Indiana holding companies agree to merge

Northwestern Financial Review, Jan 15-Jan 31, 2005 by Hilgert, Jackie

Two Indiana bank holding companies, MarBanc Financial Corp., and Grabill Bancorp., have agreed to consolidate into a new bank holding company, Independent Alliance Banks, Inc. (IAB). MarkleBank, Markle, and Grabill Bank, Grabill, are the institutions affected by their respective holding companies' merger. The new holding company will maintain both institutions as separately chartered subsidiaries, each governed by its existing board of directors.

The $220 million MarkleBank operates six locations with 75 employees; the $520 million Grabill Bank operates seven locations with 175 employees. Both institutions have trust, insurance and investment divisions. Grabill Bank also operates a mortgage center. Both boards have made a commitment to retain all employees through the merger.

"With no overlaps in branch operations, greater lending capacity and unlimited opportunities to leverage the expertise of both banks, we are looking to grow the organization, not constrict it," said Travis Holdman, president and CEO of MarkleBank.

"MarkleBank and Grabill Bank share similar corporate cultures and philosophies about service excellence, staff development, growth, bank independence and community leadership," said Michael Marhenke, president and CEO of Grabill Bank. "The merger of these two bank holding companies will allow the two individual banks to remain strong leaders in community banking well into the future and provide an improved return for our shareholders."

IAB will acquire the two existing holding companies by issuing shares in an intra-stock offering based on an exchange ratio determined by comparing the relative contributions of each institution's earnings, equity and assets. MarBanc shareholders will receive one share of IAB for each existing share of stock while Grabill shareholders will exchange existing shares for 116.1 shares of new IAB stock.

MarBanc shareholders who are not Indiana residents or own fewer than 200 shares will receive $71.50 in cash for each share. Grabill shareholders who are not Indiana residents or own fewer than five shares will receive $7,900 in cash for each share. A company release stated the intra-state offering and stock repurchase provisions are necessary components to the agreement to keep the number of shareholder below the threshold where Securities and Exchange Commission rules take affect.

It is anticipated that IAB will have approximately 400 shareholders owning approximately 1.4 million shares upon completion of the merger, which is expected to be complete at the end of the first quarter, subject to regulatory and shareholder approvals. Headquartered in northeastern Indiana, the post-merger holding company is estimated to have assets of $750 million and will operate in Allen, Huntington and Wells counties.

IAB's board of directors will include: Brent Clifton, former president and CEO of Grabill Bank who will serve as chairman; Holdman, who will serve as vice chairman and CEO; Marhenke, who will serve as board president; Kevin Himmelhaver, Grabill Bancorp's current chief financial officer who will serve as CFO, and Jeff Humbarger, MarcBanc's current CFO who will serve as treasurer.

MarBanc Financial Corp., and Grabill Bancorp., have engaged Gerrish & McCreary, P.C. as legal counsel for this transaction. Renninger & Associates, LLC, is acting as financial advisor to both entities.

"With the union of these two great independent community banks, we have created a unique framework for our customers, shareholders and communities," Clifton said.

By Jackie Hilgert