TCF Bank 2012 Annual Report Download - page 78

Notes to Consolidated Financial Statements
Note 1. Summary of Significant
Accounting Policies
Basis of Presentation The consolidated financial
statements include the accounts of TCF Financial
Corporation and its wholly owned subsidiaries (“TCF”).
TCF Financial Corporation, a Delaware corporation, is
a national bank holding company engaged primarily in
retail banking and wholesale banking through its primary
subsidiary, TCF National Bank (“TCF Bank”). TCF Bank
owns leasing and equipment finance, inventory finance,
auto finance and 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 presentation.
The preparation of financial statements in conformity
with United States Generally Accepted Accounting
Principles (“GAAP”) requires management 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.
Critical Accounting Policies
Critical Accounting Estimates Critical accounting
estimates occur in certain accounting policies and
procedures and are particularly susceptible to significant
change. Policies that contain critical accounting estimates
include the determination of the allowance for loan and
lease losses, lease financings and income taxes.
Allowance for Loan and Lease Losses The
allowance for loan and lease losses is maintained at a level
appropriate to provide for probable loan and lease losses
incurred in the portfolio as of the balance sheet date,
including known or anticipated problem loans and leases,
as well as for loans and leases which are not currently
known to require specific allowances. TCF individually
evaluates impairment on all impaired commercial and
inventory finance loans, certain large impaired equipment
finance loans and leases, large consumer real estate
troubled debt restructured (“TDR”) loans, auto finance
TDR loans, and all non-accrual Winthrop leases. See
Note 7, Allowance for Loan and Lease Losses and Credit
Quality Information for a definition of impaired loans.
Loan impairment on commercial, equipment finance and
inventory finance loans is generally based upon the present
value of the expected future cash flows discounted at
the loan’s initial effective interest rate, unless the loans
are collateral dependent, in which case loan impairment
is based upon the fair value of collateral less estimated
selling costs. Loans classified as TDR loans are considered
impaired loans, with the allowance for loan losses
determined using the present value of expected future
cash flows or the fair value of the collateral less estimated
selling costs for collateral dependent loans. See Note 7,
Allowance for Loan and Lease Losses and Credit Quality
Information for further information on the determination
of the allowance for losses on accruing consumer real
estate TDR loans.
The impairment for all other loans and leases is evaluated
collectively by various characteristics. The collective
evaluation of incurred losses in these portfolios is based
upon overall risk characteristics, changes in the character or
size of portfolios, geographic location, risk rating migration,
and prevailing economic conditions. Additionally, the level
of 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.
Loans and leases are charged off to the extent they
are deemed to be uncollectible. Charge-offs related to
confirmed losses are utilized in the historical data used
in the allowance for loan and lease losses calculations.
Consumer real estate and auto finance loans are generally
charged-off to the estimated fair value of underlying
collateral, less estimated selling costs, when they are
placed on non-accrual status. Additional review of the
fair value, less estimated costs to sell, compared with the
recorded value occurs upon foreclosure, and additional
charge-offs are recorded if necessary. Valuation
adjustments on residential properties, made within
{ 62 } { TCF Financial Corporation and Subsidiaries }