BALDWIN — A surge in deposits led a small community bank serving rural markets north of Grand Rapids to raise $15 million that will go to support growth and maintain regulated capital ratios.
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Lake Financial Corp., the parent company of Baldwin-based Lake-Osceola State Bank, raised the capital in a debt offering that involved 25 investors, according to a recent filing to the U.S. Securities and Exchange Commission.
Starting last year, Lake-Osceola State Bank recorded strong deposit growth during the COVID-19 pandemic from small businesses depositing funds from the federal government’s Paycheck Protection Program and from individuals who received stimulus checks and higher unemployment benefits, said President and CEO Robert Fisher.
As the pandemic started to spread to the U.S., people began pulling money out of the stock market and depositing it in secure accounts, which also contributed to the surge in deposits, Fisher said.
As deposits jumped, the bank needed to raise additional capital to maintain capital ratios required under federal regulations. Even though Lake-Osceola has always been and remains well capitalized, the bank wanted to avoid any possible pressure on capital ratios that could hinder growth, according to Fisher.
“We didn’t want to get hung up on if there were additional (deposit) surges that it kept us from growing the way we wanted to grow,” Fisher told MiBiz. “We said, ‘We don’t want to be interrupted by what’s going on with these deposits. We want to grow and we want to do the things that we like to do.’
“It really is about continuing our strategic initiatives and growing the bank and developing the communities that we serve.”
Lake-Osceola State Bank reported $303.6 million in deposits at the end of the first quarter, an increase of more than 30 percent from a year earlier, according to a quarterly financial report to the FDIC.
The bank has 10 branch offices in Lake, Oceana, Manistee, Mecosta and Osceola counties with $360.7 million in total assets as of March 30. The bank’s 11th branch, located in Evart, northeast of Big Rapids, was delayed a year because of the pandemic and will open in October. As well, Lake-Osceola may add to its footprint in the future.
“We’re looking at other strategic opportunities that we have,” Fisher said. “We constantly look at our market, our adjoining markets, and we look for opportunities.”
The additional capital allows Lake-Osceola to consider additional offices in the future, he said. That includes potentially acquiring a branch from another bank that was selling a location.
“If we evaluated a situation and wanted to go in there, capital was not going to keep us from doing that,” Fisher said. “We want to be in a position to take those if that opportunity is there.”
One potential source of opportunity for banks considering branch acquisitions: TCF Bank and Huntington Bank are closing several Michigan offices this year following their recent merger. To that end, Michigan City, Ind.-based Horizon Bank said it intends to buy 14 of the locations in the central and northern Lower Peninsula.
Lake-Osceola State Bank is the latest Michigan-based community bank to raise capital this year.
Mount Pleasant-based Isabella Bank Corp., with $2 billion in assets and 31 offices in the central Lower Peninsula, closed in early June on a $30 million debt offering that it said would go toward “general corporate purposes, including potential repurchases of ISBA stock and/or merger and acquisition activity.”
In Coldwater, Southern Michigan Bancorp Inc., the parent for Southern Michigan Bank & Trust, completed a private placement of subordinate notes in April to accredited investors that raised $30 million and will go to support organic growth.
As well, Honor Bancorp Inc., based near Frankfort, raised nearly $1.1 million in March through an equity offering, while Hancock-based Keweenaw Financial Corp. in the Upper Peninsula closed in April on a $15 million debt offering.