Minneapolis-based TCF Financial Corp. accelerated its expansion in the Midwest on Friday, announcing an agreement to buy the $2.8 billion-asset Great Lakes Bancorp, Ann Arbor, Mich.

The stock swap, worth $195 million or 164% of book value. is TCF's biggest deal to date and underscores the company's financial strength compared with that of other thrifts, few of which could contemplate such a transaction.

The deal represents a substantial expansion of what had been a small franchise in Michigan for TCE which also operates in Illinois and Wisconsin.

The deal followed the announcement late Thursday of another deal in Michigan, in which Bane One Corp. sold four units to Citizens Banking Corp. (See article on page 5)

The merger of TCF and Great Lakes is expected to close in the first quarter of 1995. It will boost TCFs total assets by roughly 56%, to $7.8 billion, and add 44 offices to its branch network.

William A. Cooper. chairman and chief executive of TCF Financial, said the deal would provide an opportunity for earnings growth as Great Lakes' performance is enhanced.

Rumors of an impending sale had already lifted Great Lakes stock, dampening the effect of Friday's announcement. Still, Great Lakes' stock was up 75 cents to $25.25 in afternoon trading, while TCF's stock slipped 62.5 cents to $41.625.

Steven R. Schroll, a banking analyst at Piper Jaffray Inc., endorsed the deal, saying TCF had established its ability to rejuvenate lagging thrifts. He noted that TCF's Minnesota franchise, which currently yields a 1.6% return on assets, was in much the same condition as Great Lakes when current management took control a few years ago.

TCF said it will take a $51 million restructuring charge as part of the deal. That will boost the effective purchase price to more than twice book value.

Mr. Cooper said much of the special charge stems from a planned balance-sheet restructuring at Great Lakes. Certain Federal. Home Loan Bank advances will be redeemed, he said, and a series of derivatives contracts will be unwound.

Additionally, Mr. Cooper said, a $5 million special loanloss provision will be taken, facilitating a portfolio cleanup.

Mr. Cooper said the long-distance merger would permit expense cuts equaling 10% of Great Lakes' annual overhead.

Earnings dilution could range as high as 3% in the first year after the deal, TCF said.

Great Lakes earned $7.8 million in the first half of 1994, for an annualized return of 0.58% on average assets. TCF earned $26.2 million in the first half, for an annualized ROA of 1.08%.

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