As filed with the Securities and Exchange Commission on October 16, 2007

Registration No. 333-      

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form S-4

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

IBT BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

200 East Broadway

Mt. Pleasant, MI 48858

(989) 772-9471

(Address, including zip code, and telephone number, including area code,

of registrant’s principal executive offices)

 

 

Dennis P. Angner, President & CEO

200 East Broadway

Mt. Pleasant, MI 48858

(989) 772-9471

(Address, including zip code, and telephone number,

including area code, of agent for service)

 

Copies to:

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective and satisfaction or waiver of the conditions to the proposed merger transaction, as described in this Registration Statement.

 

If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

CALCULATION OF REGISTRATION FEE

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective time until the Registrant shall file a further amendment which specifically states that this Registration shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

GREENVILLE COMMUNITY FINANCIAL CORPORATION
1405 WEST WASHINGTON STREET
GREENVILLE, MI 48838

 

NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON          , 2007

 

NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of Greenville Community Financial Corporation will be held at          , Greenville, Michigan, at           .m. Michigan time, on          , 2007, for the following purposes:

 

1. To adopt the Agreement and Plan of Merger by and between Greenville Community Financial Corporation and IBT Bancorp, Inc., dated as of August 21, 2007, as amended on September 24, 2007, and the transactions contemplated by the Merger Agreement.

 

2. To transact any other business that properly comes before the special meeting of shareholders, or any adjournments or postponements of the special meeting, including, without limitation, a motion to adjourn the special meeting to another time or place for the purpose of soliciting additional proxies in order to approve the Merger Agreement and the merger or otherwise.

 

The proposed merger is described in more detail in this Proxy Statement-Prospectus, which you should read carefully in its entirety before voting. A copy of the Merger Agreement is attached as Appendix A to this document. Only Greenville Community Financial Corporation shareholders of record as of the close of business on          , 2007, are entitled to notice of and to vote at the special meeting of shareholders or any adjournments of the special meeting. Pursuant to Section 762 of the Michigan Business Corporation Act, Greenville Community Financial Corporation’s shareholders are entitled to dissenters’ rights. A copy of Sections 761 to 774 of the Michigan Business Corporation Act, relating to dissenters’ rights is attached as Appendix C to this Proxy Statement-Prospectus.

 

YOUR VOTE IS VERY IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING OF SHAREHOLDERS, PLEASE COMPLETE, EXECUTE AND PROMPTLY MAIL YOUR PROXY CARD IN THE ENCLOSED RETURN ENVELOPE. This will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs. Your proxy may be revoked at any time before it is voted.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

Jae A. Evans, Secretary

 

Greenville, Michigan

          , 2007

 

 

 

 

GREENVILLE COMMUNITY FINANCIAL CORPORATION
1405 WEST WASHINGTON STREET
GREENVILLE, MI 48838

 

DEAR SHAREHOLDER OF GREENVILLE COMMUNITY FINANCIAL CORPORATION:

 

You are cordially invited to attend a special meeting of shareholders of Greenville Community Financial Corporation, to be held on          , 2007, at   a.m., local time, at the          , Greenville, Michigan. At this special meeting, you will be asked to approve the acquisition of Greenville Community Financial Corporation by IBT Bancorp, Inc. The acquisition will be accomplished through the merger of Greenville Community Financial Corporation with and into IBT Bancorp, Inc.

 

If the merger is completed as proposed, subject to certain possible adjustments, each share of Greenville Community Financial Corporation common stock will be converted into the right to receive .6659 of a share of IBT Bancorp, Inc. common stock and $14.70 in cash.

 

The last transaction price in IBT Bancorp, Inc. common stock known to management occurring prior to the public announcement of the merger was $44.00 a share on August 1, 2007. The last transaction price in IBT Bancorp, Inc. common stock known to management occurring prior to the mailing of this Proxy Statement-Prospectus was $      a share on          , 2007. Based on that price, your Greenville Community Financial Corporation common shares which are exchanged for IBT Bancorp, Inc. common stock and cash will be worth $      per share.

 

YOUR VOTE IS VERY IMPORTANT. The parties cannot complete the merger unless, among other things, our shareholders approve the merger. THE GREENVILLE COMMUNITY FINANCIAL CORPORATION BOARD OF DIRECTORS HAS APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE MERGER. Please review and consider this Proxy Statement-Prospectus carefully. Under Michigan law, holders of common stock of Greenville Community Financial Corporation have dissenters’ rights of appraisal with respect to the merger.

 

It is important that your shares are represented at the meeting, whether or not you plan to attend. An abstention or failure to vote will have the same effect as a vote against the merger. Accordingly, please complete, date, sign, and return promptly your proxy card in the enclosed envelope. You may attend the meeting and vote your shares in person if you wish, even if you have previously returned your proxy.

 

Sincerely,

 

Ted Kortes

President and Chief Executive Officer of

Greenville Community Financial Corporation

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER OR DETERMINED IF THIS DOCUMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. IBT BANCORP, INC. COMMON STOCK IS SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF VALUE.

 

THIS DOCUMENT IS DATED          , 2007
AND IS FIRST BEING MAILED ON OR ABOUT          , 2007.

 

TABLE OF CONTENTS

 

 

This Proxy Statement-Prospectus incorporates business and financial information about IBT Bancorp, Inc. (“IBT”) that is not included in or delivered with this Proxy Statement-Prospectus. Documents incorporated by reference are available from IBT without charge. You may obtain documents incorporated by reference in this Proxy Statement-Prospectus by requesting them in writing or by telephone from IBT at the following address:

 

IBT Bancorp, Inc.

Attn: Dennis P. Angner

President & Chief Executive Officer

200 East Broadway

Mt. Pleasant, Michigan 48858

(989) 772-9471

 

TO OBTAIN DELIVERY OF THIS INFORMATION PRIOR TO THE SPECIAL SHAREHOLDERS MEETING OF GREENVILLE COMMUNITY FINANCIAL CORPORATION (“GCFC”), YOU MUST REQUEST THE INFORMATION NO LATER THAN          , 2007, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING AT WHICH YOU ARE REQUESTED TO VOTE. You should rely only on the information contained or incorporated by reference in this Proxy Statement-Prospectus to vote on the merger and the related issuance of IBT common stock. Neither IBT nor GCFC has authorized anyone to provide you with information that is different from what is contained in this Proxy Statement-Prospectus.

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE
SPECIAL MEETING OF SHAREHOLDERS

 

 

 

	•	the GCFC shareholders must have adopted the Merger Agreement;
	•	the FRB and OFIS must have approved or not objected to the merger, as appropriate, and all statutory waiting periods must have expired;
	•	no stop order suspending the effectiveness of IBT’s registration statement of which this document is a part shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the United States Securities and Exchange Commission; and

	•	the holders of no more than 10% of GCFC’s shares of common stock have indicated their intention to seek dissenter’s rights of appraisal.

		Six Months Ended
		June 30,				Year Ended December 31,
		2007				2006				2005				2004				2003				2002
		(Unaudited)
INCOME STATEMENT DATA
Net interest income		$	13,628			$	24,977			$	23,909			$	23,364			$	23,528			$	22,905
Provision for loan losses			350				682				777				735				1,455				1,025
Net income			3,566				7,001				6,776				6,645				7,205				6,925
BALANCE SHEET DATA (period end)
Assets		$	918,265			$	910,127			$	741,654			$	678,034			$	664,079			$	652,717
Deposits			724,157				725,840				592,478				563,876				567,707				561,456
Loans (gross)			607,219				591,042				483,242				452,895				421,859				391,088
Borrowings			67,376				58,303				52,165				30,982				18,053				17,793
Shareholders’ equity			118,790				115,749				80,902				72,594				68,936				63,457
Common Stock Share Summary(1)
Net income — basic		$	0.56			$	1.23			$	1.25			$	1.24			$	1.36			$	1.33
Net income — diluted			0.55				1.19				1.25				1.24				1.36				1.33
Cash dividends			0.24				0.64				0.60				0.57				0.55				0.50
Book value			18.22				18.27				14.78				13.48				12.94				12.09
Average shares outstanding — basic			6,336,898				5,699,514				5,416,961				5,344,585				5,270,085				5,193,885
Average shares outstanding — diluted			6,515,227				5,864,314				5,416,961				5,344,585				5,270,085				5,193,885

(1)		all per share data was adjusted for common stock dividends

		Six Months Ended
		June 30,				Year Ended December 31,
		2007				2006				2005				2004				2003				2002
		(Unaudited)
INCOME STATEMENT DATA
Net interest income		$	1,770			$	3,820			$	3,420			$	3,136			$	3,091			$	2,886
Provision for loan losses			51				220				300				477				319				403
Net income			443				994				1,008				776				916				684
BALANCE SHEET DATA (period end)
Assets		$	107,170			$	107,836			$	103,462			$	103,675			$	101,257			$	89,486
Deposits			88,382				89,071				85,519				85,804				84,075				74,320
Loans (gross)			89,597				91,004				87,445				82,406				76,216				75,498
Borrowings			6,500				6,500				7,000				8,000				8,000				7,000
Shareholders’ equity			11,709				11,306				10,424				9,520				8,899				7,880
Common Stock Share Summary
Net income — basic		$	0.61			$	1.37			$	1.40			$	1.10			$	1.32			$	0.99
Net income — diluted			0.59				1.32				1.37				1.08				1.29				0.97
Book value			16.13				15.62				14.47				13.49				12.83				11.44
Cash dividends			0.10				0.20				0.20				0.12				0.10				0.10
Average shares outstanding — basic			724,883				723,948				720,154				776,342				693,855				688,518
Average shares outstanding — diluted			755,717				754,782				745,155				720,336				708,258				705,574

		Risk-Based Capital
		Leverage %				Tier 1 %				Total %
IBT’s capital ratios			10.28				15.82				17.07
GCFC’s capital ratios			10.28				12.38				13.03
Pro forma combined capital ratios — Consolidated IBT Bancorp, Inc.			9.15				13.65				14.90
Regulatory capital ratios — “well-capitalized” definition			5.00				6.00				10.00
Regulatory capital ratios — minimum requirement			4.00				N/A				N/A

