United Community Financial Corp. Announces Third Quarter Results; Asset Quality Indicators Continue To Improve

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 $8.9 million, or $(0.29) per diluted share, for the three months ended September 30, 2011. This compares to a net loss of $9.9 million, or $(0.32) per diluted share, for the three months ended September 30, 2010. Current earnings have been negatively impacted by the level of the provision for loan losses, which totaled $11.8 million in the third quarter. The Company also reported a cumulative net loss of $7.7 million, or $(0.25) per diluted share, for the nine months ended September 30, 2011, as compared to a cumulative net loss of $19.9 million, or $(0.66) per diluted share, for the nine months ended September 30, 2010.

Selected third quarter results:
  • Delinquent loans declined $10.9 million from the prior quarter to $130.9 million
  • Nonperforming loans declined $5.0 million from the prior quarter to $134.1 million
  • Nonperforming assets declined $10.4 million from the prior quarter to $172.4 million
  • Home Savings’ Tier 1 leverage ratio of 8.13% and the total risk based capital of 13.25% both exceed regulatory requirements
  • Tangible book value per share at September 30, 2011 was $5.88, down from $5.90 at June 30, 2011

Patrick W. Bevack, President and Chief Executive Officer of UCFC and Home Savings, commented that, “The positive trend of decreasing delinquent loans, nonperforming loans and nonperforming assets continued through the third quarter. The branch sale previously announced is still expected to close in the fourth quarter. This sale is expected to generate a net gain of approximately $4.0 million. The Bank was also able to recognize a gain of $4.5 million on the sale of select investment securities in October. These two actions will have a positive effect on both earnings and capital ratios in the fourth quarter.”

Asset Quality

Delinquent loans declined to $130.9 million at September 30, 2011, down $64.3 million, or 32.9%, from their high point of $195.2 million at March 31, 2010. Nonperforming loans at September 30, 2011 fell to $134.1 million, down $21.1 million, or 13.6%, from their high point of $155.1 million in at June 30, 2010. Nonperforming assets dropped to $172.4 million at September 30, 2011, down $24.8 million, or 12.6%, from their high point of $197.2 million at June 30, 2010.

The provision for loan losses was $11.8 million for the third quarter of 2011, as compared to $17.1 million for the same quarter in 2010. For the first nine months of 2011, the provision for loan losses were $22.3 million, down from $39.9 million for the same period in 2010. The provision expense included $1.8 million in the third quarter of 2011, and $5.4 million for the first nine months of 2011, associated with sales of classified loans, in keeping with the Bank’s strategy of accelerating the resolution of problem credits.

Net Interest Income and Margin

The net interest margin was 3.18% for the third quarter of 2011 compared with 3.42% for the third quarter of 2010. However, the net interest margin was 3.36% for the first nine months of 2011 compared with 3.33% for the first nine months of 2010.

Net interest income for the three months ended September 30, 2011 was $15.6 million compared to $18.8 million for the three months ended September 30, 2010. Total interest income decreased $4.9 million in the third quarter of 2011 compared to the third quarter of 2010. The Bank recognized $3.7 million less in interest on net loans because of a $279.3 million reduction in the average balance of outstanding loans. The Company also experienced a decrease in interest income on net loans of $1.3 million due to lower rates.

Total interest expense decreased $1.8 million for the quarter ended September 30, 2011, as compared to the same quarter last year. The change was due primarily to a reduction of $1.6 million in interest paid on deposits. The overall decrease in interest expense was attributable to a shift in deposit balances from certificates of deposit to relatively lower cost non-time deposits.

Net interest income for the nine months ended September 30, 2011, was $50.3 million, compared to $54.5 million for the nine months ended September 30, 2010. Total interest income decreased $11.3 million in the first nine months of 2011 compared to the first nine months of 2010. The Bank recognized $9.4 million less in interest on net loans because of a $231.5 million reduction in the average balance of outstanding loans. The Company also experienced a decrease in interest income on net loans of $2.5 million due to lower rates.

