TCF Bank 2012 Annual Report Download - page 80

Income Taxes Income taxes are accounted for using the
asset and liability method. Under this method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax basis carrying
amounts. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences
are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period in which the enactment
date occurs. Also, if current period income tax rates
change, the impact on the annual effective income tax rate
is applied year-to-date in the period of enactment.
The determination of current and deferred income taxes
is a critical accounting estimate which is based on complex
analyses of many factors, including interpretation of
income tax laws, the evaluation of uncertain tax positions,
differences between the tax and financial reporting
bases of assets and liabilities (temporary differences),
estimates of amounts due or owed, the timing of reversals
of temporary differences and current financial accounting
standards. Additionally, there can be no assurance that
estimates and interpretations used in determining income
tax liabilities will not be challenged by taxing authorities.
Actual results could differ significantly from the estimates
and tax law interpretations used in determining the current
and deferred income tax liabilities.
In the preparation of income tax returns, tax positions
are taken based on interpretation of income tax laws for
which the outcome is uncertain. Management periodically
reviews and evaluates the status of uncertain tax positions
and makes estimates of amounts ultimately due or owed.
The benefits of tax positions are recorded in income tax
expense in the Consolidated Statements of Comprehensive
Income, net of the estimates of ultimate amounts due or
owed, including any applicable interest and penalties.
Changes in the estimated amounts due or owed may result
from closing of the statute of limitations on tax returns,
new legislation, clarification of existing legislation through
government pronouncements, judicial action and through
the examination process. TCF’s policy is to report interest
and penalties, if any, related to unrecognized tax benefits
in income tax expense in the Consolidated Statements of
Comprehensive Income.
Other Significant Accounting Policies
Investments Investments are carried at cost and
adjusted for amortization of premiums or accretion of
discounts, using a level yield method. TCF periodically
evaluates investments for “other than temporary”
impairment with losses, if any, recorded in non-interest
income within gains on securities, net.
Securities Available for Sale Securities available for
sale are carried at fair value with the unrealized gains or
losses, net of related deferred income taxes, reported
within accumulated other comprehensive income (loss),
a separate component of equity. The cost of securities
sold is determined on a specific identification basis and
gains or losses on sales of securities available for sale
are recognized on trade dates. TCF evaluates securities
available for sale for “other than temporary” impairment
on a quarterly basis. Declines in the value of securities
available for sale that are considered other than temporary
are recorded net of gains on securities in non-interest
income. Discounts and premiums on securities available
for sale are amortized using a level yield method over the
expected life of the security.
Loans and Leases Held for Sale Loans and leases
designated as held for sale are carried at the lower of cost
or fair value. Any cost amount exceeding an individual loan
or lease’s fair value is recorded as a valuation allowance
and recognized within the Consolidated Statements of
Income as a reduction of gains on loans and leases held
for sale.
Loans and Leases Loans and leases are reported at
historical cost including net direct fees and costs
associated with originating and acquiring loans and leases.
The net direct fees and costs for sales-type leases are
offset against revenues recorded at the commencement
of sales-type leases. Discounts and premiums on acquired
loans, net direct fees and costs, unearned discounts and
finance charges, and unearned lease income are amortized
to interest income using methods which approximate a level
yield over the estimated remaining lives of the loans and
leases. Net direct fees and costs on all lines of credit are
amortized on a straight line basis over the contractual life
of the line of credit and adjusted for payoffs. Net deferred
fees and costs on consumer real estate lines of credit are
amortized to service fee income.
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