UNITED COMMUNITY FINANCIAL CORP - 10-Q Quarterly Report

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

FORM 10-Q


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

				For the quarterly period ended June 30, 2003

[ ]				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		34-1856319

(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

275 Federal Plaza West Youngstown, Ohio		44503-1203
(Address of principal executive offices)		(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 X No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes X No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 34,438,604 common shares as of July 31, 2003

TABLE OF CONTENTS


	CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	CONSOLIDATED STATEMENTS OF 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
	ITEM 4. Controls and Procedures
PART II. OTHER INFORMATION
EX-31.1 CERTIFICATION BY CEO
EX-31.2 CERTIFICATION BY CFO
EX-32 CERTIFICATION OF FINANCIAL STATEMENT

TABLE OF CONTENTS


Part I.	FINANCIAL INFORMATION		PAGE

	Item 1.	Financial Statements

		Consolidated Statements of Financial Condition as of June 30, 2003 (Unaudited) and December 31, 2002.	1

		Consolidated Statements of Income for the Three and Six Months Ended June 30, 2003 and 2002 (Unaudited)	2

		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 (Unaudited)	3

		Notes to Consolidated Financial Statements	4-8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9-15

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16

	Item 4.	Controls and Procedures	16

Part II.	OTHER INFORMATION		17

Signatures			18

Exhibits			19-22

UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


			June 30,			December 31,
			2003			2002
			(Unaudited)

			(In thousands)
Assets:
Cash and deposits with banks			$	35,170		$	33,178
Federal funds sold and other				27,509			77,758

		Total cash and cash equivalents		62,679			110,936

Securities:
	Trading, at fair value			13,170			5,060
	Available for sale, at fair value			274,709			237,268
Loans, net (including allowance for loan losses of $16,278 and $15,099, respectively)				1,460,910			1,478,213
Loans held for sale, net				34,640			45,825
Margin accounts				13,808			14,809
Federal Home Loan Bank stock				21,488			21,069
Premises and equipment				20,145			20,002
Accrued interest receivable				8,610			9,558
Real estate owned				519			994
Goodwill				33,593			33,593
Core deposit intangible				4,372			5,101
Bank owned life insurance				20,011			—
Other assets				10,830			7,703

		Total assets	$	1,979,484		$	1,990,131

Liabilities and Shareholders’ Equity
Liabilities:
Deposits			$	1,426,744		$	1,481,901
Other borrowed funds				245,228			210,024
Advance payments by borrowers for taxes and insurance				11,048			5,996
Accrued interest payable				1,260			1,126
Accrued expenses and other liabilities				19,133			16,515

		Total liabilities		1,703,413			1,715,562

Shareholders’ Equity:
Preferred stock-no par value; 1,000,000 shares authorized and unissued at June 30, 2003				—			—
Common stock-no par value; 499,000,000 shares authorized; 37,802,081 and 37,803,269 shares issued, respectively				138,607			138,207
Retained earnings				179,296			172,080
Other comprehensive income				1,898			2,363
Unearned stock compensation				(17,949	)		(19,724	)
Treasury stock, at cost, 3,373,697 and 2,558,214 shares, respectively				(25,781	)		(18,357	)

		Total shareholders’ equity		276,071			274,569

		Total liabilities and shareholders’ equity	$	1,979,484		$	1,990,131

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,

				2003		2002			2003			2002

				(In thousands)					(In thousands)

Interest income
	Loans			$	24,809	$	28,718		$	50,723		$	55,453
	Loans available for sale				528		221			1,024			437
	Securities
		Trading			113		28			186			61
		Available for sale			2,437		1,646			5,132			3,486
		Held to maturity			—		1,138			—			2,405
	Margin accounts				171		214			342			434
	FHLB stock dividend				212		241			420			449
	Other interest-earning assets				34		252			220			859

			Total interest income		28,304		32,458			58,047			63,584
Interest expense
	Interest expense on deposits				7,779		11,601			16,808			23,709
	Interest expense on other borrowed funds				2,398		2,125			4,600			4,910

