TCF Bank 2007 Annual Report Download - page 69

2007 Form 10-K | 49
Note 1. Summary of Significant
Accounting Policies
Basis of Presentation The consolidated financial state-
ments include the accounts of TCF Financial Corporation
and its wholly owned subsidiaries. TCF Financial Corporation
(“TCF” or the “Company”) a Delaware corporation, is a
financial holding company engaged primarily in community
banking and leasing and equipment finance through its pri-
mary subsidiaries, TCF National Bank and TCF National Bank
Arizona, collectively (“TCF Bank”). TCF Bank owns leasing
and equipment finance, investment and insurance sales
and Real Estate Investment Trust (“REIT”) subsidiaries.
These subsidiaries are consolidated with TCF Bank and are
included in the consolidated financial statements of TCF
Financial Corporation. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Certain reclassifications have been made to prior years’
financial statements to conform to the current year presen-
tation. For Consolidated Statements of Cash Flows purposes,
cash and cash equivalents include cash and due from banks.
The preparation of financial statements in conformity
with generally accepted accounting principles requires man-
agement to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and
expenses during the reporting period. These estimates are
based on information available to management at the time
the estimates are made. Actual results could differ from
those estimates.
Policies Related to Critical Accounting Estimates
Summary of Critical Accounting Estimates Critical
accounting estimates occur in certain accounting policies
and procedures and are particularly susceptible to signifi-
cant change. Policies that contain critical accounting esti-
mates include the determination of the allowance for loan
and lease losses, lease financings and income taxes. Critical
accounting policies are discussed with and reviewed by
TCF’s Audit Committee.
Allowance for Loan and Lease Losses The allowance
for loan and lease losses is maintained at a level believed
by management to be appropriate to provide for probable
loan and lease losses incurred in the portfolio as of the
balance sheet date, including known or anticipated prob-
lem loans and leases, as well as for loans and leases which
are not currently known to require specific allowances.
Management’s judgement as to the amount of the allowance
is a result of ongoing review of larger individual loans and
leases, the overall risk characteristics of the portfolios,
changes in the character or size of the portfolios, geographic
location and prevailing economic conditions. Additionally,
the level of impaired and non-performing assets, historical
net charge-off amounts, delinquencies in the loan and lease
portfolios, values of underlying loan and lease collateral
and other relevant factors are reviewed to determine the
amount of the allowance. Impaired loans include non-
accrual and restructured commercial real estate and com-
mercial business loans and equipment finance loans. Loan
impairment is measured as the present value of the expected
future cash flows discounted at the loan’s initial effective
interest rate or the fair value of the collateral for collateral-
dependent loans. Consumer loans, residential real estate
loans and leases are excluded from the definition of an
impaired loan and are evaluated on a pool basis.
Loans and leases are charged off to the extent they are
deemed to be uncollectible. The amount of the allowance
for loan and lease losses is highly dependent upon manage-
ment’s estimates of variables affecting valuation, appraisals
of collateral, evaluations of performance and status, and
the amounts and timing of future cash flows expected to
be received on impaired loans. Such estimates, appraisals,
evaluations and cash flows may be subject to frequent
adjustments due to changing economic prospects of bor-
rowers, lessees or properties. These estimates are reviewed
periodically and adjustments, if necessary, are recorded in
the provision for credit losses in the periods in which they
become known.
Notes to Consolidated Financial Statements