TCF Bank 2012 Annual Report Download - page 114

Swap Agreement TCF’s swap agreement relates to the
sale of TCF’s Visa Class B stock, and is classified as a Level
3 liability. The value of the swap agreement is based upon
TCF’s estimated exposure related to the Visa covered
litigation through a probability analysis of the funding and
estimated settlement amounts. As permitted under GAAP,
TCF has elected to net derivative receivables and derivative
payables and the related cash collateral received and
paid, when a legally enforceable master netting agreement
exists. For purposes of the previous tables, any derivative
receivable and payable balances are presented gross of this
netting adjustment.
Assets Held in Trust for Deferred Compensation
Assets held in trust for deferred compensation plans
include investments in publicly traded stocks, excluding
TCF common stock reported in treasury and other equity,
and U.S. Treasury notes. The fair value of these assets is
based upon prices obtained from independent asset pricing
services based on active markets.
The following is a description of valuation methodologies
used for assets measured on a non-recurring basis.
Loans Impaired loans for which repayment of the loan is
expected to be provided solely by the value of the underlying
collateral are considered collateral dependent and are
valued based on the fair value of such collateral, less
estimated selling costs. Selling costs are generally 10% of the
fair value of the underlying collateral.
Other Real Estate Owned and Repossessed and
Returned Assets The fair value of real estate owned is
based on independent full appraisals, real estate broker’s
price opinions, or automated valuation methods, less
estimated selling costs. Selling costs are generally 10%
of the fair value of the underlying collateral. Certain
properties require assumptions that are not observable in
an active market in the determination of fair value. The
fair value of repossessed and returned assets is based on
available pricing guides, auction results or price opinions,
less estimated selling costs. Assets acquired through
foreclosure, repossession or returned to TCF are initially
recorded at the lower of the loan or lease carrying amount
or fair value less estimated selling costs at the time of
transfer to real estate owned or repossessed and returned
assets. Other real estate owned and repossessed and
returned assets were written down $25.2 million and
included in foreclosed real estate and repossessed assets,
net expense during the year ended December 31, 2012.
Note 21. Fair Values of Financial
Instruments
Management discloses the estimated fair value of
financial instruments, both assets and liabilities on and
off the balance sheet, for which it is practicable to
estimate fair value. These fair value estimates were made
at December 31, 2012 and December 31, 2011, based on
relevant market information and information about the
financial instruments. Fair value estimates are intended
to represent the price at which an asset could be sold
or a liability could be settled. However, given there is
no active market or observable market transactions
for many of TCF’s financial instruments, the Company’s
estimates of fair values are subjective in nature, involve
uncertainties and include matters of significant judgment.
Changes in assumptions could significantly affect the
estimated values.
The carrying amounts and estimated fair values of
the Company’s financial instruments are set forth in the
following table. This information represents only a portion
of TCF’s balance sheet, and not the estimated value of the
Company as a whole. Non-financial instruments such as
the intangible value of TCF’s branches and core deposits,
leasing operations, goodwill, premises and equipment and
the future revenues from TCF’s customers are not reflected
in this disclosure. Therefore, this information is of limited
use in assessing the value of TCF.
{ 98 } { TCF Financial Corporation and Subsidiaries }