First Defiance Financial Corp and United Community Financial Corp. announced Monday the signing of a definitive merger agreement under which United Community will merge into First Defiance in a stock-for-stock transaction.

Home Savings Bank, a wholly owned subsidiary of United Community, will merge into First Federal Bank of the Midwest, a wholly owned subsidiary of First Defiance.

Under the terms of the merger agreement, shareholders of United Community will receive 0.3715 shares of First Defiance common stock for each share of United Community common stock. Based upon a closing price for First Defiance as of Sept. 6 of $26.32, the transaction is valued at approximately $473 million. Upon closing, First Defiance shareholders will own approximately 52.5% of the combined company and United Community shareholders will own approximately 47.5%.

First Defiance and United Community said in a press release they believe that this strategic business combination is “extremely attractive” to shareholders of both companies, and that both sets of shareholders will benefit from the synergies created by the transaction, as the significantly increased size and scale of the pro forma company will generate efficiencies, strengthen operating leverage and further enhance shareholder value.

The merger combines two complementary banking platforms, and First Defiance and United Community said they consider this partnership an ideal strategic, financial and operational fit, particularly given their respective strong and consistent performance over time. The pro forma combined company will have approximately $6.1 billion in assets, $5.0 billion in loans and $4.9 billion in deposits, utilizing financial information as of June 30. It will leverage the respective strengths of each institution in commercial banking, residential lending, retail, insurance and wealth management and better position the combined company to serve the geographies of Ohio, Michigan, Indiana, Pennsylvania and West Virginia with increased scale and expanded product offerings.

“After a long relationship between the two companies, we are thrilled to bring together these two great Ohio community bank franchises,” said Donald Hileman, president and chief executive officer of First Defiance. “These organizations are a perfect strategic fit, balancing the strengths of each. With enhanced scale, we will have the opportunity to continue to grow and compete more effectively in all the markets we serve for the foreseeable future.”

Gary Small, president and chief executive officer of United Community, issued the following statement: “We are pleased to partner with a company that has a shared community-minded vision, culture and focus on performance. I truly believe that this merger is a win-win for all stakeholders: customers, associates, shareholders as well as the communities we serve.”

As part of the merger, both CEOs will play critical roles in leading the integration of the companies. Once the merger is complete, Hileman will serve as the chief executive officer of the holding company and the bank before transitioning to an executive chairman role in early 2021. Small will assume the role of president of the holding company and the bank before transitioning to the chief executive officer role when Hileman becomes executive chairman. Together they will lead the company and partner on overall strategy, management and performance. In addition to these roles, the executive management team and employees of the combined company will continue to provide an “unsurpassed customer-focused culture,” stated the press release.

The board of directors of the combined company will comprise seven members designated by First Defiance (including Hileman and its current chairman, John Bookmyer) and six members designated by United Community (including Small and its current chairman, Richard Schiraldi, who will be named vice chairman). The directors of the combined company will be determined in the coming months and identified prior to the closing of the transaction.

The transaction is expected to close early in the first quarter of 2020, subject to the approval of shareholders of both First Defiance and United Community and regulatory approvals, as well as satisfaction or waiver of other customary closing conditions. The combined company will operate under a name to be jointly determined prior to closing and the holding company will be headquartered in Defiance, with the bank headquartered in Youngstown. The combined company will continue to provide the substantial philanthropic and community investment provided by First Defiance and United Community prior to the merger.

First Defiance Financial Corp. (Nasdaq: FDEF), headquartered in Defiance, is the holding company for First Federal Bank of the Midwest and First Insurance Group. As of June 30, First Defiance had $3.3 billion in assets, $2.6 billion in loans, $2.7 billion in deposits and $407.2 million in shareholders’ equity. First Defiance’s subsidiary, First Federal Bank, founded in 1920, operates 44 full-service branches in northwest and central Ohio, southeast Michigan and northeast Indiana and a loan production office in Ann Arbor, Michigan. First Insurance Group is a full-service insurance agency with nine offices throughout northwest Ohio. Additional information about First Defiance, including its products, services and banking locations is available at www.fdef.com.

United Community Financial Corp. (Nasdaq: UCFC), headquartered in Youngstown, Ohio, is the holding company for Home Savings Bank and HSB Insurance, LLC, commonly referred to as James & Sons. As of June 30, United Community had $2.9 billion in assets, $2.3 billion in loans, $2.3 billion in deposits and $317.6 million in shareholders’ equity. Home Savings Bank, founded in 1889, is a wholly owned subsidiary of United Community, 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 about the United Community, including its products, services and banking locations is available at www.homesavings.com and ir.ucfconline.com.

The documents filed by First Defiance and United Community with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov. In addition, the documents filed by First Defiance may be obtained free of charge at First Defiance’s website at www.fdef.com and the documents filed by United Community may be obtained free of charge at United Community’s website at ir.ucfconline.com. Alternatively, these documents, when available, can be obtained free of charge from First Defiance upon written request to First Defiance Financial Corp., attention: John R. Reisner, executive vice president, chief risk officer and legal counsel, 601 Clinton St., Defiance, Ohio 43512 or by calling (419) 782-5015, or from United Community upon written request to United Community Financial Corp., 275 West Federal St., Youngstown, Ohio 44503, attention: Jude J. Nohra, executive vice president, general counsel, chief risk officer and secretary, or by calling (330) 742-0500.

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