- Quarterly pretax core earnings
(adjusted for debt prepayment charge of $1.4 million) of $3.9
million
- Annualized loan growth was 12% for both
the third quarter and the first nine months of 2014
- Credit quality continues to improve
with third quarter net charge-offs at nine basis points of net
loans
- The previously announced $5 million
cost reduction initiative was successfully completed
- Diluted earnings per share for the
third quarter of $0.06 per common share
- UCFC declares a dividend of $0.01 per
common share
United Community Financial Corp. (Company) (Nasdaq: UCFC),
parent company of The Home Savings and Loan Company of Youngstown,
Ohio (Home Savings), announced today that net income for the third
quarter of 2014 totaled $2.9 million. The Company also reported net
income of $47.4 million (including the recognition of $39.1 million
of income tax benefit from the reversal of a deferred tax asset
valuation reserve) for the nine months ended September 30,
2014.
Gary M. Small, President and Chief Executive Officer of United
Community and Home Savings, commented that, “Our strong performance
is evidence that our strategies are working. We have been able to
grow our loan portfolio, manage expenses, reduce our funding costs
and attract new customers. These are all signs that we are headed
in the right direction.”
Net Loans
Net loans increased $90.8 million from $1.0 billion at December
31, 2013 to $1.1 billion at September 30, 2014. The increase was
driven by an $84.2 million increase in one-to four-family
residential loans. Commercial and commercial real estate loans also
increased $12.2 million during this period. Commercial commitments
also continue to show strong growth with an increase of $49.6
million, or 20.9% year to date.
Small noted, “We are very pleased with the third quarter loan
activity, particularly in the commercial lending segment. The
growth reflects the success we are experiencing in attracting new
business.”
Net Interest Income and Margin
The Company’s net interest margin was 3.06% in the third quarter
of 2014, up from 3.04% in the third quarter of 2013. The net
interest margin for the nine months ended September 30, 2014 was
3.07% compared to 2.99% in the prior year period. Despite the
prolonged period of low interest rates and downward pressure on
loan yields, the Company continues to make progress in expanding
its net interest margin. The expansion is attributable to loan
growth coupled with declines in deposit and borrowing costs. At the
end of September 2014, Home Savings prepaid one $30.0 million
tranche of the Company’s repurchase agreements and incurred a $1.4
million prepayment charge. Due to the timing of the debt
extinguishment, there was minimal impact on the third quarter
margin. The debt prepayment actions are one of many efforts
underway to reduce the Company’s funding costs.
Noninterest Income
Noninterest income increased to $4.2 million in the third
quarter of 2014, compared to $3.5 million in the third quarter of
2013. A portfolio of bank equities was sold in the third quarter of
2014, resulting in the recognition of security gains of
approximately $328,000. Additionally, Home Savings recognized
reduction in losses incurred on the resolution of real estate owned
of $192,000. The Company also recognized higher non-deposit
investment income due to a higher sales volume in the third quarter
of 2014, as compared to the same quarter last year. Offsetting
these changes was a reduction in mortgage banking income of
$219,000.
In the first nine months of 2014, noninterest income totaled
$10.8 million, compared to $15.6 million in the first nine months
of 2013. The difference in noninterest income year over year is due
to security gains of approximately $2.6 million that were
recognized in the first nine months of 2013. Also, during the first
nine months of 2013, Home Savings recognized a $676,000 recovery on
mortgage servicing rights. A similar recovery was not recognized in
2014. These declines over the same period in 2013 were offset
partially by a reduction in losses incurred on the resolution of
real estate owned of $1.3 million. Lastly, mortgage banking income
has declined $2.3 million, which is being driven by lower mortgage
production due to lower mortgage refinance activity.
Noninterest Expense
Noninterest expenses increased $724,000 for the quarter ending
September 30, 2014, as compared to the same quarter last year. The
third quarter of 2014 included a $1.4 million prepayment penalty on
the early termination of a $30.0 million borrowing. Reduced FDIC
insurance premiums, financial institutions taxes, legal and
consulting fees partially offset the impact of the prepayment
penalty.
