As the end of 2017 approached, Grand Rapids-based Independent Bank Corp. cut a deal to buy TCSB Bancorp Inc. in Traverse City, the parent company of Traverse City State Bank. The $63.2 million deal, which is expected to close in the first half of 2018 pending approval from regulators and TCSB Bancorp shareholders, would extend Independent Bank’s presence in northwestern Michigan, where Traverse City State Bank has five offices and assets of $346.9 million. Independent Bank, which opened lending offices in Traverse City and other markets this year, has 65 branches across the Lower Peninsula with total assets of $2.75 billion as of Sept. 30.
Why make this deal in Traverse City at this point in time?
Growth. We are a publicly traded company and you can’t stand still. You either go forward or you go in reverse. We have had a terrific run. We’ve had 14 consecutive quarters of net loan growth, so on an organic basis, we have some really good momentum going. But we regularly share with our investors that we will be open to acquisitions should they make sense. In this case, this makes sense. It’s a well-run bank, and we like the market.
Was this an opportunistic deal, or does it signal that Independent Bank has become more interested in pursuing acquisitions?
There are many banks out there that their primary focus is buying other banks. Our primary focus is to grow organically and then complement the organic growth with an acquisition, if it makes sense. Our main focus is to keep blocking and tackling, and lending and gathering deposits through our existing channels.
As you work to close the TCSB deal, what do you see ahead in Michigan for 2018 in terms of bank consolidation?
In the Michigan update published by the FDIC, we had 100 institutions as of Sept 30. I go back to a year ago at this time, it was 107, and in 2015 it was 110. The question is not are we going to continue to consolidate, but at what pace. I would envision we’ll probably continue at least the same pace that we’ve been on.
What’s continuing to drive that consolidation?
When you look at Traverse City State Bank and why its board decided to sell, it’s (that) running a smaller bank is hard. You have high regulatory costs, high costs to cover the risks of the operation and cybersecurity. So for small banks, it’s a challenge. I think we’re going to see more consolidation.
What do you see the economy doing next year and how will that play into what the bank does?
The economy is everything for the bank. The bank goes as the economy goes. The economy is pretty solid right now, as anything that we’ve seen in several years. We’re optimistic about 2018 and when we speak to our customers. Small businesses are still a little bit hesitant sometimes to add new workers or build that building expansion or make equipment purchases.
What’s Independent Bank’s biggest opportunity in 2018?
Number one, we’ve had some great momentum, so it’s continuing that momentum. We opened loan production offices (in 2017) in Ann Arbor, Brighton, Dearborn, Grosse Pointe and Traverse City, as well as in Columbus and Akron, Ohio, and those have worked out terrific for us. So it’s continuing with that momentum and then at the same time having a smooth and seamless integration of the Traverse City State Bank customer base and employee base. If we can hit on those two items that would be great.
What concerns you the most as we head into next year?
Talent. There’s a talent shortage. In our markets, businesses are having a hard time finding the talent, and talent’s critical to them growing their businesses. In our shop, we have a great team, and I want to do everything we can to retain our employees base. And obviously, (I’m concerned about) a hiccup in the economy. There are just so many uncertainties out there in the global economy and things we can’t control, and we spend a lot of time protecting our customer information, cybersecurity and managing that risk.
What’s one prediction you have for 2018?
Michigan will finally win a Big Ten football championship.