TCF Bank 2012 Annual Report Download - page 26

and marketing new lines of business and new products or
services, TCF may invest significant time and resources.
Initial timetables for the introduction and development
of new lines of business and new products or services may
not be achieved and price and profitability targets may
not prove feasible. External factors, such as compliance
with regulations, competitive alternatives and shifting
market preferences may also impact the successful
implementation of a new line of business or a new product
or service. Furthermore, any new line of business or new
product or service could have a significant impact on the
effectiveness of TCF’s system of internal controls. Failure
to successfully manage these risks in the development and
implementation of new lines of business and new products
or services could have a material adverse effect on TCF’s
financial condition and results of operations.
Increased competition in the already highly
competitive financial services industry could
have a material adverse effect on TCF’s financial
condition and results of operations.
The financial services industry is highly competitive
and could become even more competitive as a result of
legislative, regulatory and technological changes, as well
as continued industry consolidation, which may increase in
connection with current economic and market conditions.
TCF competes with other commercial banks, savings
and loan associations, mutual savings banks, finance
companies, mortgage banking companies, credit unions
and investment companies. In addition, technology has
lowered barriers to entry and made it possible for non-
banks to offer products and services traditionally only
provided by banks. Some of TCF’s competitors have fewer
regulatory constraints or lower cost structures. Also, the
potential need to adapt to industry changes in information
technology systems, on which TCF and the financial services
industry generally highly depend, could present operational
issues and require considerable capital spending. As a
result, any increased competition in the already highly
competitive financial services industry could have a
material adverse effect on TCF’s financial condition and
results of operations.
The allowance for loan and lease losses
maintained by TCF may not be sufficient.
All borrowers have the potential to default, and TCF’s
remedies may not fully satisfy the obligations owed to
TCF. TCF maintains an allowance for loan and lease losses,
which is a reserve established through a provision for loan
and lease losses charged to expense, which represents
management’s best estimate of probable credit losses that
have been incurred within the existing portfolio of loans and
leases. The level of the allowance for loan and lease losses
reflects management’s continuing evaluation of industry
concentrations, specific credit risks, loan loss experience,
current loan portfolio quality, present economic, political
and regulatory conditions and unidentified losses in
the current loan portfolio. The determination of the
appropriate level of the allowance for loan and lease
losses involves a high degree of subjectivity and requires
management to make significant estimates of current
credit risks using qualitative and quantitative factors,
each of which is subject to significant change. Changes in
economic conditions affecting borrowers, new information
regarding existing loans, identification of additional
problem loans and other factors may require an increase in
the allowance for loan and lease losses. In addition, bank
regulatory agencies periodically review TCF’s allowance for
loan and lease losses and may require an increase in the
provision for loan and lease losses or the recognition of
additional loan charge-offs, based on judgments different
than those of management. An increase in the allowance
for loan and lease losses would result in a decrease in net
income, and possibly risk-based capital, and could have
a material adverse effect on TCF’s financial condition and
results of operations.
TCF is subject to extensive government
regulation and supervision.
TCF Financial, its subsidiary TCF Bank and certain indirect
subsidiaries are subject to extensive federal and state
regulation and supervision. Banking regulations are
primarily intended to protect depositors’ funds, federal
deposit insurance funds and the banking system as a
whole, not stockholders. These regulations affect TCF’s
lending practices, capital structure, investment practices,
dividend policy and growth, among other things. Congress
and federal regulatory agencies continually review banking
laws, regulations and policies for possible changes.
Changes to statutes, regulations or regulatory policies,
including changes in interpretation or implementation of
such statutes, regulations or policies, could affect TCF in
substantial and unpredictable ways. Such changes could
subject TCF to additional costs, limit the types of financial
{ 10 } { TCF Financial Corporation and Subsidiaries }