UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
September 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
__________________
Commission File
No. 0-16431
__________________
TCF FINANCIAL CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1591444
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
801 Marquette Avenue, Minneapolis, Minnesota 55402
-----------------------------------------------------
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (612) 661-6500
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class October 31, 1997
- ---------------------------- -----------------
Common Stock, $.01 par value 46,356,060 shares
1
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information Pages
Item 1. Financial Statements
Consolidated Statements of Financial Condition
at September 30, 1997 and December 31, 1996 . . . . . . . . 3
Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1997 and 1996 . . 4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 . . . . . . . 5
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1996 and for the
Nine Months Ended September 30, 1997. . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
and Nine Months Ended September 30, 1997 and 1996 . . . . . . 11-31
Supplementary Information . . . . . . . . . . . . . . . . . . 32-33
Part II. Other Information
Items 1-6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34-35
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands, except per-share data)
(Unaudited)
AT AT
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
ASSETS
Cash and due from banks $ 258,465 $ 236,446
Interest-bearing deposits with banks 9,092 386,224
Federal funds sold 21,000 -
U.S. Government and other marketable securities
held to maturity (fair value of $4,000 and $3,910) 4,000 3,910
Federal Home Loan Bank stock, at cost 73,926 66,061
Federal Reserve Bank stock, at cost 22,243 -
Securities available for sale (amortized cost of $1,612,444
and $995,384) 1,628,126 999,586
Loans held for sale 236,858 203,869
Loans and leases:
Residential real estate 3,612,155 2,261,237
Commercial real estate 882,532 861,056
Commercial business 222,332 156,712
Consumer 2,036,075 1,801,066
Lease financing 407,228 341,721
Unearned discounts and deferred fees (108,290) (128,872)
---------- -----------
Total loans and leases 7,052,032 5,292,920
Allowance for loan and lease losses (82,039) (71,865)
---------- -----------
Net loans and leases 6,969,993 5,221,055
Premises and equipment 164,426 129,785
Real estate 13,976 15,771
Accrued interest receivable 57,895 42,173
Due from brokers 41,520 -
Goodwill 179,721 15,431
Deposit base intangibles 20,644 10,843
Mortgage servicing rights 19,372 17,360
Other assets 74,897 81,973
---------- -----------
$9,796,154 $7,430,487
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking $1,410,980 $1,212,771
Passbook and statement 1,147,137 783,026
Money market 690,230 631,922
Certificates 3,728,340 2,349,911
---------- -----------
Total deposits 6,976,687 4,977,630
---------- -----------
Securities sold under repurchase agreements and federal
funds purchased 98,534 293,732
Federal Home Loan Bank advances 1,281,344 1,141,040
Discounted lease rentals 238,308 185,604
Subordinated debt 34,998 42,147
Collateralized obligations 40,172 40,505
Other borrowings 61,089 5,144
---------- -----------
Total borrowings 1,754,445 1,708,172
Accrued interest payable 25,450 20,666
Accrued expenses and other liabilities 119,620 93,332
---------- -----------
Total liabilities 8,876,202 6,799,800
---------- -----------
Stockholders' equity:
Preferred stock, par value $.01 per share, 30,000,000
shares authorized; none issued and outstanding - -
Common stock, par value $.01 per share, 140,000,000 shares
authorized; 46,330,294 and 42,621,116 shares issued 463 426
Additional paid-in capital 453,733 274,746
Unamortized deferred compensation (24,381) (7,693)
Retained earnings, subject to certain restrictions 480,674 402,109
Loan to Executive Deferred Compensation Plan (17) (68)
Unrealized gain on securities available for sale, net 9,480 2,376
Treasury stock, at cost, 1,185,018 shares in 1996 - (41,209)
---------- -----------
Total stockholders' equity 919,952 630,687
---------- -----------
$9,796,154 $7,430,487
---------- -----------
---------- -----------
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
3
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per-share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1997 1996 1997 1996
-------- -------- -------- --------
Interest income:
Loans $132,333 $121,760 $373,118 $366,245
Lease financing 10,833 7,597 27,722 21,677
Loans held for sale 4,146 4,351 11,338 13,461
Securities available for sale 24,355 18,228 67,562 57,750
Investments 1,586 1,113 4,135 3,299
-------- -------- -------- --------
Total interest income 173,253 153,049 483,875 462,432
-------- -------- -------- --------
Interest expense:
Deposits 50,193 42,090 135,549 129,760
Borrowings 23,206 21,461 65,744 66,268
-------- -------- -------- --------
Total interest expense 73,399 63,551 201,293 196,028
-------- -------- -------- --------
Net interest income 99,854 89,498 282,582 266,404
Provision for credit losses 6,341 6,972 11,936 17,198
-------- -------- -------- --------
Net interest income after provision for credit losses 93,513 82,526 270,646 249,206
-------- -------- -------- --------
Non-interest income:
Fee and service charge revenues 25,785 23,458 73,378 66,220
Leasing revenues 9,299 5,778 23,651 17,295
ATM network revenues 8,360 5,471 21,960 15,466
Title insurance revenues 3,698 3,294 9,721 10,485
Commissions on sales of annuities 1,991 2,454 6,035 6,989
Gain on sale of loans held for sale 1,825 1,345 3,231 3,422
Gain on sale of securities available for sale 2,852 - 5,330 84
Gain on sale of loan servicing - - 1,622 -
Gain on sale of branches 10,635 - 13,445 1,725
Gain on sale of loans - 4,633 - 4,633
Other 2,959 2,028 8,740 7,119
-------- -------- -------- --------
Total non-interest income 67,404 48,461 167,113 133,438
-------- -------- -------- --------
Non-interest expense:
Compensation and employee benefits 45,055 40,276 129,380 115,451
Occupancy and equipment 14,365 12,810 42,074 38,500
Advertising and promotions 5,228 4,040 15,334 13,545
Federal deposit insurance premiums and assessments 1,183 3,172 3,313 9,535
Amortization of goodwill and other intangibles 10,559 893 12,913 2,659
Provision for real estate losses (56) 121 (18) 418
FDIC special assessment - 34,803 - 34,803
Other 22,019 20,678 60,640 57,144
-------- -------- -------- --------
Total non-interest expense 98,353 116,793 263,636 272,055
-------- -------- -------- --------
Income before income tax expense 62,564 14,194 174,123 110,589
Income tax expense 25,354 5,346 68,951 42,108
-------- -------- -------- --------
Net income $ 37,210 $ 8,848 $105,172 $ 68,481
-------- -------- -------- --------
-------- -------- -------- --------
Per common share:
Net income $ .85 $ .21 $ 2.47 $ 1.63
-------- -------- -------- --------
-------- -------- -------- --------
Dividends declared $ .25 $ .1875 $ .6875 $ .53125
-------- -------- -------- --------
-------- -------- -------- --------
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
4
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 105,172 $ 68,481
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,796 14,507
Amortization of goodwill and other intangibles 12,913 2,659
Amortization of fees, discounts and premiums 125 (349)
Proceeds from sales of loans held for sale 422,192 670,133
Principal collected on loans held for sale 6,457 8,377
Originations and purchases of loans held for sale (487,728) (633,776)
Net (increase) decrease in other assets and
liabilities, and accrued interest (28,472) 12,864
Provisions for credit and real estate losses 11,918 17,616
Gain on sale of securities available for sale (5,330) (84)
Gain on sale of loans - (4,633)
Gain on sale of branches (13,445) (1,725)
Gain on sale of loan servicing (1,622) -
Other, net (5,954) (1,496)
---------- ---------
Total adjustments (72,150) 84,093
---------- ---------
Net cash provided by operating activities 33,022 152,574
---------- ---------
Cash flows from investing activities:
Principal collected on loans and leases 1,311,659 1,425,271
Loan originations (1,392,855) (1,274,304)
Purchase of equipment for lease financing (140,879) (125,129)
Proceeds from sales of loans - 46,411
Net (increase) decrease in interest-bearing deposits
with banks 465,375 (323,067)
Proceeds from sales of securities available for sale 416,945 16,630
Proceeds from maturities of and principal collected on
securities available for sale 280,643 159,068
Purchases of securities available for sale (382,761) -
Proceeds from redemption of FHLB stock 15,880 11,054
Purchase of FRB stock (22,663) -
Net (increase) decrease in short-term federal funds sold 24,000 (5,000)
Proceeds from sales of loan servicing 2,286 -
Purchases of premises and equipment (23,201) (18,026)
Acquisitions of Standard Financial, Inc. and BOC Financial
Corporation, net of cash acquired (218,896) -
Sales of deposits, net of cash paid (171,174) (31,679)
Other, net 26,345 12,149
---------- ---------
Net cash provided (used) by investing activities 190,704 (106,622)
---------- ---------
Cash flows from financing activities:
Net increase (decrease) in deposits 134,774 (139,935)
Proceeds from securities sold under repurchase agreements
and federal funds purchased 8,481,194 9,535,723
Payments on securities sold under repurchase agreements
and federal funds purchased (8,676,392) (9,507,116)
Proceeds from FHLB advances 818,825 1,139,667
Payments on FHLB advances (1,114,611) (1,113,712)
Proceeds from discounted lease rentals 126,630 58,949
Proceeds from subordinated debt - 28,750
Proceeds from other borrowings 502,229 295,232
Payments on collateralized obligations and other borrowings (446,766) (322,536)
Proceeds from issuance of common stock 29,266 13,726
Repurchases of common stock (27,316) (37,630)
Payments of dividends on common stock (26,607) (19,626)
Other, net (2,933) (3,730)
---------- ---------
Net cash used by financing activities (201,707) (72,238)
---------- ---------
Net increase in cash and due from banks 22,019 (26,286)
Cash and due from banks at beginning of period 236,446 232,792
---------- ---------
Cash and due from banks at end of period $ 258,465 $ 206,506
---------- ---------
---------- ---------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 196,685 $ 181,392
---------- ---------
---------- ---------
Income taxes $ 77,261 $ 71,783
---------- ---------
---------- ---------
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
5
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
(Unaudited)
UNREALIZED
LOAN TO GAIN
UNAMOR- EXECUTIVE (LOSS) ON
TIZED DEFERRED SECURITIES
ADDITIONAL DEFERRED COMPEN- AVAILABLE
NUMBER OF COMMON COMMON PAID-IN COMPEN- RETAINED SATION FOR SALE, TREASURY
SHARES ISSUED STOCK CAPITAL SATION EARNINGS PLAN NET STOCK TOTAL
---------------- ------ ---------- --------- -------- --------- ----------- -------- --------
Balance, December 31, 1995,
as originally reported 35,604,531 $356 $243,122 $(11,195) $283,821 $(131) $11,702 $ - $527,675
Adjustments for pooling
of interests 6,121,860 61 9,483 - 45,180 - - - 54,724
---------- ---- -------- -------- -------- ----- ------- -------- --------
Balance, December 31, 1995,
as restated 41,726,391 417 252,605 (11,195) 329,001 (131) 11,702 - 582,399
Net income - - - - 100,377 - - - 100,377
Dividends on common stock - - - - (26,595) - - - (26,595)
Purchase of 1,190,068 shares to
be held in treasury - - - - - - - (41,382) (41,382)
Issuance of 36,400 shares of
restricted stock, of which
3,000 shares were from
treasury 33,400 - 4,520 (4,609) - - - 102 13
Repurchase and retirement of
shares (33,471) - (52) - (674) - - - (726)
Issuance of shares of common
stock, net 582,450 6 13,720 - - - - - 13,726
Grant of 2,050 shares of
restricted stock to outside
directors from treasury - - 295 (366) - - - 71 -
Cancellation of shares of
restricted stock (23,200) - (636) 574 - - - - (62)
Amortization of deferred
compensation - - - 7,903 - - - - 7,903
Exercise of stock options 328,330 3 4,171 - - - - - 4,174
Issuance of common stock on
conversion of convertible
debentures 7,216 - 123 - - - - - 123
Payments on loan to Executive
Deferred Compensation Plan - - - - - 63 - - 63
Change in unrealized gain (loss)
on securities available for
sale, net - - - - - - (9,326) - (9,326)
---------- ---- -------- -------- -------- ----- ------- -------- --------
Balance, December 31, 1996 42,621,116 426 274,746 (7,693) 402,109 (68) 2,376 (41,209) 630,687
Net income - - - - 105,172 - - - 105,172
Dividends on common stock - - - - (26,607) - - - (26,607)
Issuance of 700,000 shares of
common stock from treasury, net - - 2,532 - - - - 26,734 29,266
Issuance of 3,850,000 shares of
common stock to effect purchase
acquisition, of which
597,134 were from treasury 3,252,866 33 162,969 - - - - 22,805 185,807
Purchase of 647,900 shares to
be held in treasury - - - - - - - (27,316) (27,316)
Repurchase and retirement
of shares (43) - (2) - - - - - (2)
Issuance of 464,600 shares of
restricted stock, of which
434,600 shares were from
treasury 30,000 - 5,834 (21,002) - - - 15,168 -
Grant of 11,992 shares of
restricted stock to outside
directors from treasury - - 306 (725) - - - 419 -
Issuance of 66,892 shares of
treasury stock to employee
benefit plans - - 375 - - - - 2,555 2,930
Amortization of deferred
compensation - - - 5,039 - - - - 5,039
Exercise of stock options, of
which 22,300 shares were
from treasury 6,822 - (172) - - - - 844 672
Issuance of common stock on
conversion of convertible
debentures 419,533 4 7,145 - - - - - 7,149
Payments on loan to Executive
Deferred Compensation Plan - - - - - 51 - - 51
Change in unrealized gain on
securities available for
sale, net - - - - - - 7,104 - 7,104
---------- ---- -------- -------- -------- ----- ------- -------- --------
Balance, September 30, 1997 46,330,294 $463 $453,733 $(24,381) $480,674 $ (17) $ 9,480 $ - $919,952
---------- ---- -------- -------- -------- ----- ------- -------- --------
---------- ---- -------- -------- -------- ----- ------- -------- --------
See accompanying notes to consolidated financial statements.
