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United Community Financial Nets $5 Million for Second Quarter
YOUNGSTOWN, Ohio -- United Community Financial Corp., holding company of The Home Savings and Loan Co. and Butler Wick Corp., yesterday reported net income of $5 million, or 17 cents per diluted share, for the quarter ended June 30 compared to $7 million, or 22 cents per diluted share, for the second quarter of 2003.Annualized return on average equity for the second quarter of 2004 was 8.12% versus 10.23% for the same period in 2003.For the six months ended June 30,net income was $10.5 million, or 35 cents per diluted share, compared with $12 million, or 38 cents per diluted share, for the six months ended June 30, 2003. Annualized return on average equity for the first half of 2004 was 8.06% compared to 8.74% in the prior year."As anticipated, the gain on loans sold has decreased significantly from the prior year," comments Douglas M. McKay, chairman and chief executive officer. "Home Savings recorded a gain of $4.2 million in June 2003 from a non-recurring sale of mortgage loans from the portfolio. In addition, mortgage loan originations and sales have declined in 2004 as interest rates have started to trend upward. Furthermore, during the first half of 2004, growth and diversification in the loan portfolio continue to play a key role in positioning the organization for the future."We have seen some compression in net interest income and the net interest margin," McKay continues, "although both performance measurements remain strong. Improving trends in service charges and other fee income along with disciplined expense control have been important contributors to our overall performance."Net interest income for the second quarter was $18.2 million, up from $18.1 million in the second quarter of last year, the company reported. The average balance of interest earning assets increased 5.7% from the second quarter of last year, with continued strong growth in average loans. The average loan balance increased 14.3% from last year. Average deposits were down 3.3% from the same quarter last year. The net interest margin was 3.64%, a decrease of 12 basis points from the last quarter and a decrease of 20 basis points from the second quarter a year ago. The lower net interest margin reflects the impact of additional borrowings related to the self-tender offer completed at the end of the first quarter and the impact of the extended low rate environment, the company said.Total non-interest income decreased $4.5 million to $8.7 million for the three months ended June 30 compared to $13.2 million for the same period in 2003. The primary reason for the change is a decrease in the net gain on the sale of loans of $5.6 million, the company said. During the second quarter of 2003, Home Savings sold newly originated loans and fixed rate loans from the portfolio to help manage interest rate risk. These sales resulted in gains of approximately $6.4 million. In comparison, during the three months ended June 30, Home Savings sold newly originated loans that resulted in gains of $788,000. Partially offsetting the change in net gain on the sale of loans was an increase in service fees and other charges of $1.1 million.Net income for the first six months of 2004 decreased $1.5 million from the same period in 2003, primarily as a result of a decrease of $479,000 in net interest income, a decrease in non-interest income of $2.1 million and an increase in non-interest expense of $399,000. These changes were partially offset by decreases in the provision for loan losses of $570,000 and the provision for income taxes of $921,000.Net interest income decreased $479,000 as a result of a $3.3 million decrease in interest income offset by a decrease in interest expense of $2.9 million. The decrease in interest income is a result of a 55 basis point decrease in yield on interest earning assets driven by reductions in the average balances of securities of $69.7 million, other interest earning assets of $28.2 million and loans held for sale of $21.3 million. These decreases were partially offset by an increase in the average balance of net loans of $186.8 million. Interest expense decreased $2.9 million primarily as a result of a decline in the average balance of deposits of $73.5 million and a 42 basis point reduction in cost of total interest bearing liabilities.The provision for loan losses declined $570,000 for the six months ended June 30, 2004, compared to the first six months of 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.Non-interest income decreased as a result of a reduction in gains on loans sold of $6.8 million. This decrease was partially offset by increases in service fees and other charges of $2.2 million and brokerage commissions of $1.5 million.Non-interest expense increased $399,000 primarily as a result of an increase in salaries and employee benefits of $979,000, offset by reductions in core deposit intangible amortization and equipment and data processing expense of $243,000 and $283,000, respectively.United Community's return on average assets and return on average equity were 1% and 8.06%, respectively, for the six months ended June 30. The returns on average assets and average equity were 0.94% and 8.12 %, respectively, for the three months ended June 30.Total assets increased by $109.7 million, or 5.3%, to $2.2 billion at June 30 compared to Dec. 31, 2003. The net change in assets was a result of increases of $177.5 million in net loans, $14.0 million in trading securities and $5.8 million in other assets, partially offset by decreases of $39 million in cash and cash equivalents, $29 million in available for sale securities and $19.6 million in loans held for sale. Total liabilities increased $145.3 million primarily as a result of a $17.4 million increase in interest bearing deposits, a $9.1 million increase in non-interest bearing deposits and a $120.0 million increase in borrowings. The increase in borrowings is primarily a result of loan growth and completing the self-tender offer.Total shareholders' equity decreased $35.6 million from December 31, 2003 to June 30, 2004, largely due to the self-tender offer. Tangible book value and book value as of June 30, 2004, were $6.65 and $7.84 per share, respectively.Home Savings and Butler Wick are wholly owned subsidiaries of United Community Financial Corp. Home Savings operates 35 full service banking offices and 5 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 throughout Northern Ohio and Western Pennsylvania.Visit United Community Financial Corp.: www.ucfconline.com"