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UNITED COMMUNITY FINCL CP
Symbol U : UCFC
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United Community Financial Corp. Announces Second Quarter Results; Asset Quality Improvement Continues

2012-08-14 16:10 ET - News Release


Company Website: http://www.ucfconline.com
YOUNGSTOWN, Ohio -- (Business Wire)

United Community Financial Corp. (Company) (Nasdaq: UCFC), holding company of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), today reported consolidated net income of $62,000 for the three months ended June 30, 2012. The Company also reported net income of $3.9 million, or $0.12 per diluted share, for the six months ended June 30, 2012.

Selected second quarter results:

  • Delinquent loans were $109.8 million at June 30, 2012, down $17.1 million year to date
  • Nonperforming assets were $139.3 million at June 30, 2012, down $17.3 million year to date
  • Classified loans were $171.8 million at June 30, 2012, down $48.6 million year to date
  • Home Savings’ Tier 1 leverage ratioof 9.32% and the total risk based capital ratio of 16.43% both reflected increases from the prior quarter and were in excess of regulatory minimums

Patrick W. Bevack, President and Chief Executive Officer of UCFC and Home Savings, commented that, “We are pleased that the Company has now achieved profitability for three consecutive quarters. The Company is continuing to see positive results from improvements in asset quality since year-end.”

Asset Quality

Delinquent loans were $109.8 million at June 30, 2012, down $85.4 million, or 43.8%, from their high point of $195.2 million at March 31, 2010. Nonperforming loans at June 30, 2012 were $114.5 million, down $40.6 million, or 26.2%, from their high point of $155.1 million at June 30, 2010. Nonperforming assets were $139.3 million at June 30, 2012, down $57.9 million, or 29.4%, from their high point of $197.2 million at June 30, 2010. Delinquent loan totals, nonperforming loan totals and nonperforming asset totals were negatively affected in the second quarter by a single loan relationship consisting of seven loans totaling $8.4 million that went into bankruptcy proceedings in the second quarter.

The provision for loan losses was $6.3 million for the second quarter of 2012, as compared to $680,000 for the first quarter in 2012. This $5.6 million increase in the provision for loan losses was primarily the result of recording a charge related to the resolution of debt of a single commercial loan customer, as mentioned above. The Company was able to successfully secure the settlement of seven loans related to this borrower. The aggregate unpaid principal balance of these seven loans totaled $22.2 million, with Home Savings recognizing a loss through a chargeoff of $5.2 million as part of the final settlement. This transaction represented the successful resolution of the largest troubled loan relationship at the Company. As of June 30, 2012, there were three loan relationships in the Company exceeding $10.0 million, two of which were performing.

Net Interest Income and Margin

Net interest income for the three months ended June 30, 2012 was $16.4 million, an improvement of $541,000 over the prior quarter. Improvement was also seen in the net interest margin, which increased 25 basis points from 3.30% during the first quarter to 3.55% during the second quarter.

Total interest income decreased $668,000 in the second quarter of 2012 compared to the first quarter of 2012, primarily as a result of a decrease of $60.0 million in the average balance of outstanding loans.

Total interest expense decreased $1.2 million for the quarter ended June 30, 2012, as compared to the previous quarter. The change was due primarily to reductions of $1.1 million in interest paid on deposits. The overall decrease in interest expense was attributable to the maturity of the Company’s high-yielding Step CDs and a shift in deposit balances from certificates of deposit to relatively less expensive non-time deposits. The average outstanding balance of certificates of deposit declined by $56.3 million, while non-time deposits increased by $33.4 million. Also contributing to the change was a reduction of 46 basis points in the cost of certificates of deposit. Interest expense also improved due to the prepayment of $25.0 million in term borrowings.

Net interest income for the six months ended June 30, 2012 and June 30, 2011, was $32.3 million and $34.7 million, respectively. Despite a decrease of $2.4 million in net interest income, the net interest margin remained relatively flat. The net interest margin was 3.42% for the six months ended June 30, 2012, compared with 3.45% for the six months ended June 30, 2011.

Total interest income decreased $8.1 million in the first six months of 2012 compared to the first six months of 2011, primarily as a result of a decrease of $288.2 million in the average balance of outstanding loans. This change in interest income was further impacted by a decrease in the yield on net loans of 22 basis points.

