Business Combinations

12 Months Ended

Dec. 31, 2012

Business Combinations

Business Combinations

Note 3. Business Combinations

Rochdale Investment Management

        On July 2, 2012, the Company acquired Rochdale Investment Management, LLC and associated entities (collectively, "Rochdale"), a New York City-based investment firm with approximately $4.89 billion of assets under management at the date of acquisition. Rochdale manages assets for affluent and high-net-worth clients and their financial advisors across the nation, and operates as a wholly owned subsidiary of the Bank. The investment firm was acquired with both cash and contingent consideration.

        The Company recognized goodwill of $86.5 million and a client contract intangible of $19.0 million related to the acquisition. The goodwill recognized is attributable to the expected synergies between Rochdale and the Company's existing wealth management business. It reflects the value associated with the addition of Rochdale's business model, delivery platform and experienced portfolio management team.

        The Company recognized a contingent consideration liability at its fair value of $46.7 million. The contingent consideration arrangements require the Company to pay additional cash consideration to Rochdale's former shareholders at certain points in time over the next six years if certain criteria, such as revenue growth and pre-tax margin, are met. The fair value of the contingent consideration was estimated using a probability-weighted discounted cash flow model. Although the acquisition agreement does not set a limit on the total payment, the Company estimates that the total consideration payment could be in the range of $32 million to $74 million, but will ultimately be determined based on actual future results.

        The Company recognized acquisition-related expense of $2.0 million during the year ended December 31, 2012. The majority of this expense is included in Legal and professional fees in the consolidated statements of income.

        The operating results of Rochdale from its acquisition date through December 31, 2012 are included in the consolidated statement of income for 2012 and are not material to total consolidated operating results for the year ended December 31, 2012. Further, the historical results of the acquired entity are not material to the Company's results, and consequently, no pro forma information is presented.

First American Equipment Finance

        The Company acquired First American Equipment Finance ("FAEF"), a privately owned equipment leasing company, in an all-cash transaction on April 30, 2012. Headquartered in Rochester, New York, FAEF leases technology and office equipment nationwide. Its clients include educational institutions, hospitals and health systems, large law firms, insurance underwriters, enterprise businesses, professional service businesses and nonprofit organizations. FAEF operates as a wholly owned subsidiary of the Bank.

        Excluding the effects of acquisition accounting adjustments, the Company acquired approximately $343.0 million in assets and assumed $325.0 million in liabilities. The Company acquired lease receivables with a fair value of $318.3 million and assumed borrowings and nonrecourse debt with a fair value of $320.9 million. The Company recognized goodwill of $68.4 million, which is attributable to the expected synergies from combining the equipment leasing operations of the Company and FAEF. Acquisition-related expense of $0.6 million is included in Legal and professional fees in the consolidated statements of income.

        The operating results of FAEF from its acquisition date through December 31, 2012 are included in the consolidated statement of income for 2012 and are not material to total consolidated operating results for the year ended December 31, 2012. Further, the historical results of the acquired entity are not material to the Company's results, and consequently, no pro forma information is presented.

Nevada Commerce Bank

        On April 8, 2011, the Bank acquired the banking operations of Nevada Commerce Bank ("NCB"), based in Las Vegas, Nevada, in a purchase and assumption agreement with the FDIC. Excluding the effects of acquisition accounting adjustments, the Bank acquired approximately $138.9 million in assets and assumed $121.9 million in liabilities. The Bank acquired most of NCB's assets, including loans and OREO with a fair value of $56.4 million and $7.5 million, respectively, and assumed deposits with a fair value of $118.4 million. The Bank received approximately $2.7 million in cash from the FDIC at acquisition and recognized a gain of $8.2 million on the acquisition of NCB in the second quarter of 2011.

        In connection with the acquisition of NCB, the Bank entered into loss-sharing agreements with the FDIC under which the FDIC will reimburse the Bank for 80 percent of eligible losses with respect to covered assets. Covered assets include covered loans and covered OREO that are covered under loss-sharing agreements with the FDIC. The term of the loss-sharing agreements is 10 years for single-family residential loans and eight years for all other loans. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated fair value of $33.8 million. The difference between the fair value of the FDIC indemnification asset and the undiscounted cash flow the Bank expects to collect from the FDIC is accreted into noninterest income.