UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
March 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
_______________
Commission File
No. 0-16431
_______________
TCF FINANCIAL CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1591444
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
801 Marquette Avenue, 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
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class
- ---------------------------- Outstanding at
Common Stock, $.01 par value April 30, 1999
84,047,080 shares
1
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
Pages
-----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition
at March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 5
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1998 and for the
Three Months Ended March 31, 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
Months Ended March 31, 1999 and 1998 9-22
Supplementary Information 23-24
Part II. Other Information
Items 1-6 25-27
Signatures 28
Index to Exhibits 29
2
PART 1 - FINANCIAL STATEMENTS
ITEM 1. Financial Statements
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands, except per-share data)
(Unaudited)
ASSETS
At At
March 31, December 31,
1999 1998
------------ ------------
Cash and due from banks $ 355,835 $ 420,477
Investments 158,222 277,715
Securities available for sale 1,569,406 1,677,919
Loans held for sale 250,409 213,073
Loans and leases:
Residential real estate 3,788,352 3,765,280
Commercial real estate 886,554 811,428
Commercial business 321,462 289,104
Consumer 1,897,128 1,876,554
Lease financing 399,833 398,812
------------ ------------
Total loans and leases 7,293,329 7,141,178
Allowance for loan and lease losses (75,396) (80,013)
------------ ------------
Net loans and leases 7,217,933 7,061,165
Goodwill 164,715 166,645
Deposit base intangibles 15,493 16,238
Other assets 468,731 331,362
------------ ------------
$ 10,200,744 $ 10,164,594
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking $ 1,801,264 $ 1,879,623
Passbook and statement 1,187,174 1,176,931
Money market 732,231 700,004
Certificates 2,911,812 2,958,588
------------ ------------
Total deposits 6,632,481 6,715,146
------------ ------------
Securities sold under repurchase agreements 496,397 367,280
Federal Home Loan Bank advances 1,727,528 1,804,208
Discounted lease rentals 178,124 183,684
Other borrowings 177,740 105,874
------------ ------------
Total borrowings 2,579,789 2,461,046
Accrued interest payable 29,843 27,601
Accrued expenses and other liabilities 134,189 115,299
------------ ------------
Total liabilities 9,376,302 9,319,092
------------ ------------
Stockholders' equity:
Preferred stock, par value $.01 per share, 30,000,000
shares authorized; none issued and outstanding - -
Common stock, par value $.01 per share, 280,000,000 shares
authorized; 92,844,328 and 92,912,246 shares issued 928 929
Additional paid-in capital 502,309 507,534
Retained earnings, subject to certain restrictions 633,703 610,177
Unamortized deferred compensation (22,035) (24,217)
Loan to Executive Deferred Compensation Plan (5,816) (6,111)
Shares held in trust for deferred compensation
plans, at cost (45,777) (45,740)
Accumulated other comprehensive income (loss) (1,862) 7,591
Treasury stock, at cost, 8,771,248 and 7,343,117 shares (237,008) (204,661)
------------ ------------
Total stockholders' equity 824,442 845,502
------------ ------------
$ 10,200,744 $ 10,164,594
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements. Annual financial
statements are subject to audit.
3
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per-share data)
(Unaudited)
Three Months Ended
March 31,
-------------------------
1999 1998
-------- --------
Interest income:
Loans and leases $150,241 $160,848
Securities available for sale 28,088 24,164
Loans held for sale 3,519 3,681
Investments 2,195 2,783
-------- --------
Total interest income 184,043 191,476
-------- --------
Interest expense:
Deposits 43,890 56,372
Borrowings 35,314 25,952
-------- --------
Total interest expense 79,204 82,324
-------- --------
Net interest income 104,839 109,152
Provision for credit losses 7,760 5,984
-------- --------
Net interest income after provision for
credit losses 97,079 103,168
-------- --------
Non-interest income:
Fee and service charge revenues 33,841 26,931
Electronic funds transfer revenues 14,397 10,111
Leasing revenues 7,594 7,693
Title insurance revenues 4,466 4,536
Commissions on sales of annuities 2,200 2,224
Commissions on sales of mutual funds 1,542 1,331
Gain on sale of loans held for sale 1,569 2,154
Other 2,776 2,830
-------- --------
68,385 57,810
-------- --------
Gain on sale of securities available for sale 3,199 502
Gain on sale of loan servicing 2,333 -
Gain on sale of branches - 2,048
Gain on sale of joint venture interest - 5,580
-------- --------
5,532 8,130
-------- --------
Total non-interest income 73,917 65,940
-------- --------
Non-interest expense:
Compensation and employee benefits 58,053 52,763
Occupancy and equipment 18,109 17,305
Advertising and promotions 4,654 5,266
Federal deposit insurance premiums and assessments 1,365 1,395
Amortization of goodwill and other intangibles 2,675 2,916
Other 23,469 21,674
-------- --------
Total non-interest expense 108,325 101,319
-------- --------
Income before income tax expense 62,671 67,789
Income tax expense 25,331 27,895
-------- --------
Net income $ 37,340 $ 39,894
-------- --------
-------- --------
Net income per common share:
Basic $ .45 $ .44
-------- --------
-------- --------
Diluted $ .44 $ .43
-------- --------
-------- --------
Dividends declared per common share $ .1625 $ .125
-------- --------
-------- --------
See accompanying notes to consolidated financial statements. Annual financial
statements are subject to audit.
4
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
--------------------------
1999 1998
--------- ---------
Cash flows from operating activities:
Net income $ 37,340 $ 39,894
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,380 6,896
Amortization of goodwill and other intangibles 2,675 2,916
Provision for credit losses 7,760 5,984
Proceeds from sales of loans held for sale 150,226 169,196
Principal collected on loans held for sale 2,837 2,429
Originations and purchases of loans held for sale (141,524) (228,296)
Net decrease in other assets and liabilities,
and accrued interest 18,413 19,252
Gains on sale of assets (5,532) (8,130)
Other, net 1,640 (1,755)
--------- ----------
Total adjustments 43,875 (31,508)
--------- ----------
Net cash provided by operating activities 81,215 8,386
--------- ---------
Cash flows from investing activities:
Principal collected on loans and leases 631,095 733,894
Originations and purchases of loans (833,590) (655,575)
Purchases of equipment for lease financing (42,617) (39,938)
Proceeds from sales of loans - 6,907
Net decrease in interest-bearing deposits with banks 80,018 18,456
Proceeds from sales of securities available for sale 159,137 122,881
Proceeds from maturities of and principal collected on
securities available for sale 124,124 130,130
Purchases of securities available for sale (322,240) (35,643)
Net (increase) decrease in federal funds sold 41,000 (135,000)
Sales of deposits, net of cash paid - (56,771)
Other, net 3,506 6,404
--------- ---------
Net cash provided (used) by investing activities (159,567) 95,745
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in deposits (82,665) 78,200
Net increase (decrease) in securities sold under
repurchase agreements and federal funds purchased 129,117 (44,444)
Proceeds from borrowings 833,295 293,068
Payments on borrowings (819,171) (319,242)
Purchases of common stock to be held in treasury (37,350) (36,272)
Payments for dividends on common stock (13,814) (11,568)
Other, net 4,298 2,317
--------- ---------
Net cash provided (used) by financing activities 13,710 (37,941)
--------- ---------
Net increase (decrease) in cash and due from banks (64,642) 66,190
Cash and due from banks at beginning of period 420,477 297,010
--------- ---------
Cash and due from banks at end of period $ 355,835 $ 363,200
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest on deposits and borrowings $ 73,752 $ 82,776
--------- ---------
--------- ---------
Income taxes $ 4,914 $ 8,636
--------- ---------
--------- ---------
See accompanying notes to consolidated financial statements. Annual financial
statements are subject to audit.
