UNITED COMMUNITY FINANCIAL CORP (Form: 8-K, Received: 10/22/2019 16:24:02)

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): October 22, 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 October 22, 2019, United Community Financial Corp. issued a press release announcing its results of operations for the third 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 October 22, 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: October 22, 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 THIRD QUARTER AND

DECLARES A DIVIDEND

YOUNGSTOWN, Ohio (October 22, 2019) – United Community Financial Corp. (Company) (NASDAQ: UCFC), parent company of Home Savings Bank (Home Savings), announced today third quarter net income of $10.5 million, an increase of 10.2% compared to the same quarter in 2018. Diluted earnings per share (“EPS”) totaled $0.218, a 14.7% improvement over the $0.190 per share reported for the quarter ended September 30, 2018.

Third quarter 2019 highlights:

•

ROA of 1.46%, ROE of 13.1%, ROTE of 14.2% for the quarter

•

Total loan growth of 6.1% annualized for the quarter

•

Average customer deposit growth of 7.2% compared to third quarter 2018

•

Fee income (noninterest income) increase of 14.1% compared to third quarter 2018

•

Noninterest expense decrease of 4.8% compared to third quarter of 2018

•

Pretax preprovision income of $13.6 million, a 13.3% increase compared to third quarter 2018

•

Efficiency ratio of 52.2%

•

Declared a dividend of $0.08 per common share

Gary M. Small, President and Chief Executive Officer of the Company commented, “We are very pleased to report a 10.2% earnings increase for the quarter in light of the very challenging rate environment the industry is experiencing.”

Small continued, “Strong loan growth, excellent residential mortgage origination efforts, and diligent expense management were the keys to success. Expect a continuation of this theme over the remainder of the year. We are very well positioned to deliver a strong financial contribution to the Home Savings/First Defiance combination slated for the first quarter of 2020.”

Strong Loan and Deposit Growth

Total loans grew $117.9 million (including loans held for sale), or 5.3%, during the last twelve months and $35.3 million, or 6.1% annualized, compared to the previous quarter. At September 30, 2019, total net loans (including loans held for sale) aggregated $2.4 billion.

The increase in total loans for the period was driven by an increase in commercial loans, which grew $62.3 million, or 6.7%, over the last twelve months. The growth in commercial loans in comparison to the prior quarter was $19.7 million, or 8.1% annualized. Mortgage loans (including loans held for sale) increased $52.9 million, or 5.1%, over the previous twelve months and increased $10.8 million, or 4.0% annualized, during the past three months. While consumer loan growth is flat over the last twelve months, the Company realized $4.1 million in growth for the quarter, a 6.0% annualized increase. The Company continues to see increases in its indirect auto business even as conditions remain challenging with regard to home equity balances.

Average quarterly customer deposits (which exclude brokered certificates of deposit) increased $140.4 million, or 7.2%, from September 30, 2018 and is flat compared to June 30, 2019. The growth in average customer deposits over the last twelve months was primarily driven by increases in interest bearing checking and money market accounts of $134.6 million or 21.2% and increases in non-interest bearing accounts of $29.1 million, or 7.6%. This was offset by declines in savings accounts and certificates of deposit. Much of this deposit growth is in business deposits which have increased 27.8% compared to the third quarter of 2018 and 5.0% over the past three months.

Net Interest Income and Margin

Net interest income totaled $21.6 million on a fully taxable equivalent (FTE) basis for the quarter ended September 30, 2019 compared to $21.7 million for the quarter ended September 30, 2018. Average earning assets grew $79.8 million during this time but it was offset by a 12 basis point decline in the net interest margin.

The net interest margin on an FTE basis was 3.21% for the third quarter of 2019 compared to 3.33% in the third quarter of 2018. Excluding the effects of purchase accounting adjustments, the net interest margin was 3.18% in the third quarter of 2019 compared to 3.27% in the third quarter of 2018. The 9 basis point decline in the net interest margin, excluding purchase accounting, was due to declining interest rates and an inverted yield curve.

The net interest margin on a linked quarter basis declined 12 basis points from 3.33% in the second quarter of 2019 to 3.21% in the third quarter of 2019. Excluding the effects of purchase accounting adjustments, the net interest margin was 3.18% in the third quarter of 2019 compared to 3.29% in the second quarter of 2019. The dramatic fall in interest rates in the third quarter along with continued treasury curve inversion continues to place pressure on margins. In addition, the funding pressures in the repo market in September increased funding costs associated with short term FHLB advance and short term brokered CDs decreasing margin by one basis point. The Company expects stabilization in its net interest margin at these levels in the fourth quarter as higher rate money market specials and CD’s begin to reprice which should help to offset the continued decline in asset yields.

