Bank of Maumee's rating stays low

9/18/2012

Financial ratings of banks and credit unions in northwest Ohio and southeast Michigan remained largely unchanged in the second quarter from the previous quarter.

That was good news for most of the region’s financial institutions but not what the one area bank with a low rating was hoping to see.

For the third consecutive quarter, the six-year-old Bank of Maumee received one star out of a possible five, or a “troubled” rating, according to the latest report from BauerFinancial, Inc., of Coral Gables, Fla., a leading bank research firm that rates banks and credit unions from zero to five stars based on the stability of their financial profile.

Institutions with two stars are rated as “problematic,” and two institutions in the region received that rating — Toledo Teamsters Federal Credit Union, and Monroe Bank & Trust in Monroe. The credit union had raised its rating to two stars in the first quarter from one star in the fourth quarter of 2011. Monroe Bank & Trust has had a two-star rating since 2010.

While the Bank of Maumee was the region’s only one-star financial institution, Karen Dorway, president of BauerFinancial, said the bank’s financial profile actually has improved since the first quarter, although not enough to lift the bank’s rating to two stars.

“Based on the regulatory definition, they are adequately capitalized. But they are under a federal supervisory agreement and they lost $177,000 for the quarter ending June 30, and a total of $272,000 for the six months,” Ms. Dorway said. “They lost $1.088 million last year.”

But Ms. Dorway said the bank’s non-performing assets have come down over the last five quarters. “They are still higher than what a bank would like to see but they have improved since they peaked,” she said.

Its non-performing loans also are shrinking and were at $604,000 at the end of June, Ms. Dorway said. “Those are coming down, but profitability and capitalization are still areas of challenge,” she said.

“For a bank that size to be losing that much money is still a problem position,” she added.

Bank of Maumee has been operating under a federal supervisory agreement with the Office of the Comptroller of the Currency. The agreement instructs the bank to improve its financial position, which it has been doing, said Bank of Maumee president Kevin Rahe.

The bank finished its latest review with federal examiners on Friday, and Mr. Rahe said Bank of Maumee officials have  high hopes for a good review. “We’re still under the supervisory order but we will wait to see if it will be lifted,” he said. The bank expects an exit interview by examiners on Sept. 25 and a formal update on its status sometime after that.

By the next BauerFinancial ratings, the bank hopes to improve on its rating, Mr. Rahe said.

“This latest examination is what is going to be the starting blocks to solve both of [our] problems. We have to be able to get our profitability up,” he said.

The bank’s losses, however, are not  because of financial decisions by local bank officials. They stem from its earlier required participation in loans made by its majority shareholder, Capitol Bancorp of Lansing, which owns 51 percent of Bank of Maumee. Last year Capitol Bancorp attempted to sell its majority interest to Ohio-based Winding Creek Holdings, but the sale failed to gain federal approval and was called off.

“The parent company’s loans, that was the real earnings crunch that we saw for the last year and half or two years,” Mr. Rahe said. “But we’re real excited with the improvement we’ve made since then.”

Loans made locally by the Bank of Maumee are all performing well, he added.