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Published in Finance

Branch acquisitions to expand Horizon Bank’s Michigan reach

BY Sunday, June 06, 2021 05:15pm

Buying 14 offices in the central and northern Lower Peninsula from TCF Bank provides a broader stage for Horizon Bancorp Inc.’s further expansion in Michigan.

The TCF offices, which collectively have $976 million in deposits and $278 million in loans, will double the Michigan City, Ind.-based Horizon Bank’s presence in the state.

The branch acquisitions align “with Horizon’s strategic objective” and represents “a natural extension of our current footprint within the state of Michigan,” said Craig Dwight, chairman and CEO of parent corporation Horizon Bancorp Inc.

Acquiring the TCF branches will add “attractive growth markets” of Cadillac and Big Rapids and mass in the Midland market, Dwight said in a conference call with analysts to discuss the deal.

Horizon agreed to pay $17.1 million for deposits it’s acquiring, or a 1.75 percent premium.

Targeted to close by the end of the third quarter pending regulatory approval, the planned sale is part of federal regulatory approval for Detroit-based TCF Financial Inc.’s $22 billion merger into the Columbus, Ohio-based Huntington Bancshares Inc. (Nasdaq: HBAN), which is scheduled to close by June 9.

Horizon Bank (Nasdaq: HBNC) expects some attrition among customers and staff after the sale closes. The bank for the first 12 to 18 months will focus on stabilizing the customer base in each of the 11 counties where the acquired offices are located and are contiguous to the 10 counties where Horizon already has offices.

“After that 18-month period we’ll look at a build-out as we see it’s needed,” Dwight said.

Horizon Bank has 81 offices in Indiana, Michigan and Ohio with $6.1 billion in assets and deposits of more than $4.72 billion. The bank’s 17 locations in Michigan include Grand Rapids, Holland, St. Joseph, Benton Harbor, New Buffalo, Portage, Battle Creek, Three Rivers, Three Oaks and Union.

As of June 2020, Horizon Bank had $927.1 million in deposits, according to the FDIC’s most recent annual Summary of Deposits.

Future expansion in Michigan could include acquisition, Dwight said. Horizon Bank has been open to M&A in Indiana, Michigan and northwest Ohio, he said.

Buying the TCF offices in Michigan “does not take us out of the M&A game,” Dwight said.

“Given the talent and resources we have in place, we continue to have discussions around other M&A activity and will continue to actively evaluate potential transactions to enhance our positions within our current footprint,” he said. 

Banking powerhouse

TCF (Nasdaq: TCF) agreed to divest the offices to secure regulatory approval for the Huntington merger. The Federal Reserve Board of Governors and the Office of the Comptroller of the Currency approved the merger after a review by the U.S. Department of Justice’s Antitrust Division.

The Justice Department required TCF to sell 13 of the 14 offices because the merger would have resulted in Huntington having a market concentration in the affected market that exceeds a 35 percent guideline, according to an order the Federal Reserve issued on May 25 approving the deal. The sale is intended “to mitigate the potentially adverse competitive effects” of the merger in those markets, according to the order.

The deal between TCF and Huntington will create a Midwest banking powerhouse with dual headquarters in Detroit and Columbus.

After the merger closes, Huntington will become the 25th-largest bank in the U.S. and among the largest operating in Michigan with $170.8 billion in assets and deposits of $138 billion across its footprint. Huntington will base commercial banking operations at the Detroit headquarters, with consumer banking headquartered in Columbus.

In West Michigan, Huntington will become the second-largest bank in the Grand Rapids-area market with $6.7 billion in deposits and a 20.7 percent market share. Huntington would become the third-largest bank in the Kalamazoo-area market with 12 percent of the deposit market, or $646 million, according to the Federal Reserve.

Huntington will lead the Battle Creek area with $396.1 million in deposits, or a 33.2 percent market share.

 TCF’s merger into Huntington will result in the closing of 198 branch offices mostly in Michigan, including all of Huntington’s 97 branches at Meijer Inc. stores. The banks say all offices targeted to close are located near an existing branch.

The planned sale of the TCF offices in Michigan represents one of the first peripheral market shifts from the merger. Executives at smaller banks have said the combination of TCF and Huntington generates opportunity for them to pick up both business and talent.

“That’s definitely been an opportunity for us and there is disruption from that,” Mercantile Bank CEO Robert Kaminski said when asked about the TCF-Huntington deal in an April call with analysts.

Bank mergers often result in talent moving from the merged institution to another bank, as MiBiz reported earlier this spring.

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