Updated: Execs Discuss UCFC Purchase of Premier Bank

YOUNGSTOWN, Ohio — United Community Financial Corp., holding company of the Home Savings and Loan Co., will purchase Ohio Legacy Corp., parent of Premier Bank & Trust, for $40.3 million in stock and cash, the companies announced Sept. 8 after markets closed.

Under the definitive agreement the boards of directors reached, UCFC will pay roughly $18 for each share of Ohio Legacy, which has 1.97 million shares outstanding.

Premier Bank & Trust, based in North Canton, has $320 million in total assets, $249.9 million in total deposits and a network of four full-service offices in North Canton, Belden Village, Fairlawn and St. Clairsville plus a full-service wealth management and trust division. Home Savings lacks a trust division and a dedicated wealth-management division.

St. Clairsville, across the Ohio River from Wheeling, W.Va., has done well because it’s in Belmont County atop the most productive region of the Utica shale, UCFC President and CEO Gary Small told an analyst during a conference call the next morning. The analyst noted the distance between Stark and Belmont counties.

The transaction equates to UCFC paying 140% of Ohio Legacy’s tangible book value of $13.17 per share at June 30, a 6.5% premium to core deposits and 30.6 times Ohio Legacy’s last-12-months’ earnings (it earned $1.152 million in 2015, or 49 cents a share) and 8.6 times its projected 2017 earnings. Excluding certain one-time charges related to acquisition, UCFC anticipates the purchase will be accretive to earnings per share by 15% in 2017.

UCFC expects its tangible book value per common share to be diluted less than 6% at closing with a projected earn-back period of 3.9 years using the cross-over method.

Pending approval from shareholders of Ohio Legacy and the usual regulatory agencies, the transaction should be completed sometime in the first quarter 2017, said Jude Nohra, general counsel and secretary of UCFC. The offices of Premier Bank & Trust will assume the Home Savings identity.

Once completed, Home Savings intends to exchange its charter as a thrift for one as a commercial bank, possibly assuming Premier Bank’s, Small said in the conference call.

By the end of 2017, half of Home Savings’ loan portfolio should consist of residential mortgages (one- to four-family dwellings), down from 70% three years ago, with a corresponding increase in commercial loans, he also said.

Under terms of their agreement, holders of Ohio Legacy common stock have their choice of receiving 2.736 shares of UCFC stock or $18 in cash for each share or a combination of the two. Shares of Ohio Legacy have been trading at $12.50 this week.

The transaction is subject to 50% of Ohio Legacy shares outstanding exchanged for UCFC stock, the other half for cash. Roughly 75% of Ohio Legacy shares are controlled or linked to its management team.

Ohio Legacy shareholders could have to adjust their preferences, depending on demand for UCFC shares, the UCFC press release said. Just before the transaction closes, preferred shares of Ohio Legacy will be converted to common shares.

The chairman of Ohio Legacy, Louis Altman, and president and CEO, Rick L. Hull, will join the boards of directors of both UCFC and Home Savings. Hull will become Home Savings regional president for Akron-Canton and Denise M. Penz, executive vice president and chief operating office, will head the new Home Savings wealth management division.

Hull, age 64 and an attorney, was named president of the Akron-Canton region of Huntington Bank in 2007, leaving in 2009 and later that year raised $17.5 million to acquire “a controlling interest in Ohio Legacy,” its website says. In his prepared statement, Hull noted that Ohio Legacy recapitalized in 2010.

Small and Hull have known aech other 10 years, Small said, and Frank Hierro, Home Savings Mahoning Valley regional president, has known Hull since their days together to Huntington Bank. Hierro was Mahoning Valley regional president when Hull was president of its Akron-Canton region.

Ohio Legacy, which employs somewhere around 48, has a market capitalization of $24.68 million, according to its website, and earned %469,000, or 21 cents a share, the second quarter. Its second-quarter return on equity was 3.68%, its return on assets 0.42%.

It has not paid a cash dividend this year.

By late afternoon Sept. 9, markets reacted by sending Ohio Legacy shares up $4.86, nearly 39%, to $17.36, while shares of UCFC dropped six cents to $6.50.


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