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, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________________
COMMISSION FILE
NO. 0-16431
_______________________
TCF FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1591444
(State or other jurisdiction of (I.R.S. Employer
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
________________________
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)
________________________
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. [ ]
As of March 17, 1999, 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
$1,962,929,304.
As of March 17, 1999, there were outstanding 84,287,203 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, 1998 are incorporated by reference into Parts I, II and
IV hereof.
Specific portions of the registrant's definitive proxy statement dated
March 31, 1999 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 . . . . . . . . . . . . . . . . . . . . . . 2
Investment Activities. . . . . . . . . . . . . . . . . . . . . 6
Sources of Funds . . . . . . . . . . . . . . . . . . . . . . . 6
Other Information. . . . . . . . . . . . . . . . . . . . . . . 8
Activities of Subsidiaries of TCF Financial . . . . . . . . 8
Recent Accounting Developments. . . . . . . . . . . . . . . 8
Competition . . . . . . . . . . . . . . . . . . . . . . . . 9
Employees . . . . . . . . . . . . . . . . . . . . . . . . . 9
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 16
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters. . . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . 17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . 17
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . 17
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . 17
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 17
Item 12. Security Ownership of Certain Beneficial Owners and Management . 18
Item 13. Certain Relationships and Related Transactions . . . . . . . . . 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Index to Consolidated Financial Statements . . . . . . . . . . . . . . . . 20
Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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 and which make any forward-looking statements
about TCF's financial results subject to a number of risks and uncertainties.
These include but are not limited to possible legislative changes; adverse
economic developments which may increase default and delinquency risks in
TCF's loan and lease portfolios or lead to other adverse developments;
increases in bankruptcy filings by TCF's loan and lease customers; adverse
credit losses or other unfavorable developments in the liquidation or other
disposition of TCF's consumer finance automobile loan portfolio; shifts in
interest rates which may result in shrinking interest margins, increased
borrowing costs or other adverse developments; deposit outflows; interest
rates on competing investments; demand for financial services and loan and
lease products; increases in competition in the banking and financial
services industry; changes in accounting policies or guidelines, or monetary
and fiscal policies of the federal government; inflation; changes in the
quality or composition of TCF's loan, lease and investment portfolios;
adverse changes in securities markets; results of litigation or other
significant uncertainties. TCF's Year 2000 compliance initiatives or other
required technological changes are subject to certain uncertainties which may
delay or increase the cost of implementation. To some extent, TCF's
operations will be dependent on the Year 2000 compliance achieved by outside
vendors, borrowers and government agencies or instrumentalities such as the
Federal Reserve System, and also on the cooperation of such parties in
testing the effectiveness of compliance initiatives. TCF's 1997 and 1998
acquisitions (and its commitment to construct additional Jewel-Osco branches
in future periods) are subject to additional uncertainties, including the
possible failure to fully realize anticipated benefits from the transactions.
Significant uncertainties in such transactions include lower than expected
income or revenue or higher than expected operating costs; greater than
expected costs or difficulties related to the integration and retention of
employees of the acquired business operations; 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 $10.2
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 is the holding company of a
federally chartered national bank, 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 1998 Annual Report, only those portions specifically identified are so
incorporated.
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, minimize wholesale borrowings and lower
its interest-rate risk. In its local market and elsewhere, TCF Minnesota is
also engaged in commercial leasing.
TCF significantly expanded its retail banking franchise in recent
periods and had 311 retail banking branches at December 31, 1998. In the
past three years, TCF opened 147 new branches, of which 128 were supermarket
branches. This expansion includes TCF's January 30, 1998 acquisition of 76
branches and 178 automated teller machines ("ATM") in Jewel-Osco stores in
the Chicago area previously operated by Bank of America. TCF anticipates
opening approximately 40 new branches in 1999, and additional branches in
subsequent years, including approximately 25 Jewel-Osco supermarket branches
per year in subsequent years until branches have been installed in all
targeted stores, including newly constructed stores.
1
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 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 26 of TCF's 1998 Annual Report, incorporated
herein by reference, for additional information.
