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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
[ ] 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: 0-024399
UNITED COMMUNITY FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
Ohio 34-1856319
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
275 Federal Plaza West, Youngstown, Ohio 44503
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (330) 742-0500
Securities registered pursuant to Section 12(b) of the Act:
None None
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(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common shares, no par value per share
--------------------------------------
(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if there is no disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K contained in this form, and no disclosure
will be contained, to the best of issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the last reported sale on June 30,
2003 was approximately $304.9 million and on March 8, 2004 was approximately
$416.3 million. (The exclusion from such amount of the market value of the
shares owned by any person shall not be deemed an admission by the registrant
that such person is an affiliate of the registrant.)
As of March 8, 2004, there were 31,100,670 of the Registrant's Common
Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II of Form 10-K - Portions of 2003 Annual Report to Shareholders
Part III of Form 10-K - Portions of Proxy Statement for the 2004 Annual Meeting
of Shareholders
TABLE OF CONTENTS
Item
Number Page
- ------ ----
PART I
1. Description of Business
General ...................................................................................... 1
Discussion of Forward-Looking Statements ..................................................... 2
Lending Activities ........................................................................... 2
Investment Activities ........................................................................ 11
Sources of Funds ............................................................................. 13
Competition .................................................................................. 15
Employees .................................................................................... 16
Regulation ................................................................................... 16
2. Description of Property ........................................................................ 18
3. Legal Proceedings .............................................................................. 21
4. Submission of Matters to a Vote of Security Holders ............................................ 21
PART II
5. Market for Registrant's Common Equity and Related Shareholder Matters .......................... 21
6. Selected Financial Data ........................................................................ 21
7. Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 21
7A. Quantitative and Qualitative Disclosures About Market Risk ..................................... 21
8. Financial Statements and Supplemental Data ..................................................... 21
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........... 21
9A. Controls and Procedures ........................................................................ 21
PART III
10. Directors and Executive Officers of the Registrant ............................................. 22
11. Executive Compensation ......................................................................... 22
12. Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters ............................................................................ 22
13. Certain Relationships and Related Transactions ................................................. 23
14. Principal Accountant Fees and Services ......................................................... 23
PART IV
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K ................................ 23
Signatures ........................................................................................... 24
Exhibit Index ........................................................................................ 25
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
United Community Financial Corp. (United Community) was incorporated in
the State of Ohio in February 1998 for the purpose of owning all of the
outstanding capital stock of The Home Savings and Loan Company of Youngstown,
Ohio (Home Savings) issued upon the conversion of Home Savings from a mutual
savings association to a permanent capital stock savings association
(Conversion). The Conversion was completed on July 8, 1998. On August 12, 1999,
Butler Wick Corp. (Butler Wick) became a wholly-owned subsidiary of United
Community.
United Community's Internet site, http://www.ucfconline.com, contains a
hyperlink to the Securities and Exchange commission (SEC) where United
Community's annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, Section 16 Insider Reports and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 are available free of charge as soon as reasonably practicable after
United Community has filed the report with the SEC.
As a savings and loan holding company, United Community is subject to
regulation, supervision and examination by the OTS, the Division of Financial
Institutions of the Ohio Department of Commerce (Division) and the SEC. United
Community's primary activity is holding the common stock of Home Savings and
Butler Wick. Consequently, the following discussion focuses primarily on the
business of Home Savings and Butler Wick.
Home Savings was organized as a mutual savings association under Ohio
law in 1889. During 2003, Home Savings changed its charter from a
state-chartered savings and loan association to a state-chartered savings bank.
Home Savings is subject to supervision and regulation by the Federal Deposit
Insurance Corporation (FDIC), and the Division. Home Savings is a member of the
Federal Home Loan Bank (FHLB) of Cincinnati and the deposits of Home Savings are
insured up to applicable limits by the FDIC in the Savings Association Insurance
Fund (SAIF).
Home Savings conducts business from its main office located in
Youngstown, Ohio, 35 full-service branches and six loan production offices
located throughout Ohio and western Pennsylvania. The principal business of Home
Savings is the origination of mortgage loans on one- to four-family residential
real estate located in Home Savings' primary market area, which consists of
Ashland, Columbiana, Cuyahoga, Erie, Geauga, Hancock, Huron, Lake, Mahoning,
Montgomery, Richland, Sandusky, Seneca, Summit and Trumbull counties in Ohio and
Beaver County in Pennsylvania. Home Savings also originates loans secured by
nonresidential real estate. In addition to real estate lending, Home Savings
originates commercial loans and various types of consumer loans. For liquidity
and interest rate risk management purposes, Home Savings invests in various
financial instruments as discussed below under "Investment Activities." Funds
for lending and other investment activities are obtained primarily from savings
deposits, which are insured up to applicable limits by the FDIC, principal
repayments of loans, borrowings from the FHLB and maturities of securities.
Interest on loans and other investments is Home Savings' primary source
of income. Home Savings' principal expense is interest paid on deposit accounts
and other borrowings and salaries and benefits paid to our employees. Operating
results are dependent to a significant degree on the net interest income of Home
Savings, which is the difference between interest earned on loans and other
investments and interest paid on deposits and borrowed funds. Like most thrift
institutions, Home Savings' interest income and interest expense are
significantly affected by general economic conditions and by the policies of
various regulatory authorities.
Butler Wick is the parent company for two wholly-owned subsidiaries:
Butler Wick & Co., Inc. and Butler Wick Trust Company. Butler Wick conducts
business from its main office located in Youngstown, Ohio and 12 offices located
in northeastern Ohio and western Pennsylvania. Butler Wick primarily sells
common and preferred stocks, but also offers an array of government, corporate
and municipal bonds, unit trusts, mutual funds, IRAs, money market accounts and
certificates of deposit. Butler Wick also offers investments in precious metals
and a full line of life insurance and annuity products, personal and corporate
financial planning, estate planning, pension and profit sharing.
1
DISCUSSION OF FORWARD-LOOKING STATEMENTS
When used in this Form 10-K the words or phrases "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 United Community's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in Home
Savings' market area, demand for investments in Butler Wick's market area and
competition, which could cause actual results to differ materially from results
presently anticipated or projected. United Community cautions readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made. United Community advises readers that the factors listed above
could affect United Community's financial performance and could cause United
Community's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
United Community does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions, which 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.
LENDING ACTIVITIES
GENERAL. Home Savings' principal lending activity is the origination of
conventional real estate loans secured by one- to four-family residences located
in Home Savings' primary market area. Home Savings also originates loans secured
by multifamily and nonresidential real estate and originates loans for the
construction of one- to four-family residences, multifamily properties and
nonresidential real estate projects. In addition to real estate lending, Home
Savings originates commercial loans and various types of consumer credits,
including home equity loans, education loans, loans secured by savings accounts,
motor vehicles, boats and recreational vehicles and unsecured loans.
2
LOAN PORTFOLIO COMPOSITION. The following table presents certain
information regarding the composition of United Community's loan portfolio at
the dates indicated:
At December 31,
2003 2002 2001
Percent of Percent of Percent of
Amount Total loans Amount Total loans Amount Total loans
------------- ------------- ------------- ------------ ------------- -------------
(Dollars in thousands)
Real estate loans:
Permanent
One- to four-family $ 602,480 34.10% $ 889,199 56.02% $ 984,141 65.38%
Multifamily 149,547 8.47 79,760 5.05 60,691 4.06
Nonresidential 309,467 17.52 236,581 14.99 153,368 10.25
Land 14,511 0.82 5,812 0.37 11,432 0.76
------------- ------------- ------------- ------------ ------------- -------------
Total permanent 1,076,005 60.91 1,211,352 76.43 1,209,632 80.44
Construction loans:
One- to four-family 358,890 20.32 122,234 7.74 115,853 7.74
Multifamily and nonresidential 46,165 2.61 35,600 2.26 26,883 1.80
------------- ------------- ------------- ------------ ------------- -------------
Total construction 405,055 22.93 157,834 10.00 142,736 9.54
------------- ------------- ------------- ------------ ------------- -------------
Total real estate loans 1,481,060 83.84 1,369,186 86.43 1,352,368 89.98
Consumer loans:
Home equity 134,053 7.59 109,671 6.94 48,671 3.25
Auto 48,219 2.73 36,052 2.28 21,703 1.45
Education - - - - 5,280 0.35
Other (1) 36,491 2.06 9,797 0.63 35,095 2.34
------------- ------------- ------------- ------------ ------------- -------------
Total consumer 218,763 12.38 155,520 9.85 110,749 7.40
Commercial loans 66,835 3.78 58,639 3.72 39,226 2.62
------------- ------------- ------------- ------------ ------------- -------------
Total loans 1,766,658 100.00% 1,583,345 100.00% 1,502,343 100.00%
============= ============ =============
Less net items 190,164 105,132 95,864
------------- ------------- -------------
Total loans, net $ 1,576,494 $ 1,478,213 $ 1,406,479
============= ============= =============
At December 31,
2000 1999
Percent of Percent of
Amount total loans Amount Total loans
------------- ------------- ---------- -----------
(Dollars in thousands)
Real estate loans:
Permanent
One- to four-family $ 618,112 65.22% $ 546,888 70.92%
Multifamily 24,085 2.54 7,838 1.02
Nonresidential 137,976 14.56 116,690 15.13
Land 5,172 0.55 299 0.04
------------- ------------- ---------- -----------
Total permanent 785,345 82.87 671,715 87.11
Construction loans:
One- to four-family 57,955 6.11 27,486 3.57
Multifamily and nonresidential 11,389 1.20 1,637 0.21
------------- ------------- ---------- -----------
Total construction 69,344 7.31 29,123 3.78
------------- ------------- ---------- -----------
Total real estate loans 854,689 90.18 700,838 90.89
Consumer loans:
Home equity 20,147 2.13 19,151 2.48
Auto 5,171 0.55 1,130 0.15
Education 3,850 0.40 3,860 0.50
Other (1) 29,177 3.08 18,998 2.46
------------- ------------- ---------- -----------
Total consumer 58,345 6.16 43,139 5.59
Commercial loans 34,657 3.66 27,119 3.52
------------- ------------- ---------- -----------
Total loans 947,691 100.00% 771,096 100.00%
============= ===========
Less net items 71,038 48,009
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Total loans, net $ 876,653 $ 723,087
============= ==========
- --------
(1) Consists of overdraft protection loans and loans to individuals secured
by demand accounts, deposits and other consumer assets.