Total interest expense decreased $7.2 million for the nine months ended September 30, 2011, as compared to the same period last year. This change was due primarily to reductions of $6.9 million in interest paid on deposits.

Noninterest Income

Noninterest income decreased in the third quarter of 2011 to $1.9 million, as compared to $4.1 million in the third quarter of 2010. Affecting this comparison was the recognition of lower service fees due to the establishment of a valuation allowance of $1.3 million for mortgage servicing rights during the third quarter of 2011. The third quarter of 2011 also reflected $2.6 million in losses and valuation adjustments recognized on certain real estate owned properties, including $1.5 million in valuation adjustments for three specific properties. These declines in income were offset partially by a $1.2 million increase in gains recognized on the sale of available for sale securities.

Noninterest income decreased in the first nine months of 2011 to $11.2 million, as compared to the first nine months of 2010 of $15.4 million. Driving the decrease in noninterest income was the recognition of lower gains on the sale of fewer available for sale securities and the gain recognized on the sale of Home Savings’ Findlay, Ohio branch in 2010. Partially offsetting these declines was an increase in mortgage banking income due to the $2.7 million gain recognized on the bulk mortgage loan sale, which was completed in the second quarter of 2011.

Noninterest Expense

Noninterest expense was $14.6 million in the third quarter of 2011, compared to $15.7 million in the third quarter of 2010. The decrease in noninterest expense was driven by lower deposit insurance premiums. Regulatory changes resulting from the enactment of the Dodd-Frank Act revised the method for calculating deposit insurance premiums and caused those expenses to decline. Also positively affecting the comparison, United Community recognized fewer expenses associated with the maintenance of real estate owned and other repossessed assets during the third quarter of 2011, as compared to the same quarter last year. Finally, lower expenses related to nonperforming loans having negative escrow balances were recognized during the period.

Noninterest expense was $47.0 million in the first nine months of 2011, compared to $50.0 million in the first nine months of 2010. Lower salaries and benefits paid to employees drove the decrease in noninterest expense. This decrease was driven primarily by the Employee Stock Ownership Plan’s repayment in 2010 of the loan made by the Company to the ESOP.

Capital and Book Value

Home Savings’ Tier 1 leverage ratio was 8.13% as of September 30, 2011, compared to 8.40% at June 30, 2011. The Company’s total risk-based capital ratio was 13.25% at September 30, 2011, as compared to 13.47% at June 30, 2011. Tangible book value per share at September 30, 2011 was $5.88, down from $5.90 at June 30, 2011.

Home Savings is a wholly-owned subsidiary of the Company and operates 38 full-service banking offices and seven 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)
 
September 30, December 31,
2011 2010
(Dollars in thousands)
Assets:
Cash and deposits with banks $ 21,355 $ 18,627
Federal funds sold and other   27,803     18,480  
Total cash and cash equivalents 49,158 37,107
Securities:
Available for sale, at fair value 416,460 362,042
Loans held for sale 38,366 10,870
Loans, net of allowance for loan losses of $44,162 and $50,883, respectively 1,437,575 1,649,486
Federal Home Loan Bank stock, at cost 26,464 26,464
Premises and equipment, net 19,213 22,076
Accrued interest receivable 7,016 7,720
Real estate owned and other repossessed assets 38,316 40,336
Core deposit intangible 379 485
Cash surrender value of life insurance 28,089 27,303
Other assets   9,965     13,409  
Total assets $ 2,071,001   $ 2,197,298  
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Interest bearing $ 1,535,365 $ 1,551,210
Non-interest bearing   152,576     138,571  
Total deposits 1,687,941 1,689,781
Borrowed funds:
Federal Home Loan Bank advances 88,324 202,818
Repurchase agreements and other   90,623     97,797  
Total borrowed funds 178,947 300,615
Advance payments by borrowers for taxes and insurance 13,202 20,668
Accrued interest payable 793 809
Accrued expenses and other liabilities   7,421     9,370  
Total liabilities   1,888,304     2,021,243  
 
