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, 2001
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
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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
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(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
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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. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the last reported sale on March 25,
2002 was $255.0 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 25, 2002, there were 35,567,586 of the Registrant's Common
Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II of Form 10-K - Portions of 2001 Annual Report to Shareholders
Part III of Form 10-K - Portions of Proxy Statement for the 2002
Annual Meeting of Shareholders
TABLE OF CONTENTS
Item
Number Page
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PART I
1. Description of Business
General---------------------------------------------------------------------------------------1
Discussion of Forward-Looking Statements------------------------------------------------------1
Lending Activities----------------------------------------------------------------------------2
Investment Activities-------------------------------------------------------------------------11
Sources of Funds------------------------------------------------------------------------------15
Competition-----------------------------------------------------------------------------------17
Employees-------------------------------------------------------------------------------------17
Regulation------------------------------------------------------------------------------------18
2. Description of Property------------------------------------------------------------------------------19
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--------------------------------22
6. Selected Financial Data------------------------------------------------------------------------------22
7. Management's Discussion and Analysis of Financial Condition and Results of Operations----------------22
7A. Quantitative and Qualitative Disclosures About Market Risk-------------------------------------------22
8. Financial Statements and Supplemental Data-----------------------------------------------------------22
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure-----------------22
PART III
10. Directors and Executive Officers of the Registrant----------------------------------------------------22
11. Executive Compensation--------------------------------------------------------------------------------22
12. Security Ownership of Certain Beneficial Owners and Management----------------------------------------22
13. Certain Relationships and Related Transactions--------------------------------------------------------23
PART IV
14. 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.
Home Savings was organized as a mutual savings association under Ohio
law in 1889. Home Savings is subject to supervision and regulation by the Office
of Thrift Supervision (OTS), the Ohio Department of Commerce, Division of
Financial Institutions (Division) and the Federal Deposit Insurance Corporation
(FDIC). 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).
As a savings and loan holding company, United Community is subject to
regulation, supervision and examination by the OTS, the Division and the
Securities and Exchange Commission (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 conducts business from its main office located in
Youngstown, Ohio, 28 full-service branches, located in the Northern Ohio
communities of Austintown, Boardman, Canfield, Columbiana, East Palestine,
Howland, Liberty, Lisbon, Niles, Poland, Salem, Struthers, Youngstown, Ashland,
Bellevue, Clyde, Findlay, Fremont, Lexington, Norwalk, Sandusky, Tiffin, and
Willard and four loan production offices located in Canton, Cleveland, Mentor
and Stow. 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, Erie, Hancock,
Huron, Mahoning, Richland, Sandusky, Seneca and Trumbull Counties. 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, including home equity loans, education loans, loans secured by
savings accounts, motor vehicles, boats and recreational vehicles and unsecured
loans. For liquidity and interest rate risk management purposes, Home Savings
invests in various financial instruments discussed in the investment section.
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 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.
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 three wholly-owned subsidiaries:
Butler Wick & Co., Inc., Butler Wick Asset Management Company and Butler Wick
Trust Company. Butler Wick conducts business from its main office located in
Youngstown, Ohio, eight offices located in the northeastern Ohio communities of
Alliance, Cleveland, Canfield, Canton, Columbus, Kent, Warren, and Salem and two
offices in the western Pennsylvania communities of Franklin and Sharon. Butler
Wick primarily sells common and preferred stocks, but also offers an array of
government, corporate and municipal bonds, unit trusts, mutual funds, IRA's,
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.
DISCUSSION OF FORWARD-LOOKING STATEMENTS
When used in this Form 10-K or in future filings by United Community
with the SEC, in United Community's press releases or other public or
shareholder communications, or in oral statements made with the approval of an
authorized executive officer, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate,"
1
"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, that could cause actual results to differ
materially from historical earnings and those 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,
2001 2000 1999
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 $ 978,468 65.38% $ 618,112 65.22% $546,888 70.92%
Multifamily 60,691 4.06 24,085 2.54 7,838 1.02
Nonresidential 153,368 10.25 137,976 14.56 116,690 15.13
Land 11,432 0.76 5,172 0.55 299 0.04
----------- ------ --------- ------ -------- ------
Total permanent 1,203,959 80.44 785,345 82.87 671,715 87.11
Construction loans:
One- to four-family 115,853 7.74 57,955 6.11 27,486 3.57
