PVF Capital calls off UCFC acquisition deal

By Don Shilling

Home Savings put the merger on the back burner to focus on its delinquent loans.

YOUNGSTOWN — The Solon-based bank that was to be acquired by the parent of Home Savings and Loan Co. has called off the deal.

PVF Capital Corp. exercised its option to cancel the merger if it was not completed by Tuesday.

United Community Financial Corp., the Youngstown-based parent of Home Savings, had not been working on closing the deal because of its focus on controlling its delinquent loan issues, said Doug McKay, UCFC chairman and chief executive.

PVF had offered to extend the contract between the two companies but UCFC refused, he said. UCFC officials wanted to maintain an open-ended agreement that would allow the two banking companies to continue to work on the deal later, he said.

Without a firm commitment from UCFC, PVF officials canceled the deal so they could pursue other options, he said. PVF said in a news release that it is reviewing its next step with a financial adviser.

PVF operates Park View Federal Savings Bank, which has 17 branches in the Cleveland area. Home Savings has been expanding in other parts of Ohio and was going to use the acquisition to strengthen its presence in the Cleveland area. The deal, which was announced in July, was valued at $131 million in cash and stock.

Home Savings has been struggling with delinquent loans that are tied to housing contractors and commercial real estate developers. Last week, it said it was setting aside an additional $3.3 million to cover delinquent loans in the fourth quarter of last year. The change pushed the company’s financial loss for the quarter to $7.1 million, up from $3.8 million.

McKay said UCFC officials have been scrutinizing its loan portfolio to determine how loan quality has been affected by changing property values and the financial condition of builders. For example, real estate projects may be appraised at a lower value now, which could mean that the loan amount is higher than the property value.

McKay said the review of delinquent loans is complete but company officials will continue to review all loans to determine if more problems are going to occur later in the year.

“It’s a very time-consuming thing,” he said.

shilling@vindy.com