Grand River Commerce Inc., the holding company for Grand River Bank in Grandville, completed a private sale of more than 2.3 million shares of its common stock in early February to “accredited investors,” netting $10,653,786.
The sale of stock to private individuals and institutions, mostly in West Michigan, at a price of $4.50 per share was handled by Boenning & Scattergood Inc., a 100-year-old investment banking firm in Philadelphia that has two executives with key connections to investors in Michigan and the Midwest.
“West Michigan is a dynamic market and has been at the forefront of the nation’s economic recovery. We believe the newly raised capital will allow us to fully implement our growth strategy,” said Robert Bilotti, Grand River Commerce chairman and CEO.
The holding company was founded in 2006; it opened Grand River Bank in April 2009.
The offer of common stock was made only to accredited investors, under an exemption from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D.
“We have an exceptionally talented team at Grand River Bank, led by President Liz Bracken and CEO Pat Gill. Our track record of steady growth and improved earnings gives us confidence in our ability to take the bank and Grand River Commerce Inc. to their next levels of success,” said Bilotti.
The plan to raise the additional capital was conceived more than two years ago.
Bracken said the private sale brings in about 125 new investors. Almost 800 investors bought stock at the IPO when the bank was launched.
Most of the 125 new investors are from the Grand Rapids area, said Bilotti, noting that some of the buyers are institutions and a few of the investors were from outside Michigan.
He explained that once a bank is established and able to undertake a private placement of common stock under SEC rules, a private placement is a “more cost effective means of raising capital.”
A private or “accredited” offering of stock “is generally designed to attract high net worth individuals and institutions, and they generally purchase stock in greater amounts,” said Bilotti.
Gill said that often when a bank raises $10 million in capital, it does so “to fix a problem or fill a hole. In our case it was purely to position the company for growth purposes. We were well capitalized prior to the cap raise.”
He added, however, that after thorough analysis by its board, it was deemed prudent “to go out and seek additional capital to support our growth at a time when we thought it was really good to do that.”
Grand River Bank’s marketing tagline is: “Smaller. Smarter.” With total assets of $130 million, its primary sources of revenue are commercial lending and home mortgages, according to Gill.
Is the bank’s plan to grow organically or through acquisition?
“At this point, obviously, our growth has been organic,” replied Gill, “but we also believe, at some point in the future, it would be foolish to rule out some sort of partnership that would allow us to grow more quickly.”
“Given our size,” said Bilotti, an acquisition would be “more of an aspirational goal at some point in the future.”
Bilotti did tell the Business Journal, “There is a lot of disruption in the market right now,” referring to recent M&A activity that involved four West Michigan banks. “If we are doing our job for shareholders, we should be examining those opportunities.”
He said those opportunities can involve management talent becoming available at other banks, as well as new loan opportunities as the economy continues to improve.
At Community Shores Bank in Muskegon, profitability has returned, yet “problems loom,” according to the Winter 2015 Seidman Business Review published by Grand Valley State University. It states Community Shores has slowly reduced the total dollar value of its non-performing loans, but it must raise millions in capital or renegotiate repayment terms on debt maturing at the end of March.
Is Grand River Bank interested in acquiring Community Shores Bank in Muskegon?
“No,” replied Bilotti. “We don’t have any plans to acquire anyone.”