United Community Financial Corp. (Company) (Nasdaq: UCFC), holding company of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), today reported a consolidated net loss of $17.3 million, or $(0.56) per diluted share, for the three months ended December 31, 2010. This compares to a net loss of $16.3 million, or $(0.54) per diluted share, for the three months ended December 31, 2009. The Company also reported a cumulative net loss of $37.3 million, or $(1.22) per diluted share, for the twelve months ended December 31, 2010 as compared to a cumulative net loss of $16.8 million, or $(0.56) per diluted share, for the twelve months ended December 31, 2009.

The increased losses in both the fourth quarter and the twelve months ended December 31, 2010 are primarily a result of increases in the provision for loan losses. The increased provision in both time periods is a result of a higher level of chargeoff activity, additional loan downgrades within the commercial real estate portfolio and increased specific reserves assigned to a number of commercial real estate loans.

Selected fourth quarter results:
  • Nonperforming loans reduced $3.2 million to $139.5 million from the prior quarter
  • Nonperforming assets reduced $3.1 million to $179.9 million from the prior last quarter
  • Net interest margin reduced 25 basis points to 3.17% from the prior quarter
  • Increased the allowance for loan losses by $10.0 million from the prior quarter
  • Home Savings’ Tier 1 leverage ratio reduced 39 basis points from the prior quarter to 7.84%
  • Home Savings’ Total Risk Based Capital reduced 58 basis points from the prior quarter to 12.54%
  • Book value per share and tangible book value per share each declined $0.82 from the prior quarter to $5.69 and $5.67, respectively

Asset Quality

Nonperforming loans at December 31, 2010 decreased to $139.5 million, compared to $142.7 million at September 30, 2010, a decrease of $3.2 million during the period. Real estate owned and other repossessed assets were $40.3 million at December 31, 2010 and September 30, 2010. Nonperforming assets decreased $3.1 million, from $183.0 million at September 30, 2010, to $179.9 million at September 30, 2010.

Mr. Bevack commented that Home Savings will continue to take measures to accomplish the goal of restoring financial strength and profitability to the Company. “Our key initiative is improving asset quality.” He added, “It is very important that we find resolution to problem assets as quickly and economically as possible. While we have seen improvement in the last half of the year with a decrease in nonperforming assets, it is our desire to accelerate this trend.”

Capital and Book Value

Home Savings’ Tier 1 leverage ratio was 7.84% as of December 31, 2010, compared to 8.22% at December 31, 2009. The Company’s total risk-based capital ratio was 12.54% at December 31, 2010, as compared to 12.80% at December 31, 2009. Book value per share and tangible book value per share at December 31, 2010 were $5.69 and $5.67, respectively.

Home Savings is a wholly-owned subsidiary of the Company and operates 38 full-service banking offices and six 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” 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)
 
December 31,

December 31,
2010 2009
(Dollars in thousands)
Assets:
Cash and deposits with banks $ 18,627 $ 22,330
Federal funds sold and other   18,480     22,744  
Total cash and cash equivalents 37,107 45,074
Securities:
Available for sale, at fair value 362,042 281,348
Loans held for sale 10,870 10,497
Loans, net of allowance for loan losses of $50,883 and $42,287, respectively 1,649,486 1,866,018
Federal Home Loan Bank stock, at cost 26,464 26,464
Premises and equipment, net 22,076 23,139
Accrued interest receivable 7,720 9,090
Real estate owned and other repossessed assets 40,336 30,962
Core deposit intangible 485 661
Cash surrender value of life insurance 27,303 26,198
Other assets   13,409     18,976  
Total assets $ 2,197,298   $ 2,338,427  
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Interest bearing $ 1,551,210 $ 1,642,722
Non-interest bearing   138,571     126,779  
Total deposits 1,689,781 1,769,501
Borrowed funds:
Federal Home Loan Bank advances 202,818 221,323
Repurchase agreements and other   97,797     96,833  
Total borrowed funds 300,615 318,156
Advance payments by borrowers for taxes and insurance 20,668 19,791
Accrued interest payable 809 1,421
Accrued expenses and other liabilities   9,370     9,775  