5
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
(Unaudited)
Shares
Held in Accum-
Loan to Trust lated
Number Unamor- Executive for Other
of Addi- tized Deferred Deferred Compre-
Common tional Deferred Compen- Compen- hensive
Shares Common Paid-in Retained Compen- sation sation Income Treasury
Issued Stock Capital Earnings sation Plan Plans (Loss) Stock Total
---------- ------ ------- -------- -------- ------- ------- -------- --------- ---------
Balance, December 31, 1997 92,821,529 $928 $460,684 $508,969 $(25,457) $ - $ - $ 8,556 $ - $953,680
Net income - - - 156,179 - - - - - 156,179
Unrealized loss on
securities available
for sale, net of tax
and reclassification
adjustment - - - - - - - (965) - (965)
Dividends on common stock - - - (54,971) - - - - - (54,971)
Purchase of 7,549,300
shares to be held in
treasury - - - - - - - - (210,939) (210,939)
Issuance of 108,200
shares, of which
61,000 shares were
from treasury 47,200 1 2,518 - (4,815) - - - 1,933 (363)
Cancellation of shares (18,170) - (375) - 192 - - - - (183)
Amortization of deferred
compensation - - - - 5,863 - - - - 5,863
Exercise of stock options,
of which 145,183 shares
were from treasury 61,687 - (1,033) - - - - - 4,345 3,312
Shares held in trust for
deferred compensation
plans - - 45,740 - - - (45,740) - - -
Loan to Executive Deferred
Compensation Plan, net - - - - - (6,111) - - - (6,111)
---------- ------ ------- -------- -------- ------- ------- -------- --------- ------
Balance, December 31, 1998 92,912,246 929 507,534 610,177 (24,217) (6,111) (45,740) 7,591 (204,661) 845,502
Net income - - - 37,340 - - - - - 37,340
Unrealized loss on
securities available
for sale, net of tax
and reclassification
adjustment - - - - - - - (9,453) - (9,453)
Dividends on common stock - - - (13,814) - - - - - (13,814)
Purchase of 1,737,900
shares to be held in
treasury - - - - - - - - (40,854) (40,854)
Issuance of 7,000 shares
from treasury - - (36) - (158) - - - 194 -
Cancellation of shares (67,918) (1) (1,486) - 204 - - - - (1,283)
Amortization of deferred
compensation - - - - 2,136 - - - - 2,136
Exercise of stock options,
of which 302,769 shares
were from treasury - - (3,740) - - - - - 8,313 4,573
Shares held in trust for
deferred compensation
plans - - 37 - - - (37) - - -
Payments on Loan to
Executive Deferred
Compensation Plan - - - - - 295 - - - 295
---------- ------ ------- -------- -------- ------- ------- -------- --------- -------
Balance, March 31, 1999 92,844,328 $928 $502,309 $633,703 $(22,035) $(5,816) $(45,777) $(1,862) $(237,008) $824,442
---------- ------ ------- -------- -------- ------- ------- -------- --------- -------
---------- ------ ------- -------- -------- ------- ------- -------- --------- -------
See accompanying notes to consolidated financial statements. Annual financial
statements are subject to audit.
6
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation. The
results of operations for interim periods are not necessarily indicative of
the results to be expected for the entire year.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and notes necessary for complete financial
statements in conformity with generally accepted accounting principles. The
material under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is written with the
presumption that the users of the interim financial statements have read or
have access to the most recent Annual Report on Form 10-K of TCF Financial
Corporation ("TCF" or the "Company"), which contains the latest audited
financial statements and notes thereto, together with Management's
Discussion and Analysis of Financial Condition and Results of Operations as
of December 31, 1998 and for the year then ended. All significant
intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior period
financial statements to conform to the current period presentation. For
consolidated statements of cash flows purposes, cash and cash equivalents
include cash and due from banks.
(2) COMPREHENSIVE INCOME
The following table summarizes the components of comprehensive income for
the periods noted. Comprehensive income is the total of net income and
other comprehensive income, which for TCF is comprised entirely of
unrealized gains and losses on securities available for sale.
Three Months Ended
(In thousands) March 31,
---------------------
1999 1998
------- -------
Net income $37,340 $39,894
Other comprehensive income, net of tax:
Unrealized holding losses arising during the
period on securities available for sale
(net of tax benefit of $4,693 and $70,
respectively) (7,487) (108)
Reclassification adjustment for gains included
in net income (net of tax expense of $1,233
and $198, respectively) (1,966) (304)
------- -------
Total other comprehensive income (9,453) (412)
------- -------
Comprehensive income $27,887 $39,482
------- -------
------- -------
7
(3) EARNINGS PER COMMON SHARE
The weighted average number of common and common equivalent shares
outstanding used to compute basic earnings per common share were 83,613,296
and 90,914,027 for the three months ended March 31, 1999 and 1998,
respectively. The weighted average number of common and common equivalent
shares outstanding used to compute diluted earnings per common share were
84,095,999 and 91,816,480 for the three months ended March 31, 1999 and
1998, respectively.
(4) SEGMENTS
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure
about Segments of an Enterprise and Related Information," requires
disclosure of certain interim period information related to TCF's
reportable operating segments. TCF's wholly owned bank subsidiaries, 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") have been identified as
reportable operating segments in accordance with the provisions of SFAS No.
131. The following table sets forth certain information about the reported
profit or loss and assets for each of TCF's reportable segments, including
reconciliations to TCF's consolidated totals. The results of TCF's parent
bank holding company and TCF National Bank Colorado, a wholly owned bank
subsidiary of TCF, comprise the "other" category in the table below.
TCF TCF TCF Great Lakes
(In thousands) Minnesota Illinois Wisconsin Michigan Other Eliminations Consolidated
--------- -------- --------- -------- ----- ------------ ------------
At or For the Three Months Ended
March 31, 1999
- --------------------------------
Revenues from External Customers:
Interest Income $ 74,244 $ 53,288 $ 11,934 $ 43,842 $ 735 $ - $ 184,043
Non-Interest Income 43,030 18,828 4,120 7,097 842 - 73,917
---------- ---------- --------- ---------- -------- ---------- -----------
Total $ 117,274 $ 72,116 $ 16,054 $ 50,939 $ 1,577 $ - $ 257,960
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
Intersegment Revenues:
Interest Income $ 240 $ 42 $ 4 $ (74) $ 33 $ (245) $ -
Non-Interest Income 1,194 61 11 86 19,829 (21,181) -
---------- ---------- --------- ---------- -------- ---------- -----------
Total $ 1,434 $ 103 $ 15 $ 12 $ 19,862 $ (21,426) $ -
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
Net Income (Loss) $ 19,768 $ 6,974 $ 1,843 $ 9,347 $ (749) $ 157 $ 37,340
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
Total Assets $3,733,436 $3,382,162 $ 681,079 $2,382,919 $960,992 $(939,844) $10,200,744
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
At or For the Three Months Ended
March 31, 1998
- --------------------------------
Revenues from External Customers:
Interest Income $ 83,954 $ 52,554 $ 11,354 $ 43,407 $ 207 $ - $ 191,476
Non-Interest Income 45,282 10,963 3,457 5,752 486 - 65,940
---------- ---------- --------- ---------- -------- ---------- -----------
Total $ 129,236 $ 63,517 $ 14,811 $ 49,159 $ 693 $ - $ 257,416
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
Intersegment Revenues:
Interest Income $ 21 $ 690 $ (12) $ (93) $ 222 $ (828) $ -
Non-Interest Income 1,278 24 14 19 15,486 (16,821) -
---------- ---------- --------- ---------- -------- ---------- -----------
Total $ 1,299 $ 714 $ 2 $ (74) $ 15,708 $ (17,649) $ -
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
Net Income (Loss) $ 25,591 $ 6,540 $ 1,723 $ 8,560 $ (2,596) $ 76 $ 39,894
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
Total Assets $3,646,847 $3,247,351 $ 582,882 $2,202,498 $983,748 $ (998,477) $ 9,664,849
---------- ---------- --------- ---------- -------- ---------- -----------
---------- ---------- --------- ---------- -------- ---------- -----------
8
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
TCF reported net income of $37.3 million for the first quarter of 1999, compared
with $39.9 million for the same 1998 period. Diluted earnings per common share
was 44 cents for the first quarter of 1999, compared with 43 cents for the first
quarter of 1998. Diluted cash earnings per common share, which excludes
amortization and reduction of goodwill and deposit base intangibles, were 47
cents and 49 cents for the first quarter of 1999 and 1998, respectively. Return
on average assets was 1.48% for the first quarter of 1999, compared with 1.66%
for the same 1998 period. Return on average realized common equity was 18.06%
for the first quarter of 1999, compared with 16.99% for the same 1998 period.