Asset Quality Remains Strong

Asset quality remained strong during the third quarter. At September 30, 2019, nonperforming loans aggregated $10.3 million compared to $12.9 million at the end of the previous quarter. The Company’s level of nonperforming loans did move up at the end of the previous quarter, primarily as a result of a single credit.

A substantial portion of this credit was paid off in the current quarter, which reduced nonperforming loans. The allowance for loan losses at the end of the period, as a percent of nonperforming loans was 193.7%. The allowance for loan losses as a percent of loans totaled 0.88% at September 30, 2019 compared to .91% the previous quarter.

The Company recognized a provision for loan losses of $701,000 for the third quarter of 2019, compared to a negative provision of $51,000 in the third quarter of 2018. For nine months of the year the provision totaled $712,000 compared to $520,000 the previous year. Net charge offs to average loans were seven basis points for the nine months ended September 30, 2019 and delinquencies continue to trend downward.

Non-Interest Income

Non-interest income increased 14.1%, or $869,000, to $7.0 million for the third quarter of 2019 compared to $6.1 million for the same quarter last year. The primary reason for this is an increase in mortgage banking income (gain on sale) of $1.1 million along with solid increases in brokerage income, mortgage servicing fees and trading and security gains. This was offset by a decrease in the value of mortgage servicing rights of $330,000. 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. At the end of the third quarter, the Company had a $1.9 million valuation allowance associated with its mortgage servicing rights. Steady or rising interest rates should allow the Company to recoup most of this allowance over the next 18 months.

The increase in mortgage banking income was primarily driven by increased margins when comparing the third quarter of 2019 to the third 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.

Non-Interest Expense

Non-interest expense was $15.0 million for the third quarter of 2019 compared to $15.8 million during the third quarter of 2018, a decrease of $761,000, or 4.8%. This decrease was driven by a decline in salaries and benefits along with a reduction in FDIC expense related to a credit adjustment on premiums. The Company continues to focus on disciplined expense management as an offset to the challenging rate environment that exists today. The Company’s efficiency ratio improved to 52.2% for the current quarter versus 57.3% for the same quarter a year ago.

Dividend

On October 22, 2019, the Board of Directors declared a quarterly cash dividend of $0.08 per common share payable November 8, 2019 to shareholders of record November 1, 2019.

Conference Call

United Community Financial Corp. will host an earnings conference call on Wednesday, October 23, 2019, at 10:00 a.m. ET, to provide an overview of the Company’s third 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 3rd 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, competition, and the ability to close the merger of the Company with and into First Defiance Financial Corp. 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,			September 30,
	2019			2018			F/(U)
	(Dollars in thousands)
Assets:
Cash and deposits with banks	$	39,072		$	31,042			25.9	%
Federal funds sold		25,797			23,223			11.1	%

Total cash and cash equivalents		64,869			54,265			19.5	%
Securities:
Trading, at fair value		734			—			0.0	%
Available for sale, at fair value		315,021			242,106			30.1	%
Held to maturity (fair value of $0 and $74,812, respectively)		—			78,700			-100.0	%
Loans held for sale, at fair value		113,593			95,235			19.3	%
Gross loans		2,268,494			2,170,274			4.5	%
Allowance for loan losses		(19,987	)		(21,332	)		-6.3	%

Net loans		2,248,507			2,148,942			4.6	%
Federal Home Loan Bank stock, at cost		13,639			19,144			-28.8	%
Premises and equipment, net		21,187			21,449			-1.2	%
Accrued interest receivable		8,713			8,551			1.9	%
Real estate owned and other repossessed assets		948			907			4.5	%
Goodwill		20,221			20,221			0.0	%
Core deposit intangible		1,357			1,686			-19.5	%
Customer list intangible		2,078			2,259			-8.0	%
Cash surrender value of life insurance		65,401			63,789			2.5	%
Other assets		30,305			31,929			-5.1	%

Total assets	$	2,906,573		$	2,789,183			4.2	%

Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Interest bearing	$	1,666,355		$	1,553,204			7.3	%
Noninterest bearing		421,631			383,535			9.9	%

Customer deposits		2,087,986			1,936,739			7.8	%
Brokered deposits		17,772			415,737			-95.7	%

