UNITED COMMUNITY FINANCIAL CORP (Form: 8-K, Received: 07/23/2019 16:41:43)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 23, 2019

UNITED COMMUNITY FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

OHIO

000-024399

34-1856319

(State or other jurisdiction

of incorporation)

(Commission

File No.)

(IRS Employer

I.D. No.)

275 West Federal Street, Youngstown, Ohio 44503-1203

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (330) 742-0500

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Shares, no par value

UCFC

Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Section 2 – Financial Information

Item 2.02

Results of Operation and Financial Condition

(a)

On July 23, 2019, United Community Financial Corp. issued a press release announcing its results of operations for the second quarter of 2019. A copy of the press release is attached as Exhibit 99.

Section 9 – Financial Statements and Exhibits

Item 9.01

Financial Statements and Exhibits.

(d)

Exhibits.


Exhibit Number	Description

99	Press Release of United Community dated July 23, 2019.	Included herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNITED COMMUNITY FINANCIAL CORP.


By:		/s/ Jude J. Nohra
		Jude J. Nohra
		General Counsel & Secretary

Date: July 23, 2019

Exhibit 99

LOGO

275 West Federal Street

Youngstown, Ohio 44503-1203

FOR IMMEDIATE RELEASE


Media Contact:				Investor Contact:

Kathy Bushway				Gary M. Small
Senior Vice President, Marketing				President and Chief Executive Officer
Home Savings Bank				United Community Financial Corp.
(330) 742-0638				(330) 742-0472
kbushway@homesavings.com

UCFC ANNOUNCES RECORD EARNINGS FOR THE SECOND QUARTER AND

A DIVIDEND INCREASE OF 14%

YOUNGSTOWN, Ohio (July 23, 2019) – United Community Financial Corp. (Company) (NASDAQ: UCFC), parent company of Home Savings Bank (Home Savings), announced today second quarter net income of $10.5 million, an increase of 9.9% compared to the second quarter of 2018. Diluted earnings per share (“EPS”) totaled $0.215, a 13.2% improvement over the $0.190 per share reported for the quarter ended June 30, 2018.

Second quarter 2019 highlights:

•

ROA of 1.48%, ROE of 13.2%, ROTE of 14.3% for the quarter

•

Total loan growth of 6.1% over the last twelve months

•

Average customer deposit growth of 7.7% compared to second quarter 2018

•

Revenue growth of 5.8% compared to second quarter 2018

•

Pretax preprovision income of $12.7 million, a 9.6% increase compared to second quarter 2018

•

Efficiency ratio of 55.4%

•

Declared a dividend of $0.08 per common share, an increase of 14% over the prior quarter

•

Authorized an additional one million shares for repurchase

Gary M. Small, President and Chief Executive Officer of the Company commented, “The team delivered an outstanding quarter and each business line continues to contribute to our success. Balanced improvements in commercial banking, residential mortgage and our consumer business produced a very strong 9.9% net income improvement for the quarter versus the same period last year.”

Small continued, “Excellent earnings growth and an accelerated stock repurchase program combined to deliver EPS growth of 13%. Based on the strength and momentum of our performance, the board approved a 14% dividend increase. Capital management will remain a strategic priority as we are focused on delivering top tier returns for our shareholders.”

Strong Loan and Deposit Growth

Total loans grew $129.5 million (excluding loans held for sale), or 6.1%, during the previous twelve months ended June 30, 2018 and $13.8 million compared to the previous quarter. At June 30, 2019, total net loans (excluding loans held for sale) aggregated $2.23 billion.

Home Savings continues to produce excellent results over all lending categories. The increase in total loans for the period was driven by an increase in commercial loans, which grew $73.5 million, or 8.2%, over the last twelve months, remaining flat compared to the prior quarter. This was as expected due to paydowns in the commercial real estate portfolio. Mortgage loans (excluding loans held for sale and permanent construction loans) increased $54.1 million, or 6.1%, over the previous twelve months and increased $8.1 million, during the past three months.

Average quarterly customer deposits (which exclude brokered certificates of deposit) increased 7.7% from June 30, 2018 and 5.7% from March 31, 2019. The growth in average customer deposits was driven by increases in average non-interest bearing accounts of 7.6% compared to the second quarter of 2018 and 1.2% over the past three months. Secondly, increases occurred in money market accounts of 19.8% compared to the second quarter of 2018 and 17.4% over the last three months. Finally, average business deposits continue to rise, increasing 29.6% compared to the second quarter of 2018 and 8.4% over the past three months.

Net Interest Income and Margin

Net interest income totaled $22.1 million on a fully taxable equivalent (FTE) basis for the quarter ended June 30, 2019 compared to $21.4 million for the quarter ended June 30, 2018, or an increase of 3.4%. This increase is the result of growth in average earning assets of 4.3% offset by a decline in purchase accounting adjustments.

