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

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8-K - FORM 8-K - UNITED COMMUNITY FINANCIAL CORP	d809814d8k.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. POSTS

ANOTHER STRONG QUARTER

•

Quarterly pretax core earnings (adjusted for debt prepayment charge of $1.4 million) of $3.9 million

•

Annualized loan growth was 12% for both the third quarter and the first nine months of 2014

•

Credit quality continues to improve with third quarter net charge-offs at nine basis points of net loans

•

The previously announced $5 million cost reduction initiative was successfully completed

•

Diluted earnings per share for the third quarter of $0.06 per common share

•

UCFC declares a dividend of $0.01 per common share

YOUNGSTOWN, Ohio (October 22, 2014) – United Community Financial Corp. (Company) (Nasdaq: UCFC), parent company of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), announced today that net income for the third quarter of 2014 totaled $2.9 million. The Company also reported net income of $47.4 million (including the recognition of $39.1 million of income tax benefit from the reversal of a deferred tax asset valuation reserve) for the nine months ended September 30, 2014.

Gary M. Small, President and Chief Executive Officer of United Community and Home Savings, commented that, “Our strong performance is evidence that our strategies are working. We have been able to grow our loan portfolio, manage expenses, reduce our funding costs and attract new customers. These are all signs that we are headed in the right direction.”

Net Loans

Net loans increased $90.8 million from $1.0 billion at December 31, 2013 to $1.1 billion at September 30, 2014. The increase was driven by an $84.2 million increase in one-to four-family residential loans. Commercial and commercial real estate loans also increased $12.2 million during this period. Commercial commitments also continue to show strong growth with an increase of $49.6 million, or 20.9% year to date.

Small noted, “We are very pleased with the third quarter loan activity, particularly in the commercial lending segment. The growth reflects the success we are experiencing in attracting new business.”

Net Interest Income and Margin

The Company’s net interest margin was 3.06% in the third quarter of 2014, up from 3.04% in the third quarter of 2013. The net interest margin for the nine months ended September 30, 2014 was 3.07% compared to 2.99% in the prior year period. Despite the prolonged period of low interest rates and downward pressure on loan yields, the Company continues to make progress in expanding its net interest margin. The expansion is attributable to loan growth coupled with declines in deposit and borrowing costs. At the end of September 2014, Home Savings prepaid one $30.0 million tranche of the Company’s repurchase agreements and incurred a $1.4 million prepayment charge. Due to the timing of the debt extinguishment, there was minimal impact on the third quarter margin. The debt prepayment actions are one of many efforts underway to reduce the Company’s funding costs.

Noninterest Income

Noninterest income increased to $4.2 million in the third quarter of 2014, compared to $3.5 million in the third quarter of 2013. A portfolio of bank equities was sold in the third quarter of 2014, resulting in the recognition of security gains of approximately $328,000. Additionally, Home Savings recognized reduction in losses incurred on the resolution of real estate owned of $192,000. The Company also recognized higher non-deposit investment income due to a higher sales volume in the third quarter of 2014, as compared to the same quarter last year. Offsetting these changes was a reduction in mortgage banking income of $219,000.

In the first nine months of 2014, noninterest income totaled $10.8 million, compared to $15.6 million in the first nine months of 2013. The difference in noninterest income year over year is due to security gains of approximately $2.6 million that were recognized in the first nine months of 2013. Also, during the first nine months of 2013, Home Savings recognized a $676,000 recovery on mortgage servicing rights. A similar recovery was not recognized in 2014. These declines over the same period in 2013 were offset partially by a reduction in losses incurred on the resolution of real estate owned of $1.3 million. Lastly, mortgage banking income has declined $2.3 million, which is being driven by lower mortgage production due to lower mortgage refinance activity.

Noninterest Expense

Noninterest expenses increased $724,000 for the quarter ending September 30, 2014, as compared to the same quarter last year. The third quarter of 2014 included a $1.4 million prepayment penalty on the early termination of a $30.0 million borrowing. Reduced FDIC insurance premiums, financial institutions taxes, legal and consulting fees partially offset the impact of the prepayment penalty.

Noninterest expense increased to $42.0 million during the first nine months of 2014 compared to $41.8 million in the first nine months of 2013. The first nine months of 2014 included charges related to cost

reduction initiatives of $923,000 and the prepayment penalty of $1.4 million referenced above. Partially offsetting these expenses were decreases in financial institutions tax, FDIC insurance premiums and other expenses. Lower expenses due to the cost reduction initiatives will have a positive impact on earnings in the fourth quarter and beyond.

Small added, “The organization has effectively reduced the operating expense run rate by 9%. We are now much better prepared to invest in business initiatives designed to grow revenues and improve performance.”

