TCF Bank 2010 Annual Report Download - page 74

• 58 • TCF Financial Corporation and Subsidiaries
Income Taxes Income taxes are accounted for using the
asset and liability method. Under this method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax-basis carrying
amounts. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable
income in the years 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 in which the enactment
date occurs.
The determination of current and deferred income taxes
is a critical accounting estimate which is based on complex
analyses of many factors including interpretation of federal
and state income tax laws, the evaluation of uncertain
tax positions, differences between the tax and financial
reporting bases of assets and liabilities (temporary
differences), estimates of amounts due or owed such as
the timing of reversal of temporary differences and current
financial accounting standards. Additionally, there can be
no assurance that estimates and interpretations used in
determining income tax liabilities will not be challenged by
federal and state taxing authorities. Actual results could
differ significantly from the estimates and tax law inter-
pretations used in determining the current and deferred
income tax liabilities.
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 is uncertain. Management
periodically reviews and evaluates the status of uncertain tax
positions and makes estimates of amounts ultimately due or
owed. The benefits 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 the statute
of limitations on tax returns, new legislation, clarification
of existing legislation through government pronouncements,
the courts and through the examination process. TCF’s policy
is to report interest and penalties, if any, related to unrecog-
nized tax benefits in income tax expense in the Consolidated
Statements of Income.
Other Significant Accounting Policies
Investments Investments are carried at cost, adjusted for
amortization of premiums or accretion of discounts, using
a level yield method. TCF periodically evaluates investments
for “other than temporary” impairment with losses, if any,
recorded in non-interest income as a loss on securities.
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), a separate component of 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. TCF periodically evaluates
securities available for sale for “other than temporary”
impairment. Declines in the value of securities available for
sale that are considered other than temporary are recorded
in non-interest income as a loss on securities. Discounts and
premiums on securities available for sale are amortized using
a level yield method over the expected life of the security.
Loans and Leases Loans and leases are reported at
historical cost including net direct fees and costs associ-
ated with originating and acquiring loans and leases. The
net direct 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 direct fees and costs, unearned discounts and finance
charges, and unearned lease income are amortized to
interest income using methods which approximate a level
yield over the estimated remaining lives of the loans and
leases. Net direct fees and costs on all lines of credit are
amortized on a straight line basis over the contractual life
of the line of credit and adjusted for payoffs. Net deferred
fees and costs on consumer real estate lines of credit are
amortized to service fee income.
Loans and leases, including loans or leases that are
considered to be impaired, are reviewed regularly by
management. Consumer real estate loans are placed on
non-accrual status when the collection of interest and
principal is 150 days or more past due or six payments are
owed. Consumer real estate loans are also placed on
non-accrual status if, upon notification of bankruptcy,
the loan is 60 days or more past due. If the loan is current
at notification of bankruptcy, the loan is placed on