The net interest margin on an FTE basis was 3.33% for the second quarter of 2019 compared to 3.36% in the second quarter of 2018. The decline was primarily due to lower purchase accounting adjustments. Excluding the effects of purchase accounting adjustments, the net interest margin was 3.29% in the second quarter of 2019 compared to 3.28% in the second quarter of 2018.

The net interest margin on a linked quarter basis declined 5 basis points from 3.38% in the first quarter of 2019 to 3.33% in the second quarter of 2019. Two basis points of this decline was the result of lower purchase accounting adjustments. One basis point is due to increased funding costs related to treasury share repurchases. The remaining difference can be attributed to a challenging interest rate environment with an inverted treasury curve along with falling treasury rates and LIBOR.

Asset Quality Remains Strong

Asset quality remained strong during the second quarter. At June 30, 2019, nonperforming loans aggregated $12.9 million compared to $10.8 million at June 30, 2018 and $7.1 million at the end of the previous quarter. The Company’s level of nonperforming loans moved up at the end of the quarter, primarily as a result of a single credit. A substantial portion of this credit was paid off in July, which should reduce nonperforming loans to levels seen in recent quarters. The allowance for loan losses at the end of the period, as a percent of nonperforming loans was 159.1%. Net recoveries for the quarter were $87,000, or two basis points. For the six months ended June 30, 2019, net recoveries totaled $29,000. The allowance for loan losses as a percent of loans totaled 0.91% at June 30, 2019 compared to 1.01% at June 30, 2018.

The Company recognized a negative provision for loan losses of $51,000 for the second quarter of 2019, compared to a negative provision of $138,000 in the second quarter of 2018. As of June 30, 2019 the allowance for loan losses to total loans amounted to 0.91% with no change from the prior quarter. Continued asset quality combined with net recoveries for the period resulted in the negative provision for the quarter.

Non-Interest Income

Non-interest income increased 14.0%, or $819,000, to $6.7 million for the second quarter of 2019 compared to $5.9 million for the same quarter last year. The primary reason for this is an increase in mortgage banking income of $1.4 million along with solid increases in brokerage income, mortgage servicing fees and trading and security gains. This was offset by a decrease in value of mortgage servicing rights of $975,000.

The increase in mortgage banking income was primarily driven by increased margins when comparing the second quarter of 2019 to the second quarter of 2018. Pricing in the market has been much more disciplined in 2019 compared to 2018 while hedging costs for the construction loans being sold have been much lower in 2019. At this time, the Company anticipates mortgage banking margins tracking higher than in 2018 for the remainder of the year. The decrease in the mortgage servicing rights valuation was due to the dramatic drop in long term interest rates and the commensurate rise in mortgage prepayment speeds.

Non-Interest Expense

Non-interest expense was $16.0 million for the second quarter of 2019 compared to $15.5 million during the second quarter of 2018, an increase of $446,000, or 2.9%. The Company’s efficiency ratio improved to 55.4% for the current quarter versus 57.8% for the same quarter a year ago.

Small added, “We are pleased with the positive operating leverage created during the quarter given the volatile rate environment. Revenue increased 5.8% with expenses up 2.9%. We anticipate continued expansion of operational leverage over the remainder of the year.”

Effective Tax Rate

The Company’s effective tax rate on an FTE basis for the quarter ended June 30, 2019 was 18.4% compared to 19.5% for the quarter ended June 30, 2018.

Dividend to be Paid and Equity

On July 23, 2019, the Board of Directors declared a 14.3% increase to the quarterly cash dividend to $0.08 per common share payable August 13, 2019 to shareholders of record August 5, 2019. On July 23, 2019 the Board also authorized an additional one million shares to the Company’s existing share repurchase program. The Company had 727,711 shares authorized as of June 30, 2019. During the second quarter of 2019, the Company repurchased 817,000 shares for a total of 1.1 million for 2019. The average cost was $9.33 per share for the quarter and $9.36 per share for the year.

Conference Call

United Community Financial Corp. will host an earnings conference call on Wednesday, July 24, 2019, at 10:00 a.m. ET, to provide an overview of the Company’s second quarter 2019 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 ir.ucfconline.com . Click on 2nd Quarter 2019 Conference Call on our corporate profile page to join the webcast.

