United Community Financial Corp. Announces First Quarter Net Income of $2.7 Million

United Community Financial Corp. Announces First Quarter Net Income of $2.7 Million

YOUNGSTOWN, Ohio--(BUSINESS WIRE)-- United Community Financial Corp. (Company) (NAS: UCFC) , holding company of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), today reported consolidated net income of $2.7 million for the three months ended March 31, 2013.

Selected first quarter results:

  • Delinquent loans were $46.7 million at March 31, 2013, down 3.2% for the year to date
  • Nonperforming assets were $60.5 million at March 31, 2013, down 8.7% for the year to date
  • Classified loans were $57.6 million at March 31, 2013, down 3.8% for the year to date
  • Home Savings' Tier 1 leverage ratiowas 9.84% and the total risk based capital ratio was 18.28%

Patrick W. Bevack, President and Chief Executive Officer of United Community and Home Savings, commented that, "Net income for the quarter, along with improvement in asset quality and the successful completion of the private equity offering continues to move our Company forward. These positive steps provide United Community and Home Savings with the capital to grow our Company, raise our capital levels to levels that are commensurate with our risk profile and continue to execute our business plan."

Asset Quality

Delinquent loans continued to decline through the first quarter of 2013. As of March 31, 2013, delinquent loans were $46.7 million, down $1.5 million, or 3.2%, from December 31, 2012. Nonperforming loans also continued to decline. Nonperforming loans as of March 31, 2013 were down $3.1 million, or 6.4%, from $47.8 million at December 31, 2012. Nonperforming assets were $60.5 million as of March 31, 2013, down $5.7 million, or 8.7%, from $66.2 million at December 31, 2012.

The provision for loan losses increased to $2.1 million in the first quarter of 2013, compared to $680,000 in the first quarter of 2012. This $1.4 million increase in the provision for loan losses is primarily a result of chargeoffs of $560,000 associated with one commercial lending relationship and a $382,000 specific reserve established on another commercial relationship due to events surrounding these credits that occurred in the first quarter of 2013.

Net Interest Income and Margin

Net interest income for the three months ended March 31, 2013 and December 31, 2012, was $12.9 million and $14.0 million, respectively. Total interest income decreased $1.4 million in the first quarter of 2013 compared to the prior quarter, primarily because of a decrease of $36.7 million in the average balance of outstanding loans. United Community also experienced a decrease in the yield on net loans of 29 basis points.

Total interest expense decreased $267,000 for the quarter ended March 31, 2013, as compared to the prior quarter. The change was due primarily to reductions of $235,000 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 less expensive non-time deposits. Between December 31, 2012, and March 31, 2013, the average outstanding balance of certificates of deposit declined by $30.2 million, while non-time deposits increased by $9.4 million. Also contributing to the decrease was a reduction of six basis points in the cost of certificates of deposit, as well as a decrease of three basis points in the cost of non-time deposits.

Noninterest Income

Noninterest income decreased in the first quarter of 2013 to $5.7 million, as compared to noninterest income for the prior quarter of $6.9 million. Decreased noninterest income was a result of lower service fees and other charges, lower gains recognized on the sale of securities available for sale and decreased mortgage banking income recognized in the first quarter of 2013 as compared to the previous quarter.

The overall change in service fees and other charges was a result of a higher valuation adjustment recognized on deferred mortgage servicing rights in the last quarter of 2012 as compared to the first quarter of 2013. A lower gain recognized on the sale of available for sale securities was the result of fewer sales during the current quarter as compared to the prior quarter. The decline in mortgage banking income is attributable to a lower volume of sales in the first quarter of 2013 as compared to the prior quarter, as Home Savings retained a more significant portion of 15-year mortgage originations in its loan portfolio rather than selling such loans in the secondary market.

Noninterest Expense

Noninterest expense was $13.9 million in the first quarter of 2013, compared to $14.3 million in the prior quarter. In the first quarter of 2013, deposit insurance premiums were lower due to the bank being able to avail itself of more favorable insurance rates and a lower average asset base used in the calculation of insurance premiums. Professional fees were $796,000 lower during the quarter ended March 31, 2013 as compared to the quarter ended December 31, 2012. The improvement in asset quality has reduced the need to engage legal and other consultants to assist in the resolution of problem assets. Other expenses were $635,000 higher in the first quarter of 2013 as compared to the last quarter in 2012. This variance is the result of higher expenses accrued in the first quarter for loans expected to be repurchased from Fannie Mae and Freddie Mac.

Capital and Book Value per Common Share

Home Savings' Tier 1 leverage ratio was 9.84% as of March 31, 2013, as compared to 8.70% as of December 31, 2012. Home Savings' total risk-based capital ratio was 18.28% at March 31, 2013, as compared to 16.21% at December 31, 2012. Tangible book value per common share at March 31, 2013 was $4.81, as compared to $5.16 at December 31, 2012.

The Consent Order issued by the FDIC and the Ohio Division of Financial Institutions in 2012 required Home Savings to maintain a Tier 1 Leverage Capital Ratio at a minimum of 9.0% and a total risk-based capital ratio of no less than 12.0%. The FDIC and the Ohio Division terminated the Consent Order on January 31, 2013. Home Savings is now considered well capitalized and is no longer considered a troubled institution. The Memorandum of Understanding (MOU) entered into on January 31, 2013, now requires Home Savings to maintain these ratios at 8.5% and 12.0%, respectively. As of March 31, 2013, Home Savings was in compliance with the MOU.

