United Community Financial 8K Substantial Improvement in Asset Quality Measures | UCFC 13 Nov 12

Exhibit 99

LOGO

275 West Federal Street

Youngstown, Ohio 44503-1203

FOR IMMEDIATE RELEASE


Media Contact:		Investor Contact:
Colleen Scott		James R. Reske
Vice President of Marketing		Chief Financial Officer
Home Savings		United Community Financial Corp.
(330) 742-0638		(330) 742-0592
cscott@homesavings.com		jreske@ucfconline.com

United Community Financial Corp. Announces Third Quarter Results;

Substantial Improvement in Asset Quality Measures

YOUNGSTOWN, Ohio (November 13, 2012) – United Community Financial Corp. (Company) (Nasdaq: UCFC), holding company of The Home Savings and Loan Company of Youngstown, Ohio (Home Savings), today reported a consolidated net loss of $26.9 million, or $(0.82) per diluted share, for the three months ended September 30, 2012. The loss was due primarily to a $33.0 million charge related to the bulk loan sale. The Company also reported a net loss of $23.0 million, or $(0.70) per diluted share, for the nine months ended September 30, 2012.

Selected third quarter results:

•

Delinquent loans were $51.2 million at September 30, 2012, down 59.6% year to date

•

Nonperforming assets were $66.8 million at September 30, 2012, down 57.4% year to date

•

Classified loans were $58.4 million at September 30, 2012, down 73.5% year to date

•

Home Savings’ Tier 1 leverage ratio was 8.27% and the total risk based capital ratio was 15.85%

Patrick W. Bevack, President and Chief Executive Officer of UCFC and Home Savings, commented that, “The bulk asset sale completed in September represented an enormous step forward for the Company. We have achieved a substantial improvement in our asset quality and a dramatic reduction in our risk profile, and have exceeded our regulatory asset quality targets well ahead of schedule.”

Asset Quality

Delinquent loans were $51.2 million at September 30, 2012, down $144.0 million, or 74.8%, from their high point of $195.2 million at March 31, 2010. Nonperforming loans at September 30, 2012 were $46.6 million, down $108.5 million, or 70.0%, from their high point of $155.1 million at June 30, 2010. Nonperforming assets were $66.8 million at September 30, 2012, down $130.4 million, or 66.1%, from their high point of $197.2 million at June 30, 2010. Significant improvement in asset quality in the third quarter was driven by the bulk sale. Of the loans sold in the bulk sale, $91.6 million were classified, $63.3 million were nonperforming and $53.0 million were noncurrent.

The provision for loan losses was $30.3 million for the third quarter of 2012, as compared to $6.3 million for the second quarter in 2012. The provision expense in the third quarter of 2012 included $29.4 million directly associated with the bulk sale.


	June 30, 2012			September 30, 2012
Asset Quality Measure⁽¹⁾	(As Reported)			(As Reported)			Change
Classified Loans	$	171,839		$	58,373		$	(113,466	)
Other Real Estate Owned and Other Repossessed Assets	$	24,778		$	20,206		$	(4,572	)
Total Classified Assets	$	196,617		$	78,579			(118,038	)
Classified Assets/(Tier 1 + ALLL)		91.41	%		44.21	%		-47.20	%
Total Nonperforming Loans	$	114,529		$	46,557		$	(67,972	)
Allowance for Loan Losses	$	30,933		$	20,048		$	(10,885	)
Allowance for Loan Losses/Nonperforming Loans		27.01	%		43.06	%		16.05	%
Nonperforming Assets/Total Assets		7.31	%		3.65	%		-3.66	%
Noncurrent Loans (30+ Days Delinquent)	$	109,785		$	51,220		$	(58,565	)
Texas Ratio⁽²⁾		62.59	%		34.89	%		-27.70	%

(1)	Dollar amounts in thousands. All dollar amounts shown are book balance prior to any allowance for loan losses

(2)	Texas Ratio is defined as nonperforming assets divided by the sum of tangible common equity and the allowance for loan losses

Net Interest Income and Margin

Net interest income for the three months ended September 30, 2012 was $14.1 million, a decline of $2.3 million over the prior quarter. A decrease also was seen in the net interest margin, which changed 38 basis points from 3.55% during the second quarter to 3.17% during the third quarter.

Total interest income decreased $2.7 million in the third quarter of 2012 compared to the second quarter of 2012, primarily as a result of a decrease of $85.7 million in the average balance of outstanding loans.