Home Savings is a wholly owned subsidiary of the Company, offering a full line of commercial, wealth management and consumer banking products and services with 33 retail banking offices (32 in Ohio and one in Pennsylvania). Home Savings also has residential mortgage loan centers servicing Ohio, West Virginia, western Pennsylvania, northern Kentucky, and eastern Indiana. Additional information on the Company, Home Savings and James & Sons Insurance may be found on the Company’s web site: ir.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,			June 30,
	2019			2018			F/(U)
	(Dollars in thousands)
Assets:
Cash and deposits with banks	$	27,507		$	32,584			-15.6	%
Federal funds sold		27,055			34,393			-21.3	%

Total cash and cash equivalents		54,562			66,977			-18.5	%
Securities:
Trading, at fair value		705			—			0.0	%
Available for sale, at fair value		319,009			247,630			28.8	%
Held to maturity (fair value of $0 and $78,194, respectively)		—			81,294			-100.0	%
Loans held for sale, at fair value		97,477			107,701			-9.5	%
Gross loans		2,249,808			2,121,186			6.1	%
Allowance for loan losses		(20,482	)		(21,405	)		-4.3	%

Net loans		2,229,326			2,099,781			6.2	%
Federal Home Loan Bank stock, at cost		14,059			19,324			-27.2	%
Premises and equipment, net		22,130			21,645			2.2	%
Accrued interest receivable		9,184			8,454			8.6	%
Real estate owned and other repossessed assets		955			877			8.9	%
Goodwill		20,221			20,221			0.0	%
Core deposit intangible		1,439			1,769			-18.7	%
Customer list intangible		2,123			1,980			7.2	%
Cash surrender value of life insurance		65,002			63,354			2.6	%
Other assets		32,924			29,551			11.4	%

Total assets	$	2,869,116		$	2,770,558			3.6	%

Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Interest bearing	$	1,672,764		$	1,563,043			7.0	%
Noninterest bearing		398,340			383,082			4.0	%

Customer deposits		2,071,104			1,946,125			6.4	%
Brokered deposits		188,075			189,220			-0.6	%

Total deposits		2,259,179			2,135,345			5.8	%
Borrowed funds:
Federal Home Loan Bank advances
Long-term advances		—			48,927			-100.0	%
Short-term advances		233,000			248,000			-6.0	%

Total Federal Home Loan Bank advances		233,000			296,927			-21.5	%
Repurchase agreements and other		146			191			-23.6	%

Total borrowed funds		233,146			297,118			-21.5	%
Advance payments by borrowers for taxes and insurance		25,335			19,253			31.6	%
Accrued interest payable		1,378			964			42.9	%
Accrued expenses and other liabilities		32,524			16,394			98.4	%

Total liabilities		2,551,562			2,469,074			3.3	%

Shareholders’ Equity:
Preferred stock-no par value; 1,000,000 shares authorized and no shares outstanding		—			—			0.0	%
Common stock-no par value; 499,000,000 shares authorized; 54,138,910 shares issued and 48,068,790 and 49,904,074 shares, respectively, outstanding		177,319			177,311			0.0	%
Retained earnings		204,355			179,965			13.6	%
Accumulated other comprehensive loss		(15,180	)		(24,077	)		-37.0	%
Treasury stock, at cost, 6,070,120 and 4,234,836 shares, respectively		(48,940	)		(31,715	)		54.3	%

Total shareholders’ equity		317,554			301,484			5.3	%

Total liabilities and shareholders’ equity	$	2,869,116		$	2,770,558			3.6	%

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,
	2019			2019			Variance			F/(U)			2018			Variance			F/(U)			2019			2018			Variance			F/(U)
	(Dollars in thousands, except per share data)
Interest income
Loans	$	26,373		$	25,856		$	517			2.0	%	$	23,275		$	3,098			13.3	%	$	52,229		$	46,034		$	6,195			13.5	%
Loans held for sale		991			1,007			(16	)		-1.6	%		1,012			(21	)		-2.1	%		1,998			1,870			128			6.8	%
Securities:
Available for sale, nontaxable		236			307			(71	)		-23.1	%		356			(120	)		-33.7	%		544			744			(200	)		-26.9	%
Available for sale, taxable		1,611			1,263			348			27.6	%		1,193			418			35.0	%		2,874			2,408			466			19.4	%
Held to maturity, nontaxable		25			75			(50	)		-66.7	%		61			(36	)		-59.0	%		100			112			(12	)		-10.7	%
Held to maturity, taxable		118			379			(261	)		-68.9	%		398			(280	)		-70.4	%		497			820			(323	)		-39.4	%
Federal Home Loan Bank stock dividends		245			290			(45	)		-15.5	%		274			(29	)		-10.6	%		534			554			(20	)		-3.6	%
Other interest earning assets		200			224			(24	)		-10.7	%		92			108			117.4	%		424			169			255			150.9	%

Total interest income		29,799			29,401			398			1.4	%		26,661			3,138			11.8	%		59,200			52,711			6,489			12.3	%
Interest expense
Deposits		7,197			6,574			(623	)		-9.5	%		3,790			(3,407	)		-89.9	%		13,771			6,887			(6,884	)		-100.0	%
Federal Home Loan Bank advances		559			641			82			12.8	%		1,576			1,017			64.5	%		1,200			2,996			1,796			59.9	%

Total interest expense		7,756			7,215			(541	)		-7.5	%		5,366			(2,390	)		-44.5	%		14,971			9,883			(5,088	)		-51.5	%

