First Place Financial Corp. F1Q09 (Qtr End 9/30/08) Earnings Call Transcript

About: First Place Financial Corp. (FPFC)
by: SA Transcripts

First Place Financial Corp. (OTC:FPFC) F1Q09 Earnings Call October 22, 2008 10:00 AM ET


Steven R. Lewis – Chief Executive Officer, President

Albert P. Blank – Chief Operating Officer

Kenton A. Thompson – President of Wealth Management Services

David W. Gifford – Chief Financial Officer


Daniel Arnold – Sandler O’Neil

Tom Wadewitz – JP Morgan

Ken Hoexter – Merrill Lynch

Tom Albrecht – Stephens, Inc.

David Ross – Stifel Nicolaus

Justin Yagerman – Wachovia Securities

Ed Wolfe – Wolfe Research

John Rowan – Sidoti & Company


Greeting, ladies and gentlemen, and welcome to the First Place Financial Fiscal 2009 First Quarter Conference Call. (Operator Instructions) It is now my pleasure to introduce Ms. Kim Wadman. Thank you Ms. Wadman, you may now begin.

Kim Wadman

All participants please standby your meeting is ready to begin. Welcome to the First Place Financial Corp. Fiscal 2009 First Quarter Conference Call. There will be a question and answer period at the end of the presentation. If you have a question at that time please press star one on your touch tone telephone.

Before we begin today’s call, I would like to remind everyone that this call may involve certain forward looking statements, such as projections of revenue, earnings and capital structure as well as statements on the plans and objectives of the company or its management, statements on economic performance and statements regarding the underlying assumptions of the company’s business.

The company’s actual results may differ materially from any forward looking statements made today due to several important factors described in the company’s Securities and Exchange Commission file. The company assumes no obligation to update any forward looking statements made during this call.

If anyone does not already have a copy of the press release issued by First Place yesterday, you can access it at the company’s Web site at

On the conference today from First Place Financial Corp. we have Steve Lewis, President and Chief Executive Officer and David Gifford, Chief Financial Officer. We will begin the call with management’s prepared remarks and then open the call to questions. At this point I would like to turn the call over to Mr. Lewis.

Steven Lewis

Good morning. Thank you for joining us on our call this morning for what I’m sure has been a chaotic week for one and all. We are no exception, especially in light of our post-results; that certainly requires some additional detail and insight.

I’m going to provide you with a brief overview of our results and some commentary on our existing and plan for future initiatives. David will provide a more in-depth look at some financial results for the quarter followed by Mr. Al Blank, who will concentrate his comments on asset quality results and trends.

As I’m sure you are probably aware, we pre-announced a significant valuation adjustment with respect to the Fannie Mae preferred stock that we own, in accordance with FAS 159, which we adopted July 1. This charge is a direct result of Fannie Mae being placed in conservatorship by the government, consequently that valuation adjustment has dominated our first quarter results.

In addition, a valuation adjustment has also been taken on a mutual fund that we own, which is comprised of mortgage-backed securities. The charge was $1.3 million before tax. We believe for several reasons that this fund will recover, as spread that occur will eventually normalize. David’s going to provide more specific detail on that particular funds composition and our thinking toward its future.

We have obviously suffered from a long period of devaluation as Fannie Mae has been sinking the last a couple of years. If there is any good news, I suppose, the Fannie Mae stock that we do own today carries a remaining book value of about $1.3 million. So, the opportunity for significant valuation changes in that investment, I believe, has been curtailed.

We also continued our practice of aggressively charging off stressed loans in, what is obviously, a very difficult housing environment as noted by the $4.1 million charge-offs for the quarter. We responded by adding over $7.3 million to our provision, which has resulted in increasing reserves from 107 basis points of the loan portfolio to 119 and we maintained our target coverage ratio at or above 50% of our non-performing loans.

Charge-off rates in all of our asset categories have remained relatively steady over these last several quarters, which is well below the 50% coverage ratio that we’ve been maintaining. Non-performing loans and non-performing assets were up 20% late quarter, which despite some notable progress in the June 30 quarter, has returned back to levels where we were at the end of March. Mr. Blank will be providing a great deal more detail for your information shortly.