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 ATMs located in Jewel-Osco stores. TCF accounted for the acquisition
using the purchase method of accounting. Additional information concerning
this and other acquisitions is set forth in "Financial Review -- Results of
Operations - Performance Summary" on page 14 and in Note 2 of Notes to
Consolidated Financial Statements on page 37 of TCF's 1998 Annual Report,
incorporated herein by reference.
TCF operated 79 bank branches in Minnesota at December 31, 1998. The
Company also operated 128 bank branches in Illinois, 31 in Wisconsin, 64 in
Michigan and 9 in Colorado at December 31, 1998. TCF strives to develop
innovative banking products and services. Of TCF's 311 bank branches, 160
were "in-store" bank branches at December 31, 1998. 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-interest cost funds and fee income. TCF has
expanded its ATM network to 1,431 machines at December 31, 1998, and offers
its customers an automated telephone banking system.
Federal legislation imposes numerous legal and regulatory requirements
on financial institutions. Among the most significant of these requirements
are 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 exceed all of the current
minimum and well-capitalized 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, Topeka 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."
The executive offices of TCF Financial are located at 801 Marquette Avenue,
Minneapolis, Minnesota 55402.
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
operations in recent years.
2
See "Financial Review -- Financial Condition - Loans and Leases" on
pages 21 and 22, Note 7 of Notes to Consolidated Financial Statements on
pages 39 and 40 and "Other Financial Data" on pages 58 through 61 of TCF's
1998 Annual Report, incorporated herein by reference, for additional
information regarding TCF's loan and lease portfolios.
RESIDENTIAL REAL ESTATE LENDING
TCF's residential mortgage loan originations (first mortgage loans for
the financing of one- to four-family homes) 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
$2.1 billion at December 31, 1998, compared with $2.2 billion at December 31,
1997. Loan originations by TCF Mortgage Corporation ("TCF Mortgage"), a
wholly owned subsidiary of TCF Minnesota, include loans purchased from loan
correspondents.
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, 1998 and 1997, TCF serviced
for others $3.7 billion and $4.4 billion, respectively, in residential real
estate loans. During 1998 and 1997, TCF sold servicing rights on $200.4
million and $144.7 million of loans serviced for others at net gains of $2.4
million and $1.6 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 first mortgage real estate loans
with loan-to-value ratios in excess of 80% carry private mortgage insurance.
CONSUMER LENDING
TCF makes consumer loans for personal, family or household purposes,
such as debt consolidation or the financing of home improvements,
automobiles, vacations and education. Total consumer loans for the TCF Banks
totaled $1.9 billion at December 31, 1998, with $903.2 Million, or 48%,
having fixed interest rates and $973.4 million, or 52%, having adjustable
interest rates. The following discussion provides additional information on
TCF's consumer lending operations.
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.
In December 1998, TCF restructured its consumer finance company
operations, including the discontinuation of indirect automobile lending, the
consolidation of offices and a renewed focus on home equity lending. TCF
recorded a pretax charge of $1.8 million for the reorganization and increased
the provision for credit losses by $3.9 million from the 1997 fourth quarter,
primarily in connection with the finance company automobile loan portfolio.
In the states where the Company's banks operate (Minnesota, Illinois,
Wisconsin, Michigan and Colorado), the finance company operations were
combined with the banks, and 25 of the 30 finance company offices were
closed. Of the 23 offices in other states,
3
17 remain open as loan production offices of TCF Minnesota and the remainder
were closed. Additionally, TCF reorganized its loan collection operations
related to the remaining consumer finance automobile loan portfolio.
Previously such collection activities were handled centrally in Pensacola,
Florida for loans up to 30-days delinquent and by the branch from which the
loans were originated for loans over 30-days delinquent. Beginning in
December 1998, all collection operations for these loans were centralized in
Minneapolis, Minnesota and Pensacola, Florida. At December 31, 1998,
consumer finance automobile loans totaled $233.9 million, compared with
$292.6 million at December 31, 1997. For additional information on consumer
lending, including TCF's consumer finance company operations, see "Financial
Review -- Financial Condition - Loans and Leases" on pages 21 and 22 of TCF's
1998 Annual Report, incorporated herein by reference.
TCF originates student loans for resale. TCF had $138.3 million of
education loans held for sale at December 31, 1998, compared with $135.3
million at December 31, 1997. 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. 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 of private lenders in
originating student loans, and this may reduce the volume of TCF's student
loan originations in future periods.
