Market Overview

UCFC Announces Strong Fourth 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 December 31, 2015 totaled $4.3 million, or $0.09 per diluted common share compared to $2.8 million, or $0.06 per diluted common share for the quarter ended December 31, 2014. Net income for the twelve months ended December 31, 2015 totaled $16.3 million, or $0.34 per diluted common share compared to $50.2 million or $1.00 per diluted common share ($10.5 million, or $0.20 per diluted share adjusted for the recognition of $39.7 million of income tax benefit from the reversal of a deferred tax asset valuation reserve) for the twelve months ended December 31, 2014.

Gary M. Small, President and Chief Executive Officer of the Company and Home Savings, commented that, "Strong performance in the fourth quarter closes out an excellent year for the organization. We achieved our growth and profitability objectives, expanded our client base, and added a talented group of bankers. The organization is very well positioned heading into 2016."

Balance Sheet Highlights

Total Loans

Total outstanding loans, net of allowance for loan losses and including loans held for sale, increased $183.2 million, or 15.7% to $1.4 billion at December 31, 2015, compared to December 31, 2014. Driving the growth in loans was an increase of $116.8 million, or 46.2%, in commercial loans during 2015. Additionally, during the year, unfunded commercial loan commitments grew by 77.8% to approximately $103.4 million at December 31, 2015. Residential loans, including residential loans held for sale, increased 7.8%, or $58.4 million during 2015.

Total Deposits

Total deposits increased $87.9 million, or 6.5%, to $1.4 billion at December 31, 2015, compared to $1.3 billion at December 31, 2014. Non-interest bearing accounts increased $39.5 million, or 21.0%. During the same time period, interest-bearing deposits increased 4.2%, or $48.4 million. Origination of public funds continues to drive the growth of interest-bearing deposits along with an increase in commercial deposits.

Fourth Quarter Results

Net Interest Income and Margin

Net interest income on a fully taxable equivalent basis was $14.5 million in the fourth quarter of 2015, up from the $13.4 million recorded in the fourth quarter of 2014 and the $14.3 million recorded in the third quarter of 2015. The improvement in net interest income, when comparing the fourth quarter of 2015 to the fourth quarter of 2014, was due to an increase in average net loan balances totaling approximately $157.4 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 3.16% for the fourth quarter of 2015, which did not change from the fourth quarter of 2014, and decreased from the 3.18% recorded in the previous quarter. Late in December of 2015, Home Savings prepaid a high cost $30.0 million repurchase agreement. While the elimination of the debt will be beneficial going forward, minimal benefit was recognized during the quarter.

Provision for Loan Losses

The Company recognized a provision for loan losses of $893,000 in the fourth quarter of 2015 compared to a provision of $194,000 in the fourth quarter of 2014, and a provision of $673,000 in the previous quarter. Provision expense continues to be driven primarily by strong loan growth.

Non-Interest Income

Non-interest income was $5.5 million in the fourth quarter of 2015 compared to $2.9 million in the fourth quarter of 2014, and up from $4.9 million in the previous quarter. The increase in non-interest income in comparing the fourth quarter of 2015 to the fourth quarter of 2014 was primarily a result of higher mortgage banking income due to a greater volume of loans sold along with higher deposit related fees earned. The increase in noninterest income compared to the prior quarter is a result of increased deposit fees, a favorable adjustment in the mortgage servicing rights valuation allowance and gains on securities available for sale.

Non-Interest Expense

Non-interest expense was $12.8 million for the fourth quarter of 2015 compared to $13.9 million for the fourth quarter of 2014, a decrease of $1.2 million. Salaries and employee benefits decreased in that time period due to organizational restructuring and modification of certain employee benefit plans. Additionally, during the fourth quarter of 2015, the Company incurred lower prepayment penalties for the repayment of repurchase agreements. Total non-interest expense increased $470,000, when comparing the fourth quarter of 2015 to the prior quarter. This change was primarily a result of a prepayment penalty in connection with a repurchase agreement and the reversal of the residential mortgage repurchase reserve in the third quarter of 2015.