Annual financial statements are subject to audit.
6
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation. The
results of operations for interim periods are not necessarily indicative of
the results to be expected for the entire year.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and notes necessary for complete financial
statements in conformity with generally accepted accounting principles.
The material under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is written with the
presumption that the users of the interim financial statements have read or
have access to the most recent Annual Report on Form 10-K of TCF Financial
Corporation ("TCF" or the "Company"), which contains the latest audited
financial statements and notes thereto, together with Management's
Discussion and Analysis of Financial Condition and Results of Operations as
of December 31, 1996 and for the year then ended. All significant
intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior period
financial statements to conform to the current period presentation. For
consolidated statements of cash flows purposes, cash and cash equivalents
include cash and due from banks.
(2) NATIONAL BANK CONVERSION
On April 7, 1997, TCF completed the conversion of its savings bank
subsidiaries to national banks and TCF became a national bank holding
company. In connection with the national bank conversions, TCF chartered
two new national bank subsidiaries, Great Lakes National Bank Ohio ("Great
Lakes Ohio") and TCF National Bank Colorado ("TCF Colorado"). During the
third quarter of 1997, TCF sold all eight branches and related deposits of
Great Lakes Ohio. TCF now operates five national bank subsidiaries: TCF
National Bank Minnesota ("TCF Minnesota"), TCF National Bank Illinois ("TCF
Illinois"), TCF National Bank Wisconsin, TCF Colorado and Great Lakes
National Bank Michigan ("Great Lakes Michigan").
(3) EARNINGS PER COMMON SHARE
The weighted average number of common and common equivalent shares
outstanding used to compute earnings per common share were 43,926,378 and
41,924,963 for the three months ended September 30, 1997 and 1996,
respectively, and 42,546,153 and 41,974,405 for the nine months ended
September 30, 1997 and 1996, respectively.
(4) BUSINESS COMBINATIONS AND ACQUISITIONS
WINTHROP RESOURCES CORPORATION
On June 24, 1997, TCF completed its acquisition of Winthrop Resources
Corporation ("Winthrop"), a Minneapolis-based financial services company
with $363 million in assets. Winthrop leases computers, telecommunications
equipment, point-of-sale systems and other business-essential equipment to
7
companies nationwide. In connection with the acquisition, TCF issued
approximately 6.7 million shares of its common stock for all of the
outstanding common shares of Winthrop. TCF also assumed the obligation to
issue common stock upon the exercise of the outstanding employee and
director options to purchase Winthrop common stock. Winthrop is operated
as a direct subsidiary of TCF Minnesota.
The consolidated financial statements of TCF give effect to the
acquisition, which has been accounted for as a pooling-of-interests
combination. Accordingly, TCF's consolidated financial statements for
periods prior to the combination have been restated to include the accounts
and the results of operations of Winthrop for all periods presented, except
for dividends declared per share. There were no material intercompany
transactions prior to the acquisition and no material differences in the
accounting and reporting policies of TCF and Winthrop.
Certain operating financial data previously reported by TCF and Winthrop on
a separate basis and the combined amounts presented in the accompanying
consolidated financial statements are summarized as follows:
THREE MONTHS ENDED
----------------------------- NINE MONTHS ENDED
(In thousands, except MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
per-share data) 1997 1996 1996
-------- ------------- -----------------
Interest income:
TCF $145,136 $145,380 $440,667
Winthrop 8,244 7,669 21,765
-------- -------- --------
Combined $153,380 $153,049 $462,432
-------- -------- --------
-------- -------- --------
Net interest income:
TCF $ 86,018 $ 85,794 $256,124
Winthrop 4,073 3,704 10,280
-------- -------- --------
Combined $ 90,091 $ 89,498 $266,404
-------- -------- --------
-------- -------- --------
Non-interest income:
TCF $ 40,381 $ 42,683 $116,144
Winthrop 6,374 5,778 17,294
-------- -------- --------
Combined $ 46,755 $ 48,461 $133,438
-------- -------- --------
-------- -------- --------
Net income:
TCF (1) $ 28,931 $ 5,296 $ 58,234
Winthrop 4,096 3,552 10,247
-------- -------- --------
Combined $ 33,027 $ 8,848 $ 68,481
-------- -------- --------
-------- -------- --------
Earnings per common share:
TCF (1) $ .83 $ .15 $ 1.64
-------- -------- --------
-------- -------- --------
Winthrop $ .46 $ .40 $ 1.25
-------- -------- --------
-------- -------- --------
Combined $ .79 $ .21 $ 1.63
-------- -------- --------
-------- -------- --------
(1) After FDIC special assessment.
BOC FINANCIAL CORPORATION
On January 16, 1997, TCF completed its purchase of BOC Financial
Corporation ("BOC"), an Illinois-based bank holding company with $183.1
million in assets and $168 million in deposits. TCF accounted for the
acquisition using the purchase method of accounting.
8
STANDARD FINANCIAL, INC.
On September 4, 1997, TCF acquired all of the outstanding common stock of
Standard Financial, Inc. ("Standard"), a community-oriented thrift
institution with $2.6 billion in assets, $1.9 billion in deposits, and 14
full-service offices on the southwest side of Chicago and in the nearby
southwestern and western suburbs, for a purchase price of $423.7 million,
which consisted of $237.9 million in cash, including payments of $20.8
million to the holders of all of the outstanding employee and director
options to purchase Standard common stock, and 3,850,000 shares of TCF
common stock.
The acquisition has been accounted for by the purchase method of accounting
and, accordingly, the results of operations of Standard have been included
in TCF's consolidated financial statements from September 4, 1997. The
excess of the purchase price over the fair value of tangible and
identifiable intangible assets acquired and liabilities assumed of
approximately $151 million has been recorded as goodwill and is being
amortized over 25 years on a straight-line basis. In connection with the
acquisition, Standard was merged into TCF's existing Illinois-based wholly
owned national bank subsidiary, TCF Illinois.
The following unaudited pro forma financial information presents the
combined results of operations of TCF and Standard as if the acquisition
had been effective January 1, 1996 after giving effect to certain
adjustments, including amortization and accretion of discounts, premiums,
goodwill and deposit base intangibles, foregone interest income resulting
from the planned sale of securities available for sale, reduced occupancy
and equipment expense resulting from the write-off of certain fixed assets
and duplicative data processing hardware and software, increased interest
expense on debt related to the acquisition, and related income tax effects.
The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had TCF and Standard
constituted a single entity during such periods. TCF expects that the
acquisition of Standard will enhance revenues through improved interest
rate margins and fee income as a result of expanded product and service
offerings to Standard customers. TCF also expects to achieve operating
cost savings primarily through reductions in staff and the consolidation of
certain functions such as data processing, investments and other back
office operations at Standard. The revenue enhancements and operating cost
savings are expected to be achieved in various amounts at various times
during the years subsequent to the acquisition of Standard and not ratably
over, or at the beginning or end of, such periods. No adjustment has been
reflected in the following pro forma financial information for the revenue
enhancements or anticipated cost savings. See "Financial Condition -
Forward Looking Information."
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
(In thousands, except ----------------------- ----------------------
per-share data) 1997 1996 1997 1996
-------- -------- -------- --------
(unaudited)
Interest income $200,343 $189,185 $589,475 $566,305
-------- -------- -------- --------
-------- -------- -------- --------
Net interest income $108,244 $103,922 $320,639 $309,186
-------- -------- -------- --------
-------- -------- -------- --------
Non-interest income $ 68,225 $ 50,587 $170,435 $140,006
-------- -------- -------- --------
-------- -------- -------- --------
Net income (1) $ 34,870 $ 4,948 $105,940 $ 67,532
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per common share (1) $ .75 $ .11 $ 2.30 $ 1.47
-------- -------- -------- --------
-------- -------- -------- --------
(1) After FDIC special assessment.
9
AMERICAN STORES COMPANY
On November 10, 1997, TCF and American Stores Company, parent company of
Jewel-Osco, announced the signing of an agreement for TCF Illinois to acquire
and operate 76 branches in Jewel-Osco stores in the Chicago area presently
operated by Bank of America. TCF Illinois will convert existing deposits by
offering TCF Illinois products to Bank of America customers and will assume
the fixed assets at those 76 branches and 178 ATMs located in Jewel stores.
The agreement is subject to regulatory approval and is expected to close
January 30, 1998.
10
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
TCF reported record net income of $37.2 million, or 85 cents per common
share, for the third quarter of 1997, up from $8.8 million, or 21 cents per
common share, for the same 1996 period. For the first nine months of 1997,
TCF reported net income of $105.2 million, or $2.47 per common share,
compared with $68.5 million, or $1.63 per common share, for the same 1996
period. Cash earnings per common share, which exclude amortization of
goodwill and deposit base intangibles, were $1.00 and $2.67 for the third
quarter and first nine months of 1997, respectively, up from 23 cents and
$1.68 for the same 1996 periods.
TCF's 1997 third quarter results reflect a branch reorganization at Great
Lakes Michigan and Great Lakes Ohio, including the sale of all eight Great
Lakes Ohio branches and related deposits for a net gain of $10.6 million, the
accelerated amortization of Great Lakes Michigan's remaining $8.7 million of
deposit base intangibles, and the write-off of $1 million of Great Lakes
Michigan's teller equipment.
