Byron Bank Elevated To 'Five Star'
“We were really pleased to be rated a Five Star institution,” said President and CEO Patrick Gill upon acknowledging the news Monday. From a historical standpoint, Gill said he didn’t know when, if ever, the bank had previously achieved a Five Star rating.
“But it’s certainly the first time we’ve received that rating under the current management team,” he added.
Private companies like Bauer Financial that analyze and rank the quality of commercial banks reporting to the Federal Deposit Insurance Corp. usually assign each institution a letter grade or numerical ranking to indicate the institution’s safety or soundness, which is typically determined using data based upon some variation of capital, assets, management, earnings and liquidity factors, according to the FDIC.
Byron Center State Bank, a subsidiary of OAK Financial Corp., celebrates its 84th birthday next month.
News of the bank’s elevated Five Star rating came less than a month after two shareholders — past presidents Willard and John Van Singel — sent a letter to some of the company’s shareholders expressing concern about the bank’s management and future direction. The Van Singel family has held shares in the company for more than 50 years.
“In recent years, the bank has moved away from community banking, and toward a model better suited for large, more broadly based financial institutions,” the Van Singels stated in their letter.
“We are concerned about this shift and what it means for the future of the bank, and our interest in it. Our concerns — born in the wake of severe loan losses in 2001 and 2002 — have grown as management becomes increasingly ‘top-down’ and ‘top-heavy.’ Management seems to be directing the bank away from community banking and into markets where it cannot effectively compete.”
The Van Singels concluded by asking stakeholders who share those concerns to get in contact with them. John Van Singel said several shareholders have contacted him and that he continues to make additional contacts.
Van Singel told the Business Journal that he and his father sent the letter only to select shareholders because they had filed a Schedule 13D consensus group filing with the Securities and Exchange Commission. The SEC requires a 13D filing by any person or group of persons who acquire a beneficial ownership of more than 5 percent in a registered stock.
Van Singel said the Van Singel family combined is the largest shareholder, but he declined to reveal the percentage of company stock the family holds.
Gill said the bank’s management decided to share copies of the letter with all stakeholders.
“I think it’s important that everyone who has an interest in or financial stake in this company understand the issues affecting it,” Gill said. “One of the things we have committed to here is full communication, not only among staff members but all of our constituents. And on the top of that constituent list is our shareholder population.”
In a letter to shareholders dated Jan. 6, Gill said OAK Financial’s board disagreed “totally” with the Van Singels’ conclusions. He said that in contrast to the Van Singels’ opinion, Byron Center State Bank and its subsidiaries are now well positioned for growth and prosperity.
“In addition, I remind you that the performance challenges cited in their letter are directly traceable to John Van Singel’s tenure as president and chief executive officer of our bank,” Gill wrote. “At the time of his separation from the company, our bank had serious financial and regulatory issues.”
John Van Singel joined the bank in 1974, was promoted to president and CEO in 1990 and stepped down in October 2002, stating a desire to pursue other interests.
That same month, the bank entered a written agreement with the Federal Reserve and the Office of Financial and Insurance Services following a regularly scheduled examination by regulators. SEC and Fed examiners had identified supervisory issues with respect to bank operations, management, asset quality and credit risk. The agreement required that the bank resolve those concerns, as well as maintain adequate allowance for loan and lease losses.
When Gill took over a month later — in November 2002 — the bank was already on the road to dealing with those issues.
The deficiencies were resolved and the regulatory agreement was terminated by October 2003, said Jim Luyk, executive vice president and CFO. Gill credited “the bank’s absolutely first-class team of people” for the quick turnaround.
Van Singel said his family doesn’t believe their actions reflect any kind of personal vendetta.
“This is basically what good shareholders have to do,” Van Singel said. “We’re looking at the last year’s performance and also what they seem to be doing insofar as the direction they’re taking things.
“Our complaint basically is that for many, many years the bank amongst its peers ranked in the top 10 percent. In March, June and September they were pretty much the bottom 10 percent.”
Gill believes the bank’s upgrade to a Five Star institution speaks for itself, and rebuts some of the Van Singels’ concerns about the direction of the company and its performance.
“It affirms that the direction we have taken is the appropriate direction, that we are able to compete effectively across the broad West Michigan market and that we are not abandoning our roots, but simply building on our heritage,” Gill said.
Byron Center State Bank’s 2005 forecast calls for growth in terms of both assets and earnings, he said, and the company is evaluating all of its locations and prospective new locations “to ensure we’re where we need to be with the resources we need to have.”
Van Singel said that in his experience, the rating is meaningless.
“Our concern is that you can be squeaky clean but not make money. From a shareholder’s standpoint, return on investment is what it’s all about.”