Total interest expense decreased $5.7 million for the six months ended June 30, 2012, as compared to the same period last year. The change was due primarily to reductions of $5.4 million in interest paid on deposits. The overall decrease in interest expense was attributable to the maturity of the Step CDs and a shift in deposit balances from certificates of deposit to relatively less expensive non-time deposits. The average outstanding balance of certificates of deposit declined by $205.4 million, while non-time deposits increased by $49.7 million. Also contributing to the change was a reduction of 70 basis points in the cost of certificates of deposit, as well as a decrease in the cost of non-time deposits of 18 basis points.

Noninterest Income

Noninterest income increased in the second quarter of 2012 to $6.9 million, as compared to $5.1 million in the first quarter of 2012. The $1.8 million increase in noninterest income was largely driven by a gain of $3.6 million recognized on the sale of available for sale securities. This gain was offset by a decrease in service fees and other charges, which reflected the recognition of a negative valuation allowance adjustment on mortgage servicing rights of $507,000 in the second quarter. Further impacting this comparison was the fact that Home Savings recognized a positive valuation allowance adjustment on mortgage servicing rights of $948,000 in the first quarter.

Noninterest income increased in the first six months of 2012 to $12.0 million, as compared to $9.3 million for the first six months of 2011. This increase in noninterest income was primarily a result of the recognition of additional security gains. In the first six months of 2012, Home Savings sold securities totaling approximately $225.5 million and consequently recognized a $4.0 million gain. Home Savings also incurred $702,000 fewer losses in the liquidation and revaluation of real estate owned during the six months ended June 30, 2012, as compared to the same period last year.

Noninterest Expense

Noninterest expense was $17.0 million in the second quarter of 2012 as compared to $16.5 million in the first quarter of 2012, or an increase of $550,000. This 3.3% increase is primarily attributable to the prepayment penalties incurred for a planned early paydown of FHLB term advances. In the second quarter of 2012, Home Savings proceeds from the sale of $33.2 million of securities on which $697,000 in gains were realized to prepay $25.0 million in term advances, and in doing so incurred one-time prepayment penalties associated with the paydowns of $738,000. This transaction will have a positive effect in the future by reducing borrowing costs. The securities sold in this transaction had an effective yield of 2.21%, while the borrowings cost the Company an average of 2.34%.

Noninterest expense was $33.5 million in the first six months of 2012, compared to $32.4 million in the first six months of 2011 for an increase of $1.1 million. In the first half of 2012, salaries and employee benefits were up $1.6 million. Also contributing to the increase were expenses incurred due to the prepayment of FHLB term advances previously discussed. Professional fees, including legal and other consultants, were higher during the first six months of 2012 due to the engagement of professionals hired to assist management in resolving nonperforming assets at Home Savings.

Capital and Book Value

Home Savings’ Tier 1 leverage ratio was 9.32% as of June 30, 2012, as compared to 8.96% at March 31, 2012. Home Savings’ total risk-based capital ratio was 16.43% at June 30, 2012, as compared to 15.21% at March 31, 2012. Tangible book value per share at June 30, 2012 was $5.94, as compared to $5.77 at March 31, 2012. As of June 30, 2012, Home Savings was in compliance with the capital requirements of the consent order issued by the FDIC and Ohio Division of Financial Institutions.

Home Savings is a wholly-owned subsidiary of the Company and operates 34 full-service banking offices and eight loan production offices located throughout Ohio and western Pennsylvania. Additional information on the Company and Home Savings may be found on the Company’s web site: www.ucfconline.com.

When used in this press release, the words or phrases “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “will have” 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 the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company’s market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.The Company advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that 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.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
     
June 30, December 31,
2012 2011
(Dollars in thousands)
Assets:
Cash and deposits with banks $ 21,516 $ 26,573
Federal funds sold and other   77,006     27,563  
Total cash and cash equivalents 98,522 54,136
Securities:
Available for sale, at fair value 431,040 459,598
Loans held for sale 8,435 12,727
Loans, net of allowance for loan losses of $30,933 and $42,271, respectively 1,249,595 1,379,276
Federal Home Loan Bank stock, at cost 26,464 26,464
Premises and equipment, net 20,964 19,175
Accrued interest receivable 5,959 6,741
Real estate owned and other repossessed assets 24,778 33,486
Core deposit intangible 289 346
Cash surrender value of life insurance 28,375 28,354
Other assets   12,574     10,384  
Total assets $ 1,906,995   $ 2,030,687  
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Interest bearing $ 1,379,477 $ 1,440,448
Noninterest bearing   162,222     148,049  
Total deposits 1,541,699 1,588,497
Borrowed funds:
Federal Home Loan Bank advances 50,704 128,155
Repurchase agreements and other   90,608     90,618  
Total borrowed funds 141,312 218,773
Advance payments by borrowers for taxes and insurance 14,680 23,282
Accrued interest payable 603 610
Accrued expenses and other liabilities   13,070     10,780  
Total liabilities   1,711,364     1,841,942  
 
