YOUNGSTOWN, Ohio – Federal and state regulators have lifted the cease-and-desist orders United Community Financial Corp. has worked under since August 2008, UCFC announced after the markets closed Tuesday.
UCFC is the holding company of the Home Savings and Loan Co. It had operated more than 3½ years under the cease-and-desist orders imposed by the Federal Deposit Insurance Corp. and the Ohio Division of Financial Institutions.
However, the Board of Directors of Home Savings entered into a consent order with the regulators of the bank, “which lays the foundation for a stronger bank,” the UCFC announcement said.
The cease-and-desist order contained 22 provisions, the consent order has 13, the UCFC announcement said. “Those 13 provisions contain few new requirements,” the announcement reported. “One new requirement is the submission of a formal capital plan to Home Savings’ regulators. It is important to note that for the past two years, United Community filed a capital plan with its regulators as part of the strategic planning process," the company said.
Another aspect of the consent order has the company agreeing to raise more capital. The order requires Home Savings to attain a 9.00% Tier 1 leverage ratio, up from 8.00% in the terminated C&D orders, and a 12% total risk-based capital. That remains unchanged.
No figure was provided on the amount of capital UCFC will seek to raise. Nor did UCFC identify the route it intends to pursue in raising more capital. It said only, “United Community’s capital plan considers several possible ways in which to raise capital both internally and externally.”
The announcement adds, “The board and management agree that Home Savings’ capital ratios should be increased given [its] risk profile.”
The majority of any capital UCFC raises will be contributed to Home Savings, its sole subsidiary, the release said, with the remainder used for “general corporate purposes.” Home Savings would then use that capital to speed up the write-down, charge-off or sale of its nonperforming loans, those 90 and more days past due, and repossessed real estate so it would meet the capital requirements in the new consent order.
In a prepared statement, the president and CEO of UCFC, Patrick W. Bevack, said, “We are very pleased that Home Savings’ regulators have acknowledged the progress and significant efforts we’ve made. The dedicated directors and employees of Home Savings have worked, and continue to work, tirelessly to strengthen Home Savings and restore United Community back to profitability. In fact, we believe the consent order confirms the positive changes in management made by the board by providing that Home Savings ‘shall continue to retain qualified management,’ However, we know there is more work to be done, and w have plans in place to achieve our goals.”
When UCFC achieves its capital plan, Bevack said, “the consent order allows Home Savings to petition the regulators to ease the capital requirements [set forth] to match the level of risk at Home Savings.”
During 2011, Home Savings enjoyed considerable success in reducing its portfolios of loans past due and repossessed real estate. It reported a profit for the year of $230,000, or a penny a share, and fourth-quarter net income of $7.93 million, or a quarter a share.
The stock market seems to like what it sees as well with the price of UCFC shares rising more than $1 in the last 30 days. UCFC closed at $2.50 Tuesday on a volume of 55,153, about double the daily average.
The 52-week range is 87 cents to $2.54.
Copyright 2012 The Business Journal, Youngstown, Ohio.