SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE
NO. 0-16431
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TCF FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1591444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 MARQUETTE AVENUE, MAIL CODE 100-01-A, MINNEAPOLIS, MINNESOTA 55402
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: 612-661-6500
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Securities registered pursuant to Section 12(b) of the Act
(all registered on the New York Stock Exchange):
COMMON STOCK (PAR VALUE $.01 PER SHARE)
PREFERRED SHARE PURCHASE RIGHTS
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
9.50% WINTHROP RESOURCES CORPORATION SENIOR NOTES DUE 2003
(Title of class)
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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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. /X/
As of March 13, 1998, the aggregate market value of the voting stock
held by nonaffiliates of the registrant, computed by reference to the average
of the high and low prices on such date as reported by the New York Stock
Exchange, was $2,632,740,541.
As of March 13, 1998, there were outstanding 91,983,016 shares of the
registrant's common stock, par value $.01 per share, its only outstanding
class of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Specific portions of the registrant's annual report to shareholders for
the year ended December 31, 1997 are incorporated by reference into Parts I,
II and IV hereof.
Specific portions of the registrant's definitive proxy statement dated
March 20, 1998 are incorporated by reference into Part III hereof.
TABLE OF CONTENTS
PART I
PAGE
----
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Forward-Looking Information . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Lending Activities. . . . . . . . . . . . . . . . . . . . . . 3
Investment Activities . . . . . . . . . . . . . . . . . . . . 8
Sources of Funds. . . . . . . . . . . . . . . . . . . . . . . 10
Other Information . . . . . . . . . . . . . . . . . . . . . . 11
Activities of Subsidiaries of TCF Financial . . . . . . . . 11
Recent Accounting Developments. . . . . . . . . . . . . . . 12
Competition . . . . . . . . . . . . . . . . . . . . . . . . 13
Employees . . . . . . . . . . . . . . . . . . . . . . . . . 13
Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 19
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 20
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . 20
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . . 23
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . 24
PART III
Item 10. Directors and Executive Officers of the Registrant. . . . . . . 24
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . 24
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 13. Certain Relationships and Related Transactions. . . . . . . . . 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 24
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Index to Consolidated Financial Statements. . . . . . . . . . . . . . . . 28
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING INFORMATION
There are a number of important factors which could cause TCF Financial
Corporation's ("TCF" or the "Company") future results to differ materially
from historical performance. These include but are not limited to possible
legislative changes; 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; 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; results of litigation or other significant
uncertainties. TCF's recently completed acquisitions of Winthrop Resources
Corporation ("Winthrop"), Standard Financial, Inc. ("Standard") and the
Jewel-Osco branches (and its commitment to construct additional Jewel-Osco
branches in future periods) are subject to additional uncertainties,
including the possible failure to fully realize or realize within the
expected time frame expected cost savings from the transactions; lower than
expected income or revenue 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,
retention and attraction of employees or management of the acquired business
operations with those of TCF; litigation costs and delays caused by
litigation; and other unanticipated occurrences which may increase the costs
related to the transactions or decrease the expected financial benefits of
the transactions.
GENERAL
TCF, a Delaware corporation based in Minneapolis, Minnesota, with $9.7
billion in assets, is the holding company of four federally chartered
national banks, TCF National Bank Minnesota ("TCF Minnesota"), TCF National
Bank Illinois ("TCF Illinois"), TCF National Bank Wisconsin ("TCF Wisconsin")
and Great Lakes National Bank Michigan ("Great Lakes Michigan"), and one bank
holding company, TCF Colorado Corporation, which owns TCF National Bank
Colorado ("TCF Colorado"). Unless otherwise indicated, references herein to
TCF include its direct and indirect subsidiaries. TCF Minnesota, TCF
Illinois, TCF Wisconsin, Great Lakes Michigan, and TCF Colorado are
collectively referred to herein as the "TCF Banks." References herein to the
"Holding Company" or "TCF Financial" refer to TCF Financial Corporation on an
unconsolidated basis. Where information is incorporated in this report by
reference to TCF's 1997 Annual Report, only those portions specifically
identified are so incorporated.
TCF Financial was organized in 1987 as a thrift holding company, and its
common stock has been listed on the New York Stock Exchange since 1989. On
April 7, 1997, TCF completed the conversion of its savings bank subsidiaries
to 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 Colorado. During the third quarter of 1997, TCF sold all eight branches
and related deposits of Great Lakes Ohio. See "REGULATION -- Recent
Developments."
TCF has positioned the TCF Banks as "community banks" focusing on
lending, deposit products and other services offered in their local markets.
TCF's strategic emphasis on retail banking has allowed it to fund its assets
primarily with retail core deposits, significantly reduce wholesale
borrowings and lower its interest-rate risk. In its local market and
elsewhere, TCF Minnesota is also engaged in consumer finance lending through
its consumer finance subsidiaries and lease financing through its leasing
subsidiary, Winthrop.
TCF's marketing strategy emphasizes attracting deposits held in
checking, passbook and statement savings, and money market accounts, which
also provide TCF with a significant source of fee income. TCF engages in
commercial, residential and consumer lending activities, lease financing and
in the insurance services business, including the sale of single premium
tax-deferred annuities. It also has a broker dealer selling non-proprietary
mutual funds.
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. TCF's
non-interest income in future periods may be
1
negatively impacted by pending state and federal legislative proposals,
which, if enacted, could limit loan, deposit or other fees and service
charges. See "FORWARD-LOOKING INFORMATION," and "Financial Review --
Financial Condition - Legislative and Regulatory Developments" on page 31 of
TCF's 1997 Annual Report, incorporated herein by reference, for additional
information.
On September 4, 1997, TCF acquired all of the outstanding common stock
of 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.
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.
On June 24, 1997, TCF completed its acquisition of Winthrop, a leasing
company with $363 million in assets. Winthrop leases computers,
telecommunications equipment, point-of-sale systems and other
business-essential equipment to companies nationwide. 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.
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.
On January 30, 1998, TCF Illinois completed its acquisition of 76
branches in Jewel-Osco stores in the Chicago area previously operated by Bank
of America. TCF Illinois converted existing deposits by offering TCF Illinois
products to Bank of America customers and acquired the related fixed assets
and 178 automated teller machines ("ATM") located in Jewel-Osco stores. TCF
accounted for the acquisition using the purchase method of accounting.
Additional information concerning all of the aforementioned acquisitions
is set forth in Note 2 of Notes to Consolidated Financial Statements on pages
43 through 45 of TCF's 1997 Annual Report, incorporated herein by reference.
TCF operated 78 bank branches in Minnesota at December 31, 1997. The
Company also operated 47 bank branches in Illinois, 28 in Wisconsin, 61 in
Michigan and seven in Colorado at December 31, 1997. TCF strives to develop
innovative banking products and services. Of TCF's 224 bank branches, 61
were "in-store" bank branches at December 31, 1997. These in-store bank
branches provide TCF with the opportunity to sell its consumer products and
services, including deposits and loans, at a relatively low entry cost and
feature extended hours, including Saturdays and Sundays. TCF's "Totally
Free"-SM- checking accounts and other deposit products provide it with a
significant source of low-cost funds and fee income. TCF has expanded its
ATM network to 1,156 machines at December 31, 1997, and offers its customers
an automated telephone banking system.
In recent years, significant new federal legislation has imposed
numerous new legal and regulatory requirements on financial institutions.
Among the most significant of these requirements are new minimum regulatory
capital levels and enforcement actions that can be taken by regulators when
an institution's regulatory capital is deemed to be inadequate. TCF and each
of the TCF Banks currently exceeds all of the current and fully phased-in
regulatory capital requirements. See "REGULATION."
As federally chartered national banks, the TCF Banks are subject to
regulation and examination by the Office of the Comptroller of the Currency
("OCC") and, in certain cases, by the Federal Deposit Insurance Corporation
("FDIC"). The TCF Banks' deposits are insured to $100,000 by the FDIC, and
as such these institutions are subject to regulations promulgated by the
FDIC. The TCF Banks are members of the Federal Home Loan Bank ("FHLB") of
Des Moines, Chicago and/or Indianapolis, and are also member banks within
their respective Federal Reserve districts. TCF Financial is a bank holding
company and is subject to regulation and examination by the Federal Reserve
Board ("FRB"). See "REGULATION -- Regulation of TCF Financial and Affiliate
and Insider Transactions."
2
The executive offices of TCF Financial are located at 319 Barry Avenue South,
Wayzata, Minnesota 55391.
The following description includes detailed information regarding the
business of TCF and its subsidiaries.
LENDING ACTIVITIES
GENERAL
TCF's lending activities reflect its community banking philosophy,
emphasizing loans to individuals and small to medium-sized businesses in its
primary market areas in Minnesota, Illinois, Wisconsin and Michigan. TCF is
also engaged in lease financing and has expanded its consumer lending and
consumer finance operations in recent years.
The following table sets forth the contractual amortization of TCF's
loan and lease portfolios at December 31, 1997, excluding loans held for
sale. Commercial business demand loans are reported due within one year.
This table does not include the effect of prepayments, which is an important
consideration in management's interest-rate risk analysis. Industry
experience indicates that loans remain outstanding for significantly shorter
periods than their contractual terms.
AT DECEMBER 31, 1997 (1)
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REAL ESTATE
----------------------------------
TOTAL
REAL COMMERCIAL LEASE TOTAL LOANS
RESIDENTIAL COMMERCIAL ESTATE BUSINESS CONSUMER FINANCING AND LEASES
----------- ---------- ---------- ---------- ----------- --------- -----------
(IN THOUSANDS)
Amounts due:
Within 1 year $ 144,250 $159,691 $ 303,941 $119,007 $ 208,607 $192,999 $ 824,554
---------- -------- ---------- -------- ---------- -------- ----------
After 1 year:
1 to 2 years 145,709 81,983 227,692 59,036 214,367 122,769 623,864
2 to 3 years 159,976 78,132 238,108 32,932 209,014 64,867 544,921
3 to 5 years 272,606 158,028 430,634 22,370 289,794 33,635 776,433
5 to 10 years 663,297 278,845 942,142 5,813 520,313 - 1,468,268
10 to 15 years 525,604 76,082 601,686 570 578,282 - 1,180,538
Over 15 years 1,708,085 29,403 1,737,488 - 18,844 - 1,756,332
---------- -------- ---------- -------- ---------- -------- ----------
Total after 1 year 3,475,277 702,473 4,177,750 120,721 1,830,614 221,271 6,350,356
---------- -------- ---------- -------- ---------- -------- ----------
Total $3,619,527 $862,164 $4,481,691 $239,728 $2,039,221 $414,270 $7,174,910
---------- -------- ---------- -------- ---------- -------- ----------
---------- -------- ---------- -------- ---------- -------- ----------
Amounts due after 1 year on:
Fixed-rate loans and leases $1,268,897 $111,284 $1,380,181 $ 23,701 $ 668,386 $221,271 $2,293,539
Adjustable-rate loans 2,206,380 591,189 2,797,569 97,020 1,162,228 - 4,056,817
---------- -------- ---------- -------- ---------- -------- ----------
Total after 1 year $3,475,277 $702,473 $4,177,750 $120,721 $1,830,614 $221,271 $6,350,356
---------- -------- ---------- -------- ---------- -------- ----------
---------- -------- ---------- -------- ---------- -------- ----------
- ---------------------------
(1) Amounts presented are the gross balances before adjustment for net
discounts, premiums, deferred fees, and unearned discounts and finance
charges.