Multifamily and nonresidential 26,883 1.80 11,389 1.20 1,637 0.21
----------- ------ --------- ------ -------- ------
Total construction 142,736 9.54 69,344 7.31 29,123 3.78
----------- ------ --------- ------ -------- ------
Total real estate loans 1,346,695 89.98 854,689 90.18 700,838 90.89
Consumer loans
Home equity 48,671 3.25 20,147 2.13 19,151 2.48
Auto 21,703 1.45 5,171 0.55 1,130 0.15
Education 5,280 0.35 3,850 0.40 3,860 0.50
Other (1) 35,095 2.34 29,177 3.08 18,998 2.46
----------- ------ --------- ------ -------- ------
Total consumer 110,749 7.40 58,345 6.16 43,139 5.59
Commercial loans 39,226 2.62 34,657 3.66 27,119 3.52
----------- ------ --------- ------ -------- ------
Total loans 1,496,670 100.00% 947,691 100.00% 771,096 100.00%
====== ====== ======
Less net items 90,191 71,038 48,009
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Total loans, net $ 1,406,479 $ 876,653 $723,087
=========== ========= ========
1998 1997
Percent of Percent of
Amount total loans Amount Total loans
------ ----------- ------ -----------
(Dollars in thousands)
Real estate loans:
Permanent
One- to four-family $516,767 73.84% $489,677 74.19%
Multifamily 8,172 1.17 8,944 1.36
Nonresidential 65,756 9.39 51,105 7.74
Land 190 0.03 285 0.04
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Total permanent 590,885 84.43 550,011 83.33
Construction loans:
One- to four-family 25,691 3.67 24,044 3.64
Multifamily and nonresidential 833 0.12 325 0.05
-------- ------ -------- ------
Total construction 26,524 3.79 24,369 3.69
-------- ------ -------- ------
Total real estate loans 617,409 88.22 574,380 87.02
Consumer loans
Home equity 18,321 2.62 17,097 2.59
Auto 1,603 0.23 2,457 0.37
Education 3,993 0.57 3,479 0.53
Other (1) 17,856 2.55 20,355 3.08
-------- ------ -------- ------
Total consumer 41,773 5.97 43,388 6.57
Commercial loans 40,637 5.81 42,271 6.41
-------- ------ -------- ------
Total loans 699,819 100.00% 660,039 100.00%
====== ======
Less net items 42,321 26,803
-------- --------
Total loans, net $657,498 $633,236
======== ========
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(1) Consists of overdraft protection loans and loans to individuals secured by
demand accounts, deposits, boats and one- to four-family residences.
3
LOAN MATURITY. The following table sets forth certain information as of
December 31, 2001, 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,
------------------------------------------------------------------------------------------
2005- 2007 - 2012 - 2017 and
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2002 2003 2004 2006 2011 2016 thereafter Total
---- ---- ---- ---- ---- ---- ---------- -----
(In thousands)
Residential real estate loans(1) $78,877 $50,092 $44,869 $ 90,403 $ 224,824 $197,285 $ 480,094 $1,166,444
Nonresidential real estate loans 56,674 6,818 7,258 15,085 38,346 33,065 23,005 180,251
Commercial loans 18,268 7,694 5,954 4,103 2,212 892 103 39,226
Consumer loans 24,728 18,985 18,398 32,143 7,121 1,049 8,325 110,749
--------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Total $ 178,547 $ 83,589 $ 76,479 $ 141,734 $ 272,503 $ 232,291 $ 511,528 $1,496,670
========= ========== ========== ============ ========== ========== =========== ==========
(1) Includes permanent and construction loans for one- to four-family and
multifamily properties and land loans.
The next table sets forth the dollar amount of all loans due after
December 31, 2002, which have fixed or adjustable interest rates:
Due after December 31, 2002
---------------------------
(In thousands)
Fixed rate $ 975,411
Adjustable rate 342,712
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$ 1,318,123
=============
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, 2001,
Home Savings' one- to four-family residential real estate loans totaled
approximately $978.5 million, or 65.4% of total loans. At December 31, 2001,
$5.8 million, or 0.6%, of Home Savings' one-to four-family loans were
nonperforming.
OTS regulations and Ohio law limit the amount which Home Savings may
lend in relationship to the appraised value of the real estate and improvements
which will 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 by Home Savings are 15-year fixed-rate
loans. 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, 2001, loans secured by multifamily properties totaled
approximately $60.7 million, or 4.1% of total loans. The largest loan had a
principal balance of $1.8 million and was performing according to its terms.
There was approximately $165,000 in multifamily loans that were considered
nonperforming at December 31, 2001.
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, hotels, motels and freezer warehouses. The
majority of such properties are located within Home Savings' primary lending
area. Home Savings has been involved for over 20 years in freezer warehouse
financing through a Youngstown area real estate developer who specializes in the
construction of freezer facilities.
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, 2001, Home
Savings' largest loan secured by nonresidential real estate had a balance of
$6.9 million and was performing according to its terms.
At December 31, 2001, approximately $153.4 million, or 10.2%, of Home
Savings' total loans were secured by mortgages on nonresidential real estate, of
which $610,000 was considered nonperforming at December 31, 2001.
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 commercial, 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, 2001, Home Savings had approximately $142.7
million, or 9.5% of its total loans, invested in construction loans, including
$115.8 million in one- to four-family residential construction and approximately
$26.9 in multifamily and nonresidential construction loans.
Approximately 30% 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.
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,
5
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, 2001 amounted to $3.4
million.
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, 2001, approximately $11.4 million, or 0.8%,
of Home Savings' total loans were secured by land loans made to individuals
intending to construct and occupy single-family residences on the properties.
