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Edited Transcript of UCFC earnings conference call or presentation 23-Jan-19 3:00pm GMT

Q4 2018 United Community Financial Corp Earnings Call

Youngstown Jan 29, 2019 (Thomson StreetEvents) -- Edited Transcript of United Community Financial Corp earnings conference call or presentation Wednesday, January 23, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gary M. Small

United Community Financial Corp. - President, CEO & Director

* Matthew T. Garrity

United Community Financial Corp. - Executive VP of Commercial Lending & Credit Administration and Director of Home Savings Bank

* Timothy W. Esson

United Community Financial Corp. - CFO

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Conference Call Participants

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* Daniel Edward Cardenas

Raymond James & Associates, Inc., Research Division - Research Analyst

* Michael Perito

Keefe, Bruyette, & Woods, Inc., Research Division - Analyst

* Robert Scott Siefers

Sandler O'Neill + Partners, L.P., Research Division - Principal of Equity Research

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Presentation

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Operator [1]

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Good morning, and welcome to the United Community Financial Corp. Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) Please also note today's event is being recorded.

At this time, I would like to turn the conference call over to Tim Esson, Chief Financial Officer. Sir, please go ahead.

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Timothy W. Esson, United Community Financial Corp. - CFO [2]

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Good morning, and thank you for participating in today's conference call. As always, before we begin, I would like to refer you to the company's forward-looking statements and risk factors that appear on the screen in front of you. Additionally, the risk factors can be found at our web -- Investor Relations website, ir.ucfconline.com. This statement provides the standard cautionary language required by the Securities and Exchange Commission for forward-looking statements that may be included in today's call. In addition, a copy of the fourth quarter earnings release can be obtained at the same website.

With that said, I would now like to introduce Gary Small, President and CEO of both UCFC and Home Savings.

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [3]

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Thank you, Tim, and good morning to all on the call. Thanks for joining us today. I am pleased to report another strong quarter for Home Savings. Earnings for the quarter were $9.6 million or $0.191 per share, and full year income was $37.2 million or $0.742 per share, and each of those were meeting our expectations.

Loan growth for the quarter came in slightly stronger than expected. Combination of a good new business activity and a few delays on our CRE payoffs made the difference. We do expect to paydowns will come in the first quarter per course. And there's nothing unusual relative to that.

Loan growth continues to be a strength for the organization. Commercial balances were up over 14% for the year and we drove exceptional growth in our C&I portfolio. We continue to see quality CRE opportunities in the market, but we do remain very selective.

The residential mortgage business is very strong in a very competitive environment. We outpaced the industry in origination growth over the course of the year. And we did see pricing firming up in the second half of the year, particularly in the fourth quarter.

'18 was a good year for customer deposit growth. Year-over-year, we were up 8.3%, the non-interest-bearing component of that growth was up 12%, which is fantastic from our perspective. Overall, we're very pleased with the combination of margin management during a very volatile rate and yield curve environment.

Investments made in the second half of '17 to expand our treasury management and private banking teams really paid dividends in '18. Business deposit growth jumped 23% for the year and our private banking team delivered $40 million in new deposits in '19 -- in 2018.

Revenue from our trust, investment management and insurance businesses was up 11% on a combined basis for the year. And that's consistent with our continuing double-digit revenue growth expectations for these business units.

Normalized expenses came in at $64.1 million, which is on target and reflective of our focus on expense management. During the year, we did install a new consumer loans system and have initiated enhancements to our digital banking platform, each of these will improve our customer experience and efficiency.

Credit continue to be outstanding for the year, 7 basis points of net charge-offs. Our nonperforming loans ratio dropped to 30 bps. And every early warning indicator that we have around our portfolio continues to improve off an already strong position. While more economic uncertainty exists related to the equity market valuations, international trade, interest rates, the shape of the yield curve, et cetera. The underlying fundamentals for our clients remained strong by most any measure.

The fourth quarter did include a few unusual events. We exited and acquired impaired credit that generated a significant recovery and we also recognized income from the sale related to some VISA Class 2 shares. These 2 positive outcomes afforded us the opportunity to undertake a balance sheet restructuring that involved repositioning of uncertain AFS securities and a termination of a long-term federal home loan bank borrowing commitment.

While the cumulative impact of these events had no financial impact in the fourth quarter on reported earnings, the balance sheet restructuring will improve the organization's net income and margin in the years '19 and beyond.