TCF's 1998 first quarter results were favorably impacted by a non-recurring
after-tax gain of $3.4 million, or 4 cents per diluted common share, on the sale
of a joint venture interest.
TCF has significantly expanded its retail banking franchise in recent periods
and had 316 retail banking branches at March 31, 1999. Since January 1, 1996,
TCF has opened 146 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 continued to expand its supermarket
franchise by opening five new branches during the 1999 first quarter. TCF
anticipates opening approximately 33 more new branches in the remainder of 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, and also newly constructed stores.
See "Financial Condition - Forward-Looking Information."
NET INTEREST INCOME
Net interest income for the first quarter of 1999 was $104.8 million, compared
with $109.2 million for the first quarter of 1998 and $104.7 million for the
1998 fourth quarter. The net interest margin for the first quarter of 1999 was
4.52%, compared with 4.94% for the same 1998 period and 4.65% for the fourth
quarter of 1998. TCF's net interest margin has been negatively impacted by loan
prepayments, by purchases of lower-yielding mortgage-backed securities and by
the discontinuation of TCF's high-margin indirect automobile lending operation.
Changes in net interest income are dependent upon the movement of interest
rates, the volume and mix of interest-earning assets and interest-bearing
liabilities, and the level of non-performing assets. Achieving net interest
margin growth is dependent on TCF's ability to generate higher-yielding assets
and lower-cost retail deposits. The current interest rate environment and the
resulting increase in prepayment activity has made it more difficult for TCF to
increase the balance of such higher-yielding assets. As a result of recent
declines in variable index rates (e.g., prime), or if such rates were to decline
further, TCF may experience additional compression of its net interest margin
depending on the timing and amount of any reductions, as it is possible that
interest rates paid on retail deposits will not decline as quickly, or to the
same extent, as the decline in the yield on interest-rate-sensitive assets such
as home equity loans. Competition for checking, savings and money market
deposits, an important source of lower cost funds for TCF, has intensified among
depository and other financial institutions. TCF may also experience compression
in its net interest margin if the rates paid on deposits increase. See "Market
Risk - Interest Rate Risk" and "Financial Condition - Deposits."
9
The following rate/volume analysis details the increases (decreases) in net
interest income resulting from interest rate and volume changes during the first
quarter of 1999 as compared with the same period last year. Changes attributable
to the combined impact of volume and rate have been allocated proportionately to
the change due to volume and the change due to rate.
Three Months Ended
March 31, 1999
Versus Same Period in 1998
----------------------------------
Increase (Decrease) Due to
----------------------------------
(In thousands) Volume Rate Total
-------- -------- --------
Investments $ (627) $ 39 $ (588)
------- -------- --------
Securities available for sale 5,439 (1,515) 3,924
------- -------- --------
Loans held for sale 84 (246) (162)
------- -------- --------
Loans and leases:
Residential real estate 2,503 (4,222) (1,719)
Commercial real estate 45 (1,255) (1,210)
Commercial business 1,152 (567) 585
Consumer (4,705) (2,526) (7,231)
Lease financing 862 (1,894) (1,032)
------- -------- --------
Total loans and leases (143) (10,464) (10,607)
------- -------- --------
Total interest income 4,753 (12,186) (7,433)
------- -------- --------
Deposits:
Checking 102 (799) (697)
Passbook and statement 8 (1,870) (1,862)
Money market 183 (625) (442)
Certificates (7,610) (1,871) (9,481)
------- -------- --------
Total deposits (7,317) (5,165) (12,482)
------- -------- --------
Borrowings:
Securities sold under repurchase agreements
and federal funds purchased 4,488 (267) 4,221
FHLB advances 6,402 (1,499) 4,903
Discounted lease rentals (1,099) 148 (951)
Other borrowings 1,818 (629) 1,189
------- -------- --------
Total borrowings 11,609 (2,247) 9,362
------- -------- --------
Total interest expense 4,292 (7,412) (3,120)
------- -------- --------
Net interest income $ 461 $ (4,774) $ (4,313)
------- -------- --------
------- -------- --------
PROVISIONS FOR CREDIT LOSSES
TCF provided $7.8 million for credit losses in the first quarter of 1999,
compared with $6 million for the same prior-year period. The increase from the
1998 first quarter is primarily due to higher levels of net charge-offs related
to TCF's consumer finance automobile loans. At March 31, 1999, the allowance for
loan and lease losses totaled $75.4 million, compared with $80 million at
year-end 1998. See "Financial Condition - Allowance for Loan and Lease Losses."
NON-INTEREST INCOME
Non-interest income is a significant source of revenues for TCF and an important
factor in TCF's results of operations. Providing a wide range of retail banking
services is an integral component of TCF's business philosophy and a major
strategy for generating additional non-interest income. Excluding gains on sales
of securities available for sale, loan servicing, branches and a joint venture
interest, non-interest income increased $10.6 million, or 18.3%, to $68.4
million for the first quarter of 1999, compared with $57.8 million for the same
period in 1998. The increases were primarily due to increased deposit and
electronic funds transfer revenues, and reflect TCF's expanded retail banking
activities from its de novo expansion.
10
Fee and service charge revenues totaled $33.8 million for the first quarter of
1999, representing an increase of 25.7% from $26.9 million for the same 1998
period. This increase is primarily due to expanded retail banking activities.
Electronic funds transfer revenues totaled $14.4 million for the first quarter
of 1999, representing an increase of 42.4% from $10.1 million for the same 1998
period. This increase reflects TCF's effort to provide banking services through
its ATM network. TCF expanded its network of ATMs to 1,437 at March 31, 1999, an
increase of 77 ATMs since March 31, 1998. The Company anticipates installing
additional ATMs during the remainder of 1999. The significant increase in these
fees also reflects an increase in the distribution of debit cards, and an
increase in their utilization by TCF's customers. TCF initiated its debit card
program at the end of 1996, and had 814,000 debit cards outstanding at March 31,
1999.
Leasing revenues totaled $7.6 million for the first quarter of 1999, compared
with $7.7 million for the same 1998 period. Leasing revenues can fluctuate as a
result of changes in the mix of leases classified as sales-type, direct
financing or operating leases in accordance with generally accepted accounting
principles. In addition, leasing revenues may be negatively impacted by a
decline in economic activity and a resulting decrease in demand for leased
equipment.
Title insurance revenues totaled $4.5 million for the first quarter of 1999,
unchanged from the same 1998 period. Title insurance revenues are cyclical in
nature and are largely dependent on industry levels of residential real estate
loan originations and refinancings.
Gains on sales of loans held for sale totaled $1.6 million for the first quarter
of 1999, a decrease of $585,000 from the $2.2 million recognized during the same
period in 1998. Gains on sales of securities available for sale totaled $3.2
million for the first quarter of 1999, compared with $502,000 for the comparable
1998 period. Gains or losses on sales of loans held for sale and securities
available for sale may fluctuate significantly from period to period due to
changes in interest rates and volumes, and results in any period related to
these transactions may not be indicative of results which will be obtained in
future periods.
Results for the first quarter of 1999 included a pretax gain of $2.3 million on
the sale of approximately $345 million of third-party loan servicing rights. TCF
periodically sells and purchases loan servicing rights depending on market
conditions. TCF's third-party residential loan servicing portfolio totaled $3.4
billion at March 31, 1999, compared with $3.7 billion at December 31, 1998.