COMMERCIAL REAL ESTATE LENDING
TCF currently originates longer-term loans on commercial real estate
and, to a lesser extent, shorter-term construction loans. 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. At December 31, 1998, adjustable-rate
loans represented 83% of commercial real estate loans outstanding. At
December 31, 1998, TCF had a total of 1,549 outstanding commercial real
estate loans secured by properties located in its primary markets. Of this
total, 219 loans totaling $474.1 million had balances exceeding $1 million.
See "Financial Review -- Financial Condition - Loans and Leases" on pages 21
and 22 of TCF's 1998 Annual Report, incorporated herein by reference, for
information regarding the types of properties securing TCF's commercial real
estate loans.
At December 31, 1998, TCF's commercial construction and development loan
portfolio totaled $92.4 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, 1998, TCF had 81 such standby
letters of credit outstanding in the aggregate amount of $45.3 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, 1998 were
to borrowers based in its primary markets.
4
LEASE FINANCING
TCF provides a range of comprehensive lease finance products addressing
the financing needs of diverse companies through three product groups. The
Value Added Lease, which has been TCF's primary focus, generally has a term
from two to five years and is entered into with large organizations
(generally corporations with revenue of $50 million or more). Such leases
typically range from $250,000 to $20 million and cover high-technology and
other business-essential equipment. These leases are flexible in structure
to accommodate equipment additions and upgrades to meet customers' changing
needs. Small Ticket Leases are typically less than $250,000, have lease
terms of between two and five years, and cover business-essential equipment.
Leasing to small, growing businesses is inherently more risky than leasing to
large, established corporations. The Enterprise Lease is designed to meet
the needs of large corporations with influence over multiple business
entities (for example, franchise operations). The Enterprise Lease
integrates the Value Added Lease and the Small Ticket Lease for organizations
in need of enterprise-wide equipment and systems solutions.
TCF enters into standard lease agreements with each customer. TCF's
leases are noncancelable "net" leases which contain provisions under which
the customer, upon acceptance of the equipment, must make all lease payments
regardless of any defects in the equipment and which require the customer to
maintain and service the equipment, insure the equipment against casualty
loss and pay all property, sales and other taxes related to the equipment.
TCF typically retains ownership of the equipment it leases and, in the event
of default by the customer, TCF, or the financial institution that has
provided non-recourse financing for a particular lease, may declare the
customer in default, accelerate all lease payments due under the lease and
pursue other available remedies, including repossession of the equipment.
Upon completion of the initial term of the lease, the customer may return the
equipment to TCF, renew the lease for an additional term, or in certain
circumstances purchase the equipment. If the equipment is returned to TCF,
it is either re-leased to another customer or sold into the secondary-user
marketplace.
TCF internally funds certain leases, and consequently retains the credit
risk on such leases. At December 31, 1998, TCF internally funded 53.7% of
its lease portfolio, compared with 37.6% at December 31, 1997. TCF may
arrange permanent financing of Value Added Leases through non-recourse
discounting of lease rentals with various other financial institutions at
fixed interest rates. The proceeds from the assignment of the lease rentals
are equal to the present value of the remaining lease payments due under the
lease, discounted at the interest rate charged by the other financial
institutions. Interest rates obtained under this type of financing are
negotiated on a transaction-by-transaction basis and reflect the financial
strength of the lease customer, the term of the lease and the prevailing
interest rates. For a lease discounted on a non-recourse basis, the other
financial institution has no recourse against TCF unless TCF is in default of
the terms of the agreement under which the lease and the leased equipment are
assigned to the other financial institution as collateral. The other
financial institution may, however, take title to the collateral in the event
the customer fails to make lease payments or certain other defaults by the
lease customer occur under the terms of the lease.
TCF believes that it has in place experienced personnel and acceptable
standards for maintaining the credit quality of its lease portfolio, but no
assurance can be given as to the level of future delinquencies and lease
charge-offs.
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.