Year to Date Results

Net Interest Income and Margin

Net interest income on a fully taxable equivalent basis was $56.6 million for the twelve months ended December 31, 2015, an increase of $5.2 million from the same period in 2014. Net interest margin was 3.18% for the full year of 2015 compared to 3.10% for the full year of 2014. As in prior quarters 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 $2.1 million for 2015 compared to a negative provision of $1.3 million in 2014. The additional provision for loan losses resulted from the growth in outstanding loans during 2015.

Non-Interest Income

Non-interest income was $19.7 million for the twelve months ended December 31, 2015, compared to $13.7 million for the twelve months ended December 31, 2014. This favorable comparison is a result of increased mortgage banking income. During the year, 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 $49.9 million for the twelve months ended December 31, 2015, a decrease of $6.0 million over the twelve months ended December 31, 2014. All major expense categories declined as a result of effective process improvements and cost reduction efforts.

Asset Quality

Measures of asset quality continued to improve during 2015 as evidenced by nonperforming assets to total assets decreasing to 0.98%, compared to 1.30% for 2014. The allowance for loan loss as a percentage of total loans was 1.33% at December 31, 2015 compared with 1.52% at December 31, 2014.

Equity

Tangible book value per common share at December 31, 2015 improved to $5.14, as compared to $4.88 at December 31, 2014. During the third quarter of 2015, 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 116,000 shares during the quarter.

Dividend to be Paid

The Board of Directors declared a quarterly cash dividend of $0.025 per common share payable February 19, 2016 to shareholders of record at the close of business February 8, 2016.

Purchase of James & Sons Insurance Company

The Company also was pleased to announce yesterday, January 25, 2016, the purchase of James & Sons Insurance Company of Youngstown, Ohio. James & Sons Insurance is engaged in the business of selling insurance including auto, commercial, homeowners and life-health insurance. Completion of the transaction is anticipated in the first quarter of 2016.

Conference Call

United Community Financial Corp. will host an earnings conference call on Wednesday, January 27, 2016, at 10:00 a.m. ET., to provide an overview of the Company's fourth 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 4th 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 retail banking offices and 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)
     
December 31 December 31,
2015 2014
(Dollars in thousands)
Assets:
Cash and deposits with banks $ 20,528 $ 21,152
Federal funds sold   15,382     11,828  
Total cash and cash equivalents 35,910 32,980
Securities:
Available for sale, at fair value 357,670 499,790
Held to maturity (fair value of $109,644 and $0, respectively) 110,699 -
Loans held for sale, at lower of cost or market 9,085 20,730
Loans held for sale, at fair value 26,716 -
Loans, net of allowance for loan losses of $17,712 and $17,687 1,316,192 1,148,093
Federal Home Loan Bank stock, at cost 18,068 18,068
Premises and equipment, net 20,678 21,002
Accrued interest receivable 5,978 5,763
Real estate owned and other repossessed assets 2,727 3,467
Core deposit intangible 30 84
Cash surrender value of life insurance 54,366 46,401
Other assets   29,870     37,172  
Total assets $ 1,987,989   $ 1,833,550  
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Interest bearing $ 1,208,238 $ 1,159,871
Non-interest bearing   227,505     187,965  
Total deposits 1,435,743 1,347,836
Borrowed funds:
Federal Home Loan Bank advances
Long-term advances 46,975 46,194
Short-term advances   232,000     140,000  
Total Federal Home Loan Bank advances 278,975 186,194
Repurchase agreements and other   535     30,558  
Total borrowed funds 279,510 216,752
Advance payments by borrowers for taxes and insurance 21,174 19,904
Accrued interest payable 53 185
Accrued expenses and other liabilities   7,264     8,738  
Total liabilities   1,743,744     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 47,517,644 and 49,239,004 shares, respectively, outstanding

174,304 174,385
Retained earnings 140,819 128,512
Accumulated other comprehensive loss (19,220 ) (19,998 )
Treasury stock, at cost, 6,621,266 and 4,899,906 shares, respectively   (51,658 )   (42,764 )
Total shareholders' equity   244,245     240,135  
Total liabilities and shareholders' equity $ 1,987,989   $ 1,833,550  
 
