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Quarterly Earnings Up 5.5% at First Place Financial
WARREN, Ohio -- Expansion of wholesale mortgage origination operations into high-growth markets and the acquisition of Franklin Bancorp fueled a 5.5% increase in net income for First Place Financial Corp. (NASDAQ:FPFC) during the first fiscal quarter of 2005, the company reported late Thursday.First Place reported net income for the quarter ended Sept. 30 of $4.8 million compared to $4.5 million for the first quarter of fiscal 2004. Earnings per share 33 cents compared with 33 cents reported for the prior-year period. Per share results reflect the impact of a 14.6% increase in shares outstanding to 14,632,000 primarily related to the acquisition of Franklin Bancorp, which was completed May 28. "We are pleased that the Franklin acquisition has diversified our revenue stream and added significantly to our core earnings," said Steven R. Lewis, president and chief executive officer."Franklin's earnings contribution has replaced income from mortgage banking, which has declined as interest rates rose from first quarter fiscal 2004 levels," he continued. "Although mortgage banking activity has deteriorated nationwide, we have tempered this decline at First Place by expanding our wholesale mortgage origination operation and by opening new mortgage banking offices in higher-growth markets. Our offices in Columbus and Grand Blanc, Mich., both added in fiscal 2004, have matured into strong producers. As a result, originations remain fairly robust."Total revenue (net interest income plus noninterest income) for the first quarter of fiscal 2005 was $22.1 million compared with $18.4 million for the first quarter of fiscal 2004, primarily due to the Franklin acquisition. Net interest income increased 39.7% to $16.8 million, reflecting a 41.7% increase in average earning assets, partially offset by a seven basis point decline in the net interest margin to 3.30%, the company said."Although the interest rate environment affected year-over-year results, the Franklin acquisition enhanced our earning asset mix, enabling us to improve our margin by 22 basis points from the last quarter of fiscal 2004," Lewis noted. "We see further opportunities for margin expansion as the interest rate environment becomes more favorable."Here is the full text of the company's earnings release:Noninterest income for the first quarter of fiscal 2005 was $5.3 million compared with $6.4 million for the prior-year first quarter. The 17.3% decline primarily reflected lower net gains on the sale of loans. A dramatic drop in long-term interest rates in June and July of 2003 resulted in a high volume of refinance activity and a high level of gains during the first quarter of fiscal 2004. The majority of mortgage loan activity in the current quarter is the result of financing purchases of single family homes which is a more stable source of revenue. Service charges increased 53.6% primarily due to the Franklin acquisition; more than half of the Franklin deposits acquired were transaction accounts which generate the majority of service charges on deposit accounts.Total mortgage originations for the current quarter were $338.9 million, compared with $403.3 million for the prior-year first quarter. Gains on the sale of loans were $0.7 million for the first quarter of fiscal 2005, an 81.5% decline from the prior-year period, primarily from a contraction in the margins achieved on loan sales. Loan servicing income was a net loss of $21,000 in the first quarter of fiscal 2005, compared to a net loss of $861,000 for the first quarter of fiscal 2004. This improvement was primarily due to higher long-term interest rates in the current quarter than in the prior year quarter which resulted in a slowdown in the prepayment of loans serviced. This improvement in loan servicing income happened in spite of an additional charge of $182,000 for the impairment of servicing rights in the current quarter compared to a recovery of $400,000 of the impairment allowance in the prior year first quarter.Noninterest expense for the first quarter of fiscal 2005 was $14.8 million compared with $10.2 million for the first quarter of fiscal 2004. The increase primarily reflects the Franklin acquisition. The efficiency ratio was 66.51% for the current quarter compared with 74.51% for the previous quarter and 54.69% for the first quarter of fiscal 2004. The efficiency ratio for the fourth quarter of fiscal 2004 was elevated due to the recognition of $2.2 million of merger expenses. Commenting on the efficiency ratio, Lewis noted, "We are continuing to explore opportunities to reduce expenses by leveraging our increased size after the Franklin acquisition and eliminating similar functions where it does not impact service to customers."Commenting on asset quality, Lewis said, "Our asset quality continues to be strong. Nonperforming assets are lower than a year ago in absolute dollars and as a percent of assets while the allowance for loan losses is higher than a year ago in absolute dollars and as a percent of loans." Nonperforming assets were $14.9 million or 0.65% of total assets at Sept. 30, down substantially from the 0.94% level reported at Sept. 30, 2003. The loan loss allowance was 1.08% of total loans compared with 1.04% at Sept. 30, 2003. This increase in the loss allowance as a percentage of total loans is consistent with the increase in commercial loans as a percentage of total loans during the past year. For the quarter ended Sept. 30, the company realized an annualized net recovery of 0.06% of average loans, compared with annualized net charge-offs of 0.22% for the prior year quarter.Assets totaled $2.3 billion at Sept. 30, an increase of 36.1%, or $605.0 million, from Sept. 30, 2003. The Franklin acquisition resulted in the addition of $627.4 million in assets, accounting for virtually all of this growth. Portfolio loans totaled $1.6 billion at Sept. 30, a 56.6% increase from $1.0 billion at Sept. 30, 2003. Of this total, commercial loans increased $396.4 million, or 302.5%, to $527.5 million; mortgage loans increased $118.0 million, or 16.6%, to $828.6 million; and consumer loans increased $57.9 million, or 34.0%, to $227.8 million. Commercial loans now constitute 33.3% of the loan portfolio compared to 13.0% one year ago due to the Franklin acquisition and due to commercial loan originations of $53.3 million in the current quarter. The Northville, Michigan loan production office, opened in the fourth quarter of fiscal 2004, and the Indianapolis, Indiana loan production office, opened during the first quarter of fiscal 2005, both contributed significantly to the level of current quarter commercial loan originations.Deposits were $1.5 billion at Sept. 30, an increase of $427.2 million or 38.8% from Sept. 30, 2003. The Franklin acquisition added proportionally more lower-cost core deposits to the deposit mix; noninterest- bearing deposits now represent 15.3% of the deposit portfolio, compared to 3.7% a year earlier. Certificates of deposit represent 38.7% of total deposits at September 30, 2004 compared with 50.1% a year earlier.Shareholders' equity remains strong at 225.9 million, or 9.91% of total assets. As part of its capital management strategy, the company repurchased 172,800 shares during the quarter, and currently has a program underway to repurchase up to 293,600 shares over the next six months.At its regular meeting held Oct. 21, the board of directors declared a per share cash dividend of $0.14 for the second fiscal quarter of 2005, payable on Nov. 11 to shareholders of record as of the close of business on Oct. 28.First Place Financial Corp., a $2.3 billion financial services holding company, is the largest publicly traded thrift headquartered in Ohio. First Place Financial Corp. 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 three 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 First Place Financial Corp. at www.firstplace.net"