Magazine article American Banker

3Q Earnings: Capitol of Mich. Retrenches with an Eye to Acquisitions

Magazine article American Banker

3Q Earnings: Capitol of Mich. Retrenches with an Eye to Acquisitions

Article excerpt

Byline: Robert Barba

Reeling from loan losses in its beleaguered home state, Capitol Bancorp Ltd. in Lansing, Mich., plans to cut overhead by combining several of its Michigan banks.

It is a drastic measure for the $5.4 billion-asset Capitol, which has made its reputation operating single banks in multiple markets. It currently has 64 banks in 17 states.

But the company says the move would not only improve its efficiency, it would alsoset up Capitol, never much of an acquirer, to buy banks hobbled by the credit crisis.

"Obviously, we have a lot of work to do in strengthening the underlying organization," said Michael Moran, Capitol's chief of capital markets. But, he said, "this puts us in a position to be acquisitive. ... Our strength and resources could be compelling for other banks around the area that might be struggling."

Capitol disclosed the consolidation plan Thursday - five weeks after the collapse ofits deal to sell four underperforming banks in western Michigan to Northstar Financial Group Inc. of Bad Axe, Mich.

Mr. Moran said thathis company has been approached by other buyers since but that a deal could not be worked out. So instead, it will merge the four banks it planned to sell into two: Grand Haven Bank is merging with Muskegon Commerce Bank, and Kent Commerce Bank is merging with Paragon Bank and Trust.

Capitol also said its Detroit Commerce Bank would be combined with two others in its southeast Michigan market: Oakland Commerce Bank and Macomb Community Bank.

Those seven banks, along with two others in which Capitol has a controlling interest, have lost $11 million so far this year. Its four other Michigan banks have earned $4.5 million on the year.

Brad Milsaps, an analyst at Sandler O'Neill & Partners LP, called Capitol's decision to regionalize its banks a "small positive." But he said its growing credit troubles could be an obstacle in its planto start buying banks. …

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