Net interest income		22,043			22,186			(143	)		-0.6	%		21,295			748			3.5	%		44,229			42,828			1,401			3.3	%
Taxable equivalent adjustment		62			84			(22	)		-26.2	%		90			(28	)		-31.1	%		146			187			(41	)		-21.9	%

Net interest income (FTE) ⁽¹⁾		22,105			22,270			(165	)		-0.7	%		21,385			720			3.4	%		44,375			43,015			1,360			3.2	%
Provision for loan losses		(51	)		61			112			183.6	%		(138	)		(87	)		63.0	%		10			269			259			96.3	%

Net interest income after provision for loan losses (FTE)		22,156			22,209			(53	)		-0.2	%		21,523			633			2.9	%		44,365			42,746			1,619			3.8	%

Non-interest income
Insurance agency income		545			701			(156	)		-22.3	%		513			32			6.2	%		1,246			1,090			156			14.3	%
Brokerage income		409			370			39			10.5	%		300			109			36.3	%		779			572			207			36.2	%
Service fees and other charges:
Deposit related fees		1,417			1,341			76			5.7	%		1,392			25			1.8	%		2,758			2,692			66			2.5	%
Mortgage servicing fees		881			873			8			0.9	%		813			68			8.4	%		1,754			1,625			129			7.9	%
Mortgage servicing rights valuation		(995	)		(499	)		(496	)		99.4	%		(20	)		(975	)		4875.0	%		(1,494	)		(11	)		1,483			-13481.8	%
Mortgage servicing rights amortization		(553	)		(446	)		(107	)		24.0	%		(542	)		(11	)		2.0	%		(999	)		(1,042	)		(43	)		4.1	%
Other service fees		21			38			(17	)		-44.7	%		61			(40	)		-65.6	%		59			99			(40	)		-40.4	%
Net gains (losses):
Trading securities		39			64			(25	)		-39.1	%		—			39			0.0	%		103	#
Securities available for sale		148			144			4			2.8	%		94			54			57.4	%		292			233			59			25.3	%
Mortgage banking income		2,631			1,676			955			57.0	%		1,205			1,426			118.3	%		4,307			2,563			1,744			68.0	%
Real estate owned and other repossessed assets charges, net		(33	)		(31	)		(2	)		6.5	%		(113	)		80			-70.8	%		(64	)		(191	)		(127	)		66.5	%
Debit/credit card fees		1,221			934			287			30.7	%		1,177			44			3.7	%		2,156			2,126			30			1.4	%
Trust fee income		461			465			(4	)		-0.9	%		473			(12	)		-2.5	%		926			942			(16	)		-1.7	%
Bank owned life insurance		397			385			12			3.1	%		433			(36	)		-8.3	%		782			866			(84	)		-9.7	%
Other income		82			58			24			41.4	%		66			16			24.2	%		139			107			32			29.9	%

Total non-interest income		6,671			6,073			598			9.8	%		5,852			819			14.0	%		12,744			11,671			1,073			9.2	%

Non-interest expense
Salaries and employee benefits		9,106			10,575			1,469			13.9	%		8,937			(169	)		-1.9	%		19,681			18,935			(746	)		-3.9	%
Occupancy		1,028			1,046			18			1.7	%		950			(78	)		-8.2	%		2,074			2,050			(24	)		-1.2	%
Equipment and data processing		2,208			2,292			84			3.7	%		2,372			164			6.9	%		4,501			4,526			25			0.6	%
Financial institutions tax		509			509			—			0.0	%		495			(14	)		-2.8	%		1,018			991			(27	)		-2.7	%
Advertising		465			390			(75	)		-19.2	%		290			(175	)		-60.3	%		854			525			(329	)		-62.7	%
Amortization of intangible assets		127			127			—			0.0	%		132			5			3.8	%		255			245			(10	)		-4.1	%
FDIC insurance premiums		297			331			34			10.3	%		288			(9	)		-3.1	%		628			578			(50	)		-8.7	%
Other insurance premiums		76			76			—			0.0	%		109			33			30.3	%		151			218			67			30.7	%
Professional fees:
Legal fees		214			60			(154	)		-256.7	%		147			(67	)		-45.6	%		274			446			172			38.6	%
Other professional fees		562			587			25			4.3	%		499			(63	)		-12.6	%		1,150			890			(260	)		-29.2	%
Supervisory fees		34			34			—			0.0	%		42			8			19.0	%		68			84
Real estate owned and other repossessed asset expenses		17			39			22			56.4	%		34			17			50.0	%		56			70			14			20.0	%
Other expenses		1,333			1,608			275			17.1	%		1,235			(98	)		-7.9	%		2,940			2,572			(368	)		-14.3	%

Total non-interest expenses		15,976			17,674			1,698			9.6	%		15,530			(446	)		-2.9	%		33,650			32,130			(1,520	)		-4.7	%