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, 2001, Home Savings had approximately $39.2 million, or
2.6% 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. 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.
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, 2001 amounted to
$469,000.
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, 2001, automobile loans amounted to $21.7 million,
or 19.6 %, 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, 2001, approximately $48.7 million, or 43.9%, 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
6
increase. Nonperforming consumer loans as a percentage of outstanding consumer
loans amounted to 0.39%, 0.79% and 0.31% at December 31, 2001, 2000 and 1999,
respectively.
At December 31, 2001, Home Savings had approximately $110.7 million, or
7.4% 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.
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' 29 offices and 4 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 will be 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 application for a loan 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 of
Directors.
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 AND PURCHASES AND SALE OF MORTGAGE LOANS.
Historically, Home Savings has originated substantially all of the loans in its
portfolio and has held them until maturity. Nevertheless, Home Savings'
residential loans are generally made on terms and conditions and documentation
which 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.
During 2001, Home Savings became active in the secondary market. In
October, 2001, $110.9 million in fixed rate one- to- four family residential
mortgage loans held in the portfolio were securitized and sold to reduce
interest rate risk and provide liquidity. In addition to the $110.9 million
securitization and sale of portfolio loans, an additional $57.9 million of
mortgages originated during 2001 were sold. Home Savings' loan production
offices are expected to provide high levels of salable loans in 2002. Home
Savings generally retains servicing on the sale of loans originated in its
primary market area and sells loans servicing released on loans originated out
of the primary market area.
At December 31, 2001, Home Savings had $46.6 million of outstanding
commitments to originate loans and $45.5 million available to borrowers under
consumer and commercial lines of credit. At December 31, 2001, Home Savings had
$66.0 million in undisbursed funds related to construction loans in process.
7
LOANS TO ONE BORROWER LIMITS. OTS 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 Home Savings' 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 $26.7
million to one borrower at December 31, 2001. The largest amount Home Savings
had outstanding to one borrower at December 31, 2001, was $11.0 million, which
consisted of several loans secured by first mortgages on commercial buildings.
At December 31, 2001, 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.
At the beginning of each month, the Collections Department of Home
Savings receives a report on all delinquent loans. When a loan payment has not
been made by the fifteenth of the month, a late notice is sent and a penalty of
up to five percent of the payment due is assessed. Once a loan is 60 days
delinquent, a second notice is sent and the Collections Department contacts the
borrower by telephone. The Collections Department will generally continue to
attempt to bring the loan current through telephone calls or personal visits
until the loan has been delinquent 90 to 120 days. If the loan has not been
brought current by the 120th day, a member of the Collections Department will
present the loan to Home Savings' Pre-Foreclosure Committee which meets weekly.
If the Pre-Foreclosure Committee agrees to recommend the commencement of
foreclosure proceedings, the loan is presented to the Executive Committee of the
Board of Home Savings (Executive Committee) which normally refers the loan to
Home Savings' in-house legal staff. 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.
The following table reflects the amount of loans in a delinquent status
as of the dates indicated:
At December 31,
----------------------------------------------------------------------------
2001 2000
----------------------------------- -----------------------------------
Percent of Percent of
total total
Number Amount loans Number Amount loans
------ --------- ---------- ------ ------ ----------
(Dollars in thousands)
Loans delinquent for:
30-59 days 348 $ 18,450 1.22% 240 $ 10,423 1.19%
60-89 days 127 4,848 0.32 113 4,420 0.50
90 days or over 237 10,889 0.72 151 9,543 1.09
--- ---------- ---- --- --------- ----
Total delinquent loans 712 $ 34,187 2.26% 504 $ 24,386 2.78%
=== ========== ==== === ========= ====
Nonperforming assets include nonaccruing loans, restructured loans,
real estate acquired by foreclosure or by deed-in-lieu thereof, in-substance
foreclosures and repossessed assets.
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,
------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(Dollars in thousands)
Nonperforming loans:
Nonaccrual loans
Real estate loans:
One- to four-family $ 5,813 $ 2,966 $ 2,923 $ 3,655 $ 5,540
Multifamily and nonresidential 775 3,019 82 378 649
Construction (net of loans in process) and land 3,398 1,741 272 233 769
--------- ---------- -------- -------- ---------
Total real estate loans 9,986 7,726 3,277 4,266 6,958
Consumer 434 457 132 317 404
Commercial 469 1,360 206 1,146 2,129
---------- ---------- -------- ------- --------
Total nonaccrual loans 10,889 9,543 3,615 5,729 9,491
Restructured real estate loans 1,572 208 317 1,832 644
--------- ----------- -------- ------- ---------
Total nonperforming loans 12,461 9,751 3,932 7,561 10,135
Real estate acquired through foreclosure and other
repossessed assets 477 359 157 78 55
---------- ----------- ------- --------- -----------
Total nonperforming assets $ 12,938 $ 10,110 $ 4,089 $ 7,639 $10,190
======== ======== ======= ======= =======
Nonperforming loans as a percent of total loans 0.89% 1.10% 0.54% 1.15% 1.60%
Nonperforming assets as a percent of total assets 0.67 0.77 0.30 0.59 0.95
Allowance for loan losses as a percent of
nonperforming loans 92.13 67.79 164.86 84.62 59.02
Allowance for loan losses as a percent of total loans
before allowance 0.81 0.74 0.88 0.96 0.94
For 2001, approximately $523,000 in interest income would have been
recorded had nonaccruing and restructured loans been accruing pursuant to
contractual terms. During 2001 interest collected on such loans and included in
net income was approximately $412,000.