3
LOAN MATURITY. The following table sets forth certain information as of
December 31, 2003, regarding the dollar amount of loans maturing in Home
Savings' portfolio based on their contractual terms to maturity. Demand loans
and other loans having no stated schedule of repayments or no stated maturity
are reported as due in one year or less. Mortgage loans originated by Home
Savings generally include due-on-sale clauses that provide Home Savings with the
contractual right to deem the loan immediately due and payable in the event the
borrower transfers the ownership of the property without Home Savings' consent.
The table does not include the effects of possible prepayments or scheduled
repayments.
Principal repayments contractually due in the years ended
---------------------------------------------------------
December 31,
------------
2009 and
2004 2005-2008 thereafter Total
-------- --------- ---------- -------
(In thousands)
Construction loans:
One-to-four family $ 85,712 $196,834 $ 76,344 $358,890
Multifamily and nonresidential 497 16,249 29,419 46,165
Commercial loans 34,345 28,142 4,348 66,835
The next table sets forth the dollar amount of all loans reported above
as due after December 31, 2004, which have fixed or adjustable interest rates:
Due after December 31, 2004
---------------------------
(In thousands)
Fixed rate $ 68,758
Adjustable rate 282,578
----------
$ 351,336
===========
LOANS SECURED BY ONE- TO FOUR-FAMILY REAL ESTATE. The principal lending
activity of Home Savings is the origination of conventional loans secured by
first mortgages on one- to four-family residences, primarily single-family
homes, located within Home Savings' primary market area. At December 31, 2003,
Home Savings' one- to four-family residential real estate loans totaled
approximately $602.5 million, or 34.1% of total loans. At December 31, 2003,
$7.1 million, or 1.2%, of Home Savings' one- to four-family loans were
nonperforming.
FDIC regulations and Ohio law limit the amount which Home Savings may
lend in relationship to the appraised value of the real estate and improvements
that secure the loan at the time of loan origination. In accordance with such
regulations, Home Savings makes loans on one- to four-family residences of up to
97% of the value of the real estate and improvements thereon (LTV), although the
majority of such loans have LTVs of 80% or less. Loans on single-family,
owner-occupied residences located in low-income or moderate-income census tracts
are granted up to a 97% LTV, although Home Savings requires private mortgage
insurance on the portion of the principal amount that exceeds 85% of the
appraised value of the property securing the loan.
Home Savings currently offers fixed-rate mortgage loans and
adjustable-rate mortgage loans (ARMs) for terms of up to 30 years. Although Home
Savings' loan portfolio includes a significant amount of 30-year fixed-rate
loans, most loans currently originated for investment. The interest rate
adjustment periods on ARMs are typically one or three years. The maximum
interest rate adjustment on most of the ARMs is 2.0% on any adjustment date and
a total of 6.0% over the life of the loan. The interest rate adjustments on
one-year and three-year ARMs presently offered by Home Savings are indexed to
the weekly average rate on the one-year and three-year U.S. Treasury securities,
respectively. Rate adjustments are computed by adding a stated margin to the
index. Home Savings does not offer ARMs to borrowers on one- to four-family
residences with LTVs in excess of 95%.
4
Home Savings issues standby loan origination commitments to qualified
borrowers primarily for the purchase of single-family residential real estate.
Such commitments are made on specified terms and conditions and are made for
periods of up to 60 days, during which time the interest rate is locked in.
LOANS SECURED BY MULTIFAMILY RESIDENCES. Home Savings originates loans
secured by multifamily properties, which contain more than four units.
Multifamily loans are offered with adjustable rates of interest, which adjust
according to a specified index, and typically have terms ranging from five to
ten years and LTVs of up to 75%.
Multifamily lending is generally considered to involve a higher degree
of risk than one- to four-family residential lending because the borrower
typically depends upon income generated by the project to cover operating
expenses and debt service. The profitability of a project can be affected by
economic conditions, government policies and other factors beyond the control of
the borrower. Home Savings attempts to reduce the risk associated with
multifamily lending by evaluating the creditworthiness of the borrower and the
projected income from the project and by obtaining personal guaranties on loans
made to corporations and partnerships. Home Savings requires borrowers to submit
financial statements annually to enable Home Savings to monitor the loan and
requires an assignment of rents.
At December 31, 2003, loans secured by multifamily properties totaled
approximately $149.5 million, or 8.5% of total loans. The largest loan had a
principal balance of $13.3 million and was performing according to its terms.
There was approximately $59,000 in multifamily loans that were considered
nonperforming at December 31, 2003.
LOANS SECURED BY NONRESIDENTIAL REAL ESTATE. Home Savings originates
loans secured by nonresidential real estate. Home Savings' nonresidential real
estate loans have adjustable rates, terms of up to 25 years and, generally, LTVs
of up to 80%. Among the properties securing Home Savings' nonresidential real
estate loans are shopping centers, office buildings, hotels and motels. The
majority of such properties are located within Home Savings' primary lending
area.
Nonresidential real estate lending is generally considered to involve a
higher degree of risk than residential lending due to the relatively larger loan
amounts and the effects of general economic conditions on the successful
operation of income-producing properties. Home Savings has endeavored to reduce
such risk by evaluating the credit history of the borrower, the location of the
real estate, the financial condition of the borrower, the quality and
characteristics of the income stream generated by the property and the
appraisals supporting the property's valuation.
At December 31, 2003, Home Savings' largest loan secured by
nonresidential real estate had a balance of $11.5 million and was performing
according to its terms. At December 31, 2003, approximately $309.5 million, or
17.5%, of Home Savings' total loans were secured by mortgages on nonresidential
real estate, of which $1.3 million was considered nonperforming at December 31,
2003.
Home Savings also originates a limited number of loans secured by
vacant land for the construction of single-family houses. Home Savings' land
loans are generally fixed-rate loans for terms up to five years and require a
LTV of 75% or less. At December 31, 2003, approximately $14.5 million, or 0.82%,
of Home Savings' total loans were secured by land loans made to individuals
intending primarily to construct and occupy single-family residences on the
properties.
CONSTRUCTION LOANS. Home Savings makes loans for the construction of
one- to four-family residences, multifamily properties and nonresidential real
estate projects. Residential construction loans are made to both owner-occupants
and to builders on a speculative (unsold) basis. Construction loans to
owner-occupants are structured as permanent loans with fixed or adjustable rates
of interest and terms of up to 30 years. During the first year, while the
residence is being constructed, the borrower is required to pay interest only.
Construction loans for one- to four-family residences have LTVs of up to 95%,
and construction loans for multifamily and nonresidential properties have LTVs
of up to 75%, with the value of the land included as part of the owner's equity.
At December 31, 2003, Home Savings had approximately $405.0 million, or 22.9% of
its total loans, invested in construction loans, including $358.9 million in
one- to four-family residential construction and approximately $46.2 million in
multifamily and nonresidential construction loans.
Approximately 75% of Home Savings' construction loans to builders are
made for homes for which the builder does not have a contract with a buyer. Home
Savings, however, generally limits speculative loans to builders with whom Home
Savings has a long-standing relationship and limits the number of outstanding
loans on unsold homes under construction within a specific area.
5
Construction loans generally involve greater underwriting and default
risks than do loans secured by mortgages on existing properties because
construction loans are more difficult to appraise and to monitor. Loan funds are
advanced upon the security of the project under construction. In the event a
default on a construction loan occurs and foreclosure follows, Home Savings must
take control of the project and attempt either to arrange for completion of
construction or dispose of the unfinished project.
