<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 0-24399
UNITED COMMUNITY FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Ohio 34-1856319
-------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
275 Federal Plaza West
Youngstown, Ohio 44503-1203
---------------- ----------
(Address of principal executive offices) (Zip Code)
(330) 742-0500
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year, if change since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
34,007,939 common shares as of April 30, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of March 31, 2000 and
December 31,1999.................................................................... 1
Consolidated Statements of Income for the Three Months Ended March 31, 2000
and 1999............................................................................ 2
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000
and 1999............................................................................ 3
Notes to Consolidated Financial Statements ......................................... 4 - 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................... 6 - 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk........................... 10
PART II. OTHER INFORMATION......................................................................... 11
Signatures......................................................................................... 12
EXHIBITS........................................................................................... 13 - 14
</TABLE>
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(In thousands)
<S> <C> <C>
ASSETS:
Cash and deposits with banks $ 18,362 $ 30,759
Federal funds sold and other 2,056 80,686
----------- -----------
Total cash and cash equivalents 20,418 111,445
----------- -----------
Investment securities:
Trading 6,590 7,657
Available for sale (amortized cost of $152,484 and $163,515, respectively) 150,865 161,904
Held to maturity (fair value of $1,178 and $1,098, respectively) 1,175 1,091
Mortgage-backed securities:
Available for sale (amortized cost of $112,402 and $116,569, respectively) 108,670 113,559
Held to maturity (fair value of $128,287 and $135,993, respectively) 131,657 138,079
Loans, net (including allowance for loan losses of $6,390 and $6,405, respectively) 735,950 723,087
Margin accounts 41,034 32,751
Federal Home Loan Bank stock 13,048 12,825
Premises and equipment 9,400 9,252
Accrued interest receivable 8,546 8,347
Real estate owned 204 158
Other assets 10,804 7,418
----------- -----------
TOTAL ASSETS $ 1,238,361 $ 1,327,573
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits $ 824,838 $ 834,087
Other borrowed funds 129,274 213,578
Advance payments by borrowers for taxes and insurance 2,287 4,038
Accrued interest payable 2,903 4,168
Accrued expenses and other liabilities 21,121 14,834
----------- -----------
TOTAL LIABILITIES 980,423 1,070,705
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock-no par value; 1,000,000 shares authorized and unissued
at March 31, 2000 - -
Common stock-no par value; 499,000,000 shares authorized; 37,756,582
shares issued; and 33,940,113 outstanding at March 31, 2000 136,616 136,509
Retained earnings 154,115 153,553
Other comprehensive income (3,478) (3,003)
Unearned stock compensation (29,315) (30,191)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 257,938 256,868
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,238,361 $ 1,327,573
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------
2000 1999
------------ ------------
(In thousands)
<S> <C> <C>
INTEREST INCOME
Loans $ 14,314 $ 13,254
Mortgage-backed securities:
Available for sale 1,814 1,452
Held to maturity 2,353 3,050
Investment securities:
Trading 41 37
Available for sale 2,230 1,675
Held to maturity 17 78
Margin accounts 746 411
FHLB stock dividend 223 206
Other interest-earning assets 141 1,883
----------- -----------
Total interest income 21,879 22,046
INTEREST EXPENSE
Interest expense on Deposits 8,161 7,507
Interest expense on Other borrowed funds 1,922 195
----------- -----------
Total interest expense 10,083 7,702
----------- -----------
NET INTEREST INCOME 11,796 14,344
PROVISION FOR LOAN LOSS ALLOWANCES - 75
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSS ALLOWANCES 11,796 14,269
----------- -----------
NONINTEREST INCOME
Commissions 5,384 4,104
Service fees and other charges 1,255 1,077
Underwriting and investment banking 21 255
Net gains:
Investment securities 10 -
Trading securities 371 136
Other 2 1
Other income 212 177
----------- -----------