Asset Quality

Nonperforming assets decreased 32% to $25.2 million as of September 30, 2014, compared to $36.8 million at September 30, 2013. On a linked quarter basis, nonperforming assets increased approximately $300,000. The ratio of nonperforming assets to assets at September 30, 2014 was 1.40% compared to 1.39% at June 30, 2014 and 2.72% at September 30, 2014. Net charge-offs to average loans were 0.19% for the nine months ended September 30, 2014 compared to 0.51% for the same period in 2013.

As a result of the improving metrics discussed above, the Company’s provision for loan losses continues to show improvement totaling $116,000 for the quarter ended September 30, 2014 and a negative provision of $1.5 million for the nine months ended September 30, 2014. The allowance for loan losses totaled $18.1 million at September 30, 2014, which was 1.59% of total loans at the end of the quarter.

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 in June of 2014.

Capital and Book Value per Common Share

The Board of Directors declared a quarterly cash dividend of $0.01 per common share payable November 14, 2014 to shareholders of record at the close of business November 3, 2014.

In addition, as part of the Company’s capital management strategies of maximizing shareholder value and returns, during the third quarter, the Company repurchased 778,400 shares of its stock.

Home Savings is a wholly-owned subsidiary of the Company and operates 32 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)


	September 30, 2014			December 31, 2013
	(Dollars in thousands)
Assets:
Cash and deposits with banks	$	20,059		$	20,937
Federal funds sold		9,531			56,394

Total cash and cash equivalents		29,590			77,331
Securities:
Available for sale, at fair value		507,125			511,006
Loans held for sale		10,567			4,838
Loans, net of allowance for loan losses of $18,132 and $21,116		1,119,955			1,029,192
Federal Home Loan Bank stock, at cost		18,068			26,464
Premises and equipment, net		20,138			20,924
Accrued interest receivable		5,256			5,694
Real estate owned and other repossessed assets		4,487			6,341
Core deposit intangible		100			152
Cash surrender value of life insurance		46,048			44,972
Other assets		40,206			10,936

Total assets	$	1,801,540		$	1,737,850

Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Interest bearing	$	1,164,745		$	1,221,162
Non-interest bearing		181,632			170,590

Total deposits		1,346,377			1,391,752
Borrowed funds:
Federal Home Loan Bank advances		138,000			50,000
Repurchase agreements and other		60,563			90,578

Total borrowed funds		198,563			140,578
Advance payments by borrowers for taxes and insurance		13,350			20,060
Accrued interest payable		380			550
Accrued expenses and other liabilities		9,164			9,836

Total liabilities		1,567,834			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 49,682,291 and 50,339,089 shares, respectively, outstanding		174,283			174,719
Retained earnings		126,229			81,515
Accumulated other comprehensive loss		(26,310	)		(41,665	)
Treasury stock, at cost,4,456,619 and 3,799,821 shares, respectively		(40,496	)		(39,495	)

Total shareholders’ equity		233,706			175,074

Total liabilities and shareholders’ equity	$	1,801,540		$	1,737,850

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,
	2014			2014			2013			2014			2013
	(Dollars in thousands, except per share data)
Interest income
Loans	$	12,436		$	12,361		$	12,233		$	36,919		$	37,067
Loans held for sale		114			74			80			237			247
Securities:
Available for sale		3,002			3,125			3,364			9,368			10,176
Federal Home Loan Bank stock dividends		180			230			280			677			840
Other interest earning assets		4			21			52			51			102

Total interest income		15,736			15,811			16,009			47,252			48,432
Interest expense
Deposits		1,548			1,627			1,847			4,852			5,843
Federal Home Loan Bank advances		537			524			529			1,579			1,576
Repurchase agreements and other		926			919			929			2,753			2,756

Total interest expense		3,011			3,070			3,305			9,184			10,175

Net interest income		12,725			12,741			12,704			38,068			38,257
Provision for loan losses		116			(1,614	)		657			(1,465	)		3,834

Net interest income after provision for loan losses		12,609			14,355			12,047			39,533			34,423

Non-interest income
Non-deposit investment income		408			407			275			1,156			1,189
Service fees and other charges
Mortgage servicing fees		678			686			702			2,053			2,104
Deposit related fees		1,321			1,331			1,471			3,850			4,065
Mortgage servicing rights valuation		2			(5	)		30			(4	)		676
Mortgage servicing rights amortization		(435	)		(432	)		(482	)		(1,259	)		(1,712	)
Other service fees		3			—			13			3			74
Net gains (losses):
Securities available for sale		328			31			—			362			2,578
Mortgage banking income		676			312			895			1,600			3,927
Real estate owned and other repossessed assets charges, net		(203	)		(42	)		(395	)		(628	)		(1,966	)
Card fees		837			852			821			2,461			2,734
Other income		559			298			218			1,242			1,956

