Controlling stake being sought in Bank of Maumee

Princeton Capital could bolster finances

Princeton Capital has filed with the Federal Reserve Board to buy a controlling interest in Bank of Maumee in Monclova Township.

Bank of Maumee, which has had difficulties improving its financial condition, may be getting a new majority stakeholder that could bolster the six-year-old community bank.

Princeton Capital LLC of West Trenton, N.J., a financial consulting and investment firm, has filed a request with the Federal Reserve Board that seeks permission to form a savings-and-loan holding company that would buy the 51 percent controlling interest in Bank of Maumee now held by Capitol Bancorp Ltd. of Lansing.

Princeton Capital’s request is undergoing a comment period by the Federal Reserve Bank of Philadelphia. If the request does not encounter any significant roadblocks, it could be approved by the end of May and the New Jersey firm could gain the controlling interest in the bank, which is on Briarfield Boulevard in Monclova Township, by early summer. The remaining 49 percent stake would continue to be a group of local investors.

“Their business model is to acquire the 51 percent interest but then leave the banking model in place,” said Kevin Rahe, Bank of Maumee president. “They also have additional resources to enhance the revenue of the bank.”

Princeton Capital’s plans are “a breath of fresh air,” Mr. Rahe added.

Opened in 2006, Bank of Maumee has struggled in the intervening years with financial losses and profitability — but its financial condition was not the result of decisions by local bank officials.

The bank’s problems stem from its earlier required participation in loans that were made by its majority shareholder, Capitol Bancorp. In 2011, Capitol Bancorp attempted to sell its majority interest in Bank of Maumee to Ohio-based Winding Creek Holdings, but the sale failed to gain federal approval.

In the most recent ratings of Ohio financial institutions by BauerFinancial Inc., of Coral Gables, Fla., a banking data firm, Bank of Maumee continued to receive a one-star “troubled” rating. It has received a one-star rating for four consecutive quarters and has gotten one-star off and on since the second quarter of 2010.

Karen Dorway, BauerFinancial president, said the bank remains undercapitalized and lost $470,000 in 2012 and just more than $1 million in 2011.

“Its nonperforming assets have actually improved, but capitalization and profitability remain their main problems,” she said.

“They’re also under a federal enforcement action [to improve],” Ms. Dorway added.

The bank’s Tier 1 leverage capital ratio at the end of December was just under 4 percent. The industry average is 9 percent and to be designated “well capitalized” under FDIC rules, a financial institution needs a ratio of at least 5 percent.

Bank of Maumee, which previously had been under order to improve its financial position, received a new order in October from the Office of the Controller of Currency to raise its total risk-based capital ratio to 11 percent (it was 7 percent in December) and its Tier 1 leverage ratio to 9 percent.

Before it could take control of Bank of Maumee, Princeton Capital likely would have to agree to bolster the bank’s risk-based capital ratio and Tier 1 leverage capital ratio to satisfy both the Federal Reserve and the Office of the Controller of the Currency.

Fortunately, Mr. Rahe said, Princeton Capital “is a strong group with strong capital behind them.” Princeton Capital officials could not be reached for comment.

Princeton Capital became aware of Bank of Maumee more than a year ago when advising Capitol Bancorp.

Mr. Rahe said the investment firm saw an opportunity to obtain its first federally chartered bank, and opened up negotiations to purchase the controlling interest in Bank of Maumee.

“They saw a small community-oriented bank and they felt they could enhance their business model. It’s a good foundation to build upon,” said Mr. Rahe.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.