UCFC Reports 2nd Quarter Net Income of $3.4 Million
YOUNGSTOWN, Ohio -- United Community Financial Corp., holding company of Home Savings and Loan Co., Friday reported second-quarter net income of $3.4 million and first-half net income of $6.07 million,
Regardless, the funds available to common shareholders is a second-quarter loss of $2.54 million, or six cents per basic and diluted share, and a first-half loss of $680,000, or two cents a share.
The anomaly is contained in the rules UFCF was required to use to account for its raising $47 million in additional capital, according to a footnote to the earnings release. The preferred stock UCFC offered was issued below the market price of its common shares. Then the preferred shares were converted to common shares. The difference in prices is deemed a noncash dividend under Generally Accepted Accounting Principles and is deducted from the calculation of net income available to common shareholders.
“We never paid a dividend on the preferred stock. No cash was paid to shareholders,” James Reske, executive vice president and chief financial officer, emphasizes. But GAAP “deems the result of the conversion a dividend.”
UCFC stressed the improved asset quality shown in its second-quarter results:
- Delinquent loans continuing to shrink. Delinquent loans (those 30 to 89 days past due) stood at $34.1 million, down $14.1 million, or 31.1% from $48.2 million at Dec. 31.
- Total nonperforming loans (those 90 days past due) were $29.1 million at June 30 compared to $44.71 million at March 31.
- Total nonperforming assets were $40.46 million at June 30, down from $60.50 million at March 31.
Net interest income, $12.64 million, was lower than first quarter, $12.92 million, and the second quarter a year ago, $16.42 million, but this is largely because of a decrease of $282 million in the average balance of outstanding loans, UCFC said. Total interest income for the respective periods was $15.99 million, $16.44 million and $20.89 million.
Total interest expense, $3.35 million, was less than the $3.52 million reported March 31 and $4.47 million reported June 30, 2012. Home Savings paid less interest on deposits, UCFC explained, and there was a shift from customers buying certificates of deposit to less expensive nontime deposits.
Noninterest income, basically fees, service charges and gains on securities, was $6.38 million, up from $5.70 million the first quarter but less than the $6.95 million reported for the quarter ended June 30, 2012. This resulted from a lower volume of mortgage banking loans originated midyear to midyear, UCFC said.
Noninterest expense (such as salaries and benefits, rents, marketing, professional fees and Federal Deposit Insurance Corp. premiums) was $14.37 million compared to $13.86 million the previous quarter and $17.04 million the second quarter of 2012. FDIC premiums fell, UCFC reported, and professional fees also fell. “The improvement in asset quality has reduced the need to engage legal and other consultants to assist in the resolution of problem assets,” UCFC said.
Key ratios for the quarters ended June 30, March 31 and June 30, 2012:
- Return on average assets, 0.74%, 0.59%, 0.57%.
- Return on average equity, 6.46%, 6.14%, 6.06%.
- Net interest margin, 2.93%, 3.01%, 3.23%.
- Efficiency ratio, 78.38%, 75.55%, 69.50%.
Capital ratios for the same periods:
- Tier 1 leverage, 10.03%, 9.84%, 8.70%.
- Tier 1 risk-based capital, 18.17%, 17.02%, 14.95%.
- Total risk-based capital, 19.42%, 18.28%, 16.21%.
Total assets fell slightly to $1.787 billion from $1,832 billion at March 31 and $1.907 billion at June 30, 2012. So did total common equity to $183.76 million from $205.51 million at March 31 and $195.34 million at June 30, 2012.
Published by The Business Journal, Youngstown, Ohio.
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