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Monday, 02 September 2013 22:00

Feds upgrade Michigan Commerce status as operations improve

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As its parent company goes through bankruptcy, Michigan Commerce Bank reports improved operating results midway through 2013, including an upgrade in its regulatory capital status.

The Ann Arbor-based Michigan Commerce — which has five West Michigan offices in Grand Rapids, Portage, Grand Haven, Holland and Muskegon — received regulatory approval on June 30 to reverse a $12.2 million loan loss allocation.

The reversal enabled Michigan Commerce to record net income of $12.47 million for the second quarter and resulted in an upgrade of its regulatory status to “adequately capitalized” from “significantly undercapitalized.”

The second quarter results compare with net income of $235,000 in the first quarter of 2013 and a net loss of $363,000 in the second quarter a year earlier, according to a quarterly report filed last month with federal regulators.

Michigan Commerce Bank President and CEO Bruce Thomas called the reversal of the loan loss provision and the improved capital status “a real achievement for us.” With the change and with operations back to profitability, Michigan Commerce hopes to return to generating loan growth in 2013 in both the commercial and retail segments.

“We are back in the marketplace,” Thomas said.

Thomas attributed the improved performance in part to Michigan Commerce getting back to its community-banking roots and “focusing on our core customer who desires a well-rounded relationship with a community bank.”

“The improved economy certainly has helped” as well, he said.

One indication of the bank’s improvement is the sharp decline in non-performing loans, which at midyear were half of their level of 18 months ago, he said. Non-performing loans stood at $50.0 million as of June 30, compared to $58.1 million at the end of 2012.

Sustained and improved profitability for Michigan Commerce will come with growth in the bank’s loan portfolio, Thomas said.

The bank earlier this year hired a new chief lending officer and most recently launched an expanded retail loan initiative. While Michigan Commerce will maintain a core focus on lending to small businesses, it also wants to generate loan activity from the retail side of the business, Thomas said.

“We realized we need to become more active and diversified,” he said.

As of midyear, Michigan Commerce had loans of $488.3 million, down from $499.1 million at the end of 2012, according to a quarterly financial report parent corporation Capitol Bancorp filed with federal securities regulators.

The largest banking affiliate of Lansing-based Capitol Bancorp, Michigan Commerce has 10 offices in the state. In addition to the West Michigan locations, the bank’s offices are in Ann Arbor, Auburn Hills, Detroit, Brighton and Farmington Hills.

Michigan Commerce had assets of $612.4 million as of June 30, compared to $706.5 million a year earlier. Its deposits totalled $574.0 million, versus $678.0 million in the same period last year. Michigan Commerce is part of Capitol’s Great Lakes Region that includes banks in Indiana and Ohio.

The improved results come as parent company Capitol Bancorp works its way through bankruptcy proceedings that will involve taking bids for its remaining banking affiliates under a liquidation plan proposed last spring. Capitol’s creditors have until Sept. 24 to vote on the plan and a bankruptcy judge could decide at a hearing planned for Oct. 9 whether to approve it.

With all of its banking affiliates under regulatory orders to improve operations, and after deep losses, Capitol filed for bankruptcy a year ago. The liquidation plan came after an initial reorganization proposal fell through when investors pulled out of the deal.

Under the liquidation plan now before the bankruptcy court, Capitol could halt the bidding process if it were to identify new investors that could provide a needed infusion of capital. If all of the banks are eventually auctioned off, the corporation would then liquidate, according to the plan filed with the bankruptcy court.

Thomas deferred comment on how Michigan Commerce's improved operations could affect the bids for Capitol's banking affiliates. A Capitol Bancorp representative declined comment.

Capitol Bancorp has divested many of its banks in recent years to stem losses and has had others seized and sold by federal and state regulators. The most recent was Aug. 23 when Sunrise Bank in Phoenix, Ariz., with $202 million in assets, was seized and sold to First Fidelity Bank in Oklahoma City. It came on the heels of four seizures and sales earlier this year.

The corporation recorded net income of $8.9 million for the second quarter, which compares with a net loss of $9.9 million in the same period in 2012.

Read 75425 times Last modified on Monday, 02 September 2013 22:04

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