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
               
For the Three Months Ended For the Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2015 2015 2014 2015 2014
(Dollars in thousands, except per share data)
Interest income
Loans $ 13,612 $ 13,426 $ 12,640 $ 52,619 $ 49,559
Loans held for sale 371 390 217 1,396 454
Securities:
Available for sale, nontaxable 35 - - 35 -
Available for sale, taxable 2,002 2,599 2,946 10,141 12,314
Held to maturity, nontaxable 51 33 - 96 -
Held to maturity, taxable 573 17 - 590 -
Federal Home Loan Bank stock dividends 182 181 182 723 859
Other interest earning assets   10     8     7     35     58  
Total interest income 16,836 16,654 15,992 65,635 63,244
Interest expense
Deposits 1,664 1,690 1,583 6,526 6,435
Federal Home Loan Bank advances 387 340 443 1,334 2,022
Repurchase agreements and other   295     323     615     1,253     3,368  
Total interest expense   2,346     2,353     2,641     9,113     11,825  
Net interest income 14,490 14,301 13,351 56,522 51,419
Taxable equivalent adjustment   45     19     -     70     -  
Net interest income (FTE) (1) 14,535 14,320 13,351 56,592 51,419
Provision (recovery) for loan losses   893     673     194     2,135     (1,271 )
Net interest income after provision for loan losses (FTE)   13,642     13,647     13,157     54,457     52,690  
Non-interest income
Non-deposit investment income 316 259 259 1,115 1,415
Service fees and other charges:
Mortgage servicing fees 692 683 684 2,730 2,737
Deposit related fees 1,573 1,405 1,051 5,384 4,901
Mortgage servicing rights valuation 111 (138 ) (54 ) 19 (58 )
Mortgage servicing rights amortization (445 ) (449 ) (428 ) (1,800 ) (1,687 )
Other service fees 19 19 17 75 20
Net gains (losses):
Securities available for sale 131 - 82 142 444
Mortgage banking income 1,538 1,709 (30 ) 6,841 1,570
Real estate owned and other repossessed assets charges, net (134 ) (119 ) (172 ) (445 ) (800 )
Card fees 907 1,036 893 3,684 3,354
Other income   743     468     603     1,972     1,845  
Total non-interest income   5,451     4,873     2,905     19,717     13,741  
Non-interest expense
Salaries and employee benefits 5,756 6,894 6,683 26,724 29,546
Occupancy 744 819 847 3,249 3,469
Equipment and data processing 1,760 1,714 1,918 6,865 7,470
Financial institutions tax 317 272 201 1,241 795
Advertising 191 183 221 737 838
Amortization of core deposit intangible 13 14 16 54 68
Prepayment penalty 1,280 - 2,013 1,280 3,409
FDIC insurance premiums 295 313 341 1,241 1,216
Other insurance premiums 102 84 85 355 495
Professional fees:
Legal and consulting fees 338 361 85 1,227 607
Other professional fees 502 469 381 1,733 1,945
Real estate owned and other repossessed asset expenses 45 134 92 338 631
Other expenses   1,412     1,028     1,056     4,885     5,471  
Total non-interest expenses   12,755     12,285     13,939     49,929     55,960  
Income before income taxes 6,338 6,235 2,123 24,245 10,471
Taxable equivalent adjustment 45 19 - 70 -
Income tax expense (benefit)   1,965     2,073     (685 )   7,893     (39,735 )
Net income $ 4,328   $ 4,143   $ 2,808   $ 16,282   $ 50,206  
 
Earnings per common share:
Basic $ 0.09 $ 0.09 $ 0.06 $ 0.34 $ 1.00
Diluted 0.09 0.09 0.06 0.34 1.00
 
(1)  

Net interest income is also presented on a fully taxable equivalent (FTE) basis, 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

