Market Overview

UCFC Announces Third Quarter Results and Declares Dividend

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YOUNGSTOWN, Ohio--(BUSINESS WIRE)--

United Community Financial Corp. (Company) (Nasdaq: UCFC), parent company of The Home Savings and Loan Company (Home Savings), announced today that net income for the quarter ended September 30, 2015 totaled $4.1 million, or $0.086 per diluted common share. Net income for the nine months ended September 30, 2015 totaled $12.0 million, or $0.245 per diluted common share.

Gary M. Small, President and Chief Executive Officer of the Company and Home Savings, commented that, "We are pleased with the pace of performance improvement and see all aspects of our business improving. Quality loan growth, strong fee income and diligent expense management are creating outstanding momentum."

Balance Sheet Highlights

Total Loans

Total outstanding loans, including loans held for sale, increased $146.8 million to $1.3 billion, or 15.0% on an annualized basis at September 30, 2015, compared to December 31, 2014. The increase was driven by a 35.5% increase of $89.8 million in commercial loans during the first nine months of 2015. Additionally, during the year, unfunded commercial loan commitments grew by 42.0% to approximately $82.6 million at September 30, 2015. Residential loans, including residential loans held for sale, increased 6.7%, or $50.7 million during the first nine months of 2015.

Total Deposits

Total deposits increased $62.6 million, or 6.2% on an annualized basis, to $1.4 billion at September 30, 2015, compared to $1.3 billion at December 31, 2014. Non-interest bearing accounts increased $20.6 million, or 11.0%, as a result of increasing commercial deposits since year end. During the same time period, interest bearing deposits increased 3.6%, or $42.0 million.

Third Quarter Results

Net Interest Income and Margin

Net interest income on a fully taxable equivalent basis was $14.3 million in the third quarter of 2015, up from the $12.7 million recorded in the third quarter of 2014 and the $13.9 million recorded in the second quarter of 2015. The improvement in net interest income, when comparing the third quarter of 2015 to the third quarter of 2014, was due to an increase in average net loan balances totaling approximately $144.7 million. Additionally, funding costs were reduced due to a modification of an FHLB advance and the prepayment of two repurchase agreements late in 2014. Net interest margin was 3.18% for the third quarter of 2015, an increase from 3.06% for the third quarter of 2014, and an increase from the 3.16% recorded in the previous quarter.

Provision for Loan Losses

The Company recognized a provision for loan losses of $673,000 in the third quarter of 2015 compared to a provision of $116,000 in the third quarter of 2014, and a provision of $753,000 in the previous quarter. Provision expense continues to be driven primarily by strong loan growth as charge-off activity returned to more normal levels.

Non-Interest Income

Non-interest income was $4.9 million in the third quarter of 2015 compared to $4.2 million in the third quarter of 2014, and down from $5.3 million in the previous quarter. The increase in non-interest income in comparing the third quarter of 2015 to the third quarter of 2014 was primarily a result of greater mortgage banking income driven by an increase in the volume of loans sold into the secondary market. The decrease in noninterest income compared to the prior quarter is a result of an unfavorable adjustment in the mortgage servicing rights valuation allowance.

Non-Interest Expense

Non-interest expense was $12.3 million for the third quarter of 2015 compared to $14.3 million for the third quarter of 2014, a decrease of $2.0 million. Significantly impacting this comparison was the recognition of a $1.4 million prepayment penalty on the early termination of a $30.0 million borrowing in 2014. Additionally, all other major expense categories were down. Total non-interest expense remained flat, when comparing the third quarter of 2015 to the prior quarter.

Year to Date Results

Net Interest Income and Margin

Net interest income on a fully taxable equivalent basis was $42.1 million for the first nine months of 2015, an increase of $4.0 million from the same period in 2014. Net interest margin was 3.19% for the first nine months of 2015 compared to 3.07% in the first nine months of 2014. As in the second quarter of 2015, the net interest margin continues to be positively impacted by the modification of an FHLB advance and the prepayment of two repurchase agreements that occurred at the end of 2014.

Provision for Loan Losses

The Company recognized a provision for loan losses of $1.2 million in the first nine months of 2015 compared to a negative provision of $1.5 million in the first nine months of 2014. The increase in provision for loan losses resulted from the growth in outstanding loans during the first nine months of 2015. Also affecting the comparison, a large commercial real estate loan paid off in the second quarter of 2014, releasing approximately $748,000 in reserves.

