Loan losses continue to affect UCFC’s earnings

By Don Shilling

YOUNGSTOWN — The parent company of Home Savings and Loan Co. continues to be dragged down by bad loans and foreclosed properties.

Youngstown-based United Community Financial Corp. lost $867,000, or 3 cents a share, in the third quarter.

It attributed the loss to $5.6 million being set aside to cover loan losses and the write-down of $3.9 million in lost value on properties that have been foreclosed and taken back over by the bank. These foreclosures mainly are commercial properties.

The losses, however, were offset by an increase in interest income and lower expenses.

The size of the loss last quarter was smaller than the $2.9 million loss in the second quarter and a $38.6 million loss for the third quarter of 2008.

The loss a year ago was large because United Community took a $33.6 million accounting charge to cover a loss in the value of assets it received in previous bank acquisitions.

Douglas McKay, United Community chairman, president and chief executive, said improving the quality of the bank’s loans has been Home Savings’ most important objective for the past 18 months.

“While deterioration continues, the pace of that deterioration has slowed significantly,” he said.

The $5.6 million that was set aside to cover loan losses last quarter was less than the $12.3 million set aside in the second quarter and $9 million in the third quarter of 2008.

McKay said executives have taken steps to improve the quality of the bank’s loans, and he expects to see the results of those steps within the next several quarters.

The bank’s financial troubles began in early 2008 when it said that home builders it had lent money ran into problems. They were unable to repay their bank loans because they weren’t selling homes.

The bank also has been hurt by the recession in general, but McKay said he expects some stabilization in the coming quarters.

The bank’s total assets, which are mostly loans, were $2.5 billion Sept. 30, which was $156 million less than Dec. 31.

United Community said the decline came in all parts of its loan portfolio, but it has made fewer construction and commercial loans this year in order to reduce its concentration in those segments.

Home Savings operates 39 branches and six loan-production offices in Ohio and Pennsylvania.

shilling@vindy.com