Last week, TCF National Bank, a wholly-owned subsidiary of Minnesota-based TCF Financial Corporation ( TCB ) completed the acquisition of Gateway One Lending & Finance LLC. Now onwards, Gateway will be a wholly-owned subsidiary of TCF National Bank.
Based in California, Gateway One is a private lending company in the indirect auto finance market. The company is working with more than 3,100 active dealer relationships while originating loans to consumers in 30 states. As of October 31, 2011, the company had originated $239 million in auto loans.
As part of the deal, TCF is retaining back Gateway One's experienced executive management team. J.P. Morgan Securities LLC, a division of JPMorgan Chase & Co. ( JPM ), served as private financial advisor to TCF, while Morgan Keegan & Company Inc. acted as financial advisor to Gateway One.
TCF Financial has a track record of acquiring, assimilating and operating specialty finance businesses nationwide. With the acquisition of Gateway One, TCF Financial will be able to diversify its business while providing plenty of growth opportunities in the large U.S. auto lending market.
Further, the company will be able to expand high quality assets with solid risk-adjusted returns with the help of national specialty finance lending programs. Moreover, TCF Financial will have new revenue source and opportunities for balance sheet growth in the current challenging economic environment.
On the other hand, Gateway One is hoping to utilize financial capabilities of TCF Financial for pursuing growth opportunities. Moreover, dealers, customers and employees of Gateway One will even get the benefit of the financial strength of TCF Financial.
During the quarter, TCF Financial has also signed an agreement with BRP, one of the world's premier manufacturers of powersports equipment. The company expects the transaction to deliver considerable loan balances in both the U.S. and Canada's inventory finance business beginning in 2012.
Despite sluggish economic recovery and regulatory issues, TCF reported positive net income in the third quarter 2011. We expect TCF to maintain its superior position in the market based on its positive approach to market conditions, recent acquisitions and improving credit quality. However, the regulatory reforms and low interest rate environment might affect the company's near-term results to some extent.
TCF Financial currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.