TCF's 1996 third quarter results include a one-time special assessment of
$34.8 million from the Federal Deposit Insurance Corporation ("FDIC") to
recapitalize the Savings Association Insurance Fund ("SAIF") under federal
legislation enacted on September 30, 1996. On an after-tax basis, the FDIC
special assessment totaled $21.7 million, or 52 cents per common share.
Net income, excluding the 1996 special assessment, for the third quarter and
first nine months of 1997 was $37.2 million and $105.2 million, respectively,
up 21.6% and 16.6% from $30.6 million and $90.2 million for the same 1996
periods. On the same basis, net income per common share for the third quarter
and first nine months of 1997 was 85 cents and $2.47, respectively, up 16.4%
and 14.9% from 73 cents and $2.15 for the same 1996 periods. Cash earnings
per common share were $1.00 and $2.67 for the third quarter and first nine
months of 1997, respectively, up 33.3% and 21.4% from 75 cents and $2.20 for
the same 1996 periods before the special assessment.
Return on average assets was 1.80% and 1.84% for the third quarter and first
nine months of 1997, respectively, compared with 1.71% and 1.66% for the same
1996 periods before the special assessment. On the same basis, return on
average realized common equity was 19.37% and 20.60% for the third quarter
and first nine months of 1997, respectively, compared with 20.13% and 20.27%
for the same 1996 periods. As a purchase transaction, TCF's results for
periods prior to the Standard acquisition have not been restated for the
Standard acquisition. Since Standard's performance ratios were lower than
TCF's, the Company's performance ratios for the third quarter of 1997 were
negatively impacted by the acquisition of Standard. The Company's
performance ratios for the 1997 fourth quarter will be negatively impacted
further due to the inclusion of Standard for the entire quarter.
NET INTEREST INCOME
Net interest income for the third quarter of 1997 was a record $99.9 million,
up 11.6% from $89.5 million for the third quarter of 1996. The net interest
margin for the third quarter of 1997 was 5.24%, compared with 5.36% for the
same 1996 period. Net interest income for the first nine months of 1997
totaled $282.6 million, up 6.1% from
11
$266.4 million for the same 1996 period. The net interest margin for the
first nine months of 1997 was 5.31%, up from 5.23% for the same period in
1996. TCF's net interest income increased primarily due to growth of
higher-yielding consumer loans, commercial business loans, and direct
financing leases and lower-cost retail deposits. TCF's net interest margin
for the third quarter of 1997 was negatively impacted by the acquisition of
Standard and is expected to decline further in the 1997 fourth quarter due to
the impact of Standard's lower net interest margin for the entire quarter.
Changes in net interest income are dependent upon the movement of interest
rates, the volume and the mix of interest-earning assets and interest-bearing
liabilities, and the level of non-performing assets. Achieving net interest
margin growth is dependent on TCF's ability to generate higher yielding
assets and lower-cost retail deposits. Competition for checking, savings and
money market deposits, an important source of lower cost funds for TCF, has
intensified among depository and other financial institutions. TCF may
experience compression in its net interest margin if the rates paid on
deposits increase. See "Asset/Liability Management - Interest-Rate Risk" and
"Financial Condition -Deposits."
12
The following rate/volume analysis details the increases (decreases) in net
interest income resulting from interest rate and volume changes during the third
quarter and first nine months of 1997 as compared to the same periods last year.
Changes attributable to the combined impact of volume and rate have been
allocated proportionately to the change due to volume and the change due to
rate.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
VERSUS SAME PERIOD IN 1996 VERSUS SAME PERIOD IN 1996
-------------------------- --------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
-------------------------- --------------------------
(In thousands) VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ---- ----- ------ ---- -----
Securities available for sale $ 6,153 $ (26) $ 6,127 $ 9,649 $ 163 $ 9,812
-------- ------ -------- -------- ------ --------
Loans held for sale (161) (44) (205) (1,913) (210) (2,123)
-------- ------ -------- -------- ------ --------
Loans and leases:
Residential real estate 4,917 (845) 4,072 (7,646) (133) (7,779)
Commercial real estate (1,291) 203 (1,088) (5,777) 597 (5,180)
Commercial business 1,372 (134) 1,238 2,409 (21) 2,388
Consumer 7,098 (747) 6,351 18,809 (1,365) 17,444
Lease financing 2,239 997 3,236 5,948 97 6,045
-------- ------ -------- -------- ------ --------
Total loans and leases 14,335 (526) 13,809 13,743 (825) 12,918
-------- ------ -------- -------- ------ --------
Investments
Interest-bearing deposits
with banks 133 (55) 78 334 46 380
Federal funds sold 21 - 21 17 (1) 16
U.S. Government and other
marketable securities
held to maturity 2 - 2 6 - 6
FHLB stock 121 8 129 (11) 12 1
FRB stock 243 - 243 433 - 433
-------- ------ -------- -------- ------ --------
Total investments 520 (47) 473 779 57 836
-------- ------ -------- -------- ------ --------
Total interest income 20,847 (643) 20,204 22,258 (815) 21,443
-------- ------ -------- -------- ------ --------
Deposits:
Checking 135 68 203 156 - 156
Passbook and statement 489 371 860 428 611 1,039
Money market 209 131 340 368 326 694
Certificates 6,820 (120) 6,700 4,312 (412) 3,900
-------- ------ -------- -------- ------ --------
Total deposits 7,653 450 8,103 5,264 525 5,789
-------- ------ -------- -------- ------ --------
Borrowings:
Securities sold under
repurchase agreements and
federal funds purchased (3,083) 106 (2,977) (5,688) 160 (5,528)
FHLB advances 2,006 876 2,882 (162) 1,765 1,603
Discounted lease rentals 1,332 35 1,367 2,316 166 2,482
Subordinated debt (155) 392 237 830 (88) 742
Collateralized obligations (9) 24 15 (21) 20 (1)
Other borrowings 228 (7) 221 190 (12) 178
-------- ------ -------- -------- ------ --------
Total borrowings 319 1,426 1,745 (2,535) 2,011 (524)
-------- ------ -------- -------- ------ --------
Total interest expense 7,972 1,876 9,848 2,729 2,536 5,265
-------- ------ -------- -------- ------ --------
Net interest income $ 12,875 $(2,519) $ 10,356 $ 19,529 $(3,351) $16,178
-------- ------ -------- -------- ------ --------
-------- ------ -------- -------- ------ --------
13
PROVISIONS FOR CREDIT LOSSES
TCF provided $6.3 million for credit losses in the third quarter of 1997,
compared with $7 million for the same prior-year period. In the first
nine months of 1997, TCF provided $11.9 million for credit losses,
compared with $17.2 million for the same 1996 period. At September 30,
1997, the allowances for loan and lease and real estate losses and
industrial revenue bond reserves totaled $84.4 million, compared with
$74.7 million at year-end 1996. See "Financial Condition - Allowances
for Loan and Lease and Real Estate Losses and Industrial Revenue Bond
Reserves."
NON-INTEREST INCOME
Non-interest income is a significant source of revenues for TCF and an
important factor in TCF's results of operations. Providing a wide range of
retail banking services is an integral component of TCF's business philosophy
and a major strategy for generating additional non-interest income.
Excluding gains on sales of branches and loans, non-interest income increased
$12.9 million, or 29.5%, to $56.8 million for the third quarter of 1997,
compared with $43.8 million for the same period in 1996. For the first nine
months of 1997, non-interest income, excluding the items noted above, totaled
$153.7 million, up 20.9% from $127.1 million for the same period in 1996.
The increases were primarily due to increases in fee and service charge
revenues, automated teller machine ("ATM") network revenues, leasing revenues
and gains on sales of securities available for sale.
Fee and service charge revenues totaled $25.8 million and $73.4 million
for the third quarter and first nine months of 1997, respectively,
representing increases of 9.9% and 10.8% from $23.5 million and $66.2
million for the same 1996 periods. These increases are primarily due to
expanded retail banking activities.
Leasing revenues totaled $9.3 million and $23.7 million for the third quarter
and first nine months of 1997, respectively, representing increases of 60.9%
and 36.8% from $5.8 million and $17.3 million for the same 1996 periods.
Leasing revenues are based on customer demand and fluctuate depending on the
manner and timing in which leasing revenues are recognized over the term of
each particular lease. The recognition of leasing revenues is also a
function of lease classifications as sales-type, direct financing or
operating leases as determined in accordance with generally accepted
accounting principles.
ATM network revenues totaled $8.4 million and $22 million for the third
quarter and first nine months of 1997, respectively, representing increases
of 52.8% and 42% from $5.5 million and $15.5 million for the same 1996
periods. This increase reflects TCF's effort to provide banking services
through its ATM network. TCF expanded its network of ATMs to 1,119 at
September 30, 1997, an increase of 86 ATMs during the third quarter of 1997.
The Company anticipates installing additional ATMs during the remainder of
1997.
Gains on sales of securities available for sale totaled $2.9 million and $5.3
million for the third quarter and first nine months of 1997, respectively, an
increase of $2.9 million and $5.2 million from the amounts recognized during
the same periods in 1996. Gains or losses on sales of securities available
for sale may fluctuate significantly from period to period due to changes in
interest rates and volumes, and results in any period related to these
transactions may not be indicative of results which will be obtained in
future periods.
14
Results for the first nine months of 1997 include a pretax gain of $1.6
million on the sale of $150 million of third-party loan servicing rights. TCF
periodically sells and purchases loan servicing rights depending on market
conditions. TCF's third-party residential loan servicing portfolio totaled
$4.6 billion at September 30, 1997, compared with $4.5 billion at December
31, 1996.
During the third quarter of 1997, TCF recognized a $10.6 million gain on the
sale of all eight Ohio branches in connection with Great Lakes Ohio's branch
reorganization, as previously mentioned. There were no branch sales during
the same 1996 period. Results for the first nine months of 1997 also include
a $2.8 million gain on the sale of two Michigan branches, compared with gains
of $1.7 million on the sale of two Michigan branches and one Wisconsin branch
for the same 1996 period.
During the third quarter of 1996, TCF recognized a $4.6 million gain on the
sale of $37.8 million of credit card loans. The Company now provides credit
card products on behalf of a third party through a marketing agreement.
NON-INTEREST EXPENSE
Non-interest expense (excluding the previously mentioned accelerated
amortization of $8.7 million of deposit base intangibles recognized in
connection with Great Lakes Michigan's branch reorganization, and the 1996
FDIC special assessment) totaled $89.7 million for the third quarter of 1997,
up 9.3% from $82 million for the same 1996 period. For the first nine months
of 1997, non-interest expense (excluding the items noted above) totaled
$254.9 million, up 7.5% from $237.3 million for the same 1996 period.
Compensation and employee benefits expense totaled $45.1 million and $129.4
million for the 1997 third quarter and first nine months, respectively,
compared with $40.3 million and $115.5 million for the same periods in 1996.
The increased expenses in 1997 were primarily due to costs associated with
expanded retail banking activities.
Federal deposit insurance premiums and assessments totaled $1.2 million and
$3.3 million for the third quarter and first nine months of 1997,
respectively, compared with $3.2 million and $9.5 million for the same
periods in 1996. The decrease reflects a reduction, effective January 1,
1997, in the rate charged to TCF by the FDIC for federal deposit insurance
premiums from 23 basis points to approximately 6.50 basis points as a result
of Federal legislation enacted on September 30, 1996 to recapitalize the SAIF.