Total deposits		2,105,758			2,352,476			-10.5	%
Borrowed funds:
Federal Home Loan Bank advances
Long-term advances		—			49,025			-100.0	%
Short-term advances		422,000			46,000			817.4	%

Total Federal Home Loan Bank advances		422,000			95,025			344.1	%
Repurchase agreements and other		—			238			-100.0	%

Total borrowed funds		422,000			95,263			343.0	%
Advance payments by borrowers for taxes and insurance		23,447			16,494			42.2	%
Accrued interest payable		747			1,177			-36.5	%
Accrued expenses and other liabilities		27,765			17,730			56.6	%

Total liabilities		2,579,717			2,483,140			3.9	%

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 48,087,430 and 49,922,514 shares, respectively, outstanding		177,314			177,412			-0.1	%
Retained earnings		211,012			186,000			13.4	%
Accumulated other comprehensive loss		(12,673	)		(25,783	)		-50.8	%
Treasury stock, at cost, 6,051,480 and 4,216,396 shares, respectively		(48,797	)		(31,586	)		54.5	%

Total shareholders’ equity		326,856			306,043			6.8	%

Total liabilities and shareholders’ equity	$	2,906,573		$	2,789,183			4.2	%

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,
	2019			2019			Variance			F/(U)			2018			Variance			F/(U)			2019			2018			Variance			F/(U)
	(Dollars in thousands, except per share data)
Interest income
Loans	$	26,037		$	26,373		$	(336)			-1.3	%	$	24,031		$	2,006			8.3	%	$	78,267		$	70,065		$	8,202			11.7	%
Loans held for sale		1,067			991			76			7.7	%		1,264			(197	)		-15.6	%		3,065			3,134			(69	)		-2.2	%
Securities:
Available for sale, nontaxable		235			236			(1	)		-0.4	%		333			(98	)		-29.4	%		777			1,077			(300	)		-27.9	%
Available for sale, taxable		1,828			1,611			217			13.5	%		1,176			652			55.4	%		4,702			3,584			1,118			31.2	%
Held to maturity, nontaxable		—			25			(25	)		-100.0	%		69			(69	)		-100.0	%		100			181			(81	)		-44.8	%
Held to maturity, taxable		—			118			(118	)		-100.0	%		374			(374	)		-100.0	%		497			1,194			(697	)		-58.4	%
Federal Home Loan Bank stock dividends		173			245			(72	)		-29.4	%		289			(116	)		-40.1	%		707			843			(136	)		-16.1	%
Other interest earning assets		203			200			3			1.5	%		154			49			31.8	%		628			323			305			94.4	%

Total interest income		29,543			29,799			(256	)		-0.9	%		27,690			1,853			6.7	%		88,743			80,401			8,342			10.4	%
Interest expense
Deposits		6,856			7,197			(341	)		4.7	%		5,044			1,812			-35.9	%		20,627			11,931			8,696			-72.9	%
Federal Home Loan Bank advances		1,103			559			544			-97.3	%		1,023			80			-7.8	%		2,303			4,019			(1,716	)		42.7	%

Total interest expense		7,959			7,756			(203	)		2.6	%		6,067			(1,892	)		31.2	%		22,930			15,950			(6,980	)		43.8	%

Net interest income		21,584			22,043			(459	)		-2.1	%		21,623			(39	)		-0.2	%		65,813			64,451			1,362			2.1	%
Taxable equivalent adjustment		46			62			(16	)		-25.8	%		84			(38	)		-45.2	%		192			271			(79	)		-29.2	%

Net interest income (FTE)⁽¹⁾		21,630			22,105			(475	)		-2.1	%		21,707			(77	)		-0.4	%		66,005			64,722			1,283			2.0	%
Provision for loan losses		701			(51	)		(752	)		1474.5	%		251			(450	)		-179.3	%		712			520			(192	)		-36.9	%

Net interest income after provision for loan losses (FTE)		20,929			22,156			(1,227	)		-5.5	%		21,456			(527	)		-2.5	%		65,293			64,202			1,091			1.7	%