Total liabilities
  2,021,243     2,118,644  
 
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 30,937,704 and 30,897,825 shares, respectively, outstanding 142,318 145,775
Retained earnings 111,049 148,674
Accumulated other comprehensive income (loss) (4,778 ) 4,110
Unearned employee stock ownership plan shares - (5,821 )
Treasury stock, at cost, 6,866,753 and 6,906,632 shares, respectively   (72,534 )   (72,955 )
Total shareholders’ equity   176,055     219,783  
Total liabilities and shareholders’ equity $ 2,197,298   $ 2,338,427  
 
               
 
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2010 2009 2010 2009
(Dollars in thousands, except per share data)
Interest income
Loans $ 22,063 $ 27,590 $ 97,413 $ 118,122
Loans held for sale 167 428 415 1,006
Securities:
Available for sale 3,011 2,964 11,727 11,455
Federal Home Loan Bank stock dividends 267 300 1,158 1,223
Other interest earning assets   10     7     35     57  
Total interest income 25,518 31,289 110,748 131,863
Interest expense
Deposits 6,808 10,223 32,062 45,985
Federal Home Loan Bank advances 881 1,022 3,588 5,797
Repurchase agreements and other   941     951     3,737     4,167  
Total interest expense   8,630     12,196     39,387     55,949  
Net interest income 16,888 19,093 71,361 75,914
Provision for loan losses   22,551     22,740     62,427     49,074  
Net interest income after provision for loan losses   (5,663 )   (3,647 )   8,934     26,840  
Non-interest income
Non-deposit investment income 319 350 1,619 1,424
Service fees and other charges 2,631 2,286 6,369 8,531
Net gains (losses):
Securities available for sale 1,508 - 8,803 1,863
Other -than-temporary loss on equity securities
Total impairment loss (14 ) (56 ) (58 ) (778 )
Loss recognized in other comprehensive income   -     -     -     -  
Net impairment loss recognized in earnings (14 ) (56 ) (58 ) (778 )
Mortgage banking income 1,909 2,677 4,365 6,164
Real estate owned and other repossessed assets (1,611 ) (1,617 ) (6,123 ) (7,918 )
Gain on retail branch sale - - 1,387 -
Other income   1,731     1,211     5,531     4,632  
Total non-interest income   6,473     4,851     21,893     13,918  
Non-interest expense
Salaries and employee benefits 7,852 7,148 32,699 30,493
Occupancy 890 871 3,583 3,669
Equipment and data processing 1,678 1,557 6,627 6,525
Franchise tax 499 399 2,011 2,083
Advertising 286 459 860 1,136
Amortization of core deposit intangible 40 51 176 223
Deposit insurance premiums 1,375 1,050 5,686 7,304
Professional fees 1,185 946 4,106 3,520
Real estate owned and other repossessed asset expenses 2,313 431 4,971 2,713
Other expenses   2,254     1,742     7,612     5,974  
Total non-interest expenses   18,372     14,654     68,331     63,640  
Income (loss) before income taxes and discontinued operations (17,562 ) (13,450 ) (37,504 ) (22,882 )
Income taxes expense (benefit)   (231 )   2,812     (231 )   (1,160 )
Net income (loss) before discontinued operations (17,331 ) (16,262 ) (37,273 ) (21,722 )
Discontinued operations
Net income of Butler Wick Corp.   -     -     -     4,949  
Net income (loss) $ (17,331 ) $ (16,262 ) $ (37,273 ) $ (16,773 )
 
Earnings (loss) per share
Basic--continuing operations $ (0.56 ) $ (0.54 ) $ (1.22 ) $ (0.73 )
Basic--discontinued operations - - - 0.17
Basic (0.56 ) (0.54 ) (1.22 ) (0.56 )
Diluted--continuing operations (0.56 ) (0.54 ) (1.22 ) (0.73 )
Diluted--discontinued operations - - - 0.17
Diluted (0.56 ) (0.54 ) (1.22 ) (0.56 )
 
                       
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
At or for the quarters ended

