EX-99 2 l08554aexv99.txt PRESS RELEASE DATED JULY 14, 2004 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