December 31,
2015

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

(Dollars in thousands, except per share data)
Financial Data
Total assets $ 1,987,989 $ 1,970,887 $ 1,922,789 $ 1,860,620 $ 1,833,550
Total loans, net 1,316,192 1,277,330 1,224,468 1,168,434 1,148,093
Total securities 468,369 479,817 477,747 492,412 499,790
Total deposits 1,435,743 1,410,484 1,439,247 1,406,744 1,347,836
Average interest-bearing deposits 1,209,063 1,219,735 1,218,467 1,179,077 1,162,011
Average noninterest-bearing deposits 219,379 211,923 209,174 196,049 192,192
Total shareholders' equity 244,245 243,929 236,462 247,104 240,135
Net interest income 14,490 14,301 13,851 13,880 13,351
Net interest income (FTE) (1) 14,535 14,320 13,857 13,880 13,351
Provision (recovery) for loan losses 893 673 753 (184 ) 194
Noninterest income 5,451 4,873 5,275 4,118 2,905
Noninterest expense 12,755 12,285 12,208 12,681 13,939
Income tax expense (benefit) 1,965 2,073 2,040 1,815 (685 )
Net income 4,328 4,143 4,125 3,686 2,808
 
Share Data
Basic earnings per common share $ 0.09 $ 0.09 $ 0.08 $ 0.07 $ 0.06
Diluted earnings per common share 0.09 0.09 0.08 0.07 0.06
Book value per common share 5.14 5.12 4.95 5.01 4.88
Tangible book value per common share 5.14 5.12 4.95 5.01 4.88
Market value per common share 5.90 5.00 5.35 5.46 5.37
 
Common shares outstanding at end of period 47,518 47,614 47,763 49,309 49,239
Weighted average shares outstanding--basic 47,356 47,480 48,359 49,022 49,244
Weighted average shares outstanding--diluted 47,636 47,744 48,634 49,295 49,531
 
Key Ratios
Return on average assets (2) 0.88 % 0.85 % 0.88 % 0.80 % 0.62 %
Return on average equity (3) 7.02 % 6.87 % 6.73 % 5.99 % 4.70 %
Net interest margin 3.16 % 3.18 % 3.16 % 3.24 % 3.16 %
Efficiency ratio (4) 63.74 % 63.54 % 63.40 % 70.07 % 72.85 %
Nonperforming loans to net loans, end of period 1.27 % 1.20 % 1.55 % 1.72 % 1.78 %
Nonperforming assets to total assets, end of period 0.98 % 0.95 % 1.16 % 1.25 % 1.30 %
Allowance for loan loss as a percent of loans, end of period 1.33 % 1.35 % 1.36 % 1.45 % 1.52 %
Delinquent loans to total net loans, end of period 1.72 % 1.65 % 1.45 % 1.66 % 1.82 %

___________________

(1)

 

Net interest income is presented on a fully taxable equivalent (FTE) basis, 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

December 31,
2015

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

(Dollars in thousands)
Loan Portfolio Composition
Commercial loans
Multi-family $ 80,170 $ 74,042 $ 69,485 $ 63,597 $ 60,546
Owner/nonowner occupied commercial real estate 175,455 167,366 148,025 132,305 121,595
Land 9,301 9,709 10,231 9,437 9,484
Construction 38,813 26,545 16,265 11,030 16,064
Commercial and industrial   66,013     65,004     69,269     54,036     45,222  
Total 369,752 342,666 313,275 270,405 252,911
Residential mortgage loans
Real estate 733,685 723,619 709,342 696,387 694,105
Construction   40,898     40,723     34,074     37,293     37,113  
Total 774,583 764,342 743,416 733,680 731,218
Consumer loans
Consumer   188,258     186,661     183,696     180,735     180,754  
Total   188,258     186,661     183,696     180,735     180,754  
Total loans 1,332,593 1,293,669 1,240,387 1,184,820 1,164,883
Less:
Allowance for loan losses 17,712 17,482 16,881 17,221 17,687
Deferred loan costs, net   (1,311 )   (1,143 )   (962 )   (835 )   (897 )
Total   16,401     16,339     15,919     16,386     16,790  
Total loans, net 1,316,192 1,277,330 1,224,468 1,168,434 1,148,093
Loans held for sale, net   35,801     38,274     35,102     31,243     20,730  
Total loans $ 1,351,993   $ 1,315,604   $ 1,259,570   $ 1,199,677   $ 1,168,823  
 