During the first quarter of 1998, TCF recognized a $5.6 million gain on the sale
of its joint venture interest in Burnet Home Loans, and recognized gains of $2
million on the sales of two Minnesota branches.
NON-INTEREST EXPENSE
Non-interest expense totaled $108.3 million for the first quarter of 1999, up
6.9% from $101.3 million for the same 1998 period. Compensation and employee
benefits expense totaled $58.1 million for the 1999 first quarter, compared with
$52.8 million for the comparable period in 1998. Occupancy and equipment
expenses totaled $18.1 million for the first quarter of 1999, compared with
$17.3 million for the same 1998 period. The increased expenses in 1999 are
primarily due to the costs associated with expanded retail banking activities.
Amortization of goodwill and other intangibles totaled $2.7 million for the
first quarter of 1999, compared with $2.9 million for the same 1998 period.
Reductions of goodwill associated with branch sales, which are reported as a
component of gains on sales of branches, totaled $2.3 million for the first
quarter of 1998.
11
Other non-interest expense totaled $23.5 million for the first quarter of 1999,
an increase of 8.3% from $21.7 million for the same 1998 period. This increase
was primarily due to the costs associated with expanded retail banking
activities, and included a $1.7 million increase in deposit account losses.
These losses reflect the growth in the number of checking accounts to 944,000 at
March 31, 1999, up from 913,000 at December 31, 1998 and 818,000 at March 31,
1998. Deposit account losses decreased $1.4 million from the losses recognized
in the 1998 fourth quarter.
YEAR 2000
TCF continues to address the "Year 2000" computer issue. The Year 2000 issue
relates to the use of two digits rather than four by computer systems to define
the applicable year and whether such systems will properly process information
when the year changes to 2000. Failure of computer systems to properly recognize
the Year 2000 could potentially result in the production of erroneous data,
miscalculations of financial information such as interest, system failures,
business disruption and other operational problems.
TCF has established a Year 2000 Task Force and has evaluated its data processing
and other systems with imbedded technologies, such as ATMs, vaults and security
systems, to determine whether they are Year 2000 compliant. Remediation of
software is substantially complete, leaving the remainder of 1999 for testing.
Such testing includes testing of individual application systems and "integration
testing," which tests the way multiple systems work together. Many of TCF's data
processing applications are supplied by third-party vendors. TCF has also
evaluated whether such vendor-supplied applications are or will be Year 2000
compliant. Additionally, federal banking regulators are conducting special
examinations of FDIC-insured banks and savings associations to determine whether
they are taking necessary steps to prepare for the Year 2000, and are closely
monitoring the progress made by these institutions in completing key steps
required by their individual Year 2000 plans.
TCF has incurred $6.2 million of internal and external costs for replacement,
renovation and testing of its critical internal computer hardware and software
and imbedded technologies through March 31, 1999, and expects such costs to
total $10.1 million over the three-year period ending December 31, 1999. Of the
$6.2 million of Year 2000 costs incurred through March 31, 1999, $2.1 million
have been capitalized. Approximately $1.4 million of future Year 2000 costs are
expected to be capitalized.
TCF's Year 2000 Task Force is also developing contingency plans to mitigate
potential delays or other problems. TCF's contingency plans include back-up
solutions for mission-critical applications and business continuation plans for
significant vendors and other business partners. Alternative courses of action
for dealing with non-compliant systems are difficult to identify in general
terms because they depend on the nature of the system, whether internal or
external personnel are responsible for the system, and the cost and availability
of replacement systems, among other factors. Although TCF believes its plans
address significant contingencies over which it is able to exercise some
control, there may be contingencies which cannot be readily identified or
contingencies over which it has little or no control and for which few, if any,
alternatives are available (for example, system failures that affect government
agencies and instrumentalities such as the Federal Reserve System).
The effect of the Year 2000 issue on TCF will also depend on the way the Year
2000 issue is addressed by TCF's customers, including significant borrowers,
depositors, vendors, service providers, counterparties, competitors, utilities,
government agencies and instrumentalities and other entities with which TCF does
business. TCF has surveyed and continues to monitor parties with which it does
business to determine how they are addressing the Year 2000 issue and whether
computer hardware and software and other services provided to TCF will be, or
are, Year 2000 compliant. Additionally, TCF's applicable lending and investment
units have implemented procedures for identifying, managing, and underwriting
Year 2000 credit risk. TCF is
12
also monitoring the Year 2000 preparation of entities such as the Federal
Reserve System, which provides services for processing and settling payments
and securities transactions between banks.
The Year 2000 efforts of third parties are ultimately not within TCF's control,
and their failure to remediate Year 2000 issues successfully could result in a
disruption in the services TCF provides, including deposit and loan services,
and could increase TCF's operating costs and credit, investment or other risks.
At the present time, it is not possible to determine with certainty whether any
such events are likely to occur, or to quantify any potential negative impact
they may have on TCF's future results of operations and financial condition.
The foregoing discussion regarding Year 2000, including the discussion of the
timing and effectiveness of implementation and costs of TCF's Year 2000 efforts,
contains forward-looking statements which are based on management's best
estimates derived using assumptions considered reasonable. These forward-looking
statements involve inherent risks and uncertainties, and actual results could
differ materially from those contemplated by such statements. Factors that might
cause material differences include, but are not limited to, availability and
cost of programmers and other systems personnel, TCF's ability to locate and
correct all relevant Year 2000 computer code, including imbedded technologies,
and the ability of TCF's customers, including significant borrowers, vendors,
competitors, counterparties and government agencies and instrumentalities to
effectively address the Year 2000 issue. Such material differences could result
in, among other things, business disruption, operational problems, financial
loss, legal liability and similar risks. See "Financial Condition -
Forward-Looking Information."
INCOME TAXES
TCF recorded income tax expense of $25.3 million for the first quarter of 1999,
or 40.4% of income before income tax expense, compared with $27.9 million, or
41.1%, for the comparable 1998 period. The lower tax rate in 1999 reflects lower
state taxes in 1999, and the impact of relatively higher non-deductible expenses
in 1998, including goodwill reductions associated with branch sales.
MARKET RISK - INTEREST-RATE RISK
TCF's results of operations are dependent to a large degree on its net interest
income, which is the difference between interest income and interest expense,
and the Company's ability to manage its interest-rate risk. Although TCF manages
other risks, such as credit and liquidity risk, in the normal course of its
business, the Company considers interest-rate risk to be its most significant
market risk. TCF, like most financial institutions, has a material interest-rate
risk exposure to changes in both short-term and long-term interest rates as well
as variable index interest rates (e.g., prime). Since TCF does not hold a
trading portfolio, the Company is not exposed to significant risk from trading
activities.
Like most financial institutions, TCF's interest income and cost of funds are
significantly affected by general economic conditions and by policies of
regulatory authorities. The mismatch between maturities and interest-rate
sensitivities of assets and liabilities results in interest-rate risk. Although
the measure is subject to a number of assumptions and is only one of a number of
measurements, management believes the interest-rate gap (difference between
interest-earning assets and interest-bearing liabilities repricing within a
given period) is an important indication of TCF's exposure to interest-rate risk
and the related volatility of net interest income in a changing interest rate
environment. In addition to the interest-rate gap analysis, management also
utilizes a simulation model to measure and manage TCF's interest-rate risk.
13
For an institution with a negative interest-rate gap for a given period, the
amount of its interest-bearing liabilities maturing or otherwise repricing
within such period exceeds the amount of its interest-earning assets repricing
within the same period. In a rising interest-rate environment, institutions with
negative interest-rate gaps will generally experience more immediate increases
in the cost of their liabilities than in the yield on their assets. Conversely,
the yield on assets of institutions with negative interest-rate gaps will
generally decrease more slowly than the cost of their funds in a falling
interest-rate environment.
