Forming a new foundation creates greater structure for Mercantile Bank of Michigan’s corporate philanthropy.
The Grand Rapids-based bank formed The Mercantile Bank Foundation with an initial $4 million contribution and expectations for further growth in the years ahead.
The foundation formalizes the bank’s giving to a variety of charitable organizations and causes that over the last two years totaled $1.6 million.
The move enables Mercantile Bank to “enhance our charitable giving program as we work to support all of the communities within our markets, and to provide a consistent level of giving throughout the business cycle,” said President Raymond Reitsma.
The corporation will make subsequent contributions to the foundation beyond the initial $4 million “depending on Mercantile Bank’s operating performance, financial condition and other considerations,” according to an announcement.
“How much we give from a charity standpoint is subjective. … Clearly the earnings performance (and) the financial condition of the bank has an impact on that,” Chief Financial Officer Chuck Christmas said. “We’re really not changing anything that we’re doing now. It’s more of a formalization of trying to make the financial giving and donations as separate from the bank as we can, at least from a financial standpoint. We’re still looking at the same organizations to support. It’s more about the dollars involved and how we got those dollars there.”
Mercantile Bank filed documents with the state late last month to formally organize the foundation as a tax-exempt, nonprofit entity separate from the corporation.
Typically when the economy slows and a company’s financial performance follows suit, philanthropy is an area that tends to get cut or scaled back, Christmas said.
In creating, seeding and building up a foundation endowment, Mercantile aims to sustain philanthropy at a consistent level, even in difficult economic periods, Christmas said.
“When the economy is not doing as well, we’re not doing as well. But the charity needs are probably the greatest. It’s kind of an inverse relationship,” he said. “What we wanted to do was insulate our charity giving from the performance of the bank. What we want to do over time is grow the foundation to a dollar amount that eventually takes over all of our charity giving.”
Over the coming years, the corporation wants to grow the foundation’s endowment to $20 million and use the investment proceeds for philanthropic giving, he said. The goal is to generate proceeds to support $1 million in annual donations that eventually would all come through the foundation, Christmas said.
The bank will donate regularly to the foundation “as part of our normal operating experience,” as well as when generating non-core income such as the sale of a closed branch office, Christmas said.
“Over time we want to grow that (endowment) to a dollar amount where the investment income equals what we give every year,” he said. “It’s going to take a while to build that up, but ultimately we’d like to get to that level where the foundation does all of the bank’s donations.”
Foundations are required by law to give 5 percent their assets annually, which equates to $200,000 in donations this year from The Mercantile Bank Foundation.
The bank retained investment firm Graystone Consulting in Grand Rapids, a business of Morgan Stanley, to help manage the foundation’s investments.
Mercantile Bank’s charitable donations range widely from $100 to $10,000 or more per gift. The bank, with 44 offices across the Lower Peninsula and about $4.9 billion in assets, makes contributions to more than 300 community organizations annually across its market.
Recipients include health and human services organizations, community and economic development groups, and education and arts and culture groups. Organizations that have previously received support from the bank include the YMCA, United Way and Kids’ Food Basket, Christmas said.
One key criteria for The Mercantile Bank Foundation’s giving is the involvement of bank employees in an organization, Christmas said.
“We want to have our employees involved in causes in their communities,” he said.
Mercantile Bank employees typically volunteer a collective 30,000 hours a year at nonprofit organizations around the state. The COVID-19 pandemic and resulting lack of volunteer opportunities available reduced employee volunteer hours to about 13,000 in each of the last two years, according to Mercantile Bank officials.
“Importantly, our commitment to making a positive difference extends beyond donations, including community development lending, thousands of employee volunteer hours for hundreds of nonprofit organizations, financial education classes and other initiatives that will continue alongside the work of the new charitable foundation,” Reitsma said.
News coverage in the nonprofit section of MiBiz is made possible by advertising support from the Grand Rapids Community Foundation. GRCF is a leader in funding, initiating and leading programs that benefit the greater Grand Rapids area in arts and social engagement, education, health, neighborhoods, economic prosperity and the environment. This advertisement has no effect on editorial consideration in MiBiz.