8-K 1 l95403ae8vk.txt UNITED COMMUNITY FINANCIAL CORPORATION 8-K 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: July 17, 2002 ------------- United Community Financial Corp. ---------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 0-24399 34-1856319 ------------------------------------------------------------------------------- (State or other jurisdiction (Commission IRS Employer of incorporation) File Number) Identification Number) 275 Federal Plaza West Youngstown, Ohio 44503-1203 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (330) 742-0500 ----------------------- Not Applicable ---------------------------------------------------------- (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 Patrick A. Kelly Chief Financial Officer (330) 742-0500, Ext. 2592 UNITED COMMUNITY FINANCIAL CORP. ANNOUNCES EARNINGS FOR SECOND QUARTER 2002 ITEM 5: OTHER EVENTS YOUNGSTOWN, Ohio (July 17, 2002) - United Community Financial Corp. (Nasdaq: UCFC), holding company of The Home Savings and Loan Co. and Butler Wick Corp., today reported net income of $6.0 million, or $0.19 per diluted share, for the quarter ended June 30, 2002, compared to $2.9 million, or $0.09 per diluted share, for the second quarter of 2001. For the six months ended June 30, 2002, net income was $10.3 million, or $0.32 per diluted share, compared with $6.1 million, or $0.19 per diluted share, for the six months ended June 30, 2001. "The first two quarters of 2002 have been very good for United Community with a 67% increase in net income over the prior year," said Douglas M. McKay, chairman and chief executive officer of United Community. "So far this year, United Community has been able to reduce debt while continuing to expand our base through the acquisition of Potters Financial Corp. and by increasing both loans and deposits." SECOND QUARTER RESULTS United Community's net interest income for the three months ended June 30, 2002 increased $6.5 million over the same period in 2001, and noninterest income increased $2.3 million over the same quarter in the previous year. These increases were partially offset by a $3.8 million increase in noninterest expense and a $282,000 increase in the provision for loan losses. The increase in net interest income is primarily due to an increase in interest income on loans, which was partially offset by increases in interest expense on deposits and other borrowed funds and a decrease in interest earned on securities and margin accounts. The increases in interest income and interest expense were primarily due to increases in loans and deposits. The increase in noninterest income was primarily a result of increases in gains on loans sold, in commissions and in service fees and other charges, which were partially offset by realized losses on securities and other assets. United Community realized net gains of $264,000 and $14,000 on sales of securities and other assets, respectively, in the same quarter of the prior year. During the second quarter of 2002, United Community sold approximately $107.9 million in fixed rate loans out of the portfolio to help reduce interest rate risk, which resulted in a gain of approximately $2.0 million. United Community became active in the secondary market in 2001 and anticipates continuing to sell newly originated loans in the future. The increase in noninterest expense was due partially to a $1.4 million increase in salaries and employee benefits, primarily as a result of the additional staff acquired from Industrial Bancorp and Potters. Increases in the amortization of core deposit intangible, occupancy, equipment and data processing and other expenses also contributed to the increase in noninterest expense. Increases in occupancy and equipment and data processing are all primarily related to the two acquisitions. The increase in other expense is related to the costs associated with the early extinguishment of debt. In accordance with SFAS No. 145, which was adopted on April 1, 2002, these costs, which were previously recognized as an extraordinary item in the first quarter, have been reclassified as an ordinary expense and are reported in other expense. YEAR TO DATE RESULTS Net interest income for the six months ended June 30, 2002 increased $10.5 million and noninterest income increased $4.2 million over the previous year. These increases were partially offset by a $7.8 million increase in noninterest expense and an increase in the provision for loan loss reserves. The increase in net interest income for the first six months of 2002 compared to 2001 is primarily due to an increase of $18.5 million in loan income as a result of new loan originations and the acquisitions of Industrial and Potters. This increase was offset by increases in interest expense on deposits of $2.7 million and other borrowed funds of $2.0 million and decreases in interest earned on securities of $2.8 million and margin accounts of $690,000. Noninterest income increased for the six months ended June 30, 2002 compared to the same period in 2001 as a result of increases in gains on loans sold of $3.4 