GRANDVILLE — The parent company for Grand River Bank wants to raise $7.5 million to provide a cushion for the economic downturn brought on by the COVID-19 pandemic.
Grand River Commerce Inc. aims to raise the capital through a debt offering, according to a recent filing with federal securities regulators.
The offering “is in many ways based on the uncertain circumstances that we’re all facing right now” from the pandemic, Grand River Commerce President and CEO Robert Bilotti said.
“We’re facing an unprecedented circumstance,” Bilotti told MiBiz. “We feel that until we have a better understanding of the severity of the economic impact, we want to be certain that we have adequate resources to manage through this crisis and serve the interests of our customers.”
Grand River Commerce planned to approach existing shareholders and clients first to participate in the debt offering. The additional capital also will go to support clients that continue to grow even in the economic downturn, Bilotti said.
“There’s continued long (term) growth out there and we want to be in a position to meet it,” he said. “There is continuing loan demand and we want to be able to meet that.”
The holding company pursues the offering as the region continues to grapple with the COV1D-19 pandemic and its economic fallout. However, it comes after the company put up strong growth in 2019.
Grand River Commerce last year grew total assets by 21.5 percent over the previous year to $321.2 million. Total deposits grew nearly 24 percent in 2019 to end the year at $270.9 million, and total loans increased 21.4 percent to $289.8 million, according to an annual financial report posted on the bank’s website. Grand River Commerce has more than doubled assets, loans and deposits since 2015.
The corporation recorded $1.7 million in net income for 2019, up from nearly $1.4 million the year prior.
“It was a great year and a great run,” Grand River Bank CEO Pat Gill said of the 2019 results.
Given the pandemic and its effect on the economy, growth rates for 2020 are hard to predict, Gill said.
“Some of that is really going to be determined by how quickly the economy recovers, how quickly businesses reopen, what we find as we reopen and how the virus behaves,” he said. “There’s a lot of things about which there’s a great deal of uncertainty.”
Grand River Commerce operates a single Grand River Bank office in Grandville. The corporation last year opened a temporary mortgage and commercial lending office on Cascade Road and is building a new branch at Crahen Drive and Fulton Avenue that should open in the fourth quarter, giving Grand River Bank a physical presence on the eastern side of Kent County.
Gill emphasized the bank is well-capitalized with “very strong performance” and has “pristine” asset quality. The debt offering is “a prudent thing to do to buttress the capital levels a bit just to create a bit of additional buffer against the uncertainty,” and accommodate growth, Gill said.
“There may be some opportunities for growth or expansion or additional business lines that will ultimately become apparent as we work our way through this situation, and we want to make certain that we’re prepared to take advantage of opportunities, as well as have a buffer against the downside,” he said.
A number of banks in the upper Great Lakes region lately have been raising additional capital by issuing subordinated debt, Bilotti said, which is the option Grand River Commerce directors chose. The option was preferable versus a securities offering that would dilute existing shares, he said.
An offering of additional securities also would have occurred as the economy reels from the COVID-19 pandemic.
“We considered the best way to go about this, and right now, the capital markets view bank stocks with uncertainty, is the best way to put it,” Bilotti said. “The idea of raising capital through the sale of bank stocks is something we recognized as being an uphill battle at this point, and we made the commitment to not further dilute our shareholders’ interests with an equity raise, so sub-debt made sense.”