Nonperforming construction loans at December 31, 2003 amounted to $1.7
million.
CONSUMER LOANS. Home Savings originates various types of consumer
loans, including home equity loans, education loans, loans secured by savings
accounts, vehicle loans and unsecured loans. Consumer loans are made at fixed
and adjustable rates of interest and for varying terms based on the type of
loan. Consumer loans secured by a deposit or savings account are made for up to
100% of the principal balance of the account and generally have adjustable
rates, which adjust based on the weekly average yield on U.S. Treasury
securities plus a margin.
For new automobiles, loans are originated for up to 100% of the MSRP
value of the car with terms of up to 66 months, and for used automobiles, loans
are made for up to the average trade value of the car model and a term of up to
five years. All automobile loans are originated indirectly by approved auto
dealerships. At December 31, 2003, automobile loans amounted to $48.2 million,
or 22.0%, of Home Savings' consumer loan portfolio.
Home Savings makes closed-end home equity loans in an amount which,
when added to the prior indebtedness secured by the real estate, does not exceed
90% of the estimated value of the real estate. Home equity loans are typically
secured by a second mortgage on the real estate. Home Savings frequently holds
the first mortgage, although Home Savings will make home equity loans in cases
where another lender holds the first mortgage. Home Savings also offers home
equity loans with a line of credit feature. Home equity loans are made with
adjustable and fixed rates of interest. Fixed-rate home equity loans have terms
of ten years but can be called after five years. Rate adjustments on adjustable
home equity loans are determined by adding a 3.0% margin for loans on one- to
four-family residences of up to 80% LTV or by adding a 4.0% margin for loans on
one- to four-family residences of up to 90% LTV to the one-year U.S. Treasury
index. At December 31, 2003, approximately $134.1 million, or 61.3%, of Home
Savings' consumer loan portfolio consisted of home equity loans.
Consumer loans may entail greater credit risk than do residential
mortgage loans. The risk of default on consumer loans increases during periods
of recession, high unemployment, and other adverse economic conditions. Although
Home Savings has not had significant delinquencies on consumer loans, no
assurance can be provided that delinquencies will not increase. Nonperforming
consumer loans as a percentage of outstanding consumer loans amounted to 0.41%
at December 31, 2003.
At December 31, 2003, Home Savings had approximately $218.8 million, or
12.4% of its total loans, invested in consumer loans. Home Savings anticipates a
moderate increase in its consumer loan portfolio in the future as a result of
increased cross-selling efforts to existing customers.
COMMERCIAL LOANS. Home Savings makes commercial loans to businesses in
its primary market area, including traditional lines of credit, revolving lines
of credit, term loans and acquisition and development loans. The LTV ratios for
commercial loans depend upon the nature of the underlying collateral, but
generally commercial loans are made with LTVs of 50 to 85% and have adjustable
interest rates. Lines of credit and revolving credits are generally priced on a
floating rate basis, which is tied to the prime rate or U.S. Treasury bill rate.
Term and time loans are usually adjustable, but can have fixed rates of
interest, and have terms of one to five years.
At December 31, 2003, Home Savings had approximately $66.8 million, or
3.8% of total loans, invested in commercial loans. The majority of these loans
are secured by a security interest in inventory, accounts receivable, machinery,
investment property, vehicles or other assets of the borrower. Home Savings also
originates unsecured commercial loans including lines of credit for periods of
less than 12 months, short-term loans and, occasionally, term loans for periods
of up to 36 months. These loans are underwritten based on the creditworthiness
of the borrowers and the guarantors. Home savings had $25.3 million in unsecured
commercial loans as of December 31, 2003. As a result of the addition of
experienced loan personnel and the implementation of enhanced underwriting
procedures, Home Savings intends to increase its unsecured commercial loan
volume in the future.
6
Commercial loans are generally deemed to entail significantly greater
risk than real estate lending. The repayment of commercial loans is typically
dependent on the income stream and successful operation of a business, which can
be affected by economic conditions. The collateral for commercial loans, if any,
often consists of rapidly depreciating assets.
Nonperforming commercial loans at December 31, 2003 amounted to $1.9
million.
LOAN SOLICITATION AND PROCESSING. The lending activities of Home
Savings are subject to the written, non-discriminatory underwriting standards
and loan origination procedures approved by Home Savings' Board of Directors
(Board). Loan originations are generally obtained from existing customers and
members of the local community and from referrals by real estate brokers,
lawyers, accountants, and current and former customers. Home Savings also
advertises in the local print media, radio and television.
Each of Home Savings' 35 offices and six loan production offices have
loan personnel who can accept loan applications, which are then forwarded to
Home Savings' Underwriting Department for processing and approval. In
underwriting real estate loans, Home Savings typically obtains a credit report,
verification of employment and other documentation concerning the
creditworthiness of the borrower. An appraisal of the fair market value of the
real estate that will be given as security for the loan is prepared by one of
Home Savings' in-house licensed appraisers or an approved fee appraiser. For
certain large nonresidential real estate loans, the appraisal is conducted by an
outside fee appraiser whose report is reviewed by Home Savings' chief appraiser.
Upon the completion of the appraisal and the receipt of information on the
credit history of the borrower, the loan application is submitted for review to
the appropriate persons. Commercial, residential and nonresidential real estate
loans up to $1.0 million may be approved by an authorized executive officer.
Loan requests of $1.0 million to $15.0 million require the approval of the Loan
Committee. All loans of $15.0 million or more require approval by three
executive officers and a majority of the Board.
Borrowers are required to carry satisfactory fire and casualty
insurance and flood insurance, if applicable, and to name Home Savings as an
insured mortgagee. Home Savings generally obtains an attorney's opinion of
title, although title insurance may be obtained on larger nonresidential real
estate loans.
The procedure for approval of construction loans is the same as for
permanent real estate loans, except that an appraiser evaluates the building
plans, construction specifications and estimates of construction costs. Home
Savings also evaluates the feasibility of the proposed construction project and
the experience and record of the builder. Once approved, the construction loan
is disbursed in installments based upon periodic inspections of construction
progress.
Consumer loans are underwritten on the basis of the borrower's credit
history and an analysis of the borrower's income and expenses, ability to repay
the loan, and the value of the collateral, if any.
LOAN ORIGINATIONS, PURCHASES AND SALES. Home Savings' residential loans
are generally made on terms and conditions and documented to conform to the
secondary market guidelines for sale to the Federal Home Loan Mortgage Company
(FHLMC) and other institutional investors in the secondary market. Education
loans are sold, once the borrower leaves school, to the Student Loan Marketing
Association. Home Savings does not originate first mortgage loans insured by the
Federal Housing Authority or guaranteed by the Veterans Administration, but it
has purchased such loans as well as participation interests in such loans.
In 2003, Home Savings securitized and sold $90.4 million in fixed rate
single family mortgage loans, and sold an additional $443.2 million of fixed
rate mortgage loans during 2003 as part of its ongoing mortgage banking
operations. Home Savings generally retains the servicing rights on the sale of
loans originated in the geographic area surrounding its full service branches,
and sells loans generated by its loan production offices servicing released.
Home Savings anticipates continued participation in the secondary mortgage loan
market to maintain its desired risk profile.
At December 31, 2003, Home Savings had $24.5 million of outstanding
commitments to originate loans and $231.5 million available to borrowers under
consumer and commercial lines of credit. At December 31, 2003, Home Savings had
$132.8 million in undisbursed funds related to construction loans in process.
During 2003, Home Savings entered into an agreement to purchase one- to
four-family construction loans from another institution. Loans purchased under
this agreement earn a floating rate of interest, are guaranteed as to principal
and interest by a third party and may be for the purpose of constructing either
pre-sold or speculative homes. At December 31,
7
2003, approximately $101.9 million was outstanding under this program. Home
Savings anticipates continuing purchases of loans under this program in 2004.
LOANS TO ONE BORROWER LIMITS. Regulations generally limit the aggregate
amount that Home Savings may lend to any one borrower to an amount equal to
15.0% of Home Savings' unimpaired capital and unimpaired surplus (Lending Limit
Capital). A savings association may lend to one borrower an additional amount
not to exceed 10.0% of Lending Limit Capital if the additional amount is fully
secured by certain forms of "readily marketable collateral." Real estate is not
considered "readily marketable collateral." In applying this limit, the
regulations require that loans to certain related or affiliated borrowers be
aggregated.
Based on such limits, Home Savings could lend approximately $25.8
million to one borrower at December 31, 2003. The largest amount Home Savings
had outstanding to one borrower at December 31, 2003, was $21.4 million, which
consisted of four loans secured by first mortgages on commercial buildings. At
December 31, 2003, these loans were performing in accordance with their terms.
DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS. Home
Savings attempts to maintain a high level of asset quality through sound
underwriting policies and aggressive collection practices.