Total interest expense decreased $411,000 for the quarter ended September 30, 2012, as compared to the previous quarter. The change was due primarily to a reduction of $342,000 in interest paid on deposits. The average outstanding balance of certificates of deposit declined by $34.2 million, while non-time deposits increased by $852,000. Also contributing to the change was a reduction of 10 basis points in the cost of certificates of deposit. Interest expense also improved due to the prepayment of $690,000 in term borrowings.

Net interest income for the nine months ended September 30, 2012, and September 30, 2011, was $46.4 million and $50.3 million, respectively. Despite a decrease of $3.9 million in net interest income, the net interest margin for the two periods was comparable. The net interest margin was 3.34% for the nine months ended September 30, 2012, and 3.36% the nine months ended September 30, 2011.

Total interest income decreased $13.3 million in the first nine months of 2012 compared to the first nine months of 2011, primarily as a result of a decrease of $283.7 million in the average balance of outstanding loans. This change in interest income was further impacted by a decrease in the yield on net loans of 30 basis points.

Total interest expense decreased $9.4 million for the nine months ended September 30, 2012, as compared to the same period last year. The change was due primarily to reductions of $8.1 million in interest paid on deposits. The overall decrease in interest expense was attributable to the maturity of the Step CDs and a shift in deposit balances from certificates of deposit to relatively less expensive non-time deposits. The average outstanding balance of certificates of deposit declined by $212.0 million, while non-time deposits increased by $45.9 million. The decrease in certificates of deposit balances also can be attributable to the sale of four of the Bank’s branches, which took place in the fourth quarter of 2011. The maturing of the Step CDs led to a reduction of 84 basis points in the cost of certificates of deposit. The yield on non-time deposits declined 16 basis points.

Noninterest Income

Noninterest income decreased in the third quarter of 2012 to $3.8 million, as compared to $6.9 million in the second quarter of 2012. The $3.1 million decrease in noninterest income was largely driven by lower gains recognized on the sale of available for sale securities. Lower gains were driven by a decrease in the volume of sales in the third quarter of 2012 as compared to the prior quarter. Also affecting the decrease in noninterest income were higher losses recognized on the valuation and disposal of real estate owned in the third quarter. During the three months ended September 30, 2012, Home Savings increased the valuation allowance on certain properties to absorb estimated closing costs at the time of disposal.

Noninterest income increased in the first nine months of 2012 to $15.8 million, as compared to $11.2 million for the first nine months of 2011. Driving the increase in noninterest income were gains recognized on the sale of available for sale securities. In the first nine months of 2012, Home Savings sold securities totaling approximately $281.8 million and consequently recognized a $5.2 million gain. Fees generated on nondeposit investments increased $475,000 during the first nine months of 2012 as compared to the same period last year. The change was driven by the volume of investment activity in 2012. Some of Home Savings’ customers that had funds deposited in Step CDs that matured in the first quarter of 2012 were retained and their deposits were invested in various mutual funds and insurance annuities offered through Home Savings’ Investments Division. Finally, lower losses incurred on real estate owned and other repossessed assets during the nine months ended September 30, 2012, as compared to the same period last year, were the result of the need to mark fewer properties down to fair market value as real estate values have stabilized.

Noninterest Expense

Noninterest expense was $17.3 million in the third quarter of 2012 as compared to $17.0 million in the second quarter of 2012, or an increase of $287,000. Professional fees, including legal and other consultants, were higher during the third quarter of 2012 due to the engagement of professionals hired to assist management in completing the bulk sale. Professional fees specifically associated with the bulk asset sale aggregated $1.2 million. Primarily offsetting this increase in professional fees were lower prepayment penalties associated with the prepayment of FHLB term advances.

Noninterest expense was $50.9 million in the first nine months of 2012, compared to $47.0 million in the first nine months of 2011. This increase of $3.9 million was caused by an increase in salaries and employee benefits of $2.3 million and an increase in professional fees of $1.6 million. Partially offsetting these two increases was a decrease in real estate owned and other repossessed asset expenses of $621,000.

Capital and Book Value

Home Savings’ Tier 1 leverage ratio was 8.27% as of September 30, 2012, as compared to 9.32% at June 30, 2012. Home Savings’ total risk-based capital ratio was 15.85% at September 30, 2012, as compared to 16.43% at June 30, 2012. Tangible book value per share at September 30, 2012 was $5.21, as compared to $5.94 at June 30, 2012.

While Home Savings is still operating under a Consent Order requiring a minimum Tier 1 leverage ratio of 9.0%, the Company worked closely with its regulators to keep them informed of the bulk sale of problem assets that took place in the third quarter, and obtained their concurrence to complete the sale along with the Bank’s commitment to meet the 9.0% requirement by March 31, 2013.