Income before income taxes		12,851			10,608			2,243			21.1	%		11,845			1,006			8.5	%		23,459			22,287			1,172			5.3	%
Taxable equivalent adjustment		62			84			22			26.2	%		90			28			31.1	%		146			187			41			21.9	%
Income tax expense		2,303			1,868			(435	)		-23.3	%		2,214			(89	)		-4.0	%		4,171			4,003			(168	)		-4.2	%

Net income	$	10,486		$	8,656		$	1,830			21.1	%	$	9,541		$	945			9.9	%	$	19,142		$	18,097		$	1,045			5.8	%

Earnings per common share:
Basic	$	0.216		$	0.177		$	0.039			22.0	%	$	0.191		$	0.025			13.1	%	$	0.393		$	0.363		$	0.030			8.3	%
Diluted		0.215			0.176			0.039			22.2	%		0.190			0.025			13.2	%		0.391			0.361			0.030			8.3	%

⁽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.

CONSOLIDATED AVERAGE BALANCES

(Unaudited)


	For the three months ended
	June 30, 2019							March 31, 2019							June 30, 2018
	Average		Interest					Average		Interest					Average		Interest
	outstanding		earned/		Yield/			outstanding		earned/		Yield/			outstanding		earned/		Yield/
	balance		paid		rate			balance		paid		rate			balance		paid		rate
	(Dollars in thousands)
Interest earning assets:
Net loans ⁽¹⁾	$	2,207,554	$	26,382		4.79	%	$	2,191,746	$	25,864		4.75	%	$	2,075,307	$	23,275		4.49	%
Loans held for sale		84,210		991		4.71	%		84,932		1,007		4.74	%		91,836		1,012		4.42	%

Total loans, net		2,291,764		27,373		4.79	%		2,276,678		26,871		4.75	%		2,167,143		24,287		4.48	%
Securities:
Available for sale-taxable		243,895		1,611		2.64	%		200,088		1,263		2.52	%		207,908		1,193		2.30	%
Available for sale-nontaxable ⁽²⁾		33,068		283		3.42	%		43,468		365		3.36	%		50,710		429		3.38	%
Held to maturity-taxable		31,498		118		1.50	%		63,674		379		2.38	%		70,406		398		2.26	%
Held to maturity-nontaxable ⁽²⁾		6,406		31		1.94	%		13,047		93		2.85	%		11,265		78		2.77	%

Total securities		314,867		2,043		2.60	%		320,277		2,100		2.62	%		340,289		2,098		2.47	%
Federal Home Loan Bank stock		15,408		245		6.36	%		18,010		290		6.43	%		19,324		274		5.67	%
Other interest earning assets		37,240		200		2.15	%		34,986		224		2.59	%		23,831		92		1.55	%

Total interest earning assets		2,659,279		29,861		4.50	%		2,649,951		29,485		4.48	%		2,550,587		26,751		4.20	%
Non-interest earning assets		181,268							176,913							174,270

Total assets	$	2,840,547						$	2,826,864						$	2,724,857

Interest bearing liabilities:
Deposits:
Checking accounts	$	734,458		2,138		1.16	%	$	650,268		1,440		0.89	%	$	638,910		948		0.60	%
Savings accounts		293,784		26		0.04	%		297,410		29		0.04	%		307,250		26		0.03	%
Certificates of deposit
Customer certificates of deposit		645,115		3,231		2.00	%		618,752		2,824		1.83	%		608,079		2,143		1.41	%
Brokered certificates of deposit		299,747		1,802		2.40	%		397,137		2,281		2.30	%		164,400		673		1.64	%

Total certificates of deposit		944,862		5,033		2.13	%		1,015,889		5,105		2.01	%		772,479		2,816		1.46	%

Total interest bearing deposits		1,973,104		7,197		1.46	%		1,963,567		6,574		1.34	%		1,718,639		3,790		0.88	%
Federal Home Loan Bank advances
Long-term advances		—		—		0.00	%		—		—		0.00	%		48,799		493		4.05	%
Short-term advances		89,879		559		2.49	%		103,333		641		2.48	%		236,747		1,083		1.83	%

Total Federal Home Loan Bank advances		89,879		559		2.49	%		103,333		641		2.48	%		285,546		1,576		2.21	%
Repurchase agreements and other		142		—		0.00	%		233		—		0.00	%		195		—		0.00	%

Total borrowed funds		90,021		559		2.49	%		103,566		641		2.48	%		285,741		1,576		2.21	%

Total interest bearing liabilities	$	2,063,125		7,756		1.50	%	$	2,067,133		7,215		1.40	%	$	2,004,380		5,366		1.07	%

Non-interest bearing liabilities
Total noninterest bearing deposits		405,535							400,874							376,905
Other noninterest bearing liabilities		54,622							43,851							39,839

