8-K 1 l96746ae8vk.txt FORM 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: October 16, 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.) Item 5: Other Events 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 2002 YOUNGSTOWN, Ohio (October 16, 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 $5.2 million, or $0.16 per diluted share, for the quarter ended September 30, 2002, compared with $4.0 million, or $0.12 per diluted share, for the third quarter of 2001. For the nine months ended September 30, 2002, net income was $15.5 million, or $0.48 per diluted share, compared with $10.1 million, or $0.31 per diluted share, for the nine months ended September 30, 2001. "The first three quarters of 2002 have been very good for United Community with a 53% increase in net income over the same period of the prior year," said Douglas M. McKay, chairman and chief executive officer of United Community. "United Community has been able to reduce debt while continuing to expand our customer base through the acquisition of Potters Financial Corp. and by increasing both loans and deposits. The results through nine months also showed continuing improvement in our return on average assets and return on average equity compared with prior periods." Third Quarter Results --------------------- United Community's net interest income for the three months ended September 30, 2002 increased $2.6 million over the same period in 2001 and noninterest income increased $1.0 million over the same quarter in the previous year. These increases were partially offset by a $1.5 million increase in noninterest expense and a $285,000 increase in the provision for loan losses. The increase in net interest income is primarily due to a decrease in interest expense on deposits and other borrowed funds as a result of the current interest rate environment. These decreases were partially offset by a decrease in interest earned on loans, securities and margin accounts. The increase in noninterest income was primarily a result of increases in gains on loans sold, commissions and service fees and other charges. These increases were partially offset by a decline in other income, underwriting and investment banking and other recognized losses as a result of the disposal of fixed assets. Due to the current interest rate environment, United Community has been selling new loan originations to help reduce interest rate risk. 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 primarily due to a $1.5 million increase in salaries and employee benefits, primarily as a result of the additional staff acquired from Potters. Increases in occupancy, equipment and data processing and other expenses, all primarily related to the acquisition, also contributed to the increase in noninterest expense. These increases were partially offset by a decrease in the amortization of the core deposit intangible. Year to Date Results -------------------- Net interest income for the nine months ended September 30, 2002 increased $13.1 million and noninterest income increased $5.3 million over the previous year. These increases were partially offset by a $9.2 million increase in noninterest expense and a $900,000 increase in the provision for loan losses. The increase in net interest income for the first nine months of 2002 compared to 2001 is primarily due to an increase of $17.9 million in loan income as a result of new loan originations and the acquisitions of Industrial and Potters. This increase was partially offset by an increase in other borrowed funds of $1.0 million and decreases in interest earned on securities of $3.2 million and margin accounts of $874,000. Noninterest income increased for the nine months ended September 30, 2002 compared to the same period in 2001 as a result of increases in gains on loans sold of $4.4 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 costs, which is primarily 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 1.02% and 7.71%, respectively, for the nine months ended September 30, 2002. The annualized returns on average assets and average equity were 0.86% and 5.19%, respectively, for the nine months ended September 30, 2001. Total shareholders' equity increased $8.5 million from December 31, 2001 to September 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 September 30, 2002 was $7.65 per share. Total assets increased by $84.5 million, or 4.3%, to $2.0 billion at September 30, 2002 compared with December 31, 2001, primarily as a result of the acquisition of Potters. Loans increased $123.4 million, securities increased $94.1 million, goodwill increased $13.9 million and other borrowed funds decreased $18.9 million. These changes were funded by a $148.1 million decline in cash and cash equivalents and a $101.8 million increase in deposits. Net loans increased $123.4 million, or 8.8%, from December 31, 2001 to September 30, 2002. Home Savings had increases of $54.5 million in consumer loans, $49.4 million in real estate loans, $15.1 million in construction loans and $12.0 million in commercial loans. The allowance for loan losses increased $3.4 million, or 29.5%, to $14.9 million at September 30, 2002 compared with $11.5 million at December 31, 2001. Of this increase, approximately $1.9 million was acquired from Potters. The remaining increase was a result of an increase in the provision for loan losses less net chargeoffs. 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 0.96% at September 30, 2002 compared to 0.81% at December 31, 2001. Deposits increased $101.8 million, or 7.4%, from December 31, 2001 to September 30, 2002, primarily as a result of deposits acquired from Potters. Increases in Home Savings' deposits primarily consisted of a $58.6 million increase in savings accounts, a $33.9 million increase in checking accounts and a $10.2 million increase in certificates of deposit. Other borrowed funds decreased $18.9 million from December 31, 2001 to September 30, 2002, 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, 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: October 16, 2002 UNITED COMMUNITY FINANCIAL CORP.