Shareholders' Equity:
Preferred stock-no par value; 1,000,000 shares authorized and unissued - -

Common stock-no par value; 499,000,000 shares authorized; 37,804,457 shares issued and 32,884,741 and 32,597,762 shares, respectively, outstanding

128,138 128,031
Retained earnings 111,719 110,681
Accumulated other comprehensive income 7,574 5,032
Treasury stock, at cost, 4,919,716 and 5,206,695 shares, respectively   (51,800 )   (54,999 )
Total shareholders’ equity   195,631     188,745  
Total liabilities and shareholders’ equity $ 1,906,995   $ 2,030,687  
 
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
               
For the Three Months Ended

For the Six Months Ended

June 30, March 31, June 30, June 30, June 30,
2012 2012 2011 2012 2011
(Dollars in thousands, except per share data)
Interest income
Loans $ 16,959 $ 17,656 $ 21,421 $ 34,615 $ 43,931
Loans held for sale 104 100 41 204 107
Securities:
Available for sale 3,540 3,494 3,094 7,034 5,941
Federal Home Loan Bank stock dividends 280 300 294 580 594
Other interest earning assets   11     12     13     23     22  
Total interest income 20,894 21,562 24,863 42,456 50,595
Interest expense
Deposits 2,942 4,032 6,081 6,974 12,412
Federal Home Loan Bank advances 613 732 796 1,345 1,621
Repurchase agreements and other   919     919     928     1,838     1,850  
Total interest expense   4,474     5,683     7,805     10,157     15,883  
Net interest income 16,420 15,879 17,058 32,299 34,712
Provision for loan losses   6,264     680     8,244     6,944     10,436  
Net interest income after provision for loan losses   10,156     15,199     8,814     25,355     24,276  
Non-interest income
Non-deposit investment income 506 541 308 1,047 662
Service fees and other charges 901 2,317 1,588 3,218 3,041
Net gains (losses):
Securities available for sale 3,555 414 229 3,969 1,542

Other-than-temporary loss on equity securities

Total impairment loss - - (28 ) - (38 )
Loss recognized in other comprehensive income   -     -     -     -     -  
Net impairment loss recognized in earnings - - (28 ) - (38 )
Mortgage banking income 1,727 1,471 3,128 3,198 3,750
Real estate owned and other repossessed assets (923 ) (729 ) (1,362 ) (1,652 ) (2,354 )
Other income   1,183     1,077     1,437     2,260     2,685  
Total non-interest income   6,949     5,091     5,300     12,040     9,288  
Non-interest expense
Salaries and employee benefits 8,684 8,333 7,686 17,017 15,370
Occupancy 851 799 856 1,650 1,761
Equipment and data processing 1,720 1,689 1,624 3,409 3,318
Franchise tax 437 438 402 875 871
Advertising 211 141 141 352 262
Amortization of core deposit intangible 28 29 36 57 73
Prepayment penalty 738 - - 738 -
Deposit insurance premiums 1,055 1,109 1,057 2,164 2,462
Professional fees 1,039 880 293 1,919 1,255
Real estate owned and other repossessed asset expenses 419 702 891 1,121 1,764
Other expenses   1,861     2,374     2,924     4,235     5,262  
Total non-interest expenses   17,043     16,494     15,910     33,537     32,398  
Income (loss) before income taxes 62 3,796 (1,796 ) 3,858 1,166
Income tax expense   -     -     -     -     -  
Net income (loss) $ 62   $ 3,796   $ (1,796 ) $ 3,858   $ 1,166  
 
Earnings (loss) per share
Basic $ - $ 0.12 $ (0.06 ) $ 0.12 $ 0.04
Diluted - 0.12 (0.06 ) 0.12 0.04
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
         