Total noninterest income 7,255 5,750
----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits 9,628 7,827
Occupancy 456 457
Equipment and data processing 1,300 1,250
Deposit insurance premiums 41 117
Franchise tax 934 462
Advertising 501 275
Other expenses 1,581 1,705
----------- -----------
Total noninterest expenses 14,441 12,093
----------- -----------
INCOME BEFORE INCOME TAXES 4,610 7,926
INCOME TAXES 1,508 2,801
----------- -----------
NET INCOME $ 3,102 $ 5,125
=========== ===========
EARNINGS PER SHARE:
Basic and diluted $ 0.09 $ 0.15
Average common shares outstanding 33,995,082 33,856,778
Average common and common equivalent shares outstanding 33,437,697 33,856,778
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
----------- ----------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,102 $ 5,125
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan loss allowances - 75
Net gains (11) (1)
Accretion of discounts and amortization of premiums (69) (178)
Depreciation 347 347
ESOP compensation 564 537
Amortization of restricted stock compensation 420 -
FHLB stock dividends (223) (206)
Decrease in trading securities 1,067 821
Increase in margin accounts (8,283) (6,489)
(Increase) decrease in interest receivable (200) 127
Increase in prepaid and other assets (3,386) (1,839)
Increase in accounts receivable - (462)
(Decrease) increase in interest payable (1,264) 11
Increase in other liabilities 6,542 2,035
--------- ---------
Net cash used in operating activities (1,394) (97)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from principal repayments and maturities of:
Mortgage-backed securities held to maturity 6,392 15,911
Mortgage-backed securities available for sale 4,205 8,419
Investment securities held to maturity 293 5,000
Investment securities available for sale 14,224 2,500
Proceeds from sale of Investment securities available for sale 2,579 -
Purchases of:
Investment securities available for sale (5,864) (21,331)
Investment securities held to maturity (377) -
Mortgage-backed securities available for sale - (6,894)
Principal collected on loans 33,217 43,288
Loans originated (45,642) (56,542)
Loans purchased (322) -
Purchases of premises and equipment (496) (343)
Other 2 10
--------- ---------
Net cash provided by (used in) investing activities 8,211 (9,982)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in Now, savings and money market accounts (388) 5,341
Net decrease in certificates of deposit (8,861) (1,623)
Net decrease in advance payments by borrowers
for taxes and insurance (1,751) (1,633)
Net (decrease) increase in borrowed funds (84,304) 5,334
Dividends paid (2,540) (2,410)
--------- ---------
Net cash (used in) provided by financing activities (97,844) 5,009
--------- ---------
Decrease in cash and cash equivalents (91,027) (5,070)
Cash and cash equivalents, beginning of period 111,445 171,874
--------- ---------
Cash and cash equivalents, end of period $ 20,418 $ 166,804
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings $ 11,396 $ 7,690
Income taxes 445 2,216
Supplemental schedule of noncash activities:
Transfers from loans to real estate owned 48 128
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
United Community Financial Corp. (United Community) was incorporated under
Ohio law in February 1998 by The Home Savings & Loan Company of Youngstown,
Ohio (Home Savings) in connection with the conversion of Home Savings from an
Ohio mutual savings and loan association to an Ohio capital stock savings and
loan association (Conversion), the issuance of Home Savings' stock to United
Community and the offer and sale of United Community's common stock. Upon
consummation of the Conversion on July 8, 1998, United Community became the
unitary savings and loan holding company for Home Savings. Home Savings has
14 offices located throughout Mahoning, Columbiana and Trumbull Counties in
northeastern Ohio. Butler Wick Corp. (Butler Wick) became a wholly owned
subsidiary of United Community on August 12, 1999. Butler Wick is the parent
company for three wholly owned subsidiaries: Butler Wick & Co., Inc., Butler
Wick Asset Management Company and Butler Wick Trust Company. Through these
subsidiaries, Butler Wick's business includes investment brokerage services,
which it has conducted for over 70 years, and a network of integrated
financial services, including asset management, trust and estate services,
public finance and insurance. Butler Wick and its subsidiaries have ten
offices throughout northeastern Ohio and western Pennsylvania. See Note 2 for
a more detailed description of the acquisition of Butler Wick.