Nonperforming assets increased approximately $2.8 million, or 28.0%, to
$12.9 million at December 31, 2001, from $10.1 million at December 31, 2000. The
primary reasons for the increase are the restructuring of a relationship with
one borrower, the delinquency of several loans to one borrower, and the
acquisition of Industrial in 2001. At December 31, 2001, total nonaccrual and
restructured loans accounted for 0.89% of net loans receivable, compared to
1.10% at December 31, 2000. Total nonperforming assets were 0.67% of total
assets as of December 31, 2001, a decrease of 0.10% from 0.77% as of December
31, 2000.
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. After 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, 2001, the carrying
value of real estate acquired in settlement of loans was $477 and consisted of
seven single-family properties.
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 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.
9
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.
The aggregate amounts of Home Savings' classified assets at the dates
indicated were as follows:
At December 31,
-------------------------
2001 2000
---- -----
(In thousands)
Classified assets:
Substandard $ 9,515 $ 10,259
Doubtful 100 -
Loss 1,517 433
-------- --------
Total classified assets $ 11,132 $ 10,692
======== ========
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.
Home Savings establishes a general allowance for loan losses for any
loan classified as special mention, substandard or doubtful. If an asset, or
portion thereof, is classified as loss, Home Savings establishes a specific
allowance for loss in the amount of 100% of the portion of the asset classified
loss or charges off the portion of any real estate loan deemed to be
uncollectible.
ALLOWANCE FOR LOAN LOSSES. Management establishes the allowance for
loan losses at a level it believes adequate to absorb probable losses inherent
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,
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(Dollars in thousands)
Balance at beginning of period $ 6,553 $ 6,405 $ 6,398 $ 5,982 $ 5,040
Provision for (recovery of) loan loss allowances 2,495 300 100 650 (1,546)
Charge-offs:
Real estate (89) (83) (60) (47) (403)
Consumer (283) (38) (65) (72) (43)
Commercial (55) (80) - (151) -
---------- ------- --------- -------- --------
Total charge-offs (427) (201) (125) (270) (446)
---------- ------- --------- -------- --------
Recoveries:
Real estate 13 17 21 25 2,930
Consumer 10 9 9 10 4
Commercial 9 23 2 1 -
---------- ------- --------- -------- --------
Total recoveries 32 49 32 36 2,934
---------- ------- --------- -------- --------
Net recoveries (charge-offs) (395) (152) (93) (234) 2,488
Acquisition of Industrial 2,795 - - - -
---------- ------- --------- -------- --------
Balance at end of year $ 11,480 $ 6,553 $ 6,405 $ 6,398 $ 5,982
========= ======= ========= ======== ========
Ratio of net recoveries (charge-offs)
to average net loans (0.03)% (0.02)% (0.01)% (0.04)% 0.40%
Ratio of net recoveries (charge-offs) to
provision for (recovery of) loan loss (14.55)% (50.67)% (93.00)% (36.00)% 160.93%
allowances
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,
2001 2000 1999 1998 1997
------ ------ ------ ------ -------
Percent of Percent of Percent of Percent of Percent of
loans in loans in loans in loans in loans in
each each each each each
category category category category category
to total to total to total to total to total
-------- -------- -------- -------- --------
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
Real estate loans $ 8,339 72.64% $ 4,117 62.83% $4,182 65.29% $4,220 65.96% $4,242 70.91%
Consumer loans 975 8.49 566 8.64 555 8.67 611 9.55 673 11.25
Commercial loans 2,166 18.87 1,870 28.54 1,668 26.04 1,567 24.49 1,067 17.84
------- ------ ------- ------ ------ ------ ------- ------ ------ ------
Total $11,480 100.00% $ 6,553 100.00% $6,405 100.00% $6,398 100.00% $5,982 100.00%
======= ====== ======= ====== ====== ====== ====== ====== ====== ======
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
11
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.
HOME SAVINGS INVESTMENT ACTIVITY. 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'
Investment 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. The CMOs are a type of
debt security issued by a special-purpose entity that aggregrates 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 by the rating
agency. 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 ACTIVITY. Butler Wick holds securities in three
subsidiaries, Butler Wick & Co., Inc., Butler Wick Trust Company and Butler Wick
Asset Management. Butler Wick & Co., Inc. invests in municipal securities and to
a lesser extent government agency securities for sale to clients. These
securities are held as available for sale. 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 of incorporation. In addition to these deposits,
U.S. Government obligations are owned by Butler Wick Trust Company. All of these
securities are classified as held to maturity.
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
12
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.
