Macatawa Bank in the clear again

March 12, 2012
| By Pete Daly |
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Macatawa Bank of Holland learned in early March that the consent order it has been operating under for two years has been lifted by federal and state bank regulators.

The consent order, which the bank entered into following its negotiations with the Federal Deposit Insurance Corp. and the Michigan Office of Financial and Insurance Regulation, took effect in February 2010, and was the result of a regulatory examination of the bank in the summer of 2009.

“We received notice (March 2) from the FDIC and the Office of Financial Regulation in Lansing that they had terminated our consent order,” said Macatawa Bank president/CEO Ron Haan. “The regulators are acknowledging that the bank’s financial condition has improved significantly. We no longer warrant formal regulatory supervision.

“We will see a significant reduction in expenses associated with the consent order,” he added.

The FDIC accused the bank two years ago of “unsafe or unsound banking practices,” and Macatawa subsequently agreed to the terms of the consent order without admitting or denying any of charges. No fines or penalties were imposed.

At the time, the bank announced it had agreed to increase management and board oversight, improve process and controls, limit lending to certain borrowers, obtain regulatory approval of future dividends, and improve regulatory capital ratios. In a Feb. 24, 2010, statement, the bank said it had already cut approximately $9 million from its annualized operating costs “and appointed experienced and disciplined lending and compliance personnel.”

The bank was also required to maintain its capital ratio at 8 percent or more and its total risk-based capital ratio at a minimum of 11 percent.

In late 2010, Macatawa Bank had about half of the $1.1 million in cash reserves that it had a year previous.

Last year, Macatawa Bank Corp., the bank’s holding company, temporarily borrowed $1 million from board chairman Richard L. Postma, pending completion of its planned stock offering in June. That successful offering of additional common stock was quickly snatched up, raising $21 million in equity capital.

At the end of December, Macatawa’s regulatory capital ratios “were the highest they have been since Dec. 31, 1999,” according to the bank’s announcement last week.

On Dec. 31, it was categorized as “adequately capitalized” as a result of being subject to the consent order. However, had the consent order been terminated as of Dec. 31, 2011, the bank would have been categorized as “well capitalized.”

“Since the bank entered into the consent order, the board of directors, management and all of our employees have worked tirelessly to change the culture of our bank to one that embraces the disciplined and conservative business, banking and lending principles that we have adopted and which have allowed us to leave behind the consent order,” said Postma.

He noted that the bank had “operated under a regulated, strict-control environment for the past several years.”

Haan said Macatawa “never took TARP money. We were one of the few community banks in Michigan that has sufficiently raised capital. What we did, about half of that $20 million (raised last June) came from our existing shareholders. The other half came from what I would call local investors. Today, Macatawa Bank remains largely community owned.”

Haan added that “well over 90 percent of our company is owned by local shareholders.”

“One other thing that happened last year that is particularly noteworthy,” said Haan, was that Macatawa achieved “a pretty significant reduction in our problem assets.”

“I think right now we are clearly a much stronger bank and we’ve got a positive outlook for our future,” said Haan.

A spokesman for the Michigan Office of Financial and Insurance Regulation said banks that are still under joint orders of OFIR and the FDIC include Community Shores Bank in Muskegon, plus Northpointe Bank and Select Bank in Grand Rapids.

According to the FDIC, Select Bank has been under a “cease and desist” order since August 2008. Northpointe has been subject to three enforcement actions by the FDIC, including a consent order as of March 30, 2011. Community Shores Bank has been under a consent order since September 2010.

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