TCF Bank 2014 Annual Report Download - page 17

Consumer Protection Act of 2010 (the ‘‘Dodd-Frank Act’’) and the Basel III international capital standards. Among other things,
the Final Capital Rules establish a new capital ratio of common equity Tier 1 capital of 4.5% and a common equity Tier 1 capital
conservation buffer of 2.5% of risk-weighted assets; increase the minimum ratio of Tier 1 capital ratio from 4% to 6% and include
a minimum leverage ratio of 4%; place an emphasis on common equity Tier 1 capital and change the risk weights assigned to
certain instruments. Failure to meet these standards would result in limitations on capital distributions as well as executive
bonuses. The Final Capital Rules became applicable to TCF on January 1, 2015 with conservation buffers phasing in over the
subsequent five years.
Restrictions on Distributions TCF Financial’s ability to pay dividends is subject to limitations imposed by the Federal Reserve.
In general, Federal Reserve regulatory guidelines require the board of directors of a bank holding company to consider a number
of factors in determining the payment of dividends, including the quality and level of current and future earnings.
Dividends or other capital distributions from TCF Bank to TCF Financial are an important source of funds to enable TCF Financial
to pay dividends on its preferred and common stock, to pay TCF Financial’s obligations or to meet other cash needs. The ability of
TCF Financial and TCF Bank to pay dividends depends on regulatory policies and regulatory capital requirements and may be
subject to regulatory approval.
In general, TCF Bank may not declare or pay a dividend to TCF Financial in excess of 100% of its net retained profits for the
current year combined with its net retained profits for the preceding two calendar years without prior approval of the OCC. TCF
Bank’s ability to make future capital distributions will depend on its earnings and ability to meet minimum regulatory capital
requirements in effect during current and future periods. These capital adequacy requirements may be higher in the future than
existing minimum regulatory capital requirements. The OCC also has the authority to prohibit the payment of dividends by a
national bank when it determines such payments would constitute an unsafe and unsound banking practice.
In addition, income tax considerations may limit the ability of TCF Bank to make dividend payments in excess of its current and
accumulated tax earnings and profits. Annual dividend distributions in excess of earnings and profits could result in a tax liability
based on the amount of excess earnings distributed and current tax rates.
Regulation of TCF and Affiliates and Insider Transactions TCF Financial is subject to Federal Reserve regulations,
examinations and reporting requirements applicable to bank holding companies. Subsidiaries of bank holding companies, like
TCF Bank, are subject to certain restrictions in their dealings with holding company affiliates.
A holding company must serve as a source of strength for its subsidiary banks, and the Federal Reserve may require a holding
company to contribute additional capital to an undercapitalized subsidiary bank. In addition, the OCC may assess TCF Financial if
it believes the capital of TCF Bank has become impaired. If TCF Financial were to fail to pay such an assessment within three
months, the Board of Directors must cause the sale of TCF Bank’s stock to cover a deficiency in the capital. In the event of a bank
holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain
the capital of a subsidiary bank would be assumed by the bankruptcy trustee and may be entitled to priority over other creditors.
Under the Bank Holding Company Act of 1956 (‘‘BHCA’’), Federal Reserve approval is required before acquiring more than 5%
control, or substantially all of the assets, of another bank, or bank holding company, or merging or consolidating with such a bank
or bank holding company. The BHCA also generally prohibits a bank holding company, with certain exceptions, from acquiring
direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding
company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, providing
services for its subsidiaries, or conducting activities permitted by the Federal Reserve as being closely related to the business of
banking. Further restrictions or limitations on acquisitions or establishing financial subsidiaries may also be imposed by TCF’s
regulators or examiners.
Restrictions on Acquisitions and Changes in Control Under federal and state law, merger and branch acquisition
transactions may be subject to certain restrictions, including certain nationwide and statewide insured deposit maximum
concentration levels or other limitations. In addition, federal and state laws and regulations contain a number of provisions which
impose restrictions on changes in control of financial institutions such as TCF Bank, and which require regulatory approval prior to
any such changes in control.
Insurance of Accounts As of January 1, 2013, the aggregate balance of a depositor’s deposit accounts are insured up to at
least the standard maximum deposit insurance amount of $250 thousand at each separately chartered FDIC-insured institution.
Under Section 331 of the Dodd-Frank Act, the FDIC insurance assessment base is defined as average total assets minus tangible
equity. In addition to risk-based deposit insurance premiums, additional assessments may be imposed by the Financing
Corporation, a separate U.S. government agency affiliated with the FDIC, on certain insured deposits to pay for the interest cost
of Financing Corporation bonds. The Financing Corporation assessment rate for 2014 was 62 cents for each $100 of deposits.
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