TCF Bank 2007 Annual Report Download - page 23

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2007 Form 10-K | 3
Investment Activities
TCF Bank has authority to invest in various types of liquid
assets, including United States Treasury obligations and
securities of various federal agencies and U.S. Government
sponsored enterprises, deposits of insured banks, bankers’
acceptances and federal funds. TCF Bank’s portfolio does
not include commercial paper, asset-backed commercial
paper or asset-backed securities secured by credit cards or
car loans. TCF Bank also does not participate in structured
investment vehicles. Liquidity may increase or decrease
depending upon the availability of funds and comparative
yields on investments in relation to the returns on loans
and leases. TCF Bank must also meet reserve requirements
of the Federal Reserve Board, which are imposed based on
amounts on deposit in various deposit categories.
Sources of Funds
Deposits Deposits are the primary source of TCF’s funds
for use in lending and for other general business purposes.
Deposit inflows and outflows are significantly influenced
by economic and competitive conditions, interest rates,
money market conditions and other factors. Consumer,
small business and commercial deposits are attracted prin-
cipally from within TCF’s primary market areas through the
offering of a broad selection of deposit instruments including
consumer, small business and commercial demand deposit
accounts, interest-bearing checking accounts, money market
accounts, regular savings accounts, certificates of deposit
and retirement savings plans.
TCF’s marketing strategy emphasizes attracting core
deposits held in checking, savings, money market and cer-
tificate of deposit accounts. These accounts are a source
of low-interest cost funds and provide significant fee
income. The composition of TCF’s deposits has a significant
impact on the overall cost of funds. At December 31, 2007,
interest-bearing deposits comprised 77% of total deposits,
as compared with 75% at December 31, 2006.
Information concerning TCF’s deposits is set forth
in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Consolidated
Financial Condition Analysis – Deposits” and in Note 9
of Notes to Consolidated Financial Statements.
Borrowings Borrowings may be used to compensate for
reductions in deposit inflows or net deposit outflows, or
to support expanded lending activities. These borrowings
include Federal Home Loan Bank (“FHLB”) advances, repur-
chase agreements, federal funds and other borrowings.
TCF Bank, as a member of the FHLB system, is required
to own a minimum level of FHLB stock and is authorized to
apply for advances on the security of such stock, mortgage-
backed securities, loans secured by real estate and other
assets (principally securities which are obligations of, or
guaranteed by, the United States Government), provided
certain standards related to creditworthiness have been met.
FHLB advances are made pursuant to several different
credit programs. Each credit program has its own interest
rates and range of maturities. The FHLB prescribes the
acceptable uses to which the advances pursuant to each
program may be made as well as limitations on the size of
advances. In addition to the program limitations, the
amounts of advances for which an institution may be eligi-
ble are generally based on the FHLB’s assessment of the
institution’s creditworthiness.
As an additional source of funds, TCF may sell securities
subject to its obligation to repurchase these securities
(repurchase agreements) with major investment banks or
the FHLB utilizing government securities or mortgage-backed
securities as collateral. Generally, securities with a value in
excess of the amount borrowed are required to be deposited
as collateral with the counterparty to a repurchase agree-
ment. The creditworthiness of the counterparty is important
in establishing that the overcollateralized amount of secu-
rities delivered by TCF is protected. TCF only enters into
repurchase agreements with institutions with a satisfactory
credit history.
Information concerning TCF’s FHLB advances, repurchase
agreements, subordinated notes and other borrowings is
set forth in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Consolidated
Financial Condition Analysis – Borrowings” and in Notes 10
and 11 of Notes to Consolidated Financial Statements.