The Collections Department of Home Savings uses a collection program to
monitor and review the status of loans. When a loan payment has not been made by
the sixteenth of the month, a past due notice is sent to the customer. Once a
loan is 20 days delinquent, the account is turned over to a collector, who will
continue to try to bring the loan current through telephone calls, personal
visits and letters until the loan has been delinquent 60 to 75 days. If the loan
has not been brought current by the 75th day, the loan will be reviewed for
foreclosure consideration. A decision as to whether and when to initiate
foreclosure proceedings is based on such factors as the amount of the
outstanding balance in relation to the original indebtedness, the extent of the
delinquency, the borrower's ability and willingness to cooperate in curing the
delinquency and any environmental issues that may need to be addressed. Once the
foreclosure is approved by the Collection Manager, the Vice President of Loan
Administration and the Executive Committee, it is turned over to outside legal
counsel.
The following table reflects the amount of loans in a delinquent status
as of the dates indicated:
At December 31,
----------------------------------------------------------------------------------------------
2003 2002
------------------------------------------ ------------------------------------------
Percent of Percent of
total total
Number Amount loans Number Amount loans
------ ------ ---------- ------ ------ ----------
(Dollars in thousands)
Loans delinquent for:
30-59 days 250 $ 8,478 0.48% 364 $21,757 1.38%
60-89 days 75 2,877 0.16 126 5,852 0.37
90 days or over 211 12,981 0.73 207 14,424 0.91
------- ------- ------- ------- ------- -------
Total delinquent loans 536 $24,336 1.37% 697 $42,033 2.66%
======= ======= ======= ======= ======= =======
Nonperforming assets include nonaccruing loans, restructured loans,
real estate acquired by foreclosure or by deed-in-lieu thereof and repossessed
assets. Once a loan becomes 90 days delinquent, it is placed on non-accrual
status.
Loans are reviewed through monthly reports to the Board and weekly
reports to senior management and are placed on nonaccrual status when collection
in full is considered doubtful by management. Interest accrued and unpaid at the
time a loan is placed on nonaccrual status is charged against interest income.
Subsequent cash payments are generally applied to interest income unless, in the
opinion of management, the collection of principal and interest is doubtful. In
those cases, subsequent cash payments are applied to principal.
8
The following table sets forth information with respect to Home
Savings' nonperforming loans and other assets at the dates indicated:
At December 31,
---------------------------------------------------
2003 2002 2001 2000 1999
------- ------- ------- ------- -------
(Dollars in thousands)
Nonperforming loans:
Nonaccrual loans
Real estate loans:
One- to four-family $ 7,121 $ 7,567 $ 5,813 $ 2,966 $ 2,923
Multifamily and nonresidential 1,315 2,049 775 3,019 82
Construction (net of loans in process) and land 1,724 3,141 3,398 1,741 272
------- ------- ------- ------- -------
Total real estate loans 10,160 12,757 9,986 7,726 3,277
Consumer 888 715 434 457 132
Commercial 1,933 952 469 1,360 206
------- ------- ------- ------- -------
Total nonaccrual loans 12,981 14,424 10,889 9,543 3,615
Restructured real estate loans 1,853 1,271 1,572 208 317
------- ------- ------- ------- -------
Total nonperforming loans 14,834 15,695 12,461 9,751 3,932
Real estate acquired through foreclosure and other
repossessed assets
1,299 1,150 477 359 157
------- ------- ------- ------- -------
Total nonperforming assets $16,133 $16,845 $12,938 $10,110 $ 4,089
======= ======= ======= ======= =======
Nonperforming loans as a percent of total loans 0.93% 0.95% 0.89% 1.10% 0.54%
Nonperforming assets as a percent of total assets 0.82 0.81 0.67 0.77 0.30
Allowance for loan losses as a percent of nonperforming loans 100.70 100.98 92.13 67.79 164.86
Allowance for loan losses as a percent of total loans before allowance 0.94 0.94 0.81 0.74 0.88
For 2003, approximately $1.1 million in additional interest income
would have been recorded had nonaccrual and restructured loans been accruing
pursuant to contractual terms. During 2003, interest collected on such loans and
included in net income was approximately $575,000.
Nonperforming assets decreased approximately $712,000, or 4.2%, to
$16.1 million at December 31, 2003, from $16.8 million at December 31, 2002.
This decrease is due to a variety of factors, including more aggressive
collection procedures and an accelerated foreclosure process, and is not due to
a single relationship. At December 31, 2003, total nonaccrual and restructured
loans accounted for 0.93% of net loans receivable, compared to 0.95% at December
31, 2002. Total nonperforming assets were 0.82% of total assets as of December
31, 2003, a decrease of 0.01% from 0.81% as of December 31, 2002.
Real estate acquired in settlement of loans is classified separately on
the balance sheet at the lower of cost or fair value as of the date of
acquisition. At foreclosure, the loan is written down to the value of the
underlying collateral by a charge to the allowance for loan losses, if
necessary. Any subsequent write-downs are charged against operating expenses.
Operating expenses of such properties, net of related income or loss on
disposition, are included in other expenses. At December 31, 2003, the carrying
value of real estate acquired in settlement of loans was $1.3 million and
consisted of $1.28 million in single-family properties and $16,000 in property
secured by land.
In addition to the nonperforming loans identified above, other loans
may be identified as having potential credit problems that result in those loans
being classified by our internal loan review function. These potential problem
loans, which have not exhibited the more severe weaknesses generally present in
nonperforming loans, amounted to $14.2 million, net of applicable reserves, at
December 31, 2003.
Home Savings classifies its assets in accordance with federal
regulations. Problem assets are classified as "special mention," "substandard,"
"doubtful" or "loss." "Substandard" assets have one or more defined weaknesses
and are characterized by the distinct possibility that Home Savings will sustain
some loss if the deficiencies are not corrected. "Doubtful" assets have the same
weaknesses as "substandard" assets, with the additional characteristics that (i)
the weaknesses make collection or liquidation in full, on the basis of currently
existing facts, conditions and values, questionable and (ii) there
9
is a high possibility of loss. An asset classified as "loss" is considered
uncollectible and of such little value that its continuance as an asset of Home
Savings is not warranted. Federal regulations also contain a "special mention"
category, consisting of assets which do not currently expose an institution to a
sufficient degree of risk to warrant classification but which possess credit
deficiencies or potential weaknesses deserving management's close attention.
Home Savings classifies its commercial loans on a periodic basis, not
less often than annually, according to a nine-level risk rating system that
includes, in addition to the "substandard," "doubtful" and "loss," categories
discussed above, further classifications of "prime," "good," "satisfactory,"
"fair," "watch" and "uncertain."
Commercial loans that are classified "prime," "good," "satisfactory" or
"fair" possess levels of risk, if any, which are generally acceptable to Home
Savings. A loan which is classified as "uncertain" represents a loan for which
there is insufficient current information on the borrower to evaluate the
primary source of payment. A loan may only be maintained as "uncertain" for 90
days while additional information is obtained, subject to one 90-day extension
by the Commercial Loan Manager or a higher level officer.
Home Savings analyzes each classified asset quarterly to determine
whether changes in the classifications are appropriate under the circumstances.
Such analysis focuses on a variety of factors, including the amount of, and the
reasons for, any delinquency, the use of the real estate securing the loan, the
financial condition of the borrower, and the appraised value of the real estate.
As such factors change, the classification of the asset will change accordingly.
ALLOWANCE FOR LOAN LOSSES. Management establishes the allowance for
loan losses at a level it believes adequate to absorb probable losses incurred
in the loan portfolio. Management bases its determination of the adequacy of the
allowance upon estimates derived from an analysis of individual credits, prior
and current loss experience, loan portfolio delinquency levels, overall growth
in the loan portfolio and current economic conditions. Consequently, these
estimates are particularly susceptible to changes that could result in a
material adjustment to results of operations. The provision for loan losses
represents a charge against current earnings in order to maintain the allowance
for loan losses at an appropriate level.
In determining the adequacy of the allowance for loan loss, management
reviews and evaluates on a quarterly basis the necessity of a reserve for
individual loans classified by management. The specifically allocated reserve
for a classified loan is determined based on management's estimate of the
borrower's ability to repay the loan given the availability of collateral, other
sources of cash flow, and legal options available to Home Savings. Once a review
is completed, the need for a specific reserve is determined by the Home Savings
Asset Review Committee and allocated to the loan. Other loans not specifically
reviewed by management are evaluated using the historical charge-off experience
ratio calculated by type of loan. The historical charge-off experience ratio
factors into account the homogeneous nature of the loans, the geographical
lending areas involved, regulatory examination findings, specific grading
systems applied and any other known factors which may impact the ratios used.
Specific reserves on individual loans and historical ratios are reviewed
quarterly and adjusted as necessary based on subsequent collections, loan
upgrades or downgrades, nonperforming trends or actual principal charge-off.
