UCFC execs give update at annual meeting

By Don Shilling

Home Savings has met new requirements placed on it by regulators, executives say.

BOARDMAN — It’s not so bad, executives told United Community Financial Corp. shareholders, who have been stung by large losses in earnings and stock price.

“The earnings engine of the company is strong,” Jim Reske, chief financial officer, told about 200 people who gathered Thursday at Mr. Anthony’s for the annual meeting of the parent company of Home Savings and Loan Co.

He said he knows that many shareholders are tempted to think otherwise because United Community reported a $35.3 million loss during a challenging 2008 that saw the company’s stock price drop from $8.50 to as low as 46 cents in the past year. The stock closed at $1.90 Thursday.

Those events of 2008 were on the mind of one shareholder who regularly speaks at the annual meetings, Ron Lysowski of Youngstown. During public comments, he said the company has made questionable decisions as far back as the acquisition of Butler Wick Corp. in 1999 and called for stronger board members to be appointed.

“I’m disappointed in you and the board,” he told Douglas McKay, United Community chairman and chief executive.

Reske used charts to try to sway shareholders to his view that the company and its earnings are still strong.

He stripped away one-time accounting charges and money set aside for loan losses to reveal core earnings. Under this model, United Community earned $28.7 million last year, compared with $33.8 million in 2007.

Reske showed that the company took a $33.6 million accounting charge last year to write off the premium it had paid for two earlier bank acquisitions. Reske said this charge didn’t require the spending of any money but did decrease earnings.

Also, United Community set aside $25.3 million to cover loans that had gone bad and took an accounting charge $6.1 million to cover a loss in value of its investments.

Besides his earnings report, Reske told shareholders that United Community has adequate capital, despite being placed under a “cease-and-desist” orders by regulators last year.

As of Dec. 31, United Community had met the financial targets that regulators had set, Reske said.

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

Patrick Bevack, Home Savings president and chief executive, said the bank has completed all of the steps that regulators required, including reducing construction loans and some other types of loans, strengthening loan underwriting procedures and hiring a management consultant.

Despite these positive steps, Douglas McKay, chairman and chief executive of United Community, said company officials don’t know when the regulatory orders will be lifted.

The orders require United Community to receive prior approval to take on debt, repurchase stock or pay dividends.

McKay said he knows shareholders want cash dividends to resume, but he didn’t say when he expected that would happen. United Community issued a stock dividend for the fourth quarter instead of a cash dividend.

McKay said he was not prepared to give earnings expectations for 2009. Under questioning from a shareholder, however, he said the company has budgeted for positive earnings.

The regulatory orders also required United Community to pay down its debt, which was $36 million at the beginning of 2008.

McKay said the sale of Butler Wick & Co, a Youngstown-based stock brokerage, and Butler Wick Trust helped United Community eliminate that debt. Those sales netted $24.1 million.

shilling@vindy.com