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UCFC Announces Strong Earnings for the First Quarter and a Dividend of $0.07 Per Common Share

YOUNGSTOWN, Ohio--(BUSINESS WIRE)--

United Community Financial Corp. (Company) (UCFC), parent company of Home Savings Bank (Home Savings), today announced net income of $8.7 million, or $0.176 per diluted common share (“EPS”) for the three months ended March 31, 2019, compared to $0.171 EPS, or $8.6 million for the three months ended March 31, 2018.

First quarter 2019 highlights:

  • ROA of 1.22%, ROE of 10.99% and ROTE of 11.90%
  • Net loan growth of 7.1%, annualized on a linked quarter basis
  • Average customer deposit growth of 6.1% comparing first quarter 2019 to first quarter 2018
  • Net interest margin of 3.38%
  • Noninterest income growth of 4.4% comparing first quarter 2019 to first quarter 2018, 13.1% when adjusted for a change in mortgage servicing rights valuation
  • Repurchase of 328,000 shares, or approximately 0.7% of outstanding shares

Gary M. Small, President and Chief Executive Officer of the Company commented, “We are pleased with Q1 performance as our loan and deposit growth came in right on target, margin met expectations during an unpredictable interest rate environment, and our residential mortgage, wealth and insurance business units experienced strong revenue growth.”

Small further commented, “The year began a bit softer than normal as clients seemed to strike a cautious stance while evaluating the impact of Q4 market uncertainty. Activity levels picked up over the course of the quarter, the residential mortgage business began to benefit from the lower rate environment, and we enter Q2 in a good position.”

Solid Loan Growth

Total net loans grew $38.7 million on a linked quarter basis, or 7.1% annualized, in the first quarter of 2019. Commercial loan growth was $31.7 million for the quarter ended March 31, 2019, an annualized growth rate of 13.5% on a linked quarter basis. Residential mortgage loans increased $9.0 million when comparing the linked quarters, or 3.7% annualized.

Strong Business Deposit and Noninterest Bearing Deposit Growth

Average customer deposit growth was 6.1% when comparing the first quarter of 2019 to the first quarter of 2018. Average noninterest bearing deposits grew $31.3 million, or 8.4%, from March of 2018 to March of 2019 while average business deposits grew $58.8 million, or 24.0%, and average public funds grew $29.2 million, or 27.5%, over this same time frame.

Net Interest Income and Margin

Net interest income totaled $22.3 million on a fully taxable equivalent (FTE) basis for the quarter ended March 31, 2019, compared to $21.6 million for the quarter ended March 31, 2018, an increase of 3.0%. First quarter 2018 net interest income includes a onetime fee recognition from the early payoff of a single loan and a higher level of purchase accounting accretion income versus 2019. Adjusting for these two items, the increase in first quarter net interest income would be 7.0%.

The net interest margin on an FTE basis was 3.38% for the first quarter of 2019 compared to 3.47% for the similar period last year. The net interest margin during the first quarter of 2018 was positively impacted by the payoff of a single loan that added approximately 8 basis points to the reported margin. Also included in the margin for both years are purchase accounting yield adjustments aggregating 6 and 9 basis points respectively for 2019 and 2018. Absent of both the early payoff and the purchase accounting adjustments the net interest margin for the first quarter of 2019 would be 3.32% compared to 3.30% for the same time period last year.

Non-Interest Income

Non-interest income increased to $6.1 million in the first quarter of 2019, compared to $5.8 million in the first quarter of 2018, an increase of 4.4%. Excluding the unfavorable mortgage servicing rights valuation adjustment in the first quarter of 2019, non-interest income would have increased by 13.1%. Mortgage banking income was up 23.4%. Insurance agency income was up 21.5% along with wealth fees being up 12.6%. These increases helped offset the impact of the negative mortgage servicing rights valuation adjustment.

Non-Interest Expense

Non-interest expense was $17.7 million for the quarter ended March 31, 2019 compared to $16.6 million for the quarter ended March 31, 2018, or a 6.5% increase. Non-interest expense for the first quarter of 2019 also included charges of $650,000 for organizational restructuring of the retail and wealth business units. Absent of the organizational restructure charges the increase in non-interest expense is 2.6% for the same period. The Company’s efficiency ratio was 62.29%.