December 31,2010

September 30,2010

June 30,2010

March 31,2010

December 31,2009
(In thousands, except per share data)
Financial Data
Total assets $ 2,197,298 $ 2,317,948 $ 2,314,109 $ 2,279,719 $ 2,338,427
Total loans, net 1,649,486 1,726,381 1,786,038 1,823,899 1,866,018
Total securities 362,042 390,636 307,154 272,239 281,348
Total deposits 1,689,781 1,685,033 1,696,531 1,728,592 1,769,501
Total shareholders' equity 176,055 201,333 212,691 214,482 219,783
Net interest income 16,888 18,786 17,971 17,716 19,093
Provision for loan losses 22,551 17,116 10,310 12,450 22,740
Noninterest income, excluding other-than-temporary impairment losses 6,487 4,159 4,745 6,560 4,907
Net impairment losses recognized in earnings 14 44 - - 56
Noninterest expense 18,372 15,700 17,291 16,968 14,654
Income tax expense (benefit) (231 ) - - - 2,812
Net loss (17,331 ) (9,915 ) (4,885 ) (5,142 ) (16,262 )
 
Share Data
Basic loss per share $ (0.56 ) $ (0.32 ) $ (0.16 ) $ (0.17 ) $ (0.54 )
Diluted loss per share (0.56 ) (0.32 ) (0.16 ) (0.17 ) (0.54 )
Book value per share 5.69 6.51 6.88 6.94 7.11
Tangible book value per share 5.67 6.49 6.87 6.92 7.09
Market value per share 1.34 1.33 1.68 1.50 1.45
 
Shares outstanding at end of period 30,938 30,925 30,898 30,898 30,898
Weighted average shares outstanding--basic 30,906 30,899 30,039 29,955 29,879
Weighted average shares outstanding--diluted 30,906 30,899 30,039 29,955 29,879
 
Key Ratios
Return on average assets -3.06 % -1.70 % -0.85 % -0.90 % -2.69 %
Return on average equity -33.91 % -18.41 % -8.91 % -9.18 % -27.18 %
Net interest margin 3.17 % 3.42 % 3.30 % 3.28 % 3.33 %
Efficiency ratio 78.08 % 66.80 % 82.92 % 78.59 % 56.97 %
 
Capital Ratios
Tier 1 leverage ratio 7.84 % 8.23 % 8.71 % 8.47 % 8.22 %
Tier 1 risk-based capital ratio 11.26 % 11.85 % 11.90 % 11.47 % 11.53 %
Total risk-based capital ratio 12.54 % 13.12 % 13.16 % 12.73 % 12.80 %
Equity to assets 8.01 % 8.69 % 9.19 % 9.41 % 9.40 %
Tangible common equity to tangible assets 7.99 % 8.67 % 9.17 % 9.38 % 9.37 %
 
                       
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
At or for the quarters ended

December 31,2010

September 30,2010

June 30,2010

March 31,2010

December 31,2009
(Dollars in thousands, except per share data)
Loan Portfolio Composition
Real Estate Loans
One-to four-family residential $ 757,426 $ 778,005 $ 779,565 $ 777,380 $ 773,831
Multi-family residential* 135,771 136,681 138,875 143,992 150,480
Nonresidential* 331,390 355,914 383,882 389,407 397,895
Land* 25,138 25,413 26,217 25,122 23,502
Construction Loans
One-to four-family residential and land development 108,583 117,297 133,534 161,625 178,095
Multi-family and nonresidential*   15,077     14,537     14,870     14,682     13,741  
Total real estate loans 1,373,385 1,427,847 1,476,943 1,512,208 1,537,544
Consumer Loans 279,453 289,296 295,007 301,457 309,202
Commercial Loans   46,304     48,902     53,566     56,726     60,217  
Total Loans 1,699,142 1,766,045 1,825,516 1,870,391 1,906,963
Less:
Allowance for loan losses 50,883 40,884 40,728 47,768 42,287
Deferred loan costs, net   (1,227 )   (1,220 )   (1,250 )   (1,276 )   (1,342 )
Total   49,656     39,664     39,478     46,492     40,945  
Loans, net $ 1,649,486   $ 1,726,381   $ 1,786,038   $ 1,823,899   $ 1,866,018  
* Such categories are considered commercial real estate
 
