Ann Arbor-based Michigan Commerce Bank remains under FDIC scrutiny over financial health

The bank's tier 1 capital ratio -- a measure of its health and its ability to sustain future losses -- fell to 2.63 from 3.19 percent as of March 30. It was 8.07 percent a year earlier. Regulators classify ratios under 3 percent as significantly undercapitalized.

The bank has been operating under a consent order issued March 31 by the Federal Deposit Insurance Corp. and Michigan Office of Financial and Insurance Regulation. A spokesman for the OFIR said the order has not been terminated, though its original deadline for resolution for outstanding issues passed in June.

“We are monitoring the institution’s progress in meeting the terms of the order,” said Jason Moon.

John Smythe, president of the 11-network bank that’s part of Lansing-based Capital Bancorp, said the institution is “progressing, but it’s going to be a long process.”

The primary issue, he said, continues to be Michigan’s economy.

“The biggest single impact or effects we have from the economy are home and real estate valuations,” he said. “They continue to decline.”

That decline will continue to affect the bank’s earnings prospects, Smythe said.

As for its overall health, Smythe said, “It’s holding.

“I can’t say much about that on that we’re doing all that we can in the current environment … We feel like we’re improving upon a lot of the processes (here) …so we’re going to be a stronger bank in the future.”

The bank has 8.09 percent market share in Washtenaw County, according to the FDIC. That's a gain of nearly 3 basis points from 2009, which Smythe attributes mostly to internal accounting changes among the several banks under the Ann Arbor charter.

Other metrics on the second quarter report show:

• Noncurrent loans and leases climbed to $114 million from $89 million a year earlier.

• Equity capital fell to $28.7 million from $96.8 million in June 2009.

• Total assets fell to $1.13 billion from $1.21 billion a year earlier.

• The quarterly return on assets was -6.84 percent, down from -1.83 percent a year earlier.

Meanwwhile, Capitol Bancorp [NYSE: CBC] stock was selling at $1.12 per share on Friday, giving it an overall value based on outstanding shares of $24.23 million.

Over recent months, Capitol Bancorp entered agreements to sell 1st Commerce Bank in Las Vegas and its operations in Tuscon; and completed the sales of Bank of San Francisco, Adams Dairy Bank, USNY Bank.