million, increases in service fees and other charges, gains recognized on securities and other income. The increase in other income was related to the sale of Anthem stock received by Home Savings in the demutualization of Anthem. These increases were partially offset by a decline in underwriting and investment banking fees and other recognized losses primarily as a result of the disposal of fixed assets. Noninterest expense increased partially as a result of an increase in salaries and employee benefits, which is primarily due to expenses related to an increase in full time equivalent employees as a result of the acquisitions of Industrial and Potters. Adding to the increase in noninterest expense were increases in the amortization of core deposit intangible related to the two acquisitions, occupancy, equipment and data processing and other expenses. The increase in other expense is primarily due the costs associated with the early extinguishment of debt that has been reclassified from extraordinary items in accordance with SFAS No. 145, which was adopted on April 1, 2002. FINANCIAL CONDITION United Community's annualized return on average assets and annualized return on average equity were 1.00% and 7.71%, respectively, for the six months ended June 30, 2002. The annualized returns on average assets and average equity were 0.92% and 4.72%, respectively, for the six months ended June 30, 2001. Total shareholders' equity increased $4.9 million from December 31, 2001 to June 30, 2002. The increase was primarily due to income for the period, offset by quarterly dividend payments and treasury stock purchases. Book value as of June 30, 2002 was $7.55 per share. Total assets increased by $61.9 million, or 3.2%, to $2.0 billion at June 30, 2002 compared with December 31, 2001, primarily as a result of the acquisition of Potters. Loans increased $99.7 million, securities increased $23.8 million, goodwill increased $13.9 million and other borrowed funds decreased $76.3 million. These changes were funded by a $63.5 million decline in cash and cash equivalents, a $13.8 million decrease in loans held for sale and a $135.6 million increase in deposits. Net loans increased $99.7 million, or 7.1%, from December 31, 2001 to June 30, 2002. Home Savings had increases of $41.1 million in consumer loans, $23.2 million in real estate loans, $18.2 million in construction loans and $25.2 million in commercial loans. The allowance for loan losses increased $2.9 million, or 25.1%, to $14.4 million at June 30, 2002 compared to $11.5 million at December 31, 2001. Of this increase, approximately $1.9 million was acquired from Potters. The remaining increase was an increase in the provision for loan losses less net charge offs. The increase in the provision is due to the increase in the loan portfolio and current market conditions. The allowance for loan losses as a percentage of total loans increased to 0.94% at June 30, 2002 compared to 0.81% at December 31, 2001. Deposits increased $135.6 million, or 9.8%, from December 31, 2001 to June 30, 2002, primarily as a result of deposits acquired from Potters. Increases in Home Savings' deposits primarily consisted of a $14.7 million increase in checking accounts and a $11.3 million increase in savings accounts, which were partially offset by a $3.2 million decrease in certificates of deposit. Other borrowed funds decreased $76.3 million due primarily to the maturity and early extinguishment of Federal Home Loan Bank debt. "We are continuing to pursue our three initiatives of growth, profitability and capital management in 2002," said McKay. "Our acquisition of Potters is helping to strengthen our position in our current market and providing opportunities in new market areas. Our assets exceed $2.0 billion for the first time, our earnings are up considerably from last year and assuming the real estate market remains strong, we're anticipating continued good results for the remainder of the year." Home Savings and Butler Wick are wholly owned subsidiaries of United Community Financial Corp. Home Savings operates 33 full service banking offices and 5 loan production offices, including the former Potters 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 future filings by United Community with the SEC, 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 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. SIGNATURES Pursuant to the requirements 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/ PATRICK A. Kelly ---------------------------------- Patrick A. Kelly Chief Financial Officer Dated: July 16, 2002 UNITED COMMUNITY FINANCIAL CORP.
