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Section 1: 8-K (FORM 8-K)

Form 8-K

 

 

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.

 

2


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

 

3

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Section 2: EX-99 (EX-99)

EX-99

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
[email protected]     

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.”

 

1


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.

 

2


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.

###

 

3


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.

 

4


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
  

 

 

   

 

 

   

 

5


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.

 

6


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.

 

7


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

 

8


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  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

9


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  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

10


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  

 

11

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