As of As of September 30, 2002 December 31, 2001 ------------------ ----------------- (In thousands, except per share data) SELECTED FINANCIAL CONDITION DATA: ASSETS Cash and cash equivalents $ 57,780 $ 205,883 Mortgage-related securities 171,693 145,867 Marketable securities 129,434 61,131 Federal Home Loan Bank stock 20,832 18,760 Loans held for sale 22,124 20,192 Loans 1,544,712 1,417,959 Allowance for loan losses (14,865) (11,480) Real estate owned 1,622 477 Goodwill 33,593 19,664 Core deposit intangible 5,534 6,312 Other assets 56,812 60,015 ----------- ----------- Total assets $ 2,029,271 $ 1,944,780 =========== =========== LIABILITIES Deposits $ 1,485,174 $ 1,383,418 Other borrowed funds 252,751 271,631 Other liabilities 20,984 27,851 ----------- ----------- Total liabilities 1,758,909 1,682,900 SHAREHOLDERS' EQUITY Preferred stock-no par value; 1,000,000 shares authorized and unissued at September 30, 2002 - - Common stock-no par value; 499,000,000 shares authorized; 37,804,457 and 37,754,086 issued, respectively 137,953 136,903 Retained earnings 169,126 160,915 Other comprehensive income 1,401 1,402 Unearned compensation (20,616) (22,988) Treasury stock, at cost; 2,465,742 and 2,086,500 shares, respectively (17,502) (14,352) ----------- ----------- Total shareholders' equity 270,362 261,880 ----------- ----------- Total liabilities and shareholders' equity $ 2,029,271 $ 1,944,780 =========== =========== Book value per share $ 7.65 $ 7.34
Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 -------- -------- -------- -------- (In thousands, except per share data) SELECTED EARNINGS DATA (UNAUDITED): Interest income $ 31,770 $ 32,872 $ 95,633 $ 81,555 Interest expense 13,152 16,819 41,772 40,744 -------- -------- -------- -------- Net interest income 18,618 16,053 53,861 40,811 Provision for loan losses 750 465 1,978 1,045 Noninterest income: Commissions 3,189 3,019 10,248 10,031 Service fees and other charges 2,209 2,156 6,123 5,923 Underwriting and investment banking 22 127 193 511 Net gains (losses) Loans sold 1,309 258 4,758 339 Securities (490) (655) (180) (465) Other (89) 46 (254) 52 Other income 124 285 1,515 753 -------- -------- -------- -------- Total noninterest income 6,274 5,236 22,403 17,144 Noninterest expense: Salaries and employee benefits 9,568 8,097 29,238 24,496 Occupancy 818 702 2,369 1,896 Equipment and data processing 2,048 1,930 6,033 5,324 Amortization of core deposit intangible 507 915 1,746 915 Other noninterest expense 3,032 2,874 10,704 8,219 -------- -------- -------- -------- Total noninterest expense 15,973 14,518 50,090 40,850 Income before taxes 8,169 6,306 24,196 16,060 Income taxes 2,964 2,341 8,739 5,954 -------- -------- -------- -------- Net income $ 5,205 $ 3,965 $ 15,457 $ 10,106 ======== ======== ======== ======== Basic earnings per share $ 0.16 $ 0.12 $ 0.48 $ 0.31 Diluted earnings per share $ 0.16 $ 0.12 $ 0.48 $ 0.31 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, 2002 2002 2002 ----------- ----------- ----------- (Dollars in thousands) AVERAGE DAILY BALANCE OF SELECTED FINANCIAL CONDITION DATA (UNAUDITED): Net loans (including allowance for loan losses $ 1,518,533 $ 1,582,747 $ 1,428,867 of $14,865, $14,365 and $12,022, respectively) Loans held for sale 14,922 6,486 15,852 Mortgage-related securities 157,092 125,139 136,163 Marketable securities 100,633 98,349 101,730 Margin accounts 16,980 18,430 20,440 Other interest-earning assets 85,323 80,641 165,669 Total interest-earning assets 1,893,483 1,911,792 1,868,721 Total assets 2,003,574 2,023,237 1,952,630 Certificates of deposit 855,939 880,608 839,288 Interest-bearing checking, demand and savings accounts 595,866 597,144 523,731 Other-interest bearing liabilities 198,047 197,727 254,272 Total interest-bearing liabilities 1,649,852 1,675,479 1,617,291 Noninterest-bearing deposits 47,255 43,345 37,005 Total noninterest-bearing liabilities 83,463 81,175 33,249 Total liabilities 1,733,315 1,756,654 1,687,545 Shareholders' equity 270,259 266,583 265,085 Common shares outstanding for basic EPS calculation 31,773,058 31,821,940 31,951,231 Common shares outstanding for diluted EPS calculation 32,318,094 32,254,684 32,212,143 SUPPLEMENTAL LOAN DATA: Loans originated $ 220,129 $ 215,637 $ 198,712 Loans purchased 7,317 13,568 5,450 Loans sold 42,434 135,440 52,505 Loan chargeoffs 261 80 208 Recoveries on loans 35 22 54 As of As of As of September 30, June 30, March 31, 2002 2002 2002 ----------- ----------- ----------- SUPPLEMENTAL DATA: Nonaccrual loans $ 13,466 $ 12,189 $ 9,479 Restructured loans 1,255 1,281 1,459 Other real estate owned 1,622 1,167 1,186 Total nonperforming assets 16,343 14,637 12,124 Loans serviced for others 341,027 332,448 215,001 Number of full time equivalent employees 789 777 726 Mortgage-related securities available for sale 114,372 73,992 54,533 Mortgage-related securities held to maturity 57,321 62,983 70,227 Marketable securities trading 44,401 5,033 6,514 Marketable securities available for sale 82,437 86,698 90,301 Marketable securities held to maturity 2,596 2,096 2,197 Federal Home Loan Bank stock 20,832 20,586 18,968 Fair value of held to maturity securities 62,914 67,372 73,654 REGULATORY CAPITAL DATA: Regulatory tangible capital $ 173,854 $ 166,533 $ 171,759 Tangible capital ratio 9.11 8.67 9.28 Regulatory core capital 173,854 166,533 171,759 Core capital ratio 9.11 8.67 9.28 Regulatory total capital 184,935 177,766 182,158 Total risk adjusted assets 1,318,391 1,355,444 1,227,142 Total risk adjusted ratio 14.03 13.11 14.84