TCF Bank 2010 Annual Report Download - page 79

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• 63 •
2010 Form 10-K
Acquired Loans and Leases During the year ended 2010,
TCF paid $186.8 million to acquire leasing and equipment
finance loans and leases having remaining contractual
principal cash flows including residual on leases of $186.8
million and paid $168.6 million to acquire inventory finance
loans having remaining contractual principal cash flows
of $168.6 million. In total, TCF paid $355.4 million during
the year ended 2010 to acquire loans and leases having
remaining contractual principal cash flows including residual
on leases of $355.4 million. At the time of acquisition,
the expected principal cash flows including residual on
leases to be collected over the life of the contracts was
$355.2 million. As of December 31, 2010, it was probable
that TCF would not collect all contractual principal remain-
ing cash flows, but it was probable that TCF would collect
more than the expected principal cash flows including
residual on leases.
During the year ended 2009, TCF paid $339.9 million to
acquire leasing and equipment finance loans and leases
having remaining contractual principal cash flows including
residual on leases of $353.9 million and paid $274.7 million
to acquire inventory finance loans having remaining
contractual principal cash flows of $277.7 million. In
total, TCF paid $614.6 million during the year ended 2009
to acquire loans and leases having remaining contractual
principal cash flows including residual on leases of $631.6
million. At the time of acquisition, the expected principal
cash flows including residual on leases to be collected over
the life of the contracts was $615.2 million. For these loans
and leases, it was probable that TCF would not collect all of
the contractual principal amounts due, but was probable
that TCF would collect more than the expected principal
cash flows including residual on leases.
These loans and leases were initially recorded at fair
value and a non-accretable discount was established for
the difference between the contractual principal cash flows
and the expected principal cash flows determined at the
time of acquisition.
Non-accretable discounts of $4.2 million and $10.2
million remained on these portfolios at December 31, 2010,
and December 31, 2009, respectively. In the future, if TCF
is unable to collect the expected cash flows or revises its
expectations below the current level, an allowance for credit
losses will be established on these acquired portfolios.
The excess of expected principal cash flows to be col-
lected over the initial fair value of the acquired portfolios
is referred to as the accretable yield and is accreted into
interest income over the estimated life of the acquired
portfolios using the effective yield method. The accretable
yield is affected by changes in interest rate indices for
variable-rate acquired portfolios, changes in prepayment
assumptions and changes in the expected principal and
interest payments over the estimated life of the loan. These
loans and leases are classified as accruing and interest
income continues to be recognized unless expected losses
exceed the non-accretable discount.
The following table provides a rollforward of unamortized
accretable yield for all acquired loan and lease portfolios
during the years ended December 31, 2010 and 2009.
Year Ended
December 31,
(In thousands) 2010 2009
Balance, at beginning of year $ (13) $ –
Portfolio acquisitions (214) 833
Reclassification from non-accretable
discount for loans with improving
cash flows 221 –
Accretion (183) (846)
Balance, at end of year $(189) $ (13)
Within the loan and lease portfolios acquired in 2009,
there were certain loans which had experienced deterioration
in credit quality at the time of acquisition. These loans
had outstanding principal balances of $13.7 million and
$21.6 million at December 31, 2010 and 2009, respectively.
The non-accretable discount on loans acquired with
deteriorated credit quality was $769 thousand and $1
million at December 31, 2010 and 2009, respectively. The
remaining accretion to be recognized in expense for these
loans was $207 thousand at December 31, 2010, and $376
thousand at December 31, 2009. Accretion of $169 thousand
and $149 thousand was recorded during the years ended
December 31, 2010 and 2009, respectively.