Update: Rathbun leads effort to buy Bank of MaumeeWritten by Zach Davis | | email@example.com
Rathbun column: “The future of big banks”
A group of local investors named Winding Creek Holdings has entered into an agreement to purchase 51 percent of the Bank of Maumee.The closing of the transaction is conditioned upon formal approval from the U.S. Office of the Comptroller of the Currency and other federal regulators, as well as Winding Creek’s successful completion of raising additional required capital.
The man in charge of Winding Creek is Gary Rathbun, the president and CEO of Private Wealth Consultants. He has been in the wealth management field since 1981.
“I have been a charter stockholder at Bank of Maumee since they started in town,” Rathbun said. “I like the idea of a small community bank. There is plenty of room in the market and Bank of Maumee is the perfect opportunity.”
According to Bank of Maumee President Kevin Rahe, the bank has $36 million in total assets with 7.94 percent in equity assets. The bank and its owner, Capitol Bancorp Limited, have been struggling in the current economic climate.
“It’s a real breath of fresh air for us,” Rahe said. “Capitol Bancorp has been struggling and we will truly be a locally owned and operated bank.”
Rathbun said he believed Capitol Bancorp’s decisions were not in the best interest of the local area pertaining to the Bank of Maumee.
“I never thought the best solution to the bank — for building it in the community — was having an out of town owner,” Rathbun said. “A lot of their decisions didn’t take into consideration the local community.
“Capitol Bank had a great model as long as the economy cooperated. The economy changed and it just killed their model and Bank of Maumee has been sucked into that, being owned by them. It has really made it difficult for Bank of Maumee to grow. I looked at that as an opportunity to buy a part of a local bank.”
This wasn’t the first time the Morenci, Mich., native has tried with others to purchase Bank of Maumee. Three years ago, the bank contacted Rathbun to help raise capital to buy itself from Capitol Bancorp.
“They approached us and we approached a lot of our clients to buy stock and raise capital to buy them out,” Rathbun said. “Capitol Bank was positioned in such a way that there were certain restrictions on the capital raise and it just didn’t work out. The deal fell through.”
From that point, Rathbun kept an eye on Bank of Maumee and remained interested in purchasing it, along with the other investors of Winding Creek, from Capitol Bancorp. A few years later, the time was right to finally make a deal.
“As I saw Capitol Bank get in more and more trouble, I thought, ‘We should try this again’,” Rathbun said. “I put the investment group together and we approached Capitol Bank about buying out their share. It has taken many months but we were able to strike a deal with them.”
The $1.2 million purchase was approved by the Bank of Maumee’s 304 shareholders Oct. 21. Although the deal is still waiting for approval by U.S. regulators, Rathbun believes that the new local ownership could have a major impact on the company’s success.
“There’s still plenty of room in the market to grow,” Rathbun said. “I have always liked Bank of Maumee and the concept and when the opportunity came to be a bigger part of that bank and keep it local I jumped on that. I think it will be exciting and a nice complement to Private Wealth Consultants and the wealth management we do for people.”
Winding Creek’s first operation of business is to help Bank of Maumee become profitable through recapitalization. If the U.S. regulators approve the transaction, a group of local investors brought together by Rathbun will inject $3 million of capital into the bank. They will then focus on loans to professionals and business owners in the community.
“That will allow the bank then to increase their loans to the community at large and within a very short time allow them to become profitable again,” Rathbun said.
After the $3 million is invested into the Bank of Maumee, Winding Creek will no longer own 51 percent of the company. To avoid investors deciding to sell the company later on, Winding Creek will receive preferred stock to protect its investment.
“We will own 51 percent for just a few minutes,” Rathbun said. “We need to inject that money in. The only way to do that without diluting ourselves would be for us to put that money in and we are not going to put another $1.5 million to remain at our 51 percent. Because we are bailing out the bank and recapitalizing, we wanted to maintain a certain amount of say about how the bank is run and, most importantly, we wanted to protect the bank from being taken over or sold. By owning those preferred shares, even though we are not a majority owner anymore, the bank can’t get sold out from under us.”
Despite all Winding Creek’s plans, nothing can happen until the purchase is approved by the U.S. regulators. A timeline on that decision is still unknown.
“It is very anxious because you are stuck in the starting gate,” Rathbun said. “You see where you can do business in the community and you see the business owners that you want as paying customers and you can’t do anything. You are just stuck.
“It’s just very difficult because you don’t have a schedule and you don’t know what progress is being made from one day to the next. You don’t know if somebody is actually even looking at it or not. Just one of these days, the attorney is going to call me up and say, ‘Here’s your closing date, you’ve got to get the $3 million?”
At Private Wealth Consultants, a fee-based wealth management firm, Rathbun manages money on a daily basis for many individuals. He has also been a guest of afternoon host Brian Wilson on 1370 WSPD for more than two years and hosts the Thursday evening program, “Eye On Your Money.”
Rathbun is taking his work in radio broadcasting to print media as he has begun contributing as a guest financial columnist for Toledo Free Press.
“It seemed like a good fit to start writing a column and doing some work with Toledo Free Press,” said Rathbun, who has co-authored five books. “The information out there that people get, so much of what we read financially is fluff. I want the readers to read that column and walk away with something that they can use or learn.
“It will be interesting because a new group of people will be able to see what I am about and it will give the people who know me, the listeners of WSPD, a chance to get some additional information in a different format. I’m excited to see what we can do.”
Toledo Free Press senior business writer Duane Ramsey contributed to this article.
Clarifying remarks: Bank provides value to investors, customers
TO THE EDITOR,
Let me begin by thanking Toledo Free Press and Zach Davis for their time and interest in interviewing me regarding the efforts of Winding Creek Holdings, LLC to purchase the majority share of the Bank of Maumee (“The Investor,” Oct. 30).
After reading the published article, I do feel the need to clarify my opinions relative to Capitol Bancorp and to correct or prevent any possible misinterpretation of some of my remarks.
As stated in the article, I have been an investor in the Bank of Maumee since its beginning. During these years I have had the opportunity to meet and work personally with executives of Capitol Bancorp. During the recent process of negotiating the current transaction, I have spent considerable amounts of time in a direct working relationship with Capitol Bancorp’s highest level officers. I have found them to be straightforward individuals of the highest integrity.
Capitol Bancorp has demonstrated their commitment to the constituencies they serve, which includes the community of Northwest Ohio. I have witnessed their personal concern for the employees of Bank of Maumee and for its shareholders.
They have shown an elevated interest in the Northwest Ohio economy and have supported our local businesses through purchases and the establishment of lending relationships. Capitol Bancorp, directly and through the Bank of Maumee, has consistently supported our local nonprofit and support agencies through extensive donations of both time and money. Even in these extremely difficult financial times they have been dedicated in finding ways to provide value to the investors and customers of the Bank of Maumee.
I want to be extremely clear that I am unaware of any decision that Capitol Bancorp has made where it operated in a self-serving manner without consideration for the shareholders or our community at large. They have been a committed corporate citizen in Northwest Ohio and I am hopeful that Winding Creek can continue to serve this community in equal fashion.
I appreciate the opportunity to clarify my remarks.
Winding Creek Holdings LLC