- Net income for the second quarter of
2014 totaled $42.4 million which includes the recognition of $38.8
million of the tax benefit related to the reversal of the deferred
tax asset valuation allowance
- Strongest pretax quarter, adjusted for
security gains, since March 2008
- The quarter included a $923,000 charge
as part of a cost reduction initiative designed to reduce annual
costs on a go-forward basis by over $5.0 million
- Annualized loan growth of 11% through
the first two quarters of 2014
- Tangible book value per share increased
to $4.66 at June 30, 2014, from $3.76 at March 31, 2014
- Declared a dividend of $0.01 per common
share - first dividend since 2008
- Initiated common stock repurchase
effort during the second quarter
United Community Financial Corp. (Company) (Nasdaq: UCFC),
holding company of The Home Savings and Loan Company of Youngstown,
Ohio (Home Savings), today reported consolidated net income of
$42.4 million (including the recognition of $38.8 million of income
tax benefit from the reversal of a deferred tax asset valuation
reserve) for the three months ended June 30, 2014. The Company also
reported net income of $44.5 million (including the recognition of
$38.7 million of income tax benefit from the reversal of a deferred
tax asset valuation reserve) for the six months ended June 30,
2014.
Gary M. Small, President and Chief Executive Officer of United
Community and Home Savings, commented that, “The second quarter
results reflect solid core earnings progress for Home Savings. The
growth in commercial loan commitments combined with meaningful cost
reduction efforts across the organization and expected to fuel
continued performance improvement in future quarters.”
Net Interest Income and Margin
Net interest income was $12.7 million in the second quarter of
2014 compared to $12.6 million in second quarter of 2013. Net
interest margin increased from 2.93% during the second quarter of
2013 to 3.09% in the second quarter of 2014. The increase in net
interest margin over the last year is reflective of the migration
of lower interest earning assets into loans outstanding. The yield
on earning assets was 3.83% for the second quarter of 2014 compared
to 3.71% for the second quarter of 2013 and average loan balances
increased $52.9 million over this same period.
Net interest income for the six months ended June 30, 2014, was
$25.3 million compared to $25.6 million for the six months ended
June 30, 2013. The net interest margin was 3.08% for the six months
ended June 30, 2014 compared to 2.97% for the six months ended June
30, 2013. The yield on interest-earning assets increased from 3.77%
to 3.83% during this period while the cost of interest-bearing
liabilities decreased four basis points during the period to
0.92%.
Noninterest Income
Noninterest income decreased in the second quarter of 2014 to
$3.4 million, as compared to noninterest income for the second
quarter of 2013 of $6.4 million. Security gains of approximately
$1.9 million were recognized in the second quarter of 2013.
Additionally, mortgage banking income declined $1.1 million.
Offsetting these declines was a reduction in losses incurred on the
resolution of real estate owned of $1.1 million.
In the first half of 2014, noninterest income was $6.7 million,
compared to $12.1 million in the first half of 2013. Security gains
of approximately $2.6 million were recognized in the first half of
2013. Additionally, mortgage banking income declined $2.1
million.
Noninterest Expense
During the second quarter of 2014, Home Savings incurred a
$923,000 charge related to cost reduction initiatives. The Company
anticipates a savings of approximately $5.0 million annualized on a
go-forward basis or approximately 9.0% of annualized noninterest
expenses as a result of this initiative.
In spite of Home Savings incurring a $923,000 restructure charge
in the second quarter of 2014, noninterest expense improved
$143,000 to $14.2 million when compared to the second quarter of
2013.
In the second quarter of 2014, salaries and employee benefits
were approximately $1.2 million higher, primarily due to the above
mentioned cost reduction initiative. These increases were offset by
a decline in most other expense categories.
Noninterest expense declined to $27.8 million in the first half
of 2014 compared to $28.2 million in the first half of 2013.
Similarly to the quarterly comparison, the first six months of 2014
included the accrual of restructuring charges previously mentioned.
Franchise/financial institutions tax, FDIC insurance premiums and
other expenses were also lower in the first six months of 2014.
