‘In a Better Position’: Bank consolidation prompts State Savings Bank to open branches in TC, Gaylord

State Savings Bank in Frankfort and Central State Bank in Beulah operated separately in Benzie County under common ownership for more than 30 years. But that all changed in October.

The two banks have combined under the State Savings Bank name and are expanding beyond their Benzie County roots, where each bank began operations more than a century ago.

“Both were successful in their individual markets, even though they were in the same county,” said Doug Zernow, State Savings Bank’s marketing director.

State Savings Bank was founded in 1901 while Central State Bank began operations in 1913. The banks have been owned by Central-State Bancorp, a holding company based in Traverse City, since 1987. Central-State Bancorp is primarily owned by various members of the locally prominent Calcutt family and a family trust, according to its 2017 annual report with the Federal Reserve. Harry C. “Scrub” Calcutt III is the holding company’s chairman, president and CEO.

Combining State Savings Bank and Central State Bank into a single entity comes after years of questions from customers about why they were separate, Zernow said.

“It makes a lot more sense now with the consolidation,” he said. “It’s difficult for small banks to compete and manage all the technology needs out there. There are a lot of regulations that even small banks have to manage. It helps to be a little bigger. We saw some opportunities, as well.”

State Savings Bank has operated loan offices in Traverse City and Gaylord (pictured left) for several years and recently opened full-service branches in those two communities. While banking in those two cities is highly competitive, Zernow said State Savings Bank sees opportunities to grow its business there.

“Traverse City and Gaylord are dominated by national and super-regional banks,” he said. “We see an opportunity for a customer-focused community bank. That’s not what their focus is, even though they say it is.”

Customers of the former Central State Bank now have the convenience of being able to conduct banking transactions at any State Savings Bank location, Zernow said.

There will be some efficiencies in combining back office functions of the two banks, but no customer offices will be closed.

“That’s absolutely not what this is about,” Zernow said. “We want to be the customers’ friendly retail bank where they can come into our offices and get their questions answered. We’ll be in a better position as a larger institution to provide new services.”

Central-State Bancorp had assets of $218,278,000 as of June 30, according to the Federal Deposit Insurance Corp. Included in that total were State Savings Bank assets of $143,603,000. The former Central State Bank had assets of $74,675,000. State Savings Bank also services $200 million in home mortgages, Zernow said.

Central-State Bancorp, which now is a single-bank holding company, had 81 employees and net income of $275,000 for the nine months ending Sept. 30, according to the FDIC.

$125,000 Levy Against Calcutt Derailed … for Now: FDIC case against former Northwestern Bank CEO drags on

A five-year effort by a bank regulatory agency to levy a $125,000 fine against a Traverse City bank executive and prevent him from working in the industry was derailed by a recent Supreme Court ruling.

The Federal Deposit Insurance Corp. sought penalties in 2013 against Harry C. “Scrub” Calcutt III, who at the time was chief executive officer of Northwestern Bank. The bank, controlled by the Calcutt family, has since been acquired by Chemical Bank.

The FDIC accused Calcutt and two other bank executives of engaging in unsafe and unsound banking practices with respect to $38 million in troubled loans to the bank’s largest customer, which the FDIC did not name. Calcutt denied the claims.

Mark Hullman, a Traverse City attorney who represented Calcutt in the complaint, said there was never a final ruling in the case and the fine sought by the FDIC was never paid by Calcutt.

He also said the FDIC approved the recent merger of State Saving Bank and Central State Bank, which are controlled by the Calcutt family. Scrub Calcutt is on the board of directors of State Savings Bank and is the CEO of Central-State Bancorp, its parent company.

The FDIC’s complaint against Calcutt took a major turn in June when the Supreme Court ruled that Securities and Exchange Commission administrative law judges had been improperly appointed.

Hullman said the ruling also affected the FDIC, resulting in the case against Calcutt being restarted and a new judge in the case being appointed.

The FDIC directed the Traverse City Business News to its database of enforcement actions, which shows only the 2013 complaint against Calcutt.

Hullman said two out-of-state law firms are representing Calcutt in the new FDIC complaint, but he is informally advising him in what is likely to be a lengthy battle.

“It’s going to take another five years to resolve,” Hullman said.