														Equivalent
		IBT				GCFC				Pro Forma				Pro Forma
		Historical				Historical				Combined				of GCFC
Comparative Per Share Data											(1	)			(4	)
BASIC EARNINGS
Year ended December 31, 2006		$	1.23			$	1.37			$	1.23			$	1.19
Six months ended June 30, 2007			0.56				0.61				0.56				0.52
DILUTED EARNINGS
Year ended December 31, 2006		$	1.19			$	1.32			$	1.19			$	1.19
Six months ended June 30, 2007			0.55				0.59				0.54				0.52
CASH DIVIDENDS
Year ended December 31, 2006		$	0.64			$	0.20			$	0.64			$	0.64	(2)
Six months ended June 30, 2007			0.24				0.10				0.24				0.24	(2)
TANGIBLE BOOK VALUE (3)
December 31, 2006		$	18.27			$	15.62			$	20.96			$	21.36
June 30, 2007			18.22				16.13				21.44				20.54

(1)		The Pro Forma Combined earnings per share amounts were calculated by totaling the historical earnings of IBT and GCFC and dividing the resulting amount by the average pro forma shares of IBT and GCFC giving effect to the merger as if it had occurred as of the beginning of the periods presented. The average pro forma shares of IBT and GCFC reflect historical basic and diluted shares, plus historical basic and diluted average shares of GCFC, as adjusted based on an assumed exchange ratio of .6659 of a share of IBT common stock and $14.70 in cash, for each share of GCFC common stock. The aggregate merger consideration to be paid by IBT is subject to certain adjustments pursuant to the Merger Agreement. The pro forma earnings amounts do not take into consideration any operating efficiencies that may be realized as a result of the merger.
(2)		Pro Forma Combined cash dividends paid represents IBT’s historical amount only.
(3)		The Pro Forma Combined tangible book value data gives effect to the merger as if it had occurred on June 30, 2007 or December 31, 2006.
(4)		The Equivalent Pro Forma Per Share of GCFC amounts were calculated by multiplying the Pro Forma Combined amounts by the assumed exchange ratio of .6659 of a share of IBT common stock and $14.70 in cash for each share of GCFC common stock. These amounts do not take into consideration any operating efficiencies that may be realized as a result of the merger. This data is presented for comparative purposes only.

 

RISK FACTORS

 

In addition to the other information contained in or incorporated by reference into this Proxy Statement-Prospectus, including the matters addressed under the caption “Forward-Looking Statements,” on page    you should carefully consider the following risk factors in deciding whether to vote for adoption of the Merger Agreement.

 

Risks Related to the Merger

 

IBT May Fail to Realize the Anticipated Benefits of the Merger.

 

The success of the merger will depend on a number of factors, including (but not limited to) IBT’s ability to:

 

 

GCFC Shareholders Will Have Less Influence as a Shareholder of IBT Than as a Shareholder of GCFC.

 

GCFC shareholders currently have the right to vote in the election of the Board of Directors of GCFC and on other matters affecting GCFC. Assuming that one share of GCFC common stock will be exchanged for .6659 of a share of IBT common stock and $14.70 in cash in the merger, the shareholders of GCFC as a group will own approximately 7.51% of the combined organization. When the merger occurs, each GCFC shareholder that receives IBT common stock will become a shareholder of IBT with a percentage ownership of the combined organization that is much smaller than such shareholder’s percentage ownership of GCFC. Because of this, GCFC shareholders will have less influence on the management and policies of IBT than they now have on the management and policies of GCFC.

 

GCFC Directors and Executive Officers Have Interests in the Merger that Differ from Those of a Shareholder.

 

GCFC’s directors and executive officers have various interests in the merger that differ from, or are in addition to, the interests of GCFC shareholders. These interests include:

 

 

Risks About IBT

 

IBT’s Current Concentration of Loans in its Primary Market Area May Increase its Risk.

 

IBT’s success depends primarily on the general economic conditions in Mid-Michigan. Unlike larger banks that are more geographically diversified, IBT provides banking and financial services to customers primarily in Mid-Michigan. The local economic conditions in the Mid-Michigan area have a significant impact on its loans, the ability of the borrowers to repay these loans and the value of the collateral securing these loans. A significant decline in general economic conditions caused by inflation, recession, unemployment or other factors beyond IBT’s control would impact these local economic conditions and could negatively affect the financial results of its banking operations.

 

IBT targets its business lending and marketing strategy for loans to serve primarily the banking and financial services needs of small to medium size businesses. These small to medium size businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If general economic conditions negatively impact these businesses, IBT’s results of operations and financial condition may be adversely affected.

 

Changes in Interest Rates Could Adversely Affect IBT’s Results of Operations and Financial Condition.

 

IBT’s results of operations and financial condition are significantly affected by changes in interest rates. IBT’s results of operations depend substantially on its net interest income, which is the difference between the interest income earned on its interest-earning assets and the interest expense paid on its interest-bearing liabilities. At June 30, 2007, IBT’s interest rate risk profile indicated that net interest income would increase in a rising long term interest rate environment, but would decrease in a declining long term interest rate environment.

 

Changes in interest rates also affect the value of IBT’s interest-earning assets, and in particular IBT’s securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. At June 30, 2007, IBT’s available for sale and trading account securities totaled $206 million. Decreases in the fair value of these securities could have an adverse effect on shareholders’ equity or earnings.

 

IBT also is subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce borrowing costs. Under these circumstances, IBT is subject to reinvestment risk to the extent that it is unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.

 

Strong Competition Within IBT’s Market Area May Limit its Growth and Profitability.

 

Competition in the banking and financial services industry is intense. In IBT’s market area, IBT competes with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than IBT does and may offer certain services that IBT does not or cannot provide. IBT’s profitability depends upon its continued ability to successfully compete in its market area.

 

IBT Operates in a Highly Regulated Environment and May Be Adversely Affected By Changes in Laws and Regulations.

 

IBT is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve. Isabella is subject to regulation by the Office of Financial and Insurance Services of the State of Michigan and by the Federal Deposit Insurance Corporation, as insurer of its deposits. Such regulation and supervision govern the activities in which a bank and its holding company may engage and are intended primarily for the protection of the deposit insurance funds and depositors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the classification of assets by a bank and the adequacy of a bank’s allowance for loan losses. Any change in such

regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, could have a material impact on IBT and its operations.

 

IBT’s operations are also subject to extensive regulation by other federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of its operations. IBT believes that it is in substantial compliance in all material respects with applicable federal, state and local laws, rules and regulations. Because its business is highly regulated, the laws, rules and regulations applicable to IBT are subject to regular modification and change. There are currently proposed various laws, rules and regulations that, if adopted, would impact its operations, including, among other things, matters pertaining to corporate governance and SEC rules pertaining to public reporting disclosures. There can be no assurance that these proposed laws, rules and regulations, or any other laws, rules or regulations, will not be adopted in the future, which could make compliance more difficult or expensive or otherwise adversely affect its business, financial condition or prospects.

 

THE GCFC SPECIAL MEETING

 

GCFC is mailing this Proxy Statement-Prospectus to you as a GCFC shareholder on or about          , 2007. With this document, GCFC is sending you a notice of the GCFC special meeting of shareholders and a form of proxy that is solicited by GCFC’s Board of Directors. The special meeting will be held on          , 2007 at   :00 .m., local time, at          , Greenville, Michigan.

 

Purpose of the Meeting

 

The purpose of the special meeting of shareholders is to vote on the adoption of the Merger Agreement by which GCFC will merge with and into IBT. GCFC shareholders are also being asked to approve a proposal to transact any other business that may properly come before the special meeting and any adjournment or postponement of the special meeting, including a proposal to adjourn or postpone the special meeting of shareholders. GCFC could use any adjournment or postponement for the purpose, among others, of allowing additional time to solicit proxies. As of the date of this document, the GCFC Board of Directors did not know of any other matters that would be presented at the special meeting.

 

Proxy Card, Revocation of Proxy

 

You should complete and return the proxy card accompanying this document to ensure that your vote is counted at the special meeting of shareholders, regardless of whether you plan to attend. You can revoke your proxy at any time before the vote is taken at the special meeting by:

 

 

If your shares are held in street name, you should follow the instructions of your broker regarding revocation of proxies.

 

All shares represented by valid proxies, and not revoked, will be voted in accordance with your instructions on the proxy card. If you sign your proxy card, but make no specification on the card as to how you want your shares voted, your proxy card will be voted “FOR” approval of the foregoing proposal. The Board of Directors is presently unaware of any other matter that may be presented for action at the special meeting of shareholders. If any other matter does properly come before the special meeting, the Board of Directors intends that shares represented by properly submitted proxies will be voted, or not voted, by and at the discretion of the persons named as proxies on the proxy card.

Record Date

 

The close of business on          , 2007 has been fixed as the record date for determining the GCFC shareholders entitled to receive notice of and to vote at the special meeting of shareholders. At that time, 773,103 shares of GCFC common stock were outstanding, and were held by approximately 188 holders of record.

 

Voting Rights, Quorum Requirements and Vote Required

 

The presence, in person or by properly executed proxy, of the holders of a majority of the outstanding shares of GCFC common stock entitled to vote is necessary to constitute a quorum at the special meeting of shareholders. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present but will not be counted as votes cast either for or against the Merger Agreement.

 

Adoption of the Merger Agreement requires the affirmative vote of a majority of the shares of GCFC common stock issued and outstanding on the record date. Accordingly, a failure to vote, an abstention or a broker non-vote will have the same effect as a vote against the Merger Agreement. As of the record date, directors and executive officers of GCFC beneficially owned 172,667 shares of GCFC common stock entitled to vote at the special meeting of shareholders. This represents approximately 22.33% of the total votes entitled to be cast at the special meeting. These individuals have indicated that they will vote “FOR” adoption of the Merger Agreement.

 

Solicitation of Proxies

 

For GCFC shareholders, the proxy that accompanies this document is being solicited by GCFC’s Board of Directors. In addition to solicitations by mail, directors, officers, and regular employees of GCFC may solicit proxies from shareholders personally or by telephone or other electronic means. Such individuals will not receive any additional compensation for doing so. GCFC will bear its own costs of soliciting proxies, which GCFC estimates will be less than $     . GCFC also will make arrangements with brokers and other custodians, nominees, and fiduciaries to send this document to beneficial owners of GCFC common stock and, upon request, will reimburse those brokers and other custodians for their reasonable expenses in forwarding these materials.

 

Authority to Adjourn Special Meeting to Solicit Additional Proxies

 

GCFC is asking its shareholders to grant full authority for the special meeting to be adjourned, if necessary, to permit solicitation of additional proxies to approve the transactions proposed by this Proxy Statement-Prospectus. If it is necessary to adjourn the special meeting, no notice of the adjourned special meeting is required to be given to shareholders (unless a new record date is fixed), other than an announcement at the special meeting of the hour, date and place to which the special meeting is adjourned.

