UNITED COMMUNITY FINANCIAL CORP - FORM 8-K - EX-99

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8-K - FORM 8-K - UNITED COMMUNITY FINANCIAL CORP	d764271d8k.htm

EXHIBIT 99

LOGO

275 West Federal Street

Youngstown, Ohio 44503-1203

FOR IMMEDIATE RELEASE


Media Contact:		Investor Contact:
Colleen Scott		Gary M. Small
Vice President of Marketing		President and Chief Executive Officer
Home Savings		United Community Financial Corp.
(330) 742-0638		(330) 742-9823
cscott@homesavings.com

United Community Financial Corp. Announces

Second Quarter Results

•

Net income for the second quarter of 2014 totaled $42.4 million which includes the recognition of $38.8 million of the tax benefit related to the reversal of the deferred tax asset valuation allowance

•

Strongest pretax quarter, adjusted for security gains, since March 2008

•

The quarter included a $923,000 charge as part of a cost reduction initiative designed to reduce annual costs on a go-forward basis by over $5.0 million

•

Annualized loan growth of 11% through the first two quarters of 2014

•

Tangible book value per share increased to $4.66 at June 30, 2014, from $3.76 at March 31, 2014

•

Declared a dividend of $0.01 per common share - first dividend since 2008

•

Initiated common stock repurchase effort during the second quarter

YOUNGSTOWN, Ohio (July 22, 2014) – United Community Financial Corp. (Company) (Nasdaq: UCFC), holding company of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), today reported consolidated net income of $42.4 million (including the recognition of $38.8 million of income tax benefit from the reversal of a deferred tax asset valuation reserve) for the three months ended June 30, 2014. The Company also reported net income of $44.5 million (including the recognition of $38.7 million of income tax benefit from the reversal of a deferred tax asset valuation reserve) for the six months ended June 30, 2014.

Gary M. Small, President and Chief Executive Officer of United Community and Home Savings, commented that, “The second quarter results reflect solid core earnings progress for Home Savings. The growth in commercial loan commitments combined with meaningful cost reduction efforts across the organization are expected to fuel continued performance improvement in future quarters.”

Net Interest Income and Margin

Net interest income was $12.7 million in the second quarter of 2014 compared to $12.6 million in second quarter of 2013. Net interest margin increased from 2.93% during the second quarter of 2013 to 3.09% in the second quarter of 2014. The increase in net interest margin over the last year is reflective of the migration of lower interest earning assets into loans outstanding. The yield on earning assets was 3.83% for the second quarter of 2014 compared to 3.71% for the second quarter of 2013 and average loan balances increased $52.9 million over this same period.

Net interest income for the six months ended June 30, 2014, was $25.3 million compared to $25.6 million for the six months ended June 30, 2013. The net interest margin was 3.08% for the six months ended June 30, 2014 compared to 2.97% for the six months ended June 30, 2013. The yield on interest-earning assets increased from 3.77% to 3.83% during this period while the cost of interest-bearing liabilities decreased four basis points during the period to 0.92%

Noninterest Income

Noninterest income decreased in the second quarter of 2014 to $3.4 million, as compared to noninterest income for the second quarter of 2013 of $6.4 million. Security gains of approximately $1.9 million were recognized in the second quarter of 2013. Additionally, mortgage banking income declined $1.1 million. Offsetting these declines was a reduction in losses incurred on the resolution of real estate owned of $1.1 million.

In the first half of 2014, noninterest income was $6.7 million, compared to $12.1 million in the first half of 2013. Security gains of approximately $2.6 million were recognized in the first half of 2013. Additionally, mortgage banking income declined $2.1 million.

Noninterest Expense

During the second quarter of 2014, Home Savings incurred a $923,000 charge related to cost reduction initiatives. The Company anticipates a savings of approximately $5.0 million annualized on a go-forward basis or approximately 9.0% of annualized noninterest expenses as a result of this initiative.

In spite of Home Savings incurring a $923,000 restructure charge in the second quarter of 2014, noninterest expense improved $143,000 to $14.2 million when compared to the second quarter of 2013.