Asset Quality
Asset quality continued to improve as delinquent loans declined
through the second quarter of 2014. As of June 30, 2014, delinquent
loans were $20.2 million, down $3.6 million, or 15.2%, from $23.8
million at December 31, 2013. Nonperforming loans also continued to
decline, which as of June 30, 2014 were $20.3 million, down $3.3
million, or 13.9%, from $23.6 million at December 31, 2013.
Nonperforming assets were $24.9 million as of June 30, 2014, down
$5.1 million, or 16.9%, from $29.9 million at December 31, 2013.
The allowance for loan loss as a percentage of total loans was
1.65% at June 30, 2014, as compared with 2.01% at December 31,
2013.
The provision for loan losses decreased $2.7 million in the
second quarter of 2014, compared to the second quarter of 2013. The
provision for loan losses also decreased $4.8 million in the first
six months of 2014, compared to the first six months of 2013.
During the second quarter of 2014, a large commercial real estate
loan paid off, releasing approximately $748,000 in reserves. In
addition, Home Savings individually analyzed a large portion of
impaired mortgage and home equity loans in 2014. Many of these
loans were deemed to have adequate collateral to cover any
potential future losses allowing for the release of reserves.
Finally, as a result of continued improvement in asset quality and
a decline in loan loss history, Home Savings has adjusted
historical and environmental factors resulting in a decrease in
reserves.
Deferred Tax Asset Valuation
At the end of 2010, the Company established a deferred tax asset
(“DTA”) valuation allowance. In the course of its periodic
assessment of its DTA position, the Company was able to reverse
this valuation allowance in the second quarter of 2014. The Company
has determined that it is more likely than not it will be able to
fully realize its net deferred tax asset, including its tax loss
carryforward. This action resulted in the recognition of a $38.8
million income tax benefit during the current year. As a result of
this reversal, tangible book value increased $0.77 cents per share
to $4.66.
Small continued, “Thanks to a steady stream of positive
quarterly earnings, we are in a position to reflect the value of
the tax asset on the balance sheet. The Company’s book value better
reflects the value of the organization.”
Capital and Book Value per Common Share
The Board of Directors declared a quarterly cash dividend of
$0.01 per common share payable August 15, 2014 to shareholders of
record at the close of business August 1, 2014.
In addition, as part of the Company’s capital management
strategies of maximizing shareholder value and returns, during the
second quarter, the Company reinstated its share repurchase program
to take advantage of the favorable market conditions.
Small added, “The dividend reflects a conservative payout ratio
of normalized annual earnings. Investors can expect prudent capital
management designed to deliver the best return for our
shareholders.”
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.
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”,
“can expect” 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.
UNITED
COMMUNITY FINANCIAL CORP. CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION (Unaudited)
June 30,
December 31, 2014 2013 (Dollars in thousands)
Assets: Cash
and deposits with banks $ 27,363 $ 20,937 Federal funds sold
16,227 56,394 Total cash and cash equivalents
43,590 77,331 Securities: Available for sale, at fair value 516,637
511,006 Loans held for sale 9,290 4,838 Loans, net of allowance for
loan losses of $18,264 and $21,116 1,086,771 1,029,192 Federal Home