Now I'll turn it over to Matt Garrity, our head of commercial and residential mortgage business for more color.

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Matthew T. Garrity, United Community Financial Corp. - Executive VP of Commercial Lending & Credit Administration and Director of Home Savings Bank [4]

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Thanks, Gary. As Gary mentioned, we delivered another excellent quarter in our core lending businesses and another strong year overall.

Total loan growth for 2018 was 8.9% as our teams produced approximately $1 billion in loan originations across our commercial, residential mortgage and consumer lending businesses. Consistent with our strategy, the majority of loan growth was centered in the commercial business. While we expect that the market environment will be challenged in 2019 as it was in 2018, we are optimistic about our team's ability to consistently perform and deliver strong results.

Our commercial business produced another solid quarter of loan production and better-than-expected loan growth. As we had mentioned on our last earnings call, our expectation for the quarter -- fourth quarter was for portfolio balances to remain flat with the third quarter as a result of heightened, planned payoff activity. Through a combination of some payoff delays and solid fourth quarter loan funding activity, the commercial portfolio was able to grow 4.8% on an annualized basis during the quarter, which was coming off a very strong third quarter growth.

For the full year, commercial portfolio growth came in at over 14.6%, which was at the upper end of the range we had communicated during the year. We also remain very pleased with our origination mix as commercial and industrial production was approximately 50% of total originations for the quarter and for the full year, was in excess of 40%.

Commercial deposit activity was also very strong during the fourth quarter and for 2018 overall, as we continue to see the benefits of our previous investments in building out our treasury management team.

We delivered a solid 10% growth in average commercial deposit balances during the fourth quarter. And for the full year, commercial deposit growth was approximately 23%.

Overall, we are very pleased with the performance of the commercial business and our momentum headed into 2019.

In our mortgage business, overall loan originations grew during 2018 by approximately 10% compared to the prior year. And with a full year of our new loan origination system, we were able to increase production while at the same time reducing operating expenses for the business. Mortgage-banking income experienced a 20.7% seasonal decline during the fourth quarter of 2018 compared to the prior quarter. When comparing fourth quarter 2018 to the fourth quarter of 2017, the mortgage banking income declined by 18.7% and for the full year, fell by 21.7%. As we have discussed previously, the reduction in 2018 is largely a result of the margin compression that has been going on across the industry.

We expect the current margin environment to continue into 2019. And as such, we expect modest improvement in this area for the year. Given the cyclical nature of this business, we believe conditions will eventually improve. So we remain committed to the business long term as we focus on continuing to leverage technology to create greater efficiencies while improving the client experience.

Asset quality remained strong in the fourth quarter and reflects a disciplined and consistent credit culture. With significant reductions achieved in the fourth quarter, we have reduced our levels of nonperforming loans to total loans and nonperforming assets to total assets to 0.30% and 0.27%, respectively.

Commercial nonperforming loans totaled $715,000 on a portfolio of $938,411,000.

Delinquent loans fell by approximately 37% for 2018 and are now down to 0.5% of 1%. With respect to the recent announcement of the upcoming closure of the General Motors Assembly Plant in Lordstown, we are monitoring the situation but do not expect any meaningful impacts to our consumer or our commercial lending relationships as a result of the pending closure.

Charge-offs for the fourth quarter totaled 20 basis points and for the full year, totaled 7 basis points. Majority of the fourth quarter charge was associated with the resolution of a nonperforming loan that was part of the acquired portfolio. This was not a surprise and there were sufficient reserves relative to the resolution.

Overall, the acquired portfolio continues to perform in line with our expectations.

I would now like to turn the call over to Tim Esson, who will discuss our financial performance in greater detail.

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Timothy W. Esson, United Community Financial Corp. - CFO [5]

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Thank you, Matt. Let me begin by reiterating Gary's opening comment that Q4 demonstrated solid performance numbers along with positive with growth in loans in addition to outstanding credit performance and tight expense management.

On a quarterly -- our quarterly results at $0.19 per share on a fully diluted basis are right in line with our expectations as was our year-to-date performance of $0.742 per share.

In looking at Q4, we did engage in a number of transactions at the end of the quarter, the combination of which is intended to provide benefit in the new year and beyond with minimal impact on 2018 performance because the transactions were offsetting in nature.

