Home Savings holding company now debt-free

By Don Shilling

Bank officials to ask for reduced oversight

YOUNGSTOWN — The holding company for Home Savings and Loan is now debt-free, resolving a major concern of federal regulators.

“It’s an enormous corporate achievement. We’re proud of that,” said James Reske, chief financial officer of Home Savings and the holding company, United Community Financial Corp.

The last payment of $5.1 million on United Community’s debt came after it completed the sale of Butler Wick Trust Co. to Farmers National Banc Corp. of Canfield.

The sale was completed Tuesday and included the $12.1 million purchase price and a $428,000 dividend to cover the trust company’s earnings since Nov. 30. That was the date used to establish the value of the trust company.

Federal and state regulators last August placed special restrictions, called cease and desist orders, on United Community and Home Savings.

For the holding company, the biggest action demanded by regulators was that its debt be reduced, Reske said.

In 2005, United Community received a line of credit from JP Morgan Chase Bank for up to $40 million. It later borrowed $36.3 million. In April 2008, United Community made a $20 million payment, leaving a debt of $16.3 million.

Regulators did not like the company’s level of debt and also ordered Home Savings to make changes in its lending practices, risk management and other areas.

As the economy and housing market worsened last year, Home Savings was forced to write off a large amount of bad loans, primarily to housing developers.

In addition to the trust company sale, United Community also sold Butler Wick & Co., a Youngstown-based stock brokerage, to Stifel Financial Corp. of St. Louis for $12 million. Money from that sale also was applied to United Community’s debt.

Douglas McKay, United Community chairman and chief executive, said being debt-free will allow the corporation to provide more money to support the operations of Home Savings.

Losing the Butler Wick divisions will impact the profits of United Community, but over the years the vast majority of the corporation’s profits came from banking, Reske said.

He said corporate officials are hoping regulators will lift or modify the cease and desist order now that the debt is gone.

Bill Ruberry, a spokesman for the federal Office of Thrift Supervision, said he couldn’t comment on United Community’s order or on how long it normally takes to resolve an order. Each case is different, he said.

Other parts of United Community’s order involved restrictions on paying dividends and buying company stock.

As for its cease and desist order, Home Savings has met the requirements, Reske said. These involved increasing the amount of capital the company has on hand and filing reports regarding how it handles various lending and budgeting practices.

Reske said those reports are being reviewed by federal and state regulators.

Farmers National said it will retain the management, employees and offices of the trust company. The name will be changed to Farmers Trust Co.

The trust company, which was formed in 1995, has 27 employees and $600 million in trust assets.

shilling@vindy.com