Non-Interest Income

Non-interest income was $14.3 million for the nine months ended September 30, 2015, compared to $10.8 million for the nine months ended September 30, 2014. This favorable comparison is a result of increased mortgage banking income. During the period, the Company realized a high level of mortgage loan production being sold into the secondary market along with improved pricing on loans sold.

Non-Interest Expense

Total non-interest expense was $37.2 million in the first nine months of 2015, a decrease of $4.8 million over the first nine months of 2014. All major expense categories declined as a result of aggressive process improvements and cost reduction efforts.

Asset Quality

Measures of asset quality continued to improve during the first nine months of 2015 as evidenced by nonperforming assets to total assets decreasing to 0.95%, compared to 1.40% for the first nine months of 2014. The allowance for loan loss as a percentage of total loans was 1.35% at September 30, 2015 compared with 1.52% at December 31, 2014 and 1.59% at September 30, 2014.

Equity

Tangible book value per common share at September 30, 2015 improved to $5.12, as compared to $4.88 at December 31, 2014. During the third quarter, Home Savings reclassified approximately $105.0 million of available for sale securities to held to maturity providing for additional stability of tangible book value. The Company continues its share repurchase program, repurchasing 159,100 shares during the quarter.

Dividend to be Paid

The Board of Directors declared a quarterly cash dividend of $0.025 per common share payable November 13, 2015 to shareholders of record at the close of business November 2, 2015.

Conference Call

United Community Financial Corp. will host an earnings conference call on Wednesday, October 21, 2015, at 10:00 a.m. ET., to provide an overview of the Company's third quarter 2015 results and highlights. The conference call may be accessed by calling 1-877-272-7661 ten minutes prior to the start time. Please ask to be joined into the United Community Financial Corp. (UCFC) call. Additionally, a live webcast may be accessed from the Company's website www.ucfconline.com. Click on 3rd Quarter 2015 Conference Call on our corporate profile page to join the webcast.

United Community Financial Corp.

Home Savings is a wholly-owned subsidiary of the Company and operates 32 retail banking offices and nine loan production centers in Ohio and western Pennsylvania. Additional information on the Company and Home Savings may be found on the Company's web site: www.ucfconline.com.

When used in this press release, the words or phrases "believes," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project", "will have", "can expect" 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 the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company's market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that 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.

UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
   
September 30, December 31,
2015 2014
(Dollars in thousands)
Assets:
Cash and deposits with banks $ 19,831 $ 21,152
Federal funds sold   24,849     11,828  
Total cash and cash equivalents 44,680 32,980
Securities:
Available for sale, at fair value 366,765 499,790
Held to maturity (fair value of $113,152 and $0, respectively) 113,052 -
Loans held for sale, at lower of cost or market 14,195 20,730
Loans held for sale, at fair value 24,079 -
Loans, net of allowance for loan losses of $17,482 and $17,687 1,277,330 1,148,093
Federal Home Loan Bank stock, at cost 18,068 18,068
Premises and equipment, net 20,539 21,002
Accrued interest receivable 5,530 5,763
Real estate owned and other repossessed assets 3,316 3,467
Core deposit intangible 43 84
Cash surrender value of life insurance 54,482 46,401
Other assets   28,808     37,172  
Total assets $ 1,970,887   $ 1,833,550  
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Interest bearing $ 1,201,886 $ 1,159,871
Non-interest bearing   208,598     187,965  
Total deposits 1,410,484 1,347,836
Borrowed funds:
Federal Home Loan Bank advances
Long-term advances 46,780 46,194
Short-term advances   216,000     140,000  
Total Federal Home Loan Bank advances 262,780 186,194
Repurchase agreements and other   30,540     30,558  
Total borrowed funds 293,320 216,752
Advance payments by borrowers for taxes and insurance 14,360 19,904
Accrued interest payable 233 185
Accrued expenses and other liabilities   8,561     8,738  
Total liabilities   1,726,958     1,593,415  
 
Shareholders' Equity:
Preferred stock-no par value; 1,000,000 shares authorized and no shares outstanding - -

Common stock-no par value; 499,000,000 shares authorized; 54,138,910 shares issued and 47,613,582 and 49,239,004 shares, respectively, outstanding