Obviously, as you might imagine, our number one focus is managing asset quality and certainly the rapid disposition of non-performing assets. However, the core elements of the franchise continue to perform well and, in fact, in some areas are improving. As an example, mortgage banking earned roughly $1.8 million during the quarter; those results merely matched our first quarter of fiscal year ‘08 despite the difficult market.

We did about $264 million in gross originations and sold 97% of them, resulting in the gain of $1.8 million. Margins have actually increased year over year from roughly 63 basis points to 81 basis points.

Controlling the size of our balance sheet and indeed loan growth is certainly a top priority for the company. Loan servicing results on the other hand included a mortgage servicing rights impairment of $292,000, even though internal prepayment speeds have remained relatively flat.

We continue to pursue smart retail lending expansion opportunities, as well as in the wholesale area due to the dramatic changes in the competitive landscape of mortgage banking. These strategies should help to not only preserve our existing levels of mortgage banking revenue but hopefully expand them.

On the commercial lending front, again, growth has been controlled to a modest net $15 million. That net was arrived at by originating roughly $63 million during the quarter, $16 of which was pure C&I lending, $37 million was in commercial real estate. Of the $63 million, $44 was a fixed rate nature, although we do not extend rates beyond five years and $9 million was at a pure floating rate basis. Commercial portfolio yields during the quarter improved by 10 basis points.

Looking to the other side of the balance sheet, our deposit activity has been greatly impacted by customer concerns in light of unprecedented governmental involvement in media focus. The more difficult elements we’ve had to deal with is the liquidity issues that our larger competitors are battling. They’ve addressed it by paying rates of interest adding incredible stress to the yield term.

We’ve responded to these challenges by being more aggressive on our public funds program, particularly in Michigan where collateralization is not required. In addition, the Cedar Program has been quite successful in not only retaining but attracting some large deposit relationships.

Poor account growth for retail and businesses continues to be strong and that is our number one deposit strategy. Despite changes in balances, we continue to pursue these increases in core relationships that we firmly believe will be very beneficial to the bank when the cycle normalizes.

As an example, net checking account growth for both consumer and business accounts was 556 accounts for the quarter. To augment liquidity and be defensive in light of the competitive situation that we’re facing, we have obtained some broker CD’s as a temporary funding strategy. All told, our constant deposits actually declined 20 basis points during the quarter.

Clearly, the recent Fed action of lowering rates by 50 basis points will impact the company. I do not believe we’re going to benefit much, if at all, from the drop in rates on the deposit side, again, due to the reasons I cited previously and there certainly will be, I believe, some negative consequences on the margin side as we are slowly asset sensitive and those assets will be pricing lower as the [inaudible] dates approach. David will comment more on the margin analysis.

Our expense control and operation results have been excellent, if you exclude REO activity, which is clearly difficult to control. As an example, our non-interest expense ratio, absent REO expenses to average assets, was 2.50% a year ago; today it is 2.43%. I think this is particularly noteworthy when you consider the fact that we’ve added four officers to the organization over the last four quarters, which include in Hicksville in Columbus and Cleveland Heights and a de novo grocery store branch on the west [inaudible].

More recently, we’ve realigned some back office operations in Michigan and consolidated two retail offices. This will produce an estimated $750,000 in annual savings respectively. Other retail strategies include – we have plans to enhance our checking overdraft program. They will be implemented this quarter.

We have a debit card usage expansion program underway which is yielding some very positive results. And then finally, we are pursuing the implementation of branch capture technology. This would have some significant benefits on courier costs and some benefits as far as personnel expense.

Finally, we have engaged Corner Stone Advisors, a consulting firm, to examine our staffing levels and production routine, and we expect them to come forth with some positive recommendations to further enhance the overall efficiency of the organization. I think that is particularly timely as we move much closer to completing the acquisition of Camco, which was announced last May of this year.

Camco and its chief subsidiary, Advantage Bank, bring 23 retail offices and $1 billion in assets to the table. Our joint success in consolidating our back office operations will make the combination highly accretive to earnings as we had previously announced. All projections in terms of cost saves are meeting or exceeding the expectations that were previously profiled.