To summarize, $26 million of AFS securities were sold with a loss of $860,000, the proceeds of which were invested in other higher-yielding securities. This loss was partially offset with the sale of our VISA Class B shares. As a result of that particular transaction, a gain of $669,000 was recognized. Furthermore, we terminated a $50 million federal home loan bank advance to reduce future funding costs. This action with the FHLB advance carried a $937,000 termination fee.

Finally, a purchase credit impaired loan from our most recent acquisition was brought to resolution which accelerated the recognition of the credit mark, which aggregated $1,050,000. The net of these 4 transactions had a bottom line impact of $78,000 on a pretax basis in 2018.

Looking at the net interest margin. Q4 was 3.58%, which included the favorable recognition of the credit mark I just spoke of. That recognition totaled 16 basis points.

On a normalized basis, Q4 margin would be approximately 3.42% compared to the linked quarter of 3.33%. Margin improvement, primarily due to increases in the yield on loans, which increased at a faster pace than the cost of funding. LIBOR repriced more normally during the fourth quarter of '18, resulted in the higher yield on loans. LIBOR repricing lagged during the third quarter of '18.

Finally, year-to-date margin. We ended at 3.43%. As we discussed earlier, asset quality remained strong. We did recognize a provision for loan losses of $178,000 in the quarter. Total provision for the year aggregated approximately $700,000.

Charge-offs for the year were right at the 7-basis point level. In dollar terms, net charge-offs totaled $1.5 million for the year. Of that total, $676,000 related to 1 acquired impaired loan relationship.

The allowance for loan losses, as compared to total loans, our coverage ratio, was just short of 1% at 0.93%. This percentage increases to 1.03% when combining the remaining fair value adjustment for loans acquired through acquisition last year.

Continuing on, noninterest income totaled $5.6 million in Q4 compared to $6.5 million in the fourth quarter of '17. And as I mentioned, there are onetime transactions that impact this compare, specifically the securities transaction coupled with the VISA sale generated a collective loss of $191,000. Additionally, Q4 of '17 contained a gain of $595,000 from the sale of a bank-owned building.

Adjusting for these onetime items in both quarters, noninterest income would essentially be flat. As you all know, mortgage banking income did increase $257,000 comparing Q4 of '18 to Q4 of '17. But we were able to offset part of this decrease with the increases in mortgage servicing fees. We will continue to manage pricing and mix of the originations to limit margin compression in this area.

Noninterest expense was $16.2 million for the quarter. Backing out the FHLB termination fee of $937,000 that I just spoke of. This level aligns right with plan and meets our expectations. As I indicated, the last time we spoke, we anticipated expenses for the quarter to approximate $16 million.

Our efficiency ratio continues to improve and is now at 54.79% quarter-to-date and 56.85% year-to-date.

One final comment regarding our effective tax rate. On an FTE basis for the quarter, the rate is steady at 19.1%.

With that said, I would now like to return the call back to Gary Small.

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [6]

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Thank you, Tim. A lot to unpack there. Looking to '19, we expect to deliver steady growth combined with a much disciplined expense management. Our model anticipates a single fed rate increase during the year. However, we can handle additional hikes from a margin perspective. Over a 12-month horizon, we're relatively neutral from an ALCO position.

For '19 modeling purposes, I'll provide the following: expect earning asset growth in the 6% to 7% range, loan growth in the 8% to 10% range, commercial loan growth in 10% to 12% range. Customer deposit growth will be 7% to 8%. You will see fluctuations in the brokered deposit versus Federal Home Loan Bank borrowings, depending on who has most advantageous rate. Those are both wholesale sources for us.

Margins would be in the 3.37% to the 3.38% range for the full year. And that's versus 3.33% or so when you exclude the remaining purchase accounting marks that are in our book.

Betas were 36 basis points -- or 36% I should say for '18, and there will be some additional repricing upward as we head into '19, CDs repricing and so forth in all likelihood. The absolute calculation's still a bit uncertain, but we do see rates continuing to march.

Revenue growth 6% to 7%, coming off a very strong net interest income growth year for the organization of 9.4%. Expenses will come in at less than 1% year-over-year against our reported expenses and if you normalize our reported for that early termination, we come in just under 2%. And we'd expect an efficiency ratio in that 55% range.