174,215 174,385
Retained earnings 137,743 128,512
Accumulated other comprehensive loss (16,907 ) (19,998 )
Treasury stock, at cost, 6,525,328 and 4,899,906 shares, respectively   (51,122 )   (42,764 )
Total shareholders' equity   243,929     240,135  
Total liabilities and shareholders' equity $ 1,970,887   $ 1,833,550  
 
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
               
For the Three Months Ended For the Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2015 2015 2014 2015 2014
(Dollars in thousands, except per share data)
Interest income
Loans $ 13,426 $ 12,890 $ 12,436 $ 39,007 $ 36,919
Loans held for sale 390 341 114 1,025 237
Securities:
Available for sale 2,599 2,679 3,002 8,139 9,368
Held to maturity, nontaxable 33 12 - 45 -
Held to maturity, taxable 17 - - 17 -
Federal Home Loan Bank stock dividends 181 178 180 541 677
Other interest earning assets   8     11     4     25     51  
Total interest income 16,654 16,111 15,736 48,799 47,252
Interest expense
Deposits 1,690 1,639 1,548 4,862 4,852
Federal Home Loan Bank advances 340 302 537 947 1,579
Repurchase agreements and other   323     319     926     958     2,753  
Total interest expense   2,353     2,260     3,011     6,767     9,184  
Net interest income 14,301 13,851 12,725 42,032 38,068
Taxable equivalent adjustment   19     6     -     25     -  
Net interest income (FTE) (1) 14,320 13,857 12,725 42,057 38,068
Provision (recovery) for loan losses   673     753     116     1,242     (1,465 )
Net interest income after provision for loan losses (FTE)   13,647     13,104     12,609     40,815     39,533  
Non-interest income
Non-deposit investment income 259 248 408 799 1,156
Service fees and other charges:
Mortgage servicing fees 683 681 678 2,038 2,053
Deposit related fees 1,405 1,341 1,321 3,811 3,850
Mortgage servicing rights valuation (137 ) 206 2 (92 ) (4 )
Mortgage servicing rights amortization (450 ) (462 ) (435 ) (1,355 ) (1,259 )
Other service fees 19 20 3 56 3
Net gains (losses):
Securities available for sale - - 328 11 362
Mortgage banking income 1,709 2,041 676 5,303 1,600
Real estate owned and other repossessed assets charges, net (119 ) (102 ) (203 ) (311 ) (628 )
Card fees 1,036 925 837 2,777 2,461
Other income   468     377     559     1,229     1,242  
Total non-interest income   4,873     5,275     4,174     14,266     10,836  
Non-interest expense
Salaries and employee benefits 6,894 6,898 7,001 20,968 22,863
Occupancy 819 768 874 2,505 2,622
Equipment and data processing 1,714 1,719 1,791 5,105 5,552
Financial institutions tax 272 326 198 924 594
Advertising 183 221 181 546 617
Amortization of core deposit intangible 14 13 17 41 52
Prepayment penalty - - 1,396 - 1,396
FDIC insurance premiums 313 307 295 946 875
Other insurance premiums 84 85 138 253 410
Professional fees:
Legal and consulting fees 361 311 184 889 522
Other professional fees 469 386 555 1,231 1,564
Real estate owned and other repossessed asset expenses 134 18 189 293 539
Other expenses   1,028     1,156     1,433     3,473     4,415  
Total non-interest expenses   12,285     12,208     14,252     37,174     42,021  
Income before income taxes 6,235 6,171 2,531 17,907 8,348
Taxable equivalent adjustment 19 6 - 25 -
Income tax expense (benefit)   2,073     2,040     (369 )   5,928     (39,050 )
Net income $ 4,143   $ 4,125   $ 2,900   $ 11,954   $ 47,398  
 
Earnings per common share:
Basic $ 0.087 $ 0.085 $ 0.058 $ 0.246 $ 0.942
Diluted 0.086 0.084 0.058 0.245 0.937
 
(1)  

Net interest income is also presented on a fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item.