The accompanying consolidated financial statements of United Community have
been prepared in accordance with instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
such information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary for
fair statement of results for the interim periods. Financial data for all
prior periods have been restated to reflect the third quarter 1999
acquisition of Butler Wick, which was accounted for as a pooling of interests.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000. The consolidated financial statements and notes thereto
should be read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 1999, contained in United Community's
Form 10-K for the year ended December 31, 1999.
2. ACQUISITION OF BUTLER WICK CORP.
On August 12, 1999, United Community acquired Butler Wick, which became a
wholly owned subsidiary of United Community. In connection with the
acquisition, United Community issued approximately 1.7 million common shares
in exchange for all of Butler Wick's outstanding shares. The acquisition was
accounted for by the pooling of interests method. Accordingly, the assets,
liabilities and shareholders' equity of Butler Wick were recorded on the
books of United Community at their values as reported on the books of Butler
Wick immediately prior to the consummation of the acquisition by United
Community. This presentation required the restatement of prior periods as if
the companies had been combined for all periods presented. The contributions
of Butler Wick to consolidated net interest income, non-interest income and
net income for the periods prior to the acquisition were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 30, 1999
(in thousands)
Net Interest Total Noninterest Net
Income Income Income
<S> <C> <C> <C>
United Community $14,091 $ 390 $ 4,711
Butler Wick 253 5,360 414
Combined $14,344 $ 5,750 $ 5,125
======= ======= =======
</TABLE>
4
<PAGE>
3. COMPREHENSIVE INCOME
United Community's comprehensive income for the three months ended March 31,
2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
2000 1999
-------------- --------------
(In thousands)
<S> <C> <C>
Net income $3,102 $5,125
Unrealized holding losses arising
during the period, net of tax effect of
($290) and ($239), respectively (532) (444)
Reclassification adjustment for losses
included in net income, net of tax effect of ($4) (7) -
-------------- --------------
Comprehensive income $2,563 $4,681
============== ==============
</TABLE>
4. SEGMENT INFORMATION
Statement of Financial Accounting Standard (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information" requires financial
disclosure and descriptive information about reportable operating segments,
based on how chief decision-makers manage the business. United Community has
two principal segments, retail banking and investment advisory services.
Retail banking provides consumer and business banking services. Investment
advisory services provide an investment brokerage and a network of integrated
financial services. Condensed statements of income and selected financial
information by operating segment for the three months ended March 31, 2000
and 1999 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
Retail Banking Investment Advisory Services Eliminations Total
-------------- ---------------------------- ------------ -----
<S> <C> <C> <C> <C>
Interest income $ 21,571 $807 $(499) $21,879
Interest expense 10,142 440 (499) 10,083
Net interest income after
Provision for loan loss 11,429 367 - 11,796
Non-interest income 836 6,419 - 7,255
Non-interest expense 7,987 6,454 - 14,441
Income before tax 4,278 332 - 4,610
Income tax 1,389 119 - 1,508
Net income 2,889 213 - 3,102
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
Retail Banking Investment Advisory Services Eliminations Total
-------------- ---------------------------- ------------ -----
<S> <C> <C> <C> <C>
Interest income $ 22,144 $ 448 $(546) $22,046
Interest expense 8,053 195 (546) 7,702
Net interest income after
Provision for loan loss 14,016 253 - 14,269
Non-interest income 390 5,360 - 5,750
Non-interest expense 7,113 4,980 - 12,093
Income before tax 7,293 633 - 7,926
Income tax 2,582 219 - 2,801
Net income 4,711 414 - 5,125
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UNITED COMMUNITY FINANCIAL CORP.
