First Place Financial Corp. has announced plans to raise $80 million in capital not only to become stronger but also to buy other institutions — including failed banks.
The Warren, Ohio, parent company of First Place Bank, a thrift, filed a registration statement Thursday with the Securities and Exchange Commission for a public offering of $80 million of common stock. The $3.2 billion-asset company did not disclose the number of shares to be sold or the price range.
First Place said in a press release that the proceeds would be used for organic growth as well as for acquisitions, "including possible participation in FDIC-assisted transactions."
Yet an analyst said First Place needs to make sure it has enough capital to absorb future losses on souring loans before it can think about being a consolidator.
Representatives of First Place would not comment further Friday.
Many companies are seeking to raise capital but usually to strengthen the institution, not to buy weaker ones. Nine other thrifts have said this year that part of their motivation for raising capital was to use the proceeds to finance acquisitions, Jack Chen, an analyst at SNL Financial LC, said in an e-mail.
First Place sought to buy Camco Financial Corp. in Cambridge, Ohio, in May 2008 for $97 million, but the deal was terminated later that year. In June 2009, First Place agreed to buy three branches from AmTrust Bank; the companies canceled the transaction several months later.
David Trainer, CEO of the equities researcher New Constructs LLC, said First Place's effort may be based more on a need to strengthen itself than to shop for other institutions. "The capital raise is just to keep them alive," he contended. "There is not enough equity to stomach the losses seen in the future."
The thrift unit exceeds the "well-capitalized" norm, with a 13.03% total risk-based capital ratio.
First Place has reported a $21.6 million net loss for the nine months ended March 31 after increasing its allowance for loan losses by 47%, to nearly $52.6 million, from a year earlier. In this period, net chargeoffs spiked 245%, to $54.6 million.
The company also plans to sell $60 million of nonperforming loans and other real estate owned. "This will also allow them to focus more time and energy on pursuing growth strategies," said SNL's Chen.