At or for the quarters ended

June 30,
2012

March 31,
2012

December 31,
2011

September 30,
2011

June 30,
2011

(In thousands, except per share data)
Financial Data
Total assets $ 1,906,995 $ 2,041,964 $ 2,030,687 $ 2,071,001 $ 2,102,419
Total loans, net 1,249,595 1,325,101 1,379,276 1,437,575 1,509,399
Total securities 431,040 530,283 459,598 416,460 392,749
Total deposits 1,541,699 1,571,859 1,588,497 1,687,941 1,697,797
Total shareholders' equity 195,631 190,014 188,745 182,697 183,142
Net interest income 16,420 15,879 14,838 15,625 17,058
Provision for loan losses 6,264 680

2,386

11,836 8,244

Noninterest income, excluding other-than-temporary impairment losses

6,949 5,091 12,037 1,951 5,328
Net impairment losses recognized in earnings - - 16 35 28
Noninterest expense 17,043 16,494 16,545 14,569 15,910
Income tax expense (benefit) - - - - -
Net income (loss) 62 3,796 7,928 (8,864 ) (1,796 )
 
Share Data
Basic earnings (loss) per share $ - $ 0.12 $ 0.25 $ (0.29 ) $ (0.06 )
Diluted earnings (loss) per share - 0.12 0.25 (0.29 ) (0.06 )
Book value per share 5.95 5.78 5.79 5.90 5.91
Tangible book value per share 5.94 5.77 5.78 5.88 5.90
Market value per share 2.98 2.44 1.27 1.35 1.27
 
Shares outstanding at end of period 32,885 32,876 32,598 30,984 30,969
Weighted average shares outstanding--basic 32,802 32,693 31,295 30,953 30,932
Weighted average shares outstanding--diluted 32,843 23,697 31,295 30,953 30,932
 
Key Ratios
Return on average assets 0.01 % 0.74 % 1.53 % -1.69 % -0.34 %
Return on average equity 0.12 % 7.89 % 16.97 % -18.98 % -3.95 %
Net interest margin 3.55 % 3.30 % 3.04 % 3.18 % 3.39 %
Efficiency ratio 78.50 % 77.35 % 87.96 % 79.67 % 67.49 %
 
Capital Ratios
Tier 1 leverage ratio 9.32 % 8.96 % 8.61 % 8.13 % 8.40 %
Tier 1 risk-based capital ratio 15.16 % 13.94 % 13.30 % 11.98 % 12.20 %
Total risk-based capital ratio 16.43 % 15.21 % 14.57 % 13.25 % 13.47 %
Equity to assets 10.26 % 9.31 % 9.29 % 8.82 % 8.71 %
Tangible common equity to tangible assets 10.24 % 9.29 % 9.28 % 8.80 % 8.69 %
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
         
At or for the quarters ended

June 30,
2012

March 31,
2012

December 31,
2011

September 30,
2011

June 30,
2011

(Dollars in thousands)
Loan Portfolio Composition
Real Estate Loans
One-to four-family residential $ 635,756 $ 649,000 $ 667,375 $ 677,708 $ 693,435
Multi-family residential* 98,545 114,493 120,991 125,370 129,767
Nonresidential* 229,303 263,891 276,198 303,165 307,702
Land* 19,113 19,735 23,222 22,172 25,515
Construction Loans
One-to four-family residential and land development 42,077 49,311 59,339 66,761 87,827
Multi-family and nonresidential*   4,528     4,527     4,528     4,528     5,524  
Total real estate loans 1,029,322 1,100,957 1,151,653 1,199,704 1,249,770
Consumer Loans 225,067 231,008 238,397 245,367 266,075
Commercial Loans   24,799     26,434     30,146     35,277     38,354  
Total Loans 1,279,188 1,358,399 1,420,196 1,480,348 1,554,199
Less:
Allowance for loan losses 30,933 34,523 42,271 44,162 46,223
Deferred loan costs, net   (1,340 )   (1,225 )   (1,351 )   (1,389 )   (1,423 )
Total   29,593     33,298     40,920     42,773     44,800  
Loans, net $ 1,249,595   $ 1,325,101   $ 1,379,276   $ 1,437,575   $ 1,509,399  
* Categories are considered commercial real estate
 