The maturities of United Community's consolidated available for sale and held to
maturity marketable securities at December 31, 2001, excluding FHLB stock, and
equity securities, are indicated in the following table:
At December 31, 2001
-----------------------------------------------------------------------
After one through
One year or less Five years Total
------------------- ----------------- -------------------------------
Amortized Average Amortized Average Amortized Fair Average
cost yield cost Yield cost value Yield
-------- ------ -------- ------ -------- -------- ------
(Dollars in thousands)
Short-term investments:
Federal funds $148,111 1.75% - - $148,111 $148,111 1.75%
Eurodollars 20,710 1.75 - - 20,710 20,710 1.75
Money market funds 1,238 1.25 - - 1,238 1,238 1.25
Liquid cash 237 1.74 - - 237 237 1.74
-------- ---- -------- -------- ----
Total short-term investments $170,296 1.75% - - $170,296 $170,296 1.75%
======== ==== ======== ======== ====
Marketable securities:
Available for sale $ 15,089 4.72% $ 23,408 5.46% $ 38,497 $ 39,253 5.17%
Held to maturity 101 3.61 1,597 3.52 1,698 1,695 3.54
-------- ---- -------- ---- -------- -------- ----
Total marketable securities $15,190 4.71% $ 25,005 5.34% $ 40,195 $ 40,948 5.10%
======== ==== ======== ==== ======== ======== ====
13
The following table sets forth the amortized cost and fair value of United
Community's consolidated available for sale and held to maturity marketable
securities, FHLB stock, and mortgage-related securities at the dates indicated.
At December 31
------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------- -----------------------------------------
Amortized % of Fair % of Amortized % of Fair % of
Cost Total Value Total Cost Total Value Total
---------- ----- -------- ----- -------- ----- -------- -----
(Dollars in thousands)
Available for sale:
Short-term investments:
Federal funds $ 148,111 38.41% $148,111 38.01% $ 2,442 0.73% $ 2,442 0.73%
Money market funds 1,238 0.32 1,238 0.32 180 0.05 180 0.05
Eurodollars 20,710 5.37 20,710 5.32 19,643 5.86 19,643 5.85
Other 237 0.06 237 0.06 228 0.06 228 0.06
FHLB stock 18,760 4.87 18,760 4.82 13,793 4.12 13,793 4.11
Equity investments 11,463 2.97 11,828 3.04 7,296 2.18 7,411 2.21
Marketable securities:
U.S. Treasury obligations 4,045 1.05 4,093 1.05 7,511 2.24 7,526 2.24
U.S. Government agency obligations 20,647 5.36 21,067 5.41 37,737 11.26 37,916 11.30
Corporate notes 13,805 3.58 14,093 3.62 45,723 13.64 45,592 13.59
Tax exempt municipal bonds - - - - - - - -
Mortgage-related securities:
FHLMC 9,767 2.53 9,965 2.56 16,608 4.96 16,669 4.97
FNMA 16,121 4.18 16,155 4.15 20,502 6.12 20,282 6.04
GNMA 4 - 4 - - - - -
Private issues 307 0.08 292 0.07 380 0.11 361 0.11
Collateralized mortgage obligations:
FHLMC 5,097 1.32 5,237 1.34 - - - -
FNMA 13,091 3.40 13,226 3.40 21,295 6.35 21,141 6.30
GNMA 2,616 0.68 2,697 0.69 - - - -
Private issues 19,030 4.94 19,493 5.00 33,274 9.93 33,278 9.92
---------- ----- -------- ----- -------- ----- -------- -----
Total available for sale 305,049 79.12 307,206 78.86 226,612 67.61% 226,462 67.48
---------- ----- -------- ----- -------- ----- -------- -----
Held to maturity:
Marketable securities:
U.S. Treasury obligations 1,197 0.31 1,202 0.31 876 0.26 900 0.27
U.S. Government agency obligations 501 0.13 493 0.13 - - - -
Mortgage-related securities:
GNMA 2,391 0.62 2,532 0.65 3,599 1.07 3,703 1.10
FHLMC 50,896 13.20 51,810 13.30 69,375 20.70 69,560 20.73
FNMA 25,511 6.62 26,302 6.75 34,710 10.36 34,966 10.42
---------- ----- -------- ----- -------- ----- -------- -----
Total held to maturity 80,496 20.88 82,339 21.14 108,560 32.39 109,129 32.52
---------- ----- -------- ----- -------- ----- -------- -----
Total investment portfolio $ 385,545 100.00% $389,545 100.00% $335,172 100.00% $ 335,591 100.00%
========== ====== ======== ====== ========= ====== ========= ======
-------------------------------------------
1999
-------------------------------------------
Amortized % of Fair % of
Cost Total Value Total
--------- ----- -------- -----
Available for sale:
Short-term investments:
Federal funds $ 58,118 11.33% $ 58,118 11.48%
Money market funds 22,224 4.33 22,224 4.39
Eurodollars 129 0.03 129 0.03
Other 215 0.04 215 0.04
FHLB stock 12,825 2.50 12,825 2.53
Equity investments 1,864 0.36 1,715 0.34
Marketable securities:
U.S. Treasury obligations 10,026 1.96 10,024 1.98
U.S. Government agency obligations 47,879 9.34 47,316 9.35
Corporate notes 102,341 19.96 101,444 20.05
Tax exempt municipal bonds 1,405 0.27 1,405 0.28
Mortgage-related securities:
FHLMC 24,992 4.87 24,667 4.87
FNMA 23,920 4.66 22,869 4.52
GNMA - - - -
Private issues 439 0.09 429 0.08
Collateralized mortgage obligations:
FHLMC - - - -
FNMA 26,350 5.14 25,832 5.10
GNMA - - - -
Private issues 40,868 7.98 39,762 7.86
-------- ----- -------- -----
Total available for sale 373,595 72.86 368,974 72.90
-------- ----- -------- -----
Held to maturity:
Marketable securities:
U.S. Treasury obligations 1,091 0.21 1,098 0.22
U.S. Government agency obligations - - - -
Mortgage-related securities:
GNMA 5,191 1.02 5,262 1.04
FHLMC 87,245 17.01 85,604 16.92
FNMA 45,643 8.90 45,127 8.92
-------- ----- -------- -----
Total held to maturity 139,170 27.14 137,091 27.10
-------- ----- -------- -----
Total investment portfolio $512,765 100.00% $506,065 100.00%
======== ====== ======== =======
14
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.
