17.	BENEFIT PLANS

Postretirement Benefit Plans

In addition to Home Savings’ retirement plans, Home Savings sponsored a defined benefit health care plan that was curtailed in 2000 to provide postretirement medical benefits only for these employees who worked 20 years and attained a minimum age of 60 by September 1, 2000, while in service with Home Savings. That plan was curtailed again in 2015, and medical benefits are no longer provided to plan participants as of December 31, 2016. The curtailment resulted in a gain of $1.1 million recognized in salaries and employee benefits during 2015 and the recognition of unrealized gains as a reduction of salaries and employee benefits of $1.2 million during 2016. The plan was unfunded and, as such, had no assets. Furthermore, the plan was contributory and contained minor cost-sharing features such as deductibles and coinsurance. In addition, postretirement life insurance coverage was provided for employees who were participants prior to December 10, 1976. The life insurance plan was non-contributory. Home Savings’ policy was to pay premiums monthly, with no pre-funding. The life insurance portion of the plan was terminated and the plan was settled in the fourth quarter of 2016. The benefit obligation measurement date was December 31. Information about changes in obligations of the benefit plan follows:

	For the year ended December 31, 2016
	(Dollars in thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	333
Service cost		—
Net periodic benefit cost (benefit)		(1,268	)
Actuarial gain		1,268
Benefits paid		(333	)
Curtailment gain		—
Benefit obligation at end of the year		—
Funded status of the plan	$	—

Components of net periodic benefit cost/(benefit) were as follows:

	For the year ended December 31,
	2016			2015
Service cost	$	—		$	—
Interest cost		10			53
Expected return on plan assets		—			—
Net amortization of prior service cost (benefit)		(228	)		(228	)
Amortization of net actuarial gain		(1,050	)		(86	)
Curtailment gain		—			(1,072	)
Net periodic benefit cost		(1,268	)		(1,333	)
Net (gain) loss		—			(184	)
Prior service credit		—			—
Amortization of prior service cost and net actuarial gain		1,278			315
Total recognized in other comprehensive income		1,278			131
Total recognized in net periodic benefit cost and other comprehensive income	$	10		$	(1,202	)
Assumptions used in the valuations were as follows:
Weighted average discount rate		3.90	%		3.90	%

401(k) Savings Plan

Home Savings sponsors a defined contribution 401(k) savings plan, which covers substantially all employees. Under the provisions of the plan, Home Savings’ matching contribution is discretionary and may be changed from year to year. For 2017, 2016 and 2015, Home Savings’ match was 50% of pretax contributions up to a maximum of 6%. Participants become 100% vested in Home Savings contributions upon completion of three years of service. For the years ended 2017, 2016 and 2015, the expense related to this plan was approximately $619,000, $480,000 and $465,000, respectively.

Stock-based Compensation: Stock Options

On April 30, 2015, shareholders approved the United Community Financial Corp. 2015 Long Term Incentive Compensation Plan (the 2015 Plan). The purpose of the 2015 Plan is to provide a means through which United Community may attract and retain employees and non-employee directors, to provide incentives that align their interest with those of United Community’s shareholders and promote the success of United Community’s business. All employees and non-employee directors are eligible to participate in the 2015 Plan. The 2015 Plan provides for the issuance of up to 1,200,000 shares that are to be used for awards of stock options, stock awards, stock units, stock appreciation rights, annual bonus awards and long-term incentive awards.

On April 26, 2007, shareholders approved the United Community Financial Corp. 2007 Long-Term Incentive Plan (as amended, the 2007 Plan). The purpose of the 2007 Plan was to promote and advance the interests of United Community and its shareholders by enabling United Community to attract, retain and reward directors, directors emeritus, managerial and other key employees of United Community, including Home Savings, by facilitating their purchase of an ownership interest in United Community. The 2007 Plan was terminated on April 30, 2015 upon the adoption of the 2015 Plan, although the 2007 Plan survives so long as awards issued under the 2007 Plan remain outstanding and exercisable. The 2007 Plan provided for the issuance of up to 2,000,000 shares that were to be used for awards of restricted stock, stock options, performance awards, stock appreciation rights (SARs), or other forms of stock-based incentive awards.

On July 12, 1999, shareholders approved the United Community Financial Corp. 1999 Long-Term Incentive Plan (as amended, the 1999 Plan). The purpose of the 1999 Plan was the same as the 2007 Plan. The 1999 Plan terminated on May 20, 2009, although the 1999 Plan survives so long as options issued under the 1999 Plan remain outstanding and exercisable.

