YOUNGSTOWN, Ohio -- United Community Financial Corp, holding company of The Home Savings and Loan Co. and Butler Wick Corp, today reported net income of $5.5 million, or $0.18 per share, for the quarter ended March 31, compared to $5 million, or $0.16 per share, for the first quarter of 2003."United Community continues to maintain strong profitability," said Douglas M. McKay, chairman and chief executive officer. "Earnings per share increased 12.5% compared to the same period last year. Furthermore, return on equity continues to improve. During the first quarter of 2004, return on equity increased 8.02% or a 77 basis point increase when compared to the first quarter of last year."Net interest income for the first quarter was $18.0 million, down from $18.5 million in the first quarter of last year. The average volume of interest earning assets increased 1.4% from the first quarter of last year, with strong growth in average loans. The average volume loans increased 11.0% from last year. Average deposits were down 6.9% from the same quarter last year. The net interest margin was 3.76%, an increase of 6 basis points from the last quarter and a decrease of 16 basis points from the first quarter a year ago. The lower net interest margin over the year primarily reflects the impact of the extended low rate environment, McKay said.Noninterest income increased $2.3 million to $10.3 million for the first three months ended March 31, compared to $8.0 million for the same period in 2003. The primary reason for the increase is an increase in service fees and other charges of $1.1 million and a $1.5 million increase in commissions received as a result of increased brokerage activity. These increases were partially offset by a decrease in gains on loans sold of $1.1 million during the first quarter. It is anticipated the level of loan sales will be significantly lower during 2004 as compared to the previous year, the company reported.The provision for loan losses declined $237,000 for the three months ended March 31, compared to the same period in 2003. This decrease was based on an analytical review of the allowance for loan losses; after consideration was given to levels and trends of delinquencies, reserve coverage ratios and other factors in relation to the loan portfolio.Noninterest expense increased $1.4 million in the first quarter of 2004 compared to the same period in 2003, primarily as a result of a $1.8 million increase in salaries and employee benefits. The increase in salaries and employee benefits is primarily due to the change in market value of retention plan assets and increased provisions for commissions earned as a result of increased brokerage activity. This increase was partially offset by a decrease of $324,000 in other noninterest expense, the company said.United Community's return on average assets and return on average equity were 1.07% and 8.02%,respectively, for the three months ended March 31. The returns on average assets and average equity were 1.00% and 7.25 %, respectively, for the three months ended March 31.Total assets increased by $9.5 million, or 0.46%, to $2.1 billion at March 31, compared to Dec. 31. The net change in assets was a result of increases of $93.8 million in loans, $12.6 million in trading securities and $4.4 million in other assets partially offset by decreases of $47.3 million in cash and cash equivalents, $37.3 million in available for sale securities and $16.9 million in loans held for sale. Total liabilities increased $46.5 million primarily as a result of a $6.1 million increase in non-interest bearing deposits, a $13.1 million increase in short-term borrowings and a $32.7 million increase in accrued other expenses and other liabilities.Net loans increased $93.8 million, or 6.0%, from December 31, 2003 to March 31. Home Savings had increases of $26.7 million in real estate loans, $37.6 million in construction loans, $32.2 million in consumer loans and $17.8 million in commercial loans. Total shareholders' equity decreased $37.0 million from Dec. 31 to March 31, largely due to the self-tender offer. Tangible book value and book value as of March 31, were $6.61 and $7.80 per share, respectively. During the first quarter of 2004, United Community announced the commencement of a self-tender offer to purchase up to four million shares of its common stock at a price of $12.50 per share. At the end of the offer period, United Community announced it had repurchased 3,667,227 shares. The purchase represented approximately 10.4 % of the shares then outstanding while the purchase price totaled $45.9 million."We are pleased with the results of the self-tender offer," McKay said. "Our goals in this transaction were to generate additional liquidity for our shareholders, increase earnings per share growth and return on shareholders' equity. We were successful in achieving all of these goals."Home Savings and Butler Wick are wholly owned subsidiaries of United Community Financial Corp. Home Savings operates 36 banking offices and 6 loan production offices located throughout Ohio and western Pennsylvania. Butler Wick has 12 office locations providing full service retail brokerage, capital markets and trust services."