Loan Bank stock, at cost 18,068 26,464 Premises and equipment, net
20,391 20,924 Accrued interest receivable 5,762 5,694 Real estate
owned and other repossessed assets 4,548 6,341 Core deposit
intangible 117 152 Cash surrender value of life insurance 45,684
44,972 Other assets 39,081 10,936
Total assets $ 1,789,939 $ 1,737,850
Liabilities and Shareholders' Equity Liabilities:
Deposits: Interest bearing $ 1,190,063 $ 1,221,162 Non-interest
bearing 185,411 170,590 Total deposits
1,375,474 1,391,752 Borrowed funds: Federal Home Loan Bank advances
65,000 50,000 Repurchase agreements and other 90,567
90,578 Total borrowed funds 155,567 140,578 Advance
payments by borrowers for taxes and insurance 12,708 20,060 Accrued
interest payable 573 550 Accrued expenses and other liabilities
10,568 9,836
Total liabilities
1,554,890 1,562,776
Shareholders' Equity: Preferred stock-no par value;
1,000,000 shares authorized and no shares outstanding - -
Common stock-no par value; 499,000,000
shares authorized; 54,138,910 shares issued and 50,452,083 and
50,339,089 shares, respectively, outstanding
174,176 174,719 Retained earnings 123,893 81,515 Accumulated other
comprehensive loss (25,901 ) (41,665 ) Treasury stock, at cost,
3,686,827 and 3,799,821 shares, respectively (37,119 )
(39,495 )
Total shareholders’ equity 235,049
175,074
Total liabilities and shareholders’
equity $ 1,789,939 $ 1,737,850
UNITED COMMUNITY FINANCIAL CORP. CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited) For the Three Months
Ended For the Six Months Ended June 30, March 31, June 30, June 30,
June 30, 2014 2014 2013 2014 2013 (Dollars in thousands, except per
share data)
Interest income Loans $ 12,361 $ 12,122 $ 12,207
$ 24,483 $ 24,834 Loans held for sale 74 49 78 123 167 Securities:
Available for sale 3,125 3,241 3,384 6,366 6,812 Federal Home Loan
Bank stock dividends 230 267 277 497 560 Other interest earning
assets 21 26 41 47
50 Total interest income 15,811 15,705 15,987
31,516 32,423
Interest expense Deposits 1,627 1,677 1,909
3,304 3,996 Federal Home Loan Bank advances 524 518 524 1,042 1,047
Repurchase agreements and other 919 908
918 1,827 1,827 Total
interest expense 3,070 3,103
3,351 6,173 6,870
Net
interest income 12,741 12,602 12,636 25,343 25,553
Provision
for loan losses (1,614 ) 33 1,113
(1,581 ) 3,177
Net interest income
after provision for loan losses 14,355
12,569 11,523 26,924
22,376
Non-interest income Non-deposit investment
income 407 341 373 748 914 Service fees and other charges Mortgage
servicing fees 686 689 698 1,375 1,402 Deposit related fees 1,331
1,198 1,334 2,529 2,594 Mortgage servicing rights valuation (5 ) (1
) 211 (6 ) 646 Mortgage servicing rights amortization (432 ) (392 )
(570 ) (824 ) (1,230 ) Other service fees - - 18 - 61 Net gains
(losses): Securities available for sale 31 3 1,857 34 2,578
Mortgage banking income 312 612 1,389 924 3,032 Real estate owned
and other repossessed assets charges, net (42 ) (383 ) (1,140 )
(425 ) (1,571 ) Card fees 852 772 1,179 1,624 1,913 Other income
298 385 1,035 683
1,738 Total non-interest income 3,438
3,224 6,384 6,662
12,077
Non-interest expense Salaries and
employee benefits 8,282 7,580 7,132 15,862 14,005 Occupancy 815 933
851 1,748 1,673 Equipment and data processing 1,963 1,798 1,782
3,761 3,542 Franchise tax 198 198 400 396 831 Advertising 247 189
281 436 420 Amortization of core deposit intangible 16 19 23 35 46
Deposit insurance premiums 327 253 603 580 1,157 Other insurance
premiums 135 137 175 272 351 Professional fees Legal and consulting
fees 177 161 (43 ) 338 149 Other professional fees 617 392 917
1,009 1,133 Real estate owned and other repossessed asset expenses
