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By Nathan Peck | MiBiz
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GRAND RAPIDS — Amid the uncertainty in the somewhat schizophrenic economic indicators hinting that the risk of a double-dip is rising due to slowed employment growth — but wait, manufacturing numbers are up! — Grand Rapids-based United Bank of Michigan is starting to see some stability returning.

The last two years have rattled the lending industry as banks have struggled to deal with rising numbers of foreclosures, distressed businesses and reduced demand for business loans. United Bank avoided many of the riskiest loans through its historically conservative lending standards, said President and COO Mike Manica. Still, the greatest hit the recession took on United Bank’s books was the reduced value of its assets, which dropped $6 million from last year.

Founded in 1887 in Wayland, United Bank now holds $429 million in assets on $352 million of deposits and employs 112 around West Michigan. Manica spoke with MiBiz about the bank’s strategies going forward heading into the last quarter of 2010.

MiBiz: How is United Bank of Michigan faring in 2010? How were you affected by the recession?
Manica: What has changed is that while things have stabilized at the bottom and asset prices seem to have stabilized, but if the economy continues to slow … we could be in trouble. If we continue to see growth, it will translate into banking and translate into fewer distressed assets.

MiBiz: You still show increasing allowances for charge-offs on your books in 2010 over 2009. Are you concerned defaults will continue to rise?
Manica: Back when the number was set, it was late 2009. It was what we would budget, where we thought we would be at this point. We fortunately haven’t experienced that heavy of charge-offs. Our numbers have come in less than what we had anticipated.

MiBiz: Where are you seeing activity in the current market?
Manica: Certainly, one segment of business that is growing right now is people looking to refinance their mortgage. The refi residential mortgage business is doing well. Those people that have been in their home for a reasonably long period of time can lock into a historically low mortgage rate. Car sales are picking up, but consumer spending is down overall. Americans are saving more and not taking on as much debt as before.

MiBiz: We continually hear about the difficulties in businesses obtaining credit. What is going on?
Manica: Business loans are a function of jobs. If consumers aren’t spending, sales are slowing. There are a number of people who have come in and would like to refi the commercial loans. The biggest issue in business lending has been the asset depreciation. Sure, banking has tightened the lending standards, but it doesn’t explain it all. When you are requiring 15 percent down and then you see a 20 percent loss in the value of the asset, there is no equity to refinance.

MiBiz: What are your strategies going forward in 2010?
Manica: We weren’t as competitive in the residential mortgage industry, so we didn’t experience the same level of losses. We’ve remained selective in new credit. The economy has allowed us to reduce the cost of deposits. Our margins have increased. Even when we had quarters where we lost money year over year (due to the reduced values in assets), we remained profitable.

We have a reputation for being rather conservative, but we are trying to expand our business. There are a number people that are looking to move from a regional or national bank to a local bank to get a regional relationship with a more personal flair. That seems to be working quite well for us right now. We are looking to expand our business, looking for potential customers who would like to take a look at a community bank. Clearly, there are people who are out looking for a new banking relationship.

Ultimately, the real help will come to all of us when we start adding to the job base.

Projections are indicated that (large-scale) job growth is certainly not coming this year, maybe the first part of 2011. In any case, we are slowing down rather than speeding up and that is a bit disconcerting.

MiBiz: How do you see financial regulation impacting your business? Are conservative lenders being painted with too broad a brush?
Manica: Probably the painting is finished. All banks — that have been part of the difficulty or not — will be affected. We were able to avoid taking any TARP funds. Our capital levels are at historic highs. We feel we are poised to take advantage when the economy takes off.

We will deal with the current regulatory changes, we will be taking away the debit fees, overdraft fees, and it will impact our income. We will have to wait until the regulations are written. We don’t see it as a huge impact right now.

MiBiz: Do you see any signs that make you optimistic?
Manica: From what I’ve been able to gather talking to various people in the temporary services business, there is quite a demand for temp workers. It is usually a first step to hiring for permanent jobs. As far as anyone hiring, there is nothing that makes me particularly optimistic.

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• finance
• grand rapids
• mike manica
• money marshalls
• united bank of michigan