Both Mercantile Bank and ChoiceOne Bank are expanding their geographic reach by opening loan offices in new markets.
The Grand Rapids-based Mercantile Bank plans to open loan production offices in Traverse City and Saginaw as soon as it can secure locations in each market.
Kelly Poets and Ray Reitsma
ChoiceOne Bank, based in Sparta, opened a loan production office in downtown Holland within the last month that will primarily focus on commercial lending. The Holland loan office expands ChoiceOne’s lakeshore footprint into southern Ottawa County following the 2020 acquisition of Community Shores Bank that included locations in Muskegon and Grand Haven.
“With the acquisition of Community Shores, we have a very good presence on the lakeshore from Muskegon down through Grand Haven, and we already had a presence in eastern Ottawa County in Coopersville, and we saw a natural extension into Holland,” ChoiceOne CEO Kelly Potes told MiBiz. “It’s a good market. There’s a lot of business in Holland given its size, and we just feel that will further strengthen our presence in Ottawa County.”
ChoiceOne recently hired veteran commercial lender David Huisman as a vice president and commercial loan officer in Holland. Huisman was previously with First National Bank of Michigan and, before that, West Michigan Community Bank.
Huisman is joined by Craig Oosterhouse, a vice president for commercial lending who moved to ChoiceOne nearly two years ago from the former TCF Bank and has worked in the Holland market from an office in southern Kent County. He’ll now work out of the new Holland loan office, which will also provide mortgage lending, Potes said.
The two loan officers are “already getting traction in the market,” he said.
How well ChoiceOne builds a book of business in Holland will determine if and when the bank would consider opening a retail branch in the market, Potes said.
“We normally go into a market like this that we feel could sustain a full branch office, but we enter it with a loan production office first to build some scale,” he said. “If the office gains an appropriate amount of local loan business, we will assess the area for a full branch location that will also accept deposits.”
Currently, ChoiceOne has 35 branch offices in Kent, Ottawa, Muskegon, Newaygo, Lapeer, St. Clair and Macomb counties.
ChoiceOne previously opened a loan office in downtown Grand Rapids in 2016 to offer commercial loans and residential mortgages, and then developed a new branch on Market Avenue two years later. The bank also opened new loan offices in November in Oakland County and a year ago in Macomb County in suburban Detroit.
Banks usually will hire local lenders who know the market well and then open a loan production office to lead their entry into a new market, drive loan growth and expand their footprint. They’ll often follow up a few years later with a full-service retail branch. Launching a loan office enables them to build a presence in a market before incurring the costs of establishing a retail branch.
“It’s a great way to get started,” said Mercantile Bank President Ray Reitsma. “We feel like it’s a very prudent and effective way to enter a market.”
Mercantile Bank has had a commercial lender working the Saginaw market since mid 2022, and the bank recently hired a commercial loan manager in Traverse City. The commercial lenders have been working out of their homes and the bank “is going to add bricks and mortar to the equation, we hope in the very near future,” Reitsma said.
“So, we’re in each market in the early stages of growing out into a more physical presence,” Reitsma said.
Mercantile Bank followed the same playbook to expand with loan production offices into Midland in 2020 and Petoskey in 2021. The bank also opened a loan office three years ago in Cincinnati, Ohio.
The shift to physical locations in Traverse City and Saginaw followed the hiring of commercial lending talent in both markets.
In Traverse City, Mercantile in 2022 hired Scott Zimmerman as community president. He was previously with Huntington Bank and TCF Bank prior to the 2021 merger. He joined two Mercantile commercial lenders who have been working in the market and established a “beachhead” to grow in what Reitsma described as an “economically vibrant” area.
In Saginaw, Melissa Spranger, previously with Huntington and TCF, leads the market for Mercantile as a vice president.
“Everything we do is driven by people and these two decisions were people-first decisions,” Reitsma said. “We found great people that we really liked and they happen to be in new markets for us. It was a happy coincidence that it happens to be in new markets.”
Mercantile also intends to add a personal banker in both Traverse City and Saginaw, Reitsma said. The bank in the future may also establish retail branches in both markets, starting with an automated location that uses video conferencing, he said.
“We’ll expand there as success and demand dictate,” Reitsma said. “We’ll provide what the market demands from us.”
Mercantile Bank has 46 branches in the Lower Peninsula. The loan offices planned for Traverse City and Saginaw are a “natural extension” of the bank’s presence in nearby markets such as Cadillac and Petoskey in the northwestern Lower Peninsula, and Midland on the east side of the state, he said.
Both ChoiceOne and Mercantile reached into the new markets as they recorded solid loan growth.
ChoiceOne’s parent company, ChoiceOne Financial Services Inc. (Nasdaq: COFS), grew core loans nearly 21 percent during the year to $1.19 billion. The “core loans” category excludes loans still on the books from a year ago tied to the federal Paycheck Protection Program and loans held for sale.
At the end of 2022, Mercantile (Nasdaq: MBWM) had $197 million in unfunded commitments for commercial and construction loans that it expects to fund within the next 12 to 18 months, although total commercial loans dipped slightly to $3.13 billion from “full payoffs and partial paydowns of certain larger relationships” that totaled about $103 million, according to a Jan. 17 earnings report.
In a conference call with analysts to discuss fourth quarter results, Reitsma estimated that “somewhere in the two-thirds (range) of new growth is coming from disruption in the market.”
“Some of the larger players that we compete against are having trouble getting out of their own way and have, over the long haul, made it difficult for some pretty good customers to continue to bank with them. And we have been the beneficiary of that,” he said.