Pretax pre-provision growth '19 over '18 will be 12%. Net charge-offs will be consistent with '18 and the impact on our provision will be impacted somewhat by additional reserve releases out of the ALLL account due to the excellent credit environment that we're all experiencing. So again, a modest year for provision.

Effective tax rate, Tim has mentioned, GAAP 18.7%, FTE 19.2%. As we look at the 3-year planning horizon as we do, we target annual EPS growth of 10% to 12% a year. With the impact of the fourth quarter restructurings and the stock buyback activity that we incurred, we expect to fall in the mid-to high point of that range for '19.

Stock repurchase activity was at 800,000 shares for the quarter. The board just authorized another $1 million available to be repurchased to provide us with some additional capital management. And I think for planning purposes, 49 million in outstanding shares on average for the year is a good place to start.

And with that, I'll turn it over for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today comes from Scott Siefers from Sandler O'Neill + Partners.

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Robert Scott Siefers, Sandler O'Neill + Partners, L.P., Research Division - Principal of Equity Research [2]

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I think the first question is just on the margins. So just given the balance sheet restructuring actions from the fourth quarter, can you spend just a second talking sort of specifics about how much you would anticipate that impacting the net interest margin rate and NII dollars as we move throughout '19? And then I guess, Gary, just in terms of the guide on the margin for 3.37% to 3.38%, maybe some thoughts on how that trajects throughout the year? I guess we're starting with a fourth quarter margin on an adjusted basis of 3.42%. So at some point, that guide seems to anticipate some contraction. Does that -- is that the kind of thing where we sort of take a step down in the 1Q and then steady out in the 3.37%, 3.38% range or are we going to bleed down to like the low 3.30s throughout the course of the year such that the full year margin's in that kind of high-3.30s range?

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [3]

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Scott, I'll answer the question relative to the impact on our fourth quarter. About 2.5 to 3 basis points is the margin improvement that we'd expect to see that works out to be in the neighborhood of $750,000 of income -- on pretax as both the interest earned on the AFS securities will improve and we no longer have the amortization of that restructured -- restructuring charge running through margin. And that will bring us another 1.5% or so up on our EPS for the year. With regard to the 3.37%, 3.38% range. We would say it will be pretty even although the first quarter is always a bit tight just the way the math works with the days in the year. But there is not any perceived lumpiness in there. I would say there is a bit of an abundance of caution in that number. For modeling purposes, we went with the low range, if you will, on our expectations and made sure that we could get the results we are looking for with -- by hitting that low range. And as the year develops, we may have some expanded notion relative to margin, but we'll stick with 3.37% to 3.38% right now.

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Robert Scott Siefers, Sandler O'Neill + Partners, L.P., Research Division - Principal of Equity Research [4]

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Okay. That's perfect. And then just as I look at the expense guide. I think when we were talking 90 days or so ago on the call, I know this is a sort of a small change but looks like closer to, I think you had said just under 3% growth, now just under 2%. Just curious if there has been any change as to how you're approaching the cost base into 2019? Or if that's just, "Hey, we have another 90 days worth of evidence here" and that's the way the math works.

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [5]

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I appreciate this question, Scott. I think for most of the year, we were committed to $64 million in expense and we -- and I can recall we said a number of times, we'd be under $16 million in any given quarter from second, third and fourth. And I think on the fourth quarter, if you normalized for the termination expense, we came in at $16 million and change which brought us to $64.1 million. So $64 million would've been perfect. $64.1 million, acceptable range just the fourth quarter clean up, that sort of thing. No change in guidance. We still see, as I say, a 2% or less increase off of that $64 million or 1% or less off of the $65 million number that we posted, either way, you want to look at it.

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Operator [6]

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(Operator Instructions) Our next question comes from Michael Perito from KBW.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [7]

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A few questions I still had. One, on the loan growth side. I was just curious if you guys are seeing -- obviously, the outlook still seems fairly healthy. But I know, in some of the investor real estate stuff you guys are doing and some of the CRE, I was curious if you guys are seeing a dramatic impact from the nonbank lenders in any of your spaces where competition has maybe increased more so than others?