137 213 293 350 786 Other expenses 1,312 1,670
1,954 2,982 4,139
Total non-interest expenses 14,226 13,543
14,368 27,769 28,232
Income before income taxes 3,567 2,250 3,539 5,817
6,221
Income tax expense (benefit) (38,837 )
156 150 (38,681 ) 150
Net income 42,404 2,094 3,389 44,498 6,071 Amortization of
discount on preferred stock - -
5,930 - 6,751
Earnings
available to common shareholders $ 42,404 $ 2,094
$ (2,541 ) $ 44,498 $ (680 )
Earnings per common
share Basic $ 0.84 $ 0.04 $ (0.06 ) $ 0.88 $ (0.02 ) Diluted
0.84 0.04 (0.06 ) 0.88 (0.02 )
UNITED COMMUNITY FINANCIAL
CORP. SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
At or for the quarters ended
June 30,2014
March 31,2014
December 31,2013
September 30,2013
June 30,2013
(Dollars in thousands, except per share data)
Financial Data
Total assets $ 1,789,939 $ 1,749,144 $ 1,737,850 $ 1,756,202 $
1,787,071 Total loans, net 1,086,771 1,060,901 1,029,192 1,009,029
1,008,843 Total securities 516,637 517,388 511,006 542,811 555,188
Total deposits 1,375,474 1,398,067 1,391,752 1,410,610 1,433,815
Total shareholders' equity 235,049 189,829 175,074 183,322 183,759
Net interest income 12,741 12,602 13,074 12,704 12,636 Provision
for loan losses (1,614 ) 33 282 657 1,113 Noninterest income 3,438
3,224 4,124 3,548 6,384 Noninterest expense 14,226 13,543 14,977
13,528 14,368 Income tax expense (benefit) (38,837 ) 156 (300 ) 350
150 Net income 42,404 2,094 2,239 1,717 3,389
Share
Data Basic earnings (loss) per common share $ 0.84 $ 0.04 $
0.04 $ 0.03 $ (0.06 ) Diluted earnings (loss) per common share 0.84
0.04 0.04 0.03 (0.06 ) Book value per common share 4.66 3.76 3.48
3.65 3.66 Tangible book value per common share 4.66 3.76 3.47 3.65
3.66 Market value per common share 4.13 3.92 3.57 3.89 4.65
Common shares outstanding at end of period 50,452 50,422 50,339
50,225 50,189 Weighted average shares outstanding--basic 50,274
50,196 50,114 50,110 43,160 Weighted average shares
outstanding--diluted 50,495 50,451 50,360 50,382 43,160
Key Ratios Return on average assets (1) 9.67 % 0.48 % 0.51 %
0.39 % 0.74 % Return on average equity (2) 84.84 % 4.52 % 4.82 %
3.75 % 6.46 % Net interest margin 3.09 % 3.07 % 3.17 % 3.04 % 2.93
% Efficiency ratio 87.77 % 83.45 % 85.89 % 81.14 % 78.38 %
Nonperforming loans to total loans, end of period 1.87 % 2.17 %
2.29 % 2.72 % 2.88 % Nonperforming assets to total assets, end of
period 1.39 % 1.58 % 1.72 % 2.10 % 2.26 % Allowance for loan loss
as a percent of loans, end of period 1.65 % 1.90 % 2.01 % 2.04 %
1.85 % Delinquent loans to total loans, end of period 1.86 % 2.07 %
2.32 % 2.77 % 3.38 % (1) Net income divided by average total
assets (2) Net income divided by average total equity
UNITED
COMMUNITY FINANCIAL CORP. SELECTED FINANCIAL HIGHLIGHTS
(Unaudited) At or for the quarters ended
June 30,2014
March 31,2014
December 31,2013
September 30,2013
June 30,2013
(Dollars in thousands)
Loan Portfolio Composition Real
Estate Loans One-to four-family residential $ 645,211 $ 610,879
$ 585,025 $ 575,791 $ 572,575 Multi-family residential* 52,938
54,233 54,485 55,696 62,559 Nonresidential* 122,066 125,796 131,251
127,699 120,586 Land* 9,635 9,829 9,683 9,546 9,821
Construction
Loans One-to four-family residential and land development
51,974 55,082 53,349 38,932 32,512 Multi-family and nonresidential*
1,010 207 - -
4,584
Total real estate loans 882,834
856,026 833,793 807,664 802,637
Consumer Loans 182,027
184,409 189,231 194,383 199,634
Commercial Loans
39,127 40,013 26,141
26,888 24,526
Total Loans 1,103,988
1,080,448 1,049,165 1,028,935 1,026,797 Less: Allowance for loan
losses 18,264 20,554 21,116 21,032 19,037 Deferred loan costs, net
(1,047 ) (1,007 ) (1,143 ) (1,126 )