Total noninterest bearing liabilities		460,157							444,725							416,744

Total liabilities	$	2,523,282						$	2,511,858						$	2,421,124
Shareholders’ equity		317,265							315,006							303,733

Total liabilities and equity	$	2,840,547						$	2,826,864						$	2,724,857

Net interest income and interest rate spread			$	22,105		3.00	%			$	22,270		3.08	%			$	21,385		3.12	%

Net interest margin						3.33	%						3.38	%						3.36	%
Average interest earning assets to average interest bearing liabilities						128.90	%						128.19	%						127.25	%

Interest bearing deposits
Checking accounts	$	734,458	$	2,138		1.16	%	$	650,268	$	1,440		0.89	%	$	638,910	$	948		0.60	%
Savings accounts		293,784		26		0.04	%		297,410		29		0.04	%		307,250		26		0.03	%
Customer certificates of deposit		645,115		3,231		2.00	%		618,752		2,824		1.83	%		608,079		2,143		1.41	%

Total customer deposits		1,673,357		5,395		1.29	%		1,566,430		4,293		1.10	%		1,554,239		3,117		0.80	%
Brokered certificates of deposit		299,747		1,802		2.40	%		397,137		2,281		2.30	%		164,400		673		1.64	%

Total interest bearing deposits		1,973,104		7,197		1.46	%		1,963,567		6,574		1.34	%		1,718,639		3,790		0.88	%
Noninterest bearing deposits		405,535		—		0.00	%		400,874		—		0.00	%		376,905		—		0.00	%

Total average deposits and cost of deposits	$	2,378,639	$	7,197		1.21	%	$	2,364,441	$	6,574		1.11	%	$	2,095,544	$	3,790		0.72	%
Other interest bearing liabilities
Federal Home Loan Bank advances
Long term advances	$	—	$	—		0.00	%	$	—	$	—		0.00	%	$	48,799	$	493		4.05	%
Short term advances		89,879		559		2.49	%		103,333		641		2.48	%		236,747		1,083		1.83	%

Total Federal Home Loan Bank advances		89,879		559		2.49	%		103,333		641		2.48	%		285,546		1,576		2.21	%
Repurchase agreements and other		142		—		0.00	%		233		—		0.00	%		195		—		0.00	%

Total borrowed funds		90,021		559		2.49	%		103,566		641		2.48	%		285,741		1,576		2.21	%

Total average deposits and other interest bearing liabilities and total cost of funds	$	2,468,660	$	7,756		1.26	%	$	2,468,007	$	7,215		1.17	%	$	2,381,285	$	5,366		0.90	%

Customer deposits interest bearing and noninterest bearing	$	2,078,892	$	5,395		1.04	%	$	1,967,304	$	4,293		0.87	%	$	1,931,144	$	3,117		0.65	%
Brokered deposits		299,747		1,802		2.40	%		397,137		2,281		2.30	%		164,400		673		1.64	%
Total borrowings		90,021		559		2.49	%		103,566		641		2.48	%		285,741		1,576		2.21	%
Cost of funds		2,468,660		7,756		1.26	%		2,468,007		7,215		1.17	%		2,381,285		5,366		0.90	%

⁽¹⁾	Nonaccrual loans are included in the average balance at a yield of 0%.

⁽²⁾	Yields are on a fully taxable equivalent basis.

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands, except per share data)
Financial Data
Total assets	$	2,869,116		$	2,852,041		$	2,811,357		$	2,789,183		$	2,770,558
Total loans, net		2,229,326			2,215,549			2,176,842			2,148,942			2,099,781
Total securities		319,714			313,847			319,498			320,806			328,924
Total deposits		2,259,179			2,289,803			2,213,220			2,352,476			2,135,345
Average interest-bearing deposits		1,973,104			1,963,567			1,936,539			1,884,617			1,718,639
Average noninterest-bearing deposits		405,535			400,874			395,649			382,044			376,905
Total shareholders’ equity		317,554			314,709			309,334			306,043			301,484
Net interest income		22,043			22,186			23,494			21,623			21,295
Net interest income (FTE) ⁽¹⁾		22,105			22,270			23,605			21,707			21,385
Provision for loan losses		(51	)		61			178			251			(138	)
Noninterest income		6,671			6,073			5,585			6,146			5,852
Noninterest expense		15,976			17,674			17,178			15,772			15,530
Income tax expense		2,303			1,868			2,172			2,217			2,214
Net income		10,486			8,656			9,551			9,529			9,541

Share Data
Basic earnings per common share	$	0.216		$	0.177		$	0.192		$	0.191		$	0.191
Diluted earnings per common share		0.215			0.176			0.191			0.190			0.190
Book value per common share		6.61			6.44			6.30			6.13			6.04
Tangible book value per common share		6.11			5.95			5.81			5.65			5.56
Market value per common share		9.57			9.35			8.85			9.67			10.99