Home Savings is a wholly-owned subsidiary of the Company and operates 34 full-service banking offices and eight loan production offices located throughout Ohio and western Pennsylvania. Additional information on the Company and Home Savings may be found on the Company’s web site: www.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” 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)


	September 30, 2012			December 31, 2011
	(Dollars in thousands)
Assets:
Cash and deposits with banks	$	20,904		$	26,573
Federal funds sold and other		36,626			27,563

Total cash and cash equivalents		57,530			54,136
Securities:
Available for sale, at fair value		551,795			459,598
Loans held for sale		9,076			12,727
Loans, net of allowance for loan losses of $20,048 and $42,271, respectively		1,100,328			1,379,276
Federal Home Loan Bank stock, at cost		26,464			26,464
Premises and equipment, net		21,355			19,175
Accrued interest receivable		5,660			6,741
Real estate owned and other repossessed assets		20,206			33,486
Core deposit intangible		263			346
Cash surrender value of life insurance		28,626			28,354
Other assets		9,641			10,384

Total assets	$	1,830,944		$	2,030,687

Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Interest bearing	$	1,331,281		$	1,440,448
Noninterest bearing		159,361			148,049

Total deposits		1,490,642			1,588,497
Borrowed funds:
Federal Home Loan Bank advances		50,000			128,155
Repurchase agreements and other		90,603			90,618

Total borrowed funds		140,603			218,773
Advance payments by borrowers for taxes and insurance		14,121			23,282
Accrued interest payable		628			610
Accrued expenses and other liabilities		13,370			10,780

Total liabilities		1,659,364			1,841,942

Shareholders’ Equity:
Preferred stock-no par value; 1,000,000 shares authorized and unissued		—			—
Common stock-no par value; 499,000,000 shares authorized; 37,804,457 shares issued and 32,891,495 and 32,597,762 shares, respectively, outstanding		128,228			128,031
Retained earnings		84,778			110,681
Accumulated other comprehensive income		10,303			5,032
Treasury stock, at cost, 4,912,962 and 5,206,695 shares, respectively		(51,729	)		(54,999	)

Total shareholders’ equity		171,580			188,745

Total liabilities and shareholders’ equity	$	1,830,944		$	2,030,687

UNITED COMMUNITY FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)


	For the Three Months Ended									For the Nine Months Ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2012			2012			2011			2012			2011
	(Dollars in thousands, except per share data)
Interest income
Loans	$	14,567		$	16,959		$	19,558		$	49,182		$	63,489
Loans held for sale		101			104			163			305			270
Securities:
Available for sale		3,219			3,540			3,323			10,253			9,264
Federal Home Loan Bank stock dividends		279			280			264			859			858
Other interest earning assets		25			11			13			48			35

Total interest income		18,191			20,894			23,321			60,647			73,916
Interest expense
Deposits		2,600			2,942			5,972			9,574			18,384
Federal Home Loan Bank advances		535			613			793			1,880			2,414
Repurchase agreements and other		928			919			931			2,766			2,781

Total interest expense		4,063			4,474			7,696			14,220			23,579

Net interest income		14,128			16,420			15,625			46,427			50,337
Provision for loan losses		30,279			6,264			11,836			37,223			22,272

Net interest income after provision for loan losses		(16,151	)		10,156			3,789			9,204			28,065

Non-interest income
Non-deposit investment income		478			506			389			1,525			1,050
Service fees and other charges		793			901			203			4,011			3,244
Net gains (losses):
Securities available for sale		1,192			3,555			1,958			5,161			3,500
Other -than-temporary loss on equity securities
Total impairment loss		—			—			(35	)		—			(73	)
Loss recognized in other comprehensive income		—			—			—			—			—

Net impairment loss recognized in earnings		—			—			(35	)		—			(73	)
Mortgage banking income		2,110			1,727			682			5,308			4,432
Real estate owned and other repossessed assets		(1,795	)		(923	)		(2,627	)		(3,447	)		(4,981	)
Other income		974			1,183			1,346			3,234			4,032

Total non-interest income		3,752			6,949			1,916			15,792			11,204

Non-interest expense
Salaries and employee benefits		8,634			8,684			7,927			25,651			23,297
Occupancy		845			851			854			2,495			2,615
Equipment and data processing		1,665			1,720			1,592			5,074			4,910
Franchise tax		521			437			370			1,396			1,241
Advertising		134			211			204			486			466
Amortization of core deposit intangible		26			28			33			83			106
Prepayment penalty		65			738			—			803			—
Deposit insurance premiums		1,012			1,055			1,111			3,176			3,573
Professional fees		2,219			1,039			1,290			4,138			2,545
Real estate owned and other repossessed asset expenses		383			419			361			1,504			2,125
Other expenses		1,826			1,861			827			6,061			6,089

