TCF Bank 2010 Annual Report Download - page 19

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2010 Form 10-K
Leasing and Equipment Finance TCF provides a broad
range of comprehensive lease and equipment finance
products addressing the financing needs of diverse types
of small to large companies. TCF’s leasing and equipment
finance businesses, TCF Equipment Finance, Inc. (“TCF
Equipment Finance”) and Winthrop Resources Corporation
(“Winthrop Resources”), finance equipment in all 50 states
and, to a limited extent, in foreign countries. TCF Equipment
Finance delivers equipment finance solutions to small and
mid-size companies in various industries with significant
diversity in the types of underlying equipment. Winthrop
Resources focuses on providing customized lease financing
to meet the special needs of mid-size and large companies
and health care facilities that procure high-tech equipment
such as computers, servers, telecommunication and other
technology equipment. During 2009, Winthrop Resources
acquired all of the outstanding shares of Fidelity National
Capital, Inc. (“FNCI”), which provided technology financing
through leasing solutions similar to those provided by
Winthrop, which broadened its market diversification.
Inventory Finance TCF’s Inventory Finance business
originates commercial variable-rate loans which are
secured by the underlying floorplan equipment and
supported by repurchase agreements from original equip-
ment manufacturers, with a focus on consumer electronics,
household appliances, lawn and garden products and power
sports products. TCF Inventory Finance operates primarily
in the U.S. with a presence in Canada. TCF Inventory
Finance commenced lending operations in December of
2008. In 2009, TCF Inventory Finance formed a joint
venture with The Toro Company (“Toro®”) called Red Iron
Acceptance, LLC (“Red Iron”). Red Iron provides U.S.
distributors and dealers and select Canadian distributors
of the Toro and Exmark® brands with reliable, cost-
effective sources of financing. TCF and Toro maintain a
55% and 45% ownership interest, respectively, in Red Iron.
Treasury Services
TCF Bank has authority to invest in various types of liquid
assets, including United States Department of the Treasury
(“U.S. 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 investments do not include commercial
paper, asset-backed commercial paper, asset-backed secu-
rities secured by credit cards or auto loans, trust preferred
securities or preferred stock of Fannie Mae or Freddie Mac.
TCF Bank also has not participated in structured investment
vehicles and does not have any bank-owned life insurance.
TCF Bank must also meet reserve requirements of the Federal
Reserve, which are imposed based on amounts on deposit in
various deposit categories. TCF’s reserve requirements are
largely met through TCF’s vault cash levels.
Sources of Funds
Borrowings Borrowings may be used to compensate
for reductions in deposit inflows or net deposit outflows,
or to support expanded lending and leasing activities.
These borrowings may include Federal Home Loan Bank
(“FHLB”) advances, repurchase agreements, federal funds,
advances from the Federal Reserve Discount Window 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
eligible 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 market value in excess of the amount borrowed are
required to be deposited as collateral with the counterparty
to a repurchase agreement. The creditworthiness of the
counterparty is important in establishing the overcollater-
alized amount of securities delivered by TCF is protected.
TCF only enters into repurchase agreements with institutions
having a satisfactory credit profile.
Information concerning TCF’s FHLB advances, repurchase
agreements, subordinated notes, junior subordinated notes
(trust preferred securities) and other borrowings is set
forth in “Item 7. Management’s Discussion and Analysis of