TCF Bank 2012 Annual Report Download - page 46

were partially offset by a decrease in employee medical
costs, an increase in net gains recognized on the pension
re-measurement during the fourth quarter of 2011 and
decreases in branch banking compensation expenses as a
result of branch closures during 2011.
FDIC Insurance FDIC premiums expense totaled $30.4
million in 2012, an increase from $28.7 million in 2011 and
$23.6 million in 2010. The increases in 2012 and 2011 were
primarily the result of changes in the FDIC insurance rate
calculations for banks with over $10 billion in total assets,
which were implemented in April 2011.
Advertising, Marketing and Deposit Account Premiums
Advertising and marketing expenses increased to $16.6 million
in 2012, compared with $10 million in 2011 and $13.1 million
in 2010. The increase in 2012 was primarily the result of
increased spending on media advertising associated with
the reintroduction of free checking. The decrease in 2011
was primarily due to the discontinuation of the debit card
rewards program in the third quarter of 2011 in response
to new federal regulation regarding debit card interchange
fees. Deposit account premiums expense decreased to
$8.7 million in 2012, compared with $22.9 million in
2011 and $17.3 million in 2010. The decrease in 2012 was
primarily attributable to an enhanced strategy to gain
higher quality accounts through the reintroduction of free
checking products rather than through offering premiums.
The increase in deposit account premium expense in 2011
was primarily due to changes in the account premium
programs beginning in April 2011, which increased the
premiums paid for each qualified account opening.
Foreclosed Real Estate and Repossessed Assets, Net
Foreclosed real estate and repossessed assets expense,
net totaled $41.4 million in 2012 compared to $49.2 million
in 2011 and $40.4 million in 2010. The decrease in 2012
was primarily due to reduced writedowns on consumer real
estate properties as a result of a decrease in the number
of properties owned and the associated expenses. The
increase in 2011 was primarily due to increased valuation
writedowns on commercial real estate properties.
Other Non-Interest Expense Other non-interest expense
totaled $163.9 million in 2012, compared to $146.9 million
and $147.9 million in 2011 and 2010, respectively. The 2012
increase was primarily due to a $10 million accrual for the
civil money penalty assessed pursuant to previously disclosed
deficiencies in TCF’s Bank Secrecy Act compliance program.
Loss on Termination of Debt In connection with
the balance sheet repositioning completed in March 2012,
TCF restructured $3.6 billion of long-term borrowings
that had a 4.3% weighted average rate, at a pre-tax loss
of $550.7 million. As part of the debt restructuring, TCF
replaced $2.1 billion of 4.4% weighted average fixed rate,
Federal Home Loan Bank advances with a mix of floating
and fixed-rate, long- and short-term borrowings with a
current weighted average rate of .5%, and terminated
$1.5 billion of 4.2% weighted average fixed-rate
borrowings under repurchase agreements. Related to these
transactions, TCF sold $1.9 billion of mortgage-backed
securities, and recognized a pre-tax gain of $77 million.
Income Taxes Income tax benefit represented 39.13%
of loss before income tax benefit in 2012, compared with
income tax expense of 36.04% and 36.89% of income
before income tax expense in 2011 and 2010, respectively.
The higher effective income tax rate for 2012, compared
with 2011 was primarily due to the 2012 pretax loss
compared with pretax income in 2011 and 2010.
Consolidated Financial Condition Analysis
Securities Available for Sale Securities available
for sale were $712.1 million, or 3.9% of total assets, at
December 31, 2012 as compared to $2.3 billion, or 12.2%
of total assets, at December 31, 2011. TCF’s securities
available for sale portfolio primarily consists of
fixed-rate mortgage-backed securities issued by the
Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation. Net unrealized pre-tax
gains on securities available for sale totaled $18.8 million
at December 31, 2012, compared with net unrealized pre-
tax gains of $88.8 million at December 31, 2011. During
March 2012, as part of TCF’s balance sheet repositioning,
the Company sold $1.9 billion of U.S. government-
sponsored mortgage backed securities at a gain of $77
million. TCF may, from time to time, sell treasury and
agency securities and utilize the proceeds to reduce
borrowings, fund growth in loans and leases or for other
corporate purposes.
TCF’s securities portfolio does not contain commercial
paper, asset-backed commercial paper or asset-backed
securities secured by credit cards or auto loans. TCF also
has not participated in structured investment vehicles.
{ 30 } { TCF Financial Corporation and Subsidiaries }