TCF Bank 2013 Annual Report Download - page 30

of operations. In the normal course of business, TCF is routinely subject to examinations and challenges from taxing authorities,
regarding its tax positions. Recently, taxing authorities have become increasingly aggressive in challenging tax positions taken by
financial institutions. These tax positions may relate to tax compliance, sales and use, franchise, gross receipts, payroll, property
and income tax issues, including tax base, apportionment and tax credit planning. These challenges may result in adjustments to
the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions. If any such challenges
are made and are not resolved in TCF’s favor, they could have a material adverse effect on TCF’s financial condition and results of
operations.
Additionally, if TCF’s Real Estate Investment Trust (‘‘REIT’’) affiliate fails to qualify as a REIT, or if states enact legislation taxing
REITs or related entities, TCF’s tax expense would increase. TCF’s REIT and related companies must meet specific provisions of
the Internal Revenue Code of 1986, as amended, and state tax laws. Use of REITs is and has been the subject of federal and state
audits, litigation with state taxing authorities and tax policy debates by various state legislatures.
Significant legal actions could subject TCF to substantial uninsured liabilities.
TCF is subject to various claims related to its operations. These claims and legal actions, including supervisory actions by its
regulators and other government authorities, could involve large monetary claims or penalties, as well as significant defense
costs. To protect itself from the cost of certain kinds of claims, TCF maintains insurance coverage in amounts and with
deductibles that it believes are appropriate for its operations. However, TCF’s insurance coverage only covers certain types of
liability, and such insurance may not continue to be available to TCF at a reasonable cost, or at all. As a result, TCF may be
exposed to substantial uninsured liabilities, which could have a material adverse effect on TCF’s financial condition and results of
operations.
In addition, customers may make claims and take legal action pertaining to TCF’s sale or servicing of various types of loan, lease
and deposit products. Whether customer claims and legal action related to TCF are founded or unfounded, such claims and legal
actions may result in significant financial liability and could adversely affect the market perception of TCF and its products and
services, as well as impact customer demand for those products and services. Any financial liability or reputational damage could
have a material adverse effect on TCF’s financial condition and results of operations.
In particular, the financial services industry has increasingly been targeted by lawsuits alleging infringement of patent rights,
often from patent holding companies seeking to monetize patents they have purchased or otherwise obtained. Regardless of the
scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the
Company may have to engage in protracted and costly litigation. If the Company is found to infringe one or more patents or other
intellectual property rights, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a
temporary or permanent injunction prohibiting the Company from utilizing certain technologies. Regardless of the merit of
particular claims, litigation may be expensive, time-consuming, disruptive to the Company’s operations, and distracting to
management.
TCF is subject to environmental liability risk associated with lending activities.
A significant portion of TCF’s loan portfolio is secured by real property. In the ordinary course of business, TCF may foreclose on
and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on
these properties. If hazardous or toxic substances are found, TCF may be liable for remediation costs, as well as for personal
injury and property damage. Environmental laws may require TCF to incur substantial expenses and may materially reduce the
affected property’s value or limit TCF’s ability to use or sell the affected property. In addition, future laws or more stringent
interpretations or enforcement policies with respect to existing laws may increase TCF’s exposure to environmental liability. The
remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect
on TCF’s financial condition and results of operations.
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