The 1999 Plan provided for the grant of either incentive or nonqualified stock options. Options were awarded at exercise prices that were not less than the fair market value of the share at the grant date. The maximum number of common shares that could be issued under the 1999 Plan was 3,569,766. Because the 1999 Plan terminated, no additional options may be issued under it. All of the options awarded became exercisable on the date of grant except that options granted in 2009 became exercisable over three years beginning on December 31, 2009. All options expire 10 years from the date of grant.

There were no stock options granted in 2017 and 2016 and there were 6,618 stock options granted in 2015. The options must be exercised within 10 years from the date of grant. Expenses related to stock option grants are included with salaries and employee benefits. All of the Company’s stock options are vested at December 31, 2017. The Company recognized $1,000 and $9,000, in stock option expense for the twelve months ended December 31, 2017 and 2016, respectively.

A summary of activity in the plans is as follows:

	For the year ended December 31,
	2017
	Shares			Weighted average exercise price		Aggregate intrinsic value (Dollars in thousands)
Outstanding at beginning of year		371,218		$	2.55
Granted		—			—
Exercised		(110,085	)		2.53
Forfeited		(600	)		2.10
Outstanding at end of period		260,533			2.55	$	1,697
Options exercisable at end of period		260,533			2.55		1,697

Information related to the stock options granted and exercised during each year follows:

	2017		2016		2015
Intrinsic value of options exercised	$	702,000	$	883,000	$	48,000
Cash received from option exercises		279,000		517,000		28,000
Tax benefit realized from option exercises		120,000		82,000		—
Weighted average fair value of options granted		—		—		1.70

There were no options granted in 2017 and 2016. The fair value of options granted in 2015 was determined using the following weighted-average assumptions as of the grant date:

	2015
Risk-free interest rate		1.49	%
Expected term (years)		5
Expected stock volatility		35.95	%
Dividend yield		0.74	%

Outstanding stock options have a weighted average remaining life of 2.56 years and may be exercised in the range of $1.20 to $5.89.

Stock-based Compensation: Restricted Stock Awards

The 2015 and 2007 Plans permit the issuance of restricted stock awards to employees and nonemployee directors. Nonvested shares at December 31, 2017 aggregated 277,035, of which 135,635 will vest in 2018, 107,260 will vest in 2019 and 34,140 will vest in 2020. Expenses related to restricted stock awards are charged to salaries and employee benefits and are recognized over the vesting period of the awards based on the market value of the shares at the grant date. The Company recognized approximately $951,000, $970,000 and $756,000 in restricted stock award expenses, including expenses for shares issued under the annual incentive plan, for the twelve months ended December 31, 2017, 2016 and 2015, respectively. The Company expects to recognize additional expenses of approximately $784,000 in 2018, $362,000 in 2019, and $154,000 in 2020.

A summary of changes in the Company’s nonvested restricted shares for the year is as follows:

	Shares			Weighted average exercise price
Nonvested shares at January 1, 2017		341,184		$	5.50
Granted		88,681			8.77
Vested		(152,830	)		5.20
Forfeited		—			—
Nonvested shares at December 31, 2017		277,035			6.73

The total average per share fair value of shares vested during the years ended December 31, 2017, 2016 and 2015 was $8.61, $5.97 and $5.48, respectively.

Annual Incentive Plan

The Annual Incentive Plan (“AIP”) provides incentive compensation awards to certain officers of the Company. The incentive awards are based upon the actual performance of the Company, and personal performance for the twelve months ending December 31, compared to the actual performance of a peer group and plan during the same twelve month period. The target incentive awards for each year are measured as a percentage of the base salary of participating officers. Once the awards under the AIP are calculated, they are paid either in cash or 80% cash and 20% restricted stock, depending on the particpant. The restricted stock granted will vest equally over three years, beginning on the first anniversary of the date the restricted stock is issued. The Company incurred $315,000, $356,000 and $269,000 in expense for the restricted stock portion of the AIP and $1.7 million, $1.3 million and $804,000 for the cash portion of the AIP for the twelve months ended December 31, 2017, 2016 and 2015, respectively. Restricted stock expenses for the AIP are included in the total restricted stock expenses discussed above.

Long-Term Incentive Plan

The Long-Term Incentive Plan (“LTIP”) provides a long-term incentive compensation opportunity to certain executive officers. Each participant in the LTIP will be granted a target number of Performance Share Units (“PSUs”). Target PSUs will be determined as a percentage of base salary and translated into share units based on the Company’s average stock price at the appropriate measurement date. The performance period for the annual grant for a given year will be from January 1, year 1 through December 31, year 3. The Company incurred $230,000, $693,000 and $199,000 in expense for the LTIP for the twelve months ended December 31, 2017, 2016 and 2015, respectively. The increase in expense for 2016 was driven by the rise in United Community’s share price during the performance period.