United Community Financial Corp. Announces Positive Earnings for the First Quarter...

United Community Financial Corp. Announces Positive Earnings for the First Quarter of 2008

YOUNGSTOWN, Ohio--(Business Wire)--
United Community Financial Corp. (Company) (Nasdaq: UCFC), holding
company of The Home Savings and Loan Company (Home Savings) and Butler
Wick Corp. (Butler Wick), today reported net income of $4.0 million,
or $.14 per diluted share, for the three months ended March 31, 2008,
compared to net income of $4.7 million, or $0.16 per diluted share,
for the three months ended March 31, 2007, and a net loss of $7.1
million, or ($0.25) per diluted share, for the fourth quarter of 2007.
Return on average equity for the three months ended March 31, 2008 was
5.72% compared to 6.49% for the same period in 2007. Return on average
assets was 0.59% for the three months ended March 31, 2008, compared
to 0.69% for the three months ended March 31, 2007.

Chairman and Chief Executive Officer Douglas M. McKay commented,
"We are focused completely on managing our credit quality issues, and
we consider this to be our highest strategic priority. We are pleased
with the result of our efforts thus far and expect to continue this
focus throughout the remainder of this year. In addition, we are
examining a number of organizational changes designed to mitigate the
impact that a slowing economy and a weak housing market may have on
our earnings and balance sheet."

Net Interest Income and Margin

Net interest income was $17.1 million for the first quarter of
2008, compared to $18.1 million for the fourth quarter of 2007, and
$19.4 million for the first quarter a year ago. Average earning assets
were $2.6 billion at the end of the first quarter of 2008, down $7.0
million compared to the proceeding quarter and up $34.4 million from
March 31, 2007. Net interest margin for the first quarter of 2008 was
2.63 % compared to 2.77% in the preceding quarter and 3.03% for the
first quarter of 2007. The sale of $76.5 million of one-to-four-family
residential mortgages at the end of February contributed to the lower
margin for the first quarter of 2008 compared to the preceding
quarter. The decrease in net interest margin from the first quarter of
2007 to the first quarter of 2008 is due to the residential mortgage
loan sale and an increase in non-performing loans.

Loans and Deposits

Average total loans for the first quarter of 2008 decreased $33.0
million, or 1.4%, compared to the fourth quarter of 2007. The average
balance of mortgage loans, including construction loans, decreased
$37.6 million, and the average balance of installment loans, including
lines of credit decreased $3.0 million. These decreases partially
offset an increase in commercial loans of $6.5 million. Average loans
for the first quarter of 2008 increased $20.4 million, compared to the
first quarter of 2007. The average balance of mortgage loans increased
$20.5 million and the average balance of installment loans, including
lines of credit, increased $2.1 million. These increases partially
offset a decrease in the average balance of commercial loans of $2.4
million.

Average total deposits in the first quarter of 2008 were $1.8
billion, an increase of $49.1 million, or 2.8%, when compared to the
fourth quarter of 2007, and an increase of $54.9 million, or 3.2%,
when compared to the first quarter a year ago. Growth in certificates
of deposit and other time deposits, along with growth in demand
deposits and money market accounts, contributed to the overall
increase. This growth was partially offset by a decrease in savings
deposits. The average balance of certificates and other time deposits
increased $26.9 million, or 2.4%, when compared with the fourth
quarter of 2007, and $18.6 million when compared to the first quarter
of 2007. Demand and money market accounts increased $22.3 million when
compared to the fourth quarter of 2007 and $55.0 million when compared
to the first quarter of 2007. A reduction in savings deposits
partially offset the aforementioned increases when compared with the
fourth quarter of 2007 and the first quarter of 2007.

Asset Quality

The provision for loan losses was $2.5 million in the first
quarter of 2008, compared to $18.3 million in the fourth quarter of
2007 and $2.3 million in the first quarter of 2007. During 2007, the
Company experienced increased delinquencies, charge-offs and
foreclosures, particularly within the construction loan portfolio.
Because of these trends, the Company re-evaluated its estimate of
probable losses and determined that a larger provision for loan losses
was required in the fourth quarter. The allowance for loan losses was
$33.2 million, or 1.48% of portfolio loans as of March 31, 2008,
compared to $32.0 million or 1.41% of portfolio loans, as of December
31, 2007. Although the rate of new delinquencies, charge-offs and
foreclosures returned to more normalized levels in the first quarter
of 2008, no assurance can be given that these levels will prevail
throughout 2008.

Net loan charge-offs were $1.3 million in the first quarter of
2008, compared to $10.1 million in the preceding quarter and $718,000
in the first quarter a year ago.