 

Recommendation of the Board of Directors

 

GCFC’s Board of Directors has unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement. The Board of Directors believes that the Merger Agreement is fair to GCFC shareholders and is in the best interest of GCFC and its shareholders and recommends that you vote “FOR” the approval of the Merger Agreement. See “The Merger and the Merger Agreement-Recommendation of the GCFC Board of Directors and Reasons for the Merger.”

 

THE MERGER AND THE MERGER AGREEMENT

 

The description of the merger and the Merger Agreement contained in this Proxy Statement-Prospectus describes the material terms of the Merger Agreement; however, it does not purport to be complete. It is qualified in its entirety by reference to the Merger Agreement. We have attached a copy of the Merger Agreement as Appendix A and urge you to carefully review it.

General

 

Pursuant to the Merger Agreement, GCFC will merge with and into IBT. Outstanding shares of GCFC common stock will be converted into the right to receive .6659 of a share of IBT common stock and $14.70 in cash, subject to adjustment under certain circumstances. Cash will be paid in lieu of any fractional share of IBT common stock. See “Merger Consideration” below. At the effective time of the merger, GCFC’s corporate existence will terminate; and IBT will continue as the surviving corporation with a Board of Directors consisting of its current members and Ted Kortes, a current member of GCFC’s board of directors. At or after the effective time of the merger, Greenville Community Bank (“GCB”) will be merged with and into Isabella Bank and Trust (“Isabella”) and the resulting bank will operate under the name “Isabella Bank and Trust” (the “Subsidiary Bank Merger”).

 

Merger Consideration

 

Under the terms of the Merger Agreement, each outstanding share of GCFC common stock (other than dissenting shares) will be converted upon completion of the merger into the right to receive .6659 of a share of IBT common stock and $14.70 in cash, subject to adjustment under certain circumstances. No fractional shares of IBT will be issued in connection with the merger. Instead, IBT will make a cash payment to each GCFC shareholder who would otherwise receive a fractional share.

 

Based on the last transaction price in IBT common stock known to management occurring prior to the mailing of this Proxy Statement-Prospectus on          , 2007, each share of GCFC common stock that is exchanged solely for .6659 of a share of IBT common stock and $14.70 in cash would have a value of $     .

 

Surrender of Stock Certificates

 

PLEASE DO NOT FORWARD YOUR GCFC STOCK CERTIFICATES WITH YOUR PROXY CARDS. STOCK CERTIFICATES SHOULD BE RETURNED TO THE EXCHANGE AGENT IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN THE LETTER OF TRANSMITTAL WHICH WILL BE PROVIDED TO SHAREHOLDERS AS SOON AS PRACTICABLE AFTER COMPLETION OF THE MERGER.

 

GCFC Stock Options

 

As of September 30, 2007, there were 47,285 issued and outstanding options to acquire GCFC common stock under the Greenville Community Financial Corporation Stock Compensation Plan. Each option to acquire GCFC common stock must be exercised on or before the closing date of the merger or it will be cancelled and extinguished for no consideration as of the merger’s effective time.

 

Background of Merger

 

The terms and conditions of the Merger Agreement are the result of arm’s length negotiations between the representatives of IBT and the representatives of GCFC. A summary of the background of these negotiations is set forth below.

 

GCB has operated since its organization in 1999 as a community oriented Michigan-chartered commercial bank. From its inception, GCB’s main objectives were to attract deposits from the general public and use such deposits to invest primarily in residential and commercial real estate loans and commercial business loans.

 

Management and the board of directors have continually monitored the financial service industry’s evolution which has required increasing investments in technology to remain competitive and satisfy regulatory imperatives. Management and the board have been concerned about GCB’s ability to grow as a relatively small institution in the competitive Michigan banking market. The board of directors has also been aware of the trend towards consolidation in the industry and has periodically reviewed and discussed GCB’s strategic alternatives.

 

In the summer of 2005, GCFC was approached by a regional community bank (Regional Community Bank) with regard to a combination. During the next six months GCFC and the Regional Community Bank conducted discussions with regard to an affiliation, did limited due diligence and discussed a range of prices they would be

willing to pay for GCFC. GCFC’s board considered the matter and determined that the consideration was not sufficient to warrant a sale of GCFC.

 

During late 2005 and 2006 the GCFC’s Board continued to consider whether a sale would be in the best interest of the bank. During the summer of 2006, GCFC held discussions with Donnelly Penman & Partners (“Donnelly Penman”) with regard to overall market conditions in the merger and acquisition market in Michigan. On November 7, 2006 Donnelly Penman was invited to attend GCFC’s Board of Directors meeting. At this meeting Donnelly Penman presented, amongst other things, an overview of the merger and acquisition market for small banks.

 

As a result of these and other discussions, the continued consolidation of the banking market and the probable need for significant additional investment to increase GCB’s assets and earnings, GCFC’s board of directors, on January 15, 2007, determined that an affiliation by GCB with a larger entity might produce superior value for GCFC’s shareholders and authorized the bank’s management to engage the assistance of Donnelly Penman, to pursue a review of GCB’s strategic options. On March 1, 2007 the Company engaged Donnelly Penman.

 

Over the next several weeks, GCB’s management and Donnelly Penman developed a process to contact and elicit interest from a group of prospective strategic partners who would be provided a confidential descriptive memorandum presenting GCFC and its business, subject to the prior execution of a confidentiality agreement. In April 2007, Donnelly Penman began contacting potential acquirers.

 

On June 19, 2007, Donnelly Penman reviewed with GCFC’s board the results of the preliminary proposal solicitation process. During this process, conducted on GCFC’s behalf, Donnelly Penman contacted 11 potential strategic partners, of which 10 entered into confidentiality agreements and then received the confidential descriptive memorandum. Based on the consideration proposed by IBT, GCFC’s board decided to move forward with IBT on an exclusive basis and directed GCB’s management to meet with senior management of IBT.

 

In July 2007, GCB’s executive officers met with senior executives of IBT. Also during this period, GCB permitted IBT to conduct on-site due diligence investigations of GCB. Donnelly Penman requested that IBT provide GCFC with a reaffirmation letter, in regards to the consideration proposed, following completion of their due diligence investigations which IBT did.

 

Over the ensuing weeks and with regular updates to their respective boards, the parties, assisted by financial and legal advisers, began negotiating a definitive merger agreement. Additionally, after IBT confirmed their proposal, senior executives from GCFC and GCB performed on-site due diligence at IBT on August 9, 2007. GCFC’s board held a meeting on August 20, 2007, that was also attended by representatives of Donnelly Penman and Kreis, Enderle, Callander & Hudgins, P.C., counsel to GCFC. The meeting included a detailed discussion of the proposed transaction with IBT, a presentation of certain materials provided by Donnelly Penman and a description by Kreis, Enderle, Callander & Hudgins, P.C. of the terms of the agreement and plan of merger. Donnelly Penman reviewed the process leading to the proposed transaction and provided a financial analysis of the proposed transaction. At the meeting Donnelly Penman delivered its oral opinion that the proposed merger consideration to GCFC’s common shareholders was fair from a financial point of view. Kreis, Enderle, Callander & Hudgins, P.C. reviewed legal aspects of the proposed transaction and the current draft of the agreement and plan of merger with the GCFC board and answered directors’ questions. As a result of the presentations, the GCFC board approved the merger as being in the best interest of GCFC and GCB. The GCFC board authorized Theodore Kortes to sign the documents on behalf of GCFC and to submit the merger proposal to the shareholders with the board’s recommendation that it be approved.

 

On August 21, 2007, GCFC and IBT executed the agreement and plan of merger and subsequently issued a joint press release, announcing the execution of the agreement.

 

Subsequent to the execution of the agreement on August 21, 2007, and after performing additional research into the IRS tax laws and accounting standards, IBT raised concerns that certain put rights in the agreement would prevent the exchange of stock from being tax free. To be eligible for a tax-free exchange of shares, the parties agreed to amend the Agreement and Plan of Merger. Under the agreement as amended each GCFC share will be exchanged for $14.70 in cash plus .6659 of a share of IBT Common Stock. The stock portion of the exchange is intended to be a tax-free exchange under this arrangement while the cash portion will be taxable.

The GCFC Board of Directors met on September 17, 2007, to discuss the revised transaction with the intention of taking formal action to approve the amendment on September 22, 2007. The GCFC Board of Directors approved the amendment to the original agreement at a meeting on September 22, 2007. The IBT Board met and approved the amendment on September 20, 2007.

 

On September 24, 2007, GCFC and IBT executed the amendment to the agreement and plan of merger and subsequently issued letters to their respective shareholders announcing execution of the amendment.

 

Recommendation of GCFC’s Board of Directors and Reasons for the Merger

 

The Board of Directors of GCFC has approved the Merger Agreement and has determined that the merger is fair to and in the best interests of GCFC and its shareholders. In reaching its decision to approve the Merger Agreement, the Board of Directors consulted with its outside counsel regarding the legal terms of the merger and the Board of Director’s fiduciary obligations in its consideration of the proposed merger, considered the financial aspects and fairness of the proposed Merger Agreement from a financial point of view and consulted with the management of GCFC regarding the future prospects of GCFC as an independent entity and as part of IBT. Without assigning any relative or specific weight, the Board of Directors of GCFC considered a number of factors, including the following both from a short-term and long-term perspective:

 

 

 

On the basis of these considerations, the Merger Agreement was unanimously approved by GCFC’s Board of Directors.

 

The Board Of Directors Unanimously Recommends Adoption Of The Agreement And Plan Of Merger By The Shareholders Of Gcfc.

 

Fairness Opinion of Donnelly Penman & Partners

 

The fairness opinion of GCFC’s financial advisor, Donnelly Penman & Partners (“Donnelly Penman”) is described below. The full text of the fairness opinion which sets forth, among other things, assumptions made, procedures followed, matters considered and limitations on the review undertaken are attached to this document as Appendix B. Shareholders of GCFC are urged to read the fairness opinion carefully and in its entirety. To the extent that the descriptions contain projections, estimates and/or other forward-looking statements about the future earnings or other measures of the future performance of IBT, you should not rely on any of these statements as having been made or adopted by IBT unless they have been made by IBT in a document that is incorporated by reference into this Proxy Statement-Prospectus. See “Where You Can Find More Information.”

 

GCFC retained Donnelly Penman to act as GCFC’s financial advisor in connection with the merger and related matters based upon its qualifications, expertise and reputation, as well as its familiarity with GCFC. Donnelly Penman is an investment-banking firm of recognized standing. As part of its investment banking services, it is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, private placements and valuations for stock plans, corporate and other purposes. Donnelly Penman is acting as financial advisor to GCFC in connection with the merger and will receive fees from GCFC for its services pursuant to the terms of its engagement letter with GCFC, dated as of March 1, 2007.