See "Financial Review -- Financial Condition - Loans and Leases" on
pages 25 through 27 and Note 6 of Notes to Consolidated Financial Statements
on pages 47 and 48 of TCF's 1997 Annual Report, incorporated herein by
reference, for additional information regarding TCF's loan and lease
financing portfolios.
RESIDENTIAL REAL ESTATE LENDING
TCF's residential real estate lending activities (first mortgage loans
for the financing of one- to four-family homes) are conducted through certain
of the TCF Banks, through TCF Mortgage Corporation ("TCF Mortgage"), a wholly
owned subsidiary of TCF Minnesota, and Standard Financial Mortgage, Inc., a
wholly owned subsidiary of TCF Illinois. Residential mortgage loan
originations are predominantly secured by properties in Minnesota, Illinois,
Wisconsin and Michigan. TCF engages in both adjustable-rate and fixed-rate
residential real estate lending. Adjustable-rate residential real estate
loans held in TCF's portfolio totaled $2.2 billion at December 31, 1997,
compared with $987.6 million at December 31, 1996. The increase is
principally due to the acquisition of Standard.
Loan originations by TCF Mortgage include loans purchased from loan
correspondents and also loans purchased from Burnet Home Loans, a mortgage
origination joint venture between a subsidiary of TCF Mortgage and Burnet
Mortgage
3
Corporation, an affiliate of Burnet Realty Inc. Burnet Home Loan's loan
officers originate loans from certain offices of Burnet Realty Inc. On
February 13, 1998, TCF sold its partnership interest in Burnet Home Loans.
TCF sells certain residential real estate loans in the secondary market,
primarily on a nonrecourse basis. TCF retains servicing rights for the
majority of the loans it sells into the secondary market. These sales
provide additional funds for loan originations and also generate fee income.
TCF may also from time to time purchase or sell servicing rights on
residential real estate loans. At December 31, 1997 and 1996, TCF serviced
for others $4.4 billion and $4.5 billion, respectively, in residential real
estate loans. During 1997 and 1995, TCF sold servicing rights on $144.7
million and $146.3 million of loans serviced for others at net gains of $1.6
million and $1.5 million, respectively. There were no sales of servicing
rights on loans serviced for others during 1996.
Adjustable-rate residential real estate loans originated by TCF have
various adjustment periods and generally provide for limitations on the
amount the rate may adjust on each adjustment date, as well as the total
amount of adjustments over the lives of the loans. Accordingly, while this
portfolio of loans is rate sensitive, it may not be as rate sensitive as
TCF's cost of funds. In addition to such interest-rate risk, TCF faces credit
risks resulting from potential increased costs to borrowers as a result of
rate adjustments on adjustable-rate loans in its portfolio, which will depend
upon the magnitude and frequency of shifts in market interest rates. Some
adjustable-rate residential real estate loans originated by TCF in prior
periods did not provide for limitations on rate adjustments. Credit risk may
also result from declines in the values of underlying real estate collateral.
See "-- Classified Assets, Loan and Lease Delinquencies and Defaults."
TCF Mortgage and the TCF Banks generally adhere to Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation
("FHLMC"), Veterans Administration ("VA") or Federal Housing Administration
("FHA") guidelines in originating residential real estate loans. TCF
generally requires that all conventional real estate loans with loan-to-value
ratios in excess of 80% carry private mortgage insurance.
CONSUMER LENDING
GENERAL
TCF makes consumer loans for personal, family or household purposes,
such as debt consolidation or the financing of home improvements,
automobiles, vacations and education. All of TCF's consumer loans are
originated in markets in which the TCF Banks or TCF's consumer finance
subsidiaries have their offices. Total consumer loans for the TCF Banks and
the consumer finance subsidiaries totaled $2 billion at December 31, 1997,
with $797 million, or 39%, having fixed interest rates and $1.2 billion, or
61%, having adjustable interest rates. The following discussion provides
additional information on TCF's consumer lending operations.
BANK CONSUMER DIVISION LENDING
The consumer lending activities of the TCF Banks include a full range of
consumer-oriented products including real estate secured loans, loans secured
by personal property and unsecured personal loans. Each of these loan types
can be made on an open- or closed-end basis. Consumer loans having
adjustable interest rates present a credit risk similar to that posed by
residential real estate loans as a result of increased costs to borrowers in
the event of a rise in rates (see discussion above under "-- Residential Real
Estate Lending"). Consumer loans secured by real estate may present
additional credit risk in the event of a decline in the value of real estate
collateral.
TCF originates student loans for resale. TCF had $135.3 million of
education loans held for sale at December 31, 1997, compared with $146.3
million at December 31, 1996. TCF generally retains the student loans it
originates until they are fully disbursed. Under a forward commitment
agreement with the Student Loan Marketing Association ("SLMA"), TCF can sell
the student loans to SLMA once they are fully disbursed, but must sell the
student loans to SLMA before they go into repayment status. These loans are
originated in accordance with designated guarantor and U.S. Department of
Education guidelines and do not involve any independent credit underwriting
by TCF. During the years ended December 31, 1997, 1996 and 1995, TCF sold
$98.8 million, $102.8 million and $91 million of its student loans,
respectively. TCF subcontracts for the servicing of student loans in its
portfolio. TCF's future student loan origination activity will be dependent
on continued support of guaranteed student loan programs by the U.S.
Government and TCF's ability to continue to sell such loans to SLMA or other
parties. Recent federal legislation has limited the role
4
of private lenders in originating student loans, and this may reduce the
volume of TCF's student loan originations in future periods.
CONSUMER FINANCE LENDING
TCF engages in consumer finance lending through the consumer finance
subsidiaries. TCF had 60 consumer finance offices in 16 states as of
December 31, 1997. Additional information concerning the geographic
locations of TCF's consumer finance loan portfolio is set forth in Note 6 of
Notes to Consolidated Financial Statements on pages 47 and 48 of TCF's 1997
Annual Report, incorporated herein by reference. TCF's consumer finance loan
portfolio totaled $521.5 million at December 31, 1997, compared with $496.3
million at December 31, 1996. The Company is seeking to increase the
outstanding loan balances and improve the profitability of its consumer
finance subsidiaries. Consumer finance lending is generally considered to
involve a higher level of credit risk. See "Financial Review -- Financial
Condition - Loans and Leases" on pages 25 through 27 of TCF's 1997 Annual
Report, incorporated herein by reference, for additional information
regarding the operations of the consumer finance subsidiaries.
COMMERCIAL REAL ESTATE LENDING
TCF currently originates longer-term loans on commercial real estate
and, to a lesser extent, shorter-term construction loans. Although TCF's
commercial real estate lending activity has declined in recent years,
primarily as a result of more stringent underwriting standards and
competition from other lenders, TCF is endeavoring to increase its
originations of commercial real estate loans to creditworthy borrowers based
in its primary markets. TCF may also engage in commercial real estate loan
brokerage activity. TCF's commercial real estate loans are generally
originated with adjustable interest rates, but TCF also offers shorter-term
loans at fixed rates. At December 31, 1997, adjustable-rate loans
represented 84% of commercial real estate loans outstanding. At December 31,
1997, TCF had a total of 1,637 outstanding commercial real estate loans
secured by properties located in its primary markets. Of this total, 212
loans totaling $461.7 million had balances exceeding $1 million. See
"Financial Review -- Financial Condition - Loans and Leases" on pages 25
through 27 of TCF's 1997 Annual Report, incorporated herein by reference, for
information regarding the types of properties securing TCF's commercial real
estate loans.
At December 31, 1997, TCF's commercial construction and development loan
portfolio totaled $86.2 million. Construction and permanent commercial real
estate lending is generally considered to involve a higher level of risk than
single-family residential lending due to the concentration of principal in a
limited number of loans and borrowers. In addition, the nature of these
loans is such that they are generally less predictable and more difficult to
evaluate and monitor.
COMMERCIAL BUSINESS LENDING
TCF engages in general commercial business lending. Commercial business
loans may be secured by various types of business assets, including
commercial real estate, and in some cases may be made on an unsecured basis.
TCF is seeking to expand its commercial business lending activity by lending
to small and medium-sized businesses. TCF's commercial business lending
activities encompass loans with a broad variety of purposes, including
corporate working capital loans and loans to finance the purchase of
equipment or other acquisitions. TCF also makes loans to individuals who use
the funds for business or personal purposes. As part of its commercial
business and commercial real estate lending activities, TCF also issues
standby letters of credit. At December 31, 1997, TCF had 82 such standby
letters of credit outstanding in the aggregate amount of $30.7 million.
Recognizing the generally increased risks associated with commercial
business lending, TCF originates commercial business loans in order to
increase its short-term, variable-rate asset base and to contribute to its
profitability through the higher rates earned on these loans and the
marketing of other bank products. TCF concentrates on originating commercial
business loans primarily to middle-market companies based in its primary
markets with borrowing requirements of less than $15 million. Substantially
all of TCF's commercial business loans outstanding at December 31, 1997 were
to borrowers based in its primary markets.
5
LEASE FINANCING
TCF engages in lease financing through Winthrop. Lease financings
increased $72.5 million from year-end 1996 to $414.3 million at December 31,
1997, reflecting a $79.7 million increase in direct financing leases,
partially offset by a $9.9 million decrease in sales-type leases. See
"Financial Review -- Financial Condition - Loans and Leases" on pages 25
through 27 of TCF's 1997 Annual Report, incorporated herein by reference, for
additional information on lease financing.
CLASSIFIED ASSETS, LOAN AND LEASE DELINQUENCIES AND DEFAULTS
TCF has established a classification system for individual commercial
loans or other assets based on OCC regulations under which all or part of a
loan or other asset may be classified as "substandard," "doubtful," "loss" or
"special mention." It has also established overall ratings for various
credit portfolios. A loan or other asset is placed in the substandard
category when it is considered to have a well-defined weakness. A loan or
other asset is placed in the doubtful category when some loss is likely but
there is still sufficient uncertainty to permit the asset to remain on the
books at its full value. All or a portion of a loan or other asset is
classified as loss when it is considered uncollectible, in which case it is
generally charged off. In some cases, loans or other assets for which there
is perceived some possible exposure to credit loss are classified as special
mention. Loans and other assets that are classified are subject to periodic
review of their appropriate regulatory classifications.