Nonperforming assets were $114.4 million at March 31, 2008,
compared to $111.6 million at December 31, 2007. Total nonperforming
loans at March 31, 2008, were $104.4 million compared to $101.1
million at December 31, 2007. The rise in nonperforming loans was
composed of an increase of $4.9 million in residential real estate
loans, which was offset partially by decreases in the construction
portfolio of $1.3 million, a decrease in the commercial portfolio of
$210,000 and a nominal decrease in the consumer loan portfolio.

Noninterest Income

Noninterest income was $14.1 million in the first quarter of 2008,
compared to $11.2 million in the preceding quarter and $11.4 million
in the first quarter of 2007. Greater gains were recognized on the
sale of loans in the first quarter of 2008 compared to the prior
quarter and the first quarter of 2007. Loans that were designated for
sale in the fourth quarter of 2007 were sold in February 2008, with a
gain of $1.5 million compared to gains on loan sales of $545,000 in
the fourth quarter of 2007 and $663,000 in the first quarter of 2007.
The Company also incurred losses on the disposition of repossessed
assets secured in the settlement of loans in the first quarter of
2008.

Noninterest Expense

Noninterest expense was $22.5 million in the first quarter of
2008, compared to $21.9 million in the preceding quarter and $21.2
million in the first quarter a year ago. The change for the quarter is
attributable primarily to increased salaries and employee benefits
incurred because of incentive accruals, merit increases and the
issuance of stock options to certain employees.

Financial Condition

Total assets decreased $33.3 million to $2.7 billion at March 31,
2008, compared to December 31, 2007. During the first quarter of 2008,
net loans decreased $21.1 million and loans held for sale decreased
$74.0 million. These decreases were offset partially by an increase in
securities available for sale.

Total liabilities decreased by $37.5 million during the three
months ended March 31, 2008. Funds from the loan sale mentioned above
were used to purchase available for sale securities and to pay down
advances from the Federal Home Loan Bank.

Shareholders' equity increased $4.2 million during the three
months ended March 31, 2008. The increase was attributable primarily
to changes in the value of available for sale securities and net
income for the period. Book value per share and tangible book value
per share as of March 31, 2008, were $9.12 and $7.96, respectively. At
December 31, 2007, book value per share and tangible book value per
share were $8.97 and $7.81, respectively.

Home Savings and Butler Wick are wholly owned subsidiaries of the
Company. Home Savings operates 39 full service banking offices and six
loan production offices located throughout Ohio and western
Pennsylvania. Butler Wick conducts business from its main office
located in Youngstown, Ohio and 22 offices located in northeastern
Ohio, western Pennsylvania, and western New York. Additional
information on the Company, Home Savings and Butler Wick 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" 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 Home Savings' market area, demand for investments
in Butler Wick'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 publicly release 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.

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*T
UNITED COMMUNITY FINANCIAL CORP.

As of As of
March 31, 2008 December 31, 2007
-------------- -----------------
(Dollars in thousands, except
per share data)
SELECTED FINANCIAL CONDITION DATA
(UNAUDITED):

ASSETS
Cash and cash equivalents $36,135 $37,363
Securities 313,527 249,817
Federal Home Loan Bank stock, at
cost 25,764 25,432
Loans held for sale 13,268 87,236
Loans:
Real estate 1,427,001 1,433,995
Construction 378,954 382,344
Consumer 345,805 349,447
Commercial 97,359 103,208
Allowance for loan losses (33,202) (32,006)
-------------- -----------------
Net loans 2,215,917 2,236,988
Real estate owned and other
repossessed assets 9,989 10,510
Goodwill 33,713 33,713
Core deposit intangible 1,091 1,169
Cash surrender value of life
insurance 24,287 24,053
Other assets 53,027 53,758
-------------- -----------------
Total assets $2,726,718 $2,760,039
============== =================

LIABILITIES
Deposits:
Interest-bearing $1,766,280 $1,768,757
Noninterest-bearing 109,690 106,449
-------------- -----------------
Deposits 1,875,970 1,875,206
Federal Home Loan Bank advances 381,381 437,253
Repurchase agreements and other 168,857 149,533
Other liabilities 26,574 28,333
-------------- -----------------
Total liabilities 2,452,782 2,490,325

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 issued 146,962 146,683
Retained earnings 215,079 213,727
Accumulated other comprehensive
income (loss) 2,796 661
Unearned employee stock ownership
plan shares (9,009) (9,465)
Treasury stock, at cost; 7,752,684
shares (81,892) (81,892)
-------------- -----------------
Total shareholders' equity 273,936 269,714
-------------- -----------------
Total liabilities and
shareholders' equity $2,726,718 $2,760,039
============== =================

Book value per share $9.12 $8.97
Tangible book value per share $7.96 $7.81
*T

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UNITED COMMUNITY FINANCIAL CORP.