Total non-interest income		4,174			3,438			3,548			10,836			15,625

Non-interest expense
Salaries and employee benefits		7,001			8,282			6,729			22,863			20,735
Occupancy		874			815			811			2,622			2,484
Equipment and data processing		1,791			1,963			1,698			5,552			5,240
Financial institutions tax		198			198			385			594			1,216
Advertising		181			247			226			617			646
Amortization of core deposit intangible		17			16			20			52			66
Prepayment penalty		1,396			—			—			1,396			—
FDIC assessment		295			327			598			875			1,755
Other insurance premiums		138			135			174			410			525
Professional fees
Legal and consulting fees		184			177			368			522			567
Other professional fees		555			617			393			1,564			1,476
Real estate owned and other repossessed asset expenses		189			137			354			539			1,140
Other expenses		1,433			1,312			1,772			4,415			5,910

Total non-interest expenses		14,252			14,226			13,528			42,021			41,760

Income before income taxes		2,531			3,567			2,067			8,348			8,288
Income tax expense (benefit)		(369	)		(38,837	)		350			(39,050	)		500

Net income		2,900			42,404			1,717			47,398			7,788
Amortization of discount on preferred stock		—			—			—			—			6,751

Earnings available to common shareholders	$	2,900		$	42,404		$	1,717		$	47,398		$	1,037

Earnings per common share
Basic	$	0.06		$	0.84		$	0.03		$	0.94		$	0.02
Diluted		0.06			0.84			0.03			0.94			0.02

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	September 30, 2014			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
	(Dollars in thousands, except per share data)
Financial Data
Total assets	$	1,801,540		$	1,789,939		$	1,749,144		$	1,737,850		$	1,756,202
Total loans, net		1,119,955			1,086,771			1,060,901			1,029,192			1,009,029
Total securities		507,125			516,637			517,388			511,006			542,811
Total deposits		1,346,377			1,375,474			1,398,067			1,391,752			1,410,610
Total shareholders’ equity		233,706			235,049			189,829			175,074			183,322
Net interest income		12,725			12,741			12,602			13,074			12,704
Provision for loan losses		116			(1,614	)		33			282			657
Noninterest income		4,174			3,438			3,224			4,124			3,548
Noninterest expense		14,252			14,226			13,543			14,977			13,528
Income tax expense (benefit)		(369	)		(38,837	)		156			(300	)		350
Net income		2,900			42,404			2,094			2,239			1,717

Share Data
Basic earnings (loss) per common share	$	0.06		$	0.84		$	0.04		$	0.04		$	0.03
Diluted earnings (loss) per common share		0.06			0.84			0.04			0.04			0.03
Book value per common share		4.70			4.66			3.76			3.48			3.65
Tangible book value per common share		4.70			4.66			3.76			3.47			3.65
Market value per common share		4.68			4.13			3.92			3.57			3.89

Common shares outstanding at end of period		49,682			50,452			50,422			50,339			50,225
Weighted average shares outstanding—basic		49,698			50,274			50,196			50,114			50,110
Weighted average shares outstanding—diluted		49,958			50,495			50,451			50,360			50,382

Key Ratios
Return on average assets ⁽¹⁾		0.66	%		9.67	%		0.48	%		0.51	%		0.39	%
Return on average equity ⁽²⁾		4.99	%		84.84	%		4.52	%		4.82	%		3.75	%
Net interest margin		3.06	%		3.09	%		3.07	%		3.17	%		3.04	%
Efficiency ratio		84.87	%		87.77	%		83.45	%		85.89	%		81.14	%
Nonperforming loans to total loans, end of period		1.85	%		1.87	%		2.17	%		2.29	%		2.72	%
Nonperforming assets to total assets, end of period		1.40	%		1.39	%		1.58	%		1.72	%		2.10	%
Allowance for loan loss as a percent of loans, end of period		1.59	%		1.65	%		1.90	%		2.01	%		2.04	%
Delinquent loans to total loans, end of period		2.10	%		1.86	%		2.07	%		2.32	%		2.77	%

⁽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
	September 30, 2014			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
	(Dollars in thousands)
Loan Portfolio Composition
Real Estate Loans
One-to four-family residential	$	669,270		$	645,211		$	610,879		$	585,025		$	575,791
Multi-family residential*		56,445			52,938			54,233			54,485			55,696
Nonresidential*		123,260			122,066			125,796			131,251			127,699
Land*		9,487			9,635			9,829			9,683			9,546
Construction Loans
One-to four-family residential and land development		52,735			51,974			55,082			53,349			38,932
Multi-family and nonresidential*		4,667			1,010			207			—			—

