United Community Financial Corp (UCFC)

[TheGreenComma]

http://finance.yahoo.com/news/united-community-financial-corp-announces-232800193.html

United Community Financial Corp. (Company) (Nasdaq: UCFC - News), holding company of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), today reported consolidated net income of $7.9 million, or $0.25 per diluted share, for the three months ended December 31, 2011. This compares to a net loss of $17.3 million, or $(0.56) per diluted share, for the three months ended December 31, 2010. Current earnings have been positively impacted by the successful completion of the sale of four branches and gains recognized on the sale of securities. Fourth quarter earnings also benefited from the need for only $2.4 million in loan loss provision expense, down from $22.6 million in the fourth quarter of 2010. The Company also reported net income of $230,000, or $0.01 per diluted share, for the year ended December 31, 2011, as compared to a net loss of $37.3 million, or $(1.22) per diluted share, for the year ended December 31, 2010.

Selected fourth quarter results:

•Delinquent loans declined $4.0 million from the prior quarter to $126.9 million
•Nonperforming loans declined $11.0 million from the prior quarter to $123.1 million
•Nonperforming assets declined $15.8 million from the prior quarter to $156.6 million
•Home Savings’ Tier 1 leverage ratio of 8.61% and the total risk based capital ratio of 14.57% both reflected increases from the prior quarter
•Tangible book value per share at December 31, 2011 was $5.78
Patrick W. Bevack, President and Chief Executive Officer of UCFC and Home Savings, commented that, “The year 2011 was a year of progress. During the year, not only did UCFC return to profitability, but more significantly, Home Savings has positioned itself for the future with very positive improvement in asset quality measures. Delinquent loans, nonperforming loans and nonperforming assets are all headed in the right direction.” Bevack further commented, “I was also pleased that the Company was successful in attracting additional capital from an investor in the fourth quarter.”

Asset Quality

Delinquent loans declined to $126.9 million at December 31, 2011, down $68.3 million, or 35.0%, from their high point of $195.2 million at March 31, 2010. Nonperforming loans at December 31, 2011 fell to $123.1 million, down $32.0 million, or 20.7%, from their high point of $155.1 million at June 30, 2010. Nonperforming assets dropped to $156.6 million at December 31, 2011, down $40.6 million, or 20.6%, from their high point of $197.2 million at June 30, 2010.

The provision for loan losses was $2.4 million for the fourth quarter of 2011, as compared to $22.6 million for the same quarter in 2010. For the year ending December 31, 2011, the provision for loan losses was $24.7 million, as compared to $62.4 million for the year ended December 31, 2010. The overall improvement in provision expense is the result of a reduced level of outstanding loans as well as a lower level of charge-offs in the fourth quarter and all of 2011.

Net Interest Income and Margin

The average net interest margin was 3.04% for the fourth quarter of 2011 compared with 3.17% for the fourth quarter of 2010. The average net interest margin was 3.28% for the year ended 2011 compared with 3.30% for 2010.

Net interest income for the three months ended December 31, 2011 was $14.8 million compared to $16.9 million for the three months ended December 31, 2010. Total interest income decreased $3.0 million in the fourth quarter of 2011 compared to the fourth quarter of 2010. The decrease is the result of Home Savings recognizing $3.3 million less in interest on net loans due to a $280.0 million decline in the average balance of outstanding loans.

Total interest expense decreased $997,000 for the quarter ended December 31, 2011, as compared to the same quarter last year. The change was primarily attributable to a reduction of $851,000 in interest paid on deposits, which is a result of a shift in deposit balances from certificates of deposit to relatively lower cost non-time deposits.

Net interest income for the twelve months ended December 31, 2011, was $65.2 million, compared to $71.4 million for the twelve months ended December 31, 2010. Total interest income decreased $14.4 million in 2011 compared to 2010. The decrease is a result of Home Savings recognizing $13.2 million less in interest on net loans because of a $244.6 million reduction in the average balance of outstanding loans. Home Savings also experienced a decrease in interest income on net loans of $2.0 million due to lower rates.

Total interest expense decreased $8.2 million for the twelve months ended December 31, 2011, as compared to the same period last year. This change was due primarily to reductions of $7.7 million in interest paid on deposits.

Noninterest Income

Noninterest income increased in the fourth quarter of 2011 to $12.0 million, as compared to $6.5 million in the fourth quarter of 2010. The largest impact on the comparison was the sale of four northwest branches (as previously disclosed), which closed in the fourth quarter of 2011. Home Savings recognized a $4.2 million gain on that sale. Additionally, Home Savings also sold available for sale securities in the fourth quarter of 2011, producing a gain of $5.1 million. The gains recognized were offset partially by lower service fees and by a valuation allowance established on Home Savings’ mortgage servicing rights, both in the fourth quarter of 2011. A similar valuation allowance was not required in 2010.

Noninterest income increased in 2011 to $23.2 million, as compared to $21.9 million in 2010. Two large transactions affect the comparison of noninterest income year over year. First, the branch sale mentioned above generated a net gain of $4.2 million. Secondly, Home Savings sold $70.4 million in mortgage loans in the second quarter of 2011. This transaction produced a gain of $2.7 million for the Bank. Both of these transactions were partially offset by lower service fees and other charges recognized in 2011.

Noninterest Expense

Noninterest expense was $16.5 million in the fourth quarter of 2011, compared to $18.4 million in the fourth quarter of 2010. The change was driven by lower expenses associated with the maintenance of real estate owned and other repossessed assets during the fourth quarter of 2011, compared to the same quarter last year. Also positively affecting the comparison, Home Savings recognized fewer expenses associated with deposit insurance premiums. Regulatory changes revised the method for calculating deposit insurance premiums and caused those expenses to decline.

Noninterest expense was $63.5 million in 2011, compared to $68.3 million in 2010. The decline was caused primarily by the recognition of lower expenses associated with real estate owned and other repossessed assets acquired in the settlement of loans. Lower salaries and benefits paid to employees along with lower deposit insurance premiums also contributed to the change.

Capital and Book Value

Home Savings’ Tier 1 leverage ratio was 8.61% as of December 31, 2011, compared to 8.13% at September 30, 2011. The Bank’s total risk-based capital ratio was 14.57% at December 31, 2011, as compared to 13.25% at September 30, 2011. Tangible book value per share at December 31, 2011 was $5.78, down from $5.88 at September 30, 2011.

Home Savings is a wholly-owned subsidiary of the Company and operates 34 full-service banking offices and eight 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” 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.