Horizon Bank is poised to expand it’s market footprint in Michigan following news that they will acquire 14 TCF National Bank branches in 11 Michigan counties, adding $976-million in deposits and $278-million in loans to the Michigan City-based banking corporation.
Horizon Bank, which is a wholly owned subsidiary of Horizon Bancorp, Inc. has entered into a definitive purchase and assumption agreement to acquire 14 TCF National Bank branches in 11 Michigan counties which are being divested by TCF Financial Corporation in connection with its own merger with Huntington Bancshares Incorporated.
Chairman and CEO Craig M. Dwight says, “We are excited to welcome Horizon Bank’s newest employees and customers and introduce them to our record of exceptional service to consumers, small businesses, non-profits and municipalities across Michigan and Indiana,” and adds, “This financially and strategically attractive transaction is a logical extension of our efficient retail franchise, which is designed to further enhance our low-cost core deposit and funding capability to support loan growth in a recovering economy.”
The transaction, which is expected to be completed by the end of the third quarter of 2021, is subject to regulatory approval and other customary closing conditions and adjustments. Horizon expects to add more than 50,000 primarily retail and small business customer accounts and the entire workforce of the acquired branches.
Currently, Horizon Bank operates 74 bank branches, including 15 in Michigan, and customers across its diverse and economically attractive Midwestern markets conduct a majority of their transactions through its convenient digital and virtual banking channels.
Horizon Bank has agreed to pay 1.75-percent premium on deposits acquired at closing, or $17.1 million based on deposits outstanding of approximately $976 million at March 31, 2021. Horizon expects the transaction to be in excess of 17-percent accretive to 2022 earnings per share, excluding non-recurring transaction-related expenses. Tangible book value dilution is expected to be 5.0-percent, with a TBV earnback of approximately two years. An internal rate of return of approximately 21-percent is anticipated.
The transaction is expected to expand Horizon’s already low-cost core deposit franchise, even with conservative runoff and attrition assumptions. Deposit accounts to be acquired have an average relationship life of more than 10 years. The 0.08-percent average cost of acquired deposits is expected to further reduce Horizon’s total deposit cost, which was an average of 0.21-percent in the first quarter of 2021.
The low operating cost of the branches to be acquired should also further reduce Horizon’s comparatively low efficiency ratio and non-interest expense to average assets ratio.
Horizon Bank is also acquiring performing residential mortgage, consumer, and small business loans associated with the branches at a 3.50-percent discount. Based on due diligence conducted on the portfolio to be acquired, Horizon believes the loan discount is more than sufficient to cover any credit risk exposure. Loans outstanding for the portfolio to be acquired totaled approximately $278 million at March 31, 2021, more than 86-percent of which were associated with deposit accounts at the 14 branches.
As an experienced integrator, the Michigan branch transaction will be Horizon Bank’s 15th acquisition since 2002 and fifth in the last five years, productively deploying excess capital and cash currently held at the holding company.
CEO Dwight says, “We have a demonstrated history of integrating cultures, prioritizing community involvement and retaining seasoned local bankers, which continue to be key components to our future success.”
Donnelly Penman & Partners served as financial advisor and Warner Norcross + Judd LLP served as legal advisor to Horizon on the transaction.
An investor presentation with additional information, including a complete list of acquired branches, will be available at https://investor.horizonbank.com/news-and-presentations.
Horizon will also host an investor conference call tomorrow morning to review its branch transaction plans. Participants may access the live conference call on Wednesday, May 26, 2021 at 7:30 am CT (8:30 am ET) by dialing 877–317–6789 from the United States, 866–450–4696 from Canada or 412–317–6789 from international locations and requesting the “Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.
A telephone replay of the call will be available for approximately one week following the live conference. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 412–317–0088 from other international locations, and entering the access code 10156750.
Horizon Bancorp, Inc. is the $6.1 billion-asset bank holding company for Horizon Bank, which serves customers across diverse and economically attractive Midwestern markets through convenient digital and virtual tools, as well as its Indiana and Michigan branches. Horizon’s retail offerings include prime residential, indirect auto, and other secured consumer lending to in-market customers, as well as a range of personal banking and wealth management solutions. Horizon also provides a comprehensive array of in-market business banking and treasury management services, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Michigan City, is available at http://horizonbank.com and http://investor.horizonbank.com.
