Florida firm upgrades Cedar Rapids bank’s disputed rating

A private independent bank research firm improved a second-quarter rating for Guaranty Bank and Trust of Cedar Rapids after bank officials disputed an initial lower rating.

BauerFinancial Inc. of Coral Gables, Fla., upgraded the rating to three stars.

A lower two-star rating reported in early fall had landed Guaranty on BauerFinancial's second-quarter “problematic” bank list.

BauerFinancial reported that supplemental information prompted it to restore a three-star rating Guaranty had been carrying. The firm did not provide specifics of what that supplemental information was.

Robert Becker, president and chief executive officer of Guaranty Bank, said the bank's board of directors had sent a letter to BauerFinancial requesting an explanation for that lower rating but no new information.

“We told them that we had unrealized losses that had to do with ‘mark-to-market' rules,” Becker said. “We have high capital and other banks in town with less capital have higher ratings.”

BauerFinancial did not respond to any of the letters or e-mails from bank officials, Becker said.

Guaranty posted a net profit of $433,000 for the third quarter, compared with a $201,000 loss in the second quarter. Non-performing assets amounted to 2 percent of average tangible assets on Sept. 30, down from 2.3 percent at the end of the second quarter on June 30.

Guaranty ended the first nine months of 2009 with a net profit of $1.08 million, compared with a profit of $750,000 in the comparable period of 2008. The bank had a risk-based capital ratio of 11.2 percent at the end of the third quarter, up from 10.9 percent on June 30.

The BauerFinancial ratings for a majority of the banks in Eastern Iowa were three stars or above on Sept. 30, based on information federal regulators provided. Many of the smaller community banks are rated five stars, the highest level BauerFinancial awards.

Patriot Bank of Brooklyn, which had the lowest rating of any Eastern Iowa bank - zero stars - has taken steps to improve its balance sheet significantly.

Bank President Craig Arendt said the institution has signed an agreement to sell three of its branches to a neighboring bank. “That will adjust our balance sheet and get us well above the regulatory guidelines for capital,” Arendt said.

He did not provide the buyer's name. The transaction is to close on Jan. 8.

Patriot Bank has branches in Deep River, Gibson, Grinnell, Keswick, Montezuma and New Sharon.

Patriot Bank's Tier I capital or net worth slipped to $4.76 million on Sept. 30 from $4.9 million at the end of the second quarter.

Patriot Bank ended the third quarter with non-performing assets amounting to 6.9 percent of its average tangible assets, up from 5.2 percent at the end of the second quarter. The bank's assets declined from $98.8 million at the end of the second quarter to $91.5 million at the close of the third quarter on Sept. 30.

Eastern Iowa bank deposits are insured up to $250,000 per account by the Federal Deposit Insurance Corp.