TCF's Asset/Liability Management Committee manages TCF's interest-rate risk
based on interest rate expectations and other factors. The principal objective
of TCF's asset/liability management activities is to provide maximum levels of
net interest income while maintaining acceptable levels of interest-rate risk
and liquidity risk and facilitating the funding needs of the Company.
Management's estimates and assumptions could be significantly affected by
external factors such as prepayment rates other than those assumed, early
withdrawals of deposits, changes in the correlation of various interest-bearing
instruments, competition and a general rise in interest rates. Decisions by
management to purchase or sell assets, or retire debt could change the
maturity/repricing and spread relationships. In addition, TCF's interest-rate
risk will increase during periods of rising interest rates due to resulting
slower prepayments on loans and mortgage-backed securities, and the increased
likelihood that the Federal Home Loan Bank ("FHLB") will exercise its option to
call certain of TCF's longer-term FHLB advances. See "Financial Condition -
Borrowings." TCF's one-year interest-rate gap was a negative $777.8 million, or
(8)% of total assets, at March 31, 1999, compared with a negative $263.9
million, or (3)% of total assets, at December 31, 1998. The increase in TCF's
negative one-year interest-rate gap reflects the impact of projected slower
prepayments on residential loans and mortgage-backed securities. In addition,
due to recent increases in market interest rates, $375 million of TCF's callable
FHLB advances are included as repricing at their call dates rather than their
maturity dates.
14
FINANCIAL CONDITION
INVESTMENTS
Total investments decreased $119.5 million from year-end 1998 to $158.2
million at March 31, 1999. The decrease is primarily due to decreases of $80
million in interest-bearing deposits with banks and $41 million in federal
funds sold. The following table summarizes investments:
At March 31, 1999 At December 31, 1998
-------------------- --------------------
Carrying Fair Carrying Fair
(In thousands) Value Value Value Value
-------- -------- -------- --------
Interest-bearing deposits
with banks $ 35,876 $ 35,876 $115,894 $115,894
Federal funds sold - - 41,000 41,000
Federal Home Loan Bank stock,
at cost 94,976 94,976 93,482 93,482
Federal Reserve Bank stock,
at cost 23,132 23,132 23,112 23,112
Other 4,238 4,238 4,227 4,227
-------- -------- -------- --------
$158,222 $158,222 $277,715 $277,715
-------- -------- -------- --------
-------- -------- -------- --------
SECURITIES AVAILABLE FOR SALE
Securities available for sale are carried at fair value with the unrealized
gains or losses, net of deferred income taxes, reported as accumulated other
comprehensive income, which is a separate component of stockholders' equity.
Securities available for sale decreased $108.5 million from year-end 1998 to
$1.6 billion at March 31, 1999. The decrease reflects sales of $290.2 million of
securities available for sale and payment and prepayment activity, partially
offset by purchases of $575.9 million. At March 31, 1999, TCF's securities
available-for-sale portfolio included $1.4 billion and $168.8 million of
fixed-rate and adjustable-rate mortgage-backed securities, respectively. The
following table summarizes securities available for sale:
At March 31, 1999 At December 31, 1998
---------------------------- ----------------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
---------- ----------- ---------- ----------
Mortgage-backed securities:
FHLMC $1,013,347 $1,010,570 $ 989,681 $ 998,687
FNMA 435,071 435,270 537,197 541,428
GNMA 31,732 32,155 33,721 34,118
Private issuer 91,492 90,616 104,099 102,813
Collateralized mortgage
obligations 795 795 873 873
---------- ---------- ---------- ----------
$1,572,437 $1,569,406 $1,665,571 $1,677,919
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LOANS HELD FOR SALE
Loans held for sale are carried at the lower of cost or market. Education loans
held for sale increased $15.1 million and residential real estate loans held for
sale decreased $26.6 million from year-end 1998, respectively, and totaled
$153.4 million and $48.2 million at March 31, 1999.
During the 1999 first quarter, $52.5 million of consumer finance automobile
loans and $3.1 million of related allowances were transferred to loans held for
sale in connection with an agreement to sell the loans. The sale is expected to
close in the 1999 second quarter. A $500,000 loss on sale of loans held for sale
was recognized in connection with this transfer. See "Loans and Leases."
15
LOANS AND LEASES
The following table sets forth information about loans and leases held in TCF's
portfolio, excluding loans held for sale:
At At
March 31, December 31,
(In thousands) 1999 1998
------------ ------------
Residential real estate $3,780,171 $3,757,416
Unearned premiums and deferred loan fees 8,181 7,864
------------ ------------
3,788,352 3,765,280
------------ ------------
Commercial real estate:
Apartments 281,699 257,195
Other permanent 501,278 464,817
Construction and development 106,633 92,399
Unearned discounts and deferred loan fees (3,056) (2,983)
------------ ------------
886,554 811,428
------------ ------------
Total real estate 4,674,906 4,576,708
------------ ------------
Commercial business 320,984 288,676
Deferred loan costs 478 428
------------ ------------
321,462 289,104
------------ ------------
Consumer:
Home equity 1,648,970 1,526,129
Automobile 236,351 337,893
Loans secured by deposits 7,600 7,581
Other secured 8,427 19,033
Unsecured 30,504 35,290
Unearned discounts and deferred loan fees (34,724) (49,372)
------------ ------------
1,897,128 1,876,554
------------ ------------
Lease financing:
Direct financing leases 373,918 377,157
Sales-type leases 40,422 35,695
Lease residuals 29,776 29,340
Unearned income and deferred lease costs (44,283) (43,380)
------------ ------------
399,833 398,812
------------ ------------
$7,293,329 $7,141,178
------------ ------------
------------ ------------
Loans and leases increased $152.2 million from year-end 1998 to $7.3 billion at
March 31, 1999, reflecting increases of $75.1 million in commercial real estate
loans, $32.4 million in commercial business loans, $23.1 million in residential
real estate loans and $20.6 million in consumer loans. Unearned discounts and
deferred fees totaled $73.4 million at March 31, 1999 and $87.4 million at
December 31, 1998.
Consumer loans increased $20.6 million from year-end 1998 to $1.9 billion at
March 31, 1999, reflecting an increase of $122.8 million in home equity loans,
partially offset by a decrease of $101.5 million in automobile loans. 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. At March 31, 1999,
consumer finance automobile loans, net of unearned discounts and deferred fees,
totaled $149.2 million, compared with $233.9 million at December 31, 1998.
Reflected in the decrease is the previously mentioned transfer of $52.5 million
of consumer finance automobile loans to loans held for sale.
Prior to the restructuring, TCF provided financing through the purchase of
automobile loans from dealers, an activity referred to as "indirect" automobile
lending. Included in consumer finance automobile loans at March 31, 1999 are
$132.6 million of
16
sub-prime automobile loans which carry a higher level of credit risk and
higher interest rates. Loans classified as sub-prime are owed by borrowers
who historically have been unable to obtain credit from traditional sources
because of significant past credit problems or limited credit histories. The
term sub-prime refers to the Company's assessment of credit risk and bears no
relationship to the prime rate of interest or persons who are able to borrow
at that rate. There can be no assurances that the Company's sub-prime lending
criteria are the same as those utilized by other lenders.
The underwriting criteria for sub-prime loans originated by TCF generally have
been less stringent than those historically adhered to by TCF and, as a result,
these loans carry a higher level of credit risk and higher interest rates. The
indirect loan portfolio also carries an increased risk of loss in the event of
adverse economic developments such as a recession. The risks posed by this
portfolio could also be exacerbated by TCF's discontinuation of this lending
activity, which has involved the closing of its indirect lending offices and the
centralization of its loan collection operations, among other changes. Sub-prime
lending is inherently more risky than traditional lending and there can be no
assurance that all appropriate underwriting criteria have been identified or
weighted properly in the assessment of credit risk, or will afford adequate
protection against the higher risks inherent in lending to sub-prime borrowers.
