$94.1M loss at First Place Financial won’t affect bank, its chief says

By Don Shilling

WARREN — The president of First Place Financial Corp. knows the company’s latest news is enough to scare the average bank customer.

The parent company of First Place Bank said last week that it revised its quarterly report to show a loss of $94.1 million.

The bank reported a $2.6 million loss three weeks ago.

Steve Lewis, company president and chief executive, said he’s concerned that bank customers will be worried about bank operations because of the large loss.

Bank operations, however, are not affected, Lewis said. He described the loss as a “paper number” that resulted from a decision to record a $93.7 million accounting charge for the quarter that ended Dec. 31.

The charge and resulting loss have no impact on cash flow or on how the bank meets capital ratios set by regulators, he said.

The charge relates to the prices that First Place paid for banks as it expanded throughout Ohio and into Michigan. At the time, bank stock prices were much higher than they are now, so purchase prices were higher.

When one bank buys another, the part of the purchase price that exceeds the value of the assets is recorded on balance sheets as “good will.”

Lately, accountants are suggesting to many banks that this extra value be removed from balance sheets because the value of the companies has fallen amid the collapse of the nation’s financial system. In essence, banks are saying they would be paying less for acquisitions if they were made today.

First Place’s stock was worth $22 a share two years ago but is only trading at about $3 now.

Another local company, United Community Financial Corp. also recorded a large “goodwill” charge. The parent company of Home Savings and Loan Co. recorded a $33.6 million “goodwill” charge in its third quarter last year based on two previous acquisitions. That led to the company’s posting a $38.6 million loss for the quarter.

Lewis said First Place did not record a “goodwill” charge in its earnings report three week ago based on a consultant’s report that was approved by its auditing company. However, some workers in the auditing company noted later that First Place would have to justify not taking a “goodwill” charge each quarter.

Lewis said he then decided it was better to record the charge instead of continuing to address it in later quarters.

Taking the charge would avoid paying consultants in the future and would be consistent with what many other banks are doing, he said.

In today’s banking environment, growing through acquisitions is no longer a high priority for First Place, he said. As housing prices fall, it is difficult to judge the values of loans on banks’ balance sheets, he said.

shilling@vindy.com