TCF's 1996 third quarter results include a one-time special assessment of
$34.8 million from the FDIC to recapitalize the SAIF under federal
legislation enacted on September 30, 1996.
Amortization of goodwill and other intangibles totaled $10.6 million and
$12.9 million for the third quarter and first nine months of 1997,
respectively, compared with $893,000 and $2.7 million for the same 1996
periods. The increases are due to the amortization of goodwill and deposit
base intangibles resulting from the acquisitions of Standard and BOC and the
accelerated amortization of $8.7 million of deposit base intangibles, as
previously mentioned.
Other expense totaled $22 million and $60.6 million for the third quarter and
first nine months of 1997, respectively, compared with $20.7 million and
$57.1 million for the same 1996 periods. Results for the third quarter of
1997 include the write-off of $1 million of teller equipment in connection
with the previously mentioned Great Lakes Michigan branch reorganization.
Results for the first nine months of 1997 include the recognition of $1.5
million of non-recurring merger-related costs in connection with TCF's
acquisition of Winthrop.
15
TCF has established a year 2000 task force and is in the process of
evaluating whether its data processing and other systems are year 2000
compliant. Many of TCF's data processing applications are supplied by third
party software vendors. TCF is also evaluating whether such vendor supplied
applications are or will be year 2000 compliant. TCF does not expect the
additional expenditures to achieve year 2000 compliance to have a material
effect on TCF's results of operations in 1997 or in future periods.
INCOME TAXES
TCF recorded income tax expense of $25.4 million and $69 million for the
third quarter and first nine months of 1997, or 40.5% and 39.6% of income
before income tax expense, respectively, compared with $5.3 million and $42.1
million, or 37.7% and 38.1%, for the comparable 1996 periods. The higher tax
rates in 1997 reflect the impact of relatively higher non-deductible
expenses, including goodwill amortization resulting from the acquisitions of
Standard and BOC, and higher state tax rates due to business expansion.
ASSET/LIABILITY MANAGEMENT - INTEREST-RATE RISK
TCF's results of operations are dependent to a large degree on its net
interest income, which is the difference between interest income and interest
expense. Like most financial institutions, TCF's interest income and cost of
funds are significantly affected by general economic conditions and by
policies of regulatory authorities. The mismatch between maturities and
interest-rate sensitivities of assets and liabilities results in
interest-rate risk. Although the measure is subject to a number of
assumptions and is only one of a number of measurements, management believes
the interest-rate gap (difference between interest-earning assets and
interest-bearing liabilities repricing within a given period) is an important
indication of TCF's exposure to interest-rate risk and the related volatility
of net interest income in a changing interest rate environment. In addition
to the interest-rate gap analysis, management also utilizes a simulation
model to measure and manage TCF's interest-rate risk.
For an institution with a negative interest-rate gap for a given period, the
amount of its interest-earning liabilities maturing or otherwise repricing
within such period exceeds the amount of interest-bearing assets repricing
within the same period. In a rising interest rate environment, institutions
with negative interest-rate gaps will generally experience more immediate
increases in the cost on their liabilities than in the yield of their assets.
Conversely, the yield on assets of institutions with negative interest-rate
gaps will generally decrease more slowly than the cost of their funds in a
falling interest rate environment.
TCF's Asset/Liability Management Committee manages TCF's interest-rate risk
based on interest rate expectations and other factors. Management's
estimates and assumptions could be significantly affected by external
factors such as prepayment rates other than those assumed, early withdrawals
of deposits, changes in the correlation of various interest-bearing
instruments, and competition. Decisions by management to purchase or sell
assets, or retire debt could change the maturity/repricing and spread
relationships. TCF's one-year adjusted interest-rate gap was a negative
$544.9 million, or (6)% of total assets, at September 30, 1997, compared with
a positive $114 million, or 2% of total assets, at December 31, 1996.
16
FINANCIAL CONDITION
INVESTMENTS
Total investments decreased $325.9 million from year-end 1996 to $130.3
million at September 30, 1997. The decrease is primarily due to a decrease
of $377.1 million in interest-bearing deposits with banks, partially offset
by an increase of $21 million in federal funds sold, and the purchase of
$22.2 million in FRB stock in connection with the conversion of TCF's banking
subsidiaries to national banks.
SECURITIES AVAILABLE FOR SALE
Securities available for sale are carried at fair value with the unrealized
gains or losses, net of deferred income taxes, reported as a separate
component of stockholders' equity. Securities available for sale increased
$628.5 million from year-end 1996 to $1.6 billion at September 30, 1997. The
increase reflects the acquisition of $866.8 million and $83.1 million of
securities available for sale as part of the Standard and BOC transactions,
respectively, and purchases of $382.8 million of securities available for
sale, partially offset by sales of $438.3 million and payment and prepayment
activity. At September 30, 1997, TCF's securities available-for-sale
portfolio included $1 billion and $599.4 million of fixed-rate and
adjustable-rate mortgage-backed securities, respectively. The following
table summarizes securities available for sale:
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1996
------------------------------ ------------------------------
AMORTIZED FAIR AMORTIZED FAIR
(IN THOUSANDS) COST VALUE COST VALUE
----------- ---------- --------- --------
U.S. Government and other
marketable securities $ 10,700 $ 10,719 $ 32 $ 32
Mortgage-backed securities:
FHLMC 735,946 744,256 318,441 317,177
FNMA 585,815 590,898 539,475 542,147
GNMA 60,760 63,337 112,732 116,388
Private issuer 217,976 217,774 23,272 22,531
Collateralized mortgage
obligations 1,247 1,142 1,432 1,311
---------- ---------- -------- --------
$1,612,444 $1,628,126 $995,384 $999,586
---------- ---------- -------- --------
---------- ---------- -------- --------
LOANS HELD FOR SALE
Education and residential real estate loans held for sale are carried at
the lower of cost or market. Education loans held for sale decreased
$11.2 million and residential real estate loans held for sale increased
$44.2 million from year-end 1996, respectively, and totaled $135.1
million and $101.8 million at September 30, 1997.
17
LOANS AND LEASES
The following table sets forth information about loans and leases held in
TCF's portfolio, excluding loans held for sale:
AT AT
SEPTEMBER 30, DECEMBER 31,
(In thousands) 1997 1996
------------- ------------
Residential real estate $3,612,155 $2,261,237
---------- ----------
Commercial real estate:
Apartments 310,520 336,038
Other permanent 498,481 466,624
Construction and development 73,531 58,394
---------- ----------
882,532 861,056
---------- ----------
Total real estate 4,494,687 3,122,293
---------- ----------
Commercial business 222,332 156,712
---------- ----------
Consumer:
Home equity 1,495,120 1,293,871
Automobile and marine 460,532 416,535
Loans secured by deposits 10,728 8,230
Other secured 20,157 19,106
Unsecured 49,538 63,324
---------- ----------
2,036,075 1,801,066
---------- ----------
Lease financing:
Direct financing leases 338,067 265,161
Sales-type leases 40,194 50,532
Lease residuals 28,967 26,028
---------- ----------
407,228 341,721
---------- ----------
7,160,322 5,421,792
Less:
Unearned (premiums) discounts on loans
purchased (11,524) 2,441
Deferred loan fees, net 6,158 6,129
Unearned discounts and finance charges
on loans, net 68,611 75,539
Deferred lease costs (6,256) (6,705)
Unearned lease income 46,511 46,971
Unearned lease residual income 4,790 4,497
---------- ----------
$7,052,032 $5,292,920
---------- ----------
---------- ----------
Loans and leases increased $1.8 billion from year-end 1996 to $7.1
billion at September 30, 1997, of which $1.5 billion and $33.9 million
was due to the acquisitions of Standard and BOC, respectively.
Residential real estate loans increased $1.4 billion from year-end 1996
to $3.6 billion at September 30, 1997, all of which was due to the
acquisition of Standard.
Consumer loans increased $235 million from year-end 1996 to $2 billion at
September 30, 1997, reflecting a $201.2 million and $44 million increase
in home equity loans and automobile and marine loans, respectively.
These increases include $24.2 million and $64.2 million, respectively,
due to the acquisition of Standard. The growth in home equity loans
reflects TCF's expanded consumer lending and consumer finance operations.
Consumer loan growth in recent years reflects TCF's emphasis on expanding
its portfolio of higher-yielding, shorter-term loans, including home
equity loans. At
18
September 30, 1997, TCF's average home equity line of credit was
approximately $38,000 and the average loan balance outstanding was
approximately $21,000, or 55% of the available line.
TCF has significantly expanded its consumer finance operations in recent
years and had 60 consumer finance offices in 16 states as of September 30,
1997. TCF's consumer finance loan portfolio totaled $526.2 million at
September 30, 1997, compared with $496.3 million at December 31, 1996. The
Company intends to concentrate on increasing the outstanding loan balances of
its existing consumer finance offices and improving the profitability of its
consumer finance subsidiaries before considering any further expansion of
this operation.
The consumer finance subsidiaries primarily originate automobile and home
equity loans and purchase automobile loans. The average individual balance
of consumer finance automobile and marine loans, and home equity loans were
$8,000 and $31,000, respectively, at September 30, 1997. At September 30,
1997 and December 31, 1996, automobile and marine loans comprised $296.6
million, or 56.4%, and $299.6 million, or 60.4%, respectively, of total
consumer finance loans. At September 30, 1997 and December 31, 1996, home
equity loans comprised $219.1 million, or 41.6%, and $185.2 million, or
37.3%, respectively, of total consumer finance loans. TCF's consumer finance
subsidiaries are seeking to increase the percentage of home equity loans to
total consumer finance loans over time. Home equity loans originated by the
Company's consumer finance subsidiaries are generally closed-end.
Through their purchases of automobile loans, TCF's consumer finance
subsidiaries provide indirect financing. The Company's consumer finance
subsidiaries serve as an alternative source of financing to customers who
might otherwise not be able to obtain financing from more traditional
sources. Included in the consumer finance loans at September 30, 1997 are
$245.8 million of sub-prime automobile and marine loans which carry a higher
level of credit risk and higher interest rates. The term sub-prime refers to
the Company's assessment of credit risk and bears no relationship to the
prime rate of interest or persons who are able to borrow at that rate. There
can be no assurances that the Company's sub-prime lending criteria are the
same as those utilized by other lenders. Loans classified as sub-prime are to
borrowers that because of significant past credit problems or limited credit
histories are unable to obtain credit from traditional sources.
Although competition in the sub-prime lending market has increased, the
Company believes that sub-prime borrowers represent a substantial market and
their demand for financing has not been adequately served by traditional
lending sources. The underwriting criteria for loans originated by TCF's
consumer finance subsidiaries generally have been less stringent than those
historically adhered to by TCF's bank subsidiaries and, as a result, carry a
higher level of credit risk and higher interest rates. These portfolios also
represent an increased risk of loss in the event of adverse economic
developments such as a recession. TCF believes that important determinants
of success in sub-prime automobile financing include the ability to control
borrower and dealer misrepresentations at the point of origination; the
evaluation of the creditworthiness of sub-prime borrowers; and the
maintenance of an active program to monitor performance and collect payments.
Sub-prime lending is inherently more risky than traditional lending and
there can be no assurance that all appropriate underwriting criteria have
been identified or weighted properly in the assessment of credit risk, or
will afford adequate protection against the higher risks inherent in lending
to sub-prime borrowers.