At or for the quarters ended

December 31,2010

September 30,2010

June 30,2010

March 31,2010

December 31,2009
(Dollars in thousands, except per share data)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts $ 110,092 $ 103,204 $ 104,905 $ 101,068 $ 108,513
Non-interest bearing checking accounts   138,571     128,702     126,437     125,741     126,779  
Total checking accounts 248,663 231,906 231,342 226,809 235,292
Savings accounts 218,946 214,197 212,778 210,091 202,900
Money market accounts   311,692     310,884     310,506     300,610     291,320  
Total non-time deposits 779,301 756,987 754,626 737,510 729,512
Retail certificates of deposit 910,480 928,046 939,568 988,747 1,024,961
Brokered certificates of deposit   -     -     2,337     2,335     15,028  
Total certificates of deposit   910,480     928,046     941,905     991,082     1,039,989  
Total deposits $ 1,689,781   $ 1,685,033   $ 1,696,531   $ 1,728,592   $ 1,769,501  
Certificates of deposit as a percent of total deposits 53.88 % 55.08 % 55.52 % 57.33 % 58.77 %
 
                       
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
At or for the quarters ended

December 31,2010

September 30,2010

June 30,2010

March 31,2010

December 31,2009
(Dollars in thousands, except per share data)
Allowance For Loan Losses
Beginning balance $ 40,884 $ 40,728 $ 47,768 $ 42,287 $ 38,845
Provision 22,551 17,116 10,310 12,450 22,740
Net chargeoffs   (12,552 )   (16,960 )   (17,350 )   (6,969 )   (19,298 )
Ending balance $ 50,883   $ 40,884   $ 40,728   $ 47,768   $ 42,287  
 
Net Charge-offs
Real Estate Loans
One-to four-family $ 1,483 $ 1,834 $ 2,318 $ 998 $ 762
Multi-family 1,819 160 1,067 1,585 208
Nonresidential 6,923 7,041 25 1,951 1,410
Land 284 11 - 318 -
Construction Loans
One-to four-family residential and land development 669 6,595 11,924 1,018 3,860
Multi-family and nonresidential   (1 )   -     310     -     118  
Total real estate loans 11,177 15,641 15,644 5,870 6,358
Consumer Loans 639 905 1,330 904 1,312
Commercial Loans   736     414     376     195     11,628  
Total $ 12,552   $ 16,960   $ 17,350   $ 6,969   $ 19,298  
 
 
At or for the quarters ended

December 31,2010

September 30,2010

June 30,2010

March 31,2010

December 31,2009
(Dollars in thousands, except per share data)
Nonperforming Loans
Real Estate Loans
One-to four family residential $ 27,417 $ 27,505 $ 30,279 $ 30,054 $ 26,766
Multi-family residential 10,983 12,443 8,816 7,885 7,863
Nonresidential 39,838 44,561 48,653 36,083 24,091
Land 5,188 5,943 5,943 11,627 5,160
Construction Loans
One-to four-family residential and land development 44,021 40,000 49,146 42,963 42,819
Multi-family and nonresidential   2,414     2,414     2,414     382     392  
Total real estate loans 129,861 132,866 145,251 128,994 107,091
Consumer Loans 3,725 3,543 3,482 3,898 5,383
Commercial Loans   5,945     6,304     6,407     5,672     3,413  
Total Loans $ 139,531   $ 142,713   $ 155,140   $ 138,564   $ 115,887  
 
Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status $ 117,499 $ 126,062 $ 129,534 $ 131,951 $ 103,864
Past due 90 days and still accruing   6,330     4,253     2,628     536     3,669  
Past due 90 days 123,829 130,315 132,162 132,487 107,533
Past due less than 90 days and on nonaccrual   15,702     12,398     22,978     6,077     8,354  
Total Nonperforming Loans 139,531 142,713 155,140 138,564 115,887
Other Real Estate Owned 39,914 39,963 41,470 34,605 30,340
Repossessed Assets   422     334     576     813     622  
Total Nonperforming Assets $ 179,867   $ 183,010   $ 197,186   $ 173,982   $ 146,849  
 
Total Troubled Debt Restructured Loans
Accruing $ 11,240 $ 13,254 $ 18,214 $ 23,153 $ 17,640
Non-accruing   33,331     14,934     10,855     8,764     5,008  
Total $ 44,571   $ 28,188   $ 29,069   $ 31,917   $ 22,648  
 

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