Noninterest expense increased to $42.0 million during the first
nine months of 2014 compared to $41.8 million in the first nine
months of 2013. The first nine months of 2014 included charges
related to cost reduction initiatives of $923,000 and the
prepayment penalty of $1.4 million referenced above. Partially
offsetting these expenses were decreases in financial institutions
tax, FDIC insurance premiums and other expenses. Lower expenses due
to the cost reduction initiatives will have a positive impact on
earnings in the fourth quarter and beyond.
Small added, “The organization has effectively reduced the
operating expense run rate by 9%. We are now much better prepared
to invest in business initiatives designed to grow revenues and
improve performance.”
Asset Quality
Nonperforming assets decreased 32% to $25.2 million as of
September 30, 2014, compared to $36.8 million at September 30,
2013. On a linked quarter basis, nonperforming assets increased
approximately $300,000. The ratio of nonperforming assets to assets
at September 30, 2014 was 1.40% compared to 1.39% at June 30, 2014
and 2.72% at September 30, 2014. Net charge-offs to average loans
were 0.19% for the nine months ended September 30, 2014, compared
to 0.51% for the same period in 2013.
As a result of the improving metrics discussed above, the
Company’s provision for loan losses continues to show improvement
totaling $116,000 for the quarter ended September 30, 2014 and a
negative provision of $1.5 million for the nine months ended
September 30, 2014. The allowance for loan losses totaled $18.1
million at September 30, 2014 which was 1.59% of total loans at the
end of the quarter.
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 in June of 2014.
Capital and Book Value per Common Share
The Board of Directors declared a quarterly cash dividend of
$0.01 per common share payable November 14, 2014 to shareholders of
record at the close of business November 3, 2014.
In addition, as part of the Company’s capital management
strategies of maximizing shareholder value and returns, during the
third quarter, the Company repurchased 778,400 shares of its
stock.
Home Savings is a wholly-owned subsidiary of the Company and
operates 32 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)
September 30, December 31, 2014 2013
(Dollars in thousands)
Assets:
Cash and deposits with banks $ 20,059 $ 20,937 Federal funds sold
9,531 56,394 Total cash and cash
equivalents 29,590 77,331 Securities: Available for sale, at fair
value 507,125 511,006 Loans held for sale 10,567 4,838 Loans, net
of allowance for loan losses of $18,132 and $21,116 1,119,955
1,029,192 Federal Home Loan Bank stock, at cost 18,068 26,464
Premises and equipment, net 20,138 20,924 Accrued interest
receivable 5,256 5,694 Real estate owned and other repossessed
assets 4,487 6,341 Core deposit intangible 100 152 Cash surrender
value of life insurance 46,048 44,972 Other assets 40,206
10,936
Total assets $ 1,801,540
$ 1,737,850
Liabilities and Shareholders'
Equity Liabilities: Deposits: Interest bearing $
1,164,745 $ 1,221,162 Non-interest bearing 181,632
170,590 Total deposits 1,346,377 1,391,752 Borrowed
funds: Federal Home Loan Bank advances 138,000 50,000 Repurchase
agreements and other 60,563 90,578
Total borrowed funds 198,563 140,578 Advance payments by borrowers
for taxes and insurance 13,350 20,060 Accrued interest payable 380