Non-interest income
Insurance agency income		575			545			30			5.5	%		545			30			5.5	%		1,821			1,635			186			11.4	%
Brokerage income		480			409			71			17.4	%		339			141			41.6	%		1,259			911			348			38.2	%
Service fees and other charges:
Deposit related fees		1,490			1,417			73			5.2	%		1,494			(4	)		-0.3	%		4,247			4,186			61			1.5	%
Mortgage servicing fees		908			881			27			3.1	%		821			87			10.6	%		2,662			2,446			216			8.8	%
Mortgage servicing rights valuation		(336	)		(996	)		660			-66.3	%		(6	)		(330	)		5500.0	%		(1,831	)		(17	)		(1,814	)		-10670.6	%
Mortgage servicing rights amortization		(702	)		(553	)		(149	)		26.9	%		(477	)		(225	)		47.2	%		(1,701	)		(1,519	)		(182	)		-12.0	%
Other service fees		21			21			—			0.0	%		26			(5	)		-19.2	%		80			125			(45	)		-36.0	%
Net gains (losses):
Trading securities		29			39			(10	)		-25.6	%		—			29			0.0	%		131			—			131			0.0	%
Securities available for sale		128			148			(20	)		-13.5	%		—			128			0.0	%		420			233			187			80.3	%
Mortgage banking income		2,508			2,631			(123	)		-4.7	%		1,409			1,099			78.0	%		6,815			3,972			2,843			71.6	%
Real estate owned and other repossessed assets charges, net		(55	)		(33	)		(22	)		66.7	%		(45	)		(10	)		22.2	%		(119	)		(236	)		117			49.6	%
Debit/credit card fees		1,057			1,221			(164	)		-13.4	%		1,000			57			5.7	%		3,213			3,126			87			2.8	%
Trust fee income		434			461			(27	)		-5.9	%		483			(49	)		-10.1	%		1,360			1,425			(65	)		-4.6	%
Bank owned life insurance		398			397			1			0.3	%		435			(37	)		-8.5	%		1,180			1,301			(121	)		-9.3	%
Other income		80			83			(3	)		-3.6	%		122			(42	)		-34.4	%		222			229			(7	)		-3.1	%

Total non-interest income		7,015			6,671			344			5.2	%		6,146			869			14.1	%		19,759			17,817			1,942			10.9	%

Non-interest expense
Salaries and employee benefits		8,831			9,106			(275	)		3.0	%		9,107			(276	)		3.0	%		28,512			28,042			470			-1.7	%
Occupancy		1,024			1,028			(4	)		0.4	%		1,094			(70	)		6.4	%		3,098			3,144			(46	)		1.5	%
Equipment and data processing		2,307			2,208			99			-4.5	%		2,032			275			-13.5	%		6,806			6,558			248			-3.8	%
Financial institutions tax		509			509			—			0.0	%		495			14			-2.8	%		1,527			1,486			41			-2.8	%
Advertising		407			465			(58	)		12.5	%		340			67			-19.7	%		1,261			865			396			-45.8	%
Amortization of intangible assets		127			127			—			0.0	%		128			(1	)		0.8	%		382			373			9			-2.4	%
FDIC insurance premiums		(288	)		297			(585	)		197.0	%		294			(582	)		198.0	%		340			872			(532	)		61.0	%
Other insurance premiums		74			76			(2	)		2.6	%		85			(11	)		12.9	%		227			303			(76	)		25.1	%
Professional fees:
Legal fees		181			214			(33	)		15.4	%		356			(175	)		49.2	%		454			802			(348	)		43.4	%
Other professional fees		545			562			(17	)		3.0	%		651			(106	)		16.3	%		1,695			1,541			154			-10.0	%
Supervisory fees		48			34			14			-41.2	%		34			14			-41.2	%		115			118			(3	)		2.5	%
Real estate owned and other repossessed asset expenses		39			17			22			-129.4	%		25			14			-56.0	%		95			95			—			0.0	%
Other expenses		1,207			1,333			(126	)		9.5	%		1,131			76			-6.7	%		4,149			3,703			446			-12.0	%

Total non-interest expenses		15,011			15,976			965			6.0	%		15,772			761			-4.8	%		48,661			47,902			(759	)		1.6	%

Income before income taxes		12,933			12,851			82			0.6	%		11,830			1,103			9.3	%		36,391			34,117			2,274			6.7	%
Taxable equivalent adjustment		46			62			(16	)		25.8	%		84			(38	)		45.2	%		192			271			(79	)		29.2	%
Income tax expense		2,383			2,303			80			-3.5	%		2,217			166			-7.5	%		6,553			6,220			333			-5.4	%

Net income	$	10,504		$	10,486		$	18			0.2	%	$	9,529		$	975			10.2	%	$	29,646		$	27,626		$	2,020			7.3	%

