Maumee bank purchased by holding firm

New owner’s cash infusion lifts institution to Tier 1 status

Bank of Maumee opened in 2006. New owner Princeton Capital said it sought a bank to start a mortgage-lending operation.

When he got up Monday morning, Kevin Rahe thought it was going to be a good day. At 9:15 a.m., that feeling was confirmed.

At 9:15 the Bank of Maumee president got an email confirming that Princeton Capital LLC, a bank holding company, had become the majority owner of the financial institution and infused it with new funds to free it from a financial quagmire that it had been trapped in for nearly three years.

Princeton Capital of Princeton, N.J. is now the new owner of Bank of Maumee, having purchased the 51 percent controlling interest of the local bank from Capitol Bancorp Ltd. of Lansing — and Mr. Rahe could not have been happier.

“This is our third time to try to recapitalize ourselves and separate ourselves from Capital Bancorp, which is even more important than our recapitalization,” he said.

Opened in 2006, Bank of Maumee, at 3425 Briarfield Rd., has struggled the last three years with financial losses and profitability because of problems attributed to Capitol Bancorp, which took a financial hit during the housing collapse and owned a number of troubled banks.

Capitol Bancorp had attempted to sell its interest in Bank of Maumee in 2011 to Ohio-based Winding Creek Holdings, but the sale failed to gain federal approval. Since then, Bank of Maumee has struggled to maintain its bottom line, but not because of decisions made by local management.

Ironically, it was the struggles of Capital Bancorp that led to Monday’s sale to Princeton Capital.

The New Jersey-based bank holding company, which is owned by private investors Gary Hoyer, Mark Loreto, and Lance Tearnan, was formed in 2011 specifically to help the three investors acquire a bank with a charter from the federal Office of Thrift Supervision.

A thrift-chartered bank can handle commercial loans and personal accounts, which the Bank of Maumee does, but home loans are considered the backbone of a thrift bank’s charter. To maintain a thrift charter, a bank must hold more than 65 percent of its assets in mortgages and consumer-related investments.

Mr. Loreto and Mr. Hoyer have extensive backgrounds in mortgage lending and were seeking a bank to acquire to start a national mortgage-lending operation.

With Mr. Tearnan, a former bank regulator, the three did consulting work for clients seeking to acquire banks to get to know the banking business. Their work led them to examine Capitol Bancorp, which they saw as a bad investment, but also brought Bank of Maumee to their attention.

“We have been actively interested in acquiring a bank for many years. But you can’t just go to Walmart and get one,” Mr. Loreto said.

Mr. Hoyer said Bank of Maumee was “a very small asset” to Capitol Bancorp. “It was not necessarily on their ‘A’ list. But after we examined it, we got quite comfortable with it,” he said.

Because of their unfamiliarity with Maumee and the Toledo area, they assumed it was a bank with “legacy auto industry ties” or “rust-belt industry” connections.

“We found it was 180 degrees from that,” Mr. Hoyer said. Bank of Maumee has loyal customers in a community anxious to see the bank rescued from Capitol Bancorp and given a fair chance to succeed, he said.

Bank of Maumee has struggled to remain “well capitalized” — an FDIC regulatory guideline that requires a bank’s Tier 1 leverage capital ratio to be at 5 percent to receive that designation. Bank of Maumee’s ratio has been just under 4 percent.

After buying Capitol Bank’s majority interest, Princeton Capital immediately gave Bank of Maumee new funds that put it above the 5 percent threshold.

“Working with Princeton Capital, they not only brought the capital necessary to make the Bank of Maumee a ‘well-capitalized’ bank, but they’re also bringing a business model that works for the Bank of Maumee because we are a thrift charter,” Mr. Rahe said.

Mr. Loreto and Mr. Hoyer said they want Bank of Maumee to be a mortgage loan originator, something the bank has not been but can become through its thrift charter.

Mr. Rahe said he expects to begin assembling a mortgage loan staff immediately and offer mortgage loans by year’s end. Also, the bank will begin providing more Small Business Administration loans. Both areas are viewed as potential avenues for growth.

Mr. Loreto said he expects the mortgage-lending operation to start small, then expand regionally and possibly nationally. “We can’t jump into a $500 million loan portfolio immediately, but we expect to have an adequate lending program from the start,” he said.

Bank of Maumee may have to rebrand to “a more natural sounding name” to accommodate a national mortgage program, he added. But such moves are in the future.

For now, Princeton Capital is pleased to have found a sound bank with a good management team, Mr. Loreto said.

“It’s really kind of exciting, and I’m hoping that we do even just a portion of some of the things we’re thinking of doing for the bank because then it will be a resounding success,” he said.

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