550 Accrued expenses and other liabilities 9,164
9,836
Total liabilities 1,567,834
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 49,682,291 and
50,339,089 shares, respectively, outstanding 174,283 174,719
Retained earnings 126,229 81,515 Accumulated other comprehensive
loss (26,310 ) (41,665 ) Treasury stock, at cost,4,456,619 and
3,799,821 shares, respectively (40,496 ) (39,495 )
Total shareholders’ equity
233,706 175,074
Total liabilities and shareholders’
equity
$ 1,801,540 $ 1,737,850
UNITED COMMUNITY FINANCIAL
CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended For the Nine Months
Ended September 30, June 30, September 30, September 30, September
30, 2014 2014 2013 2014 2013 (Dollars in thousands, except per
share data)
Interest income
Loans $ 12,436 $ 12,361 $ 12,233 $ 36,919 $ 37,067 Loans held for
sale 114 74 80 237 247 Securities: Available for sale 3,002 3,125
3,364 9,368 10,176 Federal Home Loan Bank stock dividends 180 230
280 677 840 Other interest earning assets 4 21
52 51 102 Total
interest income 15,736 15,811 16,009 47,252 48,432
Interest expense
Deposits 1,548 1,627 1,847 4,852 5,843 Federal Home Loan Bank
advances 537 524 529 1,579 1,576 Repurchase agreements and other
926 919 929 2,753
2,756 Total interest expense 3,011
3,070 3,305 9,184
10,175
Net interest income 12,725 12,741
12,704 38,068 38,257
Provision for loan losses 116
(1,614 ) 657 (1,465 )
3,834
Net interest income after provision for loan
losses 12,609 14,355 12,047
39,533 34,423
Non-interest
income Non-deposit investment income 408 407 275 1,156 1,189
Service fees and other charges Mortgage servicing fees 678 686 702
2,053 2,104 Deposit related fees 1,321 1,331 1,471 3,850 4,065
Mortgage servicing rights valuation 2 (5 ) 30 (4 ) 676 Mortgage
servicing rights amortization (435 ) (432 ) (482 ) (1,259 ) (1,712
) Other service fees 3 - 13 3 74 Net gains (losses): Securities
available for sale 328 31 - 362 2,578 Mortgage banking income 676
312 895 1,600 3,927 Real estate owned and other repossessed assets
charges, net (203 ) (42 ) (395 ) (628 ) (1,966 ) Card fees 837 852
821 2,461 2,734 Other income 559 298
218 1,242 1,956 Total
non-interest income 4,174 3,438
3,548 10,836 15,625
Non-interest expense Salaries and employee benefits 7,001
8,282 6,729 22,863 20,735 Occupancy 874 815 811 2,622 2,484
Equipment and data processing 1,791 1,963 1,698 5,552 5,240
Financial institutions tax 198 198 385 594 1,216 Advertising 181
247 226 617 646 Amortization of core deposit intangible 17 16 20 52
66 Prepayment penalty 1,396 - - 1,396 - FDIC assessment 295 327 598
875 1,755 Other insurance premiums 138 135 174 410 525 Professional
fees Legal and consulting fees 184 177 368 522 567 Other
professional fees 555 617 393 1,564 1,476 Real estate owned and
other repossessed asset expenses 189 137 354 539 1,140 Other
expenses 1,433 1,312 1,772
4,415 5,910 Total non-interest
expenses 14,252 14,226 13,528
42,021 41,760
Income before
income taxes 2,531 3,567 2,067 8,348 8,288
Income tax
expense (benefit) (369 ) (38,837 ) 350
(39,050 ) 500
Net income 2,900
42,404 1,717 47,398 7,788 Amortization of discount on preferred
stock - - - -
6,751
Earnings available to common
shareholders $ 2,900 $ 42,404 $ 1,717 $
47,398 $ 1,037
Earnings per common
share Basic $ 0.06 $ 0.84 $ 0.03 $ 0.94 $ 0.02 Diluted 0.06
0.84 0.03 0.94 0.02