 

On August 21, 2007, IBT and GCFC entered into an Agreement and Plan of Merger (the “Agreement”) to which IBT would acquire GCFC (the “Merger”). In accordance with the terms of the Agreement, GCB will contemporaneously merge with and into Isabella. On September 24, 2007, IBT and GCFC entered into a First Amendment to the Agreement (together with the Agreement the “Merger Agreement”). Per the terms of the Merger Agreement, each share of GCFC common stock issued and outstanding immediately prior to the effective time of the Merger shall be converted into the right to receive 0.6659 of a share of IBT common stock and $14.70 in cash, for total consideration of $43.50 per share (based on a trading value of $43.25 per share for IBT stock as of September 20, 2007 — the day Donnelly Penman delivered its opinion to the GCFC Board of Directors). Donnelly Penman has delivered its opinion that the exchange ratio and per share consideration is fair to GCFC’s shareholders from a financial point of view. No limitations were imposed by GCFC on the scope of Donnelly Penman’s investigation or on the procedures followed by Donnelly Penman in rendering its opinion.

 

THE FULL TEXT OF THE OPINION OF DONNELLY PENMAN, WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY DONNELLY PENMAN, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT — PROSPECTUS. HOLDERS OF GCFC COMMON STOCK ARE URGED TO READ THE OPINION IN ITS ENTIRETY. DONNELLY PENMAN’S OPINION IS DIRECTED ONLY TO THE MERGER CONSIDERATION DESCRIBED IN THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY GCFC SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE GCFC SPECIAL SHAREHOLDER MEETING. THE SUMMARY SET FORTH IN THIS PROXY STATEMENT — PROSPECTUS OF THE OPINION OF DONNELLY PENMAN IS QUALIFIED

IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS OPINION ATTACHED TO THIS DOCUMENT AS APPENDIX B.

 

In arriving at its opinion, Donnelly Penman engaged in discussions with members of the management of each of IBT and GCFC concerning the historical and current business operations, financial conditions and prospects of IBT and GCFC, and reviewed:

 

 

In conducting its review and arriving at its opinion, as contemplated under the terms of its engagement by GCFC, Donnelly Penman, with the consent of IBT and GCFC, relied, without independent investigation, upon the accuracy and completeness of all financial and other information provided to it by IBT and GCFC or upon publicly-available information. Donnelly Penman participated in meetings and telephone conferences with certain members of IBT’s and GCFC’s senior management to discuss IBT’s and GCFC’s past and current business operations, regulatory standing, financial condition and future prospects, including any potential operating efficiencies and synergies that may arise as a result of the Merger. With respect to anticipated transactions costs, purchase accounting adjustments, expected cost savings and other synergies and other information prepared by and/or reviewed with the management of IBT and used in our analyses, IBT’s management confirmed to us that they reflected the best currently available estimates and judgments of management with respect to such information. With respect to anticipated earnings of GCFC and other information prepared by and/or reviewed with the management of GCFC and used by us in our analyses, GCFC’s management confirmed to us that they reflected the best currently available estimates and judgments of management with respect to such information. Donnelly Penman did not undertake any responsibility for the accuracy, completeness or reasonableness of, or any obligation

independently to verify, such information. Donnelly Penman further relied upon the assurance of management of IBT and GCFC that they were unaware of any facts that would make the information provided or available to Donnelly Penman incomplete or misleading in any respect. Donnelly Penman did not make any independent evaluations, valuations or appraisals of the assets or liabilities of IBT or GCFC. Donnelly Penman is not an expert in the evaluation of loan portfolios or the allowance for loan losses and did not review any individual credit files of IBT or GCFC and assumed that the aggregate allowances for credit losses for IBT and GCFC were adequate to cover such losses. Donnelly Penman’s opinion was necessarily based upon economic and market conditions and other circumstances as they existed and evaluated by Donnelly Penman on the date of its opinion. Donnelly Penman does not have any obligation to update its opinion, unless requested by GCFC in writing to do so, and Donnelly Penman expressly disclaims any responsibility to do so in the absence of any written request by GCFC.

 

In connection with rendering its opinion to the GCFC Board, Donnelly Penman performed a variety of financial analyses, which are summarized below. Donnelly Penman believes that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without consideration of all factors and analyses, could create a misleading view of the analyses and the processes underlying Donnelly Penman’s opinion. Donnelly Penman arrived at its opinion based on the results of all the analyses it undertook assessed as a whole, and it did not draw conclusions from or with regard to any one method of analysis. The preparation of a fairness opinion is a complex process involving subjective judgments, and is not necessarily susceptible to partial analysis or summary description. With respect to the analysis of selected comparable companies and analysis of selected comparable merger transactions summarized below, no public company utilized as a comparison is identical to IBT or GCFC, and such analyses necessarily involve complex considerations and judgments concerning the differences in financial and operating characteristics of the relevant financial institutions and other factors that could affect the acquisition or public trading values of the financial institutions concerned.

 

The financial forecast information and cost savings and other synergies expected to result from the Merger furnished by management of IBT and GCFC, respectively, and deemed reasonable by them contained in or underlying Donnelly Penman’s analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than such forecasts and estimates. The forecasts and estimates were based on numerous variables and assumptions that are inherently uncertain, including factors related to general economic and competitive conditions. In that regard, Donnelly Penman assumed, with IBT’s and GCFC’s consent, that the financial forecasts, including the cost savings and other synergies expected to result from the Merger, were reasonably prepared on a basis reflecting the best currently available judgments of IBT and GCFC, and that such forecasts will be realized in the amounts and at the times that they contemplate. Estimates of values of financial institutions or assets do not purport to be appraisals or necessarily reflect the prices at which financial institutions or their securities actually may be sold. Accordingly, actual results could vary significantly from those assumed in the financial forecasts and related analyses. None of the analyses performed by Donnelly Penman was assigned a greater significance by Donnelly Penman than any other.

 

The following is a brief summary of the analyses performed by Donnelly Penman. Certain analyses have been updated to reflect currently available information for purposes of the written fairness opinion.

 

Summary Analysis of the Transaction.  The Merger Agreement provides that each share of GCFC common stock issued and outstanding immediately prior to the effective time of the Merger shall be converted into the right to receive 0.6659 shares of IBT common stock and $14.70 in cash, for total consideration of $43.50 per share (based on a trading value of $43.25 per share for IBT stock as of September 20, 2007 — the day Donnelly Penman delivered its opinion to the GCFC Board of Directors).

 

Donnelly Penman reviewed the amended terms of the Merger. Each GCFC share will be exchanged for 0.6659 of a share of IBT common stock and $14.70 in cash, for total consideration of $43.50 per share (based on a trading value of $43.25 per share for IBT stock as of September 20, 2007 — the day Donnelly Penman delivered its opinion to the GCFC Board of Directors). As such, Donnelly Penman utilized a per share value of $43.50 in its analysis below, which represents a 284.1% premium to the book value and tangible book value per GCFC share (fully diluted) of $15.31; 37.3 times latest twelve month (“LTM”) earnings of $1.17 per share (fully diluted); and a 30.9% premium to core deposits as of August 31, 2007. Donnelly Penman also noted that, based on the exchange ratio and cash consideration, that the transaction had an implied aggregate value of approximately $33.6 million (exclusive of

transaction costs) as of September 20, 2007. The complete aggregate deal metrics in relation to the GCFC financial position as of August 31, 2007 are displayed below:

 

 

Donnelly Penman also noted when considering the value of the transaction based on a discounted dividend analysis implied an equity value per share of IBT of $23.42 meant that the total consideration of $30.29 per share (constituted of 0.6659 shares of IBT stock valued at $23.42, or $15.59, plus $14.70 of cash per share of GCFC) represents a 197.9% premium to the book value and tangible book value per GCFC share (fully diluted) of $15.31; 25.96 times LTM earnings of $1.17 per share (fully diluted); and a 16.4% premium to core deposits as of August 31, 2007. The $23.42 implied per share value for IBT is based on a discounted dividend analysis of IBT performed by Donnelly Penman. This analysis utilized a discount rate of 11.5% and a terminal value multiples of 1.84 times projected 2011 tangible book value. The discount rate was derived utilizing the Ibbotson and Associates 2007 Yearbook1 on cost of equity buildup, in addition to Donnelly Penman analytical judgment. The terminal multiple was determined by reviewing the multiples for select publicly traded commercial banks in Illinois, Indiana, Michigan, and Ohio, with assets between $750 million and $1.5 billion and a latest twelve month return on average equity between 6% and 12%.

 

 

 

Donnelly Penman also noted when considering the value of the transaction based on a comparable company analysis implied an equity value per share of IBT of $23.13 meant that the total consideration of $30.10 per share (constituted of 0.6659 shares of IBT stock valued at $23.13, or $15.40, plus $14.70 of cash per share of GCFC) represents a 196.6% premium to the book value and tangible book value per GCFC share (fully diluted) of $15.31; 25.79 times LTM earnings of $1.17 per share (fully diluted); and a 16.2% premium to core deposits as of August 31, 2007. The $23.13 implied per share value for IBT is based on an average of four indications: assumed price to book multiple of 1.34 times IBT’s book value of $18.74 as of June 30, 2007; assumed price to tangible book multiple of 1.84 times IBT’s tangible book value of $14.46 as of June 30, 2007; and assumed price to LTM earnings per share multiple of 15.9 times IBT’s LTM earnings per share of $1.21 for June 30, 2007. Additionally, the analysis assumed a premium to core deposits of 8.24% applied to IBT’s core deposits of $592.2 million as of June 30, 2007, which equates to $21.65 per share. The implied multiples are based on a review of the multiples for select publicly traded commercial banks in Illinois, Indiana, Michigan, and Ohio with assets between $750 million and $1.5 billion and a latest twelve month return on average equity between 6% and 12%.

 

Contribution Analysis.  The contribution analysis performed by Donnelly Penman compares the relative contribution of key balance sheet and income statement measures by IBT and GCFC to the pro-forma company.

Contribution Analysis

 

 

The range of contribution from GCFC ranges from 7.5% to 13.1% in the pro forma company, with an average of 10.0%.

 

Analysis of Selected Comparable Transactions — GCFC.  Donnelly Penman reviewed and compared actual information for 26 completed or pending bank merger transactions announced from a period of January 1, 2004 to July 31, 2007. Furthermore, the transactions listed involved commercial banks located in Illinois, Indiana, Michigan, and Ohio with total assets less than $250 million and a latest twelve month’s return on average equity of between 6% and 12%. These transactions consisted of:

 

(Buyer/Seller)

 

 

 

This comparison showed that based on the transaction price calculated above compared with GCFC’s financial condition as of August 31, 2007:

 

 

Donnelly Penman recognized that no transaction reviewed was identical to the Merger and that, accordingly, any analysis of comparable transactions necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of the parties to the transactions being compared.