The following table summarizes information about TCF's non-accrual,
restructured and past due loans and leases:
AT DECEMBER 31,
------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN MILLIONS)
Non-accrual loans and leases $36.8 $26.4 $44.3 $33.8 $88.3
Restructured loans 1.3 3.0 1.6 4.3 10.8
----- ----- ----- ----- -----
Total non-accrual and restructured
loans and leases $38.1 $29.4 $45.9 $38.1 $99.1
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Accruing loans and leases 90 days or
more past due $ - $ - $ .7 $ 2.4 $ 5.2
----- ----- ----- ----- -----
----- ----- ----- ----- -----
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. See "Financial Review -- Financial Condition -
Non-Performing Assets" on pages 27 through 29 of TCF's 1997 Annual Report,
incorporated herein by reference, for information regarding other problem
loans and leases in TCF's portfolio.
TCF has established loan and lease loss reserves for known and
anticipated problem loans and leases as well as for loans and leases which
are not currently known to require a specific reserve. Total loan and lease
loss reserves at December 31, 1997 were $82.6 million, which amounts to 1.15%
of gross loans and leases outstanding. The following table summarizes the
allocation of the allowance for loan and lease losses (includes general and
specific loss allocations):
ALLOCATIONS AS A PERCENTAGE
OF GROSS
LOANS AND LEASES OUTSTANDING
BY TYPE(1)
AT DECEMBER 31, AT DECEMBER 31,
------------------------------------------- ---------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ----- ----- ----- ----- -----
(DOLLARS IN THOUSANDS)
Residential real estate $ 3,501 $ 2,379 $ 3,238 $ 2,493 $ 2,449 .10% .11% .12% .09% .11%
Commercial real estate 15,065 16,213 20,701 22,006 24,869 1.75 1.88 2.13 2.21 2.28
Commercial business 4,520 3,072 7,261 5,603 13,605 1.89 1.96 4.33 2.93 6.33
Consumer 28,129 26,700 16,667 10,757 7,797 1.38 1.48 1.05 .83 .72
Lease financing 2,004 1,116 595 - - .48 .33 .21 - -
Unallocated 29,364 22,385 17,828 15,484 5,724 N.A. N.A. N.A. N.A. N.A.
------- ------- ------- ------- -------
Total allowance balance $82,583 $71,865 $66,290 $56,343 $54,444 1.15 1.33 1.18 1.05 1.12
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ---------------------------
(1) Excluding loans held for sale.
N.A. - Not applicable.
6
The following table summarizes the percentage of the outstanding balance
of gross loans and leases in each category to total gross loans and leases,
excluding loans held for sale:
AT DECEMBER 31,
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Residential real estate 50.5% 41.7% 46.5% 49.5% 47.3%
Commercial real estate 12.0 15.9 17.2 18.5 22.4
Commercial business 3.3 2.9 3.0 3.6 4.4
Consumer 28.4 33.2 28.3 24.2 22.1
Lease financing 5.8 6.3 5.0 4.2 3.8
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
The following table summarizes additional information about TCF's
allowance for loan and lease losses:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
Balance at beginning of year $ 71,865 $ 66,290 $ 56,343 $ 54,444 $ 47,834
Acquired balance 10,592 - - - -
Adjustments for pooling of interests - - - - (56)
Charge-offs:
Residential real estate (444) (333) (472) (1,070) (896)
Commercial real estate (927) (1,944) (4,189) (8,039) (18,942)
Commercial business (1,485) (2,786) (1,695) (2,804) (8,473)
Consumer (21,660) (18,317) (8,414) (4,081) (4,483)
Lease financing (2,297) (914) (247) (109) (2,381)
--------- --------- --------- --------- ---------
(26,813) (24,294) (15,017) (16,103) (35,175)
--------- --------- --------- --------- ---------
Recoveries:
Residential real estate 167 131 157 222 274
Commercial real estate 2,530 3,690 1,080 2,475 2,132
Commercial business 2,488 2,675 4,862 3,132 2,309
Consumer 3,141 1,918 1,892 1,262 1,353
Lease financing 618 9 - - -
--------- --------- --------- --------- ---------
8,944 8,423 7,991 7,091 6,068
--------- --------- --------- --------- ---------
Net charge-offs (17,869) (15,871) (7,026) (9,012) (29,107)
Provision charged to operations 17,995 21,446 16,973 10,911 35,773
--------- --------- --------- --------- ---------
Balance at end of year $ 82,583 $ 71,865 $ 66,290 $ 56,343 $ 54,444
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of net loan and lease charge-offs
to average loans and leases
outstanding (1) .30% .29% .13% .18% .63%
Year-end allowance as a percentage of
year-end gross loan and lease
balances (2) 1.15 1.33 1.18 1.05 1.12
- ---------------------------
(1) Excluding loans held for sale.
In addition to its allowance for loan and lease losses, TCF had an
industrial revenue bond reserve of $1.5 million at December 31, 1997.
A summary of the industrial revenue bond reserves follows:
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(IN THOUSANDS)
Balance at beginning of year $1,660 $1,960 $2,759 $2,689 $1,463
Adjustments for pooling of interests - - - - 225
Provision for losses (200) (200) (919) - 1,726
Net (charge-offs) recoveries - (100) 120 70 (725)
------- ------- ------- ------- -------
Balance at end of year $1,460 $1,660 $1,960 $2,759 $2,689
------- ------- ------- ------- -------
------- ------- ------- ------- -------
7
The allowance for loan and lease losses and industrial revenue bond
reserves are based upon management's periodic analysis of TCF's loan and
lease portfolios and industrial revenue bond financial guarantees. Although
appropriate levels of reserves have been estimated based upon factors and
trends identified by management, there can be no assurance that the levels
are adequate. Economic stagnation or reversals in the economy could give
rise to increasing risk of credit losses and necessitate an increase in the
required level of reserves. The expansion in the Company's consumer finance
operation, and in particular the emphasis on sub-prime automobile lending,
creates increased exposure to increases in delinquencies, repossessions,
foreclosures and losses that generally occur during economic downturns or
recessions.
Adverse economic developments are also likely to adversely affect
commercial lending operations and increase the risk of loan defaults and
credit losses on such loans. Carrying values of foreclosed commercial real
estate properties are based on appraisals, prepared by certified appraisers,
whenever possible. TCF reviews each external commercial real estate
appraisal it receives for accuracy, completeness and reasonableness of
assumptions used. Renewed weaknesses in real estate markets may result in
further declines in property values and the sale of 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.
Additional information concerning TCF's allowance for loan and lease
losses and industrial revenue bond reserves is set forth in "Financial Review
- -- Financial Condition - Allowance for Loan and Lease Losses and Industrial
Revenue Bond Reserves" on page 27, in Note 1 of Notes to Consolidated
Financial Statements on pages 40 through 42 of TCF's 1997 Annual Report and
in Note 7 of Notes to Consolidated Financial Statements on page 49 of TCF's
1997 Annual Report, incorporated herein by reference.
INVESTMENT ACTIVITIES
The TCF Banks have authority to invest in various types of liquid
assets, including United States Treasury obligations and securities of
various federal agencies, deposits of insured banks, bankers' acceptances and
federal funds. Liquidity may increase or decrease depending upon the
availability of funds and comparative yields on investments in relation to
the return on loans and leases. The TCF Banks must also meet reserve
requirements of the FRB, which are imposed based on amounts on deposit in
various types of deposit categories.
Following is a table indicating the investments comprising TCF's
portfolio, excluding securities available for sale:
AT DECEMBER 31,
-----------------------------
1997 1996 1995
-------- -------- -------
(IN THOUSANDS)
Interest-bearing deposits with banks $ 20,572 $386,224 $11,594
U.S. Government and other marketable securities held to maturity:
U.S. Government and agency obligations - - 50
Commercial paper 4,061 3,910 3,666
-------- -------- -------
4,061 3,910 3,716
Federal Home Loan Bank stock, at cost 82,002 66,061 60,096
Federal Reserve Bank stock, at cost 22,977 - -
-------- -------- -------
$129,612 $456,195 $75,406
-------- -------- -------
-------- -------- -------
8
Information regarding the carrying values and fair values of TCF's
investments is set forth in Note 3 of Notes to Consolidated Financial
Statements on page 45 of TCF's 1997 Annual Report, incorporated herein by
reference. Following is a table summarizing yields by scheduled maturities
for indicated investment securities:
U.S. GOVERNMENT
AND AGENCY
OBLIGATIONS ALL OTHER TOTAL
HELD TO MATURITY INVESTMENTS INVESTMENTS
------------------- ------------------- -------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
At December 31, 1997:
Due in one year or less $ - - % $ 24,633 6.09% $ 24,633 6.09%
No stated maturity - - 104,979(1) 7.04 104,979 7.04
----- -------- --------
Total $ - - $129,612 6.86 $129,612 6.86
----- -------- --------
----- -------- --------
Weighted-average life
(in years) - .1 .1
At December 31, 1996:
Due in one year or less $ - - % $390,134 5.20% $390,134 5.20%
No stated maturity - - 66,061(1) 7.24 66,061 7.24
----- -------- --------
Total $ - - $456,195 5.50 $456,195 5.50
----- -------- --------
----- -------- --------
Weighted-average life
(in years) - .1 .1
- ---------------------------
(1) Balance represents FHLB stock, a required regulatory investment at
adjustable rates having no stated maturity, and FRB stock, a required
regulatory investment at fixed rates having no stated maturity. FHLB stock
and FRB stock have been excluded from the weighted-average life
calculation.
Following is a table indicating the investments comprising TCF's
securities available for sale:
AT DECEMBER 31,
----------------------------------
1997 1996 1995
---------- -------- ----------
(IN THOUSANDS)
U.S. Government and other marketable securities:
U.S. Government and agency obligations $ - $ - $ 1,005
Other - 32 92
---------- -------- ----------
- 32 1,097
---------- -------- ----------
Mortgage-backed securities:
FHLMC 710,799 317,177 360,631
FNMA 469,900 542,147 655,568
GNMA 43,993 116,388 138,723
Private issuer 200,325 22,531 26,903
Collateralized mortgage obligations 1,114 1,311 18,603
---------- -------- ----------
1,426,131 999,554 1,200,428
---------- -------- ----------
$1,426,131 $999,586 $1,201,525
---------- -------- ----------
---------- -------- ----------
Information regarding the amortized cost and fair values of TCF's
securities available for sale is set forth in Note 4 of Notes to Consolidated
Financial Statements on page 46 of TCF's 1997 Annual Report, incorporated
herein by reference.
9
SOURCES OF FUNDS
DEPOSITS
Deposits are the primary source of TCF's funds for use in lending and
for other general business purposes. Deposit inflows and outflows are
significantly influenced by economic conditions, interest rates, money market
conditions and other factors. Higher-cost borrowings may be used to
compensate for reductions in normal sources of funds, such as deposit inflows
at less than projected levels or net deposit outflows, or to support expanded
activities.
Consumer and commercial deposits are attracted principally from within
TCF's primary market areas through the offering of a broad selection of
deposit instruments including consumer and commercial demand deposit
accounts, Negotiable Order of Withdrawal or "NOW" (interest-bearing checking)
accounts, money market accounts, regular savings accounts, certificates of
deposit and retirement savings plans.
The composition of TCF's deposits has a significant impact on its cost
of funds. TCF's marketing strategy emphasizes attracting deposits held in
checking, regular savings and money market accounts. These accounts provide
significant fee income and are a source of low-interest cost funds.
