,699 1,632 5,589 3,432
Underwriting and investment banking 202 188 574 305
Net gains (losses)
Loans sold 788 6,430 1,689 8,440
Securities 309 456 1,146 804
Other 12 15 3 (44)
Other income 761 534 1,449 1,116
-------- -------- -------- --------
Total noninterest income 8,666 13,169 18,997 21,142
Noninterest expense:
Salaries and employee benefits 11,153 11,938 23,819 22,840
Occupancy 919 916 1,834 1,745
Equipment and data processing 2,201 2,474 4,535 4,818
Amortization of core deposit intangible 229 340 486 729
Other noninterest expense 3,268 3,061 6,611 6,754
-------- -------- -------- --------
Total noninterest expense 17,770 18,729 37,285 36,886
-------- --------
Income before taxes 7,678 10,865 16,044 18,497
Income taxes 2,676 3,837 5,569 6,490
-------- -------- -------- --------
Net income $ 5,002 $ 7,028 $ 10,475 $ 12,007
======== ======== ======== ========
Basic earnings per share $ 0.17 $ 0.22 $ 0.35 $ 0.38
Diluted earnings per share $ 0.17 $ 0.22 $ 0.35 $ 0.38
Dividends paid per share $ 0.075 $ 0.075 $ 0.15 $ 0.15
Three Months Ended Three Months Ended Three Months Ended
June 30, March 31, December 31,
2004 2004 2003
------------ ------------ ------------
(In thousands)
AVERAGE DAILY BALANCE OF SELECTED FINANCIAL
CONDITION DATA (UNAUDITED):
Net loans (including allowance for loan losses $ 1,708,032 $ 1,619,186 $ 1,549,363
of $16,306, $15,253 and $15,111, respectively)
Loans held for sale 20,345 18,756 32,230
Securities 224,737 236,330 236,584
Margin accounts 13,950 13,783 14,654
Other interest-earning assets 28,031 28,030 29,773
Total interest-earning assets 1,995,095 1,916,085 1,862,604
Total assets 2,127,558 2,045,992 1,989,801
Certificates of deposit 748,365 730,139 751,531
Interest-bearing checking, demand and savings accounts 620,608 619,102 630,277
Other-interest bearing liabilities 395,917 314,336 239,798
Total interest-bearing liabilities 1,764,890 1,663,577 1,621,606
Noninterest-bearing deposits 73,845 68,199 65,436
Total noninterest-bearing liabilities 116,177 109,358 87,508
Total liabilities 1,881,067 1,772,935 1,709,114
Shareholders' equity 246,491 273,057 280,687
Common shares outstanding for basic EPS calculation 28,537 30,861 31,052
Common shares outstanding for diluted EPS calculation 29,007 31,328 31,664
SUPPLEMENTAL LOAN DATA:
Loans originated $ 394,895 $ 256,624 $ 232,725
Loans purchased 43,810 46,135 52,398
Loans sold 71,133 46,539 55,646
Loan chargeoffs 419 352 1,181
Recoveries on loans 68 35 109
As of As of As of
June 30, March 31, December 31,
2004 2004 2003
-------- --------- --------
(In thousands, except employee data)
SUPPLEMENTAL DATA:
Nonaccrual loans $ 12,650 $ 12,178 $ 12,981
Restructured loans 1,075 944 2,025
Other real estate owned 637 1,449 1,299
Total nonperforming assets 14,362 14,571 16,305
Loans serviced for others 642,847 633,703 633,189
Number of full time equivalent employees 772 782 779
Securities trading 29,568 28,159 15,600
Securities available for sale 198,506 190,179 227,525
Federal Home Loan Bank stock 22,362 22,142 21,924
REGULATORY CAPITAL DATA:
Tier 1 leverage ratio 8.33 8.35 8.22
Tier 1 risk-based capital ratio 9.49 9.68 9.64
Total risk-based capital ratio 10.40 10.58 10.56