Earnings per common share:
Basic	$	0.218		$	0.216		$	0.002			0.9	%	$	0.191		$	0.027			14.1	%	$	0.610		$	0.554		$	0.056			10.1	%
Diluted		0.218			0.215			0.003			1.4	%		0.190			0.028			14.7	%		0.608			0.551			0.057			10.3	%

⁽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
	September 30, 2019							June 30, 2019							September 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⁾	$	2,224,310	$	26,045		4.66	%	$	2,207,554	$	26,382		4.79	%	$	2,115,227	$	24,031		4.54	%
Loans held for sale		99,581		1,067		4.29	%		84,210		991		4.71	%		111,295		1,264		4.51	%

Total loans, net		2,323,891		27,112		4.66	%		2,291,764		27,373		4.79	%		2,226,522		25,295		4.54	%
Securities:
Available for sale-taxable		279,618		1,828		2.61	%		243,895		1,611		2.64	%		204,924		1,176		2.30	%
Available for sale-nontaxable ⁽²⁾		35,054		273		3.12	%		33,068		283		3.42	%		48,370		400		3.31	%
Held to maturity-taxable		—		—		0.00	%		31,498		118		1.50	%		67,979		374		2.20	%
Held to maturity-nontaxable ⁽²⁾		—		—		0.00	%		6,406		31		1.94	%		12,215		86		2.82	%

Total securities		314,672		2,101		2.67	%		314,867		2,043		2.60	%		333,488		2,036		2.44	%
Federal Home Loan Bank stock		13,872		173		4.99	%		15,408		245		6.36	%		19,160		289		6.03	%
Other interest earning assets		36,706		203		2.19	%		37,240		200		2.15	%		30,140		154		2.03	%

Total interest earning assets		2,689,141		29,589		4.38	%		2,659,279		29,861		4.50	%		2,609,310		27,774		4.26	%
Non-interest earning assets		181,208							181,268							177,553

Total assets	$	2,870,349						$	2,840,547						$	2,786,863

Interest bearing liabilities:
Deposits:
Checking accounts	$	770,268		2,391		1.24	%	$	734,458		2,138		1.16	%	$	635,705		1,026		0.64	%
Savings accounts		286,794		27		0.04	%		293,784		26		0.04	%		303,247		27		0.04	%
Certificates of deposit
Customer certificates of deposit		611,736		3,148		2.06	%		645,115		3,231		2.00	%		618,545		2,457		1.58	%
Brokered certificates of deposit		226,951		1,290		2.27	%		299,747		1,802		2.40	%		327,120		1,534		1.86	%

Total certificates of deposit		838,687		4,438		2.12	%		944,862		5,033		2.14	%		945,665		3,991		1.67	%

Total interest bearing deposits		1,895,749		6,856		1.45	%		1,973,104		7,197		1.46	%		1,884,617		5,044		1.06	%
Federal Home Loan Bank advances
Long-term advances		—		—		0.00	%		—		—		0.00	%		48,976		413		3.35	%
Short-term advances		189,370		1,103		2.33	%		89,879		559		2.49	%		120,880		610		2.00	%

Total Federal Home Loan Bank advances		189,370		1,103		2.33	%		89,879		559		2.49	%		169,856		1,023		2.39	%
Repurchase agreements and other		125		—		0.00	%		142		—		0.00	%		213		—		0.00	%

Total borrowed funds		189,495		1,103		2.33	%		90,021		559		2.49	%		170,069		1,023		2.39	%

Total interest bearing liabilities	$	2,085,244		7,959		1.53	%	$	2,063,125		7,756		1.50	%	$	2,054,686		6,067		1.17	%

Non-interest bearing liabilities
Total noninterest bearing deposits		411,106							405,535							382,044
Other noninterest bearing liabilities		54,197							54,622							39,075

Total noninterest bearing liabilities		465,303							460,157							421,119

Total liabilities	$	2,550,547						$	2,523,282						$	2,475,805
Shareholders’ equity		319,802							317,265							311,058

Total liabilities and equity	$	2,870,349						$	2,840,547						$	2,786,863

Net interest income and interest rate spread			$	21,630		2.85	%			$	22,105		3.00	%			$	21,707		3.09	%