When evaluating the adequacy of the allowance for loan losses, consideration is
given to geographic concentration and the effect changing economic conditions
have on Home Savings.
10
The following table sets forth an analysis of Home Savings' allowance
for loan losses for the periods indicated:
Year ended December 31,
--------------------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
(Dollars in thousands)
Balance at beginning of period $ 15,099 $ 11,480 $ 6,553 $ 6,405 $ 6,398
Provision for loan losses 3,179 3,578 2,495 300 100
Charge-offs:
Real estate (2,111) (347) (89) (83) (60)
Consumer (650) (410) (283) (38) (65)
Commercial (579) (1,210) (55) (80) -
-------- -------- -------- -------- --------
Total charge-offs (3,340) (1,967) (427) (201) (125)
-------- -------- -------- -------- --------
Recoveries:
Real estate 94 71 13 17 21
Consumer 41 65 10 9 9
Commercial 38 3 9 23 2
-------- -------- -------- -------- --------
Total recoveries 173 139 32 49 32
-------- -------- -------- -------- --------
Net recoveries (charge-offs) (3,167) (1,828) (395) (152) (93)
Acquisition of Industrial - - 2,795 - -
Acquisition of Potters - 1,869 - - -
-------- -------- -------- -------- --------
Balance at end of year $ 15,111 $ 15,099 $ 11,480 $ 6,553 $ 6,405
======== ======== ======== ======== ========
Ratio of net charge-offs
to average net loans (0.21)% (0.12)% (0.03)% (0.02)% (0.01)%
The following table sets forth the allocation of the allowance for loan
losses by category. The allocations are based on management's assessment of the
risk characteristics of each of the components of the total loan portfolio and
are subject to change as and when the risk factors of each component change. The
allocation is not indicative of either the specific amounts or the loan
categories in which future charge-offs may be taken, nor should it be taken as
an indicator of future loss trends. The allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not restrict the use of the allowance to absorb losses in any category.
At December 31,
--------------------------------------------------------------------------------------------------
2003 2002 2001
---------------------------- ------------------------------ ----------------------------
Percent of Percent of Percent of
loans in each loans in each loans in each
category category category
Amount to total loans Amount to total loans Amount to total loans
------- -------------- ------- ---------------- ------- --------------
(Dollars in thousands)
Real estate loans $10,796 71.44% $11,017 72.97% $ 8,339 72.64%
Consumer loans 2,670 17.67 1,947 12.89 975 8.49
Commercial loans 1,645 10.89 2,135 14.14 2,166 18.87
------- ------- ------- ------- ------- -------
Total $15,111 100.00% $15,099 100.00% $11,480 100.00%
======= ======= ======= ======= ======= =======
At December 31,
--------------------------------------------------------------
2000 1999
----------------------------- ----------------------------
Percent of loans Percent of loans
in each category in each category
Amount to total loans Amount to total loans
------- ---------------- ------- ----------------
(Dollars in thousands)
Real estate loans $ 4,117 62.83% $ 4,182 65.29%
Consumer loans 566 8.64 555 8.67
Commercial loans 1,870 28.54 1,668 26.04
------- ------ ------- ------
Total $ 6,553 100.00% $ 6,405 100.00%
======= ====== ======= ======
INVESTMENT ACTIVITIES
GENERAL. Investment and mortgage-related securities are classified upon
acquisition as available for sale, held to maturity, or trading. Securities
classified as available for sale are carried at estimated fair value with the
unrealized holding gain or loss, net of taxes, reflected as a component of
retained earnings. Securities classified as held to maturity are carried at
amortized cost. Securities classified as trading are carried at estimated fair
value with the unrealized holding gain or loss reflected as a component of
income. United Community, Home Savings and Butler Wick recognize premiums and
discounts in interest income over the period to maturity or call by the level
yield method and realized gains or losses on the sale of debt securities based
on the amortized cost of the specific securities sold.
11
HOME SAVINGS INVESTMENT ACTIVITIES. Federal regulations and Ohio law
permit Home Savings to invest in various types of marketable securities,
including interest-bearing deposits in other financial institutions, federal
funds, U.S. Treasury and agency obligations, mortgage-related securities, and
certain other specified investments. The Board has adopted an investment policy
which authorizes management to make investments in U.S. Treasury obligations,
U.S. Federal agency and federally-sponsored corporation obligations,
mortgage-related securities issued or sponsored by Federal National Mortgage
Association (FNMA), FHLMC, Government National Mortgage Association (GNMA), as
well as private issuers, investment-grade municipal obligations, creditworthy,
unrated securities issued by municipalities in which an office of Home Savings
is located, investment-grade corporate debt securities, investment-grade
asset-backed securities, certificates of deposit that are fully-insured by the
FDIC, bankers' acceptances, federal funds and money market funds. Home Savings'
investment policy is designed primarily to provide and maintain liquidity within
regulatory guidelines, to maintain a balance of high quality investments to
minimize risk, and to maximize return without sacrificing liquidity and safety.
The investment activities of Home Savings are supervised by Home Savings'
Asset/Liability Committee and investment purchases are monitored weekly by the
Executive Committee.
Home Savings maintains a significant portfolio of mortgage-related
securities and CMOs, which are rated the highest credit quality by a nationally
recognized rating agency. Mortgage-related securities are issued by FNMA, GNMA
and FHLMC. Mortgage-related securities generally entitle Home Savings to receive
a portion of the cash flows from an identified pool of mortgages. GNMA
securities, FNMA securities and a majority of Home Savings' FHLMC securities are
guaranteed by the issuing agency as to timely payment of principal and interest.
The balance of Home Savings' FHLMC securities are guaranteed as to timely
payment of interest and eventual payment of principal. CMOs are a type of debt
security issued by a special-purpose entity that aggregates pools of mortgages
and mortgage-related securities and creates different classes of securities with
varying maturities and amortization schedules, as well as a residual interest,
with each class possessing different risk characteristics. The cash flows from
the underlying collateral are generally divided into tranches or classes which
have descending priorities with respect to the distribution of principal and
interest repayment of the underlying mortgages, as opposed to pass through
mortgage-related securities where cash flows are distributed pro rata to all
security holders. In contrast to mortgage-related securities from which cash
flow is received (and hence, prepayment risk is shared) pro rata by all
securities holders, the cash flow from the mortgages or mortgage-related
securities underlying CMOs is paid in accordance with predetermined priority to
investors holding various tranches of such securities or obligations. A
particular tranche of CMOs may therefore carry prepayment risk that differs from
that of both the underlying collateral and other tranches. Accordingly, CMOs
attempt to moderate risks associated with conventional mortgage-related
securities resulting from unexpected prepayment activity.
Home Savings is exposed to prepayment risk and reinvestment risk to the
extent that actual prepayments will differ from those estimated in pricing the
security, which may result in adjustments to the net yield on such securities.
Mortgage- related securities enable Home Savings to generate positive interest
rate spreads with minimal administrative expense and reduce credit risk due to
either guarantees provided by the issuer or the high credit rating of the
issuer. Mortgage- related securities classified as available for sale also
provide Home Savings with an additional source of liquid funds. Home Savings
also invests in investment grade corporate notes, which mature within three
years or less. The notes, which include debentures and collateralized notes,
generally provide a spread above the risk-free rate afforded by comparable
maturity U.S. Treasury securities.
BUTLER WICK INVESTMENT ACTIVITIES. Butler Wick holds securities through
two subsidiaries, Butler Wick & Co., Inc. and Butler Wick Trust Company. Butler
Wick & Co., Inc. invests in municipal securities and, to a lesser extent,
government agency securities for sale to clients. Butler Wick's securities are
carried at fair value with gains and losses recognized currently. Butler Wick &
Co., Inc. does not make markets in equity securities.
In order to qualify as a fiduciary in both the State of Ohio and in the
Commonwealth of Pennsylvania, Butler Wick Trust Company deposited United States
Government obligations having a principal value of $100,000 with the Federal
Reserve Bank for each state. In addition to these deposits, U.S. Government
obligations are owned by Butler Wick Trust Company.
UNITED COMMUNITY INVESTMENT ACTIVITIES. Funds maintained by United
Community for general corporate purposes, including possible acquisitions, are
invested in investment grade corporate notes, federally sponsored corporate
obligations, and equity securities. In addition, United Community invests in
Eurodollars, which is a short-term investment. These types of investments
provide a great deal of liquidity and flexibility.
