UCFC Bad loans lower earnings report

The banking company is investigating why it had so many bad loans.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- United Community Financial Corp. lowered its reported third-quarter earnings after learning more money was needed to cover loan losses.
The parent of Home Savings and Loan Co. said Tuesday that it's now reporting earnings of $194,000, or 1 cent a share, instead of $3 million, or 10 cents a share, which it previously reported.
In the same quarter last year, it earned $5.8 million, or 17 cents a share.
UCFC said it raised its loan loss provision after learning more about bad loans to National Marine, a boat dealer in Vienna, and its customers. The new information related to whether loans would be repaid and the value of collateral.
UCFC recorded $4.4 million in additional accounting charges related to these loans, raising the total to $8.4 million.
Investigation
Patrick Kelly, UCFC chief financial officer, said the company is conducting an investigation into how problems with the boat loans developed. He declined to comment further on the investigation.
The banking company issued a $5 million commercial line of credit and a $500,000 standby letter of credit to the dealer.
It also made 85 consumer loans through the dealership. The consumer loans had an unpaid principal balance of $33.4 million as of Sept. 30.
Kelly said delinquency rates for consumer loans generally are between 1 percent and 5 percent. In this case, however, UCFC is writing off 25 of the 85 loans as bad loans. They have an unpaid principal balance of $9.9 million.
UCFC also is counting the two loans to the dealer as losses. They total $5.3 million.
The company said it can't guarantee that future accounting charges won't be needed related to these loans.
Other problems possible
Kelly said the company made this statement because problems could develop with the other 60 consumer loans.
UCFC also can't be sure of what will happen when boats are repossessed and sold, he said.
No one could be reached this morning at the dealership.
In August, a Trumbull County Common Pleas Court judge ordered National Marine to repay Home Savings about $4.9 million. Kelly said the litigation involving the dealership is continuing.
UCFC stock was trading at $11.74 early this morning, up 18 cents. In the past year, the stock has traded between $10.43 and $13.99. The Youngstown-based company also is the parent of Butler Wick Corp., a stock brokerage.
shilling@vindy.com