19
Many of the consumer finance offices are relatively new and are outside TCF's
traditional market areas. The geographic location of consumer finance loans
may change significantly in future periods. The following table sets forth
the geographic locations (based on the location of the office originating or
purchasing the loan) of TCF's consumer finance loan portfolio:
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1996
------------------------- --------------------------
LOAN LOAN
(Dollars in thousands) BALANCE PERCENT BALANCE PERCENT
-------- ------- -------- -------
Illinois $134,378 25.5% $132,474 26.7%
Minnesota 99,232 18.9 99,279 20.0
Florida 40,753 7.7 33,458 6.7
Georgia 36,054 6.9 32,270 6.5
Michigan 35,314 6.7 23,214 4.7
Wisconsin 31,402 6.0 33,328 6.7
North Carolina 30,125 5.7 24,137 4.9
Missouri 22,705 4.3 26,185 5.3
Tennessee 19,996 3.8 17,313 3.5
Mississippi 15,857 3.0 15,579 3.1
Ohio 15,763 3.0 15,503 3.1
Kentucky 15,327 2.9 17,198 3.5
Other 29,273 5.6 26,398 5.3
-------- ------ -------- ------
Total consumer finance loans $526,179 100.0% $496,336 100.0%
-------- ------ -------- ------
-------- ------ -------- ------
TCF's bank and consumer finance subsidiaries have also initiated the
origination of home equity loans with loan-to-value ratios in excess of
80%, and up to 100%, that may carry no private mortgage insurance. These
loans carry a higher level of credit risk and higher interest rates.
Commercial real estate loans increased $21.5 million from year-end 1996 to
$882.5 million at September 30, 1997, of which $19.1 million relates to the
acquisition of Standard. Commercial business loans increased $65.6 million
in the first nine months of 1997 to $222.3 million at September 30, 1997, of
which $24.6 million relates to the acquisition of BOC. TCF is seeking to
expand its commercial real estate and commercial business lending activity to
borrowers located in its primary midwestern markets in an attempt to maintain
the size of these lending portfolios and, where feasible under local economic
conditions, achieve some growth in these lending categories over time. These
loans generally have larger individual balances and a greater inherent risk
of loss. The risk of loss is difficult to quantify and is subject to
fluctuations in real estate values. At September 30, 1997, approximately 92%
of TCF's commercial real estate loans outstanding were secured by properties
located in its primary markets. At September 30, 1997, the average
individual balance of commercial real estate loans and commercial business
loans was $507,000 and $291,000, respectively.
Included in performing loans at September 30, 1997 are commercial real estate
loans aggregating $2.9 million with terms that have been modified in troubled
debt restructurings, compared with $3 million at December 31, 1996.
At September 30, 1997, the recorded investment in loans that are considered
to be impaired was $13.1 million for which the related allowance for credit
losses was $1.9 million. Included in this amount are $11.5 million of
impaired loans on non-accrual status. The average recorded investment in
impaired loans during the three and nine months ended September 30, 1997 was
$10.1 million. For the three and nine months ended September 30, 1997, TCF
recognized interest income on impaired loans of $55,000 and $344,000. For
the nine months ended September 30, 1997, interest income of $198,000 was
recognized using the cash basis method of income recognition.
20
Lease financings increased $65.5 million from year-end 1996 to $407.2
million at September 30, 1997, reflecting a $72.9 million increase in
direct financing leases, partially offset by a $10.3 million decrease in
sales-type leases.
Winthrop provides a range of comprehensive lease finance products addressing
the financing needs of diverse companies through four product groups. The
Value Added Lease, which has been Winthrop's primary focus, generally has a
term from two to five years and is entered into with large organizations
(generally corporations with revenue of $50 million or more). Such leases
typically range from $250,000 to $20 million and cover high-technology and
other business-essential equipment. These leases are flexible in structure
to accommodate equipment additions and upgrades to meet customers' changing
needs. Small Ticket Leases are typically less than $250,000, have lease
terms of between two and five years, and cover business-essential equipment.
Winthrop developed the Small Ticket Lease in response to the expanding
technological needs of increasing numbers of small, growing businesses.
Leasing to small, growing businesses is inherently more risky than leasing to
large, established corporations. The Enterprise Lease is designed to meet
the needs of large corporations with influence over multiple business
entities (for example, franchise operations). The Enterprise Lease
integrates the Value Added Lease and the Small Ticket Lease for organizations
in need of enterprise-wide equipment and systems solutions. Through the
Wholesale Lease, Winthrop acts as a lease broker that, for a fee, arranges
lease financing with other leasing companies for a variety of unrelated
brokers and vendors. The Wholesale Lease is generally sold to an outside
funding source and does not become part of Winthrop's lease portfolio.
Winthrop enters into standard lease agreements with each customer. Winthrop's
leases are noncancelable "net" leases which contain provisions under which
the customer, upon acceptance of the equipment, must make all lease payments
regardless of any defects in the equipment and which require the customer to
maintain and service the equipment, insure the equipment against casualty
loss and pay all property, sales and other taxes related to the equipment.
Winthrop typically retains ownership of the equipment it leases and, in the
event of default by the customer, Winthrop, or the financial institution that
has provided non-recourse financing for a particular lease, may declare the
customer in default, accelerate all lease payments due under the lease and
pursue other available remedies, including repossession of the equipment.
Upon completion of the initial term of the lease, the customer may: (1)
return the equipment to Winthrop; (2) renew the lease for an additional term;
or in certain circumstances (3) purchase the equipment. If the equipment is
returned to Winthrop, it is either re-leased to another customer or sold into
the secondary-user marketplace.
Winthrop's ability to arrange financing is important to its business.
Winthrop in prior periods has arranged permanent financing of Value Added
Leases through non-recourse discounting of lease rentals with various other
financial institutions at fixed interest rates. The proceeds from the
assignment of the lease rentals are equal to the present value of the
remaining lease payments due under the lease, discounted at the interest rate
charged by the other financial institutions. Interest rates obtained under
this type of financing are negotiated on a transaction-by-transaction basis
and reflect the financial strength of the lease customer, the term of the
lease and the prevailing interest rates. For a lease discounted on a
non-recourse basis, the other financial institution has no recourse against
Winthrop unless Winthrop is in default of the terms of the agreement under
which the lease and the leased equipment are assigned to the other financial
institution as collateral. The other financial institution may, however,
take title to the collateral in the event the customer fails to make lease
payments or certain other defaults by the lease customer occur under the
terms of the lease.
21
TCF is seeking to expand its leasing activity to achieve growth over time.
TCF also plans to internally fund certain Value Added Leases over time, and
thereby retain the credit risk on such leases. Value Added Leases generally
have larger individual balances and those funded by TCF have a greater
inherent risk of loss. Small Ticket Leases generally carry a higher level of
credit risk and higher implicit interest rates and represent an increased
risk of loss in the event of adverse economic conditions such as a recession.
TCF believes that it has in place experienced personnel and acceptable
standards for maintaining the credit quality of its lease portfolio, but
no assurance can be given as to the level of future delinquencies and
lease charge-offs.
Future minimum lease payments for direct financing and sales-type leases
as of September 30, 1997 are as follows (in thousands):
PERIOD PAYMENTS TO PAYMENTS TO BE
ENDING BE RECEIVED RECEIVED BY OTHER
DECEMBER 31, BY TCF FINANCIAL INSTITUTIONS TOTAL
- ------------ ------------ ---------------------- ------------
1997 $10,486 $ 30,912 $ 41,398
1998 26,556 104,854 131,410
1999 26,474 72,811 99,285
2000 13,436 38,165 51,601
2001 6,817 19,814 26,631
2002 2,127 2,950 5,077
------- -------- --------
$85,896 $269,506 $355,402
------- -------- --------
------- -------- --------
ALLOWANCES FOR LOAN AND LEASE AND REAL ESTATE LOSSES AND INDUSTRIAL
REVENUE BOND RESERVES
A summary of the activity of the allowances for loan and lease and real
estate losses and industrial revenue bond reserves, and selected
statistics follows (dollars in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
--------------------------------------- ---------------------------------------==
INDUSTRIAL INDUSTRIAL
Allowance for Loan and Lease ALLOWANCE FOR REVENUE ALLOWANCE FOR REVENUE
Losses and Industrial Revenue LOAN AND BOND LOAN AND BOND
Bond Reserves: LEASE LOSSES RESERVES TOTAL LEASE LOSSES RESERVES TOTAL
------------ ---------- ----- ------------- ---------- -----
Balance at beginning of period $72,466 $1,560 $74,026 $ 71,865 $1,660 $ 73,525
Acquired balance (1) 8,939 - 8,939 10,592 - 10,592
Provision for credit losses 6,391 (50) 6,341 12,086 (150) 11,936
Charge-offs (7,290) - (7,290) (19,236) - (19,236)
Recoveries 1,533 - 1,533 6,732 - 6,732
------- ------ ------- --------- ------ ---------
Net charge-offs (5,757) - (5,757) (12,504) - (12,504)
------- ------ ------- --------- ------ ---------
Balance at end of period $82,039 $1,510 $83,549 $ 82,039 $1,510 $ 83,549
------- ------ ------- --------- ------ ---------
------- ------ ------- --------- ------ ---------
Ratio of annualized net loan and lease
charge-offs to average loans and leases
outstanding, excluding loans held
for sale .39% .30%
Allowance for loan and lease losses as
a percentage of gross loan and lease
balances, excluding loans held for sale 1.15% 1.15%
- --------------
(1) Reflects the 1997 first quarter acquisition of BOC and the 1997 third
quarter acquisition of Standard.
22
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
--------------------------------------- ----------------------------------------
INDUSTRIAL INDUSTRIAL
Allowance for Loan and Lease ALLOWANCE FOR REVENUE ALLOWANCE FOR REVENUE
Losses and Industrial Revenue LOAN AND BOND LOAN AND BOND
Bond Reserves: LEASE LOSSES RESERVES TOTAL LEASE LOSSES RESERVES TOTAL
------------ ---------- ----- ------------- ---------- -----
Balance at beginning of period $70,207 $1,660 $71,867 $66,290 $1,960 $68,250
Provision for credit losses 6,972 - 6,972 17,398 (200) 17,198
Charge-offs (6,537) - (6,537) (17,231) (100) (17,331)
Recoveries 2,167 - 2,167 6,352 - 6,352
------- ------ ------- --------- ------ ---------
Net charge-offs (4,370) - (4,370) (10,879) (100) (10,979)
------- ------ ------- --------- ------ ---------
Balance at end of period $72,809 $1,660 $74,469 $72,809 $1,660 $74,469
------- ------ ------- --------- ------ ---------
------- ------ ------- --------- ------ ---------
Ratio of annualized net loan and lease
charge-offs to average loans and
leases outstanding, excluding loans
held for sale .33% .27%
Allowance for loan and lease losses as
a percentage of gross loan and lease
balances, excluding loans held for sale 1.33% 1.33%
THREE MONTHS ENDED NINE MONTHS ENDED
Allowance for Real Estate Losses: SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------------
1997 1996 1997 1996
---- ---- ---- ----
Balance at beginning of period $870 $1,149 $1,127 $1,526
Provision for losses (56) 121 (18) 418
Charge-offs (12) (113) (307) (787)
---- ------ ------ ------
Balance at end of period $802 $1,157 $ 802 $1,157
---- ------ ------ ------
---- ------ ------ ------
TCF has experienced an increase in the level of net loan charge offs related
to its consumer finance portfolio. As a result, net loan charge offs as a
percentage of average loans outstanding for TCF's consumer finance portfolio
was 2.95% for the third quarter and nine months ended September 30, 1997,
compared with 2.69% and 2.20% for the same periods of 1996. In addition, the
net loan charge-offs as a percentage of average loans outstanding for TCF's
indirect consumer finance portfolio was 3.94% and 4.21%, respectively, for
the third quarter and nine months ended September 30, 1997, compared with
3.60% and 3.22% for the same periods in 1996.
