July 14, 2011 7:14 a.m. By Dennis LaRue WARREN, Ohio -- The federal regulator that oversees savings and loan associations, the Office of Thrift Supervision, issued cease and desist orders Wednesday to First Place Financial Corp. and its largest subsidiary, First Place Bank.
First Place did not contest the orders.
The orders, among other requirements, call for First Place Bank to have and maintain a Tier 1 capital ratio of 8.5% and a total risk-based capital ratio of at least 12% by Dec. 31.
All other things being equal, regulators consider a bank well-capitalized when it has a Tier 1 ratio of 8% and a total risk-based capital ratio of 12%.
News of the orders sent the price of First Place shares, which had traded as high as $1.30 yesterday morning, downward to 90 cents. Shares closed at $1, down nearly 22% from Tuesday's close of $1.28, on a volume of 50,480; average volume the last 30 days is 18,876. Volume Tuesday was 3,958.
Shares dropped another nickel to 95 cents in early afterhours trading with an additional 700 shares bought and sold.
In its press release, First Place said it is working to resolve the conditions that prompted the OTS to issue the cease and desist orders.
"[I]t has made progress toward the restatement of its financial results stemming to be made to the allowance for loan losses for First Place Bank," the company said. "The increase to the allowance will result in a restatement of the company's financial statements [earnings] for the fiscal years ended June 30, 2010, and 2009."
In the supervisory agreement the OTS and First Place Board of Directors (authorized Feb. 25 and) entered March 1, but made public only yesterday, the regulator determined that First Place Financial Corp. "has engaged in unsafe or unsound practices conducting its consolidated operations." The OTS made that determination in its scheduled examination completed last Aug. 2.
The OTS finding manifested itself in the disagreement between its examiners and First Place senior officers over the size of the loan loss reserve that should be reported. That disagreement resulted in the holding company delaying the release of its quarterly earnings as required by the Securities and Exchange Commission and, more recently, Nasdaq's warning to the company that its listing on the stock exchange is in jeopardy.
First Place also said it intends to engage its independent registered public accounting firm and outside auditor, KPMG LLP, "to complete an audit of the fiscal 2009 consolidated financial statements." Said President and CEO Steven R. Lewis in a prepared statement, "We believe we will be able to issue our restated financial statements for 2010 and 2009 as well as our financial statements for the current year sometime this fall."
In the 49-page 8-K document First Place filed with the SEC yesterday, it said that the unidentified outside "independent firm" it hired to conduct a detailed review of the bank's commercial loan portfolio led it to conclude that its previously issued financial reports "could no longer be relied on." The charge to that firm was "to provide an objective basis for substantiating the appropriate level of the [loan loss] allowance and to determine the appropriate periods to which the adjustment to the allowance would apply."
Management continues to analyze that review, First Place reported, and upon completion, will restate its consolidated financial statements for the annual and quarterly periods [of 2009 and 2010], to amend SEC filings for fiscal 2010 --Ãâà"and file delinquent quarterly reports [for fiscal 2011]." While the allowance is yet to be determined, First Place said it anticipates the figure will exceed the $14 million it provided earlier.
And while management says it thinks all delinquent forms will be filed by Oct. 31, it "also acknowledges that certain factors beyond its control could affect the timing of these filings."
Among the restrictions and requirements the OTS imposed on both First Place Financial Corp. and First Place Bank:
Submission of a written capital by Aug. 31 that includes a minimum tangible capital ratio commensurate with their risk profiles, reduces their current levels of debt and addresses their cash flow needs.
Updating the plan and submitting the revised plan each Dec. 31 to OTS such that it reflects the holding company's budget and cash flow projections for the next two years.
The bank must have and submit a contingency plan should it miss its goals.
While First Place paid its last cash dividend Aug. 13, 2009, it agreed to continue not paying cash dividends, not make any other capital distributions and not repurchase or redeem any treasury stock.
It agreed not to assume any more debt without the express permission of the OTS. The OTS points out that this excludes debt incurred for goods and services in the ordinary course of business. The holding company may not, the cease and desist order states, "directly or indirectly, incur, issue, renew, rollover or pay interest or principal on any debt or commit to do so, increase any current lines of credit, or guarantee the debt of any [subsidiary], without prior written notice" of the regulatory agency. Nor may it increase its assets beyond the current $3.1 billion without the express permission of the OTS.
Unless the company complies with certain federal requirements, it may not grant "any golden parachute payment" to officers who resign or agree to leave.
Absent OTS approval, First Place may not enter into new employment contracts with management or directors, nor revise any unexpired contracts with any senior officer or director that would increase their compensation or benefits.ÃâÃÂ