Three Months Ended
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
(Dollars in thousands, except
per share data)

SELECTED EARNINGS DATA (UNAUDITED):

Interest income $39,856 $42,731 $42,825
Interest expense 22,754 24,660 23,424
--------- ------------ ---------
Net interest income 17,102 18,071 19,401

Provision for loan losses 2,466 18,318 2,325
Noninterest income:
Brokerage commissions 6,578 6,628 6,240
Service fees and other charges 3,455 3,009 3,573
Underwriting and investment banking 29 406 33
Net gains (losses):
Securities 904 (29) 5
Loans sold 2,184 545 663
Other (140) (515) (24)
Other income: 1,107 1,113 927
--------- ------------ ---------
Total noninterest income 14,117 11,157 11,417

Noninterest expense:
Salaries and employee benefits 14,729 13,595 14,282
Occupancy 1,336 1,258 1,148
Equipment and data processing 2,339 2,240 2,315
Amortization of core deposit
intangible 78 84 100
Other noninterest expense 4,033 4,677 3,397
--------- ------------ ---------
Total noninterest expense 22,515 21,854 21,242
--------- ------------ ---------

Income (loss) before taxes 6,238 (10,944) 7,251
Income tax expense (benefit) 2,195 (3,894) 2,581
--------- ------------ ---------
Net income (loss) $4,043 $(7,050) $4,670
========= ============ =========

Basic earnings (loss) per share $0.14 $(0.25) $0.16
Diluted earnings (loss) per share $0.14 $(0.25) $0.16
Dividends paid per share $0.095 $0.095 $0.095
*T

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*T
UNITED COMMUNITY FINANCIAL CORP.

Three Months Three Months Three Months
Ended Ended Ended
March 31, December 31, March 31,
2008 2007 2007
------------ ------------ ------------
(Dollars and share data in thousands)

AVERAGE DAILY BALANCE OF
SELECTED FINANCIAL CONDITION
DATA (UNAUDITED):

Net loans (including allowance $2,231,395 $2,308,157 $2,254,767
for loan losses of $33,202,
$32,006 and $23,807,
respectively)
Loans held for sale 58,752 16,327 23,182
Securities 274,895 245,250 254,048
Other interest-earning assets 33,475 35,809 32,099
Total interest-earning assets 2,598,517 2,605,543 2,564,096
Total assets 2,749,271 2,759,181 2,703,439
Certificates of deposit 1,169,251 1,142,379 1,150,602
Interest-bearing checking,
demand and savings accounts 608,335 586,075 572,133
Other interest-bearing
liabilities 548,741 598,339 552,062
Total interest-bearing
liabilities 2,326,327 2,326,793 2,274,797
Noninterest-bearing deposits 107,044 105,548 101,836
Total noninterest-bearing
liabilities 140,192 143,705 140,720
Total liabilities 2,466,519 2,470,498 2,415,517
Shareholders' equity 282,752 288,683 287,922
Common shares outstanding for
basic EPS calculation 28,545 28,339 29,126
Common shares outstanding for
diluted EPS calculation 28,545 28,339 29,457

SUPPLEMENTAL LOAN DATA:

Loans originated $197,490 $247,607 $197,203
Loans purchased 44,437 59,777 51,026
Loans sold 137,974 49,002 61,505
Loan charge-offs 1,598 10,243 854
Recoveries on loans 327 124 136

As of As of As of
March 31, December 31, March 31,
2008 2007 2007
------------ ------------ ------------
SUPPLEMENTAL DATA: (Dollars in thousands)

Nonaccrual loans $99,836 $97,499 $53,537
Restructured loans 2,869 2,342 2,833
Real estate owned and other
repossessed assets 9,989 10,510 6,370
Total nonperforming assets 114,423 111,565 62,902
Mortgage loans serviced for
others 945,939 876,147 870,222
Securities trading, at fair
value 5,930 5,064 4,451
Securities available for sale,
at fair value 307,597 244,753 259,620
Federal Home Loan Bank stock,
at cost 25,764 25,432 25,432

Number of full time equivalent
employees 809 807 809

REGULATORY CAPITAL DATA:

Tier 1 leverage ratio 7.67% 7.47% 7.80%
Tier 1 risk-based capital
ratio 9.83% 9.26% 9.68%
Total risk-based capital ratio 12.51% 11.88% 11.95%
*T

United Community Financial Corp.
Patrick A. Kelly, Chief Financial Officer, 330-742-0592

Copyright Business Wire 2008