On an ongoing basis, TCF's loan, lease and real estate portfolios are
reviewed and analyzed as to credit risk, performance, collateral value and
quality. The allowance for loan and lease losses is maintained at a level
believed to be adequate by management to provide for estimated loan and lease
losses. Management's judgment as to the adequacy of the allowance is a result
of ongoing review of larger individual loans and leases, the overall risk
characteristics of the portfolios, changes in the character or size of the
portfolios, the level of non-performing assets, net charge-offs, geographic
location and prevailing economic conditions. The allowance for loan and
lease losses is established for known or anticipated problem loans and
leases, as well as for loans and leases which are not currently known to
require specific allowances. Loans and leases are charged off to the extent
they are deemed to be uncollectible. The unallocated portion of TCF's
allowance for loan and lease losses totaled $29.2 million at September 30,
1997, compared with $22.4 million at December 31, 1996.
The allowance for real estate losses is based on management's periodic
analysis of real estate holdings and is maintained at a level believed to be
adequate by management to provide for estimated real estate losses. The
allowance for real estate losses is established to reduce the carrying value
of real estate to fair value less disposition costs. A weakness in
commercial real estate markets may result in
23
declines in the values of TCF's real estate or the sale of individual
properties at less than previously estimated values, resulting in additional
charge-offs. TCF recognizes the effect of such events in the periods in
which they occur.
TCF guarantees certain industrial development and housing revenue bonds
issued by municipalities to finance commercial and multi-family real estate
owned by third parties. The balance of such financial guarantees at
September 30, 1997 was $12.1 million, compared with $12.2 million at December
31, 1996. Management has considered these guarantees in its review of the
adequacy of the industrial revenue bond reserves, which are included in
accrued expenses and other liabilities in the Consolidated Statements of
Financial Condition.
The adequacy of the allowances for loan, lease and real estate losses and
industrial revenue bond reserves is highly dependent upon management's
estimates of variables affecting valuation, appraisals of collateral,
evaluations of performance and status, and the amounts and timing of future
cash flows expected to be received on impaired loans. Such estimates,
appraisals, evaluations and cash flows may be subject to frequent adjustments
due to changing economic prospects of borrowers or properties. These
estimates are reviewed periodically and adjustments, if necessary, are
reported in the provisions for credit and real estate losses in the periods
in which they become known. Management believes the allowances for loan and
lease and real estate losses and industrial revenue bond reserves are
adequate.
24
NON-PERFORMING ASSETS
Non-performing assets (principally non-accrual loans and leases and real
estate acquired through foreclosure) totaled $58 million at September 30,
1997, up $11.6 million from the December 31, 1996 total of $46.3 million.
The increase in non-performing assets reflects increases of $5 million and
$4.5 million in residential real estate and consumer finance non-accrual
loans, respectively. The increase in residential non-accrual loans includes
$4.7 million due to the acquisition of Standard. Approximately 70% of
non-performing assets at September 30, 1997 consist of, or are secured by,
real estate. The accrual of interest income is generally discontinued when
loans and leases become 90 days or more past due with respect to either
principal or interest unless such loans and leases are adequately secured and
in the process of collection. Non-performing assets are summarized in the
following table:
AT AT
SEPTEMBER 30, DECEMBER 31,
(Dollars in thousands) 1997 1996
------------- -----------
Non-accrual loans and leases (1):
Consumer:
Bank lending $ 1,928 $ 1,746
Consumer finance lending 16,260 11,726
------- -------
18,188 13,472
Residential real estate 8,963 3,996
Commercial real estate 8,777 7,604
Commercial business 2,707 1,149
Lease financing 592 176
------- -------
39,227 26,397
Real estate and other assets (2) 18,752 19,937
------- -------
Total non-performing assets $57,979 $46,334
------- -------
------- -------
Non-performing assets as a percentage
of net loans and leases .83% .89%
Non-performing assets as a percentage
of total assets .59 .62
(1) Included in total loans and leases in the Consolidated Statements
of Financial Condition.
(2) Includes residential real estate of $13.2 million and $13.4
million, commercial real estate of $1.1 million and $2.7 million
and automobiles of $2.5 million and $3.2 million at September 30,
1997 and December 31, 1996, respectively.
25
TCF had accruing loans and leases 90 days or more past due totaling $4.1
million at September 30, 1997. The over 30-day delinquency rate on TCF's
loans and leases (excluding loans held for sale and non-accrual loans and
leases) was .82% of gross loans and leases outstanding at September 30,
1997, compared with 1.02% at year-end 1996. TCF's delinquency rates are
determined using the contractual method. The following table sets forth
information regarding TCF's over 30-day delinquent loan and lease
portfolio, excluding loans held for sale and non-accrual loans and
leases:
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1996
--------------------- --------------------
PERCENTAGE PERCENTAGE
PRINCIPAL OF GROSS LOANS PRINCIPAL OF GROSS LOANS
(Dollars in thousands) BALANCES AND LEASES BALANCES AND LEASES
--------- -------------- --------- --------------
Consumer:
Bank lending $ 8,012 .55% $ 7,473 .61%
Consumer finance lending 21,768 3.80 21,515 3.86
-------- --------
29,780 1.48 28,988 1.62
Residential real estate 20,540 .57 8,330 .37
Commercial real estate 3,141 .36 5,114 .60
Commercial business 3,895 1.77 9 .01
Lease financing 765 .19 12,342 3.61
-------- --------
$58,121 .82 $54,783 1.02
-------- --------
-------- --------
TCF's over 30-day delinquency rate on gross consumer loans was 1.48% at
September 30, 1997, down from 1.62% at year-end 1996. Management continues
to monitor the consumer loan portfolio, which will generally have higher
delinquencies, especially consumer finance loans. TCF's over 30-day
delinquency rate on gross consumer finance loans was 3.80% at September 30,
1997, compared with 3.86% at December 31, 1996. TCF's over 30-day
delinquency rate on gross automobile and marine and home equity consumer
finance loans was 4.73% and 2.25% at September 30, 1997, compared with 4.24%
and 3.09%, respectively, at December 31, 1996. Consumer finance lending is
generally considered to involve a higher level of credit risk. TCF believes
that it has in place experienced personnel and acceptable standards for
maintaining credit quality that are consistent with its goals for expanding
its portfolio of these higher-yielding loans, but no assurance can be given
as to the level of future delinquencies and loan charge-offs.
In addition to the non-accrual and restructured loans, there were commercial
real estate and commercial business loans with an aggregate principal balance
of $28.7 million outstanding at September 30, 1997 for which management has
concerns regarding the ability of the borrowers to meet existing repayment
terms. This amount consists of loans that were classified for regulatory
purposes as substandard, doubtful or loss, or were to borrowers that
currently are experiencing financial difficulties or that management believes
may experience financial difficulties in the future. This compares with $16
million of such loans at December 31, 1996. Although these loans are secured
by commercial real estate or other corporate assets, they may be subject to
future modifications of their terms or may become non-performing. Management
is monitoring the performance and classification of such loans and the
financial condition of these borrowers.
26
DEPOSITS
Deposits totaled $7 billion at September 30, 1997, up $2 billion from
December 31, 1996, and reflects the addition of $1.9 billion and $160.9
million due to the acquisitions of Standard and BOC, respectively, partially
offset by the sale of Great Lakes Ohio's deposits totaling $127.8 million.
Lower interest-cost checking, savings and money market deposits totaled $3.2
billion, up $620.6 million from year-end 1996, and comprised 46.6% of total
deposits at September 30, 1997. Checking, savings and money market deposits
are an important source of lower cost funds and fee income for TCF. The
Company's weighted average rate for deposits, including non-interest bearing
deposits, increased to 3.45% at September 30, 1997, from 3.29% at December
31, 1996. The following table summarizes TCF's deposits:
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1996
----------------------------------- ------------------------------------
WEIGHTED WEIGHTED
AVERAGE % OF AVERAGE % OF
(Dollars in thousands) RATE AMOUNT TOTAL RATE AMOUNT TOTAL
--------- ------ ----- -------- ------ -----
Checking:
Non-interest bearing 0.00% $ 815,023 11.6% 0.00% $ 694,824 14.0%
Interest bearing 1.16 595,957 8.6 1.04 517,947 10.4
---------- ------ ---------- ------
.49 1,410,980 20.2 .45 1,212,771 24.4
---------- ------ ---------- ------
Passbook and statement 2.00 1,147,137 16.5 1.75 783,026 15.7
Money market 3.14 690,230 9.9 3.10 631,922 12.7
Certificates 5.08 3,728,340 53.4 5.33 2,349,911 47.2
---------- ------ ---------- ------
3.45 $6,976,687 100.0% 3.29 $4,977,630 100.0%
---------- ------ ---------- ------
---------- ------ ---------- ------
Certificates had the following remaining maturities:
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1996
------------------------------------------------------ -----------------------------------------------------
WEIGHTED WEIGHTED
(Dollars in NEGOTIABLE AVERAGE NEGOTIABLE AVERAGE
millions) RATE OTHER TOTAL RATE RATE OTHER TOTAL RATE
Maturity: ----------- ----- ----- ------- ---------- ----- ----- --------
0-3 months $122.7 $ 871.8 $ 994.5 5.10% $ 81.2 $ 539.7 $ 620.9 5.16%
4-6 months 48.1 873.2 921.3 4.83 26.1 452.0 478.1 5.17
7-12 months 36.0 1,127.1 1,163.1 5.03 6.6 543.2 549.8 5.28
13-24 months 1.1 403.0 404.1 5.42 1.7 464.8 466.5 5.54
25-36 months - 147.3 147.3 5.43 .1 130.3 130.4 5.68
37-48 months .1 72.9 73.0 5.88 .1 48.1 48.2 5.86
49-60 months - 16.1 16.1 5.25 - 42.8 42.8 6.35
Over 60 months - 8.9 8.9 5.50 - 13.2 13.2 5.66
------ -------- -------- ------ -------- --------
$208.0 $3,520.3 $3,728.3 5.08 $115.8 $2,234.1 $2,349.9 5.33
------ -------- -------- ------ -------- --------
------ -------- -------- ------ -------- --------
BORROWINGS
Borrowings totaled $1.8 billion as of September 30, 1997, up $46.3 million
from year-end 1996. The increase was primarily due to increases of $140.3
million in FHLB advances, $52.7 million in discounted lease rentals, $27
million in TCF's bank line of credit, and $29 million in TCF's treasury, tax
and loan note payable, partially offset by a decrease of $195.8 million in
securities sold under repurchase agreements. The weighted average rate on
borrowings increased to 6.38% at September 30, 1997, from 6.19% at December
31, 1996. At September 30, 1997, borrowings with a maturity of one year or
less totaled $747 million.