At or for the quarters ended

June 30,
2012

March 31,
2012

December 31,
2011

September 30,
2011

June 30,
2011

(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts $ 126,502 $ 129,795 $ 119,298 $ 120,115 $ 112,412
Non-interest bearing checking accounts   162,152     164,155     148,049     152,577     138,752  
Total checking accounts 288,654 293,950 267,347 272,692 251,164
Savings accounts 259,593 256,628 234,828 249,426 245,838
Money market accounts   344,750     339,824     314,907     327,751     322,955  
Total non-time deposits 892,997 890,402 817,082 849,869 819,957
Retail certificates of deposit   648,632     681,457     771,415     838,073     877,840  
Total certificates of deposit   648,632     681,457     771,415     838,073     877,840  
Total deposits $ 1,541,629   $ 1,571,859   $ 1,588,497   $ 1,687,942   $ 1,697,797  
Certificates of deposit as a percent of total deposits 42.07 % 43.35 % 48.56 % 49.65 % 51.70 %
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
         
At or for the quarters ended

June 30,
2012

March 31,
2012

December 31,
2011

September 30,
2011

June 30,
2011

(Dollars in thousands)
 
Allowance For Loan Losses
Beginning balance $ 34,523 $ 42,271 $ 44,162 $ 46,223 $ 46,415
Provision 6,264 680 2,386 11,836 8,244
Net chargeoffs   (9,854 )   (8,428 )   (4,277 )   (13,897 )   (8,436 )
Ending balance $ 30,933   $ 34,523   $ 42,271   $ 44,162   $ 46,223  
 
Net Charge-offs
Real Estate Loans
One-to four-family $ 962 $ 762 $ 366 $ 1,380 $ 501
Multi-family 588 68 203 14 1,451
Nonresidential 7,057 2,579 975 3,693 1,873
Land 44 1,776 217 281 233
Construction Loans
One-to four-family residential and land development 516 2,098 1,874 6,737 1,159
Multi-family and nonresidential   4     -     -     -     101  
Total real estate loans 9,171 7,283 3,635 12,105 5,318
Consumer Loans 160 745 493 864 642
Commercial Loans   523     400     149     928     2,476  
Total $ 9,854   $ 8,428   $ 4,277   $ 13,897   $ 8,436  
 
 
At or for the quarters ended

June 30,
2012

March 31,
2012

December 31,
2011

September 30,
2011

June 30,
2011

(Dollars in thousands)
Nonperforming Loans
Real Estate Loans
One-to four family residential $ 26,705 $ 23,721 $ 26,637 $ 27,250 $ 28,776
Multi-family residential 9,582 5,411 5,860 6,517 6,414
Nonresidential 43,103 41,871 42,902 44,243 36,382
Land 8,316 8,472 11,142 11,655 8,316
Construction Loans
One-to four-family residential and land development 18,335 22,455 27,104 31,166 43,389
Multi-family and nonresidential   -     -     -     -     382  
Total real estate loans 106,041 101,930 113,645 120,831 123,659
Consumer Loans 6,702 6,165 6,620 5,890 5,781
Commercial Loans   1,786     1,813     2,830     7,361     9,650  
Total Loans $ 114,529   $ 109,908   $ 123,095   $ 134,082   $ 139,090  
 
Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status $ 97,357 $ 91,153 $ 104,812 $ 102,890 $ 122,856
Past due 90 days and still accruing   47     303     39     3     1,121  
Past due 90 days 97,404 91,456 104,851 102,893 123,977
Past due less than 90 days and on nonaccrual   17,125     18,452     18,244     31,189     15,112  
Total Nonperforming Loans 114,529 109,908 123,095 134,082 139,089
Other Real Estate Owned 24,325 28,517 32,946 37,697 43,009
Repossessed Assets   453     540     540     619     676  
Total Nonperforming Assets $ 139,307   $ 138,965   $ 156,581   $ 172,398   $ 182,774  
 
Total Troubled Debt Restructured Loans
Accruing $ 18,530 $ 35,657 $ 33,146 $ 30,784 $ 30,546
Non-accruing   14,250     15,161     17,752     16,932     28,066  
Total $ 32,780   $ 50,818   $ 50,898   $ 47,716   $ 58,612  

Contacts:

Media Contact:
Home Savings
Colleen Scott, Vice President of Marketing, 330-742-0638
cscott@homesavings.com
or
Investor Contact:
United Community Financial Corp.
James R. Reske, Chief Financial Officer, 330-742-0592
jreske@ucfconline.com

Source: United Community Financial Corp.

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