Checking, savings and money market accounts comprised 48% of total deposits
at December 31, 1997, down from 53% and 49% of total deposits at December
31, 1996 and December 31, 1995, respectively. The decrease reflects the
impact of the acquisition of Standard, which had a lower proportion of
checking, savings and money-market accounts to total deposits than TCF. In
addition, there were approximately 1.3 million retail checking, savings and
money market accounts at December 31, 1997, compared with approximately 1.1
million and 1 million such accounts at December 31, 1996 and 1995,
respectively.
Information concerning TCF's deposits is set forth in "Financial Review
- -- Financial Condition - Deposits" on page 29 and in Note 11 of Notes to
Consolidated Financial Statements on page 51 of TCF's 1997 Annual Report,
incorporated herein by reference.
BORROWINGS
The FHLB System functions as a central reserve bank providing credit for
financial institutions through a regional bank located within a particular
financial institution's assigned region. All of the TCF Banks, except for
TCF Colorado, are members of the FHLB System, and are required to own a
minimum level of FHLB capital stock and are authorized to apply for advances
on the security of such stock and certain of their loans and other assets
(principally securities which are obligations of, or guaranteed by, the
United States Government), provided certain standards related to
creditworthiness have been met. TCF's FHLB advances totaled $1.3 billion at
December 31, 1997, compared with $1.1 billion at December 31, 1996. FHLB
advances are made pursuant to several different credit programs. Each credit
program has its own interest rates and range of maturities. The FHLB
prescribes the acceptable uses to which the advances pursuant to each program
may be made as well as limitations on the size of advances. Acceptable uses
prescribed by the FHLB have included expansion of residential mortgage
lending and meeting short-term liquidity needs. In addition to the program
limitations, the amounts of advances for which an institution may be eligible
are generally based on the FHLB's assessment of the institution's
creditworthiness. As a result of the failure of a number of savings
institutions and reductions in outstanding loans to its members, the FHLB
system has become less profitable and its continued viability may depend upon
its ability to attract new members.
As an additional source of funds, TCF may sell securities subject to its
obligation to repurchase these securities under repurchase agreements
("reverse repurchase agreements") with the FHLMC or major investment bankers
utilizing government securities or mortgage-backed securities as collateral.
Reverse repurchase agreements totaled $112.2 million at December 31, 1997,
compared with $293.7 million at December 31, 1996. Generally, securities
with a value in excess of the amount borrowed are required to be deposited as
collateral with the counterparty to a reverse repurchase agreement. The
creditworthiness of the counterparty is important in establishing that the
overcollateralized amount of securities delivered by TCF is protected and it
is TCF's policy to enter into reverse repurchase agreements only with
institutions with a satisfactory credit history.
The use of reverse repurchase agreements may expose TCF to certain risks
not associated with other sources of funds, including possible requirements
to provide additional collateral and the possibility that such agreements may
not be renewed. If for some reason TCF were no longer able to obtain reverse
repurchase agreement financing, it would
10
be necessary for TCF to obtain alternative sources of short-term funds. Such
alternative sources of funds, if available, may be higher-cost substitutes
for the reverse repurchase agreement funds.
Information concerning TCF's FHLB advances, reverse repurchase
agreements and other borrowings is set forth in "Financial Review --
Financial Condition - Borrowings" on page 29 and in Note 12 of Notes to
Consolidated Financial Statements on pages 52 and 53 of TCF's 1997 Annual
Report, incorporated herein by reference.
The following tables set forth TCF's maximum and average borrowing
levels for each of the years in the three-year period ended December 31, 1997:
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
Maximum Balances (1):
FHLB advances $1,339,578 $1,141,040 $1,089,993
Securities sold under repurchase agreements
and federal funds purchased 482,231 647,707 747,825
Discounted lease rentals 241,895 189,105 178,457
Subordinated debt 42,142 42,172 50,676
Collateralized obligations 40,374 41,170 41,817
Other borrowings 61,089 42,808 40,020
- ---------------------------
(1) Maximum month-end balances.
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995
--------------- --------------- ----------------
BALANCE RATE BALANCE RATE BALANCE RATE
------- ---- ------- ---- ------- ----
(DOLLARS IN THOUSANDS)
Average Balances and Rates:
FHLB advances $817,464 5.89% $674,703 5.52% $860,948 5.89%
Securities sold under repurchase agreements
and federal funds purchased 346,339 5.74 506,298 5.65 596,935 6.05
Discounted lease rentals 222,558 8.28 180,586 8.25 163,871 8.31
Subordinated debt 37,953 9.44 28,911 8.87 46,429 10.74
Collateralized obligations 37,938 6.43 40,831 6.33 41,586 6.93
Other borrowings 21,656 6.24 15,829 6.39 8,095 6.89
OTHER INFORMATION
ACTIVITIES OF SUBSIDIARIES OF TCF FINANCIAL
TCF's business operations include those conducted by direct and indirect
subsidiaries of TCF Financial. During the year ended December 31, 1997,
TCF's subsidiaries were principally engaged in the following activities:
Mortgage Banking
TCF Mortgage Corporation, a subsidiary of TCF Minnesota, Great Lakes
Michigan and Standard Financial Mortgage Corporation, a subsidiary of TCF
Illinois, originate, purchase, sell and service residential mortgage loans.
During 1997, a subsidiary of TCF Mortgage Corporation was involved in a joint
venture known as Burnet Home Loans with Burnet Mortgage Corporation, an
affiliate of Burnet Realty Inc., for the origination of residential mortgage
loans from offices of Burnet Realty. TCF sold its interest in the joint
venture on February 13, 1998.
11
Leasing
Winthrop, a subsidiary of TCF Minnesota, provides a range of
comprehensive lease finance products. Winthrop leases high-technology and
other business-essential equipment to customers ranging from large
corporations to small, growing businesses.
Annuities and Investment Services
TCF Financial Insurance Agency, Inc., TCF Financial Insurance Agency
Illinois, Inc., TCF Financial Insurance Agency Wisconsin, Inc. and TCF
Financial Insurance Agency Michigan, Inc. are insurance agencies engaging in
the sale of fixed-rate, single premium tax-deferred annuities. TCF
Securities, Inc. engages in the sale of non-proprietary mutual fund products,
and in the sale of variable-rate, single premium tax-deferred annuities.
Insurance, Title Insurance and Appraisal Services
TCF Agency Minnesota, Inc., TCF Agency Wisconsin, Inc., TCF Agency
Illinois, Inc., TCF Agency Colorado, Inc., TCF Agency Insurance Services,
Inc. and Lakeland Group Insurance Agency, Inc. provide various types of
insurance, principally credit-related insurance, marketed primarily to TCF's
customers. North Star Title, Inc. is a title insurance agent for several
title insurance underwriters, operating primarily in Minnesota, Illinois,
Wisconsin and Michigan, providing title insurance, real estate abstracting,
and closing services to affiliates and third parties. North Star Real Estate
Services, Inc. provides real estate appraisal services to its affiliates and
to third parties.
Consumer Finance
TCF Financial Services, Inc., TCF Consumer Financial Services, Inc. and
TCF Real Estate Financial Services, Inc. make loans to consumers for
personal, family or household purposes such as debt consolidation or the
financing of home improvements and automobiles.
RECENT ACCOUNTING DEVELOPMENTS
During the past several years, there has been an ongoing review of the
accounting principles and practices used by financial institutions for
certain types of transactions. This review is expected to continue by
banking regulators, the Securities and Exchange Commission ("SEC"), the
Financial Accounting Standards Board ("FASB"), the American Institute of
Certified Public Accountants ("AICPA") and other organizations. As a result
of this process, there have been new accounting pronouncements which have had
an impact on TCF. Further developments may be forthcoming in light of this
ongoing review process.
In June 1996, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." Additional information
on SFAS No. 125 is set forth in Note 1 of Notes to Consolidated Financial
Statements on pages 40 through 42 of TCF's 1997 Annual Report, incorporated
herein by reference.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share."
Additional information on SFAS No. 128 is set forth in Note 1 of Notes to
Consolidated Financial Statements on pages 40 through 42 of TCF's 1997 Annual
Report, incorporated herein by reference.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." Additional information on SFAS No. 123 is set
forth in Note 1 of Notes to Consolidated Financial Statements on pages 40
through 42 and Note 18 of Notes to Consolidated Financial Statements on pages
61 and 62 of TCF's 1997 Annual Report, incorporated herein by reference.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." Additional information on SFAS No. 130 is set forth in "Financial
Review -- Financial Condition - Recent Accounting Developments" on page 30 of
TCF's 1997 Annual Report, incorporated herein by reference.
12
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." Additional information on SFAS
No. 131 is set forth in "Financial Review -- Financial Condition - Recent
Accounting Developments" on page 30 of TCF's 1997 Annual Report, incorporated
herein by reference.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefits plans.
It does not change the measurement or recognition of those plans. SFAS No.
132 is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative
purposes is required. Management believes the adoption of this statement will
not significantly impact TCF's financial condition or results of operations.
COMPETITION
TCF Minnesota is the third largest depository institution headquartered
in Minnesota. TCF Illinois, TCF Wisconsin, TCF Colorado and Great Lakes
Michigan compete with a number of larger depository institutions in their
market areas. The TCF Banks experience significant competition in attracting
and retaining deposits and in lending funds. TCF believes the primary
factors in competing for deposits are the ability to offer attractive rates
and products, convenient office locations and supporting data processing
systems and services. Direct competition for deposits comes primarily from
other commercial banks, credit unions and savings institutions. Additional
significant competition for deposits comes from institutions selling money
market mutual funds and corporate and government securities. The primary
factors in competing for loans are interest rates, loan origination fees and
the range of services offered. TCF competes for origination of loans with
commercial banks, mortgage bankers, mortgage brokers, consumer finance
companies, credit unions, insurance companies and savings institutions. TCF,
through Winthrop, also competes nationwide with other leasing companies in
the financing of high-technology and business-essential equipment.
EMPLOYEES
As of December 31, 1997, TCF had approximately 5,600 employees,
including 1,400 part-time employees. TCF provides its employees with a
comprehensive program of benefits, some of which are on a contributory basis,
including comprehensive medical and dental plans, life insurance, accident
insurance, short- and long-term disability coverage, a pension plan and a
shared contribution stock ownership-401(k) plan.
REGULATION
The banking industry is generally subject to extensive regulatory
oversight. TCF Financial, as a publicly held bank holding company, and the
TCF Banks, as national banks with deposits insured by the FDIC, are subject
to a number of laws and regulations. Many of these laws and regulations have
undergone significant change in recent years. These laws and regulations
impose restrictions on activities, minimum capital requirements, lending and
deposit restrictions and numerous other requirements. Future changes to
these laws and regulations are likely and cannot be predicted with certainty.