 

Dividend Discount Analysis — GCFC.  Donnelly Penman calculated an estimated equity value per share for GCFC based upon the values, discounted to the present, of estimates of projected dividends from the fiscal year ending December 31, 2007 through the fiscal year ending December 31, 2011 and a projected year 2011 terminal value assuming GCFC continued to operate as an independent company. The valuation date contemplated is August 31, 2007, with the entirety of the 2007 dividends being paid at the end of the year. In conducting its analysis, Donnelly Penman utilized financial estimates provided by and deemed reasonable by GCFC for 2007 through 2011. Donnelly Penman further assumed, which was deemed reasonable by GCFC management, a 25% dividend payout ratio in 2007 and each year thereafter.

 

This analysis utilized a discount rate of 11.5% and a terminal value multiple of 1.94 times projected 2011 tangible book value. The discount rate was derived utilizing the Ibbotson and Associates 2007 Yearbook1 on cost of equity buildup, in addition to Donnelly Penman analytical judgment. The terminal multiple was determined by reviewing the multiples for select recent transactions of commercial banks in Illinois, Indiana, Michigan and Ohio with assets less than $250 million and latest twelve month return on average equity between 6% and 12%. The analysis resulted in an estimated equity value per share of $25.50.

 

Dividend Discount Analysis — IBT and GCFC Pro Forma.  Donnelly Penman calculated an estimated equity value per share for GCFC based upon the values, discounted to the present, of estimates of projected dividends from the fiscal year ending December 31, 2008 through the fiscal year ending December 31, 2012 and a projected year 2012 terminal value assuming IBT and GCFC were combined. The valuation date contemplated is December 31, 2007. In conducting its analysis, Donnelly Penman utilized financial estimates provided by and deemed reasonable by IBT for 2008 through 2012. Donnelly Penman then combined IBT with the GCFC estimates and factored in cost

savings and other post-transaction adjustments. Donnelly Penman further assumed, which was deemed reasonable by IBT management, a dividend payout of $.70 per share in 2008 and rising $.03 per share each year thereafter.

 

This analysis utilized a discount rate of 11.5% and a terminal value multiple of 1.84 times projected 2012 tangible book value. The discount rate was derived utilizing the Ibbotson and Associates 2007 Yearbook2( on cost of equity buildup, in addition to Donnelly Penman analytical judgment. The terminal multiple was determined by reviewing the price to tangible book value multiples of commercial banks in Illinois, Indiana, Michigan and Ohio with assets between $750 million and $1.5 billion and latest twelve month return on average equity between 6% and 12%. The analysis resulted in an estimated equity value per share of $23.43. Donnelly Penman noted this is slightly higher than the equity value per share derived from the dividend discount analysis performed for IBT stand-alone.

 

The above analyses were based upon IBT and GCFC senior management’s projections of future performance on a stand alone basis and on a combined basis, which were based upon many factors and assumptions deemed reasonable by IBT and GCFC senior management. This analysis did not purport to be indicative of actual values or actual future results and did not purport to reflect the prices at which any securities may trade at the present or at any time in the future. Donnelly Penman included this analysis because it is a widely used valuation methodology, but noted that the results of such methodology are highly dependent upon the numerous assumptions that must be made, including earnings growth rates, dividend payout rates, terminal values and discount rates.

 

For its financial advisory services provided to GCFC, Donnelly Penman has been paid ordinary and customary fees at or before the closing of the merger. In addition, GCFC has agreed to indemnify Donnelly Penman against various liabilities, including any which may arise under the federal securities laws.

 

Interests of Directors and Executive Officers In the Merger

 

General.  Some members of GCFC’s board of directors and management may be deemed to have interests in the merger that are in addition to their interests as shareholders generally. The boards of directors of each of IBT and GCFC were aware of these interests and considered them, together with the other matters described in this Proxy Statement-Prospectus, in adopting the Merger Agreement and approving the merger.

 

Arrangements with Gregg Peters, Jae Evans, James Beckman and Kathy Korson.  Concurrently with the closing of the merger, IBT will assume and perform the Amended and Re-Stated Management Continuity Agreements currently in effect for Gregg Peters, Jae Evans, James Beckman and Kathy Korson. In addition: (1) Mr. Jae Evans (president and chief executive officer of GCB) shall agree to serve as President and Chief Executive Officer of the Greenville division of Isabella; (2) Mr. James Beckman (Senior Vice President-Commercial Loans) shall agree to serve as Senior Vice President-Commercial Loans of the Greenville division of Isabella; and (3) Ms. Kathy Korson (Vice President-Mortgage Loans) shall agree to serve as Vice President-Mortgage Loans of the Greenville division of Isabella.

 

Arrangement with Gregg Peters.  Concurrently with the closing of the merger, Mr. Gregg Peters (Chief Financial Officer) shall agree to serve as an assistant vice president of IBT.

 

Appointment of Director.  The Merger Agreement provides that the effective time of the merger Mr. Ted Kortes, a member of the GCFC Board of Directors, shall be appointed to the Board of Directors of IBT.

 

Current GCB Board.  Upon completion of the merger, the incumbent directors of GCB will serve on a regional advisory board for the Greenville division of Isabella and shall receive the same board member compensation as provided by GCB prior to the merger.

 

Indemnification.  Pursuant to the Merger Agreement, IBT has agreed that from and after the effective time of the merger through the third anniversary thereof, it will indemnify and hold harmless each present and former director, officer and employee of GCFC against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation (each a “Claim”), arising in whole or in part out of, the fact that such person is or

 

 

((2) Stocks, Bonds, Bills and Inflation — Valuation Edition 2007 Yearbook, ^© Ibbotson Associates, Inc. 2007

was a director, officer, employee, fiduciary or agent of GCFC or its subsidiary or is or was serving at the request of GCFC or its subsidiary in such a role of another corporation, partnership, joint venture, trust or other enterprise if such Claim pertains to any matters existing or occurring at or before the effective time of the merger to the fullest extent to which said individuals are entitled under applicable law.

 

Management and Operations After the Merger

 

After the merger is completed, the directors and officers of IBT who were in office prior to the effective time of the merger will continue to serve as the directors and officers of IBT for the term for which they were elected or appointed, subject to IBT’s Articles of Incorporation and Bylaws and in accordance with applicable law. It also is contemplated that at or after the effective time of the merger, GCB will be merged into Isabella and the resulting bank will operate under the name “Isabella Bank and Trust.” In addition, certain officers of GCB will become officers of Isabella’s Greenville division and one GCB officer will become an officer of IBT. One director of GCFC will become a director of IBT. See “Interests of Directors and Executive Officers in the Merger” beginning on page   .

 

Upon completion of the merger, Isabella will form a regional advisory board for the Greenville division of Isabella consisting of persons living and/or working in the trade area currently served by GCB. The regional board will initially be comprised of the directors of GCB immediately preceding the merger. It is contemplated that within a reasonable time after the merger, a member of the IBT board will be added to the regional board.

 

The Articles of Incorporation and Bylaws of IBT will be the same as the Articles of Incorporation and Bylaws of the surviving entity.

 

Effective Time of Merger

 

The parties expect that the merger will be effective during the fourth quarter of 2007 or as soon as possible after the receipt of all regulatory and shareholder approvals, the expiration of all regulatory waiting periods and after the satisfaction of all conditions to the merger set forth in the Merger Agreement. Unless GCFC and IBT agree otherwise, the effective time of the merger will be contemporaneous with the closing upon filing of the certificate of merger and any other required documents with the state of Michigan, unless a later date is specified in such certificate of merger, in which case such later date will be the effective time of the merger.

 

Distribution of IBT Common Stock

 

At the effective time of the merger, GCFC’s shareholders will cease to own shares of GCFC. Subject to certain adjustments pursuant to the Merger Agreement, each share of GCFC common stock issued and outstanding immediately prior to the completion of the merger will automatically be converted into the right to receive .6659 of a share of IBT common stock and $14.70 in cash.

 

At the effective time of the merger, IBT will deliver to its exchange agent, Isabella Bank and Trust, the number of shares of IBT common stock and cash issuable in the merger. Within five business days after the closing of the merger, the exchange agent will send you and other former GCFC shareholders transmittal materials to be used to exchange the old GCFC stock certificates. The transmittal materials will contain instructions with respect to the surrender of old GCFC stock certificates. After the effective time of the merger, and once the exchange agent receives your old GCFC stock certificates, the exchange agent will register the shares of IBT common stock issuable to you in the name and at the address appearing on GCFC’s stock records as of the time of the merger or such other name or address as you request in the transmittal materials. The exchange agent will not be required to register the shares in that manner until it has received all of your old GCFC stock certificates (or an affidavit of loss for such certificate or certificates and an indemnity bond), together with properly executed transmittal materials. Such old GCFC stock certificates, transmittal materials, and affidavits must be in a form and condition reasonably acceptable to IBT and the exchange agent. The exchange agent will have discretion to determine reasonable rules and procedures relating to the exchange (or lack thereof) of old GCFC stock certificates and the payment of the per share merger consideration.

Conduct of Business Pending the Merger

 

The Merger Agreement contains various restrictions on the operations of GCFC before the effective time of the merger. In general, the Merger Agreement obligates GCFC to conduct its business in the usual, regular and ordinary course of business and to use reasonable efforts to preserve its business organization and assets and maintain its rights and franchises. In addition, GCFC has agreed that, except as expressly contemplated by the Merger Agreement or specified in a schedule to the Merger Agreement, without the prior written consent of IBT, it will not, among other things:

 

 

 

In addition to these covenants, the Merger Agreement contains various other customary covenants, including, among other things, access to information and each party’s efforts to cause its representations and warranties to be true and correct on the closing date.

 

Representations and Warranties

 

The Merger Agreement contains a number of customary representations and warranties by IBT and GCFC regarding aspects of their respective businesses, financial condition, structure and other facts pertinent to the merger that are customary for a transaction of this kind. They include, among other things:

 

 

All representations, warranties and covenants of the parties, other than the covenants in specified sections which relate to continuing matters, terminate upon the merger.