In the second quarter of 2014, salaries and employee benefits were approximately $1.2 million higher, primarily due to the above mentioned cost reduction initiative. These increases were offset by a decline in most other expense categories.

Noninterest expense declined to $27.8 million in the first half of 2014 compared to $28.2 million in the first half of 2013. Similarly to the quarterly comparison, the first six months of 2014 included the accrual of restructuring charges previously mentioned. Franchise/financial institutions tax, FDIC insurance premiums and other expenses were also lower in the first six months of 2014.

Asset Quality

Asset quality continued to improve as delinquent loans declined through the second quarter of 2014. As of June 30, 2014, delinquent loans were $20.2 million, down $3.6 million, or 15.2%, from $23.8 million at December 31, 2013. Nonperforming loans also continued to decline, which as of June 30, 2014 were $20.3 million, down $3.3 million, or 13.9%, from $23.6 million at December 31, 2013. Nonperforming assets were $24.9 million as of June 30, 2014, down $5.1 million, or 16.9%, from $29.9 million at December 31, 2013. The allowance for loan loss as a percentage of total loans was 1.65% at June 30, 2014, as compared with 2.01% at December 31, 2013.

The provision for loan losses decreased $2.7 million in the second quarter of 2014, compared to the second quarter of 2013. The provision for loan losses also decreased $4.8 million in the first six months of 2014, compared to the first six months of 2013. During the second quarter of 2014, a large commercial real estate loan paid off, releasing approximately $748,000 in reserves. In addition, Home Savings individually analyzed a large portion of impaired mortgage and home equity loans in 2014. Many of these loans were deemed to have adequate collateral to cover any potential future losses allowing for the release of reserves. Finally, as a result of continued improvement in asset quality and a decline in loan loss history, Home Savings has adjusted historical and environmental factors resulting in a decrease in reserves.

Deferred Tax Asset Valuation

At the end of 2010, the Company established a deferred tax asset (“DTA”) valuation allowance. In the course of its periodic assessment of its DTA position, the Company was able to reverse this valuation allowance in the second quarter of 2014. The Company has determined that it is more likely than not it will be able to fully realize its net deferred tax asset, including its tax loss carryforward. This action resulted in the recognition of a $38.8 million income tax benefit during the current year. As a result of this reversal, tangible book value increased $0.77 cents per share to $4.66.

Small continued, “Thanks to a steady stream of positive quarterly earnings, we are in a position to reflect the value of the tax asset on the balance sheet. The Company’s book value better reflects the value of the organization.”

Capital and Book Value per Common Share

The Board of Directors declared a quarterly cash dividend of $0.01 per common share payable August 15, 2014 to shareholders of record at the close of business August 1, 2014.

In addition, as part of the Company’s capital management strategies of maximizing shareholder value and returns, during the second quarter, the Company reinstated its share repurchase program to take advantage of the favorable market conditions.

Small added, “The dividend reflects a conservative payout ratio of normalized annual earnings. Investors can expect prudent capital management designed to deliver the best return for our shareholders.”

Home Savings is a wholly-owned subsidiary of the Company and operates 33 full-service banking offices and nine loan production offices located throughout 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)


	June 30,			December 31,
	2014			2013
	(Dollars in thousands)
Assets:
Cash and deposits with banks	$	27,363		$	20,937
Federal funds sold		16,227			56,394

Total cash and cash equivalents		43,590			77,331
Securities:
Available for sale, at fair value		516,637			511,006
Loans held for sale		9,290			4,838
Loans, net of allowance for loan losses of $18,264 and $21,116		1,086,771			1,029,192
Federal Home Loan Bank stock, at cost		18,068			26,464
Premises and equipment, net		20,391			20,924
Accrued interest receivable		5,762			5,694
Real estate owned and other repossessed assets		4,548			6,341
Core deposit intangible		117			152
Cash surrender value of life insurance		45,684			44,972
Other assets		39,081			10,936

