PLUNGING PROFITS

Banks in Valley make moves to weather economic storms

Some of the institutions are cutting the work force, freezing salaries and restructuring operations in an effort to recover this year.

STAFF/WIRE REPORT

Bad news continues to spill from three banks that operate in the Mahoning Valley.

UThe parent company of Home Savings and Loan Co. reported a year-end loss of $35.3 million.

UPNC Financial Services is laying off 5,800 workers after acquiring National City Corp.

UHuntington National Bank is cutting 500 jobs and suspending the company match on its 401(k) plan.

United Community Financial Corp., the Youngstown-based parent of Home Savings, said late Monday that it lost $3.5 million in the fourth quarter. This led to a loss of $35.3 million for all of 2008.

United Community’s losses were slightly larger if the profits of Butler Wick Corp., which is being sold, are removed. Butler Wick Corp. earned more than $800,000 in the fourth quarter and nearly $2 million for all of 2008.

From its continuing operations minus Butler Wick, United Community lost $4.3 million in the fourth quarter and $37.2 million for the year.

United Community’s fourth-quarter loss was the result of the company’s setting aside $10.6 million to cover probable loan losses.

The large year-end loss came after the company took a $33.6 million accounting charge in the third quarter. The one-time charge was recorded because assets that the company received in two previous bank acquisitions had fallen in value.

The company noted, however, that it ended 2008 with enough capital to exceed regulatory requirements.

In August, federal and state regulators issued special orders that required Home Savings and its parent to increase cash reserves and reduce certain types of risky lending.

Since then, United Community has sold Butler Wick & Co., the stock brokerage, to Stifel Financial Corp. of St. Louis for $12 million.

United Community also has reached an agreement to sell Butler Wick Trust Co. to Farmers National Bank of Canfield for $12.1 million. That deal hasn’t closed yet.

United Community said it used $9.8 million of the stock brokerage sale to reduce debt.

A year ago, it owed JP Morgan Chase Bank $36.3 million on a line of credit, but that has been reduced to $5 million.

Doug McKay, United Community chairman and chief executive, said the company accomplished three strategic objectives in the fourth quarter: negotiating the Butler Wick sale, reducing debt and meeting increased capital requirements set by bank regulators.

“Nevertheless, economic conditions facing banks like ours continue to be challenging,” McKay said, citing declining real estate values.

PNC Financial Services Group Inc. said Tuesday it plans to cut 5,800 jobs after its acquisition of National City Corp. last year and said it swung to a loss during the fourth quarter.

The job cuts cover about 9.7 percent of the combined banks’ 59,595-person work force, PNC said. The company expects to complete the cuts by 2011 to help save $1.2 billion annually.

PNC said it posted a fourth-quarter loss of $248 million, or 77 cents per share, due to increased credit provisions and costs associated with its $3.9 billion purchase of Cleveland-based National City in December.

A year earlier, PNC earned $178 million, or 52 cents per share.

Excluding merger and integration costs, PNC said it earned $132 million, or 32 cents per share.

Huntington Bancshares said Tuesday it was taking steps to reduce costs, including eliminating 500 jobs, or 4 percent of its work force. The cuts will come throughout six states and occur by March 1.

Other steps announced by Huntington are freezing salaries at 2008 levels, eliminating bonuses and other incentive pay for 2008 and suspending the 401(k) match.

The company is the parent of Huntington National Bank, which moved into the area with its acquisition of Sky Bank.