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Matthew T. Garrity, United Community Financial Corp. - Executive VP of Commercial Lending & Credit Administration and Director of Home Savings Bank [8]

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This is Matt, Mike. Definitely seeing an impact in that CRE space from nonbank lenders. Competition remains very strong there. We're very pleased with the activity that we got in 2018. I would tell you, we looked at a lot more deals and competed on a lot more things to get what we got in 2018. There was a lot of business we would have liked to have gotten that we could not get just because the terms and conditions just weren't -- they just didn't meet our credit metrics and we just weren't -- we just couldn't get comfortable with it. So we're comfortable with what we -- we're certainly happy with what we did do in '18. And we expect that, that is going to continue into '19. And I think that speaks a little bit also to the amount of C&I production we got in 2018 at about 40% of our business overall for the year. I expect that trend to continue with more business coming out of our regional markets as we head into '19 and look at growth. And just speaking to growth for a moment, we talked a little bit about some delayed payoff activity. We expect them to be delayed and not eliminated. So we'll see some of that payoff leak into the first quarter on top of what we would normally get in a quarter. So as you're thinking about the year, as Gary had mentioned, our 10% to 12% commercial growth for the year, I would expect first quarter to look more in line with fourth quarter as we kind of build out the construct of growth just based on the payoff activity I see coming up in the quarter. But good momentum overall.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [9]

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Gary, on the -- maybe a kind of longer-term high-level question, but we look back, I think total commercial loans were about 43% of the portfolio today. So obviously, you guys have made tremendous progress over the last few years since you guys kind of laid out your plan to do so. As we think about where the company is positioned today, that you've made progress on the commercial front, I'm sure there's some more progress to be made there. It seems like near term, share repurchases, organic growth, but capital levels are still fairly heavy even with the mix of loans shifting more towards commercial and I'm just curious how you kind of envision the next couple of years strategically playing out and if you could provide us, maybe with any thoughts about some of the priorities are going to be for the next couple of years after having such success kind of growing the commercial portfolio from scratch basically.

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [10]

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Relative to that specific topic, Mike. I kind of look at the inverse of that, in that we still get about 41% of our loan portfolio [that's in 1% to 4%.] And as we -- we'll have growth in that portfolio, but it'll certainly be outpaced by the commercial and the consumer book growth. And I think its percentage of our mix will fall 2% or 3% a year and it will not fall 10%, if you will. So 41% becomes 38% becomes 35% and so forth. That would be the pacing of the portfolio change. With regard to capital, which I would agree we'd probably carry, depending on the math you like, 8% to 10% more capital than our balance sheet would designate. The buyback is one of the tools we're using to manage our capital from just an absolute perspective as the best way to return capital to the shareholder and then have the longer-term impact relative to EPS. We do like the notion of sitting on a little bit of excess capital, not necessarily as much as we have now, to be dry powder for anything that might come unfavorably on the credit front, to be there for acquisitions, all the normal things that we've talked about in the past. So it's a high-quality problem to have. But we, in the near term, are kind of managing our exposure there a bit more through buybacks. We'll continue to try to grow the balance sheet into that capital. Another high-quality problem, our earnings growth keeps outpacing our -- and the residual balance of capital left is outpacing our ability to get the capital deployed. So that continues to be a focus. I don't know that the tools are going to change much over the next 2 years unless we strike, find the right opportunity to do in the market.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [11]

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Helpful. I mean, is it fair to say that the post-tax reform that -- I mean, share repurchases might have to become a bit more of a regular occurrence, just to manage, I mean not to build back north to 10% again, given how strong -- obviously, your profitability in the fourth quarter was a little elevated given some of the stuff that was going on. But I think still doing quite strong ROAs and ROEs, respectively. So is that starting to kind of become more of a thought process? Or is it still more just utilize it for the next 12 months and then kind of reevaluate at that point?

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [12]

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Two things there. The fourth quarter really wasn't -- even though we did buy back 800,000 shares, the majority of that was late in December. So on an average basis, it didn't have much impact on the EPS that was reported from the quarter and so forth. Again, it's the best tool that we have to manage our absolute capital dollar. We'd prefer that over a one-off special dividend. We prefer that to an unnatural increase in the quarterly dividends and so forth. So relative to the tools that we have to manage it, that's the one we prefer. And I think the board authorizing another million shares is being responsive to that by the -- with that addition, we'll have 1.8 million authorized for repurchase and we'll use them appropriately as we see the market being opportunistic.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [13]

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Got it. And then just to make sure I'm following you correctly. So you said you bought 800,000 shares late in the fourth quarter. So that would bring your pro forma average share count to about 49.1 million. So the 49 million for 2019, does that assume only modest additional repurchase activity or did I miss a piece of that somewhere?