5
The following table summarizes information about TCF's non-accrual,
restructured and past due loans and leases:
AT DECEMBER 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(IN MILLIONS)
Non-accrual loans and leases $33.7 $36.8 $26.4 $44.3 $33.8
Restructured loans - 1.3 3.0 1.6 4.3
------ ------ ------ ------ ------
Total non-accrual and restructured
loans and leases $33.7 $38.1 $29.4 $45.9 $38.1
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Accruing loans and leases 90 days or
more past due $ - $ - $ - $ .7 $ 2.4
------ ------ ------ ------ ------
------ ------ ------ ------ ------
The allowance for loan and lease losses is based upon management's
periodic analysis of TCF's loan and lease portfolios. 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 of the Company's consumer lending operation,
and the December 1998 reorganization of its consumer finance company
operations, create 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 is set forth in "Financial Review -- Financial Condition -
Allowance for Loan and Lease Losses" on pages 22 and 23, in Note 1 of Notes
to Consolidated Financial Statements on pages 35 through 37 of TCF's 1998
Annual Report and in Note 8 of Notes to Consolidated Financial Statements on
page 40 of TCF's 1998 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.
Information regarding the carrying values and fair values of TCF's
investments and securities available for sale is set forth in Notes 4 and 5
of Notes to Consolidated Financial Statements on page 38 of TCF's 1998 Annual
Report, incorporated herein by reference. Additional information regarding
investments and securities available for sale is set forth in "Other
Financial Data" on pages 58 through 61 of TCF's 1998 Annual Report,
incorporated herein by reference.
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.
6
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 56% of total deposits
at December 31, 1998, up from 48% of total deposits at December 31, 1997.
The increase reflects the impact of the Company's significant expansion of
its retail banking franchise, including the acquisition of the Jewel-Osco
branches. In addition, there were approximately 1.4 million retail checking,
savings and money market accounts at December 31, 1998, compared with
approximately 1.3 million and 1.1 million such accounts at December 31, 1997
and 1996, respectively.
Information concerning TCF's deposits is set forth in "Financial
Review -- Financial Condition - Deposits" on page 25 and in Note 10 of Notes
to Consolidated Financial Statements on page 42 of TCF's 1998 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. TCF Banks 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 $1.8 billion at December 31, 1998, compared with $1.3 billion at
December 31, 1997. 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 $367.3 million at December 31, 1998,
compared with $112.2 million at December 31, 1997. 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 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 25 and in Note 11 of Notes to
Consolidated Financial Statements on pages 43 and 44 TCF's 1998 Annual
Report, incorporated herein by reference.
7
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, 1998,
TCF's subsidiaries were principally engaged in the following activities:
Mortgage Banking
TCF Mortgage and Standard Financial Mortgage Corporation, a subsidiary
of TCF Illinois, originate, purchase, sell and service residential mortgage
loans. A subsidiary of TCF Mortgage 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.
Leasing
Winthrop Resources Corporation ("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., TCF Financial
Insurance Agency Michigan, Inc., and TCF Financial Insurance Agency,
Colorado, 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, 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.
RECENT ACCOUNTING DEVELOPMENTS
There has been an ongoing review over many years of the accounting
principles and practices used by financial institutions. 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 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." Additional
information on SFAS No. 130 is set forth in Note 1 of Notes to Consolidated
Financial Statements on pages 35 through 37 of TCF's 1998 Annual Report,
incorporated herein by reference.
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 Note 1 of Notes to Consolidated Financial Statements
on pages 35 through 37 and Note 20 of Notes to Consolidated Financial
Statements on pages 54 through 56 of TCF's 1998 Annual Report, incorporated
herein by reference.
8
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." Additional information on
SFAS No. 132 is set forth in Note 1 of Notes to Consolidated Financial
Statements on pages 35 through 37 and Note 18 of Notes to Consolidated
Financial Statements on pages 51 and 52 of TCF's 1998 Annual Report,
incorporated herein by reference.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Additional information on SFAS No. 133
is set forth in "Financial Review -- Financial Condition - Recent Accounting
Developments" on page 25 of TCF's 1998 Annual Report, incorporated herein by
reference.