27
TCF's borrowings consist of the following:
AT SEPTEMBER 30, 1997 AT DECEMBER 31, 1996
--------------------- --------------------
WEIGHTED WEIGHTED
YEAR OF AVERAGE AVERAGE
(Dollars in thousands) MATURITY AMOUNT RATE AMOUNT RATE
-------- ------ -------- ------ --------
Securities sold under
repurchase agreements and
federal funds purchased:
Securities sold under
repurchase agreements 1997 $ 29,934 5.78% $ 225,732 5.88%
1998 68,000 6.18 68,000 6.18
--------- ----------
97,934 6.06 293,732 5.95
--------- ----------
Federal funds purchased 1997 600 6.84 - -
--------- ----------
98,534 6.06 293,732 5.95
--------- ----------
Federal Home Loan Bank
advances 1997 93,000 5.91 766,514 5.51
1998 560,722 5.79 310,300 5.88
1999 334,318 5.88 41,000 5.98
2000 243,020 6.18 8,074 7.24
2001 25,139 6.09 15,000 6.97
2003 25,000 5.78 - -
2008 145 6.15 152 6.17
--------- ----------
1,281,344 5.90 1,141,040 5.66
--------- ----------
Discounted lease rentals 1997 26,130 8.57 78,885 9.22
1998 90,398 8.57 58,406 8.70
1999 65,223 8.57 31,789 8.82
2000 34,890 8.54 13,883 8.90
2001 18,778 8.62 2,641 9.05
2002 2,889 8.48 - -
--------- ----------
238,308 8.57 185,604 8.96
--------- ----------
Subordinated debt:
Convertible subordinated
debentures 1997 - - 7,149 7.25
Senior subordinated
debentures 2003 28,750 9.50 28,750 9.50
Senior subordinated
debentures 2006 6,248 18.00 6,248 18.00
--------- ----------
34,998 11.02 42,147 10.38
--------- ----------
Collateralized obligations:
Collateralized notes 1997 37,500 6.13 37,500 5.94
Less unamortized discount 5 - 28 -
--------- ----------
37,495 6.13 37,472 5.94
--------- ----------
Collateralized mortgage
obligations 2008 1,073 6.50 1,555 6.50
2010 1,695 5.90 1,622 5.90
--------- ----------
2,768 6.13 3,177 6.19
Less unamortized discount 91 - 144 -
--------- ----------
2,677 6.31 3,033 6.44
--------- ----------
40,172 6.14 40,505 5.98
--------- ----------
Other borrowings:
Bank line of credit 1997 27,000 6.40 - -
Treasury tax and loan note 1997 34,089 5.40 5,131 5.21
Other 1997 - - 13 7.60
--------- ----------
61,089 5.84 5,144 5.21
--------- ----------
$1,754,445 6.38 $1,708,172 6.19
--------- ----------
--------- ----------
28
During the 1997 second quarter, TCF redeemed the convertible subordinated
debentures (the "Debentures") at par plus accrued and unpaid interest to the
date of redemption. The Debentures were convertible into TCF common stock at
a conversion price of $17.04 per share. TCF issued approximately 419,000
shares of common stock in connection with the conversion of the remaining
$7.1 million of Debentures.
Effective January 1, 1997, TCF adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," not
deferred by SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125." The adoption of SFAS No. 125 did not
impact TCF's financial condition or results of operations.
STOCKHOLDERS' EQUITY
Stockholders' equity at September 30, 1997 was $920 million, or 9.4% of total
assets, up from $630.7 million, or 8.5% of total assets, at December 31,
1996. The increase in stockholders' equity is primarily due to a $185.8
million increase resulting from the issuance of 3,850,000 shares of TCF
common stock in connection with the acquisition of Standard, net income of
$105.2 million for the first nine months of 1997, the June 3, 1997 secondary
offering of 700,000 shares of TCF common stock for net proceeds of $29.3
million, and the issuance of 419,000 shares of TCF common stock in connection
with the conversion of the remaining $7.1 million of Debentures, partially
offset by the repurchase of 647,900 shares of TCF's common stock at a cost of
$27.3 million and the payment of $26.6 million in common stock dividends.
On January 20, 1997, TCF's Board of Directors (the "Board") authorized the
repurchase of up to 5% of TCF's common stock, or approximately 1.7 million
shares. On February 25, 1997, TCF announced that the Board had formally
rescinded TCF's common stock repurchase program in connection with the
Company's merger with Winthrop.
On April 23, 1997, TCF's shareholders approved an increase in the number of
authorized shares of TCF common stock from 70,000,000 to 140,000,000.
On June 3, 1997, TCF announced that it had completed a public offering of
700,000 shares of its common stock at a price of $43.375 per share. The
purpose of the offering was to meet one of the criteria for TCF's merger with
Winthrop to be accounted for as a pooling of interests. The net proceeds of
$29.3 million were used as a portion of the cash consideration paid in
connection with the acquisition of Standard.
On October 20, 1997, the Board declared a two-for-one stock split in the form
of a 100% common stock dividend payable November 28, 1997 to stockholders of
record as of November 7, 1997. The stock split will increase TCF's
outstanding common shares from 46.3 million to 92.7 million shares.
Effective October 20, 1997, TCF and BankBoston, N.A. as Rights Agent, amended
the Rights Agreement adopted effective May 23, 1989 and amended October 1,
1995 to provide that the purchase price for each one one-hundredth of a
preferred share pursuant to the exercise of a Right will be $180 until
November 28, 1997. Following the stock split occurring on November 28, 1997,
the purchase price will be adjusted to $90 per share.
On October 20, 1997, TCF declared a quarterly dividend of 25 cents per common
share, on a pre-split basis, payable on November 28, 1997 to stockholders of
record as of November 7, 1997.
On September 30, 1997, TCF exceeded its regulatory capital requirements and
believes that it would be considered "well-capitalized" under guidelines
established by the Federal Reserve Board.
29
On September 30, 1997, TCF's bank subsidiaries exceeded their regulatory
capital requirements and believe that they would be considered
"well-capitalized" under guidelines established pursuant to the Federal
Deposit Insurance Corporation Improvement Act of 1991.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share." SFAS No. 128 establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities
with publicly held common stock or potential common stock. SFAS No. 128
supersedes the standards for computing EPS previously found in Accounting
Principles Board Opinion ("APB") No. 15, "Earnings per Share." SFAS No. 128
is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. SFAS No. 128 requires restatement of all prior-period EPS data
presented.
Disclosure of earnings per share calculated in accordance with APB No. 15 is
contained in Exhibit 11. The following presentation illustrates pro forma
basic and diluted EPS based on the provisions of SFAS No. 128 (dollars in
thousands, except per share data):
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
------- -------- -------- --------
Weighted average number of common shares outstanding
used in basic earnings per common share calculation 42,562,094 40,975,003 41,199,288 40,998,686
Dilutive effect of stock option and restricted
stock plans after application of treasury
stock method 657,046 603,266 654,255 592,087
Dilutive effect from assumed conversion of 71/4%
convertible subordinated debentures - 419,542 233,290 422,052
---------- ---------- ---------- ----------
Weighted average number of shares outstanding adjusted
for effect of dilutive securities 43,219,140 41,997,811 42,086,833 42,012,825
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income available to common shareholders $ 37,210 $ 8,848 $ 105,172 $ 68,481
Add: Interest expense on 71/4% convertible subordinated
debentures, net of tax - 84 132 247
---------- ---------- ---------- ----------
Income available to common shareholders including
effect of dilutive securities $ 37,210 $ 8,932 $ 105,304 $ 68,728
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic earnings per common share $ .87 $ .22 $ 2.55 $ 1.67
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted earnings per common share $ .86 $ .21 $ 2.50 $ 1.64
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
The statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The statement is
effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. It is too early to determine what effect
SFAS No. 130 will have on disclosures included in TCF's financial statements.
In June, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The statement establishes standards for
the way that public business enterprises report information about operating
segments and certain other information in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to
30
shareholders. The statement is effective for financial statements for
periods beginning after December 15, 1997. It is too early to determine what
effect SFAS No. 131 will have on disclosures included in TCF's financial
statements.
FORWARD LOOKING INFORMATION
In recent years, significant new federal legislation has imposed numerous new
legal and regulatory requirements on financial institutions. In addition to
the uncertainties posed by possible legislative change, there are many other
uncertainties that may make TCF's historical performance an unreliable
indicator of its future performance, and forward-looking information,
including projections of future performance, is subject to numerous possible
adverse developments, including but not limited to the possibility of adverse
economic developments which may increase default and delinquency risks in
TCF's loan and lease portfolios; shifts in interest rates which may result in
shrinking interest margins; deposit outflows; interest rates on competing
investments; shifts in demand for financial services and loan and lease
products; increases generally in competitive pressure in the banking and
financial services industry; changes in accounting policies or guidelines, or
monetary and fiscal policies of the Federal government; changes in the
quality or composition of TCF's loan, lease and investment portfolios; or
other significant uncertainties.
TCF's recently completed acquisitions of Standard and Winthrop are subject to
additional uncertainties, including the possible failure to fully realize or
realize within the expected time frame expected cost savings from either
transaction; lower than expected income or revenues following the
transactions, or higher than expected operating costs; business disruption
relating to the transactions; greater than expected costs or difficulties
related to the integration of the management of the acquired companies with
that of TCF; litigation costs and delays caused by litigation; and other
unanticipated occurrences which may increase the costs related to either
transaction or decrease the expected financial benefits of either transaction.
31
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
AT AT AT AT AT AT AT
(Dollars in thousands SEPT. 30, JUNE 30, MARCH 31, DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
except per-share data) 1997 1997 1997 1996 1996 1996 1996
- ----------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL CONDITION DATA:
Total assets $9,796,154 $7,403,760 $7,317,584 $7,430,487 $7,433,682 $7,340,539 $7,316,569
Investments(1) 130,261 82,098 60,458 456,195 402,328 157,414 63,136
Securities available for sale 1,628,126 1,181,126 1,242,457 999,586 998,001 1,049,219 1,117,476
Loans and leases 7,052,032 5,382,356 5,354,941 5,292,920 5,332,800 5,393,769 5,418,564
Deposits 6,976,687 5,243,574 5,291,894 4,977,630 5,018,672 5,052,557 5,150,023
Borrowings 1,754,445 1,349,369 1,273,411 1,708,172 1,671,598 1,584,493 1,453,895
Stockholders' equity 919,952 701,063 626,716 630,687 599,573 597,632 597,891
- ----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
- ----------------------------------------------------------------------------------------------------------------------------------
SEPT. 30, JUNE 30, MARCH 31, DEC. 31, SEPT. 30, JUNE 30, MARCH 31,
1997 1997 1997 1996 1996 1996 1996
- ----------------------------------------------------------------------------------------------------------------------------------
SELECTED OPERATIONS DATA:
Interest income $173,253 $157,242 $153,380 $150,452 $153,049 $153,611 $155,772
Interest expense 73,399 64,605 63,289 62,288 63,551 64,419 68,058
-------- -------- -------- -------- -------- -------- --------
Net interest income 99,854 92,637 90,091 88,164 89,498 89,192 87,714
Provision for credit losses 6,341 4,097 1,498 4,048 6,972 7,324 2,902
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for credit losses 93,513 88,540 88,593 84,116 82,526 81,868 84,812
-------- -------- -------- -------- -------- -------- --------
Non-interest income:
Gain on sale of loans - - - 810 4,633 - -
Gain on sale of loan servicing - - 1,622 - - - -
Gain (loss) on sale of securities
available for sale 2,852 1,093 1,385 2 - (1) 85
Gain on sale of branches 10,635 2,810 - 1,022 - 480 1,245
Other non-interest income 53,917 49,051 43,748 46,340 43,828 43,270 39,898
-------- -------- -------- -------- -------- -------- --------
Total non-interest income 67,404 52,954 46,755 48,174 48,461 43,749 41,228
-------- -------- -------- -------- -------- -------- --------
Non-interest expense:
Provision for real estate losses (56) (60) 98 15 121 (151) 448
Amortization of goodwill and
other intangibles 10,559 1,161 1,193 881 893 893 873
FDIC special assessment - - - - 34,803 - -
Other non-interest expense 87,850 83,042 79,849 80,575 80,976 75,468 77,731
-------- -------- -------- -------- -------- -------- --------
Total non-interest expense 98,353 84,143 81,140 81,471 116,793 76,210 79,052
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense 62,564 57,351 54,208 50,819 14,194 49,407 46,988
Income tax expense 25,354 22,416 21,181 18,923 5,346 19,196 17,566
-------- -------- -------- -------- -------- -------- --------
Net income $ 37,210 $ 34,935 $ 33,027 $ 31,896 $ 8,848 $ 30,211 $ 29,422
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Per common share:
Net income $ .85 $ .83 $ .79 $ .76 $ .21 $ .72 $ .70
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Dividends declared $ .25 $ .25 $ .1875 $ .1875 $ .1875 $ .1875 $ .15625
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
FINANCIAL RATIOS:
Return on average assets (2) 1.80% 1.90% 1.82% 1.81% .49% 1.67% 1.59%
Return on average realized common
equity (2) 19.37 21.35 21.26 20.81 5.82 20.35 20.21
Return on average common equity (2) 19.20 21.37 21.26 20.78 5.89 20.51 19.93
Average total equity to average
assets 9.38 8.91 8.56 8.73 8.40 8.14 7.99
Net interest margin (2)(3) 5.24 5.41 5.31 5.37 5.36 5.27 5.07
- --------------------
(1) Includes interest-bearing deposits with banks, federal funds sold, U.S.