Net interest margin						3.21	%						3.33	%						3.33	%
Average interest earning assets to average interest bearing liabilities						128.96	%						128.90	%						126.99	%
Interest bearing deposits
Checking accounts	$	770,268	$	2,391		1.24	%	$	734,458	$	2,138		1.16	%	$	635,705	$	1,026		0.64	%
Savings accounts		286,794		27		0.04	%		293,784		26		0.04	%		303,247		27		0.04	%
Customer certificates of deposit		611,736		3,148		2.06	%		645,115		3,231		2.00	%		618,545		2,457		1.58	%

Total customer deposits		1,668,798		5,566		1.33	%		1,673,357		5,395		1.29	%		1,557,497		3,510		0.90	%
Brokered certificates of deposit		226,951		1,290		2.27	%		299,747		1,802		2.40	%		327,120		1,534		1.86	%

Total interest bearing deposits		1,895,749		6,856		1.45	%		1,973,104		7,197		1.46	%		1,884,617		5,044		1.06	%
Noninterest bearing deposits		411,106		—		0.00	%		405,535		—		0.00	%		382,044		—		0.00	%

Total average deposits and cost of deposits	$	2,306,855	$	6,856		1.19	%	$	2,378,639	$	7,197		1.21	%	$	2,266,661	$	5,044		0.89	%
Other interest bearing liabilities
Federal Home Loan Bank advances
Long term advances	$	—	$	—		0.00	%	$	—	$	—		0.00	%	$	48,976	$	413		3.35	%
Short term advances		189,370		1,103		2.33	%		89,879		559		2.49	%		120,880		610		2.00	%

Total Federal Home Loan Bank advances		189,370		1,103		2.33	%		89,879		559		2.49	%		169,856		1,023		2.39	%
Repurchase agreements and other		125		—		0.00	%		142		—		0.00	%		213		—		0.00	%

Total borrowed funds		189,495		1,103		2.33	%		90,021		559		2.49	%		170,069		1,023		2.39	%

Total average deposits and other interest bearing liabilities and total cost of funds	$	2,496,350	$	7,959		1.26	%	$	2,468,660	$	7,756		1.26	%	$	2,436,730	$	6,067		1.00	%

Customer deposits interest bearing and noninterest bearing	$	2,079,904	$	5,566		1.07	%	$	2,078,892	$	5,395		1.04	%	$	1,939,541	$	3,510		0.72	%
Brokered deposits		226,951		1,290		2.27	%		299,747		1,802		2.40	%		327,120		1,534		1.86	%
Total borrowings		189,495		1,103		2.33	%		90,021		559		2.49	%		170,069		1,023		2.39	%
Cost of funds		2,496,350		7,959		1.26	%		2,468,660		7,756		1.26	%		2,436,730		6,067		1.00	%

⁽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
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands, except per share data)
Financial Data
Total assets	$	2,906,573		$	2,869,116		$	2,852,041		$	2,811,357		$	2,789,183
Total loans, net		2,248,507			2,229,326			2,215,549			2,176,842			2,148,942
Total securities		315,755			319,714			313,847			319,498			320,806
Total deposits		2,105,758			2,259,179			2,289,803			2,213,220			2,352,476
Average interest-bearing deposits		1,895,749			1,973,104			1,963,567			1,936,539			1,884,617
Average noninterest-bearing deposits		411,106			405,535			400,874			395,649			382,044
Total shareholders’ equity		326,856			317,554			314,709			309,334			306,043
Net interest income		21,584			22,043			22,186			23,494			21,623
Net interest income (FTE)⁽¹⁾		21,630			22,105			22,270			23,605			21,707
Provision for loan losses		701			(51	)		61			178			251
Noninterest income		7,015			6,671			6,073			5,585			6,146
Noninterest expense		15,011			15,976			17,674			17,178			15,772
Income tax expense		2,383			2,303			1,868			2,172			2,217
Net income		10,504			10,486			8,656			9,551			9,529
Share Data
Basic earnings per common share	$	0.218		$	0.216		$	0.177		$	0.192		$	0.191
Diluted earnings per common share		0.218			0.215			0.176			0.191			0.190
Book value per common share		6.80			6.61			6.44			6.30			6.13
Tangible book value per common share		6.31			6.11			5.95			5.81			5.65
Market value per common share		10.78			9.57			9.35			8.85			9.67
Common shares outstanding at end of period		48,087			48,069			48,853			49,129			49,923
Weighted average shares outstanding—basic		47,961			48,463			48,854			49,445			49,683
Weighted average shares outstanding—diluted		48,164			48,644			49,113			49,695			49,947
Key Ratios
Return on average assets ⁽²⁾		1.46	%		1.48	%		1.22	%		1.36	%		1.37	%
Return on average equity ⁽³⁾		13.14	%		13.22	%		10.99	%		12.15	%		12.25	%
Return on tangible equity ⁽⁴⁾		14.19	%		14.30	%		11.90	%		13.16	%		13.28	%
Net interest margin		3.21	%		3.33	%		3.38	%		3.58	%		3.33	%
Efficiency ratio		52.15	%		55.37	%		62.29	%		54.79	%		57.30	%
Nonperforming loans to net loans, end of period		0.46	%		0.58	%		0.32	%		0.30	%		0.42	%
Nonperforming assets to total assets, end of period		0.39	%		0.48	%		0.34	%		0.27	%		0.36	%
Allowance for loan loss as a percent of loans, end of period		0.88	%		0.91	%		0.91	%		0.93	%		0.98	%
Delinquent loans to total net loans, end of period		0.63	%		0.58	%		0.41	%		0.50	%		0.69	%