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise - an amendment of SFAS
No. 65." Additional information on SFAS No. 134 is set forth in "Financial
Review -- Financial Condition - Recent Accounting Developments" on page 25 of
TCF's 1998 Annual Report, incorporated herein by reference.
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
also competes nationwide with other leasing companies in the financing of
high-technology and business-essential equipment.
EMPLOYEES
As of December 31, 1998, TCF had approximately 7,000 employees,
including 2,100 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 deposits insured under the Bank Insurance Fund ("BIF") and
deposits insured under the Savings Association Insurance Fund ("SAIF"). This
new legislation imposed a one-time special assessment on SAIF-insured
institutions 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.
9
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 that took place in connection with
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 when 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 (minimum additional capital 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, 1998,
TCF believes it met all these requirements. See Note 14 of Notes to
Consolidated Financial Statements on page 47 of TCF's 1998 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.
10
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, 1998.
The FRB and the OCC also have 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 funds to enable TCF Financial to pay
dividends on its common stock, to make payments on TCF Financial's other
borrowings, or for its 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.
These capital adequacy standards may be higher than existing minimum capital
requirements. 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. 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
result in 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 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.
11
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.
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 maximum concentration levels.
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
1998 ranged from $.0116 to $.0124 per $100 of deposits annually for
BIF-assessable deposits and from $.0582 to $.0622 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.
12
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 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 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
operating subsidiary 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 has adversely affected 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
related regulations, 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.
13
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. 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
20, Note 1 of Notes to Consolidated Financial Statements on pages 35 through
37 and Note 12 of Notes to Consolidated Financial Statements on pages 45 and
46 of TCF's 1998 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,
and 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%. 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.
14
ITEM 2. PROPERTIES
OFFICES
At December 31, 1998, TCF owned the buildings and land for 113 of its
bank branch offices, owned the buildings but leased the land for 5 of its
bank branch offices and leased the remaining 193 bank branch offices, all of
which are well maintained. The properties related to the bank branch offices
owned by TCF had a depreciated cost of approximately $90.5 million at
December 31, 1998. At December 31, 1998, the aggregate net book value of
leasehold improvements associated with leased bank branch office facilities
was $13.6 million. In addition to the above-referenced branch offices, TCF
owned and leased other facilities with an aggregate net book value of $16.9
million at December 31, 1998. See Note 9 of Notes to Consolidated Financial
Statements on pages 40 and 41 of TCF's 1998 Annual Report, incorporated
herein by reference.
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. Some financial services companies have recently been subjected to
significant exposure in connection with class actions and/or suits seeking
punitive damages. While the Company is not aware of any actions or
allegations which should reasonably give rise to any material adverse effect,
it is possible that the Company could be subjected to such a claim in an
amount which could be material. 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 have
since been tried before the Court of Federal Claims on the issue of damages,
and the third was settled without trial. One of these trials commenced on
February 24, 1997, the submission of evidence at trial was completed in April
1998, post-trial briefing was completed in the summer of 1998, and final
arguments were heard in September of 1998. The Court of Federal Claims has
not yet determined the amount, if any, that the plaintiff may recover in
damages from the government's breach of contract. The other case which went
to trial was settled in June 1998. In connection with the trials in those
cases, the Court of Federal Claims in December
15
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, 39 Fed Cl. 753 (1997). In reaching its decision, the Court of
Federal Claims rejected a number of "common issue" defenses that the
government has raised in a number of "supervisory goodwill" cases. In
November 1998, the Court of Federal Claims issued another decision in the
CALIFORNIA FEDERAL case prohibiting the plaintiff in that case from offering
evidence as to a lost profits theory of damages. A two-month trial regarding
the plaintiff's other damages theories in that case was concluded in early
March 1999. No damages decision in that case has yet been rendered. In
addition, the Court of Federal Claims has issued favorable liability
decisions to the plaintiffs in several other "supervisory goodwill" cases,
and a number of such cases are currently engaged in or about to commence
trials on damages issues.
