TCF Bank 2005 Annual Report Download - page 54

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34 TCF Financial Corporation and Subsidiaries
Potential Problem Loans and Leases In addition to non-
performing assets, there were $54.8 million of loans and leases at
December 31, 2005, for which management has concerns regarding
the ability of the borrowers to meet existing repayment terms,
compared with $71.1 million at December 31, 2004. These loans and
leases are primarily classified for regulatory purposes as substan-
dard and reflect the distinct possibility, but not the probability,
that the Company will not be able to collect all amounts due
according to the contractual terms of the loan or lease agreement.
Although these loans and leases have been identified as potential
problem loans and leases, they may never become non-performing.
Additionally, these loans and leases are generally secured by com-
mercial real estate or other assets, thus reducing the potential for
loss should they become non-performing. Potential problem loans
and leases are considered in the determination of the adequacy of
the allowance for loan and lease losses. Leasing and equipment
finance had no potential problem loans funded on a non-recourse
basis at December 31, 2005, compared with $1.2 million at
December 31, 2004.
The following table summarizes TCF’s over 30-day delinquent loan and lease portfolio, by loan type:
At December 31,
2005 2004
Principal Percentage of Principal Percentage of
(Dollars in thousands) Balances Portfolio Balances Portfolio
Consumer home equity and other $18,556 .36% $15,436 .35%
Commercial real estate 10,038 .44 32 –
Commercial business 819 .19 404 .10
Leasing and equipment finance 6,182 .41 8,997 .67
Residential real estate 8,009 1.04 9,516 .94
Total $43,604 .43% $34,385 .37%
Potential problem loans and leases are summarized as follows:
At December 31, Change
(Dollars in thousands) 2005 2004 $%
Commercial real estate $35,341 $34,138 $ 1,203 3.5%
Commercial business 11,793 18,112 (6,319) (34.9)
Leasing and equipment finance 7,648 18,816 (11,168) (59.4)
Total $54,782 $71,066 $(16,284) (22.9)
Liquidity Management TCF manages its liquidity position to
ensure that the funding needs of depositors and borrowers are met
promptly and in a cost-effective manner. Asset liquidity arises from
the ability to convert assets to cash as well as from the maturity
of assets. Liability liquidity results from the ability of TCF to attract a
diversity of funding sources to promptly meet funding requirements.
Deposits are the primary source of TCF’s funds for use in lending
and for other general business purposes. In addition to deposits, TCF
derives funds primarily from loan and lease repayments, proceeds
from the discounting of leases and borrowings. Deposit inflows
and outflows are significantly influenced by general interest rates,
money market conditions, competition for funds, customer service
and other factors. TCF’s deposit inflows and outflows have been
and will continue to be affected by these factors. Borrowings may
be used to compensate for reductions in normal sources of funds,
such as deposit inflows at less than projected levels, net deposit
outflows or to support expanded activities. Historically, TCF has
borrowed primarily from the FHLB, from institutional sources
under repurchase agreements and, to a lesser extent, from other
sources. At December 31, 2005, TCF had over $2.5 billion in unused
capacity under these funding sources, which could be used to
meet future liquidity needs. See “Borrowings.”
Potential sources of liquidity for TCF Financial Corporation
(parent company only) include cash dividends from TCF’s wholly
owned bank subsidiary, issuance of equity securities and borrow-
ings under a $105 million line of credit. TCF Bank’s ability to pay
dividends or make other capital distributions to TCF is restricted
by regulation and may require regulatory approval.