TCF Bank 2012 Annual Report Download - page 84

The following table summarizes the consideration paid
for Gateway One and the amounts of the assets acquired
and liabilities assumed as of the acquisition date.
(In thousands) At November 30, 2011
Cash consideration $115,218
Recognized amounts of identifiable assets
acquired and liabilities assumed:
Cash and cash equivalents $ 2,210
Restricted cash 18,685
Loans held for sale 13,711
Loans held for investment 3,879
Intangible assets 6,170
Interest-only strip 21,210
Deferred tax asset 11,286
Deferred stock compensation 2,600
Other assets 1,588
Accounts payable (1,043)
Loan sale liability (6,072)
Debt assumed (9,988)
Servicing funds to be remitted (17,901)
Other liabilities (4,158)
Total identifiable net assets $ 42,177
Goodwill 73,041
Total net assets acquired $115,218
At the time of acquisition, all of Gateway One’s loans
held for investment totaling $3.9 million, had evidence of
deteriorated credit quality. At December 31, 2012, $1.3 million
of such loans remained. See Note 6, Loans and Leases
for additional information. The goodwill of $73 million
arising from the acquisition consisted largely of expected
incremental balance sheet and fee growth and cross selling
opportunities. The goodwill was assigned to TCF’s Lending
segment. None of the goodwill recognized is deductible for
income tax purposes.
Pursuant to the terms of the acquisition, three key
members of Gateway One’s management team were
required to utilize a portion of the consideration paid to
them by TCF to separately purchase TCF common stock in
the aggregate amount of $2.6 million. These shares of TCF
common stock are being retained by a trustee for three
years pursuant to the terms of the custodial agreements
entered into between the trustee, TCF and each individual.
Ownership of these shares will be forfeited to TCF if during
the three-year period any of the individuals terminates
his employment with TCF without good reason, or TCF
terminates their employment for cause, and has been
accounted for separately from the acquisition. Due to the
fact that this portion of the purchase consideration was
tied to continuing employment, and at risk, the value of
these shares has been recorded within other assets and is
being recognized as compensation expense ratably over the
three-year period. In addition, TCF provided Gateway One
$10 million in interim funding prior to the acquisition to
facilitate its closing. This loan was executed at prevailing
market pricing and terms.
Note 3. Cash and Due from Banks
At December 31, 2012 and 2011, TCF Bank was required
by Federal Reserve regulations to maintain reserves of
$79.7 million and $42.1 million, respectively, in cash on
hand or at the Federal Reserve.
TCF maintains cash balances that are restricted as
to their use in accordance with certain contractual
agreements related to the sale and servicing of auto loans
and consumer real estate loans. Cash proceeds from loans
serviced for third parties are held in restricted accounts
until remitted. TCF also retains restricted cash balances
for potential loss recourse on certain sold auto loans.
Restricted cash totaling $28.8 million and $17.5 million
was included within cash and due from banks at
December 31, 2012 and 2011, respectively.
Note 4. Investments
At December 31,
(In thousands) 2012 2011
Federal Home Loan Bank stock, at cost $ 79,032 $119,086
Federal Reserve Bank stock, at cost 36,178 31,711
Other 5,657 6,983
Total investments $120,867 $157,780
The investments in Federal Home Loan Bank stock are
required investments related to TCF’s membership in and
current borrowings from the Federal Home Loan Bank
(“FHLB”) of Des Moines. All Federal Home Loan Bank’s
(“FHLBanks”) obtain their funding primarily through
issuance of consolidated obligations of the Federal
Home Loan Bank system. The U.S. Government does not
guarantee these obligations, and each of the 12 FHLBanks
are generally jointly and severally liable for repayment of
each other’s debt. Therefore, TCF’s investments in FHLB of
Des Moines could be adversely impacted by the financial
operations of the FHLBanks and actions of their regulator,
the Federal Housing Finance Agency.
{ 68 } { TCF Financial Corporation and Subsidiaries }