Scottsdale's Meridian Bank gets $50M in capital

Meridian Bank, a Scottsdale-based institution that has been laboring under a portfolio of bad real estate loans, said Friday it lost $42.8 million in the second quarter. But the bank also said it has received an injection of $50 million in fresh capital from its owner and has moved $100 million in underperforming assets off its books.

The capital was added by the Carl R. Pohlad family of Minneapolis, owners of Meridian with holdings in a wide range of companies in financial services, business services, real estate investment banking, and the beverage, retail and entertainment industries, including ownership of the Minnesota Twins of Major League Baseball.

The bank, which was the eighth-largest Arizona-based bank in March 2007 and which has branches in Gilbert, Fountain Hills, Scottsdale and other Arizona cities, also reported a loss of $14.1 million in the first quarter.

However, the transfer of assets will make the bank profitable in the third and fourth quarters and should calm any fears about the bank’s stability, said Chairman and Chief Executive Doug Hile.

“We are in uncharted waters,” Hile said. “For 15 years, things have been extraordinarily good in the economy, and there were no concerns about banks. But since Bear Stearns, that really disrupted the market. The news has so many negatives, that all banks are under fire. ... We are trying to communicate to our public and constituents that this is a very strong organization.”

He added that the investment by the Pohlad family indicates their confidence in Arizona’s future.

The actions by the family include investment in Meridian and its parent, Marquette Financial Companies, in the form of equity investments, loans and purchase of real estate assets. Other measures are the transfer of underperforming assets to MFC and real estate investments to a family-owned company, where they can be held or sold.

Those moves reduced Meridian’s problem assets by 72 percent in the second quarter, the bank said.

The losses in the past two quarters were the result of the need to increase reserves for loan losses and writing down investments in construction companies, the bank said.

The write-downs in the construction-lending businesses are noncash charges that do not impact tangible capital levels, the banks said.

The $50 million infusion gives the bank a total of $290 million in capital, which makes Meridian well-capitalized by industry standards, even after Friday’s reported loss, Hile said.

As a privately held entity, Meridian does not usually release earnings and financial performance information. But given the difficult conditions in the financial services market, “we wanted to proactively communicate so that our customers and key constituents have the most accurate, timely information available,” Hile said.