RECENT DEVELOPMENTS
Federal legislation enacted in September 1996 addressed a funding
shortfall that had resulted in a significant deposit insurance premium
disparity between banks insured by the Bank Insurance Fund ("BIF") and
thrifts insured by the Savings Association Insurance Fund ("SAIF"). This new
legislation imposed a one-time special assessment on thrift institutions such
as the TCF Banks and provided a reduction in deposit insurance premiums in
subsequent periods and other regulatory reforms. In other federal
legislation enacted in 1996, the reserve method of accounting for thrift bad
debt reserves was repealed, eliminating the recapture of a thrift's bad debt
reserve under certain circumstances, including a thrift institution's
conversion to a bank or similar charter changes. As a result of these
legislative changes and to reflect TCF's community banking strategies, TCF's
management elected to seek the conversion of the TCF Banks from federal
savings banks to national banks.
In April 1997, the TCF Banks became national banks (collectively, the
"Bank Conversion") regulated by the OCC and TCF Financial became a bank
holding company regulated by the FRB. As a result of these changes, TCF
Financial and the TCF Banks ceased to be regulated by the Office of Thrift
Supervision ("OTS"). Among other changes following
13
the Bank Conversion, TCF Illinois and TCF Wisconsin became direct
subsidiaries of TCF Financial as opposed to TCF Minnesota, and TCF's annuity
and mutual fund sales operations became subsidiaries of the TCF Banks as
opposed to TCF Financial.
REGULATORY CAPITAL REQUIREMENTS
TCF Financial and the TCF Banks are subject to risk-based and leverage
capital requirements of the FRB and the OCC, respectively. These
requirements are described below. In addition, these regulatory agencies are
required by law to take prompt action where institutions do not meet certain
other minimum capital standards. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") defines five levels of capital condition,
the highest of which is "well-capitalized," and requires that regulatory
authorities subject undercapitalized institutions to various restrictions
such as limitations on dividends or other capital distributions, limitations
on growth or activity restrictions. Undercapitalized banks must also develop
a capital restoration plan and the parent bank holding company is required to
guarantee compliance with the plan. TCF Financial and the TCF Banks believe
they would be considered "well-capitalized" under the FDICIA capital
standards.
The FRB's risk-based capital guidelines include among their objectives
making regulatory capital requirements more sensitive to differences in risk
profiles of banking organizations, factoring off-balance-sheet exposures into
the assessment of capital adequacy and minimizing disincentives to holding
liquid, low-risk assets. Under these guidelines, a bank holding company's
assets and certain off-balance sheet items are assigned to one of four risk
categories, each weighted differently in accordance with the perceived level
of risk posed by such assets or off-balance-sheet items.
FRB guidelines also prescribe two "tiers" of capital. "Tier 1" capital
includes common stockholders' equity; qualifying noncumulative perpetual
preferred stock (including related surplus); qualifying cumulative perpetual
preferred stock (including related surplus), subject to certain limitations;
and minority interests in the equity accounts of consolidated subsidiaries.
Tier 1 capital excludes goodwill and certain other intangible and other
assets.
"Supplementary" or "Tier 2" capital consists of the allowance for loan
and lease losses, subject to certain limitations; perpetual preferred stock
and related surplus, subject to certain conditions; hybrid capital
instruments (i.e., those with characteristics of both equity and debt),
perpetual debt and mandatory convertible debt securities; and term
subordinated debt and intermediate-term preferred stock (including related
surplus), subject to certain limitations. The maximum amount of Tier 2
capital that is allowed to be included in an institution's qualifying total
capital is 100% of Tier 1 capital, net of goodwill and other intangible
assets required to be deducted.
TCF Financial is currently required to maintain (i) Tier 1 capital equal
to at least four percent of its risk-weighted assets and (ii) total capital
(the sum of Tier 1 and Tier 2 capital) equal to eight percent of
risk-weighted assets. The FRB also requires bank holding companies to
maintain a minimum Tier 1 "leverage ratio" (measuring Tier 1 capital as a
percentage of adjusted total assets) of at least three percent. Higher
leverage ratio requirements (a minimum additional "cushion" of 100 to 200
basis points) are imposed for institutions that do not have the highest
regulatory rating or that fail to meet certain other criteria. At December
31, 1997, TCF believes it met all these requirements. See Note 15 of Notes
to Consolidated Financial Statements on page 56 of TCF's 1997 Annual Report,
incorporated herein by reference. The FRB has not advised TCF of any
specific minimum Tier 1 leverage ratio applicable to it.
The FRB's guidelines indicate that the FRB expects that bank holding
companies experiencing internal growth or making acquisitions should maintain
stronger capital positions, substantially above the minimum supervisory
levels, without significant reliance on intangible assets. In addition, the
guidelines provide that the FRB will use Tier 1 leverage guidelines in its
inspection and supervisory process and as part of its analysis of
applications to be approved by the FRB (this would include applications
relating to bank holding company activities, acquisitions or other matters).
The guidelines also indicate that the FRB will review the Tier 1 leverage
measure periodically and will consider adjustments needed to reflect
significant changes in the economy, financial markets and banking practices.
The OCC also imposes on the TCF Banks regulatory capital requirements
that are substantially similar to those imposed by the FRB, and TCF believes
each of the TCF Banks complied with OCC regulatory capital requirements at
December 31, 1997.
14
The FRB and the OCC have recently adopted rules that could permit them
to quantify and account for interest-rate risk exposure and market risk from
trading activity and reflect these risks in higher capital requirements. New
legislation, additional rulemaking, or changes in regulatory policies may
affect future regulatory capital requirements applicable to TCF Financial and
the TCF Banks. The ability of TCF Financial and the TCF Banks to comply with
regulatory capital requirements may be adversely affected by legislative
changes or future rulemaking or policies of their regulatory authorities, or
by unanticipated losses or lower levels of earnings.
RESTRICTIONS ON DISTRIBUTIONS
Dividends or other capital distributions from the TCF Banks to TCF
Financial are an important source of TCF Financial's ability to pay dividends
on its common stock, to make payments on TCF Financial's other borrowings, or
for other cash needs. The TCF Banks' ability to pay dividends is heavily
dependent on regulatory policies and regulatory capital requirements. The
ability to pay such dividends in the future may be adversely affected by new
legislation or regulations, or by changes in regulatory policies. In
general, the TCF Banks may not declare or pay a dividend to TCF Financial in
excess of 100% of their net profits during a year combined with their
retained net profits for the preceding two years without prior approval of
the OCC. The TCF Banks' ability to make any capital distributions in the
future may require regulatory approval and may be restricted by their
regulatory authorities. The TCF Banks' ability to make any such
distributions may also depend on their earnings and ability to meet minimum
regulatory capital requirements in effect during future periods. The OCC also
has the authority to prohibit the payment of dividends by a national bank
when it determines such payments would constitute an unsafe and unsound
banking practice. These capital adequacy standards may be higher than
existing minimum capital requirements. In addition, tax considerations may
limit the ability of the TCF Banks to make dividend payments in excess of
their current and accumulated tax "earnings and profits" ("E&P"). Annual
dividend distributions in excess of E&P could invoke a tax liability based on
the amount of excess earnings distributed and current tax rates.
REGULATION OF TCF FINANCIAL AND AFFILIATE AND INSIDER TRANSACTIONS
TCF Financial is subject to regulation as a bank holding company. It is
required to register with the FRB and is subject to FRB regulations,
examinations and reporting requirements relating to its bank holding
companies. As subsidiaries of a bank holding company, the TCF Banks are
subject to certain restrictions in their dealings with TCF Financial and with
other companies affiliated with TCF Financial, and also with each other.
As a result of FDICIA, TCF Financial may be required to make up certain
capital deficiencies of the TCF Banks. Under FRB policy, a bank holding
company must serve as a source of strength for its subsidiary banks. Under
this policy, the FRB may require a holding company to contribute additional
capital to an undercapitalized subsidiary bank. In addition, Section 55 of
the National Bank Act may permit the OCC to order the pro rata assessment of
shareholders of a national bank where the capital of the bank has become
impaired. If a shareholder fails to pay such an assessment within three
months, the OCC may order the sale of the shareholder's stock to cover a
deficiency in the capital of a subsidiary bank. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank
would be assumed by the bankruptcy trustee and may be entitled to priority
over other creditors.
Under the Bank Holding Company Act ("BHCA"), a bank holding company must
obtain FRB approval before acquiring more than 5% control, or substantially
all of the assets, of another bank or bank holding company, or merging or
consolidating with another bank holding company. The BHCA also generally
prohibits a bank holding company, with certain exceptions, from acquiring
direct or indirect ownership or control of more than 5% of the voting shares
of any company which is not a bank or bank holding company, or from engaging
directly or indirectly in activities other than those of banking, managing or
controlling banks, providing services for its subsidiaries, or conducting
activities permitted by the FRB as being closely related and proper incidents
to the business of banking.
RESTRICTIONS ON CHANGE IN CONTROL
Federal and state laws and regulations contain a number of provisions
which impose restrictions on changes in control of financial institutions
such as the TCF Banks, and which require regulatory approval prior to any
such changes in control. The Restated Certificate of Incorporation of TCF
Financial and a Shareholder Rights Plan adopted by TCF Financial in 1989,
among other items, contain features which may inhibit a change in control of
TCF Financial.
15
ACQUISITIONS AND INTERSTATE OPERATIONS
Under federal law, interstate merger transactions may be approved by
federal bank regulators without regard to whether such transactions are
prohibited by the law of any state, unless the home state of one of the banks
opted out of the Riegle-Neal Interstate Banking and Branching Act of 1994
(the "Act") by adopting a law after the date of enactment of the Act and
prior to June 1, 1997 which applies equally to all out-of-state banks and
expressly prohibits merger transactions involving out-of-state banks.
Interstate acquisitions of branches by banks are permitted only if the law of
the state in which the branch is located permits such acquisitions.
Interstate mergers and branch acquisitions may also be subject to certain
nationwide and statewide insured deposit concentration amounts described
above.
INSURANCE OF ACCOUNTS; DEPOSITOR PREFERENCE
The deposits of the TCF Banks are insured by the FDIC up to $100,000 per
insured depositor. Substantially all of TCF's deposits are SAIF-insured, but
TCF also has deposits insured by the BIF. The FDIC has established a
risk-based deposit insurance assessment under which deposit insurance
assessments are based upon an institution's capital strength and supervisory
condition, as determined by the institution's primary regulator. The annual
insurance premiums on bank deposits insured by the BIF and SAIF may vary
between $0 per $100 of deposits for banks classified in the highest capital
and supervisory evaluation categories to $.27 per $100 of deposits for banks
classified in the lowest capital and supervisory evaluation categories.
In addition to risk-based deposit insurance assessments, assessments may
be imposed on deposits insured by either the BIF or the SAIF to pay for the
cost of Financing Corporation ("FICO") funding. FICO assessment rates for
1997 ranged from $.0126 to $.013 per $100 of deposits annually for
BIF-assessable deposits and from $.063 to $.065 per $100 of deposits annually
for SAIF-assessable deposits.