Conditions to the Merger

 

Mutual Conditions to Close.  The respective obligations of IBT and GCFC to complete the merger are subject to various conditions prior to the merger. The conditions include the following:

 

 

IBT’s Conditions to Close.  In addition to the mutual conditions to close described above, IBT’s obligation to complete the merger is subject to fulfillment of additional conditions, including the following:

 

 

GCFC’s Conditions to Close.  In addition to the mutual conditions to close described above, GCFC’s obligation to complete the merger is subject to the fulfillment of additional conditions, including the following:

 

 

 

Regulatory Approvals

 

IBT and GCFC have agreed to use all reasonable efforts to obtain all permits, consents, approvals and authorizations of all third parties and governmental entities that are necessary or advisable to consummate the merger. The merger is subject to prior approval by the FRB under the BHC Act and the Subsidiary Bank Merger is subject to the prior approval of the FRB under the Bank Merger Act. These acts require the FRB, when approving transactions such as these, to take into consideration the financial and managerial resources, including the competence, experience and integrity of the officers, directors and principal shareholders, and future prospects of the institutions and the convenience and needs of the communities to be served. In addition under the Community Reinvestment Act of 1977, as amended, the FRB must take into account the record of performance of the acquiring institution in meeting the credit needs of the entire community, including low- and moderate-income neighborhoods, served by the institution.

 

The FRB may not approve a merger if it would result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the United states, or if its effect in any section of the country would be substantially to lessen competition or tend to create a monopoly, or if it would in any other manner result in a restraint of trade, unless the FRB finds that the anticompetitive effects of the merger are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the communities to be served.

 

Pursuant to the Bank Holding Company Act and the Bank Merger Act, a merger may not be consummated until 30 days after FRB approval, during which time the United States Department of Justice may challenge the merger on antitrust grounds. The commencement of an antitrust action would stay the effectiveness of the FRB’s approval unless a court specifically ordered otherwise. With the approval of the FRB and the concurrence of the Department of Justice, the waiting period may be reduced to not less than 15 days. GCFC and IBT believe that the merger, and the merger of the subsidiary banks, do not raise substantial antitrust or other significant regulatory concerns and that they will be able to obtain all requisite regulatory approvals on a timely basis without the imposition of any condition that would have a material adverse effect on GCFC and IBT.

 

Other Requisite Approvals and Consents.  Approvals or notices are also required from or to OFIS and may be required from or to certain other regulatory agencies.

 

Status of Regulatory Approvals.  IBT filed applications on October 11, 2007 with the FRB for approval of the merger and the merger of the subsidiary banks and with OFIS. The filings with the FRB and OFIS are being processed as of the date of this Proxy Statement-Prospectus.

 

The merger cannot proceed in the absence of the requisite regulatory approvals. We do not know if or when all of these regulatory approvals will be obtained. Also, these approvals may contain a condition, restriction or requirement that causes these approvals to fail to satisfy the conditions for the merger.

 

No Solicitation

 

Until the merger is completed or the Merger Agreement is terminated, GCFC has agreed that it, its officers, directors employees, representatives or agents will not:

 

 

GCFC may, however, furnish information regarding GCFC to, or enter into and engage in discussion with, any person or entity in response to an unsolicited proposal by the person or entity relating to an acquisition proposal if:

 

 

Employee Benefit Matters

 

From and after the effective time of the merger until no later than January 1, 2009, IBT will continue the defined contribution plan of GCFC in effect immediately preceding the effective time. No later than January 1, 2009, or as required by the Employee Retirement Income Security Act of 1974, as amended, IBT will cause the employee defined contribution plan of IBT to be adopted by Isabella for all GCFC employees who were employed as of the effective time of the merger. IBT will treat the prior service of each GCFC employee with GCFC as service with IBT for purposes of vesting and any age or period of service requirements for participation with respect to IBT’s employee defined contribution plan. In addition, IBT will, from and after the effective time of the merger, continue in effect any material welfare benefit plan, life insurance, group health plan or disability plan in which the employees of GCFC participated immediately prior to the effective time (or an arrangement providing substantially similar benefits).

 

Termination; Amendment; Waiver

 

The Merger Agreement may be terminated prior to the closing, before or after approval by GCFC’s shareholders, as follows:

 

 

Termination Fee

 

If the Merger Agreement is terminated by either IBT or GCFC on account of any willful breach by the other party of any of the representations or warranties set forth in the Merger Agreement or any willful breach by the other party of any of the agreements or covenants set forth in the Merger Agreement, the nonbreaching party shall be entitled to liquidated damages from the breaching party in the amount of $850,000.

 

Additionally, GCFC must pay to IBT a termination fee in the amount of $850,000 if GCFC has terminated the Merger Agreement because it has entered into an acquisition agreement with respect to a superior proposal (as defined in the Merger Agreement) from a third party.

 

Fees and Expenses

 

Each party will each pay its own costs and expenses in connection with the Merger Agreement and the transactions contemplated thereby.

 

Material United States Federal Income Tax Consequences Of The Merger

 

The following general discussion sets forth the anticipated material United States federal income tax consequences of the merger to U.S. holders (as defined below) of GCFC common stock that exchange their shares of GCFC common stock for shares of IBT common stock and cash in the merger. This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any United States federal laws other than those pertaining to income tax. This discussion is based upon the Code, the regulations promulgated under the Code and court and administrative rulings and decisions in effect on the date of this document. These laws may change, possibly retroactively, and any change could affect the continuing validity of this discussion.

 

This discussion addresses only those GCFC shareholders that hold their shares of GCFC common stock as capital assets within the meaning of Section 1221 of the Code. Further, this discussion does not address all aspects of United States federal income taxation that may be relevant to you in light of your particular circumstances or that may be applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:

 

 

DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE COMPLEX. THEY WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON FACTORS THAT ARE NOT WITHIN OUR CONTROL. YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR AS TO THE TAX

CONSEQUENCES OF THE MERGER IN YOUR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF CHANGES IN THOSE LAWS.

 

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of GCFC common stock that is (i) an individual citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) a trust, if a United States court can exercise primary supervision over it, and one or more United States persons have authority to control substantial decisions that affect it, or (iv) an estate subject to United States income tax on its worldwide income.

 

Tax Consequences of the Merger Generally.  The parties intend for the merger to qualify as a reorganization for United States federal income tax purposes. The consummation of the merger is conditioned on the delivery, by Foster, Swift, Collins & Smith, P.C., of an opinion to IBT and to GCFC to the effect that (1) the merger will be a tax-free reorganization within the meaning of Section 368(a) of the Code, and (2) GCFC shareholders who exchange their GCFC common stock held as a capital asset for a combination of IBT common stock and cash will (if the receipt of cash is not treated as essentially equivalent to a dividend) recognize gain, but not loss, in an amount equal to the lesser of (A) the amount of cash received in the merger, or (B) the amount of gain realized in the merger (i.e., the excess of the sum of the amount of cash and the fair market value of the GCFC common stock received in the merger over such shareholder’s adjusted tax basis in its shares of GCFC common stock surrendered in the merger).

 

This opinion will be based on representation letters provided by IBT and GCFC and on customary factual assumptions, all of which must continue to be true and accurate in all material respects as of the effective time. None of the opinions described above will be binding on the Internal Revenue Service. IBT and GCFC have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, there can be no assurance that the Internal Revenue Service will not disagree with or challenge any of the conclusions described herein.

 

Backup Withholding.  If you are a noncorporate holder of GCFC common stock, you may be subject to information reporting and backup withholding at a rate of 28% if the cash payment is $20 or more. You generally will not be subject to backup withholding, however, if you:

 

 

Any amounts withheld under the backup withholding rules will generally be allowed as a refund or credit against your United States federal income tax liability, provided you timely furnish the required information to the Internal Revenue Service.

 

Reporting Requirements.  If you receive shares of IBT common stock and cash as a result of the merger, you will be required to retain records pertaining to the merger and you will be required to file with your United States federal income tax return for the year in which the merger takes place a statement setting forth certain facts relating to the merger.

 

Dissenting Shareholders.  Holders of GCFC common stock who dissent with respect to the merger as discussed in “Dissenters’ Rights” and who receive cash in respect of their shares of GCFC common stock will recognize capital gain or loss equal to the difference between the amount of cash received and their aggregate tax basis in their GCFC shares.

 

Holding IBT Common Stock.  The following discussion describes the U.S. federal income tax consequences to a holder of IBT common stock after the merger. Any cash distribution paid by IBT out of earnings and profits, as determined under U.S. federal income tax law, will be subject to tax as ordinary dividend income and will be includible in your gross income in accordance with your method of accounting. See below under “Tax Rate Changes” for information regarding the rate of tax on dividends. Cash distributions paid by IBT in excess of its earnings and profits will be treated as (i) a tax-free return of capital to the extent of your adjusted basis in your IBT

common stock (reducing such adjusted basis, but not below zero), and (ii) thereafter as gain from the sale or exchange of a capital asset.

 

Upon the sale, exchange or other disposition of IBT common stock, you will generally recognize gain or loss equal to the difference between the amount realized upon the disposition and your adjusted tax basis in the shares of IBT common stock surrendered. Any such gain or loss generally will be long-term capital gain or loss if your holding period with respect to the IBT common stock surrendered is more than one year at the time of the disposition. For the rate of tax on capital gains, see below under “Tax Rate Changes.”

 

Tax Rate Changes.  Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the individual tax rates on long-term capital gains and dividend income have been reduced. The top individual rate for long-term capital gains from sales or exchanges on or after May 6, 2003 is 15%. The top individual rate for “qualified dividend income” received after December 31, 2002 is also 15%. To be considered “qualified dividend income” to a particular holder, the holder must have held the common stock for more than 60 days during the 120 day period beginning 60 days before the ex-dividend period as measured under Code Section 246(a). Dividend income that is not qualified dividend income will be taxed at ordinary income rates. You are urged to consult your tax advisor to determine whether a dividend, if any, would be treated as qualified dividend income.

 

Resale of IBT Common Stock

 

All shares of IBT common stock received by GCFC shareholders in the merger will be registered under the Securities Act of 1933 and will be freely transferable under the Securities Act of 1933, except that shares of IBT common stock received by persons who are deemed to be “affiliates,” as the term is defined under the Securities Act of 1933, of IBT or GCFC at the time of the special meeting may be resold by them only in transactions permitted by the resale provisions of Rule 145 under the Securities Act of 1933 or as otherwise permitted under the Securities Act of 1933. Persons who may be deemed to be affiliates of IBT or GCFC generally include individuals or entities that control, are controlled by, or are under common control with, the party and may include certain officers and directors of such party as well as principal shareholders of such party. Affiliates of both parties have previously been notified of their status. The Merger Agreement requires GCFC to use reasonable efforts to receive an affiliate letter from each person who is an affiliate of GCFC.

