EX-99 3 l03560aexv99.txt EX-99 PRESS RELEASE 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