Regulators order Ann Arbor-based Michigan Commerce Bank to seek sale or merger
Michigan Commerce Bank - a collective of 11 banks reorganized in 2009 under the charter of Ann Arbor Commerce Bank - is now operating under a consent order to correct “unsound banking practices.”
Among the requirements issued by federal and state banking regulators: The bank must plan to sell itself or merge into an institution that is not controlled by Capitlal Bancorp, its Lansing-based holding company.
The order was issued March 31 and released today by the Federal Deposit Insurance Corp. in Washington and the state’s Office of Financial and Insurance Regulation in Lansing.
According to the April 5 consent order, “the FDIC and the OFIR considered the matter and determined that they had reason to believe that the Bank had engaged in unsafe or unsound banking practices and violations of law, rule or regulation.”
Within 90 days of the order, the bank “shall have and retain qualified management,” according to the order.
The new management, according to the order, must be capable of restoring “all aspects of the bank to a safe and sound condition” in areas including earnings, liquidity and management effectiveness.
Borrowers from any of the Michigan Commerce Banks who are not current on their loans also will face changes: According to the order, the bank no longer will be able to delay payments, charge interest-only to extend loans or otherwise keep that debt on its books.
Michigan Commerce Bank, based locally at the corner of South State and Eisenhower, had $705 million in deposits as of June 30, 2009, according to FDIC filings. Of that amount, about half - $344 million - was from the Ann Arbor office, which ranked seventh in Washtenaw County banking market share as of that date. It held 5.69 percent of local deposits.
Local representatives from the bank were not available to comment this morning. Calls to the Lansing office have not yet been returned.
Other Michigan Commerce Bank offices are located in Auburn Hills, Brighton, Detroit, Grand Haven, Holland, Kentwood, Macomb, Muskegon, Farmington Hills and Portage.
Capital Bancorp, with offices in Lansing and Phoenix, is a bank development company that focuses on establishing new community banks. It operates in 16 states.
In summer 2009, Capital Bancorp said in a public filing that it intended to spinoff Michigan Commerce into a separate entity but had not yet received regulatory approval. At that time, Michigan Commerce had consolidated assets of $1.2 billion and about 1/3 of the holding company's total nonperforming assets.
Read a pdf version of the order here.
Paula Gardner is Business News Director of AnnArbor.com. Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.
Comments
colmar
Fri, Jun 4, 2010 : 3:27 p.m.
When Capitol Bancorp refers to selling charters, they are referring to charters outside of Michigan. As mentioned in a previous comment... as of 2009 annual report they have 40 nationwide charters. I agree that the merger has done nothing to help Ann Arbor Commerce Bank, but fortunately their holding company has charters to sell to raise the capital needed.
Paula Gardner
Tue, Jun 1, 2010 : 6:50 a.m.
Colmar, I'm not sure where you see the "insolvency" implied here - and there is no hysteria, either. The bank's financials put it near the top of the state's list of troubled banks. Here is some updated information from Sunday: http://www.annarbor.com/business-review/eroding-financials-prompted-fdic-to-increase-oversight-of-michigan-commerce-bank/ The bank may emerge from this "just fine." But it will do so under new management and a new holding company, since federal and state regulators have ordered that. LA, The sale of charters to raise capital means there has to be buyers - so only charters of value will be sold. So far this year in Michigan, we've seen a couple of banks find buyers (New Liberty in Plymouth to Bank of Ann Arbor, for example) and one that was dissolved b/c of no buyer (Lakeside Community in Sterling Heights). So while the order is not a "death sentence" it makes obvious that the bank won't survive in its current form and within its current structure. Beyond that, I can't see where the merger has done anything to help Ann Arbor Commerce Bank - which represents half of the Michigan Commerce Bank's deposits. Untying the bank from the others and its holding company could be its lifeline.
colmar
Tue, Jun 1, 2010 : 6:32 a.m.
L.A. is right, the article implies insolvency... this is not necessarily the case. It neglects to mention that many banks enter into C/O and come out of them just fine. Sometimes these articles are sensationalized and cause undue hystery. If your deposits are insured, there is no reason for concern.
Boss Hog
Sat, May 29, 2010 : 10:46 a.m.