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [14]

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I don't know if 49.1 million is our average. It might be the ending. But your point is correct that we will be taking -- we do anticipate taking down a few more shares as a part of the model. We also issue shares because of compensation plans and so forth over the course of any year. And so that movement to 49 million is taking in -- additional, netting out of those additional shares -- of the shares that we will issue.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division - Analyst [15]

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Got it. So the expectation is for the full year average diluted share count for next year in your budgeting would be 49 million?

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [16]

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Because -- yes, that would be the place to start. We would adjust our guidance if we get more active or have more to say on that as the year unfolds.

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Operator [17]

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Our next question comes from Daniel Cardenas from Raymond James.

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Daniel Edward Cardenas, Raymond James & Associates, Inc., Research Division - Research Analyst [18]

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Just a couple of quick questions. A follow up on the stock repurchase during Q4. What was the average price on that 800,000 shares that you bought back?

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [19]

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$9.06.

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Daniel Edward Cardenas, Raymond James & Associates, Inc., Research Division - Research Analyst [20]

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Okay, great. And then maybe just a little bit of color on M&A. What's the environment like right now in your footprint? Is there a lot of activity and what are seller expectations looking like?

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [21]

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Yes, it feels a little bit like the discussion we had in the third quarter. There is enough uncertainty in the market and certainly, with the equity prices falling and so forth, that's not a catalyst for getting folks to the table. The economic uncertainty is something that could generate as -- that we see more conversation in '19 in that certain organizations will struggle either with higher funding costs or less loan demand and think about their alternatives. In the Ohio market in general, it was pretty quiet in 2018. We do expect 2019 to pick up a bit, if for no other reason than '18 was so low. I will say conversations continue and folks are engaged. But all the uncertainties that swirls around, folks got used to seeing higher prices, boards got used to seeing higher prices. They don't always think about share conversion rates being the same, that sort of thing. I think all that just takes time to settle in, create a new norm and then you start to have more direct and pointed conversations. We're still in the queue talking with folks, but I would not say it's a robust discussion set right now.

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Daniel Edward Cardenas, Raymond James & Associates, Inc., Research Division - Research Analyst [22]

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Right. That sounds fair. All my other questions have been asked and answered.

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Operator [23]

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And our next question is a follow-up from Scott Siefers from Sandler O'Neill + Partners.

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Robert Scott Siefers, Sandler O'Neill + Partners, L.P., Research Division - Principal of Equity Research [24]

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Just wanted to go back to the margin for a second. Gary, do you have the amount by which purchase accounting benefited margin in the fourth quarter? In other words, I think we had about 375,000 or so back in the third quarter benefit. And I think throughout 2018, you averaged somewhere in the neighborhood of, call it, 7 basis points or so between what I would call like the reported and sort of core margin. Do you have those numbers for the fourth quarter? And then what your expectation for the benefit would be throughout 2019?

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [25]

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Yes. Scott, I'll start with that sort of basis point impact. It was a lumpy number in '18. We started off, Tim, with 6 or 7 basis points, say in the first --

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Timothy W. Esson, United Community Financial Corp. - CFO [26]

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Yes.

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [27]

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In the first 2 quarters and then finished the year more of a 4 basis point move. So we're tracking down 2 basis points to 3 basis points depending on the quarter. As we look at '19, there's less lumpiness to it or there's less of a curve. So it's 4 to 3 kind of contribution all through the year. So 4 on the upfront quarter and then we'll trail down just a bit toward the end of the year based on the way the amortization is running right now.

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Robert Scott Siefers, Sandler O'Neill + Partners, L.P., Research Division - Principal of Equity Research [28]

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Okay. Good. All right. So then that -- the 3.42% adjusted margin we had in the fourth quarter, that was a pretty good approximation within a couple of basis points of what we would consider sort of core margin and then less of a benefit in '19 than in '18, it sounds like.

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [29]

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That's right.

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Operator [30]

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And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

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Gary M. Small, United Community Financial Corp. - President, CEO & Director [31]

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Appreciate you joining us today. And again, we'll keep everyone updated as our year progresses. And if you have any questions at all never hesitate to call. Thank you so much.

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Operator [32]

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Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.