As of As of JUNE 30, 2002 DECEMBER 31, 2001 ------------- ----------------- (In thousands, except per share data) SELECTED FINANCIAL CONDITION DATA: ASSETS Cash and cash equivalents $ 142,341 $ 205,883 Mortgage-related securities 136,975 145,867 Marketable securities 93,827 61,131 Federal Home Loan Bank stock 20,586 18,760 Loans held for sale 6,417 20,192 Loans 1,520,577 1,417,959 Allowance for loan losses (14,365) (11,480) Real estate owned 1,167 477 Goodwill 33,583 19,664 Core deposit intangible 6,041 6,312 Other assets 59,511 60,015 ----------- ----------- Total assets $ 2,006,660 $ 1,944,780 =========== =========== LIABILITIES Deposits $ 1,518,992 $ 1,383,418 Other borrowed funds 195,354 271,631 Other liabilities 25,542 27,851 ----------- ----------- Total liabilities 1,739,888 1,682,900 SHAREHOLDERS' EQUITY Preferred stock-no par value; 1,000,000 shares authorized and unissued at June 30, 2002 -- -- Common stock-no par value; 499,000,000 shares authorized; 37,734,780 and 37,754,086 issued, respectively 137,038 136,903 Retained earnings 166,335 160,915 Other comprehensive income 1,313 1,402 Unearned compensation (21,162) (22,988) Treasury stock, at cost; 2,381,938 and 2,086,500 shares, respectively (16,752) (14,352) ----------- ----------- Total shareholders' equity 266,772 261,880 ----------- ----------- Total liabilities and shareholders' equity $ 2,006,660 $ 1,944,780 =========== =========== Book value per share $ 7.55 $ 7.34
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2002 2001 2002 2001 -------- -------- -------- -------- (In thousands, except per share data) SELECTED EARNINGS DATA (UNAUDITED): Interest income $ 32,598 $ 24,645 $ 63,860 $ 48,683 Interest expense 13,726 12,244 28,619 23,924 -------- -------- -------- -------- Net interest income 18,872 12,401 35,241 24,759 Provision for loan losses 532 250 1,228 580 Noninterest income: Commissions 3,677 3,421 7,059 7,012 Service fees and other charges 2,016 1,848 3,914 3,767 Underwriting and investment banking 138 321 171 383 Net gains (losses) Loans sold 2,673 55 3,449 81 Securities (294) 264 311 191 Other (165) 14 (165) 5 Other income 327 195 1,391 468 -------- -------- -------- -------- Total noninterest income 8,372 6,118 16,130 11,907 Noninterest expense: Salaries and employee benefits 9,947 8,534 19,670 16,399 Occupancy 878 621 1,550 1,194 Equipment and data processing 2,165 1,775 3,984 3,394 Amortization of core deposit intangible 601 -- 1,239 -- Other noninterest expense 3,774 2,622 7,673 5,344 -------- -------- -------- -------- Total noninterest expense 17,365 13,552 34,116 26,331 Income before taxes 9,347 4,717 16,027 9,755 Income taxes 3,350 1,779 5,775 3,614 -------- -------- -------- -------- Net income $ 5,997 $ 2,938 $ 10,252 $ 6,141 ======== ======== ======== ======== Basic earnings per share $ 0.19 $ 0.09 $ 0.32 $ 0.19 Diluted earnings per share $ 0.19 $ 0.09 $ 0.32 $ 0.19 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, 2002 2002 2001 ------------------ ------------------ ------------------ (Dollars in thousands) AVERAGE DAILY BALANCE OF SELECTED FINANCIAL CONDITION DATA (UNAUDITED): Net loans (including allowance for loan losses $ 1,582,747 $ 1,428,867 $ 1,391,902 of $14,365, $12,022 and $11,480, respectively) Loans held for sale 6,486 15,852 51,524 Mortgage-related securities 125,139 136,163 157,949 Marketable securities 98,349 101,730 60,028 Margin accounts 18,430 20,440 21,203 Other interest-earning assets 80,641 165,669 153,898 Total interest-earning assets 1,911,792 1,868,721 1,836,504 Total assets 2,023,237 1,952,630 1,925,300 Certificates of deposit 880,608 839,288 831,856 Interest-bearing checking, demand and savings accounts 597,144 523,731 494,023 Other-interest bearing liabilities 197,727 254,272 272,071 Total interest-bearing liabilities 1,675,479 1,617,291 1,597,950 Noninterest-bearing deposits 43,345 37,005 32,550 Total noninterest-bearing liabilities 81,175 33,249 65,223 Total liabilities 1,756,654 1,687,545 1,695,723 Shareholders' equity 266,583 265,085 262,127 Common shares outstanding for basic EPS calculation 31,821,940 31,951,231 31,788,375 Common shares outstanding for diluted EPS calculation 32,254,684 32,212,143 31,912,640 SUPPLEMENTAL LOAN DATA: Loans originated $ 215,637 $ 198,712 $ 212,200 Loans purchased 13,568 5,450 1,200 Loans sold 135,440 52,505 146,470 Loan chargeoffs 80 208 173 Recoveries on loans 22 54 6
As of As of As of June 30, March 31, December 31, 2002 2002 2001 ------------------ ------------------- ----------- SUPPLEMENTAL DATA: Nonaccrual loans $ 12,189 $ 9,479 $ 10,889 Restructured loans 1,281 1,459 1,572 Other real estate owned 1,167 1,186 477 Total nonperforming assets 14,637 12,124 12,938 Loans serviced for others 332,448 215,001 178,932 Number of full time equivalent employees 777 726 723 Mortgage-related securities available for sale 73,992 54,533 67,069 Mortgage-related securities held to maturity 62,983 70,227 78,798 Marketable securities trading 5,033 6,514 8,352 Marketable securities available for sale 86,698 90,301 51,081 Marketable securities held to maturity 2,096 2,197 1,698 Federal Home Loan Bank stock 20,586 18,968 18,760 Fair value of held to maturity securities 67,372 73,654 82,339 REGULATORY CAPITAL DATA: Regulatory tangible capital $ 166,533 $ 171,759 $ 168,233 Tangible capital ratio 8.67 9.28 9.07 Regulatory core capital 166,533 171,759 168,233 Core capital ratio 8.67 9.28 9.07 Regulatory total capital 177,766 182,158 178,196 Total risk adjusted assets 1,355,444 1,227,142 1,212,016 Total risk adjusted ratio 13.11 14.84 14.70