UNITED COMMUNITY FINANCIAL CORP. SELECTED
FINANCIAL HIGHLIGHTS (Unaudited) At or for the
quarters ended September 30, June 30, March 31, December 31,
September 30, 2014 2014 2014 2013 2013 (Dollars in thousands,
except per share data)
Financial Data
Total assets $ 1,801,540 $ 1,789,939 $ 1,749,144 $ 1,737,850 $
1,756,202 Total loans, net 1,119,955 1,086,771 1,060,901 1,029,192
1,009,029 Total securities 507,125 516,637 517,388 511,006 542,811
Total deposits 1,346,377 1,375,474 1,398,067 1,391,752 1,410,610
Total shareholders' equity 233,706 235,049 189,829 175,074 183,322
Net interest income 12,725 12,741 12,602 13,074 12,704 Provision
for loan losses 116 (1,614 ) 33 282 657 Noninterest income 4,174
3,438 3,224 4,124 3,548 Noninterest expense 14,252 14,226 13,543
14,977 13,528 Income tax expense (benefit) (369 ) (38,837 ) 156
(300 ) 350 Net income 2,900 42,404 2,094 2,239 1,717
Share Data Basic earnings (loss) per common share $ 0.06 $
0.84 $ 0.04 $ 0.04 $ 0.03 Diluted earnings (loss) per common share
0.06 0.84 0.04 0.04 0.03 Book value per common share 4.70 4.66 3.76
3.48 3.65 Tangible book value per common share 4.70 4.66 3.76 3.47
3.65 Market value per common share 4.68 4.13 3.92 3.57 3.89
Common shares outstanding at end of period 49,682 50,452 50,422
50,339 50,225 Weighted average shares outstanding--basic 49,698
50,274 50,196 50,114 50,110 Weighted average shares
outstanding--diluted 49,958 50,495 50,451 50,360 50,382
Key Ratios
Return on average assets (1)
0.66 % 9.67 % 0.48 % 0.51 % 0.39 %
Return on average equity (2)
4.99 % 84.84 % 4.52 % 4.82 % 3.75 % Net interest margin 3.06 % 3.09
% 3.07 % 3.17 % 3.04 % Efficiency ratio 84.87 % 87.77 % 83.45 %
85.89 % 81.14 % Nonperforming loans to total loans, end of period
1.85 % 1.87 % 2.17 % 2.29 % 2.72 % Nonperforming assets to total
assets, end of period 1.40 % 1.39 % 1.58 % 1.72 % 2.10 % Allowance
for loan loss as a percent of loans, end of period 1.59 % 1.65 %
1.90 % 2.01 % 2.04 % Delinquent loans to total loans, end of period
2.10 % 1.86 % 2.07 % 2.32 % 2.77 %
(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
September 30,
June 30, March 31, December 31,
September 30,
2014
2014 2014 2013
2013
(Dollars in thousands)
Loan Portfolio Composition Real
Estate Loans One-to four-family residential $ 669,270 $ 645,211
$ 610,879 $ 585,025 $ 575,791 Multi-family residential* 56,445
52,938 54,233 54,485 55,696 Nonresidential* 123,260 122,066 125,796
131,251 127,699 Land* 9,487 9,635 9,829 9,683 9,546
Construction
Loans One-to four-family residential and land development
52,735 51,974 55,082 53,349 38,932 Multi-family and nonresidential*
4,667 1,010 207 -
-
Total real estate loans 915,864
882,834 856,026 833,793 807,664
Consumer Loans 181,474
182,027 184,409 189,231 194,383
Commercial Loans
39,853 39,127 40,013
26,141 26,888
Total Loans 1,137,191
1,103,988 1,080,448 1,049,165 1,028,935 Less: Allowance for loan
losses 18,132 18,264 20,554 21,116 21,032 Deferred loan costs, net
(896 ) (1,047 ) (1,007 ) (1,143 )
(1,126 )
Total 17,236 17,217
19,547 19,973 19,906
Loans, net $ 1,119,955 $ 1,086,771 $
1,060,901 $ 1,029,192 $ 1,009,029 * Categories
are considered commercial real estate At or for the
quarters ended September 30, June 30, March 31, December 31,
September 30, 2014 2014 2014 2013 2013 (Dollars in thousands)
Deposit Portfolio Composition Checking accounts
