Paul Tobias met James C. Bess last spring and says he was so impressed with what the executive had done to fix the troubled North Country Bank in Manistique, Mich., that he decided to buy it.
Now Mr. Tobias has big plans to expand the $331 million-asset bank, largely by targeting business owners and high-net-worth individuals in Michigan's richest county.
North Country had been operating under a regulatory order for nearly two years until last month. Regulators said it was undercapitalized, had too many hotel loans, and used "hazardous" lending practices.
Under Mr. Bess, a turnaround specialist hired as the CEO in July 2003, North Country brought in a new management team, including a former state regulator. It sold some branches, closed others, and improved its underwriting.
Though it has not yet returned to profitability, the hemorrhaging has largely stopped. Its third-quarter loss of $396,000 was 85% less than that of a year earlier. (Yearend results have not been released.)
Mr. Tobias, a longtime banker with Comerica Inc. and later the founder of a Birmingham, Mich., merchant banking and advisory firm, met with Mr. Bess in Lansing in April with the idea of possibly investing in North Country.
Mr. Bess told him how it was improving its loan portfolio by selling off nonperformers and reducing its concentration of loans in the volatile hotel and tourism industries. As part of the commitment to improve underwriting policies and tighten credit standards, the portfolio was being reviewed by an outside loan consultant.
"That led to a couple of trips … where we kicked the tires and liked what we saw," Mr. Tobias said. "We started thinking, 'We've got this bank that is being fixed, but it needs some capital, and it needs a strategy.' "
So Mr. Tobias spent the rest of the year putting together a deal to recapitalize the ailing bank.
In December, Mr. Tobias led Mackinac Financial Corp. of Bloomfield Hills in making a $30 million investment in North Country. He is now the chairman and CEO of the holding company and the chairman of the bank. Mr. Bess, still the bank's CEO, has agreed to stay on for a few more years, Mr. Tobias said.
In an interview last week, he outlined Mackinac's plan for returning North Country to the black and expanding it.
Though it will not abandon slower-growing northern Michigan (North Country is No. 1 in its home market of Schoolcraft County) Mackinac is eyeing Oakland County, near Detroit. Among the state's 83 counties, Oakland has the highest income per capita, according to the Bureau of Economic Analysis. Schoolcraft ranks 54th.
In January, North Country opened a loan production office in Bloomfield Hills - a town in Oakland County - and Mr. Tobias said it plans to file an application soon to open a branch in the county. It recently hired David Crimmins, a 19-year veteran of Comerica, as a senior vice president; he will be in charge of getting business in Bloomfield Hills.
Also in the works is a name change for the bank, to be unveiled this month, to reflect the holding company's broader reach.
Given its demographics, it is little surprise that Oakland County is one of Michigan's most competitive markets. According to the most recent statistics available from the Federal Deposit Insurance Corp., the $41.3 billion-asset Standard Federal Bank, a subsidiary of ABN Amro Holding NV, controls 31.92% of deposits there. The $53 billion-asset Comerica, of Detroit, is No. 2, with 14.97%.
Over the past two years Independent Bank Corp. of Ionia and Citizens First Bancorp in Port Huron have bought banks to move into Oakland County. Last year Citizens Banking Corp. of Flint announced that it would spend $40 million through this year to build branches there.
John C. Donnelly, a managing director at the Gross Pointe investment banking firm Donnelly Penman & Partners, said Mackinac can grab market share in Oakland County, because Mr. Tobias and his chief financial officer, Eliott Stark, also a Comerica alumnus, have extensive connections there.
"Both of them were highly talented bankers in senior positions at Comerica - that positions them well down here," Mr. Donnelly said. "It's not going to be a cakewalk, but this is a highly capable group."
