Horizon in Michigan to buy divested TCF branches

Horizon Bancorp in Michigan City has agreed to buy 14 Michigan branches from TCF Financial in Detroit. 

TCF will sell the branches, along with $975.7 million of deposits and $278 million of loans, as part of its pending sale to Huntington Bancshares in Columbus, Ohio. The branch sale is expected to close in the third quarter. 

TCF is selling the branches as part of securing regulatory approval from the Department of Justice and the Federal Reserve. 

“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,” Craig Dwight, Horizon’s chairman and CEO, said in a Tuesday press release. 

Horizon said it expects to add more than 50,000 customer accounts, primarily retail and small-business related, as part of the deal. Horizon will pay a 1.75% premium on deposits acquired at closing, or $17.1 million based on deposits outstanding on March 31. 

Keefe, Bruyette & Woods estimated that Horizon would pay $17.1 million for the branches.

Horizon said the deal should be at least 17% accretive to its 2022 earnings per share, excluding merger-related expenses. It should take about two years for Horizon to earn back the projected 5% dilution to its tangible book value. 

The 0.08% average cost of acquired deposits is expected to reduce Horizon’s total deposit cost, which averaged 0.21% in the first quarter. 

Horizon said it is acquiring performing residential mortgage, consumer and small-business loans at a 3.5% discount. More than 86% of the outstanding loans are associated with deposit accounts at the branches. The loans have an average yield of 4.22%, which compares to 4.39% for loans in Horizon’s current portfolio. 

Donnelly Penman & Partners and Warner Norcross & Judd advised Horizon.