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First Place buyer to gain coveted share



Published: Sat, November 10, 2012 @ 12:10 a.m.

By Jamison Cocklin

jcocklin@vindy.com

WARREN

If approved, Michigan-based Talmer Bank and Trust will acquire First Place Bank and its 41 retail branches throughout Northeast Ohio and Michigan in yet another regional banking consolidation that will find Talmer assuming a coveted piece of market share in Youngstown and expanding to four states.

In a move announced Oct. 29, Talmer agreed to purchase all the bank’s assets through a $45 million all-stock deal with its parent company, First Place Financial Corp.

Officials at FPFC, which also filed for Chapter 11 bankruptcy Oct. 29, say the holding company had little choice after it worked for more than a year to meet a slew of demands from federal regulators.

In 2011, the bank agreed to a cease-and-desist order after regulators conducted a series of examinations that found the bank to be holding an excessive amount of impaired loans and inadequate capital levels that would protect it against potentially devastating losses.

“We needed to find someone to purchase the bank and infuse it with capital,” said FPFC spokeswoman Debra Bish. “There were not enough pillars at the holding company to pay off its debts, either.”

Under the terms of the order, which gave regulators broad oversight of FPFC’s daily operations, the company was barred from incurring more debt. It also was limited in increasing assets beyond the $3.1 billion it had on hand at the time.

That left FPFC unable to reconcile its flagrant loan portfolio, which had been deteriorating since 2008 when declining commercial real-estate values in Michigan upended its balance sheet.

At the same time, FPFC was holding $62 million in debt from a series of high-risk bonds it issued in 2003 and 2005. The terms of those bonds, and the pressures weighing on both the bank and the holding company, eventually made it impossible to pay the hundreds of investors holding those securities.

Moreover, in 2009, FPFC was handed $72.9 million worth of funds from the government’s Troubled Asset Relief Program, passed in 2008 to help avert deeper losses at financial institutions and bolster ailing banks such as First Place.

The company has yet to repay the bailout money.

In a move to capitalize the bank and protect itself against the default on its bonds and federal commitments, FPFC was forced to file for bankruptcy and seek out a bidder interested in its entire franchise.

This led the company to seek assistance with the global investment bank Keefe Bruyette & Woods, which managed to seek out 44 organizations with an interest in all or some of FPFC’s assets.

After consideration, First Place’s board selected Talmer Bancorp as the best solution to strengthen the bank’s capital base and help it to meet the requirements outlined by the cease-and-desist order, Bish said.

First Place Bank will not be affected by its parent company’s bankruptcy. It will retain its brand name and continue processing loan applications, funding commitments and serving customers under services fully insured by the Federal Deposit Insurance Corp.

But if the federal bankruptcy court and regulators approve the acquisition, Talmer will assume all of First Place Bank’s assets, from its properties all the way down to the commercial loans and residential mortgages it holds, which makes it difficult to believe there will be no changes at the bank.

“We don’t expect significant changes in products or services,” said Shellie Maitre, chief marketing officer at Talmer. “In fact, we hope to expand the lending activities, especially to small businesses served by First Place Bank.”

Considered extremely well-capitalized for a bank of its size, Talmer has $2.24 billion in assets and $360 million in equity on its balance sheet. An additional $153 million has been committed to Talmer by its investors.

The bank bears a close resemblance to First Place, Maitre said. Currently, it has 45 retail branches in three states and relies on a diverse mix of loans across all categories as its main profit engine. Both banks use a similar operating system to conduct business.

Initially, Talmer committed about $205 million in capital to First Place, but Maitre said in an email that the bank anticipates making $250 million available if the deal is approved. She added that Talmer will replace the seven board members at First Place expected to depart after the acquisition. FPFC will keep only three existing members.

In the week since the announcement, shareholders at First Place have seen their equity wiped out. Common stock at the bank plunged from about 18 cents in over-the-counter trading last week, to only a penny Thursday, with millions of shares dumped in less than a week.

On Wednesday, the U.S. Bankruptcy Court in Delaware imposed an order severely restricting any further trading of equity interests in FPFC. As proceedings continue to take place, with a sale hearing not scheduled until Dec. 7, First Place shareholders will gain little, as most of the proceeds from the asset sale likely will go to the company’s creditors.


Comments

1chuck_carney(499 comments)posted 1 year, 9 months ago

Query if the board of directors should be liable to the shareholder "for an excessive amount of impaired loans and inadequate capital levels that would protect it against potentially devastating losses."?

The current board members are:

Samuel A. Roth Chairman

Mr. Roth was named Chairman of the Board of First Place and First Place Bank in December 2004. He is a consultant to businesses since January 2003. He is the retired President of FirstEnergy Facilities Services Group, a holding company for the mechanical construction, contracting and energy management companies owned by FirstEnergy. Mr. Roth held this position from January 1999 to December 2002. Prior to that he had been the President of Roth Bros., Inc. from 1966 to 1999. He has been a Director on the Board since 2000.

Thomas M. Humphries
Mr. Humphries has been the President of the Youngstown-Warren Regional Chamber of Commerce since April 1997. Prior to that date, he was a General Manager with Sprint Corp., a telecommunications company. He has been a Director on the Board since 1990.

A. Gary Bitonte
Dr. Bitonte is a member of the teaching faculty of Northeastern Ohio College of Medicine at Rootstown (NEOUCOM). Additionally, Dr. Bitonte had a urologic surgery practice that spanned 21 years. Dr. Bitonte currently serves as a member of the Board of Trustees of the Youngstown State University Foundation as well as the NEOUCOM Foundation. He is also an Adjunct Professor at The Bitonte College of Health and Human Services at Youngstown State University. He has been a Director on the Board since 2000.

Earl T. Kissell
Mr. Kissell was President and Chief Executive Officer of Ravenna Savings Bank from 1987 to 2000. Mr. Kissell is currently an Assistant Professor of Economics, Business Management and Accounting at Hiram University. He has been a Director on the Board since 2000.


TO BE CONTINUED

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2chuck_carney(499 comments)posted 1 year, 9 months ago

The remaining board members:

Donald Cagigas

Mr. Cagigas has been the President of the Youngstown/Mahoning Valley United Way since April 2000. Prior to that date, he was the President of the Mahoning Valley Region of BANK ONE, NA, a position he had held since March 1988. He has been a Director on the Board since 2000.

Marie Izzo Cartwright

Ms. Cartwright has been a member of the marketing and public relations profession for 30 years and currently is a consultant with Revak & Associates, which she joined in January 2001. Prior to this, she was the Vice President of Corporate Communications and Marketing for Glimcher Properties Limited Partnership, a position she had held since October 1996. She has been a Director on the Board since 2000.


E. Jeffrey Rossi

Mr. Rossi has been a principal of E.J. Rossi & Company, a life and health insurance brokerage, located in Youngstown and Warren, Ohio since 1978. He has been a Director on the Board since 1994.

Frank J. Dixon

Mr. Dixon is a partner in Cohen & Company, Ltd. Certified Public Accountants in Youngstown, a position he has held since 1987. He is a member of the American Institute of Certified Public Accountants and the Ohio Society of Certified Public Accountants. He has been a Director on the Board since 2010.


William A. Russell

Mr. Russell has, since 1974, been the President of Canteen Service of Steel Valley, Inc., a food and vending service company that has served the surrounding five county area for over 67 years. He has been a Director on the Board since 2000.

Robert L. Wagmiller

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