All filings associated with the merger have been completed. Shareholder votes are going to be held on November 5 and 6 at First Place and Camco, respectively. We continue to plan for a closing and integration before the end of this quarter.

Our most recent acquisition of OC Financial, which is headquartered in Columbus, Ohio, has yet to be integrated. It will be accomplished after Camco. Obviously there are some unrealized cost saves associated with this acquisition to come, along with some consolidation opportunities in the Columbus marketplace between OC, First Place and Camco, wherein we all operate.

Because of our confidence in the performance of our core units and the strategies that we currently have in place, the Board has unanimously elected to maintain the dividend at $0.085 per share.

That concludes my opening remarks. I’m going to turn it over to David Gifford, who is going to provide additional insight as to the financial results.

David Gifford

As Steve mentioned, our loss for the quarter was $6.2 million or $0.37 per share. Our results this quarter were dominated by what happened with two securities and our investment portfolio. Our Fannie Mae preferred stock had a market value of $9.4 million at June 30. As of July 1 we began to account for that stock at fair value on the FASB 159. During the quarter it lost $8.1 million in value as Fannie Mae was put under conservatorship and stopped paying dividends. At September 30 our remaining book value was $1.3 million.

The other security was a mutual fund that owns primarily adjustable rate mortgage-backed securities, including both agency and privately issued mortgage-backed securities. It began the quarter with a value of $15.5 million, lost $1,350,000.00 in value during the quarter and ended up with a value of $14,150,000.00. We also began to account for this security based on its fair value as of July 1. Together, the loss in fair value on these securities was $9.3 million or $7.8 million, net of tax.

The remainder of our operations generated $1.6 million in after-tax income, in spite of a historically high level of provision for loan losses. Net interest income for the quarter was $23.4 million and was up $100,000.00 from the June 2008 quarter and up $1.6 million from the September 2007 quarter.

Our net interest margin was 3.07, which was down from 3.13 for the June quarter but up from 2.94 from the year ago quarter. The decline in our net interest margin from June was driven from lost earning from an increase in non-performing loans and stiff competition in pricing deposits.

As in prior periods, we are asset sensitive in the short term and the recent 50 basis point cut in the targeted Fed funds rate will reduce our net interest margin in the coming quarter as our prime based loans re-price down. I’m projecting that our net interest margin will be in the 2.98 to the 3% range over the next quarter. If we get another 25 basis point Fed rate cut next week that would reduce the margin by another 3 basis points.

Liquidity stress experienced by our competitors has made it very difficult to pass along rate declines to our deposit customers. Non-interest income is down dramatically from a year ago due to the decline in the fair market and securities and a $1.5 million gain on the sale of loan servicing rights in the prior year compared with none this year.

We sell loan servicing rights periodically when we have a significant volume to sell and when the market is favorable for a sale. Several of the other components of noninterest income are holding up well, including service charges on deposit accounts up 7%, insurance commissions up 9% and mortgage banking gains down 4% in spite of the decline in housing values and the disruptions in the markets for mortgage-backed securities.

The provision for loan losses was $7.4 million for the quarter. This was the largest quarterly provision in the company's history. However, it was $3.2 million more than charge offs for the quarter and resulted in an ending allowance for loan losses of $31.4 million or 1.19% of loans, which are also both at the highest level in the company's history.

Non-interest expense for the current quarter is $21.4 million or 2.56% of average assets, which is nearly even with the year ago quarter. I think it's helpful to breakdown interest expense into three parts and see how they've changed since last year.

The first category is merger expense. It is up as it was 0 in the first quarter last year and was $45,000 this quarter.

The second category is real estate owned expense, which is up from $404,000 or 5 basis points of average assets last year to $1,080,000 or 13 basis points of average assets this quarter. Real estate owned costs are primarily related to credit issues and differ significantly from salaries, document fee and other types of overhead costs.

The last category would be the remainder of non-interest expenses after removing merger and REO costs. These costs were up from $20,025,000 last year to $20,235,000 this year. However, those costs as a percentage of average assets were down from 250 last year to 243 this year.