			Total Interest Expense		10,177		13,726			21,408			28,619

Net interest income					18,127		18,732			36,639			34,965
Provision for loan loss allowances					1,702		532			2,398			1,228

Net interest income after provision for loan loss allowances					16,425		18,200			34,241			33,737

Noninterest income
	Commissions				3,914		3,677			7,089			7,059
	Service fees and other charges				1,632		2,011			3,432			3,913
	Underwriting & investment banking				188		138			305			171
	Net gains (losses):
		Securities			—		67			496			649
		Loans sold			6,430		2,673			8,440			3,449
		Trading securities			456		(361	)		308			(338	)
		Other			15		(165	)		(44	)		(165	)
	Other income				534		471			1,116			1,668

			Total noninterest income		13,169		8,511			21,142			16,406

Noninterest expenses
	Salaries and employee benefits				11,938		9,947			22,840			19,670
	Occupancy				916		878			1,745			1,550
	Equipment and data processing				2,474		2,165			4,818			3,984
	Franchise tax				379		492			867			999
	Advertising				612		886			1,200			1,280
	Amortization of core deposit intangible				340		601			729			1,239
	Other expenses				2,070		2,395			4,687			5,394

			Total noninterest expenses		18,729		17,364			36,886			34,116

Income before income taxes					10,865		9,347			18,497			16,027
Income taxes					3,837		3,350			6,490			5,775

Net income				$	7,028	$	5,997		$	12,007		$	10,252

Comprehensive income				$	7,363	$	6,614		$	10,839		$	10,163
Earnings per share:
	Basic and diluted			$	0.22	$	0.19		$	0.38		$	0.32

See Notes to Consolidated Financial Statements.

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


			Six Months Ended June 30,

			2003			2002

			(Dollars in thousands)
Cash Flows from Operating Activities:
	Net income		$	12,007		$	10,252
	Adjustments to reconcile net income to net cash from operating activities:
		Provision for loan loss allowances		2,398			1,228
		Net gains		(8,892	)		(3,933	)
		Amortization of premiums (accretion of discounts)		3,081			469
		Depreciation		1,851			1,304
		ESOP compensation		1,318			1,166
		Amortization of restricted stock compensation		857			795
		FHLB stock dividends		(420	)		(449	)
		(Increase) decrease in trading securities		(8,110	)		3,319
		Decrease in margin accounts		1,001			3,751
		Decrease (increase) in interest receivable		948			(88	)
		(Increase) decrease in prepaid and other assets		(3,929	)		396
		Increase (decrease) in interest payable		134			(1,140	)
		Decrease in loans held for sale		11,185			13,775
		Proceeds from sale of loans held for sale		241,738			78,774
		Increase (decrease) in other liabilities		2,391			(5,303	)

		Net cash from operating activities		257,558			104,316

Cash Flows from Investing Activities:
	Proceeds from principal repayments and maturities of:
		Securities held to maturity		—			15,101
		Securities available for sale		84,553			33,131
	Proceeds from sale of:
		Securities held to maturity		—			932
		Securities available for sale		8,242			7,550
		Real estate owned		939			814
		Loans		93,983			112,620
		Fixed assets		—			17
	Purchases of:
		Securities available for sale		(132,075	)		(80,413	)
		Securities held to maturity		—			(500	)
		Bank owned life insurance		(20,000	)		—
	Net cash paid for acquisiton			—			(13,729	)
	Net principal disbursed on loans			(206,273	)		(164,643	)
	Loans purchased			(106,544	)		(13,568	)
	Purchases of premises and equipment			(1,980	)		(1,492	)

		Net cash from investing activities		(279,155	)		(104,180	)

Cash Flows from Financing Activities:
		Net increase (decrease) in NOW, savings and money market accounts		23,102			(7,478	)
		Net (decrease) increase in certificates of deposit		(77,802	)		30,449
		Net increase (decrease) in advance payments by borrowers for taxes and insurance		5,052			(1,446	)
		Proceeds from FHLB advances and other long term debt		22,500			1,239
		Repayment of FHLB advances and other long term debt		(96	)

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