Total assets	$	1,789,939		$	1,737,850

Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Interest bearing	$	1,190,063		$	1,221,162
Non-interest bearing		185,411			170,590

Total deposits		1,375,474			1,391,752
Borrowed funds:
Federal Home Loan Bank advances		65,000			50,000
Repurchase agreements and other		90,567			90,578

Total borrowed funds		155,567			140,578
Advance payments by borrowers for taxes and insurance		12,708			20,060
Accrued interest payable		573			550
Accrued expenses and other liabilities		10,568			9,836

Total liabilities		1,554,890			1,562,776

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 50,452,083 and 50,339,089 shares, respectively, outstanding		174,176			174,719
Retained earnings		123,893			81,515
Accumulated other comprehensive loss		(25,901	)		(41,665	)
Treasury stock, at cost, 3,686,827 and 3,799,821 shares, respectively		(37,119	)		(39,495	)

Total shareholders’ equity		235,049			175,074

Total liabilities and shareholders’ equity	$	1,789,939		$	1,737,850

UNITED COMMUNITY FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended									For the Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2014			2014			2013			2014			2013
	(Dollars in thousands, except per share data)
Interest income
Loans	$	12,361		$	12,122		$	12,207		$	24,483		$	24,834
Loans held for sale		74			49			78			123			167
Securities:
Available for sale		3,125			3,241			3,384			6,366			6,812
Federal Home Loan Bank stock dividends		230			267			277			497			560
Other interest earning assets		21			26			41			47			50

Total interest income		15,811			15,705			15,987			31,516			32,423
Interest expense
Deposits		1,627			1,677			1,909			3,304			3,996
Federal Home Loan Bank advances		524			518			524			1,042			1,047
Repurchase agreements and other		919			908			918			1,827			1,827

Total interest expense		3,070			3,103			3,351			6,173			6,870

Net interest income		12,741			12,602			12,636			25,343			25,553
Provision for loan losses		(1,614	)		33			1,113			(1,581	)		3,177

Net interest income after provision for loan losses		14,355			12,569			11,523			26,924			22,376

Non-interest income
Non-deposit investment income		407			341			373			748			914
Service fees and other charges
Mortgage servicing fees		686			689			698			1,375			1,402
Deposit related fees		1,331			1,198			1,334			2,529			2,594
Mortgage servicing rights valuation		(5	)		(1	)		211			(6	)		646
Mortgage servicing rights amortization		(432	)		(392	)		(570	)		(824	)		(1,230	)
Other service fees		—			—			18			—			61
Net gains (losses):
Securities available for sale		31			3			1,857			34			2,578
Mortgage banking income		312			612			1,389			924			3,032
Real estate owned and other repossessed assets charges, net		(42	)		(383	)		(1,140	)		(425	)		(1,571	)
Card fees		852			772			1,179			1,624			1,913
Other income		298			385			1,035			683			1,738

Total non-interest income		3,438			3,224			6,384			6,662			12,077

Non-interest expense
Salaries and employee benefits		8,282			7,580			7,132			15,862			14,005
Occupancy		815			933			851			1,748			1,673
Equipment and data processing		1,963			1,798			1,782			3,761			3,542
Franchise tax		198			198			400			396			831
Advertising		247			189			281			436			420
Amortization of core deposit intangible		16			19			23			35			46
Deposit insurance premiums		327			253			603			580			1,157
Other insurance premiums		135			137			175			272			351
Professional fees
Legal and consulting fees		177			161			(43	)		338			149
Other professional fees		617			392			917			1,009			1,133
Real estate owned and other repossessed asset expenses		137			213			293			350			786
Other expenses		1,312			1,670			1,954			2,982			4,139

Total non-interest expenses		14,226			13,543			14,368			27,769			28,232

Income before income taxes		3,567			2,250			3,539			5,817			6,221
Income tax expense (benefit)		(38,837	)		156			150			(38,681	)		150

Net income		42,404			2,094			3,389			44,498			6,071
Amortization of discount on preferred stock		—			—			5,930			—			6,751