Interest bearing checking accounts $ 131,266 $ 133,999 $ 136,031 $
132,751 $ 134,766 Non-interest bearing checking accounts
181,631 185,411 185,620
170,590 167,167
Total checking accounts
312,897 319,410 321,651 303,341 301,933 Savings accounts 273,192
277,404 278,906 267,515 267,062 Money market accounts
313,513 326,738 329,163
328,625 331,449
Total non-time deposits
899,602 923,552 929,720 899,481 900,444 Retail certificates of
deposit 446,774 451,922 468,347
492,271 510,166
Total
certificates of deposit 446,774 451,922
468,347 492,271 510,166
Total deposits $ 1,346,376 $ 1,375,474
$ 1,398,067 $ 1,391,752 $ 1,410,610
Certificates of deposit as a percent of total deposits 33.18 %
32.86 % 33.50 % 35.37 % 36.17 %
UNITED COMMUNITY FINANCIAL CORP. SELECTED
FINANCIAL HIGHLIGHTS (Unaudited) At or for the
quarters ended
September 30,
June 30,
March 31, December 31,
September 30,
2014
2014
2014 2013
2013
(Dollars in thousands)
Allowance For Loan Losses
Beginning balance $ 18,264 $ 20,554 $ 21,116 $ 21,032 $ 19,037
Provision 116 (1,614 ) 33 282 657 Net (chargeoffs) recoveries
(248 ) (676 ) (595 ) (198 )
1,338 Ending balance $ 18,132 $ 18,264 $
20,554 $ 21,116 $ 21,032
Net
(Charge-offs) Recoveries Real Estate Loans One-to
four-family $ (278 ) $ (181 ) $ (163 ) $ 42 $ (201 ) Multi-family -
(135 ) (5 ) - 13 Nonresidential (9 ) 56 (252 ) (29 ) (381 ) Land -
- - 12 10
Construction Loans One-to four-family residential
and land development (90 ) (330 ) (79 ) 451 1,876 Multi-family and
nonresidential - - -
(620 ) -
Total real estate loans (377 )
(590 ) (499 ) (144 ) 1,317
Consumer Loans (29 ) (304 ) (233
) (193 ) (143 )
Commercial Loans 158
218 137 139 164
Total $ (248 ) $ (676 ) $ (595 ) $ (198 ) $ 1,338
At or for the quarters ended
September 30,
June 30,
March 31, December 31, September 30, 2014
2014
2014 2013 2013 (Dollars in thousands)
Nonperforming Loans
Real Estate Loans One-to four-family residential $ 4,700 $
5,380 $ 6,133 $ 6,356 $ 6,127 Multi-family residential 114 133
1,158 641 705 Nonresidential 6,804 4,902 5,033 5,560 8,963 Land 531
532 532 496 628
Construction Loans One-to four-family
residential and land development 2,453 2,553
2,884 3,084 3,320
Total real estate loans 14,602 13,500 15,740 16,137 19,743
Consumer Loans 1,960 2,663 3,089 3,293 3,564
Commercial
Loans 4,144 4,151 4,155
4,158 4,177
Total Loans $
20,706 $ 20,314 $ 22,984 $ 23,588 $
27,484
Total Nonperforming Loans and Nonperforming
Assets Past due 90 days and on nonaccrual status $ 18,114 $
16,636 $ 18,708 $ 20,188 $ 20,946 Past due 90 days and still
accruing - - - 45
3,413 Past due 90 days 18,114 16,636 18,708
20,233 24,359 Past due less than 90 days and on nonaccrual
2,592 3,678 4,276 3,355
3,125
Total Nonperforming Loans 20,706
20,314 22,984 23,588 27,484 Other real estate owned 4,445 4,546
4,700 6,318 9,276 Repossessed assets 42 2
- 23 39
Total
Nonperforming Assets $ 25,193 $ 24,862 $ 27,684
$ 29,929 $ 36,799
Total Troubled
Debt Restructured Loans Accruing $ 25,140 $ 25,905 $ 26,614 $
26,577 $ 26,629 Nonaccruing 4,428 4,328
4,724 4,941 5,474
Total $ 29,568 $ 30,233 $ 31,338 $
31,518 $ 32,103
Media Contact:Home SavingsColleen Scott, Vice President
of Marketing, 330-742-0638cscott@homesavings.comorInvestor
Contact:United Community Financial Corp.Gary M. Small,
President and Chief Executive Officer, 330-742-0472
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