⁽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
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands)
Loan Portfolio Composition
Commercial loans
Multi-family	$	166,027		$	154,630		$	163,243		$	134,143		$	139,938
Owner/nonowner occupied commercial real estate		409,687			414,780			412,550			409,979			408,938
Land		19,653			16,955			17,090			16,830			16,129
Construction		127,388			138,043			135,048			141,686			132,961
Commercial and industrial		271,292			249,898			246,740			240,293			233,801

Total		994,047			974,306			974,671			942,931			931,767
Residential mortgage loans
Real estate		938,899			942,698			934,586			927,255			909,626
Construction		44,636			46,196			45,102			43,435			39,396

Total		983,535			988,894			979,688			970,690			949,022
Consumer loans
Consumer		283,641			279,531			274,998			277,041			283,108

Total		283,641			279,531			274,998			277,041			283,108

Total loans		2,261,223			2,242,731			2,229,357			2,190,662			2,163,897
Less:
Allowance for loan losses		19,987			20,482			20,446			20,443			21,332
Deferred loan costs, net		(7,271	)		(7,077	)		(6,638	)		(6,623	)		(6,377	)

Total		12,716			13,405			13,808			13,820			14,955

Total loans, net		2,248,507			2,229,326			2,215,549			2,176,842			2,148,942
Loans held for sale, net		113,593			97,477			77,676			91,472			95,235

Total loans	$	2,362,100		$	2,326,803		$	2,293,225		$	2,268,314		$	2,244,177


	At or for the quarters ended
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts	$	134,662		$	131,725		$	146,244		$	146,977		$	140,722
Non-interest bearing checking accounts		421,631			398,340			404,644			394,208			383,535

Total checking accounts		556,293			530,065			550,888			541,185			524,257
Savings accounts		286,251			290,354			297,186			298,087			300,007
Money market accounts		653,926			606,661			550,049			466,167			489,668

Total non-time deposits		1,496,470			1,427,080			1,398,123			1,305,439			1,313,932
Certificates of deposit		591,516			644,024			630,174			616,826			622,807

Total customer deposits		2,087,986			2,071,104			2,028,297			1,922,265			1,936,739
Brokered deposits		17,772			188,075			261,506			290,955			415,737

Total certificates of deposit		609,288			832,099			891,680			907,781			1,038,544

Total deposits	$	2,105,758		$	2,259,179		$	2,289,803		$	2,213,220		$	2,352,476

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands)
Allowance For Loan Losses
Beginning balance	$	20,482		$	20,446		$	20,443		$	21,332		$	21,405
Provision		701			(51	)		61			178			251
Net (chargeoffs) recoveries		(1,196	)		87			(58	)		(1,067	)		(324	)

Ending balance	$	19,987		$	20,482		$	20,446		$	20,443		$	21,332


	At or for the quarters ended
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands)
Net (Charge-offs) Recoveries
Commercial loans
Multi-family	$	4		$	4		$	113		$	(99)		$	4
Owner/nonowner occupied commercial real estate		12			165			28			38			12
Land		—			—			—			—			150
Construction		—			—			1			—			11
Commercial and industrial		(897	)		1			(84	)		(765	)		(275	)

Total		(881	)		170			58			(826	)		(98	)
Residential mortgage loans
Real estate		(186	)		(53	)		78			(131	)		(141	)
Construction		—			—			—			—			—