Credit Quality

Credit quality metrics continue to show very favorably during the first quarter of 2019. The ratio of nonperforming loans to net loans was 0.32% at March 31, 2019, which is down from 0.59% reported at March 31, 2018. Total nonperforming commercial loans remain low at $2.0 million as of March 31, 2019 or 0.20% of total commercial loans. Total nonperforming assets to assets was 0.34% at March 31, 2019, while total delinquent loans to net loans was 0.41% for the same period. These ratios were 0.65% and 0.81%, respectively, at March 31, 2018.

During the quarter ended March 31, 2019, the Company recognized total net charge offs of $58,000 or one basis point as a percentage of average loans.

The Company’s provision for loan losses totaled $61,000 for the first quarter of 2019, which was down from the $407,000 reported in the first quarter of 2018. As of March 31, 2019, the Company’s allowance for loan losses to total loans was 0.91%, versus 1.04% at March 31, 2018. Also at March 31, 2019 the allowance for loan loss as a percent of nonperforming loans totaled 287.7%.

Loans acquired through acquisition during the first quarter of 2017 were recorded at fair value. When combining the remaining fair value adjustment of $1.7 million and the Company’s allowance, the Company’s allowance as a percentage total loans increases to .99%.

Capital Management and Tangible Book Value per Share

During the first quarter of 2019, the Company repurchased 328,000 shares. The Company had remaining 1,545,000 shares authorized for repurchase as of March 31, 2019. Tangible book value per common share at March 31, 2019 was $5.95 compared to $5.45 at March 31, 2018.

Dividend Declaration

On April 16, 2019, the Board of Directors declared a quarterly cash dividend of $0.07 per common share. The dividend is payable May 10, 2019 to shareholders of record at the close of business April 29, 2019.

Conference Call

United Community Financial Corp. will host an earnings conference call on Wednesday, April 17, 2019, at 10:00 a.m. ET., to provide an overview of the Company's first 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 1st Quarter 2019 Conference Call on the corporate profile page to join the webcast.

United Community Financial Corp.

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 is available at ir.ucfconline.com.

When used in this press release, the words or phrases “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project”, “will have”, “can expect” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company’s market area and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

     
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 
March 31, March 31,
2019 2018 F/(U)
(Dollars in thousands)
Assets:
Cash and deposits with banks $ 41,920 $ 27,683 51.4 %
Federal funds sold   35,277     19,058   85.1 %
Total cash and cash equivalents 77,197 46,741 65.2 %
Securities:
Trading, at fair value 666 0.0 %
Available for sale, at fair value 237,421 257,908 -7.9 %
Held to maturity (fair value of $74,748 and $78,033, respectively) 75,760 80,685 -6.1 %
Loans held for sale, at fair value 77,676 79,292 -2.0 %
Gross loans 2,235,995 2,083,053 7.3 %
Allowance for loan losses   (20,446 )   (21,610 ) -5.4 %
Net loans 2,215,549 2,061,443 7.5 %
Federal Home Loan Bank stock, at cost 16,702 19,324 -13.6 %
Premises and equipment, net 22,012 21,795 1.0 %
Accrued interest receivable 8,873 7,615 16.5 %
Real estate owned and other repossessed assets 1,180 1,293 -8.7 %
Goodwill 20,221 20,221 0.0 %
Core deposit intangible 1,521 1,851 -17.8 %
Customer list intangible 2,169 2,030 6.8 %
Cash surrender value of life insurance 64,606 62,922 2.7 %
Other assets   30,488     27,587   10.5 %
Total assets $ 2,852,041   $ 2,690,707   6.0 %
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Interest bearing $ 1,623,653 $ 1,528,262 6.2 %
Noninterest bearing   404,644     376,904   7.4 %
Customer deposits 2,028,297 1,905,166 6.5 %
Brokered deposits   261,506     161,812   61.6 %
Total deposits 2,289,803 2,066,978 10.8 %
Borrowed funds:
Federal Home Loan Bank advances
Long-term advances 48,731 -100.0 %
Short-term advances   204,000     245,000   -16.7 %
Total Federal Home Loan Bank advances 204,000 293,731 -30.5 %
Repurchase agreements and other   254     233   9.0 %
Total borrowed funds 204,254 293,964 -30.5 %
Advance payments by borrowers for taxes and insurance 19,542 18,444 6.0 %
Accrued interest payable 1,492 1,363 9.5 %
Accrued expenses and other liabilities   22,241     13,763   61.6 %
Total liabilities   2,537,332     2,394,512   6.0 %
 