TCF has changed its home equity loan origination programs in its subsidiary
banks in 1999. Under the new programs, TCF has implemented a tiered pricing
structure for its home equity loans. TCF has experienced an increase in the
loan-to-value ratios on new home equity loans originated in 1999. Many of
these loans are secured by a first lien on the home, and many have balances
exceeding $100,000. These loans may carry a higher level of credit risk than
loans with a lower loan-to-value ratio.
Commercial real estate loans increased $75.1 million from year-end 1998 to
$886.6 million at March 31, 1999. Commercial business loans increased $32.4
million in the first three months of 1999 to $321.5 million at March 31, 1999.
TCF is seeking to expand its commercial business lending activity and, to a
lesser extent, its commercial real estate lending activity to borrowers located
in its primary midwestern markets in an attempt to maintain the size of these
lending portfolios and, where feasible under local economic conditions, achieve
some growth in these lending categories over time. At March 31, 1999,
approximately 95% of TCF's commercial real estate loans outstanding were secured
by properties located in its primary markets. At March 31, 1999, the average
individual balance of commercial real estate loans and commercial business loans
was $543,000 and $368,000, respectively.
At March 31, 1999 and December 31, 1998, there were no commercial real estate
loans with terms that have been modified in troubled debt restructurings
included in performing loans.
At March 31, 1999, the recorded investment in loans that are considered to be
impaired was $9.9 million for which the related allowance for credit losses was
$2.3 million. All of the impaired loans were on non-accrual status. The average
recorded investment in impaired loans during the three months ended March 31,
1999 was $9.2 million.
Lease financings increased $1 million from year-end 1998 to $399.8 million at
March 31, 1999, reflecting a $4.7 million increase in sales-type leases,
partially offset by a $3.2 million decrease in direct financing leases.
17
ALLOWANCE FOR LOAN AND LEASE LOSSES
A summary of the activity of the allowance for loan and lease losses and
selected statistics follows:
Three Months Ended March 31,
----------------------------
(Dollars in thousands) 1999 1998
--------- ---------
Balance at beginning of period $ 80,013 $ 82,583
Provision for credit losses 7,760 5,984
Charge-offs (10,814) (7,620)
Recoveries 1,557 1,564
--------- ---------
Net charge-offs (9,257) (6,056)
Transfer to loans held for sale (3,120) -
--------- ---------
Balance at end of period $ 75,396 $ 82,511
--------- ---------
--------- ---------
Ratio of annualized net loan and lease
charge-offs to average loans and leases
outstanding .51% .34%
Allowance for loan and lease losses as a
percentage of total loan and lease
balances at period end 1.03% 1.17%
TCF has experienced an increase in the level of net loan charge-offs related to
its consumer finance automobile portfolio. As a result, net loan charge-offs as
a percentage of average loans outstanding for TCF's consumer portfolio were
1.83% for the three months ended March 31, 1999, compared with 1.13% for the
same period of 1998 and 1.82% for the three months ended December 31, 1998. In
addition, the net loan charge-offs as a percentage of average loans outstanding
for TCF's consumer finance automobile portfolio were 13.90% for the three months
ended March 31, 1999, compared with 6.03% for the same period in 1998 and 10.76%
for the three months ended December 31, 1998. Included in the net loan and lease
charge-offs of $9.3 million during the three months ended March 31, 1999 were
$7.8 million of net charge-offs related to the consumer finance automobile
loans.
On an ongoing basis, TCF's loan and lease portfolios are reviewed and analyzed
as to credit risk, performance, collateral value and quality. The allowance for
loan and lease losses is maintained at a level believed to be adequate by
management to provide for estimated loan and lease losses. Management's judgment
as to the adequacy of the allowance, including the allocated and unallocated
elements, is a result of ongoing review of larger individual loans and leases,
the overall risk characteristics of the portfolios, changes in the character or
size of the portfolios, the level of non-performing assets, historical net
charge-off amounts, geographic location and prevailing economic conditions. The
allowance for loan and lease losses is established for known or anticipated
problem loans and leases, as well as for loans and leases which are not
currently known to require specific allowances. Loans and leases are charged off
to the extent they are deemed to be uncollectible. The unallocated portion of
TCF's allowance for loan and lease losses totaled $23.8 million at March 31,
1999, compared with $23.3 million at December 31, 1998.
The adequacy of the allowance for loan and lease losses is highly dependent upon
management's estimates of variables affecting valuation, appraisals of
collateral, evaluations of performance and status, and the amounts and timing of
future cash flows expected to be received on impaired loans. Such estimates,
appraisals, evaluations and cash flows may be subject to frequent adjustments
due to changing economic prospects of borrowers, lessees or properties. These
estimates are reviewed periodically and adjustments, if necessary, are reported
in the provision for credit losses in the periods in which they become known.
The decrease in the allowance for
18
loan and lease losses since year-end 1998 primarily reflects the $84.7 million
decrease in consumer finance automobile loans, partially offset by the impact
of a $236.9 million net increase in other loans and leases, and the increase
in non-accrual loans and leases. Management believes the allowance for loan
and lease losses is adequate.
NON-PERFORMING ASSETS
Non-performing assets (principally non-accrual loans and leases and other
real estate owned) totaled $56.1 million at March 31, 1999, up $7.4 million
from the December 31, 1998 total of $48.7 million. The increase in total
non-performing assets reflects increases of $4.8 million in non-accrual lease
financings and $2 million in non-accrual commercial real estate loans.
Included in non-accrual lease financings are $3.3 million of leases that have
been funded on a non-recourse basis by third-party financial institutions.
Approximately 69% of non-performing assets at March 31, 1999 consist of, or
are secured by, real estate. The accrual of interest income is generally
discontinued when loans and leases become 90 days or more past due with
respect to either principal or interest unless such loans and leases are
adequately secured and in the process of collection. Non-performing assets
are summarized in the following table:
At At
March 31, December 31,
(Dollars in thousands) 1999 1998
--------- ------------
Non-accrual loans and leases:
Consumer $18,988 $17,745
Residential real estate 7,404 8,078
Commercial real estate 6,362 4,352
Commercial business 3,576 2,797
Lease financing 5,512 725
------- -------
41,842 33,697
Other real estate owned and other assets 14,261 14,972
------- -------
Total non-performing assets $56,103 $48,669
------- -------
------- -------
Non-performing assets as a percentage
of net loans and leases .78% .69%
Non-performing assets as a percentage
of total assets .55 .48
TCF had no accruing loans and leases 90 days or more past due at March 31, 1999.
The over 30-day delinquency rate on TCF's loans and leases (excluding loans held
for sale and non-accrual loans and leases) was .71% of loans and leases
outstanding at March 31, 1999, compared with .94% at year-end 1998. TCF's
delinquency rates are determined using the contractual method. The following
table sets forth information regarding TCF's over 30-day delinquent loan and
lease portfolio, excluding loans held for sale and non-accrual loans and leases:
At March 31, 1999 At December 31, 1998
--------------------------- ---------------------------
Principal Percentage of Principal Percentage of
(Dollars in thousands) Balances Portfolio Balances Portfolio
-------- ----------- -------- -------------
Consumer $36,330 1.93% $52,588 2.83%
Residential real estate 10,563 .28 9,151 .24
Commercial real estate 2,913 .33 1,787 .22
Commercial business 1,273 .40 1,984 .69
Lease financing 486 .12 1,631 .41
------- -------
Total $51,565 .71 $67,141 .94
------- -------
------- -------
19
TCF's over 30-day delinquency rate on total consumer loans was 1.93% at March
31, 1999, down from 2.83% at year-end 1998. Management continues to monitor
the consumer loan portfolio, which will generally have higher delinquencies,
especially indirect automobile loans. TCF's over 60-day delinquency rate on
consumer finance automobile loans was 3.63% at March 31, 1999, compared with
3.23% at December 31, 1998. Indirect automobile lending is generally
considered to involve a higher level of credit risk, and the management of
delinquencies and liquidation of this portfolio will be a key challenge.