Common shares outstanding at end of period		48,069			48,853			49,129			49,923			49,904
Weighted average shares outstanding—basic		48,463			48,854			49,445			49,683			49,694
Weighted average shares outstanding—diluted		48,644			49,113			49,695			49,947			49,944

Key Ratios
Return on average assets ⁽²⁾		1.48	%		1.22	%		1.36	%		1.37	%		1.40	%
Return on average equity ⁽³⁾		13.22	%		10.99	%		12.15	%		12.25	%		12.56	%
Return on tangible equity ⁽⁴⁾		14.30	%		11.90	%		13.16	%		13.28	%		13.65	%
Net interest margin		3.33	%		3.38	%		3.58	%		3.33	%		3.36	%
Efficiency ratio		55.37	%		62.29	%		54.79	%		57.30	%		57.75	%
Nonperforming loans to net loans, end of period		0.58	%		0.32	%		0.30	%		0.42	%		0.51	%
Nonperforming assets to total assets, end of period		0.48	%		0.34	%		0.27	%		0.36	%		0.57	%
Allowance for loan loss as a percent of loans, end of period		0.91	%		0.91	%		0.93	%		0.98	%		1.01	%
Delinquent loans to total net loans, end of period		0.58	%		0.41	%		0.50	%		0.69	%		0.67	%

⁽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⁾	Net income divided by average total equity, minus average intangible assets

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands)
Loan Portfolio Composition
Commercial loans
Multi-family	$	154,630		$	163,243		$	134,143		$	139,938		$	141,004
Owner/nonowner occupied commercial real estate		414,780			412,550			409,979			408,938			396,624
Land		16,955			17,090			16,830			16,129			16,887
Construction		138,043			135,048			141,686			132,961			127,691
Commercial and industrial		249,898			246,740			240,293			233,801			218,611

Total		974,306			974,671			942,931			931,767			900,817
Residential mortgage loans
Real estate		942,698			934,586			927,255			909,626			888,583
Construction		46,196			45,102			43,435			39,396			40,623

Total		988,894			979,688			970,690			949,022			929,206
Consumer loans
Consumer		279,531			274,998			277,041			283,108			284,909

Total		279,531			274,998			277,041			283,108			284,909

Total loans		2,242,731			2,229,357			2,190,662			2,163,897			2,114,932
Less:
Allowance for loan losses		20,482			20,446			20,443			21,332			21,405
Deferred loan costs, net		(7,077	)		(6,638	)		(6,623	)		(6,377	)		(6,254	)

Total		13,405			13,808			13,820			14,955			15,151

Total loans, net		2,229,326			2,215,549			2,176,842			2,148,942			2,099,781
Loans held for sale, net		97,477			77,676			91,472			95,235			107,701

Total loans	$	2,326,803		$	2,293,225		$	2,268,314		$	2,244,177		$	2,207,482


	At or for the quarters ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts	$	131,725		$	146,244		$	146,977		$	140,722		$	138,812
Non-interest bearing checking accounts		398,340			404,644			394,208			383,535			383,082

Total checking accounts		530,065			550,888			541,185			524,257			521,894
Savings accounts		290,354			297,186			298,087			300,007			306,283
Money market accounts		606,661			550,049			466,167			489,668			502,560

Total non-time deposits		1,427,080			1,398,123			1,305,439			1,313,932			1,330,737
Certificates of deposit		644,024			630,174			616,826			622,807			615,388

Total customer deposits		2,071,104			2,028,297			1,922,265			1,936,739			1,946,125
Brokered deposits		188,075			261,506			290,955			415,737			189,220

Total certificates of deposit		832,099			891,680			907,781			1,038,544			804,608

Total deposits	$	2,259,179		$	2,289,803		$	2,213,220		$	2,352,476		$	2,135,345

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands)
Allowance For Loan Losses
Beginning balance	$	20,446		$	20,443		$	21,332		$	21,405		$	21,610
Provision		(51	)		61			178			251			(138	)
Net recoveries (chargeoffs)		87			(58	)		(1,067	)		(324	)		(67	)

Ending balance	$	20,482		$	20,446		$	20,443		$	21,332		$	21,405


	At or for the quarters ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands)
Net Recoveries (Charge-offs)
Commercial loans
Multi-family	$	4		$	113		$	(99	)	$	4		$	9
Owner/nonowner occupied commercial real estate		165			28			38			12			29
Land		—			—			—			150			—
Construction		—			1			—			11			10
Commercial and industrial		1			(84	)		(765	)		(275	)		(72	)

Total		170			58			(826	)		(98	)		(24	)
Residential mortgage loans
Real estate		(53	)		78			(131	)		(141	)		(14	)
Construction		—			—			—			—			—

Total		(53	)		78			(131	)		(141	)		(14	)
Consumer loans
Consumer		(30	)		(194	)		(110	)		(85	)		(29	)