The government has indicated that it will have a number of affirmative
defenses against goodwill litigation filed against it. The TCF Minnesota and
Great Lakes Michigan actions involve a variety of different types of
transactions, contracts and contract provisions. There can be no assurance
that the U.S. Supreme Court decision in WINSTAR or the Court of Federal
Claims' recent decisions in CALIFORNIA FEDERAL and other cases 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
---- --- ---------
1998:
First Quarter $35 1/8 $29 1/4 $.1250
Second Quarter 37 1/4 28 3/8 .1625
Third Quarter 32 7/16 19 7/8 .1625
Fourth Quarter 25 5/8 15 13/16 .1625
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
As of March 17, 1999, there were approximately 11,000 record holders of
TCF's common stock.
16
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 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 13 of Notes to Consolidated Financial Statements
on pages 46 and 47 of TCF's 1998 Annual Report, incorporated herein by
reference. Federal income tax rules may also limit dividend payments under
certain circumstances. See "TAXATION," and Note 12 of Notes to Consolidated
Financial Statements on pages 45 and 46 of TCF's 1998 Annual Report,
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Other Financial Data on pages 58 through 61 of TCF's 1998 Annual
Report, presenting selected financial data, is incorporated herein by
reference and should be read in conjunction with the Consolidated Financial
Statements and related notes appearing on pages 30 through 57 of TCF's 1998
Annual Report, incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Financial Review on pages 14 through 29 of TCF's 1998 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 26 through 29 of TCF's 1998 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 Other Financial Data set forth
on pages 30 through 61 of TCF's 1998 Annual Report are incorporated herein by
reference. See Index to Consolidated Financial Statements on page 20 of this
report.
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 3 through 15 and pages 17 through 21 of TCF's definitive proxy
statement dated March 31, 1999 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers
of TCF is set forth on page 7, pages 12 through 15 and pages 17 through 21 of
TCF's definitive proxy statement dated March 31, 1999 and is incorporated
herein by reference.
17
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 8 and 9 of TCF's definitive proxy statement dated March 31, 1999 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 page 6 of TCF's definitive proxy statement
dated March 31, 1999 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 20 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 20 of this report.
(b) REPORTS ON FORM 8-K
A Current Report on Form 8-K, dated June 23, 1998, was filed in
connection with TCF's announcement that it had authorized the repurchase of
up to an additional 5% of the Company's outstanding shares through open
market or privately negotiated transactions.
A Current Report on Form 8-K, dated December 15, 1998, was filed
in connection with TCF's announcement that it had authorized the repurchase
of up to an additional 5% of the Company's outstanding shares through open
market or privately negotiated transactions.
18
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 30, 1999
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 30, 1999
- ---------------------------- Officer and Director
William A. Cooper
/s/ THOMAS A. CUSICK Vice Chairman of the Board, Chief Operating March 30, 1999
- ---------------------------- Officer and Director
Thomas A. Cusick
/s/ LYNN A. NAGORSKE President and Director March 30, 1999
- ----------------------------
Lynn A. Nagorske
/s/ NEIL W. BROWN Executive Vice President, Chief Financial March 30, 1999
- ---------------------------- Officer and Treasurer (Principal
Neil W. Brown Financial Officer)
/s/ MARK R. LUND Senior Vice President, Assistant Treasurer March 30, 1999
- ---------------------------- and Controller (Principal Accounting Officer)
Mark R. Lund
/s/ WILLIAM F. BIEBER Director March 30, 1999
- ----------------------------
William F. Bieber
/s/ RUDY BOSCHWITZ Director March 30, 1999
- ----------------------------
Rudy Boschwitz
/s/ JOHN M. EGGEMEYER III Director March 30, 1999
- ----------------------------
John M. Eggemeyer III
/s/ ROBERT E. EVANS Director March 30, 1999
- ----------------------------
Robert E. Evans
/s/ LUELLA G. GOLDBERG Director March 30, 1999
- ----------------------------
Luella G. Goldberg
/s/ GEORGE G. JOHNSON Director March 30, 1999
- ----------------------------
George G. Johnson
/s/ DANIEL F. MAY Director March 30, 1999
- ----------------------------
Daniel F. May
/s/ THOMAS J. McGOUGH Director March 30, 1999
- ----------------------------
Thomas J. McGough
/s/ RALPH STRANGIS Director March 30, 1999
- ----------------------------
Ralph Strangis
/s/ RONALD A. WARD Director March 30, 1999
- ----------------------------
Ronald A. Ward
19
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of TCF and its subsidiaries,
included in TCF's 1998 Annual Report, are incorporated herein by reference in
this report:
PAGE
IN 1998
DESCRIPTION ANNUAL REPORT
----------- -------------
Independent Auditors' Report 57
Consolidated Statements of Financial Condition at
December 31, 1998 and 1997 30
Consolidated Statements of Operations for each of
the years in the three-year period ended
December 31, 1998 31
Consolidated Statements of Stockholders' Equity
for each of the years in the three-year period
ended December 31, 1998 32
Consolidated Statements of Cash Flows for each of
the years in the three-year period ended
December 31, 1998 34
Notes to Consolidated Financial Statements 35
Other Financial Data 58
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 [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, 1997,
No. 0-16431]
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
[incorporated by reference to Exhibit 4(a) to TCF Financial
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, No. 0-16431]
20
EXHIBIT PAGE
NO. DESCRIPTION NO.