 
At or for the quarters ended

December 31,
2015

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts $ 160,264 $ 168,025 $ 179,969 $ 184,029 $ 137,511
Non-interest bearing checking accounts   227,505     208,598     206,228     199,512     187,965  
Total checking accounts 387,769 376,623 386,197 383,541 325,476
Savings accounts 280,889 277,313 282,737 282,643 274,149
Money market accounts   312,125     309,004     313,602     310,983     312,911  
Total non-time deposits 980,783 962,940 982,536 977,167 912,536
Retail certificates of deposit   454,960     447,544     456,711     429,577     435,300  
Total certificates of deposit   454,960     447,544     456,711     429,577     435,300  
Total deposits $ 1,435,743   $ 1,410,484   $ 1,439,247   $ 1,406,744   $ 1,347,836  
 
Certificates of deposit as a percent of total deposits 31.69 % 31.73 % 31.73 % 30.54 % 32.30 %
 
UNITED COMMUNITY FINANCIAL CORP.
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
         
At or for the quarters ended

December 31,
2015

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

(Dollars in thousands)
 
Allowance For Loan Losses
Beginning balance $ 17,482 $ 16,881 $ 17,221 $ 17,687 $ 18,132
Provision (recovery) 893 673 753 (184 ) 194
Net chargeoffs   (663 )   (72 )   (1,093 )   (282 )   (639 )
Ending balance $ 17,712   $ 17,482   $ 16,881   $ 17,221   $ 17,687  
 
At or for the quarters ended

December 31,
2015

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

(Dollars in thousands)
Net (Charge-offs) Recoveries
Commercial loans
Multi-family $ 7 $ 9 $ (64 ) $ 13 $ -
Owner/nonowner occupied commercial real estate (67 ) (109 ) (31 ) 9 (25 )
Land (100 ) (12 ) - - -
Construction 21 (88 ) (603 ) - -
Commercial and industrial   141     137     127     75     199  
Total 2 (63 ) (571 ) 97 174
Residential mortgage loans
Real estate (611 ) (17 ) (306 ) 20 (141 )
Construction   -     -     -     -     (488 )
Total (611 ) (17 ) (306 ) 20 (629 )
Consumer loans
Consumer   (54 )   8     (216 )   (399 )   (184 )
Total   (54 )   8     (216 )   (399 )   (184 )
Total net chargeoffs $ (663 ) $ (72 ) $ (1,093 ) $ (282 ) $ (639 )
 
 
At or for the quarters ended

December 31,
2015

September 30,
2015

June 30,
2015

March 31,
2015

December 31,
2014

(Dollars in thousands)
Nonperforming Loans
Commercial loans
Multi-family $ - $ - $ 85 $ 85 $ 93
Owner/nonowner occupied commercial real estate 3,599 3,694 5,637 5,700 5,781
Land 384 484 496 531 531
Construction - 415 415 1,051 1,051
Commercial and industrial   4,016     4,016     4,016     4,016     4,016  
Total 7,999 8,609 10,649 11,383 11,472
Residential mortgage loans
Real estate 6,181 4,845 6,475 6,652 6,816
Construction   -     -     -     -     -  
Total 6,181 4,845 6,475 6,652 6,816
Consumer loans
Consumer   2,567     1,887     1,887     2,061     2,163  
Total   2,567     1,887     1,887     2,061     2,163  
Total nonperforming loans $ 16,747   $ 15,341   $ 19,011   $ 20,096   $ 20,451  
 
 
Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status $ 16,279 $ 14,891 $ 14,246 $ 15,357 $ 16,018
Past due 90 days and still accruing   -     -     -     -     -  
Past due 90 days 16,279 14,891 14,246 15,357 16,018
Past due less than 90 days and on nonaccrual   468     450     4,765     4,739     4,433  
Total nonperforming loans 16,747 15,341 19,011 20,096 20,451
Other real estate owned 2,651 3,262 3,127 2,908 3,345
Repossessed assets   76     54     234     211     122  
Total nonperforming assets $ 19,474   $ 18,657   $ 22,372   $ 23,215   $ 23,918  

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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