Total real estate loans		915,864			882,834			856,026			833,793			807,664
Consumer Loans		181,474			182,027			184,409			189,231			194,383
Commercial Loans		39,853			39,127			40,013			26,141			26,888

Total Loans		1,137,191			1,103,988			1,080,448			1,049,165			1,028,935
Less:
Allowance for loan losses		18,132			18,264			20,554			21,116			21,032
Deferred loan costs, net		(896	)		(1,047	)		(1,007	)		(1,143	)		(1,126	)

Total		17,236			17,217			19,547			19,973			19,906

Loans, net	$	1,119,955		$	1,086,771		$	1,060,901		$	1,029,192		$	1,009,029

* Categories are considered commercial real estate

	At or for the quarters ended
	September 30, 2014			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
	(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts	$	131,266		$	133,999		$	136,031		$	132,751		$	134,766
Non-interest bearing checking accounts		181,631			185,411			185,620			170,590			167,167

Total checking accounts		312,897			319,410			321,651			303,341			301,933
Savings accounts		273,192			277,404			278,906			267,515			267,062
Money market accounts		313,513			326,738			329,163			328,625			331,449

Total non-time deposits		899,602			923,552			929,720			899,481			900,444
Retail certificates of deposit		446,774			451,922			468,347			492,271			510,166

Total certificates of deposit		446,774			451,922			468,347			492,271			510,166

Total deposits	$	1,346,376		$	1,375,474		$	1,398,067		$	1,391,752		$	1,410,610

Certificates of deposit as a percent of total deposits		33.18	%		32.86	%		33.50	%		35.37	%		36.17	%

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	September 30, 2014			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
	(Dollars in thousands)
Allowance For Loan Losses
Beginning balance	$	18,264		$	20,554		$	21,116		$	21,032		$	19,037
Provision		116			(1,614	)		33			282			657
Net (chargeoffs) recoveries		(248	)		(676	)		(595	)		(198	)		1,338

Ending balance	$	18,132		$	18,264		$	20,554		$	21,116		$	21,032

Net (Charge-offs) Recoveries
Real Estate Loans
One-to four-family	$	(278	)	$	(181	)	$	(163	)	$	42		$	(201	)
Multi-family		—			(135	)		(5	)		—			13
Nonresidential		(9	)		56			(252	)		(29	)		(381	)
Land		—			—			—			12			10
Construction Loans
One-to four-family residential and land development		(90	)		(330	)		(79	)		451			1,876
Multi-family and nonresidential		—			—			—			(620	)		—

Total real estate loans		(377	)		(590	)		(499	)		(144	)		1,317
Consumer Loans		(29	)		(304	)		(233	)		(193	)		(143	)
Commercial Loans		158			218			137			139			164

Total	$	(248	)	$	(676	)	$	(595	)	$	(198	)	$	1,338


	At or for the quarters ended
	September 30, 2014			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
	(Dollars in thousands)
Nonperforming Loans
Real Estate Loans
One-to four-family residential	$	4,700		$	5,380		$	6,133		$	6,356		$	6,127
Multi-family residential		114			133			1,158			641			705
Nonresidential		6,804			4,902			5,033			5,560			8,963
Land		531			532			532			496			628
Construction Loans
One-to four-family residential and land development		2,453			2,553			2,884			3,084			3,320

Total real estate loans		14,602			13,500			15,740			16,137			19,743
Consumer Loans		1,960			2,663			3,089			3,293			3,564
Commercial Loans		4,144			4,151			4,155			4,158			4,177

Total Loans	$	20,706		$	20,314		$	22,984		$	23,588		$	27,484

Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status	$	18,114		$	16,636		$	18,708		$	20,188		$	20,946
Past due 90 days and still accruing		—			—			—			45			3,413

Past due 90 days		18,114			16,636			18,708			20,233			24,359
Past due less than 90 days and on nonaccrual		2,592			3,678			4,276			3,355			3,125

Total Nonperforming Loans		20,706			20,314			22,984			23,588			27,484
Other real estate owned		4,445			4,546			4,700			6,318			9,276
Repossessed assets		42			2			—			23			39

Total Nonperforming Assets	$	25,193		$	24,862		$	27,684		$	29,929		$	36,799

Total Troubled Debt Restructured Loans
Accruing	$	25,140		$	25,905		$	26,614		$	26,577		$	26,629
Nonaccruing		4,428			4,328			4,724			4,941			5,474

Total	$	29,568		$	30,233		$	31,338		$	31,518		$	32,103

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