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,
---------------------------------------------------------------------------------------
2001 2000
----------------------------------------- ----------------------------------------
Percent Weighted Percent Weighted
of total average of total average
Amount deposits rate Amount deposits rate
----------- --------- ---- --------- ---------- ----
(Dollars in thousands)
Checking accounts:
Interest-bearing $ 106,631 7.71% 1.98% $ 65,988 7.33% 1.05%
Noninterest-bearing 36,176 2.61 - 17,573 1.95 -
Savings accounts 257,417 18.61 2.22 199,680 22.18 2.28
Money market accounts 151,251 10.93 3.50 80,004 8.89 4.35
----------- ------- --------- --------
Total transaction accounts 551,475 39.86 - 363,245 40.35 -
Certificates of deposit:
4.00% or less 212,067 15.33 - 1,594 0.18 -
4.01% - 6.00% 418,024 30.22 - 201,458 22.37 -
6.01% - 8.00% 201,852 14.59 - 333,893 37.08 -
8.01% - 10.00% - - - 223 0.02 -
----------- ------- ---- --------- -------- ---
Total certificates of deposit 831,943 60.14 4.99 537,168 59.65 6.07
----------- ------- ---- --------- -------- ----
Total deposits $1,383,418 100.00% 3.95% $ 900,413 100.00% 4.61%
=========== ======= ==== ========= ====== ====
Total deposits increased by $483.0 million, or 53.6%, from December 31,
2000, to December 31, 2001.
15
The following table shows rate and maturity information for Home
Savings' certificates of deposit at December 31, 2001:
At December 31, 2001
------------------------------------------------------------
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 $ 127,705 $ 77,937 $ 4,490 $ 1,935 $ 212,067
4.01% to 6.00% 302,558 77,592 20,651 17,223 418,024
6.01% to 8.00% 110,596 52,937 5,335 32,984 201,852
8.01% to 10.00% - - - - -
Total certificates of deposit $ 540,859 $ 208,466 $ 30,476 $ 52,142 $ 831,943
========== ========== ======== ======== =========
Percent of total certificates
of deposit 65.01% 25.06% 3.66% 6.27% 100.00%
At December 31, 2001, approximately $540.9 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 $528.0 million are available from the FHLB
of Cincinnati.
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, 2001:
Maturity Amount
-------- ------
(In thousands)
Three months or less $32,987
Over 3 months to 6 months 20,492
Over 6 months to 12 months 59,432
Over 12 months 52,917
-----------
Total $ 165,828
===========
Based on past experience, management believes that a substantial percentage of
the above certificates will be renewed with Home Savings at maturity.
16
The following table sets forth Home Savings' deposit account balance
activity for the periods indicated:
Year ended December 31,
2001 2000
----------- ------------
(Dollars in thousands)
Beginning balance $ 900,413 $ 834,087
Net increase in deposits 434,233 32,301
----------- ---------
Net deposits before interest
credited 1,334,646 866,388
Interest credited 48,772 34,025
----------- ---------
Ending balance $ 1,383,418 $ 900,413
=========== =========
Net increase $ 483,005 $ 66,326
=========== =========
Percent increase 53.64% 7.95%
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, 2001, Home Savings was in compliance
with the QTL test. Home Savings may borrow up to $528.0 million from the FHLB,
and had $228.0 million outstanding advances at December 31, 2001.
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.
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 Asset Management Company and Butler Wick Trust
Company are the only such locally owned and managed financial services
providers.