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 30,968,960 and 30,937,704 shares, respectively, outstanding 142,694 142,318
Retained earnings 102,903 111,049
Accumulated other comprehensive income (loss) 9,141 (4,778 )
Treasury stock, at cost, 6,820,113 and 6,866,753 shares, respectively   (72,041 )   (72,534 )
Total shareholders’ equity   182,697     176,055  
Total liabilities and shareholders’ equity $ 2,071,001   $ 2,197,298  
 
               
 
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
     
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2011 2010 2011 2010
(Dollars in thousands, except per share data)
Interest income
Loans $ 19,558 $ 24,589 $ 63,489 $ 75,350
Loans held for sale 163 109 270 248
Securities:
Available for sale 3,323 3,235 9,264 8,716
Federal Home Loan Bank stock dividends 264 297 858 891
Other interest earning assets   13     10     35     25  
Total interest income 23,321 28,240 73,916 85,230
Interest expense
Deposits 5,972 7,528 18,384 25,254
Federal Home Loan Bank advances 793 984 2,414 2,707
Repurchase agreements and other   931     942     2,781     2,796  
Total interest expense   7,696     9,454     23,579     30,757  
Net interest income 15,625 18,786 50,337 54,473
Provision for loan losses   11,836     17,116     22,272     39,876  
Net interest income after provision for loan losses   3,789     1,670     28,065     14,597  
Non-interest income
Non-deposit investment income 388 388 1,050 1,300
Service fees and other charges 203 1,563 3,244 3,738
Net gains (losses):
Securities available for sale 1,958 781 3,500 7,295
Other -than-temporary loss on equity securities
Total impairment loss (35 ) (44 ) (73 ) (44 )
Loss recognized in other comprehensive income   -     -     -     -  
Net impairment loss recognized in earnings (35 ) (44 ) (73 ) (44 )
Mortgage banking income 682 1,419 4,432 2,456
Real estate owned and other repossessed assets (2,627 ) (1,273 ) (4,981 ) (4,512 )
Gain on retail branch sale - - - 1,387
Other income   1,347     1,281     4,032     3,800  
Total non-interest income   1,916     4,115     11,204     15,420  
Non-interest expense
Salaries and employee benefits 7,927 7,568 23,297 24,847
Occupancy 854 850 2,615 2,693
Equipment and data processing 1,592 1,562 4,910 4,949
Franchise tax 370 498 1,241 1,512
Advertising 204 205 466 574
Amortization of core deposit intangible 33 43 106 136
Deposit insurance premiums 1,111 1,391 3,573 4,311
Professional fees 1,290 948 2,545 2,921
Real estate owned and other repossessed asset expenses 361 1,027 2,125 2,658
Other expenses   827     1,608     6,089     5,358  
Total non-interest expenses   14,569     15,700     46,967     49,959  
Income (loss) before income taxes (8,864 ) (9,915 ) (7,698 ) (19,942 )
Income tax expense (benefit)   -     -     -     -  
Net income (loss) $ (8,864 ) $ (9,915 ) $ (7,698 ) $ (19,942 )
 
Earnings (loss) per share
Basic $ (0.29 ) $ (0.32 ) (0.25 ) (0.66 )
Diluted (0.29 ) (0.32 ) (0.25 ) (0.66 )
 
               
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
At or for the quarters ended

September 30,2011

June 30,2011

March 31,2011

December 31,2010

September 30,2010
(In thousands, except per share data)
Financial Data
Total assets $ 2,071,001 $ 2,102,419 $ 2,115,080 $ 2,197,298 $ 2,317,948
Total loans, net 1,437,575 1,509,399 1,620,094 1,649,486 1,726,381
Total securities 416,460 392,749 289,388 362,042 390,636
Total deposits 1,687,941 1,697,797 1,712,523 1,689,781 1,685,033
Total shareholders' equity 182,697 183,142 177,371 176,055 201,333
Net interest income 15,625 17,058 17,654 16,888 18,786
Provision for loan losses 11,836 8,244 2,192 22,551 17,116
Noninterest income, excluding other-than-temporary impairment losses 1,951 5,328 3,998 6,487 4,159
Net impairment losses recognized in earnings 35 28 10 14 44
Noninterest expense 14,569 15,910 16,488 18,372 15,700
Income tax expense (benefit) - - - (231 ) -
Net income (loss) (8,864 ) (1,796 ) 2,962 (17,331 ) (9,915 )
 
