ANNUAL MEETING Company's growth earns the approval of its shareholders

Executives say buy-backs have helped the company increase stock values.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Shareholders sat back with apparent contentment as United Community Financial Corp. officials told how they've managed to grow earnings an average of 35 percent per year since the company went public in 1999.
When the formal presentation ended at UCFC's annual meeting Thursday there were few questions from the investors -- in sharp contrast to the early years when shareholders peppered officials with questions and criticism.
Douglas M. McKay, president and board chairman for Home Savings and Loan parent UCFC, used the forum to describe the company's progress over five years, instead of giving his usual one-year update.
Starting out with just 14 offices in three Ohio counties in 1999, he said, UCFC now has 35 full-service banking offices, five loan offices and 13 Butler Wick offices across Ohio and Western Pennsylvania.
Its assets, now $2.07 billion, have grown at a rate of 14 percent per year from $1.33 billion at the start, making UCFC the largest thrift in Ohio and the 46th largest in the country.
Net income per common share went from 31 cents five years ago to 72 cents in 2003, an average annual growth rate of 35 percent.
Diversification
A big part of its growth, McKay said, comes from diversification of the Home Savings loan portfolio.
As a state chartered thrift, the company must keep a large chunk of its assets in mortgage loans, he said, but officials have increased interest income by adding more commercial loans, construction loans and consumer loans to the mix.
Home Savings originated $1.65 billion in loans in 2003 -- nearly double its 2002 production level, and 2002 was a record year for the bank.
UCFC also improved its bottom line by cutting operating costs, McKay reported.
The company had a 78 percent efficiency ratio in 1999, meaning it spent 78 cents to generate $1; now that ratio is 65.3 percent, meaning it spends 65.3 cents to generate every $1. That's below the Ohio average for similar institutions (68 percent) and the national average (67 percent).
Investor's request
One investor urged officials to consider increasing dividend payments on the stock, and many fellow shareholders applauded. UCFC has been paying dividends of 30 cents per share annually since 1999.
"The stockholders would appreciate an increase of just 1 cent or 2 cents in dividends," said Ronald Lysowsky of Youngstown. "Many of the people here have gray hair -- there aren't too many young people here -- they use the dividends to live on."
McKay said officials will consider the idea, but he said experience has proven that the company gets "the biggest bang for its buck" by buying back shares.
The company announced plans to repurchase 3.7 million shares of stock in January and watched the stock value grow 16 percent in the months that followed.
"Our job is to increase investment value for the majority of shareholders, and we did that by buying back shares rather than increasing dividends," McKay explained.
Increasing dividend might have had the opposite effect, he said, causing the share price to drop.
Looking into the future, McKay said Home Savings is making plans to build a new branch near the Austintown Plaza and is continuing to look for ways to grow geographically and through new acquisitions.
"We're very picky. We're not looking at buying just to grow larger," he said. "Any acquisition we consider must be a good fit for the company."
vinarsky@vindy.com