Horizon Community Bank, an Arizona state-chartered bank headquartered in Lake Havasu City, AZ, and a wholly-owned subsidiary of Horizon Bancorp, entered into a definitive agreement for Arizona Federal Credit Union to acquire Horizon Community Bank pursuant to a purchase and assumption transaction.

Subject to the terms and conditions of the definitive agreement, Arizona Federal Credit Union will acquire substantially all of the assets and assume substantially all of the liabilities of Horizon Community Bank for cash consideration of $91.4 million, subject to certain adjustments.

The transaction, which is subject to regulatory and shareholder approval, has been approved by the boards of directors of both institutions and is expected to be completed by the end of 2022. Following the purchase and assumption transaction, Horizon Bancorp and Horizon Community Bank intend to wind down and dissolve.

After the completion of the proposed transaction, the combined organization will have more than $3.3 billion in assets and serve more than 155,000 members at 21 locations throughout Arizona. Deposits of Arizona Federal Credit Union will continue to be federally insured by the National Credit Union Administration.

Horizon Community Bank was founded in 2002 and currently operates six branches in multiple locations in Arizona, including Fort Mohave, Kingman, Lake Havasu City, Mesa, Parker and Quartzsite. As of Dec. 31, 2021, Horizon Community Bank reported $539.5 million in total assets, $259.9 million in total loans, $471.7 million in total deposits and $43.4 million in total equity.

Through the merger, Arizona Federal Credit Union, a $2.8 billion member-owned financial cooperative, will expand into new market areas in western Arizona. Meanwhile, Horizon Community Bank’s clients will gain access to Arizona Federal Credit Union’s suite of financial services, including consumer loans, insurance, credit cards, investments, small business services and SBA and commercial loans.

After acquiring and integrating the operations of Pinnacle Bank in 2019, Arizona Federal Credit Union’s board of directors endorsed acquisition opportunities as a component of the credit union’s future growth strategy.

“We believe that quality growth and diversification is essential to continued success in our industry, and we intend to achieve it both organically and through mergers or acquisitions,” Ronald L. Westad, president and CEO of Arizona Federal Credit Union.

“Arizona Federal has demonstrated their competency and commitment to community banking and they will be a great partner for our bank,” Ralph Tapscott, president and CEO of Horizon Community Bank, said. “I’m excited for Horizon employees to join together with Arizona Federal employees to bring additional financial services and resources to the communities we serve.”

Arizona Federal Credit Union said it will keep and operate each of Horizon Community Bank’s existing branches.

“We’re excited to welcome Horizon Community Bank clients as new members,” Westad said. “We believe this will create significant long-term value for all stakeholders.”

Based on Horizon Bancorp’s outstanding shares on a fully-diluted basis as of Dec. 31, 2021, and after taking into consideration the anticipated satisfaction of certain obligations of Horizon Bancorp and Horizon Community Bank excluded from the purchase and assumption transaction, including holding company indebtedness and tax liabilities, Horizon Bancorp expects that its shareholders will be entitled to receive approximately $18.91 per share upon liquidation, subject to certain adjustments. Arizona Federal Credit Union has also agreed to cover a portion of Horizon Community Bank’s expected federal income tax liability associated with the sale of its assets in the transaction.

Honigman advised Arizona Federal Credit Union on this transaction as legal counsel, and McQueen Financial served as the credit union’s financial advisor. Fenimore Kay Harrison advised Horizon Community Bank as legal counsel, and Hovde Group served as the bank’s financial advisor.