Cash dividends end for UCFC investors

By Don Shilling

Part of a share of stock will be issued for each share owned.

YOUNGSTOWN — The parent company of Home Savings and Loan Co. declared a dividend of stock — instead of cash — because of regulatory restrictions on the company.

Shareholders of United Community Financial Corp. will receive 0.028 share of stock for each share that they own. Fractions of shares will not be issued, so fractional dividend amounts will be rounded up to the nearest whole share.

That means someone with 100 shares would receive three additional shares.

The dividend would be worth 9.5 cents per share based on UCFC’s average closing price of $3.36 for the 20 trading days ended Wednesday.

UCFC’s stock has dropped recently. In trading Monday, it closed up 17 cents at $2.40.

The dividend will be paid Dec. 9 to shareholders of record as of Monday.

The company had been paying cash dividends of 9.5 cents a share, but that was cut to 4.75 cents when the last dividend was issued in June.

The shares being issued in the current dividend are held by the company and have been repurchased from shareholders by UCFC over the past nine years.

The company normally provides cash dividends but is prohibited from doing so under a cease-and-desist order issued by federal and state regulators in August. The order mandated that UCFC and Home Savings increase their cash reserves, reduce certain types of risky lending and stop paying dividends.

The order was issued after UCFC was forced to set aside millions of dollars to cover loan losses. Most of its problems were caused by defaults from commercial borrowers and home builders.

Doug McKay, chairman and chief executive of UCFC, said regulators approved paying the stock dividend.

“We wanted to do something that would benefit shareholders,” he said.

McKay said he expects UCFC and Home Savings to reach the level of cash reserves set by the regulators by the end of the year. Home Savings has restricted its lending in order to build up cash, but he expects that lending will be increased once the cash levels are met.

Home Savings operates 39 branches and six loan production offices in northern Ohio and Western Pennsylvania. Youngstown-based UCFC also is the parent company of Butler Wick, a stock brokerage with 23 offices in three states.

shilling@vindy.com