An increase in deposit insurance rates assessed against one of the TCF
Banks could have a material adverse effect on TCF, depending on the amount
and duration of the increase. In addition, the FDIC is authorized to
terminate a depository institution's deposit insurance if it finds that the
institution is being operated in an unsafe and unsound manner or has violated
any rule, regulation, order or condition administered by the institution's
regulatory authorities. Any such termination of deposit insurance is likely
to have a material adverse effect on TCF, the severity of which would depend
on the amount of deposits affected by such a termination.
Under federal law, deposits and certain claims for administrative
expenses and employee compensation against an insured depository institution
are afforded a priority over other general unsecured claims against such an
institution, including federal funds and letters of credit, in the
liquidation or other resolution of such an institution by any receiver
appointed by regulatory authorities. Such priority creditors would include
the FDIC.
EXAMINATIONS AND REGULATORY SANCTIONS
TCF is subject to periodic examination by the FRB, OCC and the FDIC.
Bank regulatory authorities may impose on institutions found to operating in
an unsafe or unsound manner a number of restrictions or new requirements,
including but not limited to growth limitations, dividend restrictions,
individual increased regulatory capital requirements, increased loan and real
estate loss reserve requirements, increased supervisory assessments, activity
limitations or other restrictions that could have an adverse effect on such
institutions, their holding companies or holders of their debt and equity
securities. Various enforcement remedies, including civil money penalties,
may be assessed against an institution or an institution's directors,
officers, employees, agents or independent contractors.
Subsidiaries of TCF are also subject to state and/or self-regulatory
organization licensing, regulation and examination requirements in connection
with certain insurance, mortgage banking, securities brokerage and consumer
finance activities.
NATIONAL BANK INVESTMENT LIMITATIONS
Permissible investments by national banks are limited by the National
Bank Act and by rules of the OCC. The OCC adopted new regulations in
December 1996 that permit national banks to establish operating subsidiaries
engaged in any activity that the OCC determines is incidental to banking.
This rule would permit national bank subsidiaries to engage
16
in activities that are traditionally associated with the business of banking,
and would also permit certain activities not traditionally associated with
banking. The OCC's new rule imposes certain supervisory limitations on
subsidiaries engaged in activities that are not permitted for the parent
bank, including notice and comment procedures for activities not previously
approved, corporate governance requirements and certain supervisory
requirements, including a regulatory capital deduction requirement and
application of transactions with affiliates limitations.
FUTURE LEGISLATIVE AND REGULATORY CHANGE; LITIGATION AND ENFORCEMENT ACTIVITY
There are a number of respects in which future legislative or regulatory
change, or changes in enforcement practices or court rulings, could adversely
affect TCF, and it is generally not possible to predict when or if such
changes may have an impact on TCF. Legislative proposals for tax reform have
sought the elimination of certain tax benefits for single premium annuities,
which, if adopted, could impair TCF's ability to market annuity products.
Recent legislation and administrative action has limited the role of private
lenders in education loans and may adversely impact the profitablilty of
student lending activity. TCF's non-interest income in future periods may be
negatively impacted by pending state and federal legislative proposals which,
if enacted, could limit loan, deposit or other fees and service charges.
Financial institutions have also increasingly been the subject of private
class action lawsuits challenging escrow account practices, private mortgage
insurance requirements, the use of loan brokers and other practices.
The Community Reinvestment Act ("CRA") and other fair lending laws and
regulations impose nondiscriminatory lending requirements on financial
institutions. In recent periods, federal regulatory agencies, including the
FRB and the Department of Justice ("DOJ"), have sought a more rigorous
enforcement of the CRA and other fair lending laws and regulations. The DOJ
is authorized to use the full range of its enforcement authority under the
fair lending laws. The DOJ has authority to commence pattern or practice
investigations of possible lending discrimination on its own initiative or
through referrals from the federal financial institutions regulatory
agencies, and to file lawsuits in federal court where there is reasonable
cause to believe that such violations have occurred. The DOJ is also
authorized to bring suit based on individual complaints filed with the
Department of Housing and Urban Development where one of the parties to the
complaint elects to have the case heard in federal court. A successful
challenge to an institution's performance under the CRA and related laws and
regulations could result in a wide variety of sanctions, including the
required payment of damages and civil money penalties, prospective and
retrospective injunctive relief and the imposition of restrictions on mergers
and acquisitions activity. Private parties may also have the ability to
challenge an institution's performance under fair lending laws in private
class action litigation. The ultimate effects of the foregoing or other
possible legal and regulatory developments cannot be predicted but may have
an adverse impact on TCF.
OTHER LAWS AND REGULATIONS
TCF is subject to a wide array of other laws and regulations, both
federal and state, including, but not limited to, usury laws, the CRA and
regulations thereunder, the Equal Credit Opportunity Act and Regulation B,
Regulation D reserve requirements, Regulation E Electronic Funds transfer
requirements, the Truth-in-Lending Act and Regulation Z, the Real Estate
Settlement Procedures Act and Regulation X, and the Truth-in Savings Act and
Regulation DD. TCF is also subject to laws and regulations that may impose
liability on lenders and owners for clean-up costs and other costs stemming
from hazardous waste located on property securing real estate loans made by
lenders or on real estate that is owned by lenders following a foreclosure or
otherwise. Although TCF's lending procedures include measures designed to
limit lender liability for hazardous waste clean-up or other related
liability, TCF has engaged in significant commercial lending activity, and
lenders may be held liable for clean up costs relating to hazardous wastes
under certain circumstances.
TAXATION
FEDERAL TAXATION
Bad Debt Reserves
TCF files consolidated federal income tax returns and is an accrual
basis taxpayer. The TCF Banks are subject to federal income tax under the
Internal Revenue Code of 1986 (the "Code") in the same general manner as
other corporations. Prior to 1996, savings institutions were subject to
special bad debt reserve rules and certain other rules.
17
During this period of time, a savings institution that held 60% or more of
its assets in "qualifying assets" (as defined in the Code) was permitted to
maintain reserves for bad debts and to make annual additions to such reserves
that qualified as deductions from taxable income.
Beginning in 1996, the favorable bad debt method described above was
repealed putting savings institutions on the same tax bad debt method as
commercial banks. This legislation requires recapture of the amount of the
tax bad debt reserves to the extent that they exceed the adjusted base year
reserve ("the applicable excess reserves"). The applicable excess reserves
are recaptured over a six-year period. This recapture period can be deferred
for a period of up to two years to the extent that a certain residential
lending test is met. TCF has previously provided taxes for the applicable
excess reserves.
IRS Audit History
TCF's consolidated tax returns are closed through 1994.
See "Financial Review -- Results of Operations - Income Taxes" on page
24, Note 1 of Notes to Consolidated Financial Statements on pages 40 through
42 and Note 13 of Notes to Consolidated Financial Statements on pages 54 and
55 of TCF's 1997 Annual Report, incorporated herein by reference, for
additional information regarding TCF's income taxes.
STATE TAXATION
TCF and its subsidiaries that operate in Minnesota are subject to
Minnesota state taxation. A Minnesota corporation's income or loss is
allocated based on a three-factor apportionment of the corporation's
Minnesota gross receipts, payroll and property over the total gross receipts,
payroll and property of all corporations in the unitary group. The corporate
tax rate in Minnesota is 9.8%. The Minnesota Alternative Minimum Tax rate is
5.8%.
TCF and its subsidiaries that operate in Illinois are subject to
Illinois state taxation. The Illinois corporate tax rate is 7.3%. Illinois
corporate income or loss is apportioned in a similar manner to Minnesota.
Subsequent to the Bank Conversion, all TCF entities are included in a single
unitary return and income is allocated using only the sales factor in
accordance with Illinois financial organization tax law.
TCF and its subsidiaries that operate in Wisconsin are subject to
Wisconsin state taxation. The Wisconsin state tax rate is 7.9%, and is
computed on a separate company basis. For all TCF entities operating in
Wisconsin, except the TCF Banks, the three-factor apportionment method is
used. For the TCF Banks, income is allocated using only the sales and
payroll factors in accordance with Wisconsin financial organization tax law.
TCF and its subsidiaries that operate in Michigan are subject to
Michigan state taxation. The corporate tax rate in Michigan is 2.3% and is
computed on taxable business activity in Michigan. For all TCF entities
operating in Michigan, except for the TCF Banks, the three-factor
apportionment method is used. For the TCF Banks, taxable business activity
is allocated using only the sales factor in accordance with Michigan
financial organization tax law.
Currently, TCF and its subsidiaries file state tax returns in all 50
states, and local tax returns in certain cities.
ITEM 2. PROPERTIES
OFFICES
At December 31, 1997, TCF owned the buildings and land for 121 of its
bank branch offices, owned the buildings but leased the land for 7 of its
bank branch offices and leased the remaining 93 bank branch offices, all of
which are well maintained. The properties related to the bank branch offices
owned by TCF, including vacant land upon which permanent offices may be
constructed, had a depreciated cost of approximately $93 million at December
31, 1997. At December 31, 1997, the aggregate net book value of leasehold
improvements associated with leased bank branch office facilities was $11.5
million. In addition to the above-referenced branch offices, TCF owned and
leased other facilities
18
with an aggregate net book value of $15 million at December 31, 1997. See
Note 8 of Notes to Consolidated Financial Statements on page 50 of TCF's 1997
Annual Report, incorporated herein by reference.
COMPUTER EQUIPMENT
TCF maintains depositor and borrower customer files on a batch and/or
on-line basis, utilizing an IBM computer system. TCF's general ledger
accounting and information reporting systems are generally maintained on the
mainframe computer. The net book value of all computer equipment was $18.6
million at December 31, 1997. TCF also leases a variety of data processing
equipment at a total annual rental of $1.6 million.
ITEM 3. 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 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 Michigan 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 Michigan's claim is
based on the government's breach of contract in connection with Great Lakes
Michigan's acquisitions of certain savings institutions prior to the
enactment of FIRREA in 1989, which contracts allowed Great Lakes Michigan 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 Michigan's complaint. Great Lakes Michigan's 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 May 11, 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.
On December 22, 1997, the Court of Federal Claims issued a decision
finding the existence of contracts and governmental breaches of those
contracts in four other "supervisory goodwill" cases, consolidated for
purposes of that decision only under the title CALIFORNIA FEDERAL BANK V.
UNITED STATES, Nos. 92-138C, et al. In reaching its decision, the
19
Court of Federal Claims rejected a number of "common issue" defenses that the
government has raised in a number of "supervisory goodwill" cases.
There are a variety of contracts and contract provisions in the TCF
Minnesota and Great Lakes Michigan 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 or the Court of Federal Claims' recent decision in
CALIFORNIA FEDERAL will mean that a similar result would be obtained in the
actions filed by TCF Minnesota and Great Lakes Michigan. 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
Michigan or, even if a determination favorable to TCF Minnesota or Great
Lakes Michigan 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 Michigan's 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 Michigan's
cases, and investors should not anticipate any recovery.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
TCF's common stock trades on the New York Stock Exchange under the
symbol "TCB." The following table sets forth the high and low prices and
dividends declared for TCF's common stock. The stock prices represent the
high and low sale prices for the common stock on the New York Stock Exchange
Composite Tape, as reported by THE WALL STREET JOURNAL.