<TABLE>
<CAPTION>
At or For the
Three Months Ended
March 31, March 31,
2000 1999
------------- --------------
<S> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA: (1)
Performance ratios:
Return on average assets (2) 1.00% 1.58%
Return on average equity (3) 4.81% 4.31%
Interest rate spread (4) 3.02% 3.09%
Net interest margin (5) 3.94% 4.55%
Noninterest expense to average assets 4.67% 3.73%
Efficiency ratio (6) 75.80% 60.18%
Average interest-earning assets to average interest-
bearing liabilities 127.21% 159.77%
Capital ratios:
Average equity to average assets 20.84% 36.74%
Equity to assets, end of period 20.83% 36.76%
Tangible capital 13.66% 26.97%
Core capital 13.66% 26.97%
Risk-based capital 24.69% 51.19%
Asset quality ratio:
Nonperforming loans to total loans at end of period (7) 0.57% 1.00%
Nonperforming assets to average assets (8) 0.35% 0.53%
Nonperforming assets to total assets at end of period 0.35% 0.53%
Allowance for loan losses as a percent of loans 0.86% 0.95%
Allowance for loan losses as a percent of
nonperforming loans (7) 153.31% 96.75%
Number of full service banking offices 14 14
Number of full service brokerage offices 10 10
Per share data:
Basic earnings per share (9) 0.09 0.15
Diluted earnings per share (9) 0.09 0.15
Book value (10) 7.60 14.08
</TABLE>
- ------------------------------------------------------------------------
(1) Ratios for the three month period are annualized where appropriate.
(2) Net income divided by average total assets.
(3) Net income divided by average total equity.
(4) Difference between weighted average yield on interest-earning assets
and weighted average cost of interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning assets.
(6) Noninterest expense divided by the sum of net interest income and
noninterest income.
(7) Nonperforming loans consist of nonaccrual loans and restructured loans.
(8) Nonperforming assets consist of nonperforming loans and real estate
acquired in settlement of loans.
(9) Net income divided by average number of shares outstanding.
(10) Equity divided by number of shares outstanding.
6
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2000 AND DECEMBER 31, 1999
Total assets were $1.2 billion at March 31, 2000, a $89.2 million, or 6.7%,
decrease compared to December 31, 1999. The primary reasons for the decrease
in total assets was a result of a decrease in cash and cash equivalents of
$91.0 million and a decrease in securities of $23.3 million. These decreases
were partially offset by increases of 12.9 million in net loans, $8.3 million
in margin accounts and a $3.4 million increase in other assets primarily due
to a $1.6 million increase in prepaid Ohio Franchise taxes and a $1.1 million
increase in deferred tax assets.
Net loans increased $12.9 million, or 1.8%, to $736.0 million at March 30,
2000, compared to $723.1 million at December 31, 1999. The most significant
increases were in commercial loans, which increased $8.4 million, or 7.3%,
loans secured by one-to four-family residences, which increased $4.3 million,
or 0.8%, and consumer loans which increased $2.1 million, or 4.8%.
Funds that are available for general corporate purposes, such as loan
originations, enhanced customer services and possible acquisitions, are
invested in overnight funds, investment securities and mortgage-related
securities. Overnight funds decreased $78.6 million, or 97.5%, to $2.1
million at March 31, 2000 from $80.7 million at December 31, 1999. Securities
available for sale, which include both investment and mortgage-related
securities, increased $15.9 million, or 5.8%, since December 31, 1999.
Securities held to maturity, which also consist of both investment securities
and mortgage-related securities, decreased $6.3 million, or 4.6%, since
December 31, 1999. The net decrease in overnight funds and securities were
primarily used to reduce other borrowed funds by $84.3 million, to fund an
increase in net loans of $12.9 million and to fund an increase in margin
accounts of $8.3 millon. Trading securities, which consist of investment
securities, decreased $1.1 million, or 13.9%, to $6.6 million at March 31,
2000. Securities available for sale and trading securities, in conjunction
with overnight funds, enable United Community to utilize excess funds while
providing a great deal of liquidity and flexibility as United Community
pursues other investment opportunities.
