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2nd-straight annual loss hits Home Savings’ parent



Published: Wed, February 3, 2010 @ 12:00 a.m.

By Don Shilling

United Community Financial posted a $16.3 million loss in the fourth quarter.

YOUNGSTOWN — Bad loans continue to trouble Home Savings and Loan Co., leading to a second-straight annual loss for its parent company.

United Community Financial Corp. said Tuesday that it lost $16.3 million in the fourth quarter, giving it a $16.9 million loss for the whole year.

The losses came as the company was forced to set aside more money to cover loan losses.

In the fourth quarter, United Community set side $22.7 million to cover bad loans. This was up from the $10.6 million that was set aside in the same quarter of 2008, when the company reported a $3.5 million loss.

The increase in provisions for loan losses last quarter was primarily the result of the company’s charging off $9 million in loans from a commercial account who could not repay. The borrower was not identified.

Doug McKay, United Community chairman, president and chief executive, pointed to a growing part of Home Savings’ business to show that the bank is fighting through its tough times. Home Savings originated nearly $500 million in residential mortgage loans last year, which was a 77 percent increase over 2008.

“Despite the difficult economic environment, we have remained committed to providing financial solutions to customers,” he said.

Investors reacted coolly to the large quarterly loss.

United Community’s stock dropped 9 cents, or 5 percent, to close at $1.70. The stock has traded between 46 cents and $2.72 in the past year.

Last year was the second straight year that United Community has lost money. It posted a $35.3 million loss in 2008 after taking a $33.6 million accounting charge to write off the premium that it had paid for two earlier bank acquisitions.

Home Savings has been struggling with loan losses since 2007 when the housing market and economy in general began to weaken. The company’s problem loans mostly have been to housing developers and owners of commercial real estate.

To cover its weak loans, United Community set aside $49.1 million last year, up from $25.3 million in 2008.

McKay said improving asset quality remains the highest strategic goal of the Youngstown-based financial institution.

“Recent reports on economic indicators suggest that a slow economic recovery has already begun, and we eagerly anticipate the eventual stabilization and improvement the recovery will bring to the residential and commercial real estate markets,” he said.

United Community’s total assets at the end of 2009 were $2.3 billion, a decrease of $279.6 million from a year earlier. For banks, assets are mostly loans.

United Community said it had declines in all major segments of its loan portfolio last year. The company said it intentionally reduced its construction and commercial portfolio. Also, many of its residential loans were refinanced, and those new loans were sold to the secondary market.

shilling@vindy.com


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