DIVIDENDS
HIGH LOW DECLARED
---- --- --------
1997:
First Quarter $23 3/4 $19 1/2 $.09375
Second Quarter 25 3/16 18 3/4 .125
Third Quarter 29 11/16 24 1/8 .125
Fourth Quarter 34 3/8 27 .125
1996:
First Quarter $19 $14 13/16 $.078125
Second Quarter 18 7/8 16 .09375
Third Quarter 19 5/16 15 9/16 .09375
Fourth Quarter 22 11/16 18 3/4 .09375
As of March 13, 1998, there were approximately 11,000 record holders of
TCF's common stock.
The Board of Directors of TCF has not adopted a formal dividend policy.
The Board of Directors intends to continue its present practice of paying
quarterly cash dividends on TCF's common stock as justified by the financial
condition of TCF. The declaration and amount of future dividends will depend
on circumstances existing at the time, including TCF's earnings, financial
condition and capital requirements, the cash available to pay such dividends
(derived mainly from dividends and distributions from the TCF Banks), as well
as regulatory and contractual limitations and such other factors as the Board
of Directors may deem relevant. In general, the TCF Banks may not declare or
pay a dividend to TCF in
20
excess of 100% of their net profits for that year combined with their
retained net profits for the preceding two calendar years without prior
approval of the OCC. Restrictions on the ability of the TCF Banks to pay
cash dividends or possible diminished earnings of the indirect subsidiaries
of the Holding Company may limit the ability of the Holding Company to pay
dividends in the future to holders of its common stock. See "REGULATION --
Regulatory Capital Requirements," "REGULATION -- Restrictions on
Distributions" and Note 14 of Notes to Consolidated Financial Statements on
pages 55 and 56 of TCF's 1997 Annual Report, incorporated herein by
reference. Federal income tax rules may also limit dividend payments under
certain circumstances. See "TAXATION," and Note 14 of Notes to Consolidated
Financial Statements on pages 55 and 56 of TCF's 1997 Annual Report,
incorporated herein by reference.
21
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected consolidated financial data of TCF
and its subsidiaries, and should be read in conjunction with the Consolidated
Financial Statements and related notes appearing on pages 34 through 71 of
TCF's 1997 Annual Report, incorporated herein by reference.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
OPERATING DATA:
Interest income $682,614 $612,884 $631,198 $568,864 $572,200
Interest expense 289,018 258,316 302,106 283,421 306,067
-------- -------- -------- -------- --------
Net interest income 393,596 354,568 329,092 285,443 266,133
Provision for credit losses 17,795 21,246 16,054 10,911 37,499
-------- -------- -------- -------- --------
Net interest income after
provision for credit losses 375,801 333,322 313,038 274,532 228,634
Gain on sale of loans 145 5,443 - - -
Loss on sale of mortgage-backed
securities - - (21,037) - -
Gain (loss) on sale of securities
available for sale 8,509 86 (152) 981 10,182
Gain on sale of loan servicing 1,622 - 1,535 2,353 137
Gain on sale of branches 14,187 2,747 1,103 - -
Other non-interest income 202,205 173,336 151,104 139,981 150,281
Amortization of goodwill and other
intangibles 15,757 3,540 3,163 3,282 2,981
FDIC special assessment - 34,803 - - -
Merger-related expenses - - 21,733 - 5,494
Cancellation cost on early termination
of interest-rate exchange contracts - - 4,423 - -
Other non-interest expense 345,805 315,183 297,583 282,378 275,868
-------- -------- -------- -------- --------
Income before income tax expense
and extraordinary items 240,907 161,408 118,689 132,187 104,891
Income tax expense 95,846 61,031 45,482 52,643 41,903
-------- -------- -------- -------- --------
Income before extraordinary items 145,061 100,377 73,207 79,544 62,988
Extraordinary items, net - - (963) - (157)
-------- -------- -------- -------- --------
Net income 145,061 100,377 72,244 79,544 62,831
Dividends on preferred stock - - 678 2,710 2,769
-------- -------- -------- -------- --------
Net income available to
common shareholders $145,061 $100,377 $ 71,566 $ 76,834 $ 60,062
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Basic earnings per common share:
Income before extraordinary
items $ 1.72 $ 1.23 $ .89 $ .98 $ .77
Extraordinary items - - (.01) - -
-------- -------- -------- -------- --------
Net income $ 1.72 $ 1.23 $ .88 $ .98 $ .77
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Diluted earnings per common share:
Income before extraordinary
items $ 1.69 $ 1.20 $ .87 $ .94 $ .75
Extraordinary items - - (.01) - -
-------- -------- -------- -------- --------
Net income $ 1.69 $ 1.20 $ .86 $ .94 $ .75
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Dividends declared per common share $ .46875 $.359375 $.296875 $ .25 $.171875
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average common and common
equivalent shares outstanding:
Basic 84,478 81,904 81,115 78,419 78,013
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Diluted 86,134 83,939 83,560 81,803 80,837
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
22
AT DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
FINANCIAL CONDITION DATA:
Total assets $9,744,660 $7,430,487 $7,507,856 $8,072,299 $7,809,645
Investments (1) 129,612 456,195 75,406 291,437 307,484
Securities available for sale 1,426,131 999,586 1,201,525 138,742 10,073
Loans held for sale 244,612 203,869 242,413 201,511 444,780
Mortgage-backed securities
held to maturity - - - 1,601,200 1,751,916
Loans and leases 7,069,188 5,292,920 5,516,348 5,312,760 4,825,169
Goodwill 177,700 15,431 11,569 13,355 14,549
Deposits 6,907,310 4,977,630 5,191,552 5,399,718 5,695,928
Federal Home Loan Bank advances 1,339,578 1,141,040 893,587 1,354,663 945,492
Other borrowings 387,574 567,132 726,314 684,125 587,712
Stockholders' equity 953,680 630,687 582,399 520,786 465,488
Tangible net worth 756,159 604,413 557,912 492,769 434,189
Book value per common share 10.27 7.61 6.98 6.24 5.57
Tangible book value
per common share 8.15 7.29 6.69 5.89 5.17
AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- --------
KEY RATIOS AND OTHER DATA:
Net interest margin 5.20% 5.27% 4.61% 3.95% 3.69%
Return on average assets 1.77 1.39 .95 1.03 .81
Return on average realized common equity 19.57 16.77 13.69 16.55 14.72
Average total equity to average assets 9.12 8.31 7.04 6.33 5.59
Average interest-earning assets to average
interest-bearing liabilities 117.15 115.29 111.30 108.35 106.37
Common dividend payout ratio 27.74% 29.95% 34.52% 26.60% 22.92%
Number of full service bank offices 221 196 185 177 177
- ---------------------------
(1) Includes interest-bearing deposits with banks, federal funds sold,
U.S. Government and other marketable securities held to maturity, FRB
stock and FHLB stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Financial Review on pages 17 through 33 of TCF's 1997 Annual Report,
presenting management's discussion and analysis of TCF's financial condition
and results of operations, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The quantitative and qualitative disclosures about market risk set forth
on pages 31 through 33 of TCF's 1997 Annual Report are incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Independent Auditors' Report and Selected Quarterly Financial
Data set forth on pages 34 through 71 of TCF's 1997 Annual Report are
incorporated herein by reference. See Index to Consolidated Financial
Statements on page 32 of this report.
23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and executive officers of TCF is set
forth on pages 2 through 18 of TCF's definitive proxy statement dated March
20, 1998 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers
of TCF is set forth on pages 10 through 18 of TCF's definitive proxy
statement dated March 20, 1998 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of TCF's common stock by TCF's
directors, executive officers, and certain other shareholders is set forth on
pages 9 and 10 of TCF's definitive proxy statement dated March 20, 1998 and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and transactions between TCF
and management is set forth on pages 15, 16 and 20 of TCF's definitive proxy
statement dated March 20, 1998 and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
1. Financial Statements
See Index to Consolidated Financial Statements on page 28 of
this report.
2. Financial Statement Schedules
All schedules to the Consolidated Financial Statements normally
required by the applicable accounting regulations are omitted since
the required information is included in the Consolidated Financial
Statements or the Notes thereto or is not applicable.
3. Exhibits
See Index to Exhibits on page 28 of this report.
24
(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. 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 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. 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. A Current Report on Form 8-K, dated January
20, 1998, was filed in connection with TCF's announcement that it had
authorized the repurchase of up to 5% of the Company's outstanding shares
through open market or privately negotiated transactions. A Current Report
on Form 8-K, dated January 30, 1998, was filed in connection with TCF's
announcement that it had completed the acquisition of 76 branches in
Jewel-Osco stores.
25
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) 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
Registrant
By /s/ WILLIAM A. COOPER
-----------------------------
William A. Cooper
Chairman of the Board and
Chief Executive Officer
Dated: March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ WILLIAM A. COOPER Chairman of the Board, Chief Executive March 27, 1998
- ---------------------------------- Officer and Director
William A. Cooper
/s/ THOMAS A. CUSICK Vice Chairman of the Board, Chief March 27, 1998
- ---------------------------------- Operating Officer and Director
Thomas A. Cusick
/s/ LYNN A. NAGORSKE President and Director March 27, 1998
- ----------------------------------
Lynn A. Nagorske
/s/ RONALD J. PALMER Executive Vice President, Chief March 27, 1998
- ---------------------------------- Officer and Treasurer (Principal
Ronald J. Palmer Financial Officer)
Chairman of the Board of Great Lakes March 27, 1998
- ---------------------------------- National Bank Michigan and Director
Robert J. Delonis
/s/ MARK R. LUND Senior Vice President, Assistant March 27, 1998
- ---------------------------------- Treasurer and Controller (Principal
Mark R. Lund Accounting Officer)
Chairman of the Board of TCF National March 27, 1998
- ---------------------------------- Bank Illinois and Director
David H. Mackiewich
/s/ JOHN L. MORGAN President of Winthrop Resources March 27, 1998
- ---------------------------------- Corporation and Director
John L. Morgan
/s/ BRUCE G. ALLBRIGHT Director March 27, 1998
- ----------------------------------
Bruce G. Allbright
Director March 27, 1998
- ----------------------------------
William F. Bieber
/s/ RUDY BOSCHWITZ Director March 27, 1998
- ----------------------------------
Rudy Boschwitz
Director March 27, 1998
- ----------------------------------
John M. Eggemeyer III
/s/ ROBERT E. EVANS Director March 27, 1998
- ----------------------------------
Robert E. Evans
/s/ LUELLA G. GOLDBERG Director March 27, 1998
- ----------------------------------
Luella G. Goldberg
/s/ DANIEL F. MAY Director March 27, 1998
- ----------------------------------
Daniel F. May
26
/s/ THOMAS J. McGOUGH Director March 27, 1998
- ----------------------------------
Thomas J. McGough
Director March 27, 1998
- ----------------------------------
Mark K. Rosenfeld
/s/ RALPH STRANGIS Director March 27, 1998
- ----------------------------------
Ralph Strangis
Director March 27, 1998
- ----------------------------------
Ronald A. Ward
27
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of TCF and its
subsidiaries, included in TCF's 1997 Annual Report, are incorporated herein
by reference in this report:
PAGE
IN 1997
DESCRIPTION ANNUAL REPORT
----------- -------------
Independent Auditors' Report 69
Consolidated Statements of Financial Condition at
December 31, 1997 and 1996 34
Consolidated Statements of Operations for each of
the years in the three-year period ended
December 31, 1997 35
Consolidated Statements of Cash Flows for each of
the years in the three-year period ended
December 31, 1997 36
Consolidated Statements of Stockholders' Equity
for each of the years in the three-year period
ended December 31, 1997 38
Notes to Consolidated Financial Statements 40
Selected Quarterly Financial Data (Unaudited) 70
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
3(a) Restated Certificate of Incorporation of TCF Financial Corporation, as
amended [incorporated by reference to Exhibit 3(a) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, No. 0-16431], as amended June 5, 1997 . . . . . . .
