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First Place Reports Net Income Drops in Fiscal '04
WARREN, Ohio -- First Place Financial Corp. reported net income was down $2.5 million for the 2004 fiscal year from the previous year, due largely to its acquisition of Franklin Bancorp Inc. During what Steven R. Lewis, president and chief executive officer, described as "an extraordinarily productive year," First Place reported net income for the fiscal year ended June 30 of $14.2 million compared with $16.7 million reported for fiscal year 2003. Diluted earnings per share were $1.09 compared to $1.29 reported last year. Return on average equity and return on average assets for fiscal 2004 were 7.46% and 0.83% compared with 9.23% and 1.08% for fiscal 2003. Earnings reflect the inclusion of $4.3 million of pre-tax costs ($2.8 million after-tax) associated with the acquisition of Franklin Bancorp, which was completed May 28.Lewis said the acquisition of Franklin has provided First Place with an entry into the growing southeast Michigan market, and that Franklin's mix of loans and deposits compliments that of First Place. "Although we incurred certain specific costs to complete this merger, we believe the combination will be accretive within the next 12 months," he said. Merger-related costs totaled $4.3 million, or $2.8 million after tax.Net income for the fourth quarter was $1.5 million compared with $5 million reported for the 2003 quarter. Diluted earnings per share were 11 cents, compared with 39 cents last year. The fourth quarter results were impacted by $3.9 million, or $2.6 million after-tax, of merger-related expenses as well as by shares issued in connection with the Franklin acquisition.Lewis described fiscal 2004 as "an extraordinarily productive year for First Place," during which the company "advanced significantly" in executing its strategy to offer a comprehensive array of financial services and products, diversify its revenue stream and expand into higher-growth markets. "With the acquisition of Franklin, our balance sheet reflects a major shift in our loan and deposit mix. Commercial loans now constitute nearly 32% of our portfolio, and core deposits exceed 60% of total deposits," Lewis said. During the fiscal year, First Place also added three mortgage loan production offices, including two acquired with Franklin, and introduced a wholesale mortgage banking program. In addition, the company acquired Poland-based Weigel Lackey & Ross Insurance Agency, which has become part of First Place Insurance. Total revenue (net interest income plus noninterest income) for fiscal 2004 was $70.7 million, an increase of 9.9% over the $64.3 million reported in fiscal 2003. Net interest income increased 9.2% to $48.2 million, reflecting a 9.6% increase in average earning assets, partially offset by a one basis point decline in the net interest margin to 3.20%. "We are seeing good growth in our markets, although at lower yields," Lewis commented. "This has impacted our margin throughout the year. With the addition of Franklin, we believe that we are much better positioned for margin stability and improvement as interest rates rise." For the fourth quarter of fiscal 2004, total revenue was $18.5 million, an increase of 2.8% over the $18 million reported in the prior-year quarter. Net interest income increased 13.6% to $12.8 million; average earning asset growth of 22.7% was partially offset by a 26 basis point drop in the net interest margin to 3.08%. The marginal cost of the trust preferred securities was $0.2 million for the fourth quarter of fiscal 2004.Noninterest income for the 2004 fiscal year was $22.5 million, an increase of 11.4% over the $20.2 million reported in the 2003 fiscal year. Excluding investment securities gains, noninterest income increased 15.4% to $22 million. The increase reflected growth in fee income from bank and from non-bank subsidiary activities as well as a 14.3% increase in service charges, partially offset by a decline in mortgage banking activity. Total mortgage originations for the current fiscal year were $1.3 billion, compared to $1.0 billion for the prior fiscal year.For the fourth quarter, noninterest income was $5.7 million compared with $6.7 million for the fourth quarter of 2003. Excluding investment securities gains, noninterest income was $5.7 million compared with $6.4 million in the prior year quarter. The decline reflected reduced mortgage banking income partially offset by strong growth in service charges, non-bank income and other bank income. Noninterest expense for the fiscal year was $45.3 million compared with $36.7 million in 2003. Excluding the $2.2 million in merger expenses for 2004, noninterest expense was $43.1 million, an increase of $6.4 million, or 17.5%, compared with fiscal 2003. Noninterest expense for the fourth quarter was $14.0 million compared with $9.8 million for the fourth quarter of fiscal 2003. Excluding the $2.2 million in merger expenses for 2004, noninterest expense was $11.8 million, an increase of $2.0 million, or 20.3%, compared with the prior-year quarter. The increase was attributable to First Place's expansion initiatives over the past year.Assets totaled $2.2 billion at June 30, an increase of 44.2%, or $688.5 million, from June 30, 2003. An increase of $629.1 million, or 91%, reflects the acquisition of Franklin Bancorp. Portfolio loans totaled $1.5 billion at June 30, a 66.5% increase from $901.4 million at June 30, 2003. Of this total, commercial loans increased $354.7 million, or 286%, to $478.7 million, mortgage loans increased $194.7 million, or 31.6%, to $810.2 million; and consumer loans increased $49.7 million, or 30.7%, to $211.7 million. Commercial loans now constitute 31.9% of the loan portfolio compared to 13.8% one year ago.Shareholders' equity at June 30 was $223.1 million, compared to $182.7 million at June 30, 2003. The company issued approximately 2,155,000 shares valued at $40.8 million as a portion of the consideration in the Franklin acquisition. At its regular meeting held July 27, the board of directors declared a per-share cash dividend of 14 cents for the first fiscal quarter of 2005, payable Aug. 12 to shareholders of record July 29.First Place Financial Corp., a $2.2 billion financial services holding company based in Warren, Ohio, includes First Place Bank, with 22 retail locations and 13 loan production offices; Franklin Bank, a division of First Place Bank with five retail locations and two loan production offices; First Place Insurance Agency, Ltd.; Coldwell Banker First Place Real Estate, Ltd.; TitleWorks Agency, LLC and APB Financial Group, Ltd., an employee benefit consulting firm and specialists in wealth management services for businesses and consumers. Visit the First Place Bank at www.firstplacebank.net."