We continue to focus on both reducing REO and finding additional operating efficiencies with the rest of our banking operations. One area where we expect changes going forward is deposit insurance. There are three factors impacting deposit insurance. The credits issued by the FDIC a couple of years ago will be exhausted in the upcoming quarter.

Secondly, the FDIC is doubling the current rates to recapitalize their insurance fund, and third there will be new deposit insurance on non-interest bearing checking accounts. Taken together these will increase our deposit insurance costs from $107,000 in the current quarter to approximately $350,000 in the December quarter to approximately $900,000 in the March 2009 quarter.

Since we do anticipate the Camco acquisition closing in this current quarter we would anticipate significant merger costs to be recorded in the December quarter also.

Our balance sheet contracted $25 million during the current quarter as we continue to stress credit quality in the loans we originated. In addition, the breakdowns in our security portfolio reduced capital and we were not willing to reduce capital ratios further through asset growth. We anticipate limiting growth again in the coming quarter and holding asset growth to 1% or less.

Our capital ratios fell this quarter due to the net loss we recorded. Equity to assets was 9.38% at September down from 955 at June. Intangible equity to tangible assets was 637 at September down from 655 at June. At September 30 our book value per share was $18.32 and our tangible book value per share was $12.04. Our closing price yesterday was $6.17 or 51% of tangible book value.

The volatility and level of financial institution stock prices over the past month has been unprecedented. Our stock has shared in that volatility. The current price as a percent of tangible book is extremely inexpensive historically. However, it's not inconsistent with the number of our peers currently.

Al Blank will now continue with comments on asset quality.

Al Blank

As our press release indicated we preserved $7.4 million for loan loss reserves. We continue to be committed to making sure that that category is adequate to take care of our losses. One of the factors that we looked at was our nonperforming loans. Another one was our net charge offs for the quarter.

When you take a look at our NPLs for the quarter, which increased by $12.2 million, we divide the portfolio up into loans associated with our Ohio portfolio and loans associated with our Michigan portfolio. During that analysis, we identified that the increase in non-performing loans in Michigan were $13.7 million, while the Ohio portfolio actually improved in non-performing loans by $1.5 million.

At the same time our Franklin portfolio, the Michigan portfolio, had an increase of $11.7 million in NPAs. That was benefited by a reduction of $2 million in REO. The total NPA increase for the Ohio portfolio was $2.6 million, which was impacted obviously by an increase in REO for that portfolio as well.

Some of the things that we try and dig into on a quarterly basis were mentioned last quarter by Steve Lewis. Our homebuilder credit facility is the portion of our portfolio that has given us some stress. The portfolio last quarter was $100 million. As Mr. Lewis indicated our goal is to continue to reduce that portfolio. We were successful last quarter in reducing that portfolio down to $92 million.

The segments of that portfolio are really three portions. The first one is residential as we call it. That portfolio is made up of loans that builders did without lines of credit that are back financing of maybe one or two houses per builder. That portfolio is about $21 million and has performed fairly well. The NPLs in that portfolio are only 3% of the portfolio.

Our raw land portion of this portfolio has also performed in a reasonable manner. We think that portfolio continues to perform fairly well due to the significant equity and fusion that the developers were required to put into the raw land. That portfolio has NPLs of about 7%.

The portfolio that we have struggled with is our homebuilder credit facilities that are associated with developments and that portfolio is $53.5 million. In that portfolio 14% of those loans are now in NPL for a total of $7.6 million. We really reduced that portfolio from an origination prospective about two years ago, but it will take time for us to continue to work through it and we believe that we will be able to continue to reduce those balances.

One of the ideas that Mr. Lewis championed was going out to our builders and offering them a 4.99% 30-year fixed rate for qualified buyers who come in and buy either their specs or their models. We will sell those loans into the secondary market, Fanny Mae and Freddy Mac, and anticipate some small losses due to the rate reduction, but we believe those small losses are in the best interest of all parties.

The other area of stress in our portfolio is our one-to-four family investment property portfolio. That portfolio has approximately $70 million in outstanding balances. That portfolio also from an origination standpoint was significantly detailed about two years ago. As we continue to work through that portfolio, thought, it does provide some stress.

