United Community Financial (UCFC) in Youngstown, Ohio, has reduced its classified assets nearly in half through a bulk sale.
The $1.9 billion-asset company said Monday that it sold assets valued at $114.8 million in a sale that it completed on Friday. United Community said it would record a $29.4 million loss associated with the sale, but the company defended the decision to pursue the deal because it met asset quality targets set forth in a consent order with regulators.
"In prior years, management had intended to work through these classified assets in the normal course of business," said Patrick W. Bevack, the company's president and chief executive, in a press release. "By executing the sale, the bank has accomplished, in one step, a meaningful cleanup of the balance sheet that would have taken months if not years to do."
The March 2012 consent order with the Federal Deposit Insurance Corp. and the Ohio Division of Financial Institutions called for the company's Home Savings and Loan unit to have less than $219.2 million in classified assets by Sept. 30 and less than $146 million by March 31, 2013. The company said in the release that classified assets following the bulk sale totaled $85 million.
United Community said the sale would eat away some of the bank's capital, but its tier 1 leverage ratio is "expected to remain above" 8%. The consent order requires the bank to have a leverage ratio of 9%. It was 9.32% at June 30.
The company said in the release that its regulators were aware of the transaction and granted their cooperation because the bank committed to meeting the requirement by March 31.