Banks hit hard by stock sell-off

By Don Shilling

Institutional investors were forced to sell holdings in two local banking companies.

Officials at two local banks are expecting better days ahead after suffering through a stock sell-off Friday that sent shares plummeting in value.

Prices for United Community Financial Corp. and First Place Financial Corp. fell about 20 percent after the stocks were removed from the Russell 3000 index of the nation’s largest companies.

The drops added more misery to what’s been a terrible year for the bank holding companies. The stock prices of both companies are down about 80 percent from their highs of the past year as the nation has been gripped by a recession and credit crisis.

Friday’s hit came as large institutional investors, such as mutual funds and retirement funds, were forced to sell their holdings in both local companies, bank executives said.

The rules of these institutional investors require them to invest only in Russell 3000 companies.

United Community had 4.3 million shares sold Friday, compared with a daily average of 68,000 in the previous 10 trading days, and First Place had 3.2 million shares sold Friday, compared with an average of 48,000 in the same period.

Douglas McKay, chairman and chief executive of United Community, said he expects to return to the Russell list next year.

“We’re working diligently to get the bank back to being profitable consistently. If we’re successful in that, we will get the stock price back up,” he said.

Youngstown-based United Community is the holding company for Home Savings and Loan Co., while Warren-based First Place is the holding company for First Place Bank.

Steven Lewis, president and chief executive of First Place, said he hopes to return to the list next year as well. He said he expects banks’ stocks to gain more favor with investors.

“I think we are undervalued,” he said.

He noted that First Place continued its modest growth plans last week by acquiring three branches in suburban Cleveland.

The Russell index is determined by companies’ market capitalization, which is the number of outstanding shares multiplied by the share price.

The index is adjusted once a year, which was Friday, and 152 companies were removed from the list.

Lewis said the value of some stocks has been pushed down in recent months as investors speculated on which companies would be removed from the list.

With all the advance calculations, he said he was surprised to see so much trading in First Place stock when it was officially removed from the list.

First Place stock fell 68 cents, or 19 percent, Friday to close at $2.94. It traded at $14.60 last September.

United Community stock fell 30 cents, or 23 percent, Friday to close at $1. It traded at $5.84 last August.

In trading Monday, First Place lost 14 cents, or 5 percent, to close at $2.80, while United Community gained 3 cents, or 3 percent, to close at $1.03.

shilling@vindy.com