Earnings available to common shareholders	$	42,404		$	2,094		$	(2,541	)	$	44,498		$	(680	)

Earnings per common share
Basic	$	0.84		$	0.04		$	(0.06	)	$	0.88		$	(0.02	)
Diluted		0.84			0.04			(0.06	)		0.88			(0.02	)

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013
	(Dollars in thousands, except per share data)
Financial Data
Total assets	$	1,789,939		$	1,749,144		$	1,737,850		$	1,756,202		$	1,787,071
Total loans, net		1,086,771			1,060,901			1,029,192			1,009,029			1,008,843
Total securities		516,637			517,388			511,006			542,811			555,188
Total deposits		1,375,474			1,398,067			1,391,752			1,410,610			1,433,815
Total shareholders’ equity		235,049			189,829			175,074			183,322			183,759
Net interest income		12,741			12,602			13,074			12,704			12,636
Provision for loan losses		(1,614	)		33			282			657			1,113
Noninterest income		3,438			3,224			4,124			3,548			6,384
Noninterest expense		14,226			13,543			14,977			13,528			14,368
Income tax expense (benefit)		(38,837	)		156			(300	)		350			150
Net income		42,404			2,094			2,239			1,717			3,389
Share Data
Basic earnings (loss) per common share	$	0.84		$	0.04		$	0.04		$	0.03		$	(0.06	)
Diluted earnings (loss) per common share		0.84			0.04			0.04			0.03			(0.06	)
Book value per common share		4.66			3.76			3.48			3.65			3.66
Tangible book value per common share		4.66			3.76			3.47			3.65			3.66
Market value per common share		4.13			3.92			3.57			3.89			4.65
Common shares outstanding at end of period		50,452			50,422			50,339			50,225			50,189
Weighted average shares outstanding—basic		50,274			50,196			50,114			50,110			43,160
Weighted average shares outstanding—diluted		50,495			50,451			50,360			50,382			43,160
Key Ratios
Return on average assets ⁽¹⁾		9.67	%		0.48	%		0.51	%		0.39	%		0.74	%
Return on average equity ⁽²⁾		84.84	%		4.52	%		4.82	%		3.75	%		6.46	%
Net interest margin		3.09	%		3.07	%		3.17	%		3.04	%		2.93	%
Efficiency ratio		87.77	%		83.45	%		85.89	%		81.14	%		78.38	%
Nonperforming loans to total loans, end of period		1.87	%		2.17	%		2.29	%		2.72	%		2.88	%
Nonperforming assets to total assets, end of period		1.39	%		1.58	%		1.72	%		2.10	%		2.26	%
Allowance for loan loss as a percent of loans, end of period		1.65	%		1.90	%		2.01	%		2.04	%		1.85	%
Delinquent loans to total loans, end of period		1.86	%		2.07	%		2.32	%		2.77	%		3.38	%

⁽¹⁾	Net income divided by average total assets

⁽²⁾	Net income divided by average total equity

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013
										(Dollars in thousands)
Loan Portfolio Composition
Real Estate Loans
One-to four-family residential	$	645,211		$	610,879		$	585,025		$	575,791		$	572,575
Multi-family residential*		52,938			54,233			54,485			55,696			62,559
Nonresidential*		122,066			125,796			131,251			127,699			120,586
Land*		9,635			9,829			9,683			9,546			9,821
Construction Loans
One-to four-family residential and land development		51,974			55,082			53,349			38,932			32,512
Multi-family and nonresidential*		1,010			207			—			—			4,584

Total real estate loans		882,834			856,026			833,793			807,664			802,637
Consumer Loans		182,027			184,409			189,231			194,383			199,634
Commercial Loans		39,127			40,013			26,141			26,888			24,526

Total Loans		1,103,988			1,080,448			1,049,165			1,028,935			1,026,797
Less:
Allowance for loan losses		18,264			20,554			21,116			21,032			19,037
Deferred loan costs, net		(1,047	)		(1,007	)		(1,143	)		(1,126	)		(1,083	)