12
The following table presents the amortized cost, fair value and
weighted average yield of securities at December 31, 2003 by maturity:
At December 31, 2003
---------------------------------------------------------------------------------------------
No stated After one year through Five years through
maturity One year or less five years ten years
------------------- --------------------- ------------------------- -----------------
Amortized Average Amortized Average Amortized Average Amortized Average
cost yield cost yield cost yield cost yield
--------- ------- --------- ------- --------- ------- --------- -------
(Dollars in thousands)
Securities:
US government agencies
and corporations $ - -% $28,106 2.66% $45,487 2.55% $ - -%
States and political subdivisions - - 29 5.25 9 10.45 34 5.50
Mortgage related securities - - 47 7.31 3,841 8.05 1,616 8.31
Other securities (a) 12,450 1.99 - - - - - -
------- ------- ------- -------
Total securities $12,450 1.99% $28,182 2.67% $49,337 2.98% $ 1,650 8.25%
======= ======= ======= =======
At December 31, 2003
-----------------------------------------------------------
After ten years Total
----------------------- -------------------------------
Amortized Average Amortized Average Fair
cost yield cost yield value
---- ----- ---- ----- -----
(Dollars in thousands)
Securities:
US government agencies
and corporations $ - -% $ 73,593 2.59% $ 73,788
States and political subdivisions 997 4.90 1,069 4.98 1,071
Mortgage related securities 148,874 4.24 154,375 4.38 155,266
Other securities (a) - - 12,450 2.00 13,000
-------- -------- --------
Total securities $149,871 4.24% $241,490 3.74% $243,125
======== ======== ========
(a) Yield on equity securities only; mutual funds excluded
SOURCES OF FUNDS
GENERAL. Deposits have traditionally been the primary source of Home
Savings' funds for use in lending and other investment activities. In addition
to deposits, Home Savings derives funds from interest payments and principal
repayments on loans and income on other earning assets. Loan payments are a
relatively stable source of funds, while deposit inflows and outflows fluctuate
in response to general interest rates and money market conditions. Home Savings
may also borrow from the FHLB, as well as other suitable lenders, as a source of
funds.
DEPOSITS. Deposits are attracted principally from within Home Savings'
primary market area through the offering of a selection of deposit instruments,
including regular passbook savings accounts, demand deposits, individual
retirement accounts (IRAs), NOW accounts, money market accounts, and
certificates of deposit. Interest rates paid, maturity terms, service fees, and
withdrawal penalties for the various types of accounts are monitored weekly by
the Executive Committee. Home Savings does not use brokers to attract deposits.
The amount of deposits from outside Home Savings' primary market area is not
significant.
13
The following table sets forth the dollar amount of deposits in the various
types of accounts offered by Home Savings at the dates indicated:
At December 31, 2003 For the Year Ended December 31, 2003
------------------------------------------- --------------------------------------------
Percent Weighted Percent Weighted
of total average Average of average average
Amount deposits rate balance deposits rate
------ -------- ---- ------- -------- ----
(Dollars in thousands)
Noninterest bearing demand $ 63,442 4.46% -% $ 61,273 4.17% -%
NOW and money market accounts 305,841 21.48 0.81 308,816 21.01 1.01
Savings accounts 312,210 21.93 0.52 335,843 22.85 0.70
Certificates of deposit 742,205 52.13 3.16 763,704 51.97 3.33
---------- ------ ---------- ------
Total deposits $1,423,698 100.00% 1.72% $1,469,636 100.00% 2.10%
========== ====== ========== ======
For the Year Ended December 31, 2002 For the Year Ended December 31, 2001
----------------------------------------- --------------------------------------------
Percent Weighted Percent Weighted
Average of average average Average of average average
balance deposits rate balance deposits rate
------- -------- ---- ------- -------- ----
(Dollars in thousands)
Noninterest bearing demand $ 45,806 3.10% -% $ 25,585 2.25% -%
NOW and money market accounts 279,894 18.98 1.90 184,120 16.23 2.96
Savings accounts 299,048 20.28 1.65 228,485 20.13 2.28
Certificates of deposit 850,054 57.64 4.08 696,633 61.39 5.36
---------- ------ ---------- ------
Total deposits $1,474,802 100.00% 3.05% $1,134,823 100.00% 4.23%
========== ====== ========== ======
Total deposits decreased by $58.2 million, or 3.9%, from December 31,
2002, to December 31, 2003.
The following table shows rate and maturity information for Home
Savings' certificates of deposit at December 31, 2003:
Over Over
Up to 1 year to 2 years to
Rate one year 2 years 3 years Thereafter Total
---- -------- ---------- ----------- ---------- -----
(In thousands)
4.00% or less $310,540 $ 93,072 $ 22,692 $ 71,992 $498,296
4.01% to 6.00% 25,804 44,220 15,404 116,781 202,209
Greater than 6.01% 6,050 34,112 1,496 42 41,700
-------- -------- -------- -------- --------
Total certificates of deposit $342,394 $171,404 $ 39,592 $188,815 $742,205
======== ======== ======== ======== ========
Percent of total certificates
of deposit 46.13% 23.09% 5.33% 25.44% 100.00%
At December 31, 2003, approximately $342.4 million of Home Savings'
certificates of deposit mature within one year. Based on past experience and
Home Savings' prevailing pricing strategies, management believes that a
substantial percentage of such certificates will be renewed with Home Savings at
maturity. If, however, Home Savings is unable to renew the maturing certificates
for any reason, borrowings of up to $434.2 million are available from the FHLB
of Cincinnati.
14
The following table presents the amount of Home Savings' certificates
of deposit of $100,000 or more by the time remaining until maturity at December
31, 2003:
Maturity Amount
-------- ------
(In thousands)
Three months or less $ 29,027
Over 3 months to 6 months 11,986
Over 6 months to 12 months 23,711
Over 12 months 83,686
--------
Total $148,410
========
Based on past experience, management believes that a substantial percentage of
the above certificates will be renewed with Home Savings at maturity.
The following table sets forth Home Savings' deposit account balance
activity for the periods indicated:
Year ended December 31,
----------------------------------
2003 2002
----------- -----------
(Dollars in thousands)
Beginning balance $ 1,481,901 $ 1,383,418
Net (decrease)increase in deposits (90,117) 53,919
----------- -----------
Net deposits before interest credited 1,391,784 1,437,337
Interest credited 31,914 44,564
----------- -----------
Ending balance $ 1,423,698 $ 1,481,901
=========== ===========
Net (decrease)/increase $ (58,203) $ 98,483
=========== ===========
Percent (decrease)/increase (3.93)% 7.12%
BORROWINGS. The FHLB system functions as a central reserve bank
providing credit for its member institutions and certain other financial
institutions. As a member in good standing of the FHLB of Cincinnati, Home
Savings is authorized to apply for advances, provided certain standards of
creditworthiness have been met. Under current regulations, an association must
meet certain qualifications to be eligible for FHLB advances. The extent to
which an association is eligible for such advances will depend upon whether it
meets the Qualified Thrift Lender (QTL) test. If an association meets the QTL
test, the association will be eligible for 100% of the advances it would
otherwise be eligible to receive. If an association does not meet the QTL test,
the association will be eligible for such advances only to the extent it holds
specified QTL test assets. At December 31, 2003, Home Savings was in compliance
with the QTL test. Home Savings may borrow up to $434.2 million from the FHLB,
and had $298.6 million outstanding advances at December 31, 2003.
Butler Wick borrows on a secured basis to fund client receivables.
Short-term bank loans bear interest at the federal funds rate plus 1% and are
payable on demand. The loans are fully collateralized by marketable securities
from both customers' margin accounts and securities owned by Butler Wick.
Short-term borrowings also take the form of securities loaned to other
broker/dealers. Short-term borrowings are available to Butler Wick to the extent
of the loan value of the marketable securities.
COMPETITION
Home Savings faces competition for deposits and loans from other
savings and loan associations, credit unions, banks and mortgage originators in
Home Savings' primary market area. The primary factors in competition for
deposits are customer service, convenience of office location and interest
rates. Home Savings competes for loan originations primarily through the
interest rates and loan fees it charges and through the efficiency and quality
of services it provides to borrowers. Competition is affected by, among other
things, the general availability of lendable funds, general and local economic
conditions, current interest rate levels and other factors, which are not
readily predictable.
15
Butler Wick offers retail brokerage, asset management, and trust
services to clients primarily in northeastern Ohio and western Pennsylvania. In
each of these businesses, Butler Wick competes with both regional and national
firms. As a full service broker, Butler Wick competes based on personal service
rather than price. Butler Wick Trust Company is the only such locally owned and
managed financial services providers.
EMPLOYEES
At December 31, 2003, Home Savings and Butler Wick had 604 and 175
full-time equivalent employees, respectively. Home Savings and Butler Wick
believe that relations with their employees are good. Home Savings offers
health, life and disability benefits to all employees, a 401(k) plan and an
employee stock ownership plan for its eligible employees. Butler Wick offers
health, life and disability benefits to all employees, a 401(k) plan, a profit
sharing plan and a retention plan for its eligible employees. None of the
employees of Home Savings or Butler Wick are represented by a collective
bargaining unit.