Nonaccrual and restructured loans increased approximately $297,000 to $4.2
million at March 31, 2000 from $3.9 million at December 31, 1999, primarily
due to the reclassification of four loans as nonperforming. At March 31,
2000, total nonaccrual and restructured loans accounted for 0.57% of net
loans receivable, compared to 0.54% at December 31, 1999. Total nonperforming
assets were 0.35% of total assets as of March 31, 2000 compared to 0.30% as
of December 31, 1999.
Total deposits decreased $9.2 million from $834.1 million at December 31,
1999 to $824.8 million at March 31, 2000. The decrease was due to a decrease
in certificates of deposits of $8.9 million and savings accounts of $1.2
million, which were partially offset by an increase in checking accounts of
$757,000.
Accrued expenses and other liabilities increased $6.3 million to $21.1
million at March 31, 2000 compared to $14.8 million at December 31, 1999.
This increase is primarily due to a $2.7 million liability for real estate
taxes, an increase of $1.8 million in accrued federal income taxes, an
increase in outstanding office checks of $595,000 and an increase in deferred
compensation related to the Butler Wick retention plan of $567,000.
Shareholders' equity increased $1.0 million, or 0.4%, to $257.9 million at
March 31, 2000 from $256.9 million at December 31, 1999. The increase was
primarily due to earnings for the three months, which were partially offset
by dividends of $0.075 per share paid in March 2000. Book value per share was
$7.60 as of March 31, 2000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND MARCH 31, 1999
NET INCOME. Net income for the three months ended March 31, 2000 was $3.1
million, or $0.09 per diluted share. Net income for the comparable period in
1999 was $5.1 million, or $0.15 per diluted share. The primary reason for the
decrease in net income of $2.0 million for the three months ended March 31,
2000, compared to the same period in 1999, was a decrease of $2.5 million in
net interest income and an increase in noninterest expense of $2.4 million,
which were partially offset by a $1.5 million increase in noninterest income
and a $1.3 million decrease in income taxes. United Community's annualized
return on average assets and return on average equity were 1.00% and 4.81%,
respectively, for the three months ended March 31, 2000. The annualized
return on average assets and return on average equity for the comparable
period in 1999 were 1.58% and 4.31%, respectively.
NET INTEREST INCOME. Net interest income declined $2.5 million for the
three months ended March 31, 2000, compared to the first quarter of 1999,
primarily due to an increase in interest expense of $2.4 million. The
increase in interest expense was due to two factors. First, interest on other
borrowed funds increased $1.7 million due to an increase in borrowed funds in
connection with the
7
<PAGE>
$6.00 per share special capital dividend paid in October 1999. The second
factor was an increase in expense on deposits of $654,000, which was due to
an increase in deposits held over the three months ended March 31, 2000
compared to the same period in 1999.
PROVISION FOR LOAN LOSSES. A provision for loan losses is charged to
operations to bring the total allowance for loan losses to a level considered
by management to be adequate to provide for estimated losses based on
management's evaluation of such factors as the delinquency status of loans,
current economic conditions, the net realizable value of the underlying
collateral, changes in the composition of the loan portfolio and prior loan
loss experience. No provision for loan loss allowance was recorded for the
first quarter of 2000, compared to a provision of $75,000 for the first
quarter of 1999. Home Savings' allowance for loan losses totaled $6.4 million
at March 31, 2000, which was 0.86% of total loans.
NONINTEREST INCOME. Noninterest income increased $1.5 million, or 26.2%,
from $5.8 million for the three months ended March 31, 1999, to $7.3 million
for the three months ended March 31, 2000. The primary reason for the
increase is a $1.3 million increase in commissions earned by Butler Wick due
to an increase in the volume of transactions.
NONINTEREST EXPENSE. Total noninterest expense increased $2.3 million, or
19.4%, to $14.4 million for the three months ended March 31, 2000, from $12.1
million for the three months ended March 31, 1999. The increase was primarily
due to an increase in salaries and employee benefits of $1.8 million and an
increase in franchise tax expense of $472,000. The increase in salaries and
employee benefits for the first quarter of 2000 was primarily due to $567,000
in expense related to the Butler Wick Retention Plan and the recognition of
$419,000 in expense related to the United Community Recognition and Retention
Plan. The remainder of the increase is primarily due to increases in
commissions paid due to an increase in the volume of transactions and merit
increases. Home Savings' franchise tax is based on its level of equity at
year-end. Franchise tax expense has increased due to Home Savings having
higher equity for its 2000 return compared to its 1999 return.
