First Place beefs up its mortgage business

By Don Shilling

The bank continues to have trouble with bad loans as the regional economy struggles.

VIENNA — Despite weak housing sales and continuing foreclosures, First Place Bank has been beefing up its mortgage business and has been making money at it.

So many mortgage lenders have left the market because of the unraveling of subprime loans that the Warren-based bank has been able to pick up business even in a slow market, Steven Lewis, company president and chief executive, told shareholders Thursday.

About 100 employees and shareholders of First Place Financial Corp. gathered at Squaw Creek Country Club for the company’s annual meeting.

Most of the news was sobering, as First Place posted a $110 million loss in its last fiscal year and has seen its stock price cut in half in the past year. Much of the 2009 financial loss resulted from a $93.7 million accounting charge that the company had to take because of loss in value of previous bank acquisitions.

As the nation’s credit and housing crisis evolved, however, First Place executives saw an opportunity and decided to focus efforts on increasing mortgage lending, Lewis said. Much of the company’s increase in lending has come from adding experienced loan originators who had worked for other banks, he said.

For example, First Place recently opened a loan office in Rockville, Md., which is outside of Washington, D.C. Lewis said a team of four lenders there had worked for a national bank that had been bought out, and they didn’t want to transition to the new company.

He said lenders as far away as California and Nevada have approached First Place about joining the company, but Lewis said he thinks those states are too far away.

In fiscal 2008, First Place earned $9.3 million while originating $1.3 billion in mortgages. Last fiscal year, that jumped to earning $14.5 million on loan originations of $1.9 billion. The company’s fiscal year ends July 31.

Though economists say the recession may be over nationally, Lewis said after the meeting that tough times continue in First Place’s main markets of Northeast Ohio and southeast Michigan.

Bad loans at the bank continue to grow, though the rate of increase has slowed recently, he said.

Problems exist with homeowners and among owners of commercial properties because many strip plazas have vacant storefronts, he said.

The bank charged off $31.6 million in bad loans in its last fiscal year, compared with $14.5 million in 2008.

It also acquired 208 foreclosed properties last year, compared with 154 in 2008.

Loan problems will continue until the Ohio and Michigan areas see an increase in jobs, he said.

Lewis said he didn’t want to predict what will happen with First Place’s earnings in this fiscal year because credit markets remain uncertain.

shilling@vindy.com