Total		17,217			19,547			19,973			19,906			17,954

Loans, net	$	1,086,771		$	1,060,901		$	1,029,192		$	1,009,029		$	1,008,843

* Categories are considered commercial real estate

	At or for the quarters ended
	June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013
										(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts	$	133,999		$	136,031		$	132,751		$	134,766		$	135,228
Non-interest bearing checking accounts		185,411			185,620			170,590			167,167			165,224

Total checking accounts		319,410			321,651			303,341			301,933			300,452
Savings accounts		277,404			278,906			267,515			267,062			272,991
Money market accounts		326,738			329,163			328,625			331,449			334,242

Total non-time deposits		923,552			929,720			899,481			900,444			907,685
Retail certificates of deposit		451,922			468,347			492,271			510,166			526,130

Total certificates of deposit		451,922			468,347			492,271			510,166			526,130

Total deposits	$	1,375,474		$	1,398,067		$	1,391,752		$	1,410,610		$	1,433,815

Certificates of deposit as a percent of total deposits		32.86	%		33.50	%		35.37	%		36.17	%		36.69	%

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013
										(Dollars in thousands)
Allowance For Loan Losses
Beginning balance	$	20,554		$	21,116		$	21,032		$	19,037		$	21,827
Provision		(1,614	)		33			282			657			1,113
Net (chargeoffs) recoveries		(676	)		(595	)		(198	)		1,338			(3,903	)

Ending balance	$	18,264		$	20,554		$	21,116		$	21,032		$	19,037

Net (Charge-offs) Recoveries
Real Estate Loans
One-to four-family	$	(181	)	$	(163	)	$	42		$	(201	)	$	(487	)
Multi-family		(135	)		(5	)		—			13			(113	)
Nonresidential		56			(252	)		(29	)		(381	)		(1,288	)
Land		—			—			12			10			(1,639	)
Construction Loans
One-to four-family residential and land development		(330	)		(79	)		451			1,876			(108	)
Multi-family and nonresidential		—			—			(620	)		—			4

Total real estate loans		(590	)		(499	)		(144	)		1,317			(3,631	)
Consumer Loans		(304	)		(233	)		(193	)		(143	)		(387	)
Commercial Loans		218			137			139			164			115

Total	$	(676	)	$	(595	)	$	(198	)	$	1,338		$	(3,903	)


	At or for the quarters ended
	June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013			June 30, 2013
										(Dollars in thousands)
Nonperforming Loans
Real Estate Loans
One-to four-family residential	$	5,380		$	6,133		$	6,356		$	6,127		$	4,993
Multi-family residential		133			1,158			641			705			727
Nonresidential		4,902			5,033			5,560			8,963			10,429
Land		532			532			496			628			656
Construction Loans
One-to four-family residential and land development		2,553			2,884			3,084			3,320			4,385

Total real estate loans		13,500			15,740			16,137			19,743			21,190
Consumer Loans		2,663			3,089			3,293			3,564			3,459
Commercial Loans		4,151			4,155			4,158			4,177			4,453

Total Loans	$	20,314		$	22,984		$	23,588		$	27,484		$	29,102

Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status	$	16,636		$	18,708		$	20,188		$	20,946		$	22,487
Past due 90 days and still accruing		—			—			45			3,413			3,501

Past due 90 days		16,636			18,708			20,233			24,359			25,988
Past due less than 90 days and on nonaccrual		3,678			4,276			3,355			3,125			3,114

Total Nonperforming Loans		20,314			22,984			23,588			27,484			29,102
Other real estate owned		4,546			4,700			6,318			9,276			11,203
Repossessed assets		2			—			23			39			156

Total Nonperforming Assets	$	24,862		$	27,684		$	29,929		$	36,799		$	40,461

Total Troubled Debt Restructured Loans
Accruing	$	25,905		$	26,614		$	26,577		$	26,629		$	25,165
Nonaccruing		4,328			4,724			4,941			5,474			5,455

Total	$	30,233		$	31,338		$	31,518		$	32,103		$	30,620

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