Right now we have 15% of that portfolio in some form of delinquencies and 11% of that portfolio is NPL. When you segment that portfolio out from our standard one-to-four family portfolio, which is approximately $900 million, you find that our standard homeowners are doing very well today. Their delinquency rate is approximately 3.5% and the NPL ratio in that portfolio is only 2.35%.

The other area of a lot of discussion in our industry is the commercial real estate portfolio and the C&I portfolio. Our portfolio combines for almost $1 billion. Inside of that portfolio we are still pleased that only 1.5% of that portfolio is delinquent and only 76 basis points of that portfolio is in an NPL status.

Another area that we have been focusing on over the last couple of years is our consumer loan portfolio. Obviously, the consumer loan portfolio by its nature possesses a higher level of potential charge-offs because they are generally, second mortgages. We have been very pleased with the quarter over quarter change in that portfolio.

Last quarter, as of June 30, 97.3% of that portfolio was current. This quarter 97.2% of that portfolio is current, and last quarter only 2% of that portfolio was NPL, and this quarter only 2.1% of that portfolio is currently non-performing.

This gives you some insight into those areas of our portfolio that are performing well, and some of the areas in which we are continuing to work. We will continue to focus a lot of our efforts on the investment property portion of our portfolio for single families. We will also work on the homebuilder credit facility and continue to work with our builders to lower those balances, and work our way out of those portfolios. And with that, I will turn it over to Mr. Lewis.

Steven R. Lewis

Thanks Al, David; that concludes our remarks. We would like to open it up for questions from our listeners.

Question-and-Answer Session


Our first question comes from the line of Daniel Arnold –Sandler O’Neil.

Daniel Arnold – Sandler O’Neil

I just have a couple of questions here for you. The first of them is the deposits fund. I know you guys said it would be aggressive pricing that was causing these outflows here. I want to see kind of if you if you have a little color on the trends there. Was this happening in the very end of the quarter? What has been going on since the beginning of the fourth quarter?

It looks like it was pretty broad based in terms of core deposits where we saw the outflows in checking accounts, money market accounts, savings accounts. I was wondering if your competitors are offering high rates on checking accounts and savings accounts and things like that? If you could just kind of give a little more color there, I would appreciate it.

Steven R. Lewis

Sure, the place where we are receiving the most pressure is on CD pricing and money market account pricing. In our case, we have been reluctant to re-price those large pockets of funds in the money market areas, and have focused a bit more on our CD pricing. In addition to that, we have two very large relationships in Michigan, actually they were smaller banks, but did business with us.

They we in I believe money market business, money market accounts and they pulled those due to their own liquidity issues. That cost us $30 million in deposits, just from those two small bank relationships.

Daniel Arnold – Sandler O’Neil

What about on the checking account side?

Steven R. Lewis

I think just generally, customer’s behavior has been limiting the amount they are keeping liquid. Also, with the increase in internal pricing curve, the spread between what you can get on a money market account or even in an interest bearing checking account to cover the shorter term CD’s to [inaudible] much more attractive. And as you compare those CD rates to the corresponding point on the curve, the spreads are somewhat ridiculous, again due to dome of the liquidity prices that are being brought on by some of the larger players.

Daniel Arnold – Sandler O’Neil

Could you talk a little bit about the timing for this stuff, was this mostly at the vey end of the quarter? What have you guys been seeing at the beginning of the fourth quarter, second fiscal quarter?

Steven R. Lewis

This has pretty much been going on all quarter long, and it has not let up despite the fact that the Fed dropped fifty basis points. We were hopeful, but not expecting the larger competitors to drop because, I think the liquidity concern right now are on top of market at their shops and we have been very reluctant to match that pricing with these other strategies, other tiering strategies, laddering strategies and certainly focusing on a relationship approach.

And at the end of the day, we are not chasing the hot money. You lose because of price; you can always get it back because of price. We’ve allowed that to go supplement it with, actually brokered CD’s that have cost us less than matching the competition.

Daniel Arnold – Sandler O’Neil

What kind of rates are you guys paying on the brokered CD’s right now?

