TCF Bank 2010 Annual Report Download - page 21

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2010 Form 10-K
Dividends or other capital distributions from TCF Bank
to TCF Financial are an important source of funds to enable
TCF Financial to pay dividends on its common stock, to make
payments on TCF Financial’s borrowings, or for its other
cash needs. The ability of TCF Financial and TCF Bank to pay
dividends is dependent on regulatory policies and regulatory
capital requirements. Payment of dividends may be subject
to regulatory approval. The ability to pay such dividends in
the future may be adversely affected by new legislation or
regulations, or by changes in regulatory policies.
In general, TCF Bank may not declare or pay a dividend
to TCF Financial in excess of 100% of its net retained profits
for the current year combined with its net retained profits
for the preceding two calendar years without prior approval
of the OCC. TCF Bank’s ability to make capital distributions
in the future may require regulatory approval and may be
restricted by its regulatory authorities. TCF Bank’s ability
to make any such distributions will also depend on its
earnings and ability to meet minimum regulatory capital
requirements in effect during future periods. These capital
adequacy standards may be higher in the future than exist-
ing minimum regulatory capital requirements, including the
U.S. regulatory rule-making relative to the implementation
of the capital and liquidity standards under Basel III, the
international regulatory framework for banks. The OCC also
has the authority to prohibit the payment of dividends by
a national bank when it determines such payments would
constitute an unsafe and unsound banking practice. In
addition, income tax considerations may limit the ability
of TCF Bank to make dividend payments in excess of its
current and accumulated tax “earnings and profits” (“E&P”).
Annual dividend distributions in excess of E&P could result
in a tax liability based on the amount of excess earnings
distributed and current tax rates. See “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations — Consolidated Financial Condition Analysis
— Liquidity Management” and Notes 13 and 14 of Notes to
Consolidated Financial Statements.
Regulation of TCF and Affiliates and Insider
Transactions TCF Financial is subject to Federal Reserve
regulations, examinations and reporting requirements
relating to bank holding companies. Subsidiaries of bank
holding companies like TCF Bank are subject to certain
restrictions in their dealings with holding company affiliates.
A holding company must serve as a source of strength
for its subsidiary banks, and the Federal Reserve may
require a holding company to contribute additional capital
to an under-capitalized subsidiary bank. In addition, the
OCC may assess TCF if it believes the capital of TCF Bank has
become impaired. If TCF were to fail to pay such an assess-
ment within three months, the Board of Directors must
cause the sale of TCF Bank’s stock to cover a deficiency
in the capital. In the event of a bank holding company’s
bankruptcy, any commitment by the bank holding company
to a federal bank regulatory agency to maintain the capital
of a subsidiary bank would be assumed by the bankruptcy
trustee and may be entitled to priority over other creditors.
Under the Bank Holding Company Act (“BHCA”), Federal
Reserve approval is required before acquiring more than
5% control, or substantially all of the assets, of another
bank, or bank or bank holding company, or merging or
consolidating with such a bank or holding company. The
BHCA also generally prohibits a bank holding company,
with certain exceptions, from acquiring direct or indirect
ownership or control of more than 5% of the voting
shares of any company which is not a bank or bank
holding company, or from engaging directly or indirectly
in activities other than those of banking, managing or
controlling banks, providing services for its subsidiaries,
or conducting activities permitted by the Federal Reserve
as being closely related to the business of banking. Further
restrictions or limitations on acquisitions or establishing
financial subsidiaries may also be imposed by TCF’s
regulators or examiners.
Restrictions on Change in Control Federal and state
laws and regulations contain a number of provisions which
impose restrictions on changes in control of financial
institutions such as TCF Bank, and which require regulatory
approval prior to any such changes in control. The Restated
Certificate of Incorporation of TCF Financial contains features
which may inhibit a change in control of TCF Financial.
Acquisitions and Interstate Operations Under federal
law, interstate merger transactions may be approved by
federal bank regulators without regard to whether such
transactions are prohibited by the law of any state, unless
the home state of one of the banks opted out of the
Riegle-Neal Interstate Banking and Branching Act of 1994
by adopting a law after the date of enactment of such act,
and prior to June 1, 1997, which applies equally to all out-
of-state banks and expressly prohibits merger transactions
involving out-of-state banks. Interstate acquisitions of
branches by banks are permitted only if the law of the state
in which the branches are located permits such acquisitions.
Interstate mergers and branch acquisitions may also