3(b) Bylaws of TCF Financial Corporation, as amended [incorporated by
reference to Exhibit 3(b) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, No. 0-16431]
4(a) Rights Agreement, dated as of May 23, 1989, between TCF Financial
Corporation and Manufacturers Hanover Trust Company [incorporated by
reference to Exhibit 1 to TCF Financial Corporation's Registration
Statement on Form 8-A, No. 0-16431 (filed May 25, 1989)], as amended
October 1, 1995 [incorporated by reference to Exhibit 4(a) to TCF
Financial Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, No. 0-16431 (filed November 14, 1995)], as
amended October 20, 1997 . . . . . . . . . . . . . . . . . . . . . . .
4(b) Indenture dated July 1, 1996 relating to 9.50% Senior Notes due 2003
between Winthrop Resources Corporation ("Winthrop") and Norwest Bank
Minnesota, National Association, as Trustee [incorporated by reference
to Exhibit 4.5 to Winthrop's Registration Statement on Form S-2, File
No. 333-04539 (filed May 24, 1996)], as amended by First Supplemental
Indenture dated as of June 20, 1997 by and among Winthrop, TCF
Financial Corporation and Norwest Bank Minnesota, National
Association, as Trustee [incorporated by reference to Exhibit 4(d) to
TCF Financial Corporation's Amendment No. 1 to Registration Statement
on Form S-4, File No. 333-25905 (filed May 21, 1997)]
28
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
4(c) Copies of instruments with respect to long-term debt will be furnished
to the Securities and Exchange Commission upon request.
10(a) Stock Option and Incentive Plan of TCF Financial Corporation, as
amended [incorporated by reference to Exhibit 10.1 to TCF Financial
Corporation's Registration Statement on Form S-4, No. 33-14203
(filed May 12, 1987)]; Second Amendment, Third Amendment and Fourth
Amendment to the Plan [incorporated by reference to Exhibit 10(a)
to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987, No. 0-16431]; Fifth Amendment
to the Plan [incorporated by reference to Exhibit 10(a) to TCF
Financial Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, No. 0-16431]; amendment dated January
21, 1991 [incorporated by reference to Exhibit 10(a) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, No. 0-16431]; and as further amended by amendment
dated January 28, 1992 and amendment dated March 23, 1992 (effective
April 15, 1992) [incorporated by reference to Exhibit 10(a) to TCF
Financial Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, No. 0-16431]
10(b) TCF Financial 1995 Incentive Stock Program, as amended October 1,
1995 [incorporated by reference to Exhibit 10(b) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, No. 0-16431], as amended October 22,
1996 [incorporated by reference to Exhibit 10(a) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, No. 0-16431]
10(c) Amended and Restated TCF Financial Corporation Executive Deferred
Compensation Plan effective July 21, 1997, and as amended
effective January 1, 1998 . . . . . . . . . . . . . . . . . . . .
10(d) Trust Agreement for TCF Financial Corporation Executive Deferred
Compensation Plan, as amended [the Trust Agreement incorporated
by reference to Exhibit 10(c) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31,
1989, No. 0-16431]; amendment effective April 1, 1991
[incorporated by reference to Exhibit 10(c) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, No. 0-16431]; and as further amended by
amendment dated March 23, 1992 [incorporated by reference to
Exhibit 10(c) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, No. 0-16431];
as amended July 23, 1996 [incorporated by reference to Exhibit 10(d)
to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, No. 0-16431]; as amended on
October 20, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . .
10(e) Employment Agreement of William A. Cooper, dated July 1, 1996
[incorporated by reference to Exhibit 10(a) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, No. 0-16431], as amended March 1, 1997
[incorporated by reference to Exhibit 10(e) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, No. 0-16431]
10(f) Change in Control Agreement of William A. Cooper, dated July 1,
1996 [incorporated by reference to Exhibit 10(b) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, No. 0-16431]
29
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10(g) Severance Agreement of Thomas A. Cusick, dated August 22, 1988
[incorporated by reference to Exhibit 19(c) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, No. 0-16431], amendment thereto dated
December 4, 1990 [incorporated by reference to Exhibit 10(f) to
TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, No. 0-16431], and amendment
dated October 24, 1995 [incorporated by reference to Exhibit
10(f) to TCF Financial Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, No. 0-16431]
10(h) Severance Agreement of William E. Dove, dated August 22, 1988
[incorporated by reference to Exhibit 19(d) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, No. 0-16431], amendment thereto dated
December 4, 1990 [incorporated by reference to Exhibit 10(g) to
TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, No. 0-16431], and amendment
thereto dated October 24, 1995 [incorporated by reference to
Exhibit 10(g) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, No. 0-16431]
10(i) Severance Agreement of Robert E. Evans, dated August 23, 1988
[incorporated by reference to Exhibit 19(e) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, No. 0-16431], amendment thereto dated
December 4, 1990 [incorporated by reference to Exhibit 10(h) to
TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, No. 0-16431], and amendment
thereto dated October 24, 1995 [incorporated by reference to
Exhibit 10(h) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, No. 0-16431]
10(j) Severance Agreement of Lynn A. Nagorske, dated August 22, 1988
[incorporated by reference to Exhibit 19(f) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, No. 0-16431], amendment thereto dated
December 4, 1990 [incorporated by reference to Exhibit 10(i) to
TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, No. 0-16431], and amendment
thereto dated October 24, 1995 [incorporated by reference to
Exhibit 10(i) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, No. 0-16431]
10(k) Severance Agreement of Gregory J. Pulles, dated August 23, 1988
[incorporated by reference to Exhibit 19(g) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, No. 0-16431], amendment thereto dated
December 4, 1990 [incorporated by reference to Exhibit 10(j) to
TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, No. 0-16431], and amendment
thereto dated October 24, 1995 [incorporated by reference to
Exhibit 10(j) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, No. 0-16431]
10(l) Severance Agreement of Barry N. Winslow, dated December 30, 1988
and amendment thereto dated December 4, 1990 [incorporated by
reference to Exhibit 10(n) to TCF Financial Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990,
No. 0-16431], and amendment thereto dated October 24, 1995
[incorporated by reference to Exhibit 10(m) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, No. 0-16431]
10(m) Supplemental Employee Retirement Plan, as amended and restated
effective July 21, 1997. . . . . . . . . . . . . . . . . . . . . . .
10(n) Trust Agreement for TCF Financial Corporation Supplemental
Employee Retirement Plan, dated August 21, 1991 [incorporated by
reference to Exhibit 10.16 to TCF Financial Corporation's
Registration Statement on Form S-2, filed November 15, 1991, No.
33-43988]; as amended on October 20, 1997....
30
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10(o) TCF Financial Corporation Senior Officer Deferred Compensation
Plan as amended and restated effective July 21, 1997, and as amended
effective January 1, 1998. . . . . . . . . . . . . . . . . . . . . .
10(p) Trust Agreement for TCF Financial Corporation Senior Officer
Deferred Compensation Plan [incorporated by reference to Exhibit
10(p) to TCF Financial Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989, No. 0-16431];
amendment effective April 1, 1991, [incorporated by reference to
Exhibit 10(q) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, No. 0-16431];
amendment dated December 18, 1994 [incorporated by reference to
Exhibit 10(q) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, No. 0-16431];
as amended July 23, 1996 [incorporated by reference to Exhibit 10(p)
to TCF Financial Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, No. 0-16431]; as amended
October 20, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . .
10(q) Directors Stock Program [incorporated by reference to Program
filed with registrant's definitive proxy statement dated March
22, 1996, No. 0-16431]
10(r) Management Incentive Plan-Executive [incorporated by reference to
Plan filed with registrant's definitive proxy statement dated
March 16, 1994, No. 0-16431] and 1995 Plan Acknowledgment
[incorporated by reference to Exhibit 10(s) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, No. 0-16431]
10(s) 1996 Performance-Based Incentive Policy [incorporated by
reference to Policy filed with registrant's definitive proxy
statement dated March 22, 1996, No. 0-16431]; 1996 Management
Incentive Plan-Executive [incorporated by reference to Exhibit
10(t) to TCF Financial Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, No. 0-16431];
Incentive Compensation 1997 Plan [incorporated by reference to
Plan filed with registrant's definitive proxy statement dated
March 17, 1997, No. 0-16431]; 1997 Management Incentive
Plan-Executive [incorporated by reference to Exhibit 10(t) to TCF
Financial Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, No. 0-16431]; and 1998 Management
Incentive Plan-Executive . . . . . . . . . . . . . . . . . . . . . .
10(t) Supplemental Pension Agreement with Robert E. Evans, dated July
9, 1991 [incorporated by reference to Exhibit 10.22 to TCF
Financial Corporation's Registration Statement on Form S-4, No.
33-57290 (filed January 22, 1993)]
10(u) Employment Agreement of Robert J. Delonis, dated February 9, 1995
[incorporated by reference to Exhibit 10(v) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, No. 0-16431], as amended December 18, 1995
[incorporated by reference to Exhibit 10(w) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, No. 0-16431], as amended January 23, 1998 . . . .
10(v) TCF Directors Deferred Compensation Plan [incorporated by
reference to Plan filed with registrant's definitive proxy
statement dated March 15, 1995, No. 0-16431], as amended October
22, 1996 [incorporated by reference to Exhibit 10(x) to TCF
Financial Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996, No. 0-16431]
31
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
10(w) TCF Directors Retirement Plan dated October 24, 1995
[incorporated by reference to Exhibit 10(y) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, No. 0-16431]
10(x) Employment Agreement of John L. Morgan, dated November 6, 1996
[incorporated by reference to Exhibit 10.8 to Winthrop Resources
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, No. 0-20123], as amended on February 28, 1997 . .
10(y) Employment Agreement of David Mackiewich dated September 5, 1997 . .
11 Statement regarding computation of earnings per common share . . . .
13 TCF Financial Corporation 1997 Annual Report (portions incorporated
by reference) . . . . . . . . . . . . . . . . . . . . . . . . . . .
21 Subsidiaries of TCF Financial Corporation (as of March 24, 1998) . .
24 Consent of KPMG Peat Marwick LLP dated March 27, 1998. . . . . . . .
32