Total non-interest expenses		17,330			17,043			14,569			50,867			46,967

Income (loss) before income taxes		(29,729	)		62			(8,864	)		(25,871	)		(7,698	)
Income tax expense (benefit)		(2,838	)		—			—			(2,838	)		—

Net income (loss)	$	(26,891	)	$	62		$	(8,864	)	$	(23,033	)	$	(7,698	)

Earnings (loss) per share
Basic	$	(0.82	)	$	—		$	(0.29	)	$	(0.70	)	$	(0.25	)
Diluted		(0.82	)		—			(0.29	)		(0.70	)		(0.25	)

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
				(In thousands, except per share data)
Financial Data
Total assets	$	1,830,944		$	1,906,995		$	2,041,964		$	2,030,687		$	2,071,001
Total loans, net		1,100,328			1,249,595			1,325,101			1,379,276			1,437,575
Total securities		551,795			431,040			530,283			459,598			416,460
Total deposits		1,490,642			1,541,699			1,571,859			1,588,497			1,687,941
Total shareholders’ equity		171,580			195,631			190,014			188,745			182,697
Net interest income		14,128			16,420			15,879			14,838			15,625
Provision for loan losses		30,279			6,264			680			2,386			11,836
Noninterest income, excluding other-than-temporary impairment losses		3,752			6,949			5,091			12,037			1,951
Net impairment losses recognized in earnings		—			—			—			16			35
Noninterest expense		17,330			17,043			16,494			16,545			14,569
Income tax expense (benefit)		(2,838	)		—			—			—			—
Net income (loss)		(26,891	)		62			3,796			7,928			(8,864	)
Share Data
Basic earnings (loss) per share	$	(0.82	)	$	—		$	0.12		$	0.25		$	(0.29	)
Diluted earnings (loss) per share		(0.82	)		—			0.12			0.25			(0.29	)
Book value per share		5.22			5.95			5.78			5.79			5.90
Tangible book value per share		5.21			5.94			5.77			5.78			5.88
Market value per share		3.49			2.98			2.44			1.27			1.35
Shares outstanding at end of period		32,891			32,885			32,876			32,598			30,984
Weighted average shares outstanding—basic		32,751			32,802			32,693			31,295			30,896
Weighted average shares outstanding—diluted		32,987			32,843			23,697			31,295			30,896
Key Ratios
Return on average assets		-5.67	%		0.01	%		0.74	%		1.53	%		-1.69	%
Return on average equity		-53.53	%		0.12	%		7.89	%		16.97	%		-18.98	%
Net interest margin		3.17	%		3.55	%		3.30	%		3.04	%		3.18	%
Efficiency ratio		93.62	%		78.50	%		77.35	%		87.96	%		79.67	%
Capital Ratios
Tier 1 leverage ratio		8.27	%		9.32	%		8.96	%		8.61	%		8.13	%
Tier 1 risk-based capital ratio		14.59	%		15.16	%		13.94	%		13.30	%		11.98	%
Total risk-based capital ratio		15.85	%		16.43	%		15.21	%		14.57	%		13.25	%
Equity to assets		9.37	%		10.26	%		9.31	%		9.29	%		8.82	%
Tangible common equity to tangible assets		9.36	%		10.24	%		9.29	%		9.28	%		8.80	%

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	‘September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
	(Dollars in thousands)
Loan Portfolio Composition
Real Estate Loans
One-to four-family residential	$	587,220		$	635,756		$	649,000		$	667,375		$	677,708
Multi-family residential*		82,518			98,545			114,493			120,991			125,370
Nonresidential*		150,693			229,303			263,891			276,198			303,165
Land*		16,363			19,113			19,735			23,222			22,172
Construction Loans
One-to four-family residential and land development		32,483			42,077			49,311			59,339			66,761
Multi-family and nonresidential*		4,480			4,528			4,527			4,528			4,528

Total real estate loans		873,757			1,029,322			1,100,957			1,151,653			1,199,704
Consumer Loans		222,995			225,067			231,008			238,397			245,367
Commercial Loans		22,183			24,799			26,434			30,146			35,277

