UNITED COMMUNITY FINANCIAL CORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002


		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 0-24399

UNITED COMMUNITY FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


Ohio (State or other jurisdiction of incorporation or organization)		34-1856319 (IRS Employer Identification Number)









275 Federal Plaza West Youngstown, Ohio (Address of principal executive offices)		44503-1203 (Zip Code)

(330) 742-0500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes box No box

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

35,362,842 common shares as of July 31, 2002

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
SIGNATURES
EX-99.1 Certification of Douglas M. McKay
EX-99.2 Certification of Patrick A. Kelly

TABLE OF CONTENTS


		PAGE

Part I. FINANCIAL INFORMATION




Item 1.	Financial Statements (Unaudited)




	Consolidated Statements of Financial Condition as of June 30, 2002 and December 31, 2001		1




	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2002 and 2001		2




	Consolidated Statement of Comprehensive Income for the Three and Six Months Ended June 30, 2002		3




	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001		4




	Notes to Consolidated Financial Statements		5 - 10




Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11-16




Item 3.	Quantitative and Qualitative Disclosures about Market Risk		17




Part II. OTHER INFORMATION			18




Signatures			19




Exhibits			20

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)


			June 30,			December 31,
			2002			2001

			(Dollars in thousands)
Assets:




Cash and deposits with banks			$	38,154		$	35,588




Federal funds sold and other				104,187			170,296

		Total cash and cash equivalents		142,341			205,884

Marketable securities:




	Trading (amortized cost of $5,032 and $8,352, respectively)			5,033			8,352




	Available for sale (amortized cost of $85,893 and $49,960, respectively)			86,698			51,081




	Held to maturity (fair value of $2,105 and $1,695, respectively)			2,096			1,698




Mortgage-related securities:




	Available for sale (amortized cost of $72,776 and $66,033, respectively)			73,992			67,069




	Held to maturity (fair value of $65,267 and $80,644, respectively)			62,983			78,798




Loans, net (including allowance for loan losses of $14,365 and $11,480, respectively)				1,506,212			1,406,479




Loans held for sale, net				6,417			20,192




Margin accounts				17,228			20,979




Federal Home Loan Bank stock				20,586			18,760




Premises and equipment				19,349			17,481




Accrued interest receivable				10,430			9,575




Real estate owned				1,167			477




Goodwill				33,583			19,664




Identified intangible assets				6,041			6,312




Other assets				12,504			11,979

		Total assets	$	2,006,660		$	1,944,780

Liabilities and Shareholders’ Equity




Liabilities:




Deposits			$	1,518,992		$	1,383,418




Other borrowed funds				195,354			271,631




Advance payments by borrowers for taxes and insurance				4,548			5,760




Accrued interest payable				1,937			2,983




Accrued expenses and other liabilities				19,057			19,108

		Total liabilities		1,739,888			1,682,900

Shareholders’ Equity:




Preferred stock-no par value; 1,000,000 shares authorized and unissued at June 30, 2002				—			—




Common stock-no par value; 499,000,000 shares authorized; 37,734,780 and 37,754,086 shares issued, respectively				137,038			136,903




Retained earnings				166,335			160,915




Accumulated other comprehensive income				1,313			1,402




Unearned stock compensation				(21,162	)		(22,988	)




Treasury stock, at cost; 2,381,938 and 2,086,500 shares, respectively				(16,752	)		(14,352	)

		Total shareholders’ equity		266,772			261,880

		Total liabilities and shareholders’ equity	$	2,006,660		$	1,944,780

See Notes to Consolidated Financial Statements.

UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)


				For the Three Months Ended					For the Six Months Ended
				June 30,					June 30,

				2002			2001		2002			2001

				(Dollars in thousands, except per share data)					(Dollars in thousands, except per share data)

Interest income




	Loans			$	28,984		$	19,399	$	55,958		$	37,472




	Loans held for sale				95			—		209			—




	Mortgage-related securities:




		Available for sale			854			1,412		1,743			2,876




		Held to maturity			1,118			1,652		2,369			3,434




	Marketable securities:




		Trading			28			34		61			65




		Available for sale			792			1,022		1,743			2,355




		Held to maturity			20			13		36			26




	Margin accounts				214			455		433			1,123




	FHLB stock dividend				241			254		449			500




	Other interest-earning assets				252			404		859			832

			Total interest income		32,598			24,645		63,860			48,683




Interest expense




	Deposits				11,601			10,717		23,709			21,001




	Other borrowed funds				2,125			1,527		4,910			2,923

			Total interest expense		13,726			12,244		28,619			23,924

Net interest income					18,872			12,401		35,241			24,759




Provision for loan losses					532			250		1,228			580

Net interest income after provision for loan losses					18,340			12,151		34,013			24,179

Noninterest income




	Brokerage commissions				3,677			3,421		7,059			7,012




	Service fees and other charges				2,016			1,848		3,914			3,767




	Underwriting and investment banking fees				138			321		171			383




	Net gains (losses):




		Mortgage-related securities			45			48		45			140




		Marketable securities			22			—		604			246




		Trading securities			(361	)		216		(338	)		(195	)




		Loans sold			2,673			55		3,449			81




		Other			(165	)		14		(165	)		5




	Other income				327			195		1,391			468

			Total noninterest income		8,372			6,118		16,130			11,907

Noninterest expenses




	Salaries and employee benefits				9,947			8,534		19,670			16,399




	Occupancy				878			621		1,550			1,194




	Equipment and data processing				2,165			1,775		3,984			3,394




	Franchise tax				493			504		999			1,014




	Advertising				886			436		1,280			987




	Amortization of core deposit intangible				601			—		1,239			—




	Other expenses				2,395			1,682		5,394			3,343

			Total noninterest expenses		17,365			13,552		34,116			26,331

Income before income taxes					9,347			4,717		16,027			9,755




Income taxes					3,350			1,779		5,775			3,614

Net income				$	5,997		$	2,938	$	10,252		$	6,141

Earnings per share:




	Basic and diluted			$	0.19		$	0.09	$	0.32		$	0.19

See Notes to Consolidated Financial Statements.

UNITED COMMUNITY FINANCIAL CORP.
STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended June 30,

	2002			2001

	(In thousands)
Net income	$	5,997		$	2,938




Unrealized holding gains arising during the period, net of tax effect of $341 and $34, respectively		631			96




Reclassification adjustment for gains included in net income, net of tax effect of $(8) and $(17), respectively		(14	)		(31	)

Comprehensive income	$	6,614		$	3,003


	Six Months Ended June 30,

	2002			2001

	(In thousands)
Net income	$	10,252		$	6,141




Unrealized holding gains arising during the period, net of tax effect of $164 and $631, respectively		304			1,383




Reclassification adjustment for gains included in net income, net of tax effect of $(211) and $(114), respectively		(393	)		(211	)

Comprehensive income	$	10,163		$	7,313

See Notes to Consolidated Financial Statements.

UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


			Six Months Ended June 30,

			2002			2001

			(Dollars in thousands)
Cash Flows from Operating Activities:




	Net income		$	10,252		$	6,141




	Adjustments to reconcile net income to net cash provided by (used in) operating activities:




		Provision for loan loss allowances		1,228			580




		Net gains		(3,933	)		(472	)




		Amortization of premiums (accretion of discounts)		469			(492	)




		Depreciation		1,304			1,070




		ESOP compensation		1,166	&

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