Share Data
Basic earnings (loss) per share $ (0.29 ) $ (0.06 ) $ 0.10 $ (0.56 ) $ (0.32 )
Diluted earnings (loss) per share (0.29 ) (0.06 ) 0.10 (0.56 ) (0.32 )
Book value per share 5.90 5.91 5.73 5.69 6.51
Tangible book value per share 5.88 5.90 5.72 5.67 6.49
Market value per share 1.35 1.27 1.33 1.34 1.33
 
Shares outstanding at end of period 30,984 30,969 30,951 30,938 30,925
Weighted average shares outstanding--basic 30,953 30,932 30,917 30,906 30,899
Weighted average shares outstanding--diluted 30,953 30,932 30,919 30,906 30,899
 
Key Ratios
Return on average assets -1.69 % -0.34 % 0.55 % -3.06 % -1.70 %
Return on average equity -18.98 % -3.95 % 6.56 % -33.91 % -18.41 %
Net interest margin 3.18 % 3.39 % 3.49 % 3.17 % 3.42 %
Efficiency ratio 79.67 % 67.49 % 77.12 % 78.08 % 66.80 %
 
Capital Ratios
Tier 1 leverage ratio 8.13 % 8.40 % 8.44 % 7.84 % 8.23 %
Tier 1 risk-based capital ratio 11.98 % 12.20 % 11.74 % 11.26 % 11.85 %
Total risk-based capital ratio 13.25 % 13.47 % 13.02 % 12.54 % 13.12 %
Equity to assets 8.82 % 8.71 % 8.39 % 8.01 % 8.69 %
Tangible common equity to tangible assets 8.80 % 8.69 % 8.37 % 7.99 % 8.67 %
 
               
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
At or for the quarters ended

September 30,2011

June 30,2011

March 31,2011

December 31,2010

September 30,2010
(Dollars in thousands)
Loan Portfolio Composition
Real Estate Loans
One-to four-family residential $ 677,708 $ 693,435 $ 762,065 $ 757,426 $ 778,005
Multi-family residential* 125,370 129,767 131,246 135,771 136,681
Nonresidential* 303,165 307,702 328,772 331,390 355,914
Land* 22,172 25,515 25,624 25,138 25,413
Construction Loans
One-to four-family residential and land development 66,761 87,827 88,075 108,583 117,297
Multi-family and nonresidential*   4,528     5,524     11,201     15,077     14,537  
Total real estate loans 1,199,704 1,249,770 1,346,983 1,373,385 1,427,847
Consumer Loans 245,367 266,075 272,478 279,453 289,296
Commercial Loans   35,277     38,354     45,772     46,304     48,902  
Total Loans 1,480,348 1,554,199 1,665,233 1,699,142 1,766,045
Less:
Allowance for loan losses 44,162 46,223 46,415 50,883 40,884
Deferred loan costs, net   (1,389 )   (1,423 )   (1,276 )   (1,227 )   (1,220 )
Total   42,773     44,800     45,139     49,656     39,664  
Loans, net $ 1,437,575   $ 1,509,399   $ 1,620,094   $ 1,649,486   $ 1,726,381  
* Such categories are considered commercial real estate
 