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 48,852,688 and 49,882,491 shares, respectively, outstanding

177,410 177,297 0.1 %
Retained earnings 197,286 173,419 13.8 %
Accumulated other comprehensive loss (18,416 ) (22,675 ) -18.8 %
Treasury stock, at cost, 5,286,222 and 4,256,419 shares, respectively   (41,571 )   (31,846 ) 30.5 %
Total shareholders’ equity   314,709     296,195   6.3 %
Total liabilities and shareholders’ equity $ 2,852,041   $ 2,690,707   6.0 %
 
 
UNITED COMMUNITY FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                   
For the Three Months Ended

March 31,

December 31, March 31,
2019 2018 Variance F/(U) 2018 Variance F/(U)
(Dollars in thousands, except per share data)
Interest income
Loans $ 25,856 $ 26,587 $ (731 ) -2.7 % $ 22,759 $ 3,097 13.6 %
Loans held for sale 1,007 1,184 (177 ) -14.9 % 858 149 17.4 %
Securities:
Available for sale, nontaxable 307 334 (27 ) -8.1 % 388 (81 ) -20.9 %
Available for sale, taxable 1,263 1,148 115 10.0 % 1,215 48 4.0 %
Held to maturity, nontaxable 75 69 6 8.7 % 51 24 47.1 %
Held to maturity, taxable 379 380 (1 ) -0.3 % 422 (43 ) -10.2 %
Federal Home Loan Bank stock dividends 290 290 0.0 % 280 10 3.6 %
Other interest earning assets   224     178     46   25.8 %   77     147   190.9 %
Total interest income 29,401 30,170 (769 ) -2.5 % 26,050 3,351 12.9 %
Interest expense
Deposits 6,574 5,866 (708 ) -12.1 % 3,097 (3,477 ) -112.3 %
Federal Home Loan Bank advances   641     810     169   20.9 %   1,420     779   54.9 %
Total interest expense   7,215     6,676     (539 ) -8.1 %   4,517     (2,698 ) -59.7 %
Net interest income 22,186 23,494 (1,308 ) -5.6 % 21,533 653 3.0 %
Taxable equivalent adjustment   84     111     (27 ) -24.3 %   97     (13 ) -13.4 %
Net interest income (FTE) (1) 22,270 23,605 (1,335 ) -5.7 % 21,630 640 3.0 %
Provision for loan losses   61     178     117   65.7 %   407     346   85.0 %
Net interest income after provision for loan losses (FTE)   22,209     23,427     (1,218 ) -5.2 %   21,223     986   4.6 %
Non-interest income
Insurance agency income 701 562 139 24.7 % 577 124 21.5 %
Brokerage income 370 305 65 21.3 % 272 98 36.0 %
Service fees and other charges:
