Mercantile Bank in Grand Rapids, Mich., has agreed to buy Eastern Michigan Financial in Croswell.
The $6.2 billion-asset Mercantile said in a press release that it would pay $95.8 million in cash and stock for the $505 million-asset Eastern. The deal, which is expected to close in the fourth quarter, priced Eastern at 165% of its tangible book value.
Eastern has 12 branches, $208 million loans, and $449 million of deposits.
“Eastern brings an incredible core deposit base, with a cost of deposits less than 0.50%, and substantial liquidity, that further enhances our balance sheet flexibility,” Ray Reitsma, Mercantile’s president and CEO, said in the release. “The combination provides an improved loan-to-deposit ratio, a broader deposit base, and a reduced cost of funds.”
Mercantile plans to operate Eastern under its existing charter until its planned core conversion in early 2027.
William Oldford, Eastern’s CEO, will join Mercantile as a regional market president. One Eastern director will join Mercantile’s board.
The deal is expected to be 11% accretive to Mercantile’s dilutive earnings per share once cost savings are fully phased in. It should take less than four years for Mercantile to earn back an estimated 5.8% dilution to its tangible book value.
Mercantile plans to cut about 40% of Eastern’s annual noninterest expenses, or about $5.4 million. The company expects to incur $7.8 million of merger-related expenses.
Stephens and Dickinson Wright advised Mercantile. Piper Sandler and Shumaker, Loop & Kendrick advised Eastern.