Total		(30	)		(194	)		(110	)		(85	)		(29	)

Total net chargeoffs	$	87		$	(58	)	$	(1,067	)	$	(324	)	$	(67	)


	At or for the quarters ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands)
Nonperforming Loans
Commercial loans
Multi-family	$	—		$	—		$	171		$	275		$	275
Owner/nonowner occupied commercial real estate		2,688			1,565			13			1,101			1,111
Land		—			—			—			—			—
Construction		—			—			—			—			—
Commercial and industrial		4,678			456			531			1,489			1,475

Total		7,366			2,021			715			2,865			2,861
Residential mortgage loans
Real estate		4,365			3,883			4,170			4,426			6,146
Construction		—			—			—			—			—

Total		4,365			3,883			4,170			4,426			6,146
Consumer loans
Consumer		1,141			1,203			1,654			1,770			1,783

Total		1,141			1,203			1,654			1,770			1,783

Total nonperforming loans	$	12,872		$	7,107		$	6,539		$	9,061		$	10,790

Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status	$	5,392		$	4,351		$	5,732		$	8,200		$	8,395
Past due 90 days and still accruing		—			—			18			—			—

Past due 90 days		5,392			4,351			5,750			8,200			8,395
Past due less than 90 days and on nonaccrual		7,480			2,756			789			861			2,395

Total nonperforming loans		12,872			7,107			6,539			9,061			10,790
Other real estate owned		871			1,143			1,049			907			802
Other classified assets		—			1,479			—			—			4,050
Repossessed assets		84			37			39			—			75

Total nonperforming assets	$	13,827		$	9,766		$	7,627		$	9,968		$	15,717

UNITED COMMUNITY FINANCIAL CORP.

NON-GAAP DISCLOSURE RECONCILIATION

(Unaudited)

Reconciliation of Average Shareholders’ Equity to Average Tangible Equity:


	At or for the quarters ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(Dollars in thousands, except per share data)
Average shareholders equity	$	317,265		$	315,006		$	314,464		$	311,058		$	303,733
Average intangible assets		23,867			23,994			24,123			24,144			24,063

Average tangible equity	$	293,398		$	291,012		$	290,341		$	286,914		$	279,670

Net income	$	10,486		$	8,656		$	9,551		$	9,529		$	9,541

Return on tangible equity		14.30	%		11.90	%		13.16	%		13.28	%		13.65	%

Reconciliation of Fully Taxable Equivalent Net Interest Income to Net Interest Income:


	For the quarters ended
	June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018		June 30, 2018
	(Dollars in thousands)
Interest income	$	29,799	$	29,401	$	30,170	$	27,690	$	26,661
Fully taxable equivalent adjustment		62		84		111		84		90

Fully taxable equivalent interest income		29,861		29,485		30,281		27,774		26,751
Interest expense		7,756		7,215		6,676		6,067		5,366

Fully taxable net interest income	$	22,105	$	22,270	$	23,605	$	21,707	$	21,385

Tangible Book Value Per Share:

Tangible book value, per share is defined at shareholders equity minus intangible assets divided by the number of shares outstanding.


	At the quarters ended
	June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018		June 30, 2018
	(Dollars in thousands, except per share data)
Total shareholders’ equity	$	317,554	$	314,709	$	309,334	$	306,043	$	301,484
Goodwill		20,221		20,221		20,221		20,221		20,221
Customer list intangible		2,123		2,169		2,214		2,259		1,980
Core deposit intangible		1,439		1,521		1,603		1,686		1,769
Total common shares outstanding		48,068,790		48,852,688		49,128,875		49,922,514		49,904,074
Tangible book value, as reported	$	6.11	$	5.95	$	5.81	$	5.65	$	5.56

Reconciliation of Net Interest Margin, Non-Interest Income and Non-Interest Expense:


	At the quarters ended						At the quarters ended
	June 30, 2019			June 30, 2018			March 31, 2019			March 31, 2018
Net interest income (FTE)	$	22,105		$	21,385		$	22,270		$	21,630
less: impact of loan payoff								—			(588	)
less: purchase accounting		(271	)		(463	)		(360	)		(545	)

Ajdusted net interest income		21,834			20,922			21,910			20,497
Average earning assets		2,659,279			2,550,587			2,649,951			2,496,673
Net interest margin excluding purchase accounting		3.29	%		3.28	%		3.32	%		3.30	%

Non-interest income	$	6,671		$	5,852		$	6,073		$	5,819
less: mortgage servicing valuation adjustment		995			20			499			(9	)

Non-interest income, adjusted		7,666			5,872			6,572			5,810
Non-interest income % increase		30.6	%					13.1	%

Non-interest expense	$	15,976		$	15,530		$	17,674		$	16,600
Non-interest expense % increase		2.9	%					2.6	%