 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
       
At or for the quarters ended

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

September 30,
2014

(Dollars in thousands, except per share data)
Financial Data
Total assets $ 1,970,887 $ 1,922,789 $ 1,860,620 $ 1,833,550 $ 1,801,540
Total loans, net 1,277,330 1,224,468 1,168,434 1,148,093 1,119,955
Total securities 479,817 477,747 492,412 499,790 507,125
Total deposits 1,410,484 1,439,247 1,406,744 1,347,836 1,346,377
Total shareholders' equity 243,929 236,462 247,104 240,135 233,706
Net interest income 14,301 13,851 13,880 13,351 12,725
Net interest income (FTE) (1) 14,320 13,857 13,880 13,351 12,725
Provision (recovery) for loan losses 673 753 (184 ) 194 116
Noninterest income 4,873 5,275 4,118 2,905 4,174
Noninterest expense 12,285 12,208 12,681 13,939 14,252
Income tax expense (benefit) 2,073 2,040 1,815 (685 ) (369 )
Net income 4,143 4,125 3,686 2,808 2,900
 
Share Data
Basic earnings per common share $ 0.087 $ 0.085 $ 0.075 $ 0.057 $ 0.058
Diluted earnings per common share 0.086 0.084 0.074 0.056 0.058
Book value per common share 5.12 4.95 5.01 4.88 4.70
Tangible book value per common share 5.12 4.95 5.01 4.88 4.70
Market value per common share 5.00 5.35 5.46 5.37 4.68
 
Common shares outstanding at end of period 47,614 47,763 49,309 49,239 49,682
Weighted average shares outstanding--basic 47,480 48,359 49,022 49,244 49,698
Weighted average shares outstanding--diluted 47,744 48,634 49,295 49,531 49,958
 
Key Ratios
Return on average assets (2) 0.85 % 0.88 % 0.80 % 0.62 % 0.66 %
Return on average equity (3) 6.87 % 6.73 % 5.99 % 4.70 % 4.99 %
Net interest margin 3.18 % 3.16 % 3.24 % 3.16 % 3.06 %
Efficiency ratio 63.53 % 63.40 % 70.07 % 72.85 %

(4)

76.55 %
Nonperforming loans to net loans, end of period 1.20 % 1.55 % 1.72 % 1.78 % 1.85 %
Nonperforming assets to total assets, end of period 0.95 % 1.16 % 1.25 % 1.30 % 1.40 %
Allowance for loan loss as a percent of loans, end of period 1.35 % 1.36 % 1.45 % 1.52 % 1.59 %
Delinquent loans to total net loans, end of period 1.65 % 1.45 % 1.66 % 1.82 % 2.10 %
 

___________________________

(1)

 

Net interest income is also presented on a fully taxable equivalent (FTE) basis, as the Company believes this non-GAAP measure is the preferred industry measurement for this item

(2)

Net income divided by average total assets

(3)

Net income divided by average total equity

(4)

Excludes penalty on the prepayment of repurchase agreements

 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
         
At or for the quarters ended

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

September 30,
2014

(Dollars in thousands)
Loan Portfolio Composition
Commercial loans
Multi-family $ 74,042 $ 69,485 $ 63,597 $ 60,546 $ 56,445
Owner/nonowner occupied commercial real estate 167,366 148,025 132,305 121,595 123,260
Land 9,709 10,231 9,437 9,484 9,487
Construction 26,545 16,265 11,030 16,064 4,667
Commercial and industrial   65,004     69,269     54,036     45,222     39,853  
Total 342,666 313,275 270,405 252,911 233,712
Residential mortgage loans
Real estate 723,619 709,342 696,387 694,105 669,270
Construction   40,723     34,074     37,293     37,113     52,735  
Total 764,342 743,416 733,680 731,218 722,005
Consumer loans
Consumer   186,661     183,696     180,735     180,754     181,474  
Total   186,661     183,696     180,735     180,754     181,474  
Total loans 1,293,669 1,240,387 1,184,820 1,164,883 1,137,191
Less:
Allowance for loan losses 17,482 16,881 17,221 17,687 18,132
Deferred loan costs, net   (1,143 )   (962 )   (835 )   (897 )   (896 )
Total   16,339     15,919     16,386     16,790     17,236  
Total loans, net 1,277,330 1,224,468 1,168,434 1,148,093 1,119,955
Loans held for sale, net   38,274     35,102     31,243     20,730     10,567  
Total loans $ 1,315,604   $ 1,259,570   $ 1,199,677   $ 1,168,823   $ 1,130,522  
 
