Raising $25 million in capital and acquiring a mortgage company positioned Northpointe Bank for even more growth in the years ahead.
Top executive: Charles Williams, president and CEO
Annual sales: $4.2 billion in residential mortgage originations in 2018
Full-time employees in West Michigan: About 450 (740 employees overall)
Business description: Primarily a residential mortgage lender
Advisers on the capital raise: Varnum LLP (legal) and Sandler O’Neill & Partners LP (placement agent)
The Grand Rapids-based Northpointe Bank closed in June of this year on the private placement of common stock with Castle Creek Capital LLC, a private equity firm based in Rancho Santa Fe, Calif. Through the investment, Castle Creek Capital took a 27-percent stake of the outstanding equity of the company, said Michael Winks, Northpointe’s executive vice president and chief lending officer.
The capital provided Northpointe Bank a means to grow its balance sheet “so we can continue to do what we’re doing,” Winks said.
“This just allows us to continue to expand the bank,” he said. “We’ve been on a nice growth path and enjoy expanding our business.”
Raising the $25 million, combined with Northpointe Bank’s earlier acquisition of certain assets of Home Point Financial, won the banking and finance category in the 2019 MiBiz M&A Deals of the Year Awards.
The Home Point Financial acquisition a year ago extended Northpointe Bank’s residential lending business into the northeastern U.S., a market where “we didn’t have much” previously, Winks said.
Through the deal with Home Point Financial, a subsidiary of Ann Arbor-based Home Point Capital LP, Northpointe Bank added 13 residential mortgage lending offices to grow to about 50 locations in 20 states. The mortgage offices acquired are primarily in Ohio, New Jersey, Pennsylvania, Rhode Island and Connecticut.
The deal not only grew Northpointe Bank’s reach but also has augmented earnings, Winks said.
“The residential lending business is often a scale business, so we pick up economies of scale as we grow the amount of loans that we originate. It’s accretive to the bank,” he said.
The deal with Home Point Financial came together when parent company Home Point Capital decided to sell off its consumer mortgage business. Executives at Home Point Capital, a previous client of Northpointe Bank’s warehouse business that lends to other independent mortgage bankers, reached out to their counterparts in Grand Rapids, who agreed to work out a deal.
They negotiated a deal that was announced in July 2018 and closed the following August.
Helping move the deal along was that Northpointe Bank executives “just happened to know” two managers of Home Point’s northeast region. The two people previously owned a mortgage company and were prior clients of Northpointe.
“We knew about the team, we knew about the culture, and our business goals have been to grow and add new team members as we do that,” Winks said.
Getting good cultural fit is key to any acquisition, he said.
“For us, it’s just understanding the people and the culture. At Northpointe, we focus on a few key things, but the customer is always at the center of it,” Winks said. “We work very hard to wow our customer, so we want to make sure folks joining us share that same passion for what we do. We felt that with the northeast folks.
“We like to do our homework to make sure it’s a long-term fit for everyone involved.”
To integrate the operations, the Home Point offices acquired in the deal were phased into the Northpoint operations over a 60-day period, Winks said. Home Point staff also were partnered with their counterparts at Northpointe for “almost like a buddy system and they learned our process,” he said.
“It’s a fair amount of work, but it went smoothly with no major hiccups,” Winks said.
Founded in 1999, the privately-held Northpointe Bank has a single full-service community bank office near East Beltline Avenue and I-96, along with the 56 residential mortgage locations.
Northpointe Bank originated more than $4.2 billion in residential mortgages in 2018, and for 2019 is on track to originate $7.8 billion, Winks said.
The bank as of June 30 had total assets of $1.82 billion, compared to $1.03 billion a year earlier and prior to the Home Point deal, according to a quarterly financial report to the FDIC. Deposits at midyear totaled $1.09 billion.
Through the first half of 2019, Northpointe Bank recorded $12.1 million in net income, versus $7.5 million for the first six months of 2018.
After the Home Point deal, Northpointe Bank remains open to additional acquisitions in the future.
“We would be on the outlook for similar opportunities that would fit our strategic growth plans,” Winks said. “We’re just looking for the right opportunities where top sales folks, top operational folks are a good fit with the culture of Northpointe Bank to help grow our originations throughout the country.”
FINALIST: Grand Angels launches $25 million VC fund
Since forming in August 2018, Grand Angels Venture Fund III LLC has made investments in three startup companies as it continues to seek investors and raise up to $25 million.
Managing Director Paul D’Amato expects Fund III to close on another investment in the coming weeks, and complete fundraising in the fourth quarter.
“We are working away at it and are getting some good interest in the area,” D’Amato said.
For the formation of Fund III, Grand Angels was named a finalist in the banking and finance category for the 2019 MiBiz M&A Deals of the Year Awards.
The venture capital fund invests $250,000 to $500,000 in each portfolio company, primarily in seed, Series A and Series B capital rounds with companies in advanced manufacturing, advanced agriculture, life sciences and software.
Of the three investments made to date, two of the startups are based in Michigan. They are Ann Arbor-based HistoSonics Inc., a medical device company that developed an ultrasound therapy to destroy cancer tumors, and Ocuphire Pharma Inc. of Farmington Hills, which is developing therapies to treat ophthalmic disorders. The fourth investment that is expected to close soon also will involve a Michigan-based company.
Grand Angels Venture Fund III scouts for deals across the Midwest, although “definitely the vast majority will be Michigan companies,” D’Amato said.