On January 11, 2013, United Community entered into securities purchase agreements with 28 accredited investors, pursuant to which the Investors agreed to invest an aggregate of approximately $39.9 million in United Community for 6,574,272 newly issued common shares of United Community at a purchase price of $2.75 per share, and 7,942 newly created and issued perpetual mandatorily convertible non-cumulative preferred shares of United Community at a purchase price of $2,750 per share. On March 22, 2013, UCFC received $39.9 million from the completion of this portion of the capital raise. On March 26, 2013, United Community invested $16.0 million from those proceeds into Home Savings.

Home Savings is a wholly-owned subsidiary of the Company and operates 33 full-service banking offices and nine 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.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.No offer of securities shall be made except by means of a prospectus satisfying the requirements of Section 10 of the Securities Act of 1933, as amended (the "Act").The securities offered in the private offerings have not been registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

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.

March 31,December 31,
(Dollars in thousands)
Cash and deposits with banks$20,739$26,041
Federal funds sold 57,345  16,572 
Total cash and cash equivalents78,08442,613
Available for sale, at fair value602,107574,562
Loans held for sale9,26813,031
Loans, net of allowance for loan losses of $21,827 and $21,1301,034,4151,066,240
Federal Home Loan Bank stock, at cost26,46426,464
Premises and equipment, net21,40021,549
Accrued interest receivable5,5876,238
Real estate owned and other repossessed assets15,78218,440
Core deposit intangible215238
Cash surrender value of life insurance29,10628,881
Other assets 9,348  10,109 
Total assets$1,831,776 $1,808,365 
Liabilities and Shareholders' Equity
Interest bearing$1,291,170$1,302,307
Non-interest bearing 169,790  159,767 
Total deposits1,460,9601,462,074
Borrowed funds:
Federal Home Loan Bank advances50,00050,000
Repurchase agreements and other 90,593  90,598 
Total borrowed funds140,593140,598
Advance payments by borrowers for taxes and insurance14,25823,590
Accrued interest payable597563
Accrued expenses and other liabilities 8,857  10,780 
Total liabilities 1,625,265  1,637,605 
Shareholders' Equity:

Preferred stock-no par value; 1,000,000 shares authorized and 7,942 and 0 shares, respectively issued and outstanding, $21,841 and $0 liquidation value, respectively


Common stock-no par value; 499,000,000 shares authorized; 44,378,729 and 37,804,457 shares, respectively, issued and 39,606,586 and 33,027,886 shares, respectively, outstanding

Retained earnings88,19186,345
Accumulated other comprehensive income3,7196,682
Treasury stock, at cost, 4,772,143 and 4,776,571 shares, respectively (50,247) (50,293)
Total shareholders' equity 206,511  170,760 
Total liabilities and shareholders' equity$1,831,776 $1,808,365 
For the Three Months Ended
March 31,December 31,March 31,
(Dollars in thousands, except per share data)
Interest income
Loans held for sale89119100
Available for sale3,4283,4883,494
Federal Home Loan Bank stock dividends283316300
Other interest earning assets 9  12  12 
Total interest income16,43617,79721,562
Interest expense
Federal Home Loan Bank advances523535732
Repurchase agreements and other 909  929  919 
Total interest expense 3,519  3,786  5,683 
Net interest income12,91714,01115,879
Provision for loan losses 2,064  2,102  680 
Net interest income after provision for loan losses 10,853  11,909  15,199 
Non-interest income
Non-deposit investment income541373541
Service fees and other charges1,7822,7942,317
Net gains (losses):

Securities available for sale (includes $721, $1,164 and $414, respectively, accumulated other comprehensive income reclassifications for unrealized net gains on available for sale securities)

Other -than-temporary loss on equity securities
Total impairment loss-(13)-
Loss recognized in other comprehensive income -  -  - 
Net impairment loss recognized in earnings-(13)-
Mortgage banking income1,6432,0831,471
Real estate owned and other repossessed assets(431)(744)(729)
Other income 1,437  1,282  1,077 
Total non-interest income 5,693  6,939  5,091 
Non-interest expense
Salaries and employee benefits7,4517,2538,333
Equipment and data processing1,7601,8211,689
Franchise tax431445438
Amortization of core deposit intangible232529
Deposit insurance premiums5541,0261,109
Professional fees4081,204880
Real estate owned and other repossessed asset expenses493239702
Other expenses 1,783  1,148  2,374 
Total non-interest expenses 13,864  14,302  16,494 
Income before income taxes2,6824,5463,796

Income tax expense (includes $0 income tax expense from reclassification items, respectively)

 -  1,950  - 
Net income2,6822,5963,796
Amortization of discount on preferred stock 821  -  - 
Earnings available to common shareholders$1,861 $2,596 $3,796 
Earnings per common share
At or for the quarters ended

March 31,

December 31,

September 30,

June 30,

March 31,

(In thousands, except per share data)
Financial Data
Total assets$1,831,776$
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