 

This Proxy Statement-Prospectus does not cover resales of IBT common stock received by any person who may be deemed to be an affiliate of GCFC or IBT.

 

Accounting Treatment

 

In accordance with accounting principles generally accepted in the United States of America, the merger will be accounted for using the purchase method. As a result, the recorded assets and liabilities of IBT will be carried forward at their recorded amounts, the historical operating results will be unchanged for the prior periods being reported on and the assets and liabilities from the acquisition of GCFC will be adjusted to fair value at the date of the merger. In addition, all identified intangibles, which presently consists of a core deposit intangible, will be recorded at fair value and included as part of the net assets acquired. To the extent that the purchase price payable to former GCFC shareholders exceeds the fair value of the net assets including identifiable intangibles of GCFC at the merger date, that amount will be reported as goodwill. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill will not be amortized but will be evaluated for impairment at least annually. Identified intangibles will be amortized over their estimated lives. Further, the purchase accounting method results in the operating results of GCFC being included in the consolidated income of IBT beginning from the date of consummation of the merger.

 

Dissenters’ Rights

 

Each holder of GCFC common stock has the right to dissent from the merger and receive the fair value of such shares of GCFC common stock in cash if the shareholder follows the procedures required under Sections 450.761-450.774 of the MBCA set forth in Appendix C., the material provisions of which are summarized below. Under the MBCA, a holder of GCFC common stock may dissent and IBT will pay to such shareholder the fair value of such shareholder’s shares of GCFC common stock if such shareholder: (1) files with GCFC before the

vote is taken, written notice of intent to demand payment for his or her shares and (2) does not vote in favor of the merger.

 

If the merger is approved at the GCFC special meeting, IBT will deliver written dissenters’ notice to those GCFC shareholders who complied with their notice requirements. This dissenters’ notice will be sent no later than ten days after the Closing Date. The dissenters’ notice will (1) state where payment demand must be sent and when certificates must be deposited; (2) supply a form for demanding payment that includes the date of the first announcement to the news media or to shareholders of the terms of the merger and requires that the shareholder certify whether he or she acquired beneficial ownership of the shares before such date; and (3) set a date by which the payment demand must be received, which date may be not less than thirty nor more than sixty days after the date the dissenters’ notice was delivered to shareholders.

 

A shareholder sent a dissenters’ notice must demand payment, certify whether he or she acquired beneficial ownership of the GCFC common stock before the date required to be set forth in the dissenters’ notice and deposit his or her certificates in accordance with the terms of the notice. GCFC shareholders who do not demand payment or deposit certificates within the time set forth in the dissenters’ notice lose all rights to payment for their GCFC common stock.

 

Except for “after-acquired” shares, which are discussed below, at the Closing Date or upon receipt of a payment demand, IBT will pay each dissenter the amount IBT estimates to be the fair market value of the shares plus accrued interest. The payment will be accompanied by GCFC’s most recent balance sheet, income statement, and statement of changes in shareholder equity plus the latest available interim financial statements, as well as IBT’s estimate of the fair value of the GCFC Common Stock, an explanation of how interest was calculated, and a statement of the dissenter’s right to make a supplemental demand for payment if dissatisfied with the payment made.

 

GCFC common stock acquired after the date of the first announcement to the news media or GCFC shareholders of the terms of the merger still qualify for dissenters’ rights, but the holder of the these shares may receive different and somewhat less favorable treatment than those shares acquired before such announcements. IBT, at its election, may withhold payment from a dissenter who holds “after-acquired” shares, at a time when payment to other shareholders is required. Should IBT elect to withhold payment, IBT, after the Closing Date, will estimate the fair value of the dissenter’s shares plus interest and offer to pay this amount to each dissenter who agrees to accept it in full satisfaction. Along with its offer, IBT will send a statement of its estimate of the fair value of the shares, an explanation of how interest was calculated, and a statement of the dissenter’s right to make a supplemental demand for payment if dissatisfied with the offer.

 

In the event a shareholder is dissatisfied with the payment received, or with the amount offered in the case of after-acquired shares, he or she must notify IBT in writing of his or her own estimate of the fair value of the shares and interest due and make a supplemental demand for payment of the amount he or she believes to be owing. This right is waived unless the dissenter makes his or her demand within thirty days after IBT made or offered payment for his or her shares.

 

If a supplemental demand remains unsettled, IBT shall commence a proceeding within sixty days after receiving the demand, and petition the circuit court to determine the fair value and accrued interest. Should IBT fail to do so it must pay each dissenter whose demand remains unsettled, the amount demanded. Each dissenter made a party to the proceeding is entitled to judgment for the amount by which the court determined fair value of the shares plus interest exceeds the amount paid by IBT or, in the case of after-acquired shares for which payment was not made, the total amount of the fair value plus interest.

 

A PROXY OR VOTE AGAINST THE MERGER WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN OBJECTION FOR PURPOSES OF ASSERTING DISSENTERS’ RIGHTS.

 

THE ABOVE SUMMARY OF THE PROVISIONS REGARDING DISSENTERS’ RIGHTS UNDER THE MBCA IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF SECTIONS 450.761-450.774 OF THE MBCA. THE TEXT OF SECTIONS 450.761-450.774 IS ATTACHED HERETO AS APPENDIX C.

SHAREHOLDERS OF GCFC INTENDING TO EXERCISE DISSENTERS’ RIGHTS ARE URGED TO SEEK THE ADVICE OF COUNSEL. FAILURE TO COMPLY WITH ALL REQUIREMENTS OF SECTIONS 450.761-450.774 OF THE MBCA WILL RESULT IN THE LOSS OF DISSENTERS’ RIGHTS.

 

IBT BANCORP, INC.

 

Description of Business

 

IBT is a community-based financial holding company headquartered in Mt. Pleasant, Michigan. IBT, through its wholly owned banking subsidiary, Isabella Bank and Trust (“Isabella”), provides a wide range of services, including traditional banking services, personal and corporate trust services and residential mortgage services. IBT’s principal operating subsidiary is Isabella, which is chartered as a Michigan state bank. Isabella operates in one business segment, community banking, providing a full range of services to individual and corporate customers. Isabella is a community-oriented, full-service commercial bank, providing traditional banking services to individuals, small-to-medium-sized businesses, governmental and public entities and not-for-profit organizations. Isabella operates 21 banking offices in the Michigan counties of Isabella, Montcalm, Mecosta, Clare, Gratiot and Saginaw.

 

IBT Title and Insurance Agency, Inc., a subsidiary of IBT, is a Michigan licensed title insurance agency that provides title insurance, abstract searches and closes loans in the Michigan counties of Isabella, Montcalm, Clare, Mecosta, Roscommon and Newaygo.

 

IBT is a Michigan corporation. IBT was founded in 1988 under the BHC Act as a bank holding company for Isabella.

Certain Beneficial Owners of IBT Common Stock

 

The following table sets forth, to the best knowledge and belief of IBT, certain information regarding the beneficial ownership of IBT common stock as of September 30, 2007, by (i) each director and certain named officers of IBT; and (ii) all of IBT’s directors and officers as a group. There are no persons known to IBT to be the beneficial owner of more than 5% of the IBT common stock.

 

 

 

 

Additional Information

 

Information concerning executive compensation, certain relationships and related transactions, and other related matters concerning IBT included or incorporated by reference in its Annual Report on Form 10-K for the year ended December 31, 2006, is incorporated by reference into this document. GCFC shareholders who would like a copy of this annual report or any document incorporated by reference into the report may contact IBT at the address or telephone number provided under “Where You Can Find More Information” on page   .

 

GREENVILLE COMMUNITY FINANCIAL CORPORATION

 

Description of Business

 

GCFC was formed under the laws of the state of Michigan in 1998 as a bank holding company registered under the BHC Act and as the parent company of Greenville Community Bank (“GCB”) which is chartered as a Michigan state bank. GCFC’s principal executive offices are located at 1405 West Washington Street, Greenville, Michigan, 48838, which is also the location of the main office of GCB. GCB has an additional branch operating in Stanton, Michigan.

 

As of June 30, 2007, GCFC reported total consolidated assets of $107.2 million, deposits of $88.4 million and shareholders’ equity of $11.7 million.

GCB is subject to supervision, regulation and examination by the FDIC and the Office of Financial and Insurance Services of the state of Michigan (“OFIS”) and its deposits are insured by the FDIC.

 

Additional information with respect to GCFC and GCB is included elsewhere in this Proxy Statement-Prospectus.

 

Properties

 

GCFC has two locations, including one corporate office in which banking offices are maintained and one where the banking branch is located. The following is a description of GCFC’s facilities in which the office and branch are located:

 

 

Legal Proceedings

 

GCFC is not a party to any litigation, the adverse determination of which would be likely to have a material adverse effect upon its business operations or assets.

 

Certain Beneficial Owners of GCFC Common Stock

 

The following table sets forth, to the best knowledge and belief of GCFC, certain information regarding the beneficial ownership of GCFC common stock as of September 30, 2007, by each person known to GCFC to be the beneficial owner of more than 5% of the GCFC common stock.

 

The following table sets forth, to the best knowledge and belief of GCFC, certain information regarding the beneficial ownership of GCFC common stock as of September 30, 2007, by: (i) each director and certain named executive officers of GCFC; and (ii) all of GCFC’s directors and executive officers as a group.

 

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

There have been no changes in or disagreements with accountants on accounting and financial disclosures.

 

DESCRIPTION OF CAPITAL STOCK OF IBT

 

IBT is authorized to issue 10,000,000 shares of common stock, no par value. IBT is not authorized to issue any shares of preferred stock. At September 30, 2007, there were 6,325,773 shares of IBT common stock issued and outstanding. Each share of IBT common stock has the same relative rights as, and is identical in all respects with, each other share of common stock.

 

The common stock of IBT is not an account of an insurable type, and is not insured by the Federal Deposit Insurance Corporation or any other government agency.

 

Common Stock

 

Dividends.  The holders of common stock of IBT are entitled to receive and share equally in dividends as may be declared by the Board of Directors of IBT out of funds legally available for the payment of dividends. The payment of dividends by IBT is subject to limitations that are imposed by law and applicable regulation.

 

Voting Rights.  The holders of common stock of IBT have exclusive voting rights in IBT. They elect IBT’s Board of Directors and act on other matters as are required to be presented to them under Michigan law or as are otherwise presented to them by the Board of Directors. Generally, each holder of common stock is entitled to one vote per share and does not have any right to cumulate votes in the election of directors. No vote of IBT shareholders is required for approval of the merger or Merger Agreement under Michigan law.

