Talmer in Mich. Expects Big Bargain-Purchase Gain from Bankruptcy Deal

Talmer Bancorp (TLMR) in Troy, Mich., could enjoy a bigger-than-expected benefit from its purchase of Michigan Commerce Bank.

The $5.7 billion-asset company disclosed in a regulatory filing Monday that it expects to record a bargain purchase gain of $37 million tied to the acquisition. A bargain purchase gain represents the difference between a deal's net fair value adjustments and the consideration paid.

Talmer bought Michigan Commerce from Capitol Bancorp on Jan. 1 in a deal that was facilitated through bankruptcy court. The purchase price consisted of a $4 million cash consideration and a separate $2.5 million payment to fund an escrow account tied to administrative fees and other bankruptcy related expenses. An unused escrow funds will be returned to Talmer, the filing said.

Talmer also contributed nearly $80 million to recapitalize Michigan Commerce, which it renamed Talmer West Bank. To fund the moves, Talmer borrowed $35 million under a senior unsecured line of credit and received $33 million in dividend capital from its Talmer Bank and Trust.

Michigan Commerce added about $940 million in assets, including more than $600 million in loans, and $885 million in deposits, the filing said.

The bargain purchase gain is nearly double the $20 million that Christopher McGratty at Keefe, Bruyette & Woods had expected. He wrote in a Monday note to clients that, while the disclosure leaves core earnings unaffected, the higher gain could boost Talmer's tangible book value by roughly 25 cents a share. The increase "does help make the risk-reward even more attractive," he wrote.