TCF Bank 2010 Annual Report Download - page 75

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2010 Form 10-K
non-accrual status at 90 days or when four payments are
owed, or after a partial charge-off, which management
feels is appropriate based on the experience of TCF’s cus-
tomer activity and loan type. Commercial real estate and
commercial business, leasing and equipment finance and
inventory finance loans and leases are generally placed on
non-accrual status when the collection of interest or prin-
cipal is 90 days or more past due, unless the loan or lease is
adequately secured and in the process of collection.
When a loan or lease is placed on non-accrual status,
uncollected interest accrued in prior years is charged off
against the allowance for loan and lease losses and interest
accrued in the current year is reversed. For non-accrual
leases that have been funded on a non-recourse basis
by third-party financial institutions, the related liability
is also placed on non-accrual status. Interest payments
received on loans and leases in non-accrual status are
generally applied to principal unless the remaining prin-
cipal balance has been determined to be fully collectible.
Loans on non-accrual status are reported as non-accrual
loans until there is sustained repayment performance for
six months.
Premises and Equipment Premises and equipment,
including leasehold improvements, are carried at cost and
are depreciated or amortized on a straight-line basis over
estimated useful lives of owned assets and for leasehold
improvements over the estimated useful life of the related
asset or the lease term, whichever is shorter. Maintenance
and repairs are charged to expense as incurred. Rent
expense for leased land with facilities is recognized in
occupancy and equipment expense. Rent expense for
leases with free rent periods or scheduled rent increases
is recognized on a straight-line basis over the lease term.
Other Real Estate Owned Other real estate owned is
recorded at the lower of cost or fair value less estimated
costs to sell the property at the date of transfer to other
real estate owned. The fair value of other real estate is
determined through independent third-party appraisals,
automated valuation methods or broker opinions. Within
90 days of a loan transferring to other real estate owned,
any carrying amount in excess of the fair value less
estimated costs to sell the property is charged off to the
allowance for loan and lease losses. Subsequently, if the
fair value of an asset, less the estimated costs to sell,
declines to less than the carrying amount of the asset, the
deficiency is recognized in the period in which it becomes
known and is included in other non-interest expense. Net
operating expenses of properties and recoveries on sales
of other real estate owned are recorded in foreclosed real
estate owned and repossessed assets, net.
Investments in Affordable Housing Limited
Partnerships Investments in affordable housing consist
of investments in limited partnerships that operate qualified
affordable housing projects or that invest in other limited
partnerships formed to operate affordable housing
projects. TCF generally utilizes the effective yield method
to account for these investments with the tax credits net
of the amortization of the investment reflected in the
Consolidated Statements of Income as a reduction of
income tax expense. However, depending on circumstances,
the equity or cost methods may be utilized. The amount
of the investment along with any unfunded equity
contributions which are unconditional and legally binding
are recorded in other assets. A liability for the unfunded
equity contributions is recorded in other liabilities. At
December 31, 2010, TCF’s investments in affordable housing
limited partnerships were $30.2 million, compared with
$37 million at December 31, 2009, and were recorded in
other assets.
Five of these investments in affordable housing limited
partnerships are considered variable interest entities.
These partnerships are not consolidated with TCF. As
of December 31, 2010 and 2009, the carrying amount
of these five investments was $29.4 million and $36.2
million, respectively. The maximum exposure to loss on
these five investments was $29.4 million at December 31,
2010; however, the general partner of these partnerships
provides various guarantees to TCF including guaranteed
minimum returns. These guarantees are backed by a BBB
credit-rated company and limit any risk of loss. In addition
to the guarantees, the investments are supported by the
performance of the underlying real estate properties which
also mitigates the risk of loss.
Intangible Assets Goodwill is tested for impairment
annually. Other intangibles are amortized over their esti-
mated useful life. The Company reviews the recoverability of
these assets at least annually or earlier whenever an event
occurs indicating that they may be impaired.