 

Liquidation.  In the event of liquidation, dissolution or winding up of IBT, the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of IBT available for distribution.

 

Preemptive Rights.  Holders of the common stock of IBT are not entitled to preemptive rights with respect to any shares that may be issued. The common stock is not subject to redemption.

 

The transfer agent for IBT common stock is Isabella Bank and Trust.

 

COMPARISON OF SHAREHOLDERS’ RIGHTS

 

IBT and GCFC are both organized under the laws of the state of Michigan. Any differences, therefore, in the rights of holders of IBT capital stock and GCFC capital stock arise primarily from differences in their respective Articles of Incorporation and Bylaws. Upon completion of the merger, the Articles of Incorporation and Bylaws of IBT in effect immediately prior to the effective time of the merger will be the Articles of Incorporation and Bylaws of the surviving corporation in the merger. Consequently, after the effective time of the merger, the rights of the shareholders of GCFC who become shareholders of IBT will be determined by reference to the IBT Articles of Incorporation and Bylaws.

 

Set forth on the following pages is a summary comparison of the rights of an IBT shareholder under the IBT Articles of Incorporation and the IBT Bylaws (right column) and the rights of a shareholder under the GCFC Articles of Incorporation and the GCFC Bylaws (left column). The summary set forth below is not intended to provide a comprehensive summary of each company’s governing documents. This summary is qualified in its entirety by reference to the full text of the IBT Articles of Incorporation and IBT Bylaws, and the GCFC Articles of Incorporation and GCFC Bylaws.

 

 

CERTAIN PROVISIONS OF THE IBT
ARTICLES OF INCORPORATION AND BYLAWS

 

The following discussion is a general summary of the material provisions of IBT’s Articles of Incorporation and Bylaws and certain other regulatory provisions that may be deemed to have an “anti-takeover” effect. The following description of certain of these provisions is necessarily general and, with respect to provisions contained in IBT’s Articles of Incorporation and Bylaws, reference should be made in each case to the document in question.

 

IBT’s Articles of Incorporation and Bylaws contain a number of provisions, relating to corporate governance and rights of shareholders, that might discourage future takeover attempts. As a result, shareholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the Board of Directors or management of IBT more difficult.

 

The following description is a summary of the provisions of the Articles of Incorporation and Bylaws. See “Where You Can Find More Information” as to how to review a copy of these documents.

 

Restrictions on Call of Special Meetings.  The Bylaws provide that special meetings of shareholders can be called only by the President or the Secretary, or by either of them on the request in writing or by vote of a majority of directors or holders of at least a majority of the shares of capital stock of IBT issued and outstanding.

 

Prohibition of Cumulative Voting.  The Articles of Incorporation prohibit cumulative voting for the election of directors.

 

Authorized but Unissued Shares.  IBT has authorized but unissued shares of common stock. See “Description of Capital Stock of IBT”. The Articles of Incorporation authorize ten million (10,000,000) shares of common stock, no par value. As of September 30, 2007, there were 6,325,773 shares of IBT common stock issued and outstanding.

 

Amendments to Articles of Incorporation and Bylaws.  Amendments to the Articles of Incorporation must be approved by 662/3% of the outstanding shares of IBT’s voting stock. The Bylaws may be amended by a two-thirds vote of the directors of IBT or the affirmative vote of a majority of shares in attendance at a duly constituted meeting of shareholders. However, any amendment that relates to the classified board provisions of the Bylaws requires the approval of holders of a majority of outstanding shares.

 

Classified Board of Directors.  The IBT Board of Directors is divided into three classes, with the directors in each class being elected for a term of three years.

 

“For Cause” Removal of Directors.  Directors of IBT may be removed from office at any time, but only for cause by the affirmative vote of the holders of a majority of the shares of IBT common stock entitled to vote thereon.

 

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

 

IBT

 

There is no established market for IBT’s common stock or public information with respect to its market price. There are occasional sales by shareholders of which management of IBT is aware. The prices were reported to management in only some of the transactions and management cannot confirm the prices that were reported during these periods. All of the information has been adjusted to reflect the 10% stock dividend paid February 15, 2006.

 

 

The following table sets forth the cash dividends paid for the following quarters, adjusted for the 10% stock dividend paid on February 15, 2006.

 

 

GCFC

 

There is no established public trading market for GCFC common stock. As a result, there is no readily obtainable market price for GCFC common stock. From time to time, management of GCFC has been made aware of transactions in its common stock. Transactions in 2005, 2006 and 2007 about which management of GCFC is aware are as follows:

 

 

Although other transactions may have occurred in its common stock, GCFC has not been provided with information as to the sales prices in any transactions other than as indicated.

 

It is GCFC’s established practice to pay annual cash dividends. GCFC paid cash dividends of $0.12 and $0.20 per share in 2005 and 2006, respectively, and GCFC paid a cash dividend of $0.25 per share in 2007. As of September 30, 2007, there were 773,103 shares of GCFC common stock issued and outstanding, and approximately 188 shareholders of record.

 

LEGAL OPINIONS

 

The validity of the common stock to be issued in and the United States federal income tax consequences of, the merger transaction will be passed upon by Foster, Swift, Collins & Smith, P.C., Lansing, Michigan, counsel to IBT.

 

EXPERTS

 

The consolidated financial statements of IBT as of December 31, 2006 and 2005, and for each of the years in the three-year period ended December 31, 2006, have been incorporated by reference into this Proxy Statement-Prospectus herein in reliance upon the report of Rehmann Robson, P.C., independent registered public accounting firm, which report is incorporated by reference herein, and upon the authority of such firm as experts in accounting and auditing.

 

SHAREHOLDER PROPOSALS

 

If the merger is approved by GCFC shareholders and completed as planned, GCFC will not hold an annual shareholders meeting during 2008, and GCFC shareholders receiving shares of IBT common stock in the merger would be entitled to attend and vote at the 2008 IBT annual meeting (if shares of IBT common stock are still held by such person as of the record date for such meeting). In that case, any shareholder proposal intended to be presented at the 2008 IBT annual shareholder meeting must be received by IBT no later than December 24, 2007 in order to be included in the proxy statement relating to that meeting.

 

If the merger is not approved by GCFC shareholders or is otherwise not completed, GCFC would intend to hold its 2008 annual meeting as required by GCFC’s Bylaws. In that case, any shareholder proposal intended to be presented at the 2008 GCFC annual shareholder meeting must be received by GCFC no later than February 22, 2008.

 

WHERE YOU CAN FIND MORE INFORMATION

 

IBT has filed a registration statement on Form S-4 to register with the SEC the offering of IBT common stock to be issued by IBT in the merger. This Proxy Statement-Prospectus is a part of that registration statement. As allowed by SEC rules, this Proxy Statement-Prospectus does not contain all of the information contained in the registration statement or the exhibits to the registration statement. This means that this proxy-statement prospectus incorporates important business and financial information about IBT that is not included in or delivered with this document.

 

IBT is subject to the informational requirements of the Securities Exchange Act of 1934, as amended. Accordingly, IBT files annual, quarterly, and current reports, proxy statements, and other information with the SEC. You may read and copy any reports, statements, or other information that we file at the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. IBT’s SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov. The website contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC.

 

The SEC allows IBT to incorporate by reference information into this Proxy Statement-Prospectus. This means that IBT can disclose important information by referring to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this Proxy Statement-Prospectus, except for any information superseded by information in this Proxy Statement-Prospectus. This Proxy Statement-Prospectus incorporates by reference the documents set forth below that IBT has previously filed with the SEC. These documents contain important information about IBT and its finances.

IBT Commission Filings (File No. 000-18415)

Current Report on Form 8-K filed September 28, 2007

Current Report on Form 8-K filed August 24, 2007

Current Report on Form 8-K filed August 6, 2007

Quarterly Report on Form 10-Q for the six-month period ended June 30, 2007

Current Report on Form 8-K filed May 7, 2007

Definitive Proxy Statement on Schedule 14A filed April 26, 2007

Quarterly Report on Form 10-Q for the three-month period ended March 31, 2007

Current Report on Form 8-K filed March 22, 2007

Annual Report on Form 10-K for year ended December 31, 2006

 

All documents subsequently filed by IBT with the SEC pursuant to Sections 13(a), 13(c), 14 and 15 of the Securities Exchange Act of 1934, as amended, between the date of this Proxy Statement-Prospectus and the date of the special meeting of the shareholders of GCFC are also incorporated by reference into this Proxy Statement-Prospectus.

 

Documents incorporated by reference are available from IBT without charge. You may obtain documents incorporated by reference in this Proxy Statement-Prospectus by requesting them in writing or by telephone from IBT at the following address:

 

IBT Bancorp, Inc.
Attn: Dennis P. Angner, President & Chief Executive Officer
200 East Broadway
Mt. Pleasant, Michigan 48858
(989) 772-9471

 

TO OBTAIN DELIVERY OF THIS INFORMATION PRIOR TO THE SPECIAL GCFC SHAREHOLDERS MEETING, YOU MUST REQUEST THE INFORMATION NO LATER THAN          , 2007, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING AT WHICH YOU ARE REQUESTED TO VOTE.

 

NEITHER IBT NOR GCFC HAS AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ABOUT THE MERGER OR OUR COMPANIES THAT IS DIFFERENT FROM, OR IN ADDITION TO, THAT CONTAINED IN THIS DOCUMENT OR IN ANY OF THE MATERIALS THAT HAVE BEEN INCORPORATED INTO THIS DOCUMENT. THEREFORE, IF ANYONE DOES GIVE YOU INFORMATION OF THIS SORT, YOU SHOULD NOT RELY ON IT. IF YOU ARE IN A JURISDICTION WHERE OFFERS TO EXCHANGE OR SELL, OR SOLICITATIONS OF OFFERS TO EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS DOCUMENT OR THE SOLICITATION OF PROXIES IS UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE TYPES OF ACTIVITIES, THEN THE OFFER PRESENTED IN THIS DOCUMENT DOES NOT EXTEND TO YOU. THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.

 

FORWARD-LOOKING STATEMENTS

 

This document, including information included or incorporated by reference in this document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to:

 

(i) the financial condition, results of operations and business of IBT and GCFC;

 

(ii) statements about the benefits of the merger, including future financial and operating results, cost savings, enhancements to revenue and accretion to reported earnings that may be realized from the merger;

 

(iii) statements about our respective plans, objectives, expectations and intentions and other statements that are not historical facts; and

 

(iv) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

 

 

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in IBT’s reports filed with the Securities and Exchange Commission.

 

All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to either of us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements above. Neither of us undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 21, 2007

 

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