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First Place Bank Under Federal Orders to Clean Up Bad Loans

'Unsafe or unsound practices' found at bank with an office in Solon or Mentor

First Place Bank is under a federal regulator’ s orders to reduce the amount of its bad loans and to quickly work out a plan for making a profit again.

The Office of Thrift Supervision said the bank, based in Warren, “has engaged in unsafe or unsound practices and/or violations of law or regulation.” The bank’ s parent company,First Place Financial Corp., disclosed the OTS order in a regulatory filing Thursday evening.

First Place has 41 full-service branches and 23 loan offices in Ohio, Michigan, Indiana and Maryland. Locations in the area include a loan office at 9954 Johnnycake Ridge Road in Mentor.

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The bank, its parent company and the OTS signed “ supervisory agreements” March 1 that detail the steps the companies must take over the next few months. A supervisory agreement is a formal enforcement action.

The bank’ s agreement limits the amount of lending it can do, but whether that means consumers will have a harder time getting a mortgage or a home equity loan or line of credit remains unclear. Bank officials did not respond Friday to written questions aboutthe impact of the OTS order. William Ruberry, a spokesman for the OTS in Washington,D.C., declined to comment on the agreement.

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The documents say the OTS found serious problems during a routine annual examination of First Place Bank in August.

The agreement has no expiration date. It sets several deadlines by which the bank must address problems with its bad loans, particularly commercial loans. Last fall, the OTS told First Place to increase by $14 million the amount of money it was setting aside to cover loan losses.

Since then, First Place has been working on restating financial results for its last fiscal year, which ended June 30, to reflect the larger set-aside. The company also has failed to file results for the first six months of the current fiscal year.

Setting aside more money to cover loan losses will increase last year’ s loss to $45.2million from the $31.2 million loss the company initially reported, First Place said in a December regulatory filing. The company lost $110.4 million the prior year.

In its latest quarterly report on the thrift industry, the OTS says the current high levels of problem loans are a result of continued weakness in the housing market and high unemployment. Because First Place Bank is chartered as a savings association, or thrift, its primary regulator is OTS rather than the Federal Deposit Insurance Corp.

Although Ruberry of the OTS would not comment on First Place’s predicament, he said that a formal enforcement action such as a supervisory agreement is taken only when informal, lower-level attempts to address a problem have failed.
Ruberry said a company’s failure to comply with the terms of a supervisory agreement could bring further action by the OTS. Ultimately, a bank that can no longer operate safely and soundly could be closed, he said.

That’s what happened to AmTrust Bank of Cleveland in 2009. Federal regulators seized the bank and turned it over to New York Community Bank after AmTrust failed to complete a turnaround agreement with OTS. AmTrust’s Ohio operations now go by the name Ohio Savings.

First Place Bank appears to be in better shape than AmTrust was, however. Even after setting aside more money for loan losses, the bank said in a December regulatory filing, it remains well-capitalized.

BauerFinancial Inc. of Florida, which analyzes bank finances, rated First Place Bank three stars out of five based on the bank’s condition as of Sept. 30. Three stars mean the bank’s finances are “adequate.”

In any event, depositors needn’t worry about the safety of their money. Deposits are federally insured to at least $250,000 and sometimes more, depending on how account ownership is structured.

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