---- ----------- -----
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)]
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 as amended and restated effective
November 1, 1998 [incorporated by reference to Exhibit 10(c)
to the TCF Financial Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998, No. 0-16431]
10(d) Amended and Restated Trust Agreement for TCF Financial
Corporation Executive Deferred Compensation Plan effective
September 1, 1998; amendment adopted effective November 1,
1998 [incorporated by reference to Exhibit 10(d) to TCF
Financial Corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, No. 0-16431]
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]
21
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(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 [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,
1997, No. 0-16431]; as amended effective September 30, 1998
[incorporated by reference to Exhibit 10(m) to TCF Financial
Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998, No. 0-16431]
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 [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, 1997, No. 0-16431]
22
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 [incorporated
by reference to Exhibit 10(o) to TCF Financial Corporation's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, No. 0-16431]
10(p) Amended and Restated Trust Agreement for TCF Financial
Corporation Senior Officer Deferred Compensation Plan
effective September 1, 1998; amendment adopted effective
November 1, 1998 [incorporated by reference to Exhibit 10(p)
to TCF Financial Corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, No. 0-16431]
10(q) Directors Stock Program [incorporated by reference to
Program filed with registrant's definitive proxy statement
dated March 22, 1996, No. 0-16431]; amendment adopted June
20, 1998 [incorporated by reference to Exhibit 10(q) to TCF
Financial Corporation's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998, 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];
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]; 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 [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, 1997, No. 0-16431]; and 1999 Management
Incentive Plan-Executive . . . . . . . . . . . . . . . . . .
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]; Incentive
Compensation 1997 Plan [incorporated by reference to Plan
filed with registrant's definitive proxy statement dated
March 17, 1997, No. 0-16431]; and 1999 Performance-Based
Incentive Policy (to be presented to shareholders for
approval at the Annual Meeting on May 11, 1999) . . . . . .
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 [incorporated by reference to
Exhibit 10(u) to TCF Financial Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, No. 0-16431]
23
EXHIBIT PAGE
NO. DESCRIPTION NO.
---- ----------- -----
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];
amendment adopted effective September 30, 1998 [incorporated
by reference to Exhibit 10(v) to TCF Financial Corporation's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, No. 0-16431]
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 [incorporated by reference to
Exhibit 10(x) to TCF Financial Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997,
No. 0-16431]; as amended on November 23, 1998 . . . . . . .
10(y) Employment Agreement of David Mackiewich dated September 5,
1997 [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, 1997, No. 0-16431]; as
amended on August 18, 1998 . . . . . . . . . . . . . . . . .
11 Statement regarding computation of earnings per common
share . . . . . . . . . . . . . . . . . . . . . . . . . . .
13 TCF Financial Corporation 1998 Annual Report (portions
incorporated by reference) . . . . . . . . . . . . . . . . .
21 Subsidiaries of TCF Financial Corporation (as of March 17,
1999) . . . . . . . . . . . . . . . . . . . . . . . . . . .
23 Consent of KPMG Peat Marwick LLP dated March 29, 1999 . . .
24