EMPLOYEES
At December 31, 2001, Home Savings and Butler Wick had 553 and 170
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. Home Savings had a
defined benefit pension plan, which was terminated effective July 31, 1999. Home
Savings offered a post-retirement health plan for its eligible employees. The
benefits of this plan were curtailed in 2000. Butler Wick offers health, life
and disability benefits to all employees, a 401(k) plan, a profit sharing plan
and a retention plan for
17
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 OTS, 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 OTS, 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, Home Savings may not pay any dividends if, as a result, its net
worth would be reduced below the amount required to be maintained for the
liquidation account established in connection with its mutual to stock
conversion. Home Savings must file an application with, and obtain approval
from, the OTS (i) if the proposed distribution would cause total distributions
for the calendar year to exceed net income for that year to date plus Home
Savings' retained net income for that year to date plus the retained net income
for the preceding two years; (ii) if Home Savings would not be at least
adequately capitalized following the capital distribution; (iii) if the proposed
distribution would violate a prohibition contained in any applicable statute,
regulation or agreement between Home Savings and the OTS or the FDIC, or any
condition imposed on Home Savings in an OTS-approved application or notice. If
Home Savings is not required to file an application, it must file a notice of
the proposed capital distribution with the OTS. Home Savings did not pay any
dividends to United Community in 2001. In January, 2000, Home Savings paid a
dividend to United Community of $158.0 million, which was used to pay a portion
of a $185.0 million loan related to the $6.00 per share special capital
distribution in 1999.
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 (FRA). United Community and Butler Wick
are affiliates of Home Savings for this purpose.
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 acquiror must obtain
approval, rather than give notice, of the acquisition as a savings and loan
holding company. In addition, any merger of Home Savings must be approved by the
OTS as well as the Division. Further, any merger of United Community in which
United Community is not the resulting company must also be approved by both the
OTS and the Division.
18
ITEM 2. DESCRIPTION OF PROPERTY
The following table sets forth certain information at December 31,
2001, regarding the properties on which the main office, the branch offices and
the loan production offices of Home Savings are located:
Owned or Year Net book
Location Leased opened value Deposits
-------- -------- ------ -------- --------
(In thousands)
275 Federal Plaza West Owned 1919 $ 1,294 $ 81,681
Youngstown, Ohio
32 State Street Owned 1916 270 96,690
Struthers, Ohio
4005 Hillman Way Owned 1958 423 97,268
Boardman, Ohio
650 East State Street Owned 1925 149 82,733
Salem, Ohio
6000 Mahoning Avenue Leased 1959 7 86,713
Austintown, Ohio
7525 Market Street Owned 1971 478 128,029
Boardman, Ohio
4259 Kirk Road Owned 1975 528 102,909
Austintown, Ohio
202 South Main Street Owned 1975 411 94,046
Poland, Ohio
3500 Belmont Avenue Owned 1976 279 82,831
Youngstown, Ohio
29 North Broad Street Owned 1977 253 48,483
Canfield, Ohio
980 Great East Plaza Leased 1980 8 29,489
Niles, Ohio
One University Plaza Leased 2000 14 1,010
1059-1060 Kilcawley Center
Youngstown, Ohio
127 North Market Street Owned 1987 97 33,405
East Palestine, Ohio
210 West Lincoln Way Owned 1987 296 20,447
Lisbon, Ohio
2996 McCartney Road Leased 2000 97 3,452
Youngstown, Ohio
14825 South Avenue Ext. Owned 1997 728 29,573
Columbiana, Ohio
4625 North River Road Owned 2000 1,133 23,460
Warren, Ohio
19
Owned or Year Net book
Location Leased Opened value Deposits
-------- -------- ------ -------- --------
(In thousands)
30 East Main Street Owned 1994 1,050 35,905
Ashland, Ohio
203 North Sandusky Street (1) Owned 1993 87 N/A
Bellevue, Ohio
211 North Sandusky Street Owned 1972 525 62,462
Bellevue, Ohio
255 North Main Street Owned 1975 89 12,777
Clyde, Ohio
1500 Bright Road Owned 1993 926 19,234
Findlay, Ohio
321 West State Street Owned 1987 159 19,505
Fremont, Ohio
40 East Main Street Owned 1999 329 14,751
Lexington, Ohio
50 West Main Street (3) Owned 1976 594 51,561
Norwalk, Ohio
51 West Main Street (2)(3) Owned 1992
Norwalk, Ohio
4112 Milan Road Owned 1988 385 20,238
Sandusky, Ohio
48 East Market Street Owned 1983 293 57,299
Tiffin, Ohio
796 West Market Street Owned 1990 193 9,091
Tiffin, Ohio
301 Myrtle Avenue Owned 1977 128 38,004
Willard, Ohio
121 Blossom Centre Leased - - 720
Willard, Ohio
3690 Orange Place Leased 2000 3 N/A
Beachwood, Ohio
6011 Navarre Road, S.W. Leased 2000 - N/A
Canton, Ohio
8500 Station St., #250 Leased 2000 - N/A
Mentor, Ohio
Pointe View Professional Park Leased 2000 - N/A
4831 Darrow Rd. #106
Stow, Ohio
(1) Office facility of appraisal staff.