Total Loans		1,118,935			1,279,188			1,358,399			1,420,196			1,480,348
Less:
Allowance for loan losses		20,048			30,933			34,523			42,271			44,162
Deferred loan costs, net		(1,441	)		(1,340	)		(1,225	)		(1,351	)		(1,389	)

Total		18,607			29,593			33,298			40,920			42,773

Loans, net	$	1,100,328		$	1,249,595		$	1,325,101		$	1,379,276		$	1,437,575

* Categories are considered commercial real estate
	At or for the quarters ended
	‘September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
	(Dollars in thousands)
Deposit Portfolio Composition
Checking accounts
Interest bearing checking accounts	$	128,794		$	126,502		$	129,795		$	119,298		$	120,115
Non-interest bearing checking accounts		159,361			162,152			164,155			148,049			152,577

Total checking accounts		288,155			288,654			293,950			267,347			272,692
Savings accounts		259,578			259,593			256,628			234,828			249,426
Money market accounts		345,428			344,750			339,824			314,907			327,751

Total non-time deposits		893,161			892,997			890,402			817,082			849,869
Retail certificates of deposit		597,481			648,632			681,457			771,415			838,073

Total certificates of deposit		597,481			648,632			681,457			771,415			838,073

Total deposits	$	1,490,642		$	1,541,629		$	1,571,859		$	1,588,497		$	1,687,942

Certificates of deposit as a percent of total deposits		40.08	%		42.07	%		43.35	%		48.56	%		49.65	%

UNITED COMMUNITY FINANCIAL CORP.

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)


	At or for the quarters ended
	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
				(Dollars in thousands)
Allowance For Loan Losses
Beginning balance	$	30,933		$	34,523		$	42,271		$	44,162		$	46,223
Provision		30,279			6,264			680			2,386			11,836
Net chargeoffs		(41,164	)		(9,854	)		(8,428	)		(4,277	)		(13,897	)

Ending balance	$	20,048		$	30,933		$	34,523		$	42,271		$	44,162

Net Charge-offs
Real Estate Loans
One-to four-family	$	15,010		$	962		$	762		$	366		$	1,380
Multi-family		5,632			588			68			203			14
Nonresidential		15,340			7,057			2,579			975			3,693
Land		1,561			44			1,776			217			281
Construction Loans
One-to four-family residential and land development		2,658			516			2,098			1,874			6,737
Multi-family and nonresidential		(120	)		4			—			—			—

Total real estate loans		40,081			9,171			7,283			3,635			12,105
Consumer Loans		1,536			160			745			493			864
Commercial Loans		(453	)		523			400			149			928

Total	$	41,164		$	9,854		$	8,428		$	4,277		$	13,897


	At or for the quarters ended
	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
				(Dollars in thousands)
Nonperforming Loans
Real Estate Loans
One-to four family residential	$	5,817		$	26,705		$	23,721		$	26,637		$	27,250
Multi-family residential		1,512			9,582			5,411			5,860			6,517
Nonresidential		17,484			43,103			41,871			42,902			44,243
Land		6,228			8,316			8,472			11,142			11,655
Construction Loans
One-to four-family residential and land development		9,527			18,335			22,455			27,104			31,166
Multi-family and nonresidential		—			—			—			—			—

Total real estate loans		40,568			106,041			101,930			113,645			120,831
Consumer Loans		4,921			6,702			6,165			6,620			5,890
Commercial Loans		1,068			1,786			1,813			2,830			7,361

Total Loans	$	46,557		$	114,529		$	109,908		$	123,095		$	134,082

Total Nonperforming Loans and Nonperforming Assets
Past due 90 days and on nonaccrual status	$	41,335		$	97,357		$	91,153		$	104,812		$	102,890
Past due 90 days and still accruing		47			47			303			39			3

Past due 90 days		41,382			97,404			91,456			104,851			102,893
Past due less than 90 days and on nonaccrual		5,175			17,125			18,452			18,244			31,189

Total Nonperforming Loans		46,557			114,529			109,908			123,095			134,082
Other Real Estate Owned		19,732			24,325			28,517			32,946			37,697
Repossessed Assets		474			453			540			540			619

Total Nonperforming Assets	$	66,763		$	139,307		$	138,965		$	156,581		$	172,398

Total Troubled Debt Restructured Loans
Accruing	$	17,002		$	18,530		$	35,657		$	33,146		$	30,784
Non-accruing		4,531			14,250			15,161			17,752			16,932

Total	$	21,533		$	32,780		$	50,818		$	50,898		$	47,716

United Community Financial (UCFC) 8-KSubstantial Improvement in Asset Quality Measures