Government and other marketable securities held to maturity, FHLB stock
and FRB stock.
(2) Annualized.
(3) Net interest income divided by average interest-earning assets.
32
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information (Continued)
Consolidated Average Balance Sheets, Interest and Dividends
Earned or Paid, and Related Interest Yields and Rates
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------
1997 1996
----------------------------------------- -----------------------------------------
Interest Interest
Average Yields and Average Yields and
(Dollars in thousands) Balance Interest(1) Rates (2) Balance Interest(1) Rates (2)
------- ----------- ---------- ------- ----------- ----------
Assets:
Securities available
for sale (3) $1,257,257 $ 67,562 7.17% $1,078,433 $ 57,750 7.14%
---------- --------- ---------- ---------
Loans held for sale 202,903 11,338 7.45 237,068 13,461 7.57
---------- --------- ---------- ---------
Loans and leases:
Residential real
estate 2,356,250 138,406 7.83 2,461,543 146,185 7.92
Commercial real estate 851,284 57,684 9.03 935,124 62,864 8.96
Commercial business 198,637 13,126 8.81 161,655 10,738 8.86
Consumer 1,817,742 163,902 12.02 1,597,533 146,458 12.22
Lease financings 326,257 27,722 11.33 256,313 21,677 11.28
---------- --------- ---------- ---------
Total loans and
leases (4) 5,550,170 400,840 9.63 5,412,168 387,922 9.56
---------- --------- ---------- ---------
Investments:
Interest-bearing
deposits with banks 13,430 561 5.57 5,274 181 4.58
Federal funds sold 2,175 91 5.58 1,739 75 5.75
U.S. Government and
other marketable
securities held
to maturity 3,943 155 5.24 3,798 149 5.23
FHLB stock 52,929 2,895 7.29 53,228 2,894 7.25
FRB stock 9,646 433 5.99 - - -
---------- --------- ---------- ---------
Total investments 82,123 4,135 6.71 64,039 3,299 6.87
---------- --------- ---------- ---------
Total interest-
earning assets 7,092,453 483,875 9.10 6,791,708 462,432 9.08
--------- ----- --------- -----
Other assets(5) 540,444 465,343
---------- ----------
Total assets $7,632,897 $7,257,051
---------- ----------
---------- ----------
Liabilities and
Stockholders' Equity:
Noninterest-bearing
deposits $ 765,766 $ 591,813
---------- ----------
Interest-bearing
deposits:
Checking 531,057 4,390 1.10 513,635 4,234 1.10
Passbook and
statement 836,382 11,959 1.91 805,248 10,920 1.81
Money market 647,722 15,096 3.11 631,370 14,402 3.04
Certificates 2,604,886 104,104 5.33 2,484,869 100,204 5.38
---------- --------- ---------- ---------
Total interest-
bearing
deposits 4,620,047 135,549 3.91 4,435,122 129,760 3.90
---------- --------- ---------- ---------
Borrowings:
Securities sold under
repurchase agreements
and federal funds
purchased 395,367 16,939 5.71 534,963 22,467 5.60
FHLB advances 676,794 29,649 5.84 685,569 28,046 5.45
Discounted lease rentals 218,344 13,594 8.30 181,099 11,112 8.18
Subordinated debt 38,949 2,537 8.68 24,941 1,795 9.60
Collateralized
obligations 40,258 1,930 6.39 40,950 1,931 6.29
Other borrowings 23,867 1,095 6.12 19,384 917 6.31
---------- --------- ---------- ---------
Total borrowings 1,393,579 65,744 6.29 1,486,906 66,268 5.94
---------- --------- ---------- ---------
Total interest-
bearing
liabilities 6,013,626 201,293 4.46 5,922,028 196,028 4.41
--------- ----- --------- -----
Other liabilities(5) 170,017 150,550
---------- ----------
Total liabilities 6,949,409 6,664,391
---------- ----------
Stockholders' equity:(5)
Preferred equity - -
Common equity 683,488 592,660
---------- ----------
Total stockholders'
equity 683,488 592,660
---------- ----------
Total liabilities
and stockholders'
equity $7,632,897 $7,257,051
---------- ----------
---------- ----------
Net interest income $282,582 $266,404
--------- ---------
--------- ---------
Net interest rate spread 4.64% 4.67%
----- -----
----- -----
Net interest margin 5.31% 5.23%
----- -----
----- -----
(1) Tax-exempt income was not significant and thus has not been presented on
a tax equivalent basis. Tax-exempt income of $158,000 and $270,000 was
recognized during the nine months ended September 30, 1997 and 1996,
respectively.
(2) Annualized.
(3) Average balance and yield of securities available for sale is based upon
the historical amortized cost balance.
(4) Average balance of loans and leases includes non-accrual loans and leases
and is presented net of unearned income.
(5) Average balance is based upon month-end balances.
33
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, TCF is a party to legal proceedings arising out of its
general lending and operating activities. TCF is and expects to become
engaged in a number of foreclosure proceedings and other collection actions
as part of its loan collection activities. From time to time, borrowers have
also brought actions against TCF, in some cases claiming substantial amounts
in damages. TCF is also from time to time involved in litigation relating to
its retail banking, consumer credit and mortgage banking operations and
related consumer financial services, including class action litigation.
Management, after review with its legal counsel, believes that the ultimate
disposition of its litigation will not have a material effect on TCF's
financial condition.
On November 2, 1993, TCF National Bank Minnesota ("TCF Minnesota") filed a
complaint in the United States Court of Federal Claims seeking monetary
damages from the United States for breach of contract, taking of property
without just compensation and deprivation of property without due process.
TCF Minnesota's claim is based on the government's breach of contract in
connection with TCF Minnesota's acquisitions of certain savings institutions
prior to the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), which contracts allowed TCF Minnesota to
treat the "supervisory goodwill" created by the acquisitions as an asset that
could be counted toward regulatory capital, and provided for other favorable
regulatory accounting treatment. The United States has not yet answered TCF
Minnesota's complaint. TCF Minnesota's complaint involves approximately
$80.3 million in supervisory goodwill.
In August 1995, Great Lakes National Bank Michigan ("Great Lakes") filed with
the United States Court of Federal Claims a complaint seeking monetary
damages from the United States for breach of contract, taking of property
without just compensation and deprivation of property without due process.
Great Lakes' claim is based on the government's breach of contract in
connection with Great Lakes' acquisitions of certain savings institutions
prior to the enactment of FIRREA in 1989, which contracts allowed Great Lakes
to treat the "supervisory goodwill" created by the acquisitions as an asset
that could be counted toward regulatory capital, and provided for other
favorable regulatory accounting treatment. The United States has not yet
answered Great Lakes' complaint. Great Lakes' complaint involves
approximately $87.3 million in supervisory goodwill.
On July 1, 1996, the United States Supreme Court issued a decision affirming
the August 30, 1995 decision of the United States Court of Appeals for the
Federal Circuit, which decision had affirmed the Court of Federal Claims'
liability determinations in three other "supervisory goodwill" cases,
consolidated for review under the title WINSTAR CORP. V. UNITED STATES, 116
S.Ct. 2432 (1996). In rejecting the United States' consolidated appeal from
the Court of Federal Claims' decisions, the Supreme Court held in WINSTAR
that the United States had breached contracts it had entered into with the
plaintiffs which provided for the treatment of supervisory goodwill, created
through the plaintiffs' acquisitions of failed or failing savings
institutions, as an asset that could be counted toward regulatory capital.
Two of the three cases consolidated in the Supreme Court proceedings are now
proceeding to trials before the Court of Federal Claims on the issue of
damages. One of these trials commenced on February 24, 1997, and the other
is currently scheduled to begin on April 27, 1998. In connection with the
trials in those cases, the Court of Federal Claims in December of 1996 denied
the government's motion seeking to preclude the plaintiffs in these cases
from offering evidence regarding the scope and extent of any lost profits
they suffered as a result of the government's breach.
34
There are a variety of contracts and contract provisions in the TCF Minnesota
and Great Lakes transactions. The government has indicated that it will have
a number of affirmative defenses against goodwill litigation filed against
it. There can be no assurance that the U.S. Supreme Court decision in WINSTAR
will mean that a similar result would be obtained in the actions filed by TCF
Minnesota and Great Lakes. There also can be no assurance that the
government will be determined liable in connection with the loss of
supervisory goodwill by either TCF Minnesota or Great Lakes or, even if a
determination favorable to TCF Minnesota or Great Lakes is made on the issue
of the government's liability, that a measure of damages will be employed
that will permit any recovery on TCF Minnesota's or Great Lakes' claim.
Because of the complexity of the issues involved in both the liability and
damages phases of this litigation, and the usual risks associated with
litigation, the Company cannot predict the outcome of TCF Minnesota's or
Great Lakes' cases, and investors should not anticipate any recovery.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See Index to Exhibits on page 37 of this report.
(b) Reports on Form 8-K.
A Current Report on Form 8-K, dated September 4, 1997, was filed in
connection with TCF's announcement that it had completed its acquisition of
Standard.
A Current Report on Form 8-K, dated October 20, 1997, was filed in
connection with TCF's announcement that its Board declared a two-for-one
stock split in the form of a 100% stock dividend payable November 28, 1997
to shareholders of record as of November 7, 1997, and that TCF's Board
declared a cash dividend of 25 cents per common share, to be paid
November 28, 1997, prior to the stock split.
An Amendment No. 1 to Current Report on Form 8-K/A, dated September 4,
1997, was filed in connection with the completion of the Standard
acquisition.
A current Report on Form 8-K, dated November 10, 1997, was filed in
connection with TCF's execution of an agreement relating to its pending
acquisition of 76 branches in Jewel-Osco stores.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TCF FINANCIAL CORPORATION
/s/ Ronald J. Palmer
-------------------------------------------
Ronald J. Palmer, Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Mark R. Lund
-------------------------------------------
Mark R. Lund, Senior Vice President,
Assistant Treasurer and Controller
(Principal Accounting Officer)
Dated: November 13, 1997
36
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
FOR FORM 10-Q
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
4(a) Copies of instruments with respect N/A
to long-term debt will be furnished
to the Securities and Exchange
Commission upon request.
11 Computation of Earnings Per Common Share 38
37