REGULATION
United Community is a unitary savings and loan holding company within
the meaning of the Home Owners Loan Act, as amended (HOLA), and is subject to
regulation, examination, and oversight by the OTS, although there are generally
no restrictions on the activities of United Community unless the OTS determines
that there is reasonable cause to believe that an activity constitutes a serious
risk to the financial safety, soundness, or stability of Home Savings. Home
Savings is subject to regulation, examination, and oversight by the Division and
the FDIC, and is also subject to certain provisions of the Federal Reserve Act.
Butler Wick is subject to regulation by the SEC and NASD Regulation, Inc. United
Community, Home Savings and Butler Wick are also subject to the provisions of
the Ohio Revised Code applicable to corporations generally, including laws which
restrict takeover bids, tender offers and control-share acquisitions involving
public companies which have significant ties to Ohio.
The OTS, the FDIC, the Division, the SEC and the NASD each have various
powers to initiate supervisory measures or formal enforcement actions if United
Community or the subsidiary they regulate does not comply with applicable
regulations. If the grounds provided by law exist, the FDIC or the Division may
place Home Savings in conservatorship or receivership. Home Savings is also
subject to regulatory oversight under various consumer protection and fair
lending laws which govern, among other things, truth-in-lending disclosures,
equal credit opportunity, fair credit reporting and community reinvestment.
Failure to abide by federal laws and regulations governing community
reinvestment could limit the ability of Home Savings to open a new branch or
engage in a merger.
Federal law prohibits Home Savings from making a capital distribution
to anyone or paying management fees to any person having control of Home Savings
if, after such distribution or payment, Home Savings would be undercapitalized.
In addition, each company controlling an undercapitalized institution will
comply with its capital restoration plan until the institution has been
adequately capitalized on average during each of the four preceding calendar
quarters and must provide adequate assurances of performance.
Federal Reserve Board regulations currently require savings
associations to maintain reserves of 3% of net transaction accounts (primarily
NOW accounts) up to $45.4 million (subject to an exemption of up to $6.6
million), and of 10% of net transaction accounts in excess of $45.4 million. At
December 31, 2003, Home Savings was in compliance with its reserve requirements.
Loans by Home Savings to executive officers, directors, and principal
shareholders and their related interests must conform to the lending limit on
loans to one borrower, and the total of such loans to executive officers,
directors, principal shareholders, and their related interests cannot exceed
specified limits. Most loans to directors, executive officers, and principal
shareholders must be approved in advance by a majority of the "disinterested"
members of the Board with any "interested" director not participating. All loans
to directors, executive officers, and principal shareholders must be made on
terms substantially the same as offered in comparable transactions with the
general public or as offered to all employees in a company-wide benefit program,
and loans to executive officers are subject to additional limitations. All other
transactions between Home Savings and its affiliates must comply with Sections
23A and 23B of the Federal Reserve Act. United Community and Butler Wick are
affiliates of Home Savings for this purpose.
16
Under federal law and regulations, no person, directly or indirectly,
or acting in concert with others, may acquire control of Home Savings or United
Community without 60 days' prior notice to the OTS. "Control" is generally
defined as having more than 25% ownership or voting power; however, ownership or
voting power of more than 10% may be deemed "control" if certain factors are in
place. If the acquisition of control is by a company, the acquirer must obtain
approval, rather than give notice, of the acquisition as a savings and loan
holding company.
In addition, a statutory limitation on the acquisition of control of an
Ohio savings bank requires the written approval of the Division prior to the
acquisition by any person or entity of a controlling interest in an Ohio
association. Control exists, for purposes of Ohio law, when any person or entity
which, either directly or indirectly, or acting in concert with one or more
other persons or entities, owns, controls, holds with power to vote, or holds
proxies representing, 15% or more of the voting shares or rights of an
association, or controls in any manner the election or appointment of a majority
of the directors. Ohio law also requires that certain acquisitions of voting
securities that would result in the acquiring shareholder owning 20%, 33 1/3% or
50% of the outstanding voting securities of United Community must be approved in
advance by the holders of at least a majority of the outstanding voting shares
represented at a meeting at which a quorum is present and a majority of the
portion of the outstanding voting shares represented at such a meeting,
excluding the voting shares by the acquiring shareholder.
Federal law generally prohibits a savings and loan holding company,
such as United Community, from controlling any other savings association or
savings and loan holding company, without prior approval of the OTS, or from
acquiring or retaining more than 5% of the voting shares of a savings
association or holding company thereof, which is not a subsidiary. Except with
the prior approval of the OTS, no director or officer of a savings and loan
holding company or person owning or controlling by proxy or otherwise more than
25% of such holding company's stock may also acquire control of any savings
institution, other than a subsidiary institution, or any other savings and loan
holding company.
17
ITEM 2. DESCRIPTION OF PROPERTY
The following table sets forth certain information at December 31,
2003, regarding the properties on which offices of Home Savings are located:
Owned or Year Net book
Location leased opened value Deposits
-------- ------ ------ -------- --------
(In thousands)
275 Federal Plaza West Owned 1919 $ 4,423 $ 71,208
Youngstown, Ohio
32 State Street Owned 1916 288 100,342
Struthers, Ohio
4005 Hillman Way Owned 1958 405 89,902
Boardman, Ohio
650 East State Street Owned 1925 184 83,873
Salem, Ohio
6000 Mahoning Avenue Leased 1959 60 85,970
Austintown, Ohio
7525 Market Street Owned 1971 546 128,405
Boardman, Ohio
4259 Kirk Road Owned 1975 554 101,923
Austintown, Ohio
202 South Main Street Owned 1975 432 91,126
Poland, Ohio
3500 Belmont Avenue Owned 1976 280 70,016
Youngstown, Ohio
29 North Broad Street Owned 1977 246 46,226
Canfield, Ohio
980 Great East Plaza Leased 1980 7 28,700
Niles, Ohio
One University Plaza Leased 2000 43 1,776
1059-1060 Kilcawley Center
Youngstown, Ohio
127 North Market Street Owned 1987 116 32,217
East Palestine, Ohio
210 West Lincoln Way Owned 1987 288 20,752
Lisbon, Ohio
2996 McCartney Road Leased 2000 119 4,597
Youngstown, Ohio
14825 South Avenue Ext. Owned 1997 698 30,520
Columbiana, Ohio
4625 North River Road Owned 2000 1,142 16,890
Warren, Ohio
18
Owned or Year Net book
Location Leased Opened Value Deposits
-------- ------ ------ -------- ---------
(In thousands)
30 East Main Street Owned 1994 $ 1,031 $ 27,831
Ashland, Ohio
203 North Sandusky Street Owned 1993 - N/A
Bellevue, Ohio
211 North Sandusky Street Owned 1972 613 53,021
Bellevue, Ohio
255 North Main Street Owned 1975 99 10,281
Clyde, Ohio
1500 Bright Road Owned 1993 900 18,146
Findlay, Ohio
321 West State Street Owned 1987 579 16,433
Fremont, Ohio
40 East Main Street Owned 1999 369 12,190
Lexington, Ohio
50 West Main Street (1) Owned 1976 660 46,079
Norwalk, Ohio
51 West Main Street (1)(2) Owned 1992 - N/A
Norwalk, Ohio
4112 Milan Road Owned 1988 392 17,419
Sandusky, Ohio
48 East Market Street Owned 1983 302 46,167
Tiffin, Ohio
796 West Market Street Owned 1990 196 10,950
Tiffin, Ohio
301 Myrtle Avenue Owned 1977 179 35,314
Willard, Ohio
121 Blossom Centre, Suite A Leased 93 1,408
Willard, Ohio
530 Broadway Street Owned 1982 566 57,363
East Liverpool, Ohio
15575 ST RT 170 Leased 1983 278 32,438
Calcutta, Ohio
46635 Y & O Road Owned 1975 201 9,555
Glenmoor, Ohio
998 Third Street Owned 2001 1,082 6,963
Beaver, Pennsylvania
7707 Mentor Ave Leased 2002 221 16,361
Mentor, Ohio
7075 North Aurora Rd. Owned 2003 1,848 1,047
Aurora, Ohio
250 E Wilson Bridge Rd. Leased 2003 45 N/A
Columbus, Ohio
19
3690 Orange Place, Suite 250 Leased 2000 $ 191 N/A
Beachwood, Ohio
2211 South Dixie Dr 2003 - N/A
Dayton, Ohio
Pointe View Professional Park Leased 2000 11 N/A
4831 Darrow Rd. #106
Stow, Ohio
7330 Southern Blvd Leased 1998 38 N/A
Boardman, Ohio
(1) Book value and deposit totals are combined for the two Norwalk offices.
(2) Drive-up facility only.