FEDERAL INCOME TAXES. The provision for federal income taxes decreased $1.3
million, or 46.2%, for the three months ended March 31, 2000, compared to the
three months ended March 31, 1999, primarily due to the lower pre-tax income
for the first quarter of 2000 compared to the first quarter of 1999. The
effective tax rates were 32.7% and 35.3% for the three months ended March 31,
2000 and 1999, respectively.
8
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
AVERAGE BALANCE SHEETS
The following table presents the total dollar amounts of interest income and
interest expense on the indicated amounts of average interest-earning assets
or interest-bearing liabilities together with the weighted average interest
rates for the three month periods ended March 31, 2000 and 1999. Average
balance calculations were based on daily balances.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------------
AVERAGE INTEREST AVERAGE INTEREST
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE
--------------- ----------- --------- ------------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Net loans (1) $ 728,755 $ 14,314 7.86% $ 664,260 $ 13,254 7.98%
Mortgage-backed securities:
Available for sale 111,576 1,814 6.50% 95,528 1,452 6.08%
Held to maturity 135,137 2,353 6.96% 175,140 3,050 6.97%
Investment securities:
Trading 6,715 41 2.44% 5,338 37 2.77%
Available for sale 154,488 2,230 5.77% 118,200 1,675 5.67%
Held to maturity 1,161 17 5.86% 4,940 78 6.32%
Margin accounts 36,295 746 8.22% 24,156 411 6.81%
Other interest-earning assets 23,203 364 6.28% 173,376 2,089 4.82%
--------------- ----------- --------- ------------- ---------- ---------
Total interest-earning assets 1,197,330 21,879 7.31% 1,260,938 22,046 6.99%
Noninterest-earning assets 39,586 34,041
--------------- -------------
Total assets $1,236,916 $1,294,979
=============== =============
Interest-bearing liabilities:
Checking and demand accounts $ 143,528 $ 941 2.62% $ 115,024 $ 649 2.26%
Savings accounts 221,884 1,369 2.47% 225,430 1,376 2.44%
Certificates of deposit 448,488 5,851 5.22% 429,325 5,482 5.11%
Other borrowed funds 127,320 1,922 6.04% 19,425 195 4.02%
--------------- ----------- --------- ------------- ---------- ---------
Total interest-bearing liabilities 941,220 10,083 4.29% 789,204 7,702 3.90%
----------- --------- ---------- ---------
Noninterest-bearing liabilities 37,925 30,047
--------------- -------------
Total liabilities 979,145 819,251
Equity 257,771 475,728
--------------- -------------
Total liabilities and equity $1,236,916 $1,294,979
=============== =============
Net interest income and
interest rate spread $ 11,796 3.02% $ 14,344 3.09%
=========== ========= ========== =========
Net interest margin 3.94% 4.55%
========= =========
Average interest-earning assets to average
interest-bearing liabilities 127.21% 159.77%
========= =========
</TABLE>
- -----------------------------------------
(1) Nonaccrual loans are included in the average balance.
