Note 2 - FDIC - Assisted Acquisition

12 Months Ended

Dec. 31, 2011

Note 2 - FDIC - Assisted Acquisition Disclosure

Note 2 - FDIC - Assisted Acquisition

NOTE 2 – FDIC – Assisted Acquisition

On October 23, 2009 (the “Acquisition Date”), the Bank entered into a Purchase and Assumption Agreement (the “Agreement”) with the Federal Deposit Insurance Corporation (the “FDIC”), as receiver for Bank of Elmwood (“Acquired Bank”), pursuant to which the Bank acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of Bank of Elmwood, a Wisconsin state-chartered bank headquartered in Racine, Wisconsin (the “Acquisition”).

The Acquired Bank operated five branches in Southeast Wisconsin, which allowed the Bank to expand its presence in Southeast Wisconsin, primarily the Racine and Kenosha, Wisconsin markets.

The Bank acquired loans and OREO with estimated fair market values of $196.7 million and $2.9 million, respectively.  The Bank also acquired $30.4 million in cash, due from banks and deposits with the Federal Reserve Bank, $8.8 million in investment securities and $2.1 million in other assets.  The Bank assumed $245.3 million in deposits at estimated fair market value and $4.3 million of other liabilities.  The Bank recorded $2.1 million in core deposit intangibles and recognized a pre-tax bargain purchase gain of $21.5 million, resulting in an after-tax gain of $12.9 million.

The assets acquired and liabilities assumed in the Acquisition are presented at estimated fair market values as of the Acquisition Date.

The Acquisition was completed as a whole bank purchase without any loss sharing provision on post acquisition loan losses between the Bank and the FDIC, such that the Bank bears all risk of future loan losses.  The Acquisition was completed at a purchase discount of $110.9 million, with the Bank receiving $82.8 million of assets at the Acquired Bank’s net book value, $27.5 million in cash from the FDIC and recording a settlement receivable of $0.6 million from the FDIC.  The cash assistance provided by the FDIC was an amount equal to the book value of liabilities assumed plus an agreed upon purchase discount, less the book value of assets acquired.  A summary of the cash support received from the FDIC is as follows:

Assumed liabilities at Bank of Elmwood book value	$	247,866,961
Purchase discount		110,900,000
Assets acquired at Bank of Elmwood book value		(330,644,187	)
FDIC cash support	$	28,122,774

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting.  The application of the acquisition method of accounting resulted in a net after-tax gain of $12.9 million.  A summary of the net assets acquired from the FDIC and the estimated fair market value adjustments resulting in the net after-tax gain as of the Acquisition Date are as follows:

Net assets acquired at Bank of Elmwood book value	$	82,777,226
FDIC cash support		28,122,774
Purchase accounting fair value adjustments:
Loans		(85,127,642	)
OREO		(4,669,237	)
Core deposit intangible		2,103,000
Time deposits		(1,732,000	)
Deferred income tax liability		(8,611,123	)
Net after-tax gain from Acquisition (net assets required)	$	12,862,998