In addition to the non-accrual loans and leases, there were commercial real
estate and commercial business loans with an aggregate principal balance of
$25.4 million outstanding at March 31, 1999 for which management has concerns
regarding the ability of the borrowers to meet existing repayment terms. This
amount consists of loans that were classified for regulatory purposes as
substandard, doubtful or loss, or were to borrowers that currently are
experiencing financial difficulties or that management believes may experience
financial difficulties in the future. This compares with $23.1 million of such
loans at December 31, 1998. Although these loans are secured by commercial real
estate or other corporate assets, they may be subject to future modifications of
their terms or may become non-performing. Management is monitoring the
performance and classification of such loans and the financial condition of
these borrowers.
OTHER ASSETS
Other assets consist of the following:
(In thousands) At March 31, 1999 At December 31, 1998
----------------- --------------------
Premises and equipment $171,998 $173,688
Accrued interest receivable 52,255 52,197
Mortgage servicing rights 20,875 21,566
Other real estate owned 12,506 13,602
Due from brokers 135,413 -
Other 75,684 70,309
-------- --------
$468,731 $331,362
-------- --------
-------- --------
DEPOSITS
Deposits totaled $6.6 billion at March 31, 1999, down $82.7 million from
December 31, 1998. Lower interest-cost checking, savings and money market
deposits totaled $3.7 billion, down $35.9 million from year-end 1998, and
comprised 56.1% of total deposits at March 31, 1999. Checking, savings and money
market deposits are an important source of lower cost funds and fee income for
TCF. Higher interest-cost certificates of deposit decreased $46.8 million from
December 31, 1998. The Company's weighted-average rate for deposits, including
non-interest bearing deposits, decreased to 2.64% at March 31, 1999, from 2.73%
at December 31, 1998.
20
As previously noted, TCF continued to expand its supermarket franchise by
opening five new branches during the 1999 first quarter. TCF now has 166
supermarket branches, up from 144 branches a year ago. During the past year,
deposit accounts in TCF's supermarket branches increased 59% to 445,000 accounts
and the balances increased 35% to $665.9 million. The average rate on these
deposits decreased from 2.79% at March 31, 1998 to 1.95% at March 31, 1999.
Additional information regarding TCF's supermarket branches is as follows:
At or For the Three Months
Ended March 31,
---------------------------
Increase
(Dollars in thousands) 1999 1998 (Decrease) % Change
------------ ------------ ---------- --------
Supermarket Banking Summary:
Number of branches 166 144 22 15.3%
Number of deposit accounts 445,024 280,504 164,520 58.7
Deposits:
Checking and money market $346,936 $237,891 $109,045 45.8
Savings 110,462 75,188 35,274 46.9
-------- -------- --------
457,398 313,079 144,319 46.1
Certificates 208,529 178,435 30,094 16.9
-------- -------- --------
Total deposits $665,927 $491,514 $174,413 35.5
-------- -------- --------
-------- -------- --------
Average rate on deposits 1.95% 2.79% (.84)% (30.1)
-------- -------- --------
-------- -------- --------
Total fees and other revenues $ 17,457 $ 8,822 $ 8,635 97.9
-------- -------- --------
-------- -------- --------
BORROWINGS
Borrowings totaled $2.6 billion as of March 31, 1999, up $118.7 million from
year-end 1998. The increase was primarily due to increases of $129.1 million in
securities sold under repurchase agreements, $59 million in treasury, tax and
loan notes and $13 million in TCF's bank line of credit, partially offset by a
decrease of $76.7 million in FHLB advances. The outstanding balance on TCF's
bank line of credit was $87 million at March 31, 1999. Included in FHLB advances
at March 31, 1999 are $863.5 million of advances which are callable at par on
certain anniversary dates and quarterly thereafter until maturity. If called,
the FHLB will provide replacement funding at the then-prevailing market rate of
interest for the remaining term-to-maturity of the advances, subject to standard
terms and conditions. The weighted-average rate on borrowings decreased to 5.60%
at March 31, 1999, from 6.00% at December 31, 1998. At March 31, 1999,
borrowings with a maturity of one year or less totaled $1 billion.
STOCKHOLDERS' EQUITY
Stockholders' equity at March 31, 1999 was $824.4 million, or 8.1% of total
assets, down from $845.5 million, or 8.3% of total assets, at December 31, 1998.
The decrease in stockholders' equity is primarily due to the repurchase of
1,737,900 shares of TCF's common stock at a cost of $40.9 million and the
payment of $13.8 million in dividends on common stock, partially offset by net
income of $37.3 million for the quarter.
On April 27, 1999, TCF declared a quarterly dividend of 18.75 cents per common
share, payable on May 28, 1999 to shareholders of record as of May 7, 1999.
At March 31, 1999, TCF and its bank subsidiaries exceeded their regulatory
capital requirements and are considered "well-capitalized" under guidelines
established by the Federal Reserve Board and the Federal Deposit Insurance
Corporation Improvement Act of 1991.
21
RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 requires recognition of all derivative instruments as either assets or
liabilities in the statement of financial condition and measurement of those
instruments at fair value. A derivative may be designated as a hedge of an
exposure to changes in the fair value of a recognized asset or liability, an
exposure to variable cash flows of a forecasted transaction, or a foreign
currency exposure. The accounting for gains and losses associated with changes
in the fair value of a derivative and the impact on TCF's consolidated
statements will depend on its hedge designation and whether the hedge is highly
effective in offsetting changes in the fair value or cash flows of the
underlying hedged item. The statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The impact of SFAS No. 133 on the
Company's financial position and results of operations has not yet been
determined.
FORWARD-LOOKING INFORMATION
There are a number of important factors which could cause TCF's 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.
22
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
At At At At At
(Dollars in thousands, March 31, Dec. 31, Sept. 30, June 30, March 31,
except per-share data) 1999 1998 1998 1998 1998
----------- ----------- ----------- ---------- ------------
SELECTED FINANCIAL CONDITION DATA:
Total assets $10,200,744 $10,164,594 $9,900,439 $9,393,060 $9,664,849
Investments 158,222 277,715 135,491 122,888 246,364
Securities available for sale 1,569,406 1,677,919 1,673,722 1,122,490 1,306,853
Loans and leases 7,293,329 7,141,178 7,092,639 7,103,686 7,036,646
Deposits 6,632,481 6,715,146 6,733,368 6,741,288 6,925,024
Borrowings 2,579,789 2,461,046 2,159,948 1,617,240 1,631,021
Stockholders' equity 824,442 845,502 869,426 906,485 948,070
Three Months Ended
--------------------------------------------------------------------------------
March 31, Dec. 31 Sept. 30 June 30, March 31,
1999 1998 1998 1998 1998
----------- ----------- ----------- ---------- ------------
SELECTED OPERATIONS DATA:
Interest income $184,043 $185,286 $185,229 $186,903 $191,476
Interest expense 79,204 80,625 80,605 79,606 82,324
----------- ----------- ------------ ---------- ------------
Net interest income 104,839 104,661 104,624 107,297 109,152
Provision for credit losses 7,760 9,761 4,544 2,991 5,984
----------- ----------- ------------ ---------- ------------
Net interest income after provision for
credit losses 97,079 94,900 100,080 104,306 103,168
----------- ----------- ------------ ---------- ------------
Non-interest income:
Gain (loss) on sale of securities
available for sale 3,199 - (43) 1,787 502
Gain on sale of loan servicing 2,333 - 2,414 - -
Gain on sale of branches - 12,051 226 4,260 2,048
Gain on sale of joint venture interest - - - - 5,580
Other non-interest income 68,385 70,066 71,263 63,531 57,810
----------- ----------- ------------ ---------- ------------
Total non-interest income 73,917 82,117 73,860 69,578 65,940
----------- ----------- ------------ ---------- ------------
Non-interest expense:
Amortization of goodwill and other
intangibles 2,675 2,829 2,828 2,826 2,916
Other non-interest expense 105,650 107,096 109,054 102,748 98,403
----------- ----------- ------------ ---------- ------------
Total non-interest expense 108,325 109,925 111,882 105,574 101,319
----------- ----------- ------------ ---------- ------------
Income before income tax expense 62,671 67,092 62,058 68,310 67,789
Income tax expense 25,331 27,588 25,477 28,110 27,895
----------- ----------- ------------ ---------- ------------
Net income $ 37,340 $ 39,504 $ 36,581 $ 40,200 $ 39,894
----------- ----------- ------------ ---------- ------------
----------- ----------- ------------ ---------- ------------
Per common share:
Basic earnings $ .45 $ .47 $ .42 $ .45 $ .44
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Diluted earnings $ .44 $ .46 $ .42 $ .45 $ .43
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Diluted cash earnings (1) $ .47 $ .49 $ .44 $ .48 $ .49
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Dividends declared $ .1625 $ .1625 $ .1625 $ .1625 $ .125
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
FINANCIAL RATIOS (2):
Return on average assets 1.48% 1.60% 1.54% 1.69% 1.66%
Cash return on average assets (1) 1.57 1.70 1.64 1.84 1.86
Return on average realized common equity 18.06 18.77 16.75 17.52 16.99
Return on average common equity 17.99 18.56 16.58 17.37 16.83
Cash return on average tangible equity (1) 24.49 25.18 22.48 23.73 23.78
Average total equity to average assets 8.22 8.63 9.28 9.75 9.83
Net interest margin (3) 4.52 4.65 4.82 4.94 4.94
- ------------------------
(1) Excludes amortization and reduction of goodwill and deposit base
intangibles.