Also....... "Among the requirements issued by federal and state banking regulators: The bank must plan to sell itself or merge into an institution that is not controlled by Capitlal Bancorp, its Lansing-based holding company" These were the same orders given to Michigan Heritage Bank and was pretty much their death blow....their prez soon thereafter split town and the rest is history.
Boss Hog
Sat, May 29, 2010 : 10:32 a.m.
It will be interesting to see what happens here. It does seem like the old ann arbor commerce guys are getting the raw end of the deal. I've been out of the biz for a while now but according to my recollection this went down like this(some can probably be verified by old ap articles)...... The west side capitol bancorp banks (Grand Haven Bank, Muskegon Commerce, Kent and Paragon) were hurting the most. I know at the very least Muskegon had a C&D prior to the Michigan commerce consolidation. For a while they were trying to spin off those four. Northstar Bank (in bad axe of all places) was going to purchase via their holding co. (holding co. is in FL which has a bank there as well as Northstar and Seaway here in MI). That deal seemed all but done but I "think" didn't get regulatory approval in the end. After that didn't happen Michigan Commerce is born and likely saves Muskegon and probably Macomb comm. from imminent failure. When that happened credit is centralized in Lansing for pretty much all capitol bancorp banks in MI. It was my understanding that Paragon was never a part of Michigan Comm (until recently) due to its charter...same thing with capitol national. Paragon B&T & Bank of Auburn hills gets rolled into Michigan comm. March 31st. Which probably bought auburn hills some time.
L.A.
Sat, May 29, 2010 : 8:37 a.m.
As a long time customer of the bank, I have been very happy with the level of service provided by Ann Arbor/Michigan Commerce Bank. This article seems to imply that this bank is headed for insolvency. This is not the case-in speaking with one of the bank employees yesterday it sounds to me like the wheels are in motion for raising additional capital through the sale of other bank charters under the Capital Bancorp umbrella. (According to the 2009 annual report the bank had over 40 nationwide bank charters). This consent agreement w/ the FDIC is not a death sentence as the AnnArbor.com Business Review article would imply but is instead an agreement to clean up the balance sheet, raise capital and improve bank management.
John Alan
Sat, May 29, 2010 : 2:42 a.m.
Intersting and sad!!! Ann Arbor Commerce Bank was doing fine (at least it appeared that way) and then the Capital Bank Corp puts it together with bunch of other banks and calls it Michigan Commerce Bank... here goes the story.... now as a bigger bank they get bunch of position elimination and all the goodies associated with their loans and so on..... I guess we need to wait for the Firday afternoons that FDIC Bank Closure Reports comes up in Yahoo Finance and hope for not seeing this bank's name there.... Ann Arbor Commerce was a great bank and I truly miss that..... Not too sure about Michigan Commerce though....
Ian
Fri, May 28, 2010 : 10:15 p.m.
It should be obvious by now what is happening. The Feds and the big banks are destroying the small banks so they can control much more of the financial market. Big banks, who created this financial collapse, got all of our tax money and they are letting the small, local banks go under or allowing larger banks to gobble them up. This is by design. The too big to fail banks should have been liquidated and smaller, healthier banks should have stepped in. That was nearly impossible since the banks own many of our politicians. Obama's biggest contributors, banks! Not only that, his administration is filled with Goldman Sachs criminals. So was Bush and Clinton admin.
81wolverine
Fri, May 28, 2010 : 8:50 p.m.
We've had personal and business accounts at MCB for years now and love the bank. The people down there are great. So, this is kind of disturbing. But, it's not clear from reading this article exactly whether the problem is with Capital Bancorp or Michigan Commerce Bank. Which bank "had engaged in unsafe or unsound banking practices and violations of law, rule or regulation? I hope all this doesn't mean that bankers are going back to their ultra-conservative, "tightwad" days of the early 90's when even a credit-worthy person couldn't get a loan. The knee-jerk reaction to the Savings and Loan scandal by regulators and politicians set this country's economy back for years.
Opinari
Fri, May 28, 2010 : 6:34 p.m.
If the story is accurate and 1/3 of the bank's assets are non-performing. This illustrates a complete lack of responsibility and due diligence with there underwriting standards and direction from executive management.
Stephen Lange Ranzini
Fri, May 28, 2010 : 5:12 p.m.
