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Sunday, 11 August 2013 18:36

Independent Bank files for public stock offering to pay off TARP loans

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IONIA — Independent Bank Corp. (NASDAQ: IBCP) filed a registration statement with the Securities and Exchange Commission on Friday afternoon to raise up to $98.9 million through the sale of its common stock.

The Form S-1 filing for the Ionia, Mich.-based bank holding company, which has $2.1 billion in assets and operates 71 branches throughout the state’s lower peninsula, is a next step in its previously announced plan to pay off the federal government for loans issued under the Troubled Asset Relief Plan (TARP).

Independent Bank announced on July 29 that it had executed an agreement with the U.S. Department of Treasury to buy back preferred stock and a related warrant for $81 million. The offering proposed in the SEC filing could generate up to $98.9 million if the underwriters exercise their over-allotment option.

The U.S. Treasury currently holds 74,426 shares of the bank’s preferred stock, which pays cumulative quarterly dividends at 5 percent annually through February 2014 and escalates to 9 percent thereafter.

The filing comes on the heels of a strong earnings report two weeks ago by Independent Bank, which posted net income of $62.2 million, or $2.64 per diluted share in the second quarter of 2013, compared to net income of $3.2 million, or 11 cents per diluted share, in the same period last year. While most of the earnings increase came from a $57.6 million tax benefit, the bank’s pre-tax income jumped 59.2 percent versus the year-ago period.

The recent results marked the bank’s sixth consecutive quarter of profitability, reversing a half-decade of struggles that began prior to the economic meltdown in 2008. The difficult years have left the bank with a valuable asset: a net operating loss carryforward of $110.2 million, which can be used to offset federal taxes on future earnings. 

As Independent Bank’s operating results and financial health have improved in recent quarters, the stock price has risen steadily — from a low of $1.30 in late 2011 to a high of $9.00 earlier this year. The bank’s stock closed on Friday at $8.09 per share.

A healthy stock price will help cushion dilution for current shareholders of the bank, which has a market capitalization of $76.7 million. The S-1 filing notes: “If successful, this offering will result in the issuance of a significant number of shares of our common stock and will be highly dilutive to our existing common shareholders and their voting power. ... [T]he market price of our common stock could decline as a result of the dilutive effect of this offering.”

Based on the stock’s recent trading price, the offering could more than double the number of Independent Bank’s common shares from 9.5 million to more than 20 million.

The lead underwriter for the offering is New York-based Keefe, Bruyette & Woods Inc., an investment bank and broker-dealer that specializes in the financial services sector. The Grand Rapids-based law firm Varnum LLP is providing legal counsel to Independent Bank on the offering.

The complete S-1 filing can be found here.

Read 3235 times Last modified on Sunday, 11 August 2013 23:28
Brian Edwards

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