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Home Savings’ 2nd-quarter loss shrinks
By GRACE WYLER
youngstown
Home Savings & Loan Co. said it narrowed its second-quarter loss in 2010 but continues to suffer from bad loans and the weak economic recovery.
United Community Financial Corp., the Youngstown-based parent company of Home Savings & Loan, lost $4.9 million, or 16 cents per share, in the second quarter of 2010, compared with $5.1 million, or 17 cents per share, in the same quarter last year.
The company said losses can be attributed largely to continued problems with UCFC’s commercial loan portfolio.
The bank set aside $10.3 million to cover loan losses last quarter, compared with $12.3 million set aside in the second quarter of 2009. The bank also recorded $17.3 million in net charge-offs last quarter to cover lost value on foreclosed properties. A charge-off is a debt that is deemed uncollectible by the reporting firm and is subsequently written off.
The charge-offs were a significant increase from the $10.3 million write-down the bank took in the second quarter of 2009.
UCFC is working to solve the problems in its loan portfolio by decreasing concentrations of certain commercial loans, said chief financial officer Jim Reske.
“Commercial real-estate loans, and construction loans in particular, have some of the highest losses,” Reske said. “We do want to lend money to good credits, but commercial real-estate loans is one of the area’s with the highest risk.”
The bank has continued to weather the economic crisis but has suffered setbacks from the weak economic recovery, he added.
“I think everyone is realizing that the economic recovery is going to be a lot longer than we thought it would be,” Reske said. “When our customers suffer, we suffer, so we are moving through this crisis with them.”
Although this week’s report shows UCFC’s fifth-consecutive quarterly loss, executives said the company saw some positive improvements in the second quarter of 2010.
“Despite the fact that we have yet to turn the corner relative to earnings, we have increased our capital ratios, and, through favorable changes in our deposit mix, have expanded our net interest margin,” chief executive Doug McKay said in a statement.
The company’s net interest margin rose to 3.3 percent last quarter, up from 3.1 percent in the same quarter last year. UCFC’s Tier 1 capital ratio — a key metric used to gauge the strength of a financial institution — was 8.7 percent in the second quarter of 2010, compared with 8.5 percent in the same period of 2009.