(2) Drive-up facility only.
(3) Book value and deposit totals are combined for the two Norwalk offices.
20
The following table sets forth certain information at December 31,
2001, 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, OH 44503
960 W. State Street Leased 1959
Alliance, OH 44601
1284 Liberty Street Leased 1932
Franklin, PA 16322
1 E. State Street Leased 1932
Sharon, PA 16146
25651 Detroit Road Leased 1990
Cleveland, OH 44145
3685 Stutz Drive, Suite 201 Leased 1999
Canfield, OH 44406
149 N Water Street Leased 1981
Kent, OH 44240
Howland Professional Centre Leased 1932
425 Niles-Cortland Road SE
Bldg. A, Suite 201
Warren, Ohio
Howland Professional Centre Leased 2000
425 Niles-Cortland Road SE
Bldg. A, Suite 202
Warren, Ohio
4522 Fulton Drive NW Leased 1990
Canton, OH 44718
100 S. Broadway, 2nd Floor Leased 1956
Salem, OH 44460
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 offered by Butler Wick.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information contained in the 2001 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.
As of March 19, 2002, there were approximately 14,022 registered holders of
United Community stock.
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 SUPPLEMENTAL DATA
The Consolidated Financial Statements appearing in the Annual Report
and the report of Crowe Chizek and Company LLP dated February 8, 2002, 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement for the 2002 Annual
Meeting of Shareholders of United Community (Proxy Statement), filed with the
Securities and Exchange Commission (Commission) on March 26, 2002, under the
captions "Proposal One - Election of Directors" and "Executive Officers," is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors - Certain Transactions" is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained in the Proxy Statement under the caption
"Voting Securities and Ownership of Certain Beneficial Owners and Management" is
incorporated herein by reference.
22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 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 2001 Annual Report to Shareholders
16 Letter regarding change in certifying accountants
20 Proxy Statement for 2002 Annual Meeting of Shareholders
21 Subsidiaries of Registrant
23.1 Crowe, Chizek and Company LLP Consent
23.2 Deloitte and Touche LLP Consent
99 Independent Auditors' Report from Deloitte and Touche LLP
(b) 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.
(c) REPORTS ON FORM 8-K. On October 17, 2001 form 8-K was filed for Item 5,
Other Events, providing the third quarter financial information news
release.
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 29, 2002 Date: March 29, 2002
/S/ John F. Zimmerman, Jr. /S/ Donald J. Varner
------------------------------------------------ ---------------------------------------------------
John F. Zimmerman, Jr., Director Donald J. Varner, Director
Date March 29, 2002 Date: March 29, 2002
/S/ Herbert F. Schuler, Sr. /S/ Patrick A. Kelly
------------------------------------------------ ---------------------------------------------------
Herbert F. Schuler, Sr., Director Patrick A. Kelly, Treasurer (Principal Financial
Officer)
Date: March 29, 2002 Date: March 29, 2002
/S/ Thomas J. Cavalier
------------------------------------------------
Thomas J. Cavalier, Director
Date: March 29, 2002
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, Exhibit 3.2
10.1 The Home Savings and Loan Company of Youngstown,
Ohio Employee Stock Ownership Plan
10.2 Employment Agreement between The Home Savings Incorporated by reference to the 2000 10-K filed by United
and Loan Company of Youngstown, Ohio and Douglas Community on March 30, 2001, Exhibit 10.2
M. McKay, dated December 29, 2000.
10.3 Employment Agreement between The Home Savings Incorporated by reference to the 2000 10-K filed by United
and Loan Company of Youngstown, Ohio and Donald Community on March 30, 2001, Exhibit 10.3
J. Varner, dated December 29, 2000.
10.4 Employment Agreement between The Home Savings Incorporated by reference to the 2000 10-K filed by United
and Loan Company of Youngstown, Ohio and Patrick A. Community on March 30, 2001, Exhibit 10.4
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, Exhibit 10.5
10.6 Employment Agreement between The Home Savings Incorporated by reference to the 2000 10-K filed by United
and Loan Company of Youngstown, Ohio and David G. Lodge, Community on March 30, 2001, Exhibit 10.6
dated December 29, 2000.
10.7 Employment Agreement between The Home Savings Incorporated by reference to the 2000 10-K filed by United
and Loan Company of Youngstown, Ohio and Patrick W. Community on March 30, 2001, Exhibit 10.7
Bevack, dated December 29, 2000.
11 Statement Regarding Computation of Per Share Earnings Incorporated by reference to Note 19 to the Financial
Statements included in the Annual Report in Exhibit 13
13 Portions of the 2001 Annual Report to Shareholders
20 Proxy Statement for 2002 Annual Meeting of Incorporated by reference to the Proxy Statement, filed with
Shareholders the Securities and Exchange Commission on March 26, 2002.
21 Subsidiaries of Registrant
23.1 Crowe, Chizek and Company LLP Consent
23.2 Deloitte and Touche LLP Consent
99 Independent Auditors' Report from Deloitte and Touche LLP
25