@halflight wrote "If a more financially secure institution takes over Michigan Commerce Bank, it may be able to renegotiate loans without violating the banking regulations." We'll see if one does. However, nearly all the large banks that do business in Michigan can't wait to "shake the dust off their shoes" on their way out of the state. Just today, we received yet another loan application from a credit worthy leading local business person who was told by his big (based out of state) mega bank that they won't renew his loan despite the fact that a payment was never missed, the loan is backed by excellent collateral, this business person has excellent credit, excellent character (we've done business with them) and plenty of income to repay the loan. Some banks might be too large to find any buyer, that was my point. We'll see. I hope you are correct. Oh, and by the way when a locally based bank does buy another bank unless they raise additional capital in the process they reduce their own ability to lend since they take on the loan portfolio of the bank they just bought. Banks can only lend in proportion to their existing shareholder capital base.
Stephen Lange Ranzini
Fri, May 28, 2010 : 5:11 p.m.
"If a more financially secure institution takes over Michigan Commerce Bank, it may be able to renegotiate loans without violating the banking regulations." We'll see if one does. However, nearly all the large banks that do business in Michigan can't wait to "shake the dust off their shoes" on their way out of the state. Just today, we received yet another loan application from a credit worthy leading local business person who was told by his big (based out of state) mega bank that they won't renew his loan despite the fact that a payment was never missed, the loan is backed by excellent collateral, this business person has excellent credit, excellent character (we've done business with them) and plenty of income to repay the loan. Some banks might be too large to find any buyer, that was my point. We'll see. I hope you are correct. Oh, and by the way when a locally based bank does buy another bank unless they raise additional capital in the process they reduce their own ability to lend since they take on the loan portfolio of the bank they just bought. Banks can only lend in proportion to their existing shareholder capital base.
BobbyJohn
Fri, May 28, 2010 : 3:52 p.m.
As a shareholder in Bank of Ann Arbor, I sure hope they have no interest in taking over Michigan Commerce Bank. They can't even afford to pay out their dividends to shareholders!
Veracity
Fri, May 28, 2010 : 2:59 p.m.
If this bank must be dissolved in the future then having a local bank takeover the assets will keep everything in the Ann Arbor family, so to speak. Therefore, I mentioned this situation with an executive assistant at Bank of Ann Arbor who, I discovered, is aware of the situation. Of course, Bank of Ann Arbor is still digesting New Liberty Bank of Plymouth. But who knows?
halflight
Fri, May 28, 2010 : 2:54 p.m.
Ms. Gardner: As you indicated, this will only affect Michigan Commerce Bank customers who haven't made all their required loan payments. It doesn't affect bank deposits insured by the FDIC. So Jackie L doesn't have to worry about her deposits; even if the government closed the bank, her deposits are insured by the FDIC up to $250,000 per account. http://www.fdic.gov/deposit/deposits/dis/print/dis_english.pdf @ Stephen Ranzini: the customers of this bank will be injured by denying the bank the ability to "work with" customers who are deserving of loan renewals & etc. Better the defaulting customers take the hit than the FDIC have to pay off the depositors when the bank fails. It's not clear from the story, but my guess is that Michigan Commerce Bank's willingness to "work with its customers" resulted in too high a proportion of nonperforming loans under the federal bank regulations. If that's the case, then the regulator obviously can't let those practices continue. If a more financially secure institution takes over Michigan Commerce Bank, it may be able to renegotiate loans without violating the banking regulations.
Paula Gardner
Fri, May 28, 2010 : 1:43 p.m.
I'm still reporting this story, but one thing to point out: The average customer who isn't behind on a loan shouldn't experience any change.
JackieL
Fri, May 28, 2010 : 1:28 p.m.
Yikes! I really like this bank and have money there. Not sure what this means.
Stephen Lange Ranzini
Fri, May 28, 2010 : 1:05 p.m.
"According to the order, the bank no longer will be able to delay payments, charge interest-only to extend loans or otherwise keep that debt on its books." This is very bad for Michigan and Michigan based businesses. This is a major bank with a significant share of lending and deposits and the customers of this bank will be injured by denying the bank the ability to "work with" customers who are deserving of loan renewals & etc. The lending capacity of local lenders in each local community (such as for example here in Ann Arbor: University Bank, Ann Arbor State Bank and Bank of Ann Arbor who are still actively lending) is probably not large enough to take on all these customers statewide.
Soothslayer
Fri, May 28, 2010 : 1:02 p.m.
And another one gone, and another one gone, another one bites the dust!