Independent Bank Corporation (NASDAQ: IBCP), the parent company of Independent Bank, with total assets of approximately $2.8 billion, and TCSB Bancorp, Inc. (“TCSB”), the parent company of Traverse City State Bank, today jointly announced the signing of a definitive merger agreement for IBCP to acquire TCSB.
Subject to the terms of the merger agreement, which has been unanimously approved by the Board of Directors of each company, TCSB shareholders will receive 1.1166 shares of IBCP common stock for each outstanding share of TCSB common stock or 2.71 million shares of IBCP common stock in the aggregate. The 169,800 outstanding options to acquire TCSB common stock will be converted into IBCP options at the completion of the merger. The transaction is valued at approximately $63.24 million based on IBCP’s 15-day volume weighted average price of $22.4438 as of Dec. 1, 2017, which is equal to 206.4% of TCSB tangible book value as of September 30, 2017
Subject to the approval of TCSB shareholders and the receipt of regulatory approvals and satisfaction of other customary closing conditions, the transaction is anticipated to close in the first half of 2018. After the closing, IBCP intends to consolidate Traverse City State Bank with and into Independent Bank, operate under the Independent Bank name and maintain all five branch locations. One member of the TCSB board of directors will join IBCP's board upon completion of the transaction.
Brad Kessel, the President and Chief Executive Officer of Independent Bank Corporation, commented: “The transaction with TCSB will strengthen our current franchise and support our growth in the attractive Traverse City market with full-service banking through five locations. We are excited to welcome the TCSB team and together create an even stronger bank for the Michigan communities that we serve. We are pleased that Connie Deneweth will continue to lead the Northern Michigan market. She is a respected business leader in the Traverse City area who will make a positive contribution to our organization. In addition, Ann Bollinger will lead the development of our wealth management services in Northern Michigan. Connie and Ann have built an exceptional bank with a strong foundation.”
Connie Deneweth, the Chief Executive Officer of TCSB Bancorp, Inc., commented: “We are very excited to join the Independent Bank family. We share a commitment to community banking, valuing our employees and serving our customers. This combination significantly enhances our capabilities including, larger lending limits, an expanded loan and deposit product mix, and more automated services. We believe this partnership is in the best interests of our customers and shareholders.”
IBCP currently estimates that annual pre-tax expense savings associated with the merger will be approximately 31% of TCSB’s run-rate expenses for 2017. Merger transaction and integration-related costs are expected to be approximately $3.4 million (pre-tax). The transaction is expected to be approximately 3.8% and 6.7% accretive to first-year and second-year fully diluted earnings per share, respectively. Tangible book value per share dilution will be approximately 2.8% at closing, including all transaction-related expenses, with an expected tangible book value earn-back of 3.3 years using the crossover methodology. The estimated internal rate of return for the transaction is expected to be approximately 21.0%.
ProBank Austin acted as IBCP’s financial advisor and Varnum LLP acted as legal counsel to IBCP in connection with the merger. D.A. Davidson & Co. acted as TCSB’s financial advisor and Warner Norcross & Judd LLP acted as legal counsel to TCSB in connection with the merger.