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By Joe Boomgaard | MiBiz
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BYRON CENTER — Whenever banks go through acquisitions, they usually prepare for a short-term decline in customers as the deal gets finalized. It’s a common occurrence because people might not want to place a bet on an organization going through change or for some other reason.

But when Chemical Bank acquired Byron Bank just over a year ago, the exact opposite happened in West Michigan, said Lynn Kerber, Chemical’s west region president.

“We’ve had a really good year, and our customer retention has been excellent. We’ve actually grown through the merger,” Kerber told MiBiz, noting the number of households served, number of loans and dollar amount in accounts grew over the past year. “Our people did a great job in the conversion. The team members did a good job in staying close to the customers. We’re relationship bankers, and it paid off.”

Kerber said it’s always nice to see a plan come together as expected. Chemical identified many potential synergies with Byron that led the Midland-based bank to be interested in the deal in the first place. Throughout the first year of the merger, she said it’s been rewarding to see the two organizations fit together according to plan.

Each organization on its own was somewhat spread out with some service gaps across the individual banks. “But when you overlay them, you’ve created a nice network for your customers,” said Kerber, who was with Chemical at the time of the acquisition. The synergies existed both in the culture and the products each bank had prior to the merger. “Byron had private banking, and (Chemical) had trusts and investments. We both had parts, but not the whole thing. Now, we have a whole range of products.”

Moreover, while Chemical had some major commercial clients, its business banking unit typically dealt with small businesses, but Byron had a niche with middle market companies across West Michigan.

“We could offer a much broader range of services to the customers, and they saw the benefits immediately,” she said. “We were opening accounts the week of the merger.”

Kerber said the west region, which encompasses Kent, Ottawa, Allegan, Berry, Newaygo and Van Buren counties, has the most aggressive budget within the broader Chemical Bank organization, and for the year to date, the region is exceeding those targets. From June 2010 to June 2011, approximating about the first year after the merger, the region continued to grow.

In some cases, Kerber credits the merger for helping keep clients happy. For example, Byron Bank had a lower lending limit than Chemical, and that led some clients to have to bring in another lender on large loans. As some West Michigan companies have begun to ease out of the recession, they’re finding a need for larger loans, and Chemical has been able to handle those deals in-house.

“We have a larger lending limit and we’re able to utilize that to help them grow,” she said. “We can keep the credit here instead of having them go to a bigger bank. It goes back to relationships and adding value.”

The market Kerber oversees balances metropolitan and rural areas, and she’s pleased that the headquarters ended up in Byron Center, about the geographic middle of the territory she covers. She said some Byron Bank customers in small rural markets weren’t as familiar with Chemical Bank and were unsure if Chemical would continue to operate there.

“There was this perception that we were this big bank. While we were larger than Byron, it’s still community banking,” she said.

Overall, Kerber sees the best growth opportunity in commercial lending. The west region’s portfolio is about 65 percent commercial loans.

“We’re fairly well-rounded,” she said. “With the economy, the consumer piece is still lagging (because of slow) home sales, and the re-fi boom is over. People are pretty cautious. But we’re seeing a lot more opportunity for growth in commercial. We’re in one of the most dynamic and viable markets in the state. We’re seeing some of our customers expand, get new projects and new equipment and need increased capital (to support their) organic growth. And another segment is disenchanted with how they’ve been treated…by other banks. We’ve been able to be ‘Steady Eddies’ and people see the benefit in that.”

In particular, Kerber said she’s seeing strong growth in the manufacturing segments, especially those tied to the automotive and plastic industries. Transportation has picked up as well. She said the medical industry will continue to grow, but the bank’s relationship with that sector is in its infancy. Perhaps the most unsung local industry is agribusiness, including food processing and services related to that sector, she said.

“It’s under the radar and it’s growing,” Kerber said. “Ag is doing really well in Michigan. Chemical has a team of lenders that have some specialty in agribusiness. We’re one of the few banks that does.”

While the ink may have just dried on the merger with Byron, Chemical continues to look for new acquisition opportunities, as it has for years, she said. The executives at the bank believe the new onslaught of regulations will continue to burden smaller organizations, leading to a continuation of the consolidation trend in the banking industry.

Future opportunities could take several forms. Entire bank corporations could become available, or as has been the case recently in West Michigan, branches might come on the market as other institutions large and small readjust their strategies.

Taken as a whole, Kerber said it’s not likely Chemical will be building any new buildings for a while as it surveys existing opportunities in the market.

“We do want to continue to fill in the market whether through whole bank or branch acquisitions,” she said.

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• lynn kerber
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