Total		(186	)		(53	)		78			(131	)		(141	)
Consumer loans
Consumer		(130	)		(30	)		(194	)		(110	)		(85	)

Total		(130	)		(30	)		(194	)		(110	)		(85	)

Total net chargeoffs	$	(1,197	)	$	87		$	(58	)	$	(1,067	)	$	(324	)


	At or for the quarters ended
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands)
Nonperforming Loans
Commercial loans
Multi-family	$	—		$	—		$	—		$	171		$	275
Owner/nonowner occupied commercial real estate		3,610			2,688			1,565			13			1,101
Land		—			—			—			—			—
Construction		—			—			—			—			—
Commercial and industrial		785			4,678			456			531			1,489

Total		4,395			7,366			2,021			715			2,865
Residential mortgage loans
Real estate		4,233			4,365			3,883			4,170			4,426
Construction		—			—			—			—			—

Total		4,233			4,365			3,883			4,170			4,426
Consumer loans
Consumer		1,689			1,141			1,203			1,654			1,770

Total		1,689			1,141			1,203			1,654			1,770

Total nonperforming loans	$	10,317		$	12,872		$	7,107		$	6,539		$	9,061

Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status	$	7,107		$	5,392		$	4,351		$	5,750		$	8,200
Past due 90 days and still accruing		—			—			—			—			—

Past due 90 days		7,107			5,392			4,351			5,750			8,200
Past due less than 90 days and on nonaccrual		3,210			7,480			2,756			789			861

Total nonperforming loans		10,317			12,872			7,107			6,539			9,061
Other real estate owned		880			871			1,143			1,049			907
Other classified assets		—			—			1,479			—			—
Repossessed assets		82			84			37			39			—

Total nonperforming assets	$	11,279		$	13,827		$	9,766		$	7,627		$	9,968

UNITED COMMUNITY FINANCIAL CORP.

NON-GAAP DISCLOSURE RECONCILIATION

(Unaudited)

Reconciliation of Average Shareholders’ Equity to Average Tangible Equity:


	At or for the quarters ended
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands, except per share data)
Average shareholders equity	$	319,802		$	317,265		$	315,006		$	314,464		$	311,058
Average intangible assets		23,740			23,867			23,994			24,123			24,144

Average tangible equity	$	296,062		$	293,398		$	291,012		$	290,341		$	286,914

Net income	$	10,504		$	10,486		$	8,656		$	9,551		$	9,529
Return on tangible equity		14.19	%		14.30	%		11.90	%		13.16	%		13.28	%

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

	For the quarters ended
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands)
Interest income	$	29,543		$	29,799		$	29,401		$	30,170		$	27,690
Fully taxable equivalent adjustment		46			62			84			111			84

Fully taxable equivalent interest income		29,589			29,861			29,485			30,281			27,774
Interest expense		7,959			7,756			7,215			6,676			6,067

Fully taxable net interest income	$	21,630		$	22,105		$	22,270		$	23,605		$	21,707


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
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands, except per share data)
Total shareholders’ equity	$	326,856		$	317,554		$	314,709		$	309,334		$	306,043
Goodwill		20,221			20,221			20,221			20,221			20,221
Customer list intangible		2,078			2,123			2,169			2,214			2,259
Core deposit intangible		1,357			1,439			1,521			1,603			1,686
Total common shares outstanding		48,087,430			48,068,790			48,852,688			49,128,875			49,922,514
Tangible book value, as reported	$	6.31		$	6.11		$	5.95		$	5.81		$	5.65

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



	At the quarters ended						At the quarters ended
	September 30, 2019			September 30, 2018			June 30, 2019			June 30, 2018
Net interest income (FTE)	$	21,630		$	21,707		$	22,105		$	21,385
less: purchase accounting		(213	)		(383	)		(271	)		(463	)

Adjusted net interest income		21,417			21,324			21,834			20,922
Average earning assets		2,689,141			2,609,310			2,659,279			2,550,587
Net interest margin excluding purchase accounting		3.18	%		3.27	%		3.29	%		3.28	%
Non-interest income	$	7,015		$	6,146		$	6,671		$	5,852
less: mortgage servicing valuation adjustment		336			6			996			20

Non-interest income, adjusted		7,351			6,152			7,667			5,872
Non-interest income % increase		19.5	%					30.6	%
Non-interest expense	$	15,011		$	15,772		$	15,976		$	15,530
Non-interest expense % increase		-4.8	%					2.9	%