(1,083 )
Total 17,217 19,547
19,973 19,906 17,954
Loans, net $ 1,086,771 $ 1,060,901 $
1,029,192 $ 1,009,029 $ 1,008,843 * Categories
are considered commercial real estate At or for the
quarters ended
June 30,2014
March 31,2014
December 31,2013
September 30,2013
June 30,2013
(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts Interest bearing checking accounts $
133,999 $ 136,031 $ 132,751 $ 134,766 $ 135,228 Non-interest
bearing checking accounts 185,411 185,620
170,590 167,167 165,224
Total checking accounts 319,410 321,651 303,341
301,933 300,452 Savings accounts 277,404 278,906 267,515 267,062
272,991 Money market accounts 326,738 329,163
328,625 331,449 334,242
Total non-time deposits 923,552 929,720 899,481
900,444 907,685 Retail certificates of deposit 451,922
468,347 492,271 510,166
526,130
Total certificates of deposit
451,922 468,347 492,271
510,166 526,130
Total deposits $
1,375,474 $ 1,398,067 $ 1,391,752 $ 1,410,610
$ 1,433,815 Certificates of deposit as a
percent of total deposits 32.86 % 33.50 % 35.37 % 36.17 % 36.69 %
UNITED COMMUNITY FINANCIAL CORP. SELECTED
FINANCIAL HIGHLIGHTS (Unaudited) At or for the
quarters ended
June 30,2014
March 31,2014
December 31,2013
September 30,2013
June 30,2013
(Dollars in thousands)
Allowance For Loan Losses
Beginning balance $ 20,554 $ 21,116 $ 21,032 $ 19,037 $ 21,827
Provision (1,614 ) 33 282 657 1,113 Net (chargeoffs) recoveries
(676 ) (595 ) (198 ) 1,338
(3,903 ) Ending balance $ 18,264 $ 20,554 $
21,116 $ 21,032 $ 19,037
Net
(Charge-offs) Recoveries Real Estate Loans One-to
four-family $ (181 ) $ (163 ) $ 42 $ (201 ) $ (487 ) Multi-family
(135 ) (5 ) - 13 (113 ) Nonresidential 56 (252 ) (29 ) (381 )
(1,288 ) Land - - 12 10 (1,639 )
Construction Loans One-to
four-family residential and land development (330 ) (79 ) 451 1,876
(108 ) Multi-family and nonresidential - -
(620 ) - 4
Total real
estate loans (590 ) (499 ) (144 ) 1,317 (3,631 )
Consumer
Loans (304 ) (233 ) (193 ) (143 ) (387 )
Commercial
Loans 218 137 139
164 115
Total $ (676 ) $ (595 )
$ (198 ) $ 1,338 $ (3,903 ) At or for the
quarters ended
June 30,2014
March 31,2014
December 31,2013
September 30,2013
June 30,2013
(Dollars in thousands)
Nonperforming Loans Real Estate
Loans One-to four-family residential $ 5,380 $ 6,133 $ 6,356 $
6,127 $ 4,993 Multi-family residential 133 1,158 641 705 727
Nonresidential 4,902 5,033 5,560 8,963 10,429 Land 532 532 496 628
656
Construction Loans One-to four-family residential and
land development 2,553 2,884
3,084 3,320 4,385
Total real
estate loans 13,500 15,740 16,137 19,743 21,190
Consumer
Loans 2,663 3,089 3,293 3,564 3,459
Commercial Loans
4,151 4,155 4,158
4,177 4,453
Total Loans $ 20,314
$ 22,984 $ 23,588 $ 27,484 $ 29,102
Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status $ 16,636 $ 18,708 $
20,188 $ 20,946 $ 22,487 Past due 90 days and still accruing
- - 45 3,413
3,501 Past due 90 days 16,636 18,708 20,233 24,359
25,988 Past due less than 90 days and on nonaccrual 3,678
4,276 3,355 3,125
3,114
Total Nonperforming Loans 20,314 22,984
23,588 27,484 29,102 Other real estate owned 4,546 4,700 6,318
9,276 11,203 Repossessed assets 2 -
23 39 156
Total
Nonperforming Assets $ 24,862 $ 27,684 $ 29,929
$ 36,799 $ 40,461
Total Troubled
Debt Restructured Loans Accruing $ 25,905 $ 26,614 $ 26,577 $
26,629 $ 25,165 Nonaccruing 4,328 4,724
4,941 5,474 5,455
Total $ 30,233 $ 31,338 $ 31,518 $
32,103 $ 30,620
Media Contact:Home SavingsColleen Scott, 330-742-0638Vice
President of Marketingcscott@homesavings.comorInvestor
Contact:United Community Financial Corp.Gary M. Small,
330-742-0472President and Chief Executive Officer
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