Steven R. Lewis

In the 3% and 4% range depending on the maturity.

Unidentified Corporate Participant

We’ve laddered those pretty much from six to eighteen months; I think is pretty much the range.

Daniel Arnold – Sandler O’Neil

Okay, that covers my deposit questions. Next, quickly on the impairment charges you guys took. I was just curious as to kind of, what percent of par value was Fannie preferred stock and the mutual funds you guys are currently holding?

Steven R. Lewis

The percent of par?

Daniel Arnold – Sandler O’Neil

How much have you written it down?

Steven R. Lewis

Right. From day one?

Daniel Arnold – Sandler O’Neil

Yes, from the original book value.

Steven R. Lewis

Original book was $20 million and we are currently holding it about $1.3 million.

Daniel Arnold – Sandler O’Neil

And the mutual fund part?

Steven R. Lewis

The original mutual fund was about $16 million roughly, Dan, and today we are at—

David Gifford

$14 million

Steve R. Lewis

$14 million, $14.2 million

Daniel Arnold – Sandler O’Neil

Okay. And then just one final question here. I mean, right now your capital levels seem to be all right, but if you have to take additional impairments or if credit costs creep up on you, certainly with the close of the Camco deal, capital might be an important issue. Have you guys looked at the TARP plan at all from that perspective?

Steven R. Lewis

I do not think there is a banker in the country that has not looked at the TARP plan and I’ve looked at it very, very closely, you know, the interpretations and the rules associated with it. But, you know, it’ll come out daily, if not hourly, and so we are looking at it very closely. We have been polling certainly some of the bigger bank fund managers input from their perspective and as well as investment bankers. We are looking at it very closely and have not made a decision at this particular point and time.

I would say that, back on your question with the mutual fund, one’s comprised of the mortgage security note. The problem with that is funded. First of all they are not GSC securities. The fund has also been closed to redemption so there’s a liquidity issue. But the fund is also not experiencing any credit losses, the way it has been structured through the various traunches.

And I think as we look at that, and again, I think if spreads begin normalizing and some of the – hopefully some of the stabilization that the government is intending comes into the marketplace; you know, we will find that fund recovered. You know, its decline and back. That is our perspective.

Daniel Arnold – Sandler O’Neil

To follow up on that, are you guys using kind of market evaluations on that right now to market the fair value or you using cash flows?

Steven R. Lewis

It is under FAS 159; we are marking at the market.

Daniel Arnold – Sandler O’Neil

Okay, so –

Steven R. Lewis

That began July .

Daniel Arnold – Sandler O’Neil

So there has not been any, I mean, the cash flows have been coming in; there has not been any decrease in that. So, if you were to use something like that and there was an adjustment in fair value accounting rules –

David Gifford

Our cash flows continue to come in as expected on a monthly basis.

Steven R. Lewis

No issues there.


Our next question comes from the line of John Rowan – Sidoti & Company.

John Rowan – Sidoti & Company

First question is on the Camco deal. I mean obviously with the collar at 1120, I mean, do you expect that the deal is going to get voted or approved by their shareholders?

Steven R. Lewis

Obviously, well, first of all the board has the opportunity to cancel the deal if they wish, because of trading below the collar, that is part of the definitive agreement. We are looking at it. I can’t necessarily predict shareholder behavior. I think that if a – look at this market realistically, certainly I think the more sophisticated investors are going to look at it and vote for it. The changes and evaluations that we have experienced is no different than the rest of the industry.

We all in the same, as they say, pail of water no matter how much water is in the bucket, we are all pretty much floating up and down. Not to mention the unprecedented volatility in stock prices, so I think that, you know, where Camco stock price was not tied to ours, where would it be today? They would be looking at similar changes in valuation.

I think that once people look at it from that standpoint we will not have any trouble with the vote. If there is a proxied solicitor as part of this process we will do whatever we can to educate both the shareholders in first place and at Camco. At this point in time I have no indication or expectation that this deal will not be voted on in favor. But it’s early in the process. The proxy’s only went out recently and we’re only just beginning to monitor the voting process.