(2) Annualized.
(3) Net interest income divided by average interest-earning assets.
23
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
Supplementary Information (Continued)
Consolidated Average Balance Sheets, Interest and Dividends
Earned or Paid, and Related Interest Yields and Rates
Three Months Ended March 31,
---------------------------------------------------------------------------------
1999 1998
-------------------------------------- ----------------------------------------
Interest Interest
Average Yields and Average Yields and
(Dollars in thousands) Balance Interest(1) Rates (2) Balance Interest(1) Rates (2)
----------- ----------- ----------- ----------- ----------- ----------
Assets:
Investments $ 139,014 $ 2,195 6.32% $ 178,723 $ 2,783 6.23%
----------- ----------- ----------- -----------
Securities available
for sale (3) 1,704,601 28,088 6.59 1,379,260 24,164 7.01
----------- ----------- ----------- -----------
Loans held for sale 214,960 3,519 6.55 210,065 3,681 7.01
----------- ----------- ----------- -----------
Loans and leases:
Residential real
estate 3,787,223 66,375 7.01 3,649,026 68,094 7.46
Commercial real estate 847,712 17,706 8.35 845,724 18,916 8.95
Commercial business 301,110 5,837 7.75 243,632 5,252 8.62
Consumer 1,895,160 48,834 10.31 1,962,011 56,065 11.43
Lease financing 397,365 11,489 11.57 370,562 12,521 13.52
----------- ----------- ----------- -----------
Total loans and
leases (4) 7,228,570 150,241 8.31 7,070,955 160,848 9.10
----------- ----------- ----------- -----------
Total interest-
earning assets 9,287,145 184,043 7.93 8,839,003 191,476 8.67
----------- ----- ----------- -----
Other assets(5) 821,224 802,280
----------- -----------
Total assets $10,108,369 $9,641,283
----------- -----------
----------- -----------
Liabilities and
Stockholders' Equity:
Noninterest-bearing
deposits $ 1,122,114 $ 879,272
----------- -----------
Interest-bearing
deposits:
Checking 692,948 998 .58 650,854 1,695 1.04
Passbook and
statement 1,113,043 3,075 1.11 1,111,188 4,937 1.78
Money market 723,058 4,703 2.60 697,615 5,145 2.95
Certificates 2,907,391 35,114 4.83 3,533,458 44,595 5.05
----------- ----------- ----------- -----------
Total interest-
bearing
deposits 5,436,440 43,890 3.23 5,993,115 56,372 3.76
----------- ----------- ----------- -----------
Total deposits 6,558,554 43,890 2.68 6,872,387 56,372 3.28
----------- ----------- ----------- -----------
Borrowings:
Securities sold under
repurchase
agreements and federal
funds purchased 454,028 5,650 4.98 96,246 1,429 5.94
FHLB advances 1,750,506 23,676 5.41 1,284,403 18,773 5.85
Discounted lease
rentals 180,670 3,658 8.10 235,066 4,609 7.84
Other borrowings 150,390 2,330 6.20 43,530 1,141 10.48
----------- ----------- ----------- -----------
Total borrowings 2,535,594 35,314 5.57 1,659,245 25,952 6.26
----------- ----------- ----------- -----------
Total interest-
bearing
liabilities 7,972,034 79,204 3.97 7,652,360 82,324 4.30
----------- ----- ----------- ----
Other liabilities(5) 183,786 161,603
----------- -----------
Total liabilities 9,277,934 8,693,235
Stockholders' equity (5) 830,435 948,048
----------- -----------
Total liabilities
and stockholders'
equity $10,108,369 $9,641,283
----------- -----------
----------- -----------
Net interest income $104,839 $109,152
-------- --------
-------- --------
Net interest-rate spread 3.96% 4.37%
---- ----
---- ----
Net interest margin 4.52% 4.94%
---- ----
---- ----
(1) Tax-exempt income was not significant and thus has not been presented on a
tax equivalent basis. Tax-exempt income of $42,000 and $40,000 was
recognized during the three months ended March 31, 1999 and 1998,
respectively.
(2) Annualized.
(3) Average balance and yield of securities available for sale is based upon
the amortized cost balance.
(4) Average balance of loans and leases includes non-accrual loans and leases,
and is presented net of unearned income.
(5) Average balance is based upon month-end balances.
24
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, TCF is a party to legal proceedings arising out of its
general lending and operating activities. TCF is and expects to become engaged
in a number of foreclosure proceedings and other collection actions as part of
its loan collection activities. From time to time, borrowers have also brought
actions against TCF, in some cases claiming substantial amounts in damages. 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. In one of the cases that proceeded
to a damages trial, GLENDALE FEDERAL BANK, FSB V. UNITED STATES, No. 90-772C,
the Court of Federal Claims issued a decision on April 9, 1999, awarding the
plaintiff in that case $908,948,000 in restitution and non-overlapping
reliance damages. Although no official announcement has yet been made, TCF
expects that the GLENDALE damages decision will be appealed to the United
States Court of Appeals for the Federal Circuit. The other case which went to
trial was settled in June 1998.
25
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. On April 21, 1999, the Court of Federal
Claims entered judgment for the plaintiff in CALIFORNIA FEDERAL, and awarded the
plaintiff $22,966,523.42 in damages under a cost of replacement capital theory.
On May 6, 1999, the Court denied plaintiff's motion for reconsideration of its
damages decision in the CALIFORNIA FEDERAL case. TCF expects that the CALIFORNIA
FEDERAL decision will be appealed to the United States Court of Appeals for the
Federal Circuit. 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
GLENDALE, 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 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See Index to Exhibits on page 29 of this report.
(b) Reports on Form 8-K.
None.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TCF FINANCIAL CORPORATION
/s/ Neil W. Brown
------------------------------------------
Neil W. Brown, Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Mark R. Lund
------------------------------------------
Mark R. Lund, Senior Vice President,
Assistant Treasurer and Controller
(Principal Accounting Officer)
Dated: May 13, 1999
28
TCF FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
FOR FORM 10-Q
Exhibit Sequentially
Number Description Numbered Page
------- ----------- -------------
4(a) Copies of instruments with respect N/A
to long-term debt will be furnished
to the Securities and Exchange
Commission upon request.
11 Computation of Earnings Per Common Share
29