Need To Grow Led To Grand Bank Macatawa Deal

May 16, 2002
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GRAND RAPIDS — From a single office in downtown Grand Rapids, Grand Bank Financial Corp. enjoyed plenty of success since its formation 14 years ago, growing to $252 million in assets and developing a strong reputation for personal service.

But with that success came new demands from business customers who wanted to see the bank branch out and open convenient offices elsewhere in the area.

As Grand Bank directors weighed their options for expansion and how to handle the cost, along came a new wrinkle: A telephone call last April from Ben Smith, who four years ago led a group of Holland businessmen in forming the successful Holland-based Macatawa Bank Corp., which was now setting its sights on Grand Rapids.

That call culminated with the Nov. 21 announcement that Macatawa was acquiring Grand Bank in a stock transaction valued at $40 million. When the deal is completed next year, Grand Bank will become a wholly owned subsidiary of Macatawa Bank Corp., the holding company for Macatawa Bank. Grand Bank Financial will cease to exist as a holding company.

The deal gives Grand Bank — formed in 1987 and featuring a personalized style of community banking devoid of teller windows and lines — a partner that possesses the capital it needs to achieve its growth plans, President and Chief Operating Office Tom Wesholski said.

“There’s going to be a lot of opportunities with aggressive growth,” said Wesholski, who will become CEO and president of Grand Bank when the merger occurs and Grand Bank founder and Chairman Charles Stoddard retires.

“We’re going to take the Grand Bank-style of banking out to the community,” he said.

Grand Bank, which will retain local decision-making and a board of directors, will likely target the northeast and southeast sides of the area for new branch offices, Wesholski said, as Macatawa stakes out other areas to expand its presence within the Grand Rapids market, where it now has offices in Grandville and Wyoming.

Grand Bank will seek to open two new offices in 2002 and additional branches in the future, Wesholski said. He sees the potential for Grand Bank to create a local branch network as large as the 14-office system that Macatawa has developed in just four years in southern Ottawa, northwestern Allegan and southwestern Ken counties.

“We’ll look at two right off the bat in the coming year and then we’re going to see where else we should be,” Wesholski said.

Macatawa Bank Corp. will pay Grand Bank Financial Corp. shareholders 17.5979 shares of Macatawa common stock for each share of Grand Bank stock. The merger is expected to close in the second quarter of 2002. With the merge, the Macatawa holding company will have combined assets of $886 million, deposits of $715 million and $727 million in loans.

Operating efficiencies gained from the merger are expected to cut Grand Bank’s expenses by 10 percent annually, said Steve Germond, chief financial officer for Macatawa Bank Corp. The merger is not expected to lead to any job cuts, Germond said.

While Grand Bank “was not up for sale,” directors knew that in order to continue growing, the bank needed a broader presence in the market to better serve its commercial clients.

“Having one office downtown was kind of a stumbling block for some companies to bank with us,” Wesholski said. “We had to look back and say, ‘What will make our franchise better and a little stronger?’”

As Grand Bank weighed its options, including becoming a publicly held company or selling more shares to its private shareholders, Macatawa began planning to extend its presence in the Grand Rapids market in response to the Old Kent Bank acquisition by Fifth Third Bancorp.

With both banks sharing similar corporate cultures and philosophies, Macatawa’s Smith saw an opportunity for a partnership, rather than becoming competitors. Grand Bank’s directors agreed, Wesholski said.

“They were coming,” he said. “It just seemed to make sense.”

Wesholski sees Grand Bank becoming more consumer-oriented. He promises that as Grand Bank pursues a goal of growing revenues at a rate of 15 percent to 20 percent annually, it will maintain its personalized service on which the bank built its reputation.

“We’re not going to compromise quality with aggressive growth,” he said. “We’re not going to lose sight of that, and they’re not going to lose sight of that. It took us 14 years to develop this name.”

Smith echoes those sentiments, particularly for Macatawa as it tries to further penetrate the Grand Rapids market.

“Just because you’re local doesn’t mean you have any special privileges. You still have to earn the business,” Smith said.         

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