The following table sets forth certain information at December 31,
2003, regarding the properties on which the main office and the branch offices
of Butler Wick are located:
Owned or Year
Location Leased opened
- -------------------------------- ------- ------
City Center One Bldg., Suite 700 Leased 1926
Youngstown, Ohio
960 W. State Street Leased 1959
Alliance, Ohio
1284 Liberty Street Leased 1932
Franklin, Pennsylvania
1 E. State Street Leased 1932
Sharon, Pennsylvania
25651 Detroit Road Leased 1990
Cleveland, Ohio
3685 Stutz Drive, Suite 201 Leased 1999
Canfield, Ohio
265 West Main Street, Suite 101 Leased 1980
Kent, Ohio
425 Niles-Cortland Road SE Leased 1932
Bldg. A, Suite 201
Warren, Ohio
4522 Fulton Drive NW Leased 1990
Canton, Ohio
100 S. Broadway, 2nd Floor Leased 1956
Salem, Ohio
3637 Medina Road Leased 1997
Medina, Ohio
3690 Orange Place, Suite 350 Leased 2003
Beachwood, Ohio
175 South Third Street, Suite 230 Leased 2000
Columbus, Ohio
20
Two Nationwide Plaza, Suite 770 Leased 2003
280 N. High Street
Columbus, Ohio
11 W Monument Ave., Suite 100 Leased 2002
Dayton, Ohio
ITEM 3. LEGAL PROCEEDINGS
United Community is not presently involved in any material legal
proceedings. From time to time, United Community is a party to legal proceedings
incidental to its business to enforce its security interest in collateral
pledged to secure loans made by Home Savings and incidental to its securities
business conducted by Butler Wick.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information contained in the 2003 Annual Report to Shareholders of
United Community (Annual Report) under the caption "Market Price and Dividends"
is incorporated herein by reference and attached hereto as part of Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information contained in the Annual Report under the caption
"Selected Financial Data and Other Data" is incorporated herein by reference and
attached hereto as part of Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information contained in the Annual Report under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by reference and attached hereto as part of
Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained in the Annual Report under the caption "Asset
and Liability Management and Market Risk" is incorporated herein by reference
and attached hereto as part of Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements appearing in the Annual Report
and the report of Crowe Chizek and Company LLC dated January 28, 2004, are
incorporated herein by reference and attached hereto as part of Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
An evaluation was carried out by United Community's management,
including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-14(c)/15d-14(c) of the Securities Exchange Act of 1934) as of December 31,
2003. Based on their evaluation, the Chief Executive Officer and
21
Chief Financial Officer have concluded that United Community's disclosure
controls and procedures are effective. During the last quarter of fiscal 2003,
there were no changes in United Community's internal controls over financial
reporting that materially affected , or is likely to materially affect, these
controls as of December 31, 2003.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement for the 2004 Annual
Meeting of Shareholders of United Community (Proxy Statement), to be filed with
the Securities and Exchange Commission (Commission) on or about March 24, 2004,
under the captions "Election of Directors," "Incumbent Directors," "Board
Meeting and Compensation," "Executive Officers," "Section 16(a) Beneficial
Ownership Reporting Compliance" and "Audit Committee Report" is incorporated
herein by reference.
United Community has adopted a code of ethics applicable to all
officers, directors and employees that complies with SEC requirements. A copy of
the code may be obtained upon written request to Patrick A. Kelly, Chief
Financial Officer, United Community Financial Corp., 275 Federal Plaza W,
Youngstown, Ohio 44503.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the captions
"Board Meetings, Committees and Compensation" and "Compensation of Executive
Officers," is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
The information contained in the Proxy Statement under the caption
"Ownership of UCFC Shares" is incorporated herein by reference.
United Community maintains the United Community Financial Corp. 1999
Long-Term Incentive Plan ("Incentive Plan") and the United Community Financial
Corp. Recognition and Retention Plan and Trust Agreement ("RRP") under which it
may issue equity securities to its directors, officers and employees in exchange
for goods or services. The Incentive Plan and the RRP were approved by United
Community's shareholders at the 1999 Special Meeting of Shareholders.
The following table shows, as of December 31, 2003, the number of
common shares issuable upon the exercise of outstanding stock options, the
weighted average exercise price of those stock options, and the number of common
shares remaining for future issuance under the Incentive Plan and the RRP,
excluding shares issuable upon exercise of outstanding stock options.
EQUITY COMPENSATION PLAN INFORMATION
(a) (b) (c)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
PLAN CATEGORY OUTSTANDING OPTIONS OUTSTANDING OPTIONS REFLECTED IN COLUMN (a))
- ------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by
security holders.......................... 2,468,622 $7.60 754,403
- ------------------------------------------------------------------------------------------------------------------------------
22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers --Certain Transactions" is incorporated
herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information contained in the Proxy Statement under the caption
"Audit Fees" is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(c) EXHIBITS
--------
3.1 Articles of Incorporation
3.2 Amended Code of Regulations
10 Material Contracts
11 Statement Regarding Computation of Per Share Earnings
13 Portions of the 2003 Annual Report to Shareholders
20 Proxy Statement for 2004 Annual Meeting of Shareholders
21 Subsidiaries of Registrant
23 Crowe, Chizek and Company LLC Consent
31.1 Section 302 Certification by Chief Executive Officer
31.2 Section 302 Certification by Chief Financial Officer
32 Certification of Financial Statements by Chief Executive
Officer and Chief Financial Officer
(a) FINANCIAL STATEMENT SCHEDULES. All schedules are omitted because they
are not applicable or the required information is shown in the
financial statements or notes thereto.
(b) REPORTS ON FORM 8-K. On October 15, 2003, United Community filed an 8-K
under disclosing operating results for the quarter ended September 30, 2003
under Item 12.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNITED COMMUNITY FINANCIAL CORP.
By: /S/ Douglas M. McKay
------------------------------------
Douglas M. McKay, President
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated.
/S/ Douglas M. McKay /S/ Richard M. Barrett
- -------------------------------------------------- ----------------------------------------------------------
Douglas M. McKay, President and Director Richard M. Barrett, Director
Date: March 12, 2004 Date: March 12, 2004
/S/ Richard J. Schiraldi /S/ David C. Sweet
- -------------------------------------------------- ----------------------------------------------------------
Richard J. Schiraldi, Director David C. Sweet, Director
Date: March 12, 2004 Date: March 12, 2004
/S/ Herbert F. Schuler, Sr. /S/ Patrick A. Kelly
- -------------------------------------------------- ----------------------------------------------------------
Herbert F. Schuler, Sr., Director Patrick A. Kelly, Treasurer (Principal Financial Officer)
Date: March 12, 2004 Date: March 12, 2004
/S/ Thomas J. Cavalier
- --------------------------------------------------
Thomas J. Cavalier, Director
Date: March 12, 2004
24
INDEX TO EXHIBITS
Exhibit Number
--------------
3.1 Articles of Incorporation Incorporated by reference to the Registration Statement on
Form S-1 filed by United Community on March 13, 1998 (S-1)
with the Securities and Exchange Commission (SEC), Exhibit
3.1
3.2 Amended Code of Regulations Incorporated by reference to the 1998 10-K filed by United
Community on March 31, 1999 via Edgar, film number
99582343, Exhibit 3.2
10.1 The Home Savings and Loan Company of Youngstown, Incorporated by reference to the 2001 10-K filed by United
Ohio Employee Stock Ownership Plan Community on March 29, 2002 via Edgar, film number
02593161, Exhibit 10.1
10.2 Employment Agreement between The Home Savings
and Loan Company of Youngstown, Ohio and Douglas
M. McKay, dated December 29, 2000.
10.3 Employment Agreement between The Home Savings
and Loan Company of Youngstown, Ohio and Patrick W.
Bevack, dated December 29, 2000.
10.4 Employment Agreement between The Home Savings
and Loan Company of Youngstown, Ohio and Patrick
A. Kelly, dated December 29, 2000.
10.5 Employment Agreement between Butler Wick Corp. Incorporated by reference to the 1999 10-K filed by United
and Thomas J. Cavalier, dated August 12, 1999 Community on March 29, 2000 via Edgar, film number 582478,
Exhibit 10.5
10.6 Employment Agreement between The Home Savings
and Loan Company of Youngstown, Ohio and David G.
Lodge, dated December 29, 2000.
10.7 United Community 1999 Long-Term Incentive Plan Incorporated by reference to the Proxy Statement filed by
United community via Edgar on June 7, 1999, file number
9964170 (1999 Proxy), Exhibit A
10.8 United Community Recognition and Retention Plan and Incorporated by reference to the 1999 Proxy, Exhibit B
Trust Agreement
11 Statement Regarding Computation of Per Share Earnings Incorporated by reference to Note 22 to the Financial
Statements included in the Annual Report in Exhibit 13
13 Portions of the 2003 Annual Report to Shareholders
20 Proxy Statement for 2004 Annual Meeting of Incorporated by reference to the Proxy Statement, to be filed
Shareholders with the Securities and Exchange Commission on or about
March 24, 2004.
21 Subsidiaries of Registrant
23 Crowe Chizek and Company LLC Consent
31.1 Section 302 Certification by Chief Executive Officer
31.2 Section 302 Certification by Chief Financial Officer
32 Certification of Financial Statements by Chief Executive
Officer and Chief Financial Officer
25