Rating firm downgrades 2 regional credit unions

Minor fluctuations seen hurting small institutions

12/12/2013

Two northwest Ohio credit unions stumbled financially and as a result their ratings by a leading bank research firm dropped.

Toledo Urban Federal Credit Union and the Postal Employees Federal Credit Union in Lima received three-star “adequate” ratings in the third quarter from BauerFinancial Inc. of Coral Gables, Fla.

Both credit unions had been rated as four-star “excellent” institutions on their second quarter financial reports by BauerFinancial.

Karen Dorway, BauerFinancial president, said the problem is that both institutions are quite small and, thus, easily affected by minor fluctuations in their quarterly performances.

Toledo Urban, which has just $4.3 million in assets, was hurt by an increase in its nonperforming assets — essentially its delinquent loan portfolio. In the second quarter the credit union’s percentage of nonperforming assets (compared to overall assets) was just 1.24 percent. In the third quarter that ballooned to 2.51 percent.

The Lima credit union lost its fourth star because of financial losses, Ms. Dorway said. In the third quarter, the Postal Employees credit union, which has just $3 million in assets, posted a $108,000 loss. In the second quarter its loss was only $10,000.

BauerFinancial’s ratings of 20 banks and 50 other credit unions in northwest Ohio and southeast Michigan remained unchanged from the second quarter.

That included the Bank of Maumee, whose fortunes changed last month but not soon enough to warrant a change in its rating.

Bank of Maumee, which was tied to massive bad loans incurred by its former parent firm, Capitol Bancorp Ltd. of Lansing, was sold to a financially stable and well-capitalized private holding company, Princeton Capital LLC of Princeton, N.J., on Nov. 18.

The sale immediately stabilized the bank and infused it with millions in new capital, but the third quarter ratings only go through Sept. 30. As a result, Bank of Maumee received another zero-star rating from BauerFinancial, as it has several times in the past.

Bank of Maumee officials have said they expect the rating to improve in the fourth quarter.

As of the third quarter, in northwest Ohio there were 10 banks and 26 credit unions with five-star “Superior” ratings from BauerFinancial.

In southwest Michigan, there was one bank and one credit union with five-star ratings.

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