Deposit related fees 1,341 1,521 (180 ) -11.8 % 1,300 41 3.2 %
Mortgage servicing fees 873 858 15 1.7 % 812 61 7.5 %
Mortgage servicing rights valuation (499 ) (44 ) (455 ) 1034.1 % 9 (508 ) -5644.4 %
Mortgage servicing rights amortization (446 ) (430 ) (16 ) 3.7 % (500 ) 54 -10.8 %
Other service fees 38 36 2 5.6 % 38 0.0 %
Net gains (losses):
Trading securities 64 669 (605 ) -90.4 % 64 0.0 %
Securities available for sale 144 (861 ) 1,005 -116.7 % 139 5 3.6 %
Mortgage banking income 1,676 1,118 558 49.9 % 1,358 318 23.4 %
Real estate owned and other repossessed assets charges, net (31 ) (24 ) (7 ) 29.2 % (78 ) 47 -60.3 %
Debit/credit card fees 934 1,033 (99 ) -9.6 % 949 (15 ) -1.6 %
Trust fee income 465 480 (15 ) -3.1 % 469 (4 ) -0.9 %
Bank owned life insurance 385 431 (46 ) -10.7 % 433 (48 ) -11.1 %
Other income   58     (69 )   127   -184.1 %   41     17   41.5 %
Total non-interest income   6,073     5,585     488   8.7 %   5,819     254   4.4 %
Non-interest expense
Salaries and employee benefits 10,575 9,029 (1,546 ) -17.1 % 9,998 (577 ) -5.8 %
Occupancy 1,046 1,023 (23 ) -2.2 % 1,100 54 4.9 %
Equipment and data processing 2,292 2,122 (170 ) -8.0 % 2,154 (138 ) -6.4 %
Financial institutions tax 509 464 (45 ) -9.7 % 496 (13 ) -2.6 %
Advertising 390 414 24 5.8 % 235 (155 ) -66.0 %
Amortization of intangible assets 127 128 1 0.8 % 113 (14 ) -12.4 %
FDIC insurance premiums 331 398 67 16.8 % 290 (41 ) -14.1 %
Other insurance premiums 76 70 (6 ) -8.6 % 109 33 30.3 %
Professional fees:
Legal fees 60 292 232 79.5 % 299 239 79.9 %
Other professional fees 587 721 134 18.6 % 391 (196 ) -50.1 %
Supervisory fees 34 34 0.0 % 42 8 19.0 %
Real estate owned and other repossessed asset expenses 39 34 (5 ) -14.7 % 36 (3 ) -8.3 %
Other expenses   1,608     2,449     841   34.3 %   1,337     (271 ) -20.3 %
Total non-interest expenses   17,674     17,178     (496 ) -2.9 %   16,600     (1,074 ) -6.5 %
Income before income taxes 10,608 11,834 (1,226 ) -10.4 % 10,442 166 1.6 %
Taxable equivalent adjustment 84 111 27 24.3 % 97 13 13.4 %
Income tax expense   1,868     2,172     304   14.0 %   1,789     (79 ) -4.4 %
Net income $ 8,656   $ 9,551   $ (895 ) -9.4 % $ 8,556   $ 100   1.2 %
 