9
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
For the Three Months Ended March 31
---------------------------------------------------
2000 vs. 1999
---------------------------------------------------
Increase
(decrease) due to Total
--------------------------------- increase
Rate Volume (decrease)
---- ------ ----------
(In thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans $ (203) $ 1,263 $ 1,060
Mortgage-backed securities:
Available for sale 106 256 362
Held to maturity - (697) (697)
Investment securities:
Trading securities (3) 7 4
Available for sale 32 523 555
Held to maturity (5) (56) (61)
Margin accounts 98 237 335
Other interest-earning assets 923 (2,648) (1,725)
-------------- --------------- --------------
Total interest-earning assets $ 948 $ (1,115) (167)
============== =============== ==============
Interest-bearing liabilities:
Savings accounts 15 (22) (7)
Checking accounts 115 177 292
Certificates of deposit 121 248 369
Other borrowed funds 144 1,583 1,727
-------------- --------------- --------------
Total interest-bearing liabilities $ 395 $ 1,986 2,381
============== =============== --------------
Change in net interest income $ (2,548)
==============
</TABLE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
A comprehensive qualitative and quantitative analysis regarding Home Savings'
market risk was disclosed in United Community's 1999 Annual Report under the
caption "Asset and Liability Management and Market Risk." No material change
in the methodology has occurred. Home savings continues to fall under the
criteria of being well capitalized under all interest rate shock scenarios
required by the Office of Thrift Supervision's Thrift Bulletin 13a.
10
<PAGE>
PART II. OTHER INFORMATION
UNITED COMMUNITY FINANCIAL CORP.
ITEMS 1, 2, 3, 4 AND 5 - NOT APPLICABLE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
............... ............................................
<S> <C>
11 Statement regarding computation of earnings per share
27 Financial Data Schedule - EDGAR only
</TABLE>
b. Reports on Form 8-K
On January 26, 2000 United Community filed a Form 8-K disclosing operating
results for the quarter ended December 31, 1999.
11
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED COMMUNITY FINANCIAL CORP.
Date: May 10, 2000 /s/ Douglas M. McKay
----------------------------------------
Douglas M. McKay, President
Date: May 10, 2000 /s/ Patrick A. Kelly
----------------------------------------
Patrick A. Kelly, Treasurer
12
<PAGE>
UNITED COMMUNITY FINANCIAL CORP.
EXHIBIT 11
COMPUTATIONS OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
2000 1999
------- -------
(In thousands,
except per share data)
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net income applicable to common stock $ 3,102 $ 5,125
Weighted average common shares outstanding 32,923 33,857
------- -------
Basic earnings per share $ 0.09 $ 0.15
======= =======
DILUTED EARNINGS PER SHARE:
Net income applicable to common stock $ 3,102 $ 5,125
Weighted average common shares outstanding 32,923 33,857
Dilutive effect of restricted stock 515 -
------- -------
Weighted average common shares outstanding
for dilutive computation 33,438 33,857
------- -------
Diluted earnings per share $ 0.09 $ 0.15
======= =======
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNITED COMMUNITY FINANCIAL CORP. AS OF AND
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 18,362
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,056
<TRADING-ASSETS> 6,590
<INVESTMENTS-HELD-FOR-SALE> 259,535
<INVESTMENTS-CARRYING> 132,832
<INVESTMENTS-MARKET> 129,465
<LOANS> 735,950
<ALLOWANCE> 6,390
<TOTAL-ASSETS> 1,238,361
<DEPOSITS> 824,838
<SHORT-TERM> 0
<LIABILITIES-OTHER> 155,585
<LONG-TERM> 0
0
0
<COMMON> 136,616
<OTHER-SE> 121,322
<TOTAL-LIABILITIES-AND-EQUITY> 1,238,361
<INTEREST-LOAN> 14,314
<INTEREST-INVEST> 6,455
<INTEREST-OTHER> 1,110
<INTEREST-TOTAL> 21,879
<INTEREST-DEPOSIT> 8,161
<INTEREST-EXPENSE> 10,083
<INTEREST-INCOME-NET> 11,796
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 381
<EXPENSE-OTHER> 14,441
<INCOME-PRETAX> 4,610
<INCOME-PRE-EXTRAORDINARY> 4,610
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,102
<EPS-BASIC> 0.09
<EPS-DILUTED> 0.09
<YIELD-ACTUAL> 3.94
<LOANS-NON> 3,952
<LOANS-PAST> 0
<LOANS-TROUBLED> 216
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,405
<CHARGE-OFFS> 28
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 6,390
<ALLOWANCE-DOMESTIC> 6,390
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