At or for the quarters ended

September 30,2011

June 30,2011

March 31,2011

December 31,2010

September 30,2010
(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts $ 120,115 $ 112,412 $ 110,711 $ 110,092 $ 103,204
Non-interest bearing checking accounts   152,577     138,752     144,362     138,571     128,702  
Total checking accounts 272,692 251,164 255,073 248,663 231,906
Savings accounts 249,426 245,838 234,295 218,946 214,197
Money market accounts   327,751     322,955     318,395     311,692     310,884  
Total non-time deposits 849,869 819,957 807,763 779,301 756,987
Retail certificates of deposit   838,073     877,840     904,760     910,480     928,046  
Total certificates of deposit   838,073     877,840     904,760     910,480     928,046  
Total deposits $ 1,687,942   $ 1,697,797   $ 1,712,523   $ 1,689,781   $ 1,685,033  
Certificates of deposit as a percent of total deposits 49.65 % 51.70 % 52.83 % 53.88 % 55.08 %
 
               
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
 
At or for the quarters ended

September 30,2011

June 30,2011

March 31,2011

December 31,2010

September 30,2010
(Dollars in thousands)
 
Allowance For Loan Losses
Beginning balance $ 46,223 $ 46,415 $ 50,883 $ 40,884 $ -
Provision 11,836 8,244 2,192 22,551 17,116
Net chargeoffs   (13,897 )   (8,436 )   (6,660 )   (12,552 )   (16,960 )
Ending balance $ 44,162   $ 46,223   $ 46,415   $ 50,883   $ 156  
 
Net Charge-offs
Real Estate Loans
One-to four-family $ 1,380 $ 501 $ 924 $ 1,483 $ 1,834
Multi-family 14 1,451 163 1,819 160
Nonresidential 3,693 1,873 1,038 6,923 7,041
Land 281 233 504 284 11
Construction Loans
One-to four-family residential and land development 6,737 1,159 2,295 669 6,595
Multi-family and nonresidential   -     101     -     (1 )   -  
Total real estate loans 12,105 5,318 4,924 11,177 15,641
Consumer Loans 864 642 856 639 905
Commercial Loans   928     2,476     880     736     414  
Total $ 13,897   $ 8,436   $ 6,660   $ 12,552   $ 16,960  
 
 
At or for the quarters ended

September 30,2011

June 30,2011

March 31,2011

December 31,2010

September 30,2010
(Dollars in thousands)
Nonperforming Loans
Real Estate Loans
One-to four family residential $ 27,250 $ 28,776 $ 29,062 $ 27,417 $ 27,505
Multi-family residential 6,517 6,414 8,239 10,983 12,443
Nonresidential 44,243 36,382 37,353 39,838 44,561
Land 11,655 8,316 6,722 5,188 5,943
Construction Loans
One-to four-family residential and land development 31,166 43,389 46,139 44,021 40,000
Multi-family and nonresidential   -     382     382     2,414     2,414  
Total real estate loans 120,831 123,659 127,897 129,861 132,866
Consumer Loans 5,890 5,781 4,224 3,725 3,543
Commercial Loans   7,361     9,650     13,735     5,945     6,304  
Total Loans $ 134,082   $ 139,090   $ 145,856   $ 139,531   $ 142,713  
 
Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status $ 102,890 $ 122,856 $ 112,705 $ 117,499 $ 126,062
Past due 90 days and still accruing   3     1,121     2,868     6,330     4,253  
Past due 90 days 102,893 123,977 115,573 123,829 130,315
Past due less than 90 days and on nonaccrual   31,189     15,112     30,283     15,702     12,398  
Total Nonperforming Loans 134,082 139,089 145,856 139,531 142,713
Other Real Estate Owned 37,697 43,009 42,386 39,914 39,963
Repossessed Assets   619     676     487     422     334  
Total Nonperforming Assets $ 172,398   $ 182,774   $ 188,729   $ 179,867   $ 183,010  
 
Total Troubled Debt Restructured Loans
Accruing $ 30,784 $ 30,546 $ 30,129 $ 33,331 $ 13,254
Non-accruing   16,932     28,066     24,420     11,240     14,934  
Total $ 47,716   $ 58,612   $ 54,549   $ 44,571   $ 28,188  
 

Copyright Business Wire 2010

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