John Rowan – Sidoti & Company

Okay, Dave, can you go over the FPIC insurance premiums that you stated. I thought you said that they’re going to go up to $800,000 from $100,000 per quarter is that correct?

David Gifford

Yes ,we’re going from $107,000 in the current quarter.

Al Blank

We just finished $350,000 in the December quarter to $900,000 in the March quarter and then they should remain at that level going forward.

John Rowan – Sidoti & Company

Why such a dramatic increase? I mean is that because of, I assume it’s not necessarily because of the increase in overall FPIC insurance premiums at 250. More so is that based off of the optional, for opting in I would guess you would say of the unlimited price, unlimited insurance on the transactional accounts?

David Gifford

No that only accounts for about $50,000 of this increase. The majority of it is the FPIC recently doubled their deposit insurance rates because they’ve experienced bank failures and they have to rebuild the insurance fund.

John Rowan – Sidoti & Company

Okay so they doubled the rate though but your rate is going up eight fold, your premiums.

David Gifford

Well in addition there was a credit that they granted us a couple of years ago that has been reducing our premium over the past year or two.

John Rowan – Sidoti & Company

So that runs out then. How much of that credit accounts for the change from $100,000 quarterly to $900,000 quarterly?

David Gifford

If we didn’t have that credit we would have paid about $350,000 in the current quarter, the same as we’re anticipating in December.


Our next question is from Christopher Mcgratty – Keefe, Bruyette and Woods

Christopher Mcgratty – Keefe, Bruyette and Woods

With respect to capital can you give us a little bit more color on where the Cap ratios were this quarter? I guess pro forma for Camco? Either regulatory or [inaudible]

David Gifford

We have not finished our regulatory capital calculations this quarter yet.

Steven R. Lewis

The Camco impact Chris was initially when we originally post transaction it looked like it would be a creative service space capital ratios of 5 basis points. Today we think it’s going to be roughly a push, but at the end of the day it’s going to depend on, you know, the market to market investments that occur, you know, at closing. So I think it’s really going to be sort of a push one way or another it’s not going to fluctuate a lot.

Christopher Mcgratty – Keefe, Bruyette and Woods

But there are some implications on tangible capital will be a little bit more I assume right?

Steven R. Lewsi

At the holding company?

Christopher Mcgratty – Keefe, Bruyette and Woods


Steven R. Lewis

Oh about 25 basis points.

Christopher Mcgratty – Keefe, Bruyette and Woods

That’s what you said in the past.

Steven R. Lewis

Yes I was referring to the, I’m sorry bank level.

David Gifford

And in terms of total risk space capital that was at about 1147 going back last quarter. We expect that to drop to the 1120 to 1130 range at the end of this quarter. But again those are preliminary numbers.

Christopher Mcgratty – Keefe, Bruyette and Woods

And that’s at bank level?

Unidentified Corporate Participant


Christopher Mcgratty – Keefe, Bruyette and Woods

And I guess my last question, when is the vote?

Steven R. Lewis

On November 5th for First Place, because we’re issuing stock at the upper level, First Place will be voting on the 5th and Camco is voting on the 6th of November.

Christopher Mcgratty – Keefe, Bruyette and Woods

And I guess any chance of adjusting the terms just to make sure the transaction goes through?

Steven R. Lewis

I really can’t comment on that at this point. You know, the option is at Camco’s doorstep so that’s more question for them I suspect.


There are no further questions at this time. I would now like to turn the floor back over to management for any closing comments.

Steven R. Lewis

I’d like to thank everybody for joining us today. I am sure my concluding comments are no different than anyone else’s, especially in the Mid-West which is where we’re battling, the negative housing cycle and certainly economic stress and certainly threat of additional economic stress in the automobile industry.

I think we’ve done a pretty darn good job of weathering the negative housing cycle. Admittedly the change in the evaluation of the Fannie Mae investment has been a very frustrating experience for us over the last couple of years. I guess the good news is that it’s more or less over. And we need to move on from there and so that we can be consistently providing a positive result to all shareholders.

Our shareholder meeting is the 5th and we look forward to that and having discussions with shareholders there. Thanks again for joining us, have a great day.