TCF Bank 2005 Annual Report Download - page 68

TCF Financial Corporation and Subsidiaries48
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 that
includes the enactment date.
The determination of current and deferred income taxes is based
on complex analyses of many factors including interpretation of
Federal and state income tax laws, the difference between 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 account-
ing standards. Actual results could differ significantly from the
estimates and tax law interpretations used in determining the
current and deferred income tax liabilities. Additionally, there
can be no assurances that estimates and interpretations used
in determining income tax liabilities may not be challenged by
federal and state taxing authorities.
In the preparation of income tax returns, tax positions are
taken based on interpretation of federal and state income
tax laws for which the outcome of such positions is uncertain.
Management periodically reviews and evaluates the status
of uncertain tax positions and makes estimates of amounts ulti-
mately due or owed. The benefit of tax positions are recorded
in income tax expense in the consolidated financial statements
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 tax returns,
new legislation or clarification of existing legislation, through
government pronouncements or the courts, and through the
examination process.
Other Significant Accounting Policies
Investments Investments are carried at cost, adjusted for
amortization of premiums or accretion of discounts, using meth-
ods which approximate a level yield. TCF periodically evaluates
investments for other than temporary impairment.
Securities Available for Sale Securities available for sale are
carried at fair value with the unrealized holding gains or losses, net
of related deferred income taxes, reported as accumulated other
comprehensive income (loss), which is a separate component of
stockholders’ 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.
Declines in the value of securities available for sale that are con-
sidered other than temporary are recorded in non-interest income
as a loss on securities available for sale. Discounts and premiums
on securities available for sale are amortized using methods which
approximate a level yield over the life of the security.
Loans Held for Sale Loans held for sale includes education
loans and, prior to December 31, 2004, residential mortgage loans.
Education loans held for sale are carried at the lower of cost or
market. Residential mortgage loans held for sale are carried at the
lower of cost or market as adjusted for the effects of fair value
hedges using quoted market prices. See Note 18 for additional
information concerning derivative instruments and hedging activ-
ities. Net fees and costs associated with originating and acquiring
loans held for sale are deferred and are included in the basis for
determining the gain or loss on sales of loans held for sale. Gains
on sales are recorded at the settlement date and cost is
determined on a specific identification basis.
Loans and Leases Net fees and costs associated with originat-
ing and acquiring loans and leases are deferred and amortized
over the lives of the assets. The net fees and costs for sales-type
leases are offset against revenues recorded at the commencement
of sales-type leases. Discounts and premiums on loans purchased,
net deferred fees and costs, unearned discounts and finance
charges, and unearned lease income are amortized using methods
which approximate a level yield over the estimated remaining lives
of the loans and leases.
Loans and leases, including loans that are considered to be
impaired, are reviewed regularly by management and are placed
on non-accrual status when the collection of interest or principal
is 90 days or more past due (150 days or six payments or more past
due for loans secured by residential real estate), unless the loan
or lease is adequately secured and in the process of collection.
For borrowers with loans secured by residential real estate that
have declared bankruptcy, loans are placed on non-accrual status
at 90 days or four payments or more past due or after a partial
charge-off. When a loan or lease is placed on non-accrual status,
uncollected interest accrued in prior years is charged off against
the allowance for loan and lease losses. Interest accrued in the
current year is reversed. For those non-accrual leases that have
been funded on a non-recourse basis by third-party financial
institutions, the related debt is also placed on non-accrual sta-
tus. Interest payments received on non-accrual loans and leases
are generally applied to principal unless the remaining principal
balance has been determined to be fully collectible.
Premises and Equipment Premises and equipment, including
leasehold improvements, are carried at cost and are depreciated
or amortized on a straight-line basis over their estimated useful
lives of owned assets and for leasehold improvements over the
estimated useful life of the related asset or the lease term,
whichever is shorter. Maintenance and repairs are charged to
expense as incurred. Rent expense for leased land with facilities is