Earnings per common share:
Basic $ 0.177 $ 0.192 $ (0.015 ) -7.8 % $ 0.172 $ 0.005 2.9 %
Diluted 0.176 0.191 (0.015 ) -7.9 % 0.171 0.005 2.9 %
(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
March 31, 2019 December 31, 2018 March 31, 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) $ 2,191,746 $ 25,864 4.75 % $ 2,161,414 $ 26,616 4.93 % $ 2,026,266 $ 22,760 4.49 %
Loans held for sale   84,932   1,007 4.74 %   100,348   1,184 4.68 %   80,681   858 4.31 %
Total loans, net 2,276,678 26,871 4.75 % 2,261,762 27,800 4.91 % 2,106,947 23,618 4.49 %
Securities:
Available for sale-taxable 200,088 1,263 2.52 % 196,910 1,148 2.33 % 211,332 1,215 2.30 %
Available for sale-nontaxable (2) 43,468 365 3.36 % 48,370 399 3.30 % 54,737 472 3.45 %
Held to maturity-taxable 63,674 379 2.38 % 65,605 380 2.32 % 72,627 422 2.32 %
Held to maturity-nontaxable (2)   13,047   93 2.85 %   12,215   86 2.82 %   9,227   63 2.73 %
Total securities 320,277 2,100 2.62 % 323,100 2,013 2.49 % 347,923 2,172 2.50 %
Federal Home Loan Bank stock 18,010 290 6.43 % 19,144 290 6.06 % 19,324 280 5.80 %
Other interest earning assets   34,986   224 2.59 %   34,779   178 2.03 %   22,479   77 1.39 %
Total interest earning assets 2,649,951 29,485 4.48 % 2,638,785 30,281 4.59 % 2,496,673 26,147 4.19 %
Non-interest earning assets   176,913   176,579   176,785
Total assets $ 2,826,864 $ 2,815,364 $ 2,673,458
Interest bearing liabilities:
Deposits:
Checking accounts $ 650,268 1,440 0.89 % $ 620,306 1,114 0.71 % $ 593,499 687 0.47 %
Savings accounts 297,410 29 0.04 % 303,247 28 0.04 % 303,639 27 0.04 %
Certificates of deposit
Customer certificates of deposit 618,752 2,824 1.83 % 619,208 2,652 1.70 % 581,858 1,817 1.27 %
Brokered certificates of deposit   397,137   2,281 2.30 %   393,778   2,072 2.09 %   165,169   566 1.39 %
Total certificates of deposit   1,015,889   5,105 2.01 %   1,012,986   4,724 1.85 %   747,027   2,383 1.28 %
Total interest bearing deposits 1,963,567 6,574 1.34 % 1,936,539 5,866 1.20 % 1,644,165 3,097 0.76 %
Federal Home Loan Bank advances
Long-term advances 0.00 % 46,879 357 3.02 % 48,603 431 3.60 %
Short-term advances   103,333   641 2.48 %   75,033   453 2.40 %   265,322   989 1.51 %
Total Federal Home Loan Bank advances 103,333 641 2.48 % 121,912 810 2.64 % 313,925 1,420 1.83 %
Repurchase agreements and other   233   0.00 %   245   0.00 %   213   0.00 %
Total borrowed funds   103,566   641 2.48 %   122,157   810 2.63 %   314,138   1,420 1.83 %
Total interest bearing liabilities $ 2,067,133   7,215 1.40 % $ 2,058,696   6,676 1.29 % $ 1,958,303   4,517 0.94 %
Non-interest bearing liabilities
Total noninterest bearing deposits 400,874 395,649 375,142
Other noninterest bearing liabilities   43,851   46,559   40,729
Total noninterest bearing liabilities   444,725   442,208   415,871
Total liabilities $ 2,511,858 $ 2,500,904 $ 2,374,174
Shareholders’ equity   315,006   314,464   299,284
Total liabilities and equity $ 2,826,864 $ 2,815,368 $ 2,673,458
Net interest income and interest rate spread $ 22,270 3.08 % $ 23,605 3.30 % $ 21,630 3.25 %
Net interest margin 3.38 % 3.58 % 3.47 %
Average interest earning assets to average interest bearing liabilities 128.19 % 128.18 % 127.49 %
 
 
Interest bearing deposits
Checking accounts $ 650,268 $ 1,440 0.89 % $ 620,306 $ 1,114 0.71 % $ 593,499 $ 687 0.47 %
Savings accounts 297,410 29 0.04 % 303,247 28 0.04 % 303,639 27 0.04 %
Customer certificates of deposit   618,752   2,824 1.83 %   619,208   2,652 1.70 %   581,858   1,817 1.27 %
Total customer deposits 1,566,430 4,293 1.10 % 1,542,761 3,794 0.98 % 1,478,996 2,531 0.68 %
Brokered certificates of deposit   397,137   2,281 2.30 %   393,778   2,072 2.09 %   165,169   566 1.39 %
Total interest bearing deposits 1,963,567 6,574 1.34 % 1,936,539 5,866 1.20 % 1,644,165 3,097 0.76 %
Noninterest bearing deposits   400,874   0.00 %   395,649   0.00 %   375,142   0.00 %
Total average deposits and cost of deposits $ 2,364,441 $ 6,574 1.11 % $ 2,332,188 $ 5,866 1.01 % $ 2,019,307 $ 3,097 0.61 %
Other interest bearing liabilities
Federal Home Loan Bank advances
Long term advances $ $ 0.00