 
At or for the quarters ended

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

September 30,
2014

(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts $ 168,025 $ 179,969 $ 184,029 $ 137,511 $ 131,266
Non-interest bearing checking accounts   208,598     206,228     199,512     187,965     181,632  
Total checking accounts 376,623 386,197 383,541 325,476 312,898
Savings accounts 277,313 282,737 282,643 274,149 273,192
Money market accounts   309,004     313,602     310,983     312,911     313,513  
Total non-time deposits 962,940 982,536 977,167 912,536 899,603
Retail certificates of deposit   447,544     456,711     429,577     435,300     446,774  
Total certificates of deposit   447,544     456,711     429,577     435,300     446,774  
Total deposits $ 1,410,484   $ 1,439,247   $ 1,406,744   $ 1,347,836   $ 1,346,377  
 
Certificates of deposit as a percent of total deposits 31.73 % 31.73 % 30.54 % 32.30 % 33.18 %
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
         
At or for the quarters ended

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

September 30,
2014

(Dollars in thousands)
 
Allowance For Loan Losses
Beginning balance $ 16,881 $ 17,221 $ 17,687 $ 18,132 $ 18,264
Provision (recovery) 673 753 (184 ) 194 116
Net chargeoffs   (72 )   (1,093 )   (282 )   (639 )   (248 )
Ending balance $ 17,482   $ 16,881   $ 17,221   $ 17,687   $ 18,132  
 
At or for the quarters ended

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

September 30,
2014

(Dollars in thousands)
Net (Charge-offs) Recoveries
Commercial loans
Multi-family $ 9 $ (64 ) $ 13 $ - $ -
Owner/nonowner occupied commercial real estate (109 ) (31 ) 9 (25 ) (9 )
Land (12 ) - - - -
Construction (88 ) (603 ) - - -
Commercial and industrial   137     127     75     199     158  
Total (63 ) (571 ) 97 174 149
Residential mortgage loans
Real estate (16 ) (306 ) 20 (141 ) (278 )
Construction   -     -     -     (488 )   (90 )
Total (16 ) (306 ) 20 (629 ) (368 )
Consumer loans
Consumer   7     (216 )   (399 )   (184 )   (29 )
Total   7     (216 )   (399 )   (184 )   (29 )
Total net chargeoffs $ (72 ) $ (1,093 ) $ (282 ) $ (639 ) $ (248 )
 
 
At or for the quarters ended

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

September 30,
2014

(Dollars in thousands)
Nonperforming Loans
Commercial loans
Multi-family $ - $ 85 $ 85 $ 93 $ 114
Owner/nonowner occupied commercial real estate 3,694 5,637 5,700 5,781 6,804
Land 484 496 531 531 531
Construction 415 415 1,051 1,051 2,453
Commercial and industrial   4,016     4,016     4,016     4,016     4,144  
Total 8,609 10,649 11,383 11,472 14,046
Residential mortgage loans
Real estate 4,845 6,475 6,652 6,816 4,700
Construction   -     -     -     -     -  
Total 4,845 6,475 6,652 6,816 4,700
Consumer loans
Consumer   1,887     1,887     2,061     2,163     1,960  
Total   1,887     1,887     2,061     2,163     1,960  
Total nonperforming loans $ 15,341   $ 19,011   $ 20,096   $ 20,451   $ 20,706  
 
 
Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status $ 14,891 $ 14,246 $ 15,357 $ 16,018 $ 18,114
Past due 90 days and still accruing   -     -     -     -     -  
Past due 90 days 14,891 14,246 15,357 16,018 18,114
Past due less than 90 days and on nonaccrual   450     4,765     4,739     4,433     2,592  
Total nonperforming loans 15,341 19,011 20,096 20,451 20,706
Other real estate owned 3,262 3,127 2,908 3,345 4,445
Repossessed assets   54     234     211     122     42  
Total nonperforming assets $ 18,657   $ 22,372   $ 23,215   $ 23,918   $ 25,193  

Media Contact:
Home Savings
Colleen Scott, 330-742-0638
Vice President of Marketing
